1035185--3/8/2006--GEVITY_HR

related topics

{financial, litigation, operation}

{system, service, information}

{personnel, key, retain}

{customer, product, revenue}

{regulation, change, law}

{loss, insurance, financial}

{operation, natural, condition}

{loan, real, estate}

{acquisition, growth, future}

{product, market, service}

{cost, contract, operation}

{debt, indebtedness, cash}

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. Our acquisition strategy subjects us to numerous risks. 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 or delayed sales of our products and services. We are dependent upon key personnel, and the recruitment and retention of key employees may be difficult and expensive. We depend on attracting and retaining qualified service consultants and sales associates. Our quarterly revenues may fluctuate, and we may not be able to sustain our level of total revenue or our historical rate of revenue growth. Our short-term results may be 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. As a result of our co-employment relationship with 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. 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. Our business is subject to risks associated with geographic market concentration. We may be required to provide significant collateral for our obligations to our insurance providers and the amount of cash necessary to provide that collateral may increase in the future. We operate in a complex regulatory environment and failure to comply with applicable laws and regulations could adversely affect our business. The market for our services and our revenue growth depends on our ability to use the Internet as a means of delivering human resource services and this exposes us to various security risks. 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 face increased litigation risk if we are determined to be an employer for employment and discrimination law purposes. We may find it difficult to expand our business into additional states due to varying state regulatory requirements and the existing competitive environment. We face direct and overlapping competition from a number of other companies.

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1035185--3/8/2006--GEVITY_HR_INC