<PAGE>
<PAGE>
Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-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] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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>
<PAGE>
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 14, 1997 at 3:00 P.M. (New York
Time) for the following purposes:
1) To elect two Class A Directors to serve for a three-year term and
until their successors are elected and qualified; and
2) 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 23, 1997, are
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
DAVID SAVITSKY
Secretary
June 26, 1997
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>
<PAGE>
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 14, 1997, 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, 1997.
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 for the nominees named herein as Class A
Directors of the Company.
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 fiscal year ended February 28, 1997, is included herewith, but is not to
be considered part of the proxy soliciting materials.
The Company's principal executive offices are located at 1983 Marcus
Avenue, Lake Success, New York 11042.
RECORD DATE, OUTSTANDING VOTING SECURITIES,
VOTING RIGHTS AND VOTE REQUIRED
Only stockholders of record at the close of business on June 23, 1997 (the
'Record Date') will be entitled to notice of, and to vote at, the meeting and
any adjournment thereof. As of the Record Date, 22,431,053 shares of the
Company's Class A Common Stock, $.01 par value per share (the 'Class A Common
Stock'), and 1,447,476 shares of the Company's Class B Common Stock, $.01 par
value per share (the 'Class B Common Stock'), were outstanding. As of the Record
Date, the Class A Common Stock was held of record by approximately 325 holders
and the Class B Common Stock was held of record by approximately 544 holders (in
each case, including brokerage firms holding stock in 'street name' and other
nominees).
Each holder of record of Class A Common Stock is entitled to one vote for
each share of Class A Common Stock held by such holder. Each holder of record of
Class B Common Stock is entitled to ten votes (except in certain circumstances
which are inapplicable to the election of directors) for each share of Class B
Common Stock held by such holder. A holder may own both Class A Common Stock and
Class B Common Stock, in which case such holder will be entitled to one vote for
each share of Class A Common Stock and ten votes for each share of Class B
Common Stock held by such holder.
The affirmative vote of a majority of the votes of holders of shares of
Class A Common Stock and Class B Common Stock, voting together as one class,
represented at the meeting is necessary for the election of the nominees for
Class A Directors.
With respect to abstentions, the shares will be considered present at the
meeting for the proposal, but since they are not affirmative votes for the
proposal, they will have the same effect as a vote
<PAGE>
<PAGE>
withheld on the election of the Class A Directors. If a broker indicates on the
proxy that it does not have discretionary authority as to certain shares to vote
on the proposal, those shares will not be considered as present at the meeting
and entitled to vote in respect of the proposal.
There is a box on the proxy card to vote for or to withhold authority to
vote for the nominees for Class A Directors.
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 Class A Common Stock, Class
B Common Stock and Class A Preferred Stock, $1.00 par value per share (the
'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 (the 'Named Executive Officers'), and (iv) all
directors and Named Executive Officers of the Company as a group.
CLASS A AND CLASS B COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
-------------------------------------------------------------------------------------------
PERCENTAGE OF PERCENTAGE OF
NUMBER OF OUTSTANDING NUMBER OF OUTSTANDING
SHARES OF SHARES OF SHARES OF SHARES OF PERCENTAGE OF
NAME OF CLASS A CLASS A CLASS B CLASS B OUTSTANDING
BENEFICIAL OWNER COMMON STOCK(2) COMMON STOCK COMMON STOCK(3) COMMON STOCK VOTES OWNED
- --------------------------------------------- ------------ ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Stephen Savitsky(4).......... 1,521,801(5)(6) 6.4% 342,738 23.7% 12.9%
David Savitsky(4)............ 1,470,500(6)(7)(8) 6.2% 378,537(9) 26.2% 13.7%
Bernard J. Firestone(10)..... 1,500(11) * 2,100(12) * *
Jonathan J. Halpert(10)...... -- -- -- -- --
Donald Meyers(10)............ 2,000(13) * -- -- *
Gary Tighe(10)............... 170,000(14) * -- -- *
Edward Teixeira(10).......... 71,134(15) * -- -- *
Larry Campbell(10)........... 35,000 * -- -- *
S Squared Technology
Corp.(16).................. 2,701,000 12.0% -- -- 7.3%
Dimensional Fund Advisors,
Inc.(17)................... -- -- 316,300 21.9% 8.6%
Capital Group Companies,
Inc.(18)................... 1,180,000 5.3% -- -- 3.2%
Wellington Management
Company, LLP(19)........... 2,195,000 9.8% -- -- 5.9%
All Named Executive Officers
and directors as a group (8
persons)................... 3,046,495(6)(20) 12.1% 723,375 50.0% 25.9%
</TABLE>
- ------------
* Less than one percent
CLASS A PREFERRED STOCK (21)
<TABLE>
<CAPTION>
PERCENTAGE
OF
AMOUNT AND NATURE OF OUTSTANDING
NAME OF BENEFICIAL OWNER(22) BENEFICIAL OWNERSHIP SHARES OWNED
- -------------------------------------------------------------------------- -------------------- ------------
<S> <C> <C>
Stephen Savitsky.......................................................... 333 1/3 50%
David Savitsky............................................................ 333 1/3 50%
All Named Executive Officers and directors as a group (8 persons)......... 666 2/3 100%
</TABLE>
(footnotes on next page)
2
<PAGE>
<PAGE>
(footnotes from previous page)
(1) 'Beneficial ownership' is determined in accordance with Rule 13d-3 under
the Securities 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 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 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.
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 shares of Class A Common Stock is entitled to one
vote per share held by such holder.
(3) Each holder of record of shares of Class B Common Stock, except in certain
circumstances which are inapplicable to the election of directors, is
entitled to ten votes per share held by such holder.
(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 225,440 shares of Class A Common Stock
underlying options granted to him. As a result, (i) Stephen Savitsky has
sole voting and investment power with respect to 1,296,361 shares of Class
A Common Stock and 342,738 shares of Class B Common Stock and has shared
voting power with respect to the 225,440 shares of Class A Common Stock
beneficially owned by Mr. Koschitzki and (ii) David Savitsky has sole
voting and investment power with respect to 1,244,910 shares of Class A
Common Stock and 377,537 shares of Class B Common Stock and has shared
voting power with respect to the 225,440 shares of Class A Common Stock
beneficially owned by Mr. Koschitzki.
(5) Includes options to purchase 500,000 shares of Class A Common Stock under
the 1994 Performance-Based Stock Option Plan, options to purchase 200,000
shares of Class A Common Stock under the 1993 Stock Option Plan, options to
purchase 334,000 shares of Class A Common Stock under the 1986
Non-Qualified Stock Option Plan and options to purchase 139,270 shares of
Class A Common Stock under the 1983 Incentive Stock Option Plan.
(6) Includes options to purchase 225,440 shares of Class A Common Stock granted
to Ephraim Koschitzki which are subject to the revocable proxy referred to
in footnote 4 above.
(7) Includes options to purchase 500,000 shares of Class A Common Stock under
the 1994 Performance-Based Stock Option Plan, options to purchase 200,000
shares of Class A Common Stock under the 1993 Stock Option Plan, options to
purchase 320,000 shares of Class A Common Stock under the 1986
Non-Qualified Stock Option Plan and options to purchase 139,270 shares of
Class A Common Stock under the 1983 Incentive Stock Option Plan.
(8) Includes 150 shares of Class A Common Stock held by David Savitsky's wife.
Mr. Savitsky disclaims beneficial ownership of these shares.
(9) Includes 1,000 shares of Class B 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.
(10) 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.
(11) Includes options to purchase 1,500 shares of Class A Common Stock under the
1986 Non-Qualified Stock Option Plan.
(footnotes continued on next page)
3
<PAGE>
<PAGE>
(footnotes continued from previous page)
(12) Includes 1,000 shares of Class B Common Stock held by Dr. Firestone's wife.
Dr. Firestone disclaims beneficial ownership of these shares.
(13) Includes 2,000 shares of Class A Common Stock held by Mr. Meyers' wife. Mr.
Meyers disclaims beneficial ownership of these shares.
(14) Includes options to purchase 50,000 shares of Class A Common Stock under
the 1994 Performance-Based Stock Option Plan, options to purchase 20,000
shares of Class A Common Stock under the 1986 Non-Qualified Stock Option
Plan and options to purchase 100,000 shares of Class A Common Stock under
the 1983 Incentive Stock Option Plan.
(15) Includes options to purchase 25,000 shares of Class A Common Stock under
the 1994 Performance-Based Stock Option Plan, options to purchase 15,000
shares of Class A Common Stock under the 1986 Non-Qualified Stock Option
Plan, options to purchase 27,800 shares of Class A Common Stock under the
1983 Incentive Stock Option Plan and options to purchase 3,334 shares of
Class A Common Stock under the 1993 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
2,489,000 shares of Class A Common Stock for which S Squared has sole
voting and sole investment power and 212,000 shares of Class A Common Stock
for which S Squared has shared voting and shared 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) Dimensional Fund Advisors, Inc., a registered investment advisor, is
located at 1299 Ocean Avenue, Santa Monica, California 90401.
(18) Capital Group Companies, Inc. ('Capital Group'), a parent holding company
of a group of investment management companies, is located at 333 South Hope
Street, Los Angeles, California 90071. Includes 1,180,000 shares of Class A
Common Stock, (i) sole investment power for which is held by Capital
Research and Management Company, a registered investment adviser and
wholly-owned subsidiary of Capital Group, and (ii) sole voting power for
which is held by SMALLCAP World Fund, Inc., a registered investment company
which is advised by Capital Research and Management Company. Capital Group
disclaims beneficial ownership of these shares.
(19) Wellington Management Company, LLP ('Wellington'), a registered investment
adviser, is located at 75 State Street, Boston, Massachusetts 02109.
Includes 1,465,000 shares of Class A Common Stock, for which Wellington has
shared voting and shared investment power and 730,000 shares of Class A
Common Stock for which Wellington has shared investment power.
(20) Includes options to purchase 1,075,000 shares of Class A Common Stock under
the 1994 Performance-Based Stock Option Plan, options to purchase 403,334
shares of Class A Common Stock under the 1993 Stock Option Plan, options to
purchase 690,500 shares of Class A Common Stock under the 1986
Non-Qualified Stock Option Plan and options to purchase 406,340 shares of
Class A Common Stock under the 1983 Incentive Stock Option Plan.
(21) The approval of holders of two-thirds of the shares of Preferred Stock is
required to approve certain business combinations with respect to the
Company.
(22) Each person has sole power with respect to the voting and investment of the
shares which such person owns.
ELECTION OF CLASS A 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 A is the class whose term
will expire at the Annual Meeting. This class consists of two directors, David
Savitsky and Jonathan J. Halpert, who are nominees of the Board of Directors.
The nominees for Class A Directors, if elected by a majority of the votes cast
at the Annual Meeting, will serve until the 2000 Annual Meeting and until their
successors are elected and qualified. Unless
4
<PAGE>
<PAGE>
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 a 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 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 A Directors, the Board of Directors consists of
three other directors. Mr. Stephen Savitsky is a Class C Director whose term
expires at the 1999 Annual Meeting and Bernard J. Firestone and Donald Meyers
are Class B Directors whose terms expire at the 1998 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 the 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 A Directors 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.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING THE YEAR FIRST
PAST FIVE YEARS, ANY OFFICE HELD IN THE ELECTED
NAME AGE COMPANY AND ANY OTHER DIRECTORSHIPS AS A DIRECTOR
- ----------------------------------- --- -------------------------------------------------- ---------------
<S> <C> <C> <C>
Stephen Savitsky................... 51 A founder of the Company, Mr. Savitsky has served 1983
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.................... 49 A founder of the Company, Mr. Savitsky has served 1983
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......... 52 Dr. Halpert was elected a Director by the Board of 1983
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......... 48 Dr. Firestone was elected a Director by the Board 1987
of Directors in August 1987. He is an associate
dean for curriculum and personnel in the College
of Liberal Arts and Sciences and professor of
political science at Hofstra University where he
has been teaching for 20 years.
</TABLE>
(table continued on next page)
5
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING THE YEAR FIRST
PAST FIVE YEARS, ANY OFFICE HELD IN THE ELECTED
NAME AGE COMPANY AND ANY OTHER DIRECTORSHIPS AS A DIRECTOR
- ----------------------------------- --- -------------------------------------------------- ---------------
<S> <C> <C> <C>
Donald Meyers...................... 68 Mr. Meyers was elected a Director by the Board of 1994
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 in 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., a
health care consulting firm, where he has been an
executive officer, director and stockholder since
1976.
Gary Tighe......................... 48 Mr. Tighe has been Senior Vice President, Finance Not Applicable
and Chief Financial Officer of the Company since
April 1991.
Edward Teixeira.................... 54 Mr. Teixeira has been Senior Vice President, Not Applicable
Franchising of a principal subsidiary of the
Company since December 1990.
Cynthia Nye........................ 45 Ms. Nye has been Senior Vice President, Corporate Not Applicable
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.
</TABLE>
6
<PAGE>
<PAGE>
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 three meetings and acted by written consent on
eight occasions during the fiscal year ended February 28, 1997.
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:
<TABLE>
<CAPTION>
COMPENSATION
EXECUTIVE AUDIT AND STOCK OPTION
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Stephen Savitsky Bernard J. Firestone Bernard J. Firestone
David Savitsky Jonathan J. Halpert Jonathan J. Halpert
Donald Meyers
</TABLE>
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 three meetings, the Audit Committee held two
meetings, and the Compensation and Stock Option Committee held one meeting and
acted by written consent on seven occasions during the fiscal year ended
February 28, 1997.
COMPLIANCE WITH SECTION 16(A) OF THE 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 Class A Common Stock or Class B 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 Class A Common Stock
or Class B 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, 1997, 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 except that a
report of change of beneficial ownership was not filed by Donald Meyers with
respect to one transaction during the 1997 fiscal year.
7
<PAGE>
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation of 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
AWARDS
ANNUAL COMPENSATION ------------
-------------------------------------- SECURITIES
BONUS OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION COMPENSATION OPTIONS(#)
- -------------------------------------------------- ---- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen Savitsky ................................. 1997 $474,704 -- -- --
Chairman, President and Chief Executive Officer 1996 $423,453 -- -- --
1995 $372,073 $ 16,950 -- 1,000,000
David Savitsky ................................... 1997 $343,705 -- -- --
Executive Vice President, Chief Operating 1996 $306,224 -- -- --
Officer, Secretary and Treasurer 1995 $269,999 $ 16,590 -- 1,000,000
Larry Campbell ................................... 1997 $180,692 $ 80,000 -- 100,000(1)
Executive Vice President of National Health Care 1996 -- -- -- --
Operations 1995 -- -- -- --
Gary Tighe ....................................... 1997 $169,726 -- -- --
Senior Vice President, Finance and Chief 1996 $155,241 -- -- --
Financial Officer 1995 $139,458 $ 8,475 -- 100,000
Edward Teixeira .................................. 1997 $167,714 -- -- 10,000
Senior Vice President, Franchising 1996 $156,640 -- -- --
1995 $141,639 $ 5,085 -- 50,000
</TABLE>
- ------------
(1) These options were terminated as of March 1, 1997 (See 'Executive
Compensation and Other Information -- Employment Agreements').
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, 1997. 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
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION GRANT DATE
NAME GRANTED FISCAL YEAR BASE PRICE DATE PRESENT VALUE(1)
- ------------------------------------------- ---------- ------------ ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Stephen Savitsky........................... -- -- -- -- --
David Savitsky............................. -- -- -- -- --
Larry Campbell(2).......................... 100,000 44.9% $2.94 2/28/06 $200,000
Gary Tighe................................. -- -- -- -- --
Edward Teixeira(3)......................... 10,000 4.5% $3.19 9/24/06 $ 21,300
</TABLE>
- ------------
(1) 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
(footnotes continued on next page)
8
<PAGE>
<PAGE>
(footnotes continued from previous page)
the Securities and Exchange Commission. 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 approximately 48%; (b) risk-free rate of return of
approximately 7%; (c) no dividends payable during the relevant period; and
(d) exercise at the end of a 10 year period from the date of grant.
(2) Issued under the 1993 Stock Option Plan. These options were terminated as of
March 1, 1997 (See 'Executive Compensation and Other
Information -- Employment Agreements').
(3) Issued under the 1993 Stock Option Plan. Options with respect to 3,334
shares of Class A Common Stock became exercisable on September 25, 1996;
options with respect to 3,333 shares of Class A Common Stock become
exercisable on September 25, 1997; and options with respect to 3,333 shares
of Class A Common Stock become exercisable on September 25, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR 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, 1997, 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.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS THE-MONEY OPTIONS
AT FEBRUARY 28, 1997 AT FEBRUARY 28, 1997
SHARES -------------------- ------------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- -------- -------------------- ------------------------
<S> <C> <C> <C> <C>
Stephen Savitsky......................... 13,000 $ 20,863 1,173,270/500,000 $439,090/$0
David Savitsky........................... 13,000 $ 20,863 1,159,270/500,000 $422,465/$0
Larry Campbell........................... -- -- -- --
Gary Tighe............................... -- -- 170,000/50,000 $61,125/$0
Edward Teixeira.......................... -- -- 71,134/31,666 $20,270/$0
</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, 1997, Mr. Savitsky received a
base salary of $474,704. 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 of 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 calendar 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
9
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<PAGE>
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, 1997, was
$343,705.
Effective June 1, 1997, the Company entered into an employment agreement
with Gary Tighe to serve as the Company's Senior Vice President of Finance and
Chief Financial Officer for a period of three years. Mr. Tighe's base salary
under his current employment agreement is $171,076 per year, which base salary
increases by 5% per annum each year. Mr. Tighe's salary for the fiscal year
ended February 28, 1997, was $169,726. 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 of 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 calendar years prior to termination.
On December 1, 1996, the Company entered into a three-year employment
agreement with Edward Teixeira to serve as Senior Vice President, Franchising of
a principal subsidiary of the Company until November 30, 1999. Under his
employment agreement, Mr. Teixeira is obligated to devote his full business time
to the affairs of the Company. Mr. Teixeira's base salary under his current
employment agreement is $175,000 per year, which base salary increases by
$10,000 per annum. He also receives an automobile allowance of $6,600 per annum.
Mr. Teixeira's base salary for the fiscal year ended February 28, 1997, was
$167,714. Further, if within 180 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 twelve months' salary. The employment agreement prevents Mr.
Teixeira from competing with the Company for six months after his employment is
terminated.
As of March 1, 1996, a principal subsidiary of the Company entered into a
three-year employment agreement with Larry Campbell under which Mr. Campbell was
employed as Executive Vice President for National Health Care Operations. Mr.
Campbell's base salary for the fiscal year ended February 28, 1997 was $180,692.
Mr. Campbell also received an $80,000 sign-on bonus. During fiscal 1997, the
Company also leased an automobile for Mr. Campbell at an approximate annual cost
of $7,000. Effective March 1, 1997, Mr. Campbell resigned his employment as the
Executive Vice President of National Health Care Operations and his employment
agreement was terminated. The Company then retained him as an independent
consultant for a period of 48 months pursuant to an agreement effective March 1,
1997. Mr. Campbell will receive as remuneration for his services as a consultant
monthly payments of $8,125 until February 28, 2001 or his death, whichever is
earlier. In connection with his resignation, Mr. Campbell surrendered his
options to purchase 100,000 shares of the Company's Class A Common Stock. Also,
the Company waived the return of $50,000 of his $80,000 sign-on bonus, arranged
for the sale of his residence and absorbed certain expenses of approximately
$64,000 in connection therewith, and agreed to reimburse him up to a maximum of
$7,000 in moving expenses.
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, and Edward Teixeira and such officers' employment relationships with
the Company were to terminate for reasons triggering the severance payments
noted above, then the Company would be obligated to make lump sum payments to
them in the approximate amounts of $1,461,000, $1,132,000, $466,000 and
$182,000, respectively. The lump sum severance payments payable after the end of
the calendar year or the anniversary dates of the respective employment
agreements, as the case may be, would change as a result of changes in such
individuals' compensation. 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.
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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 (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.
During the Company's most recently completed fiscal year, the Company
increased revenues by 17.1% over fiscal 1996 to $480.4 million and added 33 new
offices to expand operations to new key market areas. Earnings per share was
$.16 for fiscal year 1997 as compared to $.08 per share in the prior year. Net
income increased 87% from $2.0 million in fiscal 1996 to $3.8 million in fiscal
1997. The Committee also considers qualitative performance criteria such as the
development of new business strategies and resources, improvements in customer
satisfaction and cost management. During fiscal 1997, the Company completed 19
acquisitions contributing revenue of approximately $24.6 million. Additionally,
the Company has expanded its medical staffing operations to 36 locations as of
February 28, 1997.
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 enhances the value of the employee to the Company. The
11
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<PAGE>
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.
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. During its most recently
completed fiscal year, the Company (or a subsidiary of the Company) entered into
an employment agreement with Edward Teixeira and Larry Campbell. Mr. Campbell's
employment agreement was terminated on March 1, 1997 upon his resignation from
the Company. The Company also entered into a new employment agreement with Gary
Tighe on June 1, 1997. The terms of these employment agreements are described in
greater detail above under the heading 'Employment Agreements.' In evaluating
the terms of these employment agreements, the Committee considered each of the
factors described above, without assigning any specific weight to such factors.
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 required 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, 1997, such percentage was 2.5%. 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, the Committee considers the same
factors as it considers in setting base salaries. For fiscal 1997, no amounts
were paid under the Teamwork Incentive Program as the Company did not meet its
performance goals as required by the terms of the Program.
12
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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 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, 1997, the Committee awarded stock
options under the 1993 Stock Option Plan to Edward Teixeira and Larry Campbell
to purchase 10,000 and 100,000 shares, respectively. Mr. Campbell's options were
terminated on March 1, 1997 in connection with his resignation from the Company
(See 'Executive Compensation and Other Information -- Employment Agreements').
It is the philosophy of the Committee that stock options 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. 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 favored
the granting of stock options over 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. 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, 1997, the
Committee neither gave notice of termination nor awarded Mr. Savitsky any
additional base salary and he accordingly received a base salary of $474,704
under the terms of his employment agreement. During the last year, Mr.
Savitsky's efforts contributed to the Company's 17.1% increase in revenues, 87%
increase in net income, and the development of the Company's strategic plan to
increase profit margins by diversifying into related business areas. As Chief
Executive Officer, Mr. Savitsky was responsible for overseeing the addition of
33 offices and the renegotiation of the Company's banking line of credit whereby
the amount available for borrowing was increased from $25 million to $50
million, including a $15 million acquisition line of credit.
Compensation and Stock Option
Committee
Bernard J. Firestone
Jonathan J. Halpert
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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, 1997, 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 29, 1992. The New Peer Group selected by the Company consists
of The Olsten Corporation, In Home Health Inc., Hospital Staffing Services,
Inc., The Care Group, Inc., Caretenders Health Corp. and U.S. Home Care, 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, 1997,
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 Medical Innovations, Inc. in lieu of U.S. Home Care, Inc. Medical
Innovations, Inc., is not in this year's Peer Group because during the last
fiscal year it was acquired by another company which is not primarily engaged in
home health care services. The Old Peer Group Index consists of The Olsten
Corporation, In Home Health Inc., Hospital Staffing Services, Inc., The Care
Group, Inc., Caretenders Health Corp. and Medical Innovations, Inc.
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.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG STAFF BUILDERS, INC, NASDAQ MARKET
INDEX AND TWO PEER GROUP INDEXES
TOTAL SHAREHOLDER RETURNS
INDEXED RETURNS
YEARS ENDING
<TABLE>
<CAPTION>
BASE
PERIOD
COMPANY NAME/INDEX FEB 92 FEB 93 FEB 94 FEB 95 FEB 96 FEB 97
- ------------------- -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
STAFF BUILDERS INC 100 92.84 154.74 138.10 111.89 111.89
NASDAQ COMPOSITE 100 114.98 132.18 134,07 186.79 212.33
PEER GROUP - NEW 100 108.20 117.43 123.61 159.82 96.61
PEER GROUP - OLD 100 117.29 129.83 138.33 179.65 108.52
</TABLE>
14
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CERTAIN TRANSACTIONS
Effective April 1, 1992, the Company approved the sale by CTR Management
Corp. ('CTR') of a home care 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, 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 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, 1997, the Company
retained $62,025 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 $729,073 at February 28, 1997.
Effective September 6, 1996, DSS Staffing Corp. ('DSS') acquired a medical
staffing services franchise from the Company for Nassau, Suffolk, Queens, Kings,
New York, Bronx and Richmond counties in New York. Stuart Savitsky and Samuel
Schreier each owns one third of the outstanding capital stock of DSS. As part of
the franchise transaction, DSS paid a $75,000 franchise fee, agreed to make
monthly payments of $10,500 for a period of five years and entered into a
franchise agreement with the Company. The terms and conditions of the franchise
agreement between the Company and DSS are substantially similar to those for
other franchisees of the Company, except that the DSS franchise agreement
provides the franchise with two additional five-year renewal options.
Effective August 23, 1993, Home Care Plus, Inc. ('Home Care') acquired a
home care franchise from the Company for Bristol and Barnstable counties in
Massachusetts. Edward Teixeira 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, 1997, the
Company retained $4,967 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 $36,069 at February 28, 1997.
Effective February 6, 1995, Home Care Plus Two, Inc. ('Home Care Two')
acquired a home care franchise from the Company for Worcester, Hampden and
Franklin counties in Massachusetts. Edward Teixeira and his wife each owns 25%
of the outstanding capital stock of Home Care Two. During fiscal 1996, Home Care
Two paid $29,500 for the purchase of this franchise. 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. On
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November 27, 1996, Home Care Two received a $50,000 advance for expenses for
which a promissory note was issued to the Company (the 'Home Care Two Note').
The terms of the Home Care Two Note require repayment of the $50,000 in 36
consecutive monthly payments of $1,389 each plus interest at 2% over the prime
rate, which began on January 1, 1997. Mr. Teixeira has guaranteed payment of all
amounts due under the Home Care Two Note. During the fiscal year ended February
28, 1997, the Company retained $1,247 from the amounts otherwise due Home Care
Two under the terms of its franchise agreement as interest payments on the Home
Care Two Note. The outstanding balance of the Home Care Two Note was $45,833 at
February 28, 1997.
Effective July 20, 1995, Cynthia Nye, Senior Vice President, Corporate
Support of a principal subsidiary of the Company, acquired 9% of the outstanding
stock of Partners Two Management Corp. ('Partners'), an existing home care
franchise for Suffolk County, New York. 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. Prior to Ms. Nye's purchase of her stock in
Partners, Partners had assumed the obligations of a promissory note issued by a
predecessor franchise in the remaining principal amount of $300,000 (the
'Partners Note'). As of April 1, 1997, the terms of the Partners Note were
amended to provide for monthly payments of interest only in the amount of $2,105
from May 1997 through February 1998 and payments of principal and interest in
the amount of $6,612 from March 1998 through October 2001, the original
termination date of the Partners Note. The Partners Note continues to bear
annual interest at 2% over the prime rate. As described in greater detail below,
during the fiscal year ended February 28, 1997, the Company retained $27,066
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 $243,750 at February 28, 1997.
In connection with the resignation of Larry Campbell from his employment as
the Executive Vice President of National Health Care Operations on March 1,
1997, the Company agreed to sell its 90% ownership interest in American Homecare
Management Corp. ('AHCM') back to AHCM. Mr. Campbell is the Vice President of
AHCM. The purchase price paid by AHCM was $2,067,339 including cash of $100,000
and a promissory note payable to the Company in the amount of $1,967,339.
Interest on the promissory note is computed at 3% over the prime rate. Principal
and interest is payable in 60 consecutive monthly payments of $22,670.52
beginning April 1, 1997. A lump sum principal payment of $1,609,801.87 is due
with the final principal and interest payment. The promissory note is secured by
a pledge of all the outstanding stock and assets of AHCM to the Company.
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, 1997, the Company paid (i) BCC
$306,637 under the terms of its franchise agreement, representing a 60% gross
margin of $1,411,309 less $62,025 and $42,000 of interest and principal,
respectively, withheld on the BCC Note and $1,000,647 withheld for
administrative expenses; (ii) DSS $141,140 under the terms of its franchise
agreement, representing a 60% gross margin of $749,042 less $607,902 withheld
for administrative expenses; (iii) Home Care $1,775,209 under the terms of its
franchise agreement, representing a 60% gross margin of $2,426,759 less $4,967
and $14,925 of interest and principal, respectively, withheld on the Home Care
Note and $631,658 withheld for administrative expenses; (iv) Home Care Two
$140,583 under the terms of its franchise agreement, representing a 60% gross
margin of $451,906 less $1,246 and $4,167 of interest and principal,
respectively, withheld on the Home Care Two Note and $305,910 withheld for
administrative expenses; and (v) Partners $786,686 under the terms of its
franchise agreement, representing a 60% gross margin of $2,858,747 less $27,066
and $37,500 of interest and principal, respectively, withheld on the Partners
Note and $2,007,495 withheld for administrative expenses.
16
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To a great extent, the success of the Company is dependent upon the success
of its approximately 85 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, DSS, 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.
Donald Meyers is also the President and sole director and stockholder of
RMR Health & Hospital Management Consultants, Inc. ('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, 1997, the Company paid RMR Health $7,987 in fees for such services.
The Company has not engaged RMR Health during its 1998 fiscal year.
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.
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 1998
must submit the same in writing so as to be received at the executive offices of
the Company on or before February 20, 1998. 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, 1998. A
representative of Deloitte & Touche, LLP, which also audited the accounts of the
Company for the fiscal year ended February 28, 1997, 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 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 FISCAL YEAR ENDED FEBRUARY 28, 1997 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.
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 26, 1997
17
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APPENDIX I
PROXY
STAFF BUILDERS, INC.
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 Class A Common Stock,
$.01 par value per share (the 'Class A Common Stock'), and Class B Common Stock,
$.01 par value per share (the 'Class B 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 14, 1997 and
at any adjournment thereof. Each holder of shares of Class A Common Stock is
entitled to one vote for each share held by such holder. Each holder of shares
of Class B Common Stock is entitled to ten votes for each share held by such
holder.
[x] Please mark your
votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
1. Election of Class A Directors
Nominees for Class A Directors: DAVID SAVITSKY and JONATHAN J. HALPERT
FOR Nominees [ ] WITHHOLD AUTHORITY for Nominees [ ]
(Instruction: To withhold authority to vote for any individual nominee, write
the nominee's name on the space below)
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In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the annual meeting.
<PAGE>
<PAGE>
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' Item 1.
Date: ________________________, 1997
Signature(s): ______________________
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.
