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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
1-14080
(Commission File Number)
BERG ELECTRONICS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
75-2451903
(I.R.S. Employer Identification No.)
101 SOUTH HANLEY ROAD
ST. LOUIS, MISSOURI 63105
(314) 726-1323
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, $0.01 par value New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of January 28, 1997, the aggregate market value of the registrant's
voting stock held by non-affiliates was $273.4 million. As of January 28, 1997,
the number of outstanding shares of the registrant's Common Stock, par value
$.01 per share, was 19,125,238, and the number of outstanding shares of the
registrant's Class A Common Stock, par value $.01 per share, was 1,384,291. No
established public trading market exists for the Registrant's Class A Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of Berg Electronics Corp.'s Proxy Statement for the 1997 Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.
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PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, references to the "Company" mean
Berg Electronics Corp. and its subsidiaries, including Berg Electronics Group,
Inc., a Delaware corporation ("Berg"), taken as a whole.
THE COMPANY
The Company is a leading global designer, manufacturer and marketer of
electronic connectors and cable assembly products for applications primarily in
the computer, telecommunications and industrial markets. Electronic connectors
are electro-mechanical devices that allow an electronic signal to pass from one
device to another. They are used to connect wires, cables, printed circuit
boards, flat cable and other electronic components to each other and to related
equipment. Connectors are found in virtually every electronic product including
computers, printers, disk drives, modems, VCRs, radios, medical instruments,
airplanes, appliances, cellular telephones, pagers and automobiles. The
Company's connectors and cable assemblies are used to conduct signals (primarily
data, video and voice) in a wide range of sophisticated electronic applications
including: (i) telecommunications products such as cellular phones, pagers, and
transmission and switching equipment; (ii) personal computing equipment and
peripherals such as notebook and desk top computers, printers, disk drives and
work stations; and (iii) large data processing equipment such as servers,
supercomputers, data communications systems, mainframe computers and
mini-computers.
While the Company's worldwide operations can be grouped into several
geographic segments, the Company operates in only one business
segment -- electrical and electronic connection, switching and programming
devices. Within this business segment, the Company primarily competes in the
computer and telecommunications markets, and to a lesser extent, in the
industrial and instrumentation markets. The Company believes it is the third
largest electronic connector, socket and cable assembly manufacturer in the
world (with a market share of approximately 3%), one of the world's top two
manufacturers of connectors for the telecommunications market (with a market
share of approximately 3%), and one of the world's top three connectors
manufacturers for the computer market (with a market share of approximately 5%).
The Company is a holding company that owns all of the outstanding capital
stock of Berg. The Company and Berg were incorporated in Delaware in November
1992 by an investor group led by Hicks, Muse, Tate & Furst Incorporated ("Hicks,
Muse") and Mills & Partners, Inc. to facilitate the acquisition of the Connector
Systems Business (the "Predecessor") of the Electronics Division of E.I. du Pont
de Nemours and Company ("DuPont") in February 1993 (the "DuPont Acquisition").
Since the consummation of the DuPont Acquisition, the Company has made seven
strategic acquisitions. The largest of these was the acquisition in May 1994 of
certain assets and related liabilities of the Connector System Business of the
AT&T Microelectronics division of AT&T Corp. (now Lucent Technologies Inc.)
("Lucent") for aggregate consideration of $84.5 million (including fees and
expenses) (the "Lucent Acquisition") which greatly expanded the Company's
telecommunications product line. The other six acquisitions expanded the
Company's offerings of cable assemblies primarily used in the computer and
telecommunications market, of sockets, of radio frequency and microwave
connectors and of other connector products. These six acquisitions were made for
consideration aggregating approximately $71.8 million (including fees and
expenses).
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MARKETS SERVED BY THE COMPANY
The Company's products are designed for use primarily in the
telecommunications and computer markets, and to a lesser extent, in the
industrial and instrumentation markets. The percentage of net sales derived from
each of these markets in 1996 is as follows:
<TABLE>
<CAPTION>
PERCENTAGE
OF 1996
MARKET NET SALES PRODUCT APPLICATIONS
------ ---------- --------------------
<S> <C> <C>
TELECOMMUNICATIONS............. 50% Mobile communications: Microwave equipment, cellular
phones, hand-held radios, modems and pagers
Transmission and switching: Telephone switching
equipment
COMPUTER....................... 41 High-end data processing: Supercomputers, servers, data
communications, mainframe computers, mini-computers and
related peripherals such as disk drives and tape drives
Personal computing: Notebook computers, desk top
computers, printers, disk drives and work stations
INDUSTRIAL AND
INSTRUMENTATION.............. 5 Process control equipment, medical equipment,
instrumentation and testing equipment
OTHER.......................... 4 Military and aerospace equipment, specialized automotive
and consumer electronics
</TABLE>
PRODUCTS
The electronics industry generally classifies electronic package
interconnection into six levels, and products are classified in accordance with
the level that they serve. The Company manufactures more than 45,000 products
which are grouped into 25 product lines. The Company's products extend to each
of the six levels of interconnection.
Level 1. Level 1 refers to a direct attachment of a component part to a
printed circuit board ("PCB"), which does not involve a connector. The Company
assists customers in the design of unique interconnect devices called
application specific modules ("ASM's") for a wide range of applications that
contain active components such as microprocessor integrated circuits and passive
components such as capacitors or sockets. Some passive components and all active
components are acquired from vendors. In the process of manufacturing ASM's, the
Company attaches the active and passive components directly to the specific-
purpose PCB's, which are either produced by the Company or acquired from a
vendor.
Level 2. Level 2 connectors consist of on board connecting devices,
generally known as sockets. Sockets attach to PCBs and facilitate replacement of
expensive microprocessor integrated circuits on the PCB. Sockets are always
utilized inside of an electronic device or "box" and are required for a wide
range of applications. The Company believes that it has one of the industry's
broadest offerings in pin grid array sockets which are used to connect
microprocessors to the PCB. The Company also has a broad product offering of
dual inline memory modules which are used to connect memory chips to the PCB.
Level 3. Level 3 connectors are used to connect or "stack" PCBs in either
parallel fashion or at 90 degree angles to one another. The typical use for
Level 3 PCB connectors is inside a computer or inside a telecommunications
processing device. Level 3 PCB connectors are low frequency signal conducting
connectors usually associated with data transmission. Historically, the
Company's principal product offering has consisted of this type of connector.
The Company's broad product offering of Level 3 connectors ranges from its
mature product lines, including the widely recognized Fastech(R) (3.17mm spacing
between contacts), BergStik(R) (2.54mm), DUBOX(TM) (2.54mm) and 2.54mm
interconnection product lines, to newer products which include H.P.C.(TM)
(2.54mm), Minitek(TM) (2mm), Metral(R) (2mm), Rib-cage(TM) (1.27mm), Conan(TM)
(1mm), BergStak (0.8mm and 0.5mm) and Micropax(TM) (0.64mm). The Company's newer
generation Level 3 products allow the Company to satisfy its customer demands
for increasingly compact and high density products serving applications such as
compact mobile communications and computing devices. The Company
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believes it is the world's second largest supplier of PCB connectors to the
computer and telecommunications industries. The Company's marketing and research
will continue to focus on improvements in density and miniaturization to meet
the emerging PCB connector needs of its customers.
Level 4. Level 4 connectors consist of devices that connect a wire or a
wiring harness to a PCB, usually inside a box. The product offerings in this
category include connectors that are used to terminate discrete wire, planar
cable and flexible printed circuits. The Company's Level 4 product offerings
include "quickie" insulation displacement connectors for terminating planar
cable and Reliflex(R), Duflex(TM) and 0.5mm flat printed circuit connectors for
terminating flat printed circuit cable. The Company's history of innovation in
Level 4 devices includes its invention of the modular jack now used widely to
connect telephone, computer and facsimile equipment.
Level 5. Level 5 connectors consist of devices that connect cable to cable
or wire to wire, and are either located inside a box or provide an output
connector from the box to other equipment. Level 5 connectors are also referred
to as rectangular or input/output connectors. Historically, the Company's sales
in this category have been generated primarily to meet the special requests of
major customers. Examples of such connectors include a flex cable assembly sold
to Volkswagen for use in its automatic gear box, and a wide range of radio
frequency and coaxial connectors used in the transmission of voice, video and
data. The Company's research and development efforts relative to this product
line have focused on the next generation of input/output connectors that require
smaller and more dense connectors for a wide range of applications, such as
universal serial bus ("USB"), very high density connector interface ("VHDCI"),
and others such as the Company's new MetaGig product offering.
Level 6. Level 6 connectors or cable assemblies consist of an integrated
cable terminated with a connector at each end. Level 6 connectors such as the
SCSI cables manufactured by the Company connect two pieces of equipment. For
instance, the SCSI cable can be used to connect a printer to a personal
computer.
The Company's sales in 1996 in each category ranked in descending order by
dollar amount were: Level 3 (PCB to PCB or "board to board"), Level 4 (wire to
board), Level 6 (cable assemblies), Level 5 (wire to wire), Level 1 (ASM's) and
Level 2 (sockets).
NEW PRODUCT DEVELOPMENT
Approximately 35% of the Company's 1996 net sales were generated from
products developed by the Company within the past five years. Developing new
products requires substantial investments in research and development. The
Company targets research and development expenditures specifically to broaden
its product line and to expand its technical capabilities in order to meet its
customers' anticipated needs. In 1994, 1995 and 1996, the Company's research and
development expenditures were $34.8 million, $39.1 million and $42.3 million,
respectively. Of the $116.2 million invested in research and development during
the last three fiscal years, $71.7 million ($20.8 million, $24.8 million and
$26.1 million in 1994, 1995 and 1996, respectively) qualifies for creation and
application of new and improved products and processes as defined in SFAS No. 2,
"Accounting for Research and Development Costs."
The Company had approximately 400 full-time employees in fiscal 1996
engaged in research, development and engineering functions, primarily at its
United States, European and Asian research and development centers. In addition,
the Company has three application engineers located at Lucent's Bell
Laboratories ("Bell Labs"). Through its access to Bell Labs, the Company is not
only able to take advantage of the research capabilities of the Bell Labs
facility, but is also able to provide support to and work closely with Lucent's
engineers in the advancement of Lucent's telecommunications equipment.
To fill the needs of its customers, the Company's product engineers work
with certain customers' in-house technical staffs in the early stages of product
development to design, produce and manufacture special products to meet the
specifications of particular applications. The manufacture of special products
permits the Company, through its research and development activities, to make
technological advances to provide the customer with a design solution to fit
such customer's needs, to gain a marketing inroad with the customer
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with respect to the Company's complete product line and, in some cases, to
develop products that can be sold to additional customers in the future. The
Company presently has significant ongoing projects with a variety of key
customers in the computer and telecommunications industries.
Examples of the Company's product and market development efforts include
the Company's Metral(R) connector, originally developed in conjunction with
Lucent and Ericsson Telecom AB of Sweden, which has become the industry standard
for a variety of telecommunications and computer applications. Other products
developed by the Company which have become industry standards include SPCI,
PCMCIA, BergStik(R) and the modular jack.
SALES AND MARKETING
The Company places a high priority on identifying and responding to its
customers' requirements on a timely basis. In order to ensure that the Company
is best positioned to respond to these requirements, it has developed a sales
and marketing strategy that utilizes global account managers, a highly trained
Company-employed direct sales force, independent electronic component
distributors and independent manufacturers' representatives.
Through its global account managers and direct sales force the Company is
able to develop strong ties to leading OEMs, or Original Equipment
Manufacturers, who must use connectors to complete the design and manufacture of
their products. These ties enable the Company to act as a partner in the design
and development of new products and applications for these customers. By
becoming a partner in the design and development of new products for its leading
customers, the Company believes it can enhance its relationship with these
customers, achieve preferred supplier status and be better positioned to
anticipate its customers' future needs. In addition, the Company is assigning
industry managers to certain emerging high technology companies in order to
remain at the forefront of technological development and position itself to
supply the connector requirements of these companies.
In addition to Company-employed sales staff, independent electronic
component distributors and independent manufacturers' representatives, the
Company utilizes a number of electronic and digital distribution techniques to
ensure easy access to, and ordering of, its products by the Company's customers.
Examples of this include automated access to Company product information via
facsimile, electronic publication of Company product catalogues and access to
Company product catalogues via the World Wide Web on the Internet. This latter
utility also allows customers' engineers to electronically modify the Company's
connector designs and send them via electronic mail to the Company's engineers
for further development.
CUSTOMERS
In 1996, the Company sold its connectors to over 25,000 customers
throughout the world, including substantially all computer and
telecommunications OEMs. As a result of the Lucent Acquisition, Lucent became
the largest customer of the Company. In connection with the Lucent Acquisition,
the Company entered into a five-year supply agreement with Lucent pursuant to
which the Company will supply on an exclusive basis all of the requirements for
connectors and related products for the business units and facilities of Lucent
that were previously supplied by the AT&T Connector Business, representing
substantially all of Lucent's North American switching and transmission
business. In 1996, sales to Lucent accounted for approximately 18% of the
Company's total sales. Consequently, developments adverse to Lucent, or its
products, or decreased levels of purchases by Lucent, could have a material
adverse effect on the Company's results of operations. Additional major
customers of the Company include, among others, IBM, Hewlett Packard, Seagate,
Motorola, Northern Telecom, Compaq, Siemans GPT, Alcatel, Quantum/MKE, Philips,
Solectron and Ericsson.
There has been a trend on the part of OEM customers to reduce the number of
qualified suppliers to those companies that have a global presence, can meet
ever-increasing demand for quality and delivery standards, offer a broad product
portfolio, provide design capability, and have competitive prices. The Company
has focused its global resources on adapting to this environment. The Company
has concentrated its
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efforts on service and productivity improvements including advanced computer
aided design and manufacturing systems, and just-in-time inventory programs to
increase product quality and shorten product delivery schedules. The Company's
strategy is to provide the broadest selection of connectors in the product areas
in which it competes. The Company has achieved a preferred supplier designation
from several of its most important OEM customers in its chosen markets.
INTERNATIONAL OPERATIONS
Approximately 46% of the Company's 1996 sales originated outside of North
America, split approximately evenly between the Asia Pacific region and Europe.
In Asia, the Company has manufacturing, engineering and sales facilities in
Japan, Korea, Taiwan, the People's Republic of China and Singapore, a sales
office in Hong Kong, and a 40%-owned manufacturing and sales joint venture in
India. In Europe, the Company has manufacturing and engineering facilities in
France, The Netherlands, Ireland and Sweden, with sales offices in most major
European countries. The Company believes that its global presence is important
as it allows the Company to provide consistent, quality products on a timely
basis to its multinational customers' locations worldwide. See Note 14 of the
Company's consolidated financial statements for geographic segment information.
The Company is subject to risks generally associated with international
operations, including price and exchange controls, limitations on foreign
ownership and other restrictive actions. In addition, fluctuations in currency
exchange rates may affect the Company's results of operations.
RAW MATERIALS
The Company purchases a wide variety of raw materials for the manufacture
of its products, including precious metals such as gold and palladium used in
plating, copper alloys and brass used for contacts, and plastic resins used in
molding connector bodies and inserts. All raw materials are readily available
throughout the world and are purchased locally from a variety of suppliers. The
Company is not dependent upon any one source for raw materials.
Generally, the prices at which the Company purchases precious metals are
based upon market prices of such metals at the time of purchase. Precious metals
have historically been subject to price fluctuations. From time to time, the
Company engages in short-term hedging activities to reduce its exposure to
precious metals price fluctuations. Historically, such hedging operations have
not been material, and gain and losses from such operations have not been
significant. There can be no assurance that such hedging operations will
eliminate or substantially reduce such risk. In most cases, the Company is able
to pass on to its customers significant price fluctuations in the market prices
of precious metals. For the years ended December 31, 1994, 1995 and 1996 the
cost of gold and other precious metals accounted for approximately 9%, 7% and
7%, respectively, of the Company's cost of goods sold.
MANUFACTURING
The Company employs advanced manufacturing processes in order to
manufacture quality products for customers throughout the world. The Company's
historical emphasis on product development has been carried over to process
technology and has resulted in the development of production facilities equipped
with state-of-the-art manufacturing equipment including: high speed, selective
reel-to-reel precious metal plating equipment, with advanced on-line process
controls; proprietary high speed, flexible product assembly equipment; metal
stamping equipment; and plastic molding machines. In addition, the Company's
manufacturing operations are vertically integrated from the initial connector
design stage through manufacturing. Management believes that the vertical
integration allows the Company to reduce time to market and be more responsive
to customer needs.
The Company is committed to the highest quality standards for its products,
a standard maintained in part by continuous improvements to its production
processes and upgrades to its manufacturing equipment. The Company was the first
connector company to have its manufacturing and engineering sites certified by
the International Standards Organization ("ISO") according to its 9000 series of
quality standards. ISO 9000 series certification constitutes an independent
certification that the Company has systems in place to ensure
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that products delivered by the Company will consistently meet customer quality
requirements. While all of the Company's new facilities are in the process of
becoming ISO 9000 certified, all of the Company's other significant
manufacturing and engineering sites are ISO 9000 certified.
PATENTS AND TRADEMARKS
The Company has more than 1,600 patents and pending patent applications and
200 trademarks worldwide. While the Company considers its patents to be valuable
assets, the Company does not believe that its competitive position is dependent
on patent protection or that its operations are dependent on any individual
patent or group of related patents. However, in some instances, patents and
patent protection may serve as a barrier to entry in certain product lines. The
Company's policy is to obtain patents on its significant new products and
enforce its patent rights.
COMPETITION
The electronic connector industry is highly fragmented, with over 1,500
connector manufacturers competing worldwide. As a result, the Company generally
competes with different suppliers in each of the various categories of the
overall market in which the Company operates. The Company is generally among the
market share leaders within its targeted markets, where it competes primarily on
the basis of quality, reliability, reputation, design capability, customer
service, delivery time and price.
BACKLOG
The Company estimates that its backlog of unfilled orders on December 31,
1996, and December 31, 1995, was approximately $105.1 million and $115.3
million, respectively. The decrease in backlog in 1996 from 1995 is primarily a
result of currency declines causing backlog in U.S. dollars to be lower in 1996
than 1995 and customers moving to demand/pull and consignment order patterns
reducing open orders at any one point in time. Unfilled orders may be cancelled
prior to published lead times; however, such cancellations historically have not
been material. Substantially all the backlog as of December 31, 1996 is expected
to be filled by June 30, 1997. The backlog outstanding at any point in time is
not necessarily indicative of the level of business to be expected in the
ensuing period.
EMPLOYEES
As of December 31, 1996, the Company had approximately 6,000 employees
worldwide, including approximately 1,100 temporary employees. Of these
employees, approximately 4,900 were engaged in manufacturing, 400 were engaged
in research and development and 700 were engaged in sales, marketing and
administrative functions. Most of the Company's employees located in the United
States are not represented by labor unions, while most of the Company's
employees engaged in manufacturing in Europe and Asia belong to work councils or
unions. The Company believes that it has a good relationship with its employees,
and has never experienced a work stoppage.
RECENT DEVELOPMENTS
Initial Public Offering
On March 6, 1996, the Company consummated its initial public offering of
7,475,000 shares of the Company's common stock, par value $0.01 per share
("Common Stock"). The Company received net proceeds of approximately $147.0
million from the offering (net of underwriting commissions and discounts). On
February 29, 1996, the Company effected a 1-for-4.11 reverse stock split such
that every 4.11 outstanding shares of the Common Stock and 4.11 outstanding
shares of the Company's Class A Common Stock, par value $0.01 per share ("Class
A Common Stock"), were combined into one share of Common Stock and one share of
Class A Common Stock, respectively. No fractional shares of Common Stock or
Class A Common Stock were issued in connection with the reverse stock split;
fractional share interests resulting from the reverse stock split were
cancelled.
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New Credit Facility
On February 29, 1996, the Company entered into a new credit facility (the
"New Credit Facility") that, among other things, refinanced the Company's
existing credit agreement. The New Credit Facility consists of a $350.0 million
term loan and a $100.0 million revolving credit loan. The refinancing of the
existing credit agreement resulted in the write off of $12.8 million of deferred
financing costs in the year ended December 31, 1996. This write off, net of
income tax, is classified with other extraordinary items on the consolidated
statement of operations appearing in Item 8 hereof.
The Series B Redemption and the Series E Redemption and Tender Offer
On March 18, 1996, the Company redeemed 50% of the outstanding shares of
the Company's Series E Preferred Stock, par value $0.01 per share (the "Series E
Preferred"), including accrued and unpaid dividends and a redemption premium
thereon for approximately $44.3 million (the "Series E Preferred Redemption").
On March 19, 1996, the Company purchased all of the outstanding shares of Series
E Preferred not purchased by the Company pursuant to the Series E Preferred
Redemption for approximately $47.8 million. Also on March 19, 1996, the Company
redeemed all of the outstanding shares of the Company's Series B Preferred
Stock, par value $.01 per share (the "Series B Preferred"), including accrued
and unpaid dividends thereon, for approximately $50.9 million. The excess, $21.9
million, of the fair value of the consideration transferred to the holders of
the Series E Preferred and Series B Preferred over the carrying amount of the
Series E Preferred and Series B Preferred is reflected as a reduction from net
income for the year ended December 31, 1996 to determine net loss applicable to
common shares in the consolidated statement of operations appearing in Item 8
hereof.
The Debenture Redemption and Tender
On April 8, 1996, Berg redeemed $30.0 million aggregate principal amount of
its 11 3/8% Guaranteed Senior Subordinated Debentures due 2003 (the
"Debentures") in accordance with the terms of the Indenture, dated as of October
29, 1993, among Berg, the Company and Harris Trust and Savings Bank, as trustee,
as amended (the "Indenture"), for $34.5 million, plus accrued and unpaid
interest to the redemption date and a redemption premium thereon (the "Debenture
Redemption"). On April 9, 1996, Berg purchased all of the outstanding Debentures
not redeemed by Berg pursuant to the Debenture Redemption for approximately
$82.6 million. The redemption and purchase of the Debentures resulted in a write
off of $4.9 million of deferred financing costs in the year ended December 31,
1996. This write off, net of income tax, is classified with other extraordinary
items in the consolidated statement of operations appearing in Item 8 hereof.
Additionally, the redemption and purchase premium and the related fees and
expenses of the Debenture Redemption and purchase, totaling $13.5 million, is
classified with other extraordinary items, net of tax, in the consolidated
statement of operations appearing in Item 8 hereof.
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ITEM 2. PLANTS AND PRINCIPAL PROPERTIES
In addition to its principal executive offices in St. Louis, Missouri, the
Company operates 24 principal manufacturing and research facilities and other
principal properties located in 13 different countries. The Company considers
its plants and equipment to be modern and well-maintained. Production facilities
for certain of the Company's products are operating at or near capacity.
<TABLE>
<CAPTION>
SIZE
(SQUARE TYPE OF
LOCATION FEET) INTEREST DESCRIPTION OF USE
-------- ------- -------- ------------------
<S> <C> <C> <C>
NORTH AMERICA
Huntingdon County, PA 200,000 Leased Precious metal plating, metal stamping, plastic
injection molding and connector assembly
Emigsville, PA 190,000 Owned Global supplier of plated wire, strip and
terminals for other Company facilities;
manufacturing operations include stamping,
assembly and precious metal plating
Clearfield, PA 146,000 Owned Metal stamping, plastic injection molding and
assembly operations
Valley Green, PA 112,000 Owned U.S. engineering headquarters and certain
administrative functions
Juarez, Mexico 100,000 Leased Manufacture of high-labor-content connectors and
cable assemblies for North America and Europe
Hazelton, PA 65,000 Leased Design and manufacture of cable assemblies
Gardena, CA 56,000 Leased Design and manufacture of cable assemblies
Fremont, CA 50,000 Leased Design and manufacture of sockets and related
interconnections; manufacturing operations
include injection molding, connector assembly,
mold making and assembly
Franklin, IN 46,000 Leased Design and manufacture of radio frequency and
microwave connectors, related components and
cable assemblies; administrative and marketing
support center.
New Brunswick, NJ 12,000 Leased Manufacture of customer and standard application
integrated circuit socket devices
Ridgefield, CT 10,000 Leased Administrative, sales and marketing headquarters
for cable assemblies
EUROPE
Besancon, France 165,000 Owned Metal stamping, plastic injection molding,
component assembly and precious metal plating;
precious metal plated strip and terminals are
supplied to other global manufacturing sites
's-Hertogenbosch, The Netherlands 120,000 Owned European sales, marketing and engineering
headquarters; metal stamping, plastic injection
molding and assembly of connectors, components
and cable assemblies
Katrineholm, Sweden 97,000 Leased Metal stamping, plastic injection molding and
assembly of connectors
Fermoy, Ireland 42,500 Leased Plastic injection molding and assembly of
connectors and components
London, England 9,600 Leased Regional headquarters and administrative offices
</TABLE>
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<TABLE>
<CAPTION>
SIZE
(SQUARE TYPE OF
LOCATION FEET) INTEREST DESCRIPTION OF USE
-------- ------- -------- ------------------
<S> <C> <C> <C>
ASIA
Chungli, Taiwan 125,000 Owned Metal stamping, automatic injection and insert
molding and component and cable assembly;
approximately 65,000 sq. ft. of this facility is
leased to DuPont
Nantong, The People's Republic of
China 47,000 Leased Component and cable assembly operations
Jurong, Singapore 46,000 Leased Metal stamping, automatic injection and insert
molding and component and cable assembly
Iwaki City, Japan 39,000 Leased Metal stamping, injection molding and production
of electronic connectors, fiber optic connectors
and cable assemblies
Ichon, Korea 32,000 Owned Metal stamping, injection and insert molding,
component and cable assembly
Tokyo, Japan 16,000 Leased Design center for Asia Pacific and
administrative, sales and marketing headquarters
for Japan
Ngee Ann City Building, Singapore 15,550 Leased Regional headquarters; sales and administrative
offices
Maduri, India 11,000 Owned By 40% owned joint venture; metal stamping,
Joint Venture molding and assembly
</TABLE>
In addition to the facilities listed above, the Company maintains 25 sales
and marketing facilities, all of which are leased, including four located in the
United States, three in India, two each in Japan and the People's Republic of
China and one each in Canada, Germany, Italy, Sweden, Finland, France,
Netherlands, Spain, Switzerland, the United Kingdom, Singapore, Hong Kong,
Taiwan and Korea.
ITEM 3. LEGAL PROCEEDINGS
The operations of the Company have from time to time been involved in
claims and litigation. The nature of the Company's business is such that it is
anticipated that the Company will continue to be involved from time to time in
claims and litigation considered to be in the ordinary course of its business.
Based on experience with similar claims and litigation, the Company does not
anticipate that these matters will have a material adverse effect on the
Company.
The Company from time to time receives notifications alleging infringements
of patents generally held by other connector manufacturers. Disputes over patent
infringement are common in the connector industry and typically begin with
notices of the type described above. Although the ultimate resolution of the
legal action and infringement notices described above cannot be predicted, the
Company believes that such resolution, including any ultimate liability, will
not have a material adverse effect on the Company.
Certain operations of the Company are subject to federal, state, local and
foreign environmental laws and regulations, which govern, among other things,
the discharge of pollutants into the air and water, as well as the handling and
disposal of solid and hazardous wastes. The Company believes that the costs of
compliance with such laws and regulations will not have a material adverse
effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth
quarter of 1996.
10
<PAGE> 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
Effective March 1, 1996, the Company's Common Stock began trading on the
New York Stock Exchange under the trading symbol "BEI." There is no established
public trading market for the Class A Common Stock.
The following table sets forth the high and low closing sales prices per
share for the Company's Common Stock for the periods indicated.
<TABLE>
<CAPTION>
MARKET PRICE
-------------
PERIOD HIGH LOW
------ ---- ---
<S> <C> <C>
March 1-March 31, 1996...................................... 26 22 3/8
Second Quarter.............................................. 28 5/8 22 3/8
Third Quarter............................................... 28 20 1/4
Fourth Quarter.............................................. 32 1/2 25 1/8
</TABLE>
The Company has not paid any dividends on any class of its common stock
since its incorporation in November 1992 and no dividend payments are
anticipated in 1997. The Company is restricted by certain agreements related to
the New Credit Facility from paying dividends on shares of any class of its
common stock, except under certain limited circumstances. See Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
On December 31, 1996, the approximate number of record holders of each
class of the Company's common stock was as follows:
<TABLE>
<S> <C>
Common Stock........................................... 167
Class A Common Stock................................... 10
</TABLE>
11
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The following tables present selected historical financial data of the
Company and the Predecessor for the periods indicated. The historical financial
data for the four years ended December 31, 1996, have been derived from the
consolidated financial statements of the Company audited by Arthur Andersen LLP.
The historical financial data of the Predecessor for the year ended December 31,
1992, represent the assets and results of operations acquired by the Company in
the DuPont Acquisition and have been derived from the audited combined financial
statements of the Predecessor. Because of purchase accounting adjustments, the
indebtedness incurred in connection with the DuPont Acquisition, the cost
savings from the elimination of DuPont's overhead, and subsequent additional
acquisitions by the Company, the Company believes that the information with
respect to the Predecessor is generally not comparable to that of the Company.
THE COMPANY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1993(6) 1994 1995 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales........................................... $ 318,424 $ 526,250 $ 667,249 $ 704,669
Cost of goods sold.................................. 195,319 343,858 442,276 455,869
Selling, general and administrative expenses........ 83,947 128,865 154,756 157,682
Amortization of intangible assets................... 5,945 9,603 11,182 12,011
Net periodic postretirement benefits................ 2,200 2,640 2,271 1,272
---------- ---------- ---------- ----------
Operating income.................................... 31,013 41,284 56,764 77,835
Other income (expense):
Interest expense.................................. (18,948) (29,186) (34,609) (28,350)
Amortization of deferred financing costs.......... (4,059) (5,859) (6,286) (3,388)
Other, net........................................ (597) (346) (738) 1,239
---------- ---------- ---------- ----------
Income before income taxes and extraordinary
items............................................. 7,409 5,893 15,131 47,336
Income tax provision................................ 3,680 2,871 5,802 18,391
---------- ---------- ---------- ----------
Income before extraordinary items................... 3,729 3,022 9,329 28,945
Extraordinary items(1).............................. (1,900) -- -- (18,664)
---------- ---------- ---------- ----------
Net income.......................................... 1,829 3,022 9,329 10,281
Preferred stock:
Accretion and dividends(2)........................ (8,837) (13,287) (14,741) (5,469)
Excess of fair value over book value of redemption
and purchase(3)................................. -- -- -- (21,866)
---------- ---------- ---------- ----------
Net loss applicable to common shares................ $ (7,008) $ (10,265) $ (5,412) $ (17,054)
========== ========== ========== ==========
Net loss per common share(4)........................ $ (0.67) $ (0.79) $ (0.42) $ (0.89)
Average common shares outstanding(4)................ 10,487,674 12,997,626 12,989,324 19,245,738
OTHER DATA:
EBITDA (excluding PBC)(5)........................... $ 55,589 $ 86,055 $ 112,978 $ 135,355
Net cash from operating activities.................. 57,627 50,933 67,763 69,211
Net cash from investing activities.................. (407,858) (142,154) (56,421) (79,400)
Net cash from financing activities.................. 357,282 96,542 (4,478) (226)
Depreciation........................................ 16,431 32,528 42,761 44,237
Amortization of intangible assets................... 5,945 9,603 11,182 12,011
BALANCE SHEET DATA:
Working capital..................................... $ 37,649 $ 51,807 $ 43,802 $ 41,160
Total assets........................................ 462,918 621,836 668,340 682,007
Long-term obligations (including current
maturities)....................................... 246,238 342,679 338,171 358,558
Series B Preferred (liquidation preference)......... 41,616 45,947 49,735 --
Series E Preferred (liquidation preference)......... 56,970 67,233 76,686 --
Total stockholders' equity.......................... 106,890 129,459 144,340 138,892
</TABLE>
(footnotes on next page)
12
<PAGE> 13
- ---------------
(1) Extraordinary item in 1993 represents a $1,900 loss on early extinguishment
of debt (net of income tax of $1,100). In 1996, extraordinary item
represents an $18,664 loss on early extinguishment of debt (net of income
tax of $12,443).
(2) Consists of dividends on the Series B Preferred and the Series E Preferred,
plus accretion of original issue discount on Series B Preferred. Dividends
accrued on the Series B Preferred at the rate of 8.0% per annum per share
and were paid in additional shares quarterly. Through the February 1996
dividend payment date, the Company had issued additional shares of Series B
Preferred in payment of each such quarterly dividend and paid cash amounts
in lieu of issuing fractional shares. Annual accretion of original issue
discount on the Series B Preferred was $1,500. Dividends accrued on the
Series E Preferred at the rate of 13.375% per annum per share and were paid
in additional shares quarterly. Through the February 1996 dividend payment
date, the Company had issued additional shares of Series E Preferred in
payment of each such quarterly dividend and paid cash amounts in lieu of
issuing fractional shares. As part of the recapitalization (described in
Recent Developments) all shares of Series B Preferred and Series E Preferred
were redeemed.
(3) Excess of fair value over book value of redemption and purchase of $21,866
represents consideration transferred to the holders of the Series B
Preferred and Series E Preferred in excess of the carrying amount of the
Series B Preferred and Series E Preferred and is a reduction from net income
to determine net loss applicable to common shares.
(4) Per share data is determined by dividing the weighted average number of
shares of Common Stock outstanding during the period into net loss
applicable to common shares.
(5) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
includes operating income adjusted to exclude depreciation, amortization of
intangible assets and noncash net periodic postretirement benefits charges
("PBC"). The Company believes that EBITDA (excluding PBC) provides
additional information for determining its ability to meet future debt
service requirements. However, EBITDA (excluding PBC) is not a defined term
under GAAP and is not indicative of operating income or cash flow from
operations as determined under GAAP.
(6) The historical data for 1993 includes the results of operations of the
Company from March 1, 1993, through December 31, 1993. The Company had no
operations prior to the DuPont Acquisition consummated on March 1, 1993. Net
sales and cost of inventory sold of the Predecessor for the period January
1, 1993, through February 26, 1993, were $59,600 and $39,600, respectively.
13
<PAGE> 14
THE PREDECESSOR
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1992
(IN
THOUSANDS)
<S> <C>
RESULTS OF OPERATIONS:
Net sales................................................... $399,801
Other income................................................ 1,323
--------
Total revenues.................................... 401,124
Cost of goods sold.......................................... 283,329
Selling, general and administrative expenses................ 99,721
Research and development expenses........................... 18,148
Taxes, other than on income................................. 9,068
Exchange losses............................................. 552
--------
Operating loss.............................................. (9,694)
Interest expense(1)......................................... 7,506
--------
Loss before income taxes.................................... (17,200)
Provision for income taxes(2)............................... 7,042
--------
Net loss.................................................... $(24,242)
========
OTHER DATA:
EBITDA(3)................................................... $ 17,735
Depreciation................................................ 27,800
Amortization of intangible assets........................... 400
</TABLE>
- ---------------
(1) Interest expense in the historical financial information was determined by
DuPont based on consolidated indebtedness and allocated to the Predecessor
on the basis of the Predecessor's proportionate share of the identifiable
operating assets of DuPont. It is not necessarily indicative of the interest
expense that would have been incurred if the Predecessor had been operated
as a separate entity.
(2) Provision for income taxes in the historical financial statements assumes
that the Company is a separate taxpayer and reflects the tax strategies and
elections employed by DuPont.
(3) EBITDA includes operating income (loss) adjusted to exclude other income,
depreciation, amortization of intangible assets, business restructuring
charges and exchange losses (gains). The Company believes that EBITDA
provides additional information for determining its ability to meet future
debt service requirements. However, EBITDA is not a defined term under GAAP
and is not indicative of operating income or cash flow from operations as
determined under GAAP.
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the audited
financial statements and the notes thereto included in Item 8 hereof.
OVERVIEW
The Company's net sales increases since 1993 have principally reflected
increased unit volumes. As new products gain market acceptance and their unit
volumes increase, these products have tended to experience downward price
pressure. The gross margin effect of this pressure has been historically
mitigated or eliminated by increased manufacturing efficiencies and economies of
scale associated with higher volume production of such products. In addition,
the pricing pressure experienced by the Company with respect to its mature
products has also been mitigated by the Company's frequent introduction of
higher margin new products. Subsequent to the DuPont Acquisition, the Company
has completed seven strategic acquisitions that have broadened its product
offerings and enabled the Company to penetrate new markets.
Since the DuPont Acquisition, the Company has devoted a significant portion
of its operating income to debt service. The Company's net income applicable to
common shares has also been reduced as a result of significant noncash preferred
stock dividend payment requirements. As a result of the redemption of the
Debentures, Series B Preferred and Series E Preferred, the debt service
requirements relating to the Debentures and the dividend requirements relating
to the Series B Preferred and Series E Preferred have been eliminated.
Nevertheless, debt service expense will remain significant.
The Company manufactures connectors in various regions of the world and
exports and imports these products to and from a large number of countries.
Sales and expenses are frequently denominated in local currencies. The Company's
net sales and net income may be affected as currency fluctuations affect the
Company's product prices and cost structure. The Company, from time to time,
engages in hedging operations, such as forward exchange contracts, to reduce its
exposure to foreign currency fluctuations. Such hedging operations historically
have not been material, and gains and losses from such operations have not been
significant. There can be no assurance that such hedging operations will
eliminate or substantially reduce such risk.
Demand for the Company's products has increased significantly since the
DuPont Acquisition in 1993, and production facilities for certain of the
Company's products are operating at or near capacity. A significant portion of
the Company's planned capital expenditures in 1997 is directed toward expansion
of production capacity to meet increased demand.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales for the year ended December 31, 1996 were $704.7 million,
representing a $37.4 million, or 5.6%, increase over the year ended December 31,
1995. In general, the Company's growth in net sales during the year was
attributable to growth in unit volume partially offset by a decline in the
average prices of the Company's products.
North American sales were $382.0 million for the year ended December 31,
1996, representing a $42.7 million, or 12.6%, increase versus North American
sales for the year ended December 31, 1995. This increase was due primarily to a
$27.2 million, or 26.6%, increase in telecommunications products sales resulting
from stronger demand than in the prior year for backplanes used in switching and
transmission equipment, which translated into strong demand for the Berg
connectors used in these applications.
Sales in Europe were $155.1 million for the year ended December 31, 1996,
representing a $4.4 million, or 2.8%, decrease from European sales for the year
ended December 31, 1995. This decrease was due primarily to the strengthening of
the U.S. dollar against certain European currencies. Sales in Asia Pacific
totalled $167.6 million for the year ended December 31, 1996, representing a
$0.9 million, or 0.5%, decrease
15
<PAGE> 16
from the year ended December 31, 1995. The decrease in the Asia Pacific region
was primarily due to the effects of the weak Japanese yen versus the U.S.
dollar, offset by increased demand in the Company's major end-user markets
(computers and telecommunications). Changing currencies adversely impacted sales
recorded in Europe and Asia, reducing sales by approximately 4.0% on a combined
basis, for the year ended December 31, 1996 compared to the year ended December
31, 1995.
Due primarily to increased sales volume, cost of goods sold for the year
ended December 31, 1996 increased by $13.6 million, or 3.1%, over cost of goods
sold for the year ended December 31, 1995. As a result of cost containment and
reduction activities, cost of goods sold as a percentage of sales improved from
66.3% for the year December 31, 1995 to its current level of 64.7% for the year
December 31, 1996.
Selling, general and administrative expenses for the year ended December
31, 1996 increased by $2.9 million, or 1.9%, over selling, general and
administrative expenses for the year ended December 31, 1995 due primarily to
sales volume. However, these expenses as a percentage of sales decreased from
23.2% for the year ended December 31, 1995 to 22.4% for the year ended December
31, 1996 due in part to cost reduction and containment activities and also to
the spreading of the fixed components of such expenses over a higher sales
volume.
Other expense decreased $11.1 million, to $30.5 million for the year ended
December 31, 1996 from $41.6 million for the year ended December 31, 1995 due to
reduced interest expense and amortization of financing costs in 1996 as a result
of the redemption of the Debentures and as a result of the New Credit Facility.
The New Credit Facility, entered into in February 1996, has lower interest rates
and financing costs than the previous credit agreement and the Debentures.
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net sales for the year ended December 31, 1995, were $667.2 million,
representing a $140.9 million, or 26.8%, increase over the year ended December
31, 1994. In general, the Company's growth in net sales during such period was
attributable to growth in unit volume partially offset by a decline in the
average prices of the Company's products.
Sales in the North American region were $339.2 million in the year ended
December 31, 1995, representing a $72.7 million, or 27.3%, increase versus the
comparable period in 1994. Of this increase, approximately $27.1 million was
attributable to an 18.6% growth rate recorded by the Company's existing North
American business (excluding sales attributable to businesses acquired by the
Company subsequent to the DuPont Acquisition). This growth was attributable to
strong demand for connector products in the Company's major end-user markets
(computers and telecommunications) and increased sales to distributors as a
result of the Company's enhanced path-to-market strategy. The balance of the
increase in North American sales, approximately $45.6 million, was primarily due
to the full period inclusion of the financial results of the Lucent Acquisition
and three other smaller businesses in the year ended 1995 versus the partial
inclusion of such results (due to the timing of the aforementioned acquisitions)
in the comparable period in 1994, partially offset by a $3.4 million decline in
cable assembly sales experienced as a result of a production decline during the
combination of two cable assembly manufacturing facilities into one.
European sales were $159.5 million for the year ended December 31, 1995,
representing a $27.5 million, or 20.8%, increase versus the year ended December
31, 1994. This increase was due primarily to further market penetration by the
Company's products of the telecommunications market (including mobile
communications), improved sales to distributors and the favorable impact of the
strengthening European currencies versus the U.S. dollar. The currency
fluctuation accounted for $12.2 million of the $27.5 million increase in sales.
Sales in the Asia Pacific region totaled $168.5 million for the year ended
December 31, 1995, representing a $40.7 million, or 31.8% increase over the year
ended December 31, 1994. Of this increase, approximately $35.5 million was
attributable to increased sales of certain of the Company's new products for the
personal computer and telecommunications markets and the addition of a direct
sales force in Japan to complement the Company's distributor in that market. The
balance of the increase in Asia Pacific sales, approximately $5.2 million, was
due to the favorable impact of the appreciation of certain Asian currencies
versus the U.S. dollar.
16
<PAGE> 17
Cost of goods sold as a percent of sales increased from 65.3% in the year
ended December 31, 1994, to 66.3% in the year ended December 31, 1995. 1995
includes the full impact of inclusion of the cable assembly and socket
businesses, most of which were acquired during 1994, which generally have lower
gross margins. In addition, the gross margins on cable assembly products were
eroded by lower absorption of manufacturing costs during the second, third and
fourth quarters as a result of a decline in production during the combination of
cable assembly manufacturing facilities in addition to increased costs incurred
during the combination. In addition, the Company experienced significant price
pressure in the Asia Pacific region in the second half of 1994, and, although
prices have stabilized, the lower price level carried into the first half of
1995.
Selling, general and administrative expenses were $154.8 million in the
year ended December 31, 1995, representing a $25.9 million, or 20.1%, increase
versus the comparable 1994 period. This increase was due to (i) the full
inclusion of the financial results of the AT&T Connector Business and the other
businesses acquired in 1994 in the year ended December 31, 1995, versus the
partial inclusion of such results in the year ended December 31, 1994; (ii) the
costs of combining cable assembly manufacturing facilities; (iii) legal and
settlement costs arising from certain patent litigation; and (iv) the weakening
of the U.S. dollar versus certain European and Asian currencies. However, as a
percent of sales, selling, general and administrative expenses decreased from
24.5% of sales in the year ended December 31, 1994 to 23.2% in the year ended
December 31, 1995, due to the spreading of the fixed component of such expenses
over a significantly higher sales volume.
Other expense grew $6.2 million, from $35.4 million for the year ended
December 31, 1994, to $41.6 million for the year ended December 31, 1995,
primarily because of increased interest expense associated with the financing of
the Lucent Acquisition. This increase was partially offset by foreign currency
translation gains associated with the weaker U.S. dollar.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $69.2 million for the year
ended December 31, 1996, which compared to $67.8 million provided by operating
activities for the comparable period in 1995. Net cash used in investing
activities was $79.4 million for the year ended December 31, 1996, compared to
net cash used of $56.4 million for the year ended December 31, 1995. The net
cash used in investing activities for the year ended December 31, 1996,
consisted of $61.6 million for capital expenditures and $17.8 million for one
acquisition, while the net cash used in investing activities during the year
ended December 31, 1995 represented capital expenditures of $45.0 million and
one acquisition of $11.4 million. Cash used in financing activities was $0.2
million for the year ended December 31, 1996, compared to $4.5 million used in
financing activities for the comparable period in 1995. The use of cash in
financing activities in 1996 represented debt repayments, net of borrowings and
the effects of the initial public offering, the redemption of the Debentures,
the Series B Preferred and Series E Preferred. The use of cash in financing
activities in 1995 represented debt repayments, net of borrowings.
Net cash provided by operating activities was $67.8 million for the year
ended December 31, 1995, which compared to $50.9 million provided by operating
activities for the comparable period in 1994. Net cash used in investing
activities was $56.4 million for the year ended December 31, 1995, compared to
net cash used of $142.2 million for the year ended December 31, 1994. The net
cash used in investing activities for the year ended December 31, 1995,
represented capital expenditures of $45.0 million and one acquisition of $11.4
million, while the net cash used in investing activities during the year ended
December 31, 1994, consisted of $84.5 million for the Lucent Acquisition; $28.6
million for three other acquisitions; and $29.0 million for capital
expenditures. Cash used in financing activities was $4.5 million for the year
ended December 31, 1995, compared to $96.5 million provided by financing
activities for the comparable period in 1994. The use of cash in financing
activities in 1995 represented debt repayments, net of borrowings incurred to
fund the one acquisition consummated in 1995. The source of cash from financing
activities in 1994 represented borrowings, net of debt repayments, needed to
fund the Lucent Acquisition and the other three acquisitions consummated in
1994.
The Company's EBITDA (excluding PBC) was $135.4 million, $113.0 million and
$86.1 million in 1996, 1995 and 1994, respectively. EBITDA (excluding PBC) is
not a defined term under GAAP and is not an alternative to operating income or
cash flow from operations as determined under GAAP. The Company
17
<PAGE> 18
believes that EBITDA (excluding PBC) provides additional information for
determining its ability to meet future debt service requirements; however,
EBITDA (excluding PBC) does not reflect cash available to fund cash
requirements. EBITDA (excluding PBC) is also one of the financial measures in
the covenants contained in the New Credit Facility.
The Company anticipates that cash flow from operations and additional funds
available under the New Revolving Credit Facility will be sufficient to meet its
foreseeable requirements for working capital, capital expenditures and other
cash requirements.
The Company anticipates that its primary uses of cash in 1997 will be (i)
for capital expenditures for maintenance, replacement and acquisitions of
equipment, expansion of capacity, productivity improvements and in connection
with product development and (ii) to pay interest on, and to repay principal of,
indebtedness under the New Credit Facility. The Company anticipates spending
approximately $60.0 million in 1997 for capital expenditures, principally
related to capacity expansion, new product development and productivity
improvement projects. The Company anticipates that for the foreseeable future
its capital spending will be at levels commensurate with its anticipated
spending in 1997. The New Credit Facility contains annual limits on the
Company's capital expenditures. The Company believes that such limits are
sufficient to allow the Company to undertake all anticipated capital projects.
The Company will be obligated to make principal and interest payments of
approximately $32.5 million under the New Credit Facility in 1997. The Company
anticipates that the foregoing principal and interest payments will be made from
cash flow from the Company's operations.
The Company's obligations under the New Credit Facility bear interest at
floating rates. The New Credit Facility requires the Company to enter into
additional interest rate hedging arrangements to hedge against interest rate
fluctuations. The Company has entered into an agreement which provides a ceiling
on the LIBOR Rate (as defined in the New Credit Facility) on $137.0 million of
indebtedness until June 30, 1998. The cost of the hedge agreements is amortized
over their terms. See Note 7 to the consolidated financial statements in Item 8
for further information.
The New Credit Facility restricts the Company from, among other things: (i)
incurring additional indebtedness (other than certain permitted indebtedness);
(ii) creating liens; (iii) guaranteeing indebtedness; (iv) merging or selling
substantially all of its assets; (v) declaring and paying certain dividends;
(vi) making certain investments and loans; and (vii) entering into certain
transactions with affiliates, in each case with certain exceptions customary for
credit facilities such as the New Credit Facility.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 123 in 1996. See Note 8 to the consolidated
financial statements in Item 8 for further information.
18
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Berg Electronics Corp.
Report of Arthur Andersen LLP, Independent Public
Accountants............................................ 20
Consolidated Balance Sheets as of December 31, 1995 and
1996................................................... 21
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996....................... 22
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1994, 1995 and 1996........... 23
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996....................... 24
Notes to Consolidated Financial Statements................ 25
Schedule I -- Condensed Financial Information (Parent
Company Only).......................................... 37
Schedule II -- Valuation and Qualifying Accounts.......... 41
</TABLE>
19
<PAGE> 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Berg Electronics Corp.:
We have audited the accompanying consolidated balance sheets of Berg
Electronics Corp. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements and the
schedules referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated 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 financial statements referred to above present fairly,
in all material respects, the financial position of Berg Electronics Corp. and
subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to the
financial statements are presented for purposes of complying with the Securities
and Exchange Commission's rules and are not a part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly state, in all material respects, the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
January 29, 1997
20
<PAGE> 21
BERG ELECTRONICS CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1995 1996
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents............. $ 19,601 $ 8,999
Accounts receivable, less allowance of
$3,043 and $3,703, respectively.... 117,665 104,134
Inventories........................... 78,242 91,823
Prepaid expenses and other............ 10,697 13,935
-------- --------
Total current assets.......... 226,205 218,891
-------- --------
Property, plant and equipment........... 230,753 259,905
Deferred financing costs................ 22,645 14,896
Intangible assets....................... 183,282 174,860
Other assets............................ 5,455 13,455
-------- --------
Total assets.................. $668,340 $682,007
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
obligations........................ $ 32,798 $ 33,912
Accounts payable...................... 73,299 60,822
Accrued payroll and payroll taxes..... 25,105 23,497
Accrued and other liabilities......... 41,988 47,168
Accrued interest...................... 2,521 3,746
Income taxes payable.................. 6,692 8,586
-------- --------
Total current liabilities..... 182,403 177,731
-------- --------
Long-term obligations, less current
maturities............................ 305,373 324,646
Other liabilities....................... 36,224 40,738
Stockholders' equity:
Series B preferred stock, $.01 par
value, $25 liquidation value,
1,989,400 and 0 shares,
respectively, issued and
outstanding........................ 20 --
Series E preferred stock, $.01 par
value, $25 liquidation value,
3,067,454 and 0 shares,
respectively, issued and
outstanding........................ 31 --
Common stock, par value $.01 per
share, 11,575,280 and 19,125,238
shares, respectively, issued and
outstanding........................ 116 191
Class A common stock, par value $.01
per share, 1,420,791 and 1,384,291
shares, respectively, issued and
outstanding........................ 14 14
Paid in capital......................... 116,705 116,299
Retained earnings....................... 9,930 19,836
Cumulative translation adjustments...... 17,524 2,552
-------- --------
Total stockholders' equity.... 144,340 138,892
-------- --------
Total liabilities and
stockholders' equity......... $668,340 $682,007
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
21
<PAGE> 22
BERG ELECTRONICS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................... $ 526,250 $ 667,249 $ 704,669
Operating expenses:
Cost of goods sold.................... 343,858 442,276 455,869
Selling, general and administrative... 128,865 154,756 157,682
Amortization of intangible assets..... 9,603 11,182 12,011
Net periodic postretirement
benefits........................... 2,640 2,271 1,272
----------- ----------- -----------
Operating income........................ 41,284 56,764 77,835
Other income (expense):
Interest expense...................... (29,186) (34,609) (28,350)
Amortization of deferred financing
costs.............................. (5,859) (6,286) (3,388)
Other, net............................ (346) (738) 1,239
----------- ----------- -----------
Income before income tax provision and
extraordinary items................... 5,893 15,131 47,336
Income tax provision.................... 2,871 5,802 18,391
----------- ----------- -----------
Income before extraordinary items....... 3,022 9,329 28,945
Extraordinary items -- loss on early
extinguishment of debt, net of income
tax of $12,443........................ -- -- (18,664)
----------- ----------- -----------
Net income.............................. 3,022 9,329 10,281
Preferred stock:
Accretion and dividends............... (13,287) (14,741) (5,469)
Excess of fair value over book value
of redemption and purchase......... -- -- (21,866)
----------- ----------- -----------
Net loss applicable to common shares.... $ (10,265) $ (5,412) $ (17,054)
=========== =========== ===========
Net income (loss) per common share
before extraordinary items............ $ (0.79) $ (0.42) $ 0.08
=========== =========== ===========
Net loss per common share............... $ (0.79) $ (0.42) $ (0.89)
=========== =========== ===========
Average common shares outstanding....... 12,997,626 12,989,324 19,245,738
=========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
22
<PAGE> 23
BERG ELECTRONICS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
PREFERRED COMMON PAID IN RETAINED TRANSLATION
STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS TOTAL
--------- ------ --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993.............. $ 40 $129 $ 110,779 $ 579 $ (4,637) $ 106,890
Exercise of stock options............. 1 100 101
Preferred stock dividends............. 5 2,802 2,807
Series B preferred stock accretion.... 1,500 (1,500) --
Change in cumulative translation
adjustments........................ 16,639 16,639
Net income............................ 3,022 3,022
---- ---- --------- ------- -------- ---------
Balance, December 31, 1994.............. $ 45 $130 $ 115,181 $ 2,101 $ 12,002 $ 129,459
Exercise of stock options............. 30 30
Preferred stock dividends............. 6 (6) --
Series B preferred stock accretion.... 1,500 (1,500) --
Change in cumulative translation
adjustments........................ 5,522 5,522
Net income............................ 9,329 9,329
---- ---- --------- ------- -------- ---------
Balance, December 31, 1995.............. $ 51 $130 $ 116,705 $ 9,930 $ 17,524 $ 144,340
Exercise of stock options............. 223 223
Preferred stock dividends............. 1 (1) --
Series B preferred stock accretion.... 375 (375) --
Preferred stock purchase and
redemption......................... (52) (142,953) (143,005)
Net proceeds from IPO................. 75 146,958 147,033
Costs of IPO.......................... (5,008) (5,008)
Change in cumulative translation
adjustments........................ (14,972) (14,972)
Net income............................ 10,281 10,281
---- ---- --------- ------- -------- ---------
Balance, December 31, 1996.............. $ -- $205 $ 116,299 $19,836 $ 2,552 $ 138,892
==== ==== ========= ======= ======== =========
</TABLE>
See accompanying notes to the consolidated financial statements.
23
<PAGE> 24
BERG ELECTRONICS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------------
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Cash flows provided by (used in)
operating activities:
Net income............................ $ 3,022 $ 9,329 $ 10,281
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Extraordinary items................ -- -- 31,107
Depreciation....................... 32,528 42,761 44,237
Amortization and other non-cash
charges.......................... 18,102 19,739 16,671
Change in assets and liabilities,
net of acquisitions:
Accounts receivable.............. (11,813) (24,226) 8,706
Inventories...................... (3,331) (8,339) (10,982)
Prepaid expenses and other....... (8,485) 648 (5,873)
Accounts payable................. 6,051 23,242 (7,610)
Accrued and other liabilities.... 9,508 4,944 (2,591)
Other, net....................... 5,351 (335) (14,735)
--------- --------- ---------
Net cash from operating activities...... 50,933 67,763 69,211
--------- --------- ---------
Cash flows provided by (used in)
investing activities:
Acquisitions, less cash $94, $0, and
$0, respectively................... (113,122) (11,375) (17,844)
Capital expenditures, net............. (29,032) (45,046) (61,556)
--------- --------- ---------
Net cash from investing activities...... (142,154) (56,421) (79,400)
--------- --------- ---------
Cash flows provided by (used in)
financing activities:
Proceeds from issuance of long-term
obligations........................ 118,250 15,150 405,393
Redemption and purchase of preferred
stock.............................. -- -- (143,005)
Repayment of long-term obligations.... (21,809) (19,658) (384,662)
Net proceeds from IPO................. -- -- 147,033
Financing costs....................... -- -- (25,208)
Proceeds from issuance of common
stock.............................. 101 30 223
--------- --------- ---------
Net cash from financing activities...... 96,542 (4,478) (226)
--------- --------- ---------
Effect of exchange rate changes on
cash.................................. 1,179 756 (187)
--------- --------- ---------
Net change in cash and cash
equivalents........................... 6,500 7,620 (10,602)
Cash and cash equivalents at beginning
of period............................. 5,481 11,981 19,601
--------- --------- ---------
Cash and cash equivalents at end of
period................................ $ 11,981 $ 19,601 $ 8,999
========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
24
<PAGE> 25
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. THE COMPANY
The Company is a leading global designer, manufacturer and marketer of
electronic connectors and cable assembly products for applications primarily in
the computer, telecommunications and industrial markets. Berg Electronics Corp.
("Berg") (formerly Berg Electronics Holdings Corp.), a Delaware corporation, was
formed on November 4, 1992, to participate in the DuPont Acquisition (defined
below). Berg had no operations prior to the DuPont Acquisition. Berg's year end
is December 31.
On February 26, 1993, Berg, through its wholly-owned subsidiary Berg
Electronics Group, Inc. ("Group") (formerly Berg Electronics, Inc.) and Group's
subsidiaries (together with Berg and Group, the "Company"), acquired certain
assets and assumed certain liabilities of the Connector Systems Business (the
"Business") of the Electronics Division of E.I. duPont de Nemours and Company
("DuPont") for a total consideration of $385,057 (the "DuPont Acquisition"),
which included an agreement not to compete, plus fees and expenses relating to
the DuPont Acquisition and related financing. The results of operations of the
Business have been included in the consolidated financial statements since the
date of the DuPont Acquisition.
Since the DuPont Acquisition, the Company has made seven strategic
acquisitions. The largest of these occurred on May 23, 1994, when the Company
acquired certain assets and related liabilities of the Connector System Business
("AT&T Connectors") of the AT&T Microelectronics Division of AT&T Corp. (now
Lucent Technologies, Inc.) ("Lucent") for a total consideration of $84,500 (the
"Lucent Acquisition") which included fees and expenses relating to the Lucent
Acquisition and related financing.
During 1996, the Company implemented a recapitalization plan (the
"Recapitalization Plan") to, among other things, reduce interest expense and
preferred stock dividend requirements and to improve the Company's operating and
financial flexibility. The Recapitalization Plan included the redemption and
purchase of Series B Preferred (as defined below) and Series E Preferred (as
defined below), the redemption and purchase of the Debentures (as defined
below), the refinancing of the Amended and Restated Credit Agreement dated as of
May 23, 1994, with Chemical Bank, N.A., as Agent, and certain other banks as
parties thereto (the "Amended Credit Agreement"), the Reverse Stock Split
(defined below) and the initial public offering of 7,475,000 shares of the
Company's common stock, par value $0.01 per share (together, the
"Recapitalization").
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Berg, Group
and Group's wholly-owned subsidiaries, except for Group's interest in a joint
venture in India which is accounted for under the equity method and is
insignificant to the consolidated financial statements. All significant
intercompany accounts and transactions have been eliminated. In addition,
certain prior year amounts have been reclassified to conform to current year
presentation.
Revenue Recognition
Sales and related cost of goods sold are recognized when goods are shipped
to the customer.
Inventories
Certain U.S. inventories are valued at the lower of cost or market (LCM),
with cost being determined using the last-in, first-out (LIFO) method. Other
U.S. and non-U.S. inventories are valued at the LCM, with cost being determined
using the average cost method. Elements of cost in inventory include raw
materials, direct labor and manufacturing overhead. A portion of inventory is
financed at its fair market value and is included in inventories at its fair
market value. The related financing obligation is included in accounts payable.
25
<PAGE> 26
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment
Property, plant and equipment is stated at cost net of accumulated
depreciation. Depreciation is calculated using the straight-line method. The
average estimated useful lives utilized in calculating depreciation are as
follows: buildings -- 25 years; machinery and equipment -- 5 to 12 years; autos
and trucks -- 3 years; office furniture and fixtures -- 2 to 3 years.
Foreign Currency Translation
Local currencies have been designated as the functional currencies for all
subsidiaries. Accordingly, assets and liabilities of foreign subsidiaries are
translated at the rates of exchange at the balance sheet date. Income and
expense items of these subsidiaries are translated at average monthly rates of
exchange. The resultant translation gains or losses are included in the
component of stockholders' equity designated cumulative translation adjustments
on the Consolidated Balance Sheets.
Related Party Transactions
Berg and Group have entered into an Amended and Restated Monitoring and
Oversight Agreement ("Agreement") with Hicks, Muse, Tate & Furst Incorporated
("Hicks, Muse") (an affiliate of Berg). The Agreement provides that the Company
shall pay Hicks, Muse an annual fee, for ten years, of the greater of $700 or
one-tenth of one percent (0.1%) of net sales during such year. In addition, the
Agreement entitles Hicks, Muse to an acquisition advisory fee equal to 1.5% of
the purchase price of any acquisition effected by the Company.
Net Income (Loss) per Common Share
On February 2, 1996, Berg's stockholders approved a 1-for-4.11 reverse
stock split (the "Reverse Stock Split"). Consequently, all share and per share
information have been retroactively restated to reflect the Reverse Stock Split.
Per share amounts have been calculated using the weighted average number of
shares outstanding during each period, adjusted for the impact of common stock
equivalents using the treasury stock method when the effect is dilutive.
Statements of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, Berg considers
investments purchased with an original maturity of three months or less to be
cash equivalents. Interest and income taxes paid for the year ended December 31,
1994, are approximately $26,900 and $1,100, respectively, for the year ended
December 31, 1995, are approximately $36,300 and $3,200, respectively, and for
the year ended December 31, 1996, are approximately $27,100 and $3,300,
respectively.
Fair Value of Financial Instruments
The fair market values of the financial instruments included in the
consolidated financial statements approximate the carrying values of the
financial instruments.
26
<PAGE> 27
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Estimates and Assumptions
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.
3. INVENTORIES
The composition of inventories is as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
------- -------
<S> <C> <C>
Raw materials........................... $23,241 $25,398
Work-in-process......................... 24,114 18,998
Finished goods.......................... 30,887 47,427
------- -------
Total......................... $78,242 $91,823
======= =======
</TABLE>
The carrying value of inventories valued at LIFO, at December 31, 1995 and
1996, is approximately $34,900 and $42,000, respectively, and its current cost
is approximately $27,900 and $34,200, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment at December 31 is as
follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Land and buildings...................... $ 82,614 $ 79,655
Machinery and equipment................. 240,671 308,382
-------- --------
323,285 388,037
Less: Accumulated depreciation.......... (92,532) (128,132)
-------- --------
$230,753 $259,905
======== ========
</TABLE>
27
<PAGE> 28
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INTANGIBLE ASSETS
Intangible assets are amortized on a straight-line basis over various
estimated useful lives. The composition of intangible assets at December 31 is
as follows:
<TABLE>
<CAPTION>
AMOUNT
-----------------
1995 1996 LIFE
------- ------- ----
<S> <C> <C> <C>
Goodwill................................ $134,387 $134,387 40
Patented technology..................... 39,942 42,618 5-17
Unpatented technology................... 12,076 15,542 3-17
Covenants not to compete................ 5,150 5,150 5
Software................................ 3,400 3,400 5
Other................................... 5,344 5,344 5-20
Supply agreement........................ 6,800 6,800 10
------- -------
207,099 213,241
Less: Accumulated amortization.......... (23,817) (38,381)
------- -------
$183,282 $174,860
======= =======
</TABLE>
Goodwill represents purchase price in excess of net tangible and identified
intangible assets acquired in acquisitions. The Company generally assesses the
recoverability of its intangible assets primarily based on its current and
anticipated future undiscounted cash flows. At December 31, 1996, the Company
does not believe there has been any impairment of its intangible assets.
6. DEFERRED FINANCING COSTS
At December 31, 1996, deferred financing costs consists of aggregate fees
and expenses of $19,143 incurred in connection with acquisitions, initial
capitalization and the Recapitalization. These fees are included in deferred
financing costs and are being amortized over the terms of the related borrowing
and/or financial instrument on a straight line basis.
7. LONG-TERM OBLIGATIONS
The composition of long-term obligations at December 31 is as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Credit Agreement:
Term Loan................................................. $153,708 $332,500
Term Loan B............................................... 59,000 --
Revolving Credit Facility................................. 20,000 16,000
11 3/8% Guaranteed Senior Subordinated Debentures
Due 2003.................................................. 100,000 --
Other (Interest rates 1%-5%)................................ 5,463 10,058
-------- --------
$338,171 $358,558
Less: Current maturities.................................... (32,798) (33,912)
-------- --------
Total............................................. $305,373 $324,646
======== ========
</TABLE>
28
<PAGE> 29
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The schedule of principal payments on long-term obligations at December 31,
1996, is as follows:
<TABLE>
<S> <C>
1997........................................................ $ 33,912
1998........................................................ 57,435
1999........................................................ 50,894
2000........................................................ 60,806
2001........................................................ 70,484
Thereafter.................................................. 85,027
--------
Total............................................. $358,558
========
</TABLE>
On February 29, 1996, the Company entered into a new credit facility (the
"New Credit Facility") that among other things, refinanced the Amended Credit
Agreement (the "Refinancing"). The refinancing of the Amended Credit Agreement
resulted in the write off of $12,755 of deferred financing costs. This write
off, net of income tax, is classified with other extraordinary items in the
Consolidated Statement of Operations. The New Credit Facility consists of a
$350,000 term loan (the "Term Loan") and a $100,000 Revolving Credit Facility
(the "Revolver"). Borrowings under the New Credit Facility are secured by first
priority mortgages and liens on substantially all of the material assets of the
Company and its domestic subsidiaries and by pledges of a portion of the capital
stock of the foreign subsidiaries. As of December 31, 1995 and 1996, the Company
had approximately $10,400 and $10,000, of standby letters of credit outstanding
under the Revolver. The New Credit Facility contains several financial covenants
that, among other things, require the Company to maintain certain financial
ratios that restrict the Company's ability to incur indebtedness, make capital
expenditures and pay dividends. The commitment fee on the unused portion of the
Revolver is 0.375% per annum on the average daily available balance.
Mandatory principal payments are due in semi-annual installments with a
final installment due on December 31, 2002. Amounts outstanding under the
Revolver are due December 31, 2002. Additionally, 50% of Excess Cash Flow (as
defined in the New Credit Facility) shall be applied toward prepayment of the
borrowings under the New Credit Facility.
Borrowings under the Term Loan and Revolver bear interest, at the option of
the Company, at a rate per annum equal to (i) .05% plus the Agent's Alternate
Base Rate (as defined in the New Credit Facility) or (ii) 1.50% plus the
Eurodollar rate per annum. Interest payment dates vary depending on the interest
rate option selected by the Company, but generally, interest is payable
quarterly.
The New Credit Facility requires the Company to enter into interest rate
hedging arrangements to hedge against interest rate fluctuations. The Company
has entered into an agreement which provides a ceiling of 7.5% through June 1997
and 8.5% from July 1997 through June 1998 on the LIBOR rate on $137,000 of
indebtedness until June 30, 1998. The costs of the hedge agreements are
amortized over their terms.
The 11 3/8% Guaranteed Senior Subordinated Debentures due 2003 (the
"Debentures") were issued under an indenture, dated April 28, 1993 ( the
"Indenture"). The Debentures represented unsecured general obligations of the
Company and were subordinate to all Senior Debt (as defined in the Indenture) of
the Company.
On April 8, 1996, the Company redeemed $30,000 aggregate principal amount
of Debentures (the "Debenture Redemption") for approximately $34,487 including
accrued and unpaid interest and a redemption premium thereon, in accordance with
the terms of the Indenture dated as of October 29, 1993, as amended. On April 9,
1996, the Company purchased all of the outstanding debentures not redeemed by
the Company pursuant to the Debenture Redemption for approximately $82,590. The
redemption and purchase of the Debentures resulted in the write off of $4,900 of
deferred financing costs. This write off, net of income tax, is classified with
other extraordinary items in the Consolidated Statement of Operations.
Additionally, the
29
<PAGE> 30
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
redemption and purchase premium and the related fees and expenses of the
Debenture Redemption and purchase, totaling $13,452, are classified with other
extraordinary items, net of income tax, in the Consolidated Statement of
Operations.
8. STOCKHOLDERS' EQUITY
At December 31, 1996 and 1995, the authorized capital stock of Berg
consisted of 60 million shares of common stock, 7 million shares of Class A
common stock and 28.5 million shares of preferred stock.
On March 6, 1996, the Company consummated the sale of 7,475,000 common
shares in its initial public offering. The Company received net proceeds of
approximately $147,033 from the offering.
The Class A common stock may be converted into shares of common stock at
the option of the holder at any time. In addition, shares of the Class A common
stock may be converted into common stock at the option of Berg upon the
occurrence of a Triggering Event (as defined) or on February 26, 2003. Such
conversion is based on a formula set forth in Berg's Certificate of
Incorporation.
Dividends are payable to holders of the common stock and Class A common
stock in amounts as and when declared by Berg's board of directors, subject to
legally available funds and certain agreements. The common stock and the Class A
common stock are entitled to one vote per share on all matters submitted to a
vote of stockholders.
Dividends on the Company's Series B Preferred Stock, par value $0.01 per
share, ("Series B Preferred") were payable at an annual rate of $2 per annum per
share. Dividends were payable quarterly on February 28, May 31, August 31, and
November 30. Berg, at its option, could pay quarterly dividends on the Series B
Preferred for any or all dividend payments until February 28, 1998, and if the
Amended Credit Agreement prohibited the payment of cash dividends, until
February 28, 2000, by issuing additional shares of Series B Preferred, having a
$25 per share liquidation value. Dividends for the November 1993 and the
February, May, August and November 1994 dividend dates were paid by issuing
173,258 additional shares of Series B Preferred in 1994. Dividends for the
February, May, August and November 1995 dividend dates were paid by issuing
151,502 additional shares of Series B Preferred in 1995.
Dividends on the Series E Preferred Stock, par value $0.01 per share,
("Series E Preferred") were payable at an annual rate of $3.34375 per annum per
share prior to May 1, 2005 and $3.6250 per share from and including May 1, 2005
increasing quarterly by $.125 per share provided that in no event shall the
dividend rate exceed $5.00 per share. Dividends were payable quarterly on
February 1, May 1, August 1, and November 1 (each a "Dividend Payment Date").
Berg, at its option, could pay quarterly dividends on the Series E Preferred for
any or all dividend payments prior to May 1, 1998, and if the Amended Credit
Agreement prohibited the payment of cash dividends, prior to May 1, 2000, by
issuing additional shares of Series E Preferred, which will be valued at $25 per
share. Dividends for the November 1993 and February, May, August and November
1994 dividend dates were paid by issuing 410,510 additional shares of Series E
Preferred in 1994. Dividends for the February, May, August and November 1995
dividend dates were paid by issuing 378,135 additional shares of Series E
Preferred in 1995.
On March 18, 1996, the Company redeemed 50% of the outstanding shares of
the Series E Preferred including accrued and unpaid dividends and a redemption
premium thereon for approximately $44,253 (the "Series E Preferred Redemption").
On March 19, 1996, the Company purchased all of the outstanding shares of Series
E Preferred not purchased by the Company pursuant to the Series E Preferred
Redemption for approximately $47,819. Also, on March 19, 1996, the Company
redeemed all of the outstanding shares of the Company's Series B Preferred
including accrued and unpaid dividends thereon for approximately $50,933.
Berg's qualified and non-qualified stock option plan (the "Option Plan")
provides for the granting of up to 511,669 shares of common stock to key
officers and employees of Berg. Under the plan, options granted
30
<PAGE> 31
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximate market value of the common stock at the date of grant. Such options
vest ratably over a five-year period commencing on the first anniversary date
after the date of grant, and vested options are exercisable at the discretion of
the committee appointed to administer the Option Plan. Generally, an option may
be exercised only if the holder is an officer or employee of Berg or Group at
the time of exercise. Options granted under the Option Plan are not
transferable, except by will and the laws of descent and distribution.
In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for the Option Plan.
Accordingly, no compensation cost has been recognized for the Option Plan. Had
compensation cost for the Option Plan been determined based upon the fair value
at the grant date for awards under those plans consistent with the methodology
prescribed under SFAS No. 123, the Company's net income, net loss applicable to
common shares and net loss per common share would approximate the pro forma
amounts below:
<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C> <C>
Net Income...................................... As reported $ 9,329 $ 10,281
Pro forma $ 9,302 $ 10,203
Net loss applicable to common shares............ As reported $(5,412) $(17,054)
Pro forma $(5,439) $(17,132)
Net loss per common share....................... As reported $ (0.42) $ (0.89)
Pro forma $ (0.42) $ (0.89)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions in 1995
and 1996, respectively: (i) dividend yield of 0% in both years; (ii) expected
volatility of 30% in both years; (iii) risk free interest rate ranging from 5.9%
to 7.5% and 5.5% to 6.4%; and (iv) expected life of 10 years.
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1995. Additional awards in future years are anticipated.
Changes in the status of the Option Plan are summarized below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE OPTIONS OPTIONS
PRICE PER SHARE GRANTED VESTED
--------------- ------- -------
<S> <C> <C> <C>
December 31, 1993................................. $4.11 271,289 --
Granted......................................... $9.41 60,827 --
Vested.......................................... -- -- 54,257
------ ------- -------
December 31, 1994................................. $5.09 332,116 54,257
Granted......................................... $19.32 41,363 --
Vested.......................................... -- -- 60,584
Exercised....................................... $4.11 (7,299) (7,299)
Lapsed.......................................... $4.11 (25,547) --
------ ------- -------
December 31, 1995................................. $6.91 340,633 107,542
Granted......................................... $23.86 44,330 --
Vested.......................................... -- -- 79,792
Exercised....................................... $6.01 (20,436) (20,436)
Forfeiture...................................... $19.32 (4,866) --
Lapsed.......................................... $4.11 (8,772) (973)
------ ------- -------
December 31, 1996................................. $9.02 350,889 165,925
====== ======= =======
</TABLE>
31
<PAGE> 32
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average grant-date fair value of options granted during 1995
and 1996 was $11.07 and $13.31 per share, respectively. Of the options
outstanding at December 31, 1996, 216,539 options, 53,525 options, 60,825
options and 20,000 options have exercise prices of $4.11, $9.41, $19.32 and
$29.375, respectively, and have weighted average remaining contractual lives of
6 years, 7 years, 9.4 years and 10 years, respectively. The weighted average
exercise price of options vested at December 31, 1996, is $5.70 per share.
9. INCOME TAXES
The provision for income taxes, excluding the effects of extraordinary
items, for the year ended December 31 consisted of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------ -------
<S> <C> <C> <C>
Current:
Federal............................................... $ -- $ -- $ 2,385
State................................................. 359 117 421
Foreign............................................... 4,356 3,767 5,904
Deferred:
Federal............................................... 1,538 554 5,325
State................................................. -- -- 822
Foreign............................................... (3,382) 1,364 3,534
------- ------ -------
$ 2,871 $5,802 $18,391
======= ====== =======
</TABLE>
Reconciliation between the statutory income tax rate and effective tax rate
is summarized below:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------ -------
<S> <C> <C> <C>
U.S. Federal statutory rate............................. $ 2,004 $5,145 $16,094
State taxes, net of Federal benefit..................... 359 117 215
Foreign taxes in excess of U.S. statutory rate.......... 508 540 1,992
Other................................................... -- -- 90
------- ------ -------
$ 2,871 $5,802 $18,391
======= ====== =======
</TABLE>
The tax effects of significant temporary differences representing deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities not yet deductible.................... $ 5,503 $ 3,386
Postretirement benefits................................... 8,233 9,685
Net operating losses carried forward...................... 14,307 19,384
Foreign tax credits carried forward....................... 3,000 4,000
Other..................................................... 1,746 3,229
------- -------
32,789 39,684
------- -------
Deferred tax liabilities:
Amortization.............................................. 25,642 23,258
Contingent bank loans..................................... 2,800 2,800
Depreciation.............................................. 3,616 7,495
LIFO inventory valuation.................................. 2,410 2,410
Other..................................................... 1,641 6,870
------- -------
36,109 42,833
------- -------
Net deferred tax liability.................................. $(3,320) $(3,149)
======= =======
</TABLE>
32
<PAGE> 33
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's net operating losses carried forward expire over varying
periods ranging from 5 to 15 years. The Company's foreign tax credits carried
forward expire in 5 years.
Domestic and foreign income (loss) before income tax provision for the
years ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
Domestic............................................... $4,405 $ 701 $20,718
Foreign................................................ 1,488 14,430 26,618
</TABLE>
10. RETIREMENT BENEFITS
Pension coverage for employees of the Company's non-U.S. subsidiaries is
provided, to the extent deemed appropriate, through separate plans. Obligations
under such plans are systematically provided for by depositing funds with
trustees, under insurance policies or by book reserves. The Company has a
voluntary 401(k) savings plan designed to enhance the existing retirement
program covering eligible domestic employees. The costs of these plans recorded
in the consolidated financial statements is approximately $2,500, $3,500 and
$4,500 for 1994, 1995 and 1996, respectively.
The Company provides postretirement health care and other benefits to
qualifying domestic retirees. Most international employees are covered by
government sponsored programs and the cost to the Company is not significant.
The Company does not fund retiree health care benefits in advance and has the
right to modify these plans in the future.
Net periodic postretirement benefit cost (NPPBC) for the years ended
December 31 includes the following components:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Service cost............................................. $1,521 $1,037 $ 909
Interest cost............................................ 1,192 1,455 951
Amortization of net gain................................. (73) (221) (588)
------ ------ ------
NPPBC.................................................... $2,640 $2,271 $1,272
====== ====== ======
</TABLE>
The plan's status at December 31 is as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Expected postretirement benefit obligation (EPBO)........... $23,281 $29,719
------- -------
Actuarial present value of benefit obligation:
Retirees.................................................. $ 202 $ 515
Fully eligible active participants........................ 3,427 3,649
Other active participants................................. 9,089 9,845
------- -------
Accumulated postretirement benefit obligation (APBO)........ 12,718 14,009
Plan assets................................................. -- --
------- -------
Unfunded APBO............................................... 12,718 14,009
Unrecognized net gain....................................... 11,496 11,477
------- -------
Accrued postretirement benefit cost......................... $24,214 $25,486
======= =======
</TABLE>
The postretirement benefit obligation was determined by application of the
terms of the plan, together with relevant actuarial assumptions for active
employees. (DuPont retained the obligations for retirees at the DuPont
Acquisition). Health care cost trends are projected at annual rates grading from
8.5%, in 1996 down to 5.5% in 2009 and later for the 1995 calculation. Health
care cost trends are projected at annual rates grading from 8.0% in 1997 down to
6.0% in 2010 and later for the 1996 calculation. The effect of a 1% annual
increase in these assumed cost trend rates would increase the APBO at December
31, 1995 and 1996, by a total of $2,559 and $2,864, respectively, and the
service and interest cost components of the NPPBC for the year
33
<PAGE> 34
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ended December 31, 1995 and 1996, by a total of $406 and $545, respectively. The
assumed discount rate used in determining the APBO was 7.5% and 8.0% in 1995 and
1996, respectively. The assumed rate of increase in compensation levels used was
4.75% in 1995 and 1996. As no assets have been segregated and restricted for
payment of postretirement benefits, the expected return on plan assets is $0.
The postretirement benefit accrual is included in other long-term liabilities on
the Consolidated Balance Sheets.
The Company does not provide any other significant postemployment benefits.
11. COMMITMENTS
The Company leases certain buildings and transportation and other
equipment. Total rental expense under operating leases is $6,700, $6,500 and
$5,800 in 1994, 1995 and 1996, respectively. Future minimum lease payments under
capital and operating leases for years ending December 31 are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1997........................................................ $ 2,400 $6,300
1998........................................................ 2,000 5,300
1999........................................................ 1,500 4,300
2000........................................................ 1,000 2,700
2001........................................................ 200 2,500
Thereafter.................................................. 200 1,900
-------
Total minimum lease payments.............................. 7,300
Less amount representing interest......................... (900)
-------
Present value of net minimum lease payments............... $ 6,400
=======
</TABLE>
From time to time, the Company engages in short-term hedging activities to
reduce its exposure to precious metals price fluctuations and foreign currency
fluctuations. Such hedging activities are not material, and gains and losses
from such operations are not significant. There can be no assurance that these
hedging operations will eliminate or substantially reduce the risk.
12. CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to such
matters as patents, product liabilities, government regulations, and other
actions arising in the normal course of business. In the opinion of management,
the ultimate liabilities resulting from such lawsuits and claims will not have a
material adverse effect on the Company's financial condition and results of
operations.
In connection with DuPont's acquisition in 1987 of the stock of Optos, Ltd.
(renamed Berg Electronics K.K. following the Acquisition), preexisting bank
loans of Optos, Ltd. were restructured to provide that loans totaling
approximately $4,900 would be payable only out of positive earnings of specific
product lines over a ten year period in excess of cumulative losses on such
product lines. Due to substantial uncertainties surrounding the profitability of
the specified product lines, these loans are deemed contingently payable and
therefore are not reflected in the Consolidated Balance Sheets. A deferred tax
liability of $2,800 is recorded in the Consolidated Balance Sheets to reflect
the potential tax effect if the loans are forgiven.
13. RESEARCH AND DEVELOPMENT
Research, development and engineering expenditures for the creation and
application of new products and processes were approximately $20,800, $24,800
and $26,100 in 1994, 1995 and 1996, respectively.
34
<PAGE> 35
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. BUSINESS SEGMENT INFORMATION
The Company operates in one business segment -- electrical and electronic
connection, switching and programming devices -- which are sold throughout many
diverse markets.
The Company's operations are worldwide and can be grouped into several
geographic segments. Operations outside the United States are conducted through
wholly owned subsidiaries of the Company that function within assigned,
principally national, markets. The subsidiaries manufacture regionally where
required by market conditions and/or customer demands, however substantial
intersegment and intrasegment sales occur.
Pertinent financial data by major geographic segments is as follows:
<TABLE>
<CAPTION>
INTERCOMPANY OPERATING
NET SALES SALES INCOME (LOSS) TOTAL ASSETS
--------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
North America: 1994..................... $266,522 $ 60,537 $31,200 $ 550,249
1995..................... 339,248 70,447 34,872 573,038
1996..................... 381,967 88,138 44,380 569,266
Europe: 1994..................... $131,982 $ 20,529 $ 6,622 $ 159,756
1995..................... 159,501 25,895 7,562 159,576
1996..................... 155,083 37,166 13,306 167,720
Asia/Pacific: 1994..................... $127,746 $ 37,421 $ 3,462 $ 122,167
1995..................... 168,500 44,559 14,830 146,562
1996..................... 167,619 35,700 20,149 155,357
Eliminations: 1994..................... $ -- $(118,487) $ -- $(210,336)
1995..................... -- (140,901) (500) (210,836)
1996..................... -- (161,004) -- (210,336)
Total: 1994..................... $526,250 $ -- $41,284 $ 621,836
1995..................... 667,249 -- 56,764 668,340
1996..................... 704,669 -- 77,835 682,007
</TABLE>
As a result of the Lucent Acquisition, Lucent became a significant customer
of the Company. In 1994, 1995 and 1996, sales to Lucent were approximately
$64,600, $110,500 and $124,700, respectively. The Company entered into a
five-year supply agreement with Lucent in connection with the Lucent Acquisition
and believes that Lucent will remain an important customer in the foreseeable
future.
35
<PAGE> 36
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. UNAUDITED QUARTERLY DATA
<TABLE>
<CAPTION>
NET INCOME
NET (LOSS) PER
NET SALES GROSS PROFIT INCOME (LOSS) SHARE
------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
First Quarter: 1994...................... $ 104,236 $ 40,372 $ 1,700 $ (.12)
1995...................... 160,300 54,484 4,040 .03
1996...................... 180,118 61,914 (13,109) (2.61)
Second Quarter: 1994...................... 127,577 46,051 3,159 --
1995...................... 164,346 57,906 2,215 (.11)
1996...................... 178,063 61,931 7,612 .37
Third Quarter: 1994...................... 146,592 47,376 131 (.25)
1995...................... 170,829 55,298 3,040 (.05)
1996...................... 172,537 60,336 6,560 .32
Fourth Quarter: 1994...................... 147,845 48,593 (1,968) (.42)
1995...................... 171,774 57,285 34 (.29)
1996...................... 173,951 64,619 9,218 .44
</TABLE>
36
<PAGE> 37
BERG ELECTRONICS CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ -- $ --
-------- --------
Total current assets.............................. -- --
-------- --------
Investment in subsidiary.................................... 144,340 138,892
-------- --------
Total assets...................................... $144,340 $138,892
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to subsidiary......................................... $ -- $ --
-------- --------
Total current liabilities......................... -- --
-------- --------
Accrued preferred stock dividends........................... -- --
Stockholders' equity:
Series B preferred stock, $.01 par value, $25 liquidation
value, 1,989,400 and 0 shares, respectively, issued and
outstanding............................................ 20 --
Series E preferred stock, $.01 par value, $25 liquidation
value, 3,067,454 and 0 shares, respectively, issued and
outstanding............................................ 31 --
Common stock, par value $.01 per share, 11,575,280 and
19,125,238 shares, respectively, issued and
outstanding............................................ 116 191
Class A common stock, par value $.01 per share, 1,420,791
and 1,384,291 shares, respectively, issued and
outstanding............................................ 14 14
Paid in capital............................................. 116,705 116,299
Retained earnings........................................... 9,930 19,836
Cumulative translation adjustments.......................... 17,524 2,552
-------- --------
Total stockholders' equity........................ 144,340 138,892
-------- --------
Total liabilities and stockholders' equity........ $144,340 $138,892
======== ========
</TABLE>
See notes to the consolidated financial statements of Berg Electronics Corp.
37
<PAGE> 38
BERG ELECTRONICS CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Other income (expense):
Equity in earnings of subsidiary.................... $ 3,022 $ 9,329 $ 10,281
----------- ----------- -----------
Income before income tax provision.................... 3,022 9,329 10,281
Income tax provision.................................. -- -- --
----------- ----------- -----------
Net income............................................ 3,022 9,329 10,281
Preferred stock:
Accretion and dividends............................. (13,287) (14,741) (5,469)
Excess of fair value over book value of redemption
and purchase..................................... -- -- (21,866)
----------- ----------- -----------
Net loss applicable to common shares.................. $ (10,265) $ (5,412) $ (17,054)
=========== =========== ===========
Net loss per common share............................. $ (.79) $ (.42) $ (.89)
=========== =========== ===========
Average common shares outstanding..................... 12,977,626 12,989,324 19,245,738
=========== =========== ===========
</TABLE>
See notes to the consolidated financial statements of Berg Electronics Corp.
38
<PAGE> 39
BERG ELECTRONICS CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
PREFERRED COMMON PAID IN RETAINED TRANSLATION
STOCK STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
--------- ------ ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993...................... $40 $129 $110,779 $ 579 $ (4,637) $106,890
Exercise of stock options..................... 1 100 101
Preferred stock dividends..................... 5 2,802 2,807
Series B preferred stock accretion............ 1,500 (1,500) --
Change in cumulative translation
adjustments................................ 16,639 16,639
Net income.................................... 3,022 3,022
--- ---- -------- ------- -------- --------
Balance, December 31, 1994...................... $45 $130 $115,181 $ 2,101 $ 12,002 $129,459
Exercise of stock options..................... 30 30
Preferred stock dividends..................... 6 (6) --
Series B preferred stock accretion............ 1,500 (1,500) --
Change in cumulative translation
adjustments................................ 5,522 5,522
Net income.................................... 9,329 9,329
--- ---- -------- ------- -------- --------
Balance, December 31, 1995...................... $51 $130 $116,705 $ 9,930 $ 17,524 $144,340
Exercise of stock options..................... 223 223
Preferred stock dividends..................... 1 (1) --
Series B preferred stock accretion............ 375 (375) --
Preferred stock purchase and redemption....... (52) (142,953) (143,005)
Net proceeds from IPO......................... 75 146,958 147,033
Costs of IPO.................................. (5,008) (5,008)
Change in cumulative translation
adjustments................................ (14,972) (14,972)
Net income.................................... 10,281 10,281
--- ---- -------- ------- -------- --------
Balance, December 31, 1996...................... $-- $205 $116,299 $19,836 $ 2,552 $138,892
=== ==== ======== ======= ======== ========
</TABLE>
See notes to the consolidated financial statements of Berg Electronics Corp.
39
<PAGE> 40
BERG ELECTRONICS CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income................................................ $ 3,022 $ 9,329 $ 10,281
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Undistributed earnings of subsidiary................. (3,022) (9,329) (10,281)
------- ------- --------
Net cash from operating activities.......................... -- -- --
------- ------- --------
Cash flows provided by (used in) investing activities:
Cash (contributed to) received from subsidiary............ (117) (30) 757
------- ------- --------
Net cash from investing activities.......................... (117) (30) 757
------- ------- --------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock.................... 101 30 223
Preferred stock purchase and redemption................... -- -- (143,005)
Net proceeds from IPO..................................... -- -- 147,033
Costs of IPO.............................................. -- -- (5,008)
------- ------- --------
Net cash from financing activities.......................... 101 30 (757)
------- ------- --------
Net change in cash and cash equivalents..................... (16) -- --
Cash and cash equivalents at beginning of period............ 16 -- --
------- ------- --------
Cash and cash equivalents at end of period.................. $ -- $ -- $ --
======= ======= ========
</TABLE>
See notes to the consolidated financial statements of Berg Electronics Corp.
40
<PAGE> 41
BERG ELECTRONICS CORP.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31
(IN THOUSANDS)
<TABLE>
<CAPTION>
ALLOWANCE FOR DOUBTFUL
ACCOUNTS-DEDUCTED BALANCE AT CHARGES TO ACCOUNTS BALANCE AT
FROM RECEIVABLES IN THE BEGINNING COSTS AND WRITTEN TRANSLATION END OF
BALANCE SHEET OF PERIOD ACQUISITIONS EXPENSES OFF ADJUSTMENTS PERIOD
- ----------------------- ---------- ------------ ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1994......................... $3,478 $ 274 $ (364) $ (824) $ 46 $2,610
====== ====== ====== ======= ==== ======
1995......................... $2,610 $ 50 $1,353 $ (983) $ 13 $3,043
====== ====== ====== ======= ==== ======
1996......................... $3,043 $ -- $1,883 $(1,170) $(53) $3,703
====== ====== ====== ======= ==== ======
</TABLE>
41
<PAGE> 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information contained under the captions "PROPOSAL FOR THE ELECTION OF
DIRECTORS" and "EXECUTIVE DIRECTORS" in the 1997 Proxy Statement for the Annual
Meeting of Stockholders is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "EXECUTIVE AND DIRECTOR
COMPENSATION" in the 1997 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained under the caption "VOTING SECURITIES OUTSTANDING
AND SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS" in the 1997
Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "RELATED PARTY TRANSACTIONS" in
the 1997 Proxy Statement is incorporated herein by reference.
42
<PAGE> 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS PART OF THIS REPORT
(1) and (2) Financial Statements and Financial Statement Schedules
See Index to Financial Statements and Schedules at Item 8 of this
report.
(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 -- [Item intentionally omitted.]
3.2 -- [Item intentionally omitted.]
3.3 -- Certificate of Incorporation of Berg Electronics Corp.
(f/k/a Berg Electronics Group, Inc.; f/k/a Berg
Electronics Holdings Corp.; f/k/a Berg CS Holdings,
Inc.), together with amendments thereto.(1)
3.4 -- Certificate of Amendment to Certificate of Incorporation,
dated February 29, 1996, of Berg Electronics Corp.(4)
3.5 -- Bylaws of Berg Electronics Corp.(1)
4.1 -- [Item intentionally omitted.]
4.2 -- [Item intentionally omitted.]
4.3 -- [Item intentionally omitted.]
4.4 -- [Item intentionally omitted.]
4.5 -- [Item intentionally omitted.]
4.6 -- [Item intentionally omitted.]
4.7 -- [Item intentionally omitted.]
4.8 -- [Item intentionally omitted.]
4.9 -- [Item intentionally omitted.]
4.10 -- [Item intentionally omitted.]
4.11 -- [Item intentionally omitted.]
4.12 -- [Item intentionally omitted.]
4.13 -- [Item intentionally omitted.]
4.14 -- [Item intentionally omitted.]
4.15 -- [Item intentionally omitted.]
10.1 -- [Item intentionally omitted.]
10.2 -- [Item intentionally omitted.]
10.3 -- [Item intentionally omitted.]
10.4 -- Note Pledge Agreement, dated as of February 26, 1993,
made by Berg Electronics, Inc. in favor of Chemical Bank,
as agent for the financial institution parties to the
Credit Agreement.(2)
10.5 -- Foreign Subsidiaries Guarantee, dated as of February 26,
1993, by each of the corporations that are signatories
thereto in favor of Berg Electronics, Inc.(2)
10.6 -- The Company Pledge Agreement, dated as of February 26,
1993, made by Berg Electronics Holdings Corp. in favor of
Chemical Bank, as agent for the lenders parties to the
Credit Agreement.(2)
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.7 -- Borrower Pledge Agreement, dated as of February 26, 1993,
made by Berg Electronics, Inc. in favor of Chemical Bank,
as agent for the lenders parties to the Credit
Agreement.(2)
10.8 -- Supplement No. 1 to Borrower Domestic Pledge Agreement,
dated July 26, 1993, made by Berg Electronics, Inc. in
favor of Chemical Bank, as agent for the lenders parties
to the Credit Agreement.(2)
10.9 -- Security Agreement, dated as of February 26, 1993, made
by Berg Electronics, Inc. in favor of Chemical Bank, as
agent for the banks and other financial institutions
parties to the Credit Agreement.(2)
10.10 -- Pledge Agreement, dated as of March 1, 1993, by any
between Berg Electronics, Inc. and Chemical Bank, as
agent for the lenders named therein with respect to
shares of Connector Systems Korea, Ltd.(2)
10.11 -- Open-End Mortgage and Security Agreement, dated as of
February 26, 1993, from Berg Electronics, Inc. to
Chemical Bank, as Agent.(2)
10.12 -- Registration Rights Agreement, dated as of March 1, 1993,
by and among Berg Electronics Holdings Corp. and the
parties listed therein.(2)
10.13 -- [Item intentionally omitted.]
10.14 -- [Item intentionally omitted.]
10.15 -- [Item intentionally omitted.]
10.16 -- Amended and Restated Lease Agreement, dated July 26 1993,
by and between Ronald S. Marsilio and Harbor Electronics,
Inc.(2)
10.17+ -- Berg Electronics, Inc. Pension and Retirement Plan.(2)
10.18+ -- Berg Electronics, Inc. Savings Plan.(2)
10.19+ -- Form of Berg Electronics Holdings Corp. 1993 Stock Option
Plan.(2)
10.20 -- [Item intentionally omitted.]
10.21 -- Interest Rate Cap Letter Agreement, dated June 2, 1993,
between Berg Electronics, Inc. and Chemical Bank.(2)
10.22 -- [Item intentionally omitted.]
10.23 -- Supply Contract between AT&T Corp. and Berg Electronics,
Inc., dated as of May 23, 1994, incorporated by reference
as an exhibit to the Asset Purchase Agreement, dated as
of May 23, 1994, between Berg Electronics, Inc. and AT&T
Corp. (exhibit 10.26 hereto).(3)
10.24 -- [Item intentionally omitted.]
10.25+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among James N. Mills, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.26+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Robert N. Mills, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.27+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among David M. Sindelar, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.28+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among W. Thomas McGhee, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.29+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Timothy L. Conlon, Berg
Electronics Corp. and Berg Electronics Group, Inc.(1)
10.30+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Larry S. Bacon, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.31 -- Amended and Restated Monitoring and Oversight Agreement,
dated as of March 6, 1996 by and among Berg Electronics
Corp., Berg Electronics Group, Inc. and Hicks, Muse, Tate
and Furst Incorporated.(4)
10.32 -- Credit Agreement dated as of February 29, 1996 among Berg
Electronics Group, Inc., Berg Electronics Corp., the
banks and other financial institutions from time to time
parties thereto, and Chemical Bank, as Agent for the
Lenders.(4)
10.33 -- Form of Revolving Credit Note, dated March 6, 1996,
between Berg Electronics Group, Inc. and Chemical
Bank.(4)
10.34 -- Schedule of substantially identical Revolving Credit
Notes.(4)
10.35 -- Form of Term Note, dated March 6, 1996, between Berg
Electronics Group, Inc. and Chemical Bank.(4)
10.36 -- Schedule of substantially identical Term Notes.(4)
10.37 -- Swing Line Note, dated March 6, 1996, between Berg
Electronics Group, Inc. and Chemical Bank.(4)
10.38 -- Underwriting Agreement, dated March 1, 1996, among Berg
Electronics Corp., Berg Electronics Group, Inc. and the
underwriters named therein.(4)
10.39 -- Domestic Subsidiaries Guarantee, dated as of March 6,
1996, made by each of the corporations that are
signatories thereto in favor of Chemical Bank, as agent
for the lenders from time to time parties to the Credit
Agreement.*
10.40 -- Acknowledgement, Consent and Amendment, dated as of
February 29, 1996, to the documents listed on Schedule 1
thereto made by each of the corporations that are
signatories thereto in favor of Chemical Bank, as agent
for the lenders from time to time parties to the Credit
Agreement.*
10.41 -- First Amendment, dated as of December 18, 1996, to the
Credit Agreement among Berg Electronics Group, Inc., Berg
Electronics Corp., the banks and other financial
institutions from time to time parties thereto, and the
Chase Manhattan Bank (as successor by merger to Chemical
Bank).*
10.42 -- Supplement No. 1 to Note Pledge Agreement, dated as of
December 18, 1996, made by Berg Electronics Group, Inc.
in favor of the Chase Manhattan Bank (as successor by
merger to Chemical Bank).*
11.0 -- Computation of Net Loss Per Share.*
21.1 -- Subsidiaries of Registrant.*
27.0 -- Financial Data Schedule.*
</TABLE>
- ---------------
(1) Filed previously as an exhibit to the Registration Statement of Berg
Electronics Corp. on Form S-1, Registration No. 33-98240, and incorporated
by reference herein.
(2) Filed previously as an exhibit to the Registration Statement of Berg
Electronics Holdings Corp. on Form S-1, Registration No. 33-62552, and
incorporated by reference herein.
(3) Filed previously as an exhibit to the Berg Electronics Holdings Corp. and
Berg Electronics, Inc. Form 8-K dated May 23, 1994 and incorporated by
reference herein.
(4) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-K for
the fiscal year ended December 31, 1995, and incorporated by reference
herein.
45
<PAGE> 46
* Filed herewith.
+ Indicates a management contract or compensatory plan or arrangement.
(B) REPORT ON FORM 8-K
The Company did not file any report on Form 8-K with the Securities and
Exchange Commission during the quarter ended December 31, 1996, nor was it
required to do so.
46
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BERG ELECTRONICS CORP.
By /s/ JOSEPH S. CATANZARO
-----------------------------------
Joseph S. Catanzaro
Chief Accounting Officer
Date: February 3, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES N. MILLS Chairman of the Board of Directors February 3, 1997
- ----------------------------------------------------- and Chief Executive Officer
James N. Mills (Principal Executive Officer of
Berg Electronics Corp.)
/s/ DAVID M. SINDELAR Senior Vice President and Chief February 3, 1997
- ----------------------------------------------------- Financial Officer (Principal
David M. Sindelar Financial Officer of Berg
Electronics Corp.)
/s/ ROBERT N. MILLS Director February 3, 1997
- -----------------------------------------------------
Robert N. Mills
/s/ THOMAS O. HICKS Director February 3, 1997
- -----------------------------------------------------
Thomas O. Hicks
/s/ CHARLES W. TATE Director February 3, 1997
- -----------------------------------------------------
Charles W. Tate
/s/ KENNETH F. YONTZ Director February 3, 1997
- -----------------------------------------------------
Kenneth F. Yontz
/s/ RICHARD W. VIESER Director February 3, 1997
- -----------------------------------------------------
Richard W. Vieser
</TABLE>
47
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 -- [Item intentionally omitted.]
3.2 -- [Item intentionally omitted.]
3.3 -- Certificate of Incorporation of Berg Electronics Corp.
(f/k/a Berg Electronics Group, Inc.; f/k/a Berg
Electronics Holdings Corp.; f/k/a Berg CS Holdings,
Inc.), together with amendments thereto.(1)
3.4 -- Certificate of Amendment to Certificate of Incorporation,
dated February 29, 1996, of Berg Electronics Corp.(4)
3.5 -- Bylaws of Berg Electronics Corp.(1)
4.1 -- [Item intentionally omitted.]
4.2 -- [Item intentionally omitted.]
4.3 -- [Item intentionally omitted.]
4.4 -- [Item intentionally omitted.]
4.5 -- [Item intentionally omitted.]
4.6 -- [Item intentionally omitted.]
4.7 -- [Item intentionally omitted.]
4.8 -- [Item intentionally omitted.]
4.9 -- [Item intentionally omitted.]
4.10 -- [Item intentionally omitted.]
4.11 -- [Item intentionally omitted.]
4.12 -- [Item intentionally omitted.]
4.13 -- [Item intentionally omitted.]
4.14 -- [Item intentionally omitted.]
4.15 -- [Item intentionally omitted.]
10.1 -- [Item intentionally omitted.]
10.2 -- [Item intentionally omitted.]
10.3 -- [Item intentionally omitted.]
10.4 -- Note Pledge Agreement, dated as of February 26, 1993,
made by Berg Electronics, Inc. in favor of Chemical Bank,
as agent for the financial institution parties to the
Credit Agreement.(2)
10.5 -- Foreign Subsidiaries Guarantee, dated as of February 26,
1993, by each of the corporations that are signatories
thereto in favor of Berg Electronics, Inc.(2)
10.6 -- The Company Pledge Agreement, dated as of February 26,
1993, made by Berg Electronics Holdings Corp. in favor of
Chemical Bank, as agent for the lenders parties to the
Credit Agreement.(2)
10.7 -- Borrower Pledge Agreement, dated as of February 26, 1993,
made by Berg Electronics, Inc. in favor of Chemical Bank,
as agent for the lenders parties to the Credit
Agreement.(2)
10.8 -- Supplement No. 1 to Borrower Domestic Pledge Agreement,
dated July 26, 1993, made by Berg Electronics, Inc. in
favor of Chemical Bank, as agent for the lenders parties
to the Credit Agreement.(2)
10.9 -- Security Agreement, dated as of February 26, 1993, made
by Berg Electronics, Inc. in favor of Chemical Bank, as
agent for the banks and other financial institutions
parties to the Credit Agreement.(2)
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.10 -- Pledge Agreement, dated as of March 1, 1993, by any
between Berg Electronics, Inc. and Chemical Bank, as
agent for the lenders named therein with respect to
shares of Connector Systems Korea, Ltd.(2)
10.11 -- Open-End Mortgage and Security Agreement, dated as of
February 26, 1993, from Berg Electronics, Inc. to
Chemical Bank, as Agent.(2)
10.12 -- Registration Rights Agreement, dated as of March 1, 1993,
by and among Berg Electronics Holdings Corp. and the
parties listed therein.(2)
10.13 -- [Item intentionally omitted.]
10.14 -- [Item intentionally omitted.]
10.15 -- [Item intentionally omitted.]
10.16 -- Amended and Restated Lease Agreement, dated July 26 1993,
by and between Ronald S. Marsilio and Harbor Electronics,
Inc.(2)
10.17+ -- Berg Electronics, Inc. Pension and Retirement Plan.(2)
10.18+ -- Berg Electronics, Inc. Savings Plan.(2)
10.19+ -- Form of Berg Electronics Holdings Corp. 1993 Stock Option
Plan.(2)
10.20 -- [Item intentionally omitted.]
10.21 -- Interest Rate Cap Letter Agreement, dated June 2, 1993,
between Berg Electronics, Inc. and Chemical Bank.(2)
10.22 -- [Item intentionally omitted.]
10.23 -- Supply Contract between AT&T Corp. and Berg Electronics,
Inc., dated as of May 23, 1994, incorporated by reference
as an exhibit to the Asset Purchase Agreement, dated as
of May 23, 1994, between Berg Electronics, Inc. and AT&T
Corp. (exhibit 10.26 hereto).(3)
10.24 -- [Item intentionally omitted.]
10.25+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among James N. Mills, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.26+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Robert N. Mills, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.27+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among David M. Sindelar, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.28+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among W. Thomas McGhee, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.29+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Timothy L. Conlon, Berg
Electronics Corp. and Berg Electronics Group, Inc.(1)
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.30+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Larry S. Bacon, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.31 -- Amended and Restated Monitoring and Oversight Agreement,
dated as of March 6, 1996 by and among Berg Electronics
Corp., Berg Electronics Group, Inc. and Hicks, Muse, Tate
and Furst Incorporated.(4)
10.32 -- Credit Agreement dated as of February 29, 1996 among Berg
Electronics Group, Inc., Berg Electronics Corp., the
banks and other financial institutions from time to time
parties thereto, and Chemical Bank, as Agent for the
Lenders.(4)
10.33 -- Form of Revolving Credit Note, dated March 6, 1996,
between Berg Electronics Group, Inc. and Chemical
Bank.(4)
10.34 -- Schedule of substantially identical Revolving Credit
Notes.(4)
10.35 -- Form of Term Note, dated March 6, 1996, between Berg
Electronics Group, Inc. and Chemical Bank.(4)
10.36 -- Schedule of substantially identical Term Notes.(4)
10.37 -- Swing Line Note, dated March 6, 1996, between Berg
Electronics Group, Inc. and Chemical Bank.(4)
10.38 -- Underwriting Agreement, dated March 1, 1996, among Berg
Electronics Corp., Berg Electronics Group, Inc. and the
underwriters named therein.(4)
10.39 -- Domestic Subsidiaries Guarantee, dated as of March 6,
1996, made by each of the corporations that are
signatories thereto in favor of Chemical Bank, as agent
for the lenders from time to time parties to the Credit
Agreement.*
10.40 -- Acknowledgement, Consent and Amendment, dated as of
February 29, 1996, to the Agreements listed on Schedule 1
thereto made by each of the corporations that are
signatories thereto in favor of Chemical Bank, as agent
for the lenders from time to time parties to the Credit
Agreement.*
10.41 -- First Amendment, dated as of December 18, 1996, to the
Credit Agreement among Berg Electronics Group, Inc., Berg
Electronics Corp., the banks and other financial
institutions from time to time parties thereto, and the
Chase Manhattan Bank (as successor by merger to Chemical
Bank).*
10.42 -- Supplement No. 1 to Note Pledge Agreement, dated as of
December 18, 1996, made by Berg Electronics Group, Inc.
in favor of and the Chase Manhattan Bank (as successor by
merger to Chemical Bank).*
11.0 -- Computation of Net Loss Per Share.*
21.1 -- Subsidiaries of Registrant.*
27.0 -- Financial Data Schedule.*
</TABLE>
- ---------------
(1) Filed previously as an exhibit to the Registration Statement of Berg
Electronics Corp. on Form S-1, Registration No. 33-98240, and incorporated
by reference herein.
(2) Filed previously as an exhibit to the Registration Statement of Berg
Electronics Holdings Corp. on Form S-1, Registration No. 33-62552, and
incorporated by reference herein.
(3) Filed previously as an exhibit to the Berg Electronics Holdings Corp. and
Berg Electronics, Inc. Form 8-K dated May 23, 1994 and incorporated by
reference herein.
(4) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-K for
the fiscal year ended December 31, 1995, and incorporated by reference
herein.
* Filed herewith.
+ Indicates a management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 10.39
DOMESTIC SUBSIDIARIES' GUARANTEE
DOMESTIC SUBSIDIARIES' GUARANTEE, dated as of March 6, 1996 (this
"Guarantee"), made by each of the corporations that are signatories hereto (the
"Guarantors"), in favor of CHEMICAL BANK, as agent (in such capacity, the
"Agent") for the lenders (the "Lenders") from time to time parties to the
Credit Agreement, dated as of Feb. 29, 1996 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Berg Electronics Group, Inc. (the "Borrower"), Berg Electronics Corp.,
the Lenders and the Agent.
WITNESSETH:
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make loans to, and issue or participate in letters of credit for the account of,
the Borrower upon the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower owns directly or indirectly all of the issued and
outstanding stock of each Guarantor.
WHEREAS, the Borrower and the Guarantors are engaged in related
businesses, and each Guarantor will derive substantial direct and indirect
benefit from the making of the loans to, and the issuing of the letters of
credit for the account of, the Borrower under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective loans to, and issue letters of credit for the account
of, the Borrower under the Credit Agreement that the Guarantors shall have
executed and delivered this Guarantee to the Agent for the ratable benefit of
the Lenders.
NOW, THEREFORE, in consideration of the premises and to induce the
Agent and the Lenders to enter into the Credit Agreement and to induce the
Lenders to make their respective loans to, and issue or participate in letters
of credit for the account of, the Borrower under the Credit Agreement, the
Guarantors hereby agree with the Agent, for the ratable benefit of the Lenders,
as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to such terms in
the Credit Agreement.
<PAGE> 2
2
2. Guarantee. (a) Subject to the provisions of paragraph 2(b), each of
the Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Agent, for the ratable benefit of the Lenders and their
respective successors, indorsees, transferees and assigns, the prompt and
complete payment and performance by the Borrower when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under
the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating
to the insolvency of debtors.
(c) Each Guarantor further agrees to pay the reasonable out-of-pocket
expenses which may be paid or incurred by the Agent or the Lenders in
collecting any or all of the Obligations and/or enforcing any rights under this
Guarantee or under the Obligations in accordance with subsection 12.5 of the
Credit Agreement. This Guarantee shall remain in full force and effect until
the Obligations are paid in full and the Commitments are terminated,
notwithstanding that from time to time prior thereto the Borrower may be free
from any Obligations.
(d) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing this Guarantee or affecting the rights and remedies
of the Agent or any Lender hereunder.
(e) No payment or payments made by the Borrower, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Agent, the Issuing Lender or the Lenders from the Borrower, any of the
Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Obligations shall be deemed
to modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment or payments other than
payments made by such Guarantor in respect of the Obligations or payments
received or collected from such Guarantor in respect of the Obligations,
remain liable for the Obligations up to the maximum liability of such Guarantor
hereunder until the Obligations are paid in full and the Commitments are
terminated.
(f) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Agent, the Issuing Lender or the
Lenders on account of its liability hereunder, it will notify the Agent in
writing that such payment is made under this Guarantee for such purpose.
3. Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of
any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder who has not
paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 5 hereof.
The provisions of this Section 3 shall in no respect limit the obligations and
liabilities
<PAGE> 3
3
of any Guarantor to the Agent, the Issuing Lender and the Lenders, and each
Guarantor shall remain liable to the Agent, the Issuing Lender and the Lenders
for the full amount guaranteed by such Guarantor hereunder.
4. Right of Set-off. Upon the occurrence of any Event of Default, each
Guarantor hereby irrevocably authorizes each Lender and the Issuing Lender at
any time and from time to time without notice to such Guarantor or any other
Guarantor, any such notice being expressly waived by each Guarantor, to set-off
and appropriate and apply any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or the Issuing Lender or any branch or agency thereof to
or for the credit or the account of such Guarantor, or any part thereof in such
amounts as such Lender or the Issuing Lender may elect, against and on account
of the obligations and liabilities of such Guarantor to such Lender or the
Issuing Lender hereunder and claims of every nature and description of such
Lender or the Issuing Lender against such Guarantor, in any currency, whether
arising hereunder, under the Credit Agreement, any Note, any Loan Document or
otherwise, as such Lender or the Issuing Lender may elect, whether or not the
Agent, the Issuing Lender or the Lenders have made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Agent, the Issuing Lender and the Lenders agree promptly to
notify such Guarantor after any such set-off and the application made by the
Agent, the Issuing Lender or the Lenders, as the case may be; provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of the Agent, the Issuing Lender and the Lenders
under this Section 4 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Agent, the Issuing
Lender or the Lenders may have.
5. No Subrogation. Notwithstanding any payment or payments made by any
of the Guarantors hereunder or any set-off or application of funds of any of
the Guarantors by any Lender, no Guarantor shall be entitled to be subrogated
to any of the rights of the Agent, the Issuing Lender or the Lenders against
the Borrower or any other Guarantor or any collateral security or guarantee or
right of offset held by the Agent, the Issuing Lender or the Lenders for the
payment of the Obligations, nor shall any Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower or any other Guarantor in
respect of payments made by such Guarantor hereunder, until all amounts owing
to the Agent, the Issuing Lender and the Lenders by the Borrower on account of
the Obligations are paid in full and the Commitments are terminated. If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Agent, the Issuing
Lender and the Lenders, segregated from other funds of such Guarantor, and
shall, forthwith upon receipt by such Guarantor, be turned over to the Agent in
the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Agent, if required), to be applied against the Obligations, whether
matured or unmatured, in such order as the Agent may determine.
<PAGE> 4
4
6. Modification of Obligations. Each Guarantor consents that, without
the necessity of any reservation of rights against any Guarantor and without
notice to or further assent by any Guarantor, any demand for payment of any of
the Obligations made by the Agent, the Issuing Lender or the Lenders may be
rescinded by the Agent, the Issuing Lender or the Lenders and the Obligations
continued, and the Obligations, or the liability of any other party upon or for
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Agent, the Issuing Lender or the Lenders, and
the Credit Agreement, any Notes and the other Loan Documents, including,
without limitation, any Letter of Credit Application, or any collateral
security document or other guarantee or document in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Agent, the Issuing Lender or the Lenders may deem advisable from time to time,
and, to the extent permitted by applicable law, any collateral security or
guarantee or right of offset at any time held by the Agent, the Issuing Lender
or the Lenders for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released, all without the necessity of any reservation
of rights against any Guarantor which will remain bound hereunder
notwithstanding any such renewal, extension, modification, acceleration,
compromise, amendment, supplement, termination, sale, exchange, waiver,
surrender or release. The Agent, the Issuing Lender and the Lenders shall not
have any obligation to protect, secure, perfect or insure any collateral
security document or property subject thereto at any time held by it as
security for the Obligations or for this Guarantee or any property subject
thereto. When making any demand hereunder against any of the Guarantors, the
Agent, the Issuing Lender or the Lenders may, but shall be under no obligation
to, make a similar demand on any other party or any other Guarantor or
guarantor, and any failure by the Agent, the Issuing Lender or the Lenders to
make any such demand or to collect any payments from the Borrower or any such
other Guarantor or guarantor shall not relieve any of the Guarantors in respect
of which a demand or collection is not made of their several obligations or
liabilities hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Agent, the Issuing Lender or
the Lenders against any of the Guarantors. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
7. Guarantee Absolute and Unconditional. Each Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Agent, the Issuing
Lender or the Lenders upon this Guarantee or acceptance of this Guarantee, the
Obligations, and any of them, shall conclusively be deemed to have been
created, contracted, continued or incurred in reliance upon this Guarantee; and
all dealings between the Borrower and any of the Guarantors, on the one hand,
and the Agent, the Issuing Lender or the Lenders, on the other hand, likewise
shall be conclusively presumed to have been had or consummated in reliance upon
this Guarantee. Each Guarantor waives diligence, presentment, protest, demand
for payment and notice of default or nonpayment to or upon any of the
Guarantors with respect to the Obligations. This Guarantee shall be construed
as a continuing, absolute and unconditional guarantee of payment without regard
to the validity, regularity or enforceability of the Credit Agreement, any Note
or any other Loan Document, including, without limitation, any Letter of Credit
Application or any collateral security or guarantee therefor or right of offset
with respect thereto at any time or from time
<PAGE> 5
5
to time held by the Agent, the Issuing Lender or the Lenders and without regard
to any defense, set-off or counterclaim which may at any time be available to
or be asserted by the Borrower against the Agent, the Issuing Lender, the
Lenders or any other Person, or by any other circumstance whatsoever (with or
without notice to or knowledge of the Borrower or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for any of the Obligations (other than payment in
money or money's worth and termination of the Commitments), or of such
Guarantor under this Guarantee, in bankruptcy or in any other instance and the
obligations and liabilities of such Guarantor hereunder shall not be
conditioned or contingent upon the pursuit by the Agent, the Issuing Lender or
the Lenders or any other Person at any time of any right or remedy against the
Borrower or against any other Person which may be or become liable in respect
of any Obligations or against any collateral security or guarantee therefor or
right of offset with respect thereto. This Guarantee shall remain in full
force and effect and be binding in accordance with and to the extent of its
terms upon each Guarantor and the successors and assigns thereof, and shall
inure to the benefit of the Agent and the Lenders, and their respective
successors, endorsees, transferees and assigns, until all the Obligations and
the obligations of each Guarantor under this Guarantee shall have been
satisfied by payment in full and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement
the Borrower may be free from any Obligations.
8. Reinstatement. This Guarantee shall continue to be effective, or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or
returned by the Agent, the Issuing Lender or the Lenders upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower or any
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Borrower or any
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
9. Payments. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Agent without set-off or counterclaim in Dollars at the
office of the Agent located at 270 Park Avenue, New York, New York 10017.
10. Representations and Warranties. Each Guarantor hereby represents
and warrants that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority and the legal right to own and operate its
property, to lease the property it operates and to conduct the business in
which it is currently engaged;
(b) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee, and
has taken all necessary corporate action to authorize its execution, delivery
and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding obligation
of such Guarantor enforceable in accordance with its terms, except as affected
enforceability may be limited by
<PAGE> 6
6
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally (whether
enforcement is sought by proceedings in equity or at law);
(d) the execution, delivery and performance of this Guarantee will not
violate any provision of any material Requirement of Law or material
Contractual Obligation of such Guarantor and will not result in the creation or
imposition of any Lien on any of the material properties or revenues of such
Guarantor pursuant to any Requirement of Law or Contractual Obligation of the
Guarantor, except as set forth in the Credit Agreement;
(e) no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person (including, without limitation, any stockholder or creditor of such
Guarantor), is required in connection with the execution, delivery,
performance, validity or enforceability of this Guarantee, except as set forth
in the Credit Agreement; and
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of such
Guarantor, threatened by or against such Guarantor or against any of its
properties or revenues (i) with respect to this Guarantee or any of the
transactions contemplated hereby or (ii) which could reasonably be expected to
have a Material Adverse Effect, except as set forth in the Credit Agreement.
Each Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by such Guarantor on the date of
each borrowing by, or issuance of a Letter of Credit for the account of, the
Borrower under the Credit Agreement on and as of such date of borrowing or
issuance as though made hereunder on and as of such date, except to the extent
they related to a specified date in which case they shall be true and correct
as of such date.
11. Authority of Agent. Each Guarantor acknowledges that the rights
and responsibilities of the Agent under this Guarantee with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, right, request, judgment or other right or remedy provided for herein
or resulting or arising out of this Guarantee shall, as between the Agent and
the Lenders, be governed by the Credit Agreement and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
the Agent and such Guarantor, the Agent shall be conclusively presumed to be
acting as agent for the Lenders with full and valid authority so to act or
refrain from acting, and no Guarantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
12. Notices. All notices, requests and demands to or upon the Agent,
any Lender or any Guarantor to be effective shall be in writing (or by telex,
fax or similar electronic transfer confirmed in writing) and shall be deemed to
have been duly given or made (a) in the case of mail, two days after deposit
in the postal system, first class postage pre-paid or (b) in the case of telex
or facsimile notices, when received, addressed as follows:
<PAGE> 7
7
(a) if to the Agent or any Lender, at its address or transmission
number for notices provided in subsection 12.2 of the Credit Agreement; and
(b) if to any Guarantor, at its address or transmission number for
notices set forth under its signature below.
The Agent, each Lender and each Guarantor may change its address and
transmission numbers for notices by notice in the manner provided in this
Section 12.
13. Counterparts. This Guarantee may be executed by one or more of
the Guarantors on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the counterparts of this Guarantee signed by all the
Guarantors shall be lodged with the Agent.
14. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. Integration. This Guarantee represents the agreement of each
Guarantor with respect to the subject matter hereof and there are no promises
or representations by the Agent or any Lender relative to the subject matter
hereof not reflected herein.
16. Amendments in Writing; No Waiver; Cumulative Remedies. (a)
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
each Guarantor and the Required Lenders.
(b) Neither the Agent nor any Lender shall by any act (except by a
written instrument pursuant to paragraph 16(a) hereof), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Agent or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Agent or such Lender would otherwise have on any future
occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
17. Section Headings. The section headings used in this Guarantee
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
<PAGE> 8
8
18. Successors and Assigns. This Guarantee shall be binding upon
the successors and assigns of each Guarantor and shall inure to the benefit of
the Agent and the Lenders and their successors and assigns.
19. Governing Law. This Guarantee shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
20. Submission To Jurisdiction; Waivers. Each Guarantor hereby
irrevocably and unconditionally.
(a) submits for itself and its property in any legal action
or proceeding relating to this Guarantee and the other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same:
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Guarantor at its addresses set forth on the signature
pages hereto or at such other address of which the Agent shall have
been notified pursuant to Section 12;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section any special, exemplary, punitive
or consequential damages.
21. Acknowledgements. Each Guarantor hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of the Guarantee and the other Loan Documents:
(b) neither the Agent nor any Lender has any fiduciary
relationship with or duty to the Guarantors arising out of or in
connection with this guarantee or any of the other Loan Documents, and
the relationship between Agent and Lenders, on one hand,
<PAGE> 9
9
and the Guarantors, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture exists among the Lenders or among the
Guarantors and the Lenders.
22. WAIVERS OF JURY TRIAL. THE GUARANTORS AND THE AGENT (ON
ITS OWN BEHALF AND ON BEHALF OF THE LENDERS) HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS GUARANTEE OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE> 10
10
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
BERG TECHNOLOGY, INC.
BERG HOLDINGS U.S., INC.
CONNECTOR SYSTEMS (U.S.) INC.
HARBOR ELECTRONICS, INC.
SOCKET EXPRESS, INC.
SPECIALTY CONNECTOR COMPANY
BERG EMPLOYMENT COMPANY
By: /s/ ELLEN LIPSITZ
------------------------------
Name: Ellen L. Lipsitz
Title: Vice President and Assistant Secretary
Address for Notices:
c/o Mills & Partners
101 South Hanley
Suite 400
St. Louis, Missouri 63105
Attention: David Sindelar
Fax: (314) 746-2386
With Copies of Notices to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Thomas O. Hicks
John R. Muse
Jack D. Furst
Lawrence D. Stuart, Jr.
Fax: (214) 740-7313
<PAGE> 11
11
Hicks, Muse, Tate & Furst Incorporated
1325 Avenue of the Americas, 25th Floor
New York, New York 10019
Attention: Charles W. Tate
Fax: (212) 424-1450
<PAGE> 1
EXHIBIT 10.40
ACKNOWLEDGEMENT, CONSENT AND AMENDMENT
ACKNOWLEDGEMENT, CONSENT AND AMENDMENT, dated as of February 29, 1996
(this "Amendment"), to the documents listed on Schedule 1 hereto (the
"Documents") made by each of the corporations that are signatories hereto (each
a "Grantor"), in favor of CHEMICAL BANK, a New York banking corporation, as
agent (in such capacity, the "Agent") for the lenders (the "Lenders") from time
to time parties to the Credit Agreement referred to below.
W I T N E S S E T H
WHEREAS, Berg Electronics Group, Inc. (f/k/a Berg Electronics, Inc.)
(the "Borrower"), Berg Electronics Corp. (f/k/a Berg C.S. Holdings, Inc.)
("Holdings"), the Lenders and the Agent entered into the Credit Agreement dated
as of February 26, 1993 (as previously amended, and as the same may be further
amended, supplemented or otherwise modified from time to time, the "Original
Credit Agreement"); and
WHEREAS, to secure and guarantee the obligations of the Borrower under
the Original Credit Agreement, each Grantor entered into Documents to which it
is a party; and
WHEREAS, the Original Credit Agreement was amended and restated on May
23, 1994 (the "Amended and Restated Credit Agreement"); and
WHEREAS, the Amended and Restated Credit Agreement is being refinanced
by a new Credit Agreement dated as of the date hereof, (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement")
among the Borrower, Holdings, the Agent and the Lenders; and
WHEREAS, it is a condition precedent to the making of the Loans under
the Credit Agreement that each Grantor execute and deliver this Amendment to
confirm that the security interests granted under the Documents secure the
Obligations of the Borrower under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other valuable consideration, the receipt of which is
hereby acknowledged, each Grantor and the Agent hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, terms which
are defined in the Credit Agreement and used herein are so used as so defined.
<PAGE> 2
2
SECTION 2. Amendment of Documents. All references to the terms "Notes"
and "Loans" in the Documents shall be amended to be references to Notes and
Loans, respectively, as defined in the Credit Agreement. Each Grantor further
agrees that the term "Lenders" in the Documents includes any lenders from time
to time parties to the Credit Agreement, that the term "Obligations" means
Obligations as defined in the Credit Agreement, and that the Documents shall be
amended accordingly.
SECTION 3. Representations and Warranties. Each Grantor represents
and warrants that upon the execution and delivery of this Amendment, the
Documents, as acknowledged, consented to, and amended hereby, shall constitute
a valid and continuing lien on and, to the extent provided therein, perfected
security interest in, the collateral referred to in the Documents, as
acknowledged, consented to, and amended hereby, in favor of the Agent for the
ratable benefit of the Lenders.
SECTION 4. Acknowledgement and Consent. Each Grantor hereby:
(a) acknowledges and consents to the execution, delivery and
performance of (i) the Credit Agreement, as amended, supplemented or otherwise
modified from time to time, and (ii) all of the documents and transactions
contemplated thereby;
(b) agrees that such execution, delivery and performance shall not in
any way affect such Grantor's obligations under any Loan Document (as defined
in the Credit Agreement) to which such Grantor is a party, which obligations on
the date hereof remain absolute and unconditional and are not subject to any
defense, set-off or counterclaim; and
(c) grants to the Agent, for the ratable benefit of the Lenders, and
pursuant to the terms and conditions of the Documents a lien on and security
interest in all collateral described in the Documents as security for the
Obligations (as defined in the Credit Agreement).
SECTION 5. Miscellaneous. (a) Each amendment contained herein shall
not constitute an amendment of any provision of the Documents for any purpose
except as expressly set forth herein.
(b) This Amendment may be executed in any number of separate
counterparts, and all of said counterparts taken together shall constitute one
and the same instrument.
(c) This Amendment shall become effective when executed by each
Grantor and the Agent.
(d) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 3
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective duly authorized offices as of the
date first written above.
BERG TECHNOLOGY, INC.
BY: /s/ KELLY E. WETZLER
------------------------
Name: KELLY E. WETZLER
Title: Assistant Secretary
BERG HOLDINGS U.S., INC.
BY: /s/ KELLY E. WETZLER
------------------------
Name: KELLY E. WETZLER
Title: Assistant Secretary
CONNECTOR SYSTEMS (U.S.) INC.
BY: /s/ KELLY E. WETZLER
------------------------
Name: KELLY E. WETZLER
Title: Assistant Secretary
HARBOR ELECTRONICS, INC.
BY: /s/ KELLY E. WETZLER
------------------------
Name: KELLY E. WETZLER
Title: Assistant Secretary
SOCKET EXPRESS, INC.
BY: /s/ KELLY E. WETZLER
------------------------
Name: KELLY E. WETZLER
Title: Assistant Secretary
ELECTRONICS CORP.
BY: /s/ KELLY E. WETZLER
------------------------
Name: KELLY E. WETZLER
Title: Assistant Secretary
<PAGE> 4
4
BERG ELECTRONICS GROUP, INC.
By: /s/ KELLY E. WETZLER
---------------------------
Name: KELLY E. WETZLER
Title: Assistant Secretary
SPECIALTY CONNECTOR COMPANY
By: /s/ KELLY E. WETZLER
---------------------------
Name: KELLY E. WETZLER
Title: Assistant Secretary
BERG EMPLOYMENT COMPANY
By: /s/ KELLY E. WETZLER
---------------------------
Name: KELLY E. WETZLER
Title: Assistant Secretary
<PAGE> 5
5
Schedule 1 to
Acknowledgement,
Consent and Amendment
DOCUMENTS
The Borrower Security Agreement dated as of February 26, 1993 by Berg
Electronics, Inc. in favor of Chemical Bank, as Agent
The Holdings Pledge Agreement dated as of February 26, 1993 by Berg CS
Holdings, Inc. in favor of Chemical Bank, as Agent
The Borrower Domestic Pledge Agreement dated as of February 26, 1993 by
Berg Electronics, Inc., and Berg Employment Company in favor of Chemical Bank,
as Agent
The Intermediate Holdings Pledge Agreement dated as of February 26,
1993 by Berg Holdings U.S., Inc. in favor of Chemical Bank, as Agent
The Note Pledge and Assignment Agreement dated as of February 26, 1993
by Berg Electronics, Inc. in favor of Chemical Bank, as Agent
The Open-End Mortgage and Security Agreement dated as of February 26,
1993 by Berg Electronics, Inc. in favor of Chemical Bank, as Agent
The [DuPont] Assignment dated as of February 26, 1993 by Berg
Electronics, Inc. in favor of Chemical Bank, as Agent
The Foreign Subsidiaries Guarantee dated as of February 26, 1993 by
Berg Electronics Distributor, B.V., Connector Systems Technology, N.V., Berg
Electronics Manufacturing, B.V., Berg Electronics (France) S.A., Berg
Electronics Singapore Pte Ltd., Berg Electronics Japan, K.K., Connector
Systems, B.V., Berg Connector Systems, S.L., Berg Electronics Gmbm, Berg
Electronics S.r.l., Connector Systems Limited and Berg Electronics Hong Kong
Limited in favor of Berg Electronics, Inc.
The Patent Security Agreement dated as of February 26, 1993 by Berg
Technology, Inc., Harbor Electronics, Inc., and Socket Express, Inc. in favor
of Chemical Bank, as Agent
The Trademark Security Agreement dated as of February 26, 1993 by Berg
Technology, Inc. and Harbor Electronics, Inc. in favor of Chemical Bank, as
Agent
The Domestic Subsidiary Security Agreement dated as of February 26,
1993 by Berg Technology, Inc., Harbor Electronics, Inc., Socket Express, Inc.,
Specialty Connector Company, and Berg Employment Company in favor of Chemical
Bank, as Agent
The AT&T Assignment dated as of May 23, 1994 by Berg Electronics, Inc.,
in favor of Chemical Bank, as Agent
The Assignment and Assumption Agreement dated as of March 1, 1994 among
Mold-Con, Inc., Tre-Tec Engineering Corporation, Contex Electronics, Inc.,
Harbor Electronics, Inc. and Berg Electronics, Inc.
The Borrower Trademark Security Agreement dated as of May 23, 1994 by
Berg Electronics, Inc. in favor of Chemical Bank, as Agent
The Borrower Patent Security Agreement dated as of May 23, 1994 by Berg
Electronics, Inc. in favor of Chemical Bank, as Agent
<PAGE> 6
6
The Foreign Pledge Agreements
- Pledge Agreement dated as of March 1, 1993 between Berg Electronics,
Inc. and Chemical Bank, as Agent, of Connector Systems, Korea Ltd.
shares. [Korea]
-Pledge Agreement dated as of March 1, 1993 between Berg Holdings U.S.
Inc. and Chemical Bank, as Agent, of Connector Systems B.V. shares
[Netherlands]
- Pledge Agreement dated as of March 1, 1993 between Connector Systems
B.V. and Berg Electronics, Inc. of Berg Electronics Distributor B.V.
and Berg Electronics Manufacturing B.V. shares [Netherlands]
- Pledge Agreement dated as of February 26, 1993 between Berg Holdings
U.S. Inc. and Chemical Bank, as Agent, of Connector Systems
Technology N.V. shares [Netherlands]
- Pledge Agreement dated as of March 20, 1993 between Berg Holding
U.S., Inc. and Chemical Bank, as Agent, of Berg Connector Systems S.L.
shares [Spain]
- Pledge Agreement dated as of February 26, 1993 between Berg Holding
U.S., Inc. and Chemical Bank, as Agent, of Berg Connector Systems, S.L.
shares [France]
- Pledge Agreement dated as of April 1, 1993 between Berg Holding U.S.,
Inc. and Chemical Bank, as Agent, of Berg Connector Systems Gmbh
shares [Germany]
- Pledge Agreement dated as of February 26, 1993 between Berg Holding
U.S., Inc. and Chemical Bank, as Agent, of CBOS Electronics AB shares
[Sweden]
- Pledge Agreement dated as of February 26, 1993 between Berg Holding
U.S., Inc. and Chemical Bank, as Agent, of Bergtronics Oy shares
[Finland]
- Pledge Agreement dated as of February 26, 1993 between Berg Holding
U.S., Inc. and Chemical Bank, as Agent, of Berg Electronics S.A. shares
[Switzerland]
- Pledge Agreement dated as of February 26, 1993 between Berg Holding
U.S., Inc. and Chemical Bank, as Agent, of Berg Electronics S.r.l.
shares [Italy]
- Pledge Agreement dated as of February 26, 1993 between Berg Holding
U.S., Inc. and Chemical Bank, as Agent, of Connector Systems Limited
shares [England]
- Pledge Agreement dated as of February 26, 1993 between Berg Holding
U.S., Inc. and Chemical Bank, as Agent, of Berg Electronics Canada,
Inc. shares [Canada]
- Pledge Agreement dated as of February 26, 1993 between Berg Holding
U.S. and Chemical Bank, as Agent, of Berg Electronics Hong Kong Limited
shares [Hong Kong]
- Pledge Agreement dated as of February 26, 1993 between Berg Holding
U.S., Inc. and Chemical Bank, as Agent, of Berg Electronics Singapore
PTE Ltd. shares [Singapore]
- Pledge Agreement dated as of February 26, 1993 between Connector
Systems U.S. Inc. and Chemical Bank, as Agent, of Berg Electronics
Taiwan Ltd. shares [Taiwan]
<PAGE> 1
EXHIBIT 10.41
FIRST AMENDMENT
FIRST AMENDMENT, dated as of December 18, 1996 (this "Amendment"), to
the Credit Agreement, dated as of February 29, 1996, (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among BERG
ELECTRONICS GROUP, INC., a Delaware corporation (the "Borrower"), BERG
ELECTRONICS CORP., a Delaware corporation and the parent of the Borrower
("Holdings"), the several banks and other institutions from time to time
parties to the Credit Agreement (the "Lenders") and THE CHASE MANHATTAN BANK, a
New York banking corporation (as successor by merger to Chemical Bank), as
agent to the lenders thereunder (in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Borrower and Holdings have requested the Lenders to amend
certain provisions of the Credit Agreement as set forth herein in connection
with the Borrower's planned acquisition of the captive connectors business of
Ericsson Telecom AB, a Swedish corporation, for total consideration not to
exceed the equivalent of US$18,000,000; and
WHEREAS, the Lenders are willing to amend the Credit Agreement on and
subject to the terms and conditions hereof;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties agree as follows:
SECTION 1. Definitions. As used in this Amendment, terms defined in the
preamble hereof and the recitals hereto are used herein as so defined, terms
defined in the Credit Agreement are used herein as therein defined and the
following term shall have the following meaning:
"First Amendment Effective Date": as defined in Section 4 hereof.
SECTION 2. Amendment of Subsection 8.9 (Limitation on Investments,
Loans and Advances). Subsection 8.9 of the Credit Agreement is hereby amended
by adding to the end of subclause (i) thereof the following new proviso":
; provided further, that the Borrower need not comply with clause (ii)
of the first proviso above in connection with the acquisition of the captive
connectors business of Ericsson Telecom AB by Berg Electronics, AB a wholly
owned Swedish
<PAGE> 2
2
Foreign Subsidiary of the Borrower for total consideration not to exceed
the equivalent of US$18,000,000."
SECTION 3. Representations and Warranties. To induce the Agent and the
Lenders to enter into this Amendment and agree to the amendment herein, the
Credit Parties hereby represent and warrant to the Agent and each Lender that
after giving effect to the amendment contained herein, each Credit Party hereby
confirms, reaffirms and restates the representations and warranties set forth
in Section 5 of the Credit Agreement as if made on and as of the First
Amendment Effective Date, except as they may specifically relate to an earlier
date; provided that such representations and warranties shall and hereby are
amended so that all references to the Agreement therein shall be deemed a
reference to (i) the Credit Agreement, (ii) this Amendment and (iii) the Credit
Agreement as amended by this Amendment.
SECTION 4. Conditions Precedent. This Amendment shall become effective
as of the date that each of the conditions precedent set forth below shall have
been fulfilled to the satisfaction of the Required Lenders (the "First
Amendment Effective Date"), provided that the First Amendment Effective Date
may not occur later than January 31, 1997
(a) Amendment. The Agent shall have received this Amendment, executed
and delivered by a duly authorized officer of each of the Borrower, Holdings
and the Required Lenders.
(b) No Default or Event of Default. On and as of the First Amendment
Effective Date and after giving effect to this Amendment and the transactions
contemplated hereby, no Default or Event of Default shall have occurred and be
continuing.
(c) Representations and Warranties. The representations and warranties
made by the Borrower in the Credit Agreement and herein after giving effect to
this Amendment and the transactions contemplated hereby shall be true and
correct in all material respects on and as of the First Amendment Effective
Date as if made on such date, except where such representations and warranties
relate to an earlier date in which case such representations and warranties
shall be true and correct as of such earlier date.
(d) Certificate. The Agent shall have received a Certificate of a
Responsible Officer of the Borrower, dated the First Amendment Effective Date,
certifying the matters referred in paragraphs (b) and (c) above.
(e) Acknowledgment, Consent and Amendment. The agent shall have
received from each of Holdings, the Borrower, US Techco, Intermediate Holdings,
Connector Systems (U.S.) Inc., Harbor and Socket with respect to each Loan
Document to which it is a party a duly executed Acknowledgment, Consent, and
Amendment, substantially in the form of Exhibit A hereto.
<PAGE> 3
3
(f) Pledged Note. The Agent shall have received (i) a Subsidiary Note
made by Berg Electronics, AB as collateral under the Borrower Note Pledge
Agreement and (ii) a Supplement thereunder in form and substance reasonably
satisfactory to the agent thereto.
SECTION 5. Continuing Effect of Credit Agreement. This Amendment shall
not constitute an amendment or waiver of any provision of the Credit Agreement
not expressly referred to herein and shall not be construed as an amendment,
waiver or consent to any action on the part of any Credit Party that would
require an amendment, waiver or consent of the Agent or the Lenders except as
expressly stated herein. Except as expressly amended and waived hereby, the
provisions of the Credit Agreement are and shall remain in full force and
effect.
SECTION 6. Expenses. The Borrower agrees to pay or reimburse the Agent
for all of its reasonable out-of-pocket costs and expenses incurred in
connection with (a) the negotiation, preparation, execution and delivery of
this Amendment and any other documents prepared in connection herewith, and
consummation of the transactions contemplated hereby and thereby, including the
fees and expenses of Simpson Thacher & Bartlett, counsel to the Agent, and (b)
the enforcement or preservation of any rights under this Amendment and any
other such documents.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 8. Counterparts. This Amendment may be executed in any number
of counterparts by the parties hereto, each of which counterparts when so
executed shall be an original, but all counterparts taken together shall
constitute one and the same instrument.
<PAGE> 4
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
dully executed and delivered by their respective duly authorized officers as of
the day and year first above written.
BERG ELECTRONICS GROUP, INC.
By: /s/ JOSEPH S. CATANZARO
---------------------------------------
Name: Joseph S. Catanzaro
Title: Vice President
BERG ELECTRONICS CORP.
By: /s/ JOSEPH S. CATANZARO
---------------------------------------
Name: Joseph S. Catanzaro
Title: Vice President
THE CHASE MANHATTAN BANK,
as Agent and as a Lender, and as
Swing Line Lender and as Issuing
Lender
By: /s/ TRADBY J. STONE
---------------------------------------
Name: Tradby J. Stone
Title: Credit Executive
ARAB BANKING CORPORATION (B.S.C.)
By:/s/ STEPHEN A. PLAUCHE
---------------------------------------
Name: Stephen A. Plauche
Title: Vice President
<PAGE> 5
5
BANK OF MONTREAL
By: /s/ LEON H. SINCLAIR
---------------------------------------
Name: Leon H. Sinclair
Title: Director
BANK OF TOKYO-MITSUBISHI
By: /s/ VICTOR P. BULZACCHELLI
---------------------------------------
Name: V. Bulzacchelli
Title: Vice president and Manager
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, New York Branch
By: /s/ FRANK H. MADDEN, JR.
---------------------------------------
Name: Frank H. Madden, Jr.
Title: Vice President
BANQUE PARIBAS
By: /s/ DEANNA C. WALKER
---------------------------------------
Name: Deanna C. Walker
Title: Assistant Vice President
By: /s/ KENNETH E. MOORE, JR.
---------------------------------------
Name: Kenneth E. Moore, Jr.
Title: Vice President
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ GILLES MARCHAND
---------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
<PAGE> 6
6
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.
as Investment Advisor
By: /s/ GILLES MARCHAND
---------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
THE BANK OF NEW YORK
By: /s/ JOHN C. LOMBERT
---------------------------------------
Name: John C. Lombert
Title: Vice President
CREDIT LYONNAIS, CAYMAN ISLAND BRANCH
By: /s/ SANDRA E. HORWITZ
---------------------------------------
Name: Sandra E. Horwitz
Title: Authorized Signature
<PAGE> 7
7
GIROCREDIT
By: /s/ ANCA TRIFAN
---------------------------------------
Name: Anca Trifan
Title: Vice President
VAN KAMPEN AMERICA CAPITAL PRIME RATE
INCOME TRUST
By: /s/ JEFFREY W. MAILLET
---------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President and
Director
IMPERIAL BANK
By: /s/ RAY VEAD
---------------------------------------
Name: Ray Vead
Title:
MITSUBISHI TRUST & BANKING CORP.
By: /s/ PATRICIA LORET DE MOLA
---------------------------------------
Name: Patricia Loret de Mola
Title: Senior Vice President
<PAGE> 8
8
NBD BANK
By:/s/ DAVE R. DEMELI
---------------------------------------
Name: Dave R. DeMeli
Title: Vice President
NATIONAL CITY BANK
By:/s/ LISA BETH LISI
---------------------------------------
Name: Lisa Beth Lisi
Title: Account Officer
SUMITOMO BANK, LTD.
By:/s/ HIROYUKI IWAMI
---------------------------------------
Name: Hiroyuki Iwami
Title: Joint General Manager
ABN AMRO Bark N.V. Houston Agency
By: ABN AMRO North America, Inc., as
Agent
By:/s/ LAURIE C. TUZO
---------------------------------------
Name: Laurie C. Tuzo
Title: Vice President & Director
By:/s/ LILA JORDAN
---------------------------------------
Name: Lila Jordon
Title: Vice President & Director
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By:/s/ G. KEVIN OAKLEY
---------------------------------------
Name: G. Kevin Oakley
Title: Assistant Vice President
By:/s/ BRIAN J. CUMBERLAND
---------------------------------------
Name: Brian J. Cumberland
Title: Assistant Treasurer
<PAGE> 9
9
CAPTIVA FINANCE LTD.
By: /s/ DAVID RILEY
---------------------------------------
Name: David Riley
Title: Director
COMERICA BANK BRS
By: /s/ BURT R. SHURLY III
---------------------------------------
Name: Burt R. Shurly III
Title: Vice President
CREDIT AGRICOLE
By: /s/ DAVID BOUHL
---------------------------------------
Name: David Bouhl, F.V.P.
Title: Head of Corporate Banking -
Chicago
DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCH
By: /s/ THOMAS J. NADRAMIA
---------------------------------------
Name: Thomas J. Nadramia
Title: Vice President
By: /s/ JOHN W. SWEENEY
---------------------------------------
Name: John W. Sweeney
Title: Assistant Vice President
FUJI BANK LTD.
By: /s/ PETER L. CHINNICI
---------------------------------------
Name: Peter L. Chinnici
Title: Joint General Manager
<PAGE> 1
EXHIBIT 10.42
SUPPLEMENT NO. 1 TO NOTE PLEDGE AGREEMENT
THIS AGREEMENT SUPPLEMENTS THE NOTE
PLEDGE AGREEMENT BETWEEN THE PARTIES HERETO
DATED AS OF FEBRUARY 26, 1993.
SUPPLEMENT NO. 1 TO NOTE PLEDGE AGREEMENT
Supplement No. 1 (this "Supplement"), dated as of December 18, 1996, to
the Note Pledge and Assignment Agreement dated as of February 26, 1993 (the
"Note Pledge Agreement") made by BERG ELECTRONICS GROUP, INC. (f/k/a Berg
Electronics Inc.), a Delaware corporation (the "Borrower"), in favor of THE
CHASE MANHATTAN BANK, a New York banking corporation (as successor by merger to
Chemical Bank), as agent (in such capacity, the "Agent") for the banks and
other financial institutions (the "Lenders") parties to the Credit Agreement,
dated as of February 29, 1996 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among the Borrower, Berg
Electronics Corp., the Lenders and the Agent.
WITNESSETH:
WHEREAS, the Borrower and the Agent are parties to the Note Pledge
Agreement pursuant to which the Borrower has assigned, transferred and pledged
all the Subsidiary Notes and the Subsidiary Security Agreements (both as
defined in the Note Pledge Agreement) to the Agent for the benefit of the
Lenders;
WHEREAS, the Borrower is the legal and beneficial owner of a Subsidiary
Note made by Berg Connectors Sweden AB, a Swedish corporation, listed on
Schedule I hereto: and
WHEREAS, it is a condition precedent to the effectiveness of the First
Amendment to the Credit Agreement that the Borrower shall have executed and
delivered this Supplement to the Agent;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the Note Pledge
Agreement and the Credit Agreement.
2. Supplement to Note Pledge Agreement. From and after the date
hereof, the Note Pledge Agreement is hereby supplemented by adding the
Subsidiary Note listed on Schedule I hereto to the Pledged Notes listed on
Schedule I to the Note Pledge Agreement and to the definition of Pledged Notes
in the Note Pledge Agreement.
<PAGE> 2
2
3. Pledge, Grant of Security Interest. The Borrower hereby
delivers to the Agent, for the ratable benefit of the Lenders, all the
Subsidiary Notes listed on Schedule I hereto and hereby grants to the Agent,
for the ratable benefit of the Lenders, a first lien on and security interest
in such Subsidiary Notes, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations. Such grant shall be governed by
the terms and conditions of the Note Pledge Agreement.
4. Representations and Warranties. The representations and
warranties contained in Section 5 of the Note Agreement are made by the
Borrower, after giving effect to this Supplement, as of the date hereof and as
of each other date hereafter contemplated by such Section 5.
5. Limited Effect. Except as expressly modified hereby, the Note
Pledge Agreement remains in full force and effect.
6. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
7. Counterparts. This Supplement may be executed by the parties
hereto on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
<PAGE> 3
3
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
duly executed and delivered by its properly and duly authorized officer as of
the day and year first written above.
BERG ELECTRONICS GROUP, INC.
By: /s/ JOSEPH S. CATANZARO
---------------------------
Name: Joseph S. Catanzaro
Title: Vice President
<PAGE> 4
ACKNOWLEDGEMENT AND CONSENT
The maker of the Subsidiary Note referred to in the foregoing
Supplement hereby acknowledges receipt of a copy thereof, agrees to the
assignment to the Agent of its Subsidiary Note and hereby represents and
warrants to the extent set forth therein that its Subsidiary Note is a valid
and binding obligation enforceable against it in accordance with its terms.
BERG CONNECTORS SWEDEN AB
By: /s/ JOSEPH S. CATANZARO
--------------------------
Name: Joseph S. Catanzaro
Title: Vice President
Address for Notices:
101 South Hanley Road
St. Louis, Missouri 63105
Telecopy: (314) 746-2240
Attention: Joseph S. Catanzaro
<PAGE> 5
SCHEDULE I
DESCRIPTION OF PLEDGED NOTES
<TABLE>
<CAPTION>
Note Holder Note Issuer Amount of Note
- ----------- ----------- --------------
<S> <C> <C>
Berg Berg Connectors
Electronics Group, Inc. Sweden AB $17,512,623.68
</TABLE>
<PAGE> 1
EXHIBIT 11.0
BERG ELECTRONICS CORP.
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1994(1) 1995(1) 1996(1)
------------ ----------- ------------
<S> <C> <C> <C>
Primary Loss per Share:
Net loss applicable to common shares.............. $(10,265,000) $(5,412,000) $(17,054,000)
============ =========== ============
Average number of common shares outstanding....... 12,997,626 12,989,324 19,245,738
Assumed exercise of options (treasury stock
method)(2)..................................... -- -- --
------------ ----------- ------------
Shares for primary computation.................... 12,997,636 12,989,324 19,245,738
============ =========== ============
Net loss per share................................ $ (0.79) $ (0.42) $ (0.89)
============ =========== ============
Fully Diluted Loss per Share:
Net loss applicable to common shares.............. $(10,265,000) $(5,412,000) $(17,054,000)
============ =========== ============
Average number of common shares outstanding....... 12,997,626 12,989,324 19,245,738
Assumed exercise of options (treasury stock
method)(2)..................................... -- -- --
------------ ----------- ------------
Shares for primary computation.................... 12,997,626 12,989,324 19,245,738
============ =========== ============
Net loss per share................................ $ (0.79) $ (0.42) $ (0.89)
============ =========== ============
</TABLE>
- ---------------
(1) Per share data reflects adjustments related to the 1-for-4.11 reverse stock
split in February 1996.
(2) As there is a net loss for each of the years ended December 31, 1994, 1995
and 1996, options are anti-dilutive and, thus, excluded from the above
calculations.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
1. Berg Technology, Inc., a Nevada corporation
2. Berg Holdings U.S., Inc., a Delaware corporation
3. Berg Electronics Korea Ltd., a Korean corporation
4. Berg Electronics, B.V., a Netherlands corporation
5. Berg Electronics Manufacturing B.V., a Netherlands corporation
6. Berg Electronics Distributor B.V., a Netherlands corporation
7. Berg Connector Systems, S.L., a Spanish corporation
8. Berg Connector Systems GmbH, a German corporation
9. Bergtronics, O.y., a Finnish corporation
10. Berg Electronics, S.r.L., an Italian corporation
11. Berg Electronics Canada, Inc., a Canadian corporation
12. Berg Electronics Hong Kong Limited, a Hong Kong corporation
13. Berg Electronics Singapore PTE Ltd., a Singapore corporation
14. Berg Electronics S.A., a French corporation
15. CBOS Electronics, AB, a Swedish corporation
16. Berg Electronics S.A., a Swiss corporation
17. Connector Systems Limited, a United Kingdom corporation
18. Connector Systems (U.S.), Inc., a Delaware corporation
19. Berg Electronics Taiwan Ltd., a Taiwanese corporation
20. Berg Electronics, Japan K.K., a Japanese corporation
21. Berg Electronics Engineering K.K., a Japanese corporation
22. Connector Systems Technology, N.V., an Antilles corporation
23. TVS Berg Ltd., an Indian corporation (a 40% owned joint venture)
24. Harbor Electronics, Inc., a Delaware corporation
25. Socket Express, Inc., a New Jersey corporation
26. Berg Electronics Group, Inc., a Delaware corporation
27. Specialty Connector Company, a Delaware corporation
28. Berg Employment Company, a Delaware corporation
29. Berg Connectors Sweden AB, a Swedish corporation
30. Berg Electronics China Ltd., a Hong Kong corporation
31. Berg Electronics Nantong, Ltd., a People's Republic of China corporation
32. Berg Electronics Ireland B.V., a Netherlands corporation
33. Berg (UK) Limited, a United Kingdom corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000904900
<NAME> BERG ELECTRONICS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,999
<SECURITIES> 0
<RECEIVABLES> 107,837
<ALLOWANCES> 3,703
<INVENTORY> 91,823
<CURRENT-ASSETS> 218,891
<PP&E> 338,037
<DEPRECIATION> 128,132
<TOTAL-ASSETS> 682,007
<CURRENT-LIABILITIES> 177,731
<BONDS> 324,646
0
0
<COMMON> 0
<OTHER-SE> 138,892
<TOTAL-LIABILITY-AND-EQUITY> 682,007
<SALES> 704,669
<TOTAL-REVENUES> 704,669
<CGS> 455,869
<TOTAL-COSTS> 455,869
<OTHER-EXPENSES> 1,239
<LOSS-PROVISION> 1,883
<INTEREST-EXPENSE> 31,738
<INCOME-PRETAX> 47,336
<INCOME-TAX> 18,391
<INCOME-CONTINUING> 28,945
<DISCONTINUED> 0
<EXTRAORDINARY> (18,664)
<CHANGES> 0
<NET-INCOME> 10,281
<EPS-PRIMARY> (0.89)
<EPS-DILUTED> (0.89)
</TABLE>
