SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 14, 1997
NORTHSTAR HEALTH SERVICES, INC.
(Exact name of registrant as specified in charter)
Delaware 0-21752 25-1697152
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
665 Philadelphia Street, Indiana, Pennsylvania 15701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 349-7500
Not Applicable
(Former name or former address, if changed from last report)
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Item 5. Other Events.
Shareholder Litigation
The Company has reached a preliminary settlement which, if confirmed,
will resolve all of the eight shareholder suits currently pending
against the Company. These shareholder suits were initiated after
certain accounting irregularities were discovered early in 1996. These
discoveries resulted in the resignations of the Company's former
independent public accountants and two Directors of the Company,
including then Chairman and Chief Executive Officer, Mark A. DeSimone.
The suits, which originally sought more than $20 million in damages,
will be settled for $6.45 million. Substantially all of the Company's
share of the proposed settlement fund ($1.1 million) will be covered by
its director and officer liability insurance. The balance of the fund
will be covered by other parties and their insurers.
Final judicial confirmation of these settlements is scheduled for
November 7, 1997.
Forbearance Agreement and Related Matters
On August 18, 1997, the Company and some of its subsidiaries entered
into a Forbearance Agreement with IBJ Schroder Bank & Trust Company
("IBJ") with respect to certain defaults currently existing under a
Credit Agreement, dated as of October 20, 1997 (as amended, the "Credit
Agreement"), between the Company and IBJ, as both lender and agent.
Pursuant to the terms of the Forbearance Agreement, IBJ will forbear in
certain respects in the enforcement of the remedies available to IBJ
under the Credit Agreement through August 31, 1997, provided that the
rights of IBJ are not waived or impaired.
New Executive Officers Appointed
The Company has filled three key executive positions. Frank J.
Spramelli, 51, currently Vice President for Development of Three Rivers
Health Plan, a Pittsburgh HMO, will join the Company in September as
its Executive Vice President and Chief Administrative Officer. Lisa S.
Guarino, 38, currently a consultant to the Company, will resume her
former duties as the Company's Chief Financial Officer. Michael J.
Fournier, 32, an experienced occupational therapist who most recently
managed his own enterprise, has been named President of the Company's
long term care subsidiary, Keystone Rehabilitation Management.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of businesses being acquired: None.
(b) Pro Forma financial information: None.
(c) Exhibits:
99.1 Press release, dated August 14, 1997, issued by the
Company regarding the preliminary settlement of the
shareholder suits.
99.2 Press release, dated August 19, 1997, issued by the
Company regarding the Forbearance Agreement and the
appointment of new officers.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NORTHSTAR HEALTH SERVICES, INC.
/s/ Thomas W. Zaucha
Name: Thomas W. Zaucha
Title: Chief Executive Officer and
President
August 21, 1997
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EXHIBIT INDEX
Exhibit Page
99.1 Press release, dated August 14, 1997, issued by
the Company regarding the preliminary settlement
of the shareholder suits.......................................5
99.2 Press release, dated August 19, 1997, issued by
the Company regarding the Forbearance Agreement
and the appointment of new officers............................6
<PAGE>
Contact: Thomas W. Zaucha, CEO
Northstar Health Services, Inc.
(412) 465-3201
Tracey L. Missien, Director of Marketing
Northstar Health Services, Inc.
(412) 465-3711
For Immediate Release
Northstar Health Settles Shareholder Claims
Indiana, PA - August 14, 1997 - Northstar Health Services, Inc. (NSTR:OTCBB)
today announced a preliminary settlement which, if confirmed, will resolve all
of the eight shareholder suits currently pending against the Company. The suits,
which had originally sought more than $20 million in damages, were filed
following the Company's discovery early in 1996 of certain accounting
irregularities. These discoveries, in turn, led to the resignations of the
Company's then Chairman and Chief Executive Officer Mark DeSimone, an Executive
Vice President and an outside director.
Substantially all of the Company's share of the proposed $6.45 million
settlement fund will be covered by its director and officer liability insurance,
with other parties and their insurers funding the balance.
Thomas W. Zaucha, who became the Company's Chief Executive Officer in 1996 after
the resignation of his predecessor, stated, "This settlement removes a
significant cloud over Northstar's financial future, and positions us to
restructure our debt and attract new sources of financing. With the litigation
behind us, our plan now is to focus on our core business of physical therapy and
rehabilitation, and improve operating margins, creating a basis for measured
expansion."
Today's announcement came following a hearing before the U.S. District Court in
Pittsburgh, where seven of the suits have been consolidated. Terms of the
settlement will now be forwarded to members of the plaintiff classes involved in
the suits, who will have the opportunity to opt out of the proposal if they
elect to do so. Final judicial confirmation of these settlements is scheduled
for November 7, 1997. In connection with the settlement, the Company will also
settle its claims against Mr. DeSimone and others.
Northstar Health Services, Inc. is a leading regional provider of physical
rehabilitation, mobile diagnostics and contracted long term care services at
outpatient rehabilitation clinics and by contract to other healthcare facilities
in Pennsylvania, Ohio and West Virginia.
<PAGE>
Contact: Thomas W. Zaucha, CEO
Northstar Health Services, Inc.
(412) 465-3200
Tracey L. Missien, Director of Marketing
Northstar Health Services, Inc.
(412) 465-3710
For Immediate Release
Northstar Health Announces New Officers;
Signs Forbearance Agreement with Senior Lender
Indiana, PA -- August 19, 1997 -- Northstar Health Services, Inc. (NSTR: OTCBB)
today announced that it has appointed three key executives to its management
team.
Frank J. Spramelli, 51, currently Vice President for Development of Three Rivers
Health Plan, a Pittsburgh HMO, will be joining Northstar in September as its
Executive Vice President and Chief Administrative Officer. Mr. Spramelli
previously served as President and Chief Executive Officer of Philipsburg Area
Hospital. He holds a Masters degree in Public Administration from Shippensburg
University.
Lisa S. Guarino, 38, currently serving as financial consultant to Northstar, has
agreed to resume her former duties effective September 1, as Northstar's Chief
Financial Officer. Ms. Guarino is a Certified Public Accountant and holds an MBA
from Indiana University of Pennsylvania. Ms. Guarino served as Chief Financial
Officer of Northstar from November 1995 to September 1996 and had previously
served as Controller and CFO of Keystone Rehabilitation Systems, Inc. since
October 1986. Her auditing experience was obtained through Arthur Andersen LLP
from 1980 to 1983.
Michael J. Fournier, OTR/L, 32, has been named President of the Company's long
term care subsidiary, Keystone Rehabilitation Management. Mr. Fournier, employed
as an occupational therapist by Keystone Rehabilitation Systems, Inc. for six
years, most recently was Facility Director of the Indiana, PA outpatient
facility and a practicing clinician in several of the company's long term care
contract locations.
Commenting on these appointments, Thomas W. Zaucha, Chairman and CEO of
Northstar said, "These executives will bring new expertise, experience and
energy to Northstar. They will give our management team the depth and resources
we need to serve our therapists in the field, and to manage our responsibilities
in both the communities we serve and in the financial community."
The Company also announced that it has entered into a Forbearance Agreement with
its senior lender and largest creditor, IBJ Schroder Bank & Trust Company,
pursuant to which the bank has agreed not to enforce its rights under its credit
agreement with the Company through August 31, 1997, subject to extension in the
sole discretion of the bank. The Company has been in default of its obligations
under the credit agreement since its discovery, early in 1996, of certain
accounting
<PAGE>
irregularities but, as part of the Forbearance Agreement, the Bank has waived
its right to default interest during the period covered thereby.
Thomas Zaucha further added, "With this agreement, Northstar has taken an
important step toward normalization of its financial affairs. We hope it will
lead to a permanent reconfiguration of Northstar's entire capital structure,
including new cash infusions, as well as a reshaping of existing debt."
In recent weeks, Northstar has also announced the final resolution of its recent
contest for corporate control, as well as a global settlement, subject to final
confirmation, of the shareholder litigation against it that began in 1996. Mr.
Zaucha noted, "A bleak and difficult period in this company's history is now
drawing to a close. Challenges lie ahead, but today we know that we are on the
road back to health."
Northstar Health Services, Inc. is a leading regional provider of physical
rehabilitation, mobile diagnostic testing and contracted long term care services
as outpatient rehabilitation clinics and by contract to other healthcare
facilities in Pennsylvania, Ohio and West Virginia.
