<PAGE>
THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(D) OF REGULATION S-T
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Staff Builders, Inc.
- - - - - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - - - - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------------
3) Filing Party:
----------------------------------------------------------------------------
4) Date Filed:
----------------------------------------------------------------------------
<PAGE>
PRELIMINARY COPY
STAFF BUILDERS, INC.
1983 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Staff
Builders, Inc., a Delaware corporation (the "Company") will be held at 1983
Marcus Avenue, Lake Success, New York, on August 16, 1995, at 10:00 A.M. (New
York Time) for the following purposes:
1) To elect two Class B Directors, with each such Class B Director to
serve for a three-year term and until his successor is elected and qualified;
2) To consider and vote upon a plan of recapitalization by which (i)
Article FOURTH of the Restated Certificate of Incorporation of the Company would
be amended to eliminate the Company's time phased voting rights plan and the
currently authorized 50,000,000 shares of common stock, $.01 par value per
share, and to authorize for issuance 50,000,000 shares of Class A Common Stock,
$.01 par value per share, and 1,350,000 shares of Class B Common Stock, $.01 par
value per share, subject in the case of the Class B Common Stock, to adjustment,
and (ii) each outstanding share of common stock which is entitled to ten votes
per share as of both the record date of the Annual Meeting and the effective
date of the recapitalization (assuming for these purposes only that the
effective date of the recapitalization is a record date for a meeting of the
Company's stockholders) would be reclassified, changed and converted
automatically into one share of Class B Common Stock and each other share of
outstanding common stock would be reclassified, changed and converted
automatically into one share of Class A Common Stock; and
3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 19, 1995, are
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
DAVID SAVITSKY
SECRETARY
June __, 1995
IMPORTANT: Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted at the meeting.
Accordingly, after reading the enclosed Proxy Statement, you are
urged to SIGN, DATE and RETURN the enclosed proxy in the envelope
provided which requires no postage if mailed in the United States.
<PAGE>
PRELIMINARY COPY
STAFF BUILDERS, INC.
1983 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
------------------
PROXY STATEMENT
------------------
This Proxy Statement is being mailed to stockholders in connection with the
solicitation of proxies by the Company's Board of Directors for use at the
Annual Meeting of Stockholders of the Company to be held on August 16, 1995, and
any adjournment thereof. A copy of the notice of meeting accompanies this Proxy
Statement. The first date on which this Proxy Statement and accompanying proxy
are being sent to stockholders is on or about June 26, 1995.
SOLICITATION OF PROXIES
All shares represented by proxies received pursuant to this solicitation
will be voted as instructed. If no instructions are given, the persons named in
the accompanying proxy intend to vote (i) for the nominees named herein as Class
B Directors of the Company and (ii) for the plan of recapitalization of the
Company (the "Plan of Recapitalization") by which (A) Article FOURTH of the
Restated Certificate of Incorporation of the Company would be amended to
eliminate the Company's time phased voting rights plan and the currently
authorized 50,000,000 shares of common stock, $.01 par value per share, and to
authorize for issuance 50,000,000 shares of Class A Common Stock, $.01 par value
per share, and 1,350,000 shares of Class B Common Stock, $.01 par value per
share, subject in the case of the Class B Common Stock, to adjustment, and (B)
each outstanding share of common stock which is entitled to ten votes per share
as of both the record date of the Annual Meeting and the effective date of the
recapitalization (assuming for these purposes only that the effective date of
the recapitalization is a record date for a meeting of the Company's
stockholders) would be reclassified, changed and converted automatically into
one share of Class B Common Stock and each other share of outstanding common
stock would be reclassified, changed and converted automatically into one share
of Class A Common Stock (the transactions contemplated by the Plan of
Recapitalization are hereinafter referred to as the "Recapitalization").
Stockholders who execute proxies may revoke them by delivering subsequently
dated proxies or by giving written notice of revocation to the Secretary of the
Company at any time before such proxies are voted. No proxy will be voted if
the stockholder attends the meeting and elects to vote in person.
The Board of Directors does not know of any matter other than as set forth
herein that is expected to be presented for consideration at the meeting.
However, if other matters properly come before the meeting, the persons named in
the accompanying proxy intend to vote thereon in accordance with their judgment.
A copy of the Annual Report of the Company containing financial statements
for the year ended February 28, 1995, is included herewith, but is not to be
considered part of the proxy soliciting materials.
<PAGE>
RECORD DATE, OUTSTANDING VOTING SECURITIES,
VOTING RIGHTS AND VOTE REQUIRED
Only stockholders of record at the close of business on June 19, 1995 (the
"Record Date"), will be entitled to notice of and to vote at the meeting and any
adjournment thereof. As of the Record Date ________ shares of the Company's
Common Stock were outstanding.
Each holder of record of Common Stock, except in certain situations, is
entitled to ten votes for each share of Common Stock that has been beneficially
owned by the current beneficial owner for at least 48 consecutive calendar
months (dating from the first day of the first calendar month on or after the
holder acquired beneficial ownership of such share) prior to the Record Date for
the Annual Meeting ("Long-Term Shares"). Each holder of record of a share of
Common Stock that has not been beneficially owned by the current beneficial
owner for at least such a 48 consecutive calendar month period prior to the
Record Date (with certain limited exceptions) is entitled to only one vote per
share ("Short-Term Shares"). A change in beneficial ownership of a share of
Common Stock is deemed to have occurred whenever there is a change in the person
or persons who have direct voting or investment power with respect to such
share. Voting and investment power may be held simultaneously by more than one
person and shares may have more than one beneficial owner. Any change in the
identity of persons who have or share beneficial ownership of shares will
normally constitute a change in beneficial ownership. However, no change in
beneficial ownership of a share of Common Stock will be deemed to have occurred
upon (i) transfer by gift, (ii) transfer by devise, bequest or otherwise through
the laws of inheritance or descent, (iii) the substitution of a trustee,
guardian, committee of an incompetent, conservator or custodian, (iv) the
withdrawal or addition of beneficiaries of a trust or distribution from a trust
to the beneficiaries, in each case, under the terms of the trust, or (v) a
transfer if the circumstances surrounding it clearly demonstrate that no
material change in beneficial ownership has occurred. A holder may own both
Long-Term Shares and Short-Term Shares, in which case he will be entitled to ten
votes for each Long-Term Share and one vote for each Short-Term Share. Except
for the number of votes attached to each, Long-Term Shares and Short-Term Shares
are identical in all respects and constitute a single class of stock.
The Company's Board of Directors has established procedures to determine
whether a stockholder's shares of Common Stock are Long-Term Shares or Short-
Term Shares. Under the procedures, any share of Common Stock held of record on
the Record Date shall be presumed to have been owned beneficially by the holder
of record for the period indicated on the transfer books of the Company
maintained by the Company's transfer agent (the "Transfer Agent"), except for
shares held in "street" or "nominee" name or by a broker, clearing agency,
voting trustee, bank, trust company or other nominee. These nominee shares
shall be presumed to be Short-Term Shares, which presumption may be rebutted by
the beneficial owner delivering to the Company, on or before August 9, 1995, a
notarized affidavit, executed under penalty of perjury, stating the name of the
beneficial owner and the date upon which beneficial ownership was acquired,
together with a copy of the confirmation or other appropriate documentation
evidencing the transaction in which beneficial ownership was acquired or, in the
case of shares held of record by a voting trustee, a certified copy of the
voting trust agreement, together with a notarized affidavit of the voting
trustee, executed under penalty of perjury, stating the name of the beneficial
owner and the date upon which beneficial ownership was acquired.
- 2 -
<PAGE>
Holders claiming that shares are Long-Term Shares by virtue of a gift must
deliver to the Company, on or before August 9, 1995, an affidavit of the donor
stating, among other things, that (i) the shares were acquired by the donor at
least 48 consecutive calendar months (dating from the first day of the first
calendar month on or after the donor acquired beneficial ownership of such
shares) prior to the Record Date, and (ii) the shares were transferred to the
donee without any consideration.
Holders claiming that shares are Long-Term Shares by virtue of transfer by
will must deliver to the Company, on or before August 9, 1995, (i) a certified
copy of the transferor's will, (ii) the court decree evidencing probate of such
will, (iii) a current certificate of letters testamentary, and (iv) a notarized
affidavit of the personal representative of the decedent's estate, executed
under penalty of perjury, stating that the decedent acquired the shares at least
48 consecutive calendar months (dating from the first day of the first calendar
month on or after the decedent acquired beneficial ownership of such shares)
prior to the Record Date.
The Board of Directors also has established procedures by which holders may
demonstrate that shares are Long-Term Shares if they have been acquired through
intestate succession, through distribution from a trust, through divorce, legal
separation or annulment of a marriage, or by gift under the Uniform Gifts or
Transfers to Minors Act, or if they are shares held by a guardian, committee of
an incompetent or conservator or otherwise acquired in a manner in which it is
clearly demonstrable that no change in beneficial ownership has occurred.
ANY HOLDER OF RECORD WHO ACQUIRED RECORD OWNERSHIP OF HIS SHARES LESS THAN
48 CONSECUTIVE CALENDAR MONTHS (DATING FROM THE FIRST DAY OF THE FIRST CALENDAR
MONTH ON OR AFTER THE HOLDER ACQUIRED BENEFICIAL OWNERSHIP OF SUCH SHARES) PRIOR
TO THE RECORD DATE FOR THE ANNUAL MEETING AND WHO WISHES TO ASSERT THAT NO
CHANGE IN BENEFICIAL OWNERSHIP HAS OCCURRED FOR AT LEAST SUCH A 48 CONSECUTIVE
CALENDAR MONTH PERIOD PRIOR TO THE RECORD DATE FOR THE ANNUAL MEETING SHOULD
OBTAIN A COPY OF THE PROCEDURES BY MAILING A REQUEST TO GENERAL COUNSEL, STAFF
BUILDERS, INC., 1983 MARCUS AVENUE, LAKE SUCCESS, NEW YORK 11042. The Board of
Directors shall make the final determination whether shares are Long-Term Shares
or Short-Term Shares.
New York State requires the approval by the Public Health Council of the
New York State Department of Health ("NYPHC") of any change in the "controlling
person" of an operator of a licensed health care services agency (an "LHCSA").
Control of an entity is presumed to exist if any person owns, controls or holds
the power to vote securities representing 10% or more of the outstanding voting
securities or voting rights of such entity. The Company has 16 offices in New
York State which are LHCSAs.
The affirmative vote of a majority of the votes of holders of shares of
Common Stock represented at the meeting is necessary for the election of the
nominees for Class B Directors. The affirmative vote of a majority of the Long-
Term Shares outstanding as of the Record Date, voting as a class, and the Short-
Term Shares outstanding as of the Record Date, voting as a class, is necessary
for the approval of the Plan of Recapitalization, including the related
amendments to the Company's Restated Certificate of Incorporation. As of the
Record Date, there are (i) __________ Long-Term Shares held of record, of which
_________ are held by the executive officers and directors of the Company, and
(ii) ___________
- 3 -
<PAGE>
Short-Term Shares held of record, of which __________ are held by the executive
officers and directors of the Company. Assuming there are no other outstanding
Long-Term Shares, the executive officers and directors will control (i)
approximately _____% of the votes of Long-Term Shares as a class entitled to be
cast at the Annual Meeting, (ii) approximately _____% of the votes of Short-Term
Shares as a class entitled to be cast at the Annual Meeting, and (iii)
approximately ___% of the total votes entitled to be cast at the Annual Meeting.
The executive officers and directors of the Company intend to vote their shares
for the election of the nominees for Class B Directors and for the approval of
the Plan of Recapitalization, including the related amendments to the Company's
Restated Certificate of Incorporation.
With respect to abstentions, the shares will be considered present at the
meeting for a particular proposal, but since they are not affirmative votes for
the proposal, they will have the same effect as a vote withheld on the election
of directors or a vote against such other proposal, as the case may be. If a
broker indicates on the proxy that it does not have discretionary authority as
to certain shares to vote on a particular proposal, those shares will not be
considered as present at the meeting and entitled to vote in respect of that
proposal.
There is a box on the Proxy card to vote for or to withhold authority to
vote for the nominees for Class B Directors, and a line on which the holder may
insert the name of either nominee in order to withhold authority to vote for
such nominee. There is also a box to vote for or against or to abstain on the
Plan of Recapitalization, including the related amendments to the Company's
Restated Certificate of Incorporation.
- 4 -
<PAGE>
OWNERSHIP OF SECURITIES BY CERTAIN BENEFICIAL
OWNERS, DIRECTORS AND OFFICERS
The following table sets forth information as of the Record Date with
respect to the beneficial ownership of the Company's Common Stock and Class A
Preferred Stock by (i) each person known to the Company who beneficially owns
more than 5% of any class of voting securities of the Company, (ii) each
director of the Company, (iii) the Company's Chief Executive Officer and four
other executive officers, and (iv) all directors and executive officers of the
Company as a group.
COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP(1)
-----------------------------------
NUMBER OF NUMBER OF PERCENTAGE OF
LONG-TERM SHORT-TERM OUTSTANDING
NAME OF BENEFICIAL OWNER SHARES(2) SHARES(3) SHARES OWNED
--------- --------- ------------
<S> <C> <C> <C>
Stephen Savitsky (4). . . . . . . . . . . . 443,790 1,339,724(5)(6) 7.3%
David Savitsky (4). . . . . . . . . . . . . 479,589(7) 1,303,423(6)(8)(9) 7.3%
Bernard J. Firestone. . . . . . . . . . . . 2,100(10) 1,500(11) *
Jonathan J. Halpert . . . . . . . . . . . . -- -- --
Donald Meyers . . . . . . . . . . . . . . . -- 1,300 *
Gary Tighe. . . . . . . . . . . . . . . . . -- 105,000(12) *
Sharon Hamilton . . . . . . . . . . . . . . -- 82,500(13) *
Edward Teixeira . . . . . . . . . . . . . . -- 45,300(14) *
S Squared Technology Corp. (15) . . . . . . -- 3,181,000 13.6%
Horsburgh Carlson Investment
Management, Inc.(16). . . . . . . . . . . 67,000 1,323,000 6.0%
All executive officers and
directors as a group (8 persons). . . . . . 823,427 2,641,307(6)(17) 13.4%
CLASS A PREFERRED STOCK(18)
<CAPTION>
AMOUNT AND PERCENTAGE OF
NATURE OF OUTSTANDING SHARES
NAME OF BENEFICIAL OWNER (19) BENEFICIAL OWNERSHIP OWNED
----------------------------- -------------------- ------------------
<S> <C> <C>
Stephen Savitsky. . . . . . . . . . . . . . 333-1/3 50%
David Savitsky. . . . . . . . . . . . . . . 333-1/3 50%
All executive officers
and directors as a group (8 persons). . . . 666-2/3 100%
<FN>
- - - - - - ---------------------------------
* Less than one percent
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days of the date of this table upon the
exercise of options. Each beneficial owner's
- 5 -
<PAGE>
percentage of ownership is determined by assuming that options that are
held by such person (but not those held by any other person) and which are
exercisable within 60 days of the date of this table have been exercised.
Except as indicated in the footnotes that follow, shares listed in the
table are held with sole voting and investment power.
(2) Each holder of record of Common Stock, except in certain circumstances, is
entitled to ten votes for each share of Common Stock that has been
beneficially owned by the current beneficial owner for at least 48
consecutive calendar months (dating from the first day of the first
calendar month on or after the holder acquired beneficial ownership of such
share) prior to the Record Date for any vote. Such shares are referred to
as "Long-Term Shares."
(3) Each holder of record of shares of Common Stock that have not been
beneficially owned by the current beneficial owner for at least 48
consecutive calendar months (dating from the first day of the first
calendar month on or after the holder acquired beneficial ownership of
such shares) prior to the Record Date (with certain limited exceptions) is
entitled to only one vote per share. Such shares are referred to as
"Short-Term Shares."
(4) The address of each of these persons is c/o Staff Builders, Inc., 1983
Marcus Avenue, Lake Success, New York 11042. Each of these persons has
sole power with respect to the voting and investment of the shares which he
owns, except as follows: on November 1, 1991, Ephraim Koschitzki, a former
executive officer and director of the Company, granted to Stephen Savitsky
and David Savitsky a ten year revocable proxy to vote all shares of Common
Stock now or hereafter owned of record by him. The Company believes that
Mr. Koschitzki beneficially owns 339,492 shares of Common Stock, of which
101,052 are Long-Term Shares and 238,440 are Short-Term Shares. As a
result, Stephen Savitsky and David Savitsky have sole voting and investment
power with respect to 1,444,022 and 1,443,520 shares of Common Stock,
respectively, and they have shared voting power with respect to the 339,492
shares of Common Stock beneficially owned by Mr. Koschitzki.
(5) Includes options to purchase 250,000 shares of Common Stock under the 1994
Performance-Based Stock Option Plan, options to purchase 200,000 shares of
Common Stock under the 1993 Stock Option Plan, options to purchase 334,000
shares of Common Stock under the 1986 Non-Qualified Stock Option Plan and
options to purchase 214,577 shares of Common Stock under the 1983 Incentive
Stock Option Plan.
(6) Also includes options to purchase 225,440 and 13,000 shares of Common Stock
granted to Ephraim Koschitzki under the 1986 Non-Qualified Stock Option
Plan and 1983 Incentive Stock Option Plan, respectively, which are subject
to the ten year revocable proxy referred to in footnote 4 above.
(7) Includes 1,000 shares of Common Stock held by Mr. Savitsky's wife as
trustee for the benefit of their three children. Mr. Savitsky disclaims
beneficial ownership of these shares.
(8) Includes options to purchase 250,000 shares of Common Stock under the 1994
Performance-Based Stock Option Plan, options to purchase 200,000 shares of
Common Stock under the 1993 Stock Option Plan, options to purchase 320,000
shares of Common Stock under the 1986 Non-
- 6 -
<PAGE>
Qualified Stock Option Plan and options to purchase 214,577 shares of
Common Stock under the 1983 Incentive Stock Option Plan.
(9) Includes 150 shares of Common Stock held by David Savitsky's wife.
Mr. Savitsky disclaims beneficial ownership of these shares.
(10) Includes 1,000 shares of Common Stock held by Dr. Firestone's wife. Dr.
Firestone disclaims beneficial ownership of these shares.
(11) Includes options to purchase 1,500 shares of Common Stock under the 1986
Non-Qualified Stock Option Plan.
(12) Includes options to purchase 25,000 shares of Common Stock under the 1994
Performance-Based Stock Option Plan, options to purchase 20,000 shares of
Common Stock under the 1986 Non-Qualified Stock Option Plan and options to
purchase 60,000 shares of Common Stock under the 1983 Incentive Stock
Option Plan.
(13) Includes options to purchase 12,500 shares of Common Stock under the 1994
Performance-Based Stock Option Plan, options to purchase 20,000 shares of
Common Stock under the 1986 Non-Qualified Stock Option Plan and options to
purchase 50,000 shares of Common Stock under the 1983 Incentive Stock
Option Plan.
(14) Includes options to purchase 12,500 shares of Common Stock under the 1994
Performance-Based Stock Option Plan, options to purchase 15,000 shares of
Common Stock under the 1986 Non-Qualified Stock Option Plan and options to
purchase 17,800 shares of Common Stock under the 1983 Incentive Stock
Option Plan.
(15) S Squared Technology Corp. ("S Squared"), a registered investment adviser,
is located at 515 Madison Avenue, New York, New York 10022. Includes
3,039,000 shares for which S Squared has sole voting and sole investment
power and 142,000 shares for which S Squared has shared voting and sole
investment power. The shares are owned by limited partnerships for which S
Squared is the sole general partner, by advisory clients of S Squared, and
by Seymour Goldblatt, the principal of S Squared, and members of his
family. As of the Record Date there are _______ Long-Term Shares held of
record. Assuming there are no other outstanding Long-Term Shares, the
shares of Common Stock beneficially owned by S Squared, all of which are
Short-Term Shares entitled to one vote per share, represent _____% of the
voting power of all outstanding shares of Common Stock.
(16) Horsburgh Carlson Investment Management, Inc. ("HCIM"), a registered
investment adviser, is located at 675 Third Avenue, New York, New York
10017. HCIM has shared voting and shared dispositive power with respect to
these shares. Such shares are owned by advisory clients of HCIM.
(17) Includes options to purchase 550,000 shares of Common Stock under the 1994
Performance-Based Stock Option Plan, options to purchase 400,000 shares of
Common Stock under the 1993 Stock Option Plan, options to purchase 710,500
shares of Common Stock under the 1986 Non-
- 7 -
<PAGE>
Qualified Stock Option Plan and options to purchase 556,954 shares of
Common Stock under the 1983 Incentive Stock Option Plan.
(18) The approval of holders of two-thirds of the shares of Class A Preferred
Stock is required to approve certain business combinations with respect to
the Company.
(19) Each person has sole power with respect to the voting and investment of the
shares which he owns.
</TABLE>
PROPOSAL 1 -- ELECTION OF CLASS B DIRECTORS
The Board of Directors is divided into three classes. One class is elected
each year to hold office for a three-year term. Class B is the class whose term
will expire at the Annual Meeting. This class consists of two directors, Dr.
Bernard J. Firestone and Mr. Donald Meyers, who are nominees of the Board of
Directors. Each nominee for Class B Director, if elected by a majority of the
votes cast at the Annual Meeting, will serve until the 1998 Annual Meeting and
until his successor is elected and qualified. Unless otherwise instructed by
the stockholders, it is intended that the shares represented by the proxies in
the accompanying form will be voted for such nominees. If either nominee should
become unavailable to serve for any reason, which the Board of Directors does
not presently anticipate, the proxies will be voted for any substitute nominee
who may be selected by the Board of Directors prior to or at the meeting, the
Board of Directors may reduce the number of directors to eliminate the vacancy
for which the unavailable nominee was nominated or the Board of Directors may
elect to fill the vacancy at a later date after selecting an appropriate
nominee.
In addition to the Class B Directors, the Board of Directors consists of
three other directors. Mr. Stephen Savitsky is a Class C Director whose term
expires at the 1996 Annual Meeting and Mr. David Savitsky and Dr. Jonathan J.
Halpert are Class A Directors whose terms expire at the 1997 Annual Meeting.
The Company's By-Laws require that notice of nomination of persons for
election to the Board of Directors, other than those made by the Board of
Directors, must be submitted in writing to the Secretary of the Company not less
than thirty nor more than sixty days prior to the Annual Meeting. The notice
must set forth certain information concerning the nominees and the stockholders
making the nominations. Also, within the same period, the Secretary of the
Company must receive each nominee's written consent to being a nominee and a
statement of intention to serve as a director, if elected.
Each of the nominees for Class B Director named in this Proxy Statement has
filed with the Company a written consent to being a nominee and a statement of
intention to serve as a director, if elected.
The following table sets forth as to the nominees for election (shown by an
asterisk), each other director and each executive officer: (1) such person's
name; (2) the year in which such person was first elected (or designated) a
director of the Company; (3) biographical information for the last five years;
(4) certain other directorships, if any, held by such person; and (5) such
person's age.
- 8 -
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING THE PAST
FIVE YEARS, ANY OFFICE HELD IN THE YEAR FIRST ELECTED
NAME AGE COMPANY AND ANY OTHER DIRECTORSHIPS AS A DIRECTOR
---- --- ------------------------------------ ------------------
<S> <C> <C> <C>
Stephen Savitsky . . . . . . 49 A founder of the Company, Mr. Savitsky 1983
has served as Chairman of the Board,
Chief Executive Officer and a Director
of the Company since 1983 (and of its
predecessor from 1978 to 1983), and as
President of the Company since
November 1991. Mr. Savitsky is the
brother of David Savitsky.
David Savitsky . . . . . . . 47 A founder of the Company, Mr. Savitsky 1983
has served as Secretary, Treasurer and
a Director of the Company since 1983
(and of its predecessor from 1978 to
1983), as Executive Vice President
since December 1987 and as Chief
Operating Officer since April 1991.
Mr. Savitsky is the brother of Stephen
Savitsky.
Jonathan J. Halpert, Ph.D.. . 50 Dr. Halpert was elected a Director by 1983
the Board of Directors in August 1987.
He previously served as a Director of
the Company from May 1983 until he
resigned from the Board in February
1985. Dr. Halpert is a consultant in
the area of deinstitutionalization of
the mentally retarded and
Chief Executive Officer of the
Camelot Community Residence Program.
*Bernard J. Firestone, Ph.D. 46 Dr. Firestone was elected a Director 1987
by the Board of Directors in August
1987. He is an associate professor of
political science at Hofstra
University where he has been teaching
for 19 years.
*Donald Meyers . . . . . . . 66 Mr. Meyers was elected a Director by 1994
the Board of Directors in August 1994.
He has been an Associate Clinical
Professor, Health Policy and
Management, and the Director of the
Resident and Fellow Program in
administration at New York
University's Robert W. Wagner Graduate
School of Public Service since
November 1991. Mr. Meyers is also the
President and sole director
and stockholder of RMR Health &
Hospital Management Consultants, Inc.
("RMR Health"), a health care
consulting firm, where he has been an
executive officer, director and
stockholder since 1976. From November
1986 through November 1991, Mr. Meyers
served as a Special Consultant in
health care matters to the accounting
firm of KPMG Peat Marwick.
- 9 -
<PAGE>
PRINCIPAL OCCUPATION DURING THE PAST
FIVE YEARS, ANY OFFICE HELD IN THE YEAR FIRST ELECTED
NAME AGE COMPANY AND ANY OTHER DIRECTORSHIPS AS A DIRECTOR
---- --- ------------------------------------ ------------------
Gary Tighe . . . . . . . . . 46 Mr. Tighe has been Senior Vice Not Applicable
President, Finance and Chief Financial
Officer of the Company since April
1991. From June 1990 through April
1991, Mr. Tighe was self-employed as a
certified public accountant.
Sharon E. Hamilton . . . . . 51 Ms. Hamilton has been Senior Vice Not Applicable
President, Health Care Operations
Division of a principal subsidiary of
the Company since November 1991. From
May 1989 through December 1990,
Ms. Hamilton was President of Partners
In Care, a home health care company
located in New York City.
Edward Teixeira . . . . . . . 52 Mr. Teixeira has been Senior Vice Not Applicable
President, Franchising of a principal
subsidiary of the Company since
December 1990. From March 1989 to
December 1990, he was Vice President,
Franchise Operations of a principal
subsidiary of the Company.
</TABLE>
OPERATION OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for the overall affairs of the
Company. To assist it in carrying out its duties, certain authority has been
delegated to standing committees of the Board.
Each director who is not an officer or employee of the Company receives a
fee of $10,000 per annum for service on the Company's Board of Directors.
Directors who are officers or employees of the Company receive no fees for
service on the Board.
The Board of Directors held five meetings and acted by written consent on
eleven occasions during the fiscal year ended February 28, 1995.
- 10 -
<PAGE>
COMMITTEES OF THE BOARD
The Executive Committee, the Audit Committee and the Compensation and Stock
Option Committee are the only standing committees of the Board of Directors.
Membership is as follows:
Compensation
Executive Audit and Stock Option
--------- ----- ----------------
Stephen Savitsky Bernard J. Firestone Bernard J. Firestone
David Savitsky Jonathan J. Halpert Jonathan J. Halpert
Donald Meyers
The Executive Committee is authorized to exercise all powers of the Board
when the Board is not in session, except as to matters upon which action by the
Board itself is required.
The Audit Committee generally assists the Board with respect to accounting,
auditing and reporting practices.
The Compensation and Stock Option Committee determines the cash and other
incentive compensation, if any, to be paid to the Company's executive officers
and other key employees. In addition, it administers the 1983 Incentive Stock
Option Plan, 1986 Non-Qualified Stock Option Plan, 1993 Stock Option Plan, 1993
Employee Stock Purchase Plan, 1994 Performance-Based Stock Option Plan and the
Teamwork Incentive Program.
The Executive Committee held five meetings and the Audit Committee held two
meetings during the fiscal year ended February 28, 1995. The Compensation and
Stock Option Committee acted by written consent on eleven occasions during the
fiscal year ended February 28, 1995.
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own beneficially more than ten
percent of the Common Stock to file with the Securities and Exchange Commission
initial reports of beneficial ownership and reports of changes in beneficial
ownership of the Common Stock. Officers, directors and persons owning more than
ten percent of the Common Stock are required to furnish the Company with copies
of all such reports. To the Company's knowledge, based on a review of copies of
such reports furnished to the Company and written representations from its
officers and directors that no other reports were required, during the fiscal
year ended February 28, 1995, all Section 16(a) filing requirements applicable
to its executive officers, directors and persons owning beneficially more than
ten percent of the Common Stock were complied with.
- 11 -
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and long-
term compensation of the Company's Chief Executive Officer and the other four
most highly compensated executive officers (the "Named Executive Officers") for
services as executive officers of the Company for the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (#)
--------------------------- ---- ------ ----- ------------ -----------
<S> <C> <C> <C> <C> <C>
Stephen Savitsky . . . . . . . . . . . 1995 $372,073 $16,950 -- 1,000,000
Chairman, President and 1994 $330,298 -- -- 339,270
Chief Executive Officer 1993 $292,312 -- -- 150,000
David Savitsky . . . . . . . . . . . . 1995 $269,999 $16,950 -- 1,000,000
Executive Vice President, Chief 1994 $240,217 -- $27,862(1) 339,270
Operating Officer, Secretary 1993 $212,591 -- $27,811(2) 150,000
and Treasurer
Sharon E. Hamilton . . . . . . . . . . 1995 $174,308 $8,475 -- 50,000
Senior Vice President, 1994 $158,917 -- -- 20,000
Health Care Operations 1993 $143,770 -- -- 50,000
Gary Tighe . . . . . . . . . . . . . . 1995 $139,458 $8,475 -- 100,000
Senior Vice President, Finance and 1994 $128,025 -- -- 50,000
Chief Financial Officer 1993 $124,123 -- -- 50,000
Edward Teixeira . . . . . . . . . . . . 1995 $141,639 $5,085 -- 50,000
Senior Vice President, Franchising 1994 $129,159 -- -- --
1993 $121,384 -- -- 25,000
<FN>
- - - - - - ---------------------------
(1) Includes a $13,000 expense allowance and $14,862 for an automobile
furnished for David Savitsky's business and personal use.
(2) Includes a $13,000 expense allowance and $14,811 for an automobile
furnished for David Savitsky's business and personal use.
</TABLE>
- 12 -
<PAGE>
OPTION GRANTS TABLE
The following table sets forth information with respect to the Named
Executive Officers concerning the grant of stock options during the fiscal year
ended February 28, 1995. The Company did not have during such fiscal year, and
currently does not have, any plans providing for the grant of stock appreciation
rights ("SARs").
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS(1) PRESENT VALUE(2)
------------------------------------------------- ----------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL OR BASE EXPIRATION
NAME (#) YEAR PRICE(3) DATE
---- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Stephen Savitsky . . . . . 1,000,000 42.7% 3.136 10/01/04 $1,567,500
David Savitsky . . . . . . 1,000,000 42.7% 3.136 10/01/04 $1,567,500
Sharon E. Hamilton . . . . 50,000 2.1% 3.136 10/01/04 $78,375
Gary Tighe . . . . . . . . 100,000 4.3% 3.136 10/01/04 $156,750
Edward Teixeira . . . . . . 50,000 2.1% 3.136 10/01/04 $78,375
<FN>
- - - - - - -------------------------
(1) All options granted to the Named Executive Officers during the last fiscal
year were granted on October 1, 1994, under the 1994 Performance-Based
Stock Option Plan. The terms of the Plan provide that options are not
exercisable during the first six months following the date of grant. The
options also are subject to a performance-based condition to
exercisability: 25% of the options granted become exercisable if the
closing price of the Company's Common Stock exceeds the exercise price of
the options by 10% or more for ten consecutive trading days prior to the
first anniversary of the date of grant; 50% of the options granted (less
any that have previously become exercisable) become exercisable if the
closing price of the Company's Common Stock exceeds the exercise price of
the options by 20% or more for ten consecutive trading days during the
second year following the date of grant; 75% of the options granted (less
any that have previously become exercisable) become exercisable if the
closing price of the Company's Common Stock exceeds the exercise price of
the options by 30% or more for ten consecutive trading days during the
third year following the date of grant; and 100% of the options granted
(less any that have previously become exercisable) become exercisable if
the closing price of the Company's Common Stock exceeds the exercise price
of the options by 40% or more for ten consecutive trading days during the
fourth year following the date of grant. Options may also become
exercisable following a change of control of the Company, the amount
depending on when the change of control occurs and the price per share of
Common Stock paid to effect the change of control. The performance target
for the first year was achieved on February 7, 1995,
- 13 -
<PAGE>
and accordingly 25% of the options granted to each of the Named Executive
Officers became exercisable on April 1, 1995, at the end of the initial six
month restricted period.
(2) The values shown were calculated utilizing the Black-Scholes option pricing
model and are presented solely for the purpose of comparative disclosure in
accordance with certain regulations of the SEC. This model is a
mathematical formula used to value traded stock price volatility. The
actual value that an executive officer may realize, if any, is dependent on
the amount by which the stock price at the time of exercise exceeds the
exercise price. There is no assurance that the value realized by an
executive officer will be at or near the value estimated by the
Black-Scholes model. In calculating the grant date present values, the
Company used the following assumptions: (a) expected volatility of 22%;
(b) risk-free rate of return of 7.25%; (c) no dividends payable during the
relevant period; and (d) exercise at the end of a 10 year period from the
date of grant. An adjustment of 25% has been made for the
performance-based condition to exercisability described in
Footnote 1 above. No adjustment has been made for non-transferability.
(3) Pursuant to the terms of the 1994 Performance-Based Stock Option Plan, the
exercise price of options granted to the Named Executive Officers during
the last fiscal year was computed on the basis of the average of the
closing prices of the Company's Common Stock for the 20 consecutive trading
days preceding the granting of the options on October 1, 1994.
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides information concerning the number and value of
stock options exercised during the fiscal year ended February 28, 1995, and held
at the end of such fiscal year, by the Named Executive Officers. No SARs were
exercised during such fiscal year, and no SARs are held by any Named Executive
Officer, because the Company does not have any plans providing for SARs.
- 14 -
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
EXERCISE REALIZED AT FEBRUARY 28, 1995 AT FEBRUARY 28, 1995
-------- -------- -------------------- --------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
---- ------------- -------------
<S> <C> <C> <C> <C>
Stephen Savitsky . . . -- -- 1,053,863/ $1,308,684/
1,133,407 $651,090
David Savitsky . . . . -- -- 1,018,863/ $1,246,839/
1,133,407 $651,090
Sharon E. Hamilton . . -- -- 53,332/ $69,131/
86,668 $52,769
Gary Tighe . . . . . . 20,000 $50,000 60,000/ $78,700/
160,000 $110,700
Edward Teixeira . . . . -- -- 27,800/ $38,757/
65,000 $33,825
</TABLE>
EMPLOYMENT AGREEMENTS
On June 1, 1987, the Company entered into a five year employment agreement
with Stephen Savitsky under which Mr. Savitsky received an initial base salary
(beginning in June 1987) of $200,000 per year, which base salary increases
annually at the rate of ten percent plus any increase in the cost of living.
Mr. Savitsky's employment agreement is automatically extended at the end of each
year for an additional year and is terminable by the Company upon five years'
notice. For the fiscal year ended February 28, 1995, Mr. Savitsky received a
base salary of $372,073. Mr. Savitsky's employment agreement provides that,
upon a "change of control" of the Company and his termination of employment
other than for his conviction for a felony, he will be entitled to receive a
lump sum severance payment equal to 2.99 times his average annual compensation
for the five years prior to termination. Mr. Savitsky is required to devote all
of his business time to the affairs of the Company and his employment agreement
provides that during the term of his employment and for a period of six months
thereafter he will not compete with the Company. After termination of his
employment (other than by reason of his conviction of a felony), Mr. Savitsky
will provide consulting services to the Company for a period of ten years at
an annual salary of $50,000.
The Company entered into an employment agreement, effective as of June 1,
1987, with David Savitsky on terms substantially similar to the employment
agreement with Stephen Savitsky, except that his initial base salary was
$110,000 per year. Under his employment agreement, Mr. Savitsky is required to
devote all of his business time to the affairs of the Company. His base salary
for the fiscal year ended February 28, 1995, was $269,999.
As of May 15, 1993, the Company entered into a 47-month employment
agreement with Gary Tighe under which Mr. Tighe receives a base salary of
$128,532 per year, which base salary increases by 10% per annum each April 15.
Mr. Tighe's salary for the fiscal year ended February 28, 1995, was
- 15 -
<PAGE>
$139,458. He also receives an automobile allowance of $6,000 per annum. The
employment agreement obligates Mr. Tighe to devote all of his business time to
the affairs of the Company and provides that during the term of his employment
and for one year thereafter he will not compete with the Company. Upon a
"change of control" of the Company and termination of Mr. Tighe's employment for
any reason (other than for his conviction for a felony) within 12 months after
such change of control, he will be entitled to receive a lump sum severance
payment equal to 2.99 times his average annual compensation for the five years
prior to termination.
The Company entered into a two-year employment agreement with Edward
Teixeira to serve as Senior Vice President, Franchising of a principal
subsidiary of the Company until November 30, 1993. On July 26, 1993, that
principal subsidiary of the Company entered into an agreement with Mr. Teixeira
whereby he would continue to serve in such capacity for three additional years,
until November 30, 1996. Under his employment agreement, Mr. Teixeira is
obligated to devote his full business time to the affairs of the Company.
Mr. Teixeira receives a base salary of $126,000 per year, which base salary
increases by a minimum of 8% per annum. Mr. Teixeira's base salary for the
fiscal year ended February 28, 1995, was $141,639. He also receives an
automobile allowance of $6,600 per annum. Further, if within 90 days after a
"change of control" Mr. Teixeira were terminated for any reason (other than the
commission of a felony or the perpetration of fraud against the Company), he
would then be entitled to receive an amount equal to six months' salary. The
employment agreement prevents Mr. Teixeira from competing with the Company for
six months after his employment is terminated.
As of May 1, 1993, a principal subsidiary of the Company entered into a
three-year employment agreement with Sharon Hamilton. Ms. Hamilton's base
salary for the fiscal year ended February 28, 1995, was $174,308. This
agreement currently provides for the payment of a base salary to Ms. Hamilton at
the annual rate of $186,000 for the remainder of the term ending May 1, 1996.
Ms. Hamilton also receives an automobile allowance of $6,000 per year. In the
event Ms. Hamilton is terminated other than for cause, she will then be entitled
to receive her base salary payable in weekly installments for the remainder of
the term expiring May 1, 1996. Upon a "change of control" and her resignation
or the involuntary termination of her employment (other than for cause) within
12 months after such change of control, she will then be entitled to receive a
lump sum severance payment equal to 12 months of her annual base salary then in
effect. The employment agreement entitles Ms. Hamilton to receive 5% of the
amount, if any, made available under the Teamwork Incentive Program for the
1994, 1995 and 1996 fiscal years of the Company. Under the Teamwork Incentive
Program, the Company can award its officers and other corporate employees with
cash payments if the Company achieves certain levels of profitability. The
aggregate amount payable under the Teamwork Incentive Program for a fiscal year
equals 10% of the amount by which the Company's income from continuing
operations before income taxes (excluding extraordinary items) for that fiscal
year exceeds a specified percentage determined by the Board of Directors for
that fiscal year, subject to any limits on total payments during that fiscal
year as established by the Board. Ms. Hamilton received $8,475 for fiscal 1995
under the Teamwork Incentive Program. The employment agreement obligates
Ms. Hamilton to devote her full business time to the affairs of the Company and
prevents her from competing with the Company during her employment or, if she
resigns or is terminated for cause, through May 1996.
If a "change of control" were to occur prior to the next anniversary date
of the respective employment agreements of Stephen Savitsky, David Savitsky,
Gary Tighe, Edward Teixeira and Sharon Hamilton and such officers' employment
relationship with the Company were to terminate for reasons
- 16 -
<PAGE>
triggering the severance payments noted above, then the Company would be
obligated to make lump sum payments to them in the approximate amounts of
$940,000, $683,000, $673,000, $76,000 and $186,000, respectively. The lump sum
severance payments payable after the anniversary dates of the respective
employment agreements would change as a result of changes in such individuals'
compensation after such date. The term "change of control" as used in the
employment agreements with the Company's executive officers refers to an event
in which a person, corporation, partnership, association or entity (i) acquires
a majority of the Company's outstanding voting securities, (ii) acquires
securities of the Company bearing a majority of voting power with respect to
election of directors of the Company, or (iii) acquires all or substantially all
of the Company's assets.
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation and Stock Option Committee (hereinafter, the "Committee")
determines the cash and other incentive compensation, if any, to be paid to the
Company's executive officers and other key employees. In addition, the
Committee administers the Company's 1983 Incentive Stock Option Plan, 1986 Non-
Qualified Stock Option Plan, 1993 Stock Option Plan, 1993 Employee Stock
Purchase Plan, 1994 Performance-Based Stock Option Plan and Teamwork Incentive
Program. The Committee currently consists of Bernard J. Firestone and
Jonathan J. Halpert, each of whom is a non-employee director of the Company and
a "disinterested director" (within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934).
COMPENSATION PHILOSOPHY
The Committee has developed and implemented a compensation program that is
designed to attract, motivate, reward and retain the broad-based management
talent required to achieve the Company's business objectives and increase
stockholder value. There are three major components of the Company's
compensation program: base salary, short-term incentive compensation, including
annual bonuses, and long-term incentive compensation, including stock options.
These components are intended to provide management with incentives to aid the
Company in achieving both its short-term and long-term objectives. While salary
and bonus provide incentives to achieve short-term objectives, the Committee
believes that the potential for equity ownership by management addresses the
long-term objective of aligning management's and stockholders' interests in the
enhancement of stockholder value.
The Committee's executive compensation philosophy is to base management's
pay, in part, on the achievement of the Company's annual and long-term
performance goals, to provide competitive levels of compensation and to
recognize individual initiative, achievement and length of service to the
Company. The Committee does not assess these factors in a mechanical fashion,
but rather relies on its business experience in making a subjective evaluation
of the appropriate level and mix of compensation for each executive officer and
key employee.
The Committee evaluates the Company's performance by reviewing period to
period changes in such quantitative measures of performance as stock price,
revenue, net income and earnings per share.
- 17 -
<PAGE>
During the Company's most recently completed fiscal year, the Company's revenues
grew by 32% over fiscal 1994 to a record $325.1 million while income from
operations improved 41% over fiscal 1994 to $4.73 million. Despite a
nonrecurring gain of $.03 per share during fiscal 1994 and a 19% increase in the
weighted average number of shares outstanding during fiscal 1995, the Company
maintained its earnings per common share at $.20 per share, reflecting an 18%
increase in earnings per share from operations during fiscal 1995 over fiscal
1994. The Committee also considers such qualitative performance criteria as the
development of new business strategies and resources, and improvements in
customer satisfaction and cost management. During fiscal 1995, the Company
opened 28 new offices and improved the terms of its banking relationship. The
Company experienced a significant 33% increase in its pre-tax operating margin
to 2.52% in fiscal 1995 over its prior fiscal year. The Company also reduced
long-term debt by 35% and increased stockholders' equity by 27% during fiscal
1995, leaving the Company with a debt to equity ratio of 18% at February 28,
1995, down from 34% at the end of fiscal 1994.
The Committee believes that it competes for executives not only with the
companies comprising the New Peer Group Index described below under the heading
"Performance Graph" but also with numerous other companies in the home health
care, supplemental staffing and temporary personnel industries that are actively
seeking executives having the same type of skills and experience as the
Company's executives. The Committee has not made a statistical analysis of the
compensation practices of these competitors, but tries to keep itself generally
informed of such practices. The Committee believes that, notwithstanding the
variety of compensation packages offered by these competitors which make
objective comparisons difficult, the compensation paid by the Company to its
executive officers and other key employees is above average, reflecting the
Company's relative size and desire to retain its current employees.
The Committee also considers other subjective factors bearing on the
appropriate compensation for each of its executive officers and other key
employees, such as the length of an employee's service with the Company, which
the Committee believes enhance the value of the employee to the Company. The
Committee takes note of the individual initiative demonstrated by such officers
and employees in the development and implementation of the Company's business
plan. Where appropriate, the Committee will consider the performance of
specific divisions or departments of the Company for which the employee has
direct supervisory responsibility.
When the Company identifies a talented executive, it seeks to secure his or
her employment for a long term. For this reason, the Company has entered into
employment contracts with its executive officers, each of which provides for a
specified base salary. The existence of these employment agreements establishes
certain minimum salary and benefit levels for each covered employee during the
term of such employee's agreement which may not be reduced by the Committee.
The Committee is able, however, to apply its compensation philosophy at the time
each such employment agreement is negotiated or renewed and in determining what,
if any, additional compensation, including bonuses or issuances of stock or
stock options, is appropriate beyond the minimums established by each employment
agreement.
The particular components of executive compensation employed by the Company
are discussed in greater detail below.
- 18 -
<PAGE>
SALARIES
Base salaries for the Company's executive officers and other key employees
are determined initially by evaluating the responsibilities of the position held
and the experience of the individual in light of the Committee's compensation
philosophy discussed above. No specific formula is applied in setting an
employee's base salary, either with respect to the total amount of such base
salary or the relative value such base salary should bear to the employee's
total compensation package. The Committee believes that the base salaries paid
by the Company should be maintained at levels at least competitive with those
offered by companies with which the Company competes for executive talent in
order to attract and retain executive officers and other key employees of the
caliber that the Company desires.
The base salaries for the Company's executive officers and other key
employees are reflected in the employment agreements negotiated by the Company
with each such employee and are accordingly subject to formal review only at the
time each such contract is entered into or renewed. No such contract was
entered into or renewed during the Company's most recently completed fiscal
year.
ANNUAL BONUSES AND INCENTIVE COMPENSATION
The payment of bonuses and other incentive compensation is an important
motivating factor in recognizing an executive's performance each year. For this
reason, the Company adopted a Teamwork Incentive Program commencing with the
Company's 1993 fiscal year to award its officers, including executive officers,
and other corporate employees with cash payments if the Company achieves certain
levels of profitability. Annual payments are made under the Teamwork Incentive
Program in an aggregate amount equal to 10% of the amount by which income from
continuing operations before income taxes (excluding extraordinary items) for a
fiscal year exceeds a specified percentage of the Company's revenues, as
determined by the Board of Directors. For the fiscal year ended February 28,
1995, and for the fiscal year ending February 29, 1996, such percentage was and
will be 2%. Any amounts distributed to executive officers of the Company under
the Program are determined by the Committee. In determining the allocation of
the annual payments under the Program, including those to executive officers,
and subject to the right of Sharon Hamilton under her employment agreement to
receive 5% of any payments made under such Program, the Committee considers the
same factors as it considers in setting base salaries. For fiscal 1995, an
aggregate of approximately $169,500 was available for the payment of bonuses
under the terms of the Teamwork Incentive Program. From this amount and in
addition to the bonus awarded to Stephen Savitsky (described below), the
Committee awarded bonuses to David Savitsky, Sharon Hamilton, Gary Tighe and
Edward Teixeira of $16,950; $8,475; $8,475; and $5,085, respectively, in
recognition of their efforts which resulted in the Company's meeting its
performance goals under the Teamwork Incentive Program.
STOCK OPTION PLANS
To promote the long-term objectives of the Company and encourage growth in
stockholder value, options are granted to key executives who are in a position
to make a substantial contribution to the long-term success of the Company. We
believe that the executive officers should benefit together with stockholders as
the Company's stock increases in value. Stock options focus the executives'
efforts on
- 19 -
<PAGE>
managing the Company from the perspective of an owner with an equity stake in
the business. Because the Company views stock option grants as a part of the
executive officer's total annual compensation package, the amount of stock
options outstanding at the time of a new grant or granted in prior years does
not serve to increase or decrease the size of the new grant.
In the fiscal year ended February 28, 1995, in addition to the options
granted to Stephen Savitsky (described below), the Committee awarded stock
options under the 1994 Performance-Based Stock Option Plan to David Savitsky,
Sharon Hamilton, Gary Tighe and Edward Teixeira to purchase 1,000,000 shares,
50,000 shares, 100,000 shares and 50,000 shares, respectively. It is the
philosophy of the Committee that stock options should be awarded to executive
officers of the Company to promote long-term interests between such individuals
and the Company's stockholders and to assist in the retention of such
individuals. The 1994 Performance-Based Stock Option Plan imposes a
performance-based condition to exercisability on each option granted, making it
particularly well-suited for these purposes. The options granted to the
Company's key executive officers in fiscal 1995 under this Plan become
exercisable over a four year period following the date of grant if and only if
the Company experiences certain specified increases in the price of its Common
Stock, thus closely linking the interests of these key executive officers with
those of the Company's stockholders. As with the other components of executive
compensation, the Committee does not apply any fixed formula to determine the
appropriate number of options to grant to an executive but rather relies on its
subjective judgment in applying the compensation philosophy described above. In
order to avoid any adverse effect on the Company's earnings or cash flow, the
Committee has generally relied much more on the granting of stock options rather
than the award of cash bonuses as a means of rewarding the Company's executive
officers and other key employees.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee applies the same factors in considering Stephen Savitsky's
compensation that it applies to the Company's other executive officers and key
employees. Mr. Savitsky's five-year employment agreement establishes his annual
minimum base salary, including the amount of his minimum annual salary
adjustment (see "Executive Compensation and Other Information -- Employment
Agreements"). The Committee may reduce this base salary only at the time a new
agreement is negotiated, although the Committee does have the ability to award
Mr. Savitsky additional base salary and to give the five year notice necessary
to terminate the agreement. During the fiscal year ended February 28, 1995, the
Committee neither gave notice of termination nor awarded Mr. Savitsky any
additional base salary and he accordingly received a base salary of $372,073
under the terms of his employment agreement. During the last fiscal year,
Mr. Savitsky's efforts contributed to the Company's 32% increase in revenues,
18% increase in earnings per share from operations, 33% increase in pre-tax
operating margin and 27% increase in stockholders' equity over fiscal 1994. As
Chief Executive Officer, Mr. Savitsky was responsible for overseeing the opening
of 28 new offices and the renegotiation of the Company's banking relationship
during fiscal 1995. In light of these accomplishments and the Company's success
in meeting its goals under the Teamwork Incentive Program, the Committee awarded
Mr. Savitsky a bonus of $16,950 under the Teamwork Incentive Program for the
fiscal year ended February 28, 1995.
- 20 -
<PAGE>
With respect to long-term incentives, the Committee considers it important
to link Mr. Savitsky's compensation closely to stockholder interests and for
that reason the Committee approved the grant to him of 1,000,000 options under
the 1994 Performance-Based Stock Option Plan during the fiscal year ended
February 28, 1995. These options will provide Mr Savitsky with a strong
incentive to work toward an increase in the price of the Company's Common Stock
and, in light of the significant increase in the number of outstanding shares of
the Company's Common Stock during fiscal 1995, will continue to provide
Mr. Savitsky with a substantial interest in the Company. In approving the grant
of these options to Mr. Savitsky, the Committee also applied the other
compensation philosophy factors described above. As with the stock options
granted to the other executive officers and key employees of the Company, the
stock options granted to Mr. Savitsky were used in part to reward Mr. Savitsky
without payment of a substantial cash bonus which the Committee might otherwise
have favored.
Compensation and Stock Option Committee
Bernard J. Firestone
Jonathan J. Halpert
- 21 -
<PAGE>
PERFORMANCE GRAPH
The following Performance Graph compares the total cumulative return
(assuming dividends are reinvested) on the Company's Common Stock during the
five fiscal years ended February 28, 1995, with the cumulative return on the
NASDAQ Market Index, a New Peer Group Index and an Old Peer Group Index,
assuming investment of $100 in the Company's Common Stock, the NASDAQ Market
Index, the New Peer Group Index and the Old Peer Group Index at closing stock
prices on February 28, 1990. The New Peer Group selected by the Company
consists of The Olsten Corporation, Uniforce Temporary Personnel, Inc., In Home
Health Inc., Hooper Holmes Inc. and Hospital Staffing Services, Inc. The New
Peer Group consists of a representative group of companies whose common stock
has been publicly-traded during the five years ended February 28, 1995, and each
of which, like the Company, engages in providing home health care and temporary
personnel services. Last year, the Company's performance graph included Adia
Services, Inc. and did not include In Home Health Inc., Hooper Holmes Inc. and
Hospital Staffing Services, Inc. Adia Services, Inc. was unavailable for this
year's Peer Group because it was acquired by a foreign corporation in January
1995 and its common stock was no longer actively traded on February 28, 1995.
The Old Peer Group Index consists only of The Olsten Corporation and Uniforce
Temporary Personnel, Inc., the two remaining companies from the peer group index
used by the Company last year.
The Performance Graph below is presented in accordance with SEC
requirements. Stockholders are cautioned against drawing any conclusions from
the data contained herein, as past results are not necessarily indicative of
future stock performance. The Performance Graph in no way reflects the
Company's forecast of future stock price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, NEW PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
- - - - - - ------------------------------- FISCAL YEAR ENDING ----------------------------
COMPANY 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
STAFF BUILDERS INC 100 41.67 116.67 108.33 180.56 161.11
NEW PEER GROUP 100 111.21 192.46 251.63 276.36 286.87
BROAD MARKET 100 104.75 115.76 115.95 147.74 141.05
</TABLE>
THE BROAD MARKET INDEX CHOSEN WAS:
NASDAQ MARKET INDEX
THE NEW PEER GROUP IS MADE UP OF THE FOLLOWING SECURITIES:
HOOPER HOMES INC
HOSPITAL STAFFING SVCS
IN HOME HEALTH INC
OLSTEN CP
UNIFORCE TEMP PERSONNEL
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, OLD PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
- - - - - - ------------------------------- FISCAL YEAR ENDING -----------------------------
COMPANY 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
STAFF BUILDERS INC 100 41.67 116.67 108.33 180.56 161.11
OLD PEER GROUP 100 104.79 178.39 264.79 301.18 326.84
BROAD MARKET 100 104.75 115.76 115.95 147.74 141.05
</TABLE>
THE BROAD MARKET INDEX CHOSEN WAS:
NASDAQ MARKET INDEX
THE OLD PEER GROUP IS MADE UP OF THE FOLLOWING SECURITIES:
OLSTEN CP
UNIFORCE TEMP PERSONNEL
CERTAIN TRANSACTIONS
Effective April 1, 1992, the Company approved the sale by CTR Management
Corp. ("CTR") of a Staff Builders franchise for Nassau County, New York to Bayit
Care Corp. ("BCC"). The shareholders, officers and directors of BCC are Stuart
Savitsky, son of Stephen Savitsky, Chairman of the Board, President and Chief
Executive Officer of the Company, Samuel Schreier, the son-in-law of Stephen
Savitsky, and Julie Schreier, the daughter of Stephen Savitsky. The terms and
conditions of the franchise agreement between the Company and BCC, entered into
at the time of the sale, are substantially similar to those for other
franchisees of the Company, including the term of ten years with a five year
renewal option. In connection with the acquisition of its franchise, CTR
purchased certain assets of an existing branch office of the Company for
$911,000. The purchase price was evidenced by a promissory note, dated August
30, 1989. BCC purchased the franchise from CTR by assuming this promissory note
which, at the time of BCC's purchase of the franchise, had an outstanding
principal balance of $844,573 (the "BCC Note"). The terms of the BCC Note
originally provided for repayment of the outstanding principal amount in 120
consecutive monthly installments of $7,038 each, commencing May 1, 1994,
together with interest at 3% over the prime rate, payable monthly. Effective
June 1, 1994, the BCC Note was amended and restated to (i) provide for the
repayment of the outstanding principal amount over a
- 22 -
<PAGE>
fifteen (15) year period, and (ii) reduce the interest rate to the prime rate.
The amended principal payment schedule requires fixed monthly principal payments
of $3,500 each with all unpaid principal due at the end of the fifteen (15) year
period or earlier upon the termination of the franchise agreement for such
franchise. The BCC Note is secured by all of the franchisee's assets. The
Company restructured the BCC Note because it found the additional monthly
expense associated with the start of the principal repayment schedule in May
1994 to have a clear negative impact on the franchisee's ability to operate the
franchise. As described in greater detail below, during the fiscal year ended
February 28, 1995, the Company retained $61,790 from the amount otherwise due
BCC under the terms of its franchise agreement as interest payments on the BCC
Note. The outstanding balance of the BCC Note was $813,073 at February 28,
1995.
Effective August 23, 1993, Home Care Plus, Inc. ("Home Care") acquired a
franchise from the Company for Bristol and Barnstable counties in Massachusetts.
Mr. Edward Teixeira, Senior Vice President, Franchising of a principal
subsidiary of the Company, and his wife, each owns 25% of the outstanding
capital stock of Home Care. In purchasing the franchise, Home Care paid a
$23,000 franchise fee, received a commitment to advance up to $75,000 for
expenses from the Company, issued a $75,000 promissory note (the "Home Care
Note") to the Company with respect to such advance, and entered into a franchise
agreement with the Company. Interest on the Home Care Note is computed at 3%
over the prime rate and is payable monthly beginning September 1, 1994. The
principal amount is payable in 60 consecutive monthly installments of $1,250
each, beginning September 1, 1994. The terms and conditions of the franchise
agreement between the Company and Home Care are substantially similar to those
for other franchisees of the Company, including the term of ten years with a
five year renewal option. During the fiscal year ended February 28, 1995, the
Company retained $8,241 from the amount otherwise due Home Care under the terms
of its franchise agreement as interest payments on the Home Care Note. The
outstanding balance of the Home Care Note was $65,919 at February 28, 1995.
Effective February 6, 1995, Home Care Plus Two, Inc. ("Home Care Two")
acquired a franchise from the Company for Worcester, Hampden and Franklin
counties in Massachusetts. Mr. Teixeira and his wife each owns 25% of the
outstanding capital stock of Home Care Two. In purchasing the franchise, Home
Care Two committed to pay the Company a franchise fee of $29,500, payable in
equal installments of $14,750 on February 6, 1995, and August 6, 1995. The
terms and conditions of the franchise agreement between the Company and Home
Care Two are substantially similar to those for other franchisees of the
Company, including the term of ten years with a five year renewal option. The
Home Care Two franchise has not yet commenced operations.
Effective as of October 1, 1993, Partners Two Management Corp. ("Partners")
acquired an existing franchise for Suffolk County, New York from an unaffiliated
franchisee of the Company. Ms. Sharon Hamilton, Senior Vice President, Health
Care Operations Division of a principal subsidiary of the Company, owns 50% of
the outstanding stock of Partners. The terms and conditions of the franchise
agreement between the Company and Partners are substantially similar to those
for other franchisees of the Company, including the term of ten years with a
five year renewal option. In connection with acquiring the franchise, Partners
assumed the obligations owing under a promissory note (the "Partners Note")
issued by the former franchisee to the Company, and entered into a franchise
agreement with the Company. When originally issued by the former franchisee on
December 31, 1988, the Partners Note was in the principal amount of $446,909.76.
On the date of its assumption by Partners, the Partners Note had an outstanding
principal balance of $300,000. The Partners Note bears interest at 2% over the
prime
- 23 -
<PAGE>
rate of interest charged by Mellon Bank, N.A., and is payable monthly, in
arrears, beginning on November 1, 1993. Principal is payable in 96 consecutive
monthly installments of $3,125 each, beginning October 1, 1995. Ms. Sharon
Hamilton and the owner of the remaining 50% of the outstanding capital stock of
Partners have jointly and severally guaranteed payment of all amounts due under
the Partners Note. As described in greater detail below, during the fiscal year
ended February 28, 1995, the Company retained $28,063 from the amount otherwise
due Partners under the terms of its franchise agreement as interest payments on
the Partners Note. The outstanding balance of the Partners Note was $300,000 at
February 28, 1995.
Under the Company's franchise program, the Company processes and pays the
payroll to the field employees who service clients and invoices the clients for
such services. Each month the Company pays the franchisee 60% of the gross
margin dollars (in general, the difference between the amount so invoiced and
the payroll and related expenses for such field employees) from the franchisee's
business for the prior month's activity. Franchisees are responsible for their
general and administrative expenses, including office payroll. If the
franchisee elects, the Company will process payment of the franchisee's office
payroll and some or all of the franchisee's other administrative expenses, and
withhold the amount so expended from the 60% gross margin otherwise due the
franchisee. During the fiscal year ended February 28, 1995, the Company paid
(i) BCC $114,467 under the terms of its franchise agreement, representing a 60%
gross margin of $730,424 less $61,790 and $31,500 of interest and principal,
respectively, withheld on the BCC Note and $522,667 withheld for administrative
expenses; (ii) Home Care $430,317 under the terms of its franchise agreement,
representing 60% gross margin of $509,977 less $8,241 and $8,706 of interest and
principal, respectively, withheld on the Home Care Note and $62,713 withheld for
administrative expenses; and (iii) Partners $1,035,811 under the terms of its
franchise agreement, representing a 60% gross margin of $2,466,897 less $28,063
of interest withheld on the Partners Note and $1,403,023 withheld for
administrative expenses.
To a great extent, the success of the Company is dependent upon the success
of its approximately 70 franchises. In order to facilitate the acquisition of a
franchise by a willing prospective franchisee, the Company will frequently
accept a promissory note as consideration for the purchase from the Company of
an existing branch location and will occasionally advance expenses to a
franchisee. The Company's transactions with BCC, Home Care and Partners
described above are consistent with this business purpose and with
accommodations granted to other, unaffiliated franchisees in the past.
Messrs. Stephen Savitsky and David Savitsky are directors and each owns
one-third of the capital stock of Offset House, Inc. ("Offset House"), a private
printing company that on occasion provides services to the Company. For the
fiscal year ended February 28, 1995, the Company paid approximately $284,478 for
such services. The Company has also engaged Offset House during its 1996 fiscal
year. The Company believes that the terms of such transactions are as favorable
as the Company would have received in arm's length transactions with an
unaffiliated party.
Mr. Donald Meyers, a director of the Company, is also the President and
sole director and stockholder of RMR Health, a health care consulting firm.
From time to time, the Company has engaged RMR Health to perform consulting
services on the Company's behalf. For the fiscal year ended February 28, 1995,
the Company paid RMR Health $26,750 in fees for such services. The Company has
also engaged RMR Health during its 1996 fiscal year. The Company believes that
the terms of such
- 24 -
<PAGE>
transactions are as favorable as the Company would have received in arm's length
transactions with an unaffiliated party.
Although the Company has no formal policy regarding transactions with
affiliates, it does not intend to enter into a transaction with any affiliate on
terms less favorable to the Company than those it would receive in an arm's
length transaction with an unaffiliated party.
PROPOSAL 2 -- PLAN OF RECAPITALIZATION
THE COMPANY'S EXISTING COMMON STOCK
The Restated Certificate of Incorporation of the Company authorizes the
issuance of up to 50,000,000 shares of common stock, $.01 par value per share
(the "Existing Common Stock"), and 10,000 shares of preferred stock, $1.00 par
value per share. As of the Record Date, there were ______ shares of Existing
Common Stock, and 666-2/3 shares of Class A Preferred Stock, outstanding.
The Restated Certificate of Incorporation contains a time phased voting
rights plan (the "Voting Rights Plan"). Under the Voting Rights Plan, each
holder of record of Existing Common Stock, except in certain situations, is
entitled to ten votes for each share of Existing Common Stock that has been
beneficially owned by the current beneficial owner for at least 48 consecutive
calendar months (dating from the first day of the first calendar month on or
after the holder acquired beneficial ownership of such share) prior to the
record date for a meeting of stockholders ("Long-Term Shares"). Each holder of
record of a share of Existing Common Stock that has not been beneficially owned
by the current beneficial owner for at least such a 48 consecutive calendar
month period prior to the record date (with certain limited exceptions) is
entitled to only one vote per share ("Short-Term Shares"). A holder may own
both Long-Term Shares and Short-Term Shares, in which case he will be entitled
to ten votes for each Long-Term Share and one vote for each Short-Term Share.
Except for the number of votes attached to each, Long-Term Shares and Short-Term
Shares are identical in all respects and constitute a single class of stock.
THE RECAPITALIZATION
The Board of Directors has unanimously approved the Plan of
Recapitalization by which (i) Article FOURTH of the Restated Certificate of
Incorporation would be amended (the "Amendment") to eliminate the Voting Rights
Plan and the Existing Common Stock and to authorize for issuance 50,000,000
shares of Class A Common Stock, $.01 par value per share (the "Class A Common
Stock"), and 1,300,000 shares of Class B Common Stock, $.01 par value per share
(the "Class B Common Stock"), subject in the case of the Class B Common Stock,
to adjustment as described below, and (ii) upon the filing of the Amendment with
the Secretary of State of the State of Delaware (the "Effective Time"), each
share of Existing Common Stock which is a Long-Term Share as of both the Record
Date and the Effective Time (assuming for these purposes only that the Effective
Time is a record date for a meeting of the Company's stockholders) would be
reclassified, changed and converted automatically into one share of Class B
Common Stock and each other share of Existing Common Stock would be
reclassified, changed and converted automatically into one share of Class A
Common Stock. The newly-
- 25 -
<PAGE>
created Class A Common Stock would be identical in all respects to the Existing
Common Stock except that a holder of Class A Common Stock would be entitled to
one vote for each share of Class A Common Stock held of record by such holder as
of the record date for a meeting of stockholders, regardless of how long the
shares have been owned by the beneficial owner of such Class A Common Stock.
The newly-created Class B Common Stock would be identical in all respects to the
Existing Common Stock and the Class A Common Stock except that (i) a holder of
Class B Common Stock would be entitled to ten votes for each share of Class B
Common Stock held of record by such holder as of the record date for a meeting
of stockholders, regardless of how long the shares have been owned by the
beneficial owner of such Class B Common Stock, and (ii) each share of Class B
Common Stock will be convertible into one share of Class A Common Stock (and
will automatically convert into one share of Class A Common Stock upon any
transfer subject to certain limited exceptions). Except as otherwise required
by the Delaware General Corporation Law, shares of Class A Common Stock and
Class B Common Stock will vote as a single class on all matters submitted to a
vote by the stockholders. A copy of the Plan of Recapitalization is attached to
this Proxy Statement as Exhibit A and a copy of the Amendment is attached as
Annex 1.
The Amendment authorizes for issuance 1,350,000 shares of Class B Common
Stock, which represents an estimate by the Company's Board of Directors of the
number of shares of Class B Common Stock to be issued in the Recapitalization.
Under the Voting Rights Plan (which would be eliminated by the Amendment) the
precise number of shares of Class B Common Stock to be issued in the
Recapitalization (which will equal the number of shares of Existing Common Stock
which are Long-Term Shares at both the Record Date and the Effective Time)
cannot be determined with certainty as of the date of this Proxy Statement. The
Voting Rights Plan provides that in order for shares of Existing Common Stock to
be Long-Term Shares, they must have the same beneficial owner for at least 48
consecutive calendar months (dating from the first day of the first calendar
month on or after the holder acquired beneficial ownership of such shares) prior
to the record date for determining the holders entitled to vote on any matter
submitted to a vote by the stockholders. Shares of Existing Common Stock held
of record by the current holder for at least such a 48 consecutive calendar
month period are presumed to be owned beneficially by the current record holder
for such period and are thus Long-Term Shares. However, shares of Existing
Common Stock held of record in "street" or "nominee" name are presumed to be
owned beneficially by the current beneficial owner for less than such a 48
consecutive calendar month period and are thus presumed to be Short-Term Shares.
This latter presumption may be rebutted by presentation to the Company of
evidence (in accordance with procedures established by the Company) that such
beneficial owner has had beneficial ownership of such shares for at least the
required 48 consecutive calendar month period.
Because the Company cannot know the number of shares held in "street" or
"nominee" name which have been owned beneficially by the same stockholder for at
least a 48 consecutive calendar month period (dating from the first day of the
first calendar month on or after the holder acquired beneficial ownership of
such shares), the number of shares of Class B Common Stock to be issued in the
Recapitalization cannot be determined precisely. Accordingly, if after the
Effective Time, the Company's Board of Directors determines that a number of
shares of Class B Common Stock other than 1,350,000 is to be issued in the
Recapitalization, then the Company will file a further amendment to the Restated
Certificate of Incorporation to increase the number of authorized shares of
Class B Common Stock to the extent that more than 1,350,000 shares
are required to be issued in the Recapitalization and to reduce the number of
authorized shares of Class B Common Stock to the extent that fewer than
1,350,000 shares
- 26 -
<PAGE>
are required to be issued in the Recapitalization. A VOTE IN
FAVOR OF THE PLAN OF RECAPITALIZATION WILL INCLUDE A VOTE IN FAVOR OF PERMITTING
THE BOARD OF DIRECTORS TO FILE AN ADDITIONAL AMENDMENT TO THE RESTATED
CERTIFICATE OF INCORPORATION TO ADJUST THE NUMBER OF AUTHORIZED SHARES OF CLASS
B COMMON STOCK AS HEREIN PROVIDED.
It is anticipated that the Effective Time will be the date of the Annual
Meeting or as soon thereafter as is reasonably practicable. The Plan of
Recapitalization may be abandoned by the Company's Board of Directors at any
time prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company.
REASONS FOR THE RECAPITALIZATION
The Company's Board of Directors has unanimously approved the Plan of
Recapitalization, and unanimously recommends it to the Company's stockholders
for their approval, for the following reasons:
1. NEW YORK PUBLIC HEALTH LAW. The Company is licensed under the New
York Public Health Law to operate home care services agencies in the State of
New York. Under the New York Public Health Law, no person may become a
"controlling person" of an operator of a licensed home care services agency
without the prior approval of the New York Public Health Council. Failure to
comply with this law may result in fines and other sanctions, including possible
forfeiture of the Company's license to operate home care services agencies in
New York. A person who controls 10% or more of the voting power of an operator
of a licensed home care services agency is presumed to be a "controlling person"
of that operator. To date, only the officers and directors of the Company have
been approved by the New York Public Health Council as controlling persons of
the Company.
Because the Existing Common Stock is publicly traded, and much of it is
held in "street" or "nominee" name, the Company cannot prevent a person from
acquiring 10% of the voting power of the Company and triggering a violation of
the New York Public Health Law. Unfortunately, the Voting Rights Plan increases
the possibility of a violation of this law. Conceivably, a holder of as little
as 1.1% of the Company's outstanding Existing Common Stock could, if such shares
are Long-Term Shares, become entitled to cast 10% or more of the outstanding
votes at any meeting of stockholders, thereby making such person a "controlling
person" of the Company under the New York Public Health Law. Unless prior
approval of the New York Public Health Council were obtained, such stockholder
would cause a violation of the New York Public Health Law.
The Voting Rights Plan increases the likelihood of an inadvertent violation
of the New York Public Health Law and limits the Company's ability to monitor
compliance with such law. Under the Voting Rights Plan, the voting power of a
stockholder is not merely a function of how many shares he owns, but also a
function of how long he has beneficially owned his shares and how long other
stockholders have beneficially owned their shares. A stockholder may move back
and forth over the 10% voting level even if he refrains from buying and selling
shares. Over time, the number of votes a stockholder will be entitled to cast
may increase as his shares convert from Short-Term Shares to Long-Term Shares,
while the aggregate votes of all stockholders may decrease as holders of Long-
Term Shares sell their Existing Common Stock or as the Company repurchases
Existing Common Stock. This problem is exacerbated from the Company's
perspective because it is unable to determine at any point in time the
- 27 -
<PAGE>
number of votes attributable to shares of Existing Common Stock held in "street"
or "nominee" name.
The Company believes that there are at least two holders of Short-Term
Shares who, beginning in February 1996, when many of their shares convert to
Long-Term Shares, will become "controlling persons" for purposes of the New York
Public Health Law unless they sell, or otherwise assign their voting rights with
respect to, a substantial number of their shares of Existing Common Stock prior
to that time. The Company does not believe that such persons have applied to
the New York Public Health Council for approval as "controlling persons." Even
if such application were made, there can be no assurance that such approval
would be obtained in advance of February 1996, if at all.
Although the Recapitalization would not eliminate the difficulty all
operators of licensed home care services agencies with publicly-traded
securities have in complying with the voting control limitations of the New York
Public Health Law, it would reduce the Company's concerns in two important
respects. First, the holders who would otherwise become "controlling persons"
in February 1996 (unless between now and then they were to sell a substantial
number of their shares) will not become controlling persons because they will
receive Class A Common Stock in the Recapitalization. Second, if the Company's
outstanding stock represents a fixed number of votes, the possibility of an
inadvertent violation of the New York Public Health Law would be greatly
diminished. As long as a shareholder owns shares of Class A Common Stock
representing less than 10% of the outstanding shares of the Company's common
stock of both classes, that shareholder would not have a larger percentage of
the voting power and could not become a "controlling person" under the New York
Public Health Law based on the "voting power" standard.
2. INABILITY TO USE POOLING-OF-INTERESTS METHOD. The Voting Rights Plan
precludes the Company from using the pooling-of-interests method of accounting
for business combinations. Generally, a business combination may be accounted
for as a pooling-of-interests if it meets certain specified criteria. A
business combination that does not meet all of these specified criteria must be
accounted for as a purchase.
Under the purchase method of accounting, the acquiring corporation must
record on its books as goodwill the amount by which the fair value of the
consideration paid by the acquiring corporation exceeds the fair value of the
net assets acquired, including identifiable intangible assets. Service
companies, including home health care agencies, generally have low tangible and
identifiable intangible asset values relative to their market value. Therefore,
acquisitions of these companies will generally result in the creation of a
significant amount of goodwill, which must be amortized by the acquiring
corporation over the periods to be benefitted, but in no event more than 40
years. Amortization of goodwill will reduce the acquiring corporation's
earnings during the amortization period. Business combinations which are
accounted for as a pooling of interests do not result in the creation of
goodwill and do not thereby reduce the acquiring corporation's earnings.
In order to avoid the negative earnings impact resulting from the
amortization of goodwill, the Company may prefer to avail itself of the pooling-
of-interests method of accounting for certain future business combinations.
One of the criteria which must be met in order for an acquiring corporation to
account for a business combination as a pooling-of-interests is that the
acquiring corporation issue in the business combination only common stock with
rights identical to those of the majority of its outstanding voting common stock
in exchange for the voting common stock of the acquired corporation. The
- 28 -
<PAGE>
Company believes that its Voting Rights Plan does not satisfy this condition for
utilizing the pooling-of-interests method of accounting. The Company further
believes, however, that this condition would be satisfied if the Plan of
Recapitalization were effectuated and shares of Class A Common Stock were issued
by the Company in a business combination.
Under the accounting rules, any change in the equity interests of the
voting common stock of a corporation within two years prior to the initiation of
a business combination will be presumed to be made in contemplation of a pooling
and pooling treatment of such business combination will not be permitted. The
Recapitalization would constitute such a change in the equity interest of the
voting common stock of the Company. Accordingly, whereas under the Voting
Rights Plan the Company cannot, under any circumstances or at any time, account
for a business combination using the pooling-of-interests method, if the
Recapitalization is consummated such accounting method would be available to the
Company for business combinations initiated two years after the approval of the
Plan of Recapitalization, provided such business combinations otherwise meet the
remaining criteria for use of the pooling-of-interests method.
3. POTENTIAL ADMINISTRATIVE BURDEN. Under the Voting Rights Plan, shares
of Existing Common Stock are Long-Term Shares if they have had the same
beneficial owner for at least 48 consecutive calendar months prior to the record
date for determining the holders entitled to vote on any matter submitted to a
vote by the stockholders. Shares held of record by a holder at least 48
consecutive calendar months (dating from the first day of the first calendar
month on or after the holder acquired beneficial ownership of such shares) prior
to any such record date are presumed to be owned beneficially by the record
holder for such period and are thus Long-Term Shares. Shares held of record on
a record date in "street" or "nominee" name are presumed to be owned
beneficially by the same beneficial owner for less than such a 48 consecutive
calendar month period prior to the record date and are thus presumed to be
Short-Term Shares. This latter presumption is rebuttable by presentation to the
Company of evidence (in accordance with procedures established by the Company)
that a beneficial owner has been the beneficial owner of his shares for at least
the required 48 consecutive calendar month period. These procedures are
discussed earlier in this Proxy Statement under "Record Date, Outstanding Voting
Securities, Voting Rights and Vote Required". To date, the administration of
the Voting Rights Plan has not proven burdensome to the Company. However, if,
as expected, there is an increase in the number of holders of shares held in
"street" or "nominee" name who seek to prove that they have been the beneficial
owners of such shares for at least the required 48 consecutive calendar month
period, the effort employed by the Company in making determinations whether
shares are Long-Term Shares or Short-Term Shares could represent an
administrative burden for the Company and require it to incur additional
expense.
EFFECTS OF RECAPITALIZATION ON EXISTING STOCKHOLDERS
The principal effect of the Recapitalization on existing stockholders of
the Company will be to fix the voting rights of the shares of the Company's
common stock which they own without regard to the duration of their ownership.
Each holder of a share of Class B Common Stock will be entitled to cast ten
times the number of votes as may be cast by a holder of a share of Class A
Common Stock. Current holders of Short-Term Shares, regardless of how long they
have beneficially owned such shares and how long they continue to beneficially
own them in the future, will lose their right to become holders of ten vote
shares.
- 29 -
<PAGE>
On the Record Date, there were _______ outstanding Long-Term Shares and
______ outstanding Short-Term Shares held of record. Assuming, on the Record
Date and at the Effective Time, no shares held in "street" or "nominee" name are
owned by the same beneficial owner for at least 48 consecutive calendar months
(dating from the first day of the first calendar month on or after the holder
acquired beneficial ownership of such shares), then there will be _____ shares
of Class A Common Stock issued in the Recapitalization, with the right to cast a
total of __________ votes at any meeting of stockholders, and __________ shares
of Class B Common Stock issued in the Recapitalization, with the right to cast a
total of ____ votes at any meeting of stockholders. Holders of the Class A
Common Stock and the Class B Common Stock will thus be entitled to cast
approximately __% and ___%, respectively, of all votes cast at a meeting of
stockholders. Upon the conversion of shares of Class B Common Stock into shares
of Class A Common Stock, the percentage of all votes cast by holders of Class B
Common Stock will be reduced.
The Recapitalization will not cause existing stockholders to suffer any
dilution of their current percentage ownership of the Company. After the
Recapitalization, the Class A Common Stock will be quoted on the NASDAQ National
Market. The Company does not intend to have the Class B Common Stock quoted on
any interdealer quotation system or listed on any stock exchange. At the
Effective Time, all outstanding options and warrants to purchase shares of
Existing Common Stock will be converted automatically into options and warrants
to purchase an equal number of shares of Class A Common Stock. All other terms
and conditions of such options and warrants will remain unchanged. The
Recapitalization will have no effect on the Company's preferred stock.
FEDERAL INCOME TAX CONSEQUENCES OF RECAPITALIZATION
The Company's stockholders should not recognize gain or loss upon the
reclassification of Existing Common Stock as Class A Common Stock or Class B
Common Stock.
Each stockholder's tax basis in, and holding period for, his shares of
Existing Common Stock prior to implementation of the Recapitalization will carry
over to the shares of Class A Common Stock and Class B Common Stock received by
him in the Recapitalization. Such tax basis will be reallocated among such
shares of Class A Common Stock and Class B Common Stock in proportion to their
respective fair market values at completion of the Recapitalization.
Neither the Class A Common Stock nor the Class B Common Stock received by
stockholders pursuant to the Recapitalization will constitute "Section 306
stock" within the meaning of Section 306(c) of the Internal Revenue Code of
1986, as amended (the "Code").
The above discussion is believed to be a fair and accurate summary of the
material Federal income tax consequences to the Company's stockholders with
respect to the Recapitalization, based on the current provisions of the Code,
applicable regulations thereunder, judicial authority and administrative rulings
and practice. The discussion applies only to stockholders who are citizens or
residents of the United States and are not foreign corporations and hold their
shares as capital assets. Furthermore, state, local or foreign tax consequences
of the Recapitalization are not addressed in the discussion. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the statements and conclusions set forth herein. Any such
changes or interpretations may or may not be
- 30 -
<PAGE>
retroactive. Accordingly, each stockholder should consult his tax advisor
concerning the potential tax consequences to such stockholder of the
Recapitalization.
INTEREST OF CERTAIN PERSONS IN THE RECAPITALIZATION
Based upon their share ownership on the Record Date, Stephen Savitsky, the
Company's Chairman, President and Chief Executive Officer, and David Savitsky,
the Company's Executive Vice President, Chief Operating Officer, Secretary and
Treasurer will receive 342,738 and 378,537 (which includes 1,000 shares of Class
B Common Stock to be issued to David Savitsky's wife as trustee for the benefit
of their children) shares of Class B Common Stock, respectively, in the
Recapitalization. In addition, based upon his share ownership on the Record
Date, a former executive officer and director of the Company who has granted to
Stephen and David Savitsky a revocable proxy to vote all his shares of Existing
Common Stock will receive 101,052 shares of Class B Common Stock in the
Recapitalization. Assuming that there are 1,350,000 shares of Class B Common
Stock issued in the Recapitalization and no change in the number of outstanding
shares of the Company's Existing Common Stock between the Record Date and the
Effective Time, Stephen and David Savitsky, together with David Savitsky's wife,
individually and as trustee, will have the right, collectively, to cast
approximately __% of all votes cast at a meeting of stockholders. Over time, as
other holders of Class B Common Stock convert or sell their shares, the voting
power of Stephen and David Savitsky may increase. Although after the
Recapitalization Stephen and David Savitsky will not, together, have the right
to cast a majority of all votes cast at a meeting of stockholders, due to their
significant voting power and their positions as executive officers, directors
and members of the Executive Committee of the Company's Board of Directors, they
may have the ability to elect the entire Board of Directors and generally direct
the affairs of the Company.
Based upon his share ownership on the Record Date, Bernard Firestone, a
director of the Company, will be issued 2,100 shares of Class B Common Stock in
the Recapitalization (which includes 1,000 shares of Class B Common Stock to be
issued to Mr. Firestone's wife). No other executive officer or director of the
Company, or any of their associates, will receive shares of Class B Common Stock
in the Recapitalization. All of the other shares of Existing Common Stock owned
beneficially by executive officers and directors will be converted automatically
at the Effective Time into an equal number of shares of Class A Common Stock.
See "Ownership of Securities By Certain Beneficial Owners, Directors and
Officers."
The consummation of the Recapitalization may have the effect of
discouraging takeover bids which holders of Class A Common Stock deem to be in
their best interests and perpetuating the Company's existing management. This
impediment to takeover bids may have an adverse effect on the price of the Class
A Common Stock.
SURRENDER AND EXCHANGE OF STOCK CERTIFICATES
At the Effective Time (i) each share of Existing Common Stock which is a
Long-Term Share on both the Record Date and the Effective Time (assuming for
these purposes only that the Effective Time is a record date for a meeting of
the Company's stockholders) automatically will be converted into one
- 31 -
<PAGE>
share of Class B Common Stock and (ii) each other share of Existing Common Stock
will be automatically converted into one share of Class A Common Stock.
Promptly after the Effective Time, the American Stock Transfer and Trust Company
(the "Transfer Agent") will mail to each record holder of a stock certificate
representing shares of Existing Common Stock outstanding immediately prior to
the Effective Time instructions and transmittal materials for effecting the
surrender of stock certificates representing shares of Existing Common Stock in
exchange for replacement certificates representing the number of shares of Class
A Common Stock and Class B Common Stock into which such shares of Existing
Common Stock have been converted. STOCKHOLDERS ARE REQUESTED NOT TO SEND ANY
STOCK CERTIFICATES WITH THE ENCLOSED PROXY, AND NOT TO SURRENDER STOCK
CERTIFICATES FOR EXCHANGE, UNTIL THEY RECEIVE SUCH TRANSMITTAL MATERIALS FROM
THE TRANSFER AGENT.
After receipt of the transmittal materials from the Transfer Agent,
stockholders may complete and return such materials to the Transfer Agent along
with the certificate or certificates representing their shares of Existing
Common Stock. Upon delivery of such materials and certificates to the Transfer
Agent, the stockholder will be entitled to receive a new stock certificate
representing the same number of shares of Class A Common Stock or Class B Common
Stock, as the case may be, as were represented by the certificate or
certificates surrendered to the Transfer Agent. Until surrendered, each stock
certificate will represent for all purposes the number of shares of Class A
Common Stock or Class B Common Stock into which the shares represented by such
certificate were converted at the Effective Time, as determined by the Transfer
Agent's records.
If any new certificate representing shares of Class A Common Stock or Class
B Common Stock is to be issued in a name or number of shares other than that in
which or in respect of which the surrendered certificate is registered, it will
be a condition to such issuance that the person requesting such issuance deliver
to the Transfer Agent all documents necessary to evidence and effect such
transfer (with signature guarantees) and pay to the Transfer Agent any transfer
or other taxes required by reason thereof or establish to the Transfer Agent's
satisfaction that such taxes have been paid or are not applicable.
In the event any certificate representing shares of Existing Common Stock
has been lost, stolen or destroyed, the Transfer Agent will issue a new
certificate representing the number and class of shares into which the shares
represented by such certificate were converted pursuant to the Recapitalization
upon the making of an affidavit of that fact by the person claiming such
certificate to be lost, stolen or destroyed. As a condition precedent to such
issuance, the Company may require a bond in such sum as the Company may direct
to indemnify the Company against any claim that may be made against the Company
with respect to the certificate that is alleged to have been lost, stolen or
destroyed.
In determining whether a record holder of Existing Common Stock at the
Effective Time will be entitled to receive shares of Class A Common Stock or
Class B Common Stock, the Board of Directors of the Company, or the Transfer
Agent acting on behalf of the Board of Directors, will apply the same principles
which have been used in determining whether shares are Long-Term Shares or
Short-Term Shares for purposes of voting on matters submitted to a vote by the
stockholders. Shares held of record by a holder at least 48 consecutive
calendar months (dating from the first day of the first calendar month on or
after the holder acquired beneficial ownership of such shares) prior to both the
Record Date and the Effective Time will be exchanged for an equal number of
shares of Class B Common Stock, except that shares held of record at the
Effective Time in "street" or "nominee" name will be presumed to be
- 32 -
<PAGE>
held for less than the required 48 consecutive calendar month period prior to
both the Record Date and the Effective Time and, unless such presumption is
rebutted as described below, exchanged for an equal number of shares of Class A
Common Stock.
The transmittal materials delivered by the Transfer Agent to each record
holder of Common Stock at the Effective Time will indicate the number of shares
of Class A Common Stock and Class B Common Stock the holder is entitled to
receive in the Recapitalization and will include the provisions established by
the Board of Directors of the Company by which a stockholder may establish that
he or she has been the beneficial owner of the shares to be exchanged in the
Recapitalization for at least 48 consecutive calendar months (dating from the
first day of the first calendar month on or after the holder acquired beneficial
ownership of such shares) prior to both the Record Date and the Effective Time.
These provisions are the same as those discussed earlier in this Proxy Statement
under "Record Date, Outstanding Voting Securities, Voting Rights and Vote
Required" (the "Provisions"). IF A STOCKHOLDER WISHES TO ASSERT THAT THE
TRANSMITTAL MATERIALS OVERSTATE THE NUMBER OF SHARES OF CLASS A COMMON STOCK,
AND UNDERSTATE THE NUMBER OF SHARES OF CLASS B COMMON STOCK, ENTITLED TO BE
RECEIVED BY SUCH STOCKHOLDER IN THE RECAPITALIZATION, THEN ON OR BEFORE
SEPTEMBER 15, 1995, SUCH STOCKHOLDER MUST DELIVER TO THE GENERAL COUNSEL OF THE
COMPANY THE INFORMATION REQUIRED PURSUANT TO THE PROCEDURES TO ESTABLISH
BENEFICIAL OWNERSHIP OF HIS OR HER SHARES FOR AT LEAST 48 CONSECUTIVE CALENDAR
MONTHS (DATING FROM THE FIRST DAY OF THE FIRST CALENDAR MONTH ON OR AFTER THE
HOLDER ACQUIRED BENEFICIAL OWNERSHIP OF SUCH SHARES) PRIOR TO BOTH THE RECORD
DATE AND THE EFFECTIVE TIME. IF SUCH INFORMATION IS NOT FURNISHED TO THE
COMPANY'S GENERAL COUNSEL BY SEPTEMBER 15, 1995, THEN THE ALLOCATION OF THE
NUMBER OF SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK TO BE ISSUED
TO SUCH STOCKHOLDER AS SET FORTH IN THE TRANSMITTAL MATERIALS WILL BE FINAL AND
BINDING ON THE STOCKHOLDER. IF SUCH INFORMATION IS FURNISHED TO THE COMPANY'S
GENERAL COUNSEL PRIOR TO SEPTEMBER 15, 1995, THEN THE BOARD OF DIRECTORS OF THE
COMPANY SHALL DETERMINE THE PROPER ALLOCATION OF THE NUMBER OF SHARES OF CLASS A
COMMON STOCK AND CLASS B COMMON STOCK TO BE ISSUED TO SUCH STOCKHOLDER, WHICH
DETERMINATION SHALL BE FINAL AND BINDING.
VOTE REQUIRED
The affirmative vote of a majority of the Long-Term Shares outstanding as
of the Record Date, voting as a class, and the Short-Term Shares outstanding as
of the Record Date, voting as a class, is necessary for the approval of the Plan
of Recapitalization.
The Board of Directors recommends that you vote "For" the Plan of
Recapitalization.
- 33 -
<PAGE>
STOCKHOLDER PROPOSALS
Stockholders of the Company wishing to include proposals in the proxy
material in relation to the Annual Meeting of the Company to be held in 1996
must submit the same in writing so as to be received at the executive offices of
the Company on or before February ___, 1996. Such proposals must also meet the
other requirements of the rules of the Securities and Exchange Commission
relating to stockholder proposals.
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected the firm of Deloitte &
Touche, LLP as the independent certified public accountants to audit the
accounts of the Company for the fiscal year ending February 28, 1996. A
representative of Deloitte & Touche, LLP, which also audited the accounts of the
Company for the fiscal year ended February 28, 1995, is expected to be present
at the Annual Meeting, with an opportunity to make a statement, if he so
desires, and to respond to appropriate questions at the meeting.
GENERAL
The management of the Company does not know of any matters other than those
stated in this Proxy Statement which are to be presented for action at the
meeting. If any other matters should properly come before this meeting, it is
intended that proxies in the accompanying form will be voted on any such matters
in accordance with the judgment of the persons voting such proxies.
Discretionary authority to vote on such matters is conferred by such proxies by
the persons voting them.
The Company will bear the cost of soliciting proxies, including expenses in
connection with the preparation and mailing of this Proxy Statement and all
papers which now accompany or may hereafter supplement it. Proxies may be
solicited by directors, officers and regular employees of the Company (who will
not be specifically compensated for such services) by mail, telephone,
telecopier or by personal solicitation. Brokerage houses and other custodians,
nominees and fiduciaries will be required to forward proxies and proxy material
to the beneficial owners of the Company's Common Stock, and the Company will
reimburse them for their expenses.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON BEING SOLICITED BY
THIS PROXY STATEMENT, UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED FEBRUARY 28, 1995, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. ALL SUCH REQUESTS SHOULD BE DIRECTED TO MR.
GARY TIGHE, STAFF BUILDERS, INC., 1983 MARCUS AVENUE, LAKE SUCCESS, NEW YORK
11042.
- 34 -
<PAGE>
Insofar as any of the information in this Proxy Statement may rest
peculiarly within the knowledge of persons other than the Company, the Company
has relied upon information furnished by them.
By Order of the Board of Directors
DAVID SAVITSKY
Secretary
Dated: June ___, 1995
- 35 -
<PAGE>
EXHIBIT A TO THE
PROXY STATEMENT
PLAN OF RECAPITALIZATION
PLAN OF RECAPITALIZATION, dated as of May 12, 1995, adopted by the Board of
Directors of Staff Builders, Inc., a Delaware corporation (the "Corporation").
ARTICLE I
THE RECAPITALIZATION AND RELATED MATTERS
1.1. THE RECAPITALIZATION.
(a) Article FOURTH of the Restated Certificate of Incorporation of
the Corporation authorizes the issuance of up to 50,000,000 shares of common
stock, $.01 par value per share (the "Existing Common Stock"), and 10,000 shares
of preferred stock, $1.00 par value per share, and contains a time phased voting
rights plan (the "Voting Rights Plan"). Under the Voting Rights Plan, each
holder of record of Existing Common Stock, except in certain situations, is
entitled to ten votes for each share of Existing Common Stock that has been
beneficially owned by the current beneficial owner for at least 48 consecutive
calendar months (dating from the first day of the first calendar month on or
after the holder acquired beneficial ownership of such share) prior to the
record date for a meeting of stockholders ("Long-Term Shares"). Each holder of
record of Existing Common Stock that has not been beneficially owned by the
current beneficial owner for at least such a 48 consecutive calendar month
period prior to the record date (with certain limited exceptions) is entitled to
only one vote per share ("Short-Term Shares"). A holder may own both Long-Term
Shares and Short-Term Shares, in which case he is entitled to ten votes for each
Long-Term Share and one vote for each Short-Term Share. Except for the number
of votes attached to each, Long-Term Shares and Short-Term Shares are identical
in all respects and constitute a single class of stock.
(b) Subject to the terms and conditions of this Plan of
Recapitalization (the "Plan"), at the Effective Time (as defined in
Section 1.1(c)), the common stock of the Corporation shall be reclassified (the
"Recapitalization") in accordance with Section 1.2 of this Plan and the
provisions of the Delaware General Corporation Law (the "GCL") and exchanged in
accordance with this Article I for the New Shares (as defined in Section 1.3).
(c) The Recapitalization shall become effective upon the filing of a
certificate of amendment to the Corporation's Restated Certificate of
Incorporation in the form of ANNEX 1 hereto with the Secretary of State of the
State of Delaware (the "Certificate of Amendment") in accordance with the
provisions of Section 242 of the GCL. The Certificate of Amendment shall be
filed promptly following the approval of this Plan by the stockholders of the
Corporation in accordance with the terms hereof. The date and time when the
Recapitalization shall become effective is hereinafter referred to as the
"Effective Time".
<PAGE>
1.2. RECLASSIFICATION OF STOCK. At the Effective Time:
(a) The Voting Rights Plan and the Existing Common Stock will be
eliminated and the issuance of 50,000,000 shares of Class A Common Stock, $.01
par value per share (the "Class A Common Stock"), and 1,350,000 shares of
Class B Common Stock, $.01 par value per share (the "Class B Common Stock"),
will be authorized.
(b) Each share of Existing Common Stock which is a Long-Term Share as
of both June 19, 1995 (the "Record Date") and the Effective Time (assuming for
these purposes only that the Effective Time is a record date for a meeting of
the Company's stockholders) will be reclassified, changed and converted
automatically into one share of Class B Common Stock (the terms of which are set
forth in the Certificate of Amendment) and each other share of Existing Common
Stock will be reclassified, changed and converted automatically into one share
of Class A Common Stock (the terms of which are set forth in the Certificate of
Amendment).
1.3. EXCHANGE.
(a) Promptly after the Effective Time, the American Stock Transfer
and Trust Company (the "Transder Agent") will mail to each record holder of a
stock certificate representing shares of Existing Common Stock outstanding
immediately prior to the Effective Time instructions and transmittal materials
for effecting the surrender of stock certificates representing shares of
Existing Common Stock in exchange for replacement certificates representing the
number of shares of Class A Common Stock and Class B Common Stock into which
such shares of Existing Common Stock have been converted (the "New Shares").
(b) After receipt of the transmittal materials from the Transfer
Agent, stockholders may complete and return such materials to the Transfer Agent
along with the certificate or certificates representing their shares of Existing
Common Stock. Upon delivery of such materials and certificates to the Transfer
Agent, the stockholder will be entitled to receive a new stock certificate
representing the same number of shares of Class A Common Stock or Class B Common
Stock, as the case may be, as were represented by the certificate or
certificates surrendered to the Transfer Agent. Until surrendered, each stock
certificate will represent for all purposes the number of shares of Class A
Common Stock or Class B Common Stock, as the case may be, into which the shares
represented by such certificate were converted at the Effective Time, as
determined by the Transfer Agent's records.
(c) If any new certificate representing shares of Class A Common
Stock or Class B Common Stock is to be issued in a name or number of shares
other than that in which or in respect of which the surrendered certificate is
registered, it will be a condition to such issuance that the person requesting
such issuance deliver to the Transfer Agent all documents necessary to evidence
and effect such transfer (with signature guarantees) and pay to the Transfer
Agent any transfer or other taxes required by reason thereof or establish to the
Transfer Agent's satisfaction that such taxes have been paid or are not
applicable.
(d) In the event any certificate representing shares of Existing
Common Stock has been lost, stolen or destroyed, the Transfer Agent will issue a
new certificate representing the number and class of shares into which the
shares represented by such certificate were converted pursuant to the
A-2
<PAGE>
Recapitalization upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed. As a condition
precedent to such issuance, the Corporation may require a bond in such sum as
the Corporation may direct to indemnify the Corporation against any claim that
may be made against the Corporation with respect to the certificate that is
alleged to have been lost, stolen or destroyed.
(e) In determining whether a record holder of Existing Common Stock
on the Effective Time will be entitled to receive shares of Class A Common Stock
or Class B Common Stock, the Board of Directors of the Corporation will apply
the same principles which have been used in determining whether shares are
Long-Term Shares or Short-Term Shares for purposes of voting on matters
submitted to a vote by the stockholders. Shares held of record by a holder at
least 48 consecutive calendar months (dating from the first day of the first
calendar month on or after the holder acquired beneficial ownership of such
shares) prior to both the Record Date and the Effective Time (assuming for these
purposes only that the Effective Time is a record date for a meeting of the
Company's stockholders) will be exchanged for an equal number of shares of Class
B Common Stock, except that shares held of record on the Effective Time in
"street" or "nominee" name will be presumed to be held for less than 48
consecutive calendar months (dating from the first day of the first calendar
month on or after the holder acquired beneficial ownership of such shares) prior
to both the Record Date and the Effective Time and, unless such presumption is
rebutted as described below, exchanged for an equal number of shares of Class A
Common Stock.
(f) The transmittal materials delivered by the Transfer Agent to each
record holder of Common Stock on the Effective Time will indicate the number of
shares of Class A Common Stock and Class B Common Stock the holder is entitled
to receive in the Recapitalization and will include the provisions established
by the Board of Directors of the Corporation by which a stockholder may
establish that he or she has been the beneficial owner of the shares to be
exchanged in the Recapitalization for at least 48 consecutive calendar months
(dating from the first day of the first calendar month on or after the holder
acquired beneficial ownership of such shares) prior to both the Record Date and
the Effective Time (assuming for these purposes only that the Effective Time is
a record date for a meeting of the Company's stockholders). If a stockholder
wishes to assert that the transmittal materials overstate the number of shares
of Class A Common Stock, and understate the number of shares of Class B Common
Stock, entitled to be received by such stockholder in the Recapitalization, then
on or before September 15, 1995, such stockholder must deliver to the general
counsel of the Corporation the information required pursuant to the procedures
to establish beneficial ownership of his or her shares for at least 48
consecutive calendar months (dating from the first day of the first calendar
month on or after the holder acquired beneficial ownership of such shares) prior
to both the Record Date and the Effective Time (assuming for these purposes only
that the Effective Time is a record date for a meeting of the Company's
stockholders). If such information is not furnished to the Corporation's
general counsel by September 15, 1995, then the allocation of the number of
shares of Class A Common Stock and Class B Common Stock to be issued to such
stockholder as set forth in the transmittal materials will be final and binding
on the stockholder. If such information is furnished to the Corporation's
general counsel prior to September 15, 1995, then the Board of Directors of the
Corporation shall determine the proper allocation of the number of shares of
Class A Common Stock and Class B Common Stock to be issued to such stockholder,
which determination shall be final and binding.
A-3
<PAGE>
1.4. CERTIFICATE OF INCORPORATION. (a) The Corporation's Restated
Certificate of Incorporation, as in effect immediately prior to the Effective
Time, shall be amended at the Effective Time in the manner set forth in ANNEX 1
hereto and, as so amended, shall be the certificate of incorporation of the
Corporation until thereafter amended as provided therein and in accordance with
the GCL.
(b) The Certificate of Amendment will authorize for issuance
1,350,000 shares of Class B Common Stock, which represents an estimate by the
Board of Directors of the number of shares of Class B Common Stock to be issued
in the Recapitalization. If a number of shares of Class B Common Stock other
than 1,350,000 is required to be issued in the Recapitalization, then the Board
of Directors shall be authorized to file a further amendment to the
Corporation's Restated Certificate of Incorporation, in the form of ANNEX 2
hereto, to reflect the precise number of shares of Class B Common Stock to be
issued in the Recapitalization.
1.5. EFFECTIVE TIME. This Plan shall become effective on the later of
(i) the day on which the last of the conditions set forth in Article III hereof
is fulfilled or (subject to applicable law) waived, or (ii) such other date as
the Board of Directors of the Corporation shall fix.
ARTICLE II
ADDITIONAL ACTIONS OF THE CORPORATION UNDER
THIS PLAN OF RECAPITALIZATION
2.1. STOCK OPTIONS.
(a) The Corporation shall take such actions as are necessary to
permit each holder of an Option (as hereinafter defined), whether or not
exercisable, to have such Option adjusted as provided in Section 2.1(b). The
term "Option" means a right issued under any of the Corporation's stock option
plans to purchase shares of Existing Common Stock.
(b) Each Option will be adjusted so that upon exercise the holder
will be entitled to acquire the number of shares of Class A Common Stock equal
to the number of shares of Existing Common Stock such holder would have been
entitled to acquire under the applicable stock option plan.
2.2. STOCK WARRANTS.
(a) The Corporation shall take such actions as are necessary to
permit each holder of a Warrant (as hereinafter defined), to have such Warrant
adjusted as provided in Section 2.2(b). The term "Warrant" means a right
granted under any of the Corporation's warrant agreements to purchase shares of
Existing Common Stock.
(b) Each Warrant will be adjusted so that upon exercise the holder
will be entitled to acquire the number of shares of Class A Common Stock equal
to the number of shares of Existing Common Stock such holder would have been
entitled to acquire under the applicable warrant agreement.
A-4
<PAGE>
2.3. OTHER ACTIONS. The Corporation shall use its reasonable best efforts
to take such other actions as it, in its sole discretion, deems necessary or
advisable (including the amendment of any of the Corporation's existing employee
benefit plans) in connection with the consummation of this Plan and the
transactions contemplated hereby.
ARTICLE III
CONDITIONS PRECEDENT
3.1. CONDITIONS PRECEDENT TO CONSUMMATION OF THE RECAPITALIZATION. The
consummation of the Recapitalization is subject to the satisfaction or (subject
to applicable law) waiver of each of the following conditions:
(a) APPROVAL OF STOCKHOLDERS. The approval of this Plan and all
actions contemplated by this Plan that require the approval of the Corporation's
stockholders shall have been obtained in accordance with the GCL and the
Corporation's Restated Certificate of Incorporation. Further, such approval
shall have been obtained from holders of a majority of the Long-Term Shares,
voting as a class, and from holders of a majority of the Short-Term Shares,
voting as a class.
(b) RECEIPT OF LICENSES, PERMITS AND CONSENTS. The Corporation shall
have received evidence, in form and substance reasonably satisfactory to it,
that such licenses, permits, consents, approvals, authorizations, qualifications
and orders of governmental authorities and parties to contracts with the
Corporation and its subsidiaries as are necessary for consummation of the
Recapitalization have been obtained and are in full force and effect (other than
those which, if not obtained, would not have a material adverse effect on
(i) the Recapitalization, (ii) the financial condition, results of operations or
businesses of the Corporation and its subsidiaries taken as a whole, or
(iii) the continuation of the operations and businesses of the Corporation and
its subsidiaries after the consummation of the Recapitalization).
(c) LITIGATION. No action, proceeding or investigation shall have
been instituted or threatened prior to the Effective Time before any court or
administrative body to restrain, enjoin or otherwise prevent the consummation of
this Plan or the transactions contemplated hereby or to recover any damages or
obtain other relief as a result of this Plan or the transactions contemplated
hereby, and no restraining order or injunction issued by any court of competent
jurisdiction shall be in effect prohibiting the consummation of this Plan or any
of the transactions contemplated hereby.
(d) ACTIONS AND PROCEEDINGS. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by, or
incidental to, this Plan and all other related legal matters shall have been
reasonably satisfactory to and approved by counsel for the Corporation, and such
counsel shall have been furnished with certified copies of such corporate
actions and proceedings and such other instruments and documents as such counsel
shall have reasonably requested.
(e) NASDAQ LISTING. The Class A Common Stock shall have been
approved for listing, upon official notice of issuance, on the NASDAQ National
Market.
A-5
<PAGE>
ARTICLE IV
MISCELLANEOUS
4.1. TERMINATION AND ABANDONMENT. This Plan may be terminated and the
transactions contemplated hereby may be abandoned by the Board of Directors of
the Corporation at any time prior to the filing of the Certificate of Amendment
in accordance with Section 1.1(c), notwithstanding approval thereof by the
stockholders of the Corporation.
4.2. AMENDMENT AND MODIFICATION. Subject to applicable law, the provisions
of this Plan (including the exhibits attached hereto) may be amended or waived
in any respect by the Board of Directors of the Corporation at any time prior to
the filing of the Certificate of Amendment in accordance with Section 1.1(c);
PROVIDED that after the approval of this Plan by the stockholders of the
Corporation, no such amendment or waiver shall, without the further approval of
such stockholders, (x) modify the amendments to the Corporation's Restated
Certificate of Incorporation attached as ANNEX 1 hereto (except as contemplated
by the terms of ANNEX 2 with respect to the number of authorized shares), or
(y) change the kind of New Shares to be delivered in respect of each share of
Existing Common Stock pursuant to Sections 1.2(a) and 1.2(b). The good faith
determination by the Board of Directors that an amendment to this Plan complies
with this Section 4.2 shall be conclusive on all holders of shares of Existing
Common Stock or shares of any series of preferred stock.
By Order of the Board of Directors
DAVID SAVITSKY
Secretary
A-6
<PAGE>
ANNEX 1 TO
PLAN OF RECAPITALIZATION
AMENDMENT TO RESTATED
CERTIFICATE OF INCORPORATION
TO EFFECT RECAPITALIZATION
Paragraphs (a) through (j) (and the introductory language thereto) of
Article FOURTH of the Restated Certificate of Incorporation of the Corporation
are hereby amended to read as follows:
FOURTH: The total number of shares of stock that the Corporation
shall have authority to issue is 51,360,000, consisting of 50,000,000
shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), 1,350,000 shares of Class B Common Stock, par value
$.01 per share ("Class B Common Stock" and, collectively with Class A
Common Stock, "Common Stock"), and 10,000 shares of Preferred Stock,
par value $1.00 per share (the "Preferred Stock"). Effective upon the
filing with the Secretary of State of the State of Delaware of this
Certificate of Amendment of the Corporation's Restated Certificate of
Incorporation (the "Effective Time"): (i) each outstanding share of
common stock, par value $.01 per share ("Old Common Stock"), of the
Corporation that was a Long-Term Share on the record date for the
meeting of the stockholders of the Corporation at which this
Certificate of Amendment was approved (the "Record Date") and
continues to be a Long-Term Share at the Effective Time shall, without
any action on the part of the holder thereof, be reclassified as, and
converted into, one fully paid and nonassessable share of Class B
Common Stock of the Corporation, and (ii) every other share of Old
Common Stock of the Corporation outstanding or held in treasury shall,
without any action on the part of the holder thereof, be reclassified
as, and converted into, one fully paid and nonassessable share of
Class A Common Stock of the Corporation. Following the initial
issuance of shares of Class B Common Stock to effect the above
described reclassification, the Corporation may only issue shares of
the Class B Common Stock in the form of a distribution pursuant to a
stock dividend on, or split-up or reverse split-up of, the shares of
Class B Common Stock and only to the holders of the then outstanding
shares of Class B Common Stock. At any time shares of the Class B
Common Stock are outstanding, the Corporation may issue shares of
Common Stock in the form of a distribution pursuant to a stock
dividend on, or split-up or reverse split-up of, the shares of Common
Stock only if such stock dividend, split-up or reverse split-up is
made pro rata to the holders of the Class A Common Stock and Class B
Common Stock solely in shares of their respective classes.
The designations, powers, preferences and rights, and the
qualifications and restrictions, of the Common Stock and the Preferred
Stock are as follows:
(a) Except as otherwise required by statute, as set forth in a
resolution or resolutions of the Board of Directors as hereinafter
provided, or as otherwise provided
A-7
<PAGE>
herein, the holders of shares of Common Stock of the Corporation shall
(i) possess the exclusive right to vote for the election of directors
and for all other corporate purposes, and (ii) shall vote together
without regard to class. Except as otherwise required by the General
Corporation Law of Delaware or as otherwise provided herein, each
share of Class A Common Stock and each share of Class B Common Stock
shall have identical powers, preferences and rights, including rights
in liquidation and to dividends and distributions. With respect to
any proposed amendment to the Restated Certificate of Incorporation of
the Corporation that would increase or decrease the number of
authorized shares of either Class A Common Stock or Class B Common
Stock (other than any such amendment approved by the stockholders of
the Corporation at the same meeting at which this Certificate of
Amendment was approved), increase or decrease the par value of the
shares of Class A Common Stock or Class B Common Stock, or alter or
change the powers, preferences, relative voting power or special
rights of the shares of Class A Common Stock or Class B Common Stock
so as to affect them adversely, the approval of a majority of the
votes entitled to be cast by the holders of the class adversely
affected by the proposed amendment, voting separately as a class,
shall be obtained in addition to the approval of a majority of the
votes entitled to be cast by the holders of the Common Stock voting
together without regard to class as hereinabove provided.
(b) A holder of Class A Common Stock shall be entitled to one
(1) vote on each matter submitted to a vote at a meeting of
stockholders for each share of Class A Common Stock held of record by
such holder as of the record date for such meeting.
(c) A holder of Class B Common Stock shall be entitled to ten
(10) votes on each matter submitted to a vote at a meeting of
stockholders for each share of Class B Common Stock held of record by
such holder as of the record date for such meeting; provided, however,
that for purposes of any vote on a proposal submitted to stockholders
solely under Article EIGHTH of the Restated Certificate of
Incorporation of the Corporation and for purposes of any vote on a
proposal to amend, alter or repeal such Article EIGHTH or Paragraph
(a) or (d) of Article FIFTH, a holder of Class B Common Stock shall be
entitled to one (1) vote for each share of Class B Common Stock held
of record by such holder as of the record date for determining
stockholders entitled to vote on such proposal.
(d) Each share of Class B Common Stock may at any time be
converted at the election of the holder thereof into one share of
Class A Common Stock. Any holder of shares of Class B Common Stock
may elect to convert any or all of such shares at one time or at
various times in such holder's discretion. Such right shall be
exercised by the surrender of the certificate representing each share
of Class B Common Stock to be converted to the agent for the
registration of transfer of shares of Class B Common Stock at its
office, or to the Corporation at its principal executive offices,
accompanied by a written notice of the election by the holder thereof
to convert and (if so required by the transfer agent or by the
Corporation) by instruments of transfer, in form satisfactory to the
transfer agent and to the Corporation duly executed by such holder or
his duly authorized attorney. The issuance of a certificate for
shares of Class A Common Stock
A-8
<PAGE>
upon conversion of shares of Class B Common Stock shall be made
without charge for any stamp or other similar tax in respect of such
issuance. However, if any such certificate is to be issued in a name
other than that of the holder of the shares of Class B Common Stock
converted, the person requesting the issuance thereof shall pay to the
transfer agent or to the Corporation the amount of any tax which may
be payable in respect of such transfer, or shall establish to the
satisfaction of the transfer agent or the Corporation that such tax
has been paid. As promptly as practicable after the surrender for
conversion of a certificate representing shares of Class B Common
Stock and the payment of any such tax, the Corporation will deliver or
cause to be delivered, to the holder thereof, a certificate
representing the number of shares of Class A Common Stock issuable
upon such conversion, issued in such name or names as such holder may
direct. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of the surrender of the
certificate representing shares of Class B Common Stock (if on such
date the transfer books of the Corporation shall be closed, then
immediately prior to the close of business on the first date
thereafter that said books shall be open), and all rights of such
holder arising from ownership of shares of Class B Common Stock shall
cease at such time; and the person in whose name the certificate
representing shares of Class A Common Stock is to be issued shall be
treated for all purposes as having become the record holder of such
shares of Class A Common Stock at such time and shall have and may
exercise all the rights and powers appertaining thereto. The
Corporation shall at all times reserve and keep available, solely for
the purpose of issue upon conversion of outstanding shares of Class B
Common Stock, such number of shares of Class A Common Stock as may be
issuable upon the conversion of such outstanding shares of Class B
Common Stock; provided, however, that the Corporation may deliver
shares of Class A Common Stock which are held in the treasury of the
Corporation for shares of Class B Common Stock that are converted. If
any shares of Class A Common Stock require registration with or
approval of any governmental authority under any federal or state law
before such shares of Class A Common Stock may be issued upon
conversion, the Corporation will cause such shares to be duly
registered or approved, as the case may be. The Corporation will
endeavor to list shares of Class A Common Stock required to be
delivered upon conversion prior to such delivery upon any national
securities exchange or national automated quotation system on which
the outstanding shares of Class A Common Stock may be listed or quoted
at the time of such delivery. All shares of Class A Common Stock
which may be issued upon conversion of shares of Class B Common Stock
will, upon issue, be fully paid and nonassessable.
(e) No share of Class B Common Stock may be sold or otherwise
transferred in any transaction that results in a change in the
beneficial ownership of such share unless such transaction is an
Exempt Transfer. Any attempted transfer of a share of Class B Common
Stock in violation of this Paragraph (e) shall be treated as an
irrevocable election by the holder thereof to convert such share to a
share of Class A Common Stock pursuant to Paragraph (d) of this
Article FOURTH.
A-9
<PAGE>
(f) For purposes of this Article FOURTH, "Exempt Transfer" shall
mean the occurrence of any of the following events with respect to any
share of the Old Common Stock or Class B Common Stock, as the case may
be:
1. The transfer of such share by gift; by devise, bequest
or otherwise through the laws of inheritance or descent; or by a
trustee to a trust beneficiary or beneficiaries under the terms
of the trust; or
2. The appointment of a successor trustee, guardian,
committee of an incompetent, conservator or custodian with
respect to such share; or
3. The addition, withdrawal or demise of a beneficiary or
beneficiaries of a trust under the terms of the trust and by
reason of the birth, death, marriage or divorce of any natural
person; the adoption of any natural person; the passage of a
given period of time; the attainment by any natural person of a
specific age; or the creation or termination of any guardianship
or custodial arrangement; or
4. The transfer of record or the transfer of a beneficial
interest or interests in such share where the circumstances
surrounding such transfer clearly demonstrate that no material
change in beneficial ownership has occurred;
provided, in each such case, that (i) the transferee or the transferor
shall have provided to the Corporation, in accordance with the
procedures established by the Board of Directors pursuant to Paragraph
(i) of this Article FOURTH, satisfactory evidence that such change in
beneficial ownership qualifies as an Exempt Transfer, and (ii) such
change was not undertaken in order to circumvent the provisions or
purposes of this Article FOURTH.
(g) For purposes of this Article FOURTH, "Long-Term Share" shall
mean any share of Old Common Stock which has had the same beneficial
owner or owners for at least 48 consecutive calendar months (dating
from the first day of the first full calendar month on or after the
date the holder acquired beneficial ownership of such share) prior to
the Record Date and prior to the Effective Time; subject, in the case
of holders referred to in Paragraph (h) hereof, to the requirements
set forth in such Paragraph.
(h) Any share of the Old Common Stock held of record on the
Record Date and at the Effective Time shall be presumed to be owned
beneficially by the record holder and for the period shown by the
stockholder records of the Corporation. Notwithstanding the preceding
sentence of this Paragraph (h), any share of Old Common Stock held of
record on the Record Date or the Effective Time in "street" or
"nominee" name or by a broker, clearing agency, voting trustee, bank,
trust company or other nominee shall be presumed to have had the same
beneficial owner for a period of less than 48 consecutive calendar
months prior to both the Record Date and the Effective Time. These
presumptions shall be rebuttable by presentation to the Corporation on
or
A-10
<PAGE>
before September 15, 1995, in accordance with the procedures
established by the Corporation as provided in Paragraph (i) hereof, of
satisfactory evidence.
(i) For purposes of this Article FOURTH, all determinations
concerning changes in beneficial ownership, or the absence of any such
change, shall be made by the Board of Directors or a transfer agent
acting on behalf of the Board of Directors and any such determination
shall be conclusive. In determining whether any share of Old Common
Stock is a Long-Term Share on the Record Date and at the Effective
Time for purposes of this Article FOURTH, the Board of Directors, or
any transfer agent acting on behalf of the Board of Directors, will
apply the same principles as those reflected in the written procedures
theretofore adopted by the Board of Directors for the determination of
the voting rights of the Old Common Stock as in effect immediately
prior to the Record Date. The Board of Directors shall also establish
written procedures from time to time to facilitate such determinations
with respect to Exempt Transfers of the outstanding shares of Class B
Common Stock. Such procedures shall provide, among other things, the
manner of proof of facts that will be accepted. The Board of
Directors and any transfer agent shall be entitled to rely on
information concerning beneficial ownership of the Old Common Stock
and the Class B Common Stock coming to their attention from any source
and in any manner reasonably deemed by them to be reliable, but
neither the Board of Directors nor any transfer agent shall be charged
with any other information concerning the beneficial ownership of the
Old Common Stock or the Class B Common Stock.
(j) For purposes of this Article FOURTH, the terms "beneficial
owner" and "beneficially owned" shall be defined in accordance with
Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended (or any subsequent
provisions replacing such act or rule), except as provided otherwise
in this Article FOURTH.
A-11
<PAGE>
ANNEX 2 TO
PLAN OF RECAPITALIZATION
AMENDMENT TO
RESTATED CERTIFICATE OF INCORPORATION
TO ADJUST NUMBER OF
AUTHORIZED SHARES OF CLASS B COMMON STOCK
The first sentence of Article FOURTH of the Restated Certificate of
Incorporation of the Corporation is hereby amended to read as follows:
FOURTH: The total number of shares of stock that the Corporation
shall have authority to issue is _______________*, consisting of
50,000,000 shares of Class A Common Stock, par value $.01 per share
("Class A Common Stock"), ____________* shares of Class B Common
Stock, par value $.01 per share ("Class B Common Stock" and,
collectively with Class A Common Stock, "Common Stock"), and 10,000
shares of Preferred Stock, par value $1.00 per share (the "Preferred
Stock").
- - - - - - -------------------
* Appropriate figures will be inserted to reflect the actual number of
shares of Class B Common Stock required to effect the Plan of
Recapitalization.
A-12
<PAGE>
PRELIMINARY COPY
STAFF BUILDERS, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen Savitsky and David Savitsky and
each of them (with power of substitution) proxies of the undersigned to
represent and vote, as designated below, all shares of common stock, par value
$.01 per share ("Common Stock"), of Staff Builders, Inc. (the "Company"), which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders to be held on August 16, 1995 and at any adjournment
thereof. Each holder of shares of Common Stock is entitled to ten votes for each
share beneficially owned by the current beneficial owner for at least
forty-eight consecutive calendar months (dating from the first day of the first
calendar month on or after the holder acquired beneficial ownership of such
shares) prior to the Record Date for the Annual Meeting and one vote for each
share not beneficially owned by the current beneficial owner for at least such
period, as more fully described in the Proxy Statement accompanying this Proxy.
The holders of ten vote shares and the holders of one vote shares will vote as
separate classes with respect to the proposed Recapitalization, including the
related amendments to the Company's Restated Certificate of Incorporation.
<PAGE>
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. Election of Class B Directors
FOR BOTH NOMINEES WITHHOLD AUTHORITY FOR BOTH NOMINEES
/ / / /
Nominees for Class B Directors: (1) Bernard J. Firestone
(2) Donald Meyers
For, except vote withheld for the following nominee:
--------------------------------------------------------
2. Approval of the Plan of Recapitalization, including the related amendments
to the Company's Restated Certificate of Incorporation.
FOR AGAINST ABSTAIN
/ / / / / /
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the annual meeting.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted "FOR" Items 1 and 2.
SIGNATURE(s) DATE
-------------------------------------------------- ----------
IMPORTANT: Please date and sign as your name appears above and return in the
enclosed envelope. When signing as executor, administrator, trustee, guardian,
etc., please give full title as such. If the stockholder is a corporation, this
proxy should be signed in the full corporation name by a duly authorized officer
whose title is stated.
