Employee Benefits Agreement

EMPLOYEE BENEFITS AGREEMENT


THIS EMPLOYEE BENEFITS AGREEMENT is made on October 20, 1999 (the "Effective Date") 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 from the remainder of its business;


WHEREAS, to effect the separation of its home health care business, Staff Builders intends on the date hereof (the "Distribution Date") to distribute to its shareholders, in a pro-rata distribution of a dividend (the "Distribution") all shares of TLC common stock held by Staff Builders;


WHEREAS, certain employees of the "controlled group" (as defined in Section 414 of the Internal Revenue Code of 1986, as amended, the "Code") of Staff Builders are expected to become employees of TLC as of the Distribution Date;


WHEREAS, this Agreement sets forth the employment and employee benefit plan arrangements that will apply to certain employees of the Staff Builders controlled group who are expected to become employees of TLC as of the Distribution Date, and any other employees who are hired by TLC prior to the Distribution Date (all of such employees being referred to herein as the "TLC Employees"); and


WHEREAS, this Agreement is entered into pursuant to the Distribution Agreement dated on the date hereof between Staff Builders and TLC (the "Distribution Agreement");


NOW THEREFORE, in consideration of the mutual covenants and agreements made herein, the parties hereto agree as follows: 2


SECTION 1 - TERMINATION OF COVERAGE OF TLC
SECTION 1 EMPLOYEES UNDER STAFF BUILDERS PLANS


1.1 Termination of Coverage of TLC Employees under Staff Builders Plans


Effective as of the Distribution Date, TLC Employees shall cease to be eligible to actively participate in the following employee benefit plans offered by the Staff Builders controlled group:


(a) Staff Builders welfare plans (consisting of health, basic life insurance, accidental death and dismemberment insurance, supplemental life insurance, long-term disability, supplemental disability, business travel accident insurance, employee assistance plans and cafeteria plans, as set forth in Exhibit 1 (the "Staff Builders Welfare Plans");.


(b) the Staff Builders 401(k) savings plan (the "Staff Builders 401(k) Plan"); and


(c) the Staff Builders employee stock purchase and stock option plans, as set forth in Exhibit 1 (the "Staff Builders Stock Plans").


As of the Distribution Date, Staff Builders will have no further obligation to cover the TLC Employees under such plans (collectively, "Staff Builders Plans"); provided, however, that nothing in this Section 1.1 is intended to abrogate, discontinue or terminate stop loss coverage under any policy maintained by Staff Builders to the extent that it applies to medical claims and expenses resulting from injury or illness to TLC employees incurred prior to the Distribution Date, but for which no claim was filed, or is filed after such date.


1.2 Notice to Administrators and Insurers


To the extent required, Staff Builders agrees to inform, on or prior to the Distribution Date, all relevant third party administrators and insurance carriers, that coverage of the TLC Employees in the Staff Builders Plans ceases as of the Distribution Date.


1.3 Amendment and Termination of Plans


Nothing in this Agreement, including without limitation, the agreement of Staff Builders and TLC to maintain employee benefit plans or to make contributions to such plans for any period, shall be construed as a limitation of the right of Staff Builders or TLC to amend or terminate one or more of such plans in accordance with the terms of this Agreement and applicable law.


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SECTION 2 - ESTABLISHMENT OF TLC EMPLOYEE BENEFIT PLANS


2.1 Establishment of TLC 401(k) Plan


(a) Effective as of the Distribution Date, TLC's subsidiaries will cease to be participating Employers under the Staff Builders 401(k) Plan and TLC Employees will cease to accrue any benefits under such plan. Effective on the Distribution Date, TLC will establish a 401(k) savings plan (the "TLC 401(k) Plan") substantially the same in all respects to the Staff Builders 401(k) Plan as in effect on that date.


(b) As soon as practicable following the Distribution Date and the establishment of the TLC 401(k) Plan, Staff Builders shall direct the trustee of the Staff Builders 401(k) Plan to transfer to the trustee of the TLC 401(k) Plan (which shall accept such transfer) all assets (including, but not limited to, outstanding participant loans) and liabilities in the individual accounts of TLC Employees in the Staff Builders 401(k) Plan ("Transfer of Account Balances").


(c) As of the date of the Transfer of Account Balances, TLC and the TLC 401(k) Plan shall assume all liabilities for all accrued benefits under the Staff Builders 401(k) Plan for the TLC Employees that are transferred to the TLC 401(k) Plan, and the Staff Builders 401(k) Plan shall be relieved of all liabilities for all such transferred benefits.


(d) The TLC 401(k) Plan shall provide the following:


1. that TLC Employees shall participate in the TLC 401(k) Plan to the extent that they were eligible to participate in the Staff Builders 401(k) Plan immediately prior to the Distribution Date, and shall receive credit for eligibility, vesting, and benefit accrual for all service credited for such purposes under the Staff Builders 401(k) Plan;


2. that the compensation paid by Staff Builders to the TLC Employees that was recognized under the Staff Builders 401(k) Plan shall be credited for all applicable purposes under the TLC 401(k) Plan; and


3. that with respect to any amounts transferred from the Staff Builders 401(k) Plan, the TLC 401(k) Plan will preserve any benefits, rights and features protected under Section 411(d)(6) of the Internal Revenue Code ("Code").


2.2 Establishment of TLC Welfare Plans


(a) Effective upon the Distribution Date, TLC shall adopt, or cause to be adopted, welfare plans ("TLC Welfare Plans") substantially the same in all material respects to the corresponding plans offered by Staff Builders as of the Distribution Date, as set forth on Exhibit 1.


2.3 COBRA


Effectiv ...