SUPPORT AGREEMENT
This SUPPORT AGREEMENT is entered into as of March 7th, 2000, among
Westaff Acquisition Corp., a Delaware corporation ("WAC"), and the persons
listed on Schedule A hereto (each a "STOCKHOLDER", and, collectively, the
"STOCKHOLDERS"). Capitalized terms not otherwise defined herein have the
meanings set forth in the Merger Agreement (defined below).
WHEREAS, Westaff, Inc., a Delaware corporation (the "COMPANY") and WAC
have, simultaneously with the execution and delivery of this Agreement, entered
into a Recapitalization Agreement and Plan of Merger (as the same may be amended
or supplemented, the "MERGER AGREEMENT") providing for the merger of WAC with
and into the Company (the "MERGER"), which Merger has been recommended by the
Special Committee of the Company's Board of Directors;
WHEREAS, each Stockholder is the record and beneficial owner of the
number of shares of Common Stock, par value $.01 per share, of the Company (the
"COMPANY COMMON STOCK") set forth opposite such Stockholder's name on Schedule A
hereto and under the heading "Total Shares" (such shares of the Company Common
Stock, as such shares may be adjusted by stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or other change or transaction of or by the Company, together
with shares of the Company Common Stock that may be acquired after the date
hereof by such Stockholder, including shares of the Company Common Stock
issuable upon the exercise of options to purchase the Company Common Stock (as
the same may be adjusted as aforesaid), being collectively referred to herein as
the "SHARES"); and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, WAC has requested that the Stockholders enter into this Agreement.
NOW, THEREFORE, to induce WAC to enter into, and in consideration of it
entering into, the Merger Agreement, and in consideration of the premises and
the representations, warranties and agreements contained herein, the parties
agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
acting solely in its capacity as a holder of the shares and not as a director of
the Company or in any other capacity, hereby, severally and not jointly,
represents and warrants to WAC as follows:
(a) AUTHORITY. The Stockholder has all requisite power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Stockholder. This Agreement has been duly executed
and delivered by the Stockholder and, assuming this Agreement constitutes a
valid and binding obligation of WAC, constitutes a valid and binding obligation
of the Stockholder
enforceable against the Stockholder in accordance with its terms. Except for the
expiration or termination of the waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), and
informational filings with the Securities and Exchange Commission, neither the
execution, delivery or performance of this Agreement by the Stockholder nor the
consummation by the Stockholder of the transactions contemplated hereby will (i)
require any filing with, or permit, authorization, consent or approval of, any
federal, state, local, municipal or foreign or other government or subdivision,
branch, department or agency thereof or any governmental or quasi-governmental
authority of any nature, including any court or other tribunal, (a "GOVERNMENTAL
ENTITY"), (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, or give rise to
any right of termination, amendment, cancellation or acceleration under, or
result in the creation of any lien, charge, security interest or other
encumbrance of any nature (a "LIEN") upon any of the properties or assets of the
Stockholder under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, permit, concession, franchise, contract,
agreement or other instrument or obligation (a "CONTRACT") to which the
Stockholder is a party or by which the Stockholder or any of the Stockholder's
properties or assets, including the Stockholder's Shares, may be bound or (iii)
violate any judgment, order, writ, preliminary or permanent injunction or decree
(an "ORDER") or any statute, law, ordinance, rule or regulation of any
Governmental Entity (a "LAW") applicable to the Stockholder or any of the
Stockholder's properties or assets, including the Stockholder's Shares.
(b) THE SHARES. The Stockholder's Shares and the certificates
representing such Shares are now, and at all times during the term hereof will
be, held by such Stockholder, or by a nominee or custodian for the benefit of
such Stockholder, and the Stockholder has good and marketable title to such
Shares, free and clear of any Liens, proxies, voting trusts or agreements,
understandings or arrangements, except for any such Liens or proxies arising
hereunder. The Stockholder owns of record or beneficially no shares of the
Company Common Stock other than such Stockholder's Shares and shares of the
Company Common Stock issuable upon the exercise of Company stock options, as set
forth on Schedule A hereto.
(c) MERGER AGREEMENT. The Stockholder understands and
acknowledges that WAC is entering into the Merger Agreement in reliance upon the
Stockholder's execution and delivery of this Agreement. The Stockholder
covenants and agrees that it will timely perform all of its obligations under
the Merger Agreement and under this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF WAC. WAC hereby represents and
warrants to the Stockholders as follows:
(a) AUTHORITY. WAC has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by WAC and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of WAC. This Agreement has been duly executed and delivered by WAC and, assuming
this
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Agreement constitutes a valid and binding obligation of the Stockholders,
constitutes a valid and binding obligation of WAC enforceable in accordance with
its terms.
(b) SECURITIES ACT. The Shares will be acquired in compliance
with, and WAC will not offer to sell or otherwise dispose of any Shares so
acquired by it in violation of the registration requirements of the Securities
Act of 1933, as amended.
(c) INVESTMENT IN WAC BY THE STOVER REVOCABLE TRUST. The Stover
Revocable Trust will acquire shares of capital stock of the Surviving
Corporation (as defined in the Merger Agreement) as provided in the Merger
Agreement. The Stover Revocable Trust will purchase such shares (i) at the same
price per share and (ii) in the same ratio as between different classes of
shares of capital stock as members of the Investor Group in connection with the
Equity Contribution (as such terms are defined in the Merger Agreement). No
member of the Investor Group, and no affiliate of any such member, will have any
equity interest, or right to acquire any equity interest, in the Surviving
Corporation, other than rights which the Stover Revocable Trust shares on a pro
rata basis.
3. COVENANTS OF THE STOCKHOLDERS. Each Stockholder, severally and not
jointly, to the extent he has the capacity to vote, solely in his capacity as
holder of the Shares and not as a director of the Company or in any other
capacity, agrees as follows:
(a) Such Stockholder shall not, except as contemplated by the
terms of this Agreement or the Merger Agreement, (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any Contract, option or other
arrangement (including any profit sharing arrangement) or understanding with
respect to the sale, transfer, pledge, assignment or other disposition of his
Shares to any person other than WAC or WAC's designee, (ii) enter into any
voting arrangement, whether by proxy, voting agreement, voting trust,
power-of-attorney or otherwise, with respect to his Shares or (iii) take any
other action that would in any way restrict, limit or interfere with the
performance of his obligations hereunder or the transactions contemplated
hereby.
(b) At any meeting of stockholders of the Company called to vote
upon the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval (including by
written consent) with respect to the Merger and the Merger Agreement is sought,
each Stockholder shall as requested by WAC (including, without limitation, by
cooperating with WAC with respect to the proxy granted to WAC pursuant to
Section 5 below), vote (or cause to be voted) such Stockholder's Shares in favor
of the Merger, the adoption by the Company of the Merger Agreement and the
approval of the other transactions contemplated by the Merger Agreement. At any
meeting of Stockholders of the Company or at any adjournment thereof or in any
other circumstances upon which the Stockholder's vote, consent or other approval
is sought, such Stockholder shall as requested by WAC as provided above vote (or
cause to be voted) such Stockholder's Shares against (i) any Competing
Transaction (as defined in the Merger Agreement) or (ii) any amendment of the
Company's Certificate of Incorporation or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which
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amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify, the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement (collectively,
"FRUSTRATING TRANSACTIONS").
4. NOTICE OF ACQUISITION OF ADDITIONAL SHARES. Each Stockholder hereby
agrees, while this Agreement is in effect, to promptly notify WAC of the number
of any new shares of Company Common Stock acquired by such Stockholder, if any,
after the date hereof.
5. GRANT OF PROXY COUPLED WITH AN INTEREST; APPOINTMENT OF PROXY.
(a) Solely for the purpose of allowing enforcement of each
Stockholder's obligations under Section 3(b), each Stockholder hereby
irrevocably grants to, and appoints, Michael Najjar, Dana O'Brian, Robert
Bergmann, and any other individual who shall hereafter be designated by WAC,
such Stockholder's proxy and attorney-in-fact (with full power of substitution),
for and in the name, place and stead of such Stockholder, to vote such
Stockholder's Shares, or grant a consent or approval in respect of such Shares,
at any meeting of stockholders of the Company or at any adjournment thereof or
in any other circumstances upon which their vote, consent or other approval is
sought, (i) in favor of the Merger, the adoption by the Company of the Merger
Agreement and the approval of the other transactions contemplated by the Merger
Agreement and (ii) against any Alternative Transaction or Frustrating
Transaction.
(b) Each Stockholder represents that any proxies heretofore given
in respect of such Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(c) Each Stockholder hereby affirms that the proxy set forth in
this Section 5 is coupled with an interest and is irrevocable until the earlier
of (i) such time as this Agreement terminates in accordance with its terms, (ii)
consummation of the Merger in accordance with the terms of the Merger Agreement,
(iii) termination of the Merger Agreement by WAC in accordance with its terms or
(iv) termination of the Merger Agreement by the Company in accordance with its
terms. Such Stockholder hereby further affirms that the proxy is given in
connection with the execution of the Merger Agreement, and that such proxy is
given to secure the performance of the duties of such Stockholder under this
Agreement.
6. STOCKHOLDERS AGREEMENT. Simultaneously with the closing of the
Merger, each Stockholder will execute and deliver to WAC or its designee a
Stockholders Agreement in form and substance reasonably satisfactory to WAC
containing the terms set forth in the term sheet annexed hereto as EXHIBIT A.
7. TERMINATION OF EMPLOYMENT AGREEMENT. Effective upon the closing of
the Merger, all obligations of the Company and its subsidiaries to W. Robert
Stover under that certain Employment Agreement effective as of January 1, 1999
by and between W. Robert Stover and the
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Company (the "EMPLOYMENT AGREEMENT") shall terminate, and the Employment
Agreement shall be of no further force or effect.
8. FURTHER ASSURANCES. Solely for the purpose of allowing enforcement of
each Stockholder's obligations under Section 3(b), each Stockholder will, from
time to time, execute and deliver, or cause to be executed and delivered, such
additional or further transfers, assignments, endorsements, consents and other
instruments as WAC may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement and to vest the
power to vote such Stockholder's Shares as contemplated by Section 3. WAC agrees
to use reasonable efforts to take, or cause to be taken, all actions necessary
to comply promptly with all legal requirements that may be imposed with respect
to the transactions contemplated by this Agreement (including legal requirements
of the HSR Act).
9. COMPETING TRANSACTION FEE. The Stockholders agree that in the event
(i) a Competing Transaction (as defined in the Merger Agreement) is consummated
within twelve months of the date of this Agreement, or (ii) the Company or any
Stockholder enters into definitive agreements related to a Competing Transaction
at any time during the twelve months after the termination of the Merger
Agreement (x) by the Company or the Stockholders for any reason other than a
termination under Sections 9.01(a) and 9.01(e) of the Merger Agreement or (y) by
WAC for any reason permitted under the Merger Agreement other than a termination
under Section 9.01(a) of the Merger Agreement, and if such Competing Transaction
is eventually consummated, then in either case the Stockholders jointly and
severally agree to pay to WAC an amount in cash equal to the Competing
Transaction Fee simultaneously with the closing of such Competing Transaction.
For purposes hereof, the "COMPETING TRANSACTION FEE" shall mean the product of
(i) 50%, MULTIPLIED BY (ii) the total number of Shares sold by the Stockholders
in the Competing Transaction, MULTIPLIED BY (iii) the excess, if any, of (a) the
price per Share to be received plus the amount per Share of the fair market
value of any other consideration to be received in any form (including without
limitation earn-out payments, bonus payments, excess compensation payments,
etc.) by the Stockholders in the Competing Transaction over (b) $10.00.
10. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and assigns. Notwithstanding
the foregoing, WAC shall have the right to assign its rights, interests and
obligations hereunder to any person controlling, controlled by or under common
control with Cornerstone Equity Investors, LLC and/or Centre Partners Management
LLC at its sole option and without the prior written consent of the other
parties hereto; provided that no such assignment shall relieve WAC of its
obligations hereunder and the rights of the tranferee will be subject to all
defenses, excuses, claims and counterclaims assertable against WAC.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto
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or their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
11. GENERAL PROVISIONS.
(a) PAYMENTS. All payments required to be made to any party to
this Agreement shall be made by Wire Transfer to an account designated by the
recipient at least one business day prior to such payment.
(b) EXPENSES. Subject to the terms of the Merger Agreement, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
(c) AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(d) NOTICE. All notices and other communications hereunder shall
be in writing and shall be deemed given upon receipt to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) if to WAC, to
Cornerstone Equity Investors L.L.C.
717 Fifth Avenue
New York, New York 10022
Telecopy: (212) 826-6798
Attention: Dana O'Brien and Michael Najjar
Centre Capital Investors III, L.P.
30 Rockefeller Plaza
Suite 5050
New York, New York 10020
Telecopy: (212) 332-5800
Attention: Robert A. Bergmann and Steven M. Shapiro
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with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Telecopy: (212) 446-4900
Attention: Frederick Tanne, Esq.
and
(ii) if to a Stockholder, to the address set forth under
the name of such Stockholder on Schedule A hereto
with a copy to:
McCutchen, Doyle, Brown & Enerson, LLP
3150 Porter Drive
Palo Alto, California 94304
Telecopy: (650) 849-4800
Attention: Bart Deamer, Esq.
(e) INTERPRETATION. When a reference is made in this Agreement to
a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation".
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(g) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof including, without limitation, the letter agreement dated
December 28, 1999 between W. Robert Stover, Cornerstone Equity Investors IV,
L.P., and Centre Partners Management LLC and (ii) is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
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(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
any applicable conflicts of law principles.
(i) PUBLICITY. WAC and the Stockholders shall consult with each
other and the Company before issuing any press release or otherwise making any
public statements with respect to this Agreement or any of the transactions
contemplated by the Merger Agreement. Prior to the closing of the Merger, WAC
and the Stockholders shall not issue any such press release or make any such
public statement without the prior consent of the other (which consent shall not
be unreasonably withheld), except as may be required by Law or any listing
agreement with the NASD or any national securities exchange to which WAC or the
Company is a party and, in such case, shall use reasonable effects to consult
with all the parties hereto prior to such release or statement being issued. The
parties shall agree on the text of a joint press release by which WAC and the
Company will announce the execution of this Agreement.
12. STOCKHOLDER CAPACITY. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as a director or
officer of the Company. Each Stockholder signs solely in his capacity as the
record holder and beneficial owner of, or the trustee of a trust whose
beneficiaries are the beneficial owners of, such Stockholder's Shares and
nothing herein shall limit or affect any actions taken by a Stockholder in his
capacity as an officer or director of the Company to the extent specifically
permitted by the Merger Agreement.
13. ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in a court of the United States in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby.
14. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
15. TERMINATION. The provisions of Sections 3, 4, 5, 6, 7 and 8
shall terminate automatically and be of no further force and effect upon the
termination of the Merger Agreement. In addition, notwithstanding anything to
the contrary herein, the obligations of the Stockholders
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pursuant to Sections 3 and 5 of this Agreement shall terminate and be of no
further force and effect at such time as the Company shall have terminated the
Merger Agreement pursuant to Section 9.01(g) thereof; provided that it is
expressly agreed that the obligations of the Stockholders under Section 9 of
this Agreement shall survive any such termination.
* * * * *
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IN WITNESS WHEREOF, WAC and each Stockholder has caused this
Agreement to be duly executed and delivered as of the date first written above.
WAC
By: /s/ Michael E. Najjar
----------------------------------------
Name: Michael E. Najjar
Title: President and Secretary
STOCKHOLDERS:
THE STOVER REVOCABLE TRUST
By: /s/ W. Robert Stover
----------------------------------------
Name: W. Robert Stover
Title: Trustee
By:
----------------------------------------
Name: Joan C. Stover
Title: Trustee
THE STOVER 1999 CHARITABLE
REMAINDER UNITRUST
By: /s/ W. Robert Stover
----------------------------------------
Name: W. Robert Stover
Title: Trustee
By: /s/ Parker Williamson
----------------------------------------
Name: Parker Williamson
Title: Trustee
THE STOVER FOUNDATION
By: /s/ W. Robert Stover
----------------------------------------
Name: W. Robert Stover
Title:
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SCHEDULE A
NUMBER OF OPTIONS TO
PURCHASE THE COMPANY
STOCKHOLDER AND ADDRESS TOTAL SHARES COMMON STOCK
- ---------------------------- ---------------------------------- ---------------------------
The Stover Revocable Trust 2,060,705 None
1656 N.California Boulevard
Suite 250
Walnut Creek, CA 94596
The Stover 1999 Charitable 4,402,263 None
Remainder Unitrust
1656 N.California Boulevard
Suite 250
Walnut Creek, CA 94596
The Stover Foundation 2,000,000 None
1656 N.California Boulevard
Suite 250
Walnut Creek, CA 94596
Schedule A, Page 1