<PAGE>
As filed with the Securities and Exchange Commission on July 16, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
DDL ELECTRONICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 33-0213512
- ------------------------------ ------------------------------------
State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2151 Anchor Court
Newbury Park, California 91320
Telephone: (805) 376-9415
Telecopier: (805) 376-9015
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------
Mr. Richard K. Vitelle
Vice President -- Finance
DDL Electronics, Inc.
2151 Anchor Court
Newbury Park, California 91320
Telephone: (805) 376-9415
Telecopier: (805) 376-9015
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copy to:
Patrick Daugherty, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center
Charlotte, NC 28202-4000
Telephone: (704) 417-3101
Telecopier: (704) 377-4814
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box. [ ]
<PAGE>
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following
box.[x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box.[ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================
Title of each class Amount Proposed Proposed Amount of
of securities to be to be maximum offering maximum aggregate registration
registered registered price offering price fee
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding Common
Stock, $.01 par
value 4,719,999 shares $1.156 per share(1) $5,456,318.84 (1) $1,653
==============================================================================================================
</TABLE>
(1) Based upon the average of the high and low prices for the Common
Stock on July 11, 1997, as reported in the consolidated reporting
system, in accordance with Rule 457(c).
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this
Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be
sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such jurisdiction.
SUBJECT TO COMPLETION
DATED JULY 16, 1997
DDL ELECTRONICS, INC.
Common Stock
This Prospectus relates to the resale from time to time of up to
4,719,999 shares (the "Shares") of common stock, $.01 par value (the
"Common Stock"), of DDL Electronics, Inc. (the "Company") by certain
stockholders of the Company named herein (the "Selling Stockholders").
"See Selling Stockholders" and "Plan of Distribution."
The Shares may be sold from time to time by the Selling
Stockholders on the New York Stock Exchange (the "NYSE") or the Pacific
Exchange (the "PE") on terms to be determined at the time of each sale.
The Selling Stockholders also may make private sales from time to time
directly or through a broker or brokers. Alternatively, the Selling
Stockholders may offer Shares from time to time to or through
underwriters, dealers or agents, who may receive consideration in the
form of discounts and commissions. Such compensation, which may exceed
ordinary brokerage commissions, may be paid by the Selling Stockholders
and/or the purchasers of the Shares for whom such underwriters, dealers
and agents may act. See "Selling Stockholders" and "Plan of
Distribution."
The Selling Stockholders and any dealers or agents that may
participate in the distribution of the Shares may be considered
"underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any profit on the sale of Shares
offered by them and any discounts, commissions or concessions received
by any such dealers or agents may be considered underwriting discounts
and commissions under the Securities Act.
The Company will receive no proceeds from the sale of the Shares by
the Selling Stockholders hereunder, but the Company will pay the
expenses that it incurs in connection with the registration of the
Shares with the Securities and Exchange Commission (the "SEC"). See
"Plan of Distribution" for indemnification arrangements between the
Company and the Selling Stockholders.
The Common Stock is listed on the NYSE and on the PE under the
symbol "DDL." On July 15, 1997, the closing price per share of the
Common Stock, as reported in the consolidated reporting system, was
$1.125.
<PAGE>
--------------------------------------------
The Shares involve a high degree of risk. See "Risk Factors,"
commencing on page 3.
--------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------------------------------------
The date of this Prospectus is July ___, 1997.
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement on Form
S-3 under the Securities Act with respect to the Shares. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Shares,
reference is made to the Registration Statement, including the exhibits
and schedules filed as part thereof. Statements contained in this
Prospectus as to the contents of any contract or any other document are
not necessarily complete, and, in each such instance, reference is
hereby made to the copy of the contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in
all respects by this reference thereto.
The Company is subject to the informational and reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the SEC. The Registration
Statement and exhibits and schedules thereto, as well as such reports,
proxy statements and other information, may be inspected and copied at
the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located
at 7 World Trade Center, Suite 1300, New York, New York 10048, at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 5670
Wilshire Boulevard, 11th Floor, Los Angeles, California 90036. Copies
of all or any part of such materials may be obtained from any such
office upon payment of the fees prescribed by the SEC. The SEC
maintains a World Wide Web site (http://www.sec.gov), which contains
reports, proxy and information statements and other information filed
electronically through the SEC's Electronic Data Gathering, Analysis and
Retrieval System (known as "EDGAR"). Copies of all or any part of such
materials may be obtained from any such office upon payment of the fees
prescribed by the SEC. Such information may also be inspected at the
offices of the NYSE at 20 Broad Street, New York, New York 10005 and at
the offices of the PE at 233 South Beaudry Avenue, Los Angeles,
California 90012.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed with the SEC by the Company
and are hereby incorporated by reference into this Prospectus: (i) the
Company's Annual Report on Form 10-K for its fiscal year ended June 30,
1996 (the "Form 10-K"); (ii) the Company's Amendment on Form 10-K/A to
the Form 10-K; (iii) the Company's Quarterly Report on Form 10-Q for its
fiscal quarter ended September 30, 1996; (iv) the Company's Quarterly
Report on Form 10-Q for its fiscal quarter ended December 31, 1996; (v)
the Company's Quarterly Report on Form 10-Q for its fiscal quarter ended
March 31, 1997; (vi) the Company's Current Reports on Form 8-K, dated
the following dates: July 9, 1997, June 12, 1997, June 11, 1997,
September 18, 1996 and August 30, 1996; and (vii) the description of the
Common Stock contained in the Company's Registration Statement on Form
8-A filed with the SEC pursuant to Section 12 of the Exchange Act. All
other documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act from the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by
reference herein and shall be deemed to be a part hereof from the date
of filing thereof.
<PAGE>
Any statement contained in a document incorporated or deemed
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document that is
also deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute
a part of this Prospectus.
The Company hereby undertakes to provide without charge to each
person to whom a Prospectus is delivered, upon written or oral request
of such person, a copy of any document incorporated herein by reference
(not including exhibits to documents that have been incorporated herein
by reference unless such exhibits are specifically incorporated by
reference in the document which this Prospectus incorporates). Requests
should be directed to Mr. Richard K. Vitelle, Chief Financial Officer,
DDL Electronics, Inc., 2151 Anchor Court, Newbury Park, California
91320, telephone (805) 376-9415.
RISK FACTORS
Prospective investors should carefully consider the following
factors, in addition to the other information presented in this
Prospectus, before purchasing the Shares.
Risk that Pending Acquisitions will not Close. On May 29, 1997,
the Company signed a letter of intent with Century Electronics
Manufacturing, Inc. ("CEMI") providing for a merger of CEMI with and
into a wholly-owned subsidiary of the Company (the "Letter of Intent").
Pursuant to the Letter of Intent, CEMI was to loan up to $3.3 million
to the Company on or before June 27, 1997 for retirement of the
Company's 10% Senior Secured Notes in the aggregate principal amount of
$5,300,000 (the "Senior Notes"). Such financing was supposed to be
evidenced by a promissory note with a six-month term, paying interest at
10% per annum and secured by collateral acceptable to CEMI, but $3.3
million in funds were not made available by CEMI on June 27, 1997 or at
any other time. On June 30, 1997, the Company notified CEMI that its
failure to fund $3.3 million on June 27, 1997 for retirement of the
Senior Notes constituted a material breach of the Letter of Intent. The
Company has reserved its right to seek appropriate relief from the
courts for such breach. Furthermore, the Company has provided CEMI with
a draft of a definitive merger agreement, but CEMI has not responded
with comments. Accordingly, there can be no assurance that the merger
with CEMI will be completed on the terms disclosed herein, or at all, or
that there will be no material change in the information included and
incorporated herein with respect to such possible merger.
On June 30, 1997, in order to raise the balance of the funds
necessary to repay the Senior Notes, the Company borrowed $2.0 million
from Thomas A. Wheeler in exchange for a $2.0 million convertible
promissory note bearing interest at a rate of 8% per annum (the
"Convertible Note"). The Convertible Note matures on August 31, 1998,
is convertible into Common Stock at $0.75 per share and is secured by a
pledge of all of the outstanding shares of SMTEK, Inc. ("SMTEK"). The
Company agreed to give Mr. Wheeler two seats on its Board of Directors.
These seats were filled by Mr. Wheeler and Charlene A. Gondek. The
Company also agreed to acquire all of the issued and outstanding shares
of Jolt Technology, Inc. ("Jolt"), a privately-held electronics
manufacturing company owned by Mr. Wheeler, Ms. Gondek and a third
<PAGE>
individual, for nine million shares of Common Stock.
The Company is currently negotiating a definitive agreement and
other legal documents relating to its acquisition of Jolt. The specific
terms of such documents are subject to negotiation, and the closing of
the Jolt acquisition will be subject to many conditions, some of which
are beyond the Company's control, including obtaining a "fairness"
opinion and stockholder approval. There can be no assurance that the
Jolt acquisition will be completed on the terms described herein, or at
all, or that there will be no material change in the information
included and incorporated herein with respect to the Jolt acquisition.
Furthermore, there can be no assurance, should either the CEMI
merger or the Jolt acquisition (or both) be completed, that anticipated
benefits of the acquisitions will be realized. In any event, the
process of integrating the operations of such companies into the
Company's operations may result in unforeseen operating difficulties,
would absorb significant management attention and could require the use
of significant financial resources otherwise available for ongoing
development and expansion of the Company's existing operations.
Significant Operating Losses. The Company has incurred significant
operating losses repeatedly in recent quarters and years. Such losses
totaled $1,167,000, $4,970,000, $6,948,000 and $5,067,000 in the
Company's fiscal years ended June 30, 1996, 1995, 1994 and 1993,
respectively. Indeed, with the exception of the quarter ended March 31,
1997, during which the Company generated operating income of $373,000,
the Company has incurred operating losses for all recent reporting
periods. The Company could incur further operating losses in the future
due to goodwill amortization expense arising from the acquisition of
SMTEK, among other factors. Operating losses could at least continue
until such time as sales increase to a level sufficient to offset
goodwill amortization and other operating costs and expenses. No
assurance can be given as to whether or when such sales increases or
sustained operating profits may be achieved. See "Business -- Recent
Developments" in the Form 10-K and "The Company" herein.
In attempting to maintain and improve operating profitability,
management is focusing on problems such as aggressive price competition
throughout the industry and the Company's need to strengthen its sales
and marketing initiatives. All three of the Company's operating units
currently have significant underutilized manufacturing capacity which
management attributes to these problems. Although DDL has implemented
operational improvements during the past fourteen months that have
resulted in operating income of $373,000 for the quarter ended March 31,
1997 and increased sales of $3.1 million and increased gross profit of
$626,000 in the three months ended March 31, 1997 as compared to the
same period in 1996, there can be no assurance that the Company will be
able to maintain or improve operating profitability. See "Business --
Recent Developments" in the Form 10-K and "The Company" herein.
Limited Capital Resources; Continuing Need for Financing. The
Company's ability to maintain its current revenue base and to fund its
business operations is dependent on the availability of adequate
capital. Without sufficient capital, the Company's growth will be
limited and its operations will be adversely affected. As a result of
significant operating losses in recent years and the Company's repayment
of the Senior Notes on June 30, 1997, the Company currently has limited
capital. General market conditions and the Company's future
<PAGE>
performance, including its ability to generate profits and positive cash
flow, will also impact the Company's resources. In addition, the
Company's future capital requirements will depend upon a number of
factors, such as competitive conditions and capital costs, that are not
within the Company's control. The Company anticipates that it may be
required to issue additional equity or debt securities and may use other
financing sources to fund growth and development. The sale of
additional equity securities would result in additional dilution to the
stockholders of the Company. The failure of the Company to obtain
additional capital when needed could have material adverse effects on
the Company's business and future prospects. No assurance can be given
that additional financing will be available when needed on acceptable
terms or at all.
Dependence on Key Personnel. The Company's success depends to a
large extent upon the efforts and abilities of key managerial and
technical personnel. Pursuant to a change in control of the Company in
May 1995, the Company's incumbent senior management was replaced with
interim senior management while the Company searched for permanent
senior management possessed of desired skills, experience and other
qualifications. The operating management of the Company's Northern
Ireland subsidiaries was not changed.
Upon consummation of the acquisition of SMTEK in January 1996, the
President and Chief Executive Officer of SMTEK, Mr. Gregory L. Horton,
became the President and Chief Executive Officer of the Company and a
member of the Company's Board of Directors. Mr. Horton's experience
within the industry in which the Company operates will continue to be of
considerable importance to the Company. Pursuant to the respective
employment agreements of Messrs. Horton and Vitelle, Vice President of
Finance and Chief Financial Officer, Mr. Horton's term of employment
continues until November 1, 1999 and Mr. Vitelle's term of employment
continues until September 12, 2001, unless earlier terminated in
accordance with the terms and conditions of each respective agreement.
With respect to each such employment agreement, either the Company or
Mr. Horton or Mr. Vitelle, as the case may be, may terminate employment
with or without cause, although certain amounts are to be paid or
forfeited to the other party in the event of a termination of employment
without cause. There can be no assurance that the Company will be able
to retain its existing personnel or attract additional skilled employees
in the future. The loss of any of the Company's key personnel or its
inability to attract and retain key employees in the future could have a
material adverse effect on the Company's operations and business plan.
The Company is the beneficiary of "key-man" life insurance policy with
respect to Mr. Horton in the amount of $1.3 million. The Company does
not intend to obtain similar insurance policies with respect to the
lives of any of its other officers or personnel.
Concentration of Revenues Among Major Customers. In the nine
months ended March 31, 1997, two customers accounted for approximately
55% of the sales of DDL Electronics Limited, a wholly-owned subsidiary
of the Company located in Northern Ireland ("DDL-E"). There can be no
assurance that these customers will maintain their business relationship
with DDL-E. The loss of all or a substantial portion of DDL-E's
revenues attributable to any of its major customers that could not be
offset by a new customer could have a material adverse effect on the
Company's financial condition and results of operations.
<PAGE>
In the fiscal year ended June 30, 1996 ("fiscal 1996"), four
customers accounted for more than 60% of SMTEK's sales. Currently, more
than 50% of SMTEK's business is generated by customers located in
California. There can be no assurance that any of these customers will
maintain their volume of business with SMTEK. The loss of all or a
substantial portion of SMTEK's revenues attributable to any of SMTEK's
major customers, or an adverse change in economic conditions in
California, could have a material adverse effect on the financial
condition and results of operations of SMTEK and the Company.
Historical Dependence on Government Business; Recent Shift into
Commercial Business. A substantial portion of SMTEK's historical
revenues have been derived from contracts with United States government
prime contractors. Approximately 50% and 69% of SMTEK's net sales in
fiscal 1996 and 1995, respectively, were derived from sales to
government contractors in the defense and space sectors. In fiscal
1997, more than 75% of SMTEK's contracts have been for commercial end
use. Business with the United States and other governments is, in
general, subject to a variety of risks, including delays in funding and
performance of contracts; possible termination of contracts or
subcontracts for the convenience of the government; termination or
modification of contracts or subcontracts in the event of change in the
government's requirements; policies or budgetary constraints;
adjustments as a result of audits; and increases or unexpected costs
causing losses or reduced profits under fixed-price contracts. There
can be no assurance that any or all of these risks will not come to
fruition in the Company's business.
The ongoing shift in SMTEK's revenue base from prime government
contractors to commercial original equipment manufacturers ("OEMs") will
require significant adjustments in operations, including changes in
project management, materials management and order turnaround time. At
the management level, significant shifts in internal processes,
including strategic planning, marketing and throughput planning, are
also required for a successful completion of this transition. There can
be no assurance that SMTEK will be able to adapt to any or all of these
changes.
The anticipated shift in SMTEK's revenue base may also result in
increased financial exposure. Cancellation provisions in commercial
contracts generally are not as generous as government contracts and may
expose SMTEK to materials purchase obligations which later prove
unnecessary.
Industry Conditions. The industries and markets in which the
Company's customers compete are characterized by rapid technological
change and product obsolescence. As a result, the end products made by
the Company's customers have relatively short product lives. The
Company's ability to compete successfully will depend in substantial
part on its ability to procure appropriate raw materials and maintain
its quality asset base, incorporate or respond to advances in
technology, manufacture and price its products and services
competitively and achieve significant market acceptance. Unexpected
delays in completing or shipping products, or design or production
<PAGE>
problems, may arise and could adversely affect the Company.
Competition. The markets for the Company's products and services
are highly competitive. Competition is principally based on price,
product and service quality, order turnaround time and technical
capability. The technology used by the Company in fabricating its
products and providing its services is widely available, and the Company
has a large number of domestic and foreign competitors, many of which
are larger than the Company and possess much greater financial,
marketing, personnel and other resources. The Company also faces
competition from current and prospective customers that evaluate the
Company's capabilities against the merits of manufacturing products
internally. To remain competitive, the Company must continue to provide
technologically advanced manufacturing services, maintain quality
levels, offer flexible delivery schedules, deliver finished products on
a reliable basis and compete favorably on the basis of price. The
Company currently may be at a competitive disadvantage as to price when
compared to manufacturers with lower cost structures, particularly
manufacturers with established facilities where labor costs are lower,
and manufacturers with larger sales volume and resultant lower unit
costs.
Environmental Matters. The Company's operations involve the use
and handling of environmentally hazardous substances. It is currently a
party to certain lawsuits brought in connection with a waste disposal
site in California known as the "Stringfellow Superfund Site." Total
cleanup costs for the Stringfellow Superfund Site have been estimated at
$600 million. Under a proposed settlement agreement with respect to one
such suit, the Company's probable liability for such cleanup costs is
estimated at $120,000 and the Company has accrued this amount as its
estimate of the liability it will ultimately bear. Final settlement and
timing of payment are currently indeterminable, however, and no
assurance can be given that any settlement will be achieved. It is
impossible to determine the Company's ultimate liability for such
cleanup costs. Its allocated share of such cleanup costs could have a
material adverse impact on its business, financial condition and results
of operations. See "Business -- Environmental Regulation" in the Form
10-K.
In addition, the Company is currently involved in certain
remediation and investigative studies regarding soil and groundwater
contamination with respect to certain property in California previously
leased by its Anaheim printed circuit board manufacturing facility.
Initial estimates from environmental engineering firms indicate that it
could cost from $1,000,000 to $3,000,000 to fully clean up the site and
could take as long as ten years to complete. At March 31, 1997, the
Company has a reserve of $530,000, which represents its estimated share
of future remediation costs at this site. Based on consultation with
the environmental engineering firms, management believes that the
Company has made adequate provision for the liability based on probable
loss. It is possible, however, that the future remediation costs at
this site may differ significantly from the estimates, and may exceed
the amount of the reserve. The Company's liability for remediation in
excess of its reserve could have a material adverse impact on its
business, financial condition and results of operations. See "Business
- -- Environmental Regulation" in the Form 10-K.
<PAGE>
Dependence on Suppliers. Certain components used by the Company
are purchased from sources specified by its customers. An interruption
in delivery of these components could have material adverse effects on
the Company. See "Business -- Raw Materials and Suppliers" in the Form
10-K. SMTEK and DDL-E have been adversely affected throughout their
history by delays in production caused by delay in the receipt of
materials, resulting in reduced overall profitability. There can be no
assurance that the same adverse conditions will not recur.
Volatility. The public equity markets in recent years have
experienced extreme price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of companies.
These broad fluctuations may adversely affect the market price of the
Shares. In light of these market considerations, prospective purchasers
should view the Shares as illiquid investments.
Possible Delisting of Common Stock. The Common Stock is currently
listed and traded on the PE and the NYSE. To maintain eligibility for
listing on the NYSE, the Company must satisfy certain continued listing
criteria, including minimum levels regarding (1) number of stockholders
and shareholdings (1,200 holders and average monthly trading volume less
than 100,000 shares), (2) number of publicly-held shares (600,000), (3)
aggregate market value of publicly-held shares ($8,000,000) and (4)
annual net income (an average of $600,000 per year for the past three
years if net tangible assets are less than $12,000,000). The NYSE has
notified the Company that, due to the Company's failure to satisfy the
annual net income and net tangible asset criteria, the Common Stock is
subject to delisting. The NYSE has not yet taken affirmative action to
delist the Common Stock, but it has reserved the right to take such
action in the future. Delisting of the Common Stock from the NYSE could
have material adverse effects on the price and liquidity of the Common
Stock, depending upon, among other things, the Company's eligibility at
that time to continue listing the Common Stock on the PE or, failing
that, to list the Common Stock on Nasdaq or some other exchange. There
can be no assurance that the Common Stock could be listed on Nasdaq or
any other exchange at any time.
Proprietary Rights and Patents. The Company holds no copyrights,
patents or trademarks that are material to the sale of its products,
and currently the Company does not intend to obtain any copyrights,
patents or trademarks with respect to its intellectual property. There
can be no meaningful protection from competitors developing and
marketing products and services competitive with those of the Company.
In addition, companies that obtain patents claiming products or
processes that are necessary for or useful to the development or
operation of the Company's products and services can bring legal actions
against the Company claiming infringement. Although management is not
aware of any claim that either the Company or any of its subsidiaries
infringes any existing patent, in the event that in the future the
Company is unsuccessful against such claim it may be required to obtain
licenses to such patents or to other patents or proprietary technology
in order to develop, manufacture or market its products and services.
There can be no assurance that the Company will be able to obtain such
licenses on commercially reasonable terms or that the patents underlying
the licenses will be valid and enforceable.
Risks Associated with International Business. Revenues from
international business could continue to represent a substantial
percentage of the Company's total revenues. Such business is subject to
<PAGE>
various risks, including exposure to currency fluctuations, political
and economic instability, the greater difficulty of administering
business abroad and the need to comply with a wide variety of export
laws, tariff regulations and regulatory requirements. Such risks are
amplified in the case of the Company because a large portion of its
assets and operations are located outside of the United States. See
"Business" in the Form 10-K and "The Company" herein.
No Dividends. There can be no assurance that the operations of the
Company will ever result in revenues sufficient to enable the Company to
resume paying dividends on its Common Stock, which were suspended in
1989. For the foreseeable future, management anticipates that any
earnings generated by the Company's operations will be used to finance
the Company's business and that cash dividends on the Common Stock will
not be paid to stockholders.
THE COMPANY
This section of the Prospectus contains certain forward-looking
statements that involve various risks and uncertainties. Actual
results may differ from the results suggested by such forward-looking
statements. Factors that might cause such differences would include,
without limitation, those discussed in "Risk Factors."
The Company manufactures printed circuit boards ("PCBs"), also
called printed wire boards ("PWBs"), for use primarily in the computer,
communications and instrumentation industries. The Company also is an
independent provider of electronic manufacturing services ("EMS") for
electronic equipment manufacturers. Its PCB facilities are located in
Northern Ireland and primarily serve customers in Western Europe. Its
EMS facilities are located in Northern Ireland and Southern California.
The Company's principal executive offices are located at 2151 Anchor
Court, Newbury Park, California 91320, telephone (805) 376-9415.
All of the Company's products and services are "customized" insofar
as they are produced only after the Company has contracted for their
design and sale. The Company relies on customer specifications in
manufacturing products. Such specifications may be developed by the
customer alone or may involve some assistance provided by the Company.
Customers submit requests for quotations on each project. The Company
prepares bids based on estimates of its costs.
European PCB Operations
The Company conducts its PCB business through a wholly-owned
subsidiary, Irlandus Circuits Limited ("Irlandus").
The PCB Industry. PCBs range from simple single- and double-sided
boards to boards with more than twenty layers. When joined with
electronic components in an assembly process, they comprise the basic
building blocks of electronic equipment. PCBs consist of fine lines of
a conductive material, such as copper, which are bonded to a non-
conductive panel, typically laminated epoxy glass. The conductive
pathways in a PCB form electrical circuits and replace wire as a means
of connecting electronic components.
On technologically advanced multilayer boards, conductive pathways
between layers are connected with traditional plated through-holes and
may incorporate surface mount technology. "Through-holes" are holes
<PAGE>
drilled entirely through the board that are plated with a conductive
material and constitute the primary connection between the circuitry on
the different layers of the board and the electronic components attached
to the boards later. "Surface mount" boards are boards on which
electrical components are soldered instead of being inserted into
through-holes.
Although much more complex and difficult to produce, surface mount
boards can substantially reduce wasted space associated with through-
hole technology and permit greatly increased surface and inner layer
densities. Single-sided PCBs are used in electronic games and
automobile ignition systems, while multilayer PCBs find use in more
advanced applications such as computers, office equipment,
communications, instrumentation and defense systems.
The development of increasingly sophisticated electronic equipment,
which combines higher performance and reliability with reduced size and
cost, has created a demand for greater complexity, miniaturization and
density in electronic circuitry. In response to this demand, multilayer
technology is advancing rapidly on many fronts, including the widespread
use of surface mount technology. More sophisticated boards are being
created by decreasing the width of the tracks on the board and
increasing the amount of circuitry that can be placed on each layer.
Fabricating advanced multilayer PCBs requires high levels of capital
investment and complex, rapidly changing production processes.
Since the mid-1980s, the Company has increasingly focused on the
fabrication of advanced multilayer PCBs. Management believes that the
market for these boards offers the opportunity for more attractive
margins than the market for less complex single and double-sided boards.
As the sophistication and complexity of PCBs increase, yields
typically fall. Historically, the Company relied on tactical quality
procedures, in which defects are assumed to exist and inspectors examine
products lot by lot and board by board to identify deficiencies. This
traditional approach to quality control is not adequate, however, in an
advanced multilayer PCB fabrication environment. Irlandus is now
striving to minimize the occurrence of product defects.
Market demand for PCBs historically has been driven by end-user
product demand. Market supply has followed a classic "boom and bust"
cycle because there are few barriers to entry. High margins triggered a
flood of supply to the market in the 1980s, which drove prices down
until significant industry consolidation occurred in the early 1990s.
Competition among PCB manufacturers is based on price, quality,
order turnaround speed and technical differentiation within the
manufacturing process. Virtually every order is bid competitively. The
profit of an individual manufacturer typically depends on its throughput
mix; premium panels generate higher margins. Both Irlandus and DDL-E
have achieved "ISO 9002" certification, which is increasingly necessary
to attract business.
Irlandus. Irlandus is located in Craigavon, Northern Ireland,
where it produces high-quality, high-technology, multilayer PCBs.
Established in 1972 by Andrus Circuits, a German company, it was
acquired by the Company in 1984 and currently employs approximately 160
people. Irlandus has a base of approximately 150 active customers
throughout Europe. In fiscal 1997, Irlandus' largest customer accounted
for approximately 22% of its total revenues. No other customer
represented more than 10% of Irlandus' fiscal 1997 revenues. Over 80%
<PAGE>
of its sales are made by a direct sales force; the remainder are
effected by independent sales representatives.
Since 1989 Irlandus has struggled to compete effectively in a
marketplace characterized by excess supply. In fiscal 1997, it did
achieve an operating profit, which management attributes to a new
strategic focus on the high-technology, prototype and premium fast-
service end of the multilayer PCB market. There can be no assurance,
however, that Irlandus will continue to profit from its implementation
of this strategy.
EMS Contracts
The Company conducts its EMS business in Western Europe through
DDL-E and in the United States through SMTEK.
The EMS Industry. EMS contracts are estimated to generate more
than $30 billion in revenues annually worldwide. The EMS market has
three segments: high-volume, medium-volume and low-volume. The Company
focuses on the medium-volume segment, which accounts for approximately
20% of global demand. Manufacturers in this segment are highly
fragmented and competitive. Customer bases tend to be highly
concentrated, with two or three customers typically accounting for most
of the typical manufacturer's revenue.
Three types of technology are employed in providing higher-margin,
higher-complexity contract manufacturing in the medium-volume EMS market
segment: surface mount technology (SMT), which accounts for the majority
of manufacturing; and through-hole technology and system assembly, which
together account for the remainder. Management believes that the
medium-volume EMS market is continuing to move toward SMT as the
preferred manufacturing technique, mainly because semiconductors have
continued to decline in size, thereby lowering manufacturing tolerances.
Competition in this market segment is driven by service, order
turnaround time and quality. Margins tend to be slightly higher here
than in the high-volume segment because of greater complexity and the
generally higher price associated with specialty products. Also, the
customers in this segment tend to be smaller firms, with less bargaining
power. Such customers include specialized equipment providers to the
financial services, computer hardware, medical services and
telecommunications industries, among others.
DDL-E. DDL-E provides turnkey EMS using both SMT and through-hole
technologies. Under the turnkey process, DDL-E procures customer-
specified components from suppliers, assembles the components onto PCBs
and performs post-assembly testing. DDL-E provides EMS primarily for
original equipment manufacturers located in Western Europe and sells
system assembly and subassembly services to the same customer base. It
does not fabricate any of the components or PCBs used in these
processes. Instead, after acceptance of an order, it procures the
necessary components from distributors.
In the past, DDL-E has procured a portion of its PCB requirements
from its affiliate, Irlandus, at prevailing commercial prices. Located
approximately two miles from Irlandus' facilities in Craigavon, Northern
Ireland, DDL-E was founded by the Company in 1989 to complement
Irlandus' PCB business by adding value to boards at the next level of
manufacturing. DDL-E has traditionally focused on customers who are
major OEMs in global businesses across a wide range of industries. Its
customer base is highly concentrated; in fiscal 1997, four customers
accounted for 73% of sales. All of its sales are made by its direct
sales force.
<PAGE>
Historically, there has been a high level of interdependence in the
EMS/OEM relationship. Since contracted manufacturing may be a
substitute for all or some portion of a customer's captive EMS
capability, continuous communication between the manufacturer and the
customer is critical. To facilitate such communication, DDL-E maintains
a customer service department whose personnel work closely with the
customer throughout the assembly process. Engineering and service
personnel coordinate with the customer on product implementation,
thereby providing feedback on issues such as ease of assembly and
anticipated production lead times. Component procurement is commenced
after component specifications are verified and approved sources are
confirmed with the customer. Concurrently, assembly routing and
procurement for conformance with workmanship standards are defined and
planned.
"In-circuit" test fixturing also is designed and developed. In-
circuit tests are normally performed on all assembled circuit boards for
turnkey projects. Such tests verify that components have been properly
inserted and meet certain functional standards and that electrical
circuits are properly completed. In addition, under protocols specified
by the customer, DDL-E performs customized functional tests designed to
ensure that the board or assembly will perform its intended function.
Company personnel monitor all stages of the assembly process in an
effort to provide flexible and rapid responses to the customer's
requirements, including changes in design, order size and delivery
schedule.
The materials procurement element of DDL-E's turnkey services
consists of the planning, purchasing, expediting and financing of the
components and materials required to assemble a PCB or system-level
assembly. Customers have increasingly required DDL-E and other
independent providers of EMS to purchase all or some components directly
from component manufacturers or distributors and to finance the
components and materials. In establishing a turnkey relationship with
an independent EMS provider, a customer must incur expenses in order to
qualify the EMS provider (and, in some cases, the provider's sources of
component supply), refine product design and EMS processes and develop
mutually compatible information and reporting systems. With this
relationship established, management believes that customers experience
significant difficulty in expeditiously and effectively reassigning a
turnkey contract to a new assembler or in taking on the project
themselves.
While the interdependence between EMS providers and OEMs may be a
source of stability in DDL-E's customer base, it also is an obstacle
when DDL-E seeks to attract new customers.
SMTEK. SMTEK is an EMS provider, specializing in SMT design and
assembly of circuit boards. Its operations range from analysis and
design to complex manufacturing and test services. Its services are
marketed to the military, medical, avionics, industrial and space
industries and for high-end commercial applications.
SMTEK's core competence includes: (i) mechanical thermal and
structural engineering analysis and design of printed circuit boards;
(ii) full procurement of all materials and components; and (iii) full
in-circuit and functional testing capabilities. Such operations are
integrated with a contract manufacturing capability that relies in
substantial part upon factory automation. SMTEK employs approximately
180 persons and conducts its operations in a 45,000-square-foot facility
located in Newbury Park, California.
SMTEK was founded in 1986 by Mr. Horton, who became the Company's
President and Chief Executive Officer when the Company acquired SMTEK in
January 1996. Over the years SMTEK has focused on supplying circuit
<PAGE>
board assemblies to the aerospace and avionics industry. Management
believes that SMTEK's automated production processes and design
capabilities are a competitive advantage. Such automated processes rely
upon SMT, an unpatented design and production technique believed by
management to be less expensive and more efficient than component
through-hole insertion. SMTEK competes against companies that are much
larger and better capitalized than the Company. In the past Mr. Horton
was able to increase the revenues of SMTEK by focusing on contracts of
much smaller size than those sought actively by its principal
competitors. SCI Systems is the leading firm in the EMS industry.
Management believes that the Company's largest direct competitor is
Solectron Corporation.
In fiscal 1997, SMTEK's revenues from governmental sources were 50%
of total revenues, as compared with 69% in the year-earlier period,
evidencing a trend (which has continued) toward greater reliance on
commercial contracts. Commercial revenues, in comparison with
governmental revenues, are characterized by higher dollar amounts but
lower profit margins. Management believes that the profit structure of
most contract manufacturing firms involves a small mark-up on the cost
of materials, which comprises perhaps 85% to 90% of the dollar amount of
the contract. In contrast to the industry norm, SMTEK's cost of
materials typically has run between 50% and 70% of the contract amount,
allowing room for mark-ups on design and other value-adding services.
With the shift to an increasingly commercial customer base, however,
SMTEK is now competing against larger companies for contracts offering
lower profit margins.
SMTEK's backlog at June 27, 1997 amounted to approximately $15
million in orders to be filled within six months under contracts with
approximately 40 customers.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Shares.
DETERMINATION OF OFFERING PRICE
This Prospectus may be used from time to time by the Selling
Stockholders who offer the Shares for sale. The offering price of the
Shares will be determined by the Selling Stockholders and may be based
on market prices prevailing at the time of sale, at prices relating to
such prevailing market prices or at negotiated prices.
SELLING STOCKHOLDERS
The following table provides certain information with respect to
Common Stock beneficially owned by each Selling Stockholder as of the
dates indicated. Except as set forth in the footnotes to the table and
elsewhere in this Prospectus, within the past three years none of the
Selling Stockholders has had a material relationship with the Company or
with any of the Company's predecessors or affiliates other than as a
result of ownership of the securities of the Company. The Shares may be
offered from time to time by the Selling Stockholders named below or
their nominees, and this Prospectus may be required to be delivered by
persons who may be deemed to be underwriters in connection with the
offer or sale of Shares.
<PAGE>
<TABLE>
<CAPTION>
Number of shares Percentage of
of Common Stock Number of shares shares of Common
Beneficially Number of of Common Stock Stock Beneficially
Owned Prior to Shares Beneficially Owned Owned After
Name the Offering Offered After the Offering the Offering
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Par Investment
Partners, L.P. 1,000,000 1,000,000 0 0.0%
A.I.M. Overseas Ltd. 1,670,000 250,000 1,420,000 5.6%
Richard Fechtor 578,550 150,000 428,550 1.7%
Peter D. Fenton 125,000 125,000 0 0.0%
Robert Detwiler 125,000 125,000 0 0.0%
Jeffrey R. Power 135,000 125,000 10,000 (1)
Sheldon M. Fechtor 100,000 100,000 0 0.0%
John Pemble 75,700 75,000 700 (1)
Maurice B. Buchsbaum 25,000 25,000 0 0.0%
Andrew Detwiler 25,000 25,000 0 0.0%
Thomas M. Wheeler 2,719,999 2,719,999 (2) 0 0.0%
</TABLE>
(1) Less than one percent.
(2) All such Shares underlie a $2.0 million secured convertible
promissory note, which principal and accrued interest thereon are
convertible into the Company's Common Stock at $0.75 per share. Mr.
Wheeler became a member of the Board of Directors of the Company on June
30, 1997 upon his $2.0 million loan to the Company which is evidenced by
such convertible note. At that time, the Company also agreed to
purchase Jolt Technology, Inc., a privately-held electronic
manufacturing company controlled by Mr. Wheeler, for nine million shares
of Common Stock, subject to obtaining a fairness opinion and stockholder
approval among other conditions. See "Risk Factors -- Risk that Pending
Acquisitions will not Close."
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling
Stockholders through the facilities of the NYSE or the PE on terms to be
determined at the time of each sale. Alternatively, the Selling
Stockholders may offer Shares from time to time to or through
underwriters, dealers or agents, who may receive compensation in the
form of discounts and commissions. Such compensation, which may exceed
ordinary brokerage commissions, may be paid by the Selling Stockholders
and/or the purchasers of the Shares for whom such underwriters, dealers
and agents may act.
The Selling Stockholders and any dealers or agents that participate
in the distribution of the Shares may be considered "underwriters"
within the meaning of the Securities Act, and any profit on the sale of
<PAGE>
such Shares offered by them and any discounts, commissions or
concessions received by any such dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act. The
aggregate proceeds to the Selling Stockholders from sales of the Shares
will be the purchase price of such Shares less any brokers' commission
required to be paid by the Selling Stockholders.
To the extent required, the specific Shares to be sold, the names
of the Selling Stockholders, the respective purchase prices and public
offering prices, the names of any such agents, dealers and underwriters
and any applicable commissions or discounts with respect to a particular
offer will be set forth in a supplement to this Prospectus.
The Shares may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, at varying
prices determined at the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold by Selling Stockholders in such
jurisdictions only through registered or licensed brokers or dealers.
In addition, in certain states Shares may not be sold unless they have
been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirements is
available and is satisfied.
The Company will pay the expenses that it incurs in connection with
the registration of the Shares with the SEC.
The Company and each Selling Stockholder have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters have been passed upon for the Company by
Nelson Mullins Riley & Scarborough, L.L.P., Charlotte, North Carolina.
EXPERTS
The financial statements (and schedules) of DDL Electronics, Inc. as of
June 30, 1996 and 1995 and for each of the years in the three-year period ended
June 30, 1996, have been included (incorporated by reference) herein and
in the registration statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, appearing
elsewhere (incorporated by reference) herein, and upon the authority of
said firm as experts in accounting and auditing. The report of KPMG
Peat Marwick LLP covering the June 30, 1996 financial statements refers
to a change in accounting for income taxes.
<PAGE>
<TABLE>
<S> <C>
---------------------------- ------------------------------
No dealer, salesperson or other person has been
authorized to give any information or to make any
representations other than those contained in this
Prospectus, and, if given or made, such information
or representations must not be relied upon as having
been authorized by the Company or any Selling
Stockholder. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy,
to any person in any jurisdiction in which such
offer or solicitation is not authorized, or in which DDL ELECTRONICS, INC.
the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. COMMON STOCK
Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances,
create any implication that the information COMMON STOCK
contained herein is correct as of any date PURCHASE WARRANTS
subsequent to the date hereof.
-------------------------------
Table of Contents
-------------------------------
---------------------
Page
PROSPECTUS
Additional Information 2
---------------------
Incorporation of Certain Information by
Reference 2
Risk Factors 3
July___, 1997
The Company 7
Use of Proceeds 10
Determination of Offering Price 10
Selling Stockholders 10
Plan of Distribution 11
Legal Matters 12
Experts 12
---------------------------- ------------------------------
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses to be incurred in connection
with the Offering, all of which are to be borne by the Registrant.
SEC registration fee $ 1,653
Exchange listing fees* 25,000
Accounting fees and expenses* 10,000
Legal fees and expenses* 15,000
Miscellaneous* 3,347
-------
Total* $55,000
=======
- -------------
* Estimated.
Item 15. Indemnification of Directors and Officers.
The Company has a policy of directors and officers liability
insurance which insures directors and officers against liabilities for
securities law violations.
In addition, the Company's Bylaws provide as follows in Article
VII:
SECTION 7.01. Actions, Etc. Other Than by or in the Right of the
Corporation [i.e., the Company]. Any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit, proceeding or investigation, whether civil, criminal,
administrative, and whether external or internal to the Corporation
(other than an action by or in the right of the Corporation), by reason
of the fact that he is or was a director, officer, employee or agent of
the Corporation, or, while serving as a director or officer, is or was
serving at the request of the Corporation as a director, officer,
employee, trustee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer, trustee, employee or agent or in any other capacity, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by law, including, but not limited to, the Delaware General
Corporation Law, as the same exists or may thereafter be amended (but,
in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification
rights than said Law permitted the Corporation to provide prior to such
amendment), against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to
any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
<PAGE>
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action
or proceeding, that he had reasonable cause to believe that his conduct
was unlawful.
SECTION 7.02. Actions, Etc. by or in the right of the Corporation.
Any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed judicial action or suit by or in
the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director or officer, employee or
agent of the Corporation, or, while serving as a director or officer, is
or was serving at the request of the Corporation as a director, officer,
employee, trustee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer, trustee, employee or agent or in any other capacity, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by law, including, but not limited to, the Delaware General
Corporation Law, as the same exists or may thereafter be amended (but,
in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification
rights than said Law permitted the Corporation to provide prior to such
amendment), against all expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and except that no indemnification shall
be made in respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only
to the extent that the court of Chancery or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other
court shall deem proper.
SECTION 7.03. Determination of Right of Indemnification. Any
indemnification under Section 7.01 or 7.02 (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 7.01 and 7.02. Such
determination shall be made (i) by the Board by a majority vote of a
quorum consisting of directors who were not parties to such action, suit
or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the
stockholders.
SECTION 7.04. Indemnification Against Expenses of Successful
Party. Notwithstanding the other provisions of this Article, to the
extent that a director, officer, employee or agent of the Corporation
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Section 7.01 or 7.02, or in defense of
any claim, issue or matter therein, he shall be indemnified against all
expenses (including attorneys' fees) incurred by him in connection
therewith.
SECTION 7.05. Prepaid Expenses. Expenses incurred by an officer
or director in defending a civil or criminal action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of any undertaking by or on
behalf of the director or officer to repay such amount if it shall
ultimately by determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article. Such expenses incurred
by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board deems appropriate.
<PAGE>
SECTION 7.06. Right to Indemnification Upon Application; Procedure
Upon Application. Any indemnification under or advancement of expenses
provided by, or granted pursuant to, this Article shall be made
promptly, and in any event within ninety days, upon written request of
the director or officer, employee or agent, unless with respect to
applications under Section 7.02 and 7.03, a determination is reasonably
and promptly made by the Board by a majority vote of quorum of
disinterested directors that such director or officer, employee or agent
acted in a manner set forth in such Sections as to justify the
Corporation's not indemnifying the director or officer, employee or
agent. In the event no quorum of disinterested directors is obtainable,
the Board shall promptly direct that independent legal counsel shall
decide whether the director or officer, employee or agent acted in a
manner set forth in such Sections as to justify the Corporation's not
indemnifying or making an advance to the director or officer or, in the
case of indemnification, employee or agent. The right to
indemnification under or advancement of expenses provided by this
Article shall be enforceable by the director, officer, employee or agent
in any court of competent jurisdiction, if the Board or independent
legal counsel denies the claim, in whole or in part, or if no
disposition of such claim is made within ninety days. The director's,
officer's, employee's or agent's expenses incurred in connection with
successfully establishing his right to indemnification or advancement of
expenses, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
SECTION 7.07. Other Rights and Remedies. The indemnification
under and advancement of expenses provided by, or granted pursuant to,
this Article shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled
under any Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors
and administrators of such a person. The right to be indemnified or to
the reimbursement or advancement of expenses pursuant hereto (i) is a
contract right based upon good and valuable consideration, pursuant to
which the person entitled thereto may bring suit as if the provisions
hereof were set forth in a separate written contract between the
Corporation and the director or officer, employee or agent, (ii) is
intended to be retroactive and shall be available with respect to events
occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with
respect to events occurring prior thereto.
SECTION 7.08. Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation, as a director,
officer, employee, trustee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power
to indemnify him against such liability under the provisions of this
Article.
SECTION 7.09. Constituent Corporations. For the purposes of this
Article, references to "the Corporation" include any constituent
corporations absorbed in a consolidation or merger as well as the
<PAGE>
resulting or surviving corporation, so that any person who is or was a
director, officer, employee, trustee or agent of such a constituent
corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee, trustee or agent of
another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under the provisions of this
Article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the
same capacity.
SECTION 7.10. Other Enterprises, Fines, and Serving at
Corporation's Request. For purposes of this Article, references to
"other enterprises" shall include employee benefit plan; references to
"fines" shall include any excise taxes assessed on a person with respect
to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer,
employee, trustee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, trustee or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article.
SECTION 7.11. Savings Clause. If this Article or any portion
thereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each
director, officer, employee or agent as to expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement with
respect to any action, suit, proceeding or investigation, whether civil,
criminal or administrative, and whether internal or external, including
a grand jury proceeding and an action or suit brought by or in the right
of the Corporation, to the full extent permitted by any applicable
portion of this Article that shall not have been invalidated by any
other applicable law.
SECTION 7.12. Liability of Directors for Breaches of Fiduciary
Duty. Notwithstanding any provision to the contrary contained in these
Bylaws, to the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a
director of the Corporation shall not be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director.
Section 102(b)(7) of the Delaware General Corporation Law provides
that a corporation may eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for
willful or negligent conduct in paying dividends or repurchasing stock
out of other than lawfully available funds or (iv) for any transaction
from which the director derived an improper personal benefit. No such
provision shall eliminate or limit the liability of a director for any
act or omission occurring prior to the date when such provision becomes
effective.
<PAGE>
Item 16. Exhibits.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4-a Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8, Commission File No. 33-7440)
4-b Bylaws of the Company, amended and restated effective March 1993
(incorporated by reference to Exhibit 3-b to the Company's 1993 Annual
Report on Form 10-K)
4-c Common Stock Purchase Agreement dated as of June 3, 1997 among the
Company and certain Purchasers (incorporated by reference to Exhibit
4.1 to the Company's Current Report on Form 8-K dated June 12, 1997)
4-d $2.0 million secured convertible promissory note dated June 30, 1997
(incorporated by reference to Exhibit 4.1 to the Company's Current Report
on Form 8-K dated July 9, 1997)
4-e Convertible Debt Term Sheet (incorporated by reference to Exhibit 4.2
to the Company's Current Report on Form 8-K dated July 9, 1997)
4-f Collateral Security Stock Pledge Agreement dated June 30, 1997
(incorporated by reference to Exhibit 4.3 to the Company's Current Report
on Form 8-K dated July 9, 1997)
5 Form of Opinion of Nelson Mullins Riley & Scarborough, L.L.P. as to
the legality of the securities being registered
23-a Consent of Nelson Mullins Riley & Scarborough, L.L.P. (included in
Exhibit 5 to this Registration Statement)
23-b Consent of KPMG Peat Marwick LLP
24 Power of Attorney (included on the signature page of this Registration
Statement)
</TABLE>
<R/>
<PAGE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(a) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement
to include any material information with respect to the plan of distribution
not previously disclosed in this Registration Statement or any material
change to such information in this Registration Statement;
(b) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(c) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim or indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newbury Park,
State of California, on July 15, 1997.
DDL ELECTRONICS, INC.
By: /s/ Gregory L. Horton
-------------------------------
Gregory L. Horton
Chief Executive Officer,
President and Chairman of the
Board of Directors
Power of Attorney
We, the undersigned directors and officers of DDL Electronics, Inc.
do hereby constitute and appoint each of Messrs. Gregory L. Horton and
Richard K. Vitelle, each with full power of substitution, our true and
lawful attorney-in-fact and agent to do any and all acts and things in
our names and on our behalf in our capacities stated below, which acts
and things either of them may deem necessary or advisable to enable DDL
Electronics, Inc. to comply with the Securities Act of 1933, as amended,
and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement,
including specifically, but not limited to, power and authority to sign
for any or all of us in our names, in the capacities stated below, any
and all amendments (including post-effective amendments) thereto; and we
do hereby ratify and confirm all that they shall do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ Gregory L. Horton Chief Executive Officer, July 15, 1997
Gregory L. Horton President (principal
executive officer) and
Chairman of the
Board of Directors
/s/ Richard K. Vitelle Chief Financial Officer July 15, 1997
Richard K. Vitelle (principal financial and
accounting officer)
<PAGE>
/s/ Karen B. Brenner Director July 15, 1997
Karen B. Brenner
/s/ Melvin Foster Director July 15, 1997
Melvin Foster
/s/ Charlene A. Gondek Director July 15, 1997
Charlene A. Gondek
/s/ Thomas M. Wheeler Director July 15, 1997
Thomas M. Wheeler
/s/ Robert G. Wilson Director July 15, 1997
Robert G. Wilson
<PAGE>
Exhibit 5
LAW OFFICES
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
A REGISTERED LIMITED LIABILITY PARTNERSHIP
INCLUDING PROFESSIONAL CORPORATIONS
NATIONSBANK CORPORATE CENTER
SUITE 3350
100 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28202-4000
TELEPHONE(704)417-3000
FACSIMILE (704)377-4814
July 15, 1997
Board of Directors
DDL Electronics, Inc.
Newbury Park, California 91320
Dear Sirs:
We are acting as counsel to DDL Electronics, Inc., a Delaware corporation
(the "Company"), in connection with the preparation, execution and filing
with the Securities and Exchange Commission (the "Commission"), under the
Securities Act of 1933, as amended (the "Act"), of a Registration Statement
on Form S-3 (the "Registration Statement") and the offer and sale pursuant
to the Registration Statement of up to 4,719,999 shares (the "Shares") of
Common Stock, par value $.01 per share, of the Company (the "Common Stock")
by the Selling Stockholders identified in the Registration Statement. This
opinion letter is furnished to you for filing with the Commission pursuant
to Item 601 of Regulation S-K promulgated under the Act.
In our representation of the Company, we have examined the Registration
Statement and the Certificate of Incorporation and Bylaws of the Company,
each as amended and restated to date, and such other documents as we have
considered necessary for purposes of rendering the opinions expressed
below. We have assumed the authenticity of all documents submitted to us
as originals and the conformity to the originals of all documents submitted
to us as copies of originals.
Based upon the foregoing, it is our opinion that the Company is a
corporation duly incorporated and validly existing under the General
Corporation Law of the State of Delaware and that the Shares have been duly
and validly issued and are fully paid and nonassessable.
The opinions expressed above are limited to matters governed by the General
Corporation Law of the State of Delaware.
We hereby consent to the use of this opinion letter as Exhibit 5 to the
Registration Statement and to the use of our name under the heading "Legal
Matters" therein. In giving this consent, we do not admit that we are in
<PAGE>
the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Nelson Mullins Riley
& Scarborough, L.L.P.
<PAGE>
EXHIBIT 23-b
KPMG Peat Marwick LLP
725 South Figueroa Street
Los Angeles, California 90017
Consent of Independent Certified Public Accountants
The Board of Directors
DDL Electronics, Inc.:
We consent to the use of our reports incorporated herein by
reference and to the reference to our firm under the heading
"Experts" in the prospectus. Our report covering the June 30, 1996
financial statements refers to a change in accounting for income
taxes.
Los Angeles, California
July 15, 1996
<PAGE>
