As filed with the Securities and Exchange Commission on August 31, 1998
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
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
RICHARD K. VITELLE
CHIEF FINANCIAL OFFICER
DDL ELECTRONICS, INC.
2151 ANCHOR COURT
NEWBURY PARK, CALIFORNIA 91320
TELEPHONE: (805) 376-9415
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
ROBERT A. HUDSON, ESQ.
BERRY MOORMAN P.C.
600 WOODBRIDGE PLACE
DETROIT, MICHAGAN 48226
TELEPHONE: (313) 567-1000
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. [ ]
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.[ ]
CALCULATION OF REGISTRATION FEE
==========================================================================
Title of each Proposed Proposed
class of Amount maximum maximum Amount of
securities to to be offering aggregate registration
be registered registered price offering price fee
- --------------------------------------------------------------------------
Outstanding
Common Stock,
$.01 par value 9,200,000 $0.46875 per $4,312,500 $1,307
shares share (1)
==========================================================================
(1) Based upon the average of the high and low prices for the Common
Stock on August 27, 1998, 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.
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 AUGUST 31, 1998
DDL ELECTRONICS, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
This Prospectus relates to the resale from time to time of up to
9,200,000 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").
The Shares were acquired by the Selling Stockholders named herein
pursuant to the terms of an Agreement and Plan of Merger, dated as of
May 28, 1998, between the Company, Jolt Technology, Inc. ("Jolt"), Jolt
Acquisition Corp., and the shareholders of Jolt. The Shares were issued
as consideration for the acquisition by the Company of Jolt effective as
of June 30, 1998. "See Selling Stockholders" and "Plan of
Distribution."
The acquisition of Jolt was accounted for as a pooling of
interests and accordingly the holders of an aggregate of 9,000,000
shares may not sell, transfer or otherwise dispose of any Shares prior
to the date that the Company publishes financial results covering at
least thirty days of combined operations of the Company and Jolt.
Subject to the limitations set forth above, the Shares may be
offered or sold by or for the account of the Selling Stockholders from
time to time or at one time, on one or more exchanges or otherwise, at
prices and on terms to be determined at the time of sale, to purchasers
directly or by or through brokers or dealers, who may receive
compensation in the form of discounts, commissions or concessions. The
Selling Stockholders and any such brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any discounts, concessions and
commissions received by any such brokers and dealers may be deemed to
be underwriting commissions or discounts under the Securities Act. The
Company will not receive any of the proceeds from any sale of the Shares
offered hereby. See "Use of Proceeds," "Selling Stockholders" and "Plan
of Distribution."
The Common Stock is listed on the New York Stock Exchange and the
Pacific Exchange under the symbol "DDL." On August 27, 1998, the
closing price per share of the Common Stock, as reported in the
consolidated reporting system, was $0.50.
--------------------------------------------
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 August __, 1998.
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 (the "Registration
Statement"). 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 also 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 ("EDGAR"). Such information may
also be inspected at the offices of the New York Stock Exchange at 20 Broad
Street, New York, New York 10005 and at the offices of the Pacific Exchange
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, 1998 (the "Form 10-K");
(ii) the Company's Current Report on Form 8-K as filed with the SEC on
July 15, 1998; and
(iii) 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.
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 Richard K. Vitelle, Chief Financial Officer, DDL Electronics,
Inc., 2151 Anchor Court, Newbury Park, California 91320, telephone (805)
376-9415.
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED (THE "EXCHANGE ACT"). DISCUSSIONS CONTAINING SUCH FORWARD-
LOOKING STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH UNDER "RISK
FACTORS" AND "THE COMPANY" AS WELL AS IN THE PROSPECTUS GENERALLY. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING
THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS,
WHICH PROSPECTIVE INVESTORS SHOULD REVIEW CAREFULLY.
RISK FACTORS
Prospective investors should carefully consider the following factors,
in addition to the other information presented in this Prospectus, before
purchasing the Shares.
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, the Company currently has limited
capital. General market conditions and the Company's future 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 operations of the Company are
dependent on the continued efforts of senior management, in particular
Gregory L. Horton, the Company's Chairman of the Board, President and
Chief Executive Officer. Pursuant to the provisions of his employment
agreement, Mr. Horton's term of employment continues until November 1,
1999, unless earlier terminated in accordance with the terms and conditions
of the agreement. With respect to each such employment agreement, either
the Company or Mr. Horton 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. Should any of the
Company's senior managers be unable or choose not to continue in their
present roles, the Company's prospects could be adversely affected.
Concentration of Revenues Among Major Customers. In fiscal 1998, two
customers accounted for 68% of the sales of DDL Electronics Limited ("DDL-
E"), a wholly-owned subsidiary of the Company located in Northern Ireland.
Also in fiscal 1998, one customer accounted for 53% of the sales of SMTEK,
Inc. ("SMTEK"), a wholly-owned subsidiary of the Company located in
Southern California, and approximately 50% of SMTEK's business was
generated by customers located in California. There can be no assurance
that these significant customers will maintain their business relationships
with DDL-E and SMTEK. The loss of all or a substantial portion of DDL-E's
or SMTEK's revenues attributable to any of their 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.
Historical Dependence of SMTEK on Government Business; Recent Shift
into Commercial Business. SMTEK, the Company's principal U.S. operating
unit, accounted for 37% of the Company's consolidated revenues in fiscal
1998. Historically, the majority of SMTEK's revenues were derived from
contracts with United States government prime contractors, but this
historical dependency has diminished during the past several years.
Approximately 35% and 27% of SMTEK's revenues in fiscal 1998 and 1997,
respectively, were derived from sales to U.S. government contractors in the
defense and space sectors. Business with the United States government 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 SMTEK's business.
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 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.
Environmental Matters. The Company is currently involved in certain
remediation and investigative studies regarding soil and groundwater
contamination at the site of a former printed circuit board manufacturing
plant in Anaheim, California which was leased by one of the Company's
subsidiaries, Aeroscientific Corp., which is now an inactive, insolvent
subsidiary. Management, based in part on consultations with outside
environmental engineers and scientists, believes that the total remaining
costs to clean up this site will not exceed $600,000. The remaining costs
to be incurred to remediate this site will be borne partially by the
property owner under a cost sharing agreement entered into several years
ago. At June 30, 1998, the Company had a reserve of $528,000, which
management believes is adequate to cover its share of future remediation
costs at this site. It is possible, however, that these future remediation
costs could differ significantly from the estimates, and that the Company's
portion could exceed the amount of its 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.
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. SMTEK and DDL-E have from time to time throughout their history
been adversely affected by production delays 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.
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 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.
Year 2000 Issues. Many existing computer programs use only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results
by or at the year 2000. The global extent of the potential impact of the Year
2000 problem is not yet known, and if not timely corrected, it could affect
the economy and the Company. The Company uses computer information systems
and manufacturing equipment which may be affected. It also relies on
suppliers and customers who are also dependent on systems and equipment which
use date dependent software. The Company's Year 2000 compliance program
includes the following phases: identifying systems that need to be replaced or
fixed; carrying out remediation work to modify existing systems or convert to
new systems; and conducting validation testing of systems and applications to
ensure compliance. The Company has essentially completed the first phase of
the program and is now primarily in the remediation phase. The amount of
remediation work required is not expected to be extensive, because the Company
has replaced certain of its financial and operational systems in the normal
course of business during the last two years to enhance or better meet its
functional business and operational requirements. Management believes that
such replacements substantially meet or address its Year 2000 issues. In
addition to such normal replacement, the Company may be required to modify
some of the existing software and hardware in order for its computer systems
to function properly with respect to dates in the year 2000 and thereafter.
The estimated cost of the remaining replacement and modification for the Year
2000 issue is not considered material to the Corporation's earnings or
financial position. The Company also has contacted its major suppliers to
assess their preparations for the year 2000. Similar contacts also are
planned for major customers. These actions are intended to help mitigate the
possible external impact of Year 2000 issues. Even so, it is impossible to
fully assess the potential consequences if service interruptions occur from
suppliers or in such infrastructure areas as utilities, communications,
transportation, banking and government. The Company anticipates that the
remediation and validation phases will be completed not later than December
31, 1998. The Company has not yet developed a contingency plan to provide for
continuity of processing in the event of various problem scenarios, but will
assess the need to develop such a plan based on the outcome of its validation
phase and the results of surveying its major suppliers and customers. If the
Company is unsuccessful or if the remediation efforts of its key suppliers or
customers are unsuccessful in dealing with Year 2000 problems, there may be a
material adverse impact on the Company's consolidated results and financial
condition. The Company is unable to quantify any potential adverse impact at
this time, but will continue to monitor and evaluate the situation.
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.
Volatility. The market price of the Company's common stock has
fluctuated over a wide range during the past several years and may continue
to do so in the future. The market price of the common stock could be
subject to significant fluctuations in response to various factors or
events, including, among other things, the depth and liquidity of the
trading market of the common stock, quarterly variations and actual
anticipated operating results, growth rates, changes in estimates by
analysts, market conditions in the industry in which the Company competes,
announcements by competitors, regulatory actions, litigation and general
economic conditions. As result of the foregoing, the Company's operating
results and prospects from time to time may be below the expectations of
public market analysts and investors. Any such event would likely result
in a material adverse effect on the price of the common stock.
Possible Delisting of Common Stock; Adverse Effects on Liquidity. The
Common Stock is currently listed and traded on the New York Stock Exchange
("NYSE") and the Pacific Exchange ("PE"). 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 of at least
100,000 shares), (2) number of publicly-held shares (600,000), (3) average
annual net income after taxes of at least $600,000 for the past three years
if the aggregate market value of shares outstanding is less than
$12,000,000, and (4) average annual net income after taxes of at least
$600,000 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 average 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 the Nasdaq Stock
Market ("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.
Applicability of Low-Priced Stock Risk Disclosure Requirements. If
the Common Stock were not listed on Nasdaq or some other exchange, then it
would become subject to the SEC's "penny stock" rules. For these purposes,
a "penny stock" is defined as any equity security, subject to certain
exceptions (including an exception for securities listed on Nasdaq), that
has a market value (as defined) of less than $5.00 per share. For any non-
exempt transaction involving a penny stock, these rules require the
delivery, prior to the transaction, of a disclosure schedule prepared by
the SEC relating to the penny stock market. The broker-dealer is also
required to disclose the commissions payable to both itself and its
registered representative, current quotations for securities and
information on the limited market in penny stocks. If the broker-dealer is
the sole market maker for the penny stock, the broker-dealer is compelled
to disclose this fact and must also disclose its presumed control over the
market. The broker-dealer is required to obtain a written acknowledgment
from the customer that such disclosures were provided and must retain such
acknowledgment for at least three years. Monthly statements are to be sent
disclosing current price information for penny stocks held in the account.
The rules also require a broker-dealer engaging in a transaction in a
penny stock to make a special suitability determination for the purchaser
and to receive the purchaser's written consent to the transaction prior to
the purchase. Accordingly, the SEC's penny stock rules may materially and
adversely affect the liquidity of the market for the Common Stock by
restricting the ability of the broker-dealers to sell the Common Stock and
the ability of Common Stock holders to obtain accurate price quotations.
THE COMPANY
The Company is an independent provider of electronic manufacturing
services ("EMS") to original equipment manufacturers ("OEMs") in the
computer, telecommunications, instrumentation, medical, industrial and
aerospace industries. The Company also manufactures printed circuit boards
("PCBs") for use primarily in the computer, communications and
instrumentation industries. Its EMS facilities are located in Southern
California, Florida and Northern Ireland. Its PCB facilities are located
in Northern Ireland and primarily serve customers in Western Europe. 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 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 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.
Irlandus. Irlandus is located in Craigavon, Northern Ireland, where
it produces high-quality, high-technology, multilayer PCBs. Irlandus was
acquired by the Company in 1984 and currently employs approximately 125
people. Irlandus has a base of approximately 150 active customers
throughout Europe. In fiscal 1998, Irlandus' largest customer accounted
for approximately 17% of its total revenues. No other customer represented
more than 10% of Irlandus' fiscal 1998 revenues. Over 80% of its sales are
made by a direct sales force; the remainder are effected by independent
sales representatives. Irlandus has obtained ISO 9002 certification, which
is increasingly necessary to attract business.
Since 1989 Irlandus has struggled to compete effectively in a
marketplace characterized by excess supply. In the past two years,
Irlandus has generated operating income, which management attributes to a
strategic repositioning of Irlandus in the high-technology, prototype and
premium fast-service segment of the multilayer PCB market. There can be no
assurance, however, that Irlandus will continue to profit from its
implementation of this strategy.
EMS Operations
The Company conducts its EMS operations in the United States through
SMTEK and Jolt and in Western Europe through DDL-E.
The EMS Industry. EMS providers produce electronic assemblies for
OEMs. Electronic assemblies are printed circuit boards on which various
electronic components, such as integrated circuits, capacitors,
microprocessors and resistors, have been mounted. These assemblies are key
functional elements of many types of electronic products.
Many electronics OEMs have adopted and are becoming increasingly
reliant upon outsourcing strategies. The Company believes that the trend
toward outsourcing manufacturing will continue. Electronics industry OEMs
use EMS providers for many reasons, including the following:
Reduced Time to Market. Due to intense competitive pressures in the
electronics industry, OEMs are faced with increasingly shorter product
life-cycles and therefore have a growing need to reduce the time
required to bring a product to market. OEMs can reduce their time to
market by using a manufacturing specialist's established manufacturing
expertise and infrastructure.
Reduced Capital Investment. As electronic products have become more
technologically advanced, the manufacturing process has become
increasingly automated, requiring a greater level of investment in
capital equipment. Manufacturing specialists enable OEMs to gain access
to advanced manufacturing facilities, thereby reducing the OEM's overall
capital equipment requirements.
Focused Resources. Because the electronics industry is experiencing
greater levels of competition and more rapid technological change, many
OEMs increasingly seek to focus their resources on activities and
technologies to which they add the greatest value. By offering
comprehensive electronic assembly and turnkey manufacturing services,
manufacturing specialists allow OEMs to focus on core technologies and
activities such as product development, marketing and distribution.
Access to Leading Manufacturing Technology. Electronic products and
electronics manufacturing technology have become increasingly
sophisticated and complex. This is making it difficult for OEMs to
maintain the necessary technological expertise in process development
and control. OEMs are motivated to work with a manufacturing specialist
in order to gain access to the specialist's process expertise and
manufacturing know-how.
Improved Inventory Management and Purchasing Power. Electronics
industry OEMs are faced with increasing difficulties in efficiently
planning, procuring and managing their inventories. This difficulty is
due to frequent design changes, short product life cycles, large
investments in electronic components, component price fluctuations and
the need to achieve economies of scale in materials procurement. By
using a manufacturing specialist with established material procurement
capacities and infrastructure, OEMs can reduce production and inventory
costs.
The EMS industry's revenues in the United States were estimated by the
Institute for Interconnecting and Packaging Electronic Circuits (known as
the "IPC") to be $18 billion in 1997. As a result of the continued trend
toward outsourcing manufacturing services on the part of electronic
equipment OEMs, the EMS industry in the United States grew in excess of 20%
annually from 1990 to 1997, according to IPC estimates. The U.S. EMS
industry is highly fragmented, with several large manufacturers with over
$500 million in annual revenues. There are also numerous manufacturers
with annual revenues from under $10 million to several hundred million
dollars.
The EMS industry can be classified into three segments: high-volume,
medium-volume and low-volume. Management believes that the high-volume
segment of the U.S. EMS industry is dominated by several firms, including
SCI Systems, Solectron, and Celestica. The Company focuses on the medium-
volume and low-volume segments. Manufacturers in these segments tend to be
highly fragmented and competitive. Customer bases tend to be highly
concentrated, with two or three customers typically accounting for a
significant portion of an EMS provider's total revenue.
Two principal assembly techniques 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. 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.
The Company competes against numerous EMS suppliers. Competition in
the medium-volume market segment is driven by service, order turnaround
time and quality. Margins tend to be higher here than in the high-volume
segment because of greater complexity, shorter runs and delivery cycles 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.
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 200 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 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.
Jolt. The Company acquired Jolt Technology, located in Fort Lauderdale,
Florida, on June 30, 1998 in a merger accounted for as a pooling-of-interests.
Jolt's electronic manufacturing services consist primarily of the
manufacture of complex PCB assemblies using SMT and through-hole
interconnection technologies. In addition to assembly, Jolt provides
consultation on printed circuit board design and manufacturability. Jolt
has approximately 28 full-time employees.
Jolt is primarily a consignment EMS provider. Under a consignment
contract, the OEM customer provides most or all of the electronic components
to the EMS company, which then assembles the components and ships the finished
electronic assemblies to the OEM. EMS gross profit margins are generally much
higher on consignment contracts than on turnkey contracts, because revenues
for consignment contracts represent pure value added services, while turnkey
contract revenues are primarily comprised of material pass-through costs. For
this same reason, given a consignment contract and a turnkey contract with a
comparable amount of value-added services, revenue for the consignment
contract will be much less than for the turnkey contract. For fiscal 1998 and
1997, approximately 95% of Jolt's net sales consisted of revenue on
consignment contracts, and the remainder represented revenue on turnkey
contracts.
Jolt's relationships with its key customers are based upon providing a
responsive, flexible total manufacturing services solution. These services
include design and engineering, quick-turnaround prototype and
manufacturing and materials procurement and management. Jolt also
evaluates customer designs for manufacturability and test and, when
appropriate, recommends design changes to reduce manufacturing cost or lead
times or to increase manufacturing yields and quality of the finished
product. Once engineering is completed, Jolt manufactures prototype or
preproduction versions of the product on a quick-turnaround basis.
Jolt expects that the demand for engineering and quick-turnaround
prototype and preproduction manufacturing services will increase as OEMs'
products become more complex and as product life-cycles shorten. Materials
procurement and handling services provided by Jolt include planning,
purchasing, warehousing and financing of electronic components and
enclosures used in the assemblies and systems.
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 1998, five customers accounted for 88% of sales.
All of its sales are made by its direct sales force.
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 EMS providers 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 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 EMS provider or in taking on the project
themselves.
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.
<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>
Thomas M. Wheeler 6,386,254 6,386,254 0 0%
Charlene A. Gondek 1,742,498 1,742,498 0 0%
Mitchell Morhaim 871,248 871,248 0 0%
Saul Reiss 200,000 200,000 0 0%
</TABLE>
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
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
Berry Moorman, P.C., Detroit, Michigan.
EXPERTS
The consolidated financial statements of DDL Electronics, Inc. as
of June 30, 1998 and 1997 and for each of the years in the three-year
period ended June 30, 1998, have been incorporated by reference herein
and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.
<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 DDL ELECTRONICS, INC.
which 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 contained herein is correct as of
any date subsequent to the date hereof.
-------------------------------
Table of Contents
-------------------------------
------------------------
Page
PROSPECTUS
Additional Information 2
------------------------
Incorporation of Certain Information
By Reference 2
Risk Factors 3 August __, 1998
The Company 7
Use of Proceeds 12
Determination of Offering Price 12
Selling Stockholders 13
Plan of Distribution 13
Legal Matters 13
Experts 13
--------------------------- -----------------------------
</TABLE>
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 $ 1,568
Exchange listing fees* 32,000
Accounting fees and expenses* 2,500
Legal fees and expenses* 5,000
Miscellaneous* 3,932
-------
Total* $45,000
=======
- -------------
* 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 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.
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
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.
Item 16. Exhibits.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
4 Agreement and Plan of Merger, dated as of May 28, 1998,
between the Company, Jolt Technology, Inc., Jolt Acquisition
Corp., and the shareholders of Jolt Technology, Inc.
(incorporated by reference to Appendix A of the Company's
Definitive Proxy Statement and Form of Proxy filed with the
Securities and Exchange Commission on June 12, 1998)
5 Opinion of Berry Moorman P.C. as to the legality of the
securities being registered
23-a Consent of Berry Moorman P.C.
(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)
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.
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 August 27, 1998.
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, August 27, 1998
- ----------------------- President (principal
Gregory L. Horton executive officer) and
Chairman of the
Board of Directors
/s/ Richard K. Vitelle Chief Financial Officer August 27, 1998
- ----------------------- (principal financial and
Richard K. Vitelle accounting officer)
/s/ Karen B. Brenner Director August 27, 1998
- -----------------------
Karen B. Brenner
/s/ Charlene A. Gondek Director August 27, 1998
- -----------------------
Charlene A. Gondek
/s/ Thomas M. Wheeler Director August 27, 1998
- -----------------------
Thomas M. Wheeler
<PAGE>
Exhibit 5
BERRY MOORMAN
PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
________________
600 WOODBRIDGE PLACE
DETROIT, MICHIGAN 48226-4302
(313) 567-1000
FACSIMILE (313) 567-1001
________________
E-MAIL: [email protected]
WEBSITE: www.berrymoorman.com
August 28, 1998
DDL Electronics, Inc.
2151 Anchor Court
Newbury Park, CA 91320
Re: DDL Electronics, Inc. (the "Company")
Gentlemen:
We have acted 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 of the Registration Statement on Form
S-3 (the "Registration Statement") of the Company relating to the registration
under the Securities Act of 1933, as amended, of 9,200,000 shares of the
Company's Common Stock, par value $.01 per share (the "Shares"), to be offered
from time to time by certain selling stockholders in the manner described in
the prospectus contained in the Registration Statement (the "Prospectus"). We
have examined the Registration Statement and originals, or copies certified or
otherwise identified to our satisfaction, of such other documents and
corporate records as we have deemed necessary as a basis for the opinion set
forth herein. We have relied as to factual matters on certificates or other
documents furnished by the Company or its officers and by governmental
authorities and upon such other documents and data that we have deemed
appropriate. In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals,
the legal capacity of all persons executing such documents, the conformity to
original documents of all documents submitted to us as copies and the truth
and correctness of any representations and warranties contained therein.
Based on such examination and review and subject to the foregoing, we are
of the opinion that the Shares have been duly authorized and are validly
issued, fully paid and non-assessable.
The opinion expressed herein is limited to matters governed by the
General Corporation Law of Delaware. We express no opinion herein concerning
any other law.
We consent to the use of this opinion as an Exhibit to the Registration
Statement and to the reference to our firm under the caption "Legal Matters"
in the Prospectus. We do not thereby admit that we are "experts" as that term
is used in the Securities Act of 1933 and the regulations thereunder.
Very truly yours,
BERRY MOORMAN P.C.
By: /s/ Robert A. Hudson
________________________
Robert A. Hudson
<PAGE>
Exhibit 23-b
Consent of Independent Certified Public Accountants
The Board of Directors
DDL Electronics, Inc.:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the Registration
Statement.
/s/ KPMG Peat Marwick
Los Angeles, California
August 27, 1998
