SCHEDULE 14C INFORMATION
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DIALYSIS CORPORATION OF AMERICA
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(Name of Registrant as Specified In Its Charter)
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<PAGE>
the Company at fair market value as of the date of grant. See "Execu-
tive Compensation - Options, Warrants or Rights" and "Security
Ownership of Certain Beneficial Owners and Management."
There is no family relationship between any officer or director of the
Company.
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth compensation paid by
the Company and its subsidiaries for the last three fiscal years ended
December 31, 1997 for services in all capacities of its Chief Executive
Officer. Other than for 1997 relating to Bart Pelstring, President, no
principal executive officer of the Company received a total annual salary,
bonus or other compensation which exceeded $100,000.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term
Annual Compensation Compensation Awards
----------------------------- -------------------
(a) (b) (c) (e) (f) (i)
Securities All Other
Underlying Compensation
Other Options/SARs(#) ($)
Name and Annual Com- ------------------- ------------------------
Principal Position Year Salary($) pensation($) Company Medicore Company Medicore
- ------------------ ---- --------- ------------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas K. Langbein,
CEO 1997 64,000(1) 9,000(2) ------- ------- 74,500(1)(3) -------
1996 65,000(1) 5,000(2) ------- 250,000(4) ------- 94,200(1)
1995 58,000(1) 5,000(2) 50,000(3) 250,000(4) ------- -------
Bart Pelstring,
President 1997 77,300(5) 8,900(6) ------- ------- 74,500(3)(5) -------
1996 * ----- ------- 30,000(4) ------- 21,700(5)
1995 * ----- 50,000(3) 30,000(4) ------- -------
</TABLE>
* Annual Compensation, bonuses and other annual or other compensation
did not exceed $100,000.
- ----------
(1) Annual compensation paid by Medicore, which was $257,000, $262,000
(including a $25,000 bonus) and $230,100 respectively, for fiscal 1997,
1996 and 1995. Does not include (i) the June, 1996 Medicore forgive-
ness of a promissory note in the amount of $94,200 (including interest)
for an option exercise for Medicore common stock in 1994 (see Note (4)
to "Aggregated Option/SAR Exercises In Last Fiscal Year and FY-End
Option/SAR Values"table below); and (ii) the December, 1997 Company
forgiveness of a promissory note in the amount of $74,500 for an
option exercise for the Company's Common Stock in December, 1997.
See Column (i), "All Other Compensation." Amounts included in the
Summary Compensation Table reflect 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 $34,300, $24,800 and
$26,100, respectively for 1997, 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.
<PAGE> 8
(3) The options for 50,000 shares of the Company's Common Stock were
exercised effective December 31, 1997 at $1.50 per share. Considera-
tion for such shares was paid in cash for the par value and a
promissory note was issued for the balance. On December 31, 1997, the
Company forgave the indebtedness under the promissory notes, which
notes were cancelled. See "Options, Warrants or Rights."
(4) 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 Note (4) of "Aggregated Option/SAR Exercises In Last
Fiscal Year and FY-End Options/SAR Values."
(5) Mr. Pelstring has no employment agreement with the Company. Mr.
Pelstring's salary does not include (i) 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 Note (4) to "Aggregated Option/SAR Exercises
In Last Fiscal Year and FY-End Option/SAR Values" table below); and
(ii) the December, 1997 Company forgiveness of a promissory note in
the amount of $74,500 for an option exercise for the Company's Common
Stock in December, 1997. See Column (i), "All Other Compensation."
(6) $100,000 term life insurance policy and auto allowances for fuel,
repairs, and maintenance.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
The Company has no employment agreements with any of its officers or
directors. 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
in prior years. In June, 1995 the $10,000 yearly increment went into
effect. Medicore also provides Mr. Langbein with an automobile allowance
of $850 per month.
The Medicore employment agreement provides upon his death for payment
of three years full salary to his children or other designee of Mr.
Langbein, and 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 provides for life
insurance, of which a $500,000 policy owned by Medicore was assigned to Mr.
Langbein in the first quarter of 1997. Medicore also maintains a $750,000
whole life insurance policy and a $350,000 term life insuring the life of
Mr. Langbein with Mr. Langbein as the owner of the policies. His former
wife is beneficiary of $550,000 of these insurance policies, with his two
children beneficiaries to the balance. Most of Mr. Langbein's life
insurance is obtained through George Langbein, his brother, who is an
independent sales representative for the Company. See "Certain Relation-
ships and Related Transactions."
Based upon any wrongful termination of his employment agreement, which
includes changes in control of Medicore through an acquiring person (any
person who has acquired or announces a tender offer or exchange for 25% of
Medicore), a sale of substantially all of the assets, a merger, or an
acquisition of Medicore or its consolidation with another entity, or
certain types of board changes, Medicore shall pay Mr. Langbein a lump
sum payment, based upon his then compensation, including benefits and
perquisites, for the next three years from such termination. At Mr.
Langbein's option, he may elect, in lieu of any such lump sum payment, to
take common stock of Medicore equivalent to such lump sum payment based
upon
<PAGE> 9
To date none of the 1996 options have been exercised. Options for
5,000 shares of Common Stock were cancelled since the medical director of
the DSF facility ceased affiliation with the Company upon the sale of that
dialysis facility in October, 1997.
<PAGE> 11
Aggregated Option/SAR Exercises In Last Fiscal Year
and FY-End Option/SAR Values
(a) (b) (c) (d)
Number of
Securities
Underlying
Unexercised
Options/SARs
at FY-End (#)
Shares Acquired Value Realized Exercisable/
Name on Exercise (#) ($) Unexercisable
- ---- --------------- -------------- -------------
Thomas K. Langbein, CEO
Company Options 50,000 47,000(1) -0-
Medicore Options -0- -0- 250,000 (exer.)(2)
Bart Pelstring
Company Options 50,000 47,000(1) -0-
Medicore Options -0- -0- 30,000 (exer.)(2)
- ----------
(1) The value realized of the shares of Common Stock represents the
difference between the exercise price and the fair market value of
the stock on the date of exercise, December 31, 1997, which was
determined from the closing price of Common Stock as reported by
Nasdaq on December 31, 1997, which was $ 2.44. A substantial portion
of the exercise price was effected through a promissory note in the
amount of $74,500 which amount was forgiven by the Company. See
"Summary Compensation Table" and "Options, Warrants or Rights" under
"Executive Compensation."
(2) The Medicore options are exercisable through April 17, 2000 at
$2.38 a share. The Medicore options were out-of-the money, the
closing price of the Common Stock as reported by Nasdaq was $2.13
as of December 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, incorporated in 1976, had two original classes of stock.
One hundred percent of its class A common stock was owned by Medicore, now
the Common Stock. The other securities held by Todd 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 and currently owns approximately 66% of
the Common Stock of the Company. See "Security Ownership of Certain Bene-
ficial Owners and Management." The Company's former shareholder, Todd, a
broker-dealer, is owned by Thomas K. Langbein. See "Election of Directors."
<PAGE> 12
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. 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 provided most of the insurance coverage
for the Company, Medicore and Techdyne until that agency was sold by Mr.
D'Amore in 1992. Mr. D'Amore acts as an insurance consultant and
continues to receive nominal commissions for insurance for Medicore and
Techdyne but not the Company. 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. The aggregate annual premiums for
such insurance provided to Medicore and Techdyne were approximately
$155,000, $189,000 and $179,000 for the years ended December 31, 1997,
1996 and 1995, respectively, of which $4,000, $5,000 and $6,000 respec-
tively, represent commissions paid to Mr. D'Amore. 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 $1,600,000 of life insurance owned by
Thomas K. Langbein. See "Executive Compensation." Premiums on this
coverage in the aggregate totaled approximately $374,000 during 1997,
of which $87,000 was 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.
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 and Chief Executive Officer of the Company, Techdyne
and Medicore and President of the latter, and an officer and/or director
of the Company's, Medicore's and Techdyne'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 "Election of Directors."
Lawrence E. Jaffe is Secretary and general counsel to the Company,
Medicore and Techdyne. Mr. Jaffe receives a substantial portion of his
fees from Medicore, the Company and Techdyne. Mr. Jaffe exercised an
option for 50,000 shares of Common Stock of the Company effective De-
cember 31, 1997 at $1.50 per share, substantially all of which was
through a promissory note forgiven by the Company. See "Executive
Compensation - Options, Warrants or Rights." These shares plus an
additional 1,000 shares of Common Stock and Warrants to purchase an
additional 2,000 shares of Common Stock he acquired in the Company's
1996 public offering, shares of Medicore common stock (approximately 1%
of the outstanding shares), and options for Techdyne common stock (repre-
senting less than 1% of the Techdyne common stock) are in the name of and
held in trust for his wife, to all of which securities Mr. Jaffe disclaims
beneficial ownership.
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 are reflected in the advances from
Medicore amounted to approximately $240,000 for each of the three years
ended December 31, 1997. 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.
<PAGE> 13
DSF, formerly an 80% owned subsidiary of the Company, operated the
Fort Walton Beach, Florida dialysis facility. The medical director of
that facility had a 20% interest in DSF and was its Vice President. The
Company sold its Florida dialysis operations in October, 1997, which
included the assets of Dialysis Medical, Inc. ("DMI"), also owned 80% by
the Company and 20% by its former medical director. DMI operated the
Florida home patient care. Pursuant to the October, 1997 sale of the
Florida dialysis operations for which the Company received $5,065,000 of
which consideration $4,585,000 was cash, with the balance consisting of
13,873 shares of the purchaser's stock, the former medical director's
20% interest in DSF and DMI were redeemed by the Company in February, 1998
in both cash ($625,000) and common stock (6,936 shares) in the third party
purchaser company. In conjunction with the redemption, the medical
director resigned as an officer and director of DSF and DMI.
Dialysis Services of Pennsylvania, Inc. - Lemoyne ("DSPL"), a wholly-
owned subsidiary of the Company, leases its dialysis facility from the
Company under a five year net lease expiring November 30, 2000 at $33,730
per annum, plus applicable taxes, utilities, insurance and its propor-
tionate share of related operating costs. DSPL has two renewal options
for five years each. Management is of the opinion that the rental is on
terms as favorable as could 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
$129,000 at December 31, 1997.
Certain executive officers, and counsel to the Company signed promis-
sory notes for the balance of the price of shares received upon exercise
of options granted under the 1995 Plan, exercised on December 31, 1997.
See "Summary Compensation Table" and "Options, Warrants or Rights" under
"Executive Compensation."
AUDITORS
The audit committee consists of three persons, two of whom are recently
appointed independent board members. See "Election of Directors." They
are currently reviewing certain matters including the independent
accountants' reports, services and fees and have not to date made any
recommendations as to the principal accountant selected for the current
year. Ernst & Young LLP are the independent accountants which audited
the financial statements of the Company for fiscal 1997. That firm has
acted as accountants for the Company and Medicore 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
any appropriate questions from shareholders attending the meeting.
