<PAGE>
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
[X] Definitive Information Statement Commission Only (as permitted
by Rule 14c-5(d)(2))
DIALYSIS CORPORATION OF AMERICA
............................................................................
(Name of Registrant as Specified In Its Charter)
............................................................................
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
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fee was paid previously. Identify the previous filing by registra-
tion statement number, or the Form or Schedule and the date of its
filing.
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<PAGE>
DIALYSIS CORPORATION OF AMERICA
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 10, 1998
----------
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 10, 1998 at 12:00 p.m., for the
following purposes:
1. To elect four 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 17,
1998, 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 1997 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 1, 1998
<PAGE> 1
DIALYSIS CORPORATION OF AMERICA
2337 West 76th Street
Hialeah, Florida 33016
----------
Information Statement for Annual Meeting of Shareholders
June 10, 1998
----------
Matters to be Considered at the Meeting
This Information Statement and the Company's Annual Report to Share-
holders for the year ended December 31, 1997, anticipated to be mailed
on or about May 4, 1998, 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 10, 1998, at the Don Shula Hotel, 15255 Bull Run
Road, Miami Lakes, Florida at 12:00 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 17,
1998, 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 17, 1998 there were 3,651,344 shares of common stock,
$.01 par value ("Common Stock") outstanding and entitled to be voted at
the Annual Meeting. 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 66% voting equity
of the Company, in favor of election of each of the four (4) nominees for
directors (see "Election of Directors"), thereby assuring the election of
the four nominees. See "Security Ownership of Certain Beneficial Owners
and Management."
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
<PAGE> 2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth as of April 17, 1998, 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.
Amount and Nature of Beneficial Ownership(1)
Dialysis Medicore
Common Common
Name Stock %(2)(3) Stock %(2)(4)
---- ----- ------- ----- -------
Medicore, Inc. 2,410,622 66%(5) --- ---
2337 W. 76th St.
Hialeah, FL 33016
Thomas K. Langbein 2,460,622(6) 67.4% 1,043,414(7) 17.1%
c/o Medicore, Inc.
777 Terrace Avenue,
Hasbrouck Heights,
NJ 07604
Bart Pelstring 50,000(8) 1.4% 85,000(9) 1.4%
c/o Dialysis Corporation
of America
27 Miller Avenue
Lemoyne, PA 17043
Robert W. Trause* -0- -0-% -0- -0-%
414A Hackensack Street
Carlstadt, NJ 07072
Dr. Herbert I. Soller* 5,000(10) less than -0- -0-%
100 Chestnut Street 1%
P.O. Box 701
Harrisburg, PA 17108
All directors and
executive officers
as a group (6 persons) 2,528,122(5)(6) 69.2% 1,449,464 23.5%(11)
* Member of the Audit Committee
(Notes on next page)
- ----------
<PAGE> 3
(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.
(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 17, 1998 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 3,651,344 shares of Common Stock outstanding. Does not
include (i) 100,000 treasury shares; (ii) options for 24,500 shares of
the Company's Common Stock reserved for issuance upon exercise of the
remaining outstanding options under the 1995 Plan; and (iii) options
for 10,000 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 5,856,940 shares outstanding. Does not include 841,000
shares of common stock underlying options granted under Medicore's 1989
Stock Option Plan, which options are not transferable and are exer-
cisable through April 17, 2000 at $2.38 per share. 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 66%
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 412,000 shares of the Company (11.3%); and (ii) 50,000
shares of Common Stock of the Company which are deemed "control
shares" by virtue of Mr. Langbein's status as an "affiliate" as
defined in Rule 144 of the Securities Act. See "Executive Compensa-
tion - Options, Warrants or Rights."
(7) Includes 250,000 shares underlying options granted in 1995, exer-
cisable at $2.38 per share through April 17, 2000. Does not include
(i) 15,700 shares each held in the names of Mr. Langbein's two
children who are of majority age; and (ii) 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 Compensa-
tion."
(8) The 50,000 shares are deemed "control shares" by virtue of Mr.
Pelstring's status as an "affiliate" under Rule 144 of the Securities
Act. See "Executive Compensation - Options, Warrants or Rights."
<PAGE> 4
(9) Includes 30,000 shares underlying options granted in 1995, exercisable
at $2.38 per share through April 17, 2000. See Note (4) and "Executive
Compensation - Options, Warrants, or Rights."
(10) Reflects an option to purchase exercisable at $4.75 per share through
August 18, 1999. See Note (3)(iii) above and "Executive Compensation
- Options, Warrants or Rights."
(11) Includes 310,000 shares of Medicore's common stock underlying the
options granted under Medicore's 1989 Stock Option Plan. See Notes
(2) and (4) and "Executive Compensation - Options, Warrants or Rights."
<PAGE> 5
ELECTION OF DIRECTORS
At the Annual Meeting, shareholders will elect four 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 four directors.
Cumulative voting is not permitted in the election of directors. Conse-
quently, each shareholder is entitled to one vote for each share of Common
Stock held in his name. Medicore owns 66% 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 four 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. 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 Owner-
ship of Certain Beneficial Owners and Management," "Executive Compensation"
and "Certain Relationships and Related Transactions."
Current Position and
Name Age Areas of Responsibility Position Held Since
- ---- --- ----------------------- -------------------
Thomas K. Langbein 52 Chairman of the Board and 1982
Chief Executive Officer 1990
Bart Pelstring 57 President 1986
and Director 1985
Robert W. Trause 55 Director 1998*
Dr. Herbert I. Soller 61 Director 1998*
- ----------
* Appointed by the board on February 13, 1998
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
<PAGE> 6
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 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 (approximately 70% owned if include the Techdyne convertible
note). 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."
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.
Robert W. Trause is a senior commercial account specialist engaged
in the marketing of commercial insurance specializing in property and
casualty insurance sales to mid-to-large range companies. He is affiliated
with an insurance agency in New Jersey with which he has been since 1991.
Dr. Herbert I. Soller is a medical director certified by the American
Board of Internal Medicine and specializing in nephrology. He is medical
director of the Company's Carlisle and Lemoyne, Pennsylvania dialysis
facilities. See "Certain Relationships and Related Transactions." Dr.
Soller is a member of many state and medical nephrology and internal
medicine societies and is affiliated with several hospitals in Pennsylvania.
The term of office for directors and officers of the Company is one
year. The Company only has one board committee, the audit committee. The
audit committee consisted of Messrs. Langbein and Ouzts, both of whom are
officers of the Company and are officers and/or directors of and employed
by Medicore. The audit committee now consists of the two newly appointed
independent directors, Messrs. Trause and Soller, and Mr. Langbein. The
responsibilities of the audit committee include recommending to the board
of directors the firm of independent accountants to serve the Company,
reviewing the independent accountants' reports, services, fees and results
of audit, and reviewing the scope, results and adequacy of the internal
control procedures. No member of the audit committee receives a fee for
services. 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 and implement decisions effectively and in a coordinated
manner.
For the year ended December 31, 1997, the Company has held six meetings
of its board of directors, including action by unanimous written consent.
All of the directors participated at all the meetings.
No director or any committee member receives 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, its employees and advisors
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 Manage-
ment."
<PAGE> 7
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 ______(1) _____(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.
(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
<PAGE> 8
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 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
National 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
<PAGE> 9
stock for such option, and 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
require further non-competition provisions of Mr. Langbein in the United
States for consideration of $4,000 per month, increasing 5% in any twelve-
month period.
Certain executive personnel and administrative facilities of the
Company, Medicore and Techdyne were common for fiscal 1997, and to that
extent, certain corporate overhead of these companies were shared
equitably among the three companies. 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 for the year. See
"Executive Compensation" above and "Certain Relationships and Related
Transactions."
Compensation of Directors
Standard Arrangements
There are no standard arrangements for compensating any director
for acting in such capacity or for acting on any committee. Directors
are reimbursed for expenses for attending meetings.
Non-Standard Arrangements
In 1995, the Company and Medicore provided options to directors,
executives, consultants including the Company's attorney and employees.
Messrs. Langbein and Pelstring both hold options for Medicore common
stock. In December, 1997, certain optionees exercised their Company
options for an aggregate of par value, the balance in a promissory note
which indebtedness was forgiven by the Company. Messrs. Langbein and
Pelstring each exercised options for 50,000 shares and had their $74,500
notes forgiven. See "Security Ownership of Certain Beneficial Owners and
Management" and the "Summary Compensation Table," Notes (1) and (5) above,
and the table "Aggregated Options/SAR Exercises In Last Fiscal Year and
FY-End Option/SAR Values" below under "Options, Warrants or Rights."
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 were 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 and have been granted to officers, directors, consultants,
key employees, advisors and similar parties who provide their skills and
expertise to the Company. The Company has provided forms of equity
participation as a key part of its total program for motivating and
rewarding executives, directors and employees. Grants of stock options
have provided an important part of the equity link to shareholders.
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
<PAGE> 10
by the participant during his lifetime. Change in control under the 1995
Plan 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 resig-
nation, 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. Voluntary 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 by the optionee providing consideration of 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 option 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 14
employees of the Company and its subsidiaries for 19,000 shares of Common
Stock exercisable at $1.50 per share through November 9 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.
As of December 31, 1997, options for 168,500 shares of Common Stock
under the 1995 Plan have been exercised, 162,500 of those options were
exercised at that time by four affiliates of the Company and its counsel.
The 1995 Options were granted under Rule 701 of the Securities Act (the
"Act"), which provides an exemption from the registration requirements of
Section 5 of the Act. The "affiliates," as that term is defined under
Rule 144 of the Act, may sell their shares in accordance with Rule 144
exclusive of the one year holding period. Subparagraph (c) of Rule 701
allows sales of any amount of Common Stock obtained by non-affiliates upon
exercise of their options without any restriction. Each of the affiliates
and the non-affiliate paid the par value of the shares in cash and signed
a promissory note for the balance, which amounts were forgiven by the
Company. See "Summary Compensation Table" above and Notes (1) and (5) to
that table.
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 existing dialysis
centers. These options are not part of the 1995 Plan, and are immediately
exercisable at $4.75 per share through August 18, 1999. If the medical
director ceases affiliation with the Company or with the professional
association approved to act as medical director of a particular dialysis
center by reason of death, permanent disability or retirement at 65 years
of age, such options are exercisable for six (6) months from such occur-
rence, but not beyond the expiration date of the option. Other termination
gives the optionee 30 days to exercise except for termination for cause
which results in the option being immediately null and void. The 1996
options may only be exercised for cash.
To date none of the 1996 options have been exercised. Options for
5,000 shares of Common Stock were cancelled since the medical director of
the DSF facility ceased affiliation with the Company upon the sale of that
dialysis facility in October, 1997.
<PAGE> 11
Aggregated Option/SAR Exercises In Last Fiscal Year
and FY-End Option/SAR Values
(a) (b) (c) (d)
Number of
Securities
Underlying
Unexercised
Options/SARs
at FY-End (#)
Shares Acquired Value Realized Exercisable/
Name on Exercise (#) ($) 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."
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
<PAGE> 12
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 respectively, 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 Compensa-
tion." 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 and
Medicore and is general counsel to Techdyne. Mr. Jaffe receives a substan-
tial 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 December 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.
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
<PAGE> 13
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.
SHAREHOLDER PROPOSALS
Any shareholder proposal to be considered by the Company for inclusion
in the 1999 Information Statement must be received by the Company not later
than February 10, 1999. Any such proposal should be sent to Lawrence E.
Jaffe, Secretary of the Company, 777 Terrace Avenue, Hasbrouck Heights,
New Jersey 07604 and 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.
<PAGE> 14
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.
A COPY OF THE FINANCIAL SCHEDULES OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 (COPIES OF WHICH ANNUAL
REPORT ARE INCLUDED WITH THIS NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND INFORMATION STATEMENT) WILL BE PROVIDED WITHOUT CHARGE UPON WRITTEN
REQUEST BY ANY SHAREHOLDER TO THE SECRETARY OF THE COMPANY, LAWRENCE E.
JAFFE, 777 TERRACE AVENUE, HASBROUCK HEIGHTS, NEW JERSEY 07604.
By Order of the Board of Directors
LAWRENCE E. JAFFE
Secretary
May 1, 1998
