<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 23, 1996
------------------------------------------
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------- --------------------
Commission file number 0-08547
-------
AMSERV HEALTHCARE INC
--------------------------------------------------
(Exact name of Issuer as specified in its charter)
DELAWARE 94-1627467
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
3252 Holiday Court, #204, La Jolla, CA 92037
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(Issuer's telephone number, including area code) (619) 597-1000
--------------
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the Issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
As of May 3, 1996, there were outstanding 3,305,953 shares of the Issuer's
common stock, par value $.01 per share.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
AMSERV HEALTHCARE INC.
I N D E X
__________________________
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
A. CONDENSED CONSOLIDATED BALANCE SHEETS,
MARCH 23, 1996 AND JUNE 24, 1995 3
B. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE THREE AND NINE MONTH PERIODS
ENDED MARCH 23, 1996 AND MARCH 31, 1995 4
C. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE NINE MONTH PERIODS
ENDED MARCH 23, 1996 AND MARCH 31, 1995 5
D. NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS 6 - 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION 8 - 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
EXHIBIT INDEX E-1
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
AMSERV HEALTHCARE INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 23, June 24,
1996 1995
------------ ------------
ASSETS (unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents................................................................ $ 2,305,423 $ 1,226,448
Short-term investments, net.............................................................. 103,500 1,392,021
Accounts receivable, net of allowance for
doubtful accounts of $87,811 and $103,264, respectively................................. 1,320,969 973,731
Other current assets..................................................................... 390,827 187,463
----------- -----------
Total current assets................................................................... 4,120,719 3,779,663
Equipment, furniture and fixtures net of
accumulated depreciation of $273,369 and $196,069, respectively.......................... 429,597 387,821
Intangible assets, net.................................................................... 2,004,881 2,203,113
Other assets.............................................................................. 277,863 313,888
----------- -----------
$ 6,833,060 $ 6,684,485
=========== ===========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable......................................................................... $ 35,139 $ 105,663
Accrued payroll and related taxes........................................................ 780,407 561,143
Net liabilities of discontinued operations (Note 4)...................................... 115,422 391,770
Other current liabilities................................................................ 258,296 254,778
----------- -----------
Total current liabilities.............................................................. 1,189,264 1,313,354
----------- -----------
Long-Term Liabilities
Other long-term liabilities.............................................................. 33,406 30,859
----------- -----------
Total long-term liabilities............................................................ 33,406 30,859
----------- -----------
Redeemable Preferred Stock
Redeemable preferred stock, $.01 par value;
authorized 3,000,000 shares:
Class A; issued and outstanding 341,435 shares (Note 5)................................ - 3,414
Class B; issued and outstanding 195,106 shares (Note 5)................................ 1,951 -
Additional paid-in capital (Note 5)...................................................... 510,202 679,456
----------- -----------
Total redeemable preferred stock....................................................... 512,153 682,870
Common Shareholders' Equity
Common stock, $.01 par value; authorized 15,000,000 shares;
3,448,221 shares and 3,295,356 shares
outstanding, respectively............................................................... 34,482 32,953
Treasury stock, at cost, 143,268 shares.................................................. (296,053) (296,053)
Additional paid-in capital............................................................... 7,064,031 6,787,963
Notes receivable from officer............................................................ (397,782) (198,440)
Unrealized gain (loss) on short-term investments......................................... 5,838 (14,564)
Accumulated deficit...................................................................... (1,312,279) (1,654,457)
----------- -----------
Total common shareholders' equity...................................................... 5,098,237 4,657,402
----------- -----------
$ 6,833,060 $ 6,684,485
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
AMSERV HEALTHCARE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 23, March 31, March 23, March 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating Revenues....................... $3,122,251 $2,899,543 $9,117,616 $8,402,485
---------- ---------- ---------- ----------
Operating Expenses
Selling, general and administrative..... 2,912,013 2,693,274 8,396,028 7,783,797
Depreciation and amortization........... 92,799 110,939 275,532 330,806
---------- ---------- ---------- ----------
Total Operating Expenses.............. 3,004,812 2,804,213 8,671,560 8,114,603
---------- ---------- ---------- ----------
Operating Income
from Continuing Operations.............. 117,439 95,330 446,056 287,882
Interest Expense......................... - (14,422) - (50,726)
Interest Income.......................... 33,216 35,617 120,122 66,599
---------- ---------- ---------- ----------
Income from Continuing Operations
Before Provision for Income Taxes....... 150,655 116,525 566,178 303,755
Income Tax Provision..................... 60,000 32,000 224,000 79,000
---------- ---------- ---------- ----------
Net Income from
Continuing Operations................... 90,655 84,525 342,178 224,755
Gain on Disposal of
Discontinued Operations
(less applicable income tax provision
of $29,777)............................. - - - 168,736
Net Income............................... $ 90,655 $ 84,525 $ 342,178 $ 393,491
========== ========== ========== ==========
Net Income Per Common Share:
Income from Continuing Operations....... $ 0.03 $ 0.03 $ 0.10 $ 0.07
Gain on Disposal of
Discontinued Operations................ - - - 0.05
Net Income.............................. $ 0.03 $ 0.03 $ 0.10 $ 0.12
========== ========== ========== ==========
Shares Used in Computing
Per Share Amounts....................... 3,346,643 3,132,660 3,269,084 3,132,660
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
AMSERV HEALTHCARE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
---------------------------
March 23, March 31,
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................. $ 342,178 $ 393,491
Noncash items included in net income:
Depreciation and amortization............................. 275,532 330,806
Loss on disposal of equipment, furniture and fixtures..... - 32,680
Changes in assets and liabilities:
Accounts receivable....................................... (347,238) 822,107
Income taxes.............................................. 151,443 105,942
Other assets.............................................. (167,339) 143,174
Accounts payable.......................................... (70,524) (54,927)
Other liabilities......................................... 73,886 (126,039)
----------- -----------
Net cash provided by operating activities.................. 257,938 1,647,234
INVESTING ACTIVITIES:
Proceeds from sale of discontinued operations............. - 813,941
Payment of costs related to discontinued operations....... (276,348) (560,502)
Proceeds from sale of short-term investments.............. 2,310,486 405,000
Purchase of short-term investments........................ (1,001,563) (1,572,829)
Proceeds from sale of equipment, furniture and fixtures... - 31,851
Purchase of equipment, furniture and fixtures............. (119,076) (256,028)
Cash received on notes receivable......................... - 50,411
----------- -----------
Net cash provided by (used in) investing activities........ 913,499 (1,088,156)
FINANCING ACTIVITIES:
Repayment on note payable................................. - (240,016)
Redemption of class B preferred shares.................... (170,717) -
Exercise of employee stock options........................ 78,255 -
----------- -----------
Net cash used in financing activities...................... (92,462) (240,016)
----------- -----------
Net increase in cash and cash equivalents.................. 1,078,975 319,062
Cash and cash equivalents at beginning of year............. 1,226,448 643,987
----------- -----------
Cash and cash equivalents at end of period................. $ 2,305,423 $ 963,049
=========== ===========
NONCASH FINANCING AND INVESTING ACTIVITIES:
Income tax paid............................................ 189,715 145,884
Interest paid.............................................. - 37,115
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
AMSERV HEALTHCARE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ADJUSTMENTS
In the opinion of management of the Company, the accompanying unaudited
condensed consolidated financial statements reflect all adjustments necessary
(which are of a normal recurring nature) to present fairly the Company's
financial position as of March 23, 1996, and the results of operations and cash
flows for the three and nine month periods ended March 23, 1996 and March 31,
1995. Information included in the condensed consolidated balance sheet as of
June 24, 1995 has been derived from the Company's Form 10-K for the year ended
June 24, 1995 ("1995 Form 10-K"). The unaudited condensed consolidated
financial statements contained herein should be read in conjunction with the
consolidated financial statements and notes contained in the Company's 1995 Form
10-K.
2. FISCAL YEAR
During fiscal 1995 the Company commenced utilizing a 52/53-week fiscal year
ending on the last Saturday in June. Monthly periods are accounted for in a
four-week, four-week, five-week sequence, with each quarter consisting of 13
weeks. All references to years relate to fiscal years rather than calendar
years.
3. EARNINGS PER SHARE
Earnings per share for the three and nine month periods ended March 23, 1996 and
March 31, 1995 are based on the weighted average number of common and common
stock equivalent shares outstanding. Certain stock options were not included in
the computation of earnings per share because their effect would be
antidilutive. Earnings per share assuming full dilution are the same as primary
earnings per share.
4. DISCONTINUED OPERATIONS
On November 9, 1994, the Company sold substantially all of the fixed and
intangible assets of its temporary nursing services business for $814,000 in
cash. The related net liabilities for this discontinued operation are included
in the balance sheet under the caption "Net liabilities of discontinued
operations". The balance remaining unpaid at March 23, 1996, relates to various
state and local tax and payroll liabilities that have not been resolved.
5. REDEEMABLE PREFERRED STOCK
On April 7, 1995, the Company issued 426,794 shares of its voting Class A
Redeemable Preferred Stock, which had a redemption value of $2.00 per share, in
exchange for the Company's promissory note payable to North Central Personnel,
Inc. and related accrued interest which totalled $853,588 on the date of the
exchange. The preferred shares pay no dividends and may be redeemed at the
option of the holder, in specified installments for cash. On May 29, 1995,
85,359 shares were redeemed for $170,718. Subsequently, on July 6, 1995, the
remaining 341,435 Class A Redeemable Preferred Shares were exchanged for 260,141
Class B Redeemable Preferred Shares, with a redemption price of $2.625 per share
and an aggregate redemption value of $682,870. During the current fiscal year,
65,035 shares have been redeemed for $170,717. As of March 23, 1996, the
remaining 195,106 shares, with an aggregate redemption value of $512,153, may be
redeemed in installments of approximately 65,000 shares on or after May 29,
1996, November 29, 1996 and May 29, 1997, at the option of the holder. All
outstanding Class B shares become redeemable in the event of default.
6
<PAGE>
6. SUBSEQUENT EVENTS
MERGER AGREEMENT
- ----------------
On February 9, 1996, AMSERV's Board of Directors approved and the Company
executed an Agreement and Plan of Merger with Star Multi Care Services, Inc.
(NASDAQ:SMCS) ("Star"), in a stock transaction intended to qualify as a tax free
reorganization and to be accounted for as a pooling of interests. The merger is
subject to the approval of the shareholders of both companies, certain state and
regulatory approvals, and other customary conditions. The merger is expected to
be completed during the summer of 1996.
CONSENT SOLICITATION
- --------------------
By letters dated January 8, February 21, and March 13, 1996, York Hannover
Pharmaceuticals, Inc., a wholly-owned subsidiary of Stockbridge Investment
Partners, Inc. ("Stockbridge") and member of the Stockbridge Group, indicated
its intent to act by written consent and requested the Board set record dates.
January 29, February 29, and March 15, 1996, were established by the Board as
the respective record dates.
On or about March 7, 1996, Stockbridge commenced its solicitation of consents to
remove the five current members of the Board of Directors and replace each
member with a Stockbridge nominee. On March 13, 1996, AMSERV commenced a
solicitation of revocations of consent in opposition to the Stockbridge
solicitation.
CASH TENDER OFFER
- -----------------
On March 29, 1996, AMSERV received from Stockbridge a letter purporting to be an
offer to purchase for $3.00 per share in cash all outstanding shares of AMSERV
Common Stock. According to the letter, Stockbridge's proposal would be
structured as a merger to be voted on by AMSERV's shareholders. By letter dated
April 2, 1996, AMSERV responded to Stockbridge's proposal and stated that in
order for the Board of Directors to properly evaluate the proposal it would need
detailed answers to various questions regarding, among other things, whether the
proposal is subject to financing and, if so, the source(s) of such financing,
and the proposed structure of the merger, including what entity would be the
survivor. By letter dated April 12, 1996 addressed to Batchelder & Partners,
Inc., the Company's financial advisor, Stockbridge stated that it intends to
restructure its proposal in the form of a tender offer for any and all
outstanding shares of the Company and that Stockbridge expected to submit
evidence of irrevocable financing commitments to the Company on or before April
24, 1996. As of May 3, 1996, no such information was received.
7
<PAGE>
AMSERV HEALTHCARE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short-term investments decreased $210,000, from
$2,619,000 to $2,409,000 during the first nine months of fiscal 1996. This
decrease is the result of an increase in accounts receivable and payments made
during the period for corporate income taxes. The Company's balance sheet
maintains a current ratio of 3.5 to 1 at March 23, 1996. As discussed
previously, the Company has executed an Agreement and Plan of Merger with Star
and is the subject of litigation and a consent solicitation by Stockbridge which
will require the Company to incur legal and accounting charges. These
professional fees are estimated to be approximately $230,000 for the fourth
quarter of fiscal 1996. Management believes that its working capital position
will enable the Company to continue its expansion in home care and other health
care services and meet its anticipated cash requirements.
OPERATING RESULTS
Operating revenues for the three and nine month periods ended March 23, 1996
increased $223,000 or 8%, and $715,000 or 8%, respectively, over the same
periods of a year ago. Higher operating revenues are the result of an overall
increase in the demand for home care services.
Selling, general and administrative expenses for the three and nine months ended
March 23, 1996 increased $219,000 or 8%, and $612,000 or 8%, respectively,
compared to the same periods of the prior fiscal year. These increases were
primarily the result of the direct variable costs associated with the increase
in operating revenues; the fixed costs incurred regarding the start-up office in
Union City, New Jersey, which began operations in October 1994; and additional
expenses incurred in connection with the JCAHO accreditation program initiated
throughout the offices in New Jersey and Ohio and the implementation of new
pediatric and marketing programs in New Jersey.
Depreciation and amortization decreased $18,000 or 16%, and $55,000 or 17%,
respectively, during the three and nine month periods ended March 23, 1996 over
the same periods of fiscal 1995. These overall decreases are the result of a
reduction of amortization expense in connection with the intangible assets
acquired in the purchase of the New Jersey subsidiary, part of which became
fully amortized, offset by an increase in depreciation expense due to the
purchase of equipment, furniture and fixtures.
Interest income totalled $33,000 and $120,000, respectively, during the three
and nine month periods ended March 23, 1996 compared to $36,000 and $67,000,
respectively, during the same periods of a year ago. The overall increase of
$53,000 during the nine month period ended March 23, 1996 is due to interest and
dividends received during the period related to various short-term investments
and interest earned during fiscal 1996 on promissory notes receivable from an
officer of the Company related to the exercise of employee stock options.
8
<PAGE>
Net income from continuing operations increased from $85,000 to $91,000, or 7%,
for the third quarter of fiscal 1996, compared to the third quarter of fiscal
1995. For the nine months ended March 23, 1996, net income from continuing
operations increased 52% to $342,000, compared to $225,000 for the same nine
month period of fiscal 1995. Net income for the nine month period of fiscal
1995 included an after-tax gain of $169,000 as a result of the sale of the
Company's temporary nursing services business.
Provision for income taxes increased from $32,000 to $60,000, and from $79,000
to $224,000, for the three and nine month periods ended March 23, 1996 compared
to the same periods of fiscal 1995, which is an overall increase of 43% in the
Company's effective tax rate. In addition, the average shares outstanding used
in computing per share amounts increased 7% and 4%, respectively, for the three
and nine month periods of fiscal 1996 compared to fiscal 1995.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 22, 1996, Stockbridge Investment Partners, Inc. ("Stockbridge")
commenced litigation against AMSERV in the United States District Court for the
District of Massachusetts. In its complaint, Stockbridge alleges that AMSERV
breached the terms of the October 18, 1995 agreement between AMSERV and
Stockbridge by refusing to deal with a merger proposal by Stockbridge, which
Stockbridge described as "pre-emptive", in a fair and equitable manner. The
relief sought by Stockbridge includes reimbursement of Stockbridge's expenses in
the amount of $125,000, unspecified damages which Stockbridge estimates at more
than $275,000 and attorneys' fees. On March 14, 1996, AMSERV filed a motion to
dismiss Stockbridge's complaint for lack of personal jurisdiction. AMSERV
denies, and intends to vigorously defend itself against, Stockbridge's claims in
this lawsuit .
On April 9, 1996, Stockbridge commenced litigation against AMSERV in the Court
of Chancery of the State of Delaware for New Castle County. In its complaint,
Stockbridge requests that the Court enter judgment summarily ordering AMSERV to
conduct an annual meeting of shareholders for the purpose of electing directors
and conducting such other business as may properly be conducted at the meeting.
AMSERV intends to seek a dismissal of such action on the basis of its scheduling
an annual meeting of shareholders to consider and vote on the previously
announced merger pending between AMSERV and Star Multi Care Services, Inc., to
elect directors and to ratify the selection of Ernst & Young LLP as AMSERV's
independent public accountants .
On April 18, 1996, the Company filed a lawsuit in the United States District
Court for the Southern District of California against Stockbridge, the other
parties to Amendment No. 9 to Stockbridge's Schedule 13D (the "Stockbridge
Group") and other individuals not disclosed by Stockbridge as part of its group
for numerous violations of Sections 13(d) and 14(a) of the Securities Exchange
Act of 1934. Among the violations listed by the Company are the defendants'
failure to disclose all of the members of Stockbridge's Section 13(d) "group",
misstatements in the Stockbridge Group's consent solicitation materials, and
Stockbridge's failure to disclose its offer to purchase for $3.00 per share any
and all outstanding shares of AMSERV Common Stock. The Company seeks injunctive
relief against Stockbridge's stockholder consent solicitation, and a declaration
that the Stockbridge Group has and must publicly disclose beneficial ownership
of 10% or more of the Company's Common Stock, thereby triggering AMSERV's Rights
Plan. On April 19, 1996, Stockbridge filed an amended Schedule 13D which
included incomplete information about the $3.00 per share cash offer.
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The exhibits listed on the accompanying Exhibit Index are filed as part of
this Quarterly Report.
(b) Reports on Form 8-K:
1. A Form 8-K dated January 26, 1996, was filed with the Securities and
Exchange Commission adopting a Shareholder Rights Plan. The plan declares
a dividend of one preferred stock purchase right for each share of common
stock of the Company outstanding at the close of business on January 29,
1996.
11
<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Securities Exchange Act of 1934, the
Issuer caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMSERV HEALTHCARE INC.
- ----------------------
Issuer
/s/ Eugene J. Mora
- ----------------------
Eugene J. Mora May 3, 1996
Chairman and President
/s/ Lori Anderson
- ----------------------
Lori Anderson May 3, 1996
Treasurer
12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
<C> <S> <C>
2.6 Agreement and Plan of Merger among the Company, Star Multi Care
Services, Inc. ("Star"), and AHI Acquisition Corp., dated
February 9, 1996, incorporated herein by reference from Star's
Form 10-QSB for the quarterly period ended February 29, 1996. -
27.1 Financial Data Schedule. E-2
99.2 Complaint filed February 22, 1996, in the United States
District Court for the Western District of Massachusetts, by
Stockbridge against the Company, incorporated herein by
reference from Amendment No. 10 to Stockbridge's Schedule
13D, dated April 18, 1996. -
99.3 Consent Solicitation commenced March 7, 1996, by
Stockbridge Investment Partners, Inc., incorporated herein by
reference from Amendment No. 10 to Stockbridge's Schedule
13D, dated April 18, 1996. -
99.4 Letter dated March 29, 1996 from Stockbridge to the Company,
incorporated herein by reference from Amendment No. 10 to
Stockbridge's Schedule 13D, dated April 18, 1996. -
99.5 Letter dated April 2, 1996, from the Company to Stockbridge. E-4
99.6 Letter dated April 12, 1996 from Stockbridge to Batchelder &
Partners, Inc. E-6
99.7 Complaint filed April 9, 1996, in the Court of Chancery of
the State of Delaware for New Castle County, by Stockbridge
against the Company, incorporated herein by reference from
Amendment No. 10 to Stockbridge's Schedule 13D, dated
April 18, 1996. -
99.8 Complaint filed April 18, 1996, in the United States District
Court for the Southern District of California by the Company
against Stockbridge, et al. E-7
</TABLE>
E-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS AS OF MARCH 23, 1996 AND JUNE 24, 1995; AND
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTH
PERIODS ENDED MARCH 23, 1996 AND MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUN-25-1995
<PERIOD-END> MAR-23-1996
<CASH> 2,305,423
<SECURITIES> 103,500
<RECEIVABLES> 1,408,780
<ALLOWANCES> 87,811
<INVENTORY> 0
<CURRENT-ASSETS> 4,120,719
<PP&E> 702,966
<DEPRECIATION> 273,369
<TOTAL-ASSETS> 6,833,060
<CURRENT-LIABILITIES> 1,189,264
<BONDS> 0
512,153
0
<COMMON> 34,482
<OTHER-SE> 5,063,755
<TOTAL-LIABILITY-AND-EQUITY> 6,833,060
<SALES> 0
<TOTAL-REVENUES> 9,117,616
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 566,178
<INCOME-TAX> 224,000
<INCOME-CONTINUING> 342,178
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 342,178
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
<PAGE>
[AMSERV HEALTHCARE INC. Letterhead]
April 2, 1996
Mr. Thomas M. Clarke, President
Stockbridge Investment Partners, Inc.
The Berkshire Common
2 South Street, Suite 360
Pittsfield, Massachusetts 01201
Via Facsimile and Overnight Courier
Dear Mr. Clarke:
We are in receipt of your letter dated March 29, 1996 to the Board of Directors
of AMSERV HEALTHCARE INC. which has been forwarded to the Directors. In order
for the Board to properly evaluate your proposal, please provide the Board and
our financial advisors, Batchelder & Partners, Inc., with detailed answers to
the following questions:
1. Due Diligence. Please advise as to whether your proposal is subject to due
-------------
diligence and, if so, please advise us as to the nature and timing of such
due diligence.
2. Financing. Please advise as to whether your proposal is subject to
---------
financing. If so, please provide detailed information on financing
prospects, due diligence required, terms, timing and other relevant
information.
If such proposal is not subject to financing, please provide details of
source(s) of financing including commitment letters from debt and/or equity
sources and the material terms of such commitments.
3. Merger. Please advise how your proposed offer would be structured as a
------
merger. Indicate what entity would be the merger partner, the mechanics of
the offer and/or merger, and what entity would be the survivor.
As you know, the Company has a definitive Merger Agreement in place with Star
Multi Care Services, Inc. which provides that AMSERV is prohibited from
soliciting proposals for a sale or business combination subject to fiduciary
obligations of the Board of Directors. Such provisions provide for a break-fee
and the reimbursement of expenses in the event the Board of Directors were to
accept a competing proposal subject to their fiduciary obligations. The Merger
Agreement also requires that we keep Star informed of the receipt of any
unsolicited written offers and the status of any discussions. These contractual
obligations must be honored in accordance with the Merger Agreement.
<PAGE>
Mr. Thomas Clarke
Stockbridge Investment Partners, Inc.
April 2, 1996
Page 2
With regard to Paragraph 4 of your letter, please be advised that given the
working capital requirements associated with continuing operations, costs of
consent solicitations, expenses incurred to date in our efforts to consummate
the proposed merger with Star, prospective expenses associated with the
consummation of your proposed transaction, and other obligations, the cash and
working capital requirements required in Paragraph 4 cannot be achieved at the
closing of a transaction as you propose.
With regard to Paragraph 5 of your letter, please be advised that the Company
entered into Amendments to the Employment Agreements of Leslie Hodge and Lori
Anderson. The Board approved the Amendments in principle on or about October
23, 1995, but the documents were not finalized until January 9, 1996.
Please address the issues outlined herein as soon as possible. Upon the
satisfaction of the outlined issues the Board of Directors will respond in
detail to your proposal.
Sincerely,
Leslie Hodge
Vice President - Administration
LH/ssm
cc: Board of Directors
David Batchelder
Scott N. Wolfe, Esq.
<PAGE>
STOCKBRIDGE INVESTMENT PARTNERS, INC.
THE BERKSHIRE COMMON
2 SOUTH STREET, SUITE 360
PITTSFIELD, MA 01201
PHONE: (413) 448-2111
FAX: (413) 448-2120
April 12, 1996
Mr. David Batchelder
President
Batchelder & Partners, Inc.
4330 LaJolla Village Drive, Suite 200
San Diego, CA 92122
Dear David:
Stockbridge Investment Partners, Inc. ("Stockbridge") is currently
preparing the documents which you have requested in support of our proposal
submitted to the Board of Directors of Amserv Healthcare Inc. ("Amserv") on
March 29, 1996.
Stockbridge intends to modify its proposal inorder to tender for any and
all shares of Amserv. Stockbridge believes that over 500,000 shares of stock in
Amserv will enter into an agreement with Stockbridge not to tender.
Stockbridge intends to provide Amserv with evidence of irrevocable
commitments in amounts sufficient to finance the tender assuming all eligible
shares tender. Stockbridge expects to submit these commitments to Amserv on or
before April 24, 1996.
We look forward to working closely with you and the Board of Directors in
our combined effort to enhance value for all stockholders. Please call if you
have any additional questions.
Sincerely Yours,
/s/Tom
Thomas M. Clarke
President
TMC/df
CC: Board of Directors
Amserv Healthcare Inc.
<PAGE>
LATHAM & WATKINS
Peter H. Benzian (SBN 047456)
Hugh Steven Wilson (SBN 051961)
Kenneth M. Fitzgerald (SBN 142505)
701 "B" Street, Suite 2100
San Diego, California 92101-8197
Telephone: (619) 236-1234
Attorneys for Plaintiff
AMSERV HEALTHCARE INC.
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF CALIFORNIA
AMSERV HEALTHCARE INC., a Delaware corporation,
Plaintiff,
v.
STOCKBRIDGE INVESTMENT PARTNERS, INC., a Florida corporation; YORK HANNOVER
PHARMACEUTICALS, INC., a Florida corporation; LENOX HEALTHCARE, INC., a
Massachusetts corporation; THOMAS M. CLARKE, an individual; LAWRENCE B.
CUMMINGS, an individual; CHRISTOPHER McLAUGHLIN, an individual; JOHN KLACKING,
an individual; GEORGE COCOZZA, an individual; JANA MAR, an individual; DONALD
MAR, an individual; and JOHN PARKER, an individual,
Defendants.
Case No. 96-686
COMPLAINT FOR VIOLATION OF SECTIONS 13(d) AND 14(a) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND FOR DECLARATORY RELIEF
JURY DEMAND
Plaintiff AMSERV HEALTHCARE INC. ("AMSERV"), for its complaint against
defendants Stockbridge Investment Partners, Inc. ("Stockbridge"), York Hannover
Pharmaceuticals, Inc. ("York"), Lenox Healthcare, Inc. ("Lenox"), Thomas M.
Clarke ("Clarke"), Lawrence B. Cummings ("Cummings"), Christopher McLaughlin
("McLaughlin"), John Klacking ("Klacking"), George Cocozza ("Cocozza"), Jana
Mar and Donald Mar (together, the "Mars"), and John Parker ("Parker") alleges as
follows:
<PAGE>
NATURE AND SUMMARY OF THE ACTION
--------------------------------
1. This action arises under Sections 13(d) and 14(a) of the
Securities Exchange Act of 1934 (the "Exchange Act"/1/), and the rules
promulgated thereunder, by reason of defendants' failure to make required
filings and disclosures in connection with an illegal accumulation of AMSERV
common stock by their undisclosed group of AMSERV stockholders, and by reason of
defendants' unlawful solicitation of stockholder consents to remove AMSERV's
Board of Directors. Defendants have acted and are continuing to act as a group
and are attempting to effect a change of control at AMSERV without making the
required filings with the Securities and Exchange Commission ("SEC") and the
required disclosures to AMSERV stockholders and the investing public.
2. Section 13(d) requires a person (or two or more persons acting as
a group) beneficially owning 5% or more of a class of registered securities of a
corporation, within ten days after such acquisition, to send to the issuer and
to each exchange where the security is traded, and to file with the SEC, a
statement containing information prescribed by Schedule 13D. This disclosure
alerts shareholders and others in the marketplace to the existence and nature of
large blocks of shares which could result in a shift in corporate control.
Section 13(d) and the rules and regulations promulgated thereunder also require
the reporting person(s) to state whether the purpose of their purchases is to
acquire control of the business of the issuer of securities and to disclose any
plans or proposals which the reporting person(s) may have which would result in,
among other things, the acquisition of additional securities of the issuer, an
extraordinary corporate transaction or a change in the present board of
directors or management of the issuer. Whenever a material change occurs in the
facts set forth in a Schedule 13D filing, the reporting person(s) are required
to promptly file an amendment disclosing that change. Section 13(d) is not a
mere "technical" reporting provision; it is, rather, the "pivot" of a regulatory
scheme that may represent the only way that corporations, their shareholders and
others can adequately evaluate
- ---------------
/1/ All Section, Rule and Regulation references refer to the Exchange Act unless
otherwise indicated.
<PAGE>
the possible effects of a change in substantial shareholdings.
3. On or about February 6, 1995, Stockbridge filed a Schedule 13D in
which it acknowledged beneficial ownership of 5.03% of AMSERV common stock.
Stockbridge admitted to being part of a group which also included Clarke, Lenox
and Cummings. Later, Stockbridge admitted that York was a part of the same
group. Stockbridge referred to this group as the "Stockbridge Group."
Thereafter, the members of the Stockbridge Group (the "Stockbridge Group
Defendants") filed a total of nine amendments to their Schedule 13D disclosing
the Stockbridge Group's accumulation of AMSERV common stock. Stockbridge,
however, still has failed to identify Defendants McLaughlin, Klacking, Cocozza,
Parker and the Mars (the "Undisclosed Defendants") as additional members of the
same group ("Defendants' Group"). Adding the Undisclosed Defendants' shares to
the shares that the Stockbridge Group admits to owning reveals that Defendants'
Group owns in excess of 10% of AMSERV common stock. Defendants' Group is
attempting to replace AMSERV's Board of Directors and to effect an acquisition
of AMSERV by a company affiliated with defendants. Despite the participation of
the Undisclosed Defendants in Defendants' Group, neither the Stockbridge Group
nor the Undisclosed Defendants have filed a Schedule 13D disclosing the
Undisclosed Defendants' participation in Defendants' Group; the number of shares
the Undisclosed Defendants own; their source of funds; and their plans for their
AMSERV investments, including whether they plan to acquire more shares, to
propose a merger or reorganization, or to propose changes in the AMSERV Board of
Directors. All of these disclosures are specifically required by law.
4. Section 14(a) and the rules and regulations promulgated
thereunder regulate the solicitation of shareholder proxies in order to protect
investors from unscrupulous or misleading solicitations. Rule 14a-1 defines
"proxy" to include every proxy, consent or authorization within the meaning of
Section 14(a) of the Exchange Act. Rule 14a-3 prohibits proxy solicitations
until each person solicited is given a written proxy statement containing the
information specified in Schedule 14A. Schedule 14A requires the party
soliciting proxies to disclose the names of all of the participants in the
solicitation. Participants are defined to include any person(s) who solicit
proxies. Rule 14a-9 prohibits any false or misleading oral or written
<PAGE>
communications in conjunction with a proxy solicitation. As described more
fully below, defendants have made material misrepresentations and omissions to
AMSERV stockholders regarding AMSERV, defendants, and their intentions, all in
direct violation of Section 14(a) and Rule 14a-9.
5. In furtherance of their ongoing unlawful consent solicitation,
defendants distributed to AMSERV stockholders materially false and misleading
written materials and made false statements to stockholders and the press
designed to alter the market and to facilitate their illegal solicitation of
consents.
6. Plaintiff also is informed and believes and therefore alleges
that members of Defendants' Group, by virtue of their activities and agreements
as described herein, have triggered the dilutive provisions in AMSERV's
stockholder rights plan (the "Rights Plan"), thus entitling stockholders of
AMSERV other than defendants and the members of Defendants' Group to certain
rights and benefits. Plaintiff is informed and believes that defendants dispute
that Rights Plan has been triggered and that such rights and benefits have
accrued to AMSERV's stockholders.
7. By this action, plaintiff seeks to compel defendants to make the
required filings and disclosures pursuant to Sections 13(d) and 14(a), and to
enjoin defendants from unlawfully acquiring any further AMSERV common stock,
from participating in further unlawful solicitations of consents or proxies,
from voting their existing shares and proxies and from delivering any consents
obtained by them to AMSERV until a reasonable period after proper disclosure is
made. Plaintiff also seeks a declaratory judgment that Defendants' Group is an
"Acquiring Person" within the meaning of the Rights Plan.
THE PARTIES
-----------
8. Plaintiff AMSERV is a publicly held corporation incorporated
under the laws of Delaware with shares listed on the Nasdaq National Market
("Nasdaq"). AMSERV is a health care company which provides home care services.
AMSERV's executive offices are located in San Diego, California and it has six
branch offices located in New Jersey and Ohio.
9. Defendant Stockbridge is a Florida corporation with offices
located in Palm
<PAGE>
Beach, Florida and Pittsfield, Massachusetts which is engaged in investing in
businesses which provide healthcare products, services and facilities.
Stockbridge owns, directly and/or through York, a wholly-owned Stockbridge
subsidiary, at least 175,644 shares of AMSERV's common stock.
10. Defendant York, a corporation, is a wholly-owned subsidiary of
Stockbridge. York owns at least 175,644 shares of AMSERV common stock.
11. Defendant Lenox is a Massachusetts corporation with principal
offices in Pittsfield, Massachusetts which acts as financial advisor or
principal in health care investments and transactions. Lenox owns at least 400
shares of AMSERV common stock.
12. Defendant Clarke is the President, a director and founder of each
of Stockbridge and Lenox. Defendant Clarke and his wife jointly own 50.0% of
Stockbridge's outstanding capital stock and 100% of Lenox's outstanding capital
stock. In addition to the shares he beneficially owns through Stockbridge and
Lenox, defendant Clarke owns at least 16,800 shares of AMSERV common stock.
13. Defendant Cummings is the Chief Executive Officer of Stockbridge.
Defendant Cummings and siblings own 50.0% of Stockbridge's outstanding capital
stock. In addition to the shares he beneficially owns through Stockbridge,
defendant Cummings owns at least 10,000 shares of AMSERV common stock.
14. Defendant McLaughlin is the Controller of Stockbridge. Defendant
McLaughlin owns at least 500 shares of AMSERV common stock.
15. Defendant Klacking is a securities broker who resides and does
business in Reno, Nevada. AMSERV is informed and believes that defendant
Klacking owns at least 51,299 shares of AMSERV common stock.
16. Defendant Cocozza is a former AMSERV officer and director who
resides in California and Arizona and does business in California. AMSERV is
informed and believes that defendant Cocozza owns at least 1,102 shares of
AMSERV common stock.
17. Defendants Donald and Jana Mar are individuals residing in
Tucson, Arizona. Jana Mar was formerly employed as an officer of a former
AMSERV subsidiary.
<PAGE>
AMSERV is informed and believes that the Mars own at least 37,055 shares of
AMSERV common stock.
18. Defendant Parker was the owner of MED-PRO, Inc., a firm acquired
by AMSERV in 1992. Defendant Parker resides and does business in San Diego,
California. AMSERV is informed and believes that Defendant Parker owns at least
202,000 shares of AMSERV common stock.
19. AMSERV is informed and believes and on that basis alleges that
the Undisclosed Defendants, and other persons whose identities are presently
unknown to plaintiff, are members or agents of Defendants' Group and that the
members and agents of the Stockbridge Group and the Undisclosed Defendants have
each acted as agents of one another in doing the things alleged herein.
JURISDICTION AND VENUE
----------------------
20. This action arises under Sections 13(d) and 14(a) of the Exchange
Act, 15 U.S.C. (S)(S) 78m(d), 78n(a), the rules and regulations promulgated
thereunder.
21. Jurisdiction is conferred on this court by Section 27 of the
Exchange Act, 15 U.S.C. (S) 78aa and by 28 U.S.C. (S)(S) 1331, 1337 and 1367(a).
This court has jurisdiction of the Delaware declaratory relief claim under the
doctrine of pendent jurisdiction, in that the claim for declaratory relief
arises out of the same transactions as alleged in the counts alleging violations
of federal securities laws.
22. Venue is proper in this District pursuant to (S) 27 of the
Exchange Act and 28 U.S.C. (S) 1391(b). Certain of the acts giving rise to the
violations of law complained of herein occurred in this District, including
Stockbridge's dissemination of materially misleading proxy solicitation
materials to stockholders of AMSERV residing in this District.
PLAINTIFF AMSERV'S CORPORATE HISTORY
------------------------------------
AND CURRENT STATUS
------------------
23. On January 24, 1995, defendant Clarke approached Eugene J. Mora,
AMSERV's Chairman, Chief Executive Officer and President, and proposed that
AMSERV's Board of Directors consider a business combination in which AMSERV
would merge with York,
<PAGE>
a wholly-owned subsidiary of Stockbridge. Defendant Clarke proposed that York
would receive 57% of the stock of the combined entity. AMSERV's Board of
Directors rejected Clarke's proposal, believing that it would not enhance value
for all of AMSERV's stockholders.
24. Over the course of the ensuing eleven months, Clarke, acting on
behalf of Stockbridge, presented revised proposals for a combination of AMSERV
and York. After hiring a financial advisor and enduring a number of frustrating
attempts to obtain necessary information from Stockbridge, AMSERV's Board of
Directors rejected each of Stockbridge's proposals.
25. On April 6, 1995, Clarke withdrew Stockbridge's then-pending
merger proposal and filed a written consent to remove members of AMSERV's Board
of Directors.
26. On April 27, 1995, Stockbridge commenced litigation in Delaware
against AMSERV and its directors, seeking an order rescinding a preferred stock
transaction and the exercise of certain options by Mr. Mora. On May 15, 1995,
the parties settled the Delaware litigation. Pursuant to a Standstill Agreement
and a Settlement Agreement between AMSERV and Stockbridge, both dated as of May
12, 1995, Stockbridge agreed, among other things, to suspend for 30 days its
consent solicitation action and to dismiss the complaint it had filed against
AMSERV and its directors.
27. During the next four months, AMSERV and Stockbridge agreed to
extend the standstill period, AMSERV stepped up its due diligence investigation
of York and Stockbridge gave notice on two additional occasions of its intent to
act by written consent to remove AMSERV's Board of Directors.
28. On October 18, 1995, the AMSERV's Board of Directors announced
its intention to broaden its review of potential business combinations by
expanding the group of potential merger partners and to invite Stockbridge to
participate on a fair and equal basis with other participants in such process.
Also on October 18, 1995, AMSERV entered into an agreement with Stockbridge
pursuant to which Stockbridge withdrew the written notice delivered to AMSERV on
September 18, 1995 and agreed not to commence any other consent solicitation
with respect to AMSERV or deliver any other such notice until the earlier of
January 1, 1996 or the conclusion of the process by which the Board of Directors
would consider potential business
<PAGE>
combinations involving AMSERV.
29. On November 13, 1995, Stockbridge submitted to the Board what it
characterized as a "pre-emptive" proposal. Such proposal consisted of a
business combination between AMSERV and York whereby Stockbridge would own 27.5%
of the combined company. Stockbridge purportedly believed that, as a "pre-
emptive" proposal, its offer was so favorable to AMSERV's stockholders that the
Board should terminate its review process and consider no other proposals.
AMSERV's Board of Directors, however, decided that Stockbridge's proposal was
not "pre-emptive" and requested that AMSERV's financial advisor, Batchelder &
Partners, Inc. ("Batchelder"), inform Mr. Clarke that the proposal would be
evaluated later along with other proposals received in accordance with the
review process previously established by the Board.
30. In connection with the review process, Batchelder distributed
materials regarding AMSERV to interested parties across the country and
solicited proposals for potential business combinations. In response to such
solicitation, AMSERV received six proposals. Despite a written request,
Batchelder received no response from Stockbridge for a "best and final" proposal
to include among the group. Accordingly, the Board considered Stockbridge's
original proposal submitted on November 13, 1995 as its "best and final"
proposal, bringing the total number of proposals under consideration to seven.
31. From November 1995 to January 1996, the Board, with the
assistance of Batchelder, carefully considered each of the seven proposals to
determine which would most benefit AMSERV's stockholders. In January 1996, the
Board authorized Batchelder and AMSERV's officers to commence negotiations with
respect to the most favorable proposal, one submitted by Star Multi Care
Services, Inc. ("Star").
32. On January 8, 1996, Stockbridge again indicated its intent to act
by written consent and requested that the Board set a record date for such
consent. On January 16, 1996, Stockbridge filed preliminary consent materials
with the SEC seeking to remove the five current members of the Board and to
replace each member with a Stockbridge nominee.
33. On January 9, 1996, following extensive negotiations, the Board
of
<PAGE>
Directors confirmed that the proposal from Star was the most favorable to
AMSERV's stockholders and authorized AMSERV to negotiate and enter into a letter
of intent to merge with Star. Such letter of intent was subsequently superseded
by a definitive merger agreement, dated as of February 9, 1996 (the "Merger
Agreement").
34. Pursuant to the Merger Agreement (which is subject to stockholder
approval), AMSERV would be merged with and into a wholly-owned subsidiary of
Star (the "Merger") and each outstanding share of AMSERV common stock would be
converted into 0.4090 shares of Star common stock, representing a ratio of one
share of Star common stock for each 2.445 shares of AMSERV common stock. Upon
consummation of the Merger, AMSERV would be a wholly-owned subsidiary of Star
and would be managed by the current management of Star. Star is in the business
of providing placement services of registered and licensed nurses and home
health aides to patients for care at home and, to a lesser extent, temporary
health care personnel recruiting to hospitals and nursing homes.
DEFENDANTS' SPECIFIC ACTS IN FURTHERANCE OF THEIR SCHEME
--------------------------------------------------------
35. Since February 6, 1995 when Stockbridge filed its first Schedule
13D in which it acknowledged beneficial ownership of 5.03% of AMSERV common
stock, the Stockbridge Group Defendants have filed a total of nine amendments to
their Schedule 13D. Such filings, however, have never acknowledged the
existence, nor disclosed the identify of, the Undisclosed Defendants, who Amserv
is informed and believes, and on that ground alleges, have entered into
agreements with the Stockbridge Group Defendants regarding acquiring, holding,
voting or disposing of AMSERV common stock owned or controlled by them.
36. When Stockbridge filed its Schedule 13D with the SEC on February
6, 1995, it admitted to being part of a group which owned 148,000 or 5.03% of
the outstanding common stock of AMSERV. Stockbridge stated that defendants
Clarke, Lenox and Cummings were part of what Stockbridge referred to as the
"Stockbridge Group." Stockbridge acknowledged in its Schedule 13D a desire to
merge a Stockbridge subsidiary with and into AMSERV and described the contacts
it had with AMSERV regarding its proposal for such a merger. Stockbridge and
the other members of the Stockbridge Group, however, expressly disclaimed any
<PAGE>
intention to, among other things, take any actions to effect a change to
AMSERV's Board of Directors.
37. From March 22, 1995 to January 19, 1996, the Stockbridge Group
filed a series of nine amendments to its Schedule 13D (the "Amendments"). The
Amendments disclosed, among other things, that the Stockbridge Group's ownership
interest in AMSERV common stock rose to a high of 7.56% during the period from
March 1995 to January 1996. The Amendments also disclosed information relating
to Stockbridge's proposals for a merger between York and AMSERV and its
initiation of consent solicitation actions to remove AMSERV's Board of
Directors. Specifically, in Amendment No. 2 to its Schedule 13D, filed April 6,
1995, the Stockbridge Group stated that it had withdrawn its merger proposal and
that it had initiated a consent solicitation action to remove AMSERV's Board of
Directors, despite its statements in previous Schedule 13D filings that it had
no intention to remove the Board of Directors.
38. In Amendment No. 7, the Stockbridge Group admitted that it had
exercised an option granted to it pursuant to a Stock Option Agreement dated as
of September 19, 1995 between Stockbridge and the Mars and had thereby acquired
20,000 shares of AMSERV common stock at $3.00 per share. By exercising the
option to purchase 20,000 shares, the Stockbridge Group obtained the right to
exercise a second option granted to it pursuant to the same Stock Option
Agreement to acquire 37,055 additional shares of AMSERV common stock.
Stockbridge never disclosed any relationship between itself and the Mars prior
to Amendment No. 7 and still has not admitted that the Mars are part of
Defendants' Group.
39. AMSERV is informed and believes, and on that ground alleges, that
beginning at a date unknown and continuing to the present, the Stockbridge Group
Defendants have organized and conducted weekly telephone conference calls with
the Undisclosed Defendants, and others, during which such Undisclosed Defendants
entered into agreements with the Stockbridge Group Defendants to act with the
Stockbridge Group Defendants in acquiring, holding, voting or disposing of their
AMSERV stock. The basis of AMSERV's information and belief is information
obtained from a participant in such conference calls and the actions of the
various defendants from which AMSERV infers that such agreements have been
reached.
<PAGE>
40. The Stockbridge Group never has disclosed the identities of the
additional members of Defendants' Group, nor has it acknowledged that the
members of Defendants' Group actually own in the aggregate in excess of 10% of
AMSERV's common stock.
41. On March 8, 1996, the Stockbridge Group mailed consent
solicitation materials to AMSERV stockholders. The Stockbridge Group, however,
failed to amend its Schedule 13D to state that it intended to seek to obtain
control of AMSERV by way of a consent solicitation action. The Stockbridge
Group never has updated a statement in Amendment No. 8 to its Schedule 13D that
it had agreed to refrain from soliciting consents at least until January 1,
1996.
42. The Stockbridge Group also mailed to AMSERV stockholders on March
8, 1996 a letter dated March 6, 1996 addressed to "Dear Fellow AMSERV HEALTHCARE
INC. Stockholders" (the "March 6 Letter") for the alleged purpose of soliciting
consents to remove AMSERV's directors and to replace them with Stockbridge's own
nominees.
43. The March 6 Letter violated the anti-fraud provision of Section
14(a) found in Rule 14a-9. It contained misrepresentations and omissions
regarding material facts.
Among other things, in the March 6 Letter, Stockbridge stated that
AMSERV has made approximately $400,000 in loans to Eugene J. Mora, AMSERV's
Chairman, Chief Executive Officer and President, on a non-recourse basis. In
fact, all of AMSERV's currently outstanding loans to Mr. Mora are evidenced by
recourse promissory notes and are secured by shares of AMSERV Common Stock owned
- --------
by Mr. Mora.
44. The March 6 Letter further misled AMSERV's stockholders by
implying that AMSERV's Board of Directors has withheld until recently certain
information regarding the terms of Mr. Mora's employment contract. To the
contrary, the terms of Mr. Mora's employment agreement have been disclosed since
1991.
45. In addition, the March 6 Letter uses misleading share prices to
criticize the Merger. Instead of analyzing the conversion value of the Merger
to AMSERV stockholders or by looking at the stock price on the date that
AMSERV's Board of Directors approved the Merger, Stockbridge used an
artificially high and irrelevant stock price, the 52-week trading high,
<PAGE>
in an effort to mislead AMSERV stockholders into believing that the terms of the
Merger are not fair to them.
46. Stockbridge's consent solicitation statement on Schedule 14A
("Consent Statement") also violates the anti-fraud provisions of Rule 14a-9.
First, the Consent Statement includes patently false statements of material
fact. For example, Stockbridge states that AMSERV has not opened any new
offices since June 30, 1994, when, in fact, AMSERV opened a Union City, New
Jersey office in the fall of 1994. In addition, Stockbridge states that Mora
has been granted the use of a luxury company car. Mora has never had a company
car: He drives a car that he has owned since before he joined AMSERV in 1987.
47. Stockbridge's Consent Statement also contains misleading
information and omits to state information necessary to make Stockbridge's
statements not misleading. For example, Stockbridge states that Mora and
Stephen Sternbach, Star's Chairman, Chief Executive Officer and President,
together will receive a 32.6% interest in the combined company, implying that
Mora's interest in the combined company will be greater than what he was
entitled to based on the number of AMSERV shares he owns and will be
substantially greater than the approximately 5.2% interest he actually stands to
receive. Also misleading is Stockbridge's repeated reference to Star as a
"small company." Stockbridge neglects to mention that York, the merger partner
proposed by Stockbridge, is approximately one-thirteenth the size of Star.
Similarly, Stockbridge refers to "substantial savings" available to AMSERV if it
would relocate its executive offices to Stockbridge's home of Pittsfield,
Massachusetts. However, as Stockbridge itself has conceded, it cannot guarantee
that any savings would be obtained by such a relocation.
48. AMSERV is informed and believes, and on that ground alleges, that
at one of the weekly telephone conference calls referred to in Paragraph 39,
above, defendant Stockbridge obtained the agreements of the Undisclosed
Defendants to participate in the Stockbridge Group Defendants' solicitation of
AMSERV stockholders to obtain consents to remove AMSERV's Board of Directors.
The Undisclosed Defendants agreed to send the Stockbridge Group Defendants'
consent solicitation materials to their clients and acquaintances who owned
AMSERV common stock and to seek to persuade such AMSERV stockholders to sign
<PAGE>
consents supporting the Stockbridge Group Defendants' attempt to remove AMSERV's
Board of Directors. AMSERV's information and belief is based on information
obtained from a participant in the subject conference call, letters from the
Stockbridge Group Defendants to a participant in the conference call referencing
that stockholder lists and proxy materials were being enclosed and the actions
of the various defendants from which AMSERV infers that such actions are
occurring.
49. On March 29, 1996, AMSERV received from Stockbridge a letter (the
"March 29, 1996 Letter") purporting to be an offer to purchase for cash all
outstanding shares of AMSERV Common Stock (the "Proposal"). According to the
March 29, 1996 Letter, the Proposal would be structured as a merger to be voted
on by AMSERV's stockholders. After AMSERV sent Stockbridge an April 2, 1996
letter inquiring into the terms and conditions of the Proposal, AMSERV received,
through its financial advisor, an April 12, 1996 letter from Stockbridge (the
"April 12, 1996 Letter") in which Stockbridge stated that it intends to modify
its Proposal to structure it as a tender offer for any and all outstanding
shares of AMSERV. Despite Exchange Act requirements that it promptly amend its
Schedule 13D to reveal any plans or proposals that would result in an
extraordinary corporate transaction, the Stockbridge Group still has not amended
its Schedule 13D to disclose the Proposal.
Irreparable Injury
------------------
50. Given the pendency of AMSERV's merger with Star, it is
particularly important that AMSERV stockholders and the investing public now be
given full, fair and accurate information with respect to the future operations
and management of AMSERV, so as to guide their investment decisions. Because
accurate disclosure has not been made, AMSERV, its stockholders, and members of
the investing public are being irreparably injured by defendants' conduct, in
that:
a. Through their unlawful acts, defendants have withheld
material information from the market by failing to make required
disclosures and have disseminated material misrepresentations which
AMSERV cannot remedy after the fact with counter-information;
b. AMSERV's stockholders and the investing public are being
<PAGE>
compelled to make investment decisions, which decisions could result
in a change in the management at AMSERV, without the benefit of the
information required to be disclosed by Section 13(d) and Section
14(a) of the Exchange Act and the rules and regulations promulgated
thereunder;
c. AMSERV's stockholders and the investing public who wish to
buy and sell shares of AMSERV common stock must do so with inadequate
information, and the defendants are trading AMSERV common stock based
on their undisclosed knowledge of material information that is
unavailable to the public;
d. The widespread confusion and uncertainty as to defendants'
intentions toward AMSERV and their relationship with one another is
causing, and will continue to cause, serious dislocations in the
operation of and plans for AMSERV's business and the market for its
securities, as well as uncertainty among AMSERV's customers and
employees; and
e. AMSERV's stockholders are being asked to decide whether to
grant their consents to the Stockbridge Group based on undisclosed
information that is available to defendants, but not to the public.
First Claim For Relief
----------------------
(Violation of Section 13(d) as to All Defendants)
51. AMSERV realleges and incorporates herein by reference each and
every allegation contained in paragraphs 1 to 50, inclusive, above.
52. As alleged above, Defendants' Group, which includes all
defendants, beneficially owned over 10% of AMSERV's equity securities of a class
which is registered pursuant to Section 12 of the Exchange Act. Defendants'
Group was formed with the intention of acting together as a group for the
purpose of changing or influencing the control of AMSERV.
53. Neither the Stockbridge Group nor the Undisclosed Defendants have
disclosed the Undisclosed Defendants' participation in Defendants' Group and
their intentions
<PAGE>
with respect to their ownership of AMSERV common stock. As a result of
defendants' failure to disclose, the public remains ignorant of the identities
of the Undisclosed Defendants, the timing and nature of the Undisclosed
Defendants' investment in AMSERV common stock and the Undisclosed Defendants'
plans and purposes regarding their shares. Defendants' failure to provide such
information to stockholders and the investing public violates section 13(d).
54. Rule 13d-2 requires that a Schedule 13D be amended promptly to
reflect any changes in the information previously supplied and/or any changes in
the plans and proposals of the group on whose behalf the Schedule 13D has been
filed. Defendants have violated Section 13(d) by failing to amend promptly the
Stockbridge Group's Schedule 13D to reveal the composition of the group and its
plans and proposals for AMSERV.
55. The Stockbridge Defendants have violated Section 13(d) by failing
to amend their Schedule 13D to describe the Proposal initially set forth in
Stockbridge's March 29, 1996 Letter and modified by its April 12, 1996 Letter,
which Proposal, if effected, would constitute an extraordinary corporate
transaction.
56. AMSERV has no adequate remedy at law.
Second Claim For Relief
-----------------------
(Violation of Section 14(a) and Rule 14a-9
as to All Defendants)
57. AMSERV realleges and incorporates herein by reference each and
every allegation contained in paragraphs 1 to 50, inclusive, above.
58. The Undisclosed Defendants are participants in defendant
Stockbridge's consent solicitation as more fully alleged in paragraph 39 above.
The consent solicitation materials circulated by the Stockbridge Group
Defendants are required by Item 4 to Schedule 14A to disclose the identifies of
all participants in the solicitation. Defendants' failure to do so constitutes
a violation of Section 14(a) and the rules and regulations promulgated
thereunder, specifically Rule 14a-9.
59. Defendants' failure to disclose their intentions to effect the
Proposal described in Stockbridge's March 29, 1996 Letter, as modified by its
April 12, 1996 Letter,
<PAGE>
makes the Stockbridge Defendants' consent solicitation materials materially
misleading and constitutes a violation of Section 14(a) and the rules and
regulations promulgated thereunder, specifically Rule 14a-9.
60. As a result of defendants' failure to disclose, the investing
public and stockholders of AMSERV remain ignorant of the identity of the persons
who are conducting the consent solicitation and their relationship with the
Stockbridge Group Defendants.
61. AMSERV has no adequate remedy at law.
Third Claim for Relief
----------------------
(Claim for Declaratory and Injunctive Relief -- 28 U.S.C. (S) 2201)
62. On January 19, 1996, AMSERV's Board of Directors adopted the
Rights Plan, which provides for the distribution of preferred share purchase
rights ("Rights") to AMSERV stockholders. The Rights Plan calls for the Rights
to become exercisable to purchase shares of AMSERV common stock at bargain
prices upon a public announcement that a person or group of affiliated or
associated persons ("Acquiring Person") has acquired beneficial ownership of 10%
or more of AMSERV's common stock, provided certain other conditions to
exercisability are met. An Acquiring Person is not entitled to participate in
the bargain price purchase of shares.
63. Upon information and belief, Defendants' Group controls more than
10% of AMSERV common stock. Defendants' Group is therefore an Acquiring Person.
A public announcement of this fact would trigger the bargain purchase feature of
the Rights Plan.
64. Defendants' Group has failed to admit its true ownership of
AMSERV common stock, thereby attempting to avoid triggering the bargain purchase
feature under the Rights Plan.
65. There is now existing between Plaintiff and Defendants' Group an
actual, justiciable controversy in respect of which Plaintiff is entitled to
have a declaration of its rights and further relief, including an injunction,
because of the matters alleged. In particular, Plaintiff contends that:
<PAGE>
(a) Defendants' Group has beneficial ownership of 10% or more of
AMSERV common stock.
(b) Defendants' Group is an Acquiring Person as defined in the
Rights Plan.
(c) Defendants' Group has failed to file the required reports on
Schedule 13D, publicly announcing the beneficial ownership of 10% or
more of AMSERV common stock.
WHEREFORE, AMSERV prays for judgment against all defendants as
follows:
1. Granting AMSERV injunctive relief as follows:
a. On Claims One and Two, an order forbidding defendants from
soliciting any proxies or consents until a reasonable time after each
of the defendants has properly filed its Schedules 13D and 14A;
b. On Claims One and Two, an order prohibiting the voting of any
shares pursuant to any proxy granted prior to a reasonable time after
each of the defendants has properly filed its Schedules 13D and 14A;
c. On Claim One, an order enjoining each of the defendants from
acquiring any further shares of AMSERV stock until a reasonable time
after each of the defendants has properly filed its Schedule 13D;
d. On Claims One and Two an order enjoining each of the
defendants from exercising voting rights pertaining to shares or
proxies acquired by them during the period of time that they had
failed to make disclosures required by Sections 13(d) and 14(a) of the
Exchange Act and during the time that they acquired shares based, in
whole or in part, on non-public information; and
e. On Claims One and Two, an order enjoining each of the
defendants from exercising or attempting to exercise any influence or
control over the business or management of AMSERV until a reasonable
period after each of the defendants file their Schedules 13D and 14A;
and
2. On Claims One and Two, declaring and decreeing that AMSERV is
entitled
<PAGE>
to refuse to transfer on its books any stock purchased by or for defendants
pursuant to their unlawful plan, scheme and course of conduct, and to refuse to
recognize the vote with respect to any shares, or interests or rights in such
shares, purchased by defendants and with respect to any proxies or consents
solicited by and granted to defendants.
3. On Claims One and Two, granting AMSERV such other and further
relief as this Court may deem just and proper.
4. On Claim Three, declaring and decreeing that Defendants' Group
has and must publicly disclose beneficial ownership of 10% or more of AMSERV
common stock, and Defendants' Group is an Acquiring Person as defined in
AMSERV's Rights Plan.
DATED: April 18, 1996 LATHAM & WATKINS
Peter H. Benzian
Hugh Steven Wilson
Kenneth M. Fitzgerald
By________________________________________________
Peter H. Benzian
Attorneys for Plaintiff
AMSERV HEALTHCARE INC.
<PAGE>
DEMAND FOR JURY TRIAL
Plaintiff AMSERV HEALTHCARE INC. hereby demands a jury trial on all
issues triable by right to a jury.
DATED: April 18, 1996 LATHAM & WATKINS
By /s/ PETER H. BENZIAN
-----------------------
Peter H. Benzian
Attorneys for Plaintiff
AMSERV HEALTHCARE INC.
