<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended February 28, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period from _________ To _________
Commission File No. 0-11380
STAFF BUILDERS, INC.
(Exact name of issuer as specified in charter)
Delaware 11-2650500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1983 Marcus Avenue
Lake Success, New York 11042-7011
(Address of principal executive offices) (Zip Code)
(516) 358-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per share
Class B Common Stock, par value $.01 per share
(Title of Class)
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
_____ _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III or this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock (Class A and Class B Common
Stock, assuming conversions of Class B Common Stock into Class A Common Stock on
a share for share basis) held by non-affiliates of the registrant based on the
closing price of such stock on June 22, 1998 was $29,622,404.
The number of shares of Class A Common Stock and Class B Common Stock
outstanding on June 22, 1998 was 21,420,964 and 1,051,609 shares, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth as to each director and each executive
officer of Staff Builders, Inc. (the "Company"): (1) such person's name; (2) the
year in which such person was first elected (or designated) a director of the
Company; (3) biographical information for the last five years; (4) certain other
directorships, if any, held by such person; and (5) such person's age.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING THE
PAST FIVE YEARS, ANY OFFICE HELD IN THE YEAR FIRST ELECTED
NAME AGE COMPANY AND ANY OTHER DIRECTORSHIPS AS A DIRECTOR
- ---- --- --------------------------------------- -------------
<S> <C> <C> <C>
Stephen Savitsky ............ 52 A founder of the Company, Mr. 1983
Savitsky has served as Chairman of
the Board, Chief Executive Officer
and a Director of the Company since
1983 (and of its predecessor from
1978 to 1983), and as President of
the Company since November 1991.
Mr. Savitsky is the brother of
David Savitsky.
David Savitsky .............. 50 A founder of the Company, Mr. 1983
Savitsky has served as Secretary,
Treasurer and a Director of the
Company since 1983 (and of its
predecessor from 1978 to 1983), as
Executive Vice President since
December 1987 and as Chief
Operating Officer since April 1991.
Mr. Savitsky is the brother of
Stephen Savitsky.
Jonathan J. Halpert, Ph.D. .. 53 Dr. Halpert was elected a Director 1983
by the Board of Directors in August
1987. He previously served as a
Director of the Company from May
1983 until he resigned from the
Board in February 1985. Dr. Halpert
is a consultant in the area of
deinstitutionalization of the
mentally retarded and Chief
Executive Officer of the Camelot
Community Residence Program.
Bernard J. Firestone, Ph.D. . 49 Dr. Firestone was elected a 1987
Director by the Board of Directors
in August 1987. He is an associate
dean for curriculum and personnel
in the College of Liberal Arts and
Sciences and professor of political
science at Hofstra University where
he has been teaching for 23 years.
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING THE
PAST FIVE YEARS, ANY OFFICE HELD IN THE YEAR FIRST ELECTED
NAME AGE COMPANY AND ANY OTHER DIRECTORSHIPS AS A DIRECTOR
- ---- --- --------------------------------------- -------------
<S> <C> <C> <C>
Donald Meyers ............... 69 Mr. Meyers was elected a Director 1994
by the Board of Directors in August
1994. He has been an Associate
Clinical Professor, Health Policy
and Management, and the Director of
the Resident and Fellow Program in
administration in New York
University's Robert W. Wagner
Graduate School of Public Service
since November 1991. Mr. Meyers is
also the President and sole
director and stockholder of RMR
Health & Hospital Management
Consultants, Inc., a health care
consulting firm, where he has been
an executive officer, director and
stockholder since 1976.
Dale R. Clift ............... 47 Mr. Clift has been Executive Vice Not Applicable
President of Finance and Chief
Financial Officer of the Company
since February 1998. From January
1996 through February 1998, Mr.
Clift provided consulting services
to a number of companies, including
several in the health care
industry. From April 1994 through
January 1996, Mr. Clift was
Executive Vice President of Rock
Bottom Restaurants, Inc., a
restaurant operator, and, from
January 1993 through April 1994,
Mr. Clift was Vice President of RMD
Health Enterprises, Inc.
Edward Teixeira ............. 55 Mr. Teixeira has been Senior Vice Not Applicable
President, Franchising of a
principal subsidiary of the Company
since December 1990.
Cynthia Nye ................. 46 Ms. Nye has been Senior Vice Not Applicable
President, Corporate Support of a
principal subsidiary of the Company
since November 1994. From January
1992 through November 1994, Ms. Nye
served as Vice President, Corporate
Support of a principal subsidiary
of the Company.
Willard T. Derr ............. 41 Mr. Derr has been Senior Vice Not Applicable
President and Corporate Controller
of a principal subsidiary of the
Company since March 1998. From
February 1993 to March 1998, Mr.
Derr served as Vice President and
Controller of a principal
subsidiary of the Company.
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING THE
PAST FIVE YEARS, ANY OFFICE HELD IN THE YEAR FIRST ELECTED
NAME AGE COMPANY AND ANY OTHER DIRECTORSHIPS AS A DIRECTOR
- ---- --- --------------------------------------- -------------
<S> <C> <C> <C>
Sandra Parshall ............. 50 Ms. Parshall has been the Senior Not Applicable
Vice President, National Field
Operations, of a principal
subsidiary of the Company since
March 1998. From September 1996
through March 1998, Ms. Parshall
served as the Vice President of
Operations of a principal
subsidiary of the Company. From
June 1995 to September 1996, Ms.
Parshall served as a regional
director of operations of a
principal subsidiary of the
Company. From 1993 to 1995, Ms.
Parshall was a Divisional Vice
President of Nursefinders, Inc., a
home healthcare and medical
staffing company.
Carla Perrotta .............. 38 Ms. Perrotta has been the Senior Not Applicable
Vice President and General Manager
of a principal subsidiary of the
Company since March 1995. From
September 1993 to March 1995, Ms.
Perrotta served as the Director of
the Company's medical staffing
division.
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own beneficially more than ten
percent of the Class A Common Stock or Class B Common Stock to file with the
Securities and Exchange Commission initial reports of beneficial ownership and
reports of changes in beneficial ownership of the Common Stock. Officers,
directors and persons owning more than ten percent of the Company's Class A
Common Stock, $.01 par value per share (the "Class A Common Stock"), or the
Company's Class B Common Stock, $.01 par value per share (the "Class B Common
Stock" and, collectively with the Class A Common Stock, the "Common Stock"), are
required to furnish the Company with copies of all such reports. To the
Company's knowledge, based on a review of copies of such reports furnished to
the Company and written representations from its officers and directors that no
other reports were required, during the fiscal year ended February 28, 1998, all
Section 16(a) filing requirements applicable to its executive officers,
directors and persons owning beneficially more than ten percent of the Common
Stock were complied with on a timely basis, except that reports of change of
beneficial ownership were filed late by Stephen Savitsky and David Savitsky with
respect to two transactions during the 1998 fiscal year and Cynthia Nye did not
file one such report with respect to one transaction during the 1998 fiscal
year.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the annual and
long-term compensation of the Company's Chief Executive Officer and five other
executive officers (the "Named Executive Officers") for services as executive
officers of the Company for the last three fiscal years.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
NAME AND PRINCIPAL POSITION ANNUAL COMPENSATION AWARDS
- --------------------------- ------------------------------------------------------ ------------
SECURITIES
BONUS OTHER ANNUAL UNDERLYING
YEAR SALARY COMPENSATION COMPENSATION OPTIONS (#)
---- ------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Stephen Savitsky ................. 1998 $520,571 Not determinable(1) --- 580,691
Chairman, President and 1997 $474,704 --- --- ---
Chief Executive Officer 1996 $423,453 --- --- ---
David Savitsky ................... 1998 $377,016 Not determinable(1) --- 580,691
Executive Vice President, 1997 $343,705 --- --- ---
Chief Operating Officer, 1996 $306,224 --- --- ---
Secretary and Treasurer
Sandra Parshall .................. 1998 $148,105 $25,000 --- ---
Senior Vice President of 1997 $118,640 $14,250 --- 25,000
National Field Operations 1996 $ 68,939 $ 4,750 --- ---
Gary Tighe(2) .................... 1998 $173,116 --- $243,647(3) ---
Senior Vice President, 1997 $169,726 --- --- ---
Finance and Chief Financial 1996 $155,241 --- --- ---
Officer
Edward Teixeira .................. 1998 $175,615 $19,375 --- ---
Senior Vice President, 1997 $167,714 --- --- 10,000
Franchising 1996 $156,640 --- --- ---
Cynthia Nye. ..................... 1998 $149,835 --- --- 10,000
Senior Vice President, 1997 $142,277 --- --- ---
Corporate Support 1996 $132,585 --- --- ---
- -------------------
</TABLE>
(footnotes on next page)
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(footnotes from previous page)
(1) On November 19, 1997, the Board of Directors granted to each of Stephen
Savitsky and David Savitsky a four-year option to purchase 83 shares of
Chelsea Computer Consultants, Inc., an 82% owned subsidiary of the Company
("Chelsea"), at an exercise price of $22,749.40 per share (the "Chelsea
Options"). The 83 shares underlying each Chelsea Option represents
approximately 9% of the issued and outstanding shares of Chelsea. The grant
of the Chelsea Options is subject to the approval of the holders of the 18%
of the outstanding common stock of Chelsea not owned by the Company, which
approval has not yet been obtained. If such approval is obtained, the
options may be exercised only following: (i) an initial public offering of
Chelsea securities; (ii) the consolidation or merger of Chelsea with or
into another entity; (iii) a transaction in which more than 50% of the
voting power of Chelsea is transferred; or (iv) a sale of all or
substantially all of the assets of Chelsea. The value of the Chelsea
Options granted by the Company to Stephen Savitsky and David Savitsky is
not readily ascertainable. Based upon the October 1997 acquisition by the
Company of 62.8% of the outstanding common stock of Chelsea for
approximately $12.4 million, the valuation of Chelsea as of that date was
$20,906,700, or $22,749.40 per share, which is the exercise price of the
Chelsea Options.
(2) Effective February 20, 1998, Mr. Tighe resigned his employment as the
Senior Vice President of Finance and Chief Financial Officer and his
employment agreement was terminated.
(3) Reflects a payment made by the Company to Mr. Tighe in connection with
his resignation and termination of his employment agreement. See
"Executive Compensation--Employment Agreements."
Option Grants Table
The following table sets forth information with respect to the Named
Executive Officers concerning the grant of stock options during the fiscal year
ended February 28, 1998. The Company did not have during such fiscal year, and
currently does not have, any plans providing for the grant of stock appreciation
rights ("SARs").
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OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION GRANT DATE
NAME GRANTED FISCAL YEAR BASE PRICE DATE PRESENT VALUE(1)
---- ------- ----------- ---------- ---- ----------------
<S> <C> <C> <C> <C> <C>
Stephen Savitsky (2) .......... 197,000 13% $2.31 7/01/07 $362,480
David Savitsky (2) ............ 197,000 13% $2.31 7/01/07 $362,480
Stephen Savitsky (3) .......... 383,691 25.3% $2.25 7/01/07 $709,828
David Savitsky (4) ............ 383,691 25.3% $2.25 7/01/07 $709,828
Cynthia Nye(2) ................ 10,000 0.7% $2.28 10/20/07 $ 16,800
Edward Teixeira ............... --- --- --- --- --
Gary Tighe .................... --- --- --- --- --
Sandra Parshall ............... --- --- --- --- --
</TABLE>
- ----------
(1) The values shown were calculated utilizing the Black-Scholes option
pricing model and are presented solely for the purpose of comparative
disclosure in accordance with certain regulations of the Securities and
Exchange Commission. This model is a mathematical formula used to value
traded stock price volatility. The actual value that an executive
officer may realize, if any, is dependent on the amount by which the
stock price at the time of exercise exceeds the exercise price. There is
no assurance that the value realized by an executive officer will be at
or near the value estimated by the Black-Scholes model. In calculating
the grant date present values, the Company used the following
assumptions: (a) expected volatility of approximately 55.8%; (b)
risk-free rate of return of approximately 5.8%; (c) no dividends payable
during the relevant period; and (d) exercise at the end of a 10 year
period from the date of grant.
(2) Issued under the 1993 Stock Option Plan. All options are currently
exercisable.
(3) Issued under the 1994 Performance-Based Stock Option Plan on July 1,
1997. A percentage of options may become exercisable in each of the four
years following the grant date if certain stock price targets are
achieved. A total of 95,923 options are currently exercisable.
(4) Issued under the 1994 Performance-Based Stock Option Plan on July 1,
1997. A percentage of options may become exercisable in each of the four
years following the grant date if certain stock price targets are
achieved. A total of 95,923 options are currently exercisable.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE TABLE
The following table provides information concerning the number and value
of stock options exercised during the fiscal year ended February 28, 1998, and
held at the end of such fiscal year, by the Named Executive Officers. No SARs
were exercised during such fiscal year, and no SARs are held by any Named
Executive Officer, because the Company does not have any plans providing for
SARs.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
Shares At February 28, 1998 At February 28, 1998
Acquired -------------------- --------------------
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
---- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Stephen Savitsky --- --- 1,466,193/ 787,768 $183,111/$27,050
David Savitsky --- --- 1,452,193/ 787,768 174,795/ 27,050
Cynthia Nye --- --- 44,000/ 15,000 2,591/ 0
Gary Tighe --- --- 170,000/ 0 19,580/ 0
Edward Teixeira --- --- 74,467/ 28,333 9,705/ 0
Sandra Parshall --- --- 8,334/ 16,666 ---
</TABLE>
EMPLOYMENT AGREEMENTS
On June 1, 1987, the Company entered into a five-year employment agreement
with Stephen Savitsky under which Mr. Savitsky received an initial base salary
(beginning in June 1987) of $200,000 per year, which base salary increases
annually at the rate of ten percent plus any increase in the cost of living. Mr.
Savitsky's employment agreement is automatically extended at the end of each
year for an additional year and is terminable by the Company upon five years'
notice. For the fiscal year ended February 28, 1998, Mr. Savitsky received a
base salary of $520,571. Mr. Savitsky's employment agreement provides that, upon
a "change of control" of the Company and his termination of employment other
than for his conviction of a felony, he will be entitled to receive a lump sum
severance payment equal to 2.99 times his average annual compensation for the
five calendar years prior to termination. Mr. Savitsky is required to devote all
of his business time to the affairs of the Company and his employment agreement
provides that during the term of his employment and for a period of six months
thereafter he will not compete with the Company. After termination of his
employment (other than by reason of his conviction of a felony), Mr. Savitsky
will provide consulting services to the Company for a period of ten years at an
annual salary of $50,000.
The Company entered into an employment agreement, effective as of June 1,
1987, with David Savitsky on terms substantially similar to the employment
agreement with Stephen Savitsky, except that his initial base salary was
$110,000 per year. Under his employment agreement, Mr. Savitsky is required to
devote all of his business time to the affairs of the Company. His base salary
for the fiscal year ended February 28, 1998, was $377,016.
As of June 1, 1997, the Company entered into a three-year employment
agreement with Gary Tighe under which Mr. Tighe was employed as the Company's
Senior Vice President of Finance and Chief Financial Officer. Mr. Tighe's base
salary for the fiscal year ended February 28, 1998 was $173,116. He also
received a car allowance of $6,000. Effective February 20, 1998, Mr. Tighe
resigned his employment
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as the Senior Vice President of Finance and Chief Financial Officer and his
employment agreement was terminated. In connection with his resignation, the
Company agreed to make a payment of $243,647 to Mr. Tighe in full satisfaction
of the Company's obligations to him under the employment agreement. The Company
also agreed to pay for COBRA health insurance coverage for Mr. Tighe through
June 1, 2000, provided he has not otherwise become eligible for other health
insurance coverage.
On December 1, 1996, the Company entered into a three-year employment
agreement with Edward Teixeira to serve as Senior Vice President, Franchising of
a principal subsidiary of the Company under which Mr. Teixeira received an
initial base salary of $175,000 per year, which base salary increases by $10,000
per annum. Mr. Teixeira's base salary for the fiscal year ended February 28,
1998, was $175,615. In addition, Mr. Teixeira received a bonus of $19,375. He
also received an automobile allowance of $6,600 per annum. Under his employment
agreement, Mr. Teixeira is obligated to devote his full business time to the
affairs of the Company. Further, if within 180 days after a "change of control"
Mr. Teixeira were terminated for any reason (other than the commission of a
felony or the perpetration of fraud against the Company), he would then be
entitled to receive an amount equal to twelve months' salary. The employment
agreement prevents Mr. Teixeira from competing with the Company for six months
after his employment is terminated.
Effective September 1, 1996, a principal subsidiary of the Company entered
into a 30-month employment agreement with Sandra Parshall to serve as Vice
President of Operations until February 28, 1999. The employment agreement
provides for an annual base salary of $135,000, $140,000 and $150,000 for each
of the three years ending February 28, 1997, 1998 and 1999, respectively. In
addition, the Company leases an automobile for Ms. Parshall's use at an annual
cost of approximately $6,400. Ms. Parshall's base salary for the fiscal year
ended February 28, 1998 was $148,105. Ms. Parshall also received a $25,000
bonus. Further, if Ms. Parshall were terminated by the Company for any reason
(other than a breach of the employment agreement) she would then be entitled to
receive a severance payment equal to six months' salary. The employment
agreement requires Ms. Parshall to devote her full business time to the affairs
of the Company and prevents Ms. Parshall from competing with the Company for one
year after her employment is terminated.
As of February 9, 1998, a principal subsidiary of the Company entered into
a 37-month employment agreement with Dale R. Clift to serve as Executive Vice
President, Finance, and Chief Financial Officer until March 31, 2001. The
employment agreement provides for a base salary of $225,000 per annum.
Additionally, Mr. Clift received a bonus of $18,000, reimbursement of his moving
expenses up to $40,000, an automobile allowance of approximately $7,000 per
annum and options to purchase 333,332 shares of Class A Common Stock. Further,
if within 12 months after a "change of control" Mr. Clift is discharged, or he
resigns, for any reason (other than a breach of his employment agreement) he
would be entitled to receive a severance payment equal to 2.99 times his average
annual base salary to be paid weekly for the three-year period following such
discharge or resignation. Under his employment agreement, Mr. Clift is obligated
to devote his full business time to the affairs of the Company and he is
prevented from competing with the Company for six months after his employment is
terminated. Mr. Clift's base salary for the fiscal year ended February 28, 1998
was $8,655.
Effective October 1, 1997, a principal subsidiary of the Company entered
into a 38-month employment agreement with Cynthia Nye to serve as the Senior
Vice President, Corporate Support Services until November 30, 2000. Ms. Nye's
current base salary is $155,000 per annum, which base salary increases by no
less than 5% per year. She also received options to purchase 10,000 shares of
Class A Common Stock. Further, if within 12 months of a "change of control" Ms.
Nye is discharged, or she resigns, for any reason (other than a breach of her
employment agreement) she would be entitled to receive
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<PAGE>
a severance payment equal to one year's salary to be paid weekly for one year
following such discharge or resignation. The employment agreement requires Ms.
Nye to devote her full business time to the affairs of the Company and prevents
her from competing with the Company for one year after her employment is
terminated. Ms. Nye's base salary for the fiscal year ended February 28, 1998
was $149,835.
If a "change of control" were to occur prior to the next anniversary date
of the respective employment agreements of Stephen Savitsky, David Savitsky,
Dale R. Clift, Edward Teixeira and Cynthia Nye and such officers' employment
relationships with the Company were to terminate for reasons triggering the
severance payments noted above, then the Company would be obligated to make lump
sum payments to them in the approximate amounts of $1,594,000, $1,228,000,
$673,000, $182,000 and $159,000, respectively. The lump sum severance payments
payable after the end of the calendar year or the anniversary dates of the
respective employment agreements, as the case may be, would change as a result
of changes in such individuals' compensation. The term "change of control" as
used in the employment agreements with the Company's executive officers refers
to an event in which a person, corporation, partnership, association or entity
(i) acquires a majority of the Company's outstanding voting securities, (ii)
acquires securities of the Company bearing a majority of voting power with
respect to election of directors of the Company, or (iii) acquires all or
substantially all of the Company's assets.
DIRECTOR COMPENSATION
Each director who is not an officer or employee of the Company receives a
fee of $10,000 per annum for service on the Company's Board of Directors.
Directors who are officers or employees of the Company receive no fees for
service on the Board.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 22, 1998 with respect
to the beneficial ownership of the Company's Class A Common Stock, Class B
Common Stock and the Company's Class A Preferred Stock, $1.00 par value per
share (the "Preferred Stock") by (i) each person known to the Company who
beneficially owns more than 5% of any class of voting securities of the Company,
(ii) each director of the Company, (iii) the Named Executive Officers, and (iv)
all directors and executive officers of the Company as a group.
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CLASS A AND CLASS B COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
--------------------------------------------------------------------------------------------
PERCENTAGE OF PERCENTAGE OF
NUMBER OF OUTSTANDING NUMBER OF OUTSTANDING
SHARES OF SHARES OF SHARES OF SHARES OF PERCENTAGE OF
NAME OF CLASS A CLASS A CLASS B CLASS B OUTSTANDING
BENEFICIAL OWNER COMMON STOCK(2) COMMON STOCK COMMON STOCK(3) COMMON STOCK VOTES OWNED
- ----------------- --------------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen Savitsky (4) ......... 1,675,454(5)(6) 7.3% 342,738 32.6% 15.2%
David Savitsky (4) ........... 1,624,153(6)(7)(8) 7.1% 378,537(9) 36.0% 16.2%
Bernard J. Firestone (10) .... 1,500(11) * 2,100(12) * *
Jonathan J. Halpert (10) ..... -- -- -- -- --
Donald Meyers (10) ........... 2,000(13) * --- --- *
Gary Tighe (10) .............. 100 * --- --- *
Edward Teixeira (10) ......... 74,467(14) * --- --- *
Cynthia Nye (10) ............. 44,000(15) * --- --- *
Sandra Parshall (10) ......... 16,667(16) * --- --- *
S Squared Technology
Corp. (17) ................ 2,714,500 12.7% --- --- 8.5%
Dimensional Fund
Advisors, Inc. (18) ....... 1,372,460 6.4% --- --- 4.3%
Wellington
Management
Company, LLP (19) ......... 2,195,000 10.2% --- --- 6.9%
All executive officers
and directors as a
group (12 persons) ......... 3,345,234(6)(20) 13.6% 723,375 68.8% 30.3%
</TABLE>
- ----------
*Less than one percent
CLASS A PREFERRED STOCK (21)
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE OF
OF BENEFICIAL OUTSTANDING SHARES
NAME OF BENEFICIAL OWNER (22) OWNERSHIP OWNED
- ----------------------------- --------- -----
<S> <C> <C>
Stephen Savitsky............................ 333 1/3 50%
David Savitsky.............................. 333 1/3 50%
All executive officers
and directors as a group (12 persons).... 666 2/3 100%
</TABLE>
(footnotes on next page)
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(footnotes from previous page)
(1) "Beneficial ownership" is determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934, as amended. In general, a person is
treated as the "beneficial owner" of stock under Rule 13d-3 if such person
has (or shares) (i) either investment power or voting power over such stock
(which may be by means of a contract, arrangement, understanding,
relationship or otherwise), or (ii) the right to acquire such stock within
60 days, including by means of the exercise of an option or the conversion
of a convertible security. Each beneficial owner's percentage of ownership
and percentage of votes is determined by assuming that options that are
held by such person (but not those held by any other person) and which are
exercisable within 60 days of the date of this table have been exercised.
Except as indicated in the footnotes that follow, shares listed in the
table are held with sole voting and investment power.
(2) Each holder of record of shares of Class A Common Stock is entitled to one
vote per share held by such holder.
(3) Each holder of record of Class B Common Stock is entitled to ten votes for
each share of Class B Common Stock held by such holder, except in certain
circumstances which are inapplicable to the election of directors and the
other proposals to be considered at the Annual Meeting.
(4) The address of each of these persons is c/o Staff Builders, Inc., 1983
Marcus Avenue, Lake Success, New York 11042. Each of these persons has sole
power with respect to the voting and investment of the shares which he
owns, except as follows: on November 1, 1991, Ephraim Koschitzki, a former
executive officer and director of the Company, granted to Stephen Savitsky
and David Savitsky a ten year revocable proxy to vote all shares of Common
Stock now or hereafter owned of record by him. The Company believes that
Mr. Koschitzki beneficially owns 225,440 shares of Class A Common Stock
underlying options granted to him. As a result, (i) Stephen Savitsky has
sole voting and investment power with respect to 1,450,014 shares of Class
A Common Stock and 342,738 shares of Class B Common Stock and has shared
voting power with respect to the 225,440 shares of Class A Common Stock
beneficially owned by Mr. Koschitzki and (ii) David Savitsky has sole
voting and investment power with respect to 1,398,563 shares of Class A
Common Stock and 377,537 shares of Class B Common Stock and has shared
voting power with respect to the 225,440 shares of Class A Common Stock
beneficially owned by Mr. Koschitzki.
(5) Includes options to purchase 595,923 shares of Class A Common Stock under
the 1994 Performance Based Stock Option Plan, options to purchase 397,000
shares of Class A Common Stock under the 1993 Stock Option Plan and options
to purchase 334,000 shares of Class A Common Stock under the 1986
Non-Qualified Stock Option Plan.
(6) Includes options to purchase 225,440 shares of Class A Common Stock granted
to Ephraim Koschitzki which are subject to the revocable proxy referred to
in footnote 4 above.
(7) Includes options to purchase 595,923 shares of Class A Common Stock under
the 1994 Performance Based Stock Option Plan, options to purchase 397,000
shares of Class A Common Stock under the 1993 Stock Option Plan and options
to purchase 320,000 shares of Class A Common Stock under the 1986
Non-Qualified Stock Option Plan.
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(footnotes continued from previous page)
(8) Includes 150 shares of Class A Common Stock held by David Savitsky's wife.
Mr. Savitsky disclaims beneficial ownership of these shares.
(9) Includes 1,000 shares of Class B Common Stock held by Mr. Savitsky's wife
as trustee for the benefit of their three children. Mr. Savitsky disclaims
beneficial ownership of these shares.
(10) The address of each of these persons is c/o Staff Builders, Inc., 1983
Marcus Avenue, Lake Success, New York 11042. Each of these persons has sole
power with respect to the voting and investment of the shares which he
owns.
(11) Includes options to purchase 1,500 shares of Class A Common Stock under the
1986 Non-Qualified Stock Option Plan.
(12) Includes 1,000 shares of Class B Common Stock held by Dr. Firestone's wife.
Dr. Firestone disclaims beneficial ownership of these shares.
(13) Includes 2,000 shares of Class A Common Stock held by Mr. Meyers' wife.
Mr. Meyers disclaims beneficial ownership of these shares.
(14) Includes options to purchase 25,000 shares of Class A Common Stock under
the 1994 Performance-Based Stock Option Plan, options to purchase 15,000
shares of Class A Common Stock under the 1986 Non-Qualified Stock Option
Plan, options to purchase 27,800 shares of Class A Common Stock under the
1983 Incentive Stock Option Plan and options to purchase 6,667 shares of
Class A Common Stock under the 1993 Stock Option Plan.
(15) Includes options to purchase 15,000 shares of Class A Common Stock under
the 1994 Performance-Based Stock Option Plan, options to purchase 1,000
shares of Class A Common Stock under the 1986 Non-Qualified Stock Option
Plan, options to purchase 18,000 shares of Class A Common Stock under the
1983 Incentive Stock Option Plan and options to purchase 10,000 shares of
Class A Common Stock under the 1993 Stock Option Plan.
(16) Includes options to purchase 16,667 shares of Class A Common Stock under
the 1993 Stock Option Plan.
(17) S Squared Technology Corp. ("S Squared"), a registered investment adviser,
is located at 515 Madison Avenue, New York, New York 10022. Includes
2,502,500 shares of Class A Common Stock for which S Squared has sole
voting and sole investment power and 212,000 shares of Class A Common Stock
for which S Squared has shared voting and shared investment power. The
shares are owned by limited partnerships for which S Squared is the sole
general partner, by advisory clients of S Squared, and by Seymour
Goldblatt, the principal of S Squared, and members of his family.
(18) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is located at 1299 Ocean Avenue, Santa Monica, California 90401.
Dimensional is deemed to have beneficial ownership of 1,372,460 shares of
Class A Common Stock as of December 31, 1997, all of which shares are held
in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business
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(footnotes continued from previous page)
trust, or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional
Fund Advisors Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
(19) Wellington Management Company, LLP ("Wellington"), a registered investment
adviser, is located at 75 State Street, Boston, Massachusetts 02109.
Includes 1,965,000 shares of Class A Common Stock, for which Wellington has
shared voting and shared investment power and 230,000 shares of Class A
Common Stock for which Wellington has shared investment power.
(20) Includes options to purchase 1,315,179 shares of Class A Common Stock under
the 1994 Performance Based Stock Option Plan, options to purchase 837,334
shares of Class A Common Stock under the 1993 Stock Option Plan, options to
purchase 681,500 shares of Class A Common Stock under the 1986
Non-Qualified Stock Option Plan and options to purchase 70,800 shares of
Class A Common Stock under the 1983 Incentive Stock Option Plan.
(21) The approval of holders of two-thirds of the shares of Preferred Stock is
required to approve certain business combinations with respect to the
Company.
(22) Each person has sole power with respect to the voting and investment of the
shares which such person owns.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective April 1, 1992, the Company approved the sale by CTR Management
Corp. ("CTR") of a home care franchise for Nassau County, New York to Bayit Care
Corp. ("BCC"). The shareholders, officers and directors of BCC are Stuart
Savitsky, son of Stephen Savitsky, Samuel Schreier, the son-in-law of Stephen
Savitsky, and Julie Schreier, the daughter of Stephen Savitsky. The terms and
conditions of the franchise agreement between the Company and BCC, entered into
at the time of the sale, are substantially similar to those for other
franchisees of the Company, including the term of ten years with a five year
renewal option. In connection with the acquisition of its franchise, CTR
purchased certain assets of an existing branch office of the Company for
$911,000. The purchase price was evidenced by a promissory note, dated August
30, 1989. BCC purchased the franchise from CTR by assuming this promissory note
which, at the time of BCC's purchase of the franchise, had an outstanding
principal balance of $844,573 (the "BCC Note"). The terms of the BCC Note
originally provided for repayment of the outstanding principal amount in 120
consecutive monthly installments of $7,038 each, commencing May 1, 1994,
together with interest at 3% over the prime rate, payable monthly. Effective
June 1, 1994, the BCC Note was amended and restated to (i) provide for the
repayment of the outstanding principal amount over a fifteen (15) year period,
and (ii) reduce the interest rate to the prime rate. The amended principal
payment schedule requires fixed monthly principal payments of $3,500 each with
all unpaid principal due at the end of the fifteen (15) year period or earlier
upon the termination of the franchise agreement for such franchise. The BCC Note
is secured by all of the franchisee's assets. The Company restructured the BCC
Note because it found the additional monthly expense associated with the start
of the principal repayment schedule in May 1994 to have a clear negative impact
on the franchisee's ability to operate the franchise. As described in greater
detail below, during the fiscal year ended February 28, 1998, the Company
retained $59,881 from the amount otherwise due to BCC under the terms of its
franchise agreement as interest
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payments on the BCC Note. The outstanding balance of the BCC Note was $687,073
at February 28, 1998.
Effective March 1, 1998, Boro Care Corp. ("Boro") acquired a home care
franchise for Bronx, Kings, New York and Queens counties in New York. Stuart
Savitsky and Samuel Schreier each own 45% of the capital stock of Boro. To
acquire the franchise, Boro agreed to pay a $29,500 franchise fee, payable in 12
consecutive monthly payments of $2,458 commencing March 1, 1998. As part of the
franchise transaction, Boro purchased certain assets for $50,000 and issued a
$50,000 promissory note (the "First Boro Note") to the Company with respect to
such purchase. Boro also received a $200,000 line of credit and issued a
$200,000 promissory note (the "Second Boro Note") to the Company with respect to
such line of credit. The terms of the First Boro Note require repayment of the
$50,000 in 108 consecutive monthly payments of principal plus interest, computed
at 3% over prime, commencing March 1, 1999. The terms of the Second Boro Note
require monthly payments of interest, computed at 3% over prime, commencing 30
days after the first withdrawal of funds on the available line of credit.
Monthly principal payments are required commencing 24 months after the first
withdrawal of funds on the available line of credit, through the expiration date
of the line of credit on March 1, 2006. The terms and conditions of the
franchise agreement between the Company and Boro are substantially similar to
those for other franchises of the Company, except that the Boro franchise
agreement provides the franchise with two additional five-year renewal options.
Effective September 8, 1996, DSS Staffing Corp. ("DSS") acquired a medical
staffing services franchise from the Company for Nassau, Suffolk, Queens, Kings,
New York, Bronx and Richmond counties in New York. Stuart Savitsky and Samuel
Schreier each owns one third of the outstanding capital stock of DSS. As part of
the franchise transaction, DSS paid a $75,000 franchise fee, agreed to make
monthly payments of $10,500 for a period of five years and entered into a
franchise agreement with the Company. The terms and conditions of the franchise
agreement between the Company and DSS are substantially similar to those for
other franchisees of the Company, except that the DSS franchise agreement
provides the franchise with two additional five-year renewal options.
Effective August 23, 1993, Home Care Plus, Inc. ("Home Care") acquired a
home care franchise from the Company for Bristol and Barnstable counties in
Massachusetts. Edward Teixeira and his wife each owns 25% of the outstanding
capital stock of Home Care. In purchasing the franchise, Home Care paid a
$23,000 franchise fee, received a commitment to advance up to $75,000 for
expenses from the Company, issued a $75,000 promissory note (the "Home Care
Note") to the Company with respect to such advance, and entered into a franchise
agreement with the Company. The terms of the Home Care Note required repayment
of the $75,000 in 60 consecutive monthly payments of principal and interest,
computed at 3% over prime, through August 1999. Effective April 1, 1998, the
Home Care Note was amended to provide for a three month payment deferral through
June 1998 and monthly principal and interest payments of $1,280 from July 1998
through November 1999. The terms and conditions of the franchise agreement
between the Company and Home Care are substantially similar to those for other
franchisees of the Company, including the term of ten years with a five-year
renewal option. During the fiscal year ended February 28, 1998, the Company
retained $3,333 from the amount otherwise due Home Care under the terms of its
franchise agreement as interest payments on the Home Care Note. The outstanding
balance of the Home Care Note was $21,144 at February 28, 1998.
Effective February 6, 1995, Home Care Plus Two, Inc. ("Home Care Two")
acquired a home care franchise from the Company for Worcester, Hampden and
Franklin counties in Massachusetts. Edward Teixeira and his wife each owns 25%
of the outstanding capital stock of Home Care Two. During fiscal 1996, Home Care
Two paid $29,500 for the purchase of this franchise. The terms and conditions of
the
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franchise agreement between the Company and Home Care Two are substantially
similar to those for other franchisees of the Company, including the term of ten
years with a five-year renewal option. On November 27, 1996, Home Care Two
received a $50,000 advance for expenses for which a promissory note was issued
to the Company (the "Home Care Two Note"). The terms of the Home Care Two Note
required repayment of the $50,000 in 36 consecutive monthly payments of
principal and interest, computed at 3% over prime, through December 1999.
Effective April 1, 1998, the Home Care Two Note was amended to provide for a
three month payment deferral through June 1998 and monthly principal and
interest payments of $1,425 from July 1998 through March 2000. Mr. Teixeira has
guaranteed payment of all amounts due under the Home Care Two Note. During the
fiscal year ended February 28, 1998, the Company retained $3,992 from the
amounts otherwise due Home Care Two under the terms of its franchise agreement
as interest payments on the Home Care Two Note. The outstanding balance of the
Home Care Two Note was $29,167 at February 28, 1998.
Effective February 20, 1998, ViTex, Inc. ("VTI") acquired a medical
staffing services franchise from the Company for Worcester County and
surrounding areas in Massachusetts. Edward Teixeira's wife owns 50% of the
capital stock of VTI. VTI agreed to pay a franchise fee of $10,000 in one
installment of $5,000, which was paid in February 1998, and the balance in five
consecutive monthly payments of $1,000 commencing June 1998. The terms and
conditions of the franchise agreement between the Company and VTI are
substantially similar to those for other franchisees of the Company including
the term of ten years with a five-year renewal option.
Effective July 20, 1995, Cynthia Nye, Senior Vice President, Corporate
Support of a principal subsidiary of the Company, acquired 9% of the outstanding
stock of Partners Two Management Corp. ("Partners"), an existing home care
franchise for Suffolk County, New York. The terms and conditions of the
franchise agreement between the Company and Partners are substantially similar
to those for other franchisees of the Company, including the term of ten years
with a five-year renewal option. Prior to Ms. Nyes purchase of her stock in
Partners, Partners had assumed the obligations of a promissory note issued by a
predecessor franchise in the remaining principal amount of $300,000 (the
"Partners Note"). As of April 1, 1997, the terms of the Partners Note were
amended to provide for monthly payments of interest only in the amount of $2,105
from May 1997 through February 1998 and payments of principal and interest in
the amount of $6,612 from March 1998 through October 2001. On February 16, 1998,
the terms of the Partners Note were further amended to provide for monthly
principal payments of $250 from March 1998 through March 1999, monthly principal
and interest payments of $2,611 from April 1999 through October 2003 and a
balloon payment of $50,000 on October 25, 2003. The Partners Note continues to
bear annual interest at 2% over the prime rate. As described in greater detail
below, during the fiscal year ended February 28, 1998, the Company retained
$25,237 from the amount otherwise due Partners under the terms of its franchise
agreement as interest payments on the Partners Note. The outstanding balance of
the Partners Note was $240,625 at February 28, 1998.
Under the Company's franchise program, the Company processes and pays the
payroll to the field employees who service clients and invoices the clients for
such services. Each month the Company pays the franchisee 60% of the gross
margin dollars (in general, the difference between the amount so invoiced and
the payroll and related expenses for such field employees) from the franchisee's
business for the prior month's activity. Franchisees are responsible for their
general and administrative expenses, including office payroll. If the franchisee
elects, the Company will process payment of the franchisee's office payroll and
some or all of the franchisee's other administrative expenses, and withhold the
amount so expended from the 60% gross margin otherwise due the franchisee.
During the fiscal year ended February 28, 1998, the Company paid (i) BCC
$236,994 under the terms of its franchise agreement, representing a 60% gross
margin of $1,617,788 less $59,881 and $42,000 of interest and principal,
respectively, withheld on the
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BCC Note and $1,278,913 withheld for administrative expenses; (ii) DSS $485,708
under the terms of its franchise agreement, representing a 60% gross margin of
$1,846,838 less $1,361,130 withheld for administrative expenses; (iii) Home Care
$1,383,935 under the terms of its franchise agreement, representing a 60% gross
margin of $1,789,196 less $3,333 and $14,925 of interest and principal,
respectively, withheld on the Home Care Note and $387,102 withheld for
administrative expenses; (iv) Home Care Two $531,178 under the terms of its
franchise agreement, representing a 60% gross margin of $875,606 less $3,992 and
$16,667 of interest and principal, respectively, withheld on the Home Care Two
Note and $323,769 withheld for administrative expenses; and (v) Partners
$370,273 under the terms of its franchise agreement, representing a 60% gross
margin of $2,442,769 less $25,237 and $3,375 of interest and principal,
respectively, withheld on the Partners Note and $2,043,884 withheld for
administrative expenses.
In order to facilitate the acquisition of a franchise by a willing
prospective franchisee, the Company will frequently accept a promissory note as
consideration for the purchase from the Company of an existing branch location
and will occasionally advance expenses to a franchisee. The Company's
transactions with BCC, DSS, Home Care, Home Care Two, VTI, Boro and Partners
described above are consistent with this business purpose and with
accommodations which have been granted to other, unaffiliated franchisees.
Although the Company has no formal policy regarding transactions with
affiliates, it does not intend to enter into a transaction with any affiliate on
terms less favorable to the Company than those it would receive in an arm's
length transaction with an unaffiliated party.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to its
Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.
STAFF BUILDERS, INC.
By:/s/ Stephen Savitsky
-------------------------------
Stephen Savitsky
Chairman of the Board,
President and Chief
Executive Officer
Dated: June 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 1 to Annual Report on Form 10-K has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen Savitsky
________________________ Chairman of the Board, President June 26, 1998
Stephen Savitsky and Chief Executive Officer
(Principal Executive Officer) and
Director
/s/ David Savitsky
________________________ Executive Vice President, Chief June 26, 1998
David Savitsky Operating Officer, Secretary,
Treasurer and Director
/s/ Dale R. Clift
________________________ Executive Vice President, Finance June 26, 1998
Dale R. Clift and Chief Financial Officer
(Principal Financial Officer)
/s/ Willard T. Derr
________________________ Senior Vice President-Controller June 26, 1998
Willard T. Derr (Principal Accounting Officer)
</TABLE>
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<TABLE>
<S> <C> <C>
* Director June 26, 1998
________________________
Bernard J. Firestone,
Ph.D.
* Director June 26, 1998
________________________
Jonathan Halpert,
Ph.D.
* Director June 26, 1998
________________________
Donald Meyers
*By: /s/ Stephen Savitsky
_________________________
(Stephen Savitsky,
Attorney-in-Fact)
</TABLE>
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