<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended AUGUST 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From_________________
to_______________________.
COMMISSION FILE NUMBER 0-25068
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HASKEL INTERNATIONAL, INC.
--------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4107640
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 EAST GRAHAM PLACE
BURBANK, CALIFORNIA 91502
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(Address of principal executive offices) (Zip Code)
(818) 843-4000
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(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, address and former fiscal year, if changed since last report)
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13, or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_. No_____.
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicated by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes ______. No______ .
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
AS OF OCTOBER 10, 1996 THE REGISTRANT HAD 4,692,230 SHARES OF CLASS A COMMON
STOCK, AND 40,000 SHARES OF CLASS B COMMON STOCK OUTSTANDING.
<PAGE> 2
INDEX
HASKEL INTERNATIONAL, INC.
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - August 31, 1996 and May 31, 1996 . . . . . . . . . . . . . . . . . 3
Consolidated statements of operations - Three months ended August 31, 1996 and 1995 . . . . . . . 5
Consolidated statements of cash flows - Three months ended August 31, 1996 and 1995 . . . . . . . 6
Notes to consolidated financial statements - August 31, 1996 . . . . . . . . . . . . . . . . . . 7
Item 2. Management's discussion and analysis of financial condition and results of operations . . . . 8
PART II. OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
2
<PAGE> 3
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
August 31, May 31,
1996 1996
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,271,000 $ 8,239,000
Accounts receivable, net 9,748,000 9,581,000
Inventory, net 10,836,000 10,532,000
Prepaid expenses 414,000 356,000
Deferred income taxes 1,260,000 1,260,000
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TOTAL CURRENT ASSETS 29,529,000 29,968,000
PROPERTY, PLANT & EQUIPMENT, Net 6,021,000 5,526,000
PURCHASED TECHNOLOGY, Net 6,437,000 6,569,000
GOODWILL, Net 3,189,000 3,248,000
OTHER ASSETS 40,000 49,000
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TOTAL $45,216,000 $45,360,000
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</TABLE>
See notes to consolidated financial statements.
3
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HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
August 31, May 31,
1996 1996
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LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 993,000 $ 985,000
Account payable 3,445,000 3,510,000
Dividends payable 331,000 331,000
Accrued liabilities 2,550,000 3,089,000
Income taxes payable 407,000 162,000
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TOTAL CURRENT LIABILITIES 7,726,000 8,077,000
LONG-TERM DEBT 2,161,000 2,381,000
DEFERRED INCOME TAXES 278,000 334,000
OTHER ACCRUED LIABILITIES 2,331,000 2,348,000
COMMITMENTS & CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock: 2,000,000 shares authorized;
none issued and outstanding
Common Stock:
Class A, without par value; 20,000,000 shares
authorized; 4,692,230 and 4,688,230 issued
and outstanding at August 31, 1996 and
May 31, 1996, respectively 13,458,000 13,436,000
Class B, without par value; 40,000 shares
authorized, issued and outstanding at
August 31, 1996 and May 31, 1996 19,000 19,000
Retained Earnings 19,342,000 18,951,000
Cumulative foreign currency translation adjustment (99,000) (186,000)
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TOTAL SHAREHOLDERS' EQUITY 32,720,000 32,220,000
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TOTAL $45,216,000 $45,360,000
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See notes to consolidated financial statements.
4
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HASKEL INTERNATIONAL, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended August 31,
1996 1995
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<S> <C> <C>
SALES $13,287,000 $14,404,000
COST OF SALES 7,150,000 8,861,000
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GROSS PROFIT 6,137,000 5,543,000
EXPENSES:
Selling 2,003,000 2,175,000
General and administrative 2,682,000 2,280,000
Engineering design, research
and development 212,000 227,000
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Total 4,897,000 4,682,000
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OPERATING INCOME 1,240,000 861,000
OTHER INCOME (EXPENSE) 12,000 41,000
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INCOME BEFORE INCOME TAXES 1,252,000 902,000
PROVISION FOR INCOME TAXES 530,000 389,000
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NET INCOME $ 722,000 $ 513,000
=========== ===========
PER SHARE DATA:
NET INCOME $0.15 $0.11
=========== ===========
DIVIDEND $0.07 $0.07
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</TABLE>
See notes to consolidated financial statements.
5
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HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31, AUGUST 31,
1996 1995
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<S> <C> <C>
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 878,000 $ 263,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (600,000) (75,000)
Proceeds from sale of property 51,000
Purchase of subsidiary (net of cash and
cash equivalents acquired) (791,000)
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Net cash used in investing activities: (1,340,000) (75,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (212,000) (42,000)
Proceeds from issuance of common stock 22,000
Dividends declared (331,000) (331,000)
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Net cash used in financing activities: (521,000) (373,000)
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EFFECT OF EXCHANGE RATE ON
CASH AND CASH EQUIVALENTS 15,000 (45,000)
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NET DECREASE IN CASH AND CASH
EQUIVALENTS (968,000) (230,000)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 8,239,000 8,806,000
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 7,271,000 $8,576,000
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid for:
Interest $ 54,000 $ 66,000
=========== ==========
Income taxes $ 406,000 $ 162,000
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</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES -
On June 3, 1996, the Company's foreign subsidiary, Haskel Energy Systems,
Limited, acquired all of the outstanding stock of Hydraulic Mobile
Equipment Limited for $851,000 ($814,000 in cash and $37,000 in acquisition
costs) plus liabilities.
Fair value of assets acquired $ 1,067,000
Cash paid (851,000)
-----------
Liabilities assumed $ 216,000
===========
See notes to consolidated financial statements.
6
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PART I. FINANCIAL INFORMATION
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (which
comprise only normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the period ended August
31, 1996 are not necessarily indicative of the results that may be expected for
the year ending May 31, 1997. For further information, refer to the
consolidated financial statements and notes thereto for the year ended May 31,
1996.
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
August 31, May 31,
1996 1996
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<S> <C> <C>
Raw Materials $ 2,651,000 $ 3,335,000
Work in Process 2,256,000 2,032,000
Finished Products 5,929,000 5,165,000
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$10,836,000 $10,532,000
=========== ===========
</TABLE>
NOTE C - ACQUISITIONS
On June 3, 1996, the Company's foreign subsidiary, Haskel Energy Systems, Ltd.,
acquired all of the outstanding stock of Hydraulic Mobile Equipment Limited in
exchange for $814,000 in cash and $37,000 in acquisition costs. The business
is located in Manchester, England.
7
<PAGE> 8
HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales for the quarter ended August 31, 1996 were $13,287,000, as compared with
sales of $14,404,000 for the same period in the prior year, a decrease of
$1,117,000 or 7.8%. Sales for the first quarter of fiscal year 1997 for the
Industrial Products Group ("IPG") increased $3,040,000, or 33.1%, to
$12,215,000, as compared with $9,175,000 for the first quarter of fiscal year
1996. These results include increased sales and expanded operations by the IPG
in its international markets, particularly in Europe and the Pacific Rim.
Approximately $800,000 of this increase is attributable to the activities of
businesses acquired in Germany and the United Kingdom and the opening of an
office in the Netherlands, none of which were in place in the first quarter of
fiscal year 1996. Sales for the Electronic Products Group ("EPG") decreased
$4,157,000 to $1,072,000 for the quarter ended August 31, 1996, as compared
with $5,229,000 in the comparable period in the prior fiscal year. During the
quarter, the electronics industry continued to experience an excess supply of,
and generally lower demand for, electronic components. This is particularly
true of electronic memory components, the overall result of which was
substantially lower occurrences of critical shortages for these components.
This, together with increased competition and the effects of restructuring at
the EPG, accounted for the decrease in the EPG's sales for the quarter.
Gross profit for the quarter ended August 31, 1996 increased $594,000 to
$6,137,000, or 46.2 % of sales, as compared with gross profit of $5,543,000
(38.5% of sales) for the same period in fiscal year 1996. The IPG's gross profit
as a percentage of sales increased to 45.7% in the first quarter of fiscal year
1997 from 42.8% in the same period in fiscal year 1996, as the IPG continued to
focus on reducing product costs through improved manufacturing processes and
reduced material costs. The EPG's gross profit as a percentage of sales
increased to 52.0% in the quarter ended August 31, 1996 as compared with 30.8%
in the quarter ended August 31, 1995. This increase is largely the result of a
significant decrease in sales of low-margin products, principally memory
components, in the first quarter of fiscal year 1997, as compared with the first
quarter of fiscal year 1996.
Selling, general and administrative, and engineering ("operating") expenses
increased $215,000, or 4.6%, to $4,897,000 for the first quarter ended August
31, 1996, as compared with $4,682,000 for the comparable period in fiscal year
1996. As a result of the financial impact of declining market conditions in
the electronics industry, the Company reorganized its EPG operations in May
1996, resulting in the closure of its offices in Europe and a 30% reduction of
its employees at its U.S.
8
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HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
facility. In the first quarter of fiscal year 1997, the EPG's performance
continued to be weak. As a consequence, the Company took additional action,
including the elimination of certain management positions, resulting
in approximately $240,000 in severance and other costs. Apart from these
costs, operating expenses as a percentage of sales increased to 35.0% in the
quarter ended August 31, 1996 from 32.5% in the first quarter of 1996. This
increase is a direct result of the decreased sales levels at the EPG not being
fully offset by comparable reductions in operating expenses.
Net income increased $209,000 or 40.7% to $722,000 for the first quarter ended
August 31, 1996, as compared with $513,000 for the comparable prior period.
Although sales decreased in the first quarter of 1997 compared with the same
period in fiscal year 1996, improved gross profits resulted in increased net
earnings for the quarter ended August 31, 1996 as compared with the same
quarter in the prior period.
LIQUIDITY AND SOURCES OF CAPITAL
For the quarter ended August 31, 1996, net cash provided by operating
activities was $878,000 and resulted principally from net income in the period.
During the quarter ended August 31, 1996, cash used for investing activities
consisted primarily of cash used to acquire a new subsidiary and capital
expenditures. During the quarter ended August 31, 1995, cash used for
investing activities consisted of capital expenditures. Cash used in financing
activities for the first quarter ended August 31, 1996 and 1995 consisted
principally of payments on long-term debt and dividends paid to shareholders.
To insure the availability of funds to meet its various needs, the Company has
a comprehensive credit facility with its bank. The credit facility includes a
$5,000,000 revolving line of credit; a $4,000,000 acquisition line of credit
available for use in making acquisitions or capital expenditures; and a
$3,000,000 term loan. At August 31, 1996, the Company had no outstanding
balances under the revolving credit or acquisition lines. As of August 31,
1996, the balance of the term debt was $2,543,000, which bears interest at the
LIBOR rate plus 1-3/4% (7.25% at August 31, 1996.)
9
<PAGE> 10
HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
As of August 31, 1996, the Company had $7,271,000 in cash and cash equivalents,
and had working capital of $21,803,000, with a ratio of current assets to
current liabilities of approximately 3.8:1. This compares with cash and cash
equivalents of $8,239,000, and working capital of $21,891,000, with a ratio of
current assets to current liabilities of 3.7:1 as of May 31, 1996. The Company
believes it has adequate resources to achieve its operating goals for at least
the next 12 month period.
10
<PAGE> 11
HASKEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
During the first quarter of fiscal 1997, the Company's Electronic
Products Group ("EPG") continued to turn in a weak performance. This was the
result of ongoing weakness in the electronics industry; the lack of critical
shortages for electronic components because of an adequate supply of, and
decreased demand for, such products; increased competition; and the effects of
restructuring at the EPG.
In an effort to refocus the EPG's position in its niche market,
management replaced the President of the EPG, eliminated certain management
positions at the EPG and made significant changes to the EPG's sales and
marketing team during the first quarter. This resulted in approximately
$240,000 in severance and other costs.
The new management of the EPG is reviewing and updating, where
necessary, the Company's marketing strategies, training procedures, and
customer and vendor electronic databases. All of these efforts are ongoing.
The EPG continues to face increased competition in its business, including
competition from some former employees of the EPG.
Following the end of the quarter, the name of the EPG's principal
operating unit was changed to Haskel Electronic Products, Inc. (formerly M.G.
Electronics, Inc.).
Management of the Company is continuing to monitor closely
developments in the electronics industry and at the EPG, and will continue to
take such additional action as may be necessary.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
10.1 Employment Agreement dated July 8, 1996 regarding Doranda Frison
11.1 Statement Re: Computation of Earnings Per Share
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the fiscal quarter covered by
this report on Form 10-Q.
<PAGE> 12
HASKEL INTERNATIONAL, INC.
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.
HASKEL INTERNATIONAL, INC.
(REGISTRANT)
DATE 10-15-96 /S/ R. MALCOLM GREAVES
---------------------------------
R. Malcolm Greaves
President and
Chief Executive Officer
DATE 10-15-96 /S/ LONNIE D. SCHNELL
--------------------------------
Lonnie D. Schnell
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (herein "Agreement") is to be
effective Monday, July 8, 1996, and is by and between M.G. ELECTRONICS, INC.
(the "Company"), and DORANDA FRISON (the "Employee").
R E C I T A L S
A. The Company operates the Electronic Products Group
("EPG") for itself and for its parent corporation, Haskel International, Inc.
("HII").
B. Employee worked for predecessor to the Company as an
executive and is familiar with the Company's operations.
C. The Company desires to retain the services of
Employee, and Employee desires to accept employment ("Employment") with the
Company upon the terms and conditions hereinafter stated.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties do hereby mutually agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby
accepts such Employment based upon the terms and conditions herein set forth,
with such Employment to commence on July 8, 1996.
2. TERM. The initial term of this Agreement shall be twelve (12) months
("Term"), provided it may be extended by mutual agreement of the parties
hereto.
3. DUTIES OF EMPLOYEE. Unless and until the Company determines to change
Employee's titles and responsibilities, which the Company reserves the right to
do, Employee shall serve as the President of EPG. Employee shall be
responsible for all of the operations of the EPG, and will devote her full time
and best efforts to the performance of her duties. She will operate within the
reasonable goals, guidelines, budgets, directives, policies and procedures now
in effect and as from time to time established or approved by the Company.
Employee shall report directly to the Chief Executive Officer (CEO) of HII.
The Company's office hours are 7:00 a.m. to 4:00 p.m. Monday through Friday,
inclusive.
<PAGE> 2
However, Employee, as a senior executive, will work whatever hours and days are
necessary and required for the proper performance of her duties as President of
the EPG. Employee's principal operating base will be at Westlake Village where
the Company's headquarters and the EPG's headquarters are situated.
4. COMPENSATION, BENEFITS AND REIMBURSEMENTS.
4.1 Salary. The Company shall pay Employee at the rate
of Ten Thousand Dollars ($10,000) per month, payable in bi-weekly installments.
4.2 Incentive Bonus. The Company and Employee shall
agree to a formula incentive bonus plan based upon the performance of EPG under
the direction of Employee ("Bonus"), which plan will be worked out between
Employee, the CEO of HII and HII's Compensation Committee immediately after
signing this Agreement. Any such Bonus paid by the Company shall have no
impact on the other compensation, benefits and reimbursements provided for in
this Agreement.
4.3 Employee Benefits. The Company shall provide
Employee with the same employee benefit package, including automobile, medical
insurance coverage, two-week vacation and 401-K plan, as provided to the other
Company executives, in accordance with Company policy as it exists from time to
time. The two-weeks vacation must be taken in the year to which they relate.
Employee will maintain a current California driver's license at all times.
4.4 Executive Separation Plan. Should the Company be
sold and Employee not stay with the Company, then Employee shall receive
separation pay equal to ten (10) months compensation.
4.5 Stock Options. Upon approval by the SEC of HII's
Registration Statement for its Stock Option Plan, Employee will be granted
stock options for Fifty Thousand (50,000) shares of HII at the closing price of
the HII shares on the day the Registration Statement becomes effective, in
accordance with the standard provisions of the HII Stock Option Plan, which
stock options will vest at twenty percent (20%) per year with the first vesting
to be June 30, 1997.
4.6 Life Insurance. The Company may maintain "key man
life insurance" in such amounts as it may determine. Employee agrees to submit
to a medical examination, and to provide such medical records as may be
requested by the Company.
2
<PAGE> 3
4.7 Reimbursement of Employee Expenses. As a condition
of her Employment, Employee may be required to incur reasonable and necessary
expenses for the promotion and conduct of the EPG business, including expenses
for entertainment, transportation and travel accommodations, and dues and
subscriptions relating to the EPG business. All of the foregoing expenses
which are incurred in the performance of her duties under this Agreement shall
be reimbursed by the Company to Employee upon her furnishing invoices or paid
receipts therefor, which shall reflect in reasonable detail the expenditures
covered and their business purpose. Any unusual expenses and all travel
outside the United States will be cleared in advance with HII's CEO.
5. TRADE SECRETS, CONFIDENTIAL INFORMATION, AND COVENANT NOT TO COMPETE.
5.1 Employee Acknowledgments. Employee recognizes and
acknowledges that: (i) in the course of Employee's Employment by the Company,
it will be necessary for Employee to acquire information including, but not
limited to, information concerning the Company's, HII's and its subsidiaries'
sales, sales volumes, sales methods, sales proposals, customers and prospective
customers, identities of customers and prospective customers, identities of key
purchasing personnel in the employ of customers and prospective customers,
amounts or kinds of customers' purchases, sources of supply, computer programs,
systems documentation, special hardware, products hardware, related software
development, manuals, formulae, processes, methods, machines, compositions,
ideas, improvements, inventions, or other confidential or proprietary
information belonging to the Company, HII, and its subsidiaries, or relating to
the Company's, HII's and its subsidiaries' affairs ("Confidential
Information"); (ii) such Confidential Information is the property of the
Company, HII and its subsidiaries; (iii) the use, misappropriation, or
disclosure of such Confidential Information would constitute a breach of trust
and could cause irreparable injury to the Company, HII and its subsidiaries;
and (iv) it is essential to the protection of the Company's, HII's and its
subsidiaries' goodwill and to the maintenance of the Company's, HII's and its
subsidiaries' competitive positions, that such Confidential Information be kept
secret and that Employee not disclose such Confidential Information to others,
or use such Confidential Information to Employee's own advantage or the
advantage of others. Employee further recognizes and acknowledges that it is
essential for the proper protection of the business of the Company that
Employee be restrained from: (i) soliciting or inducing any employee of the
Company to leave the employ of the Company, HII and its subsidiaries; (ii)
hiring
3
<PAGE> 4
or attempting to hire any employee of the Company, HII and its subsidiaries;
and (iii) soliciting the trade of, or trading with, the customers and suppliers
of the Company, HII and its subsidiaries for any business purpose during
Employee's Employment with the Company, except on behalf of the Company, HII
and its subsidiaries.
5.2 Nondisclosure of Confidential Information. During
her Employment with the Company and for five (5) years after her Employment
ends, without regard to whether Employee's termination ("Termination") of
Employment was voluntary, for cause ("Cause") or without Cause, Employee shall
hold and safeguard the Confidential Information in trust for the Company, its
successors and assigns, and agrees that she shall not, without the prior
written consent of the Company, appropriate or disclose or make available to
anyone for use outside the Company's organization at any time, any of the
Confidential Information, whether or not developed by Employee, except as
required for the performance of Employee's duties to the Company.
5.3 Return of Materials. Upon the Termination of
Employee's Employment with the Company for any reason, whether voluntarily, for
Cause or without Cause, Employee shall promptly deliver to the Company all
correspondence, drawings, blueprints, manuals, letters, notes, notebooks,
reports, flowcharts, programs, proposals, software, and any documents
concerning the Company's, HII's or its subsidiaries' customers, or concerning
products or processes used by the Company or HII or its subsidiaries, and,
without limiting the foregoing, Employee shall promptly deliver to the Company
any and all other documents or materials containing or constituting
Confidential Information.
5.4 Nonsolicitation of Employees. During her Employment
with the Company and for one (1) year after such Employment terminates, without
regard to whether Employee's termination was voluntary, for Cause or without
Cause, Employee shall not, directly or indirectly, solicit, induce, or attempt
to induce, any employee, current or future, of the Company, HII or HII's
subsidiaries, to leave the Company, HII or HII's subsidiaries, for any reason
whatsoever, or hire any current or future employee of the Company, HII or HII's
subsidiaries.
5.5 Nonsolicitation of Customers and Suppliers. During
her Employment with the Company, Employee shall not, directly or indirectly,
solicit the trade of, or trade with, any customer or prospective customer, or
supplier or prospective supplier, of the Company, HII or its subsidiaries, for
any business purpose other than for the benefit of the Company.
4
<PAGE> 5
5.6 Covenant Not to Compete. During her Employment with
the Company, Employee shall not, directly or indirectly, engage, participate,
or provide services or information directly or indirectly, whether or not for
compensation, to any business in competition in any manner whatsoever with the
business of the Company, HII or its subsidiaries.
5.7 Covenants of the Essence. The covenants and
agreements of Employee set forth in this Paragraph 5 are of the essence of this
Agreement. The covenants and agreements of Employee in this Paragraph 5 shall
be construed as independent of any other provision in this Agreement. In the
event there is any future claim or cause of action by Employee against the
Company, whether predicated on this Agreement or not, the existence of such
cause or claim, whether or not bona fide, and the facts and circumstances
surrounding such cause or claim, shall not constitute a defense to the
enforcement by the Company of the covenants and agreements of Employee set
forth in this Paragraph 5.
6. TERMINATION. Notwithstanding the restrictions set forth in Paragraph
5, which shall, where applicable, survive the termination of this Agreement,
this Agreement shall terminate upon the occurrence of any of the following
events:
6.1 Disability of Employee. In the event of the
Employee's total and permanent disability (defined as any physical, mental or
emotional illness or disorder which may be expected to result in the death of
the Employee, or, for a period of at least sixty (60) consecutive days, or for
at least ninety (90) days in a period of one hundred fifty (150) days, by
reason of which Employee is unable to perform with the requisite skill the
material acts substantially necessary to the performance of the contemplated
services under this Agreement) during the term of this Agreement (it being
understood that the failure of Employee to perform such services under such
circumstances shall not be deemed to be a breach by Employee of any of
Employee's obligations hereunder), the Company may, at its option, terminate
Employee's Employment, and shall provide Employee or Employee's representative
with notice to that effect. Such Termination of Employment shall terminate
this Agreement, except that the restrictions in Paragraph 5, where applicable,
shall continue to be enforceable in accordance with Paragraphs 15 and 16.
6.2 Termination for Cause. The Company may, at its
election, terminate this Agreement at any time for Cause. Cause shall be
deemed to exist by reason of: (i)
5
<PAGE> 6
Employee's conviction or plea of guilty to the commission of a felony with
respect to the business and affairs of either the Company, HII or any
subsidiary of HII; (ii) the failure of Employee to perform the duties
reasonably required to be performed by her hereunder, or to carry out the
instructions of those to whom Employee reports (other than by reason of her
death or physical or mental disability), and such failure is material and
substantial, and continues, and is not remedied by Employee for a period of
more than ten (10) working days (other than by reason of physical or mental
disability, approved leave of absence, vacation or illness) after Employee
receives written notice from the Company specifying such failures in detail; or
(iii) a material and substantial violation by Employee of the provisions of
Paragraph 5 above, provided that Employee shall have ten (10) working days
following the date of the Company's written notice to Employee specifying in
detail the alleged breach(es), and Employee's failure to cure such violation
within said ten (10) day period. This Agreement shall terminate upon a
Termination for Cause, except that the restrictions in Paragraph 5 shall
continue, where applicable, to be enforceable in accordance with Paragraphs 15
and 16.
6.3 Voluntary Termination. If Employee voluntarily
terminates her Employment under this Agreement, this Agreement shall terminate,
except that the restrictions in Paragraph 5 shall continue, where applicable,
to be enforceable in accordance with Paragraphs 15 and 16. As used in this
Agreement, "Voluntary Termination" or "Voluntarily Terminated" shall mean
Employee's Termination of Employment for reasons other than death, disability
under Paragraph 6.1, or being expressly discharged by the Company.
6.4 Whenever Employee and the Company shall mutually
agree in writing to such Termination.
7. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto with respect to the subject matter. This Agreement is executed
without reliance upon any promise, warranty or representation by any party
other than those expressly contained herein, and each party has carefully read
this Agreement, and has been advised of its meaning and legal, tax and business
consequences by such party's attorneys, and signs this Agreement of the party's
own free will.
8. EFFECT OF WAIVER. The failure of any party to insist on strict
compliance with any of the terms, covenants, or conditions of this Agreement by
any other party shall not be
6
<PAGE> 7
deemed a waiver of that term, nor shall any waiver or relinquishment of any
right or power at any one time or times be deemed a waiver or relinquishment of
that right or power for all or any other times.
9. SEVERABILITY. All of the provisions of this Agreement are intended to
be distinct and severable. If any provision of this Agreement is or is
declared to be invalid, illegal, void or unenforceable in any jurisdiction for
any reason whatsoever, then such provision shall be deemed stricken and
ineffective in such jurisdiction only to the extent of such invalidity,
illegality, voidness or unenforceability, and the remaining terms and
provisions of this Agreement shall continue in full force and effect. Such
invalidity, illegality, voidness or unenforceability shall not affect either
the balance of such provision, to the extent it is not invalid or
unenforceable, or the remaining provisions hereof, nor render invalid, illegal,
void or unenforceable, such provision in any other jurisdiction. If any
provision of this Agreement shall be deemed invalid due to its scope or
breadth, such provision shall be deemed valid to the extent it may be
reconstrued, limited or stricken so as to be permitted by applicable law.
10. AMENDMENT. This Agreement may be amended or modified only by an
instrument in writing, stating the amendment or modification, and signed by the
parties hereto.
11. GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of California as applied to contracts
that are executed and performed entirely in California.
12. INTERPRETATION AND CONSTRUCTION. This Agreement has been fully and
freely negotiated by all of the parties hereto, shall be considered as having
been drafted jointly by all of the parties hereto, and shall not be interpreted
or construed against or in favor of any party on account of its participation
or lack thereof in the drafting of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be one and the same instrument.
7
<PAGE> 8
14. BINDING ON SUCCESSORS. Except as otherwise specified, the provisions
of this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, personal representatives,
successors and assigns.
15. DISPUTE RESOLUTION.
15.1 Notice of Claims. In the event of any dispute
arising under this Agreement, the party raising such dispute shall notify the
other party in writing of the nature of any such dispute in reasonable detail,
and specify any amount thereof in dispute.
15.2 Good Faith Settlement Negotiations. The parties
shall have good faith discussions designed to reconcile their differences, and
any resolution by them shall be final, binding and conclusive on the parties.
15.3 Judicial Arbitration and Mediation Services
Procedure. If the parties are unable to reach a resolution satisfactory to the
parties within twenty (20) days following receipt of such written notice of
dispute, the parties shall within ten (10) days thereafter mutually select a
retired judge of the panel of retired judges designated by the Los Angeles
Office of Judicial Arbitration and Mediation Services, Inc. ("JAMS"), to whom
they shall submit for resolution any item remaining in dispute. If the parties
do not agree upon such selection within such ten (10) day period, then, and in
such event, either of the parties may request that JAMS provide a list of three
(3) available retired judges, and each party shall strike one (1). If one
party refuses to strike one (1) within five (5) business days, then the other
party shall strike two (2). The remaining judge shall serve as the judge
designated to settle such dispute (the "Deciding Judge"). The Deciding Judge
and the parties shall meet within fifteen (15) days after such designation, and
the Deciding Judge shall act to resolve the dispute between the parties. The
Deciding Judge may resolve such dispute in any manner he deems appropriate, and
such determination shall be final and binding, may be entered in any court
having jurisdiction, and shall not be appealable for any reason except fraud.
Without limiting the generality of the foregoing, the Deciding Judge shall
determine all matters relating to the procedure for resolving such dispute,
including, without limitation, all matters relating to discovery, evidence,
briefs and motions.
15.4 Good Faith. All claims shall be made in good faith.
8
<PAGE> 9
15.5 Right to Injunctive Relief. Employee acknowledges
that the Company, HII and its subsidiaries will suffer irreparable injury, not
readily susceptible of valuation in monetary damages, if Employee breaches any
of her obligations under Paragraph 5. Accordingly, Employee agrees that the
Company will be entitled to injunctive relief against any breach or prospective
breach by Employee of Employee's obligations under Paragraph 5.
16. ATTORNEY'S FEES AND COSTS. If arbitration or any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees, costs, and
necessary disbursements in addition to other relief to which that party may be
entitled. This provision shall be construed as applicable to the entire
Agreement.
17. NOTICES. All notices, demands and other communications ("Notices")
required or permitted to be given by any provision of this Agreement, shall be
sufficiently given if in writing and sent by facsimile to a facsimile number
provided by the addressee, followed by being mailed by registered or certified
mail, return receipt requested, postage prepaid, or mailed by registered or
certified mail, return receipt requested, postage prepaid, or by messenger, to
the Company or to Employee, as the case may be, as follows:
To the Company:
M.G. Electronics, Inc.
31364 Via Colinas #103
Westlake Village, CA 91362
Fax: (818) 841-4291
WITH A COPY TO HII:
Haskel International, Inc.
100 E. Graham Place
Burbank, CA 91502
Fax: (818) 841-4291
9
<PAGE> 10
TO EMPLOYEE:
Doranda Frison
Or such other address, or to such other persons, as shall be furnished in
writing by any of the parties hereto; and any such Notice shall be deemed to
have been given on the day after the date so mailed (except that a notice of
change of address shall not be deemed to have been given until received by the
addressee), or, if sent by facsimile on the date transmitted, or if by
messenger, when received.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when duplicate counterparts have been signed by each of
the parties hereto and delivered one to Buyer and one to Employee.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
"The Company"
M.G. Electronics, Inc.
By: /s/ R. Malcolm Greaves
Title:__________________________
"Employee"
/s/ Doranda Frison
Doranda Frison
10
<PAGE> 1
EXHIBIT 11.1
HASKEL INTERNATIONAL, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------
AUGUST 31, AUGUST 31,
1996 1995
---------- ----------
PRIMARY & PRIMARY &
FULLY DILUTED FULLY DILUTED
------------- -------------
<S> <C> <C>
Net income used to compute
primary and fully diluted
income per share . . . . . . . . . . . . . $ 722,000 $ 513,000
=========== ===========
Weighted average number of
shares outstanding . . . . . . . . . . . . 4,731,550 4,728,230
Dilutive effect of stock options
and warrants . . . . . . . . . . . . . . . 71,664 0
----------- -----------
Number of shares used to
compute primary and fully
diluted earnings per share . . . . . . . . 4,803,214 4,728,230
=========== ===========
Net income per share . . . . . . . . . . $0.15 $0.11
=========== ===========
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, THE CONSOLIDATED STATEMENTS OF INCOME AND THE
CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 7,271
<SECURITIES> 0
<RECEIVABLES> 10,534
<ALLOWANCES> 786
<INVENTORY> 10,836
<CURRENT-ASSETS> 29,529
<PP&E> 13,397
<DEPRECIATION> 7,376
<TOTAL-ASSETS> 45,216
<CURRENT-LIABILITIES> 7,726
<BONDS> 0
13,477
0
<COMMON> 0
<OTHER-SE> (99)
<TOTAL-LIABILITY-AND-EQUITY> 45,216
<SALES> 13,287
<TOTAL-REVENUES> 13,287
<CGS> 7,150
<TOTAL-COSTS> 7,150
<OTHER-EXPENSES> 4,897<F1>
<LOSS-PROVISION> 33
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 1,252
<INCOME-TAX> 530
<INCOME-CONTINUING> 722
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 722
<EPS-PRIMARY> .15<F2>
<EPS-DILUTED> .15<F2>
<FN>
<F1>Other expenses are comprised of selling, general and administrative,
engineering design, research and development.
<F2>Fully diluted earnings per share is not disclosed in the Company's consolidated
financial statements since the maximum dilutive effect is not material.
</FN>
</TABLE>
