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As filed with the Securities and Exchange Commission on December 14, 1999
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Registration No. 333-79847
Securities and Exchange Commission
Washington, D.C. 20549
Form S-3
Amendment No. 2
Registration Statement Under
The Securities Act of 1933
Commission File Number 1-10751
STAR MULTI CARE SERVICES, INC.
(Exact Name of Registrant as specified in its charter)
New York 11-1975534
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
33 Walt Whitman Road, Suite 302, Huntington Station, NY 11746
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(Address of principal executive offices)
Registrant's telephone number, including area code: (516) 423-6689
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Stephen Sternbach
Star Multi Care Services, Inc.
33 Walt Whitman Road
Suite 302
Huntington Station, NY 11746
With a Copy to:
Lawrence A. Muenz, Esquire
Muenz & Meritz, P.C.
Three Hughes Place
Dix Hills, New York 11746
Approximate date of proposed sale to As soon as practicable after this
the public: Registration Statement becomes
effective.
If the only securities begin registered on this Form are being offered pursuant
to dividend or interest reinvestment, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box
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and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to rule 434,
please check the following box. [ ]
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
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Calculation of Registration Fee
Title of each Proposed Proposed
class of maximum maximum Amount of
securities to Amount to be offering price aggregate registration
be registered registered per unit offering price fee
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<S> <C> <C> <C> <C>
Common Stock 398,268 $2.0625 (1) $821,428 $228
Warrant 16,666 $5.175 (2) $ 86,250 $ 24
Dividend Shares 5,486 $2.0625 (2) $ 11,316 $ 3
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Total Registration Fee $255
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) of the regulations promulgated under
Securities Act of 1933 and based upon the closing price of Common Stock
as reported by the Nasdaq Stock Market on December 13, 1999.
(2) Price calculated in accordance with Rule 457(g) of the regulations
promulgated under Securities Act of 1933
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The information in this prospectus is incomplete and may be changed. The selling
stockholder may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale of these securities is not
permitted.
Subject to Completion, dated December 14, 1999
Prospectus
STAR MULTI CARE SERVICES, INC.
420,420 shares of Common Stock
This prospectus relates to up to 420,420 shares of common stock of Star
Multi Care Services, Inc. that may be offered for resale for the account of the
stockholder set forth in this prospectus under the heading "Selling Stockholder"
beginning on page 9.
Our common stock is traded on The Nasdaq SmallCap Market, under the
symbol SMCS. On December 10, 1999, the last reported sale price of our common
stock was $2.0625 (reflecting the reverse split). On December 13, 1999, the
Company effectuated a 1 for 3 reverse stock split, meaning each three issued and
outstanding shares were exchanged for one new common stock share.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is December 14, 1999.
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You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front page of this prospectus.
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Page
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<S> <C>
Business Summary ............................3
Risk Factors .................................3
Use of Proceeds ..............................9
Selling Stockholder ..........................9
Manner of Distribution ......................10
Legal Matters ...............................14
Experts .....................................14
Where You Can Find More Information .........14
</TABLE>
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The information in this Prospectus gives effect to a 1- for 3 reverse stock
split effected on December 13, 1999.
Business Summary
Star Multi Care Services, Inc. was established and has been in business
since 1938 and was purchased by present management in 1987 at which time the
primary focus of the organization was the provision of facility staffing and
private duty nursing services. After Star was acquired by present management,
Star successfully secured, in 1989, New York State Department of Health approval
as a licensed home care services agency in the five boroughs of New York City.
This expanded Star's scope of services into the home care market. In 1991, we
expanded the licensed operations to Nassau County, New York and in 1992 became
an approved provider of medicaid personal care services in Nassau County. In
addition, Star was accredited by the Joint Commission on Accreditation of Health
Care Organizations (JCAHO) in 1992.
We are in the business of providing professional and para-professional
home health care personnel services to elderly, ill and physically challenged
individuals in their homes, and to a lesser extent Star provides health care
facility staffing services for hospitals and nursing homes. We are licensed and
/ or certified in five states to provide a full array of health care personnel
services, which include registered nurses, licensed practical nurses, home
health aide, nurse aide, and personal care aide services. In some states Star is
also licensed and / or certified to provide physical therapy, speech therapy,
occupational therapy, respiratory therapy, and medical social work services.
Star maintains licensed offices within the five states it operates in,
which include New York, New Jersey, Pennsylvania, Ohio, and Florida.
Additionally, Star also maintains certified home health agency operations in
Pennsylvania, and Ohio. The Pennsylvania and Ohio certified operations are
conducted from common office facilities with the licensed office in that region.
Star maintains full functionality for service provision across Star 7 days a
week 24 hours a day. Combined through these offices Star employs approximately
5,000 full-time and part-time employees and services over 10,000 clients
annually. Our principal executive officers are located at 33 Walt Whitman Road,
Suite 302, Huntington Station, New York 11746. The main telephone number is:
(516) 423-6689.
RISK FACTORS
You should carefully consider the risks described below before you
decide to invest in our company. The risks described below are not the only ones
facing us. Additional risks not presently known to us or that we currently
believe are immaterial may also impair our business operations. Our business,
financial condition or results of operation could be materially adversely
affected by any of these risks. The trading price of our common stock could
decline because of any one of these risks, and you may lose all or part of your
investment.
Financing Arrangements
Due to the nature of our business, many of the third party payors,
insurance companies, Federal and/or state organization) do not pay our
receivables for an extended period of time. Therefore, we must finance the
operating expenses of company while awaiting payment. The present lending
arrangement with Daiwa Securities secures the loan with all of the assets of
Star and is based upon a percentage of eligible receivables. Should the value of
our eligible receivables decline, this will reduce the amount that we can borrow
from our lending, creating a potential cash flow shortage.
It is customary for a lending to impose financial covenants upon the
borrower. There can be no guarantee that Star will be in compliance with the
covenants under the loan agreement in the future, and should Star not be able to
comply with these covenants, there is no assurance that Daiwa will grant a
waiver to such covenants in the future.
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The Company intends to meet its long-term liquidity needs through
available cash, cash flow and the new Revolving Loan. To the extent that such
sources are inadequate, Star will be required to seek additional financing. In
such event, there can be no assurance that additional financing will be
available to Star on satisfactory terms.
Organizational Restructuring Changes
Star has been confronted with a variety of regulatory and reimbursement
changes as well as internal and governmental audit findings which necessitated
that we implement an internal operating restructuring both in the areas of
information technology and personnel over the last 12 months. There can be no
guarantee that the restructuring will be successful and that it will be
implemented without losing key personnel and sales revenue.
All field offices were placed on the same operating software for client
intake, scheduling, personnel and clinical database management, billing and
compliance. We chose an industry tested and respected product for front office
operations that is compatible with future regulatory and accreditation
requirements. This front office software product will transmit data to our
Resource Center into one new accounting system, which collects all financial,
accounting and general ledger data. If this computer system does not work as
expected, this could have a material adverse impact upon Star's billing, case
management and revenue.
Maintaining quality managers and branch administrators will play a
significant part in the future success of Star. Our professional nurses and
other health care personnel are also key to the continued provision of quality
care to our patients. The possible inability to attract and retain qualified
franchisees, skilled management and sufficient numbers of credentialed health
care professionals and para-professionals could adversely affect our operations
and quality of service
Another component of Star's restructuring plan, included the accounting,
operational and clinical management team which has been modified or replaced to
include known industry professionals with a variety of health care skills and
expertise. This included the Resource Center which is responsible for payroll,
billing and collection activities for the organization which was restructured in
its entirety by reducing staff by more than 40% as the result of automation and
job description efficiencies, while simultaneously initiating new operational
policies and procedures designed to insure accuracy and integrity in work
processes. Failure to fully and/or properly integrate these personnel changes
could have a material adverse impact upon Star's billing, case management and
revenue.
Customer Base
The Company has four types of customers, which form the base of its
referral source. The customer base includes state funded public assistance
programs (Medicaid), other third party payers (subcontracts), insurance
companies and private pay customers. Reductions or loss of customers that would
result in lost revenue could occur through:
o The loss of contract and/or subcontract relationships.
o Loss of approval or lack of renewal by state and/or county
administrative agencies.
o Loss of or reduction in referral sources for new cases.
o New regulatory compliance parameters that we cannot meet.
We are reimbursed for our services primarily by the Medicaid programs,
insurance companies, managed care companies and other third-party payors, the
implementation of alternative payment methodologies by any of these payors could
have an adverse impact on revenues and profit margins. Generally, managed care
companies have sought to contain costs by reducing payments to providers.
Continued cost reduction efforts by managed care companies could adversely
affect our results of operations and future profitability.
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Marketing and Sales
We maintain marketing activities in each of the five states we operate
in and concentrate our efforts through the use of regional marketing teams. The
Company believes in the use of office specific operational plans for the
management and marketing of regional sales. The individual office operational
plan format provides for the comprehensive approach to office growth, marketing,
and recruitment, as well as the clinical and fiscal operation of each office.
The plan objective is to maximize internal growth and assure clinical/fiscal
integrity. The plan serves as the framework for development of a continual
process for quality and performance improvement in all areas of responsibility
including marketing. The marketing component of the plan identifies all
potential referral sources and establishes a systematic referral source contact
strategy across the marketing and office staff. The plan is continually
reassessed and refined to ensure success, and serves as an evaluation tool to
identify strengths as well as areas needing organizational support. The failure
of us to attract and retain competent personnel to implement our marketing plan,
could have an adverse affect upon our sales revenue, profitability and growth
opportunity.
Star maintains regional marketing staff that focus on the sales and
marketing component goals of these plans. We market to the key representatives
of the contracting institutions, hospital discharge planning departments,
insurance companies, community-based facilities, and physicians to secure
contractual and referral relationships. Representatives visit targeted
facilities and programs maintaining Star presence with existing referral sources
and acting as the first line of communication with new referral sources. Beyond
the traditional personnel services offered by the industry Star offers facility
staffing, Shared Aide Team Model services and a Pediatric specialty program.
From an operational perspective we market quality benchmarks as demonstrated by
its Joint Commission accreditation (JCAHO) and a full functioning Corporate
Compliance Program. The marketing representatives are supported by print and
radio advertising, direct mailing, and attendance at trade shows and regional
health care functions. The failure of us to attract and retain competent
personnel to implement our marketing plan, could have an adverse affect upon our
sales revenue, profitability and growth opportunity.
Competition
The home health care and facility staffing industry has a variety of
local, regional and national organizations, which comprise Star's competition
base. We have numerous competitors in each of the markets it serves, however
regulatory and reimbursement changes are causing consolidation within the
industry at this time. Smaller local and regional operations are finding it
increasingly difficult to remain in the market. Larger national companies with
substantially greater financial resources are continued to be viewed by Star as
its major competitors.
Competition is based both on the quality of care provided to clients and
the price structure offered by the organization. We believe that we have
developed and maintain high quality standards through our operational, clinical,
and compliance policies, procedures and activities. Cost effectiveness in
operation, achieved through improved automation platforms, new service delivery
models, and economies of scale has enabled us to be aggressive in our pricing
structures.
Government Regulations, Licensing and Audits
Our business is subject to substantial and frequently changing
regulations by federal, state, and local authorities, which require significant
compliance responsibilities by Star. Each state in which we operate maintains
its own form of licensing standards and may maintain Certificate of Need ("CON")
or other Medicare requirements specific to the state which are above the minimum
standard requirements established by the federal government for participation in
the Medicaid and Medicare programs. The imposition of more restrictive
regulatory requirements or the denial or revocation of any license,
certification, Medicaid or Medicare approval, or permit necessary for operation
in a particular market could have a material adverse effect on our operations.
In addition, any future expansion into new markets would require us to comply
with
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all licensing, and/or CON requirements and other regulations pertinent to that
jurisdiction.
The Company maintains all applicable licenses for provision of home care
and facility staffing services in the states of New York, New Jersey,
Pennsylvania, Ohio, and Florida. In addition, we maintain Medicare Certification
in certain offices and counties in the states of Ohio, Pennsylvania, and
Florida, with Florida maintaining CON requirements. As a provider of services
under the Medicare as well as some state Medicaid programs we are required by
the U.S. Health Care Financing Administration and/or state health departments to
prepare cost reports reflecting annual expenditures and development of capital
expenditure plans. The regulatory agencies of the states in which Star operates
require compliance with certain regulations and standards with respect to health
care personnel records, client records, nursing and administrative supervision,
incident and complaint monitoring and follow-up, and the establishment of
professional advisory boards. Additionally, both federal and state Anti-kickback
regulations exist which must be complied with.
Due to our participation in the Medicare and Medicaid programs we are
subject to survey and audit of operational, clinical and financial records with
respect to proper applications of general regulations governing operation, cost
reporting criteria, and other payment formulas. These audits can result in
retroactive adjustments for payments received from these programs resulting in
either amounts due to governmental agencies from Star or amounts due to Star as
adjustments from the governmental agency. Any assessments made against Star for
retroactive adjustment for previous payments received, could require us to
establish a reserve for this potential liability, adversely affecting
profitability in the period in which the reserve is made.
Effective in January 1998, Star was required to comply with a new
payment formula or reimbursement under the Medicare program. This payment
formula, termed the Interim Payment System ("IPS"), for Medicare was developed
by the U.S. Health Care Financing Administration (HCFA) to serve as a middle
step, as the government moved from a cost based reimbursement system to a
episodic disease based Prospective Payment System (PPS). In addition, to the
imposition of IPS, which set per patient limits on Medicare home care
reimbursements, HCFA also revised regional cost limits which combined with IPS
had a material effect in reducing revenue and reimbursement for Star's Florida
based certified home health agency from approximately $8.4 million in revenue
during the fiscal year ended May 31, 1998, to approximately $5.4 million in
corresponding reimbursement and revenue for fiscal year ended May 31, 1999. The
Company has restructured its Florida Medicare operation to function under both
the IPS and the revised cost limits. However, congressional debate over the
appropriateness and fairness of retroactive establishment and imposition of
regulations associated with IPS and the changes in the cost limits could bring
further modification and or adjustments that may have a material adverse effect
on Star's operations.
In February 1998, Star Multi Care Services, Inc. (the "Company") was
advised by its Regulatory Counsel that jurisdiction with respect to a previously
disclosed audit (the "1997 Audit") of Star Multi Care Services of Florida, Inc.
d/b/a American Health Care Services, Star's Medicare agency, by the Office of
Audit Services of the Office of Inspector General of the United States
Department of Health and Human Services, which had previously been forwarded to
the Civil Division of the United States Attorney for the Southern District of
Florida (the "US Attorney") by the Medicare intermediary assigned to administer
Medicare payments in Florida, has been relinquished by the US Attorney to the
Medicare intermediary for recovery of an administrative overpayment.
The Company was informed that the Medicare intermediary had assessed an
administrative overpayment against Star in the amount of $1,248,747 based on the
1997 Audit. The Company has appealed the administrative overpayment
determination by pursuing administrative and judicial remedies. Such appeal
could result in elimination or reduction of the overpayment amount. The
Company's Regulatory Counsel has also advised that Star has claims against
third-parties (e.g., subcontractors and licensed home health agencies) for a
portion of any liability of Star in connection with such administrative
overpayment. The Company had established a reserve, in the period ended February
28, 1998, for $1.25 million, in
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connection with the administrative overpayment. In preparation of its
administrative appeal, Star's Regulatory Counsel has retained an expert to
review the government's statistical methods used in assessing the overpayment
against Star. The expert has advised Star's Regulatory Counsel that the
statistical sampling procedures used by the government indicate significant
errors and based upon these findings and in consultation with Regulatory
Counsel, the management of Star has reversed the reserve of $1.25 million as of
May 31, 1999.
On July 16, 1998, Star was advised that an audit of Star Multi Care
Services of Florida, Inc. (d/b/a American Health Care Services) ("American"),
Star's Medicare agency, was commenced by the Office of Audit Services, Office of
Inspector General of the United States Department of Health and Human Services.
This audit was conducted in conjunction with the United States Attorney's Office
for the Southern District of Florida and involved a review of claims for home
health services submitted by American Health Care Services during 1995 and 1996.
A similar audit commenced during May of 1997 for its submitted claims during
1993. Star has been advised by Broad and Cassel ("Regulatory Counsel") that they
have been in contact with the Office of Inspector General and the Assistant
United States Attorney assigned to this matter, and there is no way to determine
at this time the extent of American's liability. Regulatory Counsel has advised
American that it may litigate or appeal any determination of liability and
pursue claims against third parties (e.g., subcontractors and licensed home
health agencies) for a portion of any liability of American. Management
anticipates that this matter should be satisfactorily resolved. This is grounded
upon the advice of Regulatory Counsel to Star as to the (1) the resolution of
similar types of audits or claims based upon their experience in the health care
industry, handling appeals of these determinations and dealing with similar
matters before the Office of Inspector General and the Department of Justice,
even though there has not been a final determination of liability, and there can
be no assurance as to the ultimate liability; and (2) the fact that American
will have the right, whether or not this audit or claim is resolved in whole or
in part in American's favor, to appeal or litigate any liability, determination
and pursue a claim against third-party independent contractors and other parties
that may have rendered services to American, even though there is no assurance
that any such claims would ultimately be collectible.
In August 1995, the Office of Deputy Attorney General for Medicaid Fraud
Control initiated a personnel, clinical and billing investigation for the years
1992 through 1995. On December 3, 1997, Star was advised by its counsel that the
investigation, which was previously reported as pending, may be expanded through
1997 and that Star was a target of a criminal investigation. In response to
this, Star conducted its own internal investigation and revised its systems and
has voluntarily disclosed the results of its internal investigation to the
Office of Deputy Attorney General for Medicaid Fraud Control. The Company had
established a reserve of $1,000,000 in connection with this matter. The amount
accrued had been based upon information learned to date.
The Company discovered errors in certain cost reports that had been
previously submitted by Star to the New York State Department of Social Services
during the years 1993-1995, the basis of which served to determine the Medicaid
reimbursement rates in respect of Star for the years 1994-1996. Amended cost
reports containing the correct data were submitted to the New York State
Department of Health (the "DOH") in February 1998, which were expected to result
in the DOH's retroactive recalculation of Star's Medicaid reimbursement rate and
imposition of a substantial overpayment assessment against Star. The Company
established a reserve, in the period ended February 28, 1998, for $660,000, in
connection with this overpayment assessment.
On May 10, 1999 Star entered into a Settlement Agreement with the State
of New York whereby the State of New York will discharge and forever release
Star, including its officers, directors and employees, for any further liability
regarding Star's submission of claims for or receipt of Medicaid payments for
home health care services for the audited period of 1992 through 1996, as
discussed above. The Company had previously accrued $1.66 million for this
claim, but subsequently settled this claim for $532,823 less than the initial
accrual. The Attorney General stated in his press release that Star has fully
cooperated with the State's investigation and immediately remedied the problems
the Attorney General's office pointed out by
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improving its personnel training procedures and submitting revised cost reports.
The terms of this Settlement Agreement provided for: (a) No admission by
Star of any criminal or civil liability, guilt, wrongdoing or unacceptable
practice, nor a determination of guilt of any violation of any Federal, State or
Local statute, rule or regulation. (b) The Company agreed to pay to New York
State the total sum of $1,167,177, with an initial payment of $200,000. The
balance shall be payable over four years at 9% interest.
As part of Star's restructuring program, Star relocated the offices of
its Medicare agency and Star's Florida operation center to smaller and less
costly facilities in Miramar, Florida from Miami Lakes, Florida. Unfortunately,
Star was unable to find sub-tenants for the vacated office space in Miami Lakes.
Therefore, the landlord of the Miami Lakes offices obtained a judgement against
Star's wholly owned subsidiary, Star Multi Care Services of Florida, Inc. ("Star
of Florida") for the sum of $1,045,342. Additionally, the landlord instituted a
law suit against Star Multi Care Services, Inc. seeking to enforce a guaranty
that the landlord alleged that Star had previously provided to the landlord at
the initial term of the Miami Lakes lease. The Company and Star of Florida have
entered into a settlement agreement with the landlord for the sum of $300,000
which was paid in full as of May 31, 1999.
Except as otherwise provided in this Annual Report on Form 10-K, there are no
legal proceedings to which Star is currently a party or to which any of its
property is subject that could possibly have a material adverse effect upon
Star, and Star knows of no legal proceeding pending or threatened against any
director or officer of Star in his or her capacity as such.
Liability Insurance
The Company's employees and independent contractors routinely make
decisions which can have significant medical consequences to the patients in
their care. As a result, Star is exposed to substantial liability in the event
of negligence or wrongful acts of its personnel. The Company maintains medical
professional liability insurance providing for coverage in a maximum amount of
$1,000,000 per claim, subject to a limitation of $10,000,000 for all claims in
any single year. In addition, Star requires that each independent contractor it
refers to institutions for employment supply a certificate of insurance
evidencing that such person maintains medical professional liability insurance
providing for coverage of no less than $1,000,000 per claim. There can be no
assurance, however, that we will be able to maintain its existing insurance at
an acceptable cost or obtain additional insurance in the future, as required.
There can be no assurance that Star's insurance will be sufficient to cover
liabilities resulting from claims that may be brought in the future. A partially
or completely uninsured claim, if successfully asserted and of significant
magnitude, could have a material adverse effect on Star and its financial
condition.
Expansion Risks
There can be no assurance that Star will be able to expand its
operations successfully. Expansion of Star's operations will be dependent on:
o obtaining new contracts and referrals
o servicing additional patients
o retaining skilled management and other personnel
o successfully managing growth and the availability of adequate financing.
The Company may also seek to expand its operations through acquisitions.
There can be no assurance that we will effect any acquisition or that we are
able to effect any acquisitions that it will be able to successfully integrate
into its operations any newly acquired business.
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No Dividends.
The Company has paid no cash dividends on its Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. Under the terms
of the Revolving Loan, we cannot declare any dividend without the consent of its
lender.
Volatility: Price of Common Stock
The market price of Star's Common Stock has been, and may in the future
be, highly volatile. The following factors may have a significant impact on the
market price of Star's Common Stock:
o Star's operating results
o prospects for Star's services or developments at our competitors
o revisions in the regulatory environment in which we operate
o changes in the home health care.
Further, in recent years, the securities markets have experienced a high
level of price and volume volatility and the market price of securities for many
companies, particularly emerging growth companies, have experienced wide
fluctuations which have not been necessarily related to the operating
performance of such companies.
Registration Rights and Shares Eligible for Future Sale
No prediction can be made as to the effect that sales of the previously
restricted shares or shares currently exercisable pursuant to outstanding
warrants or options may have on the prevailing market prices of the our Common
Stock. Sales of substantial amounts of Common Stock in the public markets could
adversely affect prevailing market prices and could impair Star's ability to
raise additional capital through its sale of equity securities.
On April 30, 1999, Star consummated the sale of $575,000 of Series A 8%
Convertible Preferred Stock (the "Preferred Stock") with included the grant of a
warrant to purchase 50,000 shares of Star's Common Stock at $1.725 per share.
The Preferred Stock may be converted into Common Stock at a price equal to a
predetermined percentage discount from the market price.
Year 2000 Compliance
Many currently installed computer systems and software products are
coded to accept only two digit entries to represent years. For example, the year
"1999" would be represented by "99." These systems and products will need to be
able to accept four digit entries to distinguish years beginning with 2000 from
prior years. As a result, systems and products that do not accept four digit
year entries will need to be upgraded or replaced to comply with such "Year
2000" requirements. The Company believes that its internal systems are Year 2000
compliant or will be upgraded or replaced in connection with previously planned
changes to information systems prior to the need to comply with Year 2000
requirements without material cost or expense. The anticipated costs of any Year
2000 modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to the availability or cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes and similar certainties. In addition, there can be no assurance
that Year 2000 compliance problems will not be revealed in the future which
could have a material adverse affect on Star's business, financial condition and
results of operations. Many of Star's customers and suppliers may be affected by
the Year 2000 issues that may require them to expend significant resources to
modify or replace their existing systems. This may result in those customers
having reduced funds to purchase
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Star's products or in those suppliers experiencing difficulties in producing or
shipping key components to Star on a timely basis or at all.
Forward Looking Statements
Certain statements in this registration statement constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are typically identified by
their inclusion of phrases such as "Star anticipates", "Star believes" and other
phrases of similar meaning. These forward looking statements are based on Star's
current expectations. Such forward-looking statements involve known and unknown
risks, uncertainties, and other factors that may cause the actual results,
performance or achievements of Star to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. The potential risks and uncertainties which could cause
actual results to differ materially from Star's expectations include the impact
of further changes in the Medicare reimbursement system, including any changes
to the current IPS and/or the ultimate implementation of a prospective payment
system; government regulation; health care reform; pricing pressures from
third-party payors, including managed care organizations; retroactive Medicare
audit adjustments; and changes in laws and interpretations of laws or
regulations relating to the health care industry. . This discussion should be
read in conjunction with the attached consolidated financial statements and
notes thereto, and with Star's audited financial statements and notes thereto
for the fiscal year ended May 31, 1998.
GOVERNMENT REGULATION. As a home health care provider, Star is subject to
extensive and changing state and federal regulations relating to the licensing
and certification of its offices and the sale and delivery of its products and
services. The federal government and Medicare fiscal intermediaries have become
more vigilant in their review of Medicare and Medicaid reimbursements to home
health care providers generally, and are becoming more restrictive in their
interpretation of those costs for which reimbursement will be allowed to such
providers. Changes in the law and regulations as well as new interpretations
enforced by the relevant regulatory agencies could have an adverse effect on
Star's operations and the cost of doing business.
THIRD-PARTY REIMBURSEMENT AND MANAGED CARE. Because Star is reimbursed for its
services primarily by the Medicare/Medicaid programs, insurance companies,
managed care companies and other third-party payors, the implementation of
alternative payment methodologies for any of these payors could have an impact
on revenues and profit margins. Generally, managed care companies have sought to
contain costs by reducing payments to providers. Continued cost reduction
efforts by managed care companies could adversely affect Star's results of
operations.
HEALTH CARE REFORM. In August 1997, Congress enacted and President Clinton
signed into law the Balanced Budget Act of 1997 ("BBA"), resulting in
significant changes to cost based reimbursement for Medicare home health care
providers. Although the new legislation enacted by Congress retains a cost based
reimbursement system, the cost limits have been reduced for fiscal years which
began on or after October 1, 1997 and a new per-beneficiary limit is effective
for fiscal years which began after such date. The BBA provides two payment
systems -- an IPS which is effective for Star beginning January 1, 1998 until
the adoption of the successor payment system which is a new prospective payment
system tentatively scheduled to begin in late 1999. The effect of the changes
under IPS is to reduce the limits for the amount of costs that are reimbursable
to home health care providers under the Medicare program. The Company
anticipates a possible decrease in aggregate net revenues during the course of
the next fiscal year due principally to reductions in the limits for the amount
of costs that are reimbursable in connection with the provision of Medicare
services. The Company cannot quantify the full effect of IPS on Star's future
performance because certain components of health care reform legislation, such
as the per-beneficiary limit, require annual data which will not be known until
a final assessment by Medicare and/or its fiscal intermediary is completed for
each annual period.
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<PAGE>
As Congress and state reimbursement entities assess alternative health
care delivery systems and payment methodologies, Star cannot predict which
additional reforms may be adopted or what impact they may have on Star.
Additionally, uncertainties relating to the nature and outcomes of health care
reforms have also generated numerous realignments, combinations and
consolidations in the health care industry which may also have an adverse impact
on Star's business strategy and results of operations. The Company expects that
in addition to industry consolidation generally, there may be consolidations
within Star's locations, with the likely result that there will be fewer offices
by the end of the next fiscal year.
BUSINESS CONDITIONS. The Company must continue to establish and maintain close
working relationships with physicians and physician groups, managed care
organizations, hospitals, clinics, nursing homes, social service agencies and
other health care providers. There can be no assurance that Star will continue
to establish or maintain such relationships. The Company expects additional
competition will develop in future periods given the increasing market demand
for the type of services offered and the necessity to maximize service volume
due to anticipated operating margin decline.
ATTRACTION AND RETENTION OF EMPLOYEES. Maintaining quality managers and branch
administrators will play a significant part in the future success of Star. The
Company's professional nurses and other health care personnel are also key to
the continued provision of quality care to Star's patients . The possible
inability to attract and retain qualified skilled management and sufficient
numbers of credentialed health care professionals and para-professionals could
adversely affect Star's operations and quality of service.
USE OF PROCEEDS
If the Warrant is fully exercised, as such term is defined under the
"Description of Securities", Star would receive gross proceeds of $86,250. As
the present market price is below the exercise price, there can be no assurance
that any portion of the Warrant will be exercised. We would use any proceeds
received from the exercise of the Warrant for working capital. The above
application reflect management's current plans and may be changed to reflect
various factors.
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Shareholders.
SELLING SHAREHOLDERS
Series A 8% Convertible Preferred
On April 30, 1999, Star completed a private placement by the sale of
$575,000 Series A 8% Convertible Preferred Stock par value $1.00 per share
("Preferred Stock") to the Shaar Fund, Ltd. ("Shaar"), providing Star net
proceeds, after fees and expenses, of $500,000. After sixty days, the Preferred
Stock may be converted to Common Stock equal to the lessor of: (a) 125% of the
market price three trading days immediately preceding the closing date, or (b)
the market price of Star's Common Stock discounted from 10% to 30%, such
discount increasing with the passage of time The Preferred Stock pays an 8%
dividend payable quarterly that may be converted into Common Stock at the option
of Star. Shaar also received a Common Stock Purchase Warrant (the "Warrant") for
the right to purchase 50,000 Common Stock shares of Star at 115% of the closing
bid price on the trading day immediately preceding the closing date of this
sale. The Common Stock to be issued upon conversion of Preferred Stock, the
Common Stock to be issued upon exercise of Warrant, and Common Stock issued for
payment of Preferred Stock dividend shall be registered by Star under the
Securities Act of 1933. By using the closing price of Star's common stock on
December 10, 1999 of $2.0625, to calculate the number of common stock share that
may need to be issued should Shaar convert all of its Preferred
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<PAGE>
Stock, the Preferred Stock may be converted into 398,268 shares of Common Stock.
Warrant Shares
The Common Stock Purchase Warrant (the "Warrant") permits the holder to
purchase up to 50,000 shares of Star's Common Stock at 115% of the closing bid
price on the trading day immediately preceding the closing date of the private
placement. The exercise price for this Warrant is $1.725 per share.
Dividend Shares
The Preferred Stock pays an 8% dividend payable quarterly that may be
converted into Common Stock at the option of Star. To date, the Board of
Directors have declared two dividends upon the Preferred Stock as of June 30 and
September 30, 1999. In both cases, the Board of Directors have elected to pay
the dividend in common stock which equaled 6,236 and 10, 223 shares for the
quarter ended June 30 and September 30, 1999, respectively.
MANNER OF DISTRIBUTION
Shaar may sell the Shares through broker-dealers, agents, or directly to
one or more purchasers. The distribution of the Shares may be effected from time
to time in one or more transactions in the over-the-counter market or in
transactions otherwise than in the over-the-counter market including privately
negotiated transactions. Any of such transactions may be effected at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. Shaar may effect such transactions by
selling Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from Shaar
and/or commissions from purchasers of Shares for whom they may act as agent
(which discounts, concessions or commissions may or may not exceed those
customary in the type of transactions involved). Shaar and any broker-dealers or
agents that participate in the distribution of Shares may be deemed to be
underwriters, and any profit on the sale of Shares by them and any discounts,
concessions or commission received by any such broker-dealers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act.
In order to comply with certain states' securities laws, if applicable,
the Shares offered hereby will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, the Shares may not be
sold in certain states unless they have been registered or qualified for sale in
such state or an exemption from regulation or qualification is available and is
complied with. Pursuant to the terms of the subscription agreements, Star
intends to use its best efforts to register or qualify the Shares for resale or
to seek an exemption from registration or qualification in any state required in
order to facilitate as to a particular sale, the resale of the Shares by Shaar.
DESCRIPTION OF SECURITIES
The authorized capital stock of Star consists of 5,000,000 shares of
Common Stock $.001 par value per share. On December 10, 1999, there were issued
and outstanding 1,778,130 shares of Common Stock. Additionally, Star has
authorized 5,000,000 shares of preferred stock $1.00 par value per share. The
Company has authorized 600 shares of Series A 8% Preferred Stock. On December
13, 1999, there were issued and outstanding 575 shares of the Series A 8%
Preferred Stock. The holders of the Series A 8% Preferred Stock have no voting
power, except as otherwise provided by the New York Business Corporation Law
("NYBCL"), and in Article 7 and Article 8 of Article Fifth of Star's Certificate
of Incorporation.
Series A 8% Preferred Stock
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<PAGE>
On April 30, 1999, Star completed a private placement by the sale of
$575,000 Series A 8% Convertible Preferred Stock par value $1.00 per share
("Preferred Stock") to the Shaar Fund, Ltd., providing Star net proceeds, after
fees and expenses, of $500,000. After sixty days, the Preferred Stock may be
converted to Common Stock equal to the lessor of: (a) 125% of the market price
three trading days immediately preceding the closing date, or (b) the market
price of Star's Common Stock discounted from 10% to 30%, such discount
increasing with the passage of time, as set forth below on Schedule I. Under the
terms of the Registration Rights Agreement regarding the sale of the Preferred
Stock, Star has an obligation the file a registration statement with the
Securities and Exchange Commission within 30 days of the closing date of the
sale of the Preferred Stock. The registration statement must become effective
within 150 days. The method of conversion of the Preferred Stock to Common Stock
is set forth above under "Selling Shareholders".
Nasdaq Marketplace Rules require that a company obtain shareholder
approval prior to the sale of common stock, or stock convertible into common
stock that would represent twenty percent or more of the voting control of the
company. The sale of the Preferred Stock did not require shareholder approval,
as Article Fifth of Star's Certificate of Incorporation that sets forth the
designations, rights and preferences of the Preferred Stock specifically limits
the conversion of the Preferred Stock into common, should such conversion result
in the holders acquiring more than 19.99% of the voting control of Star.
Schedule I
Conversion Rates
As used in this Schedule I, "Closing Bid Price" means the closing bid
price for the Common Stock, par value $.001 per share, as reported by the
National Association of Securities Dealers Nasdaq Stock Market (or any other
exchange or over-the-counter market upon which the Common Stock is admitted and
listed for trading) for any trading day.
Days after Funding Date Price
60-90 90% of the lowest Closing Bid Price for the 10 day
period prior to conversion
91-120 85% of the lowest Closing Bid Price for the 13 day
period prior to conversion
121-150 82.5% of the lowest Closing Bid Price for the 15 day
period prior to conversion
151-180 80% of the lowest Closing Bid Price for the 17 day
period prior to conversion
181-210 77.5% of the lowest Closing Bid Price for the 19 day
period prior to conversion
211-240 75% of the lowest Closing Bid Price for the 22 day
period prior to conversion
241-270 72.5% of the lowest Closing Bid Price for the 25 day
period prior to conversion
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<PAGE>
271- maturity 70% of the lowest Closing Bid Price for the 28 day
period prior to conversion
Warrant Shares
The investor purchasing the Preferred Stock discussed above, also received a
Common Stock Purchase Warrant (the "Warrant") for the right to purchase 50,000
Common Stock shares of Star at 115% of the closing bid price on the trading day
immediately preceding the closing date of this sale. Under the terms of the
Registration Rights Agreement regarding the sale of the Preferred Stock and the
issuance of the Warrant, Star has an obligation the file a registration
statement with the Securities and Exchange Commission within 30 days of the
closing date of the sale of the Preferred Stock. The registration statement must
become effective within 150 days.
Dividend Shares
The Preferred Stock pays an 8% dividend payable quarterly that may be converted
into common stock at the option of Star. Under the terms of the Registration
Rights Agreement regarding the sale of the Preferred Stock and the issuance of
the Warrant, Star has an obligation the file a registration statement with the
Securities and Exchange Commission within 30 days of the closing date of the
sale of the Preferred Stock. The registration statement must become effective
within 150 days.
LEGAL MATTERS
In connection with this Registration Statement, the validity of the
shares being registered will be passed upon for Star by Muenz & Meritz, P.C.,
Dix Hills, New York.
EXPERTS
The consolidated balance sheet of Star as of May 31, 1999 and the
consolidated statement of operations, stockholder's equity and cash flows for
each of the three years for the periods ended December 31, 1999, 1998 and 1997,
incorporated by reference in this Prospectus from Star's Annual Report on Form
10-K for the period ended May 31, 1999, have been incorporated herein in
reliance on the report of Holtz Rubenstein & Co., LLP given on the authority of
that firm as experts in accounting and auditing.
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. Our SEC filings
are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information about the public
reference room.
The SEC allows us to incorporate by reference the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. This
prospectus incorporates by reference our documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, until all of the securities are sold.
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<PAGE>
Annual Report on Form 10-KSB for the year ended May 31, 1999
Quarterly Report on Form 10-QSB for the quarter ended August 31, 1999.
Proxy Statement dated September 28, 1999 for its 1999 Annual Meeting of
Stockholders;
Potential investors may obtain a copy of any of the agreements
summarized herein or any of our SEC filings without charge by written or oral
request directed to Star Multi Care Services, Inc., 33 Walt Whitman Road, Suite
302, Huntington Station, NY 11746, Attention: Stephen Sternbach, or calling
(631) 423-6689.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
A reasonable estimate of the costs to be incurred in connection with
this Registration Statement and Prospectus, to be borne entirely by the
Registrant, is as follows:
Securities and Exchange Commission Registration Fee .............. $ 255
Accounting Fees and Expenses ..................................... $ 2,000
Legal Fees and Expenses .......................................... $10,000
Printing and Publication ......................................... $ 500
Miscellaneous .................................................... $ 0
TOTAL ............................................................ $ 7,753
Item 15. Indemnification of Officers and Directors
Under the New York State Business Corporation Law (the "NYBCL"),
indemnification of directors and officers may be provided to whatever extent
shall be authorized by a corporation's certificate of incorporation or a by-law
or vote adopted by the shareholders. However, the NYBCL does not permit
indemnification with respect to any matter as to which the director or officer
has been adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interest of the corporation. The NYBCL provides
that no indemnification of directors in shareholder derivative suits may be made
in respect of (i) a threatened action, or a pending action which is settled or
otherwise disposed of, or (ii) any claim, issue or matter as to which the
director or officer has been adjudged to be liable to the corporation, unless
and only to the extent that the court in which the action was brought or, if no
action is brought, any court of competent jurisdiction, determines upon
application that, in view of the circumstances of the case, the director or
officer is fairly and reasonably entitled to indemnity for such portion of the
settlement amount and expenses as the court deems proper. The statutory
provisions for indemnification and advancement of expenses are not exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled independently of the applicable statutory provision.
The STAR By-laws currently provide for indemnification of directors and officers
and advancement of indemnified expenses to the full extent now or hereafter
permitted by the NYBCL
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Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to officers, directors or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
Item 16. Exhibits
2. (a) Agreement and Plan of Merger Among Star Multi Care Services,
Inc., EFCC Acquisition Corp. and EXTENDED FAMILY CARE
CORPORATION, dated as of January 3, 1997. Incorporated by
reference to Exhibit 2(a) 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 Exhibit 2(a) 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.)
(g) Amendment to the Certificate of Incorporation filed on April 28,
1999.
4.1 Registration Rights Agreement between the Company and the Shaar
Fund Ltd. dated April 26, 1999.
5.1 Legal opinion of Muenz & Meritz, P.C.
9. (a) Sternbach Proxy
(b) Voting Trust Agreement dated as of June 20, 1996 by and among
EFCC, Coss, Arbor, the Voting Trustee of the Issuer and Kaufman.
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.
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(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 the Company 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
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10.(w) to the Company's Quarterly Report on Form 10-QSB for the
quarterly period ended November 30, 1995.)
(u) Lease dated December 7, 1998 between Lighthouse Hicksville
Limited Partnership, a New York limited partnership, and Star
Multi Care Services, Inc., a Delaware corporation, for the
Company's office space in Hicksville incorporated to the
Company's Form 10-Q for period ended November 30, 1998 as
Exhibit 10.1 therein.
(v) Securities Purchase Agreement between the Company and the Shaar
Fund, Ltd. dated April 26, 1999.
(w) Common Stock Purchase Warrant
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.
(c) Consent of Muenz & Meritz, P.C. included in Exhibit 5.1.
- -------------------
* Incorporated by reference to the Company's Registration Statement on
Form S-18 dated May 14, 1991. (Registration No. 33-39697-NY)
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (ss.230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
[Amended in Release No. 33-7168 (P. 85,420), effective June 7, 1995, 60 FR
26604.]
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; [Amended in
Release No. 33-6423 (P. 83,250), effective September 10, 1982, 47 F.R. 39799.]
Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of this section do
not apply if the registration statement is on Form S-3 (ss.239.13 of this
chapter), Form S-8 (ss.239.16b of this chapter) or Form F-3 (ss.239.33 of this
chapter), and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement. [Amended in Release No. 33-7053 (P. 85,331),
effective April 26, 1994, 59 F.R. 21644.]
18
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by ss.210.3-19 of this chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Act need not be furnished, provided that the
registrant includes in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph (a)(4) and other
information necessary to ensure that all other information in the prospectus is
at least as current as the date of those financial statements. Notwithstanding
the foregoing, with respect to registration statements on Form F-3 (ss.239.33 of
this chapter), a post-effective amendment need not be filed to include financial
statements and information required by Section 10(a)(3) of the Act or
ss.210.3-19 of this chapter if such financial statements and information are
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the Form F-3. [Added in
Release No. FR-7 (P. 72,407), effective December 4, 1982, 47 F.R. 54764; amended
in Release No. FR-41 (P. 72,441), effective November 15, 1993, 58 F.R. 60304;
and Release No. 33-7053 (P. 85,331), effective April 26, 1994, 59 F.R. 21644.]
(b) Filings incorporating subsequent Exchange Act documents by reference.
Include the following if the registration statement incorporates by reference
any Exchange Act document filed subsequent to the effective date of the
registration statement:
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Huntington Station, the State of New York on December
13, 1999.
STAR MULTI CARE SERVICES, INC.
By: /s/ Stephen Sternbach
---------------------
Stephen Sternbach
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
19
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<TABLE>
<S> <C> <C>
/s/ Stephen Sternbach President, Chairman of the Board December 13, 1999
- --------------------- of Directors and Chief Executive
Stephen Sternbach Officer
/s/ John P. Innes, II Director December 13, 1999
- ---------------------
John P. Innes, II
/s/ Matthew Solof Director December 13, 1999
- ---------------------
Matthew Solof
/s/ Charles Berdan Director December 13, 1999
- ---------------------
Charles Berdan
/s/ Gary L. Weinberger Director December 13, 1999
- ---------------------
Gary L. Weinberger
/s/ Gregory Turchan Senior Vice President and December 13, 1999
- --------------------- Chief Operating Officer and
Gregory Turchan Director
</TABLE>
20
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EXHIBIT INDEX
-------------
Item 16. Exhibits
2. (a) Agreement and Plan of Merger Among Star Multi Care Services,
Inc., EFCC Acquisition Corp. and EXTENDED FAMILY CARE
CORPORATION, dated as of January 3, 1997. Incorporated by
reference to Exhibit 2(a) 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 Exhibit 2(a) 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.)
(g) Amendment to the Certificate of Incorporation filed on April 28,
1999.
4.1 Registration Rights Agreement between the Company and the Shaar
Fund Ltd. dated April 26, 1999.
5.1 Legal opinion of Muenz & Meritz, P.C.
9. (a) Sternbach Proxy
(b) Voting Trust Agreement dated as of June 20, 1996 by and among
EFCC, Coss, Arbor, the Voting Trustee of the Issuer and Kaufman.
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.
21
<PAGE>
(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 the Company 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
22
<PAGE>
10.(w) to the Company's Quarterly Report on Form 10-QSB for the
quarterly period ended November 30, 1995.)
(u) Lease dated December 7, 1998 between Lighthouse Hicksville
Limited Partnership, a New York limited partnership, and Star
Multi Care Services, Inc., a Delaware corporation, for the
Company's office space in Hicksville incorporated to the
Company's Form 10-Q for period ended November 30, 1998 as
Exhibit 10.1 therein.
(v) Securities Purchase Agreement between the Company and the Shaar
Fund, Ltd. dated April 26, 1999.
(w) Common Stock Purchase Warrant
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.
(c) Consent of Muenz & Meritz, P.C. included in Exhibit 5.1.
- -------------------
* Incorporated by reference to the Company's Registration Statement on
Form S-18 dated May 14, 1991. (Registration No. 33-39697-NY)
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (ss.230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
[Amended in Release No. 33-7168 (P. 85,420), effective June 7, 1995, 60 FR
26604.]
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; [Amended in
Release No. 33-6423 (P. 83,250), effective September 10, 1982, 47 F.R. 39799.]
Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of this section do
not apply if the registration statement is on Form S-3 (ss.239.13 of this
chapter), Form S-8 (ss.239.16b of this chapter) or Form F-3 (ss.239.33 of this
chapter), and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement. [Amended in Release No. 33-7053 (P. 85,331),
effective April 26, 1994, 59 F.R. 21644.]
23
<PAGE>
Exhibit 3(g)
CERTIFICATE OF
AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF
STAR MULTI CARE SERVICES, INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
* * * * *
The undersigned, being Chief Executive Officer of STAR MULTI
CARE SERVICES, INC., a New York corporation (the "Corporation"), hereby
certifies that:
(1) The name of the Corporation is Star Multi Care
Services, Inc. The name under which the Corporation
was formed is Star Registry for Nurses, Inc.
(2) The date the Certificate of Incorporation was filed
by the Department of State was April 25, 1961.
(3) The Certificate of Incorporation of the Corporation
is hereby amended pursuant to the authorization of
the Board of Directors of the Corporation, so as to
change both the county within New York in which the
Corporation is located and the post office address to
which the Secretary of State shall mail a copy of any
process against the Corporation served upon it and to
accomplish said amendment, paragraph "SECOND" of the
Certificate of Incorporation is hereby deleted in its
entirety and the following is substituted in lieu
thereof:
"SECOND: (a) The office of the Corporation is to be
located in the town of Huntington Station, County of
Suffolk, State of New York. (b) The Secretary of
State of the State of New York is hereby designated
as the agent of the Corporation upon whom any process
in any action may be served, and the address to which
the Secretary of State shall mail a copy of process
in any action or proceeding against the Corporation
which may be served upon it is:
Star Multi Care Services, Inc.
33 Walt Whitman Road
Suite 302
Huntington Station, NY 11746
(4) The foregoing amendment of the Corporation's
Certificate of Incorporation was adopted by the Board
of Directors of the
<PAGE>
Corporation (the "Board") at a special meeting of
the Board on December 9, 1998.
(5) The Corporation is authorized to issue a total of
15,000,000 shares, consisting of 10,000,000 shares of Common Stock of the par
value of $.001 per shares of Common Stock and 5,000,000 shares of Preferred
Stock of the par value of $1.00 per share. An additional amendment of the
Corporation's Certificate of Incorporation effected by this Certificate of
Amendment to add the terms of the designations, rights and preferences of Series
A 8% Convertible Preferred Stock par value $1.00 per share, (the "Series A
Preferred") is hereby made.
To effect the foregoing, a new Article FIFTH of the
Corporation's Certificate of Incorporation, relating to the Series A Preferred,
is hereby added, and all subsequent Articles of the Corporation's Certificate of
Incorporation are renumbered accordingly. Article FIFTH shall read in its
entirety as follows:
"FIFTH: The Corporation's Board of Directors has designated
600 shares of Preferred Stock as Series A 8% Convertible preferred Stock, which
shall have the following designations, rights and preferences:
ARTICLE (5)
DEFINITIONS
SECTION (1) Definitions. The terms defined in
this Article whenever used in this
Certificate of Incorporation have the
following respective meanings:
(1) "ADDITIONAL CAPITAL SHARES" has the meaning
set forth in Section 6.1(c).
(2) "AFFILIATE" has the meaning ascribed to such term in
Rule 12b-2 under the Securities Exchange Act of
1934, as amended.
(3) "BUSINESS DAY" means a day other than Saturday,
Sunday or any day on which banks located in the State
of New York are authorized or obligated to close.
(4) "CAPITAL SHARES" means the Common Shares and any
other shares of any other class or series of common
stock, whether now or hereafter authorized and
however designated, which have the right to
participate in the distribution of earnings and
assets (upon dissolution, liquidation or winding-up)
of the Corporation.
(5) "CLOSING DATE" means April ___, 1999.
<PAGE>
(6) "COMMON SHARES" or "COMMON STOCK" means shares of
common stock, $0.001 par value, of the Corporation.
(7) "COMMON STOCK ISSUED AT CONVERSION" when used with
reference to the securities issuable upon
conversion of the Series A Preferred Stock, means
all Common Shares now or hereafter Outstanding and
securities of any other class or series into which
the Series A Preferred Stock hereafter shall have
been changed or substituted, whether now or
hereafter created and however designated.
(8) "CONVERSION DATE" means any day on which all or any
portion of shares of the Series A Preferred Stock is
converted in accordance with the provisions hereof.
(9) "CONVERSION NOTICE" has the meaning set forth in
Section 6.2.
(10) "CONVERSION PRICE" means on any date of determination
the applicable price for the conversion of shares of
Series A Preferred Stock into Common Shares on such
day as set forth in Section 6.1.
(11) "CONVERSION RATIO" means on any date of determination
the applicable percentage of the Market Price for
conversion of shares of Series A Preferred Stock into
Common Shares on such day as set forth in Section
6.1.
(12) "CORPORATION" means STAR MULTI CARE SERVICES, INC., a
New York corporation, and any successor or resulting
corporation by way of merger, consolidation, sale or
exchange of all or substantially all of the
Corporation's assets, or otherwise.
(13) "CURRENT MARKET PRICE" means on any date of
determination the closing bid price of a Common Share
on such day as reported on The Nasdaq Stock Market,
Inc. National Market system (the "NMS").
(14) "HOLDER" means The Shaar Fund Ltd., any successor
thereto, or any Person to whom the Series A Preferred
Stock is subsequently transferred in accordance with
the provisions hereof.
(15) "MARKET DISRUPTION EVENT" means any event that
results in a material suspension or limitation of
trading of Common Shares on the NMS.
<PAGE>
(16) "MARKET PRICE" per Common Share means the lowest
closing bid price for the three (3) Trading Days
immediately preceding the Closing Date.
(17) "NASD" means the National Association of Securities
Dealers.
(18) "OUTSTANDING" when used with reference to Common
Shares or Capital Shares (collectively, "Shares"),
means, on any date of determination, all issued and
outstanding Shares, and includes all such Shares
issuable in respect of outstanding scrip or any
certificates representing fractional interests in
such Shares; provided, however, that any such Shares
directly or indirectly owned or held by or for the
account of the Corporation or any Subsidiary of the
Corporation shall not be deemed "Outstanding" for
purposes hereof.
(19) "PERSON" means an individual, a corporation,
partnership, an association, a limited liability
company, unincorporated business organization, a
trust or other entity or organization, and any
government or political subdivision or any agency or
instrumentality thereof.
(20) "REGISTRATION RIGHTS AGREEMENT" means that certain
Registration Rights Agreement dated a date even
herewith between the Corporation and The Shaar Fund
Ltd.
(21) "SEC" means the United States Securities and Exchange
Commission.
(22) "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC
thereunder, all as in effect at the time.
(23) "SECURITIES PURCHASE AGREEMENT" means that certain
Securities Purchase Agreement dated a date even
herewith between the Corporation and The Shaar Fund
Ltd.
(24) "SERIES A PREFERRED STOCK" means the Series A 8%
Convertible Preferred Stock of the Corporation or
such other convertible Preferred Stock exchanged
therefor as provided in Section 2.1.
(25) "STATED VALUE" has the meaning set forth in Article
2.
(26) "SUBSIDIARY" means any entity of which securities or
other ownership interests having ordinary voting
power to elect a majority
<PAGE>
of the board of directors or other persons
performing similar functions are owned directly or
indirectly by the Corporation.
(27) "TRADING DAY" means any day on which purchases and
sales of securities authorized for quotation on the
NMS reported thereon and on which no Market
Disruption Event has occurred.
(28) "VALUATION EVENT" has the meaning set forth in
Section 6.1.
(29) "VALUATION PERIOD" means the twenty (20) Trading
Day period immediately preceding the Conversion
Date.
All references to "cash" or "$" herein means currency of the
United States of America.
ARTICLE (6)
DESIGNATION AND AMOUNT
SECTION (1)
The designation of this series, which consists of 600 shares
of Preferred Stock, is Series A 8% Convertible Preferred Stock (the "Series A
Preferred Stock") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "Stated Value").
ARTICLE (7)
RANK
SECTION (1)
The Series A Preferred Stock shall rank (i) prior to the
Common Stock; (ii) prior to any class or series of capital stock of the
Corporation hereafter created other than "Pari Passu Securities" (collectively,
with the Common Stock, "Junior Securities"); and (iii) pari passu with any class
or series of capital stock of the Corporation hereafter created specifically
ranking on parity with the Series A Preferred Stock ("Pari Passu Securities").
ARTICLE (8)
DIVIDENDS
SECTION (1)
(1) The Holder shall be entitled to receive, and the
Board of Directors shall be required to declare, out
of funds legally available for the payment of
dividends, dividends (subject to Sections 4(a)(ii)
hereof) at the rate of 8% per annum (computed on
the basis of a 360-day year) (the "Dividend Rate")
on the Liquidation Value (as defined below) of each
share of Series A Preferred Stock on and as of the
<PAGE>
most recent Dividend Payment Due Date (as defined
below) with respect to each Dividend Period (as
defined below). Dividends on the Series A Preferred
Stock shall be cumulative from the date of issue,
whether or not declared for any reason, including
if such declaration is prohibited under any
outstanding indebtedness or borrowings of the
Corporation or any of its Subsidiaries, or any
other contractual provision binding on the
Corporation or any of its Subsidiaries, and whether
or not there shall be funds legally available for
the payment thereof.
(1) Each dividend shall be payable in equal
quarterly amounts on each March 31, June 30,
September 30 and December 31 of each year
(each, a "Dividend Payment Due Date"),
commencing June 30, 1999 (provided that such
initial dividend payment shall include all
dividends accrued from the Closing Date
until the initial Dividend Payment Date), to
the holders of record of shares of the
Series A Preferred Stock, as they appear on
the stock records of the Corporation at the
close of business on any record date, not
more than 60 days or less than 10 days
preceding the payment dates thereof, as
shall be fixed by the Board of Directors.
For the purposes hereof, "Dividend Period"
means the quarterly period commencing on and
including the day after the immediately
preceding Dividend Payment Date and ending
on and including the immediately subsequent
Dividend Payment Date. Accrued and unpaid
dividends for any past Dividend Period may
be declared and paid at any time, without
reference to any Dividend Payment Due Date,
to holders of record on such date, not more
than 15 days preceding the payment date
thereof, as may be fixed by the Board of
Directors.
(2) At the option of the Corporation, the
dividend shall be paid in cash or through
the issuance of duly and validly
authorized and issued, fully paid and
nonassessable, freely tradeable shares of
the Common Stock valued at the Market
Price. The Common Stock to be issued in
lieu of cash payments shall be registered
for resale in the Registration Statement
(as defined in the Registration Rights
Agreement) to be filed by the Corporation
to register the Common Stock issuable upon
conversion of the shares of Series A
Preferred Stock and exercise of the
Warrants as set forth in the Registration
Rights Agreement. Notwithstanding the
foregoing, until such Registration Statement
(as defined in the Registration Rights
Agreement) has been declared effective
<PAGE>
under the Securities Act by the SEC,
payment of dividends on the Series A
Preferred Stock shall be in cash.
(2) The Holder shall not be entitled to any dividends in
excess of the cumulative dividends, as herein
provided, on the Series A Preferred Stock. Except as
provided in this Article 4, no interest, or sum of
money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the
Series A Preferred Stock that may be in arrears.
(3) So long as any shares of the Series A Preferred Stock
are outstanding, no dividends, except as described in
the next succeeding sentence, shall be declared or
paid or set apart for payment on Pari Passu
Securities for any period unless full cumulative
dividends required to be paid in cash have been or
contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set
apart for such payment on the Series A Preferred
Stock for all Dividend Periods terminating on or
prior to the date of payment of the dividend on such
class or series of Pari Passu Securities. When
dividends are not paid in full or a sum sufficient
for such payment is not set apart, as aforesaid, all
dividends declared upon shares of the Series A
Preferred Stock and all dividends declared upon any
other class or series of Pari Passu Securities shall
be declared ratably in proportion to the respective
amounts of dividends accumulated and unpaid on the
Series A Preferred Stock and accumulated and unpaid
on such Pari Passu Securities.
(4) So long as any shares of the Series A Preferred Stock
are outstanding, no dividends shall be declared or
paid or set apart for payment or other distribution
declared or made upon Junior Securities, nor shall
any Junior Securities be redeemed, purchased or
otherwise acquired (other than a redemption, purchase
or other acquisition of shares of Common Stock made
for purposes of an employee incentive or benefit plan
(including a stock option plan) of the Corporation or
any subsidiary, (all such dividends, distributions,
redemptions or purchases being hereinafter referred
to as a "Junior Securities Distribution") for any
consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of
any shares of any such stock) by the Corporation,
directly or indirectly, unless in each case (i) the
full cumulative dividends required to be paid in cash
on all outstanding shares of the Series A Preferred
Stock and any other Pari Passu Securities shall have
been paid or set apart for payment for all past
Dividend Periods with respect to the Series A
Preferred Stock and all past dividend periods with
respect to such Pari Passu Securities, and (ii)
sufficient funds shall have been paid or set apart
for the payment of the dividend for the current
Dividend
<PAGE>
Period with respect to the Series A Preferred Stock
and the current dividend period with respect to
such Pari Passu Securities.
ARTICLE (9)
LIQUIDATION PREFERENCE
SECTION (1)
(1) If the Corporation shall commence a voluntary case
under the Federal bankruptcy laws or any other
applicable Federal or State bankruptcy, insolvency or
similar law, or consent to the entry of an order for
relief in an involuntary case under any law or to the
appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial
part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become
due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case
under the Federal bankruptcy laws or any other
applicable Federal or state bankruptcy, insolvency or
similar law resulting in the appointment of a
receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the
Corporation or of any substantial part of its
property, or ordering the winding up or liquidation
of its affairs, and any such decree or order shall be
unstayed and in effect for a period of thirty (30)
consecutive days and, on account of any such event,
the Corporation shall liquidate, dissolve or wind up,
or if the Corporation shall otherwise liquidate,
dissolve or wind up (each such event being considered
a "Liquidation Event"), no distribution shall be made
to the holders of any shares of capital stock of the
Corporation upon liquidation, dissolution or winding
up unless prior thereto, the holders of shares of
Series A Preferred Stock, subject to Article 5, shall
have received the Liquidation Preference (as defined
in Article 5(c)) with respect to each share. If upon
the occurrence of a Liquidation Event, the assets and
funds available for distribution among the holders of
the Series A Preferred Stock and holders of Pari
Passu Securities shall be insufficient to permit the
payment to such holders of the preferential amounts
payable thereon, then the entire assets and funds of
the Corporation legally available for distribution to
the Series A Preferred Stock and the Pari Passu
Securities shall be distributed ratably among such
shares in proportion to the ratio that the
Liquidation Preference payable on each such share
bears to the aggregate liquidation Preference
payable on all such shares.
(2) At the option of each Holder, the sale, conveyance or
disposition of all or substantially all of the assets
of the Corporation,
<PAGE>
the effectuation by the Corporation of a
transaction or series of related transactions in
which more than 50% of the voting power of the
Corporation is disposed of, or the consolidation,
merger or other business combination of the
Corporation with or into any other Person (as
defined below) or Persons where the Corporation is
not the survivor shall either: (i) be deemed to be
a liquidation, dissolution or winding up of the
Corporation pursuant to which the Corporation shall
be required to distribute, upon consummation of and
as a condition to, such transaction an amount equal
to one hundred percent (100%) of the Liquidation
Preference with respect to each outstanding share
of Series A Preferred Stock in accordance with and
subject to the terms of this Article 5 or (ii) be
treated pursuant to Article 5(c)(iii) hereof;
provided, that all holders of Series A Preferred
Stock shall be deemed to elect the option set forth
in clause (i) hereof if at least a majority in
interest of such holders elect such option.
(3) For purposes hereof, the "Liquidation Preference"
with respect to a share of the Series A Preferred
Stock shall mean an amount equal to the sum of (i)
the Stated Value thereof, plus (ii) an amount equal
to__________ of such Stated Value, plus (iii) the
aggregate of all accrued and unpaid dividends on such
share of Series A Preferred Stock until the most
recent Dividend Payment Due Date; provided that, in
the event of an actual liquidation, dissolution or
winding up of the Corporation, the amount referred to
in clause (iii) above shall be calculated by
including accrued and unpaid dividends to the actual
date of such liquidation, dissolution or winding up,
rather than the Dividend Payment Due Date referred to
above.
ARTICLE (10)
CONVERSION OF PREFERRED STOCK
SECTION (1) Conversion; Conversion Price. At the
option of the Holder, the shares of
Preferred Stock may be converted, either
in whole or in part, into Common Shares
(calculated as to each such conversion to
the nearest 1/100th of a share), at any
time, and from time to time commencing 60
days after the date of issuance of the
Series A Preferred Stock (such date of
issuance, the "Issue Date"), at a
Conversion Price per share of Common Stock
equal to the lessor of: (i) 125% of the
Market Price, provided, that if the
Corporation's Common Stock is delisted on
the NMS, for any reason, then any
remaining unconverted Series A Preferred
Stock may be converted, at the sole option
of the Holder, at a Conversion Price per
share of Common Stock equal to 50% of the
Market Price; or (ii)
<PAGE>
the price determined in accordance with
provisions described on Schedule I
attached hereto; provided, however, that:
(1) notwithstanding anything herein to the contrary, the
Holder shall not have the right, and the Company
shall not have the obligation, to convert all or any
portion of the Series A Preferred Stock (and the
Company shall not have the right to pay dividends on
the Series A Preferred Stock in shares of common
stock) if and to the extent that the issuance to the
Holder of shares of common stock upon such conversion
(or payment of dividends) would result in the Holder
being deemed the "beneficial owner" of 5% or more of
the then outstanding shares of Common Stock within
the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules
promulgated thereunder. If any court of competent
jurisdiction shall determine that the foregoing
limitation is ineffective to prevent a Holder from
being deemed the beneficial owner of 5% or more of
the then outstanding shares of Common Stock, then the
Corporation shall redeem so many of such Holder's
shares (the "Redemption Shares") of Series A
Preferred Stock as are necessary to cause such Holder
to be deemed the beneficial owner of not more than
4.99% of the then outstanding shares of Common Stock.
Upon such determination by a court of competent
jurisdiction, the Redemption Shares shall immediately
and without further action be deemed returned to the
status of authorized but unissued shares of Series A
Preferred Stock and the Holder shall have no interest
in or rights under such Redemption Shares. Any and
all dividends paid on or prior to the date of such
determination shall be deemed dividends paid on the
remaining shares of Series A Preferred Stock held by
the Holder. Such redemption shall be for cash at a
redemption price equal to the sum of (i) the Stated
Value of the Redemption Shares and (ii) any accrued
and unpaid dividends to the date of such redemption;
and
(2) unless the Corporation shall have obtained the
approval of its voting stockholders to such issuance
in accordance with the rules of the NASD, the NMS or
such other stock market with which the Corporation
shall be required to comply, the Corporation shall
not issue shares of Common Stock (A) upon conversion
of any shares of Series A Preferred Stock or as a
dividend on the Series A Preferred Stock, if such
issuance of Common Stock, when added to the number of
shares of Common Stock previously issued by the
Corporation (I) upon conversion of shares of the
Series A Preferred Stock, (II) upon exercise of the
Warrants issued pursuant to the terms of the
Securities Purchase Agreement and (III) in payment
of dividends on the Series A Preferred Stock, would
be in excess of 19.99% of the number of shares of
the Corporation's Common Stock which were
<PAGE>
issued and outstanding on the Closing Date (the
"Maximum Issuance Amount").
(ii) In the event that a properly executed
Conversion Notice is received by the Corporation which would require the
Corporation to issue shares of Common Stock equal to or in excess of the
Maximum Issuance Amount, the Corporation shall honor such conversion request
by (A) converting the number of shares of Series A Preferred Stock stated in
the Conversion Notice not in excess of the Maximum Issuance Amount and (B)
redeeming the number of shares of Series A Preferred Stock stated in the
Conversion Notice equal to or in excess of the Maximum Issuance Amount in cash
at a price equal to one hundred twenty-five percent (125%) of the Stated Value
of the shares of Series A Preferred Stock to be so redeemed, together with all
accrued and unpaid dividends thereon.
(iii) In the event that the Corporation shall elect
to pay a dividend in shares of Common Stock which would require the
Corporation to issue shares of Common Stock equal to or in excess of the
Maximum Issuance Amount, the Corporation shall pay (i) a dividend in shares of
Common Stock equal to one less than an amount which would result in the
Corporation issuing shares equal to the Maximum Issuance Amount and (B) the
balance of the dividend in cash.
(3) On or at any time after the Closing Date the Holder
of the Series A Preferred Stock may exercise its
right of conversion of 100% of the aggregate number
of Series A Preferred Shares issued to the Holder.
(4) The number of shares of Common Stock due upon
conversion of Series A Preferred Stock shall be (i)
the number of shares of Series A Preferred Stock to
be converted, multiplied by (ii) the Stated Value and
divided by (iii) the applicable Conversion Price.
(5) Within two (2) Business Days of the occurrence of a
Valuation Event, the Corporation shall send notice
(the "Valuation Event Notice") of such occurrence to
the Holder. Notwithstanding anything to the contrary
contained herein, if a Valuation Event occurs during
any Valuation Period, a new Valuation Period shall
begin on the Trading Day immediately following the
occurrence of such Valuation Event and end on the
Conversion Date; provided that, if a Valuation Event
occurs on the fifth day of any Valuation Period, then
the Conversion Price shall be the Current Market
Price of the Common Shares on such day; and provided,
further, that the Holder may, in its discretion,
postpone such Conversion Date to a Trading Day
which is no more than five (5) Trading Days after
the occurrence of the latest Valuation Event by
delivering a notification to the Corporation within
two (2) Business Days of the receipt of the
Valuation Event Notice. In the event that the
Holder deems the Valuation Period to be other than
the five (5) Trading Days
<PAGE>
immediately prior to the Conversion Date, the
Holder shall give written notice of such fact to
the Corporation in the related Conversion Notice at
the time of conversion.
(6) For purposes of this Section 6.1, a "Valuation Event"
shall mean an event in which the Corporation at any
time during a Valuation Period takes any of the
following actions:
(1) subdivides or combines its Capital Shares;
(2) makes any distribution of its Capital
Shares;
(3) issues any additional Capital Shares (the
"Additional Capital Shares"), otherwise than
as provided in the foregoing Sections 6.1(a)
and 6.1(b) above, at a price per share less,
or for other consideration lower, than the
Current Market Price in effect immediately
prior to such issuances, or without
consideration, except for issuances under
employee benefit plans consistent with those
presently in effect and issuances under
presently outstanding warrants, options or
convertible securities;
(4) issues any warrants, options or other rights
to subscribe for or purchase any Additional
Capital Shares and the price per share for
which Additional Capital Shares may at any
time thereafter be issuable pursuant to such
warrants, options or other rights shall be
less than the Current Market Price in effect
immediately prior to such issuance;
(5) issues any securities convertible into or
exchangeable or exercisable for Capital
Shares and the consideration per share for
which Additional Capital Shares may at any
time thereafter be issuable pursuant to the
terms of such convertible, exchangeable or
exercisable securities shall be less than
the Current Market Price in effect
immediately prior to such issuance;
(6) makes a distribution of its assets or
evidences of indebtedness to the holders of
its Capital Shares as a dividend
in liquidation or by way of return of
capital or other than as a dividend payable
out of earnings or surplus legally available
for the payment of dividends under
applicable law or any distribution to such
holders made in respect of the sale of all
or substantially all of the Corporation's
assets (other than under the circumstances
provided for in the foregoing Sections
6.1(a) through 6.1(f)(iii)); or
<PAGE>
(7) takes any action affecting the number of
Outstanding Capital Shares, other than an
action described in any of the foregoing
Sections 6.1(a) through 6.1(f)(iv) hereof,
inclusive, which in the opinion of the
Corporation's Board of Directors, determined
in good faith, would have a material adverse
effect upon the rights of the Holder at the
time of a conversion of the Preferred Stock.
SECTION (2) Exercise of Conversion Privilege.
Conversion of the Series A Preferred Stock
may be exercised, in whole or in part, by
the Holder by telecopying an executed and
completed notice of conversion in the form
annexed hereto as Annex I (the "Conversion
Notice") to the Corporation. Each date on
which a Conversion Notice is telecopied to
and received by the Corporation in
accordance with the provisions of this
Section 6.2 shall constitute a Conversion
Date. The Corporation shall convert the
Preferred Stock and issue the Common Stock
Issued at Conversion effective as of the
Conversion Date. The Conversion Notice
also shall state the name or names (with
addresses) of the persons who are to
become the holders of the Common Stock
Issued at Conversion in connection with
such conversion. The Holder shall deliver
the shares of Series A Preferred Stock to
the Corporation by express courier within
30 days following the date on which the
telecopied Conversion Notice has been
transmitted to the Corporation. Upon
surrender for conversion, the Preferred
Stock shall be accompanied by a proper
assignment hereof to the Corporation or be
endorsed in blank. As promptly as
practicable after the receipt of the
Conversion Notice as aforesaid, but in any
event not more than seven (7) Business
Days after the Corporation's receipt of
such Conversion Notice, the Corporation
shall (i) issue the Common Stock issued at
Conversion in accordance with the
provisions of this Article 6, and (ii)
cause to be mailed for delivery by
overnight courier to the Holder (X) a
certificate or certificate(s) representing
the number of Common Shares to which the
Holder is entitled by virtue of such
conversion, (Y) cash, as provided in Section
6.3, in respect of any fraction of a Share
issuable upon such conversion and (Z) cash
in the amount of accrued and unpaid
dividends as of the Conversion Date. Such
conversion shall be deemed to have been
effected at the time at which the Conversion
Notice indicates so long as the Preferred
Stock shall have been surrendered as
aforesaid at such time, and at such time the
rights of the Holder of the Preferred Stock,
as such, shall cease and the
<PAGE>
Person and Persons in whose name or names the
Common Stock Issued at Conversion shall be issuable
shall be deemed to have become the holder or
holders of record of the Common Shares represented
thereby. The Conversion Notice shall constitute a
contract between the Holder and the Corporation,
whereby the Holder shall be deemed to subscribe for
the number of Common Shares which it will be
entitled to receive upon such conversion and, in
payment and satisfaction of such subscription (and
for any cash adjustment to which it is entitled
pursuant to Section 6.4), to surrender the
Preferred Stock and to release the Corporation from
all liability thereon. No cash payment aggregating
less than $1.00 shall be required to be given
unless specifically requested by the Holder.
(1) If, at any time (i) the Corporation challenges,
disputes or denies the right of the Holder hereof to
effect the conversion of the Preferred Stock into
Common Shares or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with this
Section 6.2 or (ii) any third party who is not and
has never been an Affiliate of the Holder commences
any lawsuit or proceeding or otherwise asserts any
claim before any court or public or governmental
authority which seeks to challenge, deny, enjoin,
limit, modify, delay or dispute the right of the
Holder hereof to effect the conversion of the
Preferred Stock into Common Shares, then the Holder
shall have the right, by written notice to the
Corporation, to require the Corporation to promptly
redeem the Series A Preferred Stock for cash at a
redemption price equal to one hundred and twenty-five
percent (125%) of the Stated Value thereof together
with all accrued and unpaid dividends thereon (the
"Mandatory Purchase Amount"). Under any of the
circumstances set forth above, the Corporation shall
be responsible for the payment of all costs and
expenses of the Holder, including reasonable legal
fees and expenses, as and when incurred in disputing
any such action or pursuing its rights hereunder (in
addition to any other rights of the Holder).
SECTION (3) Fractional Shares. No fractional Common
Shares or scrip representing fractional
Common Shares shall be issued upon
conversion of the Series A Preferred
Stock. Instead of any fractional Common
Shares which otherwise would be issuable
upon conversion of the Series A Preferred
Stock, the Corporation shall pay a cash
adjustment in respect of such fraction in
an amount equal to the same fraction. No
cash payment of less than $1.00 shall be
required to be given unless specifically
requested by the Holder.
<PAGE>
SECTION (4) Reclassification, Consolidation, Merger or
Mandatory Share Exchange. At any time
while the Series A Preferred Stock remains
outstanding and any shares thereof have
not been converted, in case of any
reclassification or change of Outstanding
Common Shares issuable upon conversion of
the Series A Preferred Stock (other than a
change in par value, or from par value to
no par value per share, or from no par
value per share to par value or as a
result of a subdivision or combination of
outstanding securities issuable upon
conversion of the Series A Preferred
Stock) or in case of any consolidation,
merger or mandatory share exchange of the
Corporation with or into another
corporation (other than a merger or
mandatory share exchange with another
corporation in which the Corporation is a
continuing corporation and which does not
result in any reclassification or change,
other than a change in par value, or from
par value to no par value per share, or
from no par value per share to par value,
or as a result of a subdivision or
combination of Outstanding Common Shares
upon conversion of the Series A Preferred
Stock), or in the case of any sale or
transfer to another corporation of the
property of the Corporation as an entirety
or substantially as an entirety, the
Corporation, or such successor, resulting
or purchasing corporation, as the case may
be, shall, without payment of any
additional consideration therefor, execute
a new Series A Preferred Stock providing
that the Holder shall have the right to
convert such new Series A Preferred Stock
(upon terms and conditions not less
favorable to the Holder than those in
effect pursuant to the Series A Preferred
Stock) and to receive upon such exercise,
in lieu of each Common Share theretofore
issuable upon conversion of the Series A
Preferred Stock, the kind and amount of
shares of stock, other securities, money
or property receivable upon such
reclassification, change, consolidation,
merger, mandatory share exchange, sale or
transfer by the holder of one Common Share
issuable upon conversion of the Series A
Preferred Stock had the Series A Preferred
Stock been converted immediately prior to
such reclassification, change,
consolidation, merger, mandatory share
exchange or sale or transfer. The
provisions of this Section 6.4 shall
similarly apply to successive
reclassifications, changes,
consolidations, mergers, mandatory share
exchanges and sales and transfers.
SECTION (5) Adjustments to Conversion Ratio. For so
long as any shares of the Series A
Preferred Stock are outstanding, if the
Corporation (i) issues and sells pursuant
to an exemption
<PAGE>
from registration under the Securities Act
(A) Common Shares at a purchase price on
the date of issuance thereof that is lower
than the Conversion Price, (B) warrants or
options with an exercise price
representing a percentage of the Current
Market Price with an exercise price on the
date of issuance of the warrants or
options that is lower than the agreed upon
conversion price for the Holder, except
for employee stock option agreements or
stock incentive agreements of the
Corporation, or (C) convertible,
exchangeable or exercisable securities
with a right to exchange at lower than the
Current Market Price on the date of
issuance or conversion, as applicable, of
such convertible, exchangeable or
exercisable securities, except for stock
option agreements or stock incentive
agreements; and (ii) grants the right to
the purchaser(s) thereof to demand that
the Corporation register under the
Securities Act such Common Shares issued
or the Common Shares for which such
warrants or options may be exercised or
such convertible, exchangeable or
exercisable securities may be converted,
exercised or exchanged, then the
Conversion Ratio shall be reduced to equal
the lowest of any such lower rates.
SECTION (6) Optional Redemption Under Certain
Circumstances. At anytime after the Issue
Date and until the Mandatory Conversion
Date (as defined below) that the Closing
bid price of the Common Stock as reported
by the NMS is $1.00 or less, the
Corporation, upon notice delivered to the
Holder as provided in Section 6.7, may
redeem, in cash, the Series A Preferred
Stock (but only with respect to such
shares as to which the Holder has not
theretofore furnished a Conversion Notice
in compliance with Section 6.2), at one
hundred and twenty five percent (125%) of
the Stated Value thereof (the "Optional
Redemption Price"), together with all
accrued and unpaid dividends thereon to the
date of redemption (the "Redemption Date").
SECTION (7) Notice of Redemption. Notice of redemption
pursuant to Section 6.6 shall be provided
by the Corporation to the Holder in
writing (by registered mail or overnight
courier at the Holder's last address
appearing in the Corporation's security
registry) not less than ten (10) nor more
than fifteen (15) days prior to the
Redemption Date, which notice shall
specify the Redemption Date and refer to
Section 6.6 (including, a statement of the
Market Price per Common Share) and this
Section 6.7.
<PAGE>
SECTION (8) Surrender of Preferred Stock. Upon any
redemption of the Series A Preferred Stock
pursuant to Sections 6.6 or 6.7, the
Holder shall either deliver the Series A
Preferred Stock by hand to the Corporation
at its principal executive offices or
surrender the same to the Corporation at
such address by express courier. Payment
of the optional Redemption Price specified
in Section 6.6 shall be made by the
Corporation to the Holder against receipt
of the Series A Preferred Stock (as
provided in this Section 6.8) by wire
transfer of immediately available funds to
such account(s) as the Holder shall
specify to the Corporation. If payment of
such redemption price is not made in full
by the Mandatory Redemption Date or the
Redemption Date, as the case may be, the
Holder shall again have the right to
convert the Series A Preferred Stock as
provided in Article 6 hereof.
SECTION (9) Mandatory Conversion. On the second
anniversary of Closing Date (the
"Mandatory Conversion Date"), the
Corporation shall convert all Series A
Preferred Stock outstanding at the
Conversion Price. Notwithstanding the
previous sentence, in no event shall the
Corporation convert that portion of the
Series A Preferred Stock to the extent
that the issuance of Common Shares upon
the conversion of such Series A Preferred
Stock, when combined with shares of Common
Stock received upon other conversions of
Series A Preferred Stock by such Holder
and any other holders of Series A
Preferred Stock and Warrants, would exceed
19.99% of the Common Stock outstanding on
the Closing Date. Within ten (10) Business
Days after the Mandatory Conversion Date,
the Corporation shall redeem all remaining
outstanding Series A Preferred Stock at
one hundred and twenty-five percent (125%)
of the Stated Value thereof, together with
all accrued and unpaid dividends thereon,
in cash, to the date of redemption.
ARTICLE (11)
VOTING RIGHTS
SECTION 7.1 Voting Rights Generally. The holders of the Series A
Preferred Stock have no voting power, except as otherwise provided by the New
York Business Corporation Law ("NYBCL"), in this Article 7, and in Article 8
below.
SECTION 7.2 Notice of Meetings. Notwithstanding the above, the
Corporation shall provide each holder of Series A Preferred Stock with prior
notification of any meeting of the shareholders (and copies of proxy materials
and other information sent to shareholders). In the event of any taking by the
Corporation of a record of its shareholders
<PAGE>
for the purpose of determining shareholders who are entitled to receive
payment of any dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders
who are entitled to vote in connection with any proposed liquidation,
dissolution or winding up of the Corporation, the Corporation shall mail a
notice to each holder, at least thirty (30) days prior to the consummation of
the transaction or event, whichever is earlier), of the date on which any such
acting is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
SECTION 7.3 Required Votes. To the extent that under the NYBCL the vote
of the holders of the Series A Preferred Stock, voting separately as a class or
series as applicable, is required to authorize a given action of the
Corporation, the affirmative vote or consent of the holders of at least a
majority of the shares of the Series A Preferred Stock represented at a duly
held meeting at which a quorum is present or by written consent of a majority of
the shares of Series A Preferred Stock (except as otherwise may be required
under the NYBCL) shall constitute the approval of such action by the class. To
the extent that under the NYBCL holders of the Series A Preferred Stock are
entitled to vote on a matter with holders of Common Stock, voting together as
one class, each share of Series A Preferred Stock shall be entitled to a number
of votes equal to the number of shares of Common Stock into which it is then
convertible using the record date for the taking of such vote of shareholders as
the date as of which the Conversion Price is calculated. Holders of the Series A
Preferred Stock shall be entitled to notice of all shareholder meetings or
written consents (and copies of proxy materials and other information sent to
shareholders) with respect to which they would be entitled to vote, which notice
would be provided pursuant to the Corporation's bylaws and the NYBCL.
ARTICLE (12)
PROTECTIVE PROVISIONS
SECTION 8.1 Restrictions. So long as shares of Series A Preferred Stock
are outstanding, the Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by the NYBCL) of the holders of at
least a majority of the then outstanding shares of Series A Preferred Stock:
(1) alter or change the rights, preferences or privileges
of the Series A Preferred Stock;
(2) create any new class or series of capital stock
having a preference over the Series A Preferred Stock
as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation ("Senior
Securities") or alter or change the rights,
preferences or privileges of any Senior Securities so
as to affect adversely the Series A Preferred Stock;
<PAGE>
(3) increase the authorized number of shares of Series A
Preferred Stock; or
(4) do any act or thing not authorized or contemplated by
this Certificate of Amendment which would result in
taxation of the holders of shares of the Series A
Preferred Stock under Section 305 of the Internal
Revenue Code of 1986, as amended (or any comparable
provision of the Internal Revenue Code as hereafter
from time to time amended).
SECTION 8.2 Dissenter's Conversion Rights. In the event holders of at
least a majority of the then outstanding shares of Series A Preferred Stock
agree to allow the Corporation to alter or change the rights, preferences or
privileges of the shares of Series A Preferred Stock, pursuant to subsection (a)
above, so as to affect the Series A Preferred Stock, then the Corporation will
deliver notice of such approved change to the holders of the Series A Preferred
Stock that did not agree to such alteration or change (the "Dissenting Holders")
and Dissenting Holders shall have the right for a period of thirty (30) days to
convert pursuant to the terms of this Certificate of Amendment as they exist
prior to such alteration or change or continue to hold their shares of Series A
Preferred Stock.
ARTICLE (13)
MISCELLANEOUS
SECTION (1) Loss, Theft, Destruction of Preferred
Stock. Upon receipt of evidence
satisfactory to the Corporation of the
loss, theft, destruction or mutilation of
shares of Series A Preferred Stock and, in
the case of any such loss, theft or
destruction, upon receipt of indemnity or
security reasonably satisfactory to the
Corporation, or, in the case of any such
mutilation, upon surrender and
cancellation of the Series A Preferred
Stock, the Corporation shall make, issue
and deliver, in lieu of such lost, stolen,
destroyed or mutilated shares of Series A
Preferred Stock, new shares of Series A
Preferred Stock of like tenor. The Series
A Preferred Stock shall be held and owned
upon the express condition that the
provisions of this Section 9.1 are
exclusive with respect to the replacement
of mutilated, destroyed, lost or stolen
shares of Series A Preferred Stock and
shall preclude any and all other rights
and remedies notwithstanding any law or
statute existing or hereafter enacted to
the contrary with respect to the
replacement of negotiable instruments or
other securities without the surrender
thereof.
SECTION (2) Who Deemed Absolute Owner. The Corporation
may deem the Person in whose name the
Series A Preferred Stock
<PAGE>
shall be registered upon the registry
books of the Corporation to be, and may
treat it as, the absolute owner of the
Series A Preferred Stock for the purpose
of receiving payment of dividends on the
Series A Preferred Stock, for the
conversion of the Series A Preferred Stock
and for all other purposes, and the
Corporation shall not be affected by any
notice to the contrary. All such payments
and such conversion shall be valid and
effectual to satisfy and discharge the
liability upon the Series A Preferred
Stock to the extent of the sum or sums so
paid or the conversion so made.
SECTION (3) Notice of Certain Events. In the case of
the occurrence of any event described in
Sections 6.1, 6.6 or 6.7 of this
Certificate of Amendment, the Corporation
shall cause to be mailed to the Holder of
the Series A Preferred Stock at its last
address as it appears in the Corporation's
security registry, at least twenty (20)
days prior to the applicable record,
effective or expiration date hereinafter
specified (or, if such twenty (20) days
notice is not possible, at the earliest
possible date prior to any such record,
effective or expiration date), a notice
stating (x) the date on which a record is
to be taken for the purpose of such
dividend, distribution, issuance or
granting of rights, options or warrants,
or if a record is not to be taken, the
date as of which the holders of record of
Series A Preferred Stock to be entitled to
such dividend, distribution, issuance or
granting of rights, options or warrants
are to be determined or (y) the date on
which such reclassification,
consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is
expected to become effective, and the date
as of which it is expected that holders of
record of Series A Preferred Stock will be
entitled to exchange their shares for
securities, cash or other property
deliverable upon such reclassification,
consolidation, merger, sale transfer,
dissolution, liquidation or winding-up.
SECTION (4) Register. (a) The Corporation shall keep
at its principal office a register in
which the Corporation shall provide for
the registration of the Series A Preferred
Stock. Upon any transfer of the Series A
Preferred Stock in accordance with the
provisions hereof, the Corporation shall
register such transfer on the Series A
Preferred Stock register.
(b) The Corporation may deem the person in whose
name the Series A Preferred Stock shall be registered upon the registry books
of the Corporation to be, and may treat it as, the absolute owner of the
Series A Preferred Stock for the purpose of receiving payment of dividends on
the Series A Preferred Stock, for the conversion of the
<PAGE>
Series A Preferred Stock and for all other purposes, and the Corporation shall
not be affected by any notice to the contrary. All such payments and such
conversions shall be valid and effective to satisfy and discharge the
liability upon the Series A Preferred Stock to the extent of the sum or sums
so paid or the conversion or conversions so made.
SECTION (5) Withholding. To the extent required by
applicable law, the Corporation may
withhold amounts for or on account of any
taxes imposed or levied by or on behalf of
any taxing authority in the United States
having jurisdiction over the Corporation
from any payments made pursuant to the
Series A Preferred Stock.
SECTION (6) Headings. The headings of the Articles and
Sections of this Certificate of Amendment
are inserted for convenience only and do
not constitute a part of this Certificate
of Amendment.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
Schedule I
Conversion Rates
As used in this Schedule I, "Closing Bid Price" means the closing bid
price for the common stock, par value $.001 per share, as reported by the
National Association of Securities Dealers over-the-counter bulletin board
system (or any other exchange or over-the-counter market upon which the Common
Stock is admitted and listed for trading) for any trading day.
Days after Funding Date Price
- ----------------------- -----
60-90 90% of the lowest Closing Bid Price for the 10 day
period prior to conversion
91-120 85% of the lowest Closing Bid Price for the 13 day
period prior to conversion
121-150 82.5% of the lowest Closing Bid Price for the 15 day
period prior to conversion
151-180 80% of the lowest Closing Bid Price for the 17 day
period prior to conversion
181-210 77.5% of the lowest Closing Bid Price for the 19 day
period prior to conversion
211-240 75% of the lowest Closing Bid Price for the 22 day
period prior to conversion
241-270 72.5% of the lowest Closing Bid Price for the 25 day
period prior to conversion
271- maturity 70% of the lowest Closing Bid Price for the 28 day
period prior to conversion
<PAGE>
(6) The foregoing amendment of the Corporation's
Certificate of Incorporation was adopted by the Board
of Directors of the corporation (the "Board") at a
special meeting of the Board on April 7, 1999.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Amendment of the Certificate of Incorporation to be executed by a
duly authorized officer as of the 21st day of April, 1999.
STAR MULTI CARE SERVICES, INC.
By: s/Stephen Sternbach
Stephen Sternbach
Chief Executive Officer
<PAGE>
Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated this 26th day of April,
1999 (this "Agreement"), between STAR MULTI CARE SERVICES, INC., a New York
corporation with principal executive offices located at 99 Railroad Plaza, Suite
208, Hicksville, New York 11801 (the "Company"), and the undersigned (the
"Investor").
W I T N E S S E T H :
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of April 26th, 1999, between the
Investor and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Investor on the date hereof, (i) 500 shares of
the Company's Series A 8% Convertible Preferred Stock, par value $1.00 per share
(the "Preferred Shares") which, upon the terms of and subject to the conditions
of the Company's Certificate of Amendment to the Company's Certificate of
Incorporation (the "Certificate of Amendment"), are convertible into shares of
the Company's common stock, par value $0.001 per share (the "Common Stock"), and
(ii) Common Stock Purchase Warrants (the "Warrants") to purchase 50,000 shares
of Common Stock; and
WHEREAS, to induce the Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable in lieu of cash dividend payments on the
Preferred Shares, upon conversion of the Preferred Shares and exercise of the
Warrants certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
(14) DEFINITIONS.
(1) As used in this Agreement, the following terms shall have the
following meanings:
(1) "AFFILIATE", of any specified Person means any other
Person who directly, or indirectly through one or
more intermediaries, is in control of, is controlled
by, or is under common control with, such specified
Person. For purposes of this definition, control of a
Person means the power, directly or indirectly, to
direct or cause the direction of the management and
policies of such Person whether by contract,
securities, ownership or otherwise; and the terms
"controlling" and "controlled" have the respective
meanings correlative to the foregoing.
<PAGE>
(iii) "COMMISSION" means the Securities and
Exchange Commission.
(iv) "CURRENT MARKET PRICE" on any date of
determination means the closing bid price of a share of the Common Stock on such
day as reported by the National Association of Securities Dealers ("NASD")
over-the-counter bulletin board system ("OTC/BBS"), or, if such security is not
listed or admitted to trading on the OTC/BBS, on the principal national security
exchange or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the closing bid price of such
security on the over-the-counter market on the day in question as reported by
the National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished by any
NASD member firm selected from time to time by the Board of Directors of the
Company for that purpose, or a price determined in good faith by the Board of
Directors of the Company as being equal to the fair market value thereof, as the
case may be.
(v) "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(2) "FUNDING DATE" means the date and time of
the issuance and sale of the Preferred Shares and the
Warrants.
(vi) "INVESTORS" means the Investor and any
transferee or assignee of Registrable Securities who agrees to become bound by
all of the terms and provisions of this Agreement in accordance with Section 8
hereof.
(vii) "PUBLIC OFFERING" means an offer registered
with the Commission and the appropriate state securities commissions by the
Company of its Common Stock and made pursuant to the Securities Act.
(viii) "PERSON" means any individual, partnership,
corporation, limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
(ix) "PROSPECTUS" means the prospectus
(including, without limitation, any preliminary prospectus and any final
prospectus filed pursuant to Rule 424(b) under the Securities Act, including any
prospectus that discloses information previously omitted from a prospectus filed
as part of an effective registration statement in reliance on Rule 430A under
the Securities Act) included in the Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other
2
<PAGE>
amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
(x) "REGISTRABLE SECURITIES" means the Common
Stock issued or issuable (i) in lieu of cash dividend payments on the Preferred
Shares, (ii) upon conversion of the Preferred Shares or (iii) upon exercise of
the Warrants; provided, however, that a share of Common Stock shall cease to be
a Registrable Security for purposes of this Agreement when it no longer is a
Restricted Security.
(xi) "REGISTRATION STATEMENT" means a
registration statement of the Company filed on an appropriate form under the
Securities Act providing for the registration of, and the sale on a continuous
or delayed basis by the holders of, all of the Registrable Securities pursuant
to Rule 415 under the Securities Act, including the Prospectus contained therein
and forming a part thereof, any amendments to such registration statement and
supplements to such Prospectus, and all exhibits and other material incorporated
by reference in such registration statement and Prospectus.
(xii) "RESTRICTED SECURITY" means any share of
Common Stock issued or issuable in lieu of cash dividend payments on the
Preferred Shares, upon conversion of the Preferred Shares or exercise of the
Warrants except any such share that (i) has been registered pursuant to an
effective registration statement under the Securities Act and sold in a manner
contemplated by the Prospectus included in the Registration Statement, (ii) has
been transferred in compliance with the resale provisions of Rule 144 under the
Securities Act (or any successor provision thereto) or is transferable pursuant
to paragraph (d) of Rule 144 under the Securities Act (or any successor
provision thereto), or (iii) otherwise has been transferred and a new share of
Common Stock not subject to transfer restrictions under the Securities Act has
been delivered by or on behalf of the Company.
(xiv) "SECURITIES ACT" means the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.
(2) All capitalized terms used and not defined herein
have the respective meaning assigned to them in the
Securities Purchase Agreement.
(15) REGISTRATION.
(1) FILING AND EFFECTIVENESS OF
REGISTRATION STATEMENT. The Company shall
prepare and file with the Commission not
later than thirty (30) days after the
Funding Date, a Registration Statement
relating to the offer and sale of all of the
Registrable Securities and shall use its
best efforts to cause the Commission to
declare such Registration Statement
3
<PAGE>
effective under the Securities Act as
promptly as practicable but not later than
one hundred and twenty (120) days after the
Initial Funding Date, assuming for purposes
hereof a Conversion Price under the
Certificate of Amendment of $____ per share.
The Company shall not include any other
securities in the Registration Statement
relating to the offer and sale of the
Registrable Securities, except for ___
shares of Common Stock issued or issuable
upon exercise of stock options granted under
the Company's 1992 Stock Option Plan, as
amended. The Company shall notify the
Investor by written notice that such
Registration Statement has been declared
effective by the Commission within 24 hours
of such declaration by the Commission.
(2) REGISTRATION DEFAULT. (i) If the
Registration Statement covering the
Registrable Securities required to be filed
by the Company pursuant to Section 2 (a) or
2 (d) hereof, as the case may be, is not (A)
filed with the Commission within thirty (30)
days after the Funding Date or (B) declared
effective by the Commission within one
hundred and twenty (120) days after the
Funding Date (either of which, without
duplication, an "Initial Date"), then the
Company shall make the payments to the
Investor as provided in the next sentence as
liquidated damages and not as a penalty. The
amount to be paid by the Company to the
Investor shall be determined as of each
Computation Date (as defined below), and
such amount shall be equal to 2% (the
"Liquidated Damage Rate") of the Purchase
Price (as defined in the Securities Purchase
Agreement) from the Initial Date to the
first Computation Date and for each
Computation Date thereafter, calculated on a
pro rata basis to the date on which the
Registration Statement is filed with (in the
event of an Initial Date pursuant to (c)(A)
above) or declared effective by (in the
event of an Initial Date pursuant to (c) (B)
above) the Commission (the "Periodic
Amount"); provided, however, that in no
event shall the Liquidated Damages be less
than $25,000. The full Periodic Amount shall
be paid by the Company to the Investor by
wire transfer of immediately available funds
within three days after each Computation
Date.
(ii) As used in this Section 2(b), "Computation Date" means
the date which is 30 days after the Initial Date and, if the Registration
Statement required to be filed by the Company pursuant to Section 2(a) has not
theretofore been declared effective by the
4
<PAGE>
Commission, each date which is 30 days after the previous Computation Date until
such Registration Statement is so declared effective.
(iii) Notwithstanding the above, if the Registration Statement
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) hereof, as the case may be, is not filed with the Commission by
the thirtieth (30th) day after the Initial Funding Date, the Company shall be in
default of this Registration Rights Agreement.
[ (3) If the Company proposes to register
any of its warrants, Common Stock or any
other shares of common stock under the
Securities Act (other than a registration
(A) on Form S-8 or S-4 or any successor or
similar forms, (B) relating to Common Stock
or any other shares of common stock of the
Company issuable upon exercise of employee
share options or in connection with any
employee benefit or similar plan of the
Company or (C) in connection with a direct
or indirect acquisition by the Company of
another Person or any transaction with
respect to which Rule 145 (or any successor
provision) under the Securities Act applies,
whether or not for sale for its own account,
it will at each such time, give written
notice at least 20 days prior to the
anticipated filing date of the registration
statement relating to such registration to
the Investor, which notice shall set forth
such Investor's rights under this Section
3(e) and shall offer the Investor the
opportunity to include in such registration
statement such number of Registrable Shares
as the Investor may request. Upon the
written request of the Investor made within
ten (10) days after the receipt of notice
from the Company (which request shall
specify the number of Registrable Shares
intended to be disposed of by such
Investor), the Company will use its best
efforts to effect the registration under the
Securities Laws of all Registrable Shares
that the Company has been so requested to
register by the Investor, to the extent
requisite to permit the disposition of the
Registrable Shares so to be registered;
provided, however, that (A) if such
registration involves a Public Offering, the
Investor must sell its Registrable Shares to
the underwriters selected as provided in
Section 3(b) hereof on the same terms and
conditions as apply to the Company and
(B) if, at any time after giving written
notice of its intention to register any
Registrable
5
<PAGE>
Shares pursuant to this Section 3 and prior
to the effective date of the registration
statement filed in connection with such
registration, the Company shall determine
for any reason not to register such
Registrable Shares, the Company shall give
written notice to the Investor and,
thereupon, shall be relieved of its
obligation to register any Registrable
Shares in connection with such registration.
The Company's obligations under this Section
2(c) shall terminate on the date that the
registration statement to be filed in
accordance with Section 2(a) is declared
effective by the Commission.]
[ (1) If a registration
pursuant to this Section
2(c) involves a Public
Offering and the managing
underwriter thereof advises
the Company that, in its
view, the number of shares
of Common Stock, Warrants
or other shares of Common
Stock that the Company and
the Investor intend to
include in such
registration exceeds the
largest number of shares of
Common Stock or Warrants
(including any other shares
of Common Stock or Warrants
of the Company) that can be
sold without having an
adverse effect on such
Public Offering (the
"Maximum Offering Size"),
the Company will include in
such registration,
only that number of shares
of Common Stock or
Warrants, as applicable,
such that the number of
Registrable Shares
registered does not exceed
the Maximum Offering Size,
with the difference between
the number of shares in the
Maximum Offering Size and
the number of shares to be
issued by the Company to be
allocated (after including
all shares to be issued and
sold by the Company) among
the Company and the
Investor pro rata on the
basis of the relative
number of Registrable
Shares offered for sale
under such registration by
each of the Company and the
Investor.]
[ (2) If as a result of
the proration provisions of
Section 2 (c) (ii) above,
any Investor is not
entitled to include all
such Registrable Shares in
such registration, such
Investor may elect to
withdraw its request to
include any Registrable
Shares in such
registration. With respect
to registrations
6
<PAGE>
pursuant to this Section
2(c), the number of
securities required to
satisfy any underwriters'
over-allotment option shall
be allocated pro rata among
the Company and the
Investor on the basis of
the relative number of
securities otherwise to be
included by each of them in
the registration with
respect to which such
over-allotment option
relates.]
(16) OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(1) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the
Registration Statement and supplements to the Prospectus as
may be necessary to keep the Registration Statement
continuously effective and in compliance with the provisions
of the Securities Act applicable thereto so as to permit the
Prospectus forming part thereof to be current and useable by
Investors for resales of the Registrable Securities for a
period of two years from the date on which the Registration
Statement is first declared effective by the Commission (the
"Effective Time") or such shorter period that will terminate
when all the Registrable Securities covered by the
Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the
Prospectus, transferred pursuant to Rule 144 under the
Securities Act or otherwise transferred in a manner that
results in the delivery of new securities not subject to
transfer restrictions under the Securities Act (the
"Registration Period") and (ii) take all lawful action such
that each of (A) the Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, not misleading and (B) the Prospectus
forming part of the Registration Statement, and any amendment
or supplement thereto, does not at any time during the
Registration Period include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing provisions of this
Section 3(a), the Company may, during the Registration Period,
suspend the use of the Prospectus for a period not to exceed
60 days (whether or not consecutive) in any 12-month period if
the Board of Directors of the Company determines in good faith
that because of valid business reasons, including pending
mergers or other business combination transactions, the
planned acquisition or divestiture of assets, pending material
corporate developments and similar events, it is in the best
interests of the Company to suspend such use, and prior to or
contemporaneously with suspending such
7
<PAGE>
use the Company provides the Investors with written notice of
such suspension, which notice need not specify the nature of
the event giving rise to such suspension. At the end of any
such suspension period, the Company shall provide the
Investors with written notice of the termination of such
suspension.
(2) During the Registration Period, comply with the provisions of
the Securities Act with respect to the Registrable Securities
of the Company covered by the Registration Statement until
such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus
forming part of the Registration Statement;
(3) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and
the distribution or delivery of any Prospectus (including any
supplements thereto), provide draft copies thereof to the
Investors and reflect in such documents all such comments as
the Investors (and their counsel) reasonably may propose and
(ii) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel
identified to the Company, (A) promptly after the same is
prepared and publicly distributed, filed with the Commission,
or received by the Company, one copy of the Registration
Statement, each Prospectus, and each amendment or supplement
thereto, and (B) such number of copies of the Prospectus and
all amendments and supplements thereto and such other
documents, as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned
by such Investor;
(4) (i) Register or qualify the Registrable Securities covered by
the Registration Statement under such securities or "blue sky"
laws of such jurisdictions as the Investors who hold a
majority-in-interest of the Registrable Securities being
offered reasonably request, (ii) prepare and file in such
jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the
effectiveness thereof at all times during the Registration
Period, (iii) take all such other lawful actions as may be
necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv)
take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in
such jurisdictions; provided, however, that the Company shall
not be required in connection therewith or as a condition
thereto to qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this
Section 3(d);
8
<PAGE>
(5) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a
result of which the Prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading, and promptly prepare an amendment to the
Registration Statement and supplement to the Prospectus to
correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each
Investor as such Investor may reasonably request;
(6) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being
sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance by the Commission of
any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take
all lawful action to effect the withdrawal, recession or
removal of such stop order or other suspension;
(7) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national
securities exchange, and included in an inter-dealer quotation
system of a registered national securities association, on or
in which securities of the same class or series issued by the
Company are then listed or included;
(8) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the
effective date of the Registration Statement;
(9) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such
certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors
reasonably may request and registered in such names as the
Investor may request; and, within three business days after a
Registration Statement which includes Registrable Securities
is declared effective by the Commission, deliver and
cause legal counsel selected by the Company to deliver to the
transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in
such Registration Statement) an appropriate instruction and,
to the extent necessary, an opinion of such counsel;
(10) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of
their Registrable Securities
9
<PAGE>
in accordance with the intended methods therefor provided in
the Prospectus which are customary under the circumstances;
(11) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months
after (i) the effective date (as defined in Rule 158(c) under
the Securities Act) of the Registration Statement, and (ii)
the effective date of each post-effective amendment to the
Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(12) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as
the managers reasonably agree should be included therein and
to which the Company does not reasonably object and make all
required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is
notified of the matters to be included or incorporated in such
Prospectus supplement or post-effective amendment;
(13) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the
Registration Statement, and any attorney, accountant or other
agent retained by such Investors or any such underwriter all
relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries,
and (ii) cause the Company's officers, directors and employees
to supply all information reasonably requested by such
Investors or any such underwriter, attorney, accountant or
agent in connection with the Registration Statement, in each
case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents
that are designated in writing by the Company, in good faith,
as confidential, proprietary or containing any material
nonpublic information shall be kept confidential by such
Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in
the case of any such holder or agent), unless such disclosure
is made pursuant to judicial process in a court proceeding
(after first giving the Company an opportunity promptly to
seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or
such records, information or documents become available to the
public generally or through a third party not in violation of
an accompanying obligation of confidentiality; provided,
however, that such records, information and documents shall be
used by such person solely for the purpose of determining that
disclosures made in the Registration Statement
10
<PAGE>
are true and correct, and for no other purpose; and provided
further that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its
business, such inspection and information gathering shall, to
the maximum extent possible, be coordinated on behalf of the
Investors and the other parties entitled thereto by one firm
of counsel designed by and on behalf of the majority in
interest of Investors and other parties;
(14) In connection with any underwritten offering, make such
representations and warranties to the Investors participating
in such underwritten offering and to the managers, in form,
substance and scope as are customarily made by the Company to
underwriters in secondary underwritten offerings;
(15) In connection with any underwritten offering, obtain opinions
of counsel to the Company (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to
the managers) addressed to the underwriters, covering such
matters as are customarily covered in opinions requested in
secondary underwritten offerings (it being agreed that the
matters to be covered by such opinions shall include, without
limitation, as of the date of the opinion and as of the
Effective Time of the Registration Statement or most recent
post-effective amendment thereto, as the case may be, the
absence from the Registration Statement and the Prospectus,
including any documents incorporated by reference therein, of
an untrue statement of a material fact or the omission of a
material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not
misleading, subject to customary limitations);
(16) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent
public accountants of the Company (and, if necessary, from the
independent public accountants of any subsidiary of the
Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or
are required to be, included in the Registration Statement),
addressed to each underwriter participating in such
underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any,
required for such cold comfort letter to be so addressed), in
customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with secondary
underwritten offerings;
(17) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by
the managers, if any; and
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<PAGE>
(18) In the event that any broker-dealer registered under the
Exchange Act shall be an "Affiliate" (as defined in Rule
2729(b)(1) of the rules and regulations of the NASD (the "NASD
Rules") (or any successor provision thereto)) of the Company
or has a "conflict of interest" (as defined in Rule 2720(b)(7)
of the NASD Rules (or any successor provision thereto)) and
such broker-dealer shall underwrite, participate as a member
of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the
Registration Statement, whether as a holder of such
Registrable Securities or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or
otherwise, the Company shall assist such broker-dealer in
complying with the requirements of the NASD Rules, including,
without limitation, by (A) engaging a "qualified independent
underwriter" (as defined in Rule 2720(b) (15) of the NASD
Rules (or any successor provision thereto)) to participate in
the preparation of the Registration Statement relating to such
Registrable Securities, to exercise usual standards of due
diligence in respect thereof and to recommend the public
offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the
extent of the indemnification of underwriters provided in
Section 6(a) hereof, and (C) providing such information to
such broker-dealer as may be required in order for such broker
-dealer to comply with the requirements of the NASD Rules.
(17) OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors
shall have the following obligations:
(1) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition
of the Registrable Securities held by it as shall be
reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in
connection with such registration as the Company may
reasonably request. As least seven days prior to the first
anticipated filing date of the Registration Statement, the
Company shall notify each Investor of the information the
Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of its
Registrable Securities included in the Registration Statement.
If at least two business days prior to the anticipated filing
date the Company has not received the Requested Information
from an Investor (a "Non-Responsive Investor") , then the
Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Investor and
have no further obligations to the Non-Responsive Investor;
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<PAGE>
(2) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the
preparation and filing of the Registration Statement
hereunder, unless such Investor has notified the Company in
writing of its election to exclude all of its Registrable
Securities from the Registration Statement; and
(3) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described
in Section 3(e) or 3(f), it shall immediately discontinue its
disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section
3(e) and, if so directed by the Company, such Investor shall
deliver to the Company (at the expense of the Company) or
destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the
Prospectus covering such Registrable Securities current at the
time of receipt of such notice.
(18) EXPENSES OF REGISTRATION. All expenses, other than
underwriting discounts and commissions, incurred in connection
with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and
engraving fees, accounting fees, and the fees and
disbursements of counsel for the Company, and the reasonable
fees of one firm of counsel to the holders of a majority in
interest of the Registrable Securities shall be borne by the
Company.
(19) INDEMNIFICATION AND CONTRIBUTION.
(1) The Company shall indemnify and hold harmless each Investor
and each underwriter, if any, which facilitates the
disposition of Registrable Securities, and each of their
respective officers and directors and each person who controls
such Investor or underwriter within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (each
such person being sometimes hereinafter referred to as an
"Indemnified Person") from and against any losses, claims,
damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement or
an omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein, not misleading, or arise out of or are
based upon an untrue statement or alleged untrue statement of
a material fact contained in any Prospectus or an omission or
alleged omission to state therein a material fact required to
be stated therein
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<PAGE>
or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
and the Company hereby agrees to reimburse such Indemnified
Person for all reasonable legal and other expenses incurred by
them in connection with investigating or defending any such
action or claim as and when such expenses are incurred;
provided, however, that the Company shall not be liable to any
such Indemnified Person in any such case to the extent that
any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement
made in, or an omission or alleged omission from, such
Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company
by such Indemnified Person expressly for use therein or (ii)
in the case of the occurrence of an event of the type
specified in Section 3(e), the use by the Indemnified Person
of an outdated or defective Prospectus after the Company has
provided to such Indemnified Person an updated Prospectus
correcting the untrue statement or alleged untrue statement or
omission or alleged omission giving rise to such loss, claim,
damage or liability.
(2) Indemnification by the Investors and Underwriters. Each
Investor agrees, as a consequence of the inclusion of any of
its Registrable Securities in a Registration Statement, and
each underwriter, if any, which facilitates the disposition of
Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless
the Company, its directors (including any person who, with his
or her consent, is named in the Registration Statement as a
director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls
the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities to which the Company or
such other persons may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in such Registration Statement or Prospectus or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
light of the circumstances under which they were made, in the case of the
Prospectus), not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such holder or underwriter expressly for use
therein; provided, however, that no Investor or underwriter shall be liable
under this Section 6(b) for any amount in excess of the net proceeds paid to
such Investor or underwriter in respect of shares sold by it, and (ii) reimburse
the Company for any legal or other expenses incurred by the Company in
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<PAGE>
connection with investigating or defending any such action or claim as such
expenses are incurred.
(3) Notice of Claims, etc. Promptly after receipt by a party
seeking indemnification pursuant to this Section 6 (an
"Indemnified Party") of written notice of any investigation,
claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 6 is being sought
(the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not
relieve it from any liability that it otherwise may have to
the Indemnified Party, except to the extent that the
Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying
Party and the Indemnified Party are parties, the Indemnifying
Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by
the Indemnifying Party, the Indemnified Party shall have the
right to employ separate legal counsel and to participate in
the defense of such Claim, and the Indemnifying Party shall
bear the reasonable fees, out-of-pocket costs and expenses of
such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay
such fees, costs and expenses, (y) the Indemnified Party and
the Indemnifying Party shall reasonably have concluded that
representation of the Indemnified Party by the Indemnifying
Party by the same legal counsel would not be appropriate due
to actual or, as reasonably determined by legal counsel to the
Indemnified Party, potentially differing interests between
such parties in the conduct of the defense of such Claim, or
if there may be legal defenses available to the Indemnified
Party that are in addition to or disparate from those
available to the Indemnifying Party, or (z) the Indemnifying
Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable
period of time after notice of the commencement of such Claim.
If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x) , (y) or
(z) above, the fees, costs and expenses of such legal counsel
shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in
connection with any Claim in the same jurisdiction, be liable
for the fees and expenses of more than one firm of counsel for
the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior
written consent of the Indemnifying Party (which consent shall
not unreasonably be withheld), settle or compromise any Claim
or consent to the entry of any judgment that does not include
an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.
15
<PAGE>
(4) Contribution. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless
an Indemnified Person under subsection (a) or (b) above in
respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and the Indemnified Party in
connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to,
among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by
such Indemnified Party or by such Indemnified Party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were
determined by pro rata allocation (even if the Investors or
any underwriters were treated as one entity for such purpose)
or by any other method of allocation which does not take
account of the equitable considerations referred to in this
Section 6 (d) . The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses
reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The obligations of the
Investors and any underwriters in this Section 6(d) to
contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case
may be, by them and not joint.
(5) Notwithstanding any other provision of this Section 6, in no
event shall any (i) Investor be required to undertake
liability to any person under this Section 6 for any amounts
in excess of the dollar amount of the proceeds to be received
by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and
commissions applicable thereto) pursuant to any Registration
Statement under which such Registrable Securities are to be
registered under the Securities Act and (ii) underwriter be
required to undertake liability to any Person hereunder for
any amounts in excess of the aggregate discount, commission or
other compensation payable
16
<PAGE>
to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the
Registration Statement.
(6) The obligations of the Company under this Section 6 shall be
in addition to any liability which the Company may otherwise
have to any Indemnified Person and the obligations of any
Indemnified Person under this Section 6 shall be in addition
to any liability which such Indemnified Person may otherwise
have to the Company. The remedies provided in this Section 6
are not exclusive and shall not limit any rights or remedies
which may otherwise be available to an indemnified party at
law or in equity.
(20) RULE 144. With a view to making available to the Investors the
benefits of Rule 144 under the Securities Act or any other
similar rule or regulation of the Commission that may at any
time permit the Investors to sell securities of the Company to
the public without registration ("Rule 144"), the Company
agrees to use its best efforts to:
(1) comply with the provisions of paragraph (c) (1) of Rule 144;
and
(2) file with the Commission in a timely manner all reports and
other documents required to be filed by the Company pursuant
to Section 13 or 15(d) under the Exchange Act; and, if at any
time it is not required to file such reports but in the past
had been required to or did file such reports, it will, upon
the request of any Holder, make available other information as
required by, and so long as necessary to permit sales of, its
Registrable Securities pursuant to Rule 144.
(21) ASSIGNMENT. The rights to have the Company register
Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any permitted
transferee of all or any portion of such securities (or all or
any portion of any Preferred Shares or Warrant of the Company
which is convertible into such securities) of Registrable
Securities only if: (a) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy
of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of
such transferee or assignee and (ii) the securities with
respect to which such registration rights are being
transferred or assigned, (c) immediately following such
transfer or assignment, the securities so transferred or
assigned to the transferee or assignee constitute Restricted
Securities, and (d) at or before the time the Company received
the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company
to be bound by all of the provisions contained herein.
17
<PAGE>
(22) AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively
or prospectively) , only with the written consent of the
Company and Investors who hold a majority-in-interest of the
Registrable Securities. Any amendment or waiver effected in
accordance with this Section 9 shall be binding upon each
Investor and the Company.
(23) MISCELLANEOUS.
(1) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable
Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered
owner of such Registrable Securities.
(2) If, after the date hereof and prior to the Commission
declaring the Registration Statement to be filed pursuant to
Section 2(a) effective under the Securities Act, the Company
grants to any Person any registration rights with respect to
any Company securities which are more favorable to such other
Person than those provided in this Agreement, then the Company
forthwith shall grant (by means of an amendment to this
Agreement or otherwise) identical registration rights to all
Investors hereunder.
(3) Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered
personally or sent by certified mail, postage prepaid, or by a
nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight
courier service, or, if mailed, three (3) days after the date
of deposit in the United States mails, as follows:
18
<PAGE>
(1) if to the Company, to:
STAR MULTI CARE SERVICES, INC.
99 Railroad Station Plaza
Suite 208
Hicksville, New York 11801
Attention: Stephen Sternbach,
Chief Executive Officer
Telephone: (516) 423-6688
Facsimile: (516) 423-3924
With a copy to:
Muenz & Meritz, PC
3 Hughes Place
Dix Hills, New York 11746
Attention: Lawrence Muenz, Esq..
Telephone: (516) 242-7384
Facsimile: (516) 242-6175
(2) if to the Investor, to:
THE SHAAR FUND LTD.,
c/o SHAAR ADVISORY SERVICES LTD.
62 King George Street, Apartment 4F
Jerusalem, Israel
Attention: Sam Levinson
with a copy to:
HERRICK, FEINSTEIN LLP
2 Park Avenue
New York, New York 10016
Attention: Irwin A. Kishner, Esq.
Telephone: (212) 592-1435
Facsimile: (212) 889-7577
(3) if to any other Investor, at such address as
such Investor shall have provided in
writing to the Company.
The Company or any Investor may change the foregoing address by notice given
pursuant to this Section 10(c).
19
<PAGE>
(4) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
(5) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York
in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions.
(6) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provision, covenants
and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially
the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to
be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(7) The Company shall not enter into any agreement with respect to
its securities that is inconsistent with the rights granted to
the holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. The Company is
not currently a party to any agreement granting any registration
rights with respect to any of its securities to any person which
conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any
Registration Statement filed pursuant hereto, except for such
rights and conflicts as have been irrevocably waived, and except
for the Company's agreement with Perry and Co. to register the
underlying Common Stock with respect to 90,000 stock options
granted to Perry and Co. Without limiting the generality of the
foregoing, without the written consent of the Holders of a
majority in interest of the Registrable Securities, the Company
shall not grant to any person the right to request it to register
any of its securities under the Securities Act unless the rights
so granted are subject in all respect to the prior rights of the
holders of Registrable Securities set forth herein, and are not
otherwise in conflict or inconsistent with the provisions of this
Agreement. The restrictions on the Company's rights to grant
registration rights under this paragraph shall terminate on the
date the Registration Statement to be filed pursuant to Section
2(a) is declared effective by the Commission.
20
<PAGE>
(8) This Agreement, the Securities Purchase Agreement, the Escrow
Instructions, dated as of the date hereof (the "Escrow
Instructions"), between the Company, the Investor and Herrick,
Feinstein LLP, the Preferred Shares and the Warrants
constitute the entire agreement among the parties hereto with
respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement, the
Securities Purchase Agreement, the Escrow Instructions, the
Certificate of Amendment and the Warrants supersede all prior
agreements and undertakings among the parties hereto with
respect to the subject matter hereof.
(9) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
(10) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the
context may require.
(11) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the
meaning thereof.
(12) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3, or any delay in such
performance could result in direct damages to the Investors
and the Company agrees that, in addition to any other
liability the Company may have by reason of any such failure
or delay, the Company shall be liable for all direct damages
caused by such failure or delay.
(13) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which
shall constitute one and the same agreement. A facsimile
transmission of this signed Agreement shall be legal and
binding on all parties hereto.
21
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
THE COMPANY:
STAR MULTI CARE SERVICES, INC.
By:s/Stephen Sternbach
-------------------
Name: Stephen Sternbach
Title: Chairman of the Board,
President and
Chief Executive Officer
BUYER:
THE SHAAR FUND LTD.
By: INTERCARRIBBEAN SERVICES, INC.
By:s/Samuel Levinson
-----------------
Name:
Title:
22
<PAGE>
Exhibit 5.1
[Muenz & Meritz, P.C. letterhead]
June 21, 1999
Star Multi Care Services, Inc.
33 Walt Whitman Road
Suite 302
Huntington Station, NY 11746
Gentlemen:
You have requested our opinion, as counsel for Star Multi Care Services, Inc., a
New York corporation (the "Company"), in connection with the registration
statement on Form S-3 (the "Registration Statement"), under the Securities Act
of 1933 (the "Act"), being filed by the Company with the Securities and Exchange
Commission.
The Registration Statement relates to the registration of 879,351 shares (the
"Registered Shares") of common stock (the "Offering"), par value $.01 (the
"Common Stock"). A total of 821,429 common stock shares are being offered for
sale upon the conversion into common stock shares upon the conversion of the
Convertible Preferred Stock, up to 50,000 of the Registered Shares may be issued
by the Company upon the exercise of certain warrants, and 7,922 common stock
shares are being offered for sale that were issued through the payment of
dividends on the Convertible Preferred Stock.
We have examined such records and documents and made such examinations of law as
we have deemed relevant in connection with this opinion. It is our opinion that
when there has been compliance with the Act, the Registered Shares, when issued,
delivered, and paid for, will be fully paid, validly issued and nonassessable.
No opinion is expressed herein as to any laws other than the laws of the State
of New York and the United States of America.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement. In so doing, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the Act
of the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Respectfully yours,
Muenz & Meritz, P.C.
By: s/Lawrence A. Muenz
------------------------
Lawrence A. Muenz
<PAGE>
Exhibit 10(v)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of April 26, 1999, between
STAR MULTI CARE SERVICES, INC., a New York corporation with principal executive
offices located at 33 Walt Whitman Road, Suite 302, Huntington Station, New York
11746 (the "Company"), and the undersigned ("Buyer").
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase from Company, and the Company
desires to issue and sell to the Buyer, upon the terms and subject to the
conditions of this Agreement, (i) 571 shares of the Company's Series A 8%
Convertible Preferred Stock, par value $1.00 per share (the "Preferred Shares")
and 50,000 Common Stock Purchase Warrants in the form attached hereto as EXHIBIT
A (the "Warrants") on the Funding Date (as defined in Section VII below):
WHEREAS, upon the terms and subject to the designations, preferences
and rights set forth in the Company's Certificate of Amendment to the Company's
Certificate of Incorporation in the form attached hereto as EXHIBIT B (the
"Certificate of Amendment"), the Preferred Shares are convertible into shares of
the Company's common stock, par value $0.001 per share (the "Common Stock"); and
WHEREAS, the Warrants, upon the terms and subject to the conditions
therein, will be exercisable to purchase 50,000 shares of Common Stock for a
period of three (3) years from and after the Funding Date.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
(24) PURCHASE AND SALE OF PREFERRED SHARES AND
WARRANTS
(1) TRANSACTION. Subject to the terms and conditions
contained herein, Buyer hereby agrees to purchase
from the Company, and the Company hereby agrees to
issue and sell to the Buyer in a transaction exempt
from the registration and prospectus delivery
requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Preferred Shares
and the Warrants.
(2) PURCHASE PRICE; FORM OF PAYMENT.
(1) The net purchase price for the Preferred Shares and
the Warrants to be purchased by Buyer hereunder shall
be $500,000 (the "Purchase Price"), after deductions
for fees and expenses..
(2) Buyer shall pay the Purchase Price by wire transfer
of immediately available funds to the escrow agent
(the "Escrow Agent") identified in those certain
Escrow Instructions dated as of the date hereof, a
copy of which is
<PAGE>
attached hereto as EXHIBIT C (the "Escrow
Instructions"). Simultaneously against receipt by the
Escrow Agent of the Purchase Price, the Company shall
deliver to the Escrow Agent or its designated
depository one or more duly authorized, issued and
executed certificates (in the name of Buyer or, if
the Company has been notified otherwise, in the name
of Buyer's nominee) evidencing the Preferred Shares
and the Warrants which the Buyer is purchasing. By
executing and delivering this Agreement, Buyer and
the Company each hereby agrees to observe the terms
and conditions of the Escrow Instructions, all of
which are incorporated herein by reference as if
fully set forth herein.
(3) METHOD OF PAYMENT. Payment into escrow of
the Purchase Price shall be made by wire
transfer of immediately available funds to:
Chase Manhattan Bank
1211 Avenue of the Americas
New York, New York 10036
For the Account of: Herrick, Feinstein LLP
Attorney Trust Account
Account# 967-123445
ABA Reference# 021-000-021
Simultaneously with the execution of this Agreement, the Buyer shall deposit
with the Escrow Agent the Purchase Price and the Company shall deposit with the
Escrow Agent the Preferred Shares and the Warrants representing the securities
to be purchased.
(25) BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
Buyer represents and warrants to and covenants and agrees with
the Company as follows:
(1) Buyer is purchasing the Preferred Shares, the Warrants, the
Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares") and the shares of Common Stock issuable upon
conversion of the Preferred Shares (the "Conversion Shares"
and, collectively with the Preferred Shares, the Warrants and
the Warrant Shares, the "Securities") for its own account, for
investment purposes only and not with a view towards or in
connection with the public sale or distribution thereof in
violation of the Securities Act.
(2) Buyer is (i) an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act, (ii)
experienced in making investments of the kind contemplated by
this Agreement, (iii) capable, by reason of its business and
financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to
afford the loss of its investment in the Securities.
2
<PAGE>
(3) Buyer understands that the Securities are being offered and
sold by the Company in reliance on an exemption from the
registration requirements of the Securities Act and equivalent
state securities and "blue sky" laws, and that the Company is
relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in
this Agreement to determine the availability of such exemption
and the eligibility of Buyer to purchase the Securities;
(4) Buyer has been furnished with or provided access to all
materials relating to the business, financial position and
results of operations of the Company, and all other materials
requested by Buyer to enable it to make an informed investment
decision with respect to the Securities.
(5) Buyer acknowledges that it has been furnished with all press
releases issued by the Company since May 31, 1998 and with
copies of the Company's Annual Report on Form 10-KSB for the
fiscal year ended May 31, 1998, and all other reports and
documents heretofore filed by the Company with the Commission
pursuant to the Securities Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), since May 31, 1998
(collectively, the "Commission Filings").
(6) Buyer acknowledges that in making its decision to purchase the
Securities it has been given an opportunity to ask questions
of, and to receive answers from, the Company's executive
officers, directors and management personnel concerning the
terms and conditions of the private placement of the
Securities by the Company.
(7) Buyer understands that the Securities have not been approved
or disapproved by the Commission or any state securities
commission and that the foregoing authorities have not
reviewed any documents or instruments in connection with the
offer and sale to it of the Securities and have not confirmed
or determined the adequacy or accuracy of any such documents
or instruments.
(8) This Agreement has been duly and validly authorized, executed
and delivered by Buyer and is a valid and binding agreement of
Buyer enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally.
(9) Neither Buyer nor its affiliates nor any person acting on its
or their behalf has the intention of entering, or will enter
into, at any time prior to the conversion of the Preferred
Stock or exercise of the Warrants, any put option, short
position or other similar instrument or position with respect
to the Common Stock, and neither Buyer nor any of its
affiliates nor any person acting on its or their behalf will
use at any time shares of Common Stock acquired pursuant to
this Agreement to settle any put option, short position or
other similar instrument or position that may have been
entered into prior to the execution of this Agreement.
3
<PAGE>
(26) COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
(1) CAPITALIZATION.
(1) The authorized capital stock of the Company consists
of: (i) 10,000,000 shares of Common Stock, of which
5,246,516 shares are issued and outstanding and
137,500 are held in treasury on the date hereof; and
(ii) 5,000,000 shares of "blank check" preferred
stock, of which no shares are issued and outstanding
on the date hereof. All of the issued and outstanding
shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable.
As of the date hereof, the Company has outstanding
529,887 stock options warrants to purchase shares of
Common Stock. The Conversion Shares and Warrant
Shares have been duly and validly authorized and
reserved for issuance by the Company, and when issued
by the Company upon conversion of or in lieu of
accrued dividends on the Preferred Shares, or on
exercise of the Warrants, will be duly and validly
issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by
reason of being such holder. There are no preemptive,
subscription, "call" or other similar rights to
acquire the Common Stock (including the Conversion
Shares and Warrant Shares) that have been issued or
granted to any person, except as disclosed on
Schedule III.A.1. hereto or otherwise previously
disclosed in writing to Buyer.
(2) Except as disclosed on Schedule III.A.2. hereto, the
Company does not own or control, directly or
indirectly, any interest in any other corporation,
partnership, limited liability company,
unincorporated business organization, association,
trust or other business entity.
(2) ORGANIZATION; REPORTING COMPANY STATUS.
(1) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the
State of New York and is duly qualified as a foreign
corporation in all jurisdictions in which the failure
to so qualify would have a material adverse effect on
the business, properties, prospects, condition
(financial or otherwise) or results of operations of
the Company or on the consummation of any of the
transactions contemplated by this Agreement (a
"Material Adverse Effect").
(2) The Company has registered the Common Stock pursuant
to Section 12(g) of the Exchange Act and has timely
filed with the Commission all reports and information
required to be filed by it pursuant to all reporting
obligations under Section 13(a) or 15(d), as
applicable, of the Exchange Act for the 12-month
period immediately preceding the date hereof. The
Common Stock is listed and traded on The NASDAQ Stock
Market, Inc. national market system ("NMS") and the
Company has not received any
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notice regarding, and to its knowledge there is no
threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
(3) AUTHORIZED SHARES. The Company has duly and
validly authorized and reserved for issuance
shares of Common Stock sufficient in number
for the conversion, of the Preferred Shares
and the exercise of the Warrants. The
Company understands and acknowledges the
potentially dilutive effect to the Common
Stock of the issuance of the Preferred
Shares and Warrant Shares upon conversion of
the Preferred Shares and exercise of the
Warrants. The Company further acknowledges
that its obligation to issue Conversion
Shares upon conversion of the Preferred
Shares and Warrant Shares upon exercise of
the Warrants in accordance with this
Agreement, the Certificate of Amendment and
the Warrants is absolute and unconditional
regardless of the dilutive effect that such
issuance may have on the ownership interests
of other stockholders of the Company.
(4) AUTHORITY; VALIDITY AND ENFORCEABILITY. The
Company has the requisite corporate power
and authority to file and perform its
obligations under the Certificate of
Amendment and to enter into the Documents
(as hereinafter defined), and to perform all
of its obligations hereunder and thereunder
(including the issuance, sale and delivery
to Buyer of the Securities). The execution,
delivery and performance by the Company of
the Documents, and the consummation by the
Company of the transactions contemplated
hereby and thereby (including, without
limitation, the filing of the Certificate of
Amendment with the New York Secretary of
State's office, the issuance of the
Preferred Shares, the Warrants and the
issuance and reservation for issuance of the
Conversion Shares and Warrant Shares), has
been duly authorized by all necessary
corporate action on the part of the Company.
Each of the Documents (as defined below) has
been duly validly executed and delivered by
the Company and the Certificate of Amendment
has been duly filed with the New York
Secretary of State's office by the Company,
and each instrument constitutes a valid and
binding obligation of the Company
enforceable against it in accordance with
its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws
affecting creditors' rights and remedies
generally. The Securities have been duly and
validly authorized for issuance by the
Company and, when executed and delivered by
the Company, will be valid and binding
obligations of the Company enforceable
against it in accordance with their terms,
subject to applicable bankruptcy,
insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws
affecting creditors' rights and remedies
generally. For purposes of this Agreement,
the term "Documents" means (i) this
Agreement; (ii) the Registration Rights
Agreement of even date herewith between the
Company and
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Buyer, a copy of which is annexed hereto as
EXHIBIT D (the "Registration Rights
Agreement"); (iii) the Warrants; (iv) the
Certificate of Amendment; and (v) the Escrow
Instructions.
(5) AUTHORIZATION OF THE SECURITIES. The
authorization, issuance, sale and delivery
of the Preferred Shares and Warrants has
been duly authorized by all requisite
corporate action on the part of the Company.
As of the Funding Date, the Preferred Shares
and the Warrants, and the Conversion Shares
and the Warrant Shares upon their issuance
in accordance with the Certificate of
Amendment and the Warrants, respectively,
will be validly issued and outstanding,
fully paid and nonassessable, and not
subject to any preemptive rights, rights of
first refusal or other similar rights.
(6) NON-CONTRAVENTION. The execution and
delivery by the Company of the Documents,
the issuance of the Securities, and the
consummation by the Company of the other
transactions contemplated hereby and
thereby, including, without limitation, the
filing of the Certificate of Amendment with
the New York Secretary of State's office, do
not and will not conflict with or result in
a breach by the Company of any of the terms
or provisions of, or constitute a default
(or an event which, with notice, lapse of
time or both, would constitute a default)
under (i) the certificate of incorporation
or by-laws of the Company or (ii) any
indenture, mortgage, deed of trust or other
material agreement or instrument to which
the Company is a party or by which its
properties or assets are bound, or any law,
rule, regulation, decree, judgment or order
of any court or public or governmental
authority having jurisdiction over the
Company or any of the Company's properties
or assets.
(7) APPROVALS. No authorization, approval or
consent of any third party or entity,
including, without limitation, any court or
public or governmental authority is required
to be obtained by the Company for the
issuance and sale of the Securities to Buyer
as contemplated by this Agreement, except
such authorizations, approvals and consents
that have been obtained by the Company prior
to the date hereof.
(8) COMMISSION FILINGS. None of the Commission
Filings contained at the time they were
filed any untrue statement of a material
fact or omitted to state any material fact
required to be stated therein or necessary
to make the statements made therein, in
light of the circumstances under which they
were made, not misleading.
(9) ABSENCE OF CERTAIN CHANGES. Since the
Balance Sheet Date (as defined in Section
III.M.), there has not occurred any change,
event or development in the business,
financial condition, prospects or
results of operations of the Company, and
there has not existed any
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condition having or reasonably likely to
have, a Material Adverse Effect.
(10) FULL DISCLOSURE. There is no fact known to
the Company (other than general economic or
industry conditions known to the public
generally) that has not been fully disclosed
in writing to the Buyer that (i) reasonably
could be expected to have a Material Adverse
Effect or (ii) reasonably could be expected
to materially and adversely affect the
ability of the Company to perform its
obligations pursuant to the Documents.
(11) ABSENCE OF LITIGATION. There is no action,
suit, claim, proceeding, inquiry or
investigation pending or, to the Company's
knowledge, threatened, by or before any
court or public or governmental authority
which, if determined adversely to the
Company, would have a Material Adverse
Effect.
(12) ABSENCE OF EVENTS OF DEFAULT. No "Event of
Default" or "Default" (as each such term is
defined in any agreement or instrument to
which the Company is a party) and no event
which, with notice, lapse of time or both,
would constitute an Event of Default (as so
defined) or Default (as so defined), has
occurred and is continuing, which could have
a Material Adverse Effect.
(13) FINANCIAL STATEMENTS; NO UNDISCLOSED
LIABILITIES. The Company has delivered to
Buyer true and complete copies of its
audited balance sheet as at May 31, 1998,
and the related audited statements of
operations and cash flows for the fiscal
year ended May 31, 1998, including the
related notes and schedules thereto
(collectively, the "Financial Statements"),
and all management letters, if any, from the
Company's independent auditors relating to
the dates and periods covered by the
Financial Statements. Each of the Financial
Statements is complete and correct in all
respects, has been prepared in accordance
with United States General Accepted
Accounting Principles ("GAAP") (subject, in
the case of the interim Financial
Statements, to normal year end adjustments
and the absence of footnotes) and in
conformity with the practices consistently
applied by the Company without modification
of the accounting principles used in the
preparation thereof, and fairly presents the
financial position, results of operations
and cash flows of the Company as at the
dates and for the periods indicated. For
purposes hereof, the balance sheet of the
Company as at November 30, 1998, as filed in
connection with the Company's Quarterly
Report on Form 10-Q on January 19, 1999, is
hereinafter referred to as the "Balance
Sheet" and November 30, 1998, is hereinafter
referred to as the "Balance Sheet Date". The
Company has no indebtedness, obligations or
liabilities of any kind (whether accrued,
absolute, contingent or otherwise, and
whether due or to become due) that would
have been required to be
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<PAGE>
reflected in, reserved against or otherwise
described in the Balance Sheet or in the
notes thereto in accordance with GAAP, which
was not fully reflected in, reserved against
or otherwise described in the Balance Sheet
or the notes thereto or was not incurred in
the ordinary course of business consistent
with the Company's past practices since the
Balance Sheet Date.
(14) COMPLIANCE WITH LAWS; PERMITS. The Company
is in compliance with all laws, rules,
regulations, codes, ordinances and statutes
(collectively "Laws") applicable to it or to
the conduct of its business, except for such
noncompliance which would not have a
Material Adverse Effect. The Company
possesses all permits, approvals,
authorizations, licenses, certificates and
consents from all public and governmental
authorities which are necessary to conduct
its business, except for those the absence
of which would not have a Material Adverse
Effect.
(15) RELATED PARTY TRANSACTIONS. Except as set
forth on Schedule III.O. hereto, neither the
Company nor any of its officers, directors
or "Affiliates" (as such term is defined in
Rule 12b-2 under the Exchange Act) has
borrowed any moneys from or has outstanding
any indebtedness or other similar
obligations to the Company. Except as set
forth on Schedule III.O. hereto, neither the
Company nor any of its officers, directors
or Affiliates (i) owns any direct or
indirect interest constituting more than a
one percent equity (or similar profit
participation) interest in, or controls or
is a director, officer, partner, member or
employee of, or consultant to or lender to
or borrower from, or has the right to
participate in the profits of, any person or
entity which is (x) a competitor, supplier,
customer, landlord, tenant, creditor or
debtor of the Company, (y) engaged in a
business related to the business of the
Company , or (z) a participant in any
transaction to which the Company is a party
(other than in the ordinary course of the
Company's business) or (ii) is a party to
any contract, agreement, commitment or other
arrangement with the Company.
(16) INSURANCE. The Company maintains insurance
coverage with financially sound and
reputable insurers and such insurance
coverage is adequate, consistent with
industry standards and the Company's
historical claims experience, and includes
coverage for such things as property and
casualty, general liability, workers'
compensation, personal injury and other
similar types of insurance. The Company has
not received notice from, and has no
knowledge of any threat by, any insurer
(that has issued any insurance policy to the
Company) that such insurer intends to deny
coverage under or cancel, discontinue or not
renew any insurance policy presently in
force.
8
<PAGE>
(17) SECURITIES LAW MATTERS. Based, in part, upon
the representations and warranties of Buyer
set forth in Section II hereof, the offer
and sale by the Company of the Securities is
exempt from (i) the registration and
prospectus delivery requirements of the
Securities Act and the rules and regulations
of the Commission thereunder and (ii) the
registration and/or qualification provisions
of all applicable state securities and "blue
sky" laws. Other than pursuant to an
effective registration statement under the
Securities Act, the Company has not issued,
offered or sold the Preferred Shares or any
shares of Common Stock (including for this
purpose any securities of the same or a
similar class as the Preferred Shares or
Common Stock, or any securities convertible
into or exchangeable or exercisable for the
Preferred Shares or Common Stock or any such
other securities) within the one-year
immediately preceding the date hereof,
except as disclosed on Schedule III.Q.
hereto, and the Company shall not directly
or indirectly take, and shall not permit any
of its directors, officers or Affiliates
directly or indirectly to take, any action
(including, without limitation, any offering
or sale to any person or entity of the
Preferred Shares or shares of Common Stock
or any of the other Securities), so as to
make unavailable the exemption from
Securities Act registration being relied
upon by the Company for the offer and sale
to Buyer of the Securities as contemplated
by this Agreement. No form of general
solicitation or advertising has been used or
authorized by the Company or any of its
officers, directors or Affiliates in
connection with the offer or sale of the
Securities as contemplated by this Agreement
or any other agreement to which the Company
is a party.
(18) ENVIRONMENTAL MATTERS.
(1) The operations of the Company are in compliance with
all applicable Environmental Laws (as defined below)
and all permits issued pursuant to Environmental Laws
or otherwise;
(2) the Company has obtained or applied for all permits
required under all applicable Environmental Laws
necessary to operate its business;
(3) the Company is not the subject of any outstanding
written order of or agreement with any governmental
authority or person respecting (i) Environmental
Laws, (ii) Remedial Action or (iii) any Release or
threatened Release of Hazardous Materials;
(4) the Company has not received, since the Balance Sheet
Date, any written communication alleging that it may
be in violation of any Environmental Law or any
permit issued pursuant to any Environmental Law, or
may have any liability under any Environmental Law;
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<PAGE>
(5) the Company does not have any current contingent
liability in connection with any Release of any
Hazardous Materials into the indoor or outdoor
environment (whether on-site or off-site);
(6) except as set forth on Schedule III.R.6 hereto, to
the Company's knowledge, there are no investigations
of the business, operations, or currently or
previously owned, operated or leased property of the
Company pending or threatened which could lead to the
imposition of any liability pursuant to any
Environmental Law;
(7) there is not located at any of the properties of the
Company any (A) underground storage tanks, (B)
asbestos-containing material or (C) equipment
containing polychlorinated biphenyls; and,
(8) the Company has provided to Buyer all environmentally
related audits, studies, reports, analyses, and
results of investigations that have been performed
with respect to the currently or previously owned,
leased or operated properties of the Company.
For purposes of this Section III.R.:
"Environmental Law" means any foreign, federal, state or local
statute, regulation, ordinance, or rule of common law as now or hereafter in
effect in any way relating to the protection of human health and safety or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. App. Section 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C.
Section 651 et seq.), and the regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material or waste
which is regulated by the United States, Canada or any of its provinces, or any
state or local governmental authority including, without limitation, petroleum
and its by-products, asbestos, and any material or substance which is defined as
a "hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or toxic substance" under any provision of any Environmental Law.
"Release" means any release, spill, filtration, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, or
leaching into the indoor or outdoor environment, or into or out of any property.
"Remedial Action" means all actions to (x) clean up, remove,
treat or in any other way address any Hazardous Material; (y) prevent the
Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; or (z)
perform pre-remedial studies and investigations or post-remedial monitoring and
care.
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<PAGE>
(19) LABOR MATTERS. The Company is not party to any labor
or collective bargaining agreement and there are no
labor or collective bargaining agreements which
pertain to employees of the Company. No employees of
the Company are represented by any labor organization
and none of such employees has made a pending demand
for recognition, and there are no representation
proceedings or petitions seeking a representation
proceeding presently pending or, to the Company's
knowledge, threatened to be brought or filed, with
the National Labor Relations Board or other labor
relations tribunal. There is no organizing activity
involving the Company pending or to the Company's
knowledge, threatened by any labor organization or
group of employees of the Company. There are no (i)
strikes, work stoppages, slowdowns, lockouts or
arbitrations or (ii) material grievances or other
labor disputes pending or, to the knowledge of the
Company, threatened against or involving the Company.
There are no unfair labor practice charges,
grievances or complaints pending or, to the knowledge
of the Company, threatened by or on behalf of any
employee or group of employees of the Company.
(20) ERISA MATTERS. The Company and its ERISA
Affiliates (as defined below) are in
compliance in all material respects with all
provisions of ERISA (as defined below)
applicable to it. No Reportable Event (as
defined below) has occurred, been waived or
exists as to which the Company or any ERISA
Affiliate was required to file a report with
the Pension Benefits Guaranty Corporation,
and the present value of all liabilities
under all Plans (based on those assumptions
used to fund such Plans) did not, as of the
most recent annual valuation date applicable
thereto, exceed the value of the assets of
all such Plans (as defined below) in the
aggregate. None of the Company or ERISA
Affiliates has incurred any Withdrawal
Liability that could result in a Material
Adverse Effect. None of the Company or ERISA
Affiliates has received any notification
that any Multiemployer Plan is in
reorganization or has been terminated within
the meaning of Title IV of ERISA, and no
Multiemployer Plan is reasonably expected to
be in reorganization or termination where
such reorganization or termination has
resulted or could reasonably be expected to
result in increases to the contributions
required to be made to such Plan or
otherwise.
For purposes of this Section III.T.:
"ERISA" means the Employee Retirement Income Security Act of
1974, or any successor statute, together with the regulations thereunder, as the
same may be amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single employer under ss. 414
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").
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"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Internal Revenue Code) is making or accruing an obligation to
make contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"Plan" means any pension plan (other than a Multiemployer
Plan) subject to the provision of Title IV of ERISA or Section 412 of the
Internal Revenue Code that is maintained for employees of the Company or any
ERISA Affiliate.
"Reportable Event" means any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Internal Revenue Code.
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
(21) TAX MATTERS.
(1) The Company has filed all Tax Returns which it is
required to file under applicable Laws, except for
such Tax Returns in respect of which the failure to
so file does not and could not have a Material
Adverse Effect; all such Tax Returns are true and
accurate in all material respects and have been
prepared in compliance with all applicable Laws; the
Company has paid all Taxes (as defined below) due and
owing by it (whether or not such Taxes are required
to be shown on a Tax Return) and have withheld and
paid over to the appropriate taxing authorities all
Taxes which it is required to withhold from amounts
paid or owing to any employee, stockholder, creditor
or other third parties; and since the Balance Sheet
Date, the charges, accruals and reserves for Taxes
with respect to the Company (including any provisions
for deferred income taxes) reflected on the books of
the Company are adequate to cover any Tax liabilities
of the Company if its current tax year were treated
as ending on the date hereof.
(2) No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax
returns that such corporation is or may be subject to
taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative
or judicial proceedings pending or being conducted
with respect to the Company; no information related
to Tax matters has been requested by any foreign,
federal, state or local taxing authority; and, except
as disclosed above, no written notice indicating an
intent to open an audit or other review has been
received by the Company from any foreign, federal,
state or local taxing authority. There are no
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<PAGE>
material unresolved questions or claims concerning
the Company's Tax liability. The Company (A) has not
executed or entered into a closing agreement pursuant
to Section 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar
provision of state, local or foreign law; or (B) has
not agreed to or is required to make any adjustments
pursuant to Section 481 (a) of the Internal Revenue
Code or any similar provision of state, local or
foreign law by reason of a change in accounting
method initiated by the Company or any of its
subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting
method, or has any application pending with any
taxing authority requesting permission for any
changes in accounting methods that relate to the
business or operations of the Company. The Company
has not been a United States real property holding
corporation within the meaning of Section 897(c)(2)
of the Internal Revenue Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the
Internal Revenue Code.
(3) The Company has not made an election under Section
341(f) of the Internal Revenue Code. The Company is
not liable for the Taxes of another person that is
not a subsidiary of the Company under (A) Treas. Reg.
Section 1.1502-6 (or comparable provisions of state,
local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D)
otherwise. The Company is not a party to any tax
sharing agreement. The Company has not made any
payments, is obligated to make payments or is a party
to an agreement that could obligate it to make any
payments that would not be deductible under Section
28OG of the Internal Revenue Code.
For purposes of this Section III.U.:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
(22) PROPERTY. The Company has good and
marketable title to all real and personal
property owned by it, free and clear of all
liens, encumbrances and defects except such
as are described on Schedule III.V. hereto
or such as do not materially affect the
value of such property and do not interfere
with the use made and proposed to be made of
such property by the Company; and any real
property and buildings held under lease by
the Company are held by it under valid,
subsisting and enforceable leases with such
exceptions as are not
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<PAGE>
material and do not interfere with the use
made and proposed to be made of such
property and buildings by the Company.
(23) INTELLECTUAL PROPERTY. The Company owns or
possesses adequate and enforceable rights to
use all patents, patent applications,
trademarks, trademark applications, trade
names, service marks, copyrights, copyright
applications, licenses, know-how (including
trade secrets and other unpatented and/or
unpatentable proprietary or confidential
information, systems or procedures) and
other similar rights and proprietary
knowledge (collectively, "Intangibles")
necessary for the conduct of its business as
now being conducted including, but not
limited to, those described on Schedule
III.W. hereto. The Company is not infringing
upon or in conflict with any right of any
other person with respect to any
Intangibles. Except as disclosed on Schedule
III.W. hereto, no claims have been asserted
by any person to the ownership or use of any
Intangibles and the Company has no knowledge
of any basis for such claim.
(24) INTERNAL CONTROLS AND PROCEDURES. The
Company maintains accurate books and records
and internal accounting controls which
provide reasonable assurance that (i) all
transactions to which the Company is a party
or by which its properties are bound are
executed with management's authorization;
(ii) the reported accountability of the
Company's assets is compared with existing
assets at regular intervals; (iii) access to
the Company's assets is permitted only in
accordance with management's authorization;
and (iv) all transactions to which the
Company is a party or by which its
properties are bound are recorded as
necessary to permit preparation of the
financial statements of the Company in
accordance with U.S. generally accepted
accounting principles consistently applied.
(25) PAYMENTS AND CONTRIBUTIONS. Neither the
Company nor any of its directors, officers
or, to its knowledge, other employees has
(i) used any Company funds for any unlawful
contribution, endorsement, gift,
entertainment or other unlawful expense
relating to political activity; (ii) made
any direct or indirect unlawful payment of
Company funds to any foreign or domestic
government official or employee; (iii)
violated or is in violation of any provision
of the Foreign Corrupt Practices Act of
1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback
or other similar payment to any person with
respect to Company matters.
(26) NO MISREPRESENTATION. No representation or
warranty of the Company contained in this
Agreement, any schedule, annex or exhibit
hereto or any agreement, instrument or
certificate furnished by the Company to
Buyer pursuant to this Agreement, contains
any untrue statement of a material fact or
omits to state a material fact
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required to be stated therein or necessary
to make the statements therein, not
misleading.
(27) CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(1) RESTRICTIVE LEGEND. Buyer acknowledges and
agrees that, upon issuance pursuant to this
Agreement, the Preferred Shares and the
Warrants (and any shares of Common Stock
issued in conversion of the Preferred Shares
or exercise of the Warrants) shall have
endorsed thereon a legend in substantially
the following form (and a stop-transfer
order may be placed against transfer of the
Preferred Shares and the Conversion Shares
until such legend has been removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND
SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
(2) FILINGS. The Company shall make all
necessary Commission Filings and "blue sky"
filings required to be made by the Company
in connection with the sale of the
Securities to the Buyer as required by all
applicable Laws, and shall provide a copy
thereof to the Buyer promptly after such
filing.
(3) REPORTING STATUS. So long as the Buyer
beneficially owns any of the Securities, the
Company shall timely file all reports
required to be filed by it with the
Commission pursuant to Section 13 or 15(d)
of the Exchange Act.
(4) USE OF PROCEEDS. The Company shall use the
net proceeds from the sale of the Securities
(excluding amounts paid by the Company for
legal fees and finder's fees in connection
with such sale) solely for general corporate
and working capital purposes.
(5) LISTING. Except to the extent the Company
lists its Common Stock on The New York Stock
Exchange, the Company shall use its best
efforts to maintain its listing of the
Common Stock on the OTC/BBS.
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(6) RESERVED CONVERSION SHARES. The Company at
all times from and after the date hereof
shall have a sufficient number of shares of
Common Stock duly and validly authorized and
reserved for issuance to satisfy the
conversion, in full, of the Preferred Shares
(assuming for purposes of this Section
IV.F., a Conversion Price (as defined in the
Certificate of Amendment of $0.95) and upon
the exercise of the Warrants. In the event
the Current Market Price (as defined in the
Certificate of Amendment) declines to $0.50,
the Company shall, within 10 days of the
occurrence of such event, authorize and
reserve for issuance such additional shares
of Common Stock sufficient in number for the
conversion, in full, of the Preferred
Shares, assuming for purposes of this
Section IV.F. a Conversion Price (as defined
in the Certificate of Amendment of $0.35 per
share.
[ (7) RIGHT OF FIRST REFUSAL. If the Company
should propose (the "Proposal") to issue
Common Stock or securities convertible into
Common Stock at a price less than the
Current Market Price (as defined in the
Certificate of Amendment), or debt at less
than par value or having an effective annual
interest rate in excess of 12% (each a
"Right of First Refusal Security" and
collectively, the "Right of First Refusal
Securities"), in each case on the date of
issuance during the period ending two years
after the Closing Date (the "Right of First
Refusal Period"), the Company shall be
obligated to offer the Buyer on the terms
set forth in the Proposal (the "Offer") and
the Buyer shall have the right, but not the
obligation, to accept such Offer on such
terms. If during the Right of First Refusal
Period, the Company provides written notice
to the Buyer that it proposes to issue any
Right of First Refusal Securities on the
terms set forth in the Proposal, then the
Buyer shall have ten (10) business days to
accept or reject such offer in writing. If
the Company fails to: (i) issue a Proposal
during the Right of First Refusal Period,
(ii) offer the Buyer the opportunity to
complete the transaction as set forth in the
Proposal, or (iii) enter into an agreement
with the Buyer, at such terms after the
Buyer has accepted the Offer, then the
Company shall pay to the Buyer, as
liquidated damages, an amount in total equal
to ten percent (10%) of the amount paid to
the Company for the Right of First Refusal
Securities. The foregoing Right of First
Refusal is and shall be senior in right to
any other right of first refusal issued by
the Company to any other Person (as defined
in the Certificate of Amendment).
Notwithstanding the foregoing, the Buyer
shall have no rights under this Section
IV.G. in respect of Common Stock or any
other securities of the Company issuable (i)
upon the exercise or conversion of options,
warrants or other rights to purchase
securities of the Company outstanding as of
the date hereof or (ii) to officers,
directors or employees of the Company.]
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(28) TRANSFER AGENT INSTRUCTIONS.
(1) The Company undertakes and agrees that no instruction other
than the instructions referred to in this Section V and
customary stop transfer instructions prior to the registration
and sale of the Common Stock pursuant to an effective
Securities Act registration statement will be given to its
transfer agent for the Common Stock and that the Common Stock
issuable upon conversion of the Preferred Shares and exercise
of the Warrants otherwise shall be freely transferable on the
books and records of the Company as and to the extent provided
in this Agreement, the Registration Rights Agreement and
applicable law. Nothing contained in this Section V.A. shall
affect in any way Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of such Common
Stock. If, at any time, Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company and
its counsel that registration of the resale by Buyer of such
Common Stock is not required under the Securities Act and that
the removal of restrictive legends is permitted under
applicable law, the Company shall permit the transfer of such
Common Stock and, promptly instruct the Company's transfer
agent to issue one or more certificates for Common Stock
without any restrictive legends endorsed thereon.
(2) The Company shall permit Buyer to exercise its right to
convert the Preferred Shares by telecopying an executed and
completed Notice of Conversion to the Company. Each date on
which a Notice of Conversion is telecopied to and received by
the Company in accordance with the provisions hereof shall be
deemed a Conversion Date. The Company shall transmit the
certificates evidencing the shares of Common Stock issuable
upon conversion of any Preferred Shares (together with
certificates evidencing any Preferred Shares not being so
converted) to Buyer via express courier, by electronic
transfer or otherwise, within five business days after receipt
by the Company of the Notice of Conversion (the "Delivery
Date"). Within 30 days after Buyer delivers the Notice of
Conversion to the Company, Buyer shall deliver to the Company
the Preferred Shares being converted.
(3) The Company shall permit Buyer to exercise its right to
purchase shares of Common Stock pursuant to exercise of the
Warrants in accordance with its applicable terms of the
Warrants. The last date that the Company may deliver shares of
Common Stock issuable upon any exercise of Warrants is
referred to herein as the "Warrant Delivery Date."
(4) The Company understands that a delay in the issuance of the
shares of Common Stock issuable in lieu of cash dividends on
the Preferred Shares, upon the conversion of the Preferred
Shares or exercise of the Warrants beyond the applicable
Dividend Payment Due Date (as defined in the Certificate
of Amendment), Delivery Date or Warrant Delivery Date
could result in economic loss to Buyer. As compensation
to Buyer for such loss (and not as a penalty), the
Company agrees to pay to Buyer for late issuance of
Common Stock issuable in lieu of cash dividends on the
Preferred Shares, upon conversion of the Preferred
Shares or exercise of the Warrants in accordance with
the following schedule (where "No. Business Days" is
defined as the number of business days beyond five (5)
days from the Dividend
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Payment Due Date (as that term is defined in the Certificate
of Amendment), the Delivery Date on the Warrant Delivery Date,
as applicable):
Compensation For Each 10
Shares of Preferred Shares Not
Converted Timely or 500
Shares of Common Stock
Issuable In Payment of
No. Business Days Dividends Not Issued Timely
----------------- ---------------------------
1 $25
2 $50
3 $75
4 $100
5 $125
6 $150
7 $175
8 $200
9 $225
10 $250
more than 10 $250 + $100 for each Business
Day Late beyond 10 days
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
relevant Dividend Payment Due Date, the Delivery Date or the Warrant Delivery
Date, as applicable, Buyer shall be entitled to rescind the relevant Notice of
Conversion or exercise of Warrants by delivering a notice to such effect to the
Company whereupon the Company and Buyer shall each be restored to their
respective original positions immediately prior to delivery of such Notice of
Conversion on delivery.
(29) DELIVERY INSTRUCTIONS.
The Securities shall be delivered by the Company to the Escrow
Agent pursuant to Section I.B. hereof on a "delivery-against-payment basis" at
the closing of the transactions contemplated hereby.
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(30) FUNDING DATE.
The date and time of the issuance and sale of the Preferred
Shares and the Warrants (the "Funding Date") shall be the date hereof or such
other date as shall be mutually agreed upon in writing. The issuance and sale of
the Preferred Shares and the Warrants shall occur on the Funding Date, at the
offices of the Escrow Agent. Notwithstanding anything to the contrary contained
herein, the Escrow Agent shall not be authorized to release to the Company the
Purchase Price and to Buyer the certificate(s) evidencing the Preferred Shares
and the Warrants unless the conditions set forth in VIII.C. and IX.G hereof have
been satisfied.
(31) CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The Buyer understands that the Company's obligation to sell
the Securities on the Funding Date to Buyer pursuant to this Agreement is
conditioned upon:
(1) Delivery by Buyer to the Escrow Agent of the Purchase Price
on the Funding Date.
(2) The accuracy in all material respects on the Funding Date of
the representations and warranties of Buyer contained in this
Agreement as if made on the Funding Date (except for
representations and warranties which, by their express terms,
speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the
performance by Buyer in all material respects on or before the
Funding Date of all covenants and agreements of Buyer required
to be performed by it pursuant to this Agreement on or before
the Funding Date;
(3) There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental
authority restraining, enjoining or otherwise prohibiting any
of the transactions contemplated by this Agreement.
(32) CONDITIONS TO BUYER'S OBLIGATIONS.
The Company understands that Buyer's obligation to purchase
the Securities on the Funding Date pursuant to this Agreement is conditioned
upon:
(1) Delivery by the Company to the Escrow Agent on or before the
Funding Date of one or more certificates evidencing the
Securities;
(2) The accuracy in all respects on the Funding Dates of the
representations and warranties of the Company contained in
this Agreement as if made on the Funding Date (except
for representations and warranties which, by their
express terms, speak as of and relate to a specified
date, in which case such accuracy shall be measured as
of such specified date) and the performance by the
Company in all respects on or before the Funding Date of
all covenants and agreements of the Company required to
be performed by it pursuant to this Agreement on or
before the Funding Date;
19
<PAGE>
(3) Buyer having received an opinion of counsel for the Company,
dated the Funding Date, in form, scope and substance
satisfactory to the Buyer.
(4) There not having occurred (i) any general suspension of
trading in, or limitation on prices listed for, the Common
Stock on the NMS, (ii) the declaration of a banking moratorium
or any suspension of payments in respect of banks in the
United States, (iii) the commencement of a war, armed
hostilities or other international or national calamity
directly or indirectly involving the United States or any of
its territories, protectorates or possessions, or (iv) in the
case of the foregoing existing at the date of this Agreement,
a material acceleration or worsening thereof.
(5) There not having occurred any event or development, and there
being in existence no condition, having or which reasonably
and foreseeably could have a Material Adverse Effect.
(6) The Company shall have delivered to Buyer (as provided in the
Escrow Instructions) reimbursement of Buyer's accountable or
unaccountable out-of-pocket costs and expenses incurred in
connection with the transactions contemplated by this
Agreement.
(7) There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental
authority restraining, enjoining or otherwise prohibiting any
of the transactions contemplated by this Agreement.
(33) TERMINATION.
(1) TERMINATION BY MUTUAL WRITTEN CONSENT. This
Agreement may be terminated and the
transactions contemplated hereby may be
abandoned, for any reason and at any time
prior to the Funding Date, by the mutual
written consent of the Company and Buyer.
(2) TERMINATION BY THE COMPANY OR BUYER. This
Agreement may be terminated and the
transactions contemplated hereby may be
abandoned by action of the Company or Buyer
if (i) the Funding Date shall not have
occurred at or prior to 5:00 p.m., New York
City time, on April 21, 1999; provided,
however, that the right to terminate this
Agreement pursuant to this Section X.B.(i)
shall not be available to any party whose
failure to fulfill any of its obligations
under this Agreement has been the cause of
or resulted in the failure of the Funding
Date to occur at or before such time and
date or (ii) any court or public or
governmental authority shall have issued an
order, ruling, judgment or writ, or there
shall be in effect any Law, restraining,
enjoining or otherwise prohibiting the
consummation of any of the transactions
contemplated by this Agreement.
(3) TERMINATION BY BUYER. This Agreement may be
terminated and the transactions contemplated
hereby may be abandoned by
20
<PAGE>
Buyer at any time prior to the Funding Date,
if (i) the Company shall have failed to
comply with any of its covenants or
agreements contained in this Agreement, (ii)
there shall have been a breach by the
Company with respect to any representation
or warranty made by it in this Agreement, or
(iii) there shall have occurred any event or
development, or there shall be in existence
any condition, having or reasonably and
foreseeably likely to have a Material
Adverse Effect.
(4) TERMINATION BY THE COMPANY. This Agreement
may be terminated and the transactions
contemplated hereby may be abandoned by the
Company at any time prior to the Funding
Date, if (i) Buyer shall have failed to
comply with any of its covenants or
agreements contained in this Agreement or
(ii) there shall have been a breach by Buyer
with respect to any representation or
warranty made by it in this Agreement.
(34) SURVIVAL; INDEMNIFICATION.
(1) The representations, warranties and covenants made by each of
the Company and Buyer in this Agreement, the annexes,
schedules and exhibits hereto and in each instrument,
agreement and certificate entered into and delivered by them
pursuant to this Agreement, shall survive the Funding Date and
the consummation of the transactions contemplated hereby. In
the event of a breach or violation of any of such
representations, warranties or covenants, the party to whom
such representations, warranties or covenants have been made
shall have all rights and remedies for such breach or
violation available to it under the provisions of this
Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such
party on or prior to the Funding Date.
(2) The Company hereby agrees to indemnify and hold harmless the
Buyer, its Affiliates and their respective officers,
directors, partners and members (collectively, the "Buyer
Indemnitees"), from and against any and all losses, claims,
damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer
Indemnitees for all out-of-pocket expenses (including the fees
and expenses of legal counsel), in each case promptly as
incurred by the Buyer Indemnitees and to the extent arising
out of or in connection with:
(1) any misrepresentation, omission of fact or breach of
any of the Company's representations or warranties
contained in this Agreement or the other Documents,
or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate
entered into or delivered by the Company pursuant to
this Agreement or the other Documents; or
(2) any failure by the Company to perform any of its
covenants, agreements, undertakings or obligations
set forth in this Agreement or the other Documents,
or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate
entered into or delivered by the Company pursuant to
this Agreement or the other Documents.
21
<PAGE>
(3) Buyer hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers,
directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Losses, and agrees
to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel),
in each case promptly as incurred by the Company Indemnitees
and to the extent arising out of or in connection with:
(1) any misrepresentation, omission of fact, or breach of
any of Buyer's representations or warranties
contained in this Agreement or the other Documents,
or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate
entered into or delivered by Buyer pursuant to this
Agreement or the other Documents; or
(2) any failure by Buyer to perform in any material
respect any of its covenants, agreements,
undertakings or obligations set forth in this
Agreement or the other Documents or any instrument,
certificate or agreement entered into or delivered by
Buyer pursuant to this Agreement or the other
Documents.
(4) Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "Indemnified
Party") of written notice of any investigation, claim,
proceeding or other action in respect of which indemnification
is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification
pursuant to this Section XI is being sought (the "Indemnifying
Party") of the commencement thereof; but the omission to so
notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially
prejudiced and forfeits substantive rights and defenses by
reason of such failure. In connection with any Claim as to
which both the Indemnifying Party and the Indemnified Party
are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of
the defense of any Claim by the Indemnifying Party, the
Indemnified Party shall have the right to employ separate
legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of such separate legal
counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party
and the Indemnifying Party reasonably shall have concluded
that representation of the Indemnified Party and the
Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by
legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense
of such Claim, or if there may be legal defenses available to
the Indemnified Party that are in addition to or disparate
from those available to the Indemnifying Party, or (z) the
Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal
counsel in circumstances other than as described in clauses
(x), (y) or (z) above, the fees, costs and expenses of such
legal
22
<PAGE>
counsel shall be borne exclusively by the Indemnified
Party. Except as provided above, the Indemnifying Party shall
not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with
appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment
that does not include an unconditional release of the
Indemnified Party from all liabilities with respect to such
Claim or judgment.
(5) In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being
asserted by a third party, the Indemnified Party promptly
shall deliver notice of such claim to the Indemnifying Party.
If the Indemnified Party disputes the claim, such dispute
shall be resolved by mutual agreement of the Indemnified Party
and the Indemnifying Party or by binding arbitration conducted
in accordance with the procedures and rules of the American
Arbitration Association. Judgment upon any award rendered by
any arbitrators may be entered in any court having competent
jurisdiction thereof.
(35) GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles of such state. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. if any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(36) NOTICES.
Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
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<PAGE>
(1) if to the Company, to:
STAR MULTI CARE SERVICES, INC.
33 Walt Whitman Road
Suite 302
Huntington Station, New York 11746
Attention: Stephen Sternbach,
Chief Executive Officer
Telephone: (516) 423-6688
Facsimile: (516) 423-3924
With a copy to:
Muenz & Meritz, PC
3 Hughes Place
Dix Hills, New York 11746
Attention: Lawrence Muenz, Esq.
Telephone: (516) 242-7384
Facsimile: (516) 242-6175
(2) if to the Buyer, to
THE SHAAR FUND LTD.,
c/o SHAAR ADVISORY SERVICES LTD.
62 King George Street, Apartment 4F
Jerusalem, Israel
Attention: Sam Levinson
with a copy to:
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attention: Irwin A. Kishner, Esq.
Telephone: (212) 592-1435
Facsimile: (212) 889-7577
(3) if to the Escrow Agent, to:
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attention: Irwin A. Kishner, Esq.
Telephone: (212) 592-1435
Facsimile: (212) 889-7577
The Company, the Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Section XIII.
24
<PAGE>
(37) CONFIDENTIALITY.
Each of the Company and Buyer agrees to keep confidential and not
to disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 10 of Rule
601 of Regulation S-K under the Securities Act and the Exchange Act).
(38) ASSIGNMENT.
This Agreement shall not be assignable by either of the parties
hereto without the prior written consent of the other party, and any attempted
assignment contrary to the provisions hereby shall be null and void; provided,
however, that Buyer may assign its rights and obligations hereunder, in whole or
in part, to any affiliate of Buyer who furnishes to the Company the
representations and warranties set forth in Section II hereof and otherwise
agrees to be bound by the terms of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first written above.
THE COMPANY:
STAR MULTI CARE SERVICES, INC.
By: s/Stephen Sternbach
Name: Steven Sternbach
Title: Chief Executive Officer
BUYER:
THE SHAAR FUND LTD.
By: INTERCARRIBBEAN SERVICES, INC.
By:s/Samuel Levinson
Name:
Title:
26
<PAGE>
Exhibit 10(w)
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR
THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT.
Number of Shares of Common Stock: 50,000
COMMON STOCK PURCHASE WARRANT
To Purchase Common Stock of
Star Multi Care Services, Inc.
THIS IS TO CERTIFY THAT The Shaar Fund Ltd., or its registered
assigns, is entitled, at any time from the Funding Date (as hereinafter defined)
to the Expiration Date (as hereinafter defined), to purchase from STAR MULTI
CARE SERVICES, INC., a New York corporation (the "Company"), 50,000 shares of
Common Stock (as hereinafter defined and subject to adjustment as provided
herein), in whole or in part, including fractional parts, at a purchase price
equal to $1.725 per share, all on the terms and conditions and pursuant to the
provisions hereinafter set forth.
39. DEFINITIONS
As used in this Common Stock Purchase Warrant (this "Warrant"), the
following terms have the respective meanings set forth below:
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common
Stock issued by the Company after the Funding Date, other than Warrant Shares.
"BOOK VALUE" shall mean, in respect of any share of Common Stock on
any date herein specified, the consolidated book value of the Company as of the
last day of any month immediately preceding such date, divided by the number of
Fully Diluted Outstanding shares of Common Stock as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares) by Holtz
Rubenstein & Company, LLP or any other firm of independent certified public
accountants of recognized national standing selected by the Company and
reasonably acceptable to the Holder.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
<PAGE>
"COMMON STOCK" shall mean (except where the context otherwise
indicates) the Common Stock, par value $0.001, of the Company as constituted on
the Initial Funding Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"CONVERTIBLE SECURITIES" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"CURRENT WARRANT PRICE" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"EXERCISE PERIOD" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"EXPIRATION DATE" shall mean April 30, 2001.
"FULLY DILUTED OUTSTANDING" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, outstanding on such date,
and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining book value or
net income per share.
"FUNDING DATE" means the date and time of the issuance and sale of
the Preferred Shares and the Warrants (each as defined in the Securities
Purchase Agreement).
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"HOLDER" shall mean the Person in whose name the Warrant or Warrant
Shares set forth herein is registered on the books of the Company maintained for
such purpose.
"MARKET PRICE" per Common Share means the average of the closing bid
prices of the Common Shares as reported by the NASDAQ Stock Market, Inc.
national market system ("NMS") or, if such security bid is not listed or
admitted to trading on the NMS, on the principal national security exchange or
quotation system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
securities exchange or
2
<PAGE>
quotation system, the closing bid price of such security on the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service, or if not so available, in such manner as furnished by any member
firm of the National Association of Securities Dealers selected from time to
time by the Board of Directors of the Company for that purpose, or a price
determined in good faith by the Board of Directors of the Company as being
equal to the fair market value thereof, as the case may be, for the five (5)
Trading Days immediately preceding the Funding Date.
"OTHER PROPERTY" shall have the meaning set forth in Section 4.4.
"OUTSTANDING" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated a date even herewith by and between the Company and The Shaar
Fund Ltd., as it may be amended from time to time.
"RESTRICTED COMMON STOCK" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
9.1(a).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SECURITIES PURCHASE AGREEMENT" shall mean the Securities Purchase
Agreement dated as of a date even herewith by and between the Company and The
Shaar Fund, Ltd. as it may be amended from time to time.
"TRANSFER" shall mean any disposition of any Warrant or Warrant
Shares or of any interest in either thereof, which would constitute a sale
thereof within the meaning of the Securities Act.
"TRANSFER NOTICE" shall have the meaning set forth in Section 9.2.
"WARRANTS" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
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"WARRANT PRICE" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"WARRANT SHARES" shall mean the shares of Common Stock purchased by
the holders of the Warrants upon the exercise thereof.
40. EXERCISE OF WARRANT
40.1 Manner of Exercise. From and after the Funding Date and until 5:00
P.M., New York time, on the Expiration Date, Holder may exercise this Warrant,
on any Business Day, for all or any part of the number of shares of Common Stock
purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 33 Walt Whitman Road, Suite
302, Huntington Station, New York 11746, or at the office or agency designated
by the Company pursuant to Section 12, (i) a written notice of Holder's election
to exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased, (ii) payment of the Warrant Price in cash or by
wire transfer or cashier's check drawn on a United States bank and (iii) this
Warrant. Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder or
its agent or attorney. Upon receipt of the items referred to in clauses (i),
(ii) and (iii) above, the Company shall, as promptly as practicable, and in any
event within five (5) Business Days thereafter, execute or cause to be executed
and deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as Holder
shall request in the notice and shall be registered in the name of Holder or,
subject to Section 9, such other name as shall be designated in the notice. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the notice, together with
the cash or check or checks and this Warrant, is received by the Company as
described above and all taxes required to be paid by Holder, if any, pursuant to
Section 2.2 prior to the issuance of such shares have been paid. If this Warrant
shall have been exercised in part, the Company shall, at the time of delivery of
the certificate or certificates representing Warrant Shares, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the unpurchased shares
of Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant, or, at the request of Holder,
appropriate notation may be made on this Warrant and the same returned to
Holder. Notwithstanding any provision herein to the contrary, the Company shall
not be required to register shares in the name of any Person who acquired this
Warrant (or part hereof) or any Warrant Shares otherwise than in accordance with
this Warrant.
40.2 Payment of Taxes and Charges. All shares of Common Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, freely tradeable and without any
preemptive rights. The Company shall pay all expenses in connection with, and
all taxes and other governmental charges that may be imposed with respect to,
the issue or delivery thereof, unless such tax or charge is imposed by law upon
Holder, in which case such taxes or charges shall be paid by Holder. The Company
shall not be required,
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however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Common Stock
issuable upon exercise of this Warrant in any name other than that of Holder,
and in such case the Company shall not be required to issue or deliver any
stock certificate until such tax or other charge has been paid or it has been
established to the satisfaction of the Company that no such tax or other
charge is due.
40.3 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Market Price per share
of Common Stock as of the Initial Funding Date.
40.4 Continued Validity. A holder of shares of Common Stock issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10 and
14 of this Warrant. The Company will, at the time of exercise of this Warrant,
in whole or in part, upon the request of Holder, acknowledge in writing, in form
reasonably satisfactory to Holder, its continuing obligation to afford Holder
all such rights; provided, however, that if Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to Holder all such rights.
41. TRANSFER, DIVISION AND COMBINATION
41.1 Transfer. Subject to compliance with Section 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1
or the office or agency designated by the Company pursuant to Section 12,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall, subject
to Section 9, execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the purchase of shares of Common Stock without having a new
warrant issued.
41.2 Division and Combination. Subject to Section 9, this Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
41.3 Expenses. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
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41.4 Maintenance of Books. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
42. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
42.1 Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
42.2 Certain Other Distributions. If at any time the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock),
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised this Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of
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any other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as
a part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
42.3 Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment,
any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(b) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(c) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(d) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in
good faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the Holder, and any
dispute shall be resolved by an investment banking firm of recognized
national standing selected by the Company and acceptable to the Holder.
42.4 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. If the Company shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another corporation (where
the Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of
assets by a holder
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of the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In the case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the
successor or acquiring corporation (if other than the Company) shall expressly
assume the due and punctual observance and performance of each and every
covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for adjustments of
shares of Common Stock for which this Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this
Section 4. For purposes of this Section 4.4, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class
which is not preferred as to dividends or assets over any other class of stock
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
42.5 Other Action Affecting Common Stock. If at any time or from time to
time the Company shall take any action in respect of its Common Stock, other
than any action described in this Section 4, which would have a materially
adverse effect upon the rights of the Holder, the number of shares of Common
Stock and/or the purchase price thereof shall be adjusted in such manner as may
be equitable in the circumstances, as determined in good faith by the Board of
Directors of the Company.
42.6 Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Current Warrant Price to be less
than the par value per share of Common Stock.
43. NOTICES TO HOLDER
43.1 Notice of Adjustments. Whenever the number of shares of Common Stock
for which this Warrant is exercisable, or whenever the price at which a share of
such Common Stock may be purchased upon exercise of the Warrants, shall be
adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a description of the basis on
which the Board of Directors of the Company determined the fair value of any
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights referred to in Section 4.2),
specifying the number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.4 or 4.5)
describing the number and kind of any other shares of stock or Other Property
for which this warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to the
Holder in accordance with Section 14.2. The Company shall keep at its office
or agency designated pursuant to Section 12 copies of all such certificates
and cause the same to be available for inspection at said office during normal
business hours by the Holder or any prospective purchaser of a Warrant
designated by the Holder.
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43.2 Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of
its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company
or any consolidation or merger of the Company with, or any sale, transfer
or other disposition of all or substantially all the property, assets or
business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
44. NO IMPAIRMENT
(a) The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (i) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (ii) take
all such action as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this warrant, and (iii) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
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(b) Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form satisfactory
to Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.
45. RESERVATION AND AUTHORIZATION OF COMMON STOCK
(a) From and after the Funding Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable, and not subject to preemptive
rights.
(b) Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Current Warrant Price.
(c) Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
46. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to the
holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
47. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Shares shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Shares. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
47.1 Restrictive Legend. (a) The Holder by accepting this Warrant and any
Warrant Shares agrees that unless registered under the Securities Act of 1933,
as amended (the "Securities Act"), subsequent to the Funding Date and prior to
the exercise hereof, this Warrant and the Warrant Shares issuable upon exercise
hereof may not be assigned or otherwise transferred unless and until (i) the
Company has received an opinion of counsel for the Holder reasonably
satisfactory to the Company and its counsel that such securities may be sold
pursuant to an exemption from registration
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under the Securities Act or (ii) a registration statement relating to such
securities has been filed by the Company and declared effective by the
Commission.
(b) Each certificate for Warrant Shares issuable hereunder shall bear
a legend as follows unless such securities have been sold pursuant to an
effective registration statement under the Securities Act:
"These securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or the
securities laws of any state, and are being offered and sold pursuant
to an exemption from the registration requirements of the Securities
Act and such laws. These securities may not be sold or transferred
except pursuant to an effective registration statement under the
Securities Act or pursuant to an available exemption from the
registration requirements of the Securities Act or such other laws."
(c) Except as otherwise provided in this Section 9, the Warrant shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
"This Warrant and the securities represented hereby have not been
registered under the Securities Act of 1933, as amended, and may not
be transferred in violation of such Act, the rules and regulations
thereunder or the provisions of this Warrant."
47.2 Notice of Proposed Transfers. Prior to any Transfer or attempted
Transfer of any Warrants or any shares of Restricted Common Stock, the Holder
shall give ten days, prior written notice (a "Transfer Notice") to the Company
and its counsel of Holder's intention to effect such Transfer, describing the
manner and circumstances of the proposed Transfer, and obtain from counsel to
Holder who shall be reasonably satisfactory to the Company, an opinion that the
proposed Transfer of such Warrants or such Restricted Common Stock may be
effected without registration under the Securities Act. After receipt of the
Transfer Notice and opinion, the Company shall, within five days thereof, notify
the Holder as to whether such opinion is reasonably satisfactory and, if so,
such holder shall thereupon be entitled to Transfer such Warrants or such
Restricted Common Stock, in accordance with the terms of the Transfer Notice.
Each certificate, if any, evidencing such shares of Restricted Common Stock
issued upon such Transfer shall bear the restrictive legend set forth in Section
9.1(a), and the Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(b), unless in the opinion of such counsel such
legend is not required in order to ensure compliance with the Securities Act.
The Holder shall not be entitled to Transfer such Warrants or such Restricted
Common Stock until receipt of notice from the Company under this Section 9.2(a)
that such opinion is reasonably satisfactory.
47.3 Required Registration. Pursuant to the terms and conditions set
forth in the Registration Rights Agreement, the Company shall prepare and file
with the Commission not later than the thirtieth (30th) day after the Funding
Date, a Registration Statement relating to the offer and sale of the Common
Stock issuable upon exercise of the Warrants and shall use its best efforts to
cause the Commission to declare such Registration Statement effective under the
Securities Act as promptly as practicable but no later than one hundred and
fifty (150) days after the Funding Date.
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47.4 Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Shares and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Shares or Restricted Common Stock (or Common Stock issuable
upon the exercise of the warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto or (ii) when the Company shall have received an opinion of
counsel reasonably satisfactory to it and its counsel that such shares may be
transferred without registration thereof under the Securities Act. Whenever the
restrictions imposed by Section 9 shall terminate as to this Warrant, as
hereinabove provided, the Holder hereof shall be entitled to receive from the
Company upon written request of the Holder, at the expense of the Company, a new
Warrant bearing the following legend in place of the restrictive legend set
forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 9 HEREOF TERMINATED ON ,
AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
47.5 Listing on Securities Exchange. If the Company shall list any shares
of Common Stock on any securities exchange, it will, at its expense, list
thereon, maintain and, when necessary, increase such listing of, all shares of
Common Stock issued or, to the extent permissible under the applicable
securities exchange rules, issuable upon the exercise of this Warrant so long as
any shares of Common Stock shall be so listed during any such Exercise Period.
48. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such information as
may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
49. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to Holder; provided, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
cancellation.
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50. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
51. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
52. MISCELLANEOUS
52.1 Nonwaiver and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice Holder's rights, powers or remedies. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
52.2 Notice Generally. Except as may be otherwise provided herein, any
notice or other communication or delivery required or permitted hereunder shall
be in writing and shall be delivered personally or sent by certified mail,
postage prepaid, or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally or by overnight courier
service, or, if mailed, three (3) days after the date of deposit in the United
States mails, as follows:
(1) if to the Company, to:
STAR MULTI CARE SERVICES, INC.
33 Walt Whitman Road
Huntington Station, New York 11746
Attention: Stephen Sternbach,
Chief Executive Officer
Telephone: (516) 423-6688
Facsimile: (516) 423-3924
With a copy to:
Muenz & Meritz, PC
3 Hughes Place
Dix Hills, New York 11746
Attention: Lawrence Muenz, Esq.
Telephone: (516) 242-7384
Facsimile: (516) 242-6715
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<PAGE>
(2) if to the Holder, to
THE SHAAR FUND LTD.,
c/o SHAAR ADVISORY SERVICES LTD.
62 King George Street, Apartment 4F
Jerusalem, Israel
Attention: Sam Levinson
with a copy to:
HERRICK, FEINSTEIN LLP
2 Park Avenue
New York, New York 10016
Attention: Irwin A. Kishner, Esq.
Telephone: (212) 592-1435
Facsimile: (212) 889-7577
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
52.3 Indemnification. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Warrant; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
52.4 Remedies. Holder in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under Section 9 of this Warrant. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of Section 9 of this
Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
52.5 Successors and Assigns. Subject to the provisions of Sections 3.1
and 9, this Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors of the Company and the successors and
assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and, with respect to
Section 9 hereof, holders of Warrant Shares, and shall be enforceable by any
such Holder or holder of Warrant Shares.
52.6 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Holder.
14
<PAGE>
52.7 Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
52.8 Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
52.9 Governing Law. This Warrant shall be governed by the laws of the
State of New York, without regard to the provisions thereof relating to conflict
of laws.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
15
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: April 26, 1999
THE COMPANY:
STAR MULTI CARE SERVICES, INC.
By: /s/Stephen Sternbach
Name: Stephen Sternbach
Title: Chairman of the Board, President and
Chief Executive Officer
Attest:
By: ___________________
Name:
Title:
[SEAL]
16
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this warrant for the purchase of ______________ Shares of Common Stock
of Star Multi Care Services, Inc. and herewith makes payment therefor, all at
the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Common Stock hereby purchased
(and any securities or other property issuable upon such exercise) be issued
in the name of and delivered to ________________________________ whose address
is ________________________________ and, if such shares of Common Stock shall
not include all of the shares of Common Stock issuable as provided in this
Warrant, that a new Warrant of like tenor and date for the balance of the shares
of Common Stock issuable hereunder be delivered to the undersigned.
________________________________________
(Name of Registered Owner)
________________________________________
(Signature of Registered Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of
Common Stock
and does hereby irrevocably constitute and appoint ____________ attorney-in-fact
to register such transfer on the books of maintained for the purpose, with
full power of substitution in the premises.
Dated: _________________ Print Name: ______________________________
Signature: _______________________________
Witness: _________________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of Star Multi Care Services, Inc. of our report dated July
24, 1998 (except for Note 7, as to which the date is September 11, 1998) with
respect to the consolidated financial statements of Star Multi Care Services,
Inc. included in the Annual Report on Form 10-K for the year ended May 31, 1998,
and to the reference to us under the heading of "Experts" in the Prospectus,
which is part of the Registration Statement.
s/ Holtz Rubenstein & Co., LLP
Holtz Rubenstein & Co., LLP
Melville, NY
June 6, 1999
