SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant
to Rule 14a-11(c) or Rule 14a-12
Star Multi Care Services, Inc.
--------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------
<PAGE>
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------
<PAGE>
STAR MULTI CARE SERVICES, INC.
99 Railroad Station Plaza
Hicksville, New York 11801
---------------
NOTICE OF THE 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 10, 1997
To the Shareholders of Star Multi Care Services, Inc.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders (the
"Meeting") of Star Multi Care Services, Inc. (the "Company") will be held at the
Huntington Hilton Hotel, 598 Broadhollow Road, Melville, New York 11747 on
Wednesday, December 10, 1997 at 4:00 P.M., local time, to consider and act upon
the following matters:
(1) The election of a board of eight directors to serve until the
next annual meeting of shareholders and until their respective
successors are elected and qualified;
(2) The ratification and approval of the appointment of Holtz
Rubenstein & Co., LLP as the Company's independent certified
public accountants for the fiscal year ending May 31, 1998; and
(3) The transaction of such other business as may properly come
before the Meeting or any adjournments or postponements thereof.
The enclosed form of proxy has been prepared at the direction of the
Board of Directors of the Company and is sent to you at its request. The persons
named in said proxy have been designated by the Board of Directors.
Information regarding the matters to be acted upon at the Meeting is
contained in the accompanying Proxy Statement.
IF YOU DO NOT EXPECT TO BE PRESENT PERSONALLY AT THE MEETING AND YOU WISH YOUR
SHARES TO BE VOTED AT THE MEETING, PLEASE SIGN, DATE AND RETURN THE ENCLOSED
PROXY BY MAIL IN THE POSTAGE-PAID ENVELOPE SENT TO YOU HEREWITH FOR THAT
PURPOSE. IF YOU LATER FIND THAT YOU CAN BE PRESENT AT THE MEETING OR FOR ANY
OTHER REASON DESIRE TO REVOKE OR CHANGE YOUR PROXY, YOU MAY DO SO AT ANY TIME
BEFORE IT IS VOTED.
The Board of Directors has fixed the close of business on October 30,
1997 as the time when shareholders entitled to notice of and to vote at the
Meeting shall be determined and all persons who are holders of record of the
Company's Common Stock at such time, and no others, shall be entitled to notice
of and to vote at the Meeting or any adjournments or postponements thereof.
Holders of a majority of the outstanding shares of the Company's Common Stock
must be present in person or by proxy in order for the Meeting to be held.
A copy of the Company's Annual Report to Shareholders containing the
financial statements of the Company for the fiscal year ended May 31, 1997
accompanies this Notice.
By Order of the Board of Directors,
/s/ STEPHEN STERNBACH
---------------------------------
STEPHEN STERNBACH
President and Chief Executive Officer
Hicksville, New York
November 5, 1997
<PAGE>
PROXY STAR MULTI CARE SERVICES, INC. PROXY
This Proxy is solicited on behalf of the
Board of Directors PROXY for Annual Meeting
of Shareholders - December 10, 1997
The undersigned shareholder of common stock of STAR MULTI CARE SERVICES, INC.
hereby constitutes and appoints Stephen Sternbach and William Fellerman, and
each of them, as proxies for the undersigned, each with full power of
substitution, to vote and otherwise represent all of the shares of the
undersigned of the 1997 Annual Meeting of Shareholders of the Company to be held
at the Huntington Hilton Hotel, 598 Broadhollow Road, Melville, New York 11747
on Wednesday, December 10, 1997 at 4:00 P.M., local time, and at any
adjournments or postponements thereof, as if the undersigned were present and
voting the shares, in the following manner:
(1) Election of Directors:
[_] FOR ALL nominees listed below [_] WITHHOLD AUTHORITY
(except as indicated to the to vote for all nominees
contrary below) listed below
NOMINEES: Stephen Sternbach, William Fellerman, Charles Berdan, John P. Innes
II, Matthew Solof, Melvin L. Katten, Gary L. Weinberger and Ivan Kaufman
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
- - --------------------------------------------------------------------------------
(2) Ratification and approval of the appointment of Holtz Rubenstein
& Co., LLP as the Company's independent certified accountants:
[_] FOR [_] AGAINST [_] ABSTAIN
This Proxy is solicited on behalf of the Board of Directors and, unless contrary
instructions are indicated, will be voted FOR the election of all nominees for
directors and FOR ratification and approval of the appointment of Holtz,
Rubenstein & Co., LLP as the Company's independent certified accountants. In
their discretion, the proxies are authorized to vote upon such other matters as
may properly come before the meeting or any adjournments or postponements
thereof.
The undersigned hereby acknowledges receipt of a copy of the accompanying Notice
of Meeting, Proxy Statement and Annual Report to Shareholders of the fiscal year
ended May 31, 1997 and hereby revokes any proxy or proxies previously
given.
Dated:________________________, 1997
____________________________________
Signature
____________________________________
Signature
Please date and sign exactly as name appears hereon. If signing as attorney,
executor, administrator, trustee, or guardian, please indicate the capacity in
which your are acting. Proxies executed by corporations should be signed in the
corporation's full name by a duly authorized officer. Proxies executed by
partnerships should be signed in the partnership name by an authorized person.
If shares are held jointly, each shareholder named should sign.
PLEASE MARK, SIGN AND DATE THIS PROXY AND PROMPTLY RETURN IT IN THE ENVELOPE
PROVIDED.
<PAGE>
STAR MULTI CARE SERVICES, INC.
99 RAILROAD STATION PLAZA
HICKSVILLE, NEW YORK 11801
---------------
PROXY STATEMENT
---------------
1997 ANNUAL MEETING OF SHAREHOLDERS, DECEMBER 10, 1997
This Proxy Statement is furnished to the holders of Common Stock, par
value $.001 per share ("Common Stock") of Star Multi Care Services, Inc. (the
"Company") in connection with the solicitation by the board of directors (the
"Board of Directors" or the "Board") of the Company of proxies (the "Proxy" or
"Proxies") in the accompanying form for use at the 1997 Annual Meeting of
Shareholders of the Company to be held at 4:00 P.M. on December 10, 1997, at the
Huntington Hilton Hotel, 598 Broadhollow Road, Melville, New York, or at any
adjournments or postponements thereof (the "Meeting"), for the purposes set
forth in the accompanying Notice of 1997 Annual Meeting of Shareholders.
The presence, either in person or by properly executed Proxies, of a
majority of the shares of the Company's Common Stock entitled to vote is
necessary to constitute a quorum at the Meeting. Both abstentions and broker
non-votes are considered present for purposes of determining a quorum but are
excluded from votes cast.
This Proxy Statement and the accompanying form of Proxy are being
mailed on or about November 5, 1997. The Board of Directors of the Company has
fixed the close of business on October 30, 1997 as the Record Date for the
determination of shareholders entitled to notice of, and to vote at, the
Meeting. Accordingly, only holders of record of shares of Common Stock at the
close of business on the Record Date are entitled to notice of, and to vote at,
the Meeting. As of the Record Date, 5,104,696 shares of Common Stock were
outstanding and held of record by 2,760 shareholders. Each share is entitled to
one vote.
When a Proxy is returned, properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
Proxy. If a shareholder does not attend the Meeting and does not return the
signed Proxy, such shareholder's shares will not be voted. If a shareholder
returns a signed Proxy but does not indicate how his or her shares are to be
voted, such shares will be voted FOR each of the nominees named in this Proxy
Statement and FOR the ratification and approval of the appointment of Holtz
Rubenstein & Co., LLP as the Company's independent certified accountants for the
fiscal year ending May 31, 1998. As of the date of this Proxy Statement, the
Board of Directors does not know of any other matters which are to come before
the Meeting. If any
-1-
<PAGE>
other matters are properly presented at the Meeting for consideration, the
persons named in the enclosed Proxy and acting thereunder will have discretion
to vote on such matters in accordance with
their best judgment.
Any Proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by (i)
filing with the Secretary of the Company, at or before the taking of the vote at
the Meeting, a written notice of revocation bearing a later date than the Proxy,
(ii) duly executing a later dated Proxy relating to the same shares of Common
Stock and delivering it to the Secretary of the Company before taking the vote
at the Meeting or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute a revocation of a
Proxy). Any written notice of revocation or subsequent Proxy should be sent so
as to be delivered to Star Multi Care Services, Inc., 99 Railroad Station Plaza,
Hicksville, New York, 11801, Attention: William Fellerman, Corporate Secretary,
or hand delivered to the Secretary of the Company at or before the taking of the
vote at the Meeting.
The Company will bear the cost of the solicitation of Proxies from
its shareholders. In addition to solicitation by use of the mails, Proxies may
be solicited by directors, officers and employees of the Company in person or by
telephone or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for
out-of-pocket expenses incurred in connection with such solicitation.
Arrangements also will be made with custodians, nominees and fiduciaries for the
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such custodians, nominees and fiduciaries, and the Company will
reimburse such custodians, nominees and fiduciaries for reasonable expenses
incurred in connection therewith.
-2-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Set forth below is the ownership of the Company's Common Stock at
October 30, 1997 by (i) the only persons or groups who were owners of record or
were known by the Company to beneficially own on October 30, 1997 more than 5%
of the outstanding shares of Common Stock; (ii) each director and nominee for
director of the Company; (iii) each executive officer named in the Summary
Compensation Table under the caption "Executive Compensation" below; and (iv)
all directors and executive officers of the Company as a group. The Company
understands that, except as noted below, each beneficial owner has sole voting
and investment power with respect to all shares attributable to such owner.
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP* OF CLASS (1)
- - ------------------- ---------- ------------
Stephen Sternbach
c/o Star Multi Care Services, Inc.
99 Railroad Station Plaza
Hicksville, NY 11801 1,072,350(2) 20.55%
Ivan Kaufman
c/o Arbor Home Healthcare
Holdings, LLC
333 Earl Ovington Boulevard
Uniondale, New York 11553 667,096(3) 13.07%
Arbor Home Healthcare Holdings,
LLC
333 Earl Ovington Boulevard
Uniondale, New York 11553 667,096(4) 13.07%
Coss Holding Corp.
One Old Country Road
Suite 420
Carle Place, New York 11514 330,305(5) 6.47%
William Fellerman
c/o Star Multi Care Services, Inc.
99 Railroad Station Plaza
Hicksville, NY 18801 65,349(6) 1.27%
___________________________________________
(footnotes are continued on following page)
-3-
<PAGE>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP* OF CLASS (1)
- - ------------------- ---------- ------------
Charles Berdan
281 Potomac Drive
Basking Ridge, NJ 07920 1,019 **
John P. Innes II
8 Breckenridge Lane
Savannah, GA 31411 1,113 **
Matthew Solof
33 Fairbanks Boulevard
Woodbury, NY 11797 3,540 **
Melvin L. Katten
1480 Tower Road
Winnetka, IL 60093 56,913 1.11%
Gary L. Weinberger
38 Clayton Drive
Dix Hills, NY 11746 8,400 **
All directors and executive 1,875,780(7) 36.75%
officers of the Company as a group
(7 persons)
- - ----------
* All share amounts in this Proxy Statement have been adjusted to take into
account the stock dividends effectuated on May 30, 1995, January 12, 1996
and November 4, 1996, respectively.
** Indicates less than 1% of the outstanding shares of the Company's Common
Stock.
(1) Shares subject to options are considered outstanding only for the purpose
of computing the percentage of outstanding Common Stock which would be
owned by the optionee if the options were so exercised, but (except for
the calculation of beneficial ownership by all executive officers and
directors as a group) are not considered outstanding for the purpose of
computing the percentage of outstanding Common Stock owned by any other
person.
(2) Includes 119,606 shares of the Company's Common Stock owned by the Stephen
Sternbach Family Trust; Mr. Sternbach disclaims beneficial ownership with
respect to these shares. Also includes 92,322 shares of the Company's
Common Stock which Mr. Sternbach has a currently exercisable option to
purchase pursuant to the Company's 1992 Stock Option Plan, and 20,000
shares of the Company's Common
-4-
<PAGE>
Stock which Mr. Sternbach has a currently exercisable option to purchase
pursuant to the Company's 1996 Stock Option Plan.
(3) Based upon Mr. Kaufman's ninety-nine (99%) percent ownership interest in
Arbor Home Healthcare Holdings, LLC, as disclosed in a copy of a Schedule
13D received by the Company.
(4) Based upon a copy of a Schedule 13D received by the Company. Includes
330,305 shares of the Company's Common Stock of which dispositive power is
shared with Coss Holding Corp.
(5) Based upon a copy of a Schedule 13D received by the Company.
(6) Includes 24,068 shares of the Company's Common Stock owned by Mr.
Fellerman's wife; Mr. Fellerman disclaims beneficial ownership with
respect to these shares of the Company's Common Stock. Also includes 2,769
shares owned by the William Fellerman CPA PC Pension Trust Fund. Also
includes 28,512 shares of the Company's Common Stock which Mr. Fellerman
has a currently exercisable option to purchase pursuant to the Company's
1992 Stock Option Plan, and 10,000 shares of the Company's Common Stock
which Mr. Fellerman has a currently exercisable option to purchase
pursuant to the Company's 1996 Stock Option Plan.
(7) Includes 667,096 shares of the Company's Common Stock subject to an
irrevocable proxy whereby the Board of Directors of the Company was
granted the power to vote such shares in connection with the merger
relating to Extended Family Care Corporation.
-5-
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Meeting, eight directors are to be elected. Pursuant to the
Company's By Laws, all directors are elected to serve for the ensuing year and
until their respective successors are elected and qualified. Unless otherwise
directed, the persons named in the enclosed Proxy intend to cast all votes
pursuant to Proxies received for the election of Stephen Sternbach, William
Fellerman, Charles Berdan, John P. Innes II, Matthew Solof, Melvin L. Katten,
Gary L. Weinberger and Ivan Kaufman (collectively, the "Nominees").
Each of the Nominees has consented to serve as a director if elected.
Each of the Nominees, except for Ivan Kaufman, currently serve as a director and
was elected to that position at the Company's 1996 Annual Meeting of
Shareholders. Pursuant to the terms of the Agreement and Plan of Merger dated as
of January 3, 1997, as amended on April 6, 1997 between Extended Family Care
Corporation, a New York corporation ("EFCC") and the Company, providing for the
merger (the "Merger") of EFCC with and into a wholly-owned subsidiary of the
Company with the wholly-owned subsidiary of the Company continuing the
operations of EFCC, the Company agreed to take such reasonable action as may be
necessary to cause Ivan Kaufman to be appointed to the Board of Directors of the
Company at each of the next two annual meetings of the Company's shareholders
following the effective time of the Merger, for service on such Board until the
next such annual meeting of the Company's shareholders following such two annual
meetings. Unless authority to vote for any director is withheld in a Proxy, it
is intended that each Proxy will be voted FOR each of the Nominees. In the event
that any of the Nominees for director should, before the Meeting, become unable
to serve or for good cause will not serve if elected, it is intended that shares
represented by Proxies which are executed and returned will be voted for such
substitute nominees as may be recommended by the Company's existing Board of
Directors, unless other directions are given in the Proxies. To the best of the
Company's knowledge, all the Nominees will be available to serve.
POSITION HELD WITH THE DIRECTORS
NAME AGE COMPANY SINCE
- - ---- --- ------- -----
Stephen Sternbach 42 Chairman of the Board of 1987
Directors, President and Chief
Executive Officer
William Fellerman 53 Chief Financial Officer, 1990
Secretary, Treasurer, Director
Charles Berdan + * x 48 Director 1994
John P. Innes II + * x 63 Director 1991
Matthew Solof + * x 44 Director 1992
_________________________________
(footnotes are on following page)
-6-
<PAGE>
POSITION HELD WITH THE DIRECTORS
NAME AGE COMPANY SINCE
- - ---- --- ------- -----
Melvin L. Katten 61 Director 1996
Gary L. Weinberger 48 Director 1996
Ivan Kaufman 36 Nominee for Director --
- - -------------
+ Member of Compensation Committee
* Member of Stock Option Committee
x Member of Audit Committee
BACKGROUND OF NOMINEES:
- - -----------------------
Stephen Sternbach has been the Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since 1987. From 1978 to
1986, Mr. Sternbach was associated with Automated Data Processing, Inc. ("ADP"),
a provider of information services where he held several marketing positions and
ultimately the position of Director of Sales. Mr. Sternbach has served on the
Board of Trustees of the Long Island Chapter of the National Multiple Sclerosis
Society since 1996. Mr. Sternbach earned a Masters Degree in Public
Administration from Syracuse University and a B.A. in Industrial Relations &
Personnel Administration from Ithaca College.
William Fellerman has been the Chief Financial Officer, Secretary and
Treasurer of the Company since November 1992 and a director of the Company since
1990. Mr. Fellerman is a certified public accountant and was, until June 15,
1994, a partner in the accounting firm of Fellerman, Cohen and Tempesta and had
been for more than the five years prior thereto.
Charles Berdan became a director of the Company in April 1994 and
served as a Branch Manager of the Company from September 1993 to March 1994.
Since April 1994, Mr. Berdan has served as a Sales Executive for Automatic Data
Processing, Inc. ("ADP"), a provider of information services. From January 1993
to September 1993, Mr. Berdan was a Vice President of the Senior Bulletin, a
newspaper, which the Company purchased in September 1993. He also served from
July 1990 through July 1992 as a Division Vice President of Managistics, Inc., a
payroll services company. For at least the two years prior to July 1990, Mr.
Berdan was a Vice President of ADP.
John P. Innes II has been a director of the Company since 1991. Since
May of 1996, he has been Special Counsel to ValuJet Airlines. He has acted as a
private investor and consultant since July 1994. Previously, he was the Chairman
of Commonwealth Associates, an investment bank, from January 1992 to June 1994.
Mr. Innes also has served as Managing Director of Sabre Insurance Company, a
casualty insurance company (1986-1991), President of Boxhall Group, Inc., a
holding company for Sabre Insurance Company (1986-1991), Vice Chairman of the
Board of Directors of Wheeling-Pittsburgh Steel Corporation, an integrated steel
manufacturing company (1987-1990) and a private investor and consultant
(1990-1992).
-7-
<PAGE>
Matthew Solof has been a director of the Company since November 1992.
Since 1991, he has been the President and Chief Executive Officer of AMI Group,
a real estate development and acquisition company, and President and Chief
Executive Officer of Mercantile Mortgage Association, a mortgage lending
company. From 1983 to 1992, Mr. Solof was a trader at IRV Companies, a firm
which specializes in oil trading, and from 1981 to 1991 he was President and
Chief Executive Officer of Matthew Solof Trading Company, a firm which also
specializes in oil trading.
Melvin L. Katten, an attorney, has been a Senior partner in the
Chicago law firm of Katten Muchin & Zavis since 1974. He was a director of
Amserv Healthcare Inc., a Delaware corporation ("Amserv") from 1985 until
consummation of the merger of a wholly-owned subsidiary of the Company with and
into Amserv in August 1996. Mr. Katten also serves as a director of Washington
Scientific Industries, Inc., a publicly-held company.
Gary L. Weinberger has been engaged in the private practice of
orthodontics for more than the past twenty years. In addition, Dr. Weinberger is
engaged as a consultant on financial planning and management. Dr. Weinberger is
a member of the International Board of Standards and Practices for Financial
Planners, the International Association of Financial Planners and the American
Association of Orthodontists.
Ivan Kaufman is the founder and CEO of Arbor National Commercial
Mortgage, LLC, a leading provider of debt and equity financing to multifamily,
healthcare and commercial borrowers nationwide, since 1995. From 1983 to 1995,
Mr. Kaufman was the founder, chairman and CEO of Arbor National Holdings, Inc.
("Holdings") and Arbor National Mortgage, Inc. ("National Mortgage"). Holdings
was a publicly held NASDAQ listed holding company with National Mortgage, a
leading residential mortgage bank, its largest subsidiary until it was sold to
Bank of America in January 1995. Mr. Kaufman is the President and 99% owner of
Arbor Home Healthcare Holdings, LLC, ("Arbor Health"), since 1995. Mr. Kaufman
is also President and 99% owner of Arbor Management, LLC, since 1995. Arbor
Management has a management agreement to perform various management services for
various entities from time to time and had management control of Extended Family
Care Corporation through a management agreement from October 1995 until its sale
in September 1997 to the Company. Mr. Kaufman currently serves on the Executive
Board of the North Shore Hebrew Academy and is a Board Trustee of the Great Neck
Synagogue. He also serves as Treasurer of the Israeli Tribute Committee. Mr.
Kaufman earned a J.D. from Hofstra University School of Law, and a B.A. in
Business Administration from Boston University.
MEETINGS OF THE BOARD OF DIRECTORS
- - ----------------------------------
During the Company's last fiscal year, its Board of Directors held
two (2) meetings and acted on six (6) occasions by unanimous written consent
without a meeting.
The Stock Option Committee of the Board of Directors consists of
Messrs. John P. Innes II, Matthew Solof and Charles Berdan. The function of this
committee, which held one (1) meeting during the past fiscal year, is to
administer the Company's stock option plans.
-8-
<PAGE>
The Audit Committee of the Board of Directors consists of Messrs.
John P. Innes II, Matthew Solof and Charles Berdan and its function is to
nominate independent auditors, subject to approval by the Board of Directors,
and to examine and consider matters related to the audit of the Company's
accounts, the financial affairs and accounts of the Company, the scope of the
independent auditors' engagement and their compensation, the effect on the
Company's financial statements of any proposed changes in generally accepted
accounting principles, disagreements, if any, between the Company's independent
auditors and management, and matters of concern to the independent auditors
resulting from the audit, including the results of the independent auditors'
review of internal accounting controls. The Audit Committee held one (1) meeting
during the past fiscal year.
The Compensation Committee of the Board of Directors consists of
Messrs. John P. Innes II, Matthew Solof and Charles Berdan and its function is
to fix the salaries, bonuses and other compensation arrangements of the
executive officers of the Company, and it also has the authority to examine,
administer and make recommendations to the Board with respect to benefit plans
and arrangements (other than the stock option plans which are administered by
the Stock Option Committee) of the Company and its subsidiaries. The
Compensation Committee acted on one occasion by unanimous written consent
without a meeting during the past fiscal year.
The Compliance Committee of the Board of Directors consists of
Messrs. Charles Berdan, Gary L. Weinberger and William Fellerman. The function
of this committee, which had one meeting during the past fiscal year, is to
examine and consider matters relating to regulatory and managerial compliance.
The Board of Directors has no standing nominating committee.
Each incumbent director attended at least 75% of the meetings of the
Board of Directors and the committee on which he served which were held while he
was serving as a director and/or committee member during the Company's last
fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- - -----------------------------------------------------------
No members of the Compensation Committee has a relationship that
would constitute an interlocking relationship with executive officers or
directors of another entity.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- - -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
its common stock, to file reports of ownership and changes of ownership with the
Securities and Exchange Commission ("SEC") and each exchange on which the
Company's securities are registered. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all ownership forms they file.
Based solely on its review of the copies of such forms received by
it, or written representations from certain persons that no Form 5 was required
for those persons, the Company
-9-
<PAGE>
believes that, during the year ended May 31, 1997, its officers, directors and
greater than ten-percent shareholders complied with all applicable Section 16
filing requirements.
PERFORMANCE GRAPH
- - -----------------
Set forth below is a graph comparing the yearly change in the
cumulative shareholder return of the Company's Common Stock with the National
Association of Securities Dealers Automated Quotation Market Index and a peer
group index of six competing companies for the same period. The comparison
assumes $100 was invested at the close of business on May 31, 1992 in the
Company's Common Stock and in each of the comparison groups, and assumes
reinvestment of dividends. The Company paid no dividends during the periods.
TOTAL SHAREHOLDER RETURNS
(Dividends Reinvested)
ANNUAL RETURN PERCENTAGE
Year Ending
Company Name/Index May-93 May-94 May-95 May-96 May-97
================================================================================
STAR MULTI CARE SERVICES -43.25 42.89 58.99 97.89 -32.50
NASDAQ - U.S. 20.29 5.27 18.96 45.34 12.67
PEER GROUP -30.05 -1.58 26.85 -13.92 -25.86
TOTAL SHAREHOLDER RETURNS (cont.)
(Dividends Reinvested)
Base
Period
Company Name/Index May-92 May-93 May-94 May-95 May-96 May-97
================================================================================
STAR MULTI CARE SERVICES 100 56.75 81.09 128.93 255.15 172.22
NASDAQ - U.S. 100 120.29 126.63 150.64 218.94 246.68
PEER GROUP 100 69.95 68.85 87.34 75.18 55.74
Peer Group Companies
================================================================================
CARE GROUP INC
HOSPITAL STAFFING SVCS INC
IN HOME HEALTH INC
NATIONAL HOME HEALTH CARE
STAFF BUILDERS INC
TRANSWORLD HEALTHCARE INC
-10-
<PAGE>
[GRAPHIC OMITTED]
COMPENSATION COMMITTEE REPORT
- - -----------------------------
Overview and Philosophy
-----------------------
The Compensation Committee of the Board of Directors is composed of
three directors, Messrs. Berdan, Innes and Solof. The Compensation Committee is
responsible for developing and making recommendations to the Board of Directors
with respect to the Company's executive compensation policies. The Compensation
Committee's executive compensation philosophy (which is intended to apply to all
members of the Company's management, including its Chief Executive Officer) is
to provide competitive levels of compensation, integrate managements' pay with
achievement of the Company's performance goals, reward above average corporate
performance, recognize individual initiative and achievement and assist the
Company in attracting and retaining qualified management.
-11-
<PAGE>
The objectives of the Company's executive compensation program are
to:
* Support the achievement of desired Company performance.
* Provide compensation that will attract and retain
superior talent and reward performance.
The executive compensation program provides an overall level of
compensation opportunity that is competitive within the healthcare industry, as
well as with a broader group of companies of
comparable size and complexity.
Executive Officer Compensation
------------------------------
The Company's executive officer compensation is comprised of base
salary, annual cash bonus and long-term incentive compensation in the form of
stock options and various benefits, including
medical plans generally available to employees of the Company.
It is the philosophy of the Compensation Committee that compensation
of executive officers should be closely aligned with the financial performance
of the Company. Accordingly, benefits are provided through stock option
incentives and bonuses which are generally consistent with the goal of
coordinating the rewards to management with a maximization of shareholder
return. In reviewing Company performance, consideration is given to the
Company's earnings. Also taken into account are external economic factors that
effect results of operations. An attempt is also made to maintain compensation
within the range of that afforded like executive officers at companies whose
size and business is comparable to that of the Company.
CEO Compensation
----------------
In the case of Stephen Sternbach, the Chief Executive Officer, the
Compensation and Stock Option Committee evaluates the Company's mid and long
range strategic planning and its implementation as well as the considerations
impacting the compensation of executive officers generally which are described
above. Pursuant to the terms of his employment agreement with the Company, Mr.
Sternbach was paid a bonus of $109,251 for the year ended May 31, 1997.
Benefits
--------
The Compensation Committee endorses the position that equity
ownership by management is beneficial in aligning managements' and shareholders'
interest in the enhancement of shareholder value. Stock options were granted at
exercise prices equal to the market value of the Company's
Common Stock on the date of grant.
The Company provides to executive officers medical benefits that
generally are available to Company employees. The amount of perquisites, as
determined in accordance with the rules of the Securities and Exchange
Commission relating to executive compensation, did not exceed 10% of
salary for fiscal 1997.
-12-
<PAGE>
EXECUTIVE COMPENSATION
The following table provides information with respect to all
compensation paid or accrued by the Company during the three fiscal years ended
May 31, 1997 to Stephen Sternbach, the Company's Chief Executive Officer, the
only executive officer of the Company whose salary and bonus for fiscal 1997
exceeded $100,000. The following table provides information with respect to all
compensation paid or accrued by the Company during the three fiscal years ended
May 31, 1997 to Stephen Sternbach, the Company's Chief Executive Officer, the
only executive officer of the Company whose salary and bonus for fiscal 1997
exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
---------------------------------------- -------------------------------------------
Other Awards
Name and Annual Restricted
Principal Compen- Stock Securities LTIP All Other
Position Year Salary($) Bonus($) sation Awards Underlying Options(#) Payments($) Compensation(1)
- - ----------- ---- --------- -------- ------- ------ --------------------- ---------- ---------------
<S> <C> <C> <C> <C>
Stephen Sternbach 1997 $257,250 $109,251 -- -- -- -- $ 35,000(1)
Chief Executive Officer, 1996 $250,000 $ 34,371 -- -- 21,000 -- $ 10,000(1)
President and 1995 $225,000 -- -- -- -- -- $ 10,000(1)
Chairman of the Board
</TABLE>
- - -----------------------
(1) Represents amounts credited by the Company to a book reserve account as
contingent deferred compensation for the benefit of Mr. Sternbach pursuant
to a Non-Qualified Retirement and Death Benefit Agreement between the
Company and Mr. Sternbach.
OPTION GRANTS IN LAST FISCAL YEAR
There were no stock option grants during the fiscal year ended May
31, 1997.
-13-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table contains information concerning the number and
value, at May 31, 1997, of the exercised and unexercised options held by Mr.
Sternbach.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options Held at Fiscal Year- In-the-Money Options Held at
Acquired on Value End Fiscal Year-End
Name Exercise (#) Realized ($) (Exercisable/Unexercisable) (Exercisable/Unexercisable)(1)
- - ---- ------------ ------------ --------------------------- ------------------------------
<S> <C> <C> <C> <C>
Stephen 44,242 $ 171,385 118,332 $ 198,554
Sternbach
</TABLE>
- - ----------
(1) Fair market value of underlying securities (the closing price of the
Company's Common Stock on the Nasdaq National Market) at fiscal year end
(May 31, 1997), minus the then effective exercise price.
COMPENSATION OF DIRECTORS
The Company's non-employee directors are paid a fee of $750 for each
Board of Directors meeting which they attend. They are not paid any additional
fee for serving on any committees of the Board of Directors.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Stephen Sternbach dated
as of December 3, 1995 (the "Sternbach Employment Agreement"). The Sternbach
Employment Agreement has a term of five years and provides for an initial annual
salary of $250,000 (subject to annual increase by the amount of the increase in
the Consumer Price Index from the immediate preceding year) plus a bonus of 6%
of the Company's net profit before taxes in excess of $1,200,000, not to exceed
an aggregate annual bonus of $500,000. The Sternbach Employment Agreement
provides that after a Change in Control (as defined in the Sternbach Employment
Agreement) of the Company has occurred, if either Mr. Sternbach terminates his
employment within six months after he has obtained actual knowledge of the
Change in Control or the Company (or any successor thereto) terminates his
employment with the Company within one year after the Change in Control, Mr.
Sternbach will be entitled to receive (i) his salary, bonuses, awards,
perquisites and benefits including, without limitation, benefits and awards
under the Company's stock option plans and pension and retirement plans and
programs, accrued through the date Mr. Sternbach's employment with the Company
is terminated and (ii) a lump-sum payment in cash equal to 2.99 times Mr.
Sternbach's base amount.
The Company and Mr. Sternbach are also parties to a Consulting
Agreement (the "Sternbach Consulting Agreement") pursuant to which the Company
has agreed to retain Mr. Sternbach as a
-14-
<PAGE>
consultant for a period of two years from the time that his employment with the
Company terminates. Pursuant to the Sternbach Consulting Agreement, the Company
has agreed to pay Mr. Sternbach $150,000 per year and he will be entitled to
participate in the health insurance and similar benefits which the Company
provides to any of its other consultants.
In addition, the Company and Mr. Sternbach are parties to a
Non-Qualified Retirement and Death Benefit Agreement dated February 1, 1994,
pursuant to which the Company credits to a bank reserve (the "Deferred
Compensation Account") established for that purpose, an amount not to exceed ten
(10%) percent of Mr. Sternbach's gross annual salary during Mr. Sternbach's
employment with the Company. Any funds so credited to the Deferred Compensation
Account may be kept in cash or invested and reinvested in mutual funds, stocks,
bonds, securities or other assets as may be selected by the Company's Chief
Financial Officer in his discretion. Mr. Sternbach has agreed to assume all risk
in connection with any decrease in value of the funds which are invested. Unless
otherwise forfeited, Mr. Sternbach shall be entitled to the Deferred
Compensation Account upon his termination, disability or death or if the Company
is involved in a merger or is acquired by another company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stephen Sternbach has outstanding loans in the principal amount, as
of September 15, 1997 of $91,204 from the Company and a subsidiary of the
Company. The loan from the subsidiary has been assigned to the Company. These
loans bear interest at 6% per annum and each have a scheduled maturity
date of August 1, 1998.
In connection with services provided to the Company during the fiscal
years ended May 31, 1995, 1996 and 1997 the Company paid William Fellerman, CPA,
P.C., approximately $100,000, $100,000 and $129,000, respectively each year. Mr.
Fellerman, a director, Chief Financial Officer, Treasurer and Secretary of the
Company, is the sole shareholder of that corporation.
In addition, the Company entered into an agreement with Mr. Fellerman
providing for the payment of certain severance benefits upon the occurrence of a
change of control of the Company as defined therein and the termination of Mr.
Fellerman's position as an officer and/or director of the Company or the
reduction in the payment for services to William Fellerman, CPA, P.C.
PROPOSAL 2 - RATIFICATION AND APPROVAL OF APPOINTMENT OF INDEPENDENT
AUDITORS
The Board of Directors has selected the accounting firm of Holtz
Rubenstein & Co., LLP to serve as independent auditors of the Company for the
fiscal year ending May 31, 1997 and proposes the ratification and approval of
such decision. Holtz Rubenstein & Co., LLP has served as the principal
independent auditors of the Company since March 1993 and is familiar with the
business and operations of the Company. Representatives of Holtz Rubenstein &
Co., LLP are expected to be present at the Meeting and will have the opportunity
to make a statement if they desire to do so. Such representatives are also
expected to be available to respond to appropriate questions during the Meeting.
-15-
<PAGE>
The Board of Directors recommends a vote FOR ratification and
approval of the selection of Holtz Rubenstein & Co., LLP as the independent
auditors for the Company for the year ending May 31, 1997.
VOTING REQUIREMENTS
Directors are elected by a plurality of the votes cast at the
Meeting. The affirmative vote of a majority of the votes cast at the Meeting
will be required to ratify and approve the appointment of Holtz Rubenstein &
Co., LLP as independent auditors of the Company for the fiscal year ending May
31, 1997. Abstentions and broker non-votes with respect to any matter are not
considered as votes cast with respect to that matter.
OTHER MATTERS
The Board of Directors of the Company knows of no other matter to
come before the Meeting. However, if any matter requiring a vote of the
Shareholders should arise, it is the intention of the persons named in the
enclosed form of Proxy to vote such Proxy in accordance with their best
judgment.
Shareholder Proposals
- - ---------------------
Shareholder proposals intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company by July 7, 1998 for
possible inclusion in the proxy material relating to such
meeting.
Annual Report on Form 10-KSB
- - ----------------------------
A copy of the Company's Annual Report on Form 10-KSB for the fiscal
year ended May 31, 1997, which has been filed with the Securities and Exchange
Commission, is available to shareholders to whom this Proxy Statement is mailed
upon written request to Mr. Alan Rayman, Star Multi Care Services, Inc., 99
Railroad Station Plaza, Hicksville, New York 11801.
By order of the Board of Directors,
/s/ STEPHEN STERNBACH
-------------------------------------
STEPHEN STERNBACH
President and Chief Executive Officer
Dated: November 5, 1997
Hicksville, New York
-16-
