Trends in Long-Term Care - U.S. Senate Special Committee on Aging

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The dates when he acquired these properties are as follows: Roanoke, Virg<strong>in</strong>ia-
1963; Virg<strong>in</strong>ia Beach, Virg<strong>in</strong>ia-1963; Columbus, Ohio-1963; Jersey City, New
Jersey-1962; and B<strong>in</strong>ghamton, New York-1961.
As contemplated <strong>in</strong> connection with the forego<strong>in</strong>g transaction, Mr. Bergman
sold 50 of the shares which lhe acquired (the equivalent of 160,000 shares of
Common Stock, $.10 par value) to Samuel A. Kiurman for $100,000 and Mr.
Kilurman arranged for The First Connecticut Small Bus<strong>in</strong>ess Investment Company
("First Connecticut") to lend Medic-Home $300,000 evidenced by a 6%o
promissory note <strong>in</strong> the pr<strong>in</strong>cipal amount of $200,000 and a convertible debenture
<strong>in</strong> the pr<strong>in</strong>cipal amount of $100,000, convertible <strong>in</strong>to 50 shares of common stock,
without par value (equivalent to 160,000 shares of Common Stock, $.10 par
value). In September, 1965, First Connecticut converted this convertible debenture
<strong>in</strong>to 50 shares of common stock, without par value, (the equivalent of
160,000 shares of Common Stock, $.10 par value). As part of the forego<strong>in</strong>g
transaction the Company, on April 15, 1965, entered <strong>in</strong>to Consultation and
Advisory Contracts with Mr. Bergman and First Connecticut provid<strong>in</strong>g that
for a period of seven years the Company would pay each of them compensation
for management and consult<strong>in</strong>g services rendered by them to the Company
at the rate of $24,000 a year.
On March 11, 1965 Liberty Nurs<strong>in</strong>g Homes, Incorporated wvas organized <strong>in</strong>
the Commonwealth of Virg<strong>in</strong>ia and thereafter 51% of the stock of that corporation
was issued to William J. Lemon and another <strong>in</strong>dividual, both of whom were
residents of Roanoke, Virg<strong>in</strong>ia, and 49% of the stock was purchased by Mr.
Bergman and Mr. Kilurman, as nom<strong>in</strong>ees for Medic-Hiome, to which they subsequently
transferred such stock. Thereafter, on June 20, 1968, pursuant to agreement
dated as of January 1, 1968, the Company obta<strong>in</strong>ed from Mr. Lemon an
additional 31%o of the outstand<strong>in</strong>g stock of Liberty Nurs<strong>in</strong>g Homes, Incorporated
(giv<strong>in</strong>g it 80% of the outstand<strong>in</strong>g stock of that corporation) and an outstand<strong>in</strong>g
promissory note of that corporation <strong>in</strong> the face amount of $12,500 <strong>in</strong> exchange
for 2T,250 shares of Common Stock. $.10 par value. of the Company. In connection
with this transaction, 'Medic-Home on June 20, 1968 guaranteed a $135,000
promissory note of Mr. Liemon's and 'Mr. Lemon deposited the above-mentioned
27,250 shares <strong>in</strong> escrow pursuant to an agreement that if Medic-Home shall be
required to make any payment on its guarantee, such shares will he transferred
and delivered to Medic-Home by the escrow agent. The Company is <strong>in</strong>formed
by .Mr. Lemon that the cost to him of the above-described securities of Liberty
Nurs<strong>in</strong>g Homes, Incorporated was approximately $126,000 <strong>in</strong> cash. The Company
and Mr. Lemon are now the only stockholders of Liberty Nurs<strong>in</strong>g Homes,
Incorporated.
On September 20, 1965 Liberty House Nurs<strong>in</strong>g Home of Virg<strong>in</strong>ia Beach. Inc.
("Virg<strong>in</strong>ia Beach") was organized <strong>in</strong> the Commonwealth of Virg<strong>in</strong>ia and Medic-
Home thereafter leased Liberty House of Virg<strong>in</strong>ia Beach to that corporation for
a basic rental plus 50% of its net profits before taxes. At that time all of the
stock of Virg<strong>in</strong>ia Beach was owned by diverse <strong>in</strong>dividuals, for the most part
residents of that area. In 1967. <strong>in</strong> consideration of delet<strong>in</strong>g from the lease the
profit-shar<strong>in</strong>g provision, Virg<strong>in</strong>ia Beach issued to Medic-Home 750 shares of its
Common Stock. par value $100 a share, constitut<strong>in</strong>g 50% of its outstand<strong>in</strong>g stock.
Thereafter, <strong>in</strong> 1967, Medic-Home purchased an additional 20% of the outstand<strong>in</strong>g
stock of Virg<strong>in</strong>ia Beach for $39,000 and on June 20, 1968, pursuant to agreements
dated January 24 and January 31, 1968, it obta<strong>in</strong>ed an additional 10%, giv<strong>in</strong>g
the Company a total of 80%, of the outstand<strong>in</strong>g stock of Virg<strong>in</strong>ia Beach <strong>in</strong> exchange
for 6,750 shares of the Common Stock, $.10 par value, of Medic-Home.
Pursuant to an arrangement concluded on September 28, 1967 and later confirmed
<strong>in</strong> writ<strong>in</strong>g, the Company on January 9, 1968 issued and sold 55/8 shares of
its common stock. without par value, to Blair & Co.. Inc., and %6 of a share, each.
to Stuart M. Ber<strong>in</strong>ger and John W. Hurley, Vice Presidents of that Company,
mak<strong>in</strong>g a total of 61/4 of such shares at a price of $4,800 per share (the equivalent
of 20,000 shares of Common Stock, $.10 par value, at a price of $1.50 per share),
<strong>in</strong> connection with f<strong>in</strong>ancial services and advice which they had rendered to the
Company with respect to the development of a program of long-term'f<strong>in</strong>anc<strong>in</strong>g.
The Company has agreed that, at the request of the holders, all such shares (which
are be<strong>in</strong>g registered at this time but are not be<strong>in</strong>g offered by this Prospectus) will
be <strong>in</strong>cluded <strong>in</strong> any registration statements which the Company may hereafter,
from time to time, file under the Securities Act of 1933. If any securities are to
be sold pursuant to any such registration statement by the Company, the cost
of register<strong>in</strong>g such shares will be borne entirely by the Company. Otherwise,
the holders of such shares will pay their pro rata share of such cost.