Exhibit 10.23
EMPLOYER SERVICE AGREEMENT
DELAWARE AND MARYLAND
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Certain confidential information has been omitted from this Exhibit 10.23
pursuant to a confidential treatment request filed separately with the
Securities and Exchange Commission. The omitted information is indicated by the
symbol "***" at each place in this Exhibit 10.23 where the omitted information
appeared in the original.
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OUTSOURCING AGREEMENT
This Employer Services Agreement (hereinafter referred to as "AGREEMENT"), is
entered into as of May 17, 2004, (the "Effective Date") by and between ALS,
L.L.C., a Florida limited liability company or one of its wholly owned
subsidiaries qualified to do business in the States of Delaware and Maryland,
with principal offices located at 27 North Summerlin Avenue, Orlando, Florida
32801 (hereinafter referred to as "ADVANTAGE"), and STRATUS Services Group,
Inc., a Delaware corporation, and all affiliates thereof, including but not
limited to those entities having offices located at 500 Craig Road, Suite 201,
Manalapan, New Jersey 07726 (hereinafter collectively referred to as "STRATUS").
RECITALS:
This AGREEMENT is based upon the following facts and circumstances:
A. Whereas, ADVANTAGE is engaged in the business of providing outsourcing
services to client companies;
B. Whereas, STRATUS is engaged in the business of providing outsourcing services
to its client companies;
C. Whereas, STRATUS wishes to utilize ADVANTAGE's outsourcing services for its
own permanent employees and for any and all temporary employees that it may
require to fulfill its own contractual commitments; and,
D. Whereas, ADVANTAGE is willing to provide the outsourcing services sought by
STRATUS;
It is hereby agreed as follows:
1. TERM OF AGREEMENT
The term of the AGREEMENT shall be a minimum of one (1) year. However,
STRATUS may notify ADVANTAGE 90 days prior to the first year anniversary of this
agreement that it intends to terminate the agreement. Thereafter either party
may terminate this AGREEMENT by providing 90 days prior written notice of
termination to the other party.
2. INDEPENDENT CONTRACTOR RELATIONSHIP
STRATUS is hiring ADVANTAGE as an independent employee management
contractor, and nothing herein is intended to nor shall create the relationship
of employee, partner, joint venturer or associate, or any other relationship
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between STRATUS and ADVANTAGE, other than that of principal and independent
contractor.
ADVANTAGE is an independent service company. Certain employees assigned to
ADVANTAGE will be "Contract" employees ("Contract" Employees are Advantage
Employees providing a service to STRATUS) of STRATUS and STRATUS's clients will
remain under the technical and business directions of STRATUS and/or STRATUS's
clients at all times.
3. TERMINATION
In the event of a material breach of any term of this AGREEMENT, either
party may serve notice to terminate this AGREEMENT upon two (2) business days
written notice to the party in breach thereof. For any material breach of any
obligations other than payment obligations, the breaching party will have thirty
(30) days to cure the breach after receipt of such notice. For any material
breach of payment obligations, the breaching party shall have two (2) business
days to cure same after receipt of notice. STRATUS will pay $1000.00 per day of
payment obligation breach, or 24% annual interest on the outstanding amount,
compounded daily or maximum allowed by law, whichever is higher.
4. GENERAL DUTIES OF STRATUS
STRATUS shall be under no obligation to assign any specific number of
staff/employees to ADVANTAGE, except as provided on Exhibit A attached hereto,
which may be amended from time to time by mutual agreement of the parties.
STRATUS (or ADVANTAGE at ADVANTAGES sole discretion) shall recruit,
interview, test, drug screen, select and assign all applicants consistent with
its current practices; provided, however, that STRATUS must follow the ADVANTAGE
Applicant Acceptance Process, set forth on Exhibit B attached hereto, and the
ADVANTAGE Risk Management Policies and Procedures, set forth on Exhibit C
attached hereto.
STRATUS will provide payroll data in the agreed upon format, "Exhibit C",
including hours worked, pay rates, workers compensation classification, new hire
information, per diem, if any, and expenses, if any, for each contract employee.
In general, said data is to be transmitted to ADVANTAGE no later than the third
workday following the end of a pay period, by way of computer e-mail; however,
ADVANTAGE acknowledges that there may be circumstances from time-to-time when
late time cards will be submitted and payroll will need to be processed
immediately. ADVANTAGE will be responsible for administration of health
insurance and payment to health insurance providers, and STRATUS will indemnify
ADVANTAGE and hold ADVANTAGE harmless from any claim related to such health
insurance responsibilities, provided however only to the extent that STRATUS was
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negligent in supplying required information. STRATUS will provide to ADVANTAGE a
list of all required payroll deductions..
All employees shall fill out STRATUS, and not ADVANTAGE, time cards.
However, to the extent a notation is required by applicable law, such time cards
may be noted to indicate such STRATUS employees are "Outsourced Employees", or
similar terminology.
5. GENERAL DUTIES OF ADVANTAGE
ADVANTAGE will process deductions from payroll above for health insurance
contributions and any applicable wage garnishments. Deductions made due to any
applicable garnishments shall be paid directly to the appropriate garnishing
party.
ADVANTAGE will process payroll described above and will have payroll
checks for contract employees delivered to STRATUS no later than two days
following receipt of payroll data supplied by STRATUS, except in certain limited
circumstances, when time cards are late, as noted in Section 4 above.
ADVANTAGE will withhold and pay to all appropriate governmental agencies
all FICA, SUI, FUI and other applicable taxes from the compensation of all
employees, which are the subject of this AGREEMENT, and will promptly provide
STRATUS of evidence of payment of same.
ADVANTAGE will, to the extent necessary, recruit and employ the
appropriate on-site and staff personnel to assist in its performance of its risk
management functions hereunder, and to control the employee workplace as set
forth in more detail in Exhibit C hereto.
6. MUTUAL OBLIGATIONS OF STRATUS AND ADVANTAGE
ADVANTAGE and STRATUS will conform to all applicable local, state and
federal regulations. Any fines, costs or penalties incurred by ADVANTAGE as a
result of improper hiring practices committed by STRATUS, including but not
limited to hiring undocumented workers, will be paid for by STRATUS.
STRATUS and ADVANTAGE will each ensure that all employment decisions made
by it in connection with this AGREEMENT will be in compliance with all
applicable local, state and federal employment laws and regulations.
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7. COMPENSATION TO ADVANTAGE
ADVANTAGE will pass a mark-up per the cost schedule attached as Exhibit
"A" to the direct labor cost (straight time and overtime) to determine the fixed
hourly billing rate. The fixed hourly billing rate includes employee labor rate,
cost of maintaining proper payroll and accounting records, Workers' Compensation
Insurance, Federal and State Unemployment Insurance, and other applicable
payroll taxes, overhead and general and administrative cost and margin.
The fixed hourly billing rate shall be subject to reduction or increase
upon a reduction or increase of the workers' compensation insurance, federal and
state unemployment insurance rate, and any other applicable payroll tax rates to
ADVANTAGE which are the basis of such fixed hourly billing rate, upon the
effective dates for such rate changes. However, if ADVANTAGE rates increase more
than 15%, then with 90 days notice prior to the first year anniversary of this
Agreement or thereafter, the parties agree to renegotiate this Agreement in good
faith.
8. INVOICING
ADVANTAGE's invoices to STRATUS will be rendered weekly. ADVANTAGE's billings to
STRATUS shall be in ADVANTAGE's standard format, which is set forth on Exhibit D
attached hereto, the general form of which STRATUS hereby acknowledges. Invoices
shall be billed directly to STRATUS and not to STRATUS' clients. Stratus will
directly invoice its own client. Stratus shall, upon receipt of each ADVANTAGE
weekly invoice, forward a check representing fifty percent (50%) of the invoiced
amount, which shall be deposited by ADVANTAGE that Friday, and shall also
forward a separate check representing the remaining fifty (50%) of the invoiced
amount, which shall be deposited the following Tuesday. Once the offering is
closed all invoices will be paid on Friday of payday.
9. WORKERS' COMPENSATION INSURANCE
ADVANTAGE represents and warrants that at all times during the term of
this AGREEMENT it will maintain workers' compensation insurance in compliance
with the laws of the States of Delaware and Maryland for the benefit of the
ADVANTAGE employees outsourced hereunder. ADVANTAGE shall provide STRATUS with
the appropriate alternate employer endorsement on the Certificate of Insurance
referred to herein as Exhibit F.
Should at any point in time, ADVANTAGE receive a Notice of Cancellation of
such the workers' compensation insurance required under this AGREEMENT,
ADVANTAGE will immediately provide STRATUS with the same Notice of Cancellation
as it shall receive from its insurer.
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Upon final cancellation of the workers' compensation coverage required
under this AGREEMENT, this AGREEMENT shall automatically and immediately
terminate.
The failure by ADVANTAGE to notify STRATUS of the cancellation of the
workers' compensation insurance coverage required under this AGREEMENT will
constitute a material breach by ADVANTAGE hereunder.
An exemplar of such workers' compensation insurance coverage is set forth
in that certain certificate of insurance attached hereto as Exhibit F.
ADVANTAGE acknowledges that while this AGREEMENT is in effect, the need
may arise for STRATUS to provide to one or more of its clients, certificates of
insurance which evidence the existence of workers' compensation insurance
coverage for the benefit of the workers assigned to such client by STRATUS.
ADVANTAGE agrees to promptly furnish and/or assist in the issuance of such
certificates of insurance.
ADVANTAGE acknowledges that while this AGREEMENT is in effect, the need
may arise for STRATUS to provide to one or more of its clients, waivers of
subrogation pursuant to which the insurer providing workers compensation
insurance coverage to ADVANTAGE and/or STRATUS and/or the clients of STRATUS
agrees to waive and release its ability to pursue subrogation against one or
more individuals or entities relative to one or more employee injury claims
suffered by one or more workers assigned by STRATUS to such clients. ADVANTAGE,
shall act in good faith in its determination of whether a waiver of subrogation
will be provided and will promptly notify STRATUS of its decision.
10. PER CLAIM DEDUCTIBLE
STRATUS will be responsible for the costs of any work-related claims but
only up to a maximum of $500.00 per occurrence, but not to exceed $5,000.00
annually. Any dispute to ADVANTAGE billing under this section must be submitted
in writing within 30 days after receipt of billing by ADVANTAGE; or such dispute
shall be deemed waived, however, ADVANTAGE's ultimate determination will be
final.
11. PROTECTION OF EMPLOYEE RELATIONSHIPS:
Neither ADVANTAGE nor STRATUS will, without the written consent of the
other, which consent shall not be unreasonably withheld, solicit, recruit, or
otherwise approach for employment any employee of the other during the twelve
(12) months after such employee terminates ADVANTAGE outsourcing services.
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12. NON-SOLICITATION OF CLIENTS
ADVANTAGE and STRATUS acknowledge that by virtue of the business
transactions which are the subject of this agreement, they are likely to become
aware of information which would allow either of them to solicit the clients of
each other so that such clients might switch from ADVANTAGE to STRATUS, or vice
versa. In recognition thereof, ADVANTAGE and STRATUS agree that while this
agreement is in force, and for a period of two years after its termination,
neither ADVANTAGE nor STRATUS will engage in such solicitation.
ADVANTAGE provides outsourcing services for other staffing companies.
ADVANTAGE agrees to keep confidential, and not disclose Stratus client or
employee information to any competing entities of STRATUS. Providing of
outsourcing services to clients other than STRATUS is not considered
solicitation.
13. PROPRIETARY INFORMATION
ADVANTAGE will inform its corporate employees that private propriety
information of STRATUS and its clients may become available to them. ADVANTAGE
requires that its employees maintain confidentiality and will provide STRATUS
with a form of Confidentiality Agreement and a written certification of
compliance thereof upon request.
14. RECORDS AND ACCOUNTING
ADVANTAGE and STRATUS shall maintain complete and accurate accounting
records in accordance with generally accepted accounting practices (GAAP) to
substantiate all charges hereunder. Such records include payroll records, job
cards, attendance records and summaries. ADVANTAGE and STRATUS shall retain such
records for a period of seven (7) years from date of final invoice.
15. OBLIGATIONS UPON THE TERMINATION OF THIS AGREEMENT
Upon cancellation, breach by ADVANTAGE or expiration of this AGREEMENT,
ADVANTAGE shall return all STRATUS property and documents (other than documents
that it must retain for tax or other legal purposes for which it will allow
STRATUS to make copies, if necessary) in its possession to STRATUS, and STRATUS
shall make payment for all services rendered and expenses incurred.
Neither ADVANTAGE nor STRATUS shall, without the written consent of the
other party, which consent may not be unreasonably withheld, solicit, or
otherwise approach for employment existing staff of the other during the term of
this AGREEMENT, nor for a period of twelve (12) months thereafter.
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16. INDEMNIFICATION
ADVANTAGE and STRATUS each agree to indemnify, hold harmless and defend
the other, its employees, officers, directors, stockholders, agents and
representatives from any and all third party claims, debts, losses, actions,
liabilities and damages resulting from such indemnifying party's failure to meet
or perform any of its material obligations hereunder.
17. NOTIFICATIONS
Whenever any notice is required, it shall be sent by certified mail,
return receipt requested, and notice shall be deemed provided upon such deposit
in the U.S. mail. Notice addresses are as follows:
For ADVANTAGE:
ALS, L.L.C.
27 North Summerlin Avenue
Orlando, Florida 32801
Attention: Jay Wolin, CFO.
For STRATUS:
Stratus Services Group, Inc.
500 Craig Road, Suite 200
Manalapan, NJ 07726
Attention: Michael A. Maltzman, CFO
18. AMENDMENT
This AGREEMENT may be amended from time to time by mutual agreement of the
parties, executed and approved in the same manner as this AGREEMENT.
19. GOVERNING LAW
The laws of the State of Florida shall govern this AGREEMENT, without
regard to the conflict of law provisions thereof, and any dispute or controversy
arising out of or relating to this AGREEMENT or any breach hereof or the
termination of this AGREEMENT shall be settled by a court of law in the State of
Florida, unless an alternate jurisdiction is mutually agreed upon among the
parties. Judgment upon any award may be entered in any court having jurisdiction
thereof.
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IN WITNESS WHEREOF, the parties have made and executed this agreement as
of the date first written above.
STRATUS SERVICES GROUP, INC. ALS, L.L.C.
By: /s/ Joseph J. Raymond By: /s/ Jay Wolin
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Name: Joseph J. Raymond Name: Jay wolin
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Title: CEO Title: CFO
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ADDITIONAL CONSIDERATIONS
1. All payroll will be processed on the ASG TKO system with a mutually agreed
upon timetable for conversion provided all payroll records and other
relevant records comply with the requirements of all applicable SEC,
accounting, and other regulatory requirements for accounting records of a
publicly-held company, and further provided, that such system will convert
and be fed automatically into STRATUS' current Keynote system at the
expense of STRATUS. STRATUS will be able to use the TKO front office
software in all of its Delaware and Maryland locations for just a
licensing fee per user. At the end of the contract period STRATUS will
have an option to continue utilization of the TKO front-end system for a
mutually agreed upon fee.
2. STRATUS agrees not to make any attempt to circumvent this agreement by
forming a new company or any other means that would be detrimental to the
intent of this agreement.
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EXHIBIT A
Minimum Business Guarantee
ADVANTAGE will provide outsourced services as defined in the Employer Services
Agreement for all of STRATUS' Delaware and Maryland current and future client
relationships that are approved by ADVANTAGE for the entire term of the
agreement.
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[Advantage Services Group Logo]
EXHIBIT C
NEW CLIENT & INJURY PREVENTION PROCEDURES
NEW CLIENT:
Upon accepting a new client the New Client Information Form needs to be filled
out. The required sections are client information, job description, and risk
management. Worksite evaluation must be attached to new client form.
WORKSITE EVALUATION:
Levels A & B must be filled out on all new clients by an ASG and STRATUS
representative at the client facility being serviced. Level C is to be completed
when ASG management feels there is a need for further assessment of client site
due to injuries.
ASG has the right to reject any accounts that do not meet its' Risk Profile.
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Account Executive:_______________________________________ Branch Name/Number:__________________________
Client Name:_____________________________________________ New or Revised Information:__________________
Service Address:_________________________________________ Phone:_______________________________________
_________________________________________ Fax:_________________________________________
Contact Person/Title:____________________________________ Phone:_______________________________________
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JOB DESCRIPTION
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Job Title:_______________________________________________ Number of Staffers:__________________________
Job Description:_______________________________________________________________________________________
Job Type: Temporary:____ Temp-To-Hire:____ Direct Hire:____ Payrolling:____ Expected Start Date:____
Hours:________________________ Days:________________________ Staffer Reports To:_____________________
Length of Job:_________________ Week Ending:_________________ Pay Rate:__________ OT Rate:____________
Bill Rate:__________ OT Bill Rate:__________ OT after 8 or 40 hours:__________ Mark Up:______________
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LEGAL APPROVAL:
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Contract or Written Agreement: Yes___ No___ If Yes, document must be attached for review
by Legal before staffing.
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RISK MANAGEMENT APPROVAL:
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Company Governing Class Code:_________________ Business Type:__________________ W.C. Code:___________
Company Product:___________________________ Product Owned or Stored for Outside Vendors:______________
Worksite Evaluation Level A, B or C:______________ Date Completed:______________ W.C. Rate:____________
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INVOICING APPROVAL:
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Billing Attention:_______________________________________________ Phone:______________________________
Billing Address:_________________________________________________ Fax:________________________________
_________________________________________________
Special Billing Requirements: PO #_____________ Department:____________ Single Invoices:____________
Explanation of Special Billing Requirements:___________________________________________________________
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PAYMENT APPROVAL:
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Check Exchange: YES________ NO________ Due Upon Receipt: YES________ NO________
Net 30 Days: YES________ NO________ Other:_______________________________________________________
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CREDIT APPROVAL:
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Credit Rating: Satisfactory:___ Unsatisfactory:___ Approved:___ Rejected:___ Money in Advance Only:____
Reason:________________________________________________________________________________________________
Terms: Advance Payment:_____ Due Upon Receipt:_____ 30 Days:_____ Other:____________________________
Limits: $5,000__________ $10,000__________ $20,000__________ $50,000__________ Other________
Full Time Equivalent Allowed: Limit / Average Bill Rate / 40hours = FTE's per week Number of FTE's:____
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Account Executive:_______________________________________ Branch Name/Number:__________________________
New Client Approval :
ASG
By:
Title:
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RISK MANAGEMENT POLICIES & PROCEDURES
Injury Occurs
Step 1: Branch fills out Report of 1st Injury and sends to ASG Risk Manager;
who immediately notifies ASG East coast Representative of injury
Step 2: ASG Risk Manager determines if injury is first aid or a reportable
claim
Step 3: ASG East coast Representative and STRATUS Risk Manager visits
client site for accident investigation based upon severity of injury
Step 4: a) Reportable injury is added to injury spreadsheet by ASG Risk Manager
Or
b) First aid injury is added to injury spreadsheet by ASG Risk Manager
Step 5: Injury is reported to Insurer by ASG Risk Manager
Step 6: ASG Risk Manager notifies ASG East coast Representative and the STRATUS
Risk Manager
Step 7: If injury required hospitalization or potential hospitalization,
STRATUS Risk Manager or ASG Risk Manager, whoever is notified first,
will set up a conference call with ASG Risk Manager, the Branch
Manager, and ASG East coast Representative to determine strategy for
claim management, implementation of recommendations for facility, and
appropriate communication with client.
Step 8: ASG Risk Manager responds to requests for claim information from
Insurer including wage information, job description and work status,
and forwards copy to ASG East coast Representative and STRATUS Risk
Manager
Step 9: Any correspondence regarding the injury will be forwarded to ASG
Risk Manager, including subrogation and requests from the State,
OSHA, Insurer, client, or subpoenas
Step 10: ASG Risk Manager will send a summary of the correspondence to the
STRATUS Risk Manager and ASG East coast Representative
Step 11: ASG Risk Manager will confer with the ASG legal representative
(to be designated by ASG) and/or STRATUS Legal Department as required
Step 12: ASG Risk Manager manages claim and continues to report to the ASG
East coast Representative and STRATUS Risk Manager until the claim is
closed
Step 13: ASG Risk Manager, ASG East coast Representative, and STRATUS Risk
Manager will have a monthly East coast claims review to evaluate the
claims handling and claims status
LIGHT DUTY
Step 14: Must follow procedures outline in the Risk Control Services
Manual regarding Light Duty Requirements
MISCELLANEOUS
ASG will document full history of all claims and provide STRATUS with
regular loss runs relating thereto. ASG will maintain segregated loss
run history relative to all claims in Delaware and Maryland.
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EXHIBIT E
BILLING SCHEDULE
1. Hourly billing rates include FICA, SUI, FUI, Workers' Compensation
Insurance, General and Administrative costs and margin and any
applicable government imposed charges. The billing rate will be the
total of the established direct labor rate, multiplied by the
applicable mark-up percentage from Table 1 below:
2. ADVANTAGE will process deductions for health insurance and any
applicable support garnishments. STRATUS will forward all
garnishment information to ADVANTAGE. Deductions made due to any
applicable garnishments shall be paid directly to the appropriate
garnishing party. Any tax credits or incentives will benefit
ADVANTAGE only, and not be credited to STRATUS. ADVANTAGE shall not
be held liable for any unknown or late deductions due to STRATUS'
failure to provide information on a timely basis.
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