<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
ADMINISTAFF, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
ADMINISTAFF, INC.
A DELAWARE CORPORATION
19001 CRESCENT SPRINGS DRIVE
KINGWOOD, TEXAS 77339-3802
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 1999
KINGWOOD, TEXAS
The Annual Meeting of the Stockholders of Administaff, Inc., a Delaware
corporation (the "Company"), will be held at the Company's Corporate
Headquarters, Centre II in the University Rooms, located at 29801 Loop 494,
Kingwood, Texas 77339, on May 4, 1999 at 10:00 a.m., Central Daylight Savings
Time, for the following purposes:
1. To elect two Class I directors to serve until the annual
stockholders' meeting in 2002 or until their successors have
been elected and qualified;
2. To approve an amendment to the Company's 1997 Incentive Plan
to increase the number of shares of the Company's common stock
reserved for issuance under such Plan by 600,000 shares from a
total of 882,957 shares to a total of 1,482,957 shares.
3. To ratify and approve the appointment of Ernst & Young, L.L.P.
as the Company's independent auditors for the 1999 fiscal
year;
4. To act upon such other business as may properly come before
the meeting or any adjournments thereof.
Only stockholders of record at the close of business on March 5, 1999
are entitled to notice of, and to vote at, the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
OF STOCKHOLDERS REGARDLESS OF WHETHER YOU PLAN TO ATTEND. THEREFORE, PLEASE
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY. IF YOU ARE PRESENT AT
THE MEETING, AND WISH TO DO SO, YOU MAY REVOKE THE PROXY AND VOTE IN PERSON.
By Order of the Board of Directors
/s/ JOHN H. SPURGIN, II
John H. Spurgin, II
Vice President, Legal,
General Counsel and Secretary
March 29, 1999
Kingwood, Texas
<PAGE> 3
ADMINISTAFF, INC.
A DELAWARE CORPORATION
19001 CRESCENT SPRINGS DRIVE
KINGWOOD, TEXAS 77339-3802
---------------
PROXY STATEMENT
---------------
The accompanying proxy is solicited by the Board of Directors of
Administaff, Inc., a Delaware corporation (the "Company"), for use at the 1999
Annual Meeting of Stockholders to be held on May 4, 1999, and at any
adjournments thereof. The Annual Meeting of Stockholders will be held at 10:00
a.m., Central Daylight Savings Time, at the Company's Corporate Headquarters,
Centre II in the University Rooms, located at 29801 Loop 494, Kingwood, Texas
77339. If the accompanying proxy is properly executed and returned, the shares
it represents will be voted at the meeting in accordance with the directions
noted thereon or, if no direction is indicated, will be voted in favor of the
proposals described in this Proxy Statement. In addition, the proxy confers
discretionary authority to the persons named in the proxy authorizing those
persons to vote, in their discretion, on any other matters properly presented at
the Annual Meeting of Stockholders. The Board of Directors is not currently
aware of any such other matters. Any stockholder giving a proxy has the power to
revoke it by oral or written notice to the Secretary of the Company at any time
before it is voted.
The expense of preparing, printing and mailing proxy materials to the
Company's stockholders will be borne by the Company. The Company has engaged
Corporate Investor Communications, Inc. to assist in the solicitation of proxies
from stockholders at a fee of approximately $3,500 plus reimbursement of
reasonable out-of-pocket expenses. In addition, proxies may be solicited
personally or by telephone by officers or employees of the Company, none of whom
will receive additional compensation. The Company will also reimburse brokerage
houses and other nominees for their reasonable expenses in forwarding proxy
materials to beneficial owners of Common Stock.
The approximate date on which this Proxy Statement and the accompanying
proxy card will first be sent to stockholders is March 29, 1999.
At the close of business on March 5, 1999, the record date for the
determination of stockholders of the Company entitled to receive notice of, and
to vote at, the 1999 Annual Meeting of Stockholders or any adjournments thereof,
14,319,044 shares of the Company's Common Stock, par value $0.01 per share (the
"Common Stock"), were outstanding. Each share of Common Stock is entitled to one
vote upon each of the matters to be voted on at the meeting. The presence, in
person or by proxy, of at least a majority of the outstanding shares of Common
Stock is required for a quorum. A holder of a share shall be treated as being
present at a meeting if the holder of such share is (i) present at the meeting
or (ii) represented at the meeting by a valid proxy, whether the instrument
granting such proxy is marked as casting a vote or abstaining, is left blank or
does not empower such proxy to vote with respect to some or all matters to be
voted upon at the meeting. If a quorum is determined to exist at the meeting,
action on a matter (other than the election of directors) shall be approved if
the votes cast in favor of the matter exceed the votes cast opposing the matter.
Directors of the Company shall be elected by a plurality of the votes cast. In
determining the number of votes cast, shares abstaining from voting or not voted
on a matter will not be treated as votes cast. Broker non-votes (which result
when a broker holding shares for a beneficial owner has not received timely
voting instructions on certain matters from such beneficial owner) are not
considered "shares present" with respect to any matter, and thus will not affect
the outcome of the voting on a particular proposal.
2
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of March 1, 1999, certain information
with respect to the shares of Common Stock beneficially owned by (i) each person
known by the Company to own beneficially five percent or more of the Common
Stock, (ii) each director and director nominee of the Company, (iii) each of the
executive officers of the Company identified under the caption "Election of
Directors -- Executive Compensation," and (iv) all directors, director nominees
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
-------------------------- ------------ --------
<S> <C> <C>
Paul J. Sarvadi............................................. 1,874,300 (2) 13.1%
Gerald M. McIntosh.......................................... 1,274,942 (3) 8.9%
Richard G. Rawson........................................... 744,235 (4) 5.2%
Jack M. Fields, Jr.......................................... 15,083 (5) *
Paul S. Lattanzio........................................... 12,645 (6) *
Linda Fayne Levinson........................................ 18,082 (7) *
Jerald L. Broussard......................................... 70,939 (8) *
Jay E. Mincks............................................... 14,756 (9) *
A. Steve Arizpe............................................. 34,748(10) *
Michael W. Brown............................................ 8,052(11) *
Anne M. Busquet............................................. -(12) *
American Express Travel
Related Services Company, Inc........................... 2,758,641(13) 16.8%
Capital Research & Management Co............................ 719,700(14) 5.0%
Robert Day.................................................. 1,301,317(15) 9.1%
West Highland Capital, Inc. ................................ 1,000,000(16) 7.0%
Executive Officers and Directors as a group (18 persons).... 4,115,889 28.4%
</TABLE>
- ----------
* Represents less than 1%.
(1) Unless otherwise indicated, each of the stockholders has sole voting
and investment power with respect to the securities shown to be owned
by such stockholder. The address for each officer and director is
Administaff, Inc., 19001 Crescent Springs Drive, Kingwood, Texas
77339-3802, unless otherwise noted.
(2) Includes 1,299,700 shares owned by Our Ship Limited Partnership, Ltd.,
574,500 shares owned by the Sarvadi Children's Partnership, Ltd. and
100 shares owned by Paul J. Sarvadi and Vicki D. Sarvadi, JTWROS.
(3) Includes 843,355 shares held in trust by David W. Russell, Trustee of
the McIntosh Charitable Remainder Unitrust, 100,000 shares owned by the
G&B McIntosh Family Limited Partnership, 326,487 shares owned by Gerald
M. & Barbara McIntosh, Trustees FBO McIntosh Revocable Trust, 100
shares owned by Jerry McIntosh & Bobbi McIntosh TNCOM and options to
purchase 5,000 shares of Common Stock which are exercisable within 60
days following the 1999 Annual Stockholders' Meeting.
(4) Includes 344,049 shares owned by the RDKB Rawson LP, 314,251 shares
owned by the R&D Rawson LP, 81,710 shares owned by Richard G. Rawson,
25 shares owned by Dawn M. Rawson (spouse), 25 shares owned by Richard
G. Rawson as Custodian for Kimberly Rawson UGMA, 25 shares owned by
Richard G. Rawson as Custodian for Barbie Rawson UGMA, options to
purchase 4,000 shares of Common Stock and options held by Dawn M.
Rawson
3
<PAGE> 5
to purchase 150 shares of Common Stock which are exercisable within 60
days following the 1999 Annual Stockholders' Meeting.
(5) Includes 2,000 shares owned by Jack Fields as Custodian for Jordan
Fields UGMA and options to purchase 12,500 shares of Common Stock which
are exercisable within 60 days following the 1999 Annual Stockholders'
Meeting.
(6) Includes options to purchase 5,000 shares of Common Stock which are
exercisable within 60 days following the 1999 Annual Stockholders'
Meeting.
(7) Includes options to purchase 17,500 shares of Common Stock which are
exercisable within 60 days following the 1999 Annual Stockholders'
Meeting.
(8) Includes options to purchase 17,603 shares of Common Stock which are
exercisable within 60 days following the 1999 Annual Stockholders'
Meeting.
(9) Includes options to purchase 12,248 shares of Common Stock which are
exercisable within 60 days following the 1999 Annual Stockholders'
Meeting.
(10) Includes options to purchase 32,538 shares of Common Stock which are
exercisable within 60 days following the 1999 Annual Stockholders'
Meeting.
(11) Includes options to purchase 7,500 shares of Common Stock which are
exercisable within 60 days following the 1999 Annual Stockholders'
Meeting.
(12) Mrs. Busquet is President of American Express Relationship Services, a
division of American Express Travel Related Services Company, Inc.
("American Express"). American Express owns 693,126 shares of Common
Stock and warrants to purchase 2,065,515 shares of Common Stock. Mrs.
Busquet's address is World Financial Center, 200 Vesey Street, New
York, NY 10285. Mrs. Busquet disclaims any beneficial ownership of the
shares owned by American Express.
(13) Includes 693,126 shares of Common Stock and warrants to purchase
2,065,515 shares of Common Stock obtained pursuant to a Securities
Purchase Agreement dated January 27, 1998, by and between American
Express and the Company. American Express' address is World Financial
Center, 200 Vesey Street, New York, NY 10285.
(14) Capital Research and Management Company, an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940, is
the beneficial owner of 719,700 shares of the Common Stock outstanding
as a result of acting as investment advisor to various investment
companies registered under Section 8 of the Investment Company Act of
1940. Capital Research and Management Company's address is 333 South
Hope Street, Los Angeles, CA 90071.
(15) Includes shares of Common Stock held indirectly by The TCW Group, Inc.,
of which Mr. Day is deemed to be the beneficial owner. The TCW Group,
Inc., through its subsidiaries, holds an aggregate of 1,301,317 shares
of Common Stock of the Company. Also includes shares of Common Stock
held indirectly by Oakmont Corporation, an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940.
Mr. Day's address is 200 Park Avenue, Suite 2200, New York, NY 10166.
(16) West Highland Capital, Inc. ("WHC"), a registered investment advisor,
is the beneficial owner of 1,000,000 shares of the Common Stock
outstanding. Also includes 770,049 shares of the Common Stock held
indirectly by West Highland Partners, L.P., a California limited
partnership; 890,049 shares of Common Stock held indirectly by Estero
Partners, L.L.C., a California limited liability company; 1,000,000
shares of Common Stock held indirectly by Lang H. Gerhard; and 120,000
shares of Common Stock held indirectly by Buttonwood Partners, L.P., a
California limited partnership. Lang Gerhard is the sole shareholder of
WHC and the Manager of Estero Partners, L.L.C. WHC, Estero Partners,
L.L.C. and Lang Gerhard are the general partners of West Highland
Partners, L.P. and Buttonwood Partners, L.P., both of which are
investment limited partnerships. West Highland Capital, Inc.'s address
is 300 Drakes Landing Road, Suite 290, Greenbrae, California 94904.
4
<PAGE> 6
PROPOSAL NUMBER 1:
ELECTION OF DIRECTORS
GENERAL
The Company's Certificate of Incorporation and Bylaws provide that the
number of directors on the Board shall be fixed from time to time by the Board
of Directors but shall not be less than three nor more than 15 persons. The
Company's Board of Directors currently has eight members.
In accordance with the Certificate of Incorporation of the Company, the
members of the Board of Directors are divided into three classes and are elected
for a term of office expiring at the third succeeding annual stockholders'
meeting following their election to office, or until a successor is duly elected
and qualified. The Certificate of Incorporation also provides that such classes
shall be as nearly equal in number as possible. The terms of office of the Class
I, Class II and Class III directors expire at the annual meeting of stockholders
in 1999, 2000 and 2001, respectively.
The term of office of each of the current Class I directors expires at
the time of the 1999 Annual Meeting of Stockholders, or as soon thereafter as
their successors are elected and qualified. Ms. Levinson and Mr. Brown have been
nominated to serve an additional three-year term as Class I directors. Both of
the nominees have consented to be named in this Proxy Statement and to serve as
a director if elected.
It is the intention of the person or persons named in the accompanying
proxy card to vote for the election of both nominees named below unless a
stockholder has withheld such authority. The affirmative vote of holders of a
plurality of the Common Stock present in person or by proxy at the 1999 Annual
Meeting of Stockholders and entitled to vote is required for election of the
nominees.
If, at the time of or prior to the 1999 Annual Meeting of Stockholders,
either of the nominees should be unable or decline to serve, the discretionary
authority provided in the proxy may be used to vote for a substitute or
substitutes designated by the Board of Directors. The Board of Directors has no
reason to believe that any substitute nominee or nominees will be required. No
proxy will be voted for a greater number of persons than the number of nominees
named herein.
NOMINEES -- CLASS I DIRECTORS (FOR TERMS EXPIRING AT THE 2002 ANNUAL MEETING)
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Linda Fayne Levinson................ 56 Director
Michael W. Brown ................... 53 Director
</TABLE>
Linda Fayne Levinson. Ms. Levinson, a director of the Company since
April 1996, has served as a principal of Global Retail Partners, L.P. since
April 1997. From 1994 to 1997, she served as President of Fayne Levinson &
Associates, an independent consulting firm located in Santa Monica, California
that advises both major corporations and start-up entrepreneurial ventures.
Prior to starting Fayne Levinson & Associates, Ms. Levinson served as an
executive with Creative Artists Agency, Inc. in 1993, a partner of Wings
Partners, Inc., a merchant banking firm from 1989 to 1992, Senior Vice President
for American Express Travel Related Services Company, Inc. from 1984 to 1987,
and as a partner of the consulting firm of McKinsey and Co. from 1979 to 1981.
Ms. Levinson holds a Bachelor of Arts degree in Russian Studies from Barnard
College, a Master of Business Administration degree from New York University
School of Business and a Master of Arts degree in Russian Literature from
Harvard University. Ms. Levinson also currently serves as a director for
Genentech, Inc., Jacobs Engineering Group, Inc., NCR, Inc. and Beyond.com
Corporation.
Michael W. Brown joined the Company as a director in November 1997. Mr.
Brown is currently serving as the Chairman of the Nasdaq Stock Market Board of
Governors. Mr. Brown joined Microsoft Corporation in 1989 as its Treasurer
5
<PAGE> 7
and became its Chief Financial Officer in 1993, in which capacity he served
until his retirement in July 1997. Prior to joining Microsoft, Mr. Brown spent
18 years with Deloitte & Touche LLP. Mr. Brown is also a director of Wang
Laboratories Inc. and Citrix Systems, Inc., a trustee of the Financial
Executives Research Foundation, and is a member of the Center for Strategic and
International Studies, the Financial Executives Institute, the American
Institute of Certified Public Accountants, and the University of Washington
School of Business Advisory Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE ABOVE-NAMED NOMINEES, AND PROXIES EXECUTED AND RETURNED
WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
DIRECTORS REMAINING IN OFFICE
<TABLE>
<CAPTION>
Director
Name Age Position Class
---- --- -------- -----
<S> <C> <C> <C>
Paul J. Sarvadi ................. 42 Director, President and Chief Executive Officer II
Gerald M. McIntosh............... 58 Director II
Anne M. Busquet ................. 49 Director II
Jack M. Fields, Jr............... 47 Director III
Paul S. Lattanzio ............... 35 Director III
Richard G. Rawson................ 50 Director, Executive Vice President of III
Administration, Chief Financial Officer and
Treasurer
</TABLE>
Paul J. Sarvadi. Mr. Sarvadi is President, Chief Executive Officer and
co-founder of the Company and its subsidiaries and has been a director since its
inception. Mr. Sarvadi attended Rice University and the University of Houston
prior to starting and operating several small companies. Mr. Sarvadi has served
as President of the National Association of Professional Employer Organizations
("NAPEO") and was a member of its Board of Directors for five years. Mr. Sarvadi
also served as President of the Texas Chapter of the National Association of
Professional Employer Organizations ("TC-NAPEO") for three of the first four
years of its existence. In 1995, Mr. Sarvadi was selected as Houston's
Entrepreneur of the Year for service industries.
Gerald M. McIntosh. Mr. McIntosh, co-founder of the Company and its
subsidiaries, served in several executive capacities until his retirement in
December 1997. Mr. McIntosh has served as a director since the Company's
inception. Prior to founding the Company, Mr. McIntosh was involved in a series
of entrepreneurial ventures which encompassed the creation, management and
eventual sale of several profitable companies. Mr. McIntosh is currently
co-founder of R.O.I. Capital Group, L.C., a venture capital/management
consulting firm. Mr. McIntosh also serves as founder and Chairman of Partners 5
West, a non-profit organization involved in the revitalization of inner cities.
Mr. McIntosh currently serves as Board Trustee at La Sierra University, where he
received a Bachelor of Science degree. Mr. McIntosh also holds a Master of
Public Administration degree from the University of Southern California.
Anne M. Busquet. Mrs. Busquet, a director of the Company since March
1998, has served as President of American Express Relationship Services since
October 1995. Mrs. Busquet also is a member of the American Express Planning and
Policy Committee. Since joining American Express in 1978, Mrs. Busquet has held
several senior management positions. Before joining American Express, Mrs.
Busquet served as operations analyst for Hilton International and Holiday Inn.
Mrs. Busquet is a member of the Board of Trustees for Teach for America,
Rheedlen Centers for Children and Families and the Cornell University Trustees
Council. Mrs. Busquet also serves on the Board of Directors for InfoBeat and
Epsilon. Mrs. Busquet holds a Bachelor of Science degree from Cornell University
and a Master of Business Administration from the Columbia Graduate School of
Business.
Jack M. Fields, Jr. Mr. Fields joined the Company as a director in
January 1997 following his retirement from the United States House of
Representatives, where he served for 16 years. During 1995 and 1996, Mr. Fields
served as Chairman of the House Telecommunications and Finance Subcommittee
which has jurisdiction and oversight of the Federal
6
<PAGE> 8
Communications Commission and the Securities and Exchange Commission. Mr. Fields
is Chief Executive Officer of Texana Global, Inc. in Humble, Texas as well as
Chief Executive Officer of 21st Century Group in Washington, D.C. Mr. Fields
also serves on the Board of Directors for AIM Management and Telscape
International. Mr. Fields earned a Bachelor of Arts degree in 1974 from Baylor
University, and graduated from Baylor Law School in 1977.
Paul S. Lattanzio. Mr. Lattanzio, a director of the Company since 1995,
is a Senior Managing Director for NationsBanc Montgomery Securities LLC. Mr.
Lattanzio previously served in several positions with various affiliates of
Bankers Trust New York Corporation for over 13 years, most recently as Managing
Director of BT Capital Partners, Inc. Mr. Lattanzio has experience in a variety
of investment banking disciplines, including mergers and acquisitions, private
placements and restructuring advisory areas. Mr. Lattanzio received his Bachelor
of Science degree in Economics with honors from the University of Pennsylvania's
Wharton School of Business in 1984.
Richard G. Rawson. Mr. Rawson, who serves as Executive Vice President
of Administration, Chief Financial Officer and Treasurer of the Company and its
subsidiaries, has served as a director of the Company since 1989. Prior to
joining Administaff in 1989, Mr. Rawson served as a Senior Financial Officer and
Controller for several companies in the manufacturing and seismic data
processing industries. Mr. Rawson served as Chairman of the Accounting Practices
Committee of NAPEO for five years as well as its Treasurer and Second Vice
President. Mr. Rawson currently serves as NAPEO's First Vice President, Chairman
of the Government Affairs Committee, a member of its Accounting Practices
Committee and the Executive Committee of its Board of Directors. Mr. Rawson is
also a member of the Financial Executives Institute. Mr. Rawson has a Bachelor
of Business Administration degree in Finance from the University of Houston.
Mr. Scott C. Hensel resigned as director of the Company effective
September 1, 1998.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has appointed three committees: a Finance, Risk
Management and Audit Committee, a Compensation Committee and a Nominating
Committee. The members of the Finance, Risk Management and Audit Committee are
Mr. Brown, Ms. Levinson, Mr. Lattanzio and Mrs. Busquet. The Finance, Risk
Management and Audit Committee oversees the financial affairs of the Company,
reviews the Company's policies and procedures with respect to risk management,
reviews the scope and results of the annual audit of the Company's consolidated
financial statements conducted by the Company's independent accountants, reviews
the scope of other services provided by the Company's independent accountants,
reviews proposed changes in the Company's financial and accounting standards and
principles and the Company's policies and procedures with respect to its
internal accounting, auditing and financial controls, and makes recommendations
to the Board of Directors on the engagement of the independent accountants, as
well as other matters which may come before it as directed by the Board of
Directors. The members of the Compensation Committee are Ms. Levinson, Mr.
Lattanzio and Mr. Fields. The Compensation Committee administers the Company's
compensation programs and performs such other duties as may from time to time be
determined by the Board of Directors. The members of the Nominating Committee
are Mr. Sarvadi, Ms. Levinson and Mr. McIntosh. The Nominating Committee
considers and makes recommendations to the Board of Directors regarding persons
to be nominated by the Board of Directors for election as directors.
INFORMATION REGARDING MEETINGS
During 1998, the Finance, Risk Management and Audit Committee had five
meetings, the Compensation Committee had five meetings and took action via
written unanimous consent one time, the Nominating Committee had no meetings and
the Board of Directors had eight meetings. Each director attended more than 75%
of the meetings of the Board and Committees of which they were members during
the fiscal year ended December 31, 1998.
DIRECTOR COMPENSATION
Directors of the Company who are not employees of the Company are paid
(i) an annual retainer of $10,000, (ii) $2,500 for each Board of Directors
meeting attended, (iii) an annual fee of $1,000 payable for each committee of
the Board (if any) of which such person is the Chairperson and (iv) reasonable
expenses incurred in serving as a director. The annual compensation can be taken
in cash or Common Stock, at the director's option. In addition, pursuant to the
Company's 1997 Incentive Plan, each such director automatically receives on the
date such person first becomes a director, a grant of non-
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<PAGE> 9
qualified options to purchase 7,500 shares of Common Stock, which will vest
one-third on each anniversary of the date of grant. In addition, following each
annual meeting of the Company's Stockholders, each outside director who was not
initially elected at such meeting, will receive an annual grant of non-qualified
options to purchase an additional 2,500 shares of Common Stock, all of which are
fully vested on the date of grant. The exercise price of all such options is the
fair market value at the time the options are granted. Pursuant to such
arrangement, Ms. Levinson has been granted options to purchase 15,000 shares,
Mr. Fields has been granted options to purchase 12,500 shares, Mr. Brown has
been granted options to purchase 10,000 shares, Mr. Lattanzio has been granted
options to purchase 2,500 shares and Mr. McIntosh has been granted options to
purchase 2,500 shares. In addition, Mr. Brown, Mr. Lattanzio, Mr. Fields, Ms.
Levinson and Mr. McIntosh have each elected to and have received shares of
Common Stock in lieu of a portion of the cash compensation due for their service
as directors in 1998. Specifically, and in lieu of such cash compensation, Mr.
Brown has received 552 shares, Mr. Fields has received 471 shares, Mr. Lattanzio
has received 533 shares, Ms. Levinson has received 470 shares and Mr. McIntosh
has received 533 shares of Common Stock. Mrs. Busquet has declined all
compensation for her service as director except for reimbursement of actual
expenses.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information relating to the current
executive officers of the Company. Biographical information with respect to
Messrs. Sarvadi and Rawson is set forth above under "Directors Remaining in
Office".
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Paul J. Sarvadi........................................... 42 President and Chief Executive Officer
Richard G. Rawson......................................... 50 Executive Vice President of Administration,
Chief Financial Officer and Treasurer
A. Steve Arizpe........................................... 41 Executive Vice President of Client Services
Jay E. Mincks............................................. 46 Executive Vice President of Sales and
Marketing
Jerald L. Broussard....................................... 50 Senior Vice President of Business
Development
Constance Hall Barnaba.................................... 51 Vice President of Human Resource Services
David C. Dickson.......................................... 52 Vice President of Technology and
Infrastructure and Chief Technology Officer
Gwen Fey.................................................. 55 Vice President of Client Services
Coordination
Samuel G. Larson.......................................... 37 Vice President of Finance and Controller
John H. Spurgin, II....................................... 52 Vice President of Legal, General Counsel and
Secretary
James E. Wilkes........................................... 51 Vice President of Corporate Human
Resources
Rodney H. Williamson...................................... 53 Vice President of Benefits
</TABLE>
A. Steve Arizpe, Executive Vice President of Client Services, joined
Administaff in 1989. Since that time, Mr. Arizpe has served as Houston Sales
Manager, Regional Sales Manager, and Vice President of Sales. Prior to joining
Administaff, Mr. Arizpe served in sales and sales management roles for two large
corporations and has more than 18 years of management and sales experience.
Jay E. Mincks, Executive Vice President of Sales and Marketing, joined
Administaff in 1990. Since that time, Mr. Mincks has served as Houston Sales
Manager, Regional Sales Manager for the Western United States, and Vice
President of Sales & Marketing. Prior to joining Administaff, Mr. Mincks served
in a variety of positions, including management, in the sales and sales training
fields with various large companies.
8
<PAGE> 10
Jerald L. Broussard, Senior Vice President of Business Development,
joined Administaff in 1989. Since joining Administaff, Mr. Broussard has served
as Director of Marketing and Development and Vice President of Marketing.
Constance Hall Barnaba, Vice President of Human Resource Services,
joined Administaff in April 1996. Prior to being named Vice President of Human
Resource Services in September 1998, she served as a Training Specialist,
Manager of Human Resource Services and Director of Human Resource Services.
Prior to joining Administaff, Ms. Barnaba was employed by the Ohio Education
Association in Columbus, Ohio for 18 years, serving as Executive Manager of its
Affiliate Services Division for four years.
David C. Dickson, Vice President of Technology and Infrastructure and
Chief Technology Officer, joined Administaff in 1992 and served as Director of
Systems prior to being named Vice President in 1994. Prior to joining
Administaff, Mr. Dickson served in a broad range of management capacities,
including General Manager for a computer systems integration company, Vice
President of an international software company, and Director of Computing for a
major urban university.
Gwen Fey, Vice President of Client Services Coordination, joined
Administaff in 1990. Prior to being named Vice President of Client Services
Coordination in May 1997, Ms. Fey served as Account Executive, Account Executive
Trainer, Client Service Liaison Supervisor/Trainer, New Accounts Supervisor, and
Manager of the Orientation Team.
Samuel G. Larson, Vice President of Finance and Controller, joined
Administaff in August 1994 and was named Vice President of Finance in May 1997.
Prior to joining Administaff, Mr. Larson served as Controller for a small,
publicly held company, as Financial Reporting Manager for NL Industries, Inc.,
and as an Audit Manager with Ernst & Young, L.L.P.
John H. Spurgin, II, Vice President of Legal, General Counsel and
Secretary, joined Administaff in January 1997. Prior to joining Administaff, Mr.
Spurgin was a partner with the Austin office of McGinnis, Lochridge & Kilgore,
L.L.P., where he served as Administaff's outside counsel for over nine years.
James E. Wilkes, Vice President of Corporate Human Resources, joined
Administaff in 1992. Before being named Vice President in 1994, Mr. Wilkes
served as Director of the Human Resources Department. Prior to joining
Administaff, Mr. Wilkes served in a variety of human resource executive
positions for a number of companies, most recently as President of the Employee
Relations Advisory Council, a human resource consulting firm based in Scotts
Valley, California.
Rodney H. Williamson, Vice President of Benefits, joined Administaff in
July 1998. Prior to joining Administaff, Mr. Williamson served as a vice
president for BlueCross BlueShield of Georgia, and, prior to that, worked for
Aetna U.S. Healthcare for 27 years in various capacities.
9
<PAGE> 11
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding aggregate
cash compensation, stock option and restricted stock awards and other
compensation earned by the Company's Chief Executive Officer and each of the
four other most highly compensated executive officers of the Company
(collectively the "Named Executive Officers") for services rendered in all
capacities to the Company during 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS TOTAL UNEXERCISED OPTIONS COMPENSATION (1)
--------------------------- ---- ------ ----- ------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Paul J. Sarvadi, President and Chief 1998 $275,154 $ 36,750 -- $1,020
Executive Officer............................... 1997 $239,292 -- -- $1,020
1996 $206,674 -- -- $ 660
Richard G. Rawson, Executive Vice President 1998 $253,885 $124,040 -- $2,880
of Administration, Chief Financial Officer 1997 $226,400 $103,911 14,000 $1,740
and Treasurer................................... 1996 $206,753 $ 88,351 -- $1,740
A Steve Arizpe, Executive Vice President of 1998 $235,557 $ 23,604 20,000 --
Client Services................................ 1997 $203,517 $ 24,452 14,000 --
1996 $176,393 -- -- --
Jay E. Mincks, Executive Vice President of 1998 $197,670 $ 19,973 20,000 --
Sales and Marketing............................. 1997 $171,592 $ 11,823 23,000 --
1996 $154,371 $ 11,864 -- --
Jerald L. Broussard, Senior Vice President of 1998 $207,586 $ 36,766 -- --
Business Development............................ 1997 $180,214 $ 34,217 8,000 --
1996 $153,691 $ 13,722 -- --
</TABLE>
- ----------
(1) Represents the Company's payments with respect to life insurance
policies benefitting the named executive. Excludes perquisites and
other personal benefits because such compensation did not exceed the
lesser of $50,000 or 10% of the total annual salary reported for each
executive officer.
10
<PAGE> 12
STOCK OPTIONS
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
Percent Of Potential Realizable Value
Total At
Options/ Assumed Annual Rates Of
SARS Stock Price Appreciation
Granted To For Option Term
Number Of Securities Employees Exercise or
Underlying Options/ In Fiscal Base Price Expiration
Name SARs Granted Year ($/Sh) Date 5% ($) 10% ($)
- ---- ------------ ---- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
A. Steve Arizpe ........... 20,000 10.1% $32.56 8/05/2008 $409,536 $1,037,845
Jay E. Mincks.............. 20,000 10.1% 32.56 8/05/2008 409,536 1,037,845
</TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options/SARs At Options/SARs At
Shares Fiscal Year-End Fiscal year-End
Acquired On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable (1)
- ---- -------- -------- ------------- -----------------
<S> <C> <C> <C> <C>
Richard G. Rawson............................ -- -- 2,800/ $ 11,156/
11,200 $ 44,624
A. Steve Arizpe.............................. 5,500 $159,219 31,338/ $447,100/
40,648 $153,271
Jerald L. Broussard.......................... 21,594 755,790 17,003/ $183,115/
16,669 $142,003
Jay E. Mincks................................ 4,138 145,919 11,648/ $ 93,025/
43,098 $101,944
</TABLE>
(1) Represents the difference between the closing price of the Company's
Common Stock on December 31, 1998 and the exercise price of the
options.
11
<PAGE> 13
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors of the Company
consists of Ms. Levinson, Mr. Lattanzio and Mr. Fields, none of whom are
officers or employees of the Company. This committee is responsible for
evaluating the performance of and determining the compensation for, certain
executive officers of the Company. It is also responsible for overseeing the
Administaff Employee Stock Purchase Plan and the Administaff 1997 Incentive
Plan. The Compensation Committee has furnished the following report on executive
compensation for 1998.
The Company has developed a compensation policy which is designed to
attract and retain key executives responsible for the success of the Company and
motivate management to enhance long-term stockholder value. The annual
compensation package of executive officers has included, and may in the future
include, some or all of the following components: (i) a cash salary which
reflects the responsibilities relating to the position and individual
performance, (ii) variable performance awards payable in cash or, in certain
situations, in phantom shares, performance units, or bonus stock, and tied to
the individual's or the Company's achievement of certain goals or milestones,
(iii) other stock-based awards, and (iv) stock options which align the interests
of the executive officers with those of the Company's stockholders.
In determining the level of compensation for each of the Company's
executive officers, the Compensation Committee takes into account various
qualitative and quantitative indicators of corporate and individual performance.
Although no specific target has been established, the Compensation Committee
generally seeks to set salaries at the median to high end of the range in
comparison to peer group companies. In setting such salaries, the Compensation
Committee considers its peer group to be certain companies in the service
industry with similar revenue as the Company. In addition, in evaluating the
performance of management, the Compensation Committee also takes into
consideration such factors as revenue growth, acquisitions, achievement of
expansion goals and profitability. The Compensation Committee also recognizes
performance and achievements that are more difficult to quantify, such as the
successful supervision of major corporate projects, demonstrated leadership
ability, and contributions to the industry and the community.
Base compensation is established by the Compensation Committee of the
Board of Directors and reviewed annually. When establishing or reviewing base
compensation levels for each executive officer, the Committee, in accordance
with its general compensation policy, considers numerous factors, including the
responsibilities relating to the position, the qualifications of the executive,
the relative experience the individual brings to the Company, strategic goals
for which the executive has responsibility and compensation levels of comparable
companies. No predetermined weights are given to any one of such factors. The
salaries for each of the executive officers in 1998, including the President and
Chief Executive Officer, were determined based upon the foregoing factors.
In addition to each executive officer's base compensation, the
Compensation Committee may award cash bonuses and/or grant awards under the
Company's Incentive Plan to chosen executive officers depending on the extent to
which certain personal and corporate performance goals are achieved. Such goals
are the same as those discussed above.
Since the Company has not yet exceeded the $1,000,000 compensation
threshold to any executive officer in any year, the Compensation Committee has
not yet adopted a policy with respect to the limitation under the Federal Tax
Code that generally limits the Company's ability to deduct compensation in
excess of $1,000,000 to a particular executive officer in any year. The
Compensation Committee, in consultation with the Board of Directors, will adopt
such a policy if the Company exceeds such amount.
This report shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The foregoing report is given by the following members of the
Compensation Committee of the Board of Directors:
Linda Fayne Levinson
Paul S. Lattanzio
Jack M. Fields, Jr
12
<PAGE> 14
Performance Graph
COMPARISON OF 23 MONTH CUMULATIVE TOTAL
RETURN*
AMONG ADMINISTAFF, INC., THE S&P 500 INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
[GRAPH]
2/3/97 12/31/97 12/31/98
------- -------- --------
Administaff ................. 100 152 147
New Peer Group .............. 100 46 29
Old Peer Group .............. 100 46 29
S&P 500 ..................... 100 125 161
*$100 INVESTED ON 2/3/97 IN STOCK OR INDEX- INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDEDING DECEMBER 31.
NOTE: The Peer Group reflects the returns for last year's Peer Group (consisting
of Vincam, Inc., Employee Solutions, Inc., Team America Corporation and Digital
Solutions, Inc., now known as TeamStaff, Inc.) as well as two additional
companies (Staff Leasing, Inc. and NovaCare Employee Services, Inc.) The results
for last year's group and this year's group are substantially Identical.
13
<PAGE> 15
The above graph compares the 23 month cumulative total return
of the Company's Common Stock with the cumulative total return of the Standard &
Poor's 500 Stock Index and an industry peer group index for the period from
February 3, 1997 to December 31, 1998 (assuming reinvestment of any dividends
and an investment of $100 in each on February 3, 1997). The Company's Common
Stock closing price on March 5, 1999 was $13.6875. The new peer group consists
of Vincam, Inc., Employee Solutions, Inc., Team America Corporation, TeamStaff,
Inc. (formerly known as Digital Solutions, Inc.), Staff Leasing, Inc. and
NovaCare Employee Services, Inc., each of which provides professional employer
services. The new peer group is the same as the old peer group but has been
expanded to include NovaCare Employee Services, Inc. and Staff Leasing, Inc.,
PEO companies which have become publicly traded in the last year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, no executive officer of the Company served
as (i) a member of the compensation committee (or other board committee
performing equivalent functions or, in the absence of any such committee, the
entire board of directors) of another entity, one of whose executive officers
served on the Board of Directors of the Company, or (ii) a director of another
entity, one of whose executive officers served on the Board of Directors of the
Company or its subsidiaries.
During fiscal 1998, no member of the Compensation Committee
(or board committee performing equivalent functions) (i) was an officer or
employee of the Company, (ii) was formerly an officer of the Company or (iii)
had any business relationship or conducted any transactions with the Company,
other than the relationships disclosed under "Certain Relationships and Other
Transactions."
14
<PAGE> 16
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors and officers, and persons who own more
than 10% of the Common Stock, to file initial reports of ownership and reports
of changes in ownership (Forms 3, 4, and 5) of Common Stock with the Securities
and Exchange Commission (the "SEC") and the New York Stock Exchange. Officers,
directors and greater than 10% stockholders are required by SEC regulation to
furnish the Company with copies of all such forms that they file.
Based solely on review of the copies of such reports furnished
to the Company or written representations that no other reports were required,
the Company believes that all filing requirements with respect to fiscal year
1998 applicable to its officers, directors and greater than 10% beneficial
owners were complied with except that the following persons or entities each
filed one late report (with the number of transactions reported late indicated
in parenthesis): A. Steve Arizpe (1); Jay E.
Mincks (2).
CERTAIN RELATIONSHIPS AND OTHER TRANSACTIONS
In June 1995, Richard G. Rawson, Executive Vice President of
Administration, Chief Financial Officer, Treasurer and a director of the
Company, exercised options to purchase 448,667 shares of Common Stock at a price
of $0.75 per share. The purchase price was paid in cash by Mr. Rawson. In
connection with the exercise of the options, the Company entered into a loan
agreement with Mr. Rawson in the amount of approximately $694,000, whereby the
Company paid certain federal income tax withholding requirements related to the
stock option exercise. The loan agreement called for an additional amount to be
advanced to Mr. Rawson in the event the ultimate tax liability resulting from
the exercise exceeded the statutory withholding requirements. In April 1996, an
additional $300,000 was loaned to Mr. Rawson pursuant to this provision of the
agreement. Mr. Rawson, his wife and a family limited partnership of which Mr.
Rawson is the general partner are obligors of such loans. The loans are
repayable in five years, accrue interest at 6.83% and are secured by 48,982
shares of Common Stock owned by the obligors.
In September 1995, Jerald L. Broussard, Senior Vice President
of Business Development, exercised options to purchase 40,000 shares of Common
Stock at a price of $1.50 per share. The purchase price was paid in cash by Mr.
Broussard. In connection with the exercise of the options, the Company entered
into a loan agreement with Mr. Broussard whereby the Company paid certain
federal income tax withholding requirements related to the stock option exercise
on behalf of Mr. Broussard in the amount of $141,000. The loan agreement called
for an additional amount to be advanced to Mr. Broussard in the event the
ultimate tax liability resulting from the exercise exceeded the statutory
withholding requirements. In June 1997, the Company loaned Mr. Broussard an
additional $46,000 pursuant to this provision of the agreement. The loans are
repayable in five years, accrue interest at 6.83% for the 1995 loan and 6.60%
for the 1997 loan, and are secured by 6,500 shares of the Company's Common
Stock.
Mrs. Anne Busquet was elected to the Company's Board of
Directors in March 1998. Mrs. Busquet is President of American Express
Relationship Services ("AERS"), a division of American Express Travel Related
Services Company, Inc. ("American Express"). In March 1998, the Company
completed a Securities Purchase Agreement with American Express whereby the
Company sold units consisting of 693,126 shares of its Common Stock (293,126
shares from Treasury Stock) and warrants to purchase 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 exercise prices ranging from
$40 to $80 per share and terms ranging from three to seven years. Mrs. Busquet
was elected a director of the Company pursuant to the terms of the Securities
Purchase 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'
substantial small business customer base across the country. Under the terms of
the Marketing Agreement, American Express is utilizing its resources to generate
appointments with prospects for the Company's services. In addition, the Company
and American Express are working 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 American Express will not enter into an
alliance with another
15
<PAGE> 17
PEO 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.
In February 1998, the Company purchased 50,000 shares of
Common Stock from Pyramid Ventures, Inc., 25,000 shares of Common Stock from
Gerald M. McIntosh, 25,000 shares of Common Stock from David W. Russell, Trustee
of the McIntosh Charitable Remainder Unitrust, 30,000 shares of Common Stock
from Solar Vineyard Limited, 15,000 shares of Common Stock from The Hammond 1994
Family Limited Partnership and 5,000 shares of Common Stock from The Hammond
Family Foundation in connection with the consummation of the Securities Purchase
Agreement between the Company and American Express. The purchase price paid to
such shareholders was $21.00 per share.
In January 1997, the Company entered into an employment
agreement with John H. Spurgin, II, pursuant to which the Company agreed to
employ Mr. Spurgin on the terms set forth therein as the Company's Vice
President of Legal, General Counsel and Secretary.
16
<PAGE> 18
PROPOSAL NUMBER 2:
APPROVAL OF AUDITORS
GENERAL
The Board of Directors has appointed the firm of Ernst &
Young, L.L.P. as the Company's independent public accountants for the fiscal
year ending December 31, 1999, subject to ratification by the Company's
stockholders. Ernst & Young, L.L.P. has served as the Company's independent
public accountants since 1991. Representatives of Ernst & Young, L.L.P. are
expected to be present at the Annual Meeting of Stockholders and will have an
opportunity to make a statement, if they desire to do so, and to respond to
appropriate questions from those attending the meeting.
REQUIRED AFFIRMATIVE VOTE
The affirmative vote of holders of a majority of the shares of
Common Stock entitled to vote in person or by proxy at the 1999 Annual Meeting
of Stockholders is required to ratify the appointment of Ernst & Young, L.L.P.
as the Company's independent public accountants for fiscal 1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF ERNST & YOUNG, L.L.P.'S APPOINTMENT, AND PROXIES EXECUTED AND
RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
17
<PAGE> 19
PROPOSAL NUMBER 3:
APPROVAL OF AMENDMENT TO THE
1997 INCENTIVE PLAN
General
In May 1997, the Board of Directors of the Company adopted and
the Stockholders approved the 1997 Incentive Plan (the "1997 Plan"). At a
meeting of the Board of Directors of the Company on January 12, 1999, the Board
of Directors adopted a proposal to further amend the 1997 Plan. The sole
proposed amendment to the 1997 Plan is to increase the maximum number of shares
of Common Stock of the Company issuable under the Plan from 882,957 shares to
1,482,957 shares.
The proposal to amend the 1997 Plan is subject to stockholder
approval.
REASONS FOR AND PRINCIPAL EFFECTS OF THE PROPOSED AMENDMENT
As of March 1, 1999, there were outstanding stock options
covering an aggregate of 714,214 shares of Common Stock held by 410 persons.
Approximately 47,039 shares of Common Stock remained available for future awards
under the 1997 Plan. The Board believes that the availability of an adequate
number of shares available for grant under the 1997 Plan is an important factor
in attracting, retaining and motivating qualified employees essential to the
success of the Company. The Board further believes that the number of shares
remaining available for issuance will be insufficient to achieve the purpose of
the 1997 Plan over the term of the plan unless additional shares are authorized.
Accordingly, the current proposal would increase the aggregate number of shares
of Common Stock that may be issued under the 1997 Plan to 1,482,957 shares.
REQUIRED AFFIRMATIVE VOTE
The affirmative vote of holders of a majority of the shares of
Common Stock entitled to vote in person or by proxy at the 1999 Annual Meeting
of Stockholders is required to approve the proposal to amend the 1997 Incentive
Plan. If not approved, the amendment to the 1997 Incentive Plan will not become
effective.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE PROPOSAL TO AMEND THE ADMINISTAFF, INC. 1997 INCENTIVE PLAN, AND
PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.
SUMMARY OF THE 1997 INCENTIVE PLAN
The summary description that follows is qualified by reference
to the 1997 Plan, as most recently amended and restated by the Board of
Directors on May 28, 1997, a copy of which will be available to any stockholder
upon written request.
Eligibility for Participation. All employees, including
officers, of the Company and its subsidiaries are eligible for participation in
all Awards under the 1997 Incentive Plan, other than automatic Director options.
Only non-employee directors of the Company ("Directors") will receive automatic
grants of Director options.
Administration. The 1997 Incentive Plan is administered by the
Compensation Committee of the Company's Board of Directors. Except with respect
to the automatic grant of Director options and elective deferrals by Directors
of all or part of their annual retainer in the form of phantom shares, the
Compensation Committee will select the employees who will receive Awards,
determine the type and terms of Awards to be granted and interpret and
administer the 1997 Incentive Plan.
18
<PAGE> 20
Employee Stock Options. Stock options granted to employees are
subject to such terms and conditions as may be established by the Compensation
Committee, which may include conditioning the exercisability of an option on the
achievement of one or more performance goals, except that in all events: (i) no
stock options may be granted after the termination of the 1997 Incentive Plan;
(ii) the option exercise price cannot be less than the market value per share of
the Common Stock at the date of grant (unless it is a replacement option granted
to new employees in conjunction with an acquisition of the stock or property of
another corporation); and (iii) no stock option may be exercised more than 10
years after it is granted. Stock options may be granted either as incentive
stock options ("ISOs") under Section 422 of the Code, nonqualified stock options
or a combination thereof. In addition, the Compensation Committee may provide,
with respect to an option granted to an officer, that such option, if exercised
with Common Stock, will have an automatic "reload" grant feature, with such
terms and conditions as the Compensation Committee may establish for such
reload.
The Compensation Committee will determine the form in which
payment of the optionee's exercise price may be made, which may include cash,
shares of Common Stock already owned by the optionee for more than six months, a
"cashless broker exercise" through procedures established by the Company, or any
combination thereof.
Director Stock Options. The 1997 Incentive Plan provides that
each Director of the Company shall automatically receive on the date of each
annual meeting of the Company's stockholders (unless first elected or appointed
at such meeting) an immediately vested option to purchase 2,500 shares of Common
Stock at an exercise price per share equal to the fair market value of the
Common Stock on the date of grant. Each person who becomes a Director of the
Company shall automatically receive an option to purchase 7,500 shares of Common
Stock on the date of such person's election or appointment at an exercise price
per share equal to the fair market value of the Common Stock on the date of
grant and such option shall vest as to one-third of the shares on each
anniversary of its grant date. Neither the Compensation Committee nor the Board
of Directors has any discretion with respect to Director options. Each Director
option shall have a term of 10 years, subject to earlier termination depending
upon continuity of service on the Board.
Phantom Shares. The Compensation Committee may grant phantom
shares of Common Stock to employees, which may be payable in cash, shares of
Common Stock or a combination thereof, subject to the achievement of specified
performance goals. The Compensation Committee shall determine the performance
goals to be achieved and the length of the performance period.
Performance Units. The Compensation Committee may also grant
performance units to employees. Performance units are units equivalent to $100
(or such other value as the Compensation Committee determines) and may consist
of payments in cash, shares of Common Stock or a combination thereof, payable
upon the achievement of specified performance goals. The Compensation Committee
shall determine the performance goals to be achieved and the length of the
performance period.
Bonus Stock. The Compensation Committee may deliver
unrestricted shares of Common Stock to an employee as additional compensation
for the person's services to the Company or a subsidiary in lieu of or in
addition to a cash bonus.
Other Stock-Based Awards. The Compensation Committee, in its
discretion, may grant other forms of Awards based on, or payable in, shares of
Common Stock. Subject to certain limitations, participants, including directors,
may elect to defer the receipt of an Award or other compensation in the form of
phantom shares for limited periods.
Performance Objectives. The Compensation Committee shall
subject grants of phantom shares and performance units and, in its discretion,
may condition the exercisability of employee stock options, on the attainment of
certain performance objectives. The term "Performance Objectives" means the
objectives, if any, established by the Compensation Committee that are to be
achieved with respect to an Award granted under this Plan, which may be
described in terms of Company-wide objectives, in terms of objectives that are
related to performance of a division, Subsidiary, department, geographic market
or function within the Company or a Subsidiary in which the Participant
receiving the Award is employed, or in individual or other terms, and which will
relate to the period of time (Performance Cycle) determined by the Compensation
Committee. The Performance Objectives intended to qualify under Section 162(m)
of the Code shall be with respect to one or more of the following: (i) net
earnings; (ii) operating income; (iii) earnings before interest and taxes
("EBIT"); (iv) earnings before interest, taxes, depreciation, and amortization
expenses ("EBITDA"); (v) earnings before taxes and unusual or
19
<PAGE> 21
nonrecurring items; (vi) total revenue; (vii) return on investment; (viii)
return on equity; (ix) return on total capital; (x) return on assets; (xi) total
stockholder return; (xii) return on capital employed in the business; (xiii)
stock price performance; (xiv) earnings per share growth; (xv) cash flows; (xvi)
total profit; (xvii) operating expenses; (xviii) fee revenue; (xix) total
revenue less bonus payroll; (xx) the number of paid worksite employees; and
(xxi) gross mark-up per worksite employee. Which objectives to use with respect
to an Award, the weighting of the objectives if more than one is used, and
whether the objective is to be measured against a Company-established budget or
target, an index or a peer group of companies, shall be determined by the
Compensation Committee in its discretion at the time of grant of the Award. A
Performance Objective need not be based on an increase or a positive result and
may include, for example, maintaining the status quo or limiting economic
losses. The Compensation Committee, in its sole discretion and without the
consent of the Participant, may amend (i) any stock-based Award to reflect (1) a
change in corporate capitalization, such as a stock split or dividend; (2) a
corporate transaction, such as a corporate merger, a corporate consolidation,
any corporate separation (including a spinoff or other distribution of stock or
property by a corporation), any corporate reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code), (3) any partial or complete corporate liquidation, or (4) a change in
accounting rules required by the Financial Accounting Standards Board, and (ii)
any Award that is not intended to meet the requirements of Section 162(m) of the
Code, to reflect a significant event that the Compensation Committee, in its
sole discretion, believes to be appropriate to reflect the original intent in
the grant of the Award.
Annual Award Limits. The maximum number of shares of Common
Stock with respect to which any employee can receive stock options, bonus stock,
phantom shares, and other stock-based awards during any calendar year under the
1997 Incentive Plan is 100,000. In addition, no employee can receive performance
unit grants having a value in excess of $1.0 million in any calendar year.
Transferability. Awards under the 1997 Incentive Plan
generally will not be transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order; provided,
however, the Compensation Committee may, in its discretion, permit a participant
to transfer nonqualified stock options to the participant's "immediate family
members", as defined in the 1997 Incentive Plan.
Adjustments. The Compensation Committee may provide for
adjustment of Awards under the 1997 Incentive Plan if it determines such
adjustment is required to prevent dilution or enlargement of the rights of
participants in the 1997 Incentive Plan that would otherwise result from a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, reorganization or other similar corporate transaction.
Tax Withholding. The 1997 Incentive Plan permits the
Compensation Committee to allow a participant, upon exercise of an option or
payment of an Award, to satisfy any applicable federal tax withholding
requirements in the form of shares of Common Stock, including shares issuable
upon exercise or payment of such Award.
Change in Control. The 1997 Incentive Plan provides that upon
a "change in control" of the Company, all Awards shall become immediately
exercisable or payable, as the case may be. A "change in control" of the Company
shall be deemed to occur: (i) on the date any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended) acquires (directly or indirectly) the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under such Act) of 30%
or more of either the then outstanding shares of common stock of the Company or
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors; (ii) on the date the individuals who constitute
the Board as of May 28, 1997 (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the members of the Board, provided that any
person becoming a director subsequent to May 28, 1997 whose appointment,
election, or nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than any individual whose nomination for election to Board
membership was not endorsed by the Company's management prior to, or at the time
of, such individual's initial nomination for election) shall be, for purposes of
this Plan, considered as though such person were a member of the Incumbent
Board; (iii) on the date of consummation of a merger, consolidation,
recapitalization, reorganization, sale or disposition of all or a substantial
portion of the Company's assets, or the issuance of shares of stock of the
Company in connection with the acquisition of the stock or assets of another
entity, provided, however, that a Change in Control shall not occur under this
clause if consummation of the transaction would result in at least 50% of the
total voting power represented by the voting securities of the Company (or, if
not the Company, the entity that succeeds to all or substantially all of the
Company's business) outstanding immediately after such transaction being
beneficially owned (within the meaning of
20
<PAGE> 22
Rule 13d-3 promulgated pursuant to the Exchange Act) by at least 50% of the
total voting power represented by the voting securities of the Company (or, if
not the Company, the entity that succeeds to all or substantially all of the
Company's business) outstanding immediately after such transaction being
beneficially owned (within the meaning of Rule 13d-3 promulgated pursuant to the
Exchange Act) by at least 50% of the holders of outstanding voting securities of
the Company immediately prior to the transaction, with the voting power of each
such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or (iv) on the date the Company files
a report or proxy statement with the Securities and Exchange Commission pursuant
to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) that a change in control of
the Company has or may have occurred or will or may occur in the future pursuant
to any then-existing contract or transaction.
Amendment and Termination. The Board of Directors of the
Company may amend or terminate the 1997 Incentive Plan at any time without
stockholder approval, except for any amendment that under applicable law or
stock exchange rules requires stockholder approval. Unless the term of the 1997
Incentive Plan is extended or earlier terminated, the 1997 Incentive Plan will
terminate on April 24, 2005, after which no additional Awards may be made under
it; however, all then outstanding Awards will continue pursuant to their terms.
21
<PAGE> 23
PROPOSALS OF STOCKHOLDERS
Any proposal of a stockholder intended to be considered for
inclusion in the Company's proxy statement for the 2000 Annual Meeting of
Stockholders must be received at the Company's principal executive offices no
later than the close of business on November 30, 1999. Additionally, in order
for stockholder proposals that are not included in such proxy statement to be
brought before the 2000 Annual Meeting, such proposals must be received at the
Company's principal executive offices not later than the close of business on
November 30, 1999 and not earlier than the close of business on October 31,
1999.
FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-K for the
Year Ended December 31, 1998, including any financial statements and schedules
and exhibits thereto, may be obtained without charge by written request to Ruth
Holub, Investor Relations Administrator, Administaff, Inc., 19001 Crescent
Springs Drive, Kingwood, Texas 77339-3802.
By Order of the Board of Directors
/s/ JOHN H. SPURGIN II
John H. Spurgin, II
Vice President of Legal,
General Counsel and Secretary
March 29, 1999
Kingwood, Texas
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<PAGE> 24
PROXY ADMINISTAFF, INC. PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
MAY 4, 1999
The undersigned hereby appoints RICHARD G. RAWSON and JOHN H. SPURGIN, II,
and each or either of them, lawful attorneys and proxies of the undersigned,
each acting alone with full power of substitution, for and in the name, place
and stead of the undersigned, to attend the Annual Meeting of Stockholders of
Administaff, Inc., to be held at the Company's Corporate Headquarters, Centre II
in the University Rooms, located at 29801 Loop 494, Kingwood, Texas on the 4th
day of May, 1999 at 10:00 a.m., Central Daylight Savings Time, and any
adjournment(s) thereof, with all powers the undersigned would possess if
personally present, and to vote thereat, as provided below, the number of shares
the undersigned would be entitled to vote if personally present. Every properly
signed proxy will be voted in accordance with the specification made thereon.
IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND
3. All prior proxies are hereby revoked. This Proxy will also be voted in
accordance with the discretion of the proxies or proxy on any other business.
1. To elect two directors of the Company each to serve until the Company's
Annual Meeting of Stockholders in 2002, or until their respective
successors have been duly elected and qualified:
FOR ALL [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT [ ]
Nominees: L. Levinson, M. Brown Except for nominee(s) ____________________
__________________________________________________________________________
2. To approve an amendment to the Company's 1997 Incentive Plan increasing the
authorized number of shares:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve the appointment of Ernst & Young LLP as the Company's
independent auditors for the year 1999:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To act upon such other business as may properly come before the meeting or
any adjournments thereof.
(TO BE DATED AND SIGNED ON REVERSE SIDE)
<PAGE> 25
Only stockholders of record at the close of business on March 5, 1999 will
be entitled to notice of and to vote at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting
regardless of whether you plan to attend. THEREFORE, PLEASE MARK, DATE AND SIGN
THIS PROXY AND RETURN IT IN THE ACCOMPANYING POSTPAID ENVELOPE AS PROMPTLY AS
POSSIBLE. If you are present at the Annual Meeting, and wish to do so, you may
revoke the Proxy and vote in person.
The undersigned acknowledges receipt of the
Notice of Annual Meeting of Stockholders and
of the Proxy Statement.
Dated: , 1999
-----------------------------
Signature(s)
-----------------------------
------------------------------------------
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS.
JOINT OWNERS SHOULD EACH SIGN PERSONALLY.
WHERE APPLICABLE, INDICATE YOUR OFFICIAL
POSITION OR REPRESENTATION CAPACITY.
