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SUBSCRIBER SERVICE AGREEMENT
This Subscriber Service Agreement (the "Agreement") is made as of 1st day
of July, 1999 (the "Effective Date") by and between NovaCare, Inc., a Delaware
corporation with its principal place of business at 1016 W. Ninth Avenue, King
of Prussia, Pennsylvania 19406 ("Subscriber"), and NovaCare Employee Services,
Inc. ("NovaCare"), a Delaware corporation with its principal place of business
at the Valley Forge Corporate Center, 2621 Van Buren Avenue, Norristown,
Pennsylvania 19403. This Agreement modifies and supersedes all prior agreements
between Subscriber and NovaCare with respect to Worksite Employees (as that term
is defined in Section 1 of this Agreement).
W I T N E S S E T H:
WHEREAS, NovaCare has expertise in employment relations matters, including
payroll, benefits procurement and management, workers' compensation insurance
management (including risk assessment, injury prevention and claims management),
recruiting, human resources management (including consulting and intervention to
resolve employment-related issues) and training and development;
WHEREAS, Subscriber has outsourced certain human resource functions to
NovaCare in order to improve service and reduce costs by taking advantage of the
expertise of a focused human resources business;
WHEREAS, Subscriber and NovaCare wish to supersede their existing
subscriber service agreement and enter into this agreement for the provision of
services to Subscriber's corporate support services personnel (the "Support
Services Group"); and
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises herein contained, and intending legally to be bound, the parties
have agreed as follows:
1. Parties' Intent
Subscriber and NovaCare understand and intend that, under this Agreement,
NovaCare will assume certain rights and duties of a co-employer with respect to
employees principally located at Subscriber's headquarters in King of Prussia,
Pennsylvania and who provide corporate support services on behalf of Subscriber
(an employee in the Support Services Group, as determined by Subscriber, shall
hereinafter be referred to as a "Worksite Employee").
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2. Term and Termination.
2.1 Initial Term. The initial term (the "Initial Term") of this
Agreement shall be from July 1, 1999 through December 31, 1999 unless sooner
terminated pursuant to Section 2.3 below.
2.1.2 Renewal Term. Subscriber shall have the right to extend this
Agreement for an additional six-month term if, as of January 1, 2000, the number
of Worksite Employees covered under this Agreement does not exceed 50.
2.1.3 Termination.
2.1.3.1 By NovaCare. NovaCare may terminate this Agreement
upon notice to Subscriber, in the event that:
(a) Subscriber fails to pay any sums due hereunder, and
such failure continues for three (3) business days after written notice thereof
is sent to Subscriber, certified or registered mail, return receipt requested;
(b) Subscriber fails at any time to procure or maintain
any insurance coverage required by this Agreement;
(c) Subscriber fails to perform or observe any duty,
obligation or covenant contained in this Agreement other than those set forth in
subparagraph (a) or subparagraph (b) above, and such failure continues for ten
(10) days after written notice thereof is sent to Subscriber, certified or
registered mail, return receipt requested;
(d) Subscriber becomes insolvent (that is, unable to
pay its debts as they mature or in accordance with customary business practice)
or commits an act of bankruptcy, or if any bankruptcy or insolvency proceeding
is instituted by or against Subscriber and is consented to or acquiesced in by
Subscriber or remains for thirty (30) days undismissed;
(e) Subscriber is dissolved;
(f) any representation, warranty or statement of
material fact made or furnished to NovaCare or NovaCare's representatives by or
on behalf of the Subscriber, or any document, instrument or other paper
submitted to NovaCare or NovaCare's representatives by or on behalf of
Subscriber, is false or misleading in any material respect;
(g) NovaCare determines, and obtains an opinion of
counsel to the effect, that all or a substantial portion of its receipts
hereunder are or will
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become subject to a sales, value added, gross receipts or similar tax in a
particular jurisdiction as to which it exercises its right to terminate;
(h) changes in federal, state or local law, regulation
or controlling legal interpretation occur that make it legally impossible or
economically impractical for NovaCare to carry out its obligations hereunder in
the jurisdiction(s) as to which it exercises its right to terminate;
(i) Subscriber fails to comply with any reasonable
directive regarding health and safety from NovaCare, NovaCare's workers'
compensation carrier, or any government agency with jurisdiction over a health
or safety matter; or
(j) Subscriber misrepresents workers' compensation or
Fair Labor Standards Act classification or inaccurately reports employee payroll
hours, pay rate or salary.
2.1.3.2 By Subscriber. Subscriber may terminate this Agreement
upon notice to NovaCare in the event that:
(a) NovaCare fails to pay any sums required to be paid
hereunder by NovaCare as co-employer of the Worksite Employees;
(i) to or on behalf of a Worksite Employee or
(ii) to a governmental agency, insurance carrier, third
party administrator or other third party, and such failure continues for seven
(7) business days after written notice thereof is sent to NovaCare, certified or
registered mail, return receipt requested;
(b) NovaCare fails at any time to procure or maintain
insurance coverage required by this Agreement;
(c) NovaCare fails to meet the following service performance
standards, and such failure continues for a period of sixty (60) days after
written notice thereof is sent to NovaCare, certified or registered mail, return
receipt requested:
(i) employee status change transactions (new hires,
wage and salary actions, changes in status from full-time to part-time or on or
off leave and terminations) (hereinafter referred to as "Status Transactions")
received in a form acceptable to NovaCare by the established payroll cut-off
date and time (the "Payroll Cut-off") for a payroll will be processed for that
payroll;
(ii) payroll data received by NovaCare's designated
representative by the Payroll Cut-off will be processed to deliver payroll on
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time ninety-eight percent (98%) of the time, except for natural disasters,
errors caused by Subscriber personnel or other circumstances beyond NovaCare's
control, and ninety-eight percent (98%) of paychecks will correctly reflect
information transmitted from the Subscriber;
(iii) new hire and status change benefit forms
("Benefit Forms") will be submitted to the third party administrator responsible
for the applicable benefit plan within one (1) week of receipt by NovaCare's
designated representative. If NovaCare acts as the plan administrator, it will
update its file and provide confirmation;
(iv) seventy-five percent (75%) of incoming calls to
the employee service center 1-800 phone number, during established business
hours, will be answered immediately and incoming calls reaching voice mail will
be returned by the end of the following business day; and for open enrollment
periods, the calls will be returned within three business days.
(v) NovaCare will conduct quarterly feedback sessions
with Subscriber's designees and provide client training regarding how to
properly process payroll inputs. Significant service issues reasonably raised in
writing by Subscriber in such quarterly feedback sessions shall be addressed to
Subscriber's reasonable satisfaction within sixty days after the feedback
session in which such service issues are raised; provided, that, to the extent
that the service issues relate to and/or are caused by Subscriber's policies,
procedures and/or processes, NovaCare's responsibility shall consist of
addressing the suggested actions to cure the service issue and the related cost
and time frame to implement the cure.
(d) NovaCare becomes insolvent (that is, unable to pay its
debts as they mature or in accordance with customary business practice) or
commits an act of bankruptcy, or applies for, consents to, or acquiesces in the
appointment of a trustee or a receiver for it or any of its property, or, in the
absence of such application, consent or acquiescence, a trustee or receiver is
appointed for NovaCare or for a substantial part of its property and is not
discharged within thirty days thereof, or if any bankruptcy or insolvency
proceeding, or any dissolution or liquidation proceeding, is instituted by or
against NovaCare and is consented to or acquiesced in by NovaCare or remains or
thirty (30) days undismissed;
(e) there occurs the termination, cessation or liquidation
of NovaCare's business;
(f) NovaCare fails to perform or observe any material duty,
obligation or covenant contained in this Agreement other than those set forth in
subparagraph (a), subparagraph (b) or subparagraph (c) above, and such failure
continues for ten (10) days after written notice thereof is sent to NovaCare,
certified or registered mail, return receipt requested, unless such cure cannot
reasonably be achieved within
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such timeframe, using commercially reasonable efforts, in which case the
applicable cure period shall be as is reasonable under the circumstances;
3. Fees.
3.1 Calculation of Fees
For the Initial Term, the fees shall be determined in accordance with
this Section 3.1.
3.1.1 Payroll Fees. The following Subscriber payments will be
processed by NovaCare and billed to Subscriber:
a) gross earnings, including salary, wages, bonus, vacation time,
paid time off, sick time, commissions and severance pay (before deductions,
whether before tax or after tax) paid to Worksite Employees;
(b) the employer's portion of FICA and FUTA attributable to gross
earnings in accordance with such regulations;
(c) the employer's portion of contributions to the NCES/NovaCare,
Inc. 401(k) Retirement Savings Plan ("the 401(k) Plan"); and
(d) the net amount of expense reimbursement and any other cash
payment to a Worksite Employee that is included in a paycheck at the request of
Subscriber but is not includable in gross earnings for federal or state tax
purposes.
3.1.2 Benefits/Risk Management Fees. For Benefits/Risk
Management Responsibilities assumed hereunder, which are more specifically
described in Section 4.2 herein, Subscriber shall pay Benefits/Risk Management
Fees to NovaCare equal to the estimated costs of procuring and managing such
responsibilities (the "Section 3.1.2 Estimated Costs"), plus a fixed fee (the
"Section 3.1.2 Fixed Fee"), all of which are more specifically described on
Schedule 3.1.2 attached hereto. If NovaCare's actual costs to perform the
Benefits/Risk Management Responsibilities exceed the Section 3.1.2 Estimated
Costs by more than 15%, Subscriber shall pay to NovaCare an additional amount
equal to the amount by which such actual costs exceed the Section 3.1.2
Estimated Costs; if NovaCare's actual costs to perform the Benefits/Risk
Management Responsibilities are less than the Section 3.1.2 Estimated Costs by
more than 15%, NovaCare shall reimburse Subscriber an amount equal to the
difference between the Section 3.1.2 Estimated Costs and NovaCare's actual
costs.
3.1.3 Administrative Fees. For Administrative
Responsibilities assumed hereunder, which are more specifically described in
Section 4.3 herein, Subscriber shall pay Administrative Fees to NovaCare equal
to the estimated costs of handling such responsibilities (the "Section 3.1.3
Estimated Costs"), plus a fixed fee (the "Section
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3.1.3 Fixed Fee"), all of which are more specifically described on Schedule
3.1.3 attached hereto. If NovaCare's actual costs to perform the Administrative
Responsibilities exceed the Section 3.1.3 Estimated Costs by more than 15%,
Subscriber shall pay to NovaCare an additional amount equal to the amount by
which such actual costs exceed the Section 3.1.3 Estimated Costs; if NovaCare's
actual costs to perform the Administrative Responsibilities are less than the
Section 3.1.3 Estimated Costs by more than 15%, NovaCare shall reimburse
Subscriber an amount equal to the difference between the Section 3.1.3 Estimated
Costs and NovaCare's actual costs.
3.1.4 Additional Fees. Subscriber may request NovaCare to
assume additional responsibilities pursuant to Section 4.4 below (hereinafter
referred to as "Additional Responsibilities"). The fee for such Additional
Responsibilities shall be set forth in a schedule to this Agreement (Schedule
3.1.4).
3.1.5 Fees Not Included. Fees set forth above do not include
Subscriber special requests, potential transition set-up activities or potential
wind down costs. Fees for these services, as well as Recruiting and HR
consulting are not included herein, but will be negotiated once the scope of
such services are defined.
3.1.6 Cancellation Fee. Subscriber shall pay to NovaCare a
fee of $665,000 in consideration for NovaCare's agreement to terminate the
Amended and Restated Subscriber Services Agreement, dated July 1, 1998; such fee
shall be payable at the rate of $110,833 per month for six consecutive months,
on the last business day of each month, beginning with the month of July 1999.
3.2 Fees for Renewal Term. The fees to be paid by Subscriber to NovaCarecc
for services provided hereunder during the Renewal Term, if any, shall be equal
to NovaCare's cost to provide such services, plus a fee equal to one and
one-half percent of such costs.
3.3 Payment of Fees.
3.3.1 Administrative and Benefits/Risk Management Fees. On
or before each payroll date, Subscriber shall fund an account with the amount of
the Administrative Fees and Benefits/Risk Management Fees (the "Payroll
Account") in advance of each payroll payment date. NovaCare shall have the right
to draw against the Payroll Account an amount equal to the Payroll Fees and
Benefits/Management Fees for the applicable payroll payment date. Subscriber
agrees to collect, verify and transmit to NovaCare's administrative office, no
less than seven (7) business days before each NovaCare payroll date, any
information required to determine correctly and accurately the amount of the
payment due NovaCare. If Subscriber defaults in paying the amounts due NovaCare
and NovaCare continues to pay wages for Worksite Employees at a rate not below
the statutory minimum wage, Subscriber shall fully indemnify and hold NovaCare
harmless from any and all claims made by employees for wages in excess of the
amount paid by NovaCare and any and all legal fees and expenses incurred in
defense
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of such claims. Additionally, Subscriber must immediately inform NovaCare of any
situation in which payment will not be immediately forthcoming and thereafter,
at the request of NovaCare, Subscriber shall terminate the employment of persons
for whom payment by Subscriber to NovaCare will not be made.
3.3.2 Subscriber is responsible for all sales, franchise and
use taxes applicable to the states in which business is being conducted.
4. NovaCare's Responsibilities.
4.1 Payroll Responsibilities. NovaCare shall be responsible for and
shall perform the following functions ("Payroll Responsibilities") with respect
to Worksite Employees in consideration of the payment of Payroll Fees:
(i) Payment of wages based on hours, wage and salary rates and
other information supplied by Subscriber, including application of set-offs owed
to Subscriber and implementation of garnishment orders;
(ii) Calculation of Paid Time Off (in accordance with
Subscriber's policies);
(iii) Payment of sign-on, relocation and other bonuses;
(iv) Collection, reporting and payment of applicable federal,
state and local payroll taxes (exclusive of state unemployment insurance);
(v) Payment of the employer's portion of contributions to the
401(k); and
(vi) Payment of expense reimbursement and any other non-wage
payments to Worksite Employees, as requested by Subscriber.
4.2 Benefits Responsibilities. NovaCare shall be responsible for and
shall perform the following functions with respect to Worksite Employees in
consideration of the payment of Benefits/Risk Management Fees:
(i) Collection of employee contributions, payment of premiums and
administration under the benefit plans;
(ii) Funding of benefit plans that require funding within the
time required by law;
(iii) Reporting and payment of applicable state unemployment
insurance;
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(iv) Administration of unemployment compensation claims; and
(v) Payment of workers' compensation insurance premiums and
administration and management of workers' compensation claims, including payment
of claims not paid by an insurance carrier or other third party.
4.3 Administrative Responsibilities. NovaCare shall be responsible for
and shall perform the following functions with respect to Worksite Employees in
consideration of the payment of Administrative Fees:
(i) Completion, reporting and maintenance of payroll and Plan
records, with the exception of records of hours worked, which shall be
collected, verified and maintained by Subscriber, provided that Subscriber shall
make available to NovaCare copies of such records of hours worked as NovaCare
may require for the purpose of maintaining the Plans;
(ii) Analysis, transfer and integration of payroll and benefits
for (a) Worksite Employees newly employed as a result of Subscriber's
acquisitions of businesses employing those individuals, and(b) Worksite
Employees whose employment is terminated;
(iii) Operation of an employee service center providing Worksite
Employees with access for the purpose of making changes and resolving questions
relating to Plans and paychecks;
(iv) Provision of reports within fifteen (15) days after the last
day of each calendar month showing its performance compared to the performance
standards established in Section 2.1.3.2 c(i) - (v), in form reasonably
satisfactory to Subscriber.
(v) Provision of standardized reports, on a mutually determined
basis, as reasonably requested by Subscriber, including, without limitation,
reports regarding payroll, turnover, employee rosters; and provision of
specialized forms, in form and content reasonably requested by Subscriber,
subject to the capacity of the mutually determined systems to produce requested
formats, prepared and delivered in a reasonably prompt timeframe;
(vi) Record Maintenance - maintain accurate and complete
personnel files for active and terminated employees to the extent such
information is provided by Subscriber, including all information required by
state and federal law and by the policies and procedures of Subscriber,
including, but not limited to, information relating to performance appraisals,
I-9 forms, records of disciplinary action, staff certification and licensure;
ensure compliance with applicable records retention
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requirements; respond to Subscriber's requests for copies of such records in a
reasonably prompt timeframe and/or as reasonably requested by Subscriber;
(vii) Database Management - maintain accurate and complete
employee information and history on human resource information system, based on
information provided by Subscriber.
4.4 Additional Responsibilities. NovaCare may assume additional
responsibilities not covered by Sections 4.1-4.3 above. Any such additional
responsibilities shall be provided pursuant to a written addendum to this
Agreement, executed by both parties, setting forth the services to be provided
and the fee for such services.
4.5 Year End Reporting. Notwithstanding an earlier expiration of the
term of this Agreement, NovaCare shall be responsible for all calendar year-end
reporting that is required of Subscriber, consistent with Subscriber's and
NovaCare's past practices.
5. Rights, Duties and Obligations of Subscriber.
5.1 Supervision of Employees. Subscriber will be responsible for
supervision and direction of Worksite Employees in carrying out the work of
Subscriber's business, and shall provide all instrumentalities (including
uniforms, tools, equipment and other supplies) necessary to the performance of
job functions.
5.2 Reports of Hours Worked. Subscriber shall (i) maintain accurate
records of actual time worked, (ii) make accurate reports of time worked by
Worksite Employees to NovaCare in accordance with the requirements of the Fair
Labor Standards Act and any applicable similar state law, (iii) submit actual
time worked in a mutually determined format and (iv) verify the accuracy of such
reports. Subscriber shall maintain the records required to be kept under this
Section 5.2 for seven (7) years.
5.3 Employment Decisions. Any common-law employee of Subscriber shall
be deemed a Worksite Employee hereunder. Subscriber shall determine employment
eligibility of all Worksite Employees. If a Worksite Employee is required to
possess or maintain a license, or to be supervised by a supervisor who is
required to possess or maintain a license, Subscriber shall be responsible for
verifying such licensure or providing such required supervision. In taking any
adverse action with respect to the pay, conditions of employment or employment
status of a Worksite Employee (an "Adverse Action"), Subscriber shall comply
with applicable law governing employment. Worksite Employees who are supervisory
employees shall act in that capacity in compliance with applicable law.
Supervisors' actions alleged to be in violation of law are outside the scope of
their responsibility as NovaCare employees and supervisory employees acting in
violation of law shall be deemed to be acting solely as agents of Subscriber.
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5.4 Employee Benefit Plans. Subscriber shall not adopt, establish,
maintain, operate or contribute to any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended,
without the express written consent of NovaCare.
5.5 Financial Controls. Subscriber accepts sole responsibility for
accounting and other financial control policies (and fidelity bonding
requirements) applicable to Worksite Employees or their conduct.
5.6 Compliance With Law. Subscriber accepts sole responsibility for
compliance with the following provisions of law applicable to Worksite
Employees:
(i) the Occupational Safety and Health Act (OSHA) and related or
similar federal, state or local regulations and the employer's common law duty
to supervise the worksite and provide a safe working environment;
(ii) government contracting requirements under a) Executive Order
11246, b) the Vocational Rehabilitation Act of 1973, c) the Vietnam Era
Veterans' Readjustment Assistance Act of 1974, d) the Walsh-Healy Public
Contracts Act, e) the Davis-Bacon Act, f) the Service Contract Act of 1965, and
g) any and all similar, related, or like federal, state, or local laws,
regulations, ordinances, and statutes;
(iii) Worker Adjustment and Retraining Notification Act ("WARN");
(iv) laws affecting assignment of and ownership of intellectual
property rights including, but not limited to, inventions, whether patentable or
not, and patents resulting therefrom, copyrights and trade secrets;
(v) the Immigration Reform and Control Act of 1986, except as
otherwise provided in Section 6.1(iv); and
(vi) the Fair Labor Standards Act, Title VII of the Civil Rights
Act of 1964, as amended, the Family and Medical Leave Act, the Age
Discrimination in Employment Act, as amended, the Americans With Disabilities
Act (including provisions thereunder relating to Subscriber's premises), the
National Labor Relations Act and any other federal, state, county or local laws,
regulations, ordinances, and statutes which govern the employer/employee
relationship.
5.7 Safety. Subscriber shall report all accidents in which Worksite
Employees are injured immediately (by telephone within one working day of
Subscriber's knowledge of an injury, and in writing by fax within forty-eight
(48) hours) to NovaCare or NovaCare's designee. Subscriber shall cooperate in
any safety inspection or investigation of a worksite injury conducted by or on
behalf of NovaCare. Subscriber shall reasonably cooperate with NovaCare in
returning injured Worksite Employees to
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work in available modified-duty positions and in making reasonable
accommodations under applicable disability laws, subject to receipt of an
appropriate medical release.
Where required by applicable state law, NovaCare shall retain a right of
direction and control over the management of safety, risk and hazard control
involving Worksite Employees. However, liability for employee safety is a
responsibility of Subscriber, who controls the worksites and their business
operations. Subscriber acknowledges that it is responsible for maintaining a
safe working environment, providing proper training in compliance with federal
or state law or regulation, and establishing and maintaining such safety
programs, safety policies, and safety committees as may be required by law.
NovaCare, NovaCare's workers' compensation and liability insurance carriers or
their assignees have the right to survey the Subscriber's worksites to look for
unsafe conditions or unsafe acts which may lead to accidents. However, the
retention of such right by NovaCare does not relieve Subscriber of any
obligations that it has pursuant to the federal Occupational Safety and Health
Act (OSHA) or any other federal, state or local law intended to provide
employees at Subscriber's worksites with a safe work environment.
5.8 COBRA. NovaCare shall be responsible for administering continued
health care coverage required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA Coverage") to each employee and
former employee (and their dependents) of the Subscriber who is eligible for
such COBRA Coverage on the effective date hereof. Subject to Section 7.1 and
Subscriber's reimbursement obligation (as set forth below), upon termination of
this Agreement, NovaCare shall administer COBRA Coverage for each Worksite
Employee, former Worksite Employee, their dependents and any individual entitled
to COBRA Coverage under the preceding sentence (collectively, the "COBRA
Participants") who are eligible for such coverage.
5.9. Provision of Information. Subscriber shall provide to NovaCare
such true and accurate information as NovaCare may request as necessary to
comply with requirements of law with respect to Subscriber's ownership and
organizational structure and compensation packages of its senior executives and
structure and operation of benefit plans offered to Worksite Employees by
Subscriber.
5.10. Changes in Policies and Procedures. Subscriber shall negotiate
with NovaCare all changes to policies, processes and procedures affecting all
services provided by NovaCare under this Agreement. NovaCare shall effect such
changes on mutually agreed upon time frames, staffing and costs.
6. Rights, Duties and Obligations of NovaCare.
6.1 Compliance With Law. Provided that Subscriber has given to
NovaCare all information required hereunder, NovaCare accepts sole
responsibility for compliance with the following provisions of law applicable to
Worksite Employees:
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(i) all rules and regulations governing the reporting, collecting
and payment of federal and state payroll taxes on wages paid under this
Agreement, including, but not limited to, a) federal income tax withholding
provisions of the Internal Revenue Code, b) state and/or local income tax
withholding provisions, if applicable, c) Federal Insurance Contributions Act
(FICA), d) Federal Unemployment Tax Act (FUTA), and e) applicable state
unemployment tax provisions;
(ii) except as provided below, applicable workers' compensation
laws including, but not limited to, a) procuring workers' compensation
insurance, b) completing and filing all required reports, and c) administering,
managing, and otherwise processing claims and related procedures provided that
Subscriber agrees to reimburse NovaCare for any monies found due, whether by
audit or otherwise as a result of any workers' compensation classification
information provided by Subscriber to NovaCare;
(iii) Internal Revenue Code Section 4980B, subject to the
provisions of Section 5.8;
(iv) Section 1324A(b) of the Immigration Reform and Control Act
of 1986, assuming that Subscriber has provided to NovaCare all necessary and
accurate documentation required by such law;
(v) the Consumer Credit Protection Act, Title III; and
(vi) the Fair Labor Standards Act, 29 U.S.C. Sections 201 et
seq., based solely on information provided by Subscriber pursuant to Section 5.2
hereof.
7. Effect of Termination.
7.1 COBRA. In the event of termination of this Agreement, the
Subscriber shall immediately provide coverage under a "group health plan" (as
defined in Section 4980B(g)(2) of the Code) to all Worksite Employees, former
Worksite Employees, and their dependents who were eligible for coverage under
any NovaCare group health plan immediately before such event. The Subscriber's
group health plan provided under the preceding sentence shall not contain any
exclusion or limitation with respect to any pre-existing condition applicable to
any Worksite Employee, former Worksite Employee or their dependents.
7.2 Accrued Pay. If this Agreement is terminated and if the affected
employees are entitled to the payment of any accrued bonus, vacation, sick or
personal leave, Subscriber shall be liable for the payment thereof and will make
such payments directly to NovaCare. If, however, Subscriber continues to employ
such affected employee(s) after termination of this Agreement, the Subscriber
shall be liable to the employee(s) for same and NovaCare shall have no
obligation therefor.
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7.3 Survival. The indemnification, contribution duty to cooperate and
limitation of liability provisions of this Agreement shall survive the
expiration of this Agreement or other termination of this Agreement
indefinitely.
7.4 Duration of Obligations.
7.4.1 Upon the termination of this Agreement for any reason, the
parties shall continue to have the following obligations through and including
the termination date:
(i) NovaCare shall have the obligation for wages and
benefits payable to the employees through and including the termination date. If
NovaCare makes any payment, authorized by Subscriber or otherwise required by
law, to any of the employees after this Agreement has been terminated, NovaCare
shall be entitled to full reimbursement for such expenditures;
(ii) Except as otherwise provided herein, all obligations of
NovaCare under this Agreement to maintain workers' compensation insurance
coverage and health care coverage on behalf of the Worksite Employees shall
cease, effective as of the termination date. All such employees shall be
immediately informed by Subscriber that they are no longer covered by NovaCare's
workers' compensation policy. Subscriber shall immediately assume all federal,
state and local obligations of an employer to the employees which are not in
conflict with state or federal law, and shall immediately assume full
responsibility for providing workers' compensation coverage. NovaCare shall
immediately be released from such obligations as are permitted by law, except
that NovaCare shall remain responsible for the cost of claims for workers'
compensation incurred prior to the date of termination. It is the intent of the
parties that, to the extent allowed by law, they be placed in their respective
positions immediately before their entry into this Agreement in the event of a
termination or Subscriber's failure to pay NovaCare; and
(iii) Subscriber shall have the obligation to pay all fees
payable in accordance with the provisions of this Agreement, which are
attributable to the period ending on the termination date.
7.4.2 Upon any termination of this Agreement by Subscriber other
than (a) pursuant to the provisions of Section 2.3.2 or (b) in accordance with
Section 12.14 herein, in addition to the obligations set forth in Section 7.4.1,
Subscriber shall have the obligation to pay to NovaCare such amount as is
necessary so that Subscriber fully complies with the Minimum Fee Guarantee set
forth in Section 3.1.6 herein; provided, that any such payment shall be made in
equal monthly installments over the remaining period ending June 30, 2003.
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8. Indemnification.
8.1 Indemnification by Subscriber. Subscriber agrees to indemnify,
hold harmless, protect and defend NovaCare, its subsidiaries and affiliates and
each of their officers, directors, agents, attorneys and employees from any
claims, expenses (including court costs and attorneys' fees), damages and
liabilities (including severance payments to Worksite Employees) (collectively
hereinafter referred to as "Damages"), from claims, actions, suits, judgments or
settlements arising out of negligence, malpractice, tortious conduct, violation
of any statute, law, or regulation, criminal or dishonest activity by any
Worksite Employee, product liability related to products manufactured or
distributed by Subscriber, Subscriber's breach of any of its obligations or
warranties under this Agreement, or any action by Subscriber or its agents which
may result in a violation of any law or regulation, including, but not limited
to, Damages allegedly arising out of an Adverse Action or out of worksite
conditions or actions of any kind. If such indemnification is for any reason not
available or insufficient to hold NovaCare harmless, Subscriber agrees to
contribute to the losses involved in such proportion as is appropriate to
reflect the relative benefits received (or anticipated to be received) by
Subscriber and by NovaCare with respect to the matters contemplated by this
Agreement or, if such allocation is judicially determined to be unavailable, in
such proportion as is appropriate to reflect not only such relative benefits,
but also other equitable considerations such as the relative fault of
Subscriber, on the one hand, and of NovaCare, on the other hand; provided,
however, that Subscriber shall be responsible for all losses which in the
aggregate are in excess of the amount of all Fixed Fees (as adjusted) received
by NovaCare from Subscriber in connection with the services to be provided
hereunder during the term of this Agreement. NovaCare shall give Subscriber
prompt written notice of any claim for which indemnification will be sought
hereunder, shall cooperate in the investigation and defense of any such claim
and shall not settle or compromise any such claim without the approval of
Subscriber unless Subscriber fails to provide evidence of ability to pay a
judgment in excess of the proposed settlement amount.
8.2 Indemnification by NovaCare. NovaCare assumes responsibility for
the payment of wages to the Worksite Employees without regard to payments by
Subscriber to NovaCare, although in doing so NovaCare does not waive or limit
any claim against Subscriber. NovaCare agrees to indemnify, hold harmless,
protect and defend Subscriber, its subsidiaries and affiliates and each of their
officers, directors, agents, attorneys and employees from and against any
claims, expenses (including attorneys' fees and court costs), damages and
liabilities from claims, actions, suits, judgments or settlements arising out of
NovaCare's breach of its obligations or warranties under this Agreement or any
action by NovaCare or its agents or employees (other than Worksite Employees)
which may result in a violation of any law or regulation, except violations
resulting from conduct of Worksite Employees or worksite conditions. Subscriber
shall give NovaCare prompt written notice of any claim for which indemnification
will be sought hereunder, and shall cooperate in the investigation and defense
of any such claim and shall not settle or compromise any such claim without the
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approval of NovaCare. Where Subscriber has followed or complied with a request
or recommendation of NovaCare or otherwise properly relied on information
supplied by NovaCare, it shall be relieved of responsibility for back pay and
damages for such actions (unless Subscriber has failed to comply with its
obligations hereunder to provide accurate information to NovaCare) and NovaCare
shall indemnify and hold Subscriber harmless from and against any and all
liabilities arising therefrom.
8.3 Subrogation. Each party hereby waives any claim in its favor
against the other party by way of subrogation or indemnification which may arise
during the term of this Agreement for any and all loss of or damage to any of
its property, or for bodily injury or death, which loss, damage, or bodily
injury or death is covered by insurance to the extent that such loss or damage
is recovered under such policies of insurance as required herein. The
subrogation and indemnification concept set forth in this provision is intended
to apply only to insurance matters, and nothing in this provision is intended to
alter the indemnification rights set forth elsewhere in this Agreement. Each
party shall assure that its insurance policies contain provisions authorizing
waiver of subrogation consistent with this Section 7.3.
9. Representations and Warranties.
9.1 Fair Labor Standards Act. Subscriber agrees not to withhold a
payment to NovaCare absent NovaCare's express permission, or in any manner, or
by any device, act in violation of, cause, or seek to cause a violation of any
applicable federal, state or local law, ordinance, or regulation pertaining to
the terms, conditions, and services of this Agreement. Subscriber further
warrants that it shall not make any taxable payment of any kind, except
profit-sharing or pension plan distributions pursuant to the terms of a
qualified plan, to any employee covered by this Agreement, and that any such
payment shall be a breach of this Agreement, and at the election of NovaCare,
grounds for immediate termination of this Agreement.
9.2 Employment Matters. Subscriber warrants that there are no
collective bargaining agreements binding upon Subscriber or affecting Worksite
Employees, and that there are no pending governmental investigations or any
lawsuit material in nature related to Worksite Employees, the working conditions
of the Worksite Employees, the products or services produced or provided by
Worksite Employees or any other matters affecting the performance of NovaCare
under this Agreement except as otherwise disclosed to NovaCare. Subscriber
warrants that all hazardous materials, if any, on its premises are maintained,
stored and disposed of in accordance with applicable law. Subscriber agrees to
provide any and all protective safety equipment required for safe performance of
job duties or required under local, state or federal law.
9.3 Primary Obligor for Worksite Employee Compensation.
Notwithstanding anything else in this Agreement to the contrary, the parties
agree that Subscriber, and not NovaCare, shall have the primary responsibility
for any and all compensation due to Worksite Employees.
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9.4 APB Opinion No. 25. The parties agree, and each represent and
warrant to the other, that only Subscriber may use the rules of APB Opinion No.
25 to account for the equity compensation paid to a Worksite Employee.
9.5 Confidentiality. NovaCare and Subscriber each acknowledge and
agree that it may obtain knowledge of "confidential information" as hereinafter
defined concerning the other party. As used herein, "confidential information"
means any information, (including, without limitation, manuals, trade secrets,
protocol, methods, formula, pattern, device, plans, process, drawings, designs,
specifications, schematics, prototypes and other compilation of information or
technical know-how) which is, or is designed to be, used in the business of such
party, and is private or confidential and is not generally known or available to
the public. Subscriber and NovaCare each agree that it will not, either during
the term of this Agreement or thereafter until the expiration of a period of ten
(10) years following the termination of this Agreement, use or disclose any such
confidential information except as otherwise specifically contemplated in this
Agreement.
10. Workers' Compensation. NovaCare shall provide workers' compensation
insurance for Worksite Employees in compliance with applicable law. Workers
performing services for Subscriber not covered by this Agreement and not on
NovaCare's payroll shall not be covered by NovaCare's workers' compensation
insurance. NovaCare will not provide workers' compensation coverage to any
employee for whom Subscriber is not reporting hours of payroll. Subscriber
further agrees to require any independent contractor it utilizes to provide
evidence of workers' compensation coverage before the independent contractor
commences work at the worksite. Subscriber acknowledges that NovaCare's workers'
compensation carrier or NovaCare is entitled to periodically audit the employee
classification lists for each Subscriber location to make sure that employees
are classified properly for workers' compensation purposes. In the event that
during such an audit, or at any other time, NovaCare finds that Worksite
Employees have been misclassified and such misclassification resulted from
information supplied to NovaCare by Subscriber, Subscriber will promptly
reimburse NovaCare, upon invoice, for charges which otherwise would have been
payable by Subscriber had such employee been properly classified. NovaCare
retains the responsibility for the management of workers' compensation claims,
claim filings and related procedures. Subscriber agrees to cooperate with
NovaCare in that regard, including in regard to the notification of injuries
required by this Agreement or by law.
11. Insurance. During the Initial Term of this Agreement and any Renewal
Term, Subscriber shall obtain and maintain the following types of insurance:
11.1 Automobile. Subscriber shall obtain and maintain automobile
insurance for all owned, non-owned, and hired vehicles used in connection with
the work performed on its premises or in connection with its business, and will
cause its insurance carrier to issue a Certificate of Insurance evidencing same
to NovaCare, naming
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NovaCare as an additional named insured and allowing not less than thirty (30)
days' notice of cancellation or material change. The policy shall insure against
liability for bodily injury and property damage, with a minimum combined single
limit of Five Hundred Thousand Dollars ($500,000) and Uninsured Motorist or PIP
equivalent coverage of at least the minimum limits required by the State where a
"no fault" law shall apply.
11.2 General Liability. Subscriber shall obtain and maintain general
liability insurance, and cause its insurance carrier to issue a Certificate of
Insurance evidencing same to NovaCare, naming NovaCare as an additional named
insured and allowing not less than thirty (30) days' notice of cancellation or
material change. The minimum requirement shall be One Million Dollars
($1,000,000) combined single limit, Three Million Dollars ($3,000,000) aggregate
limit, including, but not limited to, where applicable, premises, operations,
products, completed operations, contract and broad form property damage,
independent contractors, personal injury, host liquor, and full liquor
liability. If Subscriber renders professional services, it shall obtain and
maintain throughout the term, and any succeeding terms of this Agreement,
professional liability coverage as applicable, and will cause its insurance
carrier to issue a Certificate of Insurance evidencing same to NovaCare allowing
not less than thirty (30) days' notice of cancellation or material change.
Unless otherwise agreed to, such policy shall have a combined single limit of
not less than One Million Dollars ($1,000,000), Three Million Dollars
($3,000,000) aggregate limit.
Subscriber agrees that NovaCare shall not provide any general liability
insurance coverage for products liability, completed operations or professional
liability for any Worksite Employee or the Subscriber. Subscriber shall further
agree that NovaCare shall have no obligation to provide any form of automobile
insurance coverage on behalf of any Worksite Employee or for Subscriber.
12. Miscellaneous.
12.1 Third Party Rights. This Agreement is intended solely for the
mutual benefit of the parties hereto and does not create any rights of any kind
in a third party. Each party hereto reserves the right and from time to time to
assign its rights, duties and obligations hereunder to any affiliate, provided
that the assigning party shall guarantee the performance and liability of any
such affiliate. Any such assignment may be limited to a portion of such party's
obligations arising in one or more jurisdictions.
12.2 Limitation of Liability. NovaCare's liability for actual damages
from any cause whatsoever, shall be limited to the fees (other than Payroll
Fees) paid by Subscriber with respect to the preceding calendar year under this
Agreement (or, if this Agreement shall have been in effect for less than twelve
months, the foregoing limitation shall be based on the fees paid by Subscriber
to NovaCare relating to the previous twelve-month period pursuant to the
predecessor agreement between the parties, as applicable to the employees of the
Support Services Group). This limitation will
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apply, regardless of the form of action, whether in contract or tort, including
negligence. This limitation will not apply to claims by either party for bodily
injury or damage to real property or tangible personal property for which the
other party may be legally liable. In no event will NovaCare be liable for any
lost profits, lost savings, incidental damages or consequential damages, even if
NovaCare has been advised of the possibility of such damages.
12.3 Integration. This Agreement constitutes the entire agreement
between the parties with regard to the subject matter hereof and supersedes any
and all agreements (including the Initial Agreement), whether oral or written,
between the parties with respect to its subject matter.
12.4 Waiver. Failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement will not be construed as a waiver of any subsequent breach nor affect
the effectiveness of this Agreement, nor any part thereof, nor prejudice either
party as regards to any subsequent action.
12.5 Governing Law. This Agreement shall be subject to the laws of the
Commonwealth of Pennsylvania.
12.6 Dispute Resolution.
12.6.1 Arbitration. The parties shall attempt amicably to resolve
disagreements by negotiating with each other. In the event that the matter is
not amicably settled through negotiation, any controversy, dispute or
disagreement arising out of or relating to this Agreement (a "Controversy")
shall be resolved exclusively by binding arbitration, which shall be conducted
by a single arbitrator in the Philadelphia, PA area, in accordance with the
J-A-M-S/ENDISPUTE Streamlined (in the case of a dispute within the scope of the
Streamlined Rules and Procedures) or Comprehensive Arbitration Rules and
Procedures (the "Rules"). The parties agree that notwithstanding anything to the
contrary contained in the Rules, the arbitrator shall not award consequential,
exemplary, incidental, punitive or special damages.
12.6.2 Procedure. It is agreed that if any party shall desire
relief of any nature whatsoever from any other party as a result of any
Controversy, such party will initiate such arbitration proceedings within a
reasonable time, but in no event more than twelve (12) months after the facts
underlying said Controversy first arise or become known to the party seeking
relief (whichever is later). The failure of such party to institute such
proceedings within said period shall be deemed a full waiver of any claim for
such relief. The parties shall bear equally all costs of said arbitration (other
than their own attorney's fees and costs). The parties agree that the decision
and award of the Arbitrator shall be final and conclusive upon the parties, in
lieu of all other legal, equitable (except as provided in 12.5.3. below) or
judicial proceedings between them, and that no appeal or judicial review of the
award or decision of the Arbitrator shall be taken,
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but that such award or decision may be entered as a judgment and enforced in any
court having jurisdiction over the party against whom enforcement is sought.
12.6.3. Equitable Relief. The parties recognize that irreparable
injury may result from a breach of this Agreement and that money damages may be
inadequate to fully remedy the injury. Therefore, either party may, in any such
instance, seek and obtain from a court of competent jurisdiction one or more
preliminary or permanent orders designed to maintain the status quo ante pending
arbitration by (i) restraining and enjoining any act that would constitute a
breach or (ii) compelling the performance of any obligation that, if not
performed, would constitute a breach. Any relief awarded under this paragraph
shall be dissolved upon issuance of the Arbitrator's decision and order.
12.7 Subscriber Intellectual Property Rights. Subscriber shall own any
and all intellectual property rights incident to any and all process, products,
inventions and discoveries that are created or invented by a Worksite Employee
and who was directed by Subscriber to create or develop such process, product,
discovery or invention. Subscriber shall bear any and all costs associated with
any copyrights, trademarks or patents that Subscriber chooses to obtain to
protect Subscriber's intellectual property rights.
12.8 Duty to Cooperate. In the event that an employee or a government
agency or entity files any type of claim, lawsuit or charge against NovaCare,
Subscriber or both, alleging a violation of any law or failure to do something
which was otherwise required by law, Subscriber and NovaCare mutually agree to
cooperate with each other in the defense of any such claim, lawsuit or charge.
NovaCare and Subscriber will make available to each other upon request any and
all documents that either party has in its possession which relate to any such
claim, lawsuit or charge. However, neither party shall have the duty to
cooperate with the other if the dispute is between the parties themselves, nor
shall this provision preclude the raising of cross claims or third party claims
between Subscriber and NovaCare.
12.9 Severability. Should any term, warranty, covenant, condition, or
provision of this Agreement be held to be invalid or unenforceable, the balance
of this Agreement shall remain in force and shall stand as if the unenforceable
part did not exist. The captions in this Agreement are provided for convenience
only and are not part of the terms and conditions of this Agreement.
12.10 Modification and Implementation. Any modifications to this
Agreement must be in writing and executed by NovaCare and Subscriber to be
enforceable.
12.11 No Partnership. Nothing set forth herein shall be deemed to
create a partnership or joint venture between Subscriber and NovaCare and no
fiduciary duty shall arise from the relationship created herein.
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12.12 Notification of Termination to Employees. NovaCare will notify
all Worksite Employees covered by this Agreement of that status after Subscriber
provides the names of such persons to NovaCare. NovaCare will also provide each
Worksite Employee with any required notice pursuant to applicable state law or
such person's status under this Agreement and shall obtain from such person any
required acknowledgment of such status. If for any reason this Agreement is
terminated, NovaCare will notify all Worksite Employees of whom it is aware of
the termination of this Agreement and Subscriber shall also notify all Worksite
Employees of the termination of this Agreement and shall inform them that they
are no longer covered by NovaCare's benefits or workers' compensation policy.
12.13 Real Property Leases. As soon as reasonably practicable after
the date hereof, Subscriber and NovaCare shall use their best efforts to cause
all "Subscriber Leases" (as defined herein) to be assigned or replaced, as
applicable, so that NovaCare retains the obligations under such leases, directly
with the landlord, and that Subscriber is released therefrom. For purposes
hereof, a "Subscriber Lease" shall mean any and all real estate leases covering
premises used by NovaCare in the operation of its business, for which Subscriber
has a leasehold interest, whether as landlord, tenant, sublessor or
sub-sublessor.
12.14 Assignment. Each party shall have the right to assign its rights
and obligations under this Agreement to any successor to all or substantially
all of its assets or business.
12.15 Intention of the Parties. The intention of the parties with
respect to allocation between them of rights, duties and obligations is as set
forth in this Agreement. To the extent that the law of any state requires a
different form of agreement to effect the intention of the parties, the parties
agree to negotiate in good faith and to execute separate agreements applicable
to such state.
12.16 Counterparts. This Agreement may be signed in one or more
counterparts, each of which when executed shall be deemed an original and
together shall constitute one and the same instrument
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NOVACARE, INC., NOVACARE EMPLOYEE
A Delaware corporation SERVICES, INC.
- -------------------------------- ---------------------------------
Signature Date Signature Date
- -------------------------------- ---------------------------------
Printed or Typed Name Printed or Typed Name
- -------------------------------- ---------------------------------
Title Title
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Schedule 3.1.2
Benefits/Risk Management Fees
FOR THE PERIOD ENDING DECEMBER 31, 1999:
- ----------------------------------------
Section 3.1.2 Estimated Costs: $455,000
Section 3.1.2 Fixed Fee: $227,500
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Schedule 3.1.3
Administrative Fees
FOR THE PERIOD ENDING DECEMBER 31, 1999:
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Section 3.1.3 Estimated Costs: $315,000
Section 3.1.3 Fixed Fee: $157,500
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Schedule 3.1.4
Additional Responsibilities Fee
FOR THE PERIOD ENDING DECEMBER 31, 1999:
- ----------------------------------------
None
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