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 THE FISCAL YEAR ENDED AUGUST 2,1997
COMMISSION FILE NUMBER 0-3319
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__.
The aggregate market value of the voting stock held by non-affiliates of the
registrant amounted to $68,588,836 at the close of business on October 31, 1997.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the close of business on October 31, 1997.
Common Stock - 7,500,423
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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; (iii) Dynarad Corp. ("Dynarad"), a New York corporation and
wholly-owned subsidiary of the Company; (iv) Bertan High Voltage Corp.
("Bertan"), a New York corporation and wholly-owned subsidiary of the Company;
(v) Del Medical Systems Corp. ("Del Medical"), a New York corporation and
wholly-owned subsidiary of the Company and (vi) Gendex-Del Medical Imaging Corp.
("Gendex-Del"),a Delaware corporation and a wholly-owned subsidiary of the
Company (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 tradenames and private labels. The Company's
critical electronic subsystems are custom engineered to complex customer
performance specifications and include high voltage power components, such as
power supplies, capacitors, transformers and pulse forming networks. These
products are utilized by Original Equipment Manufacturers ("OEMs") for medical
imaging and diagnostic products having a broad range of applications such as
computerized tomography (CT), magnetic resonance imaging (MRI), bone
densitometry, radiography, blood analysis, medical laser surgery and nuclear
medicine. As a result of its record for quality and reliability, the Company has
developed close working relationships with its OEM customers. These
relationships often result in the Company's selection as the sole source
provider of these critical electronic subsystems to OEMs. The Company also
designs, manufactures and markets precision power conversion products for
non-medical applications and electronic noise suppression systems for
telecommunications equipment.
The Company'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 five 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 Company's
sales of medical imaging products increased from approximately $3.4 million or
17.7% of total net sales in fiscal 1992 to approximately $35.6 million or 65.1%
of total net sales in fiscal 1997. 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 $21.9
million in fiscal 1997. Export sales consist of direct sales of the Company's
products and sales of subsystems that are incorporated into OEM's products for
export.
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,
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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, 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.
Stationary Medical X-ray Systems. Under the GENDEX brand name, the
Company produces a full product line of high frequency medical x-ray generators,
such as the GENDEX 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.
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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 consists 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 OEMs, universities and private research laboratories. The Company has also
been a supplier of miniature HV power supplies used in detection systems for
hazardous materials, serving this market for approximately 20 years.
Noise Suppression Products. Certain of the Company's noise
suppression products are designed to assure that equipment manufactured for
government applications meets rigid standards for interference generation and
susceptibility. In addition, these products are designed to prevent classified
cryptographic and data signals used in government and industrial applications
from accidentally emanating and compromising government or industrial
intelligence. The Company's noise suppression product designs are listed on the
United States Government's Qualified Products Lists. Such products are used on
satellites, space applications and other critical applications that require
approved high reliability products.
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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 1997
approximately 65% of the Company's noise suppression product sales were
attributable to custom designed products and approximately 35% were attributable
to catalog products.
Applications. The Company has developed state-of-the-art,
multi-channel critical electronic subsystems for industrial laser machining, ion
implantation, energy exploration, electrostatic deposition, photomultiplier
tube, x-ray tube, travelling wave tube, cathode ray tube and ion pump
applications, food processing and steel rolling. In addition, critical
subsystems of the Company's high voltage DC power supplies are included in
analytical and material research equipment, nuclear instrumentation, process
control equipment, automatic test equipment, scanning electron microscopes and
semi-conductor manufacturing equipment.
The Company'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.
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 250 dealers.
Medical imaging systems dealers are supported by the Company's regional
managers, product line managers and technical support groups, who train dealer
sales personnel and participate in customer calls. Technical support in the
selection, use and maintenance of the Company's products is provided to dealers
and professionals by customer service representatives. The Company also
maintains telephone hotlines to provide technical assistance to dealers and
professionals. Additional product and dealer support is provided through
participation in medical equipment exhibitions and trade advertising. The
Company exhibits its products at the American College of Surgeons Annual
Meetings, at the Radiological Society of North 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 16 in-house sales personnel,
approximately 60 exclusive independent sales representatives in the United
States and approximately 45 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 2, 1997, the Company employed 50 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 $4.5 million in
fiscal 1997, $3.4 million in fiscal 1996 and $2.9 million in fiscal 1995.
Approximately 80% of all new critical electronic subsystems produced by the
Company are designed and developed to customer specifications for use as
components of the customer's equipment. For example, the Company has developed
cost-effective anode modules for CT scanners and a "ruggedized" miniature HV oil
exploration probe for a Fortune 50 multi-national corporation. The Company
generally retains all custom technology developed to meet customer
specifications in connection with new electronic subsystems.
Certain new products are developed by the Company as standard
products for industry at large after the Company has evaluated their potential.
Such products include standardized HV, high frequency rack mounted power
supplies and associated modules for use as precision test equipment by
industrial laboratories, universities
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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 three
facilities, one in Valhalla, New York, one in Hicksville, New York and a third
in Deer Park, 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 2, 1997, August 3, 1996
and July 29, 1995, export sales accounted for approximately 40%, 40%, and 36%,
respectively, of the Company's revenues. Export sales are made principally in
Europe, the Far East, North America and the Middle East.
Backlog
The Company's backlog at August 2, 1997 was approximately $23.9
million compared to a backlog of approximately $23.0 million at August 3, 1996,
and approximately $18.9 million at July 29, 1995. 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, 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
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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 contribute to the Company's
marketing position. To safeguard these properties, the Company maintains
trademark registrations in the United States and in significant international
markets for its products. As part of its acquisition of certain assets of
Gendex, the Company acquired the UNIVERSAL tradename and has been granted a
license to use, in conjunction with the word "medical," the GENDEX tradename 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 filed 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.
The Company is in the process of obtaining ISO 9000 certification for all 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.
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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 1997, 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 2, 1997, the Company had approximately 412 employees,
including 7 executive officers, 29 persons in general administration, 24 persons
in marketing, 302 persons in manufacturing and 50 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 $282,000. 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 $222,000. 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 $310,000. 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.
ITEM 3. LEGAL PROCEEDINGS
RFI is a defendant in an action pending in the Supreme Court of the
State of New York, Kings County which commenced 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. On the advice of counsel, the Company believes it has
meritorious defenses to the claim.
Management does not believe that the resolution of the above legal
proceeding will have a material effect on the Company's consolidated financial
condition, results of operations and cash flows.
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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 common stock of Del Global Technologies Corp.
began trading on the Nasdaq Stock Market under the symbol DGTC. From April 18,
1990 to June 10, 1996 the common stock of Del Global Technologies Corp. 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.
Year Ending Year Ending Year Ending
August 2, 1997 August 3, 1996 July 29, 1995
High Low High Low High Low
---- --- ---- --- ---- ---
First Quarter 10 7 3/4 6 7/16 5 5/16 6 3/16 5
Second Quarter 10 7 3/8 7 3/4 5 3/4 4 13/16 4 3/8
Third Quarter 9 5/8 7 8 5/16 7 1/8 5 1/2 4 11/16
Fourth Quarter 10 1/4 7 1/4 18 7/8 6 13/16 6 7/16 5
The above prices have been restated to give retroactive effect to 3% stock
dividends declared in November, 1996, June, 1996, November, 1995, May, 1995 and
November, 1994.
The approximate number of holders of record of the Company's common stock $.10
par value as of August 2, 1997 was 1,182.
Due to the restrictions of its borrowing agreement, the Company has not paid any
cash dividends, except for the payment of cash in lieu of fractional shares,
since 1983.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected statements of income data presented for the fiscal years ended
August 2, 1997, August 3, 1996 and July 29, 1995 and the balance sheet data as
of August 2, 1997 and August 3, 1996, have been derived from the audited
financial statements included elsewhere in this Annual Report on Form 10-K. The
selected statements of income data for the fiscal years ended July 30, 1994 and
July 31, 1993 and the balance sheet data as of July 29, 1995, July 30, 1994 and
July 31, 1993 have been derived from audited financial statements not included
herein. This selected consolidated financial data should be read in conjunction
with the Company's Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere herein.
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DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Fiscal Year Ended
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August 2, August 3, July 29, July 30, July 31,
INCOME STATEMENT DATA: 1997(b) 1996(b) 1995(b) 1994(b) 1993(b)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $54,685,289 $43,745,454 $32,596,312 $24,327,015 $22,287,315
Cost and expenses:
Cost of sales 32,854,825 27,355,262 19,177,999 15,179,081 13,455,261
Research and development 4,548,487 3,429,331 2,861,844 2,253,412 1,712,881
Selling, general and
administrative 10,193,244 7,503,689 6,622,690 4,862,519 4,390,267
Interest (income) expense - net (54,470) 1,148,639 1,191,142 576,832 360,149
----------- ----------- ----------- ----------- -----------
47,542,086 39,436,921 29,853,675 22,871,844 19,918,558
----------- ----------- ----------- ----------- -----------
Income before provision
for income taxes 7,143,203 4,308,533 2,742,637 1,455,171 2,368,757
Provision for income taxes 2,231,649 1,393,111 837,428 341,525 708,000
Cumulative effect of change in
method for accounting for
income taxes - - - 76,363 -
----------- ------------ ----------- ----------- ------------
Net income $ 4,911,554 $ 2,915,422 $ 1,905,209 $ 1,190,009 $ 1,660,757
=========== ============ =========== =========== ============
Net income per common share and
common share equivalents,
before cumulative effect of
change in method for
accounting for income taxes $ .58 $ .48 $ .37 $ .21 $ .34
Cumulative effect of change in
method for accounting for
income taxes - - - .02 -
----------- ------------ ----------- ----------- ------------
Net income per common share and
common share equivalents (a):
primary $ .58 $ .48 $ .37 $ .23 $ .34
=========== ============ =========== =========== ============
Number of shares used in computation
of primary earnings per share (a)(c) 8,498,404 6,112,248 5,351,493 5,195,108 4,851,175
=========== ============ =========== =========== ============
Number of shares used in computation
of fully diluted earnings
per share (a)(c) 8,524,522 6,112,248 5,374,066 5,195,108 4,854,110
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
As of
----------------------------------------------------------------
August 2, August 3, July 29, July 30, July 31,
BALANCE SHEET DATA: 1997(b) 1996(b) 1995(b) 1994(b) 1993(b)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Working capital $37,007,412 $32,552,295 $20,648,281 $18,530,176 $13,856,981
========== ========== ========== ========== ==========
Total assets $64,129,810 $57,729,752 $39,054,634 $36,198,373 $24,969,136
========== ========== ========== ========== ==========
Long-term debt $ 411,127 $ 499,852 $11,902,951 $11,485,722 $ 5,639,290
========== ========== ========== ========== ==========
Shareholders' equity $52,530,230 $47,069,528 $19,525,073 $17,698,507 $15,634,240
========== ========== ========== ========== ==========
Common shares outstanding (a)(c) 7,411,979 7,380,106 4,452,244 4,451,040 4,140,923
=========== =========== =========== =========== ===========
</TABLE>
(a) Net income per common share and common stock equivalents have been
restated to give effect to stock dividends in fiscal years 1997, 1996,
1995, 1994 and 1993. See footnote 1 of notes to the consolidated
financial statements for computation of earnings per share.
(b) The fiscal years ended August 2, 1997 and August 3, 1996 include the
operations of Gendex-Del; the fiscal years ended August 2, 1997, August
3, 1996, July 29, 1995, July 30, 1994 and July 31, 1993 include the
operations of Dynarad; fiscal years ended August 2, 1997, August 3,
1996, July 29, 1995 and July 30, 1994 include the operations of Bertan.
(c) Common shares outstanding for 1997, 1996, 1995, 1994 and 1993 are
reduced by 104,255, 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
This Management Discussion and Analysis of Financial Condition and Results of
Operations contains forward looking statements. Such statements involve various
risks that may cause actual results to differ materially. These risks include,
but are not limited to, the ability of the Company to grow internally or by
acquisition and to integrate acquired businesses, changing industry or
competitive conditions, and other risks referred to in the Company's
registration statements and periodic reports filed with the Securities and
Exchange Commission.
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 five 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 approximately $18.9 million in fiscal 1992 to approximately
$54.7 million in fiscal 1997, a compounded annual growth rate of 23.6%.
During the past five years the Company has grown internally
and through acquisitions into a company whose predominant business is serving
the medical imaging and diagnostic markets. The Company's net sales attributable
to medical imaging products have increased from approximately $3.4 million or
17.7% of total net sales in fiscal 1992 to approximately $25.7 million or 59% of
total net sales and approximately $35.6 million or 65.1% of total net sales in
fiscal years 1996 and 1997, 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 systems and
critical electronic subsystems by leading OEMs, increased demand for certain
diagnostic procedures and lower cost medical services in the global marketplace.
General
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 2, 1997, August 3, 1996 and July 29,
1995. 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: Critical
Electronic Subsystems and Medical Systems. The Critical Electronic Subsystems
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 $13.2 million, $11.7 million
and $8.8 million, respectively, for fiscal years ended August 2, 1997, August 3,
1996 and July 29, 1995. Aggregate sales of medical products were approximately
$35.6 million, $25.7 million and $14.4 million, respectively, for fiscal years
ended August 2, 1997, August 3, 1996 and July 29, 1995.
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>
Fiscal Years Ended
------------------------------
August 2, August 3, July 29,
1997 1996 1995
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 60.1 62.5 58.8
Research and development 8.3 7.8 8.8
Selling, general
and administrative 18.6 17.2 20.3
Interest(income)expense - net (.1) 2.6 3.7
------ ------ ------
86.9 90.1 91.6
------ ------ ------
Income before provision
for income taxes 13.1 9.9 8.4
Provision for income taxes 4.1 3.2 2.6
------ ------ ------
Net income 9.0% 6.7% 5.8%
====== ====== ======
Fiscal Years 1997, 1996 and 1995
Net sales for the Critical Electronic Subsystems segment for
fiscal 1997 were approximately $32.3 million compared to approximately $29.4
million for fiscal 1996, an increase of 9.9%. Net sales for the Critical
Electronic Subsystems segment for fiscal 1996 were approximately $29.4 million
compared to approximately $27.0 million for fiscal 1995, an increase of 8.9%.
The increases were due to internal growth as the result of increased demand for
the Company's products. Net sales for the Medical Systems segment were
approximately $22.4 million for fiscal 1997 compared to approximately $14.3
million for fiscal 1996, an increase of 56.6%. This increase was due to the
inclusion of Gendex-Del for the whole year, which contributed an increase of
approximately $9.5 million, which was partially offset by reduced sales of
portable x-ray systems of approximately $1.4 million. Fiscal 1996 included large
initial orders for portable x-ray systems into the State of Michigan and to the
United States Marine Corps. Net sales for the Medical Systems 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%.The increase
was due to internal growth of Dynarad of approximately $1.4 million and the
acquisition of the Gendex-Del subsidiary, which occurred in March 1996.
Cost of sales for the Critical Electronic Subsystems segment
decreased to 52.6% of net sales in fiscal 1997 from 53.6% of net sales in fiscal
1996. Cost of sales for the Critical Electronic Subsystems segment decreased to
53.6% of net sales in fiscal 1996 from 55.5% of net sales in fiscal 1995. The
decrease in cost of sales as a percentage of net sales in fiscal years 1997 and
1996 were primarily due to improved operating efficiencies and a favorable
product mix. Cost of sales in fiscal 1997 for the Medical Systems segment
decreased to 70.8% of net sales from 73.8% of net sales in fiscal 1996. Cost of
sales in fiscal 1996 for the Medical Systems segment decreased to 73.8% of net
sales from 75.0% of net sales in fiscal 1995. The fiscal 1997 and 1996
improvements in margins from fiscal 1995 are due to the reduced manufacturing
cost from efficiencies implemented in this segment in both the Gendex-Del and
Dynarad subsidiaries and to the transfer of manufacturing of certain of the
Dynarad systems to Gendex-Del.
Research and development costs, for the Critical Electronic
Subsystems segment, increased 17.2% to approximately $3.34 million in fiscal
1997 from approximately $2.85 million in fiscal 1996. Research and development
costs, for the Critical Electronic Subsystems segment, increased 5.1% to
approximately $2.85 million in fiscal 1996 from approximately $2.71 million in
fiscal 1995. These increases were due to new products being developed in this
segment. Research and development costs in the Medical Systems segment increased
107% to approximately $1.21 million in fiscal 1997 from approximately $583,000
in fiscal 1996. Research and development costs in the Medical Systems segment
increased 281% to approximately $583,000 in fiscal 1996 from approximately
$153,000 in fiscal 1995. These increases were attributable to increased research
and development
12
<PAGE>
at Dynarad and to the inclusion of the research and development of the
Gendex-Del subsidiary for all of fiscal 1997 and part of fiscal 1996.
Selling, general and administrative expenses, as a percentage
of sales, in the Critical Electronic Subsystems segment, were approximately $6.1
million or 18.9% of net sales in fiscal 1997 as compared to approximately $5.0
million or 16.9% of net sales in fiscal 1996. The increase in selling, general
and administrative expenses was primarily due to the addition of several new
regional marketing managers, higher levels of advertising, trade show
attendance, marketing expenses and increased amortization of deferred charges in
fiscal 1997 as compared to fiscal 1996. Selling, general and administrative
expenses, as a percentage of sales, in the Critical Electronic Subsystems
segment, were approximately $5.0 million or 16.9% of net sales in fiscal 1996 as
compared to approximately $5.4 million or 19.9% of net sales in fiscal 1995. The
decrease was due to lower levels of advertising and trade show attendance.
Selling, general and administrative expenses, for the Medical Systems segment,
were approximately $4.1 million or 18.3% of net sales in fiscal 1997 as compared
to approximately $2.5 million or 17.7% of net sales in fiscal 1996. The increase
was due to higher levels of advertising, trade show attendance and an increase
in amortization of certain intangible assets. Selling, general and
administrative expenses, for the Medical Systems segment, were approximately
$2.5 million or 17.7% of net sales in fiscal 1996 as compared to approximately
$1.2 million or 22.2% of net sales in fiscal 1995. The reduction of selling,
general and administrative expenses as a percentage of sales was due primarily
to the increased sales volume with the acquisition of Gendex-Del in March 1996.
Interest income for fiscal 1997 was approximately $54,000, net
of interest expense of approximately $239,000. Such interest expense included
the amortization of the Company's interest rate protection agreements of
approximately $43,000 and approximately $76,000 of bank commitment fees on
unused balances. The Company's reduction in interest from fiscal 1996 is due to
the repayment of substantially all of its Bank borrowings as the result of the
equity offering completed in July 1996. Interest expense, net of interest
income, for fiscal 1996 and 1995 was approximately $1.1 million and $1.2
million, respectively. Interest expense decreased in fiscal 1996 as the result
of the completion of an equity offering in July 1996 and subsequent debt
repayments.
Income tax expense decreased to 31.2% of pre-tax income in
fiscal 1997 from 32.3% of pre-tax income in fiscal 1996, primarily due to the
reinstatement of the research and development tax credits for all of fiscal
1997. Income tax expense increased to 32.3% of pre-tax income in fiscal 1996
from 30.5% of pre-tax income in fiscal 1995, primarily due to the effect of
lower research and development tax credits 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.
Net income for fiscal 1997 was approximately $4.9 million, an
increase of 68.5% from approximately $2.9 million in fiscal 1996. Net income for
fiscal 1996 was approximately $2.9 million, an increase of 53.0% from
approximately $1.9 million in fiscal 1995. Primary and fully diluted earnings
per share for fiscal 1997 were $.58, an increase of $.10 per share which
represents a 20.8% increase from primary and fully diluted earnings per share of
$.48 in fiscal 1996. Primary and fully diluted earnings per share for fiscal
1996 were $.48, an increase of $.11 per share which represents a 29.7% increase
from primary earnings per share of $.37 in fiscal 1995. The number of
outstanding shares and common share equivalents increased from approximately 6.1
million shares in fiscal 1996 to approximately 8.5 million shares in fiscal 1997
or 39.3%, primarily due to the results of the public offering of 2,275,000
shares completed in July 1996. The increases in net income and earnings per
share for fiscal 1997 as compared to fiscal 1996 were due to internal growth,
improved gross margins due to operating efficiencies, the inclusion of the
operations of the Gendex-Del subsidiary for a full year in fiscal 1997 and the
repayment of bank borrowings in the fourth quarter of fiscal 1996. The increases
in net income and earnings per share for fiscal 1996 as compared to fiscal 1995
were due to internal growth and the addition of the Gendex-Del subsidiary in
March 1996.
Analysis of Financial Condition
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. Cash flows from operations were approximately
$3.3 million, $3.8 million and $1.3 million for the fiscal years ended August 2,
1997, August 3, 1996 and July 29, 1995, respectively. At August 2, 1997 the
Company had a current ratio of
13
<PAGE>
approximately 4.96 to 1.0 and the availability of approximately $23.3 million of
bank borrowings under its lines of credit.
Equity Financing. In July 1996, the Company completed a 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 underwriters fees and expenses.
Working Capital. At August 2, 1997 and August 3, 1996, the Company's working
capital was approximately $37.0 million and $32.6 million, respectively. At such
dates the Company had approximately $6.1 million and $5.8 million, respectively,
in cash and cash equivalents.
Trade receivables at August 2, 1997 increased approximately
$2.0 million as compared to August 3, 1996 primarily due to higher shipping
levels during the Company's fourth quarter in fiscal 1997 compared to fiscal
1996. 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 year 1996.
Cost and estimated earnings in excess of billings on
uncompleted contracts of approximately $1.9 million at August 2, 1997 relate to
long term contracts which are accounted for under the percentage of completion
method of accounting.
Inventory at August 2, 1997 increased by approximately
$861,000 as compared to August 3, 1996, primarily at Gendex-Del. 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 $134,000 at August 2, 1997 as compared to August 3, 1996. This
increase was primarily attributable to prepaid insurance and other prepaid
items. Prepaid expenses and other current assets increased approximately
$557,000 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 $243,000 at August
2, 1997 as compared to August 3, 1996. This increase was attributable to higher
levels of inventory required for fiscal 1997 shipments. Accounts payable
increased by approximately $1.2 million at August 3, 1996 as compared to July
29, 1995, which was primarily attributable to the inclusion of accounts of
Gendex-Del, partly offset by lower levels of payables at the other operating
units.
Accrued liabilities increased by approximately $174,000 at
August 2, 1997 as compared to August 3, 1996. The increase was due to higher
amounts accrued for vacations and other personnel costs. Accrued liabilities
increased by approximately $1.6 million at August 3, 1996 as compared to July
29, 1995, which was primarily attributable to the inclusion of Gendex-Del and
taxes payable.
Deferred compensation liability increased by approximately
$177,000 at August 2, 1997 as compared to August 3, 1996. $125,000 of this
increase relates to the fiscal 1997 funding of deferred compensation and
approximately $52,000 relates to recognized and unrealized gains, on the
underlying investments. Deferred compensation liability increased by
approximately $167,000 at August 3, 1996 as compared to July 29, 1995. $125,000
of this increase relates to the fiscal 1996 funding of deferred compensation and
approximately $42,000 relates to recognized and unrealized gains, on the
underlying investments. Gains and losses, either recognized or unrealized, inure
to the benefit or detriment of the President, under a contractual arrangement
between the President and the Company.
Credit Facility and Borrowing. On March 5, 1996, in connection with the
acquisition of Gendex, the Company and its lending bank entered into an Amended
and Restated Credit Agreement wherein the bank increased the Company's line of
credit to $24.0 million, consisting of a five year $10.0 million term loan and a
four year revolving
14
<PAGE>
line of credit of $14.0 million. In connection with the Gendex acquisition, on
March 6, 1996 the Company delivered a seven year $1.8 million subordinated note
to Dentsply International Inc. The Company on June 12, 1996, after partially
completing the sale of 2,275,000 shares of common stock 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 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. On August 1, 1997, the Company and its lending bank further amended their
Credit Agreement to increase the provision for letters of credit from $2,000,000
to $4,000,000, to eliminate the requirement to provide interest rate protection
contracts unless the Company's borrowings on term loans exceed $5,000,000, to
eliminate the requirement to prepare monthly borrowing base certificates until
the Company's borrowings and letters of credit outstanding exceed $5,000,000, to
increase the amount that the Company can invest in other entities without Bank
prior approval from $250,000 to $1,000,000 and to provide for a fixed rate
interest option, at the Company's request. At August 2, 1997, the Company had
approximately $13.7 million available under its revolving line of credit, after
deducting letters of credit outstanding of approximately $207,000 and
approximately $9.6 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 capabilities and capacity. The Company has expended approximately
$2.7 million, $2.0 million and $1.3 million, respectively, for capital equipment
expenditures in fiscal years 1997, 1996 and 1995, respectively.
Shareholders' Equity. Shareholders' equity increased to approximately $52.5
million at August 2, 1997 from approximately $47.1 million at August 3, 1996,
primarily due to the results of operations. Additionally, during fiscal 1997
approximately 73,000 stock options and warrants were exercised, with proceeds of
approximately $422,000 and 46,000 shares of common stock were repurchased at a
cost of approximately $367,000.
Effects of New Accounting Pronouncements
Earnings Per Share. In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." This statement is effective for financial statements
issued for periods ending after December 15, 1997. Management has evaluated the
effect on its financial reporting from the adoption of this statement and
believes it will be significant. If SFAS No. 128 were effective for the fiscal
year ended August 2, 1997, the effect of implementation would have resulted in
"Basic Earnings per Share" of $.66 and "Diluted Earnings per Share" of $.58.
Disclosure of Information About Capital Structure. In February 1997, the FASB
issued SFAS No. 129 "Disclosure of Information About Capital Structure." This
statement is effective for years ending after December 15, 1997. Management has
evaluated the effect of this statement on its financial reporting and, as it
contains no change in disclosure requirements for entities that were previously
subject to the requirements of APB Opinions 10, 15 and 47, no further
disclosures are needed.
Reporting of Comprehensive Income. In February 1997, the FASB issued SFAS No.
130 "Reporting of Comprehensive Income." This statement is effective for years
ending after December 15, 1997. Management has evaluated the effect of this
statement on its financial reporting from the adoption of this statement and has
found that no further disclosures are needed.
Disclosures About Segments of an Enterprise and Related Information. In June
1997, the FASB issued SFAS No. 131 "Disclosures About Segments of an Enterprise
and Related Information". SFAS No. 131 requires the reporting of profit and
loss, specific revenue and expense items, and assets for reportable segments. It
also requires the reconciliation of total segment revenues, total segment profit
and loss, total segment assets and other amounts disclosed for segments to the
corresponding amounts in the general purpose financial statements. This
statement is effective for financial statements issued for periods ending after
December 15, 1997. The Company has not yet determined what additional
disclosures may be required in connection with adopting SFAS No. 131.
15
<PAGE>
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)..................59 Chairman of the Board, Chief
Executive Officer and President
David Engel.............................48 Executive Vice President and
Chief Financial Officer
Louis J. Farin, Sr......................54 Vice President and General Manager
of Del Power Conversion Division
Paul J. Liesman.........................36 Vice President and General Manager
of Bertan High Voltage Corp.
John Mankowich..........................53 Vice President and General Manager
of Gendex-Del Medical Imaging Corp.
Seymour Rubin...........................67 Vice President and President of RFI
Corporation, Director
Michael H. Taber........................52 Vice President - Finance, Secretary
and Chief Accounting Officer
Natan V. Bertman (1)(2)................68 Director
David Michael (1)(2)(3).................60 Director
James Tiernan (3).......................73 Director
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Stock Option Committee
The officers of the Company, with the exception of Mr. Trugman, are
elected or appointed by the Board of Directors to hold office until the meeting
of the Board of Directors following the next annual meeting of shareholders.
Subject to the right of the Company to remove officers pursuant to its By-Laws,
officers serve until their successors are chosen and have qualified. Mr. Trugman
holds his position pursuant to an employment agreement which expires on July 31,
2000.
16
<PAGE>
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 Mankowich has been Vice President and Vice President and
General Manager of Gendex-Del Medical Imaging Corp. since April 1997. From
November 1994 to April 1997, Mr. Mankowich was a Director of International
Operations for Lorad Corp., a Division of Trex Medical. From November 1993 to
November 1994, he was Director of Business Development of E-MED, a Division of
E-Systems Corp. From September 1990 to November 1993, he was President and CEO
of Norland Corporation. Mr. Mankowich holds a Masters Degree in Bio-Chemistry.
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.
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.
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.
Section 16(a) Beneficial Ownership of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons holding more than 10% of the Company's
outstanding Common Stock to file with the Securities and Exchange Commission
initial reports of ownership, or changes in ownership and annual reports of
ownership of Common
17
<PAGE>
Stock and other equity securities of the Company. Specific due dates for these
reports have been established and the Company is required toreport herein any
failure to file by these dates in fiscal 1997. Leonard A. Trugman and Michael H.
Taber were late in reporting shares owned by them under the Company's Employee
Stock Purchase Plan ("Stock Purchase Plan"). David Engel, Paul Liesman and
Seymour Rubin were late in reporting the grant of stock options issued to them
on November 6, 1996 under the Company's Stock Option Plan ("Plan") and shares
owned by them under the Stock Purchase Plan. Louis Farin was late in reporting
the grant of stock options issued to him on November 6, 1996 under the Plan.
John Mankowich was late in filing a Form 3 and reporting stock options granted
to him on April 18, 1997 under the Plan.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, for the three fiscal years ended August
2, 1997, 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 2, 1997.
<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 1997 303,876 488,541(2) - - - 43,313
Chairman, CEO 1996 289,406 343,318(2) - - - 39,708
and President 1995 275,625 257,273(2) - - 56,275 40,356
Seymour Rubin 1997 225,000 50,000 - - 5,150 14,124
Vice President 1996 223,379 32,284 - - 10,609 7,274
and President of 1995 210,000 50,000 - - 11,255 8,539
RFI Corporation
Michael H. Taber 1997 104,000 15,000 62,821(3) - 5,150 9,655
V.P. Finance, 1996 100,000 12,500 - - 7,957 3,002
Secretary and 1995 92,500 10,000 - - 5,628 3,002
Chief Acctg. Officer
David Engel 1997 125,000 44,535 - - 7,725 2,062
Executive Vice 1996 109,423 7,500 - - 10,609 1,496
President/CFO 1995 86,634 1,500 - - 5,628 666
Louis J. Farin, Sr. 1997 110,000 15,000 - - 5,150 9,183
Sr. Vice President, 1996 105,000 20,815 - - 10,609 1,532
V.P. & Genl. Mgr. - 1995 100,000 4,000 - - - -
Del Power Conversion
Howard Bertan(4) 1997 144,063 111,910 - - 10,000 12,014(5)
Senior Technical 1996 154,918 117,665 - - 10,609 1,655
Consultant 1995 139,192 72,154 - - - 1,000
George Solomon(6) 1997 128,983 5,000 - - 2,575 2,203
V.P. - Intl. Sales & 1996 164,721 5,000 - - 10,609 1,410
Mktg., President of 1995 155,392 5,000 - - - 1,000
Del Medical Systems
</TABLE>
18
<PAGE>
(1) Includes insurance premiums where families of the officers are beneficiaries
and automobile expense allowances.
(2) Includes deferred compensation in the amount of $125,000 for each of 1997,
1996 and 1995 fiscal years, respectively.
(3) Earnings related to exercise of nonqualified stock options.
(4) 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.
(5) Includes non-compete payments of $9,648.
(6) Mr. Solomon resigned as of May 2, 1997.
Stock Options Granted to Certain Executive Officers During the Last Fiscal Year
The following table sets forth certain information regarding options
for the purchase of the Company's Common Stock that were awarded to the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers and two additional individuals, based upon salary
and bonus earned by such executive officers and individuals in the fiscal year
ended August 2, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants (1)
Potential Realizable
Value at Assumed
% of Total Annual Rates of
Options Stock Price Appreciation
Granted to Exercise or for Option Term
Options Employees Base Price Expiration --------------------------
Name Granted(# In Fiscal Year ($)(Sh) Date 5% ($) (1) 10%($)(1)
--------------------- --------- -------------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Leonard A.Trugman - - - - - -
Seymour Rubin 5,150 4% $8.25 11/06/11 $45,840 $134,993
Michael H. Taber 5,150 4% $8.25 11/06/11 $45,840 $134,993
David Engel 7,725 6% $8.25 11/06/11 $68,762 $202,490
Louis J. Farin, Sr. 5,150 4% $8.25 11/06/11 $45,840 $134,993
Howard Bertan 10,000 7% $8.63 3/25/12 $93,111 $274,197
George Solomon 2,575 2% $8.25 11/06/11 $22,920 $67,496
----------------------
</TABLE>
(1) Fair market value of stock on grant date compounded annually at rate
shown in column heading, for the option term, less exercise price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding options
for the purchase of the Company's Common Stock that were exercised and or held
by the Company's Chief Executive Officer and each of the four other most highly
compensated executive officers and two additional individuals, based upon salary
and bonus earned by such executive officers and individuals in the fiscal year
ended August 2, 1997.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In-the-Money Options
Acquired on Value Options at Fiscal Year-End at Fiscal Year-End ($)(2)
Name Exercise(#) Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---------- ----------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Leonard A. Trugman - - 722,160/28,138 $ 5,867,089/$163,482
Seymour Rubin - - 122,247/26,420 $ 777,312/$118,189
Michael H. Taber 15,749 $62,821 0/15,469 $ 0/$62,526
David Engel - - 9,813/19,777 $ 48,748/$70,551
Louis J. Farin, Sr. - - 31,473/20,441 $ 194,509/$79,119
Howard Bertan - - 54,444/7,957 $ 211,461/$32,385
George Solomon - - 11,876/0 $ 62,172/$0
</TABLE>
19
<PAGE>
- ----------------------
(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 2, 1997 ($10.25).
Directors of the Company did not receive compensation for their
services as such except a fee of $1,000 for each meeting of the Board of
Directors which they attend. Messrs. Trugman and Rubin have waived their right
to receive such compensation.
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, which ends July 31, 2000, 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 $303,876 for the fiscal
year ended August 2, 1997. His annual base salary for the fiscal year August 2,
1997 through August 1, 1998 is determined by multiplying $303,876 by the greater
of five percent or the increase in the Consumer Price Index as of August 1, 1997
over the amount of such index as of August 1, 1996. 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. Leonard Michaels, who joined the Company as of September 1, 1992,
with the acquisition of Dynarad Corp., has an employment agreement with the
Company wherein he is employed as a technical consultant to the Company from
April 1, 1996 until July 29, 2002. Upon execution of such employment agreement,
Mr. Michaels received a signing bonus of $250,000 in the fiscal year ended July
31, 1993. During fiscal 1997, due to a reduction in job responsibilities, the
Company wrote off the unamortized balance of such signing bonus, and the charge
to fiscal 1997 earnings was $158,854. Under provisions of the consulting phase
of the employment agreement, Mr. Michaels' consulting fees for the fiscal year
ended August 2, 1997 were $117,970. In consideration of Mr. Michaels' covenant
not-to-compete for ten years as set forth in his employment agreement, he
received upon execution thereof a payment of $257,400 during the fiscal year
ended July 31, 1993, and during the ten year term thereof, shall receive annual
non-compete payments of $52,000.
Mr. Howard Bertan had an employment agreement with Bertan High Voltage
Corp. which commenced on April 24, 1994 and terminated on April 23, 1997. The
employment agreement provided for the payment of a base salary of $154,350 for
the period which commenced on April 24, 1996 and terminated on April 23, 1997.
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 contained 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.
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, which commenced June 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.
20
<PAGE>
Stock Option Plans
Nonqualified Stock Option Plan
The Company's Nonqualified Stock Option Plan provides for a total of
2,624,293 shares of Common Stock authorized to be granted under such plan. For
the year ended August 2, 1997, options to purchase an aggregate of 1,781,245
shares were outstanding at an average exercise price of $4.01 per share, having
a range of expiration dates from September 2000 to May 2012. During fiscal 1997,
the Company granted options to purchase 131,842 shares of Common Stock at an
average exercise price of $6.29 per share. During fiscal 1997, 33,644 options
were exercised and 29,521 options were cancelled or expired. At August 2, 1997
160,625 shares were available for future grant under such plan. The Company's
Nonqualified 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 Nonqualified 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 31, 1997, the Company had granted options to purchase
951,975 shares to Leonard A. Trugman, 44,758 shares to David Engel, 67,791
shares to Louis Farin, 20,008 shares to Paul Liesman, 153,667 shares to Seymour
Rubin, 10,000 shares to John Mankowich and 36,218 shares to Michael Taber at an
average exercise price of $8.09 per share. Mr. Taber exercised 15,749 options
during the fiscal year ended August 2, 1997. Due to the resignations of Mr.
MacLennan, the former Vice President and General Manager of Gendex-Del Medical
Imaging Corp. and Mr. Solomon, the former Vice President of International Sales
and Marketing and President of Del Medical Systems Corp., 15,914 and 13,607
options, respectively, were cancelled during the fiscal year ended August 2,
1997.
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 either June 30 or December 31,
whereupon the shares to which the employee is entitled are issued to him. With
respect to the officers, the following shares have been issued under the plan:
Fiscal Fiscal Fiscal
Year Year Year
Ended Ended Ended
Officer 1997 1996 1995
----- ----- -----
Leonard A. Trugman 1,013 2,048 375
Seymour Rubin 1,299 2,625 843
Michael H. Taber 168 419 228
David Engel 162 199 49
Paul Liesman 94 77 --
Howard Bertan 149 350 122
George Solomon 305 691 --
21
<PAGE>
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.
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 the fiscal year
ended July 29, 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. Merrill Lynch, Pierce, Fenner & Smith
Inc. ("Merrill Lynch") is the plan administrator. All employees with over 90
days of service and over the age of 21 may elect to defer from 2% to 15% of
their annual salary. The modified plan is administered by Merrill Lynch 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 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 $52,500, $40,000 and $32,500 profit sharing contributions for the
periods ended August 2, 1997, August 3, 1996 and July 29, 1995.
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 31, 1997 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 31, 1997(1) of Class
- ----------------------------------- ------------------- --------
OFFICERS AND DIRECTORS
LEONARD A. TRUGMAN 906,453(2) 10.0%
c/o Del Global Technologies Corp.
One Commerce Park
Valhalla, NY 10595
NATAN BERTMAN 102,660(3) 1.4%
c/o Bertman & Levine
945 Manhattan Avenue
Brooklyn, NY 11222
DAVID MICHAEL 160,450(4) 2.1%
c/o David Michael & Co., P.C
Seven Penn Plaza
New York, NY 10001
SEYMOUR RUBIN 144,640(5) 1.9%
c/o RFI Corporation
100 Pine Aire Drive
Bay Shore, NY 11706
JAMES TIERNAN 8,733(6) *
7 Patriot Court
New City, NY 10956
DAVID ENGEL 16,312(7) *
c/o Del Global Technologies Corp.
One Commerce Park
Valhalla, NY 10595
LOUIS J. FARIN, SR 48,974(8) *
c/o Del Global Technologies Corp.
One Commerce Park
Valhalla, NY 10595
PAUL J. LIESMAN 7,747(9) *
c/o Bertan High Voltage Corp.
121 New South Road
Hicksville, NY 11801
JOHN MANKOWICH (10) -- *
c/o Gendex-Del Medical Imaging Corp.
11550 West King Street
Franklin Park, IL 60634
23
<PAGE>
MICHAEL H. TABER 7,292(11) *
c/o Del Global Technologies Corp.
One Commerce Park
Valhalla, NY 10595
All Officers and Directors ---------
(10) as a Group 1,403,261(12) 16.3%
=========
OTHERS
PUTNAM INVESTMENTS, INC. 456,063 6.1%
One Post Office Square =========
Boston, MA 02109
* 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 31, 1997.
(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 736,229 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 31, 1997.
(3) Includes 74,445 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 31, 1997.
(4) Includes 122,230 shares, options for which are presently exercisable
or will become exercisable within 60 days days of October 31, 1997.
(5) Includes 122,247 shares, options for which are presently exercisable
or will become exercisable within 60 days days of October 31, 1997.
(6) Includes 8,733 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 31, 1997.
(7) Includes 15,803 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 31, 1997.
(8) Includes 39,847 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 31, 1997.
(9) Includes 7,353 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 31, 1997.
(10) Mr. Mankowich was granted 10,000 options to purchase shares of Common
Stock on April 18, 1997, none of which are currently exercisable.
(11) Includes 6,220 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 31, 1997.
(12) Includes 1,133,107 shares,options for which are presently exercisable
or will become exercisable within 60 days of October 31, 1997.
24
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 17, 1997, upon approval of the Company's Board of Directors,
the Company repurchased 15,000 shares of common stock owned by Mr. Leonard A.
Trugman at a fair market value of $9.25 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 2, 1997
and August 3, 1996 F2
Consolidated Statements of Income for the Fiscal
Years Ended August 2, 1997, August 3, 1996 and
July 29, 1995 F3
Consolidated Statements of Shareholders' Equity
for the Fiscal Years Ended August 2, 1997, August 3,
1996 and July 29, 1995 F4
Consolidated Statements of Cash Flows for the
Fiscal Years Ended August 2, 1997, August 3, 1996
and July 29, 1995 F5 - F6
Notes to Consolidated Financial Statements for the
Fiscal Years Ended August 2, 1997, August 3, 1996
and July 29, 1995 F7 - F19
2. Supplemental Financial Information
Unaudited Selected Quarterly Financial Data F20
3. Exhibits
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 (4)
26
<PAGE>
3.7 By-Laws of Del Global Technologies Corp. (1)
4.1 Warrant Agreement between Del Electronics
Corp. and Chase Manhattan Investment
Holdings, Inc., dated January 27, 1995 (5)
4.2 Amendment to Warrant Agreement between
Del Electronics Corp. and Chase Manhattan
Investment Holdings, Inc., dated
January 27, 1995 (6)
4.3 Warrant Agreement and Warrant
Certificate of The Chase Manhattan
Bank, N.A. (7)
4.4 Warrant Certificate of Stanley Wunderlich,
dated as of January 1, 1996 (8)
4.5 Warrant Certificate of Stanley Wunderlich,
dated as of December 31, 1996 (9)
4.6 Warrant Certificate of Roger Winston (10)
4.7 Copy of Del Global Technologies Corp.
Amended and Restated Stock Option Plan
(the "Plan") (11)
4.8 Stock Purchase Plan (12)
4.9 Option Agreement, substantially in
the form used in connection with
options granted under the Plan (13)
10.1 Amended and Restated Executive
Employment Agreement of
Leonard A. Trugman (14)
10.2 Amendment No. 1 to Amended and
Restated Employment Agreement of
Leonard A. Trugman (15)
10.3 Amendment No. 2 to Amended and
Restated Employment Agreement of
Leonard A. Trugman (16)
10.4 Employment Agreement of
Howard Bertan (17)
10.5 Employment Agreement of
George Solomon (18)
10.6 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. (19)
10.7 First Amendment to Amended and Restated
Credit Agreement dated as of August 2, 1996 (20)
27
<PAGE>
*10.8 Second Amendment to Amended and Restated
Credit Agreement dated as of August 1, 1997
10.9 Lease Agreement dated April 7, 1992
between Messenger Realty and the Company (21)
10.10 Lease Agreement dated September 1, 1992
between Arleigh Construction and
Del Acquisition Corp. (22)
10.11 Lease and Guaranty of Lease dated
May 25, 1994 between Leshow Enterprises
and Bertan High Voltage Corp. (23)
10.12 Lease dated January 4, 1993 between
Curto Reynolds Oelerich Inc. and
Gendex Corporation (24)
10.13 Consulting Agreement by and between
Del Acquisition Corp. and
Harvey Schechter (25)
10.14 Consulting Agreement by and between
Del Acquisition Corp. and
Mark Weiss (26)
10.15 Consulting Agreement by and between
Del Global Technologies Corp. and
Stanley Wunderlich (27)
*11 Computation of earnings per Common
Share and Common Share Equivalents
for year ended August 2, 1997
*21 Subsidiaries of Del Global Technologies
Corp.
*23.1 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 3.6 to Del Global Technologies Corp. Annual Report
on Form 10-K for the year ended August 3, 1996 and incorporated
herein by reference.
(5) Filed as Exhibit 4.5 to Del Electronics Corp. Registration Statement
on Form S-3 (No. 33-61025) and incorporated herein by reference.
(6) Filed as Exhibit 4.6 to Del Electronics Corp. Registration Statement
on Form S-3 (No. 33-61025) and incorporated herein by reference.
(7) 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.
28
<PAGE>
(8) Filed as Exhibit 4.4 to Del Global Technologies Corp. Registration
Statement on Form S-3 (No. 333-09131) and incorporated herein by
reference.
(9) Filed as Exhibit 4.1 to the Del Global Technologies Corp.
Registration Statement on Form S-3 (No. 333-37825) and incorporated
herein by reference.
(10) Filed as Exhibit 4.2 to the Del Global Technologies Corp.
Registration Statement on Form S-3 (No. 333-37825) and incorporated
herein by reference.
(11) Filed as Exhibit A to Del Electronics Corp. Proxy Statement dated
January 26, 1994 and incorporated herein by reference.
(12) 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.
(13) 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.
(14) 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.
(15) 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.
(16) 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.
(17) Filed as Exhibit 2.2 to Del Electronics Corp. Current Report on Form
8-K dated June 10, 1994 and incorporated herein by reference.
(18) 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.
(19) 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.
(20) Filed as Exhibit 10.8 to the Del Global Technologies Corp. Annual
Report on Form 10-K for the year ended August 3, 1996 and
incorporated herein by reference.
(21) 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.
(22) Filed as Exhibit 28.6 to Del Electronics Corp. Current Report on Form
8-K dated November 9, 1992 and incorporated herein by reference.
(23) Filed as Exhibit 2.5 to Del Electronics Corp. Current Report on Form
8-K dated June 10, 1994 and incorporated herein by reference.
(24) 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.
(25) Filed as Exhibit 28.4 to Del Electronics Corp. Current Report on Form
8-K dated November 9, 1992 and incorporated herein by reference.
(26) Filed as Exhibit 28.5 to Del Electronics Corp. Current Report on Form
8-K dated November 9, 1992 and incorporated herein by reference.
(27) 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.
(b) Reports on Form 8-K - No reports on Form 8-K have been filed during
the last quarter of the period covered by this report.
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. and subsidiaries as of August 2, 1997 and August 3, 1996 and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the three fiscal years in the period ended August 2, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Del Global Technologies Corp. and
subsidiaries at August 2, 1997 and August 3, 1996 and the results of their
operations and their cash flows for each of three fiscal years in the period
ended August 2, 1997, in conformity with generally accepted accounting
principles.
/S/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
New York, New York
October 20, 1997
F1
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 2, August 3,
1997 1996
----------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 6,070,608 $ 5,817,800
Investments available-for-sale
(Notes 1, 2 and 10) 722,566 545,476
Trade receivables (net of allowance
for doubtful accounts of $60,407 at
August 2, 1997 and $194,775
at August 3, 1996) 11,211,357 9,221,328
Cost and estimated earnings in
excess of billings on uncompleted
contracts (Notes 1 and 3) 1,868,002 --
Inventory (Notes 1 and 4) 24,681,348 23,819,882
Prepaid expenses and other current
assets (Note 9) 1,808,762 1,675,214
----------- -----------
Total current assets 46,362,643 41,079,700
----------- -----------
FIXED ASSETS - At cost (Notes 1
and 5) 16,245,279 13,590,798
Less accumulated depreciation and
amortization 5,086,269 4,052,309
----------- -----------
11,159,010 9,538,489
----------- -----------
INTANGIBLES (net of accumulated
amortization of $242,009 at
August 2, 1997 and $32,448
at August 3, 1996) (Note 1) 1,112,991 1,322,552
GOODWILL (net of accumulated
amortization of $561,082 at August 2,
1997 and $370,020 at August 3,
1996) (Notes 1 and 11) 4,135,409 4,311,472
DEFERRED CHARGES 507,933 784,751
OTHER ASSETS (Notes 7 and 9) 851,824 692,788
----------- -----------
TOTAL $64,129,810 $57,729,752
=========== ===========
August 2, August 3,
1997 1996
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 6) $ 127,999 $ 120,078
Accounts payable - trade 3,936,529 3,693,580
Accrued liabilities 3,699,188 3,524,726
Deferred compensation liability (Notes 2
and 10) 722,566 545,476
Income taxes (Notes 1 and 9) 868,949 643,545
----------- -----------
Total current liabilities 9,355,231 8,527,405
----------- -----------
LONG-TERM LIABILITIES:
LONG-TERM DEBT (Less current
portion included above) (Note 6) 411,127 499,852
OTHER (Note 10) 725,258 789,589
DEFERRED INCOME TAXES
(Notes 1 and 9) 1,107,964 843,378
----------- -----------
Total liabilities 11,599,580 10,660,224
----------- -----------
COMMITMENTS AND
CONTINGENCIES (Notes 6,
7,8,10 and 11)
SHAREHOLDERS' EQUITY
(Notes 1, 7 and 8):
Common stock - $.10 par value;
Authorized -- 20,000,000 shares;
Issued and outstanding -
7,516,234 shares at August 2, 1997
and 7,440,108 at August 3, 1996 751,622 722,340
Additional paid-in capital 45,909,517 43,272,713
Retained earnings 6,572,318 3,411,160
----------- -----------
53,233,457 47,406,213
Less common stock in treasury -
104,255 at August 2, 1997 and
58,255 at August 3, 1996 703,227 336,685
----------- -----------
Total shareholders' equity 52,530,230 47,069,528
----------- -----------
TOTAL $64,129,810 $57,729,752
=========== ===========
See notes to consolidated financial statements.
F2
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year Ended
----------------------------------------
August 2, August 3, July 29,
1997 1996 1995
----------- ----------- -----------
NET SALES (Notes 1, 3 and 12) $54,685,289 $43,745,454 $32,596,312
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 32,854,825 27,355,262 19,177,999
Research and development (Note 1) 4,548,487 3,429,331 2,861,844
Selling, general and administrative 10,193,244 7,503,689 6,622,690
Interest (income) expense - net of
interest expense of $238,679 in 1997,
interest income of $34,777 in 1996
and $3,419 in 1995 (54,470) 1,148,639 1,191,142
----------- ------------ -----------
47,542,086 39,436,921 29,853,675
----------- ------------ -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 7,143,203 4,308,533 2,742,637
PROVISION FOR INCOME TAXES
(Notes 1 and 9) 2,231,649 1,393,111 837,428
----------- ------------ -----------
NET INCOME $ 4,911,554 $ 2,915,422 $ 1,905,209
=========== ============ ===========
PER SHARE AMOUNTS (Note 1):
NET INCOME PER COMMON SHARE AND
COMMON SHARE EQUIVALENTS:
PRIMARY $ .58 $ .48 $ .37
=========== =========== ============
FULLY DILUTED $ .58 $ .48 $ .36
=========== =========== ============
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 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 (Note 8) 38,509 (217,065) (217,065)
Tax benefit related to
exerciseof 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 (Note 8) 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
Stock dividend - 3%
November 1996 (Note 8) 215,301 21,528 1,724,075 (1,750,396) (4,793)
Exercise of stock options
and warrants (Note 8) 73,370 7,338 415,122 422,460
Shares repurchased (Note 8) 46,000 (366,542) (366,542)
Tax benefit related to
exercise of stock options
& warrants (Note 8) 458,023 458,023
Contribution to Profit
Sharing Plan (Note 7) 4,156 416 39,584 40,000
Net Income 4,911,554 4,911,554
--------- --------- -------- ----------- ------------ ------------ ------------
BALANCE - AUGUST 2, 1997 7,516,234 $ 751,622 104,255 $ (703,227) $ 45,909,517 $ 6,572,318 $ 52,530,230
========= ========= ======== =========== ============ ============ ============
</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 2, August 3, July 29,
1997 1996 1995
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $4,911,554 $2,915,422 $1,905,209
Adjustments to reconcile net income to
net cash provided by operating activities
net of effects from purchase of Gendex:
Imputed interest 68,309 66,986 68,963
Depreciation 1,038,960 740,777 749,586
Amortization 772,148 455,534 493,257
Deferred income tax provision (benefit) 147,981 (56,609) 36,452
Changes in assets and liabilities:
Increase in trade receivables (1,990,029) (2,764,475) (336,396)
(Increase) decrease in cost and estimated
earnings in excess of billings
on uncompleted contracts (1,868,002) 395,847 155,454
Increase in inventory (861,466) (1,144,987) (1,965,425)
Increase in prepaid and
other current assets (256,109) (355,086) (219,232)
Increase in other assets (10,535) (49,136) (37,097)
Increase in accounts payable - trade 242,949 1,153,965 62,514
Increase in accrued liabilities 174,464 1,418,461 164,863
Increase in deferred compensation liability 177,090 167,305 32,265
Increase in income taxes payable 683,427 824,039 245,792
----------- ------------ ------------
Net cash provided by
operating activities 3,230,741 3,768,043 1,356,205
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid on acquisition of
subsidiaries (15,000) (8,149,085) -
Payments to former shareholders of
subsidiary acquired (132,640) (52,938) (221,208)
Expenditures for fixed assets (2,659,481) (1,968,070) (1,337,509)
Investment in marketable securities (177,090) (167,117) (152,264)
Sale of marketable securities - - 120,000
------------ ----------- ------------
Net cash used in investing activities (2,984,211) (10,337,210) (1,590,981)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from public offering - 21,584,514 -
(Repayment of) proceeds from bank borrowing (80,804) (12,226,404) 432,044
Cost of debt restructuring (4,043) (63,327) -
Payment for repurchase of shares (366,542) (19,770) (217,065)
Proceeds from exercise of stock options & warrants 422,460 2,615,423 112,709
Other 35,207 (9,458) (32,520)
-------------- --------------- --------------
Net cash provided by financing activities 6,278 11,880,978 295,168
--------------- ----------- -------------
</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 2, August 3, July 29,
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
NET INCREASE IN CASH
AND CASH EQUIVALENTS $ 252,808 $ 5,311,811 $ 60,392
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 5,817,800 505,989 445,597
---------- ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 6,070,608 $ 5,817,800 $ 505,989
========== =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 86,679 $ 1,051,327 $ 1,084,332
========== =========== ============
Income taxes paid $ 1,400,240 $ 625,682 $ 355,006
========== =========== ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
ACQUISITION OF SUBSIDIARIES $ 15,000 $ 8,152,185
---------- -----------
Cash acquired in acquisition - 3,100
---------- -----------
- 3,100
---------- -----------
Cash paid to acquire subsidiaries $ 15,000 $ 8,149,085
========== ===========
TAX BENEFIT RELATED TO EXERCISE OF
STOCK OPTIONS & WARRANTS $ 458,023 $ 458,324 $ 32,038
========== =========== ============
</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 2, 1997, AUGUST 3, 1996, and JULY 29, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Description of Business Activities - Del Global Technologies Corp.
("Del") 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 critical electronic subsystems 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 all of the common stock of
Dynarad on September 1, 1992, 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. The Company provides
for returned products on an estimated basis.
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 Equivalents - Net
income per common share and common share equivalents 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 equivalents
utilizing either the Treasury Stock Method or 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
$0, $45,808 and $53,997, in fiscal 1997, 1996 and 1995,
respectively, for primary earnings per share. Net income was
increased by $0, $28,843 and $47,954 in 1997, 1996 and 1995,
respectively, for purposes of computing fully diluted earnings per
share.
The number of shares of common stock and common share equivalents
used in the calculation
F7
<PAGE>
of primary earnings per share were 8,498,404, 6,112,248 and
5,351,493 in fiscal 1997, 1996 and 1995, respectively. The number
of shares of common stock and common share equivalents used in the
calculation of fully diluted earnings per share were 8,524,522,
6,112,248 and 5,374,066 in fiscal 1997, 1996 and 1995, respectively
(Note 8).
j. Income Taxes - The Company accounts for income taxes under the
provisions of Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes." SFAS No. 109 establishes
financial accounting and reporting standards for the effect of
income taxes that result from activities during the current and
preceding years. SFAS No. 109 requires an asset and liability
approach for financial reporting for income taxes.
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 - During the year ended July 30, 1994, the Company
adopted SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." SFAS No. 115 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.
Investments, which are classified as available-for-sale, are used
to fund a deferred compensation plan established for one of the
Company's key employees. Gains and losses on these investments,
either recognized or unrealized, inure to the benefit or detriment
of this employee's deferred compensation, based upon a contractual
arrangement between the employee and the Company.
m. Intangibles - Intangible assets are patents, trademarks,
manufacturing rights and customer lists acquired with the purchase
of certain assets of Gendex. Intangibles are being amortized on a
straight-line basis over their estimated useful lives, which range
from 5 to 10 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 reviewed annually by the
Company and impairments will be recognized when the undiscounted
expected future cash flows are less than their carrying value.
Based upon its review, the Company does not believe that an
impairment of its goodwill has occurred.
o. Stock-Based Compensation - In October 1995, the FASB issued SFAS
No. 123, "Accounting for Stock- Based Compensation," (SFAS No.
123") is now effective for fiscal years beginning after December
15, 1995 and adoption of the measurement and recognition provisions
for non-employee transactions no later than fiscal years beginning
after December 15, 1995. SFAS No. 123 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 APB No. 25, "Accounting for
Stock Issued to Employees," but are 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 is disclosing the required pro forma effect on
net income and earnings per share (Note 8).
p. Effects of Recently Issued Accounting Standards - In February 1997,
the FASB issued SFAS No. 128 "Earnings Per Share." This statement
is effective for financial statements issued for periods ending
after December 15, 1997. Management believes the effect of this
statement on its financial reporting from the adoption of this
statement will be significant. If SFAS No. 128 were effective for
the fiscal year ended August 2, 1997, the effect of implementation
would have resulted in "Basic Earnings per Share" of $.66 and
"Diluted Earnings per Share" of $.58.
F8
<PAGE>
In February 1997, the FASB issued SFAS No. 129 "Disclosure of
Information about Capital Structure." This statement is effective
for financial statements issued for periods ending after December
15, 1997. Management has evaluated the effect of this statement on
its financial reporting and, as it contains no change in disclosure
requirements for entities that were previously subject to the
requirements of APB Opinions 10, 15 and 47, no further disclosures
are needed.
In February 1997, the FASB issued SFAS No. 130 "Reporting
Comprehensive Income." This statement is effective for financial
statements issued for periods ending after December 15, 1997.
Management has evaluated the effect of this statement on its
financial reporting from the adoption of this statement and has
found that no further disclosures are needed.
In June 1997, the FASB issued SFAS No. 131 "Disclosure About
Segments of an Enterprise and Related Information." SFAS No. 131
requires the reporting of profit and loss, specific revenue and
expense items, and assets for reportable segments. It also requires
the reconciliation of total segment revenues, total segment profit
or loss, total segment assets and other amounts disclosed for
segments to the corresponding amounts in the general purpose
financial statements. This statement is effective for financial
statements issued for periods ending after December 15, 1997. The
Company has not yet determined what additional disclosures may be
required in connection with adopting SFAS No. 131.
q. Certain reclassifications have been made in the prior year's
financial statements to correspond to the current year's
presentation.
2. INVESTMENTS
At August 2, 1997 investments consist of corporate debt securities and
equity securities classified as available-for-sale.
At August 2, 1997 the cost and fair value of investments classified as
available-for-sale based on maturity dates, are as follows:
Maturity Fair
Dates Cost Value Difference
----- ---- ----- ----------
Corporate debt securities
1998 $ 72,892 $ 73,288 $ 396
1999-2003 435,186 446,533 11,347
2004-2008 11,569 16,788 5,219
-------- -------- -------
Subtotal 519,647 536,609 16,962
-------- -------- -------
Equity securities 175,897 185,957 10,060
-------- -------- -------
Total $695,544 $722,566 $27,022
======== ======== =======
Investments at August 2, 1997 and August 3, 1996, consisted of $722,566
and $545,476, respectively for the Company's President's deferred
compensation, pursuant to the terms of his employment contract. The
liability of $722,566 and $545,476, respectively, is recorded as deferred
compensation liability. 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.
F9
<PAGE>
3. PERCENTAGE OF COMPLETION ACCOUNTING
Year Year
Ended Ended
August 2, July 29,
1997 1995
---------- ----------
Costs incurred on uncompleted contracts $3,086,020 $ 337,863
Estimated earnings 1,578,126 93,184
---------- ----------
4,664,146 431,047
Less: Billings to date 2,796,144 35,200
---------- ----------
Costs and estimated earnings in excess
of billings on uncompleted contracts $1,868,002 $ 395,847
========== ==========
There were no contracts accounted for under the percentage of completion
method of accounting for the year ended August 3, 1996. The backlog of
unshipped contracts being accounted for under the percentage of
completion method of accounting was approximately $4,889,000 at August 2,
1997.
4. INVENTORY
Inventory consists of the following:
August 2, 1997 August 3, 1996
-------------- --------------
Finished goods $ 3,859,842 $ 5,463,847
Work-in-process 9,770,789 9,538,081
Raw materials and purchased parts 11,050,717 8,817,954
----------- -----------
$24,681,348 $23,819,882
=========== ===========
5. FIXED ASSETS
Fixed assets consist of the following:
August 2, 1997 August 3, 1996
-------------- --------------
Land $ 694,046 $ 694,046
Buildings 2,146,025 2,146,025
Machinery and equipment 10,865,897 8,426,324
Furniture and fixtures 1,280,216 833,880
Leasehold improvements 1,228,992 1,043,996
Construction in progress -- 435,102
Transportation equipment 30,103 11,425
----------- -----------
16,245,279 13,590,798
Less accumulated depreciation
and amortization 5,086,269 4,052,309
----------- -----------
Net Fixed Assets $11,159,010 $ 9,538,489
=========== ===========
F10
<PAGE>
6. DEBT
Long-term debt is summarized as follows:
August 2, 1997 August 3, 1996
--------------------- --------------------
Due Within Due After Due Within Due After
One Year One Year One Year One Year
---------- --------- ---------- ---------
Acquisition credit line $105,263 $289,476 $105,263 $394,737
Revolving line of credit 100,000 100,000
Other Loans 22,736 21,651 14,815 5,115
-------- -------- -------- --------
$127,999 $411,127 $120,078 $499,852
======== ======== ======== ========
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 2,
1997 there were outstanding balances of $394,739 on the acquisition
credit line, $100,000 on the revolving line of credit, and $207,397 of
letters outstanding. As of August 2, 1997, there was $9,605,261 available
under the acquisition credit line and $13,692,603 available for borrowing
under the revolving credit line. The acquisition credit line is to be
repaid in 15 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 percent above LIBOR or 6.81 percent. 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 2, 1997, $25,000 is available for such
cash dividends. The Company was in compliance with its debt covenants at
August 2, 1997. Management believes that its debt obligations are stated
at fair value, because the interest rates on its credit lines are indexed
with either the Prime Rate or LIBOR.
The weighted average interest rate on the Company's borrowing under its
credit facility was 7.27% and 8.26% for the years ended August 2, 1997
and August 3, 1996, respectively.
In order to protect against adverse interest rate fluctuations, the
Company entered into two three-year interest rate protection agreements
with its bank with a combined cost of approximately $145,000. The
interest rate protection agreements protected 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 terminated in July
1997.
Long-term debt matures as follows:
Fiscal Year Ending
1998 (included in current portion) $ 127,999
1999 120,964
2000 111,213
2001 178,950
----------
$ 539,126
==========
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 1997, 1996 and 1995 was $52,500, $40,000 and $32,500,
respectively. The plan also incorporates a 401(k) Retirement Plan that is
available to substantially all employees, allowing them to defer a portion
of their salary. The Company
F11
<PAGE>
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 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.
b. Stock Dividends - On November 19, 1996, the Company declared a 3
percent stock dividend to holders of record on December 4, 1996
and was paid on December 23, 1996. 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.
c. Nonqualified Stock Option Plan - The Company has a nonqualified
stock option plan under which a total of 2,624,293 options to
purchase common stock may be granted. As of August 2, 1997, the
Company has granted options to purchase 876,975 shares to the
current president, 240,723 shares to former officers, 297,439 to
current officers and 1,253,120 to various employees and
consultants. Current officers exercised 15,749 options and
various employees and consultants exercised 17,895 options during
the fiscal year ended August 2, 1997. Former officers exercised
32,874 options and various employees and consultants exercised
175,951 options during the fiscal year ended August 3, 1996. A
former officer exercised 17,821 options and various employees
exercised 15,563 options during the fiscal year ended July 29,
1995. Substantially all of the options granted under this plan
provide for graded vesting and vest at a rate of 25% per year,
beginning one year from the date of grant, expiring fifteen years
from the date they are granted. 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:
August 2, August 3, July 29,
Options 1997 1996 1995
---------- ------------ ----------
Granted and outstanding
at beginning of year 1,712,568 1,646,607 1,670,239
Granted 131,842 297,052 104,110
Expired (29,521) (22,266) (94,358)
Exercised (33,644) (208,825) (33,384)
---------- ---------- ----------
Outstanding at end of year 1,781,245 1,712,568 1,646,607
========== ========== ==========
Exercisable at end of year 1,506,962 1,481,025 1,244,500
========== ========== ==========
Exercise prices $.93-$8.48 $.93-$8.49 $.93-$6.32
========== ========== ==========
F12
<PAGE>
The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and its related interpretations.
Accordingly, no compensation expense was recorded for the
Company's stock option and stock purchase plans. However, under
SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company has determined the pro forma net income and net income
per share amounts for fiscal 1997 and fiscal 1996, as if the
compensation expense had been recorded for options granted during
those years under the fair value method. Under SFAS No. 123, for
options granted, the fair value at the date of grant was
estimated using the Black-Scholes option pricing model. The
following weighted average assumptions were used in calculating
the fair value of the options granted in the fiscal years ended
August 2, 1997 and August 3, 1996: risk free interest rates of
6.1% to 7.65% expected life of the options are between two and
thirteen years, average volatility of between 41.33% and 44.87%,
and a maximum contractual life of fifteen years.
Had the Company adopted SFAS No. 123, the pro forma effect on net
income and net income per share would be:
For Year Ended For Year Ended
August 2, August 3,
1997 1996
---------- ----------
Net income
As reported $4,911,554 $2,915,422
========== ==========
Pro forma $4,794,017 $2,862,726
========== ==========
Net income per common share:
As reported $ .58 $ .48
========== ==========
Pro forma $ .56 $ .46
========== ==========
Weighted average number of
shares outstanding 8,498,404 6,112,248
========== ==========
d. There were warrants outstanding aggregating 79,720 shares at
August 2, 1997, all of which were granted at fair market value
(the closing stock value at the date of grant). They are as
follows:
1. 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
2, 1997, the bank held warrants for 34,778 shares at
an exercise price of $4.74 and warrants for 18,035
shares at an exercise price of $6.60. As these
warrants were issued prior to the effective date of
SFAS No. 123, no compensation expense was recorded in
fiscal 1997.
2. In connection with an extension of a consulting
agreement, the Company has issued 25,000 additional
warrants to purchase shares of common stock at and
exercise price of $8.50 to a consultant, which were
still outstanding at August 2, 1997. During the year
ended August 2, 1996, the Company granted warrants to
purchase 30,900 shares of common stock at an exercise
price of $6.37. During fiscal 1997, the consultant
exercised 29,500 warrants at an exercise price of
$6.18 and at August 2, 1997, there were 1,907 warrants
outstanding. In accordance with SFAS No. 123, $43,505
was recognized as compensation expense for the year
ended August 2, 1997, with the balance to be amortized
over the expected life of the consulting agreement of
five months.
F13
<PAGE>
9. INCOME TAXES
Provision for income taxes consists of the following:
Fiscal Year Ended
----------------------------------------
August 2, August 3, July 29,
1997 1996 1995
----------- ----------- -----------
Current:
Federal $ 1,889,377 $ 1,266,044 $ 692,064
State 194,290 183,676 108,912
----------- ----------- -----------
2,083,667 1,449,720 800,976
Deferred:
Federal and state 147,981 (56,609) 36,452
----------- ----------- -----------
$ 2,231,649 $ 1,393,111 $ 837,428
=========== =========== ===========
Deferred tax liabilities (assets) are comprised of the following:
August 2, August 3,
1997 1996
----------- -----------
Depreciation $ 1,030,628 $ 639,834
Pension 97,870 94,276
Federal effect of New
York State tax credits 118,783 106,858
Difference in basis of
fixed assets 92,684 101,368
Revenue recognition 245,978 --
----------- -----------
Gross deferred tax liabilities 1,585,943 942,336
----------- -----------
Warranty reserve (38,154) --
Amortization (133,893) 87,975
Inventory (154,594) (164,003)
Bad debt reserve (13,549) (64,312)
Deferred compensation (501,726) (388,866)
NYS tax credits (349,359) (314,286)
Self-funded health insurance (213,591) (65,748)
----------- -----------
Gross deferred tax assets (1,404,866) (909,240)
----------- -----------
Net deferred tax liabilities $ 181,077 $ 33,096
=========== ===========
Deferred tax liabilities and assets are recorded in the consolidated
balance sheets as follows:
August 2, August 3,
1997 1996
----------- -----------
Liabilities:
Deferred income taxes $ 1,107,964 $ 843,378
Assets:
Prepaid expenses and other
current assets (425,540) (495,997)
Other assets (501,347) (314,285)
----------- -----------
$ 181,077 $ 33,096
=========== ===========
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:
F14
<PAGE>
Fiscal Year Ended
-------------------------------
August 2, August 3, July 29,
1997 1996 1995
--------- --------- --------
% 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 1.6 1.5 1.5
Permanent differences .5 .6 2.8
Tax benefits on foreign sales corp. (2.5) (3.3) (3.3)
Federal tax credits and other (2.4) (.5) (4.5)
-------- -------- --------
31.2% 32.3% 30.5%
======== ======== ========
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, N.Y. 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 Medical Imaging
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 2, 1997 are as follows:
Fiscal Year Ended Amount
----------------- ----------
1998 $1,176,412
1999 1,023,855
2000 1,000,353
2001 969,030
2002 727,236
Thereafter 697,539
----------
$5,594,425
==========
Rent expense was $1,285,877 in 1997, $1,117,068 in 1996 and
$1,111,300 in 1995, which includes real estate taxes of $289,105 in
1997, $286,118 in 1996 and $296,142 in 1995.
b. The Company has an employment agreement with its President through
July 31, 2000. The agreement provides for minimum base salary,
deferred compensation and bonuses as defined. Under the terms of
the agreement with the President, the Company will accrue deferred
compensation at a rate of five percent of pretax income with a
minimum of $100,000 and a maximum of $125,000. The accumulated
amount at August 2, 1997 was $722,566. Such liability is funded by
the Company's investments of $722,566, classified as
available-for-sale. Gains and losses, either recognized or
unrealized, inure to the benefit or detriment of this employee's
deferred compensation, based upon a contractual arrangement between
the 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 Vice President through 1997. As of
April 1, 1996, the Vice President opted for an extension in the
F15
<PAGE>
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. 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.
c. 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 Bertan's pretax income.
As of May 28, 1996, this employee became a technical consultant to
the Company. On April 23, 1997, 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. At August 2, 1997 and August 3, 1996 the amounts
recorded for the net present value of future obligations relating
to the Bertan acquisition were $842,236 and $839,589, respectively.
d. The Company is a defendant in several legal actions arising from
the normal course of business. Management, on the advice of
counsel, believes the Company has meritorious defenses to such
actions and that the outcomes will not be material to the Company's
consolidated financial condition, results of operations and cash
flows.
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 $5,700,000 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. Based upon earnings of Gendex-Del since acquisition,
the Company's management believes that there is no contingent
consideration payable to Dentsply. Should contingent consideration
payments become applicable, they will increase the purchase price of
Gendex and will increase the amount of goodwill recorded on this
transaction. Gendex-Del entered into a $2,500,000 six month Supply
Agreement with Dentsply to purchase parts and subassemblies previously
manufactured by Dentsply. Gendex-Del assumed the existing lease for its
facility in Franklin Park, 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 $1,614,133, which is included in goodwill. Such
excess is being amortized over a 25 year period. The charge to income
for fiscal 1997 was $64,280 and 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:
F16
<PAGE>
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 Critical Electronic Subsystems segment, no one customer
accounts for more than ten percent of the Company's consolidated net
sales in fiscal years 1997, 1996 and 1995. In the Medical Systems
segment one customer, the U.S. Government, accounted for 17 percent of
sales in 1995.
Export sales were 40 percent, 40 percent and 36 percent of total sales
in 1997, 1996 and 1995, respectively.
For the years ended August 2, 1997, August 3, 1996 and July 29, 1995,
export sales by geographic areas were:
1997 1996 1995
----------- ----------- -----------
Europe $ 6,709,380 31% $ 5,460,305 31% $ 3,892,719 33%
Far East 6,285,606 28% 5,446,443 31% 3,336,147 28%
North America 4,817,555 22% 2,979,653 17% 627,777 6%
Middle East 3,521,101 16% 3,374,581 20% 3,256,903 28%
Other 615,967 3% 181,960 1% 614,149 5%
----------- ---- ----------- ---- ----------- ----
Total export sales $21,949,609 100% $17,442,942 100% $11,727,695 100%
=========== ==== =========== ==== =========== ====
13. SEGMENT REPORTING
The following analysis provides segment information for the two
industries in which the Company operates (see Note 1):
F17
<PAGE>
Critical
Electronic Medical
1997 Subsystems Systems Total
---------- ----------- ----------- -----------
Net Sales (a) $32,326,668 $22,358,621 $54,685,289
Operating expenses 26,471,966 21,124,590 47,596,556
----------- ----------- -----------
Operating profit $ 5,854,702 $ 1,234,031 7,088,733
=========== ===========
Interest income 54,470
Provision for income taxes 2,231,649
-----------
Net income $ 4,911,554
===========
Identifiable assets $45,422,755 $18,862,218 $64,284,973
=========== =========== ===========
Capital expenditures $ 1,837,219 $ 822,262 $ 2,659,481
=========== =========== ===========
Depreciation and amortization $ 1,119,327 $ 691,781 $ 1,811,108
=========== =========== ===========
(a) For the fiscal year ended August 2, 1997, sales of the Critical
Electronic Subsystems segment included sales of approximately
$13,240,000 to customers for medical imaging and diagnostic
applications. Aggregate medical sales for the fiscal year ended
August 2, 1997 were approximately $35,599,000 or 65% of total
sales.
Critical
Electronic Medical
1996 Subsystems Systems 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 $ 1,579,674 $ 388,396 $ 1,968,070
=========== =========== ===========
Depreciation and amortization $ 856,261 $ 340,050 $ 1,196,311
=========== =========== ===========
(a) For the fiscal year ended August 3, 1996, sales of the
Critical Electronic Subsystems segment included sales of
approximately $11,657,000 to customers for medical imaging and
diagnostic applications. Aggregate medical sales for the
fiscal year ended August 3, 1996 were approximately
$25,709,000 or 59% of total sales.
F18
<PAGE>
Critical
Electronic Medical
1995 Subsystems Systems 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 the fiscal year ended July 29, 1995, sales of the Critical
Electronic Subsystems segment included sales of approximately
$8,834,000 to customers for medical imaging and diagnostic
applications. Aggregate medical sales for the fiscal year
ended July 29, 1995 were approximately $14,403,000 or 44% of
total sales.
F19
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
QUARTER
--------------------------------------------------
First Second Third Fourth
----------- ----------- ----------- -----------
YEAR ENDED AUGUST 2, 1997:
Net sales $12,311,384 $12,691,871 $14,317,165 $15,364,869
=========== =========== =========== ===========
Gross profit $ 4,805,146 $ 5,133,272$ $ 5,372,545 $ 6,519,501
=========== =========== =========== ===========
Net income $ 988,454 $ 1,119,848 $ 1,283,682 $ 1,519,570
=========== =========== =========== ===========
Primary and fully diluted
earnings per share $ .12 $ .13 $ .15 $ .18
=========== =========== =========== ===========
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 $ .10 $ .11 $ .14 $ .13
=========== =========== =========== ===========
F20
<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 H. Taber
----------------------
Michael Taber
Vice President - Finance,
Secretary and Chief
Accounting Officer
Dated: October 31, 1997
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, 1997
- ---------------------
Natan Bertman, Director
/S/David Michael October 31, 1997
- ---------------------
David Michael, Director
/S/Seymour Rubin October 31, 1997
- ---------------------
Seymour Rubin, Director
/S/James Tiernan October 31, 1997
- ---------------------
James Tiernan, Director
/S/Leonard A. Trugman October 31, 1997
- ---------------------
Leonard A. Trugman
Chairman of the Board,
Chief Executive Officer and
President
SECOND AMENDMENT
to
AMENDED AND RESTATED CREDIT AGREEMENT
SECOND AMENDMENT (the "Amendment"), dated as of August 1, 1997 (the
"Second Amendment Date") to Amended and Restated Credit Agreement, made by The
Chase Manhattan Bank , 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., 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., 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"), and amended by that
certain amendment dated as of August 2, 1996.
W I T N E S S E T H
WHEREAS, the Debtors and the Bank entered into an Amended and Restated
Credit Agreement dated as of March 5, 1996 and amended by that certain amendment
dated as of August 2, 1996, (as heretofore amended, the "Agreement") 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 Second Amendment Date, the outstanding aggregate
principal balance of the Revolving Credit Loans is $100,000.00 and the
outstanding aggregate principal balance of the Term Loans is $394,738.92 (after
giving effect to a payment made as of this date) to all of which there are no
defenses or offsets;
WHEREAS, the Debtors and the Bank have agreed, among other things, to
increase the sublimit for Letters of Credit, to increase the amount of
investments the Debtors may make without consent of the Bank, to modify the
obligation of the Debtors to obtain interest rate protection, to add a fixed
rate pricing option, to modify the requirement of the Debtors with respect to
delivery of Borrowing Base Certificates, and to extend the Revolving Credit
Maturity Date;
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and undertakings herein
contained, the Debtors and the Bank hereby agree as follows:
A. Modification of Agreement
1. Section 1.1. Section 1.1 of the Agreement is hereby modified as of
the Second Amendment Date by the addition of the following definitions in their
proper alphabetical positions:
Fixed Rate shall mean such fixed rate of interest as may be
made available to the Debtors by the Bank, from time to time, for an
Interest Period determined by the Bank, and accepted by the Debtors.
The Fixed Rate is subject to availability as determined by the Bank, in
its sole and absolute discretion.
Fixed Rate Loan shall mean any Loan when and to the extent the
interest rate therefor is a Fixed Rate.
Second Amendment shall mean the amendment to the Agreement
dated as of August 1, 1997.
Second Amendment Date shall mean August 1, 1997.
2. Section 1.1. Section 1.1 of the Agreement is hereby further modified
as of the Second Amendment Date by the deletion of the definition for the term,
"Interest Period", and the substitution of the following therefor:
Interest Period shall mean, (i) with respect to any Eurodollar
Loan, the period commencing on the date such Eurodollar Loan is made,
converted from another type of Loan or renewed, as the case may be, and
ending, as a Debtor may select pursuant to Section 2.4(c), on the
numerically corresponding day in the first, second, third, or sixth
calendar month thereafter, or for such shorter period that a Debtor may
so select, when and if the Bank shall, in its sole and absolute
discretion, make such period available, provided that each such
Interest Period which commences on the last Business Day of a calendar
month (or on any day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall end on the last
Banking Day of the appropriate calendar month, and (ii) with respect to
any Fixed Rate Loan, the period of time determined by the Bank, in its
sole discretion, for which the Fixed Rate will be in effect for a Loan,
or a portion thereof, commencing on the date such Fixed Rate Loan is
made, converted from another type of Loan or renewed, as the case may
be, when and if the Bank shall, in its sole and absolute discretion,
make such period available.
<PAGE>
3. Section 1.1. Section 1.1 of the Agreement is hereby further modified as of
the Second Amendment Date by the deletion of the definition for the term,
"Revolving Credit Maturity Date", and the substitution of the following
therefor:
Revolving Credit Maturity Date shall mean April 30, 2001.
4. Section 2.3. Section 2.3 of the Agreement is hereby deleted as of
the Second Amendment Date and the following substituted therefor:
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 Second Amendment Date. The
principal amount of the Term Note shall be payable in 15 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 October 31, 1997 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 and continuing thereafter until the entire
unpaid principal balance of such Additional Term Loan, together with
all accrued and unpaid interest shall be paid in full on the Term Loan
Maturity Date. 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, Eurodollar Loans, or Fixed Rate Loans.
(b) Revolving Credit Loans. The Revolving Credit
Loans made by the Bank pursuant to Section 2.2 hereof shall be
evidenced by a promissory note of the Debtors substantially in the form
of Exhibit B hereto, dated the Second Amendment Date, with appropriate
insertions (the "Revolving Credit Note"), payable to the order of the
Bank and representing the obligation of the Debtors to pay the
aggregate unpaid principal amount of all Revolving Credit Loans made by
the Bank,
<PAGE>
with interest thereon as hereinafter prescribed. The outstanding
principal balance of the Revolving Credit Note, together with all
accrued and unpaid interest thereon, shall be due and payable on the
Revolving Credit Maturity Date. Revolving Credit 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, Eurodollar
Loans, or Fixed Rate Loans.
(c) Endorsement. The Bank is hereby authorized by the
Debtors to endorse on the schedule attached to each Note held by it the
amount of each Loan, the amount of such Loan, if any, to which a
Eurodollar Rate or Fixed Rate applies, the rate of interest if a
Eurodollar Rate or Fixed Rate applies, and the period during which such
Eurodollar Rate or Fixed Rate applies and each payment of principal
amount received by the Bank on account of each Loan, which endorsement
shall, in the absence of manifest error, be conclusive as to the
outstanding balance of the Loans made by the Bank; provided, however,
that the failure to make such notation with respect to any Loan or
payment shall not limit or otherwise affect the obligations of the
Debtors under this Agreement or the Notes held by the Bank.
5. Section 2.4(a). Section 2.4(a) of the Agreement is hereby deleted as
of the Second Amendment Date and the following substituted therefor:
2.4 Interest.
(a) Interest shall accrue on the outstanding and
unpaid principal amount of each Loan for the period from the Second
Amendment Date to but excluding the date such Loan is due at the
following rates per annum: (i) for a Variable Rate Loan, at a variable
rate per annum equal to the Variable Rate plus the applicable Margin,
(ii) for a Eurodollar Loan, at a fixed rate equal to the Eurodollar
Rate plus the applicable Margin, and (iii) for a Fixed Rate Loan, at
the applicable Fixed Rate. Interest shall be calculated on the basis of
a year of 360 days for the actual number of days elapsed. After any
stated or accelerated maturity thereof, each Note shall bear interest
(computed daily on the basis of a 360-day year for actual days elapsed)
at a rate of one percent (1%) per annum in excess of the rate
hereinbefore provided for. In no event shall interest be payable at a
rate which is in excess of the maximum rate of interest permitted under
applicable law.
6. Section 2.4(c). Section 2.4(c) of the Agreement is hereby deleted as
of the Second Amendment Date and the following substituted therefor:
<PAGE>
(c) Subject to the terms and conditions of this
paragraph and elsewhere in this Agreement, the Debtors may convert any
Variable Rate Loan or portion thereof to a Eurodollar Loan or to a
Fixed Rate Loan, and, at the end of the Interest Period therefor,
convert any Eurodollar Loan or Fixed Rate Loan to a Loan of another
type.
(i) In the case of each Eurodollar Loan, the
Debtors shall select an Interest Period of any duration in accordance
with the definition of Interest Period in Section 1.1, subject to the
following limitations: (A) no Interest Period may extend beyond the
Termination Date; and (B) if an Interest Period would end on a day
which is not a Business Day, such Interest Period shall be extended to
the next Business Day, unless such Business Day would fall in the next
calendar month in which event such Interest Period shall end on the
immediately preceding Business Day. In the case of a Term Loan,
interest rates based on the Eurodollar Rate shall not be available to
the Debtors at such times or in such amounts as would require
prepayment of a Eurodollar Loan in order to satisfy the amortization
requirements set forth in the Note evidencing such Term Loan. No
Eurodollar Loan (Eurodollar Loans having different Interest Periods at
the same time hereunder being deemed separate Eurodollar Loans) may be
in an amount less than $250,000.00 (or the U.S. Dollar equivalent).
Upon notice to the Bank as provided in Section 2.15, the Debtors may
renew any Eurodollar Loan on the last day of the Interest Period
therefor as a Eurodollar Loan with an Interest Period of the same or
different duration in accordance with the limitations provided above.
If the Debtors shall fail to give notice to the Bank of such a
renewal, such Eurodollar Loan shall automatically become a Variable
Rate Loan on the last day of the current Interest Period.
(ii) In the case of each Fixed Rate Loan,
upon request therefor by the Debtors and subject to the Bank's sole
and absolute discretion, the Bank shall make available to the Debtors
a Fixed Rate for a designated Interest Period which shall not extend
beyond the Termination Date. In the case of a Term Loan, a Fixed Rate
shall not be available to the Debtors at such times or in such amounts
as would require prepayment of a Fixed Rate Loan in order to satisfy
the amortization requirements set forth in the Note evidencing such
Term Loan. Upon notice to the Bank as provided in Section 2.15 and
subject to the Bank's sole discretion, the Debtors may renew any Fixed
Rate Loan on the last day of the Interest Period therefor as a Fixed
Rate Loan with an Interest Period of the same or different duration in
accordance with the limitations provided above. If the Debtors shall
fail to give notice to the Bank of such a renewal, such Fixed Rate
Loan shall automatically become a Variable Rate Loan on the last day
of the current Interest Period.
<PAGE>
7. Section 2.4(f). Section 2.4(f) of the Agreement is hereby deleted as of the
Second Amendment Date and the following substituted therefor:
(f) Accrued interest shall be due and payable in
arrears upon any payment of principal or conversion and (i) for each
Variable Rate Loan and each Fixed Rate Loan, on the first day of each
calendar month, commencing the first such date after such Loan and (ii)
for each Eurodollar Loan, on the last day of the Interest Period with
respect thereto and, in the case of an Interest Period greater than
three months, at three-month intervals after the first day of such
Interest Period provided that interest accruing after any stated or
accelerated maturity of a Note shall be due and payable from time to
time on demand of the Bank.
8. Section 2.9(a). Section 2.9(a) of the Agreement is hereby deleted as
of the Second Amendment Date and the following substituted therefor:
(a) Subject to the terms and conditions contained in
this Section 2.9 and elsewhere in this Agreement, the Debtors shall
have the right to prepay any Term Loan, at any time in whole or from
time to time in part; provided that (i) each optional partial
prepayment, except for prepayments which result in the prepayment of
all outstanding principal of such Loan, shall be in a principal amount
of not less than One Hundred Thousand Dollars ($100,000.00) and shall
be applied to installments in inverse order of their maturities; (ii)
in the case of a Eurodollar Loan or a Fixed Rate Loan, payment or
conversion may occur only on the last day of an Interest Period for
such Loan.
9. Section 2.9(e). Section 2.9 of the Agreement is hereby amended as of
the Second Amendment Date by the addition of the following Section 2.9(e)
immediately following Section 2.9(d):
(e) In the event that the Debtors prepay any Fixed
Rate Loan in full, whether such prepayment be optional or mandatory,
prior to the end of the Interest Period applicable to such Loan, such
prepayment shall be accompanied by a payment to the Bank of a premium
(as liquidated damages and not as penalty) equal to all reasonable
losses, expenses, and liabilities (including, without limitation, any
interest paid by the Bank to lenders of funds borrowed by it to make or
carry the Loan and losses sustained by the Bank in connection with the
re-employment of such funds) which the Bank may incur with respect to
such Fixed Rate Loan.
10. Section 2.13(d). Section 2.13(d) of the Agreement is hereby deleted
as of the Second Amendment Date and the following substituted therefor:
<PAGE>
(d) The Debtors shall pay to the Bank, upon the request of the Bank,
such amount or amounts as shall be sufficient (in the reasonable
opinion of the Bank) to compensate it for any loss, cost or expense
which the Bank determines is attributable to any failure by the Debtors
to borrow, convert into or renew a Eurodollar Rate Loan or Fixed Rate
Loan to be made, converted into or renewed by the Bank on the date
specified therefor in the relevant notice under Section 2.4 or 2.15, as
the case may be.
11. Section 2.14.1. Section 2.14.1 of the Agreement is hereby deleted
as of the Second Amendment Date and the following substituted therefor:
2.14.1 Letter of Credit Facility. (a) During the
Revolving Credit Commitment Period, the Bank agrees, upon the terms and
conditions set forth in this Agreement, to issue at the request of the
Debtors and for the account of the Debtors, one or more Standby Letters
of Credit and/or Sight Letters of Credit which in the aggregate of the
face amount thereof at any one time outstanding shall not exceed the
lesser of (a) the Borrowing Base less the principal balance of all
Revolving Credit Loans or (b) FOUR MILLION AND 00/100 DOLLARS
($4,000,000.00) (the "Letter of Credit Facility"), provided that the
Bank shall not be under any obligation to issue, and shall not issue,
any Letter of Credit if (i) any order, judgment or decree of any
government authority or other regulatory body or arbitrator shall
purport by its terms to enjoin or restrain the Bank from issuing any
such Letter of Credit, or any law or governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law)
from any governmental authority or other regulatory body with
jurisdiction over the Bank shall prohibit, or request that the Bank
refrain from the issuance of Letters of Credit generally or any such
Letter of Credit in particular or shall impose upon the Bank with
respect to any such Letter of Credit any restriction or reserve or
capital requirement (for which the Bank is not otherwise compensated)
or any unreimbursed loss, cost or expense which was not applicable, in
effect or known to the Bank as of the date of this Agreement and which
the Bank in good faith deems material to it; or (ii) one or more of the
conditions to such issuance contained in Section 4.1 is not then
satisfied.
(b) In no event shall (i) the aggregate face
amount of Letter of Credit Obligations with respect to Letters of
Credit at any time exceed the lesser of (A) the Borrowing Base less the
principal balance of all Revolving Credit Loans or (B) $4,000,000; (ii)
the expiration date of any Letter of Credit, or the date for payment of
any draft presented thereunder and accepted by the Bank, be more than
twelve months after the date of issuance thereof or after the Revolving
Credit Maturity Date; or (iii) the Bank issue any Letter of Credit for
the purpose of supporting the issuance of any Letter of Credit by any
other Person.
<PAGE>
12. Section 2.15. Section 2.15 of the Agreement is hereby deleted as of
the Second 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 or
Fixed 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 or Fixed Rate
Loans) renewals of (i) Variable Rate Loans, given on the date thereof;
(ii) Eurodollar Loans, given three Business Days prior thereto, and
(iii) Fixed Rate Loans, given given one Business Day prior thereto.
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 or Fixed Rate Loan, the Interest Period
therefor) and the date of the borrowing or prepayment, or conversion or
renewal (which shall be a Business Day).
13. Section 5.5(c). Section 5.5(c) of the Agreement is hereby deleted
as of March 31, 1996 and the following substituted therefor:
(c) within 20 days (or earlier, if practicable) after
the end of each month in which the aggregate of (i) the aggregate
principal amount of all outstanding Revolving Credit Loans plus (ii)
the Letter of Credit Obligations exceeds $5,000,000.00, a borrowing
base certificate ("Borrowing Base Certificate") in the form annexed
hereto as Exhibit E for the fiscal month of the Debtors just ended,
together with an aging summary of all Accounts Receivable;
14. Section 5.13. Section 5.13 of the Agreement is hereby deleted as of
the Second Amendment Date and the following substituted therefor:
5.13 Interest Rate Protection. At such time as the aggregate
principal balance of the Term Loans shall be equal to or exceed
$5,000,000.00, the Debtors shall enter into an interest rate swap
agreement or an interest rate cap agreement covering a notional
principal amount equal to at least 75% of the outstanding principal
amount of the Term Loans, as such amount may change from time to time,
with such counterparties and on such terms and conditions as shall be
reasonably satisfactory to the Bank. So long as the aggregate principal
balance of the Term Loans shall be equal to or exceed $5,000,000.00,
the Debtors shall re-establish such interest rate protection prior to
the expiration of any interest rate agreement entered into pursuant to
the foregoing.
<PAGE>
15. Section 6.7(a) Section 6.7(a) of the Agreement is hereby deleted as
of the Second 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
$1,000,000.00 (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 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.
16. Exhibits. The Agreement is hereby modified as of the Second
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 deletion
of Exhibit A-1 and the substitution therefor of a new Exhibit A-1, in the form
of Exhibit 2 to this Amendment; and (c) the deletion of Exhibit B and the
substitution therefor of a new Exhibit B, in the form of Exhibit 3 to this
Amendment.
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:
<PAGE>
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 Revolving
Credit Note in the form of Exhibit 3 to this Amendment.
3. 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 Second Amendment Date, in substantially the form of Exhibit 4
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.
4. Officer's Certificate. The following statements shall be true and
the Bank shall have received a certificate, dated the Second Amendment Date, in
substantially the form of Exhibit 5 to this Amendment, signed by a duly
authorized officer of each of the Debtors stating that to the best of his
knowledge:
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 Second
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.
5. Opinion Letter. The Bank shall have received an opinion of counsel
to the Debtors, substantially in the form of Exhibit 6 to this Amendment.
6. 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.
<PAGE>
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 1-6 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.
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
- ------- -------------------------------------
David Engel, Executive Vice President
/S/Michael Taber
- --------------------
Michael Taber, Secretary
<PAGE>
(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
-------------------------------------
/S/Michael Taber David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
(Corporate Seal)
DEL MEDICAL SYSTEMS CORP.
ATTEST: By: /S/David Engel
-------------------------------------
/S/Michael Taber David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
(Corporate Seal)
GENDEX-DEL MEDICAL IMAGING CORP.
ATTEST: By: /S/David Engel
-------------------------------------
/S/Michael Taber David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
THE CHASE MANHATTAN BANK
By: /S/Thomas R. Himmelright
-------------------------------------
Thomas R. Himmelright, Vice President
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF NASSAU )
On the 17th day of October 1997, before me personally came David Engel, to
me known, who, being by me duly sworn, did depose and say that he resides at
Patchogue, NY that he is the Executive Vice President of DEL GLOBAL TECHNOLOGIES
CORP., the corporation described in and which executed the foregoing instrument;
that it was so executed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like authority.
Christine Galway /S/Christine Galway
Notary Public, State of New York -------------------------------
No. 01GA5021498 NOTARY PUBLIC
Qualified in Nassau County
Commission Expires 12/20/97
STATE OF NEW YORK )
)ss.:
COUNTY OF NASSAU )
On the 17th day of October 1997, before me personally came David Engel, to
me known, who, being by me duly sworn, did depose and say that he resides at
Patchogue, NY that he is the Executive Vice President of DEL GLOBAL TECHNOLOGIES
CORP., the corporation described in and which executed the foregoing instrument;
that it was so executed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like authority.
Christine Galway /S/Christine Galway
Notary Public, State of New York -------------------------------
No. 01GA5021498 NOTARY PUBLIC
Qualified in Nassau County
Commission Expires 12/20/97
STATE OF NEW YORK )
)ss.:
COUNTY OF NASSAU )
On the 17th day of October 1997, before me personally came David Engel, to
me known, who, being by me duly sworn, did depose and say that he resides at
Patchogue, NY that he is the Executive Vice President of DEL GLOBAL TECHNOLOGIES
CORP., the corporation described in and which executed the foregoing instrument;
that it was so executed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like authority.
Christine Galway /S/Christine Galway
Notary Public, State of New York -------------------------------
No. 01GA5021498 NOTARY PUBLIC
Qualified in Nassau County
Commission Expires 12/20/97
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF NASSAU )
On the 17th day of October 1997, before me personally came David Engel, to
me known, who, being by me duly sworn, did depose and say that he resides at
Patchogue, NY that he is the Executive Vice President of DEL GLOBAL TECHNOLOGIES
CORP., the corporation described in and which executed the foregoing instrument;
that it was so executed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like authority.
Christine Galway /S/Christine Galway
Notary Public, State of New York -------------------------------
No. 01GA5021498 NOTARY PUBLIC
Qualified in Nassau County
Commission Expires 12/20/97
STATE OF NEW YORK )
)ss.:
COUNTY OF NASSAU )
On the 17th day of October 1997, before me personally came David Engel, to
me known, who, being by me duly sworn, did depose and say that he resides at
Patchogue, NY that he is the Executive Vice President of DEL GLOBAL TECHNOLOGIES
CORP., the corporation described in and which executed the foregoing instrument;
that it was so executed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like authority.
Christine Galway /S/Christine Galway
Notary Public, State of New York -------------------------------
No. 01GA5021498 NOTARY PUBLIC
Qualified in Nassau County
Commission Expires 12/20/97
STATE OF NEW YORK )
)ss.:
COUNTY OF NASSAU )
On the 17th day of October 1997, before me personally came David Engel, to
me known, who, being by me duly sworn, did depose and say that he resides at
Patchogue, NY that he is the Executive Vice President of DEL GLOBAL TECHNOLOGIES
CORP., the corporation described in and which executed the foregoing instrument;
that it was so executed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like authority.
Christine Galway /S/Christine Galway
Notary Public, State of New York -------------------------------
No. 01GA5021498 NOTARY PUBLIC
Qualified in Nassau County
Commission Expires 12/20/97
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the 17th day of October 1997, before me personally came David Engel, to
me known, who, being by me duly sworn, did depose and say that he resides at
Patchogue, NY that he is the Executive Vice President of DEL GLOBAL TECHNOLOGIES
CORP., the corporation described in and which executed the foregoing instrument;
that it was so executed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like authority.
Roberta M. Roos /S/Roberta M. Roos
Notary Public, State of New York -------------------------------
No. 4946700 NOTARY PUBLIC
Qualified in Westchester County
Commission Expires February 13, 1999
<PAGE>
Exhibit 1 to Amendment
EXHIBIT A
REPLACEMENT TERM NOTE
$394,738.92 White Plains, New York
Dated as of August 1, 1997
FOR VALUE RECEIVED, the undersigned, DEL GLOBAL TECHNOLOGIES CORP., a
New York corporation, ("Del"), RFI CORPORATION, a Delaware corporation, ("RFI"),
DYNARAD CORP., a New York corporation, ("Dynarad"), BERTAN HIGH VOLTAGE CORP., a
New York corporation, ("Bertan High Voltage"), DEL MEDICAL SYSTEMS CORP., a New
York corporation, ("Del Medical"), and GENDEX-DEL MEDICAL IMAGING CORP., a New
York corporation ("Gendex-DMI" and together with Del, RFI, Dynarad, Bertan High
Voltage, and Del Medical hereinafter collectively referred to as the "Debtors"),
hereby jointly and severally, promise to pay to the order of THE CHASE MANHATTAN
BANK (the "Bank"), at 106 Corporate Park Drive, White Plains, New York, the
principal sum of THREE HUNDRED NINETY-FOUR THOUSAND SEVEN HUNDRED THIRTY-EIGHT
AND 92/100 DOLLARS ($394,738.92), in lawful money of the United States of
America in immediately available funds, payable in fifteen (15) consecutive
quarterly installments in the amount of TWENTY-SIX THOUSAND THREE HUNDRED
FIFTEEN AND 27/100 DOLLARS ($26,315.27) each. The aforementioned payments shall
be payable on the last day of each fiscal quarter of Del, the first such payment
being due and payable on October 31, 1997, and continuing thereafter until the
entire unpaid principal balance of the Term Loan, together with all accrued and
unpaid interest, shall be paid in full on April 30,
2001. The Debtors further, jointly and severally, promise to pay interest at
said office in like money from the date hereof on the unpaid principal amount
hereof outstanding from time to time (i) at the Variable Rate plus the
applicable Margin, or (ii) at the election of the Debtors, and pursuant to
Section 2.4(c) of the Credit Agreement, (a) at the Eurodollar Rate plus the
applicable Margin or (b) at the Fixed Rate. Interest shall be computed on the
basis of a three hundred sixty (360) day year for actual days elapsed and shall
be payable pursuant to Section 2.4(f) of the Credit Agreement. Interest
calculated in relation to the Variable Rate shall change when the Variable Rate
changes. The applicable Margin shall be determined pursuant to Section 2.4(d) of
the Credit Agreement.
In the event that the Debtors prepay or convert any Eurodollar Loan
prior to the end of the Interest Period applicable to such loan, such prepayment
or conversion shall be accompanied by a fee pursuant to Section 2.9(d) of the
Credit Agreement. In the event that the Debtors prepay or convert any Fixed Rate
Loan prior to the end of the Interest Period applicable to such loan, such
prepayment or conversion shall be accompanied by a fee pursuant to Section
2.9(e) of the Credit Agreement.
<PAGE>
"Payments". All payments made pursuant to the Term Loan shall be made in Dollars
in immediately available funds not later than 1:00 p.m. New York City time on
the relevant dates specified herein (each such payment made after such time on
such due date shall be deemed to have been made on the next succeeding Banking
Day) at the Principal Office for the account of the Lending Office of the Bank.
The Bank may (but shall not be obligated to) debit the amount of any such
payment which is not made by such time to any ordinary deposit account of the
Debtors with the Bank. The Debtors shall, at the time of making each payment
under the Term Loan, specify to the Bank the principal or other amount payable
by the Debtors under the Term Loan to which such payment is to be applied (if a
Default or Event of Default has occurred and is continuing, the Bank may apply
such payment as it may elect in its sole discretion). If the due date of any
payment under the Term Loan would otherwise fall on a day which is not a
"Banking Day", such date shall be extended to the next succeeding Banking Day
and interest shall be payable for any principal so extended for the period of
such extension.
This Note is the Term Note referred to in the Amended and Restated
Credit Agreement dated as of March 5, 1996 by and among the Debtors and the Bank
and amended by First Amendment to Amended and Restated Credit Agreement dated as
of August 2, 1996 and by Second Amendment to Amended and Restated Credit
Agreement dated as of August 1, 1997 (as such may hereafter be amended, modified
or restated, the "Credit Agreement") and is entitled to the benefits and is
otherwise subject to the provisions thereof and may be, or may be required to
be, prepaid in whole or in part as provided therein. Terms defined in the Credit
Agreement shall have their defined meanings when used in this Note unless
otherwise defined herein. This Note is a restatement and replacement of and not
in addition to the term note in the original principal amount of $500,000.00
dated as of August 2, 1996 made by the Debtors for the benefit of the Bank,
which itself is a restatement and replacement of and not in addition to the term
note in the original principal amount of $10,000,000.00 dated March 5, 1996 made
by the Debtors for the benefit of the Bank, which itself is a restatement and
replacement of and not in addition to the term note in the original principal
amount of $2,250,000.00 dated January 27, 1995 made by Del, RFI, Dynarad, Bertan
High Voltage, and Del Medical for the benefit of the Bank, which itself is a
restatement and replacement of and not in addition to the term note in the
original principal amount of $2,357,148.00 dated November 4, 1994 made by Del,
RFI, Dynarad, Bertan High Voltage, and Del Medical for the benefit of the Bank,
which itself is a restatement and replacement of and not in addition to the term
note in the original principal amount of $2,571,432.00 dated May 10, 1994 made
by Del, RFI, Dynarad and Bertan High Voltage for the benefit of the Bank, which
itself is a restatement and replacement of and not in addition to the term note
in the original principal amount of $5,400,000 dated December 12, 1989 made by
Del and RFI for the benefit of the Bank's predecessor-in-interest, as heretofore
amended.
The Debtors, jointly and severally, promise to pay interest, on demand,
on any overdue principal and, to the extent permitted by law, overdue interest
from the due dates of such principal and interest at a rate determined as set
forth in the Credit Agreement.
<PAGE>
The Debtors hereby waive presentment, demand, protest and notice of any
kind whatsoever. The nonexercise by the holder of any of its rights hereunder in
any particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall be, or may be declared to be, immediately due and payable as provided
in the Credit Agreement.
LOAN SCHEDULE: All borrowings evidenced by this Note and all payments
and prepayments and the respective dates thereof shall be endorsed by the Bank
on the schedule attached hereto and made a part hereof, or on the continuation
thereof which shall be attached hereto and made a part hereof, or otherwise
recorded by the Bank in its internal records; provided, however, that the
failure of the Bank to make such notation or any error in such notation shall
not in any manner affect the obligation of the Debtors to make payments of
principal and interest in accordance with the terms of this Note and the Credit
Agreement.
This Note may not be changed, modified, or terminated orally, but only
by an agreement in writing signed by the Debtors or any successors or assigns of
the Debtors and the Bank or any holder hereof.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW DOCTRINE, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
(Corporate Seal) DEL GLOBAL TECHNOLOGIES CORP.
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
(Corporate Seal) RFI CORPORATION
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
<PAGE>
(Corporate Seal) DYNARAD CORP.
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Assistant Secretary
(Corporate Seal) BERTAN HIGH VOLTAGE CORP.
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
(Corporate Seal)
DEL MEDICAL SYSTEMS CORP.
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
(Corporate Seal)
GENDEX-DEL MEDICAL IMAGING CORP.
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of DEL GLOBAL TECHNOLOGIES CORP., the corporation described in and
which executed the foregoing instrument; that it was so executed by order of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
-------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of RFI CORPORATION, the corporation described in and which executed
the foregoing instrument; that it was so executed by order of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
-------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of DYNARAD CORP., the corporation described in and which executed the
foregoing instrument; that it was so executed by order of the Board of Directors
of said corporation; and that he signed his name thereto by like authority.
------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of BERTAN HIGH VOLTAGE CORP., the corporation described in and which
executed the foregoing instrument; that it was so executed by order of the Board
of Directors of said corporation; and that he signed his name thereto by like
authority.
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of DEL MEDICAL SYSTEMS CORP., the corporation described in and which
executed the foregoing instrument; that it was so executed by order of the Board
of Directors of said corporation; and that he signed his name thereto by like
authority.
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of GENDEX-DEL MEDICAL IMAGING CORP., the corporation described in and
which executed the foregoing instrument; that it was so executed by order of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
------------------------------
NOTARY PUBLIC
Table Deleted
<PAGE>
Exhibit 2 to Amendment
EXHIBIT A-1
ADDITIONAL TERM NOTE
$_______________ White Plains, New York
Dated:_______________
FOR VALUE RECEIVED, the undersigned, DEL GLOBAL TECHNOLOGIES CORP., a
New York corporation, ("Del"), RFI CORPORATION, a Delaware corporation, ("RFI"),
DYNARAD CORP., a New York corporation, ("Dynarad"), BERTAN HIGH VOLTAGE CORP., a
New York corporation, ("Bertan High Voltage"), DEL MEDICAL SYSTEMS CORP., a New
York corporation, ("Del Medical"), and GENDEX-DEL MEDICAL IMAGING CORP., a New
York corporation ("Gendex-DMI" and together with Del, RFI, Dynarad, Bertan High
Voltage, and Del Medical hereinafter collectively referred to as the "Debtors"),
hereby jointly and severally, promise to pay to the order of THE CHASE MANHATTAN
BANK (the "Bank"), at 106 Corporate Park Drive, White Plains, New York, the
principal sum of ________________________________________ DOLLARS
($___________), in lawful money of the United States of America in immediately
available funds, payable in ___________ (___) consecutive quarterly installments
in the amount of
___________________________ DOLLARS ($_______) each. The aforementioned payments
shall be payable on the last day of each fiscal quarter of Del, the first such
payment being due and payable on _________________, and continuing thereafter
until the entire unpaid principal balance of this Additional Term Loan, together
with all accrued and unpaid interest, shall be paid in full on April 30, 2001.
The Debtors further, jointly and severally, promise to pay interest at said
office in like money from the date hereof on the unpaid principal amount hereof
outstanding from time to time (i) at the Variable Rate plus the applicable
Margin or (ii) at the election of the Debtors, and pursuant to Section 2.4(c) of
the Credit Agreement, (a) at the Eurodollar Rate plus the applicable Margin or
(b) at the Fixed Rate. Interest shall be computed on the basis of a three
hundred sixty (360) day year for actual days elapsed and shall be payable
pursuant to Section 2.4(f) of the Credit Agreement. Interest calculated in
relation to the Variable Rate shall change when the Variable Rate changes. The
applicable Margin shall be determined pursuant to Section 2.4(d) of the Credit
Agreement.
In the event that the Debtors prepay or convert any Eurodollar Loan
prior to the end of the Interest Period applicable to such loan, such prepayment
or conversion shall be accompanied by a fee pursuant to Section 2.9(d) of the
Credit Agreement. In the event that the Debtors prepay or convert any Fixed Rate
Loan prior to the end of the Interest Period applicable to such loan, such
prepayment or conversion shall be accompanied by a fee pursuant to Section
2.9(e) of the Credit Agreement.
<PAGE>
"Payments". All payments made pursuant to the Term Loan shall be made
in Dollars in immediately available funds not later than 1:00 p.m. New York City
time on the relevant dates specified herein (each such payment made after such
time on such due date shall be deemed to have been made on the next succeeding
Banking Day) at the Principal Office for the account of the Lending Office of
the Bank. The Bank may (but shall not be obligated to) debit the amount of any
such payment which is not made by such time to any ordinary deposit account of
the Debtors with the Bank. The Debtors shall, at the time of making each payment
under the Term Loan, specify to the Bank the principal or other amount payable
by the Debtors under the Term Loan to which such payment is to be applied (if a
Default or Event of Default has occurred and is continuing, the Bank may apply
such payment as it may elect in its sole discretion). If the due date of any
payment under the Term Loan would otherwise fall on a day which is not a
"Banking Day", such date shall be extended to the next succeeding Banking Day
and interest shall be payable for any principal so extended for the period of
such extension.
This Note is an Additional Term Note referred to in the Amended and
Restated Credit Agreement dated as of March 5, 1996 by and among the Debtors and
the Bank and amended by First Amendment to Amended and Restated Credit Agreement
dated as of August 2, 1996 and by Second Amendment to Amended and Restated
Credit Agreement dated as of August 1, 1997 (as such may hereafter be amended,
modified or restated, the "Credit Agreement") and is entitled to the benefits
and is otherwise subject to the provisions thereof and may be, or may be
required to be, prepaid in whole or in part as provided therein. Terms defined
in the Credit Agreement shall have their defined meanings when used in this Note
unless otherwise defined herein.
The Debtors, jointly and severally, promise to pay interest, on demand,
on any overdue principal and, to the extent permitted by law, overdue interest
from the due dates of such principal and interest at a rate determined as set
forth in the Credit Agreement.
The Debtors hereby waive presentment, demand, protest and notice of any
kind whatsoever. The nonexercise by the holder of any of its rights hereunder in
any particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall be, or may be declared to be, immediately due and payable as provided
in the Credit Agreement.
LOAN SCHEDULE: All borrowings evidenced by this Note and all payments
and prepayments and the respective dates thereof shall be endorsed by the Bank
on the schedule attached hereto and made a part hereof, or on the continuation
thereof which shall be attached hereto and made a part hereof, or otherwise
recorded by the Bank in its internal records; provided, however, that the
failure of the Bank to make such notation or any error in such notation shall
not in any manner affect the obligation
<PAGE>
of the Debtors to make payments of principal and interest in accordance with the
terms of this Note and the Credit Agreement.
This Note may not be changed, modified, or terminated orally, but only
by an agreement in writing signed by the Debtors or any successors or assigns of
the Debtors and the Bank or any holder hereof.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW DOCTRINE, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
(Corporate Seal) DEL GLOBAL TECHNOLOGIES CORP.
ATTEST: By: _________________________________
Name:
____________________ Title:
, Secretary
(Corporate Seal) RFI CORPORATION
ATTEST: By: _________________________________
Name:
____________________ Title:
, Secretary
(Corporate Seal) DYNARAD CORP.
ATTEST: By: _________________________________
Name:
____________________ Title:
, Secretary
(Corporate Seal) BERTAN HIGH VOLTAGE CORP.
ATTEST: By: _________________________________
Name:
____________________ Title:
, Secretary
<PAGE>
(Corporate Seal)
DEL MEDICAL SYSTEMS CORP.
ATTEST: By: _________________________________
Name:
____________________ Title:
, Secretary
(Corporate Seal)
GENDEX-DEL MEDICAL IMAGING CORP.
ATTEST: By: _________________________________
Name:
____________________ Title:
, Secretary
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of ___________________, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that he resides at _____________________________, that he is the
_________________________ of DEL GLOBAL TECHNOLOGIES CORP., the corporation
described in and which executed the foregoing instrument; that it was so
executed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
-------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of ___________________, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that he resides at _____________________________, that he is the
_________________________ of RFI CORPORATION, the corporation described in and
which executed the foregoing instrument; that it was so executed by order of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
-------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of ___________________, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that he resides at _____________________________, that he is the
_________________________ of DYNARAD CORP., the corporation described in and
which executed the foregoing instrument; that it was so executed by order of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of ___________________, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that he resides at _____________________________, that he is the
_________________________ of BERTAN HIGH VOLTAGE CORP., the corporation
described in and which executed the foregoing instrument; that it was so
executed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of ___________________, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that he resides at _____________________________, that he is the
_________________________ of DEL MEDICAL SYSTEMS CORP., the corporation
described in and which executed the foregoing instrument; that it was so
executed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of ___________________, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that he resides at _____________________________, that he is the
_________________________ of GENDEX-DEL MEDICAL IMAGING CORP., the corporation
described in and which executed the foregoing instrument; that it was so
executed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
------------------------------
NOTARY PUBLIC
Table Deleted
<PAGE>
Exhibit 3 to Amendment
EXHIBIT B
REPLACEMENT REVOLVING CREDIT NOTE
$14,000,000.00 White Plains, New York
Dated as of August 1, 1997
FOR VALUE RECEIVED, the undersigned, DEL GLOBAL TECHNOLOGIES CORP., a
New York corporation, ("Del"), RFI CORPORATION, a Delaware corporation, ("RFI"),
DYNARAD CORP., a New York corporation, ("Dynarad"), BERTAN HIGH VOLTAGE CORP., a
New York corporation, ("Bertan High Voltage"), DEL MEDICAL SYSTEMS CORP., a New
York corporation, ("Del Medical"), and GENDEX-DEL MEDICAL IMAGING CORP., a New
York corporation ("Gendex-DMI" and together with Del, RFI, Dynarad, Bertan High
Voltage, and Del Medical hereinafter collectively referred to as the "Debtors"),
hereby jointly and severally, promise to pay to the order of THE CHASE MANHATTAN
BANK (NATIONAL ASSOCIATION) (the "Bank"), at 1 Chase Manhattan Plaza, New York,
New York, on the Revolving Credit Maturity Date, the lesser of the principal sum
of FOURTEEN MILLION and 00/100 DOLLARS ($14,000,000) or the aggregate unpaid
principal amount of all Revolving Credit Loans to the Debtors from the Bank
pursuant to Section 2.2 of the Amended and Restated Credit Agreement dated as of
March 5, 1996, by and among the Debtors and the Bank and amended by First
Amendment to Amended and Restated Credit Agreement dated as of August 2, 1996
and by Second Amendment to Amended and Restated Credit Agreement dated as of
August 1, 1997 (as such may hereafter be amended, modified or restated, the
"Credit Agreement"), in lawful money of the United States of America in
immediately available funds, and to pay interest from the date hereof on the
principal amount hereof from time to time outstanding, in like funds, at the
Bank's office, (i) at the Variable Rate plus the applicable Margin, or (ii) at
the election of the Debtors, and pursuant to Section 2.4(c) of the Credit
Agreement, (a) at the Eurodollar Rate plus the applicable Margin or (b) at the
Fixed Rate. Interest shall be computed on the basis of a three hundred sixty
(360) day year for actual days elapsed and shall be payable pursuant to Section
2.4(f) of the Credit Agreement. Interest calculated in relation to the Variable
Rate shall change when the Variable Rate changes. The applicable Margin shall be
determined pursuant to Section 2.4(e) of the Credit Agreement
In the event that the Debtors prepay or convert any Eurodollar Loan
prior to the end of the Interest Period applicable to such Loan, such prepayment
or conversion shall be accompanied by a fee pursuant to Section 2.9(d) of the
Credit Agreement. In the event that the Debtors prepay or convert any Fixed Rate
Loan prior to the end of the Interest Period applicable to such Loan, such
prepayment or conversion shall be accompanied by a fee pursuant to Section
2.9(e) of the Credit Agreement.
"Payments". All payments made pursuant to the Revolving Credit Loan
shall be made in Dollars in immediately available funds not later than 1:00 p.m.
New York City time on the relevant dates specified herein (each such payment
made after such time on such due date shall be deemed to have been made on the
next succeeding Banking Day) at the Principal Office for the account of the
Lending Office of the Bank. The Bank may (but shall not be obligated to) debit
the amount of any such payment which is not made by such time to any ordinary
deposit account of the Debtors with the Bank. The Debtors shall, at the time of
<PAGE>
making each payment under the Revolving Credit Loan, specify to the Bank the
principal or other amount payable by the Debtors under the Revolving Credit Loan
to which such payment is to be applied (if a Default or Event of Default has
occurred and is continuing, the Bank may apply such payment as it may elect in
its sole discretion). If the due date of any payment under the Revolving Credit
Loan would otherwise fall on a day which is not a "Banking Day", such date shall
be extended to the next succeeding Banking Day and interest shall be payable for
any principal so extended for the period of such extension.
This Note is the Revolving Credit Note referred to in the Credit
Agreement and is entitled to the benefits and is otherwise subject to the
provisions thereof and may be, or may be required to be, prepaid in whole or in
part as provided therein. Terms defined in the Credit Agreement shall have their
defined meanings when used in this Note unless otherwise defined herein. This
Note is a restatement and replacement of and not in addition to the revolving
credit note in the original principal amount of $14,000,000 dated as of March 5,
1996 made by the Debtors for the benefit of the Bank, which itself is a
restatement and replacement of and not in addition to the revolving credit note
in the original principal amount of $10,000,000 dated January 27, 1995 made by
Del, RFI, Dynarad, Bertan High Voltage, and Del Medical for the benefit of the
Bank, which itself is a restatement and replacement of and not in addition to
the revolving credit note in the original principal amount of $10,000,000 dated
November 4, 1994 made by Del, RFI, Dynarad, Bertan High Voltage, and Del Medical
for the benefit of the Bank, which itself is a restatement and replacement of
and not in addition to the revolving credit note in the original principal
amount of $10,000,000 dated May 10, 1994 made by Del, RFI, Dynarad and Bertan
High Voltage for the benefit of the Bank, which itself is a restatement and
replacement of and not in addition to the revolving credit note in the original
principal amount of $2,000,000 dated December 12, 1989 made by Del and RFI for
the benefit of the Bank's predecessor-in-interest, as heretofore amended.
The Debtors, jointly and severally, promise to pay interest, on demand,
on any overdue principal and, to the extent permitted by law, overdue interest
from the due dates of such principal and interest at a rate determined as set
forth in the Credit Agreement.
The Debtors hereby waive presentment, demand, protest and notice of any
kind whatsoever. The nonexercise by the holder of any of its rights hereunder in
any particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
<PAGE>
Upon the occurrence of any one or more of the Events of Default specified in the
Credit Agreement, all amounts then remaining unpaid on this Note shall be, or
may be declared to be, immediately due and payable as provided in the Credit
Agreement.
PAYMENT GRID: All borrowings evidenced by the Revolving Credit Note and
all payments and prepayment of the principal hereof and interest hereon and the
respective dates thereof shall be endorsed by the Bank on the schedule attached
hereto and made a part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded by the Bank in its
internal records; provided, however, that the failure of the Bank to make such
notation or any error in such notation shall not in any manner affect the
obligation of the Debtors to make payments of principal and interest in
accordance with the terms of the Revolving Credit Note, as modified by this
Agreement, and the Credit Agreement.
This Note may not be changed, modified, or terminated orally, but only
by an agreement in writing signed by the Debtors or any successors or assigns of
the Debtors and the Bank or any holder hereof.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW DOCTRINE, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
(Corporate Seal) DEL GLOBAL TECHNOLOGIES CORP.
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
(Corporate Seal) RFI CORPORATION
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
<PAGE>
(Corporate Seal) DYNARAD CORP.
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Assistant Secretary
(Corporate Seal) BERTAN HIGH VOLTAGE CORP.
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
(Corporate Seal)
DEL MEDICAL SYSTEMS CORP.
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
(Corporate Seal)
GENDEX-DEL MEDICAL IMAGING CORP.
ATTEST: By: _________________________________
David Engel, Executive Vice President
- --------------------
Michael Taber, Secretary
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of DEL GLOBAL TECHNOLOGIES CORP., the corporation described in and
which executed the foregoing instrument; that it was so executed by order of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
-------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of RFI CORPORATION, the corporation described in and which executed
the foregoing instrument; that it was so executed by order of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
-------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of DYNARAD CORP., the corporation described in and which executed the
foregoing instrument; that it was so executed by order of the Board of Directors
of said corporation; and that he signed his name thereto by like authority.
------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of BERTAN HIGH VOLTAGE CORP., the corporation described in and which
executed the foregoing instrument; that it was so executed by order of the Board
of Directors of said corporation; and that he signed his name thereto by like
authority.
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of DEL MEDICAL SYSTEMS CORP., the corporation described in and which
executed the foregoing instrument; that it was so executed by order of the Board
of Directors of said corporation; and that he signed his name thereto by like
authority.
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the _______ day of October 1997, before me personally came David
Engel, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________________________, that he is the Executive Vice
President of GENDEX-DEL MEDICAL IMAGING CORP., the corporation described in and
which executed the foregoing instrument; that it was so executed by order of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
------------------------------
NOTARY PUBLIC
Table Deleted
Exhibit 11
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
FISCAL YEAR ENDED AUGUST 2, 1997
Fully
Primary Diluted
------- -------
Reconciliation of net income per
statement of income to amount used in
in earnings per share computation:
Net Income $4,911,554 $4,911,554
========== ==========
Reconciliation of weighted average
number of shares outstanding to amount
used in earnings per share computation:
Weighted average number of shares
outstanding 7,422,724 7,422,724
Add - shares issuable from assumed exercise
of options subject to limitations under
the Treasury Stock method 1,075,680 1,101,798
---------- ----------
Weighted average number of shares
outstanding as adjusted 8,498,404 8,524,522
========== ==========
Net income per common share $ .58 $ .58
========== ==========
The Company utilized the 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% of the then outstanding
actual common shares.
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 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements No.
33-61025 and 33-09131 on Form S-3, and in the Registration Statement 033-6439 on
Form S-8 of Del Global Technologies Corp. and subsidiaries, of our report dated
October 20, 1997, appearing in this Annual Report on Form 10-K of Del Global
Technologies Corp. and subsidiaries for the fiscal year ended August 2, 1997.
/S/DELOITTE & TOUCHE LLP
- ------------------------
DELOITTE & TOUCHE LLP
New York, New York
November 11, 1997
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