<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1996
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DEL GLOBAL TECHNOLOGIES CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEW YORK 13-1784308
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
ONE COMMERCE PARK
VALHALLA, NY 10595
(914) 686-3600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
LEONARD A. TRUGMAN
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
DEL GLOBAL TECHNOLOGIES CORP.
ONE COMMERCE PARK
VALHALLA, NY 10595
(914) 686-3600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
THEODORE WM. TASHLIK, ESQ. THOMAS M. HAYTHE, ESQ.
MARTIN M. GOLDWYN, ESQ. ANDREW J. BECK, ESQ.
TASHLIK, KREUTZER & GOLDWYN P.C. HAYTHE & CURLEY
833 NORTHERN BOULEVARD 237 PARK AVENUE
GREAT NECK, NY 11021 NEW YORK, NY 10017
(516) 466-8005 (212) 880-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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, check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
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 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
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM OFFERING PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE PRICE PER MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock ($.10 par value)........... 2,300,000 Shares $8.44 $19,412,000 $6,694
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933 based upon the
average of the high and low prices on April 26, 1996.
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE>
DEL GLOBAL TECHNOLOGIES CORP.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM OF FORM S-2 HEADING IN PROSPECTUS
- -------------------------------------- ------------------------------
<S> <C> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...... Facing Page; This Page;
Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front and Outside Back
Cover Pages
3. Summary Information and Risk
Factors and Ratio of Earnings
to Fixed Charges.............. Prospectus Summary; Risk
Factors
4. Use of Proceeds............... Use of Proceeds
5. Determination of Offering
Price......................... Not Applicable
6. Dilution...................... Not Applicable
7. Selling Security Holders...... Not Applicable
8. Plan of Distribution.......... Outside Front Cover Page;
Underwriting
9. Description of Securities to
be Registered................. Description of Capital Stock
10. Interests of Named Experts and
Counsel....................... Legal Matters; Experts
11. Information with Respect to
the Registrant................ Front Cover Page; Prospectus
Summary; Use of Proceeds;
Price Range of Common Stock;
Dividend Policy;
Capitalization; Selected
Consolidated Financial Data;
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations; Business;
Management; Description of
Capital Stock; Available
Information; Consolidated
Financial Statements;
Consolidated Pro Forma
Financial Information
12. Incorporation of Certain
Information by Reference...... Incorporation of Certain
Documents by Reference
13. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Not Applicable
</TABLE>
<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 State in which
such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED APRIL 30, 1996
PROSPECTUS
2,000,000 Shares
Common Stock
------------------------
All of the 2,000,000 shares of Common Stock offered hereby are being sold
by Del Global Technologies Corp. (the 'Company'). The Company's Common Stock is
quoted on the American Stock Exchange under the symbol 'DEL.' On April 26, 1996,
the last reported sale price for the Company's Common Stock on the American
Stock Exchange was $8.44 per share. The Common Stock has been approved for
quotation on the Nasdaq National Market under the symbol 'DGTC'. After the
completion of this offering, the Common Stock will be traded on the Nasdaq
National Market under the symbol 'DGTC' rather than on the American Stock
Exchange. See 'Price Range of Common Stock.'
------------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE 'RISK FACTORS'
BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------
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.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share....................... $ $ $
Total (3)....................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
'Underwriting.'
(2) Before deducting expenses payable by the Company, estimated at $450,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 300,000 shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ , respectively.
See 'Underwriting.'
------------------------
The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters, subject to prior sale, when, as and if delivered to and
accepted by them, and subject to the right of the Underwriters to reject orders
in whole or in part. It is expected that delivery of the shares of Common Stock
will be made in New York, New York, on or about , 1996.
------------------------
Needham & Company, Inc. Tucker Anthony
Incorporated
The date of this Prospectus is , 1996
<PAGE>
SELECTED MEDICAL IMAGING SYSTEMS
[PHOTO]
DynaRad HF-110A Portable System
[PHOTO]
DynaRad NOVA-SC Mammography System
[PHOTO]
Gendex Mamex Mammography System
[PHOTO]
Gendex High Frequency Generator
[PHOTO]
Gendex Elevating Table System
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH MAY STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING,IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Consolidated Financial Statements and Notes thereto
included or incorporated by reference in this Prospectus. Except as otherwise
indicated, all information contained in this Prospectus assumes that the
Underwriters' over-allotment option is not exercised.
THE COMPANY
Del Global Technologies Corp. is primarily engaged in the design,
manufacture and marketing of medical imaging systems and critical electronic
subsystems for medical imaging and diagnostic products. The Company's products
are designed to provide cost-effective, high-quality solutions to the needs of
its customers. The Company's medical imaging systems include mammography
systems, high frequency x-ray generators and x-ray systems (both stationary and
portable) sold under both its tradenames and private labels. The Company's
critical electronic subsystems are custom engineered to complex customer
performance specifications and include high voltage power components, such as
power supplies, capacitors, transformers and pulse forming networks. These
products are utilized by original equipment manufacturers ('OEMs') for medical
imaging and diagnostic products having a broad range of applications such as
computerized tomography (CT), magnetic resonance imaging (MRI), bone
densitometry, radiography, blood analysis, medical laser surgery and nuclear
medicine. As a result of its record for quality and reliability, the Company has
developed close working relationships with its OEM customers. These
relationships often result in the Company's selection as the sole source
provider of these critical electronic subsystems to OEMs. The Company also
designs, manufactures and markets precision power conversion products for
non-medical applications and electronic noise suppression systems for
telecommunications equipment.
The Company believes that recent cost containment trends in the healthcare
industry have created opportunities for its cost-effective medical imaging
products in domestic and international markets. Such trends include:
o INCREASED DEMAND FOR LOWER COST MEDICAL EQUIPMENT. The Company's medical
systems and critical electronic subsystems are designed to meet the needs
of the healthcare industry to reduce medical imaging and diagnostic
costs. The Company focuses its sales, marketing and development efforts
primarily on medical imaging systems and critical electronic subsystems
priced at under $100,000 per unit. The Company's medical imaging systems
have a list price of approximately $9,000 to $70,000 per unit; however,
the Company believes that its products offer comparable performance to
competing products typically priced higher.
o OUTSOURCING OF CRITICAL ELECTRONIC SUBSYSTEMS. OEMs are responding to an
increasingly competitive environment by concentrating on their core
strengths such as marketing and distribution. As a result, OEMs are
attempting to lower their cost structures by outsourcing their
requirements for certain critical electronic subsystems to lower cost
manufacturers such as the Company. The Company has successfully utilized
its engineering and manufacturing skills to provide such subsystems on a
cost-effective basis. In addition, the Company's longstanding customer
relationships have provided the Company with substantial opportunities to
demonstrate its expertise and expand its sales to OEMs.
o INCREASED DEMAND FOR CERTAIN DIAGNOSTIC PROCEDURES. The proliferation of
managed care and the recent introduction of new therapies for diseases
such as osteoporosis have resulted in increased demand for certain
diagnostic procedures. Diagnostic imaging is an integral component of the
early detection, diagnosis, treatment and monitoring of certain diseases.
In addition, many managed care providers have encouraged the use of such
early diagnostic imaging procedures as a method of reducing overall
healthcare costs.
o LOWER COST MEDICAL SERVICES IN CERTAIN INTERNATIONAL MARKETS.
International demand for cost-effective medical devices is
increasing as many countries with limited healthcare budgets are
attempting to improve the quality of care offered to their citizens.
During the past four years the Company has grown internally and through
acquisitions into a company whose predominant business is serving the medical
imaging and diagnostic markets. Most significantly, in March 1996 the Company
completed the acquisition of certain assets of the Gendex Medical Division
('Gendex') of
3
<PAGE>
Dentsply International Inc. Gendex, which designs, manufactures and markets
medical imaging systems and related products, had recorded net sales of
approximately $18.9 million during the calendar year ended December 31, 1995.
The Company's sales of medical imaging products increased from approximately
$3.4 million or 17.7% of total net sales in fiscal 1992 to approximately $35.4
million or 66.1% of total net sales in fiscal 1995 on a pro forma basis.
Reflecting worldwide demand for its products and increased international sales
efforts, the Company has increased export sales from approximately $5.3 million
in fiscal 1992 to approximately $11.7 million in fiscal 1995. Export sales
consist of direct sales of the Company's products and sales of subsystems that
are incorporated into OEMs' products for export.
The Company's goal is to become a leading provider of cost-effective,
high-quality medical imaging systems and critical electronic subsystems at a per
unit price of less than $100,000. The Company's strategy to achieve this goal is
to continue to expand its business by focusing on selling cost-effective
products; by developing additional innovative medical imaging products; by
leveraging its marketing expertise to expand domestic and international sales;
by expanding existing OEM customer relationships; and by continuing its
strategic acquisition program.
The Company was incorporated under the laws of the State of New York in
1954. The Company's principal offices are located at One Commerce Park,
Valhalla, New York 10595. The Company's telephone number is (914) 686-3600. As
used in this Prospectus, the term 'Company' includes the Company's subsidiaries.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by
the Company.......................... 2,000,000 shares
Common Stock to be outstanding after
this offering........................ 6,378,167 shares(1)
Use of proceeds........................ For repayment of certain outstanding
indebtedness and for general corporate
purposes, including working capital and
potential acquisitions. See 'Use of
Proceeds.'
American Stock Exchange Symbol(2)...... DEL
Approved Nasdaq National Market
Symbol(2)............................ DGTC
</TABLE>
- ------------
(1) Based on the number of shares outstanding as of April 19, 1996. Does not
include an aggregate of (i) 1,636,651 shares of Common Stock issuable upon
exercise of options outstanding under the Company's employee stock option
plan, of which 1,338,373 shares are currently exercisable at a weighted
average exercise price of $3.53 per share; (ii) 300,000 shares of Common
Stock issuable upon exercise of the Underwriters' over-allotment option; and
(iii) 202,256 shares of Common Stock reserved for issuance upon exercise of
outstanding warrants exercisable at a weighted average exercise price of
$5.76. See 'Underwriting.'
(2) After the completion of this offering, the Common Stock will be traded on
the Nasdaq National Market rather than on the American Stock Exchange.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SUPPLEMENTAL DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED(2)
-------------------------
FEBRUARY 3,
FISCAL YEAR ENDED 1996
-------------------------------------------------------- -----------
AUGUST 3, AUGUST 1, JULY 31, JULY 30, JULY 29, JANUARY 28,
1991 1992 1993(2) 1994(2) 1995(2) 1995(2) ACTUAL
--------- --------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Net sales.............................. $17,323 $18,949 $ 22,287 $ 24,327 $ 32,596 $13,715 $16,801
Gross profit........................... 6,651 7,195 8,832 9,148 13,418 6,215 7,056
Income before provision for income
taxes................................ 1,478 2,150 2,369 1,455 2,742 1,375 1,673
Net income............................. 1,082 1,492 1,661 1,190(3) 1,905 956 1,163
Net income per common share and common
share equivalent, primary and fully
diluted(1)........................... $ 0.35 $ 0.34 $ 0.36 $ 0.25(3) $ 0.39 $ 0.19 $ 0.23
Number of shares used in computation of
primary earnings per share(1)........ 3,137 4,426 4,573 4,897 5,044 5,012 5,247
Number of shares used in computation of
fully diluted earnings
per share(1)......................... 3,137 4,439 4,575 4,897 5,066 5,012 5,252
SUPPLEMENTAL OPERATING DATA:
Percentage of Sales:
Medical Imaging Products........... 14.8% 17.7% 35.9% 38.7% 44.2% 47.0% 46.4%
Non-Medical Products............... 85.2% 82.3% 64.1% 61.3% 55.8% 53.0% 53.6%
<CAPTION>
SIX MONTHS ENDED(2)
---------------------------------
FEBRUARY 3, 1996
---------------------------------
PRO FORMA
PRO FORMA(4) AS ADJUSTED(4)(5)
------------- -----------------
<S> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Net sales.............................. $25,438 $25,438
Gross profit........................... 8,214 8,214
Income before provision for income
taxes................................ 1,213 1,806
Net income............................. 843 1,255
Net income per common share and common
share equivalent, primary and fully
diluted(1)........................... $ 0.16 $ 0.18
Number of shares used in computation of
primary earnings per share(1)........ 5,247 7,247
Number of shares used in computation of
fully diluted earnings
per share(1)......................... 5,252 7,252
SUPPLEMENTAL OPERATING DATA:
Percentage of Sales:
Medical Imaging Products........... 64.6% 64.6%
Non-Medical Products............... 35.4% 35.4%
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 3, 1996
----------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(4)(5)
----------- ------------- -----------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital...................... $21,917 $27,797 $28,929
Total assets......................... 40,670 48,420 49,552
Long-term debt....................... 11,755 17,455 5,055
Shareholders' equity................. 21,152 21,152 36,485
</TABLE>
- ------------
(1) Net income per common share and common share equivalent has been restated to
give effect to stock dividends in fiscal years 1992, 1993, 1994, 1995 and
1996. See Note 1 of Notes to the Company's Consolidated Financial Statements
for computation of earnings per share.
(2) The fiscal years ended July 31, 1993, July 30, 1994, July 29, 1995 and the
six month periods ended January 28, 1995 and February 3, 1996 include the
operations of Dynarad Corp. ('Dynarad'); the fiscal years ended July 30,
1994, July 29, 1995 and the six month periods ended January 28, 1995 and
February 3, 1996 include the operations of Bertan High Voltage Corp.
('Bertan') from their respective dates of acquisition.
(3) Includes cumulative effect of adoption of SFAS-109 'Accounting for Income
Taxes' in fiscal 1994 of $76,363 or $0.02 per common share.
(4) Gives effect to the Gendex acquisition, which was funded through bank
borrowings of $5.7 million and the issuance of a subordinated note for $1.8
million, as if the transactions occurred at the beginning of the six month
period for statement of income data and at February 3, 1996 for balance
sheet data. The pro forma financial information is not necessarily
indicative of the operating results which would have been achieved had the
Company acquired Gendex at the beginning of the period presented or the
results to be achieved in the future.
(5) As adjusted to give effect to estimated net proceeds of approximately $15.3
million from the offering, assuming an offering price of $8.44 per share of
Common Stock, and issuance of 2,000,000 additional shares of Common Stock,
as if the offering had occurred at the beginning of the six month period
for statement of income data and at February 3, 1996 for balance sheet data.
5
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following risk factors,
in addition to the other information in this Prospectus or incorporated herein
by reference, in evaluating the Company and its business before purchasing the
shares of Common Stock offered hereby.
ACQUISITION PROGRAM
As part of its growth strategy, the Company has been engaged in a strategic
acquisition program to expand its product lines, particularly its medical
imaging systems. Since December 1989, the Company has completed five
acquisitions. The success of the Company's acquisition program and of its
underlying growth strategy will depend, among other things, on the continued
availability of suitable acquisition candidates. Many of the Company's
competitors have greater financial, marketing and other resources than the
Company and may be willing to pay higher prices for acquisitions. There can be
no assurance as to the Company's ability to compete for or finance acquisitions,
or that the Company will be able to complete any acquisitions on satisfactory
terms, or at all, in the future. In order to finance acquisitions, it may be
necessary for the Company to raise additional funds through public or private
financing. Any equity or debt financing, if available at all, may be on terms
which are not favorable to the Company and, in the case of equity financing, may
result in dilution to the Company's stockholders. The Company's ability to
integrate the operations of acquired companies is essential to any successful
acquisition. There can be no assurance that the Company will be successful at
integrating or managing new businesses. See 'Business--The Company's Strategy.'
GENDEX ACQUISITION
In March 1996 the Company completed the acquisition of certain assets of
Gendex for approximately $7.5 million. The acquired business generated
approximately $18.9 million in net sales for the calendar year ended December
31, 1995. As a consequence of the Gendex acquisition, the Company has grown
significantly in size and has broadened its medical imaging product line. The
Gendex business has not yet been fully integrated with the Company's other
operations, and there can be no assurance that the Company will be able to
accomplish such integration successfully. In view of the size of the Gendex
business, any failure to integrate it successfully into the Company's other
operations would have a material adverse effect on the Company's business,
results of operations and financial condition. See 'Business.'
GOVERNMENT REGULATION
The Company's medical imaging systems are subject to regulation under both
the Federal Food, Drug, and Cosmetics Act and the Radiation Control for Health
and Safety Act. These statutes, in combination and individually, impose strict
requirements dealing with the safety, effectiveness and other properties of the
products to which they apply and address elements relating to the testing,
manufacturing standards and procedures, distribution, record keeping, report
making, labeling, promotion and radiation emitting qualities of these products.
Failure to comply can result in, among other things, the imposition of fines,
criminal prosecution, recall and seizure of products, injunctions restricting or
precluding production or distribution, the denial of new product approvals and
the withdrawal of existing product approvals.
Prior to commercial distribution in the United States, most medical
products, including the Company's, must be listed with the Food and Drug
Administration ('FDA') and the facilities in which they are manufactured must be
registered with the FDA. Additionally, prior to distribution, the products are
required to be subjected to a review process by the FDA to assess whether they
qualify for marketing under a '510(k)' Premarket Notification Process as
substantially equivalent to a product marketed before May 28, 1976 or whether an
application for Premarket Approval must be favorably acted upon before they may
be distributed. All of the Company's products to date have met the appropriate
FDA requirement for marketing but no assurance can be given that the Company
will receive marketing authority with respect to additional products or
applications of the Company's technology.
The Company must also comply with current Good Manufacturing Practice
('GMP') regulations promulgated by the FDA. These regulations require, among
other things, that (i) the manufacturing process be regulated and controlled by
the use of written procedures and (ii) the production of medical products, which
meet
6
<PAGE>
the manufacturer's specifications, be validated by extensive and detailed
testing of every aspect of the process. They also require investigation of any
deficiencies in the manufacturing process or in the products produced and
detailed record keeping. Manufacturing facilities are subject to FDA inspection
on an unscheduled basis to monitor compliance with GMP requirements. If
violations of the applicable regulations are noted during FDA inspections of the
Company's manufacturing facilities, there may be a material adverse effect on
the continued marketing of the Company's products through the imposition of
penalties, withdrawal of approvals or damage to reputation or goodwill. The
Company is in compliance with current GMP requirements in all material respects.
The Company's marketing of its products in several foreign markets is
subject to foreign country qualification and regulation. In certain foreign
markets it may be necessary or advantageous to obtain ISO 9000 certification,
which is analogous to compliance with the FDA's GMP requirements. The Company is
in the process of obtaining ISO 9000 certification for certain of its operating
facilities; however, there can be no assurance that such facilities will receive
ISO 9000 certification or that the Company will be able to continue to meet the
requirements for ISO 9000 certification.
There can be no assurance that the Company's products will continue to
comply with all applicable FDA regulations or that the Company will receive the
requisite approvals to market any of its future products. Any failure to receive
approvals, withdrawal of existing approvals or non-compliance with performance
standards could have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, any change in
existing Federal, state or foreign laws or regulations, or in the interpretation
or enforcement thereof, or the promulgation of any additional laws or
regulations could have a material adverse effect on the Company's business,
results of operations and financial condition. See 'Business--Government
Regulation.'
COMPETITION
The markets for the Company's products are highly competitive and subject
to technological change and evolving industry requirements and standards. The
Company believes that these trends will continue into the foreseeable future.
Many of the Company's current and potential competitors have substantially
greater financial, marketing and other resources than the Company. As a result,
they may be able to adapt more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
promotion and sale of their products than the Company. Competition could
increase if new companies enter the market or if existing competitors expand
their product lines or intensify efforts within existing product lines. Although
the Company believes that its products are more cost-effective than those of its
primary competitors, certain competing products may have other advantages which
may limit the Company's market. There can be no assurance that continuing
improvements in current or new products by competitors will not make their
products technically equivalent or superior to the Company's products in
addition to providing cost or other advantages. There can be no assurance that
the Company's current products, products under development or ability to
introduce new products will enable it to compete effectively. See
'Business--Competition.'
UNCERTAINTY OF HEALTHCARE REFORM
In recent years, healthcare reform and medical cost containment have
received significant attention in the United States and many foreign countries,
including proposals to reduce Medicare and Medicaid payments and to move toward
managed care. Although the Company believes that its products are
cost-effective, certain reform proposals and cost containment measures being
considered by Congress, as well as certain states, could limit price increases
on, and future sales of, the Company's medical imaging systems and its critical
electronic subsystems for medical applications due, among other things, to
decisions by hospitals and other healthcare providers to defer or reduce
acquisitions of capital equipment. As a result, such reforms or cost containment
measures could materially and adversely affect revenues derived by the Company
from sales of these products. Uncertainty in the medical community regarding the
nature and effect of proposed healthcare reforms and cost containment measures
may also have a material adverse effect on sales of these products. See
'Business--Government Regulation.'
7
<PAGE>
DEPENDENCE ON THE COMPANY'S KEY PERSONNEL
The Company is highly dependent on the key members of its management, the
loss of whose services could significantly impede the achievement of the
Company's business objectives. Although the Company has been able to attract and
retain highly qualified and well-trained managerial and technical personnel,
there can be no assurance that the Company will be able to continue to attract
individuals with the requisite credentials, or will be able to attract and
retain personnel on acceptable terms. See 'Management.'
PRODUCT LIABILITY
The Company's business involves the risk of product liability claims
inherent to its business. The Company currently maintains product liability
insurance with an aggregate coverage limit of $25 million per year, subject to
certain deductibles and exclusions. There can be no assurance that the product
liability insurance maintained by the Company will be sufficient to protect the
Company from product liability claims, or that product liability insurance will
be available to the Company at a reasonable cost, if at all, in the future. A
product liability claim which is not covered by the Company's insurance,
could have a material adverse effect on the Company's business, results of
operations and financial condition.
INTERNATIONAL OPERATIONS
Export sales accounted for approximately 36% of the Company's net sales in
fiscal 1995 and the Company intends to continue to expand its presence in
international markets. However, export sales are subject to a number of risks,
including the following: agreements may be difficult to enforce and receivables
difficult to collect through a foreign country's legal system; foreign customers
may have longer payment cycles; foreign countries may impose additional
withholding taxes or otherwise tax the Company's foreign income, impose tariffs
or adopt other restrictions on foreign trade; U.S. export licenses may be
difficult to obtain; and the protection of intellectual property in foreign
countries may be more difficult to enforce. There can be no assurance that any
of these factors will not have a material adverse effect on the Company's
business, results of operations and financial condition.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock may be highly volatile. Such factors
as quarterly fluctuations in the Company's results of operations, the
announcement of technological innovations or new products by the Company or its
competitors, investor perception of the Company, and general market conditions
in the industry in which the Company competes may have a significant impact on
the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
The sale, or availability for sale, of substantial amounts of Common Stock
in the public market subsequent to this offering pursuant to Rule 144 or
otherwise could adversely affect the market price of the Common Stock and could
impair the Company's ability to raise additional capital at a time and on terms
favorable to the Company. The Company's executive officers and directors, who in
the aggregate currently hold approximately 382,000 shares of Common Stock and
options to purchase 1,043,460 shares of Common Stock, have agreed pursuant to
lock-up agreements that they will not, without the prior written consent of
Needham & Company, Inc., sell or otherwise dispose of any shares of Common Stock
beneficially owned by them for a period of 12 months from the date of this
Prospectus (the 'Lock-Up Period'); provided that such persons may sell up to an
aggregate of 75,000 shares of Common Stock during the last six months of the
Lock-Up Period. Upon the expiration of the Lock-Up Period certain of these
shares will be eligible for sale in the public market or will become eligible
for sale in the public market from time to time, subject to Rule 144 under the
Securities Act of 1933, as amended. The availability of Rule 144 to the holders
of restricted securities of the Company would be conditioned on, among other
things, the availability of current public information concerning the Company.
398,683 shares of Common Stock currently outstanding are 'restricted securities'
as that term is defined in Rule 144 promulgated under the Securities Act and
may, under certain circumstances, be sold without registration pursuant to Rule
144.
8
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered hereby will be approximately $15.3 million ($17.7 million
if the Underwriters' over-allotment option is exercised in full), after
deduction of the estimated underwriting discounts and commissions and expenses
of the offering payable by the Company.
The Company intends to use the net proceeds of this offering (i) to repay
approximately $7.4 million of its revolving credit facility; (ii) to repay
approximately $5.0 million of the outstanding principal balance of the term loan
under its loan agreement; (iii) to repay the $1.8 million principal balance of
the subordinated note which it issued in connection with the acquisition of
Gendex; and (iv) to add the balance to working capital to be used for general
corporate purposes, including new product development; expansion of the
Company's sales and marketing program; and for strategic acquisitions of
businesses, products or technologies complementary to the Company's business.
Approximately $5.7 million of such bank borrowings were used to fund the cash
portion of the purchase price for Gendex. The Company expects to fund additional
working capital needs, including Gendex working capital, through cash generated
from operations and through cash generated from operations and by utilizing its
fully available revolving credit facility. Pending such uses, the Company plans
to invest the net proceeds of this offering in short term, interest-bearing
investment grade securities. No portion of the proceeds of this offering has
been allocated to any specific acquisition nor has the Company entered into any
agreements or letters of intent with respect to any future acquisitions. See
'Business.'
The Company's term loan and revolving credit facility bear interest
initially at the bank's prime rate with incentive pricing if the Company
achieves certain financial ratios which are measured on a quarterly basis. In
addition, the Company, at its option, may elect a LIBOR (London Interbank
Borrowing Rate) based rate. The Company's term loan and revolving credit
facility mature on April 30, 2001 and March 31, 2000, respectively, and
currently bear interest at the rate of 8.19% per annum. The Company's
subordinated note in the amount of $1.8 million (the 'Gendex Note') was issued
in payment of a portion of the purchase price of certain assets of Gendex. The
Gendex Note bears interest at the rate of 7.75% per annum and matures on March
6, 2003.
9
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the American Stock Exchange
('AMEX') under the symbol DEL. The following table sets forth, for the periods
indicated, the high and low sales prices per share of Common Stock, on the AMEX,
as reported on the AMEX Composite Tape through April 26, 1996, and as adjusted
to reflect 3% semi-annual stock dividends paid in each of fiscal 1994, 1995 and
1996.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED JULY 30, 1994
First Quarter................................ $5 3/4 $4 3/4
Second Quarter............................... 7 1/8 5 1/4
Third Quarter................................ 8 1/4 6
Fourth Quarter............................... 7 5/8 5 3/8
FISCAL YEAR ENDED JULY 29, 1995
First Quarter................................ 6 1/2 5 3/8
Second Quarter............................... 6 4 5/8
Third Quarter................................ 5 3/4 5
Fourth Quarter............................... 6 3/4 5 3/8
FISCAL YEAR ENDING AUGUST 3, 1996
First Quarter................................ 6 3/4 5 5/8
Second Quarter............................... 8 1/8 6
Third Quarter................................ 8 3/4 7 5/8
</TABLE>
The last reported sale price of the Common Stock on the AMEX on April 26,
1996 was $8.44 per share. As of March 31, 1996, there were approximately 1,059
holders of record of the Company's Common Stock.
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol 'DGTC'. After the completion of this offering, the
Common Stock will be traded on the Nasdaq National Market rather than on the
AMEX.
DIVIDEND POLICY
The Company has paid dividends in the form of shares of Common Stock of 5%
in each of fiscal 1986, 1987 and 1988, 6% in each of fiscal 1990 and 1992, 6%
and 3% in fiscal 1993, and 3% semi-annually in each of fiscal 1994, 1995 and
1996. The Company intends to continue the payment of 3% semi-annual dividends in
the form of shares of Common Stock. The Company has not paid any cash dividends
since 1983 and does not anticipate paying any cash dividends on the Common Stock
in the foreseeable future. The Company intends to retain any earnings to provide
funds for utilization in its business. The Company's loan agreement currently
contains provisions which effectively prohibit the payment of cash dividends by
the Company. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources' and Note 6 of Notes
to the Company's Consolidated Financial Statements.
10
<PAGE>
CAPITALIZATION
The following table sets forth at February 3, 1996: (i) the historical
capitalization of the Company, (ii) the pro forma capitalization after giving
effect to the Gendex acquisition, and (iii) the pro forma as adjusted
capitalization to reflect the issuance and sale by the Company of the 2,000,000
shares of Common Stock offered hereby, assuming an offering price of $8.44 per
share of Common Stock, and the application of the estimated net proceeds
therefrom, after deducting the estimated underwriting discounts and commissions
and offering expenses payable by the Company. This table should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FEBRUARY 3, 1996(1)
---------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
----------- ------------ --------------
<S> <C> <C> <C>
Current portion of long-term debt....... $ 943,383 $ 943,383 $ 943,383
----------- ------------ --------------
----------- ------------ --------------
Long-term debt.......................... $11,755,397 $ 17,455,397 $ 5,055,397
----------- ------------ --------------
Subordinated debt....................... 1,800,000
----------- ------------ --------------
Shareholders' equity:
Common Stock, $.10 par value,
10,000,000 shares authorized;
4,346,983 shares issued and
outstanding; 6,346,983 shares
issued and outstanding, as
adjusted........................... 434,698 434,698 634,698
Additional paid-in capital.............. 17,490,139 17,490,139 32,622,939
Retained earnings....................... 3,563,896 3,563,896 3,563,896
----------- ------------ --------------
21,488,733 21,488,733 36,821,533
Less Common Stock in treasury........... 336,685 336,685 336,685
----------- ------------ --------------
Total shareholders' equity............ 21,152,048 21,152,048 36,484,848
----------- ------------ --------------
Total capitalization.................... $32,907,445 $ 40,407,445 $ 41,540,245
----------- ------------ --------------
----------- ------------ --------------
</TABLE>
- ------------
(1) Shares outstanding are as of February 3, 1996. Subsequent to this
date, the Company issued 23,497 shares of Common Stock as the result
of the exercise of stock options and warrants. Does not include, as of
April 19, 1996, an aggregate of (i) 1,636,651 shares of Common Stock
issuable upon exercise of options outstanding under the Company's employee
stock option plan, of which 1,338,373 shares are currently exercisable at a
weighted average exercise price of $3.53 per share of Common Stock; (ii)
300,000 shares of Common Stock issuable upon exercise of the Underwriters'
over-allotment option; and (iii) 202,256 shares of Common Stock reserved
for issuance upon exercise of outstanding warrants at a weighted average
exercise price of $5.76. See 'Underwriting.'
(2) Gives effect to the Gendex acquisition, which was funded through bank
borrowings of $5.7 million and the issuance of a subordinated note for
$1.8 million, as if the transaction occurred at February 3, 1996.
(3) Assumes repayment of approximately $7.4 million of the Company's
revolving credit facility, approximately $5.0 million of the
outstanding principal balance of the term loan under its loan
agreement; and the $1.8 million principal balance of the subordinated
note which it issued in connection with the Gendex acquisition, all of
which were incurred subsequent to February 3, 1996. See 'Use of Proceeds.'
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected statement of income data presented for the fiscal years ended
July 31, 1993, July 30, 1994 and July 29, 1995 and balance sheet data as of July
30, 1994 and July 29, 1995 have been derived from the financial statements
included elsewhere in this Prospectus, which have been audited by Deloitte &
Touche LLP. The selected statement of income data for the fiscal years ended
August 3, 1991 and August 1, 1992 and balance sheet data as of August 3, 1991,
August 1, 1992 and July 31, 1993 have been derived from audited financial
statements not included herein. The information as of and for the six month
periods ended January 28, 1995 and February 3, 1996 has been derived from
unaudited financial statements and, in the opinion of management, includes all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the information shown herein. The operating results for the six
months ended February 3, 1996 are not necessarily indicative of the results to
be expected for the entire fiscal year. The pro forma results and balance sheet
data reflect the completion of the bank borrowing and Gendex acquisition in
March 1996. The pro forma as adjusted balance sheet data as of February 3, 1996
reflect the completion of the offering made hereby as well as the transactions
in the pro forma column. This selected consolidated financial data should be
read in conjunction with the Company's Consolidated Financial Statements and
Notes thereto and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' appearing elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED(2)
---------------------
FEBRUARY
FISCAL YEAR ENDED 3, 1996
------------------------------------------------------ -------
AUGUST 3, AUGUST 1, JULY 31, JULY 30, JULY 29, JANUARY 28,
1991 1992 1993(2) 1994(2) 1995(2) 1995 ACTUAL
--------- --------- -------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Net sales........................................ $ 17,323 $ 18,949 $ 22,287 $ 24,327 $ 32,596 $13,715 $16,801
--------- --------- -------- -------- -------- ----------- -------
Costs and expenses:
Cost of sales.................................. 10,672 11,754 13,455 15,179 19,178 7,500 9,745
Research and development....................... 846 1,262 1,713 2,253 2,862 1,209 1,432
Selling, general and administrative............ 3,453 3,474 4,390 4,863 6,623 3,055 3,356
Interest expense--net.......................... 874 309 360 577 1,191 576 595
--------- --------- -------- -------- -------- ----------- -------
15,845 16,799 19,918 22,872 29,854 12,340 15,128
--------- --------- -------- -------- -------- ----------- -------
Income before provision for income taxes......... 1,478 2,150 2,369 1,455 2,742 1,375 1,673
Provision for income taxes....................... 396 658 708 341 837 419 510
--------- --------- -------- -------- -------- ----------- -------
Income before cumulative effect of change in
accounting principle........................... 1,082 1,492 1,661 1,114 1,905 956 1,163
Cumulative effect of adoption of SFAS-109........ 76
--------- --------- -------- -------- -------- ----------- -------
Net income....................................... $ 1,082 $ 1,492 $ 1,661 $ 1,190 $ 1,905 $ 956 $ 1,163
--------- --------- -------- -------- -------- ----------- -------
--------- --------- -------- -------- -------- ----------- -------
Net income per common share and common share
equivalent, primary and fully diluted before
cumulative effect of adoption of SFAS-109(1)... $ 0.35 $ 0.34 $ 0.36 $ 0.23 $ 0.39 $ 0.19 $ 0.23
Cumulative effect of adoption of SFAS-109........ 0.02
--------- --------- -------- -------- -------- ----------- -------
Net income per common share and common share
equivalent primary and fully diluted(1)........ $ 0.35 $ 0.34 $ 0.36 $ 0.25 $ 0.39 $ 0.19 $ 0.23
--------- --------- -------- -------- -------- ----------- -------
--------- --------- -------- -------- -------- ----------- -------
Number of shares used in computation of primary
earnings per share(1).......................... 3,137 4,426 4,573 4,897 5,044 5,012 5,247
Number of shares used in computation of fully
diluted earnings per share(1).................. 3,137 4,439 4,575 4,897 5,066 5,012 5,252
<CAPTION>
SIX MONTHS ENDED(2)
--------------------------
FEBRUARY 3, 1996
--------------------------
PRO PRO FORMA AS
FORMA(3) ADJUSTED(3)(4)
--------- -------------
<S> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Net sales........................................ $25,438 $25,438
-------- ----------
Costs and expenses:
Cost of sales.................................. 17,224 17,224
Research and development....................... 1,434 1,434
Selling, general and administrative............ 4,662 4,662
Interest expense--net.......................... 905 312
-------- ----------
24,225 23,632
-------- ----------
Income before provision for income taxes......... 1,213 1,806
Provision for income taxes....................... 370 551
-------- ----------
Income before cumulative effect of change in
accounting principle........................... 843
Cumulative effect of adoption of SFAS-109........
-------- ----------
Net income....................................... $ 843 $ 1,255
-------- ----------
-------- ----------
Net income per common share and common share
equivalent, primary and fully diluted before
cumulative effect of adoption of SFAS-109(1)... $ 0.16 $ 0.18
Cumulative effect of adoption of SFAS-109........
-------- ----------
Net income per common share and common share
equivalent primary and fully diluted(1)........ $ 0.16 $ 0.18
-------- ----------
-------- ----------
Number of shares used in computation of primary
earnings per share(1).......................... 5,247 7,247
Number of shares used in computation of fully
diluted earnings per share(1).................. 5,252 7,252
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY
3, 1996
-------
AUGUST 3, AUGUST 1, JULY 31, JULY 30, JULY 29,
1991 1992 1993 1994 1995 ACTUAL
--------- --------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................. $ 10,210 $ 11,308 $ 13,857 $ 18,530 $ 20,648 $ 21,917
Total assets..................................... 18,299 19,413 24,969 36,198 39,055 40,670
Long-term debt................................... 3,965 3,902 5,639 11,486 11,903 11,755
Shareholders' equity............................. 10,815 12,773 15,634 17,699 19,525 21,152
<CAPTION>
FEBRUARY 3, 1996
--------------------------
PRO PRO FORMA AS
FORMA(3) ADJUSTED(3)(4)
--------- -------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................. $27,797 $28,929
Total assets..................................... 48,420 49,552
Long-term debt................................... 17,455 5,055
Shareholders' equity............................. 21,152 36,485
</TABLE>
- ------------
(1) Net income per common share and common share equivalent has been restated to
give effect to stock dividends in fiscal years 1992, 1993, 1994, 1995 and
1996. See Note 1 of Notes to the Company's Consolidated Financial Statements
for computation of earnings per share.
(2) The fiscal years ended July 31, 1993, July 30, 1994, July 29, 1995 and the
six month periods ended January 28, 1995 and February 3, 1996 include the
operations of Dynarad; the fiscal years ended July 30, 1994, July 29, 1995
and the six month periods ended January 28, 1995 and February 3, 1996
include the operations of Bertan from their respective dates of acquisition.
(3) Gives effect to the Gendex acquisition, which was funded through bank
borrowings of $5.7 million and the issuance of a subordinated note for $1.8
million, as if the transactions occurred at the beginning of the six month
period for statement of income data and at February 3, 1996 for balance
sheet data. The pro forma financial information is not necessarily
indicative of the operating results which would have been achieved had the
Company acquired Gendex at the beginning of the period presented or the
results to be achieved in the future.
(4) As adjusted to give effect to estimated net proceeds of approximately $15.3
million from the offering, assuming an offering price of $8.44 per share of
Common Stock, and issuance of 2,000,000 additional shares of Common Stock,
as if the offering had occurred at the beginning of the six month period
for statement of income data and at February 3, 1996 for balance sheet data.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's net sales have increased as a result of both internal growth
and acquisitions. The Company has completed three acquisitions in the past four
years: Dynarad (a designer and manufacturer of medical imaging systems and, to a
lesser extent, critical electronic subsystems) in fiscal 1993; Bertan (a
designer and manufacturer of precision high voltage power supplies and
instrumentation for medical and industrial applications) in fiscal 1994; and
Gendex in fiscal 1996. The Company's net sales have increased from $18.9 million
in fiscal 1992 to $32.6 million in fiscal 1995, at a compounded annual growth
rate of approximately 20%. With the acquisition of Gendex, the Company's net
sales would have been approximately $53.6 million for fiscal 1995 on a pro forma
basis. The Company has recently experienced significant internal growth. Net
sales have increased, solely from existing operations, approximately 22.5% to
$16.8 million for the first six months of fiscal 1996 versus the comparable
period of the previous year.
During the past four years the Company has grown internally and through
acquisitions into a company whose predominant business is serving the medical
imaging and diagnostic markets. The Company's net sales attributable to medical
imaging products have increased from approximately $3.4 million or 17.7% of
total net sales in fiscal 1992 to $14.4 million or 44.2% of total net sales in
fiscal 1995. On a pro forma basis, the Company's net sales attributable to
medical imaging products were approximately $35.4 million or 66.1% of total
sales in fiscal 1995.
The Company believes that recent cost containment trends in the healthcare
industry have created opportunities for its cost-effective medical imaging
products in domestic and international markets. Such trends include increased
demand for lower cost medical equipment, outsourcing of critical electronic
subsystems by OEMs, increased demand for certain diagnostic procedures and lower
cost medical services in certain international markets.
GENERAL
The following discussion and analysis examines the major factors
contributing to the Company's financial condition and results of operations for
the six months ended February 3, 1996 and January 28, 1995, and for the three
years ended July 29, 1995, July 30, 1994 and July 31, 1993. The following
discussion and analysis should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.
As described more fully under 'Business,' the Company's products are
comprised of two major product groups: Medical Imaging Products, which include
medical imaging systems and critical electronic subsystems for medical
applications, and Non-Medical Products, which include critical electronic
subsystems for precision high voltage products and noise suppression products.
Estimated percentages of net sales for these product groups for the past two
fiscal years and pro forma for the six months ended February 3, 1996 are set
forth in the table on page 21.
For segment reporting purposes, the Company has organized its operations
based upon its manufacturing capabilities into two segments: Medical
Manufacturing and Specialty Electronics Manufacturing. The Specialty Electronics
Manufacturing segment includes sales of critical electronic subsystems for
medical applications which are classified as Medical Imaging Products but which
are manufactured within this segment, of approximately $4.5 million and $4.2
million, respectively, for the six months ended February 3, 1996 and
January 28, 1995, and approximately $8.8 million, $4.6 million and $3.8 million,
respectively, for the fiscal years ended July 29, 1995, July 30, 1994 and July
31, 1993. These sales have been included in the Medical Imaging Products product
group in the table on page 21.
13
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of net sales represented by items as shown in the Company's consolidated
statements of income.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
-------------------------------- -----------------------------
JULY 31, JULY 30, JULY 29, JANUARY 28, FEBRUARY 3,
1993 1994 1995 1995 1996
-------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net sales............................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales......................................... 60.4 62.4 58.8 54.7 58.0
Research and development.............................. 7.7 9.3 8.8 8.8 8.5
Selling, general and administrative................... 19.7 19.9 20.3 22.3 20.0
Interest expense--net................................. 1.6 2.4 3.7 4.2 3.5
-------- -------- -------- ------ ------
89.4 94.0 91.6 90.0 90.0
-------- -------- -------- ------ ------
Income before provision for income taxes................ 10.6 6.0 8.4 10.0 10.0
Provision for income taxes.............................. 3.2 1.4 2.6 3.1 3.1
-------- -------- -------- ------ ------
Income before cumulative effect of change in method for
accounting for income taxes........................... 7.4 4.6 5.8 6.9 6.9
Cumulative effect of change in method for accounting for
income taxes.......................................... 0.3
-------- -------- -------- ------ ------
Net income.............................................. 7.4% 4.9% 5.8% 6.9% 6.9%
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
</TABLE>
FOR THE SIX MONTHS ENDED FEBRUARY 3, 1996 COMPARED TO THE SIX MONTHS ENDED
JANUARY 28, 1995
Net sales for the Specialty Electronics Manufacturing segment for the 1996
six month period were approximately $13.5 million compared to approximately
$11.5 million for the 1995 six month period, an increase of approximately $2.0
million or 17.4%. The increase was primarily due to higher sales levels of
products supplied by the Company to its OEM customers. Net sales for the Medical
Manufacturing segment for the 1996 six month period were approximately $3.3
million compared to approximately $2.2 million for the 1995 six month period, an
increase of approximately $1.1 million or 50.0%. The increase was primarily due
to increased sales of portable x-ray systems.
Cost of sales for the Specialty Electronics Manufacturing segment for the
1996 six month period was approximately $7.5 million or 55.6% of net sales
compared to approximately $6.3 million or 54.9% of net sales for the 1995 six
month period. The increase in cost of sales as a percentage of net sales was
primarily due to a change in product mix. Cost of sales for the Medical
Manufacturing segment for the 1996 six month period was approximately $2.3
million or 67.6% of net sales compared to approximately $1.2 million or 53.8% of
net sales for the 1995 six month period. The increase in cost of sales as a
percentage of net sales was primarily due to a change in product mix and special
introductory pricing.
Research and development costs for the Specialty Electronics Manufacturing
segment for both the 1996 six month period and the 1995 six month period were
approximately $1.1 million. Research and development costs for the Medical
Manufacturing segment for the 1996 six month period were approximately $300,000
compared to approximately $100,000 for the 1995 six month period. The increase
in research and development costs was primarily due to costs incurred in
connection with new product development.
Selling, general and administrative expenses for the Specialty Electronics
Manufacturing segment were approximately $2.8 million or 20.7% of net sales for
the 1996 six month period compared to approximately $2.6 million or 22.6% of net
sales for the 1995 six month period. The increase in selling, general and
administrative expenses was due to increased selling expenses, advertising costs
and commissions reflecting increased sales levels. Selling, general and
administrative expenses for the Medical Manufacturing segment were approximately
$600,000 or 18.2% of net sales for the 1996 six month period compared to
approximately
14
<PAGE>
$500,000 or 21.6% of net sales for the 1995 six month period. For both segments,
the decreases as a percentage of net sales were due to higher sales volumes
without a proportionate increase in expenses.
Net interest expense was approximately $600,000 for both the 1996 six month
period and the 1995 six month period.
Income tax expense was 30.5% of pre-tax income for both the 1996 six month
period and the 1995 six month period. The effective rate was less than the
Federal statutory rate primarily due to sales made through the Company's Foreign
Sales Corporation and research and development and other tax credits.
As a result of the foregoing, net income increased to approximately $1.2
million for the 1996 six month period, an increase of 21.6% from approximately
$950,000 for the 1995 six month period. For the 1996 six month period primary
and fully diluted earnings per share were $0.23 compared to $0.19 for the 1995
six month period, an increase of 21.1%. The number of outstanding shares and
common share equivalents as of February 3, 1996 increased by 4.8% from January
28, 1995.
PRO FORMA. On a pro forma basis to include Gendex, net sales increased
51.4% to approximately $25.4 million for the 1996 six month period from
approximately $16.8 million for the 1995 six month period. Pro forma net income
declined to approximately $900,000 ($0.16 per share) from approximately $1.2
million ($0.23 per share) as a result of the losses incurred at Gendex prior to
its acquisition by the Company, and the effect of interest expense on debt
incurred to effect the acquisition, net of applicable income taxes. On a pro
forma as adjusted basis, net income increased to $1.3 million ($0.18 per share)
resulting from the aforementioned factors and the assumed use of a portion of
the net proceeds of this offering to reduce Gendex acquisition debt and certain
other debt of the Company. See 'Use of Proceeds.'
FISCAL YEARS 1995, 1994 AND 1993
Net sales for the Specialty Electronics Manufacturing segment for fiscal
1995 were approximately $27.0 million compared to approximately $19.4 million
for fiscal 1994, an increase of 39.1%. The increase in net sales was due to
internal growth (approximately $1.3 million) and the inclusion of Bertan for all
of fiscal 1995 (approximately $6.3 million). Net sales for the Specialty
Electronics Manufacturing segment for fiscal 1994 increased by 7.2% from
approximately $18.1 million for fiscal 1993. The increase in net sales was
primarily due to the acquisition of Bertan, which occurred in April 1994. Net
sales for the Medical Manufacturing segment were approximately $5.6 millon in
fiscal 1995 compared to approximately $4.9 million in fiscal 1994, an increase
of 13.9%. Net sales for the Medical Manufacturing segment in fiscal 1994
increased by 17.8% from approximately $4.2 million in fiscal 1993. In all three
years, the increases in net sales for the Medical Manufacturing segment were
principally due to the internal growth of Dynarad as a result of new product
introductions.
Cost of sales for the Specialty Electronics Manufacturing segment increased
to approximately $15.0 million or 55.5% of net sales in fiscal 1995 from
approximately $12.1 million or 62.3% of net sales in fiscal 1994. The decrease
in cost of sales as a percentage of net sales in fiscal 1995 was primarily due
to the improved operating efficiencies of Bertan and the inclusion of this
subsidiary's operations for all of fiscal 1995. Cost of sales was approximately
$10.8 million or 59.3% of net sales in fiscal 1993. Cost of sales, as a
percentage of net sales, for the Specialty Electronics Manufacturing segment,
increased from fiscal 1993 primarily due to the mix of goods sold and increased
competitive pricing pressure in certain markets which this segment serves. The
cost of sales for the Medical Manufacturing segment was approximately $4.2
million or 75.0% of net sales in fiscal 1995 compared to approximately $3.1
million or 62.9% of net sales in fiscal 1994. The increase in cost of sales as a
percentage of net sales was due to a change in the mix of products sold in this
segment in fiscal 1995 as compared to fiscal 1994. The cost of sales for the
Medical Electronics Manufacturing segment was approximately $2.7 million or
65.0% of net sales in fiscal 1993.
Research and development costs for the Specialty Electronics Manufacturing
segment increased by 47.6% to approximately $2.7 million in fiscal 1995 from
approximately $1.8 million in fiscal 1994. The inclusion of Bertan for all of
fiscal 1995 was the primary reason for this increase. Research and development
costs for the Specialty Electronics Manufacturing segment increased by 19.2% in
fiscal 1994 from approximately $1.5 million in fiscal 1993. Research and
development costs for the Medical Manufacturing segment decreased by 63.3% to
approximately $153,000 in fiscal 1995 as compared to approximately $418,000 in
fiscal 1994. Research and development costs for the Medical Manufacturing
segment increased by 140.2% in fiscal 1994 from
15
<PAGE>
approximately $174,000 in fiscal 1993. This increase in research and development
costs was primarily attributable to the development of new medical imaging
systems.
Selling, general and administrative expenses, for the Specialty Electronics
Manufacturing segment, were approximately $5.4 million or 19.9% of net sales in
fiscal 1995, approximately $3.7 million or 19.1% of net sales in fiscal 1994 and
approximately $3.5 million or 19.3% of net sales in fiscal 1993. Selling,
general and administrative expenses, for the Medical Manufacturing segment, were
approximately $1.2 million or 22.2% of net sales in fiscal 1995 compared to
approximately $1.1 million or 23.5% of net sales in fiscal 1994 and
approximately $889,000 or 21.4% of net sales in fiscal 1993. These increases in
selling, general and administrative expenses were principally attributable to
increased commissions at RFI Corporation ('RFI') and the addition of a chief
financial officer in fiscal 1993.
Interest expense, net of interest income, for fiscal 1995, 1994 and 1993
was approximately $1.2 million, $577,000 and $360,000, respectively. Interest
expense increased in fiscal 1995 compared to fiscal 1994 and fiscal 1993 due to
higher levels of borrowing resulting from the Bertan acquisition, working
capital requirements and higher interest rates. In addition, interest expense
increased in fiscal 1994 due to higher levels of borrowing to fund increased
research and development expenses at Dynarad.
Income tax expense increased to 30.5% of pre-tax income in fiscal 1995 from
23.5% in fiscal 1994 due to an increase in pre-tax earnings in fiscal 1995 over
fiscal 1994. Income tax expense for fiscal 1994 would have been 28.8% if not for
a reduction of approximately $108,000 due to tax benefits in fiscal 1994
resulting from the RFI acquisition which were realized on the Company's tax
return in fiscal 1994. A corresponding charge of approximately $108,000 was
included in selling, general and administrative expenses. Income tax expense for
fiscal 1993 would have been 33.2% if not for a reduction of approximately
$117,000 due to the benefits resulting from the RFI acquisition. Income tax
expense was 30.6% in fiscal 1993 due to increased tax credits available in 1993.
There was a cumulative effect of change in method for accounting for income
taxes of approximately $76,000 in fiscal 1994 due to the adoption of SFAS 109.
Net income for fiscal 1995 was approximately $1.9 million, an increase of
60.1% from approximately $1.2 million in fiscal 1994. Net income in fiscal 1994
decreased by 28.4% from approximately $1.7 million in fiscal 1993. The primary
and fully diluted earnings per share were $0.39, an increase of $0.14 per share
which represents a 56.0% increase from primary and fully diluted earnings per
share of $0.25 in fiscal 1994 while the number of outstanding shares and common
share equivalents increased by 9.3%. Fiscal 1994 primary and fully diluted
earnings per share decreased by 30.5% from $0.36 primary and fully diluted
earnings in fiscal 1993, while the number of outstanding shares and common share
equivalents increased by 7.0%. The primary and fully diluted earnings per share
before cumulative effect of change in method for accounting for income taxes for
fiscal 1994 was $0.23 per share, a decrease of 36.1% from fiscal 1993.
PRO FORMA. On a pro forma basis to include Gendex, net sales increased to
approximately $53.6 million from approximately $32.6 million in fiscal 1995. Pro
forma net income declined to approximately $1.5 million ($0.31 per share) from
approximately $1.9 million ($0.39 per share) on an historical basis as a result
of interest on the acquisition related debt, net of applicable income taxes,
offset in part by the small historical net income of Gendex prior to its
acquisition by the Company. On a pro forma as adjusted basis, net income
increased to approximately $2.4 million ($0.34 per share) resulting from the
aforementioned factors and the assumed use of a portion of the net proceeds of
this offering to reduce Gendex acquisition debt and certain other debt of the
Company. See 'Use of Proceeds.'
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and acquisitions through a
combination of cash flow from operations, bank borrowing and the issuance of
Common Stock.
WORKING CAPITAL. At February 3, 1996 and July 29, 1995, the Company's
working capital was approximately $21.9 million and $20.6 million, respectively.
At such dates the Company had approximately $162,000 and $506,000, respectively,
in cash and cash equivalents.
Trade receivables at February 3, 1996 decreased approximately $732,000 as
compared to July 29, 1995 as the result of collections and lower sales levels in
the quarter ended February 3, 1996 as compared to the quarter ended July 29,
1995. These lower sales levels were primarily attributable to more workdays in
the last quarter of the Company's fiscal year as compared to the second quarter
of its fiscal year due to plant shutdowns for the calendar year end holidays.
16
<PAGE>
Inventory at February 3, 1996 increased approximately $1.9 million as
compared to July 29, 1995. Major new orders received in the six months ended
February 3, 1996 resulted in the increased inventory levels.
Prepaid expenses and other current assets increased approximately $449,000
at February 3, 1996 as compared to July 29, 1995. This increase in prepaid
expenses and other current assets was primarily attributable to advanced
payments for inventory for Del Medical Systems under its exclusive distribution
agreement for diagnostic medical image enhancers, worker's compensation
insurance policy premiums and costs incurred relating to the Gendex acquisition.
CREDIT FACILITY AND BORROWING. On March 5, 1996, in conjunction with the
acquisition of Gendex, the Company and its lending bank entered into an Amended
and Restated Credit Agreement wherein the bank increased the Company's line of
credit to $24.0 million, consisting of a five year $10.0 million term loan and a
four year revolving line of credit of $14.0 million. In connection with the
Gendex acquisition, on March 6, 1996 the Company delivered a seven year $1.8
million subordinated note to Dentsply International Inc. The Company had unused
and available revolving credit of $3.2 million and $1.6 million, after deducting
outstanding letters of credit of $562,000 and $504,000, at March 5, 1996 and
July 29, 1995, respectively. See Note 6 of Notes to the Company's Consolidated
Financial Statements. Borrowings under such facilities are secured by all of the
assets of the Company.
CAPITAL EXPENDITURES. The Company continues to invest in capital
equipment, principally for its manufacturing operations, in order to improve its
manufacturing capability and capacity. The Company has expended approximately
$1.3 million, $1.7 million, $1.3 million and $761,000 for capital equipment in
fiscal years 1993, 1994, 1995 and for the 1996 six month period, respectively.
At February 3, 1996, the Company had commitments totaling $150,000 to improve
the manufacturing control systems and computer systems at certain of its
manufacturing operations.
The Company may expand its technical and marketing capabilities and product
lines through the acquisition of other companies, businesses or technologies
that are complementary to the Company's current business. The Company is not
currently engaged in active discussions with respect to any acquisitions.
The Company currently anticipates that cash generated from operations and
amounts available under its bank lending facilities will be sufficient to
satisfy its operating cash needs for at least the next two years.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
LONG-LIVED ASSETS. In March 1995, the Financial Accounting Standards Board
('FASB') issued Statement of Financial Accounting Standards ('SFAS') No. 121,
'Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of.' This statement is effective for fiscal years beginning after
December 15, 1995. The Company does not expect the effect on its consolidated
financial condition from the adoption of this statement to be material.
STOCK-BASED COMPENSATION. In October 1995, the FASB issued SFAS No. 123,
'Accounting for Stock-Based Compensation,' which requires adoption of the
disclosure provisions no later than fiscal years beginning after December 15,
1995 and adoption of the measurement and recognition provisions for non-employee
transactions no later than after December 15, 1995. The new standard defines a
fair value method of accounting for the issuance of stock options and other
equity instruments. Under the fair value method, compensation cost is measured
at the grant date based on the fair value of the award and is recognized over
the service period, which is usually the vesting period. Pursuant to SFAS No.
123, companies are encouraged, but not required, to adopt the fair value method
of accounting for employee stock-based transactions. Companies are also
permitted to continue to account for such transactions under Accounting
Principles Board Opinion ('APB') No. 25, 'Accounting for Stock Issued to
Employees,' but would be required to disclose in a note to the financial
statements pro forma net income and per share amounts as if the company had
applied the new method of accounting. SFAS No. 123 also requires increased
disclosures for stock-based compensation arrangements regardless of the method
chosen to measure and recognize compensation for employee stock-based
arrangements. The Company has elected to continue to account for such
transactions under APB No. 25 and will disclose the required pro forma effect on
net income and earnings per share.
17
<PAGE>
BUSINESS
Del Global Technologies Corp. is primarily engaged in the design,
manufacture and marketing of medical imaging systems and critical electronic
subsystems for medical imaging and diagnostic products. The Company's products
are designed to provide cost-effective, high-quality solutions to the needs of
its customers. The Company's medical imaging systems include mammography
systems, high frequency x-ray generators and x-ray systems (both stationary and
portable) sold under both its tradenames and private labels. The Company's
critical electronic subsystems are custom engineered to complex customer
performance specifications and include high voltage power components, such as
power supplies, capacitors, transformers and pulse forming networks. These
products are utilized by OEMs for medical imaging and diagnostic products having
a broad range of applications such as computerized tomography (CT), magnetic
resonance imaging (MRI), bone densitometry, radiography, blood analysis, medical
laser surgery and nuclear medicine. As a result of its record for quality and
reliability, the Company has developed close working relationships with its OEM
customers. These relationships often result in the Company's selection as the
sole source provider of these critical electronic subsystems to OEMs. The
Company also designs, manufactures and markets precision power conversion
products for non-medical applications and electronic noise suppression systems
for telecommunications equipment.
The Company's medical systems and critical electronic subsystems are
designed to meet the needs of the healthcare industry to reduce medical imaging
and diagnostic costs. The Company focuses its sales, marketing and development
efforts primarily on medical imaging systems and critical electronic subsystems
priced at under $100,000 per unit. The Company's medical imaging systems have a
list price of approximately $9,000 to $70,000 per unit; however, the Company
believes that its products offer comparable performance to competing products
typically priced higher. The Company's cost-effective medical imaging systems
and subsystems also meet the increasing international demand for such products.
OEMs are also attempting to lower their cost structures by outsourcing
their requirements for certain critical electronic subsystems to lower cost
manufacturers such as the Company. The Company has successfully utilized its
engineering and manufacturing skills to provide such subsystems on a
cost-effective basis. In addition, the Company's longstanding customer
relationships have provided the Company with substantial opportunities to
demonstrate its expertise and expand its sales to OEMs.
During the past four years the Company has grown internally and through
acquisitions into a company whose predominant business is serving the medical
imaging and diagnostic markets. Most significantly, in March 1996 the Company
completed the acquisition of certain assets of Gendex. Gendex, which designs,
manufactures and markets medical imaging systems and related products, had
revenues of approximately $18.9 million during the calendar year ended December
31, 1995. The Company's sales of medical imaging products increased from
approximately $3.4 million or 17.7% of total net sales in fiscal 1992 to
approximately $35.4 million or 66.1% of total net sales in fiscal 1995 on a pro
forma basis. Reflecting worldwide demand for its products and increased
international sales efforts, the Company has increased export sales from
approximately $5.3 million in fiscal 1992 to approximately $11.7 million in
fiscal 1995. Export sales consist of direct sales of the Company's products and
sales of subsystems that are incorporated into OEMs' products for export.
MARKET TRENDS
Cost containment trends within the healthcare industry have forced both
healthcare providers and equipment suppliers to become increasingly focused on
reducing costs. The Company believes that such trends have increased the demand
for its cost-effective medical imaging products in domestic and international
markets. Healthcare providers have traditionally provided healthcare services on
a fee-for-service basis. As this model has given way to methods of compensation
which place financial risk upon the provider, providers have been forced to seek
innovative methods of reducing the cost of delivering effective health care,
including efforts to lower the amounts spent upon capital equipment; to increase
the percentage of medical procedures performed by capital constrained
alternative site providers; and to increase the use of diagnostic systems as
part of an effort to reduce total health expenditures. As a result, equipment
suppliers are faced with a market that is particularly cost sensitive. In
addition, the international demand for cost-effective medical systems is
increasing as many countries with limited healthcare budgets are attempting to
improve the quality of care offered to their citizens. These trends have forced
OEMs to attempt to lower their cost structures in order to maintain
profitability in the face of
18
<PAGE>
cost sensitive customers. One method utilized by OEMs to accomplish this is to
outsource various components for their equipment, including critical electronic
subsystems.
In addition, managed care providers have encouraged the use of early
detection diagnostic imaging procedures as a method of reducing overall costs.
Examples include the increased utilization of mammography, bone densitometry and
portable CT scanning products to identify potential health risks. Mammography
has made significant contributions to the diagnosis of breast disease and the
detection of breast cancer. Bone densitometry assists physicians in the
diagnosis and monitoring of metabolic bone diseases such as osteoporosis.
Portable CT scanners permit practitioners to obtain high quality images in
non-traditional environments.
INDUSTRY BACKGROUND
MEDICAL IMAGING SYSTEMS. Medical imaging systems of the types manufactured
by the Company use x-ray technology to produce images of matter beneath an
opaque surface. An imaging system principally consists of a high-voltage power
supply, an x-ray tube and an image recording system, which is usually film.
X-rays are generated as a result of high voltage being applied to the x-ray
tube. The performance of the x-ray system, including image resolution, is
directly linked to the precision performance of the high voltage power supply.
The object to be imaged is placed between the x-ray tube and the film. X-rays,
which are not reflected by opaque surfaces, pass through the object and expose
the film. However, if the object is comprised of areas of varying densities or
chemical compositions, x-rays will be absorbed by the denser areas or areas of
certain chemical compositions in proportion to the density or chemical
composition of the matter. As a result, the film will be exposed to a varying
degree, thereby producing an image of the density or chemical variation within
the object. For example, since bone has a greater density than the surrounding
tissue in the body, x-rays can be used to produce an image of a skeleton.
X-ray systems are differentiated by a number of key characteristics such as
image resolution, accuracy, portability, size and cost. The design of an x-ray
system requires complex engineering which determines the performance factors
required of the various components of the system.
CRITICAL ELECTRONIC SUBSYSTEMS. Critical electronic subsystems for medical
imaging and non-medical applications of the types manufactured by the Company
consist of high voltage power conversion components such as power supplies,
capacitors and transformers. High voltage power supplies are used to transform
commercially generated electric power from low voltage to high voltage. High
voltage power supplies raise the input voltage from the available level to the
significantly higher level required to operate the customer's electronic
equipment. They must be designed to meet specific requirements and involve
complex engineering including specialty high voltage magnetics, specialty
engineering materials and unique manufacturing processes, as well as special
testing and evaluation techniques.
NOISE SUPPRESSION PRODUCTS. Noise suppression products are used to reduce
or eliminate interfering signals generated by internal or external electronic
components and equipment which otherwise could interfere with the normal
operation of electronic equipment and systems. A noise suppression product may
range in size from the miniature type, which utilizes discoidal ceramic
monolithic capacitors (miniature capacitors made of ceramic material), to
multi-circuit subsystems handling high power requirements and weighing thousands
of pounds. Poor transmission reception in electronic devices can result from the
proximate operation of other electronic devices which generate unwanted
electrical signals. This problem is severely compounded in many communications
environments where there are a large number of electronic devices in a confined
area, such as in voice or data communications systems in an airplane or ship.
Noise suppression products are required by various types of equipment
manufacturers in order to comply with government regulations and specifications
and commercial standards. These products may be integrated within the electronic
equipment for which they have been designed or, in the case of large noise
suppression products, connected externally to such equipment, or to an external
power source which may power an entire facility.
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<PAGE>
THE COMPANY'S STRATEGY
The Company's goal is to become a leading provider of cost-effective,
high-quality medical imaging systems and subsystems at a per unit price of less
than $100,000. The Company's strategy is to continue the expansion of its
business through internal growth and through acquisitions. Key elements of this
strategy include:
o FOCUS ON COST-EFFECTIVE PRODUCTS. The Company believes that cost and
quality are the two major determining factors in its success in the
markets within which it competes. The Company focuses its sales,
marketing and development efforts primarily on the market for medical
imaging systems and critical electronic subsystems priced at under
$100,000 per unit. The Company's medical imaging systems have a list
price of approximately $9,000 to $70,000 per unit yet the Company
believes that its products offer comparable performance to those of its
competitors whose prices per unit are typically greater.
o DEVELOP ADDITIONAL INNOVATIVE MEDICAL IMAGING PRODUCTS. The Company
believes that a significant opportunity exists to develop other
cost-effective medical systems and products. Examples of these products
currently under development include fluoroscopy, tomography and neonatal
imaging systems.
o LEVERAGE MARKETING EXPERTISE TO EXPAND DOMESTIC AND EXPORT SALES OF
MEDICAL SYSTEMS. The Company is seeking to leverage its marketing
expertise by expanding the sale of its products into complementary
domestic and international markets, by selling newly developed and
acquired products to existing customers and by expanding its customer
base for existing products. The Company intends to continue to focus on
international opportunities. The Company's export sales increased from
approximately $6.8 million in fiscal 1994 to approximately $11.7 million
in fiscal 1995.
o EXPAND EXISTING OEM CUSTOMER RELATIONSHIPS. The Company's research and
development program is often conducted in conjunction with its customers
in order to obtain solutions for end use requirements. The Company
believes that the relationship established during this process often
allows it to be the sole source provider to its OEM customers and gives
it the ability to market its products to its existing OEM customers for
use in additional applications.
o CONSUMMATE STRATEGIC ACQUISITIONS. Strategic acquisitions have been a
major contributor to the Company's historical growth. The Company has
completed five acquisitions over the past seven years and intends to
continue to pursue acquisition opportunities to expand its product lines
into complementary markets. The Company's acquisitions include the
following entities and products:
<TABLE>
<CAPTION>
TABLE OF ACQUISITIONS
ACQUISITION DATE PRODUCT LINE
- --------------------------------------------- --------------- ---------------------------------------------
<S> <C> <C>
Gendex Medical Division of Dentsply March 1996 Radiographic x-ray systems, high frequency
International Inc. x-ray generators, x-ray tables and
mammography systems under the
GENDEX(Trademark) and UNIVERSAL tradenames,
serving the medical, chiropractic and
veterinary markets.
Bertan High Voltage Corp. April 1994 Precision high voltage power supplies and
instrumentation for medical and industrial
applications.
Dynarad Corp. September 1992 Mammography and portable x-ray systems and
precision high voltage power supplies for
medical applications.
Filtron Co., Inc. October 1991 Electronic noise suppression products.
RFI Corporation December 1989 Electronic noise suppression products,
critical electronic subsystems and advanced
magnetic products.
</TABLE>
20
<PAGE>
PRODUCTS
The following table sets forth the Company's estimate of the percentages of
the Company's net sales accounted for by its Medical Imaging and Non-Medical
Products for the past two fiscal years and pro forma for the six months ended
February 3, 1996.
MEDICAL IMAGING PRODUCTS
<TABLE>
<CAPTION>
PRO FORMA FOR
FISCAL YEAR ENDED THE SIX MONTH
------------------------------ PERIOD ENDED
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Medical Imaging Systems....... 19.7% 17.1% 47.0%
Critical Electronic Subsystems
for Medical Applications.... 19.0 27.1 17.6
----- ----- -----
Total....................... 38.7% 44.2% 64.6%
----- ----- -----
----- ----- -----
</TABLE>
NON-MEDICAL PRODUCTS
<TABLE>
<CAPTION>
PRO FORMA FOR
FISCAL YEAR ENDED THE SIX MONTH
------------------------------ PERIOD ENDED
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Critical Electronic Subsystems
for Precision High Voltage
Products.................... 22.1% 32.8% 19.4%
Noise Suppression Products.... 39.2 23.0 16.0
----- ----- -----
Total....................... 61.3% 55.8% 35.4%
----- ----- -----
----- ----- -----
</TABLE>
Medical Imaging Products
MEDICAL IMAGING SYSTEMS, The Company's medical imaging systems are sold
under the GENDEX(Trademark), UNIVERSAL and Dynarad brand names. The following
table sets forth certain information regarding the range of the Company's
medical imaging systems, including certain products under development. The list
prices of the Company's medical x-ray systems range from approximately $9,000 to
$70,000 per unit.
<TABLE>
<CAPTION>
PRODUCT FEATURES
<S> <C>
MAMMOGRAPHY SYSTEMS
MAMEX(TRADEMARK) HIGH FREQUENCY MAMMOGRAPHY SYSTEM o Digital displays of compression force, compressed
thickness and degree of angulation
o Cassette sensor switch with exposure inhibitor
o Automatic selection of collimating aperture, focal
spot and filtration
o Motorized vertical travel
o High frequency x-ray generator
o Optional Cytoguide Stereotactic needle biopsy system
NOVA SC MAMMOGRAPHY SYSTEM o Patient controlled breast compression to reduce
procedural discomfort, increase x-ray penetration and
produce superior image resolution
o Micro-computer driven data management system
assisting practitioner in compliance with governmental
and regulatory requirements
o Molybdenum and rhodium filters for improved contrast
resolution and features
o High frequency x-ray generator
o Optional Cytoguide Stereotactic needle biopsy system
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
PRODUCT FEATURES
<S> <C>
STATIONARY MEDICAL X-RAY SYSTEMS
ATC-725/525 ANATOMICALLY PROGRAMMED HIGH FREQUENCY o Individual control of kilovolt ('kV'), milliamp
GENERATORS seconds ('mAs') and time
o Vacuum fluorescent display
o Anatomically programmed radiology
o Preprogrammed for 2,400 combinations of exposure
PULSAR 625/325 GENERATOR o Control console provides large, easy to read meters
for simplified usage
o Major and minor kV selection for precise technique
set-up
o Digital display of 138 mAs stations for precision
technique selection
o Precise digital timer counts electrical pulses for
accurate exposure time
o Full wave solid state (silicon) rectification
increases reliability by making the most efficient use
of electrical power
EV SERIES OF ELEVATING X-RAY EXAMINATION TABLES o Extensive vertical table travel from 21' to 34' for
easy patient access
o Easy to use foot treadles for quick patient
positioning
o Smooth, stain resistant top designed to support up to
500 lbs.
o Low absorption table top material assures high
contrast, scatter free radiographs and reduced patient
exposure
GX-30 HIGH FREQUENCY GENERATOR o 500 mAs output; 300 mAs at 125 kV
o 40-125 kV in 32 steps; 1.0-300 mAs in 29 steps
o Digital kv and mAs displays
o Two bucky capability
o Closed loop kV and mAs stabilization
o Automatic line voltage compensation
PORTABLE X-RAY SYSTEMS
HF-110A PORTABLE X-RAY SYSTEM AND PHANTOM PORTABLE o Superior image quality
X-RAY SYSTEM o High frequency power supply
o Microprocessor control and digital display
o Electronic regulation of kV and mAs
o Extremely lightweight
o Ideal for use in the home or in the field
MODEL 1200 PORTABLE X-RAY SYSTEM o Lightweight, self contained travel container
o 1.0mm focal spot provides superior resolution
o Full-wave rectified
o Frequency selection switch to match line frequency
ALPHA-MPDX PORTABLE INTRA-ORAL DENTAL o Durable, lightweight
X-RAY SYSTEM o Short exposure time
o Capable of operating from fluctuating motor generator
power or from domestic power source
o Shipping container for shipping and storage of system
9000 SERIES PORTABLE X-RAY SYSTEMS o Lightweight, portable full wave rectified generators
o LCD kV digital displays of pre-indicated kV
o Available on three mobile stands
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
PRODUCT FEATURES
<S> <C>
MISCELLANEOUS
NEO NATAL X-RAY SYSTEM* o Reduced exposure time for premature infants
o Higher contrast
o Superior resolution
MSV-2000 MINIATURE ENDOCAMERA o High performance camera
o Vivid, crystal clear color images
o Adaptable to existing equipment and outputs including
B/W, R/G/B, Super VHS and Composite Video
o High resolution image sensor
o SAS(Trademark) automatic electronic shutter
o Rigid and flexible scope interfaces
MULTI-FUNCTIONAL ADAPTIVE IMAGE PROCESSOR (MAIP) o Sharpens and enhances video image presented allowing
diagnostician or surgeon to obtain clarity and a
virtual 'depth' of field
o Permits more precise manipulation of endoscopic tools
o Direct applications to most imaging modalities,
including Laparoscopy, Endoscopy, CT Scan, MRI,
Mammography, X-ray, Ultrasound and Fluoroscopy
</TABLE>
- ------------
* under development
Mammography Systems. The Company's mammography systems permit imaging of
the breast for both screening and diagnostic procedures. The MAMEX(Trademark)
high frequency mammography system uses a microprocessor controlled, constant
potential, high frequency generator for greater energy efficiency at lower kV
outputs, resulting in images with higher contrast. The system's sophisticated
Autocomp automatic kV program ensures proper selection of kV within the first 50
milliseconds of exposure, regardless of breast tissue type. The NOVA SC
Mammography system features 'PNEUFLO' pneumatic, patient controlled breast
compression to reduce procedural discomfort, increase x-ray penetration and
produce superior image resolution. The NOVA SC Mammography System also features
a fully integrated micro-processor driven data management system.
Stationary Medical X-Ray Systems. Under the GENDEX(Trademark) brand name,
the Company produces a full product line of high frequency medical x-ray
generators, such as the GENDEX(Trademark) GX-30, which economically provide
superior quality x-ray generation associated with high frequency technology,
resulting in lower patient dosage, extended tube life and less blurring due to
patient motion when compared to single phase generators. The GX-30 generator was
developed for both the replacement and new installation markets.
The Company also produces a broad line of single phase radiographic
generators, floor and wall tube mounts, tables and film holders. The EV-200
elevating x-ray table has a four-way float top and adjustable height features to
ease the positioning of non-ambulatory and casted patients. The Company also
markets a floor rotating tubestand.
The Company's premium x-ray products, the ATC 725/525 line of products, are
anatomically programmed high frequency generators. The technician needs only to
input the body region to be imaged, the desired view of that region and patient
thickness. The generators, through microprocessor controllers, will then
automatically select the proper exposure parameters from the database of 2,400
possible combinations. A total of 120 different examinations covering eight body
regions and up to 15 views per region can be preprogrammed into the unit's
Anatomically Programmed Radiology ('APR') memory. These controls assure the
production of consistent films for a given examination regardless of the
technician performing the examination.
Portable Medical X-Ray Systems. The Company is also a leader in the
portable x-ray market with its HF-110A and PHANTOM systems. Both of these
portable systems utilize high frequency, microprocessor controlled technology to
produce consistent quality x-rays with the added advantages of being smaller,
lighter in weight and more cost-effective than stationary x-ray systems. Both
systems are FDA certified, UL recognized and meet international safety and
quality standards. The Dynarad 9000 Series of portable x-ray systems consist of
lightweight portable full-wave rectified generators, equipped with LCD kV
digital displays of pre-indicated kV.
23
<PAGE>
The 9000 Series is available on three mobile stands. The Dynarad 1200 Series is
a compact, reliable portable system, designed for international use. It can be
operated within a wide range of environmental and electrical conditions. The
1200 Series is ideal for hospital clinics, mobile medical and military field
operations because it is extremely lightweight and versatile.
The portable Alpha-MPDX intra-oral dental system is built into a shippable
container which houses all the parts for shipment as well as becoming the system
base in the operational mode. The system's design provides a durable,
lightweight field dental x-ray system capable of operating from fluctuating
motor generator power or from domestic power sources around the world by
utilizing modern, high frequency power conversion techniques.
CRITICAL ELECTRONIC SUBSYSTEMS FOR MEDICAL APPLICATIONS. The Company's
research and development program is often conducted in conjunction with its
customers in order to obtain custom solutions for end use requirements. As a
result, the Company is often the sole source provider to its OEM customers. The
Company's high voltage power supplies deliver precisely regulated output power
while operating over a very wide range of temperatures, altitudes, humidity,
shock and vibration conditions. The Company has designed power supplies that
deliver power over a range from several watts up to 60 kilowatts with output
voltage ranging from hundreds of volts up to several hundred thousand volts.
Operating frequencies range from 60 hertz up to 100 kilohertz.
The table below sets forth selected OEM customers which utilize the
Company's critical electronic subsystems for medical imaging and diagnostic
applications in systems which they manufacture. The Company is the sole source
provider for several of these customers.
<TABLE>
<CAPTION>
SYSTEMS SELECTED CUSTOMERS
<S> <C>
CT Scanners Elscint Ltd.; Analogic Corp.
MRI GE Medical Systems
Bone Densitometry Lunar Corporation
Medical Laser Surgery Hereaus Laser
Nuclear Medicine ADAC Laboratories; Elscint Ltd.
Becton Dickinson & Co.; Coulter
Blood Analysis Electronics Inc.
Cancer Therapy Varian Associates, Inc.
</TABLE>
24
<PAGE>
Non-Medical Products
CRITICAL ELECTRONIC SUBSYSTEMS FOR HIGH VOLTAGE POWER CONVERSION
APPLICATIONS. The Company's critical electronic subsystems for high voltage
power conversion applications consist of high voltage DC power supplies, high
and low voltage power supplies and high voltage transformers. Such products are
used in many leading-edge high technology scientific and industrial applications
by OEM manufacturers, universities and private research laboratories. The
Company has also been a supplier of miniature HV power supplies used in
detection systems for hazardous materials, serving this market for approximately
20 years.
NOISE SUPPRESSION PRODUCTS. Certain of the Company's noise suppression
products are designed to assure that equipment manufactured for government
applications meets rigid standards for interference generation and
susceptibility. In addition, these products are designed to prevent classified
cryptographic and data signals used in government and industrial applications
from accidentally emanating and compromising government or industrial
intelligence. The Company's noise suppression product designs are listed on the
United States Government's Qualified Products Lists. Such products are used on
satellites, space applications and other critical applications that require
approved high reliability products.
The Company offers custom designed and standard noise suppression products
to meet customer specifications. The Company's catalog contains approximately
1,200 standard noise suppression products. During fiscal 1995 approximately 65%
of the Company's noise suppression product sales were attributable to custom
designed products and approximately 35% were attributable to catalog products.
APPLICATIONS. The Company has developed state-of-the-art, multi-channel
critical electronic subsystems for industrial laser machining, ion implantation,
energy exploration, electrostatic deposition, photomultiplier tube, x-ray tube,
travelling wave tube, cathode ray tube and ion pump applications, food
processing and steel rolling. In addition, critical subsystems of the Company's
high voltage DC power supplies are included in analytical and material research
equipment, nuclear instrumentation, process control equipment, automatic test
equipment, scanning electron microscopes and semi-conductor manufacturing
equipment. The Company is a key supplier of critical electronic subsystems for
high voltage power conversion applications to such customers as Schlumberger
Ltd., Micrion Corp., Litton Industries, Inc., Varian Associates, Inc., Eaton
Corporation and various United States and foreign governmental agencies.
The Company's noise suppression products are used in voice and data
communications equipment, computer equipment and government communications
systems, cellular telephone relay sites (cells) and other state-of-the-art voice
and data transmission modalities. The Company's filtering equipment allows the
major suppliers of telephone and cellular services to isolate subscribers' calls
and markedly improve overall system performance. The Company is a key supplier
of noise suppression products for use in telephone switching equipment for AT&T
Corp., Northern Telecom Limited, ITT Gilfillan and Westinghouse Electric Corp.
MARKETING, SALES AND DISTRIBUTION
The Company's medical imaging systems are distributed in the United States
and certain foreign countries by a network of approximately 400 dealers. Medical
imaging systems dealers are supported by the Company's regional managers,
product line managers and technical support groups, who train dealer sales
personnel and participate in customer calls. Technical support in the selection,
use and maintenance of the Company's products is provided to dealers and
professionals by customer service representatives. The Company also maintains
telephone hotlines to provide technical assistance to dealers and professionals.
Additional product and dealer support is provided through participation in
medical equipment exhibitions and trade advertising. The Company exhibits its
products at the American College of Surgeons Annual Meetings, at the
Radiological Society of North America Conferences in Chicago and at the MEDICA
Medical Conference in Dusseldorf, Germany.
The Company markets its critical electronic subsystems for both medical and
non-medical products through 17 in-house sales personnel, approximately 48
exclusive independent sales representatives in the United States and
approximately 90 exclusive international agents principally in the Middle East,
Canada, Europe, Asia, Australia and India. Sales representatives are compensated
primarily on a commission basis; the international agents are compensated either
on a commission basis or act as independent distributors. The Company's
25
<PAGE>
marketing efforts emphasize its ability to custom engineer products to optimal
performance specifications and the Company's record for quality and reliability.
The Company emphasizes team selling where a sales representative, a Company
engineer and management personnel work together to market the Company's
products. The Company also markets its products through its catalogs and through
trade journals and participation in industry shows.
PRODUCT DEVELOPMENT AND MANUFACTURING
The Company has an extensive ongoing research and development program. As
of February 3, 1996, the Company employed 44 persons in research and
development, who are engaged both in the design of customized products and in
the Company's ongoing research and development activities. The Company's
expenditures for research and development were approximately $2.9 million in
fiscal 1995, $2.3 million in fiscal 1994 and $1.7 million in fiscal 1993.
Approximately 80% of all new critical electronic subsystems produced by the
Company are designed and developed to customer specifications for use as
components of the customer's equipment. For example, the Company has developed
cost-effective anode modules for CT scanners and a 'ruggedized' miniature HV oil
exploration probe for a Fortune 50 multi-national corporation. The Company
generally retains all custom technology developed to meet customer
specifications in connection with new electronic subsystems.
Certain new products are developed by the Company as standard products for
industry at large after the Company has evaluated their potential. Such products
include standardized HV, high frequency rack mounted power supplies and
associated modules for use as precision test equipment by industrial
laboratories, universities and research facilities. In addition, many new custom
designed noise suppression products are eventually made available as standard
products in the Company's catalog.
The Company has computer-assisted design (CAD) systems to facilitate the
design of printed circuit boards for its power conversion products and assist in
the mechanical design of its products, thereby enhancing product development and
customized design services. The Company utilizes the CAD systems in the
mechanical design of its noise suppression products in order to optimize the
miniaturization and packaging of such products.
As part of its ongoing quality assurance program, the Company has installed
an expanded computerized quality control center for the testing of its noise
suppression products under a wide range of environmental conditions. The Company
maintains complete engineering laboratories for quality control and
environmental testing. In particular, the Company has extensive environmental
testing departments for the testing of its products against temperature
fluctuations, vibration, shock, humidity, electro-magnetic pulse and other
adverse environmental conditions.
The Company's long term customer relationships have facilitated and
enhanced product development. Many customers have consulted with the Company
concerning their product development programs, enabling the Company to custom
design critical electronic subsystems and noise suppression products for new
generations of customer products.
EXPORT SALES
During the three fiscal years ended July 31, 1995, July 30, 1994 and July
29, 1993, export sales accounted for approximately 36%, 28% and 21%,
respectively, of the Company's net sales. Export sales are made principally in
Europe, the Far East, the Middle East and Canada.
BACKLOG
The Company's backlog of unshipped orders as of March 31, 1996 was
approximately $25.0 million, of which approximately $2.5 million was
attributable to Gendex, as compared to $18.9 million at July 29, 1995.
Substantially all of the backlog will result in shipments within the next 12
months.
GOVERNMENT REGULATION
The Company's medical imaging systems are subject to regulation under both
the Federal Food, Drug, and Cosmetics Act and the Radiation Control for Health
and Safety Act. These statutes, in combination and individually, impose strict
requirements dealing with the safety, effectiveness and other properties of the
products
26
<PAGE>
to which they apply and address elements relating to the testing, manufacturing
standards and procedures, distribution, record keeping, report making, labeling,
promotion and radiation emitting qualities of these products. Failure to comply
can result in, among other things, the imposition of fines, criminal
prosecution, recall and seizure of products, injunctions restricting or
precluding production or distribution, the denial of new product approvals and
the withdrawal of existing product approvals.
Prior to commercial distribution in the United States, most medical
products, including the Company's, must be listed with the FDA and the
facilities in which they are manufactured must be registered with the FDA.
Additionally, prior to distribution, the products are required to be subjected
to a review process by the FDA to assess whether they qualify for marketing
under a '510(k)' Premarket Notification Process as substantially equivalent to a
product marketed before May 28, 1976 or whether an application for Premarket
Approval must be favorably acted upon before they may be distributed. All of the
Company's products to date have met the appropriate FDA requirement for
marketing but no assurance can be given that the Company will receive marketing
authority with respect to additional products or applications of the Company's
technology.
As a manufacturer of medical imaging systems, the Company is subject to
certain other FDA regulations and the Company's manufacturing processes and
facilities are subject to continuing review by the FDA. The Company must also
comply with current GMP regulations promulgated by the FDA. These regulations
require, among other things, that (i) the manufacturing process be regulated and
controlled by the use of written procedures and (ii) the production of medical
products, which meet the manufacturer's specifications, be validated by
extensive and detailed testing of every aspect of the process. They also require
investigation of any deficiencies in the manufacturing process or in the
products produced and detailed record keeping. Manufacturing facilities are
therefore subject to FDA inspection on an unscheduled basis to monitor
compliance with GMP requirements. If violations of the applicable regulations
are noted during FDA inspections of the Company's manufacturing facilities,
there may be a material adverse effect on the continued marketing of the
Company's products through the imposition of penalties or withdrawal of
approvals. The Company is required to expend time, resources and effort in
product manufacturing and quality control to ensure compliance. The Company is
in substantial compliance with current GMP requirements, as well as other
applicable FDA regulations.
The Company's marketing of its products in several foreign markets is
subject to qualification and regulation by applicable foreign governments. In
certain foreign markets, it may be necessary or advantageous to obtain ISO 9000
certification, which is analogous to compliance with the FDA's GMP requirements.
The Company is in the process of obtaining ISO 9000 certification for certain of
its operating facilities; however, there can be no assurance that such
facilities will receive ISO 9000 certification or that the Company will be able
to continue to meet the requirements for ISO 9000 certification. The Federal
government, most states and certain foreign countries monitor and require
licensing of x-ray devices and the handling of radioactive material. Failure to
comply with such laws could subject the Company to fines and penalties. The
Company has obtained the requisite regulatory approval for its systems where it
markets its products. Federal, state and foreign regulations regarding the
manufacture and sale of medical devices are subject to future change. The
Company cannot predict what impact, if any, such changes might have on its
business.
No assurance can be given that the FDA or foreign regulatory agencies will
give the requisite approvals or clearances for any of the Company's medical
imaging systems and other products under development on a timely basis, if at
all. Moreover, after clearance is given, both in the case of the Company's
existing products and any future products, these agencies can later withdraw the
clearance or require the Company to change the system or its manufacturing
process or labeling, to supply additional proof of its safety and effectiveness,
or to withdraw, recall, repair, replace or refund the cost of the medical
system, if it is shown to be hazardous or defective. The process of obtaining
clearance to market products is costly and time-consuming and can delay the
marketing and sale of the Company's products.
The Company is also subject to various United States government guidelines
and regulations relating to the qualification of its non-medical products for
inclusion in Government Qualified Product Lists in order to be eligible to
receive purchase orders from a government agency or for inclusion of a product
in a system which will ultimately be used by a governmental agency. The Company
has had many years of experience in designing, testing and qualifying its
non-medical products for sale to governmental agencies. Certain government
contracts
27
<PAGE>
are subject to cancellation rights. The Company has experienced no material
termination of a government contract and is not aware of any pending
terminations of government contracts.
The Social Security Act imposes criminal penalties and exclusion from the
Medicare and Medicaid programs upon persons who make or receive kickbacks,
bribes or rebates in connection with such programs. The anti-kickback rules
prohibit providers and others from soliciting, offering, receiving or paying,
directly or indirectly, any remuneration in return for either making a referral
for a covered service or item or ordering any such covered service or item. In
order to provide guidance with respect to the anti-kickback rules, the Office of
the Inspector General issued final regulations outlining certain 'safe harbor'
practices, which although potentially capable of inducing prohibited referrals,
would not be prohibited if all applicable requirements are met. A relationship
which fails to satisfy a safe harbor is not necessarily illegal, but could be
scrutinized on a case-by-case basis. The Company believes that it currently
complies with the anti-kickback rules in planning its activities, and believes
that its activities, even if not within a safe harbor, do not violate the
anti-kickback statute. In the event the Company was excluded from marketing and
selling its products to Medicare and Medicaid providers, such exclusion could
have a significant adverse effect on the Company.
Pursuant to the Occupational Safety and Health Act, facility operators have
a general duty to provide a workplace to their employees that is safe from
hazard. Over the past few years, the Occupational Safety and Health
Administration ('OSHA') has issued rules relevant to certain hazards that are
found in facilities such as the Company's. Failure to comply with these
regulations, other applicable OSHA rules or with the general duty to provide a
safe workplace could subject an employer, including a facility employer such as
the Company, to substantial fines and penalties.
The Company has not experienced, and does not anticipate, any material
expenditures in connection with its compliance with Federal, state or local
environmental laws or regulations.
There can be no assurance that the Company's products will continue to
comply with all applicable FDA regulations or that the Company will receive the
requisite approvals to market any of its future products. Any failure to receive
approvals, withdrawal of existing approvals or non-compliance with performance
standards could have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, any change in
existing Federal, state or foreign laws or regulations, or in the interpretation
or enforcement thereof, or the promulgation of any additional laws or
regulations could have a material adverse effect on the Company's business,
results of operations and financial condition.
COMPETITION
The markets for the Company's products are highly competitive and subject
to technological change and evolving industry requirements and standards. The
Company believes that these trends will continue into the foreseeable future.
Many of the Company's current and potential competitors have substantially
greater financial, marketing and other resources than the Company. As a result,
they may be able to adapt more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
promotion and sale of their products than the Company. Competition could
increase if new companies enter the market or if existing competitors expand
their product lines or intensify efforts within existing product lines. Although
the Company believes that its products are more cost-effective than those of its
primary competitors, certain competing products may have other advantages which
may limit the Company's market. There can be no assurance that continuing
improvements in current or new products will not make them technically
equivalent or superior to the Company's products in addition to providing cost
or other advantages. There can be no assurance that the Company's current
products, products under development or ability to introduce new products will
enable it to compete effectively.
SOURCES AND SUPPLY OF RAW MATERIALS
All of the raw materials used by the Company in the manufacture of its
products are purchased from various suppliers and are available from numerous
sources. No single supplier accounts for a significant percentage of the
Company's raw material requirements. The Company has not encountered any
difficulty in obtaining such supplies and believes that if any current source of
supply for a particular material or component became unavailable, alternate
sources of supply would be available at comparable prices and delivery
schedules.
28
<PAGE>
TRADEMARKS AND PATENTS
The Company's trademark properties are important and contribute to the
Company's marketing position. To safeguard these properties, the Company
maintains trademark registrations in the United States and in significant
international markets for its products. As part of its acquisition of certain
assets of Gendex, the Company acquired the UNIVERSAL tradename and has been
granted a license to use, in conjunction with the word 'medical', the
GENDEX(Trademark) trademark for medical imaging systems for five years from
March 1996. The Company owns the FILTRON(Registered) trademark for noise
suppression products. The Company does not consider that its business is
materially dependent on patent protection.
EMPLOYEES
As of March 31, 1996, the Company had approximately 425 employees,
including eight executive officers, 27 persons in general administration, 26
persons in sales and marketing, 314 persons in manufacturing and 50 persons in
research and development. Management believes that its employee relations are
good. None of the Company's employees are represented by a labor union.
LEGAL PROCEEDINGS
From time to time, the Company is a party to various legal proceedings
incidental to its business. Management does not believe that any of these legal
proceedings will have a material adverse effect on the Company's business,
results of operations or financial condition.
29
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- ----------------------------------
<S> <C> <C>
Leonard A. Trugman(1)............. 58 Chairman of the Board, President
and Chief Executive Officer
David Engel....................... 47 Executive Vice President and
Chief Financial Officer
Howard Bertan..................... 61 Vice President and President of
Bertan High Voltage Corp.
Louis J. Farin, Sr................ 52 Vice President and General Manager
of Del Power Conversion Division
John D. MacLennan................. 44 Vice President and Vice President
and General Manager of Gendex-Del
Medical Imaging Corp.
Seymour Rubin..................... 65 Vice President and President of
RFI Corporation, Director
George Solomon.................... 50 Vice President--International
Sales and Marketing and President
of Del Medical Systems Corp.
Michael H. Taber.................. 51 Vice President--Finance, Secretary
and Chief Accounting Officer
Natan V. Bertman(1)(2)............ 67 Director
David Michael(1)(2)(3)............ 58 Director
James Tiernan(3).................. 72 Director
</TABLE>
- ------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Stock Option Committee
The officers of the Company, with the exception of Mr. Trugman, are elected
or appointed by the Board of Directors to hold office until the meeting of the
Board of Directors following the next annual meeting of shareholders. Subject to
the right of the Company to remove officers pursuant to its By-Laws, officers
serve until their successors are chosen and have qualified. Mr. Trugman holds
his position pursuant to an employment agreement which expires on July 31, 2000.
Leonard A. Trugman has been Chairman of the Board, Chief Executive Officer
and President from September 1985 to the present. Mr. Trugman was Vice President
of Operations at General Microwave Corporation, an AMEX traded microwave
components company from 1981 to 1985. Mr. Trugman holds a Masters of Science
Degree in Mechanical Engineering and a Masters Degree in Business
Administration.
David Engel has been Executive Vice President and Chief Financial Officer
since January 1996. Mr. Engel was Executive Vice President of Bertan High
Voltage Corp. from November 1994 to January 1996. Mr. Engel was Vice
President--Finance and Administration at Bertan High Voltage Corp. from March
1981 to November 1994.
30
<PAGE>
Howard Bertan has been Vice President since April 1996 and President of
Bertan High Voltage Corp. since April 1994. From January 1989 to April 1994, Mr.
Bertan was President and part owner of Bertan Associates Inc. Mr. Bertan holds a
Masters of Science Degree in Electrical Engineering.
Louis J. Farin, Sr. has been Vice President and General Manager of Del
Power Conversion Division from August 1994 to the present. Mr. Farin had been
Senior Vice President--Operations of the Company since December 1986.
John D. MacLennan has been Vice President since April 1996 and the Vice
President and General Manager of Gendex-Del Medical Imaging Corp. since April
1996. Mr. MacLennan was Vice President and General Manager of the Gendex Medical
Division of Dentsply International Inc. from January 1995 to March 1996. From
March 1990 to December 1994, he was Vice President--Medical Marketing of the
Gendex Medical Division of Dentsply International Inc. Mr. MacLennan holds a
Masters Degree in Business Administration.
Seymour Rubin has been Vice President of the Company since December 1989
and was elected a director of the Company in February 1990. Mr. Rubin was a
co-founder of RFI Corporation. Mr. Rubin was the Executive Vice President of RFI
Corporation from 1968 to February 1990 and has been the President of RFI
Corporation since February 1990. Mr. Rubin holds a Masters of Science Degree in
Engineering.
George Solomon has been Vice President--International Sales and Marketing
since April 1, 1996. From October 1993 to March 31, 1996, Mr. Solomon was Vice
President and General Manager of Dynarad Corp. Mr. Solomon has been President of
Del Medical Systems Corp. since June 1994. From March 1993 to October 1993, Mr.
Solomon was a consultant to the Company. From February 1989 to February 1993,
Mr. Solomon was General Manager of Fujinon.
Michael H. Taber has been the Vice President--Finance and Chief Accounting
Officer of the Company since January 1996. Mr. Taber was appointed Secretary in
October 1994. Mr. Taber was Chief Financial Officer of the Company from January
1993 to December 31, 1995. Mr. Taber was the Assistant General Manager of RFI
Corporation from October 1991 to April 1992. Mr. Taber was President of Filtron
Co. Inc. from August 1990 to October 1992. Mr. Taber holds a Masters Degree in
Accounting and is a Certified Public Accountant.
Natan V. Bertman has served as a director of the Company since 1985. He is
a partner in the law firm of Bertman & Levine.
David Michael has served as a director of the Company since 1985. He is
President of David Michael & Co., P.C. and is a Certified Public Accountant.
James Tiernan has served as a director of the Company since 1985. He is a
former senior vice president of Chase Manhattan Bank, New York, NY.
Dr. Raymond Kaufman, the former Chairman and Co-Founder of the Company,
resigned from the Company's Board in April 1996. At such time Dr. Kaufman was
named Director Emeritus of the Company. He holds a Doctorate in Physics.
31
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table identifies each person known to the Company to be the
beneficial owner of more than five percent of the Common Stock, each director of
the Company, and all directors and officers of the Company as a group, and sets
forth the number of shares of Common Stock beneficially owned as of April 19,
1996 by each such person and such group and the percentage of the outstanding
Common Stock owned by each such person and such group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)
----------------------- -----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE
- ------------------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Leonard A. Trugman ........... 852,594(2) 16.9% 852,594(2) 12.1%
Natan V. Bertman ............. 101,668(3) 2.3% 101,668(3) 1.6%
David Michael ................ 151,241(4) 3.3% 151,241(4) 2.3%
Seymour Rubin ................ 114,647(5) 2.6% 114,647(5) 1.8%
James Tiernan ................ 8,231(6) * 8,231(6) *
George Solomon ............... 6,222(7) * 6,222(7) *
Howard Bertan ................ 141,984(8) 3.2% 141,984(8) 2.2%
David Engel .................. 2,836(9) * 2,836(9) *
Michael H. Taber ............. 9,442(10) * 9,442(10) *
Louis J. Farin, Sr. .......... 31,589(11) * 31,589(11) *
John D. MacLennan ............ 5,000 * 5,000 *
All officers and directors
(11) as a group ............ 1,431,467(12) 26.4% 1,431,467(12) 19.3%
</TABLE>
- ------------
* Represents less than 1% of the outstanding shares of Common Stock including
shares issuable to such beneficial owner under options which are presently
exercisable or will become exercisable within 60 days of April 19, 1996.
(1) Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares shown as beneficially owned by such
person.
(2) Mr. Trugman's address is c/o Del Global Technologies Corp., One Commerce
Park, Valhalla, NY 10595. Includes 667,444 shares, options for which are
presently exercisable or will become exercisable within 60 days of April
19, 1996.
(3) Includes 70,171 shares, options for which are presently exercisable or will
become exercisable within 60 days of April 19, 1996. Does not include 943
shares owned by Mr. Bertman's spouse.
(4) Includes 115,214 shares, options for which are presently exercisable or
will become exercisable within 60 days of April 19, 1996.
(5) Includes 102,831 shares, options for which are presently exercisable or
will become exercisable within 60 days of April 19, 1996.
(6) Includes 8,231 shares, options for which are presently exercisable or will
become exercisable within 60 days of April 19, 1996.
(7) Includes 5,797 shares, options for which are presently exercisable or will
become exercisable within 60 days of April 19, 1996.
(8) Includes 39,393 shares, options for which are presently exercisable or will
become exercisable within 60 days of April 19, 1996.
(9) Includes 2,692 shares, options for which are presently exercisable or will
become exercisable within 60 days of April 19, 1996.
(10) Includes 8,702 shares, options for which are presently exercisable or will
become exercisable within 60 days of April 19, 1996.
(11) Includes 22,985 shares, options for which are presently exercisable or will
become exercisable within 60 days of April 19, 1996.
(12) Includes 1,043,460 shares, options for which are presently exercisable or
will become exercisable within 60 days of April 19, 1996.
32
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of April 19, 1996 the Company's authorized capital stock consists of
10,000,000 shares of Common Stock, par value $.10 per share, of which 4,378,167
shares are issued and outstanding. The holders of Common Stock are entitled to
one vote per share on all matters submitted to a vote of shareholders. All
shares of Common Stock have equal rights and are entitled to such dividends as
may be declared by the Board of Directors out of funds legally available
therefor and to share ratably upon liquidation in the assets available for
distribution to shareholders. The Common Stock is not subject to call or
assessment, has no preemptive, conversion or cumulative voting rights and is not
subject to redemption. All outstanding shares of Common Stock are, and the
shares of Common Stock offered hereby will, upon issuance and sale, be, fully
paid and non-assessable with no personal liability attached to the ownership
thereof.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Chemical Mellon
Shareholder Services, 450 West 33rd Street, New York, New York 10001.
33
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting
Agreement, the Underwriters named below, for whom Needham & Company, Inc. and
Tucker Anthony Incorporated are acting as representatives (the
'Representatives'), have severally agreed to purchase from the Company, and the
Company has agreed to sell to each Underwriter, the aggregate number of shares
of Common Stock set forth opposite their respective names in the table below.
The Underwriting Agreement provides that the obligations of the Underwriters to
pay for and accept delivery of the shares of Common Stock are subject to certain
conditions precedent, and that the Underwriters are committed to purchase and
pay for all shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Needham & Company, Inc......................................
Tucker Anthony Incorporated.................................
---------
Total................................................ 2,000,000
---------
---------
</TABLE>
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the public offering
price set forth on the cover page of this Prospectus and to certain dealers (who
may include the Underwriters) at such price less a concession not in excess of
$ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers (who may include the Underwriters). After the offering to the public,
the public offering price and other selling terms may be changed by the
Representatives.
The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the public offering price, less the
underwriting discounts and commissions, set forth on the cover page of this
Prospectus. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the Common Stock offered
hereby. To the extent the Underwriters exercise such option, each of the
Underwriters will have a firm commitment, subject to certain exceptions, to
purchase approximately the same percentage of such additional shares that the
number of shares of Common Stock to be purchased by it shown in the above table
bears to the total shown.
The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriters and the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended (the
'Securities Act').
The Company and its directors and officers have agreed not to offer, sell
or otherwise dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exchangeable for shares of Common Stock for a
period of six months, in the case of the Company, and 12 months, in the case of
its directors and officers, after the date of this Prospectus without the prior
written consent of Needham & Company, Inc., except for, in the case of the
Company, the shares of Common Stock offered hereby and issuable pursuant to
currently outstanding warrants and securities issued pursuant to the Company's
stock option plan and, in the case of its officers and directors, except for an
aggregate of 75,000 shares of Common Stock which may be sold during the last six
34
<PAGE>
months of such 12-month period.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject any order for the purchase of shares in whole or in part.
LEGAL MATTERS
Certain legal matters with respect to the legality of the securities
offered hereby will be passed upon for the Company by Tashlik, Kreutzer &
Goldwyn P.C., Great Neck, New York. Certain members of Tashlik, Kreutzer &
Goldwyn P.C. beneficially own approximately 25,800 shares of the Company's
Common Stock and stock options to purchase an aggregate of approximately 29,095
additional shares of Common Stock. Certain legal matters will be passed upon for
the Underwriters by Haythe & Curley, New York, New York.
EXPERTS
The consolidated financial statements of the Company included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm upon their authority as experts in accounting and auditing.
The financial statements of the Gendex Medical Division of Dentsply
International Inc., as of December 31, 1995 and for the years ended December 31,
1994 and 1995 have been included herein and elsewhere in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing herein, and upon the authority of said
firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
'Commission') in Washington, D.C., a Registration Statement on Form S-2 under
the Securities Act, relating to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are contained in exhibits and schedules to the Registration
Statement as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract,
agreement or any other document referred to herein are not necessarily complete.
Where such contract, agreement or other document is an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matter involved, each such statement being qualified in all
respects by such reference. For further information regarding the Company and
the securities offered hereby, reference is made to the Registration Statement
and to the exhibits filed as a part thereof, which may be inspected at the
office of the Commission without charge or copies of which may be obtained
therefrom upon request to the Commission and payment of the prescribed fee.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith, files reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at prescribed rates at the public reference facilities maintained by the
Commission's Headquarters at 450 Fifth Street, Room 1024, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the Commission's Regional Offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7
World Trade Center, 13th Floor, New York, New York 10048. The Common Stock is
listed on the AMEX. Reports, proxy statements and other information concerning
the Company may be inspected at the American Stock Exchange, 86 Trinity Place,
New York, New York 10006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus its Annual
Report on Form 10-K, as amended, for the fiscal year ended July 29, 1995, its
Quarterly Reports on Form 10-Q for the quarterly periods ended October 28, 1995
and February 3, 1996, and its Current Report on Form 8-K, dated March 21, 1996,
which have been filed with the Commission. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to
35
<PAGE>
the extent that a statement contained herein or in any other subsequently filed
document that is also (or is deemed to be) incorporated by reference herein,
modifies or replaces such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of the Registration Statement or this Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all documents referred to above
(excluding exhibits thereto, unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to: Michael H.
Taber, Secretary, Del Global Technologies Corp., One Commerce Park, Valhalla,
New York 10595 (telephone number: (914) 686-3600).
36
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
-----------
<S> <C>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of July 30, 1994, July 29,
1995 and unaudited as of February 3, 1996................. F-3
Consolidated Statements of Income for the Fiscal Years Ended
July 31, 1993, July 30, 1994, July 29, 1995 and for the
unaudited Six Month Periods Ended January 28, 1995 and
February 3, 1996.......................................... F-4
Consolidated Statements of Shareholders' Equity for the
Fiscal Years Ended July 31, 1993, July 30, 1994, July 29,
1995 and for the unaudited Six Month Period Ended
February 3, 1996.......................................... F-5
Consolidated Statements of Cash Flows for the Fiscal Years
Ended July 31, 1993, July 30, 1994, July 29, 1995 and for
the unaudited Six Month Periods Ended January 28, 1995 and
February 3, 1996.......................................... F-6-F-7
Notes to Consolidated Financial Statements.................. F-8-F-20
Unaudited Selected Quarterly Financial Data................. F-21
GENDEX MEDICAL DIVISION OF DENTSPLY INTERNATIONAL INC.
Independent Auditors' Report................................ F-22
Statement of Net Assets to be Acquired As Of December 31,
1995...................................................... F-23
Statements of Revenues and Expenses for the Years Ended
December 31, 1994 and 1995................................ F-24
Notes to Financial Statements for the Years Ended December
31, 1994 and 1995......................................... F-25-F-27
CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
Condensed Consolidated Pro Forma Balance Sheet at February
3, 1996................................................... F-29
Condensed Consolidated Pro Forma Statement of Operations for
the Fiscal Year Ended July 29, 1995....................... F-30
Condensed Consolidated Pro Forma Statement of Operations for
the Six Months Ended February 3, 1996..................... F-31
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Del Global Technologies Corp.
Valhalla, New York
We have audited the accompanying consolidated balance sheets of Del Global
Technologies Corp. and subsidiaries (formerly Del Electronics Corp.) as of July
30, 1994 and July 29, 1995 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended July 29, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Del Global Technologies Corp. and
subsidiaries at July 30, 1994 and July 29, 1995, and the results of their
operations and their cash flows for each of the three fiscal years in the period
ended July 29, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes effective August 1, 1993 to
conform with Statement of Financial Accounting Standards No. 109.
DELOITTE & TOUCHE LLP
New York, New York
October 23, 1995
F-2
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 30, JULY 29, FEBRUARY 3,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
ASSETS (NOTE 6)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1)........................ $ 445,597 $ 505,989 $ 162,052
Investments available-for-sale (Notes 1, 2 and 10)........ 346,270 378,534 497,790
Trade receivables (net of allowance for doubtful accounts
of $164,675 at July 30, 1994, $144,431 at July 29, 1995
and $159,431 at February 3, 1996)...................... 6,120,457 6,456,853 5,725,121
Cost and estimated earnings in excess of billings on
uncompleted contracts (Note 3)......................... 551,301 395,847 404,030
Inventory (Notes 1 and 4)................................. 16,072,933 18,038,358 19,908,557
Prepaid expenses and other current assets (Note 11)....... 856,969 1,117,963 1,567,122
----------- ----------- -----------
Total current assets................................... 24,393,527 26,893,544 28,264,672
----------- ----------- -----------
Fixed assets--at cost (Notes 1 and 5)....................... 9,777,788 11,115,297 11,825,543
Less accumulated depreciation and amortization............ 2,612,930 3,362,516 3,650,451
----------- ----------- -----------
7,164,858 7,752,781 8,175,092
----------- ----------- -----------
Goodwill (net of accumulated amortization of $90,169 at July
30, 1994, $216,951 at July 29, 1995 and $280,342 at
February 3, 1996)(Notes 1 and 11)......................... 2,992,191 2,865,408 2,802,018
Deferred charges (Note 11).................................. 1,036,785 876,638 801,665
Other assets (Notes 7, 9 and 11)............................ 611,012 666,263 626,212
----------- ----------- -----------
Total....................................................... $36,198,373 $39,054,634 $40,669,659
----------- ----------- -----------
----------- ----------- -----------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt (Note 6)................ $ 928,568 $ 943,383 $ 943,383
Accounts payable--trade................................... 2,477,101 2,539,615 2,748,117
Accrued liabilities (Note 11)............................. 2,457,682 2,484,435 2,137,886
Income taxes (Notes 1 and 9).............................. 277,830 518,277
----------- ----------- -----------
Total current liabilities.............................. 5,863,351 6,245,263 6,347,663
LONG-TERM LIABILITIES:
Long-term debt (less current portion included above) (Note
6)..................................................... 11,485,722 11,902,951 11,755,397
Other (Note 11)........................................... 757,410 775,541 782,424
Deferred income taxes (Notes 1 and 9)..................... 393,383 605,806 632,127
----------- ----------- -----------
Total liabilities...................................... 18,499,866 19,529,561 19,517,611
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 6, 7, 8, 10 and 11)
SHAREHOLDERS' EQUITY (Notes 1, 6 and 8):
Common stock--$.10 par value; Authorized--10,000,000
shares; Issued and outstanding--4,213,731 at July 30,
1994, 4,253,486 at July 29, 1995 and 4,346,983 at
February 3, 1996....................................... 385,616 412,960 434,698
Additional paid-in capital................................ 14,828,924 16,239,784 17,490,139
Retained earnings......................................... 2,583,817 3,189,244 3,563,896
----------- ----------- -----------
17,798,357 19,841,988 21,488,733
Less common stock in treasury--16,656 at July 30, 1994,
55,165 at July 29, 1995 and 58,225 at February 3,
1996................................................... 99,850 316,915 336,685
----------- ----------- -----------
Total shareholders' equity............................. 17,698,507 19,525,073 21,152,048
----------- ----------- -----------
Total....................................................... $36,198,373 $39,054,634 $40,669,659
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
----------------------------------------- ---------------------------
JULY 31, JULY 30, JULY 29, JANUARY 28, FEBRUARY 3,
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales (Notes 1, 3 and 12)........ $22,287,315 $24,327,015 $32,596,312 $13,715,422 $ 16,800,619
----------- ----------- ----------- ----------- ------------
Costs and expenses:
Cost of sales........................ 13,455,261 15,179,081 19,177,999 7,499,943 9,744,552
Research and development (Note 1).... 1,712,881 2,253,412 2,861,844 1,209,050 1,431,894
Selling, general and administrative.. 4,390,267 4,862,519 6,622,690 3,054,806 3,356,117
Interest expense--net of interest
income of $17,350 in 1993, $1,813
in 1994, $3,419 in 1995, $1,753 for
the six months ended Jan. 28, 1995
and $3,380 for the six months ended
Feb. 3, 1996....................... 360,149 576,832 1,191,142 576,293 595,211
----------- ----------- ----------- ----------- ------------
19,918,558 22,871,844 29,853,675 12,340,092 15,127,774
----------- ----------- ----------- ----------- ------------
Income before provision for income
taxes.............................. 2,368,757 1,455,171 2,742,637 1,375,330 1,672,845
Provision for income taxes (Notes 1
and 9)............................. 708,000 341,525 837,428 419,500 510,218
----------- ----------- ----------- ----------- ------------
Income before cumulative effect of
change in method for accounting for
income taxes....................... 1,660,757 1,113,646 1,905,209 955,830 1,162,627
Cumulative effect of change in method
for accounting for income taxes
(Note 1)........................... 76,363
----------- ----------- ----------- ----------- ------------
Net income........................... $ 1,660,757 $ 1,190,009 $ 1,905,209 $ 955,830 $ 1,162,627
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
Per share amounts (Note 1):
Income before cumulative effect of
change in method for accounting for
income taxes....................... $ 0.36 $ 0.23 $ 0.39 $ 0.19 $ 0.23
Cumulative effect of change in method
for accounting for income taxes.... 0.02
----------- ----------- ----------- ----------- ------------
Net income per common share and
common share equivalents primary
and fully diluted.................. $ 0.36 $ 0.25 $ 0.39 $ 0.19 $ 0.23
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ISSUED TREASURY STOCK ADDITIONAL
-------------------- ------------------ PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- -------- ------ --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE--AUGUST 1, 1992................ 2,819,713 $281,971 $ 9,514,367 $2,976,888 $12,773,226
Shares issued related to acquisition... 168,422 16,842 983,158 1,000,000
Stock dividends--6% December 1992 and
3% May 1993 (Note 8)................. 276,367 27,637 1,708,282 (1,741,583) (5,664)
Exercise of stock options and warrants
(Note 8)............................. 106,450 10,645 45,509 56,154
Shares repurchased (Note 8)............ 4,000 $ (23,567) (23,567)
Costs of registering stock and options
(Note 8)............................. (14,666) (14,666)
Tax benefit related to exercise of
stock options (Note 8)............... 188,000 188,000
Net income............................. 1,660,757 1,660,757
--------- -------- ------ --------- ----------- ---------- -----------
BALANCE--JULY 31, 1993................. 3,370,952 337,095 4,000 (23,567) 12,424,650 2,896,062 15,634,240
Shares issued related to acquisition
(Note 11)............................ 200,000 20,000 851,429 871,429
Stock dividends--3% December 1993 and
June 1994 (Note 8)................... 212,407 21,240 1,473,677 (1,502,254) (7,337)
Exercise of stock options and warrants
(Note 8)............................. 70,658 7,066 43,000 50,066
Shares repurchased (Note 8)............ 12,656 (76,283) (76,283)
Tax benefit related to exercise of
stock options (Note 8)............... 39,857 39,857
Other.................................. 2,145 215 (3,689) (3,474)
Net income............................. 1,190,009 1,190,009
--------- -------- ------ --------- ----------- ---------- -----------
BALANCE--JULY 30, 1994................. 3,856,162 385,616 16,656 (99,850) 14,828,924 2,583,817 17,698,507
Stock dividend--3% December 1994 and
June 1995 (Note 8)................... 233,446 23,345 1,270,112 (1,299,782) (6,325)
Exercise of stock options and warrants
(Note 8)............................. 39,991 3,999 108,710 112,709
Shares repurchased (Note 8)............ 38,509 (217,065) (217,065)
Tax benefit related to exercise of
stock options (Note 8)............... 32,038 32,038
Net income............................. 1,905,209 1,905,209
--------- -------- ------ --------- ----------- ---------- -----------
BALANCE--JULY 29, 1995................. 4,129,599 412,960 55,165 (316,915) 16,239,784 3,189,244 19,525,073
Stock dividend--3% December 1995 (Note
8) (unaudited)....................... 123,604 12,360 771,524 (787,975) (4,091)
Exercise of stock options and warrants
(Note 8) (unaudited)................. 93,780 9,378 482,489 491,867
Shares repurchased (Note 8)
(unaudited).......................... 3,060 (19,770) (19,770)
Costs of registering stock and options
(Note 8) (unaudited)................. (3,658) (3,658)
Net income (unaudited)................. 1,162,627 1,162,627
--------- -------- ------ --------- ----------- ---------- -----------
BALANCE--FEBRUARY 3, 1996 (UNAUDITED).. 4,346,983 $434,698 58,225 $(336,685) $17,490,139 $3,563,896 $21,152,048
--------- -------- ------ --------- ----------- ---------- -----------
--------- -------- ------ --------- ----------- ---------- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
--------------------------------------- -------------------------
JULY 31, JULY 30, JULY 29, JANUARY 28, FEBRUARY 3,
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 1,660,757 $ 1,190,009 $ 1,905,209 $ 955,830 $ 1,162,627
Adjustments to reconcile net income to net cash
provided by (used in) operating activities net of
effects from purchase of Bertan and Dynarad........
Imputed interest................................... 68,963 18,991 33,133
Depreciation....................................... 606,389 684,786 749,586 388,492 338,919
Amortization....................................... 298,999 331,746 493,257 202,500 194,617
Deferred income tax provision (benefit)............ 138,600 (135,265) 36,452 65,491 26,321
Changes in assets and liabilities:
(Increase) decrease in trade receivables........... (56,784) (73,085) (336,396) 946,817 731,732
(Increase) decrease in cost and estimated earnings
in excess of billings on uncompleted
contracts....................................... (597,647) 46,346 155,454 168,445 (8,183)
Increase in inventory.............................. (2,430,090) (1,782,521) (1,965,425) (2,047,079) (1,870,199)
Increase in prepaid and other current assets....... (123,474) (153,368) (219,232) (196,453) (503,223)
Increase in deferred charges....................... (1,181,944)
Decrease (increase) in other assets................ 54,546 (200,862) (37,097) (16,692) 37,861
Increase (decrease) in accounts payable--trade..... 466,943 (70,113) 62,514 (686,763) 208,502
(Decrease) increase in accrued liabilities......... (520,348) (66,833) 197,128 12,804 (346,549)
Increase in income taxes payable................... 163,517 30,746 245,792 30,671 240,447
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by operating
activities.................................... (1,520,536) (198,414) 1,356,205 (156,946) 246,005
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Net cash paid on acquisition of subsidiaries....... (196,929) (2,784,282)
Payments to former shareholders of subsidiary
acquired........................................ (221,208) (195,375) (26,250)
Expenditures for fixed assets...................... (1,252,006) (1,694,344) (1,337,509) (429,508) (761,231)
(Investment in) sale of marketable securities--
net............................................. (370,181) (32,264) 52,731 (119,256)
Other current assets............................... (16,024)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities........... (1,448,935) (4,864,831) (1,590,981) (572,152) (906,737)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Net proceeds from (repayment of) bank borrowing.... 1,049,117 5,175,928 432,044 578,105 (147,554)
Payment for repurchase of shares................... (23,567) (76,283) (217,065) (122,554) (19,770)
Proceeds from exercise of stock options and
warrants........................................ 56,154 50,066 112,709 62,446 491,867
Other.............................................. (20,330) (25,827) (32,520) (18,935) (7,748)
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities....... 1,061,374 5,123,884 295,168 499,062 316,795
----------- ----------- ----------- ----------- -----------
(continued)
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
--------------------------------------- -------------------------
JULY 31, JULY 30, JULY 29, JANUARY 28, FEBRUARY 3,
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net (decrease) increase in cash and cash
equivalents........................................ $(1,908,097) $ 60,639 $ 60,392 $ (230,036) $ (343,937)
Cash and cash equivalents, beginning of year......... 2,293,055 384,958 445,597 445,597 505,989
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents, end of year............... $ 384,958 $ 445,597 $ 505,989 $ 215,561 $ 162,052
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Supplemental disclosures of cash flow information:
Interest paid...................................... $ 374,727 $ 474,010 $ 1,084,332 $ 432,586 $ 569,505
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Income taxes paid.................................. $ 404,838 $ 595,570 $ 355,006 $ 98,930 $ 269,405
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Supplemental schedule of noncash investing and
financing activities:
Acquisition of subsidiaries.......................... $ 1,235,329 $ 4,816,153
----------- -----------
Deferred tax liability acquired in acquisition..... 146,902
Cash acquired in acquisition....................... 5,400 6,130
Common stock issued................................ 1,000,000 871,429
Payment due under non-compete agreement............ 807,410
Acquisition costs in accrued liabilities........... 33,000 200,000
----------- -----------
1,038,400 2,031,871
----------- -----------
Cash paid to acquire subsidiaries.................... $ 196,929 $ 2,784,282
----------- -----------
----------- -----------
Tax benefit related to exercise of stock options..... $ 188,000 $ 39,857 $ 32,038
----------- ----------- -----------
----------- ----------- -----------
(concluded)
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Description of Business Activities--Del Global Technologies Corp.
(formerly Del Electronics Corp.) ('Del') together with its wholly owned
subsidiaries, RFI Corporation ('RFI'), Dynarad Corp. ('Dynarad'), Bertan High
Voltage Corp. ('Bertan') and Del Medical Systems Corp. ('Del Medical')
(collectively the 'Company'), are engaged in two major lines of business. Del,
RFI, Bertan and to a lesser extent Dynarad are engaged in the design and
manufacture of specialty electronic components for medical, industrial and
military applications. Dynarad is also engaged in the design and manufacture of
cost-effective medical imaging systems including high frequency portable X-ray
systems and mammography units which are used in the medical diagnostic industry.
Del Medical is also engaged in the distribution of cost-effective, medical
diagnostic products.
b. Principles of Consolidation--The consolidated financial statements
include the accounts of Del, RFI, Dynarad, Bertan and Del Medical. All material
intercompany accounts and transactions have been eliminated. Del purchased all
of the common stock of Dynarad on September 1, 1992 and the assets of Bertan on
April 1, 1994. Del Medical was formed on June 1, 1994 (Note 11).
c. Interim Financial Statements--The financial statements for the six
months ended January 28, 1995 and February 3, 1996 are unaudited, but in the
opinion of the Company's management reflect all adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation of the financial
position, results of operations and cash flows for such interim periods. The
results of operations for the six month periods ended January 28, 1995 and
February 3, 1996 do not necessarily represent the results to be expected for
the full year.
d. Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
e. Accounting Period--The Company's fiscal year-end is based on a
52/53-week cycle ending on the Saturday nearest to July 31.
f. Revenue Recognition--The Company recognizes revenues upon shipment of
its products except for certain products which have long-term production cycles
and high dollar value. Revenues for these products are recognized using the
percentage of completion method of accounting in proportion to costs incurred.
g. Inventory Valuation--Inventory is stated at the lower of cost (first-in,
first-out) or market.
h. Depreciation and Amortization--Depreciation and amortization are
computed by the straight-line method at rates adequate to allocate the cost of
applicable assets over their expected useful lives, which range from 3 to 40
years.
i. Research and Development Costs--Research and development costs are
charged to expense in the year incurred.
j. Net Income per Common Share and Common Share Equivalent--The Company
utilizes the Modified Treasury Stock method for computing net income per common
share. Under this method, the funds obtained by the assumed exercise of all
options and warrants were applied to repurchase common stock at the average
market price but limited to an amount of repurchased shares to no greater than
20 percent of the then outstanding actual common shares. Any assumed funds still
available after the repurchase of 20 percent of outstanding actual common shares
were assumed to be utilized to reduce the existing short-term debt. The
adjustment to net income has been shown net of the related tax effect. For
purposes of the calculation, this method increases net income by $0, $17,256 and
$53,997, in fiscal years ended 1993, 1994, and 1995, respectively, and $19,091
and $39,466 for
F-8
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
the six month periods ended January 28, 1995 and February 3, 1996, respectively,
for primary earnings per share. Net income was increased by $0, $10,336, and
$47,954 in fiscal years ended 1993, 1994, and 1995, respectively, and $17,525
and $22,626 for the six month periods ended January 28, 1995 and February 3,
1996, respectively, for purposes of computing fully diluted earnings per share.
The number of shares of common stock and common share equivalents used in the
calculation were 4,572,698, 4,896,888, and 5,044,295 in fiscal years ended 1993,
1994, and 1995, respectively, and 5,012,086 and 5,247,280 for the six month
periods ended January 28, 1995 and February 3, 1996, respectively (Note 8).
k. Income Taxes--Income taxes provided include deferred taxes due to timing
differences between financial and tax reporting (Note 9).
In February 1993 the Company formed a Foreign Sales Corporation to act as
an agent for its export sales.
The Company adopted Statement of Financial Accounting Standards ('SFAS')
No. 109 'Accounting for Income Taxes' ('SFAS No. 109') effective August 1, 1993.
The cumulative effect of adopting SFAS No. 109 was to increase net income by
$76,363 in the year ended July 30, 1994.
SFAS No. 109 provides for the recognition of deferred tax assets and
liabilities for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes and for tax credit carryovers.
l. Cash and Cash Equivalents--The Company generally considers short-term
instruments with original maturities of three months or less measured from their
acquisition date and highly liquid instruments readily convertible to known
amounts of cash to be cash equivalents.
m. Investments--During the year ended July 30, 1994, the Company adopted
SFAS No. 115, 'Accounting for Certain Investments in Debt and Equity Securities'
('SFAS No. 115'). SFAS No. 115 requires an enterprise to classify debt and
equity securities into one of three categories: held-to-maturity,
available-for-sale, or trading. Investments classified as available for sale are
measured at fair value. The investments classified as available-for-sale are
used to fund a deferred compensation plan established for one of the Company's
key employees. Gains and losses, either recognized or unrealized, inure to the
benefit or detriment of this employee's deferred compensation, based upon a
contractual arrangement between the employee and the Company.
n. Goodwill--Cost in excess of the net assets of companies acquired is
being amortized on a straight-line basis over twenty-five years. The carrying
value of intangible assets is periodically reviewed by the Company and
impairments are recognized when the expected future cash flows derived from such
intangible assets is less than their carrying value.
o. Long-Lived Assets--In March 1995, the Financial Accounting Standards
Board ('FASB') issued SFAS No. 121, 'Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of.' This statement is effective
for fiscal years beginning after December 15, 1995. The Company does not expect
the effect on its consolidated financial condition from the adoption of this
statement to be material.
p. Stock-Based Compensation--In October 1995, the FASB issued SFAS No. 123,
'Accounting for Stock-Based Compensation,' which requires adoption of the
disclosure provisions no later than fiscal years beginning after December 15,
1995 and adoption of the measurement and recognition provisions for non-employee
transactions no later than after December 15, 1995. The new standard defines a
fair value method of accounting for the issuance of stock options and other
equity instruments. Under the fair value method, compensation cost is measured
at the grant date based on the fair value of the award and is recognized over
the service period, which is usually the vesting period. Pursuant to SFAS No.
123, companies are encouraged, but not required, to adopt the fair value method
of accounting for employee stock-based transactions. Companies are also
permitted to continue
F-9
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
to account for such transactions under Accounting Principles Board Opinion
('APB') No. 25, 'Accounting for Stock Issued to Employees,' but would be
required to disclose in a note to the financial statements pro forma net income,
and per share amounts as if the company had applied the new method of
accounting. SFAS No. 123 also requires increased disclosures for stock-based
arrangements regardless of the method chosen to measure and recognize
compensation for employee stock-based arrangements. The Company has elected to
continue to account for such transactions under APB No. 25 and will disclose the
required pro forma effect on net income and earnings per share.
2. INVESTMENTS
At July 29, 1995 and February 3, 1996 investments consist principally of
corporate debt securities and equities classified as available-for-sale.
At July 29, 1995 and February 3, 1996 the fair value of investments
classified as available-for-sale based on maturity dates, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR JULY 29, 1995 FEBRUARY 3, 1996
- ---------------------------------------- ------------- -----------------
<S> <C> <C>
1996.................................... $ 43,892 $ 73,307
1997-2002............................... 310,512 388,172
2003-2006............................... 24,130 36,311
------------- -----------------
$ 378,534 $ 497,790
------------- -----------------
------------- -----------------
</TABLE>
3. PERCENTAGE OF COMPLETION ACCOUNTING
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Costs incurred on uncompleted
contracts............................. $ 427,392 $ 337,863 $344,309
Estimated earnings...................... 163,109 93,184 94,921
------------- ------------- ----------------
590,501 431,047 439,230
Less: Billings to date.................. 39,200 35,200 35,200
------------- ------------- ----------------
Costs and estimated earnings in excess
of billings on uncompleted
contracts............................. $ 551,301 $ 395,847 $404,030
------------- ------------- ----------------
------------- ------------- ----------------
</TABLE>
The backlog of unshipped contracts being accounted for under the percentage
of completion method of accounting was $762,524 at July 30, 1994, $633,753 at
July 29, 1995, and $625,570 at February 3, 1996.
4. INVENTORY
Inventories and their effect on cost of sales are determined by physical
count for annual reporting purposes and are estimated by management for interim
reporting purposes based on estimated gross margins.
F-10
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
4. INVENTORY--(CONTINUED)
Inventory consists of the following:
<TABLE>
<CAPTION>
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Finished goods.......................... $ 2,825,816 $ 4,398,096 $ 4,853,706
Work-in-process......................... 7,201,564 7,642,588 8,434,964
Raw materials and purchased parts....... 6,142,965 5,997,674 6,619,887
------------- ------------- ----------------
16,170,345 18,038,358 19,908,557
Less progress payments.................. 97,412
------------- ------------- ----------------
$ 16,072,933 $ 18,038,358 $ 19,908,557
------------- ------------- ----------------
------------- ------------- ----------------
</TABLE>
5. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Land.......................... $ 694,046 $ 694,046 $ 694,046
Buildings..................... 2,146,025 2,146,025 2,146,025
Machinery and equipment....... 5,475,652 6,624,296 7,164,933
Furniture and fixtures........ 707,846 773,694 802,924
Leasehold improvements........ 749,219 790,226 795,755
Construction in progress...... 76,023 210,435
Transportation equipment...... 5,000 10,987 11,425
------------- ------------- ----------------
9,777,788 11,115,297 11,825,543
Less accumulated depreciation
and amortization............ 2,612,930 3,362,516 3,650,451
------------- ------------- ----------------
Net fixed assets.............. $ 7,164,858 $ 7,752,781 $ 8,175,092
------------- ------------- ----------------
------------- ------------- ----------------
</TABLE>
Construction in progress relates to computer equipment and the
computerization of certain of the Company's manufacturing and accounting
systems.
6. DEBT
Long-term debt is summarized below:
<TABLE>
<CAPTION>
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------------------- ------------------------- -------------------------
DUE WITHIN DUE AFTER DUE WITHIN DUE AFTER DUE WITHIN DUE AFTER
ONE YEAR ONE YEAR ONE YEAR ONE YEAR ONE YEAR ONE YEAR
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Term note payable--
bank....................... $428,568 $ 2,035,722 $428,568 $ 1,607,154 $428,568 $ 1,392,870
Additional term note
payable--bank.............. 500,000 2,875,000 500,000 2,375,000 500,000 2,125,000
Credit line loan payable--
bank....................... 6,575,000 7,900,000 8,225,000
Other loan................... 14,815 20,797 14,815 12,527
---------- ----------- ---------- ----------- ---------- -----------
$928,568 $11,485,722 $943,383 $11,902,951 $943,383 $11,755,397
---------- ----------- ---------- ----------- ---------- -----------
---------- ----------- ---------- ----------- ---------- -----------
</TABLE>
The Company's credit facility with its lending bank was composed of two
term notes and a revolving credit line as of July 30, 1994, July 29, 1995 and
February 3, 1996. The total facility aggregated $14,910,722 at July 29,
F-11
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
6. DEBT--(CONTINUED)
1995 and $14,446,438 at February 3, 1996. The facilities include the balance of
a seven year term note of $2,035,722 with interest at prime plus 1/2 percent
which was eight and three quarters percent at July 29 1995; an additional five
year term note of $3,500,000, with a balance outstanding of $2,875,000 at July
29, 1995, with interest at a prime plus 3/4 percent, which was used to purchase
Bertan; and a revolving credit line of $10,000,000 with interest at prime, with
a letter of credit sub-limit of $1,000,000. The Company paid off the outstanding
borrowings of the Bertan subsidiary on May 26, 1994. The Company paid off the
outstanding borrowings of the Dynarad subsidiary on June 3, 1993. The revolving
credit facility is subject to commitment fees of 1/4 percent on the average
daily unused portion of the facility, payable quarterly. Borrowings are
collateralized by all of the assets of the Company and a $1,000,000 life
insurance policy on the life of the Company's president, up to the limit of the
indebtedness. The Credit Agreement also requires the Company to maintain minimum
annual net worth and working capital ratios, limits additional indebtedness and
the payment of cash dividends and contains other restrictive covenants. Under
the most restrictive terms, as of July 29, 1995, $10,000 is available for cash
dividends.
The Company and its lending bank further amended its credit agreement in
January 1995, whereby the Company, if it meets certain ratios in six month
increments, is able to borrow at rates which are lower than the stated rate in
its loan agreement. Based on financial ratios achieved during the six month
period ended January 28, 1995, the interest rate on all of the Company's loans
was reduced by 1/2 percent. Based on the Company's financial ratios at July 29,
1995 and for the six months then ended, the interest rate for the next six
months was again reduced 1/2 percent.
The weighted average interest rate on the Company's borrowings under its
credit facility was 6.21 percent, 8.84 percent, and 8.44 percent for the years
ended July 30, 1994 and July 29, 1995, and the six months ended February 3,
1996, respectively.
In order to protect against adverse interest rate fluctuations, the Company
entered into two three-year interest rate protection agreements with its bank
with a combined cost of approximately $145,000. The interest protection
agreements protect the Company against any fluctuation in interest expense above
nine percent at $5,500,000 of borrowings, and on any fluctuation in interest
expense above ten percent on the next $3,000,000 of borrowings. The second level
of protection is reduced on a pro-rata basis as the additional term note is
repaid. Both agreements terminate in July 1997.
As of July 29, 1995 the revolving credit line had an outstanding balance of
$7,900,000 and an unused portion of $1,596,000. Under the letter of credit
facility, letters of credit of $504,000 were outstanding at July 29, 1995.
On March 6, 1996, in connection with an acquisition, (see note 14), the
Company and its lending bank entered into an Amended and Restated Credit
Agreement wherein the bank increased the Company's line of credit to
$24,000,000, consisting of a $10,000,000 five-year term loan and a four-year
revolving credit line of $14,000,000. Initial borrowing made under this credit
line on March 6, 1996 was used to pay off existing term loans, the existing
revolving credit loan balance and to fund the acquisition of certain assets of
the Gendex Medical Division ('Gendex') of Dentsply International Inc. Borrowing
under the revolving credit loan is based upon a formula based on 80 percent of
eligible accounts receivable and 50 percent of inventory, with a $2,000,000
maximum sub-limit for letters of credit. Interest will be computed at prime, or
at the Company's option, at a rate tied to the London Interbank Borrowing Rate
('LIBOR'). The unused and available portion of the line of credit was
approximately $3,243,000 after deducting outstanding letters of credit in the
amount of $652,000.
F-12
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
6. DEBT--(CONTINUED)
Long-term debt matures as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
- -----------------------------------------------------------
<S> <C>
1996 (included in current portion)......................... $ 943,383
1997....................................................... 8,843,499
1998....................................................... 934,434
1999....................................................... 1,803,568
2000 and after............................................. 321,450
-------------
$ 12,846,334
-------------
-------------
</TABLE>
7. EMPLOYEE BENEFITS
Employee Benefit Plans--The Company has an employee benefit plan for
eligible employees. Included in the plan is a profit sharing plan which provides
for contributions as determined by the Board of Directors. The contributions can
be paid to the plan in cash or common stock of the Company. Expense for the
fiscal years ended in 1993, 1994, and 1995 was $15,000, $0, and $32,500,
respectively. The plan also incorporates a 401(k) Retirement Plan that is
available to substantially all employees, allowing them to defer a portion of
their salary.
8. SHAREHOLDERS' EQUITY
a. Stock Dividends--On December 17, 1991, the Company declared a six
percent stock dividend to holders of record on December 3, 1991. On November 17,
1992, the Company declared a six percent stock dividend to holders of record on
December 3, 1992. On April 19, 1993, the Company declared a three percent stock
dividend to holders of record on May 3, 1993. On November 22, 1993, the Company
declared a three percent stock dividend to holders of record on December 9,
1993, payable December 23, 1993. On May 4, 1994, the Company declared a three
percent stock dividend to holders of record on May 18, 1994, payable June 20,
1994. On November 23, 1994, the Company declared a three percent stock dividend
to holders of record on December 8, 1994, payable on December 27, 1994. On May
16, 1995, the Company declared a three percent stock dividend to holders of
record on June 7, 1995, payable on June 23, 1995. On November 20, 1995 the
Company declared a three percent stock dividend to holders of record on December
5, 1995 payable on December 21, 1995. The effects of these stock dividends have
been reflected in the financial statements and notes for all periods presented.
b. Nonqualified Stock Option Plan--The Company has a nonqualified stock
option plan. At the annual meeting of shareholders held on February 14, 1996,
the shareholders approved the proposal to amend the Company's nonqualified stock
option plan to increase the number of shares of common stock with respect to
which options can be granted by 250,000 to a total of 2,473,648 shares. The
President exercised options to purchase 119,405 shares, former officers
exercised options to purchase 23,239 shares, a current officer exercised options
to purchase 3,522 shares, and various employees exercised options to purchase
9,550 shares in the fiscal year ended July 31, 1993. Various employees exercised
options to purchase 18,671 shares in the fiscal year ended July 30, 1994. A
former officer exercised options to purchase 16,526 shares, and various
employees exercised options to purchase 2,575 shares, during the fiscal year
ended July 29, 1995. As of July 29, 1995, the Company has granted options to
purchase 826,639 shares to the current President, 276,490 shares to former
officers, 262,961 shares to current officers and 692,740 shares to various
employees and directors. As of December 29, 1995 the stock option committee of
the Board of Directors granted additional options of 130,000 shares, 62,500 to
officers and 67,500 to various employees. During the six months ended February
3, 1996 various employees and former employees exercised options to purchase
6,963 shares.
F-13
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
8. SHAREHOLDERS' EQUITY--(CONTINUED)
The option price per share is determined by the Board of Directors, but
cannot be less than 85 percent of fair market value of a share at the date of
grant. All options to date have been granted at the fair market value of the
Company's stock at the date of grant. No options can be granted under this plan
subsequent to December 31, 2009.
The following stock option information is as of:
<TABLE>
<CAPTION>
OPTIONS JULY 31, 1993 JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
- ------------------------------ -------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Granted and outstanding at
beginning of year........... 1,331,766 1,260,026 1,559,322 1,546,648
Granted....................... 86,723 347,319 105,820 130,000
Expired....................... (2,531) (29,353) (88,817) (9,537)
Exercised..................... (155,932) (18,670) (29,677) (6,963)
-------------- -------------- -------------- ---------------
Outstanding at end of
period...................... 1,260,026 1,559,322 1,546,648 1,660,148
-------------- -------------- -------------- ---------------
-------------- -------------- -------------- ---------------
Exercisable at end of
period...................... 908,300 1,063,557 1,173,059 1,361,870
-------------- -------------- -------------- ---------------
-------------- -------------- -------------- ---------------
Exercise prices............... $ 0.99-$6.32 $ 0.99-$6.32 $ 0.99-$6.32 $ 0.99-$6.56
-------------- -------------- -------------- ---------------
-------------- -------------- -------------- ---------------
</TABLE>
Under the Company's stock option plan, options are exercisable 25 percent a
year, commencing at the end of the first year they are outstanding and expiring
fifteen years from the date they are granted.
c. There were warrants outstanding aggregating 261,779 shares at February
3, 1996. They are as follows:
1. In connection with an underwriting in June 1991, the underwriter
was granted warrants to purchase 134,163 shares of common stock at an
exercise price of $5.36. At February 3, 1996 there were 67,081 warrants
still unexercised.
2. The Company has granted warrants to the seller of selected Filtron
assets to purchase 100,621 shares of common stock at an exercise price of
$5.88. At February 3, 1996 there were 100,621 warrants still unexercised.
3. In connection with an amendment to a bank financing completed in
May 1994, the Company issued warrants to purchase 30,900 shares of common
stock at an exercise price of $6.95. In connection with its incentive
pricing amendment with the same bank, the Company reduced the exercise
price to $5.34. At July 29, 1995, the bank held warrants for 32,782 shares
at an exercise price of $5.18. At February 3, 1996 there were 32,782
warrants still unexercised. On March 6, 1996, the Company issued an
additional warrant to purchase 17,000 shares of common stock at an exercise
price of $7.00 to its lending bank.
4. The Company has granted 26,522 warrants to its Corporate
Development Consultant. At July 29, 1995, the consultant held warrants for
26,522 shares at an exercise price of $5.18. In connection with an
extension of a consulting agreement the Company issued 30,000 additional
warrants to purchase shares of common stock at $6.56 to this Corporate
Development Consultant. At February 3, 1996 there were 56,522 warrants
still unexercised.
5. The Company has granted 37,132 warrants to an Investment Advisory
firm and its key personnel. At July 29, 1995, they held warrants for 37,132
shares at an exercise price of $5.18. At February 3, 1996 there were 4,773
warrants still unexercised.
F-14
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
9. INCOME TAXES
Provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
----------------------------------------------- ------------------------------------
JULY 31, 1993 JULY 30, 1994 JULY 29, 1995 JANUARY 28, 1995 FEBRUARY 3, 1996
------------- ------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Current:
Federal............................ $ 509,400 $ 316,812 $ 692,064 $313,692 $430,084
State.............................. 60,000 83,000 108,912 40,317 53,813
------------- ------------- ------------- ---------------- ----------------
569,400 399,812 800,976 354,009 483,897
Deferred:
Federal and state.................. 138,600 (58,287) 36,452 65,491 26,321
------------- ------------- ------------- ---------------- ----------------
$ 708,000 $ 341,525 $ 837,428 $419,500 $510,218
------------- ------------- ------------- ---------------- ----------------
------------- ------------- ------------- ---------------- ----------------
</TABLE>
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Depreciation.................. $ 213,664 $ 401,880 $464,242
Pension....................... 77,712 83,914 83,914
Federal effect of New York
State tax credit............ 55,145 77,570 82,836
Difference in basis of fixed
assets...................... 120,595 110,200 105,931
Revenue recognition........... 52,534 35,289
------------- ------------- ----------------
Gross deferred tax
liabilities................. 519,650 708,853 736,923
------------- ------------- ----------------
Amortization.................. (6,704) 72,382 72,382
Inventory..................... (122,073) (153,119) (153,119)
Bad debt reserve.............. (50,809) (45,434) (45,434)
Deferred compensation......... (124,621) (264,831) (251,092)
New York State tax credits.... (162,190) (228,146) (243,634)
------------- ------------- ----------------
Gross deferred tax assets..... (466,397) (619,148) (620,897)
------------- ------------- ----------------
$ 53,253 $ 89,705 $116,026
------------- ------------- ----------------
------------- ------------- ----------------
</TABLE>
Deferred tax liabilities and assets are recorded in the consolidated
balance sheets as follows:
<TABLE>
<CAPTION>
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Liabilities:
Deferred income taxes......... $ 393,383 $ 605,806 $632,127
Assets:
Prepaid expenses and other
current assets.............. (177,940) (287,956) (286,784)
Other assets.................. (162,190) (228,145) (229,317)
------------- ------------- ----------------
$ 53,253 $ 89,705 $116,026
------------- ------------- ----------------
------------- ------------- ----------------
</TABLE>
The New York State tax credits expire at various dates through 2002.
F-15
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
9. INCOME TAXES--(CONTINUED)
The following is a reconciliation of the statutory Federal and effective
income tax rates:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
----------------------------------------- --------------------------
JULY 31, JULY 30, JULY 29, JANUARY 28, FEBRUARY 3,
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
% OF PRETAX % OF PRETAX % OF PRETAX % OF PRETAX % OF PRETAX
INCOME INCOME INCOME INCOME INCOME
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Statutory Federal income tax expense rate..... 34.0% 34.0% 34.0% 34.0% 34.0%
State taxes, less Federal tax effect.......... 2.9 (.4) 1.5 1.9 2.1
Tax benefit from write-off of inventory for
tax purposes................................ (3.4) (4.3)
Permanent differences......................... 2.4 3.9 2.8 2.2 .8
Tax benefits on foreign sales corp............ (3.3) (3.3) (4.1) (3.2)
Federal tax credits and other................. (6.2) (6.7) (4.5) (3.5) (3.2)
----- ----- ----- ----- -----
29.7% 23.2% 30.5% 30.5% 30.5%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
a. The Company entered into an operating lease commencing August 1, 1992
and expiring July 31, 2002 for Del's offices and operating facility in Valhalla,
New York. This lease includes an escalation for real estate taxes and operating
expenses. In September 1992 the Company entered into an operating lease for
Dynarad's facility in Deer Park, N.Y. This lease provides an escalation for real
estate taxes. In May 1994 the Company entered into an operating lease for
Bertan's facility in Hicksville, New York. This lease provides for escalation
for real estate taxes. In addition, the Company has various auto leases
accounted for as operating leases. The future minimum annual lease commitments
as of July 29, 1995 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AMOUNT
- ------------------------------------------------------------ ----------
<S> <C>
1996........................................................ $1,026,953
1997........................................................ 982,341
1998........................................................ 942,923
1999........................................................ 935,779
2000........................................................ 935,779
Thereafter.................................................. 2,590,738
----------
$7,414,513
----------
----------
</TABLE>
Rent expense, including real estate taxes of $180,504 in 1993, $225,025 in
1994, and $296,142 in 1995, was $614,318 in 1993, $604,665 in 1994, and
$1,111,300 in 1995.
b. Employment Agreements--The Company has an employment agreement with its
President through July 2000. The agreement provides for minimum base salary,
deferred compensation and bonuses as defined. Under the terms of the agreement
with the President, the Company will accrue deferred compensation at a rate of
five percent of pretax income with a minimum of $100,000 and a maximum of
$125,000. Bonus will accrue at five percent of pretax income. Also included in
the President's agreement are certain benefits in the event of death or
disability, as well as certain benefits in the event of a change of control.
Upon completion of the term of the agreement, the President may opt for a five
year extension in the form of a consulting contract at a rate specified within
the agreement.
F-16
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
10. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
In connection with the acquisition of Dynarad, the Company has an
employment agreement with one Vice President through 1997. The agreement
provides for a minimum base salary of $157,500 per annum (subject to upward
adjustment on an annual basis) and certain bonuses if certain income goals of
Dynarad specified in the agreement are achieved. As of April 1, 1996, the Vice
President elected to enter the consulting phase of the agreement.
In connection with the acquisition of Dynarad, the Company entered into an
employment agreement with a key employee which provides for bonuses based on
growth of revenues. As of July 30, 1994, the employee has been engaged as a
consultant at a rate specified within the agreement.
The Company entered into ten year consulting agreements through 2002 with
two of the former shareholders of Dynarad. The agreements call for annual
payments of $28,000 and $21,000, respectively.
In connection with the acquisition of Bertan, the Company entered into a
three year employment agreement with a key employee who is President of Bertan
which provides for a minimum base salary of $140,000 per annum (subject to
upward adjustment on an annual basis) and a bonus equal to five percent of
pretax income. Upon completion of the three year term of the agreement, the
Company may opt for a two year extension of this agreement. Upon completion of
the employment phase of the agreement, the Company and the employee have agreed
to a ten year non-compete agreement at a minimum annual rate of $50,000 as
adjusted for the greater of five percent per annum or increases in the cost of
living. Additionally, the Company has entered into a ten year non-compete
agreement with the former Chairman of Bertan at a minimum annual rate of $50,000
as adjusted for the greater of five percent per annum or increases in the cost
of living.
c. The Company is a defendant in several legal actions arising from the
normal course of business. Management believes the Company has meritorious
defenses to such actions and that the outcomes will not be material to the
consolidated financial statements.
11. ACQUISITIONS
Bertan
As of April 1, 1994, the Company acquired the net assets and business of
Bertan Associates, Inc., which has been consolidated as of that date. The
Company paid the selling shareholders $2,600,000 in cash and 200,000 shares of
common stock valued at $871,429. The Company also entered into an employment and
non-compete agreements with one of the former shareholders of Bertan Associates,
Inc. and non-compete agreement with another of the former shareholders. The
Company entered into a ten year lease agreement for its operating facility in
Hicksville, New York. One of Bertan's officers is a partner in the real estate
company that owns this building. The Company believes that the lease between the
Company and the partnership was entered into on terms no less favorable than
could be obtained from unaffiliated third parties. The lease provides for
minimum annual payments of $383,380, inclusive of real estate taxes.
The acquisition has been accounted for as a purchase and, accordingly, the
original purchase price was allocated to assets and liabilities acquired based
upon the estimated fair value at the date of acquisition. The transaction
resulted in an excess of cost over fair value of net assets acquired of
$2,809,095 which is included in goodwill. Such excess is being amortized over a
25 year period. The charge to income for the four months ended July 30, 1994 was
$37,455, and was $111,666 for the year ended July 29, 1995.
F-17
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
11. ACQUISITIONS--(CONTINUED)
Unaudited pro forma financial information for the 12 month periods ended
July 31, 1993 and July 30, 1994, as if the Bertan acquisition occurred at the
beginning of the respective periods, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1993 JULY 30, 1994
------------- -------------
<S> <C> <C>
Net sales............................... $ 30,919,753 $ 29,834,149
------------- -------------
------------- -------------
Income before provision for income
taxes................................. $ 1,587,022 $ 1,015,417
------------- -------------
------------- -------------
Net income.............................. $ 1,127,022 $ 779,525
------------- -------------
------------- -------------
Net income per common share and common
share equivalents, primary and fully
diluted............................... $ 0.23 $ 0.15
------------- -------------
------------- -------------
</TABLE>
The pro forma financial information presented above is not necessarily
indicative of the operating results which would have been achieved had the
Company acquired Bertan at the beginning of the respective periods or results to
be achieved in the future.
12. MAJOR CUSTOMERS AND EXPORT SALES
No one customer accounts for more than ten percent of the Company's sales
in any of the periods presented.
Export sales were 21 percent, 28 percent, 36 percent, 35 percent and 37
percent of total net sales in 1993, 1994 and 1995, and for the six months ended
January 28, 1995 and February 3, 1996, respectively.
Export sales by geographic areas were:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
--------------------------------------------------------------- ------------------------------------------------
JULY 31, 1993 JULY 30, 1994 JULY 29, 1995 JANUARY 28, 1995 FEBRUARY 3, 1996
------------- ------------- ------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Europe......... $ 831,466 18% $ 2,321,259 34% $ 3,892,719 33% $1,640,222 34% $ 2,003,936 32%
Far East....... 220,490 5% 741,142 11% 3,336,147 28% 1,391,014 29% 1,983,265 32%
Middle East.... 2,472,027 54% 2,356,638 35% 3,256,903 28% 1,280,650 27% 1,329,819 21%
North
America....... 1,005,529 22% 1,143,215 17% 627,777 6% 255,600 5% 921,262 14%
Other.......... 47,765 1% 191,295 3% 614,149 5% 250,705 5% 40,407 1%
------------- --- ------------- --- ------------- --- -------- --- -------- ---
Total export
sales......... $ 4,577,277 100% $ 6,753,549 100% $11,727,695 100% $4,818,191 100% $ 6,278,689 100%
------------- --- ------------- --- ------------- --- -------- --- -------- ---
------------- --- ------------- --- ------------- --- -------- --- -------- ---
</TABLE>
F-18
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
13. SEGMENT REPORTING
The following analysis provides segment information for the two industries
in which the Company operates (see Note 1):
<TABLE>
<CAPTION>
SPECIALTY
ELECTRONICS MEDICAL
1993 MANUFACTURING MANUFACTURING TOTAL
- ---------------------------------------- ------------- ------------- -----------
<S> <C> <C> <C>
Net sales............................... $18,134,429 $ 4,152,886 $22,287,315
Operating expenses...................... 15,732,200 3,826,209 19,558,409
------------- ------------- -----------
Operating profit........................ $ 2,402,229 $ 326,677 2,728,906
------------- -------------
------------- -------------
Interest expense........................ 360,149
Provision for income taxes.............. 708,000
-----------
Net income.............................. $ 1,660,757
-----------
-----------
Identifiable assets..................... $23,745,219 $ 1,223,917 $24,969,136
------------- ------------- -----------
------------- ------------- -----------
Capital expenditures.................... $ 1,102,229 $ 142,167 $ 1,244,396
------------- ------------- -----------
------------- ------------- -----------
Depreciation and amortization........... $ 747,341 $ 158,047 $ 905,388
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
SPECIALTY
ELECTRONICS MEDICAL
1994 MANUFACTURING MANUFACTURING TOTAL
- ---------------------------------------- ------------- ------------- -----------
<S> <C> <C> <C>
Net sales............................... $19,436,334 $ 4,890,681 $24,327,015
Operating expenses...................... 17,654,075 4,640,937 22,295,012
------------- ------------- -----------
Operating profit........................ $ 1,782,259 $ 249,744 2,032,003
------------- -------------
------------- -------------
Interest expense........................ 576,832
Provision for income taxes.............. 341,525
FASB-109 tax adjustment................. 76,363
-----------
Net income.............................. $ 1,190,009
-----------
-----------
Identifiable assets..................... $28,833,760 $ 7,364,613 $36,198,373
------------- ------------- -----------
------------- ------------- -----------
Capital expenditures.................... $ 1,626,358 $ 406,590 $ 2,032,948
------------- ------------- -----------
------------- ------------- -----------
Depreciation and amortization........... $ 813,226 $ 203,306 $ 1,016,532
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
SPECIALTY
ELECTRONICS MEDICAL
1995 MANUFACTURING MANUFACTURING TOTAL
- ---------------------------------------- ------------- ------------- -----------
<S> <C> <C> <C>
Net sales............................... $27,026,761 $ 5,569,551 $32,596,312
Operating expenses...................... 23,097,275 5,565,258 28,662,533
------------- ------------- -----------
Operating profit........................ $ 3,929,486 $ 4,293 3,933,779
------------- -------------
------------- -------------
Interest expense........................ 1,191,142
Provision for income taxes.............. 837,428
-----------
Net income.............................. $ 1,905,209
-----------
-----------
Identifiable assets..................... $33,062,066 $ 5,992,568 $39,054,634
------------- ------------- -----------
------------- ------------- -----------
Capital expenditures.................... $ 1,140,242 $ 197,267 $ 1,337,509
------------- ------------- -----------
------------- ------------- -----------
Depreciation and amortization........... $ 965,478 $ 277,365 $ 1,242,843
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
F-19
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
13. SEGMENT REPORTING--(CONTINUED)
(a) For the fiscal year ended July 31, 1993, July 30, 1994 and July 29,
1995, sales of the Specialty Electronics Manufacturing segment included net
sales of approximately $3,838,000, $4,621,000 and $8,834,000 to customers for
medical imaging and diagnostic systems applications. Aggregate medical sales for
1993, 1994, and 1995 were approximately $7,991,000, $9,412,000 and $14,403,000
or 36%, 39% and 44% of total net sales, respectively.
14. SUBSEQUENT EVENT--UNAUDITED
On March 6, 1996, the Company and its newly formed wholly owned subsidiary,
Gendex-Del Medical Imaging Corp., acquired certain assets, including
inventories, fixed assets, intangibles and the use of the Gendex trademark, of
the Gendex Medical Division of Dentsply International Inc. for $5,700,000 in
cash and a subordinated note of $1,800,000. The subordinated note bears interest
at 7.75 percent, which is payable quarterly, with principal payments beginning
three years after closing. The Company assumed the lease for the Gendex facility
in Franklin Park, Illinois and will operate the business under the Gendex-Del
name. The Company entered into a supply agreement with Dentsply International
Inc. for certain components and parts used in the manufacture of medical x-ray
equipment and systems of Gendex.
See Consolidated Pro Forma Financial Information.
F-20
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------------
FIRST(1) SECOND THIRD FOURTH(2)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended July 30, 1994:
Net sales............................. $5,336,091 $5,380,435 $5,592,496 $8,017,993
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Gross profit.......................... $2,179,485 $2,913,193 $2,540,120 $2,235,136
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income............................ $ 484,287 $ 445,612 $ 503,543 $ (243,433)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Primary earnings and fully diluted
earnings per share................. $ 0.11 $ 0.09 $ 0.10 $ (0.05)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended July 29, 1995:
Net sales............................. $6,136,056 $7,579,366 $8,945,910 $9,934,980
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Gross profit.......................... $2,916,851 $3,298,628 $3,589,889 $3,612,945
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income............................ $ 450,615 $ 505,215 $ 521,916 $ 427,463
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Primary earnings and fully diluted
earnings per share................. $ 0.09 $ 0.11 $ 0.11 $ 0.09
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
FIRST SECOND
---------- ----------
<S> <C> <C>
Six months ended February 3, 1996:
Net sales............................. $7,471,181 $9,329,438
---------- ----------
---------- ----------
Gross profit.......................... $3,280,547 $3,775,520
---------- ----------
---------- ----------
Net income............................ $ 529,566 $ 633,061
---------- ----------
---------- ----------
Primary earnings and fully diluted
earnings per share................. $ 0.11 $ 0.12
---------- ----------
---------- ----------
</TABLE>
- ------------
(1) Includes the cumulative effect of change in the method for accounting for
income taxes of $76,363.
(2) The Company estimates gross profit for interim reporting purposes. The
fourth quarter results for the period ended July 30, 1994 were adversely
impacted by a decline in gross profit determined as a result of physical
inventories taken at year end.
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
DENTSPLY International Inc.
We have audited the accompanying statement of net assets to be acquired as of
December 31, 1995 and the statements of revenues and expenses for the years
ended December 31, 1994 and 1995 of the Gendex Medical Division of DENTSPLY
International Inc. (DENTSPLY). These financial statements are the responsibility
of DENTSPLY's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in notes 1(a) and 7 to the financial statements, DENTSPLY
International Inc. has entered into an Agreement in Principle to sell all
inventory, fixed assets and certain intangible assets of the Gendex Medical
Division to a third party on or about February 28, 1996.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets to be acquired as of December 31, 1995 and
revenues and expenses for the years ended December 31, 1994 and 1995 of Gendex
Medical Division, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 9, 1996
F-22
<PAGE>
GENDEX MEDICAL DIVISION
OF
DENTSPLY INTERNATIONAL INC.
STATEMENT OF NET ASSETS TO BE ACQUIRED
DECEMBER 31, 1995
<TABLE>
<S> <C>
Inventories (Note 2)........................................ $6,129,493
Fixed assets, net (Note 3).................................. 650,675
Intangible assets, less accumulated amortization............ 1,701,961
----------
$8,482,129
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE>
GENDEX MEDICAL DIVISION
OF
DENTSPLY INTERNATIONAL INC.
STATEMENTS OF REVENUES AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Net sales......................................... $20,664,178 $18,895,991
Cost of goods sold (Note 5)....................... 17,521,209 16,364,819
----------- -----------
Gross profit.................................... 3,142,969 2,531,172
Selling, general, and administrative expenses
(Notes 4 and 5)................................. 2,812,812 2,627,916
----------- -----------
Operating profit (loss)......................... 330,157 (96,744)
Other income (expense)............................ (51,835) 13,110
----------- -----------
Net excess (deficiency) of revenues over
expenses..................................... $ 278,322 $ (83,634)
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE>
GENDEX MEDICAL DIVISION
OF
DENTSPLY INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
The Gendex Medical Division (Gendex Medical) of DENTSPLY International Inc.
(DENTSPLY) designs, develops, manufactures and markets x-ray systems and related
components for the medical x-ray market.
Gendex Medical entered the medical x-ray market in August 1987 with the
introduction of a unique high-frequency generator and an integrated
table/tubestand. In April 1989, Universal/Allied Imaging, Inc., a manufacturer
of a full line of single phase conventional radiographic equipment and
components such as tables, film holders and tube mounts, was acquired. The
acquisition of Universal/Allied Imaging substantially expanded Gendex Medical's
medical product line and enabled it to offer its medical dealers a compliment of
tables, tubestands, film holders and generators, including its high frequency
generators. In January 1993, Gendex Medical acquired a mammography x-ray system
from the Soredex division of Orion Corporation, thereby gaining an entrant in
this attractive, growing portion of the medical x-ray market.
As more fully described in note 7, DENTSPLY International Inc. has entered
into an Agreement in Principle to sell all inventory, fixed assets and certain
intangible assets of Gendex Medical to a third party on or about February 28,
1996.
(b) Basis of Presentation
The Gendex Medical Division's financial results have historically been
reported in a combined manner with the results of the Gendex Dental Division's
Chicago, Grand Avenue location. For purposes of this presentation, the
accompanying financial statements present only those net assets of Gendex
Medical anticipated to be acquired by a third party as of December 31, 1995. The
statements of revenues and expenses of the division for the years ended December
31, 1994 and 1995 include only the operating results of the Gendex Medical
Division presented on a stand-alone basis, excluding the impact, if any, on
DENTSPLY International Inc.'s consolidated income tax provision.
(c) Inventories
Inventories are valued at the lower of cost or market using the first-in,
first-out (FIFO) method.
(d) Fixed Assets
Fixed assets are recorded at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets which range
from four to fifteen years. Leasehold improvements are amortized on the
straight-line method over the shorter of the lease term or estimated useful life
of the assets.
(e) Intangible Assets
Intangible assets, which consist primarily of trademarks, tradenames,
patents and product design rights, are being amortized over the estimated useful
lives of the respective assets (which range from 12 to 40 years) using the
straight-line method. The cumulative amount of amortization at December 31, 1995
is $553,807. Amortization expense for the years ended December 31, 1994 and 1995
is $168,087 and $153,321. Management of Gendex Medical periodically evaluates
the carrying value of intangible assets to determine that no decline in carrying
value has occurred. Upon determination of a decline in value, an appropriate
amount would be charged to operations.
(f) Revenue Recognition
Revenue is recognized when title passes upon shipment of the product.
F-25
<PAGE>
GENDEX MEDICAL DIVISION
OF
DENTSPLY INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
(2) INVENTORIES
Classification of inventories is as follows as of December 31, 1995:
<TABLE>
<S> <C>
Finished goods...................................... $2,187,988
Work-in-process..................................... 1,688,903
Raw materials....................................... 2,252,602
----------
$6,129,493
----------
----------
</TABLE>
(3) FIXED ASSETS
A summary of fixed assets follows as of December 31, 1995:
<TABLE>
<S> <C>
Leasehold improvements.............................. $ 512,347
Machinery and equipment............................. 532,740
Furniture and fixtures.............................. 25,013
Tools, dies and molds............................... 100,048
Data handling equipment............................. 107,255
Computer software................................... 6,928
----------
1,284,331
Less accumulated depreciation and amortization.... 633,656
----------
$ 650,675
----------
----------
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1994
and 1995 is $165,073 and $226,226.
(4) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling expenses include all costs associated with selling and marketing
activities including sales commission, advertising and travel. General and
administrative expenses are primarily an allocation of accounting, human
resource and data processing costs which are shared among various regional
DENTSPLY affiliated locations.
A breakdown of these costs for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Selling and marketing expenses............... $2,265,699 $2,188,095
General and administrative expenses.......... 525,897 436,047
Research and development expenses............ 21,216 3,774
---------- ----------
$2,812,812 $2,627,916
---------- ----------
---------- ----------
</TABLE>
(5) RELATED PARTY TRANSACTIONS
Other DENTSPLY affiliated divisions located in Chicago and Des Plaines,
Illinois produce fabricated components for Gendex Medical. Most of these
components could be readily sourced from local third party vendors. The cost
charged to the Gendex Medical Division for fabricated components approximates
the cost to manufacture. The total cost of components produced for Gendex
Medical by these affiliated divisions in 1994 and 1995 was $6,724,868 and
$4,801,268, respectively.
F-26
<PAGE>
GENDEX MEDICAL DIVISION
OF
DENTSPLY INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
(5) RELATED PARTY TRANSACTIONS--(CONTINUED)
Additionally, administrative services such as accounting, computer and
human resources, are performed for Gendex Medical by the DENTSPLY affiliated
division in Des Plaines, Illinois, while legal, tax and other business
administrative services are provided by the DENTSPLY Corporate office in York,
Pennsylvania. The costs of such services are deemed to be not significant. The
cost for administrative services provided by the local DENTSPLY affiliates is a
direct allocation of actual cost with no charge for Corporate services.
(6) LEASES
Gendex Medical is obligated under operating leases, principally for its
office and manufacturing facility. Total rental expense for operating leases for
the years ended December 31, 1994 and 1995 was $203,413 and $214,157,
respectively.
(7) PENDING SALE OF GENDEX MEDICAL
On December 15, 1995, DENTSPLY International Inc. entered into an Agreement
in Principle to sell all inventories, fixed assets and certain intangible assets
of the Gendex Medical Division to a third party for approximately $7,500,000. In
accordance with the Agreement in Principle, such assets existing at the closing
date will be transferred to the third party. All receivables at closing will
remain with the Seller. Substantially all contracts and leases of Gendex Medical
will be assigned to the third party. Such terms of the agreement may be subject
to revision upon final negotiation of the transaction.
F-27
<PAGE>
CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The accompanying Condensed Consolidated Pro Forma Financial Statements
reflect the acquisition of certain assets of the Gendex Medical Division of
Dentsply International Inc. by Gendex-Del Medical Imaging Corp., a wholly-owned
subsidiary of Del Global Technologies Corp. Such acquisition was effective March
7, 1996. The Condensed Consolidated Pro Forma Balance Sheet combines the
unaudited Balance Sheet of Del Global Technologies Corp. at February 3, 1996
with the audited Statement of Net Assets to be Acquired of the Gendex Medical
Division of Dentsply International Inc. at December 31, 1995 as if such
transaction had occurred on February 3, 1996. The Condensed Consolidated Pro
Forma Statement of Operations for the fiscal year ended July 29, 1995 combines
the audited Statement of Income of Del Global Technologies Corp. and
Subsidiaries for the fiscal year ended July 29, 1995 with the unaudited
Statement of Operations of the Gendex Medical Division of Dentsply International
Inc. for the twelve month period ended July 31, 1995 as if such transaction had
occurred at the beginning of the twelve month period presented. The Condensed
Consolidated Pro Forma Statement of Operations for the six month period ended
February 3, 1996 combines the unaudited Statement of Income of Del Global
Technologies Corp. and Subsidiaries for the six months ended February 3, 1996
with the unaudited Statement of Operations of the Gendex Medical Division of
Dentsply International Inc. for the six month period ended January 31, 1996 as
if such transaction had occurred at the beginning of the six month period
presented. The Pro Forma, As Adjusted column also gives effect to the use of a
portion of the net proceeds from this offering to reduce Gendex acquisition debt
and certain other debt of the Company. The transaction has been accounted for as
a purchase and appropriate adjustments have been made to the Condensed
Consolidated Pro Forma Statements of Operations to reflect the transaction at
the beginning of the respective periods combined. The pro forma financial
information presented above is not necessarily indicative of the operating
results which would have been achieved had the Company acquired Gendex Medical
at the beginning of the periods presented or of results to be achieved in the
future.
F-28
<PAGE>
CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
DEL GENDEX PRO FORMA PRO FORMA
CONSOLIDATED MEDICAL ADJUSTMENTS AT OTHER
FEBRUARY 3, DECEMBER 31, DEBIT FEBRUARY 3, ADJUSTMENTS PRO FORMA,
1996 1995 (CREDIT) 1996 DEBIT (CREDIT) AS ADJUSTED
------------ ------------ ----------- ------------ -------------- -----------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Cash and investments...... $ 659,842 $ 659,842 $ 1,132,800(3) $ 1,792,642
Trade receivables......... 5,725,121 5,725,121 5,725,121
Inventory................. 19,908,557 $6,129,493 26,038,050 26,038,050
Prepaid expenses and other
current assets.......... 1,971,152 1,971,152 1,971,152
------------ ----------- ------------ -----------
Total current assets...... 28,264,672 6,129,943 34,394,165 35,526,965
------------ ----------- ------------ -----------
Fixed assets net.......... 8,175,092 650,675 8,825,767 8,825,767
Goodwill.................. 2,802,018 2,802,018 2,802,018
Investment in assets of $ 7,750,000 (1)
subsidiary.............. (7,750,000)(2)
Other assets.............. 1,427,877 1,701,961 (732,129)(2) 2,397,709 2,397,709
------------ ----------- ------------ -----------
Total..................... $ 40,669,659 $8,482,129 $ 48,419,659 $49,552,459
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Current portion of long-
term debt............... $ 943,383 $ 943,383 $ 943,383
Accounts payable.......... 2,748,117 2,748,117 2,748,117
Accrued liabilities and
income taxes............ 2,656,163 $ (250,000)(1) 2,906,163 2,906,163
------------ ------------ -----------
Total current
liabilities............. 6,347,663 6,597,663 6,597,663
Long-term debt............ 11,755,397 (5,700,000)(1) 17,455,397 $ 12,400,000(3) 5,055,397
Subordinated debt......... (1,800,000)(1) 1,800,000 1,800,000(3)
Other liabilities......... 1,414,551 1,414,551 1,414,551
------------ ------------ -----------
Total liabilities......... 19,517,611 27,267,611 13,067,611
------------ ------------ -----------
Common stock.............. 434,698 434,698 (200,000)(3) 634,698
Net assets acquired....... $8,482,129 8,482,129 (2)
Additional paid-in
capital................. 17,490,139 17,490,139 (15,132,800)(3) 32,622,939
Retained earnings......... 3,563,896 3,563,896 3,563,896
------------ ----------- ------------ -----------
21,488,733 8,482,129 21,488,733 36,821,533
Less: Treasury stock...... 336,685 336,685 336,685
------------ ----------- ------------ -----------
Total shareholders'
equity.................. 21,152,048 8,482,129 21,152,048 36,484,848
------------ ----------- ------------ -----------
Total..................... $ 40,669,659 $8,482,129 $ 48,419,659 $49,552,459
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</TABLE>
PRO FORMA ADJUSTMENTS TO BALANCE SHEET:
(1) To reflect cash consideration of $5,700,000, seller's subordinated note of
$1,800,000, professional fees and expenses of approximately $250,000 related
to acquisition and investment in subsidiary.
(2) To reflect assets acquired at fair value and eliminate net equity acquired.
(3) To reflect the issuance and sale of 2,000,000 shares of Common Stock
assuming an offering price of $8.44 per share and the application of the
estimated net proceeds after deducting estimated underwriters' commissions
and expenses. The proceeds have been assumed to be used to repay revolving
credit debt of $7,400,000, term loan debt of $5,000,000, subordinated debt
of $1,800,000 and the balance of $1,132,800 used as working capital.
F-29
<PAGE>
CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FISCAL YEAR ENDED JULY 29, 1995
<TABLE>
<CAPTION>
GENDEX MEDICAL
DEL CONSOLIDATED TWELVE MONTHS ENDED PRO FORMA PRO FORMA
FISCAL YEAR ENDED JULY 31, 1995 ADJUSTMENTS AT
JULY 29, 1995 (UNAUDITED) DEBIT (CREDIT) JULY 29, 1995
----------------- ------------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales............................... $32,596,312 $20,995,954 $ 53,592,266
-------------- --------------- -------------
Cost of sales........................... 19,177,999 18,011,318 37,189,317
Research and development................ 2,861,844 12,056 2,873,900
Selling, general and administrative..... 6,622,690 2,895,769 9,518,459
Interest expense........................ 1,191,142 $ 624,000 (1) 1,815,142
-------------- --------------- -------------
29,853,675 20,919,143 51,396,818
-------------- --------------- -------------
Pre-tax income.......................... 2,742,637 76,811 2,195,448
Income taxes............................ 837,428 (167,000)(2) 670,428
-------------- --------------- -------------
Net income.............................. $ 1,905,209 $ 76,811 $ 1,525,020
-------------- --------------- -------------
-------------- --------------- -------------
Net income per common share and common
share equivalent......................
Primary................................. $ 0.39 $ 0.31
-------------- -------------
-------------- -------------
Fully diluted........................... $ 0.39 $ 0.31
-------------- -------------
-------------- -------------
Weighted average shares outstanding..... 5,044,295(3) 5,044,295(3)
-------------- -------------
-------------- -------------
<CAPTION>
OTHER
ADJUSTMENTS PRO FORMA
DEBIT (CREDIT) AS ADJUSTED
-------------- ------------
<S> <C> <C>
Net sales............................... $ 53,592,266
------------
Cost of sales........................... 37,189,317
Research and development................ 2,873,900
Selling, general and administrative..... 9,518,459
Interest expense........................ $ (1,193,500)(4) 621,642
------------
50,203,318
------------
Pre-tax income.......................... 3,388,948
Income taxes............................ 364,018 (4) 1,034,446
------------
Net income.............................. $ 2,354,502
------------
------------
Net income per common share and common
share equivalent......................
Primary................................. $ 0.34
------------
------------
Fully diluted........................... $ 0.34
------------
------------
Weighted average shares outstanding..... 2,000,000 (5) 7,044,295
------------
------------
</TABLE>
F-30
<PAGE>
CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 3, 1996
<TABLE>
<CAPTION>
DEL
CONSOLIDATED GENDEX MEDICAL
SIX MONTHS SIX MONTHS
ENDED ENDED PRO FORMA PRO FORMA AT OTHER
FEBRUARY 3, JANUARY 31, ADJUSTMENTS FEBRUARY 3, ADJUSTMENTS PRO FORMA
1996 (UNAUDITED) 1996 (UNAUDITED) DEBIT (CREDIT) 1996 DEBIT (CREDIT) AS ADJUSTED
----------------- ---------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $16,800,619 $8,636,962 $ 25,437,581 $25,437,581
-------------- ------------- ------------- -----------
Cost of sales........... 9,744,552 7,479,609 17,224,161 17,224,161
Research and
development........... 1,431,894 1,887 1,433,781 1,433,781
Selling, general and
administrative........ 3,356,117 1,305,516 4,661,633 4,661,633
Interest expense........ 595,211 $310,000(1) 905,211 $ (593,030)(4) 312,181
-------------- ------------- ------------- -----------
15,127,774 8,787,012 24,224,786 23,631,756
-------------- ------------- ------------- -----------
Pre-tax income (loss)... 1,672,845 (150,050) 1,212,795 1,805,825
Income taxes............ 510,218 (140,316)(2) 369,902 180,874 (4) 550,776
-------------- ------------- ------------- -----------
Net income (loss)....... $ 1,162,627 $ (150,050) $ 842,893 $1,255,049
-------------- ------------- ------------- -----------
-------------- ------------- ------------- -----------
Net income per common
share and common share
equivalent:
Primary................. $ 0.23 $ 0.16 $ 0.18
-------------- ------------- -----------
-------------- ------------- -----------
Fully diluted........... $ 0.23 $ 0.16 $ 0.18
-------------- ------------- -----------
-------------- ------------- -----------
Weighted average shares
outstanding........... 5,252,173(3) 5,252,173(3) 2,000,000 (5) 7,252,173
-------------- ------------- ------------- -----------
-------------- ------------- ------------- -----------
</TABLE>
PRO FORMA ADJUSTMENTS TO STATEMENTS OF OPERATIONS:
(1) Interest expense on $5,700,000 of additional bank debt and $1,800,000 of
subordinated debt.
(2) Tax effect of Gendex Medical pretax income net of pro forma interest
adjustment.
(3) Weighted average shares outstanding adjusted for 3% semi-annual stock
dividend paid in December 1995.
(4) To reflect reduced interest expense and related tax effect as the result of
the assumed repayment of debt at the beginning of the respective periods
presented.
(5) To reflect the additional 2,000,000 shares of Common Stock to be issued upon
completion of this offering.
F-31
<PAGE>
------------------------------------------------------
------------------------------------------------------
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 IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH THIS PROSPECTUS RELATES, OR AN
OFFER IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED,
OR IN 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.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 6
Use of Proceeds................................. 9
Price Range of Common Stock..................... 10
Dividend Policy................................. 10
Capitalization.................................. 11
Selected Consolidated Financial Data............ 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 13
Business........................................ 18
Management...................................... 30
Principal Stockholders.......................... 32
Description of Capital Stock.................... 33
Underwriting.................................... 34
Legal Matters................................... 35
Experts......................................... 35
Available Information........................... 35
Incorporation of Certain Documents by
Reference..................................... 35
Index to Financial Statements................... F-1
</TABLE>
2,000,000 Shares
[LOGO]
Common Stock
------------------------
PROSPECTUS
------------------------
Needham & Company, Inc.
Tucker Anthony
Incorporated
------------------------
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the Common Stock being registered. All items are estimated
except the registration, listing and filing fees.
<TABLE>
<S> <C>
Registration fee--Securities and Exchange Commission.......... $ 6,694
AMEX and Nasdaq listing fees.................................. 44,344
NASD filing fee............................................... 2,442
Blue Sky fees and expenses (including counsel fees)........... 17,500
Printing expenses............................................. 60,000
Legal fees and expenses....................................... 250,000
Accounting fees and expenses.................................. 50,000
Transfer agent fees........................................... 10,000
Miscellaneous................................................. 9,020
--------
Total.................................................... $450,000
--------
--------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 722 of the New York Business Corporation Law ('NYBCL') permits, in
general, a New York corporation to indemnify any person made, or threatened to
be made, a party to an action or proceeding other than one by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that he
or she was a director or officer of the corporation, or served another entity in
any capacity at the request of the corporation, against any judgments, fines,
amounts paid in settlement and reasonable expenses, including attorney's fees
actually and necessarily incurred as a result of such action or proceeding, or
any appeal therein, if such person acted in good faith, for a purpose he or she
reasonably believed to be in, or in the case of service for another entity, not
opposed to, the best interests of the corporation and, in criminal actions or
proceedings, in addition had no reasonable cause to believe that his or her
conduct was unlawful. Section 723 of the NYBCL permits the corporation to pay in
advance of a final disposition of such action or proceeding the expenses
incurred in defending such action or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount as, and to the
extent, required by statute. Section 721 of the NYBCL provides that
indemnification and advancement of expense provisions contained in the NYBCL
shall not be deemed exclusive of any rights to which a director or officer
seeking indemnification or advancement of expenses may be entitled provided no
indemnification may be made on behalf of any director or officer if a judgment
or other final adjudication adverse to the director or officer establishes that
his or her acts were committed in bad faith or were the result of active or
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
(a) EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT FOOTNOTES
- ---------- -------------------------------------------------------------------------------------------- ---------
<S> <C> <C> <C>
*1.1 -- Form of Underwriting Agreement
*4.1 -- Article Twelfth subparagraph(b) and Article Eleventh subparagraph(h) of the
Certificate of Incorporation, as amended
*4.2 -- Article V of the By-Laws
*5.1 -- Opinion of Tashlik, Kreutzer & Goldwyn P.C.
10.1 -- Warrant Certificate of ARX, Inc. (1)
10.2 -- Stock Purchase Warrant of Laidlaw Equities, Inc. (2)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
(a) EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT FOOTNOTES
- ---------- -------------------------------------------------------------------------------------------- ---------
<S> <C> <C> <C>
10.3 -- Warrant Agreement between Del Electronics Corp. and Chase Manhattan Investment (3)
Holdings, Inc., dated January 27, 1995
10.4 -- Amendment to Warrant Agreement between Del Electronics Corp. and Chase Manhattan (4)
Investment Holdings, Inc., dated January 27, 1995
10.5 -- Warrant Agreement and Warrant Certificate of Chase Manhattan Bank (5)
*10.6 -- Warrant Certificate of Stanley Wunderlich
10.7 -- Warrant Certificate of Shail B. Sheth (6)
10.8 -- Warrant Certificate of J. Shaine Gross (7)
10.9 -- Copy of Del Global Technologies Corp. Amended and Restated Stock Option Plan (the (8)
'Plan')
10.10 -- Stock Purchase Plan (9)
10.11 -- Option Agreement, substantially in the form used in connection with options granted (10)
under the Plan
10.12 -- Amended and Restated Executive Employment Agreement of Leonard A. Trugman (11)
10.13 -- Amendment No. 1 to Amended and Restated Employment Agreement of Leonard A. Trugman (12)
10.14 -- Amendment No. 2 to Amended and Restated Employment Agreement of Leonard A. Trugman (13)
10.15 -- Employment Agreement of Howard Bertan (14)
*10.16 -- Employment Agreement of George Solomon
10.17 -- Amended and Restated Credit Agreement, dated March 5, 1996, among Del Global (15)
Technologies Corp., RFI Corporation, Dynarad Corp., Bertan High Voltage Corp., Del
Medical Systems Corp. and The Chase Manhattan Bank, N.A.
10.18 -- Lease Agreement, dated April 7, 1992, between Messenger Realty and the Company (16)
10.19 -- Lease, made as of September 1, 1992, between Arleigh Construction and Del Acquisition (17)
Corp.
10.20 -- Lease and Guaranty of Lease, dated May 25, 1994, between Leshow Enterprises and Bertan (18)
High Voltage Corp.
10.21 -- Lease, dated January 4, 1993, between Curto Reynolds Oelerich Inc. and Gendex (19)
Corporation
10.22 -- Consulting Agreement by and between Del Acquisition Corp. and Harvey Schechter (20)
10.23 -- Consulting Agreement by and between Del Acquisition Corp. and Mark Weiss (21)
*10.24 -- Consulting Agreement by and between Del Electronics Corp. and Stanley Wunderlich
*10.25 -- Waiver and Modification of The Chase Manhattan Bank, N.A. and Del Global Technologies
Corp.
11.1 -- Computation of Earnings per Common Share and Common Share Equivalents for year ended (22)
July 29, 1995
11.2 -- Computation of Earnings per Common Share and Common Share Equivalents for six months (23)
ended February 3, 1996
*23.1 -- Consent of Deloitte & Touche LLP
*23.2 -- Consent of KPMG Peat Marwick LLP
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
(a) EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT FOOTNOTES
- ---------- -------------------------------------------------------------------------------------------- ---------
<S> <C> <C> <C>
23.3 -- Consent of Tashlik, Kreutzer & Goldwyn P.C. (contained in the opinion filed as Exhibit
5.1 hereto)
*24.1 -- Power of Attorney
27.1 -- Financial Data Schedule
</TABLE>
- ------------
* Filed herewith
(1) Filed as Exhibits 4.2, 4.5 and 4.6 to Del Electronics Corp. Annual Report
on Form 10-K filed November 6, 1991 and incorporated herein by reference.
(2) Filed as Exhibit 4.2 to Del Electronics Corp. Pre-Effective Amendment No. 1
to Registration Statement on Form S-2 (No. 33-40314) and incorporated
herein by reference.
(3) Filed as Exhibit 4.5 to Del Electronics Corp. Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(4) Filed as Exhibit 4.6 to Del Electronics Corp. Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(5) Filed as Exhibit 4.1 to Del Global Technologies Corp. Current Report on
Form 8-K filed March 21, 1996 and incorporated herein by reference.
(6) Filed as Exhibit 4.10 to Del Electronics Corp. Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(7) Filed as Exhibit 4.12 to Del Electronics Corp. Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(8) Filed as Exhibit A to Del Electronics Corp. Proxy Statement dated January
26, 1994 and incorporated herein by reference.
(9) Filed as Exhibit 4.9 to Del Electronics Corp. Annual Report on Form 10-K
for the year ended July 29, 1989 and incorporated herein by reference.
(10) Filed as Exhibit 4.8 to Del Electronics Corp. Annual Report on Form 10-K
for the year ended July 30, 1994 and incorporated herein by reference.
(11) Filed as Exhibit 10.1 to Del Electronics Corp. Annual Report on From 10-K
for the year ended July 31, 1993 and incorporated herein by reference.
(12) Filed as Exhibit 10.2 to Del Electronics Corp. Annual Report on Form 10-K
for the year ended July 30, 1994 and incorporated herein by reference.
(13) Filed as Exhibit 10.3 to Del Electronics Corp. Annual Report on Form 10-K
for the year ended July 30, 1994 and incorporated herein by reference.
(14) Filed as Exhibit 2.2 to Del Electronics Corp. Current Report on Form 8-K
dated June 10, 1994 and incorporated herein by reference.
(15) Filed as Exhibit 2.6 to Del Global Technologies Corp. Current Report on
Form 8-K dated March 21, 1996 and incorporated herein by reference.
(16) Filed as Exhibit 6(a) to Del Electronics Corp. Quarterly Report on Form
10-Q for the quarter ended May 2, 1992 and incorporated herein by
reference.
(17) Filed as Exhibit 28.6 to Del Electronics Corp. Current Report on Form 8-K,
dated November 9, 1992, and incorporated herein by reference.
(18) Filed as Exhibit 2.5 to Del Electronics Corp. Current Report on Form 8-K,
dated June 10, 1994, and incorporated herein by reference.
II-3
<PAGE>
(19) Filed as Exhibit 2.4 to Del Global Technologies Corp. Current Report on
Form 8-K, dated March 21, 1996, and incorporated herein by reference.
(20) Filed as Exhibit 28.4 to Del Electronics Corp. Current Report on Form 8-K,
dated November 9, 1992, and incorporated herein by reference.
(21) Filed as Exhibit 28.5 to Del Electronics Corp. Current Report on Form 8-K,
dated November 9, 1992, and incorporated herein by reference.
(22) Filed as Exhibit 11 to Del Global Technologies Corp. Annual Report on Form
10-K for the fiscal year ended July 25, 1995 and incorporated herein by
reference.
(23) Filed as Exhibit 11 to Del Global Technologies Corp. Quarterly Report on
Form 10-Q for the quarter ended February 3, 1996 and incorporated herein by
reference.
ITEM 17. UNDERTAKINGS.
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 for 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.
(a) The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this registration statement as of the time it was declared
effective;
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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;
(3) 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 therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(4) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation
S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
<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 of filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Mt. Pleasant, State of New York, on the 30th day of
April, 1996.
DEL GLOBAL TECHNOLOGIES CORP.
By: /s/ LEONARD A. TRUGMAN
----------------------------------
Leonard A. Trugman
Chairman, Chief Executive Officer
and President
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
/s/ LEONARD A. TRUGMAN Chairman of the Board, Chief Executive April 30, 1996
- ------------------------------------------ Officer and President
Leonard A. Trugman
/s/ DAVID ENGEL Executive Vice President and April 30, 1996
- ------------------------------------------ Chief Financial Officer
David Engel
/s/ MICHAEL H. TABER Vice President--Finance, Secretary and April 30, 1996
- ------------------------------------------ Chief Accounting Officer
Michael H. Taber
/s/ NATAN BERTMAN Director April 30, 1996
- ------------------------------------------
Natan Bertman
/s/ DAVID MICHAEL Director April 30, 1996
- ------------------------------------------
David Michael
/s/ JAMES M. TIERNAN Director April 30, 1996
- ------------------------------------------
James M. Tiernan
/s/ SEYMOUR RUBIN Director April 30, 1996
- ------------------------------------------
Seymour Rubin
</TABLE>
II-5
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM S-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
DEL GLOBAL TECHNOLOGIES CORP.
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Number
- --------------- -------------
<S> <C>
*1.1 Form of Underwriting Agreement
*4.1 Article Eleventh subparagraph (h) and Article Twelfth
subparagraph (b) of the Certificate of Incorporation, as
amended
*4.2 Article V of the By-Laws
*5.1 Opinion of Tashlik, Kreutzer & Goldwyn P.C.
10.1 Warrant Certificate of ARX, Inc.
10.2 Stock Purchase Warrant of Laidlaw Equities, Inc.
10.3 Warrant Agreement between Del Electronics Corp. and
Chase Manhattan Investment Holdings, Inc., dated
January 27, 1995
10.4 Amendment to Warrant Agreement between Del
Electronics Corp. and Chase Manhattan Investment
Holdings, Inc., dated January 27, 1995
10.5 Warrant Agreement and Warrant Certificate of Chase
Manhattan Bank
*10.6 Warrant Certificate of Stanley Wunderlich
10.7 Warrant Certificate of Shail B. Sheth
10.8 Warrant Certificate of J. Shaine Gross
10.9 Copy of Del Global Technologies Corp. Amended and
Restated Stock Option Plan (the "Plan")
10.10 Stock Purchase Plan
10.11 Option Agreement, substantially in the form used in
connection with options granted under the Plan
10.12 Amended and Restated Executive Employment Agreement
of Leonard A. Trugman
10.13 Amendment No. 1 to Amended and Restated Employment
Agreement of Leonard A. Trugman
10.14 Amendment No. 2 to Amended and Restated Employment
Agreement of Leonard A. Trugman
10.15 Employment Agreement of Howard Bertan
*10.16 Employment Agreement of George Solomon
10.17 Amended and Restated Credit Agreement, dated March 5,
1996, among Del Global Technologies Corp., RFI
Corporation, Dynarad Corp., Bertan High Voltage Corp.,
Del Medical Systems Corp. and The Chase Manhattan
Bank, N.A.
10.18 Lease Agreement, dated April 7, 1992, between Messenger
Realty and the Company
10.19 Lease, made as of September 1, 1992, between Arleigh
Construction and Del Acquisition Corp.
10.20 Lease and Guaranty of Lease, dated May 25, 1994,
between Leshow Enterprises and Bertan High Voltage
Corp.
10.21 Lease, dated January 4, 1993, between Curto Reynolds
Oelerich Inc. and Gendex Corporation
10.22 Consulting Agreement by and between Del Acquisition
Corp. and Harvey Schechter
10.23 Consulting Agreement by and between Del Acquisition
Corp. and Mark Weiss
*10.24 Consulting Agreement by and between Del Electronics
Corp. and Stanley Wunderlich
*10.25 Waiver and Modification between The Chase Manhattan Bank,
N.A. and Del Global Technologies Corp.
11.1 Computation of Earnings per Common Share and
Common Share Equivalents for year ended July 29, 1995
11.2 Computation of Earnings per Common Share and Common
Share Equivalents for six months ended February 3, 1996
*23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Tashlik, Kreutzer & Goldwyn P.C. (contained in
the opinion filed as Exhibit 5.1 hereto)
*24.1 Power of Attorney
*27.1 Financial Data Schedule
- --------------------
* Filed herewith
</TABLE>
EXHIBIT 1.1
Draft: 4/29/96
2,000,000 Shares*
DEL GLOBAL TECHNOLOGIES CORP.
Common Stock
UNDERWRITING AGREEMENT
, 1996
Needham & Company, Inc.
Tucker Anthony Incorporated
As Representatives of the several Underwriters
c/o Needham & Company, Inc.
445 Park Avenue
New York, New York 10022
Ladies and Gentlemen:
Del Global Technologies Corp., a New York corporation (the "Company"),
proposes to issue and sell 2,000,000 shares (the "Firm Shares") of the
Company's Common Stock, $.10 par value per share (the "Common Stock"), to you
and to the several other Underwriters named in Schedule I hereto (collectively,
the "Underwriters"), for whom you are acting as representatives (the
"Representatives"). The Company has also agreed to grant to you and the other
Underwriters an option (the "Option") to purchase up to an additional 300,000
shares of Common Stock, on the terms and for the purposes set forth in Section
l(b) (the "Option Shares"). The Firm Shares and the Option Shares are referred
to collectively herein as the "Shares."
The Company confirms as follows with the Representatives and the
several other Underwriters.
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions of this Agreement, (i) the Company agrees to issue and sell the Firm
Shares to the several Underwriters and (ii) each of the Underwriters, severally
and not jointly, agrees to purchase from the Company the respective number of
Firm Shares set forth opposite
- --------
* Plus an option to purchase up to an additional 300,000
shares to cover over-allotments.
2
that Underwriter's name in Schedule I hereto, at the purchase price of
$___________ for each Firm Share.
(b) Subject to all the terms and conditions of this Agreement,
the Company grants the Option to the several Underwriters to purchase,
severally and not jointly, up to 300,000 Option Shares at the same price per
share as the Underwriters shall pay for the Firm Shares. The Option may be
exercised only to cover overallotments in the sale of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time (but not more
than once) on or before the 30th day after the date of this Agreement upon
written or telegraphic notice (the "Option Shares Notice") by the
Representatives to the Company no later than 12:00 noon, New York City time, at
least two and no more than five business days before the date specified for
closing in the Option Shares Notice (the "Option Closing Date"), setting forth
the aggregate number of Option Shares to be purchased and the time and date for
such purchase. On the Option Closing Date, the Company will issue and sell to
the Underwriters the number of Option Shares set forth in the Option Shares
Notice, and each Underwriter will purchase such percentage of the Option Shares
as is equal to the percentage of Firm Shares that such Underwriter is
purchasing, as adjusted by the Representatives in such manner as they deem
advisable to avoid fractional shares.
2. Delivery and Payment. Delivery of the Firm Shares shall be
made to the Representatives for the accounts of the Underwriters against
payment of the purchase price by certified or official bank checks payable in
New York Clearing House (next-day) funds to the order of the Company at the
office of Needham & Company, Inc., 445 Park Avenue, New York, New York 10022,
at 10:00 a.m., New York City time, on the third (or, if the purchase price set
forth in Section l(a) hereof is determined after 4:30 p.m., New York City time,
the fourth) business day following the commencement of the offering
contemplated by this Agreement, or at such time on such other date, not later
than seven business days after the date of this Agreement, as may be agreed
upon by the Company and the Representatives (such date is hereinafter referred
to as the "Closing Date").
To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above) will take
place at the offices specified above for the Closing Date at the time and date
(which may be the Closing Date) specified in the Option Shares Notice.
Certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the
Representatives shall request at least two business days prior to the Closing
Date or the Option Closing Date, as the case may be, by written notice to the
Company. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection at least 24 hours prior to the Closing Date or the
Option Closing Date, as the case may be.
3
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Firm Shares and Option Shares by the Company to
the respective Underwriters shall be borne by the Company. The Company will pay
and save each Underwriter and any subsequent holder of the Shares harmless from
any and all liabilities with respect to or resulting from any failure or delay
in paying Federal and state stamp and other transfer taxes, if any, which may
be payable or determined to be payable in connection with the original issuance
or sale to such Underwriter of the Shares.
3. Representations and Warranties of the Company. The Company
represents, warrants and covenants to each Underwriter that:
(a) The Company meets the requirements for use of Form S-2 and a
registration statement (Registration No. 33-_______) on Form S-2, relating to
the Shares, including a preliminary prospectus and such amendments to such
registration statement as may have been required to the date of this Agreement,
has been prepared by the Company under the provisions of the Securities Act of
1933, as amended (the "Act"), and the rules and regulations (collectively
referred to as the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, and has been filed with the
Commission. The term "preliminary prospectus" as used herein means a
preliminary prospectus, including the documents incorporated by reference
therein, as contemplated by Rule 430 or Rule 430A of the Rules and Regulations
included at any time as part of the registration statement. Copies of such
registration statement and amendments and of each related preliminary
prospectus have been delivered to the Representatives. If such registration
statement has not become effective, a further amendment to such registration
statement, including a form of final prospectus, necessary to permit such
registration statement to become effective will be filed promptly by the
Company with the Commission. If such registration statement has become
effective, a final prospectus containing information permitted to be omitted at
the time of effectiveness by Rule 430A of the Rules and Regulations will be
filed promptly by the Company with the Commission in accordance with Rule
424(b) of the Rules and Regulations. The term "Registration Statement" means
the registration statement as amended at the time it becomes or became
effective (the "Effective Date"), including all documents incorporated by
reference therein, financial statements and all exhibits and any information
deemed to be included by Rule 430A and includes any registration statement
relating to the offering contemplated by this Agreement and filed pursuant to
Rule 462(b) of the Rules and Regulations. The term "Prospectus" means the
prospectus, including the documents incorporated by reference therein, as first
filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations
or, if no such filing is required, the form of final prospectus, including the
documents incorporated by reference therein, included in the Registration
Statement at the Effective Date. Any reference herein to the terms "amend,"
"amendment" or "supplement" with respect to the Registration Statement, any
preliminary prospectus or the Prospectus shall be deemed
4
to refer to and include the filing of any document under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after the Effective
Date, the date of any preliminary prospectus or the date of the Prospectus, as
the case may be, and deemed to be incorporated therein by reference.
(b) No order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission. On the Effective Date, the date
the Prospectus is first filed with the Commission pursuant to Rule 424(b) (if
required), at all times subsequent to the Effective Date to and including the
Closing Date and, if later, the Option Closing Date and when any post-effective
amendment to the Registration Statement becomes effective or any amendment or
supplement to the Prospectus is filed with the Commission, the Registration
Statement and the Prospectus (as amended or as supplemented if the Company
shall have filed with the Commission any amendment or supplement thereto),
including the financial statements included in the Prospectus, did and will
comply with all applicable provisions of the Act, the Exchange Act, the rules
and regulations under the Exchange Act (the "Exchange Act Rules and
Regulations"), and the Rules and Regulations and did and will contain all
statements required to be stated therein in accordance with the Act, the
Exchange Act, the Exchange Act Rules and Regulations, and the Rules and
Regulations. On the Effective Date and when any post-effective amendment to the
Registration Statement becomes effective, no part of the Registration
Statement, the Prospectus or any such amendment or supplement did or will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. On the Effective Date, the date the Prospectus or any
amendment or supplement to the Prospectus is filed with the Commission and the
Closing Date and, if later, the Option Closing Date, the Prospectus did not and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
representations and warranties in this Section 3(b) do not apply to any
statements or omissions made in reliance on and in conformity with information
relating to any Underwriter furnished in writing to the Company by the
Representatives specifically for inclusion in the Registration Statement or
Prospectus or any amendment or supplement thereto. The Company acknowledges
that the statements set forth under the heading "Underwriting" in the
Prospectus constitute the only information relating to any Underwriter
furnished in writing to the Company by the Representatives specifically for
inclusion in the Registration Statement.
(c) The documents that are incorporated by reference in the
preliminary prospectus and the Prospectus or from which information is so
incorporated by reference, when they became or become effective or were or are
filed with the Commission, as the case may be, complied or will comply in all
material respects with the requirements of the Act or the Exchange Act, as
applicable, and the Rules and Regulations or the Exchange Act Rules and
Regulations, as applicable; and any
5
documents so filed and incorporated by reference subsequent to the Effective
Date shall, when they are filed with the Commission, comply in all material
respects with the requirements of the Act or the Exchange Act, as applicable,
and the Rules and Regulations or the Exchange Act Rules and Regulations, as
applicable.
(d) Except as described in the Prospectus, the Company does not
own, and at the Closing Date and, if later, the Option Closing Date, will not
own, directly or indirectly, any shares of stock or any other equity or
long-term debt securities of any corporation or have any equity interest in any
corporation, firm, partnership, joint venture, association or other entity,
other than the subsidiaries listed in Exhibit 21 to the Registration Statement
(the "Subsidiaries"). The Company and each of its Subsidiaries is, and at the
Closing Date and, if later, the Option Closing Date, will be, a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company and each of its Subsidiaries has,
and at the Closing Date and, if later, the Option Closing Date, will have, full
power and authority to conduct all the activities conducted by it, to own or
lease all the assets owned or leased by it and to conduct its business as
described in the Registration Statement and the Prospectus. The Company and
each of its Subsidiaries is, and at the Closing Date and, if later, the Option
Closing Date, will be, duly licensed or qualified to do business and in good
standing as a foreign corporation in all jurisdictions in which the nature of
the activities conducted by it or the character of the assets owned or leased
by it makes such license or qualification necessary, except to the extent that
the failure to be so licensed or qualified or be in good standing could not
materially and adversely affect the Company, any of its Subsidiaries or the
business, properties, condition (financial or otherwise) or results of
operations of the Company or any of its Subsidiaries. All of the outstanding
shares of capital stock of each Subsidiary have been duly authorized and
validly issued, and are fully paid and nonassessable and owned by the Company
free and clear of all claims, liens, charges and encumbrances; there are no
securities outstanding that are convertible into or exercisable or exchangeable
for capital stock of any Subsidiary. The Company is not, and at the Closing
Date and, if later, the Option Closing Date, will not be, engaged in any
discussions or a party to any agreement or understanding, written or oral,
regarding the acquisition of assets or an interest in any corporation, firm,
partnership, joint venture, association or other entity where such discussions,
agreements or understandings would require amendment to the Registration
Statement pursuant to applicable securities laws. Complete and correct copies
of the certificate or articles of incorporation and of the by-laws of the
Company and each of its Subsidiaries and all amendments thereto have been
delivered to the Representatives, and no changes therein will be made
subsequent to the date hereof and prior to the Closing Date or, if later, the
Option Closing Date.
(e) All of the outstanding shares of capital stock of the Company
have been duly authorized, validly issued and are fully paid and nonassessable
and were issued in compliance with all applicable state and Federal securities
laws; the Shares have
6
been duly authorized and when issued and paid for as contemplated herein will
be validly issued, fully paid and nonassessable; no preemptive or similar
rights exist with respect to any of the Shares or the issue and sale thereof.
The description of the capital stock of the Company in the Registration
Statement and the Prospectus is, and at the Closing Date and, if later, the
Option Closing Date, will be, complete and accurate in all respects. Except as
set forth in the Prospectus, the Company does not have outstanding, and at the
Closing Date and, if later, the Option Closing Date, will not have outstanding,
any options to purchase, or any rights or warrants to subscribe for, or any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, any shares of capital stock, or any such warrants, convertible
securities or obligations. No further approval or authority of stockholders or
the Board of Directors of the Company will be required for the issuance and
sale of the Shares as contemplated herein.
(f) The financial statements and schedules included or
incorporated by reference in the Registration Statement or the Prospectus
present fairly the financial condition of the Company and its consolidated
Subsidiaries as of the respective dates thereof and the results of operations
and cash flows of the Company and its consolidated Subsidiaries for the
respective periods covered thereby, all in conformity with generally accepted
accounting principles applied on a consistent basis throughout the entire
period involved except as otherwise disclosed in the Prospectus. No other
financial statements or schedules of the Company are required by the Act, the
Exchange Act, the Exchange Act Rules and Regulations or the Rules and
Regulations to be included in the Registration Statement or the Prospectus.
Deloitte & Touche LLP (the "Accountants"), who have reported on such financial
statements (other than the financial statements of the Gendex Medical Division
of Dentsply International Inc. included in the Registration Statement and the
Prospectus (the "Gendex Financial Statements")) and on such schedules, and KPMG
Peat Marwick LLP (the "Gendex Accountants"), who have reported on the Gendex
Financial Statements, are independent accountants with respect to the Company
as required by the Act and the Rules and Regulations. The summary consolidated
financial and statistical data included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with the financial
statements presented therein.
(g) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the Closing
Date and, if later, the Option Closing Date, except as set forth in or
contemplated by the Registration Statement and the Prospectus, (i) there has
not been and will not have been any change in the capitalization of the Company
(other than in connection with the exercise of options to purchase the
Company's Common Stock granted pursuant to the Company's stock option plan from
the shares reserved therefor or upon the exercise of warrants, in each case as
described in the Registration Statement and the Prospectus), or any material
adverse change in the business, properties, condition
7
(financial or otherwise) or results of operations of the Company or any of its
Subsidiaries, arising for any reason whatsoever, (ii) neither the Company nor
any of its Subsidiaries has incurred nor will any of them incur, except in the
ordinary course of business as described in the Prospectus, any material
liabilities or obligations, direct or contingent, nor has the Company or any of
its Subsidiaries entered into nor will any of them enter into, except in the
ordinary course of business as described in the Prospectus, any material
transactions other than pursuant to this Agreement and the transactions
contemplated hereby and (iii) the Company has not and will not have paid or
declared any dividends or other distributions of any kind on any class of its
capital stock.
(h) The Company is not, will not become as a result of the
transactions contemplated hereby, and does not intend to conduct its business
in a manner that would cause it to become, an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act
of 1940, as amended.
(i) Except as set forth in the Registration Statement and the
Prospectus, there are no actions, suits or proceedings pending or, to the best
knowledge of the Company, threatened against or affecting the Company, any of
its Subsidiaries or any of its or their officers in their capacity as such, nor
any basis therefor, before or by any Federal or state court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, wherein an unfavorable ruling, decision or finding could materially
and adversely affect the Company, any of its Subsidiaries or the business,
properties, condition (financial or otherwise) or results of operations of the
Company or any of its Subsidiaries.
(j) The Company and each of its Subsidiaries has, and at the
Closing Date and, if later, the Option Closing Date, will have, performed all
the obligations required to be performed by it, and is not, and at the Closing
Date, and, if later, the Option Closing Date, will not be, in default, under
any contract or other instrument to which it is a party or by which its
property is bound or affected, which default could materially and adversely
affect the Company, any of its Subsidiaries or the business, properties,
condition (financial or otherwise) or results of operations of the Company or
any of its Subsidiaries. To the best knowledge of the Company, no other party
under any contract or other instrument to which it or any of its Subsidiaries
is a party is in default in any respect thereunder, which default could
materially and adversely affect the Company, any of its Subsidiaries or the
business, properties, condition (financial or otherwise) or results of
operations of the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries is, and at the Closing Date or, if later, the Option
Closing Date, will be, in violation of any provision of its certificate or
articles of incorporation, by-laws or other organizational documents.
8
(k) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is
required for the consummation by the Company of the transactions on its part
contemplated herein, except such as have been obtained under the Act or the
Rules and Regulations and such as may be required under state securities or
Blue Sky laws or the by-laws and rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the purchase and
distribution by the Underwriters of the Shares.
(l) The Company has full corporate power and authority to enter
into this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with the terms hereof.
The performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company pursuant to the
terms or provisions of, or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or give any party a right to
terminate any of its obligations under, or result in the acceleration of any
obligation under, the certificate or articles of incorporation or by-laws of
the Company or any of its Subsidiaries, any indenture, mortgage, deed of trust,
voting trust agreement, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, lease, contract or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company, any of its Subsidiaries or any of its or their properties is
bound or affected, or violate or conflict with any judgment, ruling, decree,
order, statute, rule or regulation of any court or other governmental agency or
body applicable to the business or properties of the Company or any of its
Subsidiaries.
(m) The Company or one of its Subsidiaries has good and
marketable title to all properties and assets described in the Prospectus as
owned by them, free and clear of all liens, charges, encumbrances or
restrictions, except such as are described in the Prospectus or are not
material to the business of the Company or any of its Subsidiaries. The Company
or one of its Subsidiaries has valid, subsisting and enforceable leases for the
properties described in the Prospectus as leased by them. The Company or one of
its Subsidiaries owns or leases all such properties as are necessary to its
operations as now conducted or as proposed to be conducted, except where the
failure to so own or lease could not materially and adversely affect the
Company, any of its Subsidiaries or the business, properties, condition
(financial or otherwise) or results of operations of the Company or any of its
Subsidiaries.
(n) There is no document or contract of a character required to
be described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required. All such contracts to which the Company or any of its Subsidiaries is
a party have been duly authorized, executed and delivered by the Company or
such Subsidiary, constitute
9
valid and binding agreements of the Company or such Subsidiary and are
enforceable against and by the Company or such Subsidiary in accordance with
the terms thereof.
(o) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
Sections 4 or 5 of this Agreement to be delivered to the Representatives was or
will be, when made, inaccurate, untrue or incorrect.
(p) Neither the Company nor any of its directors, officers or
controlling persons has taken, directly or indirectly, any action designed, or
which might reasonably be expected, to cause or result, under the Exchange Act
or otherwise, in, or which has constituted, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of
any of the Shares.
(q) No holder of securities of the Company has rights to the
registration of any securities of the Company in connection with the filing of
the Registration Statement, except for rights which have been effectively
waived by the holder thereof as of the date hereof.
(r) The Company has filed a registration statement pursuant to
Section 12(g) of the Exchange Act to register the Common Stock, has filed an
application to list the Shares and all of its currently outstanding shares of
Common Stock on the Nasdaq National Market (the "NNM"), and has received
notification that the listing has been approved, subject to notice of
completion of the offering of the Shares by the Underwriters. The Company has
filed an application to withdraw its Common Stock from listing on the American
Stock Exchange, Inc. (the "Amex"), has complied with the Exchange Act and the
Exchange Act Rules and Regulations for such withdrawal and has received
notification that such withdrawal has been approved, subject to notice of
completion of the offering of the Shares by the Underwriters.
(s) Except as disclosed in or specifically contemplated by the
Prospectus (i) the Company and its Subsidiaries have sufficient trademarks,
trade names, patent rights, copyrights, licenses, approvals and governmental
authorizations to conduct their businesses as now conducted, (ii) the Company
has no knowledge of any infringement by it or any of its Subsidiaries of
trademarks, trade name rights, patent rights, copyrights, licenses, trade
secrets or other similar rights of others, where such infringement could have a
material and adverse effect on the Company, any of its Subsidiaries or the
business, properties, condition (financial or otherwise) or results of
operations of the Company or any of its Subsidiaries, and (iii) there is no
claim being made against the Company or any of its Subsidiaries or, to the best
knowledge of the Company, any employee of the Company or any of its
Subsidiaries, regarding trademark, trade name, patent, copyright, license,
trade secret or other infringement which could have a material and adverse
effect on the Company, any of its
10
Subsidiaries or the business, properties, condition (financial or otherwise) or
results of operations of the Company or any of its Subsidiaries.
(t) The Company and each of its Subsidiaries has filed all
Federal, state, local and foreign income tax returns which have been required
to be filed and has paid all taxes and assessments received by it to the extent
that such taxes or assessments have become due. Neither the Company nor any of
its Subsidiaries has any tax deficiency which has been or, to the best
knowledge of the Company, might be asserted or threatened against it which
could have a material and adverse effect on the Company, any of its
Subsidiaries or the business, properties, condition (financial or otherwise) or
results of operations of the Company or any of its Subsidiaries.
(u) The pro forma financial information set forth in the
Registration Statement reflects, subject to the limitations set forth in the
Registration Statement as to such pro forma financial information, the results
of operations of the Company and its consolidated Subsidiaries purported to be
shown thereby for the periods indicated and conforms to the requirements of
Regulation S-X of the Rules and Regulations, and management of the Company
believes that (i) the assumptions underlying the pro forma adjustments are
reasonable, (ii) such adjustments have been properly applied to the historical
amounts in the compilation of such information, and (iii) such information
presents fairly, with respect to the Company and its consolidated Subsidiaries,
the pro forma financial position and results of operations and the other
information purported to be shown therein at the respective dates or for the
respective periods therein specified.
(v) The Company and each of its Subsidiaries owns or possesses
all authorizations, approvals, orders, licenses, registrations, other
certificates and permits of and from all governmental regulatory officials and
bodies, necessary to conduct their respective businesses as contemplated in the
Prospectus, except where the failure to own or possess all such authorizations,
approvals, orders, licenses, registrations, other certificates and permits
could not materially and adversely affect the Company, any of its Subsidiaries
or the business, properties, condition (financial or otherwise) or results of
operations of the Company or any of its Subsidiaries. There is no proceeding
pending or threatened (or any basis therefor known to the Company) which may
cause any such authorization, approval, order, license, registration,
certificate or permit to be revoked, withdrawn, cancelled, suspended or not
renewed; and the Company and each of its Subsidiaries is conducting its
business in compliance with all laws, rules and regulations applicable thereto
(including, without limitation, all applicable Federal, state and local
environmental laws and regulations) except where such noncompliance could not
materially and adversely affect the Company, any of its Subsidiaries or the
business, properties, condition (financial or otherwise) or results of
operations of the Company or any of its Subsidiaries.
11
(w) The Company and each of its Subsidiaries maintains insurance
of the types and in the amounts generally deemed adequate for its business,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company and each of its Subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect.
(x) Neither the Company nor any of its Subsidiaries nor, to the
best knowledge of the Company, any of its or their respective employees or
agents at any time during the last five years has (i) made any unlawful
contribution to any candidate for foreign office, or failed to disclose fully
any contribution in violation of law, or (ii) made any payment to any Federal,
state, local or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
4. Agreements of the Company. The Company covenants and agrees
with the several Underwriters as follows:
(a) The Company will not, either prior to the Effective Date or
thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by an Underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representatives within a reasonable period of time prior to the filing thereof
and the Representatives shall not have objected thereto in good faith.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective, and will notify the Representatives
promptly, and will confirm such advice in writing, (i) when the Registration
Statement has become effective and when any post-effective amendment thereto
becomes effective, (ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose or the threat thereof, (iv) of the happening
of any event during the period mentioned in the second sentence of Section 4(e)
that in the judgment of the Company makes any statement made in the
Registration Statement or the Prospectus untrue or that requires the making of
any changes in the Registration Statement or the Prospectus in order to make
the statements therein, in the light of the circumstances in which they are
made, not misleading and (v) of receipt by the Company or any representative or
attorney of the Company of any other communication from the Commission relating
to the Company, the Registration Statement, any preliminary prospectus or the
Prospectus. If at any time the Commission shall issue any order suspending the
effectiveness of the
12
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible moment. If the Company
has omitted any information from the Registration Statement pursuant to Rule
430A of the Rules and Regulations, the Company will comply with the provisions
of and make all requisite filings with the Commission pursuant to said Rule
430A and notify the Representatives promptly of all such filings.
(c) The Company will furnish to each Representative, without
charge, one signed copy of each of the Registration Statement and of any
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto and will furnish to the Representatives, without
charge, for transmittal to each of the other Underwriters, a copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules but without exhibits.
(d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to time, the
Company will deliver to each of the Underwriters, without charge, as many
copies of the Prospectus or any amendment or supplement thereto as the
Representatives may reasonably request. The Company consents to the use of the
Prospectus or any amendment or supplement thereto by the several Underwriters
and by all dealers to whom the Shares may be sold, both in connection with the
offering or sale of the Shares and for any period of time thereafter during
which the Prospectus is required by law to be delivered in connection
therewith. If during such period of time any event shall occur which in the
judgment of the Company or counsel to the Underwriters should be set forth in
the Prospectus in order to make any statement therein, in the light of the
circumstances under which it was made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with law, the Company will
forthwith prepare and duly file with the Commission an appropriate supplement
or amendment thereto, and will deliver to each of the Underwriters, without
charge, such number of copies of such supplement or amendment to the Prospectus
as the Representatives may reasonably request. The Company will not file any
document under the Exchange Act or the Exchange Act Rules and Regulations
before the termination of the offering of the Shares by the Underwriters, if
such document would be deemed to be incorporated by reference into the
Prospectus, that is not approved by the Representatives after reasonable notice
thereof.
(f) Prior to any public offering of the Shares, the Company will
cooperate with the Representatives and counsel to the Underwriters in
connection with the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions as the
Representatives may request; provided, that in no event shall the Company be
obligated to qualify to do business in any
13
jurisdiction where it is not now so qualified or to take any action which would
subject it to general service of process in any jurisdiction where it is not
now so subject.
(g) The Company will, so long as required under the Rules and
Regulations, furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and statements
of income, stockholders' equity and cash flows of the Company and its
consolidated Subsidiaries, if any, certified by independent public accountants)
and, as soon as practicable after the end of each of the first three quarters
of each fiscal year (beginning with the fiscal quarter ending after the
Effective Date), consolidated summary financial information of the Company and
its Subsidiaries, if any, for such quarter in reasonable detail.
(h) During the period of five years commencing on the Effective
Date, the Company will furnish to the Representatives and each other
Underwriter who may so request copies of such financial statements and other
periodic and special reports as the Company may from time to time distribute
generally to the holders of any class of its capital stock, and will furnish to
the Representatives and each other Underwriter who may so request a copy of
each annual or other report it shall be required to file with the Commission.
(i) The Company will make generally available to holders of its
securities as soon as may be practicable but in no event later than the last
day of the fifteenth full calendar month following the calendar quarter in
which the Effective Date falls, an earnings statement (which need not be
audited but shall be in reasonable detail) covering a period of 12 months
commencing after the Effective Date, and satisfying the provisions of Section
11(a) of the Act and Rule 158 of the Rules and Regulations.
(j) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay
or reimburse if paid by the Representatives all costs and expenses incident to
the performance of the obligations of the Company under this Agreement and in
connection with the transactions contemplated hereby, including, but not
limited to, costs and expenses of or relating to (i) the preparation, printing
and filing of the Registration Statement and exhibits and schedules thereto,
each preliminary prospectus, the Prospectus and any amendment or supplement to
the Registration Statement or the Prospectus, (ii) the preparation and delivery
of certificates representing the Shares, (iii) the printing of this Agreement,
the Agreement Among Underwriters, any Selected Dealer Agreements, any
Underwriters' Questionnaires, any Underwriters' Powers of Attorney, and any
invitation letters to prospective Underwriters, (iv) furnishing (including
costs of shipping and mailing) such copies of the Registration Statement, the
Prospectus and any preliminary prospectus, and all amendments and supplements
thereto, as may be requested for use in connection with the offering and sale
of the Shares by the Underwriters or by dealers to whom Shares may be sold, (v)
the listing of the Shares and the currently outstanding shares of Common Stock
on the NNM,
14
(vi) the withdrawal of the Shares and the currently outstanding shares of
Common Stock from listing on the Amex, (vi) any filings required to be made by
the Underwriters with the NASD, and the fees, disbursements and other charges
of counsel for the Underwriters in connection therewith, (vii) the registration
or qualification of the Shares for offer and sale under the securities or Blue
Sky laws of such jurisdictions designated pursuant to Section 4(f), including
the fees, disbursements and other charges of counsel to the Underwriters in
connection therewith, and the preparation and printing of preliminary,
supplemental and final Blue Sky memoranda, (viii) fees, disbursements and other
charges of counsel to the Company (but not those of counsel for the
Underwriters, except as otherwise provided herein) and (ix) the transfer agent
for the Shares.
(k) If this Agreement shall be terminated by the Company pursuant
to any of the provisions hereof (otherwise than pursuant to Section 8 hereof)
or if for any reason the Company shall be unable to perform its obligations
hereunder, the Company will reimburse the several Underwriters for all
out-of-pocket expenses (including the fees, disbursements and other charges of
counsel to the Underwriters) reasonably incurred by them in connection
herewith.
(l) The Company will not at any time, directly or indirectly,
take any action designed, or which might reasonably be expected, to cause or
result, under the Exchange Act or otherwise, in, or which will constitute,
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of any of the Shares.
(m) The Company will apply the net proceeds from the offering and
sale of the Shares to be sold by the Company in the manner set forth in the
Prospectus under "Use of Proceeds."
(n) During the period beginning from the date hereof and
continuing to and including the date six months after the date of the
Prospectus, without the prior written consent of Needham & Company, Inc., the
Company will not offer, sell, contract to sell, grant options to purchase or
otherwise dispose of any of the Common Stock or other equity securities of the
Company or any other securities convertible into or exchangeable with its
Common Stock or other equity security (other than pursuant to employee stock
option plans or the conversion of convertible securities or the exercise of
warrants outstanding on the date of this Agreement and set forth in the
Registration Statement and the Prospectus).
(o) During the period beginning from the date hereof and
continuing to and including the date six months after the date of the
Prospectus, the Company will not, without the prior written consent of Needham
& Company, Inc., grant options to purchase shares of Common Stock at a price
less than the purchase price for the Firm Shares set forth in Section 1(a)
hereof.
15
(p) The Company will cause each of its officers and directors
designated by the Representatives to enter into lock-up agreements with the
Representatives to the effect that such officers and directors will not,
without the prior written consent of Needham & Company, Inc., sell, contract to
sell or otherwise dispose of any shares of Common Stock or rights to acquire
such shares, as more specifically set forth in Schedule II hereto.
5. Conditions of the Obligations of the Underwriters. The
obligations of each Underwriter hereunder are subject to the following
conditions:
(a) Notification that the Registration Statement has become
effective shall be received by the Representatives not later than 5:00 p.m.,
New York City time, on the date of this Agreement or at such later date and
time as shall be consented to in writing by the Representatives and all filings
required by Rule 424 and Rule 430A of the Rules and Regulations shall have been
made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the
Commission or such authorities and (iv) after the date hereof no amendment or
supplement to the Registration Statement or the Prospectus shall have been
filed unless a copy thereof was first submitted to the Representatives and the
Representatives do not object thereto in good faith, and the Representatives
shall have received certificates, dated the Closing Date and, if later, the
Option Closing Date and signed by the Chief Executive Officer and the Chief
Financial Officer of the Company (who may, as to proceedings threatened, rely
upon the best of their information and belief), to the effect of clauses (i),
(ii) and (iii) of this paragraph.
(c) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, (i) there shall not have been
a material adverse change in the general affairs, business, properties,
management, condition (financial or otherwise) or results of operations of the
Company or any of its Subsidiaries, whether or not arising from transactions in
the ordinary course of business, in each case other than as set forth in or
contemplated by the Registration Statement and the Prospectus, and (ii) the
Company shall not have sustained any material loss or interference with its
business or properties from fire, explosion, flood or other casualty, whether
or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree, which is not
16
set forth in the Registration Statement and the Prospectus, if in the judgment
of the Representatives any such development makes it impracticable or
inadvisable to consummate the sale and delivery of the Shares by the
Underwriters at the initial public offering price.
(d) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company, any of its
Subsidiaries, or any of its or their officers or directors in their capacities
as such, before or by any Federal, state, local or foreign court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, in which litigation or proceeding an unfavorable ruling, decision or
finding would, in the judgment of the Representatives, materially and adversely
affect the Company, any of its Subsidiaries or the business, properties,
condition (financial or otherwise) or results of operations of the Company or
any of its Subsidiaries.
(e) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date and, with respect to the Option Shares, at the Option Closing
Date, and all covenants and agreements contained herein to be performed on the
part of the Company and all conditions contained herein to be fulfilled or
complied with by the Company at or prior to the Closing Date and, with respect
to the Option Shares, at or prior to the Option Closing Date, shall have been
duly performed, fulfilled or complied with.
(f) The Representatives shall have received an opinion, dated the
Closing Date and, with respect to the Option Shares, the Option Closing Date,
satisfactory in form and substance to the Representatives and counsel for the
Underwriters, from counsel to the Company, with respect to the following
matters:
(i) The Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation; has full
corporate power and authority to conduct all the activities conducted
by it, to own or lease all the assets owned or leased by it and to
conduct its business as described in the Registration Statement and
the Prospectus; and is duly licensed or qualified to do business and
is in good standing as a foreign corporation in all jurisdictions in
which the nature of the activities conducted by it or the character of
the assets owned or leased by it makes such license or qualification
necessary and where the failure to be licensed or qualified could have
a material and adverse effect on the Company, any of its Subsidiaries
or the business, properties, condition (financial or otherwise) or
results of operations of the Company or any of its Subsidiaries.
(ii) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and nonassessable
17
and, to the best knowledge of such counsel, were issued in compliance
with, or pursuant to exemptions from, the registration and
qualification requirements of Federal and applicable state securities
laws, and were not issued in violation of or subject to any preemptive
or, to the best knowledge of such counsel, similar rights.
(iii) The certificates evidencing the Common Stock are in
due and proper form under New York law, the Shares have been duly
authorized and, when issued and paid for as contemplated by this
Agreement, will be validly issued, fully paid and nonassessable; and
no preemptive or similar rights exist with respect to any of the
Shares or the issue and sale thereof.
(iv) All of the outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully
paid and nonassessable, and are owned by the Company free and clear of
all claims, liens, charges and encumbrances; to the best knowledge of
such counsel, except as described in the Prospectus, there are no
securities outstanding that are convertible into or exercisable or
exchangeable for capital stock of any Subsidiary.
(v) The authorized and outstanding capital stock of the
Company is as set forth in the Registration Statement and the
Prospectus in the column entitled "Actual" under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to
this Agreement or pursuant to reservations, agreements, employee
benefit plans or the exercise of convertible securities, options or
warrants referred to in the Prospectus). To the best knowledge of
such counsel, except as disclosed in or specifically contemplated by
the Prospectus, there are no outstanding options, warrants or other
rights calling for the issuance of, and no commitments, plans or
arrangements to issue, any shares of capital stock of the Company or
any security convertible into or exchangeable or exercisable for
capital stock of the Company. The description of the capital stock of
the Company in the Registration Statement and the Prospectus conforms
in all material respects to the terms thereof.
(vi) To the best knowledge of such counsel, there are no
legal or governmental proceedings pending or threatened to which the
Company or any of its Subsidiaries is a party or to which any of their
respective properties is subject that are required to be described in
the Registration Statement or the Prospectus but are not so described.
(vii) No consent, approval, authorization or order of, or
any filing or declaration with, any court or governmental agency or
body is required for the consummation by the Company of the
transactions on its part contemplated under this Agreement, except
such as have been obtained or made under the
18
Act or the Rules and Regulations and such as may be required under
state securities or Blue Sky laws or the by-laws and rules of the NASD
in connection with the purchase and distribution by the Underwriters
of the Shares.
(viii) The Company has full corporate power and authority to
enter into this Agreement. This Agreement has been duly authorized,
executed and delivered by the Company.
(ix) The execution and delivery of this Agreement, the
compliance by the Company with all of the terms hereof and the
consummation of the transactions contemplated hereby do not contravene
any provision of applicable law or the certificate or articles of
incorporation or by-laws of the Company or any of its Subsidiaries or
violate or conflict with (i) any judgment, ruling, decree or order
known to such counsel or (ii) any statute, rule or regulation of any
court or other governmental agency or body, applicable to the Company,
any of its Subsidiaries or the business or properties of the Company
or any of its Subsidiaries, and to the best knowledge of such counsel
will not result in the creation or imposition of any lien, charge or
encumbrance upon any of the assets of the Company pursuant to the
terms and provisions of, result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or give any
party a right to terminate any of its obligations under, or result in
the acceleration of any obligation under, any indenture, mortgage,
deed of trust, voting trust agreement, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company, any of its
Subsidiaries, or any of their respective properties is bound or
affected.
(x) To the best knowledge of such counsel, there is no
document or contract of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement which is not so described or filed or
incorporated by reference as required, and each description of such
contracts and documents that is contained or incorporated by reference
in the Registration Statement and the Prospectus fairly presents in
all material respects the information required under the Act, the
Exchange Act, the Exchange Act Rules and Regulations and the Rules and
Regulations.
(xi) The statements under the captions "Risk Factors--Shares
Eligible for Future Sales," "Risk Factors--Government Regulation,"
"Business--Government Regulation" and "Description of Capital Stock" in
the Prospectus, insofar as the statements constitute a summary of
documents referred to therein or matters of law, are accurate
summaries and fairly and
19
correctly present, in all material respects, the information called
for with respect to such documents and matters (provided, however,
that such counsel may rely on representations of the Company with
respect to the factual matters contained in such statements, and
provided further that such counsel shall state that nothing has come
to the attention of such counsel which leads them to believe that such
representations are not true and correct in all material respects).
(xii) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended.
(xiii) The Shares and the currently outstanding shares of
Common Stock have been duly authorized for listing on the NNM, subject
to notice of completion of the offering of the Shares by the
Underwriters. The Shares and the currently outstanding shares of
Common Stock have been duly withdrawn from listing on the Amex,
subject to notice of completion of the offering of the Shares by the
Underwriters.
(xiv) To the best knowledge of such counsel, no holder of
securities of the Company has rights which have not been waived to
require the registration with the Commission of shares of Common Stock
or other securities, as part of the offering contemplated hereby.
(xv) The Registration Statement has become effective under
the Act, and to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or is
pending, threatened or contemplated.
(xvi) The Registration Statement and the Prospectus comply
as to form in all material respects with the requirement of the Act
and the Rules and Regulations (other than the financial statements,
schedules and other financial data contained or incorporated by
reference in the Registration Statement or the Prospectus, as to which
such counsel need express no opinion).
(xvii) Such counsel has participated in the preparation of
the Registration Statement and the Prospectus and has no reason to
believe that, as of the Effective Date, the Registration Statement, or
any amendment or supplement thereto, (other than the financial
statements, schedules and other financial data contained or
incorporated by reference therein, as to which such counsel need
express no opinion) contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus,
20
or any amendment or supplement thereto, as of its date and the Closing
Date and, if later, the Option Closing Date, contained or contains any
untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading (other
than the financial statements, schedules and other financial data
contained or incorporated by reference therein, as to which such
counsel need express no opinion).
(xviii) The documents incorporated by reference in the
Prospectus (other than the financial statements, schedules and other
financial data contained therein, as to which such counsel need
express no opinion), when they were filed with the Commission,
complied as to form in all material respects with the requirements of
the Exchange Act and the Exchange Act Rules and Regulations.
In rendering such opinion, such counsel may rely as to matters of
local law upon opinions of counsel satisfactory in form and substance to the
Representatives and counsel for the Underwriters, provided that the opinion of
counsel to the Company shall state that they are doing so, and that they have
no reason to believe that they and the Underwriters are not entitled to rely on
such opinions, and that copies of such opinions are to be attached to the
foregoing opinion.
(g) The Representatives shall have received an opinion, dated the
Closing Date and, as to the Option Shares, the Option Closing Date, from Haythe
& Curley, counsel to the Underwriters, with respect to the Registration
Statement, the Prospectus and this Agreement, which opinion shall be
satisfactory in all respects to the Representatives.
(h) Concurrently with the execution and delivery of this
Agreement, the Accountants shall have furnished to the Representatives a
letter, dated the date of its delivery, addressed to the Representatives and in
form and substance satisfactory to the Representatives, confirming that they
are independent accountants with respect to the Company and its Subsidiaries as
required by the Act and the Exchange Act and the Rules and Regulations and with
respect to certain financial and other statistical and numerical information
contained or incorporated by reference in the Registration Statement. At the
Closing Date and, as to the Option Shares, the Option Closing Date, the
Accountants shall have furnished to the Representatives a letter, dated the
date of its delivery, which shall confirm, on the basis of a review in
accordance with the procedures set forth in the letter from the Accountants,
that nothing has come to their attention during the period from the date of the
letter referred to in the prior sentence to a date (specified in the letter)
not more than five days prior to the Closing Date and the Option Closing Date,
as the case may be, which would require any change in their letter referred to
in the prior sentence if it were required to be dated and delivered at the
Closing Date and the Option Closing Date.
21
(i) Concurrently with the execution and delivery of this
Agreement, the Gendex Accountants shall have furnished to the Representatives a
letter, dated the date of its delivery, addressed to the Representatives and in
form and substance satisfactory to the Representatives, confirming that they
are independent accountants with respect to the Company and its Subsidiaries as
required by the Act and the Exchange Act and the Rules and Regulations and with
respect to certain financial and other statistical and numerical information
contained or incorporated by reference in the Registration Statement. At the
Closing Date and, as to the Option Shares, the Option Closing Date, the Gendex
Accountants shall have furnished to the Representatives a letter, dated the
date of its delivery, which shall confirm, on the basis of a review in
accordance with the procedures set forth in the letter from the Gendex
Accountants, that nothing has come to their attention during the period from
the date of the letter referred to in the prior sentence to a date (specified
in the letter) not more than five days prior to the Closing Date and the Option
Closing Date, as the case may be, which would require any change in their
letter referred to in the prior sentence if it were required to be dated and
delivered at the Closing Date and the Option Closing Date.
(j) Concurrently with the execution and delivery of this
Agreement and at the Closing Date and, as to the Option Shares, the Option
Closing Date, there shall be furnished to the Representatives a certificate,
dated the date of its delivery, signed by each of the Chief Executive Officer
and the Chief Financial Officer of the Company, in form and substance
satisfactory to the Representatives, to the effect that:
(i) Each signer of such certificate has carefully examined
the Registration Statement and the Prospectus (including any documents
filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus) and (A) as of the date of such
certificate, such documents are true and correct in all material
respects and do not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein
not untrue or misleading and (B) in the case of the certificates
delivered at the Closing Date and the Option Closing Date, since the
Effective Date no event has occurred as a result of which it is
necessary to amend or supplement the Prospectus in order to make the
statements therein not untrue or misleading.
(ii) Each of the representations and warranties of the
Company contained in this Agreement was, when originally made, and is,
at the time such certificate is delivered, true and correct.
(iii) Each of the covenants required to be performed by the
Company herein on or prior to the date of such certificate has been
duly, timely and fully performed and each condition herein required to
be satisfied or fulfilled
22
on or prior to the date of such certificate has been duly, timely and
fully satisfied or fulfilled.
(k) On or prior to the Closing Date, the Representatives shall
have received the executed agreements referred to in Section 4(p).
(l) The Shares shall be qualified for sale in such jurisdictions
as the Representatives may reasonably request and each such qualification shall
be in effect and not subject to any stop order or other proceeding on the
Closing Date or the Option Closing Date.
(m) Prior to the Closing Date, the Shares and the currently
outstanding shares of Common Stock shall have been duly authorized for listing
on the NNM and duly withdrawn from listing on the Amex upon official notice of
issuance of the Shares and of completion of the offering to the Shares by the
Underwriters.
(n) The Company shall have furnished to the Representatives such
certificates, in addition to those specifically mentioned herein, as the
Representatives may have reasonably requested as to the accuracy and
completeness at the Closing Date and the Option Closing Date of any statement
in the Registration Statement or the Prospectus, as to the accuracy at the
Closing Date and the Option Closing Date of the representations and warranties
of the Company herein, as to the performance by the Company of its obligations
hereunder, or as to the fulfillment of the conditions concurrent and precedent
to the obligations hereunder of the Representatives.
6. Indemnification.
(a) The Company will indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person, if any, who controls each Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against any
and all losses, claims liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding of any
claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, liabilities, expenses
or damages arise out of or are based on any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus, or the omission or alleged omission
to state in such document a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances in which they were made, or arise out of or are based in whole or
in part on any inaccuracy in the representations and warranties of the Company
23
contained herein or any failure of the Company to perform its obligations
hereunder or under law in connection with the transactions contemplated hereby;
provided, however, that (i) the Company will not be liable to the extent that
such loss, claim, liability, expense or damage arises from the sale of the
Shares in the public offering to any person by an Underwriter and is based on
an untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Representatives, on behalf of any
Underwriter, expressly for inclusion in the Registration Statement, the
preliminary prospectus or the Prospectus and (ii) the Company will not be
liable to any Underwriter, the directors, officers, employees or agents of such
Underwriter or any person controlling such Underwriter with respect to any
loss, claim, liability, expense or damage arising out of or based on any untrue
statement or omission or alleged untrue statement or omission or alleged
omission to state a material fact in the preliminary prospectus which is
corrected in the Prospectus if the person asserting any such loss, claim,
liability, charge or damage purchased Shares from such Underwriter but was not
sent or given a copy of the Prospectus at or prior to the written confirmation
of the sale of such Shares to such person. The Company acknowledges that the
statements set forth under the heading "Underwriting" in the preliminary
prospectus and the Prospectus constitute the only information relating to any
Underwriter furnished in writing to the Company by the Representatives on
behalf of the Underwriters expressly for inclusion in the Registration
Statement, the preliminary prospectus or the Prospectus. This indemnity
agreement will be in addition to any liability that the Company might otherwise
have.
(b) Each Underwriter will indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who signs
the Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
to the same extent as the foregoing indemnity from the Company to each
Underwriter, as set forth in Section 6(a), but only insofar as losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or omission or alleged untrue statement or omission made in reliance
on and in conformity with information relating to any Underwriter furnished in
writing to the Company by the Representatives, on behalf of such Underwriter,
expressly for use in the Registration Statement, the preliminary prospectus or
the Prospectus. The Company acknowledges that the statements set forth under
the heading "Underwriting" in the preliminary prospectus and the Prospectus
constitute the only information relating to any Underwriter furnished in
writing to the Company by the Representatives on behalf of the Underwriters
expressly for inclusion in the Registration Statement, the preliminary
prospectus or the Prospectus. This indemnity will be in addition to any
liability that each Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 6 shall, promptly after receipt of notice of commencement of
any action
24
against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 6, notify each such
indemnifying party in writing of the commencement of such action, enclosing
with such notice a copy of all papers served, but the omission so to notify an
indemnifying party will not relieve it from any liability that it may have to
any indemnified party under the foregoing provisions of this Section 6 unless,
and only to the extent that, such omission results in the loss of substantive
rights or defenses by the indemnifying party. If any such action is brought
against any indemnified party and it notifies an indemnifying party of its
commencement, the indemnifying party will be entitled to participate in and, to
the extent that it elects by delivering written notice to the indemnified party
promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party or parties
similarly notified, to assume the defense of the action, with counsel
reasonably satisfactory to the indemnified party. An indemnifying party will
not be liable to the indemnified party for any legal or other expenses incurred
after notice from the indemnifying party to the indemnified party of its
election to assume the defense except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified
party in connection with the defense. An indemnified party will have the right
to employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(i) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (ii) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (iii) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (iv) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be
at the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees, disbursements and other charges of more than one separate firm admitted
to practice in such jurisdiction at any one time for all such indemnified party
or parties. All such fees, disbursements and other charges will be reimbursed
by the indemnifying party promptly as they are incurred. No indemnifying party
will be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld).
(d) If the indemnification provided for in this Section 6 is
applicable in accordance with its terms but for any reason is held to be
unavailable to or insufficient to hold harmless an indemnified party under
paragraphs (a), (b) and (c) of this Section 6 in respect of any losses, claims,
liabilities, expenses and damages
25
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company from persons other than the Underwriters, such as
persons who control the Company within the meaning of the Act, officers of the
Company who signed the Registration Statement and directors of the Company, who
also may be liable for contribution) by such indemnified party as a result of
such losses, claims, liabilities, expenses and damages in such proportion as
shall be appropriate to reflect the relative benefits received by the Company,
on the one hand, and the Underwriters, on the other hand. The relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. If, but only if, the allocation provided by the foregoing sentence
is not permitted by applicable law, the allocation of contribution shall be
made in such proportion as is appropriate to reflect not only the relative
benefits referred to in the foregoing sentence but also the relative fault of
the Company, on the one hand, and the Underwriters, on the other hand, with
respect to the statements or omissions which resulted in such loss, claim,
liability, expense or damage, or action in respect thereof, as well as any
other relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company to the
Representatives on behalf of the Underwriters, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
6(d) were to be determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, liability, expense or damage, or action in respect
thereof, referred to above in this Section 6(d) shall be deemed to include, for
purposes of this Section 6(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 6(d), no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts received by it and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as provided in
this Section 6(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 6(d), any person
26
who controls a party to this Agreement within the meaning of the Act will have
the same rights to contribution as that party, and each officer of the Company
who signed the Registration Statement will have the same rights to contribution
as the Company, subject in each case to the provisions hereof. Any party
entitled to contribution, promptly after receipt of notice of commencement of
any action against any such party in respect of which a claim for contribution
may be made under this Section 6(d), will notify any such party or parties from
whom contribution may be sought, but the omission so to notify will not relieve
the party or parties from whom contribution may be sought from any other
obligation it or they may have under this Section 6(d). No party will be liable
for contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless
of (i) any investigation made by or on behalf of the Underwriters, (ii)
acceptance of any of the Shares and payment therefor or (iii) any termination
of this Agreement.
7. Reimbursement of Certain Expenses. In addition to its other
obligations under Section 6(a) of this Agreement, the Company hereby agrees to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon, in whole or in part, any statement or omission or alleged statement
or omission, or any inaccuracy in the representations and warranties of the
Company contained herein or failure of the Company to perform its obligations
hereunder or under law, all as described in Section 6(a), notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the obligations under this Section 7 and the possibility that such payment
might later be held to be improper; provided, however, that, to the extent any
such payment is ultimately held to be improper, the persons receiving such
payments shall promptly refund them.
8. Termination. The obligations of the several Underwriters
under this Agreement may be terminated at any time on or prior to the Closing
Date (or, with respect to the Option Shares, on or prior to the Option Closing
Date), by notice to the Company from the Representatives, without liability on
the part of any Underwriter to the Company if, prior to delivery and payment
for the Firm Shares or Option Shares, as the case may be, in the sole judgment
of the Representatives, (i) trading in any of the equity securities of the
Company shall have been suspended by the Commission, by an exchange that lists
the Shares or by the NNM, (ii) trading in securities generally on the New York
Stock Exchange shall have been suspended or limited or minimum or maximum
prices shall have been generally established on such exchange, or additional
material governmental restrictions, not in force on the date of this Agreement,
shall have been imposed upon trading in securities generally by such
27
exchange or by order of the Commission or any court or other governmental
authority, (iii) a general banking moratorium shall have been declared by
either Federal or New York State authorities or (iv) any material adverse
change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any
outbreak or material escalation of hostilities or other calamity or crisis
shall have occurred, the effect of which is such as to make it, in the sole
judgment of the Representatives, impracticable to market the Shares.
9. Substitution of Underwriters. If any one or more of the
Underwriters shall fail or refuse to purchase any of the Firm Shares which it
or they have agreed to purchase hereunder, and the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the aggregate number of Firm
Shares, the other Underwriters shall be obligated, severally, to purchase the
Firm Shares which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase, in the proportions which the number of Firm Shares
which they have respectively agreed to purchase pursuant to Section 1 bears to
the aggregate number of Firm Shares which all such non-defaulting Underwriters
have so agreed to purchase, or in such other proportions as the Representatives
may specify; provided that in no event shall the maximum number of Firm Shares
which any Underwriter has become obligated to purchase pursuant to Section 1 be
increased pursuant to this Section 9 by more than one-ninth of such number of
Firm Shares without the prior written consent of such Underwriter. If any
Underwriter or Underwriters shall fail or refuse to purchase any Firm Shares
and the aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase exceeds one-tenth of the
aggregate number of the Firm Shares and arrangements satisfactory to the
Representatives and the Company for the purchase of such Firm Shares are not
made within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company for the
purchase or sale of any Shares under this Agreement. In any such case either
the Representatives or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or in any
other documents or arrangements may be effected. Any action taken pursuant to
this Section 9 shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
10. Miscellaneous. Notice given pursuant to any of the
provisions of this Agreement shall be in writing and, unless otherwise
specified, shall be mailed or delivered (a) if to the Company, at the office of
the Company, One Commerce Park, Valhalla, New York 10595, Attention: Chief
Executive Officer, with a copy to Tashlik, Kreutzer & Goldwyn P.C., 833
Northern Boulevard, Great Neck, New York 11021, Attention: Theodore Wm.
Tashlik, Esq., or (b) if to the Underwriters, to the Representatives at the
offices of Needham & Company, Inc., 445 Park Avenue, New
28
York, New York 10022, Attention: Corporate Finance Department, with a copy to
Haythe & Curley, 237 Park Avenue, New York, New York 10017, Attention: Thomas
M. Haythe, Esq. Any such notice shall be effective only upon receipt. Any
notice under Sections 8 or 9 may be made by telex or telephone, but if so made
shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, and the controlling persons, directors and
officers referred to in Section 6, and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" as used in this Agreement shall
not include a purchaser, as such purchaser, of Shares from any of the several
Underwriters.
Any action required or permitted to be made by the Representatives
under this Agreement may be taken by them jointly or by Needham & Company, Inc.
Needham & Company, Inc. is duly organized, validly existing and in
good standing in its jurisdiction of incorporation, and has full corporate power
and authority to enter into this Agreement. This Agreement has been duly
authorized, executed and delivered by Needham & Company, Inc. on behalf of
itself and the other several Underwriters named in Schedule I hereto.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed entirely within such State.
This Agreement may be signed in two counterparts with the same effect
as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
The Company and the Underwriters each hereby waive any right they may
have to a trial by jury in respect of any claim based upon or arising out of
this Agreement or the transactions contemplated hereby.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours.
Del Global Technologies Corp.
By: ____________________________
Title:
Confirmed as of the date first
29
above mentioned:
Needham & Company, Inc.
Tucker Anthony Incorporated
Acting on behalf of themselves
and as the Representatives of
the other several Underwriters
named in Schedule I hereto
By: Needham & Company, Inc.
By: _________________________________
Title:
SCHEDULE I
UNDERWRITERS
Number of
Firm
Shares
to be
Underwriters Purchased
Needham & Company, Inc..............................
Tucker Anthony Incorporated.........................
_________
Total...................................... 2,000,000
=========
SCHEDULE II
FORM OF LOCK-UP AGREEMENT
(To be executed and delivered by Leonard A. Trugman,
Natan V. Bertman, David Michael, Leonard Michaels,
Seymour Rubin, James Tiernan, George Solomon,
Howard Bertan, David Engel, Louis J. Farin, Sr.,
John D. MacLennan and Michael H. Taber)
The undersigned is a holder of securities of Del Global Technologies
Corp., a New York corporation (the "Company"), and wishes to facilitate the
public offering of shares of the Common Stock (the "Common Stock") of the
Company (the "Offering"). The undersigned recognizes that such Offering will be
of benefit to the undersigned.
In consideration of the foregoing and in order to induce you to act as
underwriters in connection with the Offering the undersigned hereby agrees that
he will not, without the prior written approval of Needham & Company, Inc.,
acting on its own behalf and/or on behalf of the other underwriters, directly or
indirectly, sell, contract to sell, make any short sale, pledge, or otherwise
dispose of, or enter into any hedging transaction that is likely to result in a
transfer of, any shares of Common Stock, options to acquire shares of Common
Stock or securities exchangeable for or convertible into shares of Common Stock
of the Company which he may own, exclusive of any transfer of shares of Common
Stock to the Company in payment of the exercise price for options granted to the
undersigned under the Company's stock option plan, for a period commencing as of
the date hereof and ending on the date which is twelve months after the date of
the final Prospectus relating to the Offering; provided that the officers and
directors executing lock-up agreements in connection with the offering may,
without such written approval, sell or contract to sell up to 75,000 shares in
the aggregate during the period beginning on the date which is six months after
the date of such final Prospectus and ending on the last day of such 12-month
period. The undersigned confirms that he understands that the underwriters and
the Company will rely upon the representations set forth in this Agreement in
proceeding with the Offering. The undersigned further confirms that the
agreements of the undersigned are irrevocable and shall be binding upon the
undersigned's heirs, legal representatives, successors and assigns. The
undersigned agrees and consents to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of securities held by the
undersigned except in compliance with this Agreement.
_______________________________________________
EXHIBIT 4.1
ARTICLE TWELFTH:
(b) Any person made a party to any action, suit or proceeding
by reason of the fact that he, his testator or intestate, is or was a director,
officer, or employee the Corporation or of any corporation which he served as
such at the request of the Corporation, shall be indemnified by the Corporation
against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred by him in connection with the defense of such action, suit
or proceeding or in connection with any appeal therein, except in relation to
matters as to which it shall be adjudged in such action, suit or proceeding that
such officer, director or employee or was liable for negligence or misconduct in
the performance of his duties. Such right of indemnification shall not be
deemed exclusive or any other rights to which such director, officer or employee
may be entitled apart from this provision.
ARTICLE ELEVENTH:
(h) No stockholder of this Corporation shall have any
preemptive or preferential right of purchase or subscription to any shares of
stock or other securities of this Corporation, or to options, warrants or other
interests therein or therefor, or to any obligations convertible into stock of
this Corporation, issued or sold nor any other right of subscription to any
thereof other than such, if any, as the Board of Directors of this Corporation
in its discretion, from time to time, may determine, and then only at such
price, or prices, as the Board of Directors from time to time may fix, and the
Board of Directors may issue stock of this Corporation, or options, warrants or
other interests therein or therefor, or obligations convertible into stock,
without offering any such stock, options, warrants or other interests therein or
therefor, or obligations
convertible into stock of this Corporation, either in whole or in part, to any
of the stockholders of this Corporation, whether authorized under this
certificate or any certificate of amendment hereafter filed.
EXHIBIT 4.2
ARTICLE V.
INDEMNIFICATION
Section 1. Right to Indemnification. The Corporation shall indemnify any
person made or threatened to be made a party to a threatened, pending or
completed proceeding, whether civil, criminal, investigative or administrative
because he 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, or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorney fees), judgments, fines
and amounts paid in settlement to the fullest extent possible under Sections
721-726 of the Business Corporation Law of New York or any applicable law.
EXHIBIT 5.1
April 30, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Del Global Technologies Corp.
Gentlemen:
As counsel for Del Global Technologies Corp., a New York
corporation (the "Corporation"), we are familiar with the Certificate of
Incorporation, as amended and By-Laws of the Corporation and the corporate
proceedings taken by the Corporation in connection with the preparation and
filing of a Registration Statement on Form S-2 (the "Registration Statement")
covering a public offering by the Corporation of 2,300,000 shares of Common
Stock, ten cents ($.10) par value ("Common Stock"). The 2,000,000 shares of
Common Stock include 300,000 shares of Common Stock issuable upon the exercise
by Needham & Company, Inc. and Tucker Anthony Incorporated of the
over-allotment option.
Based upon the foregoing, we are of the opinion that:
1. The Corporation is a duly organized and validly
existing corporation under the laws of the State of New York; and
2. The 2,300,000 shares of Common Stock have been duly
authorized, and when issued and sold as described in the Registration Statement
will be legally issued, fully paid and non-assessable.
We hereby consent to the use of our name under the caption
"Legal Matters" in the prospectus forming part of the Registration Statement
and to the filing of this opinion as Exhibit 5.1 thereto.
Very truly yours,
s/Tashlik, Kreutzer & Goldwyn P.C.
TK&G:rmb
EXHIBIT 10.6
THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THEY MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE REGISTERED UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
30,000 WARRANTS
VOID AFTER 5:00 P.M. NEW YORK TIME ON DECEMBER 31, 2000
WARRANT TO PURCHASE COMMON STOCK
OF
DEL ELECTRONICS CORP.
This warrant certificate ("Warrant Certificate") certifies
that for value received, Stanley Wunderlich ("SW"), an individual having an
office at 8 The Hemlocks, Roslyn Estates, New York 11576 or registered assigns
(collectively with SW, the "Warrant Holder") is the owner of the number of
warrants ("Warrants") specified above, each of which entitles the holder
thereof to purchase, at any time on or before the Expiration Date, as
hereinafter defined, one fully paid and non-assessable share ("Share") of
Common Stock, par value $.10 per share ("Common Stock"), of Del Electronics
Corp. (the "Company"), a New York corporation, at a purchase price of SIX
DOLLARS AND FIFTY-SIX CENTS ($6.56) per share in lawful money of the United
States of America in cash or by check or a combination of cash and check,
subject to adjustment as hereinafter provided.
1. Warrant; Exercise Price; Payout Amount.
1.1. Each Warrant shall entitle the Warrant
Holder the right to purchase one Share of Common Stock of the Company
(individually, a "Warrant Share"; severally, the "Warrant Shares").
1.2. The purchase price payable upon exercise of
each Warrant ("Exercise Price") shall be SIX DOLLARS AND FIFTY-SIX CENTS
($6.56), subject to adjustment as hereinafter provided. The Exercise Price and
number of Warrants evidenced by each Warrant Certificate are subject to
adjustment as provided in Section 7 hereof.
2. Exercise of Warrant; Expiration Date.
2.1. This Warrant Certificate is exercisable, in
whole or from time to time in part, at the option of the Warrant Holder, at any
time after the date of
issuance and on or before the Expiration Date, upon surrender of this Warrant
Certificate to the Company together with a duly completed exercise form and
payment of the Exercise Price. In the case of exercise of less than all the
Warrants represented by this Warrant Certificate, the Company shall cancel the
Warrant Certificate upon the surrender thereof and shall execute and deliver a
new Warrant Certificate for the balance of such Warrants.
2.2. The term "Expiration Date" shall mean 5:00
p.m. New York time on December 31, 2000, or if such date shall in the State of
New York be a holiday or a day on which banks are authorized to close, then
5:00 p.m. New York time the next following day which in the State of New York
is not a holiday or a day on which banks are authorized to close, or in the
event of any merger, consolidation, or sale of all or substantially all the
assets of the Company as an entirety resulting in any distribution to the
Company's stockholders prior to the Expiration Date, the Warrant Holder shall
have the right to exercise this Warrant commencing at such time through the
Expiration Date into the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the number
of shares of Common Stock into which this Warrant might have been exercisable
immediately prior thereto.
3. Registration and Transfer on Company Books.
3.1. The Company shall maintain books and
records for the registration and transfer of Warrant Certificates.
3.2. Prior to due presentment for registration
of transfer of this Warrant Certificate, the Company may deem and treat the
registered holder as the absolute owner thereof.
3.3. The Company shall register upon its books
any transfer of a Warrant Certificate upon surrender of same to the Company
accompanied by a written instrument of transfer duly executed by the registered
holder. Upon any such registration of transfer, new Warrant Certificate(s)
shall be issued to the transferee(s) and the surrendered Warrant Certificate
shall be cancelled by the Company. A Warrant Certificate may also be
exchanged, at the option of the holder, for new Warrant Certificates
representing in the aggregate the number of Warrants evidenced by the Warrant
Certificate surrendered.
4. Reservation of Shares. The Company covenants that
it will at all times reserve and keep available out of its authorized Common
Stock, solely for the purpose of issuance upon exercise of the Warrants, such
number of shares of Common Stock as shall then be issuable upon the exercise of
all outstanding Warrants. The Company covenants that all shares of Common
Stock which shall be issuable upon exercise of the Warrants shall be duly and
validly issued and fully paid and non-assessable and free from all taxes, liens
and charges with respect to the issuance thereof, and that upon issuance such
shares shall be listed on each national
2
securities exchange, if any, on which the other shares of outstanding Common
Stock of the Company are then listed.
5. Exchange, Transfer, Assignment, Loss or Mutilation
of Warrant Certificate. This Warrant Certificate is exchangeable, without
expense, at the option of the Warrant Holder, upon presentation and surrender
hereof to the Company or at the office of its stock transfer agent, if any, for
other Warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of shares of Common Stock purchasable
hereunder. This Warrant Certificate may be transferred or assigned by the
Warrant Holder upon surrender of this Warrant Certificate to the Company at its
principal office or at the office of its transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax. Upon such surrender the Company shall, without charge, execute
and deliver a new Warrant Certificate in the name of the assignee named in such
instrument of assignment and this Warrant Certificate shall be promptly
cancelled. This Warrant may be divided or combined with other warrants which
carry the same rights upon presentation hereof at the principal office of the
Company or at the office of its stock transfer agent, if any, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued and signed by the Warrant Holder hereof. The term "Warrant
Certificate" as used herein includes any Warrant Certificates into which this
Warrant Certificate may be divided or exchanged. Upon receipt by the Company
of reasonable evidence of the ownership of and the loss, theft, destruction or
mutilation of this Warrant Certificate and, in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to the Company, or, in the
case of mutilation, upon surrender and cancellation of the mutilated Warrant
Certificate, the Company shall execute and deliver in lieu thereof a new
Warrant Certificate of like tenor and date representing an equal number of
Warrants.
6. Rights of the Holder. The Warrant Holder shall not,
by virtue hereof, be entitled to any voting or other rights of a stockholder in
the Company, either at law or equity, and the rights of the Warrant Holder are
limited to those expressed in the Warrant Certificate and are not enforceable
against the Company except to the extent set forth herein.
7. Adjustment of Exercise Price and Number of Shares
Deliverable. The Exercise Price and the number of shares of Common Stock
purchasable pursuant to each Warrant shall be subject to adjustment from time
to time as hereinafter set forth in this Section 7:
(a) In case the Company shall (i)
declare a dividend or make a distribution on its
outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater
number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller
number of shares, the Exercise
3
Price in effect at the time of the record date for
such dividend or distribution or of the effective
date of such subdivision, combination or
reclassification shall be adjusted so that it shall
equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of
which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and
the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to
such action. Such adjustment shall be made
successively whenever any event listed above shall
occur.
(b) Whenever the Exercise Price payable
upon exercise of each Warrant is adjusted pursuant
to Subsection (a) above, the number of Shares
purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number
of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the
Exercise Price, as adjusted.
(c) Notwithstanding the provisions of
Subsections (a) and (b) of this Section 7, no
adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or
decrease of at least five cents ($0.05) in such
price; provided, however, that any adjustments which
by reason of this Subsection (c) are not required to
be made shall be carried forward and taken into
account in any subsequent adjustment required to be
made hereunder. All calculations under this Section
7 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may
be. Anything in this Section 7 to the contrary
notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the
Exercise Price, in addition to those required by
this Section 7, as it shall determine, in its sole
discretion, to be advisable in order that any
dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination
of Common Stock hereafter made by the Company, shall
not result in any Federal income tax liability to
the holders of Common Stock or securities
convertible into Common Stock (including Warrants).
(d) Whenever the Exercise Price is
adjusted as herein provided, the Company shall
promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares
issuable upon exercise of each Warrant, and if
requested by the Warrant Holder, information
describing the transactions giving rise to such
adjustments, to be mailed to the Warrant Holders at
their last addresses appearing in the books and
records of the
4
Company, and shall cause a certified copy thereof to
be mailed to its transfer agent, if any. The
Company may retain a firm of independent certified
public accountants selected by the Board of
Directors (who may be the regular accountants
employed by the Company) to make any computation
required by this Section 7, and a certificate signed
by such firm shall be conclusive evidence of the
correctness of such adjustment.
(e) In the event that at any time, as a
result of an adjustment made pursuant to Subsection
(a) above, the Warrant Holder of this Warrant
thereafter shall become entitled to receive any
shares of the Company, other than Common Stock,
thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to
the provisions with respect to the Common Stock
contained in Subsections (a) to (c), inclusive
above.
(f) Irrespective of any
adjustments in the Exercise Price or the number or
kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued
may continue to express the same price and number
and kind of shares as are stated in the similar
Warrants initially issuable pursuant to this Warrant
Certificate.
8. Fractional Shares. No certificate for fractional
Shares shall be issued upon the exercise of the Warrants. With respect to any
fraction of a Share called for upon any exercise hereof, the Company shall pay
to the Warrant Holder an amount in cash equal to such fraction calculated to
the nearest cent multiplied by the current market value of a Share, determined
as follows:
(a) If the Common Stock is listed on a
national securities exchange or admitted to unlisted
trading privileges on such exchange or listed for
trading on the NASDAQ system, the current market
value of a Share shall be the last reported sale
price per Share of the Common Stock on such exchange
or system on the last business day prior to the date
of exercise of this Warrant or if no such sale is
made on such day, the average of the closing bid and
asked prices per Share for such day on such exchange
or system; or
(b) If the Common Stock is not so
listed or admitted to unlisted trading privileges,
the current market value of a Share shall be the
mean of the last reported bid and asked prices per
Share reported by the National Quotation Bureau,
Inc. on the last business day prior to the date of
the exercise of this Warrant; or
5
(c) If the Common Stock is not so
listed or admitted to unlisted trading privileges
and bid and asked prices are not so reported, the
current market value of a Share shall be an amount,
not less than book value thereof, as at the end of
the most recent fiscal year of the Company ending
prior to the date of the exercise of the Warrant,
determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
9. Officer's Certificate. Whenever the Exercise Price
shall be adjusted as required by the provisions of Section 7 hereof, the
Company shall forthwith file in the custody of its Secretary or Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price as herein provided
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and the
manner of computing such adjustment. Each such officer's certificate shall be
made available at all reasonable times for inspection by the holder or any
holder of a Warrant executed and delivered pursuant to Section 2, and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Warrant Holder or any such holder.
10. Notices to Warrant Holders. So long as this Warrant
shall be outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock; or (ii) if the Company shall offer to the
holders of Common Stock for subscription or purchase by them any shares of any
class or any other rights; or (iii) if any capital reorganization of the
Company, reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, sale, lease or transfer
of all or substantially all of the property and assets of the Company to
another corporation, or voluntary or involuntary dissolution, liquidation or
winding up of the Company shall be effected, then in any such case, the Company
shall cause to be mailed by certified mail to the Warrant Holder, at least
fifteen days prior to the date specified in (x) or (y) below, as the case may
be, a notice containing a brief description of the proposed action and stating
the date on which (x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding
up is to take place and the date, if any, which is to be fixed, as of which the
holders of Common Stock or other securities shall receive cash or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up.
11. Reclassification, Reorganization or Merger. In case
of any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger
with a subsidiary in which merger the Company is the continuing corporation and
which does not result in any reclassification, capital reorganization or other
change of outstanding shares of
6
Common Stock of the class issuable upon exercise of this Warrant) or in case of
any sale, lease or conveyance to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Warrant Holder
shall have the right thereafter by exercising this Warrant at any time prior to
the expiration of the Warrant, to purchase the kind and amount of shares of
stock and other securities and property receivable upon such reclassification,
capital reorganization and other change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock which might have
been purchased upon exercise of this Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Any such
provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section 11 shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
In the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (a) of Section 7 hereof.
12. Voluntary Adjustment by the Company. The Company
may, at its option, at any time during the term of the Warrants, reduce the then
current Exercise Price to any amount deemed appropriate by the Board of
Directors of the Company and/or extend the date of the expiration of the
Warrants.
13. Registration Under the Securities Act of 1933.
(a) If at any time after the date
hereof, the Company shall propose to file a
registration statement ("Registration Statement")
under the Securities Act of 1933, as amended (the
"Act") (other than a reorganization or an offering
pursuant to a stock option or other employee benefit
plan or an offering on Form S-4 or S-5 (or any
successor forms thereto) relating to an acquisition
of another corporation), then, during the period
commencing on the date hereof and terminating on the
Expiration Date, and subject to Subsection (d) of
this Section 13, the Company shall in each case
deliver written notice thereof to the Holder of this
Warrant or of the Warrant Shares and/or any then
holder of Warrants or Warrant Shares (such persons
being collectively referred to herein as "holders")
at least 15 days before the anticipated filing date.
Such notice shall offer to each holder the option to
include Warrant Shares in such Registration
Statement, subject to the conditions set forth in
this Section 13; provided, however, that the Company
shall be under no obligation
7
to register Warrant Shares of any holder if in the
opinion of counsel to such holder no registration
under the Act is required with respect to a public
disposition of such Warrant Shares.
(b) Should a holder desire to have any
Warrant Shares registered under this Section 13,
such holder shall so advise in writing no later than
15 days after the date of receipt by the holder of
the Company's written notice, setting forth the
number of such Warrant Shares for which registration
is requested. Subject to Subsection (d) of this
Section 13, the Company shall thereupon include in
such Registration Statement such Warrant Shares.
(c) Neither the giving of notice by the
Company nor any request by any holders to register
Warrant Shares pursuant to this Section 13 shall in
any way obligate the Company to file any such
Registration Statement, and notwithstanding the
filing of such Registration Statement, the Company
may, at any time prior to the effective date
thereof, determine not to offer the securities to
which such registration relates and/or withdraw the
Registration Statement from the Securities and
Exchange Commission (the "Commission"), without
liability of the Company to any holders.
(d) If the securities covered by such
Registration Statement are to be sold by
underwriters in an underwritten public offering
(including, without limitation, a so-called "best
efforts" undertaking by an underwriter), the Company
shall use its best efforts to cause the managing
underwriter, if any, of a proposed offering to grant
a request by a holder that Warrant Shares be
included in the proposed offering on terms and
conditions which are customary industry practice for
such underwriter under the existing circumstance,
provided that any Warrant Shares to be sold by
holders pursuant to this Section 13 shall be sold or
distributed in a manner identical to the manner in
which the securities which are the subject of such
Registration Statement are to be sold or
distributed. Notwithstanding the foregoing, if any
such managing underwriter shall advise the Company
in writing that, in good faith and in its reasonable
opinion, the distribution of Warrant Shares
requested to be included in the Registration
Statement concurrently with the securities being
registered by the Company would adversely affect the
distribution of such securities by such
underwriters, the Company shall give notice of such
determination to the holders requesting
registration, and the number of Warrant Shares
proposed to be offered by the holders and any other
persons other than the Company shall be reduced pro
rata (as specified by the Company in such notice) to
8
aggregate a quantity of Warrant Shares (so
specified) which said managing underwriter shall not
consider excessive.
(e) The rights of holders to have their
Warrant Shares be included in any Registration
Statement pursuant to the provisions of Section 13
of this Warrant Certificate, shall be subject to the
condition that the holders requesting registration
shall furnish to the Company in writing such
information and documents as may be reasonably
required to properly prepare and file such
Registration Statement in accordance with applicable
provisions of the Act.
(f) The Company shall bear the entire
cost and expense of any registration of securities
initiated by it notwithstanding that Warrant Shares
may be included in any such registration. Any
holder whose Warrant Shares are included in any such
registration statement pursuant to this Section 13
shall, however, bear the fees of his own counsel and
any registration fees, transfer taxes or
underwriting discounts or commissions applicable to
the Warrant Shares sold by him pursuant thereto.
(g) (i) The Company shall
indemnify and hold harmless each such holder and
each underwriter, within the meaning of the Act, who
may purchase from or sell for any such holder any
Warrant Shares (collectively, "Indemnified Persons")
from and against any and all losses, claims, damages
and liabilities caused by any untrue statement or
alleged untrue statement of a material fact
contained in the Registration Statement or any
post-effective amendment thereto or any registration
statement under the Act or any prospectus included
therein required to be filed or furnished by reason
of this Section 13 or caused by any omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, except
insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement
or alleged untrue statement or omission or alleged
omission based upon information furnished or
required to be furnished in writing to the Company
by such holder or underwriter expressly for use
therein, which indemnification shall include each
person, if any, who controls any such underwriter
within the meaning of such Act; provided, however,
that the Company shall not be obliged so to
indemnify any such holder, underwriter or
controlling person unless such holder, underwriter
or controlling person shall at the same time
indemnify the Company, its directors, each officer
signing the related registration statement and each
person, if any, who controls the Company
9
within the meaning of such Act, from and against any
and all losses, claims, damages and liabilities
caused by any untrue statement or alleged untrue
statement of a material fact contained in any
registration statement or any prospectus required to
be filed or furnished by reason of this Section 13
or caused by any omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, insofar as such losses, claims,
damages or liabilities are caused by any untrue
statement or alleged untrue statement or omission or
alleged omission based upon information furnished or
required to be furnished in writing to the Company
by any such holder, underwriter or controlling
person expressly for use therein.
(ii) The holders registering
Warrant Shares pursuant to this Warrant Certificate
shall indemnify and hold harmless the Company, its
directors and officers, and each person, if any who
controls the Company within the meaning of either
Section 15 of the Act or Section 20 of the
Securities Exchange Act of 1934, as amended
("Exchange Act"), to the same extent as the
indemnity from the Company to each Indemnified
Person set forth in paragraph (i) of this
Subsection (g), but only with respect to information
relating to such Indemnified Person furnished in
writing by such Indemnified Person to the Company
expressly for use in the Registration Statement or
related Prospectus (preliminary or final), or any
amendment or supplement thereto. In case any action
or proceeding shall be brought against the Company
or its directors or officers or any such controlling
person, in respect of which indemnity may be sought
against a holder, each shall have the rights and
duties given to the Company and the Company or its
directors or its officers or its controlling persons
each shall have the rights and duties given to a
holder by Subsection (g).
(iii) In order to provide for just
and equitable contribution in circumstances in which
the indemnification provided for in this Section
13(g) is due in accordance with its terms but is,
for any reason, held by a court to be unavailable,
the Company and the holders shall contribute to the
aggregate losses, claims, damages and liabilities
(including reasonable legal or other expenses
incurred in connection with investigation or
defending of same) to which the Company and the
holders may be subject based on their comparative
fault; provided, however, that no holder shall have
any liability hereunder in excess of the gross
proceeds realized by such holder from the sale by it
of the Warrant Shares to which the third party claim
relates; provided,
10
further, however, that no person who has committed
an intentional misrepresentation shall be entitled
to contribution from any person who has not
committed an intentional misrepresentation. For the
purposes of this paragraph (iii) any person
controlling, controlled by or under common control
with the holders, or any partner, director, officer,
employee, representative or agent of any thereof,
shall have the same rights to contribution as the
holders, and each person who controls the Company
within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, each officer and
each director of the Company shall have the same
rights to contribution as the Company. Any party
entitled to contribution shall, promptly after
receipt of notice of commencement of any action,
suit or proceeding against such party in respect of
which a claim for contribution may be made against
the other party under this paragraph (iii), notify
such party from whom contribution may be sought, but
the omission to so notify such party shall not
relieve the party from which contribution may be
sought from any obligation it or they may have
hereunder or otherwise.
The Company's agreements with respect to Warrant Shares in
this Section 13 shall continue in effect regardless of the exercise and
surrender of this Warrant.
14. Governing Law. This Warrant Certificate shall be
governed by and construed in accordance with the laws of the State of New York
without regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed herein.
DEL ELECTRONICS CORP.
By: /s/ Leonard A. Trugman
Name: Leonard A. Trugman
Title: Chairman, CEO and President
[SEAL]
Dated: January 1, 1996
Attest:
/s/ Michael Taber
Michael Taber, Secretary
11
EXERCISE FORM
Dated: ________________, _____
The undersigned hereby irrevocably elects to exercise the
right to purchase __________ shares of Common Stock covered by this Warrant
according to the conditions hereof and herewith makes payment of the Purchase
Price for such shares in full.
________________________________
Signature [Print Name]
________________________________
(STREET ADDRESS)
________________________________
(CITY) (STATE) (ZIP CODE)
12
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________________________________
hereby sells, assigns and transfer unto
Name ________________________________________________________________
(Please typewrite or print in bold letters)
Address_______________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
__________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _____________________ Attorney, to transfer
the same on the books of the Company with full power of substitution in the
premises.
Date _____________, _____
Signature __________________________
[PRINT NAME]
13
EXHIBIT 10.16
EMPLOYMENT AGREEMENT, dated as of October 11, 1993, by and
between DYNARAD CORP., a New York corporation with offices at 19 Jefryn
Boulevard, Deer Park, New York 11729 (the "Corporation"), and GEORGE
SOLOMON, an individual residing at 132 Sheridan Avenue, Ho-Ho-Kus, New
Jersey 07423 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Corporation desires to secure the services of
the Executive upon the terms and conditions hereinafter set forth; and
WHEREAS, the Executive desires to render services to the
Corporation upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
Section 1. Employment. The Corporation hereby
employs the Executive and the Executive hereby accepts such employment, as an
executive of the Corporation, subject to the terms and conditions set forth in
this Agreement.
Section 2. Duties. Executive shall serve as Vice
President and General Manager of the Corporation or, in the discretion of the
Board of Directors of the Corporation, in another capacity of increasing
responsibility and shall properly
perform such duties as may be assigned to him from time to time by the Board of
Directors of the Corporation. If requested by the Corporation, the Executive
shall serve on the Board of Directors of the Corporation or any affiliates
thereof, or on any committee of such Boards of Directors, without additional
compensation. During the Term (as hereinafter defined) of this Agreement, the
Executive shall devote all of his business time to the performance of his
duties hereunder unless otherwise authorized by the Board of Directors. The
Executive shall report directly to Leonard Michaels.
Section 3. Term of Employment. The term (the
"Term") of the Executive's employment shall commence as of the date hereof and
shall continue until July 31, 1997, or until terminated pursuant to Section 5
hereof. The Term shall automatically be renewed for a period of three (3)
years unless either party provides the other with notice of non-renewal at
least one hundred twenty (120) days prior to termination of the Term.
Section 4. Compensation of Executive.
4.1. Compensation. The Corporation shall pay
to the Executive as compensation for his services hereunder a base annual
salary ("Base Salary") through July 31, 1994 an amount equal to One Hundred
Forty-Eight Thousand ($148,000) Dollars, on an annualized basis. For the
fiscal year August 1, 1994 through July 31, 1995, the Executive shall be paid a
Base Salary determined by multiplying $148,000 by the greater of (x) the
increase (expressed as a decimal), if any, in the Consumer Price Index, as
defined herein, as of August 1, 1994 over the amount of such index as of August
1, 1993, or (y) five (5%) percent; and for fiscal year August 1, 1995 through
July 31, 1996, the Executive shall be paid a Base Salary
2
determined by multiplying the Base Salary in effect for the immediately
preceding fiscal year by the greater of (x) the increase (expressed as a
decimal), if any, in the Consumer Price Index as of August 1, 1995 over the
amount of such index as of August 1, 1994, or (y) five (5%) percent. For all
purposes of this Agreement, the Consumer Price Index is hereby defined as the
index for the New York City Metropolitan Area, now known as the United States
Bureau of Labor Statistics, Consumer Price Index, for Urban Wage Earners and
Clerical Workers (revised) -- U.S. City average, and selected areas (1982 - 84
= 100), all items. If the Consumer Price Index shall be discontinued or
altered, then any successor Consumer Price Index of the United States Bureau of
Labor Statistics, or successor agency thereof, for the New York City
Metropolitan Area, shall be used, and if there is no such successor Consumer
Price Index, the Corporation and Executive shall agree upon a substitute index
or formula.
The Base Salary shall be payable bi-weekly less such
deductions as shall be required to be withheld by applicable law and
regulations.
4.2. Guaranteed Bonus. In addition to his
annual Base Salary the Executive shall receive a guaranteed bonus ("Guaranteed
Bonus") in an amount equal to Five Thousand ($5,000) Dollars plus two (2%)
percent of the Corporation's Pre-Tax Net Profits (as hereinafter defined) for
the Corporation's fiscal year ending July 30, 1994. The Guaranteed Bonus shall
be payable within thirty (30) days after the Corporation's regularly employed
independent certified public accountants ("Accountants") determine the Pre-Tax
Net Profits for such year. The
3
Guaranteed Bonus for fiscal years after fiscal 1994 shall be determined, and
performance targets shall be set, by mutual agreement of the parties hereto.
In no event shall the Guaranteed Bonus for fiscal years after fiscal 1994 be
less than an amount equal to Five Thousand ($5,000) Dollars plus two (2%)
percent of the Corporation's Pre-Tax Net Profits for the applicable fiscal
year.
4.3. Pre-Tax Net Profits Defined. The term
"Pre-Tax Net Profits" as used in this Agreement shall mean the net profits of
the Corporation for a fiscal year in excess of $500,000 prior to (i) the
payment or provision for any Federal, state or local income or other taxes;
(ii) the payment of the Guaranteed Bonus; and (iii) any bonus payments made to
Leonard Michaels by the Corporation or which are made by Del Electronics Corp.
("Del") to Leonard Michaels on behalf of the Corporation, but after (i) any
non-compete payments or payments made pursuant to consulting agreements by the
Corporation or which are made by Del on behalf of the Corporation; and (ii)
payment of the Executive's Base Salary for such fiscal year, all as computed by
the Corporation's Accountants.
4.4. Expenses. The Corporation shall pay or
reimburse the Executive for all reasonable and necessary business, travel or
other expenses, upon proper documentation thereof, which may be incurred by him
in connection with the rendition of the services contemplated hereunder.
4.5. Benefits. Executive shall be entitled
to participate in such profit sharing, group insurance, option plans,
hospitalization, and group health benefit plans and all other benefits and
plans as the Corporation provides to its
4
employees to the extent that the Executive is eligible under the terms of such
plans. During the Term of his employment hereunder the Corporation shall (i)
lease an automobile for the use by Executive in connection with his duties
hereunder; and (ii) pay for the installation and monthly service charge for a
car telephone and business telephone calls therefrom, upon proper documentation
therefor.
4.6. Discretionary Payments. Nothing herein
shall preclude the Corporation for paying Executive such bonus or bonuses or
other compensation, as the Board of Directors, in their discretion, may
authorize from time to time.
Section 5. Termination.
5.1. Termination of Employment. This
Agreement shall terminate upon the death, Disability, as hereinafter defined,
or termination of employment of the Executive For Cause, as hereinafter
defined, or because Executive wrongfully leaves his employment hereunder. The
Corporation shall pay to the Executive, any person designated by the Executive
in writing or if no such person is designated, to his estate, as the case may
be, the aggregate amount of the Base Salary accrued as of such termination but
not yet paid.
5.2. Disability Defined. As used herein,
"Disability" shall mean the Executive is mentally or physically incapable or
unable to perform his regular and customary duties of employment with the
Corporation for a period of ninety (90) consecutive days or for a period of
ninety (90) days in any three hundred sixty (360) day period.
5.3. "For Cause" Defined. As used herein,
the term "For Cause" shall mean (i) Executive's conviction in a court of law of
any crime or offense,
5
or (ii) willful misconduct, or (iii) the material breach by Executive of any
provision of this Agreement, or (iv) reckless disregard of his responsibilities
under this Agreement.
5.4. Termination For Cause. In the event
Executive is discharged For Cause, Total Disability or because Executive
wrongfully leaves his employment hereunder, then, upon such occurrence, this
Agreement shall be deemed terminated and the Corporation shall be released from
all obligations to Executive with respect to this Agreement.
5.5. Termination Without Cause.
In the event the Executive's employment
hereunder is terminated by the Corporation other than pursuant to Section 5.4
(hereinafter referred to as a "Termination Without Cause"), the Executive's
right to receive his health benefits hereunder shall continue during the next
twelve (12) month period immediately following notice of Termination Without
Cause and Executive shall be entitled to receive an amount equal to One Hundred
Forty-Eight Thousand ($148,000) Dollars, or an amount equal to the Executive's
salary at the time of the notice of Termination Without Cause, as the case may
be, and a proportionate share of the Guaranteed Bonus. Such amount shall be
payable in 26 equal bi-weekly payments.
5.6. Withholding. All payments to Executive
pursuant to Sections 5 and 8 hereof shall be less such deductions as shall be
required to be withheld by applicable law and regulations.
Section 6. Stock Options. The Stock Option
Committee of Del has granted to Executive the option to purchase 10,000 shares
of Del's common stock,
6
$.10 par value ("Common Stock"), for an exercise price of $5.75 per share.
Such exercise price equals the closing price of Del's Common Stock on The
American Stock Exchange on August 11, 1993. Such stock options are subject to
the provisions of Del's Non-Qualified Stock Option Plan, as amended, and that
certain stock option agreement, dated as of August 11, 1993, between Del and
the Executive. The Executive shall receive consideration, in the sole
discretion of Del's Stock Option Committee, for additional stock options no
later than July 31, 1994 and annually during the Term.
Section 7. Vacations. The Executive shall be
entitled to a vacation of three (3) weeks per year, during which period his
Base Salary shall be paid in full. The Executive shall take his vacation at
such time or times as the Executive and the Corporation shall determine is
mutually convenient.
Section 8. Change in Control.
8.1. Payments on Change in Control. In the
event of a Change in Control, as hereinafter defined, of Del, and Executive is
not offered a position with Del or the Corporation on substantially the same
terms and conditions as this Agreement, than the Corporation and/or its
successor shall be obligated to pay to the Executive an amount equal to One
Hundred Forty-Eight Thousand ($148,00.00) Dollars, or an amount equal to the
Executive's salary at the time of the notice of Termination Without Cause, as
the case may be, and a proportionate share of the Guaranteed Bonus. Such
amount shall be payable in 26 bi-weekly payments. In such event, the
Corporation shall pay the health insurance premiums of Executive for a
7
period of twelve (12) months from the date of such Change in Control.
Notwithstanding anything herein to the contrary, the Corporation shall not be
obligated to pay such premiums in the event Executive receives health benefits
from another employer following a Change in Control.
8.2. Change in Control Defined. The term
"Change in Control" as used herein shall mean the sale by Del of all or
substantially all of the assets of Del and its subsidiaries, the statutory
merger or consolidation, or the purchase, sale, tender or exchange of equity
securities or rights to acquire equity securities of the Corporation, with the
result that Leonard A. Trugman is no longer either an employee or a consultant
of Del in any capacity whatsoever.
Section 9. Disclosure of Confidential Information.
9.1. Disclosure. Executive recognizes that
he will have access to secret and confidential information regarding the
Corporation and its affiliates, their products, know-how, customers and plans.
Executive acknowledges that such information is of great value to the
Corporation, is the sole property of the Corporation, and has been and will be
acquired by him in confidence. In consideration of the obligations undertaken
by the Corporation and its affiliates herein, Executive will not, at any time,
during or after his employment hereunder, reveal, divulge or make known to any
person, any information acquired by Executive during the course of his
employment, which is treated as confidential by the Corporation or its
affiliates and not otherwise in the public domain.
9.2. Survival. The provisions of this
Section 9 shall survive Executive's employment hereunder.
8
Section 10. Covenant Not To Compete.
10.1. Covenant. Executive recognizes that the
services to be performed by him hereunder are special, unique and
extraordinary. The parties confirm that it is reasonably necessary for the
protection of the Corporation and its affiliates that Executive agree, and,
accordingly, Executive does hereby agree, that he will not, directly or
indirectly, in the Territory at any time during the "Restricted Period":
(a) except as provided in Section 10.3
hereof, engage in any business directly competitive with the business conducted
by the Corporation or by an affiliate of the Corporation either on his own
behalf or as an officer, director, stockholder, partner, consultant, associate,
employee, owner, agent, creditor, independent contractor, or co-venturer of any
third party; or
(b) knowingly employ or engage, or
cause or authorize, directly or indirectly, to be employed or engaged, for or
on behalf of himself or any third party, any employee or agent of the
Corporation or an affiliate of the Corporation.
10.2. Enforceability. If any of the
restrictions contained in this Section 10 shall be deemed to be unenforceable
by reason of the extent, duration or geographical scope thereof, or otherwise,
then the court making such determination shall have the right to reduce such
extent, duration, geographical scope, or other provisions hereof, and in its
reduced form this Section shall then be enforceable in the manner contemplated
hereby.
10.3. Exception. This Section 10 shall not be
construed to prevent Executive from owning, directly or indirectly, in the
aggregate, an amount not
9
exceeding five (5%) percent of the issued and outstanding voting securities of
any class of any corporation whose voting capital stock is traded on a national
securities exchange or in the over-the-counter market.
10.4. Restricted Period Defined. The term
"Restricted Period" as used in this Section 10 shall mean the period of
Executive's employment hereunder plus two (2) years after the date Executive
leaves the employ of the Corporation, except that the term "Restricted Period"
in the case of a Termination Without Cause or a termination due to a Change in
Control shall mean the period of Executive's employment hereunder plus one (1)
year after the date Executive leaves the employ of the Corporation.
10.5. Territory. The term "Territory" as used
herein shall mean the United States of America, its territories and
possessions.
10.6. Survival. The provisions of this
Section 10 shall survive the termination of Executive's employment hereunder
and until the end of the Restricted Period as provided in Section 10.4 hereof.
Section 11. Miscellaneous.
11.1. Injunctive Relief. Executive
acknowledges that the services to be rendered under the provisions of this
Agreement are of a special, unique and extraordinary character and that it
would be difficult or impossible to replace such services. Accordingly,
Executive agrees that any breach or threatened breach by him of Sections 9 and
10 of this Agreement shall entitle the Corporation, in addition to all other
legal remedies available to it, to apply to any court of competent jurisdiction
to enjoin such breach or threatened breach. The parties understand and
10
intend that each restriction agreed to by Executive hereinabove shall be
construed as separable and divisible from every other restriction, that the
unenforceability of any restriction shall not limit the enforceability, in
whole or in part, of any other restriction, and that one or more or all of such
restrictions may be enforced in whole or in part as the circumstances warrant.
In the event that any restriction in this Agreement is more restrictive than
permitted by law in the jurisdiction in which the Corporation seeks enforcement
thereof, such restriction shall be limited to the extent permitted by law.
11.2. Assignment. The Executive may not
assign or delegate any of his rights or duties under this Agreement.
11.3. Entire Agreement. This Agreement
constitutes and embodies the full and complete understanding and agreement of
the parties with respect to the Executive's employment by the Corporation,
supersedes all prior understandings and agreements, if any, whether oral or
written, between the Executive and the Corporation and shall not be amended,
modified or changed except by an instrument in writing executed by the party to
be charged. The invalidity or partial invalidity of one or more provisions of
this Agreement shall not invalidate any other provision of this Agreement. No
waiver by either party of any provision or condition to be performed shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or any prior or subsequent time.
11.4. Binding Effect. This Agreement shall
inure to the benefit of, be binding upon and enforceable against, the parties
hereto and their respective successors and permitted assigns.
11
11.5. Captions. The captions contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
11.6. Notices. All notices, requests, demands
and other communications required or permitted to be given hereunder shall be
in writing and shall be deemed to have been duly given when personally
delivered or sent by certified mail, postage prepaid, or overnight delivery to
the party at the address set forth above or to such other address as either
party may hereafter give notice of in accordance with the provisions hereof.
11.7. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such State.
This Agreement shall be construed according to and governed by the laws of the
State of New York without giving effect to the principles of conflict of laws
thereof. The parties hereto agree to accept the jurisdiction of the U.S.
Federal Court or Nassau County Supreme Court, in the State of New York, for the
purpose of any action or proceeding against them arising out of or relating to
this Agreement, and agree that venue for any judicial action or proceeding
brought in such State shall be in the Eastern District of New York or Supreme
Court of Nassau County, as the case may be. Each of the parties hereto
irrevocably consents to the services of process in any action or proceeding in
such courts by the mailing thereof by United States registered or certified
mail postage paid at its address set forth herein.
12
11.8. Counterparts. This Agreement may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth above.
DYNARAD CORP.
By: /s/ LEONARD A. TRUGMAN
LEONARD A. TRUGMAN
/s/ GEORGE SOLOMON
GEORGE SOLOMON
13
EXHIBIT 10.24
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of January 1, 1996, by and
between DEL ELECTRONICS CORP., a New York corporation with offices at
1 Commerce Park, Valhalla, New York 10595 (hereinafter referred to as the
"Company") and STANLEY WUNDERLICH, an individual with offices located at 8 The
Hemlocks, Roslyn Estates, New York 11576 (hereinafter referred to as the
"Consultant").
In consideration of the mutual premises, covenants and agreements
hereunder and for such additional valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Term. The Company hereby engages the Consultant and the
Consultant hereby accepts such engagement, for a term commencing as of the date
hereof and ending on December 31, 1997 (the "Term"). At any time during the
first sixty (60) days of the Term, either party may elect to terminate this
Agreement without cause by delivery of a written notice to the other party.
Such termination shall be effective ten (10) days following the date of such
written notice.
2. Duties. The Company hereby retains the services of the
Consultant to provide and furnish consulting services to the Company with
respect to certain financial and public relations matters. Consultant's
services hereunder shall
be such as shall be reasonably requested by the Company from time to time, and
shall include, but shall not be limited to, the following services:
(a) Assisting the Company's public relations efforts;
(b) Arranging, on behalf of the Company, meetings with
securities analysts of investment banking firms;
(c) Arranging, on behalf of the Company, meetings
with money managers on a global basis;
(d) Furnishing advice to the Company with regard to
corporate finance matters;
(e) Assisting in the drafting and release of press
releases and other public relations material; and
(f) Furnishing advice to the Company in connection
with the acquisition of other companies.
The Consultant shall devote a portion of his business time
and effort to the performance of his duties hereunder consistent with the needs
of the Company. At the request of the Company, Consultant shall from time to
time attend meetings at the Company's or its subsidiaries' headquarters.
3. Compensation.
3.1. Consulting Fee. In consideration for the consulting
senvices to be provided by Consultant, the Company shall pay to the Consultant
a consulting fee (the "Consulting Fee") in the amount of Two Thousand Six
Hundred Twenty-Five ($2,625) Dollars per month during the Term, unless this
Agreement is earlier terminated pursuant to the terms hereof.
2
3.2. Independent Contractor. Consultant and the Company agree
that Consultant is an independent contractor and that he shall be responsible
for, and indemnify and hold harmless the Company against, all Federal, state
and local taxes required to be paid by him with respect to the Consulting Fee
under all applicable laws and regulations.
3.3. Authority of Consultant.
(a) The Consultant shall have no authority to bind or
commit the Company to agreements of any kind (except as expressly agreed in
writing), nor shall the Consultant have any authority or power to incur any
debt, obligation or liability or to enter into any contract or commitment on
the Company's behalf. The Consultant shall be considered an independent
contractor and not a servant, employee or agent of the Company.
(b) It is expressly understood that any person or
entity engaged by the Consultant to assist him in providing services hereunder
is at the Consultant's own risk, expense and supervision and that any such
person or entity has no claim against the Company for salaries, commissions or
other items of cost, and the Consultant warrants that any such person or entity
shall be subordinate to the Consultant and by and under him.
3.4. Expenses. The Company shall pay or reimburse the
Consultant for all reasonable, properly documented out-of-pocket expenses
actually incurred or paid by the Consultant during the Term in the performance
of the Consultant's duties under this Agreement. Consultant and the Company
acknowledge that such out-of-pocket expenses should not exceed a maximum of
Three Hundred
3
($300) Dollars per month, unless the Company approves such additional expenses
in advance.
3.5. Benefits. Consultant shall not be permitted to
participate in any group life, hospitalization or disability insurance plans,
health programs or similar benefit plans of the Company.
3.6. Disclosure of Confidential Information.
(a) Disclosure. Consultant recognizes that he will
have access to secret and confidential information regarding the Company and
its affiliates, and their products, know-how, customers and plans. Consultant
acknowledges that such information is of great value to the Company and its
affiliates, is the sole property of the Company and its affiliates, and has been
and will be acquired by him in confidence. In consideration of the obligations
undertaken by the Company herein, Consultant will not, at any time during or
after the Term, reveal, divulge or make known to any person, any information
acquired by Consultant during the Term, which is treated as confidential by
the Company or its affiliates and not otherwise in the public domain.
(b) Survival. The provisions of this Section 3.6 shall
survive the expiration or termination of the Term.
4. Miscellaneous.
4.1. Injunctive Relief. Consultant acknowledges that the
services to be rendered under the provisions of this Agreement are of a
special, unique and extraordinary character and that it would be difficult or
impossible to replace such services. Accordingly, Consultant agrees that any
breach or threatened breach by him of Section 3.6 of this Agreement shall
entitle the Company, in addition
4
to all other legal remedies available to it, to apply to any court of competent
jurisdiction to enjoin such breach or threatened breach. The parties understand
and intend that each restriction agreed to by Consultant hereinabove shall be
construed as separable and divisible from every other restriction, that the
unenforceability of any restriction shall not limit the enforceability, in
whole or in part, of any other restriction, and that one or more or all of
such restrictions may be enforced in whole or in part as the circumstances
warrant. In the event that any restriction in this Agreement is more
restrictive than permitted by law in the jurisdiction in which the Company
seeks enforcement thereof, such restriction shall be limited to the extent
permitted by law.
4.2. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission, special overnight delivery or sent by certified,
registered or express mail, postage prepaid.
4.3. Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.
4.4. Waivers and Amendments. This Agreement may be amended,
superseded, cancelled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or privilege
nor any single or partial exercise of any such right, power or privilege,
preclude any other or further exercise thereof or the exercise of any other such
right, power or privilege.
5
4.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
4.6. Assignment. This Agreement, and the Consultant's rights
and obligations hereunder, may not be assigned by the Consultant other than as
expressly provided herein; any purported assignment by the Consultant in
violation hereof shall be null and void.
4.7. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors, heirs,
executors and legal representatives.
4.8. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument. Each counterpart may consist of two
copies hereof each signed by one of the parties hereto.
4.9. Headings. The headings in this Agreement are for
reference only and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
DEL ELECTRONICS CORP.
By: /s/ Leonard A. Trugman
----------------------
Leonard A. Trugman
/s/ Stanley Wunderlich
----------------------
Stanley Wunderlich
6
WAIVER AND MODIFICATION
The Chase Manhattan Bank, N.A. ("Chase") has been advised that Del
Global Technologies Corp. ("Del") intends to file a Form S-2 Registration
Statement (the "Impending Registration Statement") with the Securities and
Exchange Commission (the "SEC") within approximately the next 60 days, pursuant
to which Del shall register approximately 2,000,000 shares of its common stock,
par value $.10 ("Common Stock").
Pursuant to a Warrant Agreement dated March 5, 1996 between Del and
Chase (the "Warrant Agreement"), Chase holds 17,000 warrants to purchase Common
Stock of Del (the "Warrants"). Section 7.1 of the Warrant Agreement gives Chase,
as the holder of the Warrants, certain demand registration rights (the "Demand
Registration Rights") which may be exercised by Chase one time at any time
after November 5, 1996. Section 7.2 of the Warrant Agreement gives Chase, as the
holder of the Warrants, certain piggy-back registration rights (the "Piggy-Back
Registration Rights") which would be exercisable in connection with the
Impending Registration Statement.
Del has requested that Chase waive the Piggy-Back Registration Rights in
connection with the Impending Registration Statement. As an inducement to Chase
to waive such rights, Del agrees that Chase may exercise its Demand Registration
Rights one time at any time after the earlier of (i) the thirtieth day after the
Impending Registration Statement shall have been declared effective by the SEC
or (ii) November 5, 1996.
Chase hereby agrees to waive the Piggy-Back Registration Rights, subject
to the foregoing modification of the date on which Chase may exercise its Demand
Registration Rights.
The waiver granted herein shall be effective only with respect to the
Impending Registration Statement and shall not limit in any way the Piggy-Back
Registration Rights of Chase with respect to any other registration statement.
IN WITNESS WHEREOF, Chase and Del have caused this waiver and
modification to be duly executed by their respective duly authorized officers as
of the date set forth herein.
DATED: April 25, 1996 DEL GLOBAL TECHNOLOGIES CORP.
By: /s/ Leonard A. Trugman
Name: Leonard A. Trugman
Title: Chairman, CEO & President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Michael D. Anthony
Name: Michael D. Anthony
Title: Vice President
INDEPENDENT AUDITORS' CONSENT EXHIBIT 23.1
We consent to the use in this Registration Statement of Del Global Technologies
Corp. (formerly Del Electronics Corp.) on Form S-2 of our report dated October
23, 1995, included and incorporated by reference in the Annual Report on Form
10-K, as amended, of Del Global Technologies Corp. for the year ended July 29,
1995, and to the use of our report dated October 23, 1995, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to
the reference to us under the heading "Selected Financial Data" and "Experts" in
such Prospectus.
S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
April 30, 1996
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
DENTSPLY International Inc.
We consent to the use of our report included herein and to reference to our firm
under the heading 'Experts' in the prospectus.
KPMG Peat Marwick LLP
Chicago, Illinois
April 26, 1996
EXHIBIT 24.1
POWER OF ATTORNEY
Each person whose individual signature appears below hereby
authorizes Leonard A. Trugman and David Engel, and each of them, with full
power of substitution and full power to act without the others, his true and
lawful attorney-in-fact and agent in his name, place, and stead, to execute in
the name and on behalf of each such person, individually and in each capacity
stated below, and to file, any and all amendments to this Registration
Statement, including any and all post-effective amendments.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has ben signed by the following persons in the
capacities indicated on the 30 day of April 1996.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ LEONARD A. TRUGMAN Chairman of the Board, Chief
- ----------------------------------- Executive Officer and President April 30, 1996
Leonard A. Trugman
/s/ DAVID ENGEL Executive Vice President and
- ----------------------------------- Chief Financial Officer April 30, 1996
David Engel
/s/ MICHAEL H. TABER Vice President - Finance,
- ----------------------------------- Secretary and Chief Accounting April 30,1996
Michael H. Taber Officer
/s/ NATAN BERTMAN Director April 30, 1996
- -----------------------------------
Natan Bertman
/s/ DAVID MICHAEL Director April 30, 1996
- -----------------------------------
David Michael
/s/ JAMES M. TIERNAN Director April 30, 1996
- -----------------------------------
James M. Tiernan
/s/ SEYMOUR RUBIN Director April 30, 1996
- -----------------------------------
Seymour Rubin
01\204\poa
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial data extracted from the
Statement of Assets to be acquired of the Gendex Medical Divisioin of Dentsply
International Inc. as of December 31, 1995 and the Statement of Revenues and
Expenses for the years ended December 31, 1994 and 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 6,129,493 0
<CURRENT-ASSETS> 6,129,493 0
<PP&E> 650,675 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 8,482,129 0
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 0
<SALES> 18,895,991 20,664,178
<TOTAL-REVENUES> 18,895,991 20,664,178
<CGS> 16,364,819 17,521,209
<TOTAL-COSTS> 16,364,819 17,521,209
<OTHER-EXPENSES> 2,614,806 2,864,647
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (83,634) 278,322
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (83,634) 278,322
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (83,634) 278,322
<EPS-PRIMARY> 0.000 0.000
<EPS-DILUTED> 0.000 0.000
</TABLE>
