EXHIBIT 10.5
AMENDED AND RESTATED
SECURITY DEPOSIT AGREEMENT
Effective as of December 21, 2001, Administaff of Texas, Inc.
("Administaff") and United HealthCare Insurance Company ("United HealthCare")
(collectively Administaff and United HealthCare are referred to as the
"Parties") agree as follows:
1. Administaff shall remit a security deposit to United HealthCare in the
amount of Fifteen Million and No/100 Dollars ($15,000,000) on or before
December 31, 2001 plus an additional Five Million and No/100 Dollars
($5,000,000) before April 1, 2002 and an additional Five Million and
No/100 Dollars ($5,000,000) before September 30, 2002 (collectively
known as the "Security Deposit"). For the 2003 calendar year, the
Security Deposit shall be Twenty-Five Million and No/100 Dollars
($25,000,000). Unless amended in writing by the Parties, beginning in
the 2004 calendar year, the Security Deposit will be adjusted as of
January 1st of each calendar year during the term of the Insurance
Program to an amount equal to the greater of (i) $22,500,000 or (ii)
7.5 percent of the Aggregate Payable Rate (using the number of covered
employees under Policies and Non-MP Policies as of December 15 of the
prior year) for the first quarter of the applicable calendar year
multiplied by four. On or before January 1st of each calendar year
during the term of the Insurance Program as defined in section 6 below,
Administaff will remit any deficit in the above-required Security
Deposit to United HealthCare or United HealthCare will remit any
surplus in the above-required Security Deposit to Administaff.
2. United HealthCare will credit interest to the Security Deposit as of
the end of each calendar month. The interest credited for each month
will be based on (i) the daily balance in the Security Deposit for the
month and (ii) an annual interest rate equal to the average, for that
month and the two immediately preceding months, of the yields at
auction (on a bank-discount basis) for three-month Treasury bills, plus
25 basis points.
United HealthCare may change the method of crediting interest described
above by giving ninety days written notice of such change to
Administaff. However, such change shall apply only as of the first day
of the calendar year beginning after the 90-day notice period.
3. United HealthCare may without any further authorization from
Administaff draw against such Security Deposit and retain such draw
upon the following circumstances:
a. United HealthCare may draw on the Security Deposit upon a
failure by Administaff to pay (i) any amount then currently
payable under the Insurance Program, including but not limited
to, any amount described in
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section 4(b)(v) of the Minimum Premium Financial Agreement, or
(ii) any amount due under any United HealthCare policy in
effect following termination of the Minimum Premium Financial
Agreement; provided, however, that any draw shall only be
allowed under this Section 3.a. up to an amount not greater
than the Aggregate Payable Rate for the applicable calendar
year quarter reduced by any amount related to such Aggregate
Payable Rate otherwise paid by Administaff within *** business
days of the final due date of such amount or any applicable
incremental amount thereof.
b. United HealthCare may draw on the Security Deposit in an
amount equal to United HealthCare's Accumulated Deficit as of
the date that (i) Administaff's public rating on short-term
debt falls below Investment Grade and on the last day of any
subsequent calendar month in which Administaff's public rating
is still below Investment Grade, (ii) Administaff fails to
cure or a creditor fails to waive a default by Administaff or
its affiliates on their material obligations under their
revolving line of credit facility (or under any future
revolving line of credit facility or successor credit
facility) and on the last day of any subsequent calendar month
in which such default continues to exist without having been
cured or waived, or (iii) Administaff's current ratio (i.e.,
current assets over current liabilities) is less than 6.0 to
1.0 and on the last day of any subsequent calendar month in
which such a current ratio continues to exist (each of (i),
(ii) and (iii) are referred to as a "Trigger Event" or
collectively, the "Trigger Events"). If a Trigger Event occurs
other than at the end of a calendar year, United HealthCare
will determine the Accumulated Deficit as of that date, but in
accordance with the annual review principles described in
Exhibit A of the Minimum Premium Financial Agreement.
Administaff must notify United HealthCare immediately upon the
occurrence of any of the Trigger Events.
4. In addition to United HealthCare's right to draw against the Security
Deposit in accordance with Section 3 above, upon a termination of the
Minimum Premium Financial Agreement, United HealthCare without any
further authorization from Administaff may draw against the Security
Deposit and retain such draw as follows:
a. Immediately following completion of the Initial Termination
Review, United HealthCare may withdraw from the Security
Deposit an amount equal to any Accumulated Deficit identified
in that review.
b. Immediately following completion of the Final Termination
Review, United HealthCare may withdraw from the Security
Deposit an amount equal to any Accumulated Deficit identified
in that review.
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5. Any amount withdrawn against the Security Deposit by United HealthCare
shall be credited as Policy Revenue under, and to the extent provided
in, Exhibit A of the Minimum Premium Financial Agreement.
6. The below indicated defined terms when initially capitalized in this
Agreement shall have the following meanings. Capitalized terms not
defined in this section shall have the meaning ascribed to them in the
Minimum Premium Financial Agreement.
"INSURANCE PROGRAM" means the program of medical and dental
insurance and related services provided through the Policies and the
Non-MP Policies.
"MINIMUM PREMIUM FINANCIAL AGREEMENT" is the Minimum Premium
Financial Agreement by and between Administaff of Texas, Inc. and
United HealthCare Insurance Company, as amended from time to time.
"AGGREGATE PAYABLE RATE" - for a calendar year quarter means
an amount equal to the product of (i) the applicable "Monthly Payable
Rate" (defined in or pursuant to Exhibit A of the Minimum Premium
Financial Agreement) multiplied by three, and (ii) the number of
employees covered under the Policies and the Non-MP Policies in a given
month determined as of the 15th day of the applicable month.
7. In the event that Administaff fails to make any of the deposits
required by Section 1 above, then United HealthCare shall not be
obligated to perform under the Minimum Premium Financial Agreement and
the MP Administrative Services Agreement for all periods subsequent to
the date of Administaff's failure to make such deposit.
8. Within 10 days after completion of the Final Termination Review, United
HealthCare shall return to Administaff any balance of the Security
Deposit remaining after United HealthCare has exercised its right to
draw on the Security Deposit as provided in this Security Deposit
Agreement.
9. The right to draw against the Security Deposit under the Agreement
shall be in addition to, and not in lieu of, any other remedy available
at law or in equity to United HealthCare, and any such draw by United
HealthCare shall not cure Administaff's failure to pay amounts due,
without United HealthCare's express written consent.
10. This Security Deposit Agreement shall replace and render null and void
any agreements relating to any security deposit previously entered into
by the Parties. Any remittances of funds by Administaff pursuant to any
previous security deposit agreement shall be considered performance
under this Security Deposit Agreement.
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ADMINISTAFF OF TEXAS, INC. UNITED HEALTHCARE
INSURANCE COMPANY
/s/ Xxxxxx X. Xxxx /s/ Xxxxxxx X. Xxxxxx
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Date: 6/25/02 Date: 6/25/02
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