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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the fiscal year ended DECEMBER 31, 1999
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|_| Transition Report Pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from _____________ to _____________
Commission file number 0-12362
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BERGER HOLDINGS, LTD.
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2160077
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
805 PENNSYLVANIA BOULEVARD, FEASTERVILLE, PA 19053
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 215-355-1200
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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
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Common Stock, $.01 par value
Rights
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 periods 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 files pursuant to Item
405 of
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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. [ ]
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As of March 15, 2000, 5,489,736 shares of Common Stock of the registrant
were outstanding and the aggregate market value of the Common Stock (based upon
the average of high and low bid prices of the Common Stock on the National
Association of Securities Dealers Automatic Quotation System on March 15, 2000)
of the registrant, held by nonaffiliates was approximately $12,500,000.(1)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
Documents Incorporated By Reference: None
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(1) Such figure excludes the shares of Common Stock held by the registrant's
executive officers and directors. The information provided shall in no way
be construed as an admission that any person whose holdings are excluded
from the figure is an affiliate or that any person whose holdings are
included is not an affiliate and any such admission is hereby disclaimed.
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PART I
ITEM 1. BUSINESS
BACKGROUND
Berger Holdings, Ltd., a Pennsylvania corporation formed in 1979
(collectively with its subsidiaries, the "Company"), is a leading manufacturer
of roof drainage systems specializing in copper products and residential and
commercial snow guards. The Company had record revenues and income from
operations since its acquisition strategy began three years ago. The Company
continues to search for immediately accretive acquisition candidates and has
arranged certain acquisition financing described below. The Company has
successfully built its infrastructure in both facilities and human resources in
order to grow the business and support future acquisitions. The Company operates
three facilities with over 260,000 square feet used in manufacturing,
warehousing and distribution. The Company recently was able to restructure its
borrowing rates to 1/2 below the prime rate, including an $8,000,000 acquisition
fund. The Company recently commenced the use of an ERP computer system to not
only satisfy the Year 2000 issue, but also to continue to improve operating
efficiencies. The Company received Board approval in 1999 to begin a stock buy
back program up to 540,000 shares. As of December 31, 1999, the Company had
repurchased 124,400 shares.
On December 7, 1998, the Company acquired (the "Sheet Metal Acquisition")
certain assets of Sheet Metal Manufacturing Co., Inc. ("Sheet Metal"). On
January 2, 1998, the Company consummated the acquisition (the "Obdyke
Acquisition") of the Roof Drainage Division (the "Acquired Division") of
Benjamin Obdyke, Inc., its main competitor ("Obdyke"). On February 7, 1997, the
Company completed the Real-Tool Acquisition (as defined below). Sheet Metal was
the Company's second largest competitor, Obdyke was the Company's single largest
competitor, and Real-Tool provided the Company with a complete line of
commercial snow guards.
Prior to 1983, the Company was privately-owned and operated under the name
"Life Care Communities Corporation," developing life care communities on a fee
basis for non-profit entities. During 1983, the Company successfully completed a
public offering in which funds were raised for the principal purpose of
developing and constructing proprietary life care facilities.
In 1987, the management of the Company recommended, and on May 5, 1988 the
shareholders approved, the Company's withdrawal from the life care industry in
order to seek alternate investment opportunities. In 1989, the Company acquired
approximately 85% of the common stock of Berger Bros Company ("Berger") pursuant
to a plan of reorganization in exchange for shares of the Company's common
stock, $0.01 par value (the "Common Stock"), representing approximately 29% of
the outstanding Common Stock after the effective date of the 1989 Plan of
Reorganization. Subsequently, the Company acquired an additional 15% of the
common stock of Berger in exchange for shares of Common Stock representing
approximately 5% of the outstanding Common Stock.
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PRODUCT LINES
The Company is principally engaged in the manufacture and distribution of
metal roof drainage products ("RDP"). Since 1993, the Company has also engaged
in a program of internal development and product expansion. Internal development
has been characterized chiefly by the modernization and modification of
production facilities, machinery and equipment and the expansion of existing
product lines to emphasize copper-based RDP. External development has been
directed principally towards increasing the sales volume and market penetration
of the Company's products through both the Sheet Metal Acquisition and the
Obdyke Acquisition and an expanded product line, which now includes Real-Tool
Snow Guards for metal standing seam roofs.
The Company's RDP product line, consisting of gutters, downspouts,
soffits, fascias, snow guards, trim coil and associated accessories and
fittings, is manufactured by the Company at its three suburban Philadelphia
facilities. The Company sells RDP through its sales and telemarketing
representatives principally to wholesale distributors who sell directly to
roofing and general contractors for use in the repair and replacement of roof
drainage systems in existing buildings that are primarily residential.
The raw materials used in manufacturing RDP are aluminum, steel and
copper. Supplies of these materials, in either coil, sheet or bar form, are
procured by the Company from various domestic and foreign suppliers. Although
the Company believes that adequate available sources of supply exist at
customarily accepted market prices, trade restrictions, work stoppages or
adverse weather or political conditions may affect the prices and availability
of these materials. Rapid increases in prices of raw materials could adversely
affect the operations of the Company because the cost of raw materials
constitutes the largest single element of the Company's cost of sales. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the effects of recent increases in the prices of
raw materials.
The Company is largely dependent for its raw material requirements for its
RDP products on the following three suppliers: Commonwealth (aluminum); Revere
(copper); and Coilplus-Pennsylvania, Inc. (galvanized and painted steel). The
remaining raw materials are provided by a large number of small suppliers. All
raw materials procured by the Company, as well as finished products, are
scrutinized for quality control using industry standards and internal
guidelines.
ACQUISITIONS
On December 7, 1998, the Company completed the Sheet Metal Acquisition.
The acquisition of Sheet Metal, a manufacturer of roof drainage products, was
funded by an increase to the Company's bank credit facility. This acquisition
was accounted for as a purchase and the excess of the fair value of the assets
(goodwill) is being amortized on a straight-line basis over 25 years. The Sheet
Metal Acquisition added approximately $7,000,000 to the Company's revenue base
in 1999.
On January 2, 1998, the Company consummated the Obdyke Acquisition, funded
with
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the proceeds received through an issuance of 40,000 shares of the Company's
Series A convertible preferred stock, a note payable, 125,000 shares of Common
Stock which the Company had the obligation to redeem at the election of the
seller and the issuance of warrants to purchase shares of Common Stock. The
Obdyke Acquisition added approximately $14,000,000 to the Company's revenue base
in 1999, mostly in aluminum roof drainage products.
On February 7, 1997, the Company consummated the purchase (the "Real-Tool
Acquisition") of all of the outstanding shares of the common stock of Real-Tool,
Inc., a Virginia corporation ("Real-Tool"). As consideration, the Company paid
cash, issued shares of Common Stock, and issued a note payable. Concurrent with
the purchase, the Company entered into a royalty agreement with the sole
shareholder of Real-Tool, Inc., which expires in 2012. Under this agreement, the
Company is required to pay royalties of 6% of revenues, with a minimum of
$75,000 annually through 2002. Subsequent to 2002, the Company has the option to
increase the percentage of royalties paid to this individual and eliminate the
minimum payment requirement. The Real-Tool Acquisition added approximately
$1,000,000 to the Company's revenue base in 1999.
COMPETITION
The Company's business is highly competitive. In general, the building
products market is highly fragmented. The Company competes with numerous small
and large manufacturers and fabricators. Some of the Company's competitors have
substantially greater resources than the Company. The Company competes primarily
in the Northeast/Mid-Atlantic region. During the past three years, the Company
has implemented an advertising and marketing program to expand its geographic
range of operations to a more national level. Competition is primarily based
upon product quality, completeness of product lines, service and price.
GEOGRAPHIC MARKET
The Company's products are principally sold throughout the states in the
Northeast/Mid-Atlantic region. Approximately 85% of the Company's net sales in
1999 were made in the Northeast/Mid-Atlantic region.
MAJOR CUSTOMERS
During 1999, no individual customer accounted for more than 10% of the
Company's sales. The Company has no ongoing contracts for sales of its products,
but rather services customers on a per-order basis.
SEASONAL NATURE OF THE BUSINESS
The building products industry is seasonal, particularly in the
Northeast/Mid-Atlantic region of the United States where inclement weather
during the winter months usually reduces the level of building activity in both
the home-building and home improvement markets. Typically, the Company's sales
volume is lowest during the months of December, January and
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February.
INVENTORY PRACTICES
The Company's policy is to obtain, fabricate and/or manufacture inventory
in sufficient volume in order to provide a reasonable inventory level to support
estimated minimum and maximum levels based on customers historical demand.
Because of the nature of the RDP market, in which an order generally must be
filled within 48 to 72 hours of placement, the Company does not have any
substantial backlog.
The Company is subject to fluctuations in metal prices when procuring raw
material. Metal pricing is outside the Company's control. The Company believes
they can generally pass raw material increases onto their customers. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the effects of recent increases in the prices of
raw materials.
EMPLOYEES
As of December 31, 1999, the Company had 160 employees, including 17 in
sales and marketing; 124 in manufacturing and delivery and 19 in administration.
Approximately 107 of the Company's employees are represented by one of two labor
unions, The International Brotherhood of Teamsters, Chauffeurs, Warehousemen and
Helpers of America, Local 169 and the Teamsters Local Union 107. The Company's
contracts with both unions expire December 31, 2001. The Company believes that
its employee relations are good.
GOVERNMENT REGULATION
The Company is subject to numerous federal and state regulations relating
to, among other things, the operations of its manufacturing facilities, the
storage and disposal of environmentally sensitive materials, the control of
emission levels, employee safety and health, employee wages and general
environmental matters. The Company believes that these regulations are complied
with properly. There are no other outstanding notices from federal or state
regulatory bodies or agencies indicating a failure to comply with any of these
regulations.
ITEM 2. PROPERTIES
The Company owns a 120,000 square foot operating facility in Feasterville,
Pennsylvania. The corporate and sales offices occupy space at the same location.
Due to the need for more space in connection with the Obdyke and Sheet Metal
Acquisitions, the Company has entered into lease agreements for two additional
facilities. One is a 90,000 square foot manufacturing facility in Southampton,
PA, which is leased through 2002 with a five year renewal option and the second
is a 56,000 square foot warehousing facility in Huntingdon Valley, PA, which is
leased through 2003 with a two year renewal option.
The Company has a mortgage liability on the Feasterville facility in the
principal amount
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of approximately $2,824,000 at December 31, 1999. The mortgage is being repaid
in monthly installments of approximately $27,400 through March, 2008 with a
balloon payment of $1,431,391 due then.
ITEM 3. LEGAL PROCEEDINGS
As of the date hereof, there are no legal proceedings presently pending
against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market and is
included for quotation on the Nasdaq SmallCap Market operated by the Nasdaq
Stock Market, Inc. under the symbol "BGRH."
The following table sets forth certain information with respect to the
high and low bid prices of the Company's Common Stock during 1999 and 1998.
These quotations reflect inter-dealer prices, without retail mark-ups,
mark-downs or commissions and may not represent actual transactions.
HIGH LOW
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1999
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First Quarter $ 3.50 $ 2.25
Second Quarter 3.13 2.19
Third Quarter 3.25 2.50
Fourth Quarter 2.88 1.94
1998
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First Quarter $ 3.94 $ 3.00
Second Quarter 4.31 2.63
Third Quarter 3.50 2.25
Fourth Quarter 3.44 2.13
At December 31, 1999, there were approximately 2,100 holders of record of
shares of Common Stock.
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DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock to date,
and does not anticipate paying cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Net Sales $39,966,301 $35,608,309 $20,748,017 $19,745,890 $15,653,321
Cost of Sales 32,094,414 28,791,521 16,196,776 15,587,221 13,738,061
------------- -------------- -------------- ------------- -------------
Gross Profit 7,871,887 6,816,788 4,551,241 4,158,699 1,915,260
Selling, Administrative and General
Expenses 5,220,853 4,625,043 2,963,614 2,389,285 2,225,685
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Income (Loss) from Operations 2,651,034 2,191,745 1,587,627 1,769,384 (310,425)
Interest Expense (1,852,088) (1,284,761) (581,624) (619,178) (570,420)
Other Income 24,517 136,643 14,374 4,295 30,984
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Income (Loss) from Continuing
Operations before, Income Tax
(Benefit) and After Preferred
Stock
Dividend 823,463 1,043,627 1,020,377 1,154,501 (849,861)
Income Tax (Benefit) 441,666 (1) (647,201) (1,000,000) (500,000) --
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Income (Loss) before Preferred
Stock
Dividend 381,797 1,690,828 2,020,377 1,654,501 (849,861)
Preferred Stock Dividend -- 400,000 -- -- --
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Net Income (Loss) available to
Common Stock holders $381,797 $1,290,828 $2,020,377 $1,654,501 (849,861)
============= ============== ============== ============= =============
BASIC EARNINGS (LOSS)
PER COMMON SHARE:
Income (Loss) before Preferred
Stock Dividend $.07 $0.31 $0.40 $0.44 ($0.26)
Preferred Stock Dividend -- (0.07) -- -- --
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Net Income (Loss) $.07 $0.24 $0.40 $0.44 ($0.26)
============= ============== ============== ============= =============
TOTAL ASSETS $32,567,820 $34,587,204 $19,751,213 $12,292,861 $9,885,339
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LONG TERM DEBT, CAPITAL
LEASES AND REDEEMABLE
COMMON STOCK $16,888,606 (2) $15,060,307 $6,022,147 (3) $3,721,719 $1,676,713
------------- -------------- -------------- ------------- -------------
SHAREHOLDERS' EQUITY $11,445,370 $15,361,725 $12,493,271 $7,655,336 $4,635,369
============= ============== ============== ============= =============
</TABLE>
(1) The company will only pay approximately $54,000 in federal and state
income taxes.
(2) Long-Term Debt includes a $4,000,000 10.0% subordinated debenture
which was preferred stock in 1998.
(3) Long-Term Debt includes a $2,000,000 12.25% subordinated debenture used
for the Obdyke Acquisition and at December 31, 1997 was included in cash
and cash equivalents.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The Company's results of operations for the years ended December 31, 1999,
1998 and 1997 represent the consolidated operations of Berger Holdings, Ltd. and
its subsidiaries, Berger Financial and Berger Bros Co.
Net sales increased to $39,966,301 in 1999 from $35,608,309 in 1998 and
$20,748,017 in 1997. The Sheet Metal Acquisition was the major factor
contributing to the increase in sales from 1998 to 1999. The increase in 1998
over 1997 was mainly due to the Obdyke Acquisition.
The Company's gross profit, as a percentage of revenues, was 19.7% in
1999, 19.1% in 1998 and 21.9% in 1997. The changes in the Company's gross profit
percentages are related to changes in the sales product mix. In 1999, the gross
profit percentage increase over 1998 was due to an improved sales mix of higher
margin products. The increase would have been higher except for increases in raw
material costs during the fourth quarter of 1999 that were passed on to
customers in February, 2000. The Sheet Metal Acquisition increased the Company's
sales mix in copper products and snow guards.
Selling, administrative and general expenses, as a percentage of net
sales, increased to 13.1% in 1999 from 13.0% in 1998 and 14.3% in 1997. The 1999
increase is due to the Company continuing to build infrastructure to support
future acquisitions. The 1998 decrease from 1997 was due to economies of scale.
Income from operations was $2,651,034, or 6.6% of revenues, in 1999
compared to $2,191,745, or 6.2% of revenues, in 1998 and $1,587,627, or 7.7% of
revenues, in 1997. The increases in income for 1999 and 1998 are mainly due to
the acquisitions of Sheet Metal and Obdyke.
Interest expense increased to $1,852,088 in 1999 compared to $1,284,761 in
1998 and $581,624 in 1997. The increase in interest expense for 1999 was
primarily a result of the exchange of Series A Convertible Preferred Stock
issued in connection with the Obdyke Acquisition to debt effective as of January
1, 1999, which resulted in $400,000 of additional interest expense. The
remaining $167,327 increase in interest expense in 1999 was a result of the debt
issued in the Sheet Metal Acquisition. The increase in interest expense in 1998
was primarily a result of the debt incurred in connection with the Obdyke
Acquisition.
Income from continuing operations was $823,463, or 2.1% of revenues, in
1999 compared to $1,043,627, or 2.9% of revenues ($643,627, or 1.8% of revenues,
if 1998 preferred stock dividends are treated as interest expense), in 1998 and
$1,020,377, or 4.9% of revenues, in 1997. The decrease in income from continuing
operations in 1999 was a result of reporting the interest on the debentures
issued in exchange for Series A Convertible Preferred Stock of $400,000 as
interest expense in 1999, whereas that amount was reported as a preferred stock
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dividend in 1998.
The net income was $381,797, or 1.0% of revenues, in 1999 as compared to
$1,290,828, or 3.6% of revenues, in 1998 and $2,020,377, or 9.7% of revenues, in
1997. The decrease in net income in 1999 was due to the reporting of tax
benefits in 1998 of $647,101 and 1997 of $1,000,000. In 1999 the Company
reported income taxes of $441,666, but will only pay approximately $54,000 in
federal and state income taxes.
In 1998 and 1997, the Company reduced the valuation allowance applied
against deferred tax benefits associated with their net operating loss
carryforward. The reduction in the valuation allowance was based on several
factors including: recent acquisitions, past earnings history and trends and the
expiration date of carryforwards. The Company has determined that it is more
likely than not that the deferred tax asset will be realized. At December 31,
1999, the Company has net operating loss carryforwards of approximately
$5,500,000, which will reduce the income taxes that must be paid to
approximately $54,000.
LIQUIDITY AND CAPITAL RESOURCES
On December 20, 1999, the Company entered into an agreement with Summit
Bank (the "Bank") to provide additional funding of $8,000,000 intended to be
used for future acquisitions. The existing term loan was extended for an
additional 2 years to December 31, 2002. The Company's borrowing rate was
reduced to one half of one percent below the prime rate on all borrowings. The
Bank provided a new $2,000,000 term loan (the "New Loan"), which is repayable
over 33 months beginning April 2000. The Company used proceeds from the New Loan
to pay down a 12.25%, $2,000,000 unsecured debenture. See page F-14 to the
Company's Financial Statements.
At December 31, 1999, the working capital of the Company was $6,101,021
(resulting in a ratio of current assets to current liabilities of 2.4 to 1),
compared to $7,233,735 (2.7 to 1) at December 31, 1998. The decrease in working
capital is primarily due to reduction in both accounts receivable and inventory
balances, both of which were directly related to the Sheet Metal Acquisition.
At December 31, 1999, current liabilities totalled $4,233,844, consisting
primarily of $2,553,583 of accounts payable and accrued expenses and $1,680,261
of current maturities of long-term debt. Current liabilities increased $68,672
as compared to 1998.
At December 31, 1999 obligations to the Bank totaled $9,699,591, compared
to $9,024,294 in 1998 and $2,661,007 in 1997. The increase in 1999 over 1998 was
the result of financing a $2,000,000 bank term loan acquired in order to replace
$2,000,000 of subordinated debt that had an interest cost of 12.25% per year.
In 1999, the Company raised $56,250 of additional capital through the
exercise of 188,406 options and warrants from previous private placements and
employee stock option grants.
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Cash flow provided by operating activities for 1999 was $3,999,255 as
compared to $2,298,946 provided by operating activities for 1998. The cash
provided by operating activities increased due to the reduction of inventory and
accounts receivable levels, which were higher in 1998 due to the Sheet Metal
Acquisition.
Net cash used in investing activities totaled $1,347,914 for the year
ended December 31, 1999, was used for investments in capital equipment, as
compared to net cash used in investing activities of $16,057,211 for 1998, which
was a result of the Obdyke and Sheet Metal Acquisitions.
Net cash used in financing activities was $2,694,110 for 1999, as compared
to $9,496,803 provided by financing activities in 1998. The decrease was the
result of the Company's ability to use cash from operations to pay down senior
and subordinated debt in 1999 as opposed to funding the Obdyke and Sheet Metal
acquisitions in 1998.
The operating cash flow anticipated to be received from operations in 2000
and the availability of the funds under the working capital loan is anticipated
to be sufficient to cover the Company's capital expenditure needs for 2000,
which are estimated to be approximately $900,000.
The Company anticipates that it may, in the future, need to obtain
additional financing to accomplish the redemption of the debentures issued to
Finova Mezzanine Capital Inc. and Argosy Investment Partners. The Company
anticipates redeeming such instruments by the end of 2000, when the interest
rate under such instruments increases substantially. See Note 13 to the
Company's Financial Statements.
On January 21, 2000, the holder of the redeemable common stock exercised
their option to receive cash proceeds of $500,000. The Company arranged for the
sale of the 125,000 shares of redeemable common stock to an unrelated third
party. The remaining $226,254, including transfer fees was paid by the Company.
YEAR 2000 READINESS DISCLOSURE
During 1999, the Company assessed its computer systems for Year 2000
readiness and replaced all systems and software found to be non-compliant. These
replacements were generally part of the Company's regular upgrade program. The
Company then tested all of its systems and software. The Company also obtained
verifications from its vendors that its systems that they supplied were Year
2000 ready. The Company had a contingency plan to provide for disaster recovery
and continuation of critical computer and communications in case of a power
loss. The Company has not incurred any material extraordinary expense in
connection with its Year 2000 program. The Company believes that any Year 2000
problem is unlikely to arise in the future, and that if any problem does arise,
will be able to fix the problem without material expenses.
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To date, the Company has not experienced any disruptions of operations due
to Year 2000 problems.
NEW ACCOUNTING STANDARDS
In February 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 135, "Rescission of FASB
Statement No. 75 and Technical Corrections." This Statement amends existing
authoritative literature to make various technical corrections, clarify
meanings, or describe applicability under changed conditions. The Statement is
effective for fiscal years ending after February 15, 1999. Management has not
yet determined the impact that the adoption of this Statement may have on
earnings, financial condition or liquidity of the Company.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement standardizes the accounting
for derivative instruments, including derivative instruments embedded in other
contracts, by requiring that an entity recognize those items as assets for
liabilities in the statement of financial position and measure them at fair
value. The statement is effective for fiscal year beginning after June 15, 1999.
Management has not yet determined the impact that the adoption of this statement
may have on earnings, financial condition or liquidity of the Company. The
Company plans to adopt SFAS No. 133 as permitted by this accounting standard by
January 1, 2000.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Certain statements herein that include forward-looking terminology such as
"may," "will," "should," "expect," "anticipate," "estimate," "plan" or
"continue" or the negative thereof or other variations thereon are, or could be
deemed to be "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements are affected
by known and unknown risks, uncertainties and other factors that may cause the
Company's actual results, performance or achievements to differ materially from
the results, performance and achievements expressed or implied in the Company's
forward-looking statements. These risks, uncertainties and factors include
competition by competitors with more resources than the Company and the cyclical
nature of roofing repair. Certain factors that could cause the actual results,
performance or achievement of the Company to differ materially from those
contained in or implied by any forward-looking statement made by or on behalf of
the Company, including forward-looking statements contained herein, are as
follows:
Risk as to Liquidity of the Common Stock. The volume of trading in the
Common Stock has generally not been substantial. Accordingly, there is no
assurance as to the liquidity of the trading market for the Common Stock. As a
result of the issuance of Common Stock upon the exercise of outstanding options
and warrants, the number of shares of Common Stock outstanding may increase to
8,982,000. As a result, the number of shares of Common Stock that are freely
tradeable may over time greatly exceed the number of shares that are presently
freely
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tradeable. The influx of a large number of shares onto the trading market may
create downward pressures on the trading price of the Common Stock.
Authorization of Preferred Stock; Anti-takeover Provisions. The Company's
Articles of Incorporation authorize the issuance of up to 20,000,000 shares of
Common Stock and 5,000,000 shares of "blank check" preferred stock. The Board of
Directors will have the power to determine the price and terms under which any
such preferred stock may be issued and to fix the terms and designations
thereof. The ability of the Board of Directors to issue one or more series of
preferred stock without shareholder approval, which preferred stock may have
liquidation, dividend, conversion, voting or other rights that could adversely
affect the voting power or other rights of holders of the Common Stock
(including those of purchasers in this offering). In the event of issuance, the
preferred stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company. There
can be no assurance that the Company will not do so in the future. Furthermore,
the Company is subject to certain applicable anti-takeover provisions of the
Pennsylvania Business Corporation Law of 1988, as amended. Such provisions, as
well at the Company's classified Board of Directors, could deter or delay
unsolicited changes in control of the Company by discouraging takeover attempts
that might result in a premium over the market price for the shares of Common
Stock.
Uncertainty as to Payment of Dividends. No dividends have been paid by the
Company in the past five years and the payment of dividends is not contemplated
in the foreseeable future. The payment of future dividends will be directly
dependent upon the earnings of the Company, its financial needs and other
similarly unpredictable factors. Earnings, if any, are expected to be retained
to finance and develop the Company's business.
Existence of Significant Competition. There are many other companies
engaged in the Company's area of business, and many of these companies have
greater financial and other business resources than those presently possessed by
the Company. Further, other companies may enter the Company's area of business
in the future. There can be no assurance that the Company will be able to
compete successfully with such companies.
Dependence Upon Key Personnel. The Company's ongoing operations may depend
to a material extent upon the continued services of certain key management
personnel, including primarily Theodore A. Schwartz, Chairman of the Board of
Directors and Chief Executive Officer, Joseph F. Weiderman, President, Paul L.
Spiese, III, Vice President-Manufacturing, and Francis E. Wellock, Jr., Vice
President -- Finance and Chief Financial Officer. The loss of, or the
interruption in, the services of any of such individuals during this period
could adversely affect the conduct of the Company's business and its future
performance.
Dependence for Certain Raw Materials on Single Supplier; Risk of Raw
Material Price Fluctuations. The price and availability of the raw materials
utilized by the Company (mainly aluminum, steel and copper) are subject to
fluctuation. In addition, the Company's ability to obtain such materials from
domestic and foreign suppliers may be subject to trade restrictions, work
stoppages and other factors. Increases in the price of raw materials may have an
adverse
-14-
<PAGE>
impact on the profit margin for sales of the Company's products. There
can be no assurance that there will be no shortages, significant delays or price
increases in the future.
Risk that Company will be Unable to Identify Future Purchasers. As of the
date of this Annual Report, the Company has no sales contracts which call for
the Company to make ongoing deliveries of its products. All sales contracts
between the Company and its customers represent a single transaction. There can
be no assurance that customers of the Company will continue to purchase the same
volume of products from the Company or at all.
Risk that Company Will be Unable to Maintain Adequate Inventory. There can
be no assurance that the Company will be able to continue to maintain such
inventory levels in the future.
Cyclical Nature of the Housing Market and the Home Building and Home
Improvement Industry. Demand for the Company's products is dependent upon the
housing market and the home building and home improvement industry which tend to
be cyclical in nature and have experienced significant downturns in recent
years. There is no assurance that negative industry cycles in the future will
not adversely affect the Company's business.
Seasonality of Business. The demand for the Company's products in its
primary market is seasonal. Inclement winter weather, and excessively hot and
dry summer weather, such as that experienced in 1999 in the Northeastern United
States, usually causes a reduction in the level of building activity in both the
homebuilding and home improvement markets.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURE
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's investment portfolio. The Company does not
have any derivative financial instruments in its portfolio. The Company places
its investments in instruments that meet high credit quality standards. The
Company is adverse to principal loss and ensures the safety and preservation of
its invested funds by limiting default risk, market risk and reinvestment risk.
As of December 31, 1999, the Company's investments consisted of cash and money
market funds. The Company does not expect any material loss with respect to its
investment portfolio.
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
Attached at pages F-1 through F-22 are the financial statements and
financial statement schedules identified in Item 14 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-15-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the Executive Officers and Directors of the Company as
of the date of this report. The Company's By-Laws provide for the classification
of Directors into three classes, as nearly equal in numbers as possible, with
one class being elected at each annual meeting for a term of three years. The
terms of Class I directors will expire in 2000, the terms of Class II directors
in 2001 and the terms of Class III directors in 2002. Francis E. Wellock, Jr. is
the son-in-law of Joseph F. Weiderman; otherwise, there is no family
relationship among any of the Company's officers or directors. The current
directors of the Company will serve until their terms expire and until their
successors in office are elected or appointed and qualified.
EXECUTIVE OFFICERS AND DIRECTORS
NAME AGE POSITION(S)
- ---- --- -----------
Theodore A. Schwartz 70 Chairman of the Board of Directors,
(Class I) Chief Executive Officer (Principal
Executive Officer)
Joseph F. Weiderman 58 President, Chief Operating Officer,
(Class III) Secretary, Treasurer and Director
Paul L. Spiese, III 48 Vice President and Director
(Class II)
Francis E. Wellock, Jr. 35 Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
Jacob I. Haft, M.D. 63 Director
(Class III)
Dr. Irving Kraut 82 Director
(Class I)
Larry Falcon 60 Director
(Class II)
Jay Seid 39 Director
(Class I)
John Paul Kirwin, III 44 Director
(Class III)
-16-
<PAGE>
THEODORE A. SCHWARTZ was elected a Director of the Company effective June
1987 and served as President of the Company from May 5, 1988 to May 30, 1989 and
from July 17, 1990 to January 15, 1991. From May 30, 1989 to present, Mr.
Schwartz has served as Chairman of the Board of Directors and Chief Executive
Officer of the Company. Mr. Schwartz holds a B.S. in Economics from the Wharton
School of Business and spent 35 years in the investment field prior to joining
the Company.
JOSEPH F. WEIDERMAN was elected a Director of the Company on June 1, 1990,
served as Chief Financial Officer of the Company from February 1990 to January
1991, and was elected President of the Company on January 15, 1991. He also
serves as Secretary and Treasurer of the Company. Mr. Weiderman holds a Bachelor
of Science Degree in Accounting and a Master of Business Administration Degree
in Finance from LaSalle University. Prior to his joining the Company, Mr.
Weiderman had served for over fourteen years as the Chief Financial Officer of
Harry Levin, Inc., a multi-store retailer.
PAUL L. SPIESE, III was elected a Director of the Company on March 30,
1991. Mr. Spiese joined Berger as Plant Manager in 1985 and was named Vice
President - Manufacturing of the Company in July 1990. Previously, he was
employed by Hurst Performance, Inc. as a Plant Manager.
FRANCIS E. WELLOCK, JR., was hired as Controller of the Company on June
10, 1991 and was elected Vice President-Finance and Chief Financial Officer on
August 19, 1996. Mr. Wellock holds a Bachelor of Science Degree in Accounting
from Saint Joseph's University and a Masters in Taxation from Philadelphia
College of Textiles and Science. Prior to joining the Company, Mr. Wellock
worked for a public accounting firm.
JACOB I. HAFT, M.D. was elected a Director of the Company in conjunction
with the Company's acquisition of Berger in 1989. Dr. Haft has practiced
medicine, with a specialization in cardiology, for over twenty-five years. Since
1974, Dr. Haft has been a Cardiologist and from 1974 to 1998 was Chief of
Cardiology at St. Michael's Medical Center in Newark, New Jersey. In addition,
Dr. Haft is currently a Clinical Professor of Medicine at the New Jersey College
of Medicine and Dentistry and Professor of Medicine at the Seton Hall University
Post Graduate School of Medicine. Dr. Haft has several professional
certifications, is a member of various professional societies and associations
and has published many scholarly articles and books. Dr. Haft has served on the
Cardiac Services Committee of the New Jersey Department of Health.
LARRY FALCON was elected as a Director of the Company in November 1985 and
acted as Chairman of the Board from September 3, 1986 to June 1, 1987. He has
served as President of the Residential Division of The Kaplan Organization, a
real estate developer, since 1985.
DR. IRVING KRAUT was elected as a Director at the Company in July 1993.
Dr. Kraut was a practicing orthodontist from 1948 to 1991. Since that time, he
has served as a consultant to orthodontists in his capacity as President of
Irving Kraut, D.D.S., P.A. Since 1978, Dr. Kraut has served as a director of
Princeton Research Lands, Inc., a private real estate
-17-
<PAGE>
company.
JAY SEID was elected as a Director of the Company on December 15, 1997.
Mr. Seid is a Vice President of Bachow & Associates, a venture capital firm.
Prior to joining Bachow in December 1992, Mr. Seid was President and General
Counsel of Judicate, Inc. Previously he was an attorney specializing in
corporate law at Wolf, Block, Schorr and Solis-Cohen LLP in Philadelphia. Mr.
Seid graduated with a B.A. from Rutgers University and received a J.D. from New
York University School of Law.
JOHN PAUL KIRWIN, III was elected as a Director of the Company on December
15, 1997. Mr. Kirwin is a principal in Argosy Investment Partners, L.P., a small
business investment company. Mr. Kirwin is also a principal in Odyssey Capital
Group, L.P., a private investment fund. Mr. Kirwin was a corporate and
securities attorney for 14 years, including six years as a partner at
McCausland, Keen & Buckman, until joining Odyssey full time in January 1996. Mr.
Kirwin holds a Juris Doctris, Order of the Coif, from the National Law Center of
George Washington University and a Bachelor of Arts from Dickinson College.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons who own more than ten percent of a registered class of the
Company's equity securities (collectively, the "Reporting Persons") to file
reports of ownership and changes in ownership with the Commission and to furnish
the Company with copies of these reports.
Based on the Company's review of the copies of the reports received by it,
except for 900 shares purchased by Dr. Kraut in and 1,500 shares purchased by
Dr. Haft, both in December 1999, the Company believes that all filing required
to be made by the Reporting Persons for the year ended December 31, 1999 were
made on a timely basis.
-18-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table shows the annual compensation of each of the Company's
executive officers for the years 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- ------
(a) (b) (c) (d) (e) (g) (i)
Name & Principal Year Salary($) Bonus($) Other Annual Options/ All other
Position Compensation SARs (#) Compensation
($) ($)
<S> <C> <C> <C> <C> <C> <C>
Theodore A. Schwartz 1999 $193,352 $7,500 0 -- 17,653(1)
Chairman & Chief 1998 154,315 12,500 0 -- 14,735
Executive Officer 1997 131,561 10,000 0 -- 12,770
Joseph F. Weiderman 1999 $190,587 $17,500 0 -- 2,335(2)
President and Chief 1998 157,353 22,500 0 -- 2,213
Operating Officer 1997 127,512 10,000 0 -- 2,507
Paul L. Spiese, III 1999 $135,143 $12,000 0 -- 2,001(3)
Vice President 1998 114,950 15,750 0 -- 1,939
1997 93,767 10,000 0 -- 1,879
Francis E. Wellock, Jr. 1999 $119,356 $12,000 0 -- 739(4)
Chief Financial 1998 96,597 13,500 0 -- 533
Officer 1997 75,132 10,000 0 -- 514
</TABLE>
- -------------
(1) Represents premiums paid by the Company for life insurance for the benefit
of Mr. Schwartz.
(2) Represents premiums paid by the Company for life insurance for the benefit
of Mr. Weiderman.
(3) Represents premiums paid by the Company for life insurance for the benefit
of Mr. Spiese.
(4) Represents premiums paid by the Company for life insurance for the benefit
of Mr. Wellock.
-19-
<PAGE>
The following table shows (1) the number and value of options exercised by
the Company's executive officers during fiscal year 1999 and (2) the number and
value of unexercised options held by the Company's executive officers at the end
of 1999:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Value of Unexercised In
# of Unexercised Options at the-Money Options/SARs
Shares Acquired Value FY-End(#) at FY-End ($)
Name on Exercise (#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- ----------- ------------------------- -------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Theodore A. Schwartz 0 0 390,000/100,000 $417,563/$100,375
Joseph F. Weiderman 0 0 357,950/100,000 $382,508/$100,375
Paul L. Spiese, III 0 0 353,700/100,000 $377,859/$100,375
Francis E. 0 0 189,000/75,000 $199,969/$75,281
Wellock, Jr.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
During 1999, members of the Company's Board of Directors who were not also
executive officers of the Company were paid $250 for one Board meeting and $500
for two Board meetings. An aggregate of $6,000 was paid to directors for their
services. No director was paid more than $1,250. Drs. Kraut and Haft, and Mr.
Falcon, also each received options to purchase 30,000 shares of the Common Stock
at an exercise price of $1.59 per share, while Messrs. Kirwin and Seid each
received options to purchase 10,000 shares of the Common Stock at an exercise
price of $3.50 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Mr. Falcon and Dr.
Kraut. There were no relationships during 1999 that are required to be disclosed
under Item 401(j) of Regulation S-K promulgated by the Securities and Exchange
Commission.
EMPLOYMENT AGREEMENTS
THEODORE A. SCHWARTZ, JOSEPH F. WEIDERMAN, PAUL L. SPIESE, III AND FRANCIS E.
WELLOCK, JR.
Pursuant to Employment Agreements restated in their entirety as of March
28, 2000, Messrs. Schwartz, Weiderman, Spiese and Wellock are employed by the
Company as its Chief
-20-
<PAGE>
Executive Officer; President and Chief Operating Officer; Vice President of
Manufacturing; and Chief Financial Officer and Vice President - Finance,
respectively. These agreements expire December 31, 2000. The agreements provide
for base annual salaries of $203,000, $203,000, $135,000 and $130,000,
respectively. In addition to their salaries, the agreements provide that Messrs.
Schwartz, Weiderman, Spiese and Wellock shall be entitled to a bonus at the
discretion of the Board of Directors. If, at the end of the term of the
agreement, the Company and Messrs. Schwartz, Weiderman, Spiese and Wellock have
not agreed to an extension of these agreements for a minimum additional term of
three years, the Company is obligated to pay them an amount equal to 50% of
their then annual salary in weekly installments over a six month period (the
"Severance Payment"). In the event that the four officers are unable to perform
their duties under the agreement for an aggregate period of more than 180 days
in any 365-day period, the Company may terminate any one of the four officers'
employment upon 90 days notice. In this event, the Company is obligated to pay
Messrs. Schwartz, Weiderman, Spiese or Wellock his full salary for a period of
12 months. At the end of this 12-month period, the Company is obligated to pay
the sum of $1,000 per week, subject to certain reductions set forth in the
agreement, for a period of 3 years and then $500 per week for the remainder of
their lives. The agreements also provide that in the case of a "Change in
Control," as defined in the agreements, if the terms of the employee's
employment change in any material respect, the employee shall be entitled to a
lump sum payment in an amount equal to the remainder of the payments to which he
would be entitled under Section 3 of the Agreement.
Messrs. Schwartz, Weiderman, Spiese and Wellock are also entitled to the
use of a car provided by the Company and life insurance to benefit the
beneficiary of their respective choices in the face amount of $500,000. During
the term of the agreement, and so long as the any one of the four officers
receives a Severance Payment, they are prohibited directly or indirectly from
engaging in any business which is the same as, similar to or in competition with
the business of the Company. In addition, the amended agreement stipulates that
during 1999 and 2000, the stock options granted for those years will be 100,000
for each year for Messrs. Schwartz, Weiderman and Spiese, and 75,000 for Mr.
Wellock.
-21-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of December 31, 1999, information with
respect to the beneficial ownership of the Company's directors, all directors
and executive officers as a group, and all persons believed by the Company to
beneficially own more than 5% of the outstanding Common Stock based upon filings
with the Securities and Exchange Commission. Unless otherwise indicated, such
ownership is believed to be direct, with sole voting and investment power.
Name and Address Shares Owned
of Outstanding Beneficially Percentage
Beneficial Owner and of Record of Shares
- ---------------- ------------- ---------
Theodore A. Schwartz 565,692 (1) 9.62%
Joseph F. Weiderman 488,090 (2) 8.35%
Paul L. Spiese, III 444,726 (3) 7.61%
Jacob I. Haft, M.D. 183,200 (4) 3.28%
Larry Falcon 97,791 (5) 1.76%
Dr. Irving Kraut 308,433 (6) 5.53%
Jay Seid 36,500 (7) *
John Paul Kirwin 15,000 (7) *
Francis E. Wellock, Jr. 220,750 (8) 3.89%
Finova Mezzanine Capital, Inc. 588,235 (9) 9.68%
Argosy Investment Partners, L.P. 352,941 (9) 6.04%
Emerald Advisors 503,660 9.17%
All Directors, Executive Officers
and 5% owners as a group (12 persons) 3,805,018 47.61%
* = less than 1%
-22-
<PAGE>
(1) Includes 1,500 shares of Common Stock registered to Mr. Schwartz as joint
tenant with Janice L. Bredt and options to purchase 390,000 shares of
Common Stock.
(2) Includes options to purchase 357,950 shares of Common Stock.
(3) Includes options to purchase 353,700 shares of Common Stock.
(4) Includes options to purchase 95,000 shares of Common Stock.
(5) Includes options to purchase 60,000 shares of Common Stock.
(6) Includes options to purchase 85,000 shares of Common Stock.
(7) Includes options to purchase 15,000 shares of Common Stock.
(8) Includes options to purchase 189,000 shares of Common Stock.
(9) Consists solely of shares of Subordinated Debentures convertible into
Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THEODORE A. SCHWARTZ, JOSEPH F. WEIDERMAN AND PAUL L. SPIESE, III
The Company holds promissory notes (the "Notes") from Messrs. Schwartz,
Weiderman and Spiese totaling $175,083, $152,000 and $100,833 respectively,
which bear interest at a rate of six percent per annum. The Notes require that
the principal and accrued interest be paid on or before November 21, 2001. The
proceeds of the Notes were used by Messrs. Schwartz, Weiderman and Spiese to
purchase securities of the Company in the Company's 1993 private placements and
warrant exercise of 1996. These securities were purchased on the same terms as
other investors in the private placements. The largest aggregate amount
outstanding under each of the Notes during the year ended December 31, 1999 was
$175,083, $152,000 and $100,833 respectively, all of which are currently
outstanding.
-23-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. Financial statements - attached at pages F-1 through F-22 are the
consolidated financial statements and consolidated financial schedules set forth
below, and which are incorporated by reference in Item 8:
BERGER HOLDINGS, LTD.
Independent Auditors' Report on Consolidated Financial Statements F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998, and 1997 F-5
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1999, 1998 and 1997 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-7
Notes to Consolidated Financial Statements F-9
-24-
<PAGE>
2. Financial statement schedule - The following consolidated financial
statement schedule is included herein:
SCHEDULE II
BERGER HOLDINGS, LTD.
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
--------------------------------
Additions
Balance at Charged to Charged Balance at
Beginning Cost and to Other End
Description of Period Expense Accounts(1) Deductions(2) of Period
----------- --------- ------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
1999 Accounts Receivable-
Allowance for doubtful accounts $30,000 $9,249 $ - $9,249 $30,000
Inventory reserves 146,000 - - 100,000 46,000
1998 Accounts Receivable-
Allowance for doubtful accounts $43,000 $5,930 $ - $18,930 $30,000
Inventory reserves 46,000 - 100,000 - 146,000
1997 Accounts Receivable-
Allowance for doubtful accounts $43,000 $12,107 $ - $12,107 $43,000
Inventory reserves 46,000 - - - 46,000
</TABLE>
(1) Includes reserves for inventory of business acquired.
(2) Write off of uncollectible accounts and slow moving and obsolete
inventory acquired.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are included in the financial statements or the notes
thereto and therefore have been omitted.
-25-
<PAGE>
INDEPENDENT AUDITORS REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of Berger Holdings, Ltd.
Under date of February 21, 2000, we reported on the consolidated balance sheets
of Berger Holdings, Ltd. and subsidiary as of December 31, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the two-year period then ended. In connection
with our audit of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule, as of December
31, 1999 and 1998, as listed in the accompanying index (item 14). This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audit.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG
Philadelphia, PA
February 21, 2000
-26-
<PAGE>
INDEPENDENT AUDITORS REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of Berger Holdings, Ltd.
Under date of February 13, 1998, we reported on the consolidated balance sheet
of Berger Holdings, Ltd. and subsidiary as of December 31, 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. In connection with our audit of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule, as of December 31, 1997, as listed in the
accompanying index (item 14). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
GOLDENBERG ROSENTHAL LLP
Jenkintown, PA
February 13, 1998
-27-
<PAGE>
3. Exhibits
Exhibit
Number Title Method of Filing
- ------ ----- ----------------
2(a) Debtor's Third Amended Incorporated by reference to Exhibit
Joint Plan of 1 of the Company's Current Report on
Reorganization Form 8-K filed on March 31, 1993 (the
"March 1993 8-K")
2(b) Third Amended Disclosure Incorporated by reference to Exhibit
Statement for Debtor's 2 of the March 1993 8-K
Amended Joint Plan of
Reorganization
2(c) Settlement Agreement by Incorporated by reference to Exhibit
and between the Registrant 4 of the March 1993 8-K
and Meridian Bank
3(a) Articles of Incorporation Incorporated by Reference to
and Bylaws Exhibit 3 of the Registration
Statement on Form S-18 filed February
15, 1983 (File No. 2-81851-W) (the
"1983 Registration Statement")
3(b) Articles of Amendment Incorporated by reference to
dated November 29 Exhibit 3(b) of the Annual
Report on Form 10-K for the year ended
December 31, 1989 (the "1989 Form 10-K")
3(c) Articles of Amendment Incorporated by reference to
effective July 30, 1990 Exhibit 3(c) to Amendment No. 1
to the Registration Statement on Form S-1
filed on October 15, 1990 ("Pre-Effective
Amendment No. 1") (33-35898)
3(d) Amended and Restated Incorporated by reference to Exhibit 3(d)
By laws of the Registration Statement on Form S-1
filed June 16, 1993 (the "1993 Form S-1")
(33-64468)
-28-
<PAGE>
Exhibit
Number Title Method of Filing
- ------ ----- ----------------
3(e) Articles of Amendment Incorporated by reference to Exhibit 3(e)
dated July 22, 1993 of the Annual Report on Form 10-K for the
year ended December 31, 1993 (the "1993
Form 10-K")
3(f) Articles of Amendment Filed herewith
dated December 29, 1997
4(a) Form of 1993 Incorporated by reference to Exhibit 4(g)
Private Placement of the 1993 Form S-1
4(b) Form of Consulting Incorporated by reference to Exhibit 4(h)
Warrant by and between of the 1993 Form S-1
the Company and Universal
Solutions, Inc.
4(c) Form of 1993 Incorporated by reference to Exhibit 4.9
Private Placement Warrant of the Registration Statement on Form S-3
No. 2 filed January 21, 1994 (the "Form S-3")
(33-82152)
4(d) Form of Consulting Incorporated by reference to Exhibit 4.10
Warrant of the Form S-3
10(a) Lease Agreement Incorporated by reference to Exhibit
between Berger Bros. 10(i) of the 1989 Form 10-K
Company and Feasterville
Associates dated
May 30, 1989
10(b) Addendum to Lease Incorporated by reference to
Agreement between Exhibit 10(j) of the 1989
Berger Bros. Company Form 10-K
and Feasterville
Associates dated
May 30, 1989
10(c) Cobra Ridge Vent Incorporated by reference to
Sale Agreement Exhibit 10(r) of the Annual Report on
Form 10-K for the year ended December 31,
1993
-29-
<PAGE>
Exhibit
Number Title Method of Filing
- ------ ----- ----------------
10(d) Employment Agreement Filed Herewith
between Berger Holdings,
Ltd. and Theodore
A. Schwartz
10(e) Employment Agreement Filed Herewith
between Berger Holdings,
Ltd. and Joseph
F. Weiderman
10(f) Employment Agreement Filed Herewith
between Berger Holdings,
Ltd. and Paul L.
Spiese, III
10(g) Employment Agreement Filed Herewith
between Berger Holdings,
Ltd. and Francis E. Wellock
10(h) Stock Purchase Agreement, Incorporated by Reference to Exhibit 2.1
dated as of February 7, of the Company's Report on Form 8-K
1997, by and between filed on February 20, 1997 (the
Berger Holdings, Ltd. and "February 1997 8-K")
Roger M. Cline
10(i) Amendment to Stock Incorporated by Reference to Exhibit 2.2
Purchase Agreement, dated of of the February 1997 8-K
as of February 7, 1997,
by and between Berger
Holdings, Ltd. and
Roger M. Cline
10(j) Asset Purchase Agreement Incorporated by reference to Exhibit 2.1
dated as of December 3, of Company's Report on Form 8-K filed on
1997, by and among the January 20, 1998, as amended (the
Registrant, Obdyke and the "January 1998 Form 8-K")
Shareholders of Obdyke
10(k) Preferred Stock Purchase Incorporated by reference to Exhibit 2.2
Agreement, dated as of to the January 1998 Form 8-K
December 17, 1997, by
and among the Registrant,
Tandem and Argosy
-30-
<PAGE>
Exhibit
Number Title Method of Filing
- ------ ----- ----------------
10(l) Debenture Purchase Incorporated by reference to Exhibit 2.3
Agreement, dated as of to the January 1998 Form 8-K
December 17, 1997, by
and among the Registrant,
Tandem and Argosy
10(m) Amended and Restated Loan Incorporated by reference to Exhibit 2.4
and Security Agreement, to the January 1998 Form 8-K
dated as of January 2,
1998, by and among Berger
Financial Corp., a Delaware
corporation, Berger Bros.
Company, a Pennsylvania
corporation and Summit
10(n) Amendment to Amended and Incorporated by reference to Exhibit 2.2
Restated Loan and Security to the Company's Current Report on Form
Agreement, dated as of 8-K, dated December 22, 1998
December 31, 1998, by and
among Berger Financial
Corp., a Delaware
Corporation, Berger Bros
Company, A Pennsylvania
corporation and Summit
Bank, N.A.
10(o) Exchange Agreement, Incorporated by reference to Exhibit
entered into as of 10.1 of the Company's Quarterly Report
January 1, 1999, by and on Form 10-Q for the period ended March
between Sirrom Capital 31, 1999
Corporation d/b/a Tandem
Capital, a Tennessee
corporation, Argosy
Investment Partners, L.P.,
a Pennsylvania
partnership, and the
Company.
10(p) Amendment to Amended and Filed Herewith
Restated Loan and Security
Agreement, dated as of
December 20, 1999, by and
among Berger Financial
Corp., a Delaware
Corporation, Berger Bros
Company, A Pennsylvania
corporation and Summit
Bank, N.A.
-31-
<PAGE>
Exhibit
Number Title Method of Filing
- ------ ----- ----------------
21 Subsidiaries of the Incorporated by reference to
Company Exhibit 22 to the 1989 Form 10-K
23.1 Consent of KPMG LLP Filed Herewith
23.2 Consent of Goldenberg
Rosenthal Friedlander LLP Filed Herewith
27 Financial Data Schedule Filed Herewith (EDGAR version only)
All other exhibits for which provision is made in the applicable
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
(b) Reports on Form 8K:
None.
-32-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized on the 15th day of March, 2000.
BERGER HOLDINGS, LTD.
By: /s/ THEODORE A. SCHWARTZ
------------------------
Theodore A. Schwartz
Chief Executive Officer
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:
Signature Title Date
- --------- ----- ----
/s/ THEODORE A. SCHWARTZ Chief Executive Officer March 15, 2000
- --------------------------- and Chairman of the Board
Theodore A. Schwartz (Principal Executive Officer)
/s/ PAUL L. SPIESE, III Director March 15, 2000
- --------------------------- Vice President
Paul L. Spiese, III
/s/ JOSEPH F. WEIDERMAN President, Chief Operating March 15, 2000
- --------------------------- Officer and Director
Joseph F. Weiderman
/s/ LARRY FALCON Director March 16, 2000
- ---------------------------
Larry Falcon
/s/ JACOB I HAFT Director March 20, 2000
- ---------------------------
Jacob I. Haft, M.D.
/s/ DR. IRVING KRAUT Director March 16, 2000
- ---------------------------
Dr. Irving Kraut
/s/ JAY SEID Director March 16, 2000
- ---------------------------
Jay Seid
/S/ JOHN PAUL KIRWIN Director March 16, 2000
- ---------------------------
John Paul Kirwin
/S/ FRANCIS E. WELLOCK, JR. Chief Financial Officer
- --------------------------- (Principal Financial and March 15, 2000
Francis E. Wellock, Jr. Accounting Officer)
-33-
<PAGE>
BERGER HOLDINGS, LTD.
TABLE OF CONTENTS
Page
Independent Auditors' Report F 1 - F 2
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1999 and 1998 F 3 - F 4
Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F 5
Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997 F 6
Statements of Cash Flows as of
December 31, 1999, 1998 and 1997 F 7 - F 8
Notes to Consolidated Financial Statements F 9 - F 22
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Berger Holdings, Ltd.
Feasterville, Pennsylvania
We have audited the accompanying consolidated balance sheets of
BERGER HOLDINGS, LTD. and subsidiary as of December 31, 1999 and 1998 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the two-year period ended December 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The accompanying consolidated
statements of operations, stockholders' equity, and cash flows of Berger
Holdings, Ltd. as of and for the year ended December 31, 1997 were audited by
other auditors whose report thereon dated February 13, 1998, expressed an
unqualified opinion on those statements.
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, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of BERGER
HOLDINGS, LTD. and subsidiary as of December 31, 1999 and 1998, and the results
of their operations, stockholders' equity and cash flows for each of the years
in the two-year period ended December 31, 1999 in conformity with generally
accepted accounting principles.
KPMG LLP
Philadelphia, Pennsylvania
February 21, 2000
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
February 13, 1998
Stockholders and Board of Directors
Berger Holdings, Ltd. and Subsidiary
Feasterville, Pennsylvania
We have audited the accompanying consolidated statements of
operations, stockholders' equity, and cash flows of BERGER HOLDINGS, LTD. AND
SUBSIDIARY as listed under Item 14(a)(1) of the Company's annual report on Form
10-K for the year ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
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, the consolidated financial statements referred to
above present fairly, in all material respects, the results of their operations,
stockholders' equity and cash flows of BERGER HOLDINGS, LTD. AND SUBSIDIARY for
the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ GOLDENBERG ROSENTHAL FRIEDLANDER
- ------------------------------------
Goldenberg Rosenthal Friedlander
Jenkintown, Pennsylvania
F-2
<PAGE>
BERGER HOLDINGS, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
-------------------------
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 107,116 $ 149,885
Accounts receivable, net of allowance for doubtful
accounts of $30,000 in 1999 and 1998 3,695,674 3,928,858
Inventories 5,619,008 6,552,420
Prepaid and other current assets 542,307 283,744
Deferred income taxes 370,760 484,000
----------- -----------
Total current assets 10,334,865 11,398,907
Property, plant and equipment, net 10,796,886 9,789,015
Deferred income taxes 1,440,419 1,731,201
Other assets, net of accumulated amortization of
$565,828 in 1999 and $287,205 in 1998 3,134,457 4,342,283
Goodwill, net of accumulated amortization of
$1,323,693 in 1999 and $918,704 in 1998 6,861,193 7,325,798
----------- -----------
$32,567,820 $34,587,204
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
BERGER HOLDINGS, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
----------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
------------ ------------
<S> <C> <C>
Current liabilities
Current maturities of long-term debt $ 1,680,261 $ 2,062,286
Accounts payable 1,219,531 960,953
Accrued expenses 1,334,052 1,141,933
------------ ------------
Total current liabilities 4,233,844 4,165,172
Long-term debt 16,388,606 14,560,307
Redeemable common stock, 125,000 shares 500,000 500,000
Commitments and contingencies -- --
Stockholders' equity
Preferred stock, $.01 par value
Authorized 5,000,000 shares
Issued and outstanding 40,000 shares of series A
Convertible preferred stock ($4,000,000
liquidation value) in 1998 -- 400
Common stock, $.01 par value
Authorized 20,000,000 shares
Issued and outstanding 5,489,736 shares in 1999
and 5,301,330 shares in 1998 54,897 53,013
Additional paid-in capital 17,168,980 21,114,214
Accumulated deficit (4,941,189) (5,322,986)
------------ ------------
12,282,688 15,844,641
Less common stock subscribed (482,916) (482,916)
Less 124,400 common shares of treasury stock, at cost (354,402) --
Total stockholders' equity 11,445,370 15,361,725
------------ ------------
$ 32,567,820 $ 34,587,204
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
BERGER HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 39,966,301 $ 35,608,309 $ 20,748,017
Cost of sales 32,094,414 28,791,521 16,196,776
------------ ------------ ------------
Gross profit 7,871,887 6,816,788 4,551,241
Selling, administrative and general expenses 5,220,853 4,625,043 2,963,614
------------ ------------ ------------
Income from operations 2,651,034 2,191,745 1,587,627
Interest expense (1,852,088) (1,284,761) (581,624)
Other income, net 24,517 136,643 14,374
------------ ------------ ------------
Income before income tax (benefit) and
preferred stock dividend 823,463 1,043,627 1,020,377
Provision for income tax (benefit) 441,666 (647,201) (1,000,000)
------------ ------------ ------------
Income before preferred stock dividend 381,797 1,690,828 2,020,377
Preferred stock dividend -- 400,000 --
------------ ------------ ------------
Net income available to common stockholders $ 381,797 $ 1,290,828 $ 2,020,377
============ ============ ============
Basic earnings per share $ 0.07 $ 0.24 $ 0.40
============ ============ ============
Dilutued earnings per share $ 0.07 $ 0.22 $ 0.31
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
BERGER HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Series A Convertible
Preferred Stock Common Stock
------------------------ ---------------------------
Additional
Number Number Paid-in
of Shares Amount of Shares Amount Capital
--------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 -- -- 4,858,150 $ 48,581 $ 16,753,862
Issuance of 25,000 shares of
Series A convertible preferred stock 25,000 $ 250 -- -- 2,254,123
Common shares issued -- -- 182,500 1,825 330,363
Warrants exercised at $.90 per share -- -- 70,000 700 62,300
Warrants exercised at $1.00 per share -- -- 110,000 1,100 108,900
Stock based compensation -- -- -- -- 38,700
Exercise of 8,500 stock options -- -- 8,500 85 14,790
Retired shares and common stock subscribed -- -- (177) (2) (576)
Net income available to common stockholders -- -- -- -- --
--------- ----------- ----------- ------------ ------------
Balance, December 31, 1997 25,000 $ 250 5,228,973 $ 52,289 $ 19,562,462
Issuance of 15,000 shares of
Series A convertible preferred stock 15,000 150 -- -- 1,443,040
Exercise of 72,357 stock options -- -- 72,357 724 108,712
Reduction of common stock subscribed -- -- -- -- --
Net income before preferred stock dividend -- -- -- -- --
Preferred stock dividend -- -- -- -- --
--------- ----------- ----------- ------------ ------------
Balance, December 31, 1998 40,000 $ 400 5,301,330 $ 53,013 $ 21,114,214
Conversion of preferred shares to debt (40,000) (400) -- -- (3,999,600)
Exercise of 188,406 stock options -- -- 188,406 1,884 54,366
Net income -- -- -- -- --
Purchase of 124,400 shares treasury stock, at cost -- -- -- -- --
--------- ----------- ----------- ------------ ------------
-- $ -- 5,489,736 $ 54,897 $ 17,168,980
========= =========== =========== ============ ============
<CAPTION>
Common Stock
Treasury Stock Subscribed
---------------------- ----------------------
Accumulated Number Number
Deficit of Shares Amount of Shares Amount
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $(8,634,191) -- -- 370,833 $ 512,916
Issuance of 25,000 shares of
Series A convertible preferred stock -- -- -- -- --
Common shares issued -- -- -- -- --
Warrants exercised at $.90 per share -- -- -- -- --
Warrants exercised at $1.00 per share -- -- -- -- --
Stock based compensation -- -- -- -- --
Exercise of 8,500 stock options -- -- -- -- --
Retired shares and common stock subscribed -- -- -- (3,333) (5,000)
Net income available to common stockholders 2,020,377 -- -- -- --
----------- --------- --------- --------- ---------
Balance, December 31, 1997 $(6,613,814) -- -- 367,500 $ 507,916
Issuance of 15,000 shares of
Series A convertible preferred stock -- -- -- -- --
Exercise of 72,357 stock options -- -- -- -- --
Reduction of common stock subscribed -- -- -- (20,000) (25,000)
Net income before preferred stock dividend 1,690,828 -- -- -- --
Preferred stock dividend (400,000) -- -- -- --
----------- --------- --------- --------- ---------
Balance, December 31, 1998 $(5,322,986) -- -- 347,500 $ 482,916
Conversion of preferred shares to debt -- -- -- -- --
Exercise of 188,406 stock options -- -- -- -- --
Net income 381,797 -- -- -- --
Purchase of 124,400 shares treasury stock, at cost -- 124,400 $(354,402) -- --
----------- --------- --------- --------- ---------
$(4,941,189) 124,400 $(354,402) 347,500 $ 482,916
=========== ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
BERGER HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------
1999 1998 1997
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income before preferred stock dividend $ 381,797 $ 1,690,828 $ 2,020,377
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Deferred income taxes 404,022 (647,201) (1,000,000)
Depreciation and amortization 1,973,240 1,645,673 847,189
Decrease in accounts receivable allowance -- (13,000) --
Decrease in inventory reserve (100,000) -- --
Change in operating assets and liabilities, excluding
acquisitions
Accounts receivable 233,184 (726,341) 5,577
Inventories 1,033,412 (189,212) (459,116)
Other current and long-term assets (559,697) (851,572) (1,923,971)
Accounts payable 258,578 709,860 140,226
Accrued expenses 192,119 679,911 (95,199)
----------- ------------ -----------
Net cash provided by (used in) operating activities 3,816,655 2,298,946 (464,917)
----------- ------------ -----------
Cash flows from investing activities
Acquisition of companies, net of cash acquired -- (13,675,401) (900,618)
Acquisition of property and equipment,
net of retirements (1,165,314) (2,381,810) (652,715)
----------- ------------ -----------
Net cash used in investing activities (1,165,314) (16,057,211) (1,553,333)
----------- ------------ -----------
Cash flows from financing activities
Dividends paid -- (400,000) --
Net proceeds (repayments) from working capital line (792,707) 5,176,618 (126,781)
Net proceeds (repayments) from equipment term loan (531,996) 1,186,668 1,037,268
Proceeds from long-term debt 2,380,539 4,020,986 3,012,732
Loan and mortgage repayments (3,451,794) (2,064,945) (1,347,889)
Proceeds from issuance of stock, private placements,
stock warrants and stock options 56,250 1,634,286 2,820,370
Costs of raising capital -- (56,810) (202,812)
Repurchase of common stock (354,402) -- --
----------- ------------ -----------
Net cash (used in) provided by financing activities (2,694,110) 9,496,803 5,192,888
----------- ------------ -----------
Net increase (decrease) in cash (42,769) (4,261,462) 3,174,638
Cash and cash equivalents, beginning of year 149,885 4,411,347 1,236,709
----------- ------------ -----------
Cash and cash equivalents, end of year $ 107,116 $ 149,885 $ 4,411,347
=========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE>
BERGER HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the year for interest $1,852,000 $1,285,000 $582,000
Cash paid during the year for taxes $ 37,337 $ 23,890 $ 34,119
========== ========== ========
</TABLE>
The Company entered into capital leases aggregating $380,539, $520,986,
and $27,417 in the years 1999, 1998, and 1997, respectively.
See accompanying notes to consolidated financial statements
F-8
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS ORGANIZATION
The Company operates primarily from a manufacturing
facility in Feasterville, Pennsylvania. The Company operates in one
segment producing aluminum, galvanized steel and copper roof drainage
products. Berger sells to wholesale building product distributors
throughout the United States, its territories and Canada, but is
specifically concentrated in the Mid-Atlantic, New England and Northeast
corridor. The Company routinely grants credit to these distributors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the
Company and its wholly-owned subsidiary, Berger Financial Corporation and
Berger Bros Company. All significant intercompany transactions and
balances have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all highly liquid
instruments with original maturities of three months or less.
PROPERTY AND EQUIPMENT AND DEPRECIATION AND AMORTIZATION
Property and equipment are carried at cost. Depreciation
is computed by straight-line and accelerated methods using estimated
useful lives of 5 to 39 years for buildings and improvements and 3 to 15
years for machinery and equipment. Improvements are capitalized and
expenditures for maintenance, repairs and minor renewals are charged to
expense when incurred. At the time assets are retired or sold, the costs
and accumulated depreciation are eliminated and the resulting gain or
loss, if any, is reflected in the consolidated statement of operations.
OTHER ASSETS
Costs and payments pursuant to noncompetition arrangements
entered into in connection with business acquisitions are amortized over
the terms of the arrangements. Other intangibles include patents,
capitalized acquisition costs and acquired customer lists or markets.
Costs related to start-up activities and organization costs are expensed
as incurred. All intangibles are being amortized by the straight-line
method over periods not exceeding 15 years. The Company assesses the
recoverability of intangibles by determining whether the amortization of
the asset balance can be recovered through projected undiscounted cash
flows over its remaining life.
GOODWILL
Goodwill is amortized using the straight-line method over
10-25 years. The Company assesses the recoverability of this intangible
asset by determining whether the amortization of the goodwill balance over
the remaining life can be recovered through projected undiscounted future
cash flows. The amount of the impairment, if any, is
F-9
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
measured based on projected discounted future operating cash flows using a
discount rate reflecting the Company's average cost of funds or fair value
of the asset, where appropriate. The assessment of the recoverability of
intangible assets will be impacted if estimated future operating cash
flows are not achieved.
REVENUE RECOGNITION
The Company records revenues on its products when goods
are shipped.
INCOME TAXES
Income taxes are accounted for under the asset and
liability method. The Company accounts for the recognition of deferred tax
assets and liabilities based on the expected future tax consequences of
events that have been included in the financial statements or tax returns.
Deferred income taxes result from temporary differences, which consist of
different tax bases for assets and liabilities than their reported amounts
in the financial statements. Such differences result in recognition of
income or expense in different years for tax and financial statement
purposes. Deferred tax assets are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
EARNINGS PER SHARE
Basic earnings per share are computed by dividing net
income available to common stockholders by the weighted average number of
shares of common stock outstanding during the year. Diluted earnings per
common share reflects the potential dilution of securities that could
share in the earnings.
SEGMENT DISCLOSURES
The Company has one operating segment, which is engaged in
the production of aluminum, galvanized steel, painted steel and copper
roof drainage products. The segment disclosure is consistent with the
management decision-making process that determines the allocation of
resources and the measuring of performance.
RECLASSIFICATION
Certain balances not affecting net income have been
reclassed to conform to the current year presentation.
MANAGEMENT'S JUDGMENTS AND ACCOUNTING 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.
F-10
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF
The Company accounts for long-lived assets in accordance
with the provisions of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
3. ACQUISITIONS
On December 7, 1998, the Company acquired certain assets
of Sheet Metal Manufacturing Co., Inc. (Sheet Metal), a manufacturer of
roof drainage products. The purchase price consisted of $3,675,401 in cash
and a note payable of $708,833. The acquisition was funded by credit
facility and equipment term loan in an aggregate amount of $4,063,093.
This acquisition was accounted for as a purchase and the excess of the
fair value of the assets (goodwill) is being amortized on a straight-line
basis over 25 years.
On January 2, 1998, the Company acquired the roof drainage
manufacturing segment of Benjamin Obdyke, Inc. (Obdyke). The purchase
price was $10,000,000 cash, a note payable for $879,000, 125,000 shares of
the Company's redeemable common stock (see note 10 of the consolidated
financial statements) and 50,000 warrants to purchase the Company's common
stock at an exercise price of $4.42 per share. The acquisition was funded
by an increase in the Company's credit facility of $4,160,000, the
issuance to private investors of 40,000 shares of $100 Series A Preferred
Stock, the issuance of $2,500,000 in 12.25% debentures and the issuance of
300,000 common stock warrants with an exercise price of $4.25 to holders
of the preferred stock (see note 17 to the consolidated financial
statements). This acquisition was accounted for as a purchase and the
excess of the fair value of the assets (goodwill) is being amortized on a
straight-line basis over 25 years.
The following table presents the unaudited proforma
results of operations as if the acquisition of Obdyke and Sheet Metal had
occurred at the beginning of each respective period presented after giving
effect to certain adjustments, including amortization of goodwill and
increased interest expense. These proforma results have been prepared for
comparative purposes only and do not purport to be indicative of what
would have occurred had the acquisitions been made as of those dates or
results which may occur in the future.
F-11
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS (continued)
Year Ended December 31,
1998
-----------
Net Sales $46,600,000
-----------
Net Income $ 1,800,000
-----------
Earnings Per Share
Basic $ .34
===========
Diluted $ .29
===========
4. INVENTORIES
Inventories are valued at the lower of cost or market.
Cost is determined using the first-in, first-out method ("FIFO").
As of December 31, 1999 and 1998, inventories consist of
the following:
1999 1998
----------- -----------
Raw materials $ 3,561,537 $ 3,951,194
Finished goods 2,008,856 2,624,451
Packaging materials and supplies 94,615 122,775
Less provision for obsolescence (46,000) (146,000)
----------- -----------
$ 5,619,008 $ 6,552,420
=========== ===========
5. PROPERTY AND EQUIPMENT
As of December 31, 1999 and 1998, property and equipment
consists of the following:
1999 1998
----------- -----------
Land $ 485,000 $ 485,000
Building 5,497,197 5,347,021
Machinery 8,105,217 6,560,651
Furniture and fixtures 1,463,725 1,236,825
Trucks and autos 966,120 824,516
Dies 1,098,502 1,044,231
Leasehold improvements 1,522,661 1,392,264
----------- -----------
19,138,422 16,890,508
Less accumulated depreciation 8,341,536 7,101,493
----------- -----------
$10,796,886 $ 9,789,015
=========== ===========
F-12
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. PROPERTY AND EQUIPMENT (continued)
Depreciation expense for the years ended December 31,
1999, 1998 and 1997 was $1,289,357, $1,022,569 and $690,786, respectively.
Total cost of machinery under capital leases included
above as of December 31, 1999 and 1998 was $1,030,104 and $649,796,
respectively. Accumulated depreciation for machinery under capital leases
included above as of December 31, 1999 and 1998 was $280,579 and $109,103,
respectively.
6. OTHER ASSETS
As of December 31, 1999 and 1998, other assets consist of
the following:
1999 1998
---------- ----------
Patents and customer lists, net $1,377,866 $1,489,124
Non-compete agreements, net 1,161,905 1,252,381
Capitalized acquisition costs, net 594,686 543,248
Equipment deposits and other -- 1,057,530
---------- ----------
$3,134,457 $4,342,283
========== ==========
F-13
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT
As of December 31, 1999 and 1998, long-term debt consisted
of the following:
1999 1998
----------- -----------
$9,500,000 revolving line-of-credit expiring in
January, 2003. Interest is due monthly at
prime less 1/2% (prime was 8.5% as of
December 31, 1999). This line is
collateralized by 85% of eligible accounts
receivable, 50% of eligible inventory, and
any remaining uncollateralized property
and equipment $ 5,831,587 $ 6,624,294
10.0% subordinated debentures, due January 2,
2004, interest is payable quarterly
commencing February 1, 1998 through maturity
As of January 1, 1999, these debentures were
issued in exchange for Series A convertible
preferred stock 4,000,000 --
Mortgage note payable, principal and interest
(7.25%) due in monthly payments of
approximately $27,400 through March, 2008
with a balloon of $1,431,391 due then 2,824,461 2,943,589
Term loan, payable in 33 monthly installments of
$60,606 plus interest at prime less 1/2%
through December, 2002. This loan is
uncollateralized 2,000,000 --
Term loan, payable in 24 monthly installments of
$44,333 plus interest at prime less 1/2%
through January 2002, and a balloon payment
of $804,012 due in January, 2002. This loan
is collateralized by machinery and equipment 1,868,004 2,400,000
Capital leases, due in monthly installments of
approximately $15,931, including interest,
ranging from 2.90% to 18.0% through 2004;
collateralized by certain equipment 765,542 542,771
12.25% subordinated debenture, due January 2,
2004, 2004, interest is payable quarterly
commencing February 1, 1998 through
maturity 500,000 2,500,000
Notes payable in connection with various
acquisitions of assets. Due in quarterly
installments of $279,273 plus interest at
9.5% and 8.75%, respectively, through
March 1, 2000 279,273 1,611,939
----------- -----------
18,068,867 16,622,593
Less current maturities 1,680,261 2,062,286
----------- -----------
$16,388,606 $14,560,307
=========== ===========
F-14
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT (continued)
The 12.25% subordinated debenture (12.25% debenture)
matures on January 2, 2004. The interest rate on the 12.25% debenture will
increase on January 2, 2002 from 12.25% to 19.25%. The interest rate will
decrease on January 3, 2003 to 14% until maturity.
Scheduled annual maturities of long-term debt as of
December 31, 1999 are as follows:
Year Ending December 31
-----------------------
2000 $ 1,680,261
2001 1,579,888
2002 1,854,943
2003 10,140,528
2004 732,529
Thereafter 2,080,718
-----------
$18,068,867
===========
Scheduled annual maturities of capital leases as of
December 31, 1999 are as follows:
Year Ending December 31
-----------------------
2000 $ 195,481
2001 182,963
2002 175,684
2003 149,875
2004 61,539
Thereafter -
---------
$ 765,542
=========
8. ACCRUED EXPENSES
As of December 31, 1999 and 1998, accrued expenses consist
of the following:
1999 1998
---------- ----------
Payroll and related expenses $ 120,365 $ 133,073
Accrued customer rebates 573,796 470,000
Other accrued expenses 639,891 538,860
---------- ----------
Total accrued expenses $1,334,052 $1,141,933
========== ==========
F-15
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES
The sources of temporary differences and the tax effect of
each as of December 31, 1999 and 1998 as follows:
1999 1998
----------- -----------
Inventory reserves $ 17,250 $ 18,400
Net operating loss carryforwards 1,941,533 2,114,768
Depreciation and other (147,604) 82,033
----------- -----------
Total net deferred tax asset $ 1,811,179 $ 2,215,201
=========== ===========
The valuation allowance decreased by $1,023,804 during the
year ended December 31, 1998.
The net deferred asset has been recognized on the balance
sheet as follows:
December 31
-------------------------
1999 1998
---------- ----------
Current portion $ 370,760 $ 484,000
Noncurrent portion 1,440,419 1,731,201
---------- ----------
$1,811,179 $2,215,201
========== ==========
As of December 31, 1999, the Company had net operating
loss carryforwards of approximately $5,560,000, expiring through 2010. In
addition, investment tax credits of approximately $5,000 are available to
apply against future income taxes, if any, and expire in 2000.
Provision for income taxes for 1999, 1998 and 1997 were as
follows:
1999 1998 1997
----------- ----------- -----------
Current federal tax expense $ 13,467 $ 15,000 $ 20,000
Current state tax expense 24,177 53,000 7,000
Deferred tax expense 404,022 308,603 360,905
Valuation allowance reduction -- (1,023,804) (1,387,905)
----------- ----------- -----------
Provision for income tax (benefit) $ 441,666 ($ 647,201) ($1,000,000)
=========== =========== ===========
F-16
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES (Continued)
Significant differences between taxes computed at the
federal statutory rate and the provision for income taxes were.
Years Ended December 31,
1999 1998 1997
------ ------ ------
Taxes at U.S. Federal statutory rate 34.0% 34.0% 34.0%
State income taxes,
net of federal benefit 3.52% 3.35% 0.0%
Other, net 6.64% (1.26%) 1.0%
Permanent differences and
valuation allowance reduction 9.47% (98.1%) (133.0%)
------ ------ ------
53.63% (62.01%) (98.0%)
====== ====== ======
Certain gains which were recognized as a result of the
Company's emergence from bankruptcy are not considered taxable income for
either federal or state purposes. Additionally, gains recognized from
exchanging debt for common stock are not considered taxable income.
However, these gains reduce prior years' net operating loss carryforwards.
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities and projected future taxable income in making
this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the deferred
tax assets are deductible, along with reasonable and prudent tax planning
strategies and the expiration dates of carryforwards, management believes
it is more likely than not the Company will realize the benefits of these
deductible differences, net of the existing valuation allowances, at
December 31, 1999.
10. REDEEMABLE COMMON STOCK
During 1998, the Company issued 125,000 shares of common
stock valued at $500,000 in connection with the acquisition of the roof
drainage manufacturing segment of Benjamin Obdyke, Inc. In conjunction
with the transaction, the Company entered into a repurchase agreement
whereby the holder of the common stock has the option to require the
Company to repurchase the stock at $4.00. These shares have been
classified as redeemable common stock in the consolidated financial
statements.
On January 21, 2000, the holder of the redeemable common
stock exercised their option to receive cash proceeds of $500,000. The
Company arranged for the sale of the 125,000 shares of redeemable common
stock at $2.25 per share to an unrelated third party. The remaining
$226,254, including transfer fees, was paid by the Company.
F-17
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. EARNINGS PER SHARE
Basic and diluted earnings per share for the years 1999
through 1997 are as follows:
1999 1998 1997
---------- ---------- ----------
Basic earnings per share
Net income available to
common stockholders $ 381,797 $1,290,828 $2,020,377
---------- ---------- ----------
Weighted average common
shares outstanding 5,483,726 5,367,546 5,057,828
---------- ---------- ----------
Basic earnings per share $ 0.07 $ 0.24 $ 0.40
========== ========== ==========
Diluted earnings per share
Income before preferred
stock dividend $ 381,797 $1,690,828 $2,020,377
---------- ---------- ----------
Weighted average common
shares outstanding 5,483,726 5,367,546 5,057,828
Add: effect of vested and non-
vested dilutive securities 956,293 1,214,442 1,500,498
Add: effect of convertible
preferred shares 941,177 941,177 1,612
---------- ---------- ----------
7,381,196 7,523,165 6,559,937
========== ========== ==========
Diluted earnings per share $ 0.07 $ 0.22 $ 0.31
========== ========== ==========
Stock equivalents which were exercisable at prices greater
than the average market price of the common shares during the year have
been excluded from the computation since the effect would be
anti-dilutive. As of December 31, 1999, there were 538,350 options meeting
this criterion.
F-18
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK OPTIONS
Under various plans, the Company may grant stock options
to key executives, directors, management personnel, other employees and
consultants. Transactions under the various stock option plans for the
period indicated were as follows:
<TABLE>
<CAPTION>
Wtd. Avg. Wtd. Avg. Wtd. Avg.
1999 Price 1998 Price 1997 Price
-------------- -------------- ---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding as of beginning
of year 2,341,450 $ 1.73 2,449,248 $ 1.71 2,261,998 $ 1.55
Options granted 37,400 $ 2.25 - 195,750 $ 3.41
Options exercised or canceled (3,500) $ 1.78 (107,798) $ 1.51 (8,500) $ 1.75
--------- --------- ---------
Outstanding as of December 31 2,375,350 $ 1.75 2,341,450 $ 1.73 2,449,248 $ 1.71
========= ========= =========
Exercisable as of December 31 1,890,350 $ 1.76 1,341,450 $ 1.76 1,179,248 $ 1.81
========= ========= =========
</TABLE>
The following table summarizes information about stock options
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Number Remaining Weighted Weighted
Range of Of Years of Average Number Average
Exercise Options Contractual Exercise Of Options Exercise
Price Outstanding Life Price Exercisable Price
- ----------------- --------------- ----------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$1.00-$2.99 2,177,000 8.33 $1.58 1,712,000 $1.58
$3.00-$3.99 168,350 6.30 $3.39 148,350 $3.37
$4.00-$4.55 30,000 3.00 $4.55 30,000 $4.55
--------------- ---------------
2,375,350 1,890,350
=============== ===============
</TABLE>
The Company did not recognize compensation costs for stock
based compensation awards in 1999, 1998 and 1997. The Company accounts for
such compensation under the provisions of Accounting Principles Board
Opinion No. 25. Had compensation cost for the Company's stock-based
compensation plans been determined based on the fair value at the grant
dates for awards granted in 1999 and 1998 consistent with SFAS 123
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), there would
have been no change to income available to common shareholders or earnings
per share.
The fair value of the options granted in 1997 used to
compute pro forma net income and earnings per share disclosures is the
estimated present value at the grant date
F-19
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK OPTIONS (continued)
using the Black-Scholes option pricing model with the following weighted
average assumptions: dividend yield 0%; expected volatility of 29% in
1997, a risk free interest rate of 6.2% in 1997; and it is expected that
the options will be exercised immediately upon vesting.
13. COMMON STOCK AND WARRANTS
In January, 1998 the Company issued 50,000 warrants to the
previous owners of Obdyke's metal division at an exercise price of $4.42.
The warrants are immediately exercisable and will expire two years from
the date of issuance. These warrants expired on January 2, 2000.
In January, 1998 in connection with the purchase of
certain Obdyke assets the Company issued 300,000 warrants at an exercise
price of $4.25. In January, 1998 and December, 1997 the Company issued
40,000 shares of Series A Convertible Preferred Stock for $100 per share.
These shares have a $100 per share liquidating preference. Each share is
convertible at any time into 23.53 common shares. Dividends on the
preferred shares are cumulative, provided at $10.00 per share per annum
and payable quarterly commencing March 31, 1998.
Effective as of January 1, 1999, the Company entered into
an agreement pursuant to which the 40,000 shares of Series A Preferred
Stock were exchanged for 10% Subordinated Convertible Debentures (10%
debentures) due January 2, 2004. The 10% debentures are convertible at any
time into 23.53 common shares for each $100 of 10% debentures outstanding
on the conversion date subject to specified anti-dilution adjustments. The
subordinated convertible debentures are pre-payable only when the
Company's common stock trades above $9.00 per share for 10 consecutive
days.
Simultaneously with the exchange of the Series A Preferred
Stock, the Company extended the exercise date on 300,000 common stock
warrants from January 2, 2003 to December 31, 2003.
As of December 31, 1999, total outstanding warrants were
300,000. The exercise price of these warrants is $4.25 and expire on
December 31, 2003.
Stock warrant transactions are summarized as follows:
Stock Wt Avg Price
Warrants per Warrant
-------- -----------
Outstanding, January 1, 1998 375,000 $ 1.53
Issued 350,000 4.27
-------- --------
Outstanding, December 31, 1998 725,000 2.86
Exercised and expired (425,000) 1.87
-------- --------
Outstanding, December 31, 1999 300,000 $ 4.25
======== ========
F-20
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMON STOCK AND WARRANTS (Continued)
At December 31, 1999, $482,916 is due from officers for
stock subscribed, relating to loans for the exercise of options and the
purchase of stock.
14. COMMITMENTS AND CONTINGENCIES
The Company leases certain real property and equipment
under noncancellable operating leases. Under certain leasing arrangements,
the Company pays property taxes, insurance and maintenance related to the
leased property. Rent expense for the years ended December 31, 1999, 1998
and 1997 was $833,464, $614,077 and $185,000, respectively. As of December
31, 1999, minimum rental commitments under long-term, noncancellable
operating leases are as follows:
Year Ending December 31
-----------------------
2000 $ 812,690
2001 822,616
2002 805,746
2003 416,214
2004 160,164
Thereafter 80,082
----------
$3,097,512
==========
The Company's current involvement in legal proceedings are
those which arise in the ordinary course of business. In the opinion of
management, the outcome of these matters will not have a material adverse
effect on the financial position, results of operation, or liquidity of
the Company.
The Company participates in a multi-employer pension plan
covering substantially all of its union employees. The union employees
comprise 68% of the Company's workforce, which are represented by two
unions. The Company makes monthly payments as required into the
multi-employer plan trust established for union employees. Under the
Employee Retirement Income Security Act of 1974, as amended by the
Multi-Employer Pension Plan Amendments Act of 1980, an employer is liable
for a proportionate part of the plan's unfunded vested benefits liability.
The Company's share of the unfunded liability related to Local 107
Multi-Employer Pension Plan, is approximately $60,000. The Company's share
of the unfunded liability related to Local 169's Multi-Employer Pension
Plan is approximately $500,000. The Company's union agreements expire on
December 31, 2001.
15. CONCENTRATION OF CREDIT RISK ARISING FROM CASH DEPOSITS
The Company maintains cash balances at a financial
institution located in the Delaware Valley area. The accounts at the
institution are insured by the Federal Deposit Insurance Corporation up to
$100,000. During the year, the Company's cash balances periodically exceed
the insured limit.
F-21
<PAGE>
BERGER HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to
estimate the fair value of each class of financial instruments for which
it is practicable to estimate that value.
Accounts Receivable and Accounts Payable
The carrying amount approximates fair value because of the
short maturity of those instruments.
Long-Term Debt
The fair value of the Company's long-term debt is
estimated based on the current rates available to the Company for debt of
the same remaining maturities. As of December 31, 1999, the carrying value
of this debt, aggregating $18,068,867 approximates the fair value.
17. SUPPLEMENTARY INFORMATION (UNAUDITED)
This table summarizes the unaudited results of operations
for each quarter of 1999 and 1998.
<TABLE>
<CAPTION>
First Second Third Fourth Total
----- ------ ----- ------ -----
1999
<S> <C> <C> <C> <C> <C>
Net Sales $ 8,207,982 $11,091,149 $10,786,635 $ 9,880,535 $39,966,301
Operating income 397,849 1,246,186 788,807 218,192 2,651,034
Income (loss) available to
common stockholders (46,497) 505,061 210,567 (287,334) 381,797
Basic earnings (loss)
per share $ (0.01) $ 0.09 $ 0.04 $ (0.05) $ 0.07
Diluted earnings (loss)
per share $ (0.01) $ 0.08 $ 0.04 $ (0.05) $ 0.07
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
----- ------ ----- ------ -----
1998
<S> <C> <C> <C> <C> <C>
Net Sales $ 7,014,455 $ 9,739,325 $10,273,223 $ 8,581,306 $35,608,309
Operating income 135,293 872,838 976,183 207,431 2,191,745
Income (loss) available to
common stockholders (153,511) 453,123 494,557 496,659 1,290,828
Basic earnings (loss)
per share $ (0.03) $ 0.08 $ 0.09 $ 0.10 $ 0.24
Diluted earnings (loss)
per share $ (0.03) $ 0.07 $ 0.08 $ 0.10 $ 0.22
</TABLE>
F-22
<PAGE>
Exhibit 10(d)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, entered into as of the 28th day of March, 2000, by
and between BERGER HOLDINGS, LTD., d/b/a/ BERGER BUILDING PRODUCTS, CORP,
hereinafter the "Employer" and THEODORE A. SCHWARTZ, hereinafter the "Employee".
WITNESSETH:
----------
WHEREAS, this Employer and Employee entered into an Employment Agreement
as of January 1, 1994, which Employment Agreement has subsequently been amended
on several occasions;
WHEREAS, Employer and Employee wish to restate such Employment Agreement,
as so amended, in its entirety herein; and
WHEREAS, except with respect to certain agreements concerning the grant to
Employee of options to purchase shares of the common stock of Employer, entered
into prior to the date hereof, this Restated Employment Agreement shall
constitute the entire understanding between Employer and Employee as to
Employee's employment by Employer.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto intending to be legally bound hereunder,
agree as follows:
1. TERM OF EMPLOYMENT
Subject to the terms and conditions hereinafter set forth, Employer
hereby agrees to employ Employee for a term of years ending on December 31,
2000.
2. SCOPE OF EMPLOYMENT
During the term of employment, Employee shall serve as Chief
Executive Officer of Employer. Employee shall faithfully render and perform such
services as are necessary to fulfill the responsibilities of the office of Chief
Executive Officer, and such services as may be assigned to him by or under the
authority of the Board of Directors of Employer. Employee shall devote full time
efforts to the business affairs of Employer and shall render such services to
the best of his ability in the best interests of Employer. Employee shall
maintain his offices at 805 Pennsylvania Blvd., Feasterville, Pennsylvania, or
at such other addresses to which the Company may relocate. Employee shall be
permitted to engage in other business activities or trades, provided, however,
that such business activities or trades do not interfere with his duties
hereunder.
<PAGE>
3. COMPENSATION
(a) For all services rendered by Employee to Employer during the term
of employment, Employer shall pay, or cause to be paid to Employee base
compensation ( "Base Compensation"), payable weekly in the amount of $203,000
per annum.
(b) Employee shall be entitled to bonuses, if, as and when declared
by the Board of Directors of Employer, in its sole, total and absolute
discretion.
4. REIMBURSEMENT FOR EXPENSES
The Employee shall be reimbursed by the Employer for all actual,
ordinary, necessary and reasonable expenses incurred by him in the course of the
business of the Employer. The Employee shall keep an itemized account of such
expenses to be rendered to the Employer, together with vouchers and/or receipts
verifying the same.
5. EMPLOYEE BENEFITS
Employee shall be entitled to participate in all employee benefit
programs, including without limitation, group life insurance, medical and
hospitalization plans, pension and profitsharing plans, as are being presently
offered by Employer or which may hereafter during the term of employment be
offered by employer generally to its executive officers. Employer shall also
furnish to Employee an automobile for Employee's usage during the term of
employment. The Employer shall be responsible for all expenses in maintaining
the automobile, including, but not limited to insurance, gasoline costs, and all
necessary repairs.
6. INSURANCE
The Employer shall obtain for the Employee a life insurance policy
(or its equivalent) in the face amount of $500,000 wherein Employee, or his
designee, will be the owner of said policy and will retain all rights to
designate beneficiaries thereunder. The Employer shall be solely responsible for
maintaining the policy and paying the premiums as they become due.
7. DISABILITY
(a) If the Employee shall be unable, for an aggregate period of more
than 180 days in any 365 day period, to perform the services provided for herein
as a result of illness or disability of any nature, Employer may, upon 90 days
notice, terminate Employee's employment and Employer's obligations hereunder.
Employer nevertheless shall remain obligated to pay Employee his full salary for
a period of 12 months, including within such 12 month period any periods prior
to such termination for which Employee received salary while being unable to
provide services hereunder.
(b) Commencing upon the end of the 12 month period referred to in the
last sentence of subparagraph (a) above, Employer shall be obligated to pay
Employee the sum of
-2-
<PAGE>
$1,000 per week for a period of three (3) years; provided that such $1,000 per
week payments shall be reduced to $500 per week if the Net Worth of the Company
as set forth in the then most recent audited annual statements filed with the
Securities and Exchange Commission ("Annual Statements") does not equal at least
$4,000,000. Such payments shall be subject to subsequent increase to $1,000 per
week (and subsequent decrease to $500) during the period such payments are made
in the event that subsequent Annual Statements show a Net Worth at least equal
to $4,000,000 (or less than $4,000,000); provided that all such reductions and
increases shall be made solely on a prospective basis from the time the
applicable Annual Statements are filed. Upon the expiration of such 3 year
period, Employer shall be obligated to pay Employee the sum of $500 a week for
the remainder of Employee's life.
(c) The Employer may, but is not obligated to, obtain a disability
insurance policy in the amounts set forth above (or a portion thereof) in order
to secure its obligations hereunder (or a portion thereof).
8. TERMINATION
(a) By Death.
If the Employee dies, then this Agreement shall continue for a
period of 60 days with full benefits after which time this agreement shall
terminate immediately, and his rights to compensation and fringe benefits
hereunder shall terminate as of the date of such 60 day period, except that
Employee's heirs, personal representatives or estate shall be entitled to any
unpaid portion of his salary, accrued bonus and accrued benefits, if any, up to
the date of such termination.
(b) For Cause.
The Employer may terminate the Employee's employment and rights
to compensation and benefits hereunder immediately for "cause" (subject to the
last paragraph of this subparagraph (b)), except that the Employee shall be
entitled to any unpaid portion of his salary, accrued bonus, and accrued fringe
benefits, if any, up to the date of termination. "Cause" shall exist if:
(i) the Employee substantially fails to perform his duties
hereunder;
(ii) the Employee intentionally commits any acts or omits to
take any action, or commits any act of dishonesty or breach of trust, resulting
directly or indirectly in personal gain or enrichment of the Employee to the
detriment of the Employer; or
(iii) the Employee is commits a felony.
If "cause" exists as set forth in subparagraph (i) above, Employer
shall give Employee thirty (30) days prior written notice of termination
specifying the nature of the alleged "cause" and the Employee shall have such
thirty (30) day period in which to take remedial action
-3-
<PAGE>
to cure the situation that constituted the "cause". If after receiving said
thirty (30) day notice, the Employee does not cure said "cause" within such time
period, then this Agreement shall terminate as of the end of such time period.
(c) Procedure Upon Termination.
Upon termination of his employment, the Employee shall promptly
return to the Employer all documents, including without limitation, copies and
all other materials and properties of the Employer, or pertaining to its
business, including without limitation, customer and prospect lists, contacts,
files, manuals, letters, reports and records in his possession and control, no
matter from whom or in what manner acquired.
9. RESTRICTIVE COVENANT
(a) Employee agrees that, during the term of employment and so long
thereafter as he receives payments pursuant to Section 10 (Employee having the
right voluntarily to terminate such payments at any time), the Employee shall
not directly or indirectly engage in any business which is the same as, similar
to, or in competition with the business of the Employer. Employee acknowledges
that the restrictions contained herein in view of the nature of the business in
which Employee has been engaged, are reasonable and necessary to protect the
legitimate interest of Employer, and that any violation of these restrictions
would result in irreparable injury to Employer. Employee acknowledges that in
the event of a violation of any such restrictions, Employer shall be entitled to
preliminary and permanent injunctive relief as well as an equitable accounting
of all earnings, profits and other benefits arising from such violation which
rights shall be cumulative and in addition to any other rights or remedies to
which Employer may be entitled. In the event that the Employee shall engage,
directly or indirectly in any business in competition with the business of
employer, the period of non- competition referred to above shall be extended by
a period of time equal to that period beginning when such violation commenced,
and ending when the activities constituting such a violation shall have finally
been terminated in good faith.
(b) In addition, during the term of employment, and at all times
thereafter, the Employee shall not disclose confidential information of the
Employer to any other person, entity, corporation, trust, association or
partnership. For the purposes hereof, the term "confidential information" shall
include, but not be limited to, all lists or the identity of any customers,
suppliers, creditors or contacts of Employer. It shall also include any and all
information pertaining to any formulas, business opportunities, processes,
techniques, plans, contracts, sales or other financial data of Employer.
(c) Notwithstanding anything to the contrary contained herein, in the
event that any court of equity determines that time period and/or scope of this
Restrictive Covenant is held be unenforceably long or broad, as the case may be,
then, and either such event, neither the enforceability nor the validity this
paragraph as a whole shall be affected. Rather, the time period and/or scope of
the restriction so affected shall be reduced to the maximum permitted by law.
-4-
<PAGE>
10. SEVERANCE
If at the end of the term of this Agreement, Employer and Employee
have not entered into a mutually satisfactory extension of this Employment
Agreement for a term of a least three (3) years, with at least a continuation of
the present compensation structure hereunder, Employer agrees to pay Employee,
as his severance payment, an amount equal to fifty (50%) percent of Employee's
prior year Base Compensation, which amount may be paid in equal weekly
installments over a six month period without interest. Such amount shall be paid
regardless of whether Employee obtains other employment during such time,
provided such employment does not violate Section 9 hereof.
11. VACATION
Employee shall be entitled to a vacation of no more than four (4)
weeks per fiscal year.
12. ARBITRATION
Any dispute between the parties hereunder shall be determined by
arbitration in accordance with the rules of the American Arbitration Association
in Philadelphia, Pennsylvania. The Award in any such arbitration shall be final
and binding, and any party may enter judgement thereon in any court having
jurisdiction.
13. ASSIGNMENT
The Employer has the right to assign this Agreement to any successors
and assigns or other parties to whom the Board of Directors of Employer consents
to such assignment. Assignment of this Agreement by the Employee shall be
absolutely prohibited. Employee shall further be restricted from the delegation
of the performance of his duties hereunder.
14. NOTICE
Any notice required or permitted to be given under this agreement
shall be sufficient, if in writing, and if sent by registered mail to Employee
or to Employer at Employer's principal place of business.
15. APPLICABLE LAW
This Employment Agreement shall be construed in accordance with the
laws of the Commonwealth of Pennsylvania.
-5-
<PAGE>
16. ENTIRE AGREEMENT
This instrument contains the entire agreement of the parties. It may
not be changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
17. CHANGE IN CONTROL
If, at any time after a Change in Control, as hereinafter defined, (i)
Employer shall terminate Employee's employment in any manner, including, but not
limited to, pursuant to the provisions of Section 8(b), or (ii) the scope of the
Employee's employment, as described in Section 2, shall be changed in any
material manner, then, in either such event, Employee shall be immediately
entitled to a lump sum payment in cash equal to the sum of the payments (without
discount) to which he would be entitled through the end of the term of this
Agreement under the provisions of Section 3. "Change in Control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, as in effect on the date hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
ATTEST: BERGER HOLDINGS, LTD.
/s/ Joseph F. Weiderman BY: /s/ Joseph F. Weiderman
- ------------------------------- -------------------------------
Joseph F. Weiderman, President
/s/ Bonnie Steinberg /s/ Theodore A. Schwartz
- ------------------------------- -------------------------------
WITNESS Theodore A. Schwartz
-6-
<PAGE>
Exhibit 10(e)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, entered into as of the 28th day of March, 2000, by
and between BERGER HOLDINGS, LTD., d/b/a/ BERGER BUILDING PRODUCTS, CORP,
hereinafter the "Employer" and JOSEPH F. WEIDERMAN, hereinafter the "Employee".
WITNESSETH:
----------
WHEREAS, this Employer and Employee entered into an Employment Agreement
as of January 1, 1994, which Employment Agreement has subsequently been amended
on several occasions;
WHEREAS, Employer and Employee wish to restate such Employment Agreement,
as so amended, in its entirety herein; and
WHEREAS, except with respect to certain agreements concerning the grant to
Employee of options to purchase shares of the common stock of Employer, entered
into prior to the date hereof, this Restated Employment Agreement shall
constitute the entire understanding between Employer and Employee as to
Employee's employment by Employer.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto intending to be legally bound hereunder,
agree as follows:
1. TERM OF EMPLOYMENT
Subject to the terms and conditions hereinafter set forth, Employer
hereby agrees to employ Employee for a term of years ending on December 31,
2000.
2. SCOPE OF EMPLOYMENT
During the term of employment, Employee shall serve as President and
Chief Operating Officer of Employer. Employee shall faithfully render and
perform such services as are necessary to fulfill the responsibilities of the
office of President and Chief Operating Officer, and such services as may be
assigned to him by or under the authority of the Board of Directors of Employer.
Employee shall devote full time efforts to the business affairs of Employer and
shall render such services to the best of his ability in the best interests of
Employer. Employee shall maintain his offices at 805 Pennsylvania Blvd.,
Feasterville, Pennsylvania, or at such other addresses to which the Company may
relocate.
3. COMPENSATION
<PAGE>
(a) For all services rendered by Employee to Employer during the term
of employment, Employer shall pay, or cause to be paid to Employee base
compensation ("Base Compensation"), payable weekly in the amount of $203,000
per annum.
(b) Employee shall be entitled to bonuses, if, as and when declared
by the Board of Directors of Employer, in its sole, total and absolute
discretion.
4. REIMBURSEMENT FOR EXPENSES
The Employee shall be reimbursed by the Employer for all actual,
ordinary, necessary and reasonable expenses incurred by him in the course of the
business of the Employer. The Employee shall keep an itemized account of such
expenses to be rendered to the Employer, together with vouchers and/or receipts
verifying the same.
5. EMPLOYEE BENEFITS
Employee shall be entitled to participate in all employee benefit
programs, including without limitation, group life insurance, medical and
hospitalization plans, pension and profitsharing plans, as are being presently
offered by Employer or which may hereafter during the term of employment be
offered by employer generally to its executive officers. Employer shall also
furnish to Employee an automobile for Employee's usage during the term of
employment. The Employer shall be responsible for all expenses in maintaining
the automobile, including, but not limited to insurance, gasoline costs, and all
necessary repairs.
6. INSURANCE
The Employer shall obtain for the Employee a life insurance policy
(or its equivalent) in the face amount of $500,000 wherein Employee, or his
designee, will be the owner of said policy and will retain all rights to
designate beneficiaries thereunder. The Employer shall be solely responsible for
maintaining the policy and paying the premiums as they become due.
7. DISABILITY
(a) If the Employee shall be unable, for an aggregate period of more
than 180 days in any 365 day period, to perform the services provided for herein
as a result of illness or disability of any nature, Employer may, upon 90 days
notice, terminate Employee's employment and Employer's obligations hereunder.
Employer nevertheless shall remain obligated to pay Employee his full salary for
a period of 12 months, including within such 12 month period any periods prior
to such termination for which Employee received salary while being unable to
provide services hereunder.
(b) Commencing upon the end of the 12 month period referred to in the
last sentence of subparagraph (a) above, Employer shall be obligated to pay
Employee the sum of $1,000 per week for a period of three (3) years; provided
that such $1,000 per week payments shall be reduced to $500 per week if the Net
Worth of the Company as set forth in the then most recent audited annual
statements filed with the Securities and Exchange Commission ("Annual
-2-
<PAGE>
Statements") does not equal at least $4,000,000. Such payments shall be subject
to subsequent increase to $1,000 per week (and subsequent decrease to $500)
during the period such payments are made in the event that subsequent Annual
Statements show a Net Worth at least equal to $4,000,000 (or less than
$4,000,000); provided that all such reductions and increases shall be made
solely on a prospective basis from the time the applicable Annual Statements are
filed. Upon the expiration of such 3 year period, Employer shall be obligated to
pay Employee the sum of $500 a week for the remainder of Employee's life.
(c) The Employer may, but is not obligated to, obtain a disability
insurance policy in the amounts set forth above (or a portion thereof) in order
to secure its obligations hereunder (or a portion thereof).
8. TERMINATION
(a) By Death.
If the Employee dies, then this Agreement shall continue for a
period of 60 days with full benefits after which time this agreement shall
terminate immediately, and his rights to compensation and fringe benefits
hereunder shall terminate as of the date of such 60 day period, except that
Employee's heirs, personal representatives or estate shall be entitled to any
unpaid portion of his salary, accrued bonus and accrued benefits, if any, up to
the date of such termination.
(b) For Cause.
The Employer may terminate the Employee's employment and rights
to compensation and benefits hereunder immediately for "cause" (subject to the
last paragraph of this subparagraph (b)), except that the Employee shall be
entitled to any unpaid portion of his salary, accrued bonus, and accrued fringe
benefits, if any, up to the date of termination. "Cause" shall exist if:
(i) the Employee substantially fails to perform his duties
hereunder;
(ii) the Employee intentionally commits any acts or omits to
take any action, or commits any act of dishonesty or breach of trust, resulting
directly or indirectly in personal gain or enrichment of the Employee to the
detriment of the Employer; or
(iii) the Employee is commits a felony.
If "cause" exists as set forth in subparagraph (i) above, Employer
shall give Employee thirty (30) days prior written notice of termination
specifying the nature of the alleged "cause" and the Employee shall have such
thirty (30) day period in which to take remedial action to cure the situation
that constituted the "cause". If after receiving said thirty (30) day notice,
the Employee does not cure said "cause" within such time period, then this
Agreement shall terminate as of the end of such time period.
-3-
<PAGE>
(c) Procedure Upon Termination.
Upon termination of his employment, the Employee shall promptly
return to the Employer all documents, including without limitation, copies and
all other materials and properties of the Employer, or pertaining to its
business, including without limitation, customer and prospect lists, contacts,
files, manuals, letters, reports and records in his possession and control, no
matter from whom or in what manner acquired.
9. RESTRICTIVE COVENANT
(a) Employee agrees that, during the term of employment and so long
thereafter as he receives payments pursuant to Section 10 (Employee having the
right voluntarily to terminate such payments at any time), the Employee shall
not directly or indirectly engage in any business which is the same as, similar
to, or in competition with the business of the Employer. Employee acknowledges
that the restrictions contained herein in view of the nature of the business in
which Employee has been engaged, are reasonable and necessary to protect the
legitimate interest of Employer, and that any violation of these restrictions
would result in irreparable injury to Employer. Employee acknowledges that in
the event of a violation of any such restrictions, Employer shall be entitled to
preliminary and permanent injunctive relief as well as an equitable accounting
of all earnings, profits and other benefits arising from such violation which
rights shall be cumulative and in addition to any other rights or remedies to
which Employer may be entitled. In the event that the Employee shall engage,
directly or indirectly in any business in competition with the business of
employer, the period of non- competition referred to above shall be extended by
a period of time equal to that period beginning when such violation commenced,
and ending when the activities constituting such a violation shall have finally
been terminated in good faith.
(b) In addition, during the term of employment, and at all times
thereafter, the Employee shall not disclose confidential information of the
Employer to any other person, entity, corporation, trust, association or
partnership. For the purposes hereof, the term "confidential information" shall
include, but not be limited to, all lists or the identity of any customers,
suppliers, creditors or contacts of Employer. It shall also include any and all
information pertaining to any formulas, business opportunities, processes,
techniques, plans, contracts, sales or other financial data of Employer.
(c) Notwithstanding anything to the contrary contained herein, in the
event that any court of equity determines that time period and/or scope of this
Restrictive Covenant is held be unenforceably long or broad, as the case may be,
then, and either such event, neither the enforceability nor the validity this
paragraph as a whole shall be affected. Rather, the time period and/or scope of
the restriction so affected shall be reduced to the maximum permitted by law.
-4-
<PAGE>
10. SEVERANCE
If at the end of the term of this Agreement, Employer and Employee
have not entered into a mutually satisfactory extension of this Employment
Agreement for a term of a least three (3) years, with at least a continuation of
the present compensation structure hereunder, Employer agrees to pay Employee,
as his severance payment, an amount equal to fifty (50%) percent of Employee's
prior year Base Compensation, which amount may be paid in equal weekly
installments over a six month period without interest. Such amount shall be paid
regardless of whether Employee obtains other employment during such time,
provided such employment does not violate Section 9 hereof.
11. VACATION
Employee shall be entitled to a vacation of no more than four (4)
weeks per fiscal year.
12. ARBITRATION
Any dispute between the parties hereunder shall be determined by
arbitration in accordance with the rules of the American Arbitration Association
in Philadelphia, Pennsylvania. The Award in any such arbitration shall be final
and binding, and any party may enter judgement thereon in any court having
jurisdiction.
13. ASSIGNMENT
The Employer has the right to assign this Agreement to any successors
and assigns or other parties to whom the Board of Directors of Employer consents
to such assignment. Assignment of this Agreement by the Employee shall be
absolutely prohibited. Employee shall further be restricted from the delegation
of the performance of his duties hereunder.
14. NOTICE
Any notice required or permitted to be given under this agreement
shall be sufficient, if in writing, and if sent by registered mail to Employee
or to Employer at Employer's principal place of business.
15. APPLICABLE LAW
This Employment Agreement shall be construed in accordance with the
laws of the Commonwealth of Pennsylvania.
-5-
<PAGE>
16. ENTIRE AGREEMENT
This instrument contains the entire agreement of the parties. It may
not be changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
17. CHANGE IN CONTROL
If, at any time after a Change in Control, as hereinafter defined,
(i) Employer shall terminate Employee's employment in any manner, including, but
not limited to, pursuant to the provisions of Section 8(b), or (ii) the scope of
the Employee's employment, as described in Section 2, shall be changed in any
material manner, then, in either such event, Employee shall be immediately
entitled to a lump sum payment in cash equal to the sum of the payments (without
discount) to which he would be entitled through the end of the term of this
Agreement under the provisions of Section 3. "Change in Control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, as in effect on the date hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
ATTEST: BERGER HOLDINGS, LTD.
/s/ Joseph F. Weiderman By: /s/ Theodore A. Schwartz
- ------------------------------- -------------------------------
Theodore A. Schwartz, Chief
Executive Officer
/s/ Bonnie Steinberg /s/ Joseph F. Weiderman
- ------------------------------- -------------------------------
WITNESS Joseph F. Weiderman
DSB:696649.1
-6-
<PAGE>
Exhibit 10(f)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, entered into as of the 28th day of March, 2000, by
and between BERGER HOLDINGS,LTD., d/b/a/ BERGER BUILDING PRODUCTS, CORP,
hereinafter the "Employer" and PAUL L. SPIESE, III, hereinafter the "Employee".
WITNESSETH:
----------
WHEREAS, this Employer and Employee entered into an Employment Agreement
as of January 1, 1994, which Employment Agreement has subsequently been amended
on several occasions;
WHEREAS, Employer and Employee wish to restate such Employment Agreement,
as so amended, in its entirety herein; and
WHEREAS, except with respect to certain agreements concerning the grant to
Employee of options to purchase shares of the common stock of Employer, entered
into prior to the date hereof, this Restated Employment Agreement shall
constitute the entire understanding between Employer and Employee as to
Employee's employment by Employer.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto intending to be legally bound hereunder,
agree as follows:
1. TERM OF EMPLOYMENT
Subject to the terms and conditions hereinafter set forth, Employer
hereby agrees to employ Employee for a term of years ending on December 31,
2000.
2. SCOPE OF EMPLOYMENT
During the term of employment, Employee shall serve as Vice President
of Manufacturing of Employer. Employee shall faithfully render and perform such
services as are necessary to fulfill the responsibilities of the Vice President
of Manufacturing, and such services as may be assigned to him by or under the
authority of the Board of Directors of Employer. Employee shall devote full time
efforts to the business affairs of Employer and shall render such services to
the best of his ability in the best interests of Employer. Employee shall
maintain his offices at 805 Pennsylvania Blvd., Feasterville, Pennsylvania, or
at such other addresses to which the Company may relocate.
3. COMPENSATION
<PAGE>
(a) For all services rendered by Employee to Employer during the term
of employment, Employer shall pay, or cause to be paid to Employee base
compensation ( "Base Compensation"), payable weekly in the amount of $135,000
per annum.
(b) Employee shall be entitled to bonuses, if, as and when declared
by the Board of Directors of Employer, in its sole, total and absolute
discretion.
4. REIMBURSEMENT FOR EXPENSES
The Employee shall be reimbursed by the Employer for all actual,
ordinary, necessary and reasonable expenses incurred by him in the course of the
business of the Employer. The Employee shall keep an itemized account of such
expenses to be rendered to the Employer, together with vouchers and/or receipts
verifying the same.
5. EMPLOYEE BENEFITS
Employee shall be entitled to participate in all employee benefit
programs, including without limitation, group life insurance, medical and
hospitalization plans, pension and profitsharing plans, as are being presently
offered by Employer or which may hereafter during the term of employment be
offered by employer generally to its executive officers. Employer shall also
furnish to Employee an automobile for Employee's usage during the term of
employment. The Employer shall be responsible for all expenses in maintaining
the automobile, including, but not limited to insurance, gasoline costs, and all
necessary repairs.
6. INSURANCE
The Employer shall obtain for the Employee a life insurance policy
(or its equivalent) in the face amount of $500,000 wherein Employee, or his
designee, will be the owner of said policy and will retain all rights to
designate beneficiaries thereunder. The Employer shall be solely responsible for
maintaining the policy and paying the premiums as they become due.
7. DISABILITY
(a) If the Employee shall be unable, for an aggregate period of more
than 180 days in any 365 day period, to perform the services provided for herein
as a result of illness or disability of any nature, Employer may, upon 90 days
notice, terminate Employee's employment and Employer's obligations hereunder.
Employer nevertheless shall remain obligated to pay Employee his full salary for
a period of 12 months, including within such 12 month period any periods prior
to such termination for which Employee received salary while being unable to
provide services hereunder.
(b) Commencing upon the end of the 12 month period referred to in the
last sentence of subparagraph (a) above, Employer shall be obligated to pay
Employee the sum of $1,000 per week for a period of three (3) years; provided
that such $1,000 per week payments shall be reduced to $500 per week if the Net
Worth of the Company as set forth in the then most recent audited annual
statements filed with the Securities and Exchange Commission ("Annual
-2-
<PAGE>
Statements") does not equal at least $4,000,000. Such payments shall be subject
to subsequent increase to $1,000 per week (and subsequent decrease to $500)
during the period such payments are made in the event that subsequent Annual
Statements show a Net Worth at least equal to $4,000,000 (or less than
$4,000,000); provided that all such reductions and increases shall be made
solely on a prospective basis from the time the applicable Annual Statements are
filed. Upon the expiration of such 3 year period, Employer shall be obligated to
pay Employee the sum of $500 a week for the remainder of Employee's life.
(c) The Employer may, but is not obligated to, obtain a disability
insurance policy in the amounts set forth above (or a portion thereof) in order
to secure its obligations hereunder (or a portion thereof).
8. TERMINATION
(a) By Death.
If the Employee dies, then this Agreement shall continue for a
period of 60 days with full benefits after which time this agreement shall
terminate immediately, and his rights to compensation and fringe benefits
hereunder shall terminate as of the date of such 60 day period, except that
Employee's heirs, personal representatives or estate shall be entitled to any
unpaid portion of his salary, accrued bonus and accrued benefits, if any, up to
the date of such termination.
(b) For Cause.
The Employer may terminate the Employee's employment and rights
to compensation and benefits hereunder immediately for "cause" (subject to the
last paragraph of this subparagraph (b)), except that the Employee shall be
entitled to any unpaid portion of his salary, accrued bonus, and accrued fringe
benefits, if any, up to the date of termination. "Cause" shall exist if:
(i) the Employee substantially fails to perform his duties
hereunder;
(ii) the Employee intentionally commits any acts or omits to
take any action, or commits any act of dishonesty or breach of trust, resulting
directly or indirectly in personal gain or enrichment of the Employee to the
detriment of the Employer; or
(iii) the Employee is commits a felony.
If "cause" exists as set forth in subparagraph (i) above, Employer
shall give Employee thirty (30) days prior written notice of termination
specifying the nature of the alleged "cause" and the Employee shall have such
thirty (30) day period in which to take remedial action to cure the situation
that constituted the "cause". If after receiving said thirty (30) day notice,
the Employee does not cure said "cause" within such time period, then this
Agreement shall terminate as of the end of such time period.
-3-
<PAGE>
(c) Procedure Upon Termination.
Upon termination of his employment, the Employee shall promptly
return to the Employer all documents, including without limitation, copies and
all other materials and properties of the Employer, or pertaining to its
business, including without limitation, customer and prospect lists, contacts,
files, manuals, letters, reports and records in his possession and control, no
matter from whom or in what manner acquired.
9. RESTRICTIVE COVENANT
(a) Employee agrees that, during the term of employment and so long
thereafter as he receives payments pursuant to Section 10 (Employee having the
right voluntarily to terminate such payments at any time), the Employee shall
not directly or indirectly engage in any business which is the same as, similar
to, or in competition with the business of the Employer. Employee acknowledges
that the restrictions contained herein in view of the nature of the business in
which Employee has been engaged, are reasonable and necessary to protect the
legitimate interest of Employer, and that any violation of these restrictions
would result in irreparable injury to Employer. Employee acknowledges that in
the event of a violation of any such restrictions, Employer shall be entitled to
preliminary and permanent injunctive relief as well as an equitable accounting
of all earnings, profits and other benefits arising from such violation which
rights shall be cumulative and in addition to any other rights or remedies to
which Employer may be entitled. In the event that the Employee shall engage,
directly or indirectly in any business in competition with the business of
employer, the period of non- competition referred to above shall be extended by
a period of time equal to that period beginning when such violation commenced,
and ending when the activities constituting such a violation shall have finally
been terminated in good faith.
(b) In addition, during the term of employment, and at all times
thereafter, the Employee shall not disclose confidential information of the
Employer to any other person, entity, corporation, trust, association or
partnership. For the purposes hereof, the term "confidential information" shall
include, but not be limited to, all lists or the identity of any customers,
suppliers, creditors or contacts of Employer. It shall also include any and all
information pertaining to any formulas, business opportunities, processes,
techniques, plans, contracts, sales or other financial data of Employer.
(c) Notwithstanding anything to the contrary contained herein, in the
event that any court of equity determines that time period and/or scope of this
Restrictive Covenant is held be unenforceably long or broad, as the case may be,
then, and either such event, neither the enforceability nor the validity this
paragraph as a whole shall be affected. Rather, the time period and/or scope of
the restriction so affected shall be reduced to the maximum permitted by law.
-4-
<PAGE>
10. SEVERANCE
If at the end of the term of this Agreement, Employer and Employee
have not entered into a mutually satisfactory extension of this Employment
Agreement for a term of a least three (3) years, with at least a continuation of
the present compensation structure hereunder, Employer agrees to pay Employee,
as his severance payment, an amount equal to fifty (50%) percent of Employee's
prior year Base Compensation, which amount may be paid in equal weekly
installments over a six month period without interest. Such amount shall be paid
regardless of whether Employee obtains other employment during such time,
provided such employment does not violate Section 9 hereof.
11. VACATION
Employee shall be entitled to a vacation of no more than four (4)
weeks per fiscal year.
12. ARBITRATION
Any dispute between the parties hereunder shall be determined by
arbitration in accordance with the rules of the American Arbitration Association
in Philadelphia, Pennsylvania. The Award in any such arbitration shall be final
and binding, and any party may enter judgement thereon in any court having
jurisdiction.
13. ASSIGNMENT
The Employer has the right to assign this Agreement to any successors
and assigns or other parties to whom the Board of Directors of Employer consents
to such assignment. Assignment of this Agreement by the Employee shall be
absolutely prohibited. Employee shall further be restricted from the delegation
of the performance of his duties hereunder.
14. NOTICE
Any notice required or permitted to be given under this agreement
shall be sufficient, if in writing, and if sent by registered mail to Employee
or to Employer at Employer's principal place of business.
15. APPLICABLE LAW
This Employment Agreement shall be construed in accordance with the
laws of the Commonwealth of Pennsylvania.
-5-
<PAGE>
16. ENTIRE AGREEMENT
This instrument contains the entire agreement of the parties. It may
not be changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
17. CHANGE IN CONTROL
If, at any time after a Change in Control, as hereinafter defined,
(i) Employer shall terminate Employee's employment in any manner, including, but
not limited to, pursuant to the provisions of Section 8(b), or (ii) the scope of
the Employee's employment, as described in Section 2, shall be changed in any
material manner, then, in either such event, Employee shall be immediately
entitled to a lump sum payment in cash equal to the sum of the payments (without
discount) to which he would be entitled through the end of the term of this
Agreement under the provisions of Section 3. "Change in Control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, as in effect on the date hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
ATTEST: BERGER HOLDINGS, LTD.
/s/ Joseph F. Weiderman BY: /s/ Joseph F. Weiderman
- ------------------------------- -------------------------------
Joseph F. Weiderman, President
/s/ Bonnie Steinberg /s/ Paul L. Spiese, Iii
- ------------------------------- -------------------------------
WITNESS Paul L. Spiese, III
-6-
<PAGE>
Exhibit 10(g)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, entered into as of the 28th day of March, 2000, by
and between BERGER HOLDINGS, LTD., d/b/a/ BERGER BUILDING PRODUCTS, CORP,
hereinafter the "Employer" and FRANCIS E. WELLOCK, JR., hereinafter the
"Employee".
WITNESSETH:
----------
WHEREAS, this Employer and Employee entered into an Employment Agreement
as of August 19, 1996, which Employment Agreement has subsequently been amended
on several occasions;
WHEREAS, Employer and Employee wish to restate such Employment Agreement,
as so amended, in its entirety herein; and
WHEREAS, except with respect to certain agreements concerning the grant to
Employee of options to purchase shares of the common stock of Employer, entered
into prior to the date hereof, this Restated Employment Agreement shall
constitute the entire understanding between Employer and Employee as to
Employee's employment by Employer.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto intending to be legally bound hereunder,
agree as follows:
1. TERM OF EMPLOYMENT
Subject to the terms and conditions hereinafter set forth, Employer
hereby agrees to employ Employee for a term of years ending on December 31,
2000.
2. SCOPE OF EMPLOYMENT
During the term of employment, Employee shall serve as Chief
Financial Officer and Vice President-Finance and Principal Accounting and
Financial Officer of Employer. Employee shall faithfully render and perform such
services as are necessary to fulfill the responsibilities of the office of Chief
Financial Officer and Vice President-Finance and Principal Accounting and
Financial Officer, and such services as may be assigned to him by or under the
authority of the Board of Directors of Employer. Employee shall devote full time
efforts to the business affairs of Employer and shall render such services to
the best of his ability in the best interests of Employer. Employee shall
maintain his offices at 805 Pennsylvania Blvd., Feasterville, Pennsylvania, or
at such other addresses to which the Company may relocate.
<PAGE>
3. COMPENSATION
(a) For all services rendered by Employee to Employer during the term
of employment, Employer shall pay, or cause to be paid to Employee base
compensation ( "Base Compensation"), payable weekly in the amount of $130,000
per annum.
(b) Employee shall be entitled to bonuses, if, as and when declared
by the Board of Directors of Employer, in its sole, total and absolute
discretion.
4. REIMBURSEMENT FOR EXPENSES
The Employee shall be reimbursed by the Employer for all actual,
ordinary, necessary and reasonable expenses incurred by him in the course of the
business of the Employer. The Employee shall keep an itemized account of such
expenses to be rendered to the Employer, together with vouchers and/or receipts
verifying the same.
5. EMPLOYEE BENEFITS
Employee shall be entitled to participate in all employee benefit
programs, including without limitation, group life insurance, medical and
hospitalization plans, pension and profitsharing plans, as are being presently
offered by Employer or which may hereafter during the term of employment be
offered by employer generally to its executive officers. Employer shall also
furnish to Employee an automobile for Employee's usage during the term of
employment. The Employer shall be responsible for all expenses in maintaining
the automobile, including, but not limited to insurance, gasoline costs, and all
necessary repairs.
6. INSURANCE
The Employer shall obtain for the Employee a life insurance policy
(or its equivalent) in the face amount of $500,000 wherein Employee, or his
designee, will be the owner of said policy and will retain all rights to
designate beneficiaries thereunder. The Employer shall be solely responsible for
maintaining the policy and paying the premiums as they become due.
7. DISABILITY
(a) If the Employee shall be unable, for an aggregate period of more
than 180 days in any 365 day period, to perform the services provided for herein
as a result of illness or disability of any nature, Employer may, upon 90 days
notice, terminate Employee's employment and Employer's obligations hereunder.
Employer nevertheless shall remain obligated to pay Employee his full salary for
a period of 12 months, including within such 12 month period any periods prior
to such termination for which Employee received salary while being unable to
provide services hereunder.
(b) Commencing upon the end of the 12 month period referred to in the
last sentence of subparagraph (a) above, Employer shall be obligated to pay
Employee the sum of
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<PAGE>
$1,000 per week for a period of three (3) years; provided that such $1,000 per
week payments shall be reduced to $500 per week if the Net Worth of the Company
as set forth in the then most recent audited annual statements filed with the
Securities and Exchange Commission ("Annual Statements") does not equal at least
$4,000,000. Such payments shall be subject to subsequent increase to $1,000 per
week (and subsequent decrease to $500) during the period such payments are made
in the event that subsequent Annual Statements show a Net Worth at least equal
to $4,000,000 (or less than $4,000,000); provided that all such reductions and
increases shall be made solely on a prospective basis from the time the
applicable Annual Statements are filed. Upon the expiration of such 3 year
period, Employer shall be obligated to pay Employee the sum of $500 a week for
the remainder of Employee's life.
(c) The Employer may, but is not obligated to, obtain a disability
insurance policy in the amounts set forth above (or a portion thereof) in order
to secure its obligations hereunder (or a portion thereof).
8. TERMINATION
(a) By Death.
If the Employee dies, then this Agreement shall continue for a
period of 60 days with full benefits after which time this agreement shall
terminate immediately, and his rights to compensation and fringe benefits
hereunder shall terminate as of the date of such 60 day period, except that
Employee's heirs, personal representatives or estate shall be entitled to any
unpaid portion of his salary, accrued bonus and accrued benefits, if any, up to
the date of such termination.
(b) For Cause.
The Employer may terminate the Employee's employment and rights
to compensation and benefits hereunder immediately for "cause" (subject to the
last paragraph of this subparagraph (b)), except that the Employee shall be
entitled to any unpaid portion of his salary, accrued bonus, and accrued fringe
benefits, if any, up to the date of termination. "Cause" shall exist if:
(i) the Employee substantially fails to perform his duties
hereunder;
(ii) the Employee intentionally commits any acts or omits to
take any action, or commits any act of dishonesty or breach of trust, resulting
directly or indirectly in personal gain or enrichment of the Employee to the
detriment of the Employer; or
(iii) the Employee is commits a felony.
If "cause" exists as set forth in subparagraph (i) above, Employer
shall give Employee thirty (30) days prior written notice of termination
specifying the nature of the alleged "cause" and the Employee shall have such
thirty (30) day period in which to take remedial action
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<PAGE>
to cure the situation that constituted the "cause". If after receiving said
thirty (30) day notice, the Employee does not cure said "cause" within such time
period, then this Agreement shall terminate as of the end of such time period.
(c) Procedure Upon Termination.
Upon termination of his employment, the Employee shall promptly
return to the Employer all documents, including without limitation, copies and
all other materials and properties of the Employer, or pertaining to its
business, including without limitation, customer and prospect lists, contacts,
files, manuals, letters, reports and records in his possession and control, no
matter from whom or in what manner acquired.
9. RESTRICTIVE COVENANT
(a) Employee agrees that, during the term of employment and so long
thereafter as he receives payments pursuant to Section 10 (Employee having the
right voluntarily to terminate such payments at any time), the Employee shall
not directly or indirectly engage in any business which is the same as, similar
to, or in competition with the business of the Employer. Employee acknowledges
that the restrictions contained herein in view of the nature of the business in
which Employee has been engaged, are reasonable and necessary to protect the
legitimate interest of Employer, and that any violation of these restrictions
would result in irreparable injury to Employer. Employee acknowledges that in
the event of a violation of any such restrictions, Employer shall be entitled to
preliminary and permanent injunctive relief as well as an equitable accounting
of all earnings, profits and other benefits arising from such violation which
rights shall be cumulative and in addition to any other rights or remedies to
which Employer may be entitled. In the event that the Employee shall engage,
directly or indirectly in any business in competition with the business of
employer, the period of non- competition referred to above shall be extended by
a period of time equal to that period beginning when such violation commenced,
and ending when the activities constituting such a violation shall have finally
been terminated in good faith.
(b) In addition, during the term of employment, and at all times
thereafter, the Employee shall not disclose confidential information of the
Employer to any other person, entity, corporation, trust, association or
partnership. For the purposes hereof, the term "confidential information" shall
include, but not be limited to, all lists or the identity of any customers,
suppliers, creditors or contacts of Employer. It shall also include any and all
information pertaining to any formulas, business opportunities, processes,
techniques, plans, contracts, sales or other financial data of Employer.
(c) Notwithstanding anything to the contrary contained herein, in the
event that any court of equity determines that time period and/or scope of this
Restrictive Covenant is held be unenforceably long or broad, as the case may be,
then, and either such event, neither the enforceability nor the validity this
paragraph as a whole shall be affected. Rather, the time period and/or scope of
the restriction so affected shall be reduced to the maximum permitted by law.
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10. SEVERANCE
If at the end of the term of this Agreement, Employer and Employee
have not entered into a mutually satisfactory extension of this Employment
Agreement for a term of a least three (3) years, with at least a continuation of
the present compensation structure hereunder, Employer agrees to pay Employee,
as his severance payment, an amount equal to fifty (50%) percent of Employee's
prior year Base Compensation, which amount may be paid in equal weekly
installments over a six month period without interest. Such amount shall be paid
regardless of whether Employee obtains other employment during such time,
provided such employment does not violate Section 9 hereof.
11. VACATION
Employee shall be entitled to a vacation of no more than four (4)
weeks per fiscal year.
12. ARBITRATION
Any dispute between the parties hereunder shall be determined by
arbitration in accordance with the rules of the American Arbitration Association
in Philadelphia, Pennsylvania. The Award in any such arbitration shall be final
and binding, and any party may enter judgement thereon in any court having
jurisdiction.
13. ASSIGNMENT
The Employer has the right to assign this Agreement to any successors
and assigns or other parties to whom the Board of Directors of Employer consents
to such assignment. Assignment of this Agreement by the Employee shall be
absolutely prohibited. Employee shall further be restricted from the delegation
of the performance of his duties hereunder.
14. NOTICE
Any notice required or permitted to be given under this agreement
shall be sufficient, if in writing, and if sent by registered mail to Employee
or to Employer at Employer's principal place of business.
15. APPLICABLE LAW
This Employment Agreement shall be construed in accordance with the
laws of the Commonwealth of Pennsylvania.
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<PAGE>
16. ENTIRE AGREEMENT
This instrument contains the entire agreement of the parties. It may
not be changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
17. CHANGE IN CONTROL
If, at any time after a Change in Control, as hereinafter defined,
(i) Employer shall terminate Employee's employment in any manner, including, but
not limited to, pursuant to the provisions of Section 8(b), or (ii) the scope of
the Employee's employment, as described in Section 2, shall be changed in any
material manner, then, in either such event, Employee shall be immediately
entitled to a lump sum payment in cash equal to the sum of the payments (without
discount) to which he would be entitled through the end of the term of this
Agreement under the provisions of Section 3. "Change in Control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, as in effect on the date hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
ATTEST: BERGER HOLDINGS, LTD.
/s/ Joseph F. Weiderman BY: /s/ Joseph F. Weiderman
- ------------------------------- -------------------------------
Joseph F. Weiderman, President
/s/ Bonnie Steinberg /s/ Francis E. Wellock, Jr.
- ------------------------------- -------------------------------
WITNESS Francis E. Wellock, Jr.
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<PAGE>
Exhibit 10(p)
SECOND AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Second Amendment to Amended and Restated Loan and Security
Agreement (this "AMENDMENT") is made this 2oth day of December, 1999 by and
among Berger Financial Corp. ("BFC"), a Delaware corporation, Berger Bros
Company ("BBC"), a Pennsylvania corporation and Berger Holdings, Ltd. ("BHL"), a
Pennsylvania corporation, each with its chief executive office at 805
Pennsylvania Boulevard, Feasterville, Pennsylvania 19053, and Summit Bank
("BANK"), a New Jersey bank having offices at 4900 Route 70, Pennsauken, New
Jersey 08109- 4792. BFC and BBC are hereinafter collectively referred to and
obligated as "BORROWER." Borrower and BHL are hereinafter collectively referred
to and obligated as "OBLIGORS."
BACKGROUND
A. Pursuant to the terms and subject to the conditions set forth in
that certain Amended and Restated Loan and Security Agreement dated January 2,
1998 between Borrower and Bank, as amended pursuant to the terms and subject to
the conditions set forth in that certain Amendment to Amended and Restated Loan
and Security Agreement dated December 7, 1998 between Borrower and Bank (as
amended, the "LOAN AGREEMENT") and related instruments, agreements and documents
(collectively, along with the Loan Agreement, the "FINANCING AGREEMENTS"),
Borrower is currently indebted to Bank for repayment of (i) various loans,
advances and extensions of credit made pursuant to a revolving credit facility
made available by Bank to Borrower in a principal sum of up to Nine Million Five
Hundred Thousand ($9,500,000.00) Dollars (the "REVOLVING CREDIT"), which
indebtedness is further evidenced by that certain Revolving Credit Note dated
January 2, 1998 in the principal sum of Nine Million Five Hundred Thousand
($9,500,000.00) Dollars executed and delivered by Borrower to Bank (the
"REVOLVING CREDIT NOTE"); and (ii) a term loan made by Bank to Borrower in the
principal sum of Two Million Four Hundred Thousand ($2,400,000.00) Dollars (the
"TERM LOAN"), which indebtedness is further evidenced by that certain
Replacement Term Loan Note dated December 7, 1998 in the principal sum of Two
Million Four Hundred Thousand ($2,400,000.00) Dollars executed and delivered by
Borrower to Bank (the "TERM LOAN NOTE"). The Revolving Credit Note and the Term
Loan Note are hereinafter collectively referred to as the "EXISTING NOTES."
B. To induce Bank to enter into the Financing Agreements, pursuant to
the terms and subject to the conditions set forth in certain Amended and
Restated Surety Agreement dated January 2, 1998 executed and delivered by BHL to
Bank (the "SURETY AGREEMENT"), BHL guaranteed, as a surety, all existing and
future debts, liabilities and obligations of Borrower to Bank including, without
limitation, the debts, liabilities and obligations evidenced by the Existing
Notes. To secure BHL's indebtedness to Bank as a surety for the debts,
liabilities and obligations of Borrower to Bank, pursuant to a certain Security
Agreement dated August 21, 1997 between BHL and Bank, BHL granted Bank
continuing liens on and security interests in
<PAGE>
and to all of BHL's existing and future accounts, chattel paper, contracts,
documents, equipment, fixtures, general intangibles, goods, instruments,
inventory, investment property and the cash and non-cash proceeds thereof, all
as more fully described in such Security Agreement.
C. All capitalized terms not otherwise defined in this Amendment shall
have the meanings ascribed to such terms in the Loan Agreement.
D. Borrower has requested that Bank, among other things, (i) extend the
Expiration Date of the Revolving Credit and the Term Loan to January 2, 2003,
(ii) increase the Maximum Line Amount to Seventeen Million Five Hundred Thousand
($17,500,000.00) Dollars and, within such increased Revolving Credit, establish
a credit facility (the "ACQUISITION LINE FACILITY") for the making of
acquisitions by Borrower in companies which will vertically integrate with
Borrower or otherwise provide services to the core business of Borrower and are
reasonably related to the core business of Borrower (each such company being
hereinafter referred to as a "Related Company") or assets of Related Companies,
(iii) reduce the Variable Revolving Credit Rate and the Variable Term Loan Rate,
and (iv) commit to the making of an additional term loan (the "SUPPLEMENTAL TERM
LOAN") in the principal sum of Two Million Five Hundred Thousand ($2,500,000.00)
Dollars, the proceeds of which shall be used by Borrower to pay certain
Subordinated Indebtedness, and Bank is willing to accommodate Borrower in
accordance with such requests for modifications to the Financing Agreements in
accordance with the terms and subject to the conditions set forth in this
Amendment and in the instruments, agreements and documents referred to in this
Amendment. For the purposes hereof, the "core business of Borrower" is the
manufacture and distribution of roof drainage and related products.
NOW, THEREFORE, with the foregoing background deemed incorporated
hereinafter by this reference and hereby made a part hereof, the parties hereto,
intending to be legally bound hereby, further covenant and agree as follows:
1. CONFIRMATION OF EXISTING INDEBTEDNESS. Obligors hereby
unconditionally acknowledge and confirm that: (a) the unpaid principal
indebtedness of Borrower to Bank evidenced by the Revolving Credit Note is, as
of December 3, 1999, Six Million Five Hundred Eighteen Thousand Eight Hundred
One and 48/100 ($6,518,801.48) Dollars; (b) interest on the outstanding
principal balance of the Revolving Credit has been paid through November 30,
1999; (c) the unpaid principal indebtedness of Borrower to Bank evidenced by the
Term Loan Note is, as of the date hereof, One Million Eight Hundred Sixty-Eight
Thousand Four ($1,868,004.00) Dollars; (d) interest on the outstanding principal
balance of the Term Loan has been paid through November 30, 1999; and (e) the
foregoing sums, together with continually accruing interest and any related
costs, fees and expenses are, as of the date hereof, owing without claim,
counterclaim, right of recoupment, defense or set off of any kind or of any
nature whatsoever.
2. RATIFICATION OF FINANCING AGREEMENTS. Obligors hereby ratify,
confirm and reaffirm in all respects and without condition, all of the terms,
covenants and conditions set forth in the Financing Agreements, and hereby agree
that each of them remain unconditionally liable
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to Bank in accordance with the respective terms, covenants and conditions of
such instruments, agreements and documents, and that all Collateral, liens,
security interests and pledges created pursuant thereto and/or referred to
therein continue unimpaired and in full force and effect, and secure and shall
continue to secure all of the Obligations.
3. WARRANTIES AND REPRESENTATIONS.
(a) All warranties and representations set forth in the Loan
Agreement and the Surety Agreement are hereby respectively reasserted and
restated by Borrower and BHL (as applicable) as of the date hereof as if the
same were set forth at length herein. Obligors acknowledge that such warranties
and representations (and the warranties and representations set forth herein)
are being specifically relied upon by Bank as a material inducement to Bank to
enter into this Amendment, increase and extend the Revolving Credit, establish
the Acquisition Line Facility within the Revolving Credit, extend the maturity
of the Term Loan and make the Supplemental Term Loan.
(b) As a further inducement to Bank to enter into this
Amendment, Obligors further represent and warrant to Bank that:
(i) Each Obligor has the power, authority and
capacity to enter into and perform this Amendment and all related instruments,
agreements and documents, and to incur the Obligations herein and therein
provided for, and such Obligor has taken all proper and necessary corporate
action to authorize the execution, delivery and performance of this Amendment
and related instruments, agreements and documents;
(ii) This Amendment is, and the Second Replacement
Revolving Credit Note, the Second Replacement Term Loan Note and the
Supplemental Term Loan Note (each as hereinafter defined) and the other
Financing Agreements, when executed and delivered by Borrower will be, valid,
binding and enforceable against each Obligor in accordance with their respective
terms;
(iii) No consent, approval or authorization of, or
filing, registration or qualification with, any Person (including any holder of
Subordinated Indebtedness or of liens on Collateral) is required to be obtained
by any Obligor in connection with the execution and delivery of this Amendment
and the instruments, agreements and documents referred to in this Amendment; and
(iv) No Event of Default or Potential Default has
occurred under the Financing Agreements.
4. AMENDMENTS TO LOAN AGREEMENT. Under the terms and subject to
the conditions set forth in this Amendment, the Loan Agreement and the other
Financing Agreements are hereby amended as follows:
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<PAGE>
(a) Paragraph 1.5 of the Loan Agreement is hereby amended
and restated to read in its entirety as follows:
1.5 "BORROWING BASE" means, at any time, an amount
shown on the most current Borrowing Base Certificate
executed and delivered by Borrower to Bank equal to
the lesser of:
1.5.1 Seventeen Million Five Hundred
Thousand ($17,500,000.00) Dollars ("MAXIMUM LINE
AMOUNT"); or
1.5.2 An amount up to the sum of (a)
eighty-five (85%) percent of the net outstanding
amount of Eligible Accounts, after deducting
therefrom all payments, adjustments and credits
applicable thereto, and (b) the lesser of (i) fifty
(50%) percent of the value (determined on the basis
of the lower of cost or market value) of Eligible
Inventory and (ii) Four Million Five Hundred Thousand
($4,500,000.00) Dollars. The foregoing percentage
advance rates are subject to periodic examination and
analysis by Bank and, as a result thereof, and in
Bank's discretion exercised reasonably and in good
faith, are subject to change.
(b) Paragraph 1.26 of the Loan Agreement is hereby
amended to include within the definition of "Loans" all loans, advances and
extensions of credit made by Bank to or for the benefit of Borrower including,
without limitation, loans, advances and extensions of credit made under the
Revolving Credit (including the Acquisition Line Facility thereunder), the Term
Loan and the Supplemental Term Loan.
(c) Paragraph 1.29 of the Loan Agreement is hereby
amended to include within the definition of "Notes" any Instruments evidencing
Obligations including, without limitation, the Second Replacement Revolving
Credit Note, the Second Replacement Term Loan Note, the Supplemental Term Loan
Note and any instruments, agreements and documents executed and/or delivered in
replacement or substitution or modification thereof.
(d) Paragraph 2.6.1 of the Loan Agreement, and the term
"Expiration Date", are hereby amended to provide that the term of the Revolving
Credit and the maturity date of the Term Loan are hereby amended to be January
2, 2003, unless such credit facilities are sooner terminated in accordance with
their respective terms.
(e) Paragraph 2.6.2 of the Loan Agreement is hereby
amended to provide that if at any time the Revolving Credit shall terminate,
Bank shall have the option to terminate and accelerate all Obligations
including, without limitation, the Obligations with respect to the Term Loan,
the Supplemental Term Loan and amortizing Loans under the Acquisition Line
Facility. Notwithstanding the foregoing, if Borrower requests Bank to make
available a Loan under the Acquisition Line Facility, and Borrower satisfies all
conditions precedent to a Loan under the Acquisition Line Facility, and Bank
refuses or is unable to provide such Loan and, within one hundred eighty (180)
days following Bank's refusal or inability to provide such Loan, a financial
4
<PAGE>
institution agrees, in a written loan commitment, to make available to or for
the benefit of Borrower financing at a level sufficient to refinance all Loans
and provide to Borrower the acquisition financing on terms similar to the terms
upon which Bank was requested (and refused or was unable) to provide acquisition
financing, the Termination Premium shall not be applicable and shall be waived
concurrently if and when the refinancing of all Obligations by such financial
institution is completed.
(f) Paragraph 2.9.1 of the Loan Agreement is hereby
amended to reduce the "Variable Revolving Credit Rate" to the per annum rate
equal to the Base Rate in effect from time to time minus one-half (1/2%)
percent.
(g) Paragraph 2.9.2 of the Loan Agreement is hereby
amended to reduce the "Variable Term Loan Rate" to the per annum rate equal to
the Base Rate in effect from time to time minus one-half (1/2%) percent.
(h) Paragraph 2.11.2 of the Loan Agreement is hereby
amended to reduce the Collateral Management Fee from Six Thousand ($6,000.00)
Dollars per annum to Four Thousand ($4,000.00) Dollars per annum.
(i) Paragraph 2.12 of the Loan Agreement is hereby
amended to provide that if termination of the Revolving Credit occurs at any
time from the date of this Amendment through and including January 2, 2002,
Borrower shall, simultaneously with such termination, pay to Bank the
Termination Premium in an amount equal to the greater of One Hundred Ninety-
Three Thousand Six Hundred Eighty and 04/100 ($193,680.04) Dollars or, if Bank
has made the Supplemental Term Loan or otherwise increased the aggregate credit
facility, one (1%) percent of the then outstanding principal balance of the
Supplemental Term Loan and/or such increased aggregate credit facility. If
termination occurs at any time after January 2, 2002, no Termination Premium
shall be payable.
(j) Paragraph 3.2 of the Loan Agreement is hereby amended
to provide that Borrowing Base Certificates shall be delivered monthly, on or
before the first Business Day of each month, irrespective of whether a request
for an advance on any such date is then outstanding; provided, however, that
during the existence of any Potential Default or Event of Default, Bank shall
have the right, at its option, to require Borrowing Base Certificates
concurrently with each request for an advance under the Revolving Credit.
(k) Each reference in the Loan Agreement and in each of
the other Financing Agreements (including the Collateral Documents) to "Notes,"
the "Revolving Credit Note," the "Term Loan Note" and any replacement or
substitution of any such Instrument shall be deemed references to the Notes (as
herein defined) and respectively, the Second Replacement Revolving Credit Note
and the Second Replacement Term Loan Note.
(l) The terms "REVOLVING CREDIT" and "TERM LOAN" as used
in the Loan Agreement shall hereafter refer to the Revolving Credit and the Term
Loan, respectively, as
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<PAGE>
increased, extended and/or otherwise modified pursuant to the terms and subject
to the conditions of this Amendment.
(m) Paragraph 6.3.1 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
6.3.1 Borrower and Surety and, if a separate Person,
any Target acquired by Borrower, shall at all times
maintain on a consolidated basis a ratio of Senior
Liabilities (defined to be all Liabilities minus the
long-term portion of Subordinated Indebtedness) to
Tangible Capital Funds (defined to be Tangible Net
Worth plus the long-term portion of Subordinated
Indebtedness) of not more than 3.00 to 1.00 from
November 15, 1999 through March 31, 2000, and at all
times after March 31, 2000, a ratio of Senior
Liabilities to Tangible Capital Funds of not more
than 2.75 to 1.00;
5. ACQUISITION LINE FACILITY.
(a) Within the Revolving Credit and, except as expressly
set forth below, subject to all conditions applicable to the making of Loans
under the Revolving Credit, absent the existence of any Event of Default or
Potential Default, the Acquisition Line Facility shall include all sums advanced
by Bank hereunder to or for the benefit of Borrower from the date of this
Amendment through the Expiration Date up to the aggregate sum of Eight Million
($8,000,000.00) Dollars (the "ACQUISITION LINE LIMIT"). The proceeds of any Loan
made by Bank under the Acquisition Line Facility shall be used exclusively by
Borrower for Permitted Acquisitions. For the purposes of the Loan Agreement and
the other Financing Agreements, the term "Permitted Acquisitions" shall mean
acquisitions by Borrower which satisfy each of the following conditions (all
instruments, agreements and documents to be in form and substance satisfactory
to Bank and its counsel):
(i) The acquisition target (the "TARGET") must
be a Related Company;
(ii) The purchase price for the Target must be no
more than five (5) times such Target's trailing, historical earnings before
interest, taxes, depreciation and amortization expense (determined in accordance
with GAAP);
(iii) Bank shall receive annual pro forma
consolidated and consolidating financial statements and projections for two (2)
years following the acquisition of the Target for Obligors and the Target
showing that immediately following the acquisition by Borrower of the Target and
for a two (2) year period thereafter, Obligors and the Target shall be in
compliance with the following financial covenants:
(1) Their ratio of consolidated funded
Indebtedness (exclusive of Subordinated Indebtedness) to earnings before
interest, taxes, depreciation and amortization shall be less than 3.25 to 1.00;
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(2) Their ratio of consolidated total
Liabilities to earnings before interest, taxes, depreciation and amortization
shall be less than 5.00 to 1.00;
(3) Their ratio of consolidated Senior
Liabilities (defined to be all Liabilities minus the long-term portion of
Subordinated Indebtedness) to Tangible Net Worth shall be less than 3.00 to 1.00
at all times through March 31, 2000, and less than 2.75 to 1.00 at all times
thereafter; and
(4) They shall have a consolidated debt
service coverage ratio of not less than 1.10 to 1.00 (the term "debt service
coverage ratio" having the meaning ascribed to such term in Paragraph 6.3 of the
Loan Agreement);
(iv) No more than eighty (80%) percent of the
purchase price for the acquisition of the Target may be paid in cash;
(v) A business appraisal and analysis of the
Target and/or the assets of Target, which may be prepared by Borrower or
obtained from an independent Person, shall have been submitted to Bank and
approved by Bank in its reasonable discretion which approval shall not be
unreasonably withheld or delayed;
(vi) Bank shall be reasonably satisfied that no
Liabilities (contingent or otherwise) are being assumed in connection with the
acquisition of the Target except for ordinary course Liabilities in connection
with any operating lease for equipment, trade payables incurred in the ordinary
course of business of the Target and employment agreements in a reasonable
amount determined by Bank, and other ordinary course Liabilities in amount and
nature reasonably satisfactory to Bank;
(vii) Immediately following the acquisition of the
Target, Borrower shall be able to affirm and reaffirm all representations and
warranties set forth in the Loan Agreement with respect to the Target and Assets
acquired of the Target; and
(viii) Such other instruments, agreements and
documents as Bank may reasonably require in order to review the proposed
acquisition of the Target and to determine that such acquisition is a Permitted
Acquisition.
6. PERMITTED ACQUISITION LINE OVERADVANCES. Notwithstanding
anything to the contrary set forth in Paragraphs 2.3 and 2.4 of the Loan
Agreement, absent the existence of any Event of Default or any Potential
Default, upon written request of Borrower to be furnished concurrently with any
request for a Loan under the Acquisition Line Facility, Loans under the
Acquisition Line Facility which are in excess of the Borrowing Base (but subject
to the Maximum Line Amount and the Acquisition Line Limit) may be made in
amounts up to the lesser of Two Million ($2,000,000.00) Dollars or twenty-five
(25%) percent of the cash consideration for a Permitted Acquisition (such Loans
being hereinafter referred to as "Acquisition Line Overadvances"). Acquisition
Line Overadvances shall be payable as follows: Interest only shall accrue on the
outstanding principal balance of Acquisition Line Overadvances
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for the first six (6) months that they are outstanding; thereafter, Acquisition
Line Overadvances shall be paid in eighteen (18) equal and consecutive monthly
installments each in an amount sufficient to fully amortize such Acquisition
Line Overadvances over such eighteen (18) month term.
7. AMORTIZATION OF OBLIGATIONS ARISING UNDER ACQUISITION LINE
FACILITY.
(a) Within the Acquisition Line Limit and, except as
expressly set forth below, subject to all conditions applicable to the making of
Loans under the Acquisition Line Limit, absent the existence of any Event of
Default or Potential Default, upon written request of Borrower to be furnished
concurrently with any request for a Loan under the Acquisition Line Facility,
Loans under the Acquisition Line Facility which are in excess of the Borrowing
Base (but subject to the Maximum Line Amount and the Acquisition Line Limit) may
be made in amounts up to eighty (80%) percent of the orderly, liquidation value
of machinery and equipment acquired in connection with an acquisition, which
Loans shall be payable in sixty (60) equal and consecutive monthly installments,
each in an amount sufficient to fully amortize such Loans. An amount equal to
the Obligations outstanding under the Acquisition Line Facility which are being
repaid on a term basis in accordance with this Paragraph shall reduce the
Maximum Line Amount and the Acquisition Line Facility.
(b) As a condition precedent to the making of Loans
pursuant to this Paragraph 7, Borrower shall execute and deliver to Bank a term
promissory note in the principal sum of the Obligations which are to be repaid
on a term basis in accordance with this Paragraph, which promissory note, when
executed and delivered, will be valid, binding and enforceable in accordance
with its terms, will be deemed one of the "Notes" under the Loan Agreement and
shall be secured by all Collateral.
8. MANDATORY PREPAYMENT. On or before April 15 of each year
Borrower shall make a mandatory prepayment to the Obligations first, in
connection with the Supplemental Term Loan, then, in connection with the Term
Loan and finally, any amortizing Loans under the Acquisition Line Facility, in
each instance to installments payable thereunder in the inverse order of their
maturity, in an amount equal to twenty-five (25%) percent of Borrower's Excess
Cash Flow for Borrower's immediately preceding fiscal year. For the purposes of
the Financing Agreements, the terms "Excess Cash Flow" shall mean an amount
equal to Obligors' consolidated net income plus depreciation expense, less
unfinanced Capital Expenditures, payments of long-term Indebtedness and
dividends paid. This determination shall be made on the basis of Borrower's
Financial Statements for such preceding fiscal year.
9. SUPPLEMENTAL TERM LOAN. Absent the existence of any Event of
Default or Potential Default, upon written request of Borrower furnished to Bank
on or before February 15, 2000, Bank shall, on or before February 22, 2000,
under the terms and subject to the conditions set forth in the Financing
Agreements, make the Supplemental Term Loan to or for the benefit of Borrower.
Borrower acknowledges and agrees that in the event Borrower fails to request the
Supplemental Term Loan on or before February 15, 2000, or fails to satisfy any
conditions applicable to the making of the Supplemental Term Loan on or before
February 22, 2000, so that
8
<PAGE>
funding of such Supplemental Term Loan occurs on or before February 22, 2000,
the Supplemental Term Loan shall not be available to or for the benefit of
Borrower. As one of the conditions precedent to the making of the Supplemental
Term Loan, Borrower shall pay a facility fee in the amount of Eighteen Thousand
Seven Hundred Fifty ($18,750.00) Dollars.
10. SUPPLEMENTAL TERM LOAN NOTE. Concurrently with, and as a
condition precedent to, the making of the Supplemental Term Loan, Borrower shall
execute and deliver to Bank its term promissory note in the principal sum of Two
Million Five Hundred Thousand ($2,500,000.00) Dollars (the "SUPPLEMENTAL TERM
LOAN NOTE") to evidence Borrower's Obligations to repay Bank, with interest at
the Variable Term Loan Rate (as such term is amended in accordance with this
Amendment) in thirty-two (32) equal and consecutive monthly installments of
principal in the amount of Seventy-Five Thousand Seven Hundred Fifty-Seven
($75,757.00) Dollars each, plus interest as set forth therein, payable monthly,
in arrears, commencing on April 1, 2000 and continuing on the first day of each
month thereafter, followed by a final, consecutive thirty-third (33rd)
installment of all principal, interest and other sums owing in connection with
the Supplemental Term Loan, which final installment shall be due and payable on
the Expiration Date, unless the Supplemental Term Loan is sooner accelerated in
accordance with the provisions of the Loan Agreement, all as more fully
described in the Supplemental Term Loan Note, the terms, covenants and
conditions of which are hereby deemed incorporated herein by this reference and
made a part hereof.
11. SECOND REPLACEMENT REVOLVING CREDIT NOTE. Contemporaneously
herewith, Borrower shall execute and deliver to Bank its Replacement Revolving
Credit Note in the principal sum of Seventeen Million Five Hundred Thousand
($17,500,000.00) Dollars (the "SECOND REPLACEMENT REVOLVING CREDIT NOTE") to
evidence the Obligations with respect to the loans and advances made or to be
made by Bank to or for the benefit of Borrower under the Revolving Credit (as
extended hereby), all as more fully described in the Replacement Revolving
Credit Note, the terms, covenants and conditions of which are hereby deemed
incorporated herein by this reference and made a part hereof. The Replacement
Revolving Credit Note replaces and supersedes, but does not extinguish any
unpaid Obligations evidenced by or constitute a novation of, the Replacement
Revolving Credit Note.
12. SECOND REPLACEMENT TERM LOAN NOTE. Contemporaneously herewith,
Borrower shall execute and deliver to Bank its Second Replacement Term Loan Note
in the principal sum of One Million Eight Hundred Sixty-Eight Thousand Four
($1,868,004.00) Dollars (the "SECOND REPLACEMENT TERM LOAN NOTE") to evidence
the Obligations with respect to the loans and advances made or to be made by
Bank to or for the benefit of Borrower under the Term Loan (as extended hereby),
all as more fully described in the Second Replacement Term Loan Note, the terms,
covenants and conditions of which are hereby deemed incorporated herein by this
reference and made a part hereof. The Second Replacement Term Loan Note replaces
and supersedes, but does not extinguish any unpaid Obligations evidenced by or
constitute a novation of, the Replacement Term Loan Note.
9
<PAGE>
13. CONDITIONS PRECEDENT. Bank's obligations under this Amendment
are subject to the following conditions precedent (all instruments, agreements
and documents to be in form and substance satisfactory to Bank and its counsel):
(a) Borrower shall duly execute and/or deliver, or cause
to be duly executed and/or delivered, to Bank the following:
(i) This Amendment;
(ii) The Second Replacement Revolving Credit
Note;
(iii) The Second Replacement Term Loan Note;
(iv) A certified (as of the date of this
Amendment) copy of resolutions of each Obligor's board of directors authorizing
the execution, delivery and performance of this Amendment.
(v) A certificate (as of the date of this
Amendment) of each Obligor's corporate secretary as to the incumbency and
signatures of the officers of such Obligor executing this Amendment;
(vi) Copies of all documents evidencing the terms
and conditions of Borrower's Subordinated Indebtedness, together with a schedule
of all Subordinated Indebtedness (reflecting payment of the proceeds of the
Supplemental Term Loan to certain holders of Subordinated Indebtedness, which
schedule shall replace Exhibit 1.40 attached to the Loan Agreement.
(vii) The written opinion of Borrower's and BHL's
counsel, dated the date hereof and addressed to Bank; and
(viii) Such other instruments, agreements and
documents as Bank may reasonably require.
(b) No Event of Default or Potential Default shall have
occurred and be continuing.
(c) In addition to satisfaction of the condition
precedent set forth in Subparagraph 13(b) above, the delivery to Bank of the
instruments, agreements and documents referred to at Subparagraph 5(a)(viii)
above, which instruments, agreements and documents shall be furnished to Bank
concurrently with any request for a Loan under the Acquisition Line Facility,
the following shall be conditions precedent to the making of any Loan under the
Acquisition Line Facility (all instruments, agreements and documents to be in
form and substance satisfactory to Bank and its counsel):
10
<PAGE>
(i) Borrower shall furnish to Bank a written
request for a Loan under the Acquisition Line Facility, which request shall
specify the date on which Borrower is acquiring the Target for which proceeds of
the Loan are being requested;
(ii) Bank's receipt of copies of all
instruments, agreements and documents executed or to be executed and/or
delivered and exchanged in connection with the acquisition of the Target;
(iii) UCC, judgment, federal and state tax liens
against the Assets of the Target;
(iv) Bank shall be expressly entitled to rely on
any opinion furnished to Borrower in connection with its acquisition of the
Target;
(v) In connection with any request by Borrower
that Bank make amortizing Loans under the Acquisition Line Facility pursuant to
Paragraph 7 of this Amendment, an orderly liquidation appraisal of any machinery
and equipment being acquired by Borrower conducted by a reputable appraiser
selected by Borrower and reasonably acceptable to Bank;
(vi) Evidence of the consummation of the
acquisition of the Target in accordance with all applicable Law and in
accordance with all representations and warranties made to Bank by or on behalf
of Borrower in connection with Borrower's request for a Loan under the
Acquisition Line Facility; and
(vii) Such other instruments, agreements and
documents as Bank may reasonably require in connection with or to evaluate
Borrower's request for a Loan under the Acquisition Line Facility.
Borrower acknowledges and agrees that Bank shall have not less than ten (10)
Business Days from the date of Bank's receipt of all information, instruments,
agreements and documents required to be furnished to Bank as part of the
conditions precedent to the making of a Loan under the Acquisition Line Facility
(including, without limitation, evidence that the proceeds of any such loan will
be used in connection with the making by Borrower of a Permitted Acquisition) to
evaluate Borrower's request for any such Loan and, if Bank deems all conditions
precedent thereto satisfied, to make any such Loan. .
14. NO WAIVER OF DEFAULTS. This Amendment is not and shall not be
deemed to be a waiver of any defaults or Events of Default or Potential Defaults
which may now exist or hereafter occur under the Financing Agreements.
15. NO OBLIGATION TO EXTEND. Borrower acknowledges and agrees
that, notwithstanding anything to the contrary set forth in this Amendment, Bank
has no obligation to further amend the Financing Agreements or otherwise
restructure the indebtedness described in this Amendment, and that neither Bank
nor its representatives have made any agreements with,
11
<PAGE>
or commitments or representations or warranties to, Borrower (either in writing
or orally) other than as expressly stated in this Amendment. Nothing contained
in this Amendment, or any compliance with the terms of this Amendment or any of
the instruments, agreements or documents referred to in this Amendment, shall
impose any obligation on the part of Bank to consummate a further restructure of
the indebtedness described in this Amendment or provide any further financial or
other accommodation.
16. INTEGRATED AGREEMENT. This Amendment and all of the
instruments, agreements and documents executed and/or delivered or to be
executed and/or delivered in conjunction with this Amendment shall be effective
upon the date of execution hereof and thereof by all parties hereto and thereto,
and shall be deemed incorporated into and made a part of the Financing
Agreements. All such instruments, agreements and documents, and this Amendment,
shall be construed as integrated and complementary of each other, and as
augmenting and not restricting Bank's rights, remedies, benefits and security.
If, after applying the foregoing, an inconsistency still exists, the provisions
of this Amendment shall constitute an amendment thereto and shall govern and
control.
17. EXPENSES OF BANK; FACILITY FEE. Borrower shall pay all
expenses (including the reasonable fees and expenses of legal counsel to Bank)
relating to preparation, negotiation, administration and enforcement of this
Amendment and the Financing Agreements. As part of the consideration for the
increase in the Revolving Credit, and the other accommodations for the benefit
of Obligors as set forth in this Amendment, Borrower agrees to pay to Bank, on
demand, a facility fee in the amount of Sixty Thousand ($60,000.00) Dollars. The
facility fee is part of the Obligations secured by the Collateral.
18. GOVERNING LAW. This Amendment shall be governed by and
construed and interpreted in accordance with the laws of the Commonwealth of
Pennsylvania.
19. SEAL. This Amendment is intended to take effect as an
instrument under seal.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
Loan and Security Agreement to be duly executed and delivered the day and year
first above written.
Attest: BERGER FINANCIAL CORP.,
a Delaware corporation
By: /s/ FRANCIS E. WELLOCK, JR. By: /s/ JOSEPH F. WEIDERMAN
------------------------------------ ------------------------
Name: Francis E. Wellock, Jr. Joseph F. Weiderman,
Title: Chief Financial Officer President
[Corporate Seal]
Attest: BERGER BROS COMPANY,
a Pennsylvania corporation
By: /s/ FRANCIS E. WELLOCK, JR. By: /s/ JOSEPH F. WEIDERMAN
----------------------------------- ------------------------
Name: Francis E. Wellock, Jr. Joseph F. Weiderman,
Title: Chief Financial Officer President
[Corporate Seal]
Attest: BERGER HOLDINGS, LTD.,
a Pennsylvania corporation
By: /s/ FRANCIS E. WELLOCK, JR. By: /s/ JOSEPH F. WEIDERMAN
------------------------------------ ------------------------
Name: Francis E. Wellock, Jr. Joseph F. Weiderman,
Title: Chief Financial Officer President
[Corporate Seal] SUMMIT BANK
By: /s/ DAVID W. BLOOD
-------------------
David W. Blood,
Vice President
13
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration
Statements (No. 33-64705, 333-30511 and No. 333-15725) on Form S-3 and on Form
S-8 (No. 333-24917) of Berger Holdings, Ltd. of our report dated February 21,
2000 relating to the consolidated balance sheets of Berger Holdings, Ltd. as of
December 31, 1999 and 1998 and the related consolidated statements of
operations, shareholder's equity and cash flows and related financial statement
schedules for each of the year's in the two year period ended December 31, 1999,
which report are incorporated by reference in the December 31, 1999 annual
report Form 10-K of Berger Holdings, Ltd.
/S/ KPMG LLP
KPMG LLP
Philadelphia, Pennsylvania
March 26, 2000
-34-
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements (No. 33-64705 and No. 333-15725) on Form S-3 of Berger Holdings, Ltd.
of our report dated February 13, 1988 relating to the consolidated balance
sheets of Berger Holdings, Ltd. as of December 31, 1997 and the related
consolidated statements of operations, shareholder's equity and cash flows and
related financial statement schedules for the year ended December 31, 1997,
which reports are incorporated by reference in the December 31, 1997 annual
report Form 10-K of Berger Holdings, Ltd.
/S/GOLDENBERG ROSENTHAL, LLP
GOLDENBERG ROSENTHAL, LLP
Jenkintown, Pennsylvania
March 20, 2000
-35-
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<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 107,116
<SECURITIES> 0
<RECEIVABLES> 3,725,674
<ALLOWANCES> 30,000
<INVENTORY> 5,619,008
<CURRENT-ASSETS> 10,334,865
<PP&E> 19,138,422
<DEPRECIATION> 8,341,536
<TOTAL-ASSETS> 32,567,820
<CURRENT-LIABILITIES> 4,233,844
<BONDS> 0
0
0
<COMMON> 54,897
<OTHER-SE> 11,390,473
<TOTAL-LIABILITY-AND-EQUITY> 32,567,820
<SALES> 39,966,301
<TOTAL-REVENUES> 39,990,818
<CGS> 32,094,414
<TOTAL-COSTS> 37,315,267
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,852,088
<INCOME-PRETAX> 823,463
<INCOME-TAX> 441,666
<INCOME-CONTINUING> 381,797
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 381,797
<EPS-BASIC> .07
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