SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED AUGUST 31, 1997, 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 number 0-11380
STAFF BUILDERS, INC.
(Exact name of registrant as specified in its 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
(Address of principal executive offices) (Zip Code)
(516) 358-1000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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
The number of shares of Class A Common Stock and Class B Common
Stock outstanding on October 10, 1997 was 22,499,207 and 1,443,500
shares, respectively.
<PAGE>
STAFF BUILDERS, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Factors Affecting the Company's Future
Performance 2-3
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
August 31, 1997 and February 28, 1997 4
Condensed Statements of Consolidated
Income - Three and Six months ended
August 31, 1997 and 1996 5
Condensed Statements of Consolidated Cash
Flows - Six months ended August 31, 1997
and 1996 6
Notes to Condensed Consolidated Financial
Statements 7-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-10
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 11
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K 11
-1-
FORWARD LOOKING STATEMENTS
Certain statements in this report on Form 10-Q constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are
typically identified by their inclusion of phrases such as "the
Company anticipates", "the Company believes" and other phrases of
similar meaning. Such forward-looking statements involve known and
unknown risks, uncertainties, and other factors that may cause the
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements.
GOVERNMENT REGULATION. As a home care provider, the Company is
subject to extensive and changing state and federal regulations
relating to the licensing and certification of its offices and the
sale and delivery of its products and services. The Federal
government and Medicare fiscal intermediaries have become more
vigilant in their review of Medicare reimbursements to home health
care providers generally, and are becoming more restrictive in
their interpretation of those costs for which reimbursement will be
allowed to such providers. Changes in the law and regulations as
well as new interpretations enforced by the relevant regulatory
agencies could have an adverse effect on the Company's operations
and the cost of doing business.
THIRD-PARTY REIMBURSEMENT AND MANAGED CARE. Because the Company is
reimbursed primarily for its services by the Medicare/Medicaid
programs, insurance companies, managed care companies and other
third-party payors, the implementation of alternative payment
methodologies for any of these payors could have an impact on
revenues and profit margins. Generally, managed care companies
have sought to contain costs by reducing payments to providers.
Continued cost reduction efforts by managed care companies could
adversely affect the Company's results of operations.
HEALTH CARE REFORM. As Congress and state reimbursement entities
assess alternative health care delivery systems and payment
methodologies, the Company cannot predict which reforms may be
adopted or what impact they may have on the Company.
On August 5, 1997, President Clinton signed into law the Balanced
Budget Act of 1997, resulting in significant changes to cost based
reimbursement for Medicare and Medicaid home health care providers.
Although the new legislation enacted by Congress presently retains
a cost based reimbursement system, the cost limits will be reduced
for fiscal years beginning on or after October 1, 1997 and a new
per-beneficiary limit will be effective for fiscal years beginning
-2-
after such date. For fiscal years beginning on or after October 1,
1999, this cost based system is planned to be replaced by a
prospective payment system.
The effect of these changes is to reduce the amount of costs that
will be reimbursable to home health care providers under the
Medicare program. The full impact of this new legislation is
unknown at this time as the Health Care Financing Administration is
not required to establish the new cost limits until January 1998
and the per-beneficiary limits until April 1998.
Additionally, uncertainties relating to the nature and outcomes of
health care reforms have also generated numerous realignments,
combinations and consolidations in the health care industry which
may also have an adverse impact on the Company's business strategy
and results of operations.
BUSINESS CONDITIONS. The Company must continue to establish and
maintain close working relationships with physicians and physician
groups, managed care organizations, hospitals, clinics, nursing
homes, social service agencies and other health care providers.
There can be no assurance that the Company will continue to
establish or maintain such relationships. The Company expects
additional competition will develop given the increasing level of
demand for the type of services offered.
ATTRACTION AND RETENTION OF FRANCHISEES AND EMPLOYEES. Maintaining
quality franchisees, managers and branch administrators will play
a significant part in the future success of the Company. The
Company's professional nurses and other health care personnel are
also key to the continued provision of quality care to the
Company's patients. The possible inability to attract and retain
qualified franchisees, skilled management and sufficient numbers of
credentialed health care professionals and para-professionals could
adversely affect the Company's operations and quality of service.
-3-<PAGE>
STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data) AUGUST 31,
1997 FEBRUARY 28,
(UNAUDITED) 1997
ASSETS:
Current Assets:
Cash and cash equivalents $ 12,616 $ 2,006
Accounts receivable, net of allowance
for doubtful accounts of $3,000
and $2,800, respectively 75,407 77,103
Deferred income tax benefits 1,937 1,855
Prepaid expenses and other current assets 3,583 4,989
Total current assets 93,543 85,953
Fixed Assets, net of accumulated
depreciation of $7,745,
and $6,124, respectively 12,123 12,082
Intangible Assets, net of accumulated
amortization of $10,393 and
$9,126, respectively 49,182 51,022
Other Assets 8,978 7,115
Total $163,826 $156,172
LIABILITIES:
Current Liabilities:
Accounts payable and accrued expenses $ 36,713 $ 31,736
Accrued payroll and related expenses 24,924 21,742
Current portion of long-term liabilities 5,841 5,230
Total current liabilities 67,478 58,708
Amount Due Under Secured Revolving
Line of Credit 19,694 21,565
Other Long-Term Liabilities 15,064 16,433
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A Common stock - $.01 par value;
50,000,000 shares authorized; 22,498,343 and
22,343,970 shares outstanding at August 31,
1997 and February 28, 1997, respectively 225 223
Class B Common stock - $.01 par value;
1,554,936 shares authorized; 1,444,364 and
1,462,361 shares outstanding at August 31,
1997 and February 28, 1997, respectively 14 15
Convertible preferred stock, Class A;
666 2/3 shares outstanding 1 1
Additional paid-in capital 73,444 73,159
Accumulated deficit (12,094) (13,932)
Total stockholders' equity 61,590 59,466
Total $163,826 $156,172
See notes to condensed consolidated financial statements.
-4-
<TABLE>
STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
(In thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Service revenues $131,269 $114,432 $261,631 $227,312
Sales of franchises and fees, net 348 392 487 933
Total revenues 131,617 114,824 262,118 228,245
Costs and Expenses:
Operating costs 84,069 71,119 168,045 141,737
General and administrative expenses 43,903 40,832 87,230 80,814
Provision for doubtful accounts 675 690 1,350 1,390
Amortization of intangible assets 713 577 1,425 1,155
Interest expense 837 211 1,706 485
Interest (income) (371) (146) (681) (352)
Other (income) expense, net (8) (206) (299) (310)
Total costs and expenses 129,818 113,077 258,776 224,919
Income Before Income Taxes 1,799 1,747 3,342 3,326
Provision for Income Taxes 810 768 1,504 1,463
Net Income $ 989 $ 979 $ 1,838 $ 1,863
Weighted average number of common and
common equivalent shares:
Primary 24,207 24,827 24,144 24,672
Fully diluted 24,532 24,827 24,421 24,761
Income per common and
common equivalent share:
Primary $ .04 $ .04 $ .08 $ .08
Fully diluted $ .04 $ .04 $ .08 $ .08
<FN>
<F1>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
-5-
STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In thousands)
Six Months Ended
August 31,
1997 1996
Cash Flows from Operating Activities:
Net income $ 1,838 $ 1,863
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization of fixed assets 1,858 1,295
Amortization of intangibles and other assets 1,425 1,155
Allowance for doubtful accounts 100 300
Deferred income taxes (82) 35
Decrease in other long-term liabilities - (30)
Write-off of goodwill 245 -
Change in operating assets and liabilities:
Accounts receivable 1,135 1,373
Prepaid expenses and other current assets 1,242 373
Accounts payable and accrued expenses 8,233 (2,359)
Income taxes payable 121 -
Other assets (40) (884)
Net cash provided by operating activities 16,075 3,121
Cash Flows from Investing Activities:
Acquisition of businesses (1,193) (5,735)
Disposition of business (70) -
Additions to fixed assets, net (266) (1,001)
Net cash used in investing activities (1,529) (6,736)
Cash Flows from Financing Activities:
Proceeds from Employee Stock Purchase Plan 286 275
Exercise of stock options - 30
Purchase and retirement of common stock - (67)
Decrease in borrowings under
revolving line of credit (1,871) -
Reduction in other long-term liabilities (2,351) (1,277)
Net cash used in financing activities (3,936) (1,039)
Net Increase (Decrease) in Cash and
Cash Equivalents 10,610 (4,654)
Cash and Cash Equivalents, Beginning
of Period 2,006 8,710
Cash and Cash Equivalents, End of Period $12,616 $ 4,056
Supplemental Data:
Cash paid for:
Interest $ 1,507 $ 453
Income taxes, net $ 927 $ 598
Fixed assets acquired through
capital lease agreements $ 1,675 $ 2,066
Acquisition of businesses through
issuance of notes payable $ - $ 1,100
See notes to condensed consolidated financial statements.
-6-
STAFF BUILDERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. FINANCIAL STATEMENTS - In the opinion of the Company, the
accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting of only normal
and recurring accruals) necessary to present fairly the
financial position of the Company and its subsidiaries as of
August 31, 1997 and February 28, 1997 and the results of
operations and the cash flows for the three and six months
ended August 31, 1997 and 1996. Certain prior period amounts
have been reclassified to conform with the August 1997
presentation.
The results for the three and six months ended August 31, 1997
and 1996 are not necessarily indicative of the results for an
entire year. It is suggested that these condensed
consolidated financial statements be read in conjunction with
the Company's audited financial statements as of February 28,
1997 and for the year then ended.
2. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE - Earnings per
common and common equivalent share were computed by dividing
the earnings applicable to common stockholders by the weighted
average number of shares of common stock and common stock
equivalents, principally dilutive stock options and warrants,
outstanding during the period.
The shares used in computing primary earnings per common and
common equivalent share were 24,143,560 shares and 24,672,167
shares for the six months ended August 31, 1997 and 1996 and
24,206,952 shares and 24,826,534 shares for the three months
ended August 31, 1997 and 1996, respectively. The shares used
in computing fully diluted earnings per share were 24,421,406
and 24,760,934 for the six months ended August 31, 1997 and
1996 and 24,532,082 and 24,826,534 shares for the three months
ended August 31, 1997 and 1996, respectively.
3. PROVISION FOR INCOME TAXES - The provision for income taxes
for the three and six months ended August 31, 1997 and 1996 is
based upon the Company's estimated tax provision required for
the full year.
4. CONTINGENCIES - On September 20, 1995, the United States
Attorney for the Eastern District of Pennsylvania alleged that
(i) between 1987 and 1989, a corporation, substantially all of
the assets and liabilities of which were acquired by a
subsidiary of the Company in 1993, submitted false claims to
Medicare totalling approximately $1.5 million and (ii)
officers and employees of that corporation submitted false
statements in support of such claims, and made a pre-complaint
civil settlement demand of approximately $4.5 million. The
alleged false claims and false statements were made before the
-7-
Company acquired that corporation in 1993. Based on its
preliminary investigation, the Company believes that the
amount of improper claims, if any, submitted by that
corporation to Medicare between 1987 and 1989 were
significantly below $1.5 million. The Company is in
negotiations with the office of the United States Attorney to
resolve this matter, but is unable to predict the ultimate
costs, if any, that may be incurred by the Company. As such,
no provision has been made in the accompanying condensed
consolidated financial statements.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding
of the Company's results of operations and financial condition.
This discussion should be read in conjunction with the Condensed
Consolidated Financial Statements appearing in Item 1.
Results of Operations
Total revenues increased by $16.8 million or 14.6% for the three
months ended August 31, 1997 to $131.6 million from $114.8 million
for the three months ended August 31, 1996. For the six months
ended August 31, 1997 ("the 1997 period"), total revenues increased
by $33.9 million or 14.8% to $262.1 million from $228.2 million for
the six months ended August 31, 1996 ("the 1996 period"). The
foregoing amounts include increased service revenues of
approximately $23.1 million in the 1997 period over the 1996 period
from 22 locations added from acquisitions, net of a reduction in
revenue of approximately $3.4 million resulting from the sale of 17
locations since August 31, 1996. Additionally, an increase in
revenue of approximately $11.2 million, or 5%, in the 1997 period
over the 1996 period was generated from existing locations which
were included for the entire two fiscal periods.
The Company receives payment for its services from several sources
as indicated in the following table.
Service Revenues
Three Months Ended Six Months Ended
August 31, August 31,
1997 1996 1997 1996
Medicare 52.9% 55.8% 53.6% 56.8%
Medicaid and other local
government programs 20.2 20.5 19.8 20.0
Insurance and private
payors 13.3 14.8 13.2 14.5
Hospitals, nursing homes
and other health care
institutions 13.1 8.8 12.9 8.6
Other 0.5 0.1 0.5 0.1
Total 100.0% 100.0% 100.0% 100.0%
The increase in service revenues from hospitals, nursing homes and
other health care institutions includes $4.4 million and $8.3
million for the three and six months ended August 31, 1997,
respectively, resulting from the acquisition in September 1996 of
a provider of supplemental staffing services to medical
establishments in the metropolitan New York area.
-9-
Operating costs (the direct costs of providing services) were 64.0%
and 62.1% of service revenues for the three months ended August 31,
1997 and 1996, and 64.2% and 62.4% for the six months ended August
31, 1997 and 1996, respectively. The increases in operating costs
as a percentage of service revenues in the three and six months
ended August 31, 1997 over the comparable periods in the prior year
were primarily due to a change in revenue mix toward non-Medicare
services which have lower gross margins.
General and administrative expenses increased by $3.1 million, or
7.5%, to $43.9 million for the three months ended August 31, 1997
from $40.8 million for the three months ended August 31, 1996. For
the six months ended August 31, 1997, general and administrative
expenses increased by $6.4 million, or 7.9%, to $87.2 million from
$80.8 million for the six months ended August 31, 1996. Included in
these increases was approximately $2.7 million and $5.3 million for
the three and six months ended August 31, 1997, respectively, in
operating those locations added since March 1, 1996. These costs,
expressed as a percentage of service revenues, were 33.3% and 35.6%
for the six months ended August 31, 1997 and 1996, respectively.
Provision for doubtful accounts was approximately $1.4 million for
each of the 1997 and 1996 periods. The provisions represented 0.5%
and 0.6% of service revenues in the 1997 and 1996 periods,
respectively.
Interest expense was approximately $800 thousand and $200 thousand
for the three months ended August 31, 1997 and 1996, and $1.7
million and $500 thousand for the six months ended August 31, 1997
and 1996, respectively. The increases in interest expense were
primarily due to an increase in the level of borrowings under the
Company's revolving line of credit.
The provision for income taxes was approximately $1.5 million for
each of the 1997 and 1996 periods. The Company's effective income
tax rate was 45% for the 1997 period as compared to 44% in the 1996
period.
Liquidity and Capital Resources
In January 1997, the Company obtained a new secured revolving
credit facility which consists of a revolving line of credit, an
acquisition line of credit and a standby letter of credit facility
under which it can borrow up to an aggregate amount of $50 million.
As of August 31, 1997 and February 28, 1997, the amounts available
for borrowing under the credit facility were approximately $16.6
million and $16.4 million, respectively. The acquisition line of
credit provides for borrowings up to $15 million without collateral
to finance acquisitions made by the Company, provided that the sum
of all borrowings does not exceed $50 million.
-10-
At August 31, 1997 and February 28, 1997, the Company borrowed
$19.7 million and $21.6 million, respectively, under this facility.
Trade accounts receivable at August 31, 1997 and February 28, 1997
were outstanding approximately 55 days and 57 days, respectively.
At August 31, 1997, the Company's long-term debt obligations due
within the next twelve months was $5.8 million.
The Company expects that its existing working capital, cash from
operations and its credit facilities will be sufficient to meet its
needs for at least the next twelve months.
Part II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on August 14,
1997. At the Annual Meeting, the Stockholders of the Company voted
to elect David Savitsky and Jonathan J. Halpert as Class A
Directors, each for a three-year term ending with the 2000 Annual
Meeting. 28,881,190 votes were cast in favor of Mr. Savitsky's
election as a Class A Director and authority was withheld with
respect to 607,750 votes on such matter. 28,826,799 votes were cast
in favor of Mr. Halpert's election as a Class A Director and
authority was withheld with respect to 662,141 votes on such
matter.
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
(A) Exhibit
Exhibit No.
10.1 Employment Agreement between the Company
and Gary Tighe.
(B) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant for the quarter
ended August 31, 1997.
-11-<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Staff Builders, Inc.
Dated: October 14, 1997 By: /s/ Stephen Savitsky
Stephen Savitsky
Chairman of the Board, President
and Chief Executive Officer
Dated: October 14, 1997 By: /s/ Gary Tighe
Gary Tighe
Senior Vice President, Finance
(Principal Financial and
Accounting Officer)
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 12616
<SECURITIES> 0
<RECEIVABLES> 78407
<ALLOWANCES> 3000
<INVENTORY> 0
<CURRENT-ASSETS> 93543
<PP&E> 19868
<DEPRECIATION> 7745
<TOTAL-ASSETS> 163826
<CURRENT-LIABILITIES> 67478
<BONDS> 0
1
0
<COMMON> 239
<OTHER-SE> 61350
<TOTAL-LIABILITY-AND-EQUITY> 163826
<SALES> 0
<TOTAL-REVENUES> 262118
<CGS> 0
<TOTAL-COSTS> 168045
<OTHER-EXPENSES> 445
<LOSS-PROVISION> 1350
<INTEREST-EXPENSE> 1706
<INCOME-PRETAX> 3342
<INCOME-TAX> 1504
<INCOME-CONTINUING> 1838
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1838
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
EXHIBIT 10.1<PAGE>
STAFF BUILDERS, INC.
EMPLOYMENT AGREEMENT WITH GARY TIGHE
AGREEMENT executed as of June 1, 1997 between Gary Tighe,
residing at 51 Euston Road, Garden City, NY 11530 ("Employee"), and
STAFF BUILDERS, INC. ("Company"), a Delaware corporation, having
its principal place of business at 1983 Marcus Avenue, Lake
Success, New York 11042.
WITNESSETH
WHEREAS, the Company desires to continue to employ Gary Tighe as
its Senior Vice President of Finance and Chief Financial Officer of
the Company; and
WHEREAS, the Company and Employee desire to assure the continued
service of Employee to the Company on the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the premises and mutual
agreements hereinafter contained, the parties hereto do agree as
follows:
1. Employment. The Company and Employee hereby agree to
extend the Employee's employment relationship with the Company on
all the terms and conditions set forth in this Agreement.
2. Term. The term of Employee's employment under this
Agreement shall commence effective as of June 1, 1997 and, subject
to the terms and conditions of this Agreement, shall continue for
a period of thirty-six (36) consecutive months.
3. Compensation.
(a) The Company shall pay to Employee, for all services
rendered by Employee under this Agreement, a base salary at the
rate of $171,076 per year ("Base Salary") payable in equal
installments (not less frequently than monthly) in accordance with
the Company's regular payroll practices. On each July 15th during
the term hereof, the Base Salary shall be automatically increased
by five percent (5%). The Company may also pay or grant Employee
such additional compensation, including bonuses, determined in
accordance with paragraphs 3(b) and (c) hereof. Such Base Salary
may also be increased by and subject to the discretion of the
Company at any time during the term hereof.
(b) The Company may, by action of the Incentive
Bonus Committee appointed by the Board of Directors, from time to
time grant Employee additional compensation In the form of cash
bonuses pursuant to the Company's Incentive Bonus Plan for Key
Employees ("Bonus Plan").
(c) The Company shall pay to Employee, during the
thirty-six (36) month term of this Agreement, a car allowance at
the rate of $500 per month.
4. Duties. Employee is engaged to serve as Senior Vice
President of Finance and Chief Financial Officer of the Company,
and shall perform such duties and functions as is compatible with
that position as the Company from time to time may determine.
During the term of this Agreement, Employee shall devote his full
business time to the performance of his duties for the Company and
shall perform them diligently, faithfully and competently.
5. Expenses. Employee is authorized to incur expenses for
promotion the business of the Company which are reasonable and
necessary in the exercise of his duties, including reasonable
expenses for entertainment, travel and similar items. The Company
shall reimburse Employee promptly for all such expenses upon
presentation by Employee of an itemized account of expenditures.
6. Vacation. The Employee is entitled to three (3) weeks
annual vacation. If the vacation time is not used within the
annual period, the Employee will not be entitled to carry over the
unused vacation time unless the Company, within its complete
discretion, approves of such carry over.
7. Welfare Benefits. Employee shall be entitled to receive
or participate in all benefits, such as life, health, medical and
disability plans, profit sharing plans, pension plans and the like
("Welfare Plans"), which the Company may make generally available
to its senior executive employees. Employee shall be entitled to
the above-described benefits so long as Employee serves as an
employee of the Company, or as otherwise provided by the terms and
conditions of the Welfare.
8. Change of Control. In the event that at any time after
a Change of Control (as defined below) but prior to the end of
twelve months after such Change of Control, Employee is discharged
for any reason (other than the conviction of a felony) or leaves
for any reason, Employee shall receive within thirty (30) days
after such discharge a lump sum severance payment equal to 2.99
time the "average annual base salary" paid to him. For the
purposes of this Section 8, "average annual base salary" shall mean
the average of Employee's annual income in the nature of
compensation payable by the Company and includible in gross income
over the five most recent taxable years ending before the Change of
Control. In the event a Change in Control occurs prior to the
completion of five years employment, the average annual
compensation will be calculated based upon the earnings for
calendar 1996 and any future completed calendar years.
A "Change of Control" shall be deemed to occur when a person,
corporation, partnership, association or entity (x) acquires a
majority of the Company's outstanding voting securities, or (y)
acquires securities of the Company bearing a majority of voting
power with respect to election of directors of the Company, or (z)
acquires all or substantially all of the Company's assets.
9. Termination Rights and Obligations Upon Termination
(a) If the Executive dies during the Term, then the
Executive's employment under this Agreement shall terminate. In
such event, the Executive's estate shall not be entitled to any
compensation, profit sharing payments under the Plan or expense
payments hereunder other than for compensation, profit sharing
payments under the Plan, and expenses accrued and unpaid as at the
date of the Executive's death.
(b) If, as a result of the Executive's incapacity due to
physical or mental illness, whether or not job related, the
Executive is absent from his duties hereunder on a full-time basis
for sixty (60) consecutive days, or an aggregate of ninety (90)
days during the Term, the Executive's employment hereunder and this
Agreement shall terminate. In such event, the Executive shall not
be entitled to any compensation, profit sharing payments under the
Plan, or expense payments hereunder other than for compensation,
profit sharing payments under the Plan, and expenses accrued and
unpaid as at the date of termination of the Executive's employment.
(c) The Corporation shall have the right to terminate
the Executive's employment under this Agreement for Cause. For
purposes of the Agreement, the Corporation shall have "Cause" to
terminate the Executive's employment if (i) the Executive assigns,
pledges, or otherwise disposes of his rights and obligations under
this Agreement, o0attempts to do the same without the prior written
consent of the Corporation; or (ii) in the reasonable judgment of
the Corporation's Board of Directors the Executive fails to fulfill
his obligation under this Agreement, has breached any of the
material terms or conditions hereof, has engaged in willful
misconduct or has acted in bad faith; or OH) without limiting any
other provision of this Agreement, in the reasonable judgment of
the Board of Directors of the Corporation, the Executive has
breached any provision of Sections 8 or 9 of this Agreement; or
(iv) the Executive has committed a felony or perpetrated a common-
law fraud against the Corporation. If the Corporation terminates
this Agreement for Cause, the Corporation's obligations hereunder
shall cease, except for the Corporations obligation to pay the
Executive or his beneficiary the compensation, profit sharing
payments under the Plan and expenses accrued to the date of
termination in accordance with the provisions hereof, which
payments in all events shall be subject to offset by the
Corporation for amounts owed to the Corporation by the Executive
hereunder or otherwise.
10. Non-Competition.
(a) During the Term, and for a period of one (1) year
from the termination of this Agreement, the Executive shall not,
directly or indirectly, for his own account or as an employee,
officer, director, partner, joint venturer, shareholder, investor
or otherwise engage in the Area( as hereafter defined) in any phase
of any business or enterprise the same as that of the Corporation
or any of its direct or indirect subsidiaries or otherwise compete
in the Area with the Corporation or any of its direct or indirect
subsidiaries, in any business in which the Corporation or any of
its direct or indirect subsidiaries is then engaged or which any of
them then is actively developing or had developed as of the
effective date of this Agreement; except that nothing in this
Agreement shall prevent the Executive from owning less than 3% of
the outstanding stock of any class of any corporation provided such
stock is listed on a national securities exchange or regularly
traded in the over-the-counter market by a member of the National
Association of Securities Dealers, Inc. For purposes of this
Agreement, the term "Area" shall mean the fifty (50) mile radius
surrounding each of the offices of the Corporation and each of its
direct and indirect subsidiaries.
(b) During the Term and for a period of one (1) year
from the termination of this Agreement, the Executive shall not,
directly or indirectly, for his own account or as an employee,
officer, director, partner, joint venturer, shareholder, investor
or otherwise solicit the employment or engagement, nor hire
directly or indirectly, any employees of the Corporation or any of
its direct or indirect subsidiaries in any capacity whatsoever, nor
attempt to induce, directly or indirectly, any employee of the
Corporation or any of its direct or indirect subsidiaries to leave
the employ of the Corporation or any of its direct or indirect
subsidiaries.
11. Confidentiality. The Executive covenants and agrees that
during the Term of and at any time after the termination of this
Agreement, he will not directly or indirectly, for his own account
or as an employee, officer, director, partner, joint venturer,
shareholder, investor or otherwise disclose to others to do the
same, any proprietary, confidentially or secret information or
documents of the Corporation or any of its direct or indirect
subsidiaries, including, but not limited to, any customer lists,
project proposals, other work products records and business plans
of the Corporation or any of its direct or indirect subsidiaries,
but not limited to, any customer lists, projected proposals, other
work product records and business plans of the Corporation or any
of its direct or indirect subsidiaries, other than the performance
of his duties hereunder or if such information is readily
ascertainable from public or published information or trade
sources.
12. Arbitration. The Employee and Company hereby agree that
if any dispute arises between them, such dispute shall be
determined by arbitration in the State of New York in accordance
with the rules of the American Arbitration Association then in
effect. The award rendered by such arbitration shall be final and
binding upon the parties hereto, and a judgment upon the award so
rendered may be entered in any court of competent jurisdiction.
13. Waiver. Failure to insist upon compliance with any of
the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waiver
or relinquishment of any right or power hereunder at any one time
or more times be deemed a waiver or relinquishment of such right or
power at any other time or times.
14. Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or
enforceability of any other provision. The parties to this
Agreement agree and intend that this Agreement shall be enforced as
fully as it may be enforced consistent with applicable statutes and
rules of law.
15. Benefit. Except as otherwise herein expressly provided,
this Agreement shall insure to the benefit of and be binding upon
the Company, its successors and assigns, including, without
limitation, any corporation which may acquire all or substantially
all of the Company's assets or business or with or into which the
Company may be consolidated or merged, and to the benefit of, and
be binding upon, Employee, his heirs executors, administrators and
legal representatives.
16. Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties hereto, supersedes
any and all prior discussions, agreements and correspondence with
regard to the subject matter hereof, and may be amended, modified
or supplemented in any respect, except by a subsequent writing
executed by both parties hereto.
17. Applicable Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
New York, without giving effect to principles of conflicts.
18. Remedy for Breach. Any action to enforce, arising out
of, or relating in any way to, any of the provisions of this
Agreement shall be an action at law pursuant to the provisions of
Section 12 of this Agreement.
19. Notices. All notices required hereby or given under this
Agreement shall be in writing and shall be served either personally
or be certified mail, return receipt requested, at the following
addresses, or at such other address as the parties may designate to
one another in writing:
To the Company: Staff Builders, Inc.
1983 Marcus Avenue
Lake Success, New York 11042
To the Employee: Gary Tighe
51 Euston Road
Garden City, New York 11530
All notices shall be deemed given when so received. All change of
address notices shall be given in the same manner as provided
above.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the 25th day of June, 1997.
In the presence of: STAFF BUILDERS, INC.
/s/Renee Silver, Esquire By:/s/ Steve Savitsky
Renee Silver, Esquire Stephen Savitsky
/s/Gary Tighe
Gary Tighe
