<PAGE>
SCHEDULE 14A INFORMATION
Consent Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |_|
Filed by a Party other than the Registrant |X|
Check the appropriate box:
|_| Preliminary Consent Statement
|X| Definitive Consent Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Northstar Health Services, Inc.
(Name of Registrant as Specified In Its Charter)
Thomas W. Zaucha
(Name of Person(s) Filing Consent Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(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>1
CONSENT STATEMENT OF
THE COMMITTEE TO PROTECT
NORTHSTAR HEALTH
This solicitation statement, the accompanying letter and the
enclosed form of written consent are being furnished by and on behalf of the
Committee to Protect Northstar Health (the "Committee") on or about March 3,
1997, in connection with the solicitation by the Committee from the holders of
shares of common stock, par value $.01 per share (the "Common Stock") of
Northstar Health Services, Inc., a Delaware corporation ("Northstar" or the
"Company") of written consents to take the following actions without a
stockholders' meeting, as permitted by Delaware law:
(1) amend Article III, Section 1 of the By-laws of the
Company by deleting the second sentence thereof and inserting in its place the
following sentence to set the number of directors on the Board of Directors of
the Company (the "Board") at eleven (11) as follows: "The Board of Directors
shall be comprised of eleven (11) directors.";
(2) amend Article III, Section 1 of the By-laws of the
Company by deleting the third, fourth and fifth sentences thereof and inserting
in their place a provision to eliminate the classified Board of Directors which
will enable stockholders to remove directors without cause. The proposed
amendment reads as follows: "Each director shall serve for a term of one year
and shall hold office until such director's successor is elected and qualified
or until such director's earlier resignation or removal. Directors may be
removed without cause by the holders of a majority of the shares then entitled
to vote.";
(3) elect the five nominees listed on Annex A hereto as
directors of the Company to fill newly-created directorships on the Board of
Directors and to serve until their respective successors are duly elected and
qualified; and
(4) remove all current members of the Board of Directors
other than Thomas W. Zaucha, such other members being, at the present time,
Steven N. Brody, Robert J. Smallacombe, Charles B. Jarrett, Jr., Timothy L.
Pesci and David D. Watson, and any other person or persons (other than the
persons elected pursuant to this consent) elected or appointed to the Board of
Directors of the Company prior to the effective date of the shareholder action
in addition to or in lieu of any of such individuals to fill any newly-created
directorship or vacancy on the Board of Directors of the Company, or otherwise,
other than Thomas W. Zaucha (together with (1), (2) and (3), the "Proposals").
Stockholders of Northstar are being asked to express their
consent to the Proposals by MARKING, SIGNING and DATING the enclosed BLUE
consent card and returning it to MacKenzie Partners, Inc. in accordance with
the instructions set forth below.
All percentages shown herein assume that the number of shares
outstanding on February 5, 1997 (the "Record Date") is 5,867,153 shares of the
Company's Common Stock based on a shareholder list supplied by the Company's
transfer agent and the Committee's knowledge of certain transactions occurring
prior to the Record Date that are not reflected in the shareholder list. See
"Proposals."
<PAGE>2
THE COMMITTEE RECOMMENDS THAT
YOU CONSENT TO EACH OF THE PROPOSALS
SUMMARY OF CONSENT PROCEDURE
The Committee believes that the Proposals will become
effective on the date when the written consent of holders of a majority of the
shares of the Company's Common Stock outstanding on the Record Date is
delivered to Northstar, so long as such consent is obtained within sixty days
after the Record Date. In order to facilitate prompt adoption of the Proposals,
the Committee requests that you give your consent by March 21, 1997.
A consent executed by a stockholder may be revoked in writing
at any time prior to the time that the action authorized by the executed
consent is taken. The Committee intends to deliver executed consents to the
Company once the Committee has obtained valid and unrevoked consents
representing a majority of the issued and outstanding shares of Common Stock of
the Company as of the record date. Since the Committee cannot predict the date
on which it will receive a majority of the consents, the period within which a
consent may be revoked is uncertain.
THE COMMITTEE RECOMMENDS THAT YOU CONSENT TO EACH OF THE
PROPOSALS. YOUR CONSENT IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED
BLUE CONSENT CARD AND RETURN IT IN THE ENCLOSED POSTAGE PAID ENVELOPE PROMPTLY.
FAILURE TO RETURN YOUR CONSENT WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE
PROPOSALS.
The Committee has retained MacKenzie Partners, Inc.
("MacKenzie") to assist in the solicitation. If your shares are held in your
name, please mark, sign, date and mail the enclosed BLUE consent card to
MacKenzie in the postage-paid envelope provided. If your shares are held in the
name of a brokerage firm, bank nominee or other institution, you should receive
a BLUE consent card and envelope which should be used to give your instructions
to the person responsible for your account. Only that institution can execute a
BLUE consent card with respect to your shares and only upon receipt of specific
instructions from you. The Committee urges you to confirm in writing your
instructions to the person responsible for your account and to provide a copy
of those instructions to the Committee in care of MacKenzie at the address set
forth below so that the Committee will be aware of all instructions given and
can attempt to ensure that such instructions are followed.
If you have any questions about executing your consent or
require assistance, please contact:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500
(call collect)
or
Toll Free: (800) 322-2885
<PAGE>3
THE COMMITTEE
The Committee is at present comprised of its founding member,
Mr. Zaucha, Joseph F. Micallef, Chairman and Chief Executive Officer,
Associated Sales Tax Consultants Incorporated, and Basil J. Asciutto, Chief
Operating Officer of Commonwealth Associates, L.P. ("Commonwealth"), who are
referred to collectively in this Consent Statement as "Committee members." As
of the date hereof, Committee members own an aggregate of 1,009,958 shares of
the Company's common stock, representing approximately 17.21% of the Company's
shares currently outstanding. See "Proposals."
In addition, Commonwealth, though not a Committee member, has
been retained as the Committee's financial advisor and acts as a market-maker
in the Common Stock in the ordinary course of its brokerage business.
Commonwealth holds 1,307,658 shares of Company Common Stock, constituting
approximately 22.29% of outstanding shares, for the account of its customers,
including 71,397 shares held for its own account as of the close of business on
February 24, 1997 in connection with its market making activities and 55,000
shares held in the accounts of Commonwealth's officers, directors and
employees. Such customers have sole voting and dispositive power over such
shares, and Commonwealth and the Committee disclaim any beneficial ownership
thereof, although Commonwealth intends to recommend to its customers that they
support the recommendations of the Committee. See "Proposals." See Appendix A
for further information regarding Commonwealth's relationships with the
Company.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Additional information about the Committee Members, Committee
Nominees and certain other persons is set forth in Annex A and under the
heading "The Committee's Nominees."
BACKGROUND OF THE CONSENT SOLICITATION
The Northstar-Keystone Merger
Mr. Zaucha became the Company's Chief Executive Officer and
joined its Board of Directors in November 1995, at the time of the closing of
the merger of Northstar and Keystone Rehabilitation Systems, Inc. ("Keystone"),
a privately-held rehabilitation company theretofore controlled by Mr. Zaucha.
Keystone had 1995 revenues of approximately $22,000,000, as compared to Company
revenues for the same period of approximately $13,000,000 (not giving effect to
the merger). Pursuant to the terms of the Merger Agreement, Mr. Zaucha and
related entities received $7,600,000 in cash, 944,351 shares of Company Common
Stock, $2,400,000 principal amount of 6% subordinated promissory note due 1998,
$2,625,000 principal amount of interest-free subordinated promissory notes due
2000, all of which notes are convertible into an aggregate of 843,386 shares of
Common Stock following Company shareholder approval (for an effective exercise
price of $5.93 per share) and an earn-out provision providing for payment of
$1,600,000 per year for five years, contingent on the Company achieving certain
earnings levels. David D. Watson, a Keystone executive, became the Company's
President following the merger, and in connection with the merger entered into
a release agreement under which he receives $75,000 annually from the Company
payable in the form of a note. Because the Company's policy prior to the Merger
was to lease, rather than to own, its real estate, Mr. Zaucha agreed, at the
Company's request, to purchase the real property then owned by Keystone for
$5,200,000 in cash ($4,800,000 of which Keystone used to repay all of its
outstanding indebtedness prior to the merger) and to lease back the portion of
the space the Company wished to occupy following the merger at an aggregate
monthly rental of $39,197 on five different locations. Mr. Zaucha also entered
into an employment agreement with the Company providing for him to be employed
as Chief Executive Officer of the Company for annual cash compensation of
$125,000. The Merger Agreement provided that, following the merger, the
Company's Board of
<PAGE>4
Directors would consist of its former directors, Mark A. DeSimone and Michael
Pitterich, Mr. Zaucha and his consultant Steven N. Brody.
DeSimone Resignation
Shortly after assuming his duties as the Company's Chief
Executive Officer, Mr. Zaucha began to learn elements of what appeared to be
irregular, self-interested transactions between Northstar and its former CEO,
Mr. DeSimone. Mr. Zaucha confronted Mr. DeSimone with these irregularities and
brought them to the attention of KPMG Peat Marwick, L.L.P. ("KPMG"). (Prior to
the Merger, the Company's financial statements had been audited by Richard A.
Eisner & Co. Following the merger, in light of the Company's increased size,
the Company engaged KPMG, a "big six" accounting firm to audit its 1995
financial statements.) In March 1996, KPMG informed the Board that it was
unable to complete the 1995 audit due to what it termed questions stemming from
the prior management's integrity and related party transactions by the prior
management.
Mr. Zaucha thereupon demanded and received the resignation
from the Board of Directors of Messrs. DeSimone and Pitterich, and promptly
suspended, and subsequently terminated, the employment of Michael Kulmoski, the
Company's former Chief Financial Officer. On May 31, 1996, trading of the
Company's Common Stock on NASDAQ was suspended.
Payments to Brody and Smallacombe Begin
On March 21, 1996, Mr. Brody recommended that Mr. Brody be
appointed to serve as a one-person committee of the Board to conduct an
investigation of the alleged irregularities and related party transactions.
Mr. Zaucha agreed to this recommendation. The Company retained Arthur Andersen
as its new auditors and Mr. Brody was also charged with expediting the audit of
the 1995 fiscal year and attempting to restore the Company's NASDAQ listing.
Mr. Brody hired legal and other professional advisors selected by him and
compensated by the Company.
Mr. Brody also requested that Northstar enter into a separate
engagement letter with him relating to such services. Under a letter agreement
dated April 2, 1996, drafted by Mr. Brody, Mr. Brody was to head a special
investigation and be paid for his services at the rate of (i) $150 per hour for
sixty hours per month and (ii) $250 per hour for all hours in excess of 60
hours per month, plus expenses. Mr. Brody also received an advance retainer of
$25,000. Mr. Zaucha approved of this retention. As of January 6, 1997,
according to information which Mr. Zaucha learned in the course of his duties
as Chief Executive Officer of Northstar, Mr. Brody has been paid in excess of
$224,000 by the Company for services as a director and pursuant to his
consulting agreement.
In May 1996, Mr. Brody recommended that Robert J.
Smallacombe, a business consultant, be appointed to fill one of the vacancies
on the Company's Board of Directors. On May 20, 1996, Mr. Smallacombe and Mr.
Watson, the Company's President and a former Keystone executive, joined the
Board. Mr. Zaucha voted in favor of this resolution.
Mr. Brody subsequently recommended that the Company retain
Mr. Smallacombe as a consultant. On August 20, 1996, the Company entered into
an Independent Consulting Contract with Mr. Smallacombe for a six month term
pursuant to which he was to provide consulting, advisory and administrative
services and be paid $6,500 per week to work four days per week. Mr. Zaucha
voted in favor of this retention. On January 15, 1997, Mr. Brody recommended
that Mr. Smallacombe's consulting contract, which was set to expire in February
1997, be extended to September 30, 1997. The Board approved this recommendation
over Mr. Zaucha's objection. As of January 6, 1997, according to information
which Mr. Zaucha learned in the course of his duties as Chief Executive Officer
of Northstar, Mr. Smallacombe has been paid in excess of $210,000 by the
Company for his services as a director and pursuant to his consulting
agreement.
<PAGE>5
In May 1996, at Mr. Brody's recommendation the Board
appointed Mr. Brody and Mr. Smallacombe to be a two-member Audit Committee with
Mr. Smallacombe as Chairman. At Mr. Brody's recommendation, the Board also
appointed Mr. Brody, Mr. Smallacombe and Mr. Zaucha to be the Compensation
Committee. Mr. Zaucha voted in favor of this resolution.
On May 29, 1996, Mr. Smallacombe provided the report of the
Compensation Committee and recommended that outside director compensation be
set as follows: (i) a monthly retainer of $3,000 per quarter; (ii) a payment of
$1,000 per Board meeting and $500 per committee meeting; and (iii) $250 per
formal telephonic Board meeting. It was further recommended that each outside
director receive a stock option grant of 25,000 shares for serving on the
Board. The Board approved this recommendation by unanimous vote.
Shortly thereafter, over the objections of Mr. Zaucha, the
Board dismissed the Company's 36-year-old Chief Financial Officer, who had 15
years experience. The Company's Financial Controller with a nine-year tenure
with the Company was also subsequently dismissed and replaced by a 23-year old
accountant.
In November 1996, Mr. Brody and Mr. Smallacombe recommended
that the Board be expanded to five members. The motion to expand the Board was
approved over Mr. Zaucha's objection. Charles B. Jarrett, Jr. was appointed to
fill the newly created directorship. Mr. Brody and Mr. Smallacombe also
recommended that the Board create a three member Nominating Committee,
consisting of Mr. Brody, Mr. Smallacombe and Mr. Watson, to recommend further
appointments to the Board. The Board approved this recommendation over Mr.
Zaucha's objection.
On December 20, 1996, the Audit Committee, chaired by Mr.
Smallacombe, recommended that the Company's outside legal counsel, Buchanan
Ingersoll and Joseph McDonough of Manion McDonough & Lucas, the Company's
banking counsel, each be fired and replaced with counsel recommended by Mr.
Smallacombe and Mr. Brody. This motion was approved with Mr. Zaucha abstaining.
Stock Options to Board Members Granted
On December 27, 1996, the Compensation Committee, chaired by
Mr. Brody, recommended to the Board the adoption of a stock option plan
providing for the grant of 10-year options to purchase up to 1,500,000 shares
of Company Common Stock (increasing by an additional 500,000 shares over a 3
year period) to officers, directors and key employees. Mr. Zaucha believed that
a stock option plan was necessary for the Company to attract, retain and
motivate quality executives and key employees and that modest grants to
directors were also appropriate. He also believed that the number of shares
authorized in the plan would be sufficient to provide for option grants for
many years to come. Accordingly, Mr. Zaucha joined in approving the stock
option plan. At this same meeting, the Nominating Committee recommended that
the Board be expanded and the appointment of State Representative Timothy L.
Pesci as a director of the Company, effective January 1, 1997. The motion was
approved.
On January 15, 1997, Mr. Brody presented the recommendation
of the Compensation Committee that 1,020,000 of the 1,500,000 option shares
only recently approved by the Board be granted to outside directors and certain
employees subject to legal review. Mr. Zaucha, although a member of the
Compensation Committee, was never consulted in connection with this
recommendation. Mr. Zaucha vigorously objected to this recommendation at the
Board meeting.
<PAGE>6
The Board, over Mr. Zaucha's objection, nevertheless approved
option grants which, if exercised, would equal approximately 17% of the
Company's outstanding stock. (See "Proposals") The options granted are as
follows:
<TABLE>
<CAPTION>
Grantee Grant Status Amount
- - ------- ------------ ------
<S> <C> <C>
Steven N. Brody Director/consultant (outside) 200,000
Robert J. Smallacombe Director/consultant (outside) 200,000
David D. Watson Director/President and 205,000
Chief Operating Officer
Charles B. Jarrett, Jr. Director (outside) 25,000
Timothy L. Pesci Director (outside) 25,000
John Lombardi Executive Vice President and Chief 110,000
Financial Officer
Brian K. Strong Key employee 100,000
Edward Banos Key employee 55,000
Elaine Professori Key employee 50,000
Ralph Sweithelm Key employee 50,000
----------
TOTALS (shares) 1,020,000
</TABLE>
Mr. Zaucha objected to these option grants and abstained from voting. All
other Board members voted for them. When Mr. Zaucha asked Mr. Watson how his
option grant came to be set at 205,000 shares, Mr. Watson replied, "I told
those guys [i.e., Messrs. Brody and Smallacombe], I don't care what anybody
gets, as long as I get more than them." At a Board meeting held on February
13, 1997, Mr. Watson denied making this statement.
Entrenchment Measures Adopted
On January 21, 1997, at a Board meeting called by the Audit
Committee, the Board of Directors received a presentation on "shark-repellent"
anti-takeover measures by the Company's new legal counsel and proposed
amendments to the Company's By-laws. The Board, over Mr. Zaucha's abstention,
approved amendments to the Company's By-laws which purport to: (i) eliminate
the right of stockholders to call a special meeting of stockholders; (ii)
eliminate the right of stockholders to act by written consent; (iii) eliminate
the right of stockholders to remove directors without cause; and (iv) eliminate
the right of a majority of stockholders to remove any director by requiring a
two-thirds vote of the outstanding shares of common stock (collectively, the
"By-law amendments"). Mr. Zaucha objected to such proposals as taking
fundamental rights away from the shareholders. The By-law amendments were
nonetheless adopted by vote of the Directors other than Mr. Zaucha.
Zaucha Commences Consent Process and Litigation
On February 5, 1997, Mr. Zaucha delivered his written Consent
to the Proposals to the Company's registered office in the State of Delaware,
establishing the Record Date for this solicitation pursuant to Section 213(b)
of the Delaware General Corporation Law and on February 6, 1997 formally
retained the services of Commonwealth Associates as his and the Committee's
financial advisor.
On February 10, 1997, Mr. Zaucha filed a Complaint for
Declaratory and Injunctive Relief (the "Complaint") in the Court of Chancery of
the State of Delaware in and for New Castle County. In the Complaint, Mr.
Zaucha seeks declaratory and injunctive relief that the above-mentioned By-law
amendments are invalid and that the other Board Members may not enforce them.
Specifically, the Complaint requests that an order be entered:
(i) declaring the By-law amendments invalid and
unenforceable;
<PAGE>7
(ii) declaring that Mr. Zaucha retains the right to act by
written consent as provided for in Section 228 of the Delaware General
Corporation Law including the right to amend the By-laws, to eliminate the
classified board, to remove directors without cause, and to fill vacancies or
newly-created directorships on the Company's Board;
(iii) declaring that the current directors may be removed
without cause by the majority consent of the outstanding stock;
(iv) enjoining the current directors from taking any action
to enforce the By-law amendments;
(v) enjoining the current directors from seeking to enforce
the By-law amendments in any other court;
(vi) awarding to Mr. Zaucha the costs and disbursements of
this action, including reasonable attorneys' fees; and
(vii) granting such other and further relief as the Court
deems just and proper.
The Committee believes that the By-law amendment purporting
to strip shareholders of the right to take action by consent is invalid because
Section 228(a) of the Delaware General Corporation Law provides:
"Unless otherwise provided in the certificate of
incorporation, any action required by this chapter to be taken at any annual or
special meeting of such stockholders of a corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting for the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered to the corporation by delivery to its registered office in this
State, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded." (emphasis added)
The Company is a Delaware corporation, and its certificate of incorporation
contains no such provision. The Committee therefore believes that the actions
proposed by this Consent Solicitation are valid.
In addition, the Committee believes that the by-law amendment
purporting to eliminate the right of a majority of the stockholders to remove
directors without cause will be ineffective following the elimination of the
classified board of directors because Section 141(k) of the Delaware General
Corporation Law provides that if the board is not classified:
Any director or the entire board of directors may be removed,
with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors. . .
Accordingly, if a majority of the stockholders consent to the
proposal to eliminate the classified board, stockholders will, pursuant to
Section 141(k), have the right to remove directors without cause.
<PAGE>8
At the February 13, 1997 meeting of the Company's Board, Mr.
Zaucha introduced a resolution that the stock option grants previously awarded
to Messrs. Brody, Smallacombe and Watson on January 15, 1997 be declared not
exercisable unless and until approved by a majority of the Company's
shareholders. Mr. Zaucha's proposed resolution states:
RESOLVED, that all options granted under the Stock Option
Plan approved by the Board of Directors on December 27, 1996,
including without limitation the options purportedly granted
thereunder on January 15, 1997, be, and they hereby are,
declared not exercisable, and not vested in whole or in part,
unless and until such plan and such grants are approved by
the vote of a majority of the shares present and voting at an
annual or special meeting of stockholders of the Company, at
which quorum is present and acting throughout, and shall be
subject to such further vesting and other terms as shall be
set following such approval, if any, by the Compensation
Committee in consultation with Company securities counsel,
subject to final Board approval.
Messrs. Brody, Smallacombe and Jarrett opposed Mr. Zaucha's resolution, Messrs.
Pesci and Watson abstained, and Mr. Zaucha voted in favor of the resolution. A
counter-resolution was offered by Mr. Jarrett to submit Mr. Zaucha's proposed
resolution to the Compensation Committee for consideration. The Board approved
this resolution over Mr. Zaucha's objection.
At the same meeting, Mr. Zaucha was removed as the Chief
Executive Officer and Chairman of the Board of the Company by Messrs. Brody,
Smallacombe, Watson, Jarrett and Pesci. Mr. Brody was elected Chairman of the
Board. Mr. Zaucha voted against his appointment.
At a Board meeting held on February 17, 1997, Mr. Smallacombe
was named Chief Executive Officer of Northstar and the Board voted to convert
the terms of his existing consulting agreement into an employment contract. Mr.
Zaucha voted against his appointment.
REASONS FOR THE CONSENT SOLICITATION
The Committee believes that shareholders should adopt the
Proposals as promptly as practicable in order to replace the Board with a slate
of nominees who are committed to the Company's return to its long-term
strategic plan. In order to restore the liquidity of the Company's common
stock, the Committee believes that the Company should fulfill its financial
reporting responsibilities, hold its Annual Meeting of Stockholders and restore
its focus on its core business under the leadership of Mr. Zaucha. The
Committee believes that the track record of the members of the Board of
Directors, other than Mr. Zaucha, speaks for itself against the continuation
of those directors on the Company's Board.
The Committee's goal is to restore Northstar's ability to
respond effectively to the challenges it faces by forming a united team,
endorsed by stockholders, under the supervision of a Board of Directors that
combines true independence with integrity, real commitment to the Company and
its stockholders, and experienced judgment from a variety of fields. The
Committee believes that Mr. Zaucha, the person responsible for founding or
acquiring most of the Company's clinics, the largest shareholder and a
well-known and respected physical therapist with more than 29 years of
experience in Pennsylvania, is the best person to lead the Company past its
current difficulties and to execute a strategy of soundly-financed growth. A
united management team, faithfully executing its
<PAGE>9
fiduciary duties, will be well positioned to put the Company's ongoing
litigation matters to rest, restructure the Company's senior debt, comply with
its audit and SEC reporting responsibilities and get its strategic plan back on
track.
PROPOSALS
This solicitation statement and the accompanying form of
written consent are first being furnished by the Committee on or about March 3,
1997, in connection with the solicitation by the Committee from the holders of
shares of Common Stock of written consents to take the following actions
without a stockholders meeting, as permitted by Delaware law:
(1) Amend Article III, Section 1 of the Bylaws to set the
number of directors on the Board of Directors at eleven (11) as follows:
"RESOLVED, that Article III, Section 1 be amended by
deleting the second sentence thereof and inserting in its place the
following sentence:
The Board of Directors shall be comprised of eleven
(11) directors."
(2) Amend Article III, Section 1 of the Bylaws by deleting
the third, fourth and fifth sentences thereof and inserting in their place a
provision to eliminate the classified Board of Directors which will enable
stockholders to remove non-classified directors from the Board without cause as
follows:
"RESOLVED, that Article III, Section 1 be amended by
deleting the third, fourth and fifth sentences thereof and inserting
in their place the following sentences:
Each director shall serve for a term of one year and
shall hold office until such director's successor is elected and
qualified or until such director's earlier resignation or removal.
Directors may be removed without cause by the holders of a majority of
the shares then entitled to vote.";
(3) Elect the five persons listed on Annex A hereto to
fill the newly created directorships:
"RESOLVED, that the following persons are hereby
elected as directors of the Company to fill the newly created
directorships on the Board of Directors, and to serve until their
respective successors are duly elected and qualified: Lawrence F.
Jindra, M.D., James H. McElwain, Mark G. Mykityshyn, Roger J. Reschini
and David B. White."; and
(4) Remove the existing directors of the Board of
Directors (other than Thomas W. Zaucha) (the "Brody Directors"):
"RESOLVED, that each member of the Board of
Directors of the Company, other than Thomas W. Zaucha, such other
members consisting of Steven N. Brody, Charles B. Jarrett, Jr.,
Timothy L. Pesci, Robert J. Smallacombe and David D. Watson, and any
other person or persons (other
<PAGE>10
than the persons elected pursuant to this consent) elected or
appointed to the Board of Directors of the Company prior to the
effective date of this resolution in addition to or in lieu of any of
the aforenamed individuals to fill any newly created directorship or
vacancy on the Board of Directors of the Company, or otherwise, is
hereby removed and the office of each member of the Board of Directors
(other than the office of Thomas W. Zaucha) is hereby declared
vacant."
See Annex A for more information about the Committee's
Nominees. The Committee proposes that the nominees named in Annex A hereto (the
"Nominees") once elected, serve until the next Annual Meeting of the
Stockholders and until their successors have been duly elected and qualified.
Each of the Committee's Nominees has consented to serve as a director of
Northstar if elected.
Of the five Nominees, except as disclosed above, none is
employed or otherwise affiliated with the Company, and none is employed by or
affiliated with any members of the Committee. All of the Nominees are citizens
of the United States.
The Committee has agreed to indemnify each of the Nominees
against all liabilities, including liabilities under the federal securities
laws, in connection with this consent solicitation and such person's
involvement in the operation of the Company and to reimburse such Nominee for
his out-of-pocket expenses.
In the event that less than all of the Proposals are approved
as set forth above, the Committee reserves the right to withhold consent cards
until the Proposals expire without presenting them to the Company, depending on
which alternative the Committee believes is more likely to achieve its
objectives. A discussion of the possible scenarios should less than all of the
Proposals be approved by the shareholders is included in Appendix B.
Additionally, Article III, Section 1 of the By-laws of the Company in its
current form and in its proposed form should the shareholders approve both
Proposals (1) and (2) are set forth in Appendix C hereto.
The accompanying BLUE consent card will be voted in
accordance with the stockholder's instruction on such BLUE consent card. As to
the proposals set forth herein, stockholders may consent to an entire proposal
or may withhold their consent by marking the proper box in the BLUE consent
card. If the enclosed BLUE consent card is signed and returned and no
direction is given, it will be deemed to constitute consent to the proposals.
The Committee seeks the consent of an absolute majority of
the Company's issued and outstanding stock in order to act on the Proposals set
forth in this consent statement.
BROKER NON-VOTES, ABSTENTIONS AND THE FAILURE TO RETURN A
SIGNED CONSENT WILL HAVE THE SAME EFFECT AS WITHHOLDING CONSENT TO THE
PROPOSAL.
Consents Required
The written consent of an absolute majority of the
outstanding Common Stock is required to adopt and approve each of the
Proposals. According to a Certificate of Continental Stock Transfer & Trust
Company, the Company's stock transfer agent (the "Transfer Agent"), dated
September 9, 1996, there were 6,229,717 shares of Common Stock outstanding as
of that date. On February 5, 1997, the Transfer Agent issued a list of
shareholders of the Company which again
<PAGE>11
reported 6,229,717 shares of Common Stock outstanding. The Committee believes,
however, and has confirmed by telephone conversations with counsel to the
parties involved, that in December 1996 the Company foreclosed on 362,564
shares of its Common Stock pledged to the Company by Samuel Armfield, III (the
"Armfield Shares") to secure a $2,100,000 loan. The list originally furnished
by the Transfer Agent erroneously lists Mr. Armfield as a stockholder and lists
the Armfield Shares as outstanding notwithstanding the fact that the Armfield
Shares are treasury stock and are not issued and outstanding or entitled to
vote. Therefore, the Committee believes that as of the Record Date there were
5,867,153 shares of Common Stock issued and outstanding.
Each share of Common Stock entitles the Record Date holder to
one vote on the Proposals. Accordingly, based on the information known to the
Committee, written consents by holders representing 2,933,577 shares of Common
Stock will be required to adopt and approve each of the Proposals. If the
Armfield Shares are deemed for any reason to be outstanding on the Record Date,
approval of the Proposals will require the written consent of holders of
3,114,859 shares of Common Stock. Accordingly, each abstention and broker
non-vote with respect to any of the Proposals will have the same effect as
withholding consent to the adoption of such proposal.
Special Instructions
If you were a record holder as of the close of business on
the Record Date, you may elect to consent to, withhold consent or abstain with
respect to each Proposal by marking the "CONSENT", "CONSENT WITHHELD" OR
"ABSTAIN" box, as applicable, underneath each such Proposal on the accompanying
BLUE consent card and signing, dating and returning it promptly in the enclosed
postage-paid envelope.
IF THE STOCKHOLDER WHO HAS EXECUTED AND RETURNED THE CONSENT
CARD HAS FAILED TO CHECK A BOX MARKED "CONSENT", "CONSENT WITHHELD" OR
"ABSTAIN" FOR EITHER OR BOTH OF THE PROPOSALS, SUCH STOCKHOLDER WILL BE DEEMED
TO HAVE CONSENTED TO SUCH PROPOSAL OR PROPOSALS.
THE COMMITTEE RECOMMENDS THAT YOU CONSENT TO EACH OF THE
PROPOSALS. YOUR CONSENT IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED
BLUE CONSENT CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY.
FAILURE TO RETURN YOUR CONSENT WILL HAVE THE SAME EFFECT AS WITHHOLDING CONSENT
TO THE PROPOSALS.
If your shares are held in the name of a brokerage firm, bank
nominee or other institution, you should contact the person for your account
and give instructions for the BLUE consent card representing your shares to be
mailed, dated and signed. Only that institution can execute a BLUE consent card
with respect to your shares and only upon receipt of specific instructions from
you. The Committee urges you to confirm in writing your instructions to the
person responsible for your account and to provide a copy of those instructions
to the Committee in care of MacKenzie at the address set forth below using the
stamped self-addressed envelope included in the packet so that the Committee
will be aware of all instructions given and can attempt to ensure that such
instructions are followed.
THE CONSENT PROCEDURE
Section 228 of the Delaware General Corporation Law (the
"DGCL") states that, unless otherwise provided in the certificate of
incorporation, any action that may be taken at any
<PAGE>12
annual or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted, and those consents are delivered to the corporation by
delivery to its registered office in Delaware, its principal place of business
or an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. In the case of this
Consent Solicitation, written, unrevoked consents of the holders of a majority
of the outstanding shares of Common Stock as of the Record Date must be
delivered to the Company as described above to effect the actions as to which
consents are being solicited hereunder. Section 228 of the DGCL further
provides that no written consent shall be effective to take the corporate
action referred to therein unless, within 60 days of the earliest dated consent
delivered in the manner required by Section 228, written consents signed by a
sufficient number of holders to take such action are delivered to the
corporation in the manner required by Section 228. In order to facilitate
prompt adoption of the Proposals the Committee requests that you give your
consent by March 21, 1997. The date on which the earliest consent expires is
April 6, 1997.
The Committee intends to tender consents to the Company after
it receives the consent of a majority of the outstanding shares of Common Stock
of the Company. Following such delivery, in the event the Company disputes the
validity of the consents, Mr. Zaucha intends to file a complaint in the
Delaware Court of Chancery seeking relief pursuant to Section 225 ("Section
225") of the Delaware General Corporation Law for, among other things, a
declaration that the Nominees and Mr. Zaucha constitute the duly elected board
of the Company. Section 225 establishes a summary proceeding pursuant to which
the Court may decide any of the issues presented in the February 10, 1997
Complaint, if such decisions are necessary to the Court's determination of the
membership of the board of directors of the Company. Once sufficient unrevoked
and unexpired consents are delivered to the Company to take the actions set
forth therein, such consents will not expire, even if the Section 225
proceeding extends beyond the expiration date of any such consents.
IT IS CURRENTLY THE INTENTION OF THE COMMITTEE TO DELIVER
CONSENTS TO THE COMPANY IN THE MANNER REQUIRED BY SECTION 228 OF THE DGCL ONCE
THE COMMITTEE HAS DETERMINED THAT VALID AND UNREVOKED CONSENTS REPRESENTING A
MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK AS OF THE RECORD
DATE HAVE BEEN OBTAINED. WHEN CONSENTS FOR A MAJORITY OF THE COMPANY'S COMMON
STOCK HAVE BEEN OBTAINED AND DELIVERED TO THE COMPANY, A SHAREHOLDER WILL BE
UNABLE TO REVOKE HIS OR HER CONSENT.
Section 213(b) of the DGCL provides that the record date for
a consent solicitation shall be as established by the board of directors of the
corporation or, if no record date is so established, shall be the first date on
which a signed written consent is delivered to the corporation. Since the first
written consent was delivered to the Company on February 5, 1997, the Record
Date has been set as February 5, 1997.
If the actions described herein are taken, the Company will
promptly notify the stockholders who have not consented to the actions taken as
required by the DGCL.
Consents may only be executed by stockholders of record at
the close of business on the Record Date. The Committee believes that there are
5,867,153 shares of Common Stock outstanding on the date hereof. Therefore, the
number of votes necessary to effect the Proposals is 2,933,577 (an absolute
majority of 5,867,153). However, according to the records of the Transfer
<PAGE>13
Agent, the Company has outstanding 6,229,717 shares of Common Stock. In that
case, the number of votes necessary to effect the proposals would be 3,114,859
(an absolute majority of 6,229,717).
Based on its review of publicly available information, the
Committee is not aware of any other material change since February 5, 1997, in
the number of outstanding shares of Common Stock. Each share of Common Stock
entitles the record holder thereof to cast one vote. The Company's Certificate
of Incorporation and Bylaws do not provide for cumulative voting.
Since the Committee must receive consents from a majority of
the Company's outstanding shares in order for the Proposals to be adopted, a
broker non-vote or direction to withhold authority to vote on the blue card
will have the same effect as a "no" vote with respect to the Committee's
solicitation.
BROKER NON VOTES, ABSTAINING OR NOT RETURNING A SIGNED
CONSENT WILL HAVE THE SAME EFFECT AS WITHHOLDING CONSENT TO THE PROPOSED
ACTIONS. THE COMMITTEE URGES EACH STOCKHOLDER TO ENSURE THAT THE RECORD HOLDER
OF HIS OR HER SHARES MARKS, SIGNS, DATES AND RETURNS THE ENCLOSED CONSENT AS
SOON AS POSSIBLE.
VOTING; COSTS OF CONSENT SOLICITATION
Consents will be solicited by mail, telephone, telegram
and/or personal solicitation, by officers, employees and agents of the
Committee. No such persons shall receive additional compensation for such
solicitation other than MacKenzie and Commonwealth. In addition, the Committee
has retained MacKenzie to act as an advisor in the submission of this Consent
Solicitation. The Committee has agreed to pay MacKenzie a fee estimated not to
exceed $60,000 plus reasonable out-of-pocket expenses. In an engagement letter
with Commonwealth executed on February 6, 1997, the Committee agreed to pay
Commonwealth $10,000 in the aggregate in two installments by February 28, 1997.
The Committee further agreed to pay Commonwealth a "success fee" of $50,000,
plus $.03 per vote successfully solicited from customers of Commonwealth, if
the proposals are approved by an absolute majority of the Company's issued and
outstanding common stock and to pay Commonwealth's reasonable out-of-pocket
expenses. Mr. Zaucha has also agreed to pledge 75,000 shares of Common Stock
beneficially owned by him to Commonwealth as security for its fees and
expenses. The pledge agreement does not grant Commonwealth prior to default
the power to vote or direct the vote of the pledged securities or the power to
dispose or direct the disposition of the pledged securities.
If your shares are registered in your own name, you may mail
or fax your consent to the Committee at the address or fax number listed below.
If your shares are held in "street name" - held by your
brokerage firm or bank - immediately instruct your broker or bank
representative to sign the Committee's BLUE consent and mail to the Committee
and we will promptly deliver it. Please be certain to include the name of your
brokerage firm or bank. If you have additional questions, please call:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
CALL: (212) 929-5500
FAX: (212) 929-0308
<PAGE>14
The Committee anticipates that a total of approximately
$285,000 will be spent in connection with the solicitation. Actual expenditures
may vary materially from the estimate, however, as many of the expenditures
cannot be readily predicted. To date, expenses of approximately $100,000 have
been incurred in connection with the solicitation. The entire expense of
preparing, assembling, printing and mailing this Consent Statement and any
other consent soliciting materials and the cost of soliciting consents will
initially be borne by the Committee. If the Committee's nominees are elected,
the Committee intends to request reimbursement from the Company for these
expenses. This request will not be submitted to a vote of the Company's
stockholders. Banks, brokerage houses and other custodians, nominees and
fiduciaries may be requested to forward the Committee's solicitation material
to the beneficial owners of the shares they hold of record, and the Committee
will reimburse them for their reasonable out-of-pocket expenses.
A consent executed by a stockholder may be revoked at any
time before its exercise by submitting a written, dated revocation of such
consent covering the same shares. A revocation may be in any written form
validly signed by the record holder as long as it clearly states that the
consent previously given is no longer effective and must be executed and
delivered prior to the time that the action authorized by the executed consent
is taken. The revocation may be delivered to the Committee, c/o MacKenzie
Partners, Inc., 156 Fifth Avenue, New York, New York 10010, Attn.: Mark
Harnett. Although a revocation delivered only to the Company will be effective
to revoke a previously executed consent, the Committee requests that if a
revocation is delivered to the Company, a photocopy of the revocation also be
delivered to the Committee, at the address set forth above, so that the
Committee will be aware of such revocation.
YOUR CONSENT IS IMPORTANT. NO MATTER HOW MANY OR HOW FEW
SHARES YOU OWN, PLEASE CONSENT TO THE AMENDMENT TO THE BY-LAWS, THE ELECTION OF
THE COMMITTEE NOMINEES AND THE REMOVAL OF CERTAIN DIRECTORS BY MARKING,
SIGNING, DATING AND MAILING THE ENCLOSED BLUE CONSENT PROMPTLY. ONLY YOUR
LATEST DATED CONSENT COUNTS.
<PAGE>1
APPENDIX A
The names, business addresses, principal occupations and
number of shares of Common Stock beneficially owned as of the date hereof
unless otherwise noted by the Committee, and the Committee's executive officers
who are participants, and of all other participants, in this solicitation are
set forth below:
COMMITTEE MEMBERS
<TABLE>
<CAPTION>
- - ---------------------- ---------------------------- ----------------------------- -----------------
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership* Percent of Class
- - ---------------------- ---------------------------- ----------------------------- -----------------
<S> <C> <C> <C>
Common Stock Thomas W. Zaucha 949,958 (Direct) 16.19%**
100 Lafayette Circle
Indiana, PA 15701
- - ---------------------- ---------------------------- ----------------------------- -----------------
<FN>
* Mr. Zaucha holds a $2,400,000 in aggregate principal amount 6% subordinated
promissory note due 1998 and a $2,625,000 in aggregate principal amount
interest-free subordinated promissory note due 2000 both of which are
convertible into shares of common stock in an event of default subject to
shareholder approval. Apart from the ownership reported above all of which
consists of issued and outstanding shares of Common Stock, Mr. Zaucha has no
options, warrants, or other rights to acquire shares of Common Stock.
** See "Proposals."
</TABLE>
Purchase (Sales and Transfers in brackets) by Mr. Zaucha within the last two
years:
Dates Number of Shares
- - ----- ----------------
11/15/95 736,594 (with spouse Alice L. Zaucha, as
tenants by the entirety)
11/15/95 207,757 (as co-general partner with spouse, Alice L.
Zaucha, Zaucha Family Limited Partnership)
2/02/96 (50,000) (transfer to Steven Brody)
2/02/96 (18,550) (transfer to Michael Delaney)
2/02/96 (843) (transfer to Walter Lewis)
12/06/96 10,000
12/17/96 15,000
12/20/96 25,000
12/20/96 25,000
-------
Total 949,958
=======
<PAGE>2
<TABLE>
<CAPTION>
- - ---------------------- ----------------------------- ----------------------------- ---------------
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of
Class
- - ---------------------- ----------------------------- ----------------------------- ---------------
<S> <C> <C> <C>
Common Stock Joseph F. Micallef 40,000 (Direct) 0.68%*
Associated Sales Tax
Consultants Incorporated
3353 Bradshaw Road, Suite
106
Sacramento, CA 95827
- - ---------------------- ----------------------------- ----------------------------- ---------------
<FN>
* See "Proposals."
</TABLE>
Purchases by Mr. Micallef within the last two years:
Dates Number of Shares
- - ----- ----------------
5/19/95 3,000
6/08/95 2,000
6/09/95 5,000
7/05/95 7,000
11/02/95 13,000
3/27/96 10,000
------
Total 40,000
======
<TABLE>
<CAPTION>
- - ---------------------- ---------------------------- ----------------------------- ---------------
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of
Class
- - ---------------------- ---------------------------- ----------------------------- ---------------
<S> <C> <C> <C>
Common Stock Basil J. Asciutto 20,000 (Direct) 0.34%*
Commonwealth Associates,
L.P.
733 Third Avenue
New York, NY 10017
- - ---------------------- ---------------------------- ----------------------------- ---------------
<FN>
* See "Proposals."
</TABLE>
Purchases by Basil J. Asciutto within the last two years:
Dates Number of Shares
- - ----- ----------------
1/2/97 10,000
1/15/97 10,000
------
Total 20,000
======
<PAGE>3
OTHER PARTICIPANTS
<TABLE>
<CAPTION>
- - ---------------------- ---------------------------------------- ------------------------------ ---------------
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of
Class
- - ---------------------- ---------------------------------------- ------------------------------ ---------------
<C> <C> <C> <C>
Common Stock Commonwealth Associates, L.P. 71,397 (Direct)* 1.22%**
733 Third Avenue
New York, NY 10017
- - ---------------------- ---------------------------------------- ------------------------------ ---------------
<FN>
*As of February 24, 1997.
** See "Proposals."
</TABLE>
INFORMATION ABOUT COMMONWEALTH
Pursuant to an underwriting agreement with the Company, Commonwealth acted as
the lead underwriter during the Company's last public offering of its Common
Stock in May 1995. Commonwealth engages in normal market-making activities with
respect to the Common Stock in the ordinary course of its business and
consequently buys, sells and beneficially owns shares of the Common Stock for
its own account on a regular basis.
That May 1995 secondary stock offering of Northstar Common Stock yielded gross
proceeds to the Company of $12.8 million, with Commonwealth, its co-manager and
syndicate members sharing an aggregate of $1.3 million in customary
underwriting discounts, commissions and fees. In addition, in November 1995,
Commonwealth arranged and advised the Company in connection with a $16 million
credit facility for a fee of $240,000. Commonwealth also performed certain
financial advisory functions in connection with the Company's merger with
Keystone and the Company's acquisition of Penn Vascular, for which Commonwealth
received an advisory fee of $200,000.
<PAGE>1
APPENDIX B
SCENARIOS IF LESS THAN ALL OF THE PROPOSALS ARE APPROVED
The Committee recommends that stockholders vote in favor of
all of the Proposals, although stockholders retain the right to vote for some,
but not all of them. This Appendix B summarizes the effects of the adoption of
some but less than all of the Proposals. The Committee reserves the right to
withhold consent cards until they expire without presenting them to the Company
in the event that some but not all of the Proposals are approved.
In the event that all but one of the Proposals is approved by
the stockholders holding a majority of the outstanding shares of stock of the
Company, the following chart summarizes the results:
<TABLE>
<CAPTION>
- - ------------------------ ---------------------- ---------------------- -----------------------
All But Proposal (1) All But Proposal (2) All But Proposal (3) All But Proposal (4)
is Approved is Approved is Approved is Approved
- - ------------------------ ---------------------- ---------------------- -----------------------
<S> <C> <C> <C>
The five Nominees Proposal (4) would There would be The Board would
would fill the be ineffective, so eleven seats on the consist of eleven
directorships. At that the Brody non-classified Board non-classified
such time, the Directors would of Directors but the members with the
non-classified board retain their sole member of the Nominees forming a
would have six members classified seats Board of Directors majority of the Board
consisting of the until the end of would be Thomas with Thomas Zaucha.
Nominees and Thomas their current terms Zaucha.
Zaucha. but the elected
Nominees together
with Thomas Zaucha
would constitute a
majority of the
eleven-member
classified Board.
- - ------------------------ ---------------------- ---------------------- -----------------------
</TABLE>
Additionally, a majority of the shares outstanding may be
cast in favor of a combination of the Proposals with the following effects:
(i) In the event that Proposals (1) and (2) are not approved
but Proposals (3) and (4) are, the Nominees will not be elected to the
Board. Instead the Committee's measures would be defeated in their
entirety and the Brody Directors will remain classified directors and
will be allowed to serve out their current term before they are
eligible for removal or re-election by the shareholders.
(ii) If Proposals (2) and (3) are not approved but Proposals
(1) and (4) are approved, the Board composition will be essentially
unchanged. Only the Brody Directors and Mr. Zaucha would sit on the
Board. Directors would be classified and not removable without cause.
The sole change would be that the size of the Board would be increased
to eleven possible seats of which five would be vacant.
<PAGE>2
(iii) If Proposals (3) and (4) are not approved but
Proposals (1) and (2) are approved, the Brody Directors will retain
their seats on the Board and will serve out their current terms. The
Board will not be classified and will consist of eleven members with
five vacancies. The shareholders' statutory right to remove
non-classified directors without cause will be reinstated. None of the
Committee's Nominees would be entitled to serve on the Board.
(iv) Similarly, if Proposals (1) and (4) are not approved
but Proposals (2) and (3) are approved, the Brody Directors would
retain their seats on the non-classified Board. The shareholders'
statutory right to remove non-classified directors without cause will
be reinstated. However, none of the Committee's Nominees would be
entitled to sit on the Board.
(v) Should Proposals (1) and (3) fail to pass, the end
result would be a non-classified Board of Directors with five
vacancies on it. The sole Director of Northstar would be Mr. Zaucha.
(vi) If a majority of the outstanding shares are voted for
Proposals (1) and (3) but not for Proposals (2) and (4), the Board
would consist of eleven members including the Brody Directors, the
Nominees and Mr. Zaucha. There would be no vacancies on the Board.
The Board would continue to be classified and the directors could not
be removed without cause. The Nominees and Mr. Zaucha would command a
majority of the votes on the Board.
Moreover, in certain cases it is possible for shareholders to
vote in favor of portions of a Proposal. In the event that a portion of any
Proposal is not approved but all the other Proposals are approved, the
following scenarios could occur:
<TABLE>
<CAPTION>
- - -------------------- ------------------ ------------------- ------------------ ------------------
The Board is Not Fewer Than Five Fewer Than Five Fewer Than Five
Declassified Nominees are Brody Directors Nominees are
Elected are Removed Elected and
Fewer Than Five
Brody Directors
are Removed
- - -------------------- ------------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
All Other Proposal (2) The Board would The Board would Control of the
Proposals are fails in its have eleven consist of Board would be
Approved entirety. non-classified eleven uncertain.
Directors seats. Those non-classified Depending on who
continue to be Nominees who were seats. The sits on the
classified and elected would sit Nominees would Board either the
are permitted to on the Board sit on the Board Brody Directors
serve for the along with Mr. with Mr. Zaucha or the Nominees
duration of Zaucha. There and those Brody would control.
</TABLE>
<PAGE>3
<TABLE>
<S> <C> <C> <C> <C>
their terms. would be a number Directors who If an even
Classified of vacancies on were not number of Brody
Directors cannot the Board. removed. The Directors and
be removed Nominees Nominees
without cause. together with including Mr.
The Board would Mr. Zaucha would Zaucha is
consist of have a majority elected, the
eleven of the votes on Board might be
classified the Board. deadlocked.
directors
including the
Brody Directors,
the Nominees and
Mr. Zaucha. The
Nominees and Mr.
Zaucha would
constitute a
majority of the
Board.
- - -------------------- ------------------ ------------------- ------------------ ------------------
</TABLE>
Furthermore, if only one of the Proposals is approved, the
Board will remain in its current configuration with six classified members
comprised of the Brody Directors and Mr. Zaucha. Each director will be permitted
to serve his full term and none of the Nominees would be entitled to sit on the
Board.
<PAGE>
APPENDIX C
Article III, Section 1 of the By-laws of the Company currently states in its
entirety:
The business of the Corporation shall be managed by its Board
of Directors, which may exercise all powers of the Corporation and perform all
lawful acts that are not by law, the Certificate of Incorporation, or these
Bylaws directed or required to be exercised or performed by the stockholders.
The Board of Directors shall be comprised of seven (7) directors. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article. The directors shall be divided into three
classes, as nearly equal in number as possible, with the term of office of the
first class to expire at the 1998 Annual Meeting of Stockholders, the term of
office of the second class to expire at the 1999 Annual Meeting of Stockholders
and the term of office of the third class to expire at the 2000 Annual Meeting
of Stockholders. At each Annual Meeting of Stockholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding Annual Meeting of Stockholders after their election. Directors need
not be stockholders.
If both Proposal (1) and Proposal (2) are approved by the shareholders, Article
III, Section 1 of the By-laws of the Company as set forth above would be
replaced in its entirety with the following provision:
The business of the Company shall be managed by its Board of
Directors, which may exercise all powers of the Company and perform all acts
that are not by law, the Certificate of Incorporation, or these Bylaws directed
or required to be exercised or performed by the shareholders. The Board of
Directors shall be comprised of eleven (11) directors. Each director shall
serve for a term of one year and shall hold office until such director's
successor is elected and qualified or until such director's earlier resignation
or removal. Directors may be removed without cause by the holders of a
majority of the shares then entitled to vote. Directors need not be
stockholders.
<PAGE>
- - -----------------------------------------------------------------------------
YOUR VOTE IS EXTREMELY IMPORTANT
1. Please SIGN, MARK, DATE and MAIL your BLUE consent in the enclosed
postage-paid envelope as soon as possible before April 6, 1997. If you
wish to consent to the amendments to the By-laws, the election of the
Committee's Nominees and/or the removal of the current Directors (with
the exception of Thomas W. Zaucha), you must submit the enclosed
consent.
2. If your shares are held for you by a bank or brokerage firm, only your
bank or broker can vote your shares and only after receiving your
instructions. Please call your bank or broker and instruct your
representative to consent to the amendments to the By-laws, the
election of the Committee's Nominees and/or the removal of the current
Board (with the exception of Thomas W. Zaucha) on the BLUE consent.
3. Time is short. Please vote today!
If you have questions or need assistance in voting your shares or in
changing your vote please contact the Committee at the number listed
below:
c/o MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
CALL: (212) 929-5500
or
(800) 322-2885
- - -----------------------------------------------------------------------------
<PAGE>
NORTHSTAR HEALTH SERVICES, INC.
CONSENT OF STOCKHOLDERS TO ACTION WITHOUT A MEETING
THIS CONSENT IS SOLICITED BY
THE COMMITTEE
The undersigned, a stockholder of record of NORTHSTAR HEALTH
SERVICES, INC. ("Northstar" or the "Company"), hereby consents pursuant to
Section 228 of the Delaware General Corporation Law, with respect to the number
of shares of Common Stock, par value $.01 per share, of the Company held by the
undersigned, to each of the following actions without a prior notice and
without a vote as more fully described in the Committee's consent statement
("Consent Statement") (receipt thereof is hereby acknowledged).
THE COMMITTEE STRONGLY RECOMMENDS THAT STOCKHOLDERS CONSENT
TO THE FOLLOWING PROPOSALS:
PROPOSAL ONE: Amend Article III, Section 1 of the By-Laws of
Northstar pursuant to the resolutions set forth in the
Consent Statement to set the number of directors on the Board
of Directors at eleven (11).
[ ] CONSENT [ ] CONSENT WITHHELD [ ] ABSTAIN
If no box is marked with respect to Proposal One, the
undersigned will be deemed to consent to the increase in the number of
directors on the Board of Directors as set forth above.
PROPOSAL TWO: Eliminate the classified Board of Directors and
re-affirm the ability of a majority of the stockholders to
remove non-classified directors without cause in accordance
with Delaware law pursuant to the resolutions set forth in
the Consent.
[ ] CONSENT [ ] CONSENT WITHHELD [ ] ABSTAIN
PROPOSAL THREE: Elect the following five persons listed below
to fill the newly created directorships (the "Nominees")
pursuant to the resolutions set forth in the Consent
Statement:
--------------------------------
For ELECTION
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Lawrence F. Jindra, M.D.
James H. McElwain
Mark G. Mykityshyn
Roger J. Reschini
David B. White
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[ ] CONSENT [ ] CONSENT WITHHELD [ ] ABSTAIN
<PAGE>
To withhold consent to a proposed Nominee, specify the Nominee
in the following space:
If no box is marked above with respect to Proposal Three, the
undersigned will be deemed to consent to the election of all five Nominees.
PROPOSAL FOUR: Remove the members of the Board of Directors
of Northstar other than Thomas W. Zaucha and the directors
elected by this consent, pursuant to the resolutions set
forth in the Consent Statement (the "Brody Directors"):
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For REMOVAL
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Steven N. Brody
Charles B. Jarrett, Jr.
Timothy L. Pesci
Robert J. Smallacombe
David D. Watson
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[ ] CONSENT [ ] CONSENT WITHHELD [ ] ABSTAIN
To withhold consent to the removal of a Brody Director,
specify the Brody Director or Directors in the following space:
If no box is marked above with respect to Proposal Four, the
undersigned will be deemed to consent to the removal of all five Brody
Directors.
PLEASE ACT PROMPTLY. IMPORTANT: THIS CONSENT MUST BE SIGNED
AND DATED TO BE VALID.
Dated: ______________________, 1997
Signature:___________________________
Signature
(if held jointly):______________________
Title or authority
(if applicable):_______________________
Please sign exactly as your name appears hereon. If your
shares are registered in more than one name, the signature of all such persons
should be provided. A corporation should sign in its full corporate name by a
duly authorized officer, stating his title. Trustees, guardians, executors, and
administrators should sign in their official capacity, giving their full title
as such. If the shares are held in the name of a partnership, please have the
authorized persons sign on behalf of the partnership. The consent card votes all
shares in all capacities.
<PAGE>
PLEASE MARK, SIGN AND DATE THIS CONSENT BEFORE MAILING THIS
CONSENT IN THE ENCLOSED ENVELOPE.
<PAGE>
ANNEX A
THE COMMITTEE'S NOMINEES
The following sets forth information about the Nominees.
Lawrence F. Jindra, M.D. (38) has served as the Independent
Scientific/Technical Consultant to Biomedical Venture Finance since 1982. Dr.
Jindra has also served as the Assistant Chief of Ophthalmology (Northport
Veterans Affairs Medical Center) and as the Founder and Director of the
Glaucoma Consultation Unit of the United States Department of Veterans Affairs
since 1994 and 1989, respectively. From 1992 to 1993, Dr. Jindra served as a
White House Fellow, Office of Science & Technology Policy and President's Task
Force for National Health Care Reform. Dr. Jindra has rendered consulting
service to Commonwealth Associates from time to time.
James H. McElwain (50) has served as the Chief Operating Officer of S. W. Jack
Drilling Company since January 1995. From September 1988 until December 1994,
Mr. McElwain served as the Vice President of Finance of Keystone Rehabilitation
Systems, Inc., which merged with the Company in 1995.
Mark G. Mykityshyn (39) has served as a Technical and Financial Consultant with
High Technology Venture Finance since 1995. Mr. Mykityshyn has also served as a
Management and Technology Consultant with Booz Allen & Hamilton, Inc. since
1993 and was an Adjunct Professor of Aeronautics at The George Washington
University from 1994-1995. Prior to 1993, Mr. Mykityshyn served as an aviator
in the United States Marine Corps (1982-1989) and earned the Degree of Engineer
of Aeronautical and Astronautical Engineering and the Degree of Master of
Science in Aeronautical and Astronautical Engineering from the Massachusetts
Institute of Technology and a Masters Degree in Public Administration (Science
and Technology Policy concentration) from Harvard University (1990-1993).
Roger J. Reschini (59) founded the Reschini Agency, Inc. (the "Reschini
Agency"), a multiple line insurance agency, in 1979 and founded TFID, Inc., a
real estate development company, in 1984. Mr. Reschini has also been the
recipient of a Benjamin Rush Award and a Paul Harris Fellowship. The Reschini
Agency acts as the Company's broker for professional and general liability
insurance for which the Company pays premiums of approximately $300,000
annually and the agency retains customary commissions.
David B. White (41) is a name partner of Burns, White & Hickton (Pittsburgh,
PA). Mr. White was admitted to the practice of law in 1982, and he is currently
a member of the Allegheny County, Pennsylvania and American Bar Associations;
the Hospital Association of Pennsylvania; the National Order of Barristers; and
the Academy of Trial Lawyers. Mr. White's principal practice areas are personal
injury defense law, automobile law, insurance law and health care law.
<PAGE>
THE COMMITTEE'S MEMBERS
The following sets forth information about the Committee's Members.
Basil J. Asciutto (51) the Chief Operating Officer of Commonwealth Associates,
L.P., is a member of Commonwealth's Executive Committee and a Senior Managing
Director of its Trading Department. Prior to joining Commonwealth, Mr.
Asciutto was a Vice President and Manager of the National Market Department and
a Senior Position Listed Block Trader at Merrill Lynch. Mr. Asciutto has over
25 years of experience with institutional and retail customers as well as an
extensive trading background. Mr. Asciutto is also a founding member of the
Wall Street Charity Fund.
Joseph F. Micallef (49) founded Associated Sales Tax Consultants, Inc. (ASTC),
a California firm specializing in arguing tax issues before various
governmental agencies, in 1980 and currently serves as ASTC's Chairman. Mr.
Micallef also serves as the Chairman for SABER (State Alliance for Board of
Equalization Reform), a lobbyist organization he formed in 1987. Mr. Micallef
has worked with California legislators to enact several taxpayer oriented laws,
including the Taxpayer Bill of Rights passed in 1989, and has served as second
chair in various tax litigation matters before state and federal tax agencies.
Mr. Micallef has requested that he be considered as a candidate to fill a
vacancy on the Northstar Board of Directors in the event the solicitation by
the Committee of written consents from the holders of shares of Common Stock is
successful. In that event, this request will be considered in due course by the
Board.
Thomas W. Zaucha (51) is a Director of Northstar Health Services, Inc. Mr.
Zaucha founded Keystone Rehabilitation Systems, Inc. ("Keystone") in 1981 and
presided as its Chairman, President and Chief Executive Officer until Keystone
merged with Northstar in 1995. Just prior to the merger, Keystone had annual
revenues of approximately $22 million and Northstar had annual revenues of
approximately $13 million. Mr. Zaucha has approximately 28 years of experience
in health care and physical therapy related industries. Mr. Zaucha is also a
member of numerous professional and community organizations.
