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 1,1998
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
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1 Commerce Park, Valhalla, New York 10595
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 914-686-3600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, The Nasdaq Stock Market
$.10 Par Value
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate market value of the voting stock held by non-affiliates of the
registrant amounted to $44,578,013 at the close of business on October 30, 1998.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the close of business on October 30, 1998.
Common Stock - 7,642,871
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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. ("Gendex").
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, neo-natal mobile imaging 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 sales 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 $9.4 million or
approximately 39% of total net sales in fiscal 1994 to approximately $43.9
million or approximately 71% of total net sales in fiscal 1998. Reflecting
worldwide demand for its products and increased international sales efforts, the
Company has increased export sales from approximately $6.8 million in fiscal
1994 to approximately $28.3 million in fiscal 1998. 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
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generated as a result of high voltage being applied to the x-ray tube. The
performance of the x-ray system, including image resolution, is directly linked
to the precision performance of the high voltage power supply. The object to be
imaged is placed between the x-ray tube and the film. X-rays, which are not
reflected by opaque surfaces, pass through the object and expose the film.
However, if the object is comprised of areas of varying densities or chemical
compositions, x-rays will be absorbed by the denser areas or areas of certain
chemical compositions in proportion to the density or chemical composition of
the matter. As a result, the film will be exposed to a varying degree, thereby
producing an image of the density or chemical variation within the object. For
example, since bone has a greater density than the surrounding tissue in the
body, x-rays can be used to produce an image of a skeleton.
X-ray systems are differentiated by a number of key characteristics
such as image resolution, accuracy, portability, size and cost. The design of an
x-ray system requires complex engineering which determines the performance
factors required of the various components of the system.
Critical Electronic Subsystems. Critical electronic subsystems for
medical imaging and non-medical applications of the types manufactured by the
Company consist of high voltage power conversion components such as power
supplies, capacitors and transformers. High voltage power supplies are used to
transform commercially generated electric power from low voltage to high
voltage. High voltage power supplies raise the input voltage from the available
level to the significantly higher level required to operate the customer's
electronic equipment. They must be designed to meet specific requirements and
involve complex engineering including specialty high voltage magnetics,
specialty engineering materials and unique manufacturing processes, as well as
special testing and evaluation techniques.
Noise Suppression Products. Noise suppression products are used to
reduce or eliminate interfering signals generated by internal or external
electronic components and equipment which otherwise could interfere with the
normal operation of electronic equipment and systems. A noise suppression
product may range in size from the miniature type, which utilizes discoidal
ceramic monolithic capacitors (miniature capacitors made of ceramic material),
to multi-circuit subsystems handling high power requirements and weighing
thousands of pounds. Poor transmission reception in electronic devices can
result from the proximate operation of other electronic devices which generate
unwanted electrical signals. This problem is severely compounded in many
communications environments where there are a large number of electronic devices
in a confined area, such as in voice or data communications systems in an
airplane or ship. Noise suppression products are required by various types of
equipment manufacturers in order to comply with government regulations and
specifications and commercial standards. These products may be integrated within
the electronic equipment for which they have been designed or, in the case of
large noise suppression products, connected externally to such equipment, or to
an external power source which may power an entire facility.
Medical Imaging Products
Medical Imaging Systems. The Company's medical imaging systems are
sold under the GENDEX, UNIVERSAL, XTek 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.
Neo-Natal Imaging Systems. The Company markets and manufactures a
Neo-Natal mobile imaging system designed to address the critical imaging
requirements of a hospital's Neo-Natal department. This mobile imaging system
provides a high frequency, high resolution image over a 40-70 kVp range and is
specifically designed for imaging of pediatric patients.
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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.
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.
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 Industrial
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.
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.
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'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 27 in-house sales personnel,
approximately 60 exclusive independent sales representatives in the United
States and approximately 45 exclusive international agents principally in
Europe, Asia, the Middle East, Canada, 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 1, 1998, the Company employed 66 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 $5.9 million in
fiscal 1998, $4.5 million in fiscal 1997 and $3.4 million in fiscal 1996.
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
precision high-voltage power supplies for CT scanners used in explosives
detection, cost-effective precision power supplies for mobile CT scanners and a
"ruggedized" miniature HV oil exploration probe. The Company generally retains
all custom technology developed to meet customer specifications in connection
with new electronic subsystems.
Certain new products are developed by the Company as standard
products for industry at large after the Company has evaluated their potential.
Such products include standardized HV, high frequency rack mounted power
supplies and associated modules for use as precision test equipment by
industrial laboratories, universities and research facilities. In addition, many
new custom designed noise suppression products are eventually made available as
standard products in the Company's catalog.
The Company has computer-assisted design (CAD) systems to facilitate
the design of printed circuit boards for its power conversion products and to
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.
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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 facilities in Deer Park, New York, Franklin Park, Illinois and Lincolnwood,
Illinois.
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 1, 1998, August 2, 1997
and August 3, 1996, export sales accounted for approximately 45%, 40%, and 40%,
respectively, of the Company's revenues. Export sales are made principally in
Europe, the Far East, North America and the Middle East. During the current
fiscal year, the Company's export sales have increased, despite the current
global economic climate.
Backlog
The Company's backlog at August 1, 1998 was approximately $35.9
million compared to a backlog of approximately $23.9 million at August 2, 1997,
and approximately $23.0 million at August 3, 1996. 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 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.
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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 9001
certification, which is analogous to compliance with the FDA's GMP requirements.
The Company has obtained ISO 9001 certification for all of its medical systems
manufacturing facilities. The Company is in the process of obtaining ISO 9001
certification for its other manufacturing facilities; however, there can be no
assurance that such facilities will receive ISO 9001 certification or that the
Company will be able to continue to meet the requirements for ISO 9001
certification. The Federal government, most states and certain foreign countries
monitor and require licensing of x-ray devices and the handling of radioactive
material. Failure to comply with such laws could subject the Company to fines
and penalties. The Company has obtained the requisite regulatory approval for
its systems where it markets its products. Federal, state and foreign
regulations regarding the manufacture and sale of medical devices are subject to
future change. The Company cannot predict what impact, if any, such changes
might have on its business.
No assurance can be given that the FDA or foreign regulatory
agencies will give the requisite approvals or clearances for any of the
Company's medical imaging systems and other products under development on a
timely basis, if at all. Moreover, after clearance is given, both in the case of
the Company's existing products and any future products, these agencies can
later withdraw the clearance or require the Company to change the system or its
manufacturing process or labeling, to supply additional proof of its safety and
effectiveness, or to withdraw, recall, repair, replace or refund the cost of the
medical system, if it is shown to be hazardous or defective.
The Company is subject to various United States government
guidelines and regulations relating to the qualification of its non-medical
products for inclusion in Government Qualified Product Lists in order to be
eligible to receive purchase orders from a government agency or for inclusion of
a product in a system which will ultimately be used by a governmental agency.
The Company has had many years of experience in designing, testing and
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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 1998, 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 1, 1998, the Company had approximately 466 employees,
including 7 executive officers, 32 persons in general administration, 27 persons
in marketing, 334 persons in manufacturing and 66 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 $307,000. RFI owns a 55,000 square
foot facility located on four acres in Bay Shore, New York, 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 $258,000. 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 $399,000. Gendex-Del leases
approximately 68,000 square feet of its facility in Franklin Park, Illinois
under a lease which was 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 $282,000. Gendex-Del also leases
approximately 12,000 square feet of its facility in Lincolnwood, Illinois under
a lease which can be extended through January 31, 2003, where it designs and
manufactures some of its medical imaging products. The current annual base rent
for such premises is approximately $86,000. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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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 1, 1998 August 2, 1997 August 3, 1996
High Low High Low High Low
---- --- ---- --- ---- ---
First Quarter 10 7/16 9 13/16 10 7 3/4 6 7/16 5 5/16
Second Quarter 10 3/16 10 10 7 3/8 7 3/4 5 3/4
Third Quarter 12 7/8 12 1/16 9 5/8 7 8 5/16 7 1/8
Fourth Quarter 9 7/8 9 1/2 10 1/4 7 1/4 18 7/8 6 13/16
The above prices have been restated to give retroactive effect to 3% stock
dividends declared in November, 1996, June, 1996 and November, 1995.
The number of holders of record of the Company's common stock $.10 par value as
of August 1, 1998 was 1,102.
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.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected statements of income data presented for the fiscal years ended
August 1, 1998, August 2, 1997 and August 3, 1996 and the balance sheet data as
of August 1, 1998 and August 2, 1997, 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 29, 1995 and
July 30, 1994 and the balance sheet data as of August 3, 1996, July 29, 1995 and
July 30, 1994 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.
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Fiscal Year Ended
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August 1, August 2, August 3, July 29, July 30,
INCOME STATEMENT DATA: 1998(b) 1997(b) 1996(b) 1995(b) 1994(b)
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<S> <C> <C> <C> <C> <C>
Net sales $ 62,304,878 $ 54,685,289 $ 43,745,454 $ 32,596,312 $ 24,327,015
Cost and expenses:
Cost of sales 36,908,317 32,854,825 27,355,262 19,177,999 15,179,081
Research and development 5,863,343 4,548,487 3,429,331 2,861,844 2,253,412
Selling, general and
administrative 11,273,059 10,193,244 7,503,689 6,622,690 4,862,519
Interest (income) expense - net (167,926) (54,470) 1,148,639 1,191,142 576,832
------------ ------------ ------------ ------------ ------------
53,876,793 47,542,086 39,436,921 29,853,675 22,871,844
------------ ------------ ------------ ------------ ------------
Income before provision
for income taxes 8,428,085 7,143,203 4,308,533 2,742,637 1,455,171
Provision for income taxes 2,639,497 2,231,649 1,393,111 837,428 341,525
Cumulative effect of change in
method for accounting for
income taxes -- -- -- -- 76,363
------------ ------------ ------------ ------------ ------------
Net income $ 5,788,588 $ 4,911,554 $ 2,915,422 $ 1,905,209 $ 1,190,009
============ ============ ============ ============ ============
Basic earnings per share $ .77 $ .66 $ .59 $ .43 $ .28(d)
============ ============ ============ ============ ============
Diluted earnings per share $ .71 $ .61 $ .48 $ .35 $ .23(d)
============ ============ ============ ============ ============
Number of shares used in computation
of basic earnings per share (a) (c) 7,518,945 7,399,575 4,936,938 4,449,952 4,238,868
============ ============ ============ ============ ============
Number of shares used in computation
of diluted earnings per share (a) (c) 8,206,121 8,070,199 6,112,248 5,374,066 5,195,108
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
As of
--------------------------------------------------------------------------
August 1, August 2, August 3, July 29, July 30,
BALANCE SHEET DATA: 1998(b) 1997(b) 1996(b) 1995(b) 1994(b)
- ------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Working capital $ 41,747,326 $ 37,007,412 $ 32,552,295 $ 20,648,281 $ 18,530,176
============ ============ ============ ============ ============
Total assets $ 72,356,627 $ 64,129,810 $ 57,729,752 $ 39,054,634 $ 36,198,373
============ ============ ============ ============ ============
Long-term debt $ 240,273 $ 411,127 $ 499,852 $ 11,902,951 $ 11,485,722
============ ============ ============ ============ ============
Shareholders' equity $ 59,455,804 $ 52,530,230 $ 47,069,528 $ 19,525,073 $ 17,698,507
============ ============ ============ ============ ============
Common shares outstanding (a) (c) 7,518,945 7,399,575 4,936,938 4,449,952 4,238,868
============ ============ ============ ============ ============
</TABLE>
(a) Net income per common share and common share equivalents have been
restated to give effect to stock dividends in fiscal years 1997, 1996,
1995 and 1994. See Note 1 of Notes to the Consolidated Financial
Statements for computation of earnings per share.
(b) The fiscal years ended August 1, 1998, August 2, 1997 and August 3,
1996 include the operations of Gendex-Del which was purchased on March 6
1996.
(c) Common shares outstanding for 1998, 1997, 1996, 1995 and 1994 are
reduced by 269,246, 104,255, 58,255, 55,165, and 16,656 shares of
treasury stock, respectively.
(d) Includes a $.02 per share cumulative effect of change in method of
accounting for income taxes.
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 four acquisitions in
the past six 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; Gendex-Del (a designer
and manufacturer of medical imaging systems) in fiscal 1997 and X-Ray
Technologies, Inc. (a designer and manufacturer of medical imaging systems) in
fiscal 1998. The Company's net sales have increased from approximately $24.3
million in fiscal 1994 to approximately $62.3 million in fiscal 1998, a
compounded annual growth rate of 26.5%.
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 $9.4 million or
38.7% of total net sales in fiscal 1994 to approximately $35.6 million or 65% of
total net sales and approximately $43.9 million or 71% of total net sales in
fiscal years 1997 and 1998, 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 1, 1998, August 2, 1997 and August
3, 1996. 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 $14.1 million, $13.2 million
and $11.7 million, respectively, for fiscal years ended August 1, 1998, August
2, 1997 and August 3, 1996. Aggregate sales of medical products were
approximately $43.9 million, $35.6 million and $25.7 million, respectively, for
fiscal years ended August 1, 1998, August 2, 1997 and August 3, 1996.
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 1, August 2, August 3,
1998 1997 1996
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 59.2 60.1 62.5
Research and development 9.4 8.3 7.8
Selling, general
and administrative 18.0 18.6 17.2
Interest (income) expense - net (.1) (.1) 2.6
----- ----- -----
86.5 86.9 90.1
----- ----- -----
Income before provision for
income taxes 13.5 13.1 9.9
Provision for income taxes 4.2 4.1 3.2
----- ----- -----
Net income 9.3% 9.0% 6.7%
===== ===== =====
Fiscal Years 1998, 1997 and 1996
Net sales for the Critical Electronic Subsystems segment for
fiscal 1998 were approximately $32.4 million compared to approximately $32.3
million for fiscal 1997, an increase of .3%. 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 Medical Systems segment were approximately $29.9 million for
fiscal 1998 compared to approximately $22.4 million for fiscal 1997, an increase
of 33.6%. The level sales in Critical Electronic Subsystems was due to a
decrease in sales for high-voltage power supplies used in semi-conductor
equipment manufacturing and oil exploration which was offset by an increase
sales of precision high-voltage power supplies for medical applications. The
increase in the Medical Systems sales was due to the acceleration of the
outsourcing trend by major medical equipment companies and increased demand for
the Company's Medical System products. Net sales for the Medical Systems segment
were approximately $22.4 million for fiscal 1997 as 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 1997 included large
initial orders for portable x-ray systems into the State of Michigan and to the
United States Marine Corps.
Cost of sales for the Critical Electronic Subsystems segment
decreased to 51.3% of net sales in fiscal 1998 from 52.6% of net sales in fiscal
1997. 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. The
decreases in cost of sales as a percentage of net sales in fiscal years 1998 and
1997 were primarily due to improved operating efficiencies and a favorable
product mix. Cost of sales in fiscal 1998 for the Medical Systems segment
decreased to 67.9% of net sales from 70.8% of net sales in fiscal 1997. 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. The fiscal 1998 and 1997
improvements in margins from fiscal 1996 are due to the reduced manufacturing
costs 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 28.1% to approximately $4.3 million in fiscal 1998
from approximately $3.3 million in fiscal 1997. Research and development costs
for the Critical Electronic Subsystems segment increased 17.2% to approximately
$3.3 million in fiscal 1997 from approximately $2.9 million in fiscal 1996.
These increases were due to new products being developed in this segment.
Research and development costs in the Medical Systems segment increased 31.2% to
approximately $1.6 million in fiscal 1998 from approximately $1.2 million in
fiscal 1997. Research and
12
<PAGE>
development costs in the Medical Systems segment increased 107% to approximately
$1.2 million in fiscal 1997 from approximately $583,000 in fiscal 1996. These
increases were attributable to increased research and development at Dynarad and
to the inclusion of the research and development of the Gendex-Del subsidiary
for all of fiscal 1997 as compared to four months of fiscal 1996.
Selling, general and administrative expenses, as a percentage
of sales, in the Critical Electronic Subsystems segment, were approximately $6.3
million or 19.3% of net sales in fiscal 1998 as compared to approximately $6.1
million or 18.9% of net sales in fiscal 1997. 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. These increases in selling, general and administrative expenses
were 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. Selling, general and administrative
expenses, for the Medical Systems segment, were approximately $5.0 million or
16.8% of net sales in fiscal 1998 as compared to approximately $4.1 million or
18.3% of net sales in fiscal 1997. 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. These increases were due to higher levels of advertising,
trade show attendance and an increase in amortization of certain intangible
assets.
Interest income for fiscal 1998 was approximately $168,000,
net of interest expense of approximately $130,000 which included approximately
$59,000 of bank commitment fees on unused balances. There were no interest rate
protection agreements in effect for fiscal 1998. Interest income for fiscal 1997
was approximately $54,000, net of interest expense of approximately $239,000.
Interest expense for fiscal 1997 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. Interest expense, net of
interest income, for fiscal 1996 was approximately $1.1 million. 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 31.3% of pre-tax income in
fiscal 1998 from 31.2% of pre-tax income in fiscal 1997, primarily due to the
tax savings from the increase in foreign sales. 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 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 1997 and fiscal 1998, which have full years of this tax credit.
Net income for fiscal 1998 was approximately $5.8 million, an
increase of approximately 18.4% from approximately $4.9 million in fiscal 1997.
Net income for fiscal 1997 was approximately $4.9 million, an increase of
approximately 69% from approximately $2.9 million in fiscal 1996. Basic earnings
per share for fiscal 1998 were $.77, an increase of $.11 per share which
represents a 16.7% increase from basic earnings per share of $.66 in fiscal
1997. Diluted earnings per share for fiscal 1998 were $.71, an increase of $.10
per share which represents a 16.4% increase from diluted earnings per share of
$.61 in fiscal 1997. Basic earnings per share for fiscal 1997 were $.66, an
increase of $.07 per share which represents an 11.9% increase from basic
earnings per share of $.59 in fiscal 1996. Diluted earnings per share for fiscal
1997 were $.61, an increase of $.13 per share which represents a 27.1% increase
from diluted earnings per share of $.48 in fiscal 1996. The number of
outstanding shares and common share equivalents increased from approximately 8.1
million shares in fiscal 1997 to approximately 8.2 million shares in fiscal 1998
or approximately 1%. The number of outstanding shares and common share
equivalents increased from approximately 6.1 million shares in fiscal 1996 to
approximately 8.1 million shares in fiscal 1997 or 32.0%, 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 1998 as compared to
fiscal 1997 were due to internal growth and improved gross margins due to
operating efficiencies. The increases in net income and earnings per share for
fiscal 1997 as compared to fiscal 1996 were due to internal growth and the
addition of the Gendex-Del subsidiary in March 1996, 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.
13
<PAGE>
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
$1.9 million, $3.3 million and $3.8 million for the fiscal years ended August 1,
1998, August 2, 1997 and August 3, 1996, respectively. At August 1, 1998 the
Company had a current ratio of approximately 4.88 to 1.0 and the availability of
approximately $23.5 million of bank borrowings under its lines of credit.
Working Capital. At August 1, 1998 and August 2, 1997, the Company's working
capital was approximately $41.7 million and $37.0 million, respectively. At such
dates the Company had approximately $3.4 million and $6.1 million, respectively,
in cash and cash equivalents.
Trade receivables at August 1, 1998 increased approximately
$3.1 million as compared to August 2, 1997 primarily due to higher shipping
levels during the Company's fourth quarter in fiscal 1998 compared to fiscal
1997. Trade receivables at August 2, 1997 increased approximately $2.0 million
as compared to August 3, 1996 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 at August 1, 1998 increased approximately $1.4 million as
compared to August 2, 1997 due to increases in contracts being accounted for
under the percentage of completion method of accounting. At August 3, 1996 there
were no long term contracts which were accounted for under this method of
accounting.
Inventory at August 1, 1998 increased by approximately $4.5
million as compared to August 2, 1997, primarily due to the expansion of the
Gendex-Del Medical Imaging operations. Inventory at August 2, 1997 increased
approximately $861,000 as compared to August 3, 1996, primarily at Gendex-Del.
Prepaid expenses and other current assets decreased
approximately $450,000 at August 1, 1998 as compared to August 2, 1997. This
decrease was primarily attributable to the deferred tax effects of self-funding
health insurance and the increase in contracts accounted for under the
percentage of completion method of accounting. 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 items.
Fixed assets increased approximately $3.0 million at August 1,
1998 from August 2, 1997 and increased approximately $2.7 million at August 2,
1997 from August 3, 1996. These increases are primarily due to capital
expenditures for manufacturing equipment to improve operating efficiencies and
the upgrade of computer equipment.
Goodwill increased approximately $674,000 at August 1, 1998
from August 2, 1997. The increase is due to the acquisition of certain assets of
X-Ray Technologies, Inc. of approximately $883,000 offset by amortization of
approximately $ 209,000. Goodwill decreased approximately $176,000 at August 2,
1997 from August 3, 1996 due to amortization.
Accounts payable - trade increased by approximately $1.5
million at August 1, 1998 as compared to August 2, 1997 and 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 1998
and 1997 shipments, respectively.
Deferred compensation liability increased by approximately
$190,000 at August 1, 1998 as compared to August 2, 1997. $125,000 of this
increase relates to the fiscal 1998 funding of deferred compensation and
approximately $65,000 relates to recognized and unrealized gains on the
underlying investments. 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. 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.
14
<PAGE>
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 line of credit of $14.0 million. 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 prior
bank approval from $250,000 to $1,000,000 and to provide for a fixed rate
interest option, at the Company's request. At August 1, 1998, the Company had
approximately $13.8 million available under its revolving line of credit, after
deducting letters of credit outstanding of approximately $289,000 and
approximately $9.7 million available under its acquisition credit line. On July
31, 1998, the Company and its lending bank further amended their Credit
Agreement to allow for additional stock repurchases in an amount of $2,000,000
for fiscal 1998 and 80% of net income for future years.
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
$2.9 million, $2.7 million and $2.0 million, respectively, for capital equipment
expenditures in fiscal years 1998, 1997 and 1996, respectively.
Shareholders' Equity. Shareholders' equity increased to approximately $59.5
million at August 1, 1998 from approximately $52.5 million at August 2, 1997,
primarily due to the results of operations. Additionally, during fiscal 1998
approximately 468,000 stock options and warrants were exercised, with proceeds
of approximately $2.0 million and 164,991 shares of common stock were
repurchased at a cost of approximately $1.9 million.
Year 2000. The Company has initiated a company-wide program and developed a
formal plan to identify, evaluate and implement changes to products, computer
systems, applications and infrastructure necessary to achieve a year 2000 date
conversion with no effect on customers or disruption to business operations.
These actions are necessary to ensure that all systems and business applications
will recognize and process the year 2000 and beyond.
The Company uses purchased software programs for a variety of functions,
including drafting and design, general accounting and manufacturing
applications. Currently, all of the Company's products and software for design
and drafting applications are fully compliant. The Company's systems for general
accounting and manufacturing have been evaluated and steps to achieve compliance
are being implemented and are expected to be fully compliant by July 31, 1999,
although there can be no assurance that it will. At this time, the Company
believes that it does not have any internal mission critical year 2000 issues
that it cannot remedy.
As part of the year 2000 readiness process, significant customers, service
providers, vendors and suppliers that are believed to be critical to business
operations after January 1, 2000 have been identified and steps are underway in
an attempt to reasonably ascertain their stage of readiness. The Company is
surveying them primarily through written correspondence. With respect to mission
critical third parties the Company intends to create contingency plans to
mitigate its exposure to such third parties that are not year 2000 compliant. In
the event any mission critical third parties do not achieve full compliance, the
Company believes it has sufficient alternative resources upon which to rely.
Despite its efforts to ascertain the readiness of its customers, suppliers and
service providers the Company cannot be certain as to the actual year 2000
readiness of these third parties or the impact their non-compliance may have on
the Company's future financial position, the results of its operations or its
cash flows.
With respect to the Company's internal year 2000 compliance, the Company expects
to incur internal staff costs, as well as consulting and other expenses and
believes that the total costs to be incurred for all year 2000 compliance
related projects will not have a material effect on the Company's future
financial position, results of its operations or its cash flows.
The Company expects to achieve full compliance no later than September 30, 1999.
15
<PAGE>
Effects of New Accounting Pronouncements
Disclosure of Information About Capital Structure. In February 1997, the
Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standard ("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 Accounting Principles Board
("APB") Opinions 10, 15 and SFAS No. 47, no further disclosures are needed.
Reporting of Comprehensive Income. In June 1997, the FASB issued SFAS No. 130,
"Reporting of Comprehensive Income." This statement is effective for years
beginning 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 fiscal years commencing after December 15, 1997. The
Company has not yet determined what additional disclosures may be required in
connection with adopting SFAS No. 131.
Disclosures about Pensions and Other Postretirement Benefits. In February 1998,
the FASB issued SFAS No. 132, "Employers Disclosures about Pensions and Other
Postretirement Benefits." This statement revises employers' disclosures about
pensions and other postretirement benefit plans. SFAS No. 132 is effective for
fiscal years beginning after December 15, 1997. Management does not anticipate
that this statement will have a significant effect on the Company's consolidated
financial statements.
Disclosures about Derivative Instruments and Hedging Activities. In June 1998,
the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and hedging activities. SFAS No. 133 is effective for all
fiscal years beginning after December 15, 1999. Management does not anticipate
that this statement will have any effect on the Company's consolidated financial
statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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
16
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
---- --- --------
Leonard A. Trugman (1)..................60 Chairman of the Board, Chief
Executive Officer and President
David Engel.............................49 President Del Medical Systems Group
Louis J. Farin, Sr......................55 Vice President and General Manager
of Del Power Conversion Division
Paul J. Liesman.........................37 Vice President and General Manager
of Bertan High Voltage Corp.
John Mankowich..........................54 Vice President and General Manager
of Gendex-Del Medical Imaging Corp.
Seymour Rubin...........................68 Vice President and President of RFI
Corporation, Director
Michael H. Taber........................53 Chief Financial Officer, Vice
President of Finance and Secretary
Natan V. Bertman (1)(2)................69 Director
David Michael (1)(2)(3).................61 Director
James Tiernan (3).......................74 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,
2005.
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 became President of Del Medical Systems Group on
September 1, 1998. Mr. Engel was Executive Vice President and Chief Financial
Officer from January 1996 through August 1998. 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.
17
<PAGE>
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 became Chief Financial Officer, Vice President of
Finance and Secretary on September 1, 1998. Mr. Taber was Vice President -
Finance, Secretary and Chief Accounting Officer of the Company from January 1996
through August 1998. 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, a
Bachelor of Science degree in Mechanical Engineering 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 1997. At such time Dr.
Kaufman was named Director Emeritus of the Company. He holds a Doctorate in
Physics.
Section 16(a) Beneficial Ownership Reporting Compliance
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 and
the Nasdaq Stock Market initial reports of ownership, or changes in ownership
and annual reports of ownership of common stock and other equity securities of
the Company. Specific due dates for these reports have been established and the
Company is required to report any failure to file by these due dates in the
fiscal year ended August 1, 1998. Based solely upon review of the copies of such
reports furnished to the Company or written representations that no reports were
required, the Company believes that during fiscal 1998 all of its directors,
executive officers and persons holding more than 10% of the Company's
outstanding common stock are in full compliance with the requirements of Section
16(a).
18
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, for the three fiscal years ended August
1, 1998, certain compensation information with respect to the Company's
Chief Executive Officer and each of the four other most highly
compensated executive officers, based upon salary and bonus earned by
such executive officers in the fiscal year ended August 1, 1998.
<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 1998 319,070 552,739(2) 1,361,858(3) - 75,000 38,240
Chairman, CEO 1997 303,876 488,541(2) - - - 43,313
and President 1996 289,406 343,318(2) - - - 39,708
David Engel 1998 135,000 107,148 68,856(3) - 15,000 2,062
President of Del 1997 125,000 44,535 - - 7,725 2,062
Medical Systems 1996 109,423 7,500 - - 10,609 1,496
Seymour Rubin 1998 230,000 78,500 - - 5,000 8,514
Vice President 1997 225,000 50,000 - - 5,150 14,124
and President of 1996 223,379 32,284 - - 10,609 7,274
RFI Corporation
Michael H. Taber 1998 110,000 20,000 32,691(3) - 5,000 12,407
CFO, V.P. Finance, 1997 104,000 15,000 62,821(3) - 5,150 9,655
and Secretary 1996 100,000 12,500 - - 7,957 3,002
Louis J. Farin, Sr. 1998 115,000 12,500 - - 5,000 9,183
Sr. Vice President, 1997 110,000 15,000 - - 5,150 9,183
V.P. & Genl. Mgr. - 1996 105,000 20,815 - - 10,609 1,532
Del Power Conversion
</TABLE>
(1) Includes insurance premiums where families of the officers are
beneficiaries and automobile expense allowances.
(2) Includes deferred compensation in the amount of $125,000 for each of 1998,
1997 and 1996 fiscal years, respectively.
(3) Earnings related to exercise of nonqualified stock options.
19
<PAGE>
Stock Options Granted to Certain Executive Officers During the Last Fiscal Year
The following table sets forth certain information regarding options
for the purchase of the Company's common stock that were awarded to the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers, based upon salary and bonus earned by such
executive officers and individuals in the fiscal year ended August 1, 1998.
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants(1) % of Total
Value at Assumed
Annual Rates of
Options Stock Price Appreciation
Granted to Exercise or for Option Term
Options Employees Base Price Expiration -------------------------
Name Granted(#) In Fiscal Year ($)(Sh) Date 5%($)(1) 10%($)(1)
------------------- ---------- -------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Leonard A.Trugman 75,000 35% $9.63 8/18/12 $779,256 $2,294,767
David Engel 15,000 7% $9.63 8/18/12 $155,851 $458,953
Seymour Rubin 5,000 2% $9.63 8/18/12 $51,950 $152,984
Michael Taber 5,000 2% $9.63 8/18/12 $51,950 $152,984
Louis J. Farin, Sr. 5,000 2% $9.63 8/18/12 $51,950 $152,984
----------------------
</TABLE>
(1) Fair market value of stock on grant date compounded annually at rate
shown in column heading, for the option term, less exercise price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding options
for the purchase of the Company's common stock that were exercised and or held
by the Company's Chief Executive Officer and each of the four other most highly
compensated executive officers, based upon salary and bonus earned by such
executive officers in the fiscal year ended August 1, 1998.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In-the-Money Options
Acquired on Value Options at Fiscal Year-End at Fiscal Year-End ($)(2)
Name Exercise(#) Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------- ----------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Leonard A. Trugman 163,440 $1,361,858 572,789/89,069 $ 4,201,960/$94,840
David Engel 15,804 $68,856 1,449/27,505 $ 6,658/$40,411
Seymour Rubin - - 136,687/16,980 $ 768,019/$42,418
Michael H. Taber 6,221 $32,691 0/14,248 $ 0/$29,875
Louis J. Farin, Sr. - - 42,748/14,166 $ 228,286/$27,124
- ----------------------
</TABLE>
(1) Difference between the fair market value of the common stock purchased and
the exercise price on the date of exercise.
(2) Difference between the fair market value of the underlying common stock and
the exercise price for in-the-money options on August 1, 1998 ($9.875).
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, September 1, 1994 and April 29, 1998, which ends July 31,
2005, 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 $319,070
for the fiscal year ended August 1, 1998. His annual base salary for the fiscal
year August 2, 1998 through July 31, 1999 is determined by multiplying $319,070
by the greater of five percent or the increase in the Consumer Price Index as of
August 1, 1998 over the amount of such index as of August 1, 1997. Mr. Trugman
also receives a bonus each year equal to five (5%) percent of the Company's
20
<PAGE>
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, 1997 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 1, 1998 were $107,131. 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, former President of Bertan High Voltage Corp., 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, 1997 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.
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.
Stock Option Plans
Nonqualified Stock Option Plan
The Company's Nonqualified Stock Option Plan provides for a total of
3,124,293 shares of common stock authorized to be granted under such plan. For
the year ended August 1, 1998, options to purchase an aggregate of 1,562,246
shares were outstanding at an average exercise price of $4.45 per share, having
a range of expiration dates from September 2000 to July 2013. During fiscal
1998, the Company granted options to purchase 214,500 shares of common stock at
an average exercise price of $9.50 per share. During fiscal 1998, 415,666
options were exercised and 17,833 options were cancelled or expired. At August
1, 1998, 463,958 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 30, 1998, the Company had granted options to purchase
1,001,975 shares to Leonard A. Trugman, 64,758 shares to David Engel, 158,667
shares to Seymour Rubin, 51,218 shares to Michael Taber, 72,790 shares to Louis
J. Farin, Sr., 25,007 shares to Paul Liesman and 10,000 shares to John Mankowich
at an average exercise price of $3.62 per share. Mr. Trugman exercised 163,440
options, Mr. Engel exercised 15,804 options and Mr. Taber exercised 6,221
options during the fiscal year ended August 1, 1998.
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.
21
<PAGE>
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. With
respect to the officers, the following shares have been issued under the plan:
Fiscal Fiscal Fiscal
Year Year Year
Ended Ended Ended
Officer 1998 1997 1996
------- ----- ----- -----
Leonard A. Trugman -- 1,013 2,048
Seymour Rubin -- 1,299 2,625
Michael H. Taber 14 168 419
David Engel -- 162 199
Paul Liesman -- 94 77
Howard Bertan -- 149 350
George Solomon -- 305 691
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
22
<PAGE>
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 August 3, 1996, 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 $65,000, $52,500 and $40,000 profit sharing contributions for the
periods ended August 1, 1998, August 2, 1997 and August 3, 1996.
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 30, 1998 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 30, 1998 (1) of Class
- ---------------------- -------------------- --------
OFFICERS AND DIRECTORS
- ----------------------
LEONARD A. TRUGMAN 836,137 (2) 10.1%
c/o Del Global Technologies Corp.
One Commerce Park
Valhalla, NY 10595
NATAN BERTMAN 101,667 (3) 1.3%
c/o Bertman & Levine
945 Manhattan Avenue
Brooklyn, NY 11222
DAVID MICHAEL 157,505 (4) 2.0%
c/o David Michael & Co., P.C
Seven Penn Plaza
New York, NY 10001
SEYMOUR RUBIN 166,684 (5) 2.1%
c/o RFI Corporation
100 Pine Aire Drive
Bay Shore, NY 11706
JAMES TIERNAN 8,733 (6) *
c/o Del Global Technologies Corp.
One Commerce Park
Valhalla, NY 10595
DAVID ENGEL 11,912 (7) *
c/o Del Global Technologies Corp.
One Commerce Park
Valhalla, NY 10595
23
<PAGE>
LOUIS J. FARIN, SR 57,065(8) *
c/o Del Global Technologies Corp.
One Commerce Park
Valhalla, NY 10595
PAUL J. LIESMAN 11,241(9) *
c/o Bertan High Voltage Corp.
121 New South Road
Hicksville, NY 11801
JOHN MANKOWICH 2,500(10) *
c/o Gendex-Del Medical Imaging Corp.
11550 West King Street
Franklin Park, IL 60634
MICHAEL H. TABER 6,956(11) *
c/o Del Global Technologies Corp.
One Commerce Park
Valhalla, NY 10595
All Officers and Directors ---------
(10) as a Group 1,360,400(12) 15.7%
=========
OTHERS
MORGAN STANLEY ASSET MANAGEMENT, INC. 651,800 8.5%
One Tower Bridge =========
Conshoken, PA 19428-2899
1838 INVESTMENT ADVISORS FUND 476,360 6.2%
5 Radnor Corporate Center - Suite 320 =========
100 Matsonford Road
Radnor, PA 19087
DIMENSIONAL FUND ADVISORS 399,323 5.2%
1299 Ocean Avenue - 11th Floor =========
Santa Monica, CA 90401
* 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 30,
1998.
(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 605,607 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 30, 1998.
(3) Includes 74,445 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 30, 1998.
(4) Includes 122,230 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 30, 1998.
(5) Includes 144,691 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 30, 1998.
(6) Includes 4,733 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 30, 1998.
24
<PAGE>
(7) Includes 11,189 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 30, 1998.
(8) Includes 47,938 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 30, 1998.
(9) Includes 10,857 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 30, 1998.
(10) Includes 2,500 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 30, 1998.
(11) Includes 6,220 shares, options for which are presently exercisable or
will become exercisable within 60 days of October 30, 1998.
(12) Includes 1,133,107 shares, options for which are presently exercisable
or will become exercisable within 60 days of October 30, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the Company's Stock Buy-Back Program, which was approved by the
Board of Directors, the Company repurchased 70,000 shares of common stock owned
by Mr. Leonard A. Trugman at an average fair market value of $11.00 per share.
The amounts paid to Mr. Trugman were associated with the exercise of 163,440
shares of Del Global Technologies Corp. common stock under the Company's
Employee Stock Option Plan. Such funds were used to pay the payroll withholding
taxes due relating to the gains realized upon the exercise of these
non-qualified stock options. During the fiscal year, Mr. Trugman's direct
holdings of Del Global Technologies Corp. common stock increased by 60,826
shares.
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 1, 1998 and
August 2, 1997 F2
Consolidated Statements of Income for the Fiscal Years
Ended August 1, 1998, August 2, 1997 and August 3, 1996 F3
Consolidated Statements of Shareholders' Equity for the
Fiscal Years Ended August 1, 1998, August 2, 1997 and
August 3, 1996 F4
Consolidated Statements of Cash Flows for the Fiscal
Years Ended August 1, 1998, August 2, 1997 and August 3,
1996 F5 - F6
Notes to Consolidated Financial Statements for the
Fiscal Years Ended August 1, 1998, August 2, 1997 and
August 3, 1996 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 Porter, LeVay and Rose,
Inc.
*4.5 Warrant Certificate of Michael Porter
*4.6 Warrant Certificate of Jonathan Gordon
4.7 Copy of Del Global Technologies Corp. Amended
and Restated Stock Option Plan (the "Plan") (8)
4.8 Stock Purchase Plan (9)
4.9 Option Agreement, substantially in the form
used in connection with options granted under
the Plan (10)
10.1 Amended and Restated Executive Employment
Agreement of Leonard A. Trugman (11)
10.2 Amendment No. 1 to Amended and Restated
Employment Agreement of Leonard A. Trugman (12)
10.3 Amendment No. 2 to Amended and Restated
Employment Agreement of Leonard A. Trugman (13)
*10.4 Amendment No. 3 to Amended and Restated
Employment Agreement of Leonard A. Trugman
10.5 Amended and Restated Credit Agreement dated
as of March 6, 1996 among Del Global Tech-
nologies Corp., RFI Corporation, Dynarad
Corp., Bertan High Voltage Corp., Del Medical
Systems Corp. and The Chase Manhattan Bank,
N.A. (14)
10.6 First Amendment to Amended and Restated Credit
Agreement dated as of August 2, 1996 (15)
10.7 Second Amendment to Amended and Restated Credit
Agreement dated as of August 1, 1997 (16)
27
<PAGE>
*10.8 Third Amendment to Amended and Restated Credit
Agreement dated as of July 31, 1998
10.9 Lease Agreement dated April 7, 1992 between
Messenger Realty and the Company (17)
10.10 Lease Agreement dated September 1, 1992
between Arleigh Construction and Del Acqui-
sition Corp. (18)
10.11 Lease and Guaranty of Lease dated May 25,
1994 between Leshow Enterprises and Bertan
High Voltage Corp. (19)
10.12 Lease dated January 4, 1993 between Curto
Reynolds Oelerich Inc. and Gendex-Del Medical
Imaging Corp. (20)
10.13 Consulting Agreement by and between Del
Acquisition Corp. and Harvey Schechter (21)
10.14 Consulting Agreement by and between Del
Acquisition Corp. and Mark Weiss (22)
*11 Computation of Earnings per Common Share and
Common Share Equivalents for year ended
August 1, 1998
*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 2, 1997 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.
(8) Filed as Exhibit A to Del Electronics Corp. Proxy Statement
dated January 26, 1994 and incorporated herein by reference.
(9) Filed as Exhibit 4.9 to Del Electronics Corp. Annual Report on
Form 10-K for the year ended July 29, 1989 and incorporated
herein by reference.
(10) Filed as Exhibit 4.8 to Del Electronics Corp. Annual Report on
Form 10-K for the year ended July 30, 1994 and incorporated
herein by reference.
28
<PAGE>
(11) Filed as Exhibit 10.1 to Del Electronics Corp. Annual Report
on Form 10-K for the year ended July 31, 1993 and incorporated
herein by reference.
(12) Filed as Exhibit 10.2 to Del Electronics Corp. Annual Report
on Form 10-K for the year ended July 30, 1994 and incorporated
herein by reference.
(13) Filed as Exhibit 10.3 to Del Electronics Corp. Annual Report
on Form 10-K for the year ended July 30, 1994 and incorporated
herein by reference.
(14) Filed as Exhibit 2.6 to the Del Global Technologies Corp.
Current Report on Form 8-K dated March 21, 1996 and
incorporated herein by reference.
(15) 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.
(16) Filed as Exhibit 10.8 to the Del Global Technologies Corp.
Annual Report on Form 10-K for the year ended August 2, 1997
and incorporated herein by reference.
(17) Filed as Exhibit 6(a) to Del Electronics Corp. Quarterly
Report on Form 10-Q for the quarter ended May 2, 1992 and
incorporated herein by reference.
(18) Filed as Exhibit 28.6 to Del Electronics Corp. Current Report
on Form 8-K dated November 9, 1992 and incorporated herein by
reference.
(19) Filed as Exhibit 2.5 to Del Electronics Corp. Current Report
on Form 8-K dated June 10, 1994 and incorporated herein by
reference.
(20) Filed as Exhibit 10.21 to the Del Global Technologies Corp.
Registration Statement on Form S-2 (No. 333-2991) dated April
30, 1997 and incorporated herein by reference.
(21) Filed as Exhibit 28.4 to Del Electronics Corp. Current Report
on Form 8-K dated November 9, 1992 and incorporated herein by
reference.
(22) Filed as Exhibit 28.5 to Del Electronics Corp. Current Report
on Form 8-K dated November 9, 1992 and incorporated herein by
reference.
(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 1, 1998 and August 2, 1997 and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the three fiscal years in the period ended August 1, 1998.
These 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 financial statements present fairly, in all material
respects, the financial position of Del Global Technologies Corp. and
subsidiaries at August 1, 1998 and August 2, 1997 and the results of their
operations and their cash flows for each of three fiscal years in the period
ended August 1, 1998, in conformity with generally accepted accounting
principles.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
October 16, 1998
F1
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 1, August 2,
1998 1997
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 3,401,697 $ 6,070,608
Investments available-for-sale
(Notes 1, 2 and 10) 913,125 722,566
Trade receivables (net of allowance
for doubtful accounts of $206,524 at
August 1, 1998 and $60,407
at August 2, 1997) 14,341,744 11,211,357
Cost and estimated earnings in
excess of billings on uncompleted
contracts (Notes 1 and 3) 3,306,673 1,868,002
Inventory (Notes 1 and 4) 29,195,262 24,681,348
Prepaid expenses and other current
assets (Note 9) 1,358,847 1,808,762
----------- -----------
Total current assets 52,517,348 46,362,643
----------- -----------
FIXED ASSETS - At cost (Notes 1
and 5) 19,229,901 16,245,279
Less accumulated depreciation and
amortization 6,490,392 5,086,269
----------- -----------
12,739,509 11,159,010
----------- -----------
INTANGIBLES (net of accumulated
amortization of $413,557 at
August 1, 1998 and $242,009
at August 2, 1997) (Note 1) 941,443 1,112,991
GOODWILL (net of accumulated
amortization of $770,655 at August 1,
1998 and $561,082 at August 2,
1997) (Notes 1 and 11) 4,809,255 4,135,409
DEFERRED CHARGES 387,044 507,933
OTHER ASSETS (Notes 7 and 9) 962,028 851,824
----------- -----------
TOTAL $72,356,627 $64,129,810
=========== ===========
August 1, August 2,
1998 1997
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 6) $ 120,410 $ 127,999
Accounts payable - trade 5,403,403 3,936,529
Accrued liabilities 3,938,623 3,699,188
Deferred compensation liability (Notes 2
and 10) 913,046 722,566
Income taxes (Notes 1 and 9) 394,540 868,949
----------- -----------
Total current liabilities 10,770,022 9,355,231
----------- -----------
LONG-TERM LIABILITIES:
LONG-TERM DEBT (Less current
portion included above) (Note 6) 240,273 411,127
OTHER (Note 10) 484,366 725,258
DEFERRED INCOME TAXES
(Notes 1 and 9) 1,406,162 1,107,964
----------- -----------
Total liabilities 12,900,823 11,599,580
----------- -----------
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 - 7,988,993
shares at August 1, 1998 and
7,516,234 at August 2, 1997 798,898 751,622
Additional paid-in capital 49,124,456 45,909,517
Retained earnings 12,360,906 6,572,318
----------- -----------
62,284,260 53,233,457
----------- -----------
Less common stock in treasury -
269,246 at August 1, 1998 and
104,255 at August 2, 1997 2,828,456 703,227
----------- -----------
Total shareholders' equity 59,455,804 52,530,230
----------- -----------
TOTAL $72,356,627 $64,129,810
=========== ===========
See notes to consolidated financial statements.
F2
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year Ended
--------------------------------------------
August 1, August 2, August 3,
1998 1997 1996
------------ ------------ ------------
NET SALES (Notes 1, 3 and 12) $ 62,304,878 $ 54,685,289 $ 43,745,454
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales 36,908,317 32,854,825 27,355,262
Research and development (Note 1) 5,863,343 4,548,487 3,429,331
Selling, general and administrativ 11,273,059 10,193,244 7,503,689
Interest (income) expense - net of
interest expense of $129,654 in
1998, $238,679 in 1997 and interest
income of $34,777 in 1996 (167,926) (54,470) 1,148,639
------------ ------------ ------------
53,876,793 47,542,086 39,436,921
------------ ------------ ------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 8,428,085 7,143,203 4,308,533
PROVISION FOR INCOME TAXES
(Notes 1 and 9) 2,639,497 2,231,649 1,393,111
------------ ------------ ------------
NET INCOME $ 5,788,588 $ 4,911,554 $ 2,915,422
============ ============ ============
PER SHARE AMOUNTS (Note 1):
NET INCOME PER COMMON SHARE AND
COMMON SHARE EQUIVALENTS:
BASIC $ .77 $ .66 $ .59
============ ============ ============
DILUTED $ .71 $ .61 $ .48
============ ============ ============
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 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 1997 (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) 4,157 416 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
Exercise of stock options
and warrants (Note 8) 467,573 46,757 36,091 (268,047) 1,950,146 1,728,856
Shares repurchased (Note 8) 128,900 (1,857,182) (1,857,182)
Tax benefit related to
exercise of stock options
& warrants (Note 8) 1,074,582 1,074,582
Compensation cost of
warrants issued (Note 8) 142,949 142,949
Contribution to Profit
Sharing Plan (Note 7) 5,186 519 51,981 52,500
Other (4,719) (4,719)
Net Income 5,788,588 5,788,588
--------- --------- -------- ----------- ----------- ----------- -----------
BALANCE - August 1, 1998 7,988,993 $ 798,898 269,246 $(2,828,456) $49,124,456 $12,360,906 $59,455,804
========= ========= ======== =========== =========== =========== ===========
</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 1, August 2, August 3,
1998 1997 1996
----------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 5,788,588 $ 4,911,554 $ 2,915,422
Adjustments to reconcile net income to
net cash provided by operating activities
net of effects from purchase of Gendex:
Imputed interest 48,568 68,309 66,986
Depreciation 1,402,833 1,038,960 740,777
Amortization 695,655 772,148 455,534
Deferred income tax provision (benefit) 569,970 147,981 (56,609)
Tax benefit from exercise of stock options and
warrants 1,074,582 458,023 458,324
Amortization of stock-based compensation 99,444 43,505 --
Changes in assets and liabilities:
Increase in trade receivables (3,130,387) (1,990,029) (2,764,475)
(Increase) decrease in cost and estimated
earnings in excess of billings
on uncompleted contracts (1,438,671) (1,868,002) 395,847
Increase in inventory (4,380,754) (861,466) (1,144,987)
Increase in prepaid and
other current assets (126,749) (256,109) (355,086)
Decrease (increase) in other assets 3,277 (10,535) (49,136)
Increase in accounts payable - trade 1,466,874 242,949 1,153,965
Increase in accrued liabilities 110,701 130,959 1,418,461
Increase in deferred compensation liability 190,480 177,090 167,305
(Decrease) increase in income taxes payable (474,410) 225,404 365,715
----------- ----------- ------------
Net cash provided by operating activities 1,900,001 3,230,741 3,768,043
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid on acquisition of
subsidiaries (1,103,377) (15,000) (8,149,085)
Payments to former shareholders of
subsidiary acquired (117,219) (132,640) (52,938)
Expenditures for fixed assets (2,896,532) (2,659,481) (1,968,070)
Investment in marketable securities (190,559) (177,090) (167,117)
----------- ----------- ------------
Net cash used in investing activities (4,307,687) (2,984,211) (10,337,210)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from public offering -- -- 21,584,514
Repayment of bank borrowing (178,443) (80,804) (12,226,404)
Cost of debt restructuring (2,237) (4,043) (63,327)
Payment for repurchase of shares (1,857,182) (366,542) (19,770)
Proceeds from exercise of stock options & warrants 1,728,856 422,460 2,615,423
Other 47,781 35,207 (9,458)
----------- ----------- ------------
Net cash (used in) provided by financing activities (261,225) 6,278 11,880,978
----------- ----------- ------------
</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 1, August 2, August 3,
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $(2,668,911) $ 252,808 $5,311,811
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 6,070,608 5,817,800 505,989
----------- ----------- ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,401,697 $6,070,608 $5,817,800
=========== =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 127,980 $ 86,679 $1,051,327
=========== =========== ============
Income taxes paid $ 1,464,597 $1,400,240 $ 625,682
=========== =========== ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
ACQUISITION OF SUBSIDIARIES $ 1,103,377 $ 15,000 $8,152,185
----------- ----------- ------------
Cash acquired in acquisition -- -- (3,100)
----------- ----------- ------------
-- -- (3,100)
----------- ----------- ------------
Cash paid to acquire subsidiaries $ 1,103,377 $ 15,000 $8,149,085
=========== =========== ============
</TABLE>
See notes to consolidated financial statements.
F6
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED August 1, 1998, August 2, 1997, and August 3, 1996
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 - During
the year ended August 1, 1998 the Company adopted Statement of
Financial Accounting Standard "SFAS" No. 128, "Earnings Per Share."
This statement is effective for financial statements issued for
periods ending after December 15, 1997. Basic and diluted earnings
per share have been restated for fiscal years ended August 2, 1997
and August 3, 1996 to reflect the adoption of SFAS No. 128.
j. Income Taxes - The Company accounts for income taxes under the
provisions of 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.
F7
<PAGE>
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 Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standard ("SFAS") No. 123, "Accounting for Stock-Based
Compen- sation." SFAS No. 123 is effective for fiscal years
beginning after December 15, 1995 and requires adoption of the
measurement and recognition provisions for non-employee
transactions for 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 Accounting Principles Board Opinion
("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. 129 "Disclosure of Information about
Capital Structure." This statement is effective for financial
statements issued for periods beginning 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 SFAS No. 47, no further
disclosures are needed.
In June 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 fiscal years
commencing after December 15, 1997. The Company has not yet
determined what additional disclosures
F8
<PAGE>
may be required in connection with adopting SFAS No. 131.
In February 1998, the FASB issued SFAS No. 132, "Employers
Disclosures about Pensions and Other Postretirement Benefits." This
statement revises employers' disclosures about pensions and other
postretirement benefit plans. SFAS No. 132 is effective for fiscal
years beginning after December 15, 1997. Management does not
anticipate that this statement will have a significant effect on
the Company's consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS No. 133 is effective for
all fiscal years beginning after December 15, 1999. Management does
not anticipate that this statement will have any effect on the
Company's consolidated financial statements.
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 1, 1998 investments consist of corporate debt securities and
equity securities classified as available-for-sale.
At August 1, 1998 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
1999 $ 25,257 $ 25,100 $ (157)
2000-2004 544,727 560,216 15,489
-------- -------- --------
Subtotal 569,984 585,316 15,332
-------- -------- --------
Equity securities 217,052 327,809 110,757
-------- -------- --------
Total $787,036 $913,125 $126,089
======== ======== ========
Investments at August 1, 1998 and August 2, 1997, consisted of $913,046,
and $722,566, respectively, for the Company's President's deferred
compensation, pursuant to the terms of his employment contract. At August
1, 1998 $24,841 was classified as cash and $888,205 was recorded as
investments. The liability of $913,046 and $722,566, 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.
3. PERCENTAGE OF COMPLETION ACCOUNTING
Year Year
Ended Ended
August 1, August 2,
1998 1997
----------- -----------
Costs incurred on uncompleted contracts $ 6,804,554 $ 3,086,020
Estimated earnings 4,178,103 1,578,126
----------- -----------
10,982,657 4,664,146
Less: Billings to date 7,675,984 2,796,144
----------- -----------
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 3,306,673 $ 1,868,002
=========== ===========
The backlog of unshipped contracts being accounted for under the
percentage of completion method of accounting was approximately
$5,186,000 at August 1, 1998.
F9
<PAGE>
4. INVENTORY
Inventory consists of the following:
August 2, August 1,
1997 1998
----------- -----------
Finished goods $ 4,848,572 $ 3,859,842
Work-in-process 11,333,936 9,770,789
Raw materials and purchased parts 13,012,754 11,050,717
----------- -----------
$29,195,262 $24,681,348
=========== ===========
5. FIXED ASSETS
Fixed assets consist of the following:
August 2, August 1,
1997 1998
----------- -----------
Land $ 694,046 $ 694,046
Buildings 2,146,025 2,146,025
Machinery and equipment 13,261,534 10,865,897
Furniture and fixtures 1,484,310 1,280,216
Leasehold improvements 1,613,883 1,228,992
Transportation equipment 30,103 30,103
----------- -----------
19,229,901 16,245,279
Less accumulated depreciation and
amortization 6,490,392 5,086,269
----------- -----------
Net Fixed Assets $12,739,509 $11,159,010
=========== ===========
6. DEBT
Long-term debt is summarized as follows:
August 1, 1998 August 2, 1997
-------------------- --------------------
Due Within Due After Due Within Due After
One Year One Year One Year One Year
---------- --------- ---------- ---------
Acquisition credit line $105,263 $184,215 $105,263 $289,476
Revolving line of credit 50,000 100,000
Other Loans 15,147 6,058 22,736 21,651
-------- -------- -------- --------
$120,410 $240,273 $127,999 $411,127
======== ======== ======== ========
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 $4,000,000. At August 1,
1998 there were outstanding balances of $289,478 on the acquisition
credit line, $50,000 on the revolving line of credit, and $139,329 of
letters outstanding. As of August 1, 1998, there was $9,710,522 available
under the acquisition credit line and $13,810,671 available for borrowing
under the revolving credit line. The acquisition credit line is to be
repaid in 11 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 either tied to LIBOR or at a fixed rate based upon the prime
rate. The Company fixed its interest rate on the acquisition credit line
at 6.69% from January 26, 1998 until the loan matures on April 30, 2001.
The interest rate on the revolving line of credit is at prime which was
8.5% at August 1, 1998. 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
F10
<PAGE>
restrictive terms, as of August 1, 1998, $25,000 is available for such
cash dividends. The Company was in compliance with its debt covenants at
August 1, 1998. 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 7.17% and 7.27% for the years ended August 1, 1998
and August 2, 1997, respectively.
Long-term debt matures as follows:
Fiscal Year Ending
1999 (included in current portion) $ 120,410
2000 111,321
2001 128,952
----------
$ 360,683
==========
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. Contribution expense for
the fiscal years ended in 1998, 1997 and 1996 was $65,000, $52,500 and
$40,000, respectively. The plan also incorporates a 401(k) Retirement
Plan that is available to substantially all employees, allowing them to
defer a portion of their salary. The Company also has a defined benefit
plan frozen effective February 1, 1986.
8. SHAREHOLDERS' EQUITY
a. Public Offering - On June 6, 1996 the Company completed the
public offering of 2,275,000 shares of its common stock including
275,000 shares of the over-allotment option. The net proceeds of
this offering were $21,584,514 after deducting underwriting fees
and expenses, and were used to repay revolving credit loans, long
term debt and the subordinated term note to Dentsply
International Inc., with the balance added to working capital.
Had the public offering of 2,275,000 shares of common stock
occurred as of the beginning of fiscal 1996, and a portion of the
proceeds therefrom been used to repay a portion of the long term
debt, basic and diluted earnings per share would have been $.52
and $.45.
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.
c. Stock Buy-Back Program - In April 1997, the Board of Directors
adopted a program to repurchase $1.5 million of the Company's
common stock. In April 1998, the Board of Directors approved an
additional repurchase of $1.5 million. During the fiscal years
ended August 1, 1998 and August 2, 1997 the Company repurchased
128,900 and 37,000 shares for $1,857,182 and $319,885,
respectively. As of August 1, 1998, there remained $823,000
available in the program to repurchase additional shares.
d. Nonqualified Stock Option Plan - The Company has a nonqualified
stock option plan under which a total of 3,124,293 options to
purchase common stock may be granted. As of August 1, 1998, the
Company has granted options to purchase 951,975 shares to the
current president, 240,723 shares to former officers, 322,439 to
current officers and 1,367,619 to various employees and
consultants. Current officers exercised 185,465 options, a former
officer exercised 11,876 options and various employees and
consultants exercised 218,325 options during the fiscal year
ended August 1, 1998. Current officers exercised 15,749 options
and various employees and consultants exercised 17,895 options
during the fiscal year ended August 2, 1997. 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
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<PAGE>
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 1, August 2, August 3,
Options 1998 1997 1996
--------- --------- ----------
Granted and outstanding
at beginning of year 1,781,245 1,712,568 1,646,607
Granted 214,500 131,842 297,052
Expired (17,833) (29,521) (22,266)
Exercised (415,666) (33,644) (208,825)
--------- --------- ---------
Outstanding at end of year 1,562,246 1,781,245 1,712,568
========= ========= =========
Exercisable at end of year 1,203,676 1,506,962 1,481,025
========= ========= =========
Exercise prices $.93-$11.00 $.93-$8.48 $.93-$8.48
========= ========= =========
The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in APB
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 1998, 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 1, 1998, August 2, 1997 and August
3, 1996: risk free interest rates of 4.79% to 7.65%, expected
life of the options are between eight and thirteen years, average
volatility of between 40.31% and 44.87%, and a maximum
contractual life of fifteen years.
Had the Company adopted SFAS No. 123 for employee stock options,
the pro forma effect on net income and net income per share would
be:
For Year For Year For Year
Ended Ended Ended
August 1, August 2, August 3,
1998 1997 1996
---------- ---------- ----------
Net income
As reported $5,788,588 $4,911,554 $2,915,422
========== ========== ==========
Pro forma $5,640,083 $4,794,017 $2,862,726
========== ========== ==========
Net income per common share:
As reported $ .71 $ .61 $ .48
========== ========== ==========
Pro forma $ .69 $ .59 $ .45
========== ========== ==========
Weighted average number of
shares outstanding 8,206,121 8,070,199 6,250,313
========== ========== ==========
e. There were warrants outstanding aggregating 77,813 shares at
August 1, 1998, 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 the Company granted additional warrants
to purchase 17,510 shares of common stock to its
lending
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<PAGE>
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 1, 1998, 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 1998.
2. In connection with an extension of a consulting
agreement, the Company had issued 15,000 additional
warrants to purchase shares of common stock at an
exercise price of $10.00 to a consultant, which were
still outstanding at August 1, 1998. During the year
ended August 2, 1997, the Company granted warrants to
purchase 25,000 shares of common stock at an exercise
price of $8.50. During fiscal 1998, the consultant
exercised 25,000 warrants at an exercise price of
$8.50 and at August 1, 1998, there were no warrants
outstanding from this grant. In accordance with SFAS
No. 123, $79,244 and $43,505 was recognized as
compensation expense for this warrant for the years
ended August 1, 1998 and August 2, 1997, respectively.
The consulting agreement terminated during the current
fiscal year and accordingly, all future compensation
expense was recognized for the year ended August 1,
1998.
3. In connection with a consulting agreement with the
Company's investor relations firm, the Company issued
10,000 warrants to purchase shares of common stock at
an exercise price of $11.00. All of these warrants
were outstanding as of August 1, 1998. During the year
ended August 1, 1998, $5,608 of compensation cost was
recognized in connection as a result of this grant.
9. INCOME TAXES
Provision for income taxes consists of the following:
Fiscal Year Ended
-----------------------------------
August 1, August 2, August 3,
1998 1997 1996
---------- ---------- ----------
Current:
Federal $1,802,856 $1,889,377 $1,266,044
State 261,913 194,290 183,676
---------- ---------- ----------
2,064,769 2,083,667 1,449,720
Deferred:
Federal and state 569,970 147,982 (56,609)
---------- ---------- ----------
$2,634,739 $2,231,649 $1,393,111
========== ========== ==========
The difference between the income tax provision of $2,634,739 and the
income tax expense of $2,639,497 of $4,758 represents Virgin Island
Franchise taxes incurred by the Company's Foreign Sales Corporation.
Deferred tax liabilities (assets) are comprised of the following:
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<PAGE>
August 1, August 2,
1998 1997
----------- -----------
Depreciation $ 1,374,853 $ 1,030,628
Pension 98,025 97,870
Federal effect of New York
State tax credits 162,127 118,783
Difference in basis of fixed assets 84,322 92,684
Revenue recognition 444,640 245,978
----------- -----------
Gross deferred tax liabilities 2,163,967 1,585,943
----------- -----------
Warranty reserve (45,649) (38,154)
Amortization (118,761) (133,893)
Inventory (49,315) (154,594)
Bad debt reserve (77,962) (13,549)
Deferred compensation (644,392) (501,726)
NYS tax credits (476,231) (349,359)
Self-funded health insurance -- (213,591)
----------- -----------
Gross deferred tax assets (1,412,310) (1,404,866)
----------- -----------
Net deferred tax liabilities $ 751,657 $ 181,077
=========== ===========
Deferred tax liabilities and assets are recorded in the consolidated
balance sheets as follows:
August 1, August 2,
1998 1997
----------- -----------
Liabilities:
Deferred income taxes $ 1,406,162 $ 1,107,964
Assets:
Prepaid expenses and other
current assets (36,550) (425,540)
Other assets (617,955) (501,347)
----------- -----------
$ 751,657 $ 181,077
=========== ===========
The New York State tax credits expire at various dates through 2003.
The following is a reconciliation of the statutory Federal and effective
income tax rates:
Fiscal Year Ended
-----------------------------
August 1, August 2, August 3,
1998 1997 1996
--------- --------- ---------
% 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 1.8 1.6 1.5
Permanent differences .4 .5 .6
Tax benefits on foreign sales corp (3.0) (2.5) (3.3)
Federal tax credits and other (1.9) (2.4) (.5)
---- ---- ----
31.3% 31.2% 32.3%
==== ==== ====
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, NY. This lease includes escalations for real
estate taxes and operating expenses. In September 1992 the Company
entered into an operating lease for
F14
<PAGE>
Dynarad's facility in Deer Park, NY. This lease provides escalation
for real estate taxes. In May 1994 the Company entered into an
operating lease for Bertan's facility in Hicksville, NY. This lease
provides escalation for real estate taxes. On January 31, 1998 the
Company renewed an operating lease expiring on January 31, 2003,
for its Gendex-Del Medical Imaging facility in Franklin Park, IL.
This lease provides escalations for real estate taxes and operating
expenses. On March 6, 1998 the Company entered into an operating
lease for its Gendex-Del Medical Imaging facility in Lincolnwood,
IL. In addition, the Company has various auto leases accounted for
as operating leases. The future minimum annual lease commitments as
of August 1, 1998 are as follows:
Fiscal Year Ended Amount
----------------- ----------
1999 $1,417,891
2000 1,409,279
2001 1,364,176
2002 1,051,935
2003 808,591
Thereafter 298,451
----------
$6,350,323
==========
Rent expense was $1,384,952 in 1998, $1,285,877 in 1997 and
$1,117,068 in 1996, which includes real estate taxes of $361,943 in
1998, $289,105 in 1997 and $286,118 in 1996.
b. The Company has an employment agreement with its President through
July 31, 2005. 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 1, 1998 was $913,046. Such liability is funded by
the Company's investments of $913,046, 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 1998. As of
April 1, 1997, the Vice President opted for an extension in the
form of a consulting contract at a rate specified within the
agreement.
In connection with the acquisition of Dynarad, the Company entered
into an employment agreement with a key employee. 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 three of the former shareholders of Dynarad. The
agreements call for annual payments of $52,000, $28,000 and
$21,000, respectively.
c. As of May 28, 1997, the former President of Bertan became a
technical consultant to the Company. On April 23, 1998, 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 1, 1998 and
August 2, 1997 the amounts recorded for the net present value of
future obligations relating to the Bertan acquisition were $607,952
and $842,236, respectively.
F15
<PAGE>
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, 1998, the Company's Gendex-Del Medical Imaging Corp.
subsidiary acquired selected assets of X-Ray Technologies, Inc.,
consisting of inventory, fixed assets, designs and technology for
approximately $1,100,000 including transaction costs. The newly formed
XTek division is a manufacturer of cost-effective medical imaging systems
for physicians, chiropractors and veterinarians operating under
Gendex-Del Medical Imaging, Corp.
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 $883,419, which is included in goodwill. Such excess
is being amortized over a 15 year period.
12. MAJOR CUSTOMERS AND EXPORT SALES
During fiscal years 1998, 1997 and 1996 no one customer accounted
for more than ten percent of the Company's consolidated net sales.
Export sales were 45 percent, 40 percent and 40 percent of total
sales in 1998, 1997 and 1996, respectively.
For the years ended August 1, 1998, August 2, 1997 and August 3,
1996, export sales by geographic areas were:
1998 1997 1996
----------- ----------- -----------
Europe $ 8,178,548 29% $ 6,709,380 31% $ 5,460,305 31%
Far East 7,277,981 26% 6,285,606 28% 5,446,443 31%
North America 5,687,305 20% 4,817,555 22% 2,979,653 17%
Middle East 4,063,918 14% 3,521,101 16% 3,374,581 20%
South America 2,955,010 10% 455,241 2% 143,601 1%
Africa 96,802 1% 160,726 1% 38,359 --
----------- --- ----------- --- ----------- ---
Total export sales $28,259,564 100% $21,949,609 100% $17,442,942 100%
=========== === =========== === =========== ===
13. SEGMENT REPORTING
The following analysis provides segment information for the two
industries in which the Company operates (see Note 1):
F16
<PAGE>
Critical
Electronic Medical
1998 Subsystems Systems Total
------ ----------- ----------- -----------
Net Sales (a) $32,430,364 $29,874,514 $62,304,878
Operating expenses 27,164,968 26,879,751 54,044,719
----------- ----------- -----------
Operating profit $ 5,265,396 $ 2,994,763 8,260,159
Interest income - net 167,926
Provision for income taxes 2,639,497
-----------
Net income $ 5,788,588
===========
Identifiable assets $43,914,175 $28,442,452 $72,356,627
=========== =========== ===========
Capital expenditures $ 1,787,592 $ 1,108,940 $ 2,896,532
=========== =========== ===========
Depreciation and amortization $ 1,388,122 $ 710,366 $ 2,098,488
=========== =========== ===========
(a) For the fiscal year ended August 1, 1998, sales of the Critical
Electronic Subsystems segment included sales of approximately
$14,064,000 to customers for medical imaging and diagnostic
applications. Aggregate medical sales for the fiscal year ended
August 1, 1998 were approximately $43,939,000 or 71% of total
sales.
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 - net 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.
F17
<PAGE>
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 - net (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>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
QUARTER
--------------------------------------------------
First Second Third Fourth
----------- ----------- ----------- -----------
YEAR ENDED August 1, 1998:
Net sales $13,480,069 $14,403,182 $16,682,726 $17,738,901
=========== =========== =========== ===========
Gross profit $ 5,432,524 $ 5,900,167 $ 6,687,147 $ 7,376,723
=========== =========== =========== ===========
Net income $ 1,256,987 $ 1,362,480 $ 1,444,741 $ 1,724,380
=========== =========== =========== ===========
Diluted earnings per share $ .15 $ .17 $ .18 $ .21
=========== =========== =========== ===========
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
=========== =========== =========== ===========
Diluted earnings per share $ .12 $ .14 $ .16 $ .19
=========== =========== =========== ===========
F19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
DEL GLOBAL TECHNOLOGIES CORP.
By: /S/Leonard Trugman
------------------
Leonard A.Trugman
Chairman of the Board,
Chief Executive Officer and
President
By: /S/Michael H. Taber
-------------------
Michael Taber
Chief Financial Officer, Vice
President of Finance and
Secretary
Dated: October 30, 1998
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 30, 1998
- -----------------------
Natan Bertman, Director
/S/David Michael October 30, 1998
- -----------------------
David Michael, Director
/S/Seymour Rubin October 30, 1998
- -----------------------
Seymour Rubin, Director
/S/James Tiernan October 30, 1998
- -----------------------
James Tiernan, Director
/S/Leonard A. Trugman October 30, 1998
- -----------------------
Leonard A. Trugman
Chairman of the Board,
Chief Executive Officer and
President
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE REGISTERED UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
7,000 Warrants
Void after 5:00 p.m. New York time on May 1, 1998
WARRANT TO PURCHASE COMMON STOCK
OF
DEL GLOBAL TECHNOLOGIES CORP.
This warrant certificate ("Warrant Certificate") certifies
that for value received, Porter, LeVay & Rose, Inc., Seven Penn Plaza, New York,
NY 10001 is the owner of the number of warrants ("Warrants") specified above,
each of which entitles the holder thereof to purchase, at any time on or before
the Expiration Date, as hereinafter defined, one fully paid and non-assessable
share ("Share") of common stock, par value $.10 per share ("Common Stock"), of
Del Global Technologies Corp. (the "Company"), a New York corporation, at a
purchase price of ELEVEN DOLLARS ($11.00) per share in lawful money of the
United States of America in cash or by check or a combination of cash and check,
subject to adjustment as hereinafter provided.
1. Warrant; Exercise Price; Payout Amount.
1.1. Each Warrant shall entitle the Warrant Holder
the right to purchase one Share of Common Stock of the Company (individually, a
"Warrant Share"; severally, the "Warrant Shares").
1.2. The purchase price payable upon exercise of each
Warrant ("Exercise Price") shall be ELEVEN DOLLARS ($11.00), subject to
adjustment as hereinafter provided. The Exercise Price and number of Warrants
evidenced by each Warrant Certificate are subject to adjustment as provided in
Section 7 hereof.
1
<PAGE>
2. Exercise of Warrant; Expiration Date.
2.1. This Warrant Certificate is exercisable, in
whole or from time to time in part, at the option of the Warrant Holder, at any
time after the date of issuance and on or before the Expiration Date, upon
surrender of this Warrant Certificate to the Company together with a duly
completed exercise form and payment of the Exercise Price. In the case of
exercise of less than all the Warrants represented by this Warrant Certificate,
the Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2. The term "Expiration Date" shall mean 5:00 p.m.
New York time on May 1, 2001, or if such date shall in the State of New York be
a holiday or a day on which banks are authorized to close, then 5:00 p.m. New
York time the next following day which in the State of New York is not a holiday
or a day on which banks are authorized to close, or in the event of any merger,
consolidation, or sale of all or substantially all the assets of the Company as
an entirety resulting in any distribution to the Company's stockholders prior to
the Expiration Date, the Warrant Holder shall have the right to exercise this
Warrant commencing at such time through the Expiration Date into the kind and
amount of shares of stock and other securities and property (including cash)
receivable by a holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto.
3. Registration and Transfer on Company Books.
3.1. The Company shall maintain books and records for
the registration and transfer of Warrant Certificates.
3.2. Prior to due presentment for registration of
transfer of this Warrant Certificate, the Company may deem and treat the
registered holder as the absolute owner thereof.
3.3. The Company shall register upon its books any
transfer of a Warrant Certificate upon surrender of same to the Company
accompanied by a written instrument of transfer duly executed by the registered
holder. Upon any such registration of transfer, new Warrant Certificate(s) shall
be issued to the transferee(s) and the surrendered Warrant Certificate shall be
canceled by the Company. A Warrant Certificate may also be exchanged, at the
option of the holder, for new Warrant Certificates representing in the aggregate
the number of Warrants evidenced by the Warrant Certificate surrendered.
2
<PAGE>
4. Reservation of Shares. The Company covenants that it will
at all times reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon exercise of the Warrants, such number of
shares of Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants. The Company covenants that all shares of Common Stock
which shall be issuable upon exercise of the Warrants shall be duly and validly
issued and fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof, and that upon issuance such shares
shall be listed on each national securities exchange, if any, on which the other
shares of outstanding Common Stock of the Company are then listed.
5. Exchange, Transfer, Assignment, Loss or Mutilation of
Warrant Certificate. This Warrant Certificate is exchangeable, without expense,
at the option of the Warrant Holder, upon presentation and surrender hereof to
the Company or at the office of its stock transfer agent, if any, for other
Warrants of different denominations entitling the holder thereof to purchase in
the aggregate the same number of shares of Common Stock purchasable hereunder.
This Warrant Certificate may be transferred or assigned by the Warrant Holder
upon surrender of this Warrant Certificate to the Company at its principal
office or at the office of its transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax. Upon
such surrender the Company shall, without charge, execute and deliver a new
Warrant Certificate in the name of the assignee named in such instrument of
assignment and this Warrant Certificate shall be promptly canceled. This Warrant
may be divided or combined with other warrants which carry the same rights upon
presentation hereof at the principal office of the Company or at the office of
its stock transfer agent, if any, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Warrant Holder hereof. The term "Warrant Certificate" as used herein includes
any Warrant Certificates into which this Warrant Certificate may be divided or
exchanged. Upon receipt by the Company of reasonable evidence of the ownership
of and the loss, theft, destruction or mutilation of this Warrant Certificate
and, in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company, or, in the case of mutilation, upon surrender and
cancellation of the mutilated Warrant Certificate, the Company shall execute and
deliver in lieu thereof a new Warrant Certificate of like tenor and date
representing an equal number of Warrants.
6. Rights of the Holder. The Warrant Holder shall not, by
virtue hereof, be entitled to any voting or other rights of a stockholder in the
Company, either at law or equity, and the rights of the Warrant Holder are
limited to those expressed in the Warrant Certificate and are not enforceable
against the Company except to the extent set forth herein.
3
<PAGE>
7. Adjustment of Exercise Price and Number of Shares
Deliverable. The Exercise Price and the number of shares of Common Stock
purchasable pursuant to each Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Section 7:
(a) In case the Company shall (i) declare a
dividend or make a distribution on its outstanding
shares of Common Stock in shares of Common Stock,
(ii) subdivide or reclassify its outstanding shares
of Common Stock into a greater number of shares, or
(iii) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record
date for such dividend or distribution or of the
effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall
equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of
which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and
the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) Whenever the Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to
Subsection (a) above, the number of Shares
purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number
of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the
Exercise Price, as adjusted.
(c) Notwithstanding the provisions of
Subsections (a) and (b) of this Section 7, no
adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or
decrease of at least five cents ($0.05) in such
price; provided, however, that any adjustments which
by reason of this Subsection (c) are not required to
be made shall be carried forward and taken into
account in any subsequent adjustment required to be
made hereunder. All calculations under this Section 7
shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
Anything in this Section 7 to the contrary
notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the
Exercise Price, in addition to those required by this
Section 7, as it shall determine, in its sole
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discretion, to be advisable in order that any
dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination
of Common Stock hereafter made by the Company, shall
not result in any Federal income tax liability to the
holders of
Common Stock or securities convertible into Common
Stock (including Warrants).
(d) Whenever the Exercise Price is adjusted
as herein provided, the Company shall promptly cause
a notice setting forth the adjusted Exercise Price
and adjusted number of Shares issuable upon exercise
of each Warrant, and if requested by the Warrant
Holder, information describing the transactions
giving rise to such adjustments, to be mailed to the
Warrant Holders at their last addresses appearing in
the books and records of the Company, and shall cause
a certified copy thereof to be mailed to its transfer
agent, if any. The Company may retain a firm of
independent certified public accountants selected by
the Board of Directors (who may be the regular
accountants employed by the Company) to make any
computation required by this Section 7, and a
certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
(e) In the event that at any time, as a
result of an adjustment made pursuant to Subsection
(a) above, the Warrant Holder of this Warrant
thereafter shall become entitled to receive any
shares of the Company, other than Common Stock,
thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to
the provisions with respect to the Common Stock
contained in Subsections (a) to (c), inclusive above.
(f) Irrespective of any adjustments in the
Exercise Price or the number or kind of shares
purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to
express the same price and number and kind of shares
as are stated in the similar Warrants initially
issuable pursuant to this Warrant Certificate.
8. Fractional Shares. No certificate for fractional Shares
shall be issued upon the exercise of the Warrants. With respect to any fraction
of a Share called for upon any exercise hereof, the Company shall pay to the
Warrant Holder an
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<PAGE>
amount in cash equal to such fraction calculated to the nearest cent multiplied
by the current market value of a Share, determined as follows:
(a) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on
the NASDAQ system, the current market value of a
Share shall be the last reported sale price per Share
of the Common Stock on such exchange or system on the
last business day prior to the date of exercise of
this Warrant or if no such sale is made on such day,
the average of the closing bid and asked prices per
Share for such day on such exchange or system; or
(b) If the Common Stock is not so listed or
admitted to unlisted trading privileges, the current
market value of a Share shall be the mean of the last
reported bid and asked prices per Share reported by
the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of
this Warrant; or
(c) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and
asked prices are not so reported, the current market
value of a Share shall be an amount, not less than
book value thereof, as at the end of the most recent
fiscal year of the Company ending prior to the date
of the exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board
of Directors of the Company.
9. Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section 7 hereof, the Company shall
forthwith file in the custody of its Secretary or Assistant Secretary at its
principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price as herein provided setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Common Stock, if any, and such other facts
as shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section 2, and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Warrant Holder or any such holder.
10. Notices to Warrant Holders. So long as this Warrant shall
be outstanding, (i) if the Company shall pay any dividend or make any
distribution upon
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<PAGE>
the Common Stock; or (ii) if the Company shall offer to the holders of Common
Stock for subscription or purchase by them any shares of any class or any other
rights; or (iii) if any capital reorganization of the Company, reclassification
of the capital stock of the Company, consolidation or merger of the Company with
or into another corporation, sale, lease or transfer of all or substantially all
of the property and assets of the Company to another corporation, or voluntary
or involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Warrant Holder, at least fifteen days prior to the date
specified in (x) or (y) below, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which (x) a record is
to be taken for the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any,
which is to be fixed, as of which the holders of Common Stock or other
securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
11. Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Warrant Holder shall have the right thereafter by exercising this Warrant at any
time prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section 11 shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the
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<PAGE>
Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Subsection (a) of Section 7 hereof.
12. Voluntary Adjustment by the Company. The Company may, at
its option, at any time prior to the Expiration Date, reduce the then current
Exercise Price to any amount deemed appropriate by the Board of Directors of the
Company and/or extend the date of the expiration of the Warrants.
13. Registration Under the Securities Act of 1933.
The Warrant Holder shall be entitled to the following
registration rights;
(a) Demand Rights. The Company covenants and
agrees that, during the two (2) year period
commencing on the exercise of this warrant, within
forty-five (45) days after the receipt of a written
request from the Warrant holder, or a majority of
holders if there is more than one holder, that he
desires and intends to transfer all or a portion of
his Shares under such circumstances that a public
offering, within the meaning of the Securities Act of
1933, as amended (the "Act"), will be involved, the
Company shall file with the Securities and Exchange
Commission (the "Commission") with all deliberate
speed a Registration Statement on Form S-3 (or any
shortform successor thereto), or if not eligible for
the use of Form S-3, any other Form, covering all
such securities and use its best efforts to cause
such Registration Statement with respect to such
securities to become effective under the Act. The
Company shall pay all costs of preparing and filing
such Registration Statement. The Company shall not be
required to comply with more than one request for
registration pursuant to this Section 13(a). The
Company need not comply with any request for
registration pursuant to this Section 13(a) if at
such time the Company would be required to use, in
connection with the filing of the Registration
Statement, pursuant to the requirements of the Act
and the rules and regulations of the Commission
thereunder, audited financial statements as of a date
other than the end of a fiscal year of the Company.
If the Company includes Shares to be sold by it in
any registration requested pursuant to this Section
13(a), such registration shall be deemed to have been
a registration under Section 13 (b).
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<PAGE>
(b) Piggyback Rights. If at any time after the date
hereof, the Company shall propose to file a
registration statement ("Registration Statement")
under the Act (other than a reorganization or an
offering pursuant to a stock option or other employee
benefit plan or an offering on Form S-4 or S-5 (or
any successor forms thereto) relating to an
acquisition of another corporation), then, during the
two(2) year period commencing on the date hereof, and
subject to Subsection (3) of this Section 13(b), the
Company shall in each case deliver written notice
thereof to the Holder of this Warrant or of the
Warrant Shares and/or any then holder of Warrants or
Warrant Shares (such persons being collectively
referred to herein as "holders") at least 15 days
before the anticipated filing date. Such notice shall
offer to each holder the option to include Warrant
Shares in such Registration Statement, subject to the
conditions set forth in this Section 13(b); provided,
however, that the Company shall be under no
obligation to register Warrant Shares of any holder
if in the opinion of counsel to such holder no
registration under the Act is required with respect
to a public disposition of such Warrant Shares.
(1)Should a holder desire to have
any Warrant Shares registered under this Section
13(b), such holder shall so advise in writing no
later than 15 days after the date of receipt by the
holder of the Company's written notice, setting forth
the number of such Warrant Shares for which
registration is requested. Subject to Subsection (3)
of this Section 13(b), the Company shall thereupon
include in such Registration Statement such Warrant
Shares.
(2)Neither the giving of notice by
the Company nor any request by any holders to
register Warrant Shares pursuant to this Section
13(b) shall in any way obligate the Company to file
any such Registration Statement, and notwithstanding
the filing of such Registration Statement, the
Company may, at any time prior to the effective date
thereof, determine not to offer the securities to
which such registration relates and/or withdraw the
Registration Statement from the Commission, without
liability of the Company to any holders.
(3)If the securities covered by such
Registration Statement are to be sold by underwriters
in an underwritten public offering (including,
without limitation, a so-called "best efforts"
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<PAGE>
undertaking by an underwriter), the Company shall use
its best efforts to cause the managing underwriter,
if any, of a proposed offering to grant a request by
a holder that Warrant Shares be included in the
proposed offering on terms and conditions which are
customary industry practice for such underwriter
under the existing circumstance, provided that any
Warrant Shares to be sold by holders pursuant to this
Section 13(b), shall be sold or distributed in a
manner identical to the manner in which the
securities which are the subject of such Registration
Statement are to be sold or distributed.
Notwithstanding the foregoing, if any such managing
underwriter shall advise the Company in writing that,
in good faith and in its reasonable opinion, the
distribution of Warrant Shares requested to be
included in the Registration Statement concurrently
with the securities being registered by the Company
would adversely affect the distribution of such
securities by such underwriters, the Company shall
give notice of such determination to the holders
requesting registration, and the number of Warrant
Shares proposed to be offered by the holders and any
other persons other than the Company shall be reduced
pro rata (as specified by the Company in such notice)
to aggregate a quantity of Warrant Shares (so
specified) which said managing underwriter shall not
consider excessive.
(4)The rights of holders to have
their Warrant Shares be included in any Registration
Statement pursuant to the provisions of Section 13(b)
of this Warrant Certificate, shall be subject to the
condition that the holders requesting registration
shall furnish to the Company in writing such
information and documents as may be reasonably
required to properly prepare and file such
Registration Statement in accordance with applicable
provisions of the Act.
(5)The Company shall bear the entire
cost and expense of any registration of securities
initiated by it notwithstanding that Warrant Shares
may be included in any such registration. Any holder
whose Warrant Shares are included in any such
registration statement pursuant to this Section 13(b)
shall, however, bear the fees of his own counsel and
any registration fees, transfer taxes or underwriting
discounts or commissions applicable to the Warrant
Shares sold by him pursuant thereto.
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<PAGE>
(c) Indemnification. (i) The Company shall indemnify
and hold harmless each such holder and each
underwriter, within the meaning of the Act, who may
purchase from or sell for any such holder any Warrant
Shares (collectively, "Indemnified Persons") from and
against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in the
Registration Statement or any post-effective
amendment thereto or any registration statement under
the Act or any prospectus included therein required
to be filed or furnished by reason of this Section 13
or caused by any omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such
untrue statement or alleged untrue statement or
omission or alleged omission based upon information
furnished or required to be furnished in writing to
the Company by such holder or underwriter expressly
for use therein, which indemnification shall include
each person, if any, who controls any such
underwriter within the meaning of such Act; provided,
however, that the Company shall not be obliged so to
indemnify any such holder, underwriter or controlling
person unless such holder, underwriter or controlling
person shall at the same time indemnify the Company,
its directors, each officer signing the related
registration statement and each person, if any, who
controls the Company within the meaning of such Act,
from and against any and all losses, claims, damages
and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained
in any registration statement or any prospectus
required to be filed or furnished by reason of this
Section 13 or caused by any omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, insofar as such losses,
claims, damages or liabilities are caused by any
untrue statement or alleged untrue statement or
omission or alleged omission based upon information
furnished or required to be furnished in writing to
the Company by any such holder, underwriter or
controlling person expressly for use therein.
(ii) The holders registering Warrant
Shares pursuant to this Warrant Certificate shall
indemnify and hold harmless the Company, its
directors and officers, and each person, if any who
controls the Company within the meaning of either
Section 15 of
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the Act or Section 20 of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), to the same
extent as the indemnity from the Company to each
Indemnified Person set forth in paragraph (i) of this
Subsection (c), but only with respect to information
relating to such Indemnified Person furnished in
writing by such Indemnified Person to the Company
expressly for use in the Registration Statement or
related Prospectus (preliminary or final), or any
amendment or supplement thereto. In case any action
or proceeding shall be brought against the Company or
its directors or officers or any such controlling
person, in respect of which indemnity may be sought
against a holder, each shall have the rights and
duties given to the Company and the Company or its
directors or its officers or its controlling persons
each shall have the rights and duties given to a
holder by Subsection (c).
(iii) In order to provide for just
and equitable contribution in circumstances in which
the indemnification provided for in this Section
13(c) is due in accordance with its terms but is,
for any reason, held by a court to be unavailable,
the Company and the holders shall contribute to the
aggregate losses, claims, damages and liabilities
(including reasonable legal or other expenses
incurred in connection with investigation or
defending of same) to which the Company and the
holders may be subject based on their comparative
fault; provided, however, that no holder shall have
any liability hereunder in excess of the gross
proceeds realized by such holder from the sale by it
of the Warrant Shares to which the third party claim
relates; provided, further, however, that no person
who has committed an intentional misrepresentation
shall be entitled to contribution from any person who
has not committed an intentional misrepresentation.
For the purposes of this paragraph (iii) any person
controlling, controlled by or under common control
with the holders, or any partner, director, officer,
employee, representative or agent of any thereof,
shall have the same rights to contribution as the
holders, and each person who controls the Company
within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, each officer and each
director of the Company shall have the same rights to
contribution as the Company. Any party entitled to
contribution shall, promptly after receipt of notice
of commencement of any action, suit or proceeding
against such party in respect of which a claim for
contribution may be made against the other party
under this paragraph (iii), notify such party from
whom contribution may be
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<PAGE>
sought, but the omission to so notify such party
shall not relieve the party from which contribution
may be sought from any obligation it or they may have
hereunder or otherwise.
The Company's agreements with respect to Warrant Shares in
this Section 13 shall continue in effect regardless of the exercise and
surrender of this Warrant.
14. Governing Law. This Warrant Certificate shall be governed
by, enforced and construed in accordance with the laws of the State of New York
without regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed herein.
DEL GLOBAL TECHNOLOGIES CORP.
By:/S/Leonard A. Trugman
---------------------
Name: Leonard A. Trugman
Title: Chairman, CEO and
President
[SEAL]
Dated: May 1, 1998
Attest:
/S/Michael Taber
- ---------------------------
Michael Taber, Secretary
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<PAGE>
EXERCISE FORM
Dated: ________________, 199_
The undersigned hereby irrevocably elects to exercise the
right to purchase __________ shares of Common Stock covered by this Warrant
according to the conditions hereof and herewith makes payment of the Exercise
Price for such shares in full.
--------------------------------
Signature [Print Name]
--------------------------------
(STREET ADDRESS)
--------------------------------
(CITY) (STATE) (ZIP CODE)
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<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________________________________
hereby sells, assigns and transfers unto
Name ________________________________________________________________
(Please typewrite or print in bold letters)
Address_______________________________________________________________ the right
to purchase Common Stock represented by this Warrant to the extent of __________
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint _____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, 199_
Signature __________________________
[PRINT NAME]
15
THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THEY MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE REGISTERED UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
2,500 Warrants
Void after 5:00 p.m. New York time on May 1, 1998
WARRANT TO PURCHASE COMMON STOCK
OF
DEL GLOBAL TECHNOLOGIES CORP.
This warrant certificate ("Warrant Certificate") certifies
that for value received, Michael Porter, 48 Walnut Avenue, Milburn, NJ 07041 ,
SS# ###-##-#### is the owner of the number of warrants ("Warrants") specified
above, each of which entitles the holder thereof to purchase, at any time on or
before the Expiration Date, as hereinafter defined, one fully paid and
non-assessable share ("Share") of common stock, par value $.10 per share
("Common Stock"), of Del Global Technologies Corp. (the "Company"), a New York
corporation, at a purchase price of ELEVEN DOLLARS ($11.00) per share in lawful
money of the United States of America in cash or by check or a combination of
cash and check, subject to adjustment as hereinafter provided.
1. Warrant; Exercise Price; Payout Amount.
1.1. Each Warrant shall entitle the Warrant Holder
the right to purchase one Share of Common Stock of the Company (individually, a
"Warrant Share"; severally, the "Warrant Shares").
1.2. The purchase price payable upon exercise of each
Warrant ("Exercise Price") shall be ELEVEN DOLLARS ($11.00), subject to
adjustment as hereinafter provided. The Exercise Price and number of Warrants
evidenced by each Warrant Certificate are subject to adjustment as provided in
Section 7 hereof.
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2. Exercise of Warrant; Expiration Date.
2.1. This Warrant Certificate is exercisable, in
whole or from time to time in part, at the option of the Warrant Holder, at any
time after the date of issuance and on or before the Expiration Date, upon
surrender of this Warrant Certificate to the Company together with a duly
completed exercise form and payment of the Exercise Price. In the case of
exercise of less than all the Warrants represented by this Warrant Certificate,
the Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2. The term "Expiration Date" shall mean 5:00 p.m.
New York time on May 1, 2001, or if such date shall in the State of New York be
a holiday or a day on which banks are authorized to close, then 5:00 p.m. New
York time the next following day which in the State of New York is not a holiday
or a day on which banks are authorized to close, or in the event of any merger,
consolidation, or sale of all or substantially all the assets of the Company as
an entirety resulting in any distribution to the Company's stockholders prior to
the Expiration Date, the Warrant Holder shall have the right to exercise this
Warrant commencing at such time through the Expiration Date into the kind and
amount of shares of stock and other securities and property (including cash)
receivable by a holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto.
3. Registration and Transfer on Company Books.
3.1. The Company shall maintain books and records for
the registration and transfer of Warrant Certificates.
3.2. Prior to due presentment for registration of
transfer of this Warrant Certificate, the Company may deem and treat the
registered holder as the absolute owner thereof.
3.3. The Company shall register upon its books any
transfer of a Warrant Certificate upon surrender of same to the Company
accompanied by a written instrument of transfer duly executed by the registered
holder. Upon any such registration of transfer, new Warrant Certificate(s) shall
be issued to the transferee(s) and the surrendered Warrant Certificate shall be
canceled by the Company. A Warrant Certificate may also be exchanged, at the
option of the holder, for new Warrant Certificates representing in the aggregate
the number of Warrants evidenced by the Warrant Certificate surrendered.
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<PAGE>
4. Reservation of Shares. The Company covenants that it will
at all times reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon exercise of the Warrants, such number of
shares of Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants. The Company covenants that all shares of Common Stock
which shall be issuable upon exercise of the Warrants shall be duly and validly
issued and fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof, and that upon issuance such shares
shall be listed on each national securities exchange, if any, on which the other
shares of outstanding Common Stock of the Company are then listed.
5. Exchange, Transfer, Assignment, Loss or Mutilation of
Warrant Certificate. This Warrant Certificate is exchangeable, without expense,
at the option of the Warrant Holder, upon presentation and surrender hereof to
the Company or at the office of its stock transfer agent, if any, for other
Warrants of different denominations entitling the holder thereof to purchase in
the aggregate the same number of shares of Common Stock purchasable hereunder.
This Warrant Certificate may be transferred or assigned by the Warrant Holder
upon surrender of this Warrant Certificate to the Company at its principal
office or at the office of its transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax. Upon
such surrender the Company shall, without charge, execute and deliver a new
Warrant Certificate in the name of the assignee named in such instrument of
assignment and this Warrant Certificate shall be promptly canceled. This Warrant
may be divided or combined with other warrants which carry the same rights upon
presentation hereof at the principal office of the Company or at the office of
its stock transfer agent, if any, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Warrant Holder hereof. The term "Warrant Certificate" as used herein includes
any Warrant Certificates into which this Warrant Certificate may be divided or
exchanged. Upon receipt by the Company of reasonable evidence of the ownership
of and the loss, theft, destruction or mutilation of this Warrant Certificate
and, in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company, or, in the case of mutilation, upon surrender and
cancellation of the mutilated Warrant Certificate, the Company shall execute and
deliver in lieu thereof a new Warrant Certificate of like tenor and date
representing an equal number of Warrants.
6. Rights of the Holder. The Warrant Holder shall not, by
virtue hereof, be entitled to any voting or other rights of a stockholder in the
Company, either at law or equity, and the rights of the Warrant Holder are
limited to those expressed in the Warrant Certificate and are not enforceable
against the Company except to the extent set forth herein.
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<PAGE>
7. Adjustment of Exercise Price and Number of Shares
Deliverable. The Exercise Price and the number of shares of Common Stock
purchasable pursuant to each Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Section 7:
(a) In case the Company shall (i) declare a
dividend or make a distribution on its outstanding
shares of Common Stock in shares of Common Stock,
(ii) subdivide or reclassify its outstanding shares
of Common Stock into a greater number of shares, or
(iii) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record
date for such dividend or distribution or of the
effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall
equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of
which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and
the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) Whenever the Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to
Subsection (a) above, the number of Shares
purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number
of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the
Exercise Price, as adjusted.
(c) Notwithstanding the provisions of
Subsections (a) and (b) of this Section 7, no
adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or
decrease of at least five cents ($0.05) in such
price; provided, however, that any adjustments which
by reason of this Subsection (c) are not required to
be made shall be carried forward and taken into
account in any subsequent adjustment required to be
made hereunder. All calculations under this Section 7
shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
Anything in this Section 7 to the contrary
notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the
Exercise Price, in addition to those required by this
Section 7, as it shall determine, in its sole
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discretion, to be advisable in order that any
dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination
of Common Stock hereafter made by the Company, shall
not result in any Federal income tax liability to the
holders of Common Stock or securities convertible
into Common Stock (including Warrants).
(d) Whenever the Exercise Price is adjusted
as herein provided, the Company shall promptly cause
a notice setting forth the adjusted Exercise Price
and adjusted number of Shares issuable upon exercise
of each Warrant, and if requested by the Warrant
Holder, information describing the transactions
giving rise to such adjustments, to be mailed to the
Warrant Holders at their last addresses appearing in
the books and records of the Company, and shall cause
a certified copy thereof to be mailed to its transfer
agent, if any. The Company may retain a firm of
independent certified public accountants selected by
the Board of Directors (who may be the regular
accountants employed by the Company) to make any
computation required by this Section 7, and a
certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
(e) In the event that at any time, as a
result of an adjustment made pursuant to Subsection
(a) above, the Warrant Holder of this Warrant
thereafter shall become entitled to receive any
shares of the Company, other than Common Stock,
thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to
the provisions with respect to the Common Stock
contained in Subsections (a) to (c), inclusive above.
(f) Irrespective of any adjustments in the
Exercise Price or the number or kind of shares
purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to
express the same price and number and kind of shares
as are stated in the similar Warrants initially
issuable pursuant to this Warrant Certificate.
8. Fractional Shares. No certificate for fractional Shares
shall be issued upon the exercise of the Warrants. With respect to any fraction
of a Share called for upon any exercise hereof, the Company shall pay to the
Warrant Holder an
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<PAGE>
amount in cash equal to such fraction calculated to the nearest cent multiplied
by the current market value of a Share, determined as follows:
(a) If the Common Stock is listed on a
national securities exchange or admitted to unlisted
trading privileges on such exchange or listed for
trading on the NASDAQ system, the current market
value of a Share shall be the last reported sale
price per Share of the Common Stock on such exchange
or system on the last business day prior to the date
of exercise of this Warrant or if no such sale is
made on such day, the average of the closing bid and
asked prices per Share for such day on such exchange
or system; or
(b) If the Common Stock is not so listed or
admitted to unlisted trading privileges, the current
market value of a Share shall be the mean of the last
reported bid and asked prices per Share reported by
the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of
this Warrant; or
(c) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and
asked prices are not so reported, the current market
value of a Share shall be an amount, not less than
book value thereof, as at the end of the most recent
fiscal year of the Company ending prior to the date
of the exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board
of Directors of the Company.
9. Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section 7 hereof, the Company shall
forthwith file in the custody of its Secretary or Assistant Secretary at its
principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price as herein provided setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Common Stock, if any, and such other facts
as shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section 2, and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Warrant Holder or any such holder.
10. Notices to Warrant Holders. So long as this Warrant shall
be outstanding, (i) if the Company shall pay any dividend or make any
distribution upon
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<PAGE>
the Common Stock; or (ii) if the Company shall offer to the holders of Common
Stock for subscription or purchase by them any shares of any class or any other
rights; or (iii) if any capital reorganization of the Company, reclassification
of the capital stock of the Company, consolidation or merger of the Company with
or into another corporation, sale, lease or transfer of all or substantially all
of the property and assets of the Company to another corporation, or voluntary
or involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Warrant Holder, at least fifteen days prior to the date
specified in (x) or (y) below, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which (x) a record is
to be taken for the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any,
which is to be fixed, as of which the holders of Common Stock or other
securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
11. Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Warrant Holder shall have the right thereafter by exercising this Warrant at any
time prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section 11 shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the
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Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Subsection (a) of Section 7 hereof.
12. Voluntary Adjustment by the Company. The Company may, at
its option, at any time prior to the Expiration Date, reduce the then current
Exercise Price to any amount deemed appropriate by the Board of Directors of the
Company and/or extend the date of the expiration of the Warrants.
13. Registration Under the Securities Act of 1933.
The Warrant Holder shall be entitled to the following
registration rights;
(a) Demand Rights. The Company covenants and
agrees that, during the two (2) year period
commencing on the exercise of this warrant, within
forty-five (45) days after the receipt of a written
request from the Warrant holder, or a majority of
holders if there is more than one holder, that he
desires and intends to transfer all or a portion of
his Shares under such circumstances that a public
offering, within the meaning of the Securities Act of
1933, as amended (the "Act"), will be involved, the
Company shall file with the Securities and Exchange
Commission (the "Commission") with all deliberate
speed a Registration Statement on Form S-3 (or any
shortform successor thereto), or if not eligible for
the use of Form S-3, any other Form, covering all
such securities and use its best efforts to cause
such Registration Statement with respect to such
securities to become effective under the Act. The
Company shall pay all costs of preparing and filing
such Registration Statement. The Company shall not be
required to comply with more than one request for
registration pursuant to this Section 13(a). The
Company need not comply with any request for
registration pursuant to this Section 13(a) if at
such time the Company would be required to use, in
connection with the filing of the Registration
Statement, pursuant to the requirements of the Act
and the rules and regulations of the Commission
thereunder, audited financial statements as of a date
other than the end of a fiscal year of the Company.
If the Company includes Shares to be sold by it in
any registration requested pursuant to this Section
13(a), such registration shall be deemed to have been
a registration under Section 13 (b).
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<PAGE>
(b) Piggyback Rights. If at any time after the date
hereof, the Company shall propose to file a
registration statement ("Registration Statement")
under the Act (other than a reorganization or an
offering pursuant to a stock option or other employee
benefit plan or an offering on Form S-4 or S-5 (or
any successor forms thereto) relating to an
acquisition of another corporation), then, during the
two(2) year period commencing on the date hereof, and
subject to Subsection (3) of this Section 13(b), the
Company shall in each case deliver written notice
thereof to the Holder of this Warrant or of the
Warrant Shares and/or any then holder of Warrants or
Warrant Shares (such persons being collectively
referred to herein as "holders") at least 15 days
before the anticipated filing date. Such notice shall
offer to each holder the option to include Warrant
Shares in such Registration Statement, subject to the
conditions set forth in this Section 13(b); provided,
however, that the Company shall be under no
obligation to register Warrant Shares of any holder
if in the opinion of counsel to such holder no
registration under the Act is required with respect
to a public disposition of such Warrant Shares.
(1)Should a holder desire to have
any Warrant Shares registered under this Section
13(b), such holder shall so advise in writing no
later than 15 days after the date of receipt by the
holder of the Company's written notice, setting forth
the number of such Warrant Shares for which
registration is requested. Subject to Subsection (3)
of this Section 13(b), the Company shall thereupon
include in such Registration Statement such Warrant
Shares.
(2)Neither the giving of notice by
the Company nor any request by any holders to
register Warrant Shares pursuant to this Section
13(b) shall in any way obligate the Company to file
any such Registration Statement, and notwithstanding
the filing of such Registration Statement, the
Company may, at any time prior to the effective date
thereof, determine not to offer the securities to
which such registration relates and/or withdraw the
Registration Statement from the Commission, without
liability of the Company to any holders.
(3)If the securities covered by such
Registration Statement are to be sold by underwriters
in an underwritten public offering (including,
without limitation, a so-called "best efforts"
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<PAGE>
undertaking by an underwriter), the Company shall use
its best efforts to cause the managing underwriter,
if any, of a proposed offering to grant a request by
a holder that Warrant Shares be included in the
proposed offering on terms and conditions which are
customary industry practice for such underwriter
under the existing circumstance, provided that any
Warrant Shares to be sold by holders pursuant to this
Section 13(b), shall be sold or distributed in a
manner identical to the manner in which the
securities which are the subject of such Registration
Statement are to be sold or distributed.
Notwithstanding the foregoing, if any such managing
underwriter shall advise the Company in writing that,
in good faith and in its reasonable opinion, the
distribution of Warrant Shares requested to be
included in the Registration Statement concurrently
with the securities being registered by the Company
would adversely affect the distribution of such
securities by such underwriters, the Company shall
give notice of such determination to the holders
requesting registration, and the number of Warrant
Shares proposed to be offered by the holders and any
other persons other than the Company shall be reduced
pro rata (as specified by the Company in such notice)
to aggregate a quantity of Warrant Shares (so
specified) which said managing underwriter shall not
consider excessive.
(4)The rights of holders to have
their Warrant Shares be included in any Registration
Statement pursuant to the provisions of Section 13(b)
of this Warrant Certificate, shall be subject to the
condition that the holders requesting registration
shall furnish to the Company in writing such
information and documents as may be reasonably
required to properly prepare and file such
Registration Statement in accordance with applicable
provisions of the Act.
(5)The Company shall bear the entire
cost and expense of any registration of securities
initiated by it notwithstanding that Warrant Shares
may be included in any such registration. Any holder
whose Warrant Shares are included in any such
registration statement pursuant to this Section 13(b)
shall, however, bear the fees of his own counsel and
any registration fees, transfer taxes or underwriting
discounts or commissions applicable to the Warrant
Shares sold by him pursuant thereto.
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<PAGE>
(c) Indemnification. (i) The Company shall
indemnify and hold harmless each such holder and each
underwriter, within the meaning of the Act, who may
purchase from or sell for any such holder any Warrant
Shares (collectively, "Indemnified Persons") from and
against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in the
Registration Statement or any post-effective
amendment thereto or any registration statement under
the Act or any prospectus included therein required
to be filed or furnished by reason of this Section 13
or caused by any omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such
untrue statement or alleged untrue statement or
omission or alleged omission based upon information
furnished or required to be furnished in writing to
the Company by such holder or underwriter expressly
for use therein, which indemnification shall include
each person, if any, who controls any such
underwriter within the meaning of such Act; provided,
however, that the Company shall not be obliged so to
indemnify any such holder, underwriter or controlling
person unless such holder, underwriter or controlling
person shall at the same time indemnify the Company,
its directors, each officer signing the related
registration statement and each person, if any, who
controls the Company within the meaning of such Act,
from and against any and all losses, claims, damages
and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained
in any registration statement or any prospectus
required to be filed or furnished by reason of this
Section 13 or caused by any omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, insofar as such losses,
claims, damages or liabilities are caused by any
untrue statement or alleged untrue statement or
omission or alleged omission based upon information
furnished or required to be furnished in writing to
the Company by any such holder, underwriter or
controlling person expressly for use therein.
(ii) The holders registering Warrant
Shares pursuant to this Warrant Certificate shall
indemnify and hold harmless the Company, its
directors and officers, and each person, if any who
controls the Company within the meaning of either
Section 15 of
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the Act or Section 20 of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), to the same
extent as the indemnity from the Company to each
Indemnified Person set forth in paragraph (i) of this
Subsection (c), but only with respect to information
relating to such Indemnified Person furnished in
writing by such Indemnified Person to the Company
expressly for use in the Registration Statement or
related Prospectus (preliminary or final), or any
amendment or supplement thereto. In case any action
or proceeding shall be brought against the Company or
its directors or officers or any such controlling
person, in respect of which indemnity may be sought
against a holder, each shall have the rights and
duties given to the Company and the Company or its
directors or its officers or its controlling persons
each shall have the rights and duties given to a
holder by Subsection (c).
(iii) In order to provide for just
and equitable contribution in circumstances in which
the indemnification provided for in this Section
13(c) is due in accordance with its terms but is, for
any reason, held by a court to be unavailable, the
Company and the holders shall contribute to the
aggregate losses, claims, damages and liabilities
(including reasonable legal or other expenses
incurred in connection with investigation or
defending of same) to which the Company and the
holders may be subject based on their comparative
fault; provided, however, that no holder shall have
any liability hereunder in excess of the gross
proceeds realized by such holder from the sale by it
of the Warrant Shares to which the third party claim
relates; provided, further, however, that no person
who has committed an intentional misrepresentation
shall be entitled to contribution from any person who
has not committed an intentional misrepresentation.
For the purposes of this paragraph (iii) any person
controlling, controlled by or under common control
with the holders, or any partner, director, officer,
employee, representative or agent of any thereof,
shall have the same rights to contribution as the
holders, and each person who controls the Company
within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, each officer and each
director of the Company shall have the same rights to
contribution as the Company. Any party entitled to
contribution shall, promptly after receipt of notice
of commencement of any action, suit or proceeding
against such party in respect of which a claim for
contribution may be made against the other party
under this paragraph (iii), notify such party from
whom contribution may be
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<PAGE>
sought, but the omission to so notify such party
shall not relieve the party from which contribution
may be sought from any obligation it or they may have
hereunder or otherwise.
The Company's agreements with respect to Warrant Shares in
this Section 13 shall continue in effect regardless of the exercise and
surrender of this Warrant.
14. Governing Law. This Warrant Certificate shall be governed
by, enforced and construed in accordance with the laws of the State of New York
without regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed herein.
DEL GLOBAL TECHNOLOGIES CORP.
By:/S/Leonard A. Trugman
---------------------
Name: Leonard A. Trugman
Title: Chairman, CEO and President
[SEAL]
Dated: May 1, 1998
Attest:
/S/ Michael Taber
- ---------------------------
Michael Taber, Secretary
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<PAGE>
EXERCISE FORM
Dated: ________________, 199_
The undersigned hereby irrevocably elects to exercise the
right to purchase __________ shares of Common Stock covered by this Warrant
according to the conditions hereof and herewith makes payment of the Exercise
Price for such shares in full.
--------------------------------
Signature [Print Name]
--------------------------------
(STREET ADDRESS)
--------------------------------
(CITY) (STATE) (ZIP CODE)
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<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________________________________
hereby sells, assigns and transfers unto
Name ________________________________________________________________
(Please typewrite or print in bold letters)
Address_______________________________________________________________ the right
to purchase Common Stock represented by this Warrant to the extent of __________
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint _____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, 199_
Signature __________________________
[PRINT NAME]
15
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE REGISTERED UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
500 Warrants
Void after 5:00 p.m. New York time on May 1, 1998
WARRANT TO PURCHASE COMMON STOCK
OF
DEL GLOBAL TECHNOLOGIES CORP.
This warrant certificate ("Warrant Certificate") certifies
that for value received, Jonathan Gordon, 41 Wychwood Road, Livingston, NJ
07039, SS# 155-62- 1804 is the owner of the number of warrants ("Warrants")
specified above, each of which entitles the holder thereof to purchase, at any
time on or before the Expiration Date, as hereinafter defined, one fully paid
and non-assessable share ("Share") of common stock, par value $.10 per share
("Common Stock"), of Del Global Technologies Corp. (the "Company"), a New York
corporation, at a purchase price of ELEVEN DOLLARS ($11.00) per share in lawful
money of the United States of America in cash or by check or a combination of
cash and check, subject to adjustment as hereinafter provided.
1. Warrant; Exercise Price; Payout Amount.
1.1. Each Warrant shall entitle the Warrant Holder
the right to purchase one Share of Common Stock of the Company (individually, a
"Warrant Share"; severally, the "Warrant Shares").
1.2. The purchase price payable upon exercise of each
Warrant ("Exercise Price") shall be ELEVEN DOLLARS ($11.00), subject to
adjustment as hereinafter provided. The Exercise Price and number of Warrants
evidenced by each Warrant Certificate are subject to adjustment as provided in
Section 7 hereof.
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2. Exercise of Warrant; Expiration Date.
2.1. This Warrant Certificate is exercisable, in
whole or from time to time in part, at the option of the Warrant Holder, at any
time after the date of issuance and on or before the Expiration Date, upon
surrender of this Warrant Certificate to the Company together with a duly
completed exercise form and payment of the Exercise Price. In the case of
exercise of less than all the Warrants represented by this Warrant Certificate,
the Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2. The term "Expiration Date" shall mean 5:00 p.m.
New York time on May 1, 2001, or if such date shall in the State of New York be
a holiday or a day on which banks are authorized to close, then 5:00 p.m. New
York time the next following day which in the State of New York is not a holiday
or a day on which banks are authorized to close, or in the event of any merger,
consolidation, or sale of all or substantially all the assets of the Company as
an entirety resulting in any distribution to the Company's stockholders prior to
the Expiration Date, the Warrant Holder shall have the right to exercise this
Warrant commencing at such time through the Expiration Date into the kind and
amount of shares of stock and other securities and property (including cash)
receivable by a holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto.
3. Registration and Transfer on Company Books.
3.1. The Company shall maintain books and records for
the registration and transfer of Warrant Certificates.
3.2. Prior to due presentment for registration of
transfer of this Warrant Certificate, the Company may deem and treat the
registered holder as the absolute owner thereof.
3.3. The Company shall register upon its books any
transfer of a Warrant Certificate upon surrender of same to the Company
accompanied by a written instrument of transfer duly executed by the registered
holder. Upon any such registration of transfer, new Warrant Certificate(s) shall
be issued to the transferee(s) and the surrendered Warrant Certificate shall be
canceled by the Company. A Warrant Certificate may also be exchanged, at the
option of the holder, for new Warrant Certificates representing in the aggregate
the number of Warrants evidenced by the Warrant Certificate surrendered.
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<PAGE>
4. Reservation of Shares. The Company covenants that it will
at all times reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon exercise of the Warrants, such number of
shares of Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants. The Company covenants that all shares of Common Stock
which shall be issuable upon exercise of the Warrants shall be duly and validly
issued and fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof, and that upon issuance such shares
shall be listed on each national securities exchange, if any, on which the other
shares of outstanding Common Stock of the Company are then listed.
5. Exchange, Transfer, Assignment, Loss or Mutilation of
Warrant Certificate. This Warrant Certificate is exchangeable, without expense,
at the option of the Warrant Holder, upon presentation and surrender hereof to
the Company or at the office of its stock transfer agent, if any, for other
Warrants of different denominations entitling the holder thereof to purchase in
the aggregate the same number of shares of Common Stock purchasable hereunder.
This Warrant Certificate may be transferred or assigned by the Warrant Holder
upon surrender of this Warrant Certificate to the Company at its principal
office or at the office of its transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax. Upon
such surrender the Company shall, without charge, execute and deliver a new
Warrant Certificate in the name of the assignee named in such instrument of
assignment and this Warrant Certificate shall be promptly canceled. This Warrant
may be divided or combined with other warrants which carry the same rights upon
presentation hereof at the principal office of the Company or at the office of
its stock transfer agent, if any, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Warrant Holder hereof. The term "Warrant Certificate" as used herein includes
any Warrant Certificates into which this Warrant Certificate may be divided or
exchanged. Upon receipt by the Company of reasonable evidence of the ownership
of and the loss, theft, destruction or mutilation of this Warrant Certificate
and, in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company, or, in the case of mutilation, upon surrender and
cancellation of the mutilated Warrant Certificate, the Company shall execute and
deliver in lieu thereof a new Warrant Certificate of like tenor and date
representing an equal number of Warrants.
6. Rights of the Holder. The Warrant Holder shall not, by
virtue hereof, be entitled to any voting or other rights of a stockholder in the
Company, either at law or equity, and the rights of the Warrant Holder are
limited to those expressed in the Warrant Certificate and are not enforceable
against the Company except to the extent set forth herein.
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<PAGE>
7. Adjustment of Exercise Price and Number of Shares
Deliverable. The Exercise Price and the number of shares of Common Stock
purchasable pursuant to each Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Section 7:
(a) In case the Company shall (i) declare a
dividend or make a distribution on its outstanding
shares of Common Stock in shares of Common Stock,
(ii) subdivide or reclassify its outstanding shares
of Common Stock into a greater number of shares, or
(iii) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record
date for such dividend or distribution or of the
effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall
equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of
which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and
the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) Whenever the Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to
Subsection (a) above, the number of Shares
purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number
of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the
Exercise Price, as adjusted.
(c) Notwithstanding the provisions of
Subsections (a) and (b) of this Section 7, no
adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or
decrease of at least five cents ($0.05) in such
price; provided, however, that any adjustments which
by reason of this Subsection (c) are not required to
be made shall be carried forward and taken into
account in any subsequent adjustment required to be
made hereunder. All calculations under this Section 7
shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
Anything in this Section 7 to the contrary
notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the
Exercise Price, in addition to those required by this
Section 7, as it shall determine, in its sole
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discretion, to be advisable in order that any
dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination
of Common Stock hereafter made by the Company, shall
not result in any Federal income tax liability to the
holders of Common Stock or securities convertible
into Common Stock (including Warrants).
(d) Whenever the Exercise Price is adjusted
as herein provided, the Company shall promptly cause
a notice setting forth the adjusted Exercise Price
and adjusted number of Shares issuable upon exercise
of each Warrant, and if requested by the Warrant
Holder, information describing the transactions
giving rise to such adjustments, to be mailed to the
Warrant Holders at their last addresses appearing in
the books and records of the Company, and shall cause
a certified copy thereof to be mailed to its transfer
agent, if any. The Company may retain a firm of
independent certified public accountants selected by
the Board of Directors (who may be the regular
accountants employed by the Company) to make any
computation required by this Section 7, and a
certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
(e) In the event that at any time, as a
result of an adjustment made pursuant to Subsection
(a) above, the Warrant Holder of this Warrant
thereafter shall become entitled to receive any
shares of the Company, other than Common Stock,
thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to
the provisions with respect to the Common Stock
contained in Subsections (a) to (c), inclusive above.
(f) Irrespective of any adjustments in the
Exercise Price or the number or kind of shares
purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to
express the same price and number and kind of shares
as are stated in the similar Warrants initially
issuable pursuant to this Warrant Certificate.
8. Fractional Shares. No certificate for fractional Shares
shall be issued upon the exercise of the Warrants. With respect to any fraction
of a Share called for upon any exercise hereof, the Company shall pay to the
Warrant Holder an
5
<PAGE>
amount in cash equal to such fraction calculated to the nearest cent multiplied
by the current market value of a Share, determined as follows:
(a) If the Common Stock is listed on a
national securities exchange or admitted to unlisted
trading privileges on such exchange or listed for
trading on the NASDAQ system, the current market
value of a Share shall be the last reported sale
price per Share of the Common Stock on such exchange
or system on the last business day prior to the date
of exercise of this Warrant or if no such sale is
made on such day, the average of the closing bid and
asked prices per Share for such day on such exchange
or system; or
(b) If the Common Stock is not so listed or
admitted to unlisted trading privileges, the current
market value of a Share shall be the mean of the last
reported bid and asked prices per Share reported by
the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of
this Warrant; or
(c) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and
asked prices are not so reported, the current market
value of a Share shall be an amount, not less than
book value thereof, as at the end of the most recent
fiscal year of the Company ending prior to the date
of the exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board
of Directors of the Company.
9. Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section 7 hereof, the Company shall
forthwith file in the custody of its Secretary or Assistant Secretary at its
principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price as herein provided setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Common Stock, if any, and such other facts
as shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section 2, and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Warrant Holder or any such holder.
10. Notices to Warrant Holders. So long as this Warrant shall
be outstanding, (i) if the Company shall pay any dividend or make any
distribution upon
6
<PAGE>
the Common Stock; or (ii) if the Company shall offer to the holders of Common
Stock for subscription or purchase by them any shares of any class or any other
rights; or (iii) if any capital reorganization of the Company, reclassification
of the capital stock of the Company, consolidation or merger of the Company with
or into another corporation, sale, lease or transfer of all or substantially all
of the property and assets of the Company to another corporation, or voluntary
or involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Warrant Holder, at least fifteen days prior to the date
specified in (x) or (y) below, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which (x) a record is
to be taken for the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any,
which is to be fixed, as of which the holders of Common Stock or other
securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
11. Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Warrant Holder shall have the right thereafter by exercising this Warrant at any
time prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section 11 shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the
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<PAGE>
Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Subsection (a) of Section 7 hereof.
12. Voluntary Adjustment by the Company. The Company may, at
its option, at any time prior to the Expiration Date, reduce the then current
Exercise Price to any amount deemed appropriate by the Board of Directors of the
Company and/or extend the date of the expiration of the Warrants.
13. Registration Under the Securities Act of 1933.
The Warrant Holder shall be entitled to the following
registration rights;
(a) Demand Rights. The Company covenants and
agrees that, during the two (2) year period
commencing on the exercise of this warrant, within
forty-five (45) days after the receipt of a written
request from the Warrant holder, or a majority of
holders if there is more than one holder, that he
desires and intends to transfer all or a portion of
his Shares under such circumstances that a public
offering, within the meaning of the Securities Act of
1933, as amended (the "Act"), will be involved, the
Company shall file with the Securities and Exchange
Commission (the "Commission") with all deliberate
speed a Registration Statement on Form S-3 (or any
shortform successor thereto), or if not eligible for
the use of Form S-3, any other Form, covering all
such securities and use its best efforts to cause
such Registration Statement with respect to such
securities to become effective under the Act. The
Company shall pay all costs of preparing and filing
such Registration Statement. The Company shall not be
required to comply with more than one request for
registration pursuant to this Section 13(a). The
Company need not comply with any request for
registration pursuant to this Section 13(a) if at
such time the Company would be required to use, in
connection with the filing of the Registration
Statement, pursuant to the requirements of the Act
and the rules and regulations of the Commission
thereunder, audited financial statements as of a date
other than the end of a fiscal year of the Company.
If the Company includes Shares to be sold by it in
any registration requested pursuant to this Section
13(a), such registration shall be deemed to have been
a registration under Section 13 (b).
8
<PAGE>
(b) Piggyback Rights. If at any time after the date
hereof, the Company shall propose to file a
registration statement ("Registration Statement")
under the Act (other than a reorganization or an
offering pursuant to a stock option or other employee
benefit plan or an offering on Form S-4 or S-5 (or
any successor forms thereto) relating to an
acquisition of another corporation), then, during the
two(2) year period commencing on the date hereof, and
subject to Subsection (3) of this Section 13(b), the
Company shall in each case deliver written notice
thereof to the Holder of this Warrant or of the
Warrant Shares and/or any then holder of Warrants or
Warrant Shares (such persons being collectively
referred to herein as "holders") at least 15 days
before the anticipated filing date. Such notice shall
offer to each holder the option to include Warrant
Shares in such Registration Statement, subject to the
conditions set forth in this Section 13(b); provided,
however, that the Company shall be under no
obligation to register Warrant Shares of any holder
if in the opinion of counsel to such holder no
registration under the Act is required with respect
to a public disposition of such Warrant Shares.
(1)Should a holder desire to have
any Warrant Shares registered under this Section
13(b), such holder shall so advise in writing no
later than 15 days after the date of receipt by the
holder of the Company's written notice, setting forth
the number of such Warrant Shares for which
registration is requested. Subject to Subsection (3)
of this Section 13(b), the Company shall thereupon
include in such Registration Statement such Warrant
Shares.
(2)Neither the giving of notice by
the Company nor any request by any holders to
register Warrant Shares pursuant to this Section
13(b) shall in any way obligate the Company to file
any such Registration Statement, and notwithstanding
the filing of such Registration Statement, the
Company may, at any time prior to the effective date
thereof, determine not to offer the securities to
which such registration relates and/or withdraw the
Registration Statement from the Commission, without
liability of the Company to any holders.
(3)If the securities covered by such
Registration Statement are to be sold by underwriters
in an underwritten public offering (including,
without limitation, a so-called "best efforts"
9
<PAGE>
undertaking by an underwriter), the Company shall use
its best efforts to cause the managing underwriter,
if any, of a proposed offering to grant a request by
a holder that Warrant Shares be included in the
proposed offering on terms and conditions which are
customary industry practice for such underwriter
under the existing circumstance, provided that any
Warrant Shares to be sold by holders pursuant to this
Section 13(b), shall be sold or distributed in a
manner identical to the manner in which the
securities which are the subject of such Registration
Statement are to be sold or distributed.
Notwithstanding the foregoing, if any such managing
underwriter shall advise the Company in writing that,
in good faith and in its reasonable opinion, the
distribution of Warrant Shares requested to be
included in the Registration Statement concurrently
with the securities being registered by the Company
would adversely affect the distribution of such
securities by such underwriters, the Company shall
give notice of such determination to the holders
requesting registration, and the number of Warrant
Shares proposed to be offered by the holders and any
other persons other than the Company shall be reduced
pro rata (as specified by the Company in such notice)
to aggregate a quantity of Warrant Shares (so
specified) which said managing underwriter shall not
consider excessive.
(4)The rights of holders to have
their Warrant Shares be included in any Registration
Statement pursuant to the provisions of Section 13(b)
of this Warrant Certificate, shall be subject to the
condition that the holders requesting registration
shall furnish to the Company in writing such
information and documents as may be reasonably
required to properly prepare and file such
Registration Statement in accordance with applicable
provisions of the Act.
(5)The Company shall bear the entire
cost and expense of any registration of securities
initiated by it notwithstanding that Warrant Shares
may be included in any such registration. Any holder
whose Warrant Shares are included in any such
registration statement pursuant to this Section 13(b)
shall, however, bear the fees of his own counsel and
any registration fees, transfer taxes or underwriting
discounts or commissions applicable to the Warrant
Shares sold by him pursuant thereto.
10
<PAGE>
(c) Indemnification. (i) The Company shall
indemnify and hold harmless each such holder and each
underwriter, within the meaning of the Act, who may
purchase from or sell for any such holder any Warrant
Shares (collectively, "Indemnified Persons") from and
against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in the
Registration Statement or any post-effective
amendment thereto or any registration statement under
the Act or any prospectus included therein required
to be filed or furnished by reason of this Section 13
or caused by any omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such
untrue statement or alleged untrue statement or
omission or alleged omission based upon information
furnished or required to be furnished in writing to
the Company by such holder or underwriter expressly
for use therein, which indemnification shall include
each person, if any, who controls any such
underwriter within the meaning of such Act; provided,
however, that the Company shall not be obliged so to
indemnify any such holder, underwriter or controlling
person unless such holder, underwriter or controlling
person shall at the same time indemnify the Company,
its directors, each officer signing the related
registration statement and each person, if any, who
controls the Company within the meaning of such Act,
from and against any and all losses, claims, damages
and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained
in any registration statement or any prospectus
required to be filed or furnished by reason of this
Section 13 or caused by any omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, insofar as such losses,
claims, damages or liabilities are caused by any
untrue statement or alleged untrue statement or
omission or alleged omission based upon information
furnished or required to be furnished in writing to
the Company by any such holder, underwriter or
controlling person expressly for use therein.
(ii) The holders registering Warrant
Shares pursuant to this Warrant Certificate shall
indemnify and hold harmless the Company, its
directors and officers, and each person, if any who
controls the Company within the meaning of either
Section 15 of
11
<PAGE>
the Act or Section 20 of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), to the same
extent as the indemnity from the Company to each
Indemnified Person set forth in paragraph (i) of this
Subsection (c), but only with respect to information
relating to such Indemnified Person furnished in
writing by such Indemnified Person to the Company
expressly for use in the Registration Statement or
related Prospectus (preliminary or final), or any
amendment or supplement thereto. In case any action
or proceeding shall be brought against the Company or
its directors or officers or any such controlling
person, in respect of which indemnity may be sought
against a holder, each shall have the rights and
duties given to the Company and the Company or its
directors or its officers or its controlling persons
each shall have the rights and duties given to a
holder by Subsection (c).
(iii) In order to provide for just
and equitable contribution in circumstances in which
the indemnification provided for in this Section
13(c) is due in accordance with its terms but is, for
any reason, held by a court to be unavailable, the
Company and the holders shall contribute to the
aggregate losses, claims, damages and liabilities
(including reasonable legal or other expenses
incurred in connection with investigation or
defending of same) to which the Company and the
holders may be subject based on their comparative
fault; provided, however, that no holder shall have
any liability hereunder in excess of the gross
proceeds realized by such holder from the sale by it
of the Warrant Shares to which the third party claim
relates; provided, further, however, that no person
who has committed an intentional misrepresentation
shall be entitled to contribution from any person who
has not committed an intentional misrepresentation.
For the purposes of this paragraph (iii) any person
controlling, controlled by or under common control
with the holders, or any partner, director, officer,
employee, representative or agent of any thereof,
shall have the same rights to contribution as the
holders, and each person who controls the Company
within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, each officer and each
director of the Company shall have the same rights to
contribution as the Company. Any party entitled to
contribution shall, promptly after receipt of notice
of commencement of any action, suit or proceeding
against such party in respect of which a claim for
contribution may be made against the other party
under this paragraph (iii), notify such party from
whom contribution may be
12
<PAGE>
sought, but the omission to so notify such party
shall not relieve the party from which contribution
may be sought from any obligation it or they may have
hereunder or otherwise.
The Company's agreements with respect to Warrant Shares in
this Section 13 shall continue in effect regardless of the exercise and
surrender of this Warrant.
14. Governing Law. This Warrant Certificate shall be governed
by, enforced and construed in accordance with the laws of the State of New York
without regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed herein.
DEL GLOBAL TECHNOLOGIES CORP.
By:/S/Leonard A. Trugman
----------------------
Name: Leonard A. Trugman
Title: Chairman, CEO and President
[SEAL]
Dated: May 1, 1998
Attest:
/S/Michael Taber
- ---------------------------
Michael Taber, Secretary
13
<PAGE>
EXERCISE FORM
Dated: ________________, 199_
The undersigned hereby irrevocably elects to exercise the
right to purchase __________ shares of Common Stock covered by this Warrant
according to the conditions hereof and herewith makes payment of the Exercise
Price for such shares in full.
--------------------------------
Signature [Print Name]
--------------------------------
(STREET ADDRESS)
--------------------------------
(CITY) (STATE) (ZIP CODE)
14
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________________________________
hereby sells, assigns and transfers unto
Name ________________________________________________________________
(Please typewrite or print in bold letters)
Address_______________________________________________________________ the right
to purchase Common Stock represented by this Warrant to the extent of __________
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint _____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, 199_
Signature __________________________
[PRINT NAME]
15
AMENDMENT NO. 3 TO AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
Amendment No. 3 dated as of April 29, 1998 to the Amended and
Restated Executive Employment Agreement dated as of August 1, 1992, as amended
(the "Amended Agreement") by and between Del Global Technologies Corp. (formerly
known as Del Electronics Corp.) (the "Corporation") and Leonard A. Trugman
("Executive"). Capitalized terms utilized herein and not defined herein shall
have the respective meanings ascribed to them in the Amended Agreement.
WHEREAS, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto have agreed to
extend the term of the Amended Agreement until July 31, 2005 and to amend
certain other terms and provisions of the Amended Agreement.
NOW THEREFORE, the parties hereto mutually agree as follows:
Section 1. Section 3 of the Amended Agreement is hereby
amended by deleting therefrom the date "July 31, 2000" and substituting therefor
the date "July 31, 2005".
Section 2. Section 4.1 of the Amended Agreement is hereby
amended by deleting therefrom the phrase "through and until the fiscal year
8/1/99 through 7/31/00," in clause (iv) thereof and substituting therefor the
phrase "through and until the fiscal year 8/1/04 through 7/31/05,".
Section 3. Section 8.1 of the Amended Agreement is hereby
amended by deleting the second sentence thereof and inserting in lieu thereof
the following:
"As used herein, the term "Consulting Rate" shall mean the
following: (i) for the fiscal year 8/1/05 through 7/31/06, the
Consulting Rate shall be a rate equal to the Base Salary in
effect for the preceding 8/1/04 through 7/31/05 fiscal year
(the "Last Base Salary"), and (ii) for each fiscal year
thereafter, the Consulting Rate shall be determined by
multiplying the Last Base Salary by the Applicable Percentage
set forth in the schedule below as follows:
Fiscal Year Applicable Percentage
---------------- ---------------------
8/1/06 - 7/31/07 92%
8/1/07 - 7/31/08 83%
8/1/08 - 7/31/09 72%
8/1/09 - 7/31/10 61%"
1
<PAGE>
Section 4. In all other respects the Amended Agreement remains
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 3 to the Amended Agreement as of the date set forth above.
DEL GLOBAL TECHNOLOGIES CORP.
By:/S/Michael Taber
----------------
Michael Taber, Vice President-Finance
and Chief Accounting Officer
/S/Leonard A. Trugman
---------------------
Leonard A. Trugman
2
THIRD AMENDMENT
to
AMENDED AND RESTATED CREDIT AGREEMENT
THIRD AMENDMENT (the "Amendment"), dated as of July 31, 1998 (the
"Third Amendment Date") to Amended and Restated Credit Agreement, dated as of
March 5, 1996, 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 and
that certain amendment dated as of August 1, 1997.
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 and that certain amendment dated as of August 1,
1997, (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, the Debtors and the Bank have agreed, among other things, to
amend the formula pursuant to which Del may repurchase common stock of Del
without the consent of the Bank;
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 Third Amendment Date by the addition of the following
definitions in their proper alphabetical
<PAGE>
positions:
Third Amendment shall mean the amendment to the Agreement
dated as of July 31, 1998.
Third Amendment Date shall mean July 31, 1998.
2. Section 6.7. Section 6.7 of the Agreement is hereby deleted as of
the Third Amendment Date and the following substituted therefor:
6.7 Investments. 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) purchase or acquire during any fiscal
year of Del, shares of the common stock of Del with an aggregate fair
market value (valued at the time of the acquisition thereof) of not
more than 80% of its Net Income for the such fiscal year, and
thereafter own all such shares so purchased or acquired, provided,
however, that no default under Section 6.4, Section 6.8, Section 6.9 or
Section 6.11 of this Agreement shall have occurred and be continuing at
the time of such repurchase and after giving effect to such repurchase
of shares, no default shall exist under Section 6.9 hereof; (v) own,
purchase, or acquire stock, obligations and/or securities of any other
person provided that such stock, obligations and/or securities are held
by the Debtors in the deferred compensation account(s) which are
maintained by Del for the benefit of Leonard A. Trugman; and (vi) make
Acquisitions with the proceeds of Additional Term Loans provided,
however, that the Bank shall have given its prior written approval of
such Acquisitions to the extent that they exceed, in the aggregate,
$3,000,000 calculated from the First Amendment Date.
B. Condition of Effectiveness
The obligation of the Bank to enter into this Amendment to the Loan
Agreement and to make or provide any financial accommodation to the Debtors
pursuant to the terms of this Amendment is subject to the condition precedent
that the Bank shall have received each of the following documents, in form and
substance satisfactory to the Bank and its counsel, and each of the following
requirements shall have been fulfilled:
1. This Amendment. The Debtors and the Bank shall each have
executed and delivered this Amendment.
2. 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 Third Amendment Date, in substantially the form of
Exhibit 1 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 Second Amendment Date, a current good
standing certificate, and an incumbency and signature certificate.
3. Officer's Certificate. The following statements shall be
true and the Bank shall have received a certificate, dated the Third Amendment
Date, in substantially the form of Exhibit 2 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 Third
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.
4. Opinion Letter. The Bank shall have received an opinion of
counsel to the Debtors, substantially in the form of Exhibit 3 to this
Amendment.
5. Costs and Expenses. The Debtors shall have paid, or
reimbursed the Bank, for all costs, expenses and charges (including, without
limitation, all expenses and reasonable fees of legal counsel for the Bank)
incurred in connection with the negotiation, preparation, reproduction,
execution and delivery of this Amendment and any other instruments and documents
to be delivered hereunder.
C. Reference to and Effect on the Loan Documents
1. Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like
import, and each reference in the other Credit Documents to the Agreement, shall
mean and be a reference to the Agreement as amended hereby.
2. Except as specifically amended above, the Agreement and the other
Credit Documents shall remain in full force and effect and are hereby ratified
and confirmed.
3. The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Bank under any of the Credit Documents, nor constitute a
waiver of any provision of any of the Credit Documents.
D. Miscellaneous
1. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
2. Headings. Section headings in this Amendment are included herein for
convenience of reference only and do not constitute a part of this Amendment for
any other purpose.
3. Exhibits. Exhibits 1-3 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/ Leonard A. Trugman
----------------------
Leonard A. Trugman
Chairman of the Board, Chief Executive
/S/ Michael Taber Officer and President
- --------------------
Michael Taber, Secretary
<PAGE>
(Corporate Seal) RFI CORPORATION
ATTEST: By:/S/ Leonard A. Trugman
----------------------
Leonard A. Trugman
Chairman of the Board, Chief Executive
/S/ Michael Taber Officer and President
- --------------------
Michael Taber, Secretary
(Corporate Seal) DYNARAD CORP.
ATTEST: By:/S/ Leonard A. Trugman
----------------------
Leonard A. Trugman
Chairman of the Board, Chief Executive
/S/ Michael Taber Officer and President
- --------------------
Michael Taber, Secretary
(Corporate Seal) BERTAN HIGH VOLTAGE CORP.
ATTEST: By:/S/ Leonard A. Trugman
----------------------
Leonard A. Trugman
Chairman of the Board, Chief Executive
/S/ Michael Taber Officer and President
- --------------------
Michael Taber, Secretary
(Corporate Seal)
DEL MEDICAL SYSTEMS CORP.
ATTEST: By:/S/ Leonard A. Trugman
----------------------
Leonard A. Trugman
Chairman of the Board, Chief Executive
/S/ Michael Taber Officer and President
- --------------------
Michael Taber, Secretary
(Corporate Seal)
GENDEX-DEL MEDICAL IMAGING CORP.
ATTEST: By:/S/ Leonard A. Trugman
----------------------
Leonard A. Trugman
Chairman of the Board, Chief Executive
/S/ Michael Taber Officer and 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 Westchester )
On the 23rd day of October in the year 1998, before me, the
undersigned, a Notary Public in and for the State of New York, personally
appeared Leonard A. Trugman, personally known to me or proved to me on the basis
of satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
capacity, and that by his signature on the instrument, the individual, or the
person upon behalf of which the individual acted, executed the instrument.
Joanne Rizzuto /S/Joanne Rizzuto
Notary Public, State of New York -------------------------------
No. 01RI5078399 NOTARY PUBLIC
Qualified in Westchester County
Commission Expires May 27, 1999
State of New York )
) ss.:
County of Westchester )
On the 23rd day of October in the year 1998, before me, the
undersigned, a Notary Public in and for the State of New York, personally
appeared Thomas R. Himmelright, personally known to me or proved to me on the
basis of satisfactory evidence to be the individual whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his
capacity, and that by his signature on the instrument, the individual, or the
person upon behalf of which the individual acted, executed the instrument.
Joanne Rizzuto /S/Joanne Rizzuto
Notary Public, State of New York -------------------------------
No. 01RI5078399 NOTARY PUBLIC
Qualified in Westchester County
Commission Expires May 27, 1999 --------------------------------
<PAGE>
Exhibit 1 to Amendment
SECRETARY'S CERTIFICATE
DEL GLOBAL TECHNOLOGIES CORP.
The undersigned, Secretary of Del Global Technologies Corp., a New York
corporation (the "Corporation"), delivers this certificate in connection with
the Third Amendment to Amended and Restated Credit Agreement dated as of July
31, 1998 by and among The Chase Manhattan Bank (the "Bank") and the Corporation,
RFI Corporation, Dynarad Corp., Bertan High Voltage Corp., Del Medical Systems
Corp., and Gendex-Del Medical Imaging Corp. (the "Amendment"), and hereby
certifies as follows:
1. The person listed below holds the office indicated and has been
authorized by the Corporation to execute the Amendment on behalf of the
Corporation and the documents to be delivered pursuant to the Amendment. The
signature set forth opposite his name is his specimen signature and the Bank is
entitled to rely upon such authorization and specimen signature until further
notified by the Corporation:
Name Title Signature
---- ----- ---------
Leonard A. Trugman President /S/Leonard A. Trugman
---------------------
2. The copy of each resolution necessary for the Corporation to enter
into the transactions contemplated by the Amendment, attached hereto as Exhibit
A, is true, complete and correct and has not been amended since the date of its
adoption;
3. Since the Second Amendment Date, there have been no amendments to
the certificate of incorporation of the Corporation;
4. Since the Second Amendment Date, there have been no amendments to
the by-laws of the Corporation; and
5. Attached hereto as Exhibit B is the Certificate of Good Standing of
the Corporation, dated no earlier than thirty (30) days prior to the date
hereof, from the State of New York certifying that the Corporation is in good
standing.
IN WITNESS WHEREOF, I hereby set my hand hereto this day of October
1998.
/S/Michael Taber
------------------------------
Michael Taber, Secretary
I, Leonard A. Trugman, President of DEL GLOBAL TECHNOLOGIES CORP., a
New York corporation, do hereby certify that:
The person listed below holds the office indicated and that the
signature set forth opposite his name is his specimen signature:
Name Title Signature
---- ----- ---------
Michael Taber Secretary /S/Michael Taber
----------------
Dated October 23, 1998
------------------- /S/Leonard A. Trugman
---------------------
Leonard A. Trugman
The foregoing to serve as format for certificates for each of
the other Debtors
<PAGE>
Exhibit A
to
Secretary's Certificate
Joint Action by Unanimous Written Consent
of the
Board of Directors
of each of
DEL GLOBAL TECHNOLOGIES CORP., RFI CORPORATION, DYNARAD CORP.,
BERTAN HIGH VOLTAGE CORP., DEL MEDICAL SYSTEMS CORP.,
and GENDEX-DEL MEDICAL IMAGING CORP.
The undersigned, being all of the members of the Board of Directors of
(i) Del Global Technologies Corp., a New York corporation ("Del"), (ii) RFI
Corporation, a Delaware corporation ("RFI"), (iii) Dynarad Corp., a New York
corporation ("Dynarad"), (iv) Bertan High Voltage Corp., a New York corporation
("Bertan"), (v) Del Medical Systems Corp., a New York corporation ("Del
Medical"), and Gendex-Del Medical Imaging Corp., a Delaware corporation
("Gendex", and collectively with Del, RFI, Dynarad, Bertan, and Del Medical, the
"Corporations") pursuant to Section 708 of the Business Corporation Law of the
State of New York, and pursuant to Section 228 of the Delaware General
Corporation Law of the State of Delaware with respect to RFI and Gendex, do
hereby take the following action and adopt the following Resolutions and direct
that this Consent be filed with the minutes of each Corporation:
RESOLVED, that each of the Corporations is hereby authorized
to amend the Amended and Restated Credit Agreement, dated as of March 5,
1996 and amended as of August 2, 1996 and as of August 1, 1997 (the "Credit
Agreement"), by and among the Corporations and The Chase Manhattan Bank
("Chase") in order to modify the formula pursuant to which Del may
repurchase common stock of Del without the consent of Chase; and further
RESOLVED, that each of the Corporations is hereby authorized
to enter into, and the Chief Executive Officer, President or Executive Vice
President of each of the Corporations is hereby authorized and directed to
execute and deliver on behalf of each of the Corporations, the Third
Amendment to the Credit Agreement (the "Amendment") with Chase, in the form
to be reviewed by the Chief Executive Officer, President or the Executive
Vice President of each Corporation in consultation with counsel and in such
final form containing such amendments, additions, deletions, modifications
and other changes as he, in his sole discretion, shall approve (such
approval to be conclusively evidenced by the execution and delivery thereof
by the Chief Executive Officer, President or Executive Vice President); and
further
RESOLVED, that the Chief Executive Officer, President, or
Executive Vice President and Secretary of each of the Corporations are each
hereby authorized and directed to execute and deliver on behalf of each of
the Corporations such other agreements, documents and instruments in such
form as shall be approved by the Chairman of the Board, Chief Executive
Officer, President or Executive Vice President, in his sole discretion
(such approval to be conclusively evidenced by the execution and delivery
thereof by such Chairman of the Board, Chief Executive Officer, President
or Executive Vice President), and to perform all acts and to take all other
action required or permitted to be taken by each of the Corporations
pursuant to or in furtherance of the Amendment, and the other instruments
referred to therein.
IN WITNESS WHEREOF, the undersigned have executed this Consent this
23rd day of October 1998.
For DEL GLOBAL TECHNOLOGIES CORP.:
/S/Leonard A. Trugman
--------------------------------------
Leonard A. Trugman
/S/Natan V. Bertman
--------------------------------------
Natan V. Bertman
/S/David Michael
--------------------------------------
David Michael
/S/Seymour Rubin
--------------------------------------
Seymour Rubin
/S/James M. Tiernan
--------------------------------------
James M. Tiernan
For RFI CORPORATION:
/S/Leonard A. Trugman
--------------------------------------
Leonard A. Trugman
/S/Seymour Rubin
--------------------------------------
Seymour Rubin
/S/David Engel
--------------------------------------
David Engel
For DYNARAD CORP.:
/S/Leonard A. Trugman
--------------------------------------
Leonard A. Trugman
/S/David Engel
--------------------------------------
David Engel
/S/Seymour Rubin
--------------------------------------
Seymour Rubin
For BERTAN HIGH VOLTAGE CORP.:
/S/Leonard A. Trugman
--------------------------------------
Leonard A. Trugman
/S/David Engel
--------------------------------------
David Engel
/S/Seymour Rubin
--------------------------------------
Seymour Rubin
For DEL MEDICAL SYSTEMS CORP.:
/S/Leonard A. Trugman
--------------------------------------
Leonard A. Trugman
/S/David Engel
--------------------------------------
David Engel
/S/Seymour Rubin
--------------------------------------
Seymour Rubin
For GENDEX-DEL MEDICAL IMAGING CORP.:
/S/Leonard A. Trugman
--------------------------------------
Leonard A. Trugman
/S/David Engel
--------------------------------------
David Engel
/S/John Mankowich
--------------------------------------
John Mankowich
<PAGE>
Exhibit 2 to Amendment
OFFICER'S CERTIFICATE
This certificate is given in connection with the Third Amendment to
Amended and Restated Credit Agreement (the "Amendment") dated as of July 31,
1998 by and among Del Global Technologies Corp. (the "Company"), RFI Corporation
("RFI"), Dynarad Corp. ("Dynarad"), Bertan High Voltage Corp. ("Bertan"), Del
Medical Systems Corp. ("Del Medical"), Gendex-Del Medical Imaging Corp.
("Gendex" and together with the Company, RFI, Dynarad, Bertan High Voltage, and
Del Medical hereinafter referred to collectively as the "Debtors") and The Chase
Manhattan Bank (successor by merger to the Chase Manhattan Bank, N.A.) (the
"Bank"), amending the Amended and Restated Credit Agreement dated as of March 5,
1996 between the Debtors and the Bank and previously amended by that certain
amendment dated as of August 2, 1996 and that certain amendment dated as of
August 1, 1997 (as amended, the "Credit Agreement"; the terms defined in the
Credit Agreement are used herein as in the Credit Agreement unless otherwise
defined herein).
1. The representations and warranties contained in Section 3 of the Credit
Agreement and in each of the other Credit Documents are correct on and
as of the Third Amendment Date as though made on and as of such date;
and
2. No default or Event of Default has occurred and is continuing, or would
result from this execution and performance by the Company of the
Amendment or the Credit Agreement (as amended by the Amendment) or any
of the other Credit Documents; and
3. There has been no material adverse change in the business, operations,
assets or condition, financial or otherwise, of the Company since the
date of the most recent financial statements provided to the Bank.
/S/Leonard A. Trugman
--------------------------------------
Name: Leonard A. Trugman
Title: Chairman of the Board, Chief
Executive Officer and President
The foregoing to serve as format for certificates for each of
the other Debtors
<PAGE>
Exhibit 3 to Amendment
OPINION LETTER
(Letterhead of Tashlik, Kreutzer & Goldwyn P.C.)
Dated as of July 31, 1998
The Chase Manhattan Bank
106 Corporate Park Drive
White Plains, New York 10604
Re: Del Global Technologies Corp. ("Del"), RFI Corporation ("RFI"), Dynarad
Corp. ("Dynarad"), Bertan High Voltage Corp. ("Bertan high Voltage"), Del
Medical Systems Corp., ("Del Medical") and Gendex-Del Medical Imaging Corp.
("Gendex") and, collectively with Del, RFI, Dynarad, Bertan High Voltage and
Gendex, sometimes referred to as the "Borrowers") with The Chase Manhattan Bank
(the "Bank")
Gentlemen:
We have acted as counsel to the Borrowers and have been requested by the Bank to
render our opinion with respect to the authorization and execution of the Third
Amendment to Amended and Restated Credit Agreement, dated of even date herewith,
among each of the Borrowers and the Bank (the "Amendment");
Terms used herein and not otherwise defined herein shall have the meanings
ascribed to those terms in the Amended and Restated Credit Agreement, dated as
of March 5, 1996, by and among the Borrowers, as amended by the First Amendment
to Amended and Restated Credit Agreement dated as of August 2, 1996, by and
among the Borrowers and the Bank, the Second Amendment to Amended and Restated
Credit Agreement dated as of August 1, 1997, by and among the Borrowers and the
Bank, the Third Amendment to Amended and restated Credit Agreement dated as of
July 31, 1998, by and among the Borrowers and the Bank.
We advise you that we have examined and relied upon originals or copies
certified to our satisfaction of the Certificate of Incorporation and By-Laws of
each of the Borrowers; minutes of meetings of the Board of Directors of each of
the Borrowers; the Loan Documents; and such other corporate records, documents,
instruments and certificates of, and communications from, officers and
representatives of each of the Borrowers and certain public officials concerning
the incorporation and good standing of each of the Borrowers and such other
investigations and examinations as we have deemed necessary or appropriate as
the basis for the opinions hereinafter expressed. In making such examinations,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to original documents
of documents submitted to us as certified or photostatic copies. We have not,
except as specifically noted in this opinion, made any independent review or
investigation as to factual matters as a basis for the opinions hereinafter
expressed. Where we render an opinion "to the best of our knowledge" or
concerning an item "known to us" or our opinion otherwise refers to our
knowledge, it is based solely upon (i) an inquiry of attorneys within this firm
who perform legal services for the Borrowers, (ii) receipt of a certificate
executed by an officer of one or more of the Borrowers covering such matters,
and (iii) such other investigation, if any, that we specifically set forth
herein.
Based solely on the foregoing and subject to the accuracy of our assumptions and
the statements upon which we have relied and to the limited scope and extent of
our investigation, it is our opinion that:
1. Del is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York.
2. RFI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
3. Dynarad is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York.
4. Bertan High Voltage is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York.
5. Del Medical is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York.
6. Gendex is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York.
7. Each of the Loan Documents, as and to the extent modified by the Third
Amendment, constitutes a valid and binding obligation of Del, Dynarad,
Bertan High Voltage, Del Medical, Gendex and/or RFI, as the case may be,
each enforceable in accordance with its terms. There is no provision in
the Certificate of Incorporation or By-Laws of any of the Borrowers or,
to the best of our knowledge, in any agreement, court order or other
legal arrangement to which any of the Borrowers is a party, which would
impair the ability of any Borrower to fulfill its obligations under the
Loan Documents or which would affect the validity or enforceability of
such documents in accordance with their terms.
8. To the best of our knowledge, there are no judicial or administrative
appeals, actions or proceedings pending, nor threatened, which would, if
adversely decided, impair the ability of any Borrower to fulfill its
obligations under the Loan Documents.
9. The execution, delivery and performance of the Third Amendment have been
duly authorized by all requisite corporate action.
This opinion is subject to the effect of any and all bankruptcy, insolvency,
moratorium, fraudulent conveyance, reorganization or other laws relating to or
affecting the enforcement of creditors' rights generally and court decisions
with respect thereto. Furthermore, no opinion is expressed with respect to the
specific enforceability of any of the remedies, covenants or other provisions of
the Loan Documents and the application of equitable principles in any
proceeding, whether at law or in equity.
We are attorneys admitted to practice only in the State of New York and do no
purport to be experts on the laws of other jurisdictions other than Federal law
in effect on the date hereof and except to the extent that matters of Delaware
corporate law are involved in the opinions set forth above. With respect to any
matters concerning Delaware corporate law involved in the opinions set forth
above, we draw your attention to the fact that we are not admitted to the Bar in
the State of Delaware and are not experts in the law of such jurisdiction, and
that any such opinions concerning Delaware corporate law are based upon our
reasonable familiarity with the Delaware General Corporation Law as a result of
our prior involvement in transactions involving such laws.
We draw your attention to the fact that certain members of this firm, own,
directly or indirectly, shares of common stock and options to purchase shares of
common stock of Del.
This opinion is being delivered to the Bank solely for its use in connection
with the closing of the Loan Documents and may not be quoted, with or without
reference to our firm, or relied upon, or delivered to any person without our
prior written consent which may be withheld in our sole discretion. This opinion
is specifically limited to matters as of the date hereof and we undertake no
obligations to update it. We express no opinion on the possible effects of
changes in factual or legal matters occurring hereinafter including, without
limitation, the effects of the course of conduct or dealings hereinafter between
the Bank and the Borrowers and any and all assignees and participants.
Very truly yours,
/S/ Tashlik, Kreutzer & Goldwyn PC
TASHLIK, KREUTZER & GOLDWYN PC
Exhibit 11
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
FISCAL YEAR ENDED August 1, 1998
Per Share
Net Income Shares Amount
---------- ---------- ------
Basic Earnings Per Share:
Income available to common
shareholders $5,788,588 7,518,945 $ .77
---------- =======
Effect of Dilutive Securities:
Warrants 18,514
Options 668,662
---------- ---------
Diluted Earnings Per Share $5,788,588 8,206,121 $ .71
========== ========= =======
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, 333-09131, 333-37825 and 333-50759 on Form S-3, and in the
Registration Statements No. 033-65439 and 333-09133 on Form S-8 of Del Global
Technologies Corp. and subsidiaries, of our report dated October 16, 1998,
appearing in this Annual Report on Form 10-K of Del Global Technologies Corp.
and subsidiaries for the fiscal year ended August 1, 1998.
/S/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
November 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000027748
<NAME> DEL GLOBAL TECHNOLOGIES CORP.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-01-1998
<PERIOD-START> AUG-03-1997
<PERIOD-END> AUG-01-1998
<CASH> 3,401,697
<SECURITIES> 913,125
<RECEIVABLES> 14,548,268
<ALLOWANCES> 206,524
<INVENTORY> 29,195,262
<CURRENT-ASSETS> 52,517,348
<PP&E> 19,229,901
<DEPRECIATION> 6,490,392
<TOTAL-ASSETS> 72,356,627
<CURRENT-LIABILITIES> 10,770,022
<BONDS> 0
0
0
<COMMON> 798,898
<OTHER-SE> 58,656,906
<TOTAL-LIABILITY-AND-EQUITY> 72,356,627
<SALES> 62,304,878
<TOTAL-REVENUES> 62,304,878
<CGS> 36,908,317
<TOTAL-COSTS> 36,908,317
<OTHER-EXPENSES> 17,136,402
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (167,926)
<INCOME-PRETAX> 8,428,085
<INCOME-TAX> 2,639,497
<INCOME-CONTINUING> 5,788,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,788,588
<EPS-PRIMARY> .77
<EPS-DILUTED> .71
</TABLE>
