SCHEDULE 14C INFORMATION
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DIALYSIS CORPORATION OF AMERICA
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(Name of Registrant as Specified In Its Charter)
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April 8, 2001
To: Our Shareholders
From: Thomas K. Langbein
Subject: Invitation to the Dialysis Corporation of America 2001
Annual Meeting of Shareholders
Management is extending its invitation to you to attend our annual
meeting on May 23, 2001. The annual meeting is being held at the executive
offices of Medicore, Inc., our parent, 2337 West 76th Street, Hialeah,
Florida 33016 at 12:30 p.m. In addition to the formal items of business, I
will review the major developments of 2000 to the present and answer your
questions.
This booklet includes the Notice of Annual Meeting and the
Information Statement. Proxies are not being solicited since a quorum exists
for the meeting through Medicore's 61% ownership of Dialysis Corporation of
America. The Information Statement also describes the business we will conduct
at the meeting, basically the election of six directors and the amendment of
our 1999 Stock Option Plan, and provides information about Dialysis Corporation
of America.
We look forward to seeing you at the annual meeting.
Thomas K. Langbein
Chairman of the Board and
Chief Executive Officer
DIALYSIS CORPORATION OF AMERICA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
- -------------------------------------------------------------------------
Date: Wednesday, May 23, 2001
Time: 12:00 p.m.
Place: Executive Offices of our Parent
Medicore, Inc.
2337 West 76th Street
Hialeah, Florida33016
(305) 558-4000
- -------------------------------------------------------------------------
Dear Shareholder:
You are cordially invited to attend the 2001 Dialysis Corporation of
America Annual Meeting of Shareholders to:
1. Elect six directors;
2. Amend our 1999 Stock Option Plan to increase the number of
shares reserved for issuance from 800,000 shares to 1,500,000
shares; and
3. Transact any other business that may properly be presented at
the annual meeting.
If you were a shareholder of record at the close of business on April
6, 2001, you are entitled to vote at the annual meeting.
Your copy of the Annual Report on Form 10-K of Dialysis Corporation of
America for 2000 is enclosed.
By order of the Board of Directors
Lawrence E. Jaffe
Counsel and Corporate Secretary
April 8, 2001
TABLE OF CONTENTS
PAGE
Information About the Annual Meeting and Voting........... 2
Proposals................................................. 4
Information About Directors and Executive Officers........ 6
Executive Compensation.................................... 9
Board Executive Compensation Report....................... 13
Performance Graph......................................... 15
Certain Relationships and Related Transactions............ 16
Beneficial Ownership of the Company's Securities.......... 19
Appendix A: Audit Committee Charter....................... A-1
INFORMATION STATEMENT FOR
DIALYSIS CORPORATION OF AMERICA
2001 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Q: Why did you send me an Information Statement?
A: Management of Dialysis Corporation of America is asking you to attend
and vote at the 2001 annual meeting. This Information Statement
summarizes the information you need to know to vote intelligently.
Q: Why did you not send me a proxy?
A: This is because a quorum already exists based upon the 61% ownership of
the company's voting securities by Medicore, Inc., our parent company.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
Q: What does a quorum mean?
A: A quorum means a majority of the outstanding shares. The annual meeting
may only proceed if a quorum is present at the meeting. A majority of
the outstanding shares will be present at the meeting through Medicore.
At April 6, 2001, the record date, there were 3,932,844 shares of
Dialysis Corporation of America common stock outstanding. Medicore owns
2,410,622 shares of Dialysis Corporation of America common stock or
approximately 61% of the votes. A shareholder list will be available at
the executive offices of our parent in Hialeah, Florida at the meeting
and for 10 days prior to the meeting for your review.
Q: Who is entitled to vote?
A: Shareholders who owned Dialysis Corporation of America common stock at
the close of business on April 6, 2001, the record date.
Q: How many votes do I have?
A: Each share of common stock is entitled to one vote. Dialysis
Corporation of America is sending this Information Statement, the
attached Notice of Annual Meeting, and its 2000 Annual Report on Form
10-K, which includes our financial statements, on April 12, 2001 to all
shareholders entitled to vote.
Q: What am I voting on?
A: Proposal no. 1, election of six directors, Messrs. Thomas K. Langbein,
Bart Pelstring, Stephen W. Everett, Robert W. Trause, Alexander
Bienenstock and Dr. David L. Blecker, for a one year term; and proposal
no. 2, amendment of our 1999 Stock Option Plan to increase the common
stock reserved under that Plan for exercise of options to 1,500,000
shares.
Q: How do I vote?
A: By attending the annual meeting. At that time you will be given a
ballot and you may vote your shares. If your shares of Dialysis
Corporation of America common stock are held in the name of a broker,
bank or other nominee, you must bring an account statement or letter
from the nominee showing you were the beneficial owner of the shares on
April 6, 2001, the record date.
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Q: Is my vote confidential?
A: Yes. Only the inspectors of election and other employees of Dialysis
Corporation of America assisting in tallying the vote will have access
to your vote and comments, unless you tell us to disclose such
information.
Q: Who counts the votes?
A: We appoint two persons to act as inspectors of election, who each take
an oath to accept that responsibility and certify the voting to the
board.
Q: What does it mean if I receive more than one Information Statement?
A: Your shares of Dialysis Corporation of America common stock are
probably registered in more than one name or account. It would be
appreciated if you would contact our transfer agent, Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004
(Attention: Proxy Department) and tell them to put all your accounts
registered in the same name at the same address.
Q: How much common stock do officers and directors own?
A: Approximately 1.5% of our common stock as of the record date, and with
the officers and directors of Medicore, ownership of Dialysis
Corporation of America would be approximately 8%. This does not include
Medicore's 61% (2,410,622 shares) of Dialysis Corporation of America
common stock ownership.
Q: Who are the largest principal shareholders?
A: As of the record date, other than Medicore's 61% ownership, Thomas K.
Langbein, Chairman of the Board and Chief Executive Officer,
beneficially owns 6.2% represented by an option to purchase 260,000
shares of the company's common stock. No other shareholder to our
knowledge owns in excess of 5% of our common stock. See "Information
About Directors and Executive Officers" and "Beneficial Ownership of
the Company's Securities."
Q: Who sends out the Information Statements and Annual Reports and what
are the costs?
A: The company is sending out the Information Statement and Annual Report
to shareholders.
We will ask banks, brokers and other institutions, nominees and
fiduciaries to forward these materials to their principals and we will
reimburse them for their reasonable expenses in forwarding the
materials. The company pays all expenses of preparing and delivering
the Information Statements and Annual Reports, including printing,
envelopes, mailing and similar out-of-pocket expenses.
Q: Who is eligible to submit a proposal?
A: To be eligible, you must have continuously held at least $2,000 in
market value, or 1%, of Dialysis Corporation of America's common stock
for at least one year by the date you submit the proposal. You must
continue to hold your Dialysis Corporation of America shares through
the date of the meeting. However, please remember that Medicore's 61%
ownership will determine the outcome of any proposal.
Q: When are the year 2002 shareholder proposals due?
A: Shareholder proposals must be submitted in writing by December 12, 2001
to Lawrence E. Jaffe, corporate Secretary, Dialysis Corporation of
America, 777 Terrace Avenue, Hasbrouck Heights, New Jersey 07604. Any
proposal should provide the reasons for it, the text of any resolution,
and must comply with Rule 14a-8 of Regulation 14A of the proxy rules of
the SEC.
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PROPOSALS
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Nominees for election for a one year term are:
POSITION
NAME AGE CURRENT POSITION HELD SINCE
Thomas K. Langbein 55 Chairman of the Board 1980
Chief Executive Officer 1986
Bart Pelstring 60 Director 1985
Stephen W. Everett 44 President and nominee 2000
Robert W. Trause* 58 Director 1998
Alexander Bienenstock* 63 Nominee ____
Dr. David L. Blecker* 53 Nominee ____
* Member of audit committee.
Our by-laws provide that the board shall not be less than two nor
more than six persons. A majority of directors, although less than a quorum, or
a sole remaining director, have the right to appoint candidates to fill any
vacancies on the board. When appointed, such director shall then serve for the
remainder of the term.
There is no nominating committee. Nominations for directors are
considered by the entire board.
The affirmative vote of a plurality of the shares of common stock
represented at the meeting is required to elect the nominees as directors.
Abstentions and votes withheld for any nominee will have the same effect as a
vote against his election.
Medicore owns 2,410,622 shares or 61% of the voting stock of the
company, and intends to vote all of its shares in favor of the election of the
six nominees of management for directors, thereby assuring their election as
directors.
The nominees have consented to serve on the board. If any nominee is
unable to serve for any reason, the parent's controlling block of company common
stock will be voted for any substitute nominee as designated by the board.
For more information about the directors and executive officers see
"Information About Directors and Executive officers."
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PROPOSAL NO. 2 - AMENDMENT OF THE 1999 DIALYSIS CORPORATION OF AMERICA
STOCK OPTION PLAN
The 1999 Dialysis Corporation of America Stock Option Plan was adopted
in April, 1999. The 1999 Plan provides for a total of 800,000 shares of common
stock reserved for issuance for options granted under the 1999 Plan. The board
of directors believes that it is in the company's best interest to amend the
1999 Plan and increase the number of shares for issuance to 1,500,000 shares of
common stock. This will enable the company to satisfy obligations under the
options granted under the 1999 Plan, as well as continue to be able to attract
and retain high quality employees necessary to build the company, and provide
ongoing equity incentives to the company's key employees, officers, directors,
consultants, advisors and similar parties. The board of directors administers
and interprets the 1999 Plan.
Stephen W. Everett, President and director of the company, holds 68,000
options, which includes an option for 35,000 shares granted April 21, 1999,
exercisable at $1.25 per share through April 20, 2004, and an option for 165,000
shares vesting 33,000 options on January 1, 2001 and 33,000 options each January
1 for the next four years, also exercisable at $1.25 per share for five years.
Options for 800,000 shares had been granted by the board, 60,000 options
cancelled due to termination of affiliation with the company, leaving a balance
of 773,000 shares reserved for issuance. This would be insufficient to cover the
remaining options of Mr. Everett for 132,000 shares as they vest each January 1.
The additional 700,000 shares recommended as the amendment to the 1999
Plan to increase the total shares under the Plan to 1,500,000 shares would not
only cover Mr. Everett's existing options, but would allow the company the
flexibility to have options available as equity incentives for retaining high
quality employees, officers and directors.
Options granted under the Plan may be non-qualified or incentive
options, and may be exercisable for up to five years. At the discretion of the
board, options may be exercisable for cash, common stock with fair market value
equal to the cash exercise price, assignment of proceeds, optionee's personal
note, or any combination of such payments. The exercise price of options is no
less than 100% of the fair market value of the common stock on the date of
grant. Options may be fully exercised on the date of the grant, or may vest in
installments, such as the board may specify.
Options are non-transferable, except by the laws of descent or
distribution. For further terms of the 1999 Plan see "Executive Compensation -
Options, Warrants or Rights" below.
The board may amend, modify, suspend, or terminate the 1999 Plan at any
time as the board may deem advisable, except that the board shall not without
shareholders' authorization materially increase the total amount of shares which
may be awarded under the Plan, materially decrease the benefits accruing to
participants under the Plan, change the class of eligible participants, or
extend the duration of the Plan. To the extent necessary and desirable to comply
with any applicable law, rule and regulation, the company is obtaining
stockholders' approval of any amendment in a manner and to the extent required
by such applicable law, rule or regulation.
The affirmative vote of a majority of the common stock outstanding is
necessary for the amendment to increase the number of shares of common stock
reserved under the 1999 Plan to be adopted. Abstentions and broker no-votes will
have the effect of a vote against the amendment to the 1999 Plan. However,
Medicore owns 2,410,622 shares (61%) of the voting shares of the company, and
intends to vote all of its shares in favor of the amendment increasing the
shares reserved under the 1999 Plan, thereby assuring its adoption.
5
OTHER MATTERS TO BE PRESENTED TO SHAREHOLDERS
Management is not currently aware of any other matter to be presented
for action at the annual meeting other than the election of six directors and
amendment of its 1999 Stock Option Plan, and management does not presently
intend to bring any other matter before the meeting.
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
THE BOARD OF DIRECTORS
The board of directors oversees the business and affairs of the company
and monitors the performance of management. In accordance with corporate
governance principles, the board does not involve itself in day-to-day
operations. The board is kept knowledgeable and informed through discussions
with the Chairman, other directors, executives and advisors (counsel, outside
auditors, investment bankers and other consultants), by reading reports,
contracts and other materials sent to them and by participating in board and
committee meetings.
The board met 14 times during 2000, including unanimous written
consents. All directors participated at all the meetings, either present in
person or by telephone conference call, except Dr. Herbert Soller, who was
absent at two meetings, and resigned in September, 2000.
DIRECTORS STANDING FOR ELECTION
Thomas K. Langbein has been affiliated with the company since 1980 when
he was appointed Chairman of the Board of Directors and President. Mr. Langbein
relinquished the position of President in 1986 when he was appointed as Chief
Executive Officer. He is also 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, our parent. He is the
Chairman of the Board and Chief Executive Officer of Techdyne, Inc., a 71% owned
public subsidiary of Medicore engaged in the manufacture, assembly and
distribution of electronic and electro-mechanical components. Mr. Langbein is
President, sole shareholder and director of Todd & Company, Inc., a
broker-dealer registered with the SEC and a member of the NASD. Mr. Langbein was
appointed as a director of Linux Global Partners, a private holding company in
which Medicore, in January, 2000, invested and loaned money to. See "Certain
Relationships and Related Transactions." Mr. Langbein devotes most of his time
to the affairs of the company, Medicore and Techdyne, and recently more of his
time is being devoted to Linux Global Partners, Inc. See "Certain Relationships
and Related Transactions."
Stephen W. Everett has been involved in the healthcare industry for
over 21 years. From 1993 to 1997, Mr. Everett was responsible for oversight,
deal structuring, physician recruitment and practice management for the renal
care division of Vivra, Inc., the second largest provider of dialysis services
in the United States. Mr. Everett held positions of similar responsibility in
1998 in his affiliation with Physicians Practice Management, engaged in
consulting and management in the renal healthcare field. He joined the company
in November, 1998 as Vice President, became Executive Vice President in June,
1999, and President on March 1, 2000.
Bart Pelstring has been affiliated with the company since 1976. Mr.
Pelstring was appointed Vice-President of Operations in 1980 and served in that
capacity until 1986 when he was appointed as
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President, which position he relinquished on March 1, 2000. 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, since 1991, affiliated
with an insurance agency in New Jersey.
NOMINEES
Alexander Bienenstock is a legal consultant with IDT Corp., a NYSE
telecommunications company. He holds an accounting degree from New York
University and a juris doctor degree from Brooklyn Law School. From 1972 to 1981
he was an adjunct assistant professor in accounting and management at NYU School
of Continuing Education. Mr. Bienenstock was Chief Attorney, Branch of Small
Issues of the New York Regional Office of the SEC from 1970 to 1980. He was
affiliated with the law firms of Bachner, Tally, ET AL. (1980 to 1992), Singer,
Bienenstock, ET AL. (1992 to 1997), and Gusrae, Kaplan & Bruno (1997 to 1998),
and was counsel to a small brokerage firm no longer in business from 1998 to
February, 2000. Mr. Bienenstock holds various securities brokers licenses,
including financial operations and securities principal.
Dr. David L. Blecker, M.P.H., is board certified in internal medicine
and nephrology by the American Board of Internal Medicine, and also holds board
certifications from the American Board of Preventative Medicine and the American
Board of Medical Management. Dr. Blecker is Chief in Nephrology and Director of
Dialysis at Kessler Memorial Hospital in Hammonton, New Jersey (since 1984),
Chief of Nephrology and Internal Medicine at Atlantic City Medical Center,
Atlantic City, New Jersey (since 1984), and is Assistant Clinical Professor of
Medicine at the University of Medicine and Dentistry of New Jersey (since 1992).
He is affiliated with four other hospitals in southern New Jersey, is a member
of many medical associations, and has published over 30 medical articles. Dr.
Blecker is the medical director of two of our dialysis facilities in New Jersey.
EXECUTIVE OFFICERS
NAME AGE POSITION HELD SINCE
Thomas K. Langbein* 55 Chief Executive Officer 1986
(Chairman of the Board) 1980
Stephen W. Everett* 44 President 2000
Daniel R. Ouzts 54 Vice President (Finance)
and Treasurer 1996
* For information concerning Messrs. Langbein and Everett, see
"Information About Directors and Executive Officers."
Daniel R. Ouzts has been affiliated with the company since 1983 as its
controller, and in 1996 was appointed Vice President of Finance and Treasurer.
He also holds those positions with Medicore, and is Vice President of Finance
and Controller of Techdyne. Mr. Ouzts is a certified public accountant. See
"Certain Relationships and Related Transactions."
There are no family relationships among any of the officers or
directors of the Company.
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BOARD COMMITTEES
The only board committee is the audit committee, presently consisting
of Robert W. Trause. The two nominees, Mr. Bienenstock and Dr. Blecker, will
serve on the audit committee. All audit committee members are and will be
independent as defined in the rules of the Nasdaq Stock Market, Inc. The audit
committee met four times in 2000, sometimes alone, with management, and with our
independent auditors. The audit committee 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 our internal audit control
procedures. The audit committee reviewed our annual and quarterly results, the
Audit Committee Report (see below), and company disclosure filings, before
filing.
COMPENSATION OF DIRECTORS
No standard arrangements for compensating directors for services as
directors or for participating on any committee exists. We reimburse directors
for travel and related out-of-pocket expenses incurred in attending shareholder,
board and committee meetings, which expenses have been minimal. In lieu of any
cash compensation or per meeting fees to directors for acting as such, we have
provided directors, among others, with options to purchase common stock at
exercise prices no less than the fair market value as of the date of grant. See
"Executive Compensation - Options, Warrants or Rights," and "Beneficial
Ownership of the Company's Securities" below.
REPORT OF THE AUDIT COMMITTEE
Under the guidance of its written Audit Committee Charter, which was
adopted in June, 2000, the audit committee is charged with overseeing the
accounting, reporting practices, and the quality and integrity of financial
reports of our company. A copy of the Audit Committee Charter is included as
Appendix A to this Information Statement.
Management has the primary responsibility for the system of internal
controls and the financial reporting process. Our independent accountants have
the responsibility to express an opinion on the financial statements based on an
audit conducted in accordance with generally accepted auditing standards. The
audit committee has the responsibility to monitor and oversee these processes.
In fulfilling its responsibilities, the audit committee recommended to
the board the selection of the company's independent accountants, Wiss &
Company, LLP for 2000. That firm has discussed with the audit committee and
provided written disclosures to the audit committee as to (1) that firm's
independence as required by the Independence Standards Board, and (2) the
matters required to be communicated under generally accepted auditing standards.
The audit committee reviewed with our Vice President of Finance and
with our independent auditors the overall scope and specific plans for their
audit, the result of their examinations, their evaluation of the company's
internal controls, and the overall quality of Dialysis Corporation of America's
accounting and financial reporting.
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The committee reviewed and discussed with management and the
independent accountants the company's audited financial statements.
Following these actions, the audit committee recommended to the board
that the audited financial statements be included in the company's Annual Report
on Form 10-K for the year ended December 31, 2000 for filing with the SEC.
The Audit Committee
Robert Trause
March 20, 2001
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, 2000 for services in all capacities for its Chief Executive Officer and its
President. No other executive officer received a total annual salary, bonus or
other compensation which exceeded $100,000 for the year ended December 31, 2000.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation Awards
(a) (b) (c) (e) (g) (i)
Securities All Other
Underlying Compensation
Options/SARS(#) ($)
Other Annual --------------- ----------------
Name and Principal Position Year Salary($) Compensation($) Company Medicore Company Medicore
- --------------------------- ---- --------- --------------- ------- -------- ------- --------
Thomas K. Langbein, CEO 2000 69,000(1) 7,100(2) ------- 550,000 ------- --------
1999 67,000(1) 8,100(2) 260,000 ------- ------- --------
1998 64,000(1) 8,000(2) ------- ------- 25,000 --------
Stephen W. Everett, Pres. 2000 114,100(4) 474 ------- ------- ------- --------
1999 35,000 -25,000 ------- --------
1998(3)
-
- ---------------
(1) Annual compensation paid by Medicore, which was $278,000, $268,000 and
$258,000 (including a 1998 $25,000 bonus) respectively, for fiscal
2000, 1999 and, 1998. Does not include a $25,000 bonus paid by the
company in 1998. Amounts included in the Summary Compensation Table
reflect the compensation allocated to the company in proportion to the
time spent on its behalf.
(2) Automobile allowance and related expenses, and life and disability
insurance premiums paid by Medicore amounted to $28,500, $32,400 and
$32,300, respectively for 2000, 1999 and 1998. As part of the general
corporate overhead allocation, the amounts in the Summary Compensation
Table reflect the portion of such payment which is allocated to the
company.
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(3) Joined the company in November, 1998. See "Information About Executive
Officers and Directors - Directors Standing for Election."
(4) All compensation paid by the company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Stephen W. Everett, President and director of the company, has a
five-year employment contract effective January 1, 2001, providing him with a
first year salary of $120,000, increasing a minimum of $10,000 per annum the
second and third years, and for each of the two remaining years, the prior
year's adjusted compensation increased by an amount equal to the lesser of 3% of
pre-tax profits or $10,000. Mr. Everett's employment agreement also provides:
o employee and fringe benefits to the extent available by the
company to other similarly situated executive employees
o reimbursement for reasonable out-of-pocket expenses incurred in
connection with his duties
o vacations normally taken by senior management; compensated for
annual vacation
o termination
- death; three months' severance pay
- for cause; salary and expenses to date of termination
("cause" includes conviction for fraud or criminal conduct,
habitual drunkenness or drug addition, embezzlement,
regulatory agency sanctions against Mr. Everett or the
company due to his wrongful acts, material breach of the
agreement, dishonesty, or resignation, except if due to
breach by the company)
- by the company after 13 weeks of disability; three months'
severance pay
- by Mr. Everett upon breach by the company; severance pay
equal to the greater of six months of his then compensation
or his remaining compensation under the agreement
o confidentiality restrictions two years from termination
o non-competition for one year from termination within the United
States; provided, non-competition eliminated if the company
terminates Mr. Everett without cause or due to the company's
material breach of the agreement
o Mr. Everett to assign any patents, property rights, discovery or
idea to the company
Mr. Langbein has an employment agreement with Medicore through August
31, 2003 at an annual salary, presently $278,000 with yearly increases in
increments of no less than $10,000. The Medicore employment agreement also
provides:
o monthly automobile allowance
o benefit plans and other fringe benefits available to Medicore
employees generally and executives
o reimbursement for business expenses
o payment of universal and term life insurance owned by Mr. Langbein
o indemnification for acting as an officer and/or director of the
company and Medicore, and its subsidiaries
o non-competition for two years from termination within 20 miles of
Medicore's primary operations; Medicore option to request
non-competition within the United States at $4,000 per month for
each 12 month period, with escalation thereafter
10
o full compensation first 90 days of disability with the option to
Medicore to continue the employment with full compensation less
disability payments, or terminate
The Medicore employment agreement also contains different termination
provisions as follows:
o upon death, wrongful termination (defined below), disability
termination or change in control (defined below), a lump sum
payment equal to Mr. Langbein's salary, including expenses and
benefits, for three years from termination
o Mr. Langbein has option to take 400,000 shares of Medicore common
stock instead of the lump sum payment; two year right to demand
registration of the Medicore shares and for three years to include
the Medicore shares in any registration statement filed by
Medicore; registration to be at the sole cost of Medicore
o full vesting of any warrants, options or similar rights, Mr.
Langbein has choice to keep those options , otherwise Medicore has
to repurchase them at a certain repurchase formula
o for cause by Medicore - no benefits or salary
o for good reason (defined below) by Mr. Langbein - Medicore
continues to pay salary, benefits and expenses, and all options
and other securities shall be fully vested and exercisable; or
provide Mr. Langbein with the lump sum payment or, at Mr.
Langbein's option, Medicore to acquire the shares
o expiration if Medicore does not renew or enter into new employment
agreement, there is a severance allowance which is the lump sum
payment or Mr. Langbein's option to take the Medicore shares.
DEFINITIONS
o "cause" - willful failure to perform duties under the employment
agreement, and illegal or gross misconduct which damages the
business or reputation of Medicore
o "good reason" - assigning Mr. Langbein duties inconsistent with
his position or any action that results in reducing Mr. Langbein's
authority, duty or responsibilities; reduction of salary, expenses
or benefits; or other substantial breach of the agreement
o "change in control" includes (a) the announcement for and/or
acquisition by any person not affiliated with Mr. Langbein of 25%
or more of the outstanding common stock, or (b) a sale of
substantially all of the assets, or a merger or acquisition of
Medicore, or (c) certain changes in the board other than through
shareholder elections of members nominated by the existing board.
Certain executive and accounting personnel and administrative
facilities of the company, Medicore and Techdyne were common for fiscal 2000.
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 any balance allocated on the basis of time spent. Mr.
Langbein, as an officer and director, and Mr. Ouzts, as an officer, of the
company, Medicore and Techdyne, divide their time and efforts among these
companies. See "Certain Relationships and Related Transactions."
OPTIONS, WARRANTS OR RIGHTS
1995 Dialysis Corporation of America Stock Option Plan
o expired November 9, 2000
11
o terms were similar to the 1999 Plan (see below)
o 5,000 outstanding to a director exercisable at $2.25 per share
through June 9, 2003
1999 Dialysis Corporation of America Stock Option Plan
o expires April 20, 2009
o grants available to officers, directors, consultants, key
employees, advisors and similar parties
o options (non-qualified and incentive) may be up to five years, may
require vesting, exercise price determined by board of directors o
options may, at discretion of board, be exercised either with
cash, common stock with fair market value equal to cash exercise
price, optionee's personal non-recourse or recourse note, at the
discretion of the board, or assignment to the company if
sufficient proceeds from the sale of common stock acquired upon
exercise of the option with an authorization to the broker to pay
that amount to the company, or any combination of such payments
o termination of optionee's affiliation with the company by
- death, disability or retirement after age 65, exercisable for
nine months but not beyond option expiration date
- termination for cause, right to exercise terminates
immediately
- any other termination, 30 day exercise
o options are non-transferable
o forced redemption at formulated prices upon change in control of
the company which includes (i) sale of substantially all of the
assets of the company or its merger or consolidation; (ii)
majority of the board changes other than by election of
shareholders pursuant to board solicitations or vacancies filled
by board caused by death or resignation; or (iii) a person or
group acquires or makes a tender offer for at least 25% of the
company's common stock
o 1999 Plan history to April 6, 2001
- 800,000 shares reserved for issuance
- 800,000 shares granted in 1999 ?
435,000 non-qualified options (all one year except for
35,000 (5 years) to April 20, 2004) ?
365,000 incentive options expiring April 20, 2004
- exercisable at $1.25 per share
- 60,000 options cancelled due to termination of affiliation
with the company
- 340,000 options exercised; payment of par value and
non-recourse 3 year promissory notes for the balance; stock
held by the company as collateral to secure notes
- 165,000 granted January 2, 2001 (33,000 vested immediately;
33,000 vest every January 1)
- 433,000 options outstanding (all incentive options except for
35,000 options)
The exercise price of options is no less than 100% of the fair market
value of the common stock on the date of grant.
12
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY-End (#) Fiscal Year End($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name On Exercise (#) ($) Unexercisable Unexercisable($)
- --------- ---------------- -------------- ------------- ----------------
CEO
Thomas K. Langbein
Company Options -0- -0- 260,000 (exer.) ---(1)
Medicore Options -0- -0- 550,000 (exer.) ---(2)
Stephen W. Everett
Company Options -0- -0- 35,000 (exer.) ---(1)
Medicore Options -0- -0- 25,000 (exer.) ---(3)
- ----------
(1) The options are exercisable at $1.25 per share through April 20, 2004.
The options were out-of-the-money, since the closing price of the
company's common stock as reported by Nasdaq at December 29, 2000, was
$.63.
(2) The Medicore options are exercisable for 250,000 shares through
February 16, 2003 at $3.25 per share, and for 300,000 shares through
July 26, 2005 at $1.38 per share. The Medicore options were out-of-the
money, since the closing price of the Medicore common stock as reported
by Nasdaq as of December 29, 2000 was $.88.
(3) The options are exercisable for 25,000 shares through July 26, 2005 at
$1.38 per share. The company's options were out-of-the-money, since
the closing price of the Medicore common stock as reported by Nasdaq
as of December 29, 2000 was $.88.
BOARD EXECUTIVE COMPENSATION REPORT
We are a small company engaged in developing and operating outpatient
dialysis facilities and providing inpatient dialysis services. Therefore we have
no executive compensation committee. Compensation of our executive officers is
considered by all members of the board of directors. We have one employment
agreement with our President. See "Executive Compensation - Employment Contracts
and Termination of Employment and Change-in-Control Arrangements." Our
philosophy is to align compensation of management with the long-term interests
of shareholders. Executive compensation is structured to motivate management to
create and sustain shareholder value. The board attempts to accomplish this goal
by:
(i) aligning the interests of management and shareholders
through stock ownership; and
(ii) seeking growth and performance of our company by
attracting, retaining and motivating talented
executives and employees through competitive
compensation.
WHAT IS THE STRUCTURE OF EXECUTIVE COMPENSATION?
The elements of executive compensation include:
o base pay
o long-term incentives
o special awards in recognition of extraordinary efforts
and achievements
13
HOW IS BASE PAY DETERMINED?
Base pay is determined by individual performance and position with and
responsibilities to the company. We also try, although it is more difficult for
us since we are not a significant participant in the dialysis industry, to be
competitive with salaries in an attempt to be able to maintain quality
executives. Base salaries for management are below major competitors, which
competitors are much larger than the company.
RESPONSIBILITIES OF CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
Thomas K. Langbein, Chairman of the Board and Chief Executive Officer,
has been affiliated with the company for 21 years. Stephen W. Everett, although
affiliated with the company for two and one-half years, and as its President
since March, 2000, has been involved in the health care industry for over 21
years, and in recent years, affiliated with a major healthcare company. See
"Information About Directors and Executive Officers - Directors Standing for
Election." Messrs. Langbein and Everett have been most responsible for the
company's performance and recent growth. The President seeks new areas and
physician and hospital alliances and, with Mr. Langbein, evaluates the potential
for growth and expansion of our operations, facilities and patient base. In
evaluating the performance and setting Mr. Langbein's and Mr. Everett's
compensation (which was less than $100,000 for fiscal 1999), the board took into
account their efforts in directing our operations, seeking new sources of
capital for us and our dialysis operations, pursuing new areas to develop or
acquire dialysis facilities, and motivating key executive management toward
greater overall efficiencies in labor, cost control and increased business. Mr.
Langbein and Mr. Everett did not participate in decisions affecting their own
compensation.
WHAT ARE LONG-TERM INCENTIVES?
Long-term incentive awards for executives usually take the form of
granting stock options under the company's option plans or granting restricted
stock awards, meaning shares which cannot be publicly sold for a certain period
of time, usually from one to two years. We believe the granting of stock options
or restricted shares helps align the interests of our executives with our
shareholders. This is premised on the basic principle that the executives will
receive value only if the market value of our common stock increases over time.
Our market price has been depressed over the last year and in recent months,
somewhat due to general market conditions, but hopefully should increase as
management strives to improve our operations and profitability. See "Growth But
Continued Losses" below, and Item 5, "Market for the Registrant's Common Equity
and Related Stockholder Matters" of our Annual Report on Form 10-K for the year
ended December 31, 2000 accompanying this Information Statement.
SPECIAL AWARDS
Special awards may be granted from time to time in recognition of
extraordinary efforts and achievements. Such may arise based upon an executive's
extraordinary efforts in accomplishing expansion, acquisitions, increasing
market share and similar events. These situations and extent of awards are
evaluated on a case by case basis.
14
GROWTH BUT CONTINUED LOSSES
Over the years we have developed and sold certain of our dialysis
centers. By 1989, we had sold all but one center. We had slowly grown to six
centers, but this year we have expanded to nine dialysis centers and nine acute
inpatient hospital service agreements, with an additional center under
construction. Although our revenues have increased, we continue to experience
losses, since two of the new centers and two of the established centers are in
their developmental stages, not having a sufficient patient base to generate and
sustain earnings. Dialysis centers in the developmental stage adversely affect
our overall results of operations. Our President is aggressively seeking new
relationships and facilities. We are also negotiating with other physicians and
hospitals for relationships in many states, primarily on the eastern seaboard.
There is no assurance any of these negotiations will result in formalizing
agreements for additional dialysis facilities or acute inpatient services. In
spite of expansion in facilities and revenues, we continue for the past 11 years
to experience losses. See Item 6, "Selected Financial Data" and Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our Annual Report on Form 10-K for the year ended December 31,
2000 accompanying this Information Statement. Management is making every effort
to have a profitable year and enhance shareholder value. We certainly hope we
can continue our more rapid growth, and be able to reflect profitability and
enhance shareholder value. This is what our respective management is sincerely
focused upon.
SUBMITTED BY THE BOARD OF DIRECTORS
Thomas K. Langbein Bart Pelstring
Robert W. Trause Stephen W. Everett
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
shareholder returns for the company, the Nasdaq Market Index and the Dialysis
Center Industry Index from April 18, 1996, the date the common stock started
trading, through December 29, 2000. The cumulative total shareholder returns on
our common stock was measured by dividing the difference between our 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 shareholder return assumes $100
invested at the beginning of the period in our common stock, in the Nasdaq
Market Index and the Dialysis Center Industry Index. We did not pay dividends on
our common stock during the measurement period and the calculations of
cumulative total shareholders return on the common stock did not include
dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS AMONG DCA,
NASDAQ MARKET INDEX AND DIALYSIS CENTER INDUSTRY INDEX
Measurement Period Dialysis Center
(Fiscal Year Covered) Dca Nasdaq Index Industry Index
--- ------------ --------------
April 18, 1996 $ 100.00 $ 100.00 $ 100.00
December 31, 1996 51.06 107.16 90.63
December 31, 1997 41.49 131.08 121.42
December 31, 1998 13.83 184.88 142.55
December 31, 1999 116.49 326.07 62.62
December 31, 2000 10.64 204.95 101.43
15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our parent, Medicore, owns approximately 61% of our common stock. See
"Beneficial Ownership of the Company's Securities" below.
In 1977, we became a public company through a merger with Premium
Acceptance Corporation, a licensed insurance premium and second mortgage
company, underwritten by Todd & Company, Inc., a securities brokerage firm
solely owned by Thomas K. Langbein, Chairman and Chief Executive Officer of the
company. The Chairman of the Board and President of Premium Acceptance
Corporation was Anthony C. D'Amore, a current director of Medicore and
Medicore's public subsidiary, Techdyne. Mr. D'Amore acts as an insurance
consultant and receives nominal commissions for insurance provided to the
company, Medicore and Techdyne. The aggregate annual premiums for such insurance
were approximately $350,000, $245,000 and $176,000 for the three years ended
December 31, 2000, 1999 and 1998, respectively, of which $73,000, $43,000 and
$32,000 was for the company for 2000, 1999 and 1998, respectively. In addition,
the company, Medicore and Techdyne obtain group health insurance coverage for
all of their employees as well as personal life insurance policies for several
executives and key employees through George Langbein, brother of Thomas K.
Langbein, formerly an employee of Medicore. These insurance policies include
$100,000 term life insurance covering and owned by Bart Pelstring, director and
former President of the company. Medicore also pays for the $1,600,000 of life
insurance owned by Thomas K. Langbein. See "Executive Compensation" above. For
fiscal 2000 and 1999, premiums on this coverage aggregated approximately
$479,000 and $516,000, respectively, of which $41,000 and $118,000,
respectively, was paid by the company. We are 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. He is also a director of Linux Global Partners,
Inc., a private company investing in developing Linux software companies. See
discussion below as to our loans to Medicore for its investment in and financing
of Linux Global Partners. Daniel R. Ouzts is Vice President, Treasurer and
Controller of the company and Medicore and Vice President and Controller of
Techdyne. Mr. Langbein owns 6.2% of our company (an option for 260,000 Dialysis
Corporation of America shares), 21.1% of our parent (includes options for
550,000 shares) and 2.7% of Techdyne (includes options for 100,000 shares). See
"Information About Directors and Executive Officers" above and "Beneficial
Ownership of the Company's Securities" below. Mr. Ouzts has a less than 1%
interest in our company (includes an option for 25,000 shares), and Techdyne
(includes options for 15,000 shares), and 1.7% of Medicore (includes options for
70,000 shares). Lawrence E. Jaffe is Secretary and counsel to our company, our
parent and Techdyne. He is a director of Medicore. Mr. Jaffe has a 4.1% interest
in our company, a 3.3% interest in our parent (includes options for 175,000
shares) and a less than 1% interest in Techdyne (includes options for 20,000
shares). Mr. Jaffe's firm, Jaffe Freedman & Hait, LLC, also receives a
substantial portion of its professional fees from our company, our parent and
Techdyne, which for fiscal 2000 were $133,000, $82,000 and $53,000,
respectively.
Certain of the executive and accounting personnel and administrative
facilities of our company and our parent and its subsidiaries, are common. The
costs of executive, financial and administrative salaries and other shared
corporate overhead for these companies are charged 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 to us by Medicore
amounted to approximately $200,000 for the years ended December 31, 2000 and
1999 and $240,000 for the year ended December 31, 1998. As a net result of cash
transfers and corporate overhead
16
allocations, there was an intercompany indebtedness due to us from Medicore of
approximately $414,000 (including interest) at December 31, 2000. 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 our opinion that these services are on
terms as favorable as we could receive from unaffiliated parties.
Dialysis Services of PA., Inc. - Lemoyne, one of our wholly-owned
dialysis subsidiaries, leases its dialysis facility from us under a five year
net lease expiring December 31, 2003 at $43,088 per annum, plus applicable
taxes, separately metered utilities and insurance, and additional rent of $5,386
per year covering common area maintenance expenses. That subsidiary has two
renewal options for five years each under the agreement. We are of the opinion
that the rental is on terms as favorable as could be obtained from an
unaffiliated party.
We acquired property with a little over 8,100 square feet of space in
Valdosta, Georgia. We lease approximately 6,000 square feet to DCA of So. Ga.,
LLC, our 70% owned dialysis facility, for $90,600 under a 10-year lease with two
renewal options of five years each. We also lease at that property 2,160 square
feet at $32,400 per annum to a professional association, South Georgia
Nephrology, P.C., which acts as that facility's medical director, for the
professional association's medical offices under a 10-year lease with similar
five year renewal options.
On July 21, 2000, the company entered into a Loan and Security
Agreement with South Georgia Nephrology, P.C., wholly owned by Dr. Andrew
Queler, the medical director of our new dialysis facility in Georgia, to loan
South Georgia Nephrology up to $300,000 in periodic advances over an 18-month
period to January 20, 2002, at an annual interest rate of 1% over prime. The
loan is to provide South Georgia Nephrology with working capital to establish
and operate a medical practice and to purchase or lease real property and
equipment necessary to operate a medical practice. The loan is evidenced by a
promissory note requiring payments from the practice proceeds of South Georgia
Nephrology, defined as all the proceeds of the practice less base salaries and
overhead. South Georgia Nephrology many not re-borrow any amounts paid under the
promissory note. The loan is secured by South Georgia Nephrology's accounts
receivable, fixtures, intangibles, furniture and equipment, as well as all of
Dr. Queler's equity ownership of South Georgia Nephrology. The parties
simultaneously entered into a Stock Transfer Restriction Agreement, restricting
Dr. Queler from all transfer of his equity ownership of South Georgia
Nephrology, and automatically upon any transfer event, which term includes but
is not limited to Dr. Queler becoming incompetent or permanently disabled to be
unable to provide medical services to South Georgia Nephrology, is disqualified
from practicing medicine, or otherwise terminates his relationship with South
Georgia Nephrology, his South Georgia Nephrology ownership is transferred to the
next designated medical director for the company's Georgia dialysis facility.
The company is holding Dr. Queler's equity interest in escrow under the Loan and
Stock Transfer Restriction Agreements. As of December 31, 2000, this loan had an
outstanding balance of $83,521 with interest of $1,762.
In April, 2000, our subsidiary, DCA of Vineland, LLC sold additional
membership interests in that LLC to Vineland Dialysis Group, LLC, for $203,000,
giving that professional corporation a 35.9% interest in that dialysis facility,
leaving our company with a 51.3% interest, and Vineland Dialysis Professionals,
LLC, the professional association acting as our medical director for that
Vineland dialysis facility, with a 12.8% interest. Vineland Dialysis
Professionals is owned by Dr. David Blecker, who was appointed as Vineland's
medical director and who is affiliated with Vineland Dialysis Group. Dr. Blecker
is a nominee for director. See "Proposal No. 1 - Election of Directors."
In October, 1999, we entered into a merger agreement with
MainStreetIPO.com Inc., which proposed transaction was ultimately terminated in
August, 2000. We had made a loan of $140,000 to MainStreet on July 12, 2000,
with interest at 10% per annum, for working capital purposes. The loan was
17
secured with 300,000 shares of Linux Global Partners, Inc., which shares were
acquired by our company upon MainStreet's default of the loan in November, 2000.
On January 27, 2000, we loaned our parent, Medicore, $1,500,000 at an
interest rate of 10% per annum for one year through January 26, 2001. The loan
terms provided for an increase of an additional $500,000, which was effected in
March, 2000. On August 9, 2000, we loaned an additional $200,000 to Medicore for
30 days at the same 10% per annum interest rate. Interest receivable on these
loans at December 31, 2000 was approximately $186,000. These loans were
provided to Medicore for its establishment of a new division, which invests in
Linux software system companies. Medicore acquired an 8% interest in Linux
Global Partners, and loaned Linux the $2,200,000 on the same terms as it
borrowed the funds from our company. Medicore holds a security interest in all
the equity of the Linux software companies in which Linux Global Partners
invested. These companies are speculative, developing companies, with great
risk, and there exists the possibility that such collateral may be of minimal
value. Thomas K. Langbein, Chairman of the Board and CEO of our company,
Medicore, of which he is also a major stockholder and President, and Techdyne,
is a director of Linux Global Partners. We have extended these Linux Global
Partners' loans to June 30, 2001 in consideration for a portion of the
consideration Medicore is receiving for its extension of the Loan to Linux
Global Partners. Medicore has received an additional 400,000 shares of Linux
Global Partners, bringing its equity ownership of Linux Global Partners to
approximately 10%. Linux has granted Medicore the right to convert all or part
of the debt into convertible preferred A shares of Linux under certain terms
of a proposed financing being negotiated by Linux which if completed Medicore
would have priority to the proceeds for repayment of Linux's indebtedness to
Medicore. No assurance can be given that Linux Global Partners will complete
its proposed financing, or that it will repay all or any part of its
indebtedness to Medicore. Medicore is currently involved in negotiating a
proposed sale of its ownership of Techdyne, its other majority owned public
subsidiary, which if approved by Medicore's shareholders and completed, for
which there can be no assurance, will give Medicore approximately $10,000,000
with a percentage of revenues over the next several years, a portion of which
proceeds would be used to repay our company for Medicore's indebtedness to us,
assuming Medicore has not then repaid that indebtedness.
In April, 2000, options granted under our 1999 Stock Option Plan for
340,000 shares were exercised by certain officers and directors of Medicore,
Messrs. Anthony C. D'Amore, Peter D. Fischbein, Seymour Friend and Robert
Magrann (20,000 shares each), and Lawrence E. Jaffe (160,000 shares, plus
100,000 shares obtained by his children of majority age and independent of their
father), who paid cash for the par value (aggregate $3,400) and the balance,
$421,600, in three-year non-recourse promissory notes at a rate of interest of
6.2% per annum. The exercise price was $1.25 per share, and at the time of
exercise, the market price of our common stock was $2.63. The market price of
our common stock at March 20, 2001 was $.75.
In September, 2000, we announced plans to repurchase up to
approximately 300,000 shares of our outstanding common stock. At December 31,
2000, we had acquired 76,600 shares for $64,825, and in January and February,
2001, we acquired an additional 47,000 shares for $47,414.
Since mid-1999, the company has entered into management services
agreements with each of its dialysis subsidiaries, pursuant to which it provides
administrative and management services, including, among others, providing
capital equipment, preparing budgets, bookkeeping, accounting, data processing,
and other corporate based information services, materials and human resources
management, billing and collection and accounts receivable and payable
processing. These services are provided for a percentage of net revenues of the
particular dialysis subsidiary. Certain of the dialysis facilities provide their
own management services to DCA Medical Services, Inc., our wholly-owned
subsidiary, for home services provided by that subsidiary for the method 2
patients served by those facilities. Method 2 home patient treatment relates to
providing equipment and supplies, training and patient monitoring to dialysis
patients who are able to perform their treatments at home. Each subsidiary that
has such a home services management agreement with DCA Medical Services receives
a fee of DCA Medical Services revenues derived from common method 2 patients,
exclusive of DCA Medical's costs and expenses relating to those patients.
18
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
The following table sets forth as of April 6, 2001 the names and
beneficial ownership of the equity securities of Dialysis Corporation of America
and Medicore for directors and nominees of the company, individually itemized,
and for directors and executive officers of Dialysis Corporation of America as a
group, without naming them, and for each of the named executive officers
described in the Summary Compensation Table (see "Executive Compensation"), and
for shareholders known to Dialysis Corporation of America to beneficially own
more than 5% of our voting securities.
Amount and Nature of Beneficial Ownership
------------------------------------------
Dialysis Medicore
Common Common
Name Stock(1) %(2) Stock(3) %(4)
- ---- -------- ---- -------- ----
Medicore 2,410,622 61.3 -- --
2337 W. 76th Street
Hialeah, FL 33016
Thomas K. Langbein 2,670,622(1) 63.7 1,323,009 21.1
c/o Medicore
777 Terrace Avenue
Hasbrouck Heights, NJ 07604
less
Stephen W. Everett 68,000(2) 1.7 25,000 than 1%
c/o Dialysis Corporation of America
27 Miller Street
Lemoyne, PA 17043
Bart Pelstring 95,000 2.4 75,000 1.3
c/o Dialysis Corporation of America
27 Miller Street
Lemoyne, PA 17043
Robert W. Trause* 40,000 1.0 -0- -0-
431C Hackensack Street
Carlstadt, NJ 07072
Dr. David L. Blecker* -0- -0- -0- -0-
510 Jackson Avenue
Northfield, NJ 08225
Alexander Bienenstock* -0- -0- -0- -0-
70-22 173rd Street
Fresh Meadows, NY 11365
All directors, nominees and 495,500 11.3 1,534,059 24.1
executive officers
as a group (7 persons)
19
* Member of the Audit Committee
- ----------
(1) Medicore owns 2,410,622 shares (61.3%) of our common stock. Officers
and directors of Dialysis Corporation of America, who may also be
officers and/or directors of Medicore and shareholders of each company,
disclaim any indirect beneficial ownership of Dialysis Corporation of
America common stock through Medicore's 61% ownership of Dialysis
Corporation of America. Thomas K. Langbein, by virtue of his positions
with Dialysis Corporation of America and Medicore and his stock
ownership of Medicore, may be deemed to have indirect beneficial
ownership of such shares through shared voting and investment power
with respect to Medicore's ownership of Dialysis Corporation of
America. Mr. Langbein disclaims such entire indirect beneficial
ownership, but for his proportionate indirect interest, approximately
509,000 shares of the company (12.9%).
Includes the following shares that may be acquired upon exercise of
Dialysis Corporation of America options (see Note (2)) as of March 20,
2001 or within 60 days after that date:
T. Langbein, 260,000 shares (1999 options); S. Everett, 68,000
shares (1999 and 2000 options); B. Pelstring, 45,000 shares
(1999 options); R. Trause, 40,000 shares (1995 and 1999 options);
and D. Ouzts, 25,000 shares (1999 options).
If Thomas K. Langbein excluded Medicore's ownership of Dialysis
Corporation of America, then his beneficial ownership would be
260,000 (6.5%), all of which shares are obtainable upon exercise
of options. See indirect beneficial ownership above.
(2) Based on 3,932,844 shares outstanding exclusive of (i) common stock
issuable under 5,000 options exercisable at $2.25 per share through
June 9, 2003; (ii) underwriters' options for 300,000 shares exercisable
through April 16, 2001; and (iii) common stock issuable under
outstanding options for 433,000 shares at $1.25 per share, 400,000
options exercisable through April 20, 2004 (Mr. Everett has 165,000
options, vesting in amounts of 33,000 options each on January 1, 2001
and each year thereafter, exercisable for five years from vesting at
$1.25 per share).
(3) Includes the following shares that may be acquired upon exercise of
options as of March 20, 2001 or within 60 days after that date:
Shares obtainable upon exercise of options under the 1989 Stock
Option Plan: Messrs. Langbein 300,000; Everett 25,000; Ouzts
45,000; and Bart Pelstring, director of Medicore's affiliate,
Dialysis Corporation of America, 20,000.
Shares obtainable upon exercise of options under the 2000 Stock
Option Plan: Messrs. Langbein 250,000; Friend 25,000; Ouzts
25,000; Jaffe 75,000; Fischbein 25,000; D'Amore 25,000; Magrann
25,000; and Pardon 25,000.
Includes: Fischbein 100,000 shares held in trust for his son, Mr.
Fischbein's wife is trustee (to which shares Mr. Fischbein
disclaims beneficial interest); Pardon 8,400 shares owned by his
wife.
Does not include: Messrs. Langbein 25,600 shares held each by his two
children of majority age, and 400,000 shares in his employment
agreement issuable under certain conditions relating to
20
wrongful termination or change in control; Fischbein 288,582 shares
owned by Susan Kaufman, his wife, of which 100,000 shares are held
in trust for their son, and Ms. Kaufman is settlor and trustee (Mr.
Fischbein's wife is financially independent with separate bank and
brokerage accounts and each of Mr. Fischbein and his wife disclaims
beneficial interest of the other's shares); and Jaffe 136,500 shares
held by his four children and a daughter-in-law, all of whom are of
majority age and live independently, and in all of which shares he
disclaims beneficial interest.
(4) Based on 5,710,540 shares outstanding exclusive of (i) 855,000 shares
underlying options granted under Medicore's 1989 Stock Option Plan;
(ii) 5,000 shares underlying options granted in 1998 to a former
investor relations firm; (iii) 400,000 shares available for issuance
under certain conditions of Thomas K. Langbein's employment agreement;
(iv) 98,000 shares reserved for issuance under a key employee stock
plan; (v) 475,000 shares underlying options granted in February, 2000,
under Medicore's 2000 Stock Option Plan; and (vi) 150,000 shares
underlying options granted to MainStreetIPO.com, its President and
former Vice President (see "Certain Relationships and Related
Transactions").
DID DIRECTORS, EXECUTIVE OFFICERS AND 10% SHAREHOLDERS COMPLY WITH SECTION 16(A)
OWNERSHIP REPORTING IN 2000?
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and 10% shareholders to file reports with the SEC,
the Nasdaq Stock Market and the company, indicating their ownership of common
stock of the company and any changes in their beneficial ownership of their
common stock ownership interests. The rules of the SEC require that we disclose
failed or late filings of reports of company stock ownership by our directors
and executive officers. To the best of our knowledge, all beneficial ownership
reports by these reporting persons for the year 2000 were filed on a timely
basis.
UPON WRITTEN REQUEST BY ANY SHAREHOLDER TO THE SECRETARY OF THE
COMPANY, LAWRENCE E. JAFFE, 777 TERRACE AVENUE, HASBROUCK HEIGHTS, NEW JERSEY
07604, A COPY OF THE FINANCIAL SCHEDULES OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 2000 (COPIES OF WHICH ANNUAL REPORT ARE
INCLUDED WITH THIS NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND INFORMATION
STATEMENT) WILL BE PROVIDED WITHOUT CHARGE.
21
APPENDIX A
AGENDA FOR
AUDIT COMMITTEE
OF
DIALYSIS CORPORATION OF AMERICA
-----------------
1. Although each member has reviewed and signed the annual report, it is
suggested that the Annual Report on Form 10-K and all financial
information which is attached be reviewed.
2. Contact Daniel Ouzts (Chief Financial Officer) and discuss the Company's
financial operations and system of internal controls and regarding
financial statements, and legal compliance (i.e., what is in place, and
what additional policies should be put in place); review the entire
Company's accounting and financial reporting processes - audit committee
is responsible to monitor the Company's reporting processes and internal
control system.
3. Set up a meeting of the audit committee, whether in person or tele-
phonically, as one of the first of its four required meetings (more may
be necessary, depending upon the circumstances) to review responsibilities,
establish agendas for meetings with the outside auditors, with management,
with internal accounting departments, review and suggest improvements to
the audit committee charter, and prepare the review for the upcoming second
quarter Quarterly Report on Form 10-Q, which is to be filed no later than
August 15, 2000; have either counsel or someone at the meeting maintain
minutes; possibly engage in any other items set forth in the Audit
Committee Charter under the caption "Responsibilities - Administrative."
4. Set up a meeting with the independent accountants to review the financial
statements of the Company for the upcoming Quarterly Report on Form 10-Q,
review the fees and charges for the annual report, and any and all other
services (see Item 3 of the charter under "Responsibilities Independent
Auditor/Audit").
5. Set up a meeting with management to discuss the internal controls, the
discussions with the independent auditors, and any other issues you might
have, based upon your discussions with the auditors as to the auditors'
audit plan, any difficulties in the audit or disputes with management,
etc., and review the adequacy and effectiveness of the accounting and
financial personnel and controls of the Company, and attempt to make
recommendations for improvement (see "Responsibilities - Financial
Processes and Reporting" in the Audit Committee Charter).
AUDIT COMMITTEE CHARTER
Organization
There shall be a committee of the board of directors known as the audit
committee.
Composition
The audit committee shall initially be composed of no less than two
directors as determined by the board, each of which shall be independent as
defined in Nasdaq Market Place Rule 4200(a)(15).
On or before June 14, 2001, the audit committee will be composed of
three or more independent directors as determined by the board, and free from
any relationship that, in the opinion of the board, would interfere with the
exercise of his or her independent judgment as a member of the audit committee.
At that time, all members of the audit committee shall have a working knowledge
of basic finance and accounting practices, and at least one member of the audit
committee shall have accounting or related financial management expertise. The
audit committee members may enhance their knowledge and familiarity with
finance and accounting by participating in educational programs.
The members of the audit committee shall be elected by the board at the
annual organizational meeting of the board, or until their successors shall be
duly elected and qualified. The members of the audit committee may designate
a chairman by a majority vote of the full audit committee, or the chairman of
the audit committee may otherwise be elected by the full board of directors.
Statement of Policy
The audit committee shall provide assistance to the board of directors in
fulfilling their responsibility to the shareholders and the investment
community relating to accounting, reporting practices, and the quality and
integrity of financial reports of the Company. To accomplish these ends, the
audit committee will maintain open communication between the board of directors,
the independent auditors, the internal accountants, and management of the
Company.
The primary function of the audit committee in assisting the board in
fulfilling its oversight responsibilities will include reviewing:
o the financial reports and other financial information provided by the
Company to any governmental body or the public
o the Company's systems of internal controls regarding finance, accounting
and legal compliance that management and the board of directors have
established
o the Company's auditing, accounting, and financial reporting processes
generally
The audit committee will attempt to encourage continuous improvement of,
and will attempt to foster adherence to, the Company's policies, procedures and
practices at all levels. Specifically, the audit committee's primary duties
and responsibilities are to:
o serve as the independent and objective entity to monitor the Company's
financial reporting processes and internal control system
o review and appraise the audit efforts of the Company's independent
auditors and internal accounting department
o provide a channel of communication among the independent auditors,
financial and senior management, the internal accounting department,
and the board of directors
The audit committee will primarily fulfill these responsibilities by
carrying out the activities enumerated below.
Meetings
The audit committee shall meet at least four times annually, or more
frequently as circumstances dictate, exclusive of other parties. In addition,
to satisfy its responsibilities, the audit committee should meet at least
annually with management, the members or head of the internal accounting
department, and the independent auditors, in separate and/or joint executive
sessions with a combination of any of the aforementioned parties to discuss
any matters that the audit committee or each of these groups believe should
be discussed in order to strengthen the effectiveness of the audit committee,
and to provide for accountability among the Company's audit committee, outside
directors, and management, and to enhance the reliability and credibility of
financial statements of the Company.
Further, the audit committee, or at least its chairman, should meet with
the independent auditors and management quarterly to review the Company's
financial statements, consistent with the Company's requirements in filing
quarterly reports and annual reports as otherwise set forth in this Charter.
Special meetings may be called by the chairman of the audit committee, or at
the request of the independent auditors.
Responsibilities
In carrying out its responsibilities, the audit committee will:
Administrative
1. Create an agenda for the upcoming year.
2. Review and update this Charter periodically, at least annually, as
conditions dictate.
2
3. Maintain minutes and other records of meetings and activities of the
audit committee.
4. Review the powers of the audit committee, and report and make
recommendations to the board of directors on its responsibilities.
5. Conduct or authorize investigations into any matters within the audit
committee's scope of responsibilities; the audit committee shall be empowered
to retain independent counsel, accountants, or others to assist it in the
conduct of any investigation.
6. Consider such other matters in relation to the financial affairs of
the Company and its accounts as the audit committee may, at its discretion,
determine to be advisable.
7. Perform such other functions as assigned by law, the Company's charter
or bylaws, or the board of directors.
8. The duties and responsibilities of a member of the audit committee are
in addition to those duties set out for a member of the board of directors.
Independent Auditor/Audit
1. Recommend to the board of directors the selection of the independent
auditors.
2. Meet with the independent auditors and financial management of the
Company to review the annual engagement letter, the scope of the proposed audit
for the current year, and the audit procedures to be utilized; consider the
fees for the audit; at the conclusion thereof, review such audit, including
any comments or recommendations of the independent auditors.
3. Confirm and assure the independence of the independent auditors,
including a review of management consulting services and related fees
provided by the independent auditors, and all other significant relationships
the independent auditors may have with the Company; receive from the
independent auditors a written statement delineating all relationships
between the independent auditors and the Company, consistent with Independent
Standards Board Standard 1, and actively engaging in a dialogue with the
independent auditors with respect to any disclosed relationships or services
that may impact the objectivity and independence of the independent auditors.
4. Review with management and the independent auditors the completion
of the annual examination, any significant changes in the independent auditors'
audit plan, any difficulties or disputes with management encountered during
the course of the audit, and other matters related to the content of the audit,
which are to be communicated to the audit committee under generally accepted
auditing standards.
5. Approve any proposed discharge of the independent auditors when
circumstances warrant.
Financial Processes and Reporting
1. Review with the independent auditors and with the Company's financial
and accounting personnel, the adequacy and effectiveness of the accounting and
financial controls of the Company, and elicit any recommendations for the
improvement of such internal control procedures, or particular areas where new
or more detailed controls or procedures are desirable; particular emphasis
should be given to the adequacy of such internal controls and computerized
information systems controls and security, to expose any payments, transac-
tions or procedures
3
that might be deemed illegal or otherwise improper; periodically consult with
the independent auditors out of the presence of management about internal
controls.
2. Review the internal accounting functions of the Company.
3. Review the financial statements contained in the annual report to
shareholders and other filings with the SEC and other published documents
containing the Company's financial statements and consider whether the
information contained in these documents is consistent with the disclosure
and content of the financial statements; any changes in accounting principles
to be reviewed.
4. Consider and review with management and the chief financial officer:
o significant findings during the year, including the status of
previous audit recommendations and management's responses thereto
o any difficulties encountered in the course of the audit, including
any restrictions on the scope of the work or access to required
information
o any changes required in the planned scope of the audit
o the internal accounting department budget and staffing
5. Review and concur on the appointment, replacement, reassignment, or
dismissal of chief financial officer or other director of internal accounting
(or auditing).
6. Review accounting and financial human resources and succession
planning within the Company.
7. Inquire of management, the chief financial officer or the director
of internal accounting (or auditing), and the independent auditors about
significant risks or exposures, and assess the steps management has taken to
minimize such risks to the Company.
8. Review policies and procedures and general controls relating to
officers' expense accounts and perquisites, including the use of corporate
assets, and consider the results of any review of these areas by the
internal accounting department or the independent auditors.
9. Review legal and regulatory matters that may have a material impact
on the financial statements, related Company compliance policies, and
programs and reports received from regulators.
10. Review with management, the independent auditors, and the internal
accounting department the interim financial reports before such are filed
with the SEC or other regulators; review press releases with regard to
interim financial reports.
11. Review any internal reports to management prepared by the internal
accounting department and management's response.
Reports and Meetings with Management, Auditors, and Internal Accountants
1. Meet with the chief financial officer or director of internal
accounting (or auditing), the independent auditors, and management in separate
executive sessions to discuss any matters that the audit committee or these
groups should discuss privately with the audit committee.
2. Prepare a letter for inclusion in the annual report that describes
the audit committee's composition and responsibilities and how they were
discharged.
3. Meet and review with counsel any legal matter that could have a
significant impact on the Company's financial statements.
4
Limitations
The audit committee is responsible for the duties set forth in this
Charter, but is not responsible for either the preparation of the financial
statements or the auditing of the financial statements. Management has the
responsibility for preparing the financial statements and implementing internal
controls, and the independent accountants have the responsibility for auditing
the financial statements and monitoring the effectiveness of the internal
controls. The review of the financial statements by the audit committee is not
an audit. The audit is performed by the independent outside auditors. In
carrying out its responsibilities, the audit committee believes its policies
and procedures should remain flexible in order to best react to a changing
environment.