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Exhibit 10.26
*** 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.
AMENDMENT TO VARIOUS AGREEMENTS BETWEEN UNITED
HEALTHCARE INSURANCE COMPANY AND ADMINISTAFF OF TEXAS, INC.
WHEREAS, United HealthCare Insurance
Company ("United HealthCare") and
Administaff of Texas, Inc. ("Administaff")
entered into certain agreements
establishing a minimum premium arrangement
("Minimum Premium Arrangement") for
the provision of medical and dental
benefits to Administaff Inc.'s employees;
and
WHEREAS, those agreements were the Security
Deposit Agreement (effective
December 21, 2001), the Minimum Premium
Administrative Services Agreement ("MP
Services Agreement") (effective January 1,
2002), and the Minimum Premium
Financial Agreement ("MP Financial
Agreement") (effective January 1, 2002); and
WHEREAS, United HealthCare and Administaff
have agreed to amend the Agreements;
NOW THEREFORE, the Security Deposit
Agreement, the MP Services Agreement and MP
Financial Agreement are amended as follows
effective as of the dates indicated
below:
The Security Deposit Agreement
1. Section 1 of the
Security Deposit Agreement is amended to delete the third
sentence and substitute the following:
Effective
December 31, 2003, the required Security Deposit shall be
Seventeen
Million, Five Hundred Thousand and No/100 Dollars
($17,500,000).
On or
before January 31, 2004, United HealthCare shall remit to
Administaff the excess of the actual Security Deposit as of
December 31,
2003 over the required
$17,500,000.
2. Effective June 20,
2003, Section 1 of the Security Deposit Agreement is
amended to add the following as a new
paragraph at the end of Section 1.
Upon
Administaff's request, United HealthCare and Administaff will
negotiate
in good faith the terms of an agreement under which a premium
stabilization reserve or its equivalent ("PSR") held by United
HealthCare
would be
substituted for all or some of the Security Deposit provided
for
herein.
Any such PSR would, when combined with the remaining Security
Deposit,
if any, provide United HealthCare the same overall level of
risk
protection
as the Security Deposit existing at the time of such PSR
negotiation.
The MP Financial Agreement
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1. Effective April 1,
2002, section 1(s) of the MP Financial Agreement is
amended by adding the following sentence at
the end:
The
additions, deletions and substitutions agreed to by the Employer
and
the
Company shall be reflected on Exhibit D.
2. Effective January 1,
2004, the MP Financial Agreement is amended by adding
a new section 2(e) to provide as
follows:
(e)
Removal of
Dental Benefits. Effective January 1, 2004, the Agreement
shall not include or provide dental benefits under the Minimum
Premium Arrangement, and shall be construed to be so amended,
including the following changes: (i) the definition of "Health
Benefits" in section 1(i) shall not include dental benefits,
(ii)
the Maximum Monthly Employer Benefit Obligation described in
section
1(m) shall be calculated without including the Dental Policy,
(iii)
"Policy" as defined in section 1(s) shall not include the
Dental
Policy or any other policy providing dental benefits to
Employees,
(iv) "Non-MP Policy as defined in section 1(p) shall not include
the
Dental Policy or any other policy providing dental benefits to
Employees, and (v) the MP Premium described in section 3(a) shall
be
calculated without including the Dental Policy. The Company
shall
cause the dental benefits to be so removed in a manner
consistent
with funding and accounting actions required upon termination of
the
Agreement as set forth in Exhibit A, including the Company's
(I)
funding of dental claims incurred under the Dental Policy prior
to
January 1, 2004, but paid on or after such date, (II) issuance of
a
final accumulated surplus/deficit accounting with respect to
the
Dental Policy as a Final Termination Review within 195 calendar
days
of December 31, 2003, and (III) adjustment of the IBNR Reserve in
a
manner consistent with the Final Termination Review with respect
to
the Dental Policy; provided that the Company shall issue an
accumulated surplus/deficit accounting with respect to the
Dental
Policy as an Initial Termination Review by February 15, 2004.
(f)
After December
31, 2003, the Dental Policy (or any policy providing
dental benefits) shall not be included in any determination of
Accumulated Surplus or Accumulated Deficit or in any Initial or
Final Termination Review required under Exhibit A, except for
the
Initial and Final Termination Reviews with respect to the
Dental
Policy described in section 2(e).
3. Section 1(m) of the MP
Financial Agreement is amended effective January 1,
2003, by deleting the provisions of section
1(m) in their entirety and
substituting the following provision:
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(m)
"Maximum Monthly
Employer Benefit Obligation" for an Arrangement
Month shall be the amount determined in Exhibit D hereto. 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 Maximum Employer
Benefit Obligation in the prior Arrangement Month exceeded the
Health Benefits Paid in that Month.
4. Section 3(a) of the MP
Financial Agreement is amended effective January 1,
2003, by deleting the provisions of section
3(a) in their entirety and
substituting the following:
(a)
MP Premium. The
MP Premium for the Policies for the Arrangement
Month shall be the amount determined pursuant to Exhibit D
hereto.
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.
5. Effective January 1,
2004, Exhibit A to the MP Financial Agreement is
amended by deleting section 1 and
substituting the following:
The
Policies. The Employer has entered into a Minimum Premium
Arrangement
covering
certain of the Company's insurance policies or HMOs. 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;
these
policies
are identified in Exhibit B.
6. Effective January 1,
2004, Exhibit A to the MP Financial Agreement is
amended by adding a new Appendix II, and by
deleting the first sentence in
section 2.a and substituting the
following:
A monthly
composite 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, and effective January 1, 2004, as
further
provided in Appendix II to this Exhibit.
7. Effective January 1,
2004, Exhibit A to the MP Financial Agreement is
amended by adding the following provisions
after the first paragraph of section
4.a:
In
addition, effective January 1, 2004, in setting the Monthly
Payable
Rate, the
Company shall take into account an Accumulated Deficit or
Accumulated Surplus no earlier than the first Arrangement
Quarter
beginning
90 days after the
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Quarterly
Review. In the case of an Accumulated Deficit, the Company
shall
recover
such Accumulated Deficit over no fewer than *** successive
Arrangement Quarters beginning at least 90 days after the
Quarterly
Review; provided, however, that if
the Accumulated Deficit as of the end
of an
Arrangement Quarter that is the subject of the Quarterly Review
exceeds
*** of the "Aggregate Premiums" for such Arrangement Quarter,
the
Company
may recover such Accumulated Deficit over fewer than ***
Arrangement Quarters. For this purpose, "Aggregate Premiums" for
an
Arrangement Quarter shall be the product of (A) the Monthly Payable
Rate
for such
quarter, (B) the number of Employees covered under the Policies
and Non-MP
Policies as of the 15th of the last month of the preceding
Arrangement Quarter, and (C) three (3).
8. Effective October 1,
2003, section 6.h of Exhibit A to the MP Financial
Agreement is amended by deleting the second
and third sentences thereof and
substituting the following sentence:
The
Expense Percentage for the Policies and the Non-MP Policies is
set
forth in
Exhibit D to the Agreement.
9. Effective January 1,
2003, the MP Financial Agreement is amended by adding
new Exhibit D, attached hereto.
MP Services Agreement
1. Effective January 1,
2004, the MP Services Agreement is amended by
deleting section 6(b)(iii) and substituting
the following:
except as
provided in Exhibit F to the Agreement, each Employee is
offered
concurrently no more than *** option in addition to the Company's
dental
benefit
plan (where offered);
2. Effective January 1,
2004, section 6 of the MP Services Agreement is
amended to add the following sentence at
the end of subsection (b).
For
purposes of this section (6)(b), "the Plan" shall mean the plan
of
benefits
provided by the Employer under both the Policies and the Non-MP
Policies.
3. Effective January 1,
2004, the MP Services Agreement is amended by
deleting section 8(b) and substituting the
following:
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, a Non-MP 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
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prompt
notice concerning such matter and exercise by the Employer of
its
rights as
stated under subsection 8(a) above.
4. Effective January 1,
2004, Exhibit F of the MP Services Agreement is
amended to add the following to the end of
section A:
For
purposes of this Exhibit F, "Employees" shall include employees of
the
Employer
covered under Non-MP Policies as well as the Policies.
5. Effective June 20,
2003, Exhibit F of the MP Services Agreement is amended
by adding the following new section 8:
8.
Process
for Considering Alternative Vendors in Special Markets
a.
Effective
January 1, 2004, the special procedures for alternate
vendors described in this section 8 shall apply to the
following
markets ("Special Markets"):
i. ***
ii. ***
iii. ***
iv.
***
v. ***
vi. ***
b.
The
Employer and the Company shall discuss in detail whether and
upon what terms the offering of vendors other than the Company
("Alternate Vendors") in the Special Markets would be a viable
alternative to the current approach in any or all of the
Special
Markets, including but not limited to, the following:
i.
pricing, product and other competitive information;
ii. the specific
advantages expected to be gained from
offering an Alternate Vendor;
iii. the anticipated
process and terms for introducing and
offering an Alternate Vendor's product, including price,
contribution, product and benefit plan design
differences, and employee vs Client selection process;
and
iv. whether some
combination of different or additional
Company offerings would best serve the Employer,
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c.
Following
these discussions, the Employer may offer an Alternate
Vendor in a Special Market without regard to notice and cure
provisions of section 5 of this Exhibit F. Any vendor changes
made
by the Employer pursuant to this section shall be memorialized in
an
amendment to this Exhibit F. Taking into account the
discussions
with the Employer, the Company's existing offerings, and the
size
and product distribution of the existing membership in the
Special
Market, the Company shall elect one of the following:
i.
Continue to offer to the Employer an *** and/or ***
option at the Client level. (All co-employees of a
Client would be offered ***.);
ii. Continue to
offer to the Employer an *** and/or ***
option at the employee level, where Clients may elect
more ***.
iii. Discontinue
offering any option to the Employer in the
Special Market.
d. If the Employer offers
one or more Alternate Vendors in a Special
Market, this change in product offering may result in changes in
the
Monthly Payable Rate, Quoted Premiums or premiums of Non-MP
Policies; provided however that any such rate or premium change
for
a Special Market would not be effective before the later of (i)
the
date the Alternate Vendor's coverage becomes effective and (ii)
the
first of the month following 30 days advance written notice of
such
rate or premium change by the Company to the Employer.
UNITED HEALTHCARE
ADMINISTAFF OF
INSURANCE COMPANY
TEXAS, INC.
By: /s/ Simeon Schindelman
By: /s/ Richard Rawson
------------------------------
-----------------------------
Authorized Signature
Authorized Signature
Name: Simeon Schindelman
Name: Richard Rawson
Title: President, Small Business
Title: President
Date:11/9/04
Date: December 3, 2004
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EXHIBIT A
APPENDIX II
METHODOLOGY FOR ESTABLISHING MONTHLY PAYABLE RATES
1. Paragraph 2 of Exhibit
A of the MP Financial Agreement provides that the
Company
will establish for each Arrangement Quarter the Monthly Payable
Rate, a monthly
*** rate for the Policies and the Non-MP Policies
collectively (for purposes of this Appendix II, the "MPR"), which
rate
will then
be used to establish the monthly premiums for the Policies and
Non-MP
Policies. Certain components of the Company's methodology for
det
