SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[ ] Preliminary Information Statement [ ] Confidential, for Use of the
[X] Definitive Information Statement Commission Only (as permitted
by Rule 14c-5(d) (2))
TECHDYNE, INC.
................................................................................
(Name of Registrant as Specified In Its Charter)
................................................................................
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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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:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE>
TECHDYNE, INC.
2230 West 77th Street
Hialeah, Florida 33016
(305) 556-9201
April 26, 1999
Dear Fellow Shareholder:
It is my pleasure to invite you to the 10th Annual Meeting of
Shareholders of Techdyne, Inc.
We are holding the meeting on Wednesday, June 9, 1999, at 11:00 a.m. at
our executive offices in Hialeah, Florida. In addition to the formal items of
business, I will review the major developments of 1998 and answer your
questions.
The enclosed booklet includes the Notice of Annual Meeting and the
Information Statement. Proxies are not being solicited since a quorum exists for
the meeting, the Company's parent, Medicore, Inc., owning approximately 62% of
the voting shares of Techdyne, Inc. See the Information Statement for details as
to quorum and voting requirements. The Information Statement also describes the
business we will conduct at the meeting, basically the election of seven
directors, and provides information about Techdyne, Inc.
We look forward to seeing you at the meeting.
Sincerely
Thomas K. Langbein
Chairman of the Board and
Chief Executive Officer
<PAGE>
TECHDYNE, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-------------------------------------------------------
Date: Wednesday, June 9, 1999
Time: 11:00 a.m.
Place: Techdyne, Inc.
2230 West 77th Street
Hialeah, Florida 33016
-------------------------------------------------------
Dear Fellow Shareholders:
You are cordially invited to attend the 1999 Techdyne, Inc. Annual
Meeting of Shareholders to:
1. Elect seven directors;
2. Ratify the selection of Ernst & Young LLP as independent
auditors for 1999; and
3. Conduct other business properly brought before the meeting.
If you were a shareholder of record on the close of business April 23,
1999, you are entitled to vote at the Annual Meeting.
Your copy of the Annual Report of the Company for 1998 is enclosed.
By Order of the Board of Directors
LAWRENCE E. JAFFE
Secretary
April 26, 1999
<PAGE>
TECHDYNE, INC.
2230 West 77th Street
Hialeah, Florida 33016
------------------
Information Statement for Annual Meeting of Shareholders
June 9, 1999
------------------
PURPOSE OF THIS INFORMATION STATEMENT
This Information Statement and the Company's Annual Report to
Shareholders for the year ended December 31, 1998, which we anticipate mailing
on May 4, 1999, is solicited by and on behalf of the board of directors of
Techdyne, Inc., a Florida corporation ("Techdyne" or the "Company"), for the
Annual Meeting of Shareholders of the Company to be held on Wednesday, June 9,
1999, at the executive offices of the Company, 2237 West 77th Street, Hialeah,
Florida at 11:00 a.m.
The Company will request brokers, nominees, fiduciaries and custodians
to forward this Information Statement and the Company's Annual Report to their
principals and beneficial owners, and will reimburse such persons for reasonable
expenses incurred by them in forwarding such materials.
RECORD DATE
The board of directors has fixed the close of business on April 23,
1999, as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting. Only shareholders of record
on that date are entitled to vote at the meeting.
VOTING SECURITIES
On the record date there were outstanding and entitled to be voted at
the Annual Meeting, 5,250,167 shares of common stock, $.01 par value ("common
stock"). The common stock is the only class of voting stock. Each share of
common stock is entitled to one vote.
QUORUM
A quorum of shareholders is necessary to hold a valid meeting. If at
least a majority of Techdyne shareholders are present, a quorum will exist. The
Company's parent, Medicore, Inc. ("Medicore" or the "Parent"), owns 3,227,797
shares of Techdyne common stock, which represents 61.5% of the Company's out-
standing shares. Therefore, a quorum exists based on Medicore's common stock
ownership.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
2
<PAGE>
VOTING IN PERSON
If you plan to attend the Annual Meeting and vote in person, we will
give you a ballot when you arrive. However, if your shares are held in the name
of your broker, bank or other nominee, you must bring an account statement or
letter from the nominee indicating that you are the beneficial owner of the
shares on April 23, 1999, the record date for voting.
VOTES NECESSARY FOR ACTION
The two matters presently contemplated to come before the shareholders
for action at the Annual Meeting is the election of seven directors, Proposal
No. 1; a plurality of the votes cast is necessary to effectuate election of the
directors, meaning that the director nominee with the most affirmative votes for
a particular slot is elected for that slot; and (ii) the ratification of Ernst &
Young LLP as independent auditors. A majority of shares represented at the
meeting is sufficient to ratify the selection of Ernst & Young LLP or to
effectuate any other matter that may properly come before the meeting, except
as otherwise required by applicable law. The Company's Parent intends to vote
its 3,227,797 shares of the Company's common stock, or approximately 62% voting
equity of the Company, in favor of election of each of the seven (7) nominees
for directors (see "Election of Directors"), and for ratification of Ernst &
Young LLP as independent auditors, thereby assuring the election of the seven
nominees and ratification of Ernst & Young LLP as the Company's independent
auditors for 1999. See "Security Ownership of Certain Beneficial Owners and
Management."
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 23, 1999, the names and
beneficial ownership of the equity securities of the Company and its
subsidiaries and of Medicore, for directors and nominees, individually itemized,
and for directors and officers as a group, without naming them, and for each of
the named executive officers disclosed in the Summary Compensation Table (see
"Executive Compensation") and for shareholders known to the Company to
beneficially own more than 5% of its voting securities.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership(1)
-----------------------------------------------------------------
Techdyne Medicore
Common Common
Name Stock %(2)(3) Stock %(2)(4)
- ---- ----- ------- -------- -------
<S> <C> <C> <C> <C>
Medicore, Inc. 4,614,374 69.5%(5) --- ---
2337 W. 76th St.
Hialeah, FL 33016
Thomas K. Langbein ** 4,794,374(6) 70.8% 1,023,014(7) 17.1%
Barry Pardon+ 187,533(8) 3.5% 136,950(9) 2.4%
Joseph Verga + 103,834(10) 2.0% 79,075(11) 1.4%
Peter D. Fischbein ** 55,000(12) 1.0% 176,229(13) 3.0%
less than
Anthony C. D'Amore ** 44,000(14) 1.0% 273,890(15) 4.7%
Lytton Crossley *** 295,000(16) 5.6% -- --
61 Flamingo Drive
Crossville, TN 38555
less than
Edward Diamond *** -- -- 17,000(17) 1.0%
One Sprucewood Lane
West Port, CT 06880
All directors and
executive officers
as a group (6 persons) 5,209,741(5)(6) 73.5% 1,760,208(18) 28.2%
** c/o Medicore, Inc., 777 Terrace Avenue, Hasbrouck Heights, New Jersey
07604
+ c/o the Company, 2230 W. 77th Street, Hialeah, Florida 33016
*** Nominee for director
- ----------
(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
4
<PAGE>
EXCEPT AS NOTED HEREIN. "BENEFICIAL OWNERSHIP" IS A TECHNICAL TERM
BROADLY DEFINED BY THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION
TO MEAN MORE THAN JUST DIRECT OWNERSHIP IN YOUR NAME. BENEFICIAL
OWNERSHIP ALSO MEANS YOU MAY HOLD INDIRECTLY, EITHER THROUGH A
RELATIONSHIP, A POSITION OF DIRECTOR OR TRUSTEE, OR THROUGH A CONTRACT
OR OTHER ARRANGEMENT, THE POWER, ALONE OR SHARED, TO VOTE OR SELL THE
SHARES. ALSO YOU ARE DEEMED A BENEFICIAL OWNER IF YOU HAVE THE RIGHT TO
ACQUIRE THE SHARES WITHIN 60 DAYS. SEE NOTE (2) BELOW.
(2) FOR PURPOSES OF COMPUTING THE PERCENTAGE OF OUTSTANDING SHARES HELD BY
EACH PERSON OR GROUP OF PERSONS NAMED IN THIS TABLE, ANY SECURITY WHICH
SUCH PERSON OR GROUP OF PERSONS HAS THE RIGHT TO ACQUIRE WITHIN 60 DAYS
OF APRIL 23, 1999 IS DEEMED TO BE OUTSTANDING FOR PURPOSES OF COMPUTING
THE PERCENTAGE OWNERSHIP OF SUCH PERSON OR PERSONS, BUT IS NOT DEEMED
TO BE OUTSTANDING FOR THE PURPOSE OF COMPUTING THE PERCENTAGE OWNERSHIP
OF ANY OTHER PERSON.
(3) BASED ON 5,250,167 SHARES OF COMMON STOCK OUTSTANDING. DOES NOT INCLUDE
(I) SHARES OBTAINABLE UNDER MEDICORE'S CONVERTIBLE NOTE, EXCEPT AS TO
MEDICORE AND TO THOMAS K. LANGBEIN (SEE NOTE (5)); (II) OPTIONS UNDER
THE COMPANY'S 1994 STOCK OPTION PLAN FOR 56,600 SHARES OF COMMON STOCK;
(III) OPTIONS GRANTED IN 1995 TO DIRECTORS AND COUNSEL FOR 152,500
SHARES OF COMMON STOCK; (IV) OPTIONS UNDER THE COMPANY'S 1997 STOCK
OPTION PLAN FOR 375,000 SHARES OF COMMON STOCK;(V) OPTIONS GRANTED IN
1998 TO THE INVESTOR RELATIONS GROUP, INC. ("IRG"), A FORMER PUBLIC
RELATIONS FIRM TO THE COMPANY AND MEDICORE FOR 6,250 SHARES OF COMMON
STOCK EXERCISABLE THROUGH MAY 14, 2001 AT $4.25 PER SHARE; (VI) 959,152
SHARES OBTAINABLE UNDER THE COMPANY'S PUBLICLY TRADED REDEEMABLE COMMON
STOCK PURCHASE WARRANTS ("WARRANTS") EXERCISABLE AT $4.00 PER SHARE
THROUGH MAY 17, 1999 REDEEMABLE AT $.10 PER SHARE, PROVIDED THE COMMON
STOCK IS TRADING AT LEAST AT $7.50 PER SHARE FOR 15 CONSECUTIVE TRADING
DAYS ENDING ON THE FIFTH DAY PRIOR TO NOTICE OF REDEMPTION; OR (VII)
200,000 SHARES OF COMMON STOCK EXERCISABLE UNDER A PURCHASE OPTION
ISSUED TO THE UNDERWRITER OF THE COMPANY'S 1995 PUBLIC OFFERING OF
COMMON STOCK AND WARRANTS, WHICH OPTION IS FOR 100,000 SHARES OF COMMON
STOCK AT A PURCHASE PRICE OF $6.60 PER SHARE AND $.25 PER WARRANT FOR
WARRANTS EXERCISABLE INTO COMMON STOCK AT $8.25 PER SHARE THROUGH
SEPTEMBER 12, 2000. SEE NOTES (2) AND (4) AND "EXECUTIVE COMPENSATION -
OPTIONS, WARRANTS OR RIGHTS."
(4) BASED ON 5,715,540 SHARES OUTSTANDING. DOES NOT INCLUDE (I) 841,000
SHARES OF MEDICORE'S COMMON STOCK UNDERLYING OPTIONS GRANTED UNDER
MEDICORE'S 1989 STOCK OPTION PLAN, WHICH OPTIONS ARE NOT TRANSFERABLE
AND ARE EXERCISABLE THROUGH APRIL 17, 2000 AT $2.38 PER SHARE (SEE NOTE
(2) AND "EXECUTIVE COMPENSATION - OPTIONS, WARRANTS OR RIGHTS"); (II)
400,000 SHARES OF MEDICORE'S COMMON STOCK UNDER AN OPTION GRANTED IN
THE EMPLOYMENT AGREEMENT OF THOMAS K. LANGBEIN (SEE NOTE (7) BELOW);
AND (III)5,000 SHARES OF MEDICORE'S COMMON STOCK UNDERLYING OPTIONS
GRANTED TO IRG (SEE NOTE (3)) EXERCISABLE THROUGH MAY 14, 2001 AT $2.25
PER SHARE.
(5) INCLUDES 1,386,577 SHARES WHICH MEDICORE MAY ACQUIRE UPON CONVERSION OF
ITS DEMAND PROMISSORY NOTE FROM THE COMPANY IN THE AMOUNT OF
APPROXIMATELY $2,426,510 AT DECEMBER 31, 1998 CONVERTIBLE AT $1.75 PER
SHARE. OFFICERS AND DIRECTORS OF MEDICORE, INCLUDING THOSE DIRECTORS OF
THE COMPANY AND MEDICORE WHO MAY BE SHAREHOLDERS OF EACH COMPANY,
EXCEPT THOMAS K. LANGBEIN (SEE NOTE (6)), DISCLAIM ANY INDIRECT
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK THROUGH MEDICORE'S
61.5% OWNERSHIP OF THE COMPANY (69.5% INCLUSIVE OF CONVERSION OF THE
PROMISSORY NOTE).
(6) INCLUDES (I) MEDICORE'S 3,227,797 SHARE OWNERSHIP, PLUS 1,386,577
SHARES WHICH MEDICORE MAY OBTAIN UPON CONVERSION OF ITS DEMAND
PROMISSORY NOTE FROM THE COMPANY (SEE NOTE (5) ABOVE),
5
<PAGE>
BY VIRTUE OF HIS POSITION WITH THE COMPANY AND MEDICORE AND HIS STOCK
OWNERSHIP OF MEDICORE, WHICH POSITION MAY DEEM MR. LANGBEIN TO HAVE
BENEFICIAL OWNERSHIP OF SUCH SHARES THROUGH SHARED VOTING AND
INVESTMENT POWER WITH RESPECT TO MEDICORE'S OWNERSHIP OF THE COMPANY;
MR. LANGBEIN DISCLAIMS SUCH ENTIRE BENEFICIAL OWNERSHIP, BUT FOR HIS
PROPORTIONATE INTEREST, APPROXIMATELY 789,000 SHARES OF THE COMPANY
(15.0%); AND (II) COMPANY OPTIONS FOR 140,000 SHARES. SEE NOTE (2) AND
"EXECUTIVE COMPENSATION - OPTIONS, WARRANTS OR RIGHTS."
(7) INCLUDES 250,000 SHARES UNDERLYING OPTIONS GRANTED IN APRIL, 1995,
EXERCISABLE AT $2.38 PER SHARE THROUGH APRIL 17, 2000. DOES NOT INCLUDE
(I) 15,700 SHARES EACH HELD IN THE NAMES OF MR. LANGBEIN'S TWO CHILDREN
WHO ARE OF MAJORITY AGE; AND (II) AN OPTION TO ACQUIRE UP TO 400,000
SHARES OF COMMON STOCK IN LIEU OF A LUMP SUM PAYMENT, WHICH OPTION IS
NOT PRESENTLY EXERCISABLE EXCEPT IN THE EVENT OF A CHANGE IN CONTROL OF
MEDICORE. SEE NOTE (4) AND "EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS" AND "OPTIONS, WARRANTS
OR RIGHTS" UNDER THE CAPTION "EXECUTIVE COMPENSATION."
(8) INCLUDES (I) OPTIONS FOR 140,000 SHARES OF THE COMPANY'S COMMON STOCK
(SEE NOTE (2) AND "EXECUTIVE COMPENSATION - OPTIONS, WARRANTS OR
RIGHTS"); (II) WARRANTS FOR 1,000 SHARES OF COMMON STOCK EXERCISABLE AT
$4.00 PER SHARE THROUGH MAY 17, 1999; AND (III) 5,533 SHARES HELD IN
HIS WIFE'S NAME. EXCLUDES APPROXIMATELY 111,000 (2.1%) SHARES THAT MAY
BE DEEMED INDIRECTLY BENEFICIALLY OWNED THROUGH MEDICORE'S OWNERSHIP OF
THE COMPANY, WHICH INDIRECT BENEFICIAL OWNERSHIP IS DISCLAIMED. SEE
NOTE (5).
(9) INCLUDES (I) 75,000 SHARES OF MEDICORE'S COMMON STOCK UNDERLYING AN
OPTION GRANTED IN APRIL, 1995 EXERCISABLE AT $2.38 PER SHARE THROUGH
APRIL 17, 2000; AND (II) 8,400 SHARES OF MEDICORE'S COMMON STOCK OWNED
BY HIS WIFE. SEE NOTE (4) AND "EXECUTIVE COMPENSATION - OPTIONS,
WARRANTS OR RIGHTS."
(10) INCLUDES (I) OPTIONS FOR 75,000 SHARES OF THE COMPANY'S COMMON STOCK
(SEE NOTE (2) AND "EXECUTIVE COMPENSATION - OPTIONS, WARRANTS OR
RIGHTS"); AND (II) WARRANTS FOR 500 SHARES OF COMMON STOCK EXERCISABLE
AT $4.00 PER SHARE THROUGH MAY 17, 1999. EXCLUDES APPROXIMATELY 65,000
(1.29%) SHARES THAT MAY BE DEEMED INDIRECTLY BENEFICIALLY OWNED THROUGH
MEDICORE'S OWNERSHIP OF THE COMPANY, WHICH INDIRECT BENEFICIAL
OWNERSHIP IS DISCLAIMED. SEE NOTE (5).
(11) INCLUDES 30,000 SHARES OF MEDICORE'S COMMON STOCK UNDERLYING AN OPTION
GRANTED IN APRIL, 1995 EXERCISABLE AT $2.38 PER SHARE THROUGH APRIL 17,
2000. SEE NOTE (4) AND "EXECUTIVE COMPENSATION - OPTIONS, WARRANTS OR
RIGHTS."
(12) INCLUDES OPTIONS FOR 55,000 SHARES OF THE COMPANY'S COMMON STOCK. SEE
NOTE (2) AND "EXECUTIVE COMPENSATION - OPTIONS, WARRANTS OR RIGHTS."
EXCLUDES APPROXIMATELY 138,000 (2.6%) SHARES THAT MAY BE DEEMED
INDIRECTLY BENEFICIALLY OWNED THROUGH MEDICORE'S OWNERSHIP OF THE
COMPANY, WHICH INDIRECT BENEFICIAL OWNERSHIP IS DISCLAIMED. SEE NOTE
(5).
(13) INCLUDES (I) 100,000 SHARES HELD IN TRUST FOR HIS INFANT SON; MR.
FISCHBEIN'S WIFE IS TRUSTEE; MR. FISCHBEIN DISCLAIMS BENEFICIAL
INTEREST IN THESE 100,000 SHARES; AND (II) 75,000 SHARES OF MEDICORE
COMMON STOCK UNDERLYING AN OPTION GRANTED IN APRIL, 1995 EXERCISABLE AT
$2.38 PER SHARE THROUGH APRIL 17, 2000. SEE NOTE (4) 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.
6
<PAGE>
(14) INCLUDES (I) OPTIONS FOR 25,000 SHARES OF THE COMPANY'S COMMON STOCK
(SEE NOTE (2) AND "EXECUTIVE COMPENSATION - OPTIONS, WARRANTS OR
RIGHTS"); (II) WARRANTS FOR 4,000 SHARES OF COMMON STOCK EXERCISABLE AT
$4.00 PER SHARE THROUGH MAY 17, 1999 HELD IN HIS RETIREMENT PLAN; AND
(III) 15,000 SHARES OF THE COMPANY'S COMMON STOCK HELD IN HIS
RETIREMENT PLAN. EXCLUDES APPROXIMATELY 217,000 (4.1%) SHARES THAT MAY
BE DEEMED INDIRECTLY BENEFICIALLY OWNED THROUGH MEDICORE'S OWNERSHIP OF
THE COMPANY, WHICH INDIRECT BENEFICIAL OWNERSHIP IS DISCLAIMED. SEE
NOTE (5).
(15) INCLUDES 75,000 SHARES OF MEDICORE COMMON STOCK UNDERLYING AN OPTION
GRANTED IN APRIL, 1995 EXERCISABLE AT $2.38 PER SHARE THROUGH APRIL 17,
2000. SEE NOTE (4) AND "EXECUTIVE COMPENSATION - OPTIONS, WARRANTS OR
RIGHTS."
(16) COMMON STOCK OWNED BY HIS WIFE. DOES NOT INCLUDE ANY SHARES OF COMMON
STOCK HIS WIFE IS ENTITLED TO RECEIVE PURSUANT TO THE GUARANTEE OF THE
COMPANY. SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
(17) ALL SHARES HELD IN HIS RETIREMENT PLAN.
(18) INCLUDES 535,000 SHARES OF MEDICORE'S COMMON STOCK UNDERLYING THE
OPTIONS GRANTED UNDER MEDICORE'S 1989 STOCK OPTION PLAN. SEE NOTES (2)
AND (4) AND "EXECUTIVE COMPENSATION - OPTIONS, WARRANTS OR RIGHTS."
PROPOSAL NO. 1: ELECTION OF DIRECTORS
At the Annual Meeting, the first proposal being presented to
shareholders for action is the election of seven directors to serve for a one
year term or until each of their successors is elected. The certificate of
incorporation and by-laws, as presently constituted, provide that the majority
of directors have the right to appoint candidates to fill any vacancies on the
board, whether through death, retirement or other termination of a director, or
through an increase in the board. At such time that qualified candidates are
available to serve, the majority of the board, although less than a quorum, or
by a sole remaining director, may appoint such person(s) to fill the vacancy now
existing. When appointed, such director shall then serve for the remainder of
the term.
The affirmative vote of a plurality of the shares of common stock
represented at the meeting is required to elect the seven 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. Medicore owns 62% of the voting stock of the Company and intends to vote
all of its Techdyne common stock in favor of the election of the persons named
below as nominees for directors, thereby assuring the election of the seven
nominees. The nominees have consented to be named herein and to serve on the
board of directors. We know of no reason why any nominee may be unable to serve
as a director. If any nominee is unable to serve, the common stock may be voted
for such substituted nominee as may be designated by the present board of
directors, or the board may reduce the number of directors to be elected. Five
nominees, Messrs. Langbein, Pardon, Verga, Fischbein and D'Amore, are presently
directors and were elected by the shareholders at the last annual meeting, and
have been directors of the Company for at least the last nine years. There is no
nominating committee, and nominations for director are considered by the entire
board of directors.
7
<PAGE>
For additional information concerning the nominees for the board of
directors, including compensation and share ownership, see "Security Ownership
of Certain Beneficial Owners and Management," "Executive Compensation" and
"Certain Relationships and Related Transactions."
NOMINEES
CURRENT POSITION
NAME AGE AND AREAS OF RESPONSIBILITY POSITION HELD SINCE
- ---- --- --------------------------- -------------------
<S> <C> <C> <C>
Thomas K. Langbein 53 Chairman of the Board and 1982
Chief Executive Officer 1990
Barry Pardon 47 President 1991
and Director 1990
Joseph Verga 47 Senior Vice President, 1988
Treasurer 1985
and Director 1984
Peter D. Fischbein(1) 59 Director 1984
Anthony C. D'Amore(1) 68 Director 1984
Lytton Crossley 63 Nominee 1999
Edward Diamond 53 Nominee 1999
</TABLE>
(1) MEMBER OF THE AUDIT COMMITTEE.
Thomas K. Langbein was financial consultant to Medicore until 1980 when
he became Chairman of the Board of Directors, Chief Executive Officer and
President of Medicore. Mr. Langbein is also an officer and director of most of
Medicore's subsidiaries. Mr. Langbein is also a director of Lytton and Techdyne
(Scotland). Mr. Langbein is Chairman of the Board and Chief Executive Officer of
Dialysis Corporation of America ("DCA"), a 68% owned public subsidiary of
Medicore. In 1971, Mr. Langbein organized and currently is the President, sole
director and owner of Todd & Company, Inc. ("Todd"), a broker-dealer registered
with the Securities and Exchange Commission and the NASD. Mr. Langbein, devotes
most of his time to the affairs of the Company, Medicore and DCA. See "Certain
Relationships and Related Transactions."
Barry Pardon joined the Company in November, 1980 as national sales
manager and initiated the independent manufacturer representatives sales force.
Mr. Pardon became Vice President of Marketing in 1981, was appointed Executive
Vice President (Marketing) in 1988, and was appointed President in November,
1991. Mr. Pardon is Chairman of the Board of Lytton and a director of Techdyne
(Scotland).
Joseph Verga joined the Company in 1979 as purchasing agent. In 1980 he
became production control manager and Vice President, in 1981 the operations
manager, and in 1984 was elected a director and appointed Secretary of the
Company. In 1985 he was appointed Treasurer and in 1988 was made Senior Vice
President of Operations.
Peter D. Fischbein is an attorney who has from time to time represented
the Company and Medicore. Mr. Fischbein is a director of Viragen, Inc., formerly
a public subsidiary of Medicore spun-off in
8
<PAGE>
1986 (since 1981), and Medicore (since 1984). He was Chairman of the Board of
the Company 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."
Anthony C. D'Amore is director of Medicore. Mr. D'Amore is an insurance
consultant and receives minimal commissions with respect to insurance placed
with the Company, Medicore and DCA. See "Certain Relationships and Related
Transactions."
Lytton Crossley established Lytton Incorporated in 1979 and has been
its Chairman and President through July 31, 1997, at which time Lytton was
acquired by the Company. He remained as President of Lytton until August, 1998,
when he became Assistant to the President, and devotes a limited amount of time
to Lytton. See "Certain Relationships and Related Transactions."
Edward Diamond acquired with his partner and has been the President of
Robert Warren, LLC d/b/a Lance International, a contract manufacturer of
electronic and electro-mechanical products. Lance International does
manufacturing for the Company. 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, 1998, there were ten meetings of
the board of directors, including actions by unanimous written consent. All
directors participated at all the meetings.
The Company has an audit committee consisting of Peter D. Fischbein and
Anthony C. D'Amore. Mr. Fischbein is also on the audit committee of Medicore.
The audit committee meets quarterly, and is responsible for recommending to the
board of directors the firm of independent accountants to serve the Company, re-
viewing 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. No member
of the audit committee receives a fee for his services. The Company also has a
stock option committee consisting of Messrs. Langbein, Fischbein and Verga. See
"Executive Compensation - Options, Warrants or Rights."
Instead of any cash compensation or per meeting fees to directors, 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 "Security Ownership
of Certain Beneficial Owners and Management."
EXECUTIVE COMPENSATION
The Summary Compensation Table below and the option tables on pages 11
and 12 show the salaries and bonuses paid by the Company and its subsidiaries
for the last three fiscal years and aggregate options exercised in 1998 for its
Chief Executive Officer and each of its principal executive officers whose total
annual salary and bonus exceeded $100,000. The Chief Executive Officer's
compensation is primarily derived from Medicore which company owns approximately
62% of the Company. The only executive officer whose compensation exceeds
$100,000 and is paid directly by the Company is its President, Barry Pardon.
9
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
------------------- -----------------------------
(a) (b) (c) (e) (g)
Securities
Underlying
Options/SARs(#)
Other Annual -------------------------
Name and Principal Position Year Salary($) Compensation($) Company Medicore
- --------------------------- ---- --------- --------------- ------- --------
<S> <C> <C> <C> <C> <C>
Thomas K. Langbein, CEO.... 1998 90,200(1) 11,300(2)
1997 90,000(1) 12,000(2) 100,000
1996 91,700(1) 8,900(2) 250,000(3)
Barry Pardon(4) ........... 1998 150,800 7,300(5)
1997 144,100 8,000(5) 100,000
1996 160,600 8,800 75,000(3)
</TABLE>
- ----------
(1) ALL COMPENSATION PAID BY MEDICORE, WHICH WAS $258,000 FOR 1998,
$257,000 FOR 1997 AND $262,000 (INCLUDING A $25,000 BONUS) FOR 1996.
DOES NOT INCLUDE THE JUNE, 1996 MEDICORE FORGIVENESS OF A PROMISSORY
NOTE IN THE AMOUNT OF $94,200 (INCLUDING INTEREST) FOR AN OPTION
EXERCISE OF MEDICORE COMMON STOCK BY MR. LANGBEIN IN 1994. SEE
"OPTIONS, WARRANTS OR RIGHTS" BELOW. AMOUNTS REFLECTED IN THE SUMMARY
COMPENSATION TABLE WERE THE COMPENSATION PAID TO MR. LANGBEIN BY
MEDICORE BUT ALLOCATED TO THE COMPANY IN PROPORTION TO THE TIME MR.
LANGBEIN SPENT ON BEHALF OF THE COMPANY.
(2) AUTOMOBILE ALLOWANCE AND RELATED EXPENSES ($14,437) AND ($16,475) FOR
1998 AND 1997, RESPECTIVELY, AND LIFE AND DISABILITY INSURANCE PREMIUMS
($17,880) AND ($17,870) FOR 1998 AND 1997, RESPECTIVELY, PAID BY
MEDICORE AMOUNTED TO $32,300, $34,345 AND $24,800, FOR THE YEARS 1998,
1997 AND 1996, RESPECTIVELY. AS PART OF THE SERVICE AGREEMENT WITH
MEDICORE, THE AMOUNTS IN THE SUMMARY COMPENSATION TABLE REFLECT THAT
PORTION ALLOCATED TO THE COMPANY.
(3) IN DECEMBER, 1996, THE $3.00 EXERCISE PRICE OF THE OPTIONS FOR 250,000
SHARES OF MEDICORE COMMON STOCK GRANTED IN APRIL, 1995 WAS REDUCED TO
$2.38, THE THEN FAIR MARKET VALUE OF THE MEDICORE COMMON STOCK, WHICH
REPRICING IS DEEMED A NEW GRANT OF OPTIONS. SEE "AGGREGATED OPTION/SAR
EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES" UNDER THE
CAPTION "OPTIONS, WARRANTS OR RIGHTS."
(4) ALL COMPENSATION PAID BY THE COMPANY. DOES NOT INCLUDE THE JUNE, 1996
MEDICORE FORGIVENESS OF A PROMISSORY NOTE IN THE AMOUNT OF $21,200
(INCLUDING INTEREST) FOR AN OPTION EXERCISE OF MEDICORE COMMON STOCK BY
MR. PARDON IN 1994. SEE "OPTIONS, WARRANTS OR RIGHTS" BELOW.
(5) AUTOMOBILE LEASE AND RELATED EXPENSES ($7,000) AND ($7,700) FOR 1998
AND 1997, RESPECTIVELY, AND TERM LIFE INSURANCE PREMIUMS ($300) AND
($300) FOR 1998 AND 1997, RESPECTIVELY, PAID BY THE COMPANY AMOUNTED TO
$7,300, $8,000 AND $8,800, RESPECTIVELY, FOR THE YEARS 1998, 1997 AND
1996, RESPECTIVELY.
10
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Langbein has an employment agreement with Medicore through August
31, 2003 at an annual salary of $261,504 with yearly increases in increments of
no less than $10,000. The agreement provides for Mr. Langbein to serve as the
Chairman, Chief Executive Officer and President.
The Medicore employment agreement also provides
o $850 per month automobile allowance
o employee benefit plans and other fringe benefits and programs
available to Medicore employees and executives
o reimbursement for business expenses
o payment of universal and term life insurance owned by Mr.
Langbein the aggregate face value of $1,600,000 beneficiaries
designated by Mr. Langbein
o indemnification of Mr. Langbein against losses, judgments and
expenses in any claim against him for acting as an officer
and/or director of Medicore and the Company, provided he acted
in good faith and in a manner he reasonably believed was in
the best interests of Medicore and the Company
o non-competition for two years from termination within 20 miles
of Medicore's primary operations, presently Hialeah, Florida;
Medicore has option to request Mr. Langbein's non-competition
within the United States at $4,000 per month for each 12 month
period, increasing 5% each succeeding 12 month period
o full compensation for first 90 days of disability with option
of Medicore to continue employment of Mr. Langbein with full
compensation less disability payments or terminate
("Disability Termination" see below)
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), Mr. Langbein
will receive a lump sum payment (as severance allowance (see
below) and liquidated damages) in an amount equal to Mr.
Langbein's salary, including expenses and benefits, for three
years from the date of termination ("Lump Sum Payment")
o Mr. Langbein has the option to take 400,000 shares of Medicore
common stock ("Medicore Shares") instead of the Lump Sum
Payment; Mr. Langbein has the right for two years to demand
registration of the Medicore Shares and for three years to
include the Medicore Shares in any registration statement
filed by Medicore; registration of the Medicore Shares to be
at the sole cost of Medicore except any of Mr. Langbein's
legal fees and commissions for sale of the Medicore Shares
o full vesting of any warrants, options or similar rights held
by Mr. Langbein with choice of Mr. Langbein to keep those
options and warrants, 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 under the
agreement, and all options, warrants and other securities
shall be fully vested and exercisable; or provide Mr. Langbein
with the Lump Sum Payment or instead, at Mr. Langbein's
option, to acquire Medicore Shares
11
<PAGE>
o upon expiration at August 31, 2003, if Medicore does not renew
or enter into new employment agreement, severance allowance
which is the Lump Sum Payment or Mr. Langbein's option to take
the Medicore Shares.
DEFINITIONS
o "Cause" for termination includes willful failure to perform
duties under the employment agreement, and illegal conduct or
gross misconduct which damages the business or reputation of
Medicore
o "Good Reason" to terminate his employment includes assigning
Mr. Langbein duties inconsistent with his position with
Medicore 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" generally includes (a) the announcement
for and/or acquisition by an individual, entity or group
("Person") of 25% or more of the common stock then
outstanding, except by Persons affiliated with Mr. Langbein,
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.
Barry Pardon, director and President of the Company, has a five-year
employment agreement through December 31, 2000, retaining him as President. Mr.
Pardon's employment agreement provides for the following:
o base annual salary of $120,000
o over-ride commission of .5% of net sales in excess of
$22,000,000 (increasing $1,000,000 each of the next two
years); net sales of acquired companies are added to the base
$22,000,000, which included Lytton for 1997
o automobile, travel and entertainment expenses
o termination may occur by (i) expiration of the term; (ii)
death of Mr. Pardon; (iii) Mr. Pardon's disability; (iv)
conviction of a crime, failure to carry out policies of the
Company, dishonest practice, conduct prejudicing the Company
or breach of the employment agreement; severance, which is
nine months' salary, only paid upon death or termination
without cause
o non-competition for one year from termination; restrictions on
Mr. Pardon calling upon customers or suppliers of the Company,
diverting customers, services, or products of the Company, or
disclosing any trade secrets
Certain executive and accounting personnel and administrative
facilities of Medicore and its subsidiaries, including the Company and DCA, were
common for fiscal 1998. The costs of executive and accounting salaries and other
shared corporation overhead are allocated pursuant to a Service Agreement
between the Company and Medicore. Mr. Langbein, as an officer and director of
the Company, Medicore and DCA, and Mr. Daniel Ouzts, as an officer of the
Company, Medicore and DCA, divide their time and efforts among each company and
the proportionate allocation of their compensation has been provided for through
the overhead allocations and Service Agreement. See "Certain Relationships and
Related Transactions."
12
<PAGE>
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 of attending meetings, which is minimal.
NON-STANDARD ARRANGEMENTS
Over the years, the Company and Medicore provided options to directors,
among other executives, consultants and employees.
OPTIONS, WARRANTS OR RIGHTS
1994 Techdyne, Inc. Stock Option Plan ("1994 Plan")
o expires May 24, 1999
o grants available to officers, directors, consultants, key
employees, advisors and similar parties
o options, qualified and incentive, may be up to five years, may
require vesting, and exercise price established by board or
stock option committee
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 recourse note, or
assignment to the Company of sufficient proceeds from 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
optionee
-- 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
the assets of the Company or its merger or consolidation, (ii)
majority of 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; optionee may waive
redemption
o 1994 Plan history to March 15, 1999
-- 250,000 shares reserved for issuance
-- 227,900 granted
-- 166,400 exercised
-- 4,900 cancelled
-- 56,600 outstanding (including 27 employees, one
director and two advisors)
-- exercise price $1.00 per share through May 24, 1999
13
<PAGE>
1995 Options
o non-qualified
o 152,500 granted to eight directors of the Company and its
subsidiaries and counsel
o exercisable at $1.75 per share through February 26, 2000
1997 Stock Option Plan ("1997 Plan")
o expires June 22, 2002
o substantially similar to 1994 Plan (see above); non-qualified
and incentive options available for grant
o 1997 Plan history to March 15, 1999
-- 500,000 reserved for issuance
-- 375,000 granted (including 14 officers, directors
and key employees of the Company and its
subsidiaries)
-- none exercised
-- none cancelled
-- exercisable at $3.25 per share through June 22, 2002
The exercise price of all options is 100% of the fair market value of
the common stock on the date of grant.
No options were granted to officers, directors or key employees in
1998. Options were granted in May, 1998 to IRG, a former public relations firm,
all of which were cancelled except for 6,250 options exercisable at $4.25
through May 14, 2001.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- ---- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
CEO
Thomas K. Langbein
Company Options 40,000 140,000 140,000 (exer.)(1) 27,600 (exer.)(2)
Medicore Options -0- -0- 250,000 (exer.) (3) (exer.)
Barry Pardon
Company Options 40,000 140,000 140,000 (exer.)(1) 27,600 (exer.)(2)
Medicore Options -0- -0- 75,000 (exer.) (3) (exer.)
</TABLE>
14
<PAGE>
- ----------
(1) 40,000 OPTIONS EXERCISABLE AT $1.75 ("1995 OPTIONS"), AND 100,000
OPTIONS EXERCISABLE AT $3.25 ("1997 OPTIONS"). "IN-THE-MONEY" STOCK
OPTIONS ARE OPTIONS FOR WHICH THE EXERCISE PRICE IS LESS THAN THE PRICE
OF THE UNDERLYING COMMON STOCK ON A PARTICULAR DATE.
(2) THE VALUE OF THE IN-THE-MONEY OPTIONS, WHICH INCLUDED ONLY THE 40,000
1995 OPTIONS (THE 1997 OPTIONS ARE OUT-OF-THE-MONEY SINCE THE EXERCISE
PRICE IS HIGHER THAN THE YEAR-END MARKET VALUE), WAS DETERMINED BY THE
DIFFERENCE BETWEEN THE EXERCISE PRICE AND THE CLOSING PRICE OF THE
COMMON STOCK AS REPORTED BY NASDAQ ON THURSDAY, DECEMBER 31, 1998,
WHICH WAS $2.44.
(3) THE MEDICORE OPTIONS ARE OUT-OF-THE MONEY, THE EXERCISE PRICE BEING
$2.38 PER SHARE AND THE CLOSING PRICE OF THE COMMON STOCK AS REPORTED
BY NASDAQ ON DECEMBER 31, 1998 WAS $1.25.
BOARD EXECUTIVE COMPENSATION REPORT
The Company has no executive compensation committee. Compensation of
its executive officers is considered by the entire board of directors. Only
Barry Pardon, President and director of the Company, has an employment agreement
with the Company, and other than Mr. Pardon and Thomas K. Langbein, Chairman of
the Board and Chief Executive Officer of the Company, DCA and Medicore, of which
parent company he is also the President, no other executive officer of the
Company received compensation in 1998 in excess of $100,000. Mr. Langbein has
an employment agreement with Medicore. See "Executive Compensation - Employment
Contracts and Termination of Employment and Change In Control Arrangements."
Mr. Pardon has been one of the motivating forces behind the Company's
sales growth, implementing efficiency programs, expansion of products, services
and customer base, and keeping the Company current with technological changes in
the industry. He, with Mr. Langbein, directs the Company's operations and
continuously seeks new areas of growth in the electronics and electro-mechanical
industry. Mr. Pardon was previously responsible for the Lytton acquisition,
which has strengthened the Company's financial, sales and manufacturing posi-
tions and expanded its operations into new geographic areas, broadening the
Company's product line and enabling the Company to better serve the combined
existing customer base with enhanced product choices.
Thomas K. Langbein, as Chairman and Chief Executive Officer, has been
another motivating force behind the Company's growth, inventory and expense
control and strengthening of profit margins. Mr. Langbein's compensation is paid
by Medicore under his employment agreement with that parent company, with
certain amounts allocated to the Company in proportion to the time Mr. Langbein
spends on behalf of the Company.
Under the tutelage of Messrs. Langbein and Pardon the Company has re-
flected 22 continuous profitable quarters.
The board considers all these factors in evaluating the performance and
setting the compensation of Mr. Langbein as Chief Executive Officer and Mr.
Pardon as President. The board also considered these officers' direction of the
operations of Techdyne and establishing and implementing its business strategy
toward levels of growth.
15
<PAGE>
The board attempts to be competitive in executive compensation to
insure the continued loyalty of these experienced management leaders. Messrs.
Langbein and Pardon do not participate in decisions affecting their own compen-
sation.
A most important factor in compensation philosophy is aligning compen-
sation of management with the long-term interests of shareholders. This is
accomplished by providing, from time to time, stock ownership to management,
usually in the form of stock options. The principle operates on the basic
premise that the executive's stock ownership will only increase in value by
increasing the value and worth of the Company's common stock. This in turn will
create shareholder value.
The board also looks to officers' past and prospective contributions
and services to the Company to determine the appropriate range of rewards.
Submitted by the Board of Directors
Thomas K. Langbein Barry Pardon
Joseph Verga Peter D. Fischbein
Anthony C. D'Amore
PERFORMANCE GRAPH
The following graph shows a four-year comparison of cumulative total
shareholder returns for the Company, the Nasdaq Market Index and the Electronics
Industry Index from October 2, 1995, the date the common stock started trading,
through December 31, 1998. The cumulative total shareholder 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 share-
holder return assumes $100 invested at the beginning of the period in the
Company's common stock, in 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 shareholders return
on the common stock did not include dividends.
Comparison Of Four Year Cumulative Total Returns Among Techdyne, Nasdaq Market
Index and Electronics Industry Index
Measurement Period Electronic
(Fiscal Year Covered) Techdyne, Inc. Nasdaq Index Industry Index
-------------- ------------ --------------
Measurement Pt-10/2/95 $ 100.00 $ 100.00 $ 100.00
FYE 12/31/95 84.48 99.20 83.21
FYE 12/31/96 77.59 123.27 126.15
FYE 12/31/97 60.34 150.78 134.23
FYE 12/31/98 33.62 212.66 196.48
16
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Medicore had been advancing funds at no interest to finance the
Company's business since its acquisition of the Company in 1982. After several
repayments to Medicore over the years the Company issued to Medicore an
unsecured demand promissory note convertible into common stock of the Company at
a rate of $1.75 per share, which at December 31, 1998 had an outstanding balance
of $2,426,510, which includes accrued interest of $134,133. The annual interest
rate on the note is 5.7%. Medicore converted $350,000 of the Company's promisory
note into 200,000 shares of the Company's common stock in 1996, and $875,000 of
the note into 500,000 shares of the Company's common stock in 1997, resulting in
Medicore's ownership interest in the Company of 3,227,797 shares of common stock
(61.5% of the outstanding shares, or approximately 70% including the beneficial
ownership of the convertible note). The Company is advised that Medicore does
not intend to require repayment of its advances prior to January 1, 2000.
In 1990, the Company sold to Medicore its real property consisting of
land, two buildings and a parking lot in Hialeah, Florida. Medicore is leasing
to the Company these two buildings and parking lot under a five year net lease
expiring March 31, 2000 at $94,000 per year plus applicable taxes. Management is
of the opinion that the rentals are on terms as favorable as obtainable from
unaffiliated parties.
The Company has a credit facility and three commercial loans with
NationsBank in Florida. The line of credit is for $1,600,000, is secured by all
the Company's assets, with interest at the bank's prime rate, 7.75% as of
December 31, 1998. This line of credit has a maturity date of May 1, 2000
and had an outstanding balance of $1,600,000 at December 31, 1998 and
$1,000,000 at December 31, 1997.
The Company also has a five year term loan of $1,500,000 due December
29, 2002 at an annual interest rate of 8.60%. The interest was fixed based upon
a variable rate note (LIBOR plus 2.25% floating rate) and an interest rate swap
agreement entered into with the bank. The swap agreement in effect reduces the
interest rate risk by allowing the Company to lock-in a fixed rate by converting
the foregoing variable rate obligation. The term loan is payable in equal
principal payments of $25,000 plus interest. This loan had an outstanding
balance of $1,200,000 at December 31, 1998 and $1,500,000 at December 31, 1997.
Early termination of the swap agreement, either through prepayment or default
on the term loan, may result in a cost or a benefit to the Company. The market
risk from such early termination that arises from the movement in interest rates
may cause a liability to the Company if interest rates are down, and a benefit
to the Company if interest rates are up, with the Company recognizing a loss or
gain resulting from the difference between its fixed interest rate and the
market value of interest rates at the time of early termination. Under the
term loan, the Company is 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, a current ratio of 1:5 to 1:00, a capital funds ratio of total
debt to capital funds of no more than 1:7 to 1:00, maintenance of capital funds
equal to or in excess of $3,500,000, and the Company may not sell any of its
assets or properties, except inventory in the ordinary course of business,
within any calendar year for which the aggregate book value exceeds $500,000
The term loan also provides for restrictions on transactions with related
persons, precludes changes in ownership in the Company which would reduce the
ownership by Medicore, to less than 51%, and restricts the Company from
engaging in any new unrelated business which might adversely affect the
repayment of the term loan.
Two commercial term loans were obtained by the Company in 1996,
one for $712,500 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
17
<PAGE>
due on the expiration date. This loan had an outstanding balance of $636,000 at
December 31, 1998 and $663,000 at December 31, 1997. This term loan has a pre-
payment penalty and is secured by a mortgage on properties in Hialeah, Florida
owned by Medicore, two of which properties are leased to the Company and one
parcel used as a parking lot. Under this term loan the Company is obligated to
adhere to a variety of affirmative and negative covenants similar to those of
the $1,500,000 five year term loan. The mortgage issued by Medicore to secure
the $712,500 term loan provides the 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 Medicore. Medicore, as lessor to the Company of these mortgaged prop-
erties, has assigned the leases, rents and profits to the bank as further
security for the $712,500 term loan, provided Medicore may continue to collect
the rents until an event of default, if any, occurs. Medicore, as lessor of
the properties mortgaged, has subordinated its interests in the leases to the
mortgage held by NationsBank to secure this term loan.
The second 1996 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 NationsBank's prime rate and requiring monthly principal payments
with accrued interest of $3,333 through expiration on February 7, 2001. This
loan had an outstanding balance of $87,000 at December 31, 1998 and $127,000 at
December 31, 1997. This $200,000 term loan carries no prepayment penalty and is
secured by all of the Company's tangible personal property, goods and equipment,
and all cash or non-cash proceeds of such collateral.
The revolving and term financing facilities are secured by a first
security interest on corporate assets. Medicore has subordinated $2,291,665 in
principal indebtedness due it from the Company to the Company's financing
facilities, provided Techdyne may make payments to Medicore on the subordinated
debt from additional equity that is injected into the Company or from earnings,
provided Techdyne is in compliance with all the financial covenants of the loan
agreements.
Medicore has unconditionally guaranteed the payment and performance by
the Company of the line of credit and three commercial loans.
There are cross defaults between the revolving and term loans exclusive
of the $200,000 term loan.
The Company has outstanding borrowings from a local bank for $145,000
with interest payable monthly at prime with the note maturing in April, 2000.
This note is secured by two certificates of deposit of a related company and one
certificate of deposit of the Company.
The Company guaranteed a line of credit for Techdyne (Scotland) from
The Royal Bank of Scotland Plc which credit line had a U.S. equivalency of
approximately $330,000 at December 31, 1997, which was not renewed. No amounts
were outstanding under this line of credit during 1998 and no amounts were
outstanding as of December 31, 1997.
The Company's acquisition of Lytton Incorporated in 1997 (see Item 1,
"Business - Business Strategy" of the Company's Annual Report on Form 10-K for
the year ended December 31, 1998) required $2,500,000 cash at closing, funded by
the revolving line of credit as well as 300,000 shares of the
Company's common stock which had a fair value of approximately $1,031,000 based
on the closing price on the date of acquisition for which the Company has
guaranteed $2,400,000 to Patricia Crossley, the seller of Lytton. Patricia
Crossley is the wife of Lytton's former President, Lytton Crossley, a nominee
for director. See "Proposal No. 1: Election of Directors." The guarantee was
modified in June, 1998. The modified guarantee provided that Patricia Crossley
could sell an amount of her Techdyne common stock which would yield her
$1,300,000, and the Company would issue her additional shares in an amount to
18
<PAGE>
insure her Techdyne common stock ownership was 150,000 shares. In July, 1998,
Techdyne advanced Patricia Crossley approximately $1,278,000 ("Advance") toward
her sale of shares sufficient to provide her with $1,300,000. Proceeds from Mrs.
Crossley's sale of her Techdyne common stock up to 195,000 shares would repay
the Advance. To the extent the proceeds of such sales were insufficient to pay
the Advance, any such balance of the Advance would be forgiven. Techdyne also
guaranteed Patricia Crossley aggregate proceeds of $1,100,000 from the sale of
the remaining common stock she owns if sold on or prior to July 31, 1999.
The Stock Purchase Agreement also provided for incentive consideration
based on specific sales levels of Lytton for each of three successive specified
years, which includes payment to Patricia Crossley of 4% of Lytton's sales of
$14,000,000 up to $20,000,000, and 5% of Lytton's sales over $20,000,000.
$154,000 was paid during 1998 for the first year under that agreement. Lytton
Crossley had a one year employment agreement with Lytton through July 30, 1998
at an annual salary of $135,000, plus participation in medical, hospitalization,
group health, disability and life insurance programs and profit and other
employee benefit plans, and reasonable business costs and expenses. In the event
of Mr. Crossley's disability he would receive benefits from Lytton's existing
standard disability plan. Mr. Crossley's current employment agreement retains
him as Assistant to the President requiring 40 hours per month at an annual
salary of $30,000, with a one year automatic renewal and a 30 day termination
provision without cause by either party.
Mr. Crossley had borrowed an aggregate of approximately $155,000 from
Lytton, which was repaid at the closing date of the Lytton acquisition on July
31, 1997. The repayment was made through use of a portion of the cash
consideration paid to Patricia Crossley for the sale of Lytton to the Company.
Lytton has a deferred compensation arrangement with Mr. Crossley, which
requires monthly payments of $8,339 provided that Lytton's cash flow is adequate
to cover the payments with interest to be calculated on any unpaid balances as
of August 1, 1999. For the year ended December 31, 1998, a total of $59,000
was paid under this arrangement, with a balance due of $108,000.
In 1996, Lytton sold its offices and operating facility to Stanley
Avenue Properties, Ltd., a limited liability company whose membership includes
Lytton and Pat Crossley. Stanley Avenue Properties, Ltd. acquired the facili-
ties in exchange for a note to Lytton for $147,000 and the assumption of two
mortgage notes payable for a total sales price of $1,200,152. Lytton recognized
a gain on the sale of the property and equipment in the amount of approximately
$14,400, which was reflected in the revenues section of Lytton's financial
results. The note receivable from Stanley Avenue Properties, Ltd. of approxi-
mately $139,000 was repaid on July 31, 1997 upon the Company's acquisition of
Lytton.
Stanley Avenue Properties, Ltd. leased the property to Lytton. In
connection with the acquisition of Lytton by the Company, the lease was
renegotiated to a five year lease through July 31, 2002 with monthly lease
payments of approximately $17,900 for the first year, adjusted in subsequent
years for the change in the consumer price index, and contains two renewal
options each for five years of the then fair market rental value. See Item 2,
"Properties" of the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
In 1995, Lytton entered into loan agreements with The Provident Bank in
Ohio for revolving ($1,500,000), term ($1,000,000), equipment (up to $900,000)
and mortgage loans ($900,000), secured by a mortgage on the real property leased
to Lytton and owned by Stanley Avenue Properties, Ltd., and by other collateral,
and guaranteed by Lytton Crossley. The mortgage loan was assigned to and assumed
by Stanley Avenue Properties, Ltd. and the mortgage was amended to delete the
other loans from indebtednesses
19
<PAGE>
secured by the mortgage. The revolving line was renewed through June 30, 1999
and has monthly interest payments at prime plus .5% with an interest rate of
8.25% at December 31, 1998. This line had an outstanding balance of $962,000 at
December 31, 1998 and $549,000 at December 31, 1997. The $1,000,000 installment
loan matures August 1, 2002 at an annual rate of 9% for two years, with monthly
payments of $16,667 plus interest. After two years, Lytton will have an option
of a variable or fixed interest rate. The balance outstanding on this loan was
$733,000 as of December 31, 1998 and $933,000 at December 31, 1997. Lytton also
has a $500,000 equipment loan agreement with the same bank payable through
August 1, 2003 with interest at prime plus 1%. There was no outstanding balance
on this loan as of December 31, 1998 or December 31, 1997. Lytton conducts a
portion of its operations with equipment acquired under equipment financing ob-
ligations which extend through July, 1999 with interest rates ranging from 8.55%
to 10.9%. The principal balance under these financing obligations amounted to
$112,000 at December 31, 1998 and $390,000 at December 31, 1997. Lytton also
has an equipment loan at an annual interest rate of 5.5% maturing in April, 2002
with monthly payments of principal and interest of $4,298. This equipment loan
had an outstanding balance of approximately $157,000 at December 31, 1998 and
$198,000 at December 31, 1997.
Certain of the officers and directors of the Company are officers
and/or directors of Medicore and its publicly held subsidiary, DCA, including
Thomas K. Langbein, Chairman of the Board of Directors and Chief Executive
Officer of the Company holding the same positions with Medicore and DCA, as well
as being President of Medicore, and an officer and director of Medicore's and
certain of DCA's subsidiaries. Mr. Langbein is also the President, sole
shareholder and director of Todd, a securities broker-dealer. Daniel R. Ouzts,
Vice President of Finance and Controller of the Company holds the same positions
with and is also Treasurer of Medicore and DCA, and Peter D. Fischbein and
Anthony C. D'Amore are each a director of the Company and Medicore. See
"Proposal No. 1: Election of Directors." Lawrence E. Jaffe is Secretary and
counsel to the Company, Medicore and DCA and receives a substantial portion of
his fees from those companies. Options to purchase 50,000 shares of common
stock of the Company, ranging in exercise prices from $1.00 per share to $3.25
per share, from May, 1999 to June, 2002, are held in trust for Mr. Jaffe's wife,
as well as approximately 1% of the outstanding shares of Medicore common stock
and less than 1% of the securities of DCA.
In addition, certain of the accounting personnel and administrative
facilities of Medicore and its subsidiaries, including the Company, are common.
The costs of executive accounting salaries and other shared corporate overhead
for these companies are charged through a Service Agreement between the Company
and Medicore. See "Executive Compensation Employment Contracts and Termination
of Employment and Change-In-Control Arrangements." The amount of expenses due to
Medicore, generally included in intercompany Medicore advances to the Company,
for each of the three years ended December 31, 1998 was approximately $408,000.
It is the opinion of management that these services are on terms as favorable
as obtainable from unaffiliated parties.
The Company manufactures certain products for Medicore which sales
amounted to $172,000 and $214,000 for the two year period ended December 31,
1998, respectively. Medicore's Medical Products Division has recently taken
over the lancet production.
Lance International, which company Edward Diamond, a nominee for
director of the Company (see "Proposal No. 1: Election of Directors"), is
affiliated as President and one of the owners, does subcontract manufacturing
for the Company. For the two years ended December 31, 1998 and 1997, Lance
International revenues from manufacturing for the Company amounted to $2,245,325
and $2,837,473, representing 30% and 31% of its revenues for these years, re-
spectively. The Lance International
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manufacturing for the Company represented approximately 6% and 10% of the
Company's assembly and subcontract manufacturing orders for the two years ended
December 31, 1998 and 1997, respectively.
Anthony C. D'Amore, a director of the Company and Medicore, acts as an
insurance consultant and receives nominal commissions from the property,
casualty, and general liability insurance coverage for the Company, Medicore and
DCA. The Company, Medicore and DCA obtain group health insurance coverage and
several executive and key employee life insurance policies through George
Langbein, brother of Thomas K. Langbein. This insurance includes $100,000
term life insurance each covering and owned by Barry Pardon, President
and director of the Company, Joseph Verga, Senior Vice President, Treasurer and
director of the Company (each purchased and paid for by the Company), Daniel R.
Ouzts, Vice President of Finance and Controller of the Company, and Bonnie
Kaplan, a key employee of Medicore (both purchased and paid for by Medicore).
Medicore also pays for $1,600,000 of life insurance owned by Thomas K. Langbein.
See "Executive Compensation." Premiums on these coverages totaled approximately
$589,000 during 1998 of which $348,000 was for the Company. Management is of the
opinion that the cost and coverage of the insurance are as favorable as can be
obtained from unaffiliated parties.
PROPOSAL NO. 2: RATIFY SELECTION OF INDEPENDENT AUDITORS FOR 1999
The board of directors is asking the shareholders for an indication of
their approval of the board's selection of Ernst & Young LLP ("E & Y"), certi-
fied public accountants, as independent auditors for the Company for 1999.
The audit committee, which reviews the services and fees of E & Y, has
recommended the selection of E & Y to the board. E & Y has served as the
independent auditors of the Company since 1983, and has served as Medicore's
auditors since 1978.
No relationship exists between the Company and E & Y other than the
usual relationship between independent public accountant and client.
A representative of E & Y will attend the Annual Meeting to answer your
questions.
INFORMATION ABOUT SHAREHOLDER PROPOSALS
If you wish to submit proposals to be included in our 2000 Information
Statement we must receive them on or before January 3, 2000. Please address
any such proposals to: LAWRENCE E. JAFFE, SECRETARY, TECHDYNE, INC., 777 TERRACE
AVENUE, HASBROUCK HEIGHTS, NEW JERSEY 07604.
Your proposal should be accompanied by a notice of your intention to
present the proposal for action at the Annual Meeting and should otherwise
comply with Item 4 of Schedule 14C of the rules of the Securities and Exchange
Commission.
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ADDITIONAL INFORMATION
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 directors, Proposal
No. 1, and ratifying selection of independent auditors, Proposal No. 2, in the
accompanying Notice of Annual Meeting of Shareholders, and management does not
presently intend to bring any other matter before the meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon review of our records, all reports required to be filed by
officers, directors and 10% shareholders pursuant to Section 16(a) of the
Securities Exchange Act of 1934 were filed on a timely basis.
SHAREHOLDER LIST
A shareholder list will be available for your examination during normal
business hours at the offices of the Company, 2230 West 77th Street, Hialeah,
Florida at least ten days prior to the Annual Meeting.
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, 1998 (COPIES OF WHICH ANNUAL REPORT ARE
INCLUDED WITH THIS NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND INFORMATION
STATEMENT) WILL BE PROVIDED WITHOUT CHARGE.
By Order of the Board of Directors
LAWRENCE E. JAFFE
General Counsel and Secretary
April 26, 1999
