<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:
-------------------------------------------------------------
(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.
33 WALT WHITMAN ROAD
HUNTINGTON STATION, NEW YORK 11746
--------------
NOTICE OF THE 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 1, 1999
To the Shareholders of Star Multi Care Services, Inc.:
NOTICE IS HEREBY GIVEN that the 1999 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 1, 1999 at 3:00 P.M., local time, to consider and act
upon the following matters:
(1) The election of a board of six 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, 2000;
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 29,
1999 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, 1999
accompanies this Notice.
By Order of the Board of Directors,
/s/ STEPHEN STERNBACH
---------------------
STEPHEN STERNBACH
President and Chief Executive Officer
Huntington Station, New York
September 28, 1999
<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 1, 1999
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 1999
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 1, 1999 at 3:00 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:
<TABLE>
<CAPTION>
(1) Election of Directors:
<S> <C> <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, and Gary L. Weinberger.
(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, 1999 and hereby revokes any proxy or proxies previously given.
Dated: , 1999
------------------------
----------------------------------
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.
33 WALT WHITMAN ROAD
HUNTINGTON STATION, NEW YORK 11746
---------------
PROXY STATEMENT
---------------
1999 ANNUAL MEETING OF SHAREHOLDERS, DECEMBER 1, 1999
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 1999 Annual Meeting of
Shareholders of the Company to be held at 3:00 P.M. on December 1, 1999, 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 1999 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 2, 1999. The Board of Directors of the Company has
fixed the close of business on October 29, 1999 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 7, 1999, 5,354,806 shares of Common Stock were
outstanding and held of by 708 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 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, 2000. 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 other matters are properly presented at the Meeting for
consideration, the persons named in the
<PAGE>
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., 33 Walt Whitman Road,
Huntington Station, New York, 11746, 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP* OF CLASS (1)
- ------------------- --------- ------------
<S> <C> <C>
Stephen Sternbach
c/o Star Multi Care Services, Inc.
33 Walt Whitman Road
Huntington Station, NY 11746 922,714(2) 16.9%
Ivan Kaufman
c/o Arbor Home Healthcare
Holdings, LLC
333 Earl Ovington Boulevard
Uniondale, New York 11553 341,791(3) 6.4%
Arbor Home Healthcare Holdings,
LLC
333 Earl Ovington Boulevard
Uniondale, New York 11553 341,791(3) 6.4%
Coss Holding Corp.
One Old Country Road
Suite 420
Carle Place, New York 11514 275,254 5.1%
Charles Berdan
281 Potomac Drive
Basking Ridge, NJ 07920 21,019(4) **
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP* OF CLASS (1)
- ------------------- --------- ------------
<S> <C> <C>
John P. Innes II
8 Breckenridge Lane
Savannah, GA 31411 21,113(4) **
Matthew Solof
33 Fairbanks Boulevard
Woodbury, NY 11797 21,540(4) **
Gary L. Weinberger
38 Clayton Drive
Dix Hills, NY 11746 28,400(4) **
Gregory Turchan
33 Walt Whitman Road
Huntington Station, NY 11746 36,630(5) **
All directors and executive
officers of the Company as a group
(6 persons) 1,026,882 18.4%
</TABLE>
- ----------
* 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
-4-
<PAGE>
to these shares. Also includes 137,545 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, and includes an option to
purchase by Mr. Kaufman 5,000 shares of the Company's common stock
granted under the Company's 1997 Non-Employee Director Stock Option
Plan.
(4) Includes options to purchase 20,000 shares of the Company's common
stock granted under the Company's 1997 Non-Employee Director Stock
Option Plan.
(5) Includes options to purchase 36,630 shares of the Company's common
stock granted under the Company's 1992 Stock Option Plan.
-5-
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Meeting, six 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, and Gary L.
Weinberger, (collectively, the "Nominees").
Each of the Nominees has consented to serve as a director if elected.
Each of the Nominees currently serve as a director and was elected to that
position at the Company's 1998 Annual Meeting of Shareholders.. 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 44 Chairman of the Board of 1987
Directors, President and Chief
Executive Officer
Charles Berdan + * x 50 Director 1994
John P. Innes II + * x 65 Director 1991
Matthew Solof + * x 46 Director 1992
Gary L. Weinberger 50 Director 1996
Gregory Turchan 41 Senior Vice President, 1998
Secretary, Chief Operating
Officer, and Director
</TABLE>
+ Member of Compensation Committee
* Member of Stock Option Committee
x Member of Audit Committee
-6-
<PAGE>
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.
Charles Berdan became a director of the Company in April 1994. Since
January 1999, Mr. Berdan has served as Regional Sales Manager for WBT Systems,
an online training company. From April 1994 through June 1998, Mr. Berdan has
served as a sales executive for Automatic Data Processing, Inc., 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.
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. Mr. Katten resigned from the Board of
Directors in May 1999.
-7-
<PAGE>
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 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. Mr. Kaufman resigned from the Board of
Directors of the Company in August 1999.
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 two
(2) meetings and acted on two (2) 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 no meetings during the past fiscal year and acted two
times by unanimous written consent without meeting, 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 no meetings 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.
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 did not attend either of the two 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.
-9-
<PAGE>
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, 1999,
its officers, directors and greater than ten- percent shareholders complied with
all applicable Section 16 filing requirements.
-10-
<PAGE>
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 five competing companies for the same period. The comparison
assumes $100 was invested at the close of business on May 31, 199 in the
Company's Common Stock and in each of the comparison groups, and assumes
reinvestment of dividends. The Company paid no cash dividends during the
periods.
CUMULATIVE TOTAL SHAREHOLDER RETURNS
(Dividends Reinvested)
<TABLE>
<CAPTION>
Year Ending
Base
Period
Company Name/Index 5/31/94 5/31/95 5/31/96 5/30/97 5/29/98 5/28/99
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
STAR MULTI CARE SERVICES 100.00 150.01 296.93 200.51 108.61 55.70
NASDAQ - U.S. 100.00 109.45 154.49 173.33 220.07 303.20
PEER GROUP 100.00 98.41 97.76 63.24 42.02 32.16
</TABLE>
Peer Group Companies
==================================================
CORAM HEALTHCARE CORP.
IN HOME HEALTH, INC.
NATIONAL HOME HEALTH CARE
NEW YORK HEALTH CARE, INC.
TRANSWORLD HEALTHCARE INC
OLSTEN CORP.
-11-
<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.
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.
-13-
<PAGE>
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. Mr. Sternbach was awarded a bonus of $25,000 for the year ended May 31,
1999, that will be paid in fiscal 1999-2000.
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 1999.
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 1999 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 1999 $270,676 _$25,000 -- -- 137,545 (4) $52,000 (1)
Chief Executive Officer, 1998 $257,250 -- -- -- -- $323,941 (2)
President and 1997 $257,250 $109,251 -- -- -- -- $35,000 (3)
Chairman of the Board
Gregory Turchan 1999 $129,101 $12,500 36,630 (5)
Senior Vice President, 1998 $121,627
Secretary and 1997 $100,000 $25,000
Chief Operating Officer
</TABLE>
-14-
<PAGE>
(1) Represents $25,000 of income recognized upon partial forgiveness of debt
owed by Mr. Sternbach and $27,000 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.
(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 and $288,941 earned by Mr.
Sternbach upon the exercise of stock options previously granted.
(3) 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.
(4) Options repriced on September 14, 1998 to 110% of the fair market value
on such date, or $1.2375.
(5) Options repriced on September 14, 1998 to the fair market value on such
date, or $1.125.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZED VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
FOR OPTION TERM
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs
UNDERLYING GRANTED TO
OPTIONS/SARs EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME GRANTED (#) FISCAL YEAR PRICE ($/sh) DATE 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stephen Sternbach 50,000 27.4% $1.5125 11/30/03 $20,894 $46,169
Gregory Turchan 10,000 5.4% $1.125 12/08/03 $3,105 $6,863
</TABLE>
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table contains information concerning the number and
value, at May 31, 1999, of the exercised and unexercised options held by Mr.
Sternbach.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options Held at Fiscal In-the-Money Options Held at
Acquired on Value Year-End Fiscal Year-End
Name Exercise (#) Realized ($) (Exercisable/Unexercisable) (Exercisable/Unexercisable)(1)
- ---- ------------ ------------ --------------------------- ------------------------------
<S> <C> <C> <C> <C>
Stephen 0 0 137,545/0 $0
Sternbach
Gregory 0 0 36,630 $0
Turchan
</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, 1999), 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.
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
-16-
<PAGE>
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 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. Mr.
Turchan's employment agreement expired in May 18, 1999.
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,
1999. These loans have been extended for an additional year. In fiscal 1999,
$25,000 of this loan was forgiven by the Company.
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, 2000 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
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<PAGE>
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, 2000.
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, 2000.
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 2000 Annual
Meeting of Shareholders must be received by the Company by July 7, 2000 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 Ms. Concetta Pryor, Star Multi Care Services, Inc., 33
Walt Whitman Road, Huntington Station, New York 11746.
By order of the Board of Directors,
/s/ STEPHEN STERNBACH
---------------------
STEPHEN STERNBACH
Chairman of the Board,
President and Chief Executive Officer
Dated: September 28, 1999
Huntington Station, New York
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