<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
March 31, 2000 0-15045
BHA Group Holdings, Inc.
--------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 43-141673
- ------------------------------- -------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
8800 East 63rd Street, Kansas City, Missouri 64133
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (816) 356-8400
Indicate by checkmark 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 twelve 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 April 17, 2000, the number of shares outstanding of the Registrant's
Common Stock was 6,532,799.
<PAGE>
PART I. FINANCIAL INFORMATION
BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS) MARCH 31, SEPTEMBER 30,
ASSETS 2000 1999
------------------ ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,305 $ 877
Accounts receivable, less allowance for doubtful receivables
of $1,411 and $1,238, respectively 31,885 28,356
Inventories (note 3) 27,751 28,043
Income taxes receivable -- 319
Prepaid expenses 2,515 1,989
Deferred income taxes 2,360 2,360
------------------ -------------------
Total current assets 65,816 61,944
------------------ -------------------
Property, plant and equipment, at cost 70,061 67,674
Less accumulated depreciation and amortization 35,098 32,770
------------------ -------------------
Net property, plant and equipment 34,963 34,904
------------------ -------------------
Other assets 10,749 11,300
------------------ -------------------
$111,528 $108,148
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and lease obligations $ 3,232 $ 2,922
Accounts payable 7,420 8,881
Accrued expenses and other current liabilities 7,104 6,856
Income tax payable 606 --
------------------ -------------------
Total current liabilities 18,362 18,659
------------------ -------------------
Long-term deferred income taxes 1,626 1,715
Long-term debt, excluding current installments 25,301 20,345
Long-term lease obligations, excluding current installments 7,200 7,600
Other liabilities 864 937
Shareholders' equity:
Common stock $0.01 par value. 87 87
Additional paid-in capital 61,799 61,792
Retained earnings 26,053 23,219
Accumulated -- other comprehensive income (1,054) (899)
Unearned compensation -- (4)
Less cost of common stock in treasury (28,710) (25,303)
------------------ -------------------
Total shareholders' equity 58,175 58,892
------------------ -------------------
$111,528 $108,148
================== ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-1-
<PAGE>
BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 1999
---- ----
<S> <C> <C>
Net sales $ 44,201 $ 40,331
Cost of sales 30,687 30,951
------------------- --------------------
Gross margin 13,514 9,380
------------------- --------------------
Operating expenses
Selling and advertising expense 5,217 5,190
General and administrative expense 4,653 3,935
------------------- --------------------
Total operating expenses 9,870 9,125
------------------- --------------------
Operating income 3,644 255
------------------- --------------------
Interest expense, net 531 470
------------------- --------------------
Earnings before income taxes 3,113 (215)
------------------- --------------------
Income taxes 1,130 (60)
------------------- --------------------
Net earnings $ 1,983 $ (155)
=================== ====================
Basic earnings per common share $ .30 $ (.02)
Diluted earnings per common share .30 (.02)
Basic weighted average number of common shares outstanding 6,537 7,021
Diluted weighted average number of common shares outstanding 6,581 7,021
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-2-
<PAGE>
BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 1999
---- ----
<S> <C> <C>
Net sales $ 83,237 $ 75,559
Cost of sales 58,101 55,491
------------------- --------------------
Gross margin 25,136 20,068
------------------- --------------------
Operating expenses
Selling and advertising expense 10,232 9,876
General and administrative expense 8,926 7,528
------------------- --------------------
Total operating expenses 19,158 17,404
------------------- --------------------
Operating income 5,978 2,664
------------------- --------------------
Interest expense, net 990 914
------------------- --------------------
Earnings before income taxes 4,988 1,750
------------------- --------------------
Income taxes 1,750 590
------------------- --------------------
Net earnings $ 3,238 $ 1,160
=================== ====================
Basic earnings per common share* $ .48 $ .16
Diluted earnings per common share* .48 .16
Basic weighted average number of common shares outstanding* 6,685 7,082
Diluted weighted average number of common shares outstanding* 6,736 7,249
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
(IN THOUSANDS) 2000 1999
---- ----
<S> <C> <C>
Net earnings (loss) $1,983 $ (155)
Other comprehensive income -- foreign currency
translation adjustments (388) (457)
----------------- -----------------
Comprehensive income (loss) $1,595 $ (612)
================= =================
Six Months Ended
(IN THOUSANDS) 2000 1999
---- ----
Net earnings $3,238 $1,160
Other comprehensive income -- foreign currency
translation adjustments (155) (651)
----------------- -----------------
Comprehensive income $3,083 $ 509
================= =================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE>
BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except share and per share data) 2000 1999
---- ----
<S> <C> <C>
Common stock:
Balance at beginning period $ 87 $ 87
Issuance of 721 and 71,326 shares of common
stock in 2000 and 1999, respectively -- --
---------------------- ---------------------
Balance at end of period 87 87
---------------------- ---------------------
Additional paid-in capital:
Balance at beginning of period 61,792 61,310
Excess over par value of common stock issued 7 298
---------------------- ---------------------
Balance at end of period 61,799 61,608
---------------------- ---------------------
Retained earnings:
Balance at beginning of period 23,219 22,983
Net earnings for the period 3,238 1,160
Cash dividends of $.06 per share paid on common stock
during 2000 and 1999 (404) (428)
---------------------- ---------------------
Balance at end of period 26,053 23,715
---------------------- ---------------------
Accumulated -- other comprehensive income:
Balance at beginning of period (899) (293)
Equity adjustment from foreign currency translation (155) (651)
---------------------- ---------------------
Balance at end of period (1,054) (944)
---------------------- ---------------------
Unearned compensation:
Balance at beginning of period (4) (108)
Compensation expense 4 52
---------------------- ---------------------
Balance at end of period -- (56)
---------------------- ---------------------
Treasury stock:
Balance at beginning of period (25,303) (22,026)
Acquisition of 375,434 and 220,900 shares of common
stock, at cost, during 2000 and 1999, respectively (3,407) (2,536)
Issuance of 8,270 treasury shares pursuant to stock option
exercises, net, during 1999 -- 181
---------------------- ---------------------
Balance at end of period (28,710) (24,381)
---------------------- ---------------------
Total shareholders' equity $ 58,175 $ 60,029
====================== =====================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE>
BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS) 2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net earnings: $3,238 $1,160
Adjustment to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 2,840 2,775
Deferred Income Tax (89) (13)
Changes in assets and liabilities:
Accounts receivable (3,529) 222
Inventories 292 1,761
Prepaid expenses (526) (883)
Accounts payable (1,461) (3,098)
Accrued expenses and other liabilities 248 (732)
Income taxes payable 925 (1,207)
----------------- -----------------
Net cash provided by operating activities 1,938 (15)
----------------- -----------------
Cash flows from investing activities:
Acquisition of property, plant and equipment (2,469) (2,922)
Change in other assets and liabilities 53 (2,612)
----------------- -----------------
Net cash used in investing activities (2,416) (5,534)
----------------- -----------------
Cash flows from financing activities:
Payment of cash dividend on common stock (404) (428)
Purchase of treasury stock (3,407) (2,536)
Proceeds from issuance of common stock 7 579
Net stock options exercised -- (100)
Proceeds from borrowings under bank term notes -- 2,997
Proceeds from lease obligations -- 8,000
Net proceeds (repayments) from borrowings under
revolving bank lines of credit 5,265 (1,281)
Repayments of long-term debt and other long-term liabilities (400) (794)
----------------- -----------------
Net cash provided by financing activities 1,061 6,437
----------------- -----------------
Effect of exchange rate changes (155) (651)
----------------- -----------------
Net increase in cash and cash equivalents 428 237
Cash and cash equivalents at beginning of period 877 193
----------------- -----------------
Cash and cash equivalents at end of period $1,305 $ 430
================= =================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-6-
<PAGE>
BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
These condensed consolidated financial statements reflect all adjustments
(consisting of normal recurring adjustments) which, in the opinion of
management, are necessary to present fairly the financial position, results of
operations and cash flows for the periods presented in conformity with generally
accepted accounting principles applied on a consistent basis.
These statements should be read in conjunction with the Notes to Consolidated
Financial Statements contained in BHA Group Holdings, Inc.'s (the "Company" or
"BHA") Annual Report to Shareholders for the fiscal year ended September 30,
1999, and with Management's Discussion and Analysis of Results of Operations and
Financial Condition appearing within this quarterly report.
(2) EARNINGS PER COMMON SHARE
Basic earnings per share is computed by dividing net earnings available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share is computed based upon the weighted
average number of common shares and dilutive common equivalent shares
outstanding. Stock options, which are common stock equivalents, have a dilutive
effect on earnings per share in all periods presented and are therefore included
in the computation of diluted earnings per share. A reconciliation of the
numerators and the denominators of the basic and diluted per-share computations
is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED
March 31, 2000 March 31, 1999
------------------------------------------ -------------------------------------------
Net Earnings Shares Per-Share Net Earnings Shares Per-Share
(Numerator) (Denom.) Amt. (Numerator) (Denom.) Amt.
------------- -------- --------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share:
Earnings available to common
shareholders $1,983 6,537 $0.30 $(155) 7,021 $(0.02)
Effect of dilutive
securities--stock options -- 44 -- --
Diluted earnings per share:
Earnings available to common
shareholders and assumed
conversion $1,983 6,581 $0.30 $(155) 7,021 $(0.02)
========================================== ===========================================
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE SIX MONTHS ENDED
March 31, 2000 March 31, 1999
------------------------------------------ -------------------------------------------
Net Earnings Shares Per-Share Net Earnings Shares Per-Share
(Numerator) (Denom.) Amt. (Numerator) (Denom.) Amt.
------------- -------- --------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share:
Earnings available to common
shareholders $3,238 6,685 $0.48 $1,160 7,082 $0.16
Effect of dilutive
securities--stock options -- 51 -- 167
Diluted earnings per share:
Earnings available to common
shareholders and assumed
conversion $3,238 6,736 $0.48 $1,160 7,249 $0.16
========================================== ===========================================
</TABLE>
-7-
<PAGE>
(3) INVENTORIES
BHA Group Holdings, Inc. values its inventory at the lower of cost or market.
Cost is determined using the first-in, first-out (FIFO) method.
Components of inventories at March 31, 2000 and September 30, 1999 were as
follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
2000 1999
----------------------- -----------------------
<S> <C> <C>
Raw materials $17,917 $16,173
Work-in-process 1,120 2,150
Finished goods 8,714 9,720
----------------------- -----------------------
Total $27,751 $28,043
======================= =======================
</TABLE>
(4) BUSINESS SEGMENTS
BHA reports its operations as three business segments, Domestic Air Pollution
Control (Domestic APC), Europe Air Pollution Control (Europe APC), and BHA
Technologies. Domestic APC consists of the air pollution control products and
services sold or managed from the United States. Such sales include shipments
and services throughout North America, Latin America, Asia, and the Pacific Rim,
as such revenues are derived from BHA's U.S. based management group. The Europe
APC segment represents sales of products and services managed from BHA's
European manufacturing, distribution, and sales offices. BHA Europe generally
services customers throughout Europe, as well as in the Middle East and Northern
Africa. BHA Technologies supplies ePTFE membrane products to BHA's APC business,
and is also developing a market for such products outside of air pollution
control.
BHA manages these segments as strategic business units. Europe APC represents a
distinct business unit as it maintains its own manufacturing, sales, marketing,
and project management resources. Sales to other international locations are
included in the Domestic APC business segment, as most or all of the key
manufacturing, engineering, and sales support functions are performed from the
United States. BHA Technologies operates as a distinct entity due to its unique
technologies, as well as the marketing of products unrelated to air pollution
control.
Reportable segment data was as follows (in thousands):
NET SALES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------- -------------------
<S> <C> <C>
Domestic APC $37,918 $34,602
Europe APC 5,272 5,176
BHA Technologies 1,011 553
----------------------- -------------------
Total $44,201 $40,331
======================= ===================
</TABLE>
-8-
<PAGE>
NET SALES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------- -------------------
<S> <C> <C>
Domestic APC $70,558 $64,170
Europe APC 10,947 10,482
BHA Technologies 1,732 907
----------------------- -------------------
Total $83,237 $75,559
======================= ===================
</TABLE>
Net sales represent revenues from sales to unaffiliated customers.
EARNINGS (LOSS) BEFORE INCOME TAXES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------- -------------------
<S> <C> <C>
Domestic APC $3,247 $ 1,202
Europe APC (83) (289)
BHA Technologies (51) (1,128)
----------------------- -------------------
Total $3,113 $ (215)
======================= ===================
</TABLE>
EARNINGS (LOSS) BEFORE INCOME TAXES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------- -------------------
<S> <C> <C>
Domestic APC $5,946 $ 4,190
Europe APC (393) (278)
BHA Technologies (565) (2,162)
----------------------- -------------------
Total $4,988 $ 1,750
======================= ===================
</TABLE>
-9-
<PAGE>
BHA GROUP HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
For purposes of this "Management's Discussion and Analysis," as well as the
segment reporting information included in Note 4 to the Condensed Consolidated
Financial Statements, Domestic Air Pollution Control ("Domestic APC") represents
all air pollution control business for which the products or services are sold
or managed from the United States. Generally, this includes revenues to
customers in the U.S. and exports to customers in Canada, Latin America, and
Asia. Europe APC represents all air pollution control business for which the
products or services are sold or managed primarily from Europe. Such revenues
are typically generated in Europe, Northern Africa and the Middle East. BHA
Technologies, a subsidiary engaged in the production and sale of ePTFE membrane
for both APC and non-APC applications, represents BHA's third business segment.
NET SALES
Consolidated net sales for the six months ended March 31, 2000 increased 10% to
$83.2 million from $75.6 million for the same period in fiscal 1999.
Consolidated sales for the quarter ended March 31, 2000 ("second quarter") also
increased 10% to $44.2 million from $40.3 million for the same period in fiscal
1999. Sales in Domestic APC increased 10% for both the quarter and for the first
half of fiscal 2000. Sales in this business segment increased $6.4 million year
over year for the six month period in fiscal 2000 primarily on the strength of
fine filtration products in the U.S. and Canada. Europe APC sales increased 4%
to $10.9 million for the six month period and were essentially unchanged in the
second quarter as compared to the same period in the prior year. From fiscal
1999 to fiscal 2000, shipments of ePTFE membrane from BHA Technologies to third
party customers, increased from $0.9 million to $1.7 million and from $0.6
million to $1.0 million for the six month and three month periods, respectively.
GROSS MARGIN
Consolidated gross margin was 30.2% for the first six months of fiscal 2000
compared to 26.6% for the same period in the prior year. The improvement was the
result of an unusual charge recorded by the Domestic APC segment in the second
quarter of the prior year to recognize a $2.4 million cost overrun on a large
fixed-price electrostatic precipitator ("ESP") rebuild project. Consolidated
gross margins for the second quarter of fiscal 2000 were 30.6%, reflecting an
improvement as compared to the 29.8% gross margin generated in the first quarter
of fiscal 2000. Gross margins for the quarter ended March 31, 2000 benefited
from good utilization in each of its U.S. manufacturing facilities. A
historically low backlog in the ESP business as of March 31, 2000 could cause a
slight decline in gross margins for the third quarter of the fiscal year.
OPERATING EXPENSE
Operating expense was $19.2 million (23.0% of sales) for the six months ended
March 31, 2000 compared to $17.4 million (23.0% of sales) for the first six
months of fiscal 1999. For the second quarter of fiscal 2000, operating expenses
were $9.9 million (22.3% of sales) compared to $9.1 million (22.6% of sales) for
the same period in fiscal 1999. Operating expenses as a percentage of sales are
substantially unchanged. The increase in dollar spending reflects selling
expenses incurred to market the non-APC products of BHA Technologies and to hire
additional sales
-10-
<PAGE>
personnel in order to expand the Company's sales of APC products. Additionally,
general and administrative expenses as reported reflect a foreign exchange loss
of approximately $0.2 million for the first six months in fiscal 2000 compared
to a foreign exchange gain of approximately $0.1 million in the same period of
the prior year. The foreign exchange loss resulted from the weakening of the
European currencies as compared to the U.S. dollar. Other increases in operating
expenses were consistent with the growth in sales volume.
INTEREST EXPENSE
Interest expense increased by $76,000 to $1.0 million for the first six months
of fiscal 2000 as compared to the same period in the prior year. Average
borrowings increased by approximately $2.0 million for the first six months of
fiscal 2000 as compared to the same period in the prior year due to treasury
stock purchases during the first quarter of fiscal 2000. Average interest rates
were substantially unchanged in fiscal 2000 as compared to the prior year as the
lower interest rates from an $8.0 million tax exempt industrial development
revenue bond issue that was completed in December 1998 largely offset the
increased interest rates on bank borrowings.
INCOME TAXES
The effective income tax rate was 35.1% for the first six months of fiscal 2000
compared to 33.7% for the same period in fiscal 1999. The higher effective tax
rate is the result of losses in foreign operations that might not generate
income tax benefits during the current year.
NET EARNINGS
Net earnings for the second quarter of fiscal 2000 were $2.0 million ($0.30 per
diluted share) compared to a net loss of $0.2 million ($0.02 per diluted share)
in the second quarter of fiscal 1999. For the first six months of fiscal 2000,
the Company had net earnings of $3.2 million ($0.48 per diluted share) compared
to earnings of $1.2 million ($0.16 per diluted share) for the same period in the
prior year. The average number of common and common equivalent shares declined
from 7.2 million shares to 6.7 million shares due to treasury stock purchases
made in each year.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital increased from $43.3 million at September 30, 1999 to $47.5
million at March 31, 2000. The current ratio at March 31, 2000 and September 30,
1999 was 3.6 and 3.3, respectively. The Company's cash increased from $0.9
million to $1.3 million. Cash provided by operating activities for the six
months ended March 31, 2000 was $1.9 million compared to no cash being provided
by operating activities for the six months ended March 31, 1999.
Investing activities resulted in a net use of cash of $2.4 million and $5.5
million for the six months ended March 31, 2000 and 1999, respectively. The
investment in capital expenditures was $2.5 million in the first half of the
fiscal 2000 period and $2.9 million for the first six months of fiscal 1999. The
fiscal 1999 activity also included the investment of proceeds from a
sales-leaseback transaction related to the issuance of industrial development
revenue bonds of $1.9 million and the purchase of product rights in Drayton
Acoustics of $0.7 million.
-11-
<PAGE>
During the six month periods ended March 31, 2000 and 1999, net cash provided by
financing activities was $1.1 million and $6.4 million, respectively. The
Company's financing activities during fiscal 2000 consisted of borrowings on its
revolving credit facility to support its investment in capital expenditures and
the repurchase of $3.4 million in BHA common stock (or approximately 375,434
shares of BHA Common Stock purchased in the first half of fiscal 2000 at an
average price of $9.06 per share).
The Company has financing commitments that include a $15.0 million U.S. term
note with a final maturity in 2005, an $18.0 million U.S. revolving credit
facility maturing in 2002, and credit facilities in Germany for a U.S.
equivalent of approximately $5.0 million maturing in 2003. The Company's unused
commitments as of March 31, 2000 were approximately $7.8 million. The Company
believes that cash flows from operations and available credit lines will be
sufficient to meet its capital needs for the foreseeable future.
YEAR 2000
In previous years, the Company established a task force to address and assess
Year 2000 ("Y2K") compliance for the Company's computer system and software
applications, facilities throughout the world, the products that include
date-sensitive microprocessors, and suppliers providing both goods and services.
The Company did not experience any significant problems related to Y2K.
Management continues to monitor its systems, as well as the documents being
received from its trading partners, however, no significant Y2K problems are
anticipated.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," is effective for BHA's fiscal
year 2001. The statement establishes accounting and reporting standards for
derivative instruments and all hedging activities. This statement will not have
any impact on BHA's results of operations, as all derivative instruments are
designated as hedges against foreign currency exposures.
FORWARD LOOKING INFORMATION
This report contains forward-looking statements that reflect the Company's
current views with respect to future events and financial performance. The
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or those
anticipated. The words "should," "believe," "anticipate," "expect," and other
expressions that indicate future events and trends identify forward-looking
statements. Actual future results and trends may differ materially from
historical results or those anticipated depending on a variety of factors,
including, but not limited to, the performance of newly established domestic and
international operations, demand and price for the Company's products and
services, and other factors. You should consult the section entitled "Factors
Affecting Earnings and Stock Price" in the Company's annual report on Form 10-K.
-12-
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FORWARD EXCHANGE CONTRACTS
BHA periodically enters into forward exchange contracts in order to fix the
currency exchange rate related to intercompany transactions with its foreign
subsidiaries. Changes in the value of these instruments due to currency
movements offset the foreign exchange gains and losses of the corresponding
intercompany transactions. At March 31, 2000, the aggregate amount of such
forward exchange contracts was approximately $1,700,000. The fair value of the
outstanding forward exchange contracts approximates the aggregate amount
outstanding at March 31, 2000.
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 4--Submission of Matters to a Vote of Security Holders
On February 22, 2000, at the Annual Meeting of Shareholders of BHA
Group Holdings, Inc.
(a) The following persons were elected as Directors by the following vote:
<TABLE>
<CAPTION>
FOR AUTHORITY WITHHELD
<S> <C> <C>
Don H. Alexander 6,102,637 21,691
Robert D. Freeland 6,102,637 21,691
Richard C. Green 6,102,637 21,691
James E. Lund 6,101,950 22,378
Thomas A. McDonnell 6,102,637 21,691
Lamson Rheinfrank, Jr. 6,102,637 21,691
James J. Thome 6,102,637 21,691
</TABLE>
(b) Voting for the ratification of KPMG LLP as the independent auditors of
the Company for the fiscal year ending September 30, 2000 was as
follows:
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD NON-VOTE
<S> <C> <C> <C> <C>
6,124,327 1 0 0
</TABLE>
Item 6--Exhibits and Reports on Form 8-K:
(a) Exhibit 10a: Employment Agreement dated February 1, 2000 between BHA
Group Holdings, Inc. and Lamson Rheinfrank, Jr.
(b) Exhibit 10b: Employment Agreement dated February 1, 2000 between BHA
Group Holdings, Inc. and James E. Lund.
(c) Exhibit 10c: Employment Agreement dated February 1, 2000 between BHA
Group Holdings, Inc. and James J. Thome.
(d) Exhibit 10d: Employment Agreement dated February 1, 2000 between BHA
Group Holdings, Inc. and James C. Shay.
(e) Exhibit 11: Computation of earnings per common share.
(f) Exhibit 27: Financial Data Schedule
Reports on Form 8-K:
(g) During the quarter ended March 31, 2000, there were no reports on Form
8-K filed by the Company.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
BHA GROUP HOLDINGS, INC.
(Registrant)
April 25, 2000 By: /s/ James C. Shay
- ---------------------------------- -----------------------------------
Date (Signature)
James C. Shay
Senior Vice President, Finance and
Administration, Principal Financial
and Accounting Officer
By: /s/ James E. Lund
------------------------------------
(Signature)
James E. Lund
President and
Chief Executive Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10a Employment Agreement -- Lamson Rheinfrank, Jr.
10b Employment Agreement -- James E. Lund
10c Employment Agreement -- James J. Thome
10d Employment Agreement -- James C. Shay
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
-16-
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 1, 2000 (the "Effective
Date"), between Lamson Rheinfrank, Jr. ("Executive") and BHA GROUP HOLDINGS,
INC., a Delaware corporation ("Employer").
Executive is currently employed by Employer as Chairman of the Board of
Directors of Employer pursuant to an Employment Agreement dated August 1, 1990,
as amended by an amendment and restatement dated September 1, 1993 (as amended
and restated, the "Prior Agreement"). Employer wishes to continue to employ
Executive and Executive wishes to continue to be employed by Employer pursuant
to the terms and conditions set forth below. The parties therefore agree that
the Prior Agreement is terminated as of the Effective Date and Executive shall
thereafter be employed by Employer pursuant to the terms of this Agreement as
follows:
1. EMPLOYMENT OF EXECUTIVE
Employer hereby agrees to employ Executive and Executive hereby agrees
to be in the employ of Employer upon the terms and conditions hereinafter set
forth.
2. EMPLOYMENT PERIOD
The term of Executive's employment under this Agreement (the
"Employment Period") shall commence as of the Effective Date and shall, subject
to earlier termination as provided in Section 5, continue until September 30,
2002. The expiration date of the Employment Period shall be automatically
extended for an additional one year period (each thereof, a "Renewal Period") on
each October 1, commencing October 1, 2000, unless at least 90 days prior to any
such October 1st either Executive or Employer delivers written notice to the
other of his or its election to have such automatic extensions cease, in which
event the then current expiration date of the Employment Period shall continue
in effect for the balance of the Employment Period.
3. DUTIES AND RESPONSIBILITIES
During the Employment Period, Executive (i) shall be the Chairman of
the Board of Directors of Employer and (ii) shall devote his full attention and
expend his best efforts, energies and skills on a full-time basis to the
business of the Company (as hereinafter defined). Executive shall serve on
Executive Committee of the Company. Executive shall have such authority,
discretion, power and responsibility, and shall be entitled to office,
secretarial and other facilities and conditions of employment, as are customary
or appropriate to his position and as are currently exercised by or afforded to
him. Employer shall use its best efforts to cause Executive to be nominated as a
member of Employer's management slate of directors and to be elected as a
director of Employer and a member of the Executive Committee of its Board of
Directors (if such a committee exists). If so elected, Executive shall serve
without additional
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compensation as a director and member of such committee (and, if so elected or
appointed, as the case may be, as an officer or director of any of Employer's
subsidiaries), but if he is not so elected or appointed his compensation
hereunder shall in no way be affected. During the Employment Period, Executive
will be subject to all of the policies, rules and regulations applicable to
Employer's senior executives. Executive shall report directly to the Board of
Directors of the Company. For all purposes of this Agreement, the term "Company"
means Employer and all corporations, associations, companies, partnerships,
firms and other enterprises controlled by or under common control with Employer.
4. COMPENSATION AND RELATED MATTERS
4.1 Compensation, Generally. For all services rendered and required to
be rendered by, covenants of, and restrictions imposed on, Executive under this
Agreement, Employer shall pay to Executive during and with respect to the
Employment Period, and Executive agrees to accept, such base salary ("Base
Salary") and bonuses as are set forth on Exhibit 4.1. Executive's compensation
shall be reviewed by the Board of Directors prior to commencement of each
Renewal Period and may be adjusted upward only for such Renewal Period to take
into account Executive's prior performance and increases in the cost of living
not previously taken into account in setting Executive's compensation level.
4.2 Benefit Plans. To the extent that (i) Executive is eligible under
the general provisions thereof and (ii) Employer maintains such plan or program
for the benefit of its senior executives, during the Employment Period the
Executive shall be eligible to participate in any pension, profit-sharing, or
similar plan or program of the Employer now existing or established hereafter.
To the extent maintained in effect by the Employer for its senior executives,
the Executive shall also be entitled to participate in any group insurance,
hospitalization, medical, dental, accident, disability or similar plan or
program of the Employer now existing or established hereafter to the extent that
he is eligible under the general provisions thereof. The Executive shall be
entitled to receive other benefits generally available to all senior executives
of the Employer the extent that he is eligible therefor. Executive's Base Salary
shall (where applicable) constitute the compensation on the basis of which the
amount of Executive's benefits under any such plan or program shall be fixed and
determined. Without limiting the foregoing, Executive shall be eligible for the
benefits set forth on Exhibit 4.2. Any future change in the benefits offered to
Executive shall provide Executive with benefits, on an aggregate basis, at least
substantially equivalent to the benefits, on an aggregate basis, provided to
Executive prior to such change.
4.3 Business Expense Reimbursement. Employer shall reimburse Executive
for all business expenses reasonably incurred by him in the performance of his
duties under this Agreement upon his presentation, not less frequently than
monthly, of signed, itemized accounts of such expenditures, all in accordance
with Employer's procedures and policies as adopted and in effect from time to
time and applicable to its senior executives.
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4.4 Vacations. Executive shall be entitled to vacations consistent with
those currently provided to Executive, which vacations shall be taken at such
time or times as shall not unreasonably interfere with Executive's performance
of his duties under this Agreement.
5. TERMINATION OF EMPLOYMENT PERIOD
5.1 Termination Without Cause. Employer or Executive may, by notice to
the other at any time during the Employment Period, terminate the Employment
Period without cause. The effective date of termination shall be 30 days after
the date on which such notice is given.
5.2 By Employer: Cause. Employer may, at any time during the Employment
Period by action of its Board of Directors and upon notice to Executive,
terminate the Employment Period "for cause" effective immediately. Such notice
shall specify the cause for termination. For the purposes hereof, "for cause"
means:
(a) Executive's continued failure or refusal to perform his duties and
responsibilities hereunder after written warning of any such failure or refusal
and reasonable opportunity to appear before Employer's Board of Directors to
explain the reasons for such failure or refusal;
(b) Executive's dishonesty that directly or indirectly materially
affects, or has the likelihood of materially affecting, Employer;
(c) Executive's continued use of illegal drugs or excessive use of
alcohol, which has the effect of interfering materially with the performance of
his obligations under this Agreement, after written warning thereof;
(d) Conviction of Executive for a felony or any crime involving in
either case an act of moral turpitude, dishonesty, fraud, or unethical or
unlawful business conduct; or
(e) Conduct by Executive that could reasonably be expected to
materially injure the reputation, business or business relationships of the
Company.
5.3 By Executive: Good Reason. Executive may, at any time during the
Employment Period by notice to Employer, terminate the Employment Period under
this Agreement "for good reason" effective immediately. For the purposes hereof,
"for good reason" means (a) any significant reduction in the duties,
responsibilities or prerequisites of Executive that Employer fails to remedy
within 30 days after notice thereof to Employer; (b) any change in the
compensation or benefits provided for in Exhibits 4.1 and 4.2 which fails to
provide Executive with compensation and benefits, on an aggregate basis, at
least substantially equivalent to the compensation and benefits, on an aggregate
basis, provided to Executive prior to such change that Employer fails to remedy
within 30 days after notice thereof to Employer; (c) unless Executive otherwise
consents, Executive being required to render his primary services more than
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50 miles from the place he is then rendering his primary services; or (d) a
material breach by Employer of any provision of this Agreement that Employer
fails to remedy or cease within 30 days after notice thereof to Employer.
5.4 Disability. During the Employment Period, if the Executive shall
have a physical or mental incapacity or infirmity (other than alcoholism or drug
addiction) which results in his being treated as disabled (the "Disability") for
purposes of the Employer's long-term disability policy covering the Executive,
then Employer, by notice to Executive, shall have the right to terminate the
Employment Period at any time thereafter.
5.5 Death. The Employment Period shall end on the date of Executive's
death.
6. TERMINATION COMPENSATION
6.1 Termination Without Cause By Employer or By Executive For Good
Reason. If the Employment Period is terminated by Employer without cause
pursuant to Section 5.1, or by Executive for good reason pursuant to Section
5.3, then Executive shall be entitled to be paid by Employer, as liquidated
damages and not as a penalty, (a) all Base Salary that he would have been
entitled to receive pursuant to this Agreement if the Employment Period had
continued for one year after the termination of Employment Period (the "Relevant
Period") and (b) a payment equal to 70% of the maximum short-term bonus
Executive could have earned pursuant to Paragraph 2 or 3 of Exhibit 4.1 for the
fiscal year in which the Employment Period is terminated (without taking into
account any increase in the annual bonus resulting from the cumulative
three-year EPS, as defined in Paragraph 2(b), (c) and (d) of Exhibit 4.1). Any
payments required to be made pursuant to the preceding sentence shall be made on
the same dates such payments would have been made had Executive continued to be
employed by Employer during the Relevant Period. Executive shall not be required
to mitigate the amount of any payments provided for hereunder upon termination
of the Employment Period by seeking employment with any other person, or
otherwise and the amounts payable to Executive pursuant to this Section 6.1
shall not be reduced by amounts received by him from any employment or
engagements with other persons during the Relevant Period.
6.2 Termination Upon Death or Disability. If the Employment Period is
terminated by reason of Disability or the death of Executive, then Executive or
his estate shall be entitled to be paid by Employer (in addition to any amounts
payable under the insurance, plans or programs referred to in Section 4.2) the
pro rata portion of any short-term bonus that Executive would have been entitled
to receive pursuant to Paragraph 2 or 3 of Exhibit 4.1, in respect of the fiscal
year in which the Employment Period is terminated, if the Employment Period had
continued through the end of such fiscal year. Any payment required to be made
pursuant to the preceding sentence shall be made on the same date such payment
would have been made had the Employment Period continued through such date. For
the purposes hereof, the pro rata portion of any bonus in respect of any fiscal
year means the total amount of such bonus (as if the Employment Period had not
terminated prior to the end of fiscal year), multiplied by a fraction, the
numerator of which is the number of days within such fiscal year on or prior to
the
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termination of the Employment Period and the denominator of which is the number
of days within such fiscal year.
6.3 Termination After a Change in Control. If the Employment Period is
terminated within three months prior to or 12 months after a Change in Control
by Employer without cause pursuant to Section 5.1, or by Executive for good
reason pursuant to Section 5.3, then Executive shall be entitled to be paid by
Employer, as liquidated damages and not as a penalty, (a) all Base Salary that
he would have been entitled to receive pursuant to this Agreement if the
Employment Period had continued for two years after the termination of the
Employment Period (the "CIC Relevant Period") and (b) two payments each equal to
70% of the maximum short-term bonus Executive could have earned pursuant to
Paragraph 2 or 3 of Exhibit 4.1 for the fiscal year in which the Employment
Period is terminated (without taking into account any increase in the annual
bonus resulting from the cumulative three-year EPS, as defined in Paragraph
2(b), (c) or (d) of Exhibit 4.1). Any payments required to be made pursuant to
the preceding sentence shall be made on the same dates such payments would have
been made had Executive continued to be employed by Employer during the CIC
Relevant Period. Executive shall not be required to mitigate the amount of any
payments provided for hereunder upon termination of the Employment Period by
seeking employment with any other person, or otherwise and the amounts payable
to Executive pursuant to this Section 6.3 shall not be reduced by amounts
received by him from any employment or engagements with other person during the
CIC Relevant Period. For purpose of this Agreement a "Change in Control" shall
mean the occurrence of any one of the following events:
(a) any "person," as such term is used in Sections 3(a)(9)
and 13(d) of the Securities Exchange Act of 1934, becomes a "beneficial owner,"
as such term is used in Rule 13d-3 promulgated under that act, of 50% or more
of the capital stock of Employer of any class or classes having general voting
power under ordinary circumstances, in the absence of contingencies, to elect
the directors of a corporation ("Voting Stock");
(b) the majority of the Board of Directors of Employer consists
of individuals other than Incumbent Directors, which term means the members of
the Board of Directors on the Effective Date; provided that any person becoming
a director subsequent to such date whose election or nomination for election
was supported by two-thirds of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent Director;
(c) Employer adopts any plan of liquidation providing for the
distribution of all or substantially all of its assets;
(d) all or substantially all of the assets or business of
Employer is disposed of pursuant to a merger, consolidation or other transaction
(unless the shareholders of Employer immediately prior to such merger,
consolidation or other transaction beneficially own, directly or indirectly,
in substantially the same proportion as they owned the Voting Stock, the Voting
Stock or other ownership interests of the entity or entities, if any, that
succeed to the business of Employer); or
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(e) Employer combines with another company and is the surviving
corporation but, immediately after the combination, the shareholders of Employer
immediately prior to the combination hold, directly or indirectly, 50% or less
of the Voting Stock of the combined company.
6.4 Benefits After Termination. At the time the Employment Period is
terminated, Executive's rights to benefits under any benefit plans or insurance
plans or other death benefit programs or arrangements of Employer or under any
stock option, restricted stock or other plan of Employer shall be determined,
subject to the other terms and provisions of this Agreement, in accordance with
the terms and provisions of such plans, arrangements, or in the case of stock
options, restricted stock or other awards, any agreements relating to the grant
thereof. In addition, at the time the Employment Period is terminated, Employee
shall be entitled to payment for any accrued vacation time.
6.5 Additional Termination Benefits. If the Employment Period is
terminated by Employer without cause pursuant to Section 5.1, or by Executive
for good reason pursuant to Section 5.3, then during the Relevant Period or the
CIC Relevant Period, which ever is applicable, Executive shall be entitled to
continue medical insurance coverage for himself, spouse and dependents on the
same basis as he had prior to the termination of the Employment Period and,
unless otherwise specifically provided in Exhibit 4.2, to the benefits provided
for in Section 4.2 and Exhibit 4.2. In addition, if at the time the Employment
Period is terminated, Employee has the use of an Employer automobile, he shall
have the right at the end of the Relevant Period or the CIC Relevant Period,
which ever is applicable, to purchase the automobile from Employer or buy-out
any remaining lease to which the automobile is subject.
6.6 Excise Tax Gross-Up. In the event that Executive becomes entitled
to any payments under this Agreement, then if any such payments or any other
compensation, benefit or other amount from Employer for the benefit of Executive
("Parachute Payments") will be subject to the tax imposed by Section 4999 of the
Code (including any applicable interest and penalties, the "Excise Tax"), no
Parachute Payment shall be reduced (except for required tax withholdings) and
Employer shall pay to Executive by the earlier of the date such Excise Tax is
withheld from payments made to Executive or the date such Excise Tax becomes due
and payable by Executive, an additional amount (the "Gross-Up Payment") such
that the net amount retained by Executive, after deduction of any Excise Tax on
the Parachute Payments and taxes based upon the Tax Rate and Excise Tax upon the
payment provided for by this Section 6.6, shall be equal to the amount the
Executive would have received if no Excise Tax had been imposed. Employer shall
reasonably determine in good faith whether any of the Parachute Payments are
subject to the Excise Tax and the amount of any Excise Tax and shall notify
Executive of its determination. Employer and Executive shall file all tax
returns and reports regarding such Parachute Payments in a manner consistent
with Employer's reasonable good faith determination. For purposes of determining
the amount of the Gross-Up Payment, Executive shall be deemed to pay taxes at
the Tax Rate applicable at the time of the Gross-Up Payment. In the event that
the Excise Tax is
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subsequently determined to be less than the amount taken into account hereunder
at the time a Parachute Payment is made, Executive shall repay to Employer at
the time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-Up Payment attributable to such reduction plus interest
on the amount of such repayment at the rate provided in Section 1274(d)(1) of
the Code or other applicable provision of the Code, but only to the extent that
such interest is paid to Executive. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time a
Parachute Payment is made (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
Employer shall make an additional gross-up payment in respect of such excess
(plus any interest or penalties payable in respect of such excess) at the time
that the amount of such excess is finally determined. Employer shall reimburse
Executive for all reasonable fees, expenses, and costs related to determining
the reasonableness of any Employer position in connection with this paragraph,
preparation of any tax return or other filing that is affected by any matter
addressed in this paragraph and any audit, litigation or other proceeding that
is affected by any matter addressed in this paragraph.
6.7 Release. In partial consideration for Employer's obligations to
make the payments described in Section 6.1, 6.3 or 6.6 and to provide the
benefits described in Section 6.5, Executive shall execute and deliver to
Employer a general release satisfactory to Employer. If Executive shall fail to
execute and deliver such release to the Employer, or if Executive shall revoke
his consent to such release, if revocation is available, Executive shall
receive, in lieu of the payments and benefits provided in Section 6.1, 6.3, 6.5
and/or 6.6, payments and benefits, if any, determined in accordance with the
written personal policies of the Employer relating to severance then generally
applicable to employees with length of service and compensation level of
Executive.
6.8 No Other Termination Compensation. Executive shall not, except as
set forth in this Section 6, be entitled to compensation in respect of any
period following termination of the Employment Period.
7. LOCATION OF EXECUTIVE'S ACTIVITIES
Executive's principal place of business in the performance of his
duties and obligations under this Agreement shall be in the Kansas City
metropolitan area, Missouri. Notwithstanding the preceding sentence, Executive
will engage in such travel and spend such time in other places as may be
necessary and appropriate in furtherance of his duties hereunder.
8. EXCLUSIVITY OF SERVICES, CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS
8.1 Exclusivity of Services and Restrictions. During the Employment
Period and the two-year period thereafter (the "Post-Employment Period"),
Executive shall not, directly or indirectly, (a) be or become interested in or
associated with (as an officer, director, stockholder, partner, consultant,
owner, employee, agent, creditor or otherwise) any business that is then, or
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which then proposes to become, a competitor of the Company, provided, that the
foregoing shall not restrict Executive from the ownership, solely as an
investment, of securities of any business if such ownership is not as
controlling person of such business, not as a member of a group that controls
such business, and not as a direct or indirect beneficial owner of 5% or more of
any class of securities of such business, (b) induce or seek to influence any
employee of (or consultant to) the Company to leave its employ (or terminate
such consultancy), (c) aid a competitor or supplier of the Company in any
attempt to hire a person who shall have been employed by, or who was a
consultant to, the Company within the one-year period preceding the date of any
such aid, or (d) induce or attempt to influence any person who was a supplier or
customer to the Company during such period to transact business with a
competitor of the Company; provided, however, that, unless the Employment Period
has been terminated by Employer for cause pursuant to Section 5.2, the
provisions of this Section 8.1 shall continue in effect during the
Post-Employment Period only so long as Employer continues to pay Executive all
amounts to which Executive is entitled pursuant to Section 6 of this Agreement.
8.2 Confidential Information. Executive shall not at any time, whether
during the Employment Period or thereafter, disclose or use (except in the
course of his employment hereunder and in furtherance of the business of the
Company, or as required by applicable law) any confidential information, trade
secrets or proprietary data (including, without limitation, customer lists and
the identity of and any information relating to any customer) of the Company.
8.3 Disclosure of Restrictions. If Executive shall accept or commence
employment with, or agree to provide services to, any person (except a person
who is then affiliated with Employer) during the period from the date hereof
through the end of the Post-Employment Period then, and in such event, on or
before the date of such acceptance or agreement (and before commencement of
employment or the provision of services) Executive shall deliver a copy of this
Section 8 to his proposed employer.
8.4 Injunction. Notwithstanding any other provisions of this Agreement,
Executive acknowledges and agrees that in the event of a violation or threatened
violation of any of the provisions of this Section 8, Employer shall have no
adequate remedy at law and shall therefore be entitled to enforce each such
provision by temporary or permanent injunctive or mandatory relief obtained in
any court of competent jurisdiction without the necessity of proving damage or
posting any bond or other security, and without prejudice to any other remedies
that may be available at law or in equity.
9. INTELLECTUAL PROPERTY.
During the Employment Period, Executive shall disclose to Employer all
ideas, inventions and business plans developed by him during the Employment
Period that relate directly or indirectly to the Company's business, including,
without limitation, any process, operation, product or improvement that may be
patentable or copyrightable. Executive agrees that such shall be the property of
the Company and that he shall at the Company's request and
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cost do whatever is necessary to secure the rights thereto by patent, copyright
or otherwise to the Company.
10. MISCELLANEOUS
10.1 Notices. Any notice, consent or authorization required or
permitted to be given pursuant to this Agreement shall be in writing and sent to
the party for or to whom intended, at the address of such party set forth below,
by registered or certified mail (if available), postage paid, or at such other
address as either party shall designate by notice given to the other in the
manner provided herein.
If to Employer, to it at:
8800 East 63rd Street
Kansas City, Missouri 64133
Attention: Board of Directors
If to Executive, to him at:
Lamson Rheinfrank, Jr.
642 East 46th Street
Kansas City, Missouri 64110
10.2 Taxes. Employer is authorized to withhold, from any compensation
or benefits payable hereunder to Executive, such amounts for income tax, social
security, unemployment compensation and other taxes as shall be necessary or
appropriate in the reasonable judgment of Employer to comply with applicable
laws and regulations.
10.3 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of Missouri applicable to agreements
made and to be performed therein.
10.4 Headings. All descriptive headings in this Agreement are inserted
for convenience only and shall be disregarded in construing or applying any
provision of this Agreement.
10.5 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
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10.6 Severability. If any provision of this Agreement, or part thereof,
is held to be unenforceable, the remainder of such provision and this Agreement,
as the case may be, shall nevertheless remain in full force and effect.
10.7 Entire Agreement. This Agreement contains the entire agreement and
understanding between Employer and Executive with respect to the subject matter
hereof. This Agreement supersedes any prior agreement between the parties
relating to the subject matter hereof.
10.8 Arbitration. Any controversy or claim arising out of, under or
relating to this Agreement or the performance or breach hereof, shall be
resolved by arbitration in Kansas City, Missouri, before the American
Arbitration Association, in accordance with the rules then in effect of such
Association; and judgment upon the award or decision rendered may be entered and
enforced in any court of competent jurisdiction. The award of the arbitrator in
any arbitration may, in its discretion, include provision for payment of legal
fees and expenses incurred by the prevailing party.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Restatement Date.
BHA GROUP HOLDINGS, INC.
By: /s/ James E. Lund
-----------------------------------------
Name: James E. Lund
Title: President & Chief Executive Officer
Executive:
/s/ Lamson Rheinfrank, Jr.
--------------------------------------------
Lamson Rheinfrank, Jr.
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Exhibit 4.1
COMPENSATION
1. Base Salary. During the Employment Period, Employer shall pay to
Executive Base Salary, payable in equal monthly installments at such times
during each month as is customary with Employer with respect to its senior
executives, at a rate of $178,500 per annum.
2. Short-Term Bonus Arrangement Applicable for Fiscal Years 2000, 2001
and 2002.
(a) Executive shall be entitled to receive an annual cash bonus for
fiscal years 2000, 2001 and 2002 based on the consolidated earnings per share of
Employer ("EPS") and determined under the following Annual Cash Incentive
Matrix:
<TABLE>
<CAPTION>
================================================================================
ANNUAL CASH INCENTIVE MATRIX
- --------------------------------------------------------------------------------
FISCAL YEAR EPS/BONUS EPS/BONUS EPS/BONUS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
2000 $0.80/$17,500 $0.95/$35,000 $1.00/$50,000
- --------------------------------------------------------------------------------
2001 $1.00/$17,500 $1.25/$35,000 $1.35/$50,000
- --------------------------------------------------------------------------------
2002 $1.20/$17,500 $1.50/$35,000 $1.75/$50,000
- --------------------------------------------------------------------------------
Cumulative $3.00/$52,500 $3.70/$105,000 $4.10/$150,000
================================================================================
</TABLE>
(b) An annual cash bonus shall not be payable for (i) fiscal year 2000,
if EPS for such fiscal year is less than $.80 (ii) fiscal year 2001, if EPS for
such fiscal year is less than $1.00 or (iii) fiscal year 2002, if EPS is less
than $1.20; provided however, an annual cash bonus for fiscal year 2002 may be
payable, as described hereinafter, if the cumulative EPS for the three-year
period ending on September 30, 2002 (the "cumulative three-year EPS") is at
least $3.00.
(c) If the EPS for a fiscal year or for the cumulative three-year
period is between the EPS levels shown on the above matrix, the amount of the
annual cash bonus shall be determined on a pro rata basis. The maximum annual
cash bonus for fiscal year 2000 or 2001 is $50,000. The maximum annual cash
bonus for fiscal year 2002 is $50,000 unless increased as a result of the
cumulative three-year period EPS as provided hereinafter. If the cumulated
three-year EPS exceeds $4.10, the total cumulative bonus payable shall equal
$150,000 plus $1,125 for each $.01 the cumulative three-year EPS exceeds $4.10.
(d) The amount of the annual cash bonus for fiscal year 2002 may be
increased from the amounts shown on the third horizontal line in the above
matrix as a result of the cumulative three-year EPS. The following example
illustrates how the annual cash bonus for fiscal year 2002 may be increased by
the cumulative three-year EPS:
<PAGE>
<TABLE>
<CAPTION>
EPS BONUS
--- -----
<S> <C> <C>
Fiscal Year 2000 $ .75 $ 0
Fiscal Year 2001 $ 1.25 $ 35,000
Fiscal Year 2002 $ 1.50 $ 35,000
------ ---------
Cumulative Three-Year Total $ 3.50 $ 70,000
Cumulative Adjustment $ 20,000 (additional amount paid in 2002)
Cumulative Bonus Paid $ 90,000
</TABLE>
The cumulative annual bonus for fiscal years 2000, 20001 and 2002 before the
cumulative adjustment would be $70,000. Because the cumulative three-year EPS of
$3.50 is between $3.00 and $3.70, the cumulative three-year bonus amount
attributable to $3.50 would be $90,000, a proration between $3.00/$52,500 and
$3.70/$105,000. Accordingly, the cumulative three-year bonus payable under the
bonus program would be $90,000. As such, an additional $20,000 would be payable
in 2002 to bring the fiscal year 2002 bonus to $55,000 and the cumulative
three-year bonus to $90,000.
(e) Within 75 days following the end of each of fiscal years 2000, 2001
and 2002, Employer shall pay to Executive the annual cash bonus payable, if any,
with respect of such fiscal year
3. Short-Term Bonus Arrangement(s) Applicable for Fiscal Years After
2002. Executive shall be entitled to receive annual cash bonuses for years after
fiscal year 2002 under a bonus arrangement or arrangements to be determined by
Employer which shall provide Executive an annual bonus opportunity of at least
$50,000.
4. Long-Term Incentive Arrangement Applicable for Fiscal Years 2000,
2001 and 2002. On November 9, 1999, Executive received a grant of options to
purchase 18,000 shares of Company Common Stock. Pursuant to the Compensation
Committee's grant to Executive, the options, to the extent not previously
exercisable and vested, shall be immediately exercisable and vested upon the
termination of the Employment Period by Employer without cause pursuant to
Section 5.1, or by Executive for good reason pursuant to Section 5.3, if such
termination occurs within three months prior to or 12 months after a Change in
Control.
5. Long-Term Incentive Arrangement(s) Applicable for Fiscal Years After
2002. In each fiscal year after 2002, Executive shall be entitled to participate
in a long-term incentive arrangement or arrangements to be determined by
Employer, which arrangements or arrangements shall provide Executive an
opportunity to earn an amount no less than the product of $50,000 multiplied by
the numbers of fiscal years to which the arrangement or arrangements relate.
<PAGE>
Exhibit 4.2
BENEFITS
1. Automobile. To facilitate the performance of Executive's
responsibilities under this Agreement, during the Employment Period, Employer
shall, at Employer's expense, continuously make available to Executive for
Executive's personal use the automobile currently made available to Executive,
or an automobile selected by Executive substantially comparable thereto, and
shall pay the costs of operating, maintaining, insuring, garaging and otherwise
using such automobile, subject to such policies as may be in effect from time to
time applicable to Employer's senior executives.
2. Other Benefits. (a) Employer shall maintain in effect at all times
during the Employment Period, at Employer's expense, a policy of insurance on
the life of Executive in the amount of $1,000,000 naming such person as
Executive shall designate from time to time as the owner and beneficiary
thereof. Executive agrees to aid, and cooperate in all reasonable respects with,
Employer in procuring such insurance, including, without limitation, by
submitting to the usual and customary medical examinations and filling out,
executing and delivering such applications and other instruments in writing as
may be reasonably required by an insurance company or companies to which any
application or applications for such insurance may be made by or for Employer.
(b) Employer shall maintain in effect at all times during the
Employment Period, at Employer's expense, either a group or individual
disability policy covering the Executive.
(c) Employer shall reimburse Executive for all out-of-pocket medical
and related expenses incurred by Executive and his immediate family and not
otherwise covered by the Employer's insurance plans or programs, up to but not
exceeding an aggregate of $8,000 per year, upon his presentation to Employer of
signed, itemized accounts of such expenditures, all in accordance with
Employer's procedures and policies as adopted and in effect from time to time
and applicable to its senior executives.
(d) Employer shall pay or otherwise reimburse Executive for the
expenses incurred or to be incurred by him in connection with the membership of
Executive and his family in the country club to which they currently belong or a
substantially comparable club selected by Executive, up to but not exceeding an
aggregate of $4,000 per year, upon his presentation to Employer of signed,
itemized accounts of such expenditures, all in accordance with Employer's
procedures and policies as adopted and in effect from time to time and
applicable to its senior executives.
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 1, 2000 (the
"Effective Date"), between James E. Lund ("Executive") and BHA GROUP HOLDINGS,
INC., a Delaware corporation ("Employer").
Executive is currently employed by Employer as President and
Chief Executive Officer of Employer pursuant to an Employment Agreement dated
August 1, 1990, as amended by an amendment and restatement dated September 1,
1993 (as amended and restated, the "Prior Agreement"). Employer wishes to
continue to employ Executive and Executive wishes to continue to be employed by
Employer pursuant to the terms and conditions set forth below. The parties
therefore agree that the Prior Agreement is terminated as of the Effective Date
and Executive shall thereafter be employed by Employer pursuant to the terms of
this Agreement as follows:
1. EMPLOYMENT OF EXECUTIVE
Employer hereby agrees to employ Executive and Executive
hereby agrees to be in the employ of Employer upon the terms and conditions
hereinafter set forth.
2. EMPLOYMENT PERIOD
The term of Executive's employment under this Agreement (the
"Employment Period") shall commence as of the Effective Date and shall, subject
to earlier termination as provided in Section 5, continue until September 30,
2002. The expiration date of the Employment Period shall be automatically
extended for an additional one year period (each thereof, a "Renewal Period") on
each October 1, commencing October 1, 2000, unless at least 90 days prior to any
such October 1st either Executive or Employer delivers written notice to the
other of his or its election to have such automatic extensions cease, in which
event the then current expiration date of the Employment Period shall continue
in effect for the balance of the Employment Period.
3. DUTIES AND RESPONSIBILITIES
During the Employment Period, Executive (i) shall be the
President and Chief Executive Officer of Employer and (ii) shall devote his full
attention and expend his best efforts, energies and skills on a full-time basis
to the business of the Company (as hereinafter defined). Executive shall serve
on Executive Committee of the Company. Executive shall have such authority,
discretion, power and responsibility, and shall be entitled to office,
secretarial and other facilities and conditions of employment, as are customary
or appropriate to his position and as are currently exercised by or afforded to
him. Employer shall use its best efforts to cause Executive to be nominated as a
member of Employer's management slate of directors and to be elected as a
director of Employer and a member of the Executive Committee of its Board of
Directors (if such a committee exists). If so elected, Executive shall serve
without additional
<PAGE>
compensation as a director and member of such committee (and, if so elected or
appointed, as the case may be, as an officer or director of any of Employer's
subsidiaries), but if he is not so elected or appointed his compensation
hereunder shall in no way be affected. During the Employment Period, Executive
will be subject to all of the policies, rules and regulations applicable to
Employer's senior executives. Executive shall report directly to the Chairman of
the Board of Directors of the Employer. For all purposes of this Agreement, the
term "Company" means Employer and all corporations, associations, companies,
partnerships, firms and other enterprises controlled by or under common control
with Employer.
4. COMPENSATION AND RELATED MATTERS
4.1 Compensation, Generally. For all services rendered and
required to be rendered by, covenants of, and restrictions imposed on, Executive
under this Agreement, Employer shall pay to Executive during and with respect to
the Employment Period, and Executive agrees to accept, such base salary ("Base
Salary") and bonuses as are set forth on Exhibit 4.1. Executive's compensation
shall be reviewed by the Board of Directors prior to commencement of each
Renewal Period and may be adjusted upward only for such Renewal Period to take
into account Executive's prior performance and increases in the cost of living
not previously taken into account in setting Executive's compensation level.
4.2 Benefit Plans. To the extent that (i) Executive is
eligible under the general provisions thereof and (ii) Employer maintains such
plan or program for the benefit of its senior executives, during the Employment
Period the Executive shall be eligible to participate in any pension,
profit-sharing, or similar plan or program of the Employer now existing or
established hereafter. To the extent maintained in effect by the Employer for
its senior executives, the Executive shall also be entitled to participate in
any group insurance, hospitalization, medical, dental, accident, disability or
similar plan or program of the Employer now existing or established hereafter to
the extent that he is eligible under the general provisions thereof. The
Executive shall be entitled to receive other benefits generally available to all
senior executives of the Employer the extent that he is eligible therefor.
Executive's Base Salary shall (where applicable) constitute the compensation on
the basis of which the amount of Executive's benefits under any such plan or
program shall be fixed and determined. Without limiting the foregoing, Executive
shall be eligible for the benefits set forth on Exhibit 4.2. Any future change
in the benefits offered to Executive shall provide Executive with benefits, on
an aggregate basis, at least substantially equivalent to the benefits, on an
aggregate basis, provided to Executive prior to such change.
4.3 Business Expense Reimbursement. Employer shall reimburse
Executive for all business expenses reasonably incurred by him in the
performance of his duties under this Agreement upon his presentation, not less
frequently than monthly, of signed, itemized accounts of such expenditures, all
in accordance with Employer's procedures and policies as adopted and in effect
from time to time and applicable to its senior executives.
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<PAGE>
4.4 Vacations. Executive shall be entitled to vacations
consistent with those currently provided to Executive, which vacations shall be
taken at such time or times as shall not unreasonably interfere with Executive's
performance of his duties under this Agreement.
5. TERMINATION OF EMPLOYMENT PERIOD
5.1 Termination Without Cause. Employer or Executive may, by
notice to the other at any time during the Employment Period, terminate the
Employment Period without cause. The effective date of termination shall be 30
days after the date on which such notice is given.
5.2 By Employer: Cause. Employer may, at any time during the
Employment Period by action of its Board of Directors and upon notice to
Executive, terminate the Employment Period "for cause" effective immediately.
Such notice shall specify the cause for termination. For the purposes hereof,
"for cause" means:
(a) Executive's continued failure or refusal to perform his
duties and responsibilities hereunder after written warning of any such failure
or refusal and reasonable opportunity to appear before Employer's Board of
Directors to explain the reasons for such failure or refusal;
(b) Executive's dishonesty that directly or indirectly
materially affects, or has the likelihood of materially affecting, Employer;
(c) Executive's continued use of illegal drugs or excessive
use of alcohol, which has the effect of interfering materially with the
performance of his obligations under this Agreement, after written warning
thereof;
(d) Conviction of Executive for a felony or any crime
involving in either case an act of moral turpitude, dishonesty, fraud, or
unethical or unlawful business conduct; or
(e) Conduct by Executive that could reasonably be expected to
materially injure the reputation, business or business relationships of the
Company.
5.3 By Executive: Good Reason. Executive may, at any time
during the Employment Period by notice to Employer, terminate the Employment
Period under this Agreement "for good reason" effective immediately. For the
purposes hereof, "for good reason" means (a) any significant reduction in the
duties, responsibilities or prerequisites of Executive that Employer fails to
remedy within 30 days after notice thereof to Employer; (b) any change in the
compensation or benefits provided for in Exhibits 4.1 and 4.2 which fails to
provide Executive with compensation and benefits, on an aggregate basis, at
least substantially equivalent to the compensation and benefits, on an aggregate
basis, provided to Executive prior to such change that Employer fails to remedy
within 30 days after notice thereof to Employer; (c) unless Executive otherwise
consents, Executive being required to render his primary services more than
3
<PAGE>
50 miles from the place he is then rendering his primary services; or (d) a
material breach by Employer of any provision of this Agreement that Employer
fails to remedy or cease within 30 days after notice thereof to Employer.
5.4 Disability. During the Employment Period, if the Executive
shall have a physical or mental incapacity or infirmity (other than alcoholism
or drug addiction) which results in his being treated as disabled (the
"Disability") for purposes of the Employer's long-term disability policy
covering the Executive, then Employer, by notice to Executive, shall have the
right to terminate the Employment Period at any time thereafter.
5.5 Death. The Employment Period shall end on the date of
Executive's death.
6. TERMINATION COMPENSATION
6.1 Termination Without Cause By Employer or By Executive For
Good Reason. If the Employment Period is terminated by Employer without cause
pursuant to Section 5.1, or by Executive for good reason pursuant to Section
5.3, then Executive shall be entitled to be paid by Employer, as liquidated
damages and not as a penalty, (a) all Base Salary that he would have been
entitled to receive pursuant to this Agreement if the Employment Period had
continued for one year after the termination of Employment Period (the "Relevant
Period") and (b) a payment equal to 70% of the maximum short-term bonus
Executive could have earned pursuant to Paragraph 2 or 3 of Exhibit 4.1 for the
fiscal year in which the Employment Period is terminated (without taking into
account any increase in the annual bonus resulting from the cumulative
three-year EPS, as defined in Paragraph 2(b), (c) and (d) of Exhibit 4.1). Any
payments required to be made pursuant to the preceding sentence shall be made on
the same dates such payments would have been made had Executive continued to be
employed by Employer during the Relevant Period. Executive shall not be required
to mitigate the amount of any payments provided for hereunder upon termination
of the Employment Period by seeking employment with any other person, or
otherwise and the amounts payable to Executive pursuant to this Section 6.1
shall not be reduced by amounts received by him from any employment or
engagements with other persons during the Relevant Period.
6.2 Termination Upon Death or Disability. If the Employment
Period is terminated by reason of Disability or the death of Executive, then
Executive or his estate shall be entitled to be paid by Employer (in addition to
any amounts payable under the insurance, plans or programs referred to in
Section 4.2) the pro rata portion of any short-term bonus that Executive would
have been entitled to receive pursuant to Paragraph 2 or 3 of Exhibit 4.1, in
respect of the fiscal year in which the Employment Period is terminated, if the
Employment Period had continued through the end of such fiscal year. Any payment
required to be made pursuant to the preceding sentence shall be made on the same
date such payment would have been made had the Employment Period continued
through such date. For the purposes hereof, the pro rata portion of any bonus in
respect of any fiscal year means the total amount of such bonus (as if the
Employment Period had not terminated prior to the end of fiscal year),
multiplied by a fraction, the numerator of which is the number of days within
such fiscal year on or prior to the
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<PAGE>
termination of the Employment Period and the denominator of which is the number
of days within such fiscal year.
6.3 Termination After a Change in Control. If the Employment
Period is terminated within three months prior to or 12 months after a Change in
Control by Employer without cause pursuant to Section 5.1, or by Executive for
good reason pursuant to Section 5.3, then Executive shall be entitled to be paid
by Employer, as liquidated damages and not as a penalty, (a) all Base Salary
that he would have been entitled to receive pursuant to this Agreement if the
Employment Period had continued for two years after the termination of the
Employment Period (the "CIC Relevant Period") and (b) two payments each equal to
70% of the maximum short-term bonus Executive could have earned pursuant to
Paragraph 2 or 3 of Exhibit 4.1 for the fiscal year in which the Employment
Period is terminated (without taking into account any increase in the annual
bonus resulting from the cumulative three-year EPS, as defined in Paragraph
2(b), (c) or (d) of Exhibit 4.1). Any payments required to be made pursuant to
the preceding sentence shall be made on the same dates such payments would have
been made had Executive continued to be employed by Employer during the CIC
Relevant Period. Executive shall not be required to mitigate the amount of any
payments provided for hereunder upon termination of the Employment Period by
seeking employment with any other person, or otherwise and the amounts payable
to Executive pursuant to this Section 6.3 shall not be reduced by amounts
received by him from any employment or engagements with other person during the
CIC Relevant Period. For purpose of this Agreement a "Change in Control" shall
mean the occurrence of any one of the following events:
(a) any "person," as such term is used in Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934, becomes a "beneficial
owner," as such term is used in Rule 13d-3 promulgated under that act, of 50% or
more of the capital stock of Employer of any class or classes having general
voting power under ordinary circumstances, in the absence of contingencies, to
elect the directors of a corporation ("Voting Stock");
(b) the majority of the Board of Directors of
Employer consists of individuals other than Incumbent Directors, which term
means the members of the Board of Directors on the Effective Date; provided that
any person becoming a director subsequent to such date whose election or
nomination for election was supported by two-thirds of the directors who then
comprised the Incumbent Directors shall be considered to be an Incumbent
Director;
(c) Employer adopts any plan of liquidation providing
for the distribution of all or substantially all of its assets;
(d) all or substantially all of the assets or
business of Employer is disposed of pursuant to a merger, consolidation or other
transaction (unless the shareholders of Employer immediately prior to such
merger, consolidation or other transaction beneficially own, directly or
indirectly, in substantially the same proportion as they owned the Voting Stock,
the Voting Stock or other ownership interests of the entity or entities, if any,
that succeed to the business of Employer); or
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<PAGE>
(e) Employer combines with another company and is the
surviving corporation but, immediately after the combination, the shareholders
of Employer immediately prior to the combination hold, directly or indirectly,
50% or less of the Voting Stock of the combined company.
6.4 Benefits After Termination. At the time the Employment
Period is terminated, Executive's rights to benefits under any benefit plans or
insurance plans or other death benefit programs or arrangements of Employer or
under any stock option, restricted stock or other plan of Employer shall be
determined, subject to the other terms and provisions of this Agreement, in
accordance with the terms and provisions of such plans, arrangements, or in the
case of stock options, restricted stock or other awards, any agreements relating
to the grant thereof. In addition, at the time the Employment Period is
terminated, Employee shall be entitled to payment for any accrued vacation time.
6.5 Additional Termination Benefits. If the Employment Period
is terminated by Employer without cause pursuant to Section 5.1, or by Executive
for good reason pursuant to Section 5.3, then during the Relevant Period or the
CIC Relevant Period, which ever is applicable, Executive shall be entitled to
continue medical insurance coverage for himself, spouse and dependents on the
same basis as he had prior to the termination of the Employment Period and,
unless otherwise specifically provided in Exhibit 4.2, to the benefits provided
for in Section 4.2 and Exhibit 4.2. In addition, if at the time the Employment
Period is terminated, Employee has the use of an Employer automobile, he shall
have the right at the end of the Relevant Period or the CIC Relevant Period,
which ever is applicable, to purchase the automobile from Employer or buy-out
any remaining lease to which the automobile is subject.
6.6 Excise Tax Gross-Up. In the event that Executive becomes
entitled to any payments under this Agreement, then if any such payments or any
other compensation, benefit or other amount from Employer for the benefit of
Executive ("Parachute Payments") will be subject to the tax imposed by Section
4999 of the Code (including any applicable interest and penalties, the "Excise
Tax"), no Parachute Payment shall be reduced (except for required tax
withholdings) and Employer shall pay to Executive by the earlier of the date
such Excise Tax is withheld from payments made to Executive or the date such
Excise Tax becomes due and payable by Executive, an additional amount (the
"Gross-Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the Parachute Payments and taxes based upon the
Tax Rate and Excise Tax upon the payment provided for by this Section 6.6, shall
be equal to the amount the Executive would have received if no Excise Tax had
been imposed. Employer shall reasonably determine in good faith whether any of
the Parachute Payments are subject to the Excise Tax and the amount of any
Excise Tax and shall notify Executive of its determination. Employer and
Executive shall file all tax returns and reports regarding such Parachute
Payments in a manner consistent with Employer's reasonable good faith
determination. For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay taxes at the Tax Rate applicable at the time of
the Gross-Up Payment. In the event that the Excise Tax is
6
<PAGE>
subsequently determined to be less than the amount taken into account hereunder
at the time a Parachute Payment is made, Executive shall repay to Employer at
the time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-Up Payment attributable to such reduction plus interest
on the amount of such repayment at the rate provided in Section 1274(d)(1) of
the Code or other applicable provision of the Code, but only to the extent that
such interest is paid to Executive. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time a
Parachute Payment is made (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
Employer shall make an additional gross-up payment in respect of such excess
(plus any interest or penalties payable in respect of such excess) at the time
that the amount of such excess is finally determined. Employer shall reimburse
Executive for all reasonable fees, expenses, and costs related to determining
the reasonableness of any Employer position in connection with this paragraph,
preparation of any tax return or other filing that is affected by any matter
addressed in this paragraph and any audit, litigation or other proceeding that
is affected by any matter addressed in this paragraph.
6.7 Release. In partial consideration for Employer's
obligations to make the payments described in Section 6.1, 6.3 or 6.6 and to
provide the benefits described in Section 6.5, Executive shall execute and
deliver to Employer a general release satisfactory to Employer. If Executive
shall fail to execute and deliver such release to the Employer, or if Executive
shall revoke his consent to such release, if revocation is available, Executive
shall receive, in lieu of the payments and benefits provided in Section 6.1,
6.3, 6.5 and/or 6.6, payments and benefits, if any, determined in accordance
with the written personal policies of the Employer relating to severance then
generally applicable to employees with length of service and compensation level
of Executive.
6.8 No Other Termination Compensation. Executive shall not,
except as set forth in this Section 6, be entitled to compensation in respect of
any period following termination of the Employment Period.
7. LOCATION OF EXECUTIVE'S ACTIVITIES
Executive's principal place of business in the performance of
his duties and obligations under this Agreement shall be in the Kansas City
metropolitan area. Notwithstanding the preceding sentence, Executive will engage
in such travel and spend such time in other places as may be necessary and
appropriate in furtherance of his duties hereunder.
8. EXCLUSIVITY OF SERVICES, CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS
8.1 Exclusivity of Services and Restrictions. During the
Employment Period and the two-year period thereafter (the "Post-Employment
Period"), Executive shall not, directly or indirectly, (a) be or become
interested in or associated with (as an officer, director, stockholder, partner,
consultant, owner, employee, agent, creditor or otherwise) any business that is
then, or
7
<PAGE>
which then proposes to become, a competitor of the Company, provided, that the
foregoing shall not restrict Executive from the ownership, solely as an
investment, of securities of any business if such ownership is not as
controlling person of such business, not as a member of a group that controls
such business, and not as a direct or indirect beneficial owner of 5% or more of
any class of securities of such business, (b) induce or seek to influence any
employee of (or consultant to) the Company to leave its employ (or terminate
such consultancy), (c) aid a competitor or supplier of the Company in any
attempt to hire a person who shall have been employed by, or who was a
consultant to, the Company within the one-year period preceding the date of any
such aid, or (d) induce or attempt to influence any person who was a supplier or
customer to the Company during such period to transact business with a
competitor of the Company; provided, however, that, unless the Employment Period
has been terminated by Employer for cause pursuant to Section 5.2, the
provisions of this Section 8.1 shall continue in effect during the
Post-Employment Period only so long as Employer continues to pay Executive all
amounts to which Executive is entitled pursuant to Section 6 of this Agreement.
8.2 Confidential Information. Executive shall not at any time,
whether during the Employment Period or thereafter, disclose or use (except in
the course of his employment hereunder and in furtherance of the business of the
Company, or as required by applicable law) any confidential information, trade
secrets or proprietary data (including, without limitation, customer lists and
the identity of and any information relating to any customer) of the Company.
8.3 Disclosure of Restrictions. If Executive shall accept or
commence employment with, or agree to provide services to, any person (except a
person who is then affiliated with Employer) during the period from the date
hereof through the end of the Post-Employment Period then, and in such event, on
or before the date of such acceptance or agreement (and before commencement of
employment or the provision of services) Executive shall deliver a copy of this
Section 8 to his proposed employer.
8.4 Injunction. Notwithstanding any other provisions of this
Agreement, Executive acknowledges and agrees that in the event of a violation or
threatened violation of any of the provisions of this Section 8, Employer shall
have no adequate remedy at law and shall therefore be entitled to enforce each
such provision by temporary or permanent injunctive or mandatory relief obtained
in any court of competent jurisdiction without the necessity of proving damage
or posting any bond or other security, and without prejudice to any other
remedies that may be available at law or in equity.
9. INTELLECTUAL PROPERTY.
During the Employment Period, Executive shall disclose to
Employer all ideas, inventions and business plans developed by him during the
Employment Period that relate directly or indirectly to the Company's business,
including, without limitation, any process, operation, product or improvement
that may be patentable or copyrightable. Executive agrees that such shall be the
property of the Company and that he shall at the Company's request and
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<PAGE>
cost do whatever is necessary to secure the rights thereto by patent, copyright
or otherwise to the Company.
10. MISCELLANEOUS
10.1 Notices. Any notice, consent or authorization required or
permitted to be given pursuant to this Agreement shall be in writing and sent to
the party for or to whom intended, at the address of such party set forth below,
by registered or certified mail (if available), postage paid, or at such other
address as either party shall designate by notice given to the other in the
manner provided herein.
If to Employer, to it at:
8800 East 63rd Street
Kansas City, Missouri 64133
Attention: Board of Directors
If to Executive, to him at:
James E. Lund
4108 123rd Street
Leawood, Kansas 66209
10.2 Taxes. Employer is authorized to withhold, from any
compensation or benefits payable hereunder to Executive, such amounts for income
tax, social security, unemployment compensation and other taxes as shall be
necessary or appropriate in the reasonable judgment of Employer to comply with
applicable laws and regulations.
10.3 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of Missouri applicable to
agreements made and to be performed therein.
10.4 Headings. All descriptive headings in this Agreement are
inserted for convenience only and shall be disregarded in construing or applying
any provision of this Agreement.
10.5 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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10.6 Severability. If any provision of this Agreement, or part
thereof, is held to be unenforceable, the remainder of such provision and this
Agreement, as the case may be, shall nevertheless remain in full force and
effect.
10.7 Entire Agreement. This Agreement contains the entire
agreement and understanding between Employer and Executive with respect to the
subject matter hereof. This Agreement supersedes any prior agreement between the
parties relating to the subject matter hereof.
10.8 Arbitration. Any controversy or claim arising out of,
under or relating to this Agreement or the performance or breach hereof, shall
be resolved by arbitration in Kansas City, Missouri, before the American
Arbitration Association, in accordance with the rules then in effect of such
Association; and judgment upon the award or decision rendered may be entered and
enforced in any court of competent jurisdiction. The award of the arbitrator in
any arbitration may, in its discretion, include provision for payment of legal
fees and expenses incurred by the prevailing party.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the Restatement Date.
BHA GROUP HOLDINGS, INC.
By: /s/ Lamson Rheinfrank, Jr.
----------------------------------------
Name: Lamson Rheinfrank, Jr.
Title: Chairman of the Board of Directors
Executive:
/s/ James E. Lund
---------------------------------
James E. Lund
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Exhibit 4.1
COMPENSATION
1. Base Salary. During the Employment Period, Employer shall
pay to Executive Base Salary, payable in equal monthly installments at such
times during each month as is customary with Employer with respect to its senior
executives, at a rate of $250,000 per annum.
2. Short-Term Bonus Arrangement Applicable for Fiscal Years
2000, 2001 and 2002.
(a) Executive shall be entitled to receive an annual cash
bonus for fiscal years 2000, 2001 and 2002 based on the consolidated earnings
per share of Employer ("EPS") and determined under the following Annual Cash
Incentive Matrix:
<TABLE>
<CAPTION>
===================================================================================================================
ANNUAL CASH INCENTIVE MATRIX
- -------------------------------------------------------------------------------------------------------------------
FISCAL YEAR EPS/BONUS EPS/BONUS EPS/BONUS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000 $0.80/$35,000 $0.95/$70,000 $1.00/$100,000
- -------------------------------------------------------------------------------------------------------------------
2001 $1.00/$35,000 $1.25/$70,000 $1.35/$100,000
- -------------------------------------------------------------------------------------------------------------------
2002 $1.20/$35,000 $1.50/$70,000 $1.75/$100,000
- -------------------------------------------------------------------------------------------------------------------
Cumulative $3.00/$105,000 $3.70/$210,000 $4.10/$300,000
===================================================================================================================
</TABLE>
(b) An annual cash bonus shall not be payable for (i) fiscal
year 2000, if EPS for such fiscal year is less than $.80 (ii) fiscal year 2001,
if EPS for such fiscal year is less than $1.00 or (iii) fiscal year 2002, if EPS
is less than $1.20; provided however, an annual cash bonus for fiscal year 2002
may be payable, as described hereinafter, if the cumulative EPS for the
three-year period ending on September 30, 2002 (the "cumulative three-year EPS")
is at least $3.00.
(c) If the EPS for a fiscal year or for the cumulative
three-year period is between the EPS levels shown on the above matrix, the
amount of the annual cash bonus shall be determined on a pro rata basis. The
maximum annual cash bonus for fiscal year 2000 or 2001 is $100,000. The maximum
annual cash bonus for fiscal year 2002 is $100,000 unless increased as a result
of the cumulative three-year period EPS as provided hereinafter. If the
cumulated three-year EPS exceeds $4.10, the total cumulative bonus payable shall
equal $300,000 plus $2,250 for each $.01 the cumulative three-year EPS exceeds
$4.10.
(d) The amount of the annual cash bonus for fiscal year 2002
may be increased from the amounts shown on the third horizontal line in the
above matrix as a result of the cumulative three-year EPS. The following example
illustrates how the annual cash bonus for fiscal year 2002 may be increased by
the cumulative three-year EPS:
<PAGE>
<TABLE>
<CAPTION>
EPS BONUS
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<S> <C> <C>
Fiscal Year 2000 $ .75 $ 0
Fiscal Year 2001 $ 1.25 $ 70,000
Fiscal Year 2002 $ 1.50 $ 70,000
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Cumulative Three-Year Total $ 3.50 $140,000
Cumulative Adjustment $ 40,000 (additional amount paid in 2002)
Cumulative Bonus Paid $180,000
</TABLE>
The cumulative annual bonus for fiscal years 2000, 20001 and 2002 before the
cumulative adjustment would be $140,000. Because the cumulative three-year EPS
of $3.50 is between $3.00 and $3.70, the cumulative three-year bonus amount
attributable to $3.50 would be $180,000, a proration between $3.00/$105,000 and
$3.70/$210,000. Accordingly, the cumulative three-year bonus payable under the
bonus program would be $180,000. As such, an additional $40,000 would be payable
in 2002 to bring the fiscal year 2002 bonus to $110,000 and the cumulative
three-year bonus to $180,000.
(e) Within 75 days following the end of each of fiscal years
2000, 2001 and 2002, Employer shall pay to Executive the annual cash bonus
payable, if any, with respect of such fiscal year
3. Short-Term Bonus Arrangement(s) Applicable for Fiscal Years
After 2002. Executive shall be entitled to receive annual cash bonuses for years
after fiscal year 2002 under a bonus arrangement or arrangements to be
determined by Employer which shall provide Executive an annual bonus opportunity
of at least $100,000.
4. Long-Term Incentive Arrangement Applicable for Fiscal Years
2000, 2001 and 2002. On November 9, 1999, Executive received a grant of options
to purchase 36,000 shares of Company Common Stock. Pursuant to the Compensation
Committee's grant to Executive, the options, to the extent not previously
exercisable and vested, shall be immediately exercisable and vested upon the
termination of the Employment Period by Employer without cause pursuant to
Section 5.1, or by Executive for good reason pursuant to Section 5.3, if such
termination occurs within three months prior to or 12 months after a Change in
Control.
5. Long-Term Incentive Arrangement(s) Applicable for Fiscal
Years After 2002. In each fiscal year after 2002, Executive shall be entitled to
participate in a long-term incentive arrangement or arrangements to be
determined by Employer, which arrangements or arrangements shall provide
Executive an opportunity to earn an amount no less than the product of $100,000
multiplied by the numbers of fiscal years to which the arrangement or
arrangements relate.
<PAGE>
Exhibit 4.2
BENEFITS
1. Automobile. To facilitate the performance of Executive's
responsibilities under this Agreement, during the Employment Period, Employer
shall, at Employer's expense, continuously make available to Executive for
Executive's personal use the automobile currently made available to Executive,
or an automobile selected by Executive substantially comparable thereto, and
shall pay the costs of operating, maintaining, insuring, garaging and otherwise
using such automobile, subject to such policies as may be in effect from time to
time applicable to Employer's senior executives.
2. Other Benefits. (a) Employer shall maintain in effect at
all times during the Employment Period, at Employer's expense, a policy of
insurance on the life of Executive in the amount of $1,000,000 naming such
person as Executive shall designate from time to time as the owner and
beneficiary thereof. Executive agrees to aid, and cooperate in all reasonable
respects with, Employer in procuring such insurance, including, without
limitation, by submitting to the usual and customary medical examinations and
filling out, executing and delivering such applications and other instruments in
writing as may be reasonably required by an insurance company or companies to
which any application or applications for such insurance may be made by or for
Employer.
(b) Employer shall maintain in effect at all times during the
Employment Period, at Employer's expense, either a group or individual
disability policy covering the Executive.
(c) Employer shall reimburse Executive for all out-of-pocket
medical and related expenses incurred by Executive and his immediate family and
not otherwise covered by the Employer's insurance plans or programs, up to but
not exceeding an aggregate of $8,000 per year, upon his presentation to Employer
of signed, itemized accounts of such expenditures, all in accordance with
Employer's procedures and policies as adopted and in effect from time to time
and applicable to its senior executives.
(d) Employer shall pay or otherwise reimburse Executive for
the expenses incurred or to be incurred by him in connection with the membership
of Executive and his family in the country club to which they currently belong
or a substantially comparable club selected by Executive, up to but not
exceeding an aggregate of $1,500 per year, upon his presentation to Employer of
signed, itemized accounts of such expenditures, all in accordance with
Employer's procedures and policies as adopted and in effect from time to time
and applicable to its senior executives.
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 1, 2000 (the
"Effective Date"), between James J. Thome ("Executive") and BHA GROUP HOLDINGS,
INC., a Delaware corporation ("Employer").
Executive is currently employed by Employer as Executive Vice
President & Chief Operating Officer of Employer pursuant to an Employment
Agreement dated August 1, 1990, as amended by an amendment and restatement dated
September 1, 1993 (as amended and restated, the "Prior Agreement"). Employer
wishes to continue to employ Executive and Executive wishes to continue to be
employed by Employer pursuant to the terms and conditions set forth below. The
parties therefore agree that the Prior Agreement is terminated as of the
Effective Date and Executive shall thereafter be employed by Employer pursuant
to the terms of this Agreement as follows:
1. EMPLOYMENT OF EXECUTIVE
Employer hereby agrees to employ Executive and Executive
hereby agrees to be in the employ of Employer upon the terms and conditions
hereinafter set forth.
2. EMPLOYMENT PERIOD
The term of Executive's employment under this Agreement (the
"Employment Period") shall commence as of the Effective Date and shall, subject
to earlier termination as provided in Section 5, continue until September 30,
2002. The expiration date of the Employment Period shall be automatically
extended for an additional one year period (each thereof, a "Renewal Period") on
each October 1, commencing October 1, 2000, unless at least 90 days prior to any
such October 1st either Executive or Employer delivers written notice to the
other of his or its election to have such automatic extensions cease, in which
event the then current expiration date of the Employment Period shall continue
in effect for the balance of the Employment Period.
3. DUTIES AND RESPONSIBILITIES
During the Employment Period, Executive (i) shall be the
Executive Vice President & Chief Operating Officer of Employer and (ii) shall
devote his full attention and expend his best efforts, energies and skills on a
full-time basis to the business of the Company (as hereinafter defined).
Executive shall serve on Executive Committee of the Company. Executive shall
have such authority, discretion, power and responsibility, and shall be entitled
to office, secretarial and other facilities and conditions of employment, as are
customary or appropriate to his position and as are currently exercised by or
afforded to him. Employer shall use its best efforts to cause Executive to be
nominated as a member of Employer's management slate of directors and to be
elected as a director of Employer and a member of the Executive Committee of its
Board of Directors (if such a committee exists). If so elected, Executive shall
<PAGE>
serve without additional compensation as a director and member of such committee
(and, if so elected or appointed, as the case may be, as an officer or director
of any of Employer's subsidiaries), but if he is not so elected or appointed his
compensation hereunder shall in no way be affected. During the Employment
Period, Executive will be subject to all of the policies, rules and regulations
applicable to Employer's senior executives. Executive shall report directly to
the President and Chief Executive Officer of the Company. For all purposes of
this Agreement, the term "Company" means Employer and all corporations,
associations, companies, partnerships, firms and other enterprises controlled by
or under common control with Employer.
4. COMPENSATION AND RELATED MATTERS
4.1 Compensation, Generally. For all services rendered and
required to be rendered by, covenants of, and restrictions imposed on, Executive
under this Agreement, Employer shall pay to Executive during and with respect to
the Employment Period, and Executive agrees to accept, such base salary ("Base
Salary") and bonuses as are set forth on Exhibit 4.1. Executive's compensation
shall be reviewed by the Board of Directors prior to commencement of each
Renewal Period and may be adjusted upward only for such Renewal Period to take
into account Executive's prior performance and increases in the cost of living
not previously taken into account in setting Executive's compensation level.
4.2 Benefit Plans. To the extent that (i) Executive is
eligible under the general provisions thereof and (ii) Employer maintains such
plan or program for the benefit of its senior executives, during the Employment
Period the Executive shall be eligible to participate in any pension,
profit-sharing, or similar plan or program of the Employer now existing or
established hereafter. To the extent maintained in effect by the Employer for
its senior executives, the Executive shall also be entitled to participate in
any group insurance, hospitalization, medical, dental, accident, disability or
similar plan or program of the Employer now existing or established hereafter to
the extent that he is eligible under the general provisions thereof. The
Executive shall be entitled to receive other benefits generally available to all
senior executives of the Employer the extent that he is eligible therefor.
Executive's Base Salary shall (where applicable) constitute the compensation on
the basis of which the amount of Executive's benefits under any such plan or
program shall be fixed and determined. Without limiting the foregoing, Executive
shall be eligible for the benefits set forth on Exhibit 4.2. Any future change
in the benefits offered to Executive shall provide Executive with benefits, on
an aggregate basis, at least substantially equivalent to the benefits, on an
aggregate basis, provided to Executive prior to such change.
4.3 Business Expense Reimbursement. Employer shall reimburse
Executive for all business expenses reasonably incurred by him in the
performance of his duties under this Agreement upon his presentation, not less
frequently than monthly, of signed, itemized accounts of such expenditures, all
in accordance with Employer's procedures and policies as adopted and in effect
from time to time and applicable to its senior executives.
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<PAGE>
4.4 Vacations. Executive shall be entitled to vacations
consistent with those currently provided to Executive, which vacations shall be
taken at such time or times as shall not unreasonably interfere with Executive's
performance of his duties under this Agreement.
5. TERMINATION OF EMPLOYMENT PERIOD
5.1 Termination Without Cause. Employer or Executive may, by
notice to the other at any time during the Employment Period, terminate the
Employment Period without cause. The effective date of termination shall be 30
days after the date on which such notice is given.
5.2 By Employer: Cause. Employer may, at any time during the
Employment Period by action of its Board of Directors and upon notice to
Executive, terminate the Employment Period "for cause" effective immediately.
Such notice shall specify the cause for termination. For the purposes hereof,
"for cause" means:
(a) Executive's continued failure or refusal to perform his
duties and responsibilities hereunder after written warning of any such failure
or refusal and reasonable opportunity to appear before Employer's Board of
Directors to explain the reasons for such failure or refusal;
(b) Executive's dishonesty that directly or indirectly
materially affects, or has the likelihood of materially affecting, Employer;
(c) Executive's continued use of illegal drugs or excessive
use of alcohol, which has the effect of interfering materially with the
performance of his obligations under this Agreement, after written warning
thereof;
(d) Conviction of Executive for a felony or any crime
involving in either case an act of moral turpitude, dishonesty, fraud, or
unethical or unlawful business conduct; or
(e) Conduct by Executive that could reasonably be expected to
materially injure the reputation, business or business relationships of the
Company.
5.3 By Executive: Good Reason. Executive may, at any time
during the Employment Period by notice to Employer, terminate the Employment
Period under this Agreement "for good reason" effective immediately. For the
purposes hereof, "for good reason" means (a) any significant reduction in the
duties, responsibilities or prerequisites of Executive that Employer fails to
remedy within 30 days after notice thereof to Employer; (b) any change in the
compensation or benefits provided for in Exhibits 4.1 and 4.2 which fails to
provide Executive with compensation and benefits, on an aggregate basis, at
least substantially equivalent to the compensation and benefits, on an aggregate
basis, provided to Executive prior to such change that Employer fails to remedy
within 30 days after notice thereof to Employer; (c) unless Executive otherwise
consents, Executive being required to render his primary services more than
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<PAGE>
50 miles from the place he is then rendering his primary services; or (d) a
material breach by Employer of any provision of this Agreement that Employer
fails to remedy or cease within 30 days after notice thereof to Employer.
5.4 Disability. During the Employment Period, if the Executive
shall have a physical or mental incapacity or infirmity (other than alcoholism
or drug addiction) which results in his being treated as disabled (the
"Disability") for purposes of the Employer's long-term disability policy
covering the Executive, then Employer, by notice to Executive, shall have the
right to terminate the Employment Period at any time thereafter.
5.5 Death. The Employment Period shall end on the date of
Executive's death.
6. TERMINATION COMPENSATION
6.1 Termination Without Cause By Employer or By Executive For
Good Reason. If the Employment Period is terminated by Employer without cause
pursuant to Section 5.1, or by Executive for good reason pursuant to Section
5.3, then Executive shall be entitled to be paid by Employer, as liquidated
damages and not as a penalty, (a) all Base Salary that he would have been
entitled to receive pursuant to this Agreement if the Employment Period had
continued for one year after the termination of Employment Period (the "Relevant
Period") and (b) a payment equal to 70% of the maximum short-term bonus
Executive could have earned pursuant to Paragraph 2 or 3 of Exhibit 4.1 for the
fiscal year in which the Employment Period is terminated (without taking into
account any increase in the annual bonus resulting from the cumulative
three-year EPS, as defined in Paragraph 2(b), (c) and (d) of Exhibit 4.1). Any
payments required to be made pursuant to the preceding sentence shall be made on
the same dates such payments would have been made had Executive continued to be
employed by Employer during the Relevant Period. Executive shall not be required
to mitigate the amount of any payments provided for hereunder upon termination
of the Employment Period by seeking employment with any other person, or
otherwise and the amounts payable to Executive pursuant to this Section 6.1
shall not be reduced by amounts received by him from any employment or
engagements with other persons during the Relevant Period.
6.2 Termination Upon Death or Disability. If the Employment
Period is terminated by reason of Disability or the death of Executive, then
Executive or his estate shall be entitled to be paid by Employer (in addition to
any amounts payable under the insurance, plans or programs referred to in
Section 4.2) the pro rata portion of any short-term bonus that Executive would
have been entitled to receive pursuant to Paragraph 2 or 3 of Exhibit 4.1, in
respect of the fiscal year in which the Employment Period is terminated, if the
Employment Period had continued through the end of such fiscal year. Any payment
required to be made pursuant to the preceding sentence shall be made on the same
date such payment would have been made had the Employment Period continued
through such date. For the purposes hereof, the pro rata portion of any bonus in
respect of any fiscal year means the total amount of such bonus (as if the
Employment Period had not terminated prior to the end of fiscal year),
multiplied by a fraction, the numerator of which is the number of days within
such fiscal year on or prior to the
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<PAGE>
termination of the Employment Period and the denominator of which is the number
of days within such fiscal year.
6.3 Termination After a Change in Control. If the Employment
Period is terminated within three months prior to or 12 months after a Change in
Control by Employer without cause pursuant to Section 5.1, or by Executive for
good reason pursuant to Section 5.3, then Executive shall be entitled to be paid
by Employer, as liquidated damages and not as a penalty, (a) all Base Salary
that he would have been entitled to receive pursuant to this Agreement if the
Employment Period had continued for two years after the termination of the
Employment Period (the "CIC Relevant Period") and (b) two payments each equal to
70% of the maximum short-term bonus Executive could have earned pursuant to
Paragraph 2 or 3 of Exhibit 4.1 for the fiscal year in which the Employment
Period is terminated (without taking into account any increase in the annual
bonus resulting from the cumulative three-year EPS, as defined in Paragraph
2(b), (c) or (d) of Exhibit 4.1). Any payments required to be made pursuant to
the preceding sentence shall be made on the same dates such payments would have
been made had Executive continued to be employed by Employer during the CIC
Relevant Period. Executive shall not be required to mitigate the amount of any
payments provided for hereunder upon termination of the Employment Period by
seeking employment with any other person, or otherwise and the amounts payable
to Executive pursuant to this Section 6.3 shall not be reduced by amounts
received by him from any employment or engagements with other person during the
CIC Relevant Period. For purpose of this Agreement a "Change in Control" shall
mean the occurrence of any one of the following events:
(a) any "person," as such term is used in Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934, becomes a "beneficial
owner," as such term is used in Rule 13d-3 promulgated under that act, of 50% or
more of the capital stock of Employer of any class or classes having general
voting power under ordinary circumstances, in the absence of contingencies, to
elect the directors of a corporation ("Voting Stock");
(b) the majority of the Board of Directors of
Employer consists of individuals other than Incumbent Directors, which term
means the members of the Board of Directors on the Effective Date; provided that
any person becoming a director subsequent to such date whose election or
nomination for election was supported by two-thirds of the directors who then
comprised the Incumbent Directors shall be considered to be an Incumbent
Director;
(c) Employer adopts any plan of liquidation providing
for the distribution of all or substantially all of its assets;
(d) all or substantially all of the assets or
business of Employer is disposed of pursuant to a merger, consolidation or other
transaction (unless the shareholders of Employer immediately prior to such
merger, consolidation or other transaction beneficially own, directly or
indirectly, in substantially the same proportion as they owned the Voting Stock,
the Voting Stock or other ownership interests of the entity or entities, if any,
that succeed to the business of Employer); or
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<PAGE>
(e) Employer combines with another company and is the
surviving corporation but, immediately after the combination, the shareholders
of Employer immediately prior to the combination hold, directly or indirectly,
50% or less of the Voting Stock of the combined company.
6.4 Benefits After Termination. At the time the Employment
Period is terminated, Executive's rights to benefits under any benefit plans or
insurance plans or other death benefit programs or arrangements of Employer or
under any stock option, restricted stock or other plan of Employer shall be
determined, subject to the other terms and provisions of this Agreement, in
accordance with the terms and provisions of such plans, arrangements, or in the
case of stock options, restricted stock or other awards, any agreements relating
to the grant thereof. In addition, at the time the Employment Period is
terminated, Employee shall be entitled to payment for any accrued vacation time.
6.5 Additional Termination Benefits. If the Employment Period
is terminated by Employer without cause pursuant to Section 5.1, or by Executive
for good reason pursuant to Section 5.3, then during the Relevant Period or the
CIC Relevant Period, which ever is applicable, Executive shall be entitled to
continue medical insurance coverage for himself, spouse and dependents on the
same basis as he had prior to the termination of the Employment Period and,
unless otherwise specifically provided in Exhibit 4.2, to the benefits provided
for in Section 4.2 and Exhibit 4.2. In addition, if at the time the Employment
Period is terminated, Employee has the use of an Employer automobile, he shall
have the right at the end of the Relevant Period or the CIC Relevant Period,
which ever is applicable, to purchase the automobile from Employer or buy-out
any remaining lease to which the automobile is subject.
6.6 Excise Tax Gross-Up. In the event that Executive becomes
entitled to any payments under this Agreement, then if any such payments or any
other compensation, benefit or other amount from Employer for the benefit of
Executive ("Parachute Payments") will be subject to the tax imposed by Section
4999 of the Code (including any applicable interest and penalties, the "Excise
Tax"), no Parachute Payment shall be reduced (except for required tax
withholdings) and Employer shall pay to Executive by the earlier of the date
such Excise Tax is withheld from payments made to Executive or the date such
Excise Tax becomes due and payable by Executive, an additional amount (the
"Gross-Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the Parachute Payments and taxes based upon the
Tax Rate and Excise Tax upon the payment provided for by this Section 6.6, shall
be equal to the amount the Executive would have received if no Excise Tax had
been imposed. Employer shall reasonably determine in good faith whether any of
the Parachute Payments are subject to the Excise Tax and the amount of any
Excise Tax and shall notify Executive of its determination. Employer and
Executive shall file all tax returns and reports regarding such Parachute
Payments in a manner consistent with Employer's reasonable good faith
determination. For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay taxes at the Tax Rate applicable at the time of
the Gross-Up Payment. In the event that the Excise Tax is
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<PAGE>
subsequently determined to be less than the amount taken into account hereunder
at the time a Parachute Payment is made, Executive shall repay to Employer at
the time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-Up Payment attributable to such reduction plus interest
on the amount of such repayment at the rate provided in Section 1274(d)(1) of
the Code or other applicable provision of the Code, but only to the extent that
such interest is paid to Executive. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time a
Parachute Payment is made (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
Employer shall make an additional gross-up payment in respect of such excess
(plus any interest or penalties payable in respect of such excess) at the time
that the amount of such excess is finally determined. Employer shall reimburse
Executive for all reasonable fees, expenses, and costs related to determining
the reasonableness of any Employer position in connection with this paragraph,
preparation of any tax return or other filing that is affected by any matter
addressed in this paragraph and any audit, litigation or other proceeding that
is affected by any matter addressed in this paragraph.
6.7 Release. In partial consideration for Employer's
obligations to make the payments described in Section 6.1, 6.3 or 6.6 and to
provide the benefits described in Section 6.5, Executive shall execute and
deliver to Employer a general release satisfactory to Employer. If Executive
shall fail to execute and deliver such release to the Employer, or if Executive
shall revoke his consent to such release, if revocation is available, Executive
shall receive, in lieu of the payments and benefits provided in Section 6.1,
6.3, 6.5 and/or 6.6, payments and benefits, if any, determined in accordance
with the written personal policies of the Employer relating to severance then
generally applicable to employees with length of service and compensation level
of Executive.
6.8 No Other Termination Compensation. Executive shall not,
except as set forth in this Section 6, be entitled to compensation in respect of
any period following termination of the Employment Period.
7. LOCATION OF EXECUTIVE'S ACTIVITIES
Executive's principal place of business in the performance of
his duties and obligations under this Agreement shall be in the Kansas City
metropolitan area, Missouri. Notwithstanding the preceding sentence, Executive
will engage in such travel and spend such time in other places as may be
necessary and appropriate in furtherance of his duties hereunder.
8. EXCLUSIVITY OF SERVICES, CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS
8.1 Exclusivity of Services and Restrictions. During the
Employment Period and the two-year period thereafter (the "Post-Employment
Period"), Executive shall not, directly or indirectly, (a) be or become
interested in or associated with (as an officer, director, stockholder, partner,
consultant, owner, employee, agent, creditor or otherwise) any business that is
then, or
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<PAGE>
which then proposes to become, a competitor of the Company, provided, that the
foregoing shall not restrict Executive from the ownership, solely as an
investment, of securities of any business if such ownership is not as
controlling person of such business, not as a member of a group that controls
such business, and not as a direct or indirect beneficial owner of 5% or more of
any class of securities of such business, (b) induce or seek to influence any
employee of (or consultant to) the Company to leave its employ (or terminate
such consultancy), (c) aid a competitor or supplier of the Company in any
attempt to hire a person who shall have been employed by, or who was a
consultant to, the Company within the one-year period preceding the date of any
such aid, or (d) induce or attempt to influence any person who was a supplier or
customer to the Company during such period to transact business with a
competitor of the Company; provided, however, that, unless the Employment Period
has been terminated by Employer for cause pursuant to Section 5.2, the
provisions of this Section 8.1 shall continue in effect during the
Post-Employment Period only so long as Employer continues to pay Executive all
amounts to which Executive is entitled pursuant to Section 6 of this Agreement.
8.2 Confidential Information. Executive shall not at any time,
whether during the Employment Period or thereafter, disclose or use (except in
the course of his employment hereunder and in furtherance of the business of the
Company, or as required by applicable law) any confidential information, trade
secrets or proprietary data (including, without limitation, customer lists and
the identity of and any information relating to any customer) of the Company.
8.3 Disclosure of Restrictions. If Executive shall accept or
commence employment with, or agree to provide services to, any person (except a
person who is then affiliated with Employer) during the period from the date
hereof through the end of the Post-Employment Period then, and in such event, on
or before the date of such acceptance or agreement (and before commencement of
employment or the provision of services) Executive shall deliver a copy of this
Section 8 to his proposed employer.
8.4 Injunction. Notwithstanding any other provisions of this
Agreement, Executive acknowledges and agrees that in the event of a violation or
threatened violation of any of the provisions of this Section 8, Employer shall
have no adequate remedy at law and shall therefore be entitled to enforce each
such provision by temporary or permanent injunctive or mandatory relief obtained
in any court of competent jurisdiction without the necessity of proving damage
or posting any bond or other security, and without prejudice to any other
remedies that may be available at law or in equity.
9. INTELLECTUAL PROPERTY.
During the Employment Period, Executive shall disclose to
Employer all ideas, inventions and business plans developed by him during the
Employment Period that relate directly or indirectly to the Company's business,
including, without limitation, any process, operation, product or improvement
that may be patentable or copyrightable. Executive agrees that such shall be the
property of the Company and that he shall at the Company's request and
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cost do whatever is necessary to secure the rights thereto by patent, copyright
or otherwise to the Company.
10. MISCELLANEOUS
10.1 Notices. Any notice, consent or authorization required or
permitted to be given pursuant to this Agreement shall be in writing and sent to
the party for or to whom intended, at the address of such party set forth below,
by registered or certified mail (if available), postage paid, or at such other
address as either party shall designate by notice given to the other in the
manner provided herein.
If to Employer, to it at:
8800 East 63rd Street
Kansas City, Missouri 64133
Attention: Board of Directors
If to Executive, to him at:
James J. Thome
11400 West 149th Street
Overland Park, Kansas 66221
10.2 Taxes. Employer is authorized to withhold, from any
compensation or benefits payable hereunder to Executive, such amounts for income
tax, social security, unemployment compensation and other taxes as shall be
necessary or appropriate in the reasonable judgment of Employer to comply with
applicable laws and regulations.
10.3 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of Missouri applicable to
agreements made and to be performed therein.
10.4 Headings. All descriptive headings in this Agreement are
inserted for convenience only and shall be disregarded in construing or applying
any provision of this Agreement.
10.5 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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10.6 Severability. If any provision of this Agreement, or part
thereof, is held to be unenforceable, the remainder of such provision and this
Agreement, as the case may be, shall nevertheless remain in full force and
effect.
10.7 Entire Agreement. This Agreement contains the entire
agreement and understanding between Employer and Executive with respect to the
subject matter hereof. This Agreement supersedes any prior agreement between the
parties relating to the subject matter hereof.
10.8 Arbitration. Any controversy or claim arising out of,
under or relating to this Agreement or the performance or breach hereof, shall
be resolved by arbitration in Kansas City, Missouri, before the American
Arbitration Association, in accordance with the rules then in effect of such
Association; and judgment upon the award or decision rendered may be entered and
enforced in any court of competent jurisdiction. The award of the arbitrator in
any arbitration may, in its discretion, include provision for payment of legal
fees and expenses incurred by the prevailing party.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the Restatement Date.
BHA GROUP HOLDINGS, INC.
By: /s/ Lamson Rheinfrank, Jr.
------------------------------
Name: Lamson Rheinfrank, Jr.
Title: Chairman of the Board of Directors
Executive:
/s/ James J. Thome
---------------------------------
James J. Thome
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Exhibit 4.1
COMPENSATION
1. Base Salary. During the Employment Period, Employer shall
pay to Executive Base Salary, payable in equal monthly installments at such
times during each month as is customary with Employer with respect to its senior
executives, at a rate of $250,000 per annum.
2. Short-Term Bonus Arrangement Applicable for Fiscal Years
2000, 2001 and 2002.
(a) Executive shall be entitled to receive an annual cash
bonus for fiscal years 2000, 2001 and 2002 based on the consolidated earnings
per share of Employer ("EPS") and determined under the following Annual Cash
Incentive Matrix:
<TABLE>
<CAPTION>
====================================================================================================================
ANNUAL CASH INCENTIVE MATRIX
- --------------------------------------------------------------------------------------------------------------------
FISCAL YEAR EPS/BONUS EPS/BONUS EPS/BONUS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000 $0.80/$35,000 $0.95/$70,000 $1.00/$100,000
- --------------------------------------------------------------------------------------------------------------------
2001 $1.00/$35,000 $1.25/$70,000 $1.35/$100,000
- --------------------------------------------------------------------------------------------------------------------
2002 $1.20/$35,000 $1.50/$70,000 $1.75/$100,000
- --------------------------------------------------------------------------------------------------------------------
Cumulative $3.00/$105,000 $3.70/$210,000 $4.10/$300,000
====================================================================================================================
</TABLE>
(b) An annual cash bonus shall not be payable for (i) fiscal
year 2000, if EPS for such fiscal year is less than $.80 (ii) fiscal year 2001,
if EPS for such fiscal year is less than $1.00 or (iii) fiscal year 2002, if EPS
is less than $1.20; provided however, an annual cash bonus for fiscal year 2002
may be payable, as described hereinafter, if the cumulative EPS for the
three-year period ending on September 30, 2002 (the "cumulative three-year EPS")
is at least $3.00.
(c) If the EPS for a fiscal year or for the cumulative
three-year period is between the EPS levels shown on the above matrix, the
amount of the annual cash bonus shall be determined on a pro rata basis. The
maximum annual cash bonus for fiscal year 2000 or 2001 is $100,000. The maximum
annual cash bonus for fiscal year 2002 is $100,000 unless increased as a result
of the cumulative three-year period EPS as provided hereinafter. If the
cumulated three-year EPS exceeds $4.10, the total cumulative bonus payable shall
equal $300,000 plus $2,250 for each $.01 the cumulative three-year EPS exceeds
$4.10.
(d) The amount of the annual cash bonus for fiscal year 2002
may be increased from the amounts shown on the third horizontal line in the
above matrix as a result of the cumulative three-year EPS. The following example
illustrates how the annual cash bonus for fiscal year 2002 may be increased by
the cumulative three-year EPS:
<PAGE>
<TABLE>
<CAPTION>
EPS BONUS
--- -----
<S> <C> <C>
Fiscal Year 2000 $ .75 $ 0
Fiscal Year 2001 $ 1.25 $ 70,000
Fiscal Year 2002 $ 1.50 $ 70,000
------ ---------
Cumulative Three-Year Total $ 3.50 $140,000
Cumulative Adjustment $ 40,000 (additional amount paid in 2002)
Cumulative Bonus Paid $180,000
</TABLE>
The cumulative annual bonus for fiscal years 2000, 2001 and 2002 before the
cumulative adjustment would be $140,000. Because the cumulative three-year EPS
of $3.50 is between $3.00 and $3.70, the cumulative three-year bonus amount
attributable to $3.50 would be $180,000, a proration between $3.00/$105,000 and
$3.70/$210,000. Accordingly, the cumulative three-year bonus payable under the
bonus program would be $180,000. As such, an additional $40,000 would be payable
in 2002 to bring the fiscal year 2002 bonus to $110,000 and the cumulative
three-year bonus to $180,000.
(e) Within 75 days following the end of each of fiscal years
2000, 2001 and 2002, Employer shall pay to Executive the annual cash bonus
payable, if any, with respect of such fiscal year
3. Short-Term Bonus Arrangement(s) Applicable for Fiscal Years
After 2002. Executive shall be entitled to receive annual cash bonuses for years
after fiscal year 2002 under a bonus arrangement or arrangements to be
determined by Employer which shall provide Executive an annual bonus opportunity
of at least $100,000.
4. Long-Term Incentive Arrangement Applicable for Fiscal Years
2000, 2001 and 2002. On November 9, 1999, Executive received a grant of options
to purchase 36,000 shares of Company Common Stock. Pursuant to the Compensation
Committee's grant to Executive, the options, to the extent not previously
exercisable and vested, shall be immediately exercisable and vested upon the
termination of the Employment Period by Employer without cause pursuant to
Section 5.1, or by Executive for good reason pursuant to Section 5.3, if such
termination occurs within three months prior to or 12 months after a Change in
Control.
5. Long-Term Incentive Arrangement(s) Applicable for Fiscal
Years After 2002. In each fiscal year after 2002, Executive shall be entitled to
participate in a long-term incentive arrangement or arrangements to be
determined by Employer, which arrangements or arrangements shall provide
Executive an opportunity to earn an amount no less than the product of $100,000
multiplied by the numbers of fiscal years to which the arrangement or
arrangements relate.
<PAGE>
Exhibit 4.2
BENEFITS
1. Automobile. To facilitate the performance of Executive's
responsibilities under this Agreement, during the Employment Period, Employer
shall, at Employer's expense, continuously make available to Executive for
Executive's personal use the automobile currently made available to Executive,
or an automobile selected by Executive substantially comparable thereto, and
shall pay the costs of operating, maintaining, insuring, garaging and otherwise
using such automobile, subject to such policies as may be in effect from time to
time applicable to Employer's senior executives.
2. Other Benefits. (a) Employer shall maintain in effect at
all times during the Employment Period, at Employer's expense, a policy of
insurance on the life of Executive in the amount of $1,000,000 naming such
person as Executive shall designate from time to time as the owner and
beneficiary thereof. Executive agrees to aid, and cooperate in all reasonable
respects with, Employer in procuring such insurance, including, without
limitation, by submitting to the usual and customary medical examinations and
filling out, executing and delivering such applications and other instruments in
writing as may be reasonably required by an insurance company or companies to
which any application or applications for such insurance may be made by or for
Employer.
(b) Employer shall maintain in effect at all times during the
Employment Period, at Employer's expense, either a group or individual
disability policy covering the Executive.
(c) Employer shall reimburse Executive for all out-of-pocket
medical and related expenses incurred by Executive and his immediate family and
not otherwise covered by the Employer's insurance plans or programs, up to but
not exceeding an aggregate of $8,000 per year, upon his presentation to Employer
of signed, itemized accounts of such expenditures, all in accordance with
Employer's procedures and policies as adopted and in effect from time to time
and applicable to its senior executives.
(d) Employer shall pay or otherwise reimburse Executive for
the expenses incurred or to be incurred by him in connection with the membership
of Executive and his family in the country club to which they currently belong
or a substantially comparable club selected by Executive, up to but not
exceeding an aggregate of $1,500 per year, upon his presentation to Employer of
signed, itemized accounts of such expenditures, all in accordance with
Employer's procedures and policies as adopted and in effect from time to time
and applicable to its senior executives.
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 1, 2000 (the
"Effective Date"), between James C. Shay ("Executive") and BHA GROUP HOLDINGS,
INC., a Delaware corporation ("Employer").
Executive is currently employed by Employer as Senior Vice
President - Finance & Administration & Chief Financial Officer of Employer
pursuant to an Employment Agreement dated January 1, 1995 (the "Prior
Agreement"). Employer wishes to continue to employ Executive and Executive
wishes to continue to be employed by Employer pursuant to the terms and
conditions set forth below. The parties therefore agree that the Prior Agreement
is terminated as of the Effective Date and Executive shall thereafter be
employed by Employer pursuant to the terms of this Agreement as follows:
1. EMPLOYMENT OF EXECUTIVE
Employer hereby agrees to employ Executive and Executive
hereby agrees to be in the employ of Employer upon the terms and conditions
hereinafter set forth.
2. EMPLOYMENT PERIOD
The term of Executive's employment under this Agreement (the
"Employment Period") shall commence as of the Effective Date and shall, subject
to earlier termination as provided in Section 5, continue until September 30,
2002. The expiration date of the Employment Period shall be automatically
extended for an additional one year period (each thereof, a "Renewal Period") on
each October 1, commencing October 1, 2000, unless at least 90 days prior to any
such October 1st either Executive or Employer delivers written notice to the
other of his or its election to have such automatic extensions cease, in which
event the then current expiration date of the Employment Period shall continue
in effect for the balance of the Employment Period.
3. DUTIES AND RESPONSIBILITIES
During the Employment Period, Executive (i) shall be the
Senior Vice President - Finance & Administration & Chief Financial Officer of
Employer and (ii) shall devote his full attention and expend his best efforts,
energies and skills on a full-time basis to the business of the Company (as
hereinafter defined). Executive shall serve on Executive Committee of the
Company. Executive shall have such authority, discretion, power and
responsibility, and shall be entitled to office, secretarial and other
facilities and conditions of employment, as are customary or appropriate to his
position and as are currently exercised by or afforded to him.
During the Employment Period, Executive will be subject to all of the policies,
rules and regulations applicable to Employer's senior executives. Executive
shall report directly to the President & Chief Executive Officer of the Company.
For all purposes of this Agreement, the term
<PAGE>
"Company" means Employer and all corporations, associations, companies,
partnerships, firms and other enterprises controlled by or under common control
with Employer.
4. COMPENSATION AND RELATED MATTERS
4.1 Compensation, Generally. For all services rendered and
required to be rendered by, covenants of, and restrictions imposed on, Executive
under this Agreement, Employer shall pay to Executive during and with respect to
the Employment Period, and Executive agrees to accept, such base salary ("Base
Salary") and bonuses as are set forth on Exhibit 4.1. Executive's compensation
shall be reviewed by the Board of Directors prior to commencement of each
Renewal Period and may be adjusted upward only for such Renewal Period to take
into account Executive's prior performance and increases in the cost of living
not previously taken into account in setting Executive's compensation level.
4.2 Benefit Plans. To the extent that (i) Executive is
eligible under the general provisions thereof and (ii) Employer maintains such
plan or program for the benefit of its senior executives, during the Employment
Period the Executive shall be eligible to participate in any pension,
profit-sharing, or similar plan or program of the Employer now existing or
established hereafter. To the extent maintained in effect by the Employer for
its senior executives, the Executive shall also be entitled to participate in
any group insurance, hospitalization, medical, dental, accident, disability or
similar plan or program of the Employer now existing or established hereafter to
the extent that he is eligible under the general provisions thereof. The
Executive shall be entitled to receive other benefits generally available to all
senior executives of the Employer the extent that he is eligible therefor.
Executive's Base Salary shall (where applicable) constitute the compensation on
the basis of which the amount of Executive's benefits under any such plan or
program shall be fixed and determined. Without limiting the foregoing, Executive
shall be eligible for the benefits set forth on Exhibit 4.2. Any future change
in the benefits offered to Executive shall provide Executive with benefits, on
an aggregate basis, at least substantially equivalent to the benefits, on an
aggregate basis, provided to Executive prior to such change.
4.3 Business Expense Reimbursement. Employer shall reimburse
Executive for all business expenses reasonably incurred by him in the
performance of his duties under this Agreement upon his presentation, not less
frequently than monthly, of signed, itemized accounts of such expenditures, all
in accordance with Employer's procedures and policies as adopted and in effect
from time to time and applicable to its senior executives.
4.4 Vacations. Executive shall be entitled to vacations
consistent with those currently provided to Executive, which vacations shall be
taken at such time or times as shall not unreasonably interfere with Executive's
performance of his duties under this Agreement.
2
<PAGE>
5. TERMINATION OF EMPLOYMENT PERIOD
5.1 Termination Without Cause. Employer or Executive may, by
notice to the other at any time during the Employment Period, terminate the
Employment Period without cause. The effective date of termination shall be 30
days after the date on which such notice is given.
5.2 By Employer: Cause. Employer may, at any time during the
Employment Period by action of its Board of Directors and upon notice to
Executive, terminate the Employment Period "for cause" effective immediately.
Such notice shall specify the cause for termination. For the purposes hereof,
"for cause" means:
(a) Executive's continued failure or refusal to perform his
duties and responsibilities hereunder after written warning of any such failure
or refusal and reasonable opportunity to appear before Employer's Board of
Directors to explain the reasons for such failure or refusal;
(b) Executive's dishonesty that directly or indirectly
materially affects, or has the likelihood of materially affecting, Employer;
(c) Executive's continued use of illegal drugs or excessive
use of alcohol, which has the effect of interfering materially with the
performance of his obligations under this Agreement, after written warning
thereof;
(d) Conviction of Executive for a felony or any crime
involving in either case an act of moral turpitude, dishonesty, fraud, or
unethical or unlawful business conduct; or
(e) Conduct by Executive that could reasonably be expected to
materially injure the reputation, business or business relationships of the
Company.
5.3 By Executive: Good Reason. Executive may, at any time
during the Employment Period by notice to Employer, terminate the Employment
Period under this Agreement "for good reason" effective immediately. For the
purposes hereof, "for good reason" means (a) any significant reduction in the
duties, responsibilities or prerequisites of Executive that Employer fails to
remedy within 30 days after notice thereof to Employer; (b) any change in the
compensation or benefits provided for in Exhibits 4.1 and 4.2 which fails to
provide Executive with compensation and benefits, on an aggregate basis, at
least substantially equivalent to the compensation and benefits, on an aggregate
basis, provided to Executive prior to such change that Employer fails to remedy
within 30 days after notice thereof to Employer; (c) unless Executive otherwise
consents, Executive being required to render his primary services more than 50
miles from the place he is then rendering his primary services; or (d) a
material breach by Employer of any provision of this Agreement that Employer
fails to remedy or cease within 30 days after notice thereof to Employer.
3
<PAGE>
5.4 Disability. During the Employment Period, if the Executive
shall have a physical or mental incapacity or infirmity (other than alcoholism
or drug addiction) which results in his being treated as disabled (the
"Disability") for purposes of the Employer's long-term disability policy
covering the Executive, then Employer, by notice to Executive, shall have the
right to terminate the Employment Period at any time thereafter.
5.5 Death. The Employment Period shall end on the date of
Executive's death.
6. TERMINATION COMPENSATION
6.1 Termination Without Cause By Employer or By Executive For
Good Reason. If the Employment Period is terminated by Employer without cause
pursuant to Section 5.1, or by Executive for good reason pursuant to Section
5.3, then Executive shall be entitled to be paid by Employer, as liquidated
damages and not as a penalty, (a) all Base Salary that he would have been
entitled to receive pursuant to this Agreement if the Employment Period had
continued for one year after the termination of Employment Period (the "Relevant
Period") and (b) a payment equal to 70% of the maximum short-term bonus
Executive could have earned pursuant to Paragraph 2 or 3 of Exhibit 4.1 for the
fiscal year in which the Employment Period is terminated (without taking into
account any increase in the annual bonus resulting from the cumulative
three-year EPS, as defined in Paragraph 2(b), (c) and (d) of Exhibit 4.1). Any
payments required to be made pursuant to the preceding sentence shall be made on
the same dates such payments would have been made had Executive continued to be
employed by Employer during the Relevant Period. Executive shall not be required
to mitigate the amount of any payments provided for hereunder upon termination
of the Employment Period by seeking employment with any other person, or
otherwise and the amounts payable to Executive pursuant to this Section 6.1
shall not be reduced by amounts received by him from any employment or
engagements with other persons during the Relevant Period.
6.2 Termination Upon Death or Disability. If the Employment
Period is terminated by reason of Disability or the death of Executive, then
Executive or his estate shall be entitled to be paid by Employer (in addition to
any amounts payable under the insurance, plans or programs referred to in
Section 4.2) the pro rata portion of any short-term bonus that Executive would
have been entitled to receive pursuant to Paragraph 2 or 3 of Exhibit 4.1, in
respect of the fiscal year in which the Employment Period is terminated, if the
Employment Period had continued through the end of such fiscal year. Any payment
required to be made pursuant to the preceding sentence shall be made on the same
date such payment would have been made had the Employment Period continued
through such date. For the purposes hereof, the pro rata portion of any bonus in
respect of any fiscal year means the total amount of such bonus (as if the
Employment Period had not terminated prior to the end of fiscal year),
multiplied by a fraction, the numerator of which is the number of days within
such fiscal year on or prior to the termination of the Employment Period and the
denominator of which is the number of days within such fiscal year.
4
<PAGE>
6.3 Termination After a Change in Control. If the Employment
Period is terminated within three months prior to or 12 months after a Change in
Control by Employer without cause pursuant to Section 5.1, or by Executive for
good reason pursuant to Section 5.3, then Executive shall be entitled to be paid
by Employer, as liquidated damages and not as a penalty, (a) all Base Salary
that he would have been entitled to receive pursuant to this Agreement if the
Employment Period had continued for two years after the termination of the
Employment Period (the "CIC Relevant Period") and (b) two payments each equal to
70% of the maximum short-term bonus Executive could have earned pursuant to
Paragraph 2 or 3 of Exhibit 4.1 for the fiscal year in which the Employment
Period is terminated (without taking into account any increase in the annual
bonus resulting from the cumulative three-year EPS, as defined in Paragraph
2(b), (c) or (d) of Exhibit 4.1). Any payments required to be made pursuant to
the preceding sentence shall be made on the same dates such payments would have
been made had Executive continued to be employed by Employer during the CIC
Relevant Period. Executive shall not be required to mitigate the amount of any
payments provided for hereunder upon termination of the Employment Period by
seeking employment with any other person, or otherwise and the amounts payable
to Executive pursuant to this Section 6.3 shall not be reduced by amounts
received by him from any employment or engagements with other person during the
CIC Relevant Period. For purpose of this Agreement a "Change in Control" shall
mean the occurrence of any one of the following events:
(a) any "person," as such term is used in Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934, becomes a "beneficial
owner," as such term is used in Rule 13d-3 promulgated under that act, of 50% or
more of the capital stock of Employer of any class or classes having general
voting power under ordinary circumstances, in the absence of contingencies, to
elect the directors of a corporation ("Voting Stock");
(b) the majority of the Board of Directors of
Employer consists of individuals other than Incumbent Directors, which term
means the members of the Board of Directors on the Effective Date; provided that
any person becoming a director subsequent to such date whose election or
nomination for election was supported by two-thirds of the directors who then
comprised the Incumbent Directors shall be considered to be an Incumbent
Director;
(c) Employer adopts any plan of liquidation providing
for the distribution of all or substantially all of its assets;
(d) all or substantially all of the assets or
business of Employer is disposed of pursuant to a merger, consolidation or other
transaction (unless the shareholders of Employer immediately prior to such
merger, consolidation or other transaction beneficially own, directly or
indirectly, in substantially the same proportion as they owned the Voting Stock,
the Voting Stock or other ownership interests of the entity or entities, if any,
that succeed to the business of Employer); or
5
<PAGE>
(e) Employer combines with another company and is the
surviving corporation but, immediately after the combination, the shareholders
of Employer immediately prior to the combination hold, directly or indirectly,
50% or less of the Voting Stock of the combined company.
6.4 Benefits After Termination. At the time the Employment
Period is terminated, Executive's rights to benefits under any benefit plans or
insurance plans or other death benefit programs or arrangements of Employer or
under any stock option, restricted stock or other plan of Employer shall be
determined, subject to the other terms and provisions of this Agreement, in
accordance with the terms and provisions of such plans, arrangements, or in the
case of stock options, restricted stock or other awards, any agreements relating
to the grant thereof. In addition, at the time the Employment Period is
terminated, Employee shall be entitled to payment for any accrued vacation time.
6.5 Additional Termination Benefits. If the Employment Period
is terminated by Employer without cause pursuant to Section 5.1, or by Executive
for good reason pursuant to Section 5.3, then during the Relevant Period or the
CIC Relevant Period, which ever is applicable, Executive shall be entitled to
continue medical insurance coverage for himself, spouse and dependents on the
same basis as he had prior to the termination of the Employment Period and,
unless otherwise specifically provided in Exhibit 4.2, to the benefits provided
for in Section 4.2 and Exhibit 4.2. In addition, if at the time the Employment
Period is terminated, Employee has the use of an Employer automobile, he shall
have the right at the end of the Relevant Period or the CIC Relevant Period,
which ever is applicable, to purchase the automobile from Employer or buy-out
any remaining lease to which the automobile is subject.
6.6 Excise Tax Gross-Up. In the event that Executive becomes
entitled to any payments under this Agreement, then if any such payments or any
other compensation, benefit or other amount from Employer for the benefit of
Executive ("Parachute Payments") will be subject to the tax imposed by Section
4999 of the Code (including any applicable interest and penalties, the "Excise
Tax"), no Parachute Payment shall be reduced (except for required tax
withholdings) and Employer shall pay to Executive by the earlier of the date
such Excise Tax is withheld from payments made to Executive or the date such
Excise Tax becomes due and payable by Executive, an additional amount (the
"Gross-Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the Parachute Payments and taxes based upon the
Tax Rate and Excise Tax upon the payment provided for by this Section 6.6, shall
be equal to the amount the Executive would have received if no Excise Tax had
been imposed. Employer shall reasonably determine in good faith whether any of
the Parachute Payments are subject to the Excise Tax and the amount of any
Excise Tax and shall notify Executive of its determination. Employer and
Executive shall file all tax returns and reports regarding such Parachute
Payments in a manner consistent with Employer's reasonable good faith
determination. For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay taxes at the Tax Rate applicable at the time of
the Gross-Up Payment. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time a
6
<PAGE>
Parachute Payment is made, Executive shall repay to Employer at the time that
the amount of such reduction in Excise Tax is finally determined the portion of
the Gross-Up Payment attributable to such reduction plus interest on the amount
of such repayment at the rate provided in Section 1274(d)(1) of the Code or
other applicable provision of the Code, but only to the extent that such
interest is paid to Executive. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time a Parachute Payment
is made (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), Employer shall make
an additional gross-up payment in respect of such excess (plus any interest or
penalties payable in respect of such excess) at the time that the amount of such
excess is finally determined. Employer shall reimburse Executive for all
reasonable fees, expenses, and costs related to determining the reasonableness
of any Employer position in connection with this paragraph, preparation of any
tax return or other filing that is affected by any matter addressed in this
paragraph and any audit, litigation or other proceeding that is affected by any
matter addressed in this paragraph.
6.7 Release. In partial consideration for Employer's
obligations to make the payments described in Section 6.1, 6.3 or 6.6 and to
provide the benefits described in Section 6.5, Executive shall execute and
deliver to Employer a general release satisfactory to Employer. If Executive
shall fail to execute and deliver such release to the Employer, or if Executive
shall revoke his consent to such release, if revocation is available, Executive
shall receive, in lieu of the payments and benefits provided in Section 6.1,
6.3, 6.5 and/or 6.6, payments and benefits, if any, determined in accordance
with the written personal policies of the Employer relating to severance then
generally applicable to employees with length of service and compensation level
of Executive.
6.8 No Other Termination Compensation. Executive shall not,
except as set forth in this Section 6, be entitled to compensation in respect of
any period following termination of the Employment Period.
7. LOCATION OF EXECUTIVE'S ACTIVITIES
Executive's principal place of business in the performance of
his duties and obligations under this Agreement shall be in the Kansas City
metropolitan area, Missouri. Notwithstanding the preceding sentence, Executive
will engage in such travel and spend such time in other places as may be
necessary and appropriate in furtherance of his duties hereunder.
8. EXCLUSIVITY OF SERVICES, CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS
8.1 Exclusivity of Services and Restrictions. During the
Employment Period and the two-year period thereafter (the "Post-Employment
Period"), Executive shall not, directly or indirectly, (a) be or become
interested in or associated with (as an officer, director, stockholder, partner,
consultant, owner, employee, agent, creditor or otherwise) any business that is
then, or which then proposes to become, a competitor of the Company, provided,
that the foregoing shall
7
<PAGE>
not restrict Executive from the ownership, solely as an investment, of
securities of any business if such ownership is not as controlling person of
such business, not as a member of a group that controls such business, and not
as a direct or indirect beneficial owner of 5% or more of any class of
securities of such business, (b) induce or seek to influence any employee of (or
consultant to) the Company to leave its employ (or terminate such consultancy),
(c) aid a competitor or supplier of the Company in any attempt to hire a person
who shall have been employed by, or who was a consultant to, the Company within
the one-year period preceding the date of any such aid, or (d) induce or attempt
to influence any person who was a supplier or customer to the Company during
such period to transact business with a competitor of the Company; provided,
however, that, unless the Employment Period has been terminated by Employer for
cause pursuant to Section 5.2, the provisions of this Section 8.1 shall continue
in effect during the Post-Employment Period only so long as Employer continues
to pay Executive all amounts to which Executive is entitled pursuant to Section
6 of this Agreement.
8.2 Confidential Information. Executive shall not at any time,
whether during the Employment Period or thereafter, disclose or use (except in
the course of his employment hereunder and in furtherance of the business of the
Company, or as required by applicable law) any confidential information, trade
secrets or proprietary data (including, without limitation, customer lists and
the identity of and any information relating to any customer) of the Company.
8.3 Disclosure of Restrictions. If Executive shall accept or
commence employment with, or agree to provide services to, any person (except a
person who is then affiliated with Employer) during the period from the date
hereof through the end of the Post-Employment Period then, and in such event, on
or before the date of such acceptance or agreement (and before commencement of
employment or the provision of services) Executive shall deliver a copy of this
Section 8 to his proposed employer.
8.4 Injunction. Notwithstanding any other provisions of this
Agreement, Executive acknowledges and agrees that in the event of a violation or
threatened violation of any of the provisions of this Section 8, Employer shall
have no adequate remedy at law and shall therefore be entitled to enforce each
such provision by temporary or permanent injunctive or mandatory relief obtained
in any court of competent jurisdiction without the necessity of proving damage
or posting any bond or other security, and without prejudice to any other
remedies that may be available at law or in equity.
9. INTELLECTUAL PROPERTY.
During the Employment Period, Executive shall disclose to
Employer all ideas, inventions and business plans developed by him during the
Employment Period that relate directly or indirectly to the Company's business,
including, without limitation, any process, operation, product or improvement
that may be patentable or copyrightable. Executive agrees that such shall be the
property of the Company and that he shall at the Company's request and
8
<PAGE>
cost do whatever is necessary to secure the rights thereto by patent, copyright
or otherwise to the Company.
10. MISCELLANEOUS
10.1 Notices. Any notice, consent or authorization required or
permitted to be given pursuant to this Agreement shall be in writing and sent to
the party for or to whom intended, at the address of such party set forth below,
by registered or certified mail (if available), postage paid, or at such other
address as either party shall designate by notice given to the other in the
manner provided herein.
If to Employer, to it at:
8800 East 63rd Street
Kansas City, Missouri 64133
Attention: Board of Directors
If to Executive, to him at:
James C. Shay
1245 West 63rd Terrace
Kansas City, Missouri 64113
10.2 Taxes. Employer is authorized to withhold, from any
compensation or benefits payable hereunder to Executive, such amounts for income
tax, social security, unemployment compensation and other taxes as shall be
necessary or appropriate in the reasonable judgment of Employer to comply with
applicable laws and regulations.
10.3 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of Missouri applicable to
agreements made and to be performed therein.
9
<PAGE>
10.4 Headings. All descriptive headings in this Agreement are
inserted for convenience only and shall be disregarded in construing or applying
any provision of this Agreement.
10.5 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.6 Severability. If any provision of this Agreement, or part
thereof, is held to be unenforceable, the remainder of such provision and this
Agreement, as the case may be, shall nevertheless remain in full force and
effect.
10.7 Entire Agreement. This Agreement contains the entire
agreement and understanding between Employer and Executive with respect to the
subject matter hereof. This Agreement supersedes any prior agreement between the
parties relating to the subject matter hereof.
10.8 Arbitration. Any controversy or claim arising out of,
under or relating to this Agreement or the performance or breach hereof, shall
be resolved by arbitration in Kansas City, Missouri, before the American
Arbitration Association, in accordance with the rules then in effect of such
Association; and judgment upon the award or decision rendered may be entered and
enforced in any court of competent jurisdiction. The award of the arbitrator in
any arbitration may, in its discretion, include provision for payment of legal
fees and expenses incurred by the prevailing party.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the Restatement Date.
BHA GROUP HOLDINGS, INC.
By: /s/ Lamson Rheinfrank, Jr.
---------------------------------------
Name: Lamson Rheinfrank, Jr.
Title: Chairman of the Board of Directors
Executive:
/s/ James C. Shay
---------------------------------
James C. Shay
11
<PAGE>
Exhibit 4.1
COMPENSATION
1. Base Salary. During the Employment Period, Employer shall
pay to Executive Base Salary, payable in equal monthly installments at such
times during each month as is customary with Employer with respect to its senior
executives, at a rate of $170,000 per annum.
2. Short-Term Bonus Arrangement Applicable for Fiscal Years
2000, 2001 and 2002.
(a) Executive shall be entitled to receive an annual cash
bonus for fiscal years 2000, 2001 and 2002 based on the consolidated earnings
per share of Employer ("EPS") and determined under the following Annual Cash
Incentive Matrix:
<TABLE>
<CAPTION>
====================================================================================================================
ANNUAL CASH INCENTIVE MATRIX
- --------------------------------------------------------------------------------------------------------------------
FISCAL YEAR EPS/BONUS EPS/BONUS EPS/BONUS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000 $0.80/$30,625 $0.95/$61,250 $1.00/$87,500
- --------------------------------------------------------------------------------------------------------------------
2001 $1.00/$30,625 $1.25/$61,250 $1.35/$87,500
- --------------------------------------------------------------------------------------------------------------------
2002 $1.20/$30,625 $1.50/$61,250 $1.75/$87,500
- --------------------------------------------------------------------------------------------------------------------
Cumulative $3.00/$91,875 $3.70/$183,750 $4.10/$262,500
====================================================================================================================
</TABLE>
(b) An annual cash bonus shall not be payable for (i) fiscal
year 2000, if EPS for such fiscal year is less than $.80 (ii) fiscal year 2001,
if EPS for such fiscal year is less than $1.00 or (iii) fiscal year 2002, if EPS
is less than $1.20; provided however, an annual cash bonus for fiscal year 2002
may be payable, as described hereinafter, if the cumulative EPS for the
three-year period ending on September 30, 2002 (the "cumulative three-year EPS")
is at least $3.00.
(c) If the EPS for a fiscal year or for the cumulative
three-year period is between the EPS levels shown on the above matrix, the
amount of the annual cash bonus shall be determined on a pro rata basis. The
maximum annual cash bonus for fiscal year 2000 or 2001 is $87,500. The maximum
annual cash bonus for fiscal year 2002 is $87,500 unless increased as a result
of the cumulative three-year period EPS as provided hereinafter. If the
cumulated three-year EPS exceeds $4.10, the total cumulative bonus payable shall
equal $262,500 plus $1,968 for each $.01 the cumulative three-year EPS exceeds
$4.10.
(d) The amount of the annual cash bonus for fiscal year 2002
may be increased from the amounts shown on the third horizontal line in the
above matrix as a result of the cumulative three-year EPS. The following example
illustrates how the annual cash bonus for fiscal year 2002 may be increased by
the cumulative three-year EPS:
<PAGE>
<TABLE>
<CAPTION>
EPS BONUS
--- -----
<S> <C> <C>
Fiscal Year 2000 $ .75 $ 0
Fiscal Year 2001 $ 1.25 $ 61,250
Fiscal Year 2002 $ 1.50 $ 61,250
------ ---------
Cumulative Three-Year Total $ 3.50 $122,500
Cumulative Adjustment $ 35,000 (additional amount paid in 2002)
Cumulative Bonus Paid $157,500
</TABLE>
The cumulative annual bonus for fiscal years 2000, 20001 and 2002 before the
cumulative adjustment would be $140,000. Because the cumulative three-year EPS
of $3.50 is between $3.00 and $3.70, the cumulative three-year bonus amount
attributable to $3.50 would be $157,500, a proration between $3.00/$91,875 and
$3.70/$183,750. Accordingly, the cumulative three-year bonus payable under the
bonus program would be $157,500. As such, an additional $35,000 would be payable
in 2002 to bring the fiscal year 2002 bonus to $96,250 and the cumulative
three-year bonus to $157,500.
(e) Within 75 days following the end of each of fiscal years
2000, 2001 and 2002, Employer shall pay to Executive the annual cash bonus
payable, if any, with respect of such fiscal year
3. Short-Term Bonus Arrangement(s) Applicable for Fiscal Years
After 2002. Executive shall be entitled to receive annual cash bonuses for years
after fiscal year 2002 under a bonus arrangement or arrangements to be
determined by Employer which shall provide Executive an annual bonus opportunity
of at least $100,000.
4. Long-Term Incentive Arrangement Applicable for Fiscal Years
2000, 2001 and 2002. On November 9, 1999, Executive received a grant of options
to purchase 27,000 shares of Company Common Stock. Pursuant to the Compensation
Committee's grant to Executive, the options, to the extent not previously
exercisable and vested, shall be immediately exercisable and vested upon the
termination of the Employment Period by Employer without cause pursuant to
Section 5.1, or by Executive for good reason pursuant to Section 5.3, if such
termination occurs within three months prior to or 12 months after a Change in
Control.
5. Long-Term Incentive Arrangement(s) Applicable for Fiscal
Years After 2002. In each fiscal year after 2002, Executive shall be entitled to
participate in a long-term incentive arrangement or arrangements to be
determined by Employer, which arrangements or arrangements shall provide
Executive an opportunity to earn an amount no less than the product of $75,000
multiplied by the numbers of fiscal years to which the arrangement or
arrangements relate.
<PAGE>
Exhibit 4.2
BENEFITS
1. Automobile. To facilitate the performance of Executive's
responsibilities under this Agreement, during the Employment Period, Employer
shall, at Employer's expense, continuously make available to Executive for
Executive's personal use the automobile currently made available to Executive,
or an automobile selected by Executive substantially comparable thereto, and
shall pay the costs of operating, maintaining, insuring, garaging and otherwise
using such automobile, subject to such policies as may be in effect from time to
time applicable to Employer's senior executives.
2. Other Benefits. (a) Employer shall maintain in effect at
all times during the Employment Period, at Employer's expense, a policy of
insurance on the life of Executive in the amount of $1,000,000 naming such
person as Executive shall designate from time to time as the owner and
beneficiary thereof. Executive agrees to aid, and cooperate in all reasonable
respects with, Employer in procuring such insurance, including, without
limitation, by submitting to the usual and customary medical examinations and
filling out, executing and delivering such applications and other instruments in
writing as may be reasonably required by an insurance company or companies to
which any application or applications for such insurance may be made by or for
Employer.
(b) Employer shall maintain in effect at all times during the
Employment Period, at Employer's expense, either a group or individual
disability policy covering the Executive.
(c) Employer shall reimburse Executive for all out-of-pocket
medical and related expenses incurred by Executive and his immediate family and
not otherwise covered by the Employer's insurance plans or programs, up to but
not exceeding an aggregate of $8,000 per year, upon his presentation to Employer
of signed, itemized accounts of such expenditures, all in accordance with
Employer's procedures and policies as adopted and in effect from time to time
and applicable to its senior executives.
<PAGE>
EXHIBIT 11
BHA GROUP HOLDINGS, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED
March 31, 2000 March 31, 1999
------------------------------------------ -------------------------------------------
Net Earnings Shares Per-Share Net Earnings Shares Per-Share
(Numerator) (Denom.) Amt. (Numerator) (Denom.) Amt.
------------ -------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share:
Earnings available to common
shareholders $ 1,983 6,537 $ 0.30 $ (155) 7,021 $ (0.02)
Effect of dilutive
securities--stock options -- 44 -- --
Diluted earnings per share:
Earnings available to common
shareholders and assumed
conversion $ 1,983 6,581 $ 0.30 $ (155) 7,021 $ (0.02)
========================================== ===========================================
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE SIX MONTHS ENDED
March 31, 2000 March 31, 1999
------------------------------------------ -------------------------------------------
Net Earnings Shares Per-Share Net Earnings Shares Per-Share
(Numerator) (Denom.) Amt. (Numerator) (Denom.) Amt.
------------ -------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share:
Earnings available to common
shareholders $ 3,238 6,685 $ 0.48 $ 1,160 7,082 $ 0.16
Effect of dilutive
securities--stock options -- 51 -- 167
Diluted earnings per share:
Earnings available to common
shareholders and assumed
conversion $ 3,238 6,736 $ 0.48 $ 1,160 7,249 $ 0.16
========================================== ===========================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,305
<SECURITIES> 0
<RECEIVABLES> 33,296
<ALLOWANCES> 1,411
<INVENTORY> 27,751
<CURRENT-ASSETS> 65,816
<PP&E> 70,061
<DEPRECIATION> 35,098
<TOTAL-ASSETS> 111,528
<CURRENT-LIABILITIES> 18,362
<BONDS> 25,301
<COMMON> 87
0
0
<OTHER-SE> 58,088
<TOTAL-LIABILITY-AND-EQUITY> 111,528
<SALES> 36,435
<TOTAL-REVENUES> 44,201
<CGS> 25,074
<TOTAL-COSTS> 30,687
<OTHER-EXPENSES> 9,870
<LOSS-PROVISION> 88
<INTEREST-EXPENSE> 531
<INCOME-PRETAX> 3,113
<INCOME-TAX> 1,130
<INCOME-CONTINUING> 1,983
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,983
<EPS-BASIC> .30
<EPS-DILUTED> .30
</TABLE>
