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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
Administaff, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
PAUL J. SARVADI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
March 31, 2003
Dear Stockholder:
On behalf of your board of directors and management, you are cordially invited
to attend the Annual Meeting of Stockholders to be held at Administaff's
Corporate Headquarters, Centre I in the Auditorium, located at 22900 Hwy. 59 N.
(Eastex Freeway), Kingwood, Texas 77339, on May 8, 2003 at 10:00 a.m. The
Auditorium is accessible to the disabled.
It is important that your shares are represented at the meeting. Whether or not
you plan to attend the meeting, please complete and return the enclosed proxy
card in the accompanying envelope or vote using the telephone or Internet
procedures that may be provided to you. Please note that voting using any of
these methods will not prevent you from attending the meeting and voting in
person.
You will find information regarding the matters to be voted on at the meeting in
the following pages. Our 2002 Annual Report to Stockholders is also enclosed
with these materials.
Your interest in Administaff is appreciated, and we look forward to seeing you
on May 8.
Sincerely,
/s/ Paul J. Sarvadi
Paul J. Sarvadi
President and Chief Executive Officer
ADMINISTAFF, INC.
A DELAWARE CORPORATION
19001 CRESCENT SPRINGS DRIVE
KINGWOOD, TEXAS 77339-3802
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 2003
KINGWOOD, TEXAS
The Annual Meeting of the Stockholders of Administaff, Inc., a Delaware
corporation (the "Company"), will be held at the Company's Corporate
Headquarters in the Auditorium in Centre I, located at 22900 Hwy. 59 N. (Eastex
Freeway), Kingwood, Texas 77339, on May 8, 2003 at 10:00 a.m., Central Daylight
Savings Time, for the following purposes:
1. To elect two Class II directors to serve until the 2006 annual
meeting of stockholders or until their successors have been
elected and qualified.
2. To ratify the appointment of Ernst & Young LLP as the
Company's independent public accountants for the year ending
December 31, 2003.
3. To act upon such other business as may properly come before
the meeting or any reconvened meeting after an adjournment
thereof.
Only stockholders of record at the close of business on March 10, 2003
are entitled to notice of, and to vote at, the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
OF STOCKHOLDERS REGARDLESS OF WHETHER YOU PLAN TO ATTEND. THEREFORE, PLEASE
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY. IF YOU ARE PRESENT AT THE
MEETING, AND WISH TO DO SO, YOU MAY REVOKE THE PROXY AND VOTE IN PERSON.
By Order of the Board of Directors
/s/ John H. Spurgin, II
John H. Spurgin, II
Vice President, Legal,
General Counsel and Secretary
March 31, 2003
Kingwood, Texas
ADMINISTAFF, INC.
A DELAWARE CORPORATION
19001 CRESCENT SPRINGS DRIVE
KINGWOOD, TEXAS 77339-3802
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PROXY STATEMENT
---------------
The accompanying proxy is solicited by the Board of Directors of
Administaff, Inc., a Delaware corporation (the "Company"), for use at the 2003
Annual Meeting of Stockholders to be held on May 8, 2003, and at any reconvened
meeting after an adjournment thereof. The Annual Meeting of Stockholders will be
held at 10:00 a.m., Central Daylight Savings Time, at the Company's Corporate
Headquarters, Centre I in the Auditorium located at 22900 Hwy. 59 N. (Eastex
Freeway), Kingwood, Texas 77339.
Stockholders of record may vote in one of four ways:
o by attending the meeting and voting in person;
o by signing, dating and returning your proxy in the envelope
provided;
o by submitting your proxy on the Internet at the address listed
on your proxy card; or
o by submitting your proxy using the toll-free number listed on
your proxy card.
If your shares are held in an account at a brokerage firm or bank, you
may submit your voting instructions by signing and timely returning the enclosed
voting instruction form, by Internet at the address shown on your voting
instruction form, by telephone using the toll-free number shown on that form, or
by providing other proper voting instructions to the registered owner of your
shares.
If you either return your signed proxy or submit your proxy using the
Internet or telephone procedures that may be available to you, your shares will
be voted as you direct. IF THE ACCOMPANYING PROXY IS PROPERLY EXECUTED AND
RETURNED, BUT NO VOTING DIRECTIONS ARE INDICATED THEREON, THE SHARES REPRESENTED
THEREBY WILL BE VOTED FOR EACH OF THE PROPOSALS SET FORTH IN THIS PROXY
STATEMENT. In addition, the proxy confers discretionary authority to the persons
named in the proxy authorizing those persons to vote, in their discretion, on
any other matters properly presented at the Annual Meeting of Stockholders. The
Board of Directors is not currently aware of any such other matters. Any
stockholder of record giving a proxy has the power to revoke it at any time
before it is voted by (i) submitting written notice of revocation to the
Secretary of the Company at the address listed above, (ii) submitting another
proxy that is properly signed and later dated, or (iii) voting in person at the
Annual Meeting. Stockholders who hold their shares through a nominee or broker
are invited to attend the meeting but must obtain a signed proxy from the broker
in order to vote in person.
The expense of preparing, printing and mailing proxy materials to the
Company's stockholders will be borne by the Company. The Company's transfer
agent, Mellon Investor Services, LLC, will assist in the solicitation of proxies
from stockholders at a fee of approximately $500 plus reimbursement of
reasonable out-of-pocket expenses. In addition, proxies may be solicited
personally or by telephone by officers or employees of the Company, none of whom
will receive additional compensation. The Company will also reimburse brokerage
houses and other nominees for their reasonable expenses in forwarding proxy
materials to beneficial owners of our common stock.
The approximate date on which this Proxy Statement and the accompanying
proxy card will first be sent to stockholders is March 31, 2003.
At the close of business on March 10, 2003, the record date for the
determination of stockholders of the Company entitled to receive notice of, and
to vote at, the 2003 Annual Meeting of Stockholders or any reconvened meeting
after an adjournment thereof, 26,853,278 shares of the Company's Common Stock,
par value $0.01 per share (the "Common Stock"), were outstanding. Each share of
Common Stock is entitled to one vote upon each of the matters to be voted on at
the meeting. The presence, in person or by proxy, of a majority of the
outstanding shares of Common Stock is required for a quorum. If a
1
quorum is present at the meeting, action on a matter (other than the election of
directors) shall be approved if the votes cast in favor of the matter exceed the
votes cast opposing the matter. Directors of the Company shall be elected by a
plurality of the votes cast. In determining the number of votes cast, shares
abstaining from voting or not voted on a matter will not be treated as votes
cast. Accordingly, although proxies containing broker non-votes (which result
when a broker holding shares for a beneficial owner has not received timely
voting instructions on certain matters from such beneficial owner) are
considered "shares present" in determining whether there is a quorum present at
the Annual Meeting, they are not treated as votes cast with respect to any
matter, and thus will not affect the outcome of the voting on a particular
proposal.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of March 10, 2003, certain information
with respect to the shares of Common Stock beneficially owned by (i) each person
known by the Company to beneficially own five percent or more of the Common
Stock, (ii) each director and director nominee of the Company, (iii) each of the
executive officers of the Company identified under the caption "Election of
Directors -- Executive Compensation," and (iv) all directors, director nominees
and executive officers of the Company as a group.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
------------------------ ------------- --------
Michael W. Brown........................................................... 46,123(2) *
Jack M. Fields, Jr......................................................... 13,634(3) *
Paul S. Lattanzio.......................................................... 51,934(4) *
Gregory E. Petsch.......................................................... 2,145 *
Richard G. Rawson.......................................................... 1,468,026(5) 5.4%
Paul J. Sarvadi............................................................ 3,397,232(6) 12.6%
Austin P. Young ........................................................... -- *
A. Steve Arizpe............................................................ 200,893(7) *
Jay E. Mincks.............................................................. 144,501(8) *
John H. Spurgin, II........................................................ 75,644(9) *
American Express Travel Related Services Company, Inc...................... 1,731,030(10) 6.1%
Ronald Juvonen, et al...................................................... 2,988,000(11) 11.1%
EARNEST Partners, L.L.C.................................................... 2,416,979(12) 9.0%
Dimensional Fund Advisors, Inc. ........................................... 1,734,900(13) 6.5%
Executive Officers and Directors as a group (13 persons)................... 5,583,028 20.1%
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* Represents less than 1%.
(1) Except as otherwise indicated, each of the stockholders has sole voting
and investment power with respect to the securities shown to be owned
by such stockholder. The address for each officer and director is in
care of Administaff, Inc., 19001 Crescent Springs Drive, Kingwood,
Texas 77339-3802.
(2) Includes options to purchase 37,500 shares of Common Stock that are
exercisable within 60 days of March 10, 2003.
(3) Includes options to purchase 7,500 shares of Common Stock that are
exercisable within 60 days of March 10, 2003.
(4) Includes options to purchase 22,500 shares of Common Stock that are
exercisable within 60 days of March 10, 2003.
(5) Includes 658,866 shares owned by the RDKB Rawson LP, 521,502 shares
owned by the R&D Rawson LP, 350 shares owned by Dawn M. Rawson
(spouse), 50 shares owned by Kimberly Rawson (daughter), 50 shares
owned by Richard G. Rawson as Custodian for Barbie Rawson UGMA, and
options to purchase 149,333 shares of Common Stock that are exercisable
within 60 days of March 10, 2003.
(6) Includes 2,215,100 shares owned by Our Ship Limited Partnership, Ltd.,
957,120 shares owned by the Sarvadi Children's Partnership, Ltd.,
10,036 shares owned by Paul J. Sarvadi and Vicki D. Sarvadi, JT TEN,
19,644 shares owned by six education trusts established for the benefit
of the children of Paul J. Sarvadi, and options to purchase 195,332
shares of Common Stock that are exercisable within 60 days of March 10,
2003.
(7) Includes 334 shares owned by A. Steve Arizpe and Charissa Arizpe
(spouse) and options to purchase 198,171 shares of Common Stock that
are exercisable within 60 days of March 10, 2003.
(8) Includes options to purchase 136,766 shares of Common Stock that are
exercisable within 60 days of March 10, 2003.
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(9) Includes options to purchase 68,132 shares of Common Stock that are
exercisable within 60 days of March 10, 2003.
(10) Consists of warrants to purchase 1,731,030 shares of Common Stock.
American Express Travel Related Services Company, Inc.'s ("American
Express") address is World Financial Center, 200 Vesey Street, New
York, NY 10285.
(11) Based on a Schedule 13G filed with the Securities and Exchange
Commission on February 14, 2003, Ronald Juvonen is deemed to
beneficially own 2,988,000 shares of Common Stock. The shares are held
by Downtown Associates I, L.P., Downtown Associates II, L.P., Downtown
Associates III, L.P., Downtown Associates IV, L.P. and Downtown
Associates V., L.P. (collectively referred to as the "Downtown Funds").
The general partner of the Downtown Funds is Downtown Associates,
L.L.C. (the "General Partner"). Ronald Juvonen, as the Managing Member
of the General Partner, has sole power to vote and direct the
disposition of all shares of the Common Stock held by the Downtown
Funds. The address of each of such parties is c/o Downtown Associates,
L.L.C., 674 Unionville Road, Suite 105, Kennett Square, Pennsylvania
19348.
(12) Based on a Schedule 13G filed with the Securities and Exchange
Commission on February 12, 2003. EARNEST Partners, L.L.C.'s address is
75 Fourteenth Street, Suite 2300, Atlanta, Georgia 30309. EARNEST
Partners, L.L.C. has sole voting power with respect to 1,938,900
shares, shared voting power with respect to 145,979 shares and sole
dispositive power with respect to 2,416,979 shares.
(13) Based on a Schedule 13G filed with the Securities and Exchange
Commission on February 10, 2003. Dimensional Fund Advisors, Inc.'s
address is 1299 Ocean Avenue, 11th Floor, Santa Monica, California
90401. Dimensional Fund Investment Advisors Inc. ("Dimensional"), an
investment advisor registered under Section 203 of the Investment
Advisors Act of 1940, furnishes investment advice to four investment
companies registered under the Investment Company Act of 1940, and
serves as investment advisor to certain other commingled group trusts
and separate accounts. These investment companies, trusts and accounts
are the "Funds." In its role as investment advisor or manager,
Dimensional possesses voting and/or investment power over the
securities of the Company that are owned by the Funds. However, all
securities reported as being owned by Dimensional are owned by the
Funds.
4
PROPOSAL NUMBER 1:
ELECTION OF DIRECTORS
GENERAL
The Company's Certificate of Incorporation and Bylaws provide that the
number of directors on the Board shall be fixed from time to time by the Board
of Directors but shall not be less than three nor more than 15 persons. The
number of members constituting the Board of Directors is currently fixed at
seven.
In accordance with the Certificate of Incorporation of the Company, the
members of the Board of Directors are divided into three classes and are elected
for a term of office expiring at the third succeeding annual stockholders'
meeting following their election to office, or until a successor is duly elected
and qualified. The Certificate of Incorporation also provides that such classes
shall be as nearly equal in number as possible. The terms of office of the Class
I, Class II and Class III directors expire at the annual meeting of stockholders
in 2005, 2003 and 2004, respectively.
The term of office of each of the current Class II directors expires at
the time of the 2003 Annual Meeting of Stockholders, or as soon thereafter as
their successors are elected and qualified. Mr. Sarvadi and Mr. Young have been
nominated to serve an additional three-year term as Class II directors. Both of
the nominees have consented to be named in this Proxy Statement and to serve as
a director if elected.
It is the intention of the person or persons named in the accompanying
proxy card to vote for the election of all nominees named below unless a
stockholder has withheld such authority. The affirmative vote of a plurality of
the votes cast by holders of the Common Stock present in person or by proxy at
the 2003 Annual Meeting of Stockholders is required for election of the
nominees.
If, at the time of or prior to the 2003 Annual Meeting of Stockholders,
any of the nominees should be unable or decline to serve, the discretionary
authority provided in the proxy may be used to vote for a substitute or
substitutes designated by the Board of Directors. The Board of Directors has no
reason to believe that any substitute nominee or nominees will be required. No
proxy will be voted for a greater number of persons than the number of nominees
named herein.
NOMINEES -- CLASS II DIRECTORS (FOR TERMS EXPIRING AT THE 2006 ANNUAL MEETING)
PAUL J. SARVADI. Mr. Sarvadi, age 46, President, Chief Executive
Officer and co-founder of the Company and its subsidiaries, is a Class II
director and has been a director since its inception in 1986. He has been
President and Chief Executive Officer of the Company since 1989. Prior to that,
he served as Vice President and Treasurer of the Company from its inception in
1986 until April 1987, and then as Vice President from April 1987 until 1989. He
attended Rice University and the University of Houston prior to starting and
operating several small companies. Mr. Sarvadi has served as President of
National Association of Professional Employer Organizations (NAPEO) and was a
member of its Board of Directors for five years. He also served as President of
the Texas Chapter of the NAPEO for three of the first four years of its
existence. Mr. Sarvadi serves on the Board of Directors of the DePelchin
Children's Center in Houston. In 1995, Mr. Sarvadi was selected as Houston's
Ernst & Young Entrepreneur of the Year for service industries and in 2001, he
was selected as the 2001 National Ernst & Young Entrepreneur of the Year for
service industries.
AUSTIN P. YOUNG. Mr. Young, age 62, joined the Company as a Class II
director in January 2003 to fill the vacancy created by the resignation of
Steven Alesio. Mr. Young served as Senior Vice President, Chief Financial
Officer and Treasurer of CellStar Corporation from 1999 to December 2001 when he
retired. Before joining CellStar Corporation, he served as Executive Vice
President - Finance and Administration of Metamor Worldwide, Inc. from 1996 to
1999. Mr. Young also held the position of Senior Vice President and Chief
Financial Officer of American General Corporation for over eight years and was a
partner in the Houston and New York offices of KPMG Peat Marwick where his
career spanned 22 years before joining American General Corporation. He holds an
accounting degree from the University of Texas. Mr. Young currently serves on
the Board of Directors of The Park People and the Houston Fire Museum and serves
on the Audit Committee of Houston Zoo, Inc. He is a member of the Houston and
State Chapters of the Texas Society of CPAs, the American Institute of CPAs, and
the Financial Executives Institute.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE ABOVE-NAMED NOMINEES, AND PROXIES EXECUTED AND RETURNED
WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
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DIRECTORS REMAINING IN OFFICE
MICHAEL W. BROWN. Mr. Brown, age 57, joined the Company as a Class I
director in November 1997. Mr. Brown is the past Chairman of the Nasdaq Stock
Market Board of Directors and a past governor of the National Association of
Securities Dealers. Mr. Brown joined Microsoft Corporation in 1989 as its
Treasurer and became its Chief Financial Officer in 1993, in which capacity he
served until his retirement in July 1997. Prior to joining Microsoft, Mr. Brown
spent 18 years with Deloitte & Touche LLP. Mr. Brown holds a Bachelor of Science
in Economics from the University of Washington in Seattle. Mr. Brown is also a
director of Wang Laboratories, Inc., 360networks inc. and a member of the Thomas
Weisel Partners Advisory Board.
JACK M. FIELDS, JR. Mr. Fields, age 51, joined the Company as a Class
III director in January 1997 following his retirement from the United States
House of Representatives, where he served for 16 years. During 1995 and 1996,
Mr. Fields served as Chairman of the House Telecommunications and Finance
Subcommittee, which has jurisdiction and oversight of the Federal Communications
Commission and the Securities and Exchange Commission. Mr. Fields has been Chief
Executive Officer of the Twenty-First Century Group in Washington, D.C. since
January 1997. Mr. Fields also serves on the Board of Directors for AIM Mutual
Funds and the Discovery Channel - Global Education Fund. Mr. Fields earned a
Bachelor of Arts in 1974 from Baylor University, and graduated from Baylor Law
School in 1977.
PAUL S. LATTANZIO. Mr. Lattanzio, age 39, has been a Class III director
of the Company since 1995. He previously served as a Managing Director for TD
Capital Communications Partners (f/k/a Toronto Dominion Capital), a venture
capital investment firm, from July 1999 until July 2002. From February 1998 to
March 1999, he was a co-founder and Senior Managing Director of NMS Capital
Management, LLC, a $600 million private equity fund affiliated with NationsBanc
Montgomery Securities. Prior to NMS Capital, Mr. Lattanzio served in several
positions with various affiliates of Bankers Trust New York Corporation for over
13 years, most recently as a Managing Director of BT Capital Partners, Inc. for
more than 5 years. Mr. Lattanzio has experience in a variety of investment
banking disciplines, including mergers and acquisitions, private placements and
restructuring. Mr. Lattanzio received his Bachelor of Science in Economics with
honors from the University of Pennsylvania's Wharton School of Business in 1984.
GREGORY E. PETSCH. Mr. Petsch, age 52, joined the Company as a Class I
director in October 2002 to fill the vacancy created by the resignation of Linda
Fayne Levinson. He retired from Compaq Computer Corporation in 1999 where he had
held various positions since 1983, most recently as Senior Vice President of
Worldwide Manufacturing and Quality since 1991. Prior to joining Compaq, he
worked for ten years for Texas Instruments. In 1992, Mr. Petsch was voted
Manufacturing Executive of the Year by Upside Magazine, and in 1993 - 1995 he
was nominated Who's Who of Global Business Leaders. He is a Board member of
Transform Houston and Culture Shapers. He earned a Bachelor of Business
Technology degree from the University of Houston in 1978.
RICHARD G. RAWSON. Mr. Rawson, age 54, Executive Vice President of
Administration, Chief Financial Officer and Treasurer of the Company and its
subsidiaries, is a Class III director and has been a director of the Company
since 1989. He has been Executive Vice President of Administration, Chief
Financial Officer and Treasurer of the Company since February 1997. Prior to
that, he served as Senior Vice President, Chief Financial Officer and Treasurer
of the Company since 1989. Prior to joining the Company in 1989, Mr. Rawson
served as a Senior Financial Officer and Controller for several companies in the
manufacturing and seismic data processing industries. Mr. Rawson previously
served the National Association of Professional Employer Organizations (NAPEO)
as President (1999-2000), First Vice President, Second Vice President and
Treasurer. In addition, he previously served as Chairman of the Accounting
Practices Committee of NAPEO for five years. He is also a member of the
Financial Executives Institute. Mr. Rawson has a Bachelor of Business
Administration in finance from the University of Houston.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has appointed three committees: the Finance,
Risk Management and Audit Committee, the Compensation Committee and the
Nominating Committee.
The members of the Finance, Risk Management and Audit Committee are Mr.
Brown, who serves as Chairperson, Mr. Lattanzio and Mr. Young. All three members
are "independent" under the standards of The New York Stock Exchange and SEC
Regulations. The Finance, Risk Management and Audit Committee (the "Committee")
has been appointed by the Board
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of Directors to assist the Board in fulfilling its responsibility to oversee the
financial affairs, risk management, accounting and financial reporting processes
and audits of financial statements of the Company by reviewing and monitoring
(i) the financial affairs of the Company, (ii) the integrity of the Company's
financial statements, (iii) the Company's compliance with legal and regulatory
requirements, (iv) the independent auditor's (the "external auditors")
qualifications and independence, (v) the performance of the personnel
responsible for the Company's internal audit function (the "internal auditors")
and the external auditors, and (vi) the Company's policies and procedures with
respect to risk management, as well as other matters which may come before it as
directed by the Board of Directors. The Finance, Risk Management and Audit
Committee charter, which has been adopted by the Board of Directors and is
attached as Appendix A to this proxy statement, contains a detailed description
of the Committee's duties and responsibilities.
The members of the Compensation Committee are Mr. Fields, who serves as
Chairperson, and Mr. Petsch. The Compensation Committee evaluates the
performance of and determines the compensation for senior management,
administers the Company's compensation programs and performs such other duties
as may from time to time be determined by the Board of Directors.
Mr. Sarvadi is currently the sole member of the Nominating Committee;
however, in 2002, the Board of Directors performed the duties of the Nominating
Committee. It is the Board's intention to reconstitute the Nominating Committee
in 2003 so that all of the members of such committee are independent. The
Nominating Committee considers and makes recommendations to the Board of
Directors or the stockholders regarding persons to be nominated by the Board of
Directors for election as directors and, in the event of a vacancy in the office
of the Chief Executive Officer, would recommend a successor to the Board. The
Nominating Committee will consider nominations to the Board submitted by
stockholders, provided that any stockholder submitting a nomination complies
with the procedures set forth in the Company's Bylaws governing nominations by
stockholders. Such procedures are described under "Additional Information."
INFORMATION REGARDING MEETINGS
During 2002, the Finance, Risk Management and Audit Committee had 10
meetings, the Compensation Committee had three meetings, the Nominating
Committee had no meetings and the Board of Directors had five meetings. All of
the members of the Board participated in more than 75% of the meetings of the
Board and Committees of which they were members during the fiscal year ended
December 31, 2002.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no additional
compensation for serving on the Board of Directors. Directors of the Company who
are not employees of the Company are paid (i) an annual retainer of $20,000,
(ii) $3,500 for each Board of Directors meeting attended, (iii) an annual fee of
$3,000 payable for each committee of the Board (if any) which that Director
chairs, and (iv) reasonable expenses incurred in serving as a director. All
compensation can be taken in cash or Common Stock, at the director's option. In
addition, pursuant to the Company's 2001 Incentive Plan, each non-employee
director automatically receives, on the date such person first becomes a
director, a grant of nonqualified options to purchase 7,500 shares of Common
Stock, which have a term of ten years and vest in increments of one-third of the
total grant on the first, second and third anniversaries of the grant. In
addition, following each annual meeting of the Company's stockholders, each
non-employee director who was not initially elected at such meeting, receives an
annual grant of nonqualified options to purchase an additional 5,000 shares of
Common Stock, all of which have a term of ten years and are fully vested and
exercisable on the date of grant. The exercise price of all such options is the
closing sale price on the New York Stock Exchange of the Common Stock on the
date the options are granted.
7
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding
compensation earned by the Company's Chief Executive Officer and each of the
four other most highly compensated executive officers of the Company
(collectively the "Named Executive Officers") for services rendered in all
capacities to the Company during 2002.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION (1) ------------------
--------------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION (3)
-------------------------------------- ---- ------------ ------------ ------------------ ------------------
Paul J. Sarvadi ...................... 2002 $ 323,420 -- 30,000 $ 11,900
President and Chief 2001 $ 304,672 -- 60,000 $ 11,520
Executive Officer 2000 $ 297,492 $ 223,543 100,000 $ 11,220
Richard G. Rawson .................... 2002 $ 303,619 $ 31,149(2) 32,000 $ 8,202
Executive Vice President 2001 $ 286,020 $ 80,590(2) 40,000 $ 9,180
of Administration, Chief 2000 $ 279,278 $ 306,057(2) 60,000 $ 9,180
Financial Officer and Treasurer
A. Steve Arizpe ...................... 2002 $ 283,914 -- 32,000 $ 11,000
Executive Vice President 2001 $ 266,513 -- 40,000 $ 10,500
of Client Services 2000 $ 260,232 $ 195,545 60,000 $ 10,200
Jay E. Mincks ........................ 2002 $ 257,092 -- 32,000 $ 6,669
Executive Vice President of 2001 $ 240,631 -- 40,000 $ 6,300
Sales and Marketing 2000 $ 233,791 $ 175,676 60,000 $ 6,213
John H. Spurgin, II .................. 2002 $ 222,129 -- 24,000 $ 11,000
Vice President of Legal, 2001 $ 209,252 -- 30,000 $ 10,500
General Counsel and Secretary 2000 $ 204,526 $ 153,686 40,000 $ 10,200
----------
(1) Excludes perquisites and other personal benefits because such
compensation did not exceed the lesser of $50,000 or 10% of the total
annual salary reported for each executive officer.
(2) Includes a bonus for Mr. Rawson equal to the interest paid by Mr.
Rawson to the Company on loans from the Company during the applicable
year, plus any applicable taxes due on such component of his bonus. See
"Certain Relationships and Related Transactions."
(3) Consists of the Company's employer matching contributions to the
Administaff 401(k) Plan and, for Mr. Sarvadi and Mr. Rawson, includes
payments of $1,691 and $4,668 in 2002 respectively, with respect to
life insurance policies benefiting the named executive.
8
STOCK OPTIONS
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT
NUMBER OF PERCENT OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM (3)
OPTIONS/ EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME SARS GRANTED (1) FISCAL YEAR ($/SH) (2) DATE 5% 10%
---------------- ---------------- ----------- ---------- ---------- ---------
Paul J. Sarvadi............. 30,000 2.7% $14.69 05/07/12 $277,154 $702,362
Richard G. Rawson............ 20,000 $14.69 05/07/12 $184,769 $468,242
12,000 $ 4.02 10/04/12 30,338 76,882
------ -------- --------
32,000 2.9% $215,107 $545,124
A. Steve Arizpe ............. 20,000 $14.69 05/07/12 $184,769 $468,242
12,000 $ 4.02 10/04/12 30,338 76,882
------ -------- --------
32,000 2.9% $215,107 $545,124
Jay E. Mincks ............... 20,000 $14.69 05/07/12 $184,769 $468,242
12,000 $ 4.02 10/04/12 30,338 76,882
------ -------- --------
32,000 2.9% $215,107 $545,124
John H. Spurgin, II.......... 15,000 $14.69 05/07/12 $138,577 $351,181
9,000 $ 4.02 10/04/12 22,753 57,662
------ -------- --------
24,000 2.1% $161,330 $408,843
(1) All options have a term of ten years and become exercisable in
increments of one-fifth of the total grant on the first, second, third,
fourth and fifth anniversaries of the grant.
(2) The exercise price of the options granted is equal to the closing price
per share of the Common Stock on the New York Stock Exchange on the
date of grant.
(3) Represents total appreciation over the exercise price at the assumed
annual appreciation rates of 5% and 10% compounded annually for the
term of the options.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
---- ----------- -------- --------------- -----------------
Paul J. Sarvadi........................... -- -- 162,664/107,336 $ -- / $ --
Richard G. Rawson......................... -- -- 128,666/ 81,334 $ -- / $23,760
A. Steve Arizpe........................... 5,200 $93,226 177,504/ 89,334 $ -- / $23,760
Jay E. Mincks............................. 6,000 $85,920 116,099/ 89,334 $ -- / $23,760
John H. Spurgin, II....................... 4,000 $58,720 53,464/ 61,736 $ -- / $17,820
(1) Represents the difference between the closing price of the Company's
Common Stock on December 31, 2002, the last trading day of the year,
($6.00) and the exercise price of the options.
9
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee is responsible for evaluating the
performance of and determining the compensation for executive officers including
the Chief Executive Officer. It is also responsible for overseeing the Company's
1997 Incentive Plan and 2001 Incentive Plan (the "Incentive Plans"). The
Compensation Committee has furnished the following report on executive
compensation for 2002.
The Company's compensation programs are designed to attract and retain
key executives responsible for the success of the Company and motivate
management to enhance long-term stockholder value. The annual compensation
package for executive officers, including the Chief Executive Officer, generally
consists of three components: (i) a base salary payable in cash, (ii) variable
compensation, which is targeted as a percentage of base pay and may be payable
in cash awards, phantom shares, performance units, bonus stock or other
stock-based awards, and (iii) long-term incentive compensation, which generally
consists of stock options.
Base Salary
The base salary is intended to provide a stable annual salary at a
level consistent with individual contributions and at a level that attracts and
retains talented executive officers. In 2000, the Compensation Committee
reviewed the overall compensation levels of executives of a peer group of
companies, and generally sought to set base compensation at the median point of
the range of those compensation levels and total compensation (variable plus
base) at the third quartile of the range in comparison to such peer companies.
In determining the overall level of compensation in 2000 for each of the
Company's executive officers, including the Chief Executive Officer, the
Compensation Committee took into account various qualitative and quantitative
indicators of corporate and individual performance. In setting base salary for
executives other than the Chief Executive Officer, the Compensation Committee
also considered the Chief Executive Officer's subjective evaluation of each
executive's performance. In 2001 and 2002, the Compensation Committee set the
base salary for each of the Company's executive officers, including the Chief
Executive Officer, at 3% above their salary for the previous year.
Variable Compensation
Variable compensation is intended to link officers' compensation to the
Company's performance. As an incentive, the Compensation Committee sets a target
for variable compensation which is generally computed as a percentage of base
salary. The target variable compensation is subject to adjustment based on the
Company's performance. In determining the amount of variable compensation to
award, if any, the Compensation Committee considers factors that it deems
relevant to the measurement of the Company's performance. Such factors have
included earnings per share, pretax earnings and other factors that the
committee has identified as relating to the Company's performance. Based on
these factors, no variable compensation was paid to any executive officer in
2002, except for Mr. Sarvadi who received options to purchase 30,000 shares of
Common Stock, and Mr. Rawson who received an additional bonus equal to the
interest paid by him on loans from the Company plus any applicable taxes due on
such additional bonus. See "CEO Compensation" below and "Certain Relationships
and Related Transactions."
Long-term Incentive Compensation
Long-term incentive compensation is provided through the Incentive
Plans, the objectives of which are to promote the interests of the Company by
encouraging employees of the Company and its subsidiaries to acquire or increase
their equity interest in the Company and to provide a means whereby such persons
may develop a sense of proprietorship and personal involvement in the
development and financial success of the Company, and to encourage them to
remain with and devote their best efforts to the business of the Company,
thereby advancing the interests of the Company and its stockholders. Awards
under the Incentive Plans have generally been made in the form of stock options,
although in the future such awards may include phantom shares, performance
units, bonus stock or other stock-based awards. The Compensation Committee
believes that stock options align the interest of the Company's executives with
those of its stockholders by encouraging executives to enhance the value of the
Company, and hence, the price of the Common Stock and each stockholder's return.
The Company may periodically grant new options or other long-term equity-based
incentives to provide continuing incentive for future performance. In making the
decision to grant options, the Compensation Committee considers factors
including an executive's current ownership stake in the Company, the degree to
which increasing that ownership stake would provide the executive with
additional incentives for future performance, the likelihood that the grant of
those options would encourage the executive to remain with the Company and the
value of the executive's service to the Company. The Compensation Committee
evaluates the overall dilutive effect of the total grant and then establishes
individual grant levels based on the executive's grade level.
10
In 2002, the Company granted options to purchase an aggregate of
326,000 shares of Common Stock to executive officers of the Company, including
the Chief Executive Officer.
CEO Compensation
The compensation of the Chief Executive Officer is determined in the
same manner as the other executives of the Company, as set forth above, and
includes stock options. In 2002, the Compensation Committee granted Mr. Sarvadi
options to purchase 30,000 shares of Common Stock. In making the grant, the
Compensation Committee considered Mr. Sarvadi's large ownership position in the
Company. Although the Compensation Committee believes that the grant of options
to Mr. Sarvadi further aligns his interests with those of stockholders, the
Compensation Committee considered the grant to Mr. Sarvadi to be more in the
nature of variable compensation than a long-term incentive.
Section 162(m) of the Internal Revenue Code
Because the Company has not yet granted any executive officer
compensation exceeding $1,000,000 in any year, the Compensation Committee has
not yet adopted a policy with respect to the limitation under Section 162(m) of
the Internal Revenue Code, which generally limits the Company's ability to
deduct compensation in excess of $1,000,000 to a particular executive officer in
any year. The Compensation Committee, in consultation with the Board of
Directors, will adopt such a policy if the compensation awarded to an executive
exceeds such amount.
Jack M. Fields, Jr.
Gregory E. Petsch
REPORT OF THE FINANCE, RISK MANAGEMENT AND AUDIT COMMITTEE
The Finance, Risk Management and Audit Committee (the "Committee") has
been appointed by the Board of Directors to assist the Board in fulfilling its
responsibility to oversee the financial affairs, risk management, accounting and
financial reporting processes and audits of the financial reporting processes
and audits of the financial statements of the Company. The Committee operates
under a written charter adopted by the Board of Directors and reviewed annually
by the Committee. A copy of the Committee charter is attached to this proxy
statement as Appendix A. The Committee is comprised solely of independent
directors, as defined in Section 303.01 of the Listed Company Manual of the New
York Stock Exchange. The Committee has furnished the following report for 2002.
The Committee has reviewed and discussed the Company's consolidated
audited financial statements as of and for the year ended December 31, 2002 with
management and the independent auditor. The Committee has discussed with the
independent auditor the matters required to be discussed by Statement on
Auditing Standards No. 61, (Communication with Audit Committees), as currently
in effect.
The Committee has received from the independent auditor the written
disclosures and letter required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as currently in effect, and the
Committee has discussed with the independent auditor that firm's independence.
The Committee has also considered the compatibility of the provision of
non-audit services with the independent auditor's independence.
Based on the Committee's reviews and discussions referred to above, the
Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Company's annual report on Form 10-K
for the year ended December 31, 2002 for filing with the Securities and Exchange
Commission.
Michael W. Brown
Paul S. Lattanzio
Austin P. Young
11
PERFORMANCE GRAPH
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ADMINISTAFF, INC., THE S&P SMALLCAP 600 INDEX
AND A PEER GROUP
[GRAPH]
12/97 12/98 12/99 12/00 12/01 12/02
------ ------ ------ ------ ------ ------
ADMINISTAFF, INC. 100.00 96.62 116.91 210.24 211.86 46.38
S & P SMALLCAP 600 100.00 98.69 110.94 124.03 132.14 112.81
PEER GROUP 100.00 135.13 176.15 233.56 203.44 144.48
* $100 invested on 12/31/97 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
Copyright 2002, Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
All rights reserved. www.researchdatagroup.com/S&P.htm
The above performance graph compares the cumulative total stockholder
return of the Common Stock to the cumulative total stockholder return of the
Standard & Poor's SmallCap 600 Stock Index and a peer group index for the period
from December 31, 1997 to December 31, 2002 (assuming reinvestment of any
dividends and an investment of $100 in each on December 31, 1997). The peer
group used this year is the same peer group the Company used last year. The peer
group consists of Team America, Inc., TeamStaff, Inc., Gevity HR, Inc.,
Automatic Data Processing, Inc., and Paychex, Inc., each of which provides
professional employer services.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than 10% of the Common Stock, to file initial reports of ownership and
reports of changes in ownership (Forms 3, 4, and 5) of Common Stock with the
Securities and Exchange Commission and the New York Stock Exchange. Officers,
directors and greater than 10% stockholders are required by Securities and
Exchange Commission regulation to furnish the Company with copies of all such
forms that they file.
Based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that all Section 16(a) reports with respect to the year ended
December 31, 2002 applicable to its officers, directors and greater than 10%
beneficial owners, were timely filed, except that Gregory E. Petsch was late in
filing one Form 4 reflecting a change in the beneficial ownership of his Common
Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1995, Richard G. Rawson, Executive Vice President of
Administration, Chief Financial Officer, Treasurer and a director of the
Company, exercised options to purchase 897,334 shares of Common Stock (as
adjusted for the 2-for-1 split of the Common Stock effected in October 2000) at
a price of $1.50 per share (as adjusted for the 2-for-1 split of the Common
Stock effected in October 2000). The purchase price was paid in cash by Mr.
Rawson. In connection with the exercise of the options, the Company entered into
a loan agreement with Mr. Rawson in the amount of approximately $694,000,
whereby the Company paid certain federal income tax withholding requirements
related to the stock option exercise. This loan was paid in full in June 2002.
The loan accrued interest at 6.93%; however, pursuant to an understanding Mr.
Rawson had with the Company, in each year that the loan was outstanding, Mr.
Rawson received a bonus equal to the interest paid by Mr. Rawson
12
on the loans, plus any applicable taxes due on such component of his bonus. See
"Report of the Compensation Committee of the Board of Directors."
Our Ship Limited Partnership, Ltd. ("Our Ship"), which is a family
limited partnership owned by Mr. Paul Sarvadi, President and Chief Executive
Officer of the Company, and members of his immediate family, is a client of the
Company. In 2002, Our Ship paid comprehensive service fees of $86,167 ($24,689
net of payroll costs) to the Company. Mr. Sarvadi's brother is an owner and
officer of three companies that are clients of the Company. In 2002, the three
companies paid comprehensive service fees totaling $2,305,191 ($537,102 net of
payroll costs) to the Company.
In March 1998, the Company completed a Securities Purchase Agreement
(the "Agreement") with American Express Travel Related Services Company, Inc.
("American Express") whereby the Company sold to American Express units
consisting of shares of Common Stock and warrants to purchase additional shares
of Common Stock for a total purchase price of $17.7 million. The warrants had
exercise prices ranging from $20 to $40 per share (as adjusted for the 2-for-1
split of the Common Stock effected in October 2000) and terms ranging from three
to seven years. On March 5, 2002, American Express exercised warrants to
purchase 526,271 shares of Common Stock at $25.00 per share. The Company
repurchased the 526,271 shares of Common Stock from American Express for a per
share price of $27.02, which was the closing price of the shares on the New York
Stock Exchange Composite Transaction Tape on March 5, 2002. On February 25,
2003, the Company purchased 1,286,252 shares of Common Stock from American
Express at a purchase price of $6.00 per share.
In March 1998, the Company entered into a Marketing Agreement with
American Express, under which American Express is utilizing its resources and
working jointly with the Company to generate appointments with prospects for the
Company's services from the American Express customer base in certain markets.
In addition, certain American Express services are included in the Company's My
MarketPlace(SM) offerings. The Company pays a commission to American Express
based upon the number of worksite employees paid after being referred to the
Company pursuant to the Marketing Agreement and the total number of worksite
employees paid by the Company. In 2002, the Marketing Agreement produced 17.4%
of the Company's sales leads and 16.6% of new worksite employees sold. In 2002,
the Company paid commissions totaling $1.9 million to American Express under
this agreement. The Marketing Agreement expires at the end of 2005 for existing
markets, but was recently extended until the end of 2006 for new markets opened
after 2002 through 2005.
13
PROPOSAL NUMBER 2:
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
GENERAL
The Finance, Risk Management and Audit Committee has appointed the firm
of Ernst & Young LLP as the Company's independent public accountants for the
year ending December 31, 2003, subject to ratification by the Company's
stockholders. Ernst & Young has served as the Company's independent public
accountants since 1991. Representatives of Ernst & Young are expected to be
present at the Annual Meeting of Stockholders and will have an opportunity to
make a statement, if they desire to do so, and to respond to appropriate
questions from those attending the meeting.
FEES OF ERNST & YOUNG LLP
Ernst & Young's fees for professional services totaled $950,000 for 2002 and
$565,000 for 2001. Ernst & Young's fees for professional services included the
following:
o Audit Services -- fees for audit services, which
relate to the consolidated audit, quarterly reviews,
accounting consultations, subsidiary audits and
related matters were $221,000 in 2002 and $173,000 in
2001.
o Audit-Related Services -- fees for audit-related
services, which consisted of the retirement plan
audit and quarterly agreed-upon procedures, were
$37,000 in 2002 and $36,000 in 2001.
o Tax Services -- fees for tax services, which
primarily related to income tax compliance and
consultation services, were $617,000 in 2002 and
$356,000 in 2001.
o Other Services -- there were no fees for other
services in 2002 or 2001.
The Finance, Risk Management and Audit Committee reviewed the non-audit
services provided to the Company and considered whether Ernst & Young's
provision of such services was compatible with maintaining its independence.
REQUIRED AFFIRMATIVE VOTE
If the votes cast in person or by proxy at the 2003 Annual Meeting of
Stockholders in favor of this proposal exceed the votes cast opposing the
proposal, the appointment of Ernst & Young LLP as the Company's independent
public accountants for the year ending December 31, 2003 will be ratified. If
the appointment of Ernst & Young is not ratified, the Finance, Risk Management
and Audit Committee will reconsider the appointment.
THE FINANCE, RISK MANAGEMENT AND AUDIT COMMITTEE RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" RATIFICATION OF ERNST & YOUNG LLP'S APPOINTMENT AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2003,
AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS
ARE INDICATED THEREON.
14
ADDITIONAL INFORMATION
DELIVERY OF PROXY STATEMENT
Effective in December 2000, the Securities and Exchange Commission
adopted new rules that permit companies and intermediaries (e.g,. brokers) to
satisfy the delivery requirements for proxy statements with respect to two or
more security holders sharing the same address by delivering a single proxy
statement addressed to those security holders. This process, which is commonly
referred to as "householding," potentially means extra convenience for
securityholders and cost savings for companies. This year, a number of brokers
with accountholders who are Administaff stockholders will be householding our
proxy materials. A single proxy statement will be delivered to multiple
stockholders sharing an address unless contrary instructions have been received
from the affected stockholder. Once you have received notice from your broker
that they will be householding communications to your address, householding will
continue until you are notified otherwise or until you revoke your consent. If,
at any time, you no longer wish to participate in householding and would prefer
to receive a separate proxy statement, please notify your broker or direct your
written request to Administaff, Inc., Attention: Ruth Holub, Investor Relations
Administrator, 19001 Crescent Springs Drive, Kingwood, Texas 77339 or contact
Ruth Holub at 800-237-3170. The Company will promptly deliver a separate copy to
you upon request. If you are a holder of record of Administaff shares, you will
be receiving a communication from our transfer agent, Mellon Investor Services,
regarding householding of the materials we send to you. Householding of your
materials will take effect unless you inform them that you would prefer to
receive multiple copies. You may communicate with Mellon Investor Services by
writing to P. O. Box 3315, South Hackensack, New Jersey 07606, or by email at
www.shrrelations@melloninvestor.com.
STOCKHOLDER PROPOSALS FOR 2003 MEETING
In order for director nominations and stockholder proposals to have
been properly submitted for presentation at the 2003 annual meeting, notice must
have been received by the Company between the dates of October 30, 2002 and
November 29, 2002. The Company received no such notice, and no stockholder
director nominations or proposals will be presented at the annual meeting.
STOCKHOLDER PROPOSALS FOR 2004 PROXY STATEMENT
Any proposal of a stockholder intended to be considered for inclusion
in the Company's proxy statement for the 2004 Annual Meeting of Stockholders
must be received at the Company's principal executive offices no later than the
close of business on December 2, 2003.
ADVANCE NOTICE REQUIRED FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
The Bylaws of the Company require timely advance written notice of
stockholder nominations of director candidates and of any other proposals to be
presented at an annual meeting of stockholders. Notice will be considered timely
for the annual meeting to be held in 2004 if it is received not later than the
close of business on December 2, 2003 and not earlier than the close of business
on November 2, 2003. In addition, the Bylaws require that such written notice
set forth (a) for each person whom the stockholder proposes to nominate for
election, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or as otherwise
required, in each case pursuant to Regulation 14A under the Exchange Act,
including, without limitation, such person's written consent to be named in the
proxy statement as a nominee and to serve as a director if elected, and (b) as
to such stockholder (i) the name and address, as they appear on the Company's
books, of such stockholder, (ii) the class and number of shares of the Company's
capital stock that are beneficially owned by such stockholder, and (iii) a
description of all agreements, arrangements or understandings between such
stockholder and each such person that such stockholder proposes to nominate as a
director and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
stockholder.
In the case of other proposals by stockholders at an annual meeting,
the Bylaws require that such written notice set forth as to each matter such
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting, (b) the reasons
for conducting such business at the annual meeting, (c) the name and address, as
they appear on the Company's books, of such stockholder, (d) the class and
number of shares of the Company's stock which are beneficially owned by such
stockholder, and (e) any material interest of such stockholder in such business.
15
FINANCIAL INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2002, INCLUDING ANY FINANCIAL STATEMENTS AND SCHEDULES AND EXHIBITS
THERETO, MAY BE OBTAINED WITHOUT CHARGE BY WRITTEN REQUEST TO RUTH HOLUB,
INVESTOR RELATIONS ADMINISTRATOR, ADMINISTAFF, INC., 19001 CRESCENT SPRINGS
DRIVE, KINGWOOD, TEXAS 77339-3802.
By Order of the Board of Directors
/s/ John H. Spurgin, II
John H. Spurgin, II
Vice President of Legal,
General Counsel and Secretary
March 31, 2003
Kingwood, Texas
16
APPENDIX A
ADMINISTAFF FINANCE, RISK MANAGEMENT AND
AUDIT COMMITTEE CHARTER
PURPOSE
The Finance, Risk Management and Audit Committee (the "Committee") has been
appointed by the Board of Directors to assist the Board in fulfilling its
responsibility to oversee the financial affairs, risk management, accounting and
financial reporting processes and audits of financial statements of the Company
by reviewing and monitoring (i) the financial affairs of the Company, (ii) the
integrity of the Company's financial statements, (iii) the Company's compliance
with legal and regulatory requirements, (iv) the independent auditor's (the
"external auditors") qualifications and independence, (v) the performance of the
personnel responsible for the Company's internal audit function (the "internal
auditors") and the external auditors, and (vi) the Company's policies and
procedures with respect to risk management, as well as other matters which may
come before it as directed by the Board of Directors.
The Audit Committee shall prepare the report required by the rules of the
Securities and Exchange Commission (the "Commission") to be included in the
Company's annual proxy statement.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting principles
and applicable rules and regulations. The Board of Directors and the Committee
recognize that the Company's management is responsible for preparing the
Company's financial statements and the external auditors are responsible for
auditing those financial statements. Therefore, the Board of Directors and the
Committee's responsibility is one of oversight.
MEMBERSHIP AND MEETINGS
The Committee shall consist of not fewer than three directors who serve at the
discretion of the Board of Directors. The Board of Directors shall appoint the
members of the Committee on the recommendation of the Nominating Committee. The
Committee's composition shall meet the independence and experience requirements
of the New York Stock Exchange ("NYSE"), Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Commission. At least one member of the Committee shall be a financial expert, as
defined by the Commission. Committee members shall not serve simultaneously on
audit committees of more than two other public companies.
The Committee shall meet as often as it determines is necessary, but in any
event shall meet not less frequently than quarterly. The Committee shall meet
separately, periodically, with the management, with the internal auditors and
with the external auditors. The Committee may ask officers and employees of the
Company, the Company's outside counsel, the Company's external auditor or others
to attend meetings with, and furnish pertinent information to, the Committee.
AUTHORITY
The Committee is empowered to investigate any matter relating to the financial
affairs and risk management of the Company brought to its attention, and shall
have full access to all books, records, facilities and personnel of the Company.
The Committee shall have the authority to retain and obtain advice and
assistance from independent counsel, accounting and other advisors without
seeking board approval. The Company shall provide for appropriate funding, as
determined by the Committee, for payment of compensation to the external auditor
for the purpose of rendering or issuing an audit report and to any advisors
employed by the Committee.
17
RESPONSIBILITIES
The Committee has the sole responsibility and authority to select (subject to
stockholder ratification), evaluate and, where appropriate, replace the
Company's external auditors. The Committee shall preapprove all auditing
services and permitted non-audit services, including the fees and terms thereof,
to be performed by the external auditors, subject to, and in compliance with,
the de minimus exception for non-audit services described in Section
10A(i)(1)(B) of the Exchange Act. The Committee shall be directly responsible
for the compensation and oversight of the work of the external auditor
(including resolution of disagreements between management and the external
auditor regarding financial reporting) for the purpose of preparing or issuing
an audit report or related work. The external auditor shall report directly to
the Committee. The Committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the authority to
grant preapprovals of audit and permitted non-audit services, provided that the
decisions of such sub-committee to grant preapprovals shall be presented to the
full Committee at its next scheduled meeting.
In addition to the foregoing, the Committee shall:
Oversight of the External Auditors
Review and discuss with the external auditor the planning and staffing of the
annual audit and any other services provided by the Company's external auditors,
and approve the terms of and any fees related to the audit and such other
services.
1. Review and evaluate the lead partner of the external auditors.
2. At least annually, obtain and review a report by the external auditors
describing (i) the external auditors' internal quality-control
procedures, (ii) any material issues raised by the most recent internal
quality-control review, or peer review, of the external auditor, or by
any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or more
independent audits carried out by the firm, and any steps taken to deal
with any such issues, and (iii) all relationships between the external
auditor and the Company. Evaluate the external auditors'
qualifications, performance and independence, including considering
whether the external auditor's quality controls are adequate and the
provision of permitted non-audit services is compatible with
maintaining the external auditor's independence. In making this
evaluation, the Committee shall take into account the opinions of
management and the internal auditor.
3. Ensure that the external auditors deliver to the Committee on a
periodic basis a formal written report delineating all relationships
between the external auditors and the Company, actively engage in a
dialogue with the external auditors with respect to any such disclosed
relationships or services that may impact the objectivity and
independence of the external auditors, and recommend that the Board of
Directors take appropriate action in response to the written report to
satisfy itself of the independence of the external auditors. The
Committee shall present its conclusions with respect to the external
auditor to the full Board of Directors.
4. Assure the regular rotation of both the lead (or coordinating) audit
partner (having primary responsibility for the audit) and the audit
partner responsible for reviewing the audit as required by law.
Consider, whether, in order to assure continuing auditor independence,
there should be regular rotation of the audit firm itself.
5. Establish hiring policies for the Company's employment of the external
auditors' employees or former employees who participated in any
capacity in the audit of the Company.
Selection and Oversight of the Internal Auditors
6. Discuss and approve the appointment and replacement of the internal
auditors.
7. Review and discuss with the internal auditors significant reports that
the internal auditors prepare for management as well as management's
responses to those reports.
18
8. Discuss with management and the external auditors the responsibilities,
budget, staffing and qualifications of the internal auditors.
Financial Statements, Disclosure and Compliance Matters
9. Prior to the filing of the Company's quarterly report on Form 10-Q and
annual report on Form 10-K, review and discuss with the external
auditors and management the annual audited financial statements and
quarterly financial statements, as applicable, including disclosures
made in management's discussion and analysis of financial condition and
results of operations, the results of any annual audit or interim
financial review and any report or opinion rendered in connection
therewith, as the case may be. Recommend to the Board of Directors
whether the audited financial statements should be included in the
Company's Form 10-K.
10. Review with the external auditors any communication or consultation
between the audit team and the audit firm's national office respecting
auditing or accounting issues presented by the engagement.
11. Review and consider with the external auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, including any
difficulties the external auditors encountered in the course of audit
work, any restrictions on the scope of the auditors' activities or
access to requested information, and any significant disagreements with
management, whether satisfactorily resolved or not.
12. Review and discuss quarterly reports from the external auditors
concerning (i) all critical accounting policies and practices to be
used; (ii) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the external auditors;
and (iii) any material communications between the external auditors and
management such as any management letter provided by the external
auditors and management's response to that letter, as well as any
schedule of unadjusted differences.
13. Review the disclosures that the CEO and CFO make to the Committee and
the external auditors in connection with the certification process for
the Company's Form 10-K and Form 10-Q concerning any significant
deficiencies or weaknesses in the design or operation of internal
controls and any fraud that involves management or other employees who
have a significant role in the internal controls of the Company.
14. Review and discuss with management any earnings press releases, with
particular emphasis on the use of "pro forma" or "adjusted" non-GAAP
information, as well as financial information and earnings guidance
provided to analysts and rating agencies. Such discussion may be done
generally, covering, for example the types of information to be
disclosed and the type of presentation to be made.
15. Review and discuss with management and the external auditor the effect
of regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
16. Meet periodically with management to review and discuss the Company's
major risk exposures and any steps management has taken to monitor and
control such exposures, including the Company's guidelines and policies
concerning risk assessment and management.
17. Review and discuss with management and the external auditors major
issues regarding accounting principles and financial statement
presentations, including significant changes in the selection or
application of accounting principles, any major issues concerning the
adequacy of the Company's internal controls and special steps adopted
in light of material control deficiencies.
18. Review proposed changes to the Company's financial and accounting
standards and principles and the Company's policies and procedures with
respect to its internal accounting, auditing and financial controls.
19. Obtain assurance from the external auditors that they are not required
to make any of the reports described in Section 10A(b) of the Exchange
Act.
20. Assist the Board of Directors in its oversight of the Company's legal
and regulatory compliance by advising the Board of Directors with
respect to the Company's policies and procedures concerning compliance
with the Company's Code
19
of Business Conduct and Ethics. Obtain reports from management, the
internal auditors and the external auditors addressing the Company's
and its subsidiaries' compliance with the Company's Code of Business
Conduct and Ethics as well as applicable laws and regulations. Review
reports and disclosures of insider and affiliated party transactions.
21. Establish procedures for (i) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters; and (ii) the confidential,
anonymous submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
22. Discuss with management, the internal auditor and the external auditors
any legal matters that may have a material impact on the financial
statements or the Company's compliance policies and any correspondence
with regulators or governmental agencies and any published reports that
raise material issues regarding the Company's financial statements or
accounting policies.
23. Review and approve the services provided by independent accounting
firms other than the external auditors.
24. Provide a report of Committee activities to the Board of Directors at
regular intervals and review with the full Board any issues that arise
with respect to the quality or integrity of the Company's financial
statements, the Company's compliance with legal or regulatory
requirements, the performance and independence of the Company's
external auditors, or the performance of the internal auditors.
25. Perform such other functions as requested by the Board of Directors, or
required by law or NYSE rule.
ANNUAL REVIEW OF CHARTER AND PERFORMANCE
At least annually, the Committee shall review and reassess the adequacy of this
Charter. The Committee shall report the results of the review to the Board of
Directors and, if necessary, recommend that the Board of Directors amend this
Charter. The Committee shall annually review its own performance.
20
Please
Mark Here
for Address [ ]
Change or
Comments
SEE REVERSE SIDE
ADMINISTAFF, INC.
PLEASE MARK VOTE IN SQUARE IN THE FOLLOWING MANNER USING DARK INK ONLY
FOR WITHHELD FOR ALL FOR AGAINST ABSTAIN
1. Election of Directors. ALL ALL EXCEPT 2. To ratify the appointment of Ernst & Young [ ] [ ] [ ]
Nominees: 01) Paul J. Sarvadi [ ] [ ] [ ] LLP as the Company's independent auditors for
02) Austin P. Young the year 2003.
FOR ALL EXCEPT NOMINEE(S) CROSSED OUT.
The undersigned hereby revokes all previous proxies relating
to the shares of Common Stock covered hereby and confirms all
that said Proxy may do by virtue hereof.
Dated:__________________________________________________, 2003
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Signature of Stockholder
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Signature of Stockholder
This proxy must be signed exactly as the name appears hereon.
Joint owners should each sign. Executors, administrators,
trustees, etc., should give full title as such. If the signer
is a corporation, please sign full corporate name by duly
authorized officer.
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o FOLD AND DETACH HERE o
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11PM EASTERN TIME
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
http://www.eproxy.com/asf 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to Mark, sign and date
Have your proxy card in hand when you vote your proxy. Have your proxy your proxy card
access the web site. You will be OR card in hand when you call. You will OR and
prompted to enter your control be prompted to enter your control return it in the
number, located in the box below, to number, located in the box below, enclosed postage-paid
create and submit an electronic and then follow the directions envelope.
ballot. given.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
ADMINISTAFF, INC.
TO BE HELD ON MAY 8, 2003
The undersigned hereby appoints Richard G. Rawson and John H Spurgin
II, or either of them, as the lawful agents and proxies of the undersigned (with
all the powers the undersigned would possess if personally present, including
full power of substitution), and hereby authorizes them to represent and to
vote, as designated on the reverse side, all the shares of Common Stock of
Administaff, Inc. held of record by the undersigned on March 10, 2003, at the
Annual Meeting of Stockholders of Administaff, Inc., to be held at the Company's
Corporate Headquarters, Centre I in the Auditorium, located at 22900 Hwy. 59 N.
(Eastex Freeway), Kingwood, Texas on May 8, 2003 at 10:00 a.m., Central Daylight
Savings Time, or any reconvened meeting after an adjournment thereof.
It is understood that when properly executed, this proxy will be voted
in the manner directed herein by the undersigned stockholder. WHERE NO CHOICE IS
SPECIFIED BY THE STOCKHOLDER, THE PROXY WILL BE VOTED "FOR" THE PROPOSALS 1 AND
2, AND IN THE DISCRETION OF THE PERSONS NAMED HEREIN ON ALL OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
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ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
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o FOLD AND DETACH HERE o
YOU CAN NOW ACCESS YOUR ADMINISTAFF, INC. ACCOUNT ONLINE.
Access your Administaff, Inc. shareholder account online via Investor Service
Direct(R) (ISD).
Mellon Investor Services LLC, agent for Administaff, Inc., now makes it easy and
convenient to get current information on your shareholder account. After a
simple, and secure process of establishing a Personal Identification Number
(PIN), you are ready to log in and access your account to:
o View account status o View payment history for dividends
o View certificate history o Make address changes
o View book-entry information o Obtain a duplicate 1099 tax form
o Establish/change your PIN
VISIT US ON THE WEB AT HTTP://WWW.MELLONINVESTOR.COM
AND FOLLOW THE INSTRUCTIONS SHOWN ON THIS PAGE.
STEP 1: FIRST TIME USERS - ESTABLISH A PIN STEP 2: LOG IN FOR ACCOUNT ACCESS STEP 3: ACCOUNT STATUS SCREEN
You must first establish a Personal Identification You are now ready to log in. To You are now ready to access your
Number (PIN) online by following the directions access your account please enter account information. Click on the
provided in the upper right portion of the web your: appropriate button to view or
screen as follows. You will also need your initiate transactions:
Social Security Number (SSN) available to establish o SSN
a PIN. o PIN o Certificate History
INVESTOR SERVICEDIRECT(R) IS CURRENTLY ONLY o Then click on the [SUBMIT] button o Book-Entry Information
AVAILABLE FOR DOMESTIC INDIVIDUAL AND JOINT ACCOUNTS. o Issue Certificate
o SSN If you have more than one account, o Payment History
o PIN you will now be asked to select the o Address Change
o Then click on the [ESTABLISH PIN] button appropriate account. o Duplicate 1099
Please be sure to remember your PIN, or maintain it
in a secure place for future reference.
FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN
9AM-7PM MONDAY-FRIDAY EASTERN TIME