10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
[x]	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended June 30, 2002.
	or
[   ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from            to

Commission File No. 1-13998

Administaff, Inc.

(Exact name of registrant as specified in its charter)

Delaware	76-0479645
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
19001 Crescent Springs Drive
Kingwood, Texas	77339
(Address of principal executive offices)	(Zip Code)

(Registrant’s Telephone Number, Including Area Code): (281) 358-8986

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes       No    

     As of August 7, 2002, 27,822,321 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

TABLE OF CONTENTS

Part I
	Item 1. Financial Statements
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
PART II
	ITEM 1. LEGAL PROCEEDINGS.
Credit Agreement dated 6/25/2002
3rd Amend. to Marketing Agreement
Minimum Premium Financial Agreement
Minimum Premium Administrative Services Agmt.
Amended Security Deposit Agreement

TABLE OF CONTENTS

Part I
Item 1	Financial Statements	3
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Part II
Item 1	Legal Proceedings	35
Item 4	Submission of Matters to a Vote of Security Holders	35
Item 6	Exhibits and Reports on Form 8-K	35

- -2-

ADMINISTAFF, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)

ASSETS

				June 30,			December 31,
				2002			2001
				(Unaudited)
Current assets:
	Cash and cash equivalents			$	44,361		$	53,000
	Marketable securities				15,143			47,961
	Accounts receivable:
		Trade			700			4,314
		Unbilled			73,338			70,206
		Other			2,333			1,440
	Prepaid insurance				9,214			244
	Other current assets				11,708			3,495
	Notes receivable from employees				—			694
	Income taxes receivable				5,274			—
	Deferred income taxes				612			767
			Total current assets		162,683			182,121
Property and equipment:
	Land				2,920			2,920
	Buildings and improvements				19,612			18,274
	Computer hardware and software				45,342			39,723
	Software development costs				15,803			15,072
	Furniture and fixtures				22,992			20,666
	Vehicles and aircraft				6,676			2,372
	Construction in progress				22,762			14,272
					136,107			113,299
Accumulated depreciation and amortization, net					(51,328	)		(41,405	)
			Total property and equipment		84,779			71,894
Other assets:
	Deposits				21,613			15,627
	Other assets				5,721			4,361
			Total other assets		27,334			19,988
			Total assets	$	274,796		$	274,003

- -3-

ADMINISTAFF, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY

			June 30,			December 31,
			2002			2001
			(Unaudited)
Current liabilities:
	Accounts payable		$	2,696		$	4,332
	Payroll taxes and other payroll deductions payable			38,407			43,694
	Accrued worksite employee payroll expense			83,570			68,964
	Accrued health insurance costs			3,364			1,326
	Revolving line of credit			21,000			13,500
	Other accrued liabilities			10,063			13,161
	Income taxes payable			—			535
		Total current liabilities		159,100			145,512
Noncurrent liabilities:
	Deferred income taxes			4,829			5,556
		Total noncurrent liabilities		4,829			5,556
Commitments and contingencies
Stockholders’ equity:
	Common stock			309			308
	Additional paid-in capital			102,919			95,114
	Treasury stock, at cost			(44,243	)		(33,467	)
	Accumulated other comprehensive income, net of tax			94			324
	Retained earnings			51,788			60,656
		Total stockholders’ equity		110,867			122,935
		Total liabilities and stockholders’ equity	$	274,796		$	274,003

See accompanying notes.

- -4-

ADMINISTAFF, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)

		Three Months Ended					Six Months Ended
		June 30,					June 30,
		2002			2001		2002			2001
Revenues		$	1,160,930		$	1,044,776	$	2,310,273		$	2,088,195
Direct costs:
	Salaries and wages of worksite employees		955,786			869,821		1,909,047			1,742,101
	Benefits and payroll taxes		168,588			133,416		334,093			276,726
Gross profit			36,556			41,539		67,133			69,368
Operating expenses:
	Salaries, wages and payroll taxes		19,577			16,818		38,460			32,982
	General and administrative expenses		13,052			11,071		25,029			22,916
	Commissions		2,943			2,914		6,084			6,047
	Advertising		1,669			1,849		3,289			3,307
	Depreciation and amortization		5,288			4,108		10,363			7,840
			42,529			36,760		83,225			73,092
Operating income (loss)			(5,973	)		4,779		(16,092	)		(3,724	)
Other income:
	Interest income		441			965		1,176			2,359
	Other, net		304			439		260			442
			745			1,404		1,436			2,801
Income (loss) before income taxes			(5,228	)		6,183		(14,656	)		(923	)
Income tax expense (benefit)			(2,064	)		2,409		(5,788	)		(360	)
Net income (loss)		$	(3,164	)	$	3,774	$	(8,868	)	$	(563	)
Basic net income (loss) per share of common stock		$	(0.11	)	$	0.14	$	(0.32	)	$	(0.02	)
Diluted net income (loss) per share of common stock		$	(0.11	)	$	0.13	$	(0.32	)	$	(0.02	)

See accompanying notes.

- -5-

ADMINISTAFF, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
SIX MONTHS ENDED JUNE 30, 2002
(in thousands)
(Unaudited)

													Accumulated
			Common Stock				Additional						Other
			Issued				Paid-In			Treasury			Comprehensive			Retained
			Shares		Amount		Capital			Stock			Income			Earnings			Total
Balance at December 31, 2001				30,776	$	308	$	95,114		$	(33,467	)	$	324		$	60,656		$	122,935
	Purchase of treasury stock			—		—		—			(17,088	)		—			—			(17,088	)
	Exercise of common stock purchase warrants			—		—		6,952			6,205			—			—			13,157
	Exercise of stock options			59		1		742			—			—			—			743
	Sale of common stock to Administaff Employee Stock Purchase Plan			4		—		109			—			—			—			109
	Sale of treasury stock to Administaff Employee Stock Purchase Plan			—		—		(11	)		88			—			—			77
	Other			—		—		13			19			—			—			32
	Change in unrealized gain on marketable securities, net of tax:
		Unrealized loss		—		—		—			—			(54	)		—			(54	)
		Realized gain		—		—		—			—			(176	)		—			(176	)
	Net loss			—		—		—			—			—			(8,868	)		(8,868	)
	Comprehensive loss																			(9,098	)
Balance at June 30, 2002				30,839	$	309	$	102,919		$	(44,243	)	$	94		$	51,788		$	110,867

See accompanying notes.

- -6-

ADMINISTAFF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

					Six Months Ended
					June 30,
					2002			2001
Cash flows from operating activities:
	Net loss				$	(8,868	)	$	(563	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation and amortization				10,527			7,852
		Bad debt expense				729			1,354
		Deferred income taxes				(423	)		(178	)
		Gain on the disposition of assets				(255	)		(9	)
		Changes in operating assets and liabilities:
			Accounts receivable			(1,140	)		1,543
			Prepaid insurance			(8,970	)		2,835
			Other current assets			(3,729	)		305
			Other assets			(6,906	)		639
			Accounts payable			(1,636	)		1,231
			Payroll taxes and other payroll deductions payable			(6,788	)		(18,772	)
			Accrued worksite employee payroll expense			14,606			2,757
			Accrued health insurance costs			2,038			—
			Other accrued liabilities			(3,098	)		5,619
			Income taxes payable/receivable			(5,809	)		(4,736	)
				Total adjustments		(10,854	)		440
				Net cash used in operating activities		(19,722	)		(123	)
Cash flows from investing activities:
	Marketable securities:
		Purchases				(9,638	)		(35,274	)
		Proceeds from maturities				20,113			34,445
		Proceeds from dispositions				22,091			8,600
	Cash exchanged for note receivable					(2,983	)		—
	Property and equipment:
		Purchases				(14,098	)		(11,467	)
		Construction in progress				(8,490	)		—
		Investment in software development costs				(732	)		(2,137	)
		Proceeds from dispositions				96			83
	Investment in other companies					(500	)		—
				Net cash provided by (used in) investing activities		5,859			(5,750	)

- -7-

ADMINISTAFF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
(Unaudited)

			Six Months Ended
			June 30,
			2002			2001
Cash flows from financing activities:
	Purchase of treasury stock		$	(17,088	)	$	(21,566	)
	Proceeds from the exercise of common stock purchase warrants			13,157			16,000
	Borrowings under revolving line of credit			7,500			500
	Proceeds from the exercise of stock options			743			475
	Loans to employees			694			—
	Proceeds from sale of common stock to the Administaff Employee Stock Purchase Plan			186			—
	Other			32			43
		Net cash provided by (used in) financing activities		5,224			(4,548	)
Net decrease in cash and cash equivalents				(8,639	)		(10,421	)
Cash and cash equivalents at beginning of period				53,000			69,733
Cash and cash equivalents at end of period			$	44,361		$	59,312

See accompanying notes.

- -8-

ADMINISTAFF, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2002

1. Basis of Presentation

     Administaff, Inc. (“the Company”) is a professional employer organization (“PEO”) that provides a comprehensive Personnel Management System that encompasses a broad range of services, including benefits and payroll administration, health and workers’ compensation insurance programs, personnel records management, employer liability management, employee recruiting and selection, performance management, and training and development services to small and medium-sized businesses in strategically selected markets. For the six months ended June 30, 2002 and 2001, revenues from the Company’s Texas markets represented 41% and 46% of the Company’s total revenues, respectively.

     The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

     The accompanying consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2001. The consolidated balance sheet at December 31, 2001, has been derived from the audited financial statements at that date but does not include all of the information or footnotes required by generally accepted accounting principles for complete financial statements. The Company’s consolidated balance sheet at June 30, 2002, and the consolidated statements of operations, cash flows and stockholders’ equity for the interim periods ended June 30, 2002 and 2001, have been prepared by the Company without audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for a full year or of future operations. Historically, the Company’s earnings pattern has included losses in the first quarter, followed by improved profitability in subsequent quarters throughout the year. This pattern is due to the effects of employment-related taxes which are based on each employee’s cumulative earnings up to specified wage levels, causing employment-related taxes to be highest in the first quarter and then decline over the course of the year.

     Certain prior year amounts have been reclassified to conform with current year presentation.

- -9-

2. Accounting Policies

     The following accounting policies reflect only new or modified accounting policies the Company has adopted during 2002, as a result of new contractual arrangements or the adoption of newly issued accounting pronouncements.

Health Insurance Costs

     The Company provides health insurance coverage to its worksite employees through a national network of carriers including UnitedHealthcare (“United”), PacifiCare, Kaiser Permanente, Cigna and Blue Cross and Blue Shield of Georgia, all of which are fully-insured policies. The policy with United provides the majority of the Company’s health insurance coverage. Pursuant to the terms of the Company’s annual contract with United, within a 195 days after contract termination, a final accounting of the plan will be performed and the Company will receive a refund for any accumulated surplus or will be liable for any accumulated deficit in the plan, up to the amount of the Company’s security deposit with United. As a result, the Company accounts for this plan using a partially self-funded insurance accounting model, under which the Company must estimate its incurred but not reported (“IBNR”) claims at the end of each accounting period to determine the existence of any accumulated deficit or surplus. Any resulting accumulated deficit or surplus is recorded as a liability or asset, respectively, on its balance sheet. As of June 30, 2002, the Company has recorded an estimated accumulated deficit liability of approximately $175,000.

Workers’ Compensation Costs

     The Company’s workers’ compensation insurance policy for the two-year period ending September 30, 2003 is a guaranteed-cost policy under which premiums are paid for full-insurance coverage of all claims incurred during the policy. This policy also contains a dividend feature for each policy year, under which the Company is entitled to a refund of a portion of its premiums if, four years after the end of the policy year, claims paid by the insurance carrier for any policy year are less than an amount set forth in the policy. In accordance with Emerging Issues Task Force (“EITF”) Topic D-35, FASB Staff Views on EITF No. 93-6, “Accounting for Multiple-Year Retrospectively Rated Contracts by Ceding and Assuming Enterprises,” the Company estimates the amount of refund, if any, that has been earned under the dividend feature, based on the actual claims incurred to date and a factor used to develop those claims to an estimate of the ultimate cost of the incurred claims during that policy year. As of June 30, 2002, a $1.5 million estimated dividend receivable has been recorded as a long-term asset.

Cash and Cash Equivalents

     Cash and cash equivalents include bank deposits and short-term investments with original maturities of three months or less at the date of purchase. All of the Company’s cash and cash

- -10-

equivalents are available to fund the Company’s current operations, except for minimum balances required under the Company’s revolving credit agreement.

Marketable Securities

     At June 30, 2002, the Company’s marketable securities consisted of debt securities issued by corporate and governmental entities, with contractual maturities ranging from 91 days to five years from the date of purchase. All of the Company’s investments in marketable securities are classified as available-for-sale, and as a result, are reported at fair value. All of the Company’s marketable securities are available to fund the Company’s current operations, except for minimum balances required under the Company’s revolving credit agreement. Unrealized gains and losses are reported, net of tax, as a component of accumulated other comprehensive income in stockholders’ equity.

Property and Equipment

     On January 1, 2002, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 requires than an impairment loss be recognized for assets to be disposed or held-for-use when the carrying amount of the asset is not recoverable. The adoption of SFAS No. 144 did not have an impact on the Company’s results of operations or financial position.

3. Property and Equipment

     During the first quarter of 2002, the Company purchased substantially all of the assets of Virtual Growth, Inc. through bankruptcy proceedings for a total cost of $1.6 million. The purchase price was allocated to the assets purchased based on their estimated fair market value at the date of acquisition. The primary assets purchased included computer hardware and software and intellectual property, including capitalized software development costs.

4. Deposits

     As of June 30, 2002, the Company has made cash security deposits totaling $20 million with its primary health insurance carrier, United. The Company’s contract with United provides for an additional deposit of $5 million to be made prior to September 30, 2002. Unless amended in writing by the parties, beginning January 1, 2004 and each year thereafter, the security deposit will be adjusted to the greater of $22.5 million or 7.5% of the estimated annual premiums for that contract year. In the event of a default or termination of the Company’s contract with United, a default pursuant to the revolving credit agreement or the reduction of the Company’s current ratio to an amount below 0.60, United may draw against the security deposit to collect any unpaid health insurance premiums or any accumulated deficit in the plan.

- -11-

5. Other Assets

     The Company has an investment in eProsper, Inc. (“eProsper”), a development stage company, totaling $3.1 million at June 30, 2002, including a $500,000 investment that was made in April 2002 in connection with eProsper’s $1.5 million convertible preferred stock offering. This investment is recorded under the cost method. Under the cost method, the Company periodically evaluates the realizability of this investment based on its review of the investee’s financial condition, financial results, financial projections and availability of additional financing sources. If, based on its review, the Company were to determine that the investment’s estimated fair market value had declined below its carrying value for a reason that was other than temporary, the Company would be required to write down the value of the investment to its estimated fair market value in the period such determination was made.

6. Revolving Credit Agreement

     On June 25, 2002, the Company entered into a $30 million revolving credit agreement that expires on December 23, 2002, replacing its former $21 million cash-secured line of credit. As of June 30, 2002, the Company has borrowed $21 million under this credit agreement, the proceeds of which have been used to finance the construction of a new facility at the Company’s corporate headquarters. Amounts borrowed under the credit agreement accrue interest based on a rate determined at the time of borrowing (weighted average rate of 2.4% at June 30, 2002). As of June 30, approximately $275,000 of interest expense related to the current and former credit agreements have been capitalized as part of construction in progress. Borrowings under the revolving credit agreement are secured by real estate and related improvements at the Company’s headquarters, a corporate-owned aircraft and a third party note receivable. Under the terms of the agreement, the Company is required to maintain daily cash and marketable securities balances, held in custody by Morgan Stanley and JPMorgan Chase Bank, totaling at least $7.5 million through August 2002. As of June 30, 2002, the balance in these accounts was $19.5 million. The minimum required balances increase to $12 million and $15 million in September 2002 and November 2002. Additionally, the Company is required to maintain a ratio of funded debt to consolidated EBITDA for the most recent twelve month period of 1.5 to 1.0.

7. Stockholders’ Equity

     On March 6, 2002, American Express Travel Related Services Company, Inc. (“American Express”) exercised warrants to purchase 526,271 shares of common stock at $25 per share. The shares were issued from treasury stock held by the Company. The Company repurchased the 526,271 shares of common stock from American Express for $27.02 per share at a total cost of $14.2 million.

     The Company’s Board of Directors has authorized the repurchase of up to 5,000,000 shares of the Company’s outstanding common stock. As of June 30, 2002, the Company has repurchased

- -12-

3,968,000 shares at a total cost of approximately $57.4 million, including the 526,271 shares repurchased from American Express.

8. Net Income (Loss) Per Share

     The numerator used in the calculations of both basic and diluted net income (loss) per share for all periods presented was net income (loss). The denominator for each period presented was determined as follows:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2002		2001		2002		2001
Basic net income per share – weighted average shares outstanding			27,905		27,355		27,925		27,432
Effect of dilutive securities:
	Common stock options – treasury stock method		—		1,181		—		—
			—		1,181		—		—
Diluted net income per share – weighted average shares outstanding plus effect of dilutive securities			27,905		28,536		27,925		27,432
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect			7,099		4,277		7,126		7,390

9. Commitments and Contingencies

     The Company is a defendant in various lawsuits and claims arising in the normal course of business. Management believes it has valid defenses in these cases and is defending them vigorously. While the results of litigation cannot be predicted with certainty, except as set forth below, management believes the final outcome of such litigation will not have a material adverse effect on the Company’s financial position or results of operations.

State Unemployment Taxes

     In January 2002, as a result of a corporate restructuring plan, Administaff filed for a partial transfer of compensation experience used to determine unemployment tax rates with nine states, including Texas. The Company estimated and recorded its unemployment tax expense during the first six months of 2002 using tax rates in those states that were based on its expectation that these partial transfer applications would be approved. All states have approved the Company’s applications with the exception of Texas. Pending completion of the approval process, Administaff has paid its unemployment taxes to the State of Texas at the higher new employer rate as required. The Company, however, has continued to record its expense at the expected lower rate and has recorded a current asset totaling approximately $6 million for the refund expected to be received upon approval of the application. In June 2002, the Company received an initial determination from the Texas Workforce Commission (“TWC”) that its partial transfer application was denied. The Company is vigorously pursuing an appeal of this ruling with the TWC. At this time, in the opinion of the Company’s outside counsel, it is more likely than not that the Company will ultimately succeed in having its application approved. If facts or events were to indicate that it was probable

- -13-

that Administaff’s application would ultimately be denied, the Company would be required to recognize this asset as additional payroll tax expense in the period of such determination.

Health Insurance Costs

     On November 5, 2001, the Company filed a lawsuit against Aetna US Healthcare (“Aetna”). The Company has asserted claims against Aetna for breach of contract, economic duress, negligent misrepresentation, breach of good faith and fair dealing, and violations of the Texas Insurance Code. The Company has alleged that during the third quarter of 2001, Aetna placed the Company under economic duress by threatening, without any legal right, to terminate the Company’s health insurance plan if Administaff did not pay immediate and retroactive rate increases, even though Aetna had not provided at least two quarters advance notice as required under the contract. In addition, the Company has alleged that Aetna failed to properly manage the health plan and to produce timely and accurate reports regarding the health plan’s claims data and financial condition. While the Company is still in the process of quantifying its damages, it intends to seek damages in excess of $42 million, including approximately $12.7 million related to increased health insurance costs in the third and fourth quarters of 2001.

     On January 28, 2002, Aetna filed its answer denying the claims asserted by the Company and, as anticipated by the Company, filed a counterclaim. In the counterclaim, Aetna has alleged that the Company has violated the Employee Retirement Income Security Act (“ERISA”), breached its contractual obligations by failing to pay premiums owed to Aetna, and made material misrepresentations during its negotiations of rates with Aetna for the purpose of delaying rate increases while the Company sought a replacement health insurance carrier. On February 20, 2002, the Company received Aetna’s initial disclosures related to the lawsuit and counterclaim, in which Aetna stated its preliminary calculation of damages at approximately $30 million.

     While the Company cannot predict the ultimate outcome or the timing of a resolution of this dispute or the related lawsuit and counterclaim, the Company plans to vigorously pursue its case. In addition, the Company believes that Aetna’s allegations in the counterclaim are without merit and intends to defend itself vigorously. However, an adverse outcome in this dispute could have a material adverse effect on the Company’s results of operations or financial condition.

Workers’ Compensation Insurance

     In October 2001, the Company’s former workers’ compensation insurance carrier, Reliance National Indemnity Co. (“Reliance”), was forced into bankruptcy liquidation. At December 31, 2001, the estimated outstanding claims under these policies totaled approximately $8.8 million. State laws regarding the handling of the open claims of liquidated insurance carriers vary. Most states have established funds through guaranty associations to pay such remaining claims. However, several states have provisions that could be construed to return the liability for open claims to the companies that had policies with the liquidated insurance carrier, typically based on net worth. In anticipation of this situation, the Company secured insurance coverage totaling $1.8 million from its

- -14-

current workers’ compensation insurance carrier to cover potential claims returned to the Company. While the Company believes, based on its analysis of applicable state provisions, that its insurance coverage will be adequate to cover any potential losses, it is possible that such losses could exceed the Company’s insurance coverage limit.

401(k) Plan

     On May 21, 2002, Administaff entered into a Closing Agreement with the Internal Revenue Service (“IRS”) related to an audit of its 401(k) Plan for the year ended December 31, 1993. The agreement recognizes and preserves Administaff’s ability to maintain its current plan structure through December 31, 2003. As a result of the agreement, the IRS has closed its audit of the plan and granted full relief from retroactive disqualification on the exclusive benefit rule issue raised during the audit. For periods after December 31, 2003, the Company intends to comply with IRS Revenue Procedure 2002-21, which was issued on April 24, 2002 and provides guidance regarding the operation of defined contribution plans by PEOs. The Company expects that the required changes to the plan will not have a material adverse effect on its financial condition or results of operation.

- -15-

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

     The following discussion should be read in conjunction with the 2001 annual report on Form 10-K, as well as with the consolidated financial statements and notes thereto included in this quarterly report on Form 10-Q.

Critical Accounting Policies and Estimates

     The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to health and workers’ compensation insurance claims experience, customer bad debts, investments, income taxes, and contingent liabilities. The Company bases its estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

     The Company believes the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of its consolidated financial statements:

• Revenue recognition – The Company’s revenues are derived from its comprehensive service fees, which are based upon each worksite employee’s gross pay and a markup computed as a percentage of the gross pay. The Company includes the component of its comprehensive service fees related to the gross pay of its worksite employees as revenue based on its analysis of EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. In accordance with the EITF consensus, the Company is deemed to be a principal in its personnel management services because it assumes a significant number of risks as a co-employer of its worksite employees. Among the more significant of those risks is the Company’s assumption of risk for the payment of its direct costs, including the gross pay of its worksite employees, regardless of whether the Company’s clients pay their comprehensive service fees on a timely basis or at all. If the Company were deemed to be an agent in its personnel management services, the Company could be required to record its revenues net of the gross payroll cost component of its comprehensive service fees. In such an event, there would be no effect on the Company’s net income.

• Benefits costs – The Company provides health insurance coverage to its worksite employees through a national network of carriers including UnitedHealthcare (“United”), PacifiCare, Kaiser Permanente, Cigna and Blue Cross and Blue Shield of Georgia, all of which are fully-insured policies. The policy with United provides the majority of the Company’s health insurance coverage. Pursuant to the terms of the Company’s annual contract with United, within 195 days after contract termination, a final accounting of the plan will be performed and the Company will

- -16-

	receive a refund for any accumulated surplus or will be liable for any accumulated deficit in the plan, up to the amount of the Company’s security deposit with United which totaled $20 million at June 30, 2002. As a result, the Company accounts for this plan using a partially self-funded insurance accounting model, under which the Company must estimate its incurred but not reported (“IBNR”) claims at the end of each accounting period. If the estimated IBNR claims, paid claims, taxes and administrative fees are collectively greater than the premiums paid to United, an accumulated deficit in the plan would be incurred and the Company would be required to accrue the additional necessary liability on its balance sheet, which would increase benefits expense and decrease net income in the period that such determination was made. On the other hand, if the estimated IBNR claims, paid claims, taxes and administrative fees are collectively less than the premiums paid to United, an accumulated surplus in the plan would be incurred and the Company would record this surplus as a current asset, which would reduce benefits expense and increase net income in the period that such determination was made. The Company’s second quarter 2002 benefits expense includes the effect of a $2.4 million increase in the incurred but not reported (“IBNR”) component of the United plan, pertaining to a change in estimated health insurance claims resulting from a higher than expected level of claims paid during the second quarter that were incurred in the first quarter. As of June 30, 2002, the Company has estimated an IBNR component at approximately $32 million, which resulted in the Company recording an estimated accumulated deficit liability of approximately $175,000. For the six months ended June 30, 2002, the Company’s total United Plan costs were approximately $135 million.
•	State unemployment taxes – The Company records its state unemployment tax expense based on taxable wages and tax rates assigned by each state. State unemployment tax rates vary by state and are determined, in part, based on prior years’ compensation experience in each state. In the first quarter of each calendar year, the Company must estimate its expected tax rate in those states for which tax rate notices have not been received. The need for such estimates was increased in 2002 due to a corporate restructuring plan completed in January 2002. In conjunction with the restructuring, the Company filed for a partial transfer of compensation experience with nine states, including Texas. The partial transfers, once approved, were expected to result in an assigned rate in these states that was significantly lower than the standard rates typically assigned to newly registered companies.
	The Company estimated and recorded its unemployment tax expense during the first six months of 2002 using tax rates in these states that were based on its expectation that these partial transfer applications would be approved. All states have approved the Company’s applications with the exception of Texas. Pending completion of the approval process, the Company has paid its unemployment taxes to the State of Texas at the higher new employer rate as required. The Company, however, has continued to record its unemployment tax expense at the expected lower rate and has recorded an asset totaling approximately $6 million for the refund expected to be received upon approval of the application. In June 2002, the Company received an initial determination from the Texas Workforce Commission (“TWC”) that its partial transfer application was denied. The Company is vigorously pursuing an appeal of the ruling with the

- -17-

	TWC. As this time, in the opinion of the Company’s outside counsel, it is more likely than not that the Company will ultimately succeed in having its application approved. In accordance with SFAS No. 5, Accounting for Contingencies, the Company has assessed the degree of probability of an unfavorable outcome of its appeal with the TWC as reasonably possible, but not probable. If facts or events were to indicate that is was probable the Company’s application would ultimately be denied, the Company would be required to recognize this $6 million asset as additional payroll tax expense in the period of such determination.
•	Workers’ compensation costs – The Company’s workers’ compensation insurance policy for the two-year period ending September 30, 2003 is a guaranteed-cost policy under which premiums are paid for full-insurance coverage of all claims incurred during the policy. This policy also contains a dividend feature for each policy year, under which the Company is entitled to a refund of a portion of its premiums if, four years after the end of the policy year, claims paid by the insurance carrier for the policy year are less than an amount set forth in the policy. In accordance with Emerging Issues Task Force (“EITF”) Topic D-35, FASB Staff Views on EITF No. 93-6, “Accounting for Multiple-Year Retrospectively Rated Contracts by Ceding and Assuming Enterprises,” the Company estimates the amount of refund, if any, that has been earned under the dividend feature, based on the actual claims incurred to date and a factor used to develop those claims to an estimate of the ultimate cost of the incurred claims during that policy year. If the Company’s estimates were to indicate that an additional dividend had been earned, the Company would be required to record a receivable for the amount of that dividend and decrease its workers’ compensation insurance expense, which would increase net income in the period that such determination was made. On the other hand, if the Company’s estimates were to indicate that the amount of any recorded dividend receivable had been reduced due to greater than anticipated claims experience, the Company would be required to increase its workers’ compensation insurance expense, which would reduce net income in the period that such determination was made. As of June 30, 2002, the Company has recorded a long-term asset totaling $1.5 million related to this dividend feature. This estimated dividend receivable was unchanged during the second quarter of 2002.
•	Allowance for doubtful accounts – The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to pay its comprehensive service fees. The Company believes that the success of its business is heavily dependent on its ability to collect these comprehensive service fees for several reasons, including (i) the large volume and dollar amount of transactions processed by the Company; (ii) the periodic and recurring nature of payroll, upon which the comprehensive service fees are based; and (iii) the fact that the Company is at risk for the payment of its direct costs regardless of whether its clients pay their comprehensive service fees. To mitigate this risk, the Company has established very tight credit policies. The Company generally requires its clients to pay their comprehensive service fees no later than one day prior to the applicable payroll date. In addition, the Company maintains the right to terminate its Client Service Agreement and associated worksite employees, or to require prepayment, letters of credit or other collateral, upon deterioration in a client’s financial position or upon nonpayment by a client. As a result of these efforts, the outstanding balance of accounts

- -18-

	receivable and subsequent losses related to customer nonpayment have historically been very low as a percentage of revenues. However, if the financial condition of the Company’s customers were to deteriorate rapidly, resulting in nonpayment, the Company’s accounts receivable balances could grow and the Company could be required to provide for additional allowances, which would decrease net income in the period that such determination was made.
•	Marketable securities – The Company’s investments in marketable securities consist of exchange-traded debt securities which are managed by professional investment management companies. These investment managers are guided by the Company’s investment policy, which is designed to maximize after-tax interest income while preserving its principal investment. As of December 31, 2001, all of the Company’s investments in marketable securities are classified as available-for-sale, and as a result, are reported at fair value as determined by the professional investment management companies. In accordance with SFAS No. 115, Accounting for Investments in Certain Debt and Equity Securities, unrealized gains related to increases in the fair value of investments and unrealized losses related to decreases in fair value are included in comprehensive income as reported on the Company’s statement of stockholders’ equity. However, changes in the fair value of investments impacts the Company’s net income only when such investments are sold.
•	Property and equipment – The Company’s property and equipment relate primarily to its facilities and related improvements, furniture and fixtures, computer hardware and software and capitalized software development costs. These costs are depreciated or amortized over the estimated useful lives of the assets. If the useful lives of these assets were determined to be shorter than their current estimates, the Company’s depreciation and amortization expense could be accelerated, which would decrease net income in the periods following such a determination. In addition, the Company periodically evaluates these costs for impairment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. SFAS No. 144 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is not recoverable. If events or circumstances were to indicate that any of the Company’s long-lived assets might be impaired, the Company would be required to analyze the estimated undiscounted future cash flows from the applicable asset. In addition, the Company would be required to record an impairment loss, which would reduce net income, to the extent that the carrying value of the asset exceeded the fair value of the asset.
•	Investment valuation – The Company has an equity investment in a privately held development stage company whose operations fit within the Company’s strategic focus. This investment is recorded using the cost method. Under the cost method, the Company periodically evaluates the realizability of this investment based on its review of the investee’s financial condition, financial results, financial projections and availability of additional financing sources. If, based on its review, the Company were to determine that the investment’s estimated fair market value had declined below its carrying value for a reason that was other than temporary, the Company would be required to write down the value of the investment to its estimated fair market value which would reduce net income in the period that such determination was made.

- -19-

• Deferred taxes – The Company’s deferred tax assets are reported at the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance, the Company’s ability to realize its deferred tax assets could change from its current estimates. If the Company was able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to reduce the valuation allowance would increase net income in the period that such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to increase the valuation allowance would reduce net income in the period that such determination was made. At June 30, 2002, the Company has recorded a deferred tax asset valuation allowance of $1.4 million related to a long-term capital loss generated from the write-off of the Company’s investment in VGI during 2001.

• Contingent liabilities – The Company accrues or discloses contingent liabilities in accordance with SFAS No. 5, which requires accrual of contingent liabilities that are considered probable to occur and that can be reasonably estimated. Contingent liabilities that are considered reasonably possible to occur require financial statement disclosure, including the range of possible loss if it can be reasonably determined. The Company has disclosed in its financial statements several issues that it believes are reasonably possible to occur, although it cannot determine the range of possible loss in all cases. As these issues develop, the Company will continue to evaluate the probability of future loss and the potential range of such losses. If such evaluation were to indicate that a loss was probable and the loss could be reasonably estimated, the Company would be required to accrue its estimated loss, which would reduce net income in the period that such determination was made. For a discussion of certain contingent liabilities that may affect the Company, see Note 9 to the Consolidated Unaudited Financial Statements.

- -20-

Results of Operations

     Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001.

     The following table presents certain information related to the Company’s results of operations for the three months ended June 30, 2002 and 2001.

	Three months ended
	June 30,
						%
	2002			2001		Change
	(in thousands, except per share and statistical data)
Revenues	$	1,160,930		$	1,044,776		11.1	%
Gross profit		36,556			41,539		(12.0	)%
Operating expenses		42,529			36,760		15.7	%
Operating income (loss)		(5,973	)		4,779		(225.0	)%
Other income		745			1,404		(46.9	)%
Net income (loss)		(3,164	)		3,774		(183.8	)%
Diluted net income (loss) per share of common stock		(0.11	)		0.13		(184.6	)%
Statistical Data:
Average number of worksite employees paid per month		76,477			67,878		12.7	%
Fee revenue per worksite employee per month	$	4,826		$	4,871		(0.9	)%
Fee payroll cost per worksite employee per month		3,940			4,021		(2.0	)%
Gross markup per worksite employee per month		886			850		4.2	%
Gross profit per worksite employee per month		159			204		(22.1	)%
Operating expenses per worksite employee per month		185			181		2.2	%
Operating income (loss) per worksite employee per month		(26	)		23		(213.0	)%
Net income (loss) per worksite employee per month		(14	)		19		(173.7	)%

     Revenues

     The Company’s revenues for the three months ended June 30, 2002 increased 11.1% over the same period in 2001 due to a 12.7% increase in the average number of worksite employees paid per month, partially offset by a 0.9% decrease in fee revenue per worksite employee per month.

     The Company’s unit growth rate is affected by three primary sources – new client sales, client retention and the net change in existing clients through new hires and layoffs. During the second quarter of 2002, paid worksite employees from new client sales increased proportionately with the increase in trained sales representatives. Client retention improved over the 2001 period due primarily to a reduction in client company business failures and financial defaults, along with a reduction in client-elected terminations driven by cost factors. The net change in existing clients also improved over the 2001 period as new hires were level with layoffs during the 2002 period.

     The 2.0% decrease in fee payroll cost per worksite employee per month was primarily due to (i) the addition of new clients with worksite employees that had a lower average base pay than the existing client base; and (ii) a slight decrease in the average payroll cost of worksite employees at

- -21-

existing clients which was driven by the replacement of terminated personnel with new employees at an average wage level 6% lower than the terminated worksite employees. In addition, for worksite employees active in both the 2001 and 2002 periods, the average pay raise continued to decline. The average pay raise was 2.4% in the 2002 period compared to 8.0% in the 2001 period.

     By region, the Company’s revenue growth over the second quarter of 2001 and revenue distribution for the quarter ended June 30, 2002 were as follows:

		Three months ended June 30,							Three months ended June 30,
		2002		2001		% Change			2002			2001
		(in thousands)							(% of total revenues)
Northeast		$	148,666	$	113,114		31.4	%		12.8	%		10.8	%
Southeast			128,687		100,888		27.6	%		11.1	%		9.7	%
Central			166,145		141,688		17.3	%		14.3	%		13.5	%
Southwest			476,081		484,765		(1.8	)%		41.0	%		46.4	%
West			239,564		202,551		18.3	%		20.6	%		19.4	%
Other revenue			1,787		1,770		1.0	%		0.2	%		0.2	%
	Total revenue	$	1,160,930	$	1,044,776		11.1	%		100.0	%		100.0	%

     In the southwest region, where 25% of the Company’s sales representatives produced 36% of the worksite employees paid from new client sales in the second quarter of 2002, revenues declined by 1.8%. The decline was a result of layoffs exceeding new hires during the last half of 2001 and first half of 2002, which were at a level significantly higher than those experienced in the Company’s other regions.

     Gross Profit

     Gross profit for the second quarter of 2002 decreased 12.0% to $36.6 million compared to the second quarter of 2001. Gross profit per worksite employee decreased 22.1% to $159 per month in the 2002 period from $204 per month in the 2001 period. The Company’s pricing objectives attempt to maintain or improve the gross profit per worksite employee by matching or exceeding changes in its primary direct costs with increases in the gross markup per worksite employee.

     The company failed to achieve its pricing objectives in the second quarter of 2002 due to rapidly increasing health insurance costs. The Company has implemented immediate pricing increases in response to health insurance cost increases. However, due to annual contract limitations, pricing for existing customers can only be increased upon contract renewal. Accordingly, the Company expects that its pricing objectives will not be achieved until 2003. As a result, the Company expects its gross profit per worksite employee to be less than the levels achieved during 2001 for the remainder of 2002 and that gross profit per worksite employee will gradually return to 2001 levels during 2003. However, changes in health insurance claim trends which underlie the Company’s direct costs could enhance or hinder the Company’s ability to meet its pricing objectives.

     Gross markup per worksite employee per month, which represents the Company revenues less the payroll cost of worksite employees, increased 4.2% to $886 in the 2002 period versus $850

- -22-

in the 2001 period. This increase was primarily the result of price increases in response to higher health insurance costs, which were partially offset by the lower average payroll per worksite employee.

     The Company’s primary direct costs, which include payroll taxes, benefits and workers’ compensation expenses, increased 12.2% to $735 per worksite employee per month in the 2002 period versus $655 in the 2001 period. The primary components changed as follows:

• Payroll tax costs – Payroll taxes decreased $8 per worksite employee per month over the second quarter of 2001. The overall cost of payroll taxes as a percentage of payroll cost decreased to 7.40% in the 2002 period from 7.41% in the 2001 period. The results reflect the effects of the Company’s corporate restructuring completed in January 2002. The Company estimated and recorded its state unemployment tax expense during the first six months of the 2002 using tax rates in certain states, including Texas, that were based on its expectation that a partial transfer application, resulting from its restructuring, would be approved. The Company has received an initial determination from Texas that its partial transfer application was denied and is now vigorously pursing an appeal. See “Critical Accounting Policies and Estimates” on page 16 for a discussion of this matter.

• Benefits costs – The cost of health insurance and related employee benefits increased $89 per worksite employee per month over the second quarter of 2001. This increase is due to a 28.1% increase in the cost per covered employee and a slight increase in the percentage of worksite employees covered under the Company’s health insurance plans to 74.4% in the 2002 period from 72.1% in the 2001 period. The 28.1% increase in cost per covered employee includes the effect of a $2.4 million increase in the incurred but not reported (“IBNR”) component of the United plan, pertaining to a change in estimated health insurance claims resulting from a higher than expected level of claims paid during the second quarter that were incurred in the first quarter. As of June 30, 2002, the Company has recorded an estimated accumulated deficit liability of approximately $175,000 related to the Company’s health insurance plan with United. See “Critical Accounting Policies and Estimates” on page 16 for a discussion of the Company’s accounting for health insurance costs.

• Workers’ compensation costs – Workers’ compensation costs remained consistent on a per worksite employee per month basis over the second quarter of 2001, and increased to 1.26% of fee payroll cost in the 2002 period from 1.24% in the 2001 period. The Company’s estimated dividend receivable under the policy’s dividend feature remained unchanged in the second quarter. See “Critical Accounting Policies and Estimates” on page 16 for a discussion of the Company’s accounting for workers’ compensation costs.

- -23-

     Operating Expenses

     The following table presents certain information related to the Company’s operating expenses for the three months ended June 30, 2002 and 2001.

		Three months ended June 30,							Three months ended June 30,
		2002		2001		% change			2002		2001		% change
		{(in thousands)							(per worksite employee per month)
Salaries, wages and payroll taxes		$	19,577	$	16,818		16.4	%	$	85	$	83		2.4	%
General and administrative expenses			13,052		11,071		17.9	%		57		55		3.6	%
Commissions			2,943		2,914		1.0	%		13		14		(7.1	)%
Advertising			1,669		1,849		(9.7	)%		7		9		(22.2	)%
Depreciation and amortization			5,288		4,108		28.7	%		23		20		15.0	%
	Total operating expenses	$	42,529	$	36,760		15.7	%	$	185	$	181		2.2	%

     Operating expenses increased 15.7% over the second quarter of 2001 to $42.5 million. Operating expense per worksite employee increased 2.2% to $185 per month in the 2002 period versus $181 in the 2001 period. The components of operating expenses changed as follows:

• Salaries, wages and payroll taxes of corporate and sales staff increased 16.4%, or $2 per worksite employee per month, compared to the 2001 period, primarily due to a 9.7% increase in corporate personnel and a 4.9% increase in the average base pay per corporate employee. The increase in corporate personnel was primarily due to a 7.9% increase in sales personnel, a 4.4% increase in service personnel, a 36.5% increase in benefits personnel, 10.5% increase in other corporate personnel and the initial staffing of Administaff Financial Management Services, the Company’s wholly-owned subsidiary providing Web-based financial accounting services.

• General and administrative expenses increased 17.9%, or $2 per worksite employee per month, compared to the second quarter of 2001, primarily due to increased rent and facilities costs.

• Commissions expense increased 1.0%, but decreased $1 per worksite employee per month, over the 2001 period.

• Advertising costs decreased 9.7%, or $2 on a per worksite employee basis, versus the second quarter of 2001 due to a reduction in radio advertising in the Company’s major markets.

• Depreciation and amortization expense increased 28.7%, or $3 per worksite employee per month, over the 2001 period as a result of the increased capital assets placed in service in the latter half of 2001 and first half of 2002. These capital assets included (i) computer hardware to expand the Company’s development environment and to enhance the performance and stability of its production environment; (ii) computer software for various corporate needs; (iii) software development costs related to the Company’s propriety PEO information system, AIMS, and web-based service delivery platform, the Employee Service Center; (iv) facilities expansion,

- -24-

consisting primarily of the Los Angeles Service Center and new sales offices; (v) a corporate-owned aircraft; and (vi) the purchase of assets from Virtual Growth, Inc. (“VGI”) through bankruptcy proceedings.

     Net Loss

     Other income decreased 46.9% to $745,000, primarily due to lower interest rates, combined with reduced levels of cash and marketable securities resulting from the Company’s operating loss and capital expenditures.

     The Company’s provision for income taxes differed from the U.S. statutory rate of 35% primarily due to state income taxes and non-deductible expenses. The effective income tax rate for the 2002 period was consistent with the 2001 period at 39.5%.

     Operating loss and net loss per worksite employee per month was $26 and $14 in the 2002 period, versus operating income and net income of $23 and $19 in the 2001 period. The Company’s net loss and diluted net loss per share for the quarter ended June 30, 2002 was $3.2 million and $0.11, versus net income and diluted net income per share of $3.8 million and $0.13 for the quarter ended June 30, 2001.

- -25-

     Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001.

     The following table presents certain information related to the Company’s results of operations for the six months ended June 30, 2002 and 2001.

	Six months ended
	June 30,
							%
	2002			2001			Change
	(in thousands, except per share and statistical data)
Revenues	$	2,310,273		$	2,088,195			10.6	%
Gross profit		67,133			69,368			(3.2	)%
Operating expenses		83,225			73,092			13.9	%
Operating loss		(16,092	)		(3,724	)		(332.1	)%
Other income		1,436			2,801			(48.7	)%
Net loss		(8,868	)		(563	)		(1,475.1	)%
Diluted net loss per share of common stock		(0.32	)		(0.02	)		(1,500.0	)%
Statistical Data:
Average number of worksite employees paid per month		74,982			67,669			10.8	%
Fee revenue per worksite employee per month	$	4,824		$	4,835			(0.2	)%
Fee payroll cost per worksite employee per month		3,940			3,991			(1.3	)%
Gross markup per worksite employee per month		884			844			4.7	%
Gross profit per worksite employee per month		149			171			(12.9	)%
Operating expenses per worksite employee per month		185			180			2.8	%
Operating loss per worksite employee per month		(36	)		(9	)		(300.0	)%
Net loss per worksite employee per month		(20	)		(1	)		(1,900.0	)%

     Revenues

     The Company’s revenues for the six months ended June 30, 2002 increased 10.6% over the same period in 2001 due to a 10.8% increase in the average number of worksite employees paid per month, partially offset by a 0.2% decrease in fee revenue per worksite employee per month.

     The Company’s unit growth rate is affected by three primary sources – new client sales, client retention and the net change in existing clients through new hires and layoffs. During the first half of 2002, paid worksite employees from new client sales increased proportionately with the increase in trained sales representatives. Client retention improved over the 2001 period due primarily to a reduction in client company business failures and financial defaults, along with a reduction in client-elected terminations. The net change in existing clients also improved over 2001, although it continued to lessen the Company’s growth rate as layoffs in the existing client base exceeded new hires, primarily in the first quarter of 2002.

     The 1.3% decrease in fee payroll cost per worksite employee per month was primarily due to (i) the addition of new clients with worksite employees that had a lower average base pay than the existing client base; and (ii) a slight decrease in the average payroll cost of worksite employees at existing clients, which was driven by the replacement of terminated personnel with new employees at

- -26-

a lower average wage level than the terminated worksite employees. In addition, for worksite employees active in both the 2001 and 2002 periods, the average pay raise continued to decline from the levels experienced in the 2001 period.

     By region, the Company’s revenue growth over the first half of 2001 and revenue distribution for the six months ended June 30, 2002 were as follows:

		Period ended June 30,							Period ended June 30,
		2002		2001		% Change			2002			2001
		(in thousands)							(% of total revenues)
Northeast		$	294,408	$	235,983		24.8	%		12.7	%		11.3	%
Southeast			252,804		202,273		25.0	%		10.9	%		9.7	%
Central			343,372		277,612		23.7	%		14.9	%		13.3	%
Southwest			942,186		961,020		(2.0	)%		40.8	%		46.0	%
West			473,900		408,000		16.2	%		20.5	%		19.5	%
Other revenue			3,603		3,307		9.0	%		0.2	%		0.2	%
	Total revenue	$	2,310,273	$	2,088,195		10.6	%		100.0	%		100.0	%

     Despite strong sales in the southwest region, where 26.0% of the Company’s sales representatives produced 41.0% of the worksite employees paid from new sales in the first six months of 2002, revenues declined by 2.0%. The decline was a result of layoffs exceeding new hires during the last half of 2001 and first half of 2002, which were at a level significantly higher than those experienced in the Company’s other regions.

     Gross Profit

     Gross profit for the first half of 2002 decreased 3.2% to $67.1 million compared to the first half of 2001. Gross profit per worksite employee decreased 12.9% to $149 per month in the 2002 period from $171 per month in the 2001 period. The Company’s pricing objectives attempt to maintain or improve the gross profit per worksite employee by matching or exceeding changes in its primary direct costs with increases in the gross markup per worksite employee.

     The company failed to achieve its pricing objectives in the 2002 period due to rapidly increasing health insurance costs. The Company has implemented immediate pricing increases for new business to match the health insurance cost increases. However, due to annual contract limitations, pricing for existing customers can only be increased upon contract renewal. Accordingly, the Company expects that its pricing objectives will not be achieved until 2003. As a result, the Company expects its gross profit per worksite employee to be less than the levels achieved during 2001 for the remainder of 2002 and that gross profit per worksite employee will gradually return to 2001 levels during 2003. However, changes in health insurance claims trends which underlie the Company’s direct costs could enhance or hinder the Company’s ability to meet its pricing objectives.

     Gross markup per worksite employee per month, which represents the Company revenues less the payroll cost of worksite employees, increased 4.7% to $884 in the 2002 period versus $844

- -27-

in the 2001 period. This increase was primarily the result of price increases in response to higher health insurance costs, which were partially offset by the lower average payroll per worksite employee.

     The Company’s primary direct costs, which include payroll taxes, benefits and workers’ compensation expenses, increased 9.0% to $743 per worksite employee per month in the 2002 period versus $682 in the 2001 period. The primary components changed as follows:

• Payroll tax costs – Payroll taxes decreased $8 per worksite employee per month over the first half of 2001. The overall cost of payroll taxes as a percentage of payroll cost decreased to 7.93% in the 2002 period from 8.03% in the 2001 period. This decrease was the result of (i) increased bonus payroll cost in the first quarter of 2002, which allowed a larger proportion of the Company’s worksite employees to meet their FICA wage limits earlier in 2002 compared to the 2001 period; and (ii) lower state unemployment tax rates in the 2002 period as compared to 2001 resulting from the Company’s restructuring. The Company estimated and recorded its unemployment tax expense during the first six months of the 2002 using tax rates in certain states, including Texas, that were based on its expectation that a partial transfer application, resulting from its restructuring, would be approved. The Company has received an initial determination from Texas that its partial transfer application was denied and is now vigorously pursing an appeal. See “Critical Accounting Policies and Estimates” on page 16, for a discussion of this matter.

• Benefits costs – The cost of health insurance and related employee benefits increased $73 per worksite employee per month over the first half of 2001 due to an 23.6% increase in the cost per covered employee and a slight increase in the percentage of worksite employees covered under the Company’s health insurance plans to 73.9% in the 2002 period from 72.3% in the 2001 period. As of June 30, 2002, the Company has recorded an estimated accumulated deficit liability of approximately $175,000 relating to the Company’s health insurance plan with United. See “Critical Accounting Policies and Estimates” on page 16 for a discussion of the Company’s accounting for health insurance costs.

• Workers’ compensation costs – Workers’ compensation costs decreased $3 on a per worksite employee per month basis over the first half of 2001, and decreased to 1.19% of fee payroll cost in the 2002 period from 1.25% in the 2001 period. This decrease was the result of an estimated $1.5 million dividend receivable earned under the Company’s workers’ compensation policy dividend feature and recorded in the first quarter of 2002. See “Critical Accounting Policies and Estimates” on page 16 for a discussion of the Company’s accounting for this policy.

- -28-

     Operating Expenses

     The following table presents certain information related to the Company’s operating expenses for the six months ended June 30, 2002 and 2001.

		Six months ended June 30,							Six months ended June 30,
		2002		2001		% change			2002		2001		% change
		(in thousands)							(per worksite employee per month)
Salaries, wages and payroll taxes		$	38,460	$	32,982		16.6	%	$	85	$	81		4.9	%
General and administrative expenses			25,029		22,916		9.2	%		56		57		(1.8	)%
Commissions			6,084		6,047		0.6	%		14		15		(6.7	)%
Advertising			3,289		3,307		(0.5	)%		7		8		(12.5	)%
Depreciation and amortization			10,363		7,840		32.2	%		23		19		21.1	%
	Total operating expenses	$	83,225	$	73,092		13.9	%	$	185	$	180		2.8	%

     Operating expenses increased 13.9% over the first six months of 2001 to $83.2 million. Operating expense per worksite employee increased 2.8% to $185 per month in the 2002 period versus $180 in the 2001 period. The components of operating expenses changed as follows:

• Salaries, wages and payroll taxes of corporate and sales staff increased 16.6%, or $4 per worksite employee per month, compared to the 2001 period, primarily due to a 9.9% increase in corporate personnel and a 5.4% increase in the average base pay per corporate employee. The increase in corporate personnel was primarily due to a 10.8% increase in sales personnel, a 4.5% increase in service personnel, a 28.2% increase in benefits personnel, a 9.1% increase in other corporate personnel and the initial staffing of Administaff Financial Management Services.

• General and administrative expenses increased 9.2%, but decreased $1 per worksite employee per month, compared to the first half of 2001. The decrease on a per worksite employee basis primarily resulted from decreased bad debt and consulting fee expenses.

• Commissions expense increased 0.6%, but decreased $1 per worksite employee per month, over the 2001 period.

• Advertising costs decreased 0.5%, or $1 on a per worksite employee basis, versus the first half of 2001.

• Depreciation and amortization expense increased 32.2%, or $4 per worksite employee per month, over the 2001 period as a result of the increased capital assets placed in service in the latter half of 2001 and first half of 2002. These capital assets included (i) computer hardware to expand the Company’s development environment and to enhance the performance and stability of its production environment; (ii) computer software for various corporate needs; (iii) software development costs related to AIMS and the Employee Service Center; (iv) facilities expansion,

- -29-

consisting primarily of the Los Angeles Service Center and new sales offices; (v) a corporate-owned aircraft; and (vi) the purchase of assets from VGI through bankruptcy proceedings.

     Net Loss

     Other income decreased 48.7% to $1.4 million, primarily due to lower interest rates, combined with the reduced levels of cash and marketable securities resulting from the Company’s operating loss and capital expenditures.

     The Company’s provision for income taxes differed from the U.S. statutory rate of 35% primarily due to state income taxes and non-deductible expenses. The effective income tax rate for the 2002 period was consistent with the 2001 period at 39.5%.

     Operating loss and net loss per worksite employee per month increased to $36 and $20 in the 2002 period, versus $9 and $1 in the 2001 period. The Company’s net loss and diluted net loss per share for the six months ended June 30, 2002 increased to $8.9 million and $0.32, versus $563,000 and $0.02 for the six months ended June 30, 2001.

Liquidity and Capital Resources

     The Company periodically evaluates its liquidity requirements, capital needs and availability of resources in view of, among other things, expansion plans, debt service requirements and other operating cash needs. As a result of this process, the Company has in the past sought, and may in the future seek, to raise additional capital or take other steps to increase or manage its liquidity and capital resources. The Company currently believes that its cash on hand, marketable securities, cash flows from operations and its available revolving line of credit will be adequate to meet its liquidity requirements for the remainder of 2002. The Company will rely on these same sources, as well as public and private debt and equity financing, to meet its longer-term liquidity and capital needs.

     On June 25, 2002, the Company entered into a $30 million revolving credit agreement that expires on December 23, 2002, replacing its former $21 million cash-secured line of credit. As of June 30, 2002, the Company has borrowed $21 million under this credit agreement, the proceeds of which have been used to finance the construction of a new facility at the Company’s corporate headquarters. Amounts borrowed under the credit agreement accrue interest based on a rate determined at the time of borrowing (weighted average rate of 2.4% at June 30, 2002). As of June 30, approximately $275,000 of interest expense related to the current and former credit agreements have been capitalized as part of construction in progress. Borrowings under the revolving credit agreement are secured by real estate and related improvements at the Company’s headquarters, a corporate-owned aircraft and a third party note receivable. Under the terms of the agreement, the Company is required to maintain daily cash and marketable securities balances, held in custody by Morgan Stanley and JPMorgan Chase Bank, totaling at least $7.5 million through August 2002. As of June 30, 2002, the balance in these accounts was $19.5 million. The minimum required balances increase to $12 million and $15 million in September 2002 and November 2002. Additionally, the

- -30-

Company is subject to various restrictions regarding additional indebtedness and liens, the distribution of dividends, the amount of treasury stock purchases and the requirement to maintain a ratio of funded debt to consolidated EBITDA for the most recent twelve month period of 1.5 to 1.0.

     The Company intends to enhance its working capital and short-term liquidity by converting the current revolving credit agreement into a long-term debt facility and believes it can obtain such financing at commercially reasonable rates. However, failure to extend this credit facility beyond its December 2002 due date could have a material adverse effect on the Company’s financial position.

     The Company has experienced significant increases in health insurance costs and expects to continue to experience significant increases in future periods. The Company’s pricing objectives attempt to maintain or improve gross profit per worksite employee per month by matching or exceeding changes in its primary direct costs with increases in its gross markup per worksite employee. The Company has implemented pricing increases designed to match the anticipated health insurance cost increases. However, due to annual contract limitations, pricing for current customers can only be increased upon contract renewal. Accordingly, the Company expects that its pricing objectives will not be achieved until 2003. However, changes in health insurance claim trends which underlie the Company’s direct costs could enhance or hinder the Company’s ability to meet its pricing objectives. The Company’s inability to achieve its pricing objectives during the first six months of 2002 resulted in significant operating losses. These operating losses, in conjunction with other contractual obligations and capital expenditures, also resulted in a significant reduction of the Company’s liquidity and working capital. Failure to achieve its pricing objectives in 2003 could have a material adverse effect on the Company’s financial position.

     The Company had $59.5 million in cash and cash equivalents and marketable securities at June 30, 2002, of which approximately $38.4 million was payable in July 2002 for withheld federal and state income taxes, employment taxes and other payroll deductions. The Company must maintain a minimum balance of cash, cash equivalents and marketable securities, held in custody by JPMorgan Chase and Morgan Stanley, totaling $7.5 million pursuant to the Company’s revolving credit agreement. The remainder is available to the Company for general corporate purposes, including, but not limited to, current working capital requirements, capital expenditures and the Company’s stock repurchase program. At June 30, 2002, the Company had working capital of $3.6 million compared to $36.6 million at December 31, 2001. This decline was primarily due to capital expenditures of $23.3 million, the long-term cash security deposit of $5.0 million with the Company’s new health insurance carrier, United, in the first quarter of 2002, and $3.9 million in net treasury stock repurchases. The Company’s contract with United provides for an additional $5.0 million security deposit to be made prior to September 30, 2002. Additionally, in the event the Company’s Texas unemployment rate application were ultimately denied, the Company’s working capital will be reduced by approximately $6.0 million. See “Commitments and Contingencies” footnote to the financial statements on page 13 for a discussion of this matter.

- -31-

     Cash Flows From Operating Activities

     The $19.6 million increase in net cash used in operating activities was primarily the result of the increase in prepaid insurance and other assets, including $8.4 million pertaining to the Company’s worker’s compensation insurance policy, $4.5 million related to the State of Texas unemployment tax payments and an additional $5.0 million deposit with United. In addition, the Company’s operating cash flows also reflect the impact of continued increases in health insurance costs and the resulting increased operating losses. Finally, cash flows from operating activities reflect the result of the timing of payroll and related payroll tax payments surrounding the December 31 and June 30 payroll periods of each period. The timing and amounts of such payments can vary significantly based on various factors, including the day of the week on which a period ends and the occurrence of holidays on or immediately following a period end.

     Cash Flows From Investing Activities

     Capital expenditures during the 2002 period, totaling $23.3 million, primarily related to (i) building improvements and furniture and fixtures at the Company’s new Los Angeles Service Center, sales offices and corporate headquarters to accommodate the Company’s expansion plans, including $8.5 million related to the construction in progress of new facilities at the Company’s corporate headquarters; (ii) a corporate-owned aircraft; (iii) the acquisition of VGI assets through bankruptcy proceedings; and (iv) computer hardware and software.

     During 2002, the Company exchanged cash for a $3.0 million note receivable related to the development of a future service center location. The Company also invested an additional $500,000 in eProsper, a development stage company, in connection with its $1.5 million convertible preferred stock offering.

     Cash Flows From Financing Activities

     Cash flows from financing activities primarily related to the repurchase of $17.1 million in treasury stock, which was partially offset by $13.2 million in proceeds from the exercise of common stock purchase warrants by American Express. The Company has also borrowed $7.5 million under its revolving line of credit agreement during 2002.

Other Matters

     Health Insurance Costs

     The Company provides health insurance coverage to its worksite employees through a national network of providers including United Healthcare (“United”), PacifiCare, Cigna, Kaiser Permanente and Blue Cross and Blue Shield, all of which are fully-insured policies. The policy with United provides the majority of the Company’s health insurance coverage. As of June 30, 2002, the Company has made cash security deposits totaling $20 million with United. The Company’s contract with United provides for an additional deposit of $5 million to be made prior to September

- -32-

30, 2002. Beginning January 1, 2004 and each year thereafter, the security deposit will be adjusted to the greater of $22.5 million or 7.5% of the estimated annual premiums for that contract year.

     Pursuant to the terms of the Company’s annual contract with United, within 195 days following the termination of the contract, a final accounting of the plan will be performed. The final accounting will assess the premiums paid to United and the total administrative fees, taxes and claims incurred during the policy term. The incurred claims will include those paid plus an estimate of claims incurred but not processed within 180 days after the contract termination date. In the event that the incurred claims, administrative fees and taxes are collectively less than the premiums paid, the Company will receive a refund equal to the amount of such accumulated surplus. In the event that the incurred claims, administrative fees and taxes are collectively greater than the premiums paid, the Company will be liable for such accumulated deficit up to the amount of its security deposit.

     In the event of a default or termination of the Company’s contract with United, a default pursuant to the revolving credit agreement or the reduction of the Company’s current ratio to an amount below 0.60, United may draw against the security deposit to collect any unpaid health insurance premiums or any accumulated deficit in the plan.

     Since the Company is responsible for accumulated deficits up to the amount of its security deposit with United, the Company accounts for the United plan using a partially self-funded insurance accounting model. Under this approach, the Company must estimate its incurred but not reported (“IBNR”) claims at the end of each accounting period. If the estimated IBNR claims, paid claims, taxes and administrative fees, collectively, exceed the premiums paid to United, an accumulated deficit in the plan would be incurred and the Company would be required to accrue the estimated accumulated deficit on its balance sheet, which would increase benefits expense and decrease net income in the period that such determination is made. On the other hand, if the estimated IBNR claims, paid claims, taxes and administrative fees, collectively, are less than the premiums paid to United, an accumulated surplus in the plan would exist and the Company would record this surplus as a current asset, which would reduce benefits expense and increase net income in the period that such determination is made. As of June 30, 2002, the Company has recorded an estimated accumulated deficit of approximately $175,000.

Seasonality, Inflation and Quarterly Fluctuations

     Historically, the Company’s earnings pattern includes losses in the first quarter, followed by improved profitability in subsequent quarters throughout the year. This pattern is due to the effects of employment-related taxes, which are based on each employee’s cumulative earnings up to specified wage levels, causing employment-related taxes to be highest in the first quarter and then decline over the course of the year. Since the Company’s revenues related to an individual employee are generally earned and collected at a relatively constant rate throughout each year, payment of such employment-related tax obligations has a substantial impact on the Company’s financial condition

- -33-

and results of operations during the first six months of each year. Other factors that affect direct costs could mitigate or enhance this trend.

     The Company believes the effects of inflation have not had a significant impact on its results of operations or financial condition.

Factors That May Affect Future Results and the Market Price of Common Stock

     The statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,” and “assume,” and similar expressions. Forward-looking statements involve a number of risks and uncertainties. In the normal course of business, Administaff, Inc., in an effort to help keep its stockholders and the public informed about the Company’s operations, may from time to time issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, or projections involving anticipated revenues, earnings, unit growth, profit per worksite employee, pricing, operating expenses or other aspects of operating results. Administaff bases the forward-looking statements on its current expectations, estimates and projections. Administaff cautions you that these statements are not guarantees of future performance and involve risks, uncertainties and assumptions that Administaff cannot predict. In addition, Administaff has based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: (i) changes in general economic conditions; (ii) regulatory and tax developments, including the resolution of the state unemployment tax issue with the State of Texas, and possible adverse application of various federal, state and local regulations; (iii) changes in the Company’s direct costs and operating expenses including increases in health insurance premiums, increases in underlying health insurance claims trends, workers’ compensation rates and state unemployment tax rates, liabilities for employee and client actions or payroll-related claims, changes in the costs of expanding into new markets, and failure to manage growth of the Company’s operations; (iii) the estimated costs and effectiveness of capital projects and investments in technology and infrastructure, including the Company’s ability to maintain adequate financing for such projects; (v) the Company’s ability to effectively implement its eBusiness strategy; (vi) the effectiveness of the Company’s sales and marketing efforts, including the Company’s marketing agreements with American Express and other companies; (vii) the potential for impairment of investments in other companies; and (viii) changes in the competitive environment in the PEO industry, including the entrance of new competitors and the Company’s ability to renew or replace client companies. These factors are discussed in detail in the Company’s 2001 annual report on Form 10-K and elsewhere in this report. Any of these factors, or a combination of such factors, could materially affect the results of the Company’s operations and whether forward-looking statements made by the Company ultimately prove to be accurate.

- -34-

PART II

ITEM 1. LEGAL PROCEEDINGS.

     See notes to financial statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     An Annual Meeting of Stockholders of the Company was held on May 7, 2002. At the meeting, holders of 26,442,300 shares of common stock were present in person or by proxy, which constituted a quorum thereof. The vote of stockholders in respect of the two proposals voted on at the Meeting, both of which were approved, is set forth below:

1. Election of Class I Directors to serve until the Annual Meeting of Stockholders in 2005.

	For		Withheld
Michael W. Brown		26,054,379		387,921
Linda Fayne Levinson		26,044,829		397,471

Directors continuing in office were Steven Alesio, Jack M. Fields, Jr., Paul S. Lattanzio, Richard G. Rawson and Paul J. Sarvadi.

2. Ratification of Ernst & Young, LLP as the Company’s independent auditors for the year ending December 31, 2002.

For	Against		Abstain
25,899,880		536,121		6,299

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  List of Exhibits

10.1	Credit Agreement dated as of June 25, 2002 among Administaff Services, L.P, as the Borrower, Administaff, Inc., as the Parent Company, and JPMorgan Chase Bank.
*10.2	Third Amendment to the Marketing Agreement between American Express Travel Related Services Company, Inc., Administaff, Inc., Administaff Companies, Inc. and Administaff of Texas, Inc., dated April 11, 2000.

- -35-

*10.3	Minimum Premium Financial Agreement by and between Administaff of Texas, Inc. and United Healthcare Insurance Company, Hartford, Connecticut.
*10.4	Minimum Premium Administrative Services Agreement by and between Administaff of Texas, Inc. and United Healthcare Insurance Company, Hartford, Connecticut.
10.5	Amended and Restated Security Deposit Agreement by and between Administaff of Texas, Inc. and United Healthcare Insurance Company, Hartford, Connecticut.

     (b)  Reports on Form 8-K

None

* Portions of the exhibit have been omitted pursuant to a request for confidential treatment.

- -36-

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Administaff, Inc.
Date:	August 14, 2002	By:	/s/ Richard G. Rawson
			Richard G. Rawson Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Date:	August 14, 2002	By:	/s/ Douglas S. Sharp
			Douglas S. Sharp Vice President, Finance (Principal Accounting Officer)

- -37-

EXHIBIT INDEX

EXHIBIT
NUMBER	DESCRIPTION
10.1	Credit Agreement dated as of June 25, 2002 among Administaff Services, L.P, as the Borrower, Administaff, Inc., as the Parent Company, and JPMorgan Chase Bank.
*10.2	Third Amendment to the Marketing Agreement between American Express Travel Related Services Company, Inc., Administaff, Inc., Administaff Companies, Inc. and Administaff of Texas, Inc., dated April 11, 2000.
*10.3	Minimum Premium Financial Agreement by and between Administaff of Texas, Inc. and United Healthcare Insurance Company, Hartford, Connecticut.
*10.4	Minimum Premium Administrative Services Agreement by and between Administaff of Texas, Inc. and United Healthcare Insurance Company, Hartford, Connecticut.
10.5	Amended and Restated Security Deposit Agreement by and between Administaff of Texas, Inc. and United Healthcare Insurance Company, Hartford, Connecticut.

* Portions of the exhibit have been omitted pursuant to a request for confidential treatment.

EX-10.1

                                                                    EXHIBIT 10.1


================================================================================


                                 [JPMORGAN LOGO]


                                CREDIT AGREEMENT


                                   dated as of


                                  June 25, 2002

                                      among


                           ADMINISTAFF SERVICES, L.P.
                                 as the Borrower


                                ADMINISTAFF, INC.
                              as the Parent Company

                                       and

                               JPMORGAN CHASE BANK


================================================================================





                                TABLE OF CONTENTS





                                                                                                               Page
                                                                                                               ----

                                                                                                            
ARTICLE I                   DEFINITIONS...........................................................................1
         SECTION 1.01.              Defined Terms.................................................................1
         SECTION 1.02.              Terms Generally..............................................................13
         SECTION 1.05.              References to Agreements and Laws............................................14
         SECTION 1.03.              Accounting Terms; GAAP.......................................................14
         SECTION 1.04.              Rounding.....................................................................14


ARTICLE II                  THE CREDITS..........................................................................14
         SECTION 2.01.              Commitment...................................................................14
         SECTION 2.02.              Loans and Interest Periods...................................................14
         SECTION 2.03.              Requests for Loans...........................................................14
         SECTION 2.04.              Funding of Loans.............................................................15
         SECTION 2.05.              Interest Elections...........................................................15
         SECTION 2.06.              Termination and Reduction of Commitment......................................16
         SECTION 2.07.              Repayment of Loans; Evidence of Debt.........................................16
         SECTION 2.08.              Prepayment of Loans..........................................................17
         SECTION 2.09.              Fees.........................................................................17
         SECTION 2.10.              Interest.....................................................................17
         SECTION 2.11.              Alternate Rate of Interest...................................................18
         SECTION 2.12.              Increased Costs..............................................................18
         SECTION 2.13.              Break Funding Payments.......................................................19
         SECTION 2.14.              Taxes........................................................................20
         SECTION 2.15.              Illegality...................................................................21
         SECTION 2.16.              Payments Generally; Pro Rata Treatment; Sharing of Set-offs..................21

ARTICLE III                 REPRESENTATIONS AND WARRANTIES.......................................................21
         SECTION 3.01.              Organization; Powers.........................................................22
         SECTION 3.02.              Authorization; Enforceability................................................22
         SECTION 3.03.              Governmental Approvals; No Conflicts.........................................22
         SECTION 3.04.              Financial Condition; No Material Adverse Change..............................22
         SECTION 3.05.              Subsidiaries.................................................................23
         SECTION 3.06.              Properties...................................................................23
         SECTION 3.07.              Litigation and Environmental Matters.........................................24
         SECTION 3.08.              Compliance with Laws and Agreements..........................................24
         SECTION 3.09.              Investment and Holding Company Status........................................25
         SECTION 3.10.              Taxes........................................................................25
         SECTION 3.11.              Insurance....................................................................25
         SECTION 3.12.              ERISA........................................................................25



                                       i


                                                                                                              
         SECTION 3.13.              Solvency.....................................................................25
         SECTION 3.14.              Disclosure...................................................................26


ARTICLE IV                  CONDITIONS PRECEDENT.................................................................26
         SECTION 4.01.              Effective Date...............................................................26
         SECTION 4.02.              Each Loan....................................................................28


ARTICLE V                   AFFIRMATIVE COVENANTS................................................................29
         SECTION 5.01.              Financial Statements; Ratings Change and Other Information...................29
         SECTION 5.02.              Notices of Material Events...................................................30
         SECTION 5.03.              Existence; Conduct of Business...............................................31
         SECTION 5.04.              Payment of Obligations.......................................................31
         SECTION 5.05.              Maintenance of Properties; Insurance.........................................31
         SECTION 5.06.              Books and Records; Inspection Rights.........................................31
         SECTION 5.07.              Compliance with Laws.........................................................32
         SECTION 5.08.              Taxes........................................................................32
         SECTION 5.09.              Compliance with ERISA........................................................32
         SECTION 5.10.              Use of Proceeds..............................................................32
         SECTION 5.11.              Security.....................................................................32


ARTICLE VI                  NEGATIVE COVENANTS...................................................................33
         SECTION 6.01.              Indebtedness.................................................................33
         SECTION 6.02.              Liens........................................................................34
         SECTION 6.03.              Fundamental Changes..........................................................35
         SECTION 6.04.              Investments, Loans, Advances, Guarantees and Acquisitions....................35
         SECTION 6.05.              Swap Agreements..............................................................36
         SECTION 6.06.              Dispositions.................................................................36
         SECTION 6.07.              Restricted Payments..........................................................37
         SECTION 6.08.              Transactions with Affiliates.................................................38
         SECTION 6.09.              Restrictive Agreements.......................................................38
         SECTION 6.10.              Subsidiary Indebtedness......................................................38
         SECTION 6.11.              Cash and Marketable Securities...............................................39
         SECTION 6.12.              Debt to EBITDA...............................................................39


ARTICLE VII                 EVENTS OF DEFAULT....................................................................39


ARTICLE VIII                MISCELLANEOUS........................................................................42
         SECTION 8.01.              Notices......................................................................42
         SECTION 8.02.              Waivers; Amendments..........................................................43
         SECTION 8.03.              Expenses; Indemnity; Damage Waiver...........................................44





                                       ii

                                                                                                              
         SECTION 8.04.              Successors and Assigns.......................................................45
         SECTION 8.05.              Survival.....................................................................46
         SECTION 8.06.              Payments Set Aside...........................................................46
         SECTION 8.07.              Counterparts; Integration; Effectiveness.....................................46
         SECTION 8.08.              Severability.................................................................47
         SECTION 8.09.              Right of Setoff..............................................................47
         SECTION 8.10.              GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS...................47
         SECTION 8.11.              WAIVER OF JURY TRIAL.........................................................48
         SECTION 8.12.              Headings.....................................................................48
         SECTION 8.13.              Confidentiality..............................................................48
         SECTION 8.14.              Limitation of Interest.......................................................49
         SECTION 8.15.              RELEASE OF CLAIMS............................................................50
         SECTION 8.16.              ENTIRE AGREEMENT.............................................................50




SCHEDULES:

Schedule 1.01(f)- Investment Policy
Schedule 1.10(g)- Qualified Accounts
Schedule 3.05 -- Subsidiaries
Schedule 3.06 -- Disclosed Matters
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.04 -- Existing Investments
Schedule 6.09 -- Existing Restrictions

EXHIBITS:

Exhibit A -- Form of Note
Exhibit B-1 -- Form of Opinion of Baker & Botts L.L.P.
Exhibit B-2 -- Form of Opinion of John H. Spurgin, II
Exhibit C-1 -- Form of Guaranty (Parent Company and General Partner)
Exhibit C-2 -- Form of Guaranty (Other Subsidiaries)
Exhibit D -- Computation of Covenant Compliance



                                      iii



                                CREDIT AGREEMENT


         THIS CREDIT AGREEMENT (this "Agreement"), dated as of June 25, 2002, is
made and entered into by and among ADMINISTAFF SERVICES, L.P., a Delaware
limited partnership ("Borrower"); ADMINISTAFF, INC., a Delaware corporation (the
"Parent Company"), and JPMORGAN CHASE BANK ("JPMCB").

         In consideration of the mutual promises made herein, and for other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged by the parties, the parties hereto agree as follows:

                                    ARTICLE I

                                   Definitions

                  SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:

                  "ABR", when used in reference to any Loan, refers to whether
such Loan is bearing interest at a rate determined by reference to the Alternate
Base Rate.

                  "Adjusted LIBO Rate" means, with respect to any Eurodollar
Loan for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.

                  "Administaff Client Services" means Administaff Client
Services, L.P., a Delaware limited partnership.

                  "Affiliate" means, with respect to any Person, any other
Person (a) that directly or indirectly, through one or more intermediaries,
Controls or is Controlled by, or is under common Control with, such Person; (b)
that directly or indirectly beneficially owns or holds five percent (5%) or more
of any class of voting security of such Person; or (c) five percent (5%) or more
of the voting securities of which is directly or indirectly beneficially owned
or held by the Person in question.

                  "Air Carrier Lease" means the Air Carrier Lease, Operations
and Management Agreement dated as of January 1, 2002, by and between the Parent
Company and Bain Aviation, Inc., d/b/a Tavaero Jet Charter.

                  "Air Carrier Lease Subordination and Attornment Agreement"
means the Air Carrier Lease Subordination and Attornment Agreement of even date
herewith by and among the Parent Company, Bain Aviation, Inc. d/b/a/ Tavaero Jet
Charter, and JPMCB.

                  "Aircraft" means that certain Israel Aircraft Industries Model
1125 Westwind Astra aircraft, bearing manufacturer's serial number 027 and U.S.
registration number N199HE; the engines thereon; together with all equipment
(loose or otherwise), accessories, appliances, avionics, instruments, galley
equipment, parts, fittings, and accessories related thereto, installed thereon
or affixed thereto.




                  "Aircraft Security Agreement" means the Aircraft Security
Agreement of even date herewith from the Parent Company to JPMCB as secured
party securing the Obligations.

                  "Alternate Base Rate" means, for any day, a rate per annum
equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base
CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate
in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due
to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective from and including the effective date of such change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively.

                  "Applicable Margin" means (a) for ABR Loans, zero percent per
annum, and (b) for Eurodollar Loans, 90 basis points per annum.

                  "Assessment Rate" means, for any day, the annual assessment
rate in effect on such day for insurance by the Federal Deposit Insurance
Corporation of time deposits made in dollars at the offices of JPMCB.

                  "Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitment.

                  "Base CD Rate" means the sum of (a) the Three-Month Secondary
CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.

                  "Board" means the Board of Governors of the Federal Reserve
System of the United States of America.

                  "Borrower" means Administaff Services, L.P., a Delaware
limited partnership.

                  "Borrowing Request" means a request by the Borrower for a Loan
in accordance with Section 2.03.

                  "Business Day" means a day (i) on which the main office of
JPMCB in Houston, Texas, is open for the conduct of commercial lending business;
and (ii) with respect to Eurodollar Loans, on which dealings in United States
Dollar deposits are carried out in the applicable offshore Dollar market.

                  "Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

                  "Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof)
of Equity Interests representing more than 30% of the aggregate ordinary voting
power represented by the issued and outstanding Equity Interests of the Parent
Company, the Borrower, or any other Subsidiary of the Parent Company; (b)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of the Parent Company, the Borrower or any other Subsidiary of the
Parent Company by Persons who were neither (i) nominated by the board of
directors of such Person nor (ii) appointed by directors so nominated; or (c)
the acquisition of direct or indirect Control of the Parent Company, the



                                       2



Borrower, or any other Subsidiary of the Parent Company by any Person or group
(other than the Parent Company and its Subsidiaries).

                  "Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by JPMCB or by
JPMCB's holding company with any request, guideline or directive (whether or not
having the force of law) of any Governmental Authority made or issued after the
date of this Agreement.

                  "Code" means the Internal Revenue Code of 1986.

                  "Collateral" means all of the property of any kind or
character now or hereafter subject to the Security Documents, including the
Mortgaged Property, the Aircraft, the Air Carrier Lease, the Midway Note, and
the Liens securing the Midway Note.

                  "Commitment" means the commitment of JPMCB to make Loans
hereunder, as such commitment may be reduced from time to time pursuant to
Section 2.06. The initial amount of the Commitment is $30,000,000.

                  "Consolidated EBITDA" means, for any period, for the Parent
Company and its Subsidiaries on a consolidated basis, an amount equal to the sum
of (a) net income from continuing operations after extraordinary items
("Consolidated Net Income") for such period, (b) Consolidated Interest Expense,
(c) the amount of taxes, based on or measured by income, used or included in the
determination of such Consolidated Net Income, and (d) the amount of
depreciation and amortization expense deducted in determining such Consolidated
Net Income, provided that in determining Consolidated Net Income as used in this
definition the following shall be excluded, without duplication: (a) the income
of any Person accrued prior to the date such Person is merged into or
consolidated with the Parent Company or its Subsidiary or such Person's assets
are acquired by the Parent Company or its Subsidiary, (b) the proceeds of any
insurance policy, (c) gains or losses from the sale, exchange, transfer or other
disposition of property or assets of the Parent Company or any of its
Subsidiaries and related tax effects in accordance with GAAP, and (d) any
extraordinary or non-recurring gains of the Parent Company or any of its
Subsidiaries, and related tax effects in accordance with GAAP.

                  "Consolidated Interest Expense" means, for any period, for the
Parent Company and its Subsidiaries on a consolidated basis, the aggregate of
all interest expense, all prepayment charges and all amortization of debt
discount and expense, including, without limitation, all interest expense
attributable to Capital Lease Obligations, in each instance determined in
accordance with GAAP, paid or accrued by the Parent Company and its
Subsidiaries.

                  "Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or other undertaking to which such Person is a party or by which it or any of
its property is bound.

                  "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.

                  "Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.


                                       3


                  "Default Rate" means a rate per annum equal to 2% plus the
Alternate Base Rate.

                  "Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 3.06.

                  "Disposition" means "Disposition" or "Dispose" means the sale,
transfer, license or other disposition (including any sale and leaseback
transaction) of any property by any Person, regardless of the form of the
transaction, including any sale, assignment, transfer or other disposal, with or
without recourse, of any notes or accounts receivable or any rights and claims
associated therewith.

                  "dollars" or "$" refers to lawful money of the United States
of America.

                  "EDGAR System" means the Electronic Data Gathering, Analysis
and Retrieval System owned and operated by the United States Securities and
Exchange Commission or any replacement system.

                  "Effective Date" means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in accordance with Section
8.02).

                  "Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.

                  "Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Parent Company or any
Subsidiary directly or indirectly resulting from or based upon (a) violation of
any Environmental Law, (b) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials, (c) exposure to any
Hazardous Materials, (d) the release or threatened release of any Hazardous
Materials into the environment or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.

                  "Equity Interests" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.

                  "ERISA" means the Employee Retirement Income Security Act of
1974.

                  "ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Parent Company or any of its Subsidiaries,
is treated as a single employer under Section 414(b) or (c) of the Code or,
solely for purposes of Section 302 of ERISA and Section 412 of the Code, is
treated as a single employer under Section 414 of the Code.

                  "ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a




                                       4



waiver of the minimum funding standard with respect to any Plan; (d) the
incurrence by the Parent Company or any of its Subsidiaries or any ERISA
Affiliate of any such Person of any liability under Title IV of ERISA with
respect to the termination of any Plan; (e) the receipt by the Parent Company or
any of its Subsidiaries or any ERISA Affiliate of any such Person from the PBGC
or a plan administrator of any notice relating to an intention to terminate any
Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence
by the Parent Company or any of its Subsidiaries or any ERISA Affiliate of any
such Person of any liability with respect to the withdrawal or partial
withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Parent
Company or any of its Subsidiaries or any ERISA Affiliate of any such Person of
any notice, or the receipt by any Multiemployer Plan from the Parent Company or
any of its Subsidiaries or any ERISA Affiliate of any such Person of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

                  "Eurodollar", when used in reference to any Loan, refers to
whether such Loan is bearing interest at a rate determined by reference to the
Adjusted LIBO Rate.

                  "Event of Default" has the meaning assigned to such term in
Article VII.

                  "Excluded Taxes" means, with respect to JPMCB or any other
recipient of any payment to be made by or on account of any obligation of the
Borrower, the Parent Company or any other Obligor hereunder or under any other
Loan Document, (a) income or franchise taxes imposed on (or measured by) its net
income by the United States of America or any other Governmental Authority, or
by the jurisdiction under the laws of which such recipient is organized or in
which its principal office is located, and (b) any branch profits taxes imposed
by the United States of America or any other Governmental Authority or any
similar tax imposed by any other jurisdiction in which such Obligor is located.

                  "Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by JPMCB from three Federal funds
brokers of recognized standing selected by it.

                  "Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the Parent Company or
the Borrower.

                  "Funded Debt" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid, and
(d) all Capital Lease Obligations of such Person. The Funded Debt of any Person
shall include the Funded Debt of any other entity (including any partnership in
which such Person is a general partner) to the extent such Person is liable
therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such Funded
Debt provide that such Person is not liable therefor.

                  "GAAP" means generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor). If at any time any change in GAAP
would affect the computation of any financial ratio or requirement set forth in
any Loan Document, and either the Borrower or JPMCB shall so request,



                                       5


JPMCB and the Borrower shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in
GAAP; provided that, until so amended, (a) such ratio or requirement shall
continue to be computed in accordance with GAAP prior to such change therein and
(b) the Parent Company shall provide to JPMCB financial statements and other
documents required under this Agreement or as reasonably requested hereunder
setting forth a reconciliation between calculations of such ratio or requirement
made before and after giving effect to such change in GAAP.

                  "General Partner" means Administaff of Texas, Inc., a Delaware
corporation, and its successors as the general partner of the Borrower.

                  "Governmental Authority" means the government of the United
States of America, any other nation, any political subdivision of the United
States of America or any other nation, whether state, provincial or local, and
any agency, department, commission, board, bureau, authority, instrumentality,
regulatory body, court, tribunal, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.

                  "Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.

                  "Guarantor" means the Parent Company and each Subsidiary other
than the Borrower. "Guarantors" means all such Persons.

                  "Guaranty" means each Guaranty made by each of the Guarantors
in favor of JPMCB, substantially in the form of Exhibit C-1 (for the Parent
Company and the General Partner) or Exhibit C-2 (for the other Subsidiaries).

                  "Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.

                  "Home Webpage" means the Parent Company's corporate home page
on the World Wide Web, accessible through the Internet via the universal
resource locator identified as http://www.administaff.com or such other
universal source locator as Borrower shall designate in writing to JPMCB as the
Parent Company's corporate home page on the World Wide Web.

                  "Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under




                                       6


conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h)
all Capital Lease Obligations of such Person, (i) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit
and letters of guaranty, (j) all obligations, contingent or otherwise, in
respect of Swap Agreements, and (k) all obligations, contingent or otherwise, of
such Person in respect of bankers' acceptances. The Indebtedness of any Person
shall include the Indebtedness of any other entity (including any partnership in
which such Person is a general partner) to the extent such Person is liable
therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.

                  "Indemnified Taxes" means Taxes other than Excluded Taxes.

                  "Indemnitees" has the meaning set forth in Section 8.03.

                  "Interest Election Request" means a request by the Borrower to
convert or continue a Loan in accordance with Section 2.05.

                  "Interest Payment Date" means (a) with respect to any ABR
Loan, the last day of each March, June, September and December, and (b) with
respect to any Eurodollar Loan, the last day of the Interest Period applicable
to such Loan and, in the case of a Eurodollar Loan with an Interest Period of
more than three months' duration, each day prior to the last day of such
Interest Period that occurs at intervals of three months' duration after the
first day of such Interest Period, and (c) the Maturity Date.

                  "Interest Period" means, with respect to any Eurodollar Loan,
the period commencing on the date such Loan is disbursed and ending on the
numerically corresponding day in the calendar month that is one, three or six
months thereafter, as the Borrower may elect; provided, that (i) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless, in the case of a
Eurodollar Loan only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Loan that commences on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the last calendar month
of such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Loan initially
shall be the date on which such Loan is made and thereafter shall be the
effective date of the most recent conversion or continuation of such Loan.

                  "Investment" means (a) any purchase or other acquisition of
any Equity Interest in, evidence of Indebtedness of, or other securities of, any
other Person, (b) any making of any loan, advance, transfer of property or
capital contribution to, any guaranty of any debt of, or any purchase or other
acquisition of any other debt or any Equity Interest in, any other Person,
including any partnership or joint venture interest in such other Person, (c)
any incurrence, assumption or existence of any liability, contingent or
otherwise, with respect to any obligation or liability of any other Person, or
(d) any making of any commitment to make any of the foregoing. For purposes of
covenant compliance, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value
of such Investment.



                                       7


                  "Laws" means, collectively, all international, foreign,
Federal, state and local statutes, treaties, rules, guidelines, regulations,
ordinances, codes and administrative or judicial precedents or authorities,
including the interpretation or administration thereof by any Governmental
Authority charged with the enforcement, interpretation or administration
thereof, and all applicable administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any Governmental
Authority, in each case whether or not having the force of law.

                  "LIBO Rate" means, with respect to any Eurodollar Loan for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by JPMCB from
time to time for purposes of providing quotations of interest rates applicable
to dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for dollar deposits with a maturity comparable to such
Interest Period. In the event that such rate is not available at such time for
any reason, then the "LIBO Rate" with respect to such Eurodollar Loan for such
Interest Period shall be the rate at which dollar deposits of $5,000,000 and for
a maturity comparable to such Interest Period are offered by the principal
London office of JPMCB in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

                  "Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, assignment, pledge, hypothecation, deposit arrangement,
encumbrance, negative pledge, charge or security interest in, on or of such
asset, whether based on common law, constitutional provision, statute or
contract, including the interest of a purchaser of accounts receivable, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital
lease or title retention agreement (or any financing lease having substantially
the same economic effect as any of the foregoing) relating to such asset and (c)
in the case of securities, any purchase option, call or similar right of a third
party with respect to such securities.

                  "Liquid Investments" means, to the extent held in Qualified
Accounts, Permitted Investments and cash and cash equivalents (as defined under
GAAP).

                  "Loan Documents" means this Agreement, the Note, the Security
Documents, each Guaranty, each Borrowing Request, and all other assignments,
deeds, guaranties, pledges, instruments, certificates and agreements now or
hereafter executed or delivered to JPMCB pursuant to any of the foregoing, and
any Swap Agreement now or hereafter existing between the Parent Company or any
of its Subsidiaries and JPMCB or any Affiliate of JPMCB.

                  "Loans" means the loans made by JPMCB to the Borrower pursuant
to this Agreement.

                  "Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the business, assets, property, or
condition (financial or otherwise) of the Parent Company and its Subsidiaries
taken as a whole; (b) a material impairment of the ability of the Borrower, the
Parent Company or any other Obligor to perform its obligations under any Loan
Document to which it is a party; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the Borrower, the
Parent Company or any other Obligor of any Loan Document to which it is a party
or upon the rights of or benefits available to JPMCB under this Agreement or any
other Loan Document.



                                       8


                  "Material Indebtedness" means Indebtedness (other than the
Loans), or obligations in respect of one or more Swap Agreements, of any one or
more of the Borrower, the Parent Company or any other Obligor in an aggregate
principal amount exceeding $1,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of an Obligor in respect
of any Swap Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that such Obligor would be required to pay if
such Swap Agreement were terminated at such time.

                  "Maturity Date" means the earlier of (a) the date the
Obligations become due pursuant to Article VII, or (b) December 23, 2002.

                  "Midway Consent" means a Consent and Agreement executed by
Midway Oakmont and Administaff Client Services in the form agreed to by the
parties and JPMCB.

                  "Midway Note" means that certain promissory note dated March
12, 2002, executed by Midway Oakmont as maker, payable to the order of
Administaff Client Services.

                  "Midway Oakmont" means Midway Oakmont Partners, L.P., a Texas
limited partnership.

                  "Midway Property" means all of the property at any time
subject to the Mortgage (Illinois Form) dated as of March 12, 2002, executed by
Midway Oakmont to Administaff Client Services.

                  "Moody's" means Moody's Investors Service, Inc.

                  "Mortgage" means (i) the Deed of Trust and Security Agreement
(With Assignment of Rents) of even date herewith from the Borrower to David
Mendez, Trustee, and JPMCB, and (ii) any mortgage, deed of trust or similar
document delivered pursuant to this Agreement.

                  "Mortgaged Property" means all of the real property and
related improvements, fixtures and other related property of the Borrower in and
around Kingwood, Texas.

                  "Multiemployer Plan" means any employee benefit plan of the
type described in Section 4001(a)(3) of ERISA, to which the Borrower, the Parent
Company or any other Obligor or any ERISA Affiliate of the Borrower, the Parent
Company or any other Obligor makes or is obligated to make contributions, or
during the preceding three calendar years, has made or been obligated to make
contributions.

                  "Note" means a promissory note made by the Borrower payable to
the order of JPMCB, substantially in the form of Exhibit A.

                  "Obligations" means, as at any date of determination thereof,
the sum of (a) the aggregate principal amount of Loans outstanding on such date,
(b) all accrued and unpaid fees in connection with the Loan Documents on such
date, (c) all other indebtedness, liabilities, obligations, covenants,
indemnities and duties of, the Borrower, the Parent Company and the other
Obligors under the Loan Documents, (d) all indebtedness, liabilities, and
obligations under Swap Agreements with JPMCB, and (e) all accrued and unpaid
interest on the amounts described in clauses (a), (b), (c) or (d) on such date.
The term "Obligations" includes all expenses, attorneys' fees and disbursements,
and any other sum chargeable to the Borrower, the Parent Company or any other
Obligor under this Agreement or any other Loan Document and includes interest
that accrues after the commencement by or against the Borrower,



                                       9


the Parent Company or any other Obligor or any Affiliate thereof of any
proceeding under any bankruptcy or insolvency laws.

                  "Obligor" means the Borrower, the Parent Company, each other
Guarantor, and any other Person who may now or hereafter be obligated to pay all
or any part of the Obligations or to perform any obligation under any of the
Loan Documents.

                  "Organizational Documents" means, (a) with respect to any
corporation, the certificate or articles of incorporation and the bylaws; (b)
with respect to any limited liability company, the articles of formation, the
regulations, the operating agreement, and the limited liability company
agreement; and (c) with respect to any partnership, joint venture, trust or
other form of business entity, the partnership, joint venture or other
applicable agreement of formation and any agreement, instrument, filing or
notice with respect thereto filed in connection with its formation with the
secretary of state or other department in the state of its formation, in each
case including all modifications and supplements thereof as of the date of the
Loan Document referring to such Organizational Document and any and all future
modifications thereof which could not reasonably be expected to have a Material
Adverse Effect.

                  "Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.

                  "Parent Company" means Administaff, Inc., a Delaware
corporation.

                  "Participant" has the meaning set forth in Section 8.04.

                  "PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.

                  "Permitted Encumbrances" means:

                  (a) Liens imposed by law for taxes that are not yet due or are
         being contested in compliance with Section 5.08;

                  (b) carriers', warehousemen's, mechanics', materialmen's,
         repairmen's and other like Liens imposed by law, arising in the
         ordinary course of business and securing obligations that are not yet
         due or are being contested in compliance with Section 5.04;

                  (c) pledges and deposits made in the ordinary course of
         business in compliance with workers' compensation, unemployment
         insurance and other social security laws or regulations;

                  (d) deposits to secure the performance of bids, trade
         contracts, leases, statutory obligations, surety and appeal bonds,
         performance bonds and other obligations of a like nature, in each case
         in the ordinary course of business;

                  (e) judgment liens in respect of judgments that do not
         constitute an Event of Default under clause (j) of Article VII; and

                  (f) easements, zoning restrictions, rights-of-way and similar
         encumbrances on real property imposed by law or arising in the ordinary
         course of business that do not secure any




                                       10


         monetary obligations and do not materially detract from the value of
         the affected property or interfere with the ordinary conduct of
         business of the Parent Company or any Subsidiary;

provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.

                  "Permitted Investments" means:

                  (a) direct obligations of, or obligations the principal of and
         interest on which are unconditionally guaranteed by, the United States
         of America (or by any agency thereof to the extent such obligations are
         backed by the full faith and credit of the United States of America),
         in each case maturing within one year from the date of acquisition
         thereof;

                  (b) investments in commercial paper maturing within 270 days
         from the date of acquisition thereof and having, at such date of
         acquisition, the highest credit rating obtainable from S&P or from
         Moody's;

                  (c) investments in certificates of deposit, banker's
         acceptances and time deposits maturing within 180 days from the date of
         acquisition thereof issued or guaranteed by or placed with, and money
         market deposit accounts issued or offered by, any domestic office of
         any commercial bank organized under the laws of the United States of
         America or any State thereof which has a combined capital and surplus
         and undivided profits of not less than $500,000,000;

                  (d) fully collateralized repurchase agreements with a term of
         not more than 30 days for securities described in clause (a) above and
         entered into with a financial institution satisfying the criteria
         described in clause (c) above;

                  (e) money market funds that (i) comply with the criteria set
         forth in Securities and Exchange Commission Rule 2a-7 under the
         Investment Company Act of 1940, (ii) have the highest credit rating
         obtainable from S&P or from Moody's; and (iii) have portfolio assets of
         at least $5,000,000,000; and

                  (f) Investments described on Schedule 1.01(f) that meet the
         credit quality standards in Section 6.0 thereof.

                  "Person" means any individual, trustee, corporation, general
partnership, limited partnership, limited liability company, joint stock
company, trust, unincorporated organization, bank, business association, firm,
joint venture, Governmental Authority, or other form of entity.

                  "Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower,
the Parent Company or any other Obligor or any ERISA Affiliate of any of such
Persons is (or, if such plan were terminated, would under Section 4069 of ERISA
be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

                  "Pledge Agreement" means the Security Agreement-Collateral
Assignment and Pledge of even date herewith from Administaff Client Services
pursuant to which the Midway Note and the Liens securing the Midway Note are
pledged to JPMCB as security for the Obligations.

                  "Prime Rate" means the rate of interest per annum publicly
announced from time to time by JPMCB as its base rate in effect at its principal
office in New York City; each change in the Prime



                                       11


Rate shall be effective from and including the date such change in such base
rate is publicly announced as being effective. The Prime Rate is a reference
rate and may not be JPMCB's lowest or best rate; JPMCB may make commercial loans
at rates of interest at, above or below the Prime Rate.

                  "Qualified Accounts" means the securities accounts listed on
Schedule 1.01(g) and such other securities accounts as the Borrower and JPMCB
shall from time to time agree.

                  "Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers and employees of
such Person and such Person's Affiliates.

                  "Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests in the Parent Company or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interests in the Parent Company
or any Subsidiary or any option, warrant or other right to acquire any such
Equity Interests in the Parent Company or any Subsidiary.

                  "S&P" means Standard & Poors.

                  "Security Documents" means the Mortgage, the Aircraft Security
Agreement, the Air Carrier Lease Subordination and Attornment Agreement, the
Pledge Agreement, and any other security agreements, deeds of trust, mortgages,
chattel mortgages, pledges, guaranties, financing statements, continuation
statements, extension agreements and other agreements or instruments now,
heretofore, or hereafter delivered by any Person to JPMCB in connection with
this Agreement or the Transaction to secure or guarantee the payment of all or
any part of the Obligations.

                  "Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which JPMCB is subject (a) with respect
to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of
over $100,000 with maturities approximately equal to three months and (b) with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to JPMCB under
such Regulation D or any comparable regulation. The Statutory Reserve Rate shall
be adjusted automatically on and as of the effective date of any change in any
reserve percentage.

                  "subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other Equity Interests
representing more than 50% of the Equity Interests or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, Controlled or held,
or (b) that is, as of such date, otherwise Controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent.



                                       12


                  "Subsidiary" means any direct or indirect subsidiary of the
Parent Company.

                  "Swap Agreement" means any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial or
pricing indices or measures of economic, financial or pricing risk or value or
any similar transaction or any combination of these transactions; provided that
no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Parent Company or the Subsidiaries shall be a Swap Agreement.

                  "Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.

                  "Three-Month Secondary CD Rate" means, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day is not a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day) or, if such rate is not so reported on such
day or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day is not a Business Day, on the next preceding Business
Day) by JPMCB from three negotiable certificate of deposit dealers of recognized
standing selected by it.

                  "Transactions" means the execution, delivery and performance
by the Borrower, the Parent Company and the other Obligors of this Agreement and
the other Loan Documents, the borrowing of Loans, the granting of Collateral,
the making of the Guaranties, and the use of the proceeds of the Loans.

                  "Type", when used in reference to any Loan, refers to whether
the rate of interest on such Loan is determined by reference to the Adjusted
LIBO Rate or the Alternate Base Rate.

                  "Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.

                  SECTION 1.02. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, restated, extended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed to
include such Person's successors and assigns, (c) the words "herein", "hereof"
and "hereunder", and words of similar import, shall be construed to refer to the
Loan Document in which they appear in its entirety and not to any particular
provision thereof, (d) all references in any Loan Document to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, that Loan Document, (e) references
to any Law shall include all statutory and regulatory



                                       13


provisions consolidating, amending, replacing, supplementing or interpreting
such Law, and (f) the words "asset" and "property" shall be construed to have
the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including real estate, cash, securities, accounts and
contract rights.

                  SECTION 1.03. Accounting Terms; Rounding. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP. Any financial ratios required to be
maintained by the Parent Company and its Subsidiaries pursuant to this Agreement
shall be calculated by dividing the appropriate component by the other
component, carrying the result to one place more than the number of places by
which such ratio is expressed herein and rounding the result up or down to the
nearest number (with a rounding-up if there is no nearest number).


                                   ARTICLE II

                                   The Credits

                  SECTION 2.01. Commitment. Subject to the terms and conditions
set forth herein, JPMCB agrees to make Loans to the Borrower from time to time
during the Availability Period in an aggregate principal amount that will not
result in the aggregate outstanding principal balance of Loans at that time
exceeding the Commitment. Within the foregoing limits and subject to the terms
and conditions set forth herein, the Borrower may borrow, prepay and reborrow
Loans. Chapter 346 of the Texas Finance Code (which governs certain revolving
loan accounts) will not apply to this Agreement, the Note or any Loan.

                  SECTION 2.02. Loans and Interest Periods.

                  (a) At the commencement of each Interest Period for any
Eurodollar Loan, such Loan shall be in an amount that is not less than $500,000
and an integral multiple of $50,000. At the time that each ABR Loan is made,
such Loan shall be in an aggregate amount that is not less than $100,000 and an
integral multiple of $50,000; provided that an ABR Loan may be in an aggregate
amount that is equal to the entire unused balance of the Commitment. There shall
not at any time be more than a total of eight Eurodollar Loans outstanding.

                  (b) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Loan as a Eurodollar Loan if a Default shall have occurred and be
continuing, or if the Interest Period requested with respect thereto would end
after the Maturity Date.

                  SECTION 2.03. Requests for Loans. To request a Loan, the
Borrower shall notify JPMCB of such request by telephone (a) in the case of a
Eurodollar Loan, not later than 10:00 a.m., Houston time, three Business Days
before the date of the proposed Loan, or (b) in the case of an ABR Loan, not
later than 10:00 a.m., Houston time, on the Business Day of the proposed Loan.
Each such telephonic Borrowing Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to JPMCB of a written Borrowing
Request in a form approved by JPMCB and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:

                  (i) the aggregate amount of the requested Loan;



                                       14


                  (ii) the date of such Loan, which shall be a Business Day;

                  (iii) whether such Loan is to be an ABR Loan or a Eurodollar
                  Loan;

                  (iv) in the case of a Eurodollar Loan, the initial Interest
                  Period to be applicable thereto, which shall be a period
                  contemplated by the definition of the term "Interest Period";
                  and

                  (v) the location and number of the Borrower's account to which
                  funds are to be disbursed.

If no election as to the Type of Loan is specified, then the requested Loan
shall be an ABR Loan. If no Interest Period is specified with respect to any
requested Eurodollar Loan, the Borrower shall be deemed to have selected an
Interest Period of one month's duration.

                  SECTION 2.04. Funding of Loans. JPMCB shall make each Loan on
the proposed date thereof by crediting the amounts thereof to an account of the
Borrower maintained with JPMCB in Houston, Texas and designated by the Borrower
in the applicable Borrowing Request.

                  SECTION 2.05. Interest Elections.

                  (a) Each Loan initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Loan, shall have
an initial Interest Period as specified in such Borrowing Request. Thereafter,
subject to Section 2.02(b), the Borrower may elect to convert such Loan to a
different Type or to continue such Loan and may elect Interest Periods therefor,
all as provided in this Section.

                  (b) To make an election pursuant to this Section, the Borrower
shall notify JPMCB of such election by telephone by the time that a Borrowing
Request would be required under Section 2.03 if the Borrower were requesting a
Loan of the Type resulting from such election to be made on the effective date
of such election. Each such telephonic Interest Election Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to
JPMCB of a written Interest Election Request in a form approved by JPMCB and
signed by the Borrower.

                  (c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.02:

                           (i) the Loan to which such Interest Election Request
         applies and, if different options are being elected with respect to
         different portions thereof, the portions thereof to be allocated to
         each resulting Loan (in which case the information to be specified
         pursuant to clauses (iii) and (iv) below shall be specified for each
         resulting Loan);

                           (ii) the effective date of the election made pursuant
         to such Interest Election Request, which shall be a Business Day;

                           (iii) whether the resulting Loan is to be an ABR Loan
         or a Eurodollar Loan; and



                                       15


                           (iv) if the resulting Loan is a Eurodollar Loan, the
         Interest Period to be applicable thereto after giving effect to such
         election, which shall be a period contemplated by the definition of the
         term "Interest Period".

If any such Interest Election Request requests a Eurodollar Loan but does not
specify an Interest Period, the Borrower shall be deemed to have selected an
Interest Period of one month's duration.

                  (d) If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Loan prior to the end of the
Interest Period applicable thereto, then, unless such Loan is repaid as provided
herein, at the end of such Interest Period such Loan shall be converted to an
ABR Loan. Notwithstanding any contrary provision hereof, if a Default has
occurred and is continuing and JPMCB so notifies the Borrower, then, so long as
a Default is continuing (i) no outstanding Loan may be converted to or continued
as a Eurodollar Loan, and (ii) unless repaid, each Eurodollar Loan shall be
converted to an ABR Loan at the end of the Interest Period applicable thereto.

                  SECTION 2.06. Termination and Reduction of the Commitment.
Unless previously terminated, the Commitment shall terminate on the Maturity
Date. The Borrower may at any time terminate, or from time to time reduce, the
Commitment; provided that (a) each reduction of the Commitment shall be in an
amount that is an integral multiple of $50,000 and not less than $100,000, and
(b) the Borrower shall not terminate or reduce the Commitment if, after giving
effect to any concurrent prepayment of the Loans in accordance with Section
2.08, the unpaid principal balance of Loans outstanding would exceed the
Commitment. The Borrower shall notify JPMCB of any election to terminate or
reduce the Commitment under this Section at least three Business Days prior to
the effective date of such termination or reduction, specifying such election
and the effective date thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable; provided, that a notice of termination of
the Commitment delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower by notice to JPMCB on or prior to the
specified effective date if such condition is not satisfied. Any termination or
reduction of the Commitment shall be permanent.

                  SECTION 2.07. Repayment of Loans; Evidence of Debt.

                  (a) The Borrower hereby unconditionally promises to pay to
JPMCB on the Maturity Date the aggregate principal amount of Loans then
outstanding, all accrued and unpaid fees in connection with the Loan Documents,
and all accrued and unpaid interest with respect to the Loan Documents. The
Loans shall be evidenced by the Note. Payment of the Loans and all other
Obligations shall, to the extent set forth therein, be secured by the Security
Documents and guaranteed by the Guarantors pursuant to the Guaranties.

                  (b) JPMCB shall maintain in accordance with its usual practice
an account or accounts in which it shall record (i) the date and amount of each
Loan made hereunder, the Type thereof and the Interest Period applicable
thereto, and (ii) the amount of any payment of Loan principal received by JPMCB
hereunder and the date such payment was received. The entries made in that
account shall be prima facie evidence of the existence and amounts of the
obligations recorded therein; provided that the failure of JPMCB to maintain
such account or any error therein shall not in any manner affect the obligation
of the Borrower to repay the Loans and the other Obligations in accordance with
the terms of this Agreement or the obligations of any Guarantor under its
Guaranty.



                                       16


                  SECTION 2.08. Prepayment of Loans.

                  (a) The Borrower shall have the right at any time and from
time to time to prepay any Loan in whole or in part, subject to prior notice in
accordance with paragraph (b) of this Section.

                  (b) The Borrower shall notify JPMCB by telephone (confirmed by
telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Loan, not later than 10:00 a.m., Houston time, three Business Days
before the date of prepayment, or (ii) in the case of prepayment of an ABR Loan,
not later than 10:00 a.m., Houston time, one Business Day before the date of
prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Loan or portion thereof to be
prepaid. Each partial prepayment of an ABR Loan shall be in an amount that is
not less than $100,000 and an integral multiple of $50,000; each partial
prepayment of a Eurodollar Loan shall be in an amount that is not less than
$500,000 and an integral multiple of $50,000. Prepayments shall be accompanied
by accrued and unpaid interest to the extent required by Section 2.10. The
Borrower shall reimburse JPMCB on demand for any loss, cost or expense incurred
or sustained as a result of any such prepayment in accordance with Section 2.13.

                  SECTION 2.09. Commitment Fee. In consideration of the
Commitment, the Borrower agrees to pay to JPMCB a commitment fee which shall
accrue at the rate of 25 basis points per annum on the daily unused amount of
the Commitment during the period from and including the Effective Date to but
excluding the date on which the Commitment terminates. Accrued and unpaid
commitment fees shall be due in arrears on the last day of March, June,
September and December of each year and on the date on which the Commitment
terminates, commencing on the first such date to occur after the date hereof.
All commitment fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day). Fees paid shall not be refundable under any
circumstances.

                  SECTION 2.10. Interest.

                  (a) ABR Loans shall bear interest at the Alternate Base Rate.

                  (b) Each Eurodollar Loan shall bear interest at the Adjusted
LIBO Rate for the Interest Period in effect for such Loan plus the Applicable
Margin.

                  (c) Notwithstanding the foregoing, but subject to Section
8.14, if any principal of or interest on any Loan or any fee or other amount
payable by the Borrower hereunder is not paid when due, whether at stated
maturity, upon acceleration or otherwise, such overdue amount shall bear
interest, after as well as before judgment, at a rate per annum equal to (i) in
the case of overdue principal of any Loan, 2% plus the rate otherwise applicable
to such Loan as provided in the preceding paragraphs of this Section or (ii) in
the case of any other amount, the Default Rate.

                  (d) Accrued and unpaid interest on each Loan shall be due in
arrears on each Interest Payment Date for such Loan and upon termination of the
Commitment; provided that (i) interest accrued pursuant to paragraph (c) of this
Section shall be due on demand, (ii) in the event of any repayment or prepayment
of any Loan (other than a prepayment of an ABR Loan prior to the end of the
Availability Period), accrued and unpaid interest on the principal amount repaid
or prepaid shall be due on the date of such repayment or prepayment, and (iii)
in the event of any conversion of any Eurodollar Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be due on
the effective date of such conversion.



                                       17


                  (e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate shall be determined by JPMCB, and such determination shall be
conclusive absent manifest error.

                  SECTION 2.11. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurodollar Loan:

                  (a) Dollar deposits are not being offered to banks in the
         applicable offshore Dollar market for the amount and Interest Period of
         such Eurodollar Loan;

                  (b) JPMCB determines (which determination shall be conclusive
         absent manifest error) that adequate and reasonable means do not exist
         for ascertaining the Adjusted LIBO Rate or the LIBO Rate for such
         Interest Period; or

                  (c) JPMCB determines that the Adjusted LIBO Rate for such
         Interest Period will not adequately and fairly reflect the cost to
         JPMCB of making or maintaining the Eurodollar Loan for such Interest
         Period;

then JPMCB shall give notice thereof to the Borrower by telephone or telecopy as
promptly as practicable thereafter and, until JPMCB notifies the Borrower that
the circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Loan to, or continuation of
any Loan as, a Eurodollar Loan shall be ineffective, and (ii) if any Borrowing
Request requests a Eurodollar Loan, such Loan shall be made as an ABR Loan.

                  SECTION 2.12. Increased Costs.

                  (a) If any Change in Law shall:

                  (i) impose, modify or deem applicable any reserve, special
         deposit or similar requirement against assets of, deposits with or for
         the account of, or credit extended by, JPMCB (except any such reserve
         requirement reflected in the Adjusted LIBO Rate); or

                  (ii) impose on JPMCB or the applicable offshore Dollar market
         any other condition affecting this Agreement or any Eurodollar Loan;

and the result of any of the foregoing shall be to increase the cost to JPMCB of
making or maintaining any Eurodollar Loan (or of maintaining its obligation to
make any such Loan) or to reduce the amount of any sum received or receivable by
JPMCB hereunder (whether of principal, interest or otherwise), then, subject to
Section 8.14, the Borrower will pay to JPMCB such additional amount or amounts
as will compensate JPMCB for such additional costs incurred or reduction
suffered.

                  (b) If JPMCB determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on JPMCB's capital or on the capital of JPMCB's holding company as a consequence
of this Agreement or the Loans made by JPMCB to a level below that which JPMCB
or JPMCB's holding company could have achieved but for such Change in Law
(taking into consideration JPMCB's policies and the policies of JPMCB's holding
company with respect to capital adequacy), then from time to time, subject to
Section 8.14, the Borrower will pay to JPMCB such



                                       18


additional amount or amounts as will compensate JPMCB or JPMCB's holding company
for any such reduction suffered.

                  (c) A certificate of JPMCB setting forth the amount or amounts
necessary to compensate it or its holding company, as the case may be, as
specified in paragraph (a) or (b) of this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
JPMCB the amount shown as due on any such certificate within 15 days after
receipt thereof.

                  (d) Failure or delay on the part of JPMCB to demand
compensation pursuant to this Section shall not constitute a waiver of JPMCB's
right to demand such compensation; provided that the Borrower shall not be
required to compensate JPMCB pursuant to this Section for any increased costs or
reductions incurred more than 180 days prior to the date that JPMCB notifies the
Borrower of the Change in Law giving rise to such increased costs or reductions
and of JPMCB's intention to claim compensation therefor; provided further that,
if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 180-day period referred to above shall be extended to
include the period of retroactive effect thereof.

                  (e) If JPMCB request compensation under this Section or
Section 2.11, JPMCB shall, upon the request of the Borrower, use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the sole judgment of JPMCB, such
designation or assignment (i) would eliminate or reduce the amounts payable
pursuant to either Section, in the future, and (ii) would not subject JPMCB to
any unreimbursed cost or expense and would not otherwise be disadvantageous to
JPMCB. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by JPMCB in connection with any such designation or assignment.

                  SECTION 2.13. Break Funding Payments. In the event of (a) the
payment of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the continuation or conversion of any Eurodollar Loan other than
on the last day of the Interest Period applicable thereto, or (c) the failure to
borrow, convert, continue or prepay any Eurodollar Loan on the date specified in
any notice delivered pursuant hereto, then, in any such event, subject to
Section 8.14, the Borrower shall compensate JPMCB for any loss of anticipated
profits and for the loss, cost and expense attributable to such event. In the
case of a Eurodollar Loan, such loss, cost or expense shall be deemed to include
an amount determined by JPMCB to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which JPMCB would bid were
it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the Eurodollar market. A
certificate of JPMCB setting forth any amount or amounts that JPMCB is entitled
to receive pursuant to this Section shall be delivered to the Borrower and shall
be conclusive absent manifest error. The Borrower shall pay JPMCB the amount
shown on any such certificate within 15 days after receipt thereof.

                  SECTION 2.14. Taxes.

                  (a) Any and all payments by or on account of any obligation of
the Borrower hereunder shall be made free and clear of and without deduction for
any Indemnified Taxes or Other



                                       19


Taxes; provided that if the Borrower shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) JPMCB
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, and (iii)
the Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.

                  (b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

                  (c) The Borrower shall indemnify JPMCB, within 15 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by JPMCB on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
and any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to the
Borrower by JPMCB shall be conclusive absent manifest error.

                  (d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to JPMCB the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to JPMCB.

                  (e) If JPMCB determines, in its sole discretion, that it has
received a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section 2.14, it shall pay over such refund
to the Borrower (but only to the extent of indemnity payments made, or
additional amounts paid, by the Borrower under this Section 2.14 with respect to
the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket
expenses of JPMCB and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund); provided, that the
Borrower, upon the request of JPMCB, agrees to repay the amount paid over to the
Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to JPMCB in the event JPMCB is required to repay such
refund to such Governmental Authority. This Section shall not be construed to
require JPMCB to make available its tax returns (or any other information
relating to its taxes which it deems confidential) to the Borrower or any other
Person.

                  SECTION 2.15. Illegality. If at any time JPMCB determines that
any Law has made it unlawful, or that any Governmental Authority has asserted
that it is unlawful, for JPMCB to make, maintain or fund Eurodollar Loans, or
materially restricts the authority of JPMCB to purchase or sell, or to take
deposits of, the applicable offshore Dollar market, or to determine or charge
interest rates based upon the Adjusted LIBO Rate, then, on notice thereof by
JPMCB to the Borrower, any obligation of JPMCB to make or continue Eurodollar
Loans or to convert ABR Loans to Eurodollar Loans shall be suspended until JPMCB
notifies the Borrower that the circumstances giving rise to such determination
no longer exist. Upon receipt of such notice, the Borrower shall, upon demand
from JPMCB, prepay or, if applicable, convert all Eurodollar Loans to ABR Loans,
either on the last day of the Interest Period thereof, if JPMCB may lawfully
continue to maintain such Eurodollar Loans to such day, or immediately, if JPMCB
may not lawfully continue to maintain such Eurodollar Loans. Upon any such
prepayment or conversion, the Borrower shall also pay interest on the amount so
prepaid or converted. If JPMCB gives a notice under this Section, JPMCB shall,
upon the request of the Borrower, use reasonable efforts to



                                       20


designate a different lending office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the sole judgment of JPMCB, such designation (i)
would eliminate the need for such notice and (ii) would not subject JPMCB to any
unreimbursed cost or expense and would not otherwise be disadvantageous to
JPMCB. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by JPMCB in connection with any such designation.

                  SECTION 2.16. Payments Generally.

                  (a) The Borrower shall make each payment required to be made
by it hereunder (whether of principal, interest, fees, or amounts payable under
Section 2.12, 2.13 or 2.14, or otherwise) prior to 11:00 a.m., Houston time, on
the date when due, in immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any date may, in the
discretion of JPMCB, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to JPMCB at its offices at 712 Main Street, Houston, Texas. If any
payment hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day (unless the result
of such extension of time would be to extend the date of such payment into
another calendar month (in the case of a Eurodollar Loan) or (in the case of any
Loan) beyond the Maturity Date, and in either such event such payment shall be
due on the Business Day immediately preceding the day on which such payment
would otherwise have been due), and, in the case of any payment accruing
interest, interest thereon shall be due for the period of such extension. All
payments hereunder shall be made in dollars.

                  (b) If at any time insufficient funds are received by and
available to JPMCB to pay fully all amounts of principal, interest and fees then
due hereunder, such funds shall be applied first, towards payment of interest
and fees then due hereunder, and then towards payment of principal then due
hereunder.

                                   ARTICLE III

                         Representations and Warranties

                  The Borrower and the Parent Company jointly and severally
represent and warrant to JPMCB that:

                  SECTION 3.01. Organization; Powers. Each of the Parent Company
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has all
requisite power and authority and all governmental licenses, consents, approvals
and permits to carry on its business as currently conducted, and (c) except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction in which the
nature of the business conducted or the property owned by it requires such
qualification.

                  SECTION 3.02. Authorization; Enforceability. The Transactions
are within the organizational power and authority of the Borrower, the Parent
Company and each other Obligor and have been duly authorized by all necessary
corporate, partnership or other organizational action (and, if required,
stockholder or partner action) on the part of the Borrower, the Parent Company
and each other Obligor. This Agreement and the other Loan Documents have been
duly executed and delivered by each Obligor party thereto and constitute the
legal, valid and binding obligations of each Obligor party thereto,


                                       21


enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.

                  SECTION 3.03. Approvals; No Conflicts. The Transactions (a) do
not require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, or any other Person, except such as
have been obtained or made and are in full force and effect, (b) do not and will
not violate any applicable Law or the Organizational Documents of the Borrower,
the Parent Company or any other Obligor or any order of any Governmental
Authority, (c) do not and will not violate or result in a default under any
Contractual Obligation binding upon the Borrower, the Parent Company or any
other Obligor or any of their respective assets, violation of which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, or give rise to a right thereunder to require any payment to be
made by the Borrower, the Parent Company or any other Obligor, and (d) except
for the Liens created by the Loan Documents, will not result in the creation or
imposition of any Lien on any asset of the Borrower, the Parent Company or any
other Obligor.

                  SECTION 3.04. Financial Condition; No Material Adverse Change.

                  (a) The Borrower has heretofore furnished to JPMCB the
consolidated balance sheet and statements of operations, stockholders' equity
and cash flows of the Parent Company and its consolidated Subsidiaries (i) as of
and for the fiscal year ended December 31, 2001, reported on by Ernst & Young
LLP, independent public accountants, and (ii) as of and for the fiscal quarter
and the portion of the fiscal year ended March 31, 2002, certified by one of the
Parent Company's Financial Officers. Such financial statements present fairly,
in all material respects, the financial position and results of operations and
cash flows of the Parent Company and its consolidated Subsidiaries as of the
dates and for the periods indicated in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.

                  (b) The most recent consolidated balance sheet and statements
of operations and stockholders' equity and cash flows, together with the
respective notes thereto, delivered to JPMCB in accordance with the provisions
of Section 5.01(a) or (b), as the case may be, present fairly, in all material
respects, the financial position of the Parent Company and its consolidated
Subsidiaries as of the date thereof and the results of operations and cash flows
of the Parent Company and its consolidated Subsidiaries for the period then
ended in accordance with GAAP, subject to year-end adjustments and the absence
of footnotes in the case of statements referred to in Section 5.01(b).

                  (c) Since December 31, 2001, there has been no material
adverse change in the assets, liabilities, financial condition, business or
affairs of the Parent Company and its Subsidiaries, taken as a whole. Since
December 31, 2001, there has occurred no change, event, circumstance, or
condition in or with respect to the assets, liabilities, financial condition,
business or affairs of the Parent Company and its Subsidiaries which,
individually or in the aggregate with all other such changes, events,
circumstances and conditions occurring since December 31, 2001, could reasonably
be expected to result in a Material Adverse Effect.

                  (d) The Parent Company and the Borrower collectively have more
than $7,500,000 in Liquid Investments.



                                       22


                  SECTION 3.05. Subsidiaries.

                  (a) The Parent Company has no Subsidiaries other than those
specifically disclosed in Schedule 3.05. All outstanding Equity Interests of
each Subsidiary have been and will be validly issued and are and will be fully
paid and nonassessable and are and will be owned, beneficially and of record, by
the Persons disclosed in Schedule 3.05, free and clear of any Liens. The
Borrower and each other Obligor (other than the Parent Company) is a
wholly-owned Subsidiary of the Parent Company and will remain a wholly-owned
Subsidiary of the Parent Company.

                  (b) The Parent Company and its Subsidiaries have no equity
investments in any other corporation or other Person other than (i) Permitted
Investments and (ii) those equity investments specifically disclosed in
Schedules 3.05 and 6.04.

                  SECTION 3.06. Properties.

                  (a) Each of the Parent Company and its Subsidiaries has good
and indefeasible title to, or valid leasehold interests in, all its real and
personal property material to its business, except for minor defects in title
that do not interfere with its ability to conduct its business as currently
conducted or to utilize such properties for their intended purposes. The Liens
of the Loan Documents constitute valid and perfected first and prior Liens on
the Collateral, subject to no Liens other than Liens permitted by the applicable
Loan Documents.

                  (b) Each of the Parent Company and its Subsidiaries possesses
all permits and licenses and owns, or is licensed to use, all trademarks,
tradenames, service marks, copyrights, patents and other intellectual property
required to conduct its business, except for such permits, licenses, patents,
trademarks and copyrights which the failure to posses could not, individually or
in the aggregate, reasonably be excepted to have a Material Adverse Effect,
without conflict with the rights of any other Person with respect thereto, and
the use thereof by the Parent Company and its Subsidiaries does not infringe
upon the rights of any other Person, except for any such infringements that,
individually or in the aggregate, have not had and could not reasonably be
expected to result in a Material Adverse Effect. No slogan or other advertising
device, product, process, method, substance, part, component or other material
employed or contemplated to be employed by the Parent Company or any of its
Subsidiaries infringes upon any rights of any other Person, no claim or
litigation regarding any of the foregoing is pending, or, to the actual
knowledge of the Borrower or the Parent Company, threatened, and no patent,
invention, device, application, principle or any statute, law, rule, regulation,
standard or code is pending or, to the actual knowledge of the Borrower or the
Parent Company, proposed, which, in either case, individually or in the
aggregate, has resulted in or could reasonably be expected to result in a
Material Adverse Effect.

                  SECTION 3.07. Litigation and Environmental Matters.

                  (a) Except as disclosed in the Parent Company's Annual Report
on Form 10-K for the year ended December 31, 2001, as filed with the United
States Securities and Exchange Commission, and except for Disclosed Matters,
there are no actions, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of the Borrower or
the Parent Company, threatened against or affecting the Parent Company or any of
its Subsidiaries (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect, or
(ii) that involve this Agreement, any of the other Loan Documents, the
Collateral, or the Transactions.

                  (b) Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse



                                       23


Effect, neither the Parent Company nor any of its Subsidiaries (i) has failed to
comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law, (ii) has
become subject to any Environmental Liability, (iii) has received notice of any
claim or investigation with respect to any Environmental Liability, or (iv)
knows of any basis for any Environmental Liability.

                  (c) Since the date of this Agreement, there has been no change
in the status of the Disclosed Matters that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.

                  SECTION 3.08. Compliance with Laws and Agreements. Each of the
Parent Company and its Subsidiaries is in compliance with all Laws and orders of
any Governmental Authority applicable to it or its property and all Contractual
Obligations binding upon it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. No Default has occurred and is continuing. The
Borrower, the Parent Company and each other Obligor are in compliance with all
applicable Laws of each state employment commission, department of taxation, and
other Governmental Authority, except (a) as described in the Parent Company's
Annual Report on Form 10-K for the year ended December 31, 2001, as filed with
the U. S. Securities and Exchange Commission, or (b) where failure to be in such
compliance, individually or in the aggregate with all other such failures, could
not be reasonably be expected to have a Material Adverse Effect.

                  SECTION 3.09. Investment and Holding Company Status;
Regulation U. Neither the Parent Company nor any of its Subsidiaries is (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
None of the Obligors is engaged or will engage, principally or as one of its
important activities, in the business of purchasing or carrying margin stock
(within the meaning of Regulation U issued by the Board), or extending credit
for the purpose of purchasing or carrying margin stock. Margin stock does not
constitute more than 25% of the assets of any Obligor.

                  SECTION 3.10. Taxes. Each of the Parent Company and its
Subsidiaries has timely filed or caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes for which extensions have been
obtained and Taxes that are being contested in good faith by appropriate
proceedings and for which the Parent Company or such Subsidiary, as applicable,
has set aside on its books adequate reserves, and (b) to the extent that failure
to do so could not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect. There is no proposed tax assessment against
the Parent Company or any Subsidiary that would, if made, have a Material
Adverse Effect.

                  SECTION 3.11. Insurance. The properties of the Parent Company
and its Subsidiaries are insured with financially sound and reputable insurance
companies that are not Affiliates of the Parent Company, in such amounts, with
such deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where
the Parent Company or its Subsidiaries operate.

                  SECTION 3.12. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such ERISA
Events for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations under each Plan (based on the assumptions used
for purposes



                                       24


of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan.

                  SECTION 3.13. Solvency. Immediately following the making of
each Loan and after giving effect to the application of the proceeds thereof,
(a) the fair value of the assets of (i) the Borrower, and (ii) the Borrower and
the other Obligors taken as a whole, in each case of (i) and (ii) at a fair
valuation, will exceed the debts and liabilities of (x) the Borrower and (y) the
Borrower and the other Obligors taken as a whole, as the case may be, whether
such debts and liabilities be subordinated, contingent or otherwise; (b) the
present fair saleable value of the property of (i) the Borrower and (ii) the
Borrower and the other Obligors, taken as a whole, will, in each case of (i) and
(ii), be greater than the amount that will be required to pay the probable
liability of the debts and other liabilities of (x) the Borrower and (y) the
Borrower and the other Obligors, taken as a whole, as the case may be, whether
such debts and liabilities be subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (c) each of (i) the
Borrower, and (ii) the Borrower and the other Obligors, taken as a whole, will
be able to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured; and (d) neither (i)
the Borrower nor (ii) the Borrower and the other Obligors, taken as a whole,
will have unreasonably small capital with which to conduct the business in which
it is engaged as such business is now conducted and is proposed to be conducted
following the date of such Loan.

                  SECTION 3.14. Disclosure. The Borrower has disclosed to JPMCB
all agreements, instruments and corporate or other restrictions to which the
Parent Company or any of its Subsidiaries is subject, and all other matters
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. None of the reports, financial statements,
certificates or other information furnished by or on behalf of the Borrower, the
Parent Company or any other Obligor to JPMCB in connection with the negotiation
of this Agreement or any other Loan Document or delivered hereunder or
thereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
projected financial information, the Borrower represents only that such
information was prepared in good faith based upon assumptions that were
reasonable at the time.

                                   ARTICLE IV

                              Conditions Precedent

                  SECTION 4.01. Effective Date. The obligation of JPMCB to make
Loans shall not become effective until the date on which each of the following
conditions precedent is satisfied (or waived in accordance with Section 8.02):

                  (a) JPMCB (or its counsel) shall have received executed
         counterparts of this Agreement, the Guaranties, and the Security
         Documents, in form and in sufficient number of counterparts for the
         prompt completion of all recording and filing of the Security Documents
         as may be necessary or, in the opinion of JPMCB, desirable to create or
         continue, as appropriate, a valid perfected first Lien against all of
         the Collateral;

                  (b) JPMCB shall have received the Note, executed by the
         Borrower and payable to the order of JPMCB in a principal amount equal
         to the initial Commitment;



                                       25


                  (c) JPMCB shall have received favorable written opinions
         (addressed to JPMCB and dated the Effective Date) of Baker & Botts,
         L.L.P., counsel for the Obligors, and John H. Spurgin, II, Vice
         President, Legal, General Counsel and Secretary of the Borrower,
         substantially in the forms of Exhibits B-1 and B-2, respectively. The
         Borrower hereby requests such counsel to deliver such opinions;

                  (d) JPMCB shall have received such documents and certificates
         as JPMCB or its counsel may reasonably request relating to the
         organization, existence and good standing of the Borrower, the Parent
         Company and the other Obligors, the authorization of the Transactions,
         and any other legal matters relating to the Borrower, the Parent
         Company, the other Obligors, this Agreement, the other Loan Documents,
         the Collateral, or the Transactions, all in form and substance
         satisfactory to JPMCB and its counsel;

                  (e) The Borrower shall have delivered to JPMCB a certificate
         in respect of the name and signature of each officer of the Borrower,
         the Parent Company and each other Obligor who (i) is authorized to sign
         on its behalf this Agreement and the other Loan Documents to which the
         Borrower, the Parent Company or such other Obligor is a party, and (ii)
         will, until replaced by another officer or officers duly authorized for
         that purpose, act as the representative of the Borrower, the Parent
         Company or such other Obligor for the purposes of signing documents and
         giving notices and other communications in connection with this
         Agreement and the other Loan Documents. JPMCB may conclusively rely on
         such certificates until they receive notice in writing from the
         Borrower to the contrary;

                  (f) JPMCB shall have received a certificate signed by a
         Financial Officer of the Parent Company certifying that the conditions
         specified in Sections 4.02(b), (c) and (d) have been satisfied;

                  (g) JPMCB shall have received title and Lien information with
         respect to the Aircraft, the Air Carrier Lease, the Mortgaged Property
         and the Midway Property satisfactory to JPMCB in its sole discretion,
         and such environmental information with respect to the Mortgaged
         Property and the Midway Property as the Borrower, the Parent Company or
         any other Obligor may have obtained before the date of this Agreement;

                  (h) JPMCB shall have received a satisfactory flood
         determination with respect to the Mortgaged Property;

                  (i) JPMCB shall have received (a) a certificate of insurance
         issued to JPMCB evidencing that the Parent Company is carrying the
         insurance required by the Aircraft Security Agreement and that JPMCB
         has been named as loss payee and additional named insured with respect
         to such insurance, and (b) a certificate evidencing that the Parent
         Company and its Subsidiaries are carrying insurance in accordance with
         Section 5.05, and the insurance required by the Security Documents, and
         that all of the insurance described in clauses (a) and (b) above is in
         full force and effect;

                  (j) JPMCB shall have received proper financing statements
         (Form UCC-1) naming the Borrower, the Parent Company, and Administaff
         Client Services as debtors and JPMCB as secured party, describing all
         of the Collateral in which the Borrower, the Parent Company or
         Administaff Client Services has granted or purported to grant an
         interest; together with copies of search reports in such jurisdictions
         as JPMCB may reasonably request, listing all effective financing
         statements that name the Borrower, the Parent Company or any of the
         other Obligors as



                                       26


         debtor and any other documents or instruments as may be necessary or
         desirable (in the opinion of JPMCB) to perfect JPMCB's interest in the
         Collateral;

                  (k) JPMCB shall have received the documents required by the
         Aircraft Security Agreement, a copy of the certificate of airworthiness
         and the registration certificate issued by the FAA with respect to the
         Aircraft, and evidence satisfactory to JPMCB that the Aircraft Security
         Agreement has been filed for record with the FAA Aircraft Registry;

                  (l) JPMCB shall have received the Air Carrier Lease
         Subordination and Attornment Agreement, duly executed by Bain Aviation,
         Inc. and including the consent of Bain Aviation, Inc. to the Aircraft
         Security Agreement;

                  (m) JPMCB shall have received the originally executed Midway
         Note, duly indorsed to JPMCB; originally executed counterparts of each
         of the instruments creating the Liens securing the Midway Note; the
         Midway Consent; and the other documents required by the Pledge
         Agreement;

                  (n) JPMCB shall have received such other assurances,
         certificates, documents, consents or opinions as JPMCB reasonably may
         require;

                  (o) JPMCB shall have received all fees and other amounts due
         and payable on or prior to the Effective Date, including, to the extent
         invoiced, reimbursement or payment of all out-of-pocket expenses
         required to be reimbursed or paid by the Borrower hereunder.

                  (p) Due diligence of JPMCB shall not have disclosed any
         information JPMCB believes has or could have a Material Adverse Effect.

                  (q) The Credit Agreement dated as of May 25, 2001, by and
         between the Borrower and JPMCB, as amended, shall have been terminated.

JPMCB shall notify the Borrower of the Effective Date, and such notice shall be
conclusive and binding. Notwithstanding the foregoing, the obligations of JPMCB
to make Loans hereunder shall not become effective unless each of the foregoing
conditions is satisfied (or waived pursuant to Section 8.02) at or prior to 3:00
p.m., Houston time, on June 28, 2002 (and, in the event such conditions are not
so satisfied or waived, the Commitment shall terminate at such time).

                  SECTION 4.02. Each Loan. The obligation of JPMCB to make any
Loan, including the first Loan, is subject to the satisfaction of the following
conditions precedent:

                  (a) JPMCB shall have received a Borrowing Request for such
         Loan;

                  (b) Since December 31, 2001, there shall have been no material
         adverse change in the assets, liabilities, financial condition,
         business or affairs of the Parent Company and its Subsidiaries, taken
         as a whole. Since December 31, 2001, there shall have occurred no
         change, event, circumstance, or condition in or with respect to the
         assets, liabilities, financial condition, business or affairs or the
         Parent Company and its Subsidiaries, taken as a whole, which,
         individually or in the aggregate with all other such changes, events,
         circumstances and conditions occurring since December 31, 2001, could
         reasonably be expected to result in a Material Adverse Effect;



                                       27


                  (c) The representations and warranties of the Borrower, the
         Parent Company and the other Obligors set forth in this Agreement and
         in the other Loan Documents shall be true and correct on and as of the
         date of such Loan;

                  (d) At the time of and immediately after giving effect to such
         Loan, no Default shall have occurred and be continuing; and

                  (e) The making of such Loan shall not be prohibited by, or
         subject JPMCB to any penalty under, any Law.

Each delivery of a Borrowing Request to JPMCB shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof as to the
matters specified in paragraphs (b), (c) and (d) of this Section.

                                    ARTICLE V

                              Affirmative Covenants

                  Until the Commitment has expired or been terminated and the
principal of and interest on each Loan and all fees and other Obligations
hereunder shall have been paid in full, the Borrower and the Parent Company
jointly and severally covenant and agree with JPMCB that:

                  SECTION 5.01. Financial Statements; Ratings Change and Other
Information. The Parent Company will furnish to JPMCB:

                  (a) within 90 days after the end of each fiscal year of the
         Parent Company, its audited consolidated balance sheet and related
         statements of operations, stockholders' equity and cash flows as of the
         end of and for such year, setting forth in each case in comparative
         form the figures for the previous fiscal year, all reported on by Ernst
         & Young LLP or other independent public accountants of recognized
         national standing (without a "going concern" or like qualification or
         exception and without any qualification or exception as to the scope of
         such audit) to the effect that such consolidated financial statements
         present fairly in all material respects the financial position and
         results of operations of the Parent Company and its consolidated
         Subsidiaries on a consolidated basis in accordance with GAAP
         consistently applied;

                  (b) within 45 days after the end of each of the first three
         fiscal quarters of each fiscal year of the Parent Company, its
         consolidated balance sheet and related statements of operations,
         stockholders' equity and cash flows as of the end of and for such
         fiscal quarter and the then elapsed portion of the fiscal year, setting
         forth in each case in comparative form the figures for the
         corresponding period or periods of (or, in the case of the balance
         sheet, as of the end of) the previous fiscal year, all certified by one
         of its Financial Officers as presenting fairly in all material respects
         the financial position and results of operations of the Parent Company
         and its consolidated Subsidiaries on a consolidated basis in accordance
         with GAAP consistently applied, subject to normal year-end audit
         adjustments and the absence of footnotes;

                  (c) concurrently with any delivery of financial statements
         under clause (a) or (b) above, a certificate of a Financial Officer of
         the Parent Company (i) certifying as to whether a Default has occurred
         and, if a Default has occurred, specifying the details thereof and any
         action taken or proposed to be taken with respect thereto, (ii) setting
         forth in the form of Exhibit D



                                       28


         reasonably detailed calculations demonstrating compliance with Sections
         6.11 and 6.12, and (iii) stating whether any change in GAAP or in the
         application thereof has occurred since the date of the audited
         financial statements referred to in Section 3.04(a) and, if any such
         change has occurred, specifying the effect of such change on the
         financial statements accompanying such certificate;

                  (d) within 15 days after the end of each calendar month, a
         certificate of a Financial Officer of the Parent Company setting forth
         reasonably detailed calculations demonstrating compliance with Section
         6.12 as of the end of such month;

                  (e) within three Business Days of the end of each month, and
         within three Business Days after request therefor by JPMCB, a schedule
         listing the securities held in the Qualified Accounts as of the end of
         such month or the date of such request, as the case may be;

                  (f) promptly after such request is submitted to the
         appropriate Governmental Authority, any request for waiver of any
         funding standards or any extension of any amortization period with
         respect to any employee benefit plan maintained for employees of the
         Parent Company or any of its Affiliates;

                  (g) promptly after the same become publicly available, copies
         of all periodic and other reports, proxy statements and other materials
         filed by the Parent Company or any Subsidiary with the Securities and
         Exchange Commission, or any Governmental Authority succeeding to any or
         all of the functions of said Commission, or with any national
         securities exchange, or distributed by the Parent Company to its
         shareholders generally, as the case may be; and

                   (h) promptly following any request therefor, such other
         information regarding the operations, business affairs and financial
         condition of the Parent Company or any Subsidiary, the Mortgaged
         Property, the Aircraft, the Midway Note, any other Collateral, or
         compliance with the terms of this Agreement and the other Loan
         Documents, as JPMCB may from time to time reasonably request.

         The Borrower and the Parent Company shall be entitled to satisfy
clauses (a), (b) and (g) above insofar as the delivery of financial statements
is concerned by making available either on the EDGAR System or the Home Webpage
the financial statements specified therein within the times specified therein.

         Each delivery of a financial statement pursuant to this Section shall
constitute republication of the representations and warranties set forth in
Article III (except the representation in Section 3.04(c) and the representation
set forth in the proviso at the end of Section 3.14; provided, however, that,
the foregoing notwithstanding, each delivery of a financial statement pursuant
to this Section shall constitute a representation by the Borrower and the Parent
Company that, with respect to projected financial information, such information
was prepared in good faith based upon assumptions that the Borrower and the
Parent Company believed to be reasonable at the time) and in the other Loan
Documents.

                  SECTION 5.02. Notices of Material Events. The Parent Company
will furnish to JPMCB prompt written notice of the following:

                  (a) the occurrence of any Default or Event of Default under
         any Loan Document;



                                       29


                  (b) the filing or commencement, or threatened filing or
         commencement (known to the Parent Company), of any action, suit or
         proceeding, or the assertion of any claim as a counterclaim, by or
         before any arbitrator or Governmental Authority against or affecting
         the Parent Company, any Subsidiary, or any Affiliate of the Parent
         Company that, individually or in the aggregate, if adversely
         determined, could reasonably be expected to result in a Material
         Adverse Effect;

                  (c) the occurrence of any ERISA Event that, alone or together
         with any other ERISA Events that have occurred, could reasonably be
         expected to result in liability of the Parent Company and its
         Subsidiaries in an aggregate amount exceeding $1,000,000;

                  (d) the creation or acquisition by the Parent Company or any
         of its Subsidiaries of a subsidiary;

                  (e) the failure of the Qualified Accounts at any time to
         include securities sufficient in value to permit the Borrower and the
         Parent Company to comply with Section 6.11; and

                  (f) any development that has resulted in, or that results in,
         or could reasonably be expected to result in, a Material Adverse
         Effect.

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Parent Company setting
forth the details of the event or development requiring such notice and any
action taken or proposed to be taken with respect thereto.

                  SECTION 5.03. Existence; Conduct of Business. The Parent
Company will, and will cause each of its Subsidiaries to, do or cause to be done
all things necessary to preserve, renew and keep in full force and effect its
legal existence and its qualifications and rights in all jurisdictions in which
the nature of the business conducted or the property owned by it requires such
qualification, except where the failure to so to qualify, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect,
and the rights, licenses, permits, privileges and franchises material to the
conduct of its business; provided that the foregoing shall not prohibit any
merger, consolidation, liquidation or dissolution permitted under Section 6.03.

                  SECTION 5.04. Payment of Obligations. The Parent Company will,
and will cause each of its Subsidiaries to, pay its debts and obligations that,
if not paid, could reasonably be expected to result in a Material Adverse Effect
before the same shall become delinquent or in default, except where (a) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) the Parent Company or such Subsidiary has set aside on its
books adequate reserves with respect thereto in accordance with GAAP, and (c)
the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.

                  SECTION 5.05. Maintenance of Properties; Insurance. The Parent
Company will, and will cause each of its Subsidiaries to, (a) keep and maintain,
or cause to be kept and maintained, all property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted,
and make all replacements and addition to its property material to its business
as may be reasonably necessary to conduct its business in the manner heretofore
conducted, and (b) maintain, or cause to be maintained, with such reputable and
financially sound insurance companies, insurance in such amounts, with such
deductibles, and against such risks, as are customarily maintained by companies
engaged in the same or similar businesses operating in the same or similar
locations, and furnish JPMCB



                                       30


satisfactory evidence thereof promptly upon request. The insurance provisions
hereof are cumulative of the insurance provisions of the other Loan Documents.

                  SECTION 5.06. Books and Records; Inspection Rights. The Parent
Company will, and will cause each of its Subsidiaries to, keep proper books of
record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities. The Parent
Company will, and will cause each of its Subsidiaries to, permit any
representatives designated by JPMCB, upon reasonable prior notice and during
normal business hours (at JPMCB's expense, or, if an Event of Default shall
exist, at the expense of the Borrower), to visit and inspect its properties, to
examine and make extracts from its books and records (other than confidential
records relating to employees of the Borrower), and to make and take away copies
thereof, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested; provided, that Borrower shall have the right to have a
representative present at all times, but failure or refusal by the Borrower to
provide such a representative shall not prevent or delay the exercise by JPMCB
of its rights under this Section.

                  SECTION 5.07. Compliance with Laws. The Parent Company will,
and will cause each of its Subsidiaries to, comply with all Laws applicable to
it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

                  SECTION 5.08. Taxes. The Parent Company will, and will cause
each of its Subsidiaries to, file all Tax returns (including income Tax returns)
required to be filed in any jurisdiction and to pay when due all Taxes and
governmental charges of every kind upon it or against its income, profits or
property; provided, however, that nothing contained in this Section shall
require the payment or discharge of any such Tax where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
the Parent Company or such Subsidiary has set aside on its books adequate
reserves with respect thereto in accordance with GAAP, and (c) the failure to
make payment pending such contest could not reasonably be expected to result in
a Material Adverse Effect.

                  SECTION 5.09. Compliance with ERISA. The Parent Company will
do, and will cause each of its Subsidiaries and each ERISA Affiliate to do, each
of the following: (a) maintain each Plan in compliance in all material respects
with the applicable provisions of ERISA, the Code and other Federal or state
law; (b) cause each Plan which is qualified under Section 401(a) of the Code to
maintain such qualification; and (c) make all required contributions to any Plan
subject to Section 412 of the Code.

                  SECTION 5.10. Use of Proceeds. The Borrower shall use the
proceeds of the Loans only to finance the construction of improvements that
comprise the Borrower's Centre III project located at 19001 Crescent Springs
Drive, Kingwood, Texas, and for general corporate purposes. No part of the
proceeds of any Loan will be used, whether directly or indirectly, to purchase
or carry any margin stock (as such term is used in Regulation U of the Board) or
for any other purpose which would make this credit a "purpose credit" within the
meaning of Regulation U of the Board, or for any purpose that entails a
violation of any of the Regulations of the Board, including Regulations T, U and
X. All Loans will be used for business, commercial, investment, agricultural or
other similar purpose and not for personal, family or household use.

                  SECTION 5.11. Security and Guaranties.

                  (a) The Security. The Obligations will, to the extent set
forth therein, be secured by the Security Documents.



                                       31


                  (b) Agreement to Deliver Guaranties. Within five Business Days
after the creation or any permitted acquisition by the Parent Company or any of
its Subsidiaries of a Subsidiary, the Parent Company shall deliver, and cause
such Subsidiary to deliver, a Guaranty duly authorized and executed by such
Subsidiary, to the end that all Subsidiaries shall at all times (to the extent
set forth in such Guaranty) guarantee the Obligations. In connection therewith,
the Parent Company shall deliver, and shall cause each such Subsidiary to
deliver, to JPMCB with respect to each such Subsidiary, all of the materials
described in subsections (d), (e) and (j) of Section 4.01 and any other
documents or instruments as may be necessary or desirable (in the opinion of
JPMCB) in connection with such Guaranty.

                  (c) Perfection and Protection of Security Interests and Liens.
In addition and not by way of limitation of the foregoing, the Parent Company
will from time to time deliver, and cause each of its Subsidiaries to deliver,
to JPMCB any and all financing statements, continuation statements, extension
agreements and other documents, properly completed (and executed and
acknowledged when required) by the appropriate Person, in form and substance
satisfactory to JPMCB, which JPMCB reasonably requests for the purpose of
perfecting, confirming, or protecting any Liens or other rights in any
Collateral now or hereafter securing any Obligations. In addition to the
foregoing, the Parent Company hereby authorizes, and shall cause each of its
Subsidiaries to authorize, JPMCB to file in the appropriate filing office
pursuant to applicable Law such financing statements, assignments and
continuation statements as JPMCB shall deem necessary or desirable for the
purpose of perfecting, confirming, or protecting any Liens or other rights in
the Collateral without the signature of the Parent Company or any of its
Subsidiaries.

                  SECTION 5.12. Assurances. The Parent Company will, and will
cause each of its Subsidiaries to, promptly execute and deliver any and all
further agreements, documents, instruments, and other writings that JPMCB may
reasonably request to cure any defect in the execution and delivery of any one
or more of the Loan Documents or more fully to describe particular aspects of
the agreements set forth or intended to be set forth in the Loan Documents.

                  SECTION 5.13. Certain Changes. The Parent Company will, and
will cause each of its Subsidiaries to, notify JPMCB at least 30 days prior to
the date that the Borrower, the Parent Company or any other Obligor changes its
jurisdiction of formation or organization, its name, the location of its chief
executive office or principal place of business, or the place where it keeps its
books and records. The Parent Company will notify JPMCB at least 30 days prior
to the date that the Parent Company or any of its Subsidiaries creates or
acquires any Subsidiary.

                                   ARTICLE VI

                               Negative Covenants

                  Until the Commitment has expired or been terminated and the
principal of and interest on each Loan and all fees and other Obligations
hereunder shall have been paid in full, the Borrower and the Parent Company
jointly and severally covenant and agree with JPMCB that:

                  SECTION 6.01. Indebtedness. The Parent Company will not, and
will not permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:

                  (a) Indebtedness under the Loan Documents or otherwise owing
         to JPMCB;



                                       32


                  (b) Indebtedness existing on the date hereof and set forth in
         Schedule 6.01, and extensions, renewals, modifications and replacements
         of any such Indebtedness that do not increase the outstanding principal
         amount thereof;

                  (c) Indebtedness of the Parent Company to any Subsidiary and
         of any Subsidiary to the Parent Company or any other Subsidiary; -

                  (d) Guarantees by the Parent Company of Indebtedness of any
         Subsidiary and by any Subsidiary of Indebtedness of the Parent Company
         or any other Subsidiary;

                  (e) Indebtedness of the Parent or any Subsidiary incurred to
         finance the acquisition, construction or improvement of any fixed or
         capital assets, including Capital Lease Obligations and any
         Indebtedness assumed in connection with the acquisition of any such
         assets or secured by a Lien on any such assets prior to the acquisition
         thereof, and extensions, renewals, modifications and replacements of
         any such Indebtedness that do not increase the outstanding principal
         amount thereof; provided that (i) such Indebtedness is incurred prior
         to or within 90 days after such acquisition or the completion of such
         construction or improvement and (ii) the aggregate principal amount of
         Indebtedness permitted by this clause (e) shall not exceed $7,000,000
         at any time outstanding;

                  (f) Indebtedness of the Parent Company or any Subsidiary in
         connection with Swap Agreements permitted by Section 6.05;

                  (g) Indebtedness of the Parent Company or any Subsidiary as an
         account party in respect of trade letters of credit; and

                  (h) other unsecured Indebtedness in an aggregate principal
         amount not exceeding $5,000,000 at any time outstanding.

                  SECTION 6.02. Liens. The Parent Company will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired, or in any manner directly
or indirectly sell, assign, pledge or otherwise transfer any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:

                  (a) Permitted Encumbrances;

                  (b) Liens, not for borrowed money, arising in the ordinary
         course of business;

                  (c) Liens in favor of JPMCB or otherwise approved in writing
         by JPMCB;

                  (d) any Lien on any property or asset of the Parent Company or
         any Subsidiary existing on the date hereof and set forth in Schedule
         6.02; provided that (i) such Lien shall not encumber any property or
         asset of the Parent Company or any Subsidiary other than the property
         or asset encumbered by it on the date of this Agreement, and (ii) such
         Lien shall secure only those obligations which it secures on the date
         hereof and extensions, renewals, modifications and replacements thereof
         that do not increase the outstanding principal amount thereof;

                  (e) any Lien existing on any property or asset prior to the
         acquisition thereof by the Parent Company or any Subsidiary; provided
         that (i) such Lien is not created in contemplation of or in connection
         with such acquisition, (ii) such Lien shall not encumber any property
         or asset of



                                       33



         the Parent Company or any Subsidiary, other than the property or asset
         being acquired; and (iii) such Lien shall secure only those obligations
         which it secures on the date of such acquisition and extensions,
         renewals, modifications and replacements thereof that do not increase
         the outstanding principal amount thereof; and

                  (f) Liens on fixed or capital assets acquired, constructed or
         improved by the Parent Company or any Subsidiary after the date hereof;
         provided that (i) such Liens secure only Indebtedness permitted by
         clause (e) of Section 6.01, (ii) such Liens and the Indebtedness
         secured thereby are incurred prior to or within 90 days after such
         acquisition or the completion of such construction or improvement,
         (iii) the Indebtedness secured thereby does not exceed 100% of the cost
         of acquiring, constructing or improving such fixed or capital assets,
         and (iv) such Liens shall not encumber any property or assets of the
         Parent Company or any Subsidiary, other than the property or asset
         being acquired.

                  SECTION 6.03. Fundamental Changes.

                  (a) The Parent Company will not, and will not permit any
Subsidiary to, directly or indirectly, in any single transaction or series of
transactions,

                  (i) merge into or consolidate with any other Person,

                  (ii) permit any other Person to merge into or consolidate with
         it,

                  (iii) sell, transfer or otherwise Dispose of (in one
         transaction or in a series of transactions) any Equity Interest in any
         of its Subsidiaries (in each case, whether now owned or hereafter
         acquired), or any voting rights with respect to any of its
         Subsidiaries, or permit any of its Subsidiaries to issue any additional
         Equity Interests to any Person other than the Parent Company or the
         Borrower, or

                  (iv) liquidate or dissolve,

provided, however, that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing or would result
therefrom, (x) any Subsidiary may merge into or consolidate with the Borrower or
the Parent Company in a transaction in which the Borrower or the Parent Company
is the surviving entity, and (y) any Subsidiary may sell, transfer, lease or
otherwise Dispose of its assets to the Borrower or the Parent Company. No
Obligor (other than the Parent Company) shall cease to be a wholly-owned
Subsidiary. Promptly upon the request of JPMCB, the Parent Company shall deliver
to JPMCB in connection with any change permitted by this Section a written
confirmation by the Parent Company that such change, individually or in the
aggregate with all other such changes since the date of this Agreement, could
not reasonably be expected to result in a Material Adverse Effect.

                  (b) The Parent Company will not, and will not permit any of
its Subsidiaries to, change the nature of its business or enter into any
business which is substantially different from the business in which it is
engaged on the date of this Agreement.

                  SECTION 6.04. Investments. The Parent Company will not, and
will not permit any of its Subsidiaries to, make any Investment, except:

                  (a)      Permitted Investments;



                                       34


                  (b)      Investments existing on the date of this Agreement
                           and listed on Schedule 6.04;

                  (c)      Investments by the Parent Company or its Subsidiaries
                           in the Equity Interests of Subsidiaries existing on
                           the date of this Agreement;

                  (d)      loans or advances made by the Parent Company to any
                           Subsidiary and made by any Subsidiary to the Parent
                           Company or any other Subsidiary;

                  (e)      Guarantees constituting Indebtedness permitted by
                           Section 6.01;

                  (f)      the acquisition or ownership by the Parent Company or
                           a Subsidiary of Equity Interests or debt or other
                           securities received in settlement of debt (created in
                           the ordinary course of business) owing to the Parent
                           Company or such Subsidiary;

                  (g)      Loans and advances to officers and directors
                           permitted by Section 6.08 and loans and advances to
                           employees of the Parent Company and its Subsidiaries
                           for travel, entertainment, and moving or other
                           relocation expenses made in direct furtherance and in
                           the ordinary course of the business of the Parent
                           Company and its Subsidiaries;

                  (h)      Investments consisting of payments to employee
                           benefit plans or compensation arrangements entered
                           into in the ordinary course of business of the Parent
                           Company and its Subsidiaries, or payments,
                           contributions or transactions relating to such plans;
                           provided, however, that the aggregate amount of
                           deposit payments related to the Parent Company's
                           health insurance plans shall not exceed, during the
                           term of this Agreement, $12,000,000 in the aggregate;

                  (i)      Investments in any Person to the extent that the
                           consideration paid consists of capital stock of the
                           Parent Company; and

                  (j)      other Investments not expressly permitted by clauses
                           (a) through (i) of this Section, so long as the
                           aggregate amount of such Investments since the date
                           of this Agreement does not exceed $1,000,000.

                  SECTION 6.05. Swap Agreements. The Parent Company will not,
and will not permit any of its Subsidiaries to, enter into any Swap Agreement,
except (a) Swap Agreements entered into to hedge or mitigate risks to which the
Parent Company or any Subsidiary has actual exposure (but not including any Swap
Agreement in respect of Equity Interests of the Parent Company or any of its
Subsidiaries), and (b) Swap Agreements entered into in order to effectively cap,
collar or exchange interest rates (from fixed to floating rates, from one
floating rate to another floating rate or otherwise) with respect to any
interest-bearing liability or investment of the Parent Company or any
Subsidiary.

                  SECTION 6.06. Dispositions. The Parent Company will not, and
will not permit any of its Subsidiaries to, make any Disposition or enter into
any agreement to make any Disposition, except:

                  (a)      Dispositions of obsolete or worn out property,
                           whether now owned or hereafter acquired, in the
                           ordinary course of business;

                  (b)      Dispositions of inventory in the ordinary course of
                           business;



                                       35


                  (c)      Dispositions of property by any Subsidiary to the
                           Parent Company or the Borrower, or Dispositions of
                           property other than Collateral by any Subsidiary
                           other than the Borrower to another Subsidiary;

                  (d)      Dispositions permitted by Section 6.03;

                  (e)      Dispositions consisting of deposit payments related
                           to the Parent Company's health insurance plans, not
                           to exceed, during the term of this Agreement,
                           $12,000,000 in the aggregate;

                  (f)      if no Default or Event of Default exists either
                           before or after such Disposition or would result
                           therefrom, Dispositions for charitable purposes in an
                           aggregate amount not to exceed $100,000 before the
                           Maturity Date; and

                  (g)      if no Default or Event of Default exists either
                           before or after such Disposition or would result
                           therefrom, other sales of assets (other than
                           Collateral) in an aggregate amount not to exceed
                           $2,500,000 in any twelve-month period;

provided, however, that any Disposition pursuant to clauses (a), (b), (d) or (g)
shall be for fair market value.

                  SECTION 6.07. Restricted Payments.

                  (a) The Parent Company will not, and will not permit any of
its Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment or incur any obligation to do so, except (i)
the Parent Company may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its common stock, (ii)
Subsidiaries may declare and pay dividends ratably with respect to their Equity
Interests, (iii) the Parent Company may make Restricted Payments pursuant to and
in accordance with stock option plans or other benefit plans for management or
employees of the Borrower and its Subsidiaries, and (iv) provided that no
Default has occurred and is continuing, the Parent Company may from time to time
repurchase shares of its capital stock, provided that the aggregate amount
expended for transactions permitted by this clause (iv) shall not exceed
$15,000,000 in any twelve-month period.

                  (b) The Parent Company will not, and will not permit any of
its Subsidiaries to, make or agree to pay or make, directly or indirectly, any
payment or other distribution (whether in cash, securities or other property) of
or in respect of principal of or interest on any Indebtedness, or any payment or
other distribution (whether in cash, securities or other property), including
any sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any Indebtedness,
except:

                  (i) payment of Indebtedness created under the Loan Documents;

                  (ii) payment of regularly scheduled interest and principal
         payments as and when due in respect of any Indebtedness permitted by
         the Loan Documents;

                  (iii) refinancings of Indebtedness to the extent permitted by
         Section 6.01; and



                                       36


                  (iv) payment of secured Indebtedness that becomes due as a
         result of the voluntary sale or transfer of the property or assets
         securing such Indebtedness.

                  SECTION 6.08. Transactions with Affiliates. Except for
existing arrangements and modifications to such arrangements in the ordinary
course of business, the Parent Company will not, and will not permit any of its
Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or
purchase, lease or otherwise acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except (a) in the
ordinary course of business at prices and on terms and conditions not less
favorable to the Parent Company or such Subsidiary than could be obtained on an
arm's-length basis from unrelated third parties, (b) transactions not otherwise
prohibited or restricted by this Agreement or the other Loan Documents between
or among the Parent Company and its Subsidiaries and not involving any other
Affiliate, (c) any Restricted Payment permitted by Section 6.07, (d)
transactions not otherwise prohibited or restricted by this Agreement or the
other Loan Documents between or among the Parent Company and its Subsidiaries
and their respective employee benefit plans and related trusts and not involving
any other Affiliate; and (e) transactions not otherwise prohibited or restricted
by this Agreement or the other Loan Documents among the Parent Company and its
consolidated Subsidiaries.

                  SECTION 6.09. Restrictive Agreements. The Parent Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of the Parent
Company or any Subsidiary to create, incur or permit to exist any Lien upon any
of its property or assets, or (b) the ability of any Subsidiary to pay dividends
or other distributions with respect to any shares of its capital stock or other
Equity Interests or to make or repay loans or advances to the Parent Company or
any other Subsidiary or to Guarantee Indebtedness of the Parent Company or any
other Subsidiary; provided that (i) the foregoing shall not apply to
restrictions and conditions imposed by Law or by this Agreement or any other
Loan Document, (ii) the foregoing shall not apply to restrictions and conditions
existing on the date hereof identified on Schedule 6.09 (but shall apply to any
extension or renewal of, or any amendment or modification expanding the scope
of, any such restriction or condition), (iii) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the
sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (iv) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness, and (v) clause
(a) of the foregoing shall not apply to customary provisions in leases and other
contracts restricting the assignment thereof.

                  SECTION 6.10. Subsidiary Indebtedness. The Parent Company will
not permit the aggregate principal amount of Indebtedness of its Subsidiaries
(excluding any Indebtedness of the Borrower and any Indebtedness of a Subsidiary
owed to the Parent Company or the Borrower, but including any Guarantee, other
than the Guaranties, by a Subsidiary of Indebtedness of the Parent Company or
the Borrower) outstanding at any time to exceed $1,000,000.

                  SECTION 6.11. Liquid Investments. The Parent Company shall
maintain, and shall cause the Borrower to maintain, at all times during each of
the months shown, an aggregate of Liquid Investments for both such Persons not
less than the following amount for such month:

                                                            
                  June, July and August, 2002                  $ 7,500,000
                  September and October, 2002                  $12,000,000
                  November and December, 2002                  $15,000,000





                                       37


                  SECTION 6.12. Funded Debt to Consolidated EBITDA. The Parent
Company shall not at any time permit the ratio of its Funded Debt to its
Consolidated EBITDA for the four fiscal quarter years then most recently ended
to exceed 1.50 to 1.00.

                                   ARTICLE VII

                                Events of Default

                  Any of the following events shall constitute an Event of
Default:

                  (a) the Borrower shall fail to pay any principal of any Loan
         when and as the same shall become due and payable, whether at the due
         date thereof or at a date fixed for prepayment thereof or otherwise; or
         the Borrower shall fail to pay any interest on any Loan or any fee or
         other Obligation, or the Parent Company or any other Obligor shall fail
         to pay any amount under its Guaranty or any other Obligation owing by
         it, and, in each case, such failure shall continue for a period of
         three days;

                  (b) any written representation or warranty made or deemed made
         by or on behalf of the Borrower, the Parent Company, or any other
         Obligor in or in connection with this Agreement or any other Loan
         Document or any amendment or modification hereof or thereof or any
         waiver hereunder or thereunder, or in any report, certificate,
         financial statement or other document furnished pursuant to or in
         connection with this Agreement or any other Loan Document or any
         amendment or modification hereof or thereof or any waiver hereunder or
         thereunder, shall prove to have been incorrect, false or misleading in
         any material respect when made or deemed made;

                  (c) the Borrower or the Parent Company shall fail to observe
         or perform any covenant, condition or agreement contained in Section
         5.01(d), Section 5.01(e), Section 5.02, Section 5.03 (with respect to
         existence), Section 5.06 or Section 5.08, or in Article VI;

                  (d) the Borrower or the Parent Company shall fail to observe
         or perform any covenant, condition or agreement contained in this
         Agreement (other than those specified in clause (a), (b) or (c) of this
         Article), and such failure shall continue unremedied for a period of 30
         consecutive days after notice thereof from JPMCB to the Borrower;

                  (e) the Parent Company, the Borrower or any other Obligor
         shall fail to make any payment (whether of principal or interest and
         regardless of amount) in respect of any Material Indebtedness, when and
         as the same shall become due and payable (whether by scheduled
         maturity, required prepayment, acceleration, demand or otherwise) and
         such failure shall continue after the applicable grace period, if any,
         specified in the agreement or instrument relating to such indebtedness;

                  (f) any event or condition occurs that results in any Material
         Indebtedness becoming due prior to its scheduled maturity (other than
         by a regularly scheduled required prepayment or as a result of the
         giving of notice of a voluntary prepayment) or that enables or permits
         (with or without the giving of notice, the lapse of time or both) the
         holder or holders of any Material Indebtedness or any trustee or agent
         on its or their behalf to cause any Material Indebtedness to become
         due, or to require the prepayment, repurchase, redemption or defeasance
         thereof, prior to its scheduled maturity; provided that this clause (f)
         shall not apply to secured Indebtedness that



                                       38


         becomes due as a result of the voluntary sale or transfer of the
         property or assets securing such Indebtedness;

                  (g) an involuntary proceeding shall be commenced or an
         involuntary petition shall be filed seeking (i) liquidation,
         reorganization or other relief in respect of the Borrower, the Parent
         Company or any Subsidiary or any of their respective debts, or of all
         or any substantial part of their respective assets, under any Federal,
         state or foreign bankruptcy, insolvency, receivership or similar law
         now or hereafter in effect or (ii) the appointment of a receiver,
         trustee, custodian, sequestrator, conservator or similar official for
         the Borrower, the Parent Company or any Subsidiary or for all or any
         substantial part of the assets of the Borrower, the Parent Company or
         any Subsidiary, and, in any such case described in clauses (i) or (ii),
         the Borrower, the Parent Company or such Subsidiary shall indicate
         approval thereof, consent thereto or acquiescence therein, or such
         proceeding or petition shall continue undismissed for 60 days or an
         order or decree approving or ordering any of the foregoing shall be
         entered;

                  (h) the Borrower, the Parent Company or any Subsidiary shall
         (i) voluntarily commence any proceeding or file any petition seeking
         liquidation, reorganization or other relief under any Federal, state or
         foreign bankruptcy, insolvency, receivership or similar law now or
         hereafter in effect, (ii) consent to the institution of, or fail to
         contest in a timely and appropriate manner, any proceeding or petition
         described in clause (g) of this Article, (iii) apply for or consent to
         the appointment of a receiver, trustee, custodian, sequestrator,
         conservator or similar official for the Borrower, the Parent Company or
         any Subsidiary or for all or any substantial part of the assets of the
         Borrower, the Parent Company or any Subsidiary, (iv) file an answer
         admitting the material allegations of a petition filed against it in
         any such proceeding, (v) make a general assignment for the benefit of
         creditors, or (vi) take any action for the purpose of effecting any of
         the foregoing;

                  (i) the Borrower, the Parent Company or any Subsidiary shall
         become unable, admit in writing its inability or fail generally to pay
         its debts as they become due; or suffer any writ of attachment or
         execution or any similar process to be issued or levied against it or
         any substantially part of its property which is not released, stayed,
         bonded or vacated within 60 days after its issue or levy;

                  (j) one or more judgments for the payment of money in an
         aggregate amount of $2,000,000 or more shall be rendered against the
         Borrower, the Parent Company, any Subsidiary or any combination
         thereof, and the same shall remain undischarged for a period of 30
         consecutive days during which execution shall not be effectively
         stayed, or any action shall be legally taken by a judgment creditor to
         attach or levy upon any assets of the Borrower, the Parent Company or
         any Subsidiary to enforce any such judgment;

                  (k) an ERISA Event shall have occurred that, in the opinion of
         JPMCB, when taken together with all other ERISA Events that have
         occurred since the Effective Date, could reasonably be expected to
         result in liability of the Parent Company and its Subsidiaries in an
         aggregate amount exceeding $1,000,000;

                  (l) (x) the sale, transfer, conveyance, encumbrance,
         abandonment, condemnation, partition or change in ownership (except as
         otherwise expressly permitted by the relevant Security Documents) of
         (i) any of the Collateral consisting of real estate or intangible
         personal property, or (ii) any of the Collateral consisting of tangible
         personal property (other than fixtures disposed of as permitted by
         Section 6.06(a)) that (together with all other such



                                       39


         Collateral sold, transferred, conveyed, encumbered, abandoned,
         condemned, or partitioned, or with respect to which a change in
         ownership shall have occurred, since the date of this Agreement) has a
         market value of $100,000 or more, whether in one transaction or a
         series of transactions, without Secured Party's prior written consent,
         or (y) the making of any levy, seizure, garnishment, sequestration or
         attachment of any Collateral or on any Collateral;

                  (m) any order shall be entered in any proceeding against the
         Borrower, the Parent Company or any Subsidiary decreeing the
         dissolution, liquidation or split-up thereof, and such order shall
         remain in effect for longer than the appeal time provided by applicable
         law;

                  (n) the Borrower, the Parent Company or any other Obligor
         shall be prevented or relieved by any Governmental Authority from
         performing or observing any material term, covenant or condition of any
         Loan Document;

                  (o) the Borrower, the Parent Company or any Subsidiary shall
         be in violation of any Environmental Law, or any property of any such
         Person shall be subject to any one or more remediation obligations or
         Environmental Liabilities, which causes the Borrower, the Parent
         Company and its Subsidiaries or any combination thereof to incur
         Environmental Liabilities, individually or in the aggregate, in excess
         of $1,000,000;

                  (p) the Borrower, the Parent Company or any Subsidiary shall
         have concealed, removed, or permitted to be concealed or removed, any
         part of its property, with intent to hinder, delay or defraud any of
         its creditors, or made or suffered a transfer of any of its property
         which may be fraudulent under any bankruptcy, fraudulent conveyance or
         similar law, or shall have made any transfer of its property to or for
         the benefit of a creditor at a time when other creditors similarly
         situated have not been paid, or, while insolvent, shall have suffered
         or permitted any creditor to obtain a lien upon any of its property
         through legal proceedings or distraint which is not vacated within the
         appeal time provided by applicable law;

                  (q) any event of default described in any Security Document,
         any Guaranty, or any other Loan Document shall occur, or any material
         provision of any Security Document, any Guaranty, or any other Loan
         Document shall at any time for any reason cease to be valid, binding
         and enforceable against any Obligor that is an obligor thereunder;

                  (r) any Loan Document, at any time after its execution and
         delivery and for any reason other than the agreement of JPMCB or
         satisfaction in full of all the Obligations, ceases to be in full force
         and effect, or is declared by a court of competent jurisdiction to be
         null and void, invalid or unenforceable in any respect; or the
         Borrower, the Parent Company or any other Obligor takes any action in
         furtherance of any of the foregoing or denies that it has any or
         further liability or obligation under any Loan Document, or purports to
         revoke, terminate or rescind any Loan Document; or

                  (s) a Change in Control shall occur.

If an Event of Default occurs, then, and in every such event (other than an
event with respect to the Borrower described in clause (g) or (h) of this
Article), and at any time thereafter during the continuance of such event, JPMCB
may take any or all of the following actions, at the same or different times:
(i) by notice to the Borrower, terminate the Commitment, and thereupon the
Commitment shall terminate immediately, (ii) without notice of any kind to the
Borrower, the Parent Company or any other Obligor,



                                       40


and without notice of intention to accelerate or notice of acceleration, all of
which are WAIVED by the Borrower and the Parent Company, declare the Loans and
all other Obligations then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with all accrued and
unpaid interest thereon and all accrued and unpaid fees and all other accrued
and unpaid Obligations of the Borrower, the Parent Company and the other
Obligors hereunder and under the other Loan Documents, shall become due and
payable immediately, without presentment, demand, protest or other notice of any
kind; (iii) without notice of any kind to the Borrower, the Parent Company or
any other Obligor, exercise all rights and remedies available to it under the
Loan Documents or applicable Law, including, without limitation, the enforcement
of its rights either by suit in equity, or by action at law, or by other
appropriate proceedings, whether for the specific performance (to the extent
permitted by law) or any covenant or agreement contained in this Agreement or in
the Note or any other Loan Document or in aid of the exercise of any power
granted in this Agreement or in the Note or any other Loan Document; and (iv)
without notice of any kind to the Borrower, the Parent Company or any other
Obligor, set off, in any order, against the Obligations any debt owing by JPMCB
to the Borrower, the Parent Company or any other Obligor (whether such debt is
owed individually or jointly), including but not limited to any deposit account,
which right is hereby granted by the Borrower and the Parent Company to JPMCB;
and in case of any event with respect to the Borrower described in clause (g) or
(h) of this Article, the Commitment shall automatically terminate and the
principal of the Loans then outstanding, together with all accrued and unpaid
interest thereon and all accrued and unpaid fees and other accrued and unpaid
Obligations of the Borrower, the Parent Company and the other Obligors hereunder
and under the other Loan Documents, shall automatically become due and payable,
without presentment, demand, protest or other notice of any kind, including but
not limited to notice of intent to accelerate and notice of acceleration, all of
which are hereby WAIVED by the Borrower and the Parent Company, and thereupon
JPMCB may exercise any or all of its rights referred to in clauses (iii) and
(iv) above.

                                  ARTICLE VIII

                                  Miscellaneous

                  SECTION 8.01. Notices.

                  (a) Except in the case of notices and other communications
expressly permitted to be given by telephone (and subject to paragraph (b)
below), all notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail, return receipt requested, or sent by facsimile
transmission, as follows:

                  (i)      if to the Borrower or the Parent Company, to it at:

                           19001 Crescent Springs Drive
                           Kingwood, Texas 77339-3802
                           Fax: (281) 348-3232
                           Email: douglas_sharp@administaff.com



                                       41


                           with a copy to:

                           John H. Spurgin, II
                           Vice President, Legal, General Counsel and Secretary
                           19001 Crescent Springs Drive
                           Kingwood, Texas 77339-3802
                           Fax: (281) 348-3232
                           Email: john_spurgin@administaff.com

                  (ii)     if to JPMCB, to:

                           712 Main Street, P.O. Box 2558
                           Houston, Texas 77252-2558
                           Attn: Mr. David Jones
                           Fax: (713) 216-6004
                           Email: hdavid.jones@jpmorgan.com

                  (b) Except for notices required by Article II, which shall be
deemed given only when actually received by JPMCB, all such notices and other
communications shall be deemed to be made upon the earlier to occur of (i)
actual receipt by the intended recipient and (ii) (A) if delivered by hand, when
delivered; (B) if delivered by overnight courier, on the Business Day following
deposit with such courier; (C) if delivered by mail, three Business Days after
deposit in the mails, postage prepaid; and (D) if delivered by facsimile, when
sent and written confirmation of receipt has been received.

                  (c) Notices and other communications to JPMCB hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by JPMCB; provided that the foregoing shall not apply to notices
pursuant to Article II unless otherwise agreed by JPMCB. JPMCB or the Borrower
may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it;
provided that approval of such procedures may be limited to particular notices
or communications.

                  (d) Any party hereto may change its address or telecopy number
for notices and other communications hereunder by notice to the other parties
hereto.

                  SECTION 8.02. Waivers; Amendments.

                  (a) No waiver of any Default or Event of Default shall be a
waiver of any other Default or Event of Default. No failure or delay by JPMCB in
exercising any right or power hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of JPMCB hereunder
are cumulative and are not exclusive of any rights or remedies that it would
otherwise have. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by the Borrower, the Parent Company or any
other Obligor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Person shall entitle any Person to any or
notice or demand in similar or other circumstances. Without limiting the
generality of the foregoing, the making of a Loan shall not be construed as a
waiver of any Default, regardless of whether JPMCB may have had notice or
knowledge of such Default at the time.



                                       42


                  (b) Neither this Agreement or any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except pursuant
to an agreement or agreements in writing by each Person to be bound thereby.

                  SECTION 8.03. Expenses; Indemnity; Damage Waiver.

                  (a) The Borrower shall pay on demand (i) all out-of-pocket
expenses incurred by JPMCB and its Affiliates, including the reasonable fees,
charges and disbursements of counsel for JPMCB, in connection with the
development, negotiation, preparation, execution, and administration of this
Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket
expenses incurred by JPMCB, including the fees, charges and disbursements of any
counsel for JPMCB in connection with the enforcement or protection of its rights
in connection with this Agreement, including its rights under this Section, or
in connection with any other Loan Document, or in connection with the Loans made
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans. The obligations
of the Borrower under this Section shall survive the termination of this
Agreement.

                  (b) TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER AND
THE PARENT COMPANY, JOINTLY AND SEVERALLY, SHALL INDEMNIFY JPMCB AND EACH
RELATED PARTY OF JPMCB (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE") FROM, AND
HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, COSTS,
EXPENSES (INCLUDING COSTS OF INVESTIGATION AND DEFENSE, LEGAL FEES AND AMOUNTS
PAID IN SETTLEMENT), CLAIMS OR DAMAGES TO WHICH ANY OF THEM MAY BECOME SUBJECT,
REGARDLESS OF AND INCLUDING LOSSES, LIABILITIES, COSTS, EXPENSES, CLAIMS AND
DAMAGES ARISING FROM THE SOLE, ORDINARY OR CONTRIBUTORY NEGLIGENCE OF THE PERSON
TO BE INDEMNIFIED, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT
OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED
HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO AND THE OTHER OBLIGORS
OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS, OR
THE CONSUMMATION OF THE TRANSACTIONS OR ANY OTHER TRANSACTIONS CONTEMPLATED
HEREBY, (ii) ANY LOAN OR THE USE OF THE PROCEEDS THEREOF, (iii) ANY ACTUAL OR
ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED
OR OPERATED BY THE PARENT COMPANY OR ANY OF ITS SUBSIDIARIES, OR ENVIRONMENTAL
LIABILITY RELATED IN ANY WAY TO THE PARENT COMPANY OR ANY OF ITS SUBSIDIARIES,
ARISING IN CONNECTION WITH OR BY VIRTUE OF THE TRANSACTIONS, (iv) ANY ACTUAL OR
PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF
THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO; PROVIDED THAT SUCH
INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH
LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A
FINAL NONAPPEALABLE JUDGMENT OF A COURT OF COMPETENT JURISDICTION HAVE RESULTED
FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

                  (c) All amounts due under this Section shall be due not later
than 15 days after written demand therefor.

                  SECTION 8.04. Successors and Assigns.

                  (a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that neither the Borrower nor the Parent
Company may assign or otherwise transfer any of its rights or obligations



                                       43


hereunder without the prior written consent of JPMCB (and any attempted
assignment or transfer by the Borrower or the Parent Company without such
consent shall be null and void). Nothing in this Agreement or any other Loan
Document, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, the other Obligors, the successors and assigns
of the parties to this Agreement and the other Loan Documents permitted hereby,
Participants (to the extent provided in paragraph (c) of this Section) and, to
the extent expressly contemplated hereby, the Related Parties of JPMCB) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

                  (b) Except as provided elsewhere in this Section, JPMCB may
not assign its rights and obligations under this Agreement (including its
Commitment and the Loans and other Obligations at the time owing to it) and the
other Loan Documents without the consent of the Borrower, which consent shall
not be unreasonably withheld.

                  (c) (i) JPMCB may, without the consent of the Borrower, sell
participations to one or more banks or other entities (a "Participant") in all
or a portion of JPMCB's rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans and other Obligations owing to
it) and the other Loan Documents; provided that (A) JPMCB's obligations under
this Agreement shall remain unchanged by such sale, (B) JPMCB shall remain
solely responsible to the Borrower for the performance of such obligations, and
(C) the Borrower shall continue to deal solely and directly with JPMCB in
connection with this Agreement and the other Loan Documents. Any agreement or
instrument pursuant to which JPMCB sells such a participation shall provide that
JPMCB shall retain the sole right to enforce this Agreement and the other Loan
Documents and to approve any amendment, modification or waiver of any provision
of this Agreement and the other Loan Documents; provided that such agreement or
instrument may provide that JPMCB will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 8.02(b) that affects such Participant. Subject to
paragraph (c)(ii) of this Section, the Borrower agrees that each Participant
shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 to the same
extent as if it were JPMCB. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 8.09 as though it were JPMCB.

                  (ii) A Participant shall not be entitled to receive any
greater payment under Section 2.12 or 2.14 than JPMCB would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent.

                  (d) JPMCB may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement and the other Loan
Documents to secure obligations of JPMCB, including any pledge or assignment to
secure obligations to a Federal Reserve Bank, and this Section shall not apply
to any such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release JPMCB from any of its
obligations hereunder or substitute any such pledgee or assignee for JPMCB as a
party hereto.

                  (e) JPMCB may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section,
disclose to the assignee or participant or proposed assignee or participant any
information relating to the Borrower, the Parent Company or any other Obligor
furnished to JPMCB by or on behalf of the Borrower, the Parent Company or such
other Obligor.

                  (f) All transfers of any interest in any Loan shall be in
compliance with all federal and state securities laws, if applicable.
Notwithstanding the foregoing sentence, however, the parties to



                                       44


this Agreement do not intend that any transfer under this Section be construed
as a "purchase" or "sale" of a "security" within the meaning of any applicable
federal or state securities laws.

                  SECTION 8.05. Survival. All covenants, agreements,
representations and warranties made by or on behalf of the Borrower, the Parent
Company or both in or in connection with this Agreement or any of the other Loan
Documents and in the certificates or other instruments delivered in connection
with or pursuant to this Agreement or made by the Borrower, the Parent Company
or any other Obligor in any Loan Document shall be considered to have been
relied upon by JPMCB and shall survive the execution and delivery of this
Agreement and the other Loan Documents and the making of any Loans, regardless
of any investigation made by JPMCB or on its behalf and notwithstanding that
JPMCB may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other Obligations under this
Agreement or any other Loan Document is outstanding and unpaid and so long as
the Commitment has not expired or terminated. The provisions of Sections 2.12,
2.13, 2.14, 8.03 and 8.06 shall survive and remain in full force and effect
regardless of the consummation of the Transactions contemplated hereby, the
repayment of the Loans and the other Obligations, the expiration or termination
of the Commitment or the termination of this Agreement or any provision hereof.

                  SECTION 8.06. Payments Set Aside. To the extent that the
Borrower, the Parent Company, or any other Obligor makes a payment to JPMCB, or
JPMCB exercises its right of set-off, or recovers any amount from the
Collateral, and such payment or the proceeds of such set-off or Collateral, or
any part thereof, is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by JPMCB in its discretion) to be repaid to a trustee, receiver or
any other party, in connection with any proceeding under any bankruptcy or
insolvency law or otherwise, then, to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such set-off had not occurred.

                  SECTION 8.07. Counterparts; Execution by Facsimile. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. Loan Documents may
be transmitted and/or signed by facsimile. The effectiveness of any such
documents and signatures shall, subject to applicable Law, have the same force
and effect as manually-signed originals and shall be binding on the Borrower,
the Parent Company and all other Obligors and JPMCB. JPMCB may also require that
any such documents and signatures be confirmed by a manually-signed original
thereof; provided, however, that the failure to request or deliver the same
shall not limit the effectiveness of any facsimile document or signature.

                  SECTION 8.08. Severability. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

                  SECTION 8.09. Right of Setoff. Each of the Borrower and the
Parent Company grants to JPMCB a right of setoff against every deposit account
and all personal property at any time in JPMCB's possession, whether tangible or
intangible, and any claim of the Borrower or the Parent Company (whether
individual, joint, several or otherwise) against JPMCB, now or hereafter
existing. This right of setoff is not exclusive. In addition to JPMCB's right of
setoff and as further security for the



                                       45


Obligations, each of the Borrower and the Parent Company hereby grants JPMCB a
security interest in all deposits and all other accounts and property of such
Person now or hereafter on deposit with or held by JPMCB and all other sums at
any time credited by or owing from JPMCB to such Person. These rights and
remedies of JPMCB are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which JPMCB may have.

                  SECTION 8.10. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE
OF PROCESS.

                  (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF TEXAS
WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.

                  (b) EACH OF THE BORROWER AND THE PARENT COMPANY HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE DISTRICT COURTS OF THE STATE OF TEXAS SITTING
IN HARRIS COUNTY, TEXAS, AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN
DISTRICT OF TEXAS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH TEXAS STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT JPMCB MAY OTHERWISE HAVE
TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTION AGAINST THE BORROWER, THE PARENT COMPANY OR ANY
OTHER OBLIGOR OR ANY OF THEIR RESPECTIVE PROPERTIES IN THE COURTS OF ANY
JURISDICTION.

                  (c) EACH OF THE BORROWER AND THE PARENT COMPANY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND
EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTION IN ANY COURT
REFERRED TO IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

                  (d) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, NEITHER
JPMCB, THE BORROWER, THE PARENT COMPANY OR ANY OTHER OBLIGOR, NOR ANY RELATED
PARTY OF JPMCB, THE BORROWER, THE PARENT COMPANY OR ANY OTHER OBLIGOR, SHALL
HAVE ANY LIABILITY WITH RESPECT TO, AND JPMCB AND THE BORROWER, THE PARENT
COMPANY AND EACH OTHER OBLIGOR WAIVES, RELEASES, AND AGREES NOT TO SUE ANY OF
THEM UPON, ANY CLAIM FOR ANY SPECIAL, INDIRECT, INCIDENTAL AND CONSEQUENTIAL
DAMAGES SUFFERED OR INCURRED BY SUCH PERSON IN CONNECTION WITH, ARISING OUT OF,
OR IN ANY WAY RELATED TO, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH OF JPMCB, THE BORROWER, THE PARENT COMPANY AND EACH OTHER OBLIGOR WAIVES,
RELEASES, AND AGREES NOT TO SUE EACH OTHER OR ANY OF THEIR RELATED PARTIES FOR
PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM IN CONNECTION WITH, ARISING OUT OF, OR
IN ANY WAY RELATED TO, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY
OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS.

                  (e) Nothing herein shall be considered a waiver of the right
or protections afforded Bank by 12 U.S.C. 91, Texas Banking Code Art. 342-609 or
any similar statute.



                                       46


                  (f) Each party agrees that any other party may proceed against
any other liable Person, jointly or severally, or against one or more of them,
less than all, without impairing rights against any other liable Persons. A
party shall not be required to join the principal obligor or any other Person
(e.g., sureties or guarantors) in any proceeding against any Person. A party may
release or settle with one or more liable Persons as the party deems fit without
releasing or impairing right to proceed against any Persons not so released.

                  SECTION 8.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

                  SECTION 8.12. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.

                  SECTION 8.13. Confidentiality. JPMCB agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement
or any other Loan Document, (e) in connection with the exercise of any remedies
hereunder or under any other Loan Document or any suit, action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to any assignee of
or Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or any other Loan Document, or to a
Federal Reserve Bank in connection with a pledge pursuant to Section 8.04(d),
(g) with the consent of the Borrower or the Parent Company or (h) to the extent
such Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to JPMCB on a nonconfidential
basis from a source other than the Parent Company or any of its Subsidiaries.
For the purposes of this Section, "Information" means all information received
from the Borrower or the Parent Company or any of its Subsidiaries relating to
the Borrower, the Parent Company, any Subsidiary, or any of their respective
businesses, other than any such information that is available to JPMCB on a
nonconfidential basis prior to disclosure by the Borrower, the Parent Company or
such Subsidiary; provided that, in the case of information received from the
Borrower, the Parent Company or a Subsidiary after the date hereof, such
information is clearly identified at the time of delivery as confidential. Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the



                                       47


same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

                  SECTION 8.14. Limitation of Interest. The parties to the Loan
Documents intend to strictly comply with all applicable laws, including
applicable usury laws. Accordingly, the provisions of this Section 8.14 shall
govern and control over every other provision of any Loan Document which
conflicts or is inconsistent with this Section 8.14, even if such provision
declares that it controls. As used in this Section 8.14, the term "interest"
includes the aggregate of all charges, fees, benefits or other compensation
which constitute interest under applicable law; provided that, to the maximum
extent permitted by applicable law, (a) any non-principal payment shall be
characterized as an expense or as compensation for something other than the use,
forbearance or detention of money and not as interest and (b) all interest at
any time contracted for, taken, reserved, retained, charged or received shall be
amortized, prorated, allocated and spread during the full term of the Loans and
the Commitment. In no event shall the Borrower or any other Person be obligated
to pay, or JPMCB have any right or privilege to reserve, take, receive or
retain, any interest in excess of the maximum amount of nonusurious interest
permitted under applicable law. None of the terms and provisions contained in
any Loan Document which directly or indirectly relate to interest shall ever be
construed without reference to this Section 8.14, or be construed to create a
contract to pay for the use, forbearance or detention of money at an interest
rate in excess of the maximum nonusurious rate from time to time permitted by
applicable law (the "Highest Lawful Rate"). On each day, if any, that the
interest rate (the "Stated Rate") called for under any Loan Document exceeds the
Highest Lawful Rate, the rate at which interest shall accrue shall automatically
be fixed by operation of this sentence at the Highest Lawful Rate for that day,
and shall remain fixed at the Highest Lawful Rate for each day thereafter until
the total amount of interest accrued equals the total amount of interest which
would have accrued if there were no such ceiling rate as imposed by this
sentence. Thereafter, interest shall accrue at the Stated Rate unless and until
the Stated Rate again exceeds the Highest Lawful Rate, whereupon the provisions
of the immediately preceding sentence shall again automatically operate to limit
the interest accrual rate. The daily interest rates to be used in calculating
interest at the Highest Lawful Rate shall be determined by dividing the
applicable Highest Lawful Rate per annum by the number of days in the calendar
year for which such calculation is being made. If the term of any of the Loans
is shortened by reason of acceleration of maturity as a result of any Default or
by any other cause, or by reason of any required or permitted prepayment, and if
for that (or any other) reason JPMCB at any time, including the stated maturity,
is owed or receives, reserves or takes (and/or has received, reserved or taken)
interest in excess of interest calculated at the Highest Lawful Rate, then and
in any such event all of any such excess interest shall be canceled
automatically as of the date of such acceleration, prepayment or other event
which produces the excess, and, if such excess interest has been paid to JPMCB,
it shall be credited pro tanto against the then-outstanding principal balance of
the Borrower's obligations to JPMCB, effective as of the date or dates when the
event occurs which causes it to be excess interest, until such excess is
exhausted or all of such principal has been fully paid and satisfied, whichever
occurs first, and any remaining balance of such excess shall be promptly
refunded to its payor.

                  SECTION 8.15. RELEASE OF CLAIMS. EACH OF THE BORROWER AND THE
PARENT COMPANY HEREBY RELEASES, DISCHARGES AND ACQUITS FOREVER JPMCB AND ITS
RELATED PARTIES (IN EACH CASE, PAST, PRESENT OR FUTURE) FROM ANY AND ALL CLAIMS
EXISTING AS OF THE DATE HEREOF. AS USED HEREIN, THE TERM "CLAIM" MEANS ANY AND
ALL LIABILITIES, CLAIMS, DEFENSES, DEMANDS, ACTIONS, CAUSES OF ACTION,
JUDGMENTS, DEFICIENCIES, INTEREST, LIENS, COSTS OR EXPENSES (INCLUDING COURT
COSTS, PENALTIES, ATTORNEYS' FEES AND DISBURSEMENTS, AND AMOUNTS PAID IN
SETTLEMENT) OF ANY KIND AND CHARACTER WHATSOEVER, INCLUDING CLAIMS FOR USURY,
BREACH OF CONTRACT, BREACH OF COMMITMENT, NEGLIGENT MISREPRESENTATION, FRAUD OR
FAILURE TO ACT IN GOOD FAITH, IN EACH CASE WHETHER NOW KNOWN OR



                                       48


UNKNOWN, SUSPECTED OR UNSUSPECTED, ASSERTED OR UNASSERTED OR PRIMARY OR
CONTINGENT, AND WHETHER ARISING OUT OF WRITTEN DOCUMENTS, UNWRITTEN
UNDERTAKINGS, COURSE OF CONDUCT, TORT, VIOLATIONS OF LAWS OR REGULATIONS OR
OTHERWISE, IN EACH CASE TO THE EXTENT, BUT ONLY TO THE EXTENT, THAT THE SAME MAY
ARISE OUT OF OR IN CONNECTION WITH ANY OF THE TRANSACTIONS OR THE NEGOTIATION,
STRUCTURING, DOCUMENTATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION OR
COLLECTION OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY TERM SHEET OR
COMMITMENT LETTER IN CONNECTION WITH THE TRANSACTIONS OF THIS AGREEMENT, OR ANY
CURRENT OR PRIOR EXTENSION OF CREDIT BY OR ON BEHALF OF JPMCB TO BORROWER,
PARENT COMPANY, OR ANY SUBSIDIARY.

                  SECTION 8.16. ENTIRE AGREEMENT. This Agreement, together with
the other Loan Documents, comprises the complete and integrated agreement of the
parties on the subject matter hereof and thereof and supersedes all prior
agreements, written or oral, on such subject matter. THIS AGREEMENT AND THE
WRITTEN OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.




                                       49





                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.

                                        ADMINISTAFF SERVICES, L. P., a Delaware
                                        limited partnership

                                        By:  ADMINISTAFF OF TEXAS, INC.,
                                             its sole General Partner


                                             By:   /s/ Richard G. Rawson
                                                --------------------------------
                                                 Richard G. Rawson
                                                 Executive Vice President,
                                                 Administration, Chief Financial
                                                 Officer and Treasurer

                                        ADMINISTAFF, INC.



                                        By:   /s/ Richard G. Rawson
                                           -------------------------------------
                                            Richard G. Rawson
                                            Executive Vice President,
                                            Administration, Chief Financial
                                            Officer and Treasurer




                                       50






                                        JPMORGAN CHASE BANK



                                        By    /s/ H. David Jones
                                           -------------------------------------
                                                H. David Jones, Vice President

EX-10.2

                                                                    EXHIBIT 10.2


                                  June 21, 2002




American Express Travel Related Services, Inc.
3 World Financial Center
AMEX Tower
New York, New York 10285
Attn: General Counsel's Office

                  Re:      Pilot Third Amendment to the Marketing Agreement
                           dated as of March 10, 1998, as amended by letters
                           dated November 17, 1998 and April 11, 2000, by and
                           between American Express Travel Related Services
                           Company, Inc., Administaff, Inc., Administaff
                           Companies, Inc. and Administaff of Texas, Inc.

Dear Ladies and Gentlemen:

         Reference is made hereby to the Marketing Agreement (the "Marketing
Agreement") dated as of March 10, 1998, as amended by letters dated November 17,
1998 and April 11, 2000 (the "First Amendment" and "Second Amendment"
respectively), by and between American Express Travel Related Services, Inc.
("AMEX"), Administaff, Inc. ("ASF DE"), Administaff Companies, Inc. ("ASF COMP")
and Administaff of Texas, Inc. ("ASF TX and together with ASF DE and ASF COMP,
collectively referred to herein as "ASF" or "Administaff"). By execution and
delivery of this letter agreement (the "Pilot Third Amendment"), the parties are
effecting an amendment to the Marketing Agreement on the terms set forth herein.
Capitalized terms used herein, but not defined, will have the meanings assigned
to such terms in the Marketing Agreement.

         This Pilot Third Amendment sets forth the understandings of the parties
with respect to the matters set forth below:

1.       Section 1 is hereby amended to add the following new definition in
         alphabetical sequence:

         "Corporate Services: means the division within American Express Travel
         Related Services, Inc. dedicated to providing card and travel products
         and services to companies internationally.

2.       A new Section 4(a)(2)(A) is hereby added to read as follows:

         AMEX agrees to include certain AMEX PEO Prospects that it deems a
         component of its Middle Market Customer base ("Middle Market AMEX
         Leads") as targets of the AMEX Marketing Activities described at
         Section 4(a)(2). AMEX shall provide the Middle Market AMEX Leads to ASF
         in the form of a list (the "Middle Market Lead List"). The parties
         understand and agree that AMEX shall not be obligated to provide any
         specific number of Middle Market AMEX Leads, and shall provide such
         leads in its sole discretion.

3.       A new Section 4(a)(2)(B) is hereby added to read as follows:

         AMEX shall encourage its Middle Market sales force to generate Middle
         Market AMEX Leads by referring such leads to ASF. The parties
         understand and agree that the AMEX Middle Market sales force shall not
         be obligated to provide any specific number of Middle Market AMEX Leads
         to ASF, and shall provide such leads in its sole discretion. The
         parties understand and agree that ASF shall not in any way offer
         incentives to any members of AMEX's sales force team.

*** indicates material has been omitted pursuant to a Confidential Treatment
Request filed with the Securities and Exchange Commission. A complete copy of
this agreement has been filed separately with the Securities and Exchange
Commission.


         ASF agrees to provide separate performance reports for leads generated
         by Amex's Middle Market sales force.

4.       A new Section 4(f) is hereby added to read as follows:

         Telemarketing Activities: AMEX shall provide the Middle Market Lead
         List to ASF telemarketers that ASF agrees will provide the services
         described below: (the "Telemarketing Services")

         Assign at least one telemarketer to concentrate on contacting companies
         on the Middle Market List. Should it make sense to assign more, the
         parties mutually agree to work together to do this; the telemarketer(s)
         assigned to this list will be adequately trained as determined by AMEX
         before calling.

         o        Use all commercially reasonable efforts to call the total
                  number of Middle Market Leads provided by AMEX, unless it is
                  mutually agreed otherwise.

         o        Work with AMEX on the script for the Middle Market Leads -
                  with AMEX having final approval on any and all scripts.

         o        Solely for the telemarketing services related to the Middle
                  Market Leads, Administaff shall abide by the guidelines
                  described at Exhibit A (the "Telemarketing Guidelines"). The
                  provisions contained in this Section 4(f) and the related
                  exhibits attached to this Agreement shall solely be related to
                  the Middle Market Leads and shall not in any way apply to
                  other leads provided to ASF by AMEX. Guidelines concerning
                  Leads other than the Middle Market Leads are set forth in the
                  Telemarketing Services Agreement between AMEX and Administaff
                  Services, LP dated January 1, 2002 (the "Telemarketing
                  Services Agreement"). Nothing in this Agreement shall amend
                  the Telemarketing Services Agreement. AMEX and ASF will work
                  together to determine an appropriate number of hours to be
                  called each week (or month), and AMEX will have final sign-off
                  on whatever number this is. All training will be provided in
                  accordance with this Pilot Third Amendment, including but not
                  limited to, the Telemarketing Guidelines. Payments from AMEX
                  to ASF for training and for the Telemarketing Services in
                  general are spelled out in Exhibit D, of this Agreement.
                  Notwithstanding anything herein to the contrary, AMEX shall
                  only be obligated to make the payments described herein if ASF
                  provides the Telemarketing Services in accordance with this
                  Pilot Third Amendment, including but not limited to, the
                  Telemarketing Guidelines.

         Provide performance reports for telemarketing Leads from AMEX, as per
         Exhibit A, Attachment 1, with the frequency provided therein. For the
         pilot, ASF will meet the minimum performance standards outlined in
         Exhibit B.

5.       New Section 4(a)(2)(C) is hereby added to read as follows:

         The Middle Market Leads provided by AMEX to ASF pursuant to Section
         4(a)(2)(A) that eventually receive Services pursuant to a CSA shall
         require ASF to pay AMEX a commission of $*** per month per employee for
         a ***-Year Term. Such leads, provided by AMEX to ASF pursuant to
         Section 4(a)(2)(A) shall *** in the total calculation of Commissionable
         Leads under Section 7(a)(2) *** the calculation of Commission Bonus
         under Section 7(a)(5).

6.       New Section 4(a)(2)(D) is hereby added to read as follows:

         The Middle Market Leads provided by AMEX to ASF pursuant to Section
         4(a)(2)(B) that eventually receive Services pursuant to a CSA shall
         require ASF to pay AMEX a commission of $*** per employee for a
         ***-Year Term. Such leads, provided by AMEX to ASF pursuant to Section
         4(a)(2)(B) shall ***



                                      -2-

         in the total calculation of Commissionable Leads under Section 7(a)(2)
         *** the calculation of Commission Bonus under Section 7(a)(5).

7.       Section 5(a)(2) is amended and restated to read as follows:

         Referral Activities: During the term of this Agreement, ASF agrees to
         refer to AMEX all Clients generated each month within 30 days from the
         end of such month for solicitation of the services and products of the
         Corporate Services division of AMEX. ASF will work with AMEX to
         identify referral candidates from ASF's current customer base to
         provide to AMEX for solicitation of the services and products of
         Corporate Services. ASF shall refer clients to AMEX pursuant to this
         Section 5(a)(2) in its sole discretion.

8.       A new Section 5(a)(2)(A) is hereby added to read as follows:

         The referral by ASF to AMEX of Clients that become AMEX Customers due
         to such referral shall require AMEX to pay ASF commissions based upon
         the following schedule:

         o        $*** for referred AMEX Customers with an estimated charge
                  volume (as determined by AMEX standard procedures) in the
                  *** after the referral becomes an AMEX Customer of $***;

         o        $*** for referred AMEX Customers with an estimated charge
                  volume (as determined by AMEX standard procedures) in the
                  *** after the referral becomes an AMEX Customer of
                  $*** - $***; and

         o        $*** for referred AMEX Customers with an estimated charge
                  volume (as determined by AMEX standard procedures) in the
                  *** after the referral becomes an AMEX Customer of over
                  $***.

9.       This Pilot Third Amendment is entered into for a period beginning upon
         the execution of this Pilot Third Amendment and ending 90 days
         thereafter (the "Pilot Termination Date").

10.      Notwithstanding anything else herein to the contrary, the rights and
         obligations identified in this Pilot Agreement shall only bind the
         parties hereto in the following AMEX determined metropolitan areas
         Houston, Los Angeles and San Diego.

11.      This Pilot Third Amendment shall only extend beyond the Pilot
         Termination Date, if mutually agreed to in writing.

12.      Should the parties mutually agree in writing to extend the term of this
         Pilot Third Amendment, then the parties agree to discuss the issuance
         of performance based warrants to AMEX. Notwithstanding the preceding
         sentence, nothing in this paragraph shall obligate ASF to issue any
         such performance based warrants to AMEX. The decision to issue any such
         performance based warrants will be made in ASF's sole discretion and is
         subject to the approval of the ASF DE board of directors.

13.      This Pilot Third Amendment may be executed in any number of
         counterparts, each of which when so executed and delivered shall be an
         original, but all of which shall together constitute one and the same
         instrument.

14.      Except as modified by this Pilot Third Amendment, the Second Amendment
         and the First Amendment, the Marketing Agreement shall continue in full
         force and effect. The Marketing Agreement, the First Amendment, the
         Second Amendment and the Pilot Third Amendment shall be read, taken and
         construed as one and the same instrument.



                                       -3-


15.      This Pilot Third Amendment constitutes the entire agreement between the
         parties with respect to the subject matter hereof and supersedes all
         prior contemporaneous oral or written understandings or agreements
         among the parties, which relate to the subject matter hereof.

16.      This Pilot Third Amendment shall be binding upon and shall inure to the
         benefit of and be enforceable by the parties hereto and their
         respective successors and permitted assigns.

17.      Upon the execution and delivery of this Pilot Third Amendment by the
         parties hereto, this Pilot Third Amendment shall be and become a
         binding agreement among the parties hereto in accordance with the terms
         herein.

                           Very truly yours,

                           ADMINISTAFF, INC.


                           By: /s/ Jay E. Mincks
                               ------------------------------------------------
                           Name:  Jay E. Mincks
                           Title: Executive Vice President, Sales & Marketing


                           ADMINISTAFF OF TEXAS, INC.


                           By: /s/ Jay E. Mincks
                               ------------------------------------------------
                           Name:  Jay E. Mincks
                           Title: Executive Vice President, Sales & Marketing


                           ADMINISTAFF COMPANIES, INC.


                           By: /s/ Jay E. Mincks
                               ------------------------------------------------
                           Name:  Jay E. Mincks
                           Title: Executive Vice President, Sales & Marketing


Accepted and agreed to:

AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.


By:  /s/ Greg Daniel
    ---------------------------------------
Name:   Greg Daniel
TITLE:  VICE PRESIDENT



                                      -4-





EXHIBIT A

TELEMARKETING GUIDELINES
OUTBOUND SERVICES

The Fees include any and all services associated with telemarketing activities
including, but not limited to, the following:

Reporting:

   Format, frequency and transmission method will be specified by AXP including
   those reports specified in Attachment 1.

   Administaff agrees to reasonably cooperate with AXP in the development and
   implementation of AXP's Automated Channel Management process ("ACM"). Such
   cooperation will include Administaff's submission via electronic transmission
   of certain data elements identified by AXP in a format and frequency
   requested by AXP, input for an ACM requirements document to be created by
   AXP, consultation in the adjustment by AXP as necessary of any performance
   standards or measures which may be impacted by ACM, and participation in
   AXP's testing of ACM. Administaff will continue to perform its existing
   reporting services until such time as ACM testing is completed to AXP's
   satisfaction and the parties agree that ACM is ready for implementation. Upon
   conclusion of testing and prior to implementation, AXP will finalize the ACM
   requirements document and such document shall be incorporated by reference
   into and made part of this Agreement. After implementation of ACM, AXP will
   have no further obligation to continue to bear any costs for any existing
   reporting which will be superseded by ACM reporting. If, during the course of
   development and testing of ACM or after its implementation, either party
   identifies any new data element(s) for reporting, the parties shall agree
   upon a timeframe for implementation of reporting such element(s) via ACM
   (consistent with any implementation process for new data elements which may
   be included in the requirements document) and, in the meantime, Administaff
   shall report such element(s) using the existing reporting process. Should any
   of the foregoing activities with respect to ACM development and
   implementation cause Administaff to incur additional costs, such costs shall
   be apportioned between Administaff and AXP as they may agree.

Standard Programming:

   All system development and any programming necessary to support ongoing
   programs including enhancements or changes to existing programs requiring
   less than 10 screen changes/additions per request, and any data table and
   report modifications associated with such changes/additions. All existing
   software applications which were developed for other clients but are not
   proprietary to other clients will be available free of charge to AXP.

Screen Design and Modification:

   Screen design for new programs and modification for ongoing programs.

Hiring and Training:

   Hiring and training of new employees for ongoing programs as well as program
   specific training to maintain the levels of service specified by AXP. In
   addition, Administaff shall ensure that all Administaff employees working on
   AXP programs complete AXP's "Basic Readiness/Information Protection"
   training. Administaff shall track all training and uptraining sessions
   completed on forms approved by AXP, obtain signatures on such forms from
   employees who attend the sessions, and provide copies of such signed forms to
   AXP on the first and third Monday of each month. All such employees must
   complete a Bank Readiness/Information Protection assessment after training.
   Team Leaders and Quality Analysts must have passing scores on such
   assessments for the programs they supervise or monitor. All such assessments
   shall be maintained in each employee's personnel file for as long as such
   file is maintained by Administaff. Administaff shall develop training
   curriculum materials for all new or test programs. Training materials will
   include instructor guides, student guides, measurement and evaluation tools,
   and computer based training programs developed, and other appropriate
   materials. Administaff will develop training curriculum materials for any
   program handled by Administaff for which no such materials have been
   developed. Administaff will update training curriculum materials for all
   programs to reflect any product or



                                      -5-


   program changes communicated to Administaff by AXP. All training materials
   concerning AXP's products and services shall be subject to AXP's prior review
   and approval.

Script Development & Alteration:

   Development of all scripts, alterations in connection with system/screen
   modifications and other alterations needed to maintain highest level of
   service.

Remote Monitoring:

   On-line, off-site monitoring capabilities (voice) for AXP to monitor ongoing
   calls at any time without prearrangement independently via ISDN lines. Access
   charge (telephone, data line usage) not included. Adequate technology
   resource to support ISDN technology, and updated on-line seating charts.

Data Exchange/Management/Storage:

   Including preparation of tapes and handling of tape exchanges and data
   transmission between AXP/AXP designated third parties and Administaff, list
   management (data manipulation, suppression, de-duping, etc.), data storage
   and retrieval, maintenance of telephone numbers and source code matrix,
   transmission of manual faxes. If dedicated date line is required for AXP data
   transmission, AXP will pay the line usage.

Service Coverage:

   Ability to meet schedules specified by AXP for programs (all days of the
   week, all times of the day). (Attachment 2)

Account Management:

   A single point of contact to handle day to day management of programs.
   Administaff ensures the team has adequate resources to meet AXP needs.

Ad Hoc Mini Surveys:

   Mini-surveys asking additional questions or collecting additional
   information.

Dial Transfer:

   Costs associated with transferring a call to an AXP Operating Center or third
   parties designated by AXP (telephone usage not included).

Monitoring:

   Monitoring will be conducted by qualified personnel, Administaff shall
   monitor weekly a number of calls equal to 5 times the number of telephone
   representatives assigned to AXP programs; provided, however, that each
   telephone representative shall be monitored no less than 10 times per month.
   In addition, Administaff shall monitor a minimum of 2 complete presentations
   per week per telephone representative. A "complete presentation" requires the
   telephone representative to pass the gatekeeper to attempt a sale with the
   designated contact on a call list. These evaluations will be available both
   individually and in a synthesized report format acceptable to AXP. Completed
   individual evaluations reported to AXP must be signed by the telephone
   representative.

Disaster Recovery:

   Maintenance, updating and testing of Disaster Recovery Plan and back-up
   system on a regular basis.

On the Job Training Support:

   Experienced telephone representatives, supervisors, training specialists
   and/or quality analysts to answer technical questions and provide performance
   feedback for new telephone representatives assigned to AXP programs, for a
   period of time to be agreed upon between AXP and Administaff (generally
   between one and two weeks, but no less than one week for programs with
   classroom training time of one week or greater) at a ratio not greater than
   one experienced telephone representative/supervisor/training
   specialist/quality analyst for every ten new telephone representatives.
   Administaff shall monitor new telephone representatives at least 10 times per
   week and provide to



                                      -6-


   AXP a weekly report of the results of such monitoring. Administaff shall
   establish a certification process mutually agreed upon with AXP for
   certification of new telephone representatives for AXP programs.
   Certification shall take into account a representative's assessment and
   monitoring scores during on the job training.

Documentation:

   Administaff will provide and maintain detailed technical documentation
   pertaining to each AXP program handled by Administaff, including the Middle
   Market program. Documentation should be completed prior to program launch
   unless approved otherwise by AXP. AXP shall have the right to prior review
   and approval of all such documentation. Administaff shall make such
   documentation available to AXP at any time upon AXP's request.

Document Retention:

   Administaff shall maintain the following documents for the periods indicated:

                                                                    
         Individual Representative Monitoring Reports                  12 mos.
         Monitor "Results" Reports                                     13 mos.
         Escalated Calls Report/Forms                                  12 mos.
         Training Tracking Forms                                        3 yrs.
         Health of Compliance Reports                                   3 yrs.
         General Correspondence                                        13 mos.



   Individual Representative Monitoring Reports shall be filed by representative
   and date. If a representative ceases employment with Administaff, such
   Reports nevertheless shall be maintained by Administaff for the period
   specified above.

Opt-Out:

ASF shall keep track of companies that select to opt-out. An excel file
containing i) the company name, ii) name of requester, and iii) [CID] shall be
emailed on a weekly basis by ASF to an AMEX Middle Market representative to be
designated by AMEX.



                                      -7-




         EXHIBIT A: ATTACHMENT 1


         OUTBOUND REPORTING REQUIREMENTS FOR ADMINISTAFF

         The following is a listing of the standard report elements required for
         the Middle Market Leads outbound program. Reporting will be broken out
         by AMEX List. Specifically, AMEX clients that are provided as part of
         the Corporate Services Middle Market List will be reported on
         separately from other AMEX lists that have been provided.

REPORT DATE:               9/6/2001                    START DATE: 06-JUL-2001

CELL CODE:                 070_3                       DAYS DIALED:  40

GROSS LEADS:               5136
SUPPRESSED LEADS:          0
NET LEADS:                 5136



                                  MON        TUE        WED        THU        FRI        WTD        MTD        PTD           %
                                --------   --------   --------   --------   --------   --------   --------   --------    --------
                                                                                              
Calling Hours                       0.00       3.61       4.30       3.77       0.00      11.68      11.68     338.08
Appointments                           0          2          1          1          0          4          4        139
Number of employees                    0         45         40         70          0        155        155       4674
Average number of employees            0         23         40         70          0         39         39         34

REFUSAL
Already with PEO Service               0          0          2          0          0          2          2         70       4.08%
Doesn't Have Time                      0          1          2          1          0          4          4         42       8.16%
Early Hang Up                          0          1          0          2          0          3          3         31       6.12%
Going Out of Business                  0          0          0          0          0          0          0          5       0.00%
New Business                           0          0          0          0          0          0          0          0       0.00%
Prefer to do it in-house               0          0          0          0          0          0          0         25       0.00%
Request Info Only                      0          0          0          0          0          0          0         59       0.00%
Upset with mEx                         0          0          0          0          0          0          0         11       0.00%
Can not afford                         0          0          0          0          0          0          0          4       0.00%
Qualified not interested               0          1          1          3          0          5          5         71      10.20%
Not interested                         0          5          7          5          0         17         17        395      34.69%
                                --------   --------   --------   --------   --------   --------   --------   --------
     Total Refusals                    0          8         12         11          0         31         31        713      63.27%

UNPRESENTABLES
Already met with Administaff           0          0          0          1          0          1          1         83       2.04%
Incorrect Industry                     0          1          3          2          0          6          6        292      12.24%
Less than 10 employees                 0          0          2          0          0          2          2        264       4.08%
Decision maker at other location       0          4          1          0          0          5          5        287      10.20%
Do not call                            0          0          0          0          0          0          0         44       0.00%
Language barrier                       0          0          0          0          0          0          0          7       0.00%
Wrong number                           0          0          1          0          0          1          1         77       2.04%
Tri tones                              0          0          0          0          0          0          0         81       0.00%
Already with Administaff               0          0          0          0          0          0          0         23       0.00%
Unable to reach                        0          0          0         -1          0         -1         -1          4      -2.04%
TM Call Rejected                       0          0          0          0          0          0          0          0       0.00%
                                --------   --------   --------   --------   --------   --------   --------   --------
TOTAL UNPRESENTABLES                   0          5          7          2          0         14         14       1162      28.57%

Contacts                               0         10         13         12          0         35         35        852      71.43%
Completes                              0         15         20         14          0         49         49       2014
Contacts / Hour                     0.00       2.77       3.02       3.18       0.00       3.00       3.00       2.52
Completes / Hour                    0.00       4.15       4.65       3.71       0.00       4.19       4.19       5.96
Cost Per Order                  $   0.00   $  52.36   $ 124.80   $ 109.29   $   0.00   $  84.70   $  84.70   $  70.54

Total appointments / Hour           0.00       0.55       0.23       0.27       0.00       0.34       0.34       0.41
Conversion %                        0.00%     20.00%      7.69%      8.33%      0.00%     11.43      11.43%     16.31%
List Penetration %                  0.00%      0.29%      0.39%      0.27%      0.00%      0.95%      0.95%     39.21%
Contact Penetration %               0.00%      0.19%      0.25%      0.23%      0.00%      0.68%      0.68%     16.59%
Unworkable %                        0.00%     33.33%     35.00%     14.29%      0.00%     28.57%     28.57%     57.70




                                      -8-




                                            TEAM RESULTS
- ------------------------------------------------------------------------------------------------------
              HOURS                                        CONTACT
TSR NAME      DIALED     SALES        SPH       CPO         / HOUR     TALK %       CONV %     OVERALL
- --------      ------     -----        ----   ---------     -------     ------       ------     -------
                                                                       
GOALS          8.00          4        0.50   $   60.00          6       50.00%       20.00%
- ------       ------      -----        ----   ---------     ------      ------       ------     -----
bwl294         2.92          3        1.03   $   28.16       5.48       65.41        18.75         1
aow407         6.80          6        0.88   $   32.95       4.56       65.59        19.35         2
lfj674         7.73          5        0.65   $   44.62       1.68       75.03        38.46         3
pwl937         6.40          3        0.47   $   61.70       1.56       55.78        30.00         4
TEAM          53.46         24        0.45   $   64.44       2.41       61.60        18.60         5
gpj117         4.82          2        0.41   $   70.73       1.24       56.43        33.33         6
lll451         7.52          3        0.40   $   72.50       3.72       63.43        10.71         7
mpw651         5.49          1        0.18   $  161.11       1.64       63.02        11.11         8
vil653         5.54          1        0.18   $  161.11       1.26       50.00        14.29         9
anw711         6.24          0        0.00   $    0.00       1.44       55.61         0.00        10



On a weekly basis, the key elements that need to be reported upon include:

                               Sample Report Data



                                         7/5           7/12           7/19           7/26        TOTAL
                                       -------       -------        -------        -------      -------
                                                                                 
Calling Hours                            1,804         2,481          2,481          2,965       22,669

Actual Calling Hours                     2,000         2,387          2,342          2,552       14,886

Difference (To Date)                       196           102            (37)

% of Goal (Hours)                          111%        102.4%          99.5%          95.4%

Contacts Per Hour                         7.00          7.00           7.00           7.00

Actual CPH (Weekly)                       7.62          7.32           6.26           6.09

Actual CPH (To Date)                      7.62          7.46           7.04           6.78

% of Goal (CPH)                          108.9%        106.5%         100.6%          96.8%

Conversion Rate                           13.1%         16.5%          18.3%          17.3%

Actual Conversion Rate (Weekly)          10.84%        16.40%         18.80%         17.14%

Actual Conversion (To Date)               10.8%        13.81%         15.35%         15.79%

% of Goal (Conversion)                    82.9%         91.7%          94.6%          95.4%

Sales / Hour                              0.92          1.15           1.28           1.21

Actual Sales / Hour (Weekly)              0.83          1.20           1.18           1.04

Actual Sales / Hour (To Date)             .083          1.03           1.08           1.07

% of Goal (SPH)                           90.2%         97.7%          95.1%          92.4%

Total Sales                              1,652         2,865          3,170          3,590       27,443

Actual Sales (Weekly)                    1,652         2,865          2,756          2,664       14,843

Actual Sales (To Date)                   1,652         4,517          7,273          9,937

Difference (To Date)                         0             0           -414         -1,340

% of Goals (Total Sales)                   100%        100.0%          94.6%          88.1%

Leads / Hour                                14            14             14             14

Actual Leads / Hour (Weekly)                22            19             13             11            0

Leads Used                              25,256        34,734         34,734         41,510      317,366

Actual Leads Used                       44,343        45,560         31,401         27,871

Lead Penetration                             6%           15%            24%            34%

Actual Lead Penetration                   10.5%         21.3%          28.8%          35.4%




                                      -9-






STANDARD OUTBOUND REPORTING ELEMENTS

Report format, distribution and frequency are to be jointly agreed upon during
the implementation phase.



DESCRIPTION                                                                  FREQUENCY
- -----------                                                                  ---------
                                                                          
Number of Dials made                                                         Daily
Number of Hours logged in making calls                                       Daily
Dials per Hour (Calculation)                                                 Daily
Key Measures Reports                                                         Daily
Summary of Telemarketing Activity                                            Weekly
Quality Measures Reports                                                     Weekly
Health of Compliance Reports                                                 Monthly
Summary of Telemarketing Activity                                            Monthly
Training Issues Gap Analysis Reports                                         Weekly




                                      -10-





EXHIBIT A: ATTACHMENT 2

SERVICE COVERAGE

STANDARD DIALING HOURS:

The dialing hours of this program will occur during the following time frames:

         o        9AM until 5PM within the time zone being called

         o        Monday-Friday

         o        No Saturdays, Sundays

BLACKOUT DATES:

         THE BLACKOUT DATES FOR THIS PROGRAM WILL COMPLY WITH STANDARD AMERICAN
         EXPRESS TELEMARKETING PRACTICES.

A list of blackout dates will be supplied at the program start.



                                      -11-





EXHIBIT A  ATTACHMENT 3

PROGRAM LEVEL CLASSIFICATION

Programs are classified into three Levels based on the degree of complexity
associated with telephone representative's activities. Factors to be considered
are degree of scripting, product/service knowledge and various skills required
such as selling, analytical, problem-solving, etc.

This Middle Market program will be classified as a Level III (the highest level
of complexity).



                                      -12-




EXHIBIT B: OUTBOUND PERFORMANCE STANDARDS

INPUT STANDARDS

Management Support: Administaff is to provide an adequate management team to
meet both qualitative and quantitative demands and appoint an individual to be a
single point of contact for AXP, in addition to a single point of contact at the
program level. This team shall include systems personnel for ongoing programs
and implementation support as well as systems development personnel for new or
migrating programs.

Telephone Representatives: Only those representatives dedicated to AXP programs
full time will be assigned to AXP programs. Representatives will not be allowed
to work on AXP programs on a shared basis with other clients' programs to the
extent feasible.

HANDLING STANDARDS

The following standards must be met for all outbound programs. (Attachment 1)

Accuracy of Information Provided: Information provided to AXP customers and
prospects by telephone representatives, including information on products,
benefits and promotional features, must be at least 98% accurate. Accuracy will
be measured monthly based on Administaff monitoring. AXP and Administaff will
participate in weekly calibration sessions to ensure that a consistent, mutually
agreeable scoring approach is applied. AXP may validate scoring results through
remote and/or on-site monitoring and/or scoring audits. If performance below 90%
accuracy occurs for three consecutive months or any four months in a
twelve-month period, AXP may terminate the Agreement immediately.

Accuracy of Information Recorded: For any program, data and information
collected and recorded by representatives, including name, phone number and
address, must be at least 98% accurate. Administaff will shadow monitor all
calls to ensure accuracy of information recorded. In the event that shadow
monitoring is not available, Administaff will conduct a back-end quality check
on all Administaff telephone monitors completed. Administaff will also conduct
back-end quality checks on 10% of all clerical transactions performed. Data
transmitted to New Accounts and database of AXP and third party designated by
AXP will be evaluated on the completeness of all relevant data fields as well as
accuracy. AXP will issue monthly reports based on the data received from
Administaff through daily data transmission. If performance below 90% accuracy
occurs for three consecutive months or any four months in a twelve-month period,
AXP may terminate the Agreement immediately.


In the event of a Disaster, Administaff shall be relieved from performing the
Services during the 72-hour period following the occurrence of the Disaster.



                                      -13-




EXHIBIT B: ATTACHMENT 1

[INTENTIONALLY DELETED]



                                      -14-




EXHIBIT C

INFORMATION PROTECTION REQUIREMENTS

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE AGREEMENT
("AGREEMENT") TO WHICH THIS EXHIBIT IS ATTACHED AND INCORPORATED INTO, AND IN
ADDITION TO AND NOT IN LIEU OF OTHER PROVISIONS IN THE AGREEMENT GOVERNING THE
TREATMENT OF AMEX DATA ("AXP DATA (AS DEFINED BELLOW)") BY ASF (REFERRED TO IN
THIS EXHIBIT AS "VENDOR"), VENDOR AGREES TO COMPLY WITH ALL OF THE PROVISIONS OF
THIS EXHIBIT AND TO CAUSE ALL VENDOR EMPLOYEES, AGENTS. REPRESENTATIVES,
SUBCONTRACTORS, OR ANY OTHER PARTY TO WHOM VENDOR MAY PROVIDE ACCESS TO OR
DISCLOSE AXP DATA TO COMPLY WITH ALL OF THE PROVISIONS OF THIS EXHIBIT.

"AXP Data" means all proprietary and confidential information of AMEX or its
subsidiaries, affiliates, or licensees (referred to in this Exhibit collectively
as "AXP") that is solely related to data concerning the Middle Market Leads that
is submitted to ASF by AMEX, including without limitation: 1) all information
defined as "Confidential Information," "Proprietary," or words to such effect in
the Agreement; and 2) all information regarding AXP customers, customer
accounts, customer names, addresses, social security numbers or any other
personal identifier, or any information derived therefrom; and 3) any and all
other information which by reason of its nature, source, use, or other
sensitivity would ordinarily be considered the confidential and proprietary
information of AXP.

1)       Vendor warrants that, where required by applicable law, Vendor's
         registrations with relevant regulatory bodies are current and adequate
         for the services to be supplied under this agreement.

2)       General.

         a)       All AXP Data remains at all times the sole property of AXP.

         b)       Vendor agrees to implement commercially reasonable measures
                  designed to ensure the security and confidentiality of AXP
                  Data, to protect AXP Data against any anticipated threats or
                  hazards to the security or integrity of AXP Data, and to
                  protect against unauthorized access to, or use of, AXP Data.

         c)       Vendor must not permanently enhance its own in-house lists or
                  files ("House Files") by using names, addresses, or any other
                  information, whether specified or inferred, that is part of or
                  obtained from the AXP Data.

         d)       Vendor must not retain all or any portion of the AXP Data, in
                  any manner whatsoever, nor permit any parent, subsidiary,
                  affiliate, third party, agent, employee or contractor, or
                  their respective agents or employees to retain any such
                  information, beyond the completion of performance of Vendor's
                  obligations under the Agreement.

         e)       Vendor must not use the AXP Data for any purpose other than
                  the purpose for which AXP Data was provided to Vendor as set
                  forth in the Agreement and must cause all Vendor employees,
                  agents, representatives, or any other party to whom Vendor may
                  provide access to or disclose AXP Data to limit the use of AXP
                  Data to that purpose.

         f)       Vendor agrees to comply with all applicable AXP security
                  policy standards and procedures as outlined in this Agreement.

         g)       Vendor must cause each Vendor employee who is granted access
                  to AXP Data to sign the Confidentiality and Workstation Rules
                  Agreement attached hereto, and Vendor must use commercially
                  reasonable efforts to cause each such employee to comply with
                  its terms.

3)       Transfer to Third Parties.



                                      -15-



         a)       Vendor must not disclose AXP Data to any subcontractor,
                  service provider, or any other third party ("Third Party")
                  without the prior approval of AXP.

         b)       Any transfer of AXP Data to a Third Party by Vendor shall be
                  for the sole purpose of fulfilling Vendor's obligations under
                  the Agreement.

         c)       Vendor must not assign, transfer, or otherwise disclose AXP
                  Data to a Third Party prior to causing the Third Party to
                  execute a binding document committing the Third Party to
                  comply with the Information Protection Requirements set forth
                  in this Exhibit.

4)       Indemnity.

         a)       Vendor will indemnify AXP for any loss or misuse of AXP Data
                  by Vendor or its employees or by any Third Party to which
                  Vendor discloses AXP Data.

         b)       In the event of any actual or threatened unauthorized use or
                  disclosure of AXP Data by Vendor's employees or the employees
                  of any Third Party to which Vendor has disclosed AXP Data,
                  Vendor will notify AMEX of such actual or threatened
                  unauthorized use or disclosure and to provide reasonable
                  assistance to AMEX to enforce AMEX rights to prevent such
                  actual or threatened unauthorized use or disclosure.

5)       Physical Security Controls. Vendor must document and maintain adequate:

         a)       Physical security controls over all vendor facilities where
                  AXP Data is filed or stored. Examples include appropriate
                  alarm systems, access controls (including off-hours controls),
                  visitor access procedures, security guard force, fire
                  suppression, video surveillance, and staff egress searches, as
                  appropriate under applicable law.

         b)       Trash disposal programs that provide for the secure disposal
                  of sensitive trash at all vendor facilities where AXP Data is
                  filed or stored. Sensitive trash is defined as any discarded
                  material that contains AXP Data.

         c)       Security and environmental controls over all computer rooms,
                  voice rooms and related equipment (UPS, climate control,
                  etc.), which will be used in conjunction with AXP Data,
                  including restricting access to only approved staff.

6)       Data Security Controls. Vendor must document and maintain adequate:

         a)       Data security controls, such as but not limited to logical
                  access controls including user sign-on identification and
                  authentication, data access controls (e.g. password protection
                  of AXP applications, data files, and libraries),
                  accountability tracking, anti-virus software, secured
                  printers, restricted download to disk capability, and
                  provision for system backup. Vendor must ensure at each site
                  that once the data is downloaded to the secured server,
                  appropriate data controls are implemented and that no shared
                  environments exist with other businesses for all WANs, LANs,
                  network connections, dial-up connections, DASD, distributed
                  systems, or any other computer systems.

         b)       Retention processes and policies for all security data events
                  (i.e., reports) in accordance with legal and regulatory
                  requirements.

         c)       Controls in configuring and operating voice systems,
                  especially as regards fraudulent use of 800 numbers, PBX
                  switches, and other voice networks.

7)       Disaster Recovery. ASF agrees to maintain appropriate disaster recovery
         plans and shall periodically update and test its plan. In the event
         ASF's disaster recovery plan is implemented and its normal business



                                      -16-




         operations are not restored within 90 days of such implementation, AMEX
         may terminate this Third Amendment upon prior written notice to ASF.

8)       Employees.

         a)       Vendor must, in accordance with applicable law, perform
                  background checks on all employees assigned to perform
                  Vendor's obligations under the Agreement.

         b)       Vendor's policies must require its employees to report
                  suspected violations of the Information Protection
                  Requirements set forth in this Exhibit and suspected
                  violations of Vendor's data security policies to Vendor
                  management for investigation and action.

         c)       Vendor must provide to AXP a listing of all employees assigned
                  to work on AXP business upon request.

         d)       Vendor must cooperate fully with AXP in any investigations of
                  possible fraudulent or unauthorized use or access of AXP Data
                  by Vendor's employees.

         e)       Vendor must implement and document consequence management
                  policies for violations of the Information Protection
                  Requirements set forth in this Exhibit and for violations of
                  Vendor's data security policies.

9)       Audits and Inspections.

         a)       Vendor must document and provide to AXP copies of all internal
                  security policies and standards (including escalation
                  procedures for non-compliance) for AXP review upon execution
                  of the Agreement.

         b)       Vendor must allow scheduled and unscheduled on-site
                  inspections by AXP with notice during regular business hours.

         c)       Vendor must comply with all reasonable recommendations from
                  AXP that result from such inspections to meet these
                  Information Protection Requirements. Vendor must respond in
                  writing within thirty days to all recommendations that result
                  from on-site inspections by AXP.

         d)       Vendor must provide to AXP a copy of the most recent third
                  party data processing audit or review, as conducted by the
                  Vendor's external auditors. In addition, Vendor must provide
                  to AXP copies of any related audits that include data
                  processing activities within their scope from Vendor's
                  internal auditors.

10)      Right to Monitor Data.

         a)       Vendor agrees to allow AXP to monitor the AXP Data in any
                  manner determined by AXP to prevent the improper or
                  unauthorized use of the AXP Data, and such monitoring may
                  include, but is not limited to, the use of decoy names and
                  addresses.

         b)       Vendor must not use any method to detect, alter, or eliminate
                  decoy names or information embedded by AXP in AXP Data.

11)      Vendor Employees Access.

         a)       All Vendor employees accessing AXP's systems via a dial-up
                  connection must utilize AXP-owned or leased equipment and must
                  utilize approved authentication mechanisms with such
                  equipment.



                                      -17-


         b)       Vendor must ensure that all of its employees who are users of
                  any AXP system will be fully informed (at least annually) of,
                  and monitored for adherence to, these Information Protection
                  Requirements.

12)      Security Administration.

         a)       Vendor management personnel ("Vendor Security Administrators")
                  must retain sole responsibility for granting access to AXP
                  systems for all Vendor employees and users.

         b)       Vendor Security Administrators must document all procedures
                  for user ID requests, transaction authorization, and system
                  use.

         c)       Vendor Security Administrators must review all violation
                  and/or monitoring reports and take action as necessary to
                  prevent unauthorized access and use of AXP systems or AXP
                  Data.

         d)       Upon the change of job function, transfer, or termination of
                  any Vendor employee who has access to AXP systems or AXP Data,
                  Vendor must immediately delete the user ID of that Vendor
                  employee.

13.      Account Access. Vendor must cause Vendor employees to access, make
         maintenance changes to, or perform financial adjustments only on those
         AXP accounts as required by their job responsibilities. In addition,
         Vendor must cause Vendor employees to not access:

         a)       Their own account or any AXP Data regarding such employee for
                  any reason.

         b)       Another Vendor or AXP employee's account or any AXP Data
                  regarding such employee if Vendor's employee has personal
                  knowledge that the account or other AXP Data is regarding
                  another Vendor or AXP employee.

         c)       An account held by or regarding anyone Vendor's employees know
                  outside of work.

         d)       Any account or AXP Data that Vendor's employees are not
                  required to access as part of their job responsibility.

14)      Access Management. Vendor must ensure that user IDs and passwords for
         AXP systems will be controlled as follows:

         a)       Unique ("single user") ownership of user ID.

         b)       No "generic" or group user ID.

         c)       Immediate revocation or deletion of all access rights for any
                  terminated, leave of absence, or transferred Vendor employee.

         d)       Access rights to systems, transactions, screens, or data on a
                  "need to know", job function basis.

         e)       If a user ID is revoked, re-authentication and positive
                  identification of the user must occur before the user ID can
                  be reactivated.

         f)       Vendor must enforce the principle of segregation of duties.

15)      Right to Monitor Access. Vendor agrees that all access to AXP systems
         may be monitored at will by AXP for compliance with these Information
         Protection Requirements.



                                      -18-



16)      Workstation Controls. Vendor must ensure all workstations which allow
         access to AXP Data are controlled. All software used on any workstation
         must be properly licensed and used in accordance with the applicable
         license agreement. All software used must be approved by AXP. All such
         workstations must be:

         a)       located in a physically segregated work area.

         b)       positioned to face away from any common areas of the facility
                  such as windows.

         c)       equipped with appropriate access control, including password
                  protected screen savers, and/or time-out after 10 minutes or
                  less of non-use.

         d)       configured with current anti-virus software, and provide a
                  mechanism to ensure that the anti-virus software is kept
                  current.

17)      Activity Log. Vendor must log all activities by Vendor employees in
         regards to accessing AXP Systems, including inquiries. This audit data
         must be retained for one year.

18)      Systems Security.

         a)       Vendor must document and maintain adequate:

                  i.       Host-based intrusion detection capabilities to ensure
                           that successful attacks against the front-tier of
                           servers will be detected.

                  ii.      On high risk server platforms, such as NT, host-based
                           intrusion detection mechanisms.

         b)       Vendor must perform maintenance access to production servers
                  over a protected, dedicated network between Vendor's corporate
                  offices and the production systems. Vendor must not perform
                  maintenance access to production servers over the Internet.

         c)       Vendor's systems network must be configured so that each
                  desktop and laptop machine and all inbound and outbound mail
                  servers have current anti-virus protection.

19)      Operations Procedures.

         a)       Vendor must implement an adequate active load balancing system
                  that will transparently switch customers from a failed server
                  to a working one. Vendor must ensure that there is no single
                  point of failure in the production implementation of the
                  application.

         b)       Vendor must use a tape backup system and use a daily tape
                  transfer to a secure offsite data repository.

         c)       Vendor must put in place written procedures that cover the
                  following:

                  i.       Configuration and change control management
                           procedures.

                  ii.      Security patch and system update identification
                           procedures.

                  iii.     Escalation procedures in the event of operational
                           failures, or an intrusion being detected.

20)      Data Separation. Vendor must maintain all AXP Data logically separate
         from other customers' data and identifiable as AXP Data. Physical
         separation (i.e. separate servers) may be required in high sensitivity
         cases as determined by AXP.

         a)       Control Datastores. [Not applicable.]



                                      -19-



         b)       Remote Access Authentication. [Not applicable.]

         c)       Encryption.

         d)       128-bit encryption (or higher) must be used when transmitting
                  and/or communicating AXP Data across the Internet. Any
                  communication of confidential information across the Internet
                  must use an encryption system that is acceptable to AXP.
                  Within the United States, 128-bit encryption using standard
                  protocols such as SSL, or 3DES are the minimum acceptable.

21)      Development Separation.

         a)       Procedures must exist to separate the application development
                  process from the data it operates on.

         b)       Development staff must not have access to the production
                  servers; operations staff must not generally have access to
                  the development source.

         c)       Access controls on various servers must be used to ensure that
                  these policies are adhered to.

22.      Data used in development and test systems must not contain direct
         copies of production data under any circumstances.



                                      -20-





CONFIDENTIALITY AND WORKSTATION RULES AGREEMENT

         The individual specified below ("you" or "your"), in connection with
work performed for the company specified below ("Company") may have access to
trade secrets, confidential information, files, records and forms (collectively
"Confidential Information") of American Express Travel Related Services, Inc.
and its affiliates (collectively, "American Express"). Confidential Information
includes, but is not limited to, any information relating to American Express
Cardmember accounts ("Accounts"), American Express organizational structure,
marketing philosophy and objectives, project plans, data models, strategy and
vision statements, business initiatives, business requirements, systems design,
methodologies, processes, competitive advantages and disadvantages, financial
results, product features, systems, operations, technology, customer lists,
customer account information, product development, advertising or sales programs
and any other information which would give American Express an opportunity to
obtain an advantage over its competitors or which American Express is ethically
obligated to protect from unauthorized sources. None of such information shall
be deemed to be in the public domain.

         American Express desires to protect its Confidential Information and
therefore requires that you agree, as a condition of your performing services
("Services") pursuant to American Express' agreement with Company, to safeguard
all Confidential Information and not to reveal Confidential Information to any
third party (including, without limitation, at conferences, seminars, meetings
of professional organizations or by publication in journals or granting of
interviews to journalists and other members of the news media) or use
Confidential Information for your own benefit or the benefit of any third party,
except to the extent necessarily required for your performance of Services.

         You agree not to discuss Confidential Information in public places.

         You agree that any work product produced or developed by you in the
performance of your Services shall constitute Confidential Information subject
to this Agreement and such work product is, and shall remain, the property of
American Express.

         In connection with your use of American Express' computer workstations
and your access to American Express MIS systems, in addition to all other
provisions of this Agreement, you agree that:

o   You will not access your own Account for any reason;

o   You will not access another employee's Account if you have personal
    knowledge that the account holder is an employee;

o   You will not access any Account held by anyone you know outside of work;

o   You will not access any Account that you are not required to access as part
    of your performance of the Services.

         You will sign off when you leave your workstation and sign back on when
you return, including, but not limited to, time away from your desk for breaks,
lunch, meetings, etc.

         You will not give your password to any person and you are not to use
another person's password or identification number. Your password identifies you
to the system. The computer system tracks all entries that are made by the
person who makes them. If your password is used by anyone in a manner that
results in errors or fraud, you would be held accountable for the errors or
fraud.

         All terminals are subject to monitoring and terminal monitoring may
occur simultaneously with telephone monitoring. In addition, you should
understand that all transactions in the system are recorded by the computer.
Printouts listing all transactions by a personal identification number and
password are monitored on a regular basis.

         These rules are extremely important. Any employee who willfully
disregards these rules and regulations is subject to discipline, up to and
including discharge from employment.

         You also agree to help safeguard American Express customers'
expectations of privacy by exercising diligence and care in the handling of
Confidential Information relating to them.



                                      -21-



         By signing below, you indicate that you understand the above terms and
that, as a condition of performing Services, you agree to adhere to them.


COMPANY:

- -----------------------      ---------------------------       ----------------
Full Legal Name              Your Name (Print)                 Date



                             --------------------------
                             Your Signature (Sign Here)



                                      -22-




EXHIBIT D: OUTBOUND COMPENSATION

         Rates:

         Telemarketing Program Costs:

The following rates will be applied to outbound services for the first 14 weeks.
At the end of 14 weeks, the payment schedule will be reviewed and mutually
agreed upon by American Express and Administaff.

During the first 14 weeks, the rates are inclusive of all Administaff's costs
and expenses of providing outbound telemarketing services, including, but not
limited to, those services listed in Exhibit B, excepting those services listed
below as additional services.

                                                          
RATE SUMMARY

INITIAL PROGRAM START UP

Hourly Connection Rate                                       $ 29.00
ADDITIONAL SERVICES (PER HOUR)
         Training                                            $ 15.50
         Programming                                         $ 75.00


STANDARD PROGRAM RUN
RATE SUMMARY:
         To be determined at the end of Pilot.





                                      -23-

EX-10.3

                                                                   EXHIBIT 10.3





                       MINIMUM PREMIUM FINANCIAL AGREEMENT

                                 BY AND BETWEEN

                           ADMINISTAFF OF TEXAS, INC.

                                       AND

                       UNITED HEALTHCARE INSURANCE COMPANY
                              HARTFORD, CONNECTICUT



*** indicates material has been omitted pursuant to a Confidential Treatment
Request filed with the Securities and Exchange Commission. A complete copy of
this agreement has been filed separately with the Securities and Exchange
Commission.




                       MINIMUM PREMIUM FINANCIAL AGREEMENT
                                TABLE OF CONTENTS


               
Section 1:        Definitions
Section 2:        Insurance
Section 3:        Premium
Section 4:        Term and Termination of the Agreement
Section 5:        Changes in Maximum Monthly Employer Benefit Obligation and Premium
Section 6:        Representations of the Parties
Section 7:        Guaranty of Administaff Inc.
Section 8:        Notices
Section 9:        Choice of Law
Section 10:       Entire Agreement, Amendment and Waiver

Exhibit A         Reviews and Establishment of Monthly Payable Rates
                  and Premiums
Exhibit B         Non-MP Policies
Exhibit C         Minimum Premium Financial Agreement Banking Arrangement




                                       2



                       MINIMUM PREMIUM FINANCIAL AGREEMENT
                                 BY AND BETWEEN

                           ADMINISTAFF OF TEXAS, INC.

                                       AND

                       UNITED HEALTHCARE INSURANCE COMPANY
                              HARTFORD, CONNECTICUT

WHEREAS, the Employer is a "professional employer organization" that establishes
employment relationships with the employees of its clients; and

WHEREAS, the Employer has established an employee welfare plan (the "Plan") for
certain employees, former employees and their dependents of the Employer; and

WHEREAS, the Company has issued several group health insurance policies with
respect to the Plan;

NOW THEREFORE, in consideration of the mutual promises contained in the
Agreement, the Employer and the Company agree as follows:

1.   DEFINITIONS

     (a)  "Agreement" means this Minimum Premium Financial Agreement, including
          any attached Exhibits, as amended from time to time.

     (b)  "Arrangement Month" means each calendar month during the period that
          both a Policy and the Agreement are effective.

     (c)  "Arrangement Quarter" means each calendar quarter during the period
          that both a Policy and the Agreement are effective.

     (d)  "Check" means the instrument of payment issued by the Company for the
          payment of Health Benefits pursuant to the Agreement, whether such
          instrument is a draft, a check, an electronic funds transfer or
          similar instrument.



                                       3


     (e)  "Claims Account" shall have the meaning assigned to it in section 2(a)
          of the Agreement.

     (f)  "Company" means United HealthCare Insurance Company.

     (g)  "Employer" means Administaff of Texas, Inc.

     (h)  "Employee" means an employee or former employee of the Employer or of
          a member of Employer's controlled group as defined in Section 414(b)
          and (c) of the Internal Revenue Code of 1986, as amended, which is a
          participating employer under the Plan who is covered under the Plan,
          and a "qualified beneficiary" who is covered under the Plan pursuant
          to Title X of the Consolidated Omnibus Budget Reconciliation Act of
          1985, as amended from time to time ("COBRA"), except that members of a
          family unit who elect COBRA coverage as a single family unit shall be
          considered a single "Employee."

     (i)  "Health Benefits" means the medical and dental benefits that are
          payable by the Company under the terms of the Policies. For purposes
          of the Agreement, overpayment and subrogation recoveries (less the
          percentage of each such recovery that the Company retains or is
          charged by its vendors for its services in pursuing the recovery)
          shall be included as a credit to Health Benefits. There shall be no
          credit to Health Benefits for any *** or other payments received by
          the Company from *** or other third parties in connection with ***
          benefits under the Plan.

          In the second and third Arrangement Months of an Arrangement Quarter,
          Health Benefits shall also include those Health Benefits Paid during
          the prior Arrangement Month to the extent that they exceeded the ***.

     (j)  "Incurred" when referring to Health Benefits means that the Company
          has become liable for payment of such Health Benefits under a Policy.

     (k)  "Investment Grade" means a debt rating of BBB- or better (in the case
          of Standard & Poor's) and Baa3 or better (in the case of Moody's). If
          the debt in question is rated by both Standard & Poor's and Moody's,
          such debt shall not be deemed Investment Grade for purposes of the
          Agreement unless the ratings provided by both rating services qualify
          as Investment Grade as defined herein.



                                       4


     (l)  "MP Administrative Services Agreement" means the Minimum Premium
          Administrative Services Agreement between the Employer and the
          Company, as amended from time to time.

     (m)  "Maximum Monthly Employer Benefit Obligation" for an Arrangement Month
          shall be the sum of the following:

                  *** of the *** for each *** Policy
                  *** of the *** for each *** Policy

          The Maximum Monthly Employer Benefit Obligation for an Arrangement
          Month (other than the first Arrangement Month of an Arrangement
          Quarter) shall be increased by the amount by which the *** in the
          Arrangement Month exceeded the Health Benefits Paid in that ***.

     (n)  "Minimum Premium Arrangement" and "Arrangement" mean the minimum
          premium payment arrangement with respect to the Policies as described
          in the Agreement.

     (o)  "MP Premium" has the meaning assigned to it in section 3(a) of the
          Agreement.

     (p)  "Non-MP Policy" means a policy or group contract issued by the Company
          providing benefits under the Plan which are not covered by the Minimum
          Premium Arrangement. "Non-MP Policies" refer collectively to two or
          more such policies, group contracts or both. Non-MP Policies are
          identified in Exhibit B.

     (q)  "Paid" when referring to Health Benefits means that a Check for
          payment of the Health Benefit has been presented to and paid by the
          payor bank.

     (r)  "Plan" has the meaning assigned to it in the recitals to the
          Agreement.

     (s)  "Policy" means each of the following policies issued by the Company to
          provide Health Benefits under the Plan:


                                       5


          (i)  Policy No. 701648 (DA, DB, DC, DD, CX) (""Medical Policy")

          (i)  Policy No. 701648 (DE) ("Dental Policy")

          The Medical Policy and Dental Policy are referred to collectively as
          "the Policies." The Employer and the Company may agree to designate
          another policy (or component) issued by the Company as a "Policy"
          hereunder, to substitute a new policy for a Policy currently
          designated or to remove a Policy (or component) from this definition.

     (t)  "Policy Year" means each calendar year or portion thereof during which
          a Policy is in effect.

     (u)  "Prior Policy" means Group Policy No. GP-608634 issued by Aetna Life
          Insurance Company to the Employer. Expenses for medical and dental
          benefits incurred under the Prior Policy are not covered by any of the
          Policies.

     (v)  "Quoted Premium" means the total amount of premium the Employer would
          have been charged for Health Benefits of each Policy for an
          Arrangement Month if the provisions of the Agreement were not in
          effect, as determined by the Company in accordance with the terms of
          the Agreement. For purposes of calculating the Maximum Monthly
          Employer Benefit Obligation and the MP Premium during the term of the
          Agreement, the Quoted Premium for an Arrangement Month shall be deemed
          to include any adjustments authorized in Exhibit E of the MP
          Administrative Services Agreement in respect of previous Arrangement
          Months including any enrollment additions, terminations or changes in
          coverage not known at the beginning of the Arrangement Month to which
          such Quoted Premium applies. Any such adjustment shall be based on the
          Quoted Premium in effect for the Arrangement Month in respect of which
          an adjustment is made.

          The Quoted Premiums under the Policies shall be periodically reviewed
          and adjusted in accordance with Exhibit A to the Agreement.

     (w)  "Security Deposit" has the meaning assigned in the Security Deposit
          Agreement.



                                       6


     (x)  "Security Deposit Agreement" is the Security Deposit Agreement between
          the Company and the Employer, as amended from time to time.

2.   INSURANCE

The Company's agreement under the Policies to insure the Employer's Employees is
changed as follows:

     (a)  Benefit Payments Paid during Policy Continuance. The Company shall pay
          from the claims account established as provided in section 2(d) below
          (the "Claims Account") those Health Benefits of the Policies that are
          Paid during the Arrangement Month and that in the aggregate are equal
          to or less than the Maximum Monthly Employer Benefit Obligation for
          the Arrangement Month. The Employer shall fund that Claims Account as
          provided in section 2(d) of the Agreement. For Health Benefits that
          are Paid prior to termination of the Policies, the Company shall pay
          from its own funds those Health Benefits that are Paid during an
          Arrangement Month to the extent that they exceed the Maximum Monthly
          Employer Benefit Obligation for the Arrangement Month.

     (b)  Benefits Paid After Policy Termination. In the event that a Policy is
          terminated, the Company shall be responsible for paying from its own
          funds Health Benefits of such Policy that are Incurred but not Paid
          before such Policy terminates. The Maximum Monthly Employer Benefit
          Obligation does not apply to such Health Benefits.

     (c)  Company's Obligation. Any Health Benefits of the Policies that are
          required to be paid from the Claims Account shall be paid by the
          Company from its own funds if the Health Benefits are not paid by
          another source, which may include the Employer or another funding
          vehicle established or maintained by the Employer for that purpose.
          The Employer agrees to reimburse the Company for any Health Benefits
          paid by the Company pursuant to this obligation.

     (d)  Claims Account. The Company and the Employer shall establish and
          maintain those banking arrangements, including the Claims Account,
          described in Exhibit C to the Agreement.


                                       7


          In addition to its obligations under Exhibit C, the Employer shall
          fund the Claims Account as necessary to enable the Company to pay in a
          timely manner from the Claims Account the Health Benefits described in
          section 2(a).

          (i)  If the Employer does not maintain the banking arrangements
               required in this section or in Exhibit C, including any required
               balance, the Company will provide notice to the Employer so that
               it can take corrective action, and the Company may terminate the
               Agreement in accordance with section 4 of the Agreement.

          (ii) After a reasonable period of time as determined by the Company,
               the Company shall place stop payment instructions on Checks
               issued pursuant to the Agreement that are not Paid. The Company
               shall be responsible for complying with applicable abandoned
               property laws, if any, with respect to any Checks that are not
               Paid prior to the termination of the Agreement. Any amount
               transferred to a state in compliance with such laws shall be
               treated as Paid on the date that the transfer is made.

          (iii) Upon termination of the Agreement, the Claims Account shall be
                closed as soon as reasonably practicable after the Company
                determines that all Health Benefits required to be Paid from the
                Claims Account have been Paid, and any funds remaining in the
                Claims Account shall be recovered by the Employer, subject to
                the Company's right to offset such funds against amounts owed
                to it under the Minimum Premium Arrangement.

3.   PREMIUM

The amount of premium to be paid by the Employer to the Company for insurance of
the Health Benefits payable under the Policies, as modified by the Agreement, is
changed to be equal to the sum of (a) the MP Premium, and (b) the ***. All of
the provisions of each Policy that apply to "premium" for Health Benefits of the
Policy apply to the MP Premium and the ***.



                                       8


     (a)  MP Premium. The MP Premium for the Policies for the Arrangement Month
          shall be the sum of the following:

                  *** of the for each *** policy
                  *** of the for each *** policy

          The MP Premium is due on the first day of the Arrangement Month to
          which it applies. As provided in section 1(v) of the Agreement, the MP
          Premium may include any adjustments authorized in Exhibit E of the MP
          Administrative Services Agreement in respect of previous Arrangement
          Months including any additions, terminations or changes in coverage
          not known at the beginning of the Arrangement Month to which such MP
          Premium applies.

     (b)  Additional Quarterly Premium. For each Arrangement Quarter, the
          Employer shall pay an Additional Quarterly Premium to the Company in
          an amount equal to ***, before the *** of the Agreement for the
          Arrangement Months in such Arrangement Quarter less the Health
          Benefits Paid by the Company from the Claims Account in such
          Arrangement Quarter. Such invoice shall be sent by the Company no
          later than *** months following the close of the Policy Year which
          includes the Arrangement Quarter to which such invoice relates. An
          Additional Quarterly Premium shall not be due with respect to any
          Arrangement Quarter in a Policy Year if a written invoice for such
          Additional Quarterly Premium is not sent by the Company to the
          Employer within *** months of the close of the Policy Year; provided
          that the Company shall not have been prevented by the Employer from
          exercising its right to audit the Employer as provided in section 5(c)
          of the MP Administrative Services Agreement. The Additional Quarterly
          Premium shall be paid by the Employer within *** calendar days of the
          date of the Company's invoice and *** provided in any Policy shall be
          applicable to the payment of the Additional Quarterly Premium.

4.   TERM AND TERMINATION OF THE AGREEMENT

     (a)  The Agreement shall be effective as of January 1, 2002 ("Effective
          Date") for an initial period of twelve (12) months ("Agreement
          Period") and shall continue automatically for


                                       9


          successive Agreement Periods of twelve (12) months each unless it is
          terminated earlier in accordance with this section 4.

     (b)  The Agreement may be terminated as follows:

          i.   Either party may elect to terminate the Agreement upon the
               insolvency of the other, or the filing of a petition in
               bankruptcy by or against the other, the appointment of a receiver
               for the other or its property, execution of an assignment by the
               other for the benefit of creditors, or conviction of the other or
               any principal officer or manager of the other for any crime
               tending to adversely affect the ownership or operation of the
               business.

          ii.  Either party may elect to terminate the Agreement as of the last
               day of an Arrangement Quarter by giving written notice to the
               other party at least 180 calendar days prior to the date of
               termination.

          iii. The Agreement shall automatically terminate upon the date as of
               which all Policies are terminated.

          iv.  Either party may elect to terminate the Agreement due to a
               material breach of the Agreement (other than non-payment) by the
               other party, if notice of the breach is provided by the
               non-breaching party and the breach is not cured within 90
               calendar days of such notice. In such event, the termination
               shall be effective on the date designated by the non-breaching
               party, which date is no earlier than the date that the
               non-breaching party provided notice of the breach to the
               breaching party.

          v.   Except as provided in subparagraph vii, the Company may elect to
               terminate the Agreement effective on or after the first day of an
               Arrangement Month in which the Employer fails to (A) pay any fee,
               tax, premium or other amount owed under the Agreement or the MP
               Administrative Services Agreement, (B) pay any amounts due under
               the Policies (as modified by the Agreement) or under any Non-MP
               Policy, (C) fund the Claims Account described in section 2(d) of
               the Agreement, or (D) deposit any portion of the Security Deposit
               required by the Security Deposit Agreement.



                                       10


            vi.   The Company may elect to terminate the Agreement as of the
                  date of the Employer's failure to comply with any duty
                  described in section 6 of the MP Administrative Services
                  Agreement, if the Company provides notice of the failure and
                  the Employer does not cure it within *** calendar days of the
                  notice.

            vii.  Any grace period otherwise applicable under a Policy shall not
                  apply to the MP Premium. However, the Company shall not
                  terminate the Agreement for the Employer's failure to pay the
                  MP Premium on the first day of the Arrangement Month if the
                  Employer pays (a) an amount equal to *** of the total MP
                  Premium for the previous Arrangement Month on or before the
                  *** calendar day of the applicable Arrangement Month; and (b)
                  the remaining balance of the MP Premium for the Arrangement
                  Month on or before the *** calendar day of such Arrangement
                  Month.

            viii. The Company may elect to terminate the Agreement upon written
                  notice to the Employer immediately upon the closing of a sale
                  to a single buyer ("Buyer") of more than 50% of voting equity
                  securities of the Employer or of the ultimate publicly traded
                  corporation of the Employer or a sale of all or substantially
                  all of the assets of the Employer if:

                  (A)   the Buyer is (I) CIGNA, AETNA, PacificCare, Anthem,
                        Coventry, First Health, HealthNet, Humana, Oxford,
                        Wellpoint, or any other Blue Cross or Blue Shield plan,
                        (II) any affiliate (as defined in clause E below) of or
                        successor of an entity identified in (I), or (III) any
                        other entity that has, at the time of the sale, a
                        competitive position relative to the Company as a health
                        insurer substantially similar to that of any of the
                        entities named in clause (I) above as of the date the
                        Agreement is executed;

                  (B)   the debt rating on Buyer's public debt, if any, is below
                        Investment Grade as of the day preceding the closing of
                        the sale;

                  (C)   the ultimate parent of the Buyer, if any, has not, at
                        the time of the closing of the sale, executed a guaranty
                        of the Employer's obligations under the Agreement
                        substantially in the same form as section 7 of the
                        Agreement;

                                       11


                  (D)   the amount deposited in the Security Deposit as of the
                        date of closing of the sale is less than the amount then
                        required under the Security Deposit Agreement; or

                  (E)   As used in clause (A) above, an "affiliate" of an entity
                        is an organization or entity which controls, is
                        controlled by or is under common control with the entity
                        to which it is an affiliate. "Control" for this purpose
                        refers to the ownership of more than 50% of the voting
                        power of an entity.

            ix.   Except as provided in paragraph (B) below, the Employer may
                  terminate this Agreement by giving the Company notice thereof
                  not more than *** business days following receipt from the
                  Company of notice of an *** of more than *** percentage points
                  in the percentage of the *** used to calculate the MP Premium.
                  (For example, if the percentage of the *** used to calculate
                  the MP Premium equals ***, the Company may *** such percentage
                  by *** percentage points to *** without triggering the
                  Employer's termination right under this clause ix.)

                  (A)   Any such termination shall be effective on the date set
                        forth in the Employer's notice to the Company, but in
                        any event not sooner than the date the applicable ***
                        would otherwise be effective.

                  (B)   The Employer shall not have the right to terminate the
                        Agreement pursuant to this section 4(b)(ix) if the
                        increase in the percentage of the Quoted Premium used to
                        calculate the MP Premium is pursuant to section 4(c) or
                        due to the imposition of any premium tax not included in
                        the Quoted Premium at the time that the imposition was
                        effected.

      (c)   The Policies shall terminate upon termination of the Agreement. If
            one or more of the Policies may not, by its terms, be terminated as
            of the date that the Agreement would otherwise terminate, the
            Agreement shall be terminated notwithstanding the inability to
            terminate a Policy as of the


                                       12


            same date, and the terms of the Policy shall remain in force,
            unmodified by the Agreement, until such Policy can be terminated.
            However, effective as of the date of the termination of the
            Agreement, the monthly premium due under each such Policy and Non-MP
            Policy shall automatically be increased ("Increased Premium") such
            that the sum of (i) the aggregate Increased Premiums due under such
            Policies and Non-MP Policies through their termination dates and
            (ii) the balance in the Security Deposit following the withdrawal
            described in section 4(a) of the Security Deposit Agreement, equals
            *** of the aggregate monthly premiums that would be payable under
            such policies through their termination dates in the absence of an
            increase.

      (d)   In the event of termination of the Agreement, the Employer shall pay
            an Additional Quarterly Premium attributable to the Arrangement
            Quarter in which the Agreement terminates but only for the portion
            of the Arrangement Quarter during which the Agreement was in effect.
            Such Additional Quarterly Premium generally shall be determined and
            due in the manner set forth in section 3(b) of the Agreement;
            provided however, that the Additional Quarterly Premium attributable
            to any partial Arrangement Month shall be calculated based on the
            proration formula set forth in section 4(e) below.

      (e)   If the Agreement is terminated other than at the end of an
            Arrangement Month, unless the Quoted Premium is itself prorated
            under the terms of the Policy, the Maximum Monthly Employer Benefit
            Obligation and the MP Premium for the month in which termination
            occurs shall be prorated based upon the ratio of the number of
            calendar days in the Arrangement Month before termination to the
            total number of calendar days in the Arrangement Month.

      (f)   If the Agreement is terminated retroactively and any Policy remains
            in effect after such retroactive termination date, amounts due and
            paid by the parties under the Agreement after the effective date of
            termination shall be credited against their respective obligations
            under the Policy after such date.

      (g)   If the Agreement is terminated, the MP Premium and the Maximum
            Monthly Employer Benefit Obligation for the last Arrangement Month
            prior to the termination date shall be adjusted as authorized in
            Exhibit E of the MP Administrative


                                       13


            Services Agreement to include the effect of any additions,
            terminations or changes in coverage not reflected at the time of
            termination in respect of Arrangement Months prior to termination.

      (h)   In the event that either party reasonably believes that any state or
            other jurisdiction may impose a penalty on it for proceeding with
            its performance under the Agreement, such party will promptly advise
            the other party of such belief and the basis therefor. In such event
            the parties agree to cooperate in good faith to resolve such matter
            to the satisfaction of both parties. After a good faith effort by
            the parties to eliminate the risk of a material penalty being
            imposed, if the matter is not resolved to the satisfaction of both
            parties, the party upon which such penalty may be imposed may
            immediately discontinue the Agreement's application in such state or
            jurisdiction by providing notice to that effect to the other party.
            In that event, the Agreement will continue to apply in all other
            states or jurisdictions.

5.    CHANGES IN MAXIMUM MONTHLY EMPLOYER BENEFIT OBLIGATION AND PREMIUM.

      (a)   The Company may change the percentage of the *** used to calculate
            the Maximum Monthly Employer Benefit Obligation described in section
            1(m) of the Agreement and/or the MP Premium described in section
            3(a) of the Agreement:

            (i)   effective on January 1, 2003, provided that the Company
                  provides *** calendar days notice of the change; and

            (ii)  effective on January 1, 2004 or on any subsequent January 1st,
                  provided that the Company provides *** calendar days notice of
                  the change.

      (b)   Upon the notice provided in section 5(c), the Company also may
            change one or more of the following rates as provided below:

            (i)   the percentage of the *** used to calculate the Maximum
                  Monthly Employer Benefit Obligation, as described in section
                  1(m) of the Agreement,



                                       14


            (ii)  the percentage of the *** used to calculate the MP Premium, as
                  described in section 3(a) of the Agreement,

            (iii) the Quoted Premium rate under a Policy, or

            (iv)  the monthly premium rate under a Non-MP Policy.

            Each rate described in items (i) through (iv) above is referred to
            in this section as "Rate" (or collectively as "Rates").

            If the total number of Employees covered by all of the Policies and
            Non-MP Policies changes by *** or more compared to the total number
            of Employees covered by all of the Policies and Non-MP Policies on
            the later of (x) the Effective Date of the Agreement or (y) ***,
            then that Rate may be changed by the Company.

      (c)   The change in Rate described in subsection (b) shall be effective
            upon the first of the month following *** calendar days notice to
            the Employer in the case of a *** increase in the number of
            Employees covered. In the case of a *** decrease in such coverage,
            the change in Rate shall be effective on the date established by the
            Company in a notice to the Employer, but no earlier than the *** day
            of the next Arrangement Month following the date of the notice.

6.    REPRESENTATIONS OF THE PARTIES

      (a)   The Employer represents and warrants to Company as follows:

            (i)   The Employer has full authority to execute and deliver the
                  Agreement, the Security Deposit Agreement and the MP
                  Administrative Services Agreement and to perform its
                  obligations hereunder and thereunder.

            (ii)  The Employer is subject to no restriction, agreement, law,
                  judgment or decree which would prohibit or be violated by the
                  execution and delivery hereof or the consummation of the
                  transactions contemplated hereby. The Agreement has been duly
                  executed and delivered by the Employer and constitutes its
                  legal, valid and binding obligation, enforceable in accordance
                  with its terms.



                                       15


            (iii) No consent, approval or other action by, or notice to, or
                  registration or filing with, any governmental or
                  administrative agency or authority, or any other person (other
                  than any registration or filing made in the ordinary course of
                  business), is required or necessary in connection with the
                  execution, delivery and performance of the Agreement by the
                  Employer, or the consummation by the Employer of the
                  transactions contemplated hereby.

      (b)   The Company hereby represents and warrants to the Employer as
            follows:

            (i)   The Company has full authority to execute and deliver the
                  Agreement, the Security Deposit Agreement and the MP
                  Administrative Services Agreement and to perform its
                  obligations hereunder and thereunder.

            (ii)  The Company is subject to no restriction, agreement, law,
                  judgment or decree which would prohibit or be violated by the
                  execution and delivery hereof or the consummation of the
                  transactions contemplated hereby. The Agreement has been duly
                  executed and delivered by the Company and constitutes its
                  legal, valid and binding obligation, enforceable in accordance
                  with its terms.

            (iii) No consent, approval or other action by, or notice to, or
                  registration or filing with, any governmental or
                  administrative agency or authority, or any other person (other
                  than any registration or filing made in the ordinary course of
                  business), is required or necessary in connection with the
                  execution, delivery and performance of the Agreement by the
                  Company, or the consummation by the Company of the
                  transactions contemplated hereby.

7.    GUARANTY OF ADMINISTAFF INC.

To induce the Company to enter into the Agreement, the Policies, the Non-MP
Policies and the MP Administrative Services Agreement, Administaff, Inc.
guarantees that the Employer's obligations under the Agreement, the Policies,
the MP Administrative Services Agreement and the Security Deposit Agreement will
be punctually paid and performed. Upon default by the Employer and notice from
the


                                       16


Company, Administaff, Inc. will immediately make each payment or perform or
cause the Employer to perform, each unpaid or unperformed obligation under the
Agreement, the Policies, the Non-MP Policies, the MP Administrative Services
Agreement or the Security Deposit Agreement.

8.    NOTICES

      (a)   Any notice required to be given under the Agreement shall be given
            in writing by sending or delivering such notice to the receiving
            party (i) by prepaid registered or certified first class U.S. mail,
            return receipt requested, (ii) by overnight express courier with
            recipient's signature required, (iii) by hand delivery with
            recipient's signature required, (iv) by facsimile, provided that the
            other party has specifically requested that a specifically
            designated notice be made by facsimile, or (v) or by any other
            method by which the date of receipt by the party entitled to such
            notice may be determined. Notice shall be effective when sent.

      (b)   Notices to a party shall be sent or delivered:

            To the Company at:

            United Healthcare
            Small Business Group
            5901 Lincoln Drive
            Edina, MN  55436
            Fax:  (952) 992-7155
            Attention:  President, Small Business Group

            With a Copy to:

            United Healthcare
            Legal Department
            5901 Lincoln Drive
            Edina, MN  55436
            Fax:  (952) 992-5180
            Attention:  General Counsel

            And:



                                       17


            UnitedHealthcare
            Small Business Group
            5901 Lincoln Drive
            Edina, MN  55436
            Fax:  (952) 992-7155
            Attention:  Vice President, Underwriting

            And to the Employer at:

            Administaff of Texas, Inc.
            19001 Crescent Springs Drive
            Kingwood, Texas 77339-3802
            Fax: (281)312-3350
            Attention:  Vice President of Benefits

            With a Copy to:

            Administaff of Texas, Inc.
            19001 Crescent Springs Drive
            Kingwood, Texas 77339-3802
            Fax: (281)358-6492
            Attention: General Counsel

      (c)   Each party may change the person(s) designated to receive notice on
            behalf of such party, or the address or facsimile to which the
            notice shall be sent, upon written notice to the other party.

9.    CHOICE OF LAW

The Agreement shall be governed by applicable federal law and, to the extent not
governed by federal law, the laws of the State of Texas.

10.   ENTIRE AGREEMENT, AMENDMENT AND WAIVER

      (a)   Upon execution of the Agreement, all prior or contemporaneous
            letters of understanding, agreements, requests for proposal,
            proposals, representations, statements, negotiations and
            understanding, whether oral or written, are hereby terminated and
            superseded by the Agreement, the MP Administrative Services
            Agreement, the Security Deposit Agreement, the Policies and Non-MP
            Policies and all riders thereto.



                                       18


      (b)   Any amendments or modifications to the Agreement must be in writing,
            and must be signed by the duly authorized representatives of each
            party. Each party shall provide to the other a written certification
            of the names of those person(s) duly authorized to execute
            amendments or modifications on behalf of the party. Each party shall
            be entitled to rely on the other's certification of authority unless
            and until it is modified.

      (c)   No term or provision of the Agreement shall be deemed waived and no
            breach excused unless the party claimed to have waived the term or
            provision or to have excused the breach does so in a signed writing.

      (d)   In the event of any conflict between the terms and conditions of the
            Agreement, the MP Administrative Services Agreement, the Security
            Deposit Agreement or the Policies or Non-MP Policies, the following
            order of precedence shall be followed in resolving the conflict. The
            terms of the Security Deposit Agreement shall first control, then
            the Agreement, then the MP Administrative Services Agreement and
            lastly the Policies or Non-MP Policies, as applicable.

      (e)   Termination of the Agreement shall not extinguish the rights or
            liabilities of either party arising prior to termination. The
            parties' respective rights and obligations under sections
            2(d)(ii)-(iii), 4(c) through (g), 7 and Exhibit A of the Agreement
            shall survive termination of the Agreement.



                                       19


In witness whereof, the undersigned have executed the Agreement.

ADMINISTAFF OF TEXAS, INC.                    UNITED HEALTHCARE
                                              INSURANCE COMPANY


By /s/ Howard G. Buff                         By /s/ William A. Munsell
   ---------------------------------------       -----------------------------
Authorized Signature                          Authorized Signature

Name Howard G. Buff                           Name William A. Munsell
     -------------------------------------         ---------------------------
Title Vice President - Benefits & Corp. HR    Title Senior Vice President
      ------------------------------------          --------------------------
Date 6/25/02                                  Date 6/25/02
     -------------------------------------         ----------------------------

ADMINISTAFF, INC.


By /s/ Howard G. Buff
   --------------------------------------
Authorized Signature

Name Howard G. Buff
     ------------------------------------
Title Vice President - Benefits & Corp.
      -----------------------------------
Date 6/25/02
     ------------------------------------


                                       20


   EXHIBIT A - REVIEWS AND ESTABLISHMENT OF MONTHLY PAYABLE RATES AND PREMIUMS

1.    The Policies. The Employer has entered into a Minimum Premium Arrangement
      covering each of the Company's insurance policies or HMOs that is
      permitted to have such an arrangement. The Arrangement covers those
      Policies identified in section 1(s) of the Agreement. The Company has also
      issued Non-MP Policies to the Employer which policies are not subject to
      the Minimum Premium Arrangement.

2.    Procedure for Establishing Premiums

      a.    A monthly *** rate for the Policies and the Non-MP Policies
            collectively ("Monthly Payable Rate") is established for each
            Arrangement Quarter as provided in this Exhibit A. Each Arrangement
            Quarter, the Company sets the monthly premium for Employees covered
            under each Policy and Non-MP Policy based on the *** of Employees
            among the Policies and the Non- MP Policies in order to produce a
            *** rate that *** the Monthly Payable Rate for the Arrangement
            Quarter. (The monthly premium for each Policy corresponds to the
            "Quoted Premium" referenced in the Agreement.)

      b.    The Monthly Payable Rate per covered Employee for the first and
            second quarters of 2002 shall be fixed at the rates provided below.



                  Period            Med.             Dental
                  ------            ----             ------
                                               
                  1Q 2002           $***             $***
                  2Q 2002           $***             $***


            Beginning with the third quarter of 2002, the Monthly Payable Rate
            shall be established as provided in section 4 of this Exhibit.

3.    Reviews of Experience under Policies and Non-MP Policies

      a.    Within 90 calendar days following the end of each Arrangement Year,
            the Company shall review the


                                       21


            Employer's aggregate experience under the Policies and the Non-MP
            Policies for that Arrangement Year ("Annual Review"). As part of the
            Annual Review, the Company shall determine whether an aggregate
            Deficit or Surplus exists with respect to the Policies and the
            Non-MP Policies based on an analysis of the Incurred Claims,
            Expenses and Policy Revenue for the Arrangement Year, which analysis
            shall be provided in a written report to the Employer within 90
            calendar days of the close of such Arrangement Year. That report
            shall be in a form substantially similar to and contain the
            information described in Appendix 1 attached to this Exhibit A.

      b.    Within 45 calendar days following the end of each Arrangement
            Quarter, the Company shall provide to the Employer a report
            summarizing Paid Health Benefits under the Policies by incurral
            month and paid health benefits under the Non-MP Policies by incurral
            month, Expenses and Policy Revenue for the Arrangement Quarter
            ("Quarterly Review").

      c.    As part of the Quarterly Review, the Company shall provide to the
            Employer a written list of Policies and Non-MP Policies that were
            effective at any time during the Arrangement Quarter under review
            ("Current Policy List").

4.    Prospective Adjustment of Monthly Payable Rate and Premiums

      a.    Beginning with the third Arrangement Quarter of 2002, the Company
            shall, ***, establish in advance the Monthly Payable Rate for each
            Arrangement Quarter. In establishing the Monthly Payable Rate for an
            Arrangement Quarter, the Company shall take into account any
            Accumulated Deficit or Accumulated Surplus, but shall not be
            required to *** of any Accumulated Deficit or Accumulated Surplus in
            the Monthly Payable Rate of a single Arrangement Quarter. The
            Company shall notify the Employer of the Monthly Payable Rate for
            the third Arrangement Quarter of 2002 by May 31, 2002, for the
            fourth Arrangement Quarter of 2002 by August 31, 2002, and for the
            first Arrangement Quarter of 2003 by October 31, 2002. For all
            subsequent Arrangement Quarters, the Company shall notify the
            Employer of the applicable Monthly Payable Rate at least 90 calendar
            days in advance of the start of the Arrangement Quarter.



                                       22


      b.    The Company is authorized, ***, to revise the premium of any Policy
            or Non-MP Policy for each Arrangement Quarter so as to result in a
            *** rate for all Policies and Non-MP Policies that *** the revised
            Monthly Payable Rate for that Arrangement Quarter.

5.    Termination Review

      a.    Upon termination of the Agreement, the Company shall provide a
            two-step termination review, substantially in the form of the Annual
            Review ("Termination Review"). The two steps in the Termination
            Review shall be:

            i.    Within 10 calendar days after the termination of the
                  Agreement, the Company shall determine the Accumulated Deficit
                  or Accumulated Surplus as of the date of the termination of
                  the Agreement ("Initial Termination Review").

            ii.   Within 195 calendar days after the termination of the
                  Agreement and all Policies and Non-MP Policies (except those
                  issued to a Client as well as, or instead of, to the
                  Employer), the Company shall determine the Accumulated Deficit
                  or Accumulated Surplus as of the end of the last Arrangement
                  Quarter (or Partial Arrangement Quarter) ("Final Termination
                  Review").

      b.    In calculating the Accumulated Deficit or Accumulated Surplus for
            purposes of the Termination Review, "Non-MP Policies" shall include
            those policies or group contracts issued by the Company that were
            but are no longer covered by the Minimum Premium Arrangement.

      c.    If the Final Termination Review demonstrates an Accumulated Surplus,
            the Company shall pay to the Employer an amount equal to the
            Accumulated Surplus within 10 calendar days after the completion of
            the Final Termination Review.



                                       23


      d.    If the Initial Termination Review and/or Final Termination Review
            demonstrates an Accumulated Deficit, the Company shall have such
            rights to the balance in the Security Deposit as described in the
            Security Deposit Agreement.

6.    Definitions

      For the purpose of this Exhibit A and the Security Deposit Agreement,
terms with initial capitals have the meanings set forth in the Agreement, except
as set forth in this section as follows:

a.    "Accumulated Deficit" means, as of the last day of an Arrangement Period
      (i) the sum of the Deficits, if any, for such Arrangement Period and all
      preceding Arrangement Periods, reduced by (ii) the sum of the Surpluses
      for all preceding Arrangement Periods, provided, however, that a Deficit
      or Surplus shall not be counted twice in the case of overlapping
      Arrangement Periods.

b.    "Accumulated Surplus" means, as of the last day of an Arrangement period
      (i) the sum of the Surpluses, if any, for such Arrangement Period and all
      preceding Arrangement Periods, reduced by (ii) the sum of the Deficits for
      all preceding Arrangement Periods, provided, however, that a Deficit or
      Surplus shall not be counted twice in the case of overlapping Arrangement
      Periods.

c.    "Annual Review" has the meaning set forth in section 3(a) of this Exhibit
      A.

d.    "Arrangement Period" means, as the context indicates, either an
      Arrangement Year or Arrangement Quarter, or Partial Arrangement Quarter.

e.    "Arrangement Year" means each calendar year during the period that both a
      Policy and the Agreement are in effect.

f.    "Claims Recognition Date" means the 180th day following the end of the
      last Arrangement Quarter (or Partial Arrangement Quarter).

g.    "Deficit" means, with respect to an Arrangement Period, the excess of (i)
      Incurred Claims plus Expenses for such Arrangement Period, over (ii) the
      Policy Revenue for such Arrangement Period.



                                       24


h.    "Expenses" means, for an Arrangement Period, the sum of (i) the applicable
      Expense Percentage multiplied by the *** paid under the Policies and the
      monthly premiums paid under the Non-MP Policies for that Arrangement
      Period, and (ii) actual premium taxes and assessments paid with respect to
      the Policies and the Non-MP Policies during the Arrangement Period. The
      Expense Percentage for the Dental Policies and the Non-MP Policies
      providing dental benefits is ***. The Expense Percentage for the Medical
      Policies and the Non-MP Policies providing medical benefits is ***. The
      Company shall adjust the Expense Percentage for any Arrangement Quarter
      for which the percentage of the *** used to calculate the MP Premium has
      been changed pursuant to section 5 of the Agreement. The Company shall
      notify the Employer of an adjustment to the Expense Percentage at the same
      time that it provides the notice required under section 5 of the
      Agreement.

i.    "IBNR Reserve" means the amount actuarially determined by the Company,
      ***, as a reserve for Incurred Health Benefits that are paid after the
      date of termination of the Policies and incurred health benefits that are
      paid after termination of the Non-MP Policies. For purposes of the Final
      Termination Review, the IBNR Reserve shall be (A) reduced by ***
      Overpayments (as defined in section 2(d) of the MP Administrative Services
      Agreement) recoveries under the Policies and Non-MP Policies *** to be
      received after the Claims Recognition Date and (B) calculated as of the
      Claims Recognition Date and shall not include Health Benefits or Non-MP
      Policy health benefits that are included in the calculation of Incurred
      Claims as Paid Health Benefits under the Policies and paid health benefits
      under the Non-MP Policies.

j.    "Incurred Claims" means, with respect to an Arrangement Period (or Partial
      Arrangement Quarter), the sum of (i) Paid Health Benefits under the
      Policies and paid health benefits under the Non-MP Policies and (ii) any
      actuarially appropriate adjustments made by the Company, ***, to the


                                       25


      IBNR Reserve for such Arrangement Period (including establishment of the
      IBNR Reserve in the first Arrangement Quarter). For purposes of the Final
      Termination Review, item (i) of the preceding sentence shall include
      Health Benefits Paid under the Policies and health benefits paid under the
      Non-MP Policies through the Claims Recognition Date. Unless Overpayments
      recoveries have already been credited to Health Benefits, Incurred Claims
      shall be reduced by Overpayments (as defined in section 2(d) of the MP
      Administrative Services Agreement) recoveries under the Policies and
      Non-MP Policies received during the applicable Arrangement Period (and
      received prior to the Claims Recognition Date in the case of termination
      of the Agreement).

k.    "Partial Arrangement Quarter" means that period between the end of the
      last complete Arrangement Quarter under the Agreement and the termination
      of the last Policy or Non-MP Policy, whichever is later.

l.    "Policy Revenue" means, with respect to an Arrangement Period, the sum of
      (i) the MP Premiums paid with respect to such Arrangement Period for the
      Policies, (ii) the monthly premiums paid under the Non-MP Policies, (iii)
      *** Maximum Monthly Employer Benefit Obligation amounts for the
      Arrangement Months in the Arrangement Period before the *** of the
      Agreement) for an Arrangement Quarter therein, and (iv) the Additional
      Quarterly Premium paid by the Employer with respect to the Policies for
      the Arrangement Period. Any withdrawals made by the Company from the
      Security Deposit during such Arrangement Period shall be credited as
      Policy Revenue.

m.    "Quarterly Review" has the meaning set forth in section 3(b) of this
      Exhibit A.

n.    "Surplus" means, with respect to an Arrangement Period, the excess of (i)
      Policy Revenue for such Arrangement Period, over (ii) the sum of Incurred
      Claims and Expenses for such Arrangement Period.

o.    "Termination Review" has the meaning set forth in section 5(a) of this
      Exhibit A.


                                       26


APPENDIX 1 TO EXHIBIT A: ADMINISTAFF ANNUAL MEDICAL ACCOUNTING
                                                                      24-Jun-02
1ST QUARTER 2002 ESTIMATE



                                                                                     HMO          PPO                      Total
                                                                                     ---          ---                      -----
                                                                                                                   
(A)    Quoted Premium                                                               $***         $***                       $***

(B)    Monthly Premium                                                              $***         $***

       Employee Lives      Jan                                                       ***          ***                        ***
                           Feb                                                       ***          ***                        ***
                           Mar                                                       ***          ***                        ***
(C)                        1st Quarter                                               ***          ***                        ***
       Total

(D)    Quarterly Total of Monthly Premium                              (BxC)        $***         $***                       $***

(E)    Maximum Monthly Employer Benefit Obligation/Employee                                      $***

(F)    Maximum Quarterly Employer Benefit Obligation                   (ExC)                     $***

(G)    Claims Presented Through Bank Account During Quarter                                      $***

(H)    Additional Quarterly Premium                                     ***                      $***

(I)    Total Quarterly Premiums                                        (D+H)        $***         $***                       $***
       (Note that all four quarters will be presented to arrive at)
(I.1)  Total Annual Premiums

(J)    Total Quarterly Administaff Costs                               (G+I)        $***         $***                       $***
       (Note that all four quarters will be presented to arrive at)
(J.1)  Total Annual Administaff Costs

(K)    Total Quarterly Administaff Costs/Employee                      (J/C)        $***         $***                       $***
       (Note that all four quarters will be presented to arrive at)
(K.1)  Total Annual Administaff Costs/Employee

- ---------------------------------------------------------------------------------------------------------------------------------

(L)    Claims Processed or Presented During Year                                    $***         $***                       $***

(M)    Prior Year IBNR                                                              $***         $***                       $***

(N)    Current Year IBNR                                                            $***         $***                       $***

(O)    Change in IBNR                                                  (N-M)        $***         $***                       $***

(P)    Total Annual Incurred Claims                                    (L+O)        $***         $***                       $***

(Q)    Administration @ *** of Annual Administaff Costs                ***          $***         $***                       $***

(R)    Premium Tax (Est. HMO=1.0%, PPO 1.75%)                          (I.1x1.0%
                                                                       or 1.75%)    $***         $***                       $***

(S)    Total Annual Medical Program Costs                              (P+Q+R)      $***         $***                       $***

(T)    Annual Surplus or Deficit                                       (S-J.1)      $***         $***                       $***


       Note: Reference to Quarterly is for illustrative purposes only as are the
       amounts reflected. Annual Appendix will reflect 12 months/4 quarters
       activity. *** The Additional Quarterly Premiums collected for PPO
       enrollees are subject to premium tax. ***


                                       1


                           EXHIBIT B - NON-MP POLICIES

The insurance policies, HMO contracts and similar arrangements on the following
list are considered "Non-MP Policies" for purposes of the Agreement. Such list
shall be deemed modified by the Current Policy List provided by the Company as
part of the Quarterly Review, unless the Employer objects within 30 calendar
days of receipt.




UNET POLICY
  NUMBER                     MARKET                      EFFECTIVE DATE     TERMINATION DATE
- -----------                  ------                      --------------     ----------------
                                                                   
701648A          Select HMO - Downstate New York            01/01/02
701648B          Select HMO - New Jersey                    01/01/02
701648C          Select HMO - Illinois                      01/01/02
701648D          Select HMO - Texas                         01/01/02
701648E          Select HMO - Upstate New York              01/01/02
701648F          Choice HMO - Florida                       01/01/02
701648G          Choice HMO - Arizona                       01/01/02
701648H          Choice HMO - Ohio                          01/01/02
701648I          Choice HMO - Georgia                       01/01/02
701648J          Choice HMO - Kentucky                      01/01/02
701648K          Choice HMO - Texas                         01/01/02
701648L          Choice HMO - Utah                          01/01/02
701648M          Choice HMO - Missouri                      01/01/02
701648N          Choice HMO - Arkansas                      01/01/02
701648P          Choice HMO - Mississippi                   01/01/02
701648Q          Choice HMO - District of Columbia          01/01/02
701648R          Choice HMO - Virginia                      01/01/02
701648S          Choice HMO - Tennessee                     01/01/02
701648T          Choice HMO - Louisiana                     01/01/02
701648U          Choice HMO - Colorado                      01/01/02
701648V          Choice HMO - Alabama                       01/01/02
701648Y          EPO - Wisconsin                            01/01/02


                                        1




PRIME POLICY
  NUMBER                  POLICYHOLDER                   EFFECTIVE DATE     TERMINATION DATE
- -----------               ------------                   --------------     ----------------
                                                                   
0247936                       ***                           01/01/02
0247974                       ***                           01/01/02
0247977                       ***                           01/01/02             03/01/02
0247989                       ***                           01/01/02
0247996                       ***                           01/01/02
0248003                       ***                           01/01/02
0248006                       ***                           01/01/02
0248026                       ***                           01/01/02
0248030                       ***                           01/01/02
0248035                       ***                           01/01/02
0248041                       ***                           01/01/02
0248056                       ***                           01/01/02
0248063                       ***                           01/01/02
0248110                       ***                           01/01/02
0248128                       ***                           01/01/02
0248131                       ***                           01/01/02
0248133                       ***                           01/01/02
0248135                       ***                           01/01/02
0248144                       ***                           01/01/02
0248151                       ***                           01/01/02
0248163                       ***                           01/01/02
0248165                       ***                           01/01/02
0248197                       ***                           01/01/02
0248208                       ***                           01/01/02
0248241                       ***                           01/01/02
0248263                       ***                           01/01/02
0248271                       ***                           01/01/02
0248291                       ***                           01/01/02
0248306                       ***                           01/01/02
0248314                       ***                           01/01/02
0248324                       ***                           01/01/02



                                       2




PRIME POLICY
  NUMBER                  POLICYHOLDER                   EFFECTIVE DATE     TERMINATION DATE
- -----------               ------------                   --------------     ----------------
                                                                   
0248325                       ***                           01/01/02
0248339                       ***                           01/01/02
0248346                       ***                           01/01/02
0248352                       ***                           01/01/02
0248370                       ***                           01/01/02
0248371                       ***                           01/01/02
0248372                       ***                           01/01/02
0248373                       ***                           01/01/02
0248374                       ***                           01/01/02
0248375                       ***                           01/01/02
0248376                       ***                           01/01/02
0248379                       ***                           01/01/02
0248382                       ***                           01/01/02
0248384                       ***                           01/01/02
0248388                       ***                           01/01/02
0248390                       ***                           01/01/02
0248396                       ***                           01/01/02
0248399                       ***                           01/01/02
0248404                       ***                           01/01/02
0248405                       ***                           01/01/02
0248407                       ***                           01/01/02
0248408                       ***                           01/01/02
0248409                       ***                           01/01/02
0248410                       ***                           01/01/02
0248411                       ***                           01/01/02
0248412                       ***                           01/01/02
0248413                       ***                           01/01/02
0248414                       ***                           01/01/02
0248415                       ***                           01/01/02
0248416                       ***                           01/01/02
0248417                       ***                           01/01/02



                                       3




PRIME POLICY
  NUMBER                  POLICYHOLDER                   EFFECTIVE DATE     TERMINATION DATE
- -----------               ------------                   --------------     ----------------
                                                                   
0248418                       ***                           01/01/02
0248421                       ***                           01/01/02
0248429                       ***                           01/01/02
0248433                       ***                           01/01/02             01/01/02
0248442                       ***                           01/01/02
0248457                       ***                           01/01/02
0248463                       ***                           01/01/02
0248466                       ***                           01/01/02
0248473                       ***                           01/01/02
0248474                       ***                           01/01/02
0248478                       ***                           01/01/02
0248480                       ***                           01/01/02
0248486                       ***                           01/01/02
0248494                       ***                           01/01/02
0248495                       ***                           01/01/02
0248497                       ***                           01/01/02
0248501                       ***                           01/01/02
0248516                       ***                           01/01/02
0248519                       ***                           01/01/02
0248521                       ***                           01/01/02
0248524                       ***                           01/01/02
0248528                       ***                           01/01/02
0248532                       ***                           01/01/02
0250136                       ***                           01/01/02
0250197                       ***                           07/01/02
0250201                       ***                           01/01/02
0250656                       ***                           01/01/02
0250657                       ***                           01/01/02
0250658                       ***                           02/01/02
0250659                       ***                           02/01/02
0250660                       ***                           01/01/02



                                       4




PRIME POLICY
  NUMBER                  POLICYHOLDER                   EFFECTIVE DATE     TERMINATION DATE
- -----------               ------------                   --------------     ----------------
                                                                   
0250669                       ***                           02/15/02
0252657                       ***                           03/01/02
0252926                       ***                           03/01/02
0253683                       ***                           03/01/02
0253774                       ***                           03/01/02
0253775                       ***                           03/01/02
0253778                       ***                           02/27/02
0254553                       ***                           04/01/02
0254678                       ***                           04/01/02
0254741                       ***                           04/01/02
0255675                       ***                           04/01/02
0255701                       ***                           04/01/02
0255709                       ***                           04/01/02            04//01/02
0256410                       ***                           02/04/02            02/04/02
0256498                       ***                           02/04/02
0256505                       ***                           04/01/02
0257668                       ***                           04/15/02
0261873                       ***                           06/01/02
0262606                       ***                           07/01/02
0262614                       ***                           06/01/02
0262666                       ***                           06/01/02
0250579                       ***                           01/16/02
0250671                       ***                           01/22/02            03/04/02
0251016                       ***                           01/13/02
0256129                       ***                           03/01/02
0256904                       ***                           01/01/02
0256960                       ***                           03/20/02            06/01/02
0257422                       ***                           03/26/02
0257424                       ***                           04/09/02            04/09/02
0259230                       ***                           04/02/02
0259740                       ***                           04/14/02



                                       5




PRIME POLICY
  NUMBER                  POLICYHOLDER                   EFFECTIVE DATE     TERMINATION DATE
- -----------               ------------                   --------------     ----------------
                                                                   
0260298                       ***                           04/02/02
0260303                       ***                           04/16/02



                                       6


                           EXHIBIT C - MINIMUM PREMIUM
                     FINANCIAL AGREEMENT BANKING ARRANGEMENT



December 11, 2001

UnitedHealth Group
Kevin Kerlejza, Director Treasury Operations
450 Columbus Boulevard
Hartford, CT 06115-0450

RE:  Benefits Account Establishment

Dear Kevin Kerlejza:

UnitedHealthcare and Administaff of Texas, Inc. have entered into an Insured
Minimum Premium Arrangement whereby various affiliates of UnitedHealthcare will
administer benefits pursuant to the provisions of Administaff of Texas Inc.
benefits plan. In connection with that arrangement, UnitedHealthcare's standard
procedure is to have the customer establish a bank account from which
UnitedHealthcare affiliates draw to pay claims. We have requested that, as to
the Administaff of Texas, Inc.'s Benefit plan, UnitedHealthcare affiliates
instead make claims payments from a UnitedHealthcare account at J.P. Morgan
Chase Bank (Bank) into which Administaff of Texas, Inc. will deposit funds. This
is to advise you that UnitedHealthcare and its affiliates are indemnified and
held harmless by Administaff of Texas, Inc. for any and all federal, state,
local or other governmental demand, charge or tax (by whatever named called)
assessed against or imposed upon them arising out of UnitedHealthcare's
establishing a bank account as requested by Administaff of Texas, Inc. and or
making such payments as aforesaid. This account will be known as:
UnitedHealthcare Administered Plan for Administaff of Texas, Inc. -
Medical/Dental Benefits Account.

The benefits account will be used to pay benefits covered under the Administaff
of Texas, Inc.'s health plan. Drafts in payment of these benefits will be drawn
by UnitedHealthcare. The benefits account will maintain a standing balance
determined by UnitedHealthcare to cover the one day assignment lag due to next
day presentments.

We will be funding the benefits account at J. P. Morgan Chase Daily via a Wire
Transfer initiated by UnitedHealthcare.



                                       1


UnitedHealth Group
Page 2

Funding for the account will be from the bank account shown below:

         Bank Name:                 JPMorgan Chase

         Bank Address:              717 Travis Street, Houston, TX 77002

         Bank ABA Routing #:        113000609

         Bank Account Name          Administaff Companies, Inc.

         Bank Account Number:       ***

         Bank Contact:              Valerie Luecke


Bank Statements should by mailed to:
Holly Jackson
19001 Crescent Springs Drive
Kingwood, TX 77339

Notification of Amount of Request should be Faxed to:
Ellen Reason or Linda Trammel,  Fax:  281-348-3747
Phone:  281-348-3986

Monthly Banking Reports should be mailed to:
Holly Jackson
19001 Crescent Springs Drive
Kingwood, TX 77339



Sincerely,

/s/ Douglas S. Sharp

Douglas S. Sharp
VP Finance/Controller

CC: UnitedHealthcare
    JP Morgan Chase


                                       2

EX-10.4

                                                                    EXHIBIT 10.4


                MINIMUM PREMIUM ADMINISTRATIVE SERVICES AGREEMENT

                                 BY AND BETWEEN

                           ADMINISTAFF OF TEXAS, INC.

                                       AND

                       UNITED HEALTHCARE INSURANCE COMPANY
                              HARTFORD, CONNECTICUT



         *** indicates material has been omitted pursuant to a Confidential
         Treatment Request filed with the Securities and Exchange Commission. A
         complete copy of this agreement has been filed separately with the
         Securities and Exchange Commission.





                MINIMUM PREMIUM ADMINISTRATIVE SERVICES AGREEMENT

                                TABLE OF CONTENTS

Section 1:        Definitions
Section 2:        Performance under the Policies
Section 3:        Additional Services
Section 4:        Maintenance of Records and Reporting to the Employer
Section 5:        Information Access, Audit and Confidentiality
Section 6:        Additional Duties of the Employer
Section 7:        Disputes and Indemnification
Section 8:        Taxes and Assessments
Section 9:        Effective Date and Agreement Period
Section 10:       Service Fees
Section 11:       Termination of Agreement
Section 12:       Costs of Collection
Section 13:       Assignment
Section 14:       Choice of Law
Section 15:       Entire Agreement, Amendment and Waiver
Section 16:       Notices

Exhibit A         Performance Standards
Exhibit B         Additional Services [RESERVED]
Exhibit C         Reporting by the Company
Exhibit D         Third Party Disclosure Agreement
Exhibit E         Eligibility Reporting by the Employer
Exhibit F         Alternate Vendors




                                       2


                MINIMUM PREMIUM ADMINISTRATIVE SERVICES AGREEMENT

                                 BY AND BETWEEN

                           ADMINISTAFF OF TEXAS, INC.

                                       AND

                       UNITED HEALTHCARE INSURANCE COMPANY
                              HARTFORD, CONNECTICUT


WHEREAS, the Employer is a "professional employer organization" that establishes
co-employment relationships with the employees of its Clients; and

WHEREAS, the Employer has established an employee welfare plan for certain
employees, former employees and their dependents of the Employer; and

WHEREAS, the Employer desires the Company to furnish medical and dental
insurance, as well as certain administrative services with respect to the Plan;

NOW THEREFORE, in consideration of the mutual promises contained in the
Agreement, the Employer and the Company agree as follows:

SECTION 1: DEFINITIONS

(a)      "Agreement" means this Minimum Premium Administrative Services
         Agreement, including any attached Exhibits, as amended from time to
         time.

(b)      "Check" means the instrument of payment issued by the Company for the
         payment of Health Benefits pursuant to the Agreement whether such
         instrument is a draft, a check, or an electronic funds transfer or
         similar instrument.

(c)      "Claims Account" has the meaning assigned to it in section 1(e) of the
         MP Financial Agreement.

(d)      "Client" means any organization that has a client service agreement or
         other similar agreement with the Employer.



                                       3


(e)      "Company" means United HealthCare Insurance Company.

(f)      "Confidential Participant Information" has the meaning assigned to it
         in section 5(a)(i) of the Agreement.

(g)      "Effective Date" has the meaning assigned to it in section 9 of the
         Agreement.

(h)      "Employee" means an employee or former employee of the Employer or of a
         member of Employer's controlled group as defined in Section 414(b) and
         (c) of the Internal Revenue Code of 1986, as amended, which is a
         participating employer under the Plan who is covered under the Plan,
         and a "qualified beneficiary" who is covered under the Plan pursuant to
         Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985,
         as amended from time to time ("COBRA"), except that members of a family
         unit who elect COBRA coverage as a single family unit shall be
         considered a single "Employee."

(i)      "Employer" means Administaff of Texas, Inc.

(j)      "ERISA" means the Employee Retirement Income Security Act of 1974, as
         amended from time to time.

(k)      "Health Benefits" or "Benefits" has the meaning assigned to it under
         the MP Financial Agreement.

(l)      "Incurred" when referring to Health Benefits means that the Company has
         become liable for payment of such Health Benefits under a Policy.

(m)      "Investment Grade" has the meaning assigned to it under the MP
         Financial Agreement.

(n)      "MP Arrangement" means the Minimum Premium Arrangement as defined in
         the MP Financial Agreement.

(o)      "MP Financial Agreement" means the Minimum Premium Financial Agreement
         between the Employer and the Company, as amended from time to time.



                                       4


(p)      "Non-MP Policy" means a group health insurance policy or group contract
         issued by the Company to the Employer that is identified as a Non-MP
         Policy in the MP Financial Agreement. "Non-MP Policies" refers
         collectively to two or more such Policies, group contracts or both.

(q)      "Paid" when referring to Health Benefits, means that a Check for
         payment of such Health Benefits has been ***.

(r)      "Participant" means an Employee or his or her dependent who is covered
         under the Plan and who has been identified by the Employer as such
         pursuant to section 6(a) of the Agreement.

(s)      "Plan" means the employee health benefit plan maintained by the
         Employer that is insured by a Policy, but only to the extent benefits
         under the employee benefit plan are subject to the MP Financial
         Agreement. Any benefits that are insured by a Policy but not subject to
         the MP Financial Agreement are excluded from the term "Plan".

(t)      "Policy" means a group health insurance policy issued by the Company to
         the Employer that is identified as a Policy in the MP Financial
         Agreement. "Policies" refers collectively to two or more such policies.

(u)      "Proprietary Business Information" has the meaning assigned to it in
         section 5(d)(iii) of the Agreement.

(v)      "Security Deposit" has the meaning assigned to it in the Security
         Deposit Agreement.

(w)      "Security Deposit Agreement" means the Security Deposit Agreement
         between the Company and the Employer, as amended from time to time.

(x)      "Scope" has the meaning assigned to it in section 5(b)(i) and 5(c)(i),
         as appropriate, of the Agreement.

(y)      "Third Party Disclosure Agreement" is the agreement attached as Exhibit
         D of the Agreement.



                                       5


SECTION 2: PERFORMANCE UNDER THE POLICIES

(a)      The Company shall perform each of its duties and obligations under each
         Policy in accordance with such Policy's terms and all applicable laws
         and regulations. To the extent that, pursuant to a Policy, the Company
         is responsible for the performance of any duty imposed on the Employer
         and/or the Plan under applicable laws and regulations, including but
         not limited to ERISA and the Health Insurance Portability and
         Accountability Act, the Company shall perform such duty in accordance
         with such laws and regulations.

(b)      The Employer hereby and under the Policies designates the Company,
         pursuant to a procedure set forth in the Plan, as the "fiduciary" as
         defined by ERISA for the purpose of (i) reviewing, making decisions on
         and paying claims for Health Benefits and (ii) reviewing and making
         decisions on denials of such Health Benefits. The Company shall serve
         as the final review committee under the Plan to determine for all
         parties all questions relating to the payment of Health Benefits and
         shall have the discretion, authority, and responsibility to construe
         and interpret the terms of the Plan and to make factual determinations.

(c)      The rate of accuracy of Health Benefit payments by the Company under
         each Policy and each Non-MP Policy shall be consistent with the
         accuracy rate that a reasonably prudent claims administrator would be
         expected to achieve under similar circumstances. The amounts payable by
         the Employer under the Agreement, the MP Financial Agreement and the
         Policies and Non-MP Policies shall be subject to the modifications
         specified in the performance standards set out in Exhibit A.

(d)      The Company shall provide services to recover Overpayments, as defined
         below, paid under the Policies and Plan benefits that were paid under
         the Policies and are recoverable by the Plan because payment was or
         should have been made by a third party (other than in connection with
         coordination of benefits, Medicare, or other Overpayments) for the same
         expense.

         (i)      The Company engages affiliated and unaffiliated vendors to
                  assist in the recovery of Overpayments and third party claims
                  made with respect to the Policies and Non-MP Policies. The
                  fees charged by both affiliated and



                                       6


                  unaffiliated vendors are netted against any recoveries. If the
                  fee charged by any affiliated vendor exceeds ***% of the
                  recovery, the Company shall notify the Employer within 30
                  calendar days of the effective date of such charge. The
                  Employer shall not be responsible for the cost of recovering
                  any Overpayments made by the Company due to the Company's
                  gross negligence as determined by mutual agreement of the
                  parties or by a court or other tribunal.

         (ii)     The Employer delegates to the Company the discretion and
                  authority to develop and use standards and procedures for any
                  recovery under this section, including but not limited to,
                  whether or not to seek recovery, what steps to take if the
                  Company decides to seek recovery, and under what circumstances
                  to compromise a claim or settle for less than the full amount
                  of the claim. The Employer recognizes that use of these
                  standards and procedures may not result in recovery or in full
                  recovery for any particular case. The Company will not pursue
                  any recovery if any applicable law does not permit it, or, if
                  recovery would be impractical. The Company may choose to
                  initiate litigation to recover payments, but it shall have no
                  obligation to pursue litigation. If the Company initiates
                  litigation, the Employer shall cooperate with the Company in
                  the litigation.

         (iii)    If the Agreement terminates, or, if the Company's recovery
                  services terminate, the Company may, but is not required to,
                  continue to recover any Overpayments. The Company shall
                  include Overpayments recoveries in the Termination Review (as
                  defined in Exhibit A to the MP Financial Agreement) in the
                  manner reflected in Exhibit A to the MP Financial Agreement,
                  and the Company shall otherwise be authorized to retain all
                  Overpayments recoveries obtained after the Claims Recognition
                  Date (as defined in the MP Financial Agreement).

         (iv)     The Employer will not engage any entity except the Company to
                  provide these recovery services without the Company's prior
                  approval.

         (v)      For purposes of the Agreement, "Overpayments" shall mean
                  payments that exceed the amount payable under a policy (for
                  example, because of a provider billing error,



                                       7


                  retroactive or inaccurate eligibility information,
                  coordination of benefits, Medicare disputes, or missing
                  information), and other overcharges made by providers,
                  including hospitals, discovered during the course of a
                  hospital bill audit.

(e)      Claims Incurred prior to termination of any Policy shall be processed
         in accordance with such Policy.

SECTION 3: ADDITIONAL SERVICES

The Company shall provide to the Employer those additional services identified
in Exhibit B. Fees for those services are specified in the Exhibit.

SECTION 4: MAINTENANCE OF RECORDS AND REPORTING TO THE EMPLOYER

(a)      The Company will maintain all claims records for the period required by
         ERISA. Following termination of the Agreement, the Company will supply
         the Employer with historical information in the Company's possession
         reasonably needed by the Employer to administer the Plan. In addition,
         during the year following termination, the Employer may request and the
         Company shall provide, at its prevailing charge, the following
         information:

         (i)      As to each Policy and Non-MP Policy that terminates at any
                  date other than December 31, the following reports for the
                  relevant period of the calendar year in which such Policy or
                  Non-MP Policy terminates:

                  (A)      Year-to-date claims analysis for such year
                           reflecting, for each Participant, total charges,
                           deductibles, co-insurance and out-of-pocket maximum
                           charges; and

                  (B)      Per Participant, year-to-date report regarding
                           relevant annual benefit maximums.

         (ii)     For each Policy and Non-MP Policy:

                  (A)      Per Participant, lifetime maximum report and

                  (B)      Per Participant, lifetime maximum report regarding,
                           as applicable, specific medical conditions,
                           treatments, therapies, services and/or benefits.



                                       8


(b)      The Company shall make the necessary reporting to the United States
         Internal Revenue Service regarding payments that are made by the
         Company on behalf of the Plan to health care providers pursuant to the
         Agreement.

(c)      The Company shall provide the Employer with information, as required by
         ERISA, in a manner that enables the Employer to comply with ERISA's
         annual reporting requirements.

(d)      The Company shall provide to the Employer the reports identified in
         Exhibit C to the Agreement.

(e)      The Company receives payments from prescription drug manufacturers in
         connection with pharmacy benefit services provided to its customers,
         including the Employer. The estimated average payment for 2001 for the
         Company's small group segment was $*** per employee per month. The
         Company shall promptly notify the Employer if this average payment per
         employee per month (determined annually) varies by more than 25% from
         the previous estimate.

SECTION 5: INFORMATION ACCESS, AUDIT AND CONFIDENTIALITY

(a)      Employer's Access to Information. During the term of the Agreement, if
         in order to administer the Plan, the Employer reasonably requests
         information, for an auditor or otherwise, that the Company has in its
         possession, the Company will provide access to that information, if
         legally permissible, as long as the information relates to the
         Company's services under the Agreement, and the Employer provides (60)
         sixty calendar days prior notice of the need for the information.

         (i)      The Employer hereby represents that any request by the
                  Employer for disclosure of any information that contains
                  personally identifiable information about a Participant
                  ("Confidential Participant Information") shall constitute the
                  Employer's representation to the Company that the Participant
                  has authorized disclosure to the Employer or the Employer
                  otherwise has the legal authority to have access to the
                  information. The Employer must also represent at the time of
                  the disclosure request that it has a reasonable procedure in
                  place for handling Confidential



                                       9


                  Participant Information as required by any then current law.

         (ii)     The Company will provide information only while the Agreement
                  is in effect, unless the Employer demonstrates that the
                  information is required for Plan purposes and such disclosure
                  is permitted by law. The Employer shall pay the Company's
                  reasonable expenses in providing information after the
                  termination of the Agreement.

         (iii)    The Company will also provide reasonable access to information
                  to an entity providing services to the Employer, such as an
                  auditor or other consultant, upon request. Before the Company
                  gives access to Confidential Participant Information to that
                  entity, that entity will be required to sign a Third Party
                  Disclosure Agreement, substantially in the form of Exhibit D.

(b)      Audits by the Employer. During the term of the Agreement, the Employer
         or a mutually agreeable entity may audit the Company to determine
         whether it is fulfilling its obligations under the Agreement.

         (i)      The Employer shall advise the Company at least sixty (60)
                  calendar days in advance of its intent to audit. The place,
                  time, type, duration, and frequency of all audits must be
                  reasonable and agreed to by the Company, which consent shall
                  not be unreasonably withheld. All audits shall be limited to
                  information relating to the calendar year in which the audit
                  is conducted and/or the immediately preceding calendar year.
                  With respect to the Company's transaction processing services,
                  the audit scope and methodology shall be consistent with
                  generally acceptable auditing standards, including a
                  statistically valid random sample or other acceptable audit
                  technique as reasonably approved by the Company (for purposes
                  of this subsection (b), "Scope").

         (ii)     The Employer will pay any expenses that the Employer incurs,
                  and will be charged a reasonable additional fee, determined by
                  the Company, for more than one audit every twelve (12) months,
                  for any on-site audit visit that is not completed within five
                  (5) business days, or for sample



                                       10


                  sizes exceeding the Scope set forth above. The Employer will
                  incur a reasonable per claim charge for samples in excess of
                  the Scope, and a $1000 charge for each day an audit exceeds
                  the five (5) day on-site review limit per year. The additional
                  fees cover the additional resources, facility fees, and other
                  incremental costs associated with an audit that exceeds the
                  Scope. The Employer will also pay any unanticipated reasonable
                  expenses the Company incurs and all expenses incurred by the
                  Company on any audit initiated after a termination notice is
                  provided but before the effective date of the termination of
                  the Agreement.

         (iii)    The Employer will provide the Company with a copy of any final
                  audit report.

(c)      Audits by the Company. During the term of the Agreement, the Company
         may audit the Employer to determine whether the Employer is fulfilling
         its obligations under the Agreement.

         (i)      The Company shall advise the Employer at least sixty (60)
                  calendar days in advance of its intent to audit. The place,
                  time, type, duration, and frequency of all audits must be
                  reasonable and agreed to by the Employer, which consent shall
                  not be unreasonably withheld. All audits shall be limited to
                  information relating to the calendar year in which the audit
                  is conducted and/or the immediately preceding calendar year.
                  The audit scope and methodology shall be consistent with
                  generally acceptable auditing standards, including a
                  statistically valid random sample or other acceptable audit
                  techniques as reasonably approved by the Employer (for
                  purposes of this subsection (c), "Scope"). The Company will
                  bear any expenses that it incurs in conducting an audit. The
                  Company shall provide the Employer with a copy of any final
                  audit report.

         (ii)     The Company shall pay any expenses that the Company incurs,
                  and will be charged a reasonable additional fee, determined by
                  the Employer, for more that one audit every twelve (12)
                  months, for any on-site audit visit that is not completed
                  within five (5) business days, or for sample sizes exceeding
                  the Scope set forth above. The Company shall incur a $1000
                  charge for each day an audit exceeds the five (5) day on-site
                  review limit per year. The



                                       11


                  Company shall incur a reasonable per Client charge for samples
                  in access of the Scope. The additional fees cover the
                  additional resources, facility fees, and other incremental
                  costs associated with an audit that exceeds the Scope. The
                  Company will also pay any unanticipated reasonable expenses
                  the Employer incurs and all expenses incurred by the Employer
                  on any audit initiated after a termination notice is provided
                  but before the effective date of the termination of the
                  Agreement.

(d)      Confidentiality. Except as otherwise provided herein or required by
         law, Proprietary Business Information and Confidential Participant
         Information will be the used solely to administer the Plan or to
         perform under the Agreement.

         (i)      Except as provided in paragraph (ii) of this subsection (d),
                  Confidential Participant Information and Proprietary Business
                  Information will not be disclosed to any person or entity
                  other than either party's employees, subcontractors, or
                  representatives needing access to such information to
                  administer the Plan or perform under the Agreement.

         (ii)     The Company or a related entity may the use Confidential
                  Participant Information for research, creating comparative
                  databases, statistical analysis, or other studies, provided
                  that the information is de-identified or the use of the
                  Confidential Participant Information is otherwise in
                  accordance with then current law. The Company will maintain
                  the confidentiality of such information as it relates to or
                  could be identified with any individual Participant, provider,
                  the Employer, any Client or the Employer's or Client's
                  business. Such research, databases, analyses, and studies are
                  considered by the Company to be Proprietary Business
                  Information as defined in the following clause.

         (iii)    "Proprietary Business Information" means information about the
                  business of the Company or the Employer that is confidential,
                  proprietary, trade secret or is not readily available to the
                  general public, or information that has been designated by
                  either of the parties as confidential or proprietary.



                                       12


(e)      Publicity. The Company and the Employer acknowledge the important legal
         and economic interests each party has in the protection of its
         respective trademarks and tradenames, as well as in the accuracy and
         appropriateness of information released to the public concerning such
         party. Accordingly, each party shall obtain the consent of the other
         for the use of the other party's name as follows:

         (i)      With respect to any media release, advertising campaign and
                  other similar public announcement by one party referring to
                  the other party ("Media Release"), the disclosing party shall
                  provide to the other party a Disclosure Notice (as defined
                  below).

                  (A)      An Authorized Person shall provide written objections
                           or written approval on behalf of the non-disclosing
                           party within 24 hours. For purposes of this
                           subsection, with respect to the Company, its General
                           Counsel and President, Small Business Operations, are
                           both Authorized Persons. With respect to the
                           Employer, the Vice President, Benefits, and the
                           General Counsel are Authorized Persons. By written
                           notice to the other party, either party may change
                           its Authorized Persons.

                  (B)      In no event may a disclosing party publish (or cause
                           to be published) a Media Release without the prior
                           written approval of an Authorized Person of the other
                           party.

         (ii)     With respect to a filing or written communication with a state
                  department of insurance or department of health, or other
                  similar regulatory body, by one party referring to the other
                  party ("Special Regulatory Filing"), the disclosing party
                  shall provide to the other a Disclosure Notice. The disclosing
                  party may file or publish the Special Regulatory Filing if the
                  other party does not object in writing within 5 business days
                  of the Disclosure Notice. In no event may a party file or
                  publish a Special Regulatory Filing if the other party
                  provides a timely written objection unless the stated
                  objection has been resolved by the parties or unless required
                  by law or pursuant to a valid court order.

         (iii)    With respect to all other regulatory filings, public
                  announcements and public disclosures referring to the



                                       13


                  other party, other than such releases, announcements,
                  disclosures, employee enrollment and communication materials
                  as are used on a regular basis in the ordinary course of a
                  party's business, ("Other Disclosures") a disclosing party
                  shall use its best efforts to provide to the other a
                  Disclosure Notice at least 5 business days in advance of the
                  proposed announcement or disclosure date of such Other
                  Disclosure. In no event may a party file or publish Other
                  Disclosures if the other party provides a timely written
                  objection unless the stated objection has been resolved by the
                  parties unless required by law or pursuant to a valid court
                  order.

         "Disclosure Notice" means a written statement identifying and attaching
         the relevant portion of the proposed disclosure, indicating the
         proposed disclosure date and time, and identifying to whom any
         objections should be delivered.

SECTION 6: ADDITIONAL DUTIES OF THE EMPLOYER

(a)      The Employer will identify to the Company those Employees, dependents
         and/or other persons eligible to be Participants. In processing claims
         and providing other services under the Agreement, the Company will be
         entitled to rely on the most current information in its possession
         regarding Participant eligibility. The Employer shall report
         eligibility to the Company as provided in Exhibit E of the Agreement,
         and eligibility information will be effective in claims processing as
         described in such Exhibit.

(b)      The Employer shall conduct its business with each Client and administer
         the Plan to ensure that -

         (i)      each Employee has available no more than one open enrollment
                  period per calendar year (other than qualifying status change
                  events or otherwise in accordance with section 125 of the
                  Internal Revenue Code of 1986, as amended) and the Employer
                  administers the Benefits under the Plan on a calendar year
                  basis notwithstanding the effective date of the Client's
                  participation in the Plan;

         (ii)     at least ***% of the eligible Employees of the Employer
                  participate in the Plan (for this purpose, an eligible



                                       14


                  employee who is covered as a dependent under such employee's
                  spouse's group health coverage is deemed covered under the
                  Plan), and, as to each Client, no Employee contributes more
                  than ***% of the contribution required for "employee only"
                  coverage; provided that for so long as at least ***% of the
                  total Clients meet this contribution standard, then Employer
                  may continue or renew service agreements with Clients under
                  which Employees' contribution for "employee only" coverage is
                  more than ***%; provided further that no new service
                  agreements violative of this contribution standard shall be
                  executed on or after June 1, 2002.

         (iii)    each Employee is offered concurrently no more than *** in
                  addition to the Company's dental benefit plan (where offered);

         (iv)     except as provided in Exhibit F to the Agreement, the Company
                  shall be the exclusive provider of health and dental benefits
                  for each Employee;

         (v)      if the Employer terminates coverage for all or substantially
                  all Employees at a worksite, that termination *** as of the
                  date of notice to the Company of the termination.

(c)      Except to the extent that (i) the Agreement specifically requires the
         Company to have fiduciary responsibility, or (ii) a Policy imposes
         responsibility on the Company for a specific Plan administrative
         function, the Employer accepts complete responsibility for the Plan,
         including its design, and for compliance with any laws that apply to
         the Plan.

(d)      The Employer will provide to Participants the information and documents
         they need to obtain Health Benefits within a reasonable period of time
         after coverage begins. In the event of the termination of the
         Agreement, the MP Financial Agreement or the Policy, the Employer will
         notify all affected Participants of the termination.

(e)      Upon the Company's request, the Employer shall provide to the Company
         documentation of the Employer's current debt rating, if applicable. In
         addition, the Employer shall notify the Company



                                       15

         immediately upon learning that the Employer's debt rating has fallen
         below Investment Grade.

(f)      The following provisions govern coverage provided to new Clients
         obtained by the Employer as a result of the Employer's acquisition of,
         joint venture with, or any similar type of transaction with another
         professional employer organization ("New PEO Clients").

         (i)      The Employer may not add New PEO Clients to the MP Arrangement
                  or to the Non-MP Policies without the express written consent
                  of the Company. Within not more than 30 calendar days
                  following the Company's receipt of all information required by
                  the Company to evaluate the economic risk associated with the
                  proposed addition of the New PEO Client(s) to the MP
                  Arrangement as a result of any such acquisition or
                  transaction, the Company shall inform the Employer of its
                  decision regarding such proposed addition and, if such
                  addition is approved, any condition(s), including separate
                  rating for a designated period, which the Company intends to
                  impose as a condition to such addition.

         (ii)     Within a reasonable period of time not to exceed six (6)
                  months after consummation of the transaction, the Employer
                  must provide to New PEO Clients coverage under the MP
                  Arrangement or a Company product that is *** to that which the
                  New PEO Clients ***, but different and separate from the MP
                  Arrangement, if offered by the Company. In either case, within
                  such six (6) month period, the Company shall be the ***
                  coverage for such ***.

         (iii)    If the Company exercises its right under section 6(f)(i) of
                  the Minimum Premium Services Agreement to decline the addition
                  to the MP Arrangement and to the Non-MP Policies of such New
                  PEO Clients, or imposes conditions on such a proposed addition
                  that are unacceptable to the Employer in its sole discretion,
                  the exclusivity provisions of section 6(b)(iv) above shall not
                  apply and the Employer may contract with any other *** New PEO
                  Clients on such terms as it shall determine.



                                       16


         (iv)     A Client once covered under the MP Arrangement may not be
                  deemed a New PEO Client or covered under any arrangement
                  exclusively for New PEO Clients.

SECTION 7: DISPUTES AND INDEMNIFICATION

(a)      The Employer agrees to indemnify and hold harmless the Company from any
         and all liability, loss, damages, fines, penalties and costs, including
         but not limited to, expenses and reasonable attorneys' fees, which the
         Company shall sustain arising out of or in connection with (1) any
         gross negligence or material breach of the Agreement on the part of the
         Employer, (2) any determination by the Employer regarding the
         eligibility for coverage under a Policy or a Non-MP Policy of an
         Employee or Employee's dependent, (3) any direction of the Employer to
         the Company, (4) the offering or termination of the Policies or Non-MP
         Policies, or the manner of the offering or termination of the Policies
         or Non-MP Policies, to Clients, or (5) the release or use by Employer
         of any information obtained from the Company pursuant to section 5(a),
         unless the parties agree or it is determined in a final non-appealable
         decision by a court or regulatory agency having jurisdiction of the
         matter that the liability therefore was the direct consequence of
         criminal conduct or fraud on the part of the Company or negligence or a
         material breach of the Agreement on the part of the Company.

(b)      The Company agrees to indemnify and hold harmless the Employer and/or
         the Plan from any and all liability, loss, damages, fines, penalties
         and costs, including but not limited to, expenses and reasonable
         attorneys' fees, that the Employer or Plan shall sustain arising out of
         or in connection with gross negligence or material breach of the
         Agreement on the part of the Company or any direction of the Company to
         the Employer, unless the parties agree or it is determined in a final
         non-appealable decision by a court or regulatory agency having
         jurisdiction of the matter that the liability therefore was the direct
         consequence of criminal conduct or fraud on the part of the Employer or
         negligence or a material breach of the Agreement by the Employer. The
         Company shall not indemnify or hold harmless the Employer or the Plan
         for any losses arising out of Overpayments. If Health Benefits are
         required to be paid pursuant to any judgment in favor of the plaintiff
         or a settlement with the plaintiff or the order of a regulatory agency
         having



                                       17


         jurisdiction of the matter and such judgment or settlement is final or
         payable during the term of the Agreement, any portion of such judgment
         or settlement attributable to Health Benefits shall be treated as a
         claim for Health Benefits at the time that the judgment or settlement
         is final and shall be paid by the Company to the same extent as any
         other claim for Health Benefits under the provisions of section 5 of
         the Agreement and section 2 of the MP Financial Agreement.

(c)      The Company and the Employer shall promptly advise each other as to
         matters which come to their respective attentions involving potential
         legal actions or regulatory enforcement activity which involve the Plan
         or are related to the activities of either party with respect to the
         Plan or the Agreement and shall promptly advise each other of legal
         actions or administrative proceedings which have actually commenced.

(d)      In the event that a lawsuit or administrative proceeding is brought
         against the Employer or the Plan but not the Company, the defense and
         associated costs of such action or proceeding shall be paid by the
         Employer, provided that the costs, including attorneys' fees, of such
         defense shall be reimbursed to the Employer or Plan by the Company to
         the extent the Employer or the Plan is entitled to indemnification by
         the Company under subsection (b) of this section 7. The Company shall
         cooperate fully with the Employer in the defense of any such action or
         proceeding arising out of matters related to the Agreement. The
         Employer agrees not to oppose any attempt made by the Company to
         intervene in such action or proceeding, provided there is no conflict
         of interest between the Company and the Employer or the Plan.

(e)      In the event that a lawsuit or administrative proceeding is brought
         against the Company arising out of the performance of its duties under
         the Agreement, the defense of and associated costs of such action or
         proceeding shall be paid by the Company, provided that the costs,
         including reasonable attorneys' fees, of such defense shall be
         reimbursed to the Company by the Employer to the extent the Company is
         entitled to indemnification by the Employer under subsection (a) of
         this section. The Employer shall cooperate fully with the Company in
         the defense of any such action or proceeding arising out of matters
         related to the Agreement. The Company agrees not to



                                       18


         oppose any attempt made by the Employer to intervene in such action or
         proceeding, provided there is no conflict of interest between the
         Company and the Employer or the Plan. If the Employer or the Plan is
         also named as a party in such action or proceeding, the Employer may
         request that the counsel engaged by the Company also provide for the
         defense of the Employer and/or the Plan. If there is no conflict of
         interest between the Company and the Employer or the Plan, the Company
         shall take all reasonable measures to comply with the Employer's
         request. If such counsel does not provide for the Employer's or Plan's
         defense, then the Employer and Plan shall pay for the defense and
         associated costs as provided in subsection (d) of this section, subject
         to the Employer's and/or the Plan's right to reimbursement under such
         subsection.

SECTION 8: TAXES AND ASSESSMENTS

(a)      In the event that a state or other jurisdiction, in accordance with
         existing or future law, determines that the Company is liable for
         payment of any tax, surcharge or assessment (other than taxes based
         upon net income) (individually or collectively, "Tax") with respect to
         any aspect of the Plan, the Policies, the Non-MP Policies, the MP
         Arrangement, or the Agreement, the Employer agrees to reimburse the
         Company for the amount of any such Tax, any interest expense assessed
         against or incurred by the Company before or after payment of such Tax,
         and any other charges, penalties or fines in connection therewith,
         including reasonable attorneys' fees, that the Company may sustain in
         connection with the payment of such Tax, provided, however, that the
         Company shall have given the Employer prompt notification of the
         imposition of any such Tax.

         (i)      Subject to the provisions of section 8(a)(ii), any such amount
                  shall be due and payable upon written notification by the
                  Company to the Employer, regardless of whether such
                  notification occurs during the term or following the
                  termination of the Agreement. The Employer shall indemnify and
                  hold harmless the Company from any liability, loss, damages,
                  fines, penalties and costs, including reasonable attorneys
                  fees, which the Company may sustain arising out of or in
                  connection with any compromise, litigation or appeal by the
                  Employer of any



                                       19


                  Tax or any delay in payment of such Tax as a result of such
                  compromise, litigation or appeal.

         (ii)     With respect to any Tax imposed on the Company solely as a
                  result of the Employer's status as policyholder or sponsor of
                  the Plan, upon Employer's compliance with any bond, security
                  or other legal requirement imposed on a party contesting such
                  a Tax, the Employer shall have the sole discretion in
                  determining whether any such Tax shall be paid, compromised,
                  litigated or appealed and as to all matters of procedure,
                  compromise, defense or appeal of any other aspects concerning
                  liability for any such Tax, except to the extent that the
                  Company would thereby be in violation of any applicable law or
                  rule or would suffer any injury, loss or liability that would
                  not be fully compensable under section 8(a).

         (iii)    The Employer shall not be obligated to reimburse the Company
                  for that portion of any premium tax assessed against the
                  Company that was taken into account by the Company in
                  establishing the Quoted Premium (as defined in the MP
                  Financial Agreement) under a Policy or the premium under a
                  Non-MP Policy.

(b)      In the event that a state or other jurisdiction, in accordance with
         existing or future law, imposes upon the Company the duty to act as
         agent for collection of any Tax imposed on the Plan or the Employer or
         with respect to any aspect of the Plan, a Policy, the MP Financial
         Agreement, or the Agreement, the Employer will pay over any such amount
         to the Company when requested to do so by the Company, subject to
         receipt by the Employer from the Company of prompt notice concerning
         such matter and exercise by the Employer of its rights as stated under
         subsection 8(a) above.

SECTION 9: EFFECTIVE DATE AND AGREEMENT PERIOD

The Agreement shall be effective as of January 1, 2002 ("Effective Date") for a
period of twelve (12) months ("Agreement Period") and shall continue
automatically for successive Agreement Periods of twelve (12) months each unless
it is discontinued earlier in accordance with section 11 of the Agreement.



                                       20


SECTION 10: SERVICE FEES

The fees for the services provided by the Company under the Agreement are
included in the Monthly Premiums as defined in the MP Financial Agreement and
any fees for any additional services are described in Exhibit B of the
Agreement.

SECTION 11: TERMINATION OF AGREEMENT

(a)      The Agreement shall terminate on the date that the MP Financial
         Agreement terminates.

(b)      In the event that either party reasonably believes that any state or
         other jurisdiction may impose a penalty on it for proceeding with its
         performance under the Agreement, such party will promptly advise the
         other party of such belief and the basis therefore. In such event the
         parties agree to cooperate in good faith to resolve such matter to the
         satisfaction of both parties. After a good faith effort by the parties
         to eliminate the risk of a material penalty being imposed, if the
         matter is not resolved to the satisfaction of both parties, the party
         upon which such penalty may be imposed may immediately discontinue the
         Agreement's application in such state or jurisdiction by providing
         notice to that effect to the other party. In that event, the Agreement
         will continue to apply in all other states or jurisdictions.

(c)      Termination of the Agreement shall not extinguish the rights or
         liabilities of either party arising prior to termination.

SECTION 12: COSTS OF COLLECTION

The Employer and the Company agree to pay all reasonable costs of collection,
including reasonable attorneys' fees, of any amounts due the other party under
the Agreement.

SECTION 13: ASSIGNMENT

Services to be performed by the Company under the Agreement may be performed by
the Company, by any of its affiliates or by any subcontractor selected by it,
provided that the Company shall not be relieved of any of its obligations
hereunder. Except as set forth in the preceding sentence, neither party may
assign or delegate any of the



                                       21


rights and obligations hereunder to any third party without the prior written
consent of the other party.

SECTION 14: CHOICE OF LAW

The Agreement shall be governed by applicable federal law and, to the extent not
governed by federal law, the laws of the State of Texas.

SECTION 15: ENTIRE AGREEMENT, AMENDMENT AND WAIVER

(a)      Upon execution of the Agreement, all prior or contemporaneous letters
         of understanding, agreements, requests for proposal, proposals,
         representations, statements, negotiations and understandings, whether
         oral or written, are hereby terminated and superseded by the Agreement,
         the MP Financial Agreement, the Security Deposit Agreement, the
         Policies and Non-MP Policies and all riders thereto.

(b)      Any amendments or modifications to the Agreement must be in writing,
         and must be signed by the duly authorized representatives of each
         party. Each party shall provide to the other a written certification of
         the names of those persons duly authorized to execute amendments or
         modifications on behalf of the party. Each party shall be entitled to
         rely on the other's certification of authority unless and until it is
         modified.

(c)      No term or provision of the Agreement shall be deemed waived and no
         breach excused, unless the party claimed to have waived the term or
         provision or to have excused the breach does so in a signed writing.

(d)      In the event of any conflict between the terms and conditions of the
         Agreement, the MP Financial Agreement, the Security Deposit Agreement
         or the Policies or Non-MP Policies, the following order of precedence
         shall be followed in resolving the conflict. The terms of the Security
         Deposit shall first control, then the MP Financial Agreement, then the
         Agreement and lastly the Policies or the Non-MP Policies, as
         applicable.

(e)      The parties' respective rights and obligations under sections 2(a)-(d),
         4(a)-(d), 5(a), 5(d), 7, 8 and 12 of the Agreement shall survive
         termination of the Agreement.



                                       22


SECTION 16: NOTICES

(a)      Any notice required to be given under the Agreement shall be given in
         writing by sending or delivering such notice to the receiving party (i)
         by prepaid registered or certified first class U.S. mail, return
         receipt requested, (ii) by overnight express courier with recipient's
         signature required, (iii) by hand delivery with recipient's signature
         required, (iv) by facsimile, provided that the other party has
         specifically requested that a specifically designated notice be made by
         facsimile, or (v) or by any other method by which the date of receipt
         by the party entitled to such notice may be determined. Notice shall be
         effective when sent.

(b)      Notices to a party shall be sent or delivered:

         To the Company at:

         UnitedHealthcare
         Small Business Group
         5901 Lincoln Drive
         Edina, MN 55436
         Fax: (952) 992-7155
         Attention: President, Small Business Group

         With a Copy to:

         UnitedHealthcare
         Legal Department
         5901 Lincoln Drive
         Edina, MN 55436
         Fax: (952) 992-5180
         Attention: General Counsel

         And:

         UnitedHealthcare
         Small Business Group
         5901 Lincoln Drive
         Edina, MN 55436
         Fax: (952) 992-7155
         Attention: Vice President, Underwriting



                                       23


         And to the Employer at:

         Administaff of Texas, Inc.
         19001 Crescent Springs Drive
         Kingwood, Texas 77339-3802
         Fax: (281)312-3350
         Attention: Vice President of Benefits

         With a Copy to:

         Administaff of Texas, Inc.
         Attention: General Counsel
         19001 Crescent Springs Drive
         Kingwood, Texas 77339-3802
         Fax: (281)358-6492


(c)      Each party may change the person(s) designated to receive notice on
         behalf of the party, or the address or facsimile number to which such
         notice should be sent, upon written notice to the other party.






                                       24


In witness whereof, the undersigned have executed the Agreement effective as of
the Effective Date.


ADMINISTAFF OF TEXAS, INC.          UNITED HEALTHCARE
                                    INSURANCE COMPANY


By /s/ Howard G. Buff               By /s/ William A. Munsel
   ----------------------------        -----------------------------
Authorized Signature                Authorized Signature

Name Howard G. Buff                 Name William A. Munsel
     --------------------------          ---------------------------

Title Vice President - Benefits     Title Senior Vice President
      -------------------------           --------------------------

Date: 6/25/02                       Date: 6/25/02
      -------------------------           --------------------------




                                       25


                        EXHIBIT A - PERFORMANCE STANDARDS


1.       GENERAL DESCRIPTION

         a. Performance Standards and Guarantee Period

         Pursuant to section 2(c) of the Agreement, this Exhibit describes the
performance standards applicable to services provided under the Agreement with
respect to medical Policies and Non-MP Policies ("Performance Standard" or
"Performance Standards"). These standards apply to the annual period that begins
on January 1 and ends on December 31 of the same calendar year ("Guarantee
Period").

         The reports and metrics referenced in this Exhibit are those reports
and metrics utilized by the Company on the Effective Date. From time to time,
the Company may change the reports and metrics that it uses. If so,
substantially similar metrics and reports will be substituted for those set
forth in this Exhibit A. In addition, if a report or metric is changed, the
Company will modify any affected Performance Standard to the extent necessary to
carry out the intent of the parties, provided that the modified Performance
Standard shall be at least as favorable to the Employer as the standard offered
by the Company to other key account customers at the time of the modification.

         b. Premium Credits

         To the extent provided below, the Employer shall be entitled to a
Premium Credit if the Company fails to meet *** or more of the Performance
Standards during a Guarantee Period. The Premium Credit due for a Guarantee
Period shall be applied to premiums due to the Company for the first Arrangement
Month following the Quarterly Review for the fourth Arrangement Quarter of each
year.

         c. Reporting

         The Company shall report to the Employer the Performance Standards
results as part of each Quarterly Review. Performance Standard results will be
summarized and reported for the Guarantee Period as part of the Annual Review.
The amount of Premium Credit due as a result of the Company's failure to meet
any of the Performance Standards will be determined as part of the Quarterly
Review.



                                       26


         d. Special Provision for 2002

         For 2002, the Guarantee Period will be modified to begin on July 1,
2002 and end on December 31, 2002. For 2002, the sum of the Premium Credits for
all categories described below shall not exceed $*** with the dollar amount
described in each category below reduced by *** percent. In years after 2002,
Premium Credits in the aggregate may not exceed $***. The potential Premium
Credits by category are listed in sections 2 through 5 below.

         e. Non-Performance by the Company May be Excused

         The Company shall not be required to provide a Premium Credit where the
Company's failure to meet any Performance Standard is due to fire, embargo,
strike, war, accident, act of god, voluntary or involuntary compliance with any
valid or invalid law or regulation of any governmental agency or authority or
***.

2.       ELIGIBILITY LOADING

         The Company will load eligibility transmissions to the UnitedHealth
Group Eligibility System within *** business days of receipt. A tape load will
be considered to have met this standard if the elapsed time between the date the
tape is received by the Company and the date upon which the tape is loaded to
the eligibility system(s) is *** business days or less. The guarantee applies to
tapes submitted consistent with the format outlined in the UnitedHealth Group
Eligibility Handbook (last updated version June 19, 2001) and is not applicable
to tapes that cannot be loaded due to tape errors or for tapes that require
reformatting of data. Tapes must be received prior to 12:00 noon, Eastern Time,
on the date as determined by scheduled tape delivery dates. Otherwise, written
notification of tape delivery must be provided and receipt confirmed by the
Company. If the tape is received after 12:00 noon, Eastern Time, the period for
completion of the loading under this standard commences the following business
day.

         Failure to load ***% of eligibility tapes to the UnitedHealth Group
Eligibility System within *** business days of receipt during the Guarantee
Period will result in a Premium Credit of $***.




                                       27



3.    CUSTOMER REPORTING

         a. The following set of reports will be available on-line to the
Employer for all Policies and Non-MP Policies administered on the Company's UNET
system within *** calendar days of the close of each month:

         o        Premium Versus Claims

         o        Claim Expenses by Size of Payment

         o        Payments by Benefit Type

         o        Health Care Cost Management Summary

         o        Claim Experience

         o        Membership by Market

         o        Membership by Month

         o        Membership with Demographic Factors and Geographic Factors

         b. The following reports will be available to the Employer for all
Non-MP Policies administered on the Company's PRIME system (Maryland Small
Business PPO clients) within *** calendar days of the close of each month:

         o        Claim Expenses by Size of Payment

         o        Payments by Benefit Type

         c. The Quarterly Review report described in Exhibit A of the Minimum
Premium Financial Agreement will be provided to the Employer within *** calendar
days of the end of the Arrangement Quarter.

         d. Failure to deliver at minimum ***% of the total number of reports
identified in this section 3 during the Guarantee Period will result in a
Premium Credit of $***.

4.       CLAIM OPERATIONS PERFORMANCE STANDARDS

         For purposes of this section 4, the term "claim" shall mean a written
or electronic request for payment of a Plan Benefit made by a member or
provider.



                                       28


         a. Time to Pay

         During a Guarantee Period, the Company will process ***% of all claims
received by the Company within *** business days of receipt, as evidenced by the
Company's date stamp. Timeliness will be measured using the "Time to Pay" report
produced by the Company on a monthly basis. The overall Guarantee Period result
is recalculated using the raw data for such period. The "Time to Pay" results
are always rounded to the nearest whole percent.

         For the Agreement, the criteria will be based upon the results of the
Plano Service Center team servicing the Employer.

         A claim will be considered processed when the claim has been completely
reviewed and a payment determination has been made.

         Time to pay is measured the same way regardless of the timing of the
Company's responses to a claimant.

         Failure to process ***% of all claims received within *** business days
during the Guarantee Period will result in a Premium Credit in the maximum
amount of $***. Credits against this Performance Standard will be applied on a
gradient as follows:

         ***% WITHIN *** BUSINESS DAYS - $ ***

         ***% WITHIN *** BUSINESS DAYS - $ ***

         ***% WITHIN *** BUSINESS DAYS - $ ***

         ***% WITHIN *** BUSINESS DAYS - $ ***

         ***% IN MORE THAN *** BUSINESS DAYS - $ ***

         b. Financial Accuracy

         The Company will maintain a Financial Accuracy rate of not less than
***% for the Guarantee Period. Financial Accuracy is measured by collecting a
statistically significant random sample of claims processed. The sample is
reviewed to determine the percentage of claim dollars processed correctly out of
the total claim dollars submitted for payment. The measurement will be done by
the Company's standard internal quality assurance program based on a periodic
audit of all claims processed by the Plano Service Center team servicing the
Employer. The overall Guarantee Period result is recalculated using the raw data
for such period.

         Failure to maintain a Financial Accuracy rate of at least ***% for the
Guarantee Period will result in a Premium Credit in the maximum



                                       29


amount of $***. Credits against this Performance Standard will be applied on a
gradient as follows:

         ***% - ***% PAID CORRECTLY - $***

         ***% - ***% PAID CORRECTLY - $***

         ***% - ***% PAID CORRECTLY - $***

         ***% - ***% PAID CORRECTLY - $***

         LESS THAN ***% PAID CORRECTLY - $***

         c. Procedural Accuracy

         The Company will maintain a Procedural Accuracy rate of not less than
***% for the Guarantee Period. Procedural Accuracy is measured by collecting a
statistically significant random sample of claims processed by the Plano Service
Center team servicing the Employer. The sample is reviewed to determine the
percentage of claims processed without non-financial errors.

         The measurement will be done by the Company's standard internal quality
assurance program based on a periodic audit of all claims processed by the Plano
Service Center team servicing the Employer. The overall performance period
result is recalculated using the raw data for such period.

         Failure to maintain a Procedural Accuracy rate of at least ***% for the
Guarantee Period will result in a Premium Credit in the maximum amount of $***.
Credits against this Performance Standard will be applied on a gradient as
follows:

         ***% - ***% PAID CORRECTLY - $***

         ***% - ***% PAID CORRECTLY - $***

         ***% - ***% PAID CORRECTLY - $***

         ***% - ***% PAID CORRECTLY - $***

         LESS THAN ***% PAID CORRECTLY - $***

         d. Items Excluded From Claim Operations Performance Measurements

         With some products (e.g., HMO), financial reimbursement arrangements
are contractually negotiated with providers (physicians, labs, etc.), that
budget the payment they receive for certain services. Periodic payments are made
to the providers in return for their agreement to provide the negotiated
services to network members. Services provided under these arrangements are not
processed as a




                                       30


typical "claim" and, as a result, results from the networks featuring these
arrangements are not included in the performance statistics outlined above.

         The claims that are included in Claim Operations performance categories
are limited to medical claims processed through the UNET claims system(s).
Claims processed through any other system, including claims for other products
such as *** coverage, are not included in the calculation of the performance
measurements stated above.

5.       MEMBER PHONE SERVICE PERFORMANCE STANDARDS

         a. Average Speed to Answer

         This standard applies to the claim team and/or the member service team
that provide service for the Employer's Employees. The Company will guarantee
that calls will sequence through the Company's automated telephone call
distribution system and be answered by a customer service representative in ***
seconds or less, on average. The Average Speed to Answer will be measured by the
standard tracking reports produced by the Company's automated phone system for
all the calls handled by the Plano Service Center team servicing the Employer.

         If the Average Speed to Answer for the Guarantee Period is greater than
*** seconds, a Premium Credit will be due. The maximum amount of the Premium
Credit will be $***. Credits against this performance measure will be applied on
a gradient as follows:

         *** SECONDS OR LESS - $***

         *** SECONDS OR LESS - $***

         *** SECONDS OR LESS - $***

         *** SECONDS OR LESS - $***

         MORE THAN *** SECONDS TO ANSWER - $***

         b. Abandonment Rate

         This standard applies to the claim team(s) and/or the member services
team(s) which provide service for the Employer's Employees. The Company will
guarantee that calls will sequence through the Company's automated telephone
call distribution system such that the average abandonment rate will be no
greater than *** percent. The Abandonment Rate results will be measured by the
standard tracking reports produced by the Company's automated phone system for
all calls handled by the Plano Service Center team servicing the Employer.



                                       31


         If the Abandonment Rate for the Guarantee Period is greater than ***%
on average, for all locations providing member phone service to the Employer's
Employees, a Premium Credit will be made due. The maximum amount of the credit
will be $***. Credits against this performance measure will be applied on a
gradient as follows:

      ***% - ***% OF CALLS ABANDONED - $***

      ***% - ***% OF CALLS ABANDONED - $***

      ***% - ***% OF CALLS ABANDONED - $***

      ***%  - ***% OF CALLS ABANDONED - $***

      MORE THAN ***% OF CALLS ABANDONED - $***

6.       OVERALL MEMBER SATISFACTION PERFORMANCE STANDARD

         This standard applies to the member service teams that provide HMO,
EPO, PPO and Managed Indemnity services for the Employer's Employees. The
Company will conduct, on *** basis, a Uniprise Customer Satisfaction Survey. The
Overall Satisfaction question used reads:

         "Overall, how satisfied are you with the way the Company administers
         your medical health insurance plan, such as processing your claim or
         helping answer any questions or resolving any problems you may have?"

         If less than ***% of the respondents for the Plano Service Center team
providing services for the Employer's Employees are satisfied overall (i.e., if
***% of respondents do not respond with either completely satisfied, very
satisfied or somewhat satisfied), a Premium Credit of $*** will be due.





                                       32


                         EXHIBIT B - ADDITIONAL SERVICES

                                   [RESERVED]



                                       33


                      EXHIBIT C - REPORTING BY THE COMPANY


         1. By August 1, 2002, the Company shall provide the Employer with the
reports listed below. The parties acknowledge and agree that many of these
reports or samples of these reports have already been provided to the Employer
and that the Company is using its best efforts to supply the full range of these
reports on or before August 1, 2002.

         2. The Company shall provide the Employer on line access to the
Customer Reporting System (CRS) reports available to its fully insured customers
that are listed below. However, the reports that are listed below may not be
available for all Policies or Non-MP Policies or for all system platforms (UNET
or PRIME) on which the Employer's Plan is administered. Those reports that are
available on a monthly basis will be updated and available to the Employer by
the 15th of the subsequent month. The Company will review with the Employer
those reports that are available on an other than monthly basis or on a limited
Policy or Non-MP Policy basis or on a limited system platform basis. The CRS
reports are as follows:

         Premium Versus Claims

         Claims Expenses by Size of Payment

         Payments by Benefit Type

         Detailed Payment Report

         Health Care Cost Management Summary

         Claim Experience

         Claim Lag Study

         Inpatient Utilization and Costs by Admission Types

         Utilization by Diagnosis Chapters

         Managed Pharmacy Plan Performance

         Surgical Costs and Utilization by Procedure Chapters

         Membership by Market

         Membership by Month

         Membership with Demographic and Geographic Factors

         Distribution of Discounts

         Distribution of Ineligible Charges

         Distribution of Other Savings

         Inpatient Utilization by Diagnosis Chapters

         Managed Pharmacy Cost and Utilization by Month

         Managed Pharmacy Critical Indicators

         Managed Pharmacy - Key Generic Substitution Indicators by Month



                                       34


         Managed Pharmacy - Top Drug Utilization Ranked by Cost &Top Drug
         Utilization Ranked by Volume

         Managed Pharmacy - Top Therapeutic Class Utilization Ranked by Cost &
         Top Therapeutic Class Utilization Ranked Volume

         Managed Pharmacy Utilization by Gender and Age

         Network Utilization

         Network Utilization (including Capitation)

         Network Utilization by Provider Type

         Network Utilization by Provider Type (including Capitation)

         Outpatient Utilization by Diagnosis Chapters

         Surgical Utilization by Procedure Category and Place of Service

         Surgical Utilization by Procedure CPT Codes

         Top Hospitals Ranked by Total Net Paid & Top Physicians Ranked by Total
         Net Paid

         Utilization by Age Group

         Utilization and Costs by Provider Type

         Bill Count by Month

         Annual Customer Reporting & Analysis Executive Summary Report

         3. The Company shall provide to the Employer the following monthly
banking system reports in an electronic format by the 15th of the subsequent
month. These reports reflect activity processed through the Claims Account for
the Policies. The reports are as follows:

         Summary Report for Daily Transfer Evaluation

         Monthly Summary Report of Net Charge Distribution

         Detailed Report for Transfer Evaluation

         Outstanding Report

         4. The Company shall provide to the Employer the following monthly
detailed claim extracts in an electronic format consistent with the detailed
file layouts previously supplied for the Policies and Non-MP Policies by the
15th of the subsequent month. These claim extracts were modified by the Company
to include the Employer's Client code and include the following:

         CRS Medical Claim Financial Extract

         CRS Medical Claim Statistical Extract

         CRS Pharmacy Claim Extract

         Dental Claim Statistical Extract



                                       35


                  EXHIBIT D - THIRD PARTY DISCLOSURE AGREEMENT


         This THIRD PARTY DISCLOSURE AGREEMENT ("Agreement") is entered into by
and between Administaff of Texas, Inc. ("Employer"), [Examiner Name]
("Examiner") and United HealthCare Insurance Company for itself and its
affiliated companies ("United HealthCare"). These parties acknowledge and agree
as follows:

         Employer and United HealthCare entered into the Minimum Premium
Administrative Services Agreement ("the Agreement") under which United
HealthCare provides claims administration and other services for Employer's
employee welfare benefit plan ("Plan"). Employer has retained Examiner to
perform an examination, audit or other evaluation of the files, books, and/or
records of United HealthCare pertaining to the Plan ("Examination").

         Employer has requested that solely for purposes of the Examination,
United HealthCare disclose to Examiner certain documents, statistical
information and other information which is commercially valuable, confidential,
proprietary, or trade secret ("Proprietary Information") and also materials
which may contain medical or other individually identifiable information
("Confidential Medical Information"). Proprietary Information and Confidential
Medical Information shall collectively be referred to in the Agreement as
"Confidential Information". United HealthCare has agreed to disclose this
Confidential Information subject to the terms of the Agreement.

         The Examination shall take place on the date or date(s) mutually agreed
upon by the parties.

         Confidential Information disclosed by United HealthCare, its agents,
subsidiaries and affiliates, to Examiner in connection with the Examination,
including all copies thereof, shall be used by Examiner only as permitted by the
Agreement. Confidential Information shall not include information: (i) generally
available to the public or generally known in the insurance industry or employee
benefit consulting community prior to or during the time of the Examination
through authorized disclosure; (ii) obtained from a third party who is under no
obligation to United HealthCare not to disclose such information; or (iii)
required to be disclosed by subpoena, or other legal process.

         USE: Examiner shall: (a) not use (deemed to include, but not be limited
to, using, exploiting, duplicating, recreating, modifying,



                                       36


decompiling, disassembling, reverse engineering, translating, creating
derivative works or disclosing Confidential Information to another person or
permitting any other person to do so) Confidential Information except for
purposes of the Examination; (b) limit use of Confidential Information only to
its authorized employees (deemed to include employees as well as individuals who
are agents or independent contractors of Examiner) who have a need to know for
purposes of the Examination; and (c) may release Confidential Information in
response to a subpoena or other legal process to disclose Confidential
Information, after giving United HealthCare reasonable prior notice of such
disclosure.

         At the conclusion of the Examination, Examiner shall either relinquish
to United HealthCare, or destroy (with such destruction to be certified to
United HealthCare), all Confidential Information. If during the course of the
Examination it is discovered that the Agreement has been breached by Examiner
then all Confidential Information shall be relinquished to United HealthCare
upon demand.

         The Agreement binds the parties and their respective successors,
assigns, agents, employers, subsidiaries and affiliates.

         Unauthorized use of Confidential Information by Examiner is a material
breach of the Agreement resulting in irreparable harm to United HealthCare for
which the payment of money damages is inadequate. It is agreed that United
HealthCare, upon adequate proof of unauthorized use, and in addition to any
other remedies at law or in equity that it may have, may immediately obtain
injunctive relief in any court of competent jurisdiction enjoining any
continuing or further breaches and may obtain entry of judgment for injunctive
relief. Examiner consents to said injunctive relief and judgment. Employer and
Examiner agree to indemnify and hold harmless United HealthCare with respect to
any claims and any damages caused by Examiner's breach of the Agreement.

         The requirement to treat all Confidential Medical Information, as
Confidential Information shall survive the termination of the Agreement. The
requirement to treat all Proprietary Information as Confidential Information
under the Agreement shall remain in full force and effect so long as any
Proprietary Information remains commercially valuable, confidential, proprietary
and/or trade secret, but in no event less than a period of three (3) years from
the date of the Examination.

         Neither the Agreement nor Examiner's rights or obligations hereunder
may be assigned without United HealthCare's prior written approval.



                                       37


         GENERAL: (a) The Agreement is the entire understanding between the
parties as to the subject matter hereof. (b) No modification to the Agreement
shall be binding upon the parties unless evidenced in writing signed by the
party against whom enforcement is sought. (c) Headings in the Agreement shall
not be used to interpret or construe its provisions. (d) The alleged invalidity
of any term shall not affect the validity of any other terms. (d) The Agreement
may be executed in counterparts.

         The parties have caused their authorized representatives to execute the
Agreement.

ADMINISTAFF OF TEXAS, INC.

By
  --------------------------------------------
           Authorized Signature
Print Name
           -----------------------------------
Print Title
            ----------------------------------
Date
    ------------------------------------------

[EXAMINER NAME]

By
  --------------------------------------------
           Authorized Signature
Print Name
           -----------------------------------
Print Title
            ----------------------------------
Date
    ------------------------------------------

UNITED HEALTHCARE INSURANCE COMPANY

By
  --------------------------------------------
           Authorized Signature
Print Name
           -----------------------------------
Print Title
            ----------------------------------
Date
    ------------------------------------------




                                       38


                EXHIBIT E - ELIGIBILITY REPORTING BY THE EMPLOYER

For purposes of this Exhibit E, "Plan" shall include the plan of benefits
provided by the Employer under the Policies and the Non-MP Policies.

1.       The Employer shall provide to the Company an accounting of the number
         of Clients participating in the Plan as of January 1, 2002.

2.       The Employer understands that the Company requires a seven business day
         period from the date notification is received by the Company of a
         Participant's eligibility or termination of coverage under the Plan in
         order to update the UnitedHealth Group Eligibility System and the
         subsidiary eligibility systems for pharmacy, dental and mental
         health/substance abuse benefits. This seven business day period is
         predicated upon such eligibility information being provided by the
         Employer to the Company in the format consistent with that outlined in
         the UnitedHealth Group Eligibility Handbook (last updated on June 19,
         2001). The Employer agrees to pay the claims of such Participant(s)
         whose coverage has been terminated to the extent they would otherwise
         constitute Health Benefits required to be paid by the Company if the
         Company authorized the payment of the claims during this period, even
         if such persons are no longer eligible for Plan benefits during this
         period.

3.       The Company shall not be required to make retroactive corrections in
         Participant eligibility for benefits Incurred under Policies or Non-MP
         Policies on dates more than 60 calendar days before the date on which
         the corrected information is received by the Company.

4.       In calculating the Quoted Premiums under the Policies and the monthly
         premiums under the Non-MP Policies administered on the Company's UNET
         system (as designated in Exhibit B to the Minimum Premium Financial
         Agreement), the following rule shall apply. A *** shall be due for
         Employees whose effective date of coverage is on or before the 15th of
         that month and no premium shall be due for Employees whose effective
         date of coverage is after the *** of that calendar month. A *** shall
         be due for Employees whose coverage is terminated after the *** of that
         calendar month, and *** shall be due for Employees whose coverage is
         terminated on or before the *** day of that calendar month.



                                       39

5.       Monthly premiums for the Non-MP Policies administered on the Company's
         PRIME system (as designated in Exhibit B to the Minimum Premium
         Financial Agreement) are calculated by the system on an individual
         Non-MP Policy basis using a roster billing process which reflects the
         amount due for individual Participants. The calculation of monthly
         premiums on PRIME uses a *** rule to determine the premium due for
         partial month's coverage as opposed to the *** of the month rule
         described in paragraph 4 above.




                                       40


                          EXHIBIT F - ALTERNATE VENDORS

A.       Except as otherwise set forth in this Exhibit F, the Company shall have
         the right to be the exclusive provider of health and dental coverage
         for Employees.

B.       Exceptions to the Company's Right to be Exclusive Provider

         1.       ***: The Employer may offer alternate HMO or PPO coverage (but
                  not dental coverage) to Clients in ***.

         2.       ***: The Employer shall offer to each Client the following
                  coverage options for Employees at *** worksites: (i) existing
                  *** coverage options (medical and/or dental) or (ii) coverage
                  options offered by the Company (medical and/or dental).

         3.       CIGNA ***s: CIGNA ***s may be offered with, at the option of
                  the Company, the Company's ***s, in the following markets
                  effective on or after May 1, 2002, provided that each market
                  listed below shall be treated as a New Market (as defined in
                  section B(7) below) and subject to the provisions of section
                  B(5)(b) below at such time as the Company shall offer an ***
                  option which is Competitive (as defined in section B(7) below)
                  in such market.

                  a.       ***

                  b.       ***

                  c.       ***

                  d.       ***

                  e.       ***

                  f.       ***

                  g.       ***



                                       41


         4.       New Markets

                  a.       The Employer shall offer the Company's PPO option in
                           New Markets. Subject to subsection (b) below, if the
                           Employer wishes to also offer an HMO option in a New
                           Market, the Employer shall (i) notify the Company of
                           its plan, and (ii) offer such HMO option exclusively
                           through the Company, provided that the Company's HMO
                           is Competitive in such New Market at the time of the
                           Employer's notice to the Company or becomes
                           Competitive not more than *** months after receipt of
                           the Employer's notice to the Company.

                  b.       If the Employer provides an HMO option through a
                           Competing Vendor in a New Market consistent with the
                           provisions of this Exhibit F, the Company may elect
                           to offer the Company's PPO option to Employees along
                           with the Competing Vendor's HMO. If the Company's PPO
                           option is provided to Employees, the Company may upon
                           *** days notice to the Employer, cease such offering
                           in the New Market effective on the January 1
                           following the notice.

         5.       Removal or Addition of the Company's HMOs

                  a.       If at any time an HMO offered by the Employer through
                           the Company ceases to be Competitive, the Employer
                           may in its sole discretion cease offering such HMO
                           and, in any case, the respective market in which such
                           HMO operates shall be deemed a New Market. In any
                           such case, the Employer shall notify the Company of
                           its opinion concerning the Competitive status of such
                           HMO at least *** months before it ceases offering the
                           HMO and shall have the burden of undertaking the
                           steps required to confirm the same in accordance with
                           section B(7)(b) of this Exhibit F. If the Company's
                           HMO becomes Competitive within *** months after its
                           receipt of the Employer's notice, the Employer may
                           not replace it unless and until it is again not
                           Competitive, in which



                                       42


                           case a new notice shall be required and a new ***
                           month corrective period will begin.

                  b.       If at the time the Company begins to offer an HMO
                           option which is Competitive, the Employer is offering
                           an HMO option through a Competing Vendor consistent
                           with the provisions of this Exhibit F, the Employer
                           shall offer each Client in such New Market coverage
                           options for Employees in such New Market not later
                           than the *** of such *** consisting of either (i) the
                           Company's *** and *** options or (ii) such Competing
                           Vendor's *** and, at the Competing Vendor's option,
                           its ***.

         6.       Acquisition by Employer of another Professional Employer
                  Organization: The Employer's use of Competing Vendors to
                  provide coverage to New PEO Clients will not violate the
                  provisions of section 6(b)(iv) of the Agreement or this
                  Exhibit F if such coverage complies with the provisions of
                  section 6(f) of the Agreement.

         7.       Definitions: As used in this Exhibit F, capitalized terms
                  shall have the meanings assigned to them in the Minimum
                  Premium Administrative Services Agreement to which this
                  Exhibit F is attached or, if no meaning is so assigned, the
                  meaning set forth in this section B(7) of Exhibit F.

                  a.       "Competing Vendor" means a vendor of medical coverage
                           products in a particular geographic market other than
                           the Company.

                  b.       "Competitive" when referring to an HMO option means
                           that either (i) the Company and the Employer agree or
                           (ii) an independent consultant chosen by mutual
                           agreement of the parties has determined, that such
                           product ranks either *** as compared to competing
                           products of other vendors in the designated market.
                           In making any determination of the rank of a product
                           in a market, such consultant shall apply such
                           criteria relating to *** as it shall determine
                           appropriate. All fees and expenses of any such
                           consultant shall be paid by the Employer.



                                       43


                  c.       "HMO" means a product offered as a network only or
                           lock in product, including an EPO.

                  d.       "New Market" means a geographic area in which the
                           Employer does not offer an *** option as of the
                           Effective Date.

                  e.       "PPO" means any product for network coverage that is
                           not an HMO.



                                       44

EX-10.5

                                                                    EXHIBIT 10.5


                              AMENDED AND RESTATED
                           SECURITY DEPOSIT AGREEMENT

         Effective as of December 21, 2001, Administaff of Texas, Inc.
("Administaff") and United HealthCare Insurance Company ("United HealthCare")
(collectively Administaff and United HealthCare are referred to as the
"Parties") agree as follows:

1.       Administaff shall remit a security deposit to United HealthCare in the
         amount of Fifteen Million and No/100 Dollars ($15,000,000) on or before
         December 31, 2001 plus an additional Five Million and No/100 Dollars
         ($5,000,000) before April 1, 2002 and an additional Five Million and
         No/100 Dollars ($5,000,000) before September 30, 2002 (collectively
         known as the "Security Deposit"). For the 2003 calendar year, the
         Security Deposit shall be Twenty-Five Million and No/100 Dollars
         ($25,000,000). Unless amended in writing by the Parties, beginning in
         the 2004 calendar year, the Security Deposit will be adjusted as of
         January 1st of each calendar year during the term of the Insurance
         Program to an amount equal to the greater of (i) $22,500,000 or (ii)
         7.5 percent of the Aggregate Payable Rate (using the number of covered
         employees under Policies and Non-MP Policies as of December 15 of the
         prior year) for the first quarter of the applicable calendar year
         multiplied by four. On or before January 1st of each calendar year
         during the term of the Insurance Program as defined in section 6 below,
         Administaff will remit any deficit in the above-required Security
         Deposit to United HealthCare or United HealthCare will remit any
         surplus in the above-required Security Deposit to Administaff.

2.       United HealthCare will credit interest to the Security Deposit as of
         the end of each calendar month. The interest credited for each month
         will be based on (i) the daily balance in the Security Deposit for the
         month and (ii) an annual interest rate equal to the average, for that
         month and the two immediately preceding months, of the yields at
         auction (on a bank-discount basis) for three-month Treasury bills, plus
         25 basis points.

         United HealthCare may change the method of crediting interest described
         above by giving ninety days written notice of such change to
         Administaff. However, such change shall apply only as of the first day
         of the calendar year beginning after the 90-day notice period.

3.       United HealthCare may without any further authorization from
         Administaff draw against such Security Deposit and retain such draw
         upon the following circumstances:

         a.       United HealthCare may draw on the Security Deposit upon a
                  failure by Administaff to pay (i) any amount then currently
                  payable under the Insurance Program, including but not limited
                  to, any amount described in



                                      -1-


                  section 4(b)(v) of the Minimum Premium Financial Agreement, or
                  (ii) any amount due under any United HealthCare policy in
                  effect following termination of the Minimum Premium Financial
                  Agreement; provided, however, that any draw shall only be
                  allowed under this Section 3.a. up to an amount not greater
                  than the Aggregate Payable Rate for the applicable calendar
                  year quarter reduced by any amount related to such Aggregate
                  Payable Rate otherwise paid by Administaff within *** business
                  days of the final due date of such amount or any applicable
                  incremental amount thereof.

         b.       United HealthCare may draw on the Security Deposit in an
                  amount equal to United HealthCare's Accumulated Deficit as of
                  the date that (i) Administaff's public rating on short-term
                  debt falls below Investment Grade and on the last day of any
                  subsequent calendar month in which Administaff's public rating
                  is still below Investment Grade, (ii) Administaff fails to
                  cure or a creditor fails to waive a default by Administaff or
                  its affiliates on their material obligations under their
                  revolving line of credit facility (or under any future
                  revolving line of credit facility or successor credit
                  facility) and on the last day of any subsequent calendar month
                  in which such default continues to exist without having been
                  cured or waived, or (iii) Administaff's current ratio (i.e.,
                  current assets over current liabilities) is less than 6.0 to
                  1.0 and on the last day of any subsequent calendar month in
                  which such a current ratio continues to exist (each of (i),
                  (ii) and (iii) are referred to as a "Trigger Event" or
                  collectively, the "Trigger Events"). If a Trigger Event occurs
                  other than at the end of a calendar year, United HealthCare
                  will determine the Accumulated Deficit as of that date, but in
                  accordance with the annual review principles described in
                  Exhibit A of the Minimum Premium Financial Agreement.
                  Administaff must notify United HealthCare immediately upon the
                  occurrence of any of the Trigger Events.

4.       In addition to United HealthCare's right to draw against the Security
         Deposit in accordance with Section 3 above, upon a termination of the
         Minimum Premium Financial Agreement, United HealthCare without any
         further authorization from Administaff may draw against the Security
         Deposit and retain such draw as follows:

         a.       Immediately following completion of the Initial Termination
                  Review, United HealthCare may withdraw from the Security
                  Deposit an amount equal to any Accumulated Deficit identified
                  in that review.

         b.       Immediately following completion of the Final Termination
                  Review, United HealthCare may withdraw from the Security
                  Deposit an amount equal to any Accumulated Deficit identified
                  in that review.



                                      -2-


5.       Any amount withdrawn against the Security Deposit by United HealthCare
         shall be credited as Policy Revenue under, and to the extent provided
         in, Exhibit A of the Minimum Premium Financial Agreement.

6.       The below indicated defined terms when initially capitalized in this
         Agreement shall have the following meanings. Capitalized terms not
         defined in this section shall have the meaning ascribed to them in the
         Minimum Premium Financial Agreement.

                  "INSURANCE PROGRAM" means the program of medical and dental
         insurance and related services provided through the Policies and the
         Non-MP Policies.

                  "MINIMUM PREMIUM FINANCIAL AGREEMENT" is the Minimum Premium
         Financial Agreement by and between Administaff of Texas, Inc. and
         United HealthCare Insurance Company, as amended from time to time.

                  "AGGREGATE PAYABLE RATE" - for a calendar year quarter means
         an amount equal to the product of (i) the applicable "Monthly Payable
         Rate" (defined in or pursuant to Exhibit A of the Minimum Premium
         Financial Agreement) multiplied by three, and (ii) the number of
         employees covered under the Policies and the Non-MP Policies in a given
         month determined as of the 15th day of the applicable month.

7.       In the event that Administaff fails to make any of the deposits
         required by Section 1 above, then United HealthCare shall not be
         obligated to perform under the Minimum Premium Financial Agreement and
         the MP Administrative Services Agreement for all periods subsequent to
         the date of Administaff's failure to make such deposit.

8.       Within 10 days after completion of the Final Termination Review, United
         HealthCare shall return to Administaff any balance of the Security
         Deposit remaining after United HealthCare has exercised its right to
         draw on the Security Deposit as provided in this Security Deposit
         Agreement.

9.       The right to draw against the Security Deposit under the Agreement
         shall be in addition to, and not in lieu of, any other remedy available
         at law or in equity to United HealthCare, and any such draw by United
         HealthCare shall not cure Administaff's failure to pay amounts due,
         without United HealthCare's express written consent.

10.      This Security Deposit Agreement shall replace and render null and void
         any agreements relating to any security deposit previously entered into
         by the Parties. Any remittances of funds by Administaff pursuant to any
         previous security deposit agreement shall be considered performance
         under this Security Deposit Agreement.




                                      -3-


ADMINISTAFF OF TEXAS, INC.                   UNITED HEALTHCARE
                                             INSURANCE COMPANY


/s/ Howard G. Buff                           /s/ William A. Munsel
- ---------------------------                  ----------------------------
Date: 6/25/02                                Date: 6/25/02
      ---------------------                        ----------------------


                                      -4-