U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended May 31, 1997
[_] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from __________ to __________
Commission File Number 1-10751
STAR MULTI CARE SERVICES, INC.
(Name of small business issuer in its charter)
New York 11-1975534
- - ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
99 Railroad Station Plaza, Hicksville, New York 11801
- - ----------------------------------------------- -----
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code: (516) 938-2016
--------------
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendments to
this Form 10-KSB.[_]
<PAGE>
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers of the Company, their ages and
present positions with the Company are as follows:
Position Held Director
Name Age with the Company Since
- - ---- --- ---------------- -----
Stephen Sternbach 43 Chairman of the Board of Directors, 1987
President and Chief Executive
Officer
William Fellerman 53 Chief Financial Officer, Secretary, 1990
Treasurer, Director
Charles Berdan +*x 48 Director 1994
John P. Innes II +*x 63 Director 1991
Matthew Solof +*x 44 Director 1992
Gary Weinberger 48 Director 1996
Melvin L. Katten 61 Director 1996
- - --------
+ Member of Compensation Committee
* Member of Stock Option Committee
x Member of Audit Committee
Directors hold office until the annual meeting of the shareholders
next succeeding their election, and until their successors are elected and
qualified, or until their prior death, resignation or removal. Officers hold
office until the annual meeting of the Board of Directors next succeeding their
election, and until their successors shall have been elected and qualified, or
until their death, resignation or removal.
Stephen Sternbach has been the Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since 1987.
William Fellerman has been the Chief Financial Officer, Secretary and
Treasurer of the Company since November 1992 and a director of the Company since
1990. Mr. Fellerman is a certified public accountant and was, until June 15,
1994, a partner in the accounting firm of Fellerman, Cohen and Tempesta and had
been for more than the five years prior thereto.
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<PAGE>
Charles Berdan became a director of the Company in April 1994 and
served as a Branch Manager of the Company from September 1993 to March 1994.
Since April 1994, Mr. Berdan has served as a Sales Executive for Automatic Data
Processing, Inc. ("ADP"), a provider of information services. From January 1993
to September 1993, Mr. Berdan was a Vice President of the Senior Bulletin, a
newspaper, which the Company purchased in September 1993. He also served from
July 1990 through July 1992 as a Division Vice President of Managistics, Inc., a
payroll services company. For at least the two years prior to July 1990, Mr.
Berdan was a Vice President of ADP.
John P. Innes II has been a director of the Company since 1991. Since
May of 1996 he has been Special Counsel to ValuJet Airlines. He has acted as a
private investor and consultant since July of 1994. Mr. Innes was the Chairman
of Commonwealth Associates, an investment bank, from January 1992 to June 1994.
Mr. Innes also served as Managing Director of Sabre Insurance Company, a
casualty insurance company (1986-1991), President of Boxhall Group, Inc., a
holding company for Sabre Insurance Company (1986-1991), Vice Chairman of the
Board of Directors of Wheeling-Pittsburgh Steel Corporation, an integrated steel
manufacturing company (1987-1990) and a private investor and consultant
(1990-1992).
Matthew Solof has been a director of the Company since November 1992.
Since 1991, he has been the President and Chief Executive Officer of AMI Group,
a real estate development and acquisition company, and President and Chief
Executive Officer of Mercantile Mortgage Association, a mortgage lending
company. From 1983 to 1992, Mr. Solof was a trader at IRV Companies, a firm
which specializes in oil trading, and from 1981 to 1991 he was President and
Chief Executive Officer of Matthew Solof Trading Company, a firm which also
specializes in oil trading.
Melvin L. Katten, an attorney, has been a Senior partner in the
Chicago law firm of Katten Muchin & Zavis since 1974. He was a director of
Amserv from 1985 until consummation of the Merger in August 1996. Mr. Katten
also serves as a director of Washington Scientific Industries, Inc., a
publicly-held company.
Gary L. Weinberger has been engaged in the private practice of
orthodontics for more than the past twenty years. In addition, Dr. Weinberger is
engaged as a consultant on financial planning and management. Dr. Weinberger is
a member of the International Board of Standards and Practices for Financial
Planners, the International Association of Financial Planners and the American
Association of Orthodontists.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
its Common Stock, to file reports of ownership and changes of ownership with the
Securities and Exchange Commission (SEC) and each exchange on which the
Company's securities are registered. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all ownership forms they file.
Based solely on its review of the copies of such forms received by
it, or written representations from certain persons that no Forms 5 were
required for those persons, the Company
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believes that, during the fiscal year ended May 31, 1997, its officers,
directors, and greater than ten-percent shareholders complied with all
applicable Section 16 filing requirements.
ITEM 11. EXECUTIVE COMPENSATION.
The following table provides information with respect to all
compensation paid or accrued by the Company during the three fiscal years ended
May 31, 1997 to Stephen Sternbach, the Company's Chief Executive Officer, the
only executive officer of the Company whose salary and
bonus for fiscal 1997 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- ----------------------
Other Awards
Name and Annual Restricted
Principal Compen- Stock Securities LTIP All Other
Position Year Salary($) Bonus($) sation Awards Underlying Options(#) Payments($) Compensation(1)
- - -------- ---- --------- -------- ------ ------ --------------------- ----------- ---------------
<S> <C> <C> <C> <C>
Stephen Sternbach 1997 $257,250 $109,251 -- $20,000(1)
Chief Executive Officer, 1996 $250,000 $34,371 21,000 $10,000(1)
President and 1995 $225,000 -- -- $10,000(1)
Chairman of the Board
</TABLE>
- - -----------------------
(1) Represents amounts credited by the Company to a book reserve account as
contingent deferred compensation for the benefit of Mr. Sternbach pursuant
to a Non-Qualified Retirement and Death Benefit Agreement between the
Company and Mr. Sternbach.
OPTION GRANTS IN LAST FISCAL YEAR
There were no stock option grants during the fiscal year ended May
31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table contains information concerning the number and
value, at May 31, 1997, of the exercised and unexercised options held by Mr.
Sternbach.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options Held at Fiscal Year- In-the-Money Options Held at
Acquired on Value End Fiscal Year-End
Name Exercise (#) Realized ($) (Exercisable/Unexercisable) (Exercisable/Unexercisable)(1)
- - ---- ------------ ------------ --------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stephen 44,242 $171,385 118,332/0 $198,554/0
Sternbach
</TABLE>
- - ----------
(1) Fair market value of underlying securities (the closing price of the
Company's Common Stock on the Nasdaq National Market) at fiscal year end
(May 31, 1997), minus the then effective exercise price.
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<PAGE>
COMPENSATION OF DIRECTORS
The Company's non-employee directors are paid a fee of $750 for each
Board of Directors meeting which they attend. They are not paid any additional
fee for serving on any committees of the
Board of Directors.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Stephen Sternbach dated
as of December 18, 1996 (the "Sternbach Employment Agreement"). The Sternbach
Employment Agreement has a term of five years and provides for an initial annual
salary of $250,000 (subject to annual increase by the amount of the increase in
the Consumer Price Index from the immediate preceding year) plus a bonus of 6%
of the Company's net profit before taxes in excess of $1,200,000, not to exceed
an aggregate annual bonus of $500,000. The Sternbach Employment Agreement
provides that after a Change in Control (as defined in the Sternbach Employment
Agreement) of the Company has occurred, if either Mr. Sternbach terminates his
employment within six months after he has obtained actual knowledge of the
Change in Control or the Company (or any successor thereto) terminates his
employment with the Company within one year after the Change in Control, Mr.
Sternbach will be entitled to receive (i) his salary, bonuses, awards,
perquisites and benefits including, without limitation, benefits and awards
under the Company's stock option plans and pension and retirement plans and
programs, accrued through the date Mr. Sternbach's employment with the Company
is terminated and (ii) a lump-sum payment in cash equal to 2.99 times Mr.
Sternbach's base amount.
The Company and Mr. Sternbach are also parties to a Consulting
Agreement (the "Sternbach Consulting Agreement") pursuant to which the Company
has agreed to retain Mr. Sternbach as a consultant for a period of two years
from the time that his employment with the Company terminates. Pursuant to the
Sternbach Consulting Agreement, the Company has agreed to pay Mr. Sternbach
$150,000 per year and he will be entitled to participate in the health insurance
and similar benefits which the Company provides to any of its other consultants.
In addition, the Company and Mr. Sternbach are parties to a
Non-Qualified Retirement and Death Benefit Agreement dated February 1, 1994,
pursuant to which the Company credits to a bank reserve (the "Deferred
Compensation Account") established for that purpose, an amount not to exceed 10%
of Mr. Sternbach's gross annual salary during Mr. Sternbach's employment with
the Company. Any funds so credited to the Deferred Compensation Account may be
kept in cash or invested and reinvested in mutual funds, stocks, bonds,
securities or other assets as may be selected by the Company's Chief Financial
Officer in his discretion. Mr. Sternbach has agreed to assume all risk in
connection with any decrease in value of the funds which are invested. Unless
otherwise forfeited, Mr. Sternbach shall be entitled to the Deferred
Compensation Account upon his termination, disability or death or if the Company
is involved in a merger or is acquired by another company.
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<PAGE>
COMPENSATION COMMITTEE REPORT
Overview and Philosophy
-----------------------
The Compensation Committee of the Board of Directors is composed of
three directors, Messrs. Berdan, Innes and Solof. The Compensation Committee is
responsible for developing and making recommendations to the Board of Directors
with respect to the Company's executive compensation policies. The Compensation
Committee's executive compensation philosophy (which is intended to apply to all
members of the Company's management, including its Chief Executive Officer) is
to provide competitive levels of compensation, integrate managements' pay with
achievement of the Company's performance goals, reward above average corporate
performance, recognize individual initiative and achievement and assist the
Company in attracting and retaining qualified management.
The objectives of the Company's executive compensation program are
to:
* Support the achievement of desired Company performance.
* Provide compensation that will attract and retain superior
talent and reward performance.
The executive compensation program provides an overall level of
compensation opportunity that is competitive within the healthcare industry, as
well as with a broader group of companies of
comparable size and complexity.
Executive Officer Compensation
------------------------------
The Company's executive officer compensation is comprised of base
salary, annual cash bonus and long-term incentive compensation in the form of
stock options and various benefits, including medical plans generally available
to employees of the Company.
It is the philosophy of the Compensation Committee that compensation
of executive officers should be closely aligned with the financial performance
of the Company. Accordingly, benefits are provided through stock option
incentives and bonuses which are generally consistent with the goal of
coordinating the rewards to management with a maximization of shareholder
return. In reviewing Company performance, consideration is given to the
Company's earnings. Also taken into account are external economic factors that
effect results of operations. An attempt is also made to maintain compensation
within the range of that afforded like executive officers at companies whose
size and business is comparable to that of the Company.
CEO Compensation
----------------
In the case of Stephen Sternbach, the Chief Executive Officer, the
Compensation and Stock Option Committee evaluates the Company's mid and long
range strategic planning and its implementation as well as the considerations
impacting the compensation of executive officers
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<PAGE>
generally which are described above. Pursuant to the terms of his employment
agreement with the Company, Mr. Sternbach was paid a bonus of $109,251for the
year ended May 31, 1997.
Benefits
--------
The Compensation Committee endorses the position that equity
ownership by management is beneficial in aligning managements' and shareholders'
interest in the enhancement of shareholder value. Stock options were granted at
exercise prices equal to the market value of the Company's
Common Stock on the date of grant.
The Company provides to executive officers medical benefits that
generally are available to Company employees. The amount of perquisites, as
determined in accordance with the rules of the Securities and Exchange
Commission relating to executive compensation, did not exceed 10% of
salary for fiscal 1997.
Charles Berdan
John P. Innes II
Matthew Solof
Members of the Compensation Committee
PERFORMANCE GRAPH
Set forth below is a graph comparing the yearly change in the
cumulative shareholder return of the Company's Common Stock with the National
Association of Securities Dealers Automated Quotation Market Index and a peer
group index of six competing companies for the same period. The comparison
assumes $100 was invested at the close of business on May 31, 1992 in the
Company's Common Stock and in each of the comparison groups, and assumes
reinvestment of dividends. The Company paid no dividends during the periods.
ANNUAL RETURN PERCENTAGE
Years Ending
Company Name / Index May93 May94 May95 May96 May97
- - --------------------------------------------------------------------------------
STAR MULTI CARE SERVICES -43.25 42.89 58.99 97.89 -32.50
NASDAQ - U.S. 20.29 5.27 18.96 45.34 12.67
PEER GROUP -30.05 -1.58 26.85 -13.92 -25.86
- - --------------------------------------------------------------------------------
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<PAGE>
INDEXED RETURNS
Base Years Ending
Period
Company Name / Index May92 May93 May94 May95 May96 May97
- - --------------------------------------------------------------------------------
STAR MULTI CARE SERVICES 100 56.75 81.09 128.93 255.15 172.22
NASDAQ - U.S. 100 120.29 126.63 150.64 218.94 246.68
PEER GROUP 100 69.95 68.85 87.34 75.18 55.74
- - --------------------------------------------------------------------------------
Peer Group Companies
- - --------------------------------------------------------------------------------
CARE GROUP INC
HOSPITAL STAFFING SVCS INC
IN HOME HEALTH INC
NATIONAL HOME HEALTH CARE
STAFF BUILDERS INC
TRANSWORLD HEALTHCARE INC
- - --------------------------------------------------------------------------------
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Set forth below is the ownership of the Company Common Stock at
September 25, 1997 by (i) the only persons or groups who were owners of record
or were known by the Company to beneficially own more than 5% of the outstanding
shares of the Company Common Stock; (ii) each director of the Company; (iii)
Stephen Sternbach, the executive officer named in the Summary Compensation Table
under the caption "Executive Compensation"; and (iv) all directors and executive
officers of the Company as a group. The Company understands that, unless
otherwise noted below, each beneficial owner has sole voting and investment
power with respect to all shares of the Company Common Stock attributable to
such owner.
Number of
Name and Address Beneficially Percent
of Beneficial Owner Shares Owned* of Class (1)
------------------- ------------- ------------
Stephen Sternbach 1,139,692(2) 26.91%
c/o STAR Multi Care Services, Inc.
99 Railroad Station Plaza
Hicksville, NY 11801
William Fellerman 56,236(3) 1.35%
c/o STAR Multi Care Services, Inc.
99 Railroad Station Plaza
Hicksville, NY 18801
Charles Berdan 1,019 **
281 Potomac Drive
Basking Ridge, NJ 07920
John P. Innes II 1,113 **
8 Breckenridge Lane
Savannah, GA 31411
Matthew Solof 3,540 **
33 Fairbanks Boulevard
Woodbury, NY 11797
Melvin L. Katten 56,913 1.38%
1480 Tower Road
Winnetka, IL 60093
Gary L. Weinberger 8,400 **
38 Clayton Drive
Dix Hills, NY
Eugene J. Mora 210,175(4) 5.07%
3252 Holiday Court, Suite 204
LaJolla, CA 92037
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<PAGE>
Number of
Name and Address Beneficially Percent
of Beneficial Owner Shares Owned* of Class (1)
------------------- ------------- ------------
Heartland Advisors, Inc. 235,716(5) 5.85%
790 North Milwaukee Street
Milwaukee, WI 53202
All directors and executive 1,712,804 40.03%
officers of STAR as a group
(7 persons)
- - ----------
* All shares and per share amounts have been adjusted to take into account
the two stock dividends, effectuated on May 30, 1995 and January 12, 1996,
respectively.
** Indicates less than 1% of the outstanding shares of the Company Common
Stock.
(1) Shares subject to options are considered outstanding only for the purpose
of computing the percentage of outstanding Common Stock which would be
owned by the optionee if the options were so exercised, but (except for the
calculation of beneficial ownership by all executive officers and directors
as a group) are not considered outstanding for the purpose of computing the
percentage of outstanding Common Stock owned by any other person.
(2) Includes 119,606 shares of Company's Common Stock owned by the Stephen
Sternbach Family Trust; Mr. Sternbach disclaims beneficial ownership with
respect to these shares. Also includes 102,322 shares of the Company's
Common Stock which Mr. Sternbach has a currently exercisable option to
purchase pursuant to the Company's 1992 Stock Option Plan.
(3) Includes 24,068 shares of Company's Common Stock owned by Mr. Fellerman's
wife; Mr. Fellerman disclaims beneficial ownership with respect to these
shares of Company's Common Stock. Also includes 3,406 shares owned by the
William Fellerman CPA PC Pension Trust Fund. Also includes 28,512 shares of
the Company's Common Stock which Mr. Fellerman has a currently exercisable
option to purchase pursuant to the Company's 1992 Stock Option Plan.
(4) Includes 15,030 shares of Company's Common Stock which Mr. Mora has a
currently exercisable option to purchase pursuant to the options assumed by
Company upon consummation of the Amserv Merger.
(5) Based upon a copy of a Schedule 13G/A (dated February 12, 1997) received by
Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Stephen Sternbach has outstanding loans in the principal amount, as
of September 15, 1997 of $91,204 from the Company and a subsidiary of the
Company. The loan from the subsidiary has been assigned to the Company. These
loans bear interest at 6% per annum and each have a scheduled maturity date of
August 1, 1998.
In connection with services provided to the Company during the fiscal
years ended May 31, 1995, 1996 and 1997, the Company paid William Fellerman,
CPA, P.C., approximately $100,000, $100,000 and $129,000, respectively each
year. Mr. Fellerman, a director, Chief Financial Officer, Treasurer and
Secretary of the Company, is the sole shareholder of that corporation.
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<PAGE>
In addition, the Company entered into an agreement with William
Fellerman providing for the payment of certain severance benefits upon the
occurrence of a change of control of the Company as defined therein and the
termination of Mr. Fellerman's position as an officer and/or director of the
Company or the reduction in the payment for services to William Fellerman, CPA,
P.C.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
2. (a) Agreement and Plan of Merger among the Company, EFCC Acquisition
Corp. and Extended Family Care Corporation dated as of January 3,
1997. Incorporated by reference to the Company's Registration
Statement on Form S-4 dated July 29, 1997 (Registration No.
333-32171).
(b) First Amendment to Agreement and Plan of Merger among the
Company, EFCC Acquisition Corp. and Extended Family Care
Corporation, dated as of April 6, 1997. Incorporated by reference
to the Company's Registration Statement on Form S-4 dated July
29, 1997 (Registration No. 333-32171).
3. (a)* The Company's Certificate of Incorporation filed April 25, 1961.
(b)* The Company's Certificate of Amendment to Certificate of
Incorporation filed February 22, 1989.
(c)* The Company's Certificate of Amendment to Certificate of
Incorporation filed December 4, 1990.
(d) The Company's Certificate of Amendment to Certificate of
Incorporation filed February 3, 1994. (Incorporated by reference
to Exhibit 3.(d) to the Company's Annual Report on Form 10-KSB
for the fiscal year ended May 31, 1994.)
(e) The Company's Certificate of Change filed March 2, 1995.
(Incorporated by reference to Exhibit 3(e) to the Company's
Annual Report on Form 10-KSB for the fiscal year ended May 31,
1995.)
(f) The Company's By-Laws, as amended on November 18, 1992 and
September 13, 1993. (Incorporated by reference to Exhibit 3.(e)
to the Company's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 1994.)
4. (a) Irrevocable Proxy, dated as of January 3, 1996, among Arbor Home
Healthcare Holdings, LLC, Coss Holding Corp. and Gary Melius, as
Voting Trustee. (Incorporated by reference to Exhibit 2.(a) to
the Company's registration statement on Form S-4 (Registration
No. 333-32171).)
10. (a)* Form of Indemnification Agreement between the Company and
Stephen Sternbach.
(b) Employment Agreement, dated as of December 3, 1995 between the
Company and Stephen Sternbach. (Incorporated by reference to
Exhibit 10.(x) to the Company's Quarterly Report on Form 10-QSB
for the quarterly period ended February 29, 1996.)
(c)* The Company's 1991 Incentive Stock Option Plan
(d) The Company's 1992 Incentive Stock Option Plan (as amended and
restated September 13, 1993). (Incorporated by reference to
Exhibit 10.(h) to the Company's Annual Report on Form 10-KSB for
the fiscal year ended May 31, 1994.)
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<PAGE>
(e) Amendment No. 1 to the Company's 1992 Stock Option Plan.
(Incorporated by reference to Exhibit 10.(z) to the Company's
Quarterly Report on Form 10-QSB for the quarterly period ended
February 29, 1996.)
(f) The Company's Employee Stock Purchase Plan, as amended on
December 15, 1995. (Incorporated by reference to Exhibit 10.(y)
to the Company's Quarterly Report on Form 10-QSB for the
quarterly period ended February 26, 1996.)
(g) Form of Incentive Stock Option Contract (Incorporated by
reference to Exhibit 10.(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1993.)
(h)* Agreement relating to purchase of the Company among Stephen
Sternbach, Renee Starr and Leonard Taubenblatt dated December 31,
1986.
(i)* New York State Department of Consumer Affairs Employment Agency
License.
(j)* New York State Health Department Home Care License.
(k)* New Jersey Employment Agency License.
(l) Form of Indemnification Agreement between the Company and
directors and officers. (Incorporated by reference to Exhibit
10.(k) to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1992.)
(m) Asset Purchase Agreement dated as of November 1, 1991 by and
among Unity Care Services, Inc., Unity Healthcare Holding
Company, Inc. and the Company. (Incorporated by reference to
Exhibit 10.(l) to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1992.)
(n) Asset Purchase Agreement dated January 30, 1992 by and among
Unity Healthcare Holding Company, Inc., Unity Care Services, Inc.
and the Company. (Incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K dated May 26, 1992.)
(o) Asset Purchase Agreement dated January 30, 1992 by and between
Unity Home Care of Florida, Inc. and the Company. (Incorporated
by reference to Exhibit 10.2 to the Company's Current Report on
Form 8-K dated May 26, 1992.)
(p) Employment Agreement dated February 15, 1990, between Alan
Spector and the Company, as assignee of Unity Home Care of
Florida, Inc. (Incorporated by reference to Exhibit 10.(o) to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1992.)
(q) Asset Purchase Agreement dated November 8, 1993 by and between
DSI Health Care Services, Inc. and Star Multi Care Services of
Long Island, Inc., a wholly owned subsidiary of the Company.
(Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K dated November 22, 1993.)
(r) Asset Purchase Agreement dated as of January 6, 1995, as amended,
by and between Long Island Nursing Registry, Inc. and the
Company. (Incorporated by reference to Exhibit 21 to the
Company's Current Report on Form 8-K dated May 19, 1995.)
(s) Employment Agreement dated May 19, 1995 by and between the
Company and Gregory Turchan. (Incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K dated
May 19, 1995.)
(t) Loan Agreement dated November 1, 1995 by and between the Company
and Chase Manhattan Bank, N.A. (Incorporated by reference to
Exhibit 10.(w) to
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<PAGE>
the Company's Quarterly Report on Form 10-QSB for the quarterly
period ended November 30, 1995.)
(u) Non-Qualified Retirement and Death Benefit Agreement, dated
February 1, 1994, between the Company and Stephen Steinbach.
(Incorporated by reference to Exhibit 10.(t) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31,
1996.)
(v)***Amendment dated April 10, 1997 to the Employment Agreement by
and between Gregory Turchan and the Company.
(w)***Letter agreement dated as of September 5, 1997 by and between
William Fellerman and the Company.
16. (a) Letter dated April 25, 1995, as amended, from Deloitte & Touche
LLP to the Securities and Exchange Commission. (Incorporated by
reference to EFCC's Current Report on Form 8-K/A dated March 21,
1995.)
21. ** List of Subsidiaries.
23. (a) Consent of Holtz Rubenstein & Co., LLP.
(b)**Consent of Ernst & Young LLP.
27. ** Financial Data Schedule.
- - -------------------
* Incorporated by reference to the Company's Registration Statement on Form
S-18 dated May 14, 1991. (Registration No. 33-39697-NY)
** Filed with the Company's Form 10-K for the period ended May 31, 1997.
*** Filed herewith.
(b) Reports on Form 8-K.
During the last quarter of the period covered by this report, the
Company filed a report on Form 8-K on April 29, 1997.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: September 26, 1997 STAR MULTI CARE SERVICES, INC.
By /s/ Stephen Sternbach
-------------------------------------
Stephen Sternbach, President, Chairman
of the Board of Directors and Chief
Executive Officer
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INDEX TO EXHIBITS
Exhibit No. Description
- - ----------- -----------
2. (a) Agreement and Plan of Merger among the Company, EFCC Acquisition
Corp. and Extended Family Care Corporation dated as of January 3,
1997. Incorporated by reference to the Company's Registration
Statement on Form S-4 dated July 29, 1997 (Registration No.
333-32171).
(b) First Amendment to Agreement and Plan of Merger among the
Company, EFCC Acquisition Corp. and Extended Family Care
Corporation, dated as of April 6, 1997. Incorporated by reference
to the Company's Registration Statement on Form S-4 dated July
29, 1997 (Registration No. 333-32171).
3. (a)* The Company's Certificate of Incorporation filed April 25, 1961.
(b)* The Company's Certificate of Amendment to Certificate of
Incorporation filed February 22, 1989.
(c)* The Company's Certificate of Amendment to Certificate of
Incorporation filed December 4, 1990.
(d) The Company's Certificate of Amendment to Certificate of
Incorporation filed February 3, 1994. (Incorporated by reference
to Exhibit 3.(d) to the Company's Annual Report on Form 10-KSB
for the fiscal year ended May 31, 1994.)
(e) The Company's Certificate of Change filed March 2, 1995.
(Incorporated by reference to Exhibit 3(e) to the Company's
Annual Report on Form 10-KSB for the fiscal year ended May 31,
1995.)
(f) The Company's By-Laws, as amended on November 18, 1992 and
September 13, 1993. (Incorporated by reference to Exhibit 3.(e)
to the Company's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 1994.)
4. (a) Irrevocable Proxy, dated as of January 3, 1996, among Arbor Home
Healthcare Holdings, LLC, Coss Holding Corp. and Gary Melius, as
Voting Trustee. (Incorporated by reference to Exhibit 2.(a) to
the Company's registration statement on Form S-4 (Registration
No. 333-32171).)
10. (a)* Form of Indemnification Agreement between the Company and
Stephen Sternbach.
(b) Employment Agreement, dated as of December 3, 1995 between the
Company and Stephen Sternbach. (Incorporated by reference to
Exhibit 10.(x) to the Company's Quarterly Report on Form 10-QSB
for the quarterly period ended February 29, 1996.)
(c)* The Company's 1991 Incentive Stock Option Plan
(d) The Company's 1992 Incentive Stock Option Plan (as amended and
restated September 13, 1993). (Incorporated by reference to
Exhibit 10.(h) to the Company's Annual Report on Form 10-KSB for
the fiscal year ended May 31, 1994.)
(e) Amendment No. 1 to the Company's 1992 Stock Option Plan.
(Incorporated by reference to Exhibit 10.(z) to the Company's
-15-
<PAGE>
Exhibit No. Description
- - ----------- -----------
Quarterly Report on Form 10-QSB for the quarterly period ended
February 29, 1996.)
(f) The Company's Employee Stock Purchase Plan, as amended on
December 15, 1995. (Incorporated by reference to Exhibit 10.(y)
to the Company's Quarterly Report on Form 10-QSB for the
quarterly period ended February 26, 1996.)
(g) Form of Incentive Stock Option Contract (Incorporated by
reference to Exhibit 10.(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1993.)
(h)* Agreement relating to purchase of the Company among Stephen
Sternbach, Renee Starr and Leonard Taubenblatt dated December 31,
1986.
(i)* New York State Department of Consumer Affairs Employment Agency
License.
(j)* New York State Health Department Home Care License.
(k)* New Jersey Employment Agency License.
(l) Form of Indemnification Agreement between the Company and
directors and officers. (Incorporated by reference to Exhibit
10.(k) to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1992.)
(m) Asset Purchase Agreement dated as of November 1, 1991 by and
among Unity Care Services, Inc., Unity Healthcare Holding
Company, Inc. and the Company. (Incorporated by reference to
Exhibit 10.(l) to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1992.)
(n) Asset Purchase Agreement dated January 30, 1992 by and among
Unity Healthcare Holding Company, Inc., Unity Care Services, Inc.
and the Company. (Incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K dated May 26, 1992.)
(o) Asset Purchase Agreement dated January 30, 1992 by and between
Unity Home Care of Florida, Inc. and the Company. (Incorporated
by reference to Exhibit 10.2 to the Company's Current Report on
Form 8-K dated May 26, 1992.)
(p) Employment Agreement dated February 15, 1990, between Alan
Spector and the Company, as assignee of Unity Home Care of
Florida, Inc. (Incorporated by reference to Exhibit 10.(o) to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1992.)
(q) Asset Purchase Agreement dated November 8, 1993 by and between
DSI Health Care Services, Inc. and Star Multi Care Services of
Long Island, Inc., a wholly owned subsidiary of the Company.
(Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K dated November 22, 1993.)
(r) Asset Purchase Agreement dated as of January 6, 1995, as amended,
by and between Long Island Nursing Registry, Inc. and the
Company. (Incorporated by reference to Exhibit 21 to the
Company's Current Report on Form 8-K dated May 19, 1995.)
-16-
<PAGE>
Exhibit No. Description
- - ----------- -----------
(s) Employment Agreement dated May 19, 1995 by and between the
Company and Gregory Turchan. (Incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K dated
May 19, 1995.)
(t) Loan Agreement dated November 1, 1995 by and between the Company
and Chase Manhattan Bank, N.A. (Incorporated by reference to
Exhibit 10.(w) to the Company's Quarterly Report on Form 10-QSB
for the quarterly period ended November 30, 1995.)
(u) Non-Qualified Retirement and Death Benefit Agreement, dated
February 1, 1994, between the Company and Stephen Steinbach.
(Incorporated by reference to Exhibit 10.(t) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31,
1996.)
(v)***Amendment dated April 10, 1997 to the Employment Agreement by
and between Gregory Turchan and the Company.
(w)***Letter agreement dated as of September 5, 1997 by and between
William Fellerman and the Company.
16. (a) Letter dated April 25, 1995, as amended, from Deloitte & Touche
LLP to the Securities and Exchange Commission. (Incorporated by
reference to EFCC's Current Report on Form 8-K/A dated March 21,
1995.)
21. ** List of Subsidiaries.
23. (a) Consent of Holtz Rubenstein & Co., LLP.
(b)**Consent of Ernst & Young LLP.
27. ** Financial Data Schedule.
- - -------------------
* Incorporated by reference to the Company's Registration Statement on Form
S-18 dated May 14, 1991. (Registration No. 33-39697-NY)
** Filed with the Company's Form 10-K for the period ended May 31, 1997.
*** Filed herewith.
-17-
Amendment to Employment Agreement
This Amendment to the Employment Agreement dated May 19, 1995 (the
Amendment") by and between Star Multi Care Services, Inc., a New York
corporation with its principal offices at 33 Walt Whitman Road, Huntington
Station, New York 11746 (the Company") and Gregory Turchan residing at 19
Whitney Gate Smithtown, New York 11787 (the "Employee").
W I T N E S S E T H
WHEREAS, the Company desires to continue to employee the Employee, and
WHEREAS, the Employee desires to continue to be employed by the Company,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Term. The Employee's term of employment under this Amendment shall commence
on May 19, 1997 (the "New Commencement Date") and shall continue for a period of
twenty-four (24) months thereafter, unless terminated under the terms and
conditions herein (the "New Employment Term").
2. Duties. The Employee shall be fully responsible for the operations of the
Company, and to perform such other duties and services as shall from time to
time be designated by the Board of Directors or the Chief Executive Officers of
the Company, Employee shall be based in the New York metropolitan area and shall
have the title of Vice President - Operations.
3. Compensation. From the New Commencement Date through May 31, 1997, the
Employee shall receive an annual salary of One Hundred Thousand Dollars
($100,000), subject to all required federal, state and local payroll deductions.
Commencing on June 1, 1997 through the expiration of the New Employment Term,
the Employee shall receive an annual salary of One Hundred Seventeen Thousand
and Five Hundred Dollars ($117,500). In addition, the Employee shall receive an
annual bonus equal to five percent (5%) of the pre-tax income of the Company,
excluding all extraordinary items, not to exceed Twenty-five Thousand Dollars
($25,000).
<PAGE>
Additionally, the Company shall pay the Employee up to Four Hundred Dollars
($400) per month for the Employee's automobile obligations upon the presentation
of invoices or other documentation therefor.
4. Employee Benefits. The Employee shall receive all employee benefits that are
made available to other senior executives of the Company. Paragraph 7 of the
Employment Agreement dated May 19, 1995 (the "Employment Agreement") is hereby
stricken and shall no longer be effective.
5. Restrictive Covenant. Section 11 of the Employment Agreement shall be revised
and amended as follows:
(a) References to LINR shall be substituted with the Company
(b) Subparagraph 11(b)(i) shall be replaced in its entirety by: Employee
will not, at any time prior to the second anniversary of the New
Commencement Date, engage in or participate in any business activity,
including, but not limited to, acting as a director, officer,
employee, agent, independent contractor, partner, consultant, licensor
or licensee, franchisor or franchisee, proprietor, syndicate ember, or
shareholder that operates a licenced or certified home care services
agency in the New York metropolitan area and any county in which the
Company and/or any subsidiary or affiliate operates.
6. Notices. Notice to the Company shall be sent to:
Stephen Sternbach
33 Walt Whitman Road
Suite 332
Huntington Station, New York 11746
with a copy to:
Lawrence A. Muenz, Esquire
Muenz & Meritz, P.C.
Three Hughes Place
Dix Hills, New York 11746
and Notice to the Employee shall be sent to:
19 Whitney Gate
Smithtown, New York 11787
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<PAGE>
7. Additional Terms. All other terms and conditions appearing in the Employment
Agreement shall remain in full force and affect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
appearing below:
STAR MULTI CARE SERVICES, INC. GREGORY TURCHAN
By:/s/Stephen Sternbach By:/s/Gregory Turchan
- - ----------------------- -----------------------
Title: Chairman of the Board, President
Chief Executive Officer
Date: April 10, 1997 Date: April 10, 1997
3
STAR MULTI CARE SERVICES, INC.
33 Walt Whitman Road
Suite 302
Huntington Station, New York 11746
July 12, 1997
PRIVILEGED AND CONFIDENTIAL
Mr. William Fellerman
1554 Holiday Park Drive
Wantagh, New York 11793
Dear Mr. Fellerman
Star Multi Care Services, Inc., a New York corporation (the "Company"),
considers it essential to the best interests of its stockholders to foster the
continuous employment of key management personnel. In this connection, the Board
of Directors of the Company (the "Board") recognizes that, as is the case with
many publicly held corporations, a change in control of the Company is always
possible and that such possibility, and the uncertainty and questions that it
may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a change in control of the Company although no such change is now contemplated.
In order to induce you, William Fellerman (the "Executive") to remain in your
position as Secretary and Chief Financial Officer of the Company (the
"Position") and in consideration of your agreement set forth in Subparagraph
2(d) hereof, the Company agrees that you shall receive the severance benefits
set forth in this letter agreement ("Agreement") in the event your Position with
the Company is terminated subsequent to a "Change in Control of the Company" (as
such term is defined in Paragraph 2 hereof), or you are "Terminated Without
Cause" (as such term is defined in Paragraph 2 hereof), or a "Resignation of the
Executive" (as such term is defined in Paragraph 2 hereof) occurs. The amount of
your severance benefits has been calculated based upon a formula approved by the
Board and takes into account your level of responsibility and your years of
service with the Company.
1. Term of Agreement. This Agreement shall commence on the date hereof (the
"Commencement Date") and shall continue in effect for one year from the
Commencement
<PAGE>
Date; provided, however, that commencing on the one year anniversary of the
Commencement Date, and upon each annual anniversary thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than three (3) months prior to such automatic extension date, the Company
shall have given notice that it does not wish to extend this Agreement;
provided, further, if a Change in Control of the Company shall have occurred
during the original or extended term of this Agreement, this Agreement shall
continue in effect for a period of six (6) months beyond the month in which such
Change in Control occurred.
2. Termination or Resignation of Employment
(a) Change in Control. Benefits shall be payable hereunder should there
have been a Change in Control of the Company, as set forth below:
(A) For purposes of this Agreement, a "Change in Control of the
Company" shall be deemed to have occurred if: (i) any "person" or "group" (as
such terms are used in Section 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "Act")), except for an employee stock ownership
trust (or any of the trustees thereof), becomes a "beneficial owner" (as such
term is used in Rule 13d-3 promulgated under the Act), after the date hereof,
directly or indirectly, of securities of the Company representing thirty percent
(30%) or more of the combined voting power of the Company's then outstanding
securities; (ii) a change in "control" is defined in Rule 12b-2 or any successor
rule promulgated under the Act) shall have occurred; (iii) the majority of the
Board of Directors, as such entire Board of Directors is composed at the date of
this Agreement, no longer serve as directors of the Company, except that there
shall not be counted toward such majority who no longer serve as directors any
director who ceased to serve either prior to the date of a Change in Control,
for any reason, or at any other time due to his death, disability or termination
for cause; (iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets; or (v) the
shareholders of the Company approve a merger or consolidation of the Company
with any other company, other than a merger or consolidation which would result
in the combined voting power of the Company's voting securities outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than seventy percent (70%) of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation . Notwithstanding the foregoing,
any transaction involving a leveraged buy out or other acquisition of the
Company which would otherwise constitute a Change in Control, in which the
Executive participates in the surviving or successor entity (other than solely
as an employee or consultant), shall not constitute a Change in Control.
(B) Notwithstanding anything in this Agreement to the contrary, the
Executive shall have the right, prior to the receipt by him of any amounts due
thereunder, to waive receipt thereof or, subsequent to the receipt by him of any
amounts due thereunder, or subsequent to the receipt by him of any amounts due
hereunder, to treat some or all of
2
<PAGE>
such amounts as a loan from the Company which the Executive shall repay to the
Company, within ninety (90) days from the date of receipt, with interest at the
rate provided in Section 7872 of the Code. Notice of any such waiver or
treatment of amounts received as a loan shall be given by the Executive to the
Company in writing and shall be binding upon the Company.
(b) Termination Without Cause. Benefits shall be payable hereunder should
there have been a Termination Without Cause of the Executive, as set forth
below:
(A) For purposes of this Agreement, a "Termination Without Cause" of
the Executive shall be deemed to have occurred if: (i) a Change of Control shall
not have previously occurred, and (ii) the Company decides to terminate the
services of the Executive for any reason other than for Cause, Disability or
Death, as defined in Paragraph 3 of this Agreement
(B) Notwithstanding anything in this Agreement to the contrary, the
Executive shall have the right, prior to the receipt by him of any amounts due
thereunder, to waive receipt thereof or, subsequent to the receipt by him of any
amounts due thereunder, or subsequent to the receipt by him of any amounts due
hereunder, to treat some or all of such amounts as a loan from the Company which
the Executive shall repay to the Company, within ninety (90) days from the date
of receipt, with interest at the rate provided in Section 7872 of the Code.
Notice of any such waiver or treatment of amounts received as a loan shall be
given by the Executive to the Company in writing and shall be binding upon the
Company.
(c) Resignation of the Executive. Benefits shall be payable hereunder should
there have been a Resignation of the Executive, as set forth below:
(A) For purposes of this Agreement, a "Resignation of the Executive"
shall be deemed to have occurred if: (i) a Change of Control shall not have
previously occurred, (ii) the Company has not previously terminated the services
of the Executive for any reason, and (iii) the Executive decides to resign his
position with the Company after the Board of Directors duly adopts a resolution
by the affirmative vote of no less than one half (1/2) of the members of the
Board of Directors requesting the Executive to resign from his position.
(B) Notwithstanding anything in this Agreement to the contrary, the
Executive shall have the right, prior to the receipt by him of any amounts due
thereunder, to waive receipt thereof or, subsequent to the receipt by him of any
amounts due thereunder, or subsequent to the receipt by him of any amounts due
hereunder, to treat some or all of such amounts as a loan from the Company which
the Executive shall repay to the Company, within ninety (90) days from the date
of receipt, with interest at the rate provided in Section 7872 of the Code.
Notice of any such waiver or treatment of amounts received as a loan shall be
given by the Executive to the Company in writing and shall be binding upon the
Company.
3
<PAGE>
(d) Confidentiality and Non-Competition. In further consideration of the
obligation of the Company expressed in this Agreement, you agree to execute or
re-execute, as the case may be, the Company's standard form of Confidentiality
and Non-Competition Agreement for executives, attached hereto as Exhibit A.
3. Rights of the Executive Following Change in Control, Termination Without
Cause, or the Resignation of the Executive.
(a) Right to Benefits. If any of the events described in Paragraph 2(a), 2(b)
or 2(c) herein shall have occurred, you shall be entitled to the benefits
provided in Paragraph 4 herein upon the subsequent termination of your Position
with the Company during the term of this Agreement unless such termination is
(i) because of your death, Disability or Retirement, (ii) by the Company for
Cause, or (iii) by you more than six months after such Change in Control, other
than for Good Reason and not as a Resignation of the Executive, as set forth in
Paragraph 2(c).
(b) Disability; Retirement. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months, and
within thirty (30) days after written Notice of Termination (hereinafter
defined) is given, you shall not have returned to the full-time performance of
your duties, your Position may be terminated, by the Company or by you, for
"Disability"; if your employment is properly so terminated, then this Agreement
shall terminate concurrently. Termination by the Company or you of your Position
based on "Retirement" shall mean termination in accordance with the Company's
retirement policy generally applicable to its salaried employees or in
accordance with any retirement arrangement established with your consent with
respect to yourself.
(c) Cause. Termination by the Company of your Position for "Cause" shall mean
termination upon (i) the willful and continued failure by you to substantially
perform your material duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
failure after the issuance by you for Good Reason of a Notice of Termination (as
the terms "Good Reason" and "Notice of Termination" are defined in paragraphs
3(d) and 3(e), respectively) after a written demand for substantial performance
is delivered to you by the Board, which demand specifically identifies the
material duties that the Board believes that you have not substantially
performed; or (ii) the willful engaging by you in conduct that is demonstrably
and materially injurious to the Company, monetarily or otherwise; or (iii) the
conviction of the Executive of a felony, including the plea of nolo contendere,
or (iv) the commission of any act by the Executive against the Company that may
be construed as the crime of embezzlement, larceny, and/or grand larceny. For
purposes of this Subparagraph 3(c), no act, or failure to act, on your part
shall be deemed "willful" unless done, or omitted to be done, by you not in good
faith and without reasonable belief that your action or omission was in the best
interest of the Company. Any other provision in this paragraph to the contrary
notwithstanding, you shall not be deemed to have been terminated for Cause
unless and until the Board duly adopts a resolution by the affirmative vote of
no less than three-
4
<PAGE>
quarters (3/4) of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of conduct
described in Paragraphs 3(c)(i) and 3(c)(ii) specifying the particulars thereof
in detail and a certified copy of such resolution is delivered to you.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence of any of the following
circumstances unless, in the case of clauses (i), (v), (vi) or (vii), such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination, as defined in paragraphs 3(e) and 3(f), respectively,
given in respect thereof:
(i) the assignment to you of any duties inconsistent with
your status as Secretary and Chief Financial Officer of the Company
or a substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to a Change
in Control of the Company;
(ii) a reduction by the Company in the fees paid to William
Fellerman C.P.A., P.C. as in effect on the date hereof or as the same
may be increased from time to time, except for across-the-board
salary reductions similarly affecting all senior executives of the
Company and all senior executives of any person in control of the
Company;
(iii) the relocation of the Company's principal executive
offices to a location which is outside a 50-mile radius of
Hicksville, New York or the Company requiring you to be based
anywhere other than the Company's principal executive offices, in
addition to any of the Company's offices, except for required travel
on the Company's business to an extent substantially consistent with
your present business travel obligations, or the adverse and
substantial alteration of the office space or secretarial or support
services provided to you for the performance of your duties;
(iv) the failure by the Company, without your consent, to
pay to William Fellerman C.P.A., P.C. any portion of the fees
currently being paid, except pursuant to an across-the-board
compensation and fee deferral similarly affecting all senior
executives of the Company and all senior executives of any person in
control of the Company, or the failure by the Company to pay William
Fellerman C.P.A., P.C. any portion of an installment of deferred fees
under any deferred compensation and fee program of the Company,
within seven (7) days of the date such fee is due;
5
<PAGE>
(v) the failure by the Company to continue in effect any
compensation or fee plan in which you participate that is material to
the total compensation and fees, including but not limited to the
Company's Employee Stock Purchase Plan, 401(k) salary reduction plan
or any incentive compensation plan, or any substitute plans adopted
prior to a Change in Control of the Company, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the
Company to continue your participation therein (or in such substitute
or alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of your
participation relative to other participants, than your participation
as it existed at the time of a Change in Control of the Company;
(vi) unless such action is pursuant to an across-the-board
reduction in benefits similarly affecting all senior executives of
the Company and all senior executives of any person in control of the
Company, the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of
the Company's pension, life insurance, automobile insurance, medical,
health and accident, or disability plans, if any, in which you were
participating at the time of a Change in Control of the Company, or
the taking of any action by the Company that would directly or
indirectly materially reduce any of such benefits or deprive you of
any material fringe benefit enjoyed by you at the time of a Change in
Control of the Company, or the failure by the Company to provide you
with the number of paid vacation days to which you are entitled on
the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of a Change in
Control of the Company;
(vii) the failure of the Company to obtain a satisfaction
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Paragraph 5 hereof; or
(viii) any purported termination of your Position that is
not affected pursuant to a Notice of Termination satisfying the
requirements of Paragraph 3(e) below (and, if applicable, the
requirement of Paragraph 3(c) above); for purposes of this Agreement,
no such purported termination shall be effective.
Your right to terminate your Position pursuant to this Paragraph shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of right with respect
to, any circumstances constituting Good Reason hereunder.
5
<PAGE>
(e) Notice of Termination. Any purported termination of your Position by
the Company or by you shall be communicated by written Notice of Termination to
the other party hereto in accordance with Paragraph 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(f) Date of Termination, Etc. "Date of Termination" shall mean (i) if your
Position is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided, that you shall not returned to the full-time
performance of your duties during such thirty (30) day period), and (ii) if your
Position is terminated pursuant to Paragraph 3(c) or 3(d) above or for any other
reason (other than Disability), the date specified in Notice of Termination
(which, in the case of a termination pursuant to Paragraph 3(d) above shall not
be less than fifteen (15) nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided, that if within fifteen (15)
days after any Notice of Termination is given or prior to the Date of
Termination (as determined without regard to this proviso) the party receiving
such Notice of Termination notifies the other party that a dispute exists
concerning such termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding arbitration award, or by a final judgment, order or decree
of a court of competent jurisdiction (which is not appealable or the time for
appeal therefrom has expired and no appeal has been perfected); provided
further, that the Date of Termination shall be extended by notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence. During the
pendency of any such dispute, the Company will continue to pay William Fellerman
C.P.A., P.C. its full fee in effect when the notice giving rise to the dispute
was given and continue until the dispute is finally resolved in accordance with
this paragraph. Amounts paid under this paragraph are prior to all other amounts
due under this Agreement and shall not reduce any other amounts due under this
Agreement, which other amounts shall be in addition to, and shall not be offset
by, amounts due under this paragraph. Anything to the contrary herein
notwithstanding, twenty-four hours after Notice of Termination is received by
the Company, the Company may relieve you of authority to act on behalf of, or
legally bind, the Company, provided, that any such action by the Company shall
be without prejudice to your right to the compensation and benefits provided
under this Agreement and your right to termination hereunder under such
circumstances and with the compensation and benefits following such termination
as provided in this Agreement.
4. Payment of Fees Upon Termination or Resignation. Following a Change
in Control of the Company, a Termination Without Cause, or the Resignation of
the Executive, as all terms are defined herein, and upon such termination or the
resignation of your Position, you shall be entitled to the following benefits:
7
<PAGE>
(a) [Intentionally left blank]
(b) Cause, Etc. If your employment shall be (i) terminated by the
Company for Cause, or (ii) by you more than six months after a Change in
Control of the Company other than for Good Reason and not as a Resignation
of the Executive (as defined in Paragraph 2(c)), or (iii) by the Company or
you for Disability, death or Retirement, then the Company shall pay William
Fellerman C.P.A., P.C. its customary fees through the Date of Termination
at the rate in effect at the date that Notice of Termination is given, plus
all other amounts to which you are entitled under any plan of the Company
in effect on such date at the time such payments are due, and the Company
shall have no further obligations to you under this Agreement.
(c) Severance Benefits. If your Position shall be (A) terminated by
the Company or you within six (6) months after a Change in Control, or (B)
by you more than six (6) months after a Change in Control of the Company
for Good Reason, or (C) by the Company for Termination Without Cause, or
(D) a Resignation of the Executive shall have occurred, then, subject to
the limitations set forth in Subparagraph 4(e), below, you shall be
entitled to the benefits provided below:
(i) the Company shall pay to William Fellerman C.P.A., P.C. the
fees customarily paid through the Date of Termination at the rate
equal to the greater of the rate in effect on the date prior to the
Change in Control and the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled
under any compensation plan of the Company in effect on such date, at
the time such payments are due, except as otherwise provided below;
(ii) in lieu of any further payments to William Fellerman C.P.A.,
P.C. for periods subsequent to the Date of Termination, William
Fellerman C.P.A., P.C., the Company shall pay to William Fellerman
C.P.A., P.C. a severance payment equal to TWO HUNDRED AND SEVENTY-FIVE
THOUSAND DOLLARS ($275,000) payable in twenty-four (24) equal monthly
installments.
8
<PAGE>
(iii) The Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination (including
all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement or in connection with any
tax audit or proceeding to the extent attributable to the application
of Section 499 of the Code to any payment or benefit provided
hereunder).
(d) Date Benefits Due. The payments provided for in Paragraph 4(c) above
shall commence no later than the first day of the month following the Date of
Termination.
(e) No Mitigation. You shall not be required to mitigate the amount of any
payment provided for in this Paragraph 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Paragraph 4 be reduced by any compensation earned by you as the result of your
employment by another employer, by any retirement benefits, by offset against
any amount claimed to be owing by you to the Company, or otherwise, except as
specifically provided in this Paragraph 4.
(f) The benefits provided in this Paragraph 4 shall replace benefits
provided to you other than in this Agreement only in the circumstances set forth
herein, and under all other circumstances, your benefits will be determined in
accordance with other agreements between the Company and you and other plans,
arrangements and programs of the Company in which you participate.
5. Successors; Binding Agreement.
(a) Assumption by Successor. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle you to compensation from the Company in the
same amount and on the same terms as you would be entitled hereunder if you
terminate your employment for Good Reason following a Change in Control of the
Company, except that for purposes of implementing this Paragraph 5, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
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hereinbefore defined and any successor to its business and/or assets as
aforesaid that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(b) Successors. Neither this Agreement nor any right or interest hereunder
shall be assignable by you (except by will or intestate succession) or any
successor to your interest, nor shall it be subject to attachment, execution,
pledge or hypothecation, but this Agreement shall inure to the benefit of and be
enforceable by your personal or legal representative, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
6. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by United
States registered or certified mail, return receipt requested, postage prepaid,
or by nationally recognized overnight delivery service providing for a signed
return receipt, addressed to you at your home address set forth in the Company's
records and to the Company at the address set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to counsel to the Company, at Muenz & Meritz,
P.C., Attention: Lawrence A. Muenz, Esq., 3 Hughes Place, Dix Hills, NY. 11746,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party that are not set forth in this Agreement. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of New York. All references to sections of
the Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
The obligations of the Company under Section 4 shall survive the expiration of
the term of this Agreement.
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8. Severance and Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Garden City, New York, in accordance with the rules of the American Arbitration
Association then in effect. Any judgment rendered by the arbitrator as above
provided shall be final and binding on the parties hereto for all purposes and
may be entered in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreements on this subject.
Sincerely,
STAR MULTI CARE SERVICES, INC.
By: /s/Stephen Sternbach
----------------------------
Name: Stephen Sternbach
Title:Chairman of the Board, President
and Chief Executive Officer
Agreed to this 5th day of September, 1997
By: /s/William Fellerman
-----------------------
William Fellerman
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