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 NOVEMBER 30, 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 January 12, 1998 was 22,880,675 and 1,124,356
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 -
November 30, 1997 and February 28, 1997 4
Condensed Statements of Consolidated
Income - Three and Nine months ended
November 30, 1997 and 1996 5
Condensed Statements of Consolidated Cash
Flows - Nine months ended November 30, 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 9-12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
-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 Federal and State regulations
relating to the licensing and certification of its offices and the
sale and delivery of its products and services. The Office of
Inspector General of the Department of Health and Human Services
and Medicare fiscal intermediaries have expanded their auditing of
the home health care providers generally, and have become 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.
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.
-2-
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) NOVEMBER 30,
1997 FEBRUARY 28,
(UNAUDITED) 1997
ASSETS:
Current Assets:
Cash and cash equivalents $ 2,609 $ 2,006
Accounts receivable, net of allowance
for doubtful accounts of $3,100 and
$2,800, respectively 85,161 77,103
Deferred income tax benefits 1,985 1,855
Prepaid expenses and other current assets 2,960 4,989
Total current assets 92,715 85,953
Fixed Assets, net of accumulated depreciation
of $8,701 and $6,124, respectively 11,641 12,082
Intangible Assets, net of accumulated
amortization of $11,135 and $9,126,
respectively 50,531 51,022
Investment in unconsolidated affiliate 15,038 -
Other Assets 6,623 7,115
Total $176,548 $156,172
LIABILITIES:
Current Liabilities:
Accounts payable and accrued expenses $ 32,606 $ 31,736
Accrued payroll and related expenses 26,352 21,742
Current portion of long-term liabilities 9,173 5,230
Current income taxes payable 242 -
Total current liabilities 68,373 58,708
Long-Term Liabilities 45,485 37,998
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A Common stock - $.01 par value;
50,000,000 shares authorized; 22,557,794 and
22,343,970 outstanding at November 30,
1997 and February 28, 1997, respectively 226 223
Class B Common stock - $.01 par value;
1,554,936 shares authorized; 1,442,237
and 1,462,361 outstanding at November 30,
1997 and February 28, 1997, respectively 14 15
Convertible preferred stock, 10,000 shares
authorized; Class A; 666 2/3 shares outstanding 1 1
Additional paid-in capital 73,568 73,159
Accumulated deficit (11,119) (13,932)
Total stockholders' equity 62,690 59,466
Total $176,548 $156,172
See notes to condensed consolidated financial statements.
-4-<PAGE>
<TABLE>
<CAPTION>
STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
November 30, November 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Service revenues $130,772 $123,086 $392,403 $350,398
Sales of franchises and fees, net 490 221 977 1,154
Total revenues 131,262 123,307 393,380 351,552
Costs and Expenses:
Operating costs 84,268 77,553 252,313 219,290
General and administrative expenses 43,452 42,626 130,682 123,440
Provision for doubtful accounts 675 660 2,025 2,050
Amortization of intangible assets 789 692 2,214 1,847
Interest expense 873 435 2,579 920
Interest (income) (327) (266) (1,008) (618)
Other (income) expense, net (244) (160) (543) (470)
Total costs and expenses 129,486 121,540 388,262 346,459
Income Before Income Taxes 1,776 1,767 5,118 5,093
Provision for Income Taxes 801 778 2,305 2,241
Net Income $ 975 $ 989 $ 2,813 $ 2,852
Weighted average number of common
and common equivalent shares:
Primary 24,663 24,734 24,225 24,678
Fully diluted 24,749 24,785 24,442 24,728
Income per common and
common equivalent share:
Primary $ .04 $ .04 $ .12 $ .12
Fully diluted $ .04 $ .04 $ .12 $ .12
<FN>
<F1>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In thousands)
Nine Months Ended
November 30,
1997 1996
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 2,813 $ 2,852
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization of fixed assets 2,823 2,060
Amortization of intangibles and other assets 2,214 1,848
(Earnings) of unconsolidated affiliate (181)
Allowance for doubtful accounts 300 500
Deferred income taxes (130) 5
Write-off of goodwill and intangibles 492 -
Decrease in other long-term liabilities (638) (45)
Change in operating assets and liabilities:
Accounts receivable (9,012) (12,241)
Prepaid expenses and other current assets 1,866 (114)
Accounts payable and accrued expenses 5,476 693
Income taxes payable 361 193
Other assets 153 (3,034)
Net cash provided by operating activities 6,537 (7,283)
Cash Flows from Investing Activities:
Acquisition of businesses (3,288) (7,671)
Investment in unconsolidated affiliate (12,732) -
Disposition of business (70) -
Additions to fixed assets, net (344) (1,724)
Net cash used in investing activities (16,434) (9,395)
Cash Flows from Financing Activities:
Issuance of common stock for exercise of
options, warrants and employee stock purchases 411 624
Purchase and retirement of common stock - (361)
Increase in borrowings under revolving
line of credit 1,190 13,764
Borrowings under acquisition line of credit 12,625 -
Decrease in other long-term liabilities (3,726) (2,143)
Net cash provided by financing activities 10,500 11,884
Increase (decrease) in Cash and Cash Equivalents 603 (4,794)
Cash and Cash Equivalents, Beginning of Period 2,006 8,710
Cash and Cash Equivalents, End of Period $ 2,609 $ 3,916
Supplemental Data:
Cash paid for:
Interest $ 2,402 $ 747
Income taxes, net $ 1,580 $ 1,208
Fixed assets acquired through
capital lease agreements $ 2,127 $ 2,886
Acquisition of businesses through
issuance of notes payable $ - $ 3,113
<FN>
<F1>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
-6-<PAGE>
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
November 30, 1997 and February 28, 1997, and the results of
operations and the cash flows for the three and nine months
ended November 30, 1997 and 1996. Certain prior period
amounts have been reclassified to conform with the November
1997 presentation.
The results for the three and nine months ended November 30,
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
equivalents, principally dilutive stock options and warrants,
outstanding during the periods. For the three and nine months
ended November 30, 1997, the computations include the
additional shares and the assumed savings of interest expense,
net of income taxes, that would have occurred if all
outstanding options and warrants were exercised.
The shares used in computing primary earnings per common and
common equivalent share were 24,225,431 shares and 24,677,565
shares for the nine months ended November 30, 1997 and 1996
and 24,663,082 shares and 24,734,091 shares for the three
months ended November 30, 1997 and 1996, respectively. The
shares used in computing fully diluted earnings per share were
24,442,229 and 24,727,564 for the nine months ended November
30, 1997 and 1996 and 24,749,275 shares and 24,785,371 shares
for the three months ended November 30, 1997 and 1996,
respectively.
3. INVESTMENT IN UNCONSOLIDATED AFFILIATE - On October 30, 1997,
the Company purchased 60.9% of the outstanding common stock of
Chelsea Computer Consultants, Inc. ("Chelsea") for a total of
$12.4 million plus purchase related costs of $300 thousand.
Chelsea is a provider of information technology services to
clients in the financial services, communications,
manufacturing and other industries. Together with the 20.9%
of the common stock of Chelsea purchased in September 1996,
the Company owns 81.8% of the outstanding common stock of
Chelsea. The Company has accounted for Chelsea as an
-7-
unconsolidated subsidiary since it believes that majority
control may be temporary. The excess of the Company's cost of
its investment over its pro rata share of the net fair value
of assets acquired is being amortized on a straight-line
basis. The Company performed certain consulting services for
Chelsea amounting to $100,000 and $700,000 for the three and
nine months ended November 30, 1997, respectively, which are
included in service revenues. The Company has borrowed $12.6
million under its acquisition line of credit which bears
interest at .75% over the prevailing prime rate or, at the
Company's option, at the London Interbank Offered Rate (LIBOR)
plus 2.75%.
4. AMOUNT DUE UNDER SECURED LINE OF CREDIT - At November 30 and
February 28, 1997, the Company borrowed $35.4 million and
$21.6 million, respectively, under its secured line of credit.
These amounts consisted of $22.8 million and $21.6 million
under the revolving line of credit at November 30 and February
28, 1997, respectively. Also included in the borrowings at
November 30, 1997, was $12.6 million under the acquisition
line of credit of which $9.5 million is included in long-term
liabilities. The revolving line of credit expires on July 31,
2000 and the acquisition line of credit is being repaid in 48
monthly installments which began on December 1, 1997.
5. PROVISION (BENEFIT) FOR INCOME TAXES - The provision for
income taxes for the three and nine months ended November 30,
1997 and 1996 is based upon the Company's estimated tax
provision required for the full year.
6. 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
assets and liabilities of which were acquired by a subsidiary
of the Company in 1993, submitted false claims to Medicare
totaling 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 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 approximately $8 million or 6.5% for the
three months ended November 30, 1997, to $131.3 million from $123.3
million for the three months ended November 30, 1996. For the nine
months ended November 30, 1997 ("the 1997 period"), total revenues
increased by $41.8 million or 11.9% to $393.4 million from $351.6
million for the nine months ended November 30, 1996 ("the 1996
period"). The foregoing amounts include increased service revenues
of approximately $29 million in the 1997 period over the 1996
period from 25 locations added from acquisitions made since March
1, 1996. This increase is net of a reduction in service revenue of
approximately $5.8 million resulting from the sale of 18 locations
since August 1996. Additionally, an increase in service revenue of
approximately $13 million or 4% 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.
<TABLE>
<CAPTION>
Service Revenues
Three Months Ended Nine Months Ended
November 30, November 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Medicare 52.7% 54.4% 53.2% 56.0%
Medicaid and other local
government programs 19.6 19.8 19.8 19.9
Insurance and private
payors 12.9 14.2 13.1 14.4
Hospitals, nursing homes
and other health care
institutions 14.3 11.4 13.4 9.6
Other 0.5 0.2 0.5 0.1
Total 100.0% 100.0% 100.0% 100.0%
</TABLE>
The increase in service revenues from hospitals, nursing homes and
other health care institutions includes $4.4 million and $12.7
million for the three and nine months ended November 30, 1997,
respectively, as compared to $3.7 million for the three months
ended November 30, 1996, 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 64.4%
and 63.0% of service revenues for the three months ended November
30, 1997 and 1996, and 64.3% and 62.6% for the nine months ended
November 30, 1997 and 1996, respectively. The increases in
operating costs as a percentage of service revenues were primarily
due to a change in revenue mix toward services which have lower
gross margins.
General and administrative expenses increased by $800 thousand, or
1.9%, to $43.4 million for the three months ended November 30, 1997
from $42.6 million for the three months ended November 30, 1996.
For the 1997 period, general and administrative expenses increased
by $7.3 million, or 5.9%, to $130.7 million from $123.4 million in
the 1996 period. General and administrative expenses expressed as
a percentage of service revenues were 33.2% and 33.3% for the three
and nine months ended November 30, 1997, as compared to 34.6% and
35.2% for the three and nine months ended November 30, 1996,
respectively. The increase in these expenses in the 1997 period
over the 1996 period was primarily due to the addition of those
locations added since March 1, 1996.
Provision for doubtful accounts was approximately $2.0 million and
$2.1 million for the 1997 and 1996 periods, respectively. The
provisions represented 0.5% and 0.6% of service revenues in the
1997 and 1996 periods, respectively.
Interest expense was $900 thousand and $400 thousand for the three
months ended November 30, 1997 and 1996, and $2.6 million and $900
thousand for the nine months ended November 30, 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 $2.3 million and
$2.2 million for the 1997 and 1996 periods, respectively. 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
The Company has a secured 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 November 30, 1997 and February 28, 1997, the amounts
available for borrowing under the credit facility were
approximately $14.2 million and $31.4 million, respectively. At
November 30, 1997 and February 28, 1997, the Company borrowed $22.8
million and $21.6 million, respectively, under the revolving line
of credit. Additionally, at November 30, 1997 the Company had
outstanding $12.6 million under the acquisition line of credit,
which is being repaid in 48 monthly installments which began on
December 1, 1997. Trade accounts receivable at November 30, 1997
-10-
and February 28, 1997 were outstanding approximately 61 days and 57
days, respectively.
At November 30, 1997, the Company's long-term debt obligations due
within the next twelve months was $9.2 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.
Legislative Changes
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 legislation enacted by Congress retained the cost-
based reimbursement system, the cost limits will be reduced for
fiscal years beginning on or after October 1, 1997. Home health
care agencies will be reimbursed the lowest of: (a)actual costs of
operating the agency's Medicare services; (b) a reduced aggregate
cost per visit rate; or (c) an aggregate per beneficiary limit,
based on a blend of 75% agency-specific per beneficiary cost and
25% of a regional average for cost reporting periods ending during
the Federal fiscal year 1994 (10/1/93 - 9/30/94). The per
beneficiary blend is further reduced by 2% and updated by a Home
Health Market basket index.
The Budget Act requires the Health Care Financing Administration of
the U.S. Department of Health and Human Services ("HCFA"), the
Federal agency responsible for the rules governing Medicare and
Medicaid, to implement a Prospective Payment System ("PPS") for
fiscal years beginning on or after October 1, 1999 to replace this
cost-based system. The PPS will pay home health agencies a fixed
amount for services rendered without regard to their costs. There
can be no assurance that such reimbursement rates will cover the
costs incurred by the Company to provide home health care services.
The Budget act also included a change in the method of payments to
home health agencies, whereby the periodic interim payments (PIPs)
are being discontinued effective for the Company on March 1, 2000.
PIPs are biweekly payments received from the Medicare program and
adjusted quarterly to reflect increases or decreases in the cost of
home health services provided. PIPs result in an earlier payment
than is received for services billed on an individual claim basis.
The impact of these changes on the Company will be to reduce the
amount of costs that will be reimbursable, pursuant to the Medicare
program, effective March 1, 1998. To address the impact of these
reimbursement reductions, the Company is assessing the
effectiveness of its patient care services and is developing
programs to increase efficiency in providing care to patients. In
addition, the Company is reviewing its expenditures for operating
costs and general and administrative expenses to bring its costs
within the amounts that will be reimbursable under the new
-11-
regulations. Because the Company cannot determine presently the
number of patients that will be served, the severity of their
illnesses or its ability to reduce general or administrative
expenses, the Company cannot reasonably quantify the impact of the
new regulations on revenues and net income.
Additionally, another provision of the Budget Act requires the
Company to obtain by February 27, 1998, a surety bond equal to 15%
of the combined Medicare and Medicaid revenues for each Medicare-
certified home health agency. After the publication of the final
regulations by HCFA, several of the approved insurance carriers
indicated that they are waiting to see whether HCFA will modify the
bonding requirements before they will write any policies.
Therefore, there can be no assurance that these bonds can be
obtained on a commercially reasonable basis, if at all. Failure to
obtain the surety bonds would result in the inability of the
Company to provide Medicare services.
-12-
Part II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant for the quarter
ended November 30, 1997.
(B) Exhibits
Exhibit No.
10.1 Stock Option Agreement, dated July 1, 1997, under
the Company's 1993 Stock Option Plan between the
Company and Stephen Savitsky.
10.2 Stock Option Agreement, dated July 1, 1997, under
the Company's 1994 Performance-Based Stock Option
Plan between the Company and Stephen Savitsky.
10.3 Stock Option Agreement, dated July 1, 1997, under
the Company's 1993 Stock Option Plan between the
Company and David Savitsky.
10.4 Stock Option Agreement, dated July 1, 1997, under
the Company's 1994 Performance-Based Stock Option
Plan between the Company and David Savitsky.
10.5 Stock Purchase Agreement By and Among the Company
and Raymond T. Sheerin, Michael Altman, Stephen
Fleischner and Chelsea Computer Consultants, Inc.,
dated September 24, 1996.
10.6 Amendment No. 1 to Stock Purchase Agreement By and
Among the Company and Raymond T.Sheerin, Michael
Altman, Stephen Fleischner and Chelsea Computer
Consultants, Inc., dated October 30, 1997.
10.7 Shareholders Agreement between Raymond T. Sheerin
and Michael Altman and Stephen Fleischner and the
Company and Chelsea Computer Consultants, Inc.,
dated September 24, 1996.
10.8 Amendment No. 1 to Shareholders Agreement among
Chelsea Computer Consultants,Inc., Raymond T.
Sheerin, Michael Altman and the Company, dated
October 30,1997.
10.9 Common Stock Purchase Option to purchase shares of
common stock in Chelsea Computer Consultants, Inc.,
dated November 19, 1997 between the Company and
David Savitsky.
10.10 Common Stock Purchase Option to purchase shares of
common stock in Chelsea Computer Consultants, Inc.,
dated November 19, 1997 between the Company and
Stephen Savitsky.
-13-
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: January 14, 1998 By: /s/ Stephen Savitsky
Stephen Savitsky
Chairman of the Board, President
and Chief Executive Officer
Dated: January 14, 1998 By: /s/ Gary Tighe
Gary Tighe
Senior Vice President, Finance
(Principal Financial and
Accounting Officer)
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 2609
<SECURITIES> 0
<RECEIVABLES> 88261
<ALLOWANCES> 3100
<INVENTORY> 0
<CURRENT-ASSETS> 92715
<PP&E> 20342
<DEPRECIATION> 8701
<TOTAL-ASSETS> 176548
<CURRENT-LIABILITIES> 68373
<BONDS> 0
1
0
<COMMON> 240
<OTHER-SE> 62449
<TOTAL-LIABILITY-AND-EQUITY> 176548
<SALES> 0
<TOTAL-REVENUES> 393380
<CGS> 0
<TOTAL-COSTS> 252313
<OTHER-EXPENSES> 663
<LOSS-PROVISION> 2025
<INTEREST-EXPENSE> 2579
<INCOME-PRETAX> 5118
<INCOME-TAX> 2305
<INCOME-CONTINUING> 2813
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2813
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
EXHIBIT
10.1<PAGE>
STAFF BUILDERS, INC.
1993 STOCK OPTION PLAN
July 1, 1997
Stephen Savitsky
Re: Grant of Nonqualifying Stock Options
to Purchase Shares of the Class A Common
Stock of Staff Builders, Inc.
Dear Renee:
You and Staff Builders, Inc., a Delaware corporation (the
"Corporation"), hereby agree as follows:
1. Reference. This is the Stock Option Agreement
referred to in Section 7(k) of the Corporation's 1993 Stock Option
Plan (the "Plan"). The stock option this Agreement grants is a
Nonqualifying Stock Option, as set forth in Section 2 below. This
Agreement incorporates all terms, conditions and provisions of the
Plan.
2. Stock Option. The Corporation hereby grants to the
Optionee the option (the "Stock Option") to purchase that number of
shares of Class A Common Stock of the Corporation, par value $.01
per share, set forth on Schedule A. The Corporation will issue
these shares as fully paid and nonassessable shares upon the
Optionee's exercise of the Stock Option. The Optionee may exercise
the Stock Option in accordance with this Agreement any time prior
to the tenth anniversary of the date of grant of the Stock Option
evidenced by this Agreement, unless earlier terminated according to
the terms of this Agreement. Schedule A sets forth the date or
dates after which the Optionee may exercise all or part of the
Stock Option, subject to the provisions of the Plan.
3. Exercise of Stock Option. The Optionee may exercise
the Stock Option in whole or in part by written notice delivered to
the Corporation in the form of Schedule B to this Agreement. If
exercisable Stock Options as to 100 or more shares are held by an
Optionee, then such Stock Options may not be exercised for fewer
than 100 shares at any time, and if exercisable Stock Options for
fewer than 100 shares are held by an Optionee, then Stock Options
for all such shares must be exercised at one time. The Optionee
shall enclose with each such notice payment by cash or by valid
check in an amount equal to the number of shares
as to which his exercise is made, multiplied by the option price
therefor; provided, however, that if the Committee appointed by the
Board of Directors pursuant to Section 2 of the Plan shall, in its
sole discretion, approve, payment upon exercise of the Stock Option
in whole or in part may be made by surrender to the Corporation in
due form for transfer of shares of Class A Common Stock of the
Corporation. In the case of payment in the Corporation's Class A
Common Stock, such stock shall be valued at its Fair Market Value
(as defined in Section 7(b) of the Plan) as of the date of
surrender of the stock.
4. Purchase Price. The option price per share shall
be that set forth on Schedule A.
5. No Rights in Option Stock. Optionee shall have no
rights as a stockholder in respect of any shares subject to the
Stock Option unless and until Optionee has exercised the Stock
Option in complete accordance with the terms hereof, and shall have
no rights with respect to shares not expressly conferred by this
Agreement.
6. Shares Reserved. The Corporation shall at all times
during the term of this Agreement reserve and keep available such
number of shares of Class A Common Stock as will be sufficient to
satisfy the requirements of this Agreement, and shall pay all
original issue taxes on the exercise of the Stock Option, and all
other fees and expenses necessarily incurred by the Corporation in
connection therewith.
7. Nonassignability. The Stock Option and this
Agreement shall not be encumbered, disposed of, assigned or
transferred in whole or part, and, except as described in the Plan,
may only be exercised by the Optionee unless the prior written
consent of the Committee has been obtained. All shares purchased
pursuant to this Agreement shall be purchased for investment by the
Optionee.
8. Effect Upon Employment. Nothing in this Agreement
shall confer on the Optionee any right to continue in the
employment of the Corporation or shall interfere in any way with
the right of the Corporation to terminate Optionee's employment at
any time.
9. Successors. This agreement shall be binding upon
any successor of the Corporation.
In order to indicate your acceptance of the Stock Option
on the above terms and conditions, kindly sign the enclosed copy of
this letter agreement and return it to the Corporation.
STAFF BUILDERS, INC.
By:/s/ David Savitsky
Accepted and Agreed to:
/s/ Stephen Savitsky
Stephen Savitsky
Schedule A
Nonqualifying Stock Options
Date of Grant: July 1, 1997
Name of Optionee: Stephen Savitsky
Number of Shares as to
which the Option is Granted: 218,136
Option Price per Share: $2.31
Exercisability of Options:
Number of Shares Date after which the
as to which the Option is Exercisable
Optionee May Exercise (anniversaries refer
the Option Granted to the Date of Grant
Hereby of the Stock Option
218,136 July 1, 1997
Schedule B
NOTICE OF ELECTION TO EXERCISE
Staff Builders, Inc.
Attention:
Gentlemen:
I hereby irrevocably elect to exercise the Stock Option
held by me under the 1993 Stock Option Plan of Staff Builders, Inc.
(the "Corporation") to purchase shares of the Class A Common Stock,
par value $.01 per share, of the Corporation at an option price of
$ per share.
Enclosed is a check, payable to the order of the
Corporation, in the amount of $ .
A completed Exercise of Stock Option Payment Remittance
Form is attached.
Please instruct [ ], Transfer
Agent, to issue certificate(s) for shares each and,
if applicable, a separate certificate for the remaining
shares in my name as shown below. The following address is for the
records of the Transfer Agent for mailing stockholder
communications:
Name
Taxpayer I.D. Number
(i.e. Social Security/Insurance Number)
Number and Street
City State Zip Code
Please forward the certificate(s) to me at the following address:
Number and Street
City State Zip Code
This election incorporates, and is subject to, all terms
and conditions of the Plan and my Stock Option Agreement with the
Corporation. The Stock Option I am exercising is stated to be:
[Check one] ( ) Incentive Stock Option
( ) Nonqualifying Stock Option
I am acquiring the foregoing shares for investment
purposes only, and not with a view to their sale or distribution.
Dated:
Signature
Print Name
Schedule B-1
STAFF BUILDERS, INC.
1993
STOCK OPTION PLAN
Exercise of Stock Option Payment Remittance Form
In fulfillment of the accompanying Notice of Election to
Exercise, which advises you of my intention to exercise options to
purchase shares of Staff Builders, Inc. Common Stock at
an option price of $ per share, for a total purchase
price of $ , I enclose in full payment of the purchase
price:
bank check in the amount of . . . . . . $
made payable to Staff Builders, Inc.
Dated:
Signature
( ) Incentive Stock Option
( ) Nonqualifying Stock Option
Type Name
ed/opt.93n
EXHIBIT
10.2
<PAGE>
STAFF BUILDERS, INC.
July 1, 1997
To the Person Named as
Optionee on Schedule A
to this Agreement
Re: Grant of Nonqualifying Stock Options
to Purchase Shares of the Common
Stock of Staff Builders, Inc.
Dear Optionee:
You and Staff Builders, Inc., a Delaware corporation (the
"Corporation"), hereby agree as follows:
1. Reference. This is the Stock Option Agreement
referred to in Section 7(1) of the Corporation's 1994 Performance-
Based Stock Option Plan (the "Plan"). The stock option this
Agreement grants is a Nonqualifying Stock Option, as set forth in
Section 5 below. This Agreement incorporates all terms, conditions
and provisions of the Plan.
2. Stock Option.
(a) The Corporation hereby grants to the Optionee
the option (the "Stock Option") to purchase that number of shares
of Class A Common Stock of the Corporation, par value $.01 per
share, set forth in Paragraph (b) of this Section. The Corporation
will issue these shares as fully paid and nonassessable shares upon
the Optionee's exercise of the Stock Option. The Optionee may
exercise the Stock Option in accordance with this Agreement any
time between six months and the tenth anniversary of the date of
grant of the Stock Option evidenced by this Agreement, unless
earlier terminated according to the terms of this Agreement.
(b) The Stock Option shall vest and become
exercisable pursuant to Section 7(c) of the plan.
3. Exercise of Stock Option. The Optionee may
To the Person Named as
Optionee on Schedule A
July 1, 1997
Page 2
exercise the Stock Option in whole or in part by written notice
delivered to the Corporation in the form of Schedule B to this
Agreement. The Optionee shall enclose with each such notice
payment by cash or by valid check in an amount equal to the number
of shares as to which his exercise is made, multiplied by the
option price therefor. The Optionee must exercise the Stock Option
on or before July 1, 2007 after which it will lapse.
4. Purchase Price. The option price per share shall
be the Option Price as defined in Section 7(b) of the Plan.
5. Tax Treatment of the Stock Option. The following
is a summary of the federal income tax consequences of the issuance
and exercise of nonqualifying stock options under the Plan to
optionees and to the Corporation under the Internal Revenue Code of
1986, as amended (the "Code"). The following discussion does not
purport to be complete and does not cover, among other things,
state and local tax treatment of participation in the Plan.
Furthermore, differences in optionees' financial situations may
cause federal, state and local tax consequences of participation in
the Plan to vary. Therefore, each optionee in the Plan is urged to
consult his own accountant, legal counsel or other financial
advisor regarding the particular tax consequences to him of
participation in the Plan, including the applicability and effect
of any state or local tax laws, and of changes in applicable tax
laws.
The grant of a nonqualifying stock option will not result
in the recognition of taxable income to the optionee for federal
income tax purposes or in deduction to the Corporation. Upon the
exercise of a nonqualifying stock option, the optionee will
recognize ordinary income for federal income tax purposes in an
amount equal to the excess of the fair market value of the shares
of Common Stock of the Corporation over the exercise price. Such
amount may be deductible by the Corporation if it complies with
applicable reporting requirements.
If an optionee disposes of any shares of Class A Common
Stock received upon the exercise of a nonqualifying stock option,
such optionee will recognize a capital gain or loss for federal
income tax purposes equal to the difference between the amount
realized on the disposition of such shares and the fair market
value of such shares at the time the option was exercised. The
To the Person Named as
Optionee on Schedule A
July 1, 1997
Page 3
gain or loss will be either long-term or short-term, depending on
the holding period. The Corporation will not be entitled to any
tax deduction in connection with such disposition of shares.
6. No Rights in Option Stock. Optionee shall have no
rights as a stockholder in respect of any shares subject to the
Stock Option unless and until Optionee has exercised the Stock
Option in complete accordance with the terms hereof, and shall have
no rights with respect to shares not expressly conferred by this
Agreement.
7. Shares Reserved. The Corporation shall at all times
during the term of this Agreement reserve and keep available such
number of shares of Class A Common Stock as will be sufficient to
satisfy the requirements of this Agreement, and shall pay all
original issue taxes on the exercise of the Stock Option, and all
other fees and expenses necessarily incurred by the Corporation in
connection therewith; provided, however, that pursuant to Section
7(g) of the Plan, upon settlement of the Stock Option, it shall be
a condition to the obligation of the Corporation that the Optionee
pay to the Corporation such amount as the Corporation may request
for the purpose of satisfying its liability to withhold federal,
state or local income or other taxes.
8. Nonassignability. The Stock Option and this
Agreement shall not be encumbered, disposed of, assigned or
transferred in whole or part, and, except as described in the Plan,
may only be exercised by the Optionee unless the prior written
consent of the Corporation has been obtained. All shares of Class
A Common Stock purchased pursuant to this Agreement shall be
purchased for investment by the Optionee.
9. Effect Upon Employment. Nothing in this Agreement
shall confer on the Optionee any right to continue in the
employment of the Corporation or shall interfere in any way with
the right of the Corporation to terminate Optionee's employment at
any time.
10. Successors. This agreement shall be binding upon
any successor of the Corporation.
In order to indicate your acceptance of the Stock Option
on the above terms and conditions, kindly sign the enclosed copy of
this letter agreement and return it to the Corporation.
STAFF BUILDERS, INC.
By:/s/ David Savitsky
Accepted and Agreed to:
/s/ Stephen Savitsky
Stephen Savitsky
SCHEDULE A
Nonqualifying Stock Options
Date of Grant: July 1, 1997
Name of Optionee: Stephen Savitsky
Number of Shares as to
which the Option is Granted: 383,691
Option Price per Share: $2.25
SCHEDULE B
NOTICE OF ELECTION TO EXERCISE
STAFF BUILDERS, INC.
1981 Marcus Avenue
Lake Success, New York 11042
Attention:
Gentlemen:
I hereby irrevocably elect to exercise the Stock Option
held by me under the 1994 Performance-Based Stock Option Plan of
Staff Builders, Inc. (the "Company") to purchase shares of the
Class A Common Stock, par value $.01 per share, of the Company at
an option price of $ per share.
Enclosed is a check, payable to the order of the Company,
in the amount of $ .
A completed Exercise of Stock Option Payment Remittance
Form is attached.
Please issue certificate(s) for
shares each and, if applicable, a separate certificate for the
remaining shares in my name as shown below.
Name
Taxpayer I.D. Number
(i.e. Social Security/Insurance Number)
Number and Street
City State Zip Code
Please forward the certificate(s) to me at the following address:
Number and Street
City State Zip Code
This election incorporates, and is subject to, all terms
and conditions of the Plan and my Stock Option Agreement with the
Company.
I am acquiring the foregoing shares for investment
purposes only, and not with a view to their sale or distribution.
Dated:
Signature
Print Name
SCHEDULE B-1
STAFF BUILDERS, INC.
1994
PERFORMANCE-BASED STOCK OPTION PLAN
Exercise of Stock Option Payment Remittance Form
In fulfillment of the accompanying Notice of Election to
Exercise, which advises you of my intention to exercise options to
purchase shares of Staff Builders, Inc. Class A Common
Stock at an option price of $ per share, for a total
purchase price of $ , I enclose in full payment of the
purchase price a check in the amount of $ made payable
to Staff Builders, Inc.
Dated:
Signature
Type Name
ed/opt.94
EXHIBIT
10.3<PAGE>
STAFF BUILDERS, INC.
1993 STOCK OPTION PLAN
July 1, 1997
David Savitsky
Re: Grant of Nonqualifying Stock Options
to Purchase Shares of the Class A Common
Stock of Staff Builders, Inc.
Dear Renee:
You and Staff Builders, Inc., a Delaware corporation (the
"Corporation"), hereby agree as follows:
1. Reference. This is the Stock Option Agreement
referred to in Section 7(k) of the Corporation's 1993 Stock Option
Plan (the "Plan"). The stock option this Agreement grants is a
Nonqualifying Stock Option, as set forth in Section 2 below. This
Agreement incorporates all terms, conditions and provisions of the
Plan.
2. Stock Option. The Corporation hereby grants to the
Optionee the option (the "Stock Option") to purchase that number of
shares of Class A Common Stock of the Corporation, par value $.01
per share, set forth on Schedule A. The Corporation will issue
these shares as fully paid and nonassessable shares upon the
Optionee's exercise of the Stock Option. The Optionee may exercise
the Stock Option in accordance with this Agreement any time prior
to the tenth anniversary of the date of grant of the Stock Option
evidenced by this Agreement, unless earlier terminated according to
the terms of this Agreement. Schedule A sets forth the date or
dates after which the Optionee may exercise all or part of the
Stock Option, subject to the provisions of the Plan.
3. Exercise of Stock Option. The Optionee may exercise
the Stock Option in whole or in part by written notice delivered to
the Corporation in the form of Schedule B to this Agreement. If
exercisable Stock Options as to 100 or more shares are held by an
Optionee, then such Stock Options may not be exercised for fewer
than 100 shares at any time, and if exercisable Stock Options for
fewer than 100 shares are held by an Optionee, then Stock Options
for all such shares must be exercised at one time. The Optionee
shall enclose with each such notice payment by cash or by valid
check in an amount equal to the number of shares
as to which his exercise is made, multiplied by the option price
therefor; provided, however, that if the Committee appointed by the
Board of Directors pursuant to Section 2 of the Plan shall, in its
sole discretion, approve, payment upon exercise of the Stock Option
in whole or in part may be made by surrender to the Corporation in
due form for transfer of shares of Class A Common Stock of the
Corporation. In the case of payment in the Corporation's Class A
Common Stock, such stock shall be valued at its Fair Market Value
(as defined in Section 7(b) of the Plan) as of the date of
surrender of the stock.
4. Purchase Price. The option price per share shall
be that set forth on Schedule A.
5. No Rights in Option Stock. Optionee shall have no
rights as a stockholder in respect of any shares subject to the
Stock Option unless and until Optionee has exercised the Stock
Option in complete accordance with the terms hereof, and shall have
no rights with respect to shares not expressly conferred by this
Agreement.
6. Shares Reserved. The Corporation shall at all times
during the term of this Agreement reserve and keep available such
number of shares of Class A Common Stock as will be sufficient to
satisfy the requirements of this Agreement, and shall pay all
original issue taxes on the exercise of the Stock Option, and all
other fees and expenses necessarily incurred by the Corporation in
connection therewith.
7. Nonassignability. The Stock Option and this
Agreement shall not be encumbered, disposed of, assigned or
transferred in whole or part, and, except as described in the Plan,
may only be exercised by the Optionee unless the prior written
consent of the Committee has been obtained. All shares purchased
pursuant to this Agreement shall be purchased for investment by the
Optionee.
8. Effect Upon Employment. Nothing in this Agreement
shall confer on the Optionee any right to continue in the
employment of the Corporation or shall interfere in any way with
the right of the Corporation to terminate Optionee's employment at
any time.
9. Successors. This agreement shall be binding upon
any successor of the Corporation.
In order to indicate your acceptance of the Stock Option
on the above terms and conditions, kindly sign the enclosed copy of
this letter agreement and return it to the Corporation.
STAFF BUILDERS, INC.
By:/s/ Stephen Savitsky
Accepted and Agreed to:
/s/ David Savitsky
David Savitsky
Schedule A
Nonqualifying Stock Options
Date of Grant: July 1, 1997
Name of Optionee: David Savitsky
Number of Shares as to
which the Option is Granted: 218,136
Option Price per Share: $2.31
Exercisability of Options:
Number of Shares Date after which the
as to which the Option is Exercisable
Optionee May Exercise (anniversaries refer
the Option Granted to the Date of Grant
Hereby of the Stock Option
218,136 July 1, 1997
Schedule B
NOTICE OF ELECTION TO EXERCISE
Staff Builders, Inc.
Attention:
Gentlemen:
I hereby irrevocably elect to exercise the Stock Option
held by me under the 1993 Stock Option Plan of Staff Builders, Inc.
(the "Corporation") to purchase shares of the Class A Common Stock,
par value $.01 per share, of the Corporation at an option price of
$ per share.
Enclosed is a check, payable to the order of the
Corporation, in the amount of $ .
A completed Exercise of Stock Option Payment Remittance
Form is attached.
Please instruct [ ], Transfer
Agent, to issue certificate(s) for shares each and,
if applicable, a separate certificate for the remaining
shares in my name as shown below. The following address is for the
records of the Transfer Agent for mailing stockholder
communications:
Name
Taxpayer I.D. Number
(i.e. Social Security/Insurance Number)
Number and Street
City State Zip Code
Please forward the certificate(s) to me at the following address:
Number and Street
City State Zip Code
This election incorporates, and is subject to, all terms
and conditions of the Plan and my Stock Option Agreement with the
Corporation. The Stock Option I am exercising is stated to be:
[Check one] ( ) Incentive Stock Option
( ) Nonqualifying Stock Option
I am acquiring the foregoing shares for investment
purposes only, and not with a view to their sale or distribution.
Dated:
Signature
Print Name
Schedule B-1
STAFF BUILDERS, INC.
1993
STOCK OPTION PLAN
Exercise of Stock Option Payment Remittance Form
In fulfillment of the accompanying Notice of Election to
Exercise, which advises you of my intention to exercise options to
purchase shares of Staff Builders, Inc. Common Stock at
an option price of $ per share, for a total purchase
price of $ , I enclose in full payment of the purchase
price:
bank check in the amount of . . . . . . $
made payable to Staff Builders, Inc.
Dated:
Signature
( ) Incentive Stock Option
( ) Nonqualifying Stock Option
Type Name
ed/opt.93n
EXHIBIT
10.4<PAGE>
STAFF BUILDERS, INC.
July 1, 1997
To the Person Named as
Optionee on Schedule A
to this Agreement
Re: Grant of Nonqualifying Stock Options
to Purchase Shares of the Common
Stock of Staff Builders, Inc.
Dear Optionee:
You and Staff Builders, Inc., a Delaware corporation (the
"Corporation"), hereby agree as follows:
1. Reference. This is the Stock Option Agreement
referred to in Section 7(1) of the Corporation's 1994 Performance-
Based Stock Option Plan (the "Plan"). The stock option this
Agreement grants is a Nonqualifying Stock Option, as set forth in
Section 5 below. This Agreement incorporates all terms, conditions
and provisions of the Plan.
2. Stock Option.
(a) The Corporation hereby grants to the Optionee
the option (the "Stock Option") to purchase that number of shares
of Class A Common Stock of the Corporation, par value $.01 per
share, set forth in Paragraph (b) of this Section. The Corporation
will issue these shares as fully paid and nonassessable shares upon
the Optionee's exercise of the Stock Option. The Optionee may
exercise the Stock Option in accordance with this Agreement any
time between six months and the tenth anniversary of the date of
grant of the Stock Option evidenced by this Agreement, unless
earlier terminated according to the terms of this Agreement.
(b) The Stock Option shall vest and become
exercisable pursuant to Section 7(c) of the plan.
3. Exercise of Stock Option. The Optionee may
To the Person Named as
Optionee on Schedule A
July 1, 1997
Page 2
exercise the Stock Option in whole or in part by written notice
delivered to the Corporation in the form of Schedule B to this
Agreement. The Optionee shall enclose with each such notice
payment by cash or by valid check in an amount equal to the number
of shares as to which his exercise is made, multiplied by the
option price therefor. The Optionee must exercise the Stock Option
on or before July 1, 2007 after which it will lapse.
4. Purchase Price. The option price per share shall
be the Option Price as defined in Section 7(b) of the Plan.
5. Tax Treatment of the Stock Option. The following
is a summary of the federal income tax consequences of the issuance
and exercise of nonqualifying stock options under the Plan to
optionees and to the Corporation under the Internal Revenue Code of
1986, as amended (the "Code"). The following discussion does not
purport to be complete and does not cover, among other things,
state and local tax treatment of participation in the Plan.
Furthermore, differences in optionees' financial situations may
cause federal, state and local tax consequences of participation in
the Plan to vary. Therefore, each optionee in the Plan is urged to
consult his own accountant, legal counsel or other financial
advisor regarding the particular tax consequences to him of
participation in the Plan, including the applicability and effect
of any state or local tax laws, and of changes in applicable tax
laws.
The grant of a nonqualifying stock option will not result
in the recognition of taxable income to the optionee for federal
income tax purposes or in deduction to the Corporation. Upon the
exercise of a nonqualifying stock option, the optionee will
recognize ordinary income for federal income tax purposes in an
amount equal to the excess of the fair market value of the shares
of Common Stock of the Corporation over the exercise price. Such
amount may be deductible by the Corporation if it complies with
applicable reporting requirements.
If an optionee disposes of any shares of Class A Common
Stock received upon the exercise of a nonqualifying stock option,
such optionee will recognize a capital gain or loss for federal
income tax purposes equal to the difference between the amount
realized on the disposition of such shares and the fair market
value of such shares at the time the option was exercised. The
To the Person Named as
Optionee on Schedule A
July 1, 1997
Page 3
gain or loss will be either long-term or short-term, depending on
the holding period. The Corporation will not be entitled to any
tax deduction in connection with such disposition of shares.
6. No Rights in Option Stock. Optionee shall have no
rights as a stockholder in respect of any shares subject to the
Stock Option unless and until Optionee has exercised the Stock
Option in complete accordance with the terms hereof, and shall have
no rights with respect to shares not expressly conferred by this
Agreement.
7. Shares Reserved. The Corporation shall at all times
during the term of this Agreement reserve and keep available such
number of shares of Class A Common Stock as will be sufficient to
satisfy the requirements of this Agreement, and shall pay all
original issue taxes on the exercise of the Stock Option, and all
other fees and expenses necessarily incurred by the Corporation in
connection therewith; provided, however, that pursuant to Section
7(g) of the Plan, upon settlement of the Stock Option, it shall be
a condition to the obligation of the Corporation that the Optionee
pay to the Corporation such amount as the Corporation may request
for the purpose of satisfying its liability to withhold federal,
state or local income or other taxes.
8. Nonassignability. The Stock Option and this
Agreement shall not be encumbered, disposed of, assigned or
transferred in whole or part, and, except as described in the Plan,
may only be exercised by the Optionee unless the prior written
consent of the Corporation has been obtained. All shares of Class
A Common Stock purchased pursuant to this Agreement shall be
purchased for investment by the Optionee.
9. Effect Upon Employment. Nothing in this Agreement
shall confer on the Optionee any right to continue in the
employment of the Corporation or shall interfere in any way with
the right of the Corporation to terminate Optionee's employment at
any time.
10. Successors. This agreement shall be binding upon
any successor of the Corporation.
In order to indicate your acceptance of the Stock Option
on the above terms and conditions, kindly sign the enclosed copy of
this letter agreement and return it to the Corporation.
STAFF BUILDERS, INC.
By:/s/ Stephen Savitsky
Accepted and Agreed to:
/s/ David Savitsky
David Savitsky
SCHEDULE A
Nonqualifying Stock Options
Date of Grant: July 1, 1997
Name of Optionee: David Savitsky
Number of Shares as to
which the Option is Granted: 383,691
Option Price per Share: $2.25
SCHEDULE B
NOTICE OF ELECTION TO EXERCISE
STAFF BUILDERS, INC.
1981 Marcus Avenue
Lake Success, New York 11042
Attention:
Gentlemen:
I hereby irrevocably elect to exercise the Stock Option
held by me under the 1994 Performance-Based Stock Option Plan of
Staff Builders, Inc. (the "Company") to purchase shares of the
Class A Common Stock, par value $.01 per share, of the Company at
an option price of $ per share.
Enclosed is a check, payable to the order of the Company,
in the amount of $ .
A completed Exercise of Stock Option Payment Remittance
Form is attached.
Please issue certificate(s) for
shares each and, if applicable, a separate certificate for the
remaining shares in my name as shown below.
Name
Taxpayer I.D. Number
(i.e. Social Security/Insurance Number)
Number and Street
City State Zip Code
Please forward the certificate(s) to me at the following address:
Number and Street
City State Zip Code
This election incorporates, and is subject to, all terms
and conditions of the Plan and my Stock Option Agreement with the
Company.
I am acquiring the foregoing shares for investment
purposes only, and not with a view to their sale or distribution.
Dated:
Signature
Print Name
SCHEDULE B-1
STAFF BUILDERS, INC.
1994
PERFORMANCE-BASED STOCK OPTION PLAN
Exercise of Stock Option Payment Remittance Form
In fulfillment of the accompanying Notice of Election to
Exercise, which advises you of my intention to exercise options to
purchase shares of Staff Builders, Inc. Class A Common
Stock at an option price of $ per share, for a total
purchase price of $ , I enclose in full payment of the
purchase price a check in the amount of $ made payable
to Staff Builders, Inc.
Dated:
Signature
Type Name
ed/opt.94
EXHIBIT
10.5<PAGE>
STOCK PURCHASE AGREEMENT
BY AND AMONG
STAFF BUILDERS, INC.
and
RAYMOND SHEERIN, MICHAEL ALTMAN, STEPHEN
FLEISCHNER
and
CHELSEA COMPUTER CONSULTANTS, INC.
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT
("Agreement") is made and entered into as of the 24th day of
September, 1996 by and among STAFF BUILDERS, INC., a New
York corporation (the "Buyer"); and Raymond T. Sheerin, Michael
Altman, Stephen Fleischner ("Shareholders"), and Chelsea Computer
Consultants, Inc. ("CCC"), (herein collectively referred to as the
"Seller's").
BACKGROUND
WHEREAS, CCC has two-hundred (200) issued and
authorized shares of its common stock ("OLD SHARES"); and
WHEREAS, all of the Old Shares are owned by the
Shareholders; and
WHEREAS, CCC and the Shareholders are willing
to authorize an increase in the number of shares of CCC from two-
hundred (200) to one thousand (1,000) (said 800 additional shares to
be hereinafter referred to as ("NEW SHARES"). The Old Shares
plus the New Shares shall hereinafter be referred to as ("Stock"); and
WHEREAS, CCC and the Shareholders are willing
to issue a 190 of the New Shares to Buyer and Buyer is willing to
purchase such New Shares; and
WHEREAS, Sellers are willing to grant Buyer an
option to purchase an additional 61% of the Stock as more
particularly described herein; and
WHEREAS, If Buyer exercises its option to purchase
an additional 61%, Buyer is willing to grant Sellers an option to sell
to Buyer the remaining stock owned by Sellers; and
WHEREAS, the Sellers and the Buyer are prepared
to agree on a course of action in the event that Buyer does not
exercise its options; and
WHEREAS, the Buyer is willing to render consulting
services to CCC with respect to establishing a Franchise Program of
its employee staffing operations ("Franchise Program").
NOW, THEREFORE, for and in consideration of the
mutual agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, Sellers and
Buyer covenant, represent, warrant, stipulate and agree as follows:
ARTICLE 1. PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares. At the Closing (as
hereinafter defined), subject to the terms and conditions of this
Agreement, CCC agrees to sell, transfer, convey, deliver and assign
to Buyer all right, title and interest in 190 New Shares ("Buyer's
Stock"), free and clear of all liens and encumbrances, for the
consideration hereinafter set forth.
ARTICLE 2. CLOSING DATE; TRANSFER OF STOCK
2.1 Closing and Closing Date. The closing hereunder
(the "Closing") shall take place at such place and time and on such
date ("Closing Date") as may be agreed to in writing by Sellers and
Buyer but in no event later than fifteen (15) days from the date of
execution of this Agreement.
2.2 Transfer of Buyer's Stock. CCC shall, at the Closing
on the Closing Date, deliver to Buyer certificates for Buyer's Stock.
ARTICLE 3. PURCHASE PRICE FOR THE SHARES
3.1 Purchase Price for the Shares. The purchase price
(the "Purchase Price") for the Buyer's Stock payable by Buyer to
CCC at Closing shall be Two Million Dollars ($2,000,000).
ARTICLE 4. PURCHASE AND SALE OF ADDITIONAL SHARES
4.1 Exercise of First Option. Buyer is hereby granted
an option to purchase an additional 610 Shares of the of the Stock
("First Option"). These shares shall be purchased on a prorata
basis from each Shareholder. This option shall be exercisable on or
before the thirtieth (30th) day after Shareholder releases to Buyer
the certified financial data needed to calculate the Purchase Price.
The Purchase Price shall be sixty-one percent (61%) of seven (7)
times the adjusted pretax profits ("Adjusted Pretax Profits") for the
twelve months immediately subsequent to the Closing of this
Agreement. This option is conditioned upon Buyer's due diligence
investigation prior to exercise. Due diligence may be waived by
Buyer. Additionally, all the relevant Schedules of this Agreement
shall be updated, as of the date of exercise of the First Option.
The covenants and representations in this Agreement shall apply to
the acquisition of the stock under the First Option.
4.2 Calculation of Adjusted Pretax Profits. The
Adjusted Pretax Profits shall be calculated utilizing Generally
Accepted Accounting Principles ("GAAP"). CCC is and will continue
to treat the expenses connected with the hiring of employees as an
item which is amortized over a two (2) year period of time. The
Adjusted Pretax Profit shall be calculated by adjusting the Pretax
Profits by: 1) adding back any amount by which the principal's yearly
salaries exceed $616,000; 2) deducting any income from the Franchise
Program; and (3) adding any fees paid either directly or as consulting
fees for the Franchise Program.
4.3 Exercise of Second Option. Subject to the
exercise of the First Option, CCC and Shareholders are hereby
granted a further option to sell their remaining shares of CCC to
Buyer, with Buyer then required to purchase from Seller for twenty
percent (20%) of seven times the yearly Adjusted Pretax Profits,
determined before interest and taxes plus hard assets arrived at by
averaging the two years from the thirteen through thirty-six month
after the Closing of this Agreement ("Second Option"). This Second
Option shall be exercisable on of before the thirtieth day after CCC
releases the certified financial data needed to calculate the Purchase
Price. The Adjusted Pretax Profits shall be calculated utilizing the
method set forth in 4.2 above.
4.4 Repurchase Options. In the event Buyer does not
exercise its First Option: 1) CCC shall have the option ("First
Repurchase Option") (exercisable within 30 days of Buyer's non-
exercise of the First Option) to repurchase the 190 Buyer's Shares of
CCC's Stock for two million dollars ($2,000,000) payable upon
exercise of this First Repurchase Option; and 2) CCC shall have the
option ("Second Repurchase Option") (exercisable within 30 days of
Buyer's non-exercise of its First Option) to require Buyer to
purchase the Franchise Program from CCC including but not limited
to all contractual commitments, Franchise agreements, marketing
materials and good will for the sum of $2,000,000 payable upon
exercise of this Second Repurchase Option.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF
SELLER'S
Seller's hereby represent and warrant to Buyer both as of the
date hereof and the Closing Date as follows:
5.1 Organization of CCC; Good Standing; Qualifications;
Charter and By-Laws; Subsidiaries.
(a) CCC is a corporation, duly organized, and
is in good standing under the laws of the State of New York. Neither
the nature of its assets or business requires CCC to register to
conduct business in any other jurisdictions. CCC has the requisite
corporate power and authority to own, lease and operate its
properties and to conduct its business as currently conducted. A true
and complete copy of the By-Laws and Articles of Incorporation of
CCC as currently in effect has been delivered to Buyer. CCC has no
subsidiaries and is not a partner in any partnership nor a participant
in any joint venture.
(b) The authorized capital stock of CCC
consists of 200 shares of common stock, no par value, all of which
shares are issued to Shareholders and are currently outstanding. The
shares of stock of CCC issued to Shareholders are all of the issued
and outstanding shares of CCC. The Old Shares has been duly
authorized and validly issued and are fully paid and nonassessable.
The Old Shares are owned by Shareholders free and clear of any
liens, claims, pledges or other encumbrances. The Old Shares have
not been issued in violation of any preemptive rights of shareholders
and there are no outstanding warrants, calls, options or other rights
or claims with respect to the Old Shares or the issuance or transfer
of the Old Shares. There are no shareholder agreements or voting
trust agreements or other agreements with respect to the Old Shares.
(c) With respect to the New Shares after the
issuance of the New Shares, the New Shares plus our Old Shares will
be all the authorized Shares of CCC. The New Shares will not be
owned by any person and will be free and clear of any liens, claims,
pledges or other encumbrances. The New Shares, when and if issued,
will not be in violation of any preemptive rights of shareholders and
there are no outstanding warrants, calls, options or other rights or
claims with respect to the New Shares or the issuance or transfer of
the New Shares. There are no shareholder agreements or voting
trust agreements or other agreements with respect to the New
Shares.
(d) At Closing, Shareholders shall transfer good
and valid title to the Buyer's Stock to Buyer, free and clear of any
liens, claims, pledges, rights or other encumbrances. There is no
outstanding right, subscription, warrant, call, unsatisfied preemptive
right, option or other agreement of any kind to purchase or otherwise
to receive from CCC or Shareholders any of the outstanding,
authorized but unissued, unauthorized or treasury shares of the
capital stock or any other security of any kind of CCC, and there is
no outstanding security of any kind convertible into such CCC capital
stock.
(e) The minute books of CCC contain true and
complete records of all meetings of the Board of Directors,
committees of the Board, and shareholders since the time of CCC's
incorporation and accurately reflect all transactions referred to in
such minutes and consents in lieu of meeting. The stock books and
ledgers of CCC are true and complete.
(f) The sale of the Stock by Sellers to Buyer is
exempt from registration under applicable federal and state Securities
laws.
5.2 Authority.
(a) Shareholders and CCC have full power and
have taken all actions necessary to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the
other Transaction Documents (as hereinafter defined) to which they
are a party constitute the legal, valid and binding obligation of them
enforceable against them in accordance with its terms, except to the
extent that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors; rights generally, and (ii) equitable principles which
may limit the availability of certain equitable remedies (such as
specific performance) in certain instances. For purposes of this
Agreement, "Transaction Documents" shall mean this Agreement and
the Schedules hereto, each certificate delivered pursuant hereto, each
Exhibit hereto in executed form and all other documents and
agreements executed and delivered to Buyer pursuant hereto at the
Closing.
(b) Neither the execution or delivery of this
Agreement and the other Transaction Documents nor the
consummation of the transactions contemplated hereby will (i) except
for obtaining the required consents as set forth on Schedule 5.2 and
except for obtaining any consent where the failure to obtain such
consent would not materially or adversely affect the assets or the
financial condition of CCC, conflict with, constitute a breach,
violation or termination of any provision of any contracts and other
agreements to which Sellers or CCC is a party or by which any of
them is bound, (ii) conflict with or violate the Articles of
Incorporation or By-Laws, of CCC (iii) violate any statute, law,
regulation, judgment, rule, order or any other restriction of any kind
or character applicable to Sellers, except for any statute, law,
regulation, judgment, rule, order, license, permit or any other
restriction, where the violation thereof would not materially or
adversely effect the Stock, the assets or the financial condition of
CCC.
5.3 Approvals; Other Authorizations-Sellers. Except
as set forth on Schedule 5.3, no consent, waiver, authorization or
approval of, giving of notice to, or registration or filing or taking of
any other action in connection with, any governmental authority or of
any other person is necessary in connection with the execution and
delivery of this Agreement by Shareholders or CCC and the
consummation of the transactions contemplated hereby.
5.4 Approvals, Licenses and Other Authorizations CCC.
All licenses, permits and other governmental authorizations and
approvals of all federal, state and local governmental authorities
required or necessary for CCC to operate have been duly obtained
and are in full force and effect, except where the failure to do so
would not have a material adverse effect upon the financial condition
of CCC. To the Sellers' knowledge, the sale of the Stock and the
consummation of the transaction contemplated by this Agreement
and the other Transaction Documents will not result in the
termination or revocation of any license, permit or other
governmental authorizations of CCC. CCC has operated its business
in accordance with all applicable federal, state and local laws, rules
and regulations, except where noncompliance would not have a
material and adverse impact on the financial condition or operations
of CCC. There are no proceedings pending, or to the best of Sellers'
knowledge, threatened to restrict, revoke or modify such licenses,
permits or other governmental authorizations and approvals of CCC
or to the best of Sellers' knowledge, matters which could give rise to
such proceedings.
5.5 Financial Statements; Liabilities.
(a) Sellers have delivered to Buyer a copy of
the balance sheet of CCC as of June 30, 1996, and the related
statement of revenues and expenses, changes in fund balances and
statement of cash flows (the "Financial Statements") prepared by a
public accounting firm. The Financial Statements have been prepared
from the books and records of CCC on a consistent basis in
accordance with generally accepted accounting principles, as of the
date and for the period then ended. The Financial Statements are
based upon the books and records of CCC and fairly represent the
financial position of CCC and its results of operations for the period
then ended.
(b) Attached hereto as Schedule 5.5(b) is a true
and complete interim financial statements as of ,
(the "Interim Financial Statements"). Other than as disclosed in the
Financial statements, as supplemented, as of the Closing Date, by
Schedule 5.5(b), CCC has no outstanding liabilities as of the Closing
Date and CCC has no knowledge of any threatened claims, actions
or investigations which would result in the incurrence of any
additional liabilities by CCC, which would be likely to have a material
adverse effect on the Interim Financial Statements.
(c) To the Sellers knowledge, CCC has no
indebtedness, liability or obligation of any character whatsoever,
whether or not accrued, whether known or unknown, fixed or unfixed,
choate or inchoate, liquidated or unliquidated, contingent or
otherwise, including without limitation liabilities for taxes, other
governmental charges or pending lawsuits, other than (i) liabilities
reflected in the Financial statements or Interim Financial Statements
or (ii) liabilities since the date of the Interim Financial Statements as
set forth in Schedule 5.5(c), or as otherwise permitted by this
Agreement, which would be likely to have a material adverse effect
on the Interim Financial Statements.
5.6 Absence of certain Events. Since June 30, CCC has
operated its business in the ordinary and normal course and there has
not been:
(a) any damage, destruction or loss, whether
covered by insurance or not, adversely affecting the assets and
properties of CCC;
(b) except as set forth in Schedule 5.6, any
increase or decrease in the compensation payable or to become
payable to any of CCC's officers or management employees or
material change in any insurance, pension or other benefit plan,
payment or arrangement made to, for or with any of CCC's officers
or management employees, any commission or bonus paid to any of
such officers or management employees or any amendment to any
employment agreement or benefit plan except in the ordinary course
of business consistent with past practices;
(c) any sale, assignment, transfer, lease or other
disposition of any asset of CCC, other than in the ordinary course
of business consistent with past practices;
(d) any acquisition of any assets, other than in
the ordinary course of business consistent with past practices;
(e) any transaction, contract or commitment
entered into which is not in the ordinary course of business and
consistent with past practices;
(f) any material adverse change in the assets,
business or financial condition of CCC;
(g) any amendment to the Articles of
Incorporation or By-Laws of CCC other than to increase the
Corporation's authorized common shares to 1,000 shares.
(h) any issuance by CCC of any options or
rights of any commitment to pay dividends as to any of its capital
stock;
(i) any loan or advance by CCC to any
shareholder, director, officer, employee, agent, consultant or other
representative of CCC;
(j) any payment or commitment to pay
severance or termination pay to any officer, director, employee, agent,
consultant or representative of CCC;
(k) any debt or liability other than in the
ordinary course of business or as otherwise permitted pursuant to the
terms of this Agreement.
5.7 Title to and condition of Properties.
(a) Schedule 5.7 hereto contains a list of all
real property owned or leased by CCC, and a true and complete copy
of the deed therefor and each such lease with respect thereto has
been delivered to Buyer. Without limiting the generality of the
foregoing, as to leasehold estates leased by CCC, as lessee, CCC has
quiet and peaceable possession of each of the leased properties and
CCC has not pledged, assigned, mortgaged or otherwise encumbered
its leasehold interest in any such leasehold estate. All leases and
subleases to which CCC is a party are in full force and effect, and
there are no material defaults thereunder. With respect to such
leases, no default or event of default on the part of CCC, as lessee,
and to the knowledge of CCC, no default or event of default on the
part of the lessor, under the provisions of any of said leases, and no
event which with the giving of notice or passage of time, or both,
would constitute such default or event of default on the part of CCC,
or to the knowledge of CCC, on the part of any such lessor, has
occurred and is continuing unremedied or unwaived.
(b) CCC has good and valid title to all of its
assets and properties, including without limitation all leased real
estate of CCC, free and clear of all liens, security interests, and other
encumbrances, except as set forth on Schedule 5.7 hereto.
(c) The material assets of CCC including, but
not limited to, all machinery, equipment, furniture and fixtures are in
good operating condition and repair for assets of such age and type,
subject to ordinary wear and tear and the use to which such assets
have been employed.
(d) A list of all tangible personal property of
CCC is included on Schedule 5.7. Schedule 5.7 also contains a list of
all leases of personal property under which CCC is a lessee or lessor
involving tangible personal property requiring annual lease payments
or revenue in excess of $1,000 (true, accurate and complete copies of
which leases have been previously delivered to Buyer).
5.8 Intangible Properties. Schedule 5.8 hereto
contains a list of all patents and applications therefor, trademarks,
trademark registrations and applications therefor, trade names,
service marks, copyrights, copyright registrations and applications
therefor, owned or used by CCC.
5.9 Contracts and Commitments.
(a) To the extent not listed on
Schedule 5.7 hereto, Schedule 5.9 hereto lists all Material Contracts
(as hereinafter defined) to which CCC is a party or by which it is
bound. A true and complete copy of each Material Contract has
been delivered to Buyer. For purposes of this Agreement, the term
"Material Contract" means all leases, agreements, contracts and
commitments of CCC with annual payments or revenue of at least
$5,000. Each Material Contract is in full force and effect, and there
exists no default or event of default thereunder which would cause
the termination of such contract. CCC has not received any notice
that any person party to a Material Contract intends to cancel,
modify or terminate any Material Contract, and CCC has not given
any notice of cancellation, modification or termination of any
Material Contract. Each Material Contract is a valid and binding
agreement of CCC enforceable against CCC in accordance with its
terms, and no consent or approval of the other parties to any
Material Contract or any person pursuant to any Material Contract
is required for the transfer and sale of the Stock to Buyer, other than
the consents and approvals set forth on Schedule 5.9 hereto.
(b) As of the date hereof, CCC has not made
any other contract or agreement or granted any option to sell or
otherwise transfer any part of its assets or entered into any
understanding or agreement in principle respecting any such
transaction with anyone other than Buyer.
(c) As of the date hereof, neither the
Stockholders nor CCC have made any contract or agreement or
granted any option to sell or otherwise transfer the Stock or any part
thereof or entered into any understanding or agreement in principle
respecting any such transactions with anyone other than Buyer.
(d) CCC has no affiliates.
5.10 Tax Returns and Tax Audits.
(a) CCC, to the best of its knowledge and
belief, has filed with all appropriate governmental agencies all tax or
information returns and tax reports required to be filed prior to
Closing and has paid all federal, state and local income, franchise,
sales, property, excise, ad valorem, employment (including applicable
deposits of withholdings for FICA, FUTA, and other required
federal, state or municipal withholdings) or other taxes reflected on
such returns, and all interest, penalties, assessments or deficiencies
claimed to be due by any such taxing authority for all periods prior
to the current taxable period. No extensions of time to file any tax
returns of CCC have been requested that are currently effective.
(b) CCC is not a party to any pending or
threatened action or proceeding by any governmental taxing authority
for assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against CCC. CCC is not
involved with or aware of any pending audit or examination by any
governmental taxing authority for assessment or collection of taxes.
5.11 Insurance. Attached hereto as Schedule 5.11 is a list
and description of all general liability, director and officer, property
and casualty insurance policies currently in force providing coverage
on behalf of CCC including, without limitation, for the following:
malpractice or negligent or grossly negligent acts or omissions by
CCC or its employees or agents and for general liability of CCC,
general casualty and property damage and flood insurance. All of
such insurance is now in full force and effect and premiums with
respect to such policies have been paid to keep such insurance in full
force and effect through the dates set forth on Schedule 5.11. True
and complete copies of all such policies and any endorsements
thereof have been delivered to Buyer. There are no outstanding
unpaid claims for insurance with respect to the insurance policies of
CCC. Neither CCC nor Shareholders have received any notice of
cancellation or nonrenewal with respect to the insurance policies
providing coverage of CCC.
5.12 No Litigation, Adverse Events or Violations.
(a) Except as set forth on Schedule 5.12 hereto,
there is no action, suit, claim or other proceeding pending (i) against
CCC, or (ii) against Shareholders with respect to CCC. To the best
of Sellers' knowledge there is no action, suit, claim or other
proceeding (i) threatened against CCC, or (ii) threatened against
Shareholders with respect to CCC. There are no injunctions or
orders entered, pending or to the best of Sellers' knowledge,
threatened (i) against CCC, or (ii) against Shareholders with respect
to CCC.
(b) Except as set forth on Schedule 5.12, CCC,
to the best of its knowledge and belief, is in compliance with
applicable federal, state and local laws, relating or applicable to it
where the violation of or noncompliance with which would have a
material adverse effect on the financial condition or operations of
CCC.
(c) There are no actions, suits or claims or proceedings
pending or to the knowledge of Sellers, threatened that would give
rise to any right of indemnification on the part of any director or
officer of CCC or the heirs, executors or administrators of any such
director or officer, against CCC.
5.13 Labor Agreements. CCC is not and has never been
a party to and is not bound by any collective bargaining agreement.
5.14 Employee Benefit Plans.
(a) Except as set forth on Schedule 5.14 hereto,
CCC does not have any Benefit Plans, as defined in paragraph (l)
below, nor has CCC maintained or contributed to any Benefit Plans
subject to Title IV of ERISA.
(b) All persons who participate in the
operations of each Benefit Plan (including but not limited to the
members of any plan committee, all plan fiduciaries, all plan
administrators, CCC, its Board of Directors, and all relevant
employees of the CCC) act and have always acted with respect to
each Benefit Plan in all material respects in accordance with the
requirements of all applicable laws [including but not limited to the
Employee Retirement Income Security Act of 1974, as amended, and
any rules and regulations promulgated thereunder ("ERISA") and the
Internal Revenue Code of 1986, as amended, and any rules and
regulations promulgated thereunder (the "Code",) and in accordance
with the terms and conditions of each such Benefit Plan.
(c) All Benefit Plans are now, and have always
been established, maintained and operated in all material respects in
accordance with all applicable laws (including but not limited to
ERISA and the Code) and in accordance with the terms and
conditions of each such Plan.
(d) Except as set forth on Schedule 5.14, all
returns, reports, disclosure statements and elections required to be
made under all applicable laws (including but not limited to ERISA
and the Code) with respect to the Benefit Plans have been timely and
accurately filed, delivered, or made.
(e) With respect to any of the Benefit Plans, no
reportable events (within the meaning of ERISA and the Code,
respectively), prohibited transactions (within the meaning of Section
4975 of the Code) or party-in-interest transactions (within the
meaning of Section 406 of ERISA) have occurred.
(f) Except as described in Schedule 5.14 hereto
and except with respect to income taxes on benefits paid or provided,
no income, excise or other tax or penalty (federal or state) has been
waived or excused, has been paid or is owed by any person (including
but not limited to any Benefit Plan, any plan fiduciary and CCC) with
respect to the operations of, or any transactions with respect to, any
Benefit Plan. No action has been taken, nor has there been any
failure to take any action, nor is any action or failure to take action
contemplated, that would subject any person or entity to any liability
for any tax or penalty in connection with any Benefit Plan (including
but not limited to any tax or penalty for the failure to withhold
income taxes in connection with fringe benefits).
(g) Except as set forth on Schedule 5.14, all
contributions required to be made to or with respect to each Benefit
Plan have been completely and timely made.
(h) All benefits or other payments required to
be made under or by any Benefit Plan have been completely and
timely paid.
(i) There has been no merger, consolidation or
transfer of assets or liabilities (including but not limited to a split up
or split off) with respect to any Benefit Plan.
(j) There are no actions, suits or claims (other
than routine claims for benefits) pending or threatened against the
Benefit Plans or their assets, or arising out of such Benefit Plans,
including but not limited to any action, suit or claim by or on behalf
of the Benefit Plans or by any employee of CCC alleging a breach or
breaches of fiduciary duties or violations of applicable state or federal
law which could result in liability on the part of either CCC or the
Benefit Plans under ERISA or any other law, and, to CCC's best
knowledge, no facts exist which could give rise to any such actions,
suits or claims.
(k) Sellers have delivered to Buyer true and
complete copies of all current and prior material documents,
including all amendments thereto, with respect to each of the Benefit
Plans set forth in Schedule 5.14 hereto, and Sellers hereby agrees to
transfer to Buyer, upon Closing, all records in connection with each
Benefit Plan to be assumed by Buyer hereunder. All such records
shall accurately state the history of each participant and beneficiary
in connection with each Benefit Plan and accurately state the benefits
earned by and/or owed to each such person under each Benefit Plan.
(l) For purposes of this Section 5.14, the term
"Benefit Plan" includes but is not limited to (i) pension, retirement,
profit sharing, stock bonus, and nonqualified deferred compensation
plans, (ii) disability, medical, dental, worker's compensation, health
insurance, life insurance, and incentive plans, (iii) vacation benefits
and fringe benefits, (iv) any other employee benefit plan as such term
is defined in Section 3(3) of ERISA, and (v) any cafeteria plan,
accident and health plan (including self-insured medical
reimbursement plan), or dependent care assistance program (as such
terms are defined in Sections 125, 105 and 129, respectively of the
Code).
(m) CCC, to the best of its knowledge and
belief, has complied in all material respects with the continuation
coverage requirements of Section 4980B of the Code which applies
to any employees of CCC prior to the Closing.
(n) With respect to CCC 401-K's Profit-Sharing
Plan (the "401(k)Plan"): (i) such Plan which is intended to qualify as
a tax-qualified retirement plan under Code 401(a) Sellers have no
reason to believe that it cannot receive a favorable determination
letter from the Internal Revenue Service as to qualification of such
Plan; and the trust thereunder is exempt from tax pursuant to Code
5501(a), (ii) no event has occurred that will or could give rise to the
disqualification of the Plan or loss of the Tax-exempt status of the
trust created thereunder under the aforesaid Sections of the Code,
(iii) no event has occurred that will or could subject the Plan to tax
under Section 511 of the Code, and (iv) all contributions have been
made to the Plan in a complete and timely fashion pursuant to the
applicable provisions of the Code with respect to all plan years.
5.15 Trade Names. CCC does not conduct business
under any name other than those listed on Schedule 5.15. Sellers
have no knowledge that any trade name listed in Schedule 5.15 is
subject to any infringement claim.
5.16 Accounts Receivable and Notes Receivable. All
accounts receivable and notes receivable of CCC represent and
constitute bona fide indebtedness owing to CCC in the amounts
indicated in the Financial Statements and the Interim Financial
Statements of CCC, with no known setoffs (other than CCC's
customary allowances for uncollectible accounts and contractual
adjustments as indicated thereon and adjusted for estimated recovery
of bad debt). Neither CCC nor any of its respective officers,
directors, employees or agents, on behalf of or for the benefit of
Sellers, directly or indirectly, have (i) offered or paid any amount to,
or made any financial arrangements with, any of Sellers' past or
present customers or potential customers in order to obtain business
from such customers, other than standard pricing or discount
arrangements consistent with proper business practices, (ii) given, or
agreed to give, or is aware that there has been made, or that there
is an agreement to make any gift or gratuitous payment of any kind,
nature or description (whether in money, property or services) to any
past or present customer, supplier, source of financing, landlord, sub-
tenant, license or anyone else at any time, (iii) or agreed to make, or
is aware that there is any agreement to make any political
contribution or any contributions, payment or gifts of their respective
funds or property to or for the private use of any governmental
official, employee or agent where either the payment or the purpose
of such contribution, payment or gift related to the business of Sellers
and is illegal under the laws of the United States, any state thereof
or any other jurisdiction (foreign or domestic), or (iv) made, or
agreed to make, or is aware that there have been, or that there is any
agreement to make, any payments to any person with the intention
or understanding that any part of such payment was to be used
directly or indirectly for the benefit of any past or present customer,
employee, supplier or landlord of Sellers, or for any purpose other
than that reflected in the documents supporting the payments.
5.17 Licenses and Permits. Set forth on Schedule 5.17 is
a true and complete listing of, all material licenses, permits,
certificates of need and approvals from any governmental authority
required for the operation of CCC's business as conducted at present.
Each such license, permit, certificate of need and approval held by
CCC is in full force and effect, CCC is in compliance with all of its
obligations with respect thereto, and to the best knowledge of Sellers,
no event has occurred which permits or with the giving of notice or
the passage of time or both would permit, the revocation or
termination of any thereof, except as set forth on Schedule 5.17
hereto. The sale of the Stock and the consummation of the
transactions contemplated by this Agreement will not result in the
termination or revocation of any such license, permit, certificate of
need or approval by which CCC is bound or to which CCC is subject.
The Closing of this Agreement is contingent upon the continuation
of any such license, permit, certificate of need or approval.
5.18 Directors, Officers and Employees. Set forth on
Schedule 5.18 is a true and compete list of the directors and officers
of CCC and each employee of CCC, together with the current
position of each such employee and the current amount of salaries
and bonuses of each such employee. Schedule 5.18 also sets forth
whether CCC has entered into a written employment agreement with
any such person, and a true and complete copy of each such
employment agreement has been delivered to Buyer.
5.19 Discharge Fees. Sellers have not, directly or
indirectly, retained any financial advisor, broker, agent or finder or
paid or agreed to pay any financial advisor, broker, agent or finder
on account of this Agreement or the transaction contemplated
thereby.
5.20 No Adverse Action. There are no actions, suits,
claims or other proceedings pending or, to the best of Sellers'
knowledge, threatened or injunctions or orders entered, pending or,
to the best of Sellers' knowledge, threatened against Shareholders or
CCC, to restrain or prohibit the consummation of the transactions
contemplated hereby.
5.21 Full Disclosure. Sellers have disclosed to Buyer all
material facts relating to CCC and its operations and has not omitted
to disclose to Buyer any material fact relating to CCC, or its
operations necessary to make the statements made herein not
misleading.
5.22 Severance Pay. The Closing of the transaction
contemplated hereunder shall not result in any severance obligations
with respect to employees of CCC.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF
BUYER
Buyer represents and warrants to Sellers, both as of the date
hereof and as of the Closing Date, as follows:
6.1 Organization of Buyer; Good Standing.
Buyer is a corporation, duly organized, validly existing and in good
standing under the laws of the State of New York. Buyer has the
requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as currently conducted and as
contemplated subsequent to the execution of this Agreement.
6.2 Authority.
(a) Buyer has full corporate power and has
taken all action necessary to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the
other Transaction Documents to which Buyer is a party constitute
legal, valid and binding obligations of Buyer enforceable against
Buyer in accordance with its terms, except to the extent that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors;
rights generally, and (ii) equitable principles which may limit the
availability of certain equitable remedies (such as specific
performance) in certain instances.
(b) Neither the execution or delivery of this Agreement
and the other Transaction Documents nor the consummation of the
transactions contemplated hereby will (i) except for obtaining any
consent, where the failure to obtain such consent would not
materially or adversely affect the assets or the financial condition of
Buyer, conflict with, constitute a breach, violation or termination of
any provision of any contracts and other agreements to which Buyer
is a party or by which it is bound, (ii) conflict with or violate the
Articles of Incorporation or By-Laws of Buyer, or (iii) violate any
law, regulation, judgment, rule, order or any other restriction of any
kind or character applicable to Buyer or any of its properties or
assets, the violation of which could have a material adverse effect on
the financial condition or business operations of Buyer.
6.3 No Adverse Action. There are no actions, suits,
claims or other proceedings pending or, to the best of Buyer's
knowledge, threatened or injunctions or orders entered, pending or,
to the best of Buyer's knowledge, threatened against Buyer, to
restrain or prohibit the consummation of the transactions
contemplated hereby.
6.4 Access; Restriction on Stock. Buyer represents that
it has had and Sellers represent that it has given access to the books
and records generally of CCC, and all of the material agreements,
licenses, permits, contracts, properties and assets of CCC. Buyer has
knowledge and experience in financial and business matters and
investments of this type and is capable of evaluating the merits and
risks of investment in the Stock. Buyer has the financial ability to
bear the risk of investment in the stock and is acquiring the Stock
solely for investment with no present intention to resell. Buyer is
aware that the Stock is not registered under the Securities Act of
1933, as amended (the "Securities Act"), or under any state securities
laws and must be held indefinitely unless it is registered under the
Securities Act or is exempt from registration under the Securities Act.
Buyer will not further transfer the Stock without compliance with the
registration and other provisions of all applicable securities laws.
ARTICLE 7. COVENANTS AND AGREEMENTS OF SELLERS
7.1 Actions Pending Closing. From the date
hereof to the Closing, except as otherwise contemplated by this
Agreement, Sellers covenants and agrees as follows:
(a) CCC will be operated in the usual
and ordinary manner consistent with past practices and will preserve
its present business organization intact, and preserve its present
relationships with persons having business dealings with it and to take
such actions as are necessary and to cause the transition of such
business operations and employee and other relationships to Buyer
as of the Closing Date, as contemplated by this Agreement.
(b) CCC will not, without Buyer's
consent, increase or decrease the compensation payable or to become
payable by CCC to any officer or employee of CCC, or make any
change in any insurance, pension or other employee benefit plan, pay
any commission or bonus to any of such officers or employees, other
than in the normal course of business consistent with existing
personnel policies, nor will CCC amend any employment agreement
between CCC and any employee of CCC.
(c) Except as otherwise provided
herein, CCC will not (i) mortgage, pledge, create or permit to exist
any lien or security interest against any of its assets, except for the
liens and security interests set forth on Schedule 7.1 hereto and
except for liens securing property acquired by CCC in the ordinary
course of business and as otherwise permitted pursuant to this
Agreement (the "Permitted Exceptions"); (ii) fail to maintain its
assets in the usual and ordinary course of business consistent with
past practices; (iii) sell, assign, transfer, lease or otherwise dispose of
any of its assets or acquire any assets or any interest therein, except
in each case in the usual and ordinary course of business; (iv)
terminate, modify or change any of the Material Contracts; and (v)
enter into any transaction, contract or commitment obligating CCC
in excess of $5,000 which is not in the usual and ordinary course of
CCC's business.
(d) All assets of CCC will be used,
operated, maintained and repaired in the usual and ordinary course
of CCC's business consistent with past practices.
(e) Neither Shareholders nor CCC will
permit any insurance policy naming it as a beneficiary or a loss
payable payee covering any of its assets or its operations to be
canceled, terminated or modified or any of the coverage thereunder
to lapse unless simultaneously with such termination or cancellation,
replacement policies, reasonably satisfactory to Buyer, providing
substantially the same coverage are in full force and effect.
(f) CCC will timely file (including all
applicable extensions) all tax returns and reports required to be filed
prior to Closing with any federal, state or local governments or
governmental agencies.
(g) CCC shall not make or institute any
methods of collection, credit, billing, management, accounting or
operation which are not in the usual and customary course of its
business, consistent with CCC's past practices.
(h) CCC shall not transfer any of its
assets, other than in the ordinary course of business. Sellers shall not
transfer any of the Stock. Sellers shall not pledge, create or permit to
exist any lien, claim or other encumbrance against any of the Stock
nor issue any options, warrants or other rights with respect thereto.
(i) With respect to any Material
Contracts of CCC which, in accordance with their terms, will expire
prior to the Closing Date, CCC shall use good faith efforts to extend
such Material Contracts; provided, however, that in the event any
such extension would require payment of rentals or other
compensation by CCC in excess of that currently paid or would
require CCC to agree to terms which are materially and adversely
different from the present terms of such Material Contract, then
CCC shall not extend such Material Contract without obtaining
Buyer's prior written consent to such terms and extension.
(j) Except with respect to the increase
in the number of authorized shares to 1,000 as previously referred
herein, from the date hereof, through and including the Closing Date,
CCC shall not amend its Articles of Incorporation or By-Laws
without the Buyer's prior written consent.
(k) Shareholders and CCC will operate
CCC and its business through the Closing Date so that the
representations and warranties of Sellers made to Buyer in this
Agreement shall be true and correct at Closing Date as if made on
the Closing Date (except for representations and warranties made in
Sections 5.1, 5.5, 5.16 and 5.17 with respect to Financial Statements
and other financial information of CCC which expressly relate to an
earlier date or time, which representations shall be true and correct
on and as of the specific date or times referred to therein); provided
however that Shareholders and CCC shall promptly upon discovery
disclose to Buyer any information contained in the Schedules to this
Agreement which, because of an event occurring after the date
hereof, is incomplete or is no longer correct as of all times after the
date hereof until the Closing Date; provided, however, that none of
such disclosures shall be deemed to modify, amend or supplement the
representations and warranties of Sellers in the Schedules hereto,
unless Buyer shall have consented thereto in writing.
7.2 Consents. Sellers shall use good faith efforts
and cooperate with Buyer in obtaining all necessary consents required
for the transfer of the Buyers' Stock to Buyer.
ARTICLE 8. COVENANTS AND AGREEMENTS OF BUYER
Buyer hereby covenants and agrees with Sellers as follows:
8.1 Consents. From and after the date hereof
Buyer shall use good faith efforts and cooperate with Sellers in
obtaining all necessary consents required for the transfer of the Stock
to Buyer.
8.2 Post-Closing Access to Information. Sellers
and Buyer acknowledge that subsequent to Closing each party may
need access to information or documents in the control or possession
of the other party for the purposes of concluding the transactions
herein contemplated, audits, compliance with governmental
requirements and regulations, and the prosecution or defense of third
party claims. Accordingly, Sellers and Buyer agree that after Closing
each will make reasonably available to the other's agents,
independent auditors and/or governmental agencies upon written
request and at the expense of the requesting party such documents
and information as may be available relating to the Stock of CCC for
periods prior and subsequent to Closing to the extent necessary to
facilitate concluding the transactions herein contemplated, audits,
compliance with governmental requirements and regulations and the
prosecution or defense of claims.
ARTICLE 9. CONDITIONS TO BUYER'S OBLIGATION TO
CLOSE
Each and every obligation of Buyer to be performed at or
before the Closing hereunder is subject to the satisfaction on or prior
to the Closing Date of the conditions set forth below, any one or
more of which may be waived by Buyer.
9.1 Compliance with Agreement. Shareholders
and CCC shall have performed all of their obligations and
agreements, and complied, in all material respects, with all covenants,
warranties and conditions contained in this Agreement which are
required to be performed or complied with by them on or prior to
the Closing Date, and Sellers shall have delivered a certificate to such
effect to Buyer at Closing.
9.2 Representations and Warranties. The
representations and warranties of Sellers contained in this Agreement
and the other Transaction Documents shall be true, complete and
correct, in all material respects, on and as of the date made and as
of the Closing Date with the same force and effect as though such
representations and warranties had been made or given on the
Closing Date, and Sellers shall have delivered a certificate to such
effect to Buyer at Closing.
9.3 Approvals and Consents. The material
consents, approvals and waivers as set forth on Schedule 9.3 hereto
necessary in order to consummate the transactions contemplated
hereby shall have been obtained.
9.4 No Litigation. No action or proceeding
before a court or any other governmental agency or body shall have
been instituted or threatened to restrain or prohibit the transactions
herein contemplated or which would prohibit Buyer's purchase of the
Stock.
9.5 No Material Adverse Change. No event or
condition resulting in a materially adverse change in the financial
condition of CCC or its assets shall have occurred and be continuing.
9.6 Opinion of Counsel. Buyer shall have
received an opinion of Sellers' legal counsel, dated the Closing Date,
substantially in the form of Exhibit I hereto.
9.7 Employment and Noncompetition
Agreements. Buyer shall have received the Employment Agreements
executed by Raymond Sheerin and Michael Altman substantially in
the form of Exhibit II hereto. Each such Employment shall be in
full force and effect and constitute a legal, valid and binding
obligation of the parties executing same and enforceable against them
in accordance with its terms.
9.8 Deliveries. Buyer shall have received from Sellers
all of the other documents required to be delivered by them pursuant
to Section l2.l(a) of this Agreement.
9.9 Primary Lender Approval. Buyer shall
receive from Buyer's Primary Lender approval of this Agreement
and all transactions contemplated herein.
ARTICLE 10. CONDITIONS TO SELLERS' OBLIGATION TO
CLOSE
Each and every obligation of Sellers to be performed at or
before the Closing hereunder is subject to the satisfaction on or prior
to the Closing Date of the conditions set forth below, any one or
more of which may be waived by Sellers:
10.1 Compliance with Agreement. Buyer shall
have performed all of its obligations and agreements and complied,
in all material respects, with all covenants, warranties and conditions
contained in this Agreement which are required to be performed or
complied with by Buyer on or prior to the Closing Date, and the
President of the Buyer shall have delivered a certificate to such effect
to Sellers on the Closing Date.
10.2 Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement
and the other Transaction Documents shall be true, complete and
correct, in all material respects, on and as of the date made and as
of the Closing Date with the same force and effect as though such
representations and warranties had been given on the Closing Date,
and the President of Buyer shall have delivered a certificate to such
effect to Sellers at Closing.
10.3 Approvals and Consents. The material
consents, approvals and waivers as set forth on Schedule 10.3 hereto
necessary in order to consummate the transactions contemplated
hereby shall have been obtained.
10.4 No Litigation. No action or proceeding
before a court or any other governmental agency or body shall have
been instituted or threatened to restrain or prohibit the transactions
herein contemplated or which would prohibit Buyer's purchase of the
Stock.
10.5 Deliveries. Sellers shall receive from Buyer all of the
other documents required to be delivered by Buyer pursuant to
Section l2.l(b) of this Agreement.
ARTICLE 11. TERMINATION
11.1 Termination Prior to the Closing Date
Notwithstanding anything herein to the contrary, this
Agreement may be terminated at any time:
(i) On or
prior to the Closing Date by
mutual written consent of
Buyer and Sellers.
(ii) By Buyer, if the conditions specified in
Article 9 have not been satisfied or waived by Buyer as of
the Closing Date;
(iii) By Sellers, if the conditions specified in
Article 10 have not been satisfied or waived by Sellers as
of the Closing Date;
(iv) By Buyer or Sellers, on November 4, 1996, if
the Closing has not occurred by such date;
(v) At the election of the Sellers prior to
the Closing Date, if the Buyer has breached any
representation, warranty, covenant or agreement contained
in this Agreement;
(vi) At the election of the Buyer prior to
the Closing Date, if the Sellers have breached any
representation, warranty, covenant or agreement contained
in this Agreement;
(vii) At the election of the Sellers or the Buyer,
if any legal proceeding is commenced or threatened by any
court or governmental agency directed against the
consummation of the Closing or any other transaction
contemplated under this Agreement; or
In the event of the termination of this Agreement
pursuant to this Section 11.1 this Agreement shall
automatically terminate and be of no further force and
effect, and there shall be no liability hereunder (except if
termination occurs pursuant to clauses (v) or (vi) above).
ARTICLE 12. DELIVERIES AT AND AFTER CLOSING
12.1 Deliveries at Closing.
(a) At Closing, Sellers shall deliver to
Buyer:
(i) certificates for the Buyers' Stock.
(ii) certificates, dated the Closing Date,
required to be delivered by CCC and Shareholders to
Buyer pursuant to Sections 9.1 and 9.2 hereof;
(iii) a Certificate of an authorized officer
of CCC certifying: (a) as to CCC's Articles of
Incorporation (as certified by the Secretary of the State of
Arkansas) and By-Laws, and attaching a true and complete
copy of each thereto; and (b) that all necessary corporate
action by the Board of Directors of CCC has been taken to
authorize the consummation of the transactions provided
for in this Agreement. Such certificate shall attach or set
forth verbatim the resolutions adopted by the Board of
Directors of CCC;
(iv) with respect to CCC, good standing
certificate and franchise tax clearance letter from the
State of New York;
(v) the opinion of Sellers' counsel
required pursuant to Section 9.6 hereof;
(vi) the Employment Agreements
required pursuant to Section 9.7 hereof;
(vii) An incumbency certificate
with respect to the Directors and Officers of CCC, as
certified by an authorized officer of CCC.
(viii) A Shareholder Agreement
executed by all Shareholders in the form annexed hereto
as Exhibit III. (IX) A Consulting Agreement in the form
annexed hereto as Exhibit IV.
(b) At Closing, Buyer shall
deliver to Sellers:
(i) certificates, dated the Closing Date
required to be delivered by Buyer to Sellers pursuant to
Sections 10.1 and 10.2 thereof;
(ii) a certificate of an authorized
officer of Buyer certifying that all necessary corporate
action by the Board of Directors of Buyer has been taken
to authorize the consummation of the transactions
provided for in this Agreement. Such certificate shall
attach or set forth verbatim the resolutions adopted by
the Board of Directors of Buyer;
ARTICLE 13. INDEMNIFICATION
13.1 Sellers' Indemnity of Buyer.
(a) Sellers shall indemnify Buyer and
hold it harmless from and against:
(i) any and all damages, expenses
and losses suffered, paid or incurred, or to be
suffered, paid or incurred in the future, by Buyer
arising out of (a) any inaccuracies in or any breach
of any representation, covenant, agreement or warranty
on the part of Sellers herein contained or in any other
Transaction Document, (b) any breach of representation
by a Director or Officer of CCC of the representations
made in the Resignation and Certification of such
Director or Officer; and (c) any claim against CCC of
a Director or Officer of CCC who fails to deliver at
Closing to Buyer a Resignation and Certification;
and
(ii) any and all reasonable costs
and expenses of Buyer related to clause (i) above including
reasonable attorney's fees in connection with the
prosecution, defense or appeal of any suit or action in
connection therewith.
(All of such items described in paragraphs (i) and
(ii) above are collectively referred to hereinafter as the
"Buyer's Loss.")
(b) Whenever it shall come to the
attention of Buyer that it has suffered or incurred, or may
suffer or incur, any Buyer's Loss, Buyer shall give prompt
written notice to Sellers of such anticipated or actual loss,
damage, cost or expense, and Buyer will permit Sellers, at
Sellers' option and expense, to conduct the defense against
any such claims or actions, and will cooperate with Sellers
in such defense in such manner as Sellers may reasonably
request. If Sellers elect not to, or fail to, defend against
such claims or actions, Buyer shall have the right to
defend against such claims or actions at Sellers' expense.
If Buyer shall defend against such claim or action at
Sellers' expense, Buyer agrees that it will not settle or
permit the settlement of any matter giving rise to any
Buyer's Loss without the prior written consent of Sellers
(which consent will not be unreasonably withheld).
(c) Buyer's right to assert a claim against Sellers
for indemnification pursuant to this Section 13.1 shall
survive the Closing.
(d) It is expressly agreed that Buyer shall not be
entitled to any indemnification from Sellers whether
pursuant to this Section 13.1 or otherwise arising out of
the sale of the Stock to Buyer or the transaction
contemplated by this Agreement, in excess of an aggregate
maximum amount equal to the Purchase Price paid to
Sellers.
(e) It is further agreed that Sellers' liability
shall be joint and several.
13.2 Buyer's Indemnity of Sellers.
(a) Buyer shall indemnify Sellers and hold them
harmless from and against:
(i) any and all damages,
expenses and losses suffered, paid or incurred, or to be
suffered, paid or incurred in the future, by Sellers arising
out of any inaccuracies in or breach of any representation,
covenant, agreement or warranty on the part of Buyer
herein contained or in any other Transaction Document;
(ii) any and all reasonable costs and
expenses of Sellers related to clause (i) above including
reasonable attorney's fees in connection with the
prosecution, defense or appeal of any suit or action in
connection therewith.
(All of such items described in paragraphs (i) and
(ii) above are collectively referred to hereinafter as the
"Sellers' Loss.")
(b) Whenever it shall come to the
attention of Sellers that it has suffered or incurred, or
may suffer or incur, any Sellers' Loss, Sellers shall give
prompt written notice to Buyer of such anticipated or
actual loss, damage, cost or expense, and Sellers will
permit Buyer, at Buyer's option and expense, to conduct
the defense against any such claims or actions, and will
cooperate with Buyer in such defense in such manner as
Buyer may reasonably request. If Buyer elects not to, or
fails to, defend against such claims or actions, Sellers shall
have the right to defend against such claims or actions at
Buyer's expense. If Sellers shall defend against such claim
or actions at Buyer's expense Sellers agree that it will not
settle or permit the
settlement of any matter giving rise to any Sellers' Loss
without the prior written consent of Buyer (which consent
will not be unreasonably withheld).
(c) Sellers' right to assert a claim against Buyer
for indemnification pursuant to this Section 13.2 shall
survive the Closing.
ARTICLE 14. MISCELLANEOUS
14.1 Survival. Notwithstanding any right of the
Buyer to fully investigate the business and operations of
CCC or the Stock, the Buyer shall be entitled to rely fully
on the representations, warranties, covenants and
agreements of Shareholders and CCC contained in this
Agreement and the other Transaction Documents. The
representations, warranties, covenants and agreements
made by the parties herein shall survive the Closing. This
Section 14.1 is not intended to create any rights in any
third party beneficiaries.
14.2 Notices. Any notice, request, consent,
exercise or non-exercise of an option, or communication
under this Agreement shall be effective only if it is in
writing and personally delivered or sent by a nationally
recognized overnight delivery service, with delivery
confirmed, or telexed or telecopied, with receipt
confirmed (provided that if telexed or telecopied, with a
copy also send by regular United States mail), or deposited
in the United States mail, with postage prepaid thereon,
certified or registered mail, return receipt requested,
addressed as follows:
If to Sellers: Chelsea Computer Consultants, Inc.
156 Fifth Avenue., Suite 1218
New York, NY 10010
Raymond T. Sheerin
Michael Altman
Stephen Fleischner
If to Buyer: Staff Builders, Inc.
1983 Marcus Avenue
Lake Success, NY 11042
Attention: Stephen Savitsky,
Chief Executive officer
Fax No.: (516) 358-9128
With Copy To Staff Builders,Inc.
1983 Marcus Avenue
Lake Success, NY 11042
Attn: Renee J. Silver
Vice President & General Counsel
Fax No.: (516) 327-8636
or such other persons and/or addresses as shall be
furnished in writing by any party to the other party, and
shall be deemed to have been given as of the date when so
personally delivered, or the next day when delivered
during business hours to such overnight delivery service
properly addressed or when receipt of a telex or telecopy
is confirmed, or upon the earlier to occur of receipt or
five (5) business days after mailed as provided above, as
the case may be, unless the sending party has actual
knowledge that such notice was not received by the
intended recipient.
14.3 Parties in Interest and Assignment.
(a) This Agreement is binding upon and is for
the benefit of the parties hereto and their respective
successors and assigns.
(b) Neither this Agreement nor any of the
rights (except the right to receipt of any payment) or
duties of any party hereto may be transferred or assigned
to any person except by a written agreement executed by
all of the parties hereto; provided, however, that Buyer
may assign its rights or delegate its duties hereunder to a
wholly owned subsidiary of Buyer.
(c) It is expressly agreed that this Agreement is
not intended to create any rights in respect of any third
party beneficiaries.
14.4 Modification. This Agreement may not be
amended or modified except by writing signed by an the
parties or authorized officer of all of the parties hereto.
No waiver of the performance or breach of, or default
under, any condition or obligation hereof shall be deemed
to be a waiver of any other performance, or breach of, or
default under the same or any other condition or
obligation of this Agreement.
14.5 Entire Agreement. This Agreement,
together with those related agreements contemplated by
this Agreement, embodies the entire agreement between
the parties hereto and cancels and supersedes all previous
agreements and understandings relating to the subject
matter of this Agreement, written or oral, between the
parties hereto. There are no agreements, representations,
or warranties between the parties other than those set
forth or provided herein.
14.6 Execution in Multiple Counterparts. This
Agreement may be executed in multiple counterparts, each
of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
14.7 Headings. The headings contained in this
Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
14.8 Governing Law. This Agreement shall be
governed by and construed, interpreted and enforced in
accordance with the laws of the State of New York
applicable to agreements made and to be performed
entirely within such state, including all matters of
enforcement, validity and performance. All litigation
brought or held on the basis of this Agreement shall be
brought and held in the appropriate state or federal court
for Nassau County, New York.
14.9 Schedules. All of the Schedules and Exhibits
attached hereto are incorporated herein and made a part
of this Agreement by this reference thereto.
14.10 Severability. In case one or more of the
provisions contained in this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in
any respect, the invalidity or illegality or unenforceability
shall not affect any other provision and this Agreement
shall be construed as if the invalid, illegal or
unenforceable provision had never been contained in it.
14.11 Certain Post Closing Matters. Following the
Closing, each party agrees to cooperate with the other and
shall take such actions, deliver such documents to Buyer
and execute such documents as may reasonably be
requested in order to carry out the purpose of this
Agreement and the other Transaction
Documents.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
STAFF BUILDERS, INC.
BY: /s/ Stephen Savitsky
CHELSEA COMPUTER
CONSULTANTS, INC.
By: /s/ Michael Altman
/s/ Raymond T. Sheerin
RAYMOND T. SHEERIN
/s/ Michael Altman
MICHAEL ALTMAN
/s/ Stephen Fleischner
STEPHEN FLEISCHNER
LIST OF SCHEDULES AND EXHIBITS TO STOCK PURCHASE AGREEMENT
BY AND AMONG STAFF BUILDERS, INC. AND RAYMOND T. SHEERIN, MICHAEL
ALTMAN, STEPHEN FLEISCHNER AND
CHELSEA COMPUTER CONSULTANTS, INC.
SCHEDULE TITLE
5.2 SCHEDULE OF REQUIRED CONSENTS
5.3 SCHEDULE OF REQUIRED APPROVALS
OR AUTHORIZATIONS
5.5(b) INTERIM FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
5.5(c) SCHEDULE OF LIABILITIES OTHER THAN
THOSE REFLECTED IN THE INTERIM
FINANCIAL STATEMENTS
5.6 SCHEDULE OF CHANGE IN COMPENSATION
5.7 SCHEDULE OF REAL PROPERTY OWNED
AND REAL AND PERSONAL PROPERTY
LEASED
5.8 SCHEDULE OF INTANGIBLE PROPERTY
5.9 SCHEDULE OF MATERIAL CONTRACTS
5.11 SCHEDULE OF INSURANCE POLICIES
5.12 SCHEDULE OF LITIGATION
5.14 SCHEDULE OF BENEFIT PLANS
5.15 SCHEDULE OF OTHER NAMES USED BY
CHELSEA COMPUTER CONSULTANTS, INC.
5.17 SCHEDULE OF LICENSES OR PERMITS
5.18 SCHEDULE OF DIRECTORS, OFFICERS
AND EMPLOYEES
(PAGE 2)
SCHEDULE TITLE
7.1 SCHEDULE OF OTHER LIENS AND
SECURITIES INTERESTS
9.3 SCHEDULE OF SHAREHOLDERS CONSENTS
10.3 SCHEDULE OF OTHER REQUIRED
APPROVALS AND CONSENTS
EXHIBIT 1 OPINION LETTER OF SELLERS' COUNSEL
EXHIBIT 2 EMPLOYMENT AGREEMENT BY AND
BETWEEN CHELSEA COMPUTER
CONSULTANTS, INC. AND RAYMOND T.
SHEERIN
AND CHELSEA COMPUTER
CONSULTANTS, INC. AND MICHAEL ALTMAN
EXHIBIT 3 SHAREHOLDERS AGREEMENT
EXHIBIT 4 CONSULTING AGREEMENT
EXHIBIT 4.3A AMENDMENT NO. 1 TO EMPLOYMENT
AGREEMENT BY AND BETWEEN CHELSEA
COMPUTER CONSULTANTS, INC. AND
MICHAEL ALTMAN
EXHIBIT 4.3B AMENDMENT NO. 1 TO EMPLOYMENT
AGREEMENT BY AND BETWEEN CHELSEA
COMPUTER CONSULTANTS, INC. AND
RAYMOND T. SHEERIN
EXHIBIT 4.4 AMENDMENT NO. 1 TO SHAREHOLDERS
AGREEMENT BY AND AMONG CHELSEA
COMPUTER CONSULTANTS, INC.,
RAYMOND T. SHEERIN, MICHAEL
ALTMAN AND STAFF BUILDERS, INC.
*The Company agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request.
EXHIBIT
10.6 <PAGE>
AMENDMENT NO. 1 TO STOCK PURCHASE
AGREEMENT
AMENDMENT NO. 1, dated as of October 30, 1997
(this "Amendment"), to the Stock Purchase Agreement, dated as
of September 24, 1996 (the "Purchase Agreement") , among Staff
Builders, Inc., a New York corporation ("Buyer") , Raymond T.
Sheerin and Michael Altman (each a "Seller" and collectively
"Sellers"), Stephen Fleischner and Chelsea Computer
Consultants, Inc., a New York corporation ("CCC").
WHEREAS, the parties hereto have executed and
delivered the Purchase Agreement and have agreed to amend
the Purchase Agreement as set forth in this Amendment; and
WHEREAS, CCC has repurchased all shares of its
common stock, no par value ("Common Stock") , owned by
Stephen Fleischner pursuant to a Stock Redemption Agreement
dated as of October 14, 1997.
NOW, THEREFORE, for good and valuable
consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions. Capitalized terms used but
not defined in this Amendment shall have the meanings given
to such terms in the Purchase Agreement.
Section 2. Purchase and Sale of Additional
Shares. Article 4 of the Purchase Agreement is amended by
replacing such Article in its entirety with the following:
"ARTICLE 4. PURCHASE AND SALE OF
ADDITIONAL SHARES
4.1 Exercise of Option. At the option of Buyer, each
Seller shall sell to Buyer, and Buyer shall purchase from each
Seller, 280.04 shares of Common Stock at the aggregate cash
purchase price of $6,200,000 (the "Option", and all the shares
purchased by Buyer pursuant to the Option are hereinafter
referred to as the "Option Shares") . The Option shall be
exercisable on or before October 30, 1997 (the "Option
Termination Date").
4.2 Contribution of Millenium. Upon exercise of the
Option by Buyer, the Sellers shall contribute for no additional
consideration all the outstanding shares of capital stock of
Millenium Computer Systems, Inc., a New York corporation
("Millenium") , to CCC (the "Millenium Contribution").
4.3 Employment Agreements. Upon exercise of the
Option by Buyer, Sellers, together with CCC, shall execute and
deliver Amendments to their respective Employment
Agreements in the forms attached hereto as Exhibit 4.3(a) and
4.3(b) (the "Employment Agreement Amendments").
4.4 Shareholders Agreement. Upon exercise of the
Option by Buyer, Sellers, Buyer and CCC shall execute and
deliver an Amendment to the Shareholders Agreement, dated
24, 1996, by and among Sellers, Buyer and CCC, in the form
attached hereto as Exhibit 4.4 (the "Shareholder Agreement
Amendment").
4.5 Option Closing. The closing of the Option
exercise (the "Option Closing") will take place at the offices of
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New
York 10022, on October 30, 1997 (the "Option Closing Date").
4.6 Deliveries at the Option closing. At the Option
Closing:
(a) Sellers shall deliver to Buyer:
(i) certificates representing the Option
Shares duly endorsed for transfer to
Buyer;
(ii) evidence of the Millenium Contribution;
(iii) copies of the executed Employment
Agreement Amendments;
(iv) an executed counterpart of the
Shareholder Agreement Amendment; and
(v) updated Schedules to this Agreement, to
the extent such Schedules require
modification in order to remain true and-correct on and as of
the date of the Option Closing Date.
(b) Buyer shall pay to each Seller $6,200,000 in
immediately available federal funds by wire transfer to the
bank accounts designated by each Seller prior to the option
Closing and shall deliver an executed counterpart of the
Shareholder Agreement Amendment.
4.7 Exchange of Buyer Shares.
(a) In the event Buyer does not exercise the Option,
Buyer agrees to transfer and convey ownership to
CCC of 190 shares of Common Stock; in exchange
and consideration therefor, CCC agrees to
transfer and convey ownership to CCC of the
Franchise Program, including but not limited to
all contractual commitments, franchise
agreements, marketing materials and good will
associated therewith (collectively, the "Franchise
Assets") (the "Exchange Transaction").
(b) The Exchange Transaction will take place at the
offices of Willkie Farr & Gallagher, 153 East
53rd Street New York, New York 10022, on the
third (3rd) business day following the Option
Termination Date (the "Exchange Date").
On the Exchange Date, (i) Buyer agrees to deliver
to CCC certificates
representing 190 shares of Common Stock owned
by it duly endorsed for
transfer to CCC and (ii) CCC agrees to transfer,
convey and deliver the
Franchise Assets to Buyer by assignments and
other instruments of transfer and conveyance
satisfactory in form and substance to counsel for Buyer."
Section 3. Representations and Warranties of Sellers.
Each Seller represents and warrants to Buyer as follows:
(a) The authorized capital stock of CCC
consists of 1,000 shares of Common Stock of which 919 shares
are issued and outstanding. All Option Shares have been
validly authorized and issued, and are fully paid and
nonassessable. Except as contemplated by this Agreement, there
is no security, option, warrant, right, call, subscription
agreement, commitment or understanding of any nature
whatsoever to which either Seller is a party, that directly or
indirectly (i) calls for the issuance, sale, pledge or other
disposition of any shares of capital stock of CCC or any
securities convertible into, or other rights to acquire, any shares
of capital stock of CCC, (ii) obligate either Seller to grant,
offer or enter into any of the foregoing or (iii) relates to the
voting or control of such capital stock, securities or rights.
Each Seller has good and marketable title to the Option Shares
owned by it, free and clear of any liens, security interest and
other encumbrances.
(b) The authorized capital stock of Millenium
consists of 200 shares of common stock, no par value, all of
which shares (the "Millenium Shares") are issued and
outstanding and owned by Sellers. All Millenium Shares have
been validly authorized and issued, and are fully paid and
nonassessable. Except as contemplated by this Agreement, there
is no security, option, warrant, right, call, subscription
agreement, commitment or understanding of any nature
whatsoever to which either Seller is a party, that directly or
indirectly (i) calls for the issuance, sale, pledge or other
disposition of any shares of capital stock of Millenium or any
securities convertible into, or other rights to acquire, any shares
of capital stock of Millenium, (ii) obligate either Seller to
grant, offer or enter into any of the foregoing or (iii) relates to
the voting or control of such capital stock, securities or rights.
Each Seller has good and marketable title to the Millenium
Shares owned by it, free and clear of any liens, security interest
and other encumbrances.
(c) Sellers have delivered to Buyer a copy of
the draft balance sheets of CCC and Millenium as of September
30, 1997, and the related statements of revenues and expenses,
changes in fund balances and statements of cash flows for the
twelve-month period ended September 30, 1997 (the "Draft
Financial Statements"), which are subject to an audit by a
public accounting firm. The Draft Financial Statements have
been prepared from the "Cooks and records of CCC and
Millenium on a consistent basis in accordance with generally
accepted accounting principles, as of the date and for the
period then ended. The Draft Financial Statements fairly
present the financial positions of CCC and Millenium and their
respective results of operations for the period then ended. To
Sellers knowledge, neither CCC nor Millenium has any
indebtedness, liability or obligation of any character
whatsoever, whether or not accrued, whether known or
unknown, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, contingent or otherwise, including without
limitation liabilities for taxes, other governmental charges or
pending lawsuits, other than liabilities reflected in the Draft
Financial Statements.
(d) The representations and warranties of
Sellers contained in Sections 5.1(a), 5.1(e), 5.1(f), 5.2, 5.3, 5.4 and
5.6 through 5.22 of the Purchase Agreement are true and
correct on the date hereof.
Section 4. Further Assurances. Each party to this
Amendment agrees to execute, acknowledge, deliver, file and
record such further certificates, amendments, instruments and
documents, and to do all such other acts and things, as may be
required by law or as may be necessary or advisable to carry
out the intent and purpose of this Amendment.
Section 5. Effective Date; Purchase Agreement.
This Amendment shall be effective as of the date hereof and,
except as set forth herein, the Purchase Agreement shall remain
in full force and effect, shall apply to this Amendment, and
shall be otherwise unaffected hereby.
Section 6. Headings. The section headings herein
are for convenience of reference only, do not constitute part of
this Amendment and will not be deemed to limit or otherwise
affect any of the provisions hereof.
Section 7. Counterparts. This Amendment may
be executed in two or more counterparts, each of which shall
constitute an original and all of which, when taken together,
shall constitute one and the same agreement.
Section 8. Governing Law. THIS AMENDMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAW PROVISIONS THEREOF.
Section 9. Severability. If any one or more of the
provisions of this Amendment is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the
remaining provisions of this Amendment will not be affected
thereby, and Sellers, Buyer and CCC will use their reasonable
efforts to substitute one or more valid, legal and enforceable
provisions which insofar as practicable implement the purposes
and intent hereof. To the extent permitted by applicable law,
each party waives any provision of law which renders any
provision of this Amendment invalid, illegal or unenforceable
in any respect.
Section 10. Successors and Assigns. This
Amendment shall be binding upon the parties hereto and their
respective successors, executors, administrators, legal
representatives, heirs and legal assigns and shall inure to the
benefit of the parties hereto and, except as otherwise provided
herein, their respective successors, executors, administrators,
legal representatives, heirs and legal assigns. No person other
than the parties hereto and their respective successors,
executors, administrators, legal representatives, heirs and legal
assigns shall have any rights or claims under this Amendment.
IN WITNESS WHEREOF, the parties hereto have
executed this Amendment as of the day and year first above
written.
STAFF BUILDERS, INC.
By: /s/Stephen Savitsky
Name: Stephen Savitsky
Title: President/CEO/
Chairman of the Board
By: /s/ Michael Altman
Michael Altman
By: /s/ Raymond T. Sheerin
Raymond T. Sheerin
CHELSEA COMPUTER CONSULTANTS, INC.
By: /s/ Michael Altman
Name: Michael Altman
Title: President/Chairman of the Board
<PAGE>
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
BY AND AMONG STAFF BUILDERS, INC. AND RAYMOND
T. SHEERIN,
MICHAEL ALTMAN, STEPHEN FLEISHCHNER AND
CHELSEA COMPUTER
CONSULTANTS, INC.
SCHEDULE TITLE
EXHIBIT 4.3A AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT BY
AND BETWEEN CHELSEA
COMPUTER CONSULTANTS,
INC. AND MICHAEL ALTMAN
EXHIBIT 4.3B AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT BY
AND BETWEEN CHELSEA
COMPUTER CONSULTANTS,
INC. AND RAYMOND T.
SHEERIN
EXHIBIT 4.4 AMENDMENT NO. 1 TO
SHAREHOLDERS AGREEMENT
BY
AND AMONG CHELSEA
COMPUTER CONSULTANTS,
INC.
RAYMOND T. SHEERIN,
MICHAEL ALTMAN AND STAFF
BUILDERS, INC.
* The Company agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request.
Chelsea/kl
EXHIBIT
10.9<PAGE>
OPTION CERTIFICATE
The Option is non-transferable by its terms, and
the shares of Common Stock purchasable hereunder have not
been registered under the Securities Act of 1933, as amended
(the "Act") and such shares may not be sold or transferred
unless such sale or transfer is in accordance with the
registration requirements of the Act, or in conformity with the
limitations of Rule 144 or similar rule as then in effect under
such Act, or unless some other exemption from the registration
requirements of such Act is available with respect thereto.
No. 1 Option to Purchase
Shares of Common Stock
in Chelsea Computer Consultants, Inc.
STAFF BUILDERS, INC.
COMMON STOCK PURCHASE OPTION
Void after November 19, 2001
Staff Builders, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, Stephen
Savitsky, or his heirs, representatives and successors (the
"Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time
after the Initial Exercise Date (as defined below) and before
5:00 P.M. New York time, on November 19, 2001 eighty-three
(83) fully paid and nonassessable shares of common stock, par
value $1.00 (the "Common Stock"), of Chelsea Computer
Consultants, Inc., a Delaware corporation ("Chelsea"), held by
the Company. The purchase price per share of such Common
Stock ("the Exercise Price") shall be $22,749.40.
1. Initial Exercise Date; Expiration. Subject
to the receipt by the Company of any approvals required by
any institutional lenders of the Company as provided in Section
2, this Option may be exercised, in whole or in part, at any time
or from time to time after the earliest of the following events
occur (the "Initial Exercise Date"): (i) an initial public offering
of Chelsea or (ii) the consolidation or merger of Chelsea with
or into any other corporation, entity or person, or any other
corporate reorganization, or any transactions in which in excess
of fifty percent (50%) of Chelsea's voting power is transferred,
or any sale of all or substantially all of the assets of Chelsea
(any such transaction being hereinafter referred to as a
"Reorganization"). This Option shall expire at 5:00 P.M., New
York time, on November 19, 2001.
2. Approvals. As soon as practicable after
the date hereof, the Company shall obtain all approvals
required by any institutional lender of the Company for the
exercise of the Option and the purchase of the shares of
Common Stock from the Company hereunder. The Holder
agrees not to exercise this Option until such approvals have
been obtained.
3. Exercise of Option; Partial Exercise. This
Option may be exercised in whole or in part by the Holder by
surrender of this Option, with the form of subscription
attached hereto (as Attachment A) duly executed by the Holder,
to the Company at its principal office, accompanied by
payment of the Exercise Price of the shares of Common Stock
to be purchased hereunder. For any partial exercise hereof, the
Holder shall designate in the subscription the number of shares
of Common Stock that the Holder wishes to purchase. On any
such partial exercise, the Company at its expense shall
forthwith issue and deliver to the Holder a new Option of like
tenor, in the name of the Holder, which shall be exercisable for
such number of shares of Common Stock represented by this
Option which have not been purchased upon such exercise.
The Exercise Price may be paid at the Holder's
election either by cash or check payable to the order of the
Company or by wire transfer.
4. When Exercise Effective; Beneficial and
Record Ownership. The exercise of this Option shall be
deemed to have been effected immediately prior to the close of
business on the business day on which this Option is
surrendered to the Company as provided in Section 1, and at
such time the Holder shall become the beneficial holder of such
shares of Common Stock. The Holder shall promptly notify
Chelsea (or its transfer agent if a transfer agent has been
appointed) of the transfer of shares of Common Stock from the
Company to the Holder and that the record owner of the
transferred shares of Common Stock on the books of Chelsea
should be changed to the name of the Holder or another person
as designated by the Holder.
5. Delivery on Exercise. As soon as
practicable after the exercise of this Option in whole or in part,
and in any event within five (5) business days thereafter, the
Company at its expense will cause to be endorsed in the name
of the Holder and delivered to the Holder, a certificate or
certificates (or stock power attached thereto) for the number of
shares of Common Stock to which the Holder shall be entitled
on such exercise.
6. Adjustment of Purchase Price and
Number of Shares. The number of shares of Common Stock
transferable upon exercise of this Option and the purchase
price therefor are subject to adjustment upon the occurrence of
the following events:
6.1 Adjustment for Stock Splits, Stock
Dividends, Recapitalizations, etc. The exercise price of this
Option and the number of shares of Common Stock transferable
by the Company upon exercise of this Option shall be
appropriately adjusted to reflect any stock dividend, stock
split, combination of shares, reclassification, recapitalization or
other similar event affecting the number of outstanding shares
of Common Stock. For example, if there should be a two-for-
one (2-for-1) stock split, the exercise price would be divided by
two (2) and such number of shares would be doubled or if there
should be a one-for-two (1-for-2) reverse stock split, the
exercise price would be doubled and the number of shares
would be divided by two (2).
6.2 Adjustment for Other Dividends
and Distributions. In case Chelsea shall make or issue, or shall
fix a record date for the determination of eligible stockholders
entitled to receive, a dividend or other distribution with
respect to the Common Stock payable in (i) securities of the
Company (other than shares of Common Stock) or (ii) assets
(excluding cash dividends paid or payable solely out of
retained earnings), then in each case, the Holder of this Option
on exercise hereof at any time after the consummation,
effective date or record date of such event, shall receive, in
addition to the Common Stock transferable on such exercise
prior to such date, the securities or such other assets of the
Company to which the Holder would have been entitled upon
such date if the Holder had exercised this Option immediately
prior thereto (all subject to further adjustment as provided in
this Option).
6.3 Adjustment for Reorganization,
Consolidation, Merger, etc. In case of any and each
Reorganization, the Holder of this Option, on exercise hereof at
any time after the consummation or effective date of such
Reorganization (the "Effective Date"), shall receive, in lieu of
the Common Stock transferable on such exercise prior to the
Effective Date, the stock and other securities and property
(including cash) to which the Holder would have been entitled
upon the Effective Date if the Holder had exercised this
Option immediately prior thereto (all subject to further
adjustment as provided in this Option).
6.4 Certificate as to Adjustments. In case
of any adjustment or readjustment in the price or kind of
securities transferable on the exercise of this Option, the
Company will promptly give written notice thereof to the
Holder of this Option in the form of a certificate, certified and
confirmed by the Board of Directors of the Company, setting
forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or
readjustment is based.
7. Exchange of Options. On surrender for
exchange of this Option, properly endorsed, to the Company,
the Company at its expense will issue and deliver to the Holder
a new Option of like tenor, in the name of the Holder, calling
in the aggregate on the face thereof for the number of shares
of Common Stock called for on the face of the Option so
surrendered.
8. Replacement of Options. On receipt by
the Company of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this
Option and, in the case of any such loss, theft or destruction of
this Option, on delivery of an indemnity agreement reasonably
satisfactory in form and amount of the Company or, in the case
of any such mutilation, on surrender and cancellation of such
Option, the Company at its expense will execute and deliver, in
lieu thereof, a new Option of like tenor.
9. Investment Intent. The Holder, by
accepting this Option, covenants and agrees that, at the time of
exercise hereof, and at the time of any proposed transfer of
securities acquired upon exercise hereof, unless the sales of
such securities by the Holder shall have been registered
pursuant to the Securities Act of 1933, as amended (the "Act"),
the Holder will deliver to the Company a written statement
that the securities acquired by the Holder upon exercise hereof
are for the own account of the Holder for investment and are
not acquired with a view to, or for sale in connection with, any
distribution thereof (or any portion hereof) and with no
present intention (at any such time) of offering and
distributing such securities (or any portion thereof).
10. Transfer Restrictions. This Option is non-
transferable otherwise than by will or by the laws of descent
and distribution, and may not otherwise be assigned (other than
by pledge or hypothecation to a lender) and shall not be subject
to execution, attachment or similar process. The shares of
Common Stock purchasable hereunder have not been registered
under the Act and may not be sold or transferred unless such
sale or transfer is in accordance with the registration
requirements of the Act, or in conformity with the limitations
of Rule 144 or similar rule as then in effect under such Act, or
unless some other exemption from the registration requirements
of such Act is available with respect thereto.
11. No Rights as a Stockholder. This Option
does not entitle the Holder to any voting rights or other rights
as a stockholder of Chelsea.
12. Damages. The Company recognizes and
agrees that the Holder will not have an adequate remedy if the
Company fails to comply with the terms of this Option and that
damages will not be readily ascertainable, and the Company
expressly agrees that, in the event of such failure, it shall not
oppose an application by the Holder of this Option requiring
specific performance of any and all provisions hereof or
enjoining the Company from continuing to commit any such
breach of the terms hereof.
13. Notices. All notices referred to in this
Option shall be in writing and shall be delivered personally or
by certified or registered mail, return receipt requested,
postage prepaid and will be deemed to have been given when so
delivered or mailed to the Company and the Holder, at the
Company's principal executive offices.
14. Miscellaneous. This Option and any term
hereof may be changed, waived, discharged or terminated only
by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination
is sought. This Option is being delivered in the State of New
York and shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York
(without reference to any principles of the conflicts of laws).
Dated as of November 19, 1997
STAFF BUILDERS, INC.
Name: /s/ David Savitsky
Title:Executive Vice President/
Secretary
Accepted and Agreed:
/s/ Stephen Savitsky
STEPHEN SAVITSKY
<PAGE>
Attachment A to Option
FORM OF SUBSCRIPTION
(To be signed only on exercise of Option)
To: STAFF BUILDERS, INC.
The undersigned, the holder of the within
Option, hereby irrevocably elects to exercise the purchase
rights represented by such Option for, and to purchase
thereunder,
shares of Common Stock of Chelsea Computer
Consultants, Inc., and makes payment of $ therefor, and
requests that the certificates for such shares, or a stock power
or powers attached to such certificates, be endorsed on behalf
of and delivered to the holder, whose address is
.
(Signature must conform in all respects to name of holder as
specified on the face of the Option)
Address
Dated:
EXHIBIT
10.10<PAGE>
OPTION CERTIFICATE
The Option is non-transferable by its terms, and
the shares of Common Stock purchasable hereunder have not
been registered under the Securities Act of 1933, as amended
(the "Act") and such shares may not be sold or transferred
unless such sale or transfer is in accordance with the
registration requirements of the Act, or in conformity with the
limitations of Rule 144 or similar rule as then in effect under
such Act, or unless some other exemption from the registration
requirements of such Act is available with respect thereto.
No. 2 Option to Purchase
Shares of Common Stock
in Chelsea Computer Consultants, Inc.
STAFF BUILDERS, INC.
COMMON STOCK PURCHASE OPTION
Void after November 19, 2001
Staff Builders, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, David
Savitsky, or his heirs, representatives and successors (the
"Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time
after the Initial Exercise Date (as defined below) and before
5:00 P.M. New York time, on November 19, 2001 eighty-three
(83) fully paid and nonassessable shares of common stock, par
value $1.00 (the "Common Stock"), of Chelsea Computer
Consultants, Inc., a Delaware corporation ("Chelsea"), held by
the Company. The purchase price per share of such Common
Stock ("the Exercise Price") shall be $22,749.40.
1. Initial Exercise Date; Expiration. Subject
to the receipt by the Company of any approvals required by
any institutional lenders of the Company as provided in Section
2, this Option may be exercised, in whole or in part, at any time
or from time to time after the earliest of the following events
occur (the "Initial Exercise Date"): (i) an initial public offering
of Chelsea or (ii) the consolidation or merger of Chelsea with
or into any other corporation, entity or person, or any other
corporate reorganization, or any transactions in which in excess
of fifty percent (50%) of Chelsea's voting power is transferred,
or any sale of all or substantially all of the assets of Chelsea
(any such transaction being hereinafter referred to as a
"Reorganization"). This Option shall expire at 5:00 P.M., New
York time, on November 19, 2001.
2. Approvals. As soon as practicable after
the date hereof, the Company shall obtain all approvals
required by any institutional lender of the Company for the
exercise of the Option and the purchase of the shares of
Common Stock from the Company hereunder. The Holder
agrees not to exercise this Option until such approvals have
been obtained.
3. Exercise of Option; Partial Exercise. This
Option may be exercised in whole or in part by the Holder by
surrender of this Option, with the form of subscription
attached hereto (as Attachment A) duly executed by the Holder,
to the Company at its principal office, accompanied by
payment of the Exercise Price of the shares of Common Stock
to be purchased hereunder. For any partial exercise hereof, the
Holder shall designate in the subscription the number of shares
of Common Stock that the Holder wishes to purchase. On any
such partial exercise, the Company at its expense shall
forthwith issue and deliver to the Holder a new Option of like
tenor, in the name of the Holder, which shall be exercisable for
such number of shares of Common Stock represented by this
Option which have not been purchased upon such exercise.
The Exercise Price may be paid at the Holder's
election either by cash or check payable to the order of the
Company or by wire transfer.
4. When Exercise Effective; Beneficial and
Record Ownership. The exercise of this Option shall be
deemed to have been effected immediately prior to the close of
business on the business day on which this Option is
surrendered to the Company as provided in Section 1, and at
such time the Holder shall become the beneficial holder of such
shares of Common Stock. The Holder shall promptly notify
Chelsea (or its transfer agent if a transfer agent has been
appointed) of the transfer of shares of Common Stock from the
Company to the Holder and that the record owner of the
transferred shares of Common Stock on the books of Chelsea
should be changed to the name of the Holder or another person
as designated by the Holder.
5. Delivery on Exercise. As soon as
practicable after the exercise of this Option in whole or in part,
and in any event within five (5) business days thereafter, the
Company at its expense will cause to be endorsed in the name
of the Holder and delivered to the Holder, a certificate or
certificates (or stock power attached thereto) for the number of
shares of Common Stock to which the Holder shall be entitled
on such exercise.
6. Adjustment of Purchase Price and
Number of Shares. The number of shares of Common Stock
transferable upon exercise of this Option and the purchase
price therefor are subject to adjustment upon the occurrence of
the following events:
6.1 Adjustment for Stock Splits, Stock
Dividends, Recapitalizations, etc. The exercise price of this
Option and the number of shares of Common Stock transferable
by the Company upon exercise of this Option shall be
appropriately adjusted to reflect any stock dividend, stock
split, combination of shares, reclassification, recapitalization or
other similar event affecting the number of outstanding shares
of Common Stock. For example, if there should be a two-for-
one (2-for-1) stock split, the exercise price would be divided by
two (2) and such number of shares would be doubled or if there
should be a one-for-two (1-for-2) reverse stock split, the
exercise price would be doubled and the number of shares
would be divided by two (2).
6.2 Adjustment for Other Dividends
and Distributions. In case Chelsea shall make or issue, or shall
fix a record date for the determination of eligible stockholders
entitled to receive, a dividend or other distribution with
respect to the Common Stock payable in (i) securities of the
Company (other than shares of Common Stock) or (ii) assets
(excluding cash dividends paid or payable solely out of
retained earnings), then in each case, the Holder of this Option
on exercise hereof at any time after the consummation,
effective date or record date of such event, shall receive, in
addition to the Common Stock transferable on such exercise
prior to such date, the securities or such other assets of the
Company to which the Holder would have been entitled upon
such date if the Holder had exercised this Option immediately
prior thereto (all subject to further adjustment as provided in
this Option).
6.3 Adjustment for Reorganization,
Consolidation, Merger, etc. In case of any and each
Reorganization, the Holder of this Option, on exercise hereof at
any time after the consummation or effective date of such
Reorganization (the "Effective Date"), shall receive, in lieu of
the Common Stock transferable on such exercise prior to the
Effective Date, the stock and other securities and property
(including cash) to which the Holder would have been entitled
upon the Effective Date if the Holder had exercised this
Option immediately prior thereto (all subject to further
adjustment as provided in this Option).
6.4 Certificate as to Adjustments. In case
of any adjustment or readjustment in the price or kind of
securities transferable on the exercise of this Option, the
Company will promptly give written notice thereof to the
Holder of this Option in the form of a certificate, certified and
confirmed by the Board of Directors of the Company, setting
forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or
readjustment is based.
7. Exchange of Options. On surrender for
exchange of this Option, properly endorsed, to the Company,
the Company at its expense will issue and deliver to the Holder
a new Option of like tenor, in the name of the Holder, calling
in the aggregate on the face thereof for the number of shares
of Common Stock called for on the face of the Option so
surrendered.
8. Replacement of Options. On receipt by
the Company of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this
Option and, in the case of any such loss, theft or destruction of
this Option, on delivery of an indemnity agreement reasonably
satisfactory in form and amount of the Company or, in the case
of any such mutilation, on surrender and cancellation of such
Option, the Company at its expense will execute and deliver, in
lieu thereof, a new Option of like tenor.
9. Investment Intent. The Holder, by
accepting this Option, covenants and agrees that, at the time of
exercise hereof, and at the time of any proposed transfer of
securities acquired upon exercise hereof, unless the sales of
such securities by the Holder shall have been registered
pursuant to the Securities Act of 1933, as amended (the "Act"),
the Holder will deliver to the Company a written statement
that the securities acquired by the Holder upon exercise hereof
are for the own account of the Holder for investment and are
not acquired with a view to, or for sale in connection with, any
distribution thereof (or any portion hereof) and with no
present intention (at any such time) of offering and
distributing such securities (or any portion thereof).
10. Transfer Restrictions. This Option is non-
transferable otherwise than by will or by the laws of descent
and distribution, and may not otherwise be assigned (other than
by pledge or hypothecation to a lender) and shall not be subject
to execution, attachment or similar process. The shares of
Common Stock purchasable hereunder have not been registered
under the Act and may not be sold or transferred unless such
sale or transfer is in accordance with the registration
requirements of the Act, or in conformity with the limitations
of Rule 144 or similar rule as then in effect under such Act, or
unless some other exemption from the registration requirements
of such Act is available with respect thereto.
11. No Rights as a Stockholder. This Option
does not entitle the Holder to any voting rights or other rights
as a stockholder of Chelsea.
12. Damages. The Company recognizes and
agrees that the Holder will not have an adequate remedy if the
Company fails to comply with the terms of this Option and that
damages will not be readily ascertainable, and the Company
expressly agrees that, in the event of such failure, it shall not
oppose an application by the Holder of this Option requiring
specific performance of any and all provisions hereof or
enjoining the Company from continuing to commit any such
breach of the terms hereof.
13. Notices. All notices referred to in this
Option shall be in writing and shall be delivered personally or
by certified or registered mail, return receipt requested,
postage prepaid and will be deemed to have been given when so
delivered or mailed to the Company and the Holder, at the
Company's principal executive offices.
14. Miscellaneous. This Option and any term
hereof may be changed, waived, discharged or terminated only
by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination
is sought. This Option is being delivered in the State of New
York and shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York
(without reference to any principles of the conflicts of laws).
Dated as of November 19, 1997
STAFF BUILDERS, INC.
BY: /s/ Stephen Savitsky
Name: Stephen Savitsky
Title: CEO / Chairman of the Board
Accepted and Agreed:
/s/ David Savitsky
DAVID SAVITSKY
<PAGE>
Attachment A to Option
FORM OF SUBSCRIPTION
(To be signed only on exercise of Option)
To: STAFF BUILDERS, INC.
The undersigned, the holder of the within
Option, hereby irrevocably elects to exercise the purchase
rights represented by such Option for, and to purchase
thereunder,
shares of Common Stock of Chelsea Computer
Consultants, Inc., and makes payment of $ therefor, and
requests that the certificates for such shares, or a stock power
or powers attached to such certificates, be endorsed on behalf
of and delivered to the holder, whose address is
.
(Signature must conform in all respects to name of holder as
specified on the face of the Option)
Address
Dated:
