<PAGE>
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:
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(2) Aggregate number of securities to which transaction applies:
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<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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
STAR MULTI CARE SERVICES, INC.
99 Railroad Station Plaza
Hicksville, New York 11801
NOTICE OF THE 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 9, 1998
To the Shareholders of Star Multi Care Services, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 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 9, 1998 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, 1999;
and
(3) To approve an amendment to the Company's 1992 Stock Option
Plan that would increase the total number of shares
authorized to be issued therein by 300,000 shares.
(4) 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,
1998 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, 1998
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, 1998
<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 9, 1998
The undersigned shareholder of common stock of STAR MULTI CARE SERVICES, INC.
hereby constitutes and appoints Stephen Sternbach and Gregory Turchan, 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 1998 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 9, 1998 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:
<TABLE>
<S> <C>
[ ] FOR ALL nominees listed below [ ] WITHHOLD AUTHORITY
(except as indicated to the contrary below) to vote for all nominees listed below
</TABLE>
NOMINEES: Stephen Sternbach, Gregory Turchan, 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
(3) Approval of an amendment to the Company's 1992 Stock Option Plan
that would increase the total number of shares authorized to be issued therein
by 300,000 shares.
[ ] 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, 1998 and hereby revokes any proxy or proxies
previously given.
Dated:________________________, 1998
____________________________________
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 9, 1998
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 1998 Annual Meeting of
Shareholders of the Company to be held at 4:00 P.M. on December 9, 1998, 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 1998 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, 1998 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 September 28, 1998, 5,228,122 shares of Common Stock
were outstanding and held of by 730 shareholders of record. 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, 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, 1999 and FOR the amendment to the Company's
1992 Stock Option Plan. As of the date of this Proxy Statement, the Board of
Directors does not know
<PAGE>
of any other matters which are to come before the Meeting. If any 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: Gregory
Turchan, 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
September 28, 1998 by (i) the only persons or groups who were owners of record
or were known by the Company to beneficially own on September 28, 1998 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 898,180(2) 16.9%
Ivan Kaufman
c/o Arbor Home Healthcare
Holdings, LLC
333 Earl Ovington Boulevard
Uniondale, New York 11553 672,096(3) 12.84%
Arbor Home Healthcare Holdings,
LLC
333 Earl Ovington Boulevard
Uniondale, New York 11553 672,096(4) 12.84%
Coss Holding Corp.
One Old Country Road
Suite 420
Carle Place, New York 11514 330,305(5) 6.32%
William Fellerman
c/o Star Multi Care Services, Inc.
99 Railroad Station Plaza
Hicksville, NY 18801 21,012(6) **
___________________________________________
(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 6,019 (9) **
John P. Innes II
8 Breckenridge Lane
Savannah, GA 31411 6,113 (9) **
Matthew Solof
33 Fairbanks Boulevard
Woodbury, NY 11797 8,540 (9) **
Melvin L. Katten
1480 Tower Road
Winnetka, IL 60093 61,913 (9) 1.08%
Gary L. Weinberger
38 Clayton Drive
Dix Hills, NY 11746 13,400 (9) **
Gregory Turchan
c/o Star Multi Care Services, Inc.
99 Railroad Station Plaza
Hicksville, NY 18801 36,630 (8) **
All directors and executive
officers of the Company as a group
(9 persons) 1,723,903 (7) 31.92%
- -----------------
* 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
-4-
<PAGE>
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 87,545 shares
of the Company's Common Stock which Mr. Sternbach has a currently
exercisable option to purchase pursuant to the Company's 1992 Stock
Option Plan.
(3) 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 and includes an option to
purchase 5,000 shares of the Company's common stock granted under the
Company's 1997 Non-Employee Director Stock Option Plan.
(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 and includes an option held by
Ivan Kaufman to purchase 5,000 shares of the Company's common stock
granted under the Company's 1997 Non-Employee Director Stock Option
Plan..
(5) Based upon a copy of a Schedule 13D received by the Company.
(6) Includes 2,769 shares owned by the William Fellerman CPA PC Pension
Trust Fund. Also includes 21,012 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.
(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.
(8) Includes options to purchase 36,630 shares of the Company's common
stock granted under the Company's 1992 Stock Option Plan.
(9) Includes an option to purchase 5,000 shares of the Company's common
stock granted under the Company's 1997 Non-Employee Director Stock
Option Plan.
-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, Gregory
Turchan, 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 Gregory Turchan, currently serve as a
director and was elected to that position at the Company's 1997 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.
<TABLE>
<CAPTION>
Position Held with the Directors
Name Age Company Since
- ---- --- ------- -----
<S> <C> <C> <C>
Stephen Sternbach 43 Chairman of the Board of 1987
Directors, President and Chief
Executive Officer
Charles Berdan + * x 49 Director 1994
John P. Innes II + * x 64 Director 1991
Matthew Solof + * x 45 Director 1992
</TABLE>
_________________________________
(footnotes are on following page)
-6-
<PAGE>
<TABLE>
<CAPTION>
Position Held with the Directors
Name Age Company Since
- ---- --- ------- -----
<S> <C> <C> <C>
Melvin L. Katten 62 Director 1996
Gary L. Weinberger 49 Director 1996
Ivan Kaufman 37 Director 1997
Gregory Turchan 40 Senior Vice President, ----
Secretary, Chief Operating
Officer, and Nominee for
Director
</TABLE>
- -----------------
+ 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 resigned as Chief Financial Officer of the Company
on September 15, 1998. Mr. Fellerman resigned as Secretary and Treasurer and a
director of the Company on May 31, 1998. Previously, Mr. Fellerman had 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
-7-
<PAGE>
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).
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,
health care 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
-8-
<PAGE>
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.
Gregory Turchan was elected Senior Vice President, Chief Operation Officer and
a member of the Board of Directors of the Company on May 20, 1998. Previously,
he had served as Vice President-Operations of the Company since 1996. Mr.
Turchan was originally employed by the Company in 1995 to assist in the
transition of an acquisition by the Company. Prior to 1995, Mr. Turchan served
as an officer of Long Island Nursing Registry, Inc. a home health care
provider acquired by the Company in 1995.
Meetings of the Board of Directors
During the Company's last fiscal year, its Board of Directors held
five (5) meetings and acted on one (1) occasion 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 and
acted four times by unanimous written consent without meeting, to administer
the Company's stock option plans.
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 held one (1) meeting during the past fiscal year.
The Compliance Committee of the Board of Directors consists of
Messrs. Charles Berdan, Gary L. Weinberger and Gregory Turchan. 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.
-9-
<PAGE>
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, except for Ivan Kaufman who attended only two of the five Board
of Directors meetings.
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 believes that, during the year ended
May 31, 1998, its officers, directors and greater than ten-percent
shareholders complied with all applicable Section 16 filing requirements.
-10-
<PAGE>
Compensation Committee Report
Overview and Philosophy
The Compensation Committee of the Board of Directors is composed of
three directors, Messrs. Berdan, Innes and Solof. The Compensation Committee
is responsible for developing and making recommendations to the Board of
Directors with respect to the Company's executive compensation policies. The
Compensation Committee's executive compensation philosophy (which is intended
to apply to all members of the Company's management, including its Chief
Executive Officer) is to provide competitive levels of compensation, integrate
managements' pay with achievement of the Company's performance goals, reward
above average corporate performance, recognize individual initiative and
achievement and assist the Company in attracting and retaining qualified
management.
The objectives of the Company's executive compensation program are
to:
* Support the achievement of desired Company performance.
* Provide compensation that will attract and retain
superior talent and reward performance.
The executive compensation program provides an overall level of
compensation opportunity that is competitive within the health care industry,
as well as with a broader group of companies of comparable size and
complexity.
-11-
<PAGE>
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 1998.
-12-
<PAGE>
EXECUTIVE COMPENSATION
The following table provides information with respect to all
compensation paid or accrued by the Company during the three most recent
fiscal years ended May 31, to those Executive officers of the Company whose
salary and bonus for fiscal 1998 exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------------------------------
Other Awards
Name and Annual Restricted ------
Principal Compen- Stock Securities LTIP All Other
Position Year Salary($) Bonus($) sation Awards Underlying Options(#) Payments($) Compensation(1)
- -------- ---- --------- -------- ------- ---------- --------------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen Sternbach 1998 $257,250 -- -- -- -- $323,941 (1)
Chief Executive Officer, 1997 $257,250 $109,251 -- -- -- -- $ 35,000 (2)
President and 1996 $250,000 $ 34,371 -- -- 21,000 -- $ 10,000 (2)
Chairman of the Board
Gregory Turchan 1998 $121,627 $ 0
Senior Vice President, 1997 $100,000 $ 25,000
Secretary and
Chief Operating Officer 1996 $100,000 $ 0
William Fellerman 1998 $99,996 $ 24,000 (3)
1997 $99,996 $ 50,000
1996 $99,996
</TABLE>
- ------------------
(1) Represents $35,000 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 and $288,941 earned by Mr.
Sternbach upon the exercise of stock options previously granted.
(2) Represents $35,000 credited by the Company to a book reserve account
as contingent deferred compensation for the benefit of Mr. Sternbach
pursuant to a Non-Qualified Retirement and Death Benefit Agreement
between the Company and Mr. Sternbach.
(3) Represents earnings from the exercise of stock options previously
granted.
-13-
<PAGE>
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realized Value at
Assumed Annual
Rates of Stock
Price
Appreciation
for Option Term
- ----------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date 5% 10%
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stephen Sternbach 40,000 32.8 $2.68 9/07/02 $29,617 $49,752
Gregory Turchan 15,000 12.3 $2.44 9/07/02 $10,112 $22,345
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
The following table contains information concerning the number and
value, at May 31, 1998, of the exercised and unexercised options held by
Mr. Sternbach.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options Held at Fiscal Year- In-the-Money Options Held at
Acquired on Value End Fiscal Year-End
Name Exercise (#) Realized ($) (Exercisable/Unexercisable) (Exercisable/Unexercisable)(1)
- ---- ------------ ------------ --------------------------- ------------------------------
<S> <C> <C> <C> <C>
Stephen 12,000 $11,880 87,545/0 $0
Sternbach
</TABLE>
- -----------------
(1) Fair market value of underlying securities (the closing price of the
Company's Common Stock on the Nasdaq National Market) at fiscal year
end (May 31, 1998), 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. However, in
September 1998, the outside directors were granted a non-statutory stock
option for the right to purchase up to 5,000 shares of common stock of the
Company.
-14-
<PAGE>
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 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.
On July 12, 1997, the Company entered into a Severance Agreement with
William Fellerman that would provide him with a severance payment should he
terminated without cause, as defined in the agreement, Effective May 31, 1998,
the Company terminated Mr. Fellerman without cause whereby Mr. Fellerman shall
receive an aggregate of $275,000 payable over a thirty-six month period.
On May 19, 1995, the Company entered into an employment agreement
with Gregory Turchan so that he could assist the Company in the acquisition of
Long Island Nursing Registry, Inc. Therefore, this agreement was amended to
extend the term through May 18, 1999 at an annual salary of $117,500 with the
ability of Mr. Turchan to earn an annual bonus equal to five percent of the
pre-tax income of the Company, excluding extraordinary items, not to exceed
$25,000. Effective May 1998, Mr. Turchan's salary was increased to $130,000.
-15-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stephen Sternbach has outstanding loans in the principal amount, as
of May 31, 1998 of $86,260 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. These loans have been extended for an additional year.
In connection with services provided to the Company during the fiscal
years ended May 31, 1996, 1997 and 1998 the Company paid William Fellerman,
CPA, P.C., approximately $100,000, $149,996 and $100,000, respectively each
year. Mr. Fellerman, was 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. [See
Employment Agreements]
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, 1998 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.
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, 1998.
PROPOSAL 3 - AMENDMENT TO THE COMPANY'S 1992 STOCK OPTION PLAN
The Star Multi Care Services, Inc. 1992 Stock Option Plan (the
"Plan") presently has authorized 675,000 shares that may be granted and issued
therein. As of September 28, 1998, 638,703 shares have been granted under the
Plan, with 36,294 remaining. Therefore, the Board of Directors have approved a
resolution and hereby submit to the shareholders for approval an increase in
the number of shares that may be granted and issued under the Plan by 300,000
shares to 975,000 shares. The Board of Directors believe that stock options
should be an integral component to the Company's total compensation plan.
The Board of Directors recommends a vote FOR ratification and
approval of the amendment to the Plan as discussed above.
-16-
<PAGE>
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, 1998. 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, 1999 for
possible inclusion in the proxy material relating to such meeting.
Annual Report on Form 10-K
A copy of the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1998, 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. Rey Romeu, 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, 1998
Hicksville, New York
-17-
