FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED AUGUST 3,1996
COMMISSION FILE NUMBER 1-10512
DEL GLOBAL TECHNOLOGIES CORP.
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(Exact name of registrant as specified in its charter)
New York 13-1784308
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1 Commerce Park, Valhalla, New York 10595
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 914-686-3600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, The Nasdaq Stock Market
$.10 Par Value
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate market value of the voting stock held by non-affiliates of the
registrant amounted to $64,604,990 at the close of business on October 25, 1996.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the close of business on October 25, 1996.
Common Stock - 7,188,188
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PART I
ITEM 1. BUSINESS
The Company is comprised of (i) Del Global Technologies Corp.
("Del"), a New York corporation which was incorporated in 1954; (ii) RFI
Corporation ("RFI"), a Delaware corporation and wholly-owned subsidiary of the
Company, which was incorporated in 1961; (iii) Dynarad Corp. ("Dynarad"), a New
York corporation and wholly-owned subsidiary of the Company which was
incorporated in 1992 (formerly known as Porta Ray, Inc. which was founded in
1975); (iv) Bertan High Voltage Corp. ("Bertan"), a New York corporation and
wholly-owned subsidiary of the Company which was incorporated in 1994 (formerly
known as Bertan Associates, Inc. which was founded in 1969); (v) Del Medical
Systems Corp. ("Del Medical"), a New York corporation and wholly-owned
subsidiary of the Company which was incorporated in 1994 and (vi) Gendex-Del
Medical Imaging Corp. ("Gendex-Del"), a Delaware corporation and a wholly-owned
subsidiary of the Company, which was incorporated in March 1996 (formerly known
as the Gendex Medical Division of Dentsply International Inc.).
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 trade names 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 ("Original Equipment Manufacturers") 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 sale 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. The Gendex
division of Dentsply International Inc., which designed, manufactured and
marketed 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 percent of total net sales in fiscal 1992 to approximately
$26.0 million or 59.3 percent of total net sales in fiscal 1996. 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 $17.4 million in fiscal 1996. Export sales consist of
direct sales of the Company's products and sales of subsystems that are
incorporated into OEM's products for export.
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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.
Medical Imaging Products
Medical Imaging Systems. The Company's medical imaging systems are
sold under the GENDEX(TM), UNIVERSAL and Dynarad brand names. The list prices of
the Company's medical x-ray systems range from approximately $9,000 to $70,000
per unit.
Mammography Systems. The Company's mammography systems permit
imaging of the breast for both screening and diagnostic procedures. The
MAMEX(TM) 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.
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Stationary Medical X-ray Systems. Under the GENDEX(TM) brand name,
the Company produces a full product line of high frequency medical x-ray
generators, such as the GENDEX(TM) 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. 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.
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 powers 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
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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 1996
approximately 65 percent of the Company's noise suppression product sales were
attributable to custom designed products and approximately 35 percent 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 it products at the American College of Surgeons Annual
Meetings, at the Radiological Society of North American 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 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
The Company has an extensive ongoing research and development
program. As of August 3, 1996, the Company employed 52 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 $3.4 million in
fiscal 1996, $2.9 million in fiscal 1995, and $2.3 million in fiscal 1994.
Approximately 80 percent of all new critical electronic subsystems produced
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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.
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.
Manufacturing
The Company manufactures its HV power conversion components in two
facilities, one in Valhalla, New York and a second in Hicksville, New York. The
Company manufactures all of its electronic noise suppression filters and
capacitor components at its facility in Bay Shore, New York. The Company
manufactures its cost effective medical imaging products at its facility in Deer
Park, New York and at its facility in Franklin Park, IL.
The Company maintains a complete engineering laboratory for quality
control and environmental testing. In particular, the Company has an extensive
environmental testing department for the testing of its products against
temperature fluctuations, vibration, shock, humidity, electro-magnetic pulse and
other adverse environmental conditions.
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 price and delivery schedules.
Export Sales
During the three fiscal years ended August 3, 1996, July 29, 1995
and July 30, 1994, export sales accounted for approximately 40 percent, 36
percent and 28 percent, respectively, of the Company's revenues. Export sales
are made principally in Europe, the Far East, the Middle East and North America.
Backlog
The Company's backlog at August 3, 1996 was approximately $23.0
million compared to a backlog of approximately $18.9 million at July 29, 1995,
and approximately $17.2 million at July 30, 1994. Substantially all of the
backlog will result in shipments within the next 12 months.
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,
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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.
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 trade name and has been
granted a license to use, in conjunction with the word "medical", the GENDEX(TM)
trademark for medical imaging systems for five years from March 1996. The
Company owns the FILTRON(R) trademark for noise suppression products. The
Company does not consider that its business is materially dependent on patent
protection.
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 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.
The Company is also 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.
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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 Company is 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 products for sale to governmental agencies. Certain government
contracts 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 Company has not experienced in fiscal 1996, and does not
anticipate, any material expenditures in connection with its compliance with
Federal, state or local environmental laws or regulations.
Employees
As of August 3, 1996, the Company had approximately 440 employees,
including 11 executive officers, 31 persons in general administration, 24
persons in marketing, 322 persons in manufacturing and 52 persons in research
and development. The Company believes that its employee relations are good. None
of the Company's employees are represented by a labor union.
ITEM 2. PROPERTIES
The Company's executive headquarters are located in a facility in
Valhalla, New York in which the Company leases approximately 37,000 square feet
and where it designs and manufactures some of its power conversion components.
The facility is held under a lease expiring on July 31, 2002. The current annual
base rent for such premises is approximately $286,000. RFI owns a 55,000 square
foot facility located on four acres in Bay Shore, Long Island, where it engages
in electronic filter design and manufacturing. Dynarad Corp. leases
approximately 24,000 square feet of its facility in Deer Park, New York, under a
lease expiring August 31, 2002 where it designs and manufactures some of its
medical imaging products. The current annual base rent for such premises is
approximately $250,000. Bertan leases approximately 38,000 square feet of its
facility in Hicksville, New York under a lease expiring May 31, 2004 where it
designs and manufactures some of its power conversion devices. The current
annual base rent for such premises is approximately $383,000. Gendex-Del leases
approximately 68,000 square feet of its facility in Franklin Park, IL under a
lease which can be extended through January 2003 where it designs and
manufactures some of its medical imaging products. The current annual base rent
for such premises is approximately $182,000.The Company believes that its
current facilities are sufficient for its present requirements.
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ITEM 3. LEGAL PROCEEDINGS
RFI is a defendant in an action pending in the Supreme Court of the
State of New York, Kings County on July 25, 1994. The plaintiffs, Mark Palmer
Hansen and the other individuals named in the pleading, claim that while they
were employed by Unisys, they were injured as a result of exposure to an
allegedly toxic substance contained in certain filters manufactured by Filtron
Co., Inc. The principal defendants in the action are Filtron Co., Inc., RFI and
Paramax Systems Corporation. Plaintiff's exposure to the alleged toxic substance
occurred prior to the Company's purchase of selected assets of Filtron Co., Inc.
from ARX, Inc. Furthermore, Filtron Co., Inc. and ARX, Inc. are contractually
obligated to indemnify the Company in connection with this claim. The Company's
product liability insurance carrier has appointed counsel to defend this action.
The Company believes it has meritorious defenses to the claim.
The Company settled litigation in which the plaintiff , Terry Groom,
a former employee of Schlumberger Technology Corp., claimed that he was injured
while employed. The plaintiff alleged that the Company was involved in the
supply of a component used in connection with certain Schlumberger projects. The
Company's product liability insurance carrier covered all costs of the
settlement, and therefore, there was no financial impact on the Company as a
result of this settlement.
Management does not believe that the resolution of the above legal
proceeding will have a material effect on the Company's consolidated financial
condition and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of June 10,1996, the Company's common stock began trading on the
Nasdaq Stock Market under the symbol DGTC. From April 18, 1990 to June 10, 1996,
the Company's common stock was traded on the American Stock Exchange under the
symbol DEL. The following table shows the high and low closing sales prices per
share of common stock for the past twelve quarters.
<TABLE>
<CAPTION>
Year Ending Year Ending
August, 3 1996 July 29, 1995
High Low High Low
<S> <C> <C> <C> <C>
First Quarter 6 5/8 5 1/2 6 3/8 5 1/8
Second Quarter 8 6 5 7/8 4 1/2
Third Quarter 8 1/2 7 3/8 5 5/8 4 7/8
Fourth Quarter 19 3/8 7 1/4 6 5/8 5 1/8
</TABLE>
The above prices have been restated to give retroactive effect to 3% stock
dividends declared in June 1996, November 1995, May 1995, November 1994, May
1994 and November 1993.
The approximate number of holders of record of the Company's common stock $.10
par value as of August 3, 1996 was 1,195.
The Company has not paid any cash dividends, except for the payment of cash in
lieu of fractional shares, since 1983.
9
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------
August 3, July 29, July 30, July 31, August 1,
INCOME STATEMENT DATA: 1996 1995(b) 1994(b) 1993(b) 1992
<S> <C> <C> <C> <C> <C>
Net sales $43,745,454 $32,596,312 $24,327,015 $22,287,315 $18,948,930
----------- ----------- ----------- ----------- -----------
Cost and expenses:
Cost of sales 27,355,262 19,177,999 15,179,081 13,455,261 11,754,344
Research and development 3,429,331 2,861,844 2,253,412 1,712,881 1,262,263
Selling, general and
administrative 7,503,689 6,622,690 4,862,519 4,390,267 3,473,622
Interest expenses - net 1,148,639 1,191,142 576,832 360,149 308,525
---------- ---------- ---------- ---------- ----------
39,436,921 29,853,675 22,871,844 19,918,558 16,798,754
---------- ---------- ---------- ---------- ----------
Income before provision
for income taxes 4,308,533 2,742,637 1,455,171 2,368,757 2,150,176
Provision for income taxes 1,393,111 837,428 341,525 708,000 657,792
Cumulative effect of change in method
for accounting for income taxes - - 76,363 - -
---------- ---------- ---------- ---------- ----------
Net income $2,915,422 $1,905,209 $1,190,009 $1,660,757 $1,492,384
========== ========== ========== ========== ==========
Netincome per common share and
common share equivalents,
before cumulative
effect of change in method
for accounting for income taxes $ .50 $ .38 $ .22 $ .35 $ .33
Cumulative effect of change in method
for accounting for income taxes - - .02 - -
---------- ---------- ---------- ---------- ----------
Net income per common share and
common share equivalents (a):
primary and fully diluted $ .50 $ .38 $ .24 $ .35 $ .33
========== ========== ========== ========== ==========
Number of shares used in computation
of primary earnings per share (a) 5,934,221 5,195,624 5,043,794 4,709,879 4,558,543
========== ========== ========== ========== ==========
Number of shares used in computation
of fully diluted earnings
per share (a) 5,934,221 5,217,540 5,043,794 4,712,728 4,572,574
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
As of
---------------------------------------------------------------
August 3, July 29, July 30, July 31, August 1,
1996(b) 1995(b) 1994(b) 1993(b) 1992
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $32,552,295 $20,648,281 $18,530,176 $13,856,981 $11,307,592
=========== =========== =========== =========== ===========
Total assets $57,729,752 $39,054,634 $36,198,373 $24,969,136 $19,412,572
=========== =========== =========== =========== ===========
Long-term debt $ 499,852 $11,902,951 $11,485,722 $ 5,639,290 $ 3,901,622
=========== =========== =========== =========== ===========
Shareholders' equity $47,069,528 $19,525,073 $17,698,507 $15,634,240 $12,773,226
=========== =========== =========== =========== ===========
Common shares outstanding (c) 7,165,151 4,322,567 4,321,398 4,020,314 3,568,897
=========== =========== =========== =========== ===========
</TABLE>
(a) Net income per common share and common stock equivalents have been
restated to give effect to stock dividends in 1996, 1995, 1994 and 1993.
See footnote 1 of notes to the consolidated financial statements for
computation of earnings per share.
(b) The fiscal year ended August 3, 1996 includes the operations of
Gendex-Del; the fiscal years ended August 3, 1996, July 29, 1995, July
30, 1994 and July 31, 1993 include the operations of Dynarad; fiscal
years ended August 3, 1996, July 29, 1995 and July 30, 1994 include the
operations of Bertan.
(c) Common shares outstanding for 1996, 1995, 1994 and 1993 are reduced
by 58,255, 55,165, 16,656 and 4,000 shares of treasury stock,
respectively.
10
<PAGE>
ITEM 7. 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 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-Del ( a
manufacturer of medical imaging systems) in fiscal 1996. The Company's net sales
have increased from $18.9 million in fiscal 1992 to $43.7 million in fiscal
1996, a compounded annual growth rate of 23.3 percent. The Company has also
experienced internal growth of 11.7 percent to approximately $36.4 million for
fiscal 1996 versus fiscal 1995.
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 percent of total net sales in fiscal 1992 to approximately $14.4 million or
44.2 percent and approximately $25.7 million or 59 percent of total net sales in
fiscal years 1995 and 1996, respectively.
Management 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. Some of these trends are
increased demand for lower cost medical equipment, outsourcing of critical
electronic subsystems by leading OEMs, increased demand for certain diagnostic
procedures and lower cost medical services in the global marketplace.
The following discussion and analysis examines the major
factors contributing to the Company's financial condition and results of
operations for the three years ended August 3, 1996, July 29, 1995 and July 30,
1994. The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto appearing
elsewhere in this document.
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 $11.7 million, $8.8
million and $4.6 million, respectively, for fiscal years ended August 3, 1996,
July 29, 1995 and July 30, 1994.
Results of Operations
The following table sets forth, for the years indicated, the
percentage of net sales represented by items as shown in the Company's
Consolidated Statements of Income.
11
<PAGE>
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------------
August 3, July 29, July 30,
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 62.5 58.8 62.4
Research and development 7.8 8.8 9.3
Selling, general and administrative 17.2 20.3 19.9
Interest expense - net 2.6 3.7 2.4
--- --- ---
90.1 91.6 94.0
---- ---- ----
Income before provision for income taxes 9.9 8.4 6.0
Provision for income taxes 3.2 2.6 1.4
--- --- ---
Income before cumulative effect of change in 6.7 5.8 4.6
method for accounting for income taxes
Cumulative effect of change in method for
accounting for income taxes 0.3
--- --- ---
Net income 6.7% 5.8% 4.9%
=== === ===
</TABLE>
Fiscal Years 1996, 1995 and 1994
Net sales for the Specialty Electronics Manufacturing segment
for fiscal 1996 were approximately $29.4 million compared to approximately $27.0
million for fiscal 1995, an increase of 8.9 percent. This increase was due to
internal growth as the result of increased demand for the Company's products.
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 percent. 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 Medical
Manufacturing segment were approximately $14.3 million for fiscal 1996 as
compared to approximately $5.6 million in fiscal 1995, an increase of 255.4
percent. The increase was due to internal growth of Dynarad (approximately $1.4
million) and the acquisition of the Gendex-Del subsidiary, which occurred in
March 1996. Net sales for the Medical Manufacturing segment were approximately
$5.6 million for fiscal 1995 as compared to fiscal 1994, an increase of 14.3
percent.
Cost of sales for the Specialty Electronics Manufacturing
segment increased to approximately $16.8 million or 53.6 percent of net sales in
fiscal 1996 from approximately $15.0 million or 55.5 percent of net sales in
fiscal 1995. Cost of sales in the Specialty Electronics Manufacturing segment,
increased from approximately $12.1 million or 62.3 percent of sales in fiscal
1994 to approximately $15.0 million or 55.5 percent of sales in fiscal 1995. The
decrease in cost of sales as a percentage of net sales in fiscal years 1996 and
1995 were primarily due to improved operating efficiencies. Cost of sales in
fiscal 1996 for the Medical Manufacturing segment increased to approximately
$10.6 million or 73.8 percent of net sales from approximately $4.2 million or
75.0 percent of sales in fiscal 1995 and approximately $3.1 million or 62.9
percent of net sales in fiscal 1994. The fiscal 1996 improvement in margins from
fiscal 1995 is due to the reduced manufacturing cost from efficiencies
implemented in this segment in both the Dynarad and Gendex-Del subsidiaries. The
increase in cost of sales as a percentage of net sales in fiscal 1995 was due to
a change in the mix of products sold in this segment in fiscal 1995 as compared
to fiscal 1994.
Research and development costs for the Specialty Electronics
Manufacturing segment, increased approximately 5.1 percent to approximately
$2.85 million in fiscal 1996 from approximately $2.71 million in fiscal 1995. In
fiscal 1995 the increase was approximately 47.6 percent to approximately $2.71
million from
12
<PAGE>
approximately $1.84 million in fiscal 1994. The inclusion of Bertan for all of
fiscal 1995 was the primary reason for this increase. Research and development
costs in the Medical Manufacturing segment increased 381 percent to
approximately $583,000 in fiscal 1996 from approximately $153,000 in fiscal
1995. This increase was attributable to increased research and development at
Dynarad and to the inclusion of the research and development of the Gendex-Del
subsidiary. Research and development costs for the Medical Manufacturing segment
decreased by 63.3 percent to approximately $153,000 in fiscal 1995 as compared
to approximately $418,000 in fiscal 1994.
Selling, general and administrative expenses, as a percentage
of sales, in the Specialty Electronics Manufacturing segment, were approximately
$5.0 million or 16.9 percent of net sales in fiscal 1996, approximately $5.4
million or 19.9 percent of net sales in fiscal 1995 and approximately $3.9
million or 19.1 percent of net sales in fiscal 1994. Selling, general and
administrative expenses, for the Medical Manufacturing segment, were
approximately $2.5 million or 17.7 percent of net sales in fiscal 1996,
approximately $1.2 million or 22.2 percent of net sales in fiscal 1995 and
approximately $1.1 million or 23.5 percent of net sales in fiscal 1994. Selling,
general and administrative expenses, as a percentage of sales, have decreased as
the sales volume in the Company has increased.
Interest expense, net of interest income, for fiscal 1996,
1995 and 1994 was approximately $1.1 million, $1.2 million and $577,000,
respectively. Interest expense decreased in fiscal 1996 as the result of the
completion of an equity offering in June 1996 and subsequent debt repayments.
Interest expense increased in fiscal 1995 compared to fiscal 1994 due to higher
levels of borrowing due to the Bertan acquisition, working capital requirements
and higher interest rates.
Income tax expense increased to 32.3 percent of pre-tax income
in fiscal 1996 from 30.5 percent of pre-tax income in fiscal 1995 due to the
effect of a lower research and development tax credit available in fiscal 1996
due to the timing of the reinstatement of this tax credit . Fiscal 1996 includes
only one month of this tax credit as compared to fiscal 1995 which has a full
year of this tax credit. Income tax expense increased to 30.5 percent of pre-tax
income in fiscal 1995 from 23.5 percent 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 percent if not for a reduction of $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 $108,000
was included in selling, general and administrative expenses. There was a
cumulative effect of change in method for accounting for income taxes of $76,000
in fiscal 1994 due to the adoption of SFAS 109.
Net income for fiscal 1996 was approximately $2.9 million, an
increase of approximately 53.0 percent from approximately $1.9 million in fiscal
1995. Net income for fiscal 1995 was approximately $1.9 million, an increase of
approximately 60.1 percent from approximately $1.2 million in fiscal 1994.
Earnings per share were $.50, an increase of $.12 per share which represents a
31.5 percent increase from primary earnings per share of $.38 in fiscal 1995.
The number of outstanding shares and common share equivalents increased from
approximately 5.2 million shares in fiscal 1995 to approximately 5.9 million
shares in fiscal 1996 or 14.2 percent. The primary and fully diluted earnings
per share before cumulative effect of change in method for accounting for income
taxes for fiscal 1994 was $.22 per share. For fiscal 1994, primary and fully
diluted earnings per share were $.24 per share. The increase in net income for
fiscal 1996 as compared to fiscal 1995 was due to internal growth and the
addition of the Gendex-Del subsidiary in March 1996. The increase in net income
for fiscal 1995 as compared to fiscal 1994 was due to internal growth, improved
operating efficiencies and the inclusion of the Bertan subsidiary's operations
for all of fiscal 1995.
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 August 3, 1996 and July 29, 1995, the Company's working
capital was approximately $32.6 million and $20.6 million, respectively. At such
dates the Company had approximately $5.8 million and $506,000, respectively, in
cash and cash equivalents.
Trade receivables at August 3, 1996 increased approximately
$2.8 million as compared to July 29, 1995 primarily as the result of the
inclusion of the Gendex-Del receivables of approximately $3.1 million in fiscal
1996.
13
<PAGE>
Inventory at August 3, 1996 increased approximately $5.8
million as compared to July 29, 1995. Approximately $4.3 million of this
increase was due to the inclusion of the Gendex-Del inventory and the balance
due to higher business levels at the Company's other operating units.
Prepaid expenses and other current assets increased
approximately $355,000 at August 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 of Del Medical Systems and RFI Corporation
under their exclusive distribution agreement for diagnostic medical image
enhancers and filtered connectors and the prepaid expenses of Gendex-Del.
Accounts payable increased by approximately $1.2 million,
which was primarily attributable to the inclusion of accounts of Gendex-Del,
partly offset by lower levels of payable at the other operating units.
Accrued liabilities increased by approximately $1.6 million,
which was primarily attributable to the inclusion of Gendex-Del and taxes
payable.
Credit Facility and Borrowing. On March 5, 1996, in connection with the
acquisition of Gendex, the Company and its 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. On June 12, 1996, after
completing the sale of 2,275,000 shares of common stock, the Company was able to
repay the Dentsply loan and all but $600,000 of its bank borrowing. On August 2,
1996, the Company and its lending bank further amended their Credit Agreement to
allow for a five year $10.0 million acquisition credit line to replace the five
year term loan. Borrowings under the Company's Amended Credit Agreement are now
on an unsecured basis. At August 3, 1996, the Company had approximately $13.5
million available under its revolving line of credit, after deducting letters of
credit outstanding of $358,000 and $9.5 million available under its acquisition
credit line.
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
$2.0 million, $1.3 million and $1.7 million, respectively, for capital equipment
expenditures in fiscal years 1996, 1995 and 1994, respectively.
Shareholders' Equity. In July 1996, the Company completed the public offering of
2,275,000 shares of its common stock including 275,000 shares of the
over-allotment option. The net proceeds of this offering were approximately
$21.6 million after deducting underwriting fees and expenses. During fiscal 1996
approximately 487,000 stock option and warrant shares were exercised, with
proceeds of approximately $2.6 million.
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
14
<PAGE>
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to Financial Statements and Supplementary Data
attached hereto and made a part hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
Leonard A. Trugman (1)......................58 Chairman of the Board, Chief
Executive Officer and President
David Engel.................................47 Executive Vice President and
Chief Financial Officer
Louis J. Farin, Sr..........................53 Vice President and General
Manager of Del Power Conversion
Division
Paul J. Liesman.............................35 Vice President and Vice
President and General Manager
of Bertan High Voltage Corp.
John D. MacLennan...........................44 Vice President and Vice
President and General Manager
of Gendex-Del Medical Imaging
Seymour Rubin...............................66 Vice President and President
of RFI Corporation, Director
George Solomon..............................51 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).....................59 Director
James Tiernan (3)...........................72 Director
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Stock Option Committee
15
<PAGE>
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 Master 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.
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.
Paul J. Liesman has been Vice President and Vice President and
General Manager of Bertan High Voltage Corp. since May 1996. From March 1996 to
May 1996, Mr. Liesman was Vice President - Operations of Bertan High Voltage
Corp. From January 1995 to March 1996, he was Operations Manager at Del Power
Conversion. Mr. Liesman was Chief Mechanical Engineer at Del Power Conversion
from March 1990 to January 1995. Mr. Liesman holds a Masters Degree in Business
Administration and a Bachelor of Science Degree in Mechanical Engineering.
John D. MacLennan has been Vice President since April 1996 and the
Vice President and General Manager of Gendex-Del Medical Imaging Corp. since
March, 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
Master 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 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 Vice President - Finance and Chief
Accounting Officer of the Company from 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., PC and is a Certified Public Accountant.
16
<PAGE>
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.
17
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, for the three fiscal years ended
August 3, 1996, certain compensation information with respect to the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers, and two additional individuals, based upon salary and bonus
earned by such executive officers and individuals in the fiscal year ended
August 3, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-term Compensation
Annual Compensation Awards
------------------------------------------------- ---------------------------
Securities
Restricted Underlying All Other
Name and Principal Other Annual Stock Options/ Compensation
Position Year Salary($) Bonus($) Compensation($) Awards($) SARS (#) ($)(1)
- ---------------------- ---- --------- --------- --------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leonard A. Trugman 1996 289,406 343,318(2) - - - 39,708
Chairman, CEO 1995 275,625 257,273(2) - - 54,636 40,356
and President 1994 262,500 164,000(2) - - - 38,728
Seymour Rubin 1996 223,379 32,284 - - 10,300 7,274
Vice President 1995 210,000 50,000 - - 10,927 8,539
and President of 1994 200,000 50,000 - - 29,851 5,709
RFI Corporation
George Solomon 1996 164,721 5,000 - - 10,300 1,410
V.P. - Intl. Sales & 1995 155,392 5,000 - - - 1,000
Mktg., President of 1994 119,534 - - - 11,941 1,000
Del Medical Systems
David Engel 1996 109,423 7,500 - - 10,300 1,496
Executive Vice 1995 86,634 1,500 - - 5,464 666
President/CFO 1994 55,769(3) - - - 5,628 -
Louis J. Farin, Sr. 1996 105,000 20,815 - - 10,300 1,532
Sr. Vice President, 1995 100,000 4,000 - - - -
V.P. & Genl. Mgr. - 1994 82,500 4,500 - - 17,225 1,000
Del Power Conversion
Howard Bertan(5) 1996 154,918 117,665 - - 10,300 1,655
Senior Technical 1995 139,192 72,154 - - - 1,000
Consultant 1994 45,769(3) 25,493(3) - - 40,575 -
Leonard Michaels(6) 1996 150,902 - - - - 61,187(4)
Senior Technical 1995 168,404 - - - - 60,800(4)
Consultant 1994 160,385 - - - - 61,285(4)
</TABLE>
(1) Includes insurance premiums where families of the officers are beneficiaries
and automobile expense allowances.
(2) Includes deferred compensation in the amounts of $125,000, $125,000 and
$100,000 for the 1996, 1995 and 1994 fiscal years, respectively.
(3) Based on 17 weeks of employment for fiscal 1994. Bertan was acquired in
April 1994.
(4) Includes an annual non-compete payment of $52,000.
(5) Mr. Bertan was President of Bertan High Voltage Corp. until May 28, 1996, at
which time he became a senior technical consultant to the Company.
(6) Mr. Michaels was President of Dynarad Corp. until April 1, 1996, at which
time he became a senior technical consultant to the Company.
18
<PAGE>
Stock Options Granted to Certain Executive Officers During the Last Fiscal Year
The following table sets forth certain information regarding options
for the purchase of the Company's Common Stock that were awarded to the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers and two additional individuals, based upon salary
and bonus earned by such executive officers and individuals in the fiscal year
ended August 3, 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of
Individual Grants (1) for Option Term
--------------------- --------------------
% of Total
Options
Granted to
Employees Exercise or
Name Options In Fiscal Base Price Expiration
---- Granted(#) Year ($)(Sh) Date 5%($)(1) 10%($)(1)
---------- ---- ------- ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Leonard A. Trugman -- -- -- -- -- --
Seymour Rubin 10,300 4% $6.37 12/29/10 $113,723 $294,729
George Solomon 10,300 4% $6.37 12/29/10 $113,723 $294,729
David Engel 10,300 4% $6.37 12/29/10 $113,723 $294,729
Louis J. Farin, Sr 10,300 4% $6.37 12/29/10 $113,723 $294,729
Howard Bertan 10,300 4% $6.37 12/29/10 $113,723 $294,729
Leonard Michaels -- -- -- -- -- --
</TABLE>
- ----------------------
(1) Fair market value of stock on grant date compounded annually at rate shown
in column heading, for the option term, less exercise price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding options
for the purchase of the Company's Common Stock that were exercised and or held
by the Company's Chief Executive Officer and each of the four other most highly
compensated executive officers and two additional individuals, based upon salary
and bonus earned by such executive officers and individuals in the fiscal year
ended August 3, 1996.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In-the-Money Options
Acquired on Value Options at Fiscal Year-End at Fiscal Year-End ($)(2)
Name Exercise(#) Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Leonard A. Trugman - - 687,468/40,977 $4,284,488/$155,507
Seymour Rubin - - 113,379/25,957 $472,489/$78,280
George Solomon - - 2,814/8,441 $5,318/$15,953
David Engel - - 4,180/17,212 $13,444/$23,811
Louis J. Farin, Sr. - - 27,981/17,419 $122,729/$41,546
Howard Bertan - - 40,575/10,300 $94,743/20,652
Leonard Michaels 25,314 247,053 - -
</TABLE>
- ----------------------
(1) Difference between the fair market value of the common stock purchased and
the exercise price on the date of exercise.
(2) Difference between the fair market value of the underlying common stock and
the exercise price for in-the-money options on August 3, 1996 ($8.375).
Directors of the Company did not receive compensation for their
services as such except a fee of $750.00 for each meeting of the Board of
Directors which they attend. Messrs. Trugman and Rubin have waived their right
to receive such compensation.
19
<PAGE>
Employment Agreements
Mr. Leonard Trugman has an amended and restated employment agreement
with the Company, effective as of August 1, 1992 which was subsequently amended
on July 20, 1994 and September 1, 1994, pursuant to which he has agreed to serve
as Chairman, President and Chief Executive Officer of the Company. Mr. Trugman's
annual base salary was $289,406 for the fiscal year ended August 3, 1996. His
annual base salary for the fiscal year August 4, 1996 through August 2, 1997 is
determined by multiplying $289,406 by the greater of five percent or the
increase in the Consumer Price Index as of August 1, 1996 over the amount of
such index as of August 1, 1995. Mr. Trugman also receives a bonus each year
equal to five (5%) percent of the Company's pre-tax net income for such year.
Mr. Trugman's contract also provides for a deferred compensation account whereby
the Company shall deposit (a) $100,000 annually and (b) after receipt of the
Company's audited financial statements with respect to each fiscal year, an
amount equal to the lesser of (x) $25,000 or (y) five (5%) percent of the
Company's pre-tax net income for such fiscal year less $100,000. Also included
in Mr. Trugman's agreement are certain benefits in the event of a change of
control. Either upon completion of the term of the agreement or upon request at
any time, Mr. Trugman may opt for a five year extension in the form of a
consulting contract at a rate specified within the agreement. The employment
agreement contains standard confidentiality and non-compete provisions.
Mr. George Solomon, who joined the Company on October 11, 1993, has an
employment agreement which terminates on July 31, 1997. Pursuant to the terms of
the agreement, Mr. Solomon is currently Vice President of International Sales
and Marketing for Medical Products and President of Del Medical Systems Corp.
The employment agreement provides for a current base salary of $163,170 and a
bonus based on the performance of Dynarad with an annual minimum of $5,000.
Mr. John MacLennan, who joined the Company on March 6, 1996 with the
acquisition of Gendex-Del Medical Imaging Corp., has an employment agreement
which commenced on March 19, 1996 and terminates on March 18, 1999. Pursuant to
the terms of the agreement, Mr. MacLennan agreed to serve as Vice President and
General Manager of Gendex-Del Medical Imaging Corp. The employment agreement
provides for a base salary of $125,000 per annum for the first year, with five
percent increases for the second and third years. Mr. MacLennan also receives a
bonus with respect to each fiscal year equal to 3% of the Gendex-Del Medical
Imaging Corp.'s pre-tax net income in excess of $500,000.
Mr. Leonard Michaels, who joined the Company as of September 1, 1992,
has an employment agreement with Dynarad Corp., which commenced as of September
1, 1992 and expires on July 29, 1997. Pursuant to the terms of such agreement,
Mr. Michaels agreed to serve as President of Dynarad Corp. Upon his execution of
such employment agreement, Mr. Michaels received a signing bonus of $250,000 in
the fiscal year ended July 31, 1993. The employment agreement provides for the
payment of a base salary of $150,000 per annum, subject to increases on an
annual basis, and certain bonuses if the net income goals specified in such
employment agreement are achieved. Mr. Michaels' annual base salary for the
period from July 30, 1995 to March 31, 1996 was $135,526. As of April 1, 1996,
Mr. Michaels became a technical consultant to the Company. In consideration of
Mr. Michaels' covenant not to compete for ten years as set forth in the
employment agreement, he received upon execution thereof a payment of $257,400
during the fiscal year ended July 30, 1994, and during the ten year term thereof
shall receive annual non-compete payments of $52,000.
Mr. Howard Bertan has an employment agreement with Bertan High Voltage
Corp. which commenced on April 24, 1994 and terminates on April 23, 1997, unless
extended for up to an additional two (2) year period. Pursuant to the terms of
such agreement, Mr. Bertan agreed to serve as President and Chief Operating
Officer of Bertan High Voltage Corp. The employment agreement provides for the
payment of a base salary of $154,350 for the period commencing on April 24, 1996
and terminating on April 23, 1997, subject to increases each twelve months
thereafter during the term. Mr. Bertan also receives a bonus with respect to
each fiscal year equal to five (5%) percent of the Bertan High Voltage Corp.'s
pre-tax net income for such year. The employment agreement contains standard
confidentiality and non-compete provisions. As of May 28, 1996, Mr. Bertan
became a technical consultant to the Company.
In consideration of Mr. Howard Bertan's covenant not-to-compete for a
period of ten years after the completion of his employment agreement, he will
receive $500,000 payable in equal quarterly payments for a period of ten years
after his period of active employment. Such payments are subject to adjustment
to reflect the greater of (i) 5% or (ii) increases in the Consumer Price Index
for the United States.
20
<PAGE>
Mr. Lester Bertan, former Chairman and part owner of Bertan Associates,
Inc., has a non-compete agreement for a period of ten years, wherein he will
receive $500,000 payable in equal quarterly payments, commencing sixty days
after April 1, 1994 for a period of ten years. Such payments are subject to
adjustment to reflect the greater of (i) 5% or (ii) increases in the Consumer
Price Index for the United States.
Stock Option Plans
Non-Qualified Stock Option Plan
The Company's Non-Qualified Stock Option Plan provides for a total of
2,547,857 shares of Common Stock authorized to be granted under such plan. For
the year ended August 3, 1996, options to purchase an aggregate of 1,656,716
shares were outstanding at an average exercise price of $4.30 per share, having
a range of expiration dates from September 2000 to March 2011. During fiscal
1996, the Company granted options to purchase 288,400 shares of Common Stock at
an average exercise price of $6.91 per share. During fiscal 1996, 226,433
options were exercised or expired and 252,648 shares were available for future
grant under such plan. The Company's Non-Qualified Stock Option Plan provides
for the grant of options to its key employees, directors and consultants in
order to give such employees a greater personal interest in the success of the
Company and an added incentive to continue and advance in their employment. The
Company's Non-Qualified Stock Option Plan provides for a fifteen year expiration
period for each option granted thereunder and allows for the exercise of options
by delivery by the optionee of previously owned Common Stock of the Company
having a fair market value equal to the option price, or by a combination of
cash and Common Stock.
As of October 25, 1996, the Company had granted options to
purchase 851,432 shares to Leonard A. Trugman, 21,391 shares to David Engel,
55,961 shares to Louis Farin, 9,570 shares to Paul Liesman, 139,337 shares to
Seymour Rubin, 22,241 shares to George Solomon and 25,308 shares to Michael
Taber at an average exercise price of $3.45 per share. No options issued to
officers were either exercised or expired during the year.
Stock Purchase Plan
Employee Stock Purchase Plan
The Company has an employee stock purchase plan which is funded by
payroll deductions. Shares acquired pursuant to such plan by employees of the
Company are purchased in the open market by the custodian of the plan. All
shares so purchased are held in street name until an employee requests that the
shares to which he is entitled, or a portion thereof, be issued to him.
Substantially all employees of the Company are eligible to participate
in such plan. With respect to the executive officers of the Company, for the
calendar year ended December 31, 1995, 1,452, 97, 80, 1,861, 335 and 289 shares
were issued to Leonard A. Trugman, David Engel, Paul Liesman, Seymour Rubin,
George Solomon and Michael Taber, respectively, from this plan. For the six
months ended June 30, 1996, 639, 105, 40, 819, 217 and 139 shares were issued to
Leonard A. Trugman, David Engel, Paul Liesman, Seymour Rubin, George Solomon and
Michael Taber, respectively, from this plan. For the period from July 1, 1996
through October 25, 1996, 443, 66, 79, 558, 59 and 74 shares are being held in
the plan on behalf of Leonard A. Trugman, David Engel, Paul Liesman, Seymour
Rubin, George Solomon and Michael Taber, respectively.
Employee Benefit Plans
Defined Benefit Plan
The Company has a defined benefit pension plan which provides
retirement benefits for some employees ("Participants"). Pursuant to the plan,
Participants will receive a benefit, computed by an actuary at retirement based
upon their number of years of credited service and average total annual
compensation during five consecutive years of their service, reduced by a
portion of the benefits received under social security. Effective February 1,
1986, the plan was frozen so that future salary increases are not considered in
determining a Participant's pension benefit, contributions by Participants are
no longer permitted and participation in the plan is limited to those
Participants as of August 1, 1984. The Company continues to fund the plan with
contributions determined on an actuarial basis.
21
<PAGE>
The following table illustrates, for representative average annual
covered compensation and years of credited service classifications, the
estimated annual retirement benefits payable to employees under this plan upon
retirement at age 65 based on the plan's normal form of benefit and social
security benefits frozen as of August 1, 1984. Benefits under the plan are
limited to the extent required by the Employee Retirement Income Security Act of
1974.
PENSION PLAN TABLE
Average Annual Years of Credited Service
Covered Compensation 15 or more
-------------------- -------------------------
$ 40,000 $13,000
$ 50,000 $17,000
$ 75,000 $27,000
$100,000 $37,000
The executive officers named in the Summary Compensation Table do not
participate in the plan, except for Louis Farin, Sr. During fiscal 1995, the
Pension Plan was submitted to the Internal Revenue Service and a favorable
determination letter was received.
401(k) Plan
The Company has a 401(k) plan under which employees may elect to defer
a portion of their annual compensation. Connecticut General Life Insurance
Company (CIGNA) is the plan administrator. All employees with over 90 days of
service and over the age of 21 may elect to defer from 2 percent to 15 percent
of their annual salary. The modified plan is administered by CIGNA and employees
may elect where their deferred salary will be invested. Highly compensated
employees' salary deferrals are limited by the contribution levels of all other
eligible participants. Distributions are made at retirement or upon termination
of employment. During the fiscal year ended July 29, 1995, the merged plan was
submitted to the Internal Revenue Service and a favorable determination letter
was received.
On February 1, 1986 the Company initiated a profit sharing plan as part
of the 401(k) plan which allows substantially all of the Company's employees to
participate in the profits of the Company, regardless of whether or not the
employee elected to contribute to the 401(k) plan in any year. Since the profit
sharing plan is part of the 401(k) plan, eligibility, participation and other
requirements are governed by the provisions of the 401(k) plan. Contributions to
the plan are determined based upon a calculation directly related to the
Company's sales volume and pre-tax profits. The Company's Compensation Committee
approved $40,000 and $32,500 profit sharing contributions for the periods ended
August 3, 1996 and July 29, 1995. There was a $15,000 contribution for the
period ended July 31, 1993.
22
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information concerning the shares of
Common Stock beneficially owned as of October 25, 1996 by the Directors and by
all Directors, Officers and significant employees of the Company as a group
without naming them and each person who is known by the Company to be the
beneficial owner of more than five (5%) percent of the Common Stock as of such
date.
Shares of Common
Stock Beneficially
Name and Address of Owned as of Percent
Beneficial Owner October 25, 1996 (1) of Class
LEONARD A. TRUGMAN 877,646 (2) 11.1%
c/o Del Global
Technologies Corp.
1 Commerce Park
Valhalla, NY 10595
NATAN BERTMAN 104,718 (3) 1.4%
c/o Bertman & Levine
945 Manhattan Avenue
Brooklyn, NY 11222
DAVID MICHAEL 155,776 (4) 2.1%
c/o David Michael
& Co., P.C.
Seven Penn Plaza
New York, NY 10001
SEYMOUR RUBIN 134,677(5) 1.8%
c/o RFI Corporation
100 Pine Aire Drive
Bay Shore, NY 11706
JAMES TIERNAN 8,478 (6) *
7 Patriot Court
New City, NY 10956
DAVID ENGEL 4,516 (7) *
c/o Del Global
Technologies Corp.
One Commerce Park
Valhalla, NY 10595
LOUIS J. FARIN, SR. 36,843 (8) *
c/o Del Global
Technologies Corp.
One Commerce Park
Valhalla, NY 10595
PAUL J. LIESMAN 1,646 (9) *
c/o Bertan High
Voltage Corp.
121 New South Road
Hicksville, NY 11801
JOHN D. MACLENNAN 5,150 *
c/o Gendex-Del Medical
Imaging Corp.
11550 West King Street
Franklin Park, IL. 60634
23
<PAGE>
GEORGE SOLOMON 9,565 (10) *
c/o Del Global
Technologies Corp.
One Commerce Park
Valhalla, NY 10595
MICHAEL TABER 11,346 (11) *
c/o Del Global
Technologies Corp.
One Commerce Park
Valhalla, NY 10595
All Officers and Directors -------------- ----
(12) as a Group 1,350,361 (12) 16.4%
============== ====
* Represents less than 1% of the outstanding shares of Common Stock of the
Company including shares issuable under options which are presently
exercisable or will become exercisable within 60 days of October 25, 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) Includes 687,468 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 25, 1996.
(3) Includes 72,276 shares, options for which are presently exercisable or will
become exercisable within 60 days of October 25, 1996.
(4) Includes 118,669 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 25, 1996.
(5) Includes 113,379 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 25, 1996.
(6) Includes 8,478 shares, options for which are presently exercisable or will
become exercisable within 60 days of October 25, 1996.
(7) Includes 4,180 shares, options for which are presently exercisable or will
become exercisable within 60 days of October 25, 1996.
(8) Includes 27,981 shares, options for which are presently exercisable or will
become exercisable within 60 days of October 25, 1996.
(9) Includes 1,527 shares, options for which are presently exercisable or will
become exercisable within 60 days of October 25, 1996.
(10) Includes 8,955 shares, options for which are presently exercisable or will
become exercisable within 60 days of October 25, 1996.
(11) Includes 10,456 shares, options for which are presently exercisable or will
become exercisable within 60 days of October 25, 1996.
(12) Includes 980,736 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 25, 1996.
24
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On April 1, 1994, Bertan High Voltage Corp., a wholly-owned
subsidiary of the Company, acquired the assets of Bertan Associates, Inc. The
Company paid to Howard Bertan, Lester Bertan and another former shareholder of
Bertan Associates, Inc. (i) $2,600,000 in cash and (ii) 200,000 shares of the
Company's common stock, $.10 par value per share. The Company and Bertan High
Voltage Corp. entered into various employment, consulting, option and
non-compete agreements with Howard Bertan and Lester Bertan, former officers and
shareholders of Bertan Associates, Inc. The Company entered into a ten year
lease agreement for the facility of Bertan Associates, Inc. in Hicksville, New
York with a New York general partnership, of which Howard Bertan and Lester
Bertan are general partners. The lease provides for minimum annual payments of
$383,380 plus all utilities and increases in real estate taxes. Bertan High
Voltage Corp. has an option to renew the lease for a period of five years at a
fair market rental value upon the expiration of the initial term of the lease.
The Company believes that the lease was entered into on terms no less than
favorable than could be obtained from unaffiliated third parties. The lease was
approved by all of the directors of the Company who have no principal interest
in the transaction.
On May 1995, upon approval of the Company's Board of Directors, the
Company repurchased 10,000 shares of common stock owned by Mr. Leonard A.
Trugman at a fair market value of $6.375 per share.
25
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) 1. Financial Statements Page Number
-------------------- -----------
CONSOLIDATED FINANCIAL STATEMENTS OF
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES:
Independent Auditors' Report F1
Consolidated Balance Sheets As Of August 3, 1996 And
July 29, 1995 F2
Consolidated Statements Of Income For The Fiscal Years
Ended August 3, 1996, July 29, 1995 And July 30, 1994 F3
Consolidated Statements Of Shareholders' Equity For
The Fiscal Years Ended August 3, 1996, July 29, 1995
And July 30, 1994 F4
Consolidated Statements Of Cash Flows For The Fiscal
Years Ended August 3, 1996, July 29, 1995
And July 30, 1994 F5 - F6
Notes To Consolidated Financial Statements For The
Fiscal Years Ended August 3, 1996, July 29, 1995
And July 30, 1994 F7 - F18
Unaudited Selected Quarterly Financial Data F19
2.(a) Exhibit
Number Description of Document Footnotes
------- -------------------------------- ---------
3.1 Certificate of Incorporation dated
October 25, 1954 (1)
3.2 Certificate of Amendment of
Certificate of Incorporation
dated January 28, 1957 (1)
3.3 Certificate of Amendment of
Certificate of Incorporation
dated July 12, 1960 (1)
3.4 Certificate of Amendment of
Certificate of Incorporation
dated March 15, 1989 (2)
3.5 Certificate of Amendment of
Certificate of Incorporation
dated January 19, 1989 (3)
*3.6 Certificate of Amendment of
the Certificate of Incorporation
of Del Electronics Corp.
dated February 14, 1996
3.7 By-Laws of Del Electronics Corp. (1)
26
<PAGE>
4.1 Warrant Agreement between Del Electronics
Corp. and Chase Manhattan Investment
Holdings, Inc., dated January 27, 1995 (4)
4.2 Amendment to Warrant Agreement between
Del Electronics Corp. and Chase Manhattan
Investment Holdings, Inc., dated January 27,
1995 (5)
4.3 Warrant Agreement and Warrant Certificate
of The Chase Manhattan Bank, N.A. (6)
4.4 Warrant Certificate of Stanley Wunderlich (7)
4.5 Copy of Del Global Technologies Corp.
Amended and Restated Stock Option Plan
(the "Plan") (8)
4.6 Stock Purchase Plan (9)
4.7 Option Agreement, substantially in
the form used in connection with
options granted under the Plan (10)
10.1 Amended and Restated Executive
Employment Agreement of
Leonard A. Trugman (11)
10.2 Amendment No. 1 to Amended and
Restated Employment Agreement of
Leonard A. Trugman (12)
10.3 Amendment No. 2 to Amended and
Restated Employment Agreement of
Leonard A. Trugman (13)
10.4 Employment Agreement of
Howard Bertan (14)
10.5 Employment Agreement of
George Solomon (15)
*10.6 Employment Agreement of John D. MacLennan
10.7 Amended and Restated Credit Agreement
dated as of March 6, 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. (16)
*10.8 First Amendment to Amended and Restated
Credit Agreement dated as of August 2, 1996
10.9 Lease Agreement dated April 7, 1992
between Messenger Realty and the Company (17)
27
<PAGE>
10.10 Lease Agreement dated September 1, 1992
between Arleigh Construction and
Del Acquisition Corp. (18)
10.11 Lease and Guaranty of Lease dated
May 25, 1994 between Leshow Enterprises
and Bertan High Voltage Corp. (19)
10.12 Lease dated January 4, 1993 between
Curto Reynolds Oelerich Inc. and
Gendex Corporation (20)
10.13 Consulting Agreement by and between
Del Acquisition Corp. and
Harvey Schechter (21)
10.14 Consulting Agreement by and between
Del Acquisition Corp. and
Mark Weiss (22)
10.15 Consulting Agreement by and between
Del Global Technologies Corp. and
Stanley Wunderlich (23)
*11 Computation of earnings per Common
Share and Common Share Equivalents
for year ended August 3, 1996
*21 Subsidiaries of Del Global Technologies Corp.
*23 Consent of Deloitte & Touche LLP
*27 Financial Data Schedule
* Filed herewith
(1) Filed as Exhibit to Del Electronics Corp. Registration
Statement on Form S-1 (No. 2-16839) and incorporated herein by
reference.
(2) Filed as Exhibit 3.5 to Del Electronics Corp. Annual Report on
Form 10-K for the year ended August 2, 1986 and incorporated
herein by reference.
(3) Filed as Exhibit 4.5 to Del Electronics Corp. Form S-3 (No.
33-30446) filed August 10, 1989 and incorporated herein by
reference.
(4) Filed as Exhibit 4.5 to Del Electronics Corp. Registration
Statement on Form S-3 (No. 33-61025) and incorporated herein by
reference.
(5) Filed as Exhibit 4.6 to Del Electronics Corp. Registration
Statement on Form S-3 (No. 33-61025) and incorporated herein by
reference.
(6) Filed as Exhibits 4.1 and 4.2 to Del Global Technologies Corp.
Registration Statement on Form S-3 (No. 333-09131) and
incorporated herein by reference.
(7) Filed as Exhibit 4.4 to Del Global Technologies Corp.
Registration Statement on Form S-3 (No. 333-09131) 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.
28
<PAGE>
(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
Form 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 10.16 to the Del Global Technologies Corp.
Registration Statement of Form S-2 (No.333-2991) dated April
30, 1996 and incorporated herein by reference.
(16) Filed as Exhibit 2.6 to the Del Global Technologies Corp.
Current Report on Form 8-K dated March 21, 1996 and
incorporated herein by reference.
(17) 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.
(18) Filed as Exhibit 28.6 to Del Electronics Corp. Current Report
on Form 8-K dated November 9, 1992 and incorporated herein by
reference.
(19) Filed as Exhibit 2.5 to Del Electronics Corp. Current Report on
Form 8-K dated June 10, 1994 and incorporated herein by
reference.
(20) Filed as Exhibit 10.21 to the Del Global Technologies Corp.
Registration Statement on Form S-2 (No. 333-2991) dated April
30, 1996 and incorporated herein by reference.
(21) Filed as Exhibit 28.4 to Del Electronics Corp. Current Report
on Form 8-K dated November 9, 1992 and incorporated herein by
reference.
(22) Filed as Exhibit 28.5 to Del Electronics Corp. Current Report
on Form 8-K dated November 9, 1992 and incorporated herein by
reference.
(23) Filed as Exhibit 10.24 to the Del Global Technologies Corp.
Registration Statement on Form S-2 (No. 333-2991) dated April
30, 1996 and incorporated herein by reference.
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Del Global Technologies Corp. and Subsidiaries
Valhalla, New York
We have audited the accompanying consolidated balance sheets of Del Global
Technologies, Corp. (formerly Del Electronics Corp.) and subsidiaries as of
August 3, 1996 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 August 3, 1996. 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 and
subsidiaries at August 3, 1996 and July 29, 1995, and the results of their
operations and their cash flows for each of three fiscal years in the period
ended August 3, 1996, 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.
/S/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
New York, New York
October 23, 1996
F1
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 3, July 29,
1996 1995
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 5,817,800 $ 505,989
Investments available-for-sale
(Notes 1, 2 and 10) 545,651 378,534
Trade receivables (net of allowance
for doubtful accounts of $194,775 at
August 3, 1996 and $144,431
at July 29,1995) 9,221,328 6,456,853
Cost and estimated earnings in
excess of billings on uncompleted
contracts (Note 3) -- 395,847
Inventory (Notes 1 and 4) 23,819,882 18,038,358
Prepaid expenses and other current
assets (Note 9) 1,675,039 1,117,963
---------- ----------
Total current assets 41,079,700 26,893,544
---------- ----------
FIXED ASSETS - At cost (Notes 1
and 5) 13,590,798 11,115,297
Less accumulated depreciation and
amortization 4,052,309 3,362,516
---------- ----------
9,538,489 7,752,781
---------- ----------
INTANGIBLES (net of accumulated
amortization of $32,448 at
August 3, 1996) (Notes 1 and 11) 1,322,552 --
GOODWILL (net of accumulated
amortization of $370,020 at
August 3, 1996 and $261,951
at July 29, 1995)(Notes 1 and 11) 4,311,472 2,865,408
DEFERRED CHARGES 784,751 876,638
OTHER ASSETS (Notes 7 and 9) 692,788 666,263
----------- -----------
TOTAL $57,729,752 $39,054,634
=========== ===========
August 3, July 29,
1996 1995
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt(Note 6) $ 120,078 $ 943,383
Accounts payable - trade 3,693,580 2,539,615
Accrued liabilities 4,070,202 2,484,435
Income taxes (Notes 1 and 9) 643,545 277,830
--------- ---------
Total current liabilities 8,527,405 6,245,263
LONG-TERM LIABILITIES:
LONG-TERM DEBT (Less current
portion included above) (Note 6) 499,852 11,902,951
OTHER 789,589 775,541
DEFERRED INCOME TAXES
(Notes 1 and 9) 843,378 605,806
---------- ----------
Total liabilities 10,660,224 19,529,561
---------- ----------
COMMITMENTS AND
CONTINGENCIES (Notes 6,
7,8,10 and 11)
SHAREHOLDERS' EQUITY
(Notes 1, 7 and 8):
Common stock - $.10 par
value; Authorized - 10,000,000
shares; Issued and outstanding -
7,223,406 shares at August 3,
1996 and 4,129,599 at July 29, 1995 722,340 412,960
Additional paid-in capital 43,272,713 16,239,784
Retained earnings 3,411,160 3,189,244
----------- -----------
47,406,213 19,841,988
Less common stock in treasury -
58,255 at August 3, 1996 and
55,165 at July 29, 1995 336,685 316,915
----------- -----------
Total shareholders' equity 47,069,528 19,525,073
----------- -----------
TOTAL $57,729,752 $39,054,634
=========== ===========
See notes to consolidated financial statements.
F2
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year Ended
---------------------------------------
August 3, July 29, July 30,
1996 1995 1994
----------- ----------- -----------
NET SALES (Notes 1, 3 and 12) $43,745,454 $32,596,312 $24,327,015
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 27,355,262 19,177,999 15,179,081
Research and development (Note 1) 3,429,331 2,861,844 2,253,412
Selling, general and administrative 7,503,689 6,622,690 4,862,519
Interest expense - net of interest
income of $34,777 in 1996 and
$3,419 in 1995 and $1,813
in 1994 1,148,639 1,191,142 576,832
----------- ---------- ----------
39,436,921 29,853,675 22,871,844
----------- ---------- ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 4,308,533 2,742,637 1,455,171
PROVISION FOR INCOME TAXES
(Notes 1 and 9) 1,393,111 837,428 341,525
----------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN METHOD FOR ACCOUNTING
FOR INCOME TAXES 2,915,422 1,905,209 1,113,646
CUMULATIVE EFFECT OF CHANGE IN METHOD
FOR ACCOUNTING FOR INCOME TAXES
(Notes 1 and 9) - - 76,363
----------- ----------- -----------
NET INCOME $ 2,915,422 $ 1,905,209 $ 1,190,009
=========== =========== ===========
PER SHARE AMOUNTS (Note 1):
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN METHOD FOR ACCOUNTING
FOR INCOME TAXES: $ .50 $ .38 $ .22
CUMULATIVE EFFECT OF CHANGE IN
METHOD FOR ACCOUNTING FOR INCOME
TAXES (Note 9) $ - $ - $ .02
----------- ----------- -----------
NET INCOME PER COMMON SHARE AND
COMMON SHARE EQUIVALENTS:
PRIMARY AND FULLY DILUTED $ .50 $ .38 $ .24
=========== =========== ===========
See notes to consolidated financial statements.
F3
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' 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 - 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 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 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 dividends - 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 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 dividends - 3%
December 1995 and
July 1996 (Note 8) 331,726 33,173 2,650,875 (2,693,506) (9,458)
Exercise of stock options
and warrants (Note 8) 487,081 48,707 2,566,716 2,615,423
Shares repurchased 3,090 (19,770) (19,770)
Tax benefit related to
exercise of stock options
& warrants (Note 8) 458,324 458,324
Net proceeds from sale
of 2,275,000 shares through
Public Offering (Note 8) 2,275,000 227,500 21,357,014 21,584,514
Net Income 2,915,422 2,915,422
--------- --------- -------- ----------- ------------ ----------- ------------
BALANCE - AUGUST 3, 1996 7,223,406 $ 722,340 58,255 $ (336,685) $ 43,272,713 $3,411,160 $ 47,069,528
========= ========= ======== =========== ============ =========== ============
</TABLE>
See notes to consolidated financial statements.
F4
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------
August 3, July 29, July 30,
1996 1995 1994
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 2,915,422 $ 1,905,209 $ 1,190,009
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities net of
effects from purchase of
Gendex and Bertan
Imputed interest 66,986 68,963
Depreciation 740,777 749,586 684,786
Amortization 455,534 493,257 331,746
Deferred income tax provision (benefit) (56,609) 36,452 (135,265)
Changes in assets and liabilities:
Increase in trade receivables (2,764,475) (336,396) (73,085)
Decrease in cost and estimated
earnings in excess of billings
on uncompleted contracts 395,847 155,454 46,346
Increase in inventory (1,144,987) (1,965,425) (1,782,521)
Increase in prepaid and
other current assets (355,086) (219,232) (153,368)
Increase in other assets (49,136) (37,097) (200,862)
Increase (decrease) in
accounts payable - trade 1,153,965 62,514 (70,113)
Increase (decrease) in accrued
liabilities 1,585,766 197,128 (66,833)
Increase in income taxes payable 824,039 245,792 30,746
--------- --------- --------
Net cash provided by (used in)
operating activities 3,768,043 1,356,205 (198,414)
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid on acquisition of
subsidiaries (8,149,085) (2,784,282)
Payments to former shareholders of
subsidiary acquired (52,938) (221,208)
Expenditures for fixed assets (1,968,070) (1,337,509) (1,694,344)
Investment in marketable securities (167,117) (152,264) (395,404)
Sale of marketable securities 120,000 25,223
Other current assets (16,024)
----------- ---------- ----------
Net cash used in investing
activities (10,337,210) (1,590,981) (4,864,831)
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from public offering 21,584,514
Net (repayment of) proceeds from bank
borrowing (12,226,404) 432,044 5,175,928
Cost of debt restructuring (63,327)
Payment for repurchase of shares (19,770) (217,065) (76,283)
Proceeds from exercise of stock options
& warrants 2,615,423 112,709 50,066
Other (9,458) (32,520) (25,827)
----------- ---------- ----------
Net cash provided by
financing activities 11,880,978 295,168 5,123,884
----------- ---------- ----------
</TABLE>
See notes to consolidated financial statements. (Continued)
F5
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------
August 3, July 29, July 30,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
NET INCREASE IN CASH
AND CASH EQUIVALENTS $5,311,811 $ 60,392 $ 60,639
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 505,989 445,597 384,958
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $5,817,800 $ 505,989 $ 445,597
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $1,051,327 $1,084,332 $ 474,010
========== ========== ==========
Income taxes paid $ 625,682 $ 355,006 $ 595,570
========== ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
ACQUISITION OF SUBSIDIARIES $8,152,185 $4,816,153
---------- ----------
Deferred tax liability acquired
in acquisition 146,902
Cash acquired in acquisition 3,100 6,130
Common stock issued 871,429
Payment due under non-compete agreement 807,410
Acquisition costs in accrued liabilities 200,000
---------- ----------
3,100 2,031,871
---------- ----------
Cash paid to acquire subsidiaries $8,149,085 $2,784,282
========== ==========
TAX BENEFIT RELATED TO EXERCISE OF
STOCK OPTIONS AND WARRANTS $ 458,324 $ 32,038 $ 39,857
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
(Concluded)
F6
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED AUGUST 3, 1996, JULY 29, 1995 and JULY 30, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Description of Business Activities - Del Global Technologies Corp.
("Del") (formerly Del Electronics Corp.) together with its
wholly-owned subsidiaries, RFI Corporation ("RFI"), Dynarad Corp.
("Dynarad"), Bertan High Voltage Corp. ("Bertan"), Gendex-Del
Medical Imaging Corp. ("Gendex-Del), 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 and Gendex-Del are engaged in the design and
manufacture of cost-efficient medical imaging systems including
high frequency portable x-ray systems, stationary 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, Gendex-Del and
Del Medical. All material intercompany accounts and transactions
have been eliminated. Del purchased the assets of Bertan on April
1, 1994 and certain assets of Gendex-Del on March 6, 1996. Del
Medical Systems was formed on June 1, 1994.
c. 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.
d. Accounting Period - The Company's fiscal year-end is based on a
52/53 week cycle ending on the Saturday nearest to July 31.
e. 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.
f. Inventory Valuation - Inventory is stated at the lower of cost
(first-in, first-out) or market.
g. 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.
h. Research and Development Costs - Research and development costs are
charged to expense in the year incurred.
i. Net Income per Common Share and Common Share Equivalent - Net
income per common share and common share equivalent is based on the
net income for each year divided by the weighted average number of
shares outstanding during such year adjusted for stock dividends.
Net income per common share and common share equivalent, utilizing
the Modified Treasury Stock method in accordance with APB 15, also
includes the dilutive effect of shares issuable upon exercise of
stock options. For purposes of the calculation, this method
increases net income by $45,808, $53,997 and $17,256, in fiscal
1996, 1995 and 1994, respectively, for primary earnings per share.
Net income was increased by $28,843, $47,954 and $10,336 in fiscal
1996, 1995 and 1994, respectively, for purposes of computing fully
diluted earnings per share.
F7
<PAGE>
The number of shares of common stock and common share equivalents
used in the calculation of primary earnings per share were
5,934,221, 5,195,624 and 5,043,794 in fiscal 1996, 1995 and 1994,
respectively. The number of shares of common stock and common share
equivalents used in the calculation of fully diluted earnings per
share were 5,934,221, 5,217,540 and 5,043,794 in fiscal 1996, 1995
and 1994, respectively (Note 8).
j. Income Taxes - Income taxes provided include deferred taxes due to
timing differences between financial and tax reporting (Note 9).
The Company adopted Statement of Financial Accounting Standard No.
109 "Accounting for Income Taxes" ("SFAS-109") effective August 1,
1993. The cumulative effect of adopting SFAS No. 109 was to
increase net income by $76,363 in fiscal 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.
k. 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.
l. Investments - The Company follows Statement of Financial Accounting
Standards 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 officers. Gains and losses, either recognized or
unrealized, inure to the benefit or detriment of the employee's
deferred compensation, based upon a contractual arrangement between
the employee and the Company.
m. Intangibles - Intangibles are being amortized on straight-line
basis over their estimated useful lives, which range from 10 to 20
years.
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 will be recognized when the
undiscounted expected future cash flows, computed after interest
expense derived from the related operations, is less than their
carrying value.
o. Long-Lived Assets - In March 1995, the Financial Accounting
Standards Board issued Statement Number 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 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.
F8
<PAGE>
2. INVESTMENTS
At August 3, 1996 investments consist principally of corporate debt
securities and equity securities classified as available-for-sale.
At August 3, 1996 the fair value of investments classified as
available-for-sale based on maturity dates, are as follows:
Fiscal Year Fair Value
----------- ----------
1997 $218,146
1998-2002 302,705
2003-2007 24,800
--------
$545,651
========
3. PERCENTAGE OF COMPLETION ACCOUNTING
Year Ended
July 29, 1995
-------------
Costs incurred on uncompleted contracts $ 337,863
Estimated earnings 93,184
---------
431,047
Less: Billings to date 35,200
---------
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 395,847
==========
The backlog of unshipped contracts being accounted for under the
percentage of completion method of accounting was $ 633,753 at July
29, 1995. This contract was closed during fiscal year ended August 3,
1996.
4. INVENTORY
Inventory consists of the following:
August 3, 1996 July 29, 1995
-------------- -------------
Finished goods $ 5,463,847 $ 4,398,096
Work-in-process 9,538,081 7,642,588
Raw materials and purchased parts 8,817,954 5,997,674
----------- -----------
$23,819,882 $18,038,358
=========== ===========
F9
<PAGE>
5. FIXED ASSETS
Fixed assets consist of the following:
August 3, 1996 July 29, 1995
-------------- -------------
Land $ 694,046 $ 694,046
Buildings 2,146,025 2,146,025
Machinery and equipment 8,426,324 6,624,296
Furniture and fixtures 833,880 773,694
Leasehold improvements 1,043,996 790,226
Construction in progress 435,102 76,023
Transportation equipment 11,425 10,987
------------ ------------
13,590,798 11,115,297
Less accumulated depreciation and
amortization 4,052,309 3,362,516
------------ ------------
Net Fixed Assets $ 9,538,489 $ 7,752,781
============ ============
6. DEBT
Long-term debt is summarized as follows:
August 3, 1996 July 29, 1995
----------------------- -----------------------
Due Within Due After Due Within Due After
One Year One Year One Year One Year
---------- --------- ---------- ---------
Term note
payable - Bank $ 105,263 $ 394,737 $ 428,568 $ 1,607,154
Additional term
note payable -
bank 500,000 2,375,000
Credit line loan
payable - Bank 100,000 7,900,000
Other Loan 14,815 5,115 14,815 20,797
----------- ----------- ----------- -----------
$ 120,078 $ 499,852 $ 943,383 $11,902,951
=========== =========== =========== ===========
The Company's credit facility with its lending bank is composed of an
acquisition credit line of $10,000,000 and a revolving line of credit
of $14,000,000, with a letter of credit sublimit of $2,000,000. At
August 3, 1996 there were outstanding balances of $500,000 on the
acquisition credit line, $100,000 on the revolving line of credit, and
$368,000 of letters outstanding. As of August 3, 1996, there was
$13,532,000 available for borrowing under the revolving credit line.
The acquisition term note is to be repaid in 19 equal quarterly
installments of $26,315. Borrowings under this facility are on an
unsecured basis; however, the Company has agreed that its assets cannot
be used to secure other borrowings.
Interest under all facilities are at prime, or at the Company's option,
at a rate tied to LIBOR. Borrowings under the acquisition credit line
are currently at 1-1/2 percent above LIBOR or 7.23 percent. Under the
Company's loan agreement such interest rate will be reduced to 1-1/4
percent above LIBOR for the next six months. Both credit facilities are
subject to commitment fees of 1/4 percent on the daily unused portion
of the facility, payable quarterly. 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 August 3, 1996, $25,000 is available for such
cash dividends.
F10
<PAGE>
The weighted average interest rate on the Company's borrowing under its
credit facility was 8.26 percent and 8.84 percent for the years ended
August 3, 1996 and July 29, 1995, 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
borrowing, and on any fluctuation in interest expense above ten percent
on the next $3,000,000 of borrowing. Both agreements terminate in July
1997.
Long-term debt matures as follows:
Fiscal Year Ending
1997 (included in current portion) $ 120,078
1998 110,376
1999 105,261
2000 205,261
2001 78,954
----------
$ 619,930
==========
7. EMPLOYEE BENEFITS
The Company has employee benefit plans for eligible employees. Included
in the plans 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 1996, 1995 and 1994 was $40,000, $32,500 and $0,
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. The Company also has a defined benefit plan
frozen effective February 1, 1986.
8. SHAREHOLDERS' EQUITY
a. Public Offering - On June 6, 1996 the Company completed the
public offering of 2,275,000 shares of its common stock including
275,000 shares of the over-allotment option. The net proceeds of
this offering were $21,584,514 after deducting underwriting fees
and expenses and were used to repay revolving credit loans, long
term debt and the subordinated term note to Dentsply
International Inc., with the balance added to working capital.
Had the public offering of 2,275,000 shares of common stock
occurred as of the beginning of fiscal 1996 or fiscal 1995, and
had a portion of the proceeds therefrom been used to repay a
portion of the long term debt, primary and fully diluted earnings
per share would have been $.46 and $.36, respectively.
b. Stock Dividends - On June 19, 1996, the Company declared a three
percent stock dividend to holders of record on July 12, 1996, and
was paid on July 23, 1996. On November 20, 1995, the Company
declared a three percent stock dividend to holders of record on
December 5, 1995, and was paid on December 21, 1995. On May 16,
1995, the Company declared a three percent stock dividend to
holders of record on June 7, 1995, and was paid on June 23, 1995.
On November 23, 1994, the Company declared a three percent stock
dividend to holders of record on December 8, 1994, and was paid
on December 27, 1994. On May 4, 1994, the Company declared a
three percent stock dividend to holders of record on May 18,
1994, and was paid on June 20, 1994. On November 22, 1993, the
Company declared a three percent stock dividend to holders of
record on December 9, 1993, paid on December 23, 1993.
F11
<PAGE>
c. Nonqualified Stock Option Plan - The Company has a nonqualified
stock option plan under which a total of 2,547,857 options to
purchase common stock may be granted. As of August 3, 1996, the
Company has granted options to purchase 851,431 shares to the
current president, 183,813 shares to former officers, 73,808 to
current officers and 1,147,515 to various employees, directors
and consultants. Former officers exercised 31,917 options and
various employees and consultants exercised 172,899 options
during the fiscal year ended August 3, 1996. A former officer
exercised 17,302 options and various employees exercised 13,037
options during the fiscal year ended July 29, 1995. Various
employees exercised 19,183 options during the fiscal year ended
July 30, 1994.
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>
August 3, July 29, July 30,
Options 1996 1995 1994
------- ----------- ----------- -----------
<S> <C> <C> <C>
Granted and outstanding
at beginning of year 1,594,749 1,607,804 1,298,759
Granted 288,400 108,995 357,739
Expired (21,617) (91,482) (29,463)
Exercised (204,816) (30,568) (19,231)
----------- ----------- -----------
Outstanding at end of year 1,656,716 1,594,749 1,607,804
=========== =========== ===========
Exercisable at end of year 1,437,888 1,208,252 1,095,465
=========== =========== ===========
Exercise prices $ .96-$8.74 $ .96-$6.14 $ .96-$6.41
=========== =========== ===========
</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.
d. There were warrants, all of which were granted at no less than
fair market value, outstanding aggregating 82,175 shares at
August 3, 1996. They are as follows:
1. In connection with an underwriting in June 1991, the
underwriter was granted warrants to purchase 132,209
shares of common stock at exercise prices from $5.37 to
$5.53. During fiscal 1996 the total 132,209 of these
warrants were exercised.
2. The Company has granted warrants to the seller of
selected Filtron assets to purchase 100,662 shares of
common stock at an exercise price of $5.88. During
fiscal 1996 the total 100,662 of these warrants were
exercised.
3. In connection with the Company's debt restructuring on
March 5, 1996 (See Note 6) the Company granted
additional warrants to purchase 17,510 shares of common
stock to its lending bank at an exercise price of
$6.80. In connection with an amendment to a bank
financing completed in May 1994, the Company issued
warrants to purchase 30,000 shares of common stock at
an exercise price of $7.16. In connection with its
incentive pricing amendment with the same bank, the
Company reduced the exercise price to $5.50. At August
3, 1996, the bank held warrants for 33,765 shares at an
exercise price of $4.89 and warrants for 17,510 shares
at an exercise price of $6.80.
4. In connection with an extension of a consulting
agreement, the Company has issued 30,900 additional
warrants to purchase shares of common stock at and
exercise price of $6.37 to its Corporate Development
Consultant which were still outstanding at August 3,
1996. The Company has previously granted 26,522
warrants to purchase shares of common stock
F12
<PAGE>
at an exercise price of $5.18. During fiscal 1996 the
total 26,522 of these warrants were exercised.
5. The Company has granted 37,129 warrants to an
Investment Advisory firm and its key personnel. During
fiscal 1996 the total 37,129 of these warrants were
exercised.
9. INCOME TAXES
Provision for income taxes consists of the following:
Fiscal Year Ended
-----------------------------------
August 3, July 29, July 30,
1996 1995 1994
----------- -------- ---------
Current:
Federal $ 1,266,044 $692,064 $ 316,812
State 183,676 108,912 83,000
----------- -------- ---------
1,449,720 800,976 399,812
Deferred:
Federal and state (56,609) 36,452 (58,287)
----------- -------- ---------
$ 1,393,111 $837,428 $ 341,525
=========== ======== =========
Deferred tax liabilities (assets) are comprised of the following:
August 3, July 29,
1996 1995
--------- ---------
Depreciation $ 639,834 $ 401,880
Pension 94,276 83,914
Federal effect of New
York State tax credits 106,858 77,570
Difference in basis of
fixed assets 101,368 110,200
Revenue recognition 35,289
--------- ---------
Gross deferred tax liabilities 942,336 708,853
--------- ---------
Amortization 87,975 72,382
Inventory (164,003) (153,119)
Bad debt reserve (64,312) (45,434)
Deferred compensation (388,866) (264,831)
NYS tax credits (314,286) (228,146)
Self-funded health insurance (65,748)
--------- ---------
Gross deferred tax assets (909,240) (619,148)
--------- ---------
$ 33,096 $ 89,705
========= =========
Deferred tax liabilities and assets are recorded in the consolidated
balance sheets as follows:
August 3, July 29,
1996 1995
--------- ---------
Liabilities:
Deferred income taxes $ 843,379 $ 605,806
Assets:
Prepaid expenses and other current
assets (495,997) (287,956)
Other assets (314,286) (228,145)
--------- ---------
$ 33,096 $ 89,705
========= =========
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The New York State tax credits expire at various dates through 2003.
The following is a reconciliation of the statutory Federal and
effective income tax rates:
Fiscal Year Ended
--------------------------
August 3, July 29, July 30,
1996 1995 1994
% of % of % of
-------- ------- -------
Pretax Pretax Pretax
Income Income Income
-------- ------- -------
Statutory Federal income tax expense rate 34.0% 34.0% 34.0%
State taxes, less Federal tax effect 1.5 1.5 (.4)
Tax benefit from write-off of inventory
for tax purposes (4.3)
Permanent differences .6 2.8 3.9
Tax benefits on foreign sales corp (3.3) (3.3) (3.3)
Federal tax credits and other (.5) (4.5) (6.7)
---- ---- ----
32.3% 30.5% 23.2%
==== ==== ====
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 escalations for
real estate taxes and operating expenses. In September 1992 the
Company entered into an operating lease for Dynarad's facility in
Deer Park, New York. This lease provides 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
escalation for real estate taxes. On March 6, 1996 the Company
entered into an operating lease for its Gendex-Del facility in
Franklin Park, IL commencing March 6, 1996 and expiring January 31,
1998, renewable through January 31, 2003. This lease provides
escalations for real estate taxes and operating expenses. In
addition, the Company has various auto leases accounted for as
operating leases. The future minimum annual lease commitments as of
August 3, 1996 are as follows:
Fiscal Year Ended Amount
----------------- ----------
1997 $1,200,881
1998 1,072,067
1999 954,024
2000 944,495
2001 941,067
Thereafter 1,654,959
----------
$6,767,493
==========
Rent expense was $1,117,068 in 1996, $1,111,300 in 1995 and
$604,665 in 1994, which includes real estate taxes of $286,118 in
1996, $296,142 in 1995 and $225,025 in 1994.
b. 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
F14
<PAGE>
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. Such
liability is funded by the Company's investments classified as
available-for-sale. Gains and losses, either recognized or
unrealized, inure to the benefit or detriment of the President's
deferred compensation, based upon a contractual arrangement between
the President and the Company. 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.
In connection with the acquisition of Dynarad, the Company had an
employment agreement with one former Vice President through 1997.
As of April 1, 1996, the Vice President opted for an extension in
the form of a consulting contract at a rate specified within 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.
The Company has an employment agreement with its Vice President of
International Sales and Marketing which expires July 31, 1997. The
agreement provides for base compensation of $163,170 and bonuses
based on operating performance.
In connection with the acquisition of Bertan, the Company entered
into a three year employment agreement with a key employee who was
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. As of
May 28, 1996, this employee became a technical consultant to the
Company. 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.
In connection with the acquisition of Gendex-Del Medical Imaging
Corp. the Company has an employment agreement with that
subsidiary's Vice President which commenced on March 19, 1996 and
expires on March 18, 1999. The agreement provides for a base salary
of $125,000 and annual bonuses based on the performance of the
subsidiary.
c. The Company is a defendant in several legal actions arising during
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 condition and results of
operations.
11. ACQUISITIONS
As of March 6, 1996, the Company acquired certain selected assets
of the Gendex Medical Division of Dentsply International Inc. ("Dentsply"),
which have been consolidated as of that date. The new entity formed is the
Gendex-Del Medical Imaging Corp. ("Gendex-Del"). The Company paid Dentsply
$5,700,00 in cash at closing and delivered a seller's note for $1,800,000, which
was repaid on June 12, 1996. In the event that the new corporation earns in
excess of $2,000,000 in pre-interest, pretax profits in either of the two twelve
month periods subsequent to the acquisition, an additional $1,000,000 payment
will be due to Dentsply. Gendex-Del entered into a $2,500,000 six month Supply
Agreement with Dentsply to purchase parts and subassemblies previously
manufactured by Dentsply. The Company entered into a three year employment
agreement with the General Manager of the newly formed corporation. Gendex-Del
assumed the existing lease for its facility in Franklin Park,
F15
<PAGE>
Illinois. The lease provides for annual rental payment of approximately
$182,000, plus real estate taxes of approximately $93,000, and is extendable
through January 2003.
The acquisition has been accounted for as a purchase and,
accordingly, the original purchase price was allocated to the assets acquired
based on 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
$1,599,199, which is included in goodwill. Such excess is being amortized over a
25 year period. The charge to income during the period from March 6, 1996 to
August 3, 1996 was $26,287.
Unaudited pro-forma financial information for the 12 month periods
ended August 3, 1996 and July 29, 1995, as if the Gendex Medical acquisition
occurred at the beginning of the respective periods, is as follows:
Year Ended Year Ended
August 3, 1996 July 29, 1995
-------------- -------------
Net Sales $54,186,301 $53,592,266
=========== ===========
Income before provision
for income taxes $ 3,890,053 $ 2,195,448
=========== ===========
Net Income $ 2,632,321 $ 1,525,020
=========== ===========
Net income per common share
and common share equivalents
primary and fully diluted $ .45 $ .30
=========== ===========
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 the results to be achieved in the future.
12. MAJOR CUSTOMERS AND EXPORT SALES
In the Specialty Electronic Components segment, no one customer
accounts for more than ten percent of the Company's sales. In the Medical
Imaging and Diagnostic Products segment one customer, the U.S. Government,
accounted for 17 percent and 28 percent of sales in 1995 and 1994, respectively.
Export sales were 40 percent, 36 percent and 28 percent of total
sales in 1996, 1995 and 1994, respectively.
For the years ended August 3, 1996, July 29, 1995 and July 30,
1994, export sales by geographic areas were:
1996 1995 1994
----------- ----------- ----------
Europe $ 5,460,305 31% $ 3,892,719 33% $2,321,259 34%
Far East 5,446,443 31% 3,336,147 28% 741,142 11%
Middle East 3,374,581 20% 3,256,903 28% 2,356,638 35%
North America 2,979,653 17% 627,777 6% 1,143,215 17%
Other 181,960 1% 614,149 5% 191,295 3%
----------- --- ----------- --- ---------- ---
Total export sales $17,442,942 100% $11,727,695 100% $6,753,549 100%
=========== === =========== === ========== ===
F16
<PAGE>
13. SEGMENT REPORTING
The following analysis provides segment information for the two
industries in which the Company operates (see Note 1):
Specialty Medical
1996 Electronics Manufacturing Total
---- ----------- ------------- -----
Net Sales (a) $29,445,362 $14,300,092 $43,745,454
Operating expenses 24,606,511 13,681,771 38,288,282
----------- ----------- -----------
Operating profit $ 4,838,851 $ 618,321 5,457,172
=========== ===========
Interest expense 1,148,639
Provision for income taxes 1,393,111
-----------
Net income $ 2,915,422
===========
Identifiable assets $54,763,918 $ 2,965,834 $57,729,752
=========== =========== ===========
Capital expenditures $ 1,528,690 $ 946,811 $ 2,475,501
=========== =========== ===========
Depreciation and amortization $ 856,261 $ 340,050 $ 1,196,311
=========== =========== ===========
(a) For fiscal year 1996, sales of the Specialty Electronics
segment included sales of approximately $11,657,000 to
customers for medical imaging and diagnostic applications.
Aggregate medical sales for fiscal 1996 were approximately
$25,709,000 or 59 percent of total sales.
Specialty Medical
1995 Electronics Manufacturing Total
---- ----------- ------------- ------------
Net Sales (a) $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 $33,062,025 $5,992,609 $39,054,634
=========== ========== ===========
Capital expenditures $ 1,140,242 $ 197,267 $ 1,337,509
=========== ========== ===========
Depreciation and amortization $ 965,478 $ 277,365 $ 1,242,843
=========== ========== ===========
(a) For fiscal year 1995, sales of the Specialty Electronics
segment included sales of approximately $8,834,000 to
customers for medical imaging and diagnostic applications.
Aggregate medical sales for fiscal 1995 were approximately
$14,403,000 or 44 percent of total sales.
F17
<PAGE>
Specialty Medical
1994 Electronics Manufacturing Total
---- ----------- ------------- -----------
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
=========== =========== ===========
F18
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
QUARTER
-----------------------------------------------------
First Second Third Fourth
----- ------ ----- ------
YEAR ENDED AUGUST 3, 1996:
Net sales $ 7,471,181 $9,329,438 $12,555,138 $14,389,697
=========== ========== =========== ===========
Gross profit $ 3,280,547 $3,775,520 $ 4,581,832 $ 4,752,293
=========== ========== =========== ===========
Net income $ 529,566 $ 633,061 $ 782,820 $ 969,975
=========== =========== =========== ===========
Primary and fully diluted
earnings per share $ .11 $ .12 $ .13 $ .14
=========== =========== =========== ===========
QUARTER
-----------------------------------------------------
First Second Third Fourth
----- ------ ----- ------
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 and fully diluted
earnings per share $ .09 $ .10 $ .11 $ .08
=========== =========== =========== ===========
F19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
DEL GLOBAL TECHNOLOGIES CORP.
By: /S/ Leonard A. Trugman
--------------------------
Leonard A.Trugman
Chairman of the Board,
Chief Executive Officer and
President
By: /S/Michael Taber
--------------------------
Michael Taber
Vice President - Finance,
Secretary and Chief
Accounting Officer
Dated: October 31, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/S/Natan Bertman October 31, 1996
- --------------------------
Natan Bertman, Director
/S/David Michael October 31, 1996
- --------------------------
David Michael, Director
/S/Seymour Rubin October 31, 1996
- --------------------------
Seymour Rubin, Director
/S/James Tiernan October 31, 1996
- --------------------------
James Tiernan, Director
/S/Leonard A. Trugman October 31, 1996
- --------------------------
Leonard A. Trugman
Chairman of the Board,
Chief Executive Officer and
President
Exhibit 3.6
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF
DEL ELECTRONICS CORP.
Under Section 805 of the Business Corporation Law it is
hereby certified that:
FIRST: The name of the Corporation is DEL ELECTRONICS CORP.
SECOND: The certificate of incorporation of the Corporation was
filed by the Department of State on October 26, 1954.
THIRD: The amendment of the certificate of incorporation of the
Corporation effected by this certificate of amendment is as follows:
to change the name of the Corporation to DEL GLOBAL
TECHNOLOGIES CORP.
FOURTH: To accomplish the foregoing amendment, paragraph
"First" of the certificate of incorporation of the Corporation is hereby amended
to read as follows:
"FIRST: The name of the Corporation is DEL GLOBAL TECHNOLOGIES
CORP."
FIFTH: The foregoing amendment of the certificate of
incorporation of the Corporation was authorized by the Board of Directors and
followed by the majority vote of the holders of all of the outstanding shares of
the Corporation entitled to vote on such amendment of the certificate of
incorporation.
IN WITNESS WHEREOF, we have hereunto signed this certificate
this 14th day of February, 1996, and affirmed that the statements made herein
are true under penalties of perjury.
/S/Leonard A. Trugman
-----------------------
Leonard A. Trugman, President
/S/Michael Taber
----------------------
Michael Taber, Secretary
EMPLOYMENT AGREEMENT, dated as of March 19, 1996, by and
between GENDEX-DEL MEDICAL IMAGING CORP., a Delaware corporation with offices at
11550 West King Street, Franklin Park, Illinois 60131 (the "Corporation"), and
JOHN MACLENNAN, an individual residing at 2269 Riverwoods Drive, Naperville,
Illinois 60565 (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 and shall properly perform such duties
consistent with the positions of Vice President and General Manager, as may be
assigned to him from time to time by the Executive Vice President or the
Chairman and Chief Executive Officer of the Corporation or Del Global
Technologies Corp. ("Del"). Executive shall be employed at the Corporation's
Chicago, Illinois facility and shall remain employed within a radius of 25 miles
of such facility at all times during the term of this Agreement. If requested by
the Corporation and with Executive's consent, the Executive shall serve
10\187\ema1.10
1
<PAGE>
on the Board of Directors of the Corporation or any affiliates thereof, or on
any committee of such Boards of Directors, without additional compensation,
provided that Executive is indemnified to the same extent as other Directors of
the Corporation. During the term 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.
Section 3. Term of Employment. The term of the Executive's
employment shall commence as of the date hereof and shall continue for three (3)
years from the date hereof or until terminated pursuant to Section 5 hereof.
Section 4. Compensation of Executive.
4.1. Compensation. The Corporation shall pay to the
Executive as annual compensation for his services hereunder a base salary ("Base
Salary") as follows: (i) for the period commencing with the date hereof and
ending twelve (12) months from the date hereof, the Executive shall be paid a
Base Salary equal to One Hundred Twenty-Five Thousand ($125,000) Dollars; (ii)
for the next twelve (12) month period, the Executive shall be paid a Base Salary
equal to One Hundred Thirty-One Thousand Two Hundred Fifty ($131,250) Dollars;
and (iii) for the next twelve (12) month period, the Executive shall be paid a
Base Salary equal to One Hundred Thirty-Seven Thousand Eight Hundred Twelve
($137,812) Dollars.
The Base Salary shall be payable bi-weekly, in
accordance with the Corporation's regular payroll practices, less such
deductions as shall be required to be withheld by applicable law and
regulations.
10\187\ema1.10
2
<PAGE>
4.2. Bonus. In addition to his annual Base Salary
the Executive shall receive a bonus ("Bonus") with respect to each fiscal year,
or portion thereof, of employment equal to three (3%) percent of the
Corporation's Pre-Tax Net Income (as hereinafter defined) in excess of $500,000
for such year. The Executive shall receive the pro rata portion of the Bonus
based on the portion of the Corporation's fiscal year that has elapsed, for the
periods (i) commencing on the date hereof and ending July 30, 1996, the last day
of the Corporation's 1996 fiscal year; and (ii) commencing on the first day of
the Corporation's fiscal year beginning August 1997 and ending three years after
the date of this Agreement. The Bonus shall be payable within sixty (60) days
after the Corporation's regularly employed independent certified public
accountants ("Accountants") determine the Pre-Tax Net Income for each fiscal
year during the term of this Agreement.
4.3. Stock Options. Del, the Corporation's parent
corporation, has previously granted to Executive the option to purchase 15,000
shares of its common stock, $.10 par value at an exercise price of $8.00 per
share. Del represents and warrants that the shares of common stock underlying
such options have been registered pursuant to an effective Form S-8 registration
statement filed with the Securities and Exchange Commission.
10\187\ema1.10
3
<PAGE>
Executive's Base Salary for such year, as determined by the Corporation's
Accountants, a copy of which determination shall be delivered to Executive
contemporaneously with the payment of the Bonus. No allocation shall be made for
general or administrative expenses of Del or intercompany loans or for other
allocations that do not confer a direct or indirect benefit to the Corporation
and all transactions between the Corporation and affiliates shall be on a
consistent basis as is Del's practice with its other affiliates.
4.5. 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.
4.6. Benefits. Executive shall be entitled to
participate in such group insurance, hospitalization, and group health benefit
plans and option plans, profit sharing plans and all other benefits and plans as
the Corporation provides to its executives to the extent that the Executive is
eligible under the terms of such plans. The Corporation shall provide Executive
with a monthly $400 automobile allowance and upon presentation of documentation
thereof, the Corporation shall reimburse Executive for the reasonable fuel,
maintenance and insurance expenses of such automobile.
4.7. Discretionary Payments. Nothing herein shall
preclude the Corporation from paying Executive such bonus or bonuses or other
compensation, as the Board of Directors, in their discretion, may authorize from
time to time.
10\187\ema1.10
4
<PAGE>
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. In the event of a
termination For Cause or because Executive wrongfully leaves his employment
hereunder, the Corporation shall pay Executive all accrued and unpaid Base
Salary through the date of termination. In the event of termination upon the
death or Disability of Executive or if Executive's employment is terminated by
the Corporation without cause, 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
accrued and unpaid Base Salary and accrued and unpaid Bonus, on a pro rata basis
through the date of such termination. All payments for accrued pro rata payments
of Bonus shall be payable in accordance with the provisions of Section 4.2
hereof. In addition, Executive or his estate shall be entitled to receive all
benefits accrued to the date of termination pursuant to the Corporation's
incentive or benefit plans.
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 one
hundred twenty (120) days in any one hundred eighty (180) day period.
10\187\ema1.10
5
<PAGE>
5.3. "For Cause" Defined. As used herein, the term
"For Cause" shall mean the following events only:
(i) Executive's conviction or indictment in
a court of law of any crime or offense involving willful
misappropriation of money or other property or any other crime
(whether or not involving the Corporation) involving moral
turpitude and which constitutes a felony; or
(ii) The material breach by Executive of any
provision of this Agreement and Executive shall have failed to
cure such breach within thirty (30) days of the receipt by
Executive of written notice detailing the alleged breach of
this Agreement; provided, however, that Executive shall not
have the right to cure a material breach if a substantially
similar breach of this Agreement has occurred at any other
time during the term of this Agreement; or
(iii)Willful misconduct or reckless
disregard of his responsibilities under this Agreement.
Section 6. Covenant Not To Compete.
6.1. Non-Compete. The parties confirm that it is
reasonably necessary for the protection of the Corporation that Executive agree,
and accordingly, Executive does hereby agree, that he will not, directly or
indirectly, except for the benefit of the Corporation, at any time during the
"Restricted Period", as hereinafter defined:
(i) engage in any business competitive with
the business (the "Business") conducted by the Corporation or
by Dynarad Corp.
10\187\ema1.10
6
<PAGE>
("Dynarad"), an affiliate of the Corporation, for his account
or render any services, which constitute engaging in the
Business, in any capacity to any person (other than the
Corporation or its affiliates); or become interested in any
persons engaged in the Business (other than the Corporation or
its affiliates) as a partner, shareholder, officer, director,
principal, agent, employee, trustee, consultant or in any
other relationship or capacity;
(ii) solicit, or cause or authorize,
directly or indirectly, to be solicited, for or on behalf of
himself or any third party, any employee, representative or
agent of the Corporation or Dynarad; or
(iii) solicit directly or indirectly (x) any
supplier which has sold products to the Corporation or Dynarad
(or which has at the time of such termination a current quote
or proposal to the Corporation or Dynarad or (y) any customer
of the Corporation or Dynarad (or which has at the time of
such termination a current quote or proposal from the
Corporation or Dynarad).
6.2. Unenforceability. If any of the restrictions
contained in this Section 6 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\187\ema1.10
7
<PAGE>
6.3. Restricted Period. The term "Restricted Period"
as used in this Section 6, shall mean the period of Executive's employment
hereunder plus one (1) year.
6.4. Survival. The provisions of this Section 6
shall survive the expiration or prior termination of Executive's employment
hereunder and until the end of the Restricted Period as provided in Section 6.3
hereof.
6.5. Termination Without Cause. Notwithstanding
anything to the contrary set forth in this Agreement, the covenant not to
compete set forth in this Section 6 shall not apply in the event Executive's
employment is terminated without cause.
Section 7. Disclosure of Confidential Information.
(i) Executive recognizes that he will have
access to secret and confidential information regarding the
Corporation and Dynarad, its product, know-how, customers and
plans. Executive acknowledges that such information is of
great value to the Corporation and Dynarad, is the sole
property of the Corporation and Dynarad and has been and will
be acquired by him in confidence. In consideration of the
obligations undertaken by the Corporation 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; and
10\187\ema1.10
8
<PAGE>
(ii) The provisions of this Section 7 shall
survive Executive's employment hereunder.
Section 8. 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 6 or 7 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 without the requirement of posting a bond or other security or showing
special damages. The parties understand and 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.
Section 9. Severance Pay. In the event Executive's employment
by the Corporation is not continued for an additional one (1) year beyond the
term of this Agreement for any reason other than For Cause, at the end of such
additional year the Corporation shall pay the Executive an amount equal to the
difference between (x) the Base Salary of Executive during the last twelve (12)
months of the term of this Agreement and (y) any compensation of any kind
whatsoever which Executive is entitled to receive as a result of his employment
10\187\ema1.10
9
<PAGE>
by another entity during such additional one (1) year period.
Section 10. Miscellaneous.
10.1. 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 with respect to
the matters covered by this Agreement, 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.
10.2. 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.
10.3. Assignment. This Agreement, and the Executive's rights
and obligations hereunder, may not be assigned by the Executive other than as
expressly provided herein. Any purported assignment by Executive in violation
hereof shall be null and void.
10\187\ema1.10
10
<PAGE>
10.4. 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.
10.5. 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 special 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.
10.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. Except in
respect of any action commenced by a third party in another jurisdiction, the
parties hereto agree that any legal suit, action, or proceeding against them
arising out of or relating to this Agreement shall be brought exclusively in the
United States Federal Courts or Nassau County Supreme Court, in the State of New
York. The parties hereto hereby accept the jurisdictions of such courts for the
purpose of any such action or proceeding, and agree that venue for any action or
proceeding brought in the State of New York shall lie in the Eastern District of
New York or Supreme Court, Nassau County, as the case may be. Each of the
parties hereto hereby irrevocably consents to the service of process in any
action or proceeding in such courts by the mailing thereof by United States
registered or certified mail postage prepaid at its address set forth herein.
10\187\ema1.10
11
<PAGE>
10.7. 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.
As to Section 4.3 only: GENDEX-DEL MEDICAL IMAGING CORP.
DEL GLOBAL TECHNOLOGIES CORP.
By:/S/Leonard A. Trugman
------------------------
By:/S/Leonard A. Trugman Leonard A. Trugman, President
- ------------------------
Leonard A. Trugman, Chairman
CEO and President
/S/John MacLennan
- -----------------
JOHN MACLENNAN
10\187\ema1.10
12
FIRST AMENDMENT
to
AMENDED AND RESTATED CREDIT AGREEMENT
FIRST AMENDMENT (the "Amendment"), dated as of August 2, 1996 (the
"First Amendment Date") to Amended and Restated Credit Agreement, made by The
Chase Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.), a
New York banking corporation having an office at 106 Corporate Park Drive, White
Plains, New York 10604 (the "Bank") and DEL GLOBAL TECHNOLOGIES CORP., formerly
known as Del Electronics Corp., a New York corporation having an office at One
Commerce Park, Valhalla, New York 10595 ("Del"), RFI CORPORATION, a Delaware
corporation having an office at 100 Pine Aire Drive, Bay Shore, New York 11706
("RFI"), DYNARAD CORP., a New York corporation having an office at 19 Jefryn
Boulevard, Deer Park, New York 11729 ("Dynarad"), BERTAN HIGH VOLTAGE CORP.,
formerly known as Del Acquisition Corp., a New York corporation having an office
at 121 New South Road, Hicksville, New York 11801 ("Bertan High Voltage"), DEL
MEDICAL SYSTEMS CORP., a New York corporation having an office at One Commerce
Park, Valhalla, New York 10595 ("Del Medical"), and GENDEX-DEL MEDICAL IMAGING
CORP., a Delaware corporation having an office at 11550 West King Street,
Franklin Park, Illinois 60131 ("Gendex-DMI" and together with Del, RFI, Dynarad,
Bertan High Voltage, and Del Medical hereinafter sometimes referred to
collectively as the "Debtors").
W I T N E S S E T H
WHEREAS, the Debtors and the Bank entered into an Amended and Restated
Credit Agreement (the "Agreement") dated as of March 5, 1996, pursuant to the
terms of which the Bank agreed to make certain financial accommodations
available to the Debtors;
WHEREAS, all capitalized terms used in the Agreement and not otherwise
defined herein shall have the meanings given to them in the Agreement;
WHEREAS, as of the First Amendment Date, the outstanding principal
balance of the Revolving Credit Loans is $100,000 and the outstanding principal
balance of the Term Loan is $500,000, to both of which there are no defenses or
offsets;
WHEREAS, the Debtors and the Bank have agreed, among other things, to
convert the Term Loan facility to a standby term loan facility, to modify
certain amortization provisions contained in the Agreement, to release the
Bank's security interest in certain assets of the Debtors, to modify certain
covenants contained in the Agreement, and to modify the interest rates
applicable to loans made under the Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, the Debtors and the Bank hereby agree as follows:
<PAGE>
94-350-4D:del1am.006:August 7, 1996
A. Modification of Agreement
1. Section 1.1. Section 1.1 of the Agreement is hereby modified as of the
First Amendment Date by the addition of the following definitions in their
proper alphabetical positions:
Acquisition shall mean the acquisition by Del or any of its
wholly-owned subsidiaries of another entity or all or substantially all of
the assets of another entity. Additional Term Loan shall have the meaning
assigned to such term in Section 2.1.
Additional Term Note or Additional Term Notes shall mean the
additional term loan note or notes executed and delivered by the Debtors
pursuant to Section 2.3(b), in substantially the form of Exhibit A-1
hereto, as such may be amended, modified or restated from time to time.
Declaration of Restrictions shall mean the declaration of
restrictions, in substantially the form of Exhibit N hereto, as such may be
amended, modified or restated from time to time.
First Amendment shall mean the amendment to the Agreement dated as of
August 2, 1996.
First Amendment Date shall mean August 2, 1996.
Negative Pledge Agreement shall mean the Negative Pledge Agreement, in
substantially the form of Exhibit M hereto, as such may be amended,
modified or restated from time to time.
Standby Term Loan Commitment shall mean the Standby Term Loan
Commitment of the Bank as set forth in Section 2.1.
Standby Term Loan Commitment Fee shall mean the Standby Term Loan
Commitment Fee as set forth in Section 2.6.
Standby Term Loan Commitment Period shall mean the period from and
including the First Amendment Date to, but not including the Term Loan
Maturity Date.
Term Loan "A" shall have the meaning assigned to such term in Section
2.1.
2. Section 1.1. Section 1.1 of the Agreement is hereby further modified by
<PAGE>
the deletion of the definitions for the terms, "Loans," "Note or Notes," and
"Term Loan" and the substitution of the following therefor:
Loans shall mean the Term Loans, the Revolving Credit Loan, the Letter
of Credit Facility or any or all of them, as the context may require.
Note or Notes shall mean the Term Note, the Additional Term Notes
and/or the Revolving Credit Note, as the context may require.
Term Loan or Term Loans shall mean any or all of Term Loan "A" and the
Additional Term Loans, as the context may require.
3. Section 1.1 Section 1.1 of the Agreement is hereby further modified by
the deletion of the terms, "Bertan Security Agreement," "Del Medical Security
Agreement," "Del Security Agreement," "Dynarad Security Agreement," "Gendex-DMI
Security Agreement," "Indemnification Agreement," "Mortgage," "Mortgage
Modification Agreement No. 3," "Mortgagor," "Modification and Reaffirmation of
Indemnity," "RFI Security Agreement," "Subordinate Mortgage," and "Third
Mortgage."
4. Section 2.1. Section 2.1 of the Agreement is hereby deleted as of the
First Amendment Date and the following substituted therefor:
2.1 Term Loans. The Bank has heretofore made a term loan to the
Debtors, the outstanding principal balance of which was, as of the
Restatement Date, $10,000,000.00, and is, as of the First Amendment Date,
$500,000.00 ("Term Loan A"). Subject to the terms and conditions hereof,
the Bank agrees to make additional term loans (each, an "Additional Term
Loan") to the Debtors from time to time during the Standby Revolving Credit
Commitment Period which in the aggregate of the original principal amounts
thereof, when added to the outstanding principal balance as of the First
Amendment Date of Term Loan "A", shall not exceed $10,000,000.00 (the
"Standby Term Loan Commitment"). Payments made on Term Loans may not be
reborrowed. The Debtors shall have the right to reduce or terminate the
amount of the unused Standby Term Loan Commitment at any time or from time
to time, provided that: (a) the Debtors shall have given notice of each
such reduction or termination to the Bank as provided in Section 2.15; and
(b) each partial reduction shall be in an aggregate amount at least equal
to $100,000.00. The Standby Term Loan Commitment once reduced or terminated
may not be reinstated.
5. Section 2.3. Section 2.3 of the Agreement is hereby deleted as of the
First Amendment Date and the following substituted therefor:
<PAGE>
2.3 Notes
(a) Term Loans. Term Loan "A" shall be evidenced by a replacement
promissory note of the Debtors substantially in the form of Exhibit A
hereto with appropriate insertions (the "Term Note") payable to the order
of the Bank and dated the First Amendment Date. The principal amount of the
Term Note shall be payable in 19 equal consecutive quarterly installments,
each in the amount of $26,315.27, payable on the last business day of each
fiscal quarter of Del, commencing November 30, 1996 and continuing
thereafter until the entire unpaid principal balance of the Term Note,
together with all accrued and unpaid interest, shall be paid in full on the
Term Loan Maturity Date. The Additional Term Loans shall each be evidenced
by a promissory note of the Debtors substantially in the form of Exhibit
A-1 hereto, dated the date on which such Additional Term Loan is made, with
appropriate insertions (each an "Additional Term Note") payable to the
order of the Bank and representing the obligation of the Debtors to pay the
unpaid principal amount of such Additional Term Loan, with interest thereon
as hereinafter provided. The principal amount of each Additional Term Loan
shall be payable in equal consecutive quarterly installments, payable on
the last business day of each fiscal quarter of Del, commencing on the last
business day of the fiscal quarter in which such Loan is made. Term Loans,
or portions thereof, subject to limitations set forth in Section 2.4(c) and
Section 2.16 hereof, may be outstanding as Variable Rate Loans or
Eurodollar Loans.
6. Section 2.4(d) Section 2.4(d) of the Agreement is hereby deleted as of
the First Amendment Date and the following substituted therefor:
(d) The Margin that shall apply to Term Loans is set forth below and
is based on the Debtors' Consolidated Interest Expense Coverage Ratio for
the six-month period ending on the most recent Interest Measurement Date
and the Debtors' Leverage Ratio on the most recent Interest Measurement
Date, as reported in the applicable financial statement provided to the
Bank pursuant to Section 5.5 hereof:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
---------------------------------------------- ----------------------- -------------------------
Criteria Variable Rate Margin: Eurodollar Margin:
Leverage Ratio Interest Basis Points Basis Points
Coverage
Ratio
---------------------------------------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Greater than and/or Less than 3.00 0 275
1.25 to 1.00 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
<PAGE>
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or less and Equal to or 0 250
than 1.25 to greater than
1.00 3.00 to 1.00
but less than
3.50 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or and Equal to or 0 200
less than 1.25 greater than
to 1.00 3.50 to 1.00
but less than
4.00 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or less and Equal to or 0 175
than 1.00 to greater than
1.00 4.00 to 1.00
but less than
4.50 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or less and Equal to or 0 150
than .75 to 1.00 greater than
4.50 to 1.00
but less than
5.00 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or less and Equal to or 0 125
than .50 to 1.00 greater than
5.00 to 1.00
but less than
5.50 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or less and Equal to or 0 100
than .25 to 1.00 greater than
5.50 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
</TABLE>
Upon acceptance by the Bank of such calculations, Margin adjustments
resulting from such calculations shall become retroactively effective
as of the first day of the calendar month in which the above referenced
financial statements shall have been presented to the Bank.
7. Section 2.4(e) Section 2.4(e)of the Agreement is hereby deleted as
of the First Amendment Date and the following substituted therefor:
(e) The Margin that shall apply to Revolving Credit Loans is set forth
below and is based on the Debtors' Consolidated Interest Expense Coverage
Ratio for the six-month period ending on the most recent Interest
Measurement Date and the Debtors' Leverage Ratio on the most recent
Interest Measurement Date, as reported in the applicable financial
statement provided to the Bank pursuant to Section 5.5 hereof:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
---------------------------------------------- ----------------------- -------------------------
Criteria Variable Rate Margin: Eurodollar Margin:
Leverage Ratio Interest Basis Points Basis Points
Coverage
Ratio
---------------------------------------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Greater than and/or Less than 3.00 0 250
1.25 to 1.00 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or less and Equal to or 0 225
than 1.25 to greater than
1.00 3.00 to 1.00
but less than
3.50 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or and Equal to or 0 175
less than 1.25 greater than
to 1.00 3.50 to 1.00
but less than
4.00 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or less and Equal to or 0 150
than 1.00 to greater than
1.00 4.00 to 1.00
but less than
4.50 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or less and Equal to or 0 125
than .75 to 1.00 greater than
4.50 to 1.00
but less than
5.00 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or less and Equal to or 0 100
than .50 to 1.00 greater than
5.00 to 1.00
but less than
5.50 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
------------------ ---------- ---------------- ----------------------- -------------------------
Equal to or less and Equal to or 0 75
than .25 to 1.00 greater than
5.50 to 1.00
------------------ ---------- ---------------- ----------------------- -------------------------
</TABLE>
<PAGE>
Upon acceptance by the Bank of such calculations, Margin adjustments
resulting from such calculations shall become retroactively effective
as of the first day of the calendar month in which the above referenced
financial statements shall have been presented to the Bank.
8. Section 2.5 Section 2.5 of the Agreement is hereby deleted as of
the First Amendment Date and the following substituted therefor:
2.5 Procedure for Revolving Credit and Term Loan Borrowing.
The Debtors may borrow under the Revolving Credit Commitment during the
Revolving Credit Commitment Period and under the Standby Term Loan
Commitment during the Standby Term Loan Period on any Business Day by
giving the Bank written or facsimile notice of a request for a
Revolving Credit Loan or an Additional Term Loan hereunder, as the case
may be, setting forth the amount of the Loan requested and the date
thereof, and, in the case of an Additional Term Loan, setting forth the
terms of the Acquisition to be financed by such Additional Term Loan
and any information regarding such Acquisition that the Bank may
reasonably require. Prior to the advance to the Debtors of an
Additional Term Loan, or portion thereof, the Debtors shall deliver to
the Bank an Additional Term Loan Note in the amount of the Additional
Term Loan being requested. Additional Term Loans are subject to the
Bank's prior written approval of the terms of the Acquisition to be
financed by such Additional Term Loan, which approval shall be in the
Bank's sole discretion, except that the Debtors shall be permitted to
make Acquisitions without the Bank's approval, provided, however, that
such Acquisitions do not exceed, in the aggregate, $3,000,000,
calculated from the First Amendment Date. Except for borrowings which
exhaust the full remaining amount of the Revolving Credit Commitment,
or Standby Term Loan Commitment, as the case may be, and except for
Eurodollar Loans, each borrowing under the Revolving Credit Commitment
and each borrowing under the Standby Term Loan Commitment shall be in
an amount at least equal to $100,000. Such notice shall be sufficient
if given within the time period set forth therefor in Section 2.15,
provided, however, that in the case of Additional Term Loans, the Bank
shall have theretofore given its approval of the Acquisition being
funded, where such approval is required.
9. Section 2.6 Section 2.6 of the Agreement is hereby deleted as of
the First Amendment Date and the following substituted therefor:
2.6 Fees. (a) As additional compensation for the Revolving
Credit Commitment and Letter of Credit Facility provided for herein,
the Debtors, jointly and severally, agree to pay the Bank a Commitment
Fee during the Revolving Credit Commitment Period at a rate equal to
one-quarter of one percent (.25%) per annum of the average daily unused
portion of the combined (i) Revolving Credit Commitment, and, without
duplication, (ii) the Letter of Credit Facility. The Commitment Fee
shall be payable quarterly in arrears on the last day of each January,
April, July, and October during the Revolving Credit Commitment Period
and at the time of the termination of the Revolving Credit Commitment.
(b) As additional compensation for the Standby Term Loan
Commitment provided for herein, the Debtors, jointly and severally,
agree to pay the Bank a Standby Term Loan Commitment Fee during the
Standby Term Loan Commitment Period at a rate equal to one-quarter of
one percent (.25%) per annum of the average daily unused portion of the
Standby Term Loan Commitment (excluding all portions of the Standby
Term Loan Commitment which have been borrowed and repaid by the
Debtors). The Standby Term Loan Commitment Fee shall be payable
quarterly in arrears on the last day of each January, April, August,
and October during the Standby Term Loan Commitment Period and at the
time of the termination of the Standby Term Loan Commitment.
10. Section 2.15 Section 2.15 of the Agreement is hereby deleted as of
the First Amendment Date and the following substituted therefor:
2.15 Certain Notices. Notices by the Debtors to the Bank of
each borrowing, prepayment or conversion, and each renewal hereunder
shall be irrevocable and shall be effective only if received by the
Bank not later than 2:00 p.m. (in the case of Variable Rate Loans) and
11:00 a.m. (in the case of Eurodollar Loans), both New York City time,
and in the case of borrowings and prepayments of, conversions into and
(in the case of Eurodollar Loans) renewals of (i) Variable Rate Loans,
given not later than 2:00 p.m. on the date of such request; and (ii)
Eurodollar Loans, given three Business Days prior thereto no later than
11:00 a.m. on the date of such request. Each such notice shall specify
the Loans to be borrowed, prepaid, converted or renewed and the amount
and type of the Loans to be borrowed, or converted, or prepaid or
renewed (and, in the case of a conversion, the type of Loans to result
from such conversion and, in the case of a Eurodollar Loan, the
Interest Period therefor) and the date of the borrowing or prepayment,
or conversion or renewal (which shall be a Business Day).
11. Section 3.12 Section 3.12 of the Agreement is hereby deleted and
the words "Section 3.12 Intentionally Omitted" are inserted in its place.
12. Section 3.13 Section 3.13 of the Agreement is hereby modified as of
the First Amendment Date by the addition of the following at the end thereof:
<PAGE>
The proceeds of the Additional Term Loans shall be used only for the
payment of the purchase price of the Acquisitions which, to the extent
such proceeds of the Additional Term Loans exceed, in the aggregate,
$3,000,000, calculated from the First Amendment Date, shall have been
approved in writing prior thereto by the Bank.
13. Section 4.1 Section 4.1 of the Agreement is hereby modified as of
the First Amendment Date by the addition of the following paragraph (e) at the
end thereof:
(e) In the case of borrowings under the Standby Term Loan
Commitment, the Bank shall have received an Additional Term Note in the
amount of the borrowing, duly executed by the Debtors payable to its
order and otherwise complying with the provisions of Section 2.3.
14. Section 5.3 Section 5.3 of the Agreement is hereby deleted as of
the First Amendment Date and the following substituted therefor:
5.3 Insurance. Each Debtor will (a) keep its insurable
properties adequately insured at all times by financially sound and
reputable insurers, (b) maintain such other insurance, to such extent
and against such risks, including fire and other risks insured against
by extended coverage, as is customary with companies similarly situated
and in the same or similar businesses, (c) maintain in full force and
effect public liability insurance against claims for personal injury or
death or property damage occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by such
Debtor, in such amount as it shall reasonably deem necessary, and (d)
maintain such other insurance as may be required by law or as may be
reasonably requested by the Bank for purposes of assuring compliance
with this Section 5.3. All such insurance shall provide for at least 30
days' prior written notice to the Bank of the cancellation or material
modification thereof.
15. Section 6.1 Paragraph (h) of Section 6.1 of the Agreement is hereby
deleted as of the First Amendment Date and the words "Paragraph (h)Intentionally
Omitted" are inserted in its place.
16. Section 6.7 Section 6.7 of the Agreement is hereby deleted as of
the First Amendment Date and the following substituted therefor:
6.7 Investments. (a) Own, purchase or acquire any stock, obligations,
assets or securities of, or any interest in, or make any capital
contribution or loan or advance to, any other person, or make any other
investments with an aggregate fair market value exceeding $250,000.00
(valued at the time of the acquisition thereof), except that the
Debtors may (i) own, purchase or acquire certificates of deposit of the
Bank or any FDIC-insured commercial bank registered to do business in
any state of the United States having capital and surplus in excess of
$500,000,000; (ii) own, purchase or acquire obligations of the United
States government or any agency thereof which are backed by the full
faith and credit of the United States; (iii) own, purchase or acquire
commercial paper of a domestic issuer rated at least A-1 by Standard
<PAGE>
and Poor's Corporation or P-1 by Moody's Investors Service, Inc.; (iv)
subject to the provisions of Section 6.7(b) hereof, purchase or acquire
during any fiscal year of Del (a "Fiscal Year") shares of the common
stock of Del ("Common Stock") with an aggregate fair market value of
not more than $1,500,000 (valued at the time of the acquisition
thereof), and thereafter own all such shares so purchased or acquired;
(v) own, purchase, or acquire stock, obligations and/or securities of
any other person provided that such stock, obligations and/or
securities are held by the Debtors in the deferred compensation
account(s) which are maintained by Del for the benefit of Leonard A.
Trugman; and (vi) make Acquisitions with the proceeds of Additional
Term Loans provided, however, that the Bank shall have given its prior
written approval of such Acquisitions to the extent that they exceed,
in the aggregate, $3,000,000 calculated from the First Amendment Date.
(b) The right of the Debtors to repurchase shares of Common Stock
pursuant to Section 6.7(a)(iv) hereof is subject to the following:
(i) The Debtors may during any Fiscal Year repurchase shares
of the Common Stock with an aggregate fair market value of not more
than $750,000 (valued at the time of the acquisition thereof) if (A)
no default under Section 6.4, Section 6.8, Section 6.9 or Section 6.11
of this Agreement shall have occurred and be continuing at the time of
such repurchase and (B) after giving effect to such repurchase of
shares, no default shall exist under Section 6.9 hereof.
(ii) In addition to the shares of Common Stock which may be
repurchased pursuant to subsection (i) above, during any Fiscal Year
the Debtors may repurchase additional shares of the Common Stock with
an aggregate fair market value (valued at the time of the acquisition
thereof) equal to (A) the dollar amount of the increase in
Consolidated Tangible Net Worth of the Debtors for the Fiscal Year,
minus (B) $1,250,000; provided, however, that (x) in no event may the
Debtors during any Fiscal Year repurchase additional shares of Common
Stock pursuant to the provisions of this subsection (ii) with an
aggregate fair market value in excess of $750,000 (valued at the time
of the acquisition thereof) and (y) in no event may the Debtors
repurchase additional shares of Common Stock pursuant to the
provisions of this subsection (ii) if, after giving effect to such
repurchase of additional shares, a default shall exist under Section
6.9 hereof.
17. Section 6.8 Section 6.8 of the Agreement is hereby deleted as of
the First Amendment Date and the following substituted therefor:
6.8 Current Ratio. Permit the Consolidated Current Ratio of
the Debtors at any time to be less than 2.50:1.00.
<PAGE>
18. Section 6.9 Section 6.9 of the Agreement is hereby deleted as
of the First Amendment Date and the following substituted therefor:
6.9 Tangible Net Worth. Permit the Consolidated Tangible Net
Worth of the Debtors at any time during the periods specified below to
be less than:
Period Amount
Fiscal year ending 8/2/96 $33,450,000
Fiscal year ending 8/1/97 $34,800,000
Fiscal year ending 7/31/98 $36,050,000
Fiscal year ending 7/31/99 $37,300,000
Fiscal year ending 7/29/00 $38,550,000
Fiscal year ending 7/31/01 $39,800,000
19. Section 6.16 Section 6.16 of the Agreement is hereby deleted as of
the First Amendment Date and the following substituted therefor:
6.16 Leverage Ratio. Permit the Leverage Ratio of the
Debtors in any fiscal year to exceed 1.25.
20. Section 9.1 Section 9.1 of the Agreement is hereby deleted as of
the First Amendment Date and the words "Section 9.1 Intentionally Omitted"
inserted in its place.
21. Security. As of the First Amendment Date, the Bertan Security
Agreement, the Del Medical Security Agreement, the Del Security Agreement, the
Dynarad Security Agreement, the Gendex-DMI Security Agreement, the RFI Security
Agreement, and the Indemnification Agreement are hereby canceled and all
references in the Agreement to any security interests or mortgages given for the
benefit of the Bank to secure the obligations of the Debtors under the
Agreements are hereby deleted, it being the intention of the parties hereto that
(a) the Loans shall be unsecured and (b) the assets being released from the
Bank's liens shall not be given as security for any other indebtedness and shall
not become subject to any other liens. In furtherance of the foregoing, (i) the
Bank shall execute and deliver to the Debtors such UCC-3 financing statements
and a satisfaction of each of (a) the Mortgage, (b) the Subordinate Mortgage,
and (c) the Third Mortgage,(ii) the Debtors shall execute and deliver to the
Bank the Negative Pledge Agreement, in the form of Exhibit M to the Agreement,
pursuant to which they shall agree not to transfer any of their respective
assets (except for the sale of inventory in the normal course of business) and
not to encumber any of their respective assets except as specifically permitted
by Section 6.1 of the Agreement, and (iii) RFI shall execute and deliver to the
Bank a Declaration of Restrictions, in the form of Exhibit N to the Agreement,
pursuant to which RFI shall agree not to transfer, assign, mortgage or otherwise
encumber its interest in the RFI Real Property.
22. Exhibits. The Agreement is hereby modified as of the First
Amendment Date by: (a) the deletion of Exhibit A and the substitution therefor
of a new Exhibit A, in the form of Exhibit 1 to this Amendment; (b) the addition
of Exhibit A-1 immediately following Exhibit A, in the form of Exhibit 2 to this
Amendment; and (c) the addition of Exhibits M and N immediately following
Exhibit L, in the form, respectively of Exhibits 3 and 4 to this Agreement.
<PAGE>
B. Condition of Effectiveness
The obligation of the Bank to enter into this Amendment to the Loan
Agreement and to make or provide any financial accommodation to the Debtors
pursuant to the terms of this Amendment is subject to the condition precedent
that the Bank shall have received each of the following documents, in form and
substance satisfactory to the Bank and its counsel, and each of the following
requirements shall have been fulfilled:
1. This Amendment. The Debtors and the Bank shall each have executed
and delivered this Amendment.
2. The Notes. The Debtors shall have executed and delivered to the Bank
the Term Note in the form of Exhibit 1 to this Amendment and the
Additional Term Note in the form of Exhibit 2 to this Amendment.
3. Negative Pledge Agreement. The Debtors shall have executed and
delivered to the Bank a Negative Pledge Agreement in the form of
Exhibit 3 to this Amendment.
4. Declaration of Restrictions. RFI shall have executed and delivered
to the Bank a Declaration of Restrictions in the form of Exhibit 4 to
this Amendment.
5. Evidence of Corporate Action by Company. The Bank shall have
received a certificate of the Secretary or Assistant Secretary of each
of the Debtors, dated the First Amendment Date, in substantially the
form of Exhibit 5 to this Amendment, attesting to all corporate action
taken by such Debtor, including resolutions of its Board of Directors,
authorizing the execution, delivery, and performance of this Amendment
and each other document to be delivered pursuant to or in connection
with this Amendment, and including a copy of all amendments to such
Debtor's certificate of incorporation and by-laws which are subsequent
to the Restatement Date, a current good standing certificate, and an
incumbency and signature certificate.
6. Officer's Certificate. The following statements shall be true and
the Bank shall have received a certificate, dated the First Amendment
Date, in substantially the form of Exhibit 6 to this Amendment, signed
by a duly authorized officer of each of the Debtors stating that to the
best of his knowledge:
<PAGE>
a. The representations and warranties contained in Section 3
of the Agreement and in each of the other Credit
Documents are correct on and as of the First Amendment
Date, as though made on and as of such dates; and
b. No default or Event of Default has occurred and is
continuing, or would result from the execution and
performance by the Debtors of this Amendment or the
Agreement (as amended by this Amendment) or any of the
other Credit Documents; and
c. There has been no material adverse change in the
business, operations, assets or condition, financial or
otherwise, of the Debtors since the date of the most
recent financial statements provided to the Bank.
7. Opinion Letter. The Bank shall have received an opinion of
counsel to the Debtors, substantially in the form of Exhibit 7 to this Amendment
8. Costs and Expenses. The Debtors shall have paid, or reimbursed the
Bank, for all costs, expenses and charges (including, without limitation, all
expenses and reasonable fees of legal counsel for the Bank) incurred in
connection with the negotiation, preparation, reproduction, execution and
delivery of this Amendment and any other instruments and documents to be
delivered hereunder.
C. Reference to and Effect on the Loan Documents
1. Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like
import, and each reference in the other Credit Documents to the Agreement, shall
mean and be a reference to the Agreement as amended hereby.
2. Except as specifically amended above, the Agreement and the other
Credit Documents shall remain in full force and effect and are hereby ratified
and confirmed.
3. The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Bank under any of the Credit Documents, nor constitute a
waiver of any provision of any of the Credit Documents.
D. Miscellaneous
1. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
2. Headings. Section headings in this Amendment are included herein for
convenience of reference only and do not constitute a part of this Amendment for
any other purpose.
3. Exhibits. Exhibits 1-7 shall constitute integral parts of this
Amendment.
4. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Amendment by signing any such
counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
(Corporate Seal) DEL GLOBAL TECHNOLOGIES CORP.
ATTEST: By: /S/ David Engel
________________________________
/S/ Michael Taber David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
(Corporate Seal) RFI CORPORATION
ATTEST: By: /S/ David Engel
___________________________________
David Engel, Executive Vice President
/S/ Michael Taber
- --------------------
Michael Taber, Secretary
(Corporate Seal) DYNARAD CORP.
ATTEST: By: /S/ David Engel
___________________________________
David Engel, Executive Vice President
/S/ Michael Taber
- --------------------
Michael Taber, Assistant Secretary
(Corporate Seal) BERTAN HIGH VOLTAGE CORP.
ATTEST: By: /S/ David Engel
___________________________________
David Engel, Executive Vice President
/S/ Michael Taber
- --------------------
Michael Taber, Secretary
(Corporate Seal)
DEL MEDICAL SYSTEMS CORP.
ATTEST: By: /S/ David Engel
___________________________________
David Engel, Executive Vice President
/S/ Michael Taber
- --------------------
Michael Taber, Secretary
(Corporate Seal)
GENDEX-DEL MEDICAL IMAGING CORP.
ATTEST: By: /S/ David Engel
___________________________________
David Engel, Executive Vice President
/S/ Michael Taber
- --------------------
Michael Taber, Secretary
Exhibit 11
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
FISCAL YEAR ENDED AUGUST 3, 1996
Fully
Primary Diluted
------- -------
Reconciliation of net income per
statement of income to amount
used in earnings per computation:
Net Income $2,915,422 $2,915,422
Assumed reduction of - Interest on
short-term debt, net of tax effect
on application of assumed proceeds
from exercise of options subject to
limitations under the Modified
Treasury Stock method 45,808 28,843
---------- ----------
Net income, as adjusted $2,961,230 $2,944,265
========== ==========
Reconciliation of weighted average
number of shares outstanding to amount
used in earnings per share computation:
Weighted average number of shares
outstanding 4,793,144 4,793,144
Add - shares issuable from assumed
exercise of options subject to limitations
under the Modified Treasury Stock method 1,141,077 1,141,077
--------- ---------
Weighted average number of shares
outstanding as adjusted 5,934,221 5,934,221
========= =========
Net income per common share $ .50 $ .50
========== ==========
The Company utilized 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 tax effect.
Exhibit 21
SUBSIDIARIES OF DEL GLOBAL TECHNOLOGIES CORP.
RFI Corporation
Dynarad Corp
Bertan High Voltage Corp.
Gendex-Del Medical Imaging Corp.
Del Medical Systems Corp.
Del Electronics Foreign Sales Corp.
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements No.
33-61025 and 333-09131 on Form S-3, and in the Registration Statements No.
33-65439 and 033-09133 on Form S-8 of Del Global Technologies Corp. (formerly
Del Electronics Corp.) and subsidiaries, of our report dated October 23, 1996,
appearing in this Annual Report on Form 10-K of Del Global Technologies Corp.
and subsidiaries for the fiscal year ended August 3, 1996.
S/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
November 12, 1996
<TABLE> <S> <C>
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<NAME> DEL GLOBAL TECHNOLOGIES CORP.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-03-1996
<PERIOD-START> JUL-30-1995
<PERIOD-END> AUG-03-1996
<CASH> 5,817,800
<SECURITIES> 545,651
<RECEIVABLES> 9,416,103
<ALLOWANCES> 194,775
<INVENTORY> 23,819,882
<CURRENT-ASSETS> 41,079,700
<PP&E> 13,590,798
<DEPRECIATION> 4,052,309
<TOTAL-ASSETS> 57,729,752
<CURRENT-LIABILITIES> 8,527,405
<BONDS> 0
0
0
<COMMON> 722,340
<OTHER-SE> 46,347,188
<TOTAL-LIABILITY-AND-EQUITY> 57,729,752
<SALES> 43,745,454
<TOTAL-REVENUES> 43,745,454
<CGS> 27,355,262
<TOTAL-COSTS> 27,355,262
<OTHER-EXPENSES> 10,933,020
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,148,639
<INCOME-PRETAX> 4,308,533
<INCOME-TAX> 1,393,111
<INCOME-CONTINUING> 2,915,422
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<EXTRAORDINARY> 0
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