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EXHIBIT 2
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
THIS AMENDMENT NO. 2 TO RIGHTS AGREEMENT (this "Amendment"), dated as
of May 14, 1999 is entered into and effectuated by Administaff, Inc., a Delaware
corporation (the "Company"), and Harris Trust and Savings Bank, as rights agent
(the "Rights Agent"), pursuant to Section 27 of the Rights Agreement, dated as
of February 4, 1998 (the "Rights Agreement"), between the Company and the Rights
Agent, at the Company's direction. Capitalized terms used but not defined herein
are used as defined in the Rights Agreement.
RECITALS:
WHEREAS, Section 27 of the Rights Agreement provides that the Company
may in its sole discretion, and the Rights Agent shall if the Company so
directs, supplement or amend any provision of the Rights Agreement in any
respect without the approval of the holders of the Rights; and
WHEREAS, on May 7, 1999 the Company received a copy of a Schedule 13D
filed by the "Gerhard Partners" (defined below) indicating that such group
beneficially owned approximately 20.5% of the outstanding shares of the
Company's common stock; and
WHEREAS, the Board of Directors of the Company has determined that it
is in the best of the Company to amend the definition of "Exempt Person" in the
Rights Agreement to include, subject to certain limitations, the "Gerhard
Stockholders" (defined below); and
WHEREAS, in accordance with Section 27 of the Rights Agreement, the
Company has delivered a certificate from an appropriate officer of the Company
stating that this Amendment is in compliance with the terms of Section 27 of the
Rights Agreement.
NOW, THEREFORE, the Rights Agreement is hereby amended as follows:
1. The definition of "Exempt Person" contained in Section 1 (p) of the
Rights Agreement is hereby amended, effective as of the date first set forth
above, by deleting such provision in its entirety and substituting the following
in place thereof;
"Exempt Person" shall mean:
(i) the Company or any Subsidiary (as such term is
hereinafter defined) of the Company or any employee benefit plan of the
Company's;
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(ii) Paul J. Sarvadi, his spouse, lineal descendants, heirs,
executors or other legal representatives and any trusts or limited
partnerships established for the benefit of the foregoing, or any other
person or entity in which the foregoing persons or entities are at the
time of determination the direct record and beneficial owners of all
outstanding voting securities (collectively, the "Sarvadi
Stockholders"), provided that the Sarvadi Stockholders shall cease to
be an Exempt Person if the Beneficial Ownership of the Sarvadi
Stockholders exceeds 17% (the "Sarvadi Threshold");
(iii) American Express Travel Related Services Company
("AXTRSC"), its Affiliates and Associates (provided that, for purposes
of this sub-clause (iii) only, the terms Affiliate and Associate as
used with respect to AXTRSC shall not include non-employee directors of
AXTRSC or its affiliates that are in the investment advisory,
discretionary money management, asset management, brokerage, insurance,
annuity, lending or similar business to the extent such non-employee
directors are acting for their own account or for the account of, or
investing the funds of, their respective customers or clients or funds
advised or distributed by them) (collectively, the "AMEX
Stockholders"), provided that the AMEX Stockholders shall cease to be
an Exempt Person if the shares of which the AMEX Stockholders are the
Beneficial Owner exceed 19.9% of the Common Stock determined on a Fully
Diluted Basis at the time of calculation (the "AMEX Threshold"),
provided, however, that (A) if during the term of this Agreement the
AMEX Stockholders sell, transfer or otherwise dispose of any shares of
Common Stock of which the AMEX Stockholders are a Beneficial Owner,
and, after giving effect to (and solely as a result of) such sale(s),
transfer(s) or disposition(s), the AMEX Stockholders beneficially own
less than 15.8% of the Common Stock on a Fully Diluted Basis, the AMEX
Threshold shall be reduced to that percentage of the Common Stock of
which the AMEX Stockholders are a Beneficial Owner, determined on a
Fully Diluted Basis immediately after giving effect to such sale,
transfer or other disposition (assuming for purposes of such
calculation that after giving effect to the closing of the Securities
Purchase Agreement, dated as of January 27, 1998 ("AMEX Investment
Agreement"), among the Company, its subsidiaries and AXTRSC, the AMEX
Stockholders were the Beneficial Owner of 19.9% of the Common Stock
determined on a Fully Diluted Basis), and (B) if the AMEX Threshold is
reduced during the term of this Agreement to 15% or less, then the AMEX
Threshold shall be 15%; and
(iv) Lang H. Gerhard, West Highland Capital, Inc., Estero
Partners, LLC, West Highland Partners, L.P. and Buttonwood Partners,
L.P. (collectively, the "Gerhard Stockholders"), provided that the
Gerhard Stockholders shall cease to be an Exempt Person if the shares
of which the Gerhard Stockholders are the Beneficial Owner exceed the
lesser of (i) 2,929,800 shares of common stock and (ii) 20.5% of the
Common Stock outstanding at the time of calculation (the "Gerhard
Threshold"); provided, however, that (A) if during the term of this
Agreement the Gerhard Stockholders sell, transfer or otherwise dispose
of any shares of Common Stock of which the Gerhard Stockholders are a
Beneficial Owner, the Gerhard Threshold shall be reduced to that
percentage of the Common Stock of which the the Gerhard Stockholders
are a Beneficial Owner, determined immediately after giving effect
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to such sale, transfer or other disposition, and (B) if the Gerhard
Threshold is reduced during the term of this Agreement to 15% or less,
or if the Gerhard Stockholders modify their Schedule 13D to indicate an
intent to effect a change in control of the Company, then the Gerhard
Stockholders shall no longer constitute an Exempt Person.
Notwithstanding the foregoing, no Person shall cease to be an Exempt
Person as the result of an acquisition of Common Stock by the Company
which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person. As
used in clause (iii) of this definition, the term "Fully Diluted Basis"
means the sum, without duplication, of (i) all shares of Common Stock
then outstanding (as such term is used in the definition of Beneficial
Ownership in Section 1(d) hereof), (ii) shares of Common Stock issuable
upon the 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.
2. The Summary of Rights to Purchase Preferred Stock attached as Exhibit C
to the Rights Agreement is hereby amended, effective as of the date first set
forth above, by revising the Summary of Rights to Purchase Preferred Stock as
included in Exhibit C to read in its entirety as set forth in the Amended
Summary of Rights to Purchase Preferred Stock included as Annex I hereto.
3. Except to the extent amended by this Amendment, the Rights Agreement
shall continue in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
ADMINISTAFF, INC.
By: /s/ PAUL J. SARVADI
-------------------------------------
Paul J. Sarvadi
President and Chief Executive Officer
HARRIS TRUST AND SAVINGS BANK
as Rights Agent
By: /s/ LORRAINE RODEWALD
-------------------------------------
Lorraine Rodewald
Vice President
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ANNEX I
EXHIBIT C
AMENDED SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On January 20, 1998, the Board of Directors of Administaff, Inc. (the
"Company") 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 ("Common Stock"), of the Company. The distribution is payable on
February 9, 1998 (the "Record Date") 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 (the "Preferred Stock") at a price of
$125, subject to adjustment. The following is a summary of the Rights; the full
description and terms of the Rights are set forth in a Stockholder Rights
Agreement (the "Rights Agreement") between the Company and Harris Trust and
Savings Bank, as Rights Agent (the "Rights Agent").
Copies of the Rights Agreement and the Certificate of Designation are
available free of charge from the Company. This summary description of the
Rights and the Preferred Stock does not purport to be complete and is qualified
in its entirety by reference to all the provisions of the Rights Agreement and
the Certificate of Designation, including the definitions therein of certain
terms, which Rights Agreement and Certificate of Designation are incorporated
herein by reference.
Initially, the Rights will attach to all certificates representing
shares of outstanding Company Common Stock, and no separate Rights Certificates
will be distributed. The Rights will separate from the Company Common Stock and
the Distribution Date will occur upon the earlier of (i) 10 days following the
date of public announcement that a person or group of persons has become an
Acquiring Person (as hereinafter defined) or (ii) 10 business days (or such
later date as may be determined by action of the Board of Directors prior to the
time a person becomes an Acquiring Person) following the commencement of, or the
announcement of an intention to make, a tender offer or exchange offer upon
consummation of which the offeror would, if successful, become an Acquiring
Person (the earlier of such dates being called the "Distribution Date").
The term "Acquiring Person" means any person who or which, together
with all of its affiliates and associates, shall be the beneficial owner of 15%
or more of the outstanding Common Stock, but shall not include:
(i) the Company or any Subsidiary (as such term is hereinafter
defined) of the Company or any employee benefit plan of the Company's;
(ii) Paul J. Sarvadi, his spouse, lineal descendants, heirs, executors
or other legal representatives and any trusts or limited partnerships
established for the benefit of the foregoing, or
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any other person or entity in which the foregoing persons or entities are at the
time of determination the direct record and beneficial owners of all outstanding
voting securities (collectively, the "Sarvadi Stockholders"), provided that the
Sarvadi Stockholders shall cease to be an Exempt Person if the Beneficial
Ownership of the Sarvadi Stockholders exceeds 17% (the "Sarvadi Threshold");
(iii) American Express Travel Related Services Company ("AXTRSC"), its
Affiliates and Associates (provided that, for purposes of this sub-clause (iii)
only, the terms Affiliate and Associate as used with respect to AXTRSC shall not
include non-employee directors of AXTRSC or its affiliates that are in the
investment advisory, discretionary money management, asset management,
brokerage, insurance, annuity, lending or similar business to the extent such
non-employee directors are acting for their own account or for the account of,
or investing the funds of, their respective customers or clients or funds
advised or distributed by them) (collectively, the "AMEX Stockholders"),
provided that the AMEX Stockholders shall cease to be an Exempt Person if the
shares of which the AMEX Stockholders are the Beneficial Owner exceed 19.9% of
the Common Stock determined on a Fully Diluted Basis at the time of calculation
(the "AMEX Threshold"), provided, however, that (A) if during the term of the
Rights Agreement the AMEX Stockholders sell, transfer or otherwise dispose of
any shares of Common Stock of which the AMEX Stockholders are a Beneficial
Owner, and, after giving effect to (and solely as a result of) such sale(s),
transfer(s) or disposition(s), the AMEX Stockholders beneficially own less than
15.8% of the Common Stock on a Fully Diluted Basis, the AMEX Threshold shall be
reduced to that percentage of the Common Stock of which the AMEX Stockholders
are a Beneficial Owner, determined on a Fully Diluted Basis immediately after
giving effect to such sale, transfer or other disposition (assuming for purposes
of such calculation that after giving effect to the closing of the Securities
Purchase Agreement, dated as of January 27, 1998 ("AMEX Investment Agreement"),
among the Company, its subsidiaries and AXTRSC, the AMEX Stockholders were the
Beneficial Owner of 19.9% of the Common Stock determined on a Fully Diluted
Basis), and (B) if the AMEX Threshold is reduced during the term of this
Agreement to 15% or less, then the AMEX Threshold shall be 15%; and
(iv) Lang H. Gerhard, West Highland Capital, Inc., Estero Partners,
LLC, West Highland Partners, L.P. and Buttonwood Partners, L.P. (collectively,
the "Gerhard Stockholders"), provided that the Gerhard Stockholders shall cease
to be an Exempt Person if the shares of which the Gerhard Stockholders are the
Beneficial Owner exceed the lesser of (i) 2,929,800 shares of common stock and
(ii) 20.5% of the Common Stock outstanding at the time of calculation (the
"Gerhard Threshold"); provided, however, that (A) if during the term of the
Rights Agreement the Gerhard Stockholders sell, transfer or otherwise dispose of
any shares of Common Stock of which the Gerhard Stockholders are a Beneficial
Owner, the Gerhard Threshold shall be reduced to that percentage of the Common
Stock of which the the Gerhard Stockholders are a Beneficial Owner, determined
immediately after giving effect to such sale, transfer or other disposition, and
(B) if the Gerhard Threshold is reduced during the term of this Agreement to 15%
or less, or if the Gerhard Stockholders modify their Schedule 13D to indicate an
intent to effect a change in control of the Company, then the Gerhard
Stockholders shall no longer constitute an Exempt Person.
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Notwithstanding the foregoing, no Person shall cease to be an Exempt
Person as the result of an acquisition of Common Stock by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of Common Stock, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Stock, outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and such separate Rights Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on February 9, 2008 (the "Expiration Date").
The Purchase Price payable, and the number of one-hundredths of a share
of Preferred Stock or other securities or property issuable, upon exercise of
the Rights are subject to adjustment from time to time to prevent dilution (i)
in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) upon the grant to holders of the
Preferred Stock of certain rights or warrants to subscribe for or purchase
shares of Preferred Stock at a price, or securities convertible into Preferred
Stock with a conversion price, less than the then current market price of the
Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock
of evidences of indebtedness or assets (excluding regular periodic cash
dividends paid or dividends payable in Preferred Stock) or of subscription
rights or warrants (other than those referred to in (ii) above).
The number of outstanding Rights and the number of one-hundredths of a
share of Preferred Stock issuable upon exercise of each Right are also subject
to adjustment in the event of a stock split of the Common Stock or a stock
dividend on the Common Stock payable in the Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.
In the event that following a Stock Acquisition Date (the date of
public announcement that an Acquiring Person has become such) the Company is
acquired in a merger or other business combination transaction or more than 50%
of its consolidated assets or earning power are sold, proper provision will be
made so that each holder of a Right will thereafter have the right to receive,
upon the exercise thereof at the then current exercise price of the Right, that
number of shares of
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common stock of the acquiring company which at the time of such transaction will
have a market value of two times the exercise price of the Right (the "Flip-Over
Right").
In the event that an Acquiring Person becomes the beneficial owner of
15% or more of the outstanding shares of Common Stock, proper provision shall be
made so that each holder of a Right (other than the Acquiring Person and its
affiliates and associates) will thereafter have the right to receive upon
exercise that number of shares of Common Stock (or, under certain circumstances,
cash, other equity securities or property of the Company) having a market value
equal to two times the Purchase Price of the Rights (the "Flip-In Right"). Upon
the occurrence of the foregoing event giving rise to the exercisability of the
Rights, any Rights that are or were at any time owned by an Acquiring Person
shall become void.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. Upon exercise of the Rights, no fractional shares of
Preferred Stock will be issued other than fractions which are integral multiples
of one-hundredth of a share of Preferred Stock; cash will be paid in lieu of
fractional shares of Preferred Stock that are not integral multiples of
one-hundredth of a share of Preferred Stock.
At any time prior to the earlier to occur of (i) 5:00 p.m., Houston,
Texas time on the 10th day after the Stock Acquisition Date or (ii) the
expiration of the Rights, the Company may redeem the Rights in whole, but not in
part, at a price of $0.01 per Right (the "Redemption Price"); provided, that (i)
if the Board of Directors authorizes redemption on or after the time a person
becomes an Acquiring Person, then such authorization must be by Board Approval
(as hereinafter defined) and (ii) the period for redemption may, upon Board
Approval, be extended by amending the Rights Agreement. The term "Board
Approval" means the approval of a majority of the directors of the Company.
Immediately upon any redemption of the Rights described in this paragraph, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors
without the consent of the holders of the Rights at any time and from time to
time provided that such amendment does not adversely affect the interests of the
holders of the Rights. In addition, during any time that the Rights are subject
to redemption, the terms of the Rights may be amended by Board Approval,
including an amendment that adversely affects the interests of the holders of
the Rights, without the consent of the holders of Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Preferred Stock (or other consideration).
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DESCRIPTION OF PREFERRED STOCK
Each one-hundredth of a share of the Preferred Stock ("Preferred Share
Fraction") that may be acquired upon exercise of the Rights will be
nonredeemable and subordinate to any other shares of preferred stock that may be
issued by the Company.
Each Preferred Share Fraction will have a minimum preferential
quarterly dividend rate of $0.01 per Preferred Share Fraction but will, in any
event, be entitled to a dividend equal to the per share dividend declared on the
Company Common Stock.
In the event of liquidation, the holder of a Preferred Share Fraction
will receive a preferred liquidation payment equal to the greater of $0.01 per
Preferred Share Fraction or the per share amount paid in respect of a share of
Company Common Stock.
Each Preferred Share Fraction will have one vote, voting together with
the Company Common Stock. The holders of Preferred Share Fractions, voting as a
separate class, shall be entitled to elect two directors if dividends on the
Preferred Stock are in arrears for six fiscal quarters.
In the event of any merger, consolidation or other transaction in which
shares of Company Common Stock are exchanged, each Preferred Share Fraction will
be entitled to receive the per share amount paid in respect of each share of
Company Common Stock.
The rights of holders of the Preferred Stock to dividends, liquidation
and voting, and in the event of mergers and consolidations, are protected by
customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation
and voting rights, the economic value of one Preferred Share Fraction that may
be acquired upon the exercise of each Right should approximate the economic
value of one share of the Company's Common Stock.