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EXHIBIT 10.1
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (the "AGREEMENT") is made as of the day of
March, 1999 between STAFF BUILDERS, INC., a Delaware corporation ("STAFF
BUILDERS"), and TENDER LOVING CARE HEALTH CARE SERVICES, INC., a Delaware
corporation ("TLC").
RECITALS
WHEREAS, the Board of Directors of Staff Builders has determined that
it is in the best interest of Staff Builders and its shareholders to separate
its home health care business (the "HOME HEALTH CARE BUSINESS") from the
remainder of its business;
WHEREAS, Staff Builders and TLC have determined that it is necessary
and desirable, on the terms and conditions contemplated hereby, for Staff
Builders to distribute to shareholders of Staff Builders all of the outstanding
shares of TLC Common Stock (as defined below) held by Staff Builders;
WHEREAS, the Distribution (as defined below) is intended to qualify as
a tax-free spin-off under Sections 355 and 368 of the Code (as defined below);
WHEREAS, Staff Builders and TLC have further determined that it is
necessary and desirable to set forth the principal corporate transactions
required to effect the Distribution and to set forth other agreements that will
govern certain other matters following the Distribution;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
made herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 General. As used in this Agreement and the Exhibits hereto, the
following terms shall have the following meanings:
AAA: The American Arbitration Association.
ACTION: Any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or other regulatory or
administrative agency or commission or arbitration tribunal.
AFFILIATE: An Affiliate of any Person means a Person that controls, is
controlled by, or is under common control with such Person. As used herein,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management
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and polices of such entity, whether through ownership of voting securities or
other interests, by contract or otherwise.
AGENT: The distribution agent to be appointed by Staff Builders to
distribute to the shareholders of Staff Builders the shares of TLC Common Stock
held by Staff Builders pursuant to the Distribution.
ANCILLARY AGREEMENTS: All of the agreements, instruments,
understandings, assignments or other arrangements entered into in connection
with the transactions contemplated hereby, including, without limitation, the
Transitional Services Agreement, the Tax Allocation Agreement, the Employee
Benefits Agreement, the Sublease and the Trademark License Agreement.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: The Securities and Exchange Commission.
CONVEYANCE AND ASSUMPTION INSTRUMENTS: Collectively, the various
agreements, instruments and other documents entered into or to be entered into
to effect the transfer, prior to the Distribution Date and in the manner
contemplated by this Agreement or any other agreement or document contemplated
by this Agreement or otherwise, of TLC Assets to TLC (including, without
limitation, the intellectual property rights and other assets described in the
Information Statement) and the assumption of TLC Liabilities by TLC, in both
cases relating to the business of TLC as described in the Information Statement.
DISTRIBUTION: The distribution by Staff Builders on a pro rata basis to
holders of Staff Builders Common Stock of all of the outstanding shares of TLC
Common Stock owned by Staff Builders on the Distribution Date as set forth in
Article II.
DISTRIBUTION DATE: [ , 1999], or such other date as may be set by the
Board of Directors of Staff Builders in its sole discretion.
EMPLOYEE BENEFITS AGREEMENT: the Employee Benefits Agreement between
Staff Builders and TLC providing for, among other things, the employee benefit
plan arrangements that will apply to certain employees of Staff Builders who are
expected to become employees of TLC as of the Distribution Date.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXISTING STAFF BUILDERS OPTIONS: Options to acquire shares of Staff
Builders Common Stock held by employees of Staff Builders and/or its
Subsidiaries.
FORM 10: The General Form for Registration of Securities on Form 10,
including the Information Statement, pursuant to which all of the outstanding
TLC Common Stock will be registered under the Exchange Act, together with all
amendments thereto.
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GOVERNMENTAL APPROVALS: Any notices, reports or other filings to be
made, or any consents, registrations, approvals, permits or authorizations to be
obtained from any Governmental Authority.
GOVERNMENTAL AUTHORITY: Any federal, state, local, foreign or
international court, government, department, commission, board, bureau, agency,
official or other regulatory, administrative or governmental authority.
INFORMATION STATEMENT: The Information Statement portion of the Form 10
prepared in accordance with Regulation 14C under the Exchange Act.
LIABILITIES: Any and all debts, liabilities and obligations, absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising (unless otherwise specified in
this Agreement), including all costs and expenses relating thereto, and those
debts, liabilities and obligations arising under any law, rule, regulation,
Action, threatened Action, order or consent decree of any Governmental Authority
or any award of any arbitrator of any kind, and those arising under any
contract, commitment or undertaking.
PERSON: An individual, a general or limited partnership, a corporation,
a trust, a joint venture, an unincorporated organization, a limited liability
entity, any other entity and any Governmental Authority.
RECORD DATE: The close of business on the date to be determined by the
Staff Builders Board of Directors as the record date for determining
shareholders of Staff Builders entitled to receive shares of TLC Common Stock.
REORGANIZATION AGREEMENT: The Reorganization Agreement between Staff
Builders and TLC providing for the transfer from Staff Builders to TLC of the
shares of all direct and indirect subsidiaries which engage in the Home Health
Care Business.
STAFF BUILDERS COMMON STOCK: the Class A Common Stock, par value $.01
per share, and the Class B Common Stock, par value $.01 per share, of Staff
Builders.
SUBLEASE: The Sublease Agreement between Staff Builders and TLC
pursuant to which TLC subleases to Staff Builders certain premises located at
0000 Xxxxxx Xxxxxx, Xxxx Xxxxxxx, Xxx Xxxx.
SUBSIDIARY: A Subsidiary of any Person means any corporation or other
organization whether incorporated or unincorporated of which at least a majority
of the securities or interests having by their terms ordinary voting power to
elect at least a majority of the board of directors or other body or persons
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries; provided, however, that no Person that is not directly or
indirectly wholly-owned by any other Person shall be a Subsidiary of such other
Person unless such other Person controls, or has the right, power or ability to
control, that Person.
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TAX ALLOCATION AGREEMENT: the Tax Allocation Agreement between Staff
Builders and TLC, providing for, among other things, the allocation of
liabilities with respect to federal, state and local income taxes and the
procedures for filing returns with respect to such taxes.
TLC ASSETS:
(a) any and all assets that are expressly contemplated by the TLC
Contracts or this Agreement or any other agreement or document contemplated by
this Agreement (or any Schedule hereto or thereto) as assets to be transferred
to TLC or a Subsidiary designated by TLC;
(b) any assets reflected in TLC's consolidated balance sheet
dated February 28, 1999 as assets of TLC or any of its Subsidiaries, subject to
any dispositions of such assets subsequent to the date of such balance sheet;
and
(c) any and all assets owned or held immediately prior to the
Distribution Date by Staff Builders or any of its Subsidiaries that are used
primarily in the Home Health Care Business. The intention of this clause (c) is
only to rectify any inadvertent omission of transfer or conveyance of any assets
that, had the parties given specific consideration to such asset as of the date
hereof, would have otherwise been classified as a TLC Asset. No asset shall be
deemed to be a TLC Asset solely as a result of this clause (c) if such asset is
within the category or type of asset expressly covered by the subject matter of
an Ancillary Agreement.
TLC COMMON STOCK: the Common Stock, par value $.01 per share, of TLC.
TLC CONTRACTS: the following contracts and agreements to which Staff
Builders is a party or by which its or any of its Subsidiaries' assets are
bound, whether or not in writing:
(a) any contract or agreement entered into by Staff Builders or
any of its Subsidiaries or TLC or any of its Subsidiaries that relates primarily
to the Home Health Care Business;
(b) any contract or agreement that is otherwise expressly
contemplated pursuant to this Agreement or any of the Ancillary Agreements to be
assigned to TLC; and
(c) any guarantee, indemnity, representation, warranty or other
Liability of Staff Builders or any of its Subsidiaries in respect of any other
TLC Contract, any TLC Liability or the Home Health Care Business;
TLC EMPLOYEES: TLC Employees include current employees of TLC or any
of its Subsidiaries and any other employees who are hired by TLC or any of its
subsidiaries prior to the Distribution Date.
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TLC LIABILITIES:
(a) any and all Liabilities that are expressly contemplated by
this Agreement or any other agreement or document contemplated by this Agreement
or otherwise (or the Schedules hereto or thereto) as Liabilities to be assumed
by TLC;
(b) all Liabilities (other than taxes based on, or measured by
reference to, net income), including any Liabilities related to TLC Employees
and Liabilities, primarily relating to, arising out of or resulting from:
(i) the operation of the Home Health Care Business, as
conducted at any time prior to, on or after the Distribution Date
(including any Liability relating to, arising out of or resulting from
any act or failure to act or any statement made by any director,
officer, employee, agent or representative (whether or not such act or
failure to act or statement is or was within such Person's authority);
(ii) any TLC Assets (including any TLC Contracts); in any
such case whether arising before, on or after the Distribution Date;
(iii) the offer or sale of franchises with respect to the
Home Health Care Business or
(c) all Liabilities, excluding any intercompany indebtedness
forgiven pursuant to Section 2.4 of this Agreement, reflected as liabilities or
obligations of TLC or any of its Subsidiaries in TLC's consolidated balance
sheet, subject to any discharge of such Liabilities subsequent to the date of
such balance sheet.
TRADEMARK LICENSE AGREEMENT: the Trademark License Agreement between
Staff Builders Intl., Inc. ("SB INTL."), a New York corporation and wholly-owned
subsidiary of TLC, and Staff Builders, providing for, among other things, the
licensing by SB Intl. to Staff Builders of certain trademarks and related
rights.
TRANSITIONAL SERVICES AGREEMENT: the Transitional Services Agreement
between Staff Builders and TLC providing for, among other things, the provision
by TLC to Staff Builders of certain administrative and other services on a
transitional basis.
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ARTICLE II
THE DISTRIBUTION
2.1 THE DISTRIBUTION.
(a) Following the completion of the actions and the occurrence of
the events set forth in Section 2.2 hereof, or the mutual agreement of Staff
Builders and TLC that one or more of such actions need not be completed or one
or more of such events need not occur prior to the Distribution, and provided
that this Agreement shall not have been terminated at Staff Builders' election
pursuant to Section 7.2, on or prior to the Distribution Date, Staff Builders
will deliver to the Agent for the benefit of holders of record of Staff Builders
Common Stock on the Record Date, a single stock certificate, endorsed by Staff
Builders in blank, representing all of the outstanding shares of TLC Common
Stock then owned by Staff Builders, and shall cause the transfer agent for the
shares of Staff Builders Common Stock to instruct the Agent to distribute (or if
the Agent and the transfer agent for the shares of Staff Builders Common Stock
are the same, the Agent shall distribute) on the Distribution Date the
appropriate number of such shares of TLC Common Stock to each such holder or
designated transferee or transferees of such holder.
(b) Subject to Section 2.6 hereof, each holder of Staff Builders
Common Stock on the Record Date (or such holder's designated transferee or
transferees) shall be entitled to receive, in the Distribution, a number of
shares of TLC Common Stock equal to the number of outstanding shares of TLC
Common Stock owned by Staff Builders on the Record Date multiplied by a
fraction, the numerator of which is the number of shares of Staff Builders
Common Stock held by such holder on the Record Date, and the denominator of
which is the number of shares of Staff Builders Common Stock outstanding on the
Record Date.
(c) TLC and Staff Builders, as the case may be, will provide to
the Agent all share certificates and any information required in order to
complete the Distribution on the basis specified above.
2.2 ACTIONS AND EVENTS PRIOR TO THE DISTRIBUTION.
(a) TLC shall prepare and file the Form 10, and such amendments
or supplements thereto, as may be necessary in order to cause the same to become
and remain effective as required by law, including, but not limited to, filing
such amendments to the Form 10 as may be required by the Commission or federal
or state securities laws. The Form 10 shall have become effective on or prior to
the Distribution Date, and there shall be no stop-order in effect with respect
thereto.
(b) Staff Builders and TLC shall cooperate in preparing and
filing with the appropriate Governmental Authority any documents or statements
which are required to reflect the establishment of, or amendments to, any
employee benefit and other plans necessary or appropriate in connection with the
Distribution or the other transactions contemplated by this Agreement or any
other agreement or document contemplated by this Agreement or otherwise.
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(c) Staff Builders and TLC shall prepare and mail, prior to the
Distribution Date, to the holders of Staff Builders Common Stock, the
Information Statement and such other information concerning TLC, its business,
operations and management, the Distribution and such other matters as Staff
Builders and TLC shall reasonably determine and as may be required by law.
(d) Staff Builders and TLC shall take all other actions as may be
necessary or appropriate under the securities or blue sky laws of the United
States in connection with the Distribution and such actions and filings, where
applicable, shall have become effective or been accepted.
(e) Staff Builders and TLC shall have executed the Reorganization
Agreement and shall have consummated the transactions contemplated thereby.
(f) With respect to the TLC Assets and TLC Liabilities not
reflected in TLC's consolidated balance sheet dated as of the Distribution Date,
Staff Builders shall take or cause to be taken all actions necessary to cause
the transfer, assignment, delivery and conveyance to TLC (or if directed by TLC,
to one or more Subsidiaries of TLC) of all of Staff Builders' right, title and
interest in any TLC Assets, and TLC shall take or cause to be taken all action
necessary to assume and agree faithfully to perform and fulfill all TLC
Liabilities, regardless of when or where such liabilities arose, in accordance
with their respective terms. Staff Builders and TLC shall execute and deliver
all necessary Conveyance and Assumption Instruments in order to comply with this
Section 2.2(f).
(g) TLC shall use its reasonable best efforts to have a Form 211
filed with NASD Regulation, Inc. by a market maker in TLC Common Stock such that
the TLC Common Stock to be distributed in the Distribution is quoted on the OTC
Bulletin Board.
(h) A written opinion from Xxxxxxxx & X'Xxxx, LLP shall have been
delivered to the effect that, among other things, it appears that there is
substantial authority for viewing the Distribution as a tax-free distribution
for federal income tax purposes under Sections 355 and 368 of the Code, and such
opinion shall be in form and substance satisfactory to Staff Builders in its
sole discretion.
(i) Any material Governmental Approvals and consents necessary to
consummate the Distribution shall have been obtained and shall be in full force
and effect.
(j) No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Distribution shall be in effect and no other event outside
the control of Staff Builders shall have occurred or failed to occur that
prevents the consummation of the Distribution.
(k) The transactions contemplated hereby shall be in compliance
with applicable federal and state securities laws.
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(l) Each of TLC and Staff Builders shall have received such
consents, and shall have received executed copies of such agreements or
amendments of agreements, as they shall deem necessary in connection with the
completion of the transactions contemplated by this Agreement or any other
agreement or document contemplated by this Agreement or otherwise.
(m) All action and other documents and instruments deemed
necessary or advisable in connection with the transactions contemplated hereby
shall have been taken or executed, as the case may be, in form and substance
satisfactory to Staff Builders and TLC.
2.3 ANCILLARY AGREEMENTS. Each of Staff Builders and TLC will execute
and deliver (or cause SB Intl. to execute and deliver, in the case of the
Trademark License Agreement) all Ancillary Agreements to which it is a party,
including but not limited to, the Transitional Services Agreement, the Tax
Allocation Agreement, the Employee Benefits Agreement, the Trademark License
Agreement and the Sublease. All such Ancillary Documents shall become effective
on the Distribution Date.
2.4 FORGIVENESS OF INTERCOMPANY DEBT. Effective immediately prior to
the distribution date, staff builders hereby forgives all existing remaining
intercompany indebtedness owed by TLC to staff builders in order to provide an
appropriate level of working capital and equity at TLC as it is established as a
separate stand alone company. Each of staff builders and TLC shall execute any
documents and instruments necessary or appropriate to confirm such loan
forgiveness. Staff builders and TLC agree that staff builders shall treat the
loan forgiveness as a contribution to the capital of TLC in constructive
exchange for TLC common stock, provided that no additional shares of TLC common
stock shall be issued or issuable in connection with or as a result of such
contributions.
2.5 CONSENTS. Each party hereto understands and agrees that no party
hereto is, in this Agreement or in any other agreement or document contemplated
by this Agreement or otherwise, representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
agreements or the making of any filings or applications contemplated by this
Agreement will satisfy the provisions of any or all applicable agreements or the
requirements of any or all applicable laws or judgments, it being agreed and
understood that the party to which any assets were or are transferred shall bear
the economic and legal risk that any necessary consents or approvals are not
obtained or that any requirements of laws or judgments are not complied with.
Notwithstanding the foregoing, the parties shall use reasonable best efforts to
obtain all consents and approvals, to enter into all agreements and to make all
filings and applications which may be required for the consummation of the
transactions contemplated by this Agreement or any other agreement or document
contemplated by this Agreement or otherwise, including, without limitation, all
applicable regulatory filings or consents under federal or state laws and all
necessary consents, approvals, agreements, filings and applications.
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2.6 FRACTIONAL SHARES. As soon as practicable after the Distribution
Date, Staff Builders shall direct the Agent to determine the number of whole
shares and fractional shares of TLC Common Stock allocable to each holder of
record of Staff Builders Common Stock as of the Record Date, to aggregate all
such fractional shares and sell the whole shares obtained thereby in open-market
transactions in the Agent's sole discretion as to when, how, through which
broker-dealer and at what price to make such sales, and to cause to be
distributed to each such holder or for the benefit of each such holder, in lieu
of any fractional share, such holder's ratable share of the proceeds of such
sale, after making appropriate deductions of the amount required to be withheld
for federal income tax purposes and after deducting an amount equal to all
brokerage charges, commissions and transfer taxes attributed to such sale. Staff
Builders and the Agent shall use their reasonable best efforts to aggregate the
shares of Staff Builders Common Stock that may be held by any holder of record
thereof through more than one account in determining the fractional share
allocable to such holder.
ARTICLE III
ACKNOWLEDGEMENT OF MATERIAL FACTS
3.1 ORGANIZATION. Staff Builders and TLC acknowledge that each is duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with requisite corporate power to own their properties and assets and
to carry on their respective businesses as presently conducted or contemplated.
ARTICLE IV
MISCELLANEOUS LIABILITIES AND INDEMNIFICATION
4.1 TLC LIABILITIES; INDEMNIFICATION. TLC shall indemnify, defend and
hold harmless Staff Builders and its Subsidiaries from and against any and all
Liabilities arising out of or resulting from any of the following items (without
duplication):
(a) the employment of TLC Employees;
(b) the business of TLC and its Subsidiaries, including, without
limitation, the Home Health Care Business, and the TLC Assets;
(c) purchase orders, accounts payable, accrued compensation and
other accrued TLC Liabilities and other agreements which relate to the business
of TLC or any Subsidiary of TLC, including, without limitation, the Home Health
Care Business, or the TLC Assets; and
(d) any misstatement or omission of a material fact other than
misstatements or omissions with respect to Staff Builders or its Subsidiaries
based on information supplied in writing by Staff Builders in any documents or
filings prepared for purposes of compliance or qualification under applicable
securities laws in connection with the Distribution and related transactions,
including, without limitation, the Form 10.
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4.2 STAFF BUILDERS LIABILITIES; INDEMNIFICATION. Staff Builders shall
indemnify, defend and hold harmless TLC and its Subsidiaries from and against
any and all Liabilities arising out of or resulting from any of the following
items (without duplication):
(a) the business of Staff Builders and its Subsidiaries and the
Liabilities not assumed by TLC under the terms of this Agreement or any other
agreement or document contemplated by this Agreement; and
(b) any misstatement or omission of a material fact with respect
to Staff Builders or its Subsidiaries based on information supplied in writing
by Staff Builders in any documents or filings prepared for purposes of
compliance or qualification under applicable securities laws in connection with
the Distribution and related transactions, including, without limitation, the
Form 10.
4.3 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS.
(a) If any Person entitled to indemnification hereunder (an
"Indemnitee") shall receive notice or otherwise learn of the assertion by a
Person (including any Governmental Authority) of any claim or of the
commencement by any such Person of any Action (collectively, a "Third Party
Claim") with respect to which any party (an "Indemnifying Party") may be
obligated to provide indemnification to such Indemnitee pursuant to Section 4.1
or 4.2, or any other Section of this Agreement or any other agreement or
document contemplated by this Agreement or otherwise, such Indemnitee shall give
such Indemnifying Party written notice thereof within twenty (20) days after
becoming aware of such Third Party Claim. Any such notice shall describe the
Third Party Claim in reasonable detail. Notwithstanding the foregoing, the
failure of any Indemnitee or other Person to give notice as provided in this
Section 4.3(a) shall not relieve the Indemnifying Party of its obligations under
this Article IV, except to the extent that such Indemnifying Party is actually
prejudiced by such failure to give notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within thirty (30) days
after the receipt of notice from an Indemnitee in accordance with Section 4.3(a)
(or sooner, if the nature of such Third Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether the
Indemnifying Party will assume responsibility for defending such Third Party
Claim, which election shall specify any reservations or exceptions. After notice
from an Indemnifying Party to an Indemnitee of its election to assume the
defense of a Third Party Claim, such Indemnitee shall have the right to employ
separate counsel and to participate in (but not control) the defense,
compromise, or settlement thereof, but the fees and expenses of such counsel
shall be the expense of such Indemnitee except as set forth in Section 4.3(c).
(c) If an Indemnifying Party elects not to assume responsibility
for defending a Third Party Claim, or fails to notify an Indemnitee of its
election as provided in Section 4.3(b), such Indemnitee may defend such Third
Party Claim at the cost and expense (including allocated costs of in-house
counsel and other personnel) of the Indemnifying Party.
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(d) Unless the Indemnifying Party has failed to assume the
defense of the Third Party Claim in accordance with the terms of this Agreement,
no Indemnitee may settle or compromise any Third Party Claim without the consent
of the Indemnifying Party.
(e) No Indemnifying Party shall consent to entry of any judgment
or enter into any settlement of the Third Party Claim without the consent of the
Indemnitee if the effect thereof is to permit any injunction, declaratory
judgment, other order or other nonmonetary relief to be entered, directly or
indirectly, against any Indemnitee.
4.4 TAX LIABILITIES. Notwithstanding the provisions of Sections 4.1 and
4.2, all tax Liabilities relating to the business of TLC and the TLC Assets
including, without limitation, income taxes, franchise taxes, sales taxes, use
taxes, payroll taxes and employment taxes, shall be assumed by the party to whom
the Liability has been allocated in the Tax Allocation Agreement.
4.5 ADDITIONAL MATTERS.
(a) Any claim on account of a Liability which does not result
from a Third Party Claim shall be asserted by written notice given by the
Indemnitee to the Indemnifying Party. Such Indemnifying Party shall have a
period of thirty (30) days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such thirty
(30)-day period, such Indemnifying Party shall be deemed to have refused to
accept responsibility to make payment. If such Indemnifying Party does not
respond within such thirty (30)-day period or rejects such claim in whole or in
part, such Indemnitee shall be free to pursue such remedies as may be available
to such party as contemplated by this Agreement.
(b) In the event of payment by or on behalf of any Indemnifying
Party to any Indemnitee in connection with any Third Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of which such Indemnitee
may have the right, defense or claim relating to such Third Party Claim against
any claimant or plaintiff asserting such Third Party Claim or against any other
person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense (including allocated costs of
in-house counsel and other personnel) of such Indemnifying Party, in prosecuting
any subrogated right, defense or claim.
(c) In the event of an Action in which the Indemnifying Party is
not a named defendant, if either the Indemnitee or Indemnifying Party shall so
request, the parties shall endeavor to substitute the Indemnifying Party for the
named defendant. If such substitution or addition cannot be achieved for any
reason or is not requested, the named defendant shall allow the Indemnifying
Party to manage the Action as set forth in this Section and the Indemnifying
Party shall fully indemnify the named defendant against all costs of defending
the Action (including court costs, sanctions imposed by a court, attorneys'
fees, experts' fees and all other external expenses, and the allocated costs of
in-house counsel and other personnel), the costs of any judgment or settlement,
and the cost of any interest or penalties relating to any judgment or
settlement.
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(d) If for any reason, the indemnification provisions of Section
4.1 or 4.2 are unavailable to an Indemnified Party otherwise subject thereto,
the Indemnifying Party shall contribute to the amount paid by the Indemnified
Party as a result of such Liability in such proportion to reflect the relative
economic interests of the matter giving rise to the Liability.
4.6 REMEDIES CUMULATIVE. The remedies provided in this Article IV shall
be cumulative and shall not preclude assertion by an Indemnitee of any other
rights or the seeking of any and all other remedies against any Indemnifying
Party.
ARTICLE V
ACCESS TO INFORMATION AND SERVICES
5.1 PROVISION OF CORPORATE RECORDS. Upon TLC's request, Staff Builders
shall arrange as soon as practicable following the date hereof for the delivery
to TLC of existing corporate records in the possession of Staff Builders
relating to the business of TLC or TLC Assets, together with all active
agreements and active litigation files relating to the businesses of TLC and its
Subsidiaries, except to the extent such items are already in the possession of
TLC or its Subsidiaries. Such records shall be the property of TLC but shall be
available to Staff Builders for review and duplication until Staff Builders
shall notify TLC in writing that such records are no longer of use to Staff
Builders.
5.2 ACCESS TO INFORMATION. From and after the date hereof, Staff
Builders shall afford to TLC and its authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable best
efforts to give access to persons or firms possessing information) and
duplicating rights during normal business hours to all records, books,
contracts, instruments, computer data and other data and information
(collectively, "Information") within Staff Builders' or its Subsidiaries'
possession relating to the businesses of TLC or its Subsidiaries, insofar as
such access is reasonably required by TLC. TLC shall afford to Staff Builders
and its authorized accountants, counsel and other designated representatives
reasonable access (including using reasonable best efforts to give access to
persons or firms possessing Information) and duplicating rights during normal
business hours to Information within TLC's or its Subsidiaries' possession
relating to the business of TLC or its Subsidiaries prior to the Distribution or
to the business of Staff Builders or its Subsidiaries, insofar as such access is
reasonably required by Staff Builders. Information may be requested under this
Article V for, without limitation, audit, accounting, claims, litigation and tax
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing the transactions contemplated in this Agreement
or any other agreement or document contemplated by this Agreement or otherwise.
5.3 PRODUCTION OF WITNESSES. At all times from and after the date
hereof, each of Staff Builders and TLC shall use reasonable best efforts to make
available to the other, upon written request, its and its Subsidiaries'
officers, directors, employees and agents as witnesses to the extent that such
persons may reasonably be required, in connection with legal, administrative or
other proceedings in which the requesting party may from time to time be
involved.
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5.4 REIMBURSEMENT. Except to the extent otherwise contemplated by any
Ancillary Agreement, a party providing information to the other party under this
Article V shall be entitled to receive from the recipient, upon the presentation
of invoices therefor, payments for such amounts, relating to supplies,
disbursements and other out-of-pocket expenses, as may be reasonably incurred in
providing such information.
5.5 RETENTION OF RECORDS. For a period of six (6) years following the
date hereof, each of Staff Builders and TLC shall retain all Information
relating to the other and the other's Subsidiaries as of the Distribution Date,
except as otherwise required by law or set forth in an Ancillary Agreement or
except to the extent that such Information is in the public domain or in the
possession of the other party.
5.6 CONFIDENTIALITY. Subject to any contrary requirement of law and the
right of each party to enforce its rights hereunder in any legal action, each
party shall keep strictly confidential, and shall cause its employees and agents
to keep strictly confidential, any Information of or concerning the other party
or any of its Subsidiaries which it or any of its agents or employees may
acquire pursuant to, or in the course of performing its obligations under, any
provisions of this Agreement or any Ancillary Agreement; provided, however, that
such obligation to maintain confidentiality shall not apply to Information which
(i) at the time of disclosure was in the public domain or (ii) was received by
the receiving party from a third party who did not receive such Information from
the disclosing party under an obligation of confidentiality.
ARTICLE VI
COVENANTS
6.1 OTC BULLETIN BOARD. TLC hereby agrees to use its reasonable efforts
to cooperate with one or more market makers to effect and maintain the quotation
of the TLC Common Stock on the OTC Bulletin Board; provided, that nothing
contained herein shall restrict TLC from listing its shares on NASDAQ or a
national securities exchange instead of the OTC Bulletin Board.
6.2 ANCILLARY AGREEMENTS. The parties agree that they shall comply with
and provide all services and take any and all actions required to be provided or
taken by the terms of any and all of the Ancillary Agreements following the
effectiveness thereof.
6.3 MUTUAL ASSURANCES.
(a) In addition to the actions specifically provided for
elsewhere in this Agreement or any other agreement or document contemplated by
this Agreement or otherwise, Staff Builders and TLC agree to cooperate with
respect to the implementation of this Agreement or any other agreement or
document contemplated by this Agreement or otherwise, and to execute such
further documents and instruments as may be necessary to consummate and make
effective the transactions contemplated by this Agreement or any other agreement
or document contemplated by this Agreement or otherwise;
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(b) Staff Builders and TLC shall arrange, attend and participate
in joint meetings with corporate collaborators, suppliers, customers and others
to the extent necessary to assure the orderly transition of the business and
assets contemplated hereby, provided that nothing herein shall be deemed to
obligate either Staff Builders or TLC to take any action or reach any
understandings which may violate any applicable laws.
(c) Staff Builders and TLC agree to take any reasonable actions
necessary in order for the Distribution to qualify as a tax-free distribution
pursuant to Sections 355 and 368 of the Code.
ARTICLE VII
TERMINATION
7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at
any time prior to the Distribution Date by the mutual consent of Staff Builders
and TLC.
7.2 TERMINATION BY STAFF BUILDERS. Prior to the Record Date, Staff
Builders may terminate this Agreement at its election if its Board of Directors
determines that the consummation of the Distribution would, in light of the
circumstances at the time, not be in the best interests of the shareholders of
Staff Builders.
7.3 OTHER TERMINATION. This Agreement shall terminate if the
Distribution Date shall not have occurred on or prior to September 30, 1999.
7.4 EFFECT OF TERMINATION. In the event of any termination of this
Agreement, no party to this Agreement (or any of its directors or officers)
shall have any Liability or further obligation to any other party.
ARTICLE VIII
MISCELLANEOUS
8.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York.
8.2 CONSTRUCTION. Each provision of this Agreement shall be interpreted
in a manner to be effective and valid to the fullest extent permissible under
applicable law. The invalidity or unenforceability of any particular provision
of this Agreement shall not affect the other provisions of this Agreement which
shall remain in full force and effect.
8.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
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8.4 EXHIBITS. Exhibits to this Agreement shall be deemed to be an
integral part hereof, and schedules or exhibits to such Exhibits shall be deemed
to be an integral part thereof.
8.5 AMENDMENTS; WAIVERS. This Agreement may be amended or modified only
in a writing executed on behalf of Staff Builders and TLC. No waiver shall
operate to waive any further or future act and no failure to object of
forbearance shall operate as a waiver.
8.6 NOTICES. Notices hereunder shall be effective if given in writing
and delivered or mailed, postage prepaid, by registered or certified mail to:
STAFF BUILDERS, INC.
0000 Xxxxxx Xxxxxx
Xxxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, President
TENDER LOVING CARE HEALTH CARE SERVICES, INC.
0000 Xxxxxx Xxxxxx
Xxxx Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, President
8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, provided that this Agreement and the rights and obligations
contained herein or in any exhibit or schedule hereto shall not be assignable,
in whole or in part, without the prior written consent of the parties hereto and
any attempt to effect any such assignment without such consent shall be void.
8.8 PUBLICITY. Prior to the Distribution, each of TLC and Staff
Builders shall consult with each other prior to issuing any press releases or
otherwise making public statements with respect to the Distribution and prior to
making any filings with any Governmental Authority with respect thereto.
8.9 EXPENSES. Except as expressly set forth in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise, (i) if
the Distribution is not consummated, all third party fees, costs and expenses
paid or incurred in connection with the Distribution will be paid by Staff
Builders; and (ii) if the Distribution is consummated, all third party fees,
costs and expenses paid and incurred in connection with the Distribution will be
paid 50% by Staff Builders and 50% by TLC and to the extent a party has paid
more than its required share of expenses the other party shall promptly
reimburse it upon request therefor supported by appropriate documentation.
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8.10 HEADINGS. The article, section and paragraph headings contained in
this Agreement and in the Ancillary Agreements are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement
or any Ancillary Agreement.
8.11 ARBITRATION.
(a) All disputes or differences of any kind or nature between or
among the parties (such parties being referred to individually as a "DISPUTING
PARTY," and, together, as the "DISPUTING PARTIES") arising out of or in any way
relating to this Agreement or the transactions contemplated hereby, including
issues of arbitrability, and including, without limitation, any dispute between
the parties under Article IV, which the parties are unable to resolve themselves
shall be submitted to and resolved by arbitration before a single arbitrator in
accordance with the commercial arbitration rules of the AAA. Such arbitrator
shall have substantial professional experience with regard to corporate legal
matters.
(b) The arbitrator shall consider the dispute at issue in New
York, New York, at a mutually agreed upon time within sixty (60) days (or such
longer period as may be acceptable to the Disputing Parties or as directed by
the arbitrator) of the designation of the arbitrator. The arbitration proceeding
shall be held in accordance with the rules for commercial arbitration of the AAA
in effect on the date of the initial request by the Disputing Party, that gave
rise to the dispute to be arbitrated (as such rules are modified by the terms of
this Agreement or may be further modified by mutual agreement of the Disputing
Parties) and shall include an opportunity for the parties to conduct discovery
in advance of the proceeding. Notwithstanding the foregoing, the Disputing
Parties shall agree that they will attempt, and they intend that they and the
arbitrator should use their best efforts in that attempt, to conclude the
arbitration proceeding and have a final decision from the arbitrator within one
hundred twenty (120) days from the date of selection of the arbitrator;
provided, however, that the arbitrator shall be entitled to extend such one
hundred twenty (120) day period for a total of two one hundred twenty (120) day
periods. The arbitrator shall deliver a written award with respect to the
dispute to each of the parties, who shall promptly act in accordance therewith.
Each Disputing Party to such arbitration agrees that any award of the arbitrator
shall be final, conclusive and binding and that it will not contest any action
by any other party thereto in accordance with an award of the arbitrator. It is
specifically understood and agreed that any party may enforce any award rendered
pursuant to the arbitration provisions of this Section 8.11 by bringing suit in
any court of competent jurisdiction.
(c) All costs and expenses attributable to the arbitrator shall
be allocated among the parties to the arbitration in such manner as the
arbitrator shall determine to be appropriate under the circumstances.
(d) The parties hereto recognize and agree that in the event of a
breach by a party of this Section 8.11, money damages would not be an adequate
remedy to the injured party for such breach and it would be impossible to
ascertain or measure with any degree of accuracy the damages sustained by such
injured party therefrom. Accordingly, if there should be a breach or threatened
breach by a party of the provisions of this Section 8.11, the injured party
shall be entitled to an injunction restraining the breaching party from any
breach without showing or proving actual damage sustained by the injured party.
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8.12 ENTIRE AGREEMENT. This Agreement contains the full understanding
of the parties with respect to the subject matter hereof and supersedes all
prior understandings and writings relating thereto. No waiver, alteration or
modification of any of the provisions hereof shall be binding unless made in
writing and signed by the parties.
[Remainder of Page Intentionally Omitted]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
STAFF BUILDERS, INC.
By:
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Title:
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TENDER LOVING CARE HEALTH
CARE SERVICES, INC.
By:
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Title:
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