<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:
|X| Preliminary Consent Statement
|_| 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
PRELIMINARY COPY--FOR THE INFORMATION OF THE SECURITIES AND
EXCHANGE COMMISSION
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 February __,
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
to set the number of directors on the Board of Directors of the Company (the
"Board") at eleven (11), to eliminate the classified Board of Directors and to
affirm the ability of a majority of the stockholders of the Company, once the
Board is no longer classified, to remove directors without cause as follows:
"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 By-laws 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";
(2) 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
(3) 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) and (2), 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.
<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 February 5, 1997 (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 14,
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 16.21% of the Company's shares
currently outstanding.
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 1,302,458 shares of Company Common Stock, constituting approximately
20.91% of outstanding shares, for the account of its customers, including 66,197
shares held for its own account as of the close of business on February 14, 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.
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
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 843,170 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. 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 Directors
would consist of its former directors, Mark A. DeSimone and Michael Pitterich,
Mr. Zaucha and his consultant Steven N. Brody.
Shortly after assuming his duties as the Company's Chief
Executive Officer, Mr. Zaucha began to uncover elements of what appeared to be
irregular, self-interested transactions
<PAGE>4
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.
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, 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 local business consultant, be appointed to fill one of the
vacancies on the Company's Board of Directors. On May 20, 1996, Mr.
Smallacombe and David D. 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, 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.
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
<PAGE>5
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.
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 to six (6) members 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.
The Board, over Mr. Zaucha's objection, nevertheless approved
option grants which, if exercised, would equal approximately 14% of the
Company's outstanding stock. The options granted are as follows:
Grantee Grant Status Amount
- ------- ------------ ------
Steven N. Brody Director/consultant (outside) 200,000
Robert J. Smallacombe Director/consultant (outside) 200,000
David D. Watson Director/President and
Chief Operating Officer 205,000
Charles B. Jarrett, Jr. Director (outside) 25,000
Timothy L. Pesci Director (outside) 25,000
<PAGE>6
Grantee Grant Status Amount
- ------- ------------ ------
John Lombardi Executive Vice President
and Chief Financial Officer 110,000
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
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.
On January 21, 1997, at a Board meeting called by the Audit
Committee, the Board of Directors received a presentation on "shark-repellent"
antitakeover 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.
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;
(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;
<PAGE>7
(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.
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:
<PAGE>8
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 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.
<PAGE>9
PROPOSALS
This solicitation statement and the accompanying form of
written consent are first being furnished by the Committee on or about February
__, 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 eliminate
the classified Board of Directors, set the number of directors on the Board of
Directors at eleven (11) and to affirm the ability of a majority of the
stockholders, once the Board of Directors is no longer classified, to remove
directors without cause, as follows:
"RESOLVED, that Article III, Section 1 be amended to
read in its entirety as follows:
The business of the Corporation shall be managed by
its Board of Directors, which may exercise all powers of the
Corporation and perform all acts that are not by law, the Certificate
of Incorporation, or these By-laws directed or required to be exercised
or performed by the stockholders. 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 entitled to vote.
Directors need not be stockholders.";
(2) Elect 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
(3) 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. Jarret, Jr., Timothy
L. Pesci, Robert J. Smallacombe 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 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
<PAGE>10
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.
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. To the
knowledge of the Committee, there were 6,229,717 shares of Common Stock
outstanding at September 9, 1996 based on a Certificate of Continental Stock
Transfer & Trust Company, the Company's stock transfer agent. 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 3,114,859 shares of Common Stock will be required to
adopt and approve each of the Proposals. 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.
<PAGE>11
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 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 14, 1997.
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.
<PAGE>12
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. As of September 9, 1996, the Company had
outstanding 6,229,717 shares of Common Stock. The number of votes necessary to
effect the proposals is 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.
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
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 $95,000
<PAGE>13
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 (i) a written, dated revocation of such
consent or (ii) a later dated 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 or later dated consent delivered only to the
Company will be effective to revoke a previously executed consent, the Committee
requests that if a revocation or later dated consent is delivered to the
Company, a photocopy of the revocation or later dated consent 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>14
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:
Number of
Shares
Name and Principal Beneficially
Business Address Occupation Owned
- ---------------- ---------- ------------
Thomas W. Zaucha Former Chief Executive 949,958
Officer of the Company
Purchase (Sales and Transfers in brackets) by Thomas W.
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>15
Number of Shares
Name and Principal Beneficially Owned as
Business Address Occupation of February 14, 1997
- ---------------- ---------- ---------------------
Commonwealth Associates, L.P. Broker-Dealer 66,197
Pursuant to an underwriting agreement with the Company, Commonwealth Associates,
L.P. acted as the lead underwriter during the Company's last public offering of
its Common Stock in May 1995. Accordingly, Commonwealth Associates, L.P. engaged
in, and continues to engage in, customary market-making and market-stabilization
activities in the ordinary course of business and consequently beneficially owns
shares of the Common Stock for its own account.
<PAGE>1
- --------------------------------------------------------------------------------
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 amendment to the By-laws, the election of the
Committee's Nominees and 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 amendment to the By-laws, the
election of the Committee's Nominees and 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>2
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), to eliminate the classified
Board of Directors and to affirm the ability of a majority of
the stockholders, once the Board of Directors is no longer
classified, to remove directors without cause.
[ ] CONSENT [ ] CONSENT WITHHELD [ ] ABSTAIN
If no box is marked with respect to Proposal One, the
undersigned will be deemed to consent to the amendment of the By-Laws of
Northstar as set forth above.
Proposal Two: 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
--------------------------------
Lawrence F. Jindra, M.D.
James H. McElwain
Mark G. Mykityshyn
Roger J. Reschini
David B. White
--------------------------------
[ ] CONSENT [ ] CONSENT WITHHELD [ ] ABSTAIN
To withhold consent to a proposed Nominee, specify the
Nominee in the following space:
<PAGE>3
If no box is marked above with respect to Proposal Two, the
undersigned will be deemed to consent to the election of all five Nominees.
Proposal Three: 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"):
[ ] CONSENT [ ] CONSENT WITHHELD [ ] ABSTAIN
If no box is marked above with respect to Proposal Three, the
undersigned will be deemed to consent to the removal of all of the 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.
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.
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.
<PAGE>
