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EXHIBIT 4.2
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SECURITIES PURCHASE AGREEMENT
BETWEEN
ADMINISTAFF, INC.
AND
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
Dated as of January 27, 1998
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TABLE OF CONTENTS
Page
RECITALS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2. Purchase and Sale of Units; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Purchase and Sale of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3. Representations and Warranties of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Organization, Standing and Power of the Company . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Company Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Authorization; Non-Contravention; Consents; Issuance of Common Stock and
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) SEC Documents; Financial Statements; Undisclosed Liabilities . . . . . . . . . . . . . . . 12
(g) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(h) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(i) Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(j) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(k) Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(l) Absence of Changes in Benefit Plans; ERISA Compliance . . . . . . . . . . . . . . . . . . . 14
(m) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(n) No Payments to Employees, Officers or Directors . . . . . . . . . . . . . . . . . . . . . . 17
(o) Compliance with Laws; Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(p) Contracts; Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(q) State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(r) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(s) Worksite Employee Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(t) Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(u) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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SECTION 4. Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) Absence of Restrictions and Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(e) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) Availability of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Pre-Closing Conduct of Business by the Company . . . . . . . . . . . . . . . . . . . . . . 24
(b) Pre-Closing Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Post-Closing Access to Business Information . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Public Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Private Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(f) Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(g) Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(h) HSR Act Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(i) Audit of Administaff 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6. Board Nomination Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7. Business Combinations Between the Company and the Purchaser . . . . . . . . . . . . . . . . . . 28
(a) Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Additional Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(d) Notice of Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8. Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Transfers of Unit Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Rule 144 Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(d) Rule 144(k) Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(e) Legend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(f) Termination of Rights upon Sale to the Public . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 9. Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Other Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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SECTION 10. Conditions to Each Party's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(c) Marketing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(e) Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 11. Conditions to Obligations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Performance of Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . 35
(c) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(e) Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(f) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(g) Administaff 401(k) Plan and Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(h) Opinions of Counsel to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 12. Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(b) Performance of Obligations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . 36
(c) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(d) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 13. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) The Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) Claims Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 14. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 15. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 16. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 17. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 18. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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SECTION 19. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 20. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 21. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 22. Amendments; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 23. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 24. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 25. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 26. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 27. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 28. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
List of Exhibits
Exhibit A - Marketing Agreement
Exhibit B - Registration Rights Agreement
Exhibit C - Warrant Agreement
Exhibit D - Warrant Certificates
Exhibit E - Opinions of Counsel to the Company
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of January 27, 1998 by and between ADMINISTAFF, INC., a Delaware
corporation (the "Company"), and AMERICAN EXPRESS TRAVEL RELATED SERVICES
COMPANY, INC., a New York corporation (the "Purchaser").
RECITALS:
A. The Purchaser desires to purchase from the Company and the Company
desires to issue and sell to the Purchaser, subject to the terms and conditions
set forth therein, 693,126 Units (as hereinafter defined), each of which shall
consist of one share of Common Stock, par value $.01 per share, of the Company
and 2.98 Warrants (as hereinafter defined); and
B. The Purchaser and the Company desire to set forth in this Agreement
the conditions to the issuance and sale of the Units to the Purchaser;
NOW, THEREFORE, in consideration of the premises and the agreements
herein set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
SECTION 1. Definitions.
(a) Defined Terms. The following terms (whether or not underscored)
when used in this Agreement, including its preamble and recitals, shall, except
where the context otherwise requires, have the following meanings (such meanings
to be equally applicable to the singular and plural forms thereof):
"ASF Companies" is defined in Section 3(c).
"ASFT" is defined in Section 3(c).
"Affiliate" has the same meaning as in Rule 12b-2 promulgated under
the Exchange Act; provided that, for purposes of Sections 7 and 8, the last
sentence of Section 4(a) and the definitions in this Section 1 of "Business
Combination," "Standstill Termination Ownership Threshold" and "Purchaser's
Interest," the term "Affiliate" shall not include non-employee directors of the
Purchaser or Affiliates of the Purchaser that are in the investment advisory,
discretionary money management, asset management, brokerage, insurance, annuity,
lending or similar business to the extent they are acting for their own account
or the account of, or investing the funds of, their respective customers or
clients or funds advised or distributed by them.
"Associate" has the same meaning as in Rule 12b-2 promulgated under
the Exchange Act; provided that, for purposes of Sections 7 and 8, and the
definition in this Section 1 of "Business
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Combination," the term "Associate" shall not include non-employee directors of
the Purchaser or Associates of the Purchaser that are in the investment
advisory, discretionary money management, asset management, brokerage,
insurance, annuity, lending or similar business to the extent they are acting
for their own account or the account of, or investing the funds of, their
respective customers or clients or funds advised or distributed by them.
"Agreement" means this Securities Purchase Agreement as in effect on
the date hereof and as hereafter amended, supplemented, restated or otherwise
modified.
"Business Combination" means any one of the following transactions:
(i) Any merger or consolidation of the Company with (A) the
Purchaser or (B) any other Person (other than the Company or any
Subsidiary of the Company) which Person is, or immediately after such
merger or consolidation would be, an Affiliate or Associate of the
Purchaser;
(ii) Any sale, lease, exchange, mortgage, pledge, transfer
or other disposition by the Company or its Subsidiaries (in one
transaction or a series of transactions) to or with the Purchaser or
any Affiliate or Associate of the Purchaser (or any Person that will
be an Affiliate or Associate of the Purchaser immediately after such
sale, lease, exchange, mortgage, pledge, transfer or other
disposition) of all or substantially all of the consolidated assets of
the Company;
(iii) The adoption of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of
the Purchaser or any Affiliate or Associate of the Purchaser; or
(iv) Any reclassification of securities (including any
reverse stock split), recapitalization of the Company, or any merger
or consolidation of the Company or any other transaction to which the
Company is a party which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any
class of equity or convertible securities of the Company or any
Subsidiary thereof which is directly or indirectly owned by the
Purchaser or any Affiliate or Associate of the Purchaser.
"Business Day" means any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be closed in New
York, New York or Houston, Texas.
"Change of Control" means the occurrence of any of the following: (a)
any Third Party shall have acquired beneficial ownership of more than 30% of the
outstanding voting stock of the Company (within the meaning of Section 13(d) or
14(d) of the Exchange Act); or (b) individuals
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who on the Closing Date were directors of the Company (together with any
replacement or additional directors who were nominated or elected by a majority
of directors then in office) cease to constitute a majority of the Board of
Directors of the Company.
"Closing" is defined in Section 2(c).
"Closing Date" is defined in Section 2 (c).
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means shares now or hereafter authorized of any class
of common stock of the Company and any other class of capital stock of the
Company, however designated, that has the right (subject to any prior rights of
any class or series of preferred stock) to participate in any distribution of
the assets upon voluntary or involuntary liquidation, dissolution or winding up
of the Company or in the earnings of the Company without limit as to per share
amount, and shall include, without limitation, the presently authorized
60,000,000 shares of Common Stock, par value $0.01 per share.
"Company" is defined in the Preamble.
"Company SEC Documents" is defined in Section 3(f).
"Company Subsidiary" means any Subsidiary of the Company.
"Confidentiality Agreement" means the Confidentiality Agreement by and
between the Company and the Purchaser dated as of October 15, 1997.
"Equity Securities" means equity securities of the Company and
options, warrants or other direct or indirect rights to acquire equity
securities of the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Exercise Price" means the exercise price per share of Common Stock
issuable upon exercise of a Warrant, as set forth in the Warrant Certificate
evidencing such Warrant and as adjusted from time to time in accordance with the
Warrant Agreement.
"Expiration Date" means the expiration date of a Warrant, as set forth
in the Warrant Certificate evidencing such Warrant.
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"Fair Market Value per Share" means the arithmetic mean of the closing
sales price of a share of Common Stock as reported by the New York Stock
Exchange Composite Transactions over the five trading days immediately preceding
the date of determination or, if not so trading, the fair value as determined in
good faith by the Board of Directors of the Company.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means each 12-month accounting period ending December 31
of a calendar year.
"Form Client Service Agreement" is defined in Section 3(p).
"Fully Diluted Basis" includes, without duplication, (i) all shares of
Common Stock outstanding at the time of calculation, (ii) Common Stock issuable
upon exercise of all outstanding warrants, options and other rights to acquire
Common Stock directly or indirectly and (iii) Common Stock issuable upon
conversion of all securities convertible directly or indirectly into Common
Stock.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Materials" means those substances, materials, and items, in
any form, whether solid, liquid, gaseous, semisolid, or any combination thereof,
whether waste materials, raw materials, chemicals, finished products,
byproducts, or any other material or article, which are regulated by or form the
basis of liability under federal, state or local environmental, health, and
safety statutes or regulations including, without limitation, hazardous wastes,
hazardous substances, pollutants, contaminants, asbestos, polychlorinated
biphenyls, petroleum (including, but not limited to, crude oil,
petroleum-derived substances, waste, or breakdown or decomposition products
thereof or any fraction thereof), and radioactive substances.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Laws" means any judgment, order, decree, statute, law, ordinance,
rule or regulation of any Governmental Authority.
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"Lien" means any mortgage, pledge, hypothecation, assignment, charge,
deposit arrangement, encumbrance, lien (statutory or other), adverse claim or
other security agreement of any kind or nature whatsoever.
"Marketing Agreement" means the Marketing Agreement to be entered into
by and between the Company, ASF Companies, ASFT and the Purchaser on the Closing
Date in substantially the form of Exhibit A attached hereto.
"Material Adverse Effect" means a material adverse effect on the
business, properties, assets, financial condition, results of operations or
prospects of the Company and the Company Subsidiaries, taken as a whole.
"New Securities" is defined in Section 9(a).
"Person" means any natural person, corporation, partnership, limited
liability company, firm, association or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Preferred Stock" means the 20,000,000 shares of preferred stock, par
value $0.01 per share, authorized pursuant to the Company's certificate of
incorporation and any additional shares of preferred stock or other class of
capital stock of the Company other than Common Stock that may be authorized
pursuant to the Company's certificate of incorporation during the term of this
Agreement.
"Purchase Price" is defined in Section 2(b).
"Purchased Stock" means the 693,126 shares of Common Stock of the
Company purchased by the Purchaser at the Closing pursuant to this Agreement and
such additional shares of Common Stock as may be purchased by the Purchaser from
the Company in connection with the Purchaser's exercise of its preemptive rights
in accordance with Section 9 hereof.
"Purchaser's Interest" means, as of the date of determination, the
total number of shares of Common Stock (i) owned, directly or indirectly, by the
Purchaser or any of its Affiliates and (ii) for which Warrants owned, directly
or indirectly, by the Purchaser or any of its Affiliates may be exercised,
assuming all such Warrants are exercisable as of the date of such determination,
expressed as a percentage of the Common Stock on a Fully Diluted Basis at the
time of calculation.
"Purchaser Nominee" is defined in Section 6.
"Repurchase Agreements" is defined in Section 2(d).
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"Registration Rights Agreement" means the Registration Rights
Agreement to be entered into by and between the Company and the Purchaser, in
substantially the form of Exhibit B attached hereto.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Standstill Termination Ownership Threshold" means, as of the fifth
anniversary of the Closing Date, the total number of shares of Common Stock (i)
owned, directly or indirectly, by the Purchaser or any of its Affiliates and
(ii) for which Warrants owned, directly or indirectly, by the Purchaser or any
of its Affiliates, with an exercise price per share that is less than the Fair
Market Value per Share are exercisable, expressed as a percentage of the Common
Stock on a Fully Diluted Basis as of the fifth anniversary.
"Subsidiary" of any corporation means any other corporation greater
than 50% of the outstanding shares of capital stock having ordinary voting power
for the election of directors is owned directly or indirectly by such
corporation. Except as otherwise indicated herein, references to Subsidiaries
shall refer to Subsidiaries of the Company.
"Tax" means all federal, state, local and foreign income, employment,
property, sales and excise taxes and all other taxes, assessments, fees, tariffs
or governmental charges of any nature whatsoever, together with any penalties,
interest or additions to Tax with respect thereto.
"Termination Event" is defined in Section 7(c).
"Third Party" shall have the meaning set forth in Section 7(b) hereof.
"Transaction Documents" means, collectively, this Agreement, the
Warrant Agreement, the Warrant Certificates, the Registration Rights Agreement,
the Marketing Agreement and any other agreement executed or delivered at the
Closing in connection with any of the foregoing to which the Company, its
Subsidiaries and the Purchaser is a party.
"Unit" means an investment unit consisting of one share of Common
Stock and 2.98 Warrants.
"Unit Stock" means the Purchased Stock and the Warrant Stock.
"Warrant Agreement" means the Warrant Agreement to be entered into by
and between the Company and the Purchaser on the Closing Date, in substantially
the form of Exhibit C attached hereto.
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"Warrant Certificates" means collectively, the certificates evidencing
(i) the Warrants with an Expiration Date of the third anniversary of the Closing
Date in the form of Exhibit D-1 attached hereto, (ii) the Warrants with an
Expiration Date of the fourth anniversary of the Closing Date in the form of
Exhibit D-2 attached hereto, (iii) the Warrants with an Expiration Date of the
fifth anniversary of the Closing Date in the form of Exhibit D-3 attached
hereto, (iv) the Warrants with an Expiration Date of the sixth anniversary of
the Closing Date in the form of Exhibit D-4 attached hereto, and (v) the
Warrants with an Expiration Date of the seventh anniversary of the Closing Date
in the form of Exhibit D-5 attached hereto.
"Warrant Securities" means, collectively, the Warrants and Warrant
Stock.
"Warrant Stock" means the securities which a Holder may acquire upon
exercise of a Warrant, together with any other securities which such Holder may
be issued in respect of any such securities, including, without limitation, by
way of any dividend or other distribution on such securities, any split-up of
such securities or a recapitalization, merger, consolidation, share exchange,
reorganization or other transaction or series of related transactions in which
shares of such securities are changed into or exchanged for securities of
another corporation.
"Warrants" is defined in Section 2.
(b) Cross-References. Unless otherwise specified, references in this
Agreement to any Section are references to such Section of this Agreement, and
unless otherwise specified, references in any Section or definition to any
clause or subsection are references to such clause or subsection of such Section
or definition.
SECTION 2. Purchase and Sale of Units; Closing.
(a) Purchase and Sale of Units. On the terms and subject to the
conditions set forth in this Agreement, the Company hereby agrees to issue, sell
and deliver to the Purchaser on the Closing Date, and the Purchaser hereby
agrees to purchase from the Company on the Closing Date, 693,126 Units, each of
which shall consist of (i) one share of Common Stock and (ii) 2.98 Warrants.
Each Warrant shall be exercisable in accordance with the terms of the Warrant
Agreement (together with any warrants issued in substitution or replacement
therefor, the "Warrants"). The Warrants issued to the Purchaser on the Closing
Date shall be identical except for the Expiration Date and the Exercise Price.
The Expiration Date for the Warrants shall be as follows: the third anniversary
of the Closing Date for 400,000 Warrants; the fourth anniversary of the Closing
Date for 400,000 Warrants; the fifth anniversary of the Closing Date for 400,000
Warrants; the sixth anniversary of the Closing Date for 400,000; and the seventh
anniversary of the Closing Date for 465,515 Warrants. The Exercise Price for the
Warrants shall be as follows: $40 for the Warrants expiring on the third
anniversary of the Closing Date; $50 for the Warrants expiring on the fourth
anniversary of the Closing Date; $60 for the Warrants expiring on the fifth
anniversary of the Closing Date; $70 for the
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Warrants expiring on the sixth anniversary of the Closing Date; and $80 for the
Warrants expiring on the seventh anniversary of the Closing Date.
(b) Purchase Price. The Purchaser shall pay to the Company on the
Closing Date an aggregate purchase price for the 693,126 Units of Seventeen
Million Seven Hundred Thirty-Three Thousand One Hundred Fifty Dollars
($17,733,150) (the "Purchase Price") by wire transfer of immediately available
funds to a bank account designated by the Company not less than three Business
Days prior to the Closing Date.
(c) Closing. Subject to the satisfaction or waiver of the conditions
set forth herein, the closing of the sale and purchase of the Units (the
"Closing") shall take place at American Express Tower, World Financial Center,
200 Vesey Street, New York, New York, at 10:00 a.m. on March 16, 1998, or at
such other place and time as may be agreed upon by the Purchaser and the
Company.
(d) Deliveries at Closing. Subject to the satisfaction or waiver of
the conditions set forth herein, at the Closing, the Company shall execute and
deliver to the Purchaser the following: (i) the Warrant Agreement; (ii) the
Marketing Agreement; (iii) the Registration Rights Agreement; (iv) the Warrant
Certificates evidencing an aggregate of 2,065,515 Warrants purchased hereunder;
(v) stock certificates evidencing an aggregate of 693,126 shares of Common Stock
purchased hereunder (which certificates shall bear the legends set forth in
Section 8(e)) and (vi) such other instruments as may reasonably be requested by
the Purchaser to evidence the consummation of the transactions contemplated
hereby. Subject to the satisfaction or waiver of the conditions set forth
herein, at the Closing, the Purchaser shall execute and deliver to the Company
the following: (i) the Warrant Agreement; (ii) the Marketing Agreement; (iii)
the Registration Rights Agreement and (iv) such other instruments as may
reasonably be requested by the Company to evidence the consummation of the
transactions contemplated hereby.
SECTION 3. Representations and Warranties of the Company. The Company
represents and warrants to the Purchaser as follows:
(a) Organization, Standing and Power of the Company. The Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not have a Material Adverse Effect.
The Company has delivered to the Purchaser complete and correct copies of its
Certificate of Incorporation, as amended (the "Company's Certificate") and
Amended Bylaws (the "Company's Bylaws").
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(b) Company Subsidiaries. Schedule 3(b) to the Company Disclosure
Letter sets forth each Company Subsidiary and the ownership interest therein of
the Company. Except as set forth on Schedule 3(b) to the Company Disclosure
Letter, all the outstanding shares of capital stock of each Company Subsidiary
have been validly issued and are fully paid and nonassessable, are owned by the
Company or by another Company Subsidiary free and clear of all Liens. Each
Company Subsidiary is a corporation, duly incorporated and validly existing
under the laws of its jurisdiction of incorporation and has the requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each Company Subsidiary is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed, individually or in the
aggregate, would not have a Material Adverse Effect. There are no restrictions
on any Company Subsidiary's ability to dividend or distribute money to the
Company, except for certain state regulatory obligations which require the
maintenance of minimum levels of net worth and any restrictions under applicable
corporate law. Copies of the charters, articles or certificates of
incorporation, bylaws or other organization documents (as amended to the date of
this Agreement) for each Company Subsidiary have been previously delivered to
Purchaser.
(c) Authorization; Non-Contravention; Consents; Issuance of Common
Stock and Warrants.
(i) The Company and its Subsidiaries have the full corporate
power and authority to execute and deliver this Agreement and the
other Transaction Documents, to perform their respective obligations
hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the other Transaction Documents by the Company,
Administaff of Texas, Inc. ("ASFT") and Administaff Companies, Inc.,
("ASF Companies") the performance by the Company, ASFT and ASF
Companies of their respective obligations hereunder and thereunder and
the consummation by the Company, ASFT and ASF Companies of the
transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part of
the Company, ASFT and ASF Companies. This Agreement has been, and each
of the other Transaction Documents will be at the Closing, duly
executed and delivered by the Company, ASFT and ASF Companies and this
Agreement constitutes, and, assuming the due execution and delivery
thereof by the Purchaser, each of the other Transaction Documents upon
due execution and delivery will constitute, a valid and binding
agreement of the Company, ASFT and ASF Companies (to the extent a
party thereto), enforceable against the Company, ASFT and ASF
Companies (to the extent a party thereto) in accordance with its
respective terms, except as such enforceability may be affected by
bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting creditors rights generally and other than general
equitable principles. Except as set forth in Schedule 3(c) to
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the Company Disclosure Letter, the execution, delivery and performance
of this Agreement and of the Transaction Documents by the Company,
ASFT and ASF Companies do not and will not, and the consummation of
the transactions contemplated hereby and by the other Transaction
Documents will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a benefit or alteration of rights or
obligations under, or result in the creation of any Lien upon any of
the properties or assets of the Company or any Company Subsidiary
under, (A) the Company's Certificate or the Company's Bylaws, or the
comparable charter or organizational documents of any Company
Subsidiary, (B) any loan or credit agreement, note, bond, mortgage,
indenture, reciprocal easement agreement, lease or other agreement,
instrument, permit, concession, contract, franchise or license to
which the Company or any Company Subsidiary is a party or by which any
of their respective properties or assets are bound or (C) subject to
the governmental filings and other matters referred to in the
following sentence, any Laws applicable to the Company or any Company
Subsidiary, or their respective properties or assets, other than, in
the case of clause (B) or (C), any such conflicts, violations,
defaults, rights or Liens that either individually or in the aggregate
would not (x) have a Material Adverse Effect or (y) prevent or delay
in any material respect the consummation of any of the transactions
contemplated hereby or by the other Transaction Documents. No consent,
approval, order or authorization of, or registration, declaration or
filing with, any Governmental Authority is required by or with respect
to the Company or any Company Subsidiary in connection with the
execution and delivery of this Agreement and the other Transaction
Documents by the Company, ASFT and ASF Companies or the consummation
by the Company, ASFT and ASF Companies of the transactions
contemplated hereby or thereby, except for (A) the filing with the SEC
of a Notice of Sale of Securities on Form D and such reports under
Section 13(a) of the Exchange Act, as may be required in connection
with this Agreement and such transactions, (B) filings required under
the HSR Act and (C) such other consents, approvals, orders,
authorizations, registrations, declarations and filings (x) as are set
forth in Schedule 3(c) to the Company Disclosure Letter or (y) which,
if not obtained or made, would not prevent or delay in any material
respect the consummation of any of the transactions contemplated
hereby or by the other Transaction Documents or otherwise prevent the
Company, ASFT and ASF Companies from performing its obligations under
this Agreement or any other Transaction Document in any material
respect or have, individually or in the aggregate, a Material Adverse
Effect.
(ii) Upon delivery to Purchaser of stock certificates
evidencing the Common Stock to be purchased by the Purchaser hereunder
and Warrant Certificates evidencing the Warrants in accordance with
the terms hereof, such Common Stock and the Warrants, respectively,
will have been validly issued and fully paid and
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nonassessable, free and clear of all Liens and the issuance thereof
will not give rise to any preemptive rights, except for such rights as
set forth on Schedule 3(c)(ii) to the Company Disclosure Letter which
rights have been effectively waived. The issuance of the shares of
Warrant Stock pursuant to the Warrant Agreement has been duly
authorized and, when issued upon exercise of the Warrants in
accordance with the terms of the Warrant Agreement, such shares will
have been validly issued and fully paid and nonassessable. The Company
has reserved 2,065,515 shares of Common Stock for issuance upon the
exercise of the Warrants. Except as set forth in the Registration
Rights Agreement and on Schedule 3(c)(ii) to the Company Disclosure
Letter, no Person has the right to demand or any other right to cause
the Company to file any registration statement under the Securities
Act relating to any securities of the Company or any right to
participate in any such registration.
(d) Capital Structure. The authorized capital stock of the Company
consists of 60,000,000 shares of Common Stock and 20,000,000 shares of Preferred
Stock. As of January 20, 1998, (i) 14,361,925 shares of Common Stock and no
shares of Preferred Stock were issued and outstanding, (ii) 489,117 shares of
Common Stock were held by the Company in its treasury (and 150,000 outstanding
shares of Common Stock held by a total of six persons who are listed on
Scheduled 3(d)(ii) to the Company Disclosure Letter are to be purchased by the
Company at a price of $21.00 per share prior to Closing pursuant to written
agreements which the Company has previously delivered to the Purchaser), and
(iii) 861,804 shares of Common Stock were issuable under the Company's employee
benefit or incentive plans pursuant to awards granted or that may be granted by
the Company. (The written agreements referred in clauses (ii) hereof are
sometimes also referred to herein as "Repurchase Agreements.") Except as set
forth in this Section 3(d) or in Schedule 3(d) to the Company Disclosure Letter,
no shares of Common Stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. The Company has no outstanding stock
appreciation rights relating to the Common Stock of the Company. All outstanding
shares of Common Stock of the Company are duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except (A) as set
forth above in this Section 3(d), or (B) as set forth in Schedule 3(d) to the
Company Disclosure Letter, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any Company Subsidiary is a party or by
which such entity is bound, obligating the Company or any Company Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock, voting securities or other ownership interests of the
Company or any Company Subsidiary or obligating the Company or any Company
Subsidiary to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. Except
as set forth on Schedule 3(d) to the Company Disclosure Letter, there are no
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any capital stock, voting securities or
other ownership interests in the
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Company or any Company Subsidiary or make any investment (in the form of a
loan, capital contribution or otherwise) in any Person (other than a Company
Subsidiary). There are no outstanding agreements related to the voting of
capital stock of the Company.
(e) Securities Laws. In reliance on the investment representations
contained in Section 4(a), the offer, issuance, sale and delivery of the shares
of Common Stock and the Warrants to the Purchaser as provided in this Agreement,
and the issuance and delivery of Common Stock upon the exercise of the Warrants
by the Purchaser, are and will be exempt from the registration requirements of
the Securities Act and all applicable state securities laws, as such laws are
currently in effect.
(f) SEC Documents; Financial Statements; Undisclosed Liabilities. The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed with the SEC (the "Company SEC Documents"). All of the
Company SEC Documents, as of their respective filing dates, complied, or will
comply, as the case may be, in all material respects with all applicable
requirements of the Securities Act and the Exchange Act and, in each case, the
rules and regulations promulgated thereunder applicable to such Company SEC
Documents. None of the Company SEC Documents at the time of filing and
effectiveness contained, or will contain as of the Closing Date, as the case may
be, any untrue statement of a material fact or omitted, or will omit, as the
case may be, to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent such statements
have been amended, modified or superseded by later Company SEC Documents. The
consolidated financial statements of the Company included in the Company SEC
Documents complied, or will comply, as the case may be, as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared, or
will be prepared, as the case may be, in accordance with GAAP (except, in the
case of unaudited statements, as permitted by Form 10-Q promulgated under the
Exchange Act) applied on a consistent basis during the periods involved and
fairly presented, or will present, as the case may be, in accordance with the
applicable requirements of GAAP, the consolidated financial position of the
Company as of the dates thereof and the consolidated results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal and recurring year-end audit adjustments which were not or
are not expected to be material in amount). Except as set forth in the Company
SEC Documents filed with the SEC prior to the date hereof or in Schedule 3(f) to
the Company Disclosure Letter, and except for liabilities and obligations
incurred since September 30, 1997 in the ordinary course of business and
consistent with past practice, neither the Company nor any Company Subsidiary
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of the Company or in the notes thereto and which, individually or
in the aggregate, would have a Material Adverse Effect.
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(g) Absence of Certain Changes or Events. Except as set forth in the
Company SEC Documents filed with the SEC prior to the date hereof or disclosed
in Schedule 3(g) to the Company Disclosure Letter, since December 31, 1996, the
Company and the Company Subsidiaries have conducted their business only in the
ordinary course and there has not been (i) any change that would have a Material
Adverse Effect, nor has there been any occurrence or circumstance that with the
passage of time would reasonably be expected to result in a Material Adverse
Effect, (ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company's capital stock, (iii) any split, combination or reclassification of any
of the Company's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for, or giving the right to acquire by exchange or exercise, shares of its
capital stock or any issuance of an ownership interest in, any Company
Subsidiary, (iv) any damage, destruction or loss, whether or not covered by
insurance, that has or would have or is reasonably likely to have a Material
Adverse Effect or (v) any change in accounting methods, principles or practices
by the Company or any Company Subsidiary, except insofar as required by a change
in GAAP.
(h) Litigation. Except as disclosed in Schedule 3(h) to the Company
Disclosure Letter, there is no suit, action or proceeding pending, threatened in
writing or to the best knowledge of the Company otherwise threatened against or
affecting the Company or any Company Subsidiary or any of their respective
properties or assets that, individually or in the aggregate, could reasonably be
expected to (i) have a Material Adverse Effect or (ii) prevent or delay in any
material respect the consummation of any of the transactions contemplated hereby
or by the other Transaction Documents, nor is there any judgment, decree,
injunction, rule or order of any Governmental Authority or arbitrator
outstanding against the Company or any Company Subsidiary or any of their
respective properties or assets having, or which, insofar as reasonably can be
foreseen, in the future would have, any such effect.
(i) Title to Assets. Except as set forth on Schedule 3(i) to the
Company Disclosure Letter, the Company and the Company Subsidiaries have good,
valid and marketable title to, or valid and subsisting leasehold interests in,
all of the assets owned or used in the operation of the Company, free and clear
of all Liens, except for (i) Liens and imperfections of the title that do not,
singly or in the aggregate, materially interfere with the present use by the
Company or any of the Company Subsidiaries of the property subject thereto or
affected thereby or that otherwise do not have a Material Adverse Effect on the
Company and the Company Subsidiaries, (ii) Liens for assessments or governmental
charges, or landlords', mechanics', workmen's, materialmen's or similar liens,
in each case that (x) either are not delinquent or that are being contested in
good faith and (y) do not constitute Liens or charges arising under ERISA or the
Code and (iii) Liens reflected in the consolidated balance sheet of the Company
as of September 30, 1997, as contained in the Company SEC Documents filed with
the SEC prior to the date hereof.
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(j) Environmental Matters. Except (i) as disclosed in the Company SEC
Documents filed prior to the date hereof, (ii) as set forth in Schedule 3(j) to
the Company Disclosure Letter or (iii) as to matters previously remediated in
accordance with applicable Law, none of the Company, or any Company Subsidiaries
or, to the Company's knowledge, any other Person has caused or permitted (a) the
presence of any Hazardous Materials at, in, on, or under any of the real
properties owned or leased by the Company or any of the Company Subsidiaries in
any amount, form, or location that would be unlawful, require investigation,
notification of Government Authorities, or remedial action, or otherwise result
in potential material liabilities under any applicable local, state, or federal
environmental Laws, or (b) any spills, releases, discharges or disposal of
Hazardous Materials to have occurred or be presently occurring on or from any of
the real property owned or leased by the Company as a result of the Company's
operation and use of such properties, which presence or occurrence would,
individually or in the aggregate, have or is reasonably likely to have a
Material Adverse Effect; and except (i) as disclosed in the Company's SEC
Documents filed prior to the date hereof, (ii) as set forth in Schedule 3(j) to
the Company Disclosure Letter and (iii) as to matters previously remediated in
accordance with applicable law in connection with the Company's operation and
use of the real property owned or leased by the Company, the Company and the
Company Subsidiaries have complied in all material respects with all applicable
local, state and federal environmental Laws, regulations, ordinances and
administrative and judicial orders relating to the generation, use, recycling,
reuse, sale, storage, handling, transport and disposal of any Hazardous
Materials.
(k) Related Party Transactions. Set forth in Schedule 3(k) to the
Company Disclosure Letter or in the Company's definitive proxy statement for the
Annual Meeting of Shareholders held May 23, 1997 is a list of all arrangements,
agreements and contracts entered into by the Company or any of the Company
Subsidiaries with any Person who is an executive officer, director or Affiliate
of the Company or any of the Company Subsidiaries, or any entity of which any of
the foregoing is an Affiliate which would be required to be disclosed under Item
404 of Regulation S-K (other than compensation paid or payable by the Company or
its Subsidiaries to such Persons for calendar year 1997 or during calendar year
1998 in respect of salaries, bonuses, inactive plan participation, directors'
fees and similar compensation arrangements in the ordinary course of business
and other than the Repurchase Agreements.
(l) Absence of Changes in Benefit Plans; ERISA Compliance.
(i) Except as disclosed in Schedule 3(l)(i) to the Company
Disclosure Letter or in the Company SEC Documents filed prior to the
date hereof, since the date of the most recent audited financial
statements included in the Company SEC Documents filed with the SEC
prior to the date hereof, there has not been any adoption or amendment
by the Company, any Company Subsidiary or any Person affiliated with
the Company under Section 414(b), (c), (m) or (o) of the Code (each,
an "ERISA Affiliate of the Company") of any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock
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option, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical, employment agreement or other
employee benefit plan, arrangement, agreement, policy or understanding
(whether or not legally binding, or oral or in writing) providing
benefits to any current or former employee, officer or director of the
Company or any of their dependents, any Company Subsidiary, or any
ERISA Affiliate of the Company (collectively, "Company Benefit
Plans"). No Company Benefit Plan is, or has been subject to Title IV
of ERISA or to Section 412 of the Code (except for the Company's
401(k) plan, which was formerly a money purchase plan subject to
Section 412 of the Code) or Section 302 of ERISA or provides
post-retirement health benefits other than the health benefits
required under Section 4980B of the Code or Part 6 of Title I of
ERISA.
Each Company Benefit Plan pursuant to which the Company has any
liability is listed in Schedule 3(l)(i) to the Company Disclosure
Letter, and true and correct copies of each of the following have been
made available to the Purchaser with respect to each such Company
Benefit Plan, where applicable: (i) all annual reports (Form 5500,
including applicable schedules), if any, relating to each such Company
Benefit Plan filed with the IRS since January 1, 1995, (ii) each such
Company Benefit Plan, (iii) the trust agreement, if any, relating to
each such Company Benefit Plan, (iv) the most recent summary plan
description for each such Company Benefit Plan for which a summary
plan description is required by ERISA, (v) each administrative
services agreement, if any, with respect to each Company Benefit Plan,
and (vi) the most recent determination letter, if any, issued by the
Internal Revenue Service with respect to any such Company Benefit Plan
qualified under Section 401 of the Code.
Except as set forth in Schedule 3(l)(i) to the Company Disclosure
Letter, as to any such Company Benefit Plan intended to be qualified
under Section 401 of the Code, (i) such Company Benefit Plan satisfies
in form and in operation the requirements of such Section and there
has been no termination or partial termination of, or complete
discontinuance of contributions under, such Company Benefit Plan
within the meaning of Section 411(d)(3) of the Code and (ii) the
Internal Revenue Service has issued a favorable determination letter,
which remains valid and in full force and effect.
As to any such terminated Company Benefit Plan intended to have been
qualified under Section 401 of the Code, such terminated Company
Benefit Plan received a favorable determination letter from the
Internal Revenue Service with respect to its termination.
Except as set forth in Schedule 3(l)(i) to the Company Disclosure
Letter, either the Company, a Company Subsidiary or an ERISA Affiliate
of the Company has the right, either individually or in the aggregate,
unilaterally to terminate any, and each,
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of the Company Benefit Plans without incurring any additional
contributions or expense to fund or pay any benefits upon such
termination, other than contributions or expenses that, individually
or in the aggregate, would not reasonably be expected to result in a
Material Adverse Effect.
Except as set forth in Schedule 3(l)(i) to the Company Disclosure
Letter or in the Company SEC Documents filed prior to the date hereof,
there are no audits, investigations, actions, suits or claims pending
(other than routine claims for benefits) or, to the knowledge of the
Company, threatened against, or with respect to, any of such Company
Benefit Plans or their assets that could reasonably be expected to
have a Material Adverse Effect.
Except as set forth in Schedule 3(l)(i) to the Company Disclosure
Letter or as disclosed in the Company SEC Documents filed prior to the
date hereof, all reports, returns and similar documents with respect
to the Company Benefit Plans required to be filed with any
governmental agency have been so timely filed.
Neither the Company, any Company Subsidiary nor any ERISA Affiliate of
the Company makes or has made, nor has or has had an obligation to
make, nor reimburses or has reimbursed, nor has or has had an
obligation to reimburse, another employer, directly or indirectly, for
making, contributions to any plan, that is a multiemployer plan
subject to Title IV of ERISA.
To the extent assets have been set aside in a trust or other separate
account to pay directly or indirectly benefits under any Company
Benefit Plan, all such assets are shown on the books and records of
such trust or separate account at their current fair market value.
(ii) Except as described in Schedule 3(l)(ii) to the Company
Disclosure Letter, as disclosed in the Company SEC Documents filed
prior to the date hereof, or as would not reasonably be expected to
have a Material Adverse Effect, (A) all Company Benefit Plans,
including any such plan that is an "employee benefit plan" as defined
in Section 3(3) of ERISA, are in compliance with all applicable
requirements of law (including applicable laws of any jurisdiction
outside of the United States of America), including ERISA and the
Code, (B) all contributions required to be made to the Company Benefit
Plans pursuant to their terms and provisions have been timely made and
other than contributions in the normal course of business, neither the
Company, any Company Subsidiary nor any ERISA Affiliate of the Company
has any liabilities or obligations with respect to any such Company
Benefit Plan, whether accrued, contingent or otherwise, nor to the
best knowledge of the Company are any such liabilities or obligations
expected to be incurred and (C) other than claims for benefits made in
the normal course, no individual has any
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claim with respect to any such Company Benefit Plan, nor to the
knowledge of the Company is any such claim expected to be incurred.
Except as set forth in Schedule 3(l)(ii) to the Company Disclosure
Letter, the execution of, and performance of the transactions
contemplated hereby will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event under any
Company Benefit Plan, policy, arrangement or agreement or any trust or
loan that will or may trigger any payment (whether of severance pay or
otherwise), acceleration in the accrual or payment of any benefits,
forgiveness of indebtedness, vesting of benefits, increase in benefits
or obligation to fund benefits with respect to any current or former
employee, officer or director of the Company, any Company Subsidiary,
or any ERISA Affiliate of the Company or their dependents.
Except as set forth in Schedule 3(1)(ii) to the Company Disclosure
Letter, as disclosed in the Company SEC Documents filed prior to the
date hereof or as would not reasonably be expected to have a Material
Adverse Effect, neither the Company nor any Company Subsidiary has a
duty or obligation to indemnify or hold any other person or entity
harmless for any liability attributable to any acts or omissions by
such person or entity with respect to any Company Benefit Plan.
(m) Taxes.
(i) Except as set forth in Schedule 3(m) to the Company
Disclosure Letter, the Company and each Company Subsidiary has (A)
timely filed all Tax returns and reports required to be filed by it
(after giving effect to any filing extension properly granted by a
Governmental Authority having authority to do so) and all such returns
and reports are accurate and complete in all material respects; and
(B) timely paid (or the Company has paid on its behalf) all material
Taxes required to be paid by it, and the most recent financial
statements contained in the Company SEC Documents reflect an adequate
reserve for all material Taxes payable by the Company and the Company
Subsidiaries for all taxable periods and portions thereof through the
date of such financial statements. Except as set forth on Schedule
3(m) to the Company Disclosure Letter, no deficiencies greater than
$25,000 for any Taxes have been proposed, asserted or assessed against
the Company, any predecessor to the Company or any of the Company
Subsidiaries during the past five years, and no requests for waivers
of the time to assess any such Taxes are pending.
(n) No Payments to Employees, Officers or Directors. Except as set
forth on Schedule 3(n) to the Company Disclosure Letter, or filed as an exhibit
to a Company SEC Document filed prior to the date hereof, there is no employment
or severance contract, or other agreement requiring payments to be made or
increasing any amounts payable thereunder on a change of control or otherwise as
a result of the consummation of any of the transactions contemplated hereby or
by
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the other Transaction Documents, with respect to any employee, officer or
director of the Company or any Company Subsidiary.
(o) Compliance with Laws; Permits.
(i) Except as set forth in Schedule 3(h) or 3(o)(i) to the
Company Disclosure Letter, neither the Company nor any Company
Subsidiary has violated or failed to comply with any Law applicable to
its business, properties or operations, except for violations and
failures to comply that would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(ii) The permits, licenses, approvals, franchises,
registered and common law trademarks, service marks, trade names,
copyrights (and applications for each of the foregoing), notices and
authorizations issued by Governmental Authorities (collectively, the
"Permits") and held by the Company and the Company Subsidiaries are
all the Permits required for the conduct by the Company and the
Company Subsidiaries of their respective businesses. All the Permits
are in full force and effect, and neither the Company nor any Company
Subsidiary has engaged in any activity which to the Company's
knowledge would cause or permit revocation or suspension of any such
Permit, and no action or proceeding looking to or contemplating the
revocation or suspension of any such Permit is pending or, to the
knowledge of the Company, threatened. To the Company's knowledge,
there are no existing defaults or events of default by the Company or
any Company Subsidiary under any Permit and no event or state of facts
has occurred which with notice or lapse of time or both would
constitute a default by the Company or any Company Subsidiary under
any such Permit. The Company does not have any knowledge of any
default or claimed or purported or alleged default or state of facts
which with notice or lapse of time or both would constitute a default
on the part of any Person other than the Company or any Company
Subsidiary that is a party to such Permit in the performance of any
obligation to be performed or paid by such Person under any Permit.
The use by the Company of any proprietary rights relating to any
Permit does not involve any claimed infringement of such Permit or
rights. The consummation of the transactions contemplated hereby and
by the other Transaction Documents will not affect the continuation,
validity or effectiveness of the Permits or require the consent of any
Person under any of the Permits. Except as set forth in paragraph
(iii) below, the Company is not required to be licensed by any
governmental or regulatory body.
(iii) The operations of the Company are (A) licensed under
the laws of Arkansas, Florida, New Hampshire, Maine, Oregon, South
Carolina, Tennessee, Texas and Utah (and application has been made for
a license to operate as a professional employer organization in the
State of Minnesota) and in each other state
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where the failure to be licensed would have a Material Adverse Effect
on the Company and (B) registered in Kentucky, Massachusetts,
Minnesota, Nevada, New Mexico, and Rhode Island and in each other
state where the failure to be registered would have a Material Adverse
Effect on the Company. The Company has satisfied (or with respect to
Minnesota is in the process of satisfying) all requirements for
obtaining the licenses and registrations in each state listed or
otherwise referred to in the immediately preceding sentence and is in
compliance in all material respects with all other applicable Laws,
including, but not limited to, those Laws regulating professional
employer organizations in each state in which it operates.
(p) Contracts; Debt Instruments.
(i) To the Company's knowledge, neither the Company nor any
Company Subsidiary is in violation of or in default under (nor does
there exist any condition which upon the passage of time or the giving
of notice or both would cause such a violation of or default under)
any loan or credit agreement, note, bond, mortgage or indenture, or
any other material contract, agreement, arrangement or understanding,
to which it is a party or by which it or any of its properties or
assets is bound, except as set forth in Schedule 3(p) to the Company
Disclosure Letter and except for violations or defaults that would
not, individually or in the aggregate, result in a Material Adverse
Effect.
(ii) Except as set forth on Schedule 3(p) hereto or filed as
an exhibit to a Company SEC Document filed prior to the date hereof,
the Company has no:
(A) Contract or agreement (other than client
service agreements) involving amounts payable to the Company
in each case during any 12-month period, which will
aggregate $500,000 or more;
(B) Management or employment contract or
collective bargaining or other labor union agreement;
(C) Contract or agreement for the purchase, sale
or lease of goods, materials, equipment, supplies or capital
assets or for the rendering of services (excluding any
insurance or benefit plan contracts or agreements) involving
payments by the Company which will aggregate $500,000 or
more in any 12-month period or which require more than 30
days' notice in order for such commitments to be terminated
without liability to the Company;
(D) Loan, factoring, guaranty, credit line or
subordination agreement;
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(E) Joint venture or other agreement involving
sharing of profits;
(F) Outstanding offer or bid which, if accepted,
would result in a contract (other than client service
agreements) requiring the Company to pay, or that there be
paid to the Company, in the aggregate, $500,000 or more in
any 12-month period; or
(G) Material contract, commitment, or obligation
not made in the ordinary course of business.
True and complete copies of all such contracts and other documents
noted in Schedule 3(p)(ii) have been furnished to the Purchaser. The
Company is not a party to or bound by any executory or presently
existing contract, agreement or other arrangement which has had, or
which Company believes or has reason to believe may in the future
have, a Material Adverse Effect. All contracts and other agreements to
which the Company is a party are in full force and effect and are
enforceable by the Company against all other parties thereto in all
material respects.
(iii) True and complete copies of the Company's form of
client service agreement (the "Form Client Service Agreement"),
together with all forms of addenda thereto, have been furnished to the
Purchaser. Each of the client service agreements to which the Company
or any Company Subsidiary is a party or is bound is substantially in
the form of the Form Client Service Agreement and each of the addenda
attached thereto is substantially similar to one of the forms of
addenda previously furnished to the Purchaser.
(q) State Takeover Statutes. The Board of Directors of the Company has
approved pursuant to Section 203(a)(1) of the Delaware General Corporation Law
the following transactions pursuant to which the Purchaser may be deemed to be
an "interested stockholder" (as defined in the Delaware General Corporation
Law): (i) the issuance of the Unit Stock and the Warrants to the Purchaser at
the Closing, (ii) the issuance of the Warrant Stock to the Purchaser upon the
exercise of the Warrants pursuant to, and the other transactions to be effected
in accordance with, the Warrant Agreement, (iii) the exercise by the Purchaser
of the preemptive rights pursuant to Section 9(a) hereof (regardless of whether
the Purchaser's Interest is greater than or less than 15% at the time of
exercise of such rights), (iv) the exercise by the Purchaser of other purchase
rights pursuant to Section 9(b) hereof (regardless of whether the Purchaser's
Interest is greater than or less than 15% at the time of exercise of such
rights) and (v) the transactions to be effected in accordance with the Marketing
Agreement and the Registration Rights Agreement and, accordingly, the
restrictions contained in Section 203 of the Delaware General Corporation Law
regarding business combinations with interested stockholders will not apply to
the Purchaser so long as the Purchaser engages in any of the transactions set
forth in (i) through (v) above. The Company also has taken all actions
necessary, if any, to exempt the transactions to be effected between the
Purchaser and the
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Company and its Affiliates from the operation of any other applicable "business
combination" or anti-takeover statute or similar statute enacted under any state
laws or the federal laws of the United States, or any similar statute or
regulation.
(r) Insurance. The Company maintains commercial property (including
business interruption coverage), commercial general liability, automobile
liability, product liability, professional liability, employment practices
liability, workers' compensation, employer's liability and umbrella liability
with reputable insurance carriers, which the Company reasonably believes provide
adequate coverage for all normal risks incident to the business of the Company
and the Company Subsidiaries and their respective properties and assets. The
Company believes that the insurance policies and bonds maintained by it are in
such amounts and cover such losses and risks as are generally maintained by
comparable businesses.
(s) Worksite Employee Numbers. For the month of December 1997, the
number of paid worksite employees of the Company was approximately 29,700. As of
December 31, 1997, the Company had paid or accrued all salaries, wages,
employers' portion of social security and Medicare taxes , employee benefit plan
premiums, insurance premiums, employment related taxes, health care and workers'
compensation costs, state unemployment taxes and administrative costs and
related expenses with respect to such worksite employees due and payable by such
dates and since December 31, 1997, the Company has continued to pay or accrue
such amounts as such obligations have become due and payable.
(t) Software.
(i) Except as specified on Schedule 3(t) to the Company
Disclosure Letter, the Company owns all right, title and interest in
and to, or holds valid licenses or sub-licenses to use, all of the
computer software used by the Company in its operations, free and
clear of any liens, claims or encumbrances of any kind or nature
(excluding the rights of the owner or licensor in the case of software
licensed or sub-licensed by the Company from others). Except as
specified on Schedule 3(t) to the Company Disclosure Letter, all
computer software owned by the Company was developed by the Company
entirely through the Company's own efforts and for its own account.
The use by the Company of computer software licensed to the Company
from third parties (including the sublicensing of such licensed
software to customers) does not violate the terms of the respective
license agreements with respect to such licensed software.
(ii) Except as set forth on Schedule 3(t) to the Company
Disclosure Letter, no director, officer or employee of the Company
owns, directly or indirectly, in whole or in part, any computer
software or other intellectual property right which the Company is
using or which is necessary for the business of the Company as now
conducted.
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(iii) All computer software owned by the Company is fully
Year 2000 Compliant (as defined below), and, to the Company's
knowledge after due inquiry, all software owned by third parties and
licensed to the Company is fully Year 2000 Compliant. "Year 2000
Compliant" means (A) the computer software is capable of correctly
processing, providing and receiving date data within and between the
twentieth and twenty-first century (including accounting for all
required leap year calculations); and (B) all date fields in the
computer software use four digit year fields.
(u) Brokers. No broker, investment banker, financial advisor or other
Person (the "Financial Advisors"), other than Morgan Stanley & Co. Incorporated,
has been used or retained by the Company in connection with the transactions
contemplated hereby and by the other Transaction Documents based upon
arrangements made by or on behalf of the Company or any Company Subsidiary. The
Company shall be responsible for any and all expenses related to its Financial
Advisors, including Morgan Stanley & Co. Incorporated.
SECTION 4. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants to the Company as follows:
(a) Investment Representations. The Purchaser is purchasing the Common
Stock and Warrants pursuant to this Agreement for its own account, for
investment purposes and not with a view to the distribution thereof; provided,
however, that the foregoing representation shall not be construed as imposing
any limitation on the Purchaser's right to transfer Common Stock or Warrants
that is not otherwise expressly set forth in this Agreement or the Warrant
Agreement or required under applicable law. None of the Purchaser or any of its
Affiliates owns any capital stock of the Company and, except to the extent
contemplated by the terms of this Agreement, none of the Purchaser or any of its
Affiliates has any option or other right to acquire capital stock of the
Company.
(b) Organization. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted.
(c) Authorization. The Purchaser has full corporate power and
authority to execute and deliver this Agreement and the other Transaction
Documents, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the other Transaction Documents by the Purchaser, the
performance by the Purchaser of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Purchaser. This Agreement has been, and each of the
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other Transaction Documents will be at the Closing, duly executed and delivered
by the Purchaser and this Agreement constitutes, and, assuming the due execution
and delivery thereof by the Company, each of the other Transaction Documents
upon due execution and delivery will constitute, the valid and binding agreement
of the Purchaser, enforceable against the Purchaser in accordance with its
respective terms, except as such enforceability may be affected by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors rights generally and other than general equitable principles.
(d) Absence of Restrictions and Conflicts. The execution, delivery and
performance of this Agreement and of the Transaction Documents by the Purchaser
do not and will not, and the consummation of the transactions contemplated
hereby and by the other Transaction Documents will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both) under or give rise to a right of termination, cancellation or acceleration
of any obligation or to loss of a benefit or alteration of rights or obligations
under, or result in the creation of any Lien upon any of the properties or
assets of the Purchaser under, (A) the articles of incorporation or Bylaws of
the Purchaser, (B) any loan or credit agreement, note, bond, mortgage,
indenture, reciprocal easement agreement, lease or other agreement, instrument,
permit, concession, contract, franchise or license to which the Purchaser is a
party or by which any of its assets are bound, or (C) subject to the
governmental filings and other matters referred to in the following sentence,
any Laws applicable to the Purchaser or its properties or assets, other than, in
the case of clause (B) or (C), any such conflicts, violations, defaults, rights
or Liens that neither individually nor in the aggregate would (x) have a
material adverse effect on the business, assets, financial condition, results of
operations or prospects of the Purchaser or (y) prevent or delay in any material
respect the consummation of any of the transactions contemplated hereby or by
the other Transaction Documents. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Authority is
required by or with respect to the Purchaser in connection with the execution
and delivery of this Agreement and the other Transaction Documents by the
Purchaser or the consummation by the Purchaser of the transactions contemplated
hereby or thereby, except for (A) the filing with the SEC of such reports under
Section 13(a) of the Exchange Act, as may be required in connection with this
Agreement and such transactions, (B) filings required under the HSR Act and (C)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings which, if not obtained or made, would not prevent or
delay in any material respect the consummation of any of the transactions
contemplated hereby or by the other Transaction Documents or otherwise prevent
the Company from performing its obligations under this Agreement or any other
Transaction Document in any material respect or have, individually or in the
aggregate, a material adverse effect on the business, assets, financial
condition, results of operations or prospects of the Purchaser.
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(e) Brokers. No Financial Advisor, other than BT Wolfensohn, has been
used or retained by the Purchaser in connection with the transactions
contemplated hereby and by the other Transaction Documents based upon
arrangements made by or on behalf of the Purchaser. The Purchaser shall be
responsible for any and all expenses related to its Financial Advisors,
including BT Wolfensohn.
(f) Availability of Funds. The Purchaser has available sufficient
liquid funds to pay to the Company the Purchase Price on the Closing Date.
SECTION 5. Covenants.
(a) Pre-Closing Conduct of Business by the Company. During the period
from the date of this Agreement to the Closing Date, the Company shall, and
shall cause the Company Subsidiaries each to, carry on its businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and use commercially reasonable efforts to preserve intact
its current business organization, goodwill and ongoing businesses. Without
limiting the generality of the foregoing, the following additional restrictions
shall apply: during the period from the date of this Agreement to the earlier of
the (A) termination of this Agreement and (B) Closing Date, the Company shall
not and shall cause the Company Subsidiaries not to (and not to authorize or
commit or agree to) without the prior written consent of the Purchaser:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in stock in respect of any of the Company's or
any Company Subsidiary's capital stock, (B) split, combine or
reclassify any shares of Common Stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of such shares of Common Stock or (C)
purchase, redeem or otherwise acquire any shares of Common Stock of
the Company or any options, warrants or rights to acquire, or security
convertible into, shares of such Common Stock (other than the
contemplated repurchase by the Company of up to 150,000 shares of
Common Stock pursuant to the Repurchase Agreements); and
(ii) except for the exercise of stock options or warrants
outstanding on the date of this Agreement, the issuance of Common
Stock pursuant to Company's 1997 Employee Stock Purchase Plan, the
issuance of employee stock options pursuant to other benefit plans
which options are currently reserved for issuance under such plans or
in connection with any automatic grants of options or restricted stock
to non-employee directors pursuant to any existing employee benefit
plan of the Company, issue, deliver or sell, or grant any option or
other right in respect of, any shares of Common Stock, any other
voting securities of the Company or any Company Subsidiary or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities.
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(b) Pre-Closing Access to Information. The Company shall, and shall
cause each of the Company Subsidiaries to, afford to the Purchaser and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of the Purchaser, reasonable access during normal business hours
during the period prior to the Closing Date to all their respective properties,
books, contracts, commitments, personnel and records and, during such period,
the Company shall, and shall cause each of the Company Subsidiaries to, furnish
promptly to the Purchaser (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) subject to the
Confidentiality Agreement, all other information concerning its business,
properties and personnel as Purchaser may reasonably request.
(c) Post-Closing Access to Business Information. Commencing on the
date hereof and for so long as either (i) the Purchaser Nominee (as defined in
Section 6 hereof) is on the Board of Directors of the Company or (ii) the
Purchaser's Interest is at least 10%, the Company shall furnish to the Purchaser
such information regarding the Company and the Company Subsidiaries as is
furnished to the members of the Board of Directors of the Company. The
information currently provided to members of the Board of Directors is described
in Schedule 5(c) hereto. If the Company determines to provide the members of its
Board of Directors with less information or information of a different type from
that currently being furnished to members of the Board of Directors, as
described in Schedule 5(c) hereto, then in addition to the information otherwise
required to be furnished to the Purchaser pursuant to this Section 5(c), the
Company shall furnish to the Purchaser information of the type described on
Schedule 5(c) at such times as are specified on such schedule.
(d) Public Company Information. So long as the Company is subject to
the periodic reporting requirements of the Exchange Act and for so long as the
Purchaser's Interest is at least 5%, the Company will:
(i) file with the SEC on or before the required date all
regular or periodic reports required pursuant to the Exchange Act; and
(ii) use its reasonable commercial efforts to make publicly
available information concerning the Company sufficient to allow the
Purchaser to dispose in accordance with this Agreement and the Warrant
Agreement of all or a portion of the Purchased Stock, the Warrants or
the Warrant Stock pursuant to Rule 144 (or any successor provision)
promulgated by the SEC under the Securities Act.
(e) Private Company Information. If the Company shall cease to be
subject to the periodic reporting requirements of the Exchange Act and for so
long as the Purchaser's Interest is at least 5%, the Company will furnish, or
will cause to be furnished, to the Purchaser copies of the following financial
statements, reports and information:
(i) promptly when available and in any event within 90 days
after the close of each Fiscal Year, a consolidated balance sheet at
the close of such Fiscal
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Year, and related consolidated statements of operations, stockholders'
equity and cash flows for such Fiscal Year, of the Company and the
Company Subsidiaries (with comparable information at the close of and
for the prior Fiscal Year), certified (in the case of consolidated
statements) without qualification by Ernst & Young or other nationally
recognized independent public accountants; and
(ii) promptly when available and in any event within 45 days
after the close of each Fiscal Quarter, consolidated balance sheets at
the close of such Fiscal Quarter, and consolidated statements of
operations, stockholders' equity and cash flows for such Fiscal
Quarter and for the period commencing at the close of the previous
Fiscal Year and ending with the close of such Fiscal Quarter, of the
Company and the Company Subsidiaries (with comparable information at
the close of and for the corresponding Fiscal Quarter of the prior
Fiscal Year and for the corresponding portion of such prior Fiscal
Year), certified by the chief financial or executive officer of the
Company.
(f) Inconsistent Agreements. The Company will not, and will not permit
any Company Subsidiary to, take any action which would (i) impair or adversely
affect the right of the Purchaser to exercise the Warrants or exercise any
rights of the Purchaser pursuant to the Transaction Documents, or (ii) breach
any of the covenants or agreements of the Company in the Transaction Documents.
The Company has taken and will take all action necessary to assure that the
Purchaser is an "exempted holder" pursuant to any shareholder rights plan or
"poison pill" plan of the Company (a "Rights Plan") so long as the Purchaser's
Interest does not exceed 19.9%; provided, that, if the Purchaser's Interest is
reduced below 19.9% due to dispositions of Unit Stock by the Purchaser (and not
through the issuance of equity by, or any other action of, the Company), the
ownership threshold up to which the Purchaser will be an "exempted holder" under
a Rights Plan will be reduced to the greater of the Purchaser's Interest
following such dispositions and 15%. The Company will not amend or modify a
Rights Plan in any manner that would adversely affect the Purchaser, without the
Purchaser's prior written consent.
(g) Certain Actions. Subject to the terms and conditions herein
provided, each of the parties will use its reasonable commercial efforts to
cooperate with the other party (i) to, secure all necessary consents, approvals,
authorizations and exemptions from all third parties, including, without
limitation, all Governmental Authorities, in connection with and to effectuate
the transactions contemplated hereby and by the other Transaction Documents and
(ii) to take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated hereby and by the other Transaction
Documents, including, without limitation, the execution of each Transaction
Document and all other certificates and instruments contemplated hereby and
thereby. If, at any time after the Closing Date, any further action is necessary
or desirable to carry out the purpose of this Agreement, the proper officers and
directors of the Company and the Purchaser shall take all such necessary action.
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(h) HSR Act Filings. Promptly after the date hereof (and in any event
within five Business Days), each of the parties shall make any filing required
under the HSR Act to be made by it and prior to the Closing each of the parties
shall use its reasonable commercial efforts to promptly make any additional
filing required under the HSR Act and to promptly respond to any request for
additional information under the HSR Act.
(i) Audit of Administaff 401(k) Plan. With respect to the current
audit by the IRS of the Administaff 401(k) Plan and Trust, the Company will
continue to use its commercially reasonable efforts to attempt to resolve the
issues raised by the audit in a manner that would not reasonably be expected to
result in a Material Adverse Effect.
SECTION 6. Board Nomination Rights.
(a) Concurrently with or prior to the Closing, (i) the Company's Board
of Directors shall increase the number of members constituting the Company's
Board of Directors by one (with the vacancy created thereby being in Class II,
whose term expires at the Company's annual meeting to be held in 2000 (the "2000
Meeting")) and (ii) the Purchaser shall be entitled to select one individual
(the "Purchaser Nominee") to fill the vacancy in Class II of the Board of
Directors of the Company created by such increase. Within 30 days following the
Closing, the Company's Board of Directors shall appoint the Purchaser Nominee to
fill the vacancy in Class II referred to in the immediately preceding sentence.
At all stockholders meetings at which Class II directors are to be elected, the
Purchaser Nominee shall be included in the slate of nominees recommended by the
Company and the Board to the stockholders of the Company for election as
directors, and the Company shall use its best efforts to cause the election of
the Purchaser Nominee at each such election. The Purchaser will confer with the
Company concerning the Purchaser's selection of the Purchaser Nominee prior to
making such selection.
(b) The Purchaser's right to elect a Purchaser Nominee and the
Company's obligation set forth in Section 6(a) above shall continue so long as
the Purchaser's Interest is greater than 5%. Subject to the preceding sentence,
any change in the structure or classification of the Board shall not affect the
Purchaser's right to have the Purchaser Nominee nominated for election to the
Board. Upon the termination, removal or resignation of a Purchaser Nominee for
any reason, the Purchaser shall have the right to appoint a new Purchaser
Nominee to fill such vacancy, and the Company shall use its best efforts to
cause the election of such new Purchaser Nominee to the Board through action of
the Board of Directors or stockholders. Further, if a Purchaser Nominee shall
not be elected as a Class II director at any election, then the Company shall
use its best efforts to ensure that the Purchaser Nominee obtains a seat on the
Board as soon as reasonably possible, whether by appointment of the Purchaser
Nominee to fill an existing or newly created vacancy on the Board, by nomination
at the next election of directors of the Company or otherwise.
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SECTION 7. Business Combinations Between the Company and the
Purchaser.
(a) Purchases of Equity Securities. Neither the Purchaser nor any of
its Affiliates shall, without the prior written consent of the Company, (i)
directly or indirectly, purchase or otherwise acquire, or propose or offer to
purchase or otherwise acquire, any Equity Securities whether by tender offer,
market purchase, privately negotiated purchase or otherwise, if, immediately
after such purchase or acquisition, the Purchaser's Interest would equal or
exceed 19.9% or (ii) directly or indirectly propose or offer to enter into a
Business Combination.
(b) Additional Limitations. Neither the Purchaser nor any of its
Affiliates shall:
(i) other than in connection with an election contest to
which Rule 14a- 11 under the Exchange Act applies, and which election
contest is either initiated by a Person other than the Purchaser, any
Affiliate or Associate of the Purchaser or any "group" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder) of which the
Purchaser or any of its Affiliates or Associates is a member (a "Third
Party") or is otherwise approved by the Board of Directors, make, or
in any way participate, directly or indirectly, in any "solicitation"
of "proxies" to vote (as such terms are used in Regulation 14A
promulgated by the SEC) or seek to advise, encourage or influence any
person or entity with respect to the voting of any shares of capital
stock of the Company, propose or otherwise solicit stockholders of the
Company for the approval of one or more stockholder proposals or
induce or attempt to induce any other individual, firm, corporation,
partnership or other entity to initiate any stockholder proposal;
(ii) deposit any Equity Securities into a voting trust or
subject any Equity Securities to any arrangement or agreement with
respect to the voting of such securities or form, join or in any way
participate in a "group" (within the meaning of Sections 13(d) or
14(d) of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder) for the purposes of acquiring, holding or
disposing of any Equity Securities;
(iii) make any public announcement with respect to a
proposed or contemplated or pending transaction of the type described
in any of Section 7(a) hereof or Section 7(b)(i), (ii) or (iv) hereof;
(iv) take any other action to seek to affect the management
or Board of Directors of the Company or any of its Affiliates or the
business, operations or affairs of the Company or any of its
Affiliates; provided, that nothing in this Section 7(c)(iv) shall
restrict the manner in which (i) the Purchaser Nominee on the Board of
Directors of the Company may vote on any matter submitted to such
Board, or (ii)
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such Purchaser Nominee participates in deliberations or discussions of
such Board in such Purchaser Nominee's capacity as a member of such
Board; or
(v) request the Company (or any of its officers, directors,
representatives, employees, attorneys, advisors, agents, affiliates or
associates) to waive, amend or modify in any material respect any
restrictions contained in this Section 7 (or to waive, amend or modify
this paragraph (v)).
(c) Exceptions. The prohibitions contained in Sections 7(a) and (b)
shall not apply in connection with the exercise by the Purchaser of any of its
rights under Section 9 hereof and shall terminate on the earliest to occur of
the following (each a "Termination Event"): (i) the commencement by a Third
Party of (A) a bona fide tender or exchange offer, conducted pursuant to Section
14(d) of the Exchange Act and the rules and regulations of the SEC promulgated
thereunder, to purchase at least a majority of the outstanding Common Stock of
the Company, provided that within ten days after the commencement of such offer
the Board of Directors either recommends acceptance of, expresses no opinion and
remains neutral toward, is unable to take a position or takes no action with
respect thereto, (B) a bona fide proposal to acquire all or substantially all of
the assets of the Company, which has been publicly announced or otherwise
disclosed to the Company stockholders and has not been rejected by the Board of
Directors within ten days of receipt by the Board of Directors or (C) a bona
fide proposal to effect a Change of Control, or to enter into any acquisition
with the Company or other business combination transaction with the Company in
which the Company is not the surviving entity or the stockholders of the Company
cease to own a majority of the outstanding equity of the Company, which has been
publicly announced or otherwise disclosed to the Company stockholders and has
not been rejected by the Board of Directors within ten days of receipt by the
Board of Directors, (ii) the Company entering into (or announcing its intention
to do so) a definitive agreement, or an agreement contemplating a definitive
agreement, for any of the transactions described in clauses (A) through (C)
above, (iii) a Change of Control, (iv) the termination of the Marketing
Agreement by the Purchaser as a result of a breach by the Company or a Company
Subsidiary, provided that the Purchaser is not then in breach of the Marketing
Agreement, (v) the failure of the Purchaser Nominee to be nominated for election
to the Board of Directors of the Company, (vi) the fifth anniversary of the
Closing Date, if, as of the fifth anniversary, the Standstill Termination
Ownership Threshold is not greater than ten percent, and (vii) the seventh
anniversary of the Closing Date; provided, that if (i) the Termination Event was
a tender or exchange offer referred to in clause (i)(A) and such tender or
exchange offer is terminated, (ii) the Termination Event was a proposal to
acquire all or substantially all of the assets of the Company referred to in
clause (i)(B) or a proposal to effect a Change of Control, or enter into any
acquisition or other business combination transaction with the Company described
in clause (i)(C) and after the ten day period referred to in clause (i)(B) or
(i)(C) such proposal is rejected by the Board of Directors of the Company, or
(iii) the Termination Event was a definitive agreement or agreement
contemplating a definitive agreement referred to in clause (ii) and such
agreement is terminated, and at the time of the termination of the exchange or
tender offer, the rejection of the proposal or the termination of the agreement,
as the case may be, the Purchaser's Interest has neither exceeded fifty
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percent nor decreased below five percent, then the restrictions set forth in
Section 7(b) shall be reinstated and those set forth in Section 7(a) shall be
reinstated at the higher of (A) 19.9% and (B) one-tenth of one percent more than
the percentage of the Common Stock of the Company on a Fully Diluted Basis
beneficially owned by the Purchaser and its Affiliates at the time of such
reinstatement.
(d) Notice of Termination Events. The Company shall notify the
Purchaser in writing, as promptly as practicable, but in any event within three
Business Days, of (i) the commencement of a tender or exchange offer of the type
described in Section 7(c)(i)(A), (ii) its receipt of a proposal of the type
described in Section 7(c)(i)(B) or (C), (iii) the Company's entering into or
announcement of its intention to enter into an agreement of the type described
in Section 7(c)(ii), (iv) a Change of Control, (v) the termination of a tender
or exchange offer of the type described in Section 7(c)(i)(A),(vi) the Company's
rejection, if any, of a proposal of the type described in Section 7(c)(i)(B) or
(C) or (vii) the termination of an agreement of the type described in Section
7(c)(ii).
SECTION 8. Restrictions on Transfer.
(a) Transfers of Unit Stock. Without the prior written consent of the
Company, (i) prior to the second anniversary of the Closing Date, neither
Purchaser nor any Affiliate or Associate of the Purchaser may sell, transfer or
otherwise dispose of any Unit Stock to any Third Party, except in accordance
with the following sentence, and (ii) during the period that commences on the
second anniversary of the Closing Date and continues until the fifth anniversary
of the Closing Date, neither Purchaser nor any Affiliate or Associate of the
Purchaser may sell, transfer or otherwise dispose of any Unit Stock to any Third
Party, except in accordance with the following sentence or Section 8(b) hereof.
Notwithstanding anything to the contrary set forth in this Section 8(a), the
provisions of this Section 8(a) and 8(b) shall not apply to any sale, transfer
or other disposition by the Purchaser or any Affiliate or Associate of the
Purchaser that holds Unit Stock (i) to any of its Subsidiaries or any entity of
which the Purchaser is, directly or indirectly, a Subsidiary provided that the
transferee agrees to be bound by the restrictions set forth in this Section 8 or
(ii) following the occurrence of a Termination Event, other than a Termination
Event of the type described in Section 7(c)(iv); provided, that if (i) the
Termination Event was a tender or exchange offer referred to in clause (i)(A) of
Section 7(c) and such tender or exchange offer is terminated, (ii) the
Termination Event was a proposal to acquire all or substantially all of the
assets of the Company referred to in clause (i)(B) of Section 7(c) or a proposal
to effect a Change of Control or enter into any acquisition or other business
combination transaction with the Company described in clause (i)(C) of Section
7(c) and after the ten day period referred to in clauses (i) (B) and (i)(C) of
Section 7(c) such proposal is rejected by the Board of Directors of the Company,
or (iii) the Termination Event was a definitive agreement or agreement
contemplating a definitive agreement referred to in clause (ii) of Section 7(c)
and such agreement is terminated, then from the date of any such termination or
rejection the restrictions set forth in this Section 8(a) and 8(b) shall again
be applicable on a prospective basis.
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(b) Restricted Securities. During the time period established pursuant
to Section 8(a), Unit Stock is transferable only as follows:
(i) pursuant to an underwritten offering of all or part of
such Unit Stock, registered under the Securities Act, provided that
the underwriters of such offering have undertaken to effect a
distribution of the Unit Stock in which no person will purchase from
the underwriters, to the knowledge of such underwriters, Unit Stock
representing more than five percent of the Common Stock outstanding on
a Fully Diluted Basis as of the date of the closing of such offering;
or
(ii) pursuant to secondary distributions, exchange
distributions, block trades, ordinary brokerage transactions or any
other method of registered distribution, provided that any broker or
dealer that participates in such distribution will undertake to effect
a distribution of the Unit Stock in which no person will purchase from
the Purchaser, to the knowledge of such broker or dealer, Unit Stock
constituting more than five percent of the Common Stock outstanding on
a Fully Diluted Basis at the time of such sale; or
(iii) pursuant to an underwritten offering of securities
convertible into Unit Stock, registered under the Securities Act,
provided that the underwriters of such offering have undertaken to
effect a distribution of such convertible securities in which no
person will purchase from the underwriters, to the knowledge of such
underwriters, securities convertible into a number of the Unit Stock
constituting more than five percent of the Common Stock outstanding on
a Fully Diluted Basis of the date of the closing of such offering; or
(iv) pursuant to a pro rata rights offering or pro rata
distribution to all holders of American Express Company common stock
("AXPress Stock"), provided that at the time of such offering or pro
rata distribution the AXPress Stock is publicly traded on a national
securities exchange; or
(v) pursuant to Rule 144 of the general rules and
regulations promulgated by the SEC under the Securities Act or any
successor rule or regulation thereof, provided that, to the
Purchaser's knowledge, no person will purchase in such transaction
Unit Stock constituting more than five percent of the Common Stock
outstanding on a Fully Diluted Basis at the time of such sale; or
(vi) Any sale, whether by private placement or other
transaction exempt from registration under the Securities Act, (other
than pursuant to clause (iv) above), so long as (I) King & Spalding or
other counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities law matters delivers an opinion to the
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Company, in form and substance reasonably satisfactory to the Company,
that the Unit Stock so proposed to be sold may be so sold or
transferred without registration under the Securities Act, and (II) to
the Purchaser's knowledge, no person will purchase in such transaction
Unit Stock constituting more than five percent of the Common Stock
outstanding on a Fully Diluted Basis at the time of such sale,
transfer or disposition.
(c) Rule 144 Information. Upon the request of the Purchaser, the
Company shall promptly supply to the Purchaser or its prospective transferees
all information regarding the Company required to be delivered in connection
with a transfer pursuant to Rule 144 or Rule 144A of the rules and regulations
promulgated by the SEC under the Securities Act.
(d) Rule 144(k) Sales. If any Unit Stock is or becomes eligible for
sale pursuant to Rule 144(k), the Company, upon the request of holders of any
such Unit Stock, shall remove the Securities Legend from the certificates for
such Unit Stock; provided, however, that if at such time, any such Unit Stock
remains subject to certain provisions of this Agreement or the Warrant
Agreement, the Company shall not remove the Legend, but shall modify it to
delete all references to restrictions or conditions on sale of the Unit Stock
except those references to restrictions or conditions which are still applicable
and specified in this Agreement or the Warrant Agreement.
(e) Legend. Each certificate for Unit Stock shall be imprinted with a
legend (the "Securities Legend") in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. SAID SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF SAID ACT OR LAWS. THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A SECURITIES
PURCHASE AGREEMENT, DATED AS OF JANUARY 27, 1998, BETWEEN
ADMINISTAFF, INC. (THE "COMPANY") AND AMERICAN EXPRESS
TRAVEL RELATED SERVICES COMPANY, INC. (THE "PURCHASER"), A
WARRANT AGREEMENT, DATED AS OF MARCH 10, 1998, BETWEEN
THE COMPANY AND THE PURCHASER, AND A REGISTRATION
RIGHTS AGREEMENT, DATED AS OF MARCH 10, 1998, BETWEEN THE
COMPANY AND THE PURCHASER,
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COPIES OF EACH OF WHICH ARE ON FILE AT THE MAIN OFFICE OF
THE COMPANY. ANY SALE OR TRANSFER OF THE SECURITIES
EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF
THOSE AGREEMENTS AND ANY SALE OR TRANSFER OF SUCH SECURITIES
IN VIOLATION OF SAID AGREEMENTS SHALL BE INVALID."
If the holders of Unit Stock deliver to the Company an
opinion of King & Spalding or such other counsel that no subsequent transfer of
Unit Stock shall require registration under the Securities Act, the Company
shall promptly upon such contemplated transfer deliver new certificates for such
Unit Stock which do not bear the Securities Legend; provided, however, that if
at such time, any such Unit Stock remains subject to certain provisions of this
Agreement, the Company shall not remove the Securities Legend, but shall modify
it to delete all references to restrictions or conditions on sale of the Unit
Stock except those references to restrictions or conditions which are still
applicable and specified in this Agreement.
(f) Termination of Rights upon Sale to the Public. Notwithstanding
anything to the contrary set forth herein, the transfer restrictions contained
in Section 8(a) and 8(b) shall terminate as to any Person (including any
underwriter), other than an Affiliate of the Purchaser, acquiring Unit Stock
from the Purchaser or an Affiliate of the Purchaser in a transfer made in
accordance with Section 8 hereof.
SECTION 9. Purchase Rights.
(a) Preemptive Rights. If, at any time after the date hereof and for
so long as (and during any period in which) the restrictions set forth in
Section 7(a) and (b) apply to the Purchaser (other than in connection with the
exercise by the Purchaser of its rights under this Section 9), the Company
determines to issue for cash consideration additional Equity Securities
(collectively, "New Securities") to any Third Party, other than Equity
Securities (i) issued or proposed to be issued to or for the benefit of any
Person(s) who serve(s) as an employee(s) (including, without limitation,
worksite employee(s), officer(s) or director(s) of the Company or any of its
Subsidiaries) or (ii) as consideration in a bona fide acquisition by the Company
of assets, operations or any business or entity (and properties or assets
ancillary or related thereto) from any Person that is not an Affiliate of the
Company prior to such acquisition, the Company shall offer the Purchaser the
right to purchase a certain portion of the New Securities as set forth below.
Upon any determination by the Company to issue New Securities in respect of
which the Purchaser has the right to purchase New Securities as contemplated in
the immediately preceding sentence, the Company shall give written notice (the
"Notice") to the Purchaser (i) stating the aggregate number of such New
Securities proposed to be issued, the terms upon which such New Securities are
to be issued (which terms may include an estimated price range for such New
Securities and, if the New Securities are to be priced based upon the reported
trading or closing prices on a national securities exchange or the Nasdaq of
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any class of Equity Securities, such terms may include a description of the
basis on which such price will be so determined) and the consideration to be
paid therefor, (ii) stating the date proposed for issuance of such New
Securities (which date, the "Tender Date," shall be not less than 20 Business
Days after the date on which such Notice is given), and (iii) requesting that
the Purchaser indicate in writing within ten Business Days after its receipt of
the Notice whether it will purchase such number of shares of the New Securities
as may be required to cause the Purchaser's Interest immediately prior to such
issuance of New Securities to equal the Purchaser's Interest immediately
following the issuance of the New Securities. Except as provided above, the
Purchaser shall purchase its New Securities on the same terms and for the same
price as specified in the Notice, unless such terms have been modified with
respect to the Third Party Purchaser(s), in which event the Purchaser shall
purchase its New Securities on the terms and for the price paid by such Third
Party Purchaser(s); provided, however, that if the modified terms are not
acceptable to the Purchaser, the Purchaser may revoke its election to purchase;
provided, further that if the price is not fixed at time of Notice but is on a
basis described in the Notice and the price paid by the Third Party Purchaser
is unacceptable to the Purchaser, the Purchaser may revoke its election to
purchase. Unless otherwise agreed, the closing of such purchase shall occur on
the Tender Date.
(b) Other Purchase Rights. If, at any time after the date hereof and
for so long as (and during any period in which) the restrictions set forth in
Section 7(a) and 7(b) apply to the Purchaser (other than in connection with the
exercise by the Purchaser of its rights under this Section 9), the Purchaser's
Interest is reduced to less than 19.9% because of issuances by the Company of
any securities, the Purchaser shall have the right to acquire securities of the
Company through open market purchases or otherwise to increase the Purchaser's
Interest to that which it was immediately prior to such issuances; provided,
however that if the Purchaser has disposed of securities of the Company and
thereby reduced the Purchaser's Interest after any such issuance and prior to
the exercise of the rights under this Section 9(b), then the Purchaser shall
have the right pursuant to this Section 9(b) to acquire securities of the
Company through open market purchases or otherwise to increase the Purchaser's
Interest to that which it would have been immediately prior to such issuance if
the Purchaser had disposed of the securities prior to the issuance.
SECTION 10. Conditions to Each Party's Obligations. The respective
obligations of each party to effect the transactions contemplated hereby shall
be subject to the fulfillment at or prior to the Closing of each of the
following conditions:
(a) Injunction. As of the Closing, there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction to the effect
that the purchase and sale of the Common Stock and the Warrants contemplated
hereby may not be consummated as herein provided, no proceeding or lawsuit shall
have been commenced by any governmental or regulatory agency for the purpose of
obtaining any such injunction, writ or preliminary restraining order and no
written notice shall have been received from any such agency indicating an
intent to restrain, prevent, materially delay or restructure the transactions
contemplated by this Agreement.
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(b) Regulatory Approvals. The Purchaser and the Company shall have
obtained the approval of all Governmental Authorities (or all applicable waiting
periods shall have expired) necessary for the consummation of the acquisition by
the Purchaser of the Units, as contemplated under this Agreement, including
without limitation, those approvals required under the HSR Act.
(c) Marketing Agreement. Each of the Purchaser, AFST, ASF Companies
and the Company shall have executed and delivered the Marketing Agreement.
(d) Warrant Agreement. Each of the Purchaser and the Company shall
have executed and delivered the Warrant Agreement.
(e) Registration Rights Agreement. Each of the Purchaser and the
Company shall have executed and delivered the Registration Rights Agreement.
SECTION 11. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to effect the transactions contemplated hereby
shall be subject to the fulfillment at or prior to the Closing of each of the
following additional conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in Section 3 of this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date as though made on and (except for representations and warranties
given as of a specified date) as of the Closing Date.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all covenants and agreements required to be
performed by it on or prior to the Closing under this Agreement.
(c) Certificates. The Company shall have furnished the Purchaser with
a certificate of its appropriate officers as to compliance with the conditions
set forth in Sections 11(a) and (b).
(d) Warrant Certificates. Concurrently with the Closing, the Company
shall deliver to the Purchaser Warrant Certificates registered in the
Purchaser's name evidencing the Warrants.
(e) Stock Certificates. Concurrently with the Closing, the Company
shall deliver to the Purchaser Stock Certificates registered in the Purchaser's
name evidencing the Common Stock to be purchased hereunder.
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(f) No Material Adverse Change. There shall not have occurred any
material adverse change since the date of this Agreement in the business,
assets, results of operations, financial condition or prospects of the Company
or physical loss or damage to any of the properties or assets (whether or not
covered by insurance) of the Company which adversely affects or impairs the
business now being conducted by the Company, and the Purchaser shall have
received a certificate, signed by an executive officer of the Company and dated
the Closing Date, to such effect.
(g) Administaff 401(k) Plan and Trust. The Purchaser shall not have
concluded, based on discussions with or proclamations, declarations or advice of
the IRS, that it is reasonably likely that a penalty will be applied
retroactively by the IRS with respect to the Administaff 401(k) Plan and Trust.
(h) Opinions of Counsel to the Company. The Purchaser shall have
received an opinion of Andrews & Kurth, L.L.P., counsel to the Company, dated
the Closing Date, in a form reasonably acceptable to the Purchaser and covering
the matters set forth in Exhibit E-1 hereto and the opinion of John H. Spurgin,
general counsel to the Company, dated the Closing Date, in a form reasonably
acceptable to the Purchaser and covering the matters set forth in Exhibit E-2
hereto.
SECTION 12. Conditions to Obligations of the Company. The obligations
of the Company to effect the transactions contemplated hereby shall be subject
to the fulfillment at or prior to the Closing of each of the following
additional conditions:
(a) Representations and Warranties. The representations and warranties
of the Purchaser set forth in Section 4 of this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date as though made on and (except for representations and warranties
given as of a specified date) as of the Closing Date.
(b) Performance of Obligations of the Purchaser. The Purchaser shall
have performed in all material respects all covenants and agreements required to
be performed by it on or prior to the Closing under this Agreement.
(c) Certificates. The Purchaser shall have furnished the Company with
a certificate of its appropriate officers as to compliance with the conditions
set forth in Sections 12(a) and (b).
(d) Payment. The Purchaser shall deliver to the Company a certified
check in immediately available funds (or, at the Company's option, a wire
transfer of immediately available funds to an account to be designated by the
Company by notice given to the Purchaser not later than three Business Days
prior to the Closing) in the amount of $17,733,150.
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SECTION 13. Indemnification.
(a) The Company.
(i) The Company shall defend and indemnify the Purchaser and
hold the Purchaser harmless from and against any and all losses,
liabilities, damages, costs (including, without limitation, court
costs) and expenses (including, without limitation, reasonable
attorneys' fees) (collectively, "Costs") which the Purchaser or its
Subsidiaries or Affiliates, any of their respective officers,
directors, employees, agents or representatives or any of the heirs,
executors, successors or assigns of any of the foregoing
(collectively, the "Purchaser Indemnified Parties") incurs as a result
of, or with respect to, any inaccuracy in or breach of any
representation, warranty, covenant or agreement by or on behalf of the
Company contained in this Agreement, any Transaction Document or
contained in any certificate, agreement or document of the Company
delivered to the Purchaser in connection with the consummation of the
transactions contemplated hereby; provided that the Purchaser
Indemnified Parties shall not make a claim against the Company for
indemnification pursuant to this Section 13(a)(i) for any Costs unless
and until the aggregate amount of such Costs exceeds $100,000 (the
"Company Deductible"), in which event the Purchaser Indemnified
Parties may claim indemnification for all such Costs to the extent the
amount of such Costs exceeds the amount of the Company Deductible.
(ii) In the event that any Purchaser Indemnified Party shall
receive written notice of any claim or proceeding against a Purchaser
Indemnified Party that, if successful, might result in a claim under
this Section 13(a) by a Purchaser Indemnified Party, the Purchaser
Indemnified Party shall give the Company written notice of such claim
or proceeding and shall permit the Company to participate in the
defense of such claim or proceeding by counsel of the Company's own
choosing and at the expense of the Company; provided that, if the
defendants in any such action include both the Purchaser Indemnified
Party and the Company and the Purchaser Indemnified Party shall have
reasonably concluded that there may be reasonable defenses available
to it which are different from or additional to those available to the
Company, or if the interests of the Purchaser Indemnified Party
reasonably may be deemed to conflict with the interests of the
Company, the Purchaser Indemnified Parties shall collectively have the
right to select a single separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action,
with counsel to the Company (but the Purchaser Indemnified Party shall
have no right to settle or compromise any such claim, action or
proceeding), and the expenses and fees of such separate counsel and
other expenses incurred by the Purchaser Indemnified Party in relation
to such participation shall constitute Costs subject to indemnity by
the Company. Upon written request of the Purchaser, the Company shall
assume the carriage of the defense of any such claim or proceeding.
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(b) The Purchaser.
(i) The Purchaser shall defend and indemnify the Company and
hold the Company wholly harmless from and against any and all Costs
which the Company or its Subsidiaries or Affiliates, any of their
respective officers, directors, employees, agents or representatives
or any of the heirs, executors, successors or assigns of any of the
foregoing (collectively, the "Company Indemnified Parties") incurs as
a result of, or with respect to, any inaccuracy in or breach of any
representation, warranty, covenant or agreement by or on behalf of the
Purchaser contained in this Agreement, any Transaction Document or
contained in any certificate, agreement or document of the Purchaser
delivered to the Company in connection with the consummation of the
transactions contemplated hereunder; provided that the Company
Indemnified Parties shall not make a claim against the Purchaser for
indemnification pursuant to this Section 13(b)(i) for any Costs unless
and until the aggregate amount of such Costs exceeds $100,000 (the
"Purchaser Deductible"), in which event the Company Indemnified
Parties may claim indemnification for all Costs to the extent the
amount of such Costs exceeds the amount of the Purchaser Deductible.
(ii) In the event that any Company Indemnified Party shall
receive written notice of any claim or proceeding against a Company
Indemnified Party that, if successful, might result in a claim under
this Section 13(b) by a Company Indemnified Party, the Company
Indemnified Party shall give the Purchaser written notice of such
claim or proceeding and shall permit the Purchaser to participate in
defense of such claim or proceeding by counsel of the Purchaser's own
choosing and at the expense of the Purchaser; provided that, if the
defendants in any such action include both the Company Indemnified
Party and the Purchaser and the Company Indemnified Party shall have
reasonably concluded that there may be reasonable defenses available
to it which are different from or additional to those available to the
Purchaser, or if the interests of the Company Indemnified Party
reasonably may be deemed to conflict with the interests of the
Purchaser, the Company Indemnified Parties shall collectively have the
right to select a single separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action,
and the Purchaser shall bear the expenses and fees of such separate
counsel and other expenses incurred by the Company Indemnified Party
in relation to such participation shall constitute Costs subject to
indemnity by the Purchaser. Upon written request of the Company
Indemnified Party, the Purchaser shall assume the carriage of the
defense of any such claim or proceeding.
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(c) Claims Period. For purposes of this Agreement, a "Claims Period"
shall be the period during which a claim for indemnification may be asserted
under this Agreement by a Purchaser Indemnified Party or a Company Indemnified
Party. The Claims Periods under this Agreement shall commence on the date of
this Agreement and shall terminate as follows:
(i) with respect to Costs incurred by a Purchaser
Indemnified Party as a result of, or with respect to, (A) any
inaccuracy in or breach of any representation or warranty of the
Company contained in Section 3(c)(ii) or 3(d) of this Agreement or (B)
any inaccuracy in or breach of any covenant or agreement by or on
behalf of the Company contained in this Agreement, any Transaction
Document or any certificate, agreement or document of the Company
delivered to the Purchaser in connection with the consummation of the
Transactions contemplated hereby, the Claims Period shall continue
indefinitely, except as limited by law (including by applicable
statutes of limitation);
(ii) with respect to Costs incurred by a Purchaser
Indemnified Party as a result of, or with respect to, any inaccuracy
in or breach of any representation or warranty of the Company
contained in this Agreement (other than Section 3(c)(ii) or 3(d)), any
Transaction Document or any certificate, agreement or document of the
Company delivered to the Purchaser in connection with the consummation
of the Transactions contemplated hereby, the Claims Period shall
terminate on the earlier of (a) April 30, 1999 and (b) the thirtieth
day following the filing with the SEC of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998;
(iii) with respect to Costs incurred by a Company
Indemnified Party as a result of, or with respect to any inaccuracy in
or breach of any covenant or agreement by or on behalf of the
Purchaser contained in this Agreement, any Transaction, Document or
any certificate, agreement or document of the Purchaser delivered to
the Company in connection with the consummation of the Transactions
contemplated hereby, the Claims Period shall continue indefinitely,
except as limited by law (including any applicable statutes of
limitation); and
(iv) with respect to Costs incurred by a Company Indemnified
Party as a result of, or with respect to, any inaccuracy in or breach
of any representation or warranty of the Purchaser contained in this
Agreement, any Transaction Document or any certificate, agreement or
document of the Purchaser delivered to the Company in connection with
the consummation of the Transactions contemplated hereby, the Claims
Period shall terminate on the earlier of (a) April 30, 1999 and (b)
the thirtieth day following the filing with the SEC of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
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Notwithstanding the foregoing, if prior to the close of business on
the last day of the applicable Claims Period, the Company or the
Purchaser shall have been properly notified of a claim for indemnity
hereunder by a Purchaser Indemnified Party or a Company Indemnified
Party, respectively, and such claim shall not have been finally
resolved or disposed of at such date, such claim shall continue to
survive and shall remain a basis for indemnity hereunder until such
claim is finally resolved or disposed of in accordance with the terms
hereof to the satisfaction of the Purchaser Indemnified Party or the
Company Indemnified Party, as the case may be.
SECTION 14. Termination. This Agreement may be terminated at any time
prior to the Closing (the "Termination Date"):
(i) in writing by mutual agreement of the Purchaser and the
Company;
(ii) by written notice from the Company to the Purchaser, if
the conditions set forth in Sections 10 and 12 hereof shall not have
been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its
nature cannot be cured or eliminated) by the Purchaser on or before
May 15, 1998, provided that the Company is not then in material
default under the Agreement;
(iii) by written notice from the Purchaser to the Company,
if the conditions set forth in Sections 10 and 11 hereof shall not
have been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its
nature cannot be cured or eliminated) by the Company on or before May
15, 1998, provided that the Purchaser is not then in material default
under the Agreement; and
(iv) by written notice from the Purchaser to the Company,
upon (A) the occurrence of any of the events described in Sections
7(c)(i), (ii) or (iii) or (B) a public announcement that a bona fide
proposal has been made, or the Company's entering into a definitive
agreement, regarding, or the occurrence of, any transaction or series
of related transactions involving, an acquisition of, a merger or
consolidation with, or a purchase of all or a substantial portion of
the equity securities or all or substantially all of the assets of,
any business or any corporation, partnership, limited liability
company, joint venture, association, business trust or other business
organization or division thereof or interest therein.
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SECTION 15. Notices. All notices, consents, approvals, agreements and
other communications provided hereunder shall be in writing and delivered
personally, by mail or by telecopy and shall be sufficiently given to the
Purchaser and the Company if addressed or delivered to them at the following
addresses:
If to the Purchaser: American Express Company
American Express Tower
World Financial Center
200 Vesey Street
New York, New York 10285
Attention: General Counsel
Telephone No.: (212) 640-5789
Facsimile No.: (212) 267-9061
with copies to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30301-1763
Attention: John J. Kelley III
Telephone No.: (404) 572-3401
Facsimile No.: (404) 572-5146
If to the Company: Administaff, Inc.
19001 Crescent Springs Drive
Kingswood, Texas 77339-3802
Attention: General Counsel
Telephone No.: (281) 348-3251
Facsimile No.: (281) 348-2859
with a copy to: Andrews & Kurth, L.L.P.
4200 Texas Commerce Tower
600 Travis Street
Houston, Texas 77002
Attention: G. Michael O'Leary
Telephone No.: (713) 220-4360
Facsimile No.: (713) 220-4593
or at such other address as any party may designate to any other party by
written notice. All such notices and communications shall be deemed to have
been duly given: (i) at the time delivered by hand, if personally delivered,
(ii) when received, if deposited in the mail, postage prepaid and (iii) when
transmission is verified, if telecopied.
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SECTION 16. Costs and Expenses. Each party shall pay the fees and
expenses incurred by it in connection with the negotiation, preparation,
execution, and delivery of this Agreement and the related agreements and other
documents.
SECTION 17. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Purchaser shall bind and
inure to the benefit of their respective successors and assigns, including those
by operation of law, merger or consolidation.
SECTION 18. Survival of Representations. Except as specifically
provided herein, all representations, warranties, covenants and agreements made
by the parties in this Agreement and pursuant to the terms hereof shall survive
indefinitely, notwithstanding any investigation heretofore or hereafter made by
any of them or on behalf of any of them. However, any claims by the parties
hereto shall be subject to the time limitations, if any, set forth in Section 13
hereof.
SECTION 19. Governing Law. This Agreement, the Purchased Stock and the
Warrant Securities shall be governed by those provisions of the General
Corporation Law of the State of Delaware and Article 8 of the Delaware Uniform
Commercial Code which are necessarily applicable to securities issued by a
Delaware corporation and otherwise shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the internal laws of said state.
SECTION 20. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company and the
Purchaser any legal or equitable right, remedy or claim under this Agreement;
this Agreement shall be for the sole and exclusive benefit of the Company and
the Purchaser.
SECTION 21. Counterparts. This Agreement may be executed in any number
of counterparts and each such counterpart shall for all purposes be deemed to be
an original, and all such counterparts shall together constitute one and the
same instrument.
SECTION 22. Amendments; Waiver. No provision of this Agreement may be
amended or waived except by an instrument in writing signed by the party sought
to be bound. No failure or delay by any party in exercising any right or remedy
hereunder shall operate as a waiver thereof, nor shall a waiver of a particular
right or remedy on one occasion be deemed a waiver of any other right or remedy
or a waiver of the same right or remedy on any subsequent occasion.
SECTION 23. Jurisdiction. Each of the parties hereto hereby agrees
that any legal action or proceeding against such party with respect to this
Agreement, the Unit Stock, or any of the Transaction Documents may be brought in
the courts of the State of New York or of the United States of America for the
Southern District of New York as the other party may elect, and, by execution
and delivery hereof, such party accepts and consents for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts and agrees that such
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jurisdiction shall be exclusive, unless waived by the other party in writing,
with respect to any action or proceeding brought by such party against the
other party. Each of the parties hereto irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of the copies thereof by certified mail, return
receipt requested, postage prepaid, to it at its address set forth herein, such
service to become effective upon the earlier of (i) the date ten calendar days
after such mailing and (ii) any earlier date permitted by applicable law.
SECTION 24. Specific Performance. Each of the parties hereto
recognizes that the rights of the parties under this Agreement and the other
Transaction Documents are unique and, accordingly, the parties shall, in
addition to such other remedies as may be available to any of them at law or in
equity, have the right to enforce their rights hereunder and thereunder by
actions for injunctive relief and specific performance to the extent permitted
by law. Each of the parties hereto agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement or any of the other Transaction Documents and
hereby agrees to waive in any action for specific performance the defense that a
remedy at law would be adequate. This Agreement is not intended to limit or
abridge any rights of the parties which may exist apart from this Agreement.
SECTION 25. Confidentiality. Each of the Company and the Purchaser
shall hold, and shall use reasonable efforts to cause its and its respective
Subsidiaries, officers, employees, accountants, counsel, financial advisors and
other representatives to hold, any proprietary or confidential information in
confidence to the extent required by, and in accordance with, and will comply
with the provisions of, the Confidentiality Agreement relating to
confidentiality.
SECTION 26. Public Announcements. The Purchaser and the Company will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated hereby will be in the form agreed to by the parties
hereto prior to the execution of this Agreement.
SECTION 27. Entire Agreement. The parties hereto agree that this
Agreement, the Confidentiality Agreement and the other Transaction Documents
constitute the entire agreement among the parties with respect to the subject
matter hereof (other than agreements and other arrangements between the parties
with respect to the ongoing pilot program relating to the Company's marketing of
products of the Purchaser and the Purchaser's marketing of products of the
Company) and supersede all prior agreements and understandings between them as
to such subject matter; and there are no restrictions, agreements, arrangements,
oral or written, between any or all of the parties relating to the subject
matter hereof which are not fully expressed or referred to herein or therein.
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SECTION 28. Severability. If any provision of this Agreement shall be
held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable
as applied to any particular case in any jurisdiction or jurisdictions, or in
all jurisdictions or in all cases, because of the conflict of any provision with
any constitution, statute, rule or public policy, or for any other reason, such
circumstances shall not have the effect of rendering the provision or provisions
in question, invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute, rule or public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ADMINISTAFF, INC.
By: /s/ PAUL J. SARVADI
-------------------------------------
Name: Paul J. Sarvadi
Title: President, CEO
AMERICAN EXPRESS TRAVEL RELATED SERVICES
COMPANY, INC.
By: /s/ ANNE BUSQUET
-------------------------------------
Name: Anne Busquet
Title: President, AERS
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January 27, 1998
Administaff, Inc.
19001 Crescent Springs Drive
Kingswood, Texas 77339-3802
Re: Investment by American Express Travel Related
Services Company, Inc. in Administaff, Inc.
Ladies and Gentlemen:
Reference is hereby made to the Securities Purchase Agreement (the
"Securities Purchase Agreement"), dated as of the date hereof, between
Administaff, Inc. (the "Company") and American Express Travel Related Services
Company, Inc. (the "Purchaser") and the Warrant Agreement (the "Warrant
Agreement"), to be entered into between the Company and the Purchaser with
respect to the Warrants to be purchased by the Purchaser under the Securities
Purchase Agreement.
In connection with the Securities Purchase Agreement and the Warrant
Agreement, the parties and their affiliates agree to treat and report for all
purposes the Warrants issued or to be issued pursuant to the Securities Purchase
Agreement and the Warrant Agreement as part of an investment unit together with
Common Stock of the Company in consideration for the Purchase Price to be
provided by the Purchaser as described in Section 2(a) of the Purchase
Agreement. In furtherance of this agreement, the parties and their affiliates
will not treat or report for any purpose the Warrants or the Warrant Stock as
being or having been issued as property transferred in connection with the
performance of services or otherwise as compensation for services rendered. The
parties and their affiliates also will not take any position inconsistent with
the foregoing undertakings except if required to do so by a taxing authority. If
the Company or any affiliate receives an inquiry or inquiries from a taxing
authority as to the Warrants or the Warrant Stock, the Company shall promptly
notify Purchaser of the same and shall respond thereto in accordance with the
Purchaser's reasonable specifications.
52
Administaff, Inc.
January 27, 1998
Page 2
To indicate your agreement to the foregoing, please cause this letter
to be signed by a duly authorized officer.
Very truly yours,
AMERICAN EXPRESS TRAVEL
RELATED SERVICES COMPANY, INC.
By: /s/ ANNE BUSQUET
--------------------------------
Name: Anne Busquet
Title: President, AERS
AGREED TO:
ADMINISTAFF, INC.
By: /s/ PAUL J. SARVADI
----------------------------
Name: Paul J. Sarvadi
Title: President