<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
For the quarterly period ended March 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________to__________
COMMISSION FILE NUMBER 1-333-36675
-----------------
BURKE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-3081144
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13767 FREEWAY DRIVE
SANTA FE SPRINGS, CALIFORNIA 90670
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 221-0923
-----------------
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, as amended, during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
--- ---.
As of May 12, 2000, the number of shares outstanding of the
Registrant's Common Stock was 3,894,500.
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<PAGE>
BURKE INDUSTRIES, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NUMBER
<S> <C> <C>
Item 1 Financial Statements
Condensed Consolidated Statements of Operations for the three
months ended March 31, 2000 and April 2, 1999 (unaudited) 3
Condensed Consolidated Balance Sheets as of March 31, 2000
(unaudited) and December 31, 1999 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and April 2, 1999
(unaudited) 5
Notes to Condensed Consolidated Financial Statements
(unaudited) 6-7
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations 8-10
Item 3 Quantitative and Qualitative Disclosures About Market Risk 11
PART II OTHER INFORMATION
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
Signature 13
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BURKE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Three Month Period
Ended
--------------------------------------
March 31, April 2,
2000 1999
--------------------------------------
(Unaudited)
<S> <C> <C>
Net sales.................................................. $ 27,654 $ 28,828
Costs and expenses:........................................
Cost of sales......................................... 19,859 20,430
Selling, general and administrative................... 5,135 4,711
Amortization of goodwill.............................. 504 504
-------------------- -------------------
Income from operations..................................... 2,156 3,183
Interest expense, net...................................... 3,921 3,738
-------------------- -------------------
Income (loss) before income tax............................ (1,765) (555)
Income tax................................................. -- (221)
-------------------- -------------------
Net loss................................................... $ (1,765) $ (334)
==================== ===================
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
3
<PAGE>
BURKE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
------------- December 31,
March 31, 1999
------------- (Derived from audited
2000 financial statements)
(Unaudited) ----------------------
--------------
ASSETS (In Thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................... $ 171 $ 348
Trade accounts receivable, less allowance of $738 in 2000 and $658 15,154 13,627
in 1999
Inventories............................................................. 15,458 15,585
Prepaid expenses and other current assets............................... 973 1,510
Deferred income tax assets.............................................. 503 503
-------- -------
Total current assets.................................................. 32,259 31,573
Property, Plant and Equipment:
Land and improvements................................................... 2,107 2,107
Buildings and improvements.............................................. 11,210 11,210
Equipment............................................................... 19,506 19,543
Leasehold improvements.................................................. 1,040 1,040
Assets under capital leases............................................. 1,589 1,589
-------- -------
35,452 35,489
Accumulated depreciation and amortization............................... 15,061 14,464
-------- -------
20,391 21,025
Construction in process................................................. 585 419
-------- -------
Total property, plant and equipment................................... 20,976 21,444
Other Assets:
Prepaid pension cost....................................................... 442 442
Goodwill, net.............................................................. 27,214 27,718
Deferred financing costs, net.............................................. 5,513 5,718
Other assets............................................................... 135 139
-------- -------
Total other assets.................................................... 33,304 34,017
-------- -------
Total assets.................................................... $ 86,539 $ 87,034
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Revolving line of credit................................................ $ 6,547 $--
Trade accounts payable and accrued expenses............................. 6,398 8,174
Accrued compensation and related liabilities............................ 1,848 1,743
Accrued interest........................................................ 2,028 5,528
Payable to shareholders................................................. 785 785
Capital lease obligations............................................... 514 514
Income taxes payable.................................................... 501 481
-------- -------
Total current liabilities............................................. 18,621 17,225
Senior notes............................................................... 110,000 110,000
Floating notes............................................................. 30,000 30,000
Capital lease obligations, non-current 544 669
Other non-current liabilities.............................................. 443 444
Deferred income tax liabilities 2,388 2,388
Preferred stock, no par value; 50,000 shares authorized; 30,000 Series A
Redeemable shares designated; 18,611 Series A shares issued and outstanding;
5,000 Series B Redeemable shares designated; 2,326 Series B shares issued
and outstanding (aggregate liquidation and redemption preference $18,000) 21,039 20,536
Shareholders' equity (deficit):
Convertible preferred stock, no par value: 3,000 Series C shares
designated, issued and outstanding (liquidation preference $3,000)..... 3,000 3,000
Class A common stock, no par value: Authorized shares-20,000,000
issued and outstanding shares--3,894,500 in 2000 and 1999. 25,708 25,708
Accumulated deficit......................................................... (125,204) (122,936)
-------- -------
Total shareholders' equity (deficit)..................................... (96,496) (94,228)
-------- -------
Total liabilities and shareholders' equity (deficit)................... $ 86,539 $ 87,034
======== =======
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
4
<PAGE>
BURKE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Three Month Period
Ended
-------------------------------
March 31, 2000 April 2,
1999
------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................... $ (1,765) $ (334)
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization:
Property, plant and equipment...................................... 597 527
Goodwill........................................................... 504 504
Debt financing costs............................................... 205 206
Other adjustments to reconcile net income to net cash used
in operating activities............................................... (6,136) (2,744)
------------- --------------
Net cash used in operating activities.................................... (6,595) (1,841)
INVESTING ACTIVITIES
Purchases of property, plant and equipment............................... (129) (764)
------------- --------------
Net cash used in investing activities.................................... (129) (764)
FINANCING ACTIVITIES
Short term borrowings under revolving line of credit..................... 6,547 --
------------- --------------
Net cash provided by financing activities................................ 6,547 --
------------- --------------
Decrease in cash......................................................... (177) (2,605)
Cash at beginning of period.............................................. 348 2,981
------------- --------------
Cash at end of period.................................................... $ 171 $ 376
============= ==============
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of the
Company have been prepared without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The condensed
consolidated balance sheet as of December 31, 1999 was derived from audited
financial statements. The accompanying condensed consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
The financial information included herein reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
period. The results of operations for the three months ended March 31, 2000
are not necessarily indicative of the results to be expected for the full
year. Certain prior year reclassifications have been made in order to conform
to current year presentation.
The Company uses a 52 to 53-week fiscal year ending on the Friday
closest to December 31. The Company also follows a thirteen-week quarterly
cycle. The three-month periods ended on March 31, 2000 and April 2, 1999.
2. INVENTORIES
Inventories consist of the following at the period ended:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- --------------
(In thousands)
--------------------------------
<S> <C> <C>
Raw materials................................................... $5,663 $5,540
Work-in-process................................................. 2,727 1,861
Finished goods.................................................. 7,068 8,184
------------- --------------
$15,458 $15,585
============= ==============
</TABLE>
3. SEGMENT INFORMATION
The Company has two reportable business segments: organic products
and silicone products. The organic products group produces and distributes
rubber and vinyl wall base, other floor covering accessory products, flexible
membranes and other organic rubber products. The silicone products group
produces and distributes precision silicone seals and other products used on
commercial and military aircraft as well as high performance silicone truck
and bus engine hoses and other silicone rubber products.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
6
<PAGE>
BURKE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED MARCH 31, 2000 Organic Products Silicone Products Total
-------------------- ---------------------- --------------------
(Amounts in Thousands)
<S> <C> <C> <C>
Revenues from external customers............ $15,268 $12,386 $27,654
Segment profit.............................. 2,279 1,304 3,583
PROFIT
Total profit for reportable segments........ $3,583
Unallocated items:
Corporate general and administrative
expenses................................ 923
Amortization of goodwill related to the
acquisition of Mercer................... 504
Interest expense, net..................... 3,921
--------------------
Income before income taxes.................. $(1,765)
====================
THREE MONTH PERIOD ENDED APRIL 2, 1999 Organic Products Silicone Products Total
-------------------- ---------------------- --------------------
(Amounts in Thousands)
Revenues from external customers............ $15,187 $13,641 $28,828
Segment profit.............................. 2,534 1,631 4,165
PROFIT
Total profit for reportable segments........ $4,165
Unallocated items:
Corporate general and administrative
expenses................................ 478
Amortization of goodwill related to the
acquisition of Mercer................... 504
Interest expense, net..................... 3,738
--------------------
Income before income taxes.................. $(555)
====================
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the
Company's Unaudited Condensed Consolidated Financial Statements and Notes
thereto included elsewhere in this Quarterly Report on Form 10-Q.
This Report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of
management as well as assumptions made by and information currently available
to management. The words "anticipates," "believes," "estimates," "expects,"
"plans," "intends," and similar expressions, as they relate to the Company or
its management, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company, with respect to future
events and are subject to certain risks, uncertainties and assumptions, that
could cause actual results to differ materially from those expressed in any
forward-looking statement, including, without limitation: competition from
other manufacturers in the Company's aerospace, flooring or commercial
product lines, loss of key employees, general economic conditions and adverse
factors impacting the aerospace industry such as changes in government
procurement policies. Should one or more of these risks or uncertainties
materialize, or should the underlying assumptions prove incorrect, actual
results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Company does not intend to update these
forward-looking statements.
RESULTS OF OPERATIONS
The Company operates within one industry segment, elastomer
products, and is organized into two business segments: silicone and organic
products. The Company's products are organized into three product groups:
Aerospace and Defense Products, which produces precision silicone seals and
other products used on commercial and military aircraft; Flooring Products,
which produces and distributes rubber and vinyl cove base and other floor
covering accessory products; and Commercial Products, which produces various
intermediate and finished silicone and organic rubber products.
The following table sets forth certain income statement information
for the Company for the three month period ended March 31, 2000 compared to
the three month period ended April 2, 1999:
<TABLE>
<CAPTION>
Fiscal First Quarter
---------------------------------------------------------------------
March 31, Percentage April 2, Percentage
2000 of Net Sales 1999 of Net Sales
---------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales:
Aerospace and Defense Products......... $7,630 27.6% $9,114 31.6%
Flooring Products...................... 11,494 41.6% 11,151 38.7%
Commercial Products.................... 8,530 30.8% 8,563 29.7%
------------------------------ -------------------------------
Net sales................................... 27,654 100.0% 28,828 100.0%
Cost of sales............................... 19,859 71.8% 20,430 70.9%
------------------------------ -------------------------------
Gross profit................................ 7,795 28.2% 8,398 29.1%
Selling, general and
administrative expenses................... 5,135 18.6% 4,711 16.3%
Amortization of goodwill.................... 504 1.8% 504 1.7%
------------------------------ -------------------------------
Income from operations...................... 2,156 7.8% 3,183 11.1%
Interest expense............................ 3,921 14.2% 3,738 13.1%
------------------------------ -------------------------------
Loss before income tax benefit............. (1,765) -6.4% (555) -2.0%
Income tax benefit.......................... -- -- (221) -0.8%
------------------------------ -------------------------------
Net loss................................... ($1,765) -6.4% ($334) -1.2%
============================== ===============================
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
8
<PAGE>
NET SALES. Total net sales decreased 4.1%, from $28.8 million for
the three month period ended April 2, 1999 to $27.7 million for the same
period in 2000. Aerospace and Defense Products sales decreased 16.3%, from
$9.1 million for the three month period ended April 2, 1999 to $7.6 million
for the same period in 2000, due to decreases in demand for commercial
products, which were partially offset by increases in demand for military
products. Flooring Products net sales increased 3.1%, from $11.2 million for
the three month period ended April 2, 1999 to $11.5 million for the same
period in 2000, due to higher demand for vinyl flooring and cove base
products. Commercial Products sales decreased 0.4%, from $8.6 million for the
three month period ended April 2, 1999 to $8.5 million for the same period in
2000. The small decrease in sales as compared to the prior year was the
result of slow demand for the Company's organic roofing products, which was
offset by stronger demand for the Company's commercial silicone hose and
specialty products.
COST OF SALES. Cost of sales decreased 2.8%, from $20.4 million for
the three-month period ended April 2, 1999 to $19.9 million for the same
period in 2000, due to the decrease in net sales. As a percentage of net
sales, gross profit decreased from 29.1% for the three-month period ended
April 2, 1999 to 28.2% for the same period in 2000. The year on year
reduction in net sales of aerospace and defense products, which have a high
proportion of fixed operating expenses, was the primary cause of the decrease
in gross profit percent. This impact was partially offset by an improved
sales mix resulting from the increase in net sales of higher margin flooring
products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 9.0%, from $4.7 million for the three
month period ended April 2, 1999 to $5.1 million for the same period in 2000.
As a percentage of net sales, selling, general and administrative expenses
increased from 16.3% for the three month period ended April 2, 1999 to 18.6%
for the same period in 2000. The increase in expenses was due to increased
shipping and warehousing costs and one-time costs associated with the recent
management reorganization within the Company.
AMORTIZATION OF GOODWILL. Amortization of goodwill was $0.5 million
for the three month period ended March 31, 2000, which was unchanged from the
same period in 1999.
INCOME FROM OPERATIONS. As a result of the above factors, income
from operations decreased 32.3%, from $3.2 million for the three-month period
ended April 2, 1999 to $2.2 million for the same period in 2000.
INTEREST EXPENSE. Interest expense increased from $3.7 million for
the three-month period ended April 2, 1999 to $3.9 million for the same
period in 1999. The increase is due to the debt service associated with the
Company's use of its Revolving Credit Facility during the quarter, and the
interest expense associated with the capital lease for the Company's new
computer system which was entered into in March of 1999.
NET INCOME. As a result of the above factors, net loss increased
from $0.3 million for the three-month period ended April 2, 1999 to a loss of
$1.8 million for the same period in 2000.
INCOME TAX PROVISION (BENEFIT)
For the three-month period ended March 31, 2000, the Company did not
record an income tax provision due to operating losses.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW. The Company's principal uses of cash are to finance
working capital and capital expenditures related to asset acquisitions and
internal growth.
CAPITAL REQUIREMENTS. The Company expects to spend approximately
$2.0 million during 2000 on capital expenditures not directly related to
acquisitions. Cash flow from operations, to the extent available, may also be
used to fund a portion of any acquisition expenditures. The Company
anticipates that its principal use of cash during 2000 will be working
capital requirements, capital expenditures and debt service requirements.
Based upon current and anticipated levels of operations, the Company believes
that its cash flow from operations, together with amounts available under the
Credit Facility (described below), will be adequate to meet its anticipated
requirements for the foreseeable future for working capital, capital
expenditures and interest payments.
SOURCES OF CAPITAL. Under a Loan and Security Agreement with
NationsBank, N.A., as administrative agent, and other lending institutions
party thereto, the Company has a borrowing capacity of $25.0 million (the
"Credit Facility"). The Credit Facility matures in August 2002. Interest on
loans under the Credit Facility bear interest at rates based upon either, at
the Company's options, Eurodollar Rates plus a margin of 2.5% or upon the
Prime Rate. Loans under the Credit Facility are secured by security interests
in substantially all of the assets of the Company and are guaranteed by any
and all current or future subsidiaries of the Company, which guarantees are
secured by substantially all of the assets of such subsidiaries. The Credit
Facility contains customary covenants restricting the Company's ability to,
among other things, incur additional indebtedness, create liens or other
encumbrances, pay dividends or make other restricted payments, make
investments, loans and guarantees or sell or otherwise dispose of a
substantial portion of assets to, or merge or consolidate with, another
entity. The Credit Facility also contains a number of financial covenants
that will require the Company to meet certain ratios and tests and provide
that a change of control of the Company (as defined in the Credit Facility)
will constitute an event of default.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
10
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As reported by the Company in its Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, the Company is exposed to market risks
related to fluctuations in interest rates on its Senior and Floating rate
notes. The Company does not currently use interest rate swaps or other types
of derivative financial instruments.
For fixed rate debt such as the Senior Notes, changes in interest
rates generally affect the fair value of the debt instrument. For variable
rate debt such as the Floating-Rate Notes, changes in interest rates
generally do not affect the fair value of the debt instrument, but do affect
earnings and cash flows. The Company does not have an obligation to repay its
Senior Notes prior to maturity in 2007 and, as a result, interest rate risk
and changes in fair value should not have a significant impact on the
Company. Management believes that the interest rate on the Senior Notes
approximates the current rates available for similar types of financing and
as a result the carrying amount of the Senior Notes approximates fair value.
The carrying value of the Floating-Rate Notes approximates fair value as the
interest rate is variable and resets frequently. The Floating-Rate Notes bear
interest at a rate per annum equal to LIBOR plus 400 basis points and each
one percentage point increase in interest rates would result in an increase
in interest expense of $300,000 per year.
Management does not believe that the future market rate risk related
to the Senior Notes and Floating-Rate Notes will have a material impact on
the Company's financial position, results of operations or liquidity.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
11
<PAGE>
PART II OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
Effective March 1, 2000, Stephen G. Geane became the Company's Chief
Financial Officer. Mr. Geane replaced David Worthington, Vice President --
Finance, who resigned effective March 31, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company (1)
3.2 By-laws of the Company (1)
10.1 Letter Agreement, dated February 4, 2000, by and between Burke Industries,
Inc. and Theodore M. Clarke, amending Mr. Clarke's employment agreement
dated as of September 16, 1999. (2)
10.2 Employment Agreement effective as of March 29, 2000, by and between Stephen
G. Geane and Burke Industries, Inc.
10.3 Employment Agreement effective as of March 22, 2000, by and between Elliot
S. Stein and Burke Industries, Inc.
27 Financial Data Schedule
</TABLE>
----------------------------
(1) Incorporated by reference to the Company's Registration
Statement on Form S-4, File No. 333-36675, as filed with the
Securities and Exchange Commission on September 29, 1997, as
amended.
(2) Incorporated by reference to the Company's annual report on
Form 10-K, File No. 333-36675, as filed with the Securities
and Exchange Commission on March 30, 2000.
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the three months
ended March 31, 2000.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
12
<PAGE>
SIGNATURE
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 in the City of Santa Fe
Springs, State of California on the 12th day of May, 2000.
BURKE INDUSTRIES, INC.
By: /s/ Stephen G. Geane
------------------------
Stephen G. Geane
Chief Financial Officer
13
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement, by and between Stephen Gregory
Geane (Geane) and Burke Industries, Inc. (Burke), is made and entered into as
of the last date that this Agreement is executed by the parties.
RECITALS
WHEREAS, Burke is a California corporation, with offices
and business operations in the state of California; and
WHEREAS, Burke desires assurance of the continued
association and services of Geane in order to retain his experience,
abilities and knowledge, and is therefore is willing to engage the services
of Geane subject to the terms and conditions stated herein; and
WHEREAS, Geane desires to be employed by Burke subject to
the terms and conditions stated herein;
NOW THEREFORE, it is hereby agreed by and between the
parties as follows:
1. TERM: This Agreement shall have a term of one (1)
year beginning on March 2, 2000, and ending on March 1, 2001, subject to
annual extensions as hereinafter provided unless earlier terminated in
accordance with the provisions of this Agreement. After March 1, 2001, this
Agreement shall be extended for additional successive one-year terms unless
terminated by either party with not less than 90 days notice.
2. DUTIES OF GEANE:
A. Burke shall employ Geane as the Chief Financial Officer,
or in such other capacity or capacities as Burke may from time to time
prescribe. The scope of Geane's duties hereunder may be modified from time to
time at the discretion of the Chief Executive Officer of Burke. Geane shall
devote his exclusive and full-time services, energy and attention to the
business of Burke. Geane shall not, without Burke's prior written consent,
render to others services of any kind for compensation, or engage in any
other business activity that would materially interfere with the performance
of his duties under this Agreement. Geane represents to Burke that he has no
outstanding commitments inconsistent with any of the terms of this Agreement
or the services to be rendered hereunder.
Page 1 of 8
<PAGE>
B. During the employment term, Geane shall not, directly or
indirectly, whether as partner, employee, creditor, shareholder or otherwise,
promote, participate or engage in any activity or other business competitive
with Burke's business.
3. COMPENSATION:
A. Burke shall pay to Geane a base salary of $158,000
annually. This base salary may be (but shall not be required to be) increased
by the Board of Directors of Burke if the Board of Directors of Burke
determines, in its sole and complete discretion, to provide for such
increase. Geane's salary shall be paid to him in installments on the dates
customarily set for the payment of executive salaries at Burke.
B. Geane may also receive an annual bonus of up to sixty
(60) percent of his base salary, which annual bonus, if awarded, shall be
based upon performance criteria established by the Board of Directors of
Burke in its sole discretion. Geane shall also participate in any performance
based or profit participation programs as may be established for all Burke
executives.
C. Geane shall also be selected by the Board of Directors
to receive options to acquire not less than one (1) percent of the stock of
Burke pursuant to the Burke Industries, Inc. 1997 Stock Option Plan ("The
Plan") that was approved by the shareholders of Burke, which options will be
exercisable within thirty (30) days after the termination of Geane's
employment in accordance with Section 5.10 of The Plan.
4. EMPLOYMENT BENEFITS: Geane shall also be entitled
to participate in any and all employee benefit plans or programs of any
nature or kind whatsoever now existing or that may hereafter be adopted by
Burke for its employees and executives when and as Geane becomes eligible for
such benefits, including, but not limited to, vacations, retirement plans,
thrift plans, medical plans, life insurance plans, disability insurance
plans, and any other employee benefit plans or programs. A copy of the
schedule of the current employee benefit plans is attached to this Agreement.
In addition to such plans, Burke will pay to Geane a monthly automobile
allowance in the amount of $1,200. Burke reserves the right to modify,
suspend or discontinue any and all of the above benefit plans, policies and
practices at any time without notice to or recourse by Geane, so long as such
action is taken generally with respect to other similarly situated persons.
5. COMPENSATION DURING DISABILITY: In the event that
Geane shall fail or be unable to perform his services by reason of illness,
or if he should become incapacitated for a period of more than one (1) month,
the compensation payable to Geane under this Agreement shall be suspended
during such illness or incapacity, this Agreement shall remain in effect and
Geane shall be compensated in accordance with Burke policies, if any, then in
effect for similarly situated employees who become disabled to the extent
that Geane has elected to participate in the programs available under such
policies. Full compensation shall be restored to Geane upon his return to
full time employment, following any period of leave as required or provided
by applicable law or then existing Burke polices, and this Agreement shall
not otherwise be affected by such disability
Page 2 of 8
<PAGE>
provided, however, that nothing in this Section shall affect Burke's right to
terminate this Agreement in accordance with Section 9.B.
6. BUSINESS EXPENSES: Geane shall be authorized to
incur reasonable and customary business expenses, including expenses for
entertainment and travel, in accordance with Burke policies. Geane shall be
reimbursed for itemized accounts of business expenditures presented in
accordance with Burke policies and procedures.
7. CONFIDENTIAL INFORMATION: Geane agrees not to use
or disclose, either directly or indirectly, any confidential information of
Burke, except as required in the course of his employment with Burke. For the
purposes of this Section 7, the term "Confidential Information" includes
information relating to the processes, products, manufacturing techniques,
methodology, practices, policies, technical plans, computer programs,
reports, customer or employee lists, marketing plans, distribution channels
and financial information that may have been developed by, derived from or
obtained in the course of the business of Burke.
8. TERMINATION:
A. TERMINATION FOR CAUSE: Burke shall have the right to
terminate this Agreement at any time without notice if Geane commits any of
the following acts (each of which is referred to herein as "cause"):
(i) breach of any provision of this Agreement and
Geane's failure to cure such breach within ten
(10) days of receipt of notice of such breach;
(ii) any act of fraud, dishonesty or sexual
harassment with respect to any aspect of the
business of Burke;
(iii) drug or alcohol abuse or behavior that impedes
Geane's job performance or does or could bring
Geane or Burke into disrepute;
(iv) disclosure of confidential information of
Burke;
(v) misappropriation of funds of any corporate
opportunity of Burke;
(vi) conviction of Geane of a crime of moral
turpitude, or a plea of NOLO CONTENDERE
thereto;
(vii) conduct by Geane attempting to secure or
securing any personal profit not fully
disclosed to and approved by the President or
Chief Executive Officer in connection with any
transaction entered into on behalf of or
involving Burke;
Page 3 of 8
<PAGE>
(viii) gross, wilful or wanton carelessness or
misconduct that constitutes a breach of any
fiduciary duty owed to Burke;
(ix) unjustifiably neglecting , failing or refusing
to perform the duties that he is required to
perform hereunder; or,
(x) conduct, even if not in connection with the
performance of his duties contemplated under
this Agreement, that would result in serious
prejudice to the interests of Burke and his
failure to cease such conduct with fifteen
(15) days of his receipt of notice to cease
such conduct.
B. TERMINATION ON DISABILITY: If Geane is unable to
perform the essential functions of his position due to any mental or physical
illness or disability for four (4) consecutive full calendar months, or if he
is unable to so perform for 80 percent of more of the normal working days or
hours during such four (4) consecutive calendar months, then Burke shall have
the right to declare this Agreement terminated if such disability continues
following the expiration of any sick leave, medical leave or other leave
available pursuant to any Burke policy applicable to Geane.
9. COMPENSATION UPON TERMINATION:
A. TERMINATION FOR CAUSE: If Geane's employment is
terminated for cause, Burke shall pay to Geane his full base salary through
the date of termination at the rate in effect at the time of the termination,
and any unpaid expenses, and any unused earned vacation to the extent
required by law, as well as any life insurance, disability payments or other
benefits then owed to Geane under any benefit plans or programs then
maintained by Burke (the "Accrued Benefits"). Burke shall, thereafter, have
no further obligations to Geane under this Agreement.
B. TERMINATION UPON DEATH OR DISABILITY: If Geane's
employment is terminated by Geane's death or disability (as defined above),
Burke shall pay to Geane's estate the accrued portion of any salary and bonus
through the date of termination. Burke shall, thereafter, have no further
obligations to Geane under this Agreement.
C. TERMINATION UPON NOTICE OR CHANGE IN CONTROL: If
Geane's employment is terminated after March 1, 2001 pursuant to notice given
by Burke in accordance with Section 1, or is terminated as a result of a
Change in Control as defined by Section 19, then Burke shall pay to Geane the
salary, expenses and benefits due to him pursuant to this Agreement through
the date of termination, and shall also pay to Geane only his then applicable
base salary in accordance with Section 3.A. for the nine (9) months
immediately following the date of termination.
Page 4 of 8
<PAGE>
10. RIGHTS AND OBLIGATIONS AFTER NOTICE OF
TERMINATION: If Geane gives notice of termination of this Agreement, or if it
becomes known that this Agreement will otherwise terminate in accordance with
its provisions, Burke may, in its sole discretion and subject to its other
obligations under this Agreement, relieve Geane of his duties under this
Agreement and assign Geane other duties and responsibilities to be performed
until the termination becomes effective.
11. INJUNCTIVE RELIEF: Geane acknowledges that the
breach of any of the agreements contained herein, including, without
limitation, any of the non-competition covenants specified in Section 13,
will give rise to irreparable injury to Burke, which injury is inadequately
compensable in damages. Accordingly, Burke shall be entitled to injunctive
relief to prevent or cure breaches or threatened breaches of the provisions
of this Agreement and to enforce specific performance of the terms hereof in
any court of competent jurisdiction, in addition to any other legal or
equitable remedies that may be available to Burke. Geane further acknowledges
and agrees that in the event of the termination of this Agreement, his
experience and capabilities are such that he can obtain employment in
business activities that are of a different or noncompeting nature with his
activities pursuant to this Agreement; and that the enforcement of a remedy
hereunder by way of injunction shall not prevent Geane from earning a
reasonable livelihood. Geane further acknowledges and agrees that the
covenants contained herein are necessary for the protection of Burke's
legitimate business interests and are reasonable in scope and content.
12. BURKE'S OWNERSHIP OF INTANGIBLES: All processes,
inventions, patents, copyrights, trademarks, and other intangible rights that
may be conceived or developed by Geane either alone or with others during the
term of his employment, whether or not conceived or developed during Geane's
working hours, and with respect to which the equipment, supplies, facilities,
or trade secret information of Burke was used, or that relate at the time of
conception or reduction to practice of the invention to the business of the
Burke or to Burke's actual or demonstrably anticipated research and
development, or that result from ANY work performed by Geane for Burke shall
be the sole property of Burke. Geane shall disclose to Burke all inventions
conceived during the term of employment, and for one year thereafter,
regardless of whether such inventions may be the property of Burke under the
terms of the preceding sentence, provided that such disclosure shall be
received by Burke in confidence. Geane shall execute all documents, including
patent applications and assignments, required by Burke to establish Burke's
rights under this section.
13. UNFAIR COMPETITION, SOLICITATION OF EMPLOYEES AND
DISCLOSURE OF CONFIDENTIAL INFORMATION:
A. Because of his employment by Burke, Geane will
have access to trade secrets and confidential information about Burke, its
products, its customers and its methods of doing business. In consideration
of his access to this information, Geane agrees that for a period of five
years after termination of his employment, he will not, directly or
indirectly, compete with Burke in the field of manufacturing silicone and
organic rubber products for the aerospace, automotive and
Page 5 of 8
<PAGE>
flooring industries within the state of California. Geane understands and
agrees that direct competition means the design, development, production,
promotion or sale of products or services competitive with those of Burke.
Indirect competition means employment by any competitor or third party
providing products that compete with Burke's products, for whom Geane will
perform the same or similar functions as he performed for Burke pursuant to
this Agreement.
B. In the course of his employment, Geane will have
access to confidential records and data pertaining to Burke's customers. Such
information is considered secret and is disclosed to Geane in confidence.
During his employment by Burke and for a period of five years after
termination of such employment, Geane shall not directly or indirectly
disclose or use any such information except as required in the course of his
employment by Burke. In addition, during his employment and for five years
after termination of his employment, Geane shall not induce or solicit, or
attempt to induce or solicit any employee of Burke to discontinue employment
with Burke for the purpose of being employed by a competitor of Burke.
14. CONSTRUCTION: This Agreement shall be construed in
accordance with the laws of the State of California. If any provision of this
Agreement is held invalid or unenforceable, the remainder of this Agreement
shall remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall nevertheless
remain in full force and effect in all other circumstances. This Agreement
shall also be construed according to its fair meaning and not for or against
Geane or Burke regardless of who is responsible for its preparation in whole
or in part.
15. INTEGRATED COMPLETE AGREEMENT: This agreement
integrates and supersedes all other prior and contemporaneous written and
oral agreements and understandings of every character between Geane and Burke
and comprises the entire agreement between Geane and Burke regarding the
terms of Geane's employment. This Agreement may be amended only by a further
express, written agreement between Geane and Burke and cannot be amended by
informal discussions or written communications from either party to the
other. No waiver of any rights or obligations under this Agreement shall be
deemed to have occurred unless made in writing signed by the party against
whom such waiver is asserted, and no waiver shall be deemed a waiver of any
other or subsequent rights or obligations. Nothing in this Agreement shall be
construed to limit any amount that Geane is entitled to receive under any
applicable federal or state law or any other written agreement, policy,
program or plan.
16. ARBITRATION: Any controversy or claim arising out
of or relating to this Agreement, or the breach, termination or invalidity
thereof, and all other related claims shall be exclusively and finally
settled by arbitration in accordance with the Labor Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrator may be rendered in any court having jurisdiction thereof. Such
arbitration shall be held in Los Angeles County.
Page 6 of 8
<PAGE>
17. NOTICES: Any notices to be given hereunder by
either party to the other may be effected either by personal delivery in
writing or by mail, registered or certified, postage prepaid with return
receipt requested. Mailed notices shall be addressed to the parties at the
addresses set forth below, but each party may change his address by written
notice in accordance with this paragraph. Notices delivered personally shall
be deemed communicated as of actual receipt. Mailed notices shall be deemed
communicated as of three (3) days after mailing, as follows:
If to Burke: Ted Clark, President
Burke Industries, Inc.
2250 South Tenth Street
San Jose, CA 95112
If to Geane: Stephen G. Geane
2980A Malaga Circle
Diamond Bar, CA 91765
18. ASSIGNMENT: The rights and obligations of Burke
under this Agreement shall inure to the benefit of, and shall be binding
upon, its successors and assigns in accordance with Section 19. Any successor
or assignee of Burke shall be deemed substituted for Burke under the terms of
this Agreement for all purposes.
19. SALE, MERGER OR DISSOLUTION:
A. For the purposes of this agreement, a "Change in
Control" of Burke, shall be defined as follows:
(i) Any event by which an individual,
entity, or group (a "Person"), other
than J.F. Lehman Group, acquires
direct or indirect ownership or
control of at least a majority of
the combined voting power of the
then outstanding voting shares of
Burke; or
(ii) The consummation of a
reorganization, merger or
consolidation, or such other
disposition or transfer of a
majority of the assets of Burke,
whether in one or more separate
transactions, to any Person or
Persons.
(iii) In the event of a Change in Control
in which Burke in not the surviving
entity, Burke may, at its sole
option, (1) assign this Agreement
and all rights and obligations under
it to any business entity that
succeeds to all or substantially all
of Burke's assets or business, or
(2) on at least 30 days prior
written notice to Geane, terminate
this Agreement effective on the date
of the Change in Control.
Page 7 of 8
<PAGE>
20. COUNTERPARTS: This agreement may be signed in one
or more counterparts, each of which shall be deemed to be an original.
EXECUTED and made effective this 29th day of March 2000 at
Santa Fe Springs, California.
/s/ Stephen G. Geane Burke Industries, Inc.
- ----------------------
Stephen G. Geane
By: /s/ Ted Clark
Its: CEO
---------------------------
Page 8 of 8
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement, by and between Elliot Seth Stein
(Stein) and Burke Industries, Inc. (Burke), is made and entered into as of
the last date that this Agreement is executed by the parties.
RECITALS
WHEREAS, Burke is a California corporation, with offices and
business operations in the state of California; and
WHEREAS, Burke desires assurance of the continued association
and services of Stein in order to retain his experience, abilities and
knowledge, and is therefore is willing to engage the services of Stein subject
to the terms and conditions stated herein; and
WHEREAS, Stein desires to be employed by Burke subject to the
terms and conditions stated herein;
NOW THEREFORE, it is hereby agreed by and between the parties
as follows:
1. TERM: This Agreement shall have a term of one
(1) year beginning on March 1, 2000, and ending on February 28, 2001, subject
to annual extensions as hereinafter provided unless earlier terminated in
accordance with the provisions of this Agreement. After February 28, 2001,
this Agreement shall be extended for additional successive one-year terms
unless terminated by either party with not less than 90 days notice.
2. DUTIES OF STEIN:
A. Burke shall employ Stein as the Chief Operating
Officer, or in such other capacity or capacities as Burke may from time to
time prescribe. The scope of Stein's duties hereunder may be modified from
time to time at the discretion of the Chief Executive Officer of Burke. Stein
shall devote his exclusive and full-time services, energy and attention to
the business of Burke. Stein shall not, without Burke's prior written
consent, render to others services of any kind for compensation, or engage in
any other business activity that would materially interfere with the
performance of his duties under this Agreement. Stein represents to Burke
that he has no outstanding commitments inconsistent with any of the terms of
this Agreement or the services to be rendered hereunder.
Page 1 of 8
<PAGE>
B. During the employment term, Stein shall not,
directly or indirectly, whether as partner, employee, creditor, shareholder
or otherwise, promote, participate or engage in any activity or other
business competitive with Burke's business.
3. COMPENSATION:
A. Burke shall pay to Stein a base salary of $198,000
annually. This base salary may be (but shall not be required to be) increased
by the Board of Directors of Burke if the Board of Directors of Burke
determines, in its sole and complete discretion, to provide for such
increase. Stein's salary shall be paid to him in installments on the dates
customarily set for the payment of executive salaries at Burke.
B. Stein may also receive an annual bonus of up to
sixty (60) percent of his base salary, which annual bonus, if awarded, shall
be based upon performance criteria established by the Board of Directors of
Burke in its sole discretion. Stein shall also participate in any performance
based or profit participation programs as may be established for all Burke
executives.
C. Stein shall also be selected by the Board of
Directors to receive options to acquire not less than one (1) percent of the
stock of Burke pursuant to the Burke Industries, Inc. 1997 Stock Option Plan
("The Plan") that was approved by the shareholders of Burke, which options
will be exercisable within thirty (30) days after the termination of Stein's
employment in accordance with Section 5.10 of The Plan.
4. EMPLOYMENT BENEFITS: Stein shall also be entitled
to participate in any and all employee benefit plans or programs of any
nature or kind whatsoever now existing or that may hereafter be adopted by
Burke for its employees and executives when and as Stein becomes eligible for
such benefits, including, but not limited to, vacations, retirement plans,
thrift plans, medical plans, life insurance plans, disability insurance
plans, and any other employee benefit plans or programs. A copy of the
schedule of the current employee benefit plans is attached to this Agreement.
In addition to such plans, Burke will pay to Stein a monthly automobile
allowance in the amount of $1,400. Burke reserves the right to modify,
suspend or discontinue any and all of the above benefit plans, policies and
practices at any time without notice to or recourse by Stein, so long as such
action is taken generally with respect to other similarly situated persons.
5. COMPENSATION DURING DISABILITY: In the event that
Stein shall fail or be unable to perform his services by reason of illness,
or if he should become incapacitated for a period of more than one (1) month,
the compensation payable to Stein under this Agreement shall be suspended
during such illness or incapacity, this Agreement shall remain in effect and
Stein shall be compensated in accordance with Burke policies, if any, then in
effect for similarly situated employees who become disabled to the extent
that Stein has elected to participate in the programs available under such
policies. Full compensation shall be restored to Stein upon his return to
full time employment, following any period of leave as required or provided
by applicable law or then existing Burke polices, and this Agreement shall
not otherwise be affected by such disability
Page 2 of 8
<PAGE>
provided, however, that nothing in this Section shall affect Burke's right to
terminate this Agreement in accordance with Section 9.B.
6. BUSINESS EXPENSES: Stein shall be authorized to
incur reasonable and customary business expenses, including expenses for
entertainment and travel, in accordance with Burke policies. Stein shall be
reimbursed for itemized accounts of business expenditures presented in
accordance with Burke policies and procedures.
7. CONFIDENTIAL INFORMATION: Stein agrees not to use
or disclose, either directly or indirectly, any confidential information of
Burke, except as required in the course of his employment with Burke. For the
purposes of this Section 7, the term "Confidential Information" includes
information relating to the processes, products, manufacturing techniques,
methodology, practices, policies, technical plans, computer programs,
reports, customer or employee lists, marketing plans, distribution channels
and financial information that may have been developed by, derived from or
obtained in the course of the business of Burke.
8. TERMINATION:
A. TERMINATION FOR CAUSE: Burke shall have the right
to terminate this Agreement at any time without notice if Stein commits any
of the following acts (each of which is referred to herein as "cause"):
(i) breach of any provision of this Agreement
and Stein's failure to cure such breach
within ten (10) days of receipt of notice of
such breach;
(ii) any act of fraud, dishonesty or sexual
harassment with respect to any aspect of the
business of Burke;
(iii) drug or alcohol abuse or behavior that
impedes Stein's job performance or does or
could bring Stein or Burke into disrepute;
(iv) disclosure of confidential information of
Burke;
(v) misappropriation of funds of any corporate
opportunity of Burke;
(vi) conviction of Stein of a crime of moral
turpitude, or a plea of NOLO CONTENDERE
thereto;
(vii) conduct by Stein attempting to secure or
securing any personal profit not fully
disclosed to and approved by the President
or Chief Executive Officer in connection
with any transaction entered into on behalf
of or involving Burke;
Page 3 of 8
<PAGE>
(viii) gross, wilful or wanton carelessness or
misconduct that constitutes a breach of any
fiduciary duty owed to Burke;
(ix) unjustifiably neglecting, failing or
refusing to perform the duties that he is
required to perform hereunder; or,
(x) conduct, even if not in connection with the
performance of his duties contemplated under
this Agreement, that would result in serious
prejudice to the interests of Burke and his
failure to cease such conduct with fifteen
(15) days of his receipt of notice to cease
such conduct.
B. TERMINATION ON DISABILITY: If Stein is unable to
perform the essential functions of his position due to any mental or physical
illness or disability for four (4) consecutive full calendar months, or if he
is unable to so perform for 80 percent of more of the normal working days or
hours during such four (4) consecutive calendar months, then Burke shall have
the right to declare this Agreement terminated if such disability continues
following the expiration of any sick leave, medical leave or other leave
available pursuant to any Burke policy applicable to Stein.
9. COMPENSATION UPON TERMINATION:
A. TERMINATION FOR CAUSE: If Stein's employment is
terminated for cause, Burke shall pay to Stein his full base salary through
the date of termination at the rate in effect at the time of the termination,
and any unpaid expenses, and any unused earned vacation to the extent
required by law, as well as any life insurance, disability payments or other
benefits then owed to Stein under any benefit plans or programs then
maintained by Burke (the "Accrued Benefits"). Burke shall, thereafter, have
no further obligations to Stein under this Agreement.
B. TERMINATION UPON DEATH OR DISABILITY: If Stein's
employment is terminated by Stein's death or disability (as defined above),
Burke shall pay to Stein's estate the accrued portion of any salary and bonus
through the date of termination. Burke shall, thereafter, have no further
obligations to Stein under this Agreement.
C. TERMINATION UPON NOTICE OR CHANGE IN CONTROL: If
Stein's employment is terminated after February 28, 2001 pursuant to notice
given by Burke in accordance with Section 1, or is terminated as a result of
a Change in Control as defined by Section 19, then Burke shall pay to Stein
the salary, expenses and benefits due to him pursuant to this Agreement
through the date of termination, and shall also pay to Stein only his then
applicable base salary in accordance with Section 3.A. for the nine (9)
months immediately following the date of termination.
Page 4 of 8
<PAGE>
10. RIGHTS AND OBLIGATIONS AFTER NOTICE OF
TERMINATION: If Stein gives notice of termination of this Agreement, or if it
becomes known that this Agreement will otherwise terminate in accordance with
its provisions, Burke may, in its sole discretion and subject to its other
obligations under this Agreement, relieve Stein of his duties under this
Agreement and assign Stein other duties and responsibilities to be performed
until the termination becomes effective.
11. INJUNCTIVE RELIEF: Stein acknowledges that the
breach of any of the agreements contained herein, including, without
limitation, any of the non-competition covenants specified in Section 13,
will give rise to irreparable injury to Burke, which injury is inadequately
compensable in damages. Accordingly, Burke shall be entitled to injunctive
relief to prevent or cure breaches or threatened breaches of the provisions
of this Agreement and to enforce specific performance of the terms hereof in
any court of competent jurisdiction, in addition to any other legal or
equitable remedies that may be available to Burke. Stein further acknowledges
and agrees that in the event of the termination of this Agreement, his
experience and capabilities are such that he can obtain employment in
business activities that are of a different or noncompeting nature with his
activities pursuant to this Agreement; and that the enforcement of a remedy
hereunder by way of injunction shall not prevent Stein from earning a
reasonable livelihood. Stein further acknowledges and agrees that the
covenants contained herein are necessary for the protection of Burke's
legitimate business interests and are reasonable in scope and content.
12. BURKE'S OWNERSHIP OF INTANGIBLES: All processes,
inventions, patents, copyrights, trademarks, and other intangible rights that
may be conceived or developed by Stein either alone or with others during the
term of his employment, whether or not conceived or developed during Stein's
working hours, and with respect to which the equipment, supplies, facilities,
or trade secret information of Burke was used, or that relate at the time of
conception or reduction to practice of the invention to the business of the
Burke or to Burke's actual or demonstrably anticipated research and
development, or that result from ANY work performed by Stein for Burke shall
be the sole property of Burke. Stein shall disclose to Burke all inventions
conceived during the term of employment, and for one year thereafter,
regardless of whether such inventions may be the property of Burke under the
terms of the preceding sentence, provided that such disclosure shall be
received by Burke in confidence. Stein shall execute all documents, including
patent applications and assignments, required by Burke to establish Burke's
rights under this section.
13. UNFAIR COMPETITION, SOLICITATION OF EMPLOYEES AND
DISCLOSURE OF CONFIDENTIAL INFORMATION:
A. Because of his employment by Burke, Stein will
have access to trade secrets and confidential information about Burke, its
products, its customers and its methods of doing business. In consideration
of his access to this information, Stein agrees that for a period of five
years after termination of his employment, he will not, directly or
indirectly, compete with Burke in the field of manufacturing silicone and
organic rubber products for the aerospace, automotive and flooring industries
within the state of California. Stein understands and agrees that direct
Page 5 of 8
<PAGE>
competition means the design, development, production, promotion or sale of
products or services competitive with those of Burke. Indirect competition
means employment by any competitor or third party providing products that
compete with Burke's products, for whom Stein will perform the same or
similar functions as he performed for Burke pursuant to this Agreement.
B. In the course of his employment, Stein will have
access to confidential records and data pertaining to Burke's customers. Such
information is considered secret and is disclosed to Stein in confidence.
During his employment by Burke and for a period of five years after
termination of such employment, Stein shall not directly or indirectly
disclose or use any such information except as required in the course of his
employment by Burke. In addition, during his employment and for five years
after termination of his employment, Stein shall not induce or solicit, or
attempt to induce or solicit any employee of Burke to discontinue employment
with Burke for the purpose of being employed by a competitor of Burke.
14. CONSTRUCTION: This Agreement shall be construed in
accordance with the laws of the State of California. If any provision of this
Agreement is held invalid or unenforceable, the remainder of this Agreement
shall remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall nevertheless
remain in full force and effect in all other circumstances. This Agreement
shall also be construed according to its fair meaning and not for or against
Stein or Burke regardless of who is responsible for its preparation in whole
or in part.
15. INTEGRATED COMPLETE AGREEMENT: This agreement
integrates and supersedes all other prior and contemporaneous written and
oral agreements and understandings of every character between Stein and Burke
and comprises the entire agreement between Stein and Burke regarding the
terms of Stein's employment. This Agreement may be amended only by a further
express, written agreement between Stein and Burke and cannot be amended by
informal discussions or written communications from either party to the
other. No waiver of any rights or obligations under this Agreement shall be
deemed to have occurred unless made in writing signed by the party against
whom such waiver is asserted, and no waiver shall be deemed a waiver of any
other or subsequent rights or obligations. Nothing in this Agreement shall be
construed to limit any amount that Stein is entitled to receive under any
applicable federal or state law or any other written agreement, policy,
program or plan.
16. ARBITRATION: Any controversy or claim arising out
of or relating to this Agreement, or the breach, termination or invalidity
thereof, and all other related claims shall be exclusively and finally
settled by arbitration in accordance with the Labor Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrator may be rendered in any court having jurisdiction thereof. Such
arbitration shall be held in Los Angeles County.
Page 6 of 8
<PAGE>
17. NOTICES: Any notices to be given hereunder by
either party to the other may be effected either by personal delivery in
writing or by mail, registered or certified, postage prepaid with return
receipt requested. Mailed notices shall be addressed to the parties at the
addresses set forth below, but each party may change his address by written
notice in accordance with this paragraph. Notices delivered personally shall
be deemed communicated as of actual receipt. Mailed notices shall be deemed
communicated as of three (3) days after mailing, as follows:
If to Burke: Ted Clark, President
Burke Industries, Inc.
2250 South Tenth Street
San Jose, CA 95112
If to Stein: Elliot S. Stein
15856 Falconrim Drive
Canyon Country, CA 91351
18. ASSIGNMENT: The rights and obligations of Burke
under this Agreement shall inure to the benefit of, and shall be binding
upon, its successors and assigns in accordance with Section 19. Any successor
or assignee of Burke shall be deemed substituted for Burke under the terms of
this Agreement for all purposes.
19. SALE, MERGER OR DISSOLUTION:
A. For the purposes of this agreement, a "Change in
Control" of Burke, shall be defined as follows:
(i) Any event by which an individual,
entity, or group (a "Person"), other
than J.F. Lehman Group, acquires
direct or indirect ownership or
control of at least a majority of
the combined voting power of the
then outstanding voting shares of
Burke; or
(ii) The consummation of a
reorganization, merger or
consolidation, or such other
disposition or transfer of a
majority of the assets of Burke,
whether in one or more separate
transactions, to any Person or
Persons.
(iii) In the event of a Change in Control
in which Burke in not the surviving
entity, Burke may, at its sole
option, (1) assign this Agreement
and all rights and obligations under
it to any business entity that
succeeds to all or substantially all
of Burke's assets or business, or
(2) on at least 30 days prior
written notice to Stein, terminate
this Agreement effective on the date
of the Change in Control.
Page 7 of 8
<PAGE>
20. COUNTERPARTS: This agreement may be signed in
one or more counterparts, each of which shall be deemed to be an original.
EXECUTED and made effective this 22nd day of March 2000 at
Santa Fe Springs, California.
/s/ Elliot Seth Stein
- ---------------------- Burke Industries, Inc.
Elliot S. Stein
By: Ted Clark
Its: CEO
---------------------
Page 8 of 8
<TABLE> <S> <C>
<PAGE>
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<FISCAL-YEAR-END> DEC-29-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
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<RECEIVABLES> 15,154
<ALLOWANCES> 738
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<TOTAL-ASSETS> 86,539
<CURRENT-LIABILITIES> 18,621
<BONDS> 140,000
21,039
3,000
<COMMON> 25,708
<OTHER-SE> (125,204)
<TOTAL-LIABILITY-AND-EQUITY> 86,539
<SALES> 27,654
<TOTAL-REVENUES> 27,654
<CGS> 19,859
<TOTAL-COSTS> 19,859
<OTHER-EXPENSES> 5,639
<LOSS-PROVISION> 80
<INTEREST-EXPENSE> 3,921
<INCOME-PRETAX> (1,765)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,765)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,765)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
