1035185--3/16/2007--GEVITY_HR

related topics

{system, service, information}

{product, market, service}

{loss, insurance, financial}

{personnel, key, retain}

{debt, indebtedness, cash}

{regulation, change, law}

{customer, product, revenue}

{regulation, government, change}

{financial, litigation, operation}

{interest, director, officer}

{operation, natural, condition}

{loan, real, estate}

{provision, law, control}

{cost, contract, operation}

Our short-term results may be negatively impacted due to changes in health insurance claims, state unemployment tax rates and workers compensation rates, which we may not be able to immediately pass through to our clients. We are dependent upon key personnel, and the recruitment and retention of key employees may be difficult and expensive. If we cannot attract and retain qualified individuals, the quality of our services may deteriorate and our results of operations could be adversely affected. Our insurance-related loss reserves may be inadequate to cover our ultimate liability for losses and as a result our financial results could be materially and adversely affected. Our results of operations may be adversely affected if insurance coverage for workers compensation or medical benefits is not available or if we lose relationships with our key providers. We may be required to provide significant cash collateral for our obligations to our insurance providers and the amount of cash necessary to provide that collateral may increase in the future. Our workers compensation receivable from AIG represents a significant concentration of credit risk. If AIG were to default on its obligations our results of operations would be materially and adversely affected. Our business is subject to risks associated with vendor agreements. Our business is subject to risks associated with geographic market concentration. Our headquarters, many of our clients headquarters, and the facilities of many of the third parties on which we rely to provide us and our clients with critical services are located in an area of the United States that is susceptible to hurricane damage and other natural disasters. We may find it difficult to expand our business into additional states due to varying state regulatory requirements and the existing competitive environment. We operate in a complex regulatory environment and failure to comply with applicable laws and regulations could adversely affect our business. We face direct and overlapping competition from a number of other companies. Certain of our existing or potential competitors may have substantially greater financial, technical and marketing resources, larger customer bases, greater name recognition and more established relationships with their clients and key product and service suppliers than we do. This may enable them to develop and expand their delivery infrastructure and service offerings more quickly, which could adversely affect our ability to attain new clients. The market for our services and our revenue growth depends on our ability to use the Internet as a means of delivering HR services and this exposes us to various security risks. We are dependent upon technology services and any damage, interruptions or failures in our computer and telecommunications systems could adversely affect our existing client relationships and our ability to attract new clients. We may not be able to keep pace with changes in technology We depend on the technology of third parties licensed to us, and the loss or inability to maintain these licenses or errors in the software we license could result in increased costs, reduced service levels and delayed sales of our products and services. Our professional services agreement allows clients to terminate their relationship with us upon either 30 or 45 days notice, and as a result, we could lose a significant number of customers in a short period of time. As a result of our co-employment relationship with most of our clients and client employees, we may be subject to liabilities as a result of their acts or omissions. Because we assume the obligation to make wage, tax and regulatory payments of behalf of our clients, we are exposed to certain credit risks with respect to our larger clients. If we are determined not to be an employer pursuant to applicable ERISA and IRS rules and regulations, we may be subject to additional regulations and liabilities. We may not be successful in recovering the remaining premium we paid to a Bermuda reinsurance company that is subject to liquidation proceeding. Our new credit agreement contains restrictive covenants that may restrict our financial and operating flexibility. Anti-takeover provisions in our organizational documents and Florida law may limit the ability of our shareholders to control our policies and effect a change of control of our company, which may not be in your best interests.

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1035185--3/16/2007--GEVITY_HR_INC