<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
</TABLE>
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11 (c) or Rule 14a-12
MEDICORE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
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<PAGE> 2
MEDICORE, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 11, 1997
----------------
To Shareholders:
The Annual Meeting of Shareholders of MEDICORE, INC. (the "Company") will
be held at the Don Shula Hotel, 15255 Bull Run Road, Miami Lakes, Florida on
Wednesday, June 11, 1997 at 1:00 p.m., for the following purposes:
1. To elect two members to the Class 2 members of the Board of Directors
to serve for a three year term until the Annual Meeting of
Shareholders in 2000; 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 30, 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.
- --------------------------------------------------------------------------------
It is important that your shares be represented at the Annual Meeting in order
that the presence of a quorum be assured and to avoid added proxy solicitation
costs. THEREFORE, YOUR PERSONAL ATTENDANCE OR PROXY IS IMPORTANT. Whether or not
you plan to attend, please sign and date the accompanying proxy and return it
promptly in the enclosed self-addressed envelope. All shareholders are cordially
invited to attend the meeting. If you attend the meeting and decide to vote in
person, you may revoke your proxy.
- --------------------------------------------------------------------------------
By Order of the Board of Directors
LAWRENCE E. JAFFE
Secretary and Counsel
Hasbrouck Heights, New Jersey
May 2, 1997
<PAGE> 3
MEDICORE, INC.
2337 West 76th Street
Hialeah, Florida 33016
------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
JUNE 11, 1997
------------------
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and accompanying form of proxy 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 Medicore, Inc., 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 1:00
p.m., including any adjournment thereof, for the purposes set forth in the
Notice of Annual Meeting and Proxy Statement.
If the enclosed form of proxy is executed and returned, it will be voted as
directed, but may be revoked at any time insofar as it has not been exercised,
either by a written notice of the revocation received by the persons named
therein, or by voting the shares covered thereby in person or by another proxy
dated subsequent to the date thereof. In the absence of specific instructions by
the shareholders, proxies will be voted for the election of the two members of
Class 2 directors to serve on the Board of Directors for a three year term until
the 2000 Annual Meeting of Shareholders. Abstentions and broker non-votes will
be counted for purposes of a quorum, with abstentions having the legal effect of
a vote "against" the election of the Class 2 directors. In instances where
brokers are prohibited from exercising discretionary authority for beneficial
owners who have not returned a proxy (broker no-votes, which is not the case
with respect to the election of directors), such shares will not be included in
the vote totals and, therefore will have no effect on the vote. The form of
proxy vests in the persons named therein as proxies discretionary authority to
vote on any matter that may properly come before the meeting not presently known
to the Board of Directors.
The cost of preparing and mailing the Notice of Annual Meeting and Proxy
material and soliciting proxies will be paid by the Company. In addition to the
use of the mails, officers, directors or employees of the Company, who will
receive no additional compensation therefore, may solicit proxies by telephone
or personal interview. The Company will request brokers, nominees, fiduciaries
and custodians to forward proxy material to their beneficial owners, and will
reimburse such persons for reasonable expenses incurred by them in forwarding
the proxy materials.
RECORD DATE
The Board of Directors has fixed the close of business on April 30, 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 30, 1997 there were outstanding and entitled to be voted at the
Annual Meeting, 5,456,940 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, in
person or by proxy, is necessary to effectuate election of the two directors for
the Class 2 members of the Board of Directors.
<PAGE> 4
ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect two Class 2 directors,
which in accordance with the Company's amended Certificate of Incorporation
("Certificate of Incorporation") provides for two members to serve for three
years, which will be to the 2000 Annual Meeting of Shareholders, and until each
of their successors is elected and qualified. There is currently only one Class
2 director. The Certificate of Incorporation and By-Laws of the Company provide
that Class 2 directors shall not be more than two persons, and 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 singular
vacancies now existing each in Class 1 and 2 directors. When appointed, such
Class 1 and 2 directors shall then serve for the remainder of the term provided
for that particular Class of directors. Anthony C. D'Amore, one of the Class 2
nominees, has been a director of the Company since 1979. Robert P. Magrann was
recently nominated by the Board of Directors to fill the remaining Class 2
directorship.
The affirmative vote of a plurality of the shares of Common Stock
represented at the meeting is required to elect the Class 2 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. The persons named as proxies in the form of proxy solicited hereby
intend to vote all valid proxies received in favor of the election of the
persons named below as nominees for Class 2 directors except where authority is
withheld by the shareholder. The nominee has consented to be named herein and to
serve on the Board of Directors if elected. If either nominee is unable to serve
as a director (which presently is not anticipated), the proxies will be voted
for such substituted nominee as may be designated by the present Board of
Directors. To apprise shareholders of the qualifications of all directors,
information is provided concerning the two nominees and the three incumbent
directors whose terms expire in 1998 and 1999.
There is no nominating committee with nominations for directors considered
by the entire Board of Directors.
For additional information concerning the two nominees for Class 2
directors and the incumbent directors, including compensation and share
ownership, see "Executive Compensation", "Beneficial Ownership of the Company's
Securities" and "Certain Relationships and Related Transactions."
NOMINEES FOR CLASS 2 DIRECTORS
<TABLE>
<CAPTION>
Current Position
Name Age and Areas of Responsibility Position Held Since
- ---- --- --------------------------- -------------------
<S> <C> <C> <C>
Anthony C. D'Amore(1) 66 Director 1979
Robert P. Magrann 53 Nominee ----
</TABLE>
Anthony C. D'Amore is a director of Techdyne and is registered as a
part-time account executive with Todd & Company, Inc. ("Todd"), a broker-dealer
registered with the Securities and Exchange Commission and a member of the
National Association of Securities Dealers, Inc., but has not been active in the
brokerage
2
<PAGE> 5
business for many years. Mr. D'Amore was the owner of an insurance
agency, the A.C. D'Amore Agency, Inc., which he sold in 1992, and from whom the
Company, Techdyne, Inc., a 63% owned public subsidiary ("Techdyne"), Dialysis
Corporation of America, a 67% owned public subsidiary ("DCA") and their
subsidiaries purchase much of their insurance at rates competitive with
unaffiliated parties. Mr. D'Amore continues to receive commissions with respect
to insurance placed with the Company and Techdyne. See "Certain Relationships
and Related Transactions".
Robert P. Magrann has been a senior executive and general manager with
major national and international food distributors. From 1991 to 1994 Mr.
Magrann was Executive Vice President of E. J. Brach Corporation and from 1994 to
1996 he was Senior Vice President at Borden, Inc., at each entity with
management supervision and responsibility for marketing, sales and public
relations. In September, 1996, Mr. Magrann became affiliated with Tetley USA,
Inc., a beverage producer and distributor, with whom he is Senior Vice
President, Sales for its North America Food Group.
INCUMBENT DIRECTORS
<TABLE>
<CAPTION>
Current Position
Name Age and Areas of Responsibility Position Held Since
- ---- -- --------------------------- -------------------
<S> <C> <C> <C>
Thomas K. Langbein(2) 51 Chairman of the Board 1980
of Directors, Chief
Financial Officer and
President
Seymour Friend(2) 76 Vice President 1981
Director 1975
Peter D. Fischbein(1) (3) 57 Director 1984
</TABLE>
- ----------
(1) Member of the Audit Committee.
(2) Class 3 director; term ends in 1998.
(3) Class1 director; term ends in 1999 .
Thomas K. Langbein was appointed as Chairman of the Board of Directors,
Chief Executive Officer and President in 1980, which latter position was
relinquished in January, 1983 and reassumed in April, 1985 upon completion of
Techdyne's public offering. Mr. Langbein is an officer and director of most of
the Company's subsidiaries and was appointed President and Chief Executive
Officer of Techdyne in April, 1990. Barry Pardon succeeded to the Presidency of
Techdyne in November, 1991 at which time Mr. Langbein reassumed the position of
Chairman of the Board. He has been a director of Techdyne since it acquired by
the Company in 1982. He is also a director of Techdyne's foreign subsidiary,
Techdyne (Scotland). Mr. Langbein is Chairman of the Board
3
<PAGE> 6
and Chief Executive Officer of DCA. He also held those positions with Viragen,
Inc. ("Viragen"), formerly a public subsidiary of the Company spin-off in 1986.
Mr. Langbein is President, sole shareholder and director of Todd. Mr. Langbein
devotes most of his time to the affairs of the Company, Techdyne and DCA.
Seymour Friend is a real estate investor and devotes a portion of his time
to the affairs of the Company. He resigned as a director of Viragen in May,
1993.
Peter D. Fischbein is an attorney who has from time to time represented the
Company, Techdyne, Viragen and Todd. Mr. Fischbein is a director of Viragen
(since 1981) and Techdyne (since 1985). He was Chairman of the Board of Techdyne
from April, 1990 to November, 1991. Mr. Fischbein is a general partner of
several limited partnerships engaged in real estate development. See "Certain
Relationships and Related Transactions."
There is no family relationship between any officer or director of the
Company.
Since the last Annual Meeting in June, 1996, there were three meetings of
the Board of Directors, including actions by unanimous written consent. All
directors participated at all the meetings.
The only committee the Company has is an Audit Committee consisting of
Peter D. Fischbein and Anthony C. D'Amore. If Mr. Magrann is elected as a
director he will replace Mr. D'Amore on the Audit Committee. The Audit
Committee, which meets informally, usually on a monthly basis, is responsible
for recommending to the Board of Directors the firm of independent accountants
to serve the Company, reviewing fees, services and results of the audit by such
independent accountants, reviewing the accounting books and records of the
Company and reviewing the scope, results and adequacy of the internal audit
control procedures of the Company. No member of the Audit Committee receives a
fee for services rendered as a participant of such committee. The By-Laws
provide for and the Company has made payment of reasonable expenses for
directors' attendance at meetings. In lieu of any cash 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 "Beneficial Ownership of the Company's
Securities."
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
MANAGEMENT
The following table sets forth as of April 30, 1997, the names and
beneficial ownership of the equity securities of the Company and its
subsidiaries 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."
4
<PAGE> 7
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership(1)
--------------------------------------------------------------------------------------
Medicore Techdyne DCA
Common Common Common
Name Stock(1) %(2)(3) Stock(4) %(3)(5) Stock(6) %(3) (7)
- ------ -------- ------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas K. Langbein(8) 1,074,014(9) 18.8% 4,520,940(10) 74.1% 2,460,622(11) 67.6%
Seymour Friend(8) 432,705(12) 7.8% 26,333(13) * -- (14) --
Peter D. Fischbein(15) 176,229(16) 3.2% 40,000(17) * -- (18) --
Anthony C. D'Amore(19) 273,890(20) 4.9% 29,000(21) * 3,000(22) *
Barry Pardon 135,750(23) 2.5% 84,333(24) 1.9% -- (25) --
All directors and 2,028,288(26) 34.0% 4,626,273(4)(5)(10) 74.9% 2,471,122 67.7%(6)(7)(11)
executive officers
as a group (5 persons)
- ------------------
* less than 1 %
</TABLE>
(Notes on the following page)
(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) Based on 5,456,940 shares outstanding. Does not include 807,000 shares of
Common Stock underlying Options granted in April, 1995 under the Company's
1989 Stock Option Plan, which are being registered and are exercisable for
50% of the Option on or after April 18, 1996 and the balance one year
thereafter. See "Executive Compensation - Options, Warrants or Rights."
(3) For purposes of computing the percentage of outstanding shares held by each
person or group of persons named above, any security which such person or
group of persons has the right to acquire within 60 days of April 30, 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.
(4) The Company owns 4,440,940 shares (73.7%) of the common stock of Techdyne.
Includes 1,713,143 shares which the Company may acquire upon conversion of
its demand promissory note from Techdyne in the amount of approximately
$2,998,000 at December 31, 1996, including accrued interest, convertible at
$1.75 per share. Officers and directors of the Company, including those
directors of the Company and Techdyne who may be shareholders of each
company, except
5
<PAGE> 8
Thomas K. Langbein (see Note (10)), disclaim any indirect beneficial
ownership of Techdyne common shares through the Company's 73.7% ownership
of Techdyne.
(5) Based on 4,311,819 Techdyne common shares outstanding. Does not include (i)
shares obtainable under the Company's convertible note, except as to Thomas
K. Langbein (see Notes (4) and (10)) or (ii) options for 173,700 shares of
Techdyne common stock. See "Executive Compensation - Options, Warrants or
Rights."
(6) The Company owns 2,410,622 shares (67.2%) of the common stock of DCA.
Officers and directors of the Company, including those officers and
directors of the Company and DCA who may be shareholders of each Company,
except Thomas K. Langbein (see Note (11)), disclaim any indirect beneficial
ownership of DCA common stock through the Company's 67.2% ownership of DCA.
(7) Based on 3,588,844 DCA shares outstanding.
(8) Class 3 director; term to 1998 Annual Meeting of Shareholders. See
"Election of Directors."
(9) 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
shares Mr. Langbein disclaims beneficial ownership; and (ii) 250,000 shares
of Common Stock underlying the Option granted in April, 1995, 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, 2000. 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 the Company. See Note (2) and "Employment Contracts
and Termination of Employment and Change-In-Control Arrangements" and
"Options, Warrants or Rights" under the caption "Executive Compensation."
(10) Includes (i) the Company's 4,440,940 share ownership, including 1,713,143
shares which the Company may obtain upon conversion of its demand
promissory note from Techdyne (see Note (4) above), by virtue of his
position with the Company and Techdyne and stock ownership of the Company,
which may deem Mr. Langbein to have beneficial ownership of such shares
through shared voting and investment power with respect to the Company's
ownership of Techdyne; Mr. Langbein disclaims such entire beneficial
ownership, but for his proportionate interest, approximately 835,000 shares
of Techdyne (13.9%); and (ii) Techdyne options for 80,000 shares. See
"Executive Compensation - Options, Warrants or Rights."
(11) Includes (i) the Company's 2,410,622 share ownership, by virtue of his
position with the Company and DCA and his stock ownership of the Company,
which may deem Mr. Langbein to have beneficial ownership of such shares
through shared voting and investment power with respect to the Company's
ownership of DCA; Mr. Langbein disclaims such entire beneficial ownership,
but for his proportionate interest, approximately 453,000 shares of DCA
(12.6%); and (ii) DCA options for 50,000 shares. See "Executive
Compensation-Options, Warrants or Rights."
(12) Includes 75,000 shares of Common Stock underlying an Option granted in
April, 1995 exercisable 50% on April 18, 1996 with the balance exercisable
on April 18, 1997 at an exercise price of
6
<PAGE> 9
$2.38 per share through April 17, 2000, which becomes fully exercisable in
the event of a change in control of the Company. See Note (2) and
"Executive Compensation - Option, Warrants or Rights."
(13) Includes Techdyne options for 10,000 shares. See "Executive Compensation."
Excludes approximately 346,000 (5.7%) shares that may be deemed indirectly
beneficially owned through the Company's ownership of Techdyne, which
indirect beneficial ownership is disclaimed. See Note (4).
(14) Excludes approximately 188,000 (5.2%) shares that may be deemed indirectly
beneficially owned through the Company's ownership of DCA, which indirect
beneficial ownership is disclaimed. See Note (6).
(15) Class 1 director. Term to 1999. See "Election of Directors."
(16) Includes (i) 100,000 shares held in trust for his infant son; Mr.
Fischbein's wife is trustee; Mr. Fischbein disclaims beneficial interest in
the 100,000 shares held in trust for his son; and (ii) 75,000 shares of
Common Stock underlying an Option granted in April, 1995 exercisable 50% on
April 18, 1996 with the balance exercisable on April 18, 1997 at $2.38 per
share through April 17, 2000, which becomes fully exercisable in the event
of a change in control of the Company. See Note (2) and "Executive
Compensation-Options, Warrants, or Rights." Does not include 196,382 shares
of Common Stock owned by his wife in which shares, based on her financial
independence, Mr. Fischbein disclaims beneficial interest.
(17) Includes Techdyne options for 40,000 shares. See "Executive Compensation."
Excludes approximately 142,000 (2.4%) shares that may be deemed indirectly
beneficially owned through the Company's ownership of Techdyne, which
indirect beneficial ownership is disclaimed. See Note (4).
(18) Excludes approximately 77,000 (2.1%) shares that may be deemed indirectly
beneficially owned through the Company's ownership of DCA, which indirect
beneficial ownership is disclaimed. See Note (6).
(19) Class 2 director; term to 1997 Annual Meeting of Shareholders. See
"Election of Directors."
(20) Includes 75,000 shares of Common Stock underlying an Option granted in
April, 1995 exercisable 50% on April 18, 1996 with the balance exercisable
on April 18, 1997 at $2.38 per share through April 17, 2000, which becomes
fully exercisable in the event of a change in control of the Company. See
Note (2) and "Executive Compensation-Options, Warrants, or Rights."
(21) Includes (i) Techdyne options for 10,000 shares (see "Executive
Compensation"); (ii) Techdyne warrants for 4,000 shares of Common Stock
exercisable at $5.00 per share through September 12, 1998 held in his
retirement plan; and (iii) 15,000 shares of Common Stock held in his
retirement plan. Excludes approximately 218,000 (3.6%) shares that may be
deemed indirectly beneficially owned through the Company's ownership of
Techdyne, which indirect beneficial ownership is disclaimed. See Note (4).
7
<PAGE> 10
(22) Includes 2,000 shares underlying DCA warrants exercisable for two years
commencing April 13, 1997 at $4.50 per share. Excludes approximately
118,000 (3.3%) shares that may be deemed indirectly beneficially owned
through the Company's ownership of DCA, which indirect beneficial
ownership is disclaimed. See Note (6).
(23) Includes 75,000 shares of Common Stock underlying an Option granted in
April, 1995 exercisable 50% on April 18, 1996 with the balance exercisable
on April 18, 1997 at $2.38 per share through April 17, 2000, which becomes
fully exercisable in the event of a change in control of the Company. See
Note (2) and "Executive Compensation-Options, Warrants, or Rights."
(24) Includes (i) Techdyne options for 80,000 shares (see "Executive
Compensation"); (ii) Techdyne warrants for 1,000 shares of Common Stock
exercisable at $5.00 per share through September 12, 1998; and (iii) 2,333
shares held in his wife's name. Excludes approximately 111,000 (1.8%)
shares that may be deemed indirectly beneficially owned through the
Company's ownership of Techdyne, which indirect beneficial ownership is
disclaimed. See Note (4).
(25) Excludes approximately 60,000 (1.7%) shares that may be deemed indirectly
beneficially owned through the Company's ownership of DCA, which indirect
beneficial ownership is disclaimed. See Note (6).
(26) Does not include Barry Pardon's interest. Includes 505,000 shares of Common
Stock underlying the Options granted in April, 1995, 50% which became
exercisable on April 18, 1996 and the balance on April 18, 1997. See Note
(2) and "Executive Compensation-Options, Warrants, or Rights."
OTHER PRINCIPAL SECURITY HOLDERS
Other than for Messrs. Langbein and Friend, officers and directors of the
Company, no other shareholder is known by the Company, nor has it received any
Schedule 13D reflecting the same, to own beneficially more than 5% of its voting
securities. See "Beneficial Ownership of the Company's Securities-Management."
8
<PAGE> 11
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,
1996 for services in all capacities for its Chief Executive Officer and each of
its principal executive officers whose total annual salary and bonus exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------- ---------- ----------------
(a) (b) (c) (e) (f) (g)
Other
Annual Restricted Securities
Name and Compen- Stock Underlying
Principal Position Year Salary($) sation($) Award(s) Options/SARs(#)
- ------------------ ---- --------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C>
CEO
Thomas K. Langbein 1996 262,000(1) 24,800(2) 250,000(5)
1995 230,100 26,100(2) 250,000(5)
1994 220,000 25,000(2)(3) 112,500(4)
Barry Pardon(6) 1996 160,000(1) 75,000(5)
1995 113,000 (2) 75,000(5)
1994 91,600 (3) 11,250(4)
</TABLE>
- ----------
(1) Includes a $25,000 bonus in 1996 for Mr. Langbein. Does not include the
Company's June, 1996 forgiveness of indebtedness represented by promissory
notes for option exercises for Common Stock in 1994, in the amount of
$94,200 for Mr. Langbein and $21,200 for Mr. Pardon, which sums include
interest. See "Options, Warrants or Rights" and "Ten-Year Option/SAR
Repricing" table below.
(2) Includes automobile allowance and related expenses, life and disability
insurance premiums, and $1,000 compensation received in 1995 by Messrs.
Langbein and Pardon as directors to Techdyne (Scotland).
(3) Does not include 150,000 shares and 15,000 shares of Common Stock granted
to Messrs. Langbein and Pardon, respectively, on January 17, 1994 as part
of 410,000 shares granted to officers, directors and key employees of the
Company and certain subsidiaries as incentive awards, with a fair market
value on the date of grant of $.75 per share. Included in Restricted Stock
Awards, column (f) of the Summary Compensation Table. See Note (4) and the
table "Ten-Year
9
<PAGE> 12
Options/SAR Repricings" under "Options, Warrants or Rights" below.
(4) Incentive awards granted in January, 1994. The Common Stock vested in equal
amounts of 1/12th per month and at December 31, 1994 was fully vested. See
Note (2). An aggregate of 150,000 and 15,000 shares of restricted Common
Stock, respectively are held by Messrs. Langbein and Pardon with a value at
December 31, 1994 of $375,000 and $37,500, respectively. Should the Company
pay dividends, which it has not in many years, dividends would be paid on
such restricted securities.
(5) In April, 1995, the Company granted non-qualified stock options under its
1989 Stock Option Plan to officers, directors, employees and consultants
for 809,000 shares of Common Stock, now 807,000 due to terminations, 50% of
the Options being exercisable on April 18, 1996 with the balance being
exercisable on April 18, 1997, all at an exercise price of $3.00 per share.
On December 30, 1996, the Company adjusted the exercise price to $2.38, the
fair market value on that date. See the table "Ten-Year Options/SAR
Repricings" under "Options, Warrants or Rights" below and Note (2) to
"Beneficial Ownership of the Company's Securities."
(6) President and director of Techdyne and director of Techdyne (Scotland).
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
Mr. Langbein has an employment agreement with the Company 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 fiscal 1992, 1993
and 1994. The first $10,000 increment became effective June 1, 1995. The
Company's subsidiary, DCA completed a public offering of securities on April 23,
1996 at which time Mr. Langbein commenced receiving $75,000 per annum of his
overall compensation from DCA, which sum reduced his base compensation from the
Company. See Note (1) to "Summary Compensation Table" above. Mr. Langbein's
employment agreement further 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. The Company maintains an income disability insurance policy for Mr.
Langbein. The agreement also provides for life insurance, of which the Company
was the owner and beneficiary of a $500,000 policy, recently assigned to Mr.
Langbein. The Company 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 affiliated with Techdyne as an independent sales
representative. See "Certain Relationships and Related Transactions."
Based upon any wrongful termination of his employment agreement, which
includes changes in control of the Company through an acquiring person (any
person who has acquired or announces a tender offer or exchange for 25% of the
Company), a sale of substantially all of the assets or merger, acquisition of
the Company or its consolidation with another, or certain types of Board
changes, the Company 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 the Company equivalent to such
lump sum
10
<PAGE> 13
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. The
Company has reserved up to 400,000 shares of its Common Stock for such option to
Mr. Langbein. The Company has granted Mr. Langbein one time demand and five year
"piggy-back" registration rights with respect to such shares. Such registration
of the stock would be at the sole cost and expense of the Company 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 the Company's primary operations in
Florida. The Company 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. The Company also
provides Mr. Langbein with an automobile allowance of $850 per month.
Certain executive and accounting personnel and administrative facilities of
the Company and its subsidiaries, including Techdyne and DCA, were common for
fiscal 1996. The costs of executive and accounting salaries and other shared
corporate overhead for these companies were charged on the basis of direct usage
when identifiable with the remainder allocated on the basis of time spent. The
Techdyne allocation is now accomplished pursuant to a two-year Service Agreement
which commenced October 1, 1996. Mr. Langbein, as an officer and director of the
Company, Techdyne and DCA, and Daniel Ouzts, as an officer of the Company,
Techdyne and DCA, divide their time and efforts to each company.
Barry Pardon, director and President of Techdyne, has a five-year
employment agreement with Techdyne through December 31, 2000, which provides him
with a base annual salary of $120,000, plus an over-ride commission of .5% of
net sales of Techdyne in excess of $20,000,000 the first year of the agreement,
increasing $1,000,000 each successive year of the term. In January, 1993, as
part of Techdyne's administrative cost reduction program, Mr. Pardon voluntarily
reduced his base salary to $84,000, which was increased to $96,000 in April,
1994, and to $108,000 in March, 1995. Under the employment agreement, Mr. Pardon
is entitled to severance pay of nine months salary if he dies or is terminated
without cause during the term. Mr. Pardon is furnished with an automobile,
travel and entertainment expenses incurred relating to Techdyne's business,
which sums did not exceed 10% of his reported cash compensation. The agreement
provides for non-competition for one year following termination and for
restrictions upon Mr. Pardon calling upon any customers or suppliers of
Techdyne, diverting any customers, services, items or products of Techdyne or
disclosing any trade secrets of Techdyne.
COMPENSATION OF DIRECTORS
STANDARD ARRANGEMENTS
There are no standard arrangements for compensating directors for services
as directors or for acting on any committee. The Company does reimburse
directors for expenses for attending meetings.
11
<PAGE> 14
NON-STANDARD ARRANGEMENTS
For the year ended December 31, 1996, the Company obtained its property,
casualty and general liability insurance, as did its subsidiaries, through the
efforts of one of its directors, Anthony C. D'Amore, who received $9,500 in
commissions in 1996 with respect to this insurance. See "Certain Relationships
and Related Transactions."
The Company has provided options to its directors, among other executives
and consultants. Its public subsidiaries, Techdyne and DCA, have also issued
options to their respective officers, directors and advisors. Three of the
directors of the Company are directors of Techdyne and have received Techdyne
options, and Mr. Langbein, also Chairman of the Board of Directors of DCA,
received options from that subsidiary. See below "Options, Warrants or Rights",
"Beneficial Ownership of the Company's Securities" and "Certain Relationships
and Related Transactions." Neither Techdyne or DCA granted any options or
restricted stock to directors of the Company in 1996. In April, 1995 Options
were granted under the Company's 1989 Stock Option Plan (the "Option Plan")
exercisable into Common Stock at $3.00 per share, 50% on or after April 18,
1996, the first anniversary date of grant, and in full on or after the second
anniversary date of grant. Options were granted to officers, directors,
consultants and certain employees of the Company and its subsidiaries, which
includes Options for 250,000 shares of Common Stock to Mr. Langbein, and Options
for 75,000 shares of Common Stock each to Messrs. Friend, Fischbein and D'Amore.
The exercise price of all options is 100% of the fair market value of the Common
Stock on the date of grant. On December 30, 1996, the Company repriced the
exercise price of the Options to $2.38 per share, the then fair market value of
the Common Stock. The repricing is deemed a new grant of Options. See the table
"Ten-Year Option/SAR Repricings" under "Options, Warrants or Rights."
OPTIONS, WARRANTS OR RIGHTS
In May, 1989, the Board of Directors adopted the 1989 Stock Option Plan
(the "Option Plan"), approved by shareholders in July, 1994, pursuant to which
1,000,000 shares of Common Stock are reserved for issuance under Options at fair
market value on the date of grant. The Option Plan is for a period of 20 years,
terminating May 18, 2009. Options may be granted to employees, officers,
directors, attorneys, consultants and similar parties who provide their skills
and expertise to the Company. Options granted under the Option Plan are
non-transferable and are exercisable for ten years (no vesting schedule) from
date of grant, but may expire at the earlier of two years from retirement,
permanent disability or death. The Options are exercisable 50% on or after the
first anniversary date of grant and in full on or after the second anniversary
date of grant, provided acceleration of full exercise will be permitted upon
changes in control or death. Changes in control include the sale of
substantially all of the assets of the Company or its merger or consolidation
with another, or a majority of the Board of Directors changes other than by
election by shareholders pursuant to Board solicitation, or by vacancies filled
by the Board caused by death or resignation, or a person or group acquires 25%
or makes a tender for 25% of the Company's outstanding shares.
Options under the Option Plan may be exercised either with cash or Company
stock or both. If exercised with stock the shares are valued at the current
market price and the optionee obtains an additional non-qualified stock option
for the stock used for the exercise. This new Option is exercisable at the then
current market price for the remainder of the original Option period under the
same terms of the original
12
<PAGE> 15
Option. Stock for stock exercises of Options allow for the withholding of
shares to cover tax liability upon exercise.
On April 18, 1995, the Board granted Options for 809,000 shares of Common
Stock under the Option Plan exercisable at $3.00 per share, the closing price
for the stock on the date of grant. Based on two employee terminations, there
are presently outstanding Options for 807,000 shares of Common Stock. As
permitted pursuant to the terms of the Option Plan, on December 30, 1996, the
Stock Option Committee and the Board of Directors authorized the repricing of
the exercise price of the options to $2.38 per share based upon the closing
price of the Company's Common Stock on the Nasdaq National Market on that date.
See "Beneficial Ownership of the Company's Securities" and "Executive
Compensation - Compensation of Directors - Non-Standard Arrangements" and
"Ten-Year Option/SAR Repricings" below. The Company is in the process of
registering these shares for resale by the optionees.
In 1990, the By-Laws were amended to opt-out of the control share
acquisition section of the Florida Business Corporation Act only to the extent
such might relate to the issuance of any securities to directors, management,
key employees, advisors or consultants, whether under a stock option plan,
benefit, bonus, awards, retirement program or similar plan.
In May, 1994, the Board of Directors and shareholders of Techdyne adopted
the 1994 Techdyne, Inc. Stock Option Plan (the "Techdyne 1994 Plan"). In
November, 1995, the Board of Directors and shareholders of DCA adopted the 1995
Dialysis Corporation of America Stock Option Plan (the "DCA 1995 Plan"). Each of
the Techdyne 1994 and the DCA 1995 Plans are substantially similar and the
following description applies to each, unless otherwise indicated.
250,000 shares of common stock are reserved for issuance at 100% of the
fair market value on the date of grant. The Techdyne 1994 Plan expires May 24,
1999 and the DCA 1995 Plan expires November 9, 2000. Options may be and have
been granted to officers, directors, consultants, key employees, advisors and
similar parties, may be exercisable for up to five years, may require vesting,
are non-transferable except by the laws of descent and distribution or a change
in control of the Company, and are exercisable only by the participant during.
his lifetime.
Change in control includes (i) the sale of substantially all of the assets
of the company or its merger or consolidation with another, or (ii) a majority
of the Board changes other than by election by 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 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 (9) 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 Techdyne 1994 Plan and the DCA 1995 Plan, at the
discretion of the Board, may be exercised either with cash, common stock having
a fair market 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.
13
<PAGE> 16
There are presently outstanding under the Techdyne 1994 Plan options to 74
officers, employees and advisors of Techdyne and its subsidiary for 173,700
shares of Techdyne common stock exercisable at $1.00 per share through May 24,
1999. Under the DCA 1995 Plan there are currently options to 24 persons
affiliated with DCA and its subsidiaries for 193,500 shares of DCA common stock
exercisable at $1.50 per share through November 9, 2000.
To date Techdyne options have been exercised for 51,400 shares, and DCA
options have been exercised for 6,000 shares.
On February 27, 1995, Techdyne granted non-qualified stock options, not
part of the Techdyne 1994 Plan, to directors of Techdyne and its subsidiary for
142,500 shares of common stock exercisable at $1.75 per share for five years. In
April, 1995 an option for 10,000 shares of Techdyne common stock was granted to
counsel as part of his compensation for assisting in the preparation of
Techdyne's registration statement for a public offering of its common stock and
warrants completed in October, 1995. The exercise price of all options is 100%
of the fair market value of the common stock on the date of grant.
In August, 1996, DCA's 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 DCA 1995 Plan, and are immediately exercisable at $4.75 per share
through August 18, 1999. If the medical director ceases affiliation with DCA or
with the professional association approved to act as medical director of a
particular dialysis center, or by reason of death, permanent disability or
retirement at 65 years of age, such options are exercisable for six (6) months
from such occurrence, but not beyond the expiration date of the option. Other
termination gives the optionee 30 days to exercise except for termination for
cause which results in the option being immediately null and void. The DCA 1996
options may only be exercised for cash. To date none of the these options have
been exercised.
COMPANY OPTIONS/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g)
Potential Realizable
Value at Assumed
% of Total Annual rates of Stock
Options/SARs Price Appreciation
Number of Securities Granted to Exercise or for Option Term
Underlying Options/SARs Employees in Base Price Expiration -------------------
Name Granted (#) 1996 ($/Sh) Date 5%($) 10%($)
- ---- ----------------------- ------------ ---------- ----------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
CEO
Thomas K. Langbein 250,000 30.9 2.38(1) 4-17-2000 165,000 362,500
Barry Pardon 75,000 9.3 2.38(1) 4-17-2000 49,500 108,750
</TABLE>
- -----------------
(1) Original grant date exercise price (April 18, 1995) was $3.00 per share,
reduced on December 30, 1996 to an exercise price of $2.38 per share. See
Table "Ten-Year Option/SAR Repricings' below.
14
<PAGE> 17
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized($) Unexercisable Unexercisable
- ---- --------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
CEO
Thomas K. Langbein
Company Options -0- -0- 250,000 (exer)(1) 30,000 (exer)(2)
Techdyne Options -0- -0- 80,000 (exer)(3) 340,400 (exer)(4)
DCA Options -0- -0- 50,000 (exer)(5) 81,500 (exer)(6)
Barry Pardon(7)
Company Options -0- -0- 75,000 (exer)(1) 9,000 (exer)(2)
Techdyne Options -0- -0- 80,000 (exer)(3) 340,400 (exer)(4)
DCA Options -0- -0- -0- -0-
</TABLE>
- ----------
(1) 50% became exercisable on April 18, 1996 with the balance exercisable on
April 18, 1997. See Note (2) to "Beneficial Ownership of the Company's
Securities."
(2) The value of the in-the-money options was determined by the difference
between the exercise price (repriced from $3.00 per share, which would have
made the Options out-of-money, to $2.38 per share on December 30, 1996, see
table below "Ten-Year Option/SAR Repricings") and the closing price of the
Common Stock on December 31, 1996, as reported by the Nasdaq National
Market which was $2.50.
(3) 40,000 options exercisable at $1.00 and 40,000 options exercisable at
$1.75.
(4) The value of the in-the-money options was determined by the difference
between the exercise price and the closing price of the common stock as
reported by Nasdaq on December 31, 1996, which was $5.63.
(5) Exercisable at $1.50 per share through November 9, 2000.
(6) The value of the 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.
(7) President and director of Techdyne.
15
<PAGE> 18
On December 30, 1996, Options for 807,000 shares of Common Stock granted in
April, 1995 under its Option Plan to officers, directors and key-employees of
the Company and certain subsidiaries, exercisable through April 17, 2000 at
$3.00 per share, were modified by the Stock Option Committee and the Board of
Directors to an exercise price of $2.38 the then fair market value, the closing
price as reported by Nasdaq. There are 19 Option holders of which Messrs.
Langbein and Pardon, the named executive officers (Mr. Pardon is President of
Techdyne, the Company's 63% owned subsidiary, and not an officer or director of
the Company) hold approximately 40% of the Options. The other officers of the
Company hold approximately 18% of the Options. The two non-management directors
hold approximately 18% of the Options, and the balance held by a former officer,
other executive officers and directors of Techdyne and DCA, the attorney and
Secretary for the Company, and several of its employees.
The purpose of the Option Plan is to advance the interests of the Company
and its stockholders by providing a means by which the Company and its
subsidiaries would be able to attract and retain competent officers, directors,
consultants, key-employees and others and provide such persons with an
opportunity to participate in and increase the value of the Company with their
efforts, initiatives and skills. The Option Plan and the granting of Options is
to encourage those persons to have a proprietary interest in the Company and to
provide their continued efforts.
It was the opinion of the Board of Directors that the Option exercise
repricing supported the purpose of the Option Plan to insure continued, if not
enhanced incentive on behalf of the optionees. The Board also considered the
fact that unlike normal practices in many public companies, there is no
compensation for directors in acting as such nor is there any compensation to
directors for participating on any committee. The Board also considered in its
repricing determination that there have been no increases in officers'
compensation over the last several years other than for the Chairman of the
Board, which minimal incremental increase is incorporated into his employment
agreement. See "Executive Compensation-Employment Contracts and Termination of
Employment and Change-In-Control Arrangements."
Further, the repricing of the 1995 Options was moderate, was accomplished
at fair market value of the Common Stock on December 30, 1996, and was not
deemed a material modification. The Option Plan provides for stock-for-stock
exercise which, if accomplished, would have provided the exercising optionee
with a new Option at the $2.38 exercise price, the fair market value, on the
date of such exercise.
SUBMITTED BY THE BOARD OF DIRECTORS
Thomas K. Langbein Seymour Friend
Anthony C. D'Amore Peter D. Fischbein
The table below provides information of all repricings of options held by
any executive officer during the last ten fiscal years.
16
<PAGE> 19
<TABLE>
<CAPTION>
Ten-Year Option/SAR Repricings
- ------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Length of
Number of Market Price Exercise Original
Securities of Stock at Price At Option Term
Underlying Time of Time of Remaining at
Options/SARs Repricing or Repricing or New date of
Repriced or or Amend- or Exercise Repricing or
Name Date Amended (#) ment($) Amendment Price($) Amendment
- ---- ---- ----------- ------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas K. Langbein 4/29/87 147,000(1) $2.13 $3.13 $2.13 35 Months
Ch. of the Bd., CEO 7/11/88 53,000(1) $2.13 $2.88 $2.13 50 Months
and Pres. 2/2/89 50,000(1) $2.13 $2.75 $2.13 56 Months
9/16/92 130,000 (2) $ .69 (2) 15 Months
4/17/95 250,000 $2.38 $3.00 $2.38 39 Months
Seymour Friend 4/29/87 14,000 $2.13 $3.13 $2.13 35 Months
Vice President and 7/11/88 15,000(1) $2.13 $2.88 $2.13 50 Months
Director 2/2/89 10,000(1) $2.13 $2.75 $2.13 56 Months
9/16/92 50,000(1) (2) $ .69 (2) 15 Months
4/17/95 75,000 $2.38 $3.00 $2.38 39 Months
Daniel R. Ouzts 4/29/87 5,000 $2.13 $3.13 $2.13 35 Months
Vice Pres. (Fin.) 7/11/88 10,000(1) $2.13 $2.88 $2.13 50 Months
CFO, Cont. & Treas 2/2/89 5,000(1) $2.13 $2.75 $2.13 56 Months
9/16/92 10,000(1) (2) $ .69 (2) 15 Months
4/17/95 30,000 $2.38 $3.00 $2.38 39 Months
Barry Pardon (3) 9/16/92 30,000 (2) $ .69 (2) 15 Months
Pres. & Director of 4/17/95 75,000 $2.38 $3.00 $2.38 39 Months
Techdyne
</TABLE>
- ---------------------
(1) Options canceled on December 18, 1990. On January 4, 1991, restricted
Common Stock awards were issued in lieu of any bonuses to officers and
directors of the Company and certain of its subsidiaries, including 250,000
shares to Mr. Langbein, 39,000 shares to Mr. Friend, 20,000 shares to Mr.
Ouzts, and 7,500 shares to Mr. Pardon, The market value on that date as
reported by the American Stock Exchange was $.75.
(2) The 1992 Options were exercisable by all optionees (10 officers and
directors of the Company and its subsidiaries for an aggregate of 480,000
shares of Common Stock) on September 12, 1994, with a cash payment equal to
par value, $.01 per share, times the number of shares acquired, with a
three year promissory note secured by the Common Stock purchased, which
shares were held in escrow by the Company, with per annum interest at 5.36%
payable semi-annually. On June 5, 1996, the Board forgave the indebtedness
and the notes were canceled and the shares issued. The
17
<PAGE> 20
forgiveness to Messrs. Langbein, Friend, Ouzts and Pardon amounted to
$94,200, $35,400, $7,100 and $21,200 (including interest), respectively.
See Note 5 to "Notes to Consolidated Financial Statements."
(3) President and director of Techdyne. Not an officer or director of the
Company. See above "Executive Compensation."
BOARD EXECUTIVE COMPENSATION REPORT
The Company has no executive compensation committee. Compensation of its
executive officers is considered by the entire Board of Directors, presently
four members, one of whom Thomas K. Langbein is the Chairman of the Board and
Chief Executive Officer of the Company and its subsidiaries. Mr. Langbein is the
only executive officer of the Company that has an employment agreement. The only
other executive of the Company's subsidiaries that has an employment agreement
is Barry Pardon, President and director of Techdyne, a 63% owned public
subsidiary. These are the only two individuals who receive in excess of $100,000
from the Company and/or its subsidiaries. See "Executive Compensation."
Mr. Langbein's employment contract has provided him with the same salary
over the last five years. His agreement was renewed for another five years in
1994 at the same base salary with $10,000 incremental increases each year. Mr.
Langbein has the most responsibility for the Company's performance, particularly
sales growth in marketing and in each segment of operations, expense control,
profit margins, structuring and implementing efficiency programs, asset
management, inventory control, and assessment of plans for existing and new
products and services. It took several years of extensive effort in these areas
with attempts to develop the right mix of management, to turn the Company from
losses to a break-even in 1993, to profitability in the last three years. During
those years Mr. Langbein waived the $10,000 per year salary increase to which he
was entitled under his employment agreement. It was only in June, 1995 that the
$10,000 increment was effected. The Board considered Mr. Langbein's effectively
directing the Company's operations, providing capital for the Company and its
subsidiaries operations, and motivating key executive management toward greater
efficiencies in labor, cost control, increased sales and new business.
The turnaround strategy, including a return to profitability and a stronger
financial condition has enabled the Board to also reward the officers,
directors, key employees and advisors with options under the Company's 1989
Option Plan. Options are the only other significant component of compensation.
No director receives any cash compensation for acting as such, not normally the
case with most other public companies, nor does any officer or director receive
fees for participating on any committee, the only active committees being the
audit committee, consisting of two independent directors, Peter F. Fischbein and
Anthony C. D'Amore, and the stock option committee, consisting of Thomas K.
Langbein, Peter D. Fischbein and Lawrence E. Jaffe, Secretary and counsel to the
Company and DCA, and counsel to Techdyne. See "Certain Relationships and Related
Transactions." Based upon the turnaround of the Company, the efforts of
management and their respective levels of responsibility and performance,
non-qualified stock options were granted to officers, directors, key employees
and advisors in April, 1995 under the 1989 Option Plan. The Board believes that
managements' and employees' ownership of equity in the Company is a significant
incentive in building shareholder wealth and aligning the long-term interest of
management and key employees with stockholders. Options granted are at prices
not less than the fair market value of the Company's common stock on the date of
grant. Sometimes there may be vesting
18
<PAGE> 21
schedules. The options granted in 1995 are exercisable 50% on April 18, 1996,
and the balance on April 18, 1997. The options have little value unless the
share price of the Common Stock increases over the fair market value on the date
of grant. On December 30, 1996, the board modified the exercise price of these
Options from $3.00, the fair market value on the date of grant, to $2.38, the
fair market value on the repricing date. See "Executive Compensation-Options,
Warrants or Rights."
The Board also looks to historical option grants as well as the officer's,
director's and/or key employee's past and prospective contributions to the
success of the Company to determine the appropriate range of awards. The Board
considers option grants more as incentives than as compensation.
SUBMITTED BY THE BOARD OF DIRECTORS
Thomas K. Langbein Seymour Friend
Anthony C. D'Amore Peter D. Fischbein
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a five-year comparison of cumulative total
stockholder returns for the Company, the Nasdaq Market Index and the Electronics
Industry Index from December 31, 1991 through December 31, 1996. The cumulative
total stockholder returns on the Company's Common Stock was measured by dividing
the difference between the Company's share price at the end and the beginning of
the measurement period by the share price at the beginning of the measurement
period. The total stockholder return assumes $100 invested at the beginning of
the period in the Company's Common Stock, and the Nasdaq Market Index and the
Electronics Industry Index. The Company did not pay dividends on its Common
Stock during the measurement period and the calculations of cumulative total
stockholders return on the Common Stock did not include dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG MEDICORE,
NASDAQ MARKET INDEX AND ELECTRONICS INDUSTRY INDEX
<TABLE>
<CAPTION>
ELECTRONIC
MEASUREMENT PERIOD MEDICORE, INC. NASDAQ INDEX INDUSTRY INDEX
- ------------------ -------------- ------------ --------------
<S> <C> <C> <C>
(FISCAL YEAR COVERED)
MEASUREMENT PT-12/31/91 $100.00 $100.00 $100.00
FYE 12/31/92 150.00 100.98 130.50
FYE 12/31/93 140.00 121.13 178.28
FYE 12/31/94 390.00 127.17 215.09
FYE 12/31/95 760.00 164.96 332.30
FYE 12/31/96 400.00 204.98 503.77
</TABLE>
19
<PAGE> 22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the officers and directors of the Company are officers and/or
directors of Techdyne and DCA, including Thomas K. Langbein, Chairman of the
Board of Directors, President and Chief Executive Officer of the Company and an
officer and director of the Company's subsidiaries, and Chairman of the Board of
Directors and Chief Executive Officer of Techdyne and DCA; Mr. Langbein is also
the President, sole shareholder and director of Todd, a broker-dealer; Daniel R.
Ouzts, Vice President of Finance and Controller of the Company, Techdyne and
DCA; Peter D. Fischbein and Anthony C. D'Amore each a director of the Company
and Techdyne; and Lawrence E. Jaffe, Secretary and corporate counsel to the
Company and DCA and counsel to Techdyne. Mr. Jaffe is the beneficial owner of
approximately 3.6% of the Company's Common Stock and received a substantial
portion of his fees from the Company, Techdyne and DCA, which for the year ended
December 31, 1996, were approximately $107,000, $32,000 and $63,000,
respectively.
In addition, certain of the accounting personnel and administrative
facilities of the Company and its subsidiaries, including Techdyne and DCA, 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. Utilization of personnel and administrative
facilities in this manner enables the Company to share the cost of qualified
individuals with its subsidiaries rather than duplicating the cost for various
entities. These services are provided by the Company and allocated to Techdyne
pursuant to a two-year Service Agreement through September 30, 1998. It is the
opinion of management that these services are on terms as favorable as
obtainable from unaffiliated parties.
The amount of expenses charged by the Company to Techdyne and DCA for each
of the years ended December 31, 1996, 1995 and 1994 were approximately $408,000
and $240,000, respectively. These were included in the intercompany advance
accounts with Techdyne and DCA.
DCA had been advancing funds to the Company 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, the Company repaid
$1,000,000 of the intercompany indebtedness, which was further reduced in
November, 1995, when DCA 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 Company's debt by
approximately $3,134,000, with no current balance at December 31, 1995. As a
result of cash transfers from the Company and corporate overhead allocations,
there was an intercompany indebtedness due from DCA to the Company of
approximately $370,000 at December 31, 1996.
All future transactions between DCA and the Company and their respective
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.
Since the Company's acquisition of Techdyne in 1982, through Techdyne's
public offering in
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April, 1985, the Company had been advancing funds to finance that subsidiary's
business. $900,000 of the resulting intercompany indebtedness was repaid from
the proceeds of Techdyne's public offering in 1985. Upon completion of Techdyne'
public offering in October, 1995, Techdyne repaid $1,500,000 to the Company
leaving a net balance due to the Company at December 31, 1995 of $2,686,000
including a balance of $3,173,000 under an unsecured demand promissory note
convertible into common stock of Techdyne at a rate of $1.75 per share net of an
intercompany advance from the Company of $487,000. The annual interest rate on
the note is 5.7%. There is no schedule for the repayment of such indebtedness.
In June, 1996, the Company converted $350,000 of this note into 200,000 shares
giving it an approximately 63% ownership interest in Techdyne (approximately 74%
including the beneficial ownership of the Techdyne stock underlying the
convertible note). At December 31, 1996, the balance of the convertible note
including accrued interest amounted to approximately $2,998,000. The Company had
an intercompany advance payable to Techdyne of approximately $540,000 with
interest at 5.7% at December 31, 1996. Pursuant to Techdyne's refinanced credit
facility with a Florida bank, the Company has not only guaranteed the loans, and
secured them with certain of its properties which it leases to Techdyne, but has
also agreed to subordinate this indebtedness, provided Techdyne may make
payments to the Company on the subordinated debt from funds received in
Techdyne's 1995 public offering of common stock and warrants or from retained
earnings arising subsequent to March 31, 1995, provided that at the time of any
such repayment to the Company Techdyne is in compliance with the financial
covenants of the $712,500 term loan agreement. The Company does not intend to
require repayment of these advances prior to January 1, 1998.
In 1990 the Company acquired Techdyne's real property in Hialeah, Florida
consisting of the land and two buildings and a parking lot. Payment to Techdyne
was made through a reduction in the Company's advance account balance with
Techdyne less approximately $256,000 in existing mortgages on the property, and
during 1994 refinanced the mortgages with a $230,000 mortgage which has been
replaced with Techdyne's new loan agreements with a Florida bank. The Company is
leasing the buildings and the parking lot to Techdyne under a five year net
lease expiring March 31, 2000 at $130,000 per year plus applicable taxes. The
annual rental was reduced to $94,000 per year plus applicable taxes for 12
months commencing on April 1, 1996. Management is of the opinion that the
rentals are on terms as favorable as obtainable from unaffiliated parties.
Techdyne had a credit facility with Consolidated Bank, N.A., now
NationsBank of Florida, which it had amended over the years, which at December
31, 1995 amounted to $549,508.
The $230,000 mortgage and the NationsBank credit facility were replaced on
February 8, 1996 by Techdyne entering into three loan arrangements with Barnett
Bank of South Florida, NA ("Barnett Bank"). One credit facility is a $2,000,000
line of credit, due on demand, secured by Techdyne's accounts receivable,
inventory, furniture, fixtures, and intangible assets and bears interest at
Barnett Bank's prime rate plus 1.25%. Techdyne has not drawn down any funds
under this line of credit.
Barnett Bank has also extended two commercial term loans to Techdyne, one
for $712,500 for five years expiring on February 7, 2001 at an annual rate of
interest equal to 8.28% with monthly payments of principal and interest of
$6,925 based on a 15-year amortization schedule with the unpaid principal and
accrued interest due on the expiration date. This term loan has a prepayment
penalty and is secured by a mortgage on properties in Hialeah, Florida owned by
the Company, two of which properties are leased to Techdyne and one parcel being
vacant land used as a parking lot. Under this term loan Techdyne is
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obligated to adhere to a variety of affirmative and negative covenants,
including but not limited to a debt service ratio of 1:25 to 1:00, maintenance
of capital funds equal to or in excess of $3,500,000, have a capital fund ratio
of total debt to capital funds of 1.5 to 1.0; and Techdyne may not merge or
acquire businesses, create or transfer any assets to a subsidiary, if the
aggregate annual value of such transactions exceeds $750,000, cannot sell its
interest in its subsidiary Techdyne (Scotland) or allow that Scottish subsidiary
to sell all or substantially all of its assets unless 50% of the aggregate gross
sales price is used to pay this term loan, may not sell any of its assets or
properties, except inventory in the ordinary course of business, for which the
aggregate book value exceeds $500,000; and this term loan further provides for
restrictions and transactions with related persons, restrictions on dividends
except if such does not exceed 30% of Techdyne's net income in any year,
precludes changes in ownership in Techdyne which would reduce the Company's
ownership to less than 51%, and restricts Techdyne from engaging in any new
unrelated business.
The mortgage issued by the Company to secure the $712,500 term loan
provides Barnett Bank with reappraisal rights so that should the principal
amount outstanding under the Note exceed 75% of the reappraised value of the
mortgaged property, such excess has to be repaid by the Company and/or Techdyne.
The Company, as lessor to Techdyne of these mortgaged properties, has assigned
the leases, rents and profits to Barnett Bank as further security for this
$712,500 term loan, provided the Company may continue to collect the rents until
an event of default, if any. The Company has also subordinated the $2,500,000 of
indebtedness due to it from Techdyne. The Company, as lessor of the properties
mortgaged, has subordinated its interests in the leases to the mortgage held by
Barnett Bank to secure this term loan.
The second commercial term loan is for the principal amount of $200,000 for
a period of five years bearing interest at a per annum rate of 1.25% over
Barnett Bank's prime rate and requiring monthly principal payments with accrued
interest of $3,333 through expiration on February 7, 2001. This $200,000 term
loan carries no prepayment penalty and is secured by all of Techdyne's tangible
personal property, goods and equipment, and all cash or non-cash proceeds of
such collateral.
A default of the $712,500 term loan will be deemed a default of the
$2,000,000 revolving credit line, but only a financial default of the $2,000,000
revolving line will be deemed a default of the $712,500 term loan.
The Company has unconditionally guaranteed the payment and performance by
Techdyne of the $2,000,000 revolving line of credit and the two commercial term
loans.
Techdyne has advanced funds to Techdyne (Scotland) for that subsidiary's
working capital requirements which advances had an outstanding balance of
$600,000 at December 31, 1996. This sum is not evidenced by a note, is at
interest rate of prime plus 1.5% per annum, and is not expected to be repaid in
the near future. Techdyne has guaranteed a line of credit for Techdyne
(Scotland) from The Royal Bank of Scotland Plc which credit line has a U.S.
equivalency of approximately $342,000 at December 1, 1996, which is secured by
the assets of Techdyne (Scotland) and generated by Techdyne. This line of credit
operates as an overdraft facility. No amounts were outstanding under this line
of credit as of December 31, 1996.
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Property, casualty and general liability insurance coverage for the Company
and similar insurance for subsidiaries, including Techdyne and DCA, had been
obtained through the A.C. D'Amore Agency, Inc. an insurance agency owned by Mr.
D'Amore, a director of the Company and Techdyne and registered as a part-time
account executive with Todd, although he has not been active in the securities
business. In 1992, Mr. D'Amore sold his insurance business to Community
Insurance Associates which agency he continues as a consultant. Mr. D'Amore
continues to receive commissions for the account of the Company and Techdyne but
not DCA. The aggregate annual premiums for such insurance were approximately
$189,000 for the year ended December 31, 1996 of which $130,000 and $5,000,
respectively were for Techdyne and DCA. Mr. D'Amore's commissions amounted to
approximately $9,500. In addition, the Company, Techdyne and DCA obtained group
health insurance coverage and several executive and key life insurance policies
through George Langbein, brother of Thomas K. Langbein. This insurance includes
$100,000 term life insurance covering certain of the executive officers of the
Company, Techdyne and DCA, purchased and paid for by their respective companies.
George Langbein is affiliated as an independent sales representative with
Techdyne. The Company also pays for $750,000 of whole life insurance and
$350,000 of term life insurance owned by Thomas K. Langbein The Company owns a
$500,000 life policy on Thomas K. Langbein. See "Executive Compensation."
Premiums on these coverage's totaled approximately $327,000 for the year ended
December 31, 1996 of which $182,000 and $75,000, respectively, were for Techdyne
and DCA. Management is of the opinion that the cost and coverage of the
insurance obtained through Mr. D'Amore and George Langbein are as favorable as
can be obtained from unaffiliated parties.
Dialysis Services of Pennsylvania, Inc. - Lemoyne, a wholly-owned
subsidiary of DCA, which commenced dialysis operations in June, 1995, is leasing
its dialysis center from DCA 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 established Viragen as a research and development bio-medical
company, primarily for production and use of human leukocyte interferon, in
1980. It has advanced and invested substantial funds to that former subsidiary
over the years. In 1986, the Company spun-off Viragen and entered into certain
agreements with its former subsidiary, the primary existing agreements being a
royalty agreement expiring in November, 2001, pursuant to which Viragen is to
pay a schedule of royalty payments with respect to Viragen's interferon and
related product sales with a maximum cap of $2,400,000. As of December 31, 1996,
Viragen has paid approximately $64,000 of royalties to the Company. Also in
conjunction with the spin-off, certain of Viragen's indebtedness was paid with
Viragen common stock, with the Company at December 31, 1996 owning approximately
269,000 shares. These shares were stated at a carrying value of $234,375 at
December 31, 1990 and were written off in 1991. The Company sold approximately
682,000 Viragen shares in 1996; approximately 173,000 shares in 1995; and
approximately 375,000 shares in 1994 recognizing gains of $2,583,000, $183,000,
and $524,000, respectively. The Company also held a demand promissory note of
$429,400 with interest at 1% over prime, payable quarterly. The note, evidenced
by a loan agreement, was secured by a mortgage on Viragen's building and a
security interest in Viragen's equipment, fixtures, accounts receivable and
contract rights. The security interest in the building and equipment which
Viragen granted to the Company was second to the security interest held by
Equitable Bank with whom Viragen refinanced its bank credit facility and
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mortgage in August, 1991. The Company had guaranteed payments of principal and
interest and any expenses and fees with respect to collection upon any default
by Viragen under its mortgage and note. In August, 1996 the remaining principal
balance and accrued interest due under the Viragen note was fully repaid and the
mortgages satisfied and the Company's guarantees terminated. The Company leases
2,800 square feet of office space from Viragen at this property for $19,600 per
annum.
The only remaining common director of the Company and Viragen is Peter D.
Fischbein, also a director of Techdyne. Mr. Fischbein is an attorney who had
acted from time to time as counsel to the Company, Techdyne, Todd and Viragen.
In December, 1994 Mr. Fischbein resigned as Secretary of Viragen. See "Election
of Directors" and "Beneficial Ownership of the Company's Securities."
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 since 1978.
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.
SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder proposal to be considered by the Company for inclusion in
the 1998 Proxy Statement must be received by the Company not later than February
11, 1998. Any such proposal should be sent to the Secretary of the Company,
Lawrence E. Jaffe, 777 Terrace Avenue, Hasbrouck Heights, New Jersey 07604. Any
such proposal should provide the reason for it, the complete text of any
resolution and other specified matters, and must comply with Rule 14a-8 of
Regulation 14A of the proxy rules of the Securities and Exchange Commission.
To nominate a director at the Annual Meeting, a shareholder must satisfy
Florida law and the By-laws of the Company. A shareholder who wishes to suggest
a potential nominee should provide the Secretary of the Company for the 1998
Annual Meeting written notice of such nominee and other appropriate information
at least 60 days prior to that Annual Meeting, detailing the qualifications of
such nominee for consideration by the Board. Any shareholder requesting a copy
of the Company's By-laws will be furnished one without charge upon written
request to the Company.
OTHER MATTERS
Management is not aware of any other matter to be presented for action at
the meeting other than the proposal to elect two members of the Class 2
directors as set forth in the accompanying Notice of Annual Meeting and in this
Proxy Statement, and management does not intend to bring any other matter before
the meeting. However, if any other matter should be presented at the meeting, it
is the intention of the persons named in the accompanying proxy to vote said
proxy in accordance with their best judgment and in the best interests of the
Company.
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UPON WRITTEN REQUEST BY ANY SHAREHOLDER OF RECORD (OR ANY SHAREHOLDER WHO
OWNS THE COMMON STOCK LISTED IN THE NAME OF A BANK OR BROKER AS NOMINEE) AT THE
CLOSE OF BUSINESS ON APRIL 30, 1997, TO THE SECRETARY OF THE COMPANY, LAWRENCE
E. JAFFE, ESQ., 777 TERRACE AVENUE, HASBROUCK HEIGHTS, NEW JERSEY 07604, A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996
WILL BE PROVIDED WITHOUT CHARGE.
Kindly date, sign and return the enclosed form of proxy. YOUR VOTE IS
IMPORTANT.
By Order of the Board of Directors
LAWRENCE E. JAFFE
Secretary and Counsel
May 2, 1997
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- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
PROXY
MEDICORE, INC.
The Board of Directors Solicits This Proxy
The undersigned appoints Lawrence E. Jaffe and Thomas K. Langbein, with
power of substitution in each, proxies to vote all the shares of MEDICORE, INC.
which the undersigned may be entitled to vote as a stockholder of record on
April 30, 1997 at the Annual Meeting of Shareholders to be held Wednesday, June
11, 1997, or any adjournment thereof.
This proxy when properly executed and returned in a timely manner will be
voted at the Annual Meeting and any adjournment thereof in the manner directed
herein. Directors recommend a vote FOR Proposal 1. SHARES WILL BE SO VOTED
UNLESS OTHERWISE INDICATED.
1. Election of Directors:
Nominees: Anthony C. D'Amore for Class 2 director.
Robert P. Magrann for Class 2 director.
[ ] FOR director nominees listed; [ ] WITHHOLD AUTHORITY to vote
nominees listed for directors
2. In their discretion, such other business as may properly come before
the meeting.
(Back side of the card)
Dated:___________________________, 1997
- -------------------------------------
(Signature)
- -------------------------------------
(Signature)
Signatures(s) should be exactly as your name(s) appears on this proxy. If
signing as executor, administrator, trustee, guardian or attorney, please give
full title when signing. If stock is registered in the names of joint owners,
the proxy should be signed by each. If the stockholder is a corporation, sign
full corporate name by a duly authorized officer.
IMPORTANT: PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED
