<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
/X/ AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended February 28, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Transition Period from _________ To _________
Commission File No. 0-11380
STAFF BUILDERS, INC.
(Exact name of issuer as specified in charter)
Delaware 11-2650500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1983 Marcus Avenue
Lake Success, New York 11042-7011
(Address of principal executive offices)
(516) 358-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class:
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III or this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant based on the closing price of such stock on April 28, 1995 was
$97,933,137.
The number of shares of Common Stock outstanding on April 28, 1995 was
23,289,055 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth as to each director and each executive
officer of the Company: (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.
<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.
- 2 -
<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 Executive Vice Not Applicable
President, Health Care Operations
of a principal subsidiary of
the Company since February 1995.
From November 1991 until February 1995,
Ms. Hamilton served as Senior Vice
President, Healthcare Operations of a
principal subsidiary of the Company.
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.
Cynthia Nye . . . . . . . . . 43 Ms. Nye has been Senior Vice President, Not Applicable
Corporate Support of a principal subsidiary
of the Company since November 1994. From
January 1992 through November 1994, Ms. Nye
served as Vice President, Corporate Support
of a principal subsidiary of the Company.
From 1983 to 1981, Ms. Nye served
as the Chief Financial Officer of United
Cerebral Palsy of New York State, a not-for-profit
health care organization.
</TABLE>
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 on a timely basis.
- 3 -
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
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>
- 4 -
<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,
- 5 -
<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.
- 6 -
<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
- 7 -
<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 7 less $28,063 of interest withhes. 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
- 8 -
<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.
- 9 -
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of June 19, 1995, 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 five
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 PERCENTAGE OF
LONG-TERM SHORT-TERM OUTSTANDING OUTSTANDING
NAME OF BENEFICIAL OWNER SHARES(2) SHARES(3) SHARES OWNED VOTES OWNED
--------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Stephen Savitsky (4). . . . . . . . . . . . 443,790 1,339,724(5)(6) 7.2% 15.5%
David Savitsky (4). . . . . . . . . . . . . 479,589(7) 1,303,423(6)(8)(9) 7.2% 16.4%
Bernard J. Firestone. . . . . . . . . . . . 2,100(10) 1,500(11) * *
Jonathan J. Halpert . . . . . . . . . . . . -- -- -- --
Donald Meyers . . . . . . . . . . . . . . . -- 1,400 * *
Gary Tighe. . . . . . . . . . . . . . . . . -- 105,000(12) * *
Sharon Hamilton . . . . . . . . . . . . . . -- 82,500(13) * *
Edward Teixeira . . . . . . . . . . . . . . -- 45,300(14) * *
Cynthia Nye . . . . . . . . . . . . . . . . -- 35,500(15) * *
S Squared Technology Corp. (16) . . . . . . -- 3,181,000 13.6% 8.8%
Horsburgh Carlson Investment
Management, Inc.(17). . . . . . . . . . . 67,000 1,323,000 5.9% 5.5%
All executive officers and
directors as a group (9 persons). . . . . . 824,427 2,675,907(6)(18) 13.5% 28.4%
CLASS A PREFERRED STOCK(19)
<CAPTION>
AMOUNT AND PERCENTAGE OF
NATURE OF OUTSTANDING SHARES
NAME OF BENEFICIAL OWNER (20) 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 (9 persons). . . . 666-2/3 100%
<FN>
- ---------------------------------
* Less than one percent
(1) "Beneficial ownership" is determined in accordance with Rule 13d-3 under
the Securities and Exchange Act of 1934, as amended. In general, a person
is treated as the "beneficial owner" of stock under Rule 13d-3 if such
person has (or shares) (i) either investment power or voting power over
over such stock (which may be by means of a contract, arrangement,
understanding, relationship or otherwise), or (ii) the right to acquire
such stock within 60 days, including by means of the exercise of an option
or the conversion of a convertible security. Each beneficial owner's
- 10 -
<PAGE>
percentage of ownership and percentage of votes 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. Each beneficial owner's percentage of votes is
determined by assuming that any share of Common Stock held of record on
the Record Date has been beneficially owned by the holder of record for
the period indicated on the Transfer Agent's books for purposes of
determining the number of votes to which such share is entitled, except
for shares held in "street" or "nominee" name or by a broker, clearing
agency, voting trustee, bank, trust company or other nominee which are
presumed to be entitled to only one vote per share no matter how long they
have been held of record (except for 67,000 shares held by Horburgh
Carlson Investment Management, Inc. ("HCIM") which HCIM has independently
confirmed to the Company are entitled to ten votes per share). 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 for any vote (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-
- 11 -
<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) Includes options to purchase 7,500 shares of Common Stock under the 1994
Performance-Based Stock Option Plan and options to purchase 1,000 shares
of Common Stock under the 1986 Non-Qualified Stock Option Plan.
(16) 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.
(17) 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.
(18) Includes options to purchase 557,500 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 711,500
shares of Common Stock under the 1986 Non-
- 12 -
<PAGE>
Qualified Stock Option Plan and options to purchase 556,954 shares of
Common Stock under the 1983 Incentive Stock Option Plan.
(19) 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.
(20) Each person has sole power with respect to the voting and investment of the
shares which he owns.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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
- 13 -
<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 to
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 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
- 14 -
<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 franchisees. 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, Home Care Two 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
- 15 -
<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.
- 16 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to its
Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.
STAFF BUILDERS, INC.
By: /s/ Stephen Savitsky
--------------------------
Stephen Savitsky
Chairman of the Board,
President and Chief
Executive Officer
Dated: June 28, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 1 to Annual Report on Form 10-K has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Stephen Savitsky Chairman of the Board, June 28, 1995
- --------------------- President and Chief
Stephen Savitsky Executive Officer
(Principal Executive
Officer) and Director
/s/ David Savitsky Executive Vice President, June 28, 1995
- --------------------- Chief Operating Officer,
David Savitsky Secretary, Treasurer and
Director
/s/ Gary Tighe Senior Vice President, June 28, 1995
- --------------------- Finance and Chief
Gary Tighe Financial Officer
(Principal Financial and
Accounting Officer)
* Director June 28, 1995
- ---------------------
Bernard J. Firestone,
Ph.D.
<PAGE>
Signature Title Date
--------- ----- ----
* Director June 28, 1995
- ---------------------
Jonathan Halpert,
Ph.D.
* Director June 28, 1995
- ---------------------
Donald Meyers
*By: /s/ Stephen Savitsky
---------------------------
(Stephen Savitsky,
Attorney-in-Fact)
