<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
STAFF BUILDERS, INC.
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(Name of Registrant as Specified in its Charter)
Staff Builders, Inc.
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
<PAGE> 2
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 3
STAFF BUILDERS, INC.
1983 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Staff
Builders, Inc., a Delaware corporation (the "Company"), will be held at 1983
Marcus Avenue, Lake Success, New York, on Friday, August 11, 2000 at 10:00
a.m.(New York Time) for the following purposes:
1) To elect two Class A Directors to serve for a three-year term and
until their successors are elected and qualified; and
2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 23, 2000, are
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
/s/ DAVID SAVITSKY
DAVID SAVITSKY
Secretary
July 17, 2000
IMPORTANT: Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted at the meeting.
Accordingly, after reading the enclosed Proxy Statement, you are
urged to SIGN, DATE and RETURN the enclosed proxy in the envelope
provided which requires no postage if mailed in the United States.
<PAGE> 4
STAFF BUILDERS, INC.
1983 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
---------------
PROXY STATEMENT
---------------
This Proxy Statement is being mailed to stockholders of Staff Builders,
Inc. (the "Company") in connection with the solicitation of proxies by the
Company's Board of Directors (the "Board of Directors") for use at the Annual
Meeting of Stockholders of the Company (the "Annual Meeting") to be held on
August 11, 2000, and any adjournment thereof. A copy of the notice of meeting
accompanies this Proxy Statement. The first date on which this Proxy Statement
and accompanying proxy are being sent to stockholders is on or about July 17,
2000.
SOLICITATION OF PROXIES
All shares represented by proxies received pursuant to this solicitation
will be voted as instructed. If no instructions are given, the persons named in
the accompanying proxy intend to vote for the nominees named herein as Class A
Directors of the Company.
Stockholders who execute proxies may revoke them by delivering subsequently
dated proxies or by giving written notice of revocation to the Secretary of the
Company at any time before such proxies are voted. No proxy will be voted if the
stockholder attends the meeting and elects to vote in person.
The Board of Directors does not know of any matter other than as set forth
herein that is expected to be presented for consideration at the meeting.
However, if other matters properly come before the meeting, the persons named in
the accompanying proxy intend to vote thereon in accordance with their judgment.
A copy of the Annual Report of the Company containing financial statements
for the fiscal year ended February 29, 2000, is included herewith, but is not to
be considered part of the proxy soliciting materials.
The Company's principal executive offices are located at 1983 Marcus
Avenue, Lake Success, New York 11042.
RECORD DATE, OUTSTANDING VOTING SECURITIES,
VOTING RIGHTS AND VOTE REQUIRED
Only stockholders of record at the close of business on June 23, 2000 (the
"Record Date") will be entitled to notice of, and to vote at, the meeting and
any adjournment thereof. As of the Record Date, 23,338,912 shares of the
Company's Class A Common Stock, $.01 par value per share (the "Class A Common
Stock"), and 292,885 shares of the Company's Class B Common Stock, $.01 par
value per share (the "Class B Common Stock," and, collectively with the Class A
Common Stock, the "Common Stock"), were outstanding. As of the Record Date, the
Class A Common Stock was held of record by approximately 293 holders and the
Class B Common Stock was held of record by approximately 450 holders (in each
case, including brokerage firms holding stock in "street name" and other
nominees).
Each holder of record of Class A Common Stock is entitled to one vote for
each share of Class A Common Stock held by such holder. Each holder of record of
Class B Common Stock is entitled to ten votes (except in certain circumstances
which are inapplicable to the election of directors and the other proposals to
be considered at the Annual Meeting) for each share of Class B Common Stock held
by such holder. A holder may own both Class A Common Stock and Class B Common
<PAGE> 5
Stock, in which case such holder will be entitled to one vote for each share of
Class A Common Stock and ten votes for each share of Class B Common Stock held
by such holder.
The affirmative vote of a majority of the votes of holders of shares of
Class A and Class B Common Stock, voting together as one class, represented at
the meeting in person or by proxy is necessary for the election of the nominees
for Class A Directors. As of the Record Date, 5,473,376 shares of Class A Common
Stock were held by the executive officers and directors of the Company. The
executive officers and directors will control approximately 23.5% of the votes
entitled to be cast at the annual meeting by holders of Common Stock. The
executive officers and directors of the Company intend to vote their shares for
the election of the nominees for Class A Directors.
With respect to abstentions, the shares will be considered present at the
meeting for a particular proposal, but since they are not affirmative votes for
the proposal, they will have the same effect as a vote withheld on the election
of the Class A Directors or a vote against such other proposal, as the case may
be. If a broker indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on the proposal, those shares will be
considered as present at the meeting for a particular proposal, but will not be
counted in determining the number of shares necessary for approval of the
proposal.
There is a box on the proxy card to vote for or to withhold authority to
vote for the nominees for Class A Directors. The cost of soliciting proxies will
be borne by the Company.
OWNERSHIP OF SECURITIES BY CERTAIN BENEFICIAL
OWNERS, DIRECTORS AND OFFICERS
The following table sets forth information as of the Record Date with
respect to the beneficial ownership of the Company's Class A Common Stock, by
(i) each person known to the Company who beneficially owns more than 5% of any
class of voting securities of the Company, (ii) each director of the Company,
(iii) the Company's Chief Executive Officer and three other executive officers
(the "Named Executive Officers"), and (iv) all directors and the Named Executive
Officers of the Company as a group. None of the executive officers or directors
of the Company beneficially own any of the Company's Class B Common Stock.
CLASS A COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
----------------------------------------------------
NUMBER OF
SHARES OF PERCENTAGE OF
NAME OF CLASS A OUTSTANDING
BENEFICIAL OWNER COMMON STOCK(2) VOTES OWNED
---------------- ---------------- ---------------
<S> <C> <C>
Stephen Savitsky(3) ......... 3,553,639(4,5) 14.8%
David Savitsky(3) ........... 3,370,437(6,7,8) 14.0%
Bernard J
Firestone(9) .............. 1,100 *
Jonathan J
Halpert(9) ................ 0 *
Donald Meyers(9) ............ 0 *
Edward Teixeira(9) .......... 126,667(10) *
S Squared Technology
Corp.(11) ................. 2,353,500 10.1%
Dimensional Fund
Advisors, Inc.(12) ........ 1,372,460 5.9%
All executive officers
and directors as a
group (8 persons) ......... 6,391,841(13) 28.3%
</TABLE>
<PAGE> 6
---------------
* Less than one percent
---------------
(1) "Beneficial ownership" is determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934, as amended. In general, a person is
treated as the "beneficial owner" of stock under Rule 13d-3 if such person
has (or shares) (i) either investment power or voting power over such stock
(which may be by means of a contract, arrangement, understanding,
relationship or otherwise), or (ii) the right to acquire such stock within
60 days, including by means of the exercise of an option or the conversion
of a convertible security. Each beneficial owner's percentage of ownership
and percentage of votes is determined by assuming that options that are
held by such person (but not those held by any other person) and which are
exercisable within 60 days of the date of this table have been exercised.
Except as indicated in the footnotes that follow, shares listed in the
table are held with sole voting and investment power.
(2) Each holder of record of shares of Class A Common Stock is entitled to one
vote per share held by such holder.
(3) The address of each of these persons is c/o Staff Builders, Inc., 1983
Marcus Avenue, Lake Success, New York 11042. Each of these persons has sole
power with respect to the voting and investment of the shares which he
owns, except as follows: on November 1, 1991, Ephraim Koschitzki, a former
executive officer and director of the Company, granted to Stephen Savitsky
and David Savitsky a ten year revocable proxy to vote all shares of Common
Stock now or hereafter owned of record by him. The Company believes that
Mr. Koschitzki beneficially owns 225,440 shares of Class A Common Stock
underlying options granted to him. As a result, (i) Stephen Savitsky has
sole voting and investment power with respect to 2,555,739 shares of Class
A Common Stock and has shared voting power with respect to the 225,440
shares of Class A Common Stock beneficially owned by Mr. Koschitzki and
(ii) David Savitsky has sole voting and investment power with respect to
2,193,087 shares of Class A Common Stock and has shared voting power with
respect to the 225,440 shares of Class A Common Stock beneficially owned by
Mr. Koschitzki.
(4) Includes options to purchase 198,500 shares of Class A Common Stock under
the 1993 Stock Option Plan and options to purchase 334,000 shares of Class
A Common Stock under the 1986 Non-Qualified Stock Option Plan.
(5) Includes 240,000 shares of Class A Common Stock held by Stephen Savitsky's
children. Mr. Savitsky disclaims beneficial ownership of these shares.
(6) Includes options to purchase 198,500 shares of Class A Common Stock under
the 1993 Stock Option Plan and options to purchase 320,000 shares of Class
A Common Stock under the 1986 Non-Qualified Stock Option Plan.
(7) Includes 7,450 shares of Class A Common Stock held by David Savitskys'
wife. Mr. Savitsky disclaims beneficial ownership of these shares.
(8) Includes 273,800 shares of Class A Common Stock held by Mr. Savitskys' wife
as trustee for the benefit of their three children and 135,000 shares of
Class A Common Stock held directly by one of Mr. Savitsky's children. Mr.
Savitsky disclaims beneficial ownership of these shares.
(9) The address of each of these persons is c/o Staff Builders, Inc., 1983
Marcus Avenue, Lake Success, New York 11042. Each of these persons has sole
power with respect to the voting and investment of the shares which he
owns.
(10) Includes options to purchase 6,667 shares of Class A Common Stock under the
1993 Stock Option Plan, options to purchase 53,334 shares under the 1998
<PAGE> 7
Stock Option Plan and options to purchase an additional 20,000 shares
exercisable under the 1998 Stock Option Plan.
(11) S Squared Technology Corp. ("S Squared"), a registered investment adviser,
is located at 515 Madison Avenue, New York, New York 10022. Includes
2,041,500 shares of Class A Common Stock for which S Squared has sole
voting and sole investment power and 212,000 shares of Class A Common Stock
for which S Squared has shared voting and shared investment power. The
shares are owned by limited partnerships for which S Squared is the sole
general partner, by advisory clients of S Squared, and by Seymour
Goldblatt, the principal of S Squared, and members of his family.
(12) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is located at 1299 Ocean Avenue, Santa Monica, California 90401.
Dimensional is deemed to have beneficial ownership of 1,372,460 shares of
Class A Common Stock, all of which shares are held in portfolios of DFA
Investment Dimensions Group Inc., a registered open-end investment company,
or in series of the DFA Investment Trust Company, a Delaware business
trust, or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, Dimensional Fund Advisors
Inc. serves as investment manager for all of such entities, but Dimensional
disclaims beneficial ownership of all such shares.
(13) Includes options to purchase 403,667 shares of Class A Common Stock under
the 1993 Stock Option Plan, options to purchase 654,000 shares of Class A
Common Stock under the 1986 Non Qualified Stock Option Plan and options to
purchase 308,888 shares of Class A Common Stock under the 1998 Stock Option
Plan.
PROPOSAL 1 -- ELECTION OF CLASS A DIRECTORS
The Board of Directors is divided into three classes. One class is elected
each year to hold office for a three-year term. Class A is the class whose term
will expire at the Annual Meeting. This class consists of two directors, David
Savitsky and Jonathan Halpert, who are nominees of the Board of Directors. The
nominees for Class A Directors, if elected by a majority of the votes cast at
the Annual Meeting, will serve until the 2003 Annual Meeting and until their
successors are elected and qualified. Unless otherwise instructed by the
stockholders, it is intended that the shares represented by the proxies in the
accompanying form will be voted for such nominees. If a nominee should become
unavailable to serve for any reason, which the Board of Directors does not
presently anticipate, the proxies will be voted for any substitute nominee who
may be selected by the Board of Directors prior to or at the meeting or the
Board of Directors may elect to fill the vacancy at a later date after selecting
an appropriate nominee.
In addition to the Class A Directors, the Board of Directors consists of
three other directors. Bernard J. Firestone and Donald Meyers are Class B
directors whose term expire at the 2001 annual meeting. Stephen Savitsky is a
Class C Director whose term expires at the 2002 Annual Meeting.
The Company's By-Laws require that notice of nomination of persons for
election to the Board of Directors, other than those made by the Board of
Directors, must be submitted in writing to the Secretary of the Company not less
than thirty nor more than sixty days prior to the Annual Meeting. The notice
must set forth certain information concerning the nominees and the stockholders
making the nominations. Also, within the same period, the Secretary of the
Company must receive the nominee's written consent to being a nominee and a
statement of intention to serve as a director, if elected.
Each of the nominees for Class A Directors named in this Proxy Statement
has filed with the Company a written consent to being a nominee and a statement
of intention to serve as a director, if elected.
The following table sets forth as to the nominees for election (shown by an
asterisk), each other director and each executive officer: (1) such person's
<PAGE> 8
name; (2) the year in which such person was first elected (or designated) a
director of the Company; (3) biographical information for the last five years;
(4) certain other directorships, if any, held by such person; and (5) such
person's age.
<TABLE>
<CAPTION>
First
Year Elected
Name Age as Director
---- --- ------------
<S> <C> <C>
Stephen Savitsky 54 1983 A founder of the Company, Mr. Savitsky has served as Chairman of
the Board, Chief Executive Officer and a Director of the Company
since 1983 (and of its predecessor from 1978 to 1983), and as
President of the Company from November 1991 through November
1998. Since October 1999, Mr. Savitsky has also served as the
Chief Executive Officer and Director of Tender Loving Care Health
Care Services, Inc. Mr. Savitsky is the brother of David
Savitsky.
David Savitsky 52 1983 A founder of the Company, Mr. Savitsky has served as President
since December 1998 and as a Director of the Company since 1983.
In addition, Mr. Savitsky served as Executive Vice President of
the Company from December 1987 through November 1998 and as Chief
Operating Officer of the Company from April 1991 through November
1998. Since October 1999, Mr. Savitsky has also served as Vice
Chairman, Government Relations and a Director of Tender Loving
Care Health Care Services, Inc. Mr. Savitsky is the brother of
Stephen Savitsky.
Jonathan Halpert, PhD 55 1983 Dr.Halpert was first elected a Director by the Board of Directors
in August 1987. He previously served as a Director of the Company
from May 1983 until he resigned from the Board in February 1985.
Dr. Halpert is a consultant in the area of deinstitutionalization
of the mentally retarded and Chief Executive Officer of the
Camelot Community Residence Program. Since October 1999, Dr.
Halpert has also served as a Director of Tender Loving Care
Health Care Services, Inc.
Bernard Firestone, Ph.D 51 1987 Dr. Firestone was first elected a Director by the Board of
Directors in August 1987. He is the dean of the College of
Liberal Arts and Sciences and professor of political science at
Hofstra University, where he has been teaching for 23 years.
Since October 1999, Dr. Firestone has also served as a Director
of Tender Loving Care Health Care Services, Inc.
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C>
Donald Meyers 71 1994 Mr. Meyers was elected a Director by the Board of Directors in
August 1994. He has been an Associate Clinical Professor, Health
Policy and Management, and the Director of the Resident and
Fellow Program in administration in New York University's Robert
W. Wagner Graduate School of Public Service since November 1991.
Mr. Meyers is also the President and sole director and
stockholder of RMR Health & Hospital Management Consultants,
Inc., a health care consulting firm, where he has been an
executive officer, director and stockholder since 1976.
Dale R. Clift 49 N/A Mr. Clift has been the Senior Vice President, Financial Strategy
of the Company since October 1999. Mr. Clift has served as
President, Chief Operating Officer and Director of Tender Loving
Care Health Care Services since October 1999. From February 1998
to October 1999, Mr. Clift was the Executive Vice President and
Chief Financial Officer of the Company. In addition, from
December 1998 to October 1999, Mr. Clift was the Chief Operating
Officer of the Company. From January 1996 through February 1998,
Mr. Clift provided consulting services to a number of companies,
including several in the health care industry. From April 1994
through January 1996, Mr. Clift was Executive Vice President of
Rock Bottom Restaurants, Inc., a restaurant operator.
Edward Teixeira 57 N/A Mr. Teixeira has been the Executive Vice President and Chief
Operating Officer of a principal subsidiary of the Company since
April 1999. From December 1990 to April 1999, Mr. Teixeira served
as the Senior Vice President, Franchising of a principal
subsidiary of the Company.
Alan Levy 38 N/A Mr. Levy has been the Vice President of Finance, Chief Financial
Officer and Treasurer of the Company since April 2000. From
November 1999 through January 2000, Mr. Levy was Vice President
and Chief Accounting Officer of Espernet.com, a residential
internet service provider. From February 1997 to November 1999,
Mr. Levy was the Treasurer, Controller and Chief Accounting
Officer of Globix Corporation, a business internet service
provider and computer equipment reseller. From March 1994 to
February 1997, Mr. Levy was the Assistant to the Vice President -
Finance of Del Laboratories, Inc., a
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C>
manufacturer and distributor of cosmetics and over-the-counter
pharmaceuticals.
Joseph Murphy 42 N/A Mr. Murphy was the Vice President of Finance and Chief
Financial Officer of the Company from May 1999 through April
2000 and Controller - Financial Reporting of the Company
from April 1998 through April 1999. From June 1987 through
October 1997, Mr. Murphy held various financial positions at
Colorado Prime Corporation, culminating as Vice President -
Finance and Administration. Mr. Murphy resigned his position
with the Company effective April 2000.
</TABLE>
<PAGE> 11
OPERATION OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for the overall affairs of the
Company. To assist it in carrying out its duties, certain authority has been
delegated to standing committees of the Board.
Each director who is not an officer or employee of the Company receives a
fee of $10,000 per annum for service on the Company's Board of Directors.
Directors who are officers or employees of the Company receive no fees for
service on the Board.
The Board of Directors held five meetings and acted by written consent on
five occasions during the fiscal year ended February 29, 2000. All of the
directors attended at least 75% of the meetings of the Board and applicable
committees during the fiscal year ended February 29, 2000.
COMMITTEES OF THE BOARD
The Executive Committee, the Audit Committee and the Compensation and Stock
Option Committee are the only standing committees of the Board of Directors.
Membership is as follows:
<TABLE>
<CAPTION>
COMPENSATION
EXECUTIVE AUDIT AND STOCK OPTION
--------- ----- ----------------
<S> <C> <C>
Stephen Savitsky Bernard J. Firestone Bernard J. Firestone
David Savitsky Jonathan J. Halpert Jonathan J. Halpert
Donald Meyers
</TABLE>
The Executive Committee is authorized to exercise all powers of the Board
when the Board is not in session, except as to matters upon which action by the
Board itself is required.
The Audit Committee generally assists the Board with respect to accounting,
auditing and reporting practices.
The Compensation and Stock Option Committee determines the cash and other
incentive compensation, if any, to be paid to the Company's executive officers
and other key employees. In addition, it administers the 1983 Incentive Stock
Option Plan, 1986 Non-Qualified Stock Option Plan, 1993 Stock Option Plan, 1993
Employee Stock Purchase Plan, 1994 Performance-Based Stock Option Plan, the
Teamwork Incentive Program, the 1998 Stock Option Plan and the 1998 Employee
Stock Purchase Plan.
The Executive Committee held ten meetings throughout the year, the Audit
Committee held no meetings, and the Compensation and Stock Option Committee held
one meeting during the fiscal year ended February 29, 2000. -
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation and Stock Option Committee is composed of
Bernard J. Firestone and Jonathan J. Halpert.
No member of the Compensation Committee of the Board of Directors of the
Company was, during 1999, an officer or employee of the Company or any of its
subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries, or had any relationship requiring disclosure pursuant to
applicable rules and regulations of the Securities and Exchange Commission.
During 1999, no executive officer of the Company served as (i) a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served on the
Compensation Committee of the Company, (ii) a director of another entity, one of
whose executive officers served on the Compensation Committee of the Company, or
<PAGE> 12
(iii) a member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose executive
officers served as a director of the Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own beneficially more than ten
percent of the Class A Common Stock to file with the Securities and Exchange
Commission initial reports of beneficial ownership and reports of changes in
beneficial ownership of the Common Stock. Officers, directors and persons owning
more than ten percent of the Class A Common Stock or Class B Common Stock are
required to furnish the Company with copies of all such reports. To the
Company's knowledge, based on a review of copies of such reports furnished to
the Company and written representations from its officers and directors that no
other reports were required, during the fiscal year ended February 29, 2000, all
Section 16(a) filing requirements applicable to its executive officers,
directors and persons owning beneficially more than ten percent of the Common
Stock were complied with on a timely basis, except that the an initial holdings
statement for Mr. Murphy, the Company's former Vice President and Chief
Financial Officer was not filed. Mr. Murphy resigned his employment with the
Company in April 2000. Mr. Murphy held no shares of Company stock.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for the last three Fiscal years of the Chief Executive
Officer and other Executive Officers of the Company whose total annual salary
and bonuses exceeded $100,000 ("Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------- SECURITIES
BONUS UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS (#)
<S> <C> <C> <C> <C>
Stephen Savitsky ................. 2000 $ 494,277(1) -- --
Chairman, and .................. 1999 $ 594,991 -- 1,383,691
Chief Executive Officer ........ 1998 $ 520,571 -- 580,691
David Savitsky ................... 2000 $ 383,002(2) -- --
President, Secretary, .......... 1999 $ 426,131 -- 1,383,691
Chief Operating Officer ........ 1998 $ 377,016 -- 580,691
Edward Teixeira .................. 2000 $ 206,512 $ 23,000 160,000
Executive Vice President and ... 1999 $ 178,684 $ 30,625 102,800
Chief Operating Officer of a ... 1998 $ 176,615 $ 19,375 --
Principal Subsidiary
Joseph Murphy(3) ................. 2000 $ 139,558 -- --
Vice President - Finance and ... 1999 $ 94,097 -- 15,000
Chief Financial Officer ........ 1998 -- -- --
</TABLE>
---------------
(1) Mr. Savitsky received an additional $100,836 in compensation in fiscal 2000
from Tender Loving Care Health Care Services, Inc. for which he also serves
as Chairman and Chief Executive Officer.
(2) Mr. Savitsky received an additional $33,382 in compensation in fiscal 2000
from Tender Loving Care Health Care Services, Inc. for which he also serves
as Vice Chairman, Government Relations
(3) Mr. Murphy resigned his employment effective April 2000.
<PAGE> 13
OPTION GRANTS TABLE
The following table sets forth information with respect to the Named
Executive Officers concerning the grant of stock options during the fiscal year
ended February 29, 2000. The Company did not have during such fiscal year, and
currently does not have, any plans providing for the grant of stock appreciation
rights ("SARs").
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION GRANT DATE (1)
NAME GRANTED FISCAL YEAR BASE PRICE DATE PRESENT VALUE
---- ------- ----------- ---------- ---- -------------
<S> <C> <C> <C> <C> <C>
Stephen Savitsky ........ -- -- -- -- --
David Savitsky .......... -- -- -- -- --
Edward Teixeira(2) ...... 100,000 46.5% $ .34 2009 $ 33,000
Edward Teixeira (3) ..... 60,000 27.9% $ .41 2009 $ 24,000
Joseph Murphy ........... -- -- -- -- --
</TABLE>
---------------
(1) The values shown were calculated utilizing the Black-Scholes option pricing
model and are presented solely for the purpose of comparative disclosure in
accordance with certain regulations of the Securities and Exchange
Commission. This model is a mathematical formula used to value traded stock
price volatility. The actual value that an executive officer may realize,
if any, is dependent on the amount by which the stock price at the time of
exercise exceeds the exercise price. There is no assurance that the value
realized by an executive officer will be at or near the value estimated by
the Black-Scholes model. In calculating the grant date present values, the
Company used the following assumptions: (a) expected volatility of
approximately 146%; (b) risk-free rate of return of approximately 6.0%; (c)
no dividends payable during the relevant period; and (d) exercise at the
end of a 10 year period from the date of grant.
(2) Issued under the 1998 Stock Option Plan. 33,334 are currently exercisable.
(3) Issued under the 1998 Stock Option Plan. 20,000 are currently exercisable.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
TABLE
The following table provides information concerning the number and value of
stock options exercised during the fiscal year ended February 29, 2000, and held
at the end of such fiscal year, by the Named Executive Officers. No SARs were
exercised during such fiscal year, and no SARs are held by any Named Executive
Officer, because the Company does not have any plans providing for SARs.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FEBRUARY 29, 2000 AT FEBRUARY 29,2000
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Stephen Savitsky .. -- -- 532,500/1,582,191 0/0
David Savitsky .... -- -- 518,500/1,582,191 0/0
Edward Teixeira ... -- -- 60,001/187,779 0/0
Joseph Murphy ..... -- -- 0/15,000 0/0
</TABLE>
<PAGE> 14
EMPLOYMENT AGREEMENTS
On June 1, 1987, the Company entered into a five-year employment agreement
with Stephen Savitsky to serve as Chief Executive Officer and Chairman of the
Board of Directors of the Company under which Mr. Savitsky received an initial
base salary (beginning in June 1987) of $200,000 per year, which base salary
increases annually at the rate of ten percent plus any increase in the cost of
living. Mr. Savitsky's employment agreement is automatically extended at the end
of each year for an additional year and is terminable by the Company upon five
years' notice. On October 20, 1999, the Company amended Mr. Savitsky's
employment agreement pursuant to which Mr. Savitsky serves as Chairman of the
Board and Chief Executive Officer of the Company, receives a base salary of
$295,373. Mr. Savitsky's employment agreement provides that, upon a "change of
control" of the Company and his termination of employment other than for his
conviction of a felony, he will be entitled to receive a lump sum severance
payment equal to 2.99 times his average annual compensation for the five
calendar years prior to termination. Mr. Savitsky is required to devote
approximately one-half of his business time to the affairs of the Company and
his employment agreement provides that during the term of his employment and for
a period of six months thereafter, he will not compete with the Company.
On June 1, 1987, the Company entered into a five-year employment agreement
with David Savitsky to serve as Secretary and Treasurer of the Company under
which Mr. Savitsky received an initial annual base salary of $110,000 per year,
which base salary increases annually at the rate of ten percent plus any
increase in the cost of living. Mr. Savitsky's employment agreement is
automatically extended at the end of each year for an additional year and is
terminable by the Company upon five years' notice. On October 20, 1999, the
Company amended Mr. Savitsky's employment agreement under which Mr. Savitsky now
serves as President, Secretary and Chief Operating Officer of the Company and
receives an annual base salary of $367,080. Mr. Savitsky's employment contract
provides that upon a "change of control" of the Company or his termination of
employment other than for his conviction of a felony, he will be entitled to
receive a lump sum severance payment equal to 2.99 times his average annual
compensation for the five calendar years prior to termination. Mr. Savitsky is
required to devote approximately 80% of his business time to the affairs of the
Company and his employment contract provides that during the term of his
employment and for a period of six months thereafter, he will not compete with
the Company.
On December 1, 1996, the Company entered into a three-year employment
agreement with Edward Teixeira to serve as Senior Vice President, Franchising of
a principal subsidiary of the Company under which Mr. Teixeira received an
initial annual base salary of $175,000 per year, which base salary increases by
$10,000 per annum. On April 15, 1999, Mr. Teixeira's existing agreement was
terminated and was replaced by a new agreement. Under this new employment
agreement, Mr. Teixeira serves as the Executive Vice President and Chief
Operating Officer of a principal subsidiary of the Company and receives an
annual base salary of $175,000 which increases by $10,000 per annum. He is also
eligible for an annual bonus equal to 5% of the pre-tax profit greater than 3%
of the Company's profit and loss statement. He is also eligible to receive an
automobile allowance of $6,700 per annum. Under his employment agreement, Mr.
Teixeira is obligated to devote his full business time to the affairs of the
Company. Further, if within 12 months after a "change of control" Mr. Teixeira
were terminated for any reason (other than the commission of a felony or the
perpetration of fraud against the Company), he would then be entitled to receive
an amount equal to twelve months' of his base salary. Mr. Teixeira's employment
agreement provides that during the term of his employment and for a period of
six months thereafter, he will not compete with the Company.
If a "change of control" were to occur prior to the next anniversary date
of the respective employment agreements of Stephen Savitsky, David Savitsky and
Edward Teixeira and their employment relationships with the Company were to
terminate for reasons triggering the severance payments noted above, then the
Company would be obligated to make lump sum payments to them in the approximate
amounts of $883,165 and $1,097,569 to Stephen and David Savitsky and weekly
installment payments $3,846 for one year to Edward Teixeira, respectively. The
lump sum severance payments payable after the end of the calendar year or the
anniversary dates of the respective employment agreements, as the case may be,
would change as a result of changes in such individuals' compensation. The term
"change of control" as used in the employment agreements with the Company's
executive officers refers to an event in which a person, corporation,
partnership, association or entity (i) acquires a majority of the Company's
outstanding voting securities, (ii) acquires securities of the Company bearing a
majority of voting power with respect to election of directors of the Company,
or (iii) acquires all or substantially all of the Company's assets.
<PAGE> 15
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General
The Compensation and Stock Option Committee (hereinafter, the "Committee")
determines the cash and other incentive compensation, if any, to be paid to the
Company's executive officers and other key employees. In addition, the Committee
administers the Company's 1983 Incentive Stock Option Plan, 1986 Non-Qualified
Stock Option Plan, 1993 Stock Option Plan, 1993 Employee Stock Purchase Plan,
1994 Performance-Based Stock Option Plan, Teamwork Incentive 1998 Stock Option
Plan and the 1998 Employee Stock Purchase Plan. The Committee currently consists
of Bernard J. Firestone and Jonathan J. Halpert, each of whom is a non-employee
director of the Company (within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934).
Compensation Philosophy
The Committee has developed and implemented a compensation program that is
designed to attract, motivate, reward and retain the broad-based management
talent required to achieve the Company's business objectives and increase
stockholder value. There are three major components of the Company's
compensation program: base salary, short-term incentive compensation, including
annual bonuses, and long-term incentive compensation, including stock options.
These components are intended to provide management with incentives to aid the
Company in achieving both its short-term and long-term objectives. While salary
and bonus provide incentives to achieve short-term objectives, the Committee
believes that the potential for equity ownership by management addresses the
long-term objective of aligning management's and stockholders' interests in the
enhancement of stockholder value.
The Committee's executive compensation philosophy is to base management's
pay, in part, on the achievement of the Company's annual and long-term
performance goals, to provide competitive levels of compensation and to
recognize individual initiative, achievement and length of service to the
Company. The Committee does not assess these factors in a mechanical fashion,
but rather relies on its business experience in making a subjective evaluation
of the appropriate level and mix of compensation for each executive officer and
key employee.
The Committee evaluates the Company's performance by reviewing period to
period changes in such quantitative measures of performance as stock price,
revenue, net income and earnings per share. The Committee also considers
qualitative performance criteria such as the development of new business
strategies and resources, improvements in customer satisfaction and cost
management. During the Company's most recently completed fiscal year, the
Company increased revenues by 21%. The Company also successfully spun off its
home health care operation and relocated its back office operations from
Atlanta, Georgia to Lake Success, New York.
The Committee believes that it competes for executives not only with the
companies comprising the New Peer Group Index described below under the heading
"Performance Graph" but also with numerous other companies in supplemental
staffing and temporary personnel industries that are actively seeking executives
having the same type of skills and experience as the Company's executives. The
Committee has not made a statistical analysis of the compensation practices of
these competitors, but tries to keep itself generally informed of such
practices. The Committee believes that, notwithstanding the variety of
compensation packages offered by these competitors which make objective
comparisons difficult, the compensation paid by the Company to its executive
officers and other key employees is above average,
<PAGE> 16
reflecting the Company's relative size and desire to retain its current
employees.
The Committee also considers other subjective factors bearing on the
appropriate compensation for each of its executive officers and other key
employees, such as the length of an employee's service with the Company, which
the Committee believes enhances the value of the employee to the Company. The
Committee takes note of the individual initiative demonstrated by such officers
and employees in the development and implementation of the Company's business
plan. Where appropriate, the Committee will consider the performance of specific
divisions or departments of the Company for which the employee has direct
supervisory responsibility.
When the Company identifies a talented executive, it seeks to secure his or
her employment for a long term. For this reason, the Company has entered into
employment agreements with its executive officers, each of which provides for a
specified base salary. The existence of these employment agreements establishes
certain minimum salary and benefit levels for each covered employee during the
term of such employee's agreement which may not be reduced by the Committee. The
Committee is able, however, to apply its compensation philosophy at the time
each such employment agreement is negotiated or renewed and in determining what,
if any, additional compensation, including bonuses or issuances of stock or
stock options, is appropriate beyond the minimums established by each employment
agreement.
The particular components of executive compensation employed by the Company
are discussed in greater detail below.
Salaries
Base salaries for the Company's executive officers and other key employees
are determined initially by evaluating the responsibilities of the position held
and the experience of the individual in light of the Committee's compensation
philosophy discussed above. No specific formula is applied in setting an
employee's base salary, either with respect to the total amount of such base
salary or the relative value such base salary should bear to the employee's
total compensation package. The Committee believes that the base salaries paid
by the Company should be maintained at levels at least competitive with those
offered by companies with which the Company competes for executive talent in
order to attract and retain executive officers and other key employees of the
caliber that the Company desires.
The base salaries for the Company's executive officers and other key
employees are reflected in the employment agreements negotiated by the Company
with each such employee and are accordingly subject to formal review only at the
time each such contract is entered into or renewed. During its most recently
completed fiscal year, the Company (or a subsidiary of the Company) amended
employment agreements with Stephen Savitsky, David Savitsky and Edward Teixeira.
The terms of these employment agreements are described in greater detail above
under the heading "Employment Agreements." In evaluating the terms of employment
agreements, the Committee considers each of the factors described above, without
assigning any specific weight to such factors.
Annual Bonuses and Incentive Compensation
The payment of bonuses and other incentive compensation is an important
motivating factor in recognizing an executive's performance each year. For this
reason, the Company adopted a Teamwork Incentive Program commencing with the
Company's 1993 fiscal year to award its officers, including executive officers,
and other corporate employees with cash payments if the Company achieves certain
levels of profitability. Annual payments are required under the Teamwork
Incentive Program in an aggregate amount equal to 10% of the amount by which
income from continuing operations before income taxes (excluding extraordinary
items) for a fiscal year exceeds a specified percentage of the Company's
revenues, as determined by the Board of Directors. For fiscal 2000, no amounts
were paid under the Teamwork Incentive Program as the Company did not meet its
performance goals as required by the terms of the Program.
<PAGE> 17
Stock Option Plans
To promote the long-term objectives of the Company and encourage growth in
stockholder value, options are granted to key executives who are in a position
to make a substantial contribution to the long-term success of the Company. We
believe that the executive officers should benefit together with stockholders as
the Company's stock increases in value. Stock options focus the executives'
efforts on managing the Company from the perspective of an owner with an equity
stake in the business. Because the Company views stock option grants as a part
of the executive officer's total annual compensation package, the amount of
stock options outstanding at the time of a new grant or granted in prior years
does not serve to increase or decrease the size of the new grant.
In the fiscal year ended February 29, 2000, 160,000 stock options were
awarded to Edward Teixeira. It is the philosophy of the Committee that stock
options be awarded to executive officers of the Company to promote long-term
interests between such individuals and the Company's stockholders and to assist
in the retention of such individuals. As with the other components of executive
compensation, the Committee does not apply any fixed formula to determine the
appropriate number of options to grant to an executive but rather relies on its
subjective judgment in applying the compensation philosophy described above. In
order to avoid any adverse effect of the Company's earnings or cash flow, the
Committee has favored the granting of stock options over cash bonuses as a means
of rewarding the Company's executive officers and other key employees.
Compensation of Chief Executive Officer
The Committee applies the same factors in considering Stephen Savitsky's
compensation that it applies to the Company's other executive officers and key
employees. Mr. Savitsky's five-year employment agreement establishes his annual
minimum base salary, including the amount of his minimum annual salary
adjustment. The Committee may reduce this base salary only at the time a new
agreement is negotiated, although the Committee does have the ability to award
Mr. Savitsky additional base salary and to give the five year notice necessary
to terminate the agreement. During the fiscal year ended February 29, 2000, the
Committee did not provide notice of termination to Mr. Savitsky. Mr. Savitsky's
base salary was set at $295,373 pursuant to an amendment to his employment
agreement. In addition, Mr. Savitsky receives a base salary of $295,373 from
Tender Loving Care Health Care Services, Inc. ("TLCS"). During the last year,
Mr. Savitsky's efforts contributed to the Company's 21% increase in revenues to
$115 million and the successful spin-off of its home health care operation.
Compensation and Stock Option
Committee
Bernard J. Firestone
Jonathan J. Halpert
PERFORMANCE GRAPH
The following Performance Graph compares the total cumulative return
(assuming dividends are reinvested) on the Company's Common Stock during the
five fiscal years ended February 29, 2000, with the cumulative return on the
Nasdaq Market Index and a Peer Group Index, assuming investment of $100 in the
Company's Common Stock, the Nasdaq Market Index and the Peer Group Index at
February 29, 2000 closing stock prices on the OTC Bulletin Board. The Peer Group
selected by the Company consists of Kelly Services Inc and Interim Services,
Inc. The Peer Group consists of a representative group of companies whose common
stock has been publicly-traded during the five years ended February 29, 2000,
and each of which, like the Company, engages in providing medical staffing
services.
The Performance Graph below is presented in accordance with SEC
requirements. Stockholders are cautioned against drawing any conclusions from
the data contained herein, as past results are not necessarily indicative of
<PAGE> 18
future stock performance. The Performance Graph in no way reflects the Company's
forecast of future stock price performance.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG STAFF BUILDERS, INC., NASDAQ MARKET
INDEX AND PEER GROUP INDEX
[GRAPH]
<TABLE>
<CAPTION>
Value at Value at Value at Value at Value at
Feb-96 Feb-97 Feb-98 Feb-99 Feb-00
<S> <C> <C> <C> <C> <C>
NASDAQ 140 167 225 291 598
Peer Group 116 111 108 74 83
SBLI 81 81 64 5 9
</TABLE>
CERTAIN TRANSACTIONS
On October 20, 1999 (the "Distribution Date"), the Company spun-off its
home health care operations to Tender Loving Care Health Care Services, Inc.
("TLCS") which became an independent, publicly traded company (the "Spin-off")
as of the Distribution Date. The Spin-off was accomplished by TLCS acquiring
100% of the outstanding capital stock of the Company's subsidiaries engaged in
the home health care business with a pro rata distribution made to the Company's
stockholders of all of the shares of the TLCS common stock owned by the Company
(the "Distribution").
On October 20, 1999, TLCS entered into a five-year employment agreement
with Stephen Savitsky under which Mr. Savitsky serves as Chairman of the Board,
Chief Executive Officer and a Director and receives a base salary of $295,374
per year, plus annual cost of living increases. Mr. Savitsky's employment
agreement is automatically extended at the end of each year for an additional
year and is terminable by the TLCS upon five years' notice. Mr. Savitsky's
employment agreement provides that, upon a "change of control" of TLCS and his
termination of employment other than for his conviction of a felony, he will be
entitled to receive a lump sum severance payment equal to 2.99 times his average
annual compensation for the five calendar years prior to termination. Mr.
Savitsky is required to devote approximately one-half of his business time to
the affairs of TLCS and his employment agreement provides that during the term
of his employment and for a period of six months thereafter he will not compete
with TLCS.
On October 20, 1999, TLCS entered into a five-year employment agreement
with David Savitsky under which Mr. Savitsky serves as Vice Chairman, Government
Relations and a Director and receives a base salary of $91,770 per year, plus
annual cost of living increases. Mr. Savitsky's employment agreement is
automatically extended at the end of each year for an additional year and is
terminable by TLCS upon five years' notice. Mr. Savitsky's employment agreement
provides that, upon a "change of control" of TLCS and his termination of
employment other than for his conviction of a felony, he will be entitled to
receive a lump sum severance payment equal to 2.99 times his average annual
compensation for the five calendar years prior to termination. Mr. Savitsky is
required to devote approximately twenty percent of his business time to the
affairs of TLCS and his employment agreement provides that during the term of
his employment and for a period of six months thereafter he will not compete
with TLCS.
Stephen Savitsky and David Savitsky, who together own approximately 20% of
the Company's common stock, also own approximately 20% of TLCS common stock.
Also, five of the Company's
<PAGE> 19
directors are also directors of TLCS and two of the Company's directors are
executive officers of TLCS. In addition, three executive officers of the Company
are employed by TLCS, and two executive officers of TLCS are serving as
consultants to the Company.
Distribution Agreement
The Company and TLCS have entered into a distribution agreement (the
"Distribution Agreement") which provides for, among other things, mechanics of
the Distribution, cooperation regarding past matters and the allocation of
responsibility for past obligations and certain obligations that may arise in
the future.
The Distribution Agreement provides that each of the Company and TLCS will
indemnify the other party and its affiliates from and against any and all
damage, loss, liability and expense arising out of or due to the failure of the
indemnitor or any of its subsidiaries to pay, perform or otherwise discharge any
of the liabilities or obligations for which it is responsible under the terms of
the Distribution Agreement, which include, subject to certain exceptions, all
liabilities and obligations arising out of the conduct or operation of their
respective business before, on or after the Distribution Date. 50% of all costs
and expenses of the Distribution incurred on or prior to the Distribution Date
were to be paid by the Company and 50% were to be paid by TLCS. During the
fiscal year ended February 29, 2000, the Company incurred approximately $706,946
of distribution expenses.
Tax Allocation Agreement
The Company and TLCS have entered into a tax allocation agreement (the "Tax
Allocation Agreement") to allocate certain tax liabilities between the Company
and TLCS and their respective subsidiaries and to allocate responsibilities with
respect to tax returns. Under the Tax Allocation Agreement, the Company and TLCS
will each be responsible for the taxes allocated between the respective parties
based on the legal entity on which the tax is imposed.
The Tax Allocation Agreement provides that if the Company is subject to any
tax attributable to the Distribution, including by reason of the Distribution's
failure to qualify under Section 355 of the Internal Revenue Code of 1986 as
amended as a tax-free distribution, then the Company shall be responsible for
any such tax. In the Tax Allocation Agreement, TLCS represented that it has no
plan or intention to take certain specified actions which might adversely affect
the tax-free status of the Distribution which include: (a) no plan or intention
to liquidate, merge with another corporation or sell or otherwise dispose of its
assets subsequent to the Distribution except in the ordinary course of business;
(b) no plan involving the issuance or transfer of equity interests in TLCS
following the Distribution other than issuances to employees and consultants of
TLCS upon the exercise of stock options under its option plan; and (c) no plan
or intention for the transfer or cessation of a substantial portion of the
business of TLCS or other substantial change in the business of TLCS following
the Distribution.
Transitional Services Agreement
The Company and TLCS have entered into an agreement pursuant to which TLCS
furnishes various administrative services to the Company. The initial one-year
term of the agreement expires on October 20, 2000. The agreement will
automatically renew at the end of the initial term or any renewal term for
successive three-month terms until terminated by either party upon written
notice to the other party at least 90 days prior to the expiration of the
applicable term. Fees payable by the Company to TLCS for such services are
expected to be at the rate of 110% of the costs actually incurred. During the
period October 20, 1999 to February 29, 2000, the Company was charged
approximately $400,000 for services rendered pursuant to this agreement.
Employee Benefits Agreement
The Company and TLCS have entered into an employee benefits agreement (the
"Employee Benefits Agreement") which sets forth the employee benefit plan
<PAGE> 20
arrangements that apply to those employees who became employees of TLCS as of
the Distribution Date. The Employee Benefits Agreement requires that TLCS
establish a 401(k) savings plan, welfare plans and stock purchase and option
plans which are substantially the same in all respects to the corresponding
plans maintained by the Company prior to the Distribution Date. TLCS has
assumed, with certain exceptions, all liability and responsibility for providing
continuation of health care coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") to TLCS employees and any former employee
of the home health care business prior to the Distribution. The Employee
Benefits Agreement also provides for certain cross-indemnities with respect to
the TLSC 401(k) plan and the Company 401(k) plan.
Trademark License Agreement
The Company and TLCS have entered into a license agreement pursuant to
which the Company will license to TLCS the right to use the service marks Staff
Builders and the Stick Figure Logo in connection with home health care services.
The license is royalty-free and will continue for so long as TLCS uses such
marks in connection with home health care services. Both parties will have a
right of termination upon 30 days' prior written notice to the other party if
such party materially breaches the agreement.
Effective September 8, 1996, DSS Staffing Corp. ("DSS") acquired a medical
staffing services franchise from the Company for Nassau, Suffolk, Queens, Kings,
New York, Bronx and Richmond counties in New York. Stuart Savitsky, son of
Stephen Savitsky and Samuel Schreier, the son-in-law of Stephen Savitsky, each
owns one third of the outstanding capital stock of DSS. As part of the franchise
transaction, DSS paid a $75,000 franchise fee, agreed to make monthly payments
of $10,500 for a period of five years and entered into a franchise agreement
with the Company. The terms and conditions of the franchise agreement between
the Company and DSS are substantially similar to those for other franchisees of
the Company, except that the DSS franchise agreement provides the franchise with
two additional five-year renewal options.
Effective February 20, 1998, ViTex, Inc. ("VTI") acquired a medical
staffing services franchise from the Company for Worcester County and
surrounding areas in Massachusetts. Edward Teixeira's wife owns 50% of the
capital stock of VTI. VTI agreed to pay a franchise fee of $10,000 in one
installment of $5,000, which was paid in February 1998, and the balance in five
consecutive monthly payments of $1,000 commencing June 1998. The terms and
conditions of the franchise agreement between the Company and VTI are
substantially similar to those for other franchisees of the Company including
the term of ten years with a five-year renewal option.
Effective June 1998, Direct Staffing Inc. ("DS") acquired a medical
staffing service franchise from the Company for Westchester and Rockland County
and surrounding areas in New York. Steven Weiner, the son-in-law of Stephen
Savitsky, owns 50% of the outstanding capital stock of DS. As part of the
franchise transaction, DS paid a $19,500 franchise fee and entered into a
franchise agreement with the Company. The terms and conditions of the franchise
agreement between the Company and DS are substantially similar to those for
other franchises of the Company.
In order to facilitate the acquisition of a franchise by a willing
prospective franchisee, the Company will frequently accept a promissory note as
consideration for the purchase from the Company of an existing branch location
and will occasionally advance expenses to a franchisee. The Company's
transaction with DSS is consistent with this business purpose and with
accommodations which have been granted to other, unaffiliated franchisees.
Under the Company's franchise program, the Company processes and pays the
payroll to the field employees who service clients and invoices the clients for
such services. Each month the Company pays the franchisee 60% of the gross
margin dollars (in general, the difference between the amount so invoiced and
the payroll and related expenses for such field employees) from the franchisee's
business for the prior month's activity. Franchisees are responsible for their
general and administrative expenses, including office payroll. If the franchisee
<PAGE> 21
elects, the Company will process payment of the franchisee's office payroll and
some or all of the franchisee's other administrative expenses, and withhold the
amount so expended from the 60% gross margin otherwise due the franchisee.
During the fiscal year ended February 29, 2000, the Company paid DSS $1,766,188
under the terms of its franchise agreement, representing a 21.35% gross margin
of $5,959,693 less $1,953,248 withheld for administrative expenses and paid DS
$343,730 under the terms of its franchise agreement, representing a 24.63% gross
margin of $1,018,138 less $215,767 withheld for administrative expenses
Although the Company has no formal policy regarding transactions with
affiliates, it does not intend to enter into a transaction with any affiliate on
terms less favorable to the Company than those it would receive in an arm's
length transaction with an unaffiliated party.
STOCKHOLDER PROPOSALS
Stockholders of the Company wishing to include proposals in the proxy
material in relation to the Annual Meeting of the Company to be held in 2001
must submit the same in writing so as to be received at the executive offices of
the Company on or before February 28, 2001. Such proposals must also meet the
other requirements of the rules of the Securities and Exchange Commission
relating to stockholder proposals.
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected the firm of Deloitte &
Touche, LLP as the independent certified public accountants to audit the
accounts of the Company for the fiscal year ending February 28, 2001. A
representative of Deloitte & Touche, LLP, which also audited the accounts of the
Company for the fiscal year ended February 29, 2000, is expected to be present
at the Annual Meeting, with an opportunity to make a statement, if he so
desires, and to respond to appropriate questions at the meeting.
INCORPORATION BY REFERENCE
The Company's Financial Statements and the Management's Discussion and
Analysis of Financial Condition and Results of Operations for the fiscal year
ended February 29, 2000 contained in the Annual Report have been incorporated by
reference in this Proxy Statement.
<PAGE> 22
GENERAL
The management of the Company does not know of any matters other than those
stated in this Proxy Statement which are to be presented for action at the
meeting. If any other matters should properly come before this meeting, it is
intended that proxies in the accompanying form will be voted on any such matters
in accordance with the judgment of the persons voting such proxies.
Discretionary authority to vote on such matters is conferred by such proxies by
the persons voting them.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON BEING SOLICITED BY
THIS PROXY STATEMENT, UPON WRITTEN REQUEST, ADDITIONAL COPIES OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 29, 2000 FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. ALL SUCH REQUESTS SHOULD BE
DIRECTED TO ALAN LEVY, STAFF BUILDERS, INC., 1983 MARCUS AVENUE, LAKE SUCCESS,
NEW YORK 11042.
Insofar as any of the information in this Proxy Statement may rest
peculiarly within the knowledge of persons other than the Company, the Company
has relied upon information furnished by them.
By Order of the Board of Directors
/s/ DAVID SAVITSKY
DAVID SAVITSKY
Secretary
Dated: July 17, 2000
<PAGE> 23
STAFF BUILDERS, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen Savitsky and David Savitsky and
each of them (with power of substitution) proxies of the undersigned to
represent and vote, as designated below, all shares of Class A Common Stock,
$.01 par value per share (the "Class A Common Stock"), and Class B Common Stock,
$.01 par value per share (the "Class B Common Stock"), of Staff Builders, Inc.,
(the "Company") which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders to be held on August 11, 2000 and
at any adjournment thereof. Each holder of shares of Class A Common Stock is
entitled to one vote for each share held by such holder. Each holder of shares
of Class B Common Stock is entitled to ten votes for each share held by such
holder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the annual meeting.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholders. If no direction is made, this Proxy will
be voted "FOR" Item 1.
-----------
SEE REVERSE
SIDE
-----------
[X] Please mark your votes as in this example.
<TABLE>
<CAPTION>
WITHHELD AUTHORITY
FOR NOMINEES FOR NOMINEES NOMINEES FOR CLASS A DIRECTORS:
<S> <C> <C> <C>
1. Election of
Class A [ ] [ ] David Savitsky
Directors Jonathan Halpert
</TABLE>
(Instruction: To withhold authority to vote for any individual nominee, write
the nominee's name on the space below)
--------------------------------------------------------------------------------
SIGNATURE(S) DATE
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IMPORTANT: Please date and sign as your name appears above and return in the
enclosed envelope. When signing as executor, administrator, trustee, guardian,
etc., please give full title as such. If the stockholder is a corporation, this
proxy should be signed in the full corporation name by a duly authorized officer
whose title is stated.
