<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1999, OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
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Commission file number 0-11380
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STAFF BUILDERS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 11-2650500
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1983 MARCUS AVENUE, LAKE SUCCESS, NEW YORK 11042
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(Address of principal executive offices) (Zip Code)
(516) 358-1000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares of Class A Common Stock and Class B Common Stock
outstanding on October 12, 1999 was 23,311,825 and 307,563 shares, respectively.
<PAGE> 2
STAFF BUILDERS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
August 31, 1999 and February 28, 1999 2
Condensed Statements of Consolidated
Income - Three and six months ended
August 31, 1999 and 1998 3
Condensed Statements of Consolidated
Cash Flows - Six months ended August 31,
1999 and 1998 4
Notes to Condensed Consolidated
Financial Statements 5-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 7-10
Factors Affecting the Company's Future
Performance 10-12
PART II OTHER INFORMATION
ITEM 5. OTHER INFORMATION
SALE OF BUSINESS AND PRO FORMA FINANCIAL
INFORMATION 13
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K 17
</TABLE>
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STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 31,
1999 FEBRUARY 28,
(UNAUDITED) 1999
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<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 666 $ 685
Accounts receivable, net of allowance
for doubtful accounts of $1,670
and $1,915, respectively 31,010 31,778
Prepaid expenses and other current assets 1,977 1,668
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Total current assets 33,653 34,131
Fixed Assets, net of accumulated depreciation
of $1,188 and $934, respectively 1,301 744
Intangible Assets, net of accumulated
amortization of $2,499 and $2,169,
respectively 21,644 21,965
Other Assets 247 342
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TOTAL $ 56,845 $ 57,182
======== ========
LIABILITIES:
Current Liabilities:
Accounts payable and accrued expenses $ 8,519 $ 7,120
Accrued payroll and related expenses 3,493 3,525
Current portion of long-term debt 24,418 24,305
Income taxes payable 721 1,522
Other current liabilities 65 --
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Total current liabilities 37,216 36,472
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Long-Term Debt -- 56
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Other Liabilities 25 81
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A Common Stock - $.01 par value;
50,000,000 shares authorized; 23,311,825 and
23,307,129 shares outstanding at August 31,
1999 and February 28, 1999, respectively 233 233
Class B Common Stock - $.01 par value;
1,554,936 shares authorized; 307,563 and
312,251 shares outstanding at August 31,
1999 and February 28, 1999, respectively 3 3
Additional paid-in capital 16,110 18,929
Retained earnings 3,258 1,408
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Total stockholders' equity 19,604 20,573
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TOTAL $ 56,845 $ 57,182
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31,
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(Restated- (Restated-
see Note 1) see Note 1)
<S> <C> <C> <C> <C>
REVENUES:
Service revenues:
Supplemental staffing $ 29,306 $ 23,710 $ 58,533 $ 44,443
Information technology staffing 8,555 8,305 17,069 14,947
--------- --------- --------- ---------
Total service revenues 37,861 32,015 75,602 59,390
Sale of licensees and fee, net -- 57 13 133
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Total revenues 37,861 32,072 75,615 59,523
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COSTS AND EXPENSES:
Operating costs 28,833 24,855 58,383 46,326
General and administrative expenses 6,591 5,119 12,724 9,497
Amortization of intangible assets 13 27 52 53
Interest expense 705 381 1,298 742
Interest (income) (2) (16) (5) (33)
Other (income) expense, net (120) -- 199 3
--------- --------- --------- ---------
Total costs and expenses 36,020 30,366 72,651 56,588
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INCOME BEFORE INCOME TAXES 1,841 1,706 2,964 2,935
PROVISION FOR INCOME TAXES 832 171 1,114 292
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NET INCOME $ 1,009 $ 1,535 $ 1,850 $ 2,643
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES:
Basic 23,619 22,526 23,619 23,090
========= ========= ========= =========
Diluted 23,619 22,563 23,619 23,190
========= ========= ========= =========
INCOME PER COMMON AND
COMMON EQUIVALENT SHARE:
Basic $ .04 $ .07 $ .08 $ .11
========= ========= ========= =========
Diluted $ .04 $ .07 $ .08 $ .11
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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STAFF BUILDERS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31,
----------------------
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 1,850 $ 2,643
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization of fixed assets 254 102
Amortization of intangibles and goodwill 52 53
Allowance for doubtful accounts (245) 139
Deferred income taxes -- 702
Change in operating assets and liabilities:
Accounts receivable 1,013 (7,050)
Prepaid expenses and other current assets (309) 172
Accounts payable and accrued expenses 1,260 2,619
Income taxes payable (801) 591
Other assets 95 (1,355)
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Net cash provided by (used in) operating activities 3,169 (1,384)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets, net (820) (78)
Acquisition of business -- (387)
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Net cash used in investing activities (820) (465)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Employee Stock Purchase Plan -- 188
Exercise of stock options -- 35
Purchase and retirement of common stock -- (3,120)
Decrease in notes payable and other long
term liabilities -- (1,675)
(Decrease) increase in borrowings under
revolving line of credit (2,368) 5,639
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Net cash used in financing activities (2,368) 1,067
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NET DECREASE IN CASH
AND CASH EQUIVALENTS (19) (782)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 685 1,718
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 666 $ 936
======== ========
SUPPLEMENTAL DATA:
Cash paid for:
Interest $ 939 $ 742
======== ========
Income taxes, net $ 309 $ 200
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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STAFF BUILDERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SPIN-OFF TRANSACTION AND FINANCIAL STATEMENTS - Staff Builders,Inc. ("Staff
Builders" or "the Company") will separate its home health care business
from its existing supplemental staffing business. To accomplish this
separation of its businesses, Staff Builders' Board of Directors
established a new, wholly-owned subsidiary, Tender Loving Care Health Care
Services,Inc. ("TLC"), which will acquire 100% of the outstanding capital
stock of the Staff Builders subsidiaries engaged in the home health care
business. The spin-off will be effected through a pro rata distribution to
Staff Builders' stockholders of all the shares of common stock of TLC owned
by Staff Builders ("the Distribution"). The Distribution will be made by
issuing one share of TLC common stock for every two shares of Staff
Builders Class A and Class B common stock outstanding on October 12, 1999
("the Record Date"). Based upon the 23,619,388 shares of Staff Builders
common stock which was outstanding on the Record Date, 11,809,694 shares of
TLC common stock will be distributed to holders of Staff Builders Class A
and Class B common stock on or about October 20, 1999. The supplemental
staffing business will remain with Staff Builders.
On October 13, 1999, Staff Builders received notice from the Securities and
Exchange Commission that its Registration Statement on Form 10 was cleared
from further comments. Further, on October 20, 1999, Staff Builders
received consent from its current lending institution to complete the
spin-off transaction. Since after the Distribution TLC will own a majority
of the operations, employees and assets of the historical business of Staff
Builders, the Distribution will be treated as a "reverse spin-off" for
financial reporting purposes under generally accepted accounting
principles. The historical condensed consolidated financial statements
contained in this quarterly report reflect the financial position and
results of operations of the supplemental staffing and information
technology staffing businesses.
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 Staff Builders and its subsidiaries as of August 31,
1999 and February 28, 1999, the results of operations for the three and six
months ended August 31, 1999 and 1998 and the cash flows for the six months
ended August 31, 1999 and 1998. Certain prior period amounts have been
reclassified to conform with the August 1999 presentation.
During the period October 20, 1997 through September 17, 1999, the Company
owned 81.8% of the outstanding common stock of Chelsea Computer
Consultants, Inc. ("Chelsea") (see "Sale of
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Business"). Prior to the Company's Board of Directors' approval in March
1999 of the spin-off of the home health care business, the Company had
intended to dispose of its investment in Chelsea and the accounts of
Chelsea were originally accounted for on the equity basis in its financial
statements for the year ended February 28, 1998 and in its condensed
consolidated interim financial statements as of August 31, 1998 and for the
three and six months then ended. In connection with the Company's proposed
spin-off of its home health care business, management developed plans to
retain its investment in Chelsea by combining the Chelsea operations with
its existing supplemental staffing business. Accordingly, the accounts of
Chelsea were fully consolidated in the Company's financial statements as of
February 28, 1999 and for the year then ended and prior period financial
statements have been restated from amounts previously reported to properly
consolidate the accounts of Chelsea. The effects of this restatement
represents a correction of an error in its financial statements for the
three and six months ended August 31, 1998. As a result, total revenues and
total expenses each increased by $8.3 million for the three months ended
August 31, 1998 and by $14.9 million for the six months then ended from the
amounts originally reported. Net income (loss) and basic and diluted income
(loss) per share were not affected. Earnings attributable to the minority
interest in Chelsea, the amounts of which are not material, are included in
other (income) expense in the accompanying statements of operations and
accrued expenses in the accompanying balance sheets.
The results for the three and six months ended August 31, 1999 and 1998 are
not necessarily indicative of the results for an entire year. It is
suggested that these condensed financial statements be read in conjunction
with Staff Builders' audited financial statements as of February 28, 1999
and for the year then ended.
2. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE - Primary and fully diluted
earnings per share was calculated for all periods in accordance with the
requirements of Statement of Financial Accounting Standards No. 128,
"Earnings per Share."
The shares used in computing basic earnings per share were 23,619,388 and
23,090,458 shares for the six months ended August 31, 1999 and 1998,
respectively. The shares used in computing diluted earnings per share were
23,619,388 and 23,190,462 shares for the six months ended August 31, 1999
and 1998, respectively. The shares used in computing basic earnings per
share were 23,619,388 and
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<PAGE> 8
22,526,140 for the three months ended August 31, 1999 and 1998,
respectively. The shares used in computing diluted earnings per share were
23,619,388 and 22,563,259 shares for the three months ended August 31, 1999
and 1998, respectively.
3. PROVISION FOR INCOME TAXES - The provision for income taxes for the three
and six months ended August 31, 1999 and 1998 is based upon Staff Builders
estimated tax provision required for the full year.
4. CONTINGENCIES - Although the Company cannot estimate the ultimate cost of
its open legal matters with precision, it maintains a loss contingency
accrual for the aggregate estimated amount to settle such matters. In
management's opinion, settlement of these matters will not have a material
adverse effect on the Company's consolidated financial position, liquidity
or results of operations.
5. SALE OF BUSINESS - On September 17, 1999, the Company sold its entire
interest in Chelsea for total consideration of $17.5 million, subject to a
post-closing net asset book value adjustment. Such consideration included
$14.5 million received in cash and $3.0 million to be paid in cash upon
completion of the Distribution, $500 thousand of which is payable to a
former principal of Chelsea. The proceeds received of $14.5 million were
used to pay off $8.4 million of borrowings under the Company's acquisition
line of credit and $1.5 million to pay down the Company's revolving line of
credit. The remaining $4.6 million was used to pay down TLC's revolving
line of credit. There was no material gain or loss from this transaction.
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 Staff Builders
results of operations and financial condition. This discussion should be read in
conjunction with the Condensed Consolidated Financial Statements appearing in
Item 1.
RESULTS OF OPERATIONS
Total revenues increased by $5.8 million or 18.0% for the three months ended
August 31, 1999 to $37.9 million from $32.1 million for the three months ended
August 31, 1998. For the six months ended August 31, 1999 ("the 1999 period"),
total revenues increased by $16.1 million or 27.0% to $75.6 million from $59.5
million for the six months ended August 31, 1998 ("the 1998 period"). The
increase in total revenues for the 1999 period was primarily due to an increase
in supplemental staffing revenues of $14.0 million, or 31.3% to $58.5 million in
the 1999 period from $44.6 million in the 1998 period.
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<PAGE> 9
The increase in the supplemental staffing revenues in the 1999 period over the
1998 period was primarily due to the increase in the number of staffing offices
to 57 locations operated by 40 licensees as of August 31, 1999 as compared to 46
locations operated by 35 licensees as of February 28, 1998. Additionally,
information technology staffing revenues generated by Chelsea, a subsidiary in
which the Company owned a majority interest, were $17.1 million and $14.9
million in the 1999 and 1998 periods, respectively.
Operating costs (the direct costs of providing services) were 76.2% and 77.5% of
total revenues for the three months ended August 31, 1999 and 1998, and 77.2%
and 77.8% for the six months ended August 31, 1999 and 1998, respectively. The
decrease in operating costs as a percentage of total revenues for the three and
six months ended August 31, 1999 as compared to the same periods in the prior
year is primarily due to an increase in supplemental staffing billing rates and
changes in the service mix towards higher margin business. Supplemental staffing
direct operating costs as a percentage of related revenues were 77.0% and 78.5%
for the 1999 and 1998 periods, and information technology staffing direct
operating costs as a percentage of related revenues were 77.8% and 75.7%,
respectively.
General and administrative expenses increased by $1.4 million, or 28.1%, to $6.5
million for the three months ended August 31, 1999 from $5.1 million for the
three months ended August 31, 1998. For the six months ended August 31, 1999,
general and administrative expenses increased by $3.2 million, or 33.7%, to
$12.6 million from $9.4 million for the six months ended August 31, 1998. The
increase in general and administrative expenses for the three and six months
ended August 31, 1999 as compared to the same periods in the prior year is
primarily due to the expansion of the Company.
Interest expense was approximately $700 thousand and $400 thousand for the three
months ended August 31, 1999 and 1998, and $1.3 million and $700 thousand for
the six months ended August 31, 1999 and 1998, respectively. The increase in
interest expense for the three and six months ended August 31, 1999 as compared
to the same periods in the prior year is primarily due to increased borrowings
under the secured revolving lines of credit, together with higher interest rates
on such borrowings.
The provision for income taxes of $832 thousand and $1.1 million for the three
and six months ended August 31, 1999, respectively, primarily consists of state
income taxes. In the fourth quarter of the year ended February 28, 1999, a
valuation allowance was recorded aggregating $2 million. Such valuation
allowance was recorded because management does not believe that the utilization
of the tax benefits from operating losses and other temporary differences are
"more likely than not" to be required by Statement of Financial Accounting
Standards No. 109. There has been no change to this determination relative to
the 1999 period.
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<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Staff Builders has a secured credit facility which consists of a revolving line
of credit under which Staff Builders is permitted to borrow amounts based upon
certain percentages of eligible receivables, up to the maximum amount of the
credit facility. On September 17, 1999, Staff Builders paid off an acquisition
line of credit which prior thereto was also included as part of the secured
credit facility (see "Sale of Business").
On September 24, 1999, the Company entered into an amended and restated loan and
security agreement ("Loan Agreement") which expires on February 29, 2000. The
Loan Agreement provides for the Company to borrow up to a maximum of $17.0
million which shall be reduced to $15.0 million on the earlier of (a) October
29, 1999, or (b) the date of the Distribution. The Company is permitted to
borrow up to 75% of eligible accounts receivable, up to the maximum amount of
the credit facility. Until the earlier of October 29, 1999 or the date of the
Distribution, the Company is permitted to have additional borrowing capability
of up to $2.0 million over its borrowing base, provided that TLC can provide
such calculated availability under its borrowing base. On the Distribution date,
the provisions in the Loan Agreement which provide for cross-default and cross-
collateralization with the TLC loan facility will terminate, and as of the
Distribution, each of the Company and TLC will have separate and independent
loan facilities. During the period ending February 29, 2000 through which the
Company may borrow under the amended loan and security agreement, management is
taking steps to obtain new financing.
The borrowings under the credit facility bear interest at 2.0% over the
prevailing prime lending rate (such rate being 8.25% as of October 19, 1999). In
addition, the Company is required to pay a monthly collateral management fee of
$3 thousand and .375% per annum of the daily unused portion of the credit
facility. The Company paid bank fees of $170 thousand in connection with the
execution of the Loan Agreement. Subsequently, the Company is required to pay
facility fees of $131 thousand on each of November 30 and December 30, 1999 and
$75 thousand on January 31, 2000. If the loan is fully paid on a date prior to
any of the foregoing dates, then the Company will not be required to make any of
the payments on dates subsequent to the loan pay off date.
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On September 17, 1999, the Company sold its entire interest in Chelsea for total
consideration of $17.5 million, subject to a post-closing net asset book value
adjustment. Such consideration included $14.5 million received in cash and $3.0
million to be paid in cash upon completion of the Distribution, $500 thousand of
which is payable to a former principal of Chelsea. The proceeds received of
$14.5 million were used to pay off $8.4 million of borrowings under the
Company's acquisition line of credit and $1.5 million to pay down the Company's
revolving line of credit. The remaining $4.6 million was used to pay down TLC's
revolving line of credit. There was no material gain or loss from this
transaction.
The Company's working capital deficiency was $3.6 million and $2.3 million at
August 31 and February 28, 1999, respectively. Current liabilities at August 31,
1999 include $24.4 million of outstanding borrowings under the secured credit
facility (of which $9.9 million was paid on September 17, 1999). The Company is
currently investigating alternative sources of funding.
YEAR 2000
Many computer systems, applications, information technologies and equipment
containing computer related components (generally "computer systems and
equipment") are unable to differentiate between the year 2000 and the year 1900
because they were programmed with two-digit, rather than four digit, date
fields. Accordingly, older computer systems that have time-sensitive
applications may not properly recognize the year 2000 and beyond("Year 2000
issue"). This could cause system or equipment shut downs, failures or
miscalculations resulting in inaccuracies in computer output or disruptions of
operations, including, among other things, inaccurate processing of financial
information and/or temporary inabilities to process transactions, manufacture
products, or engage in similar normal business activities.
The Company has made upgrades to its computer systems and equipment controlling
its general ledger, accounts payable and payroll systems and believes that these
systems are largely Year 2000 compliant. The Company is continuing its upgrades
with respect to the front end systems, which include scheduling and billing. The
Company expects to complete such upgrades by November 30, 1999. The Company
believes that with these upgrades, the Year 2000 issue will not pose significant
operational problems for its computer systems and equipment. However, if such
upgrades are not made or are not completed in a timely fashion, the Year 2000
issue might have an adverse impact on the operations of the Company, the precise
degree of which cannot be known at this time.
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In addition to risks associated with the Company's own computer systems and
equipment, the Company has relationships with, and is to varying degrees
dependent upon, a large number of third party vendors that provide information,
goods and services to the Company and third party customers to which the Company
provides its services. These include financial institutions, companies in
industry, and Federal and state government agencies. If significant numbers of
these third parties experience failures in their computer systems or equipment
due to the Year 2000 issue and if, in particular, the Federal government is not
Year 2000 compliant these failures could adversely affect the Company's ability
to process transactions or engage in similar normal business activities. While
some of these risks are outside of the Company's control, it has instituted
programs, including internal records review to identify key third parties,
assess their level of Year 2000 compliance, update contracts and address any
non-compliance issues.
The total cost of the Year 2000 systems assessment and upgrades is funded
through operating cash flows and the Company is expensing certain items and
capitalizing others. The estimated cost to replace existing software
applications, including modifications to accommodate the Year 2000, is
approximately $3 million, including the cost of implementation. The actual cost
could, however, exceed this estimate. The Company has not established a
contingency plan to deal with major Year 2000 failures, if any, and does not
intend to establish a contingency plan because it is comfortable with progress
made to date, although no assurances can be made.
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 the inclusion of phrases
such as "the Company anticipates", "the Company believes" and other phrases of
similar meaning. These forward looking statements are based on the Company's
current expectations. 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. The potential risks and uncertainties which could
cause actual results to differ materially from the Company's expectations
include the pricing pressures from third-party payors; Year 2000 failures; and
inability to obtain financing on satisfactory terms.
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
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to establish or maintain such relationships. The Company expects additional
competition will develop in future periods given the increasing market demand
for the type of services offered.
ATTRACTION AND RETENTION OF LICENSEES AND EMPLOYEES. Maintaining quality
licensees 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 performance of the Company. The possible inability to attract and
retain qualified licensees, and sufficient numbers of credentialed health care
professionals and para-professionals could adversely affect the Company's
operations and quality of service.
SATISFACTORY FINANCING. Staff Builders' working capital deficiency as of August
31, 1999 was $3.6 million. The Company's credit facility expires February 29,
2000. Although the Company is in the process of seeking new financing, there can
be no assurance that a new credit facility will be available by February 29,
2000.
YEAR 2000. The Company believes that because of the upgrades it has made and is
making to its computer systems, the Year 2000 issue will not pose significant
operational problems for it. However, if the upgrades are not completed on time,
the Year 2000 issue might have an adverse effect. The Company has not
established a contingency plan to deal with major Year 2000 failures, if any,
and does not intend to establish a contingency plan because it is comfortable
with progress made to date, although no assurances can be made. The total cost
of the Company's Year 2000 systems assessments and upgrades is funded through
operating cash flows and leases. If the financial condition of Staff Builders
deteriorates, it may be unable to fund these systems assessments and upgrades.
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<PAGE> 14
PART II - OTHER INFORMATION
ITEM 5. - OTHER INFORMATION
SALE OF BUSINESS AND PRO FORMA FINANCIAL INFORMATION
On September 17, 1999, the Company sold its entire interest in Chelsea for total
consideration of $17.5 million, subject to a post-closing net asset book value
adjustment. Such consideration included $14.5 million received in cash and $3.0
million to be paid in cash upon completion of the Distribution, $500 thousand of
which is payable to a former principal of Chelsea. The proceeds received of
$14.5 million were used to pay off $8.4 million of borrowings under the
Company's acquisition line of credit and $1.5 million to pay down the Company's
revolving line of credit. The remaining $4.6 million was used to pay down TLC's
revolving line of credit. There was no material gain or loss from this
transaction.
The following unaudited pro forma consolidated balance sheet as of August 31,
1999 and unaudited pro forma consolidated statements of operations of the
Company for the six months ended August 31, 1999 and the fiscal year ended
February 28, 1999 (collectively, the "Pro Forma Statements") are based on the
historical Consolidated Financial Statements of Staff Builders included
elsewhere in this quarterly report as adjusted to give effect to the sale of
Chelsea. See assumptions and adjustments in the accompanying Notes to the Pro
Forma Statements. The pro forma consolidated balance sheet gives effect to the
sale of Chelsea as if it occurred on August 31, 1999 and the pro forma
consolidated statements of operations give effect to the sale of Chelsea as if
it occurred on the first day of each respective period.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable. The Pro Forma Statements
do not purport to represent what the Company's financial position and result of
operations would actually have been had the sale of Chelsea occurred on such
dates or to project the Company's financial position or results of operations
for any future period.
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<PAGE> 15
STAFF BUILDERS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA CONSOLID.
AUGUST ADJUSTS. AUGUST
31, 1999 (A) 31, 1999
--------- --------- ---------
<S> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 666 $ (497)(B) $ 169
Accounts receivable, net 31,010 (5,974)(B) 25,036
Prepaid expenses and
other current assets 1,977 (487)(B) 1,490
--------- --------- ---------
Total current assets 33,653 (6,958) 26,695
Fixed Assets, net 1,301 (49)(B) 1,252
Intangible Assets, net 21,644 (12,768)(B) 8,876
Other Assets 247 (113)(B) 134
--------- --------- ---------
Total Assets $ 56,845 (19,888) 36,957
========= ========= =========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 8,519 $ (1,253)(B) $ 7,266
Accrued payroll and payroll
related expenses 3,493 (1,190)(B) 2,303
Income taxes payable 721 (368)(B) 353
Other current liabilities 65 (65)(B) --
Current portion of long-term debt 24,418 (13,321)(B) 11,097
--------- --------- ---------
Total current liabilities 37,216 (16,197) 21,019
--------- --------- ---------
OTHER LIABILITIES 25 -- 25
--------- --------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A Common stock 236 -- 236
Class B Common stock -- -- --
Additional paid-in capital 16,110 (1,498)(B) 14,612
Retained earnings 3,258 (2,193)(B) 1,065
--------- --------- ---------
Total stockholders' equity 19,604 (3,691) 15,913
--------- --------- ---------
Total Liabilities and Stockholders Equity $ 56,845 $ (19,888) $ 36,957
========= ========= =========
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements
-14-
<PAGE> 16
STAFF BUILDERS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA CONSOLID.
AUGUST 31, ADJUSTS. AUGUST 31,
1999 (A) 1999
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Supplemental staffing $ 58,533 $ -- $ 58,533
Information technology staffing 17,069 (17,069)(B) --
--------- --------- ---------
Total service revenues 75,602 (17,069) 58,533
--------- --------- ---------
Sale of licensees and fee, net 13 -- 13
--------- --------- ---------
Total revenues 75,615 (17,069) 58,546
--------- --------- ---------
Costs and Expenses:
Operating costs 58,383 (13,278)(B) 45,105
General and administrative expenses 12,724 (1,577)(B) 11,147
Amortization of intangible assets 52 -- 52
Interest expense 1,298 (117)(B) 1,181
Interest (income) (5) 1 (B) (4)
Other (income) expense, net 199 (265)(B) (66)
--------- --------- ---------
Total costs and expenses 72,651 (15,236) 57,415
--------- --------- ---------
INCOME BEFORE INCOME TAXES 2,964 (1,833) 1,131
PROVISION FOR INCOME TAXES 1,114 (1,004)(C) 110
--------- --------- ---------
NET INCOME $ 1,850 $ (829) $ 1,021
========= ========= =========
EARNINGS PER COMMON SHARE:
Basic $ 0.08 $ 0.04
========= =========
Diluted $ 0.08 $ 0.04
========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic 23,619 -- 23,619
========= =========
Diluted 23,619 -- 23,619
========= =========
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements
-15-
<PAGE> 17
STAFF BUILDERS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
STAFF PRO FORMA
BUILDERS ADJUSTS. PRO FORMA
HISTORICAL (A) CONSOLID.
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Supplemental staffing $ 94,505 $ -- $ 94,505
Information technology staffing 31,331 (31,331)(B) --
---------- ---------- ----------
Total service revenues 125,836 (31,331) 94,505
---------- ---------- ----------
Sale of licensees and fee, net 190 -- 190
---------- ---------- ----------
Total revenues 126,026 (31,331) 94,695
---------- ---------- ----------
Costs and Expenses:
Operating costs 99,803 (25,900)(B) 73,903
General and administrative expenses 22,824 (3,314)(B) 19,510
Amortization of intangible assets 124 -- 124
Interest expense 1,626 (344)(B) 1,282
Interest (income) (75) -- (75)
Other (income) expense, net 468 (319)(B) 149
---------- ---------- ----------
Total costs and expenses 124,770 (29,877) 94,893
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 1,256 (1,454) (198)
PROVISION FOR INCOME TAXES 922 (993)(C) (71)
---------- ---------- ----------
NET INCOME (LOSS) $ 334 $ (461) $ (127)
========== ========== ==========
EARNINGS (LOSS) PER COMMON SHARE:
Basic $ 0.00 $ (0.00)
========== ==========
Diluted $ 0.00 $ (0.00)
========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic 23,162 -- 23,162
========== ==========
Diluted 23,162 -- 23,162
========== ==========
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements
-16-
<PAGE> 18
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(A) The following pro forma adjustments reflect the sale of Chelsea.
(B) Pro forma adjustments to remove assets, liabilities, revenues and
expenses of Chelsea and to record the entire sales transaction including related
selling expenses.
(C) Pro forma adjustments to give effect to the computation of income taxes
as if separate income tax returns were filed.
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit No.
2 Purchase Agreement dated as of September 17,
1999 among MSX International Engineering
Services, Inc., Staff Builders, Inc., Raymond
Sheerin, Michael Altman and Chelsea Computer
Consultants, Inc. (A)
10.1 Distribution Agreement, dated as of October 20,
1999, between the Company and Tender Loving
Care Health Care Services, Inc. (B)
10.2 Tax Allocation Agreement, dated as of October
20, 1999, between the Company and Tender Loving
Care Health Care Services, Inc. (B)
10.3 Transitional Services Agreement, dated as of October 20, 1999,
between the Company and Tender Loving Care Health Care
Services, Inc. (B)
10.4 Trademark License Agreement, dated as of October 20, 1999,
between the Company and Tender Loving Care Health Care
Services, Inc.(B)
10.5 Sublease, dated as of October 20, 1999, between
the ATC Healthcare Services, Inc. and Tender
Loving Care Health Care Services, Inc. (B)
10.6 Employee Benefits Agreement, dated as of October 20, 1999,
between the Company and Tender Loving Care Health Care
Services, Inc. (B)
-17-
<PAGE> 19
10.7 ATC Revolving Credit Loan and Security
Agreement dated June 16, 1999, between ATC
Healthcare Services, Inc., ATC Staffing
Services, Inc. and Mellon Bank, N.A. (C)
10.8 First Amendment to ATC Revolving Credit Loan and Security
Agreement dated September 24, 1999, between ATC Healthcare
Services, Inc., ATC Staffing Services, Inc., Staff Builders,
Inc., a Delaware corporation, and Mellon Bank, N.A.
10.9 Amendment, dated as of October 20, 1999, to the Employment
Agreement between the Company and Stephen Savitsky.
10.10 Amendment, dated as of October 20, 1999, to the Employment
Agreement between the Company and David Savitsky.
10.11 Amendment, dated as of October 20, 1999, to the Employment
Agreement between the Company and Dale R. Clift.
10.12 Termination and Release, dated as of October
20, 1999, of the Employment Agreement between
the Company and Willard T. Derr.
10.13 Termination and Release, dated as of October
20, 1999, of the Employment Agreement between
the Company and Renee J. Silver.
10.14 Consulting Agreement, dated as of October 20,
1999, between the Company and Renee J. Silver.
10.15 Consulting Agreement, dated as of October 20,
1999, between the Company and Willard T. Derr.
10.16 Second Amendment to ATC Revolving Credit Loan and Security
Agreement, dated October 20, 1999 between ATC Healthcare
Services, Inc., ATC Staffing Services, Inc., Staff Builders,
Inc., and Mellon Bank, N.A.
27 Financial Data Schedule.
Notes to Exhibits
(A) Incorporated by reference to Staff Builders, Inc.'s Form 8-K
(File No. 0-11380) filed with the Commission on October 4,
1999.
(B) Incorporated by reference to Tender Loving Care Health Care
Services, Inc.'s Form 10-Q (File No. 0-25777), filed with the
Commission on October 20, 1999.
(C) Incorporated by reference to the Company's Form 10Q (File No.
0-11380) filed with the Commission on July 20, 1999.
-18-
<PAGE> 20
(B) REPORTS ON FORM 8-K
The following Form 8-K reports were filed by the Company:
I. Form 8-K filed on October 4, 1999.
-19-
<PAGE> 21
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. and
Subsidiaries
Dated: October 20, 1999 By: /s/ Stephen Savitsky
-------------------------------------
Stephen Savitsky
Chairman of the Board, President
and Chief Executive Officer
Dated: October 20, 1999 By: /s/ Joseph Murphy
-------------------------------------
Joseph Murphy
Vice President, Finance and
Chief Financial Officer
-20-
<PAGE> 22
STAFF BUILDERS EXHIBIT LIST
ITEM 6. Exhibits and Reports on Form 8-K
(A) Exhibits
2 Purchase Agreement dated as of September 17, 1999 among MSX
International Engineering Services, Inc., Staff Builders, Inc., Raymond
Sheerin, Michael Altman and Chelsea Computer Consultants, Inc. (A)
10.1 Distribution Agreement, dated as of October 20, 1999, between the
Company and Tender Loving Care Health Care Services, Inc. (B)
10.2 Tax Allocation Agreement, dated as of October 20, 1999, between the
Company and Tender Loving Care Health Care Services, Inc. (B)
10.3 Transitional Services Agreement, dated as of October 20, 1999, between
the Company and Tender Loving Care Health Care Services, Inc. (B)
10.4 Trademark License Agreement, dated as of October 20, 1999, between
the Company and Tender Loving Care Health Care Services, Inc. (B)
10.5 Sublease, dated as of October 20, 1999, between ATC Heathcare
Services, Inc. and Tender Loving Care Health Care Services, Inc. (B)
10.6 Employee Benefits Agreement, dated as of October 20, 1999 between the
Company and Tender Loving Care Health Care Services, Inc. (B)
10.7 ATC Revolving Credit Loan and Security Agreement dated June 16, 1999,
between ATC Healthcare Services, Inc., ATC Staffing Services, Inc. and
Mellon Bank, N.A. (C)
10.8 First Amendment to ATC Revolving Credit Loan and Security Agreement
dated September 24, 1999 between ATC Healthcare Services, Inc., ATC
Staffing Services, Inc., Staff Builders, Inc., a Delaware corporation,
and Mellon Bank, N.A.
10.9 Amendment, dated as of October 20, 1999, to the Employment Agreement
between the Company and Stephen Savitsky.
<PAGE> 23
10.10 Amendment, dated as of October 20, 1999, to the Employment Agreement
between the Company and David Savitsky.
10.11 Amendment, dated as of October 20, 1999, to the Employment
Agreement between the Company and Dale R. Clift.
10.12 Termination and Release, dated as of October 20, 1999, of the
Employment Agreement between the Company and Willard T. Derr.
10.13 Termination and Release, dated as of October 20, 1999, of the
Employment Agreement between the Company and Renee J. Silver.
10.14 Consulting Agreement, dated as of October 20, 1999, between the
Company and Renee J. Silver.
10.15 Consulting Agreement, dated as of October 20, 1999, between the
Company and Willard T. Derr.
10.16 Second Amendment to ATC Revolving Credit Loan and Security Agreement,
dated October 20, 1999 between ATC Healthcare Services, Inc., ATC
Staffing Services, Inc., Staff Builders, Inc., and Mellon Bank, N.A.
27 Financial Data Schedule.
NOTES TO EXHIBITS
(A) Incorporated by reference to the Company's Form 8-K (File No. 0-11380)
filed with the Commission on October 4, 1999.
(B) Incorporated by reference to Tender Loving Care Health Care Services,
Inc.'s Form 10-Q (File No. 0-25777) filed with the Commission on October
20, 1999.
(C) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended May 31, 1999 (File No. 0-11380), filed with the Commission
on July 20, 1999.
(B) Reports on Form 8-K
The following Form 8-k reports were filed by the Company:
I. Form 8-K filed on October 4, 1999.
<PAGE> 1
EXHIBIT 10.8
FIRST AMENDMENT TO ATC REVOLVING CREDIT
LOAN AND SECURITY AGREEMENT
This First Amendment to ATC Revolving Credit Loan and Security
Agreement ("Amendment"), dated September 24, 1999, is made by and among ATC
HEALTHCARE SERVICES, INC., a Georgia corporation ('ATC Healthcare"), and ATC
STAFFING SERVICES, INC., a Delaware corporation ("ATC Staffing") (each of the
foregoing individually, an "Existing Borrower" and collectively, the "Existing
Borrowers") and STAFF BUILDERS, INC., a Delaware corporation ("Staff Builders")
and MELLON BANK, N.A. ("Lender").
BACKGROUND
A. Lender and Existing Borrowers are parties to a certain ATC Revolving
Credit Loan and Security Agreement, dated June 25, 1999 (as heretofore or
hereafter amended, modified, supplemented or replaced from time to time, "Loan
Agreement"). Capitalized terms used but not otherwise defined in this Amendment
shall have the meanings set forth in the Loan Agreement.
B. Contemporaneously with the execution of this Amendment, Tender
Loving Care Health Care Services, Inc., a Delaware corporation ("TLC"), each
member of the Home Healthcare Group (all of the foregoing collectively, the "TLC
Group") and Lender shall enter into a certain Second Amended and Restated Loan
and Security Agreement C'TLC Loan Agreement") and related instruments,
agreements and documents (all of the foregoing collectively, "TLC Loan
Documents") pursuant to which certain terms and conditions of the Existing Loan
Documents are modified as more fully set forth therein.
C. Pursuant to the TLC Loan Documents, ATC Healthcare and ATC Staffing
shall remain, and Staff Builders (a co-Borrower under the predecessor agreement
to the TLC Loan Agreement) shall become, liable as sureties for all obligations
and liabilities of TLC and the Home Healthcare Group under the TLC Loan
Documents.
D. Staff Builders has notified Lender that a plan has been approved by
the Board of Directors of Staff Builders to separate its home healthcare
business from its supplemental staffing business and to create two separate,
publicly-traded companies, one engaged exclusively in providing home healthcare
services and the other engaged exclusively in providing supplemental staffing
services (the "Spin-Off"). After consummation of Spin-Off, the publicly traded
company engaged exclusively in home healthcare services shall be TLC and the
publicly traded company engaged exclusively in providing supplemental staffing
services shall be Staff Builders.
E. At Borrowers' request, prior to the proposed Spin-Off, Lender and
Borrowers desire to modify the terms and conditions of the Loan Agreement as
more fully described herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby promise and agree as follows:
1 JOINDER.
(a) Staff Builders, presently obligated to Lender as a surety for
all Obligations under the Loan Agreement, hereby joins in, assumes, adopts, and
becomes a Co-Borrower under the Loan Agreement and all other Loan Documents. All
references to Borrowers contained in this Amendment as well as in the Loan
<PAGE> 2
Agreement, Revolving Credit Note and other Loan Documents are deemed, for all
purposes, to also refer to and include Staff Builders as a Borrower. Staff
Builders agrees that it has become a party to and agrees to comply with all of
the terms and conditions of, and undertakings and obligations of Borrowers
under, the Loan Agreement and other Loan Documents as if it were an original
signatory thereto.
(b) Without limiting the generality of the provisions of
subparagraph (a) above, Staff Builders confirms that it is primarily and
unconditionally liable, on a joint and several basis, as a Borrower with each
other Borrower, for all Obligations now or at any time outstanding under the
Loan Documents, as amended hereby or as may hereafter be amended, supplemented
or replaced and (ii) as security for the payment of all Obligations and
performance of all covenants and undertakings in the Loan Documents, Staff
Builders reconfirms its grant to Lender of an assignment and continuing first
lien on and security interest in all of the items and types of Collateral
described in Section 3.1 of the Loan Agreement and agrees to execute and deliver
to Lender any and all further UCC-1 financing statements for filing in all
jurisdictions which Lender may deem appropriate. Staff Builders further
acknowledges that any and all rights and claims to the Pre-Dividend Property (as
defined by that certain Escrow Agreement, dated as of September 17, 1999, by and
between MSX International Engineering Services, Inc. ("MSXI") and Staff
Builders) under any and all agreements between Staff Builders and MSXI relating
to the sale of Chelsea Computer Consultants, Inc. ("Chelsea Sale Documents") are
included as Collateral. Borrowers further confirm that the Lender has not
assumed and has no responsibility or liability for performance of any duty or
obligation of Staff Builders under the Chelsea Sale Documents.
2. MAXIMUM REVOLVING CREDIT AMOUNT. The "Maximum Revolving Credit
Amount" of the Revolving Credit shall be Seventeen Million Dollars ($17,000,000)
which shall be automatically reduced to Fifteen Million Dollars ($15,000,000) on
the earlier of: (a) October 29, 1999, or (b) the date of the Spin-off. On the
date of such automatic reduction, any and all principal amounts outstanding in
excess of Fifteen Million Dollars ($15,000,000) shall be immediately due and
payable in full.
3. DEFINITIONS. Section 1.1 of the Loan Agreement is hereby amended by
deleting the definitions of "Obligations", "Revolving Credit Maturity Date" and
"Unfunded Capital Expenditures" in their entirety and replacing them with the
following:
OBLIGATIONS - All existing and future liabilities of Borrowers
to Lender, including, without limitation, indebtedness evidenced under
the Revolving Credit Note issued pursuant hereto, the Loans, repayment
of cash advances, all existing and future obligations of Borrowers as
sureties for the obligations of Tender Loving Care Health Care
Services, Inc., a Delaware corporation and the Home Healthcare Group to
Lender, all fees and charges owing by Borrowers, and all other
liabilities and obligations of every kind or nature whatsoever of
Borrowers to Lender, whether hereunder or otherwise, whether now
existing or hereafter incurred, joint or several, matured or unmatured,
direct or indirect, primary or secondary, related or unrelated, due or
to become due, including, without limitation, any extensions,
modifications, substitutions, increases and renewals thereof, and
substitutions therefor; the payment of all amounts advanced by Lender
to preserve, protect, defend, and enforce its rights hereunder and in
the Collateral in accordance with the terms of this Agreement; and the
payment of all Expenses.
REVOLVING CREDIT MATURI1Y DATE - February 29, 2000.
<PAGE> 3
UNFUNDED CAPITAL EXPENDITURES - Any expenditure (except for
any expenditure classified as an Unfunded Y2K Capital Expenditure) that
would be classified as a capital expenditure on a consolidated
statement of cash flows of Borrowers prepared in accordance with GAAP.
4. DEFINITIONS. Section 1. 1 of the Loan Agreement is hereby amended by
adding the definitions of "Book Net Worth", "Excess Cash Flow", "Net Income" and
"Unfunded Y2K Capital Expenditure" with the following:
BOOK NET WORTH - For any period, the amount by which all
assets of Borrowers exceed all of Borrowers' Liabilities, as would be
shown on a consolidated balance sheet of Borrowers prepared as of such
date in accordance with GAAP.
Excess Cash Flow - Net Income plus depreciation expense minus
any payments on long term indebtedness.
Net Income - The net income after taxes of Borrowers, as such
would be shown on a consolidated profit and loss statement of
Borrowers, prepared in accordance with GAAP.
TOTAL DEBT TO BOOK NET WORTH RATIO - The ratio of (i) total
Liabilities to (ii) Book Net Worth, as would be shown on a
consolidated balance sheet of Borrowers prepared as of such date in
accordance with GAAP.
Unfunded Y2K Capital Expenditures - Any expenditure by
Borrowers for the purpose of addressing the Year 2000 Problem that
would be classified as a capital expenditure on a consolidated
statement of cash flows of Borrowers prepared in accordance with GAAP.
5. Termination Fee. The Loan Agreement is amended by deleting
Subsection 2.6(c) thereof in its entirety.
6. Nature of Collateral. The Loan Agreement is amended by deleting
Section 3. 10 in its entirety and replacing it with the following:
3.10 Nature of Collateral: Borrowers confirm and agree that
all security interests and liens granted hereunder shall continue
unimpaired and in full force and effect until all Obligations are
satisfied in full.
7. Financial Covenants. The Loan Agreement is amended by deleting
Section 6.12 in its entirety and replacing it with the following:
6.12 Financial Covenants: Borrowers shall comply with the
following financial covenants
(a) Unfunded Capital Expenditures - Borrowers shall not
expend, on a consolidated basis, sums for Unfunded Capital Expenditures
in excess of the following amounts during the following respective
periods, all determined on a non-cumulative basis:
<PAGE> 4
Period Amount
October 1, 1999 through November 30, 1999 $300,000
December 1, 1999 through January 31, 2000 $15,000
February 1, 2000 through February 29, 2000 $15,000
(a) Unfunded Y2K Capital Expenditures - Borrowers shall not
expend, on a consolidated basis, sums for Unfunded Y2K Capital
Expenditures in excess of the following amounts during the following
respective periods, all determined on a non-cumulative basis:
Period Amount
September 1, 1999 through September 30, 1999 $545,000
October 1, 1999 through November 30, 1999 $895,000
December 1, 1999 and all times thereafter $0
(b) Net Income - Borrowers shall have achieved, on a
consolidated basis, Net Income of not less than the following amounts
for the following respective periods:
Period Amount
September 1, 1999 through September 30, 1999 $25,000
October 1, 1999 through October 31, 1999 $90,000
November 1, 1999 through November 30, 1999 $90,000
December 1, 1999 through December 31, 1999 $90,000
January 1, 2000 through January 31, 2000 $65,000
February 1, 2000 through February 29, 2000 $70,000
(c) Book Net Worth - Borrowers shall have a Book Net Worth of
not less than the following amounts at all times during the following
respective periods:
Period Amount
October 1, 1999 through October 31, 1999 $17,340,000
November 1, 1999 through November 30, 1999 $17,430,000
December 1, 1999 through December 31, 1999 $17,520,000
January 1, 2000 through January 31, 2000 $17,585,000
February 1, 2000 through February 29, 2000 $17,655,000
<PAGE> 5
(d) TOTAL DEBT TO BOOK NET WORTH RATIO - Borrowers shall have
and maintain a Total Debt to Book Net Worth Ratio of not more than the
following ratios during the following respective periods:
Period Ratio
October 1, 1999 through October 31, 1999 1.20:1
November 1, 1999 through November 30, 1999 1.15:1
December 1, 1999 through December 31, 1999 1.05:1
January 1, 2000 through January 31, 2000 1.00:1
February 1, 2000 through February 29, 2000 1.00:1
(e) EXCESS CASH FLOW - Borrowers shall have achieved, on a
consolidated basis, Excess Cash Flow of not less than the following
amounts for the following respective periods:
Period Amount
September 1, 1999 through September 30, 1999 $70,000
October 1, 1999 through October 31, 1999 $150,000
November 1, 1999 through November 30, 1999 $150,000
December 1, 1999 through December 31, 1999 $150,000
January 1, 2000 through January 31, 2000 $155,000
February 1, 2000 through February 29, 2000 $155,000
For purposes hereof, Unfunded Capital Expenditures and
Unfunded Y2K Capital Expenditures are eliminated from the calculation
of Excess Cash Flow.
8. DIVIDENDS. Notwithstanding any provisions contained in Section 7.6
of the Loan Agreement to the contrary, Staff Builders shall be permitted to
dividend the stock of TLC to the shareholders of Staff Builders in conjunction
with the Spin-Off.
9. PERMITTED OVERADVANCE. As of the date hereof, Borrowers shall be
permitted additional availability under the Revolving Credit Borrowing Base in
an amount ('Permitted Overadvance") not to exceed Two Million Dollars
($2,000,000); provided however, that (a) the Permitted Overadvance shall not
exceed, on a daily basis, the dollar for dollar amount of the Excess Borrowing
Availability (as defined in the TLC Loan Agreement) of the TLC Group, and (b)
the sum of (i) the Permitted Overadvance plus (ii) the amount of outstanding
Loans under the TLC Loan Agreement shall not exceed the Maximum Revolving Credit
Amount (as defined in the TLC Loan Agreement). The parties hereby agree that as
of the earlier of (Y) October 29, 1999, or (z) the date of the Spin-Off, the
Permitted Overadvance shall be equal to zero dollars ($0.00). Moreover, no
Permitted Overadvance shall thereafter be made or allowed. Notwithstanding the
foregoing, at no time shall Advances to Borrowers under the Revolving Credit
exceed the Maximum Revolving Credit Amount.
10. FACILI1Y FEE. In consideration of the agreements of Lender herein,
Borrowers hereby jointly, severally and unconditionally agree and covenant to
pay Lender a facility fee ("Facility Fee") on the dates and in the amounts
designated on the following schedule:
<PAGE> 6
Date of Payment Amount of Payment
On the date hereof $85,000
November 30, 1999 $131,250
December 30, 1999 $131,250
January 31, 2000 $75,000
The above-described payments, upon being made, shall be
non-refundable. The Facility Fee is deemed fully earned as of the date hereof;
provided however, that if the Revolving Credit is terminated and all Obligations
are satisfied in full on a date ("Loan Satisfaction Date") prior to any of the
following dates: (a) November 30, 1999, (b) December 30, 1999, or (c) January
31, 2000, then Borrowers shall not be required to make any of the payments
designated in the above schedule to be paid on a date subsequent to the actual
Loan Satisfaction Date.
11. RESTRUCTURING FEE. In further consideration of the agreements of
Lender herein, Borrowers hereby jointly, severally and unconditionally agree and
covenant to pay, contemporaneously with the execution of this Amendment, to
Lender a non-refundable restructuring fee ("Restructuring Fee") of Eighty Five
Thousand Dollars ($85,000).
12. COVENANTS. Borrowers hereby agree and covenant as follows:
(a) Borrowers shall continue to retain for the remaining period of
the Contract Term a consultant selected by Borrowers but acceptable to Lender to
provide financial and strategic advice to Borrowers, to validate Borrowers'
projections, and to analyze, inter alia, the viability of each Borrower's
business, profitability, ability to meet its current and long term obligations,
the effect on the business, properties, assets, financial condition, results of
operations or prospects of each Borrower of any monetary or non-monetary
obligations resulting from the Year 2000 Problem, and the effect on each
Borrower of the scheduled bank amortization under the terms of the proposed
Spin-Off. Upon receipt by Borrowers of any written reports by such consultant,
Borrowers shall promptly deliver a copy of such report to Lender;
(b) Borrowers shall continue, unless Lender agrees otherwise, to
retain for the remaining period of the Contract Term a collection agency
selected by Borrowers but acceptable to Lender to provide assistance in the
collection of past due Accounts of Borrowers;
(c) Borrowers shall continue to impose for the remaining period of
the Contract Term a twenty percent (20%) reduction on the salaries of Stephen
Savitsky and David Savitsky;
(d) Notwithstanding any other provisions of the Loan Agreement to
the contrary, none of the Borrowers shall at any time (i) enter into the
purchase, sale, or exchange of Property with; (ii) make or have loans, advances,
or extensions of credit to; (iii) make capital contributions or investments in;
(iv) obtain or have borrowings from; or (y) become or be liable, directly or
indirectly, primary or secondary, matured or contingent, in any manner, whether
as guarantor, surety, accommodation maker, or otherwise, for the existing or
future indebtedness of, any member of the Home Healthcare Group or TLC (whether
or not any such Person is an
<PAGE> 7
Affiliate of any Borrower), except for those transactions set forth on Exhibit
"A" attached hereto and made part hereof;
(e) At no time shall the aggregate of all Accounts of all
Borrowers outstanding and unpaid for more than one hundred and twenty (120) days
past their respective original invoice dates exceed twenty-seven percent (27%)
of the total aggregate outstanding Accounts of all Borrowers;
(f) Lender shall have the right to engage a consultant or
investment banker at any time to assist Lender in its analysis and evaluation of
Borrowers' finances and operations and Lender's Collateral, and for such
purpose, Borrowers shall permit any such advisor to Lender to have access to
Borrowers' books and records and Property. Prior to occurrence of an Event of
Default, the expense of any such advisory services shall be borne by Lender; and
(g) Lender shall have received prior to October 29, 1999, the
Pre-Dividend Property (as defined by that certain Escrow Agreement, dated as of
September 17, 1999, by MSXI and Staff Builders) in the amount of Two Million
Five Hundred Thousand Dollars ($2,500,000) from Staff Builders; and
(h) Borrowers shall have caused the Spin-Off to occur prior to
October 29, 1999, pursuant to terms and conditions acceptable to Lender.
13. CROSS-DEFAULT AND CROSS-COLLATERALIZATION.
(a) The parties acknowledge and agree that (i) an Event of Default
under the TLC Loan Agreement presently constitutes an Event of Default under the
Loan Agreement, (ii) an Event of Default hereunder presently constitutes an
Event of Default under the TLC Loan Agreement, (iii) the collateral of the TLC
Group presently secures all Obligations under the Loan Agreement, and (iv) the
Collateral of Borrowers presently secures all obligations and liabilities of the
TLC Group under the TLC Loan Documents.
(b) The parties hereby agree that if:
(i) Lender shall have received prior to October 29, 1999 the
Pre-Dividend Property from Staff Builders which shall be applied against the
Obligations of Borrowers;
(ii) the Spin-Off shall have occurred prior to October 29,
1999, pursuant to terms and conditions acceptable to Lender;
(iii) Lender shall have received on the earlier of: (A)
October 22, 1999 or (B) three (3) Business days before the occurrence of the
Spin-Off, pro-forma balance sheets of Borrowers and the TLC Group reflecting the
proposed status of each after the occurrence of the Spin-Off, with adjusting
entries with explanations, all of which shall be in form and substance
satisfactory to Lender;
(iv) Lender shall have received prior to October 29, 1999
evidence that, after giving effect to the payment described in subsection (i)
above, Borrowers have a minimum Excess Borrowing Availability of One Million Two
Hundred Thousand Dollars ($1,200,000);
<PAGE> 8
(v) Lender shall have received prior to October 29, 1999
evidence that, after giving effect to the payment described in subsection (i)
above, TLC and the Home Healthcare Group have a minimum Excess Borrowing
Availability (as defined in the TLC Loan Agreement) of Two Million Dollars
($2,000,000);
(vi) no Event of Default shall have occurred under Subsections
8. 1 (a)-(d), (h), (j)-(o), (q) and (r) of the Loan Agreement and be continuing
and no event shall have occurred which with the passage of time, the giving of
notice or both would constitute an Event of Default under such subsections of
the Loan Agreement;
(vii) no Event of Default shall have occurred under
Subsections 8. 1 (a)-(d), (h), (j)-(o), (q) and (r) of the TLC Loan Agreement
and be continuing and no event shall have occurred which with the passage of
time, the giving of notice or both would constitute an Event of Default under
such subsections of the TLC Loan Agreement;
(viii) Lender shall have received on the date of the Spin-Off,
a certificate from Borrowers, executed by each Borrower's Chief Financial
Officer, certifying that the signer has reviewed the relevant terms of this
Agreement, and has made (or caused to be made under his supervision) a review of
the transactions and conditions of Borrowers from the date of Closing to the
date of the Spin-Off, and that such review has not disclosed the existence
during such period of any condition or event which constitutes an Event of
Default hereunder or under the TLC Loan Agreement or which is then, or with the
passage of time or giving of notice, or both, would become an Event of Default
hereunder of under the TLC Loan Agreement, then
(A) an Event of Default under the TLC Loan Agreement
shall thereafter not constitute an Event of Default under the Loan Agreement;
(B) an Event of Default under the Loan Agreement shall
thereafter not constitute an Event of Default under the TLC Loan Agreement;
(C) each Borrower shall no longer serve as a surety for
all obligations of the TLC Group under the TLC Loan Documents;
(D) each member of the TLC Group shall no longer serve
as sureties for all Obligations of each Borrower under the Loan Documents;
(E) any and all collateral of the TLC Group shall no
longer secure the Obligations of Borrowers under the Loan Documents;
(F) any and all Collateral of each Borrower shall no
longer secure the obligations of the TLC Group under the TLC Loan Documents;
(G) Dale Clift and Willard Derr shall no longer be
subject to or bound by the terms and conditions set forth in those certain
Management Support Agreements and Fraud Guarantees, each dated June 25, 1999,
executed by each (with respect to the ATC Group) in favor of Lender in
conjunction with the execution of the Loan Agreement; and
(H) David Savitsky shall no longer be subject to or
bound by the terms and conditions set forth in that certain Management Support
Agreement and Fraud Guarantees, of even date
<PAGE> 9
herewith, executed by David Savitsky in favor of Lender in conjunction with the
execution of the TLC Loan Agreement.
For the purposes of subsection (iv) above, "Excess Borrowing
Availability" shall mean an amount equal to the Revolving Credit Borrowing Base
less the sum of: (i) the amount of Loans then outstanding and requested to be
made as of the date of calculation thereof, plus (ii) all sums due and owing to
trade creditors which remain outstanding beyond normal terms, plus (iii) any
reserves against the Revolving Credit Borrowing Base.
(c) The parties agree and acknowledge that in order to effectuate the
Spin-Off and upon fulfillment of the conditions set forth in Subsection (b)
above, (i) Lender shall deliver a certificate to Borrowers or, if requested by
Borrowers, to MSXI, certifying that all conditions set forth in Subsection (b)
above have been fulfilled, (ii) Lender shall release its lien on and security
interest in the stock of TLC, (iii) Lender shall deliver to Staff Builders the
pledged stock of each member of the Home Healthcare Group in exchange for
delivery to Lender of replacement certificates as described in clause (y) below,
(iv) TLC shall execute and deliver to Lender a new stock pledge agreement
covering the stock described in Subsection (iii) above, and (v) TLC shall
deliver to Lender the original replacement stock certificates representing the
stock of TLC in each member of the Home Healthcare Group, together with stock
powers executed in blank by TLC. Nothing contained herein shall impair, limit,
or affect the continuing validity, enforceability and priority of Lender's lien
and security interest, and the priority thereof, in the stock of the Home
Healthcare Group.
14. CONDITIONS TO CLOSING. Lender's obligation to enter into this
Amendment and the effectiveness of this Amendment are subject to the following
conditions having been satisfied in full to Lender's satisfaction:
(a) Borrowers shall have delivered to Lender the following (all
documents to be in form and substance acceptable to Lender):
(i) this Amendment properly executed by Borrowers;
(ii) a certain Replacement Revolving Credit Note, properly
executed by Borrowers;
(iii) a Reaffirmation of Surety Agreement, properly executed
by each member of the Home Healthcare Group;
(iv) a certain Surety Agreement, properly executed by TLC;
(v) a certain Stock Pledge Agreement, properly executed by
Staff Builders, pledging the stock of TLC to secure all of the Obligations and
reaffirming the pledge of the stock of Home Healthcare Group to secure all of
the Obligations;
(vi) certain Re-affirmations of Management Support Agreement
and Fraud Guarantee in favor of Lender, properly executed by David Savitsky,
Stephen Savitsky, Dale Clift, Willard Derr, Joseph Murphy and Edward Teixeira;
(vii) a certification by the chief financial officer of each
Existing Borrower that there has not occurred any material adverse change since
July 31, 1999, in the operations, condition (financial or otherwise) and
business prospects of each Existing Borrower as a whole;
<PAGE> 10
(viii) certified copies of resolutions of each Borrower's
board of directors authorizing execution of this Amendment and each document
required under any provision hereof;
(ix) consolidated and consolidating income and cash flow
statements of Borrowers for the period beginning March 1, 1999, through July 31,
1999;
(x) complete financial projections for Borrowers, on a monthly
and consolidated basis, for the period beginning September 1, 1999, through
February 28, 2000, including profit and loss statements, income and cash flow
statements, balance sheets, and borrowing availability calculations, with
supporting documentation and assumptions, all of which are in form and substance
satisfactory to Lender in all respects;
(xi) pro-forma balance sheets of Borrowers reflecting the sale
of Chelsea Computer Consultants, Inc. to MSXI and its effect on the profit and
loss statements of Borrowers, with adjusting entries and explanations;
(xii) any and all Supplements to Exhibits to be delivered
pursuant to Section 10(d) below;
(xiii) a written opinion of Borrowers' general counsel
addressed to Lender; and
(xiv) such other documents, instruments and writings as Lender
may reasonably require to carry out the intentions of parties hereunder;
(b) No Event of Default shall have occurred under the Loan
Agreement and be continuing and no event shall have occurred which with the
passage of time, the giving of notice or both would constitute an Event of
Default under the Loan Agreement;
(c) Payment of the Facility Fee and Restructuring Fee; and
(d) Payment or reimbursement to Lender for all legal expenses
incurred by Lender to analyze, prepare and negotiate and conclude this Amendment
and all related agreements and transactions described herein.
15. REPRESENTATIONS AND WARRANTIES. Each Borrower represents and
warrants to Lender that:
(a) the execution, delivery and performance by each Borrower of
this Amendment and the transactions contemplated herein: (i) are and will be
within each Borrower's corporate powers; (ii) have been authorized by all
necessary corporate action; (iii) are not and will not be in contravention of
any order of any court or other agency of government, or of any law to which any
Borrower or property of any Borrower is bound; and (iv) are not and will not be
in conflict with, or result in a breach of or constitute (with due notice and/or
lapse of time) a default under the articles of incorporation or bylaws or any
indenture, agreement or undertaking to which any Borrower is a party or by which
any Borrower or property of any Borrower is bound;
<PAGE> 11
(b) this Amendment and any other agreements, instruments or
documents executed and/or delivered in connection herewith, shall be valid,
binding and enforceable against each Borrower in accordance with their
respective terms;
(c) each of the representations and warranties contained in the
Loan Agreement and all related agreements, instruments and documents are true
and correct as of the date hereof .as to each Borrower; and
(d) each of the schedules to the Loan Agreement are true, correct
and complete as of the date hereof as to each Borrower, except as disclosed on
the Supplements to each exhibit as attached hereto and made part hereof; and
(e) no Event of Default and no event which, with the passage of
time, giving of notice or both would become an Event of Default under the Loan
Agreement, has occurred or is existing.
16. CONFIRMATION OF INDEBTEDNESS. Each Borrower confirms and
acknowledges that as of the close of business on September 24, 1999, it is
jointly and severally indebted to Lender under the Loan Documents without any
deduction, defense, setoff, claim or counterclaim, of any nature, in the
aggregate principal amount of $15,809,188.48, plus interest from September 1,
1999, and all fees, costs and expenses (including attorneys' fees), incurred to
date in connection with the Revolving Credit.
17. REAFFIRMATION OF SECURI1Y INTEREST. Each Borrower confirms and
agrees that all prior security interests and liens granted to Lender (including,
without limitation, a pledge of the capital stock in the Existing Borrowers)
continue unimpaired and in full force and effect and shall continue to cover and
secure all Obligations of Borrowers to Lender. Each Borrower further confirms
and represents that all Collateral remains free and clear of all liens other
than those in favor of Lender or as otherwise permitted in the Loan Agreement.
Nothing contained herein is intended to in any way impair or limit the validity,
priority or extent of Lender's security interest in and liens upon the
Collateral of each Borrower.
NO WAIVER BY LENDER. This Amendment does not and shall not be
deemed to constitute a waiver by Lender of any breach or violation of any
representation, warranty or covenant made or agreed to by any Borrower under the
Loan Agreement as amended hereby, and all of Lender's claims and rights
resulting from any such breach or misrepresentation by any Borrower, are
expressly reserved by Lender. This Amendment does not obligate Lender to agree
to any further extension or any other modification of the Loan Agreement nor
does it constitute a waiver of any other rights or remedies of Lender.
19. INCORPORATION. This Amendment shall amend, and is incorporated
into and made part of, the Loan Agreement. All references to the Loan Agreement
shall mean the Loan Agreement as amended hereby. To the extent that any term or
provision of this Amendment is or may be deemed expressly inconsistent with any
term or provision in the Loan Agreement, the terms and provisions hereof shall
control. Except as expressly amended by this Amendment, all of the terms and
conditions of the Loan Agreement continue unchanged and remain in full force and
effect.
20. NO MODIFICATION. No modification hereof or of any agreement
referred to herein shall be binding or enforceable unless in writing and signed
on behalf of the party against whom enforcement is sought.
21. SUCCESSOR AND ASSIGNS. This Amendment will be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
<PAGE> 12
22. GOVERNING LAW. This Amendment shall be governed by, and construed
and enforced in accordance with the laws of the Commonwealth of Pennsylvania,
excluding its conflict of laws rule.
23. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Signature by facsimile shall also bind the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 13
IN WITNESS WHEREOF, the undersigned have executed this Amendment on the
date first written above.
LENDER:
Mellon Bank, N.A.
By: /s/ Jeffrey Saperstein
----------------------------
Jeffrey Saperstein
Vice President
BORROWERS:
ATC Healthcare Services, Inc.
By: /s/ Stephen Savitsky
---------------------------
Stephen Savitsky
President
ATC Staffing Services, Inc.
By: /s/ Stephen Savitsky
---------------------------
Stephen Savitsky
President
Staff Builders, Inc.
By: /s/ Stephen Savitsky
---------------------------
Stephen Savitsky
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.9
AMENDMENT TO THE
EMPLOYMENT AGREEMENT
This Amendment Agreement, made as of the 20th day of October, 1999, is
between Staff Builders, Inc., a Delaware corporation (the "Company") and Stephen
Savitsky (the "Employee").
WHEREAS, the Company and the Employee entered into an Employment
Agreement, dated as of June 1, 1987, amended by Agreement dated October 31,
1991, and further amended by Agreement dated December 7, 1992 (the "Agreement");
and
WHEREAS, the parties now desire to further amend the Agreement
as provided herein;
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. Section 3(a) of the Agreement, relating to compensation, is hereby
amended such that the Employee's base salary will be $295,373.00 and such
salary will not be increased automatically by 10% per annum.
2. Section 4, relating to duties is amended such that the Employee is
required to devote approximately one-half of his business time to the
affairs of the Company.
3. Section 12 of the Agreement relating to post-term consulting is hereby
deleted in its entirety.
Except as expressly amended herein, all other terms, conditions,
agreements, representations and warranties contained in the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date and year first above written.
STAFF BUILDERS, INC.
/s/ David Savitsky
------------------------
EMPLOYEE
/s/ Stephen Savitsky
------------------------
<PAGE> 1
EXHIBIT 10.10
AMENDMENT TO THE
EMPLOYMENT AGREEMENT
This Amendment Agreement, made as of the 20th day of October, 1999, is
between Staff Builders, Inc., a Delaware corporation (the "Company") and David
Savitsky (the "Employee").
WHEREAS, the Company and the Employee entered into an Employment
Agreement, dated as of June 1, 1987, amended by Agreements dated October 31,
1991 January 3, 1992 and December 7, 1992 (the "Agreement"); and
WHEREAS, the parties now desire to further amend the Agreement
as provided herein;
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. Section 3(a) of the Agreement, relating to Compensation, is hereby
amended such that the Employee's base salary will be decreased to
$357,080 and such salary will not be increased automatically by 10% per
annum.
2. Section 4, relating to duties is amended such that the Employee is
required to devote approximately eighty percent (80%) of his business
time to the affairs of the Company.
3. Section 12 of the Agreement relating to post-term consulting is hereby
deleted in its entirety.
Except as expressly amended herein, all other terms, conditions,
agreements, representations and warranties contained in the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date and year first above written.
STAFF BUILDERS, INC.
/s/ Stephen Savitsky
-----------------------------
EMPLOYEE
/s/ David Savitsky
-----------------------------
<PAGE> 1
EXHIBIT 10.11
AMENDMENT TO THE
EMPLOYMENT AGREEMENT
This Amendment Agreement, made as of the 20th day of October,
1999, is between Staff Builders, Inc., a Delaware corporation (the "Company")
and Dale R. Clift (the "Executive").
WHEREAS, the Company and the Executive entered into an
Employment Agreement, dated as of February 9, 1998 and amended by Amendment
dated December 1, 1998 (the "Agreement"); and
WHEREAS, the parties now desire to further amend the Agreement
as provided herein;
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
1. Paragraph 1 is hereby amended to change the Executive's
position to Senior Vice President, Financial Strategy.
2. Paragraph 2 relating to duties shall be amended such that
Executive will perform limited employment duties as
directed by the Chief Executive Officer.
3. Paragraph 3 relating to compensation shall be reduced to
$24,000.00 per year.
4. Paragraph 3 shall be amended to delete sub-sections (b),
(d) (e), (f), (g), (h), (i) and (j).
5. Paragraph 4 shall be amended to delete sub-section (d).
Except as expressly amended herein, all other terms,
conditions, agreements, representations and warranties contained in the
Agreement shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date and year first above written.
STAFF BUILDERS, INC.
BY /s/ Stephen Savitsky
-------------------------------------
/s/ Dale R. Clift
---------------------------------------
<PAGE> 1
EXHIBIT 10.12
TERMINATION AGREEMENT AND RELEASE
THIS TERMINATION AGREEMENT AND RELEASE is entered into by and between
WILLARD DERR ("DERR") who resides at 8 Shirley Court, East Northport, NY 11731
and STAFF BUILDERS, INC., a Delaware corporation, with its principal place of
business at 1983 Marcus Avenue New York, 11042 ("STAFF BUILDERS") (collectively
the "Parties") on the date set forth below.
WHEREAS the Parties have entered into an Employment Agreement
("Employment Agreement") executed as of March 1, 1998, and
WHEREAS DERR is entering into a new Employment Agreement with Tender
Loving Care Health Care Services, Inc. of even date herewith; and
WHEREAS the Parties now desire to terminate the Employment Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth
herein, the parties hereto agree as follows:
1. The Parties agree that effective at the close of business October
20, 1999, DERR'S employment with STAFF BUILDERS shall cease and the Employment
Agreement shall be terminated. As of October 21, 1999, DERR shall have no
duties, responsibilities or authority on behalf of STAFF BUILDERS, nor shall he
otherwise act as an employee of STAFF BUILDERS. DERR shall provide STAFF
BUILDERS with a letter of resignation dated October 20, 1999, attached hereto as
Exhibit A.
<PAGE> 2
2. In consideration for his compliance with all of the provisions of
this Termination Agreement And Release, Staff Builders will use its best efforts
to have DERR'S name removed from all company forms and documents.
3. DERR understands that there are various state and federal laws that
prohibit employment discrimination on the basis of age, race, sex, religion,
national origin, martial status and disability and that these laws are enforced
by the courts and various government agencies. By signing this Termination
Agreement And Release, DERR intends to give up any rights he may have under
these laws or any other laws with respect to his employment or the termination
of his employment with or by STAFF BUILDERS and acknowledges that STAFF BUILDERS
has not (a) discriminated against him; (b) breached any express or implied
contract with him; or (c) otherwise acted unlawfully towards him.
4. As a material inducement to the Parties to enter into this
Termination Agreement And Release, DERR covenants not to sue and hereby
irrevocably and unconditionally releases, acquits and forever discharges STAFF
BUILDERS, and all other affiliated, subsidiary or related organizations,
parents, companies or divisions, and their respective present, former or future
officers, directors, shareholders, agents, employees, representatives,
consultants, attorneys, successors, and assigns, and all STAFF BUILDERS'
employee benefit plans and the current and former Trustees of all of them
(collectively the "Releasees"), of and from any claim, right, demand, charge,
complaint, action, cause of action, obligation, or liability of any and every
kind based on any federal, state, or local law, statute or regulation, whether
known or unknown, suspected or unsuspected, fixed or contingent, whether in tort
or in contract or by statute, which arises or results from any event, action or
inaction occurring prior to the execution of this Termination Agreement And
Release, as well as any and all claims arising out of or relating to any alleged
tortious, wrongful, discriminatory, defamatory, improper or unlawful act or
omission of STAFF BUILDERS, including without limitation, claims alleging a
violation of the Age Discrimination In Employment Action of 1967, as amended 29
U.S.C. ss. 621 et seq. The Americans with Disabilities Act of 1990, 42 U.S.C.
ss. 12101 et seq., which arose prior to the
2
<PAGE> 3
execution of this Termination Agreement And Release, or which might exist under
the qui tam provisions of the False Claims Act, 31 U.S.C. ss. 3730. DERR
represents that he has received complete satisfaction of any and all claims,
whether known, suspected or unknown, that he may have or have had against any of
the Releasees as of the date of this Termination Agreement And Release, and he
hereby waives any and all relief for such claims not explicitly provided for
herein.
5. DERR affirms that he is not aware of any outstanding administrative
or judicial claims, charges, lawsuits or proceedings of any kind against any of
the Releasees to which he is a party or which were filed on his behalf, and
promises not to commence any proceeding or action against STAFF BUILDERS except
to enforce this Termination Agreement And Release. DERR further agrees not only
to release and discharge the Releasees of and from any and all claims which he
could make on his own behalf, but also those which may have been or may be made
by any other person or organization on his behalf as of the date of this
Termination Agreement And Release.
6. DERR acknowledges that as a result of his employment by STAFF
BUILDERS, he has had access to confidential, proprietary business information
belonging to STAFF BUILDERS, as those terms are defined in the Employment
Agreement, and hereby agrees not to use or disclose any such information
personally or for the benefit of others. DERR also agrees (1) not to disclose to
anyone any such confidential and proprietary information; and (2) to comply with
any and all provisions of his Employment Agreement that, by their terms, survive
the termination of his employment. On the date he signs this Termination
Agreement And Release, DERR further promises and agrees to return to STAFF
BUILDERS any and all documents or diskettes now in his possession which he
received, sent, generated or had access to in the course of his employment by
STAFF BUILDERS, together with any and all property of STAFF BUILDERS he has in
his possession.
3
<PAGE> 4
7. The waiver by any Party of a breach of any provision hereof shall
not operate or be construed as a waiver of any subsequent breach by any Party.
8. This Termination Agreement And Release and the exhibits attached
hereto contain the full agreement between DERR and STAFF BUILDERS, and may not
be modified, altered or changed except upon the express prior written consent of
both DERR and STAFF BUILDERS.
9. DERR affirms that he has been given at least 21 days to consider
this Termination Agreement And Release and that he has voluntarily chosen not to
wait 21 days to execute this Termination Agreement And Release. His choice to
execute this Termination Agreement And Release was knowing and voluntary and
made after consultation with his counsel. DERR understands that he may revoke
his agreement hereto by so notifying STAFF BUILDERS in writing within seven (7)
days after he signs this Termination Agreement And Release.
10. DERR acknowledges and agrees that: (a) no promise or inducement for
this Termination Agreement And Release has been made by STAFF BUILDERS, except
as set forth in this Termination Agreement And Release; (b) this Termination
Agreement And Release is executed by him without reliance upon any statement or
representation by STAFF BUILDERS other than as set forth herein; (c) he fully
understands this Termination Agreement And Release and the meaning of its
provisions; (d) he fully understands that he is giving up important rights set
forth herein; (e) he is legally competent to enter into this Termination
Agreement And Release and to accept full responsibility therefor; (f) he
consulted with his counsel before entering into this Termination Agreement And
Release; and (g) he voluntarily enters into this Termination Agreement And
Release.
11. This Termination Agreement And Release may be executed in
counterparts, and, when each party has signed and delivered at lease one such
counterpart, each counterpart shall be
4
<PAGE> 5
deemed an original and taken together, shall constitute one and the same
agreement, which shall be binding and effective to all parties.
12. This Termination Agreement And Release shall be construed in
accordance with the laws of the State of New York. Any action or proceeding
relating to or arising from this Termination Agreement And Release or any other
dispute between the parties hereto shall be brought solely in the Supreme Court
of the State of New York, Nassau County. DERR hereby consents to personal
jurisdiction and venue in New York State Supreme Court, County of Nassau for any
such action or proceeding. The parties expressly waive their right to trial by
jury in any action or proceeding against the other and consent to trial before a
judge.
13. This Termination Agreement And Release is the product of
negotiation and mutual discussion. The rule of construction that an agreement
may be construed against its drafter shall not apply in any action or proceeding
arising from or based, in whole or in part, on this Termination Agreement And
Release.
14. DERR ACKNOWLEDGES AND AGREES THAT HE HAS READ AND FULLY UNDERSTANDS
THE MEANING OF EACH PROVISION OF THIS TERMINATION AGREEMENT AND RELEASE, THAT HE
HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL CONCERNING IT, AND THAT HE
FREELY AND VOLUNTARILY ENTERS INTO IT.
IN WITNESS WHEREOF, the Parties have hereunto set their hand on the
dates indicated below.
STAFF BUILDERS, INC.
By: /s/ Stephen Savitsky
-----------------------------
Date: October 20, 1999
---------------------------
5
<PAGE> 6
/s/ Willard Derr
--------------------------------
WILLARD DERR
Date: October 20, 1999
---------------------------
6
<PAGE> 7
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
I, _____________________________ do hereby certify that WILLARD DERR,
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he signed and delivered the said instrument as his free and voluntary act,
for the uses and purposes therein set forth.
Given under my hand and official seal this __ day of October, 1999.
----------------------------
Notary Public
My Commission Expires:
- ---------------------
<PAGE> 1
EXHIBIT 10.13
TERMINATION AGREEMENT AND RELEASE
THIS TERMINATION AGREEMENT AND RELEASE is entered into by and between
RENEE J. SILVER ("SILVER") who resides at 11 Pine Drive, Port Washington, NY
11050 and STAFF BUILDERS, INC., a Delaware corporation, with its principal place
of business at 1983 Marcus Avenue New York, 11042 ("STAFF BUILDERS")
(collectively the "Parties") on the date set forth below.
WHEREAS the Parties have entered into an Employment Agreement
("Employment Agreement") executed as of January 7, 1999, and
WHEREAS SILVER is entering into a new employment agreement with Tender
Loving Care Health Care Services, Inc. of even date herewith; and
WHEREAS the Parties now desire to terminate the Employment Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth
herein, the parties hereto agree as follows:
1. The Parties agree that effective at the close of business October
20, 1999, SILVER'S employment with STAFF BUILDERS shall cease and the Employment
Agreement shall be terminated. As of October 21, 1999, SILVER shall have no
duties, responsibilities or authority on behalf of STAFF BUILDERS, nor shall she
otherwise act as an employee of STAFF BUILDERS. SILVER shall provide STAFF
BUILDERS with a letter of resignation dated October 20, 1999, attached hereto as
Exhibit A.
<PAGE> 2
2. In consideration for her compliance with all of the provisions of
this Termination Agreement And Release, Staff Builders will use its best efforts
to have SILVER'S name removed from all company forms and documents.
3. SILVER understands that there are various state and federal laws
that prohibit employment discrimination on the basis of age, race, sex,
religion, national origin, martial status and disability and that these laws are
enforced by the courts and various government agencies. By signing this
Termination Agreement And Release, SILVER intends to give up any rights she may
have under these laws or any other laws with respect to her employment or the
termination of her employment with or by STAFF BUILDERS and acknowledges that
STAFF BUILDERS has not (a) discriminated against her; (b) breached any express
or implied contract with her; or (c) otherwise acted unlawfully towards her.
4. As a material inducement to the Parties to enter into this
Termination Agreement And Release, SILVER covenants not to sue and hereby
irrevocably and unconditionally releases, acquits and forever discharges STAFF
BUILDERS, and all other affiliated, subsidiary or related organizations,
parents, companies or divisions, and their respective present, former or future
officers, directors, shareholders, agents, employees, representatives,
consultants, attorneys, successors, and assigns, and all STAFF BUILDERS'
employee benefit plans and the current and former Trustees of all of them
(collectively the "Releasees"), of and from any claim, right, demand, charge,
complaint, action, cause of action, obligation, or liability of any and every
kind based on any federal, state, or local law, statute or regulation, whether
known or unknown, suspected or unsuspected, fixed or contingent, whether in tort
or in contract or by statute, which arises or results from any event, action or
inaction occurring prior to the execution of this Termination Agreement And
Release, as well as any and all claims arising out of or relating to any alleged
tortious, wrongful, discriminatory, defamatory, improper or unlawful act or
omission of STAFF BUILDERS, including without limitation, claims alleging a
violation of the Age Discrimination In Employment Action of 1967, as amended 29
U.S.C. ss. 621 et seq. The Americans with Disabilities Act of 1990, 42 U.S.C.
ss. 12101 et seq., which arose prior to the
2
<PAGE> 3
execution of this Termination Agreement And Release, or which might exist under
the qui tam provisions of the False Claims Act, 31 U.S.C. ss. 3730. SILVER
represents that she has received complete satisfaction of any and all claims,
whether known, suspected or unknown, that she may have or have had against any
of the Releasees as of the date of this Termination Agreement And Release, and
she hereby waives any and all relief for such claims not explicitly provided for
herein.
5. SILVER affirms that she is not aware of any outstanding
administrative or judicial claims, charges, lawsuits or proceedings of any kind
against any of the Releasees to which she is a party or which were filed on her
behalf, and promises not to commence any proceeding or action against STAFF
BUILDERS except to enforce this Termination Agreement And Release. SILVER
further agrees not only to release and discharge the Releasees of and from any
and all claims which she could make on her own behalf, but also those which may
have been or may be made by any other person or organization on her behalf as of
the date of this Termination Agreement And Release.
6. SILVER acknowledges that as a result of her employment by STAFF
BUILDERS, she has had access to confidential, proprietary business information
belonging to STAFF BUILDERS, as those terms are defined in the Employment
Agreement, and hereby agrees not to use or disclose any such information
personally or for the benefit of others. SILVER also agrees (1) not to disclose
to anyone any such confidential and proprietary information; and (2) to comply
with any and all provisions of her Employment Agreement that, by their terms,
survive the termination of her employment. On the date she signs this
Termination Agreement And Release, SILVER further promises and agrees to return
to STAFF BUILDERS any and all documents or diskettes now in her possession which
she received, sent, generated or had access to in the course of her employment
by STAFF BUILDERS, together with any and all property of STAFF BUILDERS she has
in her possession.
3
<PAGE> 4
7. The waiver by any Party of a breach of any provision hereof shall
not operate or be construed as a waiver of any subsequent breach by any Party.
8. This Termination Agreement And Release and the exhibits attached
hereto contain the full agreement between SILVER and STAFF BUILDERS, and may not
be modified, altered or changed except upon the express prior written consent of
both SILVER and STAFF BUILDERS.
9. SILVER affirms that she has been given at least 21 days to consider
this Termination Agreement And Release and that she has voluntarily chosen not
to wait 21 days to execute this Termination Agreement And Release. Her choice to
execute this Termination Agreement And Release was knowing and voluntary and
made after consultation with her counsel. SILVER understands that she may revoke
her agreement hereto by so notifying STAFF BUILDERS in writing within seven (7)
days after she signs this Termination Agreement And Release.
10. SILVER acknowledges and agrees that: (a) no promise or inducement
for this Termination Agreement And Release has been made by STAFF BUILDERS,
except as set forth in this Termination Agreement And Release; (b) this
Termination Agreement And Release is executed by her without reliance upon any
statement or representation by STAFF BUILDERS other than as set forth herein;
(c) she fully understands this Termination Agreement And Release and the meaning
of its provisions; (d) she fully understands that she is giving up important
rights set forth herein; (e) she is legally competent to enter into this
Termination Agreement And Release and to accept full responsibility therefor;
(f) she consulted with her counsel before entering into this Termination
Agreement And Release; and (g) she voluntarily enters into this Termination
Agreement And Release.
11. This Termination Agreement And Release may be executed in
counterparts, and, when each party has signed and delivered at lease one such
counterpart, each counterpart shall be
4
<PAGE> 5
deemed an original and taken together, shall constitute one and the same
agreement, which shall be binding and effective to all parties.
12. This Termination Agreement And Release shall be construed in
accordance with the laws of the State of New York. Any action or proceeding
relating to or arising from this Termination Agreement And Release or any other
dispute between the parties hereto shall be brought solely in the Supreme Court
of the State of New York, Nassau County. SILVER hereby consents to personal
jurisdiction and venue in New York State Supreme Court, County of Nassau for any
such action or proceeding. The parties expressly waive their right to trial by
jury in any action or proceeding against the other and consent to trial before a
judge.
13. This Termination Agreement And Release is the product of
negotiation and mutual discussion. The rule of construction that an agreement
may be construed against its drafter shall not apply in any action or proceeding
arising from or based, in whole or in part, on this Termination Agreement And
Release.
14. SILVER ACKNOWLEDGES AND AGREES THAT SHE HAS READ AND FULLY
UNDERSTANDS THE MEANING OF EACH PROVISION OF THIS TERMINATION AGREEMENT AND
RELEASE, THAT SHE HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL CONCERNING IT,
AND THAT SHE FREELY AND VOLUNTARILY ENTERS INTO IT.
IN WITNESS WHEREOF, the Parties have hereunto set their hand on the
dates indicated below.
STAFF BUILDERS, INC.
By: /s/ Stephen Savitsky
------------------------------
Date: October 20, 1999
----------------------------
5
<PAGE> 6
/s/ Renee J. Silver
---------------------------------
RENEE J. SILVER
Date: October 20, 1999
----------------------------
6
<PAGE> 7
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
I, _____________________________ do hereby certify that RENEE J.
SILVER, personally known to me to be the same person whose name is subscribed to
the foregoing instrument, appeared before me this day in person and acknowledged
that she signed and delivered the said instrument as her free and voluntary act,
for the uses and purposes therein set forth.
Given under my hand and official seal this __ day of October, 1999.
----------------------------
Notary Public
My Commission Expires:
- ---------------------
<PAGE> 1
EXHIBIT 10.14
CONSULTING AGREEMENT
This Agreement ("AGREEMENT") is made effective this 20th day of
October, 1999 between Renee J. Silver, hereinafter referred to as "CONSULTANT"
and Staff Builders, Inc., hereinafter referred to as "Staff Builders".
WITNESSETH:
WHEREAS, the Consultant is experienced and knowledgeable of legal
services;
WHEREAS, heretofore Consultant has provided such services to Staff
Builders as well as other entities;
WHEREAS, Staff Builders anticipates that its needs for such services
will continue and believes that Consultant is qualified to perform such services
hereunder; and
WHEREAS, Staff Builders wishes to retain Consultant to provide legal
services and Consultant agrees to perform consulting services under the terms
and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
as hereinafter set forth, the parties agree as follows:
I. DESCRIPTION OF SERVICES
A. From the effective date of this Agreement through October 20, 2000,
Consultant agrees to assist Staff Builders in the offices of Staff Builders, to
provide legal services or other related services to Staff Builders.
B. Consultant agrees to provide services as requested by the President
of Staff Builders, Inc. and to perform such services in a good and workmanlike
fashion. Consultant further agrees that the services to be rendered by
Consultant pursuant to this Consulting Agreement must be performed solely by
her. All documentation shall be the property of Staff Builders, as well as all
proprietary work developed by Consultant while consulting for Staff Builders.
C. Staff Builders will supply Consultant at Staff Builders' office,
such working space, equipment, and utilities as may be required for performance
of services pursuant to this Agreement.
<PAGE> 2
D. For her services hereunder, Staff Builders shall pay to Consultant a
monthly consulting fee of $1,000.00.
E. Consultant shall be reimbursed for all necessary and reasonable
out-of-pocket expenses in connection with her consulting services to Staff
Builders, but only if the same have been approved in advance by the President of
Staff Builders and verified in writing at the time of submission for
reimbursement.
F. In all things undertaken by the parties under this Agreement, it is
specifically understood and agreed that Consultant is and shall be at all times
during the term of this Agreement, an independent contractor and not the agent
or employee of Staff Builders. Consultant also expressly acknowledges and agrees
that because of her independent status, she will make no application for
participation in any of Staff Builders' current or future benefit plans, unless
she becomes an employee of Staff Builders.
II. CONFLICT OF INTEREST
A. Consultant agrees that Staff Builders and its affiliates' customers,
business connections, customer and supplier lists, pricing, costing, operations,
source code and operating code and employees (collectively, "Confidential
Information") are established at great expense and protected as Confidential
Information and provide Staff Builders with substantial competitive advantage in
conducting its business. Consultant acknowledges that she has or will have
access to and be trusted with secret, confidential and proprietary information
of Staff Builders which will suffer great loss and injury if Consultant would
disclose or use this information. Consultant agrees that so long as she is
consulting for Staff Builders, and thereafter for a period of 2 years, she will
not directly or indirectly, either individually or as an employee, agent,
partner, shareholder, consultant or in any other capacity, use or disclose or
cause to be used or disclosed any such Confidential Information. Consultant
further grants to Staff Builders injunctive relief as well as all other remedies
at law or in equity.
B. Consultant is expected to maintain the highest standards of
professional integrity and to avoid situations that could cause embarrassment to
Staff Builders or pose a conflict of interest. Consultant is expected:
1. Not to disclose Confidential Information or proprietary materials
of Staff Builders to any party without Staff Builders' prior
written consent;
2. Not to take action in the performance of this Agreement to created
an unfair, unethical or improper competitive advantage for herself
or anyone other than Staff Builders; and
3. To use her best efforts in the performance of services hereunder.
2
<PAGE> 3
III. ASSIGNMENT
Neither party shall have the right to assign its rights or delegate its
obligations under this Agreement without prior written consent of the other
party; provided however, that such consent shall not be unreasonably withheld.
Consultant acknowledges that her services are personal in nature, based on her
unique and special knowledge.
IV. WAIVER
Any failure by either party to enforce any of the terms or conditions
of this Agreement shall not constitute a waiver of such terms or conditions and
shall not affect or impair such terms or conditions in any way or the right of
either party at any time to avail itself of such remedies as it may have for any
default in the performance of such terms or conditions.
V. CONTRACT CONTAINS ENTIRE AGREEMENT
This written Agreement embodies the entire contract of the parties on
relation to the subject matter and not understandings or agreements of any kind
in relation to it exist between the parties except as herein set forth.
VI. NOTIFICATION TO BE IN WRITING
No change or modification of this Agreement will be valid unless it is
in writing and signed by both Consultant and Staff Builders.
VII. LEGAL PROCESS
In the event that a subpoena or other legal process in any way
concerning information disclosed by Staff Builders to the Consultant is served
upon the Consultant, the Consultant agrees to notify Staff Builders immediately
upon receipt of such subpoena or other legal process and to cooperate with Staff
Builders, at Staff Builders' expense, in any lawful effort by Staff Builders to
contest the legal validity of such a subpoena or other legal process. This
provision shall in no way limit the Consultant's ability to satisfy any
governmentally required disclosure. The obligations set forth in this paragraph,
paragraphs II.A. and II.B.1. shall survive termination of this Agreement.
3
<PAGE> 4
VIII. LAW GOVERNING
This Agreement will be governed, construed, and interpreted according
to the laws of the State of New York. All litigation brought or held on the
basis of this Agreement shall be brought or held in the appropriate state or
federal court located in Nassau County, New York.
IN WITNESSETH WHEREOF, the parties hereto have executed this Agreement
as of the day and year first herein above written.
RENEE J. SILVER STAFF BUILDERS, INC.
By: /s/ Renee J. Silver By: /s/ Stephen Savitsky
-------------------------- --------------------------
Date: October 20, 1999 Date: October 20, 1999
------------------------ ------------------------
4
<PAGE> 1
EXHIBIT 10.15
CONSULTING AGREEMENT
This Agreement ("AGREEMENT") is made effective this 20th day of
October, 1999 between Willard Derr, hereinafter referred to as "CONSULTANT" and
Staff Builders, Inc., hereinafter referred to as "Staff Builders".
WITNESSETH:
WHEREAS, the Consultant is experienced and knowledgeable of accounting
and financial services;
WHEREAS, heretofore Consultant has provided such services to Staff
Builders as well as other entities;
WHEREAS, Staff Builders anticipates that its needs for such services
will continue and believes that Consultant is qualified to perform such services
hereunder; and
WHEREAS, Staff Builders wishes to retain Consultant to provide
accounting and financial services and Consultant agrees to perform consulting
services under the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
as hereinafter set forth, the parties agree as follows:
I. DESCRIPTION OF SERVICES
A. From the effective date of this Agreement through October 20, 2000,
Consultant agrees to assist Staff Builders in the offices of Staff Builders, to
provide accounting and financial services or other related services to Staff
Builders.
B. Consultant agrees to provide services as requested by the President
of Staff Builders, Inc. and to perform such services in a good and workmanlike
fashion. Consultant further agrees that the services to be rendered by
Consultant pursuant to this Consulting Agreement must be performed solely by
him. All documentation shall be the property of Staff Builders, as well as all
proprietary work developed by Consultant while consulting for Staff Builders.
<PAGE> 2
C. Staff Builders will supply Consultant at Staff Builders' office,
such working space, equipment, and utilities as may be required for performance
of services pursuant to this Agreement.
D. For his services hereunder, Staff Builders shall pay to Consultant a
monthly consulting fee of $1,000.00.
E. Consultant shall be reimbursed for all necessary and reasonable
out-of-pocket expenses in connection with his consulting services to Staff
Builders, but only if the same have been approved in advance by the President of
Staff Builders and verified in writing at the time of submission for
reimbursement.
F. In all things undertaken by the parties under this Agreement it is
specifically understood and agreed that Consultant is and shall be at all times
during the term of this Agreement, an independent contractor and not the agent
or employee of Staff Builders. Consultant also expressly acknowledges and agrees
that because of his independent status, he will make no application for
participation in any of Staff Builders' current or future benefit plans, unless
he becomes an employee of Staff Builders.
II. CONFLICT OF INTEREST
A. Consultant agrees that Staff Builders and its affiliates' customers,
business connections, customer and supplier lists, pricing, costing, operations,
source code and operating code and employees (collectively, "Confidential
Information") are established at great expense and protected as Confidential
Information and provide Staff Builders with substantial competitive advantage in
conducting its business. Consultant acknowledges that he has or will have access
to and be trusted with secret, confidential and proprietary information of Staff
Builders which will suffer great loss and injury if Consultant would disclose or
use this information. Consultant agrees that so long as he is consulting for
Staff Builders, and thereafter for a period of 2 years, he will not directly or
indirectly, either individually or as an employee, agent, partner, shareholder,
consultant or in any other capacity, use or disclose or cause to be used or
disclosed any such Confidential Information. Consultant further grants to Staff
Builders injunctive relief as well as all other remedies at law or in equity.
B. Consultant is expected to maintain the highest standards of
professional integrity and to avoid situations that could cause embarrassment to
Staff Builders or pose a conflict of interest. Consultant is expected:
1. Not to disclose Confidential Information or proprietary
materials of Staff Builders to any party without Staff
Builders' prior written consent;
2. Not to take action in the performance of this Agreement to
created an unfair, unethical or improper competitive advantage
for himself or anyone other than Staff Builders; and
2
<PAGE> 3
3. To use his best efforts in the performance of services
hereunder.
III. ASSIGNMENT
Neither party shall have the right to assign its rights or delegate its
obligations under this Agreement without prior written consent of the other
party; provided however, that such consent shall not be unreasonably withheld.
Consultant acknowledges that his services are personal in nature, based on his
unique and special knowledge.
IV. WAIVER
Any failure by either party to enforce any of the terms or conditions
of this Agreement shall not constitute a waiver of such terms or conditions and
shall not affect or impair such terms or conditions in any way or the right of
either party at any time to avail itself of such remedies as it may have for any
default in the performance of such terms or conditions.
V. CONTRACT CONTAINS ENTIRE AGREEMENT
This written Agreement embodies the entire contract of the parties on
relation to the subject matter and not understandings or agreements of any kind
in relation to it exist between the parties except as herein set forth.
VI. NOTIFICATION TO BE IN WRITING
No change or modification of this Agreement will be valid unless it is
in writing and signed by both Consultant and Staff Builders.
VII. LEGAL PROCESS
In the event that a subpoena or other legal process in any way
concerning information disclosed by Staff Builders to the Consultant is served
upon the Consultant, the Consultant agrees to notify Staff Builders immediately
upon receipt of such subpoena or other legal process and to cooperate with Staff
Builders, at Staff Builders' expense, in any lawful effort by Staff Builders to
contest the legal validity of such a subpoena or other legal process. This
provision shall in no way limit the Consultant's ability to satisfy any
governmentally required disclosure. The obligations set forth in this paragraph,
paragraphs II.A. and II. B.1. shall survive termination of this Agreement.
VIII. LAW GOVERNING
This Agreement will be governed, construed, and interpreted according
to the laws of the State of New York. All litigation brought or held on the
basis of this Agreement shall be brought or held in the appropriate state or
federal court located in Nassau County, New York.
3
<PAGE> 4
IN WITNESSETH WHEREOF, the parties hereto have executed this Agreement
as of the day and year first herein above written.
WILLARD DERR STAFF BUILDERS, INC.
By: /s/ Willard Derr By: /s/ Stephen Savitsky
-------------------------- ------------------------------
Date: October 20, 1999 Date: October 20, 1999
------------------------ ----------------------------
4
<PAGE> 1
Exhibit 10.16
SECOND AMENDMENT TO ATC REVOLVING CREDIT
LOAN AND SECURITY AGREEMENT
This Second Amendment to ATC Revolving Credit Loan and Security
Agreement ("Amendment"), dated October 20, 1999, is made by and among ATC
Healthcare Services, Inc., a Georgia corporation ("ATC Healthcare"), and ATC
Staffing Services, Inc., a Delaware corporation ("ATC Staffing") (each of the
foregoing individually, an "Original Borrower" and collectively, the "Original
Borrowers") and Staff Buildings, Inc., a Delaware corporation ("Staff Builders"
and together with the Existing Borrowers, the "Borrowers") and Mellon Bank, N.A.
("Lender").
BACKGROUND
A. Lender and Original Borrowers are parties to a certain ATC Revolving
Credit Loan and Security Agreement, dated June 25, 1999. Such parties and Staff
Builders are also parties to a certain First Amendment to the ATC Revolving Loan
and Security Agreement dated September 24, 1999 ("First Amendment"). The
foregoing Loan and Security Agreement, as heretofore or hereafter amended,
modified, supplemented or replaced from time to time is hereinafter referred to
as the "Loan Agreement". Capitalized terms used but not otherwise defined in
this Amendment shall have the meanings set forth in the Loan Agreement.
B. In conjunction with arrangements to consummate the Spin-Off, and as
a result of the variation of Borrowers' actual performance from projections
previously delivered to Lender, Borrowers have determined a need to change the
required minimum amounts of Excess Borrowing Availability required under Section
13(b)(v) of the Loan Agreement. Lender is willing to accommodate Borrowers'
request subject to the terms and conditions of this Amendment.
NOW, THEREFORE, the parties hereto intending to be legally bound hereby
promise and agree as follows:
1. Excess Borrowing Availability ATC. Section 13(b)(iv) of the First
Amendment is hereby amended as follows: "Lender shall have received evidence on
the date subsections (i) and (ii) above are satisfied that, after giving effect
to the payment described in sub-section (i) above, Borrowers have a minimum
Excess Borrowing Availability of $1,000,000."
2. Excess Borrowing Availability TLC. Section 13(b)(v) of the First
Amendment is hereby amended to read as follows: "Lender shall have received
evidence on the date subsections (i) and (ii) above are satisfied that, after
giving effect to the payment described in sub-section (i) above, TLC and the
Home Healthcare Group have a minimum Excess Borrowing Availability (as defined
in the TLC Loan Agreement) of $1,100,000."
3. Future Excess Availability Covenant. Apart from any other covenant
of Borrowers set forth in the Loan Agreement, Borrowers shall have and maintain,
on a consolidated basis, an Excess Formula Availability of not less than
$300,000 on Thursday of each week and not less than $500,000 on Friday of each
week (measured at 2:00 p.m. on every such date); provided, however, that for the
period from October 1, 1999 through December 11, 1999 (solely for the purposes
of this covenant), clause (i) of the definition of Excess Formula Availability
shall mean "an amount equal
1
<PAGE> 2
to seventy-five percent (75%) of Qualified Accounts."
4. Implementation of Action Plan. Borrowers covenant and agree that
they shall implement with the active assistance of the current President of the
Original Borrowers and University Management Associates (UMAC) and
PricewaterhouseCoopers the office expense reductions and expanded collection
efforts set forth in the Company Initiatives Relating to Cost Cuts and
Collections and ATC/University Management Associates & Consultants Action Plan
delivered to Lender on October 18, 1999 in accordance with the time schedules
set forth in such action plan. Borrowers will further cause such outside
consultants to periodically report to Lender concerning the status of
implementation of such action plan.
5. Amendment Fee. In consideration of the agreements and undertaking
set forth herein, Lender has earned an amendment fee of $50,000, which shall be
paid by Borrowers as follows: $20,000 on October 28, 1999; $15,000 on November
4, 1999; and $15,000 on November 11, 1999.
6. Acknowledgment, Waiver and Release. Borrowers acknowledge and agree
that the outstanding principal indebtedness under the Loan Agreement as of the
close of business on October 19, 1999 is $16,181,829.78, which, together with
accrued interest, fees and expenses, is owing without offset, defense,
deduction, claim or counterclaim. Borrowers each waive any defense of any kind
or nature whatsoever to their obligations to Lender and each releases and
discharges Lender, its successors, assigns, officers, agents and
representatives, of and from any and all claims, demands, counterclaims,
cross-claims, losses, liabilities and damages, whether direct or indirect, known
or unknown, matured or contingent, due or to become due, asserted or unasserted,
at law or in equity.
7. No Waiver by Lender. This Amendment does not and shall not be deemed
to constitute a waiver by Lender of any breach or violation of any
representation, warranty or covenant made or agreed to by any Borrower under the
Loan Agreement as amended hereby, and all of Lender's claims and rights
resulting from any such breach or misrepresentation by any Borrower, are
expressly reserved by Lender. This Amendment does not obligate Lender to agree
to any further extension or any other modification or the Loan Agreement nor
does it constitute a waiver of any other rights or remedies of Lender.
8. Incorporation. This Amendment shall amend, and is incorporated into
and made part of, the Loan Agreement. All references to the Loan Agreement shall
mean the Loan Agreement as amended hereby. To the extent that any term or
provision of this Amendment is or may be deemed expressly inconsistent with any
term or provision in the Loan Agreement, the terms and provisions hereof shall
control. Except as expressly amended by this Amendment, all of the terms and
conditions of the Loan Agreement continue unchanged and remain in full force and
effect.
9. No Modification. No modification hereof or of any agreement referred
to herein shall be binding or enforceable unless in writing and signed on behalf
of the party against whom enforcement is sought. This Amendment supersedes any
drafts or prior versions of this document and represents the agreement of the
parties regarding the subject matter hereof.
10. Successors and Assigns. This Amendment will be binding upon and
inure to the
2
<PAGE> 3
benefit of the parties hereto and their respective successors and assigns.
11. Governing Law. This Amendment shall be governed by, and construed
and enforced in accordance with the laws of the Commonwealth of Pennsylvania,
excluding its conflict of laws rule.
12. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Signature by facsimile shall also bind the parties hereto.
[Remainder of page intentionally left blank]
[SIGNATURES ON FOLLOWING PAGE]
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this Amendment on the
date first written above.
LENDER:
MELLON BANK, N.A.
By: /s/ Jeffrey Saperstein
---------------------------------------
Jeffrey Saperstein, Vice President
BORROWERS:
ATC HEALTHCARE SERVICES, INC.
By: /s/ Stephen Savitsky
---------------------------------------
Stephen Savitsky, President
ATC STAFFING SERVICES, INC.
By: /s/ Stephen Savitsky
---------------------------------------
Stephen Savitsky, President
STAFF BUILDERS, INC.
By: /s/ Stephen Savitsky
---------------------------------------
Stephen Savitsky, Chief Executive
Officer
4
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<PERIOD-START> MAR-01-1999
<PERIOD-END> AUG-31-1999
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