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Exhibit 10.5.1
SERVICE AGREEMENT
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THIS SERVICE AGREEMENT is made and entered into on the ____ day of
____________, 1997, by and between National Health Corporation, a Tennessee
corporation (hereinafter referred to as "National"), and National HealthCare
Corporation, a Delaware corporation (hereinafter referred to as "NHC").
WITNESSETH:
WHEREAS, NHC desires to obtain access to the services of employees of
National and National desires to provide the services of such employees to NHC
for the purpose of assisting NHC to carry out its business purposes; and
WHEREAS, the parties hereto desire to set forth their agreement
relating to said employee services in writing.
NOW, THEREFORE, for good and valuable consideration, which the parties
hereby acknowledge, and in consideration of the premises contained herein, the
parties hereto intending to be legally bound, hereby agree as follows:
1. NATIONAL'S RESPONSIBILITIES AS REGARDS EMPLOYEES.
National, as employer of certain employees to provide services to NHC,
shall have the following authority and responsibility:
A. To employ those persons necessary to provide services to the
business of NHC after consultation with NHC, and as their
employer to set all wages and salaries, provide all fringe
benefits, and otherwise perform all duties customary, necessary
and appropriate as their employer.
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B. To utilize any qualified leveraged employee stock ownership plan
which it may establish, or has established, in order to
facilitate the acquisition of additional assets or businesses for
National to provide benefits to such employees, and to obtain
long-term and/or short-term financing, or any other valid
business purpose consistent with the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
C. To establish, or continue, and carry out profit-sharing, bonus,
purchase, option, savings, thrift and other incentive and
employee benefit plans, trusts, leveraged employee stock
ownership plans, as National in its sole discretion deems
advisable, for such employees of National and its officers and
directors, including plans, trusts and provisions which may
provide for the ownership, acquisition, holding, or disposition
of shares of National.
D. To purchase and pay for, in whole or part, insurance coverage of
the broadest and most commercially reasonable categories
(including health, accident, life, disability, workers
compensation, etc.) as may be determined by National, for any and
all National employees providing services to NHC.
E. To indemnify and purchase and maintain insurance on behalf of any
fiduciary of such plans, trusts or provisions, including, without
limitation, fiduciary insurance, bond(s) required by ERISA, and
health insurance on behalf of any fiduciary of such plans, trusts
or provisions, including without limitation, health insurance,
medical and dental reimbursement, life insurance, accident
insurance, disability insurance and other plans, trusts or
provisions.
F. To provide self insurance, at the discretion of National, for any
and all of the preceding employee benefit arrangements or
programs that could be funded through
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insurance, and whether such arrangements are self-insured
or insured, to charge NHC for the costs or premiums thereon as
part of its consideration for this Agreement, provided that said
premiums shall be adjusted annually so that NHC pays only the
actual cost of the coverage, including commercially reasonable
reserves and direct administrative expenses.
2. DELEGATION OF AUTHORITY, POWER & DUTIES TO NATIONAL.
NHC delegates to National the authority, power and duty to
purchase and maintain, in its discretion, but at the expense of NHC,
liability and any other insurance, including errors and omissions
insurance, sufficient to protect NHC, its officers and directors and
any National employee providing services to NHC from those liabilities
and hazards which may be insured against in the conduct of NHC's
business and in the management of NHC's business.
3. ACCEPTANCE.
National accepts the delegation of the authority, powers, and
duties set forth in Section 2 of this Agreement and agrees to exercise
the powers and authority, and to discharge the duties, with a level of
skill and diligence that is customary in the business engaged in by
NHC.
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4. CONSIDERATION FOR SERVICES OF NATIONAL EMPLOYEES.
Consideration for the services performed by National employees
to NHC, in addition to that described at Section 1.F, shall be as set
forth in Exhibit A hereto, which is made by reference a part of this
Agreement, as if fully set forth herein, as it may be amended from time
to time by execution by both parties hereto.
5. EMPLOYEE EXPENSES.
The parties to this Agreement recognize that NHC, as successor
by merger to National HealthCare, L.P., manages the business of nursing
homes previously purchased by National from National HealthCare, L.P.,
and that businesses currently owned by NHC may be sold to National in
the future. The parties hereto agree that with respect to any nursing
home or other property of NHC or its predecessor which is, or has been,
leased or sold to National, during the time of this Agreement NHC
acknowledges that, as negotiated between the parties hereto, it shall
have the continuing obligation to pay for all costs of employees
employed by National at such locations; provided, however, that at all
times as National may own, in its name, such nursing homes, then the
salary expenses incurred by National in the direct administration of
its Personnel Department and its Payroll Department attributable to
these properties shall be borne directly by National. In lieu of
reimbursing National's expenses therefor, NHC agrees to compensate
National by paying a monthly fee thereto equal to one percent (1%) of
the then current month's gross payroll of such employees as submitted
for reimbursement to NHC by National, but in no event shall this fee be
less than the actual cost of administering the Payroll and Personnel
Department.
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6. UNEMPLOYMENT INSURANCE EXPENSE REIMBURSEMENT.
In the event of the sale, dissolution, liquidation,
reorganization or permanent closing of NHC's business which causes
National to terminate or lay-off any employee providing services to NHC
under this Agreement, NHC agrees promptly to reimburse National the
actual cost for all unemployment expenses and charges incurred by
National with respect to each such employee, in the event National is
unable to find employment for such employees and must terminate the
employee's employment for lack of work or any other reason.
7. WORK ENVIRONMENT AND RELATED MATTERS.
7.1. DIRECTION AND CONTROL - EMPLOYEES.
NHC and National agree that National as employer has the right
to exercise direction and control relating to the management of safety,
risk and labor matters at work site locations. However, National shall
consult with NHC, and NHC shall have the opportunity to consult with
National on the following issues, provided National shall retain the
final decision, after consultation with NHC, to
i. hire, fire, discipline and direct and regulate and supervise
all working conditions and labor policies;
ii. establish all wages, benefits, salaries, bonuses or
advancements;
iii. conduct safety inspections of NHC's equipment and work site;
and set and administer employment and safety policies; and
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iv. facilitate collective bargaining relationships between
National and labor unions representing the employees
described hereunder and contract administration in
connection therewith.
National shall be entitled, at its own expense, to install in
conspicuous location(s) bulletin board(s) at NHC's work site(s), in
order to effectively communicate with the employees. NHC shall
cooperate with National in maintaining the integrity of such bulletin
board(s) and shall, upon request, insert or post information for the
employees described hereunder as requested or required by National from
time to time.
7.2. COOPERATION IN DEFENSE OF CLAIMS.
NHC represents that it will, and NHC agrees to, cooperate
fully when required to assist National in defending claims or
litigation from personnel decisions or job actions relating to the
employees described hereunder. NHC's cooperation shall include, but not
be limited to, the completion of reports and, if requested, attendance
at hearings as a witness, answering questions or interrogatories under
oath or otherwise and providing access to NHC's documents relating to
the employees described herein.
7.3. NHC RESPONSIBILITIES.
NHC shall comply with all health, labor and safety laws,
regulations, ordinances and rules of Federal, State and local
government authorities, and those policies set by National pursuant to
Section 7.1 iii. NHC shall comply at its own expenses with any
specific directives from National, National's workers' compensation
carrier or any government agency having jurisdiction over NHC's place
of business or the safety and health of the employees described
hereunder. NHC shall report all employee accidents and injuries to
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National such reasonable period of time as National may require.
National and its carriers shall have the right to inspect NHC's place
of business at all reasonable times to insure compliance with this
Section and the terms of this Agreement.
NHC agrees to provide National with a periodic report
regarding the employees described hereunder, the hours worked and any
other information reasonably requested by National (the "Report") on a
form and at such schedule as requested by National. NHC represents and
warrants that the information provided to NHC in or in connection with
the Report shall be complete and accurate and that National may rely
upon such information.
8. REPRESENTATIONS AND WARRANTIES OF NHC.
The representation and warranties made by NHC in this
Agreement shall survive the term of this Agreement. Furthermore, the
representations and warranties in this Section are deemed to be
material and National is entering into this Agreement relying on such
representations and warranties. NHC represents and warrants to National
as follows:
8.1. EMPLOYEE RELATIONS.
A. Compliance.
NHC represents that it is in compliance with all
material Federal, State and local laws respecting employment
practices, terms and conditions of employment, wages and
hours, and is not engaged in any discriminatory employment or
unfair labor practice and there are no arrears in the payment
of wages, taxes or workers' compensation assessments or
penalties.
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B. Labor Practices.
Except to the extent National has actual knowledge
or except as NHC has disclosed in writing prior to the
execution of this Agreement:
i. None of the employees providing services to NHC will be
represented by any labor union because of an agreement
between the union and NHC;
ii. There is no pending labor strike, material unfair labor
practice complaint or other material labor trouble
affecting NHC (including, but not limited to, any
organizational campaign) and there is no material labor
grievance pending against or affecting NHC which will
affect the employees described herein;
iii. There are no pending material arbitration proceedings
arising out of or under any collective bargaining
agreement to which NHC is a party which will affect the
employees described herein; and
iv. There is no pending material litigation, or other
material proceeding or basis for an unasserted claim
against NHC which is based on claims arising out of
employment relationships with NHC which will affect the
employees described herein, including, but not limited
to, claims for breach of contract, tort,
discrimination, employee benefits, wrongful termination
or any common law or statutory claims.
C. Payroll List.
NHC will provide to National a correct and complete
list of NHC's most recent payroll.
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D. Taxes.
Where required by law, NHC will deduct, or withhold
as required, and remit to the relevant governmental authority
all income taxes, employment taxes, unemployment insurance
contributions or other amounts which it is required by statute
to deduct or remit to any governmental authority.
9. INDEMNIFICATION AND REIMBURSEMENT.
9.1. INDEMNIFICATION OF NATIONAL BY NHC.
A. Indemnification.
NHC hereby agrees to indemnify, defend and hold
harmless National and any parent, subsidiary or affiliate
thereof, and all directors, officers, attorneys, employees,
agents and consultants of each of the foregoing (collectively
"National") from and against all demands, claims, actions or
causes of action, assessments, losses, damages, judgments,
arbitration awards, liabilities (whether absolute or accrued,
contingent or otherwise), costs and expenses, including, but
not limited to, interest penalties and reasonable attorney
fees and expenses (collectively "Damages"), asserted against,
imposed upon or incurred by National, directly or indirectly,
by reason of or resulting from or relating to any of the
following:
(i) Misrepresentation or breach by NHC of
any warranty or term made or contained in this
Agreement or in any certificate or other instrument
or document furnished or to be furnished to National
under this Agreement, including, but not limited,
failure of NHC to cooperate in the
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defense of employment claims, litigation, grievances
and arbitration hereunder;
(ii) Litigation or other claims arising from
the acts or failures to act of NHC and/or its
employees, agents, former employees or former agents,
in accordance
(a) with applicable Federal, State
or local law or
(b) with the terms and conditions of
this Agreement or another agreement;
(iii) Employment matters relating to the
employees described herein as a result of gross
negligence or intentional misconduct by NHC or the
failure of NHC to obtain and/or follow specific
advice and direction from National in matters of
employee separation and/or discipline.
B. Notice and Defense of Claims.
If National so desires, it may tender the defense to
NHC of any matter for which it believes it is entitled to
indemnification pursuant to this Agreement in which event NHC
shall conduct such defense at its sole cost and, thereafter,
be liable for all damages with respect to such claim or
proceeding. NHC shall conduct such defense or settlement in a
manner to protect fully National; NHC and its counsel will
keep National fully advised as to the conduct of such defense
or settlement, and no compromise or settlement shall be agreed
or made without National's written consent. In any case
National shall have the right to employ its own counsel and
such counsel may participate in such action, but the
reasonable
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fees and expenses of such counsel shall be at the
expense of National when and as incurred unless
(i) the employment counsel by National has
been authorized in writing by NHC;
(ii) National shall have reasonably
concluded, based upon the opinion of counsel, that
there may be a conflict of interest between NHC and
National in the conduct of the defense of such
action; or
(iii) NHC shall not, in fact, have employed
independent counsel reasonably satisfactory to
National to assume the defense of such action and
shall have been so notified by National. If clause
(ii) or (ii) of the preceding sentence shall be
applicable, then counsel for National shall have the
right to direct the defense of such claim, action,
suit or proceeding on behalf of National and the
reasonable fees and disbursements of such counsel
shall constitute damages hereunder.
9.2. INDEMNIFICATION BY NATIONAL.
National hereby agrees to indemnify, defend and hold harmless
NHC, its directors, officers, attorneys, employees, and agents and
consultants from and against all demands, claims, action, or causes of
action, assessments, losses, damages, judgments, arbitration awards,
liabilities (whether absolute or accrued, contingent or otherwise),
costs and expenses asserted against, imposed upon or incurred by NHC,
directly or indirectly, by reason of, resulting from or relating to
employee separation and/or discipline of employees by National.
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9.3. COOPERATION.
The parties agree that, except where conflicts prevent same,
they shall render to each other such assistance as may reasonably be
expected and to cooperate in good faith with each other in order to
insure the proper and adequate defense of any claim, action, suit or
proceeding brought by any third party. Where counsel has been selected
pursuant to this Agreement, National shall be entitled to rely on the
advice of such counsel in the conduct of the defense.
9.4. CONFIDENTIALITY.
The parties agree to cooperate in such a manner as to preserve
and uphold the confidentiality of all business records and the
attorney-client and work-product privileges.
10. MISCELLANEOUS.
10.1. INDEPENDENT CONTRACTOR.
National is an independent contractor to NHC and neither party
is the agent of the other.
10.2. ABSENCE OF GUARANTEE.
Neither National nor its representatives have made any
representation, warranty or guarantee to NHC of growth forecasts or
production increases in NHC's business due to the entry of NHC into
this Agreement or the utilization of National's services.
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10.3. ENTIRE AGREEMENT.
This constitutes the entire Agreement (including Exhibit A)
between the parties with regard to the subject matter herein. No prior
oral or written agreement, practice or course of dealing between the
parties relating to the subject matter herein shall supersede this
Agreement.
10.4. ASSIGNMENT/AMENDMENT.
Neither party can assign this Agreement nor any interest
herein without prior written consent from the other party. None of the
terms and provisions of this Agreement may be modified or amended
except by an instrument in writing executed by each party.
10.5. WAIVER.
Failure by either party to require performance by the other
party or to claim a material breach of any provision of this Agreement
will not be construed as a waiver of any subsequent breach nor
prejudice either party with regard to any subsequent action.
10.6. SEVERABILITY.
If any one or more of the provisions of this Agreement should
be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herewith shall not in any way be affected impaired or prejudiced
thereby and such provision deemed invalid, illegal or unenforceable
shall be construed beyond the reasonable control of National or NHC.
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10.7. SECTION HEADINGS AND INTERPRETATION.
The Section Headings of this Agreement are for convenience of
the parties only and in no way alter, modify, amend, limit or restrict
contractual obligations of the parties. This Agreement shall not be
construed for or against either party based upon the drafting of this
Agreement.
11. TERM.
The Agreement may be terminated by any party, with or without notice,
at any time.
12. APPLICABLE LAW.
This Agreement shall be construed and governed under the laws of the
State of Tennessee, except where ERISA is invoked.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
set forth their hands and seals through their duly authorized officers and
agents on the date as first written above.
Attest: NATIONAL HEALTH CORPORATION ("National")
________________________ By:_________________________________________
Secretary ____________________, President
Attest: NATIONAL HEALTHCARE CORPORATION ("NHC")
________________________ By:_________________________________________
Secretary ____________________, President
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EXHIBIT A
COMPENSATION FOR SERVICES OF NATIONAL EMPLOYEES
The compensation to be paid by NHC to National for services of National
employees shall be as follows:
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