<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: MARCH 31, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
----------- ------------
Commission File Number: 1-8101
Exact Name of Registrant as
Specified in Its Charter): DDL ELECTRONICS, INC.
State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization): DELAWARE Identification No.: 33-0213512
Address of Principal Executive Offices: 2151 Anchor Court
Newbury Park, CA 91320
Registrant's Telephone Number: (805) 376-9415
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
The registrant had 20,322,532 shares of Common Stock outstanding as of
May 8, 1996.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DDL ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited, except June 30, 1995)
March 31, June 30,
1996 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,649,000 $ 2,917,000
Accounts receivable 5,553,000 3,600,000
Inventories 7,621,000 2,188,000
Prepaid expenses and deposits 170,000 171,000
---------- ---------
Total current assets 15,993,000 8,876,000
---------- ---------
PROPERTY, EQUIPMENT AND
IMPROVEMENTS, AT COST
Buildings and improvements 5,538,000 5,217,000
Plant equipment 13,670,000 9,486,000
Office and other equipment 1,488,000 1,268,000
---------- ----------
20,696,000 15,971,000
Less: accumulated depreciation
and amortization (14,730,000) (12,662,000)
---------- ----------
Property, equipment and
improvements, net 5,966,000 3,309,000
---------- ----------
OTHER ASSETS
Goodwill 6,025,000 -
Debt issue costs 1,022,000 -
Deposits and other 922,000 405,000
---------- -----------
Total other assets 7,969,000 405,000
---------- -----------
Total assets $ 29,928,000 $ 12,590,000
========== ===========
See accompanying Notes to Unaudited
Consolidated Financial Statements.
<PAGE>
DDL ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Continued)
(Unaudited, except June 30, 1995)
March 31, June 30,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of
long-term debt $ 4,203,000 $ 633,000
Accounts payable 7,708,000 5,283,000
Accrued payroll and
employee benefits 724,000 601,000
Other accrued liabilities 2,611,000 2,387,000
Income taxes payable 762,000 -
---------- ----------
Total current liabilities 16,008,000 8,904,000
---------- ----------
LONG-TERM DEBT
10% Senior Secured Notes 5,300,000 -
7% Convertible Subordinated
Debentures, less current
portion 441,000 621,000
8-1/2% Convertible
Subordinated Debentures 1,580,000 1,580,000
Notes payable, capitalized
lease obligations and
other long-term debt,
less current portion 3,713,000 4,829,000
---------- ----------
Total long-term debt 11,034,000 7,030,000
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 202,000 161,000
Additional paid-in capital 25,828,000 20,983,000
Common stock held in escrow (1,325,000) -
Accumulated deficit (20,715,000) (23,598,000)
Foreign currency translation
adjustment (1,104,000) (890,000)
---------- ----------
Total stockholders'
equity (deficit) 2,886,000 (3,344,000)
---------- ----------
Total liabilities and
stockholders' deficit $ 29,928,000 $ 12,590,000
========== ==========
See accompanying Notes to Unaudited
Consolidated Financial Statements.
<PAGE>
DDL ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Nine Months Ended
March 31,
1996 1995
SALES $ 22,722,000 $ 22,673,000
---------- ----------
COSTS AND EXPENSES
Cost of goods sold 19,985,000 20,629,000
Administrative and selling 3,027,000 4,146,000
Amortization of goodwill 317,000 -
Restructuring charges - 1,173,000
---------- ----------
Total costs and expenses 23,329,000 25,948,000
---------- ----------
OPERATING LOSS (607,000) (3,275,000)
---------- ----------
NONOPERATING INCOME (EXPENSE)
Investment income 208,000 85,000
Interest expense (584,000) (767,000)
Gain on sale of assets - 3,374,000
Other income 204,000 33,000
--------- ----------
Nonoperating income (expense), net (172,000) 2,725,000
--------- ----------
LOSS BEFORE INCOME TAX BENEFIT (779,000) (550,000)
BENEFIT FROM INCOME TAXES 1,110,000 -
--------- ----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 331,000 (550,000)
EXTRAORDINARY ITEM
Gain on debt extinguishment 2,552,000 2,441,000
--------- ---------
NET INCOME $ 2,883,000 $ 1,891,000
========= =========
PRIMARY EARNINGS (LOSS) PER SHARE
Income (loss) before
extraordinary item $ 0.02 ($ 0.03)
Extraordinary item 0.14 0.15
---- ----
Earnings per share $ 0.16 $ 0.12
==== ====
AVERAGE NUMBER OF PRIMARY
COMMON AND COMMON SHARE
EQUIVALENTS 17,677,831 15,790,737
========== ==========
See accompanying Notes to Unaudited
Consolidated Financial Statements.
<PAGE>
DDL ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1996 1995
SALES $ 10,501,000 $ 6,079,000
---------- ---------
COSTS AND EXPENSES
Cost of goods sold 9,147,000 4,916,000
Administrative and selling 1,132,000 913,000
Amortization of goodwill 317,000 -
---------- ---------
Total costs and expenses 10,596,000 5,829,000
---------- ---------
OPERATING INCOME (LOSS) (95,000) 250,000
NONOPERATING INCOME (EXPENSE)
Investment income 8,000 28,000
Interest expense (355,000) (111,000)
Other income 37,000 -
---------- ---------
Nonoperating expense, net (310,000) (83,000)
---------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES (405,000) 167,000
INCOME TAXES - -
---------- ---------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (405,000) 167,000
EXTRAORDINARY ITEM
Gain on debt extinguishment 2,552,000 -
---------- ---------
NET INCOME $ 2,147,000 $ 167,000
========== =========
PRIMARY EARNINGS (LOSS)
PER SHARE
Income (loss) before
extraordinary item ($ 0.02) $ 0.01
Extraordinary item 0.13 -
---- ----
Earnings (loss) per share $ 0.11 $ 0.01
==== ====
AVERAGE NUMBER OF PRIMARY COMMON
AND COMMON SHARE EQUIVALENTS 19,064,501 16,012,801
========== ==========
See accompanying Notes to Unaudited
Consolidated Financial Statements.
<PAGE>
DDL ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended March 31,
1996 1995
Cash flows from operating activities:
Net income $ 2,883,000 $ 1,891,000
Adjustments to reconcile net income
to net cash provided (used) by
operating activities -
Depreciation and amortization 1,152,000 1,220,000
Gain on debt extinguishment (2,552,000) (2,441,000)
Gain on sale of property and other assets - (3,377,000)
Net (increase) decrease in
operating working capital (1,773,000) 2,064,000
(Increase) decrease in deposits
and other assets (500,000) 2,000
Benefit of noncapital grants (207,000) (33,000)
--------- ---------
Net cash used by operating activities (997,000) (674,000)
--------- ---------
Cash flows from investing activities:
Capital expenditures (696,000) (243,000)
Purchase of SMTEK, Inc., net of
cash acquired (7,638,000) -
Proceeds from disposition of
capital assets - 9,997,000
--------- ---------
Net cash provided (used) by
investing activities (8,334,000) 9,754,000
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt 8,800,000 166,000
Reductions of long-term debt (1,439,000) (10,603,000)
Debt issue costs (352,000) -
Proceeds from issuance of common stock 1,112,000 980,000
Proceeds from exercise of stock options 492,000 9,000
Proceeds from exercise of warrants 317,000 -
Proceeds from government grants 231,000 200,000
--------- ---------
Net cash provided (used)
by financing activities 9,161,000 (9,248,000)
--------- ---------
Effect of exchange rate changes on cash (98,000) 17,000
--------- ---------
Decrease in cash and cash equivalents (268,000) (151,000)
Cash and cash equivalents at
beginning of period 2,917,000 2,540,000
--------- ---------
Cash and cash equivalents at
end of period $ 2,649,000 $ 2,389,000
========= =========
See accompanying Notes to Unaudited Consolidated Financial Statements
<PAGE>
DDL ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION
- ------------------------------------
In the opinion of the Company's management, the accompanying consolidated
financial statements, which have not been audited by independent accountants
(except for the balance sheet as of June 30, 1995), reflect all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
Company's financial position at March 31, 1996 and June 30, 1995, the results
of operations for the three and nine month periods ended March 31, 1996 and
1995, and the cash flows for the nine months ended March 31, 1996 and 1995.
The Company uses a 52-53 week fiscal year ending on the Friday closest to
June 30. In the accompanying interim consolidated financial statements, the
interim period end for both years is shown as March 31 for clarity of
presentation. The actual periods ended on March 29, 1996 and March 31, 1995.
Certain notes and other information are condensed or omitted from the interim
financial statements presented in this Quarterly Report on Form 10-Q.
Therefore, these financial statements should be read in conjunction with the
Company's 1995 Annual Report to Stockholders as filed with the Securities and
Exchange Commission on or about September 30, 1995.
NOTE 2 - ACQUISITION OF SMTEK, INC.
- -----------------------------------
On January 12, 1996, the Company acquired 100% of the outstanding stock of
SMTEK, Inc., a provider of integrated electronic manufacturing services. The
purchase price of $8,000,000 was paid in cash of $7,199,000 and 1,000,000
shares of unregistered common stock. The Company also incurred acquisition-
related fees and other costs totaling $495,000. The cash portion of the
purchase price was financed through the issuance of short-term 10% bridge
loans in the aggregate amount of $7,000,000 (the "Bridge Loans"). The Bridge
Loans were repaid in February 1996 through the issuance of 10% Senior Secured
in the aggregate amount of $5,300,000 and 10% Cumulative Convertible
Debentures in the aggregate amount of $3,500,000. As further described in
Note 8 herein, subsequent to March 31, 1996 the holders of $3,300,000 of the
10% Cumulative Convertible Debentures elected to convert their debentures to
equity.
The acquisition has been accounted for using the purchase method. In
accordance with Accounting Principles Board Opinion No. 16, the total
investment made in SMTEK of $8,495,000 has been allocated to the assets and
liabilities acquired at their estimated fair values at the acquisition date,
which resulted in the recognition of goodwill of $6,342,000. The Company is
amortizing the goodwill amount over five years.
<PAGE>
NOTE 3 - REVENUE RECOGNITION
- ----------------------------
The Company's European operating units recognize revenue upon shipment of
products.
SMTEK, Inc., the Company's U.S. operating unit, has historically generated
the majority of its sales through long-term contracts with suppliers of
electronic components and products to the federal government. Consequently,
SMTEK uses the percentage of completion method to recognize revenue. SMTEK
determines percentage complete on the basis of costs incurred to total
estimated costs. In the period in which it is determined that a loss will
result from the performance of a contract, the entire amount of the estimated
loss is charged to income. Other changes in contract price and estimates of
costs and profits at completion are recognized prospectively. This method
recognizes in the current period the cumulative effect of the changes on
current and prior periods.
NOTE 4 - INVENTORIES
- --------------------
Inventories are comprised of the following:
March 31, June 30,
1996 1995
---- ----
Raw materials $4,258,000 $1,634,000
Work in process 4,353,000 710,000
Less advances and progress
payments (735,000) -
Less reserves (255,000) (156,000)
--------- ---------
$7,621,000 $2,188,000
========= =========
NOTE 5 - FINANCING ARRANGEMENTS
- -------------------------------
Bank Credit Agreement:
In December 1995, the Company entered into an agreement with Ulster Bank
Group which provides for multiple credit facilities for its Northern Ireland
operations. This agreement includes a working capital line of credit of
500,000 pounds sterling (approximately $750,000), and provides for interest
on borrowings at 1-1/2% over the Bank's base rate. The credit facilities are
available to the Company until November 30, 1996, and are subject to renewal
thereafter. There were no borrowings outstanding under this credit facility
at March 31, 1996. The Company is currently negotiating with a bank for a
U.S. credit facility to provide working capital financing for SMTEK, Inc.
However, there can be no assurance that the Company will be successful in
obtaining a bank credit facility for its U.S. operations.
<PAGE>
Acquisition indebtedness:
In February 1996 the Company issued 10% Senior Secured Notes due July 1, 1997
in the aggregate amount of $5,300,000 (the "10% Senior Notes") and 10%
Cumulative Convertible Debentures due February 28, 1997 in the aggregate
amount of $3,500,000 (the "10% Convertible Debentures"). The proceeds of
these borrowings were used to pay off the principal and accrued interest of
the $7,000,000 Bridge Loans which had been taken out to finance the
acquisition of SMTEK, pay acquisition costs, and provide working capital for
SMTEK.
The 10% Convertible Debentures were sold to offshore investors under
Regulation S provisions of U.S. securities laws. The Debentures are
convertible at the holders' option into the Company's common stock at any
time after 60 days at a conversion price equal to 82% of the average of the
lowest trade price for the Company's common stock on the New York Stock
Exchange for the three days immediately preceding the conversion date. Any
10% Convertible Debentures outstanding after 12 months will automatically be
converted into common stock. As further described in Note 8 herein,
subsequent to March 31, 1996 the holders of $3,300,000 of the 10% Cumulative
Convertible Debentures elected to convert their debentures to equity.
The 10% Senior Notes are secured by (i) 1,060,000 shares of common stock and
(ii) warrants to purchase 1,060,000 shares of common stock (the "Collateral
Warrants"), all of which have been placed into an escrow account. In the
event the Collateral Warrants are required to redeem the 10% Senior Notes,
each warrant would be exercisable into one share of common stock at a price
which is 6% less than the market value of the Company's common stock at the
time of exercise. If the 10% Senior Notes are repaid from sources other than
the Collateral Warrants, then the Collateral Warrants expire and can no
longer be exercised.
In connection with the sale of the 10% Senior Notes and 10% Convertible
Debentures, the Company paid $352,000 as a fee to the placement agent for
these financings. The Company also issued to the placement agent as
additional compensation 572,683 shares of common stock and warrants to
purchase 1,500,000 shares of common stock for $2.50 per share which are
exercisable for five years.
<PAGE>
Other stock purchase warrants:
The Company carries previously issued 7% and 8-1/2% Convertible Subordinated
Debentures ("CSDs"). In fiscal 1993, the Company exchanged a portion of the
CSDs for stock and common stock purchase warrants. The remaining 223,500 of
these warrants were exercised during the nine months ended March 31, 1996 at
$1.42 per share. The Company may effect similar exchanges with holders of the
remaining outstanding CSDs in the future.
On March 29, 1996, the Company entered into a settlement agreement with
certain of its former officers, key employees and directors to restructure
its unfunded retirement obligations under several post-employment benefit
plans covering these individuals (the "Participants"). Under terms of the
settlement, the Participants agreed to relinquish all future payments due
them under these benefit plans in return for an aggregate of 595,872 stock
purchase warrants. The warrant exercise price will be equal to the New York
Stock Exchange closing price of the Company's common stock on May 31, 1996
minus $1.50, subject to a minimum exercise price of $2.50 and a maximum
exercise price of $6.00. The Company will subsidize the exercise of warrants
by crediting the Participants with $2.50 for each warrant exercised. The
warrants may be called for redemption by the Company at any time after June
1, 1996 if DDL's common stock closes above $4.00 per share, at a redemption
price of $.05 per warrant. Under a contingent payments provision of the
settlement agreement, the Company is obligated to pay the Participants $2.50
for each warrant which remains unexercised on the June 1, 1998 warrant
expiration date, payable in semiannual installments over two to ten years.
The Company has recorded a liability for the present value of these
contingent payments, which amounted to $919,000 at March 31, 1996. As the
result of this settlement agreement, the Company recorded an extraordinary
gain of $2,552,000 and had a net reduction of its liabilities of a
corresponding amount.
Stock sale:
In March 1996, the Company sold 600,000 shares of common stock to an offshore
investor under the provisions of Regulation S which generated net proceeds of
$1,112,000.
NOTE 6 - INFORMATION RELATING TO STATEMENT OF CASH FLOWS
- --------------------------------------------------------
"Net cash used by operating activities" includes cash payments for interest
as follows:
Nine months ended March 31,
1996 1995
---- ----
Interest paid $ 433,000 $ 767,000
======= =======
<PAGE>
"Net (increase) decrease in operating working capital" is comprised of the
following:
Nine months ended March 31,
1996 1995
---- ----
Decrease in accounts receivable $ 226,000 $1,470,000
(Increase) decrease in
inventories (3,246,000) 1,520,000
(Increase) decrease in
prepaid expenses 57,000 (28,000)
Increase (decrease) in
accounts payable 312,000 (273,000)
Decrease in accrued payroll
and employee benefits (23,000) (290,000)
Increase (decrease) in other
liabilities 901,000 (335,000)
--------- ---------
Net (increase) decrease in
operating working capital $(1,773,000) $2,064,000
========= =========
Changes in operating working capital accounts may not equal differences
derived by comparing balance sheet accounts due to fluctuations in the
exchange rate between reported balance sheet dates.
Supplemental schedule of non-cash investing and financing activities:
Nine months ended March 31,
1996 1995
---- ----
Capital expenditures financed by
lease obligations $ 619,000 $ 75,000
========= =======
7% Convertible Subordinated
Debentures converted to equity $ 124,000 $ 20,000
========= =======
Common stock issued as a fee to
debt placement agent $ 716,000 -
========= =======
Common stock issued as collateral
for 10% Senior Notes $1,325,000 -
========= =======
Common stock issued as partial
consideration for SMTEK, Inc.
acquisition $ 801,000 -
========= =======
<PAGE>
NOTE 7 - PRO FORMA FINANCIAL INFORMATION
- ----------------------------------------
Following are the Company's restated pro forma consolidated operating results
for the nine months ended March 31, 1995, excluding results of operations for
the Company's Aeroscientific Corp. and A.J. Electronics, Inc. subsidiaries,
and excluding any gain from sale of these subsidiaries' assets, as compared
with actual operating results for the nine months ended March 31, 1996 (in
thousands except per share amounts):
Nine months ended
March 31,
1996 1995
---- ----
Sales $22,722 $13,908
------ ------
Cost of sales 19,985 12,068
Operating expenses 3,344 2,733
------ ------
Total cost and expenses 23,329 14,801
------ ------
Operating loss (607) (893)
Nonoperating income
(expense), net (172) (474)
------ ------
Loss before income tax benefit (779) (1,367)
Benefit from income taxes 1,110 -
------ ------
Income (loss) before
extraordinary item 331 (1,367)
Extraordinary item - gain on
debt extinguishment 2,552 2,441
------ ------
Net income $ 2,883 $ 1,074
====== ======
Earnings (loss) per share:
Income (loss) before
extraordinary item $0.02 ($0.08)
Extraordinary item 0.14 0.15
---- ----
$0.16 $0.07
==== ====
NOTE 8 - EVENTS SUBSEQUENT TO MARCH 31, 1996
- --------------------------------------------
At March 31, 1996 the Company had outstanding warrants to purchase 100,000
shares of common stock at $1.31 per share which had been issued in May 1995.
These warrants were exercised in April 1996.
On May 9, 1996, the holders of an aggregate of $3,300,000 of the Company's
10% Convertible Debentures elected to convert their debentures to common
stock. The effective conversion price is approximately $1.29 per share,
which will result in the issuance of approximately 2,558,500 new shares of
common stock. After giving effect to this conversion, the Company will have
approximately 22,881,000 shares of common stock outstanding. The
accompanying consolidated balance sheet as of March 31, 1996 does not give
effect to this debt conversion.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
DESCRIPTION OF THE BUSINESS
The Company provides customized, integrated electronic manufacturing services
("EMS") to original equipment manufacturers (OEMs) in the computer,
telecommunications, instrumentation, medical, industrial and aerospace
industries. The Company also manufactures multilayer printed circuit boards
("PCBs") for use primarily in the computer, communications, and
instrumentation industries. The Company's EMS operations are located in
Southern California and Northern Ireland. Its PCB facilities are located in
Northern Ireland.
The Company entered the EMS business by acquiring its domestic EMS operations
in 1985 and by organizing its European EMS operations in 1990. Since 1985,
the Company has made substantial capital expenditures in its Northern Ireland
EMS and PCB fabrication facilities. In fiscal 1995, the Company liquidated
or sold all assets associated with its PCB and ECM operations in the United
States, which essentially eliminated its U.S.-based operations.
In January 1996, as the first step toward reestablishing a domestic presence
in the EMS industry, the Company acquired SMTEK, Inc., a provider of
integrated electronic manufacturing services. In conjunction with this
acquisition, Gregory L. Horton, SMTEK's Chief Executive Officer and
President, was appointed Chief Executive Officer and President of the
Company. In addition, the Company's principal corporate office was relocated
from Oregon to SMTEK's facility in Newbury Park, California.
RESULTS OF OPERATIONS
THREE AND NINE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
Consolidated sales for the three months ended March 31, 1996 were
$10,501,000, compared to $6,079,000 for the same period in the previous
fiscal year. The increase in sales results from the acquisition of SMTEK,
which contributed revenues of $4,871,000 in the current quarter. Sales for
the Northern Ireland operations, Irlandus Circuits, Ltd. ("Irlandus") and DDL
Electronics, Ltd. ("DDL-E"), declined approximately 7% in the current three
month period compared to the same period of the prior year.
Consolidated sales for the nine months ended March 31, 1996 were $22,722,000,
compared to $22,673,000 for the same period in the previous fiscal year.
Included in sales of the earlier nine month period are revenues from the
Company's former U.S. EMS operation, A.J. Electronics, Inc. ("A.J."), and PCB
operation, Aeroscientific Corp. ("Aero"). A.J.'s operations were
discontinued and ultimately liquidated in fiscal 1995, and Aero's
manufacturing facility and related assets were sold December 30, 1994. Aero
and A.J. represented $8,765,000 of sales for the nine months ended March 31,
1995. After giving effect to a pro forma adjustment to exclude sales of Aero
and A.J. from prior year's revenues, sales in the current nine month period
increased $8,814,000 over sales of the earlier nine month period. Of this
<PAGE>
$8,814,000 increase, $4,871,000 represents revenues of SMTEK, which was
acquired in 1996. Sales growth at DDL-E accounted for most of the remaining
increase in consolidated sales. DDL-E has added several new significant
turnkey customers that have contributed to sales growth in the first half of
fiscal 1996 and have reduced the relative volume of sales made on a
consignment basis. For "turnkey" sales, DDL-E provides all materials, labor
and equipment associated with producing the customers' products, while
"consigned" sales are those in which the customers furnish the materials and
DDL-E provides only the labor and equipment to manufacture the product.
Consolidated gross profit (sales less cost of goods sold) for the first nine
months of fiscal 1996 improved by $693,000 compared with the first nine
months of fiscal 1995. The consolidated gross profit percentage declined from
13.2% (on a pro forma basis without Aero and A.J.) for the first nine months
of fiscal 1995 to 12.0% for the first nine months of fiscal 1996. DDL-E's
gross profit declined by $112,000, and its gross profit percentage declined
from 15.2% to 7.5% due to a decrease in consignment sales and an increase in
turnkey sales volume. Also, the cost of direct materials as a percent of
turnkey sales in fiscal 1996 was higher than in fiscal 1995. An increase in
the number of production employees handling the higher sales volume and
additional costs incurred for previously deferred equipment maintenance
further contributed to the decline in DDL-E's gross profit percentage.
Irlandus' gross profit improved by $142,000 and its gross profit percentage
improved from 11.5% to 12.8%. Improved margins at Irlandus were due to
improved product yields and higher profit margins on new business.
Consolidated gross profit for the three months ended March 31, 1996 was
$1,354,000, compared to $1,163,000 for the comparable period of the prior
year. The acquisition of SMTEK in January 1996 accounted for $979,000 of the
increase, offset by a decline in gross profit of the Northern Ireland
operations of approximately $800,000. Irlandus' gross profit declined
approximately $200,000 due to changes in product mix, while DDL-E's gross
profit declined by approximately $600,000. The lower gross profit at DDL-E
was attributable to the factors cited above for the nine month periods. The
consolidated gross percentage declined from 19.1% in the three months ended
March 31, 1995 to 12.9% in the three months ended March 31, 1996, primarily
due to the decline in gross profit at DDL-E.
The operating loss for the first nine months of fiscal 1996 improved over the
comparable period of fiscal 1995 by $2,668,000, from a loss in fiscal 1995 of
$3,275,000 to a loss of $607,000 in fiscal 1996. On a consolidated pro forma
basis, after giving effect to the exclusion of Aero and A.J. from fiscal 1995
operating results, the improvement in the operating loss was only $286,000. A
substantial portion of fiscal 1995's operating costs were attributable to
accrual of restructuring charges associated with the discontinuance of A.J.'s
operations and disposal of its assets. The restructuring charge of $1,173,000
in fiscal 1995 was comprised of a writedown of assets to liquidation value,
accrual of expected lease termination costs and provision for operating
expenses through A.J.'s ultimate and final disposal.
<PAGE>
Net nonoperating expense for the three months ended March 31, 1996 and 1995
amounted to $310,000 and $83,000, respectively. This increase was
principally due to an increase in interest expense of $244,000 between these
two periods. The higher interest expense is associated with the new debt
issued in the current quarter to finance the acquisition of SMTEK. For the
year to date periods, net nonoperating income (expense) declined from
$2,725,000 in the nine months ended March 31, 1995 to ($172,000) in the nine
months ended March 31, 1996. This change is attributable principally to a
nonrecurring gain of $3,374,000 on the sale of assets of Aero and A.J. in the
earlier nine month period. Partially offsetting the effect of this gain was a
decrease in interest expense from $767,000 to $584,000 due to the payoff of
the Company's senior bank debt at the end of December 1994.
During the nine months ended March 31, 1996, the Company recognized an income
tax benefit associated with application for federal tax refunds as permitted
under section 172(f) of the Internal Revenue Code. In the aggregate the
Company applied for federal tax refunds of $2,175,000, net of costs
associated with applying for such refunds. Through March 31, 1996, the
Company has received $1,871,000 of net refunds plus interest on such refunds
of $106,000, and has recognized as an income tax benefit $1,110,000 net of
certain expenses. Because of the possibility that the tax returns underlying
these refunds may be subject to audit by the Internal Revenue Service and a
portion of the refunds disallowed, the Company has not yet recognized a tax
benefit for the remainder of the refunds received to date, or for the refunds
still expected to be received. Nonetheless, the Company feels that its claim
for refund and carry back of net operating losses can be substantiated and is
supported by law, and that the Company will ultimately collect and retain a
substantial portion of the refunds applied for.
For the nine months ended March 31, 1995, the loss before extraordinary item
was $550,000 or ($0.03) per share. On a pro forma basis, excluding the
nonrecurring gain on sale of assets and the operations of A.J. and Aero, the
first nine months of fiscal 1995 would have shown a loss before extraordinary
item of $1,367,000. For the nine months ended March 31, 1996, the income
before extraordinary item was $331,000, or $0.02 per share, which includes
the effect of the $1,110,000 income tax benefit discussed above.
Consolidated net income for the first nine months of fiscal 1996 was
$2,883,000 or $0.16 per share, compared to $1,891,000 or $0.12 per share for
the same period of fiscal 1995. Net income for the fiscal 1996 period
includes an extraordinary gain on debt extinguishment of $2,552,000
associated with the reduction of the Company's unfunded retirement
obligations to certain former employees and directors in March 1996. Net
income for the fiscal 1995 period includes an extraordinary gain on debt
extinguishment of $2,441,000 associated with the retirement of the Company's
senior bank debt in December 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity are its cash and cash equivalents,
which amounted to $2,649,000 at March 31, 1996. During the nine months ended
March 31, 1996, cash and cash equivalents decreased by $268,000. This net
cash outflow was comprised of cash used to acquire SMTEK of $7,638,000, cash
used by operating activities of $997,000, capital expenditures of $696,000,
and the effect of exchange rate changes on cash of $98,000, partially offset
by cash inflows of $7,009,000 from new borrowings net of debt repayments and
debt issue costs, proceeds from issuance of common stock of $1,921,000, and
proceeds from government grants of $231,000.
<PAGE>
Components of operating working capital increased by $1,773,000 during the
first nine months of fiscal 1996, comprised of a $226,000 decrease in
accounts receivable, a $3,246,000 increase in inventory and a $57,000
decrease in prepaid expenses, partially offset by an increase current
liabilities of $1,190,000. The increase in working capital is primarily the
result of the acquisition of SMTEK in 1996.
In December 1995, the Company finalized a renewable one year credit facility
with a European bank to provide a working capital line of credit of 500,000
pounds sterling (approximately $750,000) for use in financing the growth of
the Company's Northern Ireland operations. There were no borrowings
outstanding under this credit facility at March 31, 1996. The Company is
currently negotiating with a bank for a U.S. credit facility to provide
working capital financing for SMTEK, Inc. There can be no assurance, however,
that the Company will be successful in obtaining a bank credit facility for
its U.S. operations.
In February 1996, the Company issued 10% Senior Notes due July 1, 1997 in the
aggregate amount of $5,300,000 and 10% Convertible Debentures due February
28, 1997 in the aggregate amount of $3,500,000. The proceeds of these
borrowings were used to pay off the principal and accrued interest of the
$7,000,000 Bridge Loans which had been taken out to finance the acquisition
of SMTEK, pay acquisition costs, and provide working capital for SMTEK. In
March 1996, to raise additional working capital for SMTEK, the Company sold
600,000 shares of common stock to an offshore investor under the provisions
of Regulation S which generated net proceeds of $1,112,000.
The 10% Convertible Debentures were sold to offshore investors under
Regulation S provisions of U.S. securities laws. The Debentures are
convertible at the holders' option into the Company's common stock at any
time after 60 days at a conversion price equal to 82% of the average of the
lowest trade price for the Company's common stock on the New York Stock
Exchange for the three days immediately preceding the conversion date. Any
10% Convertible Debentures outstanding after 12 months will automatically be
converted into common stock.
On May 9, 1996, the holders of an aggregate of $3,300,000 of the Company's
10% Convertible Debentures elected to convert their debentures to common
stock. The effective conversion price is approximately $1.29 per share,
which will result in the issuance of approximately 2,558,500 new shares of
common stock. After giving effect to this conversion, the Company will have
approximately 22,881,000 shares of common stock outstanding. The
accompanying consolidated balance sheet as of March 31, 1996 does not give
effect to this debt conversion.
The achievement of sustained operating profitability is the most significant
internal factor to ensure the Company's long-term viability. No assurance can
be given that the Company will attain operating profitability, or that cash
generated from non-operating sources will be adequate to fund future cash
needs. As a necessary step to ensure the Company's increased profitability
the Company is actively pursuing strategic acquisition candidates that will
help ensure growth of the Company in the markets and industries in which it
has expertise.
<PAGE>
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.1 Form of 10% Senior Secured Notes due July 1, 1997, issued as of
February 29, 1996 in the aggregate amount of $5,300,000
10.2 Form of Offshore Securities Subscription Agreement and Form of
Debenture dated as of February 28, 1996 covering the sale under
Regulation S of $3,500,000 aggregate amount of the Company's 10%
Cumulative Convertible Debentures due February 28, 1997
10.3 Offshore Securities Subscription Agreement dated as of March 1,
1996 covering the sale under Regulation S of 600,000 shares of the
Company's Common Stock
11 Computation of Earnings Per Share
27 Financial Data Schedule
b. Reports on Form 8-K:
On January 29, 1996, a Form 8-K was filed regarding the acquisition of
SMTEK, Inc. This Form 8-K was amended by the filing of a Form 8-K/A on
March 27, 1996 to provide the required audited financial statements of
SMTEK and the unaudited pro forma financial information for this
acquisition.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
March 13, 1996 /s/ Gregory L. Horton
_________________________________ ___________________________________
Date Gregory L. Horton
Chief Executive Officer and
President
March 13, 1996 /s/ Richard K. Vitelle
_________________________________ ___________________________________
Date Richard K. Vitelle
Vice President -Finance
(Principal Financial Officer)
<PAGE>
EXHIBIT 10.1
THIS SENIOR SECURED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), NOR UNDER ANY STATE SECURITIES LAWS AND MAY
NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED
UNTIL (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY (AS
HEREINAFTER DEFINED) RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR
OTHER COUNSEL TO THE HOLDER OF THIS SENIOR SECURED NOTE, WHICH OTHER
COUNSEL IS REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS SENIOR
SECURED NOTE MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE
STATE SECURITIES LAWS..
DDL ELECTRONICS, INC.
10% Senior Secured Note
$[__________] New York, New York
___________, 199__
FOR VALUE RECEIVED, DDL ELECTRONICS, INC., a Delaware corporation (the
"Company"), with an address at 2151 Anchor Court, Newbury Park, California
91320, hereby promises to pay, in lawful money of the United States of
America, to the order of [____] (the "Holder"), with an address at [______],
on the Repayment Date (as hereinafter defined), the principal sum of [_____]
($_______[________]) and accrued interest thereon as hereinafter provided.
The outstanding principal amount of this Senior Secured Note (the "Note")
shall bear interest at the per annum rate of ten percent (10%) (computed on
the basis of a 360 day year and actual days elapsed). Interest shall be
payable quarterly in arrears on each June 1, September 1, December 1 and
March 1 of each year until said principal amount shall have become due and
payable, commencing June 1, 1996, to the registered Holder at the close of
business on May 27th, August 27th, November 26th or February 24th,
respectively, immediately preceding the next payment date.
For purposes hereof, the "Repayment Date" shall be July 1, 1997.
If the due date of any payment under this Note would otherwise fall on a day
which is not a Business Day (as hereinafter defined), such date will be
extended to the immediately succeeding Business Day and interest shall be
payable at the rate set forth herein for the period of the extension. The
term "Business Day" shall mean any day on which commercial banks in the
State of New York are not authorized or required to close.
This Note may be prepaid, in whole or in part, at any time or from time to
time, without premium or penalty. As more fully set forth in the Securities
Purchase Agreement (as hereinafter defined), this Note is also subject to
certain mandatory prepayments in certain circumstances without premium or
penalty. Any prepayments of this Note shall be applied first to the payment
of all interest accrued on this Note as of the date of the prepayment, and
then to the outstanding and unpaid principal amount of this Note.
<PAGE>
All payments or prepayments of principal and interest and other sums due
pursuant to this Note shall be made in immediately available funds by wire
transfer to an account or accounts designated in writing by the Holder or by
certified or official bank check in New York Clearing House funds made
payable to the order of the Holder at the address of the Holder noted above
or at such other place in the United States of America as the Holder shall
have designated to the Company, in any case, not later than 2:00 p.m. New
York time on the date on which such payment becomes due.
The obligations of the Company under this Note are absolute and
unconditional, and are not subject to any counterclaim, setoff, deduction or
defense that the Company may have against the Holder.
This Note is one of the 10% Senior Secured Notes (collectively, the "Notes")
referred to in, is secured pursuant to the terms of, and is entitled to the
benefits of, that certain Securities Purchase Agreement (the "Securities
Purchase Agreement"), dated as of February 29, 1996, by and among the
Company and each of the Purchasers who are signatories thereto, and such
other documents contemplated thereby or referred to therein and entered into
pursuant thereto, including, without limitation, the Warrants (the
"Warrants"), each dated as of February 29, 1996, granted by the Company in
favor of each of the Holders of the Notes, the Pledge Agreement (the "Pledge
Agreement"), dated as of February 29, 1996, among Rickel & Associates, Inc.
("Rickel"), the Company and the Collateral Agent, for the benefit of the
Holders of the Notes, the Registration Rights Agreement (the "Registration
Rights Agreement"), dated as of February 29, 1996, among the Company and
each of the Holders of the Notes and the Collateral Agency Agreement (the
"Collateral Agency Agreement"), dated as of February 29, 1996, among Rickel,
the Company, each of the Holders of the Notes and the Collateral Agent named
therein. All capitalized terms used herein but not otherwise defined herein
shall have the meanings assigned to such terms in the Securities Purchase
Agreement. Reference is made to the Pledge Agreement and the Collateral
Agency Agreement for a further statement concerning the terms and conditions
governing the collateral security for the obligations of the Company
hereunder.
The Company, for itself, its successors and assigns, covenants and agrees
that the payment of the principal and interest on the Notes is senior in
right of payment to the payment of all existing and future Indebtedness (as
hereinafter defined) of the Company and its subsidiaries (the "Junior Debt")
other than up to $13.5 million (plus approximately $3.2 million of certain
amounts owing by the Company under its post-retirement non-competition
programs as reflected in the Financial Statements) of Indebtedness of the
Company and its subsidiaries, including capitalized lease obligations of the
Company and its subsidiaries (the "Permitted Amount"). The aggregate amount
of all existing Indebtedness of the Company and its subsidiaries reflected
in the Financial Statements which by its terms ranks senior or pari passu in
right of payment to the Notes, as well as the Indebtedness evidenced by
certain cumulative convertible debentures of the Company in the aggregate
principal amount of approximately $3.5 million sold by the Company on or
prior to the Closing Date which shall rank pari passu in right of payment
with the Notes, shall be included in the Permitted Amount. The Company
shall not, and shall cause its subsidiaries not to, incur or suffer to exist
any Indebtedness in an aggregate amount in excess of the Permitted Amount
which ranks or would rank senior or pari passu in right of payment to the
Notes. "Indebtedness" means (a) any liability of the Company or any of its
subsidiaries (i) for borrowed money, or (ii) evidenced by a note, debenture,
bond or other instrument of indebtedness (including, without limitation, a
purchase money obligation), given in connection with the acquisition of
property, assets or services, or (iii) for the payment of rent or other
<PAGE>
amounts relating to capitalized lease obligations; (b) any liability of
others described in the preceding clause (a) which the Company or any of its
subsidiaries has guaranteed or as to which it or any of them has provided
security or which is otherwise its or any of their legal liability (except
such liabilities which the Company or any of its subsidiaries may not
subordinate to the payment of the Notes as a matter of law); and (c) any
modification, renewal, extension, replacement or refunding of any such
liability described in the preceding clauses. Upon any Event of Default
relating to the payment of principal of, or interest on, the Notes or any
fee or other amount payable by the Company under the Notes whether at
maturity or otherwise, no payment may be made with respect to the principal
of, or interest on, any Junior Debt or with respect to any fee or other
amount payable by the Company or any of its subsidiaries on any Junior Debt
or in respect of any redemption, retirement, purchase or other acquisition
thereof, unless and until such Event of Default has been cured or waived or
has ceased. Upon any other Event of Default and upon written notice thereof
given to the Company, no payment may be made with respect to the principal
of, or interest on, any Junior Debt or with respect to any fee or other
amount payable by the Company or any of its subsidiaries on any Junior Debt
or in respect of any redemption, retirement, purchase or other acquisition
thereof unless and until such Event of Default has been cured or waived or
has ceased. Upon any payment or distribution of the assets of the Company
or any of its subsidiaries to creditors upon dissolution, total or partial
liquidation or reorganization of or similar proceeding relating to the
Company or any of its subsidiaries, the holders of the Notes will be
entitled to receive payment in full before any holder of Junior Debt is
entitled to receive payment.
Subject to the provisions hereinafter set forth, if one or more of the
following events (an "Event of Default") shall occur and be continuing:
(a) the Company shall default in the payment when due of any principal
of, or interest on, this Note or any fee or other amount payable by the
Company under this Note or the Securities Purchase Agreement, and such
default shall continue unremedied for a period of five (5) days; or
(b) the Company shall default in the performance of any of its covenants
or agreements in this Note or the other Operative Documents or any of the
representations and warranties of the Company contained in the Securities
Purchase Agreement were untrue when made, and such default shall continue
unremedied for a period of ten (10) days; or
(c) the Company or any of its subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due; or
(d) Any Material Adverse Change (as defined in the Securities Purchase
Agreement) shall occur or shall have occurred; or
(e) the Company or any of its subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part
of its property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code (as now
or hereafter in effect), (iv) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization, winding-
up, or composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce to, any petition filed against
it in an involuntary case under the Bankruptcy Code or (vi) take any action
for the purpose of effecting any of the foregoing; or
<PAGE>
(f) a proceeding or case shall be commenced, without the application or
consent of the Company or any of its subsidiaries, as the case may be, in
any court of competent jurisdiction seeking (i) the liquidation,
reorganization, dissolution or winding-up of the Company or any of its
subsidiaries or of their respective assets or the composition or adjustment
of their respective debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company or any of its subsidiaries
or of all or any substantial part of their respective assets or (iii)
similar relief in respect of their respective creditors, under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall
continue undismissed or an order, judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect
for a period of thirty (30) days or an order for relief against any of them
or any of their respective assets shall be entered in an involuntary case
under the Bankruptcy Code;
THEREUPON: (x) this Note and all amounts payable by the Company under this
Note shall be immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company, and in any case the Holder may take such action as is
permitted to enforce its rights hereunder; (y) the Company shall pay all of
the expenses of the Holder incurred for the collection of this Note and for
the enforcement and protection of its rights under this Note and under the
other Operative Documents, including reasonable attorneys' fees and legal
expenses; and (z) the Holder may exercise from time to time any rights and
remedies available to it by law, including those available under any
agreement or other instrument, if any, relating to the amounts owed under
this Note or any security therefor (including, without limitation, under the
Warrants, the Pledge Agreement, the Security Agreement and the Collateral
Agency Agreement). No failure or delay on the part of the Holder in the
exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by the Holder of any right or remedy shall
preclude other or further exercise thereof or the exercise of any other
right or remedy. The Holder may apply any funds received from the Company
or (subject to Section 8.3 of the Securities Purchase Agreement) realize
upon any collateral securing payment of this Note, if any, in such manner
and order of priority and against such payment obligations hereunder as the
Holder may determine.
The Company hereby waives presentment, demand for payment, notice of
dishonor, protest and notice of protest of this Note. No waiver of any
provision of this Note, or any agreement or instrument evidencing or
providing security for this Note made by agreement of the Holder and any
other person or party, shall constitute a waiver of any other terms hereof,
or otherwise release or discharge the liability of the Company under this
Note. The Company agrees to perform and comply with each of the covenants,
conditions, provisions and agreements of the Company contained in this Note.
The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies provided by law.
This Note may be assigned by the Holder without the prior written consent of
the Company, and any holder of this Note shall have all the rights of the
Holder provided herein.
This Note shall be governed by, and construed in accordance with, the laws
of the State of New York applicable to contracts made and to be performed
entirely in the State of New York.
<PAGE>
The Company (a) hereby irrevocably submits to the jurisdiction of the state
courts of the State of New York and the jurisdiction of the United States
District Court for the Southern District of New York, for the purpose of any
suit, action or other proceeding arising out of or based upon this Note, or
the subject matter hereof brought by the Holder and (b) hereby waives and
agrees not to assert, by way of motion, as a defense, or otherwise, in any
such suit, action or proceeding, any claim that it is not subject personally
to the jurisdiction of the above-named courts, that its property is exempt
or immune from attachment or execution, that the suit, action or proceeding
is brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Note or the subject matter hereof may
not be enforced in or by such court, and (c) hereby waives in any such
action, suit, or proceeding any offsets or counterclaims. The Company
hereby consents to service of process by certified mail at the address set
forth herein and agrees that its submission to jurisdiction and its consent
to service of process by mail is made for the express benefit of the Holder.
Final judgment against the Company in any such action, suit or proceeding
shall be conclusive, and may be enforced in other jurisdictions (i) by suit,
action or proceeding on the conclusive evidence of the fact and of the
amount of any indebtedness or liability of the Company therein described or
(ii) in any other manner provided by or pursuant to the laws of such other
jurisdiction; provided, however, that the Holder may at its option bring
suit, or institute other judicial proceedings, against the Company or any of
its assets in any state or Federal court of the United States or of any
country or place where the Company or its assets may be found.
Any term, covenant, agreement or condition of this Note, with the consent of
the Company, may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by one or more substantially concurrent written instruments
signed by the Majority Noteholders (as defined in the Securities Purchase
Agreement); provided, however, that (i) no such amendment or waiver shall
(x) reduce the principal of, or reduce the rate of or change the time for
payment of interest on this Note, or extend the maturity of this Note, or
modify any other payment terms of this Note without the consent of the
Holder of this Note, or (y) modify any of the provisions of this Note with
respect to the payment or prepayment thereof, or reduce the percentage of
Holders of Notes required to approve any such amendment or effectuate any
such waiver, or amend this paragraph without the consent of the Holders of
all of the Notes at the time outstanding; and (ii) no such waiver shall
extend to or affect any obligation not expressly waived or impair any right
consequent thereon. Any amendment or waiver pursuant to of this paragraph
shall apply equally to all the Holders of the Notes and shall be binding
upon them, upon each future holder of any Note and upon the Company, in each
case whether or not a notation thereof shall have been placed on any Note.
<PAGE>
Except for such actions which are expressly provided herein to be taken by
an individual Holder of Notes, all actions required or permitted to be taken
by the Holders of
Notes under the Notes including, without limitation, in connection with the
exercise of remedies, shall be taken by the Majority Noteholders
(individually or by a trustee or other agent designated by the Majority
Noteholders to act on behalf of the Majority Noteholders); and the decision
of the Majority Noteholders (or such trustee or agent, as applicable) shall
be binding on all other Holders of Notes.
DDL ELECTRONICS, INC.
By: /s/ Gregory L. Horton
-----------------------------------
President and Chief Executive Officer
<PAGE>
EXHIBIT 10.1
SCHEDULE A
Page 1 of 2
DDL ELECTRONICS, INC.
PURCHASERS OF 10% SENIOR SECURED NOTES
Purchaser Name and Address Note Date Note Amount
- -------------------------- --------------- -----------
LEONARD WILF February 1, 1996 $500,000
Garden Homes
820 Morris Turnpike
Short Hills, NJ 07078
ELLIOTT SMITH January 5, 1996 $250,000
400 East 56th Street
New York, NY 10022
ELLIOTT SMITH February 29, 1996 $200,000
400 East 56th Street
New York, NY 10022
GREGG A. SMITH February 29, 1996 $ 75,000
Rickel & Associates, Inc.
875 Third Avenue
New York, NY 10022
SARATOGA HOLDINGS February 29, 1996 $ 75,000
c/o Gregg Smith
Rickel & Associates, Inc.
875 Third Avenue
New York, NY 10022
SHANE LIMITED PARTNERSHIP February 29, 1996 $100,000
c/o Rickel & Associates, Inc.
13400 South Cleveland Avenue
Fort Myers, FL 33908
PETER AND PATRICE KNOBEL February 29, 1996 $1,000,000
645 Fifth Avenue
New York, NY 10022
MARVIN NUMEROFF January 5, 1996 $1,000,000
1414 Newkirk Avenue
Brooklyn, NY 11226
MARVIN NUMEROFF February 29, 1996 $200,000
1414 Newkirk Avenue
Brooklyn, NY 11226
HOWARD MILLER January 5, 1996 $250,000
c/o Rickel & Associates, Inc.
875 Third Avenue
New York, NY 10022
<PAGE>
EXHIBIT 10.1
SCHEDULE A
Page 2 of 2
DDL ELECTRONICS, INC.
PURCHASERS OF 10% SENIOR SECURED NOTES
Purchaser Name and Address Note Date Note Amount
- -------------------------- --------------- -----------
HOWARD MILLER February 29, 1996 $200,000
c/o Rickel & Associates, Inc.
875 Third Avenue
New York, NY 10022
KENNETH D. RICKEL February 29, 1996 $225,000
Rickel & Associates, Inc.
875 Third Avenue
New York, NY 10022
ROBERT RICKEL January 5, 1996 $500,000
c/o Rickel & Associates, Inc.
875 Third Avenue
New York, NY 10022
JERRY GRAY January 5, 1996 $250,000
410 17th Street
Denver, CO 80202
STEVE LEVY January 5, 1996 $250,000
c/o Rickel & Associates, Inc.
875 Third Avenue
New York, NY 10022
DAVID CORNSTEIN February 29, 1996 $ 50,000
Finlay Corporation
521 Fifth Avenue
New York, NY 10175-0399
EDWARD McWILLIAMS February 29, 1996 $ 50,000
c/o Rickel & Associates, Inc.
13400 South Cleveland Avenue
Fort Myers, FL 33908
JOSEPH FAIR February 29, 1996 $ 25,000
Rickel & Associates, Inc.
13400 South Cleveland Avenue
Fort Myers, FL 33908
JEFFREY S. SILVERMAN February 29, 1996 $100,000
Ply Gem Industries
777 Third Avenue
New York, NY 10017
<PAGE>
EXHIBIT 10.2
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S OF THE 1933 ACT)
OR TO, OR FOR THE ACCOUNT OF OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN
REGULATION S OF THE 1933 ACT) EXCEPT PURSUANT TO REGISTRATION UNDER OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of February 28,
1996 (the "Agreement"), is executed in reliance upon the exemption from
registration afforded by Regulation S ("Regulation S") as promulgated by the
Securities and Exchange Commission ("SEC"), under the Securities Act of 1933,
as amended. Capitalized terms used herein and not defined shall have the
meanings given to them in Regulation S.
This Agreement has been executed by the undersigned,
__________________, as "Purchaser" in connection with the private placement
of a principal amount not to exceed $3,500,000 of 10.0% Cumulative
Convertible Debentures of DDL ELECTRONICS, INC., a corporation organized
under the laws of the State of Delaware, with its principal executive offices
located at 2151 Anchor Court, Newbury Park, California 91320 (hereinafter
referred to as the "SELLER" or "COMPANY"). Purchaser hereby represents and
warrants to, and agrees with SELLER:
1. Agreement to Subscribe: Purchase Price.
-----------------------------------------
a) Subscription. The undersigned Purchaser hereby subscribes for and
agrees to purchase the SELLER's 10.0% Cumulative Convertible Debentures
having an aggregate principal amount of U.S. ________________________
(singly, a "Debenture", and collectively, the "Debentures").
b) Form of Payment. Purchaser shall pay the total consideration by
delivering good funds by wire transfer in United States Dollars on or before
February 28, 1996 into the escrow account as follows:
The Bank of New York,
350 Fifth Avenue,
NY, NY 10016
ABA Number: 02100018
Swift Number:
Account Number: 105-0036843
Account Name: Krieger & Prager - Master Escrow Account
c) By signing this Agreement, the PURCHASER and the COMPANY each agrees
to all of the terms and conditions of, and becomes a party to, the Joint
Escrow Instructions attached hereto as Annex II, all of the provisions of
which are incorporated herein by this reference as if set forth in
full.
<PAGE>
d) Closing. Subject to the satisfaction of the conditions set forth in
Sections 7 and 8 hereof, the closing of the transactions contemplated by this
Agreement shall occur from time to time on or before February 28, 1996 or
such earlier date as is mutually agreed in writing by Purchaser and SELLER.
2. Purchaser Representations; Access to Information.
------------------------------------------------
a) Offshore Transaction. In connection with the purchase and sale of
the Debentures, Purchaser represents and warrants to, and covenants and
agrees with SELLER as follows:
i) Purchaser is not a natural person and is not organized under the laws
of any jurisdiction within the United States, was not formed by a U. S.
Person (as defined in Section 902(o) of Regulation S) for the purpose of
investing in Regulation S securities and is not otherwise a U. S. Person.
Purchaser is not, and on the closing date will not be, an affiliate of the
SELLER;
ii) At the time this buy order was originated, Purchaser was outside the
United States and is outside of the United States as of the date of the
execution and delivery of this Agreement;
iii) No offer to purchase the Debentures or the common stock of SELLER
issuable upon conversion of the Debentures (collectively, the "Securities")
was made by Purchaser in the United States;
iv) Purchaser is purchasing the Securities for its own account and
Purchaser is qualified to purchase the Securities under the laws of its
jurisdiction of residence, and the offer and sale of the Securities
will not violate the securities or other laws of such jurisdiction;
v) All offers and sales of any of the Securities by Purchaser prior to
the end of the Restricted Period (as hereinafter defined) shall be made in
compliance with any applicable securities laws of any applicable jurisdiction
and in accordance with Rule 903 and 904, as applicable, of Regulation S or
pursuant to registration of securities under the 1933 Act or pursuant to an
exemption from registration. In any case, none of the Securities have been
and will be offered or sold by Purchaser to, or for the account or benefit
of, a U. S. Person or within the United States until after the end of the
forty (40) day period commencing on the later of (x) the date of closing of
the offering of the Securities or (y) the date of the first offer of the
Securities to persons other than distributors (the "Restricted Period"), as
certified by Purchaser to SELLER;
vi) The transactions contemplated by this Agreement (a) have not been
and will not be pre-arranged by Purchaser with a purchaser located in the
United States or a purchaser which is a U. S. Person, and (b) are not and
will not be part of a plan or scheme by Purchaser, to evade the registration
provisions of the 1933 Act;
vii) Purchaser understands that the Securities are not registered under
the 1933 Act and are being offered and sold to it in reliance on specific
exclusions from the registration requirements of Federal and State securities
laws, and that SELLER is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings
of Purchaser set forth herein in order to determine the applicability of such
exclusions and the suitability of Purchaser to acquire these Securities.
<PAGE>
viii) Purchaser shall take all reasonable steps to ensure its compliance
with Regulation S and shall promptly send to each purchaser which acts as a
distributor, dealer or a person receiving a selling concession, fee or other
remuneration in respect of any of the Securities, who purchases prior to the
expiration of the Restricted Period referred to in subparagraph (v) above, a
confirmation or other notice to the purchaser stating that the purchaser is
subject to the same restrictions on offers and sales as Purchaser pursuant to
Rule 903 of Regulation S;
ix) Purchaser has not conducted and shall not conduct any "directed
selling efforts" as that term is defined in Rule 902(b) of Regulation S; nor
has Purchaser conducted any sale of any of the Securities in the United
States or elsewhere;
x) This Agreement has been duly authorized, validly executed and
delivered on behalf of Purchaser and is a valid and binding agreement in
accordance with its terms, subject to general principles of equity and to
bankruptcy or other laws affecting the enforcement of creditors' rights
generally;
xi) The execution and delivery of this Agreement and the consummation of
the purchase of the Securities and the transactions contemplated by the
Agreement do not and will not conflict or result in a breach by the Purchaser
of any of the terms or provisions of, or constitute a default under, the
articles of incorporation or by-laws (or similar constitutive documents) of
the Purchaser, or any indenture, mortgage, deed of trust, or other material
agreement or instrument to which Purchaser is a party or by which it or any
of its properties or assets are bound, or any existing applicable law, rule
or regulation of the United States or any State thereof or any applicable
decrees, judgment, or order of any Federal or State court, Federal or other
governmental body having jurisdiction over the Purchaser or any of its
properties or assets;
xii) All invitations, offers and sales of or in respect of any of the
Securities, by Purchaser and by distribution by Purchaser of any documents
relating to any offer by it of any of the Securities will be in compliance
with applicable laws and regulations and will be made in such a manner that
no prospectus need be filed and no other filing need be made by SELLER with
any regulatory authority or stock exchange in any country or any political
subdivision of any country;
xiii) Purchaser will not make any offer or sale of the Securities by any
means which would not comply with the laws and regulation of the territory in
which such offer or sale takes place or to which such offer or sale is
subject or which would in connection with any such offer or sale impose upon
SELLER any obligation to satisfy any public filing or registration
requirement or provide or publish any information of any kind whatsoever or
otherwise undertake or become obligated to do any act; and
xiv) During the Restricted Period, neither the Purchaser nor any of its
affiliates has entered, has the intention of entering, or will during the
Restricted Period enter into any put option, short position or other similar
instrument or position with respect to any of the Securities or securities of
the same class as the Securities.
b) No Government Recommendation or Approval. Purchaser understands
that no Federal or State or foreign government agency has passed on or made
any recommendation or endorsement of the Securities.
<PAGE>
c) Current Public Information. Purchaser acknowledges that it and its
advisors, if any, have had access to or have been furnished with all
materials relating to the business, finances and operations of SELLER and all
materials relating to the offer and sale of the Securities which have been
requested by Purchaser. Purchaser further acknowledges that it and its
advisors, if any, have received complete and satisfactory answers to such
inquiries.
d) Purchaser's Sophistication. Purchaser acknowledges that the
purchase of the Securities involves a high degree of risk, including the
total loss of Purchaser's investment. Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of purchasing the Securities.
e) Tax Status. Purchaser is not a "10-percent Shareholder" (as
defined in Section 871(h)(3)(b) of the U.S. Internal Revenue Code) of SELLER.
3. SELLER Representations.
----------------------
a) Reporting COMPANY Status. SELLER is a "Reporting Issuer" as
defined by Rule 902 of Regulation S. SELLER has registered its common stock,
$0.01 par value per share (the "Common Stock"), pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Common Stock is listed and trades on the New York Stock Exchange ("NYSE") and
the issuance and sale of the securities under this Agreement is in compliance
with the terms of the application for exemption from the listing requirements
approved by the said exchange on November 13, 1995. SELLER will, upon
request of Purchaser, promptly take all necessary action as may be further
required by the NYSE in respect of the listing of the Common Stock issuable
upon conversion of the Securities. SELLER has filed all material required to
be filed pursuant to all reporting obligations under either Section 13(a) or
15(d) of the Exchange Act for a period of at least 12 months immediately
preceding the offer and sale of the Securities (or for such shorter period
that SELLER has been required to file such material).
b) Current Public Information. SELLER has either furnished Purchaser
with copies of its most recent reports filed under the Exchange Act referred
to in Section 2(c) above, and other publicly available documents or Purchaser
has had access thereto.
c) Offshore Transaction. SELLER has not offered any of the
Securities to any person in the United States, any identifiable groups of
U.S. Citizens abroad, or to any U. S. Person, as such terms are used in
Regulation S.
i) At the time the buy order was originated, SELLER and/or its agents
reasonably believe that the Purchaser was outside of the United States and
was not a U. S. Person, based on the representations of Purchaser.
ii) SELLER and/or its agents reasonably believe that the transaction has
not been pre-arranged with a buyer in the United States, based on the
representations of Purchaser.
iii) No offer to buy or sell the Securities was or will be made by
SELLER to any person in the United States.
<PAGE>
iv) The sale of the Securities by SELLER pursuant to this Agreement will
be made in accordance with the provisions and requirements of Regulation S
provided that the representations and warranties of Purchaser in Section 2(a)
hereof are true and correct.
v) The transactions contemplated by this Agreement (a) have not been and
will not be pre-arranged by SELLER with a purchaser located in the United
States or a purchaser which is a U. S. Person, and (b) are not and will not
be part of a plan or scheme by SELLER to evade the registration provisions of
the 1933 Act.
d) No Directed Selling Efforts. In regard to this transaction,
SELLER has not conducted any "directed selling efforts" as that term is
defined in Rule 902 of Regulation S nor has SELLER conducted any general
solicitation relating to the offer and sale of any of the Securities in the
United States or elsewhere.
e) Concerning the Securities. The issuance, sale and delivery of the
Debentures have been duly authorized by all required corporate action on the
part of SELLER, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued, fully paid and non-assessable. The Common
Stock issuable upon conversion of the Debentures has been duly and validly
reserved for issuance, and, upon issuance in accordance with the terms of the
Debentures, shall be duly and validly issued, fully paid, and non-assessable
and will not subject the holders thereof, if such persons are non-U.S.
persons, to personal liability by reason of being such holders. There are
no pre-emptive rights of any shareholder of SELLER.
f) Authority to Enter Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of SELLER, and is a
valid and binding agreement in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally.
g) Non-contravention. The execution and delivery of this Agreement
and the consummation of the issuance of the Securities, and the transactions
contemplated by this Agreement do not and will not conflict with or result in
a breach by SELLER of any of the terms or provisions of, or constitute a
default under, the articles of incorporation or by-laws of SELLER, or any
indenture, mortgage, deed of trust, or other material agreement or instrument
to which SELLER is a party or by which it or any of its properties or assets
are bound, or any existing applicable law, rule or regulation of the United
States or any State thereof or any applicable decree, judgment, or order of
any Federal or State court, Federal or State regulatory body, administrative
agency or other United States governmental body having jurisdiction over
SELLER or any of its properties or assets.
h) Approvals. SELLER is not aware of any authorization, approval or
consent of any governmental body which is legally required for the issuance
and sale of the Debentures and the Common Stock issuable upon conversion
thereof to persons who are non-U.S. Persons, as contemplated by this
Agreement.
i) Filings. The COMPANY undertakes and agrees to make all necessary
filings in connection with the sale of the Debentures as required by United
States laws and regulations or any domestic securities exchange or trading
market.
<PAGE>
j) Absence of Certain Changes. Since September 30, 1995, there has been
no material adverse development in the assets, liabilities, business,
properties, operations, financial condition or results of operations of the
COMPANY, except as disclosed in the SEC filings, or otherwise disclosed in
the documents annexed hereto.
4. Exemption: Reliance on Representations.
---------------------------------------
Purchaser understands that the offer and sale of the Securities are not
being registered under the 1933 Act. SELLER and Purchaser are relying on
the rules governing offers and sales made outside the United States pursuant
to Regulation S.
5. Transfer Agent Instructions.
---------------------------
a) Debentures. The SELLER's transfer agent or attorney shall act as
Debenture Registrar and shall maintain an appropriate ledger containing the
necessary information with respect to each Debenture.
b) Common Stock to be Issued without Restrictive Legend. Upon the
conversion of any Debentures and upon receipt by the COMPANY of a facsimile
or original of Purchaser's signed Purchaser Representation Letter, a copy of
which is attached hereto as Exhibit 2, SELLER shall instruct SELLER's
transfer agent to issue Stock Certificates without restrictive legend in the
name of Purchaser (or its nominee being a non-U. S. Person) or such non-U. S.
Persons as may be designated by Purchaser prior to the closing) and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion, as applicable. SELLER warrants
that no instructions other than these instructions have been given or will
be given to the transfer agent and that the Common Stock shall otherwise be
freely transferable on the books and records of SELLER. Nothing in this
Section 5, however, shall affect in any way Purchaser's or such nominee's
obligations and agreements to comply with all applicable securities laws
upon resale of the Securities.
c) The holder of the Debenture ("Holder") is entitled, at its option, at
any time commencing 60 days after issue hereof to convert any or all of the
original principal amount of the Debenture into shares of Common Stock, $0.01
par value per share, of the COMPANY (the "Common Stock"), at a conversion
price for each share of Common Stock equal to Eighty-two percent (82%) of the
Market Price (as defined below) of the COMPANY's Common Stock. "Market
Price" shall mean the average of the lowest trade for the Common Stock for
the three (3) business days immediately preceding the Conversion Date, as
reported by the New York Stock Exchange ("NYSE"). Such conversion shall be
effectuated by surrendering to the COMPANY, or its attorney, the original
Debenture to be converted together with a facsimile or original of the signed
Notice of Conversion and a facsimile or original of the signed Purchaser
Representation Letter (see Exhibits 1 and 2 attached hereto) which evidences
such Holder's intention to convert the Debenture or a specified portion
thereof, and accompanied by proper assignment, if applicable. No fractional
shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded down to the
nearest whole share, with the fraction paid in cash by the COMPANY. The date
on which notice of conversion is effective ("Conversion Date") shall be
deemed to be the date on which the Holder has delivered to the COMPANY the
original Debenture, a facsimile or original of the signed Notice of
Conversion and a facsimile or original of the signed Purchase Representation
Letter, or, if earlier, the date set forth in such Notice of Conversion if
the original Debenture and a facsimile or original of the signed Purchaser
Representation Letter are received by the COMPANY within five (5) business
days thereafter.
<PAGE>
d) Within five (5) business days after receipt of the documentation
referred to above in this Section, the COMPANY shall deliver a certificate
for the number of shares of Common Stock issuable upon the conversion and a
check for any fraction of a share. The person in whose name the certificate
of Common Stock is to be registered shall be treated as a shareholder of
record on and after the Conversion Date. If the holder hereof converts more
than one Debenture at the same time, the number of full shares issuable upon
the conversion shall be based on the total principal amount of Debentures
converted. Upon a conversion in part the Company shall issue new Debentures
equal in principal amount to the unconverted portion of the Debenture
surrendered.
e) The COMPANY reserves the right to call a mandatory redemption, at its
discretion, of any percentage of the balance on the Debenture after the
expiration of the sixty (60) day restricted period and up to twelve (12)
months after issuance of this Debenture to the Purchaser. In the event the
COMPANY exercises its right of redemption it shall pay the Purchaser, in U.
S. currency One hundred and twenty one and nine-tenths Percent (121.9%) of
the face amount of this Debenture, or of the remaining balance on this
Debenture if Purchaser has partially converted. If such right of redemption
is exercised by the COMPANY, then the COMPANY shall pay accrued and unpaid
interest calculated to the date of redemption. The COMPANY will notify the
PURCHASER not less than 10 days prior to any mandatory redemption of the
Debentures. During the 10 day period the PURCHASER shall have the right to
convert such amounts as have not been converted to date.
f) Mandatory redemption by the COMPANY shall be effected by the COMPANY
notifying the Purchaser by facsimile at the number listed in this
Subscription Agreement of COMPANY's intention to exercise its right of
mandatory redemption. The COMPANY shall state in such notice the portion of
the Debenture it intends to convert, the amount that it will pay to
effectuate such redemption and the date by which the Purchaser must deliver
the original Debenture to the Company's Transfer Agent. On or before the
date by which the Purchaser is to deliver the original Debenture to the
Transfer Agent, the COMPANY shall wire to the Transfer Agent that amount
necessary to pay the Purchaser to effectuate the mandatory redemption. Once
the Transfer Agent is in receipt of the original Debenture and those funds
necessary to effectuate the mandatory redemption he shall wire those funds to
the Purchaser and deliver to the COMPANY the original Debenture via overnight
courier.
g) Provided sufficient funds are on deposit with the Transfer Agent on
the redemption date as herein described, then in such event, after the date
of redemption, interest shall cease to accrue and the holder shall have no
further rights under the debenture other than the right to receive payments
on the redemption date.
h) Nothing contained in the Debenture shall be deemed to establish or
require payment of interest to the Purchaser at a rate in excess of the
maximum rate permitted by governing law. In the event that the rate of
interest required to be paid under the Debenture exceeds the maximum rate
permitted by governing law, the rate of interest required to be paid
thereunder shall be automatically reduced to the maximum rate permitted under
the governing law and any amounts collected in excess of the permissible
amount shall be deemed a payment of principal. To the extent that such
excess amount exceeds the aggregate principal amount of the Debenture, such
excess shall be returned with reasonable promptness by the Holder to the
COMPANY.
<PAGE>
6. Delivery Instructions.
---------------------
The Debenture being purchased hereunder shall be delivered to the
Purchaser at such time and place as shall be mutually agreed by SELLER and
Purchaser.
7. Conditions to the Company's obligation to Sell.
----------------------------------------------
PURCHASER understands that COMPANY'S obligation to sell the Debentures
is conditioned upon:
a) The receipt and acceptance by the COMPANY of this Agreement as
evidenced by execution of this Agreement by the President or any Vice
President of the COMPANY. The acceptance of funds by the COMPANY shall be
deemed to be constructive acceptance of this Agreement;
b) Delivery to the Escrow Agent by PURCHASER of good funds as payment
in full for the purchase of the Debentures; and
c) The accuracy on the Closing Date of the representations and
warranties of PURCHASER contained in this Agreement and the performance by
PURCHASER on or before the Closing Date of all covenants and agreements of
PURCHASER required to be performed on or before the Closing Date.
d) There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent
or approval which shall have not been obtained.
8. Conditions to PURCHASER'S Obligation to Purchase.
------------------------------------------------
The COMPANY understands that the PURCHASER'S obligation to purchase the
Debentures is conditioned upon:
a) Acceptance by PURCHASER of an Agreement for the sale of Debentures,
as indicated by execution of this Agreement;
b) Delivery of Debentures to Escrow Agent as herein set forth;
c) The accuracy on the Closing Date of the representations and
warranties of the COMPANY contained in this Agreement and the performance by
the COMPANY on or before the Closing Date of all covenants and agreements of
the COMPANY required to be performed on or before the Closing Date; and
d) Delivery to the Escrow Agent of an opinion of counsel for the
COMPANY, dated the Closing Date and addressed to PURCHASER, in the form
attached hereto as Annex III.
9. Offering Materials.
------------------
All offering materials and documents used in connection with offers and
sales of the Securities prior to the expiration of the Restricted Period
referred to in Section 2(a)(v) hereof shall include statements to the effect
that the Securities have not been registered under the 1933 Act or applicable
state securities laws, and that neither Purchaser, nor any direct or
indirect purchaser of the Securities from Purchaser, may directly or
indirectly offer or sell the Securities in the United States or to U. S.
Persons (other than distributors) unless the Securities are registered under
the 1933 Act or any applicable state securities laws, or any exemption from
the registration requirements of the 1933 Act or such state securities laws
is available. Such statements shall appear (1) on the cover of any prospectus
<PAGE>
or offering circular used in connection with the offer or sale of the
Securities, (2) in the underwriting section of any prospectus or offering
circular used in connection with the offer or sale of the Securities, and (3)
in any advertisement made or issued by SELLER, Purchaser, any other
distributor, any of their respective affiliates, or any person acting on
behalf of any of the foregoing.
10. Registration of the Securities.
------------------------------
COMPANY agrees that, upon demand of a majority interest of the then
holders of the Securities as a result of a regulatory development including,
but not limited to, an amendment or proposed amendment of Regulation S, or a
"no-action" or interpretive guidance from the Securities and Exchange
Commission, which call into question the ability of PURCHASER to resell the
Securities without registration, COMPANY will promptly file, and use its
reasonable best efforts to cause to become effective a registration statement
on Form S-3 and relevant blue sky laws under the 1933 Act covering the resale
of the Shares issuable upon conversion of the Debentures. Any such
registration statement shall remain effective for up to twelve (12) months,
or until all of the Securities are sold, whichever is earlier. The COMPANY
shall provide the PURCHASER with such number of copies of the prospectus as
shall be reasonably requested to facilitate the sale of the Shares issuable
upon conversion of the Debentures. The COMPANY shall bear and pay all
expenses incurred in connection with any such registration, excluding
discounts and commissions.
11. Further Offerings.
-----------------
Company agrees, that it will not register or offer for sale or sell any
securities which would be available for trading during the period commencing
on the closing date and ending on June 7, 1996 other than the shares issuable
upon conversion of the Debentures issued to purchaser or other purchasers
contemporaneously herewith. Company hereby warrants that it has not engaged
in any such offerings during the six months prior to the closing date except as
disclosed in Annex V.
12. Notices.
-------
Any notice required or permitted hereundershall be given in writing
(unless otherwise specified herein) and shall be deemed effectively given
upon personal delivery or three business days after deposit in the United
States Postal Service, by registered or certified mail with postage and fees
prepaid, addressed to each of the other parties thereunto entitled at the
following address, or at such other addresses as a party may designate by ten
days advance written notice to each of the other parties hereto.
COMPANY:
DDL Electronics, Inc.
2151 Anchor Court
Newbury Park, California 91320
Attn. : Gregory L. Horton
President and Chief Executive Officer
PURCHASER: At the address set forth on the last page of this Agreement.
ESCROW AGENT:
Krieger & Prager, Esqs.
319 Fifth Avenue
New York, NY 10016
<PAGE>
13. No Shareholder Approval.
-----------------------
SELLER hereby agrees that prior to the Closing Date it will take all
appropriate action to authorize the issuance of Common Stock upon the
conversion of the Debentures and that no shareholder approval is required for
such action.
14. Miscellaneous.
-------------
a) Except as specifically referenced herein, this Agreement constitutes
the entire contract between the parties, and neither party shall be liable or
bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties hereto. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
b) Purchaser is an independent contractor, and is not the agent of
SELLER. Purchaser is not authorized to bind SELLER, or to make any
representations or warranties on behalf of SELLER.
c) SELLER makes no representations or warranty with respect to SELLER,
its finances, assets, business prospects or otherwise. Purchaser will advise
each purchaser, if any, and potential purchaser of the Securities, of the
foregoing sentence, and that such purchaser is relying on its own
investigation with respect to all such matters, and that such purchaser will
be given access to any and all documents and SELLER personnel as it may
reasonably request for such investigation.
d) All representations and warranties contained in this Agreement by
SELLER and Purchaser shall survive the closing of the transactions
contemplated by this Agreement.
This Agreement shall be construed in accordance with the internal laws
of the State of California, and shall be binding upon the successors and
assigns of each party hereto. This Agreement may be executed in
counterparts, and the facsimile transmission of an executed counterpart to
this Agreement shall be effective as an original. Wherever used, the
singular number shall include the plural, and the plural the singular, and
the use of any gender shall be applicable to all genders.
IN WITNESS HEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
Official Signatory of SELLER:
DDL ELECTRONICS, INC.
By: /s/ Gregory L. Horton
-----------------------
Gregory L. Horton
Title: President
<PAGE
Official Signatory of Purchaser:
By: ________________________________
Title: _______________________________
Address 0f Purchaser:
______________________________________
______________________________________
______________________________________
______________________________________
Telephone: ___________________________
Fax: _________________________________
<PAGE>
Exhibit 1
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Debentures.)
The undersigned hereby irrevocably elects, as of ____ _____________, 199__
to convert $ _____________________ of the Debentures into Shares of Common
Stock of DDL ELECTRONICS, INC. (the "COMPANY") according to the conditions
set forth in the Subscription Agreement dated _____________________, 199__.
The undersigned represents that it is not a U. S. Person as defined in
Regulation S promulgated under the Securities Act of 1933, as amended, and is
not converting the Debentures on behalf of any U.S. Person.
Date of Conversion **
______________________________________________
Applicable Conversion Price
______________________________________________
Signature ____________________________________
[Name]
Address
______________________________________________
______________________________________________
Phone ______________ Fax__________________
** The original Debenture and a facsimile or original of the signed Purchaser
Representation Letter must be received by the COMPANY by the fifth business
day following the date of Conversion.
<PAGE>
Exhibit 2
PURCHASER REPRESENTATION LETTER
Dear Sirs:
The undersigned, _____________________________________ , has purchased
on _________________________ , 1996, ________________________ Convertible
Debentures of DDL ELECTRONICS, INC. ( the "COMPANY") in the amount of
$___________________, (the "Debentures"). In connection with such purchase,
the undersigned, has executed and delivered a subscription agreement
("Subscription Agreement") of your design. As the sixty day (60)
transaction period has expired, the undersigned hereby requests that the
Debentures be transferred into "Street Name" of _________________________ .
The undersigned represents and warrants and follows:
1. The offer to purchase the Debentures was made to it outside of the
United States and the undersigned was, at the time the Subscription Agreement
was executed and delivered, and is now, outside the United States;
2. It is not a U. S. Person (as such term is defined in Section 902(a) of
Regulation S. promulgated under the United States Securities Act of 1933 (the
"Securities Act"); and it has purchased the Debentures for its own account
and not for the account or benefit of any U. S. Person;
3 All offers and sales by the undersigned of the Debentures shall be made
pursuant to an effective registration statement under the Securities Act or
pursuant to and exemption from, or in a transaction not subject to the
registration requirements of, the Securities Act;
4. It is familiar with and understands the terms, conditions and
requirements contained in Regulation S and definitions of U.S. Persons
contained in Regulation S;
5. The undersigned has not engaged in any "directed selling efforts" (as
such term is defined in Regulation S) with respect to the Debentures or the
Common Stock that is issuable upon conversion;
6. The purpose for this request is to facilitate the management of the
undersigned's investment accounts.
7. The undersigned has not entered into any short sales with respect to
the Common Stock of SELLER that during the Restricted Period,
Dated this ___________ day of the month of
_______________________________, 1996.
By:
_______________________________ _____________________________
Official Signature of Purchaser Title or Country of Execution
<PAGE>
FORM OF DEBENTURE
10.0% Cumulative Convertible Debenture due February 28, 1997.
THIS DEBENTURE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER ( THE "1933 ACT" ), AND MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF U. S. PERSONS
(AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE 1933 ACT ), FOR A PERIOD
OF SIXTY (60) DAYS AFTER COMPLETION OF THE OFFERING PURSUANT TO WHICH THIS
DEBENTURE WAS ISSUED, AND THEREAFTER MAY ONLY BE OFFERED OR SOLD PURSUANT TO
REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
1933 ACT.
10.0% Cumulative Convertible Debenture due February 28, 1997.
$ ______________________
Number ________________
For value received , DDL Electronics, INC., a Delaware corporation
(the "Company") , hereby promises to pay to ________________________ or
registered assigns (the "Holder") on February 28, 1997 (the "Maturity
Date"), the principal amount of ______________________ ($ _________________)
U.S., and to pay interest on the principal amount hereof, in such amounts,
at such times and on such terms and conditions as are specified herein.
1. Interest.
--------
The Company shall pay interest on the unpaid principal amount of this
Debenture (the "Debenture") at the rate of Ten Percent (10.0%) per year,
payable annually in arrears until the principal hereof is paid in full or has
been converted. Interest on this Debenture shall accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
February 28, 1996. Interest shall be computed on the basis of a 360 day
year of twelve, 30 day months. If the Holder shall convert this Debenture
during any quarter or if the Company shall elect to redeem the Debentures,
the Company shall pay to the Holder, upon conversion or redemption, the pro-
rata portion of accrued interest payable through the conversion date.
2. Method Of Payment.
-----------------
This Debenture must be surrendered to the Company in order for the
Holder to receive payment of the principal amount hereof. The Holder shall
have the option of receiving the interest on this Debenture in United States
dollars or in common stock upon conversion pursuant to Article 3 hereof.
The Company may draw a check for the payment of interest to the order of the
Holder of this Debenture and mail it to the Holder's address as shown on the
Register (as defined in Section 7.2 below). Interest and principal
payments shall be subject to withholding under applicable United States
Federal Internal Revenue Service Regulations.
<PAGE>
3. Conversion.
----------
a) Conversion Privilege
i) The Holder of this Debenture shall have the right, at its option, to
convert it into shares of common stock, par value $0.01 per share, of the
Company ("Common Stock") at any time which is before the close of business
on the Maturity Date, except as set forth in Section 3.1 (d) below. The
number of shares of Common Stock issuable upon the conversion of this
Debenture is determined by dividing the principal amount hereof to be
converted plus all accrued and unpaid interest thereon minus any required
withholding by the conversion price in effect on the Conversion Date (as
defined in paragraph (b) of Section 3.2 below) and rounding the result to
the nearest whole share .
ii) The conversion price shall be Eighty-two Percent (82%) of the
Market Price (as defined hereafter) of the Company's Common Stock.
iii) Less than all of the principal amount of this Debenture may be
converted into Common Stock, if the portion converted is $10,000 or a whole
multiple of $10,000 and the provisions of this Article 3 that apply to the
conversion of all of the Debenture shall also apply to the conversion of a
portion of it. If less than all of the principal amount of this Debenture is
converted, all accrued and unpaid interest on this Debenture shall be added
to the amount converted and shall be deemed to be paid and discharged
thereby. This Debenture may not be converted, whether in whole or in part,
until sixty (60) days following the closing of the purchase of this
Debenture.
iv) In the event all or any portion of this Debenture remains
outstanding on the first anniversary of the date hereof and provided no Event
of Default exists, the unconverted portion of such Debenture, together with
accrued interest will automatically be converted into shares of Common Stock
at the rate of 82% of the Market Price on such date in the manner set forth
in this Section 3.1.
b) Conversion Procedure
i) The holder of the Debenture ("Holder") is entitled, at its option, at
any time commencing 60 days after issue hereof to convert any or all of the
original principal amount of the Debenture into shares of Common Stock, $0.01
par value per share, of the COMPANY (the "Common Stock"), at a conversion
price for each share of Common Stock equal to Eighty-two percent (82%) of the
Market Price (as defined below) of the COMPANY's Common Stock. "Market
Price" shall mean the average of the lowest trade for the Common Stock for
the three (3) business days immediately preceding the Conversion Date, as
reported by the New York Stock Exchange ("NYSE"). Such conversion shall be
effectuated by surrendering to the COMPANY, or its attorney, the original
Debenture to be converted together with a facsimile or original of the signed
Notice of Conversion and a facsimile or original of the signed Purchaser
Representation Letter (see Exhibits 1 and 2 attached hereto) which evidences
such Holder's intention to convert the Debenture or a specified portion
thereof, and accompanied by proper assignment, if applicable. No fractional
shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded down to the
nearest whole share, with the fraction paid in cash by the COMPANY. The date
on which notice of conversion is effective ("Conversion Date") shall be
deemed to be the date on which the Holder has delivered to the COMPANY the
<PAGE>
original Debenture, a facsimile or original of the signed Notice of
Conversion and a facsimile or original of the signed Purchase Representation
Letter, or, if earlier, the date set forth in such Notice of Conversion if
the original Debenture and a facsimile or original of the signed Purchaser
Representation Letter are received by the COMPANY within five (5) business
days after such date.
ii) Within five (5) business days after receipt of the documentation
referred to above in this Section, the COMPANY shall deliver a certificate
for the number of shares of Common Stock issuable upon the conversion and a
check for any fraction of a share. The person in whose name the certificate
of Common Stock is to be registered shall be treated as a shareholder of
record on and after the Conversion Date. If the holder hereof converts more
than one Debenture at the same time, the number of full shares issuable upon
the conversion shall be based on the total principal amount of Debentures
converted. Upon a conversion in part the Company shall issue new Debentures
equal in principal amount to the unconverted portion of the Debenture
surrendered.
iii) The COMPANY reserves the right to call a mandatory redemption, at
its discretion, of any percentage of the balance on the Debenture after the
expiration of the sixty (60) day restricted period and up to twelve (12)
months after issuance of this Debenture to the Purchaser. In the event the
COMPANY exercises its right of redemption it shall pay the Purchaser, in U.
S. currency One hundred and twenty one and nine-tenths Percent (121.9%) of
the face amount of this Debenture, or of the remaining balance on this
Debenture if Purchaser has partially converted. If such right of redemption
is exercised by the COMPANY, then the COMPANY shall also pay accrued and
unpaid interest calculated to the date of redemption. The COMPANY will notify
the PURCHASER 10 days prior to any mandatory redemption of the Debentures.
During the 10 day period, the PURCHASER shall have the right to convert such
amounts as have not been converted to date.
c) Mandatory Redemption
i) Mandatory redemption by the COMPANY shall be effected by the COMPANY
notifying the Purchaser by facsimile at the number listed in this
Subscription Agreement of COMPANY's intention to exercise its right of
mandatory redemption. The COMPANY shall state in such notice the portion of
the Debenture it intends to redeem, the amount that it will pay to effectuate
such redemption and the date by which the Purchaser must deliver the original
Debenture to the Company's Transfer Agent. On or before the date by which the
Purchaser is to deliver the original Debenture to the Transfer Agent, the
COMPANY shall wire to the Transfer Agent that amount necessary to pay the
Purchaser to effectuate the mandatory redemption. Once the Transfer Agent is
in receipt of the original Debenture and those funds necessary to effectuate
the mandatory redemption he shall wire those funds to the Purchaser and
deliver to the COMPANY the original Debenture via overnight courier.
Provided sufficient funds are on deposit with the Transfer Agent on the
redemption date as herein described, then in such event, after the date of
redemption, interest shall cease to accrue and the holder shall have no
further rights under this debenture other than the right to receive payments
on the redemption date.
ii) Nothing contained in this Debenture shall be deemed to establish or
require the payment of interest to the Holder at a rate in excess of the
maximum rate permitted by governing law. In the event that the rate of
interest required to be paid under this Debenture exceeds the maximum rate
permitted by governing law, the rate of interest required to be paid
<PAGE>
hereunder shall be automatically reduced to the maximum rate permitted under
the governing law and any amounts collected in excess of the permissible
amount shall be deemed a payment of principal. To the extent that such
excess amount exceeds the aggregate principal amount of this Debenture, such
excess shall be returned with reasonable promptness by the Holder to the
Company.
d) Fractional Shares. The Company shall not issue a fractional share of
Common Stock upon the conversion of this Debenture. Instead, the Company
shall pay in lieu of any fractional share the cash value thereof at the then
current Market Price of the Common Stock as determined under Section 3.8
below.
e) Taxes on Conversion. The Company shall pay any documentary ,
stamp or similar issue or transfer tax due on the issue of shares of Common
Stock upon the conversion of this Debenture. However, the Holder shall pay
any such tax which is due because the shares are issues in a name other than
its name.
f) Company to Reserve Stock. The Company shall reserve out of its
authorized but unissued Common Stock or Common Stock held in treasury enough
shares of Common Stock to permit the conversion of this Debenture. All
shares of Common Stock which may be issued upon the conversion hereof shall
be fully paid and nonassessable.
g) Restrictions on Transfer. This Debenture and the Common Stock
issuable upon the conversion hereof have not been registered under the
Securities Act of 1933, as amended, (the "Act" ) and have been sold
pursuant to Regulation S Under the Act ("Regulation S") . The Debenture
may not be transferred or resold in the United States, or to a U.S. Person,
or to or for the account or benefit of a U.S. Person (as defined in
Regulation S) for a period of sixty (60) days from the date hereof and
thereafter this Debenture and the Common Stock issuable upon the conversion
thereof may only be offered or sold pursuant to registration under or an
exemption from the Act.
h) Market Price. For the purpose of any computation referenced in this
Debenture, "Market Price" shall mean the average of the lowest trade for the
Common Stock for the three (3) business days immediately preceding the
Conversion Date, as reported by the New York Stock Exchange ("NYSE").
i) Mergers, Etc. If the Company merges or consolidates with another
corporation or sells or transfers all or substantially all of its assets to
another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such merger, consolidation, sale or transfer, the
Company and any such successor, purchaser or transferee shall amend this
Debenture to provide that it may thereafter be converted on the terms and
subject to the conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger, consolidation, sale or
transfer by a Holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as
nearly equivalent as may be practicable to those provided for in this Article
3.
<PAGE>
4. Mergers.
-------
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes
the obligations of the Company under this Debenture and immediately after
such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such assumption.
5. Reports.
-------
The Company will mail to the Holder hereof at its address as shown on
the Register a copy of any annual, quarterly or current report that it files
with the Securities and Exchange Commission promptly after the filing
thereof and a copy of any annual, quarterly or other report or proxy
statement that it gives to its shareholders generally at the time such report
or statement is sent to shareholders.
6. Defaults and Remedies.
---------------------
a) Events of Default. An "Event of Default" occurs if (a) the
Company does not make the payment of the principal of this Debenture when the
same becomes due and payable at maturity, upon redemption or otherwise, (b)
the Company does not make a payment, other than a payment of principal,
for a period of 5 days after same becomes due and payable, (c) the Company
fails to comply with any of its other agreements in this Debenture and such
failure continues for the period and after the notice specified below, (d)
the Company pursuant to or within the meaning of any Bankruptcy Law (as
hereinafter defined): (i) commences a voluntary case; (ii) consents to the
entry of an order for relief against it in an involuntary case; (iii)
consents to the appointment of a Custodian ( as hereinafter defined) of it or
for all or substantially all of its property or (iv) makes a general
assignment for the benefit of its creditors or (v) a court of competent
jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is
for relief against the Company in an involuntary case; (B) appoints a
Custodian of the Company or for all or substantially all of its property or
(C) orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for 60 days. As used in this Section 6.1, the term
"Bankruptcy Law" means Title 11 of the United States Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means
any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy law.
b) Acceleration. If an Event of Default occurs and is continuing,
the Holder hereof by notice to the Company, may declare the principal of and
accrued interest on this Debenture to be due and payable. Upon such
declaration, the principal and interest hereof shall be due and payable
immediately.
7. Registered Debentures.
---------------------
a) Series. This Debenture is one of a numbered series of Debentures
having an aggregate principal amount of not more than $3,500,000 which are
identical except as to the principal amount and date of issuance thereof and
as to any restriction on the transfer thereof in order to comply with the
Securities Act of 1933 and the regulations of the Securities and Exchange
Commission promulgated thereunder. Such Debentures are referred to herein
collectively as the "Debentures". The Debentures shall be issued in whole
multiples of $10,000.
<PAGE>
b) Record Ownership. The Company, or its attorney, shall maintain a
register of the holders of the Debentures (the "Register") showing their
names and addresses and the serial numbers and principal amounts of
Debentures issued to or transferred of record by them from time to time. The
Register may be maintained in electronic magnetic or other computerized form.
The Company may treat the person named as the Holder of this Debenture in the
register and as the sole owner of this Debenture. The Holder of this
Debenture is the person exclusively entitled to receive payments of interest
on this Debenture, convert it into Common Stock and otherwise exercise all
of the rights and powers as the absolute owner hereof.
c) Registration of Transfer. Transfers of this Debenture may be
registered on the books of the Company maintained for such purpose pursuant
to Section 7.2. above (i.e., the Register). Transfers shall be registered
when this Debenture is presented to the Company with a request to register
the transfer hereof and the Debenture is duly endorsed by the appropriate
person, reasonable assurances are given that the endorsements are genuine and
effective, and the Company has received evidence satisfactory to it that
such transfer is rightful and in compliance with all applicable laws,
including tax laws and state and federal securities laws. When this
Debenture is presented for transfer and duly transferred hereunder, it shall
be canceled and a new Debenture showing the name of the transferee as the
record holder thereof shall be issued in lieu hereof. When this Debenture is
presented to the Company with a reasonable request to exchange it for an
equal principal amount of Debentures of other denominations, the Company
shall make such exchange and shall cancel this Debenture and issue in lieu
thereof Debentures having a total principal amount equal to this Debenture
in the denominations requested by the Holder. No transfer of this Debenture
shall be made to any U. S. Person as that term is defined in Regulation S.
d) Worn or Lost Debentures. If this Debenture becomes worn, defaced
or mutilated but is still substantially intact and recognizable, the Company
or its agent may issue a new Debenture in lieu hereof upon its surrender.
Where the Holder of this Debenture claims that the Debenture has been lost,
destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice
to the Company actually received by the Company before it is notified that
the Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with and affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or
verification as the Company may request.
8. Notices.
-------
Any notice which is required or convenient under the terms of this
Debenture shall be duly given if it is in writing and delivered in person or
mailed by first class mail, postage prepaid and directed to the Holder of the
debenture at its address as it appears on the Register or if to the Company
to its principal executive offices. The time when such notice is sent shall
be the time of the giving of the notice.
9. Time.
----
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance
of a condition obligation within, before or after a period of time ends on a
<PAGE>
Saturday or a Sunday or a public holiday, such payment may be made or
condition or obligation performed on the next succeeding business day, with
the same force and effect as if made or performed in accordance with the
terms of this Debenture. Where time is extended by virtue of the provisions
in Article 9, such extended time shall not be included in the computation of
interest. A "business day" shall mean a day on which the banks in
California are not required or allowed to be closed.
10. Waivers.
-------
The holders of a majority in principal amount of the Debentures may
waive a default or rescind the declaration of an Event of Default and its
consequences except for a default in respect of conversion or in the payment
of principal or interest on any Debenture.
11. Rules of Construction.
---------------------
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular,
and words of the masculine gender include the feminine and the neuter, and
when the sense so indicates, words of the neuter gender refer to any
gender. The numbers and titles of sections contained in the Debenture are
inserted for convenience of reference only, and they neither form a part
of this Debenture not are they to be used in the construction or
interpretation hereof. Wherever, in this Debenture, a determination of the
Company is required or allowed, such determination shall be made by a
majority of the Board of Directors of the Company and if it is made in good
faith, it shall be conclusive and binding upon the Company and the Holder of
this Debenture.
12. Governing Law.
-------------
The validity, terms, performance and enforcement of this Debenture shall
be governed and constructed by the provisions hereof and in accordance with
the laws of the State of California applicable to agreements that are
negotiated, executed, delivered and performed solely in the State of
California.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above.
DDL ELECTRONICS, INC.
BY:
--------------------------
NAME: GREGORY L. HORTON
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
( name, address, and SSN or EIN of assignee)
________________________________________________________________________
(principal amount of Debenture, $10,000 or integral multiples of $10,000)
of principal amount of this Debenture together with all accrued and unpaid
interest hereon.
Date: ____________________
Signed:____________________
(signature must conform in all respects to name of
holder shown of face of Debenture)
Signature Guaranteed:
<PAGE>
EXHIBIT 10.2
SCHEDULE A
DDL ELECTRONICS, INC.
PURCHASERS OF 10% CUMULATIVE CONVERTIBLE DEBENTURES
DEBENTURE NO. NAME PRINCIPAL AMOUNT
- ------------ ----------------------------- ------------------
101 FTS WORLDWIDE CORP. $800,000
102 EUROFACTORS INTERNATIONAL, INC. $500,000
103 PETROLA, INC. $750,000
104 BARRAS INVESTMENTS INC. $750,000
105 BRIDGE LTD. $500,000
106 THE TAILWIND FUND LTD. $200,000
<PAGE>
EXHIBIT 10.3
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN
REGULATION S OF THE 1933 ACT) OR TO, OR FOR THE ACCOUNT OF OR BENEFIT
OF, U.S. PERSONS (AS DEFINED IN REGULATION S OF THE 1933 ACT) EXCEPT
PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT.
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of March
1, 1996 (the "Agreement"), is executed in reliance upon the exemption
from registration afforded by Regulation S ("Regulation S") as
promulgated by the Securities and Exchange Commission ("SEC"), under the
Securities Act of 1933, as amended. Capitalized terms used herein and
not defined shall have the meanings given to them in Regulation S.
This Agreement has been executed by the undersigned A.I.M. OVERSEAS
LTD. as "Purchaser" in connection with the private placement of Six
Hundred Thousand (600,000) shares of the Common Stock, par value $.01
("Common Stock"), of DDL ELECTRONICS, INC., a corporation organized
under the laws of the State of Delaware, with its principal executive
offices located at 2151 Anchor Court, Newbury Park, California 91320
(hereinafter referred to as the "SELLER" or "COMPANY"). Purchaser
hereby represents and warrants to, and agrees with SELLER:
1. Agreement to Subscribe; Purchase Price.
(a) Subscription. The undersigned Purchaser hereby subscribes
for and agrees to purchase Six Hundred Thousand (600,000) shares of the
SELLER's Common Stock (the "Securities") at a price of One U.S. Dollar
and Ninety-Five Cents per share ($1.95), for an aggregate price of One
Million, One Hundred and Seventy Thousand U.S. Dollars ($1,170,000).
(b) Form of Payment. Purchaser shall pay the total
consideration by delivering good funds by wire transfer in United States
Dollars on or before March 8, 1996 into the Company's account as
follows:
First Interstate Bank of Oregon (Portland, Oregon)
ABA Number: 123000123
Account Number: 103-0058106
Account Name: DDL Electronics, Inc.
(d) Closing. Subject to the satisfaction of the conditions set
forth in Sections 6 and 7 hereof, the closing of the transaction
contemplated by this Agreement shall occur on or before March 8, 1996,
or
such earlier date as is mutually agreed in writing by Purchaser and
SELLER.
<PAGE>
2. Purchaser Representations; Access to Information.
(a) Offshore Transaction. In connection with the purchase and
sale of the Shares, Purchaser represents and warrants to, and covenants
and agrees with SELLER as follows:
(i) Purchaser is not a natural person and is not organized under
the laws of any jurisdiction within the United States, was not formed by
nor is a U. S. Person (as defined in Section 902(o) of Regulation S) for
the purpose of investing in Regulation S securities and is not otherwise
a U. S. Person. Purchaser is not, and on the closing date will not be
an affiliate of the SELLER;
(ii) Purchaser is outside of the United States as of the date of
the execution and delivery of this Agreement;
(iii) No offer to purchase the Shares of SELLER issuable pursuant
to this transaction (the "Shares") was made by Purchaser in the United
States;
(iv) Purchaser is purchasing the Securities for its own account
and Purchaser is qualified to purchase the Securities under the laws of
its jurisdiction of residence, and the offer and sale of the Securities
will not violate the securities or other laws of such jurisdiction;
(v) None of the Securities have been and will be offered or sold by
Purchaser to, or for the account or benefit of, a U. S. Person or within
the United States until after the end of the one-hundred (100) day
period commencing on the date of closing of the sale of the Securities
to Purchaser (the "Restricted Period"). Upon the completion of the
Restricted Period, Purchaser agrees to deliver a representation letter,
substantially in the form of Exhibit 1 attached hereto, in advance of
any sale of the Securities;
(vi) The transactions contemplated by this Agreement (a) have not
been and will not be pre-arranged by Purchaser with a purchaser located
in the United States or a purchaser which is a U. S. Person, and (b) are
not and will not be part of a plan or scheme by Purchaser, to evade the
registration provisions of the 1933 Act;
(vii) Purchaser understands that the Securities are not registered
under the 1933 Act and are being offered and sold to it in reliance on
specific exclusions from the registration requirements of Federal and
State securities laws, and that SELLER is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine
the applicability ofsuch exclusions and the suitability of Purchaser to
acquire these Securities.
(viii) Purchaser shall take all reasonable steps to ensure its
compliance with Regulation S;
(ix) Purchaser has not conducted and shall not conduct any
"directed selling efforts" as that term is defined in Rule 902(b) of
Regulation S; nor has Purchaser conducted any sale of any of the
Securities in the United States or elsewhere;
<PAGE>
(x) This Agreement has been duly authorized, validly executed and
delivered on behalf of Purchaser and is a valid and binding agreement in
accordance with its terms, subject to general principals of equity and
to bankruptcy or other laws affecting the enforcement of creditors'
rights generally;
(xi) The execution and delivery of this Agreement and the
consummation of the purchase of the Securities, and the transactions
contemplated by the Agreement do not and will not conflict or result in
a breach by the Purchaser of any of the terms or provisions of, or
constitute a default under, the articles of incorporation or by-laws (or
similar constitutive documents) of the Purchaser, or any indenture,
mortgage, deed of trust, or other material agreement or instrument to
which Purchaser is a party or by which it or any of its properties or
assets are bound, or any existing applicable law, rule or regulation of
the United States or any State thereof or any applicable decrees,
judgment, or order of any Federal or State court, Federal or other
governmental body having jurisdiction over the Purchaser or any of its
properties or assets;
(xii) All invitations, offers and sales of or in respect of any of
the Securities, by Purchaser and by distribution by Purchaser of any
documents relating to any offer by it of any of the Securities will be
in compliance with applicable laws and regulations and will be made in
such a manner that no prospectus need be filed and no other filing need
be made by SELLER with any rgulatory authority or stock exchange in any
country or any political subdivision of any country;
(xiii) Purchaser will not make any offer or sale of the Securities
by any means which would not comply with the laws and regulation of the
territory in which such offer or sale takes place or to which such offer
or sale is subject or which would in connection with any such offer or
sale impose upon SELLER any obligation to satisfy any public filing or
registration requirement or provide or publish any information of any
kind whatsoever or otherwise undertake or become obligated to do any
act; and
(xiv) During the Restricted Period, neither the Purchaser nor any
of its affiliates has entered, has the intention of entering, or will
during the Restricted Period enter into any put option, short position
or other similar instrument or position with respect to any of the
Securities or securities of the same class as the Securities.
(b) No Government Recommendation or Approval. Purchaser
understands that no Federal or State or foreign government agency has
passed on or made any recommendation or endorsement of the Securities.
(c) Current Public Information. Purchaser acknowledges that it
and its advisors, if any, have had access to or have been furnished with
all materials relating to the business, finances and operations of
SELLER and all materials relating to the offer and sale of the
Securities which have been requested by Purchaser. Purchaser further
acknowledges that it and its advisors, if any, have received complete
and satisfactory answers to such inquiries.
<PAGE>
(d) Purchaser's Sophistication. Purchaser acknowledges that
the purchase of the Securities involves a high degree of risk, including
the total loss of Purchaser's investment. Purchaser has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of purchasing the Securities.
(e) Tax Status. Purchaser is not a "10-percent Shareholder"
(as defined in Section 871(h)(3)(b) of the U.S. Internal Revenue Code)
of SELLER.
3. SELLER Representations.
(a) Reporting COMPANY Status. SELLER is a "Reporting Issuer"
as defined by Rule 902 of Regulation S. SELLER has registered its
Common Stock pursuant to Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the Common Stock is listed
and trades on the New York Stock Exchange ("NYSE"). SELLER has filed
all material required to be filed pursuant to all reporting obligations
under either Section 13(a) or 15(d) of the Exchange Act for a period of
at least 12 months immediately preceding the offer and sale of the
Securities (or for such shorter period that SELLER has been required to
file such material).
(b) Current Public Information. SELLER has either furnished
Purchaser with copies of its most recent reports filed under the
Exchange Act referred to in Section 2(c) above, and other publicly
available documents, or Purchaser has had access thereto.
(c) Offshore Transaction. SELLER has not offered any of the
Securities to any person in the United States, any identifiable groups
of U.S. Citizens abroad, or to any U. S. Person, as such terms are used
in Regulation S.
(i) At the time the buy order was originated, SELLER and/or its
agents reasonably believe that the Purchaser was outside of the United
States and was not a U. S. Person, based on the representations of
Purchaser.
(ii) SELLER and/or its agents reasonably believe that the
transaction has not been pre-arranged with a buyer in the United States,
based on the representations of Purchaser.
(iii) No offer to buy or sell the Securities was or will be made
by SELLER to any person in the United States.
(iv) The sale of the Securities by SELLER pursuant to this
Agreement will be made in accordance with the provisions and
requirements of Regulation S provided that the representations and
warranties of Purchaser in Section 2(a) hereof are true and correct.
(v) The transactions contemplated by this Agreement (a) have not been
and will not be pre-arranged by SELLER with a purchaser located in the
United States or a purchaser which is a U. S. Person, and (b) are not
and will not be part of a plan or scheme by SELLER to evade the
registration provisions of the 1933 Act.
<PAGE>
(d) No Directed Selling Efforts. In regard to this
transaction, SELLER has not conducted any "directed selling efforts" as
that term is defined in Rule 902 of Regulation S nor has SELLER
conducted any general solicitation relating to the offer and sale of any
of the Securities in the United States or elsewhere.
(e) Concerning the Securities. The issuance, sale and delivery
of the Shares have been duly authorized by all required corporate action
on the part of SELLER, and when issued, sold and delivered in accordance
with the terms hereof and thereof for the consideration expressed herein
and therein, will be duly and validly issued, fully paid and non-
assessable. There are no pre-emptive rights of any shareholder of
SELLER.
(f) Authority to Enter Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of SELLER, and is a
valid and binding agreement in accordance with its terms, subject to
general principals of equity and to bankruptcy or other laws affecting
the enforcement of creditors' rights generally.
(g) Non-contravention. The execution and delivery of this
Agreement and the consummation of the issuance of the Securities, and
the transactions contemplated by this Agreement do not and will not
conflict with or result in a breach by SELLER of any of the terms or
provisions of, or constitute a default under, the articles of
incorporation or by-laws of SELLER, or any indenture, mortgage, deed of
trust, or other material agreement or instrument to which SELLER is a
party or by which it or any of its properties or assets are bound, or
any existing applicable law, rule or regulation of the United States or
any State thereof or any applicable decree, judgment, or order of any
Federal or State court, Federal or State regulatory body, administrative
agency or other United States governmental body having jurisdiction over
SELLER or any of its properties or assets.
(h) Approvals. SELLER is not aware of any authorization,
approval or consent of any governmental body which is legally required
for the issuance and sale of the Shares and the Common Stock issuable
upon conversion thereof to persons who are non-U.S. Persons, as
contemplated by this Agreement.
(i) Filings. The COMPANY undertakes and agrees to make all
necessary filings in connection with the sale of the Shares as required
by United States laws and regulations or any domestic securities
exchange or trading market.
(j) Absence of Certain Changes. Since December 31, 1995, there
has been no material adverse development in the assets, liabilities,
business, properties, operations, financial condition or results of
operations of the COMPANY, except as disclosed in the SEC filings, or
otherwise disclosed in the documents annexed hereto.
4. Exemption; Reliance on Representations. Purchaser understands
that the offer and sale of the Securities are not being registered under
the 1933 Act. SELLER and Purchaser are relying on the rules governing
offers and sales made outside the United States pursuant to Regulation
S.
<PAGE>
5. Delivery Instructions. The Shares being purchased hereunder
shall be delivered to the Purchaser at such time and place as shall be
mutually agreed by SELLER and Purchaser.
6. Conditions to the COMPANY'S obligation to Sell. PURCHASER
understands that COMPANY'S obligation to sell the Shares is conditioned
upon:
(a) The receipt and acceptance by the COMPANY of this Agreement as
evidenced by execution of this Agreement by the President or any Vice
President of the COMPANY. The acceptance of funds by the COMPANY shall
be deemed to be constructive acceptance of this Agreement;
(b) Delivery to the Company by PURCHASER of good funds as payment
in full for the purchase of the Shares; and
(c) The accuracy on the Closing Date of the representations and
warranties of PURCHASER contained in this Agreement and the performance
by PURCHASER on or before the Closing Date of all covenants and
agreements of PURCHASER required to be performed on or before the
Closing Date.
(d) There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or
requiring any consent or approval which shall have not been obtained.
7. Conditions to PURCHASER'S Obligation to Purchase. The COMPANY
understands that the PURCHASER'S obligation to purchase the Shares is
conditioned upon:
(a) Acceptance by PURCHASER of an Agreement for the sale of
Shares, as indicated by execution of this Agreement;
(b) Delivery of Shares to PURCHASER as herein set forth;
(c) The accuracy on the Closing Date of the representations and
warranties of the COMPANY contained in this Agreement and the
performance by the COMPANY on or before the Closing Date of all
covenants and agreements of the COMPANY required to be performed on or
before the Closing Date; and
8. Offering Materials. All offering materials and documents used in
connection with offers and sales of the Securities prior to the
expiration of the Restricted Period referred to in Section 2(a)(v)
hereof shall include statements to the effect that the Securities have
not been registered under the 1933 Act or applicable state securities
laws, and that neither Purchaser, nor any direct or indirect purchaser
of the Securities from Purchaser, may directly or indirectly offer or
sell the Securities in the United States or to U. S. Persons (other than
distributors) unless the Securities are registered under the 1933 Act or
any applicable state securities laws, or any exemption from the
registration requirements of the 1933 Act or such state securities laws
is available. Such statements shall appear (1) on the cover of any
prospectus or offering circular used in connection with the offer or
sale of the Securities, (2) in the underwriting section of any
prospectus or offering circular used in connection with the offer or
sale of the Securities, and (3) in any advertisement made or issued by
SELLER, Purchaser, any other distributor, any of their respective
affiliates, or any person acting on behalf of any of the foregoing.
<PAGE>
9. Notices. Any notice required or permitted thereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given upon personal delivery or three business days after
deposit in the United States Postal Service, by registered or certified
mail with postage and fees prepaid, addressed to each of the other
parties thereunto entitled at the following address, or at such other
addresses as a party may designate by ten days advance written notice to
each of the other parties hereto.
COMPANY:
DDL Electronics, Inc.
2151 Anchor Court
Newbury Park, California
Attn. : Gregory L. Horton
President and Chief Executive Officer
PURCHASER:
A.I.M. Overseas Ltd.
c/o LIS s.a.
31, bd. Prince Felix
L-1513 Luxembourg
Attn: Sylvie Allen
10. No Shareholder Approval. SELLER hereby represents and warrants
that no shareholder approval is required for this transaction.
11. Miscellaneous.
(a) Except as specifically referenced herein, this Agreement
constitutes the entire contract between the parties, and neither party
shall be liable or bound to the other in any manner by any warranties,
representations or covenants except as specifically set forth herein.
The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
hereto. Nothing in this Agreement, express or implied, is intended to
confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly
provided herein.
(b) Purchaser is an independent contractor, and is not the agent
of SELLER. Purchaser is not authorized to bind SELLER, or to make any
representations or warranties on behalf of SELLER.
(c) SELLER makes no representations or warranty with respect to
SELLER, its finances, assets, business prospects or otherwise.
Purchaser will advise each purchaser, if any, and potential purchaser of
the Securities, of the foregoing sentence, and that such purchaser is
relying on its own investigation with respect to all such matters, and
that such purchaser will be given access to any and all documents and
SELLER personnel as it may reasonably request for such investigation.
(d) All representations and warranties contained in this Agreement
by SELLER and Purchaser shall survive the closing of the transactions
contemplated by this Agreement.
<PAGE>
(e) This Agreement shall be construed in accordance with the
internal laws of the State of California, and shall be binding upon the
successors and assigns of each party hereto. This Agreement may be
executed in counterparts, and the facsimile transmission of an executed
counterpart to this Agreement shall be effective as an original.
Wherever used, the singular number shall include the plural, and the
plural the singular, and the use of any gender shall be applicable to
all genders.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
taken together shall constitute one and the same document.
IN WITNESS HEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
Official Signatory of SELLER:
DDL ELECTRONICS, INC.
By: /s/ Gregory L. Horton
----------------------
Gregory L. Horton
Title: President
Official Signatory of Purchaser:
A.I.M. OVERSEAS LTD.
By: /s/ Sylvie Allen
----------------
Title: Attorney at Fact
Address of Purchaser:
C/o LIS s.a.
31, bd. Prince Felix
L-1513 Luxembourg
Attn: Sylvie Allen
Telephone: 352 43 9590
Fax: 352 43 4035
<PAGE>
Exhibit 1
PURCHASER REPRESENTATION LETTER
Dear Sirs:
The undersigned, A.I.M. Overseas Ltd., has purchased on March 8,
1996, Six Hundred Thousand Shares of DDL ELECTRONICS, INC. ( the
"COMPANY") in the amount of $1,700,000, (the "Shares"). In connection
with such purchase, the undersigned, has executed and delivered a
subscription agreement ("Subscription Agreement") of your design. As
the one-hundred day (100) transaction period has expired, the
undersigned hereby requests that the Shares be transferred into "Street
Name" of Morgan Stanley Bank Luxembourg Acct. A.I.M.
The undersigned represents and warrants and follows:
1. The offer to purchase the Shares was made to it outside of the
United States and the undersigned was, at the time the Subscription
Agreement was executed and delivered, and is now, outside the United
States;
2. It is not a U. S. Person (as such term is defined in Section
902(a) of Regulation S. promulgated under the United States Securities
Act of 1933 (the "Securities Act"); and it has purchased the Shares for
its own account and not for the account or benefit of any U. S. Person;
3. All offers and sales by the undersigned of the Shares shall be
made pursuant to an effective registration statement under the
Securities Act or pursuant to and exemption from, or in a transaction
not subject to the registration requirements of, the Securities Act;
4. It is familiar with and understands the terms, conditions and
requirements contained in Regulation S and definitions of U.S. Persons
contained in Regulation S;
5. The undersigned has not engaged in any "directed selling efforts"
(as such term is defined in Regulation S) with respect to the Shares or
the Common Stock that is issuable upon conversion;
6. The purpose for this request is to facilitate the management of
the undersigned's investment accounts.
7. The undersigned has not entered into any short sales with respect
to the Common Stock of SELLER that during the Restricted Period,
Dated this 7th day of the month of March, 1996.
By:
/s/ Sylvie Allen Luxembourg
- ------------------------------- -----------------------------
Official Signature of Purchaser Title or Country of Execution
<PAGE>
EXHIBIT 11
DDL ELECTRONICS, INC. AND SUBSIDIARIES Page 1 OF 2
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Nine Months Ended
March 31
1996 1995
PRIMARY EARNINGS PER SHARE:
Income (loss) before extraordinary item $ 331,000 $ (550,000)
Extraordinary item 2,552,000 2,441,000
---------- ----------
Net income $ 2,883,000 $ 1,891,000
========== ==========
Weighted average number of
common shares outstanding 17,053,331 14,911,656
Assumed exercise of options and warrants
net of shares assumed reacquired 624,500 879,081
---------- ----------
Average common shares and common
share equivalents 17,677,831 15,790,737
========== ==========
Primary earnings per share:
Income (loss) before extraordinary item $ 0.02 ($ 0.03)
Extraordinary item 0.14 0.15
---- ----
Earnings per share $ 0.16 $ 0.12
==== ====
FULLY DILUTED EARNINGS PER SHARE:
Income (loss) before extraordinary item $ 331,000 $ (550,000)
Add back net interest related to
convertible subordinated debentures 131,000 101,000
---------- ----------
Income (loss) before extraordinary
item for fully diluted computation 462,000 (449,000)
Extraordinary item 2,552,000 2,441,000
---------- ----------
Net income for fully diluted computation $ 3,014,000 $ 1,992,000
========== ==========
Weighted average number of common
shares outstanding 17,053,331 14,911,656
Assumed exercise of options and warrants
net of shares assumed reacquired
under treasury stock method using
period end market price, if higher
than average market price 722,213 875,734
Assumed conversion of convertible
subordinated debentures 545,876 762,324
---------- ----------
Average fully diluted shares 18,321,420 16,549,714
========== ==========
Fully diluted earnings per share:
Income (loss) before extraordinary item $ 0.02 ($ 0.03)
Extraordinary item .14 .15
---- ----
Earnings per share $ 0.16 $ 0.12
==== ====
<PAGE>
EXHIBIT 11
DDL ELECTRONICS, INC. AND SUBSIDIARIES Page 2 of 2
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Three Months Ended
March 31
1996 1995
PRIMARY EARNINGS PER SHARE:
Income (loss) before extraordinary item $ (405,000) $ 167,000
Extraordinary item 2,552,000 -
---------- ----------
Net income (loss) $ 2,147,000 $ 167,000
========== ==========
Weighted average number of
common shares outstanding 18,476,959 15,257,663
Assumed exercise of options and warrants
net of shares assumed reacquired 587,542 755,138
---------- ----------
Average common shares and common
share equivalents 19,064,501 16,012,801
========== ==========
Primary earnings (loss) per share:
Income (loss) before extraordinary item ($ 0.02) $ 0.01
Extraordinary item 0.13 -
---- ----
Earnings (loss) per share $ 0.11 $ 0.01
==== ====
FULLY DILUTED EARNINGS PER SHARE:
Income (loss) before extraordinary item $ (405,000) $ 167,000
Add back net interest related to
convertible subordinated debentures 64,000 34,000
--------- ---------
Income (loss) before extraordinary item
for fully diluted computation (341,000) 201,000
Extraordinary item 2,552,000 -
--------- ---------
Net income (loss) for fully diluted
computation $ 2,211,000 $ 201,000
========= =========
Weighted average number of common
shares outstanding 18,476,959 15,257,663
Assumed exercise of options and warrants
net of shares assumed reacquired
under treasury stock method using
period end market price, if higher
than average market price 588,438 795,366
Assumed conversion of convertible
subordinated debentures 989,084 761,047
---------- ----------
Average fully diluted shares 20,054,481 16,814,076
========== ==========
Fully diluted earnings (loss) per share:
Income (loss) before extraordinary item ($ 0.02) $ 0.01
Extraordinary item 0.13 -
---- ----
Earnings (loss) per share $ 0.11 $ 0.01
==== ====
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1995
<CASH> 2649000
<SECURITIES> 0
<RECEIVABLES> 5553000
<ALLOWANCES> 0
<INVENTORY> 7621000
<CURRENT-ASSETS> 15993000
<PP&E> 20696000
<DEPRECIATION> 14730000
<TOTAL-ASSETS> 29928000
<CURRENT-LIABILITIES> 16008000
<BONDS> 2021000
<COMMON> 202000
0
0
<OTHER-SE> 2684000
<TOTAL-LIABILITY-AND-EQUITY> 29928000
<SALES> 22722000
<TOTAL-REVENUES> 22722000
<CGS> 19985000
<TOTAL-COSTS> 23329000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 584000
<INCOME-PRETAX> (779000)
<INCOME-TAX> (1110000)
<INCOME-CONTINUING> 331000
<DISCONTINUED> 0
<EXTRAORDINARY> 2552000
<CHANGES> 0
<NET-INCOME> 2883000
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.14
</TABLE>
