SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 30, 1997
_____________________
Exact Name of Registrant as
Specified in Its Charter: DDL ELECTRONICS, INC.
______________________________
DELAWARE 1-8101 33-0213512
_____________________________ ____________ _____________
State or Other Jurisdiction of Commission I.R.S. Employer
Incorporation or Organization File Number Identification No.
Address of Principal Executive Offices: 2151 Anchor Court
Newbury Park, CA 91320
_________________________
Registrant's Telephone Number, Including
Area Code: (805) 376-9415
_________________________
Former Name or Former Address,
if Changed Since Last Report: Not applicable
_________________________
<PAGE>
Item 5. Other Events.
In a press release dated July 2, 1997, a copy of which is attached as
Exhibit 99.1, DDL Electronics, Inc. ("DDL") announced the repayment in full
of its 10% Senior Secured Notes due July 1, 1997 (the "Senior Notes") in
the aggregate amount of $5.3 million. Of the funds used to repay the
Senior Notes, $2.0 million was borrowed from a private investor (the
"Investor") on June 30, 1997 as evidenced by a convertible promissory note
and term sheet, copies of which are attached as Exhibits 4.1 and 4.2,
respectively. The promissory note is secured by all of the outstanding
shares of SMTEK, Inc., a subsidiary of DDL, pursuant to a collateral
security stock pledge agreement, a copy of which is attached as Exhibit
4.3. DDL also agreed to give the Investor two seats on its Board of
Directors. Concurrently with all of the foregoing, DDL agreed to acquire
all of the issued and outstanding shares of Jolt Technology, Inc., a
privately-held electronics manufacturing company controlled by the
Investor, for nine million shares of DDL's common stock pursuant to a term
sheet, a copy of which is attached as Exhibit 2.1. The acquisition of Jolt
Technology, Inc. is subject to executing a definitive agreement, obtaining
a fairness opinion on the transaction, and obtaining the approval of DDL's
stockholders.
Item 7. Exhibits.
Exhibit Description
_______ ____________
2.1 Jolt Technology Inc. Acquisition Term
Sheet dated June 30, 1997.
4.1 $2.0 million secured convertible
promissory note dated June 30, 1997
4.2 Convertible Debt Term Sheet
4.3 Collateral Security Stock Pledge
Agreement dated June 30, 1997.
99.1 Press release dated July 2, 1997.
SIGNATURE
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.
DDL ELECTRONICS, INC.
July 9, 1997 /s/ Richard K. Vitelle
_________________________________ ___________________________________
Date Richard K. Vitelle
Vice President - Finance
(Principal Financial Officer)
<PAGE>
EXHIBIT 2.1
JOLT TECHNOLOGY INC. ACQUISITION TERM SHEET
When signed by all parties, this Term Sheet will memorialize the
terms and conditions of a binding agreement between Thomas M. Wheeler
("Wheeler") and DDL Electronics, Inc. ("DDL") as to all of the terms
herein set forth. This agreement may be supplemented by additional
definitive agreements, instruments and other documents including terms
and conditions customary in transactions of this nature but not
inconsistent herewith. The terms set forth herein shall not be further
modified or negotiated without the consent of both parties and shall be
included in the definitive agreements.
1. DDL will acquire all of the issued and outstanding shares of Jolt
Technology, Inc. in exchange for nine million shares of DDL common
stock.
2. Registration Requirement: DDL will register these shares on
the next available registration of stock, but not later than twelve
months from closing.
3. Lock-up Period: A lock-up period of three months from closing
will be established in the final documents.
4. Closing: This transaction will close as soon as possible
after approval of the issuance of the 9 million shares of common stock
by DDL stockholders. Stockholder approval will be requested at the next
scheduled stockholder meeting. Management and the Board of Directors
agree to support stockholder approval. If stockholder approval is not
obtained, this transaction shall terminate without liability to either
party.
5. Jolt will have at closing, book value of at least $1.5 million of
which not less than $600,000 will be in cash. There will be no
shareholder debt on the Company's books.
6. DDL will seek a fairness opinion for this transaction. If such
an opinion cannot be obtained after reasonable attempts to do so in
which representatives of Jolt may participate this transaction shall
terminate without liability to either party.
7. If it is determined that the consummation of this transaction
will violate any securities laws or regulations or the rules of the New
York Stock Exchange, this transaction shall terminate without liability
to either party.
<PAGE>
Agreed as of June 30, 1997:
DDL ELECTRONICS, INC.
By: /s/Gregory L. Horton
______________________________
Gregory L. Horton
President & CEO
/s/Thomas M. Wheeler
______________________________________
Thomas M. Wheeler
/s/Charlene Ann Gondek
______________________________________
Charlene Ann Gondek
<PAGE>
EXHIBIT 4.1
NEITHER THIS NOTE, NOR THE SECURITIES BY WHICH THIS NOTE HAS BEEN
SECURED, NOR THE SECURITIES INTO WHICH IT IS CONVERTIBLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR WITH ANY STATE SECURITIES COMMISSIONER OR
AUTHORITY AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATIONS
REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
SECURED, FULL RECOURSE,
CONVERTIBLE, NON-NEGOTIABLE
PROMISSORY NOTE
Los Angeles, California
June 30, 1997 $2,000,000.00
FOR VALUE RECEIVED, DDL ELECTRONICS, INC., a Delaware Corporation
("Maker" or "DDL") promises to pay to THOMAS M. WHEELER, ("Holder"), the
principal sum of Two Million and No/100 Dollars ($2,000,000.00),
together with interest on the principal amount outstanding from the date
of this Note, until paid, at the rate of eight percent (8.0%) per annum.
Principal and interest shall be payable in lawful money of the United
States at Los Angeles, California, or any other place as the Holder
hereof may designate in writing to Maker.
All interest will be calculated on the basis of a three hundred and
sixty five (365) day year. The principal of this Note and all accrued
interest shall be due and payable in full on August 31, 1998.
Any and all payments shall be applied first to accrued interest,
and the remainder, if any, to reduction of principal. If any
installment of principal or interest is not paid within fifteen (l5)
days after mailing of written notice to Maker that the installment is
due and has not been paid or upon any default in the performance of any
of the covenants or agreements of this Note, the Convertible Debt Term
Sheet of even date herewith, or any instrument now or hereafter
evidencing or securing this Note or the obligation represented hereby,
the entire indebtedness (including principal and interest) remaining
unpaid shall, at the option of the Holder, become immediately due,
payable and collectable. The principal, or any installment of principal,
and overdue interest shall bear interest at the maximum rate permitted
by law from maturity until paid, accruing at such rate even after entry
of final judgment for payment of same.
Each Maker, and endorser of this Note severally waives notice of
dishonor, protest, and notice of protest of this Note, and all
requirements necessary to hold each of them liable as makers and
endorsers.
<PAGE>
Each Maker, and endorser further agrees jointly and severally, to
pay all costs of collection, including reasonable attorneys' fees and
disbursements of Holder (including fees on appeal) in case the principal
or any interest of this Note is not paid when due, or in case it becomes
necessary to protect the security hereof, whether suit be brought or
not.
This Note is issued pursuant to and secured by a Stock Pledge
Agreement, of even date herewith, and all of the terms and conditions
set forth in the Stock Pledge Agreement are hereby made a part of this
Note.
This Note is issued pursuant to and in reliance upon that certain
Convertible Debt Term Sheet of even date herewith, and all of the terms
and conditions set forth in the Stock Pledge Agreement are hereby made a
part of this Note. A breach of any obligation created by said document
shall constitute a breach of DDL's obligations under this Note and shall
result in the acceleration of any amounts due hereunder.
The Holder of this Note may, at any time elect to convert all, but
not less than all, of the unpaid principal and accrued interest due
under this note into one (1) share of the unregistered common stock of
DDL for each seventy five cents ($0.75) of principal and accrued
interest outstanding as of the date that the shares are issued and
delivered to the Holder. Other than securities offered to officers and
directors, in the event that at any time prior to repayment of this Note
DDL shall offer to sell any equity securities of any kind for cash, to
any party, it shall first offer to Holder the right to acquire all or
any part of such securities on the same terms and conditions as are
proposed to the other party. Holder shall have 5 business days from the
presentation of any such proposal to exercise this right of first
refusal. This provision shall not apply to securities issued in
connection with the acquisition of a company by DDL.
Any and all shares issued pursuant to the conversion right herein
set forth shall be registered pursuant to the Securities Act of 1933 as
part of the first registration of securities made by DDL subsequent to
issuance of said shares, and in any event, within twelve (12) months
following such issuance.
This Note may be prepaid by DDL at any time after September 30,
1997, by giving DDL at least thirty (30) days advance written notice to
Holder of the intention to prepay. At any time during said thirty (30)
day notice period Holder may elect to exercise the conversion rights set
forth herein and convert the principal and accrued interest due
hereunder into common stock of DDL. DDL shall have the right on the
maturity date of this Note to pay up to $1,000,000 of the principal
amount of this Note in common stock of DDL valued at $0.75 per share and
subject to the same terms and conditions relating to registration as
herein set forth.
In addition to the acceleration rights set forth hereinabove, the
Holder hereof shall be entitled to accelerate the entire unpaid balance
and any accrued interest hereunder, forthwith as against the Maker
hereof and any endorsers, upon the occurrence of any of the following
events (a) in the event any party liable for the payment hereof shall
make a general assignment for the benefit of creditors or if any
bankruptcy, insolvency or reorganization proceeding of any nature under
Federal or state statutes be commenced by or against any of them, or in
the event a receiver shall be appointed, or a writ or order of
<PAGE>
attachment or garnishment be issued or made against any of the property,
assets or income of any of them (b) failure of any party obligated
hereunder to do all things necessary to preserve and maintain the value
and collectability of any collateral now or hereafter securing the
obligations created hereunder.
This Note shall be governed and construed in all respects in
accordance with the internal laws of the State of California, exclusive
of its choice of laws principles, and the Maker hereby submits and
consents to the personal jurisdiction of any court of competent subject
matter jurisdiction therein for the sole and limited purpose of
enforcing this Note.
The total charges for interest and in the nature of interest under
this Note shall not exceed the maximum amount allowed by law. Should
any interest paid by Maker result in the computation or earning of
interest in excess of the maximum lawful rate, any excess portion of
such charges shall be credited against and in reduction of the principal
balance, or any portion of the excess that exceeds the principal balance
shall be refunded to the Maker. No delay by the Holder in enforcing any
covenant or right hereunder shall be deemed a waiver of such covenant or
right and no waiver by the Holder of any particular provision hereof
shall be deemed a waiver of any other provisions or a continuing waiver
of such particular provision and except as so expressly waived, all
provisions hereof shall continue in full force and effect.
[SEAL] "Maker"
DDL ELECTRONICS, INC.
/s/Gregory L. Horton
______________________________
By: GREGORY L. HORTON
Its President
ATTEST:
/s/Richard K. Vitelle
______________________________
By:
Its Secretary
<PAGE>
EXHIBIT 4.2
CONVERTIBLE DEBT TERM SHEET
When signed by all parties, this Term Sheet will memorialize the terms
and conditions of a binding agreement between Thomas M. Wheeler
("Wheeler") and DDL Electronics, Inc. ("DDL") as to all of the terms
herein set forth. This agreement may be supplemented by additional
definitive agreements, instruments and other documents including terms
and conditions customary in transactions of this nature but not
inconsistent herewith. The terms set forth herein shall not be further
modified or negotiated without the consent of both parties and shall be
included in the definitive agreements.
1. Wheeler's Advance: Not later than June 30, 1997, Wheeler
will advance $2 million to DDL in immediately available funds for the
purpose of prepaying DDL's outstanding senior secured notes on June 30,
1997.
2. Convertible Note: DDL will issue to Wheeler a secured non-
negotiable Convertible Note bearing simple interest, payable quarterly
in arrears, at 8% per annum, maturing at August 31, 1998 unless the
maturity thereof is accelerated pursuant to paragraph 3 below. Subject
to the prepayment option referred to in such paragraph 3, all (but not
less than all) of such Convertible Note may at Wheeler's option be
convertible at any time into DDL common stock until August 31, 1998 at a
conversion price equal to $0.75 per share of such common stock, subject
to antidilution adjustments.
3. Prepayment Option: Provisions will be included in the
final documents for prepayment of the note any time after sixty days
from closing. Prepayment will require 30 days notice from DDL in which
time Wheeler has first right of refusal to exercise his conversion
rights at $0.75 per share in lieu of prepayment.
4. Security: The note will be secured by a pledge of all of
the outstanding common stock of SMTEK, Inc. as collateral.
5. Registration Requirement: DDL will register the shares
after conversion on the next available registration of stock, but not
later than twelve months from conversion. A lock-up period of three
months from conversion will be established in the final documents.
6. Corporate Governance: Wheeler will be given the right to
select two representatives on DDL's Board of Directors immediately upon
funding. DDL will reconstitute its Board to make two Director positions
available within the seven existing positions. Gregory L. Horton and
Richard K. Vitelle will remain on the Board.
Agreed as of June 30, 1997:
DDL ELECTRONICS, INC.
By: /s/Gregory L. Horton /s/Thomas M. Wheeler
__________________________________ _____________________
Gregory L. Horton, President & CEO Thomas M. Wheeler
<PAGE>
EXHIBIT 4.3
COLLATERAL SECURITY
STOCK PLEDGE AGREEMENT
This AGREEMENT is made and entered into on June 30, 1997, by and
between DDL ELECTRONICS, INC. ("Pledgor" and "Debtor"), and THOMAS M.
WHEELER ("Pledgee" and "Creditor").
RECITALS
At the time of the execution of this Agreement the Pledgee lent the
Debtor, TWO MILLION DOLLARS ($2,000,000.00) evidenced by the promissory
note of the Pledgor dated June 30, 1997.
To induce the Pledgee to make the loan, the Pledgor has agreed to
pledge certain stock to the Pledgee as security for the repayment of the
loan.
It is therefore agreed:
PLEDGE
1. In consideration of the sum TWO MILLION DOLLARS ($2,000,000.00)
lent to the Pledgor by the Pledgee, receipt of which is acknowledged,
the Pledgor grants a security interest to the Pledgee in instruments of
the following description:
ALL OF THE ISSUED AND OUTSTANDING COMMON AND PREFERRED
STOCK OF SMTEK, INC. A CALIFORNIA CORPORATION, EVIDENCED BY
CERTIFICATE NUMBER 50 STANDING IN THE NAME OF DDL ELECTRONICS,
INC. AND REPRESENTING 250,000 SHARES OF THE COMMON STOCK OF
SMTEK, INC.
Said certificates shall be duly endorsed in blank and delivered to
the Pledgee with this Agreement. The Pledgor appoints the Pledgee as
his attorney-in-fact to arrange for the transfer of the pledged shares
on the books of the issuer to the name of the Pledgee. The Pledgee
shall hold the pledged shares as security for the repayment of the loan,
and shall not encumber or dispose of the shares except in accordance
with the provisions of Paragraph 8 of this Agreement.
DIVIDENDS
2. During the term of this pledge, all dividends and other amounts
received by the Pledgee as a result of the Pledgee's record ownership of
the pledged shares shall be applied to the payment of the principal and
interest on the loan. This provision shall not apply to intercompany
transfers in the ordinary course of business.
<PAGE>
VOTING RIGHTS
3. During the term of this pledge, and as long as the Pledgor is not
in default in the performance of any of the terms of this Agreement or
in the payment of the principal or interest of the loan, the Pledgor
shall have the right to vote the pledged shares on all corporate
questions. The Pledgee shall execute due and timely proxies in favor of
the Pledgor to this end.
REPRESENTATIONS
4. The Pledgor warrants and represents that there are no
restrictions on the transfer of any of the pledged shares, other than
may appear on the face of the certificates and that the Pledgor has the
right to transfer the shares free of any encumbrances.
ADJUSTMENT
5. In the event that, during the term of this pledge, any share
dividend, reclassification, readjustment, or other change is declared or
made in the capital structure of the company that has issued the pledged
shares, all new, substituted, and additional shares or other securities
issued by reason of any change shall be held by the Pledgee in the same
manner as the shares originally pledged under this Agreement.
WARRANTS AND RIGHTS
6. In the event that during the term of this pledge, subscription
warrants or any other rights or options shall be issued in connection
with the pledged shares, the warrants, rights, and options shall be
immediately assigned to the Pledgee by the Pledgor, and if exercised by
the Pledgor, all new shares or other securities so acquired by the
Pledgor shall be immediately assigned to the Pledgee to be held in the
same manner as the shares originally pledged under this Agreement.
PAYMENT OF LOAN
7. On payment at or before maturity of the principal and interest of
the loan, less amounts received and applied by the Pledgee in reduction
of the loan, the Pledgee shall transfer to the Pledgor all the pledged
shares and all rights received by the Pledgee as a result of the
Pledgee's record ownership of the pledged shares.
DEFAULT
8. In the event that the Pledgor defaults in the performance of any
of the terms of this Agreement, or in the payment at maturity of the
principal or interest of the loan, the Pledgee shall have the rights and
remedies provided in the California Commercial Code. In this
connection, the Pledgee may, on five days' written notice to the Pledgor
and without liability for any diminution in price that may have
occurred, sell all the pledged shares in the manner and for the price
that the Pledgee may determine at either public or private sale. At any
bona fide public or private sale the Pledgee shall be free to purchase
all or any part of the pledged shares. In the event that Pledgee
purchases the shares at a private sale, the minimum bid by the Pledgee
shall be the then outstanding balance of principal and interest on the
loan. Out of the proceeds of any sale the Pledgee may retain an amount
equal to the principal and interest then due on the loan, plus the
<PAGE>
amount of the expenses of the sale, and shall pay any balance of the
proceeds of any sale to the Pledgor. If the proceeds of the sale are
insufficient to cover the principal and interest of the loan plus
expenses of the sale, the Pledgor shall remain liable to the Pledgee for
any deficiency in accordance with the provisions set forth in Commercial
Code Section 9504.
DATED: JUNE 30, 1997
PLEDGOR PLEDGEE
DDL ELECTRONICS, INC. THOMAS M. WHEELER
/s/Gregory Horton /s/Thomas M. Wheeler
_________________________ ________________________
GREGORY HORTON, PRESIDENT THOMAS M. WHEELER
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
From: DDL Electronics, Inc. Contact: Rick Vitelle
2151 Anchor Court Chief Financial Officer
Newbury Park, California 91320 (805) 376-9415, ext. 142
DDL ELECTRONICS PAYS OFF $5.3 MILLION NOTES
DDL also agrees to acquire a contract manufacturing company
NEWBURY PARK, CA, July 2, 1997 -- DDL Electronics, Inc. (NYSE:DDL)
announced today that it has repaid in full its 10% Senior Secured Notes due
July 1, 1997 (the "Senior Notes") in the aggregate amount of $5.3 million.
To raise a portion of the funds needed to pay off the Senior Notes, DDL
borrowed $2 million from a private investor (the "Investor") on June 30, 1997
under an 8% promissory note which is convertible into DDL common stock at
$0.75 per share (the "Convertible Note"). The shares which are issuable upon
conversion have registration rights, but are subject to a three month lock-up
period. The Convertible Note matures August 31, 1998 and is secured by a
pledge of all of the outstanding shares of SMTEK, Inc., DDL's U.S. operating
subsidiary. DDL also agreed to give the Investor two seats on its seven-
person Board of Directors.
Concurrent with entering into the Convertible Note, DDL agreed to acquire
a privately-held electronics contract manufacturing company in Florida that is
controlled by the Investor for nine million shares of DDL's common stock.
This acquisition is subject to the approval of DDL's stockholders and to
obtaining a fairness opinion on the transaction.
DDL is an independent provider of electronic manufacturing services
("EMS") for electronic equipment manufacturers. DDL also manufactures printed
circuit boards ("PCBs") for use primarily in the computer, communications and
instrumentation industries. Its EMS facilities are located in Southern
California and in Northern Ireland, and its PCB facilities are located in
Northern Ireland.
Certain statements made above are forward-looking in nature and reflect
DDL's current expectations and anticipated future plans. Such statements
involve various risks and uncertainties that could cause actual results to
differ materially from those forecast in the statements. Factors that might
cause such differences would include, without limitation, the factors
described as "Risk Factors" in DDL's Registration Statement on Form S-3 (No.
333-02969) on file with the Securities and Exchange Commission.
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