1
EXHIBIT 10.19
ADMINISTAFF(R)
CLIENT SERVICE AGREEMENT
THIS CLIENT SERVICE AGREEMENT ("the Agreement"), is made by and between
Administaff Companies, Inc., ("Administaff"), a Delaware corporation with its
principal place of business at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, and MHM EXTENDED CARE SERVICES, INC. ("Client").
I. PERSONNEL
Subject to the terms of this Agreement, Administaff agrees to furnish Client,
and Client agrees to engage from Administaff, employees for the job functions
listed in Exhibit A ("Confidential Census"). Client warrants that information
supplied to Administaff concerning the employee functions is accurate.
II. TERM OF AGREEMENT
This Agreement shall commence on the date this Agreement is executed and remain
in force and effect for a term of one (1) year ("Initial Term"). Following the
Initial Term, this Agreement shall remain in full force and effect for
successive monthly terms (the "Extended Terms") until either (i) the Agreement
is renewed; or, (ii) the Agreement is terminated. During the Initial Term, and
any Extended Term of this Agreement, either Administaff or Client may terminate
this Agreement by giving thirty (30) days prior written notice.
III. ADMINISTRATION
3.1 There are a number of federal and state statutory, common law and
regulatory provisions which define the employer-employee relationship.
"Employer" status is based upon the function for which the employer-employee
relationship is being considered.
3.2 Administaff is the employer of those persons furnished to Client and
listed on Exhibit A and is liable as such for the following purposes:
a. compliance with rules and regulations governing the reporting
and payment of all federal and state taxes on payroll wages
paid under this Agreement including, but not limited to: (i)
federal income tax withholding provisions of the Internal
Revenue Code; (ii) state and/or local income tax withholding
provisions, if applicable; (iii) Federal Insurance
Contributions Act (FICA); (iv) Federal Unemployment Tax Act
(FUTA); and (v) applicable state unemployment provisions;
b. except as provided in Paragraph 3.4g below, compliance with
applicable workers' compensation laws including, but not
limited to: (i) procuring workers' compensation insurance;
(ii) completing and filing all required reports; and (iii)
managing claims;
c. compliance with the Consolidated Omnibus Reconciliation Act
(COBRA);
d. compliance with the Immigration Reform and Control Act (IRCA);
e. compliance with the Consumer Credit Protection Act, Title III;
f. procuring and providing employee benefits;
g. monitoring and transmitting to Client changes in governmental
regulations relating to policies and practices governing the
employer-employee relationship including, but not limited to,
issues such as recruiting, interviewing, testing, selecting,
orientation of, training, evaluating, replacing, supervision,
disciplining and terminating employees.
3.3 Client is the employer of those persons furnished by Administaff and
listed on Exhibit A and is liable as such for the following purposes:
a. compliance with Occupational Safety and Health Administration
(OSHA) regulations;
b. compliance with Environmental Protection Agency (EPA)
regulations and any state and/or local equivalent;
c. compliance with government contracting provisions including,
but not limited to: (i) Executive Order 11246; (ii) Vocational
Rehabilitation Act of 1973; (iii) Vietnam Era Veterans'
Readjustment Assistance Act of 1974; (iv) ▇▇▇▇▇-▇▇▇▇▇▇ Public
Contracts Act; (v) ▇▇▇▇▇-▇▇▇▇▇ Act; and (vi) Service Contract
Act of 1965;
d. compliance with the Fair Labor Standards Act (FLSA);
e. compliance with the Worker Adjustment and Retraining
Notification Act; (WARN);
f. compliance with any professional licensing requirements;
g. compliance with any fidelity bonding requirements;
1
2
h. professional liability, including but not limited to
malpractice or errors and omissions coverage and compliance
with any regulation mandating such coverage;
i. Section 414(o) of the Internal Revenue Code (avoidance of
certain pension and non-pension employee benefits
requirements) (except as provided in paragraph 3.4c below);
j. assignment to, and ownership of, all intellectual property
rights including, but not limited to, inventions, whether
patentable or not, and patents resulting therefrom, copyrights
and trade secrets and all confidentiality agreements regarding
proprietary information.
3.4 Administaff staff and Client will be considered co-employers ("dual or
joint employers") of those persons furnished to Client by Administaff and
listed on Exhibit A for the following purposes:
a. compliance with Title VII of the 1964 Civil Rights Act;
b. compliance with the Age Discrimination in Employment Act
(ADEA);
c. compliance with the Employee Retirement Income Security Act
(ERISA) (except as provided by paragraph 3.3i above);
d. compliance with the Polygraph Protection Act,
e. compliance with the Federal Drug Free Workplace Act and any
state and/or local equivalent,
f. compliance with state employment discrimination laws
including, but not limited to, Article 5221k, Texas Revised
Civil Statues;
g. employer liability under workers' compensation laws;
h. implementation of policies and practices relating to the
employer-employee relationship such as recruiting,
interviewing, testing, selecting, orientation of, training,
evaluating, replacing, supervision, disciplining and
terminating employees; and
i. selection of fringe benefits, including, but not limited to,
holidays, vacation, sick leave, parental leave, military
leave, and leave of absence.
3.5 Nothing in paragraphs 3.2,3.3 or 3.4 above shall be construed to
require either Administaff or Client to provide any of the matters referred to
therein except as provided by law or as otherwise specifically provided by this
contract.
3.6 For the purposes of this Agreement, determination of employer status
for situations not set forth and not contemplated herein shall be made by
mutual agreement of Administaff and Client.
IV. SUPERVISION
Administaff shall designate one or more on-site supervisors from among its
employees furnished to Client and listed on Exhibit A. On-site supervisors
shall direct operational and administrative matters relating to services
provided by Administaff's employees and shall carry out Administaff's policies
and procedures formulated in accordance with Paragraph 3.4h above.
V. ENROLLMENT FEE
Client agrees to pay Administaff a non-refundable enrollment fee in the sum
specified in Exhibit B (Client Service Application). This enrollment fee is
due and payable at the time that this Agreement is signed by Client.
VI. SERVICE FEE
In exchange for the personnel services provided by Administaff hereunder,
Administaff and Client agree as follows:
6.1 The Administaff fee rate percentage is set forth in Exhibit B (Client
Service Application) and is calculated utilizing the data submitted by Client
in Exhibit A. If such information is inaccurate, Client shall immediately
agree to amend Exhibit A to reflect the current information and shall pay,
within ten (10) days notice from Administaff of the error, any additional costs
incurred by Administaff as a result of the inaccuracy.
6.2 Each pay period, Client shall pay Administaff its fee comprised of:
(i) the gross payroll of Administaff employees leased to Client during such pay
period; and, (ii) a service fee equal to the fee rate percentage specified in
Exhibit B multiplied by the actual gross payroll of Administaff employees
furnished to Client during such pay period.
6.3 Administaff shall not adjust the fee rate percentage for Client during
any term of this Agreement except for adjustments made necessary by:
2
3
(i) statutory and regulatory changes, including, but not limited
to, adjustments to FICA, federal and/or state unemployment
taxes and workers' compensation; and/or
(ii) changes in the information supplied on Exhibit A (Confidential
Census) initiated by Client to the extent that such change,
when applied to the recalculation of the fee rate percentage,
causes an increase or decrease of at least one fee rate
percentage point.
6.4 In addition to the foregoing, during any Extended Term, Administaff may
adjust the fee rate percentage upon thirty (30) days written notice to Client.
6.5 Any increases in the fee rate percentages for statutory or regulatory
changes in employment taxes, insurance costs or job functions shall be
effective on the date of such statutory or regulatory increase or change.
6.6 Any increase in the fee will be billed with the next effective payroll
and be kept current at all times except for retroactive changes or statutory
and/or regulatory changes known at the time the payroll is billed.
6.7 Any change in the fee rate percentage shall be reflected in a revised
Exhibit B which shall then be made a part of this Agreement.
6.8 The fee provided for by this Agreement shall be due and payable at
least one (1) working day prior to the date of payroll delivery.
6.9 Client shall use a method of payment approved in advance by
Administaff.
6.10 Client or on-site supervisor shall report to Administaff all time
worked by all Administaff employees furnished to Client each pay period and
shall provide Administaff with written verification of same.
6.11 Client shall notify Administaff within two (2) working days of any
error in billing.
6.12 Client shall reimburse Administaff for services not contemplated by
this Agreement which may be required by Client.
VII. INSURANCE
7.1 Administaff shall furnish, and keep in full force and effect at all
times during the term of this Agreement, worker's compensation insurance
covering all Administaff employees furnished to Client pursuant to the terms of
this Agreement. Upon written request by Client, Administaff shall furnish a
certificate of insurance verifying such coverage.
7.2 Client shall furnish, and keep in force and effect at all times during
the term of this Agreement, comprehensive general liability insurance including
products/completed operations coverage with minimum limits of $1,000,000 per
occurrence and $2,000,000 aggregate. Client shall cause its insurance carrier
to issue a certificate of insurance to Administaff, Inc. confirming this
coverage and to give not less than thirty (30) days advance notice of
cancellation or material change.
7.3 Client shall furnish, and keep in force and effect at all times during
the term of this Agreement, comprehensive automobile liability insurance
covering all owned, hired and non-owned automobiles with a minimum limit of
$1,000,000 per occurrence combined single limit bodily injury and property
damage liability. The policy shall also provide uninsured motorists insurance
with a minimum combined single limit of Sixty Thousand Dollars ($60,000.00). In
states where "no fault" laws apply, Personal Injury Protection (P.I.P.) or
equivalent coverage shall be required to meet the requirements of the state.
The client shall cause its insurance carrier to issue a certificate of
insurance to Administaff, Inc. confirming this coverage and to give not less
than thirty (30) days advance notice of cancellation or material change.
7.4 Client shall deliver copies of all insurance certificates required
pursuant to this Article signed by authorized representatives of the insurance
companies to Administaff within fifteen (15) days of the commencement date of
this Agreement.
VIII. EMPLOYMENT AGREEMENT
Each employee furnished by Administaff to Client and listed on Exhibit A shall
be required to execute an Employment Agreement as set forth in Exhibit C
(Employment Agreement Form) before such employee shall commence the term of
assignment with Client.
IX. DEFAULT
9.1 Acts of default by Client shall include, but are not limited to:
a. failure of Client to pay a fee when due;
b. failure of Client to comply within thirty (30) days of any
directive of Administaff, when such directive is promulgated or
made necessary by: (i) a federal, state or local governmental
body, department or agency; or (ii) an insurance carrier
providing coverage to Administaff and/or its employees;
3
4
c. direct payment of taxable wages by Client to Administaff
employees for services contemplated by this Agreement;
d. commission or omission of any act that usurps any right or
obligation of Administaff as an employer of the employees
covered by this Agreement; and/or,
e. violation by Client of any provision of this Agreement.
9.2 In the event Administaff incurs any expenses, fines and/or liabilities
as a result of an act of default by Client as set forth above, Client shall
reimburse Administaff for all actual expenses, fines and/or liabilities,
including, but not limited to, reasonable attorneys' fees, court costs and any
related expenses.
9.3 In the event that this Agreement is terminated due to a default by
Client, Client shall pay Administaff a sum equal to the fee rate percentage
multiplied by the estimated gross payroll for the remaining contract period as
liquidated damages, but such payment does not release Client from its
obligations under this Agreement, or from liability for future breach of such
obligations.
9.4 Upon an act of default by Client other than under Paragraph 9.1c
above, Administaff shall have the option, in its sole and absolute discretion,
of terminating this Agreement, and in the event Administaff exercises such
option, this Agreement shall terminate on the date written notice of same is
delivered to Client. In the event, however, of an act of default by Client
under Paragraph 9.1c above, Administaff shall have the option in its sole and
absolute discretion of terminating this Agreement effective on the date of such
act.
X. INDEMNITY
10.1 Client hereby agrees to indemnify, defend and hold Administaff
harmless from and against any and all liability, expense (including court costs
and attorneys' fees) and claims for damage of any nature whatsoever, whether
known or unknown and whether direct or indirect, as though expressly set forth
and described herein, which Administaff may incur, suffer, become liable for or
which may be asserted or claimed against Administaff as a result of the acts,
errors or omissions, including negligent acts and statutory violations, of
Client.
10.2 Administaff hereby agrees to indemnify, defend and hold Client
harmless from and against any and all liability, expense (including court costs
and attorneys' fees) and claims for damage of any nature whatsoever, whether
known or unknown and whether direct or indirect, as though expressly set forth
and described herein, which Client may incur, suffer, become liable for or
which may be asserted or claimed against Client as a result of the acts, errors
or omissions, including negligent acts and statutory violations, of
Administaff.
10.3 Client and Administaff expressly agree that the indemnification
provisions of this Agreement shall not be limited to claims, expenses, or
liabilities for which one of them is solely liable, but shall also apply to
claims, expenses and liabilities for which client and Administaff are jointly
and concurrently liable. In such event, if either of them advances funds in
connection with a claim, expense or liability which is subject to this Article
X in excess of its pro rata share, said party shall be indemnified by the other
party hereto for such excess amounts.
XI. MISCELLANEOUS
11.1 This Agreement may be amended from time to time as agreed by the
parties in writing. Such amendment shall become effective on the date so
designated when signed by both Administaff and Client.
11.2 Client and Administaff warrant and represent to each other that; prior
to the commencement of this Agreement, no separate agreements or arrangements
exist that would obligate Client or Administaff except as set forth herein.
11.3 Client and Administaff agree to immediately report to each other all
accidents and injuries involving Administaff employees assigned to Client.
11.4 Client agrees to comply, at its sole cost and expense, with any
applicable specific directives promulgated by: (i) a federal state or local
governmental body, department or agency, (ii) an insurance carrier providing
coverage to Administaff and/or its employees affecting this Agreement, and/or
(iii) Administaff as made necessary by circumstances which currently or
specifically affect Administaff, Client or Administaff's employees.
11.5 This Agreement is between Administaff and Client and creates no
individual rights of Administaff employees as against Client.
11.6 Administaff and Administaff's workers' compensation insurance carrier
shall have the right to inspect Client's premises, including any job site to
which Client assigns Administaff's employees. To the extent possible, such
inspection shall be scheduled at a mutually convenient time.
XII. ARBITRATION
12.1 Administaff and Client agree and stipulate that all claims, disputes
and other matters in question between Administaff and Client arising out of, or
relating to this Agreement or the breach thereof will be decided by arbitration
in accordance with the Federal Arbitration Act (9 U.S.C. Sections 10 and 11)
and the Commercial Arbitration Rules of the American Arbitration Association
then obtaining subject to the limitations of this Article XII. This agreement
to so arbitrate and any other agreement or consent to arbitrate entered into in
accordance herewith as provided in this Article XII will be specifically
enforceable under the prevailing law of any court having jurisdiction.
4
5
12.2 Notice of the demand for arbitration will be filed in writing with the
other party to the Agreement and with the American Arbitration Association.
The demand for arbitration shall be made within a reasonable time after the
claim, dispute or other matter in question has arisen, and in no event shall
any such demand be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statute of limitations.
12.3 No arbitration arising out of, or relating to, this Agreement shall
include by consolidation, joinder or in any other manner any other person or
entity who is not a party to this contract unless:
a. the inclusion of such other person or entity is necessary if
complete relief is to be afforded among those who are already
parties to the arbitration, and/or such other person or entity
is substantially involved in a question of law or fact which
is common to those who are already parties to the arbitration
and which will arise in such proceedings; and,
b. the written consent of the other person or entity sought to be
included and Administaff and Client has been obtained for such
inclusion, which consent shall make specific reference to this
paragraph; but no such consent shall constitute consent to
arbitration of any dispute not specifically described in such
consent or to arbitration with any party not specifically
identified in such consent.
12.4 The award rendered by the arbitrators will be final, judgment may be
entered upon it in any court having jurisdiction thereof, and will not be
subject to modification or appeal except to the extent permitted by Sections 10
and 11 of the Federal Arbitration Act (9 U.S.C. Sections 10 and 11).
XIII. ASSIGNMENT
Neither party shall assign this Agreement or its rights and duties hereunder,
or any interest herein, without the prior written consent of the other party.
XIV. ATTORNEYS' FEES
The prevailing party in any enforcement action arising in respect to this
Agreement shall be entitled to recover from the other party all costs of such
enforcement action including, without limitation, reasonable attorneys' fees,
court costs and related expenses.
XV. GOVERNING LAW
EXCEPT FOR ARTICLE XII OF THIS AGREEMENT, WHICH SHALL BE GOVERNED BY THE
FEDERAL ARBITRATION ACT (9 U.S.C. Sections 10 AND 11), THIS AGREEMENT SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
XVI. ENTIRE AGREEMENT
This instrument, including the Exhibits attached hereto, contains the entire
Agreement of the parties and supersedes all prior and contemporaneous
agreements or understandings, whether written or oral, with respect to the
subject matter hereof. No amendment or modification hereto shall be valid
unless in writing and signed by both parties hereto.
XVII. SEVERABILITY
If any provision of this Agreement, or any amendment thereof, should be invalid,
the remaining provision shall remain in effect and be so construed as to
effectuate the intent and purposes of this Agreement and any amendments
thereto.
XVIII. NOTICES
All notices, requests and communications provided hereunder shall be in
writing, and hand delivered or mailed by United States registered, certified,
or express mail, return receipt requested, and addressed to the party's
principal place of business as set forth in this Agreement adjacent the
signature of each party (or to such other address provided in writing by such
party).
XIX. WAIVER
The waiver by either party hereto of a breach of any term or provision of this
Agreement shall not operate or be construed as a waiver of a subsequent breach
of the same provision by any party or of a breach of any other term or
provision of this Agreement.
XX. EXHIBITS
The following exhibits are attached to this Agreement and incorporated
herein by reference for all purposes:
A. Exhibit A ("Confidential Census");
5
6
B. Exhibit B ("Client Service Application"); and,
C. Exhibit C ("Employment Agreement Form").
THIS AGREEMENT is duly executed this 30 day of June, 1996.
FOR CLIENT: MHM Extended Care Services, Inc. ADMINISTAFF COMPANIES, INC.
-------------------------------- ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
(Company Name) ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
President By: /s/ A. ▇▇▇▇▇ ARIZOF
----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Vice-President
-----------------------------------------
(Name - Typed or Printed)
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇.
---------------------------------
Ste ▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
---------------------------------
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
---------------------------------
7
ADDENDUM
This Addendum is attached to and made a part of that certain Client
Service Agreement (the Agreement) of even date, between Administaff Companies,
Inc. (Administaff), and MHM EXTENDED CARE SERVICES, INC. (Client). In the event
of a conflict between this Addendum and the Agreement, this Addendum shall
control.
ARTICLE I. PERSONNEL
Article I., Personnel, shall be amended to read as follows:
"Subject to the terms of this Agreement, Administaff agrees to furnish
Client, and Client agrees to engage form Administaff, employees for the
job classifications listed, by workers' compensation classification
codes, in Exhibit A ("Confidential Census"). Client warrants that
information supplied to Administaff concerning the codes applicable to
an employee is accurate."
ARTICLE II. TERM OF AGREEMENT
Article II, shall be amended to read as follows:
"This Agreement shall commence on June 30, 1996 and shall remain in
force and effect until terminated as provided for herein. Either
Administaff or Client may terminate this Agreement by giving thirty
(30) days prior written notice."
ARTICLE III. ADMINISTRATION
Article III, Administration, shall be amended to read as follows:
"3.1 Administaff and Client recognize that there are a number of federal
and state statutory, common law and regulatory provisions which define
the employer-employee relationship. It is the intent of Administaff and
Client that to the extent permitted by law, "employer" status with
respect to an employee furnished to Client by Administaff shall be
determined as set forth in paragraphs 3.2, 3.3, 3.4, and 3.7 and if not
so determined, shall be based upon the function for which the
employer-employee relationship is being considered and shall be
determined in accordance with paragraph 3.6.
"3.2 Administaff is the employer of those persons furnished to Client
and is liable as such for the following purposes:
"a. compliance with rules and regulations governing the
reporting and payment of all federal and state taxes on
payroll wages paid under this Agreement including, but
Page 1
8
not limited to: (i) federal income tax withholding
provisions of the Internal Revenue Code; (ii) state and/or
local income tax withholding provisions, if applicable;
(iii) Federal Insurance Contributions Act (FICA); (iv)
Federal Unemployment Tax Act (FUTA); and (v) applicable
state unemployment provisions;
"b. except as provided in Paragraph 3.4 g., below, compliance
with applicable workers' compensation laws including, but
not limited to: (i) procuring workers' compensation
insurance; (ii) completing and filing all required reports;
and (iii) managing claims;
"c. compliance with the Consolidated Omnibus Reconciliation Act
(COBRA);
"d. compliance with the Immigration Reform and Control Act
(IRCA);
"e. compliance with the Consumer Credit Protection Act, Title
III;
"f. procuring and providing employee benefits;
"g. monitoring and transmitting to Client changes in
governmental regulations relating to policies and practices
governing the employer-employee relationship including, but
not limited to, issues such as recruiting, interviewing,
testing, selecting, orientation of, training, evaluating,
replacing, supervision, disciplining and terminating
employees.
"3.3 Client is the employer of those persons furnished by Administaff
and is liable as such for the following purposes:
"a. compliance with Occupational Safety and Health
Administration (OSHA) regulations;
"b. compliance with Environmental Protection Agency (EPA)
regulations and any state and/or local equivalent;
"c. compliance with government contracting provisions including,
but not limited to: (i) Executive Order 11246; (ii)
Vocational Rehabilitation Act of 1973; (iii) Vietnam Era
Veterans' Readjustment Assistance Act of 1974; (iv)
▇▇▇▇▇-▇▇▇▇▇ Public Contracts Act; (v) ▇▇▇▇▇-▇▇▇▇▇ Act; and
(vi) Service Contract Act of 1965;
"d. compliance with the Fair Labor Standards Act (FLSA);
"e. compliance with the Worker Adjustment and Retraining
Notification Act (WARN); provided, however, that so long as
Client is an employer of less than the
Page 2
9
number of employees required to make Client subject to the
application of WARN, and if Client would not otherwise be
subject to the jurisdiction or application of WARN but for
the fact that Administaff is an employer of more than the
jurisdictional minimum number of employees required for the
compliance with WARN then Administaff shall be responsible
for compliance with WARN, in which case Client covenants and
agrees that it shall give Administaff no less than ninety
(90) days notice of (i) the closing or shut down of an
employment site (or one or more facilities or operating
units within an employment site) resulting in an employment
loss for fifty (50) or more employees during any thirty (30)
day period; (ii) the mass layoff of employees which does not
result in the closing or shut down of an employment site but
which will result in the loss of employment during any
thirty (30) day period for 500 or more employees, or for 50
to 499 employees if they make up at least 33% of the work
force; or (iii) any combination of the closing of an
employment site or mass layoff of employees which would not
individually trigger the WARN notice requirement if it
occurred within a thirty (30) day time period, but which
taken together during any ninety (90) day time period
reaches the threshold level of employment loss that would
require Administaff to give notice;
"f. compliance with any professional licensing requirements;
"g. compliance with any fidelity bonding requirements;
"h. professional liability, including but not limited to
malpractice or errors and omissions coverage and compliance
with any regulation mandating such coverage;
"i. Section 414(o) of the Internal Revenue Code (avoidance of
certain pension and non-pension employee benefit
requirements) (except as provided in paragraph 3.4c below);
"j. the rendering of professional medical services, including,
but not by way of limitation, the services of a psychologist
and the diagnosis and treatment of all patients under the
Client's care; it being specifically acknowledged and agreed
that Administaff's duties, responsibilities and functions
hereunder shall be administrative and managerial in nature
only, and that notwithstanding any other provision of this
Agreement to the contrary, Administaff shall engage in no
activity hereunder that would constitute the corporate
practice of medicine as defined by applicable laws in any
jurisdiction in which the corporate practice of medicine is
prohibited. The parties understand and agree that Client has
the sole responsibility for the coordination and provision
of all medical services and Administaff shall not interfere
in any way with the exercise of the professional medical
judgment of Client or Client's providers in connection with
their practice of medicine. All of Client's policies and
Page 3
10
procedures relating to the governance of its physicians or
psychologists who will work under the direction of Client
or its physicians or psychologists shall be adopted from
time to time in the sole discretion of Client, its
shareholders and board of directors, as applicable. Such
policies may include practice standards, peer review and
corrective action, disciplinary matters, on-call schedules,
referral physician panel and services, clinical procedures,
utilization management and quality management procedures,
credentialing, appointment and replacement of Association
medical directors, patient care decisions, physician and
other licensed health care professional compensation and
incentives, physician training, continuing education,
development and supervision and shareholder eligibility.
Should any function assigned to Administaff hereunder be
construed to be within the practice of medicine such that,
if performed by Administaff, it would be violative of
applicable prohibitions on the corporate practice of
medicine, such function thereafter shall be assigned to and
become the responsibility of Client and any such prior
activities which were undertaken by Administaff shall be
considered to have been undertaken by
Client.
"3.4 Administaff and Client will be considered co-employers ("dual or
joint employers") of those persons furnished to Client by Administaff
for the following purposes:
"a. compliance with Title VII of the 1964 Civil Rights Act;
"b. compliance with the Age Discrimination in Employment Act
(ADEA);
"c. compliance with the Employee Retirement Income Security Act
(ERISA) (except as provided by paragraph 3.3i above);
"d. compliance with the Polygraph Protection Act;
"e. compliance with the Federal Drug Free Workplace Act and any
state and/or local equivalent;
"f. compliance with state employment discrimination laws;
"g. employer liability under workers' compensation laws;
"h. implementation, of policies and practices relating to the
employer-employee relationship such as recruiting,
interviewing, testing, selecting, orientation of, training,
evaluating, replacing, supervision, disciplining and
terminating employees; and
Page 4
11
"i. selection of fringe benefits, including, but not limited to,
holidays, vacation, sick leave, parental leave, military
leave, and leave of absence.
"3.5 Nothing in paragraphs 3.2, 3.3, 3.4, or 3.7 shall be construed to
require either Administaff or Client to perform any matter not referred
to therein; provided that the foregoing shall not affect the obligation
of Administaff or Client to perform any matter required by law or as
otherwise specifically provided by this Agreement.
"3.6 For purposes of this Agreement, determination of employer status
for situations not set forth and not contemplated herein shall be made
by mutual agreement of Administaff and Client.
"3.7 Client is the employer of those persons furnished by Administaff
(i) with respect to the assignment and ownership of all intellectual
property rights including, but not limited to, inventions, whether
patentable or not, and patents resulting therefrom, copyrights and
trade secrets; and (ii) with respect to any confidentiality agreements
regarding proprietary information and any covenant not to compete.
ARTICLE VI. SERVICE FEE
Article VI., Service Fee, Paragraph 6.3 (i) shall be amended to read as
follows:
"6.3 ADMINISTAFF shall not adjust the fee rate percentage for Client
more often than once annually during the term of this Agreement except
for adjustments made necessary by:
"(i) statutory and regulatory changes including, but not limited
to, adjustments to FICA and federal and/or state
unemployment taxes and workers' compensation; and/or;
"(ii) changes in the information supplied on Exhibit A
(Confidential Census) initiated by Client to the extent that
such change, when applied to the recalculation of the fee
rate percentage, causes an increase or decrease of at least
one fee rate percentage point."
Article VI., Paragraph 6.5 shall be amended to read as follows:
"6.5 Any increases in the fee rate percentages for statutory or
regulatory changes in employment taxes, insurance costs or job functions
shall be effective on the date of such statutory or regulatory increase
or change. Any such increase shall be no greater than the amount
necessary to cover the cost to Administaff of the increase in employment
taxes, insurance costs, or costs resulting from the change in job
functions."
Page 5
12
Article VI., Paragraph 6.8, shall be amended to read as follows:
"6.8 The fee provided for by this Agreement shall be due and payable at
least one (1) working day prior to the date of payroll delivery. So long
as Client is timely in the reporting of payroll information and payment
of the fee provided for by this Agreement Administaff shall make payroll
delivery to the employees furnished to the Client on the regularly
scheduled payday. In addition Administaff shall provide Client on each
payday with a report of the accrued leave for each employee furnished to
Client (including the leave currently accrued by each employee while
employed by Client prior to the effective date of this Agreement,
provided that such information is timely and accurately provided to
Administaff by Client for inclusion on the payday accrued leave
report)."
ARTICLE VII. INSURANCE
"7.1 Administaff shall furnish and keep in full force and effect at all
times during the term of this Agreement, workers' compensation insurance
covering all Administaff employees furnished to Client pursuant to the
terms of this Agreement. Upon written request by Client, Administaff
shall furnish a certificate of insurance verifying such coverage. Such
workers' compensation coverage will comply with applicable law."
ARTICLE IX. DEFAULT
Article IX., Default, Paragraph 9.3 shall be amended to read as follows:
"9.3 In the event that this Agreement is terminated due to a default by
Client, Client shall pay Administaff a sum equal to the fee rate
percentage multiplied by the estimated gross payroll for a thirty day
period as liquidated damages, but such payment does not release Client
from its obligations under this Agreement, or from liability for future
breach of such obligations."
Article IX., Default, shall be amended to add Paragraphs 9.5, 9.6, and
9.7 as follows:
"9.5 Acts of default by Administaff shall include, but are not limited
to:
"a. failure to pay wages to leased employees;
"b. failure to pay payroll taxes to a federal, state, or local
governmental body, department or agency when due;
"c. failure to pay premiums to an insurance carrier providing
coverage to Administaff employees leased to Client;
"d. violation by Administaff of any provision of this
Agreement."
Page 6
13
"9.6 Upon an act of default by Administaff, Client shall have the
option, in its sole and absolute discretion, of terminating this
Agreement, and in the event Client exercises such option, this Agreement
shall terminate on the date written notice of same is delivered to
Administaff. "
"9.7 In the event Client incurs any expenses, fines and/or liabilities
as a result of an act of default by Administaff as set forth above,
Administaff shall reimburse Client for all actual expenses, fines and/or
liabilities, including, but not limited to, reasonable attorneys' fees,
court costs and any related expenses."
ARTICLE X. INDEMNITY
Article X., Indemnity, Paragraph 10.3, shall be amended to read as
follows:
"10.3 Client and Administaff expressly agree that the indemnification
provisions of this Agreement shall not be limited to claims, expenses,
or liabilities for which one of them is solely liable, but shall also
apply to claims, expenses and liabilities for which Client and
Administaff are jointly or concurrently liable. In such event, if either
of them advances funds or makes any other payment in connection with a
claim expense or liability which is subject to this Article X in excess
of its pro rata share, said party shall be indemnified by the other
party hereto for such excess amounts.
ARTICLE XI. MISCELLANEOUS
Article XI., Miscellaneous, Paragraph 11.2, shall be amended to read as
follows:
"11.2 Client and Administaff warrant and represent to each other that,
prior to the commencement of this Agreement, no separate agreements or
arrangements exist between the parties that would obligate Client or
Administaff except as set forth herein."
Article XI., Miscellaneous, Paragraph 11.4 shall be amended to read as
follows:
"11.4 Client agrees to comply, at its sole cost and expense, with any
applicable specific directives promulgated by: (i) a federal, state, or
local governmental body, department, or agency, (ii) an insurance
carrier providing coverage to Administaff and/or its employees affecting
this Agreement and/or, (iii) Administaff as made necessary by
circumstances which currently or specifically affect Administaff, Client
or Administaff's employees except where such compliance is otherwise the
responsibility of Administaff under the terms of this Agreement."
Page 7
14
Article XI., Miscellaneous, shall be amended to add Paragraph 11.7 as
follows:
"11.7 Administaff hereby warrants that (i) the scope of benefits
available to eligible employees under the Administaff Benefit Plan (the
Administaff Plan) on the effective date of this Agreement are
substantially the same as are stated in the attached pamphlet entitled
Outline of Benefits attached; (ii) Administaff will give notice of any
material change in the Administaff Plan to all eligible participants at
least thirty-five (35) days prior to the effective date of such
material change; (iii) pre-existing conditions are covered by the Major
Medical Plan (the Administaff Medical Plan) which is part of the
Administaff Plan; (iv) amounts paid by a covered employee to defray a
covered expense under the Client's existing health or medical benefit
plan (Client's Plan) toward the deductible or co-payment requirements of
Client's Plan will be credited and apply to the satisfaction of the
deductible or co-payment requirement of the Administaff Medical Plan
provided that the amount paid otherwise satisfies the criteria for
credit or application to the satisfaction of the deductible or
co-payment requirements of the Administaff Medical Plan and its usual
proof of payment criteria; and (v) a former employee of Client which is
covered by COBRA under Client's Plan on the effective date of this
Agreement will be eligible for COBRA coverage under Administaff's
Medical Plan provided that Client has fully disclosed the scope and
extent of such existing COBRA coverage to Administaff prior to the
execution of this Agreement."
XVI. ENTIRE AGREEMENT
Article XVI., Entire Agreement, shall be amended to read as follows:
"This instrument, including the Exhibits attached hereto, contains the
entire Agreement of the parties and supersedes all prior and
contemporaneous agreements or understandings, whether written or oral,
with respect to the subject matter hereof. No amendment or modification
hereto shall be valid unless in writing and signed by both parties
hereto other than changes to Exhibit A (Confidential Census) from time
to time as may be necessary in the operation of Client's business and
the performance of the parties of their respective obligations under
this Agreement."
This Addendum is executed and effective of even date with the Client
Service Agreement dated June 30, 1996, between the parties hereto to which it is
attached and incorporated by reference.
ADMINISTAFF COMPANIES, INC. MHM EXTENDED CARE SERVICES, INC.
By: /s/ A. ▇▇▇▇▇ ARIZOF By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------- ------------------------------
Vice President President
------------------------------- ---------------------------------
Name: Typed or Printed Name: Typed or Printed
Page 8