<PAGE> 1
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934 (Amendment No. )
Check the appropriate box:
[ ] Preliminary Information Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
DIALYSIS CORPORATION OF AMERICA
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Its Charter)
- --------------------------------------------------------------------------------
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<PAGE> 2
DIALYSIS CORPORATION OF AMERICA
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 11, 1997
----------------
To Shareholders:
The Annual Meeting of Shareholders of DIALYSIS CORPORATION OF AMERICA
(the "Company") will be held at the Don Shula Hotel, 15255 Bull Run Road, Miami
Lakes, Florida on Wednesday, June 11, 1997 at 4:00 p.m., for the following
purposes:
1. To elect three members to the Board of Directors to serve
until the next Annual Meeting of Shareholders; and
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 18,
1997, as the record date for the determination of the shareholders entitled to
notice of and to vote at the meeting and any adjournment thereof.
Your copy of the Annual Report of the Company for 1996 is enclosed.
You are cordially invited to attend the Annual Meeting of Shareholders.
By Order of the Board of Directors
LAWRENCE E. JAFFE
Secretary
Hialeah, Florida
May 2, 1997
<PAGE> 3
DIALYSIS CORPORATION OF AMERICA
2337 West 76th Street
Hialeah, Florida 33016
------------------
Information Statement for Annual Meeting of Shareholders
June 11, 1997
------------------
Matters to be Considered at the Meeting
This Information Statement and the Company's Annual Report to
Shareholders for the year ended December 31, 1996, anticipated to be mailed on
or about May 2, 1997, is solicited by and on behalf of the Board of Directors of
Dialysis Corporation of America, a Florida corporation (the "Company") for the
Annual Meeting of Shareholders of the Company to be held on Wednesday, June 11,
1997, at the Don Shula Hotel, 15255 Bull Run Road, Miami Lakes, Florida at 4:00
p.m., including any adjournment thereof, for the purposes set forth in the
Notice of Annual Meeting.
The Company will request brokers, nominees, fiduciaries and custodians
to forward this Information Statement and the Company's Annual Report to their
principals and beneficial owners, and will reimburse such persons for reasonable
expenses incurred by them in forwarding such materials.
Record Date
The Board of Directors has fixed the close of business on April 18,
1997, as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting and any adjournment thereof.
Only shareholders of record on that date are entitled to vote at the meeting.
Voting Securities
As of April 18, 1997 there were outstanding and entitled to be voted at
the Annual Meeting, 3,588,844 shares of common stock, $.01 par value ("Common
Stock"). Each share of Common Stock is entitled to one vote. A majority of the
outstanding shares is needed for a quorum and a plurality of the votes cast is
necessary to effectuate election of the directors. A majority of shares
represented at the meeting is sufficient to effectuate any other matter that may
properly come before the meeting, except as otherwise required by applicable
law. The Company's parent, Medicore, Inc. ("Medicore" or the "Parent"), intends
to vote its 2,410,622 shares of the Company's Common Stock, or approximately 67%
voting equity of the Company, in favor of election of each of the three (3)
nominees for directors (see "Election of Directors"), thereby assuring the
election of the three nominees.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth as of April 18, 1997, the names and
beneficial ownership of the equity securities of the Company and its
subsidiaries and of Medicore, the Parent, for directors, individually itemized,
and for directors and officers as a group, without naming them, and for each of
the named executive officers disclosed in the Summary Compensation Table (see
"Executive Compensation") and for shareholders known to the Company to
beneficially own more than 5% of its voting securities.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership(1)
-------------------------------------------------------------------
Dialysis Medicore
Common Common
Name Stock %(2)(3) Stock %(2)(4)
---- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Medicore, Inc. 2,410,622 67.2% -- --
2337 W. 76th St
Hialeah, FL 33016
Thomas K. Langbein 2,460,622(6) 67.1% 1,074,814 18.8%
c/o Medicore, Inc.
777 Terrace Avenue,
Hasbrouck Heights, New Jersey 07604
Bart Pelstring 50,000(8) 1.4% 85,000(9) 1.5%
c/o Dialysis Corporation of America
402 Marvel Court
Easton, MD 21601
Michael Duke 10,000(8) * -- 0%
2 West Market Street
Suite 509
West Chester, PA 19382
All directors and
executive officers
as a group (5 persons) 2,533,122(5)(6) 69.1% 1,225,864 21.3%
</TABLE>
*less than 1 %
- ----------
(1) Based upon information furnished to the Company by either the directors
and officers or obtained from the stock transfer books of the Company.
The Company is informed that these persons hold sole voting and
dispositive power with respect to the shares of Common Stock except as
noted herein.
(Notes continued on following page)
2
<PAGE> 5
(2) For purposes of computing the percentage of outstanding shares held by
each person or group of persons named in this table, any security which
such person or group of persons has the right to acquire within 60 days
of April 18, 1997 is deemed to be outstanding for purposes of computing
the percentage ownership of such person or persons, but is not deemed
to be outstanding for the purpose of computing the percentage ownership
of any other person.
(3) Based on 3,588,844 shares of Common Stock outstanding. Does not include
(i) options for 193,500 shares of the Company's Common Stock reserved
for issuance upon exercise of the outstanding options under the 1995
Plan; and (ii) options for 15,000 shares of the Company's Common Stock
reserved for issuance upon exercise of outstanding options granted to
medical directors in 1996. See Note (2) and "Executive Compensation -
Options, Warrants or Rights."
(4) Based on 5,456,940 shares outstanding. Does not include 807,000 shares
of common stock underlying options granted in April, 1995 under
Medicore's 1989 Stock Option Plan, which options are not transferable
and are exercisable for 50% of the option on or after April 18, 1996
and the balance one year thereafter. See Note (2) and "Executive
Compensation - Options, Warrants or Rights."
(5) Officers and directors of Medicore, including those directors of the
Company and Medicore who may be shareholders of each company, except
Thomas K. Langbein (see Note (6)), disclaim any indirect beneficial
ownership of the Company's Common Stock through Medicore's 67.2%
ownership of the Company.
(6) Includes (i) Medicore's 2,410,622 share ownership, by virtue of his
position with the Company and Medicore and his stock ownership of
Medicore, which may deem Mr. Langbein to have beneficial ownership of
such shares through shared voting and investment power with respect to
Medicore's ownership of the Company; Mr. Langbein disclaims such entire
beneficial ownership, but for his proportionate interest, approximately
453,000 shares of the Company (12.6%); and (ii) Company options for
50,000 shares. See Note (2) and "Executive Compensation - Options,
Warrants or Rights."
(7) Includes (i) 15,700 shares each held in the names of Mr. Langbein's two
children who are of majority age but live in the same household, to
which Mr. Langbein disclaims beneficial ownership; and (ii) 250,000
shares underlying options exercisable 50% on April 18, 1996 with the
balance on April 18, 1997 at an exercise price of $2.38 per share
through April 17, 2005. Does not include an option to acquire up to
400,000 shares of common stock in lieu of a lump sum payment, which
option is not presently exercisable except in the event of a change in
control of Medicore. See Note (4) and "Employment Contracts and
Termination of Employment and Change-In-Control Arrangements" and
"Options, Warrants or Rights" under the caption "Executive
Compensation."
(Notes continued on following page)
3
<PAGE> 6
(8) All Shares underlying the 1995 Plan Options. See Note (3).
(9) Includes (i) 30,000 shares underlying an options for exercisable 50% on
April 18, 1996 with the balance exercisable on April 18, 1997 at $2.38
per share through April 17, 2005, which becomes fully exercisable in
the event of a change in control of Medicore. See Note (4) and
"Executive Compensation-Options, Warrants, or Rights."
4
<PAGE> 7
ELECTION OF DIRECTORS
At the Annual Meeting, shareholders will elect three directors to serve
for a one year term and until each of their successors is elected and qualified.
The By-Laws of the Company provide that the Board of Directors shall not be less
than two nor more than six persons, and since less than the maximum number of
directors are to be elected, which is permissible pursuant to the Company's
By-Laws, shareholders cannot vote for a greater number of persons than the
number of nominees named. The By-Laws, as presently constituted, provide that
the majority of directors have the right to appoint candidates to fill any
vacancies on the Board, whether through death, retirement or other termination
of a director, or through an increase in the Board. At such time that qualified
candidates are available to serve, the majority of the Board, although less than
a quorum, or by a sole remaining director, may appoint such person(s) to fill
the vacancy now existing. When appointed, such director shall then serve for the
remainder of the term.
The affirmative vote of a plurality of the shares of Common Stock
represented at the meeting is required to elect the three directors. Cumulative
voting is not permitted in the election of directors. Consequently, each
shareholder is entitled to one vote for each share of Common Stock held in his
name. Medicore owns 67.2% of the voting stock of the Company and intends to vote
all of its Common Stock in favor of the election of the persons named below as
nominees for directors, thereby assuring the election of the three nominees. The
nominees have consented to be named herein and to serve on the Board of
Directors. If any nominee is unable to serve as a director (which presently is
not anticipated), the Common Stock will be voted for such substituted nominee as
may be designated by the present Board of Directors. The three nominees for
directors are current directors. There is no nominating committee with
nominations for director considered by the entire Board of Directors.
For additional information concerning the nominees for the Board of
Directors, including compensation and share ownership, see "Security Ownership
of Certain Beneficial Owners and Management," "Executive Compensation" and
"Certain Relationships and Related Transactions."
<TABLE>
<CAPTION>
Current Position
Name Age and Areas of Responsibility Position Held Since
- ---- --- --------------------------- -------------------
<S> <C> <C> <C>
Thomas K. Langbein 51 Chairman of the Board and 1982
Chief Executive Officer 1990
Bart Pelstring 56 President 1986
and Director 1985
Michael Duke 40 Director 1995
</TABLE>
THOMAS K. LANGBEIN has been affiliated with the Company since March,
1980 when he was appointed Chairman of the Board of Directors and President. Mr.
Langbein relinquished the position of President in September, 1986 when he was
appointed as Chief Executive Officer of the Company. He is Chairman of the Board
and Chief Executive Officer of each of the Company's subsidiaries. Mr. Langbein
is also the Chairman of the Board, Chief Executive Officer and President of
Medicore, the parent of the
5
<PAGE> 8
Company. He is the Chairman of the Board and Chief Executive Officer of
Techdyne, Inc. ("Techdyne") a 63% owned public subsidiary of Medicore engaged in
the manufacturer, assembly and distribution of electronic and electro-mechanical
components. Mr. Langbein is President, sole shareholder and director of Todd &
Company, Inc., ("Todd") a broker-dealer registered with the Securities and
Exchange Commission and a member of the NASD. Mr. Langbein devotes most of his
time to the affairs of the Company, Medicore and Techdyne. See "Certain
Relationships and Related Transactions" of the Company's definitive Information
Statement relating to the Annul Meeting of Shareholders to be held on June 11,
1997, incorporated herein by reference.
BART PELSTRING has been affiliated with the Company since 1976. Mr.
Pelstring was appointed Vice-President of Operations in March, 1980 and served
in that capacity until September, 1986 when he was appointed as President of the
Company, which position as well as director (elected in July, 1985) he holds
with the Company's subsidiaries. Mr. Pelstring is a founding member of the
National Renal Administrators Association and was the founder and president of
the Florida Renal Administrators Association.
MICHAEL C. DUKE served as Vice President and general counsel to Renal
Treatment Centers, Inc., a competitor of the Company, from 1989 through 1994.
Mr. Duke is a partner of Duke & Duke, a law firm in West Chester, Pennsylvania.
Mr. Duke has experience and expertise in the dialysis industry and its
regulation.
There is no family relationship between and any officer or director of
the Company.
The term of office for directors and officers of the Company is one
year. The audit committee consists of Messrs. Langbein and Ouzts, both of whom
are officers (Mr. Langbein is also Chairman of the Board) of the Company and are
officers and/or directors of and employed by Medicore. Therefore, they are not
deemed independent. By virtue of their relationship, the audit committee does
not formally meet, but has ongoing informal communications. See "Principal
Shareholders" and "Certain Relationships and Related Transactions." The
responsibilities of the audit committee include recommending to the Board of
Directors the firm of independent accounts to serve the Company, reviewing the
independent accountants' reports, services and results of audit, and reviewing
the scope, results and adequacy of the internal control procedures. The Company
has no compensation, nominating or stock option committee since the Board is of
such a size that it can deal with these matters as a whole.
Since the Company completed its public offering in April, 1996, it has
held six meetings of its Board of Directors, including action by unanimous
written consent. All the directors participated at all the meetings.
No director or any committee member has received any compensation for
acting as such. The By-laws provide for the payment of and the Company pays the
reasonable expenses for directors' attendance at meetings. In lieu of any such
compensation or per meeting fees to directors for acting as such, the Company
has provided directors, among others, with options to purchase Common Stock of
the Company at fair market value as of the date of grant. See "Executive
Compensation-Options, Warrants or Rights" and "Security Ownership of Certain
Beneficial Owners and Management."
6
<PAGE> 9
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth compensation paid by
the Company and its subsidiaries for the last two fiscal years ended December
31, 1996 for services in all capacities for its Chief Executive Officer. No
principal executive officer received a total annual salary and bonus from the
Company which exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
------------------- -----------------------------
(a) (b) (c) (e) (f)
Securities
Underlying
Options/SARs(#)
Other Annual ------------------
Name and Principal Position Year Salary($) Compensation($) Company Medicore
- --------------------------- ---- --------- --------------- ------- --------
<S> <C> <C> <C> <C> <C>
Thomas K. Langbein, CEO.... 1996 65,000(1) 5,000(2) ----- 250,000(3)
1995 58,000(1) 5,000 (2) 50,000 250,000(3)
</TABLE>
- --------------
(1) Annual compensation paid by Medicore, which was $262,000 (including a
$25,000 bonus) and $230,100 respectively, for fiscal 1996 and 1995.
Does not include the June, 1996 Medicore forgiveness of a promissory
note in the amount of $94,200 (including interest) for an option
exercise for Medicore common stock by Mr. Langbein in 1994. See
"Options, Warrants or Rights" below and Note (4) to "Aggregated
Option/SAR Exercises In Last Fiscal Year and FY-End Option/SAR Values"
table below. Amounts reflected in the Summary Compensation Table is the
compensation allocated to the Company in proportion to the time spent
on behalf of the Company.
(2) Automobile allowance and related expenses, and life and disability
insurance premiums paid by Medicore amounted to $24,800 and $26,100,
respectively for 1996 and 1995. As part of the general corporate
overhead allocation, the amounts in the Summary Compensation Table
reflect that portion allocated to the Company.
(3) The $3.00 exercise price of the options for 250,000 shares of Medicore
common stock granted in 1995 was reduced in December, 1996 to $2.38,
its then fair market value, and is deemed a new grant of options. See
"Aggregated Option/SAR Exercises In Last Fiscal Year and FY-End
Options/SAR Values" under the caption "Options, Warrants or Rights."
Since 1980, no executive officer of the Company received any direct
compensation from the Company with the exception of Bart Pelstring, President
and director of the Company, whose current annual salary is $77,500 with
additional perquisites of a $100,000 term life insurance policy and auto
allowances for fuel, repairs, and maintenance. For the year ended December 31,
1996, Mr. Pelstring's perquisites amounted to $8,200. Mr. Pelstring has no
employment agreement with the Company. Does not include the June, 1996 Medicore
forgiveness of a promissory note in the amount of $21,700 (including interest)
for an option exercise for Medicore common stock by Mr. Pelstring in 1994. See
"Options, Warrants or Rights" below and Note (4) to "Aggregated Option/SAR
Exercises In Last Fiscal Year and
7
<PAGE> 10
FY-End Option/SAR Values" table below.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Langbein has an employment agreement with Medicore through May 31,
1999 at an annual salary of $220,000 with yearly increases in increments of no
less than $10,000 which increases Mr. Langbein had waived for the last three
years. In June, 1995 the $10,000 yearly increment went into effect.
The Medicore employment agreement provides upon his death three years
full salary to his children or other designee of Mr. Langbein. The employment
agreement provides for reimbursement of reasonable business expenses and full
salary for the remainder of the term of the employment agreement in the event of
disability. Medicore maintains an income disability insurance policy for Mr.
Langbein. The agreement also provided for life insurance, of which Medicore was
the owner and beneficiary of a $500,000 policy, recently assigned to Mr.
Langbein. Medicore also maintains a $750,000 whole life insurance policy and a
$350,000 term policy insuring the life of Mr. Langbein with Mr. Langbein as the
owner of the policies. His former wife is beneficiary of the term policy and of
$200,000 of the whole life policy, with his two children beneficiaries to the
balance of the whole life policy. Most life insurance is obtained through George
Langbein, his brother, who is an independent sales representative for the
Company. See "Certain Relationships and Related Transactions."
Based upon any wrongful termination of his employment agreement, which
includes changes in control of Medicore through an acquiring person (any person
who has acquired or announces a tender offer or exchange for 25% of Medicore), a
sale of substantially all of the assets or merger, acquisition of Medicore or
its consolidation with another, or certain types of board changes, Medicore
shall pay Mr. Langbein a lump sum payment, based upon his then compensation,
including benefits and perquisites, for the next three years from such
termination. At Mr. Langbein's option, he may elect, in lieu of any such lump
sum payment, to take common stock of Medicore equivalent to such lump sum
payment based upon the lowest closing price of the stock as reported by the
principal stock exchange upon which the shares are then trading, or if the
trading is then in the over-the-counter market, presently trading on the Nasdaq
SmallCap Market, then as reported by Nasdaq or other inter-dealer quotation
medium, within 30 days of such wrongful termination or change in control.
Medicore has reserved up to 400,000 shares of its common stock for such option
to Mr. Langbein. Medicore has granted Mr. Langbein one time demand and five year
"piggy-back" registration rights with respect to the shares Mr. Langbein may
obtain upon any wrongful termination with or change in control of Medicore in
lieu of any lump sum payment as provided in the employment agreement. Such
registration of the stock of Medicore would be at the sole cost and expense of
Medicore except with respect to Mr. Langbein's legal fees and commissions or
discounts upon sale of such stock. The employment agreement also contains a two
(2) year non-competition provision within a 20 mile radius of Medicore's primary
operation in Florida. Medicore has the right, upon Mr. Langbein's termination,
to request further non-competition by Mr. Langbein in the United States for
consideration of $4,000 per month, increasing 5% in any twelve-month period.
Medicore also provides Mr. Langbein with an automobile allowance of $850 per
month.
Certain executive personnel and administrative facilities of the
Company, Medicore and Techdyne were common for fiscal 1996, and to that extent,
certain corporate overhead of these companies were shared equitably. Messrs.
Langbein, an officer and director of the Company, Medicore and Techdyne, and
Ouzts, an officer of each company, divide a portion of their time and effort to
each company and their compensation was allocated proportionately. See
"Executive Compensation" above and "Certain
8
<PAGE> 11
Relationships and Related Transactions."
COMPENSATION OF DIRECTORS
STANDARD ARRANGEMENTS
No fees are paid to any director of the Company for acting in such
capacity. Directors are reimbursed for expenses for attending meetings.
NON-STANDARD ARRANGEMENTS
The Company and Medicore have provided options to directors, among
other executives, consultants and employees. No options were granted to
executives or employees of the Company in 1996. Medicore options granted in
1995, of which Messrs. Langbein and Pelstring were optionees, had their exercise
price reduced in December, 1996 from $3.00 per share to $2.38 per share, the
fair market value at that time. See the table "Aggregated Options/SAR Exercises
In Last Fiscal Year and FY-End Option/SAR Values" below under "Options, Warrants
or Rights" and "Security Ownership of Certain Beneficial Owners and Management"
above.
OPTIONS, WARRANTS OR RIGHTS
In November, 1995, the Board of Directors and shareholders adopted the
1995 Dialysis Corporation of America Stock Option Plan (the "1995 Plan")
pursuant to which 250,000 shares of Common Stock are reserved for issuance at
fair market value on the date of grant of the options. The 1995 Plan is for a
period of five years, expiring on November 9, 2000. Options may be granted to
officers, directors, consultants, key employees, advisors and similar parties
who provide their skills and expertise to the Company. Options granted under the
1995 Plan may be exercisable for up to five years, may require vesting, and
shall be at an exercise price all as determined by the Board. Options are
non-transferable except by the laws of descent and distribution or a change in
control of the Company as defined in the 1995 Plan and are exercisable only by
the participant during his lifetime. Change in control includes (i) the sale of
substantially all the assets of the Company or its merger or consolidation with
another, or (ii) a majority of the Board changes other than by election of
shareholders pursuant to Board solicitation or by vacancies filled by the Board
caused by death or resignation, or (iii) a person or group acquires 25% or makes
a tender offer for 25% of the Company's outstanding shares.
If a participant ceases affiliation with the Company by reason of
death, permanent disability or retirement at or after age 65, the option remains
exercisable for nine months from such occurrence but not beyond the option's
expiration date. Other termination gives the participant 30 days to exercise
except for termination for cause which results in the option becoming
immediately null and void.
Options granted under the 1995 Plan, at the discretion of the Board,
may be exercised either with cash, Common Stock having a fair market value equal
to the cash exercise price, the participant's personal recourse note, or with an
assignment to the Company of sufficient proceeds from the sale of the Common
Stock acquired upon exercise of the options with an authorization to the broker
or selling agent to pay that amount to the Company, or any combination of the
above.
There are presently outstanding under the 1995 Plan options to 24
officers, directors, employees, and
9
<PAGE> 12
advisors of the Company and its subsidiaries for 193,500 shares of Common Stock
exercisable at $1.50 per share through November 2, 2000. The exercise price of
all options is 100% of the fair market value of the Common Stock on the date of
grant, which, since there was no market for the Company's securities at that
time, was determined primarily on the book value of the Common Stock on the date
of grant.
To date options for 6,000 shares of Common Stock have been exercised.
The 1995 Options were granted under Rule 701 of the Securities Act.
Notwithstanding subparagraph (c) of that rule which allows sales of any amount
of Common Stock obtained by non-affiliates upon exercise of their options, and
limited sales of such Common Stock acquired by affiliates upon exercise of their
Options under Rule 144 of the Securities Act exclusive of the one year holding
period, all optionees are required to hold any Common Stock purchased upon
exercise of their Options until April 16, 1997.
In August, 1996, the Board of Directors approved and issued
non-qualified stock options for 15,000 shares of Common Stock, options for 5,000
shares each, to the medical directors of its three dialysis centers. These
options are not part of the 1995 Plan, and are immediately exercisable at $4.75
per share through August 18, 1999. If the medical director ceases affiliation
with the Company or with the professional association approved to act as medical
director of a particular dialysis center, or by reason of death, permanent
disability or retirement at 65 years of age, such options are exercisable for
six (6) months from such occurrence, but not beyond the expiration date of the
option. Other termination gives the optionee 30 days to exercise except for
termination for cause which results in the option being immediately null and
void. The 1996 options may only be exercised for cash. To date none of the these
options have been exercised.
In December, 1996, Medicore modified the exercise price of its 807,000
options from $3.00 per share to $2.38 per share. Messrs. Langbein and Pelstring
were optionees and such repricing is deemed a new grant of options and is
reflected in the "Aggregated Option/SAR Exercises In Last Fiscal Year and FY-End
Option/SAR Values" table below.
10
<PAGE> 13
Aggregated Option/SAR Exercises In Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs
Options/SARs at FY-End
at FY-End (#) ($)
Shares Acquired Value Realize Exercisable/ Exercisable/
Name on Exercise(#) ($) Unexercisable Unexercisable
- ---- ---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Thomas K.Langbein, CEO
Company Options -0- -0- 50,000 (exer.)(1) 81,500(exer.)(2)
Medicore Options -0- -0- 250,000 (exer.)(3) 30,000(exer.)(4)
Bart Pelstring
Company Options -0- -0- 50,000 (exer.)(1) 81,500(exer.)(2)
Medicore Options -0- -0- 30,000 (exer.)(3) 3,600(exer.)(4)
</TABLE>
- ----------
(1) Company options granted in November, 1995 under the 1995 Plan,
exercisable at $1.50 per share through November 9, 2000. See discussion
above under "Options, Warrants or Rights."
(2) The value of the Company's in-the-money options was determined by the
difference between the exercise price and the average value of the bid
and asked prices of the Common Stock as reported by Nasdaq on December
31, 1996, which was $ 3.13.
(3) The options are exercisable, 50% on or after April 18, 1996 and in full
on or after April 18, 1997.
(4) The value of the Medicore in-the-money options was determined by the
difference between the exercise price (reduced from $3.00 per share,
which would have made the options out-of-the-money, to $2.38 per share
on December 30, 1996) and the closing price of the Common Stock on the
Nasdaq National Market on December 31, 1996, which was $2.50. Medicore
issued (i) five year options in April, 1987 for 242,000 shares
exercisable at $3.13 per share, of which Messrs. Langbein and Pelstring
were recipients of options for 147,000 shares and 10,000 shares,
respectively; (ii) five year options in July, 1988 for 178,000 shares
exercisable at $2.88 per share, of which Messrs. Langbein and Pelstring
were recipients of options for 53,000 shares and 15,000 shares,
respectively; and (iii) five year options in February, 1989 for 170,000
shares exercisable at $2.75 per share, of which Mr. Langbein was a
recipient of options for 50,000 shares, and no options granted to Mr.
Pelstring. On May 22, 1989, all the options had their exercise prices
reduced to $2.13, the then market price as reported by the American
Stock Exchange where the Medicore common stock traded; and on December
18, 1990 all the options were canceled. On January 4, 1991, Medicore
issued restricted common stock vesting equally 1/12th over the year to
its and certain of its subsidiaries' executive officers, including
Messrs. Langbein and Pelstring in
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the amounts of 250,000 shares and 25,000 shares, respectively.
Termination, other than voluntarily or for cause, gave the grantee the
right to purchase the non-vested shares at $.75 per share, the then
market price of the Medicore common stock as traded on and reported by
the American Stock Exchange. In September, 1992 five year options were
granted for 480,000 shares exercisable at $.69 per share, of which
Messrs. Langbein and Pelstring were recipients of options for 130,000
shares and 30,000 shares, respectively. These options were exercised
for cash at par value ($.01 per share) and a three year non-recourse
promissory note collateralized by the common stock with interest at
5.36%, which indebtedness was forgiven on June 5, 1996, $94,200
(including interest) for Mr. Langbein and $21,700 (including interest)
for Mr. Pelstring. See "Executive Compensation." These options and
shares were granted as compensation and incentives, and it was the
opinion of Medicore's board of directors that since directors (other
than those directors who were also executive officers and received a
salary) did not receive any compensation, which is not the norm for
most public corporations, for acting as directors and/or committee
members, it was reasonable and appropriate to so modify the option
exercise prices over the years, which modifications were not deemed
material and were always restructured at the then fair market value of
the publicly traded securities, so as to preserve incentive and award
benefits of such securities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, incorporated in 1976, was owned by Medicore, 100% of class
A common stock, now the Common Stock, and by Todd, 100% of class B common stock
(1/10 voting rights), which were canceled in December, 1993. In 1980, Medicore,
then owning 73% of the Company, effected an exchange offer for the Company's
securities resulting in its ownership of the Company becoming 99.1%. Upon
completion of the Company's public offering of Common Stock and Warrants in
April, 1996, Medicore owned approximately 67% of the Company. See "Security
Ownership of Certain Beneficial Owners and Management." Todd, a broker-dealer,
was and continues to be owned by Thomas K. Langbein, Todd's sole officer,
director and shareholder, and the Chairman of the Board and Chief Executive
Officer of the Company, Medicore (of which parent he is also the President), and
Chairman of the Board of Techdyne and other affiliated corporations. See
"Management."
In 1977, the Company became a public company through a merger with
Premium Acceptance Corporation ("PAC"), a licensed insurance premium and second
mortgage company, underwritten by Todd in 1975. The Chairman of the Board of
Directors and President of PAC was Anthony C. D'Amore, a current director of
Medicore and Techdyne, and the former owner of the A.C. D'Amore Insurance
Agency, which sold most of the Company's, Medicore's and Techdyne's insurance
coverages until that agency was sold by Mr. D'Amore in 1992. Mr. D'Amore acts as
consultant to the purchaser of his insurance agency and continues to receive
commissions for Medicore but not the Company. The aggregate annual premiums for
such insurance were approximately $189,000, $179,000 and $147,000 for the years
ended December 31, 1996, 1995 and 1994, respectively, of which $5,000, $6,000
and $13,000 respectively, were paid by the Company. In addition, the Company,
Medicore and Techdyne obtained group health insurance coverage and several
executive and key employee life insurance policies through George Langbein,
brother of Thomas K. Langbein. This insurance includes $100,000 term life
insurance covering and owned by Bart Pelstring, President and director of the
Company. George Langbein is affiliated as an independent sales representative
with Medicore's public subsidiary Techdyne. Medicore also pays for $750,000 of
whole life insurance and $350,000 of term life insurance owned by Thomas K.
Langbein. Medicore owned a $500,000 life policy on the life of Thomas K.
Langbein, which it recently assigned to Mr. Langbein. See
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"Management - Executive Compensation." Premiums on these coverages totaled
approximately $327,000, $311,000 and $313,000 for the years ended December 31,
1996, 1995 and 1994, respectively, of which $75,000, $67,000 and $59,000,
respectively, were paid by the Company. Management is of the opinion that the
cost and coverage of the insurance are as favorable as can be obtained from
unaffiliated parties. Mr. D'Amore is also registered as a part-time account
executive with Todd, although he has not been active in the securities industry
for many years.
Certain of the officers and directors of the Company are officers
and/or directors of Medicore and its affiliates. Thomas K. Langbein is Chairman
of the Board of the Company, Techdyne and Medicore and Chief Executive Officer
and President of the latter, and an officer and director of Medicore's
subsidiaries. Mr. Langbein is President, sole shareholder and director of Todd.
Daniel R. Ouzts is Vice President, Treasurer and Controller of the Company and
Medicore and Vice President and Controller of Techdyne. See "Management."
Lawrence E. Jaffe is Secretary and general counsel to the Company and Medicore
and is general counsel to Techdyne. He is the beneficial owner of approximately
3.6% of Medicore's stock. Mr. Jaffe receives a substantial portion of his fees
from Medicore, the Company and Techdyne, which for the year ended December 31,
1996 were approximately $107,000, $63,000 and $32,000, respectively. Mr. Jaffe
also holds options for 50,000 shares of Common Stock of the Company exercisable
through November 9, 2000, at $1.50 per share. See "Management - Options,
Warrants or Rights." He also has options to purchase 30,000 shares of Common
Stock of Techdyne, 20,000 shares exercisable through May 24, 1999 at $1.00 per
share and 10,000 shares exercisable through February 26, 2000 at $1.75 per
share.
In addition, certain of the accounting personnel and administrative
facilities of Medicore and its subsidiaries, including the Company, are common.
The costs of executive and accounting salaries and other shared corporate
overhead for these companies are charged first on the basis of direct usage when
identifiable, with the remainder allocated on the basis of time spent. Since the
shared expenses are allocated on a cost basis, there is no intercompany profit
involved. The amount of expenses charged by Medicore to the Company which was
deducted from the intercompany receivable from Medicore, amounted to
approximately $240,000 for each of the years ended December 31, 1996, 1995 and
1994. See Note 4 to "Notes to Consolidated Financial Statements." Utilization of
personnel and administrative facilities in this manner enables Medicore to share
the cost of qualified individuals with its subsidiaries rather than duplicating
the cost for various entities. It is the opinion of management that these
services are on terms as favorable as obtainable from unaffiliated parties.
In December, 1988, DSF, a subsidiary of the Company, was formed to
develop and operate the Fort Walton Beach, Florida dialysis facility. The
Company owns 80% of DSF and the Medical Director of that facility has a 20%
interest in DSF and is its Vice President. During DSF's formation, the Company
contributed $300,000 to it, and the Medical Director contributed contracts for
acute dialysis services at four hospitals in Florida, one of which remains, and
his agreement and leases for operating the Fort Walton Beach, Florida dialysis
center. Many of the Medical Director's patients became patients of DSF. The
Medical Director of DSF is employed under a five year renewed contract expiring
October 31, 1999 with the right to earlier terminate the agreement on October
31, 1997, which the Medical Director has opted to do. The Medical Director
received $60,000 from the Company in 1989 for reimbursement of his expenses
relating to the establishment of the Fort Walton Beach, Florida dialysis
facility.
DSP-L, a wholly-owned subsidiary of the Company, is leasing its
dialysis center from the
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Company under a five year net lease expiring November 30, 2000 at $60,000 per
annum, reduced to $33,730 per annum effective May, 1996, plus applicable taxes,
utilities, insurance and its proportionate share of related operating costs.
Management is of the opinion that the rental is on terms as favorable as can be
obtained from unaffiliated parties.
The Company had been advancing funds to Medicore for working capital
requirements which advances had an outstanding balance of $4,263,000 at
September 30, 1995. This sum was not evidenced by a note, and bore interest at
the short-term U.S. Treasury bill rate. On October 4, 1995, Medicore repaid
$1,000,000 of the intercompany indebtedness, which was further reduced in
November, 1995, when the Company declared a 50% stock dividend and thereafter a
$1.30 per Share dividend, which was effected by paying the .9% shareholders
approximately $29,000 and effecting a reduction of the Medicore debt by
approximately $3,134,000. As a result of cash transfers from Medicore and
corporate overhead allocations there was an intercompany indebtedness due from
the Company to Medicore of approximately $370,000 at December 31, 1996.
All future transactions between the Company and its officers, directors
and 5% shareholders will be on terms no less favorable than could be obtained
from independent, unaffiliated parties and will be approved by a majority of the
independent, disinterested directors of the Company.
AUDITORS
The Board of Directors pursuant to the recommendation of the Audit
Committee has reappointed Ernst & Young LLP as its independent accountants to
audit the financial statements of the Company for the current fiscal year. That
firm has acted as accountants for the Company and its parent since 1978. The
Company also files consolidated financial statements with Medicore.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if desired to
do so. The representative will also be available to respond to appropriate
questions from any shareholder present at the meeting.
SHAREHOLDER PROPOSALS
Any shareholder proposal to be considered by the Company for inclusion
in the 1998 Information Statement must be received by the Company not later than
February 11, 1998. Any such proposal should be sent to Lawrence E. Jaffe,
Secretary of the Company, 777 Terrace Avenue, Hasbrouck Heights, New Jersey
07604. Any such proposal should provide the proposer's intention to present the
proposal for action at the meeting, and must comply with Item 4 of Schedule 14C
of the rules of the Securities and Exchange Commission.
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ADDITIONAL INFORMATION
Management is not aware of any other matter to be presented for action
at the Annual Meeting other than the election of directors, Item 1 in the
accompanying Notice of Annual Meeting of Shareholders, and management does not
intend to bring any other matter before the Meeting.
UPON WRITTEN REQUEST BY ANY SHAREHOLDER TO THE SECRETARY OF THE
COMPANY, LAWRENCE E. JAFFE, 777 TERRACE AVENUE, HASBROUCK HEIGHTS, NEW JERSEY
07604, A COPY OF THE FINANCIAL SCHEDULES OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1996 (COPIES OF WHICH ANNUAL REPORT ARE
INCLUDED WITH THIS NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND INFORMATION
STATEMENT) WILL BE PROVIDED WITHOUT CHARGE.
By Order of the Board of Directors
LAWRENCE E. JAFFE
Secretary
MAY 2, 1997
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