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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED MAY 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 NO. 0-25068
HASKEL INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
CALIFORNIA 95-4107640
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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100 EAST GRAHAM PLACE, BURBANK, CA 91502
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 843-4000
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: CLASS A COMMON
STOCK
NAME OF EACH EXCHANGE ON WHICH REGISTERED: THE NASDAQ STOCK MARKET
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes __ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant: $19,795,936 as of August 16, 1996.
As of August 16, 1996, the registrant had 4,688,230 shares of Class A
Common Stock and 40,000 shares of Class B Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Established in 1946, the Company manufactures pneumatically (compressed
air or gas) and hydraulically (oil) driven, high-pressure low-flow, fixed
displacement, reciprocating plunger, liquid pumps, gas boosters, chemical
injection pumps and air pressure amplifiers ("Haskel(R) Specialty Pumps") for
industrial, commercial, aerospace and military applications. Management believes
that the Company is one of the world's leading manufacturers of pneumatically-
driven, high-pressure liquid pumps and gas boosters, which represent the vast
majority of Haskel(R) Specialty Pumps manufactured by the Company. The Company
also manufactures high-pressure valves, regulators, and accessories to
complement Haskel(R) Specialty Pumps. The Company distributes third-party
manufactured valves, cylinders and actuators, and other pneumatic and hydraulic
devices.
Applying its engineering expertise and high-pressure pump, booster,
amplifier and relief valve technology, the Company is also engaged in the test
and control systems business. The Company's systems business consists of the
design and manufacture of many different kinds of apparatus that incorporate the
Company's products, engineering knowledge and experience in high pressure
technology, often incorporating electronic and computer controls to achieve a
functional piece of equipment. This integrated equipment (a "Haskel(R) System")
has a wide variety of applications throughout industry.
The Company also specializes in the international trading of electronic
components, utilizing its proprietary QRD(R) (Quick Response Delivery) global
trading network.
In its fiscal year ended May 31, 1996, approximately 42% of the
Company's business was manufacturing (including Haskel(R) Systems); the balance
was distribution of third-party fluid power products and distribution of
electronic components.
The Company's operations are organized into two groups, the Industrial
Products Group ("IPG") and the Electronic Products Group ("EPG"). The IPG
operates in two segments, industrial products manufacturing and industrial
products distribution. The EPG operates in one segment, electronic products
distribution.
The IPG's operations are headquartered in Burbank, California and
consist of the Company's Industrial Technologies Division ("ITD"), Haskel
Controls Division ("Controls"), and the Company's wholly owned subsidiary,
Haskel Energy Systems, Ltd. ("HESL"), located in Sunderland, England and its
divisions and subsidiaries. The ITD is the U.S. manufacturer of Haskel(R)
Specialty Pumps, Haskel(R) Systems, high-pressure valves, regulators and
accessories to complement these products. Controls distributes product lines
used primarily in the fluid power business, the largest line of which is the
Company's products. HESL represents the Company's European industrial products
operations with offices located in Sunderland and Manchester, England; Aberdeen,
Scotland; Lille, France; Wesel, Germany; and the most recent addition, after the
completion of the fiscal year, in Zoetermeer, the Netherlands. HESL and its
divisions and subsidiaries primarily distribute Haskel(R) Specialty Pumps and
design and manufacturer Haskel(R) Systems for specific applications required by
customers in Europe, India, and the Middle East. HESL and its divisions and
subsidiaries also manufacture products needed for HESL's markets that are not
produced in the United States, such as the Jetflow Airmover(R), and distribute
products of other manufacturers.
The EPG consists of M.G. Electronics, Inc. ("MGE"), headquartered in
Westlake Village, California, and its purchasing office in Hong Kong. The EPG
provides purchasing services, product substitution and solutions to shortage and
delivery problems of original
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equipment manufacturers ("OEMs") of electronic components. The EPG specializes
in locating sources (which includes researching, evaluating and supplying) for
circuit board-level components, such as integrated circuits, capacitors,
transistors and resistors.
Certain financial information about the Company's business segments and
its domestic and foreign operations and export sales is presented in Note 14 of
the Notes to Consolidated Financial Statements appearing in this Report.
Inter-segment sales are principally sales from the IPG manufacturing segment to
the IPG distribution segment. No single customer accounted for more than 10% of
sales during fiscal 1994, 1995 or 1996.
INDUSTRIAL PRODUCTS GROUP - MANUFACTURING
Products and Markets
The Company is one of the world's leading manufacturers of
pneumatically-driven, high-pressure liquid pumps and gas boosters, which
represent the vast majority of Haskel(R) Specialty Pumps manufactured by the
Company. Haskel(R) Specialty Pumps produce very high pressures (typically 4,000
to 20,000 psi with a capability of up to 150,000 psi) at low volumes of flow,
with rated fluid power of up to ten horsepower. Haskel(R) Specialty Pumps
utilize reciprocating plungers with fixed displacement bodies to generate these
pressures. Management believes that the high quality of the Company's products,
in terms of engineering design, reliability, durability and performance, enables
the Company to sell such products at a premium price. Haskel(R) Specialty Pumps
are designed for niche markets where high pressure with low flow of liquids or
gases at ten horsepower or less is required. The pump's function is to generate
pressure, taking in low-pressure, low-flow liquids and gases and producing
high-pressure, low-flow liquids and gases. The energy produced by a pump is used
to move a linear or rotary actuator, generate pressure for testing or metal
forming, charge pressure containers, and transfer fluids under pressure.
Additional products include metal seals for extreme temperature applications;
the Company's patented Hydroswage(R) products, which use high liquid pressure
for metal expansion, creating a high integrity joint between the metal tube and
the tube sheet as found in boilers and heat exchangers; and the Jetflow
Airmover(R), which ventilates stagnant environments, such as mines, by diluting
and removing hazardous gases. The Company has also entered into private branding
agreements with other companies in the pressure industry to have manufactured
certain valve and pump products in the Company's name for marketing by the
Company in selected geographic areas.
Haskel's systems business consists of the design and manufacture of
many different kinds of apparatus that incorporate the Company's products,
engineering knowledge and experience in high pressure technology, together with
third party products. They often incorporate electronic computer controls to
achieve a functional piece of equipment. Haskel(R) Systems have a wide variety
of applications throughout industry. Some of the many applications of Haskel(R)
Systems include:
- pressure testing hoses, valves and cylinders
- mixing liquids and gases under pressure
- injecting gases into plastics in order to improve the molding
process
- boosting oxygen for life support and emergency service use
- boosting nitrogen for charging cryostats in missile guidance
applications, commercial aircraft tires, struts and escape
chutes
- pressurizing argon for infrared cooling in missiles
- boosting helium for testing automotive brake and air
conditioning hoses and charging satellite rocket motors
- pressure charging and testing of automotive air bag cannisters
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- recovering and charging chlorofluorocarbons ("CFC's") used in
air conditioning and refrigeration applications
- recovering and charging SF6 (Sulfar Hexafluoride), an arc
suppressant gas, used in high voltage switch gear
- pressurizing carbon dioxide for filling fire extinguishers and
manufacturing foam
- compressing natural gas (CNG) for use as a vehicle fuel
- hydrostatic forming of metal using the Company's
Hydroswage(R) process
- work holding and press overload applications
- chemical injection and well head control applications for oil
and gas production platforms
- boosting shop compressed air
In addition, other manufacturers incorporate Haskel(R) Specialty Pumps in their
equipment for these and similar purposes.
During fiscal year 1996, the Company began producing, in the United
States, a series of "test bench" Haskel(R) Systems designed to meet the growing
demand for devices that test the integrity of valves, hoses, cylinders, and
other components commonly used by the nuclear, oil and gas, airline, chemical
and power generation industries in high-pressure liquid and gas applications.
Since 1992, the Company has been designing and manufacturing similar systems at
HESL.
The Company has qualified for and been awarded the ISO 9001
accreditation, a total quality certification from the International Standards
Organization ("ISO"), for HESL's United Kingdom operations and the Company is in
the process of applying for such certification for its IPG operations. The ISO
9001 accreditation gives recognition for maintaining an internationally
recognized standard of quality in both its products and engineering and should
help the Company maintain a competitive advantage.
On November 30, 1995, HESL acquired the high-pressure pump distribution
and systems fabrication division of Armaturenbau, GmbH, located in Wesel,
Germany for approximately $412,000. Previously, Armaturenbau had been
distributing the Company's products in Germany. The new business, known as
Haskel HochdruckSysteme GmbH, distributes Haskel products and designs and
manufactures Haskel(R) Systems for the German market.
The markets served by the IPG are substantial and diversified, with no
single customer accounting for 10% or more of its sales. Total IPG -
Manufacturing sales were approximately 45.9%, 40.9% and 42.3% of the Company's
total sales in 1994, 1995 and 1996, respectively.
The following table lists the broad range of industries utilizing
Haskel(R) Specialty Pumps and Haskel(R) Systems. The industries that, taken in
the aggregate, account for a majority of the Company's sales are marked with an
asterisk(*).
INDUSTRIES USING HASKEL(R) PRODUCTS
Abrasive Pressure Water Cleaning Marine Engineering
Aerospace and Aircraft * Mining
Automotive * Medical Equipment and Emergency Support
Services
Boiler and Heat Exchanger Manufacture Oil and Gas Exploration and
Production *
Brewing and Distilling Oil and Petrochemical Refining and
Production *
Chemicals Pressure Testing *
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CNG Charging Stations Paper Industry
Defense * Plastic Extrusion Machinery
Diving Charging Equipment Railways
Electronic/Electrical Machinery Refrigeration and Air Conditioning
Fire Fighting and Related Services Research and Development
Establishments, including
General Engineering * Universities and Colleges
I.C. Engines and Compressors Textile Engineering
Industrial Machinery Utilities, Power Generation,
Valve Testing and Packing Removal Electricity Distribution *
Although specific applications may have a limited life, the useful
lives of the IPG's products are generally quite long. Product parts are usually
replaceable from current stock; older products can be modified to include the
latest technology. Spare parts requirements grow each year as the number of
installed units increases, providing an increasing source of revenue.
Facilities and Materials
The IPG manufactures Haskel(R) Specialty Pumps and related products and
Haskel (R) Systems at the Company's facilities in Burbank, California, and in
Sunderland, England. Manufacturing operations in Sunderland include products
that are not produced in the United States, which are needed for European
markets, such as the Jetflow Airmover(R). Haskel(R) Systems are also designed
and manufactured at facilities in Manchester, England; Lille, France; and
Wesel, Germany. Approximately 76% of the components used in its products are
manufactured by the Company, with the balance subcontracted to outside
machining and processing companies.
Historically, the IPG has been able to pass a significant portion of
increased component part prices through to their customers by price increases,
although there is no assurance that they will be able to continue to do so in
the future. Currently, all materials used by the Company in the manufacturing
process are readily available at reasonable prices, and Management does not
anticipate any adverse change in this situation. Management has an ongoing
program to improve its manufacturing processes.
Backlog
Backlog of unfilled firm orders for the IPG - Manufacturing segment was
approximately $5,114,000 at May 31, 1996, as compared to approximately
$3,630,000 at May 31, 1995. This increase in backlog was due primarily to
increased orders as a result of continued internal growth as the IPG continues
to expand its international markets, especially throughout Europe and the
Pacific Rim. Substantially all of the Company's fiscal 1996 year-end backlog is
expected to be recognized as revenue in fiscal 1997.
Pursuant to the customary terms of the Company's agreements with
government contractors and other customers and in accordance with industry
custom, a customer may generally cancel or reschedule an order without penalty
if the Company has not made financial commitments with respect to the order.
Lead times for the release of purchase orders depend upon the scheduling and
forecasting practices of the Company's individual customers, which also can
affect the timing of the conversion of the Company's backlog into revenues. For
these reasons, among others, the Company's backlog at a particular date may not
be indicative of its future revenue, and there is no assurance that the backlog
will be completed and recorded as revenue. Cancellation of pending contracts or
termination or reductions of contracts in progress may have a materially adverse
effect on the Company's business and results of operations.
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INDUSTRIAL PRODUCTS GROUP - DISTRIBUTION
Haskel(R) Specialty Pumps and Haskel(R) Systems
The Company's manufactured products are sold through a direct sales
force, independent distributors, and authorized manufacturers' representatives
throughout the world. The largest distribution of the Company's products are
through its own subsidiaries and divisions. Products are sold throughout the
United States; Canada; the United Kingdom; other European countries, including
France, Germany, and the Netherlands; the former Soviet Republics; Pacific Rim
countries, including China and Japan; Australia; Africa; South America; India;
and the Middle East.
Distribution of the IPG's products is accomplished through a network of
82 distributors in the United States and Canada and 64 distributors in Europe,
the Asia-Pacific region and Central and South America. The activities of these
distributors are supported by the Company's regional sales managers who have
extensive technical backgrounds.
Third-Party Pumps and Related Products
The IPG distributes over 40 different lines of third-party
manufactured products worldwide. These products are used primarily in the pump
and pump-related fluid power business, and include cylinders, actuators,
pneumatic and hydraulic valves, hoses and fittings, high-pressure components,
pumps and motors, as well as a major line of seals and lubricants.
In June 1996, HESL acquired Hydraulic Mobile Equipment Ltd. ("HME") for
approximately $814,000. HME, located in Manchester, England, distributes a range
of high-pressure gear pumps, valves and motors in the United Kingdom and has a
growing systems business. Additionally, in June 1996, the Company opened a new
facility in Zoetermeer, the Netherlands, which will provide sales and service
for the Company's full range of products and systems in the Benelux countries.
Total IPG - Distribution sales were approximately 44.7%, 34.3% and
31.9% of the Company's total sales in fiscal 1994, 1995 and 1996, respectively.
Backlog of unfilled firm orders for the IPG - Distribution segment was
approximately $3,276,000 at May 31, 1996, as compared to approximately
$2,979,000 at May 31, 1995. Substantially all of the Company's fiscal 1996
year-end backlog is expected to be recognized as revenue in fiscal 1997.
ELECTRONIC PRODUCTS GROUP
The EPG provides purchasing services, product substitution and
solutions to shortage and delivery problems of OEMs of electronic components.
The EPG specializes in locating sources (which includes researching, evaluating
and supplying) for circuit board-level components, such as integrated circuits,
capacitors, transistors and resistors. There are more than 500,000 separate
components available for use in electronic systems, each designated by a unique
part number. A typical electronic system may consist of hundreds of components;
if any single component becomes unavailable, an entire production line could
come to a halt. Changing manufacturer requirements, advancing technology, and
the shortening of the cycle of bringing new products to market, as manufacturers
adopt "just-in-time" systems and related inventory reduction procedures, often
result in last-minute parts shortages, requiring buyers to spend an increasing
percentage of their time trying to find missing components for their production
lines.
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When the EPG receives a customer request, it uses its databases and
CD-ROM engineering library to determine the availability of the requested,
identical or alternative components and immediately transmits inquiries
regarding these parts to all sources and stocking locations that have been
identified as potential suppliers. Upon locating a suitable component, the EPG
ascertains the purchase price and then quotes a sale price to the potential
buyer. Through negotiation with the potential customer, a mutually satisfactory
price is reached. The EPG then purchases the product and sells it to the
customer. Because most of MGE's customers have an immediate and urgent need for
a product that they have been unable to find elsewhere, the EPG achieves profit
margins that are higher than customary for electronic components.
The EPG uses independent manufacturers' representative organizations,
telemarketing and Internet E-Mail gateways to allow purchasing departments to
transmit requirements directly. As part of a multi-pronged program to market its
services to potential customers, preprinted personalized forms are used that
enable buyers to simply write in the part number and number of units required
and transmit their requests to the EPG. The EPG is using its international
purchasing office in Hong Kong to assist in procuring parts in the Pacific Rim.
MGE has qualified for and been awarded the ISO 9002 accreditation, a
total quality certification from the ISO, for its Westlake Village, California
facility. The ISO 9002 accreditation attests that MGE maintains an
internationally recognized standard of quality in its distribution business
and should help MGE's competitive advantage.
In May 1996, the Company reorganized the EPG by closing its offices in
the United Kingdom and Germany. The United Kingdom operations were consolidated
into the Westlake Village, California facility, while the German operations are
being handled by local representatives in that country. In addition to the
closing of these facilities, there were selective reductions in employees at the
Westlake Village facility. In total, approximately 13 individuals, or 30%, of
the EPG's employees were terminated. Management believes that these actions were
necessary to respond to the slow down in the worldwide electronics industry
served by the EPG, as many major computer and semiconductor manufacturers began
to reduce the previous buildup of inventories. The EPG's Hong Kong office
has not been closed. Management intends to monitor the situation and take
further steps as appropriate.
Quick Response Distribution(R) System
Through the Company's global sourcing and trading network and
proprietary QRD(R) system, the EPG is a worldwide distributor of electronic
components, particularly components for circuit boards. The EPG utilizes the
QRD(R) system for locating and trading electronic components and services
requested by its customers. Upon locating an appropriate component, the EPG
uses the QRD(R) system to purchase and resell the component. Key elements of the
QRD(R) system are its information databases, communications software, a CD-ROM
engineering library and the technical expertise of its staff. The value of the
QRD(R) system is derived primarily from two factors: first, the large size and
international scope of its database, permitting a comprehensive product search
and enabling it to solve customer parts shortages; and second, the speed with
which it can locate, purchase and deliver parts, reducing customers' needs for
inventories, increasing customer inventory turns and facilitating "just-in-time"
procurement systems. Moreover, the QRD(R) system permits the EPG to operate
with minimal inventories, purchasing all parts to customer order.
The heart of the EPG's QRD(R) system is its ability to access and
communicate automatically in real time with thousands of suppliers throughout
the world. A network of 40 high-performance PC workstations is utilized,
integrated into a database, an accounting and
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communication system and a fully-networked integrated computer/telecopier system
to communicate rapidly with over 8,400 vendors worldwide, independent
representatives' offices, and international purchasing offices. Additionally,
on-line access to information regarding hundreds of millions of dollars of
vendor component inventories is available. For immediate alternate sourcing,
the EPG can consult a computerized technical library, which includes a
comprehensive CD-ROM database of circuit board component specifications.
Total EPG sales were approximately 9.4%, 24.8%, and 25.8% of the
Company's total sales in fiscal 1994, 1995, and 1996 respectively.
The EPG's distribution business, through its QRD(R) system, provides
its customers a short lead time between orders and delivery. As a consequence,
there is not a significant backlog of orders in the operation of this business
segment.
COMPETITION
Manufacturing
In general, the principal competitive factors in the markets in which
the Company's IPG Manufacturing segment participates are product quality and
performance, availability, reliability, technical support and price.
In the high-pressure pump manufacturing industry, the Company's IPG -
Manufacturing segment has three major competitors: Teledyne Fluid Systems, a
division of Teledyne Inc.; Schmidt Kranz & Company GmbH; and SC Hydraulic
Engineering Corporation. Certain of the Company's competitors are larger overall
and have greater financial resources than the Company. The Company has a
significantly larger United States and United Kingdom market share in this line
of business than do any of its competitors, but there can be no assurance that
the Company will maintain its market share. In order to remain competitive, the
Company supports the reliability and reputation of its products with customer
service, prompt product delivery, competitive pricing, and comprehensive
technical assistance.
The Company's competitors in the low-horsepower (10 HP or less)
systems market include the same companies that compete with the Company in the
high-pressure pump market and a number of small manufacturers of systems, as
well as unrelated distributors of systems. The Company's competitors in the
higher-horsepower (more than 10 HP) systems market are primarily the same
distributors with which it competes in its distribution business.
Distribution
Unlike its manufacturing business, the Company's IPG distribution
business competes with many other companies that provide substantially similar
products. Management believes that many of these competing companies are larger
and have greater financial strength than the Company.
In its EPG distribution business, the Company competes with numerous
companies in each market it serves, many of which have far greater financial and
other resources than the Company. There is intense competition in electronic
component sourcing and supply to OEMs. Although the Company received a trademark
on its marketing system, it does not have patent or copyright protection on its
proprietary system or technology, nor does it have exclusive franchises for the
products it distributes, and there can be no assurance that traditional
franchised electronic distributor organizations or independent distributors will
not adopt similar communications technologies to offer the same service.
Additionally, purchasing
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departments of OEMs can develop this capability in-house, and many of the larger
OEMs have already established international purchasing offices. In some cases,
the Company competes with franchised distributors, such as Avnet Inc., Arrow
Electronics Inc. and other large organizations, many of which have substantially
greater financial and other resources. The Company also competes with small
independent distributors that locate and source products, but Management
believes that few of these distributors utilize the advanced technology employed
by the Company for servicing its customers.
ENGINEERING, DESIGN, RESEARCH AND DEVELOPMENT
Substantially all of the Company's engineering, design, research and
development ("EDR&D") is performed in connection with its manufacturing business
and falls into three categories. The first and most significant category is the
modification or improvement of existing products. Modifications are usually the
result of application engineering, where the Company tailors a product to fit a
specific application, often at the request of a particular customer. The Company
also engineers improvements that apply to all of its pumps. The second type of
EDR&D involves utilizing Haskel(R) high-pressure technology and know how to
develop new products. The Company's Hydroswage(R), for example, uses Haskel(R)
Specialty Pumps to create high pressure for hydraulically expanding metal tubes
into tube sheets. During fiscal year 1996, the Company introduced a
lower-priced, high quality commercial hydraulic heat exchanger tube expansion
system incorporating the Hydroswage(R) technology. Tube expansion systems, which
are used worldwide in boilers, economizers, and heat exchanging systems, expand
tubing where it connects to tube sheets and other structures to form a high
integrity joint. The third type of EDR&D is the development of products
unrelated to pumps where the Company can utilize its expertise in valve and seal
technology. One product that resulted from this kind of EDR&D is the Company's
line of high-pressure metal seals.
The Company's business requires ongoing EDR&D expenditures. For fiscal
years 1994, 1995 and 1996, the Company incurred approximately $1,186,000,
$1,151,000, and $905,000, respectively, on general engineering and research and
development (R&D) with an increasing part of these expenditures now directed
towards R&D. Due to increased engineering efforts, the Company began tracking
time related to direct production during fiscal year 1996 and that portion of
expenditures applicable to sustaining engineering is now being charged directly
to cost of sales. The Company relies on market opportunities to determine the
allocation of such expenditures. The Company expects to continue to pursue
product development programs and to increase expenditures in all of its
principal product lines and services.
For its electronic component distribution business, the Company's EDR&D
focuses on the continual updating and upgrading of its QRD(R) sourcing and
tracking system. Over the past three years, the Company has customized its
software to optimize rapid worldwide communications and allow it to offer
purchasing solutions to its electronic's OEM market.
CUSTOMER SUPPORT AND SERVICES
The Company provides competitive warranty service for each of its
product lines, as well as follow-up service, training, and support, for which
the Company typically charges separately. Management views customer support
services as a critical competitive factor, as well as a revenue source. The
Company maintains its own service groups and trains its customers and
distributors in the performance of user-level maintenance.
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GOVERNMENT REGULATION
The Company's manufacturing operations are subject to various foreign,
federal, state and local laws, including those restricting the discharge of
materials into the environment. The Company is subject to environmental
regulation governing the generation, transportation and disposal of hazardous
waste, the appropriate labeling of products and materials, storage and use of
hazardous materials, and employee safety training. Applicable federal
environmental regulations include, but are not limited to, the federal
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA");
the Resource Conservation and Recovery Act; the Clean Air Act; and the Clean
Water Act. Individual Company sites may also be subject to similar state and
local environmental regulation. The Company is not involved in any pending or
threatened proceedings that would require curtailment of its operations because
of such regulations. The Company continually expends funds to assure that its
facilities are in compliance with applicable environmental regulations. However,
such expenditures have not been significant in the past, and no significant
future expenditures are expected.
FUNDS IN FOREIGN SUBSIDIARIES
The Company has relied primarily on its income from domestic operations
to pay dividends and make major capital expenditures. In pursuit of a global
growth strategy, the Company generally avoids paying dividends from the earnings
of its U.K. and French subsidiaries, allowing substantial cash balances to be
retained in those countries for internal growth and strategic acquisitions
outside the United States. In July 1995, $3,500,000 was distributed to the
Company by its foreign subsidiaries.
While Management is continually evaluating possible acquisitions and,
from time to time, is engaged in discussions with respect thereto, the Company
currently has no commitments for any material acquisition.
PATENTS AND TRADEMARKS
The Company currently owns a number of United States and foreign
patents and trademarks, which expire at various dates through 2006. Although
Management believes that the patents and trademarks associated with the
Company's various products are of value, Management does not consider any of
them to be essential to the Company's business.
EMPLOYEES
As of May 31, 1996, the Company had 335 employees, including 61 in
general management, administration and finance; 80 in sales and marketing; 25 in
engineering; and 169 in operations, manufacturing, and customer service.
Management believes that the Company's success depends in part upon its ability
to attract, retain, train and motivate highly skilled and dedicated employees.
None of the Company's employees is represented by a labor union, and the Company
has never experienced a work stoppage. Management believes the Company's
relations with its employees are good.
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ITEM 2. DESCRIPTION OF PROPERTIES
The Company's principal facilities are as follows:
<TABLE>
<CAPTION>
Lease Expiration
Owned/ Square Feet Dates, Including
Location Leased Under Roof Occupied By Option Periods
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Burbank, California Owned 103,500 Corporate, ITD, --
Controls Division
Denver, Colorado Leased 500 Controls Division January 1997
American Fork, Utah Leased 500 Controls Division Month-to-Month
Kent, Washington Leased 1,500 Controls Division January 1998
San Bruno, California Leased 500 Controls Division Month-to-Month
San Diego, California Leased 500 Controls Division Month-to-Month
Brisbane, Australia Leased 500 ITD Month-to-Month
Sunderland, England Owned 41,000 HESL --
Manchester, England Leased 7,000 HESL October 1999
Lille, France Owned 7,000 HESL --
Aberdeen, Scotland Leased 1,000 HESL October 2009
Wesel, Germany Leased 2,366 HESL December 1996
Westlake Village, Leased 6,550 MGE September 1998
California
Hong Kong Leased 500 MGE April 1997
Singapore Leased 500 ITD December 1996
</TABLE>
The Company's corporate headquarters and principal executive offices
are located at the Burbank, California premises.
The Company's IPG - Manufacturing business segment uses the facilities
located in Burbank, California; Sunderland and Manchester, England; Lille,
France; and Wesel, Germany. The Company's IPG - Distribution business segment
uses the facilities located in Burbank, California; Denver, Colorado; American
Fork, Utah; Kent, Washington; San Diego, California; San Bruno, California;
Sunderland, England; Aberdeen, Scotland; Singapore; and Brisbane, Australia. The
Company's EPG business segment uses the facilities at Westlake Village,
California and Hong Kong.
Management believes that the facilities used by the Company are
suitable and adequate for the Company's business as presently conducted.
11
<PAGE> 12
ITEM 3. LEGAL PROCEEDINGS
Other than as set forth below, the Company is not a party to any legal
proceedings other than routine litigation incidental to its business.
San Fernando Valley Area 2 Superfund Site
The Environmental Protection Agency (the "EPA") has named the Company a
Potentially Responsible Party ("PRP"), as that term is defined in applicable
law, for an area known as the San Fernando Valley Area 2 Superfund Site (the
"Superfund Site"), in which the groundwater has been contaminated by solvents.
Of the 32 parties named by the EPA as PRPs for the Superfund Site, 27 parties,
including the Company, have formed the Glendale PRP Group (the "Group"). Under
applicable law, most notably the federal CERCLA, the Company might be jointly
and severally liable with other PRPs for the full cost of cleaning up the
Superfund Site, including the cost of the remedial design phase discussed below,
which the EPA currently estimates to be approximately $48,000,000 (the
"Remediation Cost"). There is also legal authority, however, which holds that
when the approximate extent of contamination caused by each PRP can be
determined, liability must be allocated among the PRPs in proportion to their
relative contribution. Based on this authority, Management and the Company's
environmental counsel believe there will be a rational, pro rata allocation of
responsibility for the cleanup of the Superfund Site among the participating
PRPs. Management and the Company's environmental counsel believe, based upon
extensive research conducted on the Company's site, that the Company was, at
most, a small contributor to groundwater contamination at the Superfund Site.
On December 21, 1993, an independent mediation team engaged by the
Group presented a confidential proposed interim allocation schedule (the
"Interim Allocation"), which allocated 1.76% responsibility to the Company for
the remedial design phase. In May 1994, 23 of the 27 parties (including the
Company) signed an Administrative Order on Consent ("AOC"), by which the parties
committed themselves to carrying out the initial remedial design phase.
Subsequent to the Interim Allocation, the Group delivered data to the EPA
regarding the existence of additional PRPs. Based upon that data, the EPA named
additional PRPs in May and June 1995. Several of those newly named PRPs joined
the Group, such that currently there are 32 members of the PRP group.
In June 1995, the initial phase of an allocation process began for the
purpose of dividing the liability between Lockheed Martin Corporation
("Lockheed"), as the only Burbank-based PRP, on the one hand, and all other
PRPs, all of whom are Glendale-based (the "Glendale Parties"), on the other hand
(the "Burbank-Glendale Split"). In Fall 1995, the Group began the process of
reallocating percentages among the Group members with the aim of arriving at a
final allocation relative to the Remediation Cost (the "Final Allocation"). The
Group engaged the services of technical scientists as arbitrators who determined
that Lockheed was to bear 58.8% of the Remediation Cost and the Glendale Parties
were to bear 41.2% of the Remediation Cost. The Glendale-Burbank Split decision
has been challenged by Lockheed and has not yet been confirmed by a court. Based
upon the advice and opinion of environmental counsel, the Company believes that
it is reasonable to assume that the Glendale-Burbank Split arbitration award
will be confirmed.
In July 1996, the Glendale Parties began a mediation regarding the
reallocation of the 41.2% of the Remediation Costs. While the mediation is not
yet complete, the Company believes, based upon the advice and opinion of its
environmental counsel, that the Company's share of the 41.2% of the Glendale
Parties' portion will not exceed 1.5%, or approximately $300,000. It is the hope
of the Group that the Final Allocation will be concluded prior to the time the
EPA will request receipt of a signed AOC regarding the 12-year remedy phase.
12
<PAGE> 13
In addition to the Remediation Cost, the EPA has informed the Group
that it intends to seek reimbursement from PRPs for some portion of the
approximately $13,000,000 of expenses it has incurred in studying the Superfund
Site and three adjacent superfund sites. The EPA also has the right to seek
recovery from PRPs for additional administrative expenses it incurs in studying
the superfund sites. Those expenses are not currently quantifiable or subject to
reasonable estimation. The EPA has informed the Company's environmental counsel
that only a portion of the $13,000,000 is attributable to the Superfund Site and
the Company's counsel does not believe it is unreasonable to estimate that
approximately 25% of such amount will be attributable to the Superfund Site.
Assuming that 25% of the claimed costs are attributable to the Superfund Site,
the Company believes, based upon advice and opinion of its environmental
counsel, that the Company's share of that amount would be approximately $50,000.
In the event that the pending mediation does not successfully conclude
in a mediated settlement, the Company believes, based upon the advice and
opinion of it environmental counsel, that the Company's share of the Remediation
Cost, whether determined by the EPA or by a court of law, would nevertheless be
approximately 1.5% of the Glendale Parties' share as determined by the
Glendale-Burbank Split. Furthermore, the Company believes, based upon the advice
and opinion of its environmental counsel, that if the Glendale-Burbank Split is
not confirmed by the Court, that the Company's share would not be significantly
impacted.
On-Site Contamination
The soil at the property occupied by the Company at 100 East Graham
Place, Burbank, California has been contaminated by hazardous waste, primarily
at one pit with a surface area of less than ten square feet (the "On-Site
Contamination"). The extent of such contamination has been quantified by
environmental consultants and engineers. The cost of such soil and groundwater
assessment was approximately $250,000, including the cost of installation of
five groundwater wells, which the Company has installed pursuant to a directive
of the Regional Water Quality Control Board ("RWQCB"). Based on such analysis,
Management estimates that approximately 250 cubic yards of contaminated soil has
been affected. The remediation system to clean the on-site contamination was
installed in July 1995, and was continuously operational for about four months,
until November 1995, by which time the contamination in the soil had been
reduced by more than 90% of the original concentrations. The Company had spent
approximately $71,000 on mobilizing, installing and operating the remediation
system through December 1995. The Company's environmental consultants and
engineers believed that maximum possible results were obtained after four months
of operation of the remediation system. However, the RWQCB requested that the
system be reactivated for a 90-day period to ascertain if additional benefits
were possible. The Company completed the additional 90-day reactivation period
and has met the RWQCB's objectives. The estimated costs associated with such
reactivation are approximately $45,000.
Lubrication Corporation of America
The Company has been named a PRP regarding contamination of a site
operated by Lubrication Corporation of America ("LCA"). LCA operates a used oil
recycling facility in the Santa Clarita flood plain, to which a portion of the
Company's used oil was sent for recycling. In 1992, the Company was informed by
the California Department of Toxic Substances Control that the Company's total
contribution to the contamination was about 2,500 gallons, which constituted
approximately .05% of the total contamination identified at the LCA site.
Recently, the Company was informed by the Department of Toxic Substances Control
that its contribution was in the amount of 4,545 gallons. The Department of
Toxic Substances Control has negotiated a settlement with approximately 20 other
LCA PRPs who collectively constitute about 6% of the total contamination found
at the LCA site. The Department of
13
<PAGE> 14
Toxic Substances is also negotiating with the United States military which,
according to the Department of Toxic Substances Control, is responsible for more
than 70% of the total contamination found at the LCA site. The Company has been
offered a full release from the Department of Toxic Substances Control relative
to the LCA site if the Company pays approximately $37,000. The Company is
considering this settlement offer.
Insurance and Reserves
When the Company initially tendered the EPA claim relative to the
Superfund Site, the Company's insurers refused to pay the Company's defense
costs. The Company brought litigation against its insurers in which the Company
sought an order that its insurers must defend and indemnify the Company with
respect to Superfund Site litigation. In August 1995, the trial court ruled that
the Company's insurers must reimburse the Company for its past defense costs and
must pay its defense costs in the future. As a result of this ruling, the
Company expects a substantial recovery of its defense costs. Currently, the
Company is negotiating with its carriers who have indicated their willingness to
pay the Company in excess of $600,000 in past defense costs incurred through May
31, 1996. They have also indicated their willingness to pay all defense costs
incurred subsequent to May 31, 1996, at a reasonable rate. Litigation is pending
as to whether the Company's insurers must indemnify the Company for the
Superfund Site liability.
The Company established an Environmental Reserve in the amount of
$1,445,000 for contingent liabilities that may arise in connection with the
Superfund Site, the On-Site Contamination and other environmental matters. As of
May 31, 1993 the Company had reserved $510,000 to perform testing and cleanup of
soil contamination at its facility in Burbank in accordance with a mandate from
the RWQCB. The Company increased the Environmental Reserve when the EPA
established its $48,000,000 estimate of the Remediation Cost. At May 31, 1996,
the Environmental Reserve was $1,006,000. In light of the results of the
Glendale-Burbank Split arbitration and the progress of the Glendale Parties'
mediation, the Company believes, based upon the advice and opinion of its
environmental counsel, that the Company's liabilities will be less than the
amount currently in reserves for these matters. However, until further
definitive facts develop regarding these matters, the reserve amount will not be
changed.
The Company has not included any specific amount in the Environmental
Reserve for litigation defense costs, which cannot be estimated but could be
substantial if the pending mediation does not result in a settlement among the
PRPs. However, in light of the court order regarding the obligation of the
insurers to pay defense costs, the impact upon the Company in the event of
litigation, should not be substantial.
Due to the nature of environmental matters, there can be no assurance
that the Environmental Reserve will be adequate to cover any contingent
liabilities arising from the above-referenced environmental matters or that any
liability in excess of the Environmental Reserve will not have a materially
adverse effect on the Company's results of operations or financial condition.
Compliance with Existing Regulations
Although Management anticipates increases in the Company's cost of
ongoing compliance with existing environmental regulations due to inflation,
Management believes that the cost of compliance will not have a material adverse
effect on the Company's financial condition.
14
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of fiscal 1996.
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Stock is quoted on the Nasdaq Stock Market
under the symbol "HSKL". Prior to November 1, 1994, there was no public trading
market for the Company's Common Stock. The following table sets forth the high
and low sales prices for the Company's Class A Common Stock as reported by the
Nasdaq Stock Market:
<TABLE>
<CAPTION>
Fiscal 1995 High Low
----------- ---- ---
<S> <C> <C>
First Quarter -- --
Second Quarter $10 1/2 $ 9
Third Quarter $12 1/2 $ 8 1/2
Fourth Quarter $10 1/8 $ 5 1/4
Fiscal 1996
-----------
First Quarter $ 8 $ 5 1/8
Second Quarter $ 7 $ 5
Third Quarter $ 7 3/8 $ 5 1/4
Fourth Quarter $ 7 1/2 $ 5 3/4
</TABLE>
On August 16, 1996, the closing price of the Company's Class A Common
Stock on the Nasdaq Stock Market was $ 8 5/8.
On August 9, 1996, there were approximately 483 holders of record of
the Company's Class A Common Stock.
There is no established trading market for shares of the Company's
Class B Common Stock. As of August 16, 1996, all of the Company's Class B Common
Stock was held by eight irrevocable trusts. Altogether, there are three
beneficiaries of these trusts and each trust has only one beneficiary. All eight
trusts have the same co-trustees.
The Company paid cash dividends in the amount of $.28 per share in
fiscal years ended May 31, 1995 and 1996, on shares of its Class A and Class B
Common Stock. The Company currently expects that comparable cash dividends will
continue to be paid.
16
<PAGE> 17
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for each of the
three years in the period ended May 31, 1996 are derived from the consolidated
financial statements of the Company and notes thereto included elsewhere herein
and audited by Deloitte & Touche LLP, as set forth in their report (which report
is based in part on the work of other auditors), also included elsewhere herein.
The selected consolidated financial data for the years ended May 31, 1992 and
1993 are derived from audited consolidated financial statements of the Company
not included herein. The following data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto included
elsewhere in this Report.
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Revenues $35,465,000 $40,054,000 $41,354,000 $51,701,000 $56,792,000
Income before taxes 4,536,000 3,110,000 33,000 1,976,000 4,544,000
Net income 2,452,000 2,208,000 3,000 1,019,000 2,547,000
Cash Flow from Operations 1,608,000 2,390,000 496,000 2,633,000 2,550,000
FINANCIAL POSITION:
Cash & Cash Equivalents $12,966,000 $ 9,736,000 $ 7,120,000 $ 8,806,000 $ 8,239,000
Working Capital 23,251,000 22,287,000 17,172,000 20,969,000 21,891,000
Total Assets 33,596,000 34,506,000 44,411,000 44,295,000 45,360,000
Long-term Debt 92,000 827,000 10,187,000 3,514,000 3,366,000
Shareholders' Equity 27,410,000 25,036,000 24,384,000 31,007,000 32,220,000
PER SHARE DATA:
Net Income $ 0.63 $ 0.57 $ -- $ 0.23 $ 0.54
Cash Dividends 0.53 0.55 0.36 0.28 0.28
Book Value 7.87 7.46 6.33 6.56 6.81
Average shares outstanding 3,898,981 3,876,345 3,929,349 4,500,783 4,738,266
</TABLE>
17
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The consolidated financial statements include the results of the
Company and all of its operating divisions and subsidiaries. The Company's
operations are headquartered in the United States and Europe. The Company is
organized and operates as two groups: the IPG and the EPG.
The IPG's operations are headquartered in Burbank, California and
consist of the Company's Industrial Technologies Division ("ITD"), Haskel
Controls Division ("Controls"), and the Company's wholly owned subsidiary,
Haskel Energy Systems, Ltd. ("HESL"), located in Sunderland, England and its
divisions and subsidiaries. The ITD is the U.S. manufacturer of
Haskel(R) Specialty Pumps, Haskel(R) Systems, high-pressure valves,
regulators and accessories to complement these products. Controls distributes
product lines used primarily in the fluid power business, the largest line of
which is the Company's products. HESL represents the Company's European
industrial products operations with offices located in Sunderland and
Manchester, England; Aberdeen, Scotland; Lille, France; Wesel, Germany; and
the most recent addition, after the completion of the fiscal year, in
Zoetermeer, the Netherlands. HESL and its divisions and subsidiaries primarily
distribute Haskel(R) Specialty Pumps and design and manufacturer Haskel(R)
Systems for specific applications required by customers in Europe, India,
and the Middle East. HESL and its divisions and subsidiaries also manufacture
products needed for HESL's markets that are not produced in the United States,
such as the Jetflow Airmover(R), and distribute specialty products of other
manufacturers.
The EPG consists of M.G. Electronics, Inc. ("MGE"), headquartered in
Westlake Village, California, and its purchasing office in Hong Kong. MGE (UK),
located in Sunderland, England, and MGE Germany, located in Frankfurt, Germany,
were included in the EPG's operations until May 1996 when the Company closed
these facilities. The EPG provides purchasing services, product substitution and
solutions to shortage and delivery problems of OEMs of electronic components.
The EPG specializes in locating sources (which includes researching, locating,
evaluating and supplying) circuit board-level components, such as integrated
circuits, capacitors, transistors and resistors.
ENVIRONMENTAL ISSUES
At May 31, 1996, the Company had reserves of approximately $1,006,000
related to its environmental liabilities. Based on the advice and opinion of its
environmental counsel, Management believes that these reserves are adequate.
The Company has four matters pending concerning environmental issues.
They are: 1) Superfund Site; 2) On-site remediation; 3) LCA litigation; and 4)
Insurance litigation.
Superfund Site. The Company has been named a PRP at the Superfund Site.
(See Note 12 of Notes to Consolidated Financial Statements.) The EPA has divided
the Superfund Site into two regions, Glendale and Burbank, and negotiations are
being conducted between regions, and among PRP members, to reallocate the
respective shares of the regions and PRP members. The Company and other PRP's
may be jointly and severally liable for the remediation of this site. However,
based upon advice and opinion of environmental counsel, the Company, which is a
participant in the Glendale region, does not anticipate its proportionate share
of the remediation costs to exceed the amount already reserved.
18
<PAGE> 19
On-Site Remediation. The Company contracted with a third party to
install a vapor extraction system designed to remove below-surface contaminants
at the Company's Burbank facility. This system was operated for several months
during the fiscal year and lowered the contaminant levels to those recommended
by the RWQCB. After an additional period of required testing, the system was
reactivated for an additional 90-day period. Currently, the Company has complied
with all RWQCB's requests.
LCA Litigation. The Company has been offered a full release from the
California Department of Toxic Substances Control relative to the LCA site in
exchange for approximately $37,000. The Company is considering this settlement
offer.
Insurance Litigation. In August 1995, the Company received a favorable
ruling from the trial court with respect to its insurance litigation against its
main carriers. This ruling requires Company's insurance carriers to provide the
defense costs for its environmental matters. Currently, the Company is
negotiating with its carriers who have indicated their willingness to pay the
Company in excess of $600,000 in past defense costs through May 31, 1996 and all
defense costs incurred subsequent to that date. Litigation is pending as to
whether the Company's insurers must indemnify the Company for the Superfund Site
liability.
19
<PAGE> 20
RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, the
percentage of net sales represented by certain items included in the
Consolidated Statements of Income:
<TABLE>
<CAPTION>
Year Ended May 31,
---------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Sales ............................................... 100.0% 100.0% 100.0%
Cost of sales ....................................... 60.4 61.8 56.5
----- ----- -----
Gross profit ........................................ 39.6 38.2 43.5
Selling expenses .................................... 17.1 15.5 15.8
General and administrative expenses ................. 15.9 16.1 18.2
Engineering design, research and development expenses 2.9 2.2 1.6
Restructuring costs ................................. 1.5 -- --
Environmental reserve costs ......................... 2.5 -- --
----- ----- -----
Total operating costs ............................... 39.9 33.8 35.6
----- ----- -----
Income (loss) from operations ....................... (.3) 4.4 7.9
Other income (expense) .............................. .4 (.6) .1
----- ----- -----
Income before income taxes .......................... .1 3.8 8.0
Provision for income taxes .......................... .1 1.8 3.5
----- ----- -----
Net income .......................................... 0.0% 2.0% 4.5%
===== ===== =====
</TABLE>
YEAR ENDED MAY 31, 1996 ("1996") COMPARED TO YEAR ENDED MAY 31, 1995 ("1995")
Sales in 1996 increased by $5,091,000, or 9.8%, to $56,792,000, from
$51,701,000 in 1995. The IPG's sales increased $3,287,000 (8.5%) from
$38,882,000 in 1995 to $42,169,000 in 1996 primarily due to expanding
international markets, especially throughout Europe and the Pacific Rim, and
sales of new and private-branded products. The EPG's sales increased $1,804,000
(14.1%) from $12,819,000 in 1995 to $14,623,000 in 1996. Approximately
$1,354,000 of this increase was due to the EPG's subsidiary in England, which
operated for a full year in 1996 compared to approximately nine months in 1995.
The remaining increase was principally the result of strong market demand in the
United States during the first half of 1996 leading up to the Christmas holiday
season as compared to the first six months in 1995. In the second half of 1996,
the EPG's sales declined concurrently with a slow down in the electronics
industry and were $3,378,000, or 42%, lower as compared to the same six-month
period in 1995.
Cost of sales was $32,082,000 in 1996, compared to $31,937,000 in 1995,
an increase of less than one percent. Cost of sales as a percentage of sales was
56.5% in 1996, as compared to 61.8% in 1995, a decrease of 5.3 percentage
points. Cost of sales as a percentage of sales for the IPG was 54.4% in 1996,
compared to 57.6% in 1995. The decrease in the percentage of cost of sales to
sales is due principally to the additional sales volume which resulted in lower
overhead rates as fixed costs were allocated over a larger
20
<PAGE> 21
number of units. Additionally, the IPG continues to improve its manufacturing
processes resulting in lower overall product costs. For the EPG, cost of sales
as a percentage of sales were 62.4% in 1996 as compared to 74.4% in 1995. During
1995, approximately $4,000,000 of EPG sales were derived from high-volume, low
gross margin "memory" components which normally earn gross profit percentages,
on average, of 10% compared to an average of more than 33% on sales of other
electronic components. During 1996, the EPG did not sell a significant volume of
"memory" product and, as such, cost of sales as a percentage of sales decreased.
Selling, general and administrative, and engineering, ("Operating")
expenses increased $2,770,000 from $17,491,000 in 1995 to $20,261,000 in 1996
and, as a percentage of sales, such expenses increased from 33.8% in 1995 to
35.6% in 1996. The higher expenses in 1996 as compared to 1995 resulted
principally from increases in selling and marketing costs associated with the
Company's efforts to expand market share worldwide, and from higher
administrative costs associated with building the Company's infrastructure, as
well as public ownership. Approximately $1,655,000 of the increase was due to
increased costs at the EPG due to the expansion of its European and U.S.
operations during 1996 as compared to 1995. As a result of the slow down in the
electronics industry, in May 1996, the Company reorganized its EPG operations
resulting in the closure of its offices in Europe and a reduction of 13
individuals, or approximately 30%, of its employees at its U.S. facility.
Other income (expense) in 1996 reflected net other income of $95,000 as
compared to net other expense of $297,000 in 1995. The change from 1995 to 1996
is primarily a result of decreased interest expense in 1996 compared to 1995.
The lower interest expense was due to the reduction of a significant portion of
the Company's debt in the third quarter of 1995 as well as lower interest rates
in 1996. In addition, other expense in 1995 includes the write-off of a joint
venture investment of $216,000.
The provision for income taxes in 1996 increased $1,040,000 from 1995
principally due to the increase in taxable income. The effective tax rate in
1996 was 43.9% compared to 48.4% in 1995. The effective tax rate in 1995 was
higher due primarily to additional income taxes associated with dividends from
foreign subsidiaries.
YEAR ENDED MAY 31, 1995 ("1995") COMPARED TO YEAR ENDED MAY 31, 1994 ("1994")
Sales in 1995 increased by $10,347,000, or 25.0%, to $51,701,000, from
$41,354,000 in 1994. The IPG had sales increases of approximately 3.8% to
$38,882,000. The sales increases in the IPG's manufacturing operations were
attributable to new product introductions and improved bookings of operating
systems using the Company's products. The distribution operations of the IPG
experienced a sales decline from 1994 of approximately 4.2%, due principally to
distribution lines lost as a result of the business restructuring begun in 1994
which eliminated unprofitable sales and distribution facilities in the U.S. The
EPG experienced a sales increase of $8,922,000 from 1994, and the IPG had a
$1,425,000 sales increase from 1994. Sales in 1995 included $12,819,000 (24.8%
of consolidated sales) from the EPG. Sales in 1994 include operations from this
group from late November 1993 (after the acquisition of MGE) of $3,897,000 (9.4%
of 1994 consolidated sales). Evaluated on a full year, pro forma basis, the EPG
sales increased more than 58.1% over the same period in 1994. The increased
sales in the EPG operations resulted from a strong market for electronic
components and from new sales representative programs implemented in 1995.
Increased sales of high volume programmable memory components also contributed
to the EPG's sales increase.
21
<PAGE> 22
Cost of sales in 1995 was $31,937,000 as compared with $24,983,000 in
1994, an increase of 27.8%. Cost of sales as a percentage of sales in 1995 was
61.8%, an increase of 1.4 percentage points as compared with 60.4% in 1994. Cost
of sales as a percentage of sales for the IPG was 57.6% in 1995 as compared with
61.4% in 1994. During the fourth quarter of 1995, the Company recorded inventory
valuation reserves of approximately $400,000 to reflect the impact of slow
moving and potentially obsolete parts which occurred as a result of changes in
product demand and product lines. The decrease in the IPG's costs as a
percentage of sales is attributable principally to cost reductions related to
the restructuring initiated in 1994 within the U.S. manufacturing operations.
The restructuring savings were partially offset by additional costs incurred to
meet customers' shortened delivery requirements and significant price
competition. This competition is experienced primarily in the IPG's sales of
systems in the low to mid price range. The IPG's meeting customer delivery
schedules and delivering complete systems on time are important to IPG's
strategic plans. Cost of sales as a percentage of sales for the EPG was 74.4% in
1995 as compared with 51.3% in 1994. In 1995, approximately $4,000,000 of EPG
sales were derived from high-volume, low gross margin transactions. This
resulted in the higher cost of sales as a percentage of sales in 1995 as
compared with 1994.
Operating expenses in 1995 were $17,491,000, or 33.8% of sales, as
compared with $14,850,000, or 35.9% of sales, in 1994. Approximately $1,884,000
of the $2,641,000 increase in expenses is attributable to the EPG which was
included in consolidated operations in 1994 for only the six months following
the acquisition of MGE. The remainder of the increase is attributable
principally to costs connected with the IPG's increased sales volume; costs
associated with being a publicly-owned corporation; and increased costs
associated with marketing, engineering and the expansion of foreign operations.
During the fourth quarter of 1995, reserves for uncollectible accounts were
increased by approximately $300,000 for customer accounts which were determined
to be uncollectible during the quarter. The cost increases were offset partially
by savings from the restructuring initiated in 1994. Operating expenses in 1994
include, in addition to the selling, general and administrative, and engineering
expenses, restructuring costs of $620,000, and environmental reserve costs of
$1,039,000.
Other income (expense) in 1995 reflected net other expense of $297,000
as compared to net other income of $171,000 in 1994. The increased expenses in
1995 are primarily attributable to interest charges associated with the debt
incurred in connection with the MGE acquisition for a full year in 1995 as
compared to approximately six months in 1994. In addition, other expense in 1995
includes the write-off of a joint venture investment of $216,000 during the
fourth quarter.
The provision for income taxes in 1995 increased by $927,000 from 1994
attributable principally to the increase in taxable income. The effective tax
rate in 1995 was 48.4% compared to 90.9% in 1994. The effective tax rate in 1995
is increased by additional income taxes associated with dividends received from
foreign subsidiaries. The high effective tax rate in 1994 results principally
from the tax on intercompany profit recorded on shipments that remained in the
European operations' inventory at the fiscal year end.
22
<PAGE> 23
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations and met its
capital requirements primarily through cash generated from operations.
<TABLE>
<CAPTION>
Year Ended May 31,
---------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash and cash equivalents ......................... $7,120,000 $8,806,000 $ 8,239,000
========== ========== ===========
Net cash provided by operating activities ......... $ 496,000 $2,633,000 $ 2,550,000
========== ========== ===========
Net cash used in investing activities ............. $6,637,000 $1,252,000 $ 1,341,000
========== ========== ===========
Net cash provided by (used in) financing activities $3,669,000 $ 188,000 $(1,726,000)
========== ========== ===========
</TABLE>
WORKING CAPITAL AND LIQUIDITY
The Company had working capital at May 31, 1996 of $21,891,000 as
compared to $20,969,000 at May 31, 1995.
Net cash provided by operating activities was $496,000, $2,633,000, and
$2,550,000 in 1994, 1995 and 1996, respectively. The decrease in net cash
provided by operating activities in 1996 as compared to 1995 is primarily the
result of increased inventory and accounts receivable balances due to increased
sales levels and newly acquired operations. This decrease in cash flow was
offset by the significant increase in earnings. The increase in net cash
provided by operating activities in 1995 as compared to 1994 is principally the
result of increased operating earnings and favorable currency exchange rate
fluctuations. Depreciation and amortization was $1,011,000, $1,515,000, and
$1,825,000 in 1994, 1995 and 1996, respectively, which included approximately
$377,000, $754,000, and $756,000 in 1994, 1995, and 1996, respectively, of
amortization expense associated with purchased technology and goodwill recorded
in connection with the MGE acquisition.
Net cash used for investing activities was $6,637,000, $1,252,000, and
$1,341,000 in 1994, 1995 and 1996, respectively. Capital expenditures of
$1,330,000 and $1,272,000 represent the primary cash used for investing
activities in 1995 and 1996, respectively. Cash used for investing activities in
1994 was due primarily to the purchase of MGE and Environclean for an aggregate
of $5,770,000, net of cash and cash equivalents acquired, and capital
expenditures totaling $1,279,000 in 1994, offset in part by a decrease in notes
receivable of $549,000 due to payments made in 1994.
Net cash used in financing activities in 1996 was $1,726,000 and
represented principal payments of long-term debt as well as the payment of
dividends. Net cash provided by financing activities was $188,000 in 1995. Net
cash of approximately $6,297,000 ($6,670,000 in 1995, before accounting for
deferred costs of $373,000 in 1994) was raised in connection with the Company's
initial public offering. Following the offering, the Company paid a related
party promissory note using $2,000,000 in cash, and renegotiated its credit
facility with its bank, substantially resulting in the total long-term debt
reduction of $3,173,000 for the year. Cash dividends of $1,201,000 were also
paid during 1995. Net cash provided by financing activities was $3,669,000 in
1994 and was attributable to proceeds from the $6,000,000 loan used for the
purchase of MGE, offset in part by dividends paid in 1994.
23
<PAGE> 24
The effect of the exchange rates on cash and cash equivalents resulted
in a decrease in cash and cash equivalents of $50,000 in 1996, an increase in
cash and cash equivalents of $117,000 in 1995 and a decrease in cash and cash
equivalents of $144,000 in 1994.
The Company maintains substantial cash balances in Europe consisting of
accumulated earnings from its U.K. and French subsidiaries. The Company intends
to use these funds primarily for acquisitions outside the United States and
expansion of the Company's European operations. The Company currently maintains
approximately $1.6 million of these European cash balances in United States
dollars in order to minimize foreign exchange risks and because it is unable to
anticipate in which currencies it will make future acquisitions and investments.
In July 1995, $3,500,000 was distributed to the Company by its foreign
subsidiaries.
See "Consolidated Statements of Cash Flows" for supplemental
disclosures of cash flow information related to the Company's acquisitions.
At May 31, 1996, the Company's principal source of liquidity was
$8,239,000 in cash and cash equivalents. The Company believes that these funds
plus funds generated by operations, and the available borrowing capacity under
its bank credit line, will be sufficient to finance its working capital and
capital expenditure requirements for at least the next 12 months.
CREDIT FACILITIES
On October 14, 1993, the Company issued a $3,500,000 promissory note in
connection with the acquisition, from a related party, of the land and building
previously leased at its Burbank facility. The $3,500,000 note was paid
subsequent to completion of the initial public offering by payment of $2,000,000
cash and offsetting the $1,500,000 balance of a note receivable from this
related party. (See Notes 4 and 11 of Notes to Consolidated Financial
Statements.)
In November 1993, the Company borrowed $6,000,000 in term debt from a
bank to finance the acquisition of MGE. As of May 31, 1996, the balance of the
term debt was $2,739,000 and bears interest at the LIBOR rate plus 1 3/4% (6.87%
at May 31, 1996). Additionally, the Company has obtained, from the same bank, a
$5,000,000 revolving line of credit and a $4,000,000 acquisition line of credit
available for use in making acquisitions or capital expenditures. Borrowings
under the acquisition credit line will be converted annually into five-year term
loans with interest-only payments in the first year of conversion. Borrowings
under the lines of credit bear interest at the LIBOR rate plus 1 1/2% (6.62% at
May 31, 1996) for the revolving line of credit, and 1 3/4% (6.87% at May 31,
1996) for the acquisition line of credit. At May 31, 1996, there were no
outstanding balances under the lines of credit.
All amounts advanced under the loan agreement, as amended, with the
Company's bank (the "Loan Agreement") are secured by a pledge of 50 percent of
the outstanding shares of HESL. The Loan Agreement requires, among other things,
that the Company maintain a specified minimum consolidated tangible net worth of
not less than $18,000,000; minimum working capital of not less than $15,000,000;
earnings before income taxes, depreciation and amortization equal to or greater
than 1.25 times required debt service, dividends and capital expenditures;
certain other ratios and insurance. In addition, the Loan Agreement restricts
the Company's ability to incur indebtedness, pay dividends in the event of a
default under the Loan Agreement, consummate mergers or acquisitions without
prior Bank approval in which the consideration paid by the Company exceeds the
acquisition line, or
24
<PAGE> 25
make annual aggregate capital expenditures exceeding $2,000,000. The revolving
credit portion of the Loan Agreement provides that for at least 30 consecutive
days during each twelve-month period there shall be no loans outstanding under
the revolving credit line. As of May 31, 1996, the Company was in compliance
with all of the covenants of the Loan Agreement.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Consolidated Financial Statements of Haskel
International, Inc. and Subsidiaries included herein and listed on the Index to
Consolidated Financial Statements set forth below.
Index to Consolidated Financial Statements
Page
----
Independent Auditors' Reports ........................................... F-1
Consolidated Balance Sheets
at May 31, 1995 and 1996 ................................................ F-3
Consolidated Statements of Income
for the years ended May 31, 1994, 1995 and 1996 ......................... F-5
Consolidated Statements of Shareholders' Equity
for the years ended May 31, 1994, 1995 and 1996 ......................... F-6
Consolidated Statements of Cash Flows
for the years ended May 31, 1994, 1995 and 1996 ......................... F-7
Notes to Consolidated Financial Statements .............................. F-9
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
NONE
25
<PAGE> 26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position with Company
- ---- --- ---------------------
<S> <C> <C>
R. Malcolm Greaves 57 President, Chief Executive Officer and Director
Robert A. Smith 55 Executive Vice President and President -
Industrial Products Group
Doranda Frison 44 President - Electronic Products Group and
President of MGE
Lonnie D. Schnell 47 Chief Financial Officer and Secretary
James C. Minyard 54 Formerly President - Electronic Products Group
and President of MGE
Maury S. Friedman 46 Formerly Executive Vice President, President -
Electronic Products Group and Director
Edward Malkowicz 56 Chairman of the Board and Director
Marvin L. Goldberger 74 Director
Marvin Goodson 77 Director
Stanley T. Myers 59 Director
Terrence A. Noonan 58 Director
William L. Slover 74 Director
</TABLE>
R. Malcolm Greaves was appointed President and Chief Executive Officer
of the Company on February 14, 1996. He joined HESL as General Manager in
January 1989 and was appointed Managing Director of HESL in June 1990. Mr.
Greaves has served as a director of the Company since September 1990. Between
January 1994 and February 1995, he served as Executive Vice President in
charge of worldwide pump operations, after serving as Vice President, Chief
Operating Officer for Europe, the Middle East, India and Africa from April 1993.
Robert A. Smith joined the Company as President - Industrial Products
Group in February 1995 and has also served as an Executive Vice President of the
Company since November 1995. From February 1991 through February 1995, Mr. Smith
was employed by Puroflow, Inc. and its affiliates, including Puroflow Corp.
(where he served as President and a director from February 1991 to October
1992), and Engineered Filtration Company (where he served as President from
October 1992 to January 1994). Mr. Smith has also served as a director of
Industrial Tools Inc. since 1978 and served as its President from January 1994
to February 1995. These companies are manufacturers of filtration and machining
systems used,
26
<PAGE> 27
among other things, in airbags. Mr. Smith is currently Vice Chairman of the
Board of Puroflow, Inc.
Doranda Frison joined the Company on July 8, 1996 as President -
Electronic Products Group and President of MGE. Ms. Frison had previously served
as Vice President Sales/Marketing of MGE from January 1989 to August 1994. From
October 1994 through July 1996, she served as a sales and marketing consultant
to various telecommunications and technology companies, primarily AT&T's Western
Region operations.
Lonnie D. Schnell joined the Company as Chief Financial Officer and
Secretary in November 1994. From August 1990 through October 1994, Mr. Schnell
was Vice President and Controller of Teleflex Control Systems, Inc., an
electromechanical actuator and cargo handling business.
James C. Minyard joined the Company as President of MGE in August 1994.
He was promoted to President - Electronic Products Group on April 1, 1996 and
continued to serve as President of MGE. From 1986 until July 1994, Mr. Minyard
served as President of CompuScan, Inc., a company that specialized in automatic
data collection using bar-code technology. Mr. Minyard's employment with the
Company and MGE was terminated on July 1, 1996.
Maury S. Friedman joined the Company as Executive Vice President and a
director in November 1993. He was elected President and Chief Executive Officer
in February 1994 and Chairman of the Board in November 1994. He was named to the
new position of President - Electronic Products Group in April 1995, at which
time he resigned as Chairman of the Board, President and Chief Executive
Officer. Mr. Friedman resigned as a director on January 3, 1996 and as President
- - Electronic Products Group and Executive Vice President on March 31, 1996. He
currently serves as a consultant to MGE.
Edward Malkowicz has been a director of the Company since November 1994.
He was elected Chairman of the Board in April 1995. Between 1992 and May 1995,
Mr. Malkowicz taught business courses at Riverside College in Riverside,
California.
Marvin L. Goldberger, Ph.D., has been a director of the Company since
1982. Since January 1993, Dr. Goldberger has been a professor of physics at the
University of California, San Diego. From September 1991 through December 1992
he was a professor of physics at the University of California, Los Angeles, and
from 1987 through July 1991 he served as the Director of the Institute for
Advanced Studies at Princeton, New Jersey. Dr. Goldberger served as a director
of General Motors from January 1981 through June 1993 and is currently a member
of the General Motors Corporate Advisory Council. He is currently Dean of
Natural Sciences, University of California, San Diego and President Emeritus of
the California Institute of Technology.
Marvin Goodson has been a director of the Company since 1971. Mr.
Goodson is a founder and has been a member of the law firm of Goodson and
Wachtel A Professional Corporation and its predecessors since 1952 and has been
counsel to the Company and its predecessors since 1952.
Stanley T. Myers has been a director of the Company since November 1994.
Mr. Myers has served as President and Chief Executive Officer of Siltec
Corporation, a manufacturer of strategic silicon and epitaxial materials for the
semiconductor industry, since November 1985.
27
<PAGE> 28
Terrence A. Noonan has been a director of the Company since May 10,
1996. Since June 1991, Mr. Noonan has also served as President of Furon Company,
a manufacturing company specializing in polymer components. He is also a member
of the Board of Directors of Furon Company.
William L. Slover has been a director since June 1992. Mr. Slover has
been working as a management consultant since January 1990. From March 1987
through June 1992 he also served as a senior consultant with Persona Consulting
Group. Mr. Slover is a director of Trio-Tech International, a manufacturing
company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific filing deadlines of these reports
have been established and the Company is required to disclose in this Report any
failure to file by these dates during the fiscal year ended May 31, 1996. Based
solely upon a review of Forms 3 and 4 and amendments thereto furnished to the
Company during the fiscal year ended May 31, 1996 and Forms 5 and amendments
thereto furnished to the Company with respect to the fiscal year ended May 31,
1996, and written representations, all of these filing requirements have been
satisfied, except that Maury S. Friedman, formerly a director, President -
Electronic Products Group, and Executive Vice President, made two late filings
on Form 4, each relating to one transaction. All such filings have been made as
of the date hereof.
28
<PAGE> 29
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid by the
Company, together with long term and other compensation, for each of the last
three fiscal years to its Chief Executive Officer and to each of its executive
officers whose total salary and bonus from the Company exceeded or equaled
$100,000 in fiscal 1996 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
Summary Compensation Table
----------------------------------------------
Annual Compensation Long-Term Compensation
---------------------------------------------- --------------------------
Awards
------
Other Securities All
Annual Underlying Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation($) Options (#) Compensation($)
- --------------------------- ---- ---------- --------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
R. Malcolm Greaves(1) 1996 $165,200(2) $110,000 -- 43,000(3) $29,500(4)
President and Chief Executive 1995 151,680(2) 20,000 -- -- 34,878(4)
Officer 1994 123,333(2) 50,000 -- 60,000(5) 23,508(4)
Robert A. Smith 1996 157,390 75,000 731(6) 50,000(3) --
Executive Vice President and 1995 34,038 -- -- -- --
President - Industrial 1994 -- -- -- -- --
Products Group
James C. Minyard(7) 1996 104,700 25,000 7,800(6) 30,000(8) --
Formerly President - 1995 -- -- -- -- --
Electronic Products Group 1994 -- -- -- -- --
Maury S. Friedman(9) 1996 240,500 35,000 -- -- 45,400(10)
Formerly Executive Vice 1995 240,000 60,000 -- 60,000(5) --
President and President - 1994 124,000 60,000 -- -- --
Electronic Products Group
Edward Malkowicz(11) 1996 135,000 -- 12,000(6) 24,000(12) 34,000(13)
Chairman of the Board 1995 13,270 -- 1,926(14) 12,000(5) 16,000(13)
1994 -- -- -- -- --
Lonnie D. Schnell 1996 106,000 40,000 1,537(6) 30,000(3) --
Chief Financial Officer and 1995 49,900 6,000 -- -- --
Secretary 1994 -- -- -- -- --
</TABLE>
- --------------------------
(1) Mr. Greaves was appointed President and Chief Executive Officer on
February 14, 1996.
(2) A portion of Mr. Greaves' salary in the amount of $108,000 in fiscal
1994, $114,480 in fiscal 1995, and $111,600 in fiscal 1996 was paid in English
Pounds, and has been converted at the estimated average exchange rate of
(pound)1 to $1.50 in effect during fiscal 1994, $1.59 in effect during fiscal
1995, and $1.55 in effect during 1996.
(3) Options granted under the Company's 1995 Incentive Stock Option Plan.
(4) Company's contribution to HESL Pension Plan.
(5) Options granted under the Company's Nonqualified Stock Option Plan.
(6) Automobile allowance.
(7) Mr. Minyard served as President - Electronic Products Group from April
1, 1996 to July 1, 1996, on which date his employment was terminated. Mr.
Minyard also served as President of MGE from August 1, 1994 to July 1, 1996.
[FOOTNOTES CONTINUE ON NEXT PAGE]
29
<PAGE> 30
(8) Options granted under the Company's 1989 Incentive Stock Option Plan.
(9) Mr. Friedman served as Chairman of the Board and Chief Executive
Officer from November 22, 1994 to April 11, 1995, President-Electronic Products
Group from April 12, 1995 to March 31, 1996 and Executive Vice President of the
Company from November 22, 1995 to March 31, 1996, on which date he resigned.
(10) Represents consulting fees paid to Mr. Friedman subsequent to his
resignation as an officer of the Company on March 31, 1996.
(11) Mr. Malkowicz also served as an executive officer from April 12, 1995
to February 14, 1996.
(12) Options granted under the Company's 1995 Incentive Stock Option Plan,
net of forfeitures pursuant to the terms of the related stock option agreement.
(13) Consisting of $12,000 in director's fees and $4,000 in aggregate
committee fees in fiscal year 1995 and $24,000 in director's fees and $10,000 in
aggregate committee fees in fiscal year 1996.
(14) Consisting of automobile allowance of $1,061 and medical insurance
allowance of $865.
30
<PAGE> 31
COMPENSATION OF DIRECTORS
Each of the Company's directors who is not an employee of the Company
(Messrs. Goldberger, Goodson, Malkowicz, Myers, Noonan, and Slover) receives an
annual fee of $24,000, payable in monthly installments. The Company does not pay
its employee directors any fee for their services as directors, except that Mr.
Malkowicz was an employee director through March 1996 and received directors
fees of $2,000 per month during that period. Subsequent to March 1996, Mr.
Malkowicz's status changed to a non-employee director. Each non-employee
director, including Mr. Malkowicz, for the period he was an employee director,
receives reimbursement for out-of-pocket expenses, and $500 for each committee
meeting in which he otherwise participates. Directors who chair a Board
committee receive $750 per meeting. During fiscal 1995 and 1996, Mr. Slover
received fees of $26,600 and $27,800, respectively, for special consulting
services provided to the Company, on an "as requested" basis, in connection with
financial matters and inventory controls. During fiscal 1996, Mr. Goodson
received fees of $9,500 for special consulting services provided to the Company,
on an "as requested" basis, in connection with business matters not involving
legal advice.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Maury S.
Friedman, effective November 19, 1993 and expiring in November 1996. The
employment agreement provided for an annual base salary of $240,000 and a
performance bonus at the discretion of the Board of Directors. Upon Mr.
Friedman's resignation as an officer of the Company on March 31, 1996, the
agreement was terminated. Effective April 1, 1996, Mr. Friedman serves as a
consultant to MGE pursuant to the terms of a consulting agreement dated March
21, 1996. The consulting agreement requires Mr. Friedman to provide consulting
services to MGE at the rate of $200 per hour and will continue on a year-to-year
basis for a term not to exceed December 31, 1998.
Pursuant to an employment agreement dated December 22, 1995 with MGE,
Mr. Minyard was entitled to receive a monthly base salary of $9,000 and a
monthly bonus equal to one percent of pre-tax operating income before corporate
charges, commencing January 1996. This agreement also provided for a
Company-provided automobile, health insurance, Board-determined discretionary
bonus of up to 40% of annual base salary and three-month severance pay upon
termination. Mr. Minyard's employment at the Company and MGE was terminated on
July 1, 1996 and the agreement is no longer in effect.
The Company established, effective March 1, 1996, an Executive
Separation Pay Plan (the "Separation Pay Plan"), to establish a uniform basis
for providing separation allowances to certain executives when their positions
are eliminated or when they are terminated for reasons other than for cause. The
Separation Pay Plan is administered by the Compensation Committee. The Board of
Directors or the Compensation Committee has absolute discretion to designate
those executives who are covered by the Separation Pay Plan (a "Covered
Employee"). The amount of separation allowance which a Covered Employee is
entitled to receive is determined by the Board of Directors and specified as a
number of months of the Covered Employee's base salary as of the date of
termination of employment. Presently, the following Named Executive Officers are
the only executives designated as Covered Employees under the Separation Pay
Plan (specified period for separation allowance indicated in parentheses): R.
Malcolm Greaves, President and Chief Executive Officer (12 months); Robert A.
Smith, Executive Vice President and President-Industrial Products Group (10
months); and Lonnie D. Schnell, Chief Financial Officer and Secretary (8
months).
31
<PAGE> 32
With the exception of the employment agreements as described above, the
Company has no employment agreements with any of the Named Executive Officers.
STOCK OPTION PLANS
1989 Incentive Stock Option Plan
The Haskel International, Inc. 1989 Incentive Stock Option Plan, as
amended (the "1989 ISO Plan") is administered by the Compensation Committee.
Subject to the terms of the 1989 ISO Plan, the Compensation Committee
establishes the terms and conditions applicable to option grants under said
Plan. The 1989 ISO Plan has a term of ten years and provides for the sale by the
Company of a maximum of 450,000 shares of Class A Common Stock, subject to
adjustments to reflect any future change in capitalization of the Company. As of
May 31, 1996, there were options granted and outstanding for 70,065 shares at an
exercise price of $9.46 per share, 38,086 shares at an exercise price of $7.18
per share, and 110,000 shares at an exercise price of $8.03 per share. There are
no further grants being made under this Plan, its having been replaced by the
1995 Incentive Stock Option Plan.
Nonqualified Stock Option Plan
The Haskel International, Inc. Stock Option Plan, as amended (the
"Nonqualified Plan"), is also administered by the Compensation Committee. The
Nonqualified Plan differs from the 1989 ISO Plan in that the 1989 ISO Plan is
qualified under the Internal Revenue Code as an Incentive Stock Option plan
entitling the optionee to certain income tax benefits, to which the optionee
under the Nonqualified Plan is not entitled. Subject to the terms of the
Nonqualified Plan, the Compensation Committee establishes the terms and
conditions applicable to option grants under said Plan. The Nonqualified Plan
has a term of ten years and provides for the sale by the Company of a maximum of
650,000 shares of Class A Common Stock, subject to adjustments to reflect any
future change in capitalization of the Company. As of May 31, 1996, there were
options granted and outstanding under the Nonqualified Plan for 87,500 shares at
an exercise price of $9.46 per share, 215,247 shares at an exercise price of
$7.18 per share, 127,667 shares at an exercise price of $7.00 per share, and
24,000 shares at an exercise price of $10.00 per share. There are no further
grants being made under this Plan, its having been replaced by the 1995
Incentive Stock Option Plan.
1995 Incentive Stock Option Plan
The Haskel International, Inc. 1995 Incentive Stock Option Plan (the
"1995 ISO Plan"), which replaced both the 1989 ISO Plan and the Nonqualified
Plan, was approved by the shareholders at the 1995 Annual Shareholders Meeting
on October 5, 1995. The 1995 ISO Plan permits certain employees of the Company
and its subsidiaries who are responsible for the management, growth and
protection of the business of the Company or its subsidiaries to be granted the
right to purchase shares of Class A Common Stock at the fair market value per
share at the date of grant. The 1995 ISO Plan is designed to assist the Company
in securing and retaining employees of outstanding ability and to motivate such
individuals to exert their best efforts on behalf of the Company. The 1995 ISO
Plan is administered by the Stock Option Committee of the Board of Directors,
consisting of disinterested directors as that term is defined by Rule 16b-3
under the Securities Exchange Act of 1934, as amended. The Committee selects
employees who may purchase shares under the 1995 ISO Plan and establishes,
subject to the terms of the 1995 ISO Plan, the terms and conditions applicable
to such purchase. In order to purchase shares, an employee is required to enter
into a purchase agreement with the Company. The 1995 ISO Plan has a term of ten
years and provides for
32
<PAGE> 33
the grant of options to purchase an aggregate of 240,000 shares of Class A
Common Stock, plus the number of shares available as a result of presently
outstanding options which lapse because of nonexercise under the 1989 ISO Plan
and the Nonqualified Plan. That additional number of shares cannot be determined
at this time, but cannot exceed the total number of 773,885 shares subject to
options which are currently outstanding and unexercised. The number of shares is
also subject to adjustments to reflect any future changes in the capitalization
of the Company. As of May 31, 1996, there were options granted and outstanding
for 104,000 shares at an exercise price of $5.375 per share, 43,000 shares at an
exercise price of $6.50 per share, and 5,000 shares at an exercise price of
$7.25 per share.
1995 Formula Stock Option Plan
The Haskel International, Inc. 1995 Formula Stock Option Plan (the
"1995 Formula Plan") was approved by the shareholders at the 1995 Annual
Shareholders Meeting on October 5, 1995. The 1995 Formula Plan permits
directors who are not employees of the Company or its subsidiaries ("Outside
Directors") and who have been granted options under said Plan, the right to
purchase shares of Class A Common Stock at the fair market value per share at
the date of the grant. Because the 1995 Formula Plan operates by its own terms,
and there are no discretionary decisions, there is no committee needed to
administer the 1995 Formula Plan. The 1995 Formula Plan is designed to assist
the Company in attracting and retaining high quality Outside Directors. At
present, that group consists of Messrs. Goldberger, Goodson, Malkowicz, Myers,
Noonan, and Slover. Every new Outside Director, upon becoming a director of the
Company, is granted an option to purchase 10,000 shares of Class A Common Stock.
Such options vest in equal amounts over five years, with the first installment
vesting on the first anniversary of the Outside Director's appointment as
director. Additional options are granted to each Outside Director if the
Company's performance exceeds certain benchmarks. All options granted under the
1995 Formula Plan become 100% vested in the event of a change in control of the
Company. The 1995 Formula Plan provides for the grants of options to purchase an
aggregate of 40,000 shares of Class A Common Stock. The number of shares is also
subject to adjustments to reflect any future changes in the capitalization of
the Company. As of May 31, 1996, there were options granted and outstanding for
10,000 at an exercise price of $6.625 per share.
33
<PAGE> 34
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock
options granted to the Named Executive Officers during fiscal 1996:
Option Grants in Last Fiscal Year
---------------------------------
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual
Rates of Stock Price
Individual Grants Appreciation For Option Term
------------------------------------------------------- --------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 0%($) 5%($) 10%($)
- ---- ----------- ------------ ----------- ---------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Malcolm Greaves 43,000 18.9% $ 6.50 2/27/06 $0 $455,275 $724,950
Robert A. Smith 50,000 21.9% $5.375 2/21/05 $0 $437,765 $697,068
James C. Minyard -- -- -- -- -- -- --
Maury S. Friedman -- -- -- -- -- -- --
Edward Malkowicz 100,000(1) 43.9% $5.375 4/12/05 $0 $210,127(1) $334,593(1)
Lonnie D. Schnell 30,000 13.2% $5.375 11/7/04 $0 $262,659 $418,240
</TABLE>
- --------------------
(1) Pursuant to the terms of the stock option agreement entered into
between the Company and Mr. Malkowicz, the option lapsed with respect to 76,000
shares during fiscal 1996. Potential Realizable Values were calculated based on
the net 24,000 shares relating to such option.
STOCK OPTION EXERCISES AND OPTIONS OUTSTANDING
The following table provides certain information regarding outstanding
options by the Named Executive Officers at May 31, 1996:
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
-----------------------------------------------
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money
Name Exercise (#) Realized ($) Options at May 31, 1996 (#) Options at May 31, 1996 ($)
- ---- ------------ ------------ --------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Malcolm Greaves -- -- 104,267 44,733 $ 4,300 $17,200
Robert A. Smith -- -- 10,000 40,000 $16,250 $65,000
James C. Minyard -- -- 10,000 20,000 -- --
Maury S. Friedman -- -- 40,000 -- -- --
Edward Malkowicz -- -- 10,400 25,600 $13,000 $26,000
Lonnie D. Schnell -- -- 6,000 24,000 $ 9,750 $39,000
</TABLE>
34
<PAGE> 35
REPRICING OF OPTIONS
The following table shows all repricings of options held by any
executive officer during the last ten completed fiscal years:
Ten-Year Option Repricings
--------------------------
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock at Price at Remaining
Options Time of Time of New at Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date Amended Amendment Amendment Price Amendment
- ---- ---- ----------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Maury S. Friedman 1/19/95 60,000(1) $10.13 $7.18(2) $8.03 6/9/04
</TABLE>
- --------------------
(1) Pursuant to the terms of the stock option agreement entered into
between the Company and Mr. Friedman, the option lapsed with respect to 20,000
shares on March 31, 1996, upon Mr. Friedman's resignation as an officer of the
Company, and lapsed with respect to the remaining 40,000 shares on June 3, 1996.
(2) This option, and all other options granted on June 9, 1994, was at
an exercise price of $7.18, subject to adjustment based on the independent
appraisal report of the shares owned by the Company's Profit Sharing Plan for
the fiscal year ended May 31, 1994. Based on that appraisal, the exercise price
of all options granted on June 9, 1994, including Mr. Friedman's option, was
adjusted to $8.03.
RETIREMENT PLANS
Haskel International, Inc. Profit Sharing Plan
The Haskel International, Inc. Profit Sharing Plan, as amended (the
"PSP"), covers all of Haskel International, Inc.'s employees and includes MGE's
employees, but not HESL's or its subsidiaries' employees. The purpose of the PSP
is to enable participating employees of the Company to share in a portion of the
profits and in the growth and prosperity of the Company and to provide them with
the opportunity to accumulate capital for their future economic security.
Employees are entitled to 100% of their account balances upon death or
retirement. Generally, employees whose employment terminates for any reason
other than death or retirement are vested after five years of service. However,
if the percentage interest in the PSP and other similar plans of certain
high-level employees of the Company falls below a prescribed level, employees
who commenced participating in the PSP prior to June 1, 1989 become vested
according to a schedule that provides for full vesting after fifteen years of
service. The PSP is funded solely by the Company; individual contributions
through payroll deduction or otherwise are not permitted. The Company
contribution is determined annually by the Board of Directors of the Company.
The PSP is administered by a four-member administrative committee of employees
(the "Administrative Committee") appointed by the Board of Directors. The Board
of Directors retains an independent corporate trustee who holds all funds in
trust and votes the Company shares held by the PSP as directed by the
Administrative Committee.
35
<PAGE> 36
HESL Pension Plan
All of HESL's employees who work at least 16 hours per week, who are at
least 21 years of age, and have been with HESL for one year or more are covered
by the Haskel Retirement Benefits Plan, a contributory pension plan (the "HESL
Pension Plan"). Mr. Greaves is the only executive officer who is currently
participating in the HESL Pension Plan. Currently, the pension costs are
equivalent to 15% of the individual's pensionable salary (basic annual salary or
wages at the HESL Pension Plan anniversary, which is June 1 of each year) and
are borne 80% by HESL and 20% by the individual. The pension benefits payable
are on a final salary basis, ie. pension benefits accrue at the rate of 1/60th
of final pensionable salary for each complete year of service with HESL less
deductions to take into account the lower-level earnings and upper-level
earnings limits originally set down in SERPS (State Earnings Related Pension
Scheme). Pension benefits are subject to an annual cost-of-living increase of
not less than 3% nor more than 5%. Three directors of HESL have an enhancement
to their pension plan (the "Haskel Discretionary Benefits Scheme"), whereby
pension benefits accrue at the rate of 1/40th of pensionable salary but, again,
subject to the deductions described in the preceding sentence. The normal
retirement age for both men and women is 65 years. The HESL Pension Plan
additionally provides for a death-in-service lump sum payment of twice salary
(in the case of the three directors' pension enhancement scheme, four times
salary) and a spouse's pension of two-thirds the prospective pension at date of
death of the employee. The funds are held and invested by Norwich Union on
behalf of the trustees of the HESL Pension Plan, and HESL is assisted in its
management of the HESL Pension Plan by Sedgwick Noble Lowndes, who are pension
advisers. The trustees responsible for the HESL Pension Plan are HESL's
secretary, a retired director of HESL, an employee of HESL and a representative
of HESL's legal counsel, Dickinson Dees. See Note 8 of Notes to Consolidated
Financial Statements.
The following table sets forth annual pension benefits under the HESL
Pension Plan on a straight-life annuity basis for representative years of
service as defined in the HESL Pension Plan at an accrual rate of 1/60th of
final pensionable salary. Amounts shown assume retirement at age 65 on January
1, 1996. Other than the adjustment described in footnote 2 below, such benefits
are not subject to reduction for benefits and other offset amounts. As of May
31, 1996, Mr. Greaves had approximately 7 years of service credited under the
HESL Pension Plan.
HESL Pension Plan Table
-----------------------
<TABLE>
<CAPTION>
Estimated Annual Retirement Benefit at Age 65 for Indicated Years of Credited Service(2)
----------------------------------------------------------------------------------------
Final Pensionable Salary(1) 5 10 15 20 25 30 35
- --------------------------- ------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 4,167 $ 8,333 $12,500 $16,667 $20,833 $ 25,000 $ 29,167
75,000 6,250 12,500 18,750 25,000 31,250 37,500 43,750
100,000 8,333 16,667 25,000 33,333 41,667 50,000 58,333
125,000 10,417 20,833 31,250 41,667 52,083 62,500 72,917
150,000 12,500 25,000 37,500 50,000 62,500 75,000 87,500
200,000 16,667 33,333 50,000 66,667 83,333 100,000 116,667
</TABLE>
- ---------------------
(1) Calculated based on highest average of three consecutive years'
pensionable salaries at June 1 during the 13-year or shorter period prior to
retirement.
(2) Benefits under the HESL Pension Plan are reduced in an amount of
1/100th of the employee's earnings in excess of a lower earnings limit (as of
April 6, 1996, such limit was (pound)3,172, subject to annual adjustment), not
to exceed an upper earnings limit (as of April 6, 1996, such limit was
(pound)23,660, subject to annual increase) times the number of years in service
after April 6, 1978.
36
<PAGE> 37
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee reviews and makes recommendations to the
Board of Directors regarding salaries, bonuses, benefits, and other compensation
for executive officers and key employees of the Company. This Compensation
Committee report discusses the components of the Company's executive officer
compensation policies and programs and describes the bases upon which
compensation is determined by the Compensation Committee with respect to the
executive officers of the Company, including the Named Executive Officers.
Compensation Philosophy. The compensation philosophy of the Company is
to link directly executive compensation to individual and team contributions,
continuous improvements in corporate performance and shareholder value. The
Compensation Committee has adopted the following objectives as guidelines for
compensation decisions:
- Display a willingness to pay levels of compensation that are
necessary to attract and retain highly qualified executives.
- Be willing to compensate executive officers in recognition
of superior individual performance, new responsibilities or new positions within
the Company.
- Take into account historical levels of executive
compensation and the overall competitiveness of the market for high quality
executive talent.
- Implement a balance between short and long-term compensation
to complement the Company's annual and long-term business objectives and
strategy and encourage executive performance in furtherance of the fulfillment
of those objectives.
- Provide variable compensation opportunities based on the
performance of the Company, encourage stock ownership by executives and align
executive remuneration with the interests of shareholders.
The Compensation Committee is aware of the Internal Revenue Code
$1,000,000 cap on deductions for compensation. While that cap does not have an
impact on the Company at present, the Compensation Committee will take
appropriate steps to make the Company's compensation policy comply should
circumstances warrant in the future.
Compensation Program Components. The Compensation Committee regularly
reviews the Company's compensation program to ensure that pay levels and
incentive opportunities are competitive with the market and reflect the
performance of the Company. The particular elements of the compensation program
for executive officers are further explained below.
Base Salary. The Company's base pay levels for executive officers are
determined by the particular responsibilities of the position held and the
experience of the individual and by comparing the salary scale with companies of
similar size and complexity. Actual base salaries are kept within a competitive
salary range for each position that is established through job evaluation and
market comparisons.
Chief Executive Officer's Compensation. The Chief Executive Officer
("CEO") of the Company heads a group of senior management officers who
participate in a common set of compensation criteria linked to the performance
of the Company. The compensation of the CEO is determined by the Compensation
Committee and approved by the Board of Directors based upon its assessment of
the Company's financial performance and non-financial performance measured
against a background of factors which are critical to the success of the
37
<PAGE> 38
business. The Compensation Committee exercises its judgment in weighting the
factors and evaluating performance. The CEO, who currently sits on the
Compensation Committee, does not participate in deliberations regarding his own
compensation.
Annual Bonus. The executive bonus program provides for the granting of
cash bonuses to the senior managers (including the Named Executive Officers) of
the Company. The objective of the bonus is to enhance management's contribution
to shareholder value by providing competitive levels of compensation for the
attainment of financial objectives. In particular, the executive bonus program
focuses corporate behavior on consistent and steady earnings growth by basing
performance on a comparison of actual results to the Company's annual budget.
Actual bonuses are subject to decrease or increase on the basis of the Company's
performance and range up to 55% of base salary for attaining goals. Based on the
Company's performance during fiscal year 1996, bonuses were paid to the Named
Executive Officers and the majority of the senior management.
Summary. After its review of all existing programs, the Compensation
Committee continues to believe that the total compensation program for
executives of the Company is focused on increasing values for shareholders and
enhancing corporate performance. The Compensation Committee believes that
executive compensation levels of the Company are competitive with the
compensation programs provided by other corporations with which the Company
competes. The foregoing report has been approved by all members of the
Compensation Committee.
COMPENSATION COMMITTEE
Stanley T. Myers, Chairman
Marvin L. Goldberger
Terrence A. Noonan
R. Malcolm Greaves
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During fiscal 1996, Marvin Goodson, Edward Malkowicz, Stanley T.
Myers, Dr. Marvin Goldberger and R. Malcolm Greaves served as members of the
Compensation Committee of the Board of Directors, which determines salaries of
the Company's employees. Mr. Goodson served on the Compensation Committee until
February 26, 1996, when Mr. Greaves was appointed by the Board of Directors as
Mr. Goodson's replacement. Mr. Greaves, President and Chief Executive Officer of
the Company, did not participate in deliberations regarding his own
compensation. The Company incurred attorneys' fees in the amount of
approximately $358,000 in fiscal 1996 in connection with services provided by
the firm of Goodson and Wachtel A Professional Corporation. Mr. Goodson is a
principal with that law firm.
38
<PAGE> 39
Performance Graph
The following graph compares the Company's cumulative total
shareholders return since the Class A Common Stock became publicly traded on
November 1, 1994, with the Nasdaq Stock market (National Market) Index, the
Standard & Poor's 500 Index and with a peer group comprised of companies which
manufacture high-pressure equipment and with which the Company generally
competes. The peer group is comprised of the following companies: Duriron Co.
Inc., Flow International Corp., IDEX Corp., Oilgear Co. and Watts Industries
Inc. The graph and table assume that $100 was invested on November 1, 1994 in
the Company's Class A Common Stock, at the initial public offering price of
$10.00 per share, and in each of the indexes mentioned above, and that all
dividends were reinvested.
Total Shareholder Return
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Quarters
11/1/94 Nov 94 Feb 95 May 95 Aug 95 Nov 95 Feb 96 May 96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------- ------ ------ ------ ------ ------ ------ ------
Haskel Intl Inc-CLA 100 100.00 95.69 68.49 58.93 56.38 66.87 74.25
S&P 500 Index 100 96.86 104.77 115.48 122.38 132.67 141.13 148.32
Peer Group 100 89.86 101.45 107.13 128.38 122.97 113.60 117.02
NASQAQ COMPOSITE 100 96.68 102.65 111.84 132.41 137.84 143.02 162.55
</TABLE>
39
<PAGE> 40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to each person
who, as of July 31, 1996 is known by the Company to be the beneficial owner of
more than five percent (5%) of the Company's Common Stock:
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
------------------------ ----------------------
Amount and Amount and Percent of
Nature of Percent Nature of Percent Combined
Name and Address of Beneficial of Beneficial of Voting
Beneficial Owner Ownership Class(1) Ownership Class(1) Power(2)
- ---------------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Hayman Family Trusts 1,584,477(3) 33.8% 40,000(3) 100.0% 34.4%
c/o The Boston Company
300 S. Grand Avenue Suite 1200
Los Angeles, CA 90071
Maury S. Friedman 447,000(4) 9.5% -- -- 9.5%
29480 Bertrand Street
Agoura Hills, CA 91301
Haskel, Inc. Profit Sharing Plan 259,607 5.5% -- -- 5.5%
Citizens Bank, Trustee
225 East Colorado Blvd.
Pasadena, CA 91101
</TABLE>
- --------------------
(1) Included as outstanding for purposes of these calculations with
respect to (1) the Class A Common Stock were 4,688,230 shares of Class A Common
Stock outstanding as of May 31, 1996 plus, in the case of a particular person,
the shares of Class A Common Stock subject to currently exercisable options
(which are deemed to include options exercisable within 60 days after August 16,
1996) held by that person, which options are specified by footnote. Other than
as described in the preceding sentence, shares upon exercise of outstanding
options are not deemed to be outstanding for purposes of these calculations, and
(ii) the Class B Common Stock were 40,000 shares of Class B Common Stock
outstanding as of May 31, 1996.
(2) Represents the combined voting power of the shares of Class A
Common Stock and Class B Common Stock beneficially owned by the persons named as
a percent of the aggregate combined voting power of all outstanding shares of
Common Stock.
(3) All of the shares shown are owned beneficially and of record by
eight irrevocable trusts. Sheryl L. Everett is the beneficiary of three of the
trusts, Sandra Nelson the beneficiary of three of the trusts, and Rick Meeker
Hayman the beneficiary of two of the trusts. The trustees of two of the trusts
of which Sheryl L. Everett is the beneficiary, two of the trusts of which Sandra
Nelson is the beneficiary and the two of the trusts of which Rick Meeker Hayman
is the beneficiary are The Boston Safe Deposit and Trust Company of California
("The Boston Company"), Sheryl L. Everett and Sandra Nelson. The Boston Company
has two votes and each of the other trustees has one vote in determining action
to be taken by each of these six trusts with respect to the shares held by each
such trust. The Boston Company is sole trustee for each of the other two trusts,
one of which Sheryl L. Everett is the beneficiary and one of which Sandra Nelson
is the beneficiary. Excludes 25,450 and 41,145 shares as to which Sandra Nelson
and Sheryl L. Everett, respectively, have sole voting and dispositive power; and
41,145 shares which are held in trust by another trustee, and with respect to
which Rick Meeker Hayman is the beneficiary, and has sole voting and dispositive
power.
(4) Includes 440,000 shares owned beneficially and of record by the
Friedman Family Trust, of which Maury S. Friedman and Lisa E. Friedman are
co-trustees, and 7,000 shares owned by Mr. Friedman as custodian for his minor
children.
40
<PAGE> 41
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of July 31, 1996, by (i)
each director and nominee for director, (ii) each of the executive officers
named in the Summary Compensation Table, and (iii) all directors and executive
officers as a group. Except as otherwise noted, and subject to applicable
community property and similar laws, each person named has sole voting and
investment power with respect to the Common Stock shown as beneficially owned.
<TABLE>
<CAPTION>
Class A Shares Percent
Beneficially of
Name and Address Title Owned Class
- ---------------- ----- -------------- -------
<S> <C> <C> <C>
R. Malcolm Greaves President, Chief Executive 117,600(1) 2.5%
100 East Graham Place Officer and Director
Burbank, CA 91502
Robert A. Smith Executive Vice President and 10,000(2) *
100 East Graham Place President - Industrial Products
Burbank, CA 91502 Group
James C. Minyard Formerly President - Electronic 10,400(3) *
1874 Dunnigan Street Products Group and President of
Camarillo, CA 93010 MGE
Maury S. Friedman Formerly Executive Vice 447,000(4) 9.5%
29480 Bertrand Street President, President - Electronic
Agoura Hills, CA 91301 Products Group and Director
Lonnie D. Schnell Chief Financial Officer and 7,500(5) *
100 East Graham Place Secretary
Burbank, CA 91502
Edward Malkowicz Chairman of the Board and 21,400(6) *
100 East Graham Place Director
Burbank, CA 91502
Marvin L. Goldberger Director 50,155(7) 1.1%
100 East Graham Place
Burbank, CA 91502
Marvin Goodson Director 178,910(8) 3.8%
100 East Graham Place
Burbank, CA 91502
Stanley T. Myers Director 3,400(9) *
100 East Graham Place
Burbank, CA 91502
Terrence A. Noonan Director 1,000 *
100 East Graham Place
Burbank, CA 91502
William L. Slover Director 32,000(10) *
100 East Graham Place
Burbank, CA 91502
All directors and executive
officers as a group (11
persons) 879,365(11) 18.8%
</TABLE>
* Denotes beneficial ownership of less than 1%.
[Footnotes on next page]
41
<PAGE> 42
- --------------------
(1) Includes 114,600 shares issuable upon exercise of options
exercisable within 60 days of August 16, 1996.
(2) Includes 10,000 shares issuable upon exercise of options exercisable
within 60 days of August 16, 1996.
(3) Includes 10,000 shares issuable upon exercise of options
exercisable within 60 days of August 16, 1996. Mr. Minyard was terminated as an
employee of the Company and MGE on July 1, 1996.
(4) Includes 440,000 shares owned beneficially and of record by the
Friedman Family Trust, of which Mr. Friedman is a co-trustee; and 7,000 shares
owned by Mr. Friedman as custodian for his minor children. Mr. Friedman resigned
as a director of the Company in January 1996 and as President - Electronic
Products Group in April 1996. He currently serves as a consultant to MGE.
(5) Includes 6,000 shares issuable upon exercise of options exercisable
within 60 days of August 16, 1996.
(6) Includes 10,400 shares issuable upon exercise of options exercisable
within 60 days of August 16, 1996.
(7) Includes 11,155 shares owned beneficially and of record by the
Marvin and Mildred Goldberger Family Trust, of which Dr. Goldberger is a
co-trustee; and 39,000 shares issuable upon exercise of options exercisable
within 60 days of August 16, 1996.
(8) Includes 26,800 shares owned beneficially and of record by the
Goodson and Wachtel Professional Corporation Profit Sharing Plan, of which Mr.
Goodson is a co-trustee; 81,110 shares owned beneficially and of record by the
Marvin and Mae Goodson Family Trust, of which Mr. Goodson is a co-trustee; and
71,000 shares issuable upon exercise of options exercisable within 60 days of
August 16, 1996.
(9) Includes 2,400 shares issuable upon exercise of options exercisable
within 60 days of August 16,1996.
(10) Includes 5,000 shares owned beneficially and of record by the
Slover Family Trust, of which Mr. Slover is a trustee; and 27,000 shares
issuable upon exercise of options exercisable within 60 days of August 16, 1996.
(11) Includes 290,400 shares issuable upon exercise of options
exercisable within 60 days of August 16, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company incurred attorneys' fees in the amounts of approximately
$358,000 in fiscal 1996 in connection with services provided by the firm of
Goodson and Wachtel A Professional Corporation. That firm continues to provide
legal services to the Company. Marvin Goodson, a director and shareholder of the
Company, is a principal with that law firm. In addition, that firm represents
the Hayman Family Trusts and the Haskel, Inc. Profit Sharing Plan, who are
principal shareholders of the Company.
42
<PAGE> 43
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
Exhibit
Number Exhibit Description
3.1 Restated Articles of Incorporation of the Company, as amended.
(Incorporated by reference to Exhibit 3.1 of the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1995)
3.2 Restated Bylaws of the Company, as amended.
4.1 Specimen Class A Common Stock and Class B Stock Certificates.
(Incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-1 (File No. 33-74362))
4.2 Form of Underwriter's Warrants. (Incorporated by reference to
Exhibit 4.2 of the Company's Registration Statement on Form S-1
(File No. 33-74362))
10.1 1989 Incentive Stock Option Plan and form of Stock Option
Agreement. (Incorporated by reference to Exhibit 10.1 of the
Company's Registration Statement on Form S-1 (File No. 33-74362))
10.2 Non-Qualified Stock Option Plan and form of Stock Option Agreement.
(Incorporated by reference to Exhibit 10.2 of the Company's
Registration Statement on Form S-1 (File No. 33-74362))
10.3 1995 Incentive Stock Option Plan and form of Stock Option
Agreement.
10.4 1995 Formula Stock Option Plan and form of Stock Option Agreement.
10.5 Haskel Inc. Profit Sharing Plan. (Incorporated by reference to
Exhibit 10.3 of the Company's Registration Statement on Form S-1
(File No. 33-74362))
10.6 Haskel Energy Systems, Ltd. Pension Plan. (Incorporated by
reference to Exhibit 10.4 of the Company's Registration Statement
on Form S-1 (File No. 33-74362))
10.7 Agreement and Plan of Reorganization of M.G. Electronics, Inc. into
Haskel Network Group, Inc. dated November 17, 1993 and related
Indemnification Agreement and Agreement of Merger. (Incorporated by
reference to Exhibit 10.7 of the Company's Registration Statement
on Form S-1 (File No. 33-74362))
10.8 Employment Agreement dated November 17, 1993 between Maury S.
Friedman and the Company. (Incorporated by reference to Exhibit
10.8 of the Company's Registration Statement on Form S-1 (File No.
33-74362))
10.9 Non-Competition Agreement dated November 17, 1993 between Maury S.
Friedman, the Friedman Family Trust and M.G. Electronics, Inc.
(Incorporated by reference to Exhibit 10.9 of the Company's
Registration Statement on Form S-1 (File No. 33-74362))
43
<PAGE> 44
Exhibit
Number Exhibit Description
10.10 Consulting Agreement dated March 21, 1996 between the Company and
Maury S. Friedman. (Incorporated by reference to Exhibit 10.17 of
the Company's Quarterly Report on Form 10-Q for the period ended
February 29, 1996)
10.11 Leases dated June 1, 1993 and September 24, 1993 between West Lake
Village Industrial Park and M.G. Electronics, Inc. (Incorporated by
reference to Exhibit 10.10 of the Company's Registration Statement
on Form S-1 (File No. 33-74362))
10.12 Consultant and Widow's Pension Agreement dated May 16, 1983 between
the Company and Frederick J. Broderick and related Memorandum dated
April 22, 1993. (Incorporated by reference to Exhibit 10.13 of the
Company's Registration Statement on Form S-1 (File No. 33-74362))
10.13 Glendale Superfund Site PRP Organization Agreement dated October
28, 1993 by and among the Company and the other PRPs in the Group.
(Incorporated by reference to Exhibit 10.14 of the Company's
Registration Statement on Form S-1 (File No. 33-74362))
10.14 Amendment to the Glendale Superfund Site PRP Organization Agreement
dated as of January 11, 1996 by and among the Company and the
other PRPs in the Group.
10.15 Memorandum of Agreement Regarding Cost-Sharing for the Glendale
Operable Unit Superfund Sites dated June 7, 1995 by and among the
Company and the other PRPs in the Group.
10.16 Underwriter's Warrant Agreement. (Incorporated by reference to
Exhibit 10.18 of the Company's Registration Statement on Form S-1
(File No. 33-74362))
10.17 Loan Agreement dated February 21, 1995 by and between the Company
and Union Bank and related Commercial Promissory Note, Arbitration
Agreement, Continuing Guaranty and Security Agreement-Pledge.
(Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the period ended February 28, 1995)
10.18 First Amendment dated as of August 30, 1995 to Loan Agreement
between the Company and Union Bank.
10.19 Second Amendment dated as of February 13, 1996 to Loan Agreement
between the Company and Union Bank.
44
<PAGE> 45
Exhibit
Number Exhibit Description
10.20 Third Amendment dated as of April 16, 1996 to Loan Agreement
between the Company and Union Bank.
10.21 Employment Agreement dated December 22, 1995 regarding James C.
Minyard.
10.22 Haskel International, Inc. Executive Separation Pay Plan.
11.1 Statement regarding computation of net income per share.
21 Schedule of Subsidiaries.
27 Financial Data Schedule.
The following schedules supporting the financial statements:
Schedule II Valuation and Qualifying Accounts
(b) Reports on Form 8-K:
The Company filed one Current Report on Form 8-K dated May 31, 1996,
during the fourth quarter of its fiscal year, reporting certain information
under Item 5 thereof. No financial statements were filed therewith.
45
<PAGE> 46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: August 26, 1996 HASKEL INTERNATIONAL, INC.
By /s/ Lonnie D. Schnell
---------------------------------
Lonnie D. Schnell
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears
below constitutes and appoints R. Malcolm Greaves and Lonnie D. Schnell, or any
one of them, his attorney-in-fact and agent, with full power of substitution,
for him in any and all capacities, to sign any amendments to this Annual Report,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or their substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Edward Malkowicz Chairman of the Board August 26, 1996
- ----------------------------- and Director
Edward Malkowicz
/s/ R. Malcolm Greaves Chief Executive Officer August 26, 1996
- ----------------------------- and Director
R. Malcolm Greaves
/s/ Marvin L. Goldberger Director August 26, 1996
- -----------------------------
Marvin L. Goldberger
/s/ Marvin Goodson Director August 26, 1996
- -----------------------------
Marvin Goodson
- ----------------------------- Director August 1996
Stanley T. Myers
/s/ Terrence A. Noonan Director August 26, 1996
- -----------------------------
Terrence A. Noonan
- ----------------------------- Director August 1996
William L. Slover
</TABLE>
46
<PAGE> 47
HASKEL INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Reports........................................... F-1
Consolidated Balance Sheets
at May 31, 1995 and 1996................................................ F-3
Consolidated Statements of Income
for the years ended May 31, 1994, 1995 and 1996......................... F-5
Consolidated Statements of Shareholders' Equity
for the years ended May 31, 1994, 1995 and 1996......................... F-6
Consolidated Statements of Cash Flows
for the years ended May 31, 1994, 1995 and 1996......................... F-7
Notes to Consolidated Financial Statements.............................. F-9
</TABLE>
47
<PAGE> 48
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Haskel International, Inc.:
We have audited the accompanying consolidated balance sheets of Haskel
International, Inc. and its subsidiaries as of May 31, 1995 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended May 31, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based upon our audits. We
did not audit the financial statements of Haskel Energy Systems, Ltd. ("HESL")
(a consolidated subsidiary), which statements reflect total assets constituting
35% and 30% of consolidated total assets at May 31, 1995 and 1996, respectively,
and total sales constituting 28%, 28% and 31% for fiscal years 1994, 1995 and
1996, respectively, of consolidated total sales. Those financial statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for HESL, is based solely
upon the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Haskel International, Inc. and its subsidiaries at May 31,
1995 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended May 31, 1996 in conformity with generally
accepted accounting principles. Also, in our opinion, based on our audits and
the report of other auditors, the financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
August 23, 1996
F - 1
<PAGE> 49
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
HASKEL ENERGY SYSTEMS LIMITED
We have audited the consolidated balance sheets of Haskel Energy Systems
Limited and its subsidiaries as of May 31, 1995 and 1996, and the related
consolidated statements of income, of shareholders' equity, and of cash flows
for each of the three years in the period ended May 31, 1996 (not included
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management. as well as evaluating the overall financial
statements presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of Haskel Energy Systems Limited
and its subsidiaries as of May 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
May 31, 1996 in conformity with generally accepted accounting principles.
PRICE WATERHOUSE
Chartered Accountants
and Registered Auditors
Newcastle
United Kingdom
August 23, 1996
F - 2
<PAGE> 50
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, May 31,
1995 1996
---------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash & cash equivalents $8,806,000 $ 8,239,000
Accounts receivable, net 8,870,000 9,581,000
Inventories 8,827,000 10,532,000
Prepaid expenses 431,000 356,000
Income taxes receivable 491,000 -
Deferred income taxes 1,022,000 1,260,000
---------- -----------
TOTAL CURRENT ASSETS 28,447,000 29,968,000
PROPERTY, PLANT & EQUIPMENT, NET 5,351,000 5,526,000
PURCHASED TECHNOLOGY, NET 7,098,000 6,569,000
GOODWILL, NET 3,389,000 3,248,000
OTHER ASSETS 10,000 49,000
----------- -----------
TOTAL $44,295,000 $45,360,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F - 3
<PAGE> 51
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
May 31, May 31,
1995 1996
----------- -----------
<S> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 389,000 $ 985,000
Accounts payable 3,402,000 3,510,000
Dividends payable 331,000 331,000
Accrued liabilities 2,610,000 3,089,000
Income taxes payable 746,000 162,000
----------- -----------
TOTAL CURRENT LIABILITIES 7,478,000 8,077,000
LONG-TERM DEBT 3,125,000 2,381,000
DEFERRED INCOME TAXES 450,000 334,000
OTHER ACCRUED LIABILITIES 2,235,000 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; issued and outstanding 4,688,230
at May 31, 1995 and May 31, 1996 13,436,000 13,436,000
Class B, without par value; 40,000 shares
authorized, issued and outstanding at
May 31, 1995 and May 31, 1996 19,000 19,000
Retained Earnings 17,729,000 18,951,000
Cumulative foreign currency translation adjustment (177,000) (186,000)
----------- -----------
Total shareholders' equity 31,007,000 32,220,000
----------- -----------
TOTAL $44,295,000 $45,360,000
=========== ===========
</TABLE>
See notes to consolidated financial statements
F - 4
<PAGE> 52
HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended May 31,
-------------------------------------------
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
SALES $41,354,000 $51,701,000 $56,792,000
COST OF SALES 24,983,000 31,937,000 32,082,000
----------- ----------- -----------
GROSS PROFIT 16,371,000 19,764,000 24,710,000
EXPENSES:
Selling 7,091,000 7,998,000 9,000,000
General and administrative 6,573,000 8,342,000 10,356,000
Engineering design, research 1,186,000 1,151,000 905,000
and development
Restructuring Costs 620,000 - -
Environmental reserve costs 1,039,000 - -
----------- ----------- -----------
Total 16,509,000 17,491,000 20,261,000
----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (138,000) 2,273,000 4,449,000
OTHER INCOME (EXPENSE):
Interest expense (308,000) (550,000) (274,000)
Interest income 423,000 435,000 356,000
Other 56,000 (182,000) 13,000
----------- ----------- -----------
171,000 (297,000) 95,000
----------- ----------- -----------
INCOME BEFORE INCOME
TAXES 33,000 1,976,000 4,544,000
PROVISION FOR INCOME TAXES 30,000 957,000 1,997,000
----------- ----------- -----------
NET INCOME $ 3,000 $ 1,019,000 $ 2,547,000
=========== =========== ===========
PER SHARE DATA:
NET INCOME $0.00 $0.23 $0.54
DIVIDENDS $0.36 $0.28 $0.28
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 3,929,349 4,500,783 4,738,266
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements
F - 5
<PAGE> 53
HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
SHARES OUTSTANDING
COMMON STOCK, CLASS A SHARES
Balance, beginning of year 2,906,372 3,406,470 4,688,230
Issuance of common stock 500,098 874,500 -
Conversion of common stock - 407,260 -
----------- ----------- -----------
BALANCE, END OF YEAR 3,406,470 4,688,230 4,688,230
=========== =========== ===========
COMMON STOCK, CLASS B SHARES
Balance, beginning of year 449,955 447,260 40,000
Repurchase of common stock (2,695) - -
Conversion of common stock - (407,260) -
----------- ----------- -----------
BALANCE, END OF YEAR 447,260 40,000 40,000
=========== =========== ===========
COMMON STOCK, CLASS A
Balance, beginning of year $ 3,296,000 $ 6,859,000 $13,436,000
Issuance of common stock 3,563,000 6,381,000 -
Conversion of common stock - 196,000 -
----------- ----------- -----------
BALANCE, END OF YEAR 6,859,000 13,436,000 13,436,000
----------- ----------- -----------
COMMON STOCK, CLASS B
Balance, beginning of year 218,000 215,000 19,000
Repurchase of common stock (3,000) - -
Conversion of common stock - (196,000) -
----------- ----------- -----------
BALANCE, END OF YEAR 215,000 19,000 19,000
----------- ----------- -----------
RETAINED EARNINGS
Balance, beginning of year 21,817,000 17,971,000 17,729,000
Net income 3,000 1,019,000 2,547,000
Repurchase of common stock (22,000)
Cash dividends, class A and B shares (1,316,000) (1,261,000) (1,325,000)
Dividend - related party (2,511,000)
----------- ----------- -----------
BALANCE, END OF YEAR 17,971,000 17,729,000 18,951,000
----------- ----------- -----------
CUMULATIVE TRANSLATION ADJUSTMENT
BALANCE, END OF YEAR (661,000) (177,000) (186,000)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY $24,384,000 $31,007,000 $32,220,000
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements
F - 6
<PAGE> 54
HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,000 $ 1,019,000 $ 2,547,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,011,000 1,515,000 1,825,000
Gain on sale of property (19,000) (15,000) (5,000)
Deferred income taxes (453,000) (242,000) (354,000)
Effect of exchange rate changes (221,000) 368,000 41,000
Changes in operating assets and liabilities
(net of acquisitions):
Accounts receivable, net 253,000 904,000 (711,000)
Inventories 614,000 (617,000) (1,436,000)
Prepaid expenses and other assets (124,000) 322,000 36,000
Accounts payable and accrued liabilities 466,000 (456,000) 700,000
Income taxes (1,034,000) (165,000) (93,000)
----------- ----------- -----------
Net cash provided by operating activities 496,000 2,633,000 2,550,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,279,000) (1,330,000) (1,272,000)
Proceeds from sale of property 79,000 78,000 90,000
Repayment on notes receivable-related party 549,000
Purchase of subsidiary (net of cash and
cash equivalents acquired) (5,770,000) (159,000)
Increase in long-term investments (216,000)
----------- ----------- -----------
Net cash used in investing activities (6,637,000) (1,252,000) (1,341,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt-related party (2,000,000)
Principal payments on long-term debt (141,000) (3,173,000) (401,000)
Proceeds from issuance of debt 6,000,000
Proceeds from issuance of common stock 332,000 6,754,000
Repurchase of common stock (25,000)
Deferred public offering costs (373,000)
Dividends declared (1,316,000) (1,261,000) (1,325,000)
Repayment of notes payable (192,000)
Increase (decrease) in dividends payable (173,000) 60,000
Dividend-related party (635,000)
----------- ----------- -----------
Net cash provided by (used in)
financing activities 3,669,000 188,000 (1,726,000)
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (144,000) 117,000 (50,000)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,616,000) 1,686,000 (567,000)
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 9,736,000 7,120,000 8,806,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,120,000 $ 8,806,000 $ 8,239,000
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F - 7
<PAGE> 55
HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 280,000 $ 580,000 $ 256,000
=========== =========== ===========
Income taxes $ 1,652,00 $ 1,245,000 $ 2,128,000
=========== =========== ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On October 14, 1993, the Company paid $1,000,000 in cash and issued a
promissory note in the amount of $3,500,000 in connection with the purchase
of land and buildings. Because the property was purchased from a group of
controlling shareholders, the Company has recorded the property at the
historical net book value ($365,000) to such shareholders and has reflected
the excess of the purchase price as a deemed dividend of $2,511,000
($635,000 of which is cash) net of deferred income taxes of $1,624,000. In
November 1994, the Company paid the promissory note with $2,000,000 cash and
offsetting a $1,500,000 note receivable from such shareholders.
On November 19, 1993, the Company acquired all the outstanding stock of M.G.
Electronics, Inc. (MGE) for $9,499,000 ($6,000,000 in cash, $268,000
acquisition costs and $3,231,000 of Class A Common Stock) plus assumed
liabilities.
Fair value of assets acquired $ 13,273,000
Cash paid (6,268,000)
Common stock issued (3,231,000)
-----------
Liabilities assumed $ 3,774,000
===========
On December 30, 1993, the Company's wholly owned foreign operating
subsidiary, Haskel Energy Systems, Ltd. ("HESL"), acquired all of the
outstanding stock of Enviroclean Systems Limited for $207,000 ($15,000
in cash and a note payable of $192,000) plus liabilities.
Fair value of assets acquired $ 859,000
Cash paid (15,000)
-----------
Liabilities assumed $ 844,000
===========
In fiscal year 1995, $6,670,000 was raised (net of offering costs) in
connection with the Company's initial public offering of Class A Common
Stock. These proceeds, net of deferred public offering costs of $373,000,
resulted in net proceeds from the offering of $6,297,000.
On November 30, 1995, HESL acquired certain assets of Armaturenbau GmbH
for $412,000 ($159,000 in cash and a note payble of $253,000.)
See notes to consolidated financial statements.
F - 8
<PAGE> 56
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Haskel
International, Inc. (the "Company"), its wholly owned operating domestic
subsidiaries and its operating foreign subsidiary, Haskel Energy Systems, Ltd.
("HESL"), and its operating subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
Cash Equivalents
The Company considers all short-term investments with original
maturities of 90 days or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. The cost of
domestic inventories is determined by the last-in, first-out (LIFO) method and
represents approximately 67% and 64% of consolidated inventories at May 31, 1995
and 1996, respectively. All other inventories are valued using the first-in,
first-out (FIFO) method. If all domestic inventories had been valued on the FIFO
method, they would have been higher by $1,766,000 and $1,843,000 at May 31, 1995
and 1996, respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Provision for
depreciation has been made based upon the estimated useful lives of the assets,
which range from 3 to 30 years, using principally the straight-line method.
Provision for amortization of leasehold improvements is made based upon the
estimated lives of the assets or terms of the leases, whichever is shorter.
Income Taxes
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and income tax bases of assets and
liabilities. Such deferred income tax asset and liability computations are based
on enacted tax laws and rates applicable to periods in which the differences are
expected to reverse. A valuation allowance is established, when necessary, to
reduce deferred income tax assets to the amount expected to be realized. Income
tax expense is the tax payable or refundable for the period plus or minus the
change during the period in deferred income tax assets and liabilities.
Fair Value of Financial Instruments
The carrying values of cash equivalents, accounts receivable, and
accounts payable approximate fair value due to the short maturities of such
instruments. The carrying values of notes payable approximate fair value due to
the fact that the majority of the notes are based on variable interest rates.
F - 9
<PAGE> 57
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
Revenue is recognized upon shipment of product. Accounts receivable are
uncollateralized and contain no significant concentrations of credit risk.
Research and Development
Research and development costs are expensed as incurred.
Earnings Per Share
Earnings per share are computed based upon the weighted average number
of common shares and dilutive common share equivalents (consisting of incentive
stock options and nonqualified stock options) outstanding during the periods.
Foreign Currency Translation
Foreign assets and liabilities are translated to their United States
dollar equivalents based on rates of exchange prevailing at the end of each
respective period. Income statement information is translated using the average
rate for the year. Gains and losses resulting from foreign currency
transactions, which have not been significant, are included in the consolidated
statements of income. Gains and losses resulting from translation of foreign
financial statements are included as a separate component of shareholders'
equity.
Restructuring Costs
During 1994, the Company restructured part of its operations. The
restructuring charge, which related almost entirely to certain employee
termination benefits, was substantially paid as of May 31, 1994.
Intangible Assets
The Company reviews the carrying value of all intangible assets on a
quarterly basis, and if future undiscounted cash flows are believed insufficient
to recover the remaining carrying value of an intangible asset, the carrying
value is written down to fair market value in the period the impairment is
identified.
Stock Options
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". The Company plans to adopt only the disclosure portion of the
statement and therefore does not expect the statement to have a material impact
on the financial statements.
F - 10
<PAGE> 58
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made in the 1994 and 1995 financial
statements to conform with the 1996 financial statement presentation.
2. MERGERS AND ACQUISITIONS
On November 19, 1993, the Company paid $6,000,000 in cash, $268,000 in
acquisition costs and issued 450,000 shares of its Class A Common Stock in
exchange for all of the outstanding common stock of MGE. The transaction has
been accounted for as a purchase. The valuation of the Company's stock used in
recording the purchase price was $7.18 per share, which was the value as of the
fiscal year ended May 31, 1993 as determined by an independent appraisal. In
connection with the acquisition, the Company recorded purchased technology of
$7,900,000 and goodwill of $3,428,000, which are being amortized over 15 years.
On December 30, 1993, HESL acquired all the outstanding stock of
Enviroclean Systems Limited in exchange for $15,000 in cash and a note payable
of $192,000. In connection with the acquisition, the Company recorded goodwill
of approximately $320,000, which is being amortized over 15 years.
On November 30, 1995, HESL acquired certain assets of Armaturenbau GmbH
in exchange for $159,000 in cash and a note payable of $253,000. In connection
with the acquisition, the Company recorded goodwill of approximately $108,000,
which is being amortized over 15 years.
F - 11
<PAGE> 59
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
3. COMPOSITION OF CERTAIN BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
May 31, May 31,
1995 1996
------------ ------------
<S> <C> <C>
Cash and cash equivalents:
Cash in banks ................................... $ 2,980,000 $ 2,901,000
Time deposits ................................... 5,826,000 5,338,000
------------ ------------
$ 8,806,000 $ 8,239,000
============ ============
Accounts receivable:
Accounts receivable ............................. $ 9,785,000 $ 10,542,000
Less: Allowance for doubtful accounts ........... (915,000) (961,000)
------------ ------------
$ 8,870,000 $ 9,581,000
============ ============
Inventories:
Raw materials ................................... $ 2,837,000 $ 3,335,000
Work-in-process ................................. 1,249,000 2,032,000
Finished goods .................................. 4,741,000 5,165,000
------------ ------------
$ 8,827,000 $ 10,532,000
============ ============
Property, plant and equipment:
Land and building ............................... $ 2,655,000 $ 2,636,000
Computer equipment .............................. 1,730,000 2,530,000
Machinery and equipment ......................... 3,154,000 3,378,000
Furniture and fixtures .......................... 2,646,000 2,466,000
Leasehold improvements .......................... 1,269,000 1,436,000
------------ ------------
11,454,000 12,446,000
Less: Accumulated depreciation and amortization.. (6,116,000) (6,920,000)
------------ ------------
5,338,000 5,526,000
------------ ------------
Equipment under capital lease ..................... 43,000
Less: Accumulated amortization .................... (30,000)
------------
13,000
------------
$ 5,351,000 $ 5,526,000
============ ============
Purchased technology:
Purchased technology ............................ $ 7,900,000 $ 7,900,000
Less: Accumulated amortization .................. (802,000) (1,331,000)
============ ============
$ 7,098,000 $ 6,569,000
============ ============
Goodwill:
Goodwill ........................................ $ 3,760,000 $ 3,859,000
Less: Accumulated amortization .................. (371,000) (611,000)
------------ ------------
$ 3,389,000 $ 3,248,000
============ ============
</TABLE>
F - 12
<PAGE> 60
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
3. COMPOSITION OF CERTAIN BALANCE SHEET ACCOUNTS (CONTINUED)
<TABLE>
<CAPTION>
May 31, May 31,
1995 1996
----------- ----------
<S> <C> <C>
Accrued Liabilities:
Accrued payroll and related expenses ..... $ 529,000 $ 452,000
Accrued bonuses .......................... 123,000 725,000
Accrued environmental expenses ........... 171,000 93,000
Accrued retirement benefits .............. 113,000 209,000
Accrued vacation ......................... 323,000 521,000
Accrued commissions ...................... 282,000 284,000
Other .................................... 1,069,000 805,000
---------- ----------
$2,610,000 $3,089,000
========== ==========
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
May 31, May 31,
1995 1996
---------- ----------
<S> <C> <C>
Various installment notes issued in connection with stock
repurchases. Principal payable in equal quarterly
installments through February 2000. Interest payable at
a rate equal to one year Treasury Notes adjusted
quarterly. Interest rate at May 31, 1996 was 5.19%............ $ 501,000 $ 386,000
Non-interest bearing note payable issued in connection
with acquisition. Payable in three annual installments of
$95,000. Interest imputed based on an assumed
interest rate of 8%............................................ 241,000
Note payable to bank, principal payable in 46 equal
monthly installments of $65,200 beginning in February,
1996. The unpaid principal balance bears interest, to be
paid monthly, based upon the LIBOR rate plus 1 3/4%.
Interest rate at May 31, 1996 was 6.87%.
Collateralized by 50% of the Company's stock in HESL........... 3,000,000 2,739,000
Capitalized equipment lease obligation, secured by the
related equipment, payable in monthly installments
including interest at 10.75% through September 1995 ........... 13,000
---------- ----------
3,514,000 3,366,000
Less: Current portion of long-term debt......................... (389,000) (985,000)
---------- ----------
Long-term debt................................................... $3,125,000 $2,381,000
========== ==========
</TABLE>
F - 13
<PAGE> 61
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
4. LONG-TERM DEBT (CONTINUED)
Amounts of scheduled debt repayments by fiscal year are summarized as follows:
<TABLE>
<CAPTION>
May 31,
----------
<S> <C>
1997 .................................................. $ 985,000
1998 .................................................. 973,000
1999 .................................................. 947,000
2000 .................................................. 461,000
----------
$3,366,000
==========
</TABLE>
The Company has a $5 million revolving line of credit available with a
bank at an interest rate equal to the LIBOR rate plus 1 1/2% (6.62% at May 31,
1996). There were no outstanding balances under the line of credit as of May 31,
1995 or 1996.
The Company has a $4 million acquisition line of credit available with
the same bank at an interest rate equal to the LIBOR rate plus 1 3/4% (6.87% at
May 31, 1996). The Company may make minimum draws against this line of $250,000.
Balances outstanding against this line at the end of February each year are
converted into a five-year term loan, payable in 48 equal installments beginning
one year from the conversion to a term loan. The term loan with the bank bears
interest at the same rate as the acquisition line. There were no borrowings
against this acquisition line and no term loans associated with this line
outstanding as of May 31, 1996.
The above loan agreement with the bank contains certain covenants,
including a requirement to maintain working capital of not less than
$15,000,000; tangible net worth of not less than $18,000,000; and earnings
before income taxes, depreciation and amortization equal to or greater than 1.25
times required debt service, dividends and capital expenditures. In addition,
the covenants restrict the Company's ability to incur indebtedness, pay
dividends in the event of default, consummate certain mergers and make capital
expenditures in excess of $2,000,000. As of May 31, 1996, the Company was in
compliance with all of the covenants of the loan agreement.
5. LEASE COMMITMENTS
The Company leases office space, plant and warehouse facilities under
operating lease agreements expiring at various dates through October 2000. Some
of the operating leases contain renewal options and provisions requiring the
Company to pay property tax increases in addition to the minimum rental.
Additionally, the Company leases automobiles under operating lease agreements
expiring at various dates through November 1997.
F - 14
<PAGE> 62
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
5. LEASE COMMITMENTS (CONTINUED)
Future minimum rental payments under operating leases with an initial
term of one year or more are as follows:
<TABLE>
<CAPTION>
Fiscal year ending May 31,
<S> <C>
1997 .............................................. $231,000
1998 .............................................. 161,000
1999 .............................................. 78,000
2000 .............................................. 29,000
2001 .............................................. 6,000
--------
Total minimum lease payments ........................ $505,000
========
</TABLE>
Rent expense for all operating leases was $328,000, $212,000, and
$246,000 for fiscal years 1994, 1995 and 1996, respectively. See discussion of
related party leases in Note 11.
6. INCOME TAXES
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended May 31,
-------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal ................... $ 62,000 $ 311,000 $1,124,000
State ..................... (9,000) 263,000 326,000
Foreign ................... 430,000 625,000 901,000
-------------------------------------
483,000 1,199,000 2,351,000
Deferred:
Federal ................... (394,000) (180,000) (305,000)
State ..................... (59,000) (62,000) (49,000)
-------------------------------------
$ 30,000 $ 957,000 $1,997,000
=====================================
</TABLE>
HESL had undistributed earnings of approximately $12,100,000 at May 31,
1995. In July 1995, $3,500,000 of these earnings were distributed to the
Company. The Company included income taxes on this distribution in its fiscal
year 1995 tax provision. Management retained permanently the remaining
$8,600,000 of the undistributed earnings of HESL as of May 31, 1995 primarily
for internal growth and strategic acquisitions outside of the United States.
Unrecognized income taxes on such earnings would be approximately 2 1/2 percent,
or $215,000, after taking into effect foreign tax credits which would be
available as a reduction of the majority of the U.S. income tax in the event of
the future distribution of these earnings. In fiscal year 1996, the Company has
provided taxes (net of expected foreign tax credits) on the undistributed
earnings of HESL in excess of the $8,600,000 permanently retained.
F - 15
<PAGE> 63
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
6. INCOME TAXES (CONTINUED)
The components of deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
May 31, 1995 May 31, 1996
------------ ------------
Federal State Federal State
--------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred tax assets:
Uniform capitalization rules ..... $ 280,000 $ 66,000 $ 280,000 $ 54,000
Allowance for doubtful accounts ... 250,000 59,000 281,000 63,000
Environmental accrual ............. 362,000 85,000 342,000 65,000
Vacation and sick accrual ......... 101,000 24,000 137,000 26,000
Retirement accrual ................ 470,000 111,000 451,000 87,000
Reserve for obsolescence .......... 224,000 53,000 283,000 77,000
Purchased land/building - related..
party (Note 11) ............... 1,275,000 326,000 1,286,000 263,000
State taxes ....................... 25,000 62,000
Other ............................. 7,000 2,000 90,000 18,000
--------------------------------------------------------
Total deferred tax assets ........... 2,994,000 726,000 3,212,000 653,000
Deferred tax liabilities:
Depreciation ...................... (126,000) (31,000) (160,000) (31,000)
Purchased technology .............. (2,413,000) (568,000) (2,234,000) (428,000)
Other ............................. (7,000) (2,000) (66,000) (20,000)
--------------------------------------------------------
Total deferred tax liabilities ...... (2,546,000) (601,000) (2,460,000) (479,000)
--------------------------------------------------------
Net deferred tax asset .............. $ 448,000 $ 125,000 $ 752,000 $ 174,000
--------------------------------------------------------
</TABLE>
The reconciliation between the amount computed by applying the U.S.
federal statutory tax rate of 35% to income before income taxes and the actual
income taxes follows:
<TABLE>
<CAPTION>
Fiscal Year Ended May 31,
-------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Income tax expense at statutory rate .............. $ 11,000 $ 692,000 $1,590,000
State income taxes, net of federal tax benefit .... (44,000) 130,000 131,000
Goodwill .......................................... 78,000 79,000
Tax-free municipal bond interest .................. (19,000)
Taxes associated with dividends from HESL ........ 34,000 53,000
Foreign income subject to tax other than at federal
statutory rate .................................... 110,000
Other ............................................. 82,000 23,000 34,000
-------------------------------------
$ 30,000 $ 957,000 $1,997,000
=====================================
</TABLE>
F - 16
<PAGE> 64
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
7. PROFIT SHARING PLAN
The Company has a profit sharing plan which covers substantially all
U.S. employees. Contributions are at the discretion of the Board of Directors.
The Company did not make any profit sharing contributions for fiscal years 1994,
1995 or 1996.
8. RETIREMENT PLANS
HESL maintains two pension plans for the benefit of employees:
(a) The Haskel Retirement Benefits Plan provides future benefits for
all employees of HESL who have completed one year of qualifying service.
(b) A Discretionary Benefits Plan provides additional future benefits
for United Kingdom directors.
Pension costs are determined under the provisions of Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for Pensions."
Plan assets are held separately from those of HESL and are invested with
insurance companies. Certain selected information for the plans is as follows:
<TABLE>
<CAPTION>
May 31,
--------------------------
1995 1996
------------ -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits ......................................... $ 1,385,000 $ 1,897,000
Non-vested benefits ..................................... 185,000 174,000
----------- -----------
Accumulated benefit obligation ............................ 1,570,000 2,071,000
Effect of projected salary increases ...................... 796,000 229,000
----------- -----------
Projected benefit obligation .............................. 2,366,000 2,300,000
Net assets available for benefits (market value) .......... 1,766,000 1,876,000
----------- -----------
Projected benefit obligation in excess of plan assets ..... 600,000 424,000
Unrecognized net obligation being recognized over 15 years 558,000 469,000
----------- -----------
Unfunded obligation / (Prepaid pension cost) .............. $ 42,000 $ (45,000)
=========== ===========
</TABLE>
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 134,000 $ 131,000 $ 158,000
Interest cost on projected benefit obligation .. 224,000 214,000 184,000
Expected return on plan assets ................. (158,000) (158,000) (150,000)
Amortization of unrecognized net obligation .... 48,000 42,000 16,000
--------- --------- ---------
Net periodic pension cost ...................... $ 248,000 $ 229,000 $ 208,000
========= ========= =========
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 9 percent and 8 percent, respectively, for
fiscal years 1994 and 1995 and 8 percent and 6 percent, respectively, for fiscal
year 1996. The expected long-term rate of return on assets was 9 percent for
fiscal years 1994 and 1995 and 8 percent for fiscal year 1996. The discount rate
approximates the rate on AA-rated bonds in the United Kingdom.
F - 17
<PAGE> 65
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
9. STOCK OPTIONS AND WARRANTS
The Company has four stock option plans: the 1989 Incentive Stock
Option Plan and the Nonqualified Stock Option Plan which were replaced by the
1995 Incentive Stock Option Plan and the 1995 Formula Stock Option Plan,
respectively. Under the Company's various stock option plans, the Company may
issue nonqualified and incentive stock options to officers, directors and other
employees to purchase the Company's Class A Common Stock at a price that is not
less than 100 percent of the fair market value at the date of grant. The options
granted under the 1989 Incentive Stock Option Plan and the Nonqualified Stock
Option Plan become exercisable at such times, and in such installments, as were
determined by the Board of Directors at the time of the grant. The options
granted under the 1995 Incentive Stock Option Plan, which replaced both the 1989
Incentive Stock Option Plan and Nonqualified Stock Option Plan, become
exercisable at such times, and in such installments, as are determined by the
Stock Option Committee at the time of grant. The options granted under the 1995
Formula Stock Option Plan become exercisable in equal installments over five
years. The options under all of the above plans expire no later than ten years
after the date of grant. There are 1,380,000 shares of Class A Common Stock
reserved for issuance under the option plans as of May 31, 1996. As of May 31,
1996, options for 581,619 of these shares, in the aggregate, were exercisable.
The following table summarizes the stock option activity:
<TABLE>
<CAPTION>
Range of Option
Shares Prices Per Share
-------- ----------------
<S> <C> <C>
Outstanding at June 1, 1993 ... 410,195 $4.17 - $9.46
Options exercised ............. (42,100) $4.17 - $9.46
Options granted ............... 321,500 $7.18
Options canceled .............. (165,310) $4.17 - $9.46
--------
Outstanding at May 31, 1994 ... 524,285 $7.00 - $9.46
Options exercised ............. (12,000) $7.00 - $7.18
Options granted ............... 269,000 $8.03 - $10.00
Options canceled .............. (2,400) $8.03 - $9.46
--------
Outstanding at May 31, 1995 ... 778,885 $7.00 - $10.00
Options granted ............... 238,000 $5.38 - $7.25
Options canceled .............. (182,320) $5.38 - $9.50
--------
Outstanding at May 31, 1996 ... 834,565 $5.38 - $10.00
========
</TABLE>
In connection with the initial public offering of its common stock, the
Company sold Representative's Warrants which entitle the holder to purchase up
to 75,000 shares of Class A Common Stock at a price per share of $15.00. The
Warrants are exercisable for a period of four years beginning November 1, 1995.
The warrants contain certain restrictions regarding transferability and
registration rights. On November 22, 1994, an option to purchase 25,000 shares
of Class A Common Stock was granted to an unaffiliated person at an option price
of $10.00 per share. This option is 100% vested and expires November 22, 1999.
F - 18
<PAGE> 66
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
10. RETIREMENT BENEFITS
The Company is committed under unfunded consultant and non-compete
agreements to make post-retirement payments to employees in return for
consulting services from date of retirement to date of death or disability and
subsequent retirement payments to each employee's widow. Total payments
associated with these pension agreements were $149,000 for fiscal year 1994 and
$139,000 for fiscal years 1995 and 1996. Additionally, the Company has accrued
costs of $1,382,000 and $1,348,000 associated with the actuarial present value
of the accumulated obligation as of May 31, 1995 and 1996, respectively. The
actuarial assumptions used to determine the obligation include an assumed
interest rate of 7%. Such accrual was made because the Company determined that
significant consulting service would not be required in the future. The current
portion of the liability was $139,000 as of May 31, 1995 and 1996 and is
included in accrued liabilities. Other accrued liabilities include $1,243,000
and $1,209,000 as of May 31, 1995 and 1996, respectively.
11. RELATED PARTY TRANSACTIONS
The Company previously leased its principal office space, plant, and
warehouse facilities in Burbank, California from a controlling shareholder of
the Company. Lease payments were $161,000 for fiscal year 1994 and are included
in rent expense for operating leases presented in Note 5.
On October 14, 1993, the Company purchased the land and certain
buildings previously leased at its Burbank facility from a group of controlling
shareholders of the Company. The Company paid $1,000,000 in cash and issued a
$3,500,000 promissory note to the sellers. The purchase price was based upon an
independent appraisal. The promissory note was repaid in 1995 by a cash payment
of $2,000,000 and offsetting a $1,500,000 balance of a note receivable from the
same shareholders (see below). Interest paid on the note totaled $167,000 in
fiscal year 1995. Because the property was purchased from a group of controlling
shareholders, the Company recorded the property at the historical net book value
to such shareholders and reflected the excess of the purchase price of
$4,500,000 and the net book value of $365,000, as a deemed dividend of
$2,511,000 net of deferred income taxes of $1,624,000.
During fiscal year 1993, the Company received a note in the amount of
$1,500,000 from a group of controlling shareholders of the Company. The note
receivable was settled during fiscal year 1995 in a non-cash exchange with a
portion of a $3,500,000 promissory note (see above) from the Company. Accrued
interest receivable on the note was $29,000 as of May 31, 1994. During 1995,
$62,000 in interest was received on the note.
The Company incurred attorneys' fees in the amount of $489,000,
$353,000, and $358,000 in 1994, 1995 and 1996, respectively, in connection with
services provided by a law firm. A principal with that law firm, which serves as
the Company's counsel, is also a director and shareholder of the Company. In
addition, that firm represents the Hayman Family Trusts and the Haskel, Inc.
Profit Sharing Plan, which are principal shareholders of the Company. The
Company had accrued $21,000 and $62,000 as of May 31, 1995 and May 31, 1996,
respectively, associated with the above.
F - 19
<PAGE> 67
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
12. CONTINGENCY
The Company is currently under investigation by the Environmental
Protection Agency (the "EPA") regarding contamination at the Burbank, California
facility which is part of an area known as the San Fernando Valley Area 2
Superfund Site (the "Superfund Site"). A law firm specializing in environmental
law has been hired by the Company to represent it in this matter. There are
several potentially responsible parties ("PRPs") involved in this investigation.
Under applicable law, most notably the federal Comprehensive Environmental
Response Compensation and Liability Act, the Company might be jointly and
severally liable with the other PRPs for the full cost of cleaning up the
Superfund Site.
The PRP's entered into an agreement whereby they are split between the
Glendale-based ("Glendale") parties, in which the Company is included, and the
Burbank-based ("Burbank") parties. The Glendale and Burbank parties engaged the
services of technical scientists as arbitrators who determined that the Burbank
parties would bear 58.8% of total estimated remediation costs of $48,000,000 and
the Glendale parties would bear the remaining 41.2%. This split is currently
being appealed by the Burbank parties. In July, 1996, the Glendale parties began
a mediation amongst themselves regarding the allocation of the 41.2%. Although
the mediation is not yet complete, the Company believes, based upon the advice
and opinion of its environmental counsel, that the Company's share of the 41.2%
portion will not exceed 1.5%, or approximately $300,000, if the arbitrator's
determination is upheld.
In addition to the remediation costs, the EPA has informed the Company
that it intends to seek reimbursement from the PRPs for some portion of the
$13,000,000 of expenses it has incurred in studying the Superfund Site and three
adjacent superfund sites. The EPA also has the right to seek recovery from PRPs
for additional administative expenses it incurs in studying the superfund sites.
Those expenses are not currently quantifiable or subject to reasonable
estimation. The EPA has informed the Company's environmental counsel that only a
portion of the $13,000,000 is attributable to the Superfund Site and the
Company's counsel believes that this portion will be approximately 25%. Assuming
the 25% of the claimed costs are attributable to the Superfund Site, the Company
believes, based upon advice and opinion of its environmental counsel, that the
Company's share of that amount would be approximately $50,000, based on a
projection of a 1.5% allocation. As of May 31, 1995 and 1996, the Company had
accrued liabilities of $962,000 and $913,000, respectively, related to this
matter. The Company believes, based upon the advice and opinion of its
environmental counsel, that the Company's liabilities will be less than the
amount currently in reserves for these matters. However, until further
definitive facts develop regarding these matters, the reserve amount will not be
changed.
Additionally, the Company was issued a mandate by the Regional Water
District to perform testing and clean-up of a site at the same facility. Based
on information available to date, management had accrued liabilities of $103,000
and $56,000 as of May 31, 1995 and 1996, respectively, which management believes
will be sufficient to perform the requested tasks.
When the Company initially tendered the EPA claim relative to the
Superfund Site, the Company's insurers refused to pay the Company's defense
costs. The Company brought litigation against its insurers in which the Company
sought an order that its insurers
F - 20
<PAGE> 68
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
12. CONTINGENCY (CONTINUED)
must defend and indemnify the Company with respect to Superfund Site litigation.
In August 1995, the trial court ruled that the Company's insurers must reimburse
the Company for its defense costs and must pay its defense costs in the future.
As a result of this ruling, the Company expects a substantial recovery of its
defense costs. Currently, the Company is negotiating with its carriers who have
indicated their willingness to pay the Company in excess of $600,000 in past
defense costs incurred through May 31, 1996. They have also indicated their
willingness to pay all defense costs incurred subsequent to May 31, 1996, at a
reasonable rate. Litigation is pending as to whether the Company's insurers must
indemnify the Company for the Superfund Site liability.
Due to the nature of environmental matters, there can be no assurance
that the Environmental Reserve will be adequate to cover any contingent
liabilities arising from the above-referenced environmental matters or that any
liability in excess of the Environmental Reserve will not have a materially
adverse effect on the Company's results of operations or financial condition.
13. COMMON STOCK
Shareholders of Class B Common Stock elect the majority and
shareholders of Class A Common Stock elect the minority of the Board of
Directors. The holders of Class A Common Stock and Class B Common Stock have
equal rights on a per share basis (including the right to dividends) and vote as
a single class on all matters except the election of directors.
During the second quarter of fiscal 1995, the Company effected an
Initial Public Offering of 862,500 shares of its Class A Common Stock. The
proceeds to the Company for the offering were approximately $7,765,000 (after
underwriting commissions and expenses). Other costs associated with the offering
were approximately $1,468,000, resulting in net funds available to the Company
of approximately $6,297,000.
14. BUSINESS SEGMENTS
The Company is organized and operates in two business groups: the
Industrial Products Group (IPG) and the Electronic Products Group (EPG). The IPG
operates in two segments: industrial products manufacturing and industrial
products distribution. The EPG operates in one segment: electronic products
distribution. The IPG manufacturing segment manufactures pneumatically and
hydraulically driven, high-pressure low-flow, fixed displacement, reciprocating,
liquid pumps, gas boosters, chemical injection pumps, air pressure amplifiers,
high-pressure valves, regulators, and accessories to complement these products.
The IPG manufacturing segment also designs and manufacturers systems. The IPG
distribution segment distributes product lines used primarily in the fluid power
business, the largest line of which is the Company's products. The EPG
distribution segment distributes circuit board-level electronic components to
manufacturers of electronic systems and products.
F - 21
<PAGE> 69
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
14. BUSINESS SEGMENTS (CONTINUED)
Intersegment sales are principally sales from the IPG manufacturing
segment to the IPG distribution segment. Corporate expenses consist mainly of
salaries and related expenses, legal and accounting costs, and directors' fees.
<TABLE>
<CAPTION>
Fiscal Year Ended May 31,
-------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Sales:
Industrial Products Group - Manufacturing ............. $ 20,062,000 $ 25,603,000 $ 29,184,000
Industrial Products Group - Distribution .............. 18,811,000 18,019,000 18,718,000
Electronic Products Group - Distribution .............. 3,896,000 12,819,000 14,623,000
Less intersegment sales ............................... (1,415,000) (4,740,000) (5,733,000)
------------ ------------ ------------
Total sales .................................... $ 41,354,000 $ 51,701,000 $ 56,792,000
============ ============ ============
Operating profit:
Industrial Products Group - Manufacturing ............. $ 817,000 $ 3,024,000 $ 4,925,000
Industrial Products Group - Distribution .............. 50,000 1,310,000 1,707,000
Electronic Products Group -Distribution ............... 92,000 (413,000) 147,000
------------ ------------ ------------
Total operating profit ......................... 959,000 3,921,000 6,779,000
Interest expense ........................................ (308,000) (550,000) (274,000)
Interest income ......................................... 423,000 435,000 356,000
Other ................................................... 56,000 (182,000) 13,000
Corporate expenses ...................................... (1,097,000) (1,648,000) (2,330,000)
------------ ------------ ------------
Income before income taxes .................... $ 33,000 $ 1,976,000 $ 4,544,000
============ ============ ============
Depreciation and amortization:
Industrial Products Group - Manufacturing ............. $ 368,000 $ 427,000 $ 670,000
Industrial Products Group - Distribution .............. 210,000 199,000 254,000
Electronic Products Group - Distribution .............. 433,000 889,000 901,000
------------ ------------ ------------
Total depreciation and amortization .......... $ 1,011,000 $ 1,515,000 $ 1,825,000
============ ============ ============
Capital expenditures (excluding subsidiaries acquired):
Industrial Products Group - Manufacturing ............. $ 982,000 $ 903,000 $ 687,000
Industrial Products Group - Distribution .............. 233,000 283,000 335,000
Electronic Products Group -Distribution ............... 64,000 144,000 250,000
------------ ------------ ------------
Total capital expenditures ................... $ 1,279,000 $ 1,330,000 $ 1,272,000
============ ============ ============
</TABLE>
F - 22
<PAGE> 70
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1994, 1995 AND 1996
14. BUSINESS SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Fiscal Year Ended May 31,
-------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Identifiable assets:
Industrial Products Group - Manufacturing.. $ 15,828,000 $ 17,033,000 $ 18,102,000
Industrial Products Group - Distribution .. 13,769,000 11,130,000 10,482,000
Electronic Products Group - Distribution .. 12,278,000 12,141,000 10,802,000
Corporate ................................. 2,536,000 3,991,000 5,974,000
------------ ------------ ------------
Total assets .................... $ 44,411,000 $ 44,295,000 $ 45,360,000
============ ============ ============
Sales:
United States ............................. $ 32,627,000 $ 40,567,000 $ 42,215,000
Europe .................................... 11,754,000 14,807,000 19,987,000
Less sales between geographic areas ....... (3,027,000) (3,673,000) (5,410,000)
------------ ------------ ------------
$ 41,354,000 $ 51,701,000 $ 56,792,000
============ ============ ============
Operating profit (loss):
United States ............................. $ (318,000) $ 2,353,000 $ 4,346,000
Europe .................................... 1,277,000 1,568,000 2,433,000
------------ ------------ ------------
959,000 3,921,000 6,779,000
Interest expense ............................ (308,000) (550,000) (274,000)
Interest income ............................. 423,000 435,000 356,000
Other ....................................... 56,000 (182,000) 13,000
Corporate expenses .......................... (1,097,000) (1,648,000) (2,330,000)
------------ ------------ ------------
Income before income taxes .................. $ 33,000 $ 1,976,000 $ 4,544,000
============ ============ ============
Identifiable assets:
United States ............................. $ 30,517,000 $ 28,794,000 $ 31,685,000
Europe .................................... 13,894,000 15,501,000 13,675,000
------------ ------------ ------------
$ 44,411,000 $ 44,295,000 $ 45,360,000
============ ============ ============
</TABLE>
Export sales were $4,326,000 and $5,461,000 during fiscal year 1994 and
1995, respectively. Export sales did not represent more than 10% of total sales
during fiscal year 1996.
No single customer accounted for more than 10% of total sales during
fiscal year 1994, 1995 or 1996.
15. SUBSEQUENT EVENT
On June 3, 1996, HESL acquired all of the outstanding stock of
Hydraulic Mobile Equipment Limited ("HME") in exchange for approximately
$814,000. The business is located in Manchester, England.
* * * * * *
F - 23
<PAGE> 71
SCHEDULE II
HASKEL INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
Balance at Balance at
Beginning of End of
Period Additions Write-offs Period
------------ --------- ---------- ----------
<S> <C> <C> <C> <C>
May 31, 1994 $188,000 $ 73,000 $ 50,000 $211,000
May 31, 1995 $211,000 $791,000 $ 87,000 $915,000
May 31, 1996 $915,000 $389,000 $343,000 $961,000
</TABLE>
<PAGE> 72
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------- -------------------
<S> <C>
(4) 3.1 Restated Articles of Incorporation of the Company, as amended.
(1) 3.2 Restated Bylaws of the Company, as amended.
(2) 4.1 Specimen Class A Common Stock and Class B Stock Certificates.
(2) 4.2 Form of Underwriter's Warrants.
(2) 10.1 1989 Incentive Stock Option Plan and form of Stock Option
Agreement.
(2) 10.2 Non-Qualified Stock Option Plan and form of Stock Option Agreement.
(1) 10.3 1995 Incentive Stock Option Plan and form of Stock Option Agreement.
(1) 10.4 1995 Formula Stock Option Plan and form of Stock Option Agreement.
(2) 10.5 Haskel Inc. Profit Sharing Plan.
(2) 10.6 Haskel Energy Systems, Ltd. Pension Plan.
(2) 10.7 Agreement and Plan of Reorganization of M.G. Electronics, Inc. into
Haskel Network Group, Inc. dated November 17, 1993 and related
Indemnification Agreement and Agreement of Merger.
(2) 10.8 Employment Agreement dated November 17, 1993 between Maury S.
Friedman and the Company.
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------- -------------------
<S> <C>
(2) 10.9 Non-Competition Agreement dated November 17, 1993 between Maury S.
Friedman, the Friedman Family Trust and M.G. Electronics, Inc.
(5) 10.10 Consulting Agreement dated March 21, 1996 between the Company and
Maury S. Friedman.
(2) 10.11 Leases dated June 1, 1993 and September 24, 1993 between West Lake
Village Industrial Park and M.G. Electronics, Inc.
(2) 10.12 Consultant and Widow's Pension Agreement dated May 16, 1983 between
the Company and Frederick J. Broderick and related Memorandum dated
April 22, 1993.
(2) 10.13 Glendale Superfund Site PRP Organization Agreement dated October 28,
1993 by and among the Company and the other PRPs in the Group.
(1) 10.14 Amendment to the Glendale Superfund Site PRP Organization Agreement
dated as of January 11, 1996 by and among the Company and the
other PRPs in the Group.
(1) 10.15 Memorandum of Agreement Regarding Cost-Sharing for the Glendale
Operable Unit Superfund Sites dated June 7, 1995 by and among the
Company and the other PRPs in the Group.
(2) 10.16 Underwriter's Warrant Agreement.
(3) 10.17 Loan Agreement dated February 21, 1995 by and between the Company
and Union Bank and related Commercial Promissory Note, Arbitration
Agreement, Continuing Guaranty and Security Agreement-Pledge.
(1) 10.18 First Amendment dated as of August 30, 1995 to Loan Agreement
between the Company and Union Bank.
(1) 10.19 Second Amendment dated as of February 13, 1996 to Loan Agreement
between the Company and Union Bank.
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------- -------------------
<S> <C>
(1) 10.20 Third Amendment dated as of April 16, 1996 to Loan Agreement between
the Company and Union Bank.
(1) 10.21 Employment Agreement dated December 22, 1995 regarding James C.
Minyard.
(1) 10.22 Haskel International, Inc. Executive Separation Pay Plan.
(1) 11.1 Statement regarding computation of net income per share.
(1) 21 Schedule of Subsidiaries.
(1) 27 Financial Data Schedule.
</TABLE>
(1) Filed herewith.
(2) Filed as an exhibit to the Registrant's Registration Statement on
Form S-1 (SEC File No. 33-74362), and incorporated herein by this
reference.
(3) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended February 28, 1995, and incorporated herein by
this reference.
(4) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the year ended May 31, 1995, and incorporated herein by this reference.
(5) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended February 29, 1996, and incorporated herein by
this reference.
<PAGE> 1
EXHIBIT 3.2
RESTATED
BY-LAWS
OF
HASKEL INTERNATIONAL, INC.
EFFECTIVE JUNE 9, 1994
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The Board of Directors shall fix
the location of the principal executive office of the Corporation at any place
within or outside the State of California. If the principal executive office
is located outside this State, and the Corporation has one or more business
offices in this State, the Board of Directors shall fix and designate a
principal business office in the State of California.
Section 2. OTHER OFFICES. The Board of Directors may at any
time establish branch or subordinate offices at any place or places where the
Corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be
held at any place within or outside the State of California designated by the
Board of Directors. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the Corporation.
Section 2. ANNUAL MEETINGS. The annual meeting of the
shareholders shall be held on the third Friday in October, each year, if not a
legal holiday, and if a legal holiday, then on the next succeeding business
day, at the hour of 10:00 o'clock A.M., at which time the shareholders shall
elect the Board of Directors, consider reports of the affairs of the
Corporation, and transact such other business as may properly be brought before
the meeting.
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<PAGE> 2
Section 3. SPECIAL MEETING. A special meeting of the
shareholders may be called at any time by the Board of Directors, or by the
Chairman of the Board, or by the President, or by one or more shareholders
holding shares in the aggregate entitled to cast not less than ten percent
(10%) of the votes at that meeting.
Upon request, in writing, to the Chairman of the Board, President,
Vice President or Secretary by any person (other than the Board) entitled to
call a special meeting of shareholders, the officer forthwith shall cause
notice to be given to the shareholders entitled to vote that a meeting will be
held at a time requested by the person or persons calling the meeting, not less
than 35 nor more than 60 days after the receipt of the request. If the notice
is not given within 20 days after receipt of the request, the persons entitled
to call the meeting may give the notice.
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETING. Written notice
of each annual or special meeting of shareholders shall be given not less than
ten (10) nor more than sixty (60) days before the date of the meeting to each
shareholder entitled to vote thereat. Such notice shall state the place, date,
and hour of the meeting and (i) in the case of a special meeting, the general
nature of the business to be transacted, and no other business may be
transacted, or (ii) in the case of the annual meeting, those matters which the
Board, at the time of the mailing of the notice, intends to present for action
by the shareholders, but subject to the provisions of applicable law, any
proper matter may be presented at the meeting for such action. The notice of
any meeting at which directors are to be elected shall include the names of
nominees intended at the time of the notice to be presented by management for
election.
Notice of a shareholders meeting shall be given either personally, by
mail or by other means of written communication, addressed to the shareholder
at the address of such shareholder appearing on the books of the corporation,
or given by the shareholder to the corporation for the purpose of notice; or,
if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the principal
executive office is located. Notice by mail shall be
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<PAGE> 3
deemed to have been given at the time a written notice is deposited in the
United States mail, postage prepaid. Any other written notice shall be deemed
to have been given at the time it is personally delivered to the recipient or
is delivered to a common carrier for transmission, or actually transmitted by
the person giving the notice by electronic or other means of written
communication, to the recipient.
If any notice or report addressed to the shareholder at the address of
such shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice or report to the
shareholder at such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be available for
the shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one (1) year from the date
of the giving of the notice or report to all other shareholders. An affidavit
of mailing of any such notice in accordance with the foregoing provisions,
executed by the Secretary, Assistant Secretary or any transfer agent of the
corporation shall be prima facie evidence of the giving of the notice.
Section 5. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting of
shareholders shall constitute a quorum for the transaction of business. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 6. ADJOURNED MEETING AND NOTICE THEREOF. Any
shareholders' meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of the majority of the shares
represented at that meeting, except as provided in Section 5 of this Article.
It shall not be necessary to give any notice of the time and place of the
adjourned meeting or of the
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<PAGE> 4
business to be transacted thereat, other than by announcement at the meeting at
which such adjournment is taken; provided, however, when any shareholders'
meeting is adjourned for more than 45 days or, if after adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given as in the case of an original meeting.
Section 7. VOTING. The shareholders entitled to notice of any
meeting or to vote at any such meeting shall be only persons in whose name
shares stand on the stock records of the corporation on the record date
determined in accordance with Section 9 of this Article.
Voting shall in all cases be subject to the provisions of Chapter 6 of
the California General corporation Law and to the following provisions:
(a) Subject to subparagraph (g), shares held by an administrator,
executor, guardian, conservator or custodian may be voted by such holder either
in person or by proxy, without a transfer of such shares into the holder's
name; and shares standing in the name of a trustee may be voted by the trustee,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by such trustee without a transfer of such shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted by such
receiver; and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into the receiver's name if
authority to do so is contained in the order of the court by which such
receiver was appointed.
(c) Subject to the provisions of section 705 of the California
General Corporation Law, and except where otherwise agreed in writing between
the parties, a shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
4
<PAGE> 5
(d) Shares standing in the name of a minor may be voted and the
corporation may treat all rights incident thereto as exercisable by the minor,
in person or by proxy, whether or not the corporation has notice, actual or
constructive, of the nonage, unless a guardian of the minor's property has been
appointed and written notice of such appointment given to the corporation.
(e) Shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent or proxyholder as the By-Laws
of such other corporation may prescribe or, in the absence of such provision,
as the Board of Directors of such other corporation may determine or, in the
absence of such determination, by the Chairman of the Board, President or any
Vice President of such other corporation, or by any other person authorized to
do so by the Board, President or any Vice President of such other corporation.
Shares which are purported to be voted or any proxy purported to be executed in
the name of a corporation (whether or not any title of the person signing is
indicated) shall be presumed to be voted or the proxy executed in accordance
with the provisions of this subdivision, unless the contrary is shown.
(f) Shares of the corporation owned by any subsidiary shall not be
entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary capacity, and
shares of the corporation held in a fiduciary capacity by any subsidiary, shall
not be entitled to vote on any matter, except to the extent that the settlor or
beneficial owner possesses and exercises a right to vote or to give the
corporation binding instructions as to how to vote such shares.
(h) If shares stand of record in the names of two (2) or more
persons, whether fiduciaries, members of a partnership, joint
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<PAGE> 6
tenants, tenants in common, husband and wife as community property, tenants by
the entirety, voting trustees, persons entitled to vote under a shareholder
voting agreement or otherwise, or if two (2) or more persons (including
proxyholders) have the same fiduciary relationship respecting the same shares,
unless the Secretary of the corporation is given written notice to the contrary
and is furnished with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, their acts with respect to
voting shall have the following effect:
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority so voting binds
all; or
(iii) If more than one vote, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionately.
If the instrument so filed, or the registration of the shares shows
that any such tenancy is held in unequal interests, a majority or even split for
the purpose of this section shall be a majority or even split in interest.
Subject to the following sentence and to the provisions of section 708
of the California General Corporation Law, every shareholder entitled to vote
at any election of directors may cumulate such shareholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit. No shareholder shall be
entitled to cumulate votes for any candidate or candidates pursuant to the
preceding sentence unless such candidate or candidates' names have been placed
in nomination prior to the voting and the
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<PAGE> 7
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes
for candidates in nomination.
Notwithstanding any other provision in these By-Laws, in accordance
with California Corporations Code Section 301.5 (the "Code"), at such time as
this corporation becomes a "listed corporation" as defined in the Code,
cumulative voting will be eliminated. This provision shall become effective
only when the corporation becomes a listed corporation within the meaning of
the Section 301.5 of the Corporations Code.
Elections need not be by ballot; provided, however, that all elections
for directors must be by ballot upon demand made by a shareholder at the
meeting and before the voting begins.
Section 8. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.
The transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though had
at a meeting duly held after regular call and notice, if a quorum be present
either in person or by proxy, and, if either before or after the meeting each
person entitled to vote who was not present in person or by proxy signs a
written waiver of notice or a consent to a holding of the meeting or an
approval of the minutes. The written waiver of notice need not specify either
the business to be transacted or the purpose of any annual or special meeting
of shareholders, except as provided in section 601(b) of the California General
Corporation Law. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters required to be but not
included in the notice of the meeting if that objection is expressly made at
the meeting.
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<PAGE> 8
Section 9. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted. In the case of
election of directors, such a consent shall be effective only if signed by the
holders of all outstanding shares entitled to vote for the election of
directors; provided, that a director may be elected at any time to fill a
vacancy on the Board of Directors that has not been filled by the directors, by
the written consent of the holders of a majority of the outstanding shares
entitled to vote for the election of directors. All such consents shall be
filed with the Secretary of the corporation and shall be maintained in the
corporate records. Any shareholder giving a written consent, or the
shareholder's proxyholders, or a transferee of the shares or a personal
representative of the shareholder or their respective proxyholders, may revoke
the consent by a writing received by the Secretary of the corporation before
written consents of the number of shares required to authorize the proposed
action have been filed with the Secretary of the corporation, but may not do so
thereafter. Such revocation is effective upon its receipt by the Secretary of
the corporation.
Unless the consents of all shareholders entitled to vote have been
solicited in writing,
(a) Notice of any proposed shareholder approval of, (i) a contract
or other transaction with an interested director, (ii) indemnification of an
agent of the corporation as authorized by Article V of these By-Laws, (iii) a
reorganization of the corporation as defined in section 181 of the General
Corporation Law, or (iv) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, if any, without a meeting by
less than unanimous written consent, shall be given at least ten (10) days
before the consummation of the action authorized by such approval; and
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<PAGE> 9
(b) Prompt notice shall be given of the taking of any other
corporate action approved by shareholders without a meeting by less than
unanimous written consent, to those shareholders entitled to vote who have not
consented in writing. Such notices shall be given in the manner and shall be
deemed to have been given as provided in Section 4 of Article II of these
By-Laws.
Section 10. RECORD DATE. The Board may fix, in advance, a record
date for the determination of the shareholders entitled to notice of any
meeting, to vote or entitled to receive payment of any dividend or other
distribution, or any allotment of rights, or to exercise rights in respect of
any other lawful action. The record date so fixed shall be not more than sixty
(60) nor less than ten (10) days prior to the date of the meeting nor more than
sixty (60) days prior to any other action. When a record date is so fixed,
only shareholders of record on that date are entitled to notice of and to vote
at the meeting or to receive the dividend, distribution, or allotment of
rights, or to exercise of the rights, as the case may be, notwithstanding any
transfer of shares on the books of the corporation after the record date. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless
the Board fixes a new record date for the adjourned meeting. The Board shall
fix a new record date if the meeting is adjourned for more than forty-five (45)
days.
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held. The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board has been taken, shall be the day on which the first written
consent is given. The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto, or the 60th day prior to the date of
such other action, whichever is later.
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<PAGE> 10
Section 11. PROXIES. Every person entitled to vote shares shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the Secretary of the
corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the shareholder or the shareholder's attorney in
fact. A validly executed proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the person
executing it, before the vote pursuant to that proxy, by a writing delivered to
the corporation stating that the proxy is revoked, or by a subsequent proxy
executed by, or attendance at the meeting and voting in person by, the person
executing the proxy; or (ii) written notice of the death or incapacity of the
maker of that proxy if received by the corporation before the vote pursuant to
that proxy is counted; provided, however, that no proxy shall be valid after
the expiration of eleven (11) months from the date of the proxy, unless
otherwise provided in the proxy. The revocability of a proxy that states on
its face that it is irrevocable shall be governed by the provisions of Sections
705(e) and 705(f) of the Corporations Code of California. The dates contained
on the forms of proxy presumptively determine the order of execution,
regardless of the postmark dates on the envelopes in which they are mailed.
Section 12. INSPECTORS OF ELECTION. Before any meeting of
shareholders, the Board of Directors may appoint any persons other than
nominees for office to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the chairman of
the meeting may, and on the request of any shareholder or a shareholder's proxy
shall, appoint inspectors of election at the meeting. The number of inspectors
shall be either one (1) or three (3). If inspectors are appointed at a meeting
on the request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one represented in
person or by proxy shall determine whether one (1) or three (3) inspectors are
to be appointed. If any person appointed as inspector fails to appear or fails
or refuses to act, the chairman of the meeting may, and upon the request of any
shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.
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<PAGE> 11
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability and as expeditiously
as is practical. If there are three (3) inspectors of election, the decision,
act or certificate of a majority is effective in all respects as to the
decision, act or certificate of all. Any report or certificate made by the
inspectors of election is prima facie evidence of the facts stated therein.
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to the provisions of the California
General Corporation Law and any limitations in the Articles of Incorporation
and these By-Laws relating to action required to be approved by the
shareholders or by the outstanding shares, the business and affairs of the
corporation shall be managed
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<PAGE> 12
and all corporate powers shall be exercised by or under the direction of the
Board of Directors. The Board may delegate the management of the day-to-day
operation of the business of the corporation to a management company or other
person provided that the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised under the ultimate
direction of the Board.
Without prejudice to these general powers, and subject to the same
limitations, it is hereby expressly declared that the directors shall have the
following powers in addition to the other powers enumerated in these By-Laws:
(a) to select and remove all officers, agents and employees of the
corporation; prescribe any powers and duties for them that are consistent with
law, with the Articles of Incorporation, and with these By-Laws; fix their
compensation; and require from them security for faithful service.
(b) to conduct, manage and control the affairs and business of the
corporation, and to make such rules and regulations therefor not inconsistent
with the law, the Articles of Incorporation or the By-Laws, fix their
compensation and require from them security for faithful service.
(c) to change the principal executive office and the principal
business office in the State of California from one location to another; cause
the corporation to be qualified to do business in any other state, territory,
dependency, or country and conduct business and fix and locate one (1) or more
subsidiary offices within or without the State of California; and designate any
place within or without the State of California for the holding of any
shareholders' meeting, or meetings, including annual meetings.
(d) to adopt, make and use a corporate seal; prescribe the forms
of certificates of stock; and alter the form of the seal and certificates from
time to time, as in their
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<PAGE> 13
judgment, within the provisions of the law, they may deem best.
(e) to authorize the issuance of shares of stock of the
corporation on any lawful terms, in consideration of money paid, labor done,
services actually rendered, debts or securities canceled, or tangible or
intangible property actually received.
(f) to borrow money and incur indebtedness for the purposes of the
corporation, and cause to be executed and delivered therefor, in the corporate
name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, and other evidences of debt and securities therefor.
(g) by resolution adopted by a majority of the authorized number
of directors, to designate an executive and other committees, each consisting
of two (2) or more directors, to serve at the pleasure of the Board, and to
prescribe the manner in which proceedings of such committees shall be
conducted. Unless the Board of Directors shall otherwise prescribe the manner
of proceedings of any such committee, meetings of such committee may be
regularly scheduled in advance and may be called at any time by any two (2)
members thereof; otherwise, the provisions of these By-Laws with respect to
notice and conduct of meetings of the Board shall govern. Any such committee,
to the extent provided in a resolution of the Board, shall have all of the
authority of the Board, except with respect to:
(i) the approval of any action for which the General Corporation
Law or the Articles of Incorporation also require shareholder approval;
(ii) the filing of vacancies on the Board or in any committee;
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<PAGE> 14
(iii) the fixing of compensation of the directors for serving on the
Board or on any committee;
(iv) the adoption, amendment or repeal of By-Laws;
(v) the amendment or repeal of any resolution of the Board;
(vi) any distribution to the shareholders, except at a rate or in a
periodic amount or within a price range determined by the Board; and
(vii) the appointment of other committees of the Board or the
members thereof.
Section 2. LIABILITY OF DIRECTORS. A person who performs the
duties of a director, in good faith, in a manner such director believes to be
in the best interests of the corporation and its shareholders, and with such
care including reasonable inquiry as an ordinarily prudent person in a like
position would use under similar circumstances, shall have no liability based
upon any alleged failure to discharge the person's obligations as a director.
In addition, the liability of a director for monetary damages in an action
brought by or in the right of the corporation for breach of a director's duties
to the corporation and its shareholders shall be eliminated.
The personal liability of a director may not be limited or eliminated
for actions brought against a director for:
(a) Acts or omissions involving intentional misconduct or a
knowing and culpable violation of law;
(b) Acts or omissions that a director believes to be contrary to
the best interests of the corporation or its shareholders or that involve the
absence of good faith on the part of a director;
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<PAGE> 15
(c) Any transaction from which a director derived an improper
personal benefit;
(d) Acts or omissions that show a reckless disregard for the
director's duty to the corporation or its shareholders in circumstances in
which the director was aware, or should have been aware, in the ordinary course
of performing a director's duties, of a risk of serious injury to the
corporation or its shareholders;
(e) Acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders;
(f) Approval of an improper distribution to shareholders; or
(g) Approval of an improper loan to any director or officer.
Section 3. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of directors shall be seven (7) until changed by a duly
adopted amendment to the Articles of Incorporation or by an amendment to this
by-law adopted by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that an amendment
reducing the number of directors to a number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of action by written consent, are equal to more than
sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to
vote.
Section 4. ELECTION AND TERM OF OFFICE. The directors shall be
elected at each annual meeting of shareholders but, if any such annual meeting
is not held or the directors are not elected thereat, the directors may be
elected at any special meeting of shareholders held for that purpose. All
directors shall hold office until their respective successors are elected,
subject to the General Corporation Law and the provisions of these By-Laws with
respect to vacancies on the Board.
Section 5. VACANCIES. Vacancies on the Board of Directors may
be filled by a majority of the
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<PAGE> 16
remaining directors though less than a quorum, or by a sole remaining director,
except that a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
vote of a majority of the shares entitled to vote represented at a duly held
meeting at which a quorum is present, or by the written consent of holders of a
majority of the outstanding shares entitled to vote. Each director so elected
shall hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies on the Board of Directors shall be deemed to
exist in the event of the death, resignation, or removal of any director, or if
the Board of Directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors is increased, or if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the full authorized number of directors to be
voted for at that meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
Any director may resign effective on giving written notice to the
Chairman of the Board, the President, the Secretary, or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
Section 6. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular
meetings of the Board of Directors may be held at any place within or outside
the State of California that has been designated from time to time by
resolution of the Board or by written consent of all members of the Board. In
the absence of such a
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designation, regular meetings shall be held at the principal executive office
of the corporation. Special meetings of the Board shall be held at any place
within or outside the State of California that has been designated in the
notice of the meeting or, if not stated in the notice, or there is no notice,
at the principal executive office of the corporation. Any meeting, regular or
special, may be held by telephone conference or similar communication
equipment, so long as all directors participating in the meeting can hear one
another, and all such directors shall be deemed to be present in person at the
meeting.
Section 7. ANNUAL MEETING. The Board of Directors shall hold a
regular annual meeting on the last Friday in July each year if not a legal
holiday, and if a legal holiday, on the next succeeding business day, for the
purpose of organization, any desired election of officers, and the transaction
of other business. Notice of this meeting shall not be required.
Section 8. OTHER REGULAR AND ORGANIZATIONAL MEETINGS. An
organizational meeting shall be held immediately following the annual meeting
of the shareholders. The organizational meeting and other regular meetings of
the Board of Directors shall be held without call at such time and at such
place as shall from time to time be fixed by the Board of Directors. Such
organizational and regular meetings may be held without notice.
Section 9. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose or purposes may be called at any time by the Chairman
of the Board, or the President, or any Vice President, or the Secretary or any
two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. In case the notice
is mailed, it shall be deposited in the United States mail at least four (4)
days before the time of the holding of the meeting. In case the notice is
delivered personally, or by telephone or telegram, it shall be delivered
personally or by
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telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose of the meeting nor the place if the meeting is to be held at the
principal executive office of the corporation.
Section 10. QUORUM. A majority of the authorized number of
directors shall constitute a quorum for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, unless a
greater number be required by law, by these By-Laws or by the Articles of
Incorporation. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
Section 11. WAIVER OF NOTICE. The transactions of any meeting of
the Board of Directors, however called and noticed, or wherever held, shall be
as valid as though had at a meeting duly held after regular call and notice if
a quorum is present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding
the meeting or an approval of the minutes. The waiver of notice or consent
need not specify the purpose of the meeting. All such waivers, consents, and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting shall also be deemed given to any
director who attends the meeting without protesting before or at its
commencement, the lack of notice to that director.
Section 12. ADJOURNMENT. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting to another time
and place.
Section 13. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given, unless the meeting is
adjourned for more than twenty-four (24) hours, in which case notice of the
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time and place shall be given before the time of the adjourned meeting to the
directors who were not present at the time of the adjournment.
Section 14. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Board of Directors may be taken without a meeting,
if all members of the Board shall individually or collectively consent in
writing to that action. Such action by written consent shall have the same
force and effect as a unanimous vote of the Board of Directors. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board.
Section 15. FEES AND COMPENSATION OF DIRECTORS. Directors and
members of committees may receive such compensation, if any, for their
services, and such reimbursement of expenses, as may be fixed or determined by
resolution of the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a
Chief Executive officer, a President, a Secretary, and a Chief Financial
Officer. The corporation may also have, at the discretion of the Board of
Directors, a Chairman of the Board, one or more Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article. Any number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the
corporation, except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article IV, shall be chosen
annually by the Board of Directors, and each shall serve at the pleasure of the
Board, and shall hold their respective offices until their resignation,
removal, or other disqualification from service, or until their respective
successors shall be elected subject to the rights, if any, of an officer under
any contract of employment.
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Section 3. SUBORDINATE OFFICERS. The Board of Directors may
appoint, and may empower the President to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for
such period, have such authority and perform such duties as are provided in the
By-Laws or as the Board of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause by the Board of Directors, at any
regular or special meeting of the Board, or, except in case of an officer
chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office
because of death, resignation, removal, disqualification or any other cause
shall be filled in the manner prescribed in these By-Laws for regular
appointments to that office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
such an officer be elected, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or prescribed by
the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman of the Board, if
there be such an officer, the President shall be the Chief Executive Officer of
the corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction, and control of the business and the
officers of the corporation. He shall preside at all meetings of the
shareholders and, in the absence of
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the Chairman of the Board, or if there be none, at all meetings of the Board of
Directors. He shall have the general powers and duties of management usually
vested in the office of President of a corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors or the
By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents, in order of their rank as fixed by the Board of
Directors or, if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the Board of Directors or the By-Laws, and the President, or the Chairman of
the Board.
Section 9. SECRETARY. The Secretary shall keep or cause to be
kept, at the principal executive office and such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and shareholders, with the time and place
of holding, whether regular or special, and, if special, how authorized, the
notice given, the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors required by the By-Laws or by
law to be given, and the Secretary shall keep the seal of the corporation if
one be adopted, in safe custody, and shall have such other powers and perform
such other
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duties as may be prescribed by the Board of Directors or by the By-Laws. In
the absence or disability of the Secretary, the Assistant Secretary shall
perform all of the duties of the Secretary and when so doing shall have all of
the powers of and be subject to all of the restrictions upon the Secretary.
Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings, and shares.
The books of account shall at all reasonable times be open to inspection by any
director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the Board of Directors. The Chief
Financial Officer shall disburse the funds of the corporation as may be ordered
by the Board of Directors, shall render to the President and Directors,
whenever they request it, an account of all of his transactions as Chief
Financial Officer and of the financial condition of the corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-Laws. In the absence or disability of the Chief
Financial Officer, the Assistant Treasurer shall perform all the duties of the
Chief Financial Officer and when so doing shall have all of the powers of and
be subject to all of the restrictions upon, the Chief Financial Officer.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS, EXPENSES. For the purposes of
this Article, "agent" means any person who is or was a director, officer,
employee, or other agent of this corporation, or is or was serving at the
request of this corporation as a director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee, or
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agent of a foreign or domestic corporation which was a predecessor corporation
of this corporation or of another enterprise at the request of such predecessor
corporation; "proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative, or investigative; and
"expenses" includes, without limitation, attorneys' fees and any expenses of
establishing a right to indemnification under Section 4 or Section 5(c) of this
Article.
Section 2. ACTIONS OTHER THAN BY THE CORPORATION. This
corporation shall indemnify any person who was or is a party, or is threatened
to be made a party, to any proceeding (other than an action by or in the right
of this corporation) by reason of the fact that such person is or was an agent
of this corporation, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in the best interests of this corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of such person was
unlawful. The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
corporation or that the person had reasonable cause to believe that the
person's conduct was unlawful.
Section 3. ACTIONS BY THE CORPORATION. This corporation shall
indemnify any person who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed action by or in the right of
this corporation to procure a judgment in its favor by reason of the fact that
such person is or was an agent of this corporation, against expenses actually
and reasonably incurred by such person in connection with the defense or
settlement of such action if such person acted in good faith, in a manner such
person believed would be in the best interests of this corporation and with
such care, including reasonable inquiry, as an ordinarily prudent person in a
like position would use under similar circumstances. No indemnification shall
be made under this Section 3:
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(a) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to this corporation in the
performance of such person's duty to this corporation, unless and only
to the extent that the court in which that action was brought shall
determine upon application that, in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine;
(b) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or
(c) Of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an
agent of this corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 of this Article, or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against
expenses actually and reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4
of this Article, any indemnification under this Article shall be made by this
corporation only if authorized in the specific case upon a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article, by:
(a) A majority vote of a quorum consisting of directors who
are not parties to such proceeding;
(b) Approval or ratification by the affirmative vote of a
majority of the shares of this corporation entitled to vote represented
at a duly held meeting at which a
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quorum is present or by the written consent of holders of a majority of
the outstanding shares entitled to vote. For such purpose, the shares
owned by the person to be indemnified shall not be considered
outstanding or entitled to vote thereon; or
(c) The court in which the proceeding is or was pending, upon
application made by this corporation, or the agent, the attorney or
other person rendering services in connection with the defense, whether
or not such application by the agent, attorney, or other person is
opposed by this corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending
any proceeding may be advanced by this corporation prior to the final
disposition of such proceeding upon receipt of an undertaking by or on behalf
of the agent to repay such amount unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 7. OTHER INDEMNIFICATION. No provision made by the
corporation to indemnify its or its subsidiary's directors or officers for the
defense of any proceeding, whether contained in the Articles of Incorporation,
By-Laws, a resolution of shareholders or directors, an agreement, or otherwise,
shall be valid unless consistent with this Article. Nothing contained in this
Article shall affect any right to indemnification to which persons other than
such directors and officers may be entitled by contract or otherwise.
Section 8. LIMITATIONS. No indemnification or advance shall be
made under this Article, except as provided in Section 4 or Section 5(c), in
any circumstance where it appears:
(a) That it would be inconsistent with a provision of the
Articles of Incorporation, a resolution of the shareholders, or an
agreement in effect at the time of the accrual of the alleged cause of
action asserted in the proceeding in which the expenses were incurred
or other amounts
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were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 9. INSURANCE. Upon and in the event of a determination
by the Board of Directors of this corporation to purchase such insurance, this
corporation shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent's status as such whether or not this
corporation would have the power to indemnify the agent against that liability
under the provisions of this section.
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in such person's
capacity as such, even though such person may also be an agent of the
corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such a trustee,
investment manager, or other fiduciary may be entitled by contract or
otherwise, which shall be enforceable to the extent permitted by applicable law
other than this Article.
ARTICLE VI
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF REGISTER. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, if either be appointed and as determined by resolution of
the Board of Directors, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares held by each
shareholder.
A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who hold at least one percent (1%) of such voting shares and
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have filed a Schedule 14B with the United States Securities and Exchange
Commission relating to the election of directors of the corporation shall have
the right to (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours five (5) business days'
after written demand upon the corporation, and (ii) obtain from the transfer
agent for the corporation, upon written demand and upon the tender of its usual
charges for such a list, a list of the shareholders' names and addresses, who
are entitled to vote for the election of directors, and their shareholdings, as
of the most recent record date for which it has been compiled or as of a date
specified by the shareholder subsequent to the date of demand. This list shall
be made available on or before the later of five (5) business days after the
demand is received or the date specified therein as the date as of which the
list is to be compiled.
The record of shareholders shall also be open to inspection and
copying upon written demand of any shareholder or holder of a voting trust
certificate, at any time during usual business hours, for a purpose reasonably
related to such holder's interests as a shareholder or holder of a voting trust
certificate.
Any inspection and copying under this Section 1 may be made in person
or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The
corporation shall keep at its principal executive office, or if its principal
executive office is not in the State of California, at its principal business
office in this State, the original or a copy of the By-laws as amended to
date, which shall be open to inspection by the shareholders at all reasonable
times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in this State, the Secretary shall, upon the written
request of any shareholder, furnish to that shareholder a copy of the By-laws
as amended to date.
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS. The accounting books and records and minutes of proceedings of the
shareholders and the Board of Directors and any committee or committees of the
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Board Directors shall be kept at such place or places designated by the Board
of Directors, or, in the absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written
demand of any shareholder or holder of a voting trust certificate, at any
reasonable time during usual business hours, for a purpose reasonably related
to such holder's interests as a shareholder or as the holder of such voting
trust certificate. The inspection may be made in person or by an agent or
attorney, and shall include the right to copy and make extracts. These rights
of inspection shall extend to the records of each subsidiary corporation of the
corporation.
Section 4. INSPECTION BY DIRECTORS. Every director shall have
the absolute right at any reasonable time to inspect all books, records, and
documents of every kind and to inspect the physical properties of the
corporation and each of its subsidiary corporations. Such inspection by a
director may be made in person or by an agent or attorney and the right of
inspection includes the right to copy and make extracts of documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS. The Board of
Directors of the corporation shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of
the fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days before the annual meeting of shareholders to be held during
the next fiscal year and in the manner specified in Section 4 of Article II of
these By-laws for giving notice to shareholders of the corporation. The annual
report shall contain a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year, accompanied by any report thereon of independent accountants or, if there
is no such report, the certificate of an authorized officer of the corporation
that the statements were prepared without audit from the books and records of
the Company. The annual report referred to herein is expressly waived if the
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corporation has less than one hundred (100) shareholders.
Section 6. FINANCIAL STATEMENTS. A copy of any annual financial
statement and any income statement of the corporation for each quarterly period
of each fiscal year, and any accompanying balance sheet of the corporation as
of the end of each such period that has been prepared by the corporation shall
be kept on file in the principal executive office of the corporation for twelve
(12) months, and each such statement shall be exhibited at all reasonable times
to any shareholder demanding an examination of any such statement or a copy
shall be mailed to any such shareholder.
ARTICLE VII
GENERAL CORPORATE MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All
checks, drafts, or other orders for payment of money, notes, or other evidences
of indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as, from time
to time, shall be determined by resolution of the Board of Directors.
Section 2. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.
The Board of Directors, except as otherwise provided in these By-laws, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation, and
this authority may be general or confined to specific instances; and, unless so
authorized or ratified by the Board of Directors or within the agency power of
an officer, no officer, agent, or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or
to render it liable for any purpose or for any amount.
Section 3. CERTIFICATE FOR SHARES. Every holder of shares in
the corporation shall be entitled to have a certificate signed in the name of
the corporation by the Chairman or Vice Chairman of the Board or the President
or a Vice President and by the Chief Financial Officer or an Assistant
Treasurer or the Secretary or
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any Assistant Secretary, certifying the number of shares and the class or
series of shares owned by the shareholder. Any or all of the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person were an officer, transfer agent or registrar at the date of
issue.
Any such certificate shall also contain such legend or other statement
as may be required by Section 418 of the General Corporation Law, the Corporate
Securities Law of 1968, the federal securities laws, and any agreement between
the corporation and the issuee thereof.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board of Directors or the By-Laws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state on the face thereof the amount remaining unpaid and the
terms of payment thereof.
Section 4. LOST CERTIFICATES. No new certificate for shares
shall be issued in lieu of an old certificate unless the latter is surrendered
and canceled at the same time; provided, however, that a new certificate will
be issued without the surrender and cancellation of the old certificate if (a)
the old certificate is lost, apparently destroyed or wrongfully taken; (b) the
request for the issuance of the new certificate is made within a reasonable
time after the owner of the old certificate has notice of its loss,
destruction, or theft; (c) the request for the issuance of a new certificate is
made prior to the receipt of notice by the corporation that the old certificate
has been acquired by a bona fide purchaser; (d) the owner of the old
certificate files a sufficient indemnity bond with or provides other adequate
security to the corporation; and (e) the owner satisfies any other reasonable
requirements imposed by the corporation. In the event of the issuance of a new
certificate, the rights and liabilities of the corporation, and of the holders
of the old and new certificates, shall be
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governed by the provisions of Section 8104 and 8405 of the California
Commercial Code.
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
Chairman of the Board, the President, or any Vice President, or any other
person authorized by resolution of the Board of Directors or by any of the
foregoing designated officers, is authorized to vote on behalf of the
corporation any and all shares of any other corporation or corporations,
foreign or domestic, standing in the name of the corporation. The authority
granted to these officers to vote or represent on behalf of the corporation any
and all shares held by the corporation in any other corporation or corporations
may be exercised by any of these officers in person or by any person authorized
to do so by a proxy or power of authority duly executed by these officers.
Section 6. CONSTRUCTION AND DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction, and
definitions in the California General Corporation Law shall govern the
construction of these By-Laws. Without limiting the generality of the
foregoing, the masculine gender includes the feminine and neuter, the singular
number includes the plural, the plural number includes the singular, and the
term "person" includes both a corporation and a natural person.
ARTICLE VIII
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New By-Laws may be
adopted or these By-Laws may be amended or repealed by the affirmative vote or
written consent of holders of a majority of the outstanding shares entitled to
vote except as otherwise provided by law or by the Articles of Incorporation.
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
shareholders as provided in Section 1 of this Article VIII, to adopt, amend or
repeal By-Laws, By-Laws other than a by-law or an amendment thereof changing
the authorized number of directors, may be adopted, amended, or repealed by the
Board of Directors.
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AMENDMENT TO BY-LAWS
OF
HASKEL INTERNATIONAL, INC.
Adopted at a special meeting of the Board of Directors held on
August 31, 1994, the By-Laws of this corporation are amended as follows:
That ARTICLE II, Section 2 be amended for 1994 only, as follows:
ARTICLE II, Section 2 be amended only for the
year 1994, for the purpose of changing the annual meeting of
the shareholders, for the shareholders of record on September
30, 1994, to be on November 22, 1994 at 9:00 o'clock A.M. For
the ensuing years, or until again amended, the date for the
annual meeting of the shareholders will remain as the third
Friday in October each year at 10:00 o'clock A.M.
<PAGE> 33
AMENDMENT TO BY-LAWS
OF
HASKEL INTERNATIONAL, INC.
Pursuant to a resolution adopted at a meeting of the Board of
Directors held on May 12, 1995, ARTICLE II, Section 2 of the By-Laws of this
corporation is amended as follows:
"For the year 1995, the annual shareholders meeting
will be October 5, 1995. For the ensuing years, or until this
Section is again amended, the date for the annual shareholders
meeting will remain as the fourth Friday in September."
<PAGE> 34
AMENDMENT TO BY-LAWS
OF
HASKEL INTERNATIONAL, INC.
Pursuant to a resolution adopted at a meeting of the Board of
Directors held on August 1, 1996, ARTICLE II, Section 2 of the By-Laws of this
corporation is amended as follows:
Section 2. The Annual Meeting of
shareholders shall be held on such date and at such time as
shall be fixed by the Board of Directors by resolution, at
which time the shareholders shall elect the Board of
Directors, consider reports of the affairs of the Corporation,
and transact such other business as may properly be brought
before the meeting.
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EXHIBIT 10.3
HASKEL INTERNATIONAL, INC.
1995 INCENTIVE STOCK OPTION PLAN
1. Purpose. This Incentive Stock Option Plan (the
"Plan"), is intended to provide incentives to employees of Haskel
International, Inc. (the "Company") and its subsidiaries, by providing them
with opportunities to purchase Class A Common stock in the Company as a form of
additional compensation for performance of services to the Company pursuant to
options granted hereunder ("Options"). As used herein, the term "subsidiary"
has the meaning assigned to it in section 424(f) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. Administration of the Plan. The Plan shall be
administered by the Stock Option Committee (the "Committee") consisting of
members of the Board of Directors of the Company (the "Board") who are
disinterested directors as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended. Subject to the terms of the Plan, the Committee shall
have authority to determine the persons to whom Options shall be granted, the
number of shares covered by each Option, times at which Options shall be
granted, the terms and provisions of the instruments by which Options shall be
evidenced and modify outstanding options by issuing new options which will
replace all or some of the existing options and will have new and different
terms. The interpretation and construction by the Committee of any provisions
of the Plan or of any Option granted under it shall be final. The Committee
may from time to time adopt such rules and regulations for carrying out the
Plan as it may deem best. No member of the Board or the Committee shall be
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liable for any action or determination made in good faith with respect to the
Plan or any Option granted under it.
The Committee may select one of its members as its Chairman,
and shall hold meetings at such times and places as it may determine. Acts by
a majority of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee without a meeting, shall be the valid
acts of the Committee.
3. Eligible Employees. Options may be granted to any
employee of the Company or any subsidiary. Granting of any Option to any such
person shall neither entitle such person to, nor disqualify such person from,
participation in any other grant of options.
4. Stock. The stock subject to the Options shall be
authorized but unissued shares of Class A Common stock of the Company (the
"Class A stock"), or shares of Class A stock reacquired by the Company,
including shares purchased in the open market. The aggregate number of shares
which may be issued pursuant to the Plan is two hundred forty thousand
(240,000), plus the number of shares resulting from options that lapse from
nonexercise of options that were originally granted under the 1989 Incentive
Stock Option Plan and Stock Option Plan, subject to adjustment as provided in
Section 13 herein. In the event any Option granted under the Plan shall expire
or terminate for any reason without having been exercised in full or shall
cease for any reason to be exercisable in whole or in part, the unpurchased
shares subject thereto shall again be available for grants of Options under the
Plan.
5. Granting of Options. Options may be granted under
the Plan at any time within ten (10) years from the date the Plan is adopted.
The date of grant of an Option under the Plan shall be the date specified by
the Committee
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at the time it awards the Option, provided, however, that such date shall not
be prior to the date of award.
6. Minimum Option Price. The price per share specified
in each Option granted under the Plan shall in no event be less than the fair
market value per share of Class A stock on the date of such grant. In the case
of an Option to be granted to an employee owning stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or any subsidiary, the price per share specified in each Option shall
not be less than one hundred ten percent (110%) of the fair market value per
share of Class A stock on the date of grant, and such Option, by its terms,
shall not be exercisable after the expiration of five (5) years from the date
the Option is granted. For purposes of this Plan, "fair market value" of stock
shall mean the closing price of the Company's Class A stock as reported on the
Nasdaq National Market on the previous trading day.
7. Option Duration. Subject to earlier termination as
provided in Sections 6, 9 and 10, each Option shall expire on the date
specified by the Committee, but not more than ten (10) years from the date of
grant. The Committee may extend the term of any previously granted Option
provided that such Option, as extended, expires within ten (10) years of its
original date of grant.
8. Exercise of Option. Subject to the provisions of
Sections 9 through 12, each Option granted under the Plan shall be exercisable
as follows:
A. The Option shall become exercisable in such
installments as the Committee may specify.
B. Once an installment becomes exercisable it
shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
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C. Each Option or installment may be exercised
at any time, or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then exercisable.
D. The Committee shall have the right to
accelerate the date or dates on which any installment may be exercised.
E. There is a minimum six (6) month holding
period between the time of the grant of the option and the disposition
of the underlying shares for all directors and executive officers of
the Company.
9. Termination of Employment. If an optionee
ceases to be employed by the Company or any subsidiary other than by reason of
death, no further installments of optionee's Options shall become exercisable,
and optionee's Options shall terminate after passage of three (3) months from
the date of termination of optionee's employment (one [1] year in the case of
an employee who is disabled within the meaning of Code Section 22(e)(3)), but
in no event later than on their specified expiration dates. Whether leave of
absence by approval of the Company or by reason of military or governmental
service constitutes employment for purposes of the Plan shall be conclusively
determined by the Committee. Nothing in the Plan shall be deemed to give any
optionee the right to be retained in employment by the Company or its
subsidiaries for any period of time. Options granted under the Plan shall not
be affected by any change of employment within or among the Company and its
subsidiaries, so long as the optionee continues to be an employee of the
Company or one of its subsidiaries. For purposes of this Paragraph 9, a
director shall be deemed to be employed by the Company of which he is a
director.
10. Death. If an optionee dies, any Option of optionee
may be exercised, to the extent of the number of
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shares with respect to which optionee could have exercised it on the date of
optionee's death, by optionee's estate, personal representative or beneficiary
who has acquired the Option by will or by the laws of descent and distribution,
at any time prior to the earlier of the Option's specified expiration date or
three (3) months from the date of the optionee's death. The Option shall
terminate on the earlier of such dates.
11. Nonassignability. No Option shall be assignable or
transferable by the optionee except by will or by the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined by
the Code or Title 1 of the Employee Retirement Income Security Act, or the
rules thereunder, and during the lifetime of the optionee each Option shall be
exercisable only by optionee.
12. Terms and Conditions of Options. Options shall be
evidenced by instruments (which need not be identical) in such forms as the
Committee may from time to time approve. Such instruments shall conform to the
terms and conditions set forth in Sections 6 through 11 hereof, and may contain
such other provisions, as the Committee deems advisable, which are not
inconsistent with the Plan, including restrictions applicable to shares of
Class A stock issuable upon exercise of Options.
13. Adjustments. Upon the happening of any of the
following described events, an optionee's rights with respect to Options
granted hereunder shall be adjusted as hereinafter provided:
13.1 In the event the shares of Class A stock shall
be subdivided or combined into a greater or smaller number of shares
or if, upon a merger, consolidation, reorganization, split-up,
liquidation, combination, recapitalization or the like of the Company,
the shares of Class A stock shall be exchanged
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for other securities of the Company or of another corporation, each
optionee shall be entitled, subject to the conditions herein stated,
to purchase such number of shares of Class A stock or amount of other
securities of the Company or such other corporation as were
exchangeable for the number of shares of Class A stock which such
optionee would have been entitled to purchase except for such action,
and appropriate adjustments shall be made in the purchase price per
share to reflect such subdivision, combination, or exchange; and
13.2 In the event the Company shall issue any of its
shares as a stock dividend upon or with respect to the shares of stock
of the class which shall at the time be subject to option hereunder,
each optionee upon exercising an Option shall be entitled to receive
(for the purchase price paid upon such exercise) the shares as to
which optionee is exercising optionee's Option and, in addition
thereto (at no additional cost), such number of shares of the class or
classes in which such stock dividend or dividends were declared or
paid, and such amount of cash in lieu of fractional shares, as
optionee would have received if optionee had been the holder of the
shares as to which optionee is exercising optionee's Option at all
times of its exercise.
Upon the happening of any of the foregoing events,
the class and aggregate number of shares set forth in Section 4 hereof which
are subject to Options which have heretofore been or may hereafter be granted
under the Plan shall also be appropriately adjusted to reflect the events
specified in subparagraphs 13.1 and 13.2 above. The Committee shall determine
the adjustments to be made under this Section 13, and its determination shall
be conclusive.
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14. Exercise of Options. An Option (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Option being
exercised and specify the number of shares as to which such Option is being
exercised and shall state that payment shall be made in not more than fifteen
(15) days after the Company gives the optionee notice that the share
certificate is ready to deliver. Payment and delivery shall be concurrent.
Payment shall be by full payment of the purchase price therefor either (i) in
United States dollars in cash or by cashier's check or bank draft, or (ii) at
the discretion of the Optionee, through delivery of previously owned shares of
Class A stock of the Company (which, as to employee directors and executive
officers, the optionee has held at least six (6) months prior to delivery of
such shares and for which the optionee has good title free and clear of all
liens and encumbrances), having a fair market value equal as of the date of the
exercise to the option purchase price, (iii) in cash by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise, or (iv) at the discretion of the Optionee, by a combination
of (i) and (ii) above. The Committee shall have sole discretion to disapprove
of an election pursuant to any of clauses (ii) through (iv). The holder of an
Option shall not have the rights of a shareholder with respect to the shares
covered by optionee's Option until the date of issuance of a stock certificate
to optionee for such shares. The Company shall issue such share certificate
within thirty (30) days of receipt of notice of exercise. Adjustment, and
payment for dividends, if applicable, shall be made for dividends or similar
rights for which the record date is after the exercise of the Option but before
the date such stock certificate is issued.
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<PAGE> 8
In no event shall fractional shares be purchased or issued under the Plan.
15. Term and Amendment of Plan. The Plan shall expire on
the date ten (10) years after the date on which the Plan was adopted by the
stockholders (except as to Options outstanding on that date). The Board may
terminate or amend the Plan in any respect at any time. The Board may also, at
any time, amend or revise the plan subject to any requirement of shareholder
approval required by applicable law, including Rule 16b-3 under the Exchange
Act and Section 422 of the Code; provided, however, that without stockholder
approval:
A. The total number of shares that may be issued
under the Plan may not be increased (except by adjustment pursuant to
Section 13);
B. The provisions of Section 3 regarding
eligibility may not be modified;
C. The provisions of Section 6 regarding the
exercise price at which shares may be offered pursuant to Options may
not be modified (except by adjustment pursuant to Section 13); and
D. The expiration date of the Plan may not be
extended.
In no event may action of the Board of Directors or stockholders alter or
impair the rights of an optionee, without optionee's consent, under any Option
previously granted to him.
16. Application of Funds. The proceeds received by the
Company from the sale of shares pursuant to Options granted under the Plan
shall be used for general corporate purposes.
17. Governmental Regulation. The Company's obligation to
sell and deliver shares of the Class A stock under this Plan is subject to the
approval of any governmental
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<PAGE> 9
authority required in connection with the authorization, issuance or sale of
such shares.
18. Governing Law. The validity and construction of the
Plan and the instruments evidencing Options shall be governed by California
Law.
19. Company Disclosure. The Company and its officers,
directors, employees, attorneys and agents are not rendering advice as to the
desirability of investment in the stock covered by the Options and all persons
receiving Options are advised to consult with their own legal, tax, financial
or other advisers as to the consequence of receiving Options or purchasing the
underlying shares.
20. Foreign Subsidiaries. This Plan may be amended to
provide special additional terms (but no lesser terms) for employees of
foreign subsidiaries to provide that their options qualify for tax benefits
under the laws of the country of such employee's domicile.
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HASKEL INTERNATIONAL, INC.
1995 INCENTIVE STOCK OPTION AGREEMENT
This Agreement is entered into as of ____________, by and
between Haskel International, Inc., a California corporation (the "Company")
and __________________ ("the Optionee").
The parties covenant and agree as follows:
1. Grant of Option. The Company hereby grants to the
Optionee an option to purchase __________ (______) shares of Company's Class A
Common Stock (the "Option") pursuant to the conditions set forth in the
Company's 1995 Incentive Stock Option Plan (the "Plan"), a copy of which is
attached hereto as Exhibit "A," and is incorporated herein in its entirety by
reference. The Optionee hereby accepts the Option granted herein subject to
the terms and provisions set forth in the Plan and the additional terms and
provisions contained in this Agreement.
2. Purchase Price; Adjustments. The price at which the
shares may be purchased is ______________________ Dollars ($_____) per share.
Both the price and number of shares that may be purchased are subject to
adjustment as provided in the Plan.
3. Option Exercise Period. The period for exercising
the Option (the "Exercise Period") shall be the period beginning ____________,
provided the Optionee has been continuously employed with the Company to that
date (the "Commencement Date"), and ending ____________, ten (10) years from
the date of this Agreement (the "Expiration Date"). The Option may be
exercised at any time and from time to time during the Exercise Period as
follows:
(a) As to ______ percent (__%) of the Option
shares on or after ____________;
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(b) As to an additional ______ percent (__%) of
the Option shares on or after ______ of each year thereafter through
and including ____________.
(c) During the entire period in which the Option
is exercisable, it may be exercised as to any number of shares
theretofore vested. Any unexercised portion of the Option will expire
on the Expiration Date.
4. Exercise of Option on Termination or Death. In the
event of the termination of the Optionee's employment or death, the Option
shall be exercisable no later than three (3) months following Optionee's death
or date of termination of employment, as the case may be. In the event the
Optionee's employment terminates due to disability, the Option shall be
exercisable no later than one (1) year from the date of termination of
employment. The Option shall only be exercisable as to the number of shares,
if any, as to which such Option was exercisable immediately prior to the
Optionee's death or other termination of employment, as the case may be.
5. Manner of Exercise. The Option shall be exercised by
delivering written notice to the Company at its principal place of business.
The notice shall specify that the Option is being exercised, the number of
shares as to which the Option is being exercised, the Optionee's social
security number and the address to which the stock certificate should be
delivered. Payment for the exercise of the Option is to be included with the
notice. The Company shall use its best efforts to cause its transfer agent to
issue and deliver the stock certificate evidencing such shares within thirty
(30) days of receipt by the Company of notice of exercise and payment in full.
Payment of the purchase price shall be either (i) in United States dollars in
cash or by cashier's check, or (ii) at the discretion of the
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Optionee, through delivery of shares of Class A Common Stock of the Company
(which, as to employee directors and executive officers, the Optionee has held
at least six (6) months prior to delivery of such shares and for which the
Optionee has good title free and clear of all liens and encumbrances), having a
fair market value equal as of the date of the exercise to the Option purchase
price, or (iii) by a combination of (i) and (ii) above.
6. Nontransferability. The Option shall not be
transferable by the Optionee otherwise than by will or by the laws of descent
and distribution.
7. Securities Act. Notwithstanding Paragraph 3 above,
the Stock Option Committee of the Board of Directors may, in its discretion,
require as a condition to the exercise of the Option granted hereunder, that
either (a) a Registration Statement under the Securities Act of 1933, as
amended, or any succeeding act, with respect to the shares reserved for issue
upon the exercise of such Option shall have become effective and remain
effective, or (b) the person who shall exercise any Option shall represent and
agree that any and all shares purchased under such Option are being purchased
for investment and not with a view to the distribution thereof; provided,
however, that this representation and agreement shall not be applicable if an
effective Registration Statement under the Securities Act of 1933, as amended,
or any succeeding act, shall be in effect on the date of exercise, with respect
to the shares reserved for issue upon the exercise of such Option. The Option
granted hereunder shall be subject to further requirements that, if at any time
the Board of Directors or the Stock Option Committee shall determine in their
discretion that the listing or qualification of the shares of Common Stock
subject to such Option under any securities exchange requirements or under any
applicable law, or the consent or
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approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with the issue of shares hereunder, the Option
may not be exercised in whole or in part unless such listing, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Board of Directors or the Stock Option Committee.
8. Exchange Act. It is intended that this Agreement and
the Plan will comply with the requirements of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, as applicable during the term of this
Agreement. Should the requirements of such Rule change, the Company may, at
its discretion, amend this Agreement to comply with the applicable requirements
of said Rule, or its successor provision or provisions.
9. Performance. All performances required under this
Agreement shall be at the Company's offices in Burbank, California.
10. Notices. All notices and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the day of service if personally served on the party to whom the notice is
to be given, or within three (3) days after mailing, if mailed to the party to
whom notice is to be given by first class mail, registered or certified,
postage prepaid, return receipt requested and properly addressed to the party
at his address set forth below or to any other address that any party may
designate by written notice to the others.
If to Company: Haskel International, Inc.
100 East Graham Place
Burbank, CA 91502
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If to Optionee: ______________________________
c/o Haskel International, Inc.
100 East Graham Place
Burbank, CA 91502
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
HASKEL INTERNATIONAL, INC. OPTIONEE
By
--------------------------- ----------------------------
R. Malcolm Greaves
President
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EXHIBIT 10.4
HASKEL INTERNATIONAL, INC.
1995 FORMULA STOCK OPTION PLAN
1. Purpose. This Stock Option Plan (the "Plan"), is
intended to provide incentives to the outside directors of Haskel
International, Inc. (the "Company") by providing them with opportunities to
purchase Class A Common stock in the Company as a form of additional
compensation for performance of services to the Company pursuant to options to
be granted hereunder ("Options").
2. Eligibility. Options will be granted to each
director who is not an employee of the Company or any of its subsidiaries.
3. Stock. The stock subject to the Options shall be
authorized but unissued shares of Class A Common stock of the Company (the
"Class A stock"), or shares of Class A stock reacquired by the Company,
including shares purchased in the open market. The aggregate number of shares
which may be issued pursuant to the Plan is forty thousand (40,000), subject to
adjustment as provided in Section 11 herein. In the event any Option granted
under the Plan shall lapse, they shall again be available for grants of Options
under the Plan.
4. Granting of Options. Options must be granted under
the Plan within ten (10) years from the date the Plan is adopted. The date of
grant of an Option under the Plan shall be the date the option grant is
formally documented.
5. Option Price. The price per share for each Option
granted under the Plan shall be the fair market value per share of Class A
stock on the date of such grant. For purposes of this Plan, "fair market
value" of stock shall mean the closing price of the Company's Class A stock as
reported on the Nasdaq National Market on the previous trading day.
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6. Option Duration. Subject to earlier termination as
provided in Section 8, each Option shall expire ten (10) years from the date of
the grant.
7. Exercise of Option. Subject to the provisions of
Sections 8 through 10, each Option granted under the Plan shall be exercisable
as follows:
7.1 Each outside director who first becomes a
director after October 15, 1995, will receive an option for ten
thousand (10,000) shares, which will vest twenty percent (20%) per
year, with the first twenty percent (20%) to be vested twelve (12)
months from the date of becoming a director.
7.2 Commencing in fiscal year 1996 and for each
subsequent fiscal year, each person who was an outside director as of
the end of the previous fiscal year and who served as an outside
director during the entire fiscal year just completed, will receive
additional options relating to that fiscal year based upon the
performance of the Company, as follows:
7.2.1. For any fiscal year, if the Company's
return on investment exceeds ten percent (10%), each outside
director will be granted one thousand (1,000) shares.
7.2.2. For any fiscal year, if the Company's
return on investment exceeds thirteen percent (13%), each
outside director will be granted two thousand (2,000) shares
in addition to the shares set forth in subparagraph 7.2.1.
The options set forth in subparagraphs 7.2.1 an 7.2.2 will vest based
on optionee's service as a director at the rate of twenty percent
(20%) for each year of service as a director from the date such
optionee first became a director. All options granted under this
Paragraph 7 shall become one hundred percent (100%)
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vested on the business day preceding the day on which any transaction
is consummated resulting in a change of control of the Company.
7.3 Each vested Option may be exercised at any
time, or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
8. Termination as Director. If an optionee ceases to be
a director of the Company, optionee, or optionee's descendants will have five
(5) years from each event to exercise all options which were exercisable on the
date of termination. In no event may an Option be exercised later than on
their specified expiration dates. Nothing in the Plan shall be deemed to give
any optionee the right to be retained as a director by the Company for any
period of time.
9. Nonassignability. No Option shall be assignable or
transferable by the optionee except by will or by the laws of descent and
distribution, and during the lifetime of the optionee, each Option shall be
exercisable only by optionee.
10. Terms and Conditions of Options. Options shall be
evidenced by instruments (which need not be identical) in such forms as the
Board may from time to time approve. Such instruments shall conform to the
terms and conditions set forth in Sections 5 through 9 hereof.
11. Adjustments. Upon the happening of any of the
following described events, an optionee's rights with respect to Options
granted hereunder shall be adjusted as hereinafter provided:
11.1 In the event the shares of Class A stock shall
be subdivided or combined into a greater or smaller number of shares
or if, upon a merger, consolidation, reorganization, split-up,
liquidation,
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combination, recapitalization or the like of the Company, the shares
of Class A stock shall be exchanged for other securities of the
Company or of another corporation, each optionee shall be entitled,
subject to the conditions herein stated, to purchase such number of
shares of Class A stock or amount of other securities of the Company
or such other corporation as were exchangeable for the number of
shares of Class A stock which such optionee would have been entitled
to purchase except for such action, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination, or exchange; and
11.2 In the event the Company shall issue any of its
shares as a stock dividend upon or with respect to the shares of stock
of the class which shall at the time be subject to option hereunder,
each optionee upon exercising an Option shall be entitled to receive
(for the purchase price paid upon such exercise) the shares as to
which optionee is exercising optionee's Option and, in addition
thereto (at no additional cost), such number of shares of the class or
classes in which such stock dividend or dividends were declared or
paid, and such amount of cash in lieu of fractional shares, as
optionee would have received if optionee had been the holder of the
shares as to which optionee is exercising optionee's Option at all
times of its exercise.
Upon the happening of any of the foregoing events,
the class and aggregate number of shares set forth in Section 3 hereof, which
are subject to Options which have heretofore been or may hereafter be granted
under the Plan, shall also be appropriately adjusted to reflect the events
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specified in subparagraphs 11.1 and 11.2 above. The Board shall determine the
adjustments to be made under this Section 11, and its determination shall be
conclusive.
12. Exercise of Options. An Option (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Option being
exercised and specify the number of shares as to which such Option is being
exercised and shall state that payment shall be made in not more than fifteen
(15) days after the Company gives the optionee notice that the share
certificate is ready to deliver. Payment and delivery shall be concurrent.
Payment shall be by full payment of the purchase price therefor either (i) in
United States dollars in cash or by cashier's check or bank draft, (ii) at the
discretion of the optionee, through delivery of shares of Class A stock of the
Company having an appraised value equal as of the date of the exercise to the
option purchase price, which have been owned by the optionee for at least six
(6) months, or (iii) at the discretion of the optionee, by a combination of (i)
and ii) above. The holder of an Option shall not have the rights of a
shareholder with respect to the shares covered by optionee's Option until the
date of issuance of a stock certificate to optionee for such shares. The
Company shall issue such share certificate within thirty (30) days of receipt
of notice of exercise. Adjustment, and payment for dividends, if applicable,
shall be made for dividends or similar rights for which the record date is
after the exercise of the Option but before the date such stock certificate is
issued. In no event shall a fraction of a share be purchased or issued under
the Plan.
13. Term and Amendment of Plan. The Plan shall expire on
the date ten (10) years after the date on which the Plan was adopted (except as
to Options outstanding on
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that date). The Board may extend or terminate the Plan in any respect at any
time. This Plan may not be amended more than once every six (6) months other
than to comport with changes in the Internal Revenue Code, or the rules
thereunder, and subject to any requirement of shareholder approval required by
applicable law, including Rule 16b-3 under the Exchange Act; provided, however,
that no amendment shall be made without shareholder approval if such amendment
would (a) increase the maximum number of shares of Class A stock available
under the 1995 Formula Plan, (b) reduce the minimum purchase price per share of
the Class A stock subject to an option, or (c) extend the term of the 1995
Formula Plan or the maximum period during which an option may be exercised;
provided, further, that the 1995 Formula Plan shall not be amended in a manner
which fails to comply with Rule 16b-3(c)(2)(ii)(B) under Section 16 of the
Exchange Act. In no event, may action of the Board of Directors or
stockholders alter or impair the rights of an optionee, without optionee's
consent, under any Option previously granted to optionee.
14. Application of Funds. The proceeds received by the
Company from the sale of shares pursuant to Options granted under the Plan
shall be used for general corporate purposes.
15. Governmental Regulation. The Company's obligation to
sell and deliver shares of the Class A stock under this Plan is subject to the
approval of any governmental authority required in connection with the
authorization, issuance or sale of such shares. The optionee, on exercise of
the Option, shall sign such document in relation to the Option exercise as
Company counsel shall provide.
16. Governing Law. The validity and construction of the
Plan and the instruments evidencing Options shall be governed by California
Law.
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17. Company Disclaimer. The Company and its officers,
directors, employees, attorneys and agents are not rendering advice as to the
desirability of investment in the stock covered by the Options, and all persons
receiving Options are advised to consult with their own legal, tax, financial
or other advisors as to the consequence of receiving Options or purchasing the
underlying shares.
7
<PAGE> 8
HASKEL INTERNATIONAL, INC.
1995 FORMULA STOCK OPTION AGREEMENT
This Agreement is entered into as of ____________, by and
between Haskel International, Inc., a California corporation (the "Company")
and ______________________ (the "Optionee").
The parties covenant and agree as follows:
1. Grant of Option. The Company hereby grants to the
Optionee an option to purchase _________________ (______) shares of Company's
Class A Common Stock (the "Option") pursuant to the conditions set forth in the
Company's 1995 Formula Stock Option Plan (the "Plan"), a copy of which is
attached hereto as Exhibit "A," and is incorporated herein in its entirety by
reference. The Optionee hereby accepts the Option granted herein subject to
the terms and provisions set forth in the Plan and the additional terms and
provisions contained in this Agreement.
2. Purchase Price; Adjustments. The price at which the
shares may be purchased is ______________________ Dollars ($_____) per share.
Both the price and number of shares that may be purchased are subject to
adjustment as provided in the Plan.
3. Option Exercise Period. So long as the Optionee
remains a member of the Board of Directors of the Company, and is not employed
by the Company or any of its subsidiaries, the period for exercising the Option
(the "Exercise Period") shall be the period beginning ____________ (the
"Commencement Date"), and ending ____________, ten (10) years from the date of
this Agreement (the "Expiration Date"). The Option may be exercised at any
time and from time to time during the Exercise Period as follows:
1
<PAGE> 9
(a) As to twenty percent (20%) of the Option
shares on or after ____________;
(b) As to an additional twenty percent (20%) of
the Option shares on or after ______ of each year thereafter through
and including ____________.
(c) The option granted under Paragraph 1 shall
become one hundred percent (100%) vested on the business day preceding
the day on which any transaction is consummated resulting in a change
of control of the Company.
(d) During the entire period in which this Option
is exercisable, it may be exercised as to any number of shares
theretofore vested. Any unexercised portion of the Option will expire
on the Expiration Date.
4. Termination as Director. On such date as the
Optionee ceases to be a member of the Board of Directors of Company, whether
upon termination or death (the "Termination Date"), the Optionee or Optionee's
estate shall have five (5) years from the Termination Date to exercise the
option. The Option shall only be exercisable as to the number of shares, if
any, as to which such Option was exercisable on the Termination Date.
5. Manner of Exercise. The Option shall be exercised by
delivering written notice to the Company at its principal place of business.
The notice shall specify that the Option is being exercised, the number of
shares as to which the Option is being exercised, the Optionee's social
security number and the address to which the stock certificate should be
delivered. Payment for the exercise of the Option is to be included with the
notice. The Company shall use its best efforts to cause its transfer agent to
issue and deliver the stock certificate evidencing such shares within thirty
(30) days of receipt by the Company of notice
2
<PAGE> 10
of exercise and payment in full. Payment of the purchase price shall be either
(i) in United States dollars in cash or by cashier's check, or (ii) at the
discretion of the Optionee, through delivery of shares of Class A Common Stock
of the Company (which, as to employee directors and executive officers, the
Optionee has held at least six (6) months prior to delivery of such shares and
for which the Optionee has good title free and clear of all liens and
encumbrances), having a fair market value equal as of the date of the exercise
to the Option purchase price, or (iii) by a combination of (i) and (ii) above.
6. Nontransferability. The Option shall not be
transferable by the Optionee otherwise than by will or by the laws of descent
and distribution.
7. Securities Act. Notwithstanding Paragraph 3 above,
the Company may, in its discretion, require as a condition to the exercise of
the Option granted hereunder, that either (a) a Registration Statement under
the Securities Act of 1933, as amended, or any succeeding act, with respect to
the shares reserved for issue upon the exercise of such Option shall have
become effective and remain effective, or (b) the person who shall exercise any
Option shall represent and agree that any and all shares purchased under such
Option are being purchased for investment and not with a view to the
distribution thereof; provided, however, that this representation and agreement
shall not be applicable if an effective Registration Statement under the
Securities Act of 1933, as amended, or any succeeding act, shall be in effect
on the date of exercise, with respect to the shares reserved for issue upon the
exercise of such Option. The Option granted hereunder shall be subject to
further requirements that, if at any time the Company shall determine that the
listing or qualification of the shares of Common Stock subject to such Option
under any securities
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<PAGE> 11
exchange requirements or under any applicable law, or the consent or approval
of any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with the issue of shares hereunder, the Option may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company.
8. Exchange Act. It is intended that this Agreement and
the Plan will comply with the requirements of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, as applicable during the term of this
Agreement. Should the requirements of such Rule change, the Company may, at
its discretion, amend this Agreement to comply with the applicable requirements
of said Rule, or its successor provision or provisions.
9. Performance. All performances required under this
Agreement shall be at the Company's offices in Burbank, California.
10. Notices. All notices and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the day of service if personally served on the party to whom the notice is
to be given, or within three (3) days after mailing, if mailed to the party to
whom notice is to be given by first class mail, registered or certified,
postage prepaid, return receipt requested and properly addressed to the party
at his address set forth below or to any other address that any party may
designate by written notice to the others.
If to Company: Haskel International, Inc.
100 East Graham Place
Burbank, CA 91502
4
<PAGE> 12
If to Optionee: _________________________
_________________________
_________________________
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
HASKEL INTERNATIONAL, INC. OPTIONEE
By _______________________ __________________________
R. Malcolm Greaves
President
5
<PAGE> 1
EXHIBIT 10.14
AMENDMENT TO THE GLENDALE SUPERFUND SITE PRP
ORGANIZATION AGREEMENT
This AMENDMENT TO THE GLENDALE SUPERFUND SITE PRP ORGANIZATION
AGREEMENT ("Amendment") is made as of this 11th day of January, 1996 by and
among the parties to the Glendale Superfund Site PRP Organization Agreement
dated as of October __, 1993 (the "Organization Agreement"), with reference to
the following facts:
WHEREAS, the Organization Agreement currently provides that shared
information received from any Member (as defined below) or its counsel, or
technical consultant retained for the Group pursuant to the Organization
Agreement shall only be used in connection with allocating Shared Costs,
asserting any common claims or defenses in connection with the Site and
conducting such other activities that are necessary and proper to carry out the
purposes of the Organization Agreement.
WHEREAS, the current parties to the Organization Agreement
(individually, a "Member" and collectively, the "Members") now desire to amend
the Organization Agreement to provide that any Member may disclose shared
information to (1) its insurance company for the sole purpose of obtaining
insurance coverage for fees, costs and expenses incurred by such Member and
related to the Site, provided that such Member's insurance company agrees to
keep such shared information strictly confidential, and (2) indemnitors and/or
contributors for the sole purpose of obtaining indemnity and/or contribution
for fees, costs and expenses incurred by such Member and related to the Site,
provided that such indemnitor and/or contributor agrees to keep such shared
information strictly confidential.
WHEREAS, the Members also desire to amend the Organization Agreement to
provide that any Member may disclose to its outside independent auditors (1)
its own allocable share of fees, costs and expenses that have been assessed,
and (2) estimates of the allocable share of fees, costs and expenses that may
be assessed, to such Member by the Group for the purpose of preparing,
reviewing and auditing financial statements for such Member.
WHEREAS, any term not otherwise defined herein shall have the same meaning
ascribed to such term in the Organization Agreement.
NOW THEREFORE, in consideration of the foregoing, the Members agree as
follows:
1. Use and Disclosure of Shared Information. Section 12.41 (a) of
the Organization Agreement is hereby deleted in its entirety, and the following
paragraph is inserted in lieu thereof:
<PAGE> 2
"(a) Each Member agrees that all shared information received
from any other Member or its counsel, or technical consultant
retained for the Group pursuant to this Agreement, shall be
held in strict confidence by the receiving Member and by all
persons to whom such confidential information is revealed by
the receiving Member, pursuant to this Agreement, and that
such information shall be used only in connection with
allocating Shared Costs, asserting any common claims or
defenses in connection with the Site, and conducting such
other activities that are necessary and proper to carry out
the purposes of this Agreement; provided, further that a
Member may also voluntarily disclose shared information (i) to
its insurance company or companies for the sole purpose of
obtaining insurance coverage from such insurance company for
fees, costs and expenses incurred by such Member and related
to the Site (including, without limitation, all fees, costs
and expenses arising from, or related to, such Member's
participation in the Group and the Interim Remedial Action) or
(ii) to any indemnitor or indemnitors, or any contributor or
contributors, of such Member for the sole purpose of obtaining
indemnity and/or contribution for fees, costs and expenses
incurred by such Member and related to the Site (including,
without limitation, all fees, costs and expenses arising from,
or related to, such Member's participation in the Group and
the Interim Remedial Action) if and only if such Member's
insurance company or indemnitor or contributor, as the case
may be, agrees in writing (A) to keep such shared information
strictly confidential, except as is required by law, by an
order of a court of competent jurisdiction or by subpoena, in
which event such insurance company or indemnitor or
contributor shall notify such Member and the Group of the
circumstances requiring disclosure and shall refrain from such
disclosure for the maximum period of time allowed by law so
that such Member, the Member that generated the information to
be disclosed or the Group may obtain a protective order or
take other action to protect the confidentiality of the shared
information, (B) that such disclosure does not waive any
attorney-client privilege, attorney work product protections
or any other privilege associated with such information and
(C) that the Group shall be entitled to injunctive and other
equitable relief in the event of a threatened or actual breach
of the foregoing confidentiality provisions. Additionally,
any Member may voluntarily disclose to its outside independent
auditors (1) its own allocable share of fees, costs and
expenses that have been and (2) estimates of, and reasons
for, the allocable share of fees, costs and expenses that may
be assessed, to such Member by the Group for the purpose of
preparing, reviewing and auditing financial statements for
such Member, provided that no other shared information may be
disclosed to the auditor of any Member without the prior
written consent of the Group and the Member that generated the
information to be disclosed. A Member's disclosure of shared
information shall not be considered voluntary if such
disclosure is required by a court order or subpoena; provided,
that in the event that a
-2-
<PAGE> 3
Member is required to disclose shared information pursuant to
a court order or subpoena, such Member shall comply with all
provisions of Section 12 of the Organization Agreement,
including, without limitation, all provisions of Section
12.3(b)."
2. Except as otherwise expressly amended herein, the Organization
Agreement shall continue in full force and effect in accordance with the terms
in effect immediately prior to the execution of this Amendment.
IN WITNESS WHEREOF, pursuant to Section 20 of the Organization Agreement,
the Chairman and Secretary of the Group hereby certify and attest that the
foregoing Amendment has been approved by a vote of at least two-thirds of the
Voting Power of the Members present in person or by proxy at a Group meeting
called for the purpose of considering such amendment, and pursuant to such
vote, the Group has agreed that this Amendment is effective and binding on all
Members as of January 11, 1996.
/s/ RICHARD J. McNEIL
-----------------------------------
Richard McNeil, Chairman
/s/ TERESA C. OLMSTED
-----------------------------------
Teresa Olmsted, Secretary
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<PAGE> 1
EXHIBIT 10.15
PRIVILEGED AND CONFIDENTIAL SETTLEMENT
AND JOINT DEFENSE COMMUNICATION
MEMORANDUM OF AGREEMENT REGARDING COST-SHARING
FOR THE GLENDALE OPERABLE UNIT SUPERFUND SITES
This Memorandum of Agreement (this "Agreement") dated June 7,
1995, is an amendment to the March 1994 Glendale Superfund Site PRP
Organization Agreement ("PRP Agreement"), and is binding upon the undersigned
Parties, as that term is hereafter defined. If there are any ambiguities or
direct conflicts between this Agreement and the PRP Agreement, such ambiguities
shall be resolved pursuant to the terms of this Agreement. Except as amended
hereby, the PRP Agreement remains in full force and effect.
RECITALS
A. Pursuant to the PRP Agreement, the signatories to
that document agreed to a process whereby each signatory was allocated an
interim percentage share of the costs to be jointly incurred in responding to
the United States Environmental Protection Agency's ("EPA") request, pursuant
to Section 106 of the Comprehensive Environmental Response, Compensation and
Liability Act, that the signatories develop the remedial design called for in
the Records of Decision ("RODs") for the Glendale North and Glendale South
Operable Units. The interim cost-sharing allocation was established in January
of 1994.
<PAGE> 2
B. Of necessity, the interim cost-sharing allocation
that resulted from the foregoing process was developed on an expedited schedule
based on data that were readily available at the time. The Parties now desire
to finally allocate their Shared Costs, as that term is hereafter defined,
between sources located in the Burbank Operable Unit on the one hand and
sources located in the Glendale Operable Units on the other and have agreed
upon a process whereby such allocation is to be accomplished. That process is
the subject of this Agreement.
C. In establishing such a final allocation , it is the
intent of the Parties that (1) the Party located in the Burbank Operable Unit,
Lockheed Martin Corporation ("Lockheed Martin"), be solely responsible for
funding that portion of the Shared Costs attributed to sources of COCs, as that
term is hereafter defined, located in the Burbank Operable Unit and be given
all of the Parties' contribution rights against all persons or entities with
respect to liability for such sources, and (2) as among the Parties, other than
Lockheed Martin, which are all located in the Glendale Operable Units, such
Parties be solely responsible for funding that portion of the Shared Costs
attributed to sources of COCs located in the Glendale Operable Units and be
given all of the Parties' contribution rights against all persons or entities
with respect to liability for those sources.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the undersigned Parties agree as follows:
2
<PAGE> 3
1. CONFIDENTIALITY
With the sole exception of the percentage shares set forth in
the final Burbank/Glendale Split Allocation Decision that become binding on the
Parties pursuant to this Agreement, this Agreement and all proceedings
hereunder shall be subject to the "Confidentiality and Use of Information"
provision of the PRP Agreement. This section should be construed in a manner
consistent with the PRP Agreement. Except by Mutual Agreement of the Parties,
none of the Parties shall disclose to any person who is not associated with the
process, including any administrative or judicial officer, any information
regarding the process or outcome of the proceedings, except for its own
presentations to the Panel and the percentage share information discussed
earlier in this section. Notwithstanding the foregoing, the terms of this
Agreement shall be disclosable in any action brought by a Party to enforce or
obtain a judicial interpretation of its provisions.
In addition, the entire allocation process shall be deemed a
compromise negotiation subject to Federal Rule of Evidence 408 and all state
counterparts, together with any applicable statutes protecting the
confidentiality of arbitration. All offers, promises, conduct and statements,
whether oral or written, made in the course of the proceedings by any of the
Participants, their agents, employees, experts or attorneys, shall be
considered confidential. Such offers, promises, conduct and statements shall
also be considered privileged under any applicable arbitration privilege and
shall not be admissible or discoverable for any purpose, including impeachment,
in litigation between the Parties.
3
<PAGE> 4
Notwithstanding the foregoing, evidence that is otherwise admissible or
otherwise discoverable shall not be rendered inadmissible or non-discoverable
solely as a result of its presentation or use during these proceedings.
Each Party further hereby agrees that the exchange of any
tangible material or information in connection with these proceedings is for
the sole purpose of this process. Such disclosure shall not be deemed a waiver
of the attorney-client, work product or any other privilege.
2. DEFINITIONS
For purposes of this Agreement, each of the following terms
shall have the indicated meaning:
A. "Allocation Participants" or "Participants" shall
mean all Parties, except Cash-Out Parties and Parties
that withdraw or are removed from the PRP Agreement
for reasons other than payment default or violation
of the confidentiality provisions prior to the date
the Burbank/Glendale Split Allocation Decision is
deemed final.
B. "AOC Compliance Costs" shall mean all costs,
including, but not limited to, administrative costs,
jointly incurred by the Allocation Participants, in
connection with or related to compliance with the
Administrative Order on Consent
4
<PAGE> 5
for the Glendale North and Glendale South Operable
Units, dated March 20, 1994.
C. "Burbank/Glendale Split Allocation Decision" shall
mean the aggregate percentage share of Shared Costs
attributable to sources of COCs located in the
Burbank Operable Unit and the aggregate percentage
share of Shared Costs attributable to sources of COCs
located in the Glendale Operable Units as determined
pursuant to the allocation process provided herein.
D. "Burbank Operable Unit" shall mean the geographical
area depicted as Area A on the map attached to this
Agreement as Appendix A. It is the intention of the
Parties that Appendix A be used solely to identify
the location of specific sources of COCs for purposes
of this allocation proceeding and not for any other
purposes.
E. "Cash-Out Parties" shall mean those Parties that
enter a fully executed cash-out agreement with the
other Glendale Members prior to the date the
Burbank/Glendale Split Allocation Decision is deemed
final.
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<PAGE> 6
F. "COCs" shall mean the compounds identified as
contaminants of concern on the list attached to this
Agreement as Appendix B.
G. "Consensus" or "Mutual Agreement" shall mean 90% of
the weighted votes of the Allocation Participants
based on the interim allocation percentages
established pursuant to the PRP Agreement as such
percentages are assigned at the time of any vote
requiring Consensus or Mutual Agreement.
H. "Glendale Members" shall mean all Allocation
Participants other than Lockheed Martin.
I. "Glendale Operable Units" shall mean the geographical
area depicted as Area B on the map attached to this
Agreement as Appendix A. It is the intention of the
Parties that Appendix A be used solely to identify
the location of specific sources of COCs for purposes
of this allocation proceeding and not for any other
purposes.
J. "Interim Remedial Costs" shall mean all costs,
including, but not limited to, administrative costs,
EPA and California past costs, EPA and California
oversight and other site-specific and San Fernando
Valley Basinwide response costs, jointly incurred or
reimbursed by the Allocation
6
<PAGE> 7
Participants, in connection with or related to
compliance with a consent decree entered into with or
unilateral order issued by EPA requiring the
construction, operation, maintenance or dismantling
of any interim remedial measure for the Glendale
North and Glendale South Operable Units.
K. "Other Costs" shall mean all costs other than Interim
Remedial Costs and AOC Compliance Costs, including,
but not limited to, the costs of this allocation
proceeding, jointly incurred by the Allocation
Participants in connection with or related to any
interim remedial measure for the Glendale North and
Glendale South Operable Units.
L. "Parties" shall mean all entities that have executed
this Agreement at any time without regard to whether
the entity subsequently withdraws or is removed for
any reason from the PRP Agreement.
M. "Shared Costs" shall mean all Interim Remedial Costs,
AOC Compliance Costs and Other Costs.
3. ALLOCATION PANEL
The Burbank/Glendale Split Allocation Decision shall be
rendered by a panel of not more than three technical experts ("the Panel")
selected by the Allocation Participants in accordance with the procedures
established in this Agreement.
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<PAGE> 8
4. COMPOSITION OF THE PANEL
The Panel shall be composed of not more than three individuals
with expertise in one or more of the scientific disciplines relevant to the
behavior of volatile organic compounds in soil and groundwater and shall be
selected by Mutual Agreement of the Allocation Participants. As of the date of
this Agreement, the Participants have selected Steven M. Gorelick, David A.
Stephenson and David B. McWhorter to serve on the Panel. If one or more of
these individuals should, for any reason, be unable or unwilling to continue
serving on the Panel, the Allocation Participants may select a replacement or
replacements by Consensus.
5. DECISION TO BE RENDERED BY THE PANEL
The Panel, by concurrence of two or more members, shall
prepare and deliver by facsimile transmission and next day delivery service to
all Allocation Participants a written determination, with supporting rationale,
for the Burbank/Glendale Split Allocation Decision. In rendering the
Burbank/Glendale Split Allocation Decision, the Panel shall distribute any
percentage share attributable to sources of COCs located in the Burbank
Operable Unit that are not Allocation Participants to Lockheed Martin and any
percentage share attributable to sources of COCs located in the Glendale
Operable Units that are not Allocation Participants to the Glendale Members.
The Panel shall be the sole judge of the facts and arguments
presented by the Allocation Participants. In reaching the Burbank/Glendale
Split Allocation Decision, the Panel shall
8
<PAGE> 9
exercise its best technical judgment based on all of the information presented
to it during the allocation proceedings to assign to (1) Lockheed Martin that
percentage share of the Shared Costs for which Burbank Operable Unit sources of
COCs are responsible, and (2) Glendale Members that percentage share of Shared
Costs for which Glendale Operable Units sources of COCs are responsible. The
Panel shall be free to consider any allocation theory advanced by an Allocation
Participant or developed by the Panel. In the absence of sufficient geologic,
hydrogeologic, soil or groundwater information to adequately support any such
decision, the Panel may use such additional technical, operational and
scientific information as it deems relevant to render the Burbank/Glendale
Split Allocation Decision. Absent extraordinary circumstances, the Panel shall
render the Burbank/Glendale Split Allocation Decision in accordance with the
schedule attached to this Agreement as Appendix C.
6. APPEAL OF PANEL ACTIONS
Any Allocation Participant shall have the right to make a
written request for a decision from an independent judicial neutral ("Judicial
Neutral") selected by a Consensus of the Allocation Participants concerning
whether an action taken by the Panel is (1) in conflict with this Agreement or
any written procedural rules adopted by Mutual Agreement among the Allocation
Participants, (2) based upon a clear error of fact, or (3) subject to reversal
based on the standards set forth in California Code of Civil Procedure Section
1286.2(a), (b) or (d). There shall be no other basis for appealing an action
taken by the Panel to the Judicial
9
<PAGE> 10
Neutral, who shall be an attorney or a retired judge. As of the date of this
Agreement, the Allocation Participants have selected Harry V. Peetris to serve
as the Judicial Neutral. If, for any reason, the person selected to serve as
the Judicial Neutral is unable or unwilling to continue so serving, the
Participants shall select a replacement by Consensus.
Prior to the date the Burbank/Glendale Split Allocation
Decision is rendered, requests for a decision by the Judicial Neutral may be
made by any Allocation Participant at any time, provided that (1) any issue
raised by the request has already been presented to the Panel and the Panel has
had a reasonable opportunity to respond to the issue, and (2) oral or written
notice of the request has been given to the Panel and to all of the other
Allocation Participants, who shall be provided with 7 days to respond in
writing to the request; however, any request for a decision by the Judicial
Neutral concerning whether action taken by the Panel is subject to reversal
based on the standards set forth in California Code of Civil Procedure Section
1286.2(a), (b) or (d) may be made without first presenting the issue to the
Panel. Notwithstanding the foregoing, the Participants can by Mutual Agreement
follow a different procedure.
After the date the Burbank/Glendale Split Allocation Decision
is rendered, any request for a decision by the Judicial Neutral shall be
treated as an appeal of the Burbank/Glendale Split Allocation Decision. To be
timely, such an appeal (1) must be submitted to the Judicial Neutral within 7
days after the date the
10
<PAGE> 11
Burbank/Glendale Split Allocation Decision was delivered to the appealing
Allocation Participant, and (2) on the same date the appeal is submitted to the
Judicial Neutral, written notice of the appeal by next day delivery service
must be given to the Panel and to all of the other Allocation Participants,
each of which shall have 7 days from delivery of the notice to submit a written
response to the Judicial Neutral, which response shall be transmitted by next
day delivery service to the Panel and to all of the other Allocation
Participants on the same date the response is submitted.
Decisions rendered by the Judicial Neutral shall be binding
upon the Panel, which is hereby instructed to act in accordance therewith in
completing its proceedings. Such decisions by the Judicial Neutral shall not
be appealable by any Party. If the Burbank/Glendale Split Allocation Decision
is not appealed in a timely manner or it is revised to conform to any
instructions issued by the Judicial Neutral following a timely appeal, the
Burbank/Glendale Split Allocation Decision shall not be subject to further
modification. The Burbank/Glendale Split Allocation Decision shall be deemed
final on the date that the Judicial Neutral transmits written notification to
all Allocation Participants by facsimile transmission and next day delivery
service that all timely appeals, if any, have been concluded and the Panel's
Burbank/Glendale Split Allocation Decision is not subject to further
modification.
11
<PAGE> 12
7. PROCEDURAL INQUIRIES BY THE PANEL
In the event of controversy, confusion or uncertainty over any
issue relating to the rules or to the integrity of the allocation process, the
Panel (or any member(s) thereof) may pose a question, in writing, to the
Chairperson of the Allocation Committee ("Chairperson"), who shall promptly
transmit the written question to the Allocation Participants for resolution.
8. EFFECT OF THE BURBANK/GLENDALE SPLIT ALLOCATION
DECISION
(a) The Binding Effect of the Burbank/Glendale Split
Allocation Decision:
At such time as the Burbank/Glendale Split Allocation
Decision becomes final, it shall not be subject to further administrative or
judicial review, and each of the Parties hereby agrees that, in any subsequent
judicial or administrative proceeding, at the request of any Party, the
aggregate percentage shares assigned to the two groups of sources in the
Burbank/Glendale Split Allocation Decision shall be entered as a binding and
non-appealable stipulated factual finding and may also be entered as a judgment
in any court of competent jurisdiction.
(b) Effect of the Burbank/Glendale Split Allocation
Decision on the Obligations of Lockheed Martin:
When the Burbank/Glendale Split Allocation Decision becomes
final, the Lockheed Martin percentage share of Shared Costs which it was
obligated to pay prior to such decision and which it is obligated to pay after
such decision shall be adjusted to
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<PAGE> 13
correspond to the aggregate percentage share attributed to Burbank Operable
Unit sources of COCs in the Burbank/Glendale Split Allocation Decision.
(c) Effect of the Burbank/Glendale Split Allocation
Decision on the Obligations of the Glendale Members:
When the Burbank/Glendale Split Allocation Decision becomes
final, the aggregate percentage share of Shared Costs that the Glendale Members
were obligated to pay prior to such decision and which the Glendale Members are
obligated to pay after such decision shall be adjusted to correspond to the
aggregate percentage share attributed to Glendale Operable Units sources of
COCs in the Burbank/Glendale Split Allocation Decision. However, nothing in
this Agreement shall be construed to make final the interim cost-sharing
allocation established in January of 1994 pursuant to the PRP Agreement.
9. ASSIGNMENT OF CONTRIBUTION RIGHTS
The Parties hereby agree that Lockheed Martin shall have the
exclusive right among the Parties to assert claims for contribution against all
persons and entities that any Party contends have any responsibility or
liability for Shared Costs because of their relationship to a source of COCs
located in the Burbank Operable Unit, and that the Parties, other than Lockheed
Martin, shall have the exclusive right to assert claims for contribution
against all persons and entities that any Party contends have responsibility or
liability for Shared Costs because of their relationship to a source of COCs
located in the Glendale
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<PAGE> 14
Operable Units. All of the Parties shall preserve their respective
contribution rights against all persons and entities asserted to have
responsibility or liability for Shared Costs because of their relationship to a
source of COCs located outside the Burbank Operable Unit and Glendale Operable
Units.
10. PRESENTATIONS TO THE PANEL
Each of the Allocation Participants shall have the right to
present any information to the Panel the Participant determines is appropriate
to assist the Panel in rendering the Burbank/Glendale Split Allocation
Decision, subject to the limitations set forth in this Agreement or any written
procedural rules established by a Consensus of the Allocation Participants.
(a) Written Submittals
Any briefs submitted to the Panel in accordance with the
schedule attached to this Agreement as Appendix C shall be comprised of no more
than 30 pages of double-spaced type on letter-sized paper, excluding any
attached graphics, charts or other explanatory exhibits. The only other
limitation on the type of information that may be presented to the Panel in a
written submittal shall be that the information cannot reveal any Party's
current or previous interim allocated share of costs with respect to the
Glendale North and Glendale South Operable Units, the views or opinions of the
mediation team that developed the January 1994 interim allocation regarding
adequacy of the data, or any allocation decisions which that team rendered.
14
<PAGE> 15
(b) Workshops Conducted By The Panel
Workshops at which each Allocation Participant shall have the
right to make such additional oral and graphic presentations to the Panel as
the Participant deems appropriate or the Panel may request shall be held in
accordance with the schedule attached to this Agreement as Appendix C or at
such other times as the Allocation Participants determine by Mutual Agreement.
However, the Panel shall have the right to limit the Allocation Participant's
right to make oral and graphic presentations or decline to hear or receive
information from a Participant which the Panel deems to be redundant or of no
significant value in arriving at the Burbank/Glendale Split Allocation
Decision. Only Allocation Participant representatives, their attorneys and
experts, the Panel members and the Judicial Neutral may attend such workshops.
All workshops shall be informal in nature and designed to aid
the Panel in promptly arriving at the Burbank/Glendale Split Allocation
Decision. To that end, the Panel may establish such limitations on the time
allotted for individual Allocation Participants to address the Panel and the
order in which presentations shall be made as it determines to be efficient and
equitable, with a view toward assuring that each Participant has a reasonable
opportunity to provide the Panel with all relevant information it wishes to
present.
The only limitation on the types of information that may be
presented to the Panel at a workshop shall be that the information cannot
reveal a Party's current or previous interim
15
<PAGE> 16
allocated share of costs with respect to the Glendale North and Glendale South
Operable Units, the views or opinions of the mediation team that developed the
January 1994 interim allocation regarding adequacy of the data, or any
allocation decisions which that team rendered.
11. GENERAL DATA SUBMISSIONS TO THE PANEL
The allocation administrator shall be responsible for making
all general data submissions to the Panel and for receiving any requests from
the Panel for general information not primarily related to the presentation by
a specific Allocation Participant. As of the date of this Agreement, the
Participants have selected Boone & Associates, located at 901 Corporate Center
Drive, Suite 204, Monterey Park, California 91754, telephone number (213)
261-3771, as the allocation administrator. The allocation administrator shall
promptly report to the Allocation Participants in writing any request for
information received from the Panel and obtain the Mutual Agreement of the
Participants before providing information to the Panel in response to such a
request. The initial general data submission to the Panel consists of the
documents listed in Appendix D.
12. COMMUNICATIONS WITH THE PANEL
All written communications intended for transmittal to the
Panel shall be delivered to the allocation administrator in multiple sets of
five. Within one business day of receipt, the allocation administrator shall
transmit one copy of the communication to each of the Panel members. The other
two copies
16
<PAGE> 17
shall be retained in the allocation document repository established by the
allocation administrator and shall be accessible to all Participants and their
experts, Panel Members and the Judicial Neutral during regular business hours.
At the same time that the allocation administrator transmits any communication
to the Panel, he or she shall provide each Allocation Participant by facsimile
transmission with a copy of the covering transmittal document, which shall
contain a brief description of each communication being transmitted to the
Panel. Any Allocation Participant desiring a copy of a communication
transmitted to the Panel may obtain same by contacting the allocation
administrator or the Participant that provided the communication to the
allocation administrator and paying any associated copying charges. Other than
the Chairperson, no Allocation Participant, its attorney or expert shall
contact a member of the Panel except as provided in this Agreement.
13. DOCUMENT REPOSITORIES
On or before the date indicated in the schedule attached to
this Agreement as Appendix C, each Glendale Member shall deliver the following
information to the document repository established pursuant to Section 12 of
this Agreement:
1) An index by chronological date of all documents
submitted by the Party, with each document identified
by date, title, subject and author.
2) A copy of each document submitted to a governmental
entity containing information pertaining to usage
17
<PAGE> 18
of COCs at the site for which a Remedial Design
Notice letter has been received by the Party
("RDN site").
3) A copy of each non-privileged document, excluding any
drafts and consultant proposals for services, in the
possession, custody or control of the Party relating
to the RDN site containing, discussing or analyzing:
(a) data relating to site soils, geology or
hydrology; (b) the absence or presence of COCs in the
air, soils, surface water or groundwater; and (c)
releases of COCs to the air, soils, surface water or
groundwater.
All documents and data submitted by a Party as part of any
prior allocation proceeding conducted pursuant to the PRP Agreement shall be
placed in the document repository established pursuant to Section 12 of this
Agreement. However, a Party shall have the right to remove any attorney client
communications from such documents prior to the time such documents are made
available to Allocation Participants. No Party shall be required to resubmit
documents or data which have already been placed in the document repository.
Should any Glendale Member claim that documents otherwise
required to be submitted pursuant to this section are subject to a privilege
under State or Federal law or documents claimed as privileged are removed from
the document repository by
18
<PAGE> 19
such Member, the Glendale Member may withhold the document for which legal
privilege is claimed, but shall provide a log showing the date, author, title,
general subject matter and basis for asserting privilege with respect to the
document; provided however, a Glendale Member is not required to include in
such log draft documents, attorney client communications or consultant
proposals for services. All disputes regarding the assertion of privileges
shall be brought to the Judicial Neutral for prompt resolution.
In lieu of compliance with the foregoing requirements, on or
before the date indicated in the schedule attached to this Agreement as
Appendix C, Lockheed Martin shall make available all documents in the Lockheed
Martin Burbank Program Office Technical Information Center, at 2550 North
Hollywood Way, Suite 500, in Burbank, California, and in the Hargis &
Associates technical library, at 2223 Avenida De La Playa, Suite 300, in La
Jolla, California, relating to facilities that Lockheed Martin owns within the
Burbank Operable Unit or considers to be responsible for the groundwater
contamination problem addressed by the Burbank Operable Unit Interim Remedy
that would be covered by subparagraphs 2) and 3) of this Section if the
facilities were RDN sites.
Lockheed Martin represents that these documents fully satisfy
the document submission standards set forth for the Glendale Members.
Should Lockheed Martin claim that documents otherwise required
to be submitted pursuant to this section are subject to a
19
<PAGE> 20
privilege under State or Federal law or documents claimed as privileged are
removed from the document repository by Lockheed Martin, Lockheed Martin may
withhold the document for which legal privilege is claimed, but shall provide a
log showing the date, author, title, general subject matter and basis for
asserting privilege with respect to the document; provided however Lockheed
Martin is not required to include in such log draft documents, attorney client
communications or consultant proposals for services. All disputes regarding
the assertion of privileges shall be brought to the Judicial Neutral for prompt
resolution.
Until the date set forth in the schedule attached to this
Agreement as Appendix C, all Allocation Participants shall be under a
continuing obligation to deliver to the document repository established
pursuant to Section 12 of this Agreement any documents containing material new
information the Participant becomes aware of that are within the scope of the
submittal requirements in this section. Such supplemental submissions shall be
made within 10 days after the Participant first learns of the existence of such
documents.
All submittals to the document repository established pursuant
to Section 12 of this Agreement shall be accompanied by a verification in the
form attached to this Agreement as Appendix E, executed by an authorized
representative of the Party making the submittal, verifying that the Party has
made a good faith effort and diligent investigation to comply with the
requirements of this Section.
20
<PAGE> 21
14. NO RIGHT TO DISCOVERY
Except as set forth in this Agreement, no Party shall be
entitled to obtain information or documents from another Party through this
allocation proceeding. Nor shall any Party have the right to depose or orally
examine any Party or its expert at any workshop conducted by the Panel or
otherwise as part of these proceedings. Notwithstanding the foregoing, the
Panel, in its sole discretion, may allow any Allocation Participant, its
attorney or expert to address questions to or make oral or written comments in
response to any person providing oral or graphic information to the Panel at a
workshop.
15. ADDITIONAL PROCEDURAL REQUIREMENTS
The procedural requirements established by this Agreement can
be supplemented or modified at any time by procedural rules adopted by a
Consensus of the Allocation Participants. Such rules shall be in writing and
may only be adopted (1) during a workshop conducted pursuant to Section 10 of
this Agreement, or (2) at a meeting or via a teleconference of the Participants
called and held for that purpose on at least three days written notice.
16. NONWAIVER OF OTHER CLAIMS OF PARTIES
Except as provided in Section 8 of this Agreement (The Binding
Effect of the Burbank/Glendale Split Allocation Decision), participation in the
allocation process established pursuant to this Agreement shall not constitute
a waiver of, or prejudice to, any position a Party has taken or may take in any
other administrative or judicial proceeding.
21
<PAGE> 22
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: A.C. LAYNE, INC.
------------------------------------
BY: MICHAEL D. LEE, PRES.
------------------------------------
(Name and Title)
SIGNATURE: /s/ MICHAEL D. LEE
------------------------------------
22
<PAGE> 23
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: ADMIRAL CONTROL INC.
------------------------------------
BY: DAVID J. HIGGINS, PRES.
------------------------------------
(Name and Title)
SIGNATURE: /s/ DAVID J. HIGGINS
------------------------------------
22
<PAGE> 24
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: AMERICAN METASEAL
------------------------------------
BY: RICARDO CANALES, PRESIDENT
------------------------------------
(Name and Title)
SIGNATURE: /s/ RICARDO CANALES
------------------------------------
22
<PAGE> 25
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: BROCK BUS LINES
------------------------------------
BY: RUTH BINZLEY -- SECT/TREAS.
------------------------------------
(Name and Title)
SIGNATURE: /s/ RUTH BINZLEY
------------------------------------
22
<PAGE> 26
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: BURBANK STEEL TREATING INC.
------------------------------------
BY: MILDRED N. BENNETT -- SEC-TR
------------------------------------
(Name and Title)
SIGNATURE: /s/ MILDRED N. BENNETT
------------------------------------
22
<PAGE> 27
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: COORTAULDS AEROSPACE
------------------------------------
BY: TED CLARK, V.P. & GENERAL MANAGER
------------------------------------
(Name and Title)
SIGNATURE: /s/ TED CLARK
------------------------------------
22
<PAGE> 28
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: CREDIT MANAGERS ASSN. OF CALIFORNIA
------------------------------------
BY: DAVID F. MACOMBER, VP & CFO
------------------------------------
(Name and Title)
SIGNATURE: /s/ DAVID F. MACOMBER
------------------------------------
22
<PAGE> 29
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: EEMCO DIV., DATRON INC.
------------------------------------------
BY: DANIEL F. O'SULLIVAN, DIRECTOR OF FINANCE & ADMINISTRATION
------------------------------------------
(Name and Title)
SIGNATURE: /s/ DANIEL F. O'SULLIVAN
------------------------------------------
22
<PAGE> 30
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: EXCELLO PLATING CO.
------------------------------------
BY: GLEN HARLEMAN, PRES/OWNER
------------------------------------
(Name and Title)
SIGNATURE: /s/ GLEN HARLEMAN
------------------------------------
22
<PAGE> 31
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: HASKEL INTERNATIONAL, INC.
------------------------------------
BY: EDWARD MALKOWICZ, CHAIRMAN
------------------------------------
(Name and Title)
SIGNATURE: /s/ EDWARD MALKOWICZ
------------------------------------
22
<PAGE> 32
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: ITT CORPORATION
------------------------------------------
BY: ROGER W. LANGSDORF, ASST. GENERAL COUNSEL
------------------------------------------
(Name and Title)
SIGNATURE: /s/ ROGER W. LANGSDORF
------------------------------------------
22
<PAGE> 33
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: LANCO METALS
------------------------------------
BY: STEPHEN P. SAURENMAN, V.P.
------------------------------------
(Name and Title)
SIGNATURE: /s/ STEPHEN P. SAURENMAN
------------------------------------
22
<PAGE> 34
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: LOCKHEED MARTIN CORPORATION
---------------------------------------
BY: GREGORY R. McCLINTOCK, RETAINED COUNSEL
---------------------------------------
(Name and Title)
SIGNATURE: /s/ GREGORY R. McCLINTOCK
---------------------------------------
22
<PAGE> 35
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: LORAL LIBRASCOPE CORPORATION
------------------------------------
BY: DAVID SWEET - VICE PRESIDENT
------------------------------------
(Name and Title)
SIGNATURE: /s/ DAVID SWEET
------------------------------------
22
<PAGE> 36
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: MENASCO
-------------------------------------
BY: CHARLES H. POMEROY, ATTY. FOR MENASCO
-------------------------------------
(Name and Title)
SIGNATURE: /s/ CHARLES H. POMEROY
------------------------------------
22
<PAGE> 37
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: PACIFIC BELL
------------------------------------
BY: IRENE SOTO, ENV. MGR.
------------------------------------
(Name and Title)
SIGNATURE: /s/ IRENE SOTO
------------------------------------
22
<PAGE> 38
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: PHILIPS COMPONENTS, A DIVISION OF
PHILIPS ELECTRONICS N. AMERICA CORP.
-------------------------------------------
BY: JOSEPH L. WOLF JR., DIV. ENVIRONMENTAL MGR.
-------------------------------------------
(Name and Title)
SIGNATURE: /s/ JOSEPH L. WOLF JR.
-------------------------------------------
22
<PAGE> 39
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
-------------------------------------------
BY: ANA M. PEREZ, VICE PRESIDENT
-------------------------------------------
(Name and Title)
SIGNATURE: /s/ ANA M. PEREZ
-------------------------------------------
22
<PAGE> 40
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: RALPHS GROCERY COMPANY
--------------------------------------------------
BY: JAN CHARLES GRAY -- SENIOR VICE PRESIDENT,
GENERAL COUNSEL & SECRETARY
--------------------------------------------------
(Name and Title)
SIGNATURE: /s/ JAN CHARLES GRAY
--------------------------------------------------
22
<PAGE> 41
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: SOUTHERN PACIFIC TRANSPORTATION CO.
------------------------------------
BY: ROBERT F. STARZEL, VICE CHAIRMAN
------------------------------------
(Name and Title)
SIGNATURE: /s/ ROBERT F. STARZEL
------------------------------------
22
<PAGE> 42
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: VICKERS, INC. (STERER ENGINEERING & MFG. CO.)
------------------------------------------------
BY: MADONNA F. McGRATH, SENIOR ATTY-ENVIRONMENTAL
------------------------------------------------
(Name and Title)
SIGNATURE: /s/ MADONNA F. McGRATH
------------------------------------------------
22
<PAGE> 43
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: VORELCO/VOLKSWAGEN OF AMERICA, INC.
------------------------------------
BY: LEIGH TAYLOR COMBS
------------------------------------
(Name and Title)
SIGNATURE: /s/ LEIGH TAYLOR COMBS
------------------------------------
22
<PAGE> 44
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: W&W MANUFACTURING CO.
------------------------------------
BY: AARON ROSEN, ATTORNEY
------------------------------------
(Name and Title)
SIGNATURE: /s/ AARON ROSEN
------------------------------------
22
<PAGE> 45
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: THE WALT DISNEY COMPANY
------------------------------------
BY: MANUEL G. GRACE
------------------------------------
(Name and Title)
SIGNATURE: /s/ MANUEL G. GRACE
------------------------------------
22
<PAGE> 46
17. SURVIVAL OF AMENDMENT
This Agreement cannot be amended without the written Consensus
of the Allocation Participants. All such amendments shall inure to the benefit
of and be binding upon all Parties who are Allocation Participants at the time
of the amendment notwithstanding the subsequent withdrawal or removal of any
such Allocation Participant from the Glendale PRP Group.
18. SECTION HEADINGS
The section headings used herein are for reference and
convenience only and shall not enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned Party enters into this
Agreement and amendment to the PRP Agreement as of the date first set forth
above. Each person signing this document represents and warrants that he or
she has been duly authorized to enter into this Agreement by the Party on whose
behalf it is indicated the person is signing.
PARTY: ZERO CORPORATION
------------------------------------
BY: ANITA T. CUTCHALL, CORP. SECTY.
------------------------------------
(Name and Title)
SIGNATURE: /s/ ANITA T. CUTCHALL
------------------------------------
22
<PAGE> 47
MAP
AREA A: BURBANK OPERABLE UNIT
AREA B: GLENDALE OPERABLE UNITS
APPENDIX A
<PAGE> 48
CONTAMINANTS OF CONCERN
Benzene
Carbon Tetrachloride
1,1-Dichloroethane
1,2-Dichloroethane
1,1-Dichloroethene
Methylene Chloride
1,1,2,2-Tetrachloroethane
Tetrachloroethene
Toluene
1,1,1-Trichloroethane
Trichloroethene
1,1,2,2-Tetrachloroethene
2-Butanone (MEK)
1,2-Dichloroethene (total)
Vinyl chloride
Xylene (total)
Nitrates
APPENDIX B
<PAGE> 49
ALLOCATION SCHEDULE
<TABLE>
<S> <C>
Process Starts -- Facility Data Submittal to On or before
Document Repository 6/7/95
Opening Briefs 6/7/95
Responsive Briefs 6/30/95
1st Workshop 7/15-16/95
Panel Report on 1st Workshop 8/7/95
Last Date to Submit New Facility Data 8/14/95
Supplemental Briefs 9/1/95
2nd Workshop 9/13-14/95
Panel Issues Proposed Allocation 10/13/95
PRPs Respond to Proposed Allocation 10/27/95
Panel's Allocation Decision 11/3/95
Deadline for Filing Appeals to Judicial Neutral On or about 11/10/95
Responses to Appeals On or about 11/17/95
Judicial Neutral Rules On or about
11/27/95
Process Concludes -- Panel Issues Final Decision --
Based on Results of Appeal
</TABLE>
APPENDIX C
<PAGE> 50
INITIAL DATA SUBMISSION TO PANEL
Remedial Investigation Report for the Glendale Study Area, Vol. 1 & 2, J.M.
Montgomery, January 92
Feasibility Study for the Glendale Study Area North Plume Operable Unit, J.M.
Montgomery, April 92
Feasibility Study for the Glendale Study Area South Operable Unit, J.M.
Montgomery, August 92
Remedial Investigation of Groundwater Contamination in the San Fernando Valley
(5 Volumes), J.M. Montgomery, December 92
San Fernando Basin Water Management: San Fernando Valley Superfund Site,
CH2MHill, January 94
San Fernando Basin Groundwater Model Documentation: San Fernando Valley
Superfund Site, CH2MHill, October 94
Glendale North and South Operable Unit Record of Decision, USEPA, June 93
Administrative Order on Consent, USEPA, May 94
Glendale North and South Operable Units Remedial Design: Conceptual Remedial
Design Report, CDM, February 95
Water Level Elevation Contour Maps, Upper Los Angeles River Watermaster,
1950-1969, 1988, 1993
Water Level Elevation Contour Maps, Upper Los Angeles River Watermaster,
1958-1992
Record of Decision for the Burbank Well Field Operable Unit, 5/89
Operable Unit Feasibility Study, Burbank Well Field, Vols. 1-2, 10/88 (James
Montgomery)
Phase I Final Remedial Design Report, Burbank Operable Unit, Vols. 5 and 6,
9/30/93, Simon Hydro-Search
Remedial Investigation Report, Vols. 1-3, 12/92 (James Montgomery)
Final Phase I Conceptual Remedial Design Report, Burbank Operable Unit, Vols.
1-2 1/19/93, Simon Hydro-Search
APPENDIX D
<PAGE> 51
VERIFICATION
The undersigned hereby verifies that a good faith and diligent
investigation has been undertaken to identify all information required to be
produced to the allocation document repositories established pursuant to
Section 13 of the Memorandum of Agreement Regarding Cost-Sharing dated June 7,
1995 (the "Information"), and that all such Information has been forwarded to
the appropriate document repository. The undersigned further acknowledges that
it is under a duty to supplement or correct the Information and hereby verifies
that it will produce any subsequently discovered, corrected or newly generated
or received Information to the document repository within ten days of the
discovery, receipt or generation of such Information.
This verification is made under penalty of perjury and is
executed on 11/22, 1995 at GLENDALE, CALIF.
APPENDIX E
<PAGE> 52
VERIFICATION
The undersigned hereby verifies that a good faith and diligent
investigation has been undertaken to identify all information required to be
produced to the allocation document repositories established pursuant to
Section 13 of the Memorandum of Agreement Regarding Cost-Sharing dated June 7,
1995 (the "Information"), and that all such Information has been forwarded to
the appropriate document repository. The undersigned further acknowledges that
it is under a duty to supplement or correct the Information and hereby verifies
that it will produce any subsequently discovered, corrected or newly generated
or received Information to the document repository within ten days of the
discovery, receipt or generation of such Information.
This verification is made under penalty of perjury and is
executed on ______________, 1995 at ______________________.
APPENDIX E
<PAGE> 53
VERIFICATION
The undersigned hereby verifies that a good faith and diligent
investigation has been undertaken to identify all information required to be
produced to the allocation document repositories established pursuant to
Section 13 of the Memorandum of Agreement Regarding Cost-Sharing dated June 7,
1995 (the "Information"), and that all such Information has been forwarded to
the appropriate document repository. The undersigned further acknowledges that
it is under a duty to supplement or correct the Information and hereby verifies
that it will produce any subsequently discovered, corrected or newly generated
or received Information to the document repository within ten days of the
discovery, receipt or generation of such Information.
/s/ AARON RESEN
This verification is made under penalty of perjury and is
executed on November 14, 1995 at Glendale, Calif.
APPENDIX E
<PAGE> 1
EXHIBIT 10.18
FIRST AMENDMENT
TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "First Amendment") dated as of
August 30th 1995, is made and entered into by and between HASKEL INTERNATIONAL,
INC., a California corporation ("Borrower"), and UNION BANK, a California
banking corporation ("Bank").
RECITALS:
A. Borrower and Bank are parties to that certain Loan Agreement dated as of
February 21, 1995 (the "Agreement"), pursuant to which Bank agreed to extend
credit to Borrower.
B. Borrower and Bank desire to amend the Agreement, subject to the terms
and conditions of this First Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. Defined Terms. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. Amendments to the Agreement.
(a) Section 1.8 of the Agreement is hereby amended to read in full as
follows:
"1.8 Security. Prior to any disbursement of the Loans on or after the
effective date of the First Amendment to this Agreement, Bank shall have
received an Amended and Restated Security Agreement, whereby Borrower shall
pledge and grant to Bank a first priority perfected security interest in 50,000
shares of deferred ordinary stock of Borrower's subsidiary, Haskel Energy
Systems, Ltd.
(b) The definition of "Debt Service" appearing in Section 4.10 of the
Agreement is hereby amended to read in full as follows:
"Debt Service" shall mean the sum of (a) the principal portion of all
term obligations owing to Bank or any other person or entity coming due within
12 months after the date of calculation, and (b) interest expense, non-financed
capital expenditures, dividends and the aggregate amount, expressed in Dollars,
of all purchases, redemptions, retirements and other acquisitions of shares of
the capital stock of Borrower for the twelve (12) months preceding the date of
calculation."
3. Effectiveness of this First Amendment. This First Amendment shall
become effective as of the date hereof when, and only when, Bank shall have
received all of the following, in form and substance satisfactory to Bank:
(a) A counterpart of this First Amendment, duly executed by Borrower
and acknowledged by Guarantor where indicated below; and
(b) An Amended and Restated Security Agreement, duly executed by
Borrower; and
(c) Such other documents, instruments or agreements as Bank may
reasonably deem necessary.
4. Ratification. Except as specifically amended hereinabove, the
Agreement shall remain in full force and
<PAGE> 2
effect and is hereby ratified and confirmed.
5. Representations and Warranties. Borrower represents and warrants as
follows:
(a) Each of the representations and warranties contained in the
Agreement, as may be amended hereby, is hereby reaffirmed as of the date
hereof, each as if set forth herein;
(b) The execution, delivery and performance of this First Amendment
and any other instruments or documents in connection herewith are within
Borrower's power, have been duly authorized, are legal, valid and binding
obligations of Borrower, and are not in conflict with the terms of any charter,
bylaw, or other organization papers of Borrower or with any law, indenture,
agreement or undertaking to which Borrower is a party or by which Borrower is
bound or affected; and
(c) No event has occurred and is continuing or would result from this
First Amendment which constitutes or would constitute an Event of Default under
the Agreement.
6. Governing Law. This First Amendment and all other instruments or
documents in connection herewith shall be governed by and construed according
to the laws of the State of California.
7. Counterparts. This First Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
WITNESS the due execution hereof as of the date first above written.
HASKEL INTERNATIONAL, INC. UNION BANK
By: /s/ MAURY FRIEDMAN By: /s/ CATHERINE ABE
------------------------------- ---------------------------------
Maury Friedman Catherine Abe
Title: President Title: Vice President
---------------------------- ------------------------------
By: /s/ L. D. SCHNELL By: /s/ ALLISON W. BERRY
------------------------------- ---------------------------------
L. D. Schnell Allison W. Berry
Title: Chief Financial Officer Title: Credit Officer
---------------------------- ------------------------------
Acknowledged and Agreed and
Continuing Guaranty dated February
21, 1995 confirmed this _____ day
of August, 1995
M.G. ELECTRONICS, INC.
By: /s/ MAURY FRIEDMAN
-------------------------------
Maury Friedman
Title: Chairman
----------------------------
<PAGE> 1
EXHIBIT 10.19
SECOND AMENDMENT
TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Second Amendment") dated as of
February 13, 1996, is made and entered into by and between HASKEL INTERNATIONAL,
INC., a California Corporation ("Borrower"), and UNION BANK, a California
banking corporation ("Bank").
RECITALS:
A. Borrower and Bank are parties to that certain Loan Agreement dated
February 21, 1995 (the "Agreement"), pursuant to which Bank agreed to extend
credit to Borrower and amendments thereto dated August 30, 1995.
B. Borrower and Bank desire to amend the Agreement subject to the terms and
conditions of this Second Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. Defined Terms. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. Amendments to the Agreement.
(a) Section 4.5(a) of the Agreement is hereby amended by substituting
"sixty (60) days" for "forty-five (45) days".
3. Effectiveness of the Second Amendment. This Second Amendment shall
become effective as of the date hereof when, and only when, Bank shall have
received all of the following, in form and substance satisfactory to Bank:
(a) The counterpart of this Second Amendment, duly executed by
Borrower;
(b) Such other documents, instruments or agreements as Bank may
reasonably deem necessary.
4. Ratification. Except as specifically amended hereinabove, the Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
5. Representations and Warranties. Borrower represents and warrants as
follows:
(a) Each of the representations and warranties contained in the
Agreement, as may be amended hereby, is hereby reaffirmed as of the date hereof,
each as if set forth herein;
(b) The execution, delivery and performance of the Second Amendment and
any other instruments or documents in connection herewith are within Borrower's
power, have been duly authorized, are legal, valid and binding obligations of
Borrower, and are not in conflict with the terms of any charter, bylaw, or other
organization papers of Borrower or with any law, indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is bound or
affected;
(c) No event has occurred and is continuing or would result from this
Second Amendment which constitutes or would constitute an Event of Default under
the Agreement.
6. Governing Law. This Second Amendment and all other instruments or
documents in connection
<PAGE> 2
herewith shall be governed by and construed according to the laws of the State
of California.
7. Counterparts. This Second Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
WITNESS the due execution hereof as of the date first above written.
HASKEL INTERNATIONAL, INC. UNION BANK
By: /s/ LONNIE D. SCHNELL By: /s/ ALLISON W. BERRY
------------------------------- -------------------------------
Lonnie D. Schnell Allison W. Berry
Title: Chief Financial Officer Title: Assistant Vice President
---------------------------- ----------------------------
By: /s/ R. M. GREAVES By: /s/ CATHERINE ABE
------------------------------- -------------------------------
R. M. Greaves Catherine Abe
Title: Title: Vice President
---------------------------- ----------------------------
Acknowledge and Agreed and Continuing
Guaranty dated February 21, 1995 confirmed
this ___ day of February, 1996.
By:
-------------------------------
Title:
----------------------------
<PAGE> 1
EXHIBIT 10.20
THIRD AMENDMENT
TO LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Third Amendment") dated as of
April 16, 1996, is made and entered into by and between HASKEL INTERNATIONAL,
INC., a California Corporation ("Borrower"), and UNION BANK, a Division of Union
Bank of California, N.A., a banking corporation ("Bank").
RECITALS:
A. Borrower and Bank are parties to that certain Loan Agreement dated
February 21, 1995 (the "Agreement"), pursuant to which Bank agreed to extend
credit to Borrower and amendments thereto dated August 30, 1995 and February 13,
1996.
B. Borrower and Bank desire to amend the Agreement subject to the terms and
conditions of this Third Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. Defined Terms. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. Amendments to the Agreement.
(a) Section 1.1.1.1 of the Agreement is hereby added in its entirety
as follows:
"The Commercial Letter of Credit Sublimit. As a sublimit to the
Revolving Loan, Bank shall issue, for the account of Borrower, one or more
commercial letters of credit (individually, an "L/C" and collectively, the
"L/Cs"). The aggregate amount available to be drawn under all outstanding L/Cs
and the aggregate amount of unpaid reimbursement obligations under drawn L/Cs
shall not exceed One Million Dollars ($1,000,000) and shall reduce, dollar for
dollar, the maximum amount available under the Revolving Loan. All such
commercial L/Cs shall be drawn on such terms and conditions as are acceptable to
Bank and shall be governed by the terms of (and Borrower agrees to execute)
Bank's standard form for commercial L/C applications and reimbursement agreement
and shall not have an expiration date more than one year from its date of
issuance. No letter of credit shall expire within ninety days after the
maturity of The Revolving Loan.
3. Effectiveness of the Third Amendment. This Third Amendment shall
become effective as of the date hereof when, and only when, Bank shall have
received all of the following, in form and substance satisfactory to Bank:
(a) The counterpart of this Third Amendment, duly executed by
Borrower;
(b) Such other documents, instruments or agreements as Bank may
reasonably deem necessary.
4. Ratification. Except as specifically amended hereinabove, the Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
5. Representations and Warranties. Borrower represents and warrants as
follows:
(a) Each of the representations and warranties contained in the
Agreement, as may be amended hereby, is hereby reaffirmed as of the date hereof,
each as if set forth herein;
(b) The execution, delivery and performance of the Third Amendment and
any other instruments
<PAGE> 2
or documents in connection herewith are within Borrower's power, have been duly
authorized, are legal, valid and binding obligations of Borrower, and are not in
conflict with the terms of any charter, bylaw, or other organization papers of
Borrower or with any law, indenture, agreement or undertaking to which Borrower
is a party or by which Borrower is bound or affected;
(c) No event has occurred and is continuing or would result from this
Second Amendment which constitutes or would constitute an Event of Default under
the Agreement.
6. Governing Law. This Third Amendment and all other instruments or
documents in connection herewith shall be governed by and construed according to
the laws of the State of California.
7. Counterparts. This Third Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
WITNESS the due execution hereof as of the date first above written.
HASKEL INTERNATIONAL, INC. UNION BANK
By: /s/ LONNIE D. SCHNELL By: /s/ CATHERINE ABE
------------------------------- -------------------------------
Lonnie D. Schnell Catherine Abe
Title: Chief Financial Officer Title: Vice President
---------------------------- ----------------------------
By: /s/ R. M. GREAVES By: /s/ ALLISON W. BERRY
------------------------------- -------------------------------
R. M. Greaves Allison W. Berry
Title: Title: Assistant Vice President
---------------------------- ----------------------------
<PAGE> 1
EXHIBIT 10.21
M.G. ELECTRONICS, INC.
31364 Via Colinas, #103, Westlake Village, California 91362
Phone: (818) 889-1300 FAX: (818) 889-4987
December 22, 1995
Jim Minyard
President
M.G. Electronics
31364 Via Colinas, #103
Westlake Village, CA 91362
Dear Jim,
Effective with the new year, your base salary will be increased to
$9,000 per month with a monthly bonus equal to 1% of pre-tax operating
income (before corporate charges). All other provisions of your
compensation package will remain the same which are as follows:
- Company provided automobile including operating expenses
- Blue Cross insurance for you and your family
- Discretionary bonus up to 40% of annual base pay
- Termination pay at minimum of 3 months plus 30 day notice
Thanks for your contributions in 1995 and I look forward to an even more
profitable 1996.
Sincerely,
/s/ MAURY FRIEDMAN
Maury Friedman
President
Electronic Products Group
<PAGE> 1
EXHIBIT 10.22
HASKEL INTERNATIONAL, INC.
EXECUTIVE SEPARATION PAY PLAN
1. Introduction. Haskel International, Inc. hereby establishes this
Executive Separation Pay Plan, effective March 1, 1996. The purpose of the
Plan is to establish a uniform basis for providing separation allowances to
certain eligible executive employees whose positions are eliminated or who are
terminated for reasons other than for cause. This document constitutes both
the written instrument under which the Plan is maintained and the summary plan
description for the Plan. Beginning as of the effective date of this Plan,
separation allowances for all employees who are Covered Employees under this
Plan shall be provided only under this Plan and Covered Employees under this
Plan shall not be eligible for any other separation allowances.
2. Definitions.
2.1 "Company" means Haskel International, Inc. and any subsidiary
or affiliate of the Company which adopts the Plan with the approval of the
Board of Directors of the Company.
2.2 "Covered Employee" means any executive employee so designated
in writing by the Compensation Committee pursuant to Section 3.1, who has not
subsequently been designated as ineligible.
2.3 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
2.4 "Compensation Committee" means the Compensation Committee
established by the Board of Directors.
<PAGE> 2
2.5 "Plan" means this Executive Separation Pay Plan, as set forth
in this instrument and as hereafter amended.
3. Eligibility.
3.1 Designation of Covered Employees. The Board of Directors or
the Compensation Committee, from time to time, in its absolute discretion,
shall designate in writing which executive employees of the Company shall be
Covered Employees eligible for a separation allowance under this Plan. The
Board of Directors, upon a recommendation from the Compensation Committee,
shall designate which Corporate Officers shall be Covered Employees. The
Compensation Committee shall designate all other Covered Employees.
3.2 General Eligibility Rules. An executive employee is eligible
for a separation allowance under this Plan only if he or she is a Covered
Employee on the date his or her employment with the Company terminates.
3.3 Exclusions. A Covered Employee is not eligible for a
separation allowance if he or she:
(a) Voluntarily resigns, even after receiving advance notice of
his or her involuntary termination;
(b) Is terminated after declining to accept a transfer, with no
reduction in his or her current base salary or wage rate, to a
comparable position with the Company or any affiliate in the
same metropolitan area or geographic location; or
(c) Is involuntarily terminated or resigns because he or she
violated any policy, procedure or other rule of the Company;
failed to perform his/her assigned duties; engaged in
dishonest or wrongful conduct; committed any crime; or was
otherwise discharged for cause.
- 2 -
<PAGE> 3
No separation allowance is payable under this Plan to the estate or other
survivor of an Covered Employee who dies before his or her employment with the
Company terminates. No separation allowance is payable under this Plan to a
Covered Employee (1) by reason of his or her transfer to a position with any
affiliate, or (2) by reason of the sale or other disposition of the Company,
any affiliate or any assets of either, if the Covered Employee is offered a
position with the successor employer, whether or not such offer is accepted.
All determinations as to the application of exclusions under 3.3 shall be made
solely in the reasonable discretion of the Compensation Committee.
4. Amount. A Covered Employee who is eligible to receive a separation
allowance under Section 3 will receive at the discretion of the Company either
a lump-sum or an agreement to receive salary continuation payments at the time
of termination. The amount of the separation allowance will be a specified
number of MONTHS of the Covered Employee's base salary as of the date his or
her employment terminates. The Board of Directors on the recommendation of the
Compensation Committee in its absolute discretion, will make this designation
in writing at any time prior to the Covered Employee's termination of
employment.
5. Special Rules.
5.1 Salary Continuation Payments. Instead of making a lump-sum
payment, the Company (in its discretion) may pay the separation allowance in
the form of regular payroll salary continuation payments.
5.2 Withholding. The Company SHALL withhold from any separation
allowance all required federal, state, local and other taxes and any other
payroll deductions required, including amounts necessary to satisfy any debt
the
- 3 -
<PAGE> 4
employee owes to the Company or any affiliate by reason of advance on wages or
vacation pay.
5.3 Death. In the event of a Covered Employee's death after
termination of employment, separation allowance payments under Section 5.1 will
cease as of the date of death, and the remainder of the separation pay will be
made in a lump sum payment to the Covered Employee's estate.
5.4 Other Benefit Plans. If the COMPANY ELECTS TO GIVE salary
continuation payments, all coverage under the Company's life insurance, medical
and dental plans will continue for the time specified. Accrued and unpaid
vacation pay balances will be paid as of the Covered Employee's termination
date.
6. Administration. The Plan is administered and interpreted by the
Compensation Committee. The Compensation Committee has the authority and
responsibility to act for the Company as to all matters pertaining to the Plan,
provided that any action which could significantly increase the cost of the
Plan is subject to the prior approval of the Board of Directors. The Board of
Directors may delegate and reallocate any authority and responsibility with
respect to the Plan. All decisions of the Compensation Committee or the Board
of Directors, taken in respect of the Plan and within the powers granted to
them under the Plan, and any interpretation by any of them of any term and
condition of the Plan shall be conclusive and binding on all Covered Employees,
and shall be given the maximum deference allowed by law.
7. Amendment or Termination. The Board of Directors reserves the right,
in his or her absolute and unlimited discretion, to amend, alter, revoke,
rescind or terminate this Plan by a written instrument at any time, without
advance notice
- 4 -
<PAGE> 5
to any Covered Employee. No exception to Section 3 or Section 4 of this Plan
is valid unless approved in writing by the Board of Directors.
8. Claims Procedure. Any Covered Employee who believes he or she is
entitled to any payment under this Plan may submit a claim in writing to the
appropriate person, i.e., the Compensation Committee or the President of their
respective Operating Group. If the claim is denied (either in full or in
part), the employee will receive a written notice explaining the specific
reasons for the denial and referring to the provisions of this Plan on which
the denial is based. The notice will describe any additional information
needed to support the claim. The denial notice will be provided within 90 days
after the claim is received. If special circumstances require an extension of
time (up to 90 days), written notice of the extension will be given within the
initial 90-day period.
9. Appeal Procedure. If a Covered Employee's claim is denied, the
Covered Employee (or his or her authorized representative) may apply in writing
to the Compensation Committee for a review of the decision denying the claim.
The Covered Employee (or representative) then has the right to review pertinent
documents and to submit issues and comments in writing. The Compensation
Committee will provide written notice of its decision on review within 60 days
after it receives a review request. If additional time (up to 60 days) is
needed to review the request, the Covered Employee will be given written notice
of the reason for the delay.
10. Source of Payments. All separation allowances will be paid in cash
from the general funds of the Company, no separate fund will be established
under this Plan, and this Plan has no assets. Any right of any person to any
payment under this Plan shall be no greater than the right of any other
unsecured creditor of the Company.
- 5 -
<PAGE> 6
11. Inalienability. In no event may any current or former Covered
Employee sell, transfer, anticipate, assign, hypothecate, or otherwise dispose
of any right or interest under this Plan; and at no time will any such right or
interest be subject to the claims of creditors nor liable to attachment,
execution or other legal process.
12. Applicable Law. The provisions of this Plan will be construed,
administered and enforced in accordance with ERISA and, to the extent
applicable, the laws of the State of California.
13. Severability. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability will not affect any other
provision of the Plan, and the Plan will be construed and enforced as if such
provision had not been included.
Additional Information
Employer/Sponsor: Haskel International, Inc.
100 E. Graham Place
Burbank, CA 91502
818-843-4000
Identification No's.: EIN: 95-4107640
Plan Type: Employee welfare
benefit plan --
separation pay plan.
- 6 -
<PAGE> 1
EXHIBIT 11.1
HASKEL INTERNATIONAL, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended May 31,
---------------------------------------------
1994 1995 1996
------------- ------------- -------------
Primary & Primary & Primary &
Fully Diluted Fully Diluted Fully Diluted
------------- ------------- -------------
<S> <C> <C> <C>
Net income used to compute
primary and fully diluted
income per share................. $ 3,000 $ 1,019,000 $ 2,547,000
============= ============= =============
Weighted average number of
shares outstanding............... 3,600,992 4,356,322 4,728,230
Dilutive effect of stock
options and warrants............. 74,041 80,428 10,036
Dilutive effect of stock
options granted and stock
issued in the 17 months
prior to November 1, 1994
using the treasury stock
method........................... 254,316 64,033 -
------------- ------------- -------------
Number of shares used to
compute primary and fully
diluted earnings per share....... 3,929,349 4,500,783 4,738,266
============= ============= =============
Net income per share...... $0.00 $0.23 $0.54
============= ============= =============
</TABLE>
<PAGE> 1
EXHIBIT 21
SCHEDULE OF SUBSIDIARIES
HASKEL INTERNATIONAL, INC.
Direct and indirect subsidiaries:
<TABLE>
<CAPTION>
State or Country
Name of Organization Parent
- ---- ---------------- ------
<S> <C> <C>
Haskel International, Inc. California N/A
M.G. Electronics, Inc. California Haskel International, Inc.
Haskel Energy Systems, Ltd. England Haskel International, Inc.
S.A.T. Air Limited England Haskel Energy Systems, Ltd.
Environclean Systems Limited England Haskel Energy Systems, Ltd.
General Pneumatic S.A. France Haskel Energy Systems, Ltd.
Haskel HochdruckSysteme GmbH Germany Haskel Energy Systems, Ltd.
Hydraulic Mobile Equipment Ltd. England Haskel Energy Systems, Ltd.
MGE (UK), Ltd. England M.G. Electronics, Inc.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS OF HASKEL INTERNATIONAL, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH ANNUAL 10-K.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 8,239,000
<SECURITIES> 0
<RECEIVABLES> 10,542,000
<ALLOWANCES> 961,000
<INVENTORY> 10,532,000
<CURRENT-ASSETS> 29,968,000
<PP&E> 12,446,000
<DEPRECIATION> 6,920,000
<TOTAL-ASSETS> 45,360,000
<CURRENT-LIABILITIES> 8,077,000
<BONDS> 0
0
0
<COMMON> 13,455,000
<OTHER-SE> 18,765,000
<TOTAL-LIABILITY-AND-EQUITY> 45,360,000
<SALES> 56,792,000
<TOTAL-REVENUES> 56,792,000
<CGS> 32,082,000
<TOTAL-COSTS> 32,082,000
<OTHER-EXPENSES> 20,261,000<F1>
<LOSS-PROVISION> 389,000
<INTEREST-EXPENSE> 274,000
<INCOME-PRETAX> 4,544,000
<INCOME-TAX> 1,997,000
<INCOME-CONTINUING> 2,547,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,547,000
<EPS-PRIMARY> .54
<EPS-DILUTED> 0<F2>
<FN>
<F1>OTHER EXPENSES ARE COMPRISED OF SELLING, GENERAL AND ADMINISTRATIVE,
ENGINEERING, DESIGN 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>
