<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee required]
For the transition period from ______________ to ______________
Commission File No. 1-13998
Administaff, Inc.
(Exact name of registrant as specified in its charter)
Delaware 76-0479645
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19001 Crescent Springs Drive
Kingwood, Texas 77339
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(Registrant's Telephone Number, Including Area Code): (281) 358-8986
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares outstanding of each of the issuer's classes of common
stock, as of May 4, 1998: 14,467,691 shares.
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TABLE OF CONTENTS
PART I
<TABLE>
<S> <C>
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . 14
PART II
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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ADMINISTAFF, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED)
<S> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 40,561 $ 41,295
Marketable securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 26,012 27,780
Accounts receivable:
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,324 837
Unbilled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,371 26,834
Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 149
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,208 872
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,585 1,480
Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . -- 596
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 199 275
------------ -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 89,423 100,118
Property and equipment:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 817 817
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . . . . 7,557 7,721
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,219 7,780
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . 6,342 6,919
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 950 1,095
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . -- 44
------------ -----------
21,885 24,376
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . (5,214) (5,949)
------------ -----------
Total property and equipment . . . . . . . . . . . . . . . . . . . . 16,671 18,427
Other assets:
Notes receivable from employees . . . . . . . . . . . . . . . . . . . . . 1,181 1,201
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 822 1,128
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,358 1,334
------------ -----------
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . 3,361 3,663
------------ -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109,455 $ 122,208
============ ===========
</TABLE>
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<PAGE> 4
ADMINISTAFF, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,421 $ 1,205
Payroll taxes and other payroll deductions payable . . . . . . . . . . . 19,190 12,822
Accrued worksite employee payroll expense . . . . . . . . . . . . . . . 18,153 26,836
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 3,319 2,659
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 729 --
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 42,812 43,522
Noncurrent liabilities:
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 2,558 2,558
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 322 492
------------ ------------
Total noncurrent liabilities . . . . . . . . . . . . . . . . . . . 2,880 3,050
Commitments and contingencies
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 148
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 50,670 63,249
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . (1,998) (1,983)
Unrealized gain on marketable securities. . . . . . . . . . . . . . . . . 31 46
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,918 14,176
------------ ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 63,763 75,636
------------ ------------
Total liabilities and stockholders' equity . . . . . . . . . . . . $ 109,455 $ 122,208
============ ============
</TABLE>
See accompanying notes.
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ADMINISTAFF, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
---------- ----------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 262,200 $ 362,396
Direct costs:
Salaries and wages of worksite employees . . . . . . . . . . . . . . . . 215,659 299,522
Benefits and payroll taxes . . . . . . . . . . . . . . . . . . . . . . . 37,751 51,701
---------- ----------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,790 11,173
Operating expenses:
Salaries, wages and payroll taxes . . . . . . . . . . . . . . . . . . . 4,198 6,306
General and administrative expenses . . . . . . . . . . . . . . . . . . 2,589 3,931
Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,024 1,357
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 854
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 461 773
---------- ----------
9,068 13,221
---------- ----------
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (278) (2,048)
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 812
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . (321) --
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) 10
---------- ----------
266 822
---------- ----------
Loss before income tax benefit . . . . . . . . . . . . . . . . . . . . . . (12) (1,226)
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 484
---------- ----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7) $ (742)
========== ==========
Basic and diluted net loss per share of common stock . . . . . . . . . . . $ 0.00 $ (0.05)
========== ==========
</TABLE>
See accompanying notes.
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ADMINISTAFF, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK UNREALIZED
ISSUED ADDITIONAL GAIN ON
---------------- PAID-IN TREASURY MARKETABLE RETAINED
SHARES AMOUNT CAPITAL STOCK SECURITIES EARNINGS TOTAL
------ ------ ------- ----- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 14,221 $ 142 $ 50,670 $ (1,998) $ 31 $ 14,918 $ 63,763
Purchase of treasury stock, at cost -- -- -- (6,101) -- -- (6,101)
Sale of units consisting of common
stock and common stock purchase
warrants, net of issuance costs
of $85 400 4 11,529 6,116 -- -- 17,649
Exercise of common stock
purchase warrants 141 1 634 -- -- -- 635
Exercise of stock options 50 1 416 -- -- -- 417
Unrealized gain on
marketable securities -- -- -- -- 15 -- 15
Net loss -- -- -- -- -- (742) (742)
------- ------ --------- --------- ------- --------- --------
Balance at March 31, 1998 14,812 $ 148 $ 63,249 $ (1,983) $ 46 $ 14,176 $75,636
======= ====== ========= ========= ======= ========= ========
</TABLE>
See accompanying notes.
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ADMINISTAFF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7) $ (742)
Adjustments to reconcile net loss to net cash
used in operating activities :
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 730 858
Bad debt expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 190
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . (309) 95
Gain on the disposition of assets . . . . . . . . . . . . . . . . . . -- (5)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . (3,335) (7,815)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . (107) 105
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 21
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115 (216)
Payroll taxes and other payroll deductions payable . . . . . . . . . (2,278) (6,370)
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 3,279 8,023
Income taxes payable/receivable . . . . . . . . . . . . . . . . . . . (82) (1,325)
-------- --------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . (861) (6,439)
-------- --------
Net cash used in operating activities . . . . . . . . . . . . . . (868) (7,181)
Cash flows from investing activities:
Marketable securities:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,469) (5,510)
Proceeds from dispositions . . . . . . . . . . . . . . . . . . . . . . 1,495 3,697
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . (1,181) (2,490)
Increases in intangible assets . . . . . . . . . . . . . . . . . . . . . . (77) (362)
-------- --------
Net cash used in investing activities . . . . . . . . . . . . . . (20,232) (4,665)
</TABLE>
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ADMINISTAFF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
--------- -----------
<S> <C> <C>
Cash flows from financing activities:
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . $ (4,603) $ --
Proceeds from the sale of units consisting of common stock
and common stock purchase warrants . . . . . . . . . . . . . . . . . . . 47,430 17,649
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . (1,999) (6,101)
Repurchase of common stock purchase warrants . . . . . . . . . . . . . . . (542) --
Prepaid expenses - initial public offering costs . . . . . . . . . . . . . (22) --
Proceeds from the exercise of stock options . . . . . . . . . . . . . . . . 11 417
Proceeds from the exercise of common stock
purchase warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 635
Loans to employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19) (20)
--------- ----------
Net cash provided by financing activities . . . . . . . . . . . . . 40,304 12,580
--------- ----------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . 19,204 734
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . 13,360 40,561
--------- ----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . $ 32,564 $ 41,295
========= ==========
</TABLE>
See accompanying notes.
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ADMINISTAFF, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1998
1. BASIS OF PRESENTATION
Administaff, Inc. ("the Company") is a professional employer organization
("PEO") that provides a comprehensive Personnel Management System which
encompasses a broad range of services, including benefits and payroll
administration, medical and workers' compensation insurance programs, personnel
records management, employer liability management, recruiting and selection,
performance management, and training and development services to small and
medium-sized businesses in several strategically selected markets. The Company
operates primarily in the state of Texas.
The consolidated financial statements include the accounts of Administaff,
Inc., and its wholly owned subsidiaries. Intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The consolidated balance sheet at December 31, 1997 has been derived
from the audited financial statements at that date but does not include all of
the information or footnotes required by generally accepted accounting
principles for complete financial statements. The Company's consolidated
balance sheet at March 31, 1998 and the consolidated statements of operations,
cash flows and stockholders' equity for the interim periods ended March 31,
1998 and 1997 have been prepared by the Company without audit. In the opinion
of management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position,
results of operations and cash flows have been made. The results of operations
for the interim periods are not necessarily indicative of the operating results
for a full year or of future operations. Historically, the Company's earnings
pattern has included losses in the first quarter, followed by improved
profitability in subsequent quarters throughout the year. This pattern is due
to the effects of employment-related taxes which are based on each employee's
cumulative earnings up to specified wage levels, causing employment-related
taxes to be largest in the first quarter and then decline over the course of
the year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying consolidated
financial statements should be read in conjunction with the Company's audited
consolidated financial statements for the year ended December 31, 1997.
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2. NET LOSS PER SHARE
The numerator and denominator used in the calculations of both basic and
diluted net loss per share were net loss and the weighted average shares
outstanding, respectively. The weighted average shares outstanding for the
three months ended March 31, 1997 and 1998 were 12,478,000 and 14,021,000,
respectively. Had the Company incurred net income during the three months
ended March 31, 1997 or 1998, the denominator used in the calculation of
diluted earnings per share would have been 749,000 and 366,000 higher,
respectively, reflecting the dilutive effects of outstanding common stock
purchase warrants and stock options.
3. STOCKHOLDERS' EQUITY
In March 1998, the Company completed a Securities Purchase Agreement with
American Express Travel Related Services Company, Inc. ("American Express")
whereby the Company sold units consisting of 693,126 shares of its common stock
(293,126 shares from Treasury Stock) and common stock purchase warrants for an
additional 2,065,515 shares of common stock to American Express for a total
purchase price of $17.7 million. The common stock purchase warrants have prices
ranging from $40 to $80 per share and terms ranging from three to seven years.
In January 1998, a third party warrant holder exercised warrants to
purchase 140,508 shares of common stock at a price of $4.52 per share. The
Company then repurchased the shares from the warrant holder at a price of $21
per share.
In March 1998 and prior to the closing of the transaction with American
Express, the Company completed the repurchase of 150,000 shares of common stock
from three stockholders for $21 per share. The three stockholders included two
former officers of the Company and a current director of the Company.
4. MARKETING AGREEMENT
In conjunction with the Securities Purchase Agreement with American
Express, the Company entered into a Marketing Agreement with American Express
to jointly market the Company's services to American Express's substantial
small business customer base across the country. Under the Marketing
Agreement, American Express will utilize its resources to generate
appointments with prospects for the Company's services. In addition, the
Company and American Express will work to jointly develop product offerings
that enhance the current PEO services offered by the Company. The Marketing
Agreement has a seven year term and provides that the Company will be the
exclusive PEO partner of American Express for the first three years. The
Company will pay a commission to American Express based upon the number of
worksite employees paid after being referred to the Company pursuant to the
Marketing Agreement.
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5. MARKETABLE SECURITIES
At March 31, 1998, the Company's marketable securities consisted of debt
securities issued by corporate and governmental entities, with contractual
maturities ranging from 91 days to two years from the date of purchase. All of
the Company's investments in marketable securities are classified as
available-for-sale and are carried at fair market value with unrealized gains
and losses recorded as a component of stockholders' equity.
6. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various lawsuits and claims arising in the
normal course of business. Management believes it has valid defenses in these
cases and is defending them vigorously. While the results of litigation cannot
be predicted with certainty, management believes the final outcome of such
litigation will not have a material adverse effect on the Company's financial
position or results of operations.
The Company's 401(k) plan is currently under audit by the Internal Revenue
Service (the "IRS") for the year ended December 31, 1993. Although the audit
is for the 1993 plan year, certain conclusions of the IRS would be applicable
to other years as well. In addition, the IRS has established an Employee
Leasing Market Segment Group for the purpose of identifying specific compliance
issues prevalent in certain segments of the PEO industry. Approximately 70
PEOs, including the Company, have been randomly selected by the IRS for audit
pursuant to this program. One issue that has arisen from these audits is
whether a PEO can be a co-employer of worksite employees, including officers
and owners of client companies, for various purposes under the Internal Revenue
Code of 1986, as amended (the "Code"), including participation in the PEO's
401(k) plan. With respect to the 401(k) Plan audit, the IRS Houston District
has sought technical advice (the "Technical Advice Request") from the IRS
National Office about (1) whether participation in the 401(k) Plan by worksite
employees, including officers of client companies, violates the exclusive
benefit rule under the Code because they are not employees of the Company, and
(2) whether the 401(k) Plan's failure to satisfy a nondiscrimination test
relating to contributions should result in disqualification of the 401(k) Plan
because the Company has failed to provide evidence that it satisfies an
alternative nondiscrimination test. A copy of the Technical Advice Request and
the Company's response have been sent to the IRS National Office for review.
The Technical Advice Request contains the conclusions of the IRS Houston
District with respect to the 1993 plan year that the 401(k) Plan should be
disqualified because it (1) covers worksite employees who are not employees of
the Company, and (2) failed a nondiscrimination test applicable to
contributions and the Company has not furnished evidence that the 401(k) Plan
satisfies an alternative test. The Company's response refutes the conclusions
of the IRS Houston District. The Company also understands that, with respect
to the Market Segment Group study, the issue of whether a PEO and a client
company may be treated as co-employers of worksite employees for certain
federal tax purposes (the "Industry Issue") has been referred to the IRS
National Office.
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<PAGE> 12
Whether the National Office will address the Technical Advice Request
independently of the Industry Issue is unclear. Should the IRS conclude that
the Company is not a "co-employer" of worksite employees for purposes of the
Code, worksite employees could not continue to make salary deferral
contributions to the 401(k) Plan or pursuant to the Company's cafeteria plan or
continue to participate in certain other employee benefit plans of the Company.
The Company believes that, although unfavorable to the Company, a prospective
application of such a conclusion (that is, one applicable only to periods after
the conclusion by the IRS is finalized) would not have a material adverse
effect on its financial position or results of operations, as the Company could
continue to make available comparable benefit programs to its client companies
at comparable costs to the Company. However, if the IRS National Office adopts
the conclusions of the IRS Houston District set forth in the Technical Advice
Request and any such conclusions were applied retroactively to disqualify the
401(k) Plan for 1993 and subsequent years, employees' vested account balances
under the 401(k) Plan would become taxable, the Company would lose its tax
deductions to the extent its matching contributions were not vested, the 401(k)
Plan's trust would become a taxable trust and the Company would be subject to
liability with respect to its failure to withhold applicable taxes with respect
to certain contributions and trust earnings. Further, the Company would be
subject to liability, including penalties, with respect to its cafeteria plan
for the failure to withhold and pay taxes applicable to salary deferral
contributions by employees, including worksite employees. In such a scenario,
the Company also would face the risk of client dissatisfaction and potential
litigation. While the Company is not able to predict either the timing or the
nature of any final decision that may be reached with respect to the 401(k)
Plan audit or with respect to the Technical Advice Request or the Market
Segment Group study and the ultimate outcome of such decisions, the Company
believes that a retroactive application of an unfavorable determination is
unlikely. The Company also believes that a prospective application of an
unfavorable determination will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
In addition to the 401(k) Plan audit and Market Segment Group study, the
Company notified the IRS of certain operational issues concerning
nondiscrimination test results for certain prior plan years. In 1991 the
Company engaged a third party vendor to be the 401(k) Plan's record keeper and
to perform certain required annual nondiscrimination tests for the 401(k) Plan.
Each year such record keeper reported to the Company that such
nondiscrimination tests had been satisfied. However, in August 1996 the 401(k)
Plan's record keeper advised the Company that certain of these tests had been
performed incorrectly for prior years and, in fact, that the 401(k) Plan had
failed certain tests for the 1993, 1994 and 1995 plan years. The Company has
subsequently determined that the 401(k) Plan also failed a nondiscrimination
test for 1991 and 1992, closed years for tax purposes. At the time the Company
received such notice, the period in which the Company could voluntarily "cure"
this operational defect had lapsed for all such years except 1995.
With respect to the 1995 plan year, the Company has caused the 401(k) Plan
to refund the required excess contributions and earnings thereon to the
affected employees. In connection with this correction, the Company paid
approximately $47,000 for an excise tax applicable to this plan year. With
respect to all other plan years, the Company has proposed a corrective action
to the IRS
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<PAGE> 13
under which the Company would make additional contributions to certain plan
participants which bring the plan into compliance with the nondiscrimination
tests.
During 1996, the Company recorded an accrual for its estimate of the cost
of corrective measures and penalties for all of the affected plan years, which
accrual is reflected in Other accrued liabilities - noncurrent on the
Consolidated Balance Sheets. The Company calculated its estimates based on its
understanding of the resolution of similar issues with the IRS. Separate
calculations were made to determine the Company's estimate of both the cost of
corrective measures and penalties for each plan year. In addition, at the same
time, the Company recorded an asset for an amount recoverable from the 401(k)
Plan's record keeper should the Company ultimately be required to pay the
amount accrued for such corrective measures and penalties, which amount is
reflected in Other assets on the Consolidated Balance Sheets. The amount of
the accrual is the Company's estimate of the cost of corrective measures and
practices, although no assurance can be given that the actual amount that the
Company may be ultimately required to pay will not substantially exceed the
amount accrued. There has been no change in the amounts of the accrual or the
amount recoverable from the record keeper subsequent to December 31, 1997.
Based on its understanding of the settlement experience of other companies with
the IRS, the Company does not believe the ultimate resolution of this 401(k)
Plan matter will have a material adverse effect on the Company's financial
condition or results of operations.
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<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1998.
The following table presents certain information related to the Company's
results of operations for the three months ended March 31, 1997 and 1998. The
following discussion should be read in conjunction with the 1997 annual report
on Form 10-K as well as with the consolidated financial statements and notes
thereto included in this quarterly report on Form 10-Q.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1998 CHANGE
--------- --------- ------
(OPERATING RESULTS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING RESULTS:
Revenues . . . . . . . . . . . . . . . . . . . . . . . $ 262,200 $ 362,396 38.2%
Gross profit . . . . . . . . . . . . . . . . . . . . . 8,790 11,173 27.1%
Gross profit margin . . . . . . . . . . . . . . . . . 3.4% 3.1%
Operating loss . . . . . . . . . . . . . . . . . . . . (278) (2,048) NM
STATISTICAL DATA:
Monthly revenue per worksite employee . . . . . . . . 3,326 3,639 9.4%
Monthly payroll cost per worksite employee . . . . . . 2,710 2,982 10.0%
Monthly gross markup per worksite employee . . . . . . 616 657 6.7%
Average number of worksite employees paid
per month during period . . . . . . . . . . . . . . 25,026 31,512 25.9%
- -------------------------
NM - Not meaningful
</TABLE>
REVENUES
The Company's revenues for the three months ended March 31, 1998
increased 38.2% over the same period in 1997 due to an increase in worksite
employees paid accompanied by an increase in the revenue per employee. The
Company's expansion of its sales force through new market and sales office
openings over the past five years is the primary factor contributing to the
increased number of worksite employees. Revenues from markets opened prior to
1993 (the commencement of the Company's national expansion plan) increased by
24% over the first quarter of 1997, while revenues from markets opened after
1993 increased by 68%. The Company expects continued growth in the number of
worksite employees during the remainder of 1998 versus 1997 due to the effect
of sales in existing markets and the Company's national expansion plan.
- 14 -
<PAGE> 15
The increase in revenue per employee of 9.4% directly relates to the
increase in payroll cost per employee of 10.0%. This increase reflects the
continuing effects of the net addition, through the Company's sales efforts, of
clients with worksite employees that have higher average base pay than the
existing client base and through the penetration of markets with generally
higher wage levels, such as Los Angeles, Chicago and Washington, D.C. In
addition, wage inflation within the Company's existing worksite employee base
has contributed to the increase in payroll cost per worksite employee.
GROSS PROFIT
The Company's gross profit for the first quarter of 1998 increased by
27.1% over the first quarter of 1997, while the gross profit margin decreased
from 3.4% in the 1997 period to 3.1% in the 1998 period. The primary factors
which caused the decrease in gross profit margin were an increase in the
Company's weighted average state unemployment tax rate as a percentage of
payroll cost and an increase in the gross payroll cost per worksite employee.
Employment-related taxes as a percentage of payroll cost increased from
8.3% during the first quarter of 1997 to 8.7% during the 1998 period, reflecting
an increase in the weighted average state unemployment tax rate paid by the
Company as compared to the same period in 1997. The effects of changes in
employment-related tax rates on gross profit margin are more pronounced in the
first quarter of the year because employment-related taxes are based on the each
employee's cumulative earnings up to specified wage levels, causing them to be
highest in the first quarter and then decline over the course of the year.
The continued addition of higher wage, less risk sensitive worksite
employees resulted in a decrease in gross markup per employee as a percentage
of revenue from 18.5% in the first quarter of 1997 to 18.1% in the first
quarter of 1998. The Company attempts to match changes in the overall gross
markup percentage charged for its services with changes in its direct cost
structure while improving the overall gross profit per worksite employee.
Gross profit per worksite employee improved slightly from $117 in the first
quarter of 1997 to $118 in the first quarter of 1998.
The cost of providing employee benefits, which includes benefit plan
premiums and workers' compensation costs, was slightly lower in the first
quarter of 1998 than in the first quarter of 1997. Benefit plan premiums
declined from 6.0% of revenue during the first quarter of 1997 to 5.8% of
revenue during the first quarter of 1998. Workers' compensation costs
decreased from 1.9% of payroll cost during the first quarter of 1997 to 1.3% of
payroll cost during the first quarter of 1998. This reduction was due to the
rate on the Company's fixed premium policy in effect during the 1998 period
being lower than the rate in place during the first quarter of 1997.
OPERATING EXPENSES
Operating expenses increased as a percentage of revenue from 3.5% in the
first quarter of 1997 to 3.6% in the first quarter of 1998. Total operating
expenses increased 45.8% while revenues and
- 15 -
<PAGE> 16
gross profit increased 38.2% and 27.1%, respectively. The overall increase in
operating expenses can be attributed principally to increased
compensation-related costs (salaries, wages and payroll taxes and commissions),
increased general and administrative expenses and increased depreciation and
amortization expense.
Compensation-related costs increased by 46.7% from the first quarter of
1997 to the first quarter of 1998, and increased from 2.0% of revenues in the
1997 period to 2.1% of revenues in the 1998 period. This increase is primarily
related to a 25.9% and 54.4% increase over the 1997 period in corporate and
sales staff, respectively, as the Company has continued to invest in sales and
service capacity to accommodate its rapid growth.
General and administrative expenses increased by 51.8% from the first
quarter of 1997 to the first quarter of 1998, and increased from 1.0% of
revenues in the 1997 period to 1.1% of revenues in the 1998 period. This
increase resulted primarily from the general services and support required to
accommodate the increase in corporate and sales staff. In addition, travel
expenses have increased substantially as a result of the Company's national
expansion.
Depreciation and amortization expense increased by 67.7% over the 1997
period. This increase is primarily due to capital expenditures related to the
opening of new sales offices as part of the Company's national expansion and
investments in technology and infrastructure related to increasing corporate
service capacity.
NET INCOME
Interest income increased significantly over the first quarter of 1997
due to the investment of the proceeds from the Company's initial public
offering ("IPO") for the entire quarter in 1998 and the investment of the
proceeds from the sale of common stock to American Express received in March
1998. The Company incurred no interest expense in the first quarter of 1998
while the 1997 period included a one-time write-off of deferred financing costs
relating to long-term debt that was repaid using a portion of the proceeds from
the IPO.
The Company's provision for income taxes in both periods differs from the
U.S. statutory rate of 34% due primarily to state income taxes.
The Company's net loss for the three months ended March 31, 1998 was
$742,000, or $0.05 per share, versus a loss of $7,000, or $0.00 per share, for
the three months ended March 31, 1997. Historically, the Company's earnings
pattern has included losses in the first quarter, followed by improved
profitability in subsequent quarters throughout the year. This pattern is due
to the effects of employment-related taxes which are based on each employee's
cumulative earnings up to specified wage levels, causing employment- related
taxes to be largest in the first quarter and then decline over the course of
the year. The Company expects the remaining 1998 results to be consistent with
this pattern.
- 16 -
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
The Company periodically evaluates its liquidity requirements, capital
needs and availability of resources in view of, among other things, expansion
plans including potential acquisitions, debt service requirements and other
operating cash needs. As a result of this process, the Company has, in the
past, sought and may, in the future, seek to raise additional capital or take
other steps to increase or manage its liquidity and capital resources. The
Company currently believes that its cash and marketable securities on hand and
cash flows from operations will be adequate to meet its liquidity requirements
through at least 1999. The Company will rely on these same sources, as well as
public and private debt and equity financing, to meet its long-term liquidity
needs.
The Company had $69.1 million in cash and cash equivalents and marketable
securities at March 31, 1998, of which approximately $12.8 million was payable
in early April 1998 for withheld federal and state income taxes, FICA and other
payroll deductions. The remainder is available to the Company for general
corporate purposes, including, but not limited to, current working capital
requirements, expenditures related to the continued expansion of the Company's
sales force through the opening of new sales offices and capital expenditures.
The Company had no long-term debt as of March 31, 1998. At March 31, 1998 the
Company had net working capital of $56.6 million which increased from $46.6
million at December 31, 1997 due to the receipt of proceeds from the sale of
common stock to American Express in March 1998.
CASH FLOWS FROM OPERATING ACTIVITIES
The Company's cash flows from operating activities decreased for the
first quarter of 1998 versus the first quarter of 1997 due to a larger net
loss, the timing of payroll tax payments, and higher income tax payments.
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchases of marketable securities during the first quarter of 1998
reflect the investment of a portion of the proceeds from the Company's sale of
common stock to American Express in short-term, highly liquid marketable
securities with maturities greater than 90 days consisting primarily of
corporate and government bonds. Net purchases of marketable securities in the
1997 period reflect a similar investment of a portion of the proceeds from the
Company's IPO.
Capital expenditures during the first quarter of 1998 were primarily
related to the opening of a new sales office in Los Angeles in January, the
opening of a new sales office in Dallas in early April and furniture, equipment
and computer equipment at its corporate office facilities.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flows from financing activities for the first quarter of 1998 consist
primarily of items relating to the sale of units consisting of 693,126 shares of
common stock (293,126 shares from Treasury Stock) and
- 17 -
<PAGE> 18
common stock purchase warrants for an additional 2,065,515 shares to American
Express for a total cost of $17.7 million. Other significant cash flows from
financing activities during the first quarter of 1998 included the exercise of
warrants to purchase 140,508 shares of common stock by a third party warrant
holder at a price of $4.52 per share, the repurchase of 140,508 shares of
common stock from the third party warrant holder at a price of $21 per share,
and the repurchase of 150,000 shares of common stock from three shareholders at
a price of $21 per share.
Cash flows from financing activities during the first quarter of 1997
consist primarily of items resulting from the completion of the Company's IPO.
Such offering was completed in January 1997. The net proceeds to the Company
from the offering (after deducting underwriting discounts and commissions of
$3.6 million) were $47.4 million. The Company utilized approximately $7.1
million of the proceeds as follows: (i) $4.6 million to repay certain
subordinated notes and other secured notes comprising all of the Company's
outstanding indebtedness at the time, (ii) approximately $2.0 million to
exercise its option to repurchase 348,945 shares of common stock from one of
its stockholders, which is now held in treasury by the Company, and (iii)
approximately $0.5 million to exercise its option to repurchase 173,609
warrants to purchase shares of common stock from the subordinated note holder.
SEASONALITY, INFLATION AND QUARTERLY FLUCTUATIONS
Historically, the Company's earnings pattern has included losses in the
first quarter, followed by improved profitability in subsequent quarters
throughout the year. This pattern is due to the effects of employment-related
taxes which are based on each employee's cumulative earnings up to specified
wage levels, causing employment-related taxes to be highest in the first
quarter and then decline over the course of the year. Since the Company's
revenues related to an individual employee are generally earned and collected
at a relatively constant rate throughout each year, payment of such
employment-related tax obligations has a substantial impact on the Company's
financial condition and results of operations during the first six months of
each year. Other factors that affect direct costs could mitigate or enhance
this trend.
The Company believes the effects of inflation have not had a significant
impact on its results of operations or financial condition.
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report on Form 10-Q which are
not historical facts are forward-looking statements that involve a number of
risks and uncertainties. In the normal course of business, Administaff, Inc.,
in an effort to help keep its stockholders and the public informed about the
Company's operations, may from time to time issue such forward-looking
statements, either orally or in writing. Generally, these statements relate to
business plans or strategies, projected or anticipated benefits or other
consequences of such plans or strategies, or projections involving anticipated
revenues, earnings or other aspects of operating results. All phases of the
Company's operations are subject to a number of uncertainties, risks and other
influences.
- 18 -
<PAGE> 19
Therefore, the actual results of the future events described in such
forward-looking statements could differ materially from those stated in such
forward-looking statements. Among the factors that could cause actual results
to differ materially are: (i) regulatory and tax developments including the
ongoing audit of the Company's 401(k) Plan and related compliance issues, and
possible adverse application of various federal, state and local regulations;
(ii) changes in the Company's direct costs and operating expenses including
increases in health insurance premiums, workers' compensation rates and state
unemployment tax rates, liabilities for employee and client actions or
payroll-related claims, changes in the costs of expanding into new markets, and
failure to manage growth of the Company's operations; (iii) changes in the
competitive environment in the PEO industry or new market entrants. Any of
these factors, or a combination of such factors, could materially affect the
results of the Company's operations and whether forward-looking statements made
by the Company ultimately prove to be accurate.
- 19 -
<PAGE> 20
PART II
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal proceedings,
other than ordinary routine litigation incidental to its business that the
Company believes would not have a material adverse effect on its financial
position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(b) On January 20, 1998, the Company's Board of Directors declared a
dividend distribution of one preferred stock purchase right (a "right") for
each outstanding share of common stock, par value $0.01 per share, of the
Company. The distribution was payable on February 9, 1998 to the stockholders
of record on that date. Each right entitles the registered holder thereof to
purchase from the Company one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $0.01 per share, of the Company at a
price of $125, subject to adjustment.
(c) In March 1998, the Company completed a Securities Purchase
Agreement with American Express Travel Related Services Company, Inc. ("American
Express") whereby the Company sold units consisting of 693,126 shares of its
common stock (293,126 shares from Treasury Stock) and common stock purchase
warrants for an additional 2,065,515 shares of common stock to American Express
for a total purchase price of $17.7 million. The common stock purchase warrants
have prices ranging from $40 to $80 per share and terms ranging from three to
seven years. All of the shares were sold pursuant to an exemption to
registration under Rule 506 of the Securities Act of 1933, as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits
3.1 Certificate of Designations of Series A Junior Participating
Preferred Stock of Administaff, Inc. dated February 4, 1998
(incorporated by reference to Exhibit 2 to the Registrant's Form
8-A filed on February 5, 1998).
4.1 Rights Agreement dated as of February 4, 1998 between Administaff,
Inc. and Harris Trust and Savings Bank as Rights Agent
(incorporated by reference to Exhibit 1 to the Registrant's Form
8-A filed on February 5, 1998).
4.2 Securities Purchase Agreement between Administaff, Inc. and
American Express Travel Related Services Company, Inc., dated
January 27, 1998 and the Letter Agreement between Administaff,
Inc. and American Express Travel Related Services Company, Inc.,
dated March 10, 1998 amending the Securities Purchase Agreement.
- 20 -
<PAGE> 21
4.3 Registration Rights Agreement between Administaff, Inc. and
American Express Travel Related Services Company, Inc., dated
March 10, 1998.
4.4 Warrant Agreement between Administaff, Inc. and American Express
Travel Related Services Company, Inc., dated March 10, 1998.
4.5 Warrant Certificate No. 1, evidencing that American Express Travel
Related Services Company, Inc. is the registered holder of 400,000
warrants to purchase 400,000 shares of the common stock of
Administaff, Inc.
4.6 Warrant Certificate No. 2, evidencing that American Express Travel
Related Services Company, Inc. is the registered holder of 400,000
warrants to purchase 400,000 shares of the common stock of
Administaff, Inc.
4.7 Warrant Certificate No. 3, evidencing that American Express Travel
Related Services Company, Inc. is the registered holder of 400,000
warrants to purchase 400,000 shares of the common stock of
Administaff, Inc.
4.8 Warrant Certificate No. 4, evidencing that American Express Travel
Related Services Company, Inc. is the registered holder of 400,000
warrants to purchase 400,000 shares of the common stock of
Administaff, Inc.
4.9 Warrant Certificate No. 5, evidencing that American Express Travel
Related Services Company, Inc. is the registered holder of 465,515
warrants to purchase 465,515 shares of the common stock of
Administaff, Inc.
10.1 Marketing Agreement between American Express Travel Related
Services Company, Inc., Administaff, Inc., and Administaff of
Texas, Inc. dated March 10, 1998.
27 Financial Data Schedule.
(b) Reports on Form 8-K
Form 8-K, dated January 20, 1998, filed February 5, 1998 relating to (i)
the Securities Purchase Agreement with American Express Travel Related
Services Company, Inc. and (ii) the adoption of a Preferred Share Rights
Plan by the Company's Board of Directors.
- 21 -
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Administaff, Inc.
Date: May 11, 1998 By: /s/ Richard G. Rawson
---------------------------------------
Richard G. Rawson
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: May 11, 1998 By: /s/ Samuel G. Larson
-----------------------------------------
Samuel G. Larson
Vice President, Finance
(Principal Accounting Officer)
- 22 -
<PAGE> 23
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Certificate of Designations of Series A Junior Participating
Preferred Stock of Administaff, Inc. dated February 4, 1998
(incorporated by reference to Exhibit 2 to the Registrant's Form
8-A filed on February 5, 1998).
4.1 Rights Agreement dated as of February 4, 1998 between Administaff,
Inc. and Harris Trust and Savings Bank as Rights Agent
(incorporated by reference to Exhibit 1 to the Registrant's Form
8-A filed on February 5, 1998).
4.2 Securities Purchase Agreement between Administaff, Inc. and
American Express Travel Related Services Company, Inc., dated
January 27, 1998 and the Letter Agreement between Administaff,
Inc. and American Express Travel Related Services Company, Inc.,
dated March 10, 1998 amending the Securities Purchase Agreement.
4.3 Registration Rights Agreement between Administaff, Inc. and
American Express Travel Related Services Company, Inc., dated
March 10, 1998.
4.4 Warrant Agreement between Administaff, Inc. and American Express
Travel Related Services Company, Inc., dated March 10, 1998.
4.5 Warrant Certificate No. 1, evidencing that American Express Travel
Related Services Company, Inc. is the registered holder of 400,000
warrants to purchase 400,000 shares of the common stock of
Administaff, Inc.
4.6 Warrant Certificate No. 2, evidencing that American Express Travel
Related Services Company, Inc. is the registered holder of 400,000
warrants to purchase 400,000 shares of the common stock of
Administaff, Inc.
4.7 Warrant Certificate No. 3, evidencing that American Express Travel
Related Services Company, Inc. is the registered holder of 400,000
warrants to purchase 400,000 shares of the common stock of
Administaff, Inc.
4.8 Warrant Certificate No. 4, evidencing that American Express Travel
Related Services Company, Inc. is the registered holder of 400,000
warrants to purchase 400,000 shares of the common stock of
Administaff, Inc.
4.9 Warrant Certificate No. 5, evidencing that American Express Travel
Related Services Company, Inc. is the registered holder of 465,515
warrants to purchase 465,515 shares of the common stock of
Administaff, Inc.
10.1 Marketing Agreement between American Express Travel Related
Services Company, Inc., Administaff, Inc., and Administaff of
Texas, Inc. dated March 10, 1998.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 4.2
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
BETWEEN
ADMINISTAFF, INC.
AND
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
Dated as of January 27, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
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
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
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
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
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
</TABLE>
iii
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<TABLE>
<S> <C> <C>
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
</TABLE>
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
iv
<PAGE> 6
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
<PAGE> 7
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
2
<PAGE> 8
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.
3
<PAGE> 9
"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.
4
<PAGE> 10
"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).
5
<PAGE> 11
"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.
6
<PAGE> 12
"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
7
<PAGE> 13
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").
8
<PAGE> 14
(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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<PAGE> 15
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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<PAGE> 16
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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<PAGE> 17
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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<PAGE> 18
(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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<PAGE> 19
(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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<PAGE> 20
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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<PAGE> 21
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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<PAGE> 22
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
17
<PAGE> 23
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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<PAGE> 24
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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<PAGE> 25
(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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<PAGE> 35
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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<PAGE> 39
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.
43
<PAGE> 49
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.
44
<PAGE> 50
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
45
<PAGE> 51
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.
<PAGE> 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
<PAGE> 1
EXHIBIT 4.3
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
BETWEEN
ADMINISTAFF, INC.
AND
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
Dated as of March 10, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
RECITALS..........................................................................................................1
SECTION 1. Definitions............................................................................1
(a) Defined Terms.................................................................1
(b) Terms Defined in Purchase Agreement...........................................5
(c) Cross-References..............................................................5
SECTION 2. Registration Under the Securities Act for the Benefit of the Holders...................5
(a) Filing of Registration Statement. ............................................5
(b) Number of Registrations.......................................................5
(c) Inclusion in Registration Statement. ........................................6
(d) Plan of Distribution. ........................................................6
(e) Company Delay Rights..........................................................6
(f) Selection of Underwriters. ..................................................7
(g) Priority......................................................................7
SECTION 3. Registration Procedures................................................................8
SECTION 4. Right to Piggyback....................................................................12
(a) Piggyback Registration.......................................................12
(b) Priority on Primary Offerings................................................12
(c) Priority on Secondary Offerings..............................................12
SECTION 5. Holdback Agreements...................................................................13
SECTION 6. Registration Expenses.................................................................13
SECTION 7. Indemnification.......................................................................14
(a) Indemnification by the Company...............................................14
(b) Indemnification by Holders of Registrable Stock. ...........................15
(c) Procedure....................................................................15
(d) Contribution.................................................................16
(e) Other Indemnifications.......................................................17
SECTION 8. Withdrawals...........................................................................17
SECTION 9. Exchange Act Registration; Rule 144 Reporting.........................................17
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 10. Limitation on Registration Rights of Others...........................................18
SECTION 11. Termination. ........................................................................18
SECTION 12. Notices. .............................................................................18
SECTION 13. Successors............................................................................19
SECTION 14. Governing Law. .......................................................................19
SECTION 15. Benefits of this Agreement. .........................................................19
SECTION 16. Counterparts..........................................................................19
SECTION 17. Amendments; Waivers...................................................................19
SECTION 18. Jurisdiction. .......................................................................20
SECTION 19. Specific Performance..................................................................20
SECTION 20. Entire Agreement. ...................................................................20
SECTION 21. Severability..........................................................................20
</TABLE>
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<PAGE> 4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of March
10, 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 and the Company have entered into a Securities
Purchase Agreement, dated as of January 27, 1998 (the "Purchase Agreement"),
pursuant to which the Purchaser has agreed to purchase Units from the Company,
each of which shall consist of one share of Common Stock and 2.98 Warrants;
B. As a condition of the willingness of the Purchaser to purchase the
Common Stock and the Warrants pursuant to the Purchase Agreement, the Company
has agreed to enter into this Agreement; and
NOW, THEREFORE, in consideration of the premises and the agreements
herein set forth and to induce the Purchaser and the Company to proceed with the
transactions contemplated by the Purchase Agreement, the parties hereto,
intending to be legally bound, hereby agree as follows:
SECTION 1. Definitions.
(a) Defined Terms. For purposes of this Agreement, the
following terms have the meanings set forth below:
"Agreement" means this Registration Rights Agreement as in effect on
the date hereof and as hereafter amended, supplemented, restated or otherwise
modified.
"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.
"Common Stock" means shares now or hereafter authorized of any class of
common stock of the Company and any other 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 $.01 per share.
"Company" is defined in the Preamble.
<PAGE> 5
"Current Market Price" of each share of Common Stock means (i) the
average of the closing prices of the Common Stock for the five-day period
immediately preceding the day in question as reported by The Wall Street Journal
under the New York Stock Exchange Composite Transactions quotation system (or
under any successor quotation system) or, if the Common Stock is no longer
traded on the New York Stock Exchange under the quotation system under which
closing prices are reported or, if The Wall Street Journal no longer reports
such closing prices, such closing prices as reported by a newspaper or trade
journal selected by the Company, or, if no such closing prices are available on
such dates, (ii) the proposed public offering price estimated in good faith by
the requesting Holders.
"Demand Prospectus" means the prospectus included in the Demand
Registration Statement, including any preliminary prospectus and any amendment
or supplement thereto, including any supplement relating to the terms of the
offering of any portion of the Registrable Stock covered by the Demand
Registration Statement, and in each case including all material incorporated by
reference therein.
"Demand Registration" shall mean a registration effected by means of a
Demand Registration Statement.
"Demand Registration Request" is defined in Section 2(a).
"Demand Registration Statement" shall mean a registration statement of
the Company (and any other entity required to be a registrant with respect to
such registration statement pursuant to the requirements of the Securities Act)
that covers all of the Registrable Stock to be offered and sold, and all
amendments (including post-effective amendments) to such registration statement,
and all exhibits thereto and materials incorporated by reference therein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means the Purchaser or any subsequent holder of Registrable
Stock or Warrants.
"Indemnified Person" is defined in Section 7(a).
"Indemnifying Person" is defined in Section 7(c).
"Listed Underwriters" shall initially mean Morgan Stanley & Co.
Incorporated; Donaldson, Lufkin & Jenrette Securities Corporation; Solomon Smith
Barney; Lehman Brothers; Goldman, Sachs & Co.; Bear, Stearns & Co. Inc.; and
Merrill Lynch & Co.
"Maximum Number" is defined in Section 4(b).
"Named Underwriters" shall initially mean Morgan Stanley & Co.
Incorporated; Donaldson, Lufkin & Jenrette Securities Corporation; Raymond James
& Associates, Inc.; The Robinson-
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<PAGE> 6
Humphrey Company LLC.; Robert W. Baird & Co.; BancAmerica Robertson Stephenson;
Solomon Smith Barney; and BT Alex. Brown Incorporated.
"NASD" means the National Association of Securities Dealers, Inc.
"Piggyback Registration" is defined in Section 4(a).
"Piggyback Registration Request" is defined in Section 4(a).
"Prospectus" means a Demand Prospectus or a Shelf Prospectus.
"Purchase Agreement" is defined in the Recitals.
"Purchaser" is defined in the Preamble.
"PVI Agreement" means the Registration Rights Agreement among the
Company, Pyramid Ventures, Inc. and the Board of Trustees of the Texas Growth
Fund, as trustee for the Texas Growth Fund -- 1991 Trust, dated as of May 13,
1994.
"Registrable Stock" means (i) the Common Stock issued to the Purchaser
pursuant to the Purchase Agreement, (ii) the Common Stock issued or issuable
upon exercise of a Warrant, and (iii) any Common Stock issued or purchased upon
exercise of the preemptive or other purchase rights set forth in Section 9 of
the Purchase Agreement, (iv) any Common Stock acquired by the Purchaser after
the date hereof (other than pursuant to clauses (i), (ii) and (iii) above) and
(v) any Common Stock that may be issued or distributed in respect of the Common
Stock referred to in clauses (i) through (iv), or any stock split, stock
dividend, merger, share exchange, recapitalization or other distribution or
similar event; provided, however, that any Registrable Stock shall cease to be
Registrable Stock when (i) a registration statement covering such Registrable
Stock has been declared effective and such Registrable Stock has been disposed
of pursuant to such effective registration statement, or (ii) such Registrable
Stock is sold by a person in a transaction in which the rights under the
provisions of this Agreement are not assigned; provided, however, that any
Registrable Stock referred to in clause (iv) shall cease to be Registrable Stock
when the Purchaser is no longer an Affiliate of the Company.
"Registration Expenses" is defined in Section 6.
"Registration Request" is defined in Section 2(a).
"Registration Statement" means a Demand Registration Statement or a
Shelf Registration Statement.
"Requesting Holders" is defined in Section 2(a).
- 3 -
<PAGE> 7
"SEC" means the Securities and Exchange Commission.
"Secondary Requests" is defined in Section 2(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" is defined in Section 6.
"Shelf Prospectus" means the prospectus included in the Shelf
Registration Statement, including any preliminary prospectus, and any amendment
or supplement thereto, including any supplement relating to the terms of the
offering of any portion of the Registrable Stock covered by the Shelf
Registration Statement, and in each case including all material incorporated by
reference therein.
"Shelf Registration" shall mean a registration effected by means of a
Shelf Registration Statement.
"Shelf Registration Request" is defined in Section 2(a).
"Shelf Registration Statement" shall mean a registration statement of
the Company (and any other entity required to be a registrant with respect to
such registration statement pursuant to the requirements of the Securities Act)
that covers all of the Registrable Stock to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, or any similar
rule that may be adopted by the SEC, and all amendments (including
post-effective amendments) to such registration statement, and all exhibits
thereto and materials incorporated by reference therein.
"Termination Event" is defined in Section 7(c) of the Purchase
Agreement.
"Underwritten Distribution" is defined in Section 2(b).
"Underwritten Distribution Request" is defined in Section 2(f).
"Underwritten Transactions" is defined in Section 6.
"Units" means investment units of the Company, each of which consists
of one share of Common Stock and 2.98 Warrants.
"Warrant Agreement" means the Warrant Agreement, dated the date hereof,
between the Company and the Purchaser.
"Warrants" means the warrants to purchase one share of Common Stock of
the Company, issued to the Purchaser pursuant to the Purchase Agreement.
- 4 -
<PAGE> 8
(b) Terms Defined in Purchase Agreement. Unless otherwise
defined herein, capitalized terms used in this Agreement shall have the meanings
ascribed to such terms in the Purchase Agreement.
(c) Cross-References. Unless otherwise specified, references
in this Agreement to any Section, Recital or Preamble are references to such
Section, Recital or Preamble 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. Registration Under the Securities Act for the Benefit of the
Holders.
(a) Filing of Registration Statement. One or more Holders (the
"Requesting Holders") of Registrable Stock may notify the Company in writing at
any time and from time to time after the earlier of (i) the second anniversary
of the Closing Date and (ii) the occurrence of a Termination Event that such
Requesting Holders desire that the Company either (A) file a Shelf Registration
Statement with respect to the Registrable Stock (a "Shelf Registration Request")
or (B) file a Demand Registration Statement with respect to the Registrable
Stock (a "Demand Registration Request", and together with a "Shelf Registration
Request", a "Registration Request"). The Company agrees to use its reasonable
efforts to keep (i) any Shelf Registration Request continuously effective for a
period of two years after the effective date and (ii) any Demand Registration
Statement filed pursuant to a Demand Registration Request continuously effective
for a period of six months following the effective date. Promptly (and in any
case within five Business Days) following a Registration Request, the Requesting
Holders shall give written notice of such requested registration to all other
Holders and thereupon the Company will expeditiously prepare and file a
registration statement with respect to, and use its reasonable best efforts to
effect the registration under the Securities Act, of:
(1) the Registrable Stock which the Company has been
so requested to register by the Holders delivering the
Registration Request, for disposition in accordance with the
intended method of disposition stated in such request, and
(2) all other Registrable Stock which the Company has
been requested to register by the other Holders by written
request (a "Secondary Requests") delivered to the Company
within five Business Days after the giving of such notice by
the Requesting Holders.
Any Shelf Registration Request shall contain an undertaking by the Requesting
Holders that the numbers of shares requested to be registered pursuant to a
Shelf Registration Statement represent the number of shares that the Requesting
Holders in good faith believe will be sold or disposed of in the two year period
after the effective date of such Shelf Registration Request. Any Secondary
Request with respect to a Shelf Registration Statement shall contain a similar
undertaking. Notwithstanding anything to the contrary contained herein, the
Company shall not be required to file a Demand Registration Statement pursuant
to this Section 2(a) or to participate in an Underwritten
- 5 -
<PAGE> 9
Distribution off of a Shelf Registration Statement if the Current Market Price
of all Registrable Stock which the Requesting Holders request be registered on
such Demand Registration Statement or sold in such Underwritten Distribution
does not equal $2,500,000 or more.
(b) Number of Registrations. In addition to the Company's obligations
under Section 2(a) to file registration statements, and to use its reasonable
best efforts to cause such registration statements to become effective, the
Company agrees to participate in underwritten distributions off of a Shelf
Distribution Statement (an "Underwritten Distribution"). The Company shall be
obligated to cause a Demand Registration Statement to be filed pursuant to the
provisions of Section 2(a) and to participate in Underwritten Distributions a
total of ten times; provided, however, that a request for a Demand Registration
Statement or an Underwritten Distribution shall not be deemed to be effected for
purposes of this Section 2(b) unless (i) the Demand Registration Statement or
Shelf Registration Statement (as the case may be) has been declared effective by
the SEC, and (ii) such registration statement has remained continuously
effective until the earlier of (A) the termination of the period set forth in
Section 2(a), (B) the disposition of the Registrable Stock covered by such
Registration Statement and (C) the withdrawal of such Registration Statement at
the request of the Requesting Holders. The Company shall be obligated to cause a
Shelf Registration Statement to be filed pursuant the provisions of Section 2(a)
an unlimited number of times. The Company shall not be obligated to cause a
Demand Registration Statement or Shelf Registration Statement to be filed
pursuant to the provisions of Section 2(a) at any time an earlier Registration
Statement is still effective, unless such later filing is intended to add
securities to be distributed in connection with the prior filing pursuant to
Rule 429 or 462 under the Securities Act (or any successor rules) or otherwise.
(c) Inclusion in Registration Statement. Any Holder who does not
provide the information requested by the Company and required by the rules and
regulations of the SEC to be included in a Registration Statement as promptly as
practicable after receipt of such request, but in no event later than ten days
thereafter, shall not be entitled to have its Registrable Stock included in a
Registration Statement.
(d) Plan of Distribution. A Registration Statement shall provide for
and permit distributions of the Registerable Stock through underwritten
distributions, secondary distributions, exchange distributions, block trades,
ordinary brokerage transactions, any other method of distribution requested by a
Holder or a combination of such methods of sale. Registerable Stock may be sold
from time to time to purchasers directly by any Holder, or any such Holder may
from time to time offer the Registerable Stock through underwriters, dealers or
agents, who may receive compensation in the form of discounts or commissions
from such Holder and/or the purchasers of Registerable Stock.
(e) Company Delay Rights. Notwithstanding anything to the contrary
contained herein, the Company shall not be required to take any of the actions
described in Section 3(a), Section 3(b), or Section 3(i) with respect to each
Holder who holds Registerable Stock to the extent that the Company is in
possession of material non-public information that it has a bona fide business
- 6 -
<PAGE> 10
purpose for preserving as confidential and that is not then otherwise required
to be disclosed and it delivers written notice (i) in the case of a Demand
Registration, to each Holder that it intends to defer the actions so required
for a period not to exceed 60 days from the date of such notice, and (ii) in the
case of a Shelf Registration, to each Holder that it intends to defer the
actions so required, and that such Holder may not make offers or sales under a
Shelf Registration Statement, for a period not to exceed 60 days from the date
of such notice; provided, however, that the Company may deliver only two such
notices in the aggregate within any twelve-month period.
(f) Selection of Underwriters. Upon receipt of a Demand Registration
Request which contemplates an underwritten offering or a request (an
"Underwritten Distribution Request") to participate in an Underwritten
Distribution, the Company shall choose three of the Named Underwriters (two of
which must be Listed Underwriters) and promptly (but in any event within five
Business Days) notify the Requesting Holders of its selections. The Holders of a
majority of the Registerable Stock to be sold in the Demand Registration or
Underwritten Distribution then may designate one of the three designated Named
Underwriters to serve as the managing underwriter in such offering. The Company
and the Purchaser agree to annually review the list of Named Underwriters and to
mutually agree on any deletions or additions to the list of Named Underwriters,
provided that the list of Named Underwriters shall at all times include at least
seven Named Underwriters and at least two Listed Underwriters. The Company and
the Purchaser agree to annually review the list of Listed Underwriters and to
mutually agree on any deletions or additions to the list of Listed Underwriters.
(g) Priority. Notwithstanding any other provision of this Section 2,
if, in the case of a Demand Registration involving an underwritten offering, the
managing underwriter advises the Company and the Requesting Holders in writing
that in its opinion the aggregate number of shares of Common Stock requested to
be included in such offering (including Registrable Stock and any shares of
Common Stock to be offered for the account of the Company or any other
securityholder of the Company) would materially adversely affect the success of
such offering or the offering price of the shares of Common Stock to be offered,
the managing underwriter may limit the Registrable Stock that may be included in
such registration. The Company shall so advise each Requesting Holder of such
limitation, and the number of shares of Registrable Stock that may be included
in such registration and underwriting shall be allocated in the following order
of priority: (i) first, the number of shares of Registrable Stock specified in
the Demand Request (and in any Secondary Requests) in proportion, as nearly as
practicable, to the respective number of Registrable Stock requested to be
included in such registration by each such Holder, (ii) second, any or all
shares of Common Stock to be sold by the Company pursuant to such registration,
and (iii) third, among any other securityholders requesting that shares of
Common Stock held by such securityholders be included in such registration in
proportion, as nearly as practicable, to the respective number of shares of
Common Stock requested to be included in such registration by each such
securityholder. No Registrable Stock or other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration.
- 7 -
<PAGE> 11
SECTION 3. Registration Procedures.
In connection with the obligations of the Company with respect to a
Shelf Registration Statement or Demand Registration Statement contemplated by
Section 2 hereof, the Company shall as expeditiously as possible:
(a) subject to Section 2(e) hereof, prepare and file with the
SEC a Shelf Registration Statement or Demand Registration Statement for the sale
of the Registrable Stock in accordance with the requested methods of
distribution described in Section 2(d) hereof, which Registration Statement
shall comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith, and use its reasonable best efforts to cause such Registration
Statement to become and remain effective for the periods contemplated in this
Agreement;
(b) subject to Section 2(e) and Section 3(i) hereof, (i)
prepare and file with the SEC such amendments to each Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period; (ii) cause the Prospectus to be amended or supplemented as
required and to be filed as required by Rule 424 or any similar rule that may be
adopted under the Securities Act; (iii) respond as promptly as practicable to
any comments received from the SEC with respect to a Registration Statement or
any amendment thereto; and (iv) comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the requested methods
of distribution;
(c) furnish to each Holder, without charge, as many copies of
each Shelf Prospectus or Demand Prospectus forming a part of a Registration
Statement and any amendment or supplement thereto in order to facilitate the
public sale or other disposition of the Registrable Stock; subject to Section
2(e) hereof, the Company consents to the use of the Shelf Prospectus or Demand
Prospectus and any amendment or supplement thereto by each such Holder of
Registrable Stock in connection with the offering and sale of the Registrable
Stock covered by the Shelf Prospectus or Demand Prospectus or amendment or
supplement thereto;
(d) use its reasonable efforts to register or qualify the
Registrable Stock by the time a Shelf Registration Statement or Demand
Registration Statement (as the case may be) is declared effective by the SEC
under all applicable state securities or blue sky laws of such jurisdictions in
the United States and its territories and possessions as any Holder who holds
Registrable Stock covered by such Shelf Registration Statement or Demand
Registration Statement shall reasonably request in writing, keep each such
registration or qualification effective during the period such Shelf
Registration Statement or Demand Registration Statement is required to be kept
effective; provided, however, that in connection therewith, the Company shall
not be required to
- 8 -
<PAGE> 12
(i) qualify as a foreign corporation to do business or to register as a broker
or dealer in any such jurisdiction where it would not otherwise be required to
qualify or register but for this Section 3(d), (ii) subject itself to taxation
in any such jurisdiction, or (iii) file a general consent to service of process
in any such jurisdiction;
(e) notify each Holder promptly (i) when a Shelf Registration
Statement or Demand Registration Statement (as the case may be) and any
post-effective amendments thereto have become effective, (ii) when any amendment
or supplement to a Shelf Prospectus or Demand Prospectus forming a part of a
Registration Statement has been filed with the SEC, (iii) of the issuance by the
SEC or any state securities authority of any stop order suspending the
effectiveness of a Shelf Registration Statement or Demand Registration Statement
or any part thereof or the initiation of any proceedings for that purpose, (iv)
if the Company receives any notification with respect to the suspension of the
qualification of the Registrable Stock for offer or sale in any jurisdiction or
the initiation of any proceeding for such purpose, and (v) of the happening of
any event during the period a Shelf Registration Statement or Demand
Registration Statement is effective as a result of which (A) such Shelf
Registration Statement or Demand Registration Statement contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or (B)
the Shelf Prospectus or Demand Prospectus forming a part of the registration
statement as then amended or supplemented contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Shelf Registration Statement or
Demand Registration Statement or any part thereof as promptly as possible;
(g) furnish to each Holder, without charge, at least one
conformed copy of each Shelf Registration Statement and Demand Registration
Statement and any post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto, unless requested);
(h) cooperate with the selling Holders to facilitate the
timely preparation and delivery of certificates representing Registrable Stock
to be sold and not bearing any Securities Act legend; and enable certificates
for such Registrable Stock to be issued for such numbers of shares and
registered in such names as the selling Holders may reasonably request at least
two business days prior to any sale of Registrable Stock;
(i) subject to Section 2(e) hereof, upon the occurrence of any
event contemplated by Section 2(e) or clause (v) of Section 3(e) hereof, use its
reasonable efforts promptly to prepare and file an amendment or a supplement to
the Shelf Prospectus or Demand Prospectus or any document incorporated therein
by reference or prepare, file and obtain effectiveness of a post-effective
amendment to the Shelf Registration Statement or Demand Registration Statement,
or file any other required document, in any such case to the extent necessary so
that, such Shelf Prospectus
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<PAGE> 13
or Demand Prospectus and Shelf Registration Statement or Demand Registration
Statement as then amended or supplemented will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading;
(j) make available for inspection by the Holders and any
counsel, accountants, underwriters, dealers or agents or other representatives
retained by such Holders all financial and other records, pertinent corporate
documents and properties of the Company and cause the officers, directors and
employees of the Company to supply all such records, documents or information
reasonably requested by such Holders, counsel, accountants or representatives in
connection with any Registration Statement; provided, however, that such
records, documents or information which the Company determines in good faith to
be confidential and notifies such Holders, counsel, accountants or
representatives in writing that such records, documents or information are
confidential shall not be disclosed by such Holders, counsel, accountants or
representatives unless (i) such disclosure is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction, or (ii) such records,
documents or information become generally available to the public other than
through a breach of this Agreement;
(k) furnish, at the request of any selling Holder, on the date
that shares of Registrable Stock are delivered to the underwriters for sale
pursuant to a Demand Registration or an Underwritten Distribution: (i) an
opinion dated such date of counsel representing the Company for the purposes of
such registration, addressed to the underwriters, stating that the Shelf
Registration Statement or Demand Registration Statement (as the case may be) has
become effective under the Securities Act and that (A) to the knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the Registration Statement and
Prospectus, and each amendment or supplement thereto, comply as to form in all
material respects with the requirements of the Securities Act and the applicable
rules and regulations of the SEC thereunder and that such counsel does not
believe that any such Registration Statement, Prospectus, amendment or
supplement contains a misstatement of a material fact or an omission to state a
material fact required to be stated therein or necessary to make the statements
made therein not misleading (except that such counsel need express no opinion as
to financial statements or financial or statistical data contained therein) and
(C) to such other effects as may reasonably be requested by counsel for the
underwriters or by such selling Holder or its counsel, and (ii) a letter dated
such date from the independent public accountants retained by the Company,
addressed to the underwriters, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
Registration Statement and the Prospectus, or any amendment or supplement
thereto, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to the registration in respect of which such letter is being given
as such underwriters may reasonably request;
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<PAGE> 14
(l) a reasonable time prior to the filing of the Shelf
Registration Statement or Demand Registration Statement or any amendment
thereto, or any Shelf Prospectus or Demand Prospectus forming a part of the
registration statement or any amendment or supplement thereto, provide copies of
such document (not including any documents incorporated by reference therein,
unless requested) to the Holders;
(m) use its reasonable efforts to cause all Registrable Stock
to be listed on any securities exchange on which similar securities issued by
the Company are then listed; and
(n) use its reasonable efforts to make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering at least 12 months which shall satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder.
In connection with and as a condition to the Company's obligations with
respect to any Shelf Registration Statement or Demand Registration Statement
pursuant to Section 2 hereof and this Section 3, each Holder covenants and
agrees that upon receipt of any notice from the Company contemplated by Section
2(e) or Section 3(e) (in respect of the occurrence of an event contemplated by
clause (v) of Section 3(e)), such Holder shall not offer or sell any Registrable
Stock pursuant to a Shelf Registration Statement or Demand Registration
Statement until such Holder receives copies of the supplemented or amended Shelf
Prospectus or Demand Prospectus contemplated by Section 3(i) hereof and receives
notice that any post-effective amendment has become effective, and, if so
directed by the Company, such Holder will deliver to the Company (at the expense
of the Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Shelf Prospectus or Demand Prospectus
as amended or supplemented at the time of receipt of such notice.
In connection with each Demand Registration Statement or Underwritten
Distribution pursuant to this Section 3 and Section 2 hereof, the Company agrees
(i) to cooperate fully in such distribution, and (ii) to participate in meetings
with potential investors and in the preparation of presentations for such
meetings and to cause its executive officers to participate in a "roadshow" if
the managing underwriter so requests; provided, that the Company shall be
obligated to participate in meetings and "roadshows" pursuant to (ii) above on
only seven occasions. In connection with each Demand Registration Statement or
Underwritten Distribution pursuant to this Section 3 and Section 2 hereof, the
Company further agrees, to enter into a written agreement with the managing
underwriter selected in the manner herein provided in such form and containing
such provisions as are customary in the securities business for such an
arrangement between major underwriters and companies of the Company's size and
investment stature, including, without limitation, customary indemnification
provisions substantially consistent with Section 7 hereof and customary lockup
provisions; provided that such agreement shall not contain any such provision
applicable to the Company which is inconsistent with the provisions hereof;
provided, further that the time and place of the closing under said agreement
shall be as mutually agreed upon between the Company and such managing
underwriter. In connection with any other distribution that is not a
underwritten distribution, the Company agrees to enter into a written agreement
with any broker or dealer who
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<PAGE> 15
participates in such distribution containing such provisions as are customary in
the securities business for such an arrangement, including, without limitation,
customary indemnity provisions substantially consistent with Section 7.
SECTION 4. Right to Piggyback.
(a) Piggyback Registration. If the Company at any time
proposes to register any of its Common Stock or other securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other shareholders or both (except with respect to registration
statements on Form S-4, Form S-8 or another form not available for registering
the Registrable Stock for sale to the public) (a "Piggyback Registration"), the
Company will promptly (but in any event within 20 Business Days) give written
notice to all Holders of its intention to effect such registration and will
include in such registration all Registrable Stock with respect to which the
Company has received written requests for inclusion within 10 Business Days
after the giving of the Company's notice (a "Piggyback Registration Request");
provided, however, that the Company shall not be required to include Registrable
Stock in the securities to be registered pursuant to a registration statement on
any form which limits the amount of securities which may be registered by the
issuer and/or selling security holders if, and to the extent that, such
inclusion would make the use of such form unavailable, so long as no other
shares are to be included in the securities to be registered pursuant to the
registration statement for the account of any person other than the Company. In
the event that any Piggyback Registration shall be, in whole or in part, an
underwritten public offering of Common Stock, any Piggyback Registration Request
by a Holder shall include an agreement of such Holder that such Registrable
Stock is to be included in the underwriting on the same terms and conditions as
the shares of Common Stock otherwise being sold through underwriters under such
registration.
(b) Priority on Primary Offerings. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of shares requested to be included in such registration exceeds the
maximum number which can be included in such offering without adversely
affecting the marketability of the offering (the "Maximum Number"), the Company
will limit the number of shares included in such registration to the Maximum
Number, and the shares registered shall be selected in the following order of
priority: (i) first, securities the Company proposes to sell, (ii) second,
subject to the rights set forth in the PVI Agreement as in effect on the date
hereof, Registrable Stock covered by Piggyback Registration Requests, which
shall be pro rata among the Holders thereof on the basis of the number of shares
requested to be registered by each such Holder, and (iii) third, other
securities requested to be included in such registration.
(c) Priority on Secondary Offerings. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the Maximum Number, the Company will include in
such registration the shares requested to be included therein by the holders
requesting such
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<PAGE> 16
registration and the Registrable Stock covered by Piggyback Registration
Requests and any other securities requested to be included in such registration,
pro rata among the holders thereof on the basis of the number of shares
requested to be included in such registration; provided, however, that if the
holders requesting registration are doing so pursuant to demand registration
rights of such holders, such holders' shares shall take priority over any
Registrable Stock.
SECTION 5. Holdback Agreements. If any registration in which any Holder
is participating shall be in connection with an underwritten public offering,
each such Holder agrees (and shall enter into an agreement which shall so
state), if requested by the managing underwriter or underwriters, not to effect
any public sale or distribution, including any sale pursuant to Rule 144 under
the Securities Act, of any Registrable Stock (other than as part of such
underwritten public offering) during the 90 day period beginning on the
effective date of any underwritten offering of securities by the Company;
provided, however, that the provisions of this Section 5 shall be applicable to
Holders only if each officer and director of the Company, and all other
stockholders of the Company so requested by the underwriters, shall, prior to
such effective date, have entered into written agreements with the Company
and/or the managing underwriter or underwriters imposing on such officer and
director and other stockholders similar restrictions as those set forth in this
Section 5 with respect to the Holders.
SECTION 6. Registration Expenses. Except as otherwise provided herein,
all expenses incident to the Company's performance of or compliance with its
obligations under this Agreement will be paid by the Company, regardless of
whether Registrable Stock is sold pursuant to any registration statement,
including, without limitation, all registration, filing and listing fees, fees
and expenses of compliance with securities or blue sky laws, printing,
messenger, telephone and delivery expenses, fees and disbursements of counsel
for the Company, fees and disbursements of all independent certified public
accountants of the Company (including, without limitation, in connection with
any special audit or "cold comfort" letters), and fees and expenses associated
with any NASD filing required to be made in connection with the registration
statement, including, if applicable, the fees and expenses of any "qualified
independent underwriter" (and its counsel) that is required to be retained in
accordance with the rules and regulations of the NASD (collectively, the
"Registration Expenses"); provided, however, that any incremental expenses
incurred by the Company in connection with the registration and disposition of
Registrable Stock referred to in clause (iv) of the definition of Registrable
Stock in Section 1 hereof shall not be Registration Expenses for purpose hereof
and will be paid in all cases by the Purchaser. Registration Expenses shall not
include the fees and disbursements of counsel for any Holder or any fees,
discounts or commissions to any underwriter or any fees or disbursements of
counsel for any underwriter in respect of the Registrable Stock sold by such
Holders (collectively, the "Selling Expenses"). Notwithstanding the first
sentence of this Section 6, with respect to Demand Registration Statements and
Underwritten Distributions (collectively, the "Underwritten Transactions"), the
Registration Expenses shall be payable as follows: the Company shall pay the
Registration Expenses for the first three Underwritten Transactions; the Holders
shall pay the Registration Expenses for the fourth Underwritten Transaction; the
Company shall pay the Registration Expenses for the fifth Underwritten
Transaction; the Holders shall pay the Registration Expenses for the sixth
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<PAGE> 17
Underwritten Transaction; the Company shall pay the Registration Expenses for
the seventh Underwritten Distribution; and the Holders shall pay the
Registration Expenses for the eighth Underwritten Distribution. The Company
will, in any event, pay its internal expenses, the expense of any annual audit,
and the fees and expenses incurred in connection with the listing of the
securities to be registered on each securities exchange on which securities of
the same class are then listed or the qualification for trading of the
securities to be registered in each inter-dealer quotation system in which
securities of the same class are then traded.
SECTION 7. Indemnification.
(a) Indemnification by the Company. In the event of the
registration of any Registrable Stock under the Securities Act pursuant to the
provisions hereof, the Company will indemnify and hold harmless each and every
seller of Registrable Stock, its directors, officers, employees and agents, and
each other Person, if any, who controls such seller within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act (each such
Person being hereinafter sometimes referred to as an "Indemnified Person"
provided that for purposes of subsections (b), (c) and (d) of this Section 7
"Indemnified Person" also shall include the Company, its directors, officers,
employees and agents, and each other Person, if any who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act) from and against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Indemnified Person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained or incorporated by reference in any registration
statement under which Registrable Stock was registered under the Securities Act
or any prospectus or preliminary prospectus included therein (in each case, as
amended or supplemented), or any document incorporated by reference therein, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such Indemnified
Person for any legal or other expenses reasonably incurred by such Indemnified
Person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made or incorporated by reference in
such registration statement or prospectus or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company by such Indemnified Person stated to be specifically for use in
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Person
and shall survive the transfer of such Registrable Stock.
(b) Indemnification by Holders of Registrable Stock. In the
event of the registration of any Registrable Stock under the Securities Act
pursuant to the provisions hereof, each Holder on whose behalf such Registrable
Stock shall have been registered will indemnify and hold harmless each and every
Indemnified Person, against any losses, claims, damages or liabilities, joint
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<PAGE> 18
or several, to which such Indemnified Person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained or incorporated by reference in any registration statement under
which Registrable Stock was registered under the Securities Act or any
prospectus or preliminary prospectus included therein (in each case, as amended
or supplemented), or any document incorporated by reference therein, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, which untrue statement or alleged untrue statement or
omission or alleged omission has been made or incorporated therein in reliance
upon and in conformity with written information furnished to the Company by such
Holder specifically stating that it is for use in preparation thereof, and will
reimburse each such Indemnified Person for any legal and other expenses
reasonably incurred by such Indemnified Person in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the liability of each Holder hereunder shall be limited to the
proceeds received by such Holder from the sale of Registrable Stock covered by
such registration statement.
(c) Procedure. Promptly after receipt by an Indemnified Person
of notice of the commencement of any action (including any governmental
investigation or inquiry), such Indemnified Person will, if such Indemnified
Person intends to make a claim in respect thereof against the party agreeing to
indemnify such Indemnified Person pursuant to subsections (a) or (b) of this
Section 7 (any such Person being hereinafter referred to as an "Indemnifying
Person"), give written notice to such Indemnifying Person of the commencement
thereof, but the omission so to notify the Indemnifying Person shall not relieve
the Indemnifying Person from any of its obligations pursuant to the provisions
of this Section 7 except to the extent that the Indemnifying Person is actually
prejudiced by such failure to give notice. In case any such action is brought
against any Indemnified Person and it notifies an Indemnifying Person of the
commencement thereof, the Indemnifying Person shall be entitled to participate
in, and to the extent that it may wish, jointly with any other Indemnifying
Person similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Person, and after notice from the
Indemnifying Person to such Indemnified Person, the Indemnifying Person shall
not, except as hereinafter provided, be responsible for any legal or other
expenses subsequently incurred by such Indemnified Person in connection with the
defense thereof. No Indemnifying Person will consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Person of a
release from all liability in respect of such claim or litigation. Such
Indemnified Person shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be the expense of such Indemnified Person unless (i) the
Indemnifying Person has agreed to pay such fees and expenses, (ii) the
Indemnifying Person shall have failed to assume the defense of such action or
proceeding or has failed to employ counsel reasonably satisfactory to such
Indemnified Person in any such action or proceeding or (iii) the named parties
to any such action or proceeding (including any impleaded parties) include both
such Indemnified Person and the Indemnifying Person and such Indemnified Person
shall have been advised by counsel that representation of both
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<PAGE> 19
parties by the same counsel would be inappropriate due to actual or potential
material differing interests between them (in which case, if such Indemnified
Person notifies the Indemnifying Person in writing that it elects to employ
separate counsel at the expense of the Indemnifying Person, the Indemnifying
Person shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Person). The Indemnifying Person shall
not be liable for any settlement of any such action or proceeding effected
without its written consent, which consent shall not unreasonably be withheld,
delayed or conditioned, but if settled with its written consent, or if there is
a final judgment for the plaintiff in any such action or proceeding, subject to
no further appeal, the Indemnifying Person shall indemnify and hold harmless
such Indemnified Persons from and against any loss or liability by reason of
such settlement or judgment.
(d) Contribution. If the indemnification provided for in this
Section 7 is unavailable to a party that would have been an Indemnified Person
under this Section 7 in respect of any losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to herein, then each party
that would have been an Indemnifying Person thereunder shall, in lieu of
indemnifying such Indemnified Person, contribute to the amount paid or payable
by such Indemnified Person as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Person on the one
hand and the Indemnified Person on the other in connection with the statement or
omission which resulted in such losses, claims, damages, liabilities or expenses
(or actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission of a material fact relates to information
supplied by the Indemnifying Person or the Indemnified Person and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Section 7(c), any legal or other fees or expenses reasonably incurred by such
party in connection with the investigation or defense of any action or claim.
The Company and each Holder of Registrable Stock agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in this Section 7. Notwithstanding
the provisions of this Section 7(d), no Holder of Registrable Stock shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Stock sold by it exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(e) Other Indemnifications. Indemnification or, if
appropriate, contribution, similar to that specified in the preceding provisions
of this Section 7 (with appropriate modifications) shall be given by the Company
and each seller of Registrable Stock with respect to any required
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<PAGE> 20
registration or other qualification of such Registrable Stock under any federal
or state law or regulation or governmental authority other than the Securities
Act.
SECTION 8. Withdrawals. Any Holder or Holders may at any time withdraw
any request made pursuant to Section 4 hereof for inclusion of its Registrable
Stock in a Piggyback Registration or Section 2 hereof for registration of its
Registrable Stock.
SECTION 9. Exchange Act Registration; Rule 144 Reporting. The Company
covenants and agrees that until such time as the Holders no longer hold any
Registrable Stock it will:
(a) if required by law, maintain an effective registration
statement (containing such information and documents as the SEC shall specify)
with respect to the Common Stock of the Company under Section 12(g) of the
Exchange Act;
(b) use its reasonable best efforts to make and keep public
information available, as those terms are understood and defined in Rule 144
under the Securities Act, even if the Company subsequently ceases to be subject
to the reporting requirements of the Securities Act or the Exchange Act;
(c) use its reasonable best efforts to file with the SEC in a
timely manner all reports and documents required of the Company under the
Securities Act and the Exchange Act; and
(d) furnish to any Holder promptly upon request (i) a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144 under the Securities Act and of the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of the Company,
and (iii) such other reports and documents of the Company and other information
in the possession of or reasonably attainable by the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing such Holder to sell any such Registrable Stock without registration.
The Company represents and warrants that such registration statement or any
information, document or report filed with the SEC in connection therewith or
any information so made public shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements contained therein not misleading. The
Company agrees to indemnify and hold harmless (or to the extent the same is not
enforceable, make contribution to) the Holders, their officers, directors,
employees and agents, or any Person controlling (within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act) such Holder
from and against any and all losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arising out of or resulting from any breach of
the foregoing representation or warranty, all on terms and conditions comparable
to those set forth in Section 7.
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<PAGE> 21
SECTION 10. Limitation on Registration Rights of Others. Except as set
forth on Exhibit A hereto, the Company represents and warrants that it has not
granted to any Person the right to request or require the Company to register
any securities issued by the Company. The Company covenants and agrees that, so
long as Holders hold Registrable Stock with a Current Market Price equal to or
greater than $2,500,000, the Company will not, directly or indirectly, grant to
any Person or agree to or otherwise become obligated in respect of any
registration rights of securities of the Company upon the demand of any Person
without the prior written consent of the Required Holders. The Company may grant
"piggyback" registration rights after the date hereof, provided such rights are
expressly subject and subordinated to the rights of registration of the Holders
pursuant to Section 4(b) on terms reasonably satisfactory to the Required
Holders.
SECTION 11. Termination. The rights of any Holder under Sections 2, 3
and 4 of this Agreement shall terminate as to any Registrable Stock when such
Registrable Stock has been effectively registered under the Securities Act and
sold pursuant to a registration statement covering such Registrable Stock. The
expense provisions of Section 6 and the indemnification and contribution
provisions of Section 7 shall survive any termination of this Agreement.
SECTION 12. 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 Company: Administaff, Inc.
19001 Crescent Springs Drive
Kingswood, Texas 77339-3802
Attention: General Counsel
Telephone No.: (281)348-3251
Telecopier 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
Telecopier No.: (713)220-4593
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<PAGE> 22
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
Telecopier No.: (212) 267-9061
with a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30301-1763
Attention: John J. Kelley III
Telephone No.: (404)572-3401
Telecopier No.: (404)572-5146
or at such other address as any party or any other Holder 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.
SECTION 13. Successors. All covenants and agreements of this Agreement
by or on behalf of any of the parties hereto shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns, including, without limitation, any Holders from time to time of the
Registrable Stock or the Warrants and successors and assigns by operation of
law, merger or consolidation; provided, that without the consent of the Company
the Purchaser may not assign its rights under this Agreement to any Person,
except for an assignment to an Affiliate of the Purchaser, an Associate of the
Purchaser, a Subsidiary of the Purchaser or any entity of which Purchaser is,
directly or indirectly, a Subsidiary.
SECTION 14. Governing Law. This Agreement shall be governed by laws of
the State of New York and for all purposes shall be construed in accordance with
the internal laws of said state.
SECTION 15. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Purchaser and the
other Holders any legal or equitable right, remedy or claim under this
Agreement; this Agreement shall be for the sole and exclusive benefit of the
Company, the Purchaser and the other Holders.
SECTION 16. 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.
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<PAGE> 23
SECTION 17. Amendments; Waivers. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended or waived and the
Company may take any action herein prohibited, or fail to take any action herein
required to be performed by it if, but only if, the Company has obtained the
written consent of the Holders of a majority of the total number of shares of
outstanding Registrable Stock at the time such amendment or waiver becomes
effective and any such waiver or action so given or taken shall be binding on
all Holders. No failure or delay by any party in exercising any right or remedy
hereunder shall operate as a waiver thereof, and a waiver of a particular right
or remedy on one occasion shall not be deemed a waiver of any other right or
remedy or a waiver of the same right or remedy on any subsequent occasion.
SECTION 18. Jurisdiction. Each of the parties hereto hereby agrees that
any legal action or proceeding against such party with respect to this Agreement
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 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 19. Specific Performance. The Company recognizes that the
rights of the Holders under this Agreement are unique and, accordingly, the
Holders 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 by
actions for injunctive relief and specific performance to the extent permitted
by law. The Company 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 and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate. This Agreement is
not intended to limit or abridge any rights of the Holders which may exist apart
from this Agreement.
SECTION 20. Entire Agreement. The parties hereto agree that this
Agreement, the Purchase Agreement and the other Transaction Documents constitute
the entire agreement among the parties with respect to the subject matter hereof
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.
SECTION 21. 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
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<PAGE> 24
provision with any constitution, statute, rule or public policy, or for any
other reason, such circumstance 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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<PAGE> 25
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
AMERICAN EXPRESS COMPANY
By: /s/ ANNE BUSQUET
--------------------------------------
Name: Anne Busquet
Title: President, AERS
- 22 -
<PAGE> 1
EXHIBIT 4.4
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
BETWEEN
ADMINISTAFF, INC.
AND
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
Dated as of March 10, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
WARRANT AGREEMENT
THIS WARRANT AGREEMENT is made as of March 10, 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 Company and the Purchaser have entered into a Securities Purchase
Agreement dated as of January 27, 1998 (the "Purchase Agreement"), pursuant to
which the Purchaser has agreed to purchase from the Company 693,126 Units (as
hereinafter defined), each of which shall consist of one share of Common Stock
(as hereinafter defined) and 2.98 Warrants (as hereinafter defined).
B. The Company and the Purchaser have agreed to enter into this Agreement
to supplement the terms and conditions set forth in the Purchase Agreement which
relate to the Warrants purchased thereunder.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions.
(a) Certain Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"Affiliate" has the same meaning as in Rule 12b-2 promulgated under
the Exchange Act.
"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 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 Date" means March 10, the date of the Closing of the purchase
by the Purchaser of the Units in accordance with the Purchase Agreement.
<PAGE> 3
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" is defined in the Warrant Certificates.
"Exercise Price" means the exercise price per Warrant as set forth in
the Warrant Certificate evidencing such Warrant and as adjusted from time to
time in accordance with this Agreement.
"Fair Market Value per Share" means the arithmetic mean of the closing
sales price of a share of Common Stock of the Company 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.
"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.
"Holder" means the Purchaser or any subsequent holder of Warrants or
Warrant Stock, to which the Warrants or Warrant Stock are transferred in
accordance with the provisions of this Agreement and the Purchase Agreement.
"Marketing Agreement" means the Marketing Agreement, dated as of the
date hereof, by and between the Company and the Purchaser in substantially the
form of Exhibit A attached to the Purchase Agreement.
"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.
"Purchase Agreement" is defined in the Recitals.
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<PAGE> 4
"Put Closing" is defined in Section 5(a).
"Put Exercise Notice" is defined in Section 5(a).
"Put Price" is defined in Section 5(a).
"Put Right" is defined in Section 5(a).
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, between the Company and the Purchaser,
in substantially the form of Exhibit B attached to the Purchase Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Unit" means an investment unit consisting of one share of Common
Stock and 2.98 Warrants.
"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 A-1 attached hereto, (ii) the Warrants with an
Expiration Date of the fourth anniversary of the Closing Date in the form of
Exhibit A-2 attached hereto, (iii) the Warrants with an Expiration Date of the
fifth anniversary of the Closing Date in the form of Exhibit A-3 attached
hereto, (iv) the Warrants with an Expiration Date of the sixth anniversary of
the Closing Date in the form of Exhibit A-4 attached hereto, (v) the Warrants
with an Expiration Date of the seventh anniversary of the Closing Date in the
form of Exhibit A-5 attached hereto.
"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" means the 2,065,515 warrants each of which entitles the
holder thereof to purchase one share of Common Stock of the Company issued to
the Purchaser on the Closing Date pursuant to this Agreement and the Purchase
Agreement, which warrants shall be subject to adjustment and shall have the
rights, privileges and limitations set forth in this Agreement and in each
Warrant.
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<PAGE> 5
(b) Terms Defined in Purchase Agreement. Unless otherwise defined
herein, capitalized terms used in this Agreement shall have the meanings
ascribed to such terms in the Purchase Agreement.
SECTION 2. Exercise of Warrants.
(a) A Warrant may be exercised by the Purchaser or any Holder only in
accordance with the terms and conditions of this Agreement and at any time
during the period beginning on the date hereof and ending on the Expiration Date
for such Warrant as set forth in the Warrant Certificate evidencing such
Warrant. The Warrant Certificates evidencing 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 Warrants; 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 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) Subject to the terms and conditions hereof, Warrants may be
exercised pursuant to this Section 2 upon surrender to the Company at its office
designated for such purpose (the address of which is set forth in Section 13) of
the certificate or certificates evidencing the Warrant(s) to be exercised and
upon payment to the Company of the aggregate Exercise Price for the number of
Warrants which are then exercised, provided that a Warrant may not be exercised
in part. Upon such surrender of Warrant Certificates and payment of the Exercise
Price in cash or by check payable to the Company, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in any event within
three Business Days after such surrender) to or upon the written order of the
Holder, and in the name of the Holder or the Holder's nominee, a certificate or
certificates for the number of full shares of Warrant Stock issuable upon the
exercise of such Warrants, together with such other property (including cash)
and securities as may then be deliverable upon such exercise, including cash for
fractional Warrant Stock as provided in Section 11, provided that all such
Warrant Stock held by the Purchaser shall be subject to the restrictions set
forth in Sections 7 and 8 of the Purchase Agreement. Such certificate or
certificates shall be deemed to have been issued and the Person so named therein
shall be deemed to have become a holder of record of such Warrant Stock as of
the date of the surrender of such Warrant Certificates.
-4-
<PAGE> 6
(c) Subject to the terms and conditions hereof, the Warrants shall be
exercisable at the election of the Holders thereof, either in full or from time
to time in part (but in no event shall a Warrant be exercisable in part), and in
the event that a Warrant Certificate is exercised in respect of fewer than all
of the Warrants evidenced by such Warrant Certificate at any time prior to the
Expiration Date of such Warrant, a new Warrant Certificate evidencing the
remaining Warrant or Warrants will be issued and delivered pursuant to the
provisions of this Section 2(c). All Warrant Certificates surrendered upon
exercise of Warrants shall be canceled. The Company shall keep copies of this
Agreement and any notices received hereunder available for inspection during
normal business hours at its office. The Company will furnish, at its expense,
copies of this Agreement and all such notices, upon request, to any Holder of
any Warrant Certificates.
SECTION 3. Adjustment of Exercise Price and Number of Shares of
Warrant Stock Issuable. The Exercise Price and the number of shares of Warrant
Stock issuable upon the exercise of each Warrant are subject to adjustment from
time to time upon the occurrence of any of the events enumerated in this Section
3.
(a) Adjustment for Change in Capital Stock of the Company. If the
Company (i) pays a dividend or makes a distribution on its Common Stock in
shares of any class of its capital stock, (ii) subdivides its outstanding shares
of Common Stock into a greater number of shares, (iii) combines its outstanding
shares of Common Stock into a smaller number of shares, (iv) makes a
distribution on its Common Stock in shares of its capital stock other than
Common Stock, or (v) issues to holders of its Common Stock by reclassification
of its Common Stock any shares of its capital stock, then the Exercise Price and
number of shares for which any Warrant may be exercised in effect immediately
prior to such action shall be proportionately adjusted so that the Holder of the
Warrant thereafter exercised may receive the aggregate number and kind of shares
of capital stock of the Company which it would have owned immediately following
such action if such Warrant had been exercised immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur, and shall become effective immediately after the record date in the case
of a dividend or distribution and immediately after the effective date in the
case of a subdivision, combination or reclassification. If after an adjustment
made pursuant to the second preceding sentence a Holder of a Warrant upon
exercise of such Warrant may receive shares of two or more classes of capital
stock of the Company, the Board of Directors of the Company shall determine in
the good faith exercise of its reasonable business judgment the allocation of
the adjusted Exercise Price between the classes of capital stock. After such
allocation, the exercise privilege and the Exercise Price of each class of
capital stock shall thereafter be subject to adjustment on terms comparable to
those in this Section 3.
(b) Reorganization of the Company. In the event of any capital
reorganization, recapitalization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with another entity, in which
the Company does not continue as the surviving corporation or, if it does so
continue, its Common Stock does not remain outstanding, any acquisition of
capital stock of the Company by means of a share exchange, or the sale, lease,
transfer, conveyance or other disposition of all or substantially all of its
assets to another entity, then, as a
-5-
<PAGE> 7
condition of and concurrently with such reorganization, recapitalization,
reclassification, consolidation, merger, share exchange or sale, lease,
transfer, conveyance or other disposition, lawful and adequate provision shall
be made whereby the Holders of the Warrant Certificates shall thereafter have
the right to purchase and receive, on the basis and upon the terms and
conditions specified in this Agreement and in lieu of the Warrant Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented by the Warrants, such shares of stock, securities, cash or
property as would have been issued or payable with respect to or in exchange for
the number of shares of Warrant Stock purchasable and receivable immediately
prior to such transaction upon the exercise of the rights represented by the
Warrant Certificates if such Warrants had been exercised immediately prior to
such transaction. If such consolidation, merger, share exchange, sale, lease,
transfer, conveyance or other disposition is with any Person or group of Persons
(within the meaning of Section 13(d) or 14(d) of the Exchange Act) who shall
have made a purchase, tender or exchange offer pursuant to which a majority of
the outstanding shares of Common Stock of the Company were validly tendered and
accepted, promptly after the consummation of such transaction, the Holders of
the Warrants shall be given a reasonable opportunity (and, in no event, less
than 30 days) to elect to receive the stock, securities, cash or property issued
or paid (or to be issued or paid) to holders of the Common Stock in accordance
with such offer. In any such case appropriate provision shall be made with
respect to the rights and interests of the Holders of the Warrants to the end
that the provisions of this Agreement (including, without limitation, provisions
for adjustment of the Exercise Price and of the number and type of securities
purchasable upon the exercise of the Warrants) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities, cash or
property thereafter deliverable upon the exercise of the Warrants. The Company
shall not effect any such consolidation, merger, share exchange or sale, lease,
transfer, conveyance or other disposition unless prior to or simultaneously with
the consummation thereof the successor entity (if other than the Company)
resulting from such consolidation, merger or share exchange or the entity
purchasing or otherwise acquiring such assets or shares (i) shall assume by a
supplemental Warrant Agreement, reasonably satisfactory in form, scope and
substance to the Holders (which shall be mailed or delivered to the Holders of
the Warrants at the last address of such Holders appearing on the books of the
Company) the obligation to deliver to such Holders such shares of stock,
securities, cash or property as, in accordance with the foregoing provisions,
such Holders may be entitled to purchase (the "Substitute Securities") and (ii)
shall assume all of the other obligations of the Company set forth in this
Agreement, the Purchase Agreement and the Registration Rights Agreement.
Following such assumption such obligations shall apply to the Substitute
Securities rather than to the Warrant Stock. If the issuer of securities
deliverable upon exercise of Warrants under the supplemental Warrant Agreement
is an Affiliate of the formed, surviving, transferee or lessee entity, such
issuer shall join the supplemental Warrant Agreement. The foregoing provisions
of this paragraph shall similarly apply to successive reorganizations,
recapitalizations, reclassifications, consolidations, mergers, share exchanges,
sales, leases, transfers, conveyances or other dispositions.
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<PAGE> 8
SECTION 4. Covenants.
(a) Private Company Information. If the Company shall cease to be
subject to the periodic reporting obligations of the Exchange Act and for so
long as the Purchaser's Interest is at least five percent, the Company will
furnish, or will cause to be furnished, to each Holder 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 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.
(b) 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 five percent, 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 a
Holder to dispose in accordance with this Agreement and the Warrant
Agreement of all or a portion of the Warrant Stock pursuant to Rule
144 (or any successor provision) promulgated by the SEC under the
Securities Act.
(c) 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 a Holder to exercise the Warrants or (ii) breach any of the
covenants or agreements in this document.
-7-
<PAGE> 9
(d) Governmental Approvals. The Company will use its reasonable
commercial efforts, and will cooperate with the Holders to, secure all necessary
consents, approvals, authorizations and exemptions from all Governmental
Authorities in connection with the transactions contemplated hereby and the
exercise of the Warrants and the issuance of shares of Common Stock upon
exercise of the Warrants.
(e) Termination of Rights upon Sale to the Public. Notwithstanding
anything to the contrary set forth herein, the obligations of the Company set
forth in this Section 4 shall terminate with respect to any Holder (including an
underwriter) acquiring any Warrants or Warrant Stock pursuant to a registration
statement declared effective by the SEC under the Securities Act or in a sale
effected pursuant to Rule 144 promulgated under the Securities Act.
SECTION 5. Restrictions on Transfers.
(a) Transfers of Warrants.
(i) Without the prior written consent of the Company, the
Purchaser may not dispose of or transfer any Warrants now or hereafter
owned, whether by sale, assignment, gift, pledge, encumbrance or
otherwise, except (A) to a Subsidiary of the Purchaser or to any
entity of which the Purchaser is, directly or indirectly, a Subsidiary
(provided that such transferee agrees to be bound by the transfer
restrictions contained herein), (B) in connection with the exercise of
a Warrant in accordance with the provisions of the Agreement and (C)
in connection with the exercise in accordance with Section 5(a)(ii) of
a put of a Warrant to the Company after the occurrence of a Change of
Control.
(ii) Upon a Change of Control, each of the Purchaser and any
other Holders to which the Warrants were transferred in accordance
with Section 5(a) hereof shall individually have the right (the "Put
Right") to require the Company to purchase all (but not less than all)
of the Warrants owned by the Purchaser and each such Holder. The
Company shall notify each Holder in writing, as promptly as
practicable, but in any event within three Business Days, after a
Change in Control. The Put Right may be exercised by the Purchaser and
any Holder by delivering a written notice, which notice shall be
irrevocable (the "Put Exercise Notice"), to the Company within 90 days
after any Change of Control. The purchase price for each Warrant
purchased by the Company upon exercise of the Put Right shall equal
the Fair Market Value per Share as of the date of the Change of
Control minus the Exercise Price of such Warrant (the "Put Price").
The purchase and sale of the Warrants upon exercise of the Put Rights
shall be consummated at a closing (the "Put Closing") that shall occur
not later than 15 days following the Put Exercise Notice. At the Put
Closing, the Purchaser and the Holders seeking to exercise the Put
Rights set forth herein shall surrender to the Company the Warrant
Certificates evidencing their Warrants. In exchange therefor, (A) if
the Put Price for the Warrants evidenced
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<PAGE> 10
by a Warrant Certificate is greater than zero, the Company shall issue
to the Holder of such Warrants Common Stock in an amount, calculated
based on the Fair Market Value per Share of such Common Stock at the
time of Change of Control, equal to the Put Price for such Warrants
multiplied by the number of Warrants evidenced by such Warrant
Certificate and (B) if the Put Price for the Warrants evidenced by a
Warrant Certificate is not greater than zero, the Company shall not be
obligated to make any payment or issue any Common Stock to the Holder
of such Warrants. Prior to the delivery of a Put Exercise Notice, the
Put Right shall not restrict or limit or have any affect on a Holder's
right to exercise a Warrant pursuant to Section 2 hereof. If as a
result of a Change in Control the Company is not the surviving entity
or shares of Common Stock are no longer outstanding after a Change in
Control, then the Put Price shall be payable in such shares of stock,
securities, cash or property as would have been issued or payable as a
result of such Change of Control with respect to or in exchange for
the number of shares of Common Stock a Holder would have received upon
exercise of the Put immediately prior to such Change in Control.
(b) Restricted Securities. Warrants are transferable only in
accordance with Section 5(a).
(c) Transfers of Warrant Stock. The Purchaser may not dispose of or
transfer any Warrant Stock now or hereafter owned, whether by sale, assignment,
gift, pledge, encumbrance or otherwise, except in accordance with Section 8 of
the Purchase Agreement.
SECTION 6. Termination.
This Agreement shall terminate on the earlier of (a) the seventh
anniversary of the Closing Date and (b) the exercise or expiration of all
Warrants issued pursuant to this Agreement. Each Warrant shall expire upon the
Expiration Date set forth in the Warrant Certificate by which it is evidenced.
SECTION 7. Registration of Transfers and Exchanges.
(a) The Company shall from time to time register the transfer of any
outstanding Warrant Certificates made in accordance with Section 5 hereof in a
Warrant register to be maintained by the Company upon surrender of such Warrant
Certificates accompanied by a written instrument or instruments of transfer in
form reasonably satisfactory to the Company, duly executed by the Holder or
Holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney; provided, however, that prior to effecting such
transfer, the transferee shall agree (in a form reasonably satisfactory to the
Company) to be bound by the terms of this Agreement. Upon any such registration
of transfer, a new Warrant Certificate shall be issued to the transferee(s) and
the surrendered Warrant Certificate shall be canceled. Until the Warrant
Certificate is transferred on the Warrant register of the Company, the Company
may treat the Holder as shown in the Warrant register as the absolute owner of
the Warrant Certificate for all purposes, and
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<PAGE> 11
notwithstanding any notice to the contrary. The Company agrees that it will make
the Warrant register available for inspection by the Holders for a proper
purpose during normal business hours at its office.
(b) The Holders agree that each Warrant Certificate and each
certificate representing Warrant Stock will bear the following legend (the
"Securities Legend"):
"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 __ 1998, BETWEEN THE
COMPANY AND THE PURCHASER, AND A REGISTRATION RIGHTS
AGREEMENT, DATED AS OF MARCH __ 1998, BETWEEN THE COMPANY
AND THE PURCHASER, 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."
(c) If the holder of the Warrants or Warrant Stock delivers, in
accordance with Section 8(e) of the Purchase Agreement, to the Company an
opinion of King & Spalding or such other counsel that no subsequent transfer of
such Warrants or Warrant Stock shall require registration under the Securities
Act, the Company shall promptly upon such contemplated transfer deliver new
certificates for such Warrants or Warrant Stock which do not bear the Securities
Legend;
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<PAGE> 12
provided, however, that if at such time, any such Warrants or Warrant Stock
remain subject to certain provisions of this Agreement or the Purchase
Agreement, the Company shall not remove the Securities Legend, but shall modify
it to delete all references to restrictions or conditions on sale of Warrants or
Warrant Stock except those references to restrictions or conditions which are
specified in this Agreement or the Purchase Agreement. If the Company is not
required to deliver new certificates for such Warrants or Warrant Stock not
bearing such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in Section 5(b) hereof with respect to
Warrants and Section 8(b) of the Purchase Agreement with respect to Warrant
Stock.
(d) If any Warrants or Warrant Stock are or become eligible for sale
pursuant to Rule 144(k), the Company, upon the request of holders of any such
Warrants or Warrant Stock, shall remove the Securities Legend from the
certificates for such Warrants or Warrant Stock; provided, however, that if at
such time, any such Warrants or Warrant Stock remain subject to certain
provisions of this Agreement or the Purchase 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 Warrants or Warrant Stock except those
references to restrictions or conditions which are still applicable and
specified in this Agreement or the Purchase Agreement.
(e) Warrant Certificates may be exchanged at the option of the
Holder(s) thereof when surrendered to the Company at its office for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants, including, without limitation, upon
an adjustment in the Exercise Price or in the number of Warrant Shares
purchasable upon exercise of the Warrants. Warrant Certificates surrendered for
exchange shall be canceled.
SECTION 8. Payment of Taxes. The Company will pay all stamp, transfer
and similar taxes in connection with the issuance, sale and delivery of the
Warrants hereunder, as well as all such taxes attributable to the initial
issuance of Warrant Stock upon the exercise of Warrants and payment of the
appropriate Exercise Price. The Company will not, however, be required to pay
any such taxes imposed in connection with any transfer of any Warrants or
Warrant Stock or any federal or state income taxes payable in respect of any
Holder's purchase, ownership, sale, transfer, exercise or other disposition of
Warrants or Warrant Stock.
SECTION 9. Mutilated or Missing Warrant Certificates. Upon receipt by
the Company of evidence reasonably satisfactory to the Company (which shall
include an affidavit of the Holder) that any Warrant Certificate shall have been
mutilated, lost, stolen or destroyed and, in the case of loss, theft or
destruction, a customary indemnity agreement from the Holder of such Warrant
Certificate, the Company shall issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants.
-11-
<PAGE> 13
SECTION 10. Reservation of Warrant Stock. The Company will at all
times that any Warrant is exercisable reserve and keep available, free from
preemptive or similar rights, out of the aggregate of its authorized but
unissued capital stock or its authorized and issued capital stock held in its
treasury, for the purpose of enabling it to satisfy any obligation to issue
Warrant Stock upon exercise of Warrants, the maximum number of shares of each
class of capital stock constituting a part of the Warrant Stock which may then
be deliverable upon the exercise of all outstanding Warrants. The Company or, if
appointed, the transfer agent for shares of each class of capital stock of the
Company (the "Transfer Agent") and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of the Warrants
will be irrevocably authorized and directed at all times to reserve such number
of authorized shares as shall be required for such purpose. The Company will
keep a copy of this Agreement on file with the Transfer Agent and with every
subsequent transfer agent for any shares of the Company's capital stock issuable
upon the exercise of the rights of purchase represented by the Warrants. The
Company will furnish such Transfer Agent a copy of all notices of adjustments,
and certificates related thereto, transmitted to Holders pursuant to Section 12.
Before taking any action which would cause an adjustment pursuant to Section 3
to the maximum number of shares of Warrant Stock deliverable upon the exercise
of all outstanding Warrants pursuant to Section 2(a), the Company shall cause to
be authorized additional shares of Common Stock such that the sum of such
maximum number of shares of Common Stock deliverable upon exercise of all
outstanding Warrants and the number of shares of Common Stock outstanding or
issuable pursuant to outstanding rights, options or warrants as of such date
does not exceed the number of shares of Common Stock authorized pursuant to the
Company's Certificate.
SECTION 11. Fractional Interests. The Company shall not be required to
issue fractional shares of Warrant Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full shares of Warrant Stock which shall be issuable
upon exercise thereof shall be computed on the basis of the aggregate number of
shares of Warrant Stock purchasable on exercise of the Warrants so presented. If
any fraction of a share of the Warrant Stock would, except for the provisions of
this Section 11, be issuable on the exercise of any Warrants (or specified
portion thereof), the Company shall pay an amount in cash equal to the Fair
Market Value per Share calculated as of the day immediately preceding the date
the Warrant is presented for exercise, multiplied by such fraction.
SECTION 12. Notice to Warrant Holders. Upon any adjustment of the
Exercise Price or number or type of securities purchasable upon exercise of the
Warrants pursuant to Section 3, the Company shall promptly thereafter (i) cause
to be filed with the Company a certificate of the chief financial officer of the
Company setting forth the Exercise Price and the number and type of securities
or other property constituting Warrant Stock after such adjustment and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculations are based and, in the case of an adjustment pursuant to
Section 3(b), setting forth the number and type of securities or other property
constituting Warrant Stock (or portion thereof) issuable, after such adjustment
in the Exercise Price or number of Warrant Stock, upon exercise of a Warrant and
payment of the adjusted Exercise Price, and (ii) cause to be given to each of
the Holders of the Warrant Certificates
-12-
<PAGE> 14
written notice of such adjustments, together with a copy of such certificate.
Where appropriate, such notice may be given in advance and included as a part of
the notice required to be given under the other provisions of this Section 11.
In the event:
(a) the Company shall authorize the payment of any dividend or
distribution to holders of shares of Common Stock of capital stock of the
Company; or
(b) of any capital reorganization, reclassification, recapitalization,
consolidation, or share exchange, or sale, lease, conveyance, transfer or other
disposition to which the adjustment provisions of Section 3(b) apply, or a
purchase, tender or exchange offer for shares of Common Stock or other
securities constituting part of the Warrant Stock (whether by the Company or
some other party); or
(c) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(d) the Company proposes to take any action that would require an
adjustment of the Exercise Price or number of shares of Warrant Stock for which
the Warrants are exercisable;
then the Company shall cause to be given to each of the Holders, at least 20
days prior to the applicable record date hereinafter specified (or promptly in
the case of events for which there is no record date), a written notice stating
(as applicable) (i) the date as of which the holders of record of shares of
Common Stock entitled to receive any such dividends or distribution are to be
determined, (ii) the date on which any such reclassification, recapitalization
or reorganization, consolidation, merger, share exchange, sale, lease,
conveyance, transfer or disposition to which the adjustment provisions of
Section 3(b) apply or any such dissolution, liquidation or winding up is
expected to become effective or be consummated, or (iii) the initial expiration
date set forth in any purchase, tender or exchange offer for shares of capital
stock, and the date as of which it is expected that holders of record of shares
of capital stock or other securities constituting a part of the Warrant Stock
(or securities into which the Warrant Stock may be converted) shall be entitled
to exchange such shares or securities for securities or other property, if any,
deliverable upon such reclassification, recapitalization, reorganization,
consolidation, merger, share exchange, sale, lease, conveyance, transfer,
disposition, dissolution, liquidation or winding up.
SECTION 13. Notices. All notices, consents, approvals, agreements and
other communications provided hereunder shall be in writing and delivered
personally, by mail, by overnight courier (providing proof of delivery) or by
telecopy and shall be sufficiently given to the Purchaser and the Company if
addressed or delivered to them at the following addresses:
-13-
<PAGE> 15
If to 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
Houston, Texas 77002
Attention: G. Michael O'Leary
Telephone No.: (713) 220-4360
Facsimile No.: (723) 220-4593
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 a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John J. Kelley III
Telephone No.: (404) 572-3401
Facsimile No.: (404) 572-5146
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, (iii) when
transmission is verified, if telecopied, and (iv) on the next Business Day, if
timely delivered to an air courier guaranteeing overnight delivery.
SECTION 14. Successors. Except as otherwise expressly provided herein
or in the Warrants, all covenants and agreements of this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns, including those by operation of law, merger
or consolidation. In addition, except as otherwise expressly provided in the
Warrants, and whether or not any express assignment has been made, the
provisions of this Agreement which are for Purchaser's benefit as a purchaser or
Holder of a Warrant or Warrant Stock
-14-
<PAGE> 16
are also for the benefit of, and enforceable by, any subsequent Holder of such a
Warrant or Warrant Stock.
SECTION 15. Governing Law. This Agreement, the Warrants and the
Warrant Stock 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 16. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company and the Holders
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
Holders.
SECTION 17. 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 18. Amendment; Waivers. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended or waived and the
Company may take any action herein prohibited, or fail to take any action herein
required to be performed by it if, but only if, the Company has obtained the
written consent of the Holders of a majority of the Warrants in existence at the
time such amendment or waiver becomes effective. 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 19. Jurisdiction. Each of the parties hereto hereby agrees
that any legal action or proceeding against such party with respect to this
Agreement, the Warrants or the Warrant Stock 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 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.
-15-
<PAGE> 17
SECTION 20. Specific Performance. The Company and the Holders
recognize that the rights of the Holder(s) and the Company under this Agreement
are unique and, accordingly, the Holder(s) and the Company 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. The
Company and the Holders agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by them of the
provisions of this Agreement and the Company and each of the Holders 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 Holder(s) or the Company which may exist apart from this
Agreement.
SECTION 21. Entire Agreement. The parties hereto agree that this
Agreement, the Purchase Agreement, the Confidentiality Agreement and the other
Transaction Documents constitute the entire agreement among the parties with
respect to the subject matter hereof 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.
SECTION 22. 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.
-16-
<PAGE> 18
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
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.
By: /s/ ANNE BUSQUET
---------------------------------
Name: Anne Busquet
Title: President, AERS
<PAGE> 1
EXHIBIT 4.5
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,
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.
Certificate No. 1 400,000 Warrants
Warrant Certificate
ADMINISTAFF, INC.
This Warrant Certificate certifies that AMERICAN EXPRESS
TRAVEL RELATED SERVICES COMPANY, INC., a New York corporation (the
"Purchaser"), or its registered assigns, is the registered holder of the number
of Warrants (the "Warrants") set forth above to purchase shares of common
stock, par value $0.01 per share (the "Common Stock"), of ADMINISTAFF, INC., a
Delaware corporation (the "Company"). Each Warrant entitles the holder upon
exercise to receive from the Company one fully paid and nonassessable share of
Common Stock (a share of "Warrant Stock") upon the payment by the Purchaser to
the Company of the initial exercise price (the "Exercise Price") of $40,
payable in lawful money of the United States of America, upon surrender of this
Warrant Certificate and payment of the Exercise Price at the office of the
Company designated for such purpose, subject to the conditions set forth herein
and in the Warrant Agreement referenced below. The Exercise Price and number
and type of shares of Warrant Stock issuable upon exercise of the Warrants are
subject to adjustment upon the occurrence of certain events, as set forth in
the Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants, and are issued or to be issued pursuant to
a Securities Purchase Agreement, dated as of January 27, 1998 (the "Purchase
Agreement"), and a Warrant Agreement, dated as of March 10, 1998 (the "Warrant
Agreement"), each of which has been duly executed and delivered by the Company
and the Purchaser, which Purchase Agreement and Warrant Agreement are hereby
incorporated by reference in and made a part of this instrument and are hereby
referred to for a description of the rights, obligations and duties hereunder
of the Company and the holders of the Warrants (the words "holders" or "holder"
meaning the registered holders or registered
<PAGE> 2
holder). By acceptance of this Warrant Certificate, the holder hereof agrees
to be bound by the Purchase Agreement and the Warrant Agreement. Copies of the
Purchase Agreement and the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company. The Warrants evidenced by this
Warrant Certificate are exercisable at any time and from time to time during
the period beginning on the date hereof and ending on the third anniversary of
the date hereof (the "Expiration Date").
The holder of Warrants evidenced by this Warrant Certificate
may exercise such Warrants under and pursuant to the terms and conditions of
the Warrant Agreement by surrendering this Warrant Certificate, with the form
of election to purchase attached hereto (and by this reference made a part
hereof) properly completed and executed, together with payment of the Exercise
Price in cash at the office of the Company designated for such purpose. In the
event that any exercise of Warrants evidenced hereby shall be for less than the
total number of Warrants evidenced hereby and except as otherwise provided in
the Warrant Agreement, there shall be issued by the Company to the holder
hereof or its registered assignee a new Warrant Certificate evidencing the
number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof and the number
of shares of Warrant Stock issuable upon the exercise of each Warrant may,
subject to certain conditions, be adjusted. No fractional shares of Warrant
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Company by the registered holder thereof in person or by legal representative
or attorney duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, for another
Warrant Certificate or Warrant Certificates of like tenor evidencing in the
aggregate a like number of Warrants.
The Company may deem and treat the registered holder(s)
thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing made hereon) for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be signed by its duly authorized officer and has caused its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: March 10, 1998 ADMINISTAFF, INC.
---------------
By: /s/ PAUL J. SARVADI
------------------------------
Name: Paul J. Sarvadi
Title: President and CEO
[CORPORATE SEAL]
-3-
<PAGE> 1
EXHIBIT 4.6
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,
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.
Certificate No. 2 400,000 Warrants
Warrant Certificate
ADMINISTAFF, INC.
This Warrant Certificate certifies that AMERICAN EXPRESS
TRAVEL RELATED SERVICES COMPANY, INC., a New York corporation (the
"Purchaser"), or its registered assigns, is the registered holder of the number
of Warrants (the "Warrants") set forth above to purchase shares of common
stock, par value $0.01 per share (the "Common Stock"), of ADMINISTAFF, INC., a
Delaware corporation (the "Company"). Each Warrant entitles the holder upon
exercise to receive from the Company one fully paid and nonassessable share of
Common Stock (a share of "Warrant Stock") upon the payment by the Purchaser to
the Company of the initial exercise price (the "Exercise Price") of $50,
payable in lawful money of the United States of America, upon surrender of this
Warrant Certificate and payment of the Exercise Price at the office of the
Company designated for such purpose, subject to the conditions set forth herein
and in the Warrant Agreement referenced below. The Exercise Price and number
and type of shares of Warrant Stock issuable upon exercise of the Warrants are
subject to adjustment upon the occurrence of certain events, as set forth in
the Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants, and are issued or to be issued pursuant to
a Securities Purchase Agreement, dated as of January 27, 1998 (the "Purchase
Agreement"), and a Warrant Agreement, dated as of March 10, 1998 (the "Warrant
Agreement"), each of which has been duly executed and delivered by the Company
and the Purchaser, which Purchase Agreement and Warrant Agreement are hereby
incorporated by reference in and made a part of this instrument and are hereby
referred to for a description of the rights, obligations and duties hereunder
of the Company and the holders of the Warrants (the words "holders" or "holder"
meaning the registered holders or registered
<PAGE> 2
holder). By acceptance of this Warrant Certificate, the holder hereof agrees
to be bound by the Purchase Agreement and the Warrant Agreement. Copies of the
Purchase Agreement and the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company. The Warrants evidenced by this
Warrant Certificate are exercisable at any time and from time to time during
the period beginning on the date hereof and ending on the third anniversary of
the date hereof (the "Expiration Date").
The holder of Warrants evidenced by this Warrant Certificate
may exercise such Warrants under and pursuant to the terms and conditions of
the Warrant Agreement by surrendering this Warrant Certificate, with the form
of election to purchase attached hereto (and by this reference made a part
hereof) properly completed and executed, together with payment of the Exercise
Price in cash at the office of the Company designated for such purpose. In the
event that any exercise of Warrants evidenced hereby shall be for less than the
total number of Warrants evidenced hereby and except as otherwise provided in
the Warrant Agreement, there shall be issued by the Company to the holder
hereof or its registered assignee a new Warrant Certificate evidencing the
number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof and the number
of shares of Warrant Stock issuable upon the exercise of each Warrant may,
subject to certain conditions, be adjusted. No fractional shares of Warrant
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Company by the registered holder thereof in person or by legal representative
or attorney duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, for another
Warrant Certificate or Warrant Certificates of like tenor evidencing in the
aggregate a like number of Warrants.
The Company may deem and treat the registered holder(s)
thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing made hereon) for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be signed by its duly authorized officer and has caused its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: March 10, 1998 ADMINISTAFF, INC.
---------------
By: /s/ PAUL J. SARVADI
------------------------------
Name: Paul J. Sarvadi
Title: President and CEO
[CORPORATE SEAL]
-3-
<PAGE> 1
EXHIBIT 4.7
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,
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.
Certificate No. 3 400,000 Warrants
Warrant Certificate
ADMINISTAFF, INC.
This Warrant Certificate certifies that AMERICAN EXPRESS
TRAVEL RELATED SERVICES COMPANY, INC., a New York corporation (the
"Purchaser"), or its registered assigns, is the registered holder of the number
of Warrants (the "Warrants") set forth above to purchase shares of common
stock, par value $0.01 per share (the "Common Stock"), of ADMINISTAFF, INC., a
Delaware corporation (the "Company"). Each Warrant entitles the holder upon
exercise to receive from the Company one fully paid and nonassessable share of
Common Stock (a share of "Warrant Stock") upon the payment by the Purchaser to
the Company of the initial exercise price (the "Exercise Price") of $60,
payable in lawful money of the United States of America, upon surrender of this
Warrant Certificate and payment of the Exercise Price at the office of the
Company designated for such purpose, subject to the conditions set forth herein
and in the Warrant Agreement referenced below. The Exercise Price and number
and type of shares of Warrant Stock issuable upon exercise of the Warrants are
subject to adjustment upon the occurrence of certain events, as set forth in
the Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants, and are issued or to be issued pursuant to
a Securities Purchase Agreement, dated as of January 27, 1998 (the "Purchase
Agreement"), and a Warrant Agreement, dated as of March 10, 1998 (the "Warrant
Agreement"), each of which has been duly executed and delivered by the Company
and the Purchaser, which Purchase Agreement and Warrant Agreement are hereby
incorporated by reference in and made a part of this instrument and are hereby
referred to for a description of the rights, obligations and duties hereunder
of the Company and the holders of the Warrants (the words "holders" or "holder"
meaning the registered holders or registered
<PAGE> 2
holder). By acceptance of this Warrant Certificate, the holder hereof agrees
to be bound by the Purchase Agreement and the Warrant Agreement. Copies of the
Purchase Agreement and the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company. The Warrants evidenced by this
Warrant Certificate are exercisable at any time and from time to time during
the period beginning on the date hereof and ending on the third anniversary of
the date hereof (the "Expiration Date").
The holder of Warrants evidenced by this Warrant Certificate
may exercise such Warrants under and pursuant to the terms and conditions of
the Warrant Agreement by surrendering this Warrant Certificate, with the form
of election to purchase attached hereto (and by this reference made a part
hereof) properly completed and executed, together with payment of the Exercise
Price in cash at the office of the Company designated for such purpose. In the
event that any exercise of Warrants evidenced hereby shall be for less than the
total number of Warrants evidenced hereby and except as otherwise provided in
the Warrant Agreement, there shall be issued by the Company to the holder
hereof or its registered assignee a new Warrant Certificate evidencing the
number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof and the number
of shares of Warrant Stock issuable upon the exercise of each Warrant may,
subject to certain conditions, be adjusted. No fractional shares of Warrant
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Company by the registered holder thereof in person or by legal representative
or attorney duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, for another
Warrant Certificate or Warrant Certificates of like tenor evidencing in the
aggregate a like number of Warrants.
The Company may deem and treat the registered holder(s)
thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing made hereon) for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be signed by its duly authorized officer and has caused its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: March 10, 1998 ADMINISTAFF, INC.
---------------
By: /s/ PAUL J. SARVADI
------------------------------
Name: Paul J. Sarvadi
Title: President and CEO
[CORPORATE SEAL]
-3-
<PAGE> 1
EXHIBIT 4.8
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,
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.
Certificate No. 4 400,000 Warrants
Warrant Certificate
ADMINISTAFF, INC.
This Warrant Certificate certifies that AMERICAN EXPRESS
TRAVEL RELATED SERVICES COMPANY, INC., a New York corporation (the
"Purchaser"), or its registered assigns, is the registered holder of the number
of Warrants (the "Warrants") set forth above to purchase shares of common
stock, par value $0.01 per share (the "Common Stock"), of ADMINISTAFF, INC., a
Delaware corporation (the "Company"). Each Warrant entitles the holder upon
exercise to receive from the Company one fully paid and nonassessable share of
Common Stock (a share of "Warrant Stock") upon the payment by the Purchaser to
the Company of the initial exercise price (the "Exercise Price") of $70,
payable in lawful money of the United States of America, upon surrender of this
Warrant Certificate and payment of the Exercise Price at the office of the
Company designated for such purpose, subject to the conditions set forth herein
and in the Warrant Agreement referenced below. The Exercise Price and number
and type of shares of Warrant Stock issuable upon exercise of the Warrants are
subject to adjustment upon the occurrence of certain events, as set forth in
the Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants, and are issued or to be issued pursuant to
a Securities Purchase Agreement, dated as of January 27, 1998 (the "Purchase
Agreement"), and a Warrant Agreement, dated as of March 10, 1998 (the "Warrant
Agreement"), each of which has been duly executed and delivered by the Company
and the Purchaser, which Purchase Agreement and Warrant Agreement are hereby
incorporated by reference in and made a part of this instrument and are hereby
referred to for a description of the rights, obligations and duties hereunder
of the Company and the holders of the Warrants (the words "holders" or "holder"
meaning the registered holders or registered
<PAGE> 2
holder). By acceptance of this Warrant Certificate, the holder hereof agrees
to be bound by the Purchase Agreement and the Warrant Agreement. Copies of the
Purchase Agreement and the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company. The Warrants evidenced by this
Warrant Certificate are exercisable at any time and from time to time during
the period beginning on the date hereof and ending on the third anniversary of
the date hereof (the "Expiration Date").
The holder of Warrants evidenced by this Warrant Certificate
may exercise such Warrants under and pursuant to the terms and conditions of
the Warrant Agreement by surrendering this Warrant Certificate, with the form
of election to purchase attached hereto (and by this reference made a part
hereof) properly completed and executed, together with payment of the Exercise
Price in cash at the office of the Company designated for such purpose. In the
event that any exercise of Warrants evidenced hereby shall be for less than the
total number of Warrants evidenced hereby and except as otherwise provided in
the Warrant Agreement, there shall be issued by the Company to the holder
hereof or its registered assignee a new Warrant Certificate evidencing the
number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof and the number
of shares of Warrant Stock issuable upon the exercise of each Warrant may,
subject to certain conditions, be adjusted. No fractional shares of Warrant
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Company by the registered holder thereof in person or by legal representative
or attorney duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, for another
Warrant Certificate or Warrant Certificates of like tenor evidencing in the
aggregate a like number of Warrants.
The Company may deem and treat the registered holder(s)
thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing made hereon) for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be signed by its duly authorized officer and has caused its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: March 10, 1998 ADMINISTAFF, INC.
---------------
By: /s/ PAUL J. SARVADI
------------------------------
Name: Paul J. Sarvadi
Title: President and CEO
[CORPORATE SEAL]
-3-
<PAGE> 1
EXHIBIT 4.9
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,
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.
Certificate No. 5 465,515 Warrants
Warrant Certificate
ADMINISTAFF, INC.
This Warrant Certificate certifies that AMERICAN EXPRESS
TRAVEL RELATED SERVICES COMPANY, INC., a New York corporation (the
"Purchaser"), or its registered assigns, is the registered holder of the number
of Warrants (the "Warrants") set forth above to purchase shares of common
stock, par value $0.01 per share (the "Common Stock"), of ADMINISTAFF, INC., a
Delaware corporation (the "Company"). Each Warrant entitles the holder upon
exercise to receive from the Company one fully paid and nonassessable share of
Common Stock (a share of "Warrant Stock") upon the payment by the Purchaser to
the Company of the initial exercise price (the "Exercise Price") of $80,
payable in lawful money of the United States of America, upon surrender of this
Warrant Certificate and payment of the Exercise Price at the office of the
Company designated for such purpose, subject to the conditions set forth herein
and in the Warrant Agreement referenced below. The Exercise Price and number
and type of shares of Warrant Stock issuable upon exercise of the Warrants are
subject to adjustment upon the occurrence of certain events, as set forth in
the Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants, and are issued or to be issued pursuant to
a Securities Purchase Agreement, dated as of January 27, 1998 (the "Purchase
Agreement"), and a Warrant Agreement, dated as of March 10, 1998 (the "Warrant
Agreement"), each of which has been duly executed and delivered by the Company
and the Purchaser, which Purchase Agreement and Warrant Agreement are hereby
incorporated by reference in and made a part of this instrument and are hereby
referred to for a description of the rights, obligations and duties hereunder
of the Company and the holders of the Warrants (the words "holders" or "holder"
meaning the registered holders or registered
<PAGE> 2
holder). By acceptance of this Warrant Certificate, the holder hereof agrees
to be bound by the Purchase Agreement and the Warrant Agreement. Copies of the
Purchase Agreement and the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company. The Warrants evidenced by this
Warrant Certificate are exercisable at any time and from time to time during
the period beginning on the date hereof and ending on the third anniversary of
the date hereof (the "Expiration Date").
The holder of Warrants evidenced by this Warrant Certificate
may exercise such Warrants under and pursuant to the terms and conditions of
the Warrant Agreement by surrendering this Warrant Certificate, with the form
of election to purchase attached hereto (and by this reference made a part
hereof) properly completed and executed, together with payment of the Exercise
Price in cash at the office of the Company designated for such purpose. In the
event that any exercise of Warrants evidenced hereby shall be for less than the
total number of Warrants evidenced hereby and except as otherwise provided in
the Warrant Agreement, there shall be issued by the Company to the holder
hereof or its registered assignee a new Warrant Certificate evidencing the
number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof and the number
of shares of Warrant Stock issuable upon the exercise of each Warrant may,
subject to certain conditions, be adjusted. No fractional shares of Warrant
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Company by the registered holder thereof in person or by legal representative
or attorney duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, for another
Warrant Certificate or Warrant Certificates of like tenor evidencing in the
aggregate a like number of Warrants.
The Company may deem and treat the registered holder(s)
thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing made hereon) for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be signed by its duly authorized officer and has caused its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: March 10, 1998 ADMINISTAFF, INC.
---------------
By: /s/ PAUL J. SARVADI
------------------------------
Name: Paul J. Sarvadi
Title: President and CEO
[CORPORATE SEAL]
-3-
<PAGE> 1
EXHIBIT 10.1
MARKETING AGREEMENT
BETWEEN
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.,
ADMINISTAFF, INC.,
ADMINISTAFF COMPANIES, INC.
AND
ADMINISTAFF OF TEXAS, INC.
DATED
MARCH 10, 1998
<PAGE> 2
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
- -------
PAGE
----
<S> <C> <C>
A Client Service Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
B Quality Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
C Description of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
D AMEX Audit Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
E AMEX Data Access Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
F Confidentiality/Data Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
G Customer Data and Data-Related Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
H Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
I Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
J Non-Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
K Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
<PAGE> 3
MARKETING AGREEMENT
This Marketing Agreement (this "Agreement") is entered into this 10th day of
March 1998, by ADMINISTAFF, INC., a Delaware corporation, ADMINISTAFF
COMPANIES, INC., a Delaware corporation, ADMINISTAFF OF TEXAS, INC., a Texas
corporation and AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., a New
York corporation.
RECITALS:
A. This Agreement is entered into in connection with the Securities
Purchase Agreement between AMEX and ASF DE dated January 27, 1998.
B. ASF is engaged in the business of providing professional employer
services.
C. ASF and AMEX wish to cooperate in the marketing of the Services.
D. AMEX intends to utilize its resources, including access to AMEX
Customers, to generate AMEX Leads and/or Appointments.
E. ASF and AMEX intend to contact the AMEX Leads, in order to generate
Appointments.
F. ASF and AMEX intend to solicit AMEX Leads to subscribe to the Services
and become AMEX Clients.
G. AMEX and ASF intend to market and promote Embedded Products.
H. ASF desires to utilize its resources and current and future client
base to provide ASF Referrals for services furnished by AMEX's business units
including AEFA and TBS.
I. The Parties wish to set forth in this Agreement the terms and
conditions under which they will undertake the marketing activities described
above.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the Parties hereto agree as follows:
1. DEFINITIONS:
AEFA: American Express Financial Advisors.
Agents: ASF or its officers, directors, employees, contractors or
agents.
Agreement: this Marketing Agreement.
-1-
<PAGE> 4
AMEX: AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., a New
York corporation.
AMEX Client: means any AMEX Customer that is a party to an AMEX PEO
CSA and is not a party to an ASF PEO CSA.
AMEX Customer: means any Business Entity that utilizes an AMEX product
or service (e.g., an American Express Corporate Card).
AMEX Indemnitee: AMEX, its parent, subsidiaries, affiliates,
successors and assignees, and their respective directors, officers,
agents and employees.
AMEX Lead: means: (a) any AMEX PEO Prospect that expresses to AMEX an
interest in the AMEX Product either in person, in writing, via
telephone or via the Internet (including, without limitation,
accessing any Web Site used by AMEX to describe, or solicit interest
in, PEO services); (b) any AMEX PEO Prospect that contacts ASF and
indicates to ASF that (1) such AMEX PEO Prospect is interested in
purchasing, or obtaining additional information regarding, the AMEX
Product or (2) such AMEX PEO Prospect is responding to an AMEX Product
solicitation; or (c) any Business Entity attending or participating in
a joint marketing activity as contemplated in Section 5(b).
AMEX Marketed PEO Prospect: means any AMEX PEO Prospect that: (a) AMEX
has specifically targeted regarding the Services or the AMEX Product
and with which AMEX has communicated by mail, telemarketing,
interactive media, direct sales force, seminars or otherwise; or (b)
has been referred by an AMEX business unit to ASF as being interested
in the AMEX Product; provided however, the status of AMEX Marketed PEO
Prospect shall cease when six months have lapsed from the later of the
Contact Date or the referral date.
AMEX PEO Prospect: means any AMEX Customer that is not a party to
either an ASF PEO CSA or an AMEX PEO CSA.
AMEX PEO CSA: means the agreement by which an AMEX Client engages ASF
to provide the AMEX Product to such AMEX Client.
***
Appointment: means the meeting of an AMEX Lead with an ASF salesperson
to discuss the Services.
***Confidential Treatment Requested.
-2-
<PAGE> 5
ASF: ASF DE, ASF COMP and ASF TX.
ASF Client: means any ASF Customer that is a party to an ASF PEO CSA
and is not a party to an AMEX PEO CSA.
ASF COMP: ADMINISTAFF COMPANIES, INC., a Delaware corporation.
ASF Customer: any Business Entity that engages ASF to provide PEO
services to such Business Entity in accordance with the terms of a
current and enforceable ASF PEO CSA.
ASF DE: ADMINISTAFF, INC., a Delaware corporation.
ASF Derivative Proprietary Work: proprietary interests in technology,
products or services that AMEX and ASF jointly develop that is an
improvement, enhancement, extension or derivative of ASF's preexisting
proprietary rights. The ASF Derivative Proprietary Work consists
solely of the improvement, enhancement, extension or derivative and
will not include the preexisting or underlying work.
ASF Indemnitee: ASF, its parent, subsidiaries, affiliates, successors
and assignees, and their respective directors, officers, agents and
employees.
ASF PEO CSA: the agreement by which ASF provides PEO services to ASF
Customers.
ASF TX: ADMINISTAFF OF TEXAS, INC., a Texas corporation.
ASF Referral: referral to AMEX for AEFA and TBS Services from past,
current and future customers of ASF.
Business Entity: any corporation, subchapter S corporation,
partnership, joint venture, trust, association, limited liability
company, sole proprietorship or un-incorporated organization engaged
in a commercial enterprise.
Business Records: business and financial records maintained by ASF
that detail the completeness and accuracy of the commissions paid to
AMEX and revenue related to embedded AMEX Products.
Change of Control: the occurrence of any of the following:***
*** Confidential Treatment Requested.
-3-
<PAGE> 6
Claim: any loss, damage, cost, expense, liability, and settlement,
including without limitation, any reasonable attorney fees and court
costs.
Client: includes AMEX Clients and ASF Clients.
Commission Report: A report which includes: (a) total number of AMEX
Clients; (b) AMEX Clients' names; (c) AMEX Clients' dates of
enrollment; (d) total number of worksite employees for each AMEX
Client; and (e) the related commissions due to AMEX.
Commissionable Client: Any AMEX Lead or AMEX Marketed PEO Prospect
that enters into an AMEX PEO CSA or ASF PEO CSA.
Competitor:***
Contact Date: date of specific solicitation of the AMEX Product or
Services, including mail, telemarketing, direct or indirect sales
force, seminar and interactive e-mail.
CPR: the Center for Public Resources.
CSA: Client Service Agreement, as attached in Exhibit A.
Dedicated Staff: ASF sales personnel who: (a) are full-time salaried
employees of ASF; (b) have completed at least 30 days of sales
training in professional employer services; (c) and have at least 60
days continuous sales experience of professional employer services
with ASF; and (d) only sell professional employer services.
Effective Date: March 10, 1998.
Embedded Products: certain AMEX products and services that are offered
to ASF clients and prospects in a seamless integrated manner embedded
in ASF's offering of Services.
Expiration Date: March 10, 2005 (including any renewal period as
provided).
Fifteen Month Period: first 15 months from the date of this Agreement.
Joint Work: any proprietary interests in technology, products or
services that is jointly developed by AMEX and ASF and is not an ASF
Derivative Proprietary Work. If the
*** Confidential Treatment Requested
-4-
<PAGE> 7
Joint Work consists of an improvement, enhancement, extension or
derivative of AMEX's preexisting proprietary rights, the Joint Work
shall consist solely of the improvement, enhancement, extension or
derivative and will not include the preexisting or underlying work.
Notice: all notices, consents, requests, instructions, approvals, and
other communications made, required or permitted.
Paid Worksite Employee: An employee with a unique Social Security
number or taxpayer identification number paid by ASF during a calendar
month.
Parties: AMEX and ASF.
PEO: Professional Employer Organization.
Purchase Agreement: Securities Purchase Agreement between AMEX and ASF
dated January 27, 1998.
Reenrolled Client: any of the Clients that cancel the Services and
have reenrolled in the Services.
Required Embedding: AEFA and TBS services as specified by AMEX.
Services: the business of providing professional employer services, as
more particularly described on Exhibit C.
TBS: Tax and Business Services.
Ten Year Term: a ten year period from the date an AMEX Lead becomes a
Client.
2. PROMOTION OF THE SERVICES:
AMEX and ASF will cooperate in the joint marketing and promotion of
the Services including utilizing AMEX's technology, marketing and
personnel resources in order to generate AMEX Clients.
3. AMEX PRODUCT:
ASF will offer, at the expense of ASF, the AMEX Product to: (1) AMEX
Leads; (2) AMEX Marketed PEO Prospects; and (3) AMEX Customers. ASF
and AMEX agree to mutually develop value-added components to be
integrated into the AMEX Product, at ASF's expense, to differentiate
the AMEX Product (e.g. unique specialized training on
-5-
<PAGE> 8
small business topics, including planning and hiring) from the
Services offered to ASF Customers. The AMEX Product will be marketed
exclusively to AMEX Leads and AMEX Customers and will be marketed
under the name and brand of ASF, but at AMEX's discretion, will be
identified as being co-marketed by AMEX. ASF shall not market the
AMEX Product other than to AMEX Leads and AMEX Marketed PEO Prospects.
At AMEX's discretion, ASF will include in the AMEX Product, and make
available to AMEX Clients, any new products or services that ASF
markets to ASF Customers.
If the facts from the date of this Agreement regarding the IRS's audit
of ASF's single employer 401(k) plan change which may require ASF to
change its delivery of the 401(k) service, ASF covenants to: (1)
disclose, to AMEX's reasonable satisfaction, the proposed changes in
ASF's delivery of the 401(k) service; and (2) use commercially
reasonable efforts to make the transition seamless. ASF covenants to
use commercially reasonable efforts to ensure that the value of the
products and services offered to Clients shall not decrease due to a
change in the embedded benefits plan, provided that except as provided
in the CSA ASF shall have no obligation to hold Clients harmless from
any such decrease in value.
4. AMEX LEAD GENERATION ACTIVITIES:
a. AMEX Marketing Activities: AMEX will use commercially reasonable
efforts to generate AMEX Leads to ASF.
(1) Costs: All marketing and promotional costs incurred
by AMEX in connection with generating the AMEX Leads
for ASF shall be borne by AMEX. Once an AMEX PEO
Prospect is generated to ASF as an AMEX Lead, any
costs incurred in converting the AMEX Lead to an
Appointment or an AMEX Client shall be borne by the
Party converting the AMEX Lead. ASF agrees that it
will assist AMEX in its ability to convert AMEX Leads
to Appointments; if any tools are needed by AMEX to
convert AMEX Leads to Appointments, such as meeting
schedule software, ASF shall provide the tools at
ASF's expense.
(2) Activities: AMEX agrees to use commercially
reasonable efforts to target its marketing
activities to AMEX PEO Prospects that meet ASF's
reasonable guidelines including size, location and
SIC code of prospects. AMEX may use any marketing
channel to generate leads including mail,
telemarketing, newsletter, direct or indirect sales
force and interactive media. AMEX will establish a
yearly budget for supporting its activities under
this Agreement including generating leads. AMEX will
form a dedicated team of full-time employees to
fulfill AMEX's activities under this Agreement.
-6-
<PAGE> 9
(3) Quality Standards: ASF covenants that when marketing
the Services to AMEX Leads, ASF will comply with the
Quality Standards listed in Exhibit B.
(4) Planning:***
b. Joint Marketing Activities: AMEX and ASF agree to conduct joint
marketing activities (such as customized seminars) in order to
generate AMEX Leads, whereby ASF provides experts and marketing
materials at ASF's expense and AMEX generates attendees at AMEX's
expense. ASF covenants that when conducting joint marketing
activities, ASF will comply with the Quality Standards listed in
Exhibit B. AMEX is responsible for meeting expenses associated with
the customized seminars.
c. Training: In order to enable AMEX employees and/or customer service
representatives to generate leads successfully, ASF and AMEX will
arrange for education and training of the AMEX employees whose job
responsibilities include generating AMEX Leads, including TBS, AEFA,
Small Business Services, Corporate Services and Establishment Services
employees. ASF shall provide the education and training as AMEX
reasonably requests, and without any costs to AMEX, other than the
costs of facilities and general meeting expenses. The location of the
education and training will be determined based upon business
necessities. Each Party will be responsible for the out of pocket
expenses incurred by that Party in connection with the education and
training, including housing, lodging and travel associated with such
Party's employees. Neither Party will compensate the other Party for
lost employee time.
d. Toll-Free Number: ASF will support dedicated toll-free numbers to
receive inquiries from prospective AMEX Leads and AMEX Clients which
toll-free numbers shall be wholly-owned by AMEX. ASF shall pay all
costs associated with such toll-free numbers, including monthly
maintenance fees and usage charges. The toll-free number(s) for this
service shall not be used for any other service or any other
client/program without express written consent of AMEX. AMEX shall
have all rights in and to the toll-free number(s) upon termination of
this Agreement and at that time shall assume any and all costs
associated with these toll-free numbers after any deposits on them,
paid by ASF are refunded to ASF. AMEX shall have the right to retain
and reuse the toll-free number(s). AMEX shall have the right to
approve ASF's telecommunications requirements for marketing response
to maximize best efforts and professionalism. At AMEX's discretion,
ASF will provide, at its sole cost and expense, a dedicated toll-free
dial transfer number with priority handling to AMEX. For a period of
one year from the termination of this Agreement for any reason, ASF
shall continue to provide AMEX the dedicated toll- free dial transfer
number. After one year from the termination of this Agreement, AMEX
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shall be responsible for the cost and expense of such toll-free
number, and AMEX may use such number in its own discretion.
5. ASF ACTIVITIES:
a. Embedded Activities:
(1) Embedded Product: At AMEX's discretion, AMEX may
require ASF to embed the Required Embedding in the
Services provided to AMEX Clients or other existing
or potential ASF Clients, and ASF shall use all
reasonable commercial efforts to integrate the
Required Embedding into a seamless offering of the
Services. After mutually agreeable terms to both
Parties are reached, ASF may embed in the Services
other AMEX products, including Small Business
Services, Corporate Card, Business Travel and
Purchasing Card services. Any AMEX Embedded Products
will, at AMEX's discretion, be clearly identified
under the name and brand that AMEX designates. AMEX
will use reasonable efforts to customize the AMEX
products, at AMEX's expense, that will be embedded in
the Services. As mutually agreed by the Parties, ASF
may collect payment on any and all Embedded Products
as part of the fee structure established with a
Client and shall remit any payments so collected to
AMEX within 25 days following the end of the month.
(2) Referral Activities:***
(3) Review and Audit: If both Parties agree to embed
other AMEX products in addition to the Required
Embedding with respect to which ASF is due
commissions, ASF shall have the audit rights as
agreed by the Parties with respect to any commissions
owed to ASF by AMEX.
b. Sales Force Commitment: ASF acknowledges that an adequate and
properly trained sales force is essential to the successful marketing
of the Services and agrees that ASF's undertaking to maintain such a
sales force is a prime consideration of AMEX for entering into and
continuing this Agreement.*** Both Parties agree to
discuss in good faith any
*** Confidential Treatment Requested.
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reasonable requests by the other Party to modify the guidelines. At
no time will the guidelines provide for a lower standard than internal
guidelines used by ASF with respect to other activities. ASF
covenants not to pay the Dedicated Staff less commission or different
compensation for selling the AMEX Product when compared to other
Services (including Services marketed through third party
arrangements).
6. CUSTOMER PROTECTION:
a. AMEX Customer Protection: ASF acknowledges that unnecessary risk would
be caused to AMEX if ASF solicited AMEX Customers outside this
Agreement or otherwise intentionally diluted AMEX's ability to provide
AMEX Leads to ASF. ASF's agreement, as detailed in this Section, to
protect AMEX from this risk is a prime consideration of AMEX for
entering into and continuing this Agreement. ASF will not knowingly
market any products or services to AMEX Customers other than under the
terms of this Agreement. ASF covenants:
***
b. ASF Customer Protection: AMEX acknowledges that unnecessary risk would
be caused to ASF if AMEX solicited ASF Clients outside this Agreement.
AMEX understands that
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to protect ASF from this risk is a prime consideration of ASF for
entering into and continuing this Agreement. AMEX will not knowingly
market another PEO's products or services to ASF Customers other than
under the terms of this Agreement. AMEX covenants: ***
7. FINANCIAL ARRANGEMENT:
a. Commission Revenues:
(1) ASF agrees to pay AMEX a commission based on ***
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<TABLE>
<CAPTION>
<S> <C>
***
(3) Payments shall be due and payable by ASF to AMEX
*** (the "due date") for the *** commission.
(4) ASF shall pay interest at the rate of *** per annum
on all commissions paid after the due date.
(5) ASF shall deliver to AMEX the *** for each month
together with the payments required hereunder for
such month.
(6) ***
</TABLE>
b. ASF Referrals: ASF will provide AMEX with ASF Referrals. ***
*** Confidential Treatment Requested
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***
c. Billing and Records: ASF shall be responsible for billing and
processing any fees associated with providing the Services. ASF shall
maintain the Business Records which shall contain sufficient
information to verify the completeness and accuracy of the commissions
paid to AMEX. The Business Records shall be kept for a period of at
least three years beyond the end of the fiscal year to which they
relate.
d. Review and Audit: AMEX shall have those review and audit rights
contained in Exhibit D.
e. Survival: The terms of this Section 7 shall survive the termination
of this Agreement.
8. MOST FAVORED NATION:
a. ASF agrees that AMEX shall have "most favored nation" status with
respect to investment and marketing and other terms at least equal to
or better than any other terms ASF has in existence or may negotiate
in the future when taken as a whole with respect to any other
marketing agreement and purchase agreement or similar agreement that
also involves an investment or financing arrangement in ASF.
b. ASF shall provide written notice to AMEX of all agreements and
arrangements it enters into that may impact AMEX's rights under this
Section 8, within 10 days prior to entering into such agreements and
arrangements, unless such agreement or arrangement is: (1) presented
during an ASF's Board of Directors meeting; and (2) at the time of
presentation the AMEX designated board member serves on the Board.
***
*** Confidential Treatment Requested
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***
10. INDEMNIFICATION AND HOLD HARMLESS:
a. ASF DE, ASF COMP and ASF TX shall jointly and severally indemnify and
hold harmless AMEX and each AMEX Indemnitee from and against any
material Claim incurred by any AMEX Indemnitee which Claim arises out
of or in connection with: (1) the intentional or negligent act or
omission of ASF or its Agents in the course of the performance of
ASF's duties and obligations under this Agreement; (2) the failure of
ASF or its Agents, as the case may be, to comply with the terms of
this Agreement; (3) the failure of ASF (including without limitation
its Agents who perform on behalf of ASF hereunder) to comply with its
obligations under any and all laws, rules, or regulations applicable
to ASF, its Agents or the Services, as the case may be; (4) the
marketing, promotion, sale or provision of any services offered by ASF
(other than the Embedded Products provided by AMEX), including without
limitation any federal, state or local taxes, penalties or interest,
and liabilities to employees of ASF (including liabilities based upon
joint employer or other theories); or (5) any state or local taxing
authority which relates to ASF Services excluding any embedded AMEX
products.
Each AMEX Indemnitee seeking indemnification under this Agreement
shall give prompt notice to ASF along with such AMEX Indemnitee's
request for indemnification, of any Claim for which it is seeking
indemnification. The Parties understand and further agree that no
settlement of an indemnified Claim shall be made by an AMEX Indemnitee
without the concurrence of ASF. ASF shall control the settlement or
defense of any Claim; provided, however, that the AMEX Indemnitee may,
at its cost, engage its own attorneys. The AMEX Indemnitee will fully
cooperate with ASF to enable it to fulfill its obligations with
respect to such Claim. All of the provisions in this Section 10(a)
shall survive the termination of this Agreement.
b. AMEX shall indemnify and hold harmless ASF and each ASF Indemnitee
from and against any material Claim reasonably incurred by any ASF
Indemnitee which Claim arises out of or in connection with the
intentional or negligent act or omission of AMEX in the course of the
performance of AMEX's duties and obligations under this Agreement.
*** Confidential Treatment Requested
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Each ASF Indemnitee seeking indemnification under this Agreement shall
give prompt notice to AMEX along with such ASF Indemnitee's request
for indemnification, of any Claim for which it is seeking
indemnification. The Parties understand and further agree that no
settlement of an indemnified Claim shall be made by an ASF Indemnitee
without the concurrence of AMEX. AMEX shall control the settlement or
defense of any Claim; provided, however, that the ASF Indemnitee may,
at its cost, engage its own attorneys. The ASF Indemnitee will fully
cooperate with AMEX to enable it to fulfill its obligations with
respect to such Claim. All of the provisions in this Section 10(b)
shall survive the termination of this Agreement.
11. CUSTOMER SERVICES:
ASF agrees to provide customer services to Clients in accordance with
the Quality Standards set forth in Exhibit B.
12. REPORTS:
a. ASF shall provide AMEX with the following reports, at the time and in
the form and substance mutually agreed upon by the Parties hereto:
(1) AMEX Lead Report including: (a) detail list of all
AMEX Leads; (b) dates of contact on a per AMEX Lead
basis; (c) number of business days for AMEX Leads to
be contacted by an ASF salesperson; (d) status of all
AMEX Leads; (e) date of Appointment for each AMEX
Lead; (f) results from Appointment for each AMEX
Lead; and (g) any other relevant information gained
on each AMEX Lead;
(2) Commission Report;
(3) Quality Standards Report including: (a) number of
inbound marketing calls; (b) number of mail and
e-mail responses; and (c) response time to customer
complaints transferred by AMEX to ASF; when ASF
implements the tracking technology, this report will
include average time taken to answer inbound calls
and percentage of calls that are abandoned;
(4) Attrition Report including total number and names of
the Clients that: (a) cancel their enrollment in the
Services; (b) reasons disclosed to ASF for such
Clients' discontinuing their respective enrollment in
the Services; and (c) date of cancellation by such
Clients or the last date such Client used the
Services. Further, this Attrition report shall track
previous Clients to determine the Reenrolled Client.
(5) Embedded Product Report including: (a) number of
contacts with Clients regarding sales of Embedded
Products; and (b) status of each contact.
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ASF covenants to make reasonable efforts throughout
the term of this Agreement to: (a) improve the
quality and timing of information made available to
AMEX as required in this Section; and (b) provide any
additional information or reports that AMEX
reasonably requests.
b. AMEX shall provide ASF with reports on marketing activities with
respect to generating AMEX Leads at the time and in the form and
substance mutually agreed upon by the Parties. AMEX covenants to make
reasonable efforts throughout the term of this Agreement to: (1)
improve the quality and timing of information made available to ASF as
required in this Section; and (2) provide any additional information
or reports that ASF reasonably requests.
c. The reports required above will be provided to AMEX and ASF
respectively on a monthly basis or as otherwise mutually agreed by
AMEX and ASF.
13. PUBLICITY:
Neither ASF nor AMEX shall issue advertising, promotional activity or
publicity release relating to the Services without securing the prior
written consent of the other Party. Further, neither ASF nor AMEX may
use any of the other Party's registered or unregistered trademarks,
tradenames or service marks in the marketing and promotional materials
or otherwise in connection with the promotion of the Services, except
with the prior written consent of the other Party and then, only in
accordance with such guidelines as the other Party may from
time-to-time reasonably establish concerning such use.
14. CONFIDENTIALITY:
a. ASF and AMEX acknowledge that as a result of the performance of their
responsibilities under this Agreement, both ASF and AMEX will obtain
access to confidential and proprietary information of the other Party.
ASF acknowledges that AMEX's confidential information includes the
names of AMEX Customers and that AMEX has the sole ownership rights in
these names and that ASF has no rights to these names outside of this
Agreement. AMEX acknowledges that ASF's confidential information
includes the names of ASF Referrals and that ASF has the sole
ownership rights in these names and that AMEX has no rights to use
these names outside this Agreement. All such information shall be
deemed to be confidential unless it is clearly intended by the first
Party for public distribution in the public domain, information known
to the second Party prior to the receipt of such information from the
first Party, or information lawfully obtained from a third party by
the other Party. Except for marketing activities that mutually
benefit both Parties, this Agreement, along with all exhibits hereto,
is hereby designated as confidential within the meaning of this
Section 14 and shall not be disclosed to a third party unless required
by law. ASF and AMEX shall each take the same measures to protect the
confidentiality of such information received by them as they
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take with respect to their own confidential information, including,
but not limited to, instructing their employees, vendors, agents, and
independent contractors (excluding only those retained to provide the
Services) of the foregoing and requiring them to be bound by
appropriate confidentiality agreements. ASF and AMEX shall not use
any such information for any purpose other than to perform their
responsibilities under this Agreement.
b. Each Party acknowledges that irreparable injury would be caused to the
other Party in the event of unauthorized use of the other Party's
confidential information, and agrees that preliminary and permanent
injunctive relief would be appropriate in the event of breach of
Section 14. Upon termination or expiration of this Agreement, each
Party agrees to promptly return the confidential information of the
other Party or to acknowledge in writing that all confidential
information of the other Party has been destroyed at the request and
option of the requesting Party.
c. It is understood and agreed by the Parties hereto that all lists of
AMEX Leads are and always have been the exclusive property of AMEX,
and will be turned over to AMEX, at no cost to AMEX, upon termination
of this Agreement.
d. Section 14, in its entirety, shall survive the termination of this
Agreement.
15. DATA AND RECORDS:
Acknowledging the confidentiality of Client data, ASF hereby agrees to
the terms of the AMEX Data Access Document attached hereto as Exhibit
E, the Confidentiality/Data Security schedule attached hereto as
Exhibit F and the Customer Data and Data-Related Rights schedule
attached hereto as Exhibit G the terms of which are hereby
incorporated herein and made a part hereof. ASF will limit the
information it obtains from Clients to information required by ASF to
fulfill the Services, and in any event only such information as
approved by AMEX. In addition, ASF will comply with the exhibits
entitled Security attached hereto as Exhibit H and AMEX Audit Rights
attached hereto as Exhibit D, the terms of both are incorporated
herein by reference and made a part hereof. In the event ASF uses the
services of third party vendors, representatives or subcontractors,
ASF shall be responsible for ensuring their compliance with the terms
of this Agreement, and shall ensure that all such vendors,
representatives or subcontractors execute the Confidentiality
Agreement attached hereto as Exhibit I. ASF's employees and agents
shall execute the Non-Disclosure Agreement attached hereto as Exhibit
J, prior to gaining access to AMEX data.
16. REPRESENTATIONS, WARRANTIES & COVENANTS:
a. Each of ASF and AMEX represents and warrants that it has full power
and authority to execute this Agreement and to take all actions
required by, and to perform the agreements
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contained in, this Agreement, and that each Party's obligations under
this Agreement do not conflict with their obligations under any other
agreement to which it may be a party.
b. Each of ASF and AMEX represents, warrants and covenants that the
performance of their obligations under this Agreement in connection
with the Services complies and will comply with all applicable
federal, state, local and foreign laws and regulations.
c. Each of ASF and AMEX represents, warrants and covenants that each of
its respective employees assigned to perform services with respect to
the Services under this Agreement has and will have the skill and
background to perform such assigned services in a competent and
professional manner, and to act in compliance with all applicable laws
and regulations.
d. ASF covenants to stay current with the law and to inform AMEX
immediately of any material changes in such laws or regulations which
may require a change in the Services.
17. INSURANCE:
During the term of this Agreement: (a) ASF shall continue to maintain,
at its own expense, insurance equal to or better than the insurance
policies listed on Exhibit K from insurers that maintain a rating of
B++ or higher from A.M. Best; and (b) ASF shall continue to require
its Clients to maintain insurance policies equal to or better than the
insurance policies as currently required of Clients as listed on
Exhibit K.
ASF shall, prior to the Effective Date and upon the renewal of each
coverage required pursuant to this Section, furnish certificates of
insurance or adequate proof of the foregoing insurance to AMEX. All
insurance policies required of ASF (except policies procured from
government sources which do not allow this provision) shall contain a
provision stating the name and address of AMEX and that AMEX is to be
notified in writing by the insurer at least 30 days prior to
cancellation of, or any material change in, the policy.
18. INTELLECTUAL PROPERTY OWNERSHIP:
AMEX acknowledges that as between ASF and AMEX, ASF shall have
exclusive and unlimited ownership rights of all proprietary interest
in technology, products or services that ASF owned before this
Agreement or that was developed independently by ASF during this
Agreement. ASF acknowledges that as between ASF and AMEX, AMEX shall
have exclusive and unlimited ownership rights of all proprietary
interests in technology, products or services that AMEX owned before
this Agreement or that was developed independently by AMEX during this
Agreement.
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ASF acknowledges that any Joint Work shall belong exclusively to AMEX
without any duty of accounting, with AMEX having the sole right to
obtain, hold and renew, in its own name and/or for its own benefit,
patents, copyrights, registrations and/or appropriate protection.
AMEX shall grant to ASF a license to use in perpetuity the Joint Work,
without any costs to ASF. ASF covenants that during the term of this
Agreement, the Joint Work will not be used by ASF except in soliciting
AMEX Leads. After the termination of this Agreement, ASF shall be
free to use the Joint Work without any costs to ASF and without any
duty of accounting. All ASF Derivative Proprietary Work belongs
exclusively to ASF without any duty of accounting to AMEX. ASF has
the sole right to obtain, hold and renew, in its own name and/or for
its own benefit, the ASF Derivative Proprietary Work. ASF shall grant
to AMEX a license to use in perpetuity the ASF Derivative Proprietary
Work, without any costs to AMEX. AMEX covenants that during the term
of this Agreement, the ASF Derivative Proprietary Work will not be
used by AMEX except in soliciting AMEX Leads. After the termination
of this Agreement, AMEX shall be free to use the ASF Derivative
Proprietary Work without any costs to AMEX and without any duty of
accounting.
19. NOTICES:
a. All Notices shall be given in writing and delivered to the receiving
Party to its respective address set forth below (1) by personal
delivery to a responsible officer of such Party, (2) by certified or
registered mail (return receipt requested), (3) by a nationally
recognized courier service or (4) by facsimile transmission (such to
be confirmed by mail). The effective date of such Notice shall be
deemed to be the date upon which any such Notice is personally
delivered or, if it is given by mail, courier service or facsimile
transmission, the date upon which it is received by the addressee.
Any Party hereto may change its address set forth below by written
notice to the other Party hereto in accordance with the terms of this
Section:
b. If to AMEX:
American Express Travel Related Services Company, Inc.
3 World Financial Center
AMEX Tower
New York, NY 10285
Attn.: American Express Relationship Services
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Copy to:
American Express Travel Related Services Company, Inc.
3 World Financial Center
AMEX Tower
New York, NY 10285
Attn.: General Counsel's Office
AERS Counsel
c. If to ASF:
Administaff, Inc.
19001 Crescent Springs Drive
Kingwood, Texas 77339-3802
Attn.: Paul J. Sarvadi
Copy to:
Administaff, Inc.
19001 Crescent Springs Drive
Kingwood, Texas 77339-3802
Attn.: John H. Spurgin, II
20. TERM AND TERMINATION:
This Agreement shall take effect upon the Effective Date, and continue
until the Expiration Date unless earlier terminated in accordance with
this Section. Both Parties may agree in writing at least 90 days
before the Expiration Date to renew this Agreement for successive one
year periods. If both Parties elect to renew this Agreement, this
Agreement shall renew in accordance with the then current terms and
conditions.
a. Early Termination: In accordance with the following, this Agreement
may be terminated by either Party prior to the Expiration Date as
follows:
(1) Except as provided in Section 20(d) and (e), in the event that
the other Party commits a material breach or default under
this Agreement which breach is not cured by the breaching
Party 30 days from the receipt of notice to cure the breach
from the non-breaching Party, then the non-breaching Party may
terminate this Agreement in its discretion at any time after
such 30 day period.
(2) Either Party may terminate this Agreement with immediate
effect: (a) upon the institution by the other Party of
proceedings to be adjudicated a bankrupt or insolvent, or the
consent by the other Party to institution of bankruptcy or
insolvency proceedings against it or the filing by the other
Party of a petition or
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answer or consent seeking reorganization or release under the
Federal Bankruptcy Act, or any other applicable Federal or
state law, or the consent by the other Party to the filing of
any such petition or the appointment of a receiver,
liquidator, assignee, trustee, or other similar official of
the other Party or of any substantial part of its property, or
the making by the other Party of an assignment for the benefit
of creditors, or the admission in writing by the other Party
of an assignment for the benefit of creditors, or the
admission in writing by the other Party of its inability to
pay its debts generally as they become due or the taking of
corporate action by the other Party in furtherance of any such
actions; or (b) if, within 60 days after the commencement of
an action against the other Party seeking any bankruptcy,
insolvency, reorganization, liquidation, dissolution or
similar relief under any present or future law or regulation,
such action shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the
business of the other Party stayed, or if the stay of any such
order or proceeding shall thereafter be set aside; or if,
within 60 days after the appointment without the consent or
acquiescence of the other Party of any trustee, receiver or
liquidator or similar official of the other Party, or of all
or any substantial part of the property of the other Party,
such appointment shall not have been vacated.
b. ***
c. ***
21. MISCELLANEOUS:
a. Headings: Headings stated in this Agreement are for convenience of
reference only and are not intended as a summary of such sections and
do not affect, limit, modify, or construe the contents thereof.
b. 21st Century: No later than September, 1998, ASF shall: (1) manage and
manipulate data in connection with the Services involving all dates
from the 20th and 21st centuries without functional or data
abnormality related to such dates; (2) manage and manipulate data in
connection with the Services involving all dates from the 20th and 21st
centuries without inaccurate results related to such dates; (3) have
user interfaces and data fields in connection with the Services
formatted to distinguish between dates from the 20th and 21st
centuries; and (4) represent all data in connection with the Services
to include indications of the millennium, century, and decade as well
as the actual year.
*** Confidential Treatment Requested
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c. Alternative Dispute Resolution:
(1) Negotiation: The Parties shall attempt in good faith to
resolve any dispute arising out of or relating to this
Agreement (other than disputes regarding material breaches)
promptly by negotiations between executives who have authority
to settle the controversy. Any Party may give the other Party
written notice of any dispute not resolved in the normal
course of business. Within 20 days after delivery of said
notice, executives of both Parties shall meet at a mutually
acceptable time and place, and thereafter as often as they
reasonably deem necessary, to exchange relevant information
and to attempt to resolve the dispute. If the matter has not
been resolved within 60 days of the disputing Party's notice,
or if the Parties fail to meet within 20 days, either Party
may initiate mediation of the controversy or claim as provided
hereinafter.
If a negotiator intends to be accompanied at a meeting by an
attorney, the other negotiator shall be given advance notice
of such intention and may also be accompanied by an attorney.
All negotiations pursuant to this clause are confidential and
shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of
evidence.
(2) Mediation: If the above referenced dispute has not been
resolved by negotiation as provided above, the Parties shall
endeavor to settle the dispute by mediation under the then
current CPR Model Procedure for Mediation of Business
Disputes. One neutral third party will be selected from the
CPR Panels of Neutrals to mediate the dispute. If the Parties
encounter difficulty in agreeing on a neutral, they will seek
the assistance of CPR in the selection process.
(3) Other Remedies: In the event of a dispute arising out of or
relating to this contract or the breach, termination or
validity thereof, which has not been resolved by non-binding
means as provided in subsection (1) and (2) above within 60
days of the initiation of such procedure, either party may
seek any remedy available at law or equity, including recourse
to the courts.
d. ASF's Independent Contractor Status and Authority:
(1) ASF agrees and acknowledges that in its performance of its
obligations under this Agreement: (a) ASF is an independent
contractor of AMEX; and (b) AMEX is neither a joint employer
nor a co-employer of ASF's employees. ASF is solely
responsible for its own activities. ASF has no authority to
make commitments or enter into contracts on behalf of, bind or
otherwise obligate AMEX in any manner whatsoever except as
expressly stated in this Agreement.
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(2) Since ASF is an independent contractor and not an agent of
AMEX, ASF represents, warrants and agrees that it shall be
liable for all taxes, withholdings, and imposts of any nature
applicable to the payment of compensation, whether current or
deferred, for the work performed on ASF's behalf in accordance
with ASF's obligations hereunder. Furthermore, ASF will
indemnify and hold AMEX harmless for any such taxes,
withholding or imposts for which AMEX may be determined to be
liable.
e. AMEX's Independent Contractor Status and Authority:
(1) AMEX agrees and acknowledges that in its performance of its
obligations under this Agreement AMEX is an independent
contractor of ASF. AMEX is solely responsible for its own
activities. AMEX has no authority to make commitments or enter
into contracts on behalf of, bind or otherwise obligate ASF in
any manner whatsoever except as expressly stated in this
Agreement.
(2) Since AMEX is an independent contractor and not an agent of
ASF, AMEX represents, warrants and agrees that it shall be
liable for all taxes, withholdings, and imposts of any nature
applicable to the payment of compensation, whether current or
deferred, for the work performed on AMEX's behalf in
accordance with AMEX's obligations hereunder. Furthermore,
AMEX will indemnify and hold ASF harmless for any such taxes,
withholding or imposts for which ASF may be determined to be
liable.
f. 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.
g. Survival of Representations: All representations, warranties,
covenants and agreements made by the Parties in this Agreement and
pursuant to the terms hereof shall survive the consummation of the
transactions contemplated hereby, notwithstanding any investigation
heretofore or hereafter made by any of them or on behalf of any of
them.
h. Counterparts: This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of
which together shall constitute one instrument notwithstanding that
all Parties are not signatories to the same counterparts.
i. 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.
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j. New York Law: This Agreement shall be governed by and in accordance
with the laws of the State of New York, without reference to its
conflict of laws principles.
k. Non-Waiver; Cumulative Rights: No failure or delay (in whole or in
part) on the part of any Party to exercise any right or remedy, or
operate as a waiver thereof, nor effect any other right or remedy.
All rights and remedies hereunder are cumulative and are not exclusive
of any other rights or remedies provided hereunder or by law.
l. Severability: If any provision contained in this Agreement is or
becomes invalid, illegal, or unenforceable in whole or in part, such
invalidity, legality, or unenforceability shall not affect the
remaining provisions and portions of this Agreement.
m. Assignment: This Agreement may not be assigned by either Party
without the prior written consent of the other Party except that AMEX
may assign this Agreement to its parent, a subsidiary or an affiliate
without ASF's prior written consent.
n. Entire Agreement: This Agreement constitutes the entire Agreement
between the Parties with respect to the subject matter hereof and
supersedes all prior contemporaneous oral or written understandings or
Agreements among the Parties which relate to the subject matter
hereof. No modification or amendment of this Agreement or any of its
provisions shall be binding upon any Party unless made in writing and
duly executed by authorized representatives of all Parties.
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IN WITNESS WHEREOF, AMEX and ASF, intending to be legally bound by the terms of
this Agreement, have caused this Agreement to be executed by their duly
authorized representatives as of the date and year first above written.
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.
By: /s/ ANNE BUSQUET
-----------------------------------
Name: Anne Busquet
-----------------------------------
Title: President, AERS
-----------------------------------
ADMINISTAFF, INC.
By: /s/ PAUL J. SARVADI
-----------------------------------
Name: Paul J. Sarvadi
-----------------------------------
Title: President
-----------------------------------
ADMINISTAFF COMPANIES, INC.
By: /s/ PAUL J. SARVADI
-----------------------------------
Name: Paul J. Sarvadi
-----------------------------------
Title: President
-----------------------------------
ADMINISTAFF OF TEXAS, INC.
By: /s/ PAUL J. SARVADI
-----------------------------------
Name: Paul J. Sarvadi
-----------------------------------
Title: President
-----------------------------------
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<PAGE> 27
EXHIBIT A
CLIENT SERVICE AGREEMENT
-25-
<PAGE> 28
EXHIBIT B
QUALITY STANDARDS
CUSTOMER SERVICE
Customer service shall be provided to Clients for the term of their respective
enrollment in the Services.
To ensure the continuous attainment of quality customer service, ASF agrees to
do the following:
o Strive for 100% accuracy and timely handling on all Client calls,
correspondence, and service requests.
o Train and have available sufficient staff to provide adequate customer
service to Clients.
o Dedicate to continuously improve upon its existing customer service
standards and measuring techniques, and develop additional standards
as reasonably requested by AMEX.
o Inform AMEX of any material customer service issues.
o Assist AMEX in conducting Client satisfaction research (for both AMEX
and ASF Clients) via surveys and other forms of client monitoring.
MARKETING
To ensure the continuous attainment of quality and marketing standards
described, ASF agrees to do the following:
o Strive for 100% accuracy and timely handling on all calls and
correspondence from prospective Clients.
o Train and have available sufficient staff to provide adequate response
to prospective Clients.
o Inform AMEX of any material marketing issues.
o Designate a quality assurance individual to regularly measure and
report directly to AMEX results against quality standards in
accordance with the requirements of Exhibit B and any reporting
requested by AMEX and mutually agreed upon at a later date.
SALES FORCE
Comply with the Sales Force Commitment as outlined in the Marketing Agreement.
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<PAGE> 29
Quality standards defined below will be aggregated through weighted measurement
to determine overall aggregate quality performance levels attained during each
quarter.
***
*** Confidential Treatment Requested
-27-
<PAGE> 30
EXHIBIT C
DESCRIPTION OF SERVICES*
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Service Category Services Offered
---------------- ----------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Recruiting and Selection o Job descriptions
o Advertising
o Resume review
o Background checks
o Interviewing
o Pre-employment testing
o Profiling
o Drug testing
o Salary information
- ----------------------------------------------------------------------------------------------------------------------
2. Performance Management o Organization structure
o Job design
o Performance measurement plans
o Compensation, incentive and review
o Employee relations
o Dispute resolution
o Supervisor training
- ----------------------------------------------------------------------------------------------------------------------
3. Training and Development o Training programs (over 100 to date)
o Certified provider (IACET) for continuing
education credit
o CPE Providers for CPAs
o Needs analysis for performance improvement
o Curriculum development for employee,
supervisory, and executive professional growth
- ----------------------------------------------------------------------------------------------------------------------
4. Benefit Management o Comprehensive health and benefit plans
o Employee assistance plans
o 401(k) plan
o Credit Union
o Disability plans
o Educational assistance
o Supplemental life insurance
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
-28-
<PAGE> 31
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Service Category Services Offered
---------------- ----------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5. Liability Management o Worker's compensation coverage and claim service
o Safety inspection and policy development
o Employment claims
o Termination
o Conflict resolution
o Outplacement
o Employee handbooks
o Personnel guide
o Sample forms and policies
- ----------------------------------------------------------------------------------------------------------------------
6. Owner Support o Business continuation planning
o Key man coverage
o Personnel consulting
o 401(k) planning and participation
o Employee communications
- ----------------------------------------------------------------------------------------------------------------------
7. Government Compliance o Government reporting and agency interface
o Unemployment claims management
o Employment records management
o Claims and audits
o EEOC, DOL, FMLA, DFWP, FLSA Title VII, CRA '91,
COBRA
- ----------------------------------------------------------------------------------------------------------------------
8. Employment Administration o Payroll
o Payroll taxes
o Garnishments
o Insurance procurement
o Quarterly reports
o Employee files
o W2s and W4s
o Employment verification
o Human resource management reports
o Direct deposit
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Services will be updated throughout the term of the Agreement.
-29-
<PAGE> 32
EXHIBIT D
AMEX AUDIT RIGHTS
ASF shall prepare and submit to AMEX periodic reports from the service data
collected relating to any or all of the Services described in this Agreement as
AMEX may reasonably request.
ASF shall keep all documents (excluding credit and monitoring reports and
information pertaining to the employer/employee relationship) relating to
Services provided under this Agreement for a period in conformance with ASF's
record retention policy. At AMEX's request, ASF shall promptly deliver a copy
of all such documents to AMEX upon the termination of this Agreement
AMEX shall have the right to monitor as outlined in the Marketing Agreement as
well as the right to inspect the business records required to confirm the
accounting of commissions payable to AMEX.
-30-
<PAGE> 33
EXHIBIT E
AMEX DATA ACCESS DOCUMENT
GENERAL
Each ASF employee, subcontractor, agent or representative with direct access to
AMEX data shall sign a Confidentiality Agreement or Non-Disclosure Agreement,
as applicable, and abide by all terms contained therein.
For purposes of review of security and data access issues, ASF shall allow site
audit visit by AMEX assigned staff during all periods of the relationship,
including unscheduled visits and reviews with 24 hours notice. AMEX reserves
the express right to make unscheduled visits to any and all ASF sites when
there is a suspicion of a security breach. ASF agrees to comply with any
reasonable recommendations from said audit and reviews.
ASF shall continue to maintain an adequate level of physical security controls
over ASF Service Location including, but not limited to: appropriate alarm
systems, access controls, fire suppression and video surveillance.
ASF shall maintain an adequate level of data security controls including, but
not limited to: proper safeguarding of AMEX data, logical access controls
(e.g. password protection of AMEX applications, data files and libraries, if
any), computer security software and a secure tape library. ASF will maintain
controls over AMEX data consistent with ASF standard controls on data.
ASF shall maintain an adequately secured computer room facility, with access
restricted to only approved personnel.
Upon request, ASF shall provide to AMEX Information Security management a copy
of the most recent third party data processing audit or review, conducted by
ASF's external auditors as well as management copies of any related data
processing audits from their internal audit team.
ASF agrees to abide by the Privacy Principles as described below:
1. COLLECT ONLY CUSTOMER INFORMATION THAT IS NEEDED.
Limit the collection of information about customers to what
is needed to be known to administer their accounts, to
provide customer services, to offer new products and
services, and to fulfill any legal and regulatory
requirements.
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<PAGE> 34
2. ENSURE INFORMATION QUALITY.
Use advanced technology and well-defined employee practices
to help ensure that customer data are processed promptly,
accurately and completely.
3. USE INFORMATION SECURITY SAFEGUARDS.
Access to customer data is limited to those who specifically
need it to conduct their business responsibilities. Use
security techniques designed to protect customer data --
especially when certain data are used by employees and
business partners to fulfill customer services.
4. LIMIT THE RELEASE OF CUSTOMER INFORMATION.
In addition to providing customers with the opportunity to
"opt-out" of marketing offers, information is released only
with the customers' consent or request, or when required to
do so by law or other regulatory authority.
5. HOLD EMPLOYEES RESPONSIBLE FOR THESE PRIVACY PRINCIPLES.
Each employee is personally responsible for maintaining
consumer confidence in ASF. Provide training and
communications programs designed to educate employees about
the meaning and requirements of these Privacy Principles.
ASF shall have an appropriate sensitive-trash disposal
program at each operations center.
ASF shall return all magnetic media to the appropriate AMEX
location within seven business days of receipt of such
magnetic media.
ASF shall ensure at each site that no shared environments
exist with other businesses for all WANs, LANs, Network
connections, dial-up connections, DASD, distributed systems,
and that appropriate data controls are implemented.
ASF shall follow standard industry practices in configuring
and operating voice systems to control fraudulent use of 800
numbers, PBX switches and other voice networks.
EMPLOYEE RESPONSIBILITIES
ASF employees are encouraged to report suspected violations of any Privacy
Rules, or violations of Information Security Standards to their management for
investigation and action.
ASF policy will prohibit employees sharing their USERID/PASSWORD with any other
person.
-32-
<PAGE> 35
ASF employees must sign-off or envoke a password protected time-out feature
when leaving their workstation for any reason if such employee is working on
AMEX programs or accessing any AMEX data.
ASF shall execute background checks on all employees working on AMEX programs
including employment and criminal checks as permitted by all local, state and
federal laws.
In the event that AMEX commences an investigation of possible fraudulent
activity, or otherwise upon AMEX's reasonable request, ASF will cooperate with
the investigation.
SYSTEM SECURITY
ASF shall ensure all system connected terminals are equipped with access
control (password protection), time-out for non-use if such terminals have
access to AMEX programs or can access AMEX data..
If data is to reside on any ASF system, then standards and security practices
must be inserted, including host access control, personal computer access
control, virus protection and LAN access controls.
-33-
<PAGE> 36
EXHIBIT F
CONFIDENTIALITY/DATA SECURITY
1. Confidentiality: Definition "Confidential Data and Information" shall
include any information, data, or materials obtained by one party to this
Agreement (the "Receiving Party") from, or disclosed to such party by the other
party (or, in the case of AMEX, disclosed to or by AMEX, or any parent,
subsidiary, or affiliate to AMEX) (the "Disclosing Party"), or customer or
service establishment, which information, data, or materials relate to the
Marketing Agreement and their design and processes, or to the past, present, or
future business activities of the Disclosing Party or any of its subsidiaries,
affiliates, or clients, including methods, processes, telephone conversations,
financial data, systems, customer names, account numbers, and other customer
data, lists, apparatus, statistics, programs, and research and development
related information of such entities, except such information as:
(a) is already known to the Receiving Party prior to
receipt from Disclosing Party or any of its
subsidiaries, affiliates or clients, free of any
confidentiality obligation at the time it is
obtained;
(b) is or becomes publicly known through no wrongful act
of the Receiving Party;
(c) is rightfully received by Receiving Party from a
third party without restriction and without breach of
this Agreement; or
(d) is independently developed by the Receiving Party.
With respect to each party's access to customer files and related customer data
("Files"), each party specifically acknowledges the importance of maintaining
the security and confidentiality of the Files, and agrees to take whatever
reasonable steps are necessary to prevent the unauthorized transfer, disclosure
to, or use of the Files by any person or entity not a party to this Agreement.
2. Standard of Care: Neither party shall disclose, publish, release,
transfer, or otherwise make available Confidential Data and Information of the
other party in any form to, or for the use or benefit of, any person or entity
without such party's prior written consent. Each party, however, shall be
permitted to disclose relevant aspects of the other party's Confidential Data
and Information only to its officers and its employees on a need to know basis
to the extent that such disclosure is reasonably necessary for the performance
of their duties and obligations under the Agreement; provided, that such party
shall take all reasonable measures to ensure that Confidential Data and
information of the other party is not disclosed or duplicated in contravention
of the provisions of this Agreement by such officers and employees. Each party
agrees to ensure that the terms and conditions of this Agreement are strictly
adhered to by all of its employees and any third party representative. The
obligations shall not restrict any disclosure by either party mandated by any
applicable law, or by order of any court or government agency
-34-
<PAGE> 37
(provided that the disclosing party shall give prompt notice to the
non-disclosing party of such order).
3. Notice of Violations: Each party or its employees shall: (a) notify
the other party promptly of any material unauthorized possession, use or
knowledge, or attempt thereof, of the other party's Confidential Data and
Information by any person or entity which may become known to such party and
encourage its employees to do the same, (b) promptly furnish to the other party
full details of the unauthorized possession, use or knowledge, or attempt
thereof, and use reasonable efforts to investigate any unauthorized possession,
use or knowledge, or attempt thereof, of Confidential Data and Information, (c)
use reasonable efforts to cooperate with the other party in any litigation and
investigation against third parties deemed necessary by the other party to
protect its proprietary rights, and (d) promptly use all reasonable efforts to
prevent a recurrence of any such unauthorized possession, use or knowledge of
Confidential Data and Information. Each party shall bear the cost it incurs as
a result of compliance with the requirements set forth in these paragraphs.
4. Monitoring: AMEX reserves the right to monitor access to Confidential
Data and Information to prevent the improper or unauthorized use of such
Confidential Data and Information such monitoring may include, but is not
limited to, on-site inspection of ASF's locations providing Services for AMEX
at any time, and inserting decoy names and addresses in any lists provided to
ASF. In addition, AMEX reserves the right to visit, unannounced, any of the
locations used by ASF that provides the Services for AMEX and verify security
procedures.
5. Remedy for Confidential Data and Information Loss: Each party agrees
that if there is any disclosure of the Confidential Data and Information by its
employees or the employees of any third party contacted by it, it will enforce
for the other party's benefit through litigation, if necessary, all rights
provided under law to compensate the former party for any reasonable damages
arising out of such disclosure and to protect the former party from additional
disclosure.
6. Remedy for Breach: Each party agrees that if a party, its officers,
employees or anyone obtaining access to the proprietary information of the
other party by, through or under them, breached any provision of this Exhibit,
such other party would suffer irreparable harm and the total amount of monetary
damages for any injury to such other party from any violation of this Exhibit
would be impossible to calculate and would therefore be an inadequate remedy.
Accordingly, each party agrees that the other party shall be entitled to
temporary and permanent injunctive relief against the breaching party, its
officers or employees, and such other rights and remedies to which such other
party may be entitled to at law, in equity and under this Agreement for any
violation of this Exhibit.
7. Survival: The provisions of this Exhibit shall survive the
termination or expiration of this Agreement.
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<PAGE> 38
EXHIBIT G
CUSTOMER DATA AND DATA-RELATED RIGHTS
1. Limited Access to Client Data. ASF shall have limited access to
certain data of AMEX's clients and other relevant information solely for the
purposes consistent with meeting ASF's obligations under this Agreement.
2. Data and Reports
Ownership of Service Data. All data and information submitted to one party by
the other party in connection with the Services (the "Service Data") is and
shall remain the property of the originator of the data and information. The
Service Data shall: (a) not be used by either party other than in connection
with providing or analyzing the Services; (b) not be disclosed, sold, assigned,
leased or otherwise provided to third parties by either party; and (c) not be
commercially exploited by or on behalf of either party, its employees or agents
except as provided in this Agreement. Each party shall take all appropriate
actions to safeguard the Service Data. The database of Enrolled Clients shall
remain the sole property of AMEX save and except employer data which shall not
be disclosed to AMEX.
Return of Data. Upon request by the other party upon the termination or
expiration of this Agreement, each party shall (a) promptly return to the other
party, in a format agreed upon by the parties hereto and on the media
reasonably requested by, all Service Data belonging to that party and/or (b)
erase or destroy under the supervision of the owner of the Service Data, all
such Service Data.
Database Maintenance. ASF agrees to transmit information each month within
thirty (30) days of the end of the month on use of the Service by
Clients/Client (including, Client account number), to the AMEX location
designated by AMEX. The mechanism for this transmission to be agreed to by the
parties.
Each party shall use best efforts for the accuracy and completeness of the data
and information submitted to the other party and shall promptly correct any
errors or inaccuracies in the data or information submitted.
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<PAGE> 39
EXHIBIT H
SECURITY
1. Safety and Security Procedures: General - ASF shall have limited
access to certain Confidential Data and Information solely for the purposes
consistent with meeting ASF's obligations under this Agreement: (a) ASF shall
require all visitors to be identified at the front entrance of all operating
centers and to sign a visitor's log which includes the date, time in/out, firm
represented and signature. All visitors shall be issued badges; (b) ASF shall
maintain a secure environment for all Confidential Data and Information for
such ASF service location to prevent unauthorized access, damage, or
destruction of Confidential Data and Information, including, but not limited
to: appropriate alarm systems, access controls, fire suppression, video
surveillance, plan material disposal (e.g. sensitive trash disposal program);
(c) All Confidential Data and Information shall be securely stored for a
mutually agreed to retention period, either at ASF's service location or at an
off-site location. Said off-site storage location shall be subject to AMEX's
approval. No party shall, without the prior written consent of the Disclosing
Party, use any of the Confidential Data and Information supplied by the
Disclosing Party for any purpose other than to fulfill the terms of this
Agreement; (d) ASF shall maintain an adequately secured computer room facility
and tape library, with access restricted to only approved personnel; (e) Upon
request by AMEX, ASF shall provide to AMEX Information Security management
copies of all internal security policies and standards for review prior to
commencing administration of the Service; and (f) ASF shall return all magnetic
media to the appropriate AMEX location within seven (7) business days of
receipt of such magnetic media.
2. Logical Security Controls: ASF shall maintain a secure environment for
all Confidential Data and Information which includes a level of logical
security controls at such ASF service location to prevent unauthorized access,
damage, or destruction of Confidential Data and Information, including, but not
limited to: individual user identifications, password protection of data files
and libraries, computer security software, and a secure tape library. In
addition: (a) ASF shall ensure at each site that to the extent shared
environments exist with other businesses for all WANS, LANS, Network
connections, dial-up connections, DASD and distributed systems, that all access
to AMEX Confidential Data and Information is restricted by employee function
and position to only those ASF employees who are involved in the administration
of the Program; (b) ASF shall ensure that all system connected terminals are
equipped with access control (password protection), time-out for non-use if
such terminals have access to AMEX programs or can access AMEX data; (c) if
AMEX Confidential Data and Information is to reside on any ASF system, then
standards and security practices must be resident, including host access
control, personal computer access control and virus protection, and LAN access
controls; and (d) ASF shall make every reasonable effort to ensure computer
terminals displaying AMEX data face away from common areas.
-37-
<PAGE> 40
3. Disaster Recovery: ASF shall provide to AMEX upon request a disaster
recovery plan with a maximum of 24 hour recovery for each operation center
performing services hereunder. ASF shall also provide information on hot site
and cold sites as requested. ASF shall provide AMEX written notification
should there be a material change or modification with respect to ASF's hot and
cold sites. All critical supporting applications at each ASF site performing
services hereunder shall have had a valid and documented test of the disaster
recovery plan, and ASF shall provide copies of such to AMEX.
4. Assignment and Successions: No party shall transfer or assign this
Agreement, or any right or obligation under it, by operation of law or
otherwise, to any person or entity without the prior written consent of the
other party and any such attempted assignment shall be void; provided, however,
that each party may assign this Agreement and any of its rights and obligations
under it to its parent, subsidiaries and affiliates without such written
consent.
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of each party, unless terminated as provided herein.
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<PAGE> 41
EXHIBIT I
PERSONAL CONFIDENTIALITY AGREEMENT
The nature of your work at Administaff of Texas, Inc. ("ASF") for American
Express Travel Related Services, Inc., and its affiliates (collectively "AMEX")
involves your access to trade secrets, confidential information, files, records
and forms of AMEX and/or ASF (collectively "Confidential Information").
Confidential Information includes, but is not limited to, any information
relating to AMEX or ASF organizational structure, marketing philosophy and
objectives, project plans, data models, strategy and vision statements,
business initiatives, business requirements, systems design, methodologies,
processes, competitive advantages and disadvantages, financial results, product
features, systems, operations, technology, customer lists, customer account
information, products development, advertising or sales programs and any other
information which would give AMEX or ASF an opportunity to obtain an advantage
over its competitors or which AMEX or ASF is ethically obligated to protect
from unauthorized sources. None of such information shall be deemed to be in
the public domain.
Both AMEX and ASF desire to protect this Confidential Information and therefore
requires that you agree, as a condition of your performing services on the AMEX
project pursuant to AMEX's agreement with ASF, to safeguard all Confidential
Information and not to reveal Confidential Information to any third party
(including, without limitation, at conferences, seminars, meetings or
professional organizations or by publications in journals or granting of
interviews to journalists and other members of the news media) or use
Confidential Information for your own benefit or the benefit of any third
party, except to the extent necessarily required for the performance of your
services for the AMEX project.
You agree not to discuss Confidential Information of AMEX or ASF in public
places.
You agree that any work product produced or developed by you in the performance
of your services for AMEX and ASF shall be Confidential Information subject to
this Agreement and such work product is, and shall remain, the property of AMEX
and/or ASF.
You also agree to help safeguard AMEX's and ASF's customers' expectations of
privacy by exercising diligence and care in the handling of Confidential
Information relating to them, as more fully explained in the AMEX Data Access
Document.
By signing below, you indicate that you understand the above terms and that, as
a condition of performing Services for the AMEX project, you agree to adhere to
them.
- ----------------------------------------------------
Your Signature
- ----------------------------------------------------- -----------------
Print Your Name Date
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<PAGE> 42
EXHIBIT J
NON-DISCLOSURE
[Subcontractor/Agent/Representative Name] ("Receiving Party") agrees that
Receiving Party is aware that American Express Travel Related Services, Inc.
("AMEX") and Administaff of Texas, Inc. ("ASF") have entered into a Marketing
Agreement ("Agreement") that imposes certain obligations on ASF, some of which
are specifically set forth below. Receiving Party understands that as part of
ASF's obligations under the Agreement, ASF is required to obtain this written
agreement from Receiving Party to further ensure understanding and compliance
with these obligations.
In consideration of Receiving Party's future assignment and/or responsibilities
in connection with ASF's performance under the Agreement, Receiving Party
hereby acknowledges, represents and confirms to ASF and AMEX as follows: (a)
Receiving Party has read the provisions of this Non-Disclosure Agreement,
understands each of them, agrees to them, and knows of no agreements,
obligations or restrictions which prevent or prohibit Receiving Party from
complying with them; (b) Receiving Party shall receive and maintain all AMEX
information and perform services in a manner consistent with these obligations;
and (c) Receiving Party agrees not to, directly or indirectly, engage in or
assist others to engage in, any activity or conduct which violates the
provisions of this Non-Disclosure Agreement.
1. General Obligations. All confidential or proprietary information and
documentation ("Confidential Information" (including the terms of this
Agreement, the AMEX data, AMEX software, ASF data, ASF software, processes,
modeling, pricing, etc.) relating to AMEX or ASF shall be held in confidence by
Receiving Party to the same extent and in at least the same manner as AMEX and
ASF protects its own confidential or proprietary information and as recommended
as a result of any facility audits or reviews. Receiving Party shall not
disclose, publish, release, transfer or otherwise make available Confidential
Information in any form to, or for the use or benefit of, any person or entity
without AMEX's or ASF's consent. Receiving Party shall, however, be permitted
to disclose relevant aspects of Confidential Information to its officers,
agents, subcontractors and employees and to the officers, agents,
subcontractors and employees of its corporate affiliates or subsidiaries to the
extent that such disclosure is reasonably necessary for the performance of its
duties and obligations under this Agreement; provided, that Receiving Party
shall take all reasonable measures to ensure that Confidential Information is
not disclosed or duplicated in contravention of the provisions of this
Agreement by such officers, agents, subcontractors and employees. The
obligations in this Section 1 shall not restrict any disclosure by Receiving
Party pursuant to any applicable law, or by order of any court or government
agency (provided that Receiving Party shall give prompt notice to AMEX and ASF
of such order) and shall not apply with respect to information which (a) is
developed by Receiving Party without violating AMEX's or ASF's proprietary
rights, (b) is or becomes publicly known (other than through unauthorized
disclosure), (c) is disclosed by AMEX or ASF to a third-party free of any
obligation of confidentiality, is already known by Receiving Party without an
obligation of confidentiality other than pursuant to this Agreement or any
confidentiality agreements entered into before the Effective Date between AMEX
and ASF, or (d) is rightfully received by Receiving Party free of any
obligation of confidentiality.
2. Unauthorized Acts. Receiving Party shall: (a) notify AMEX and ASF promptly
at the respective addresses below of any material unauthorized possession, use
or knowledge, or attempt thereof, of the Confidential Information by any person
or entity which may become known to Receiving Party, (b) promptly furnish to
AMEX and ASF full details of the unauthorized possession, use or knowledge, or
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<PAGE> 43
attempt thereof, and use reasonable efforts to investigate and prevent the
recurrence of any unauthorized possession, use or knowledge, or attempt
thereof, of Confidential Information, (c) use reasonable efforts to cooperate
with AMEX and ASF in any litigation and investigation against third parties
deemed necessary by AMEX or ASF to protect its proprietary rights and (d)
promptly use all reasonable efforts to prevent a recurrence of any such
unauthorized possession, use or knowledge of Confidential Information.
Receiving Party agrees that if Receiving Party threatens to or actually
breaches or fails to observe any of the obligations set forth in this
Non-Disclosure Agreement, AMEX and ASF shall be subject to irreparable harm
which shall not be adequately satisfied by damages. Receiving Party therefore
agrees that ASF and/or AMEX shall be entitled to an injunction and/or any other
remedies permitted, to ensure and enforce Receiving Party's compliance with
these obligations; provided, however, that no specification herein of any
particularly legal or equitable remedy shall be construed as a waiver,
prohibition or limitation of any legal or equitable remedies.
By:
------------------------------------
(Receiving Party's Name)
Name:
----------------------------------
(Type, Stamp or Print)
Title:
---------------------------------
Date:
---------------------------------
Witness:
-------------------------------
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<PAGE> 44
EXHIBIT K
INSURANCE
TYPES AND AMOUNTS REQUIRED OF ASF:
1. workers' compensation, as prescribed by the law of any state in which
the Services are to be performed;
2. employer's liability insurance with limits of at least $1,000,000 per
occurrence, covering bodily injury by accident or disease, including
death;
3. employment practices liability insurance with limits of $5,000,000 per
insured event, with a $5,000,000 aggregate and a deductible amount of
$250,000. Employment practices liability insurance must cover, at a
minimum, claims of discrimination, sexual harassment or wrongful
termination, and must also cover, at a minimum, related allegations of
defamation, negligent infliction of emotional distress, and invasion
of privacy;
4. commercial general liability insurance, including contractual
liability, products liability and complete operations coverage and, if
the use of motor vehicles is required, comprehensive motor vehicle
liability insurance, each with limits of at least $1,000,000 for
bodily injury, including death to any one person, and $1,000,000 on
account of any one occurrence and $1,000,000 for each occurrence of
property damage;
5. errors and omissions liability insurance and other professional
liability insurance covering the acts, errors and omissions of ASF in
an amount combined with employment practices liability insurance of
not less than $25,000,000 per claim and a three year aggregate of
$50,000,000;
6. fire and casualty insurance including business interruption; and
7. excess liability insurance in excess of the insurance required in 2.
and 4. above in amounts of no less than $50,000,000 for each accident
or occurrence and $50,000,000 annual aggregate.
TYPES AND AMOUNTS REQUIRED OF CUSTOMERS OF ASF:
1. general liability insurance of $1,000,000;
2. comprehensive automobile liability insurance of $1,000,000; and
3. exceptions to, or required coverages in addition to, 1. and 2. above
may be made according to ASF's usual business practice and/or
judgement.
-42-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 41,295
<SECURITIES> 27,780
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0
0
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</TABLE>
