<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Period Ended NOVEMBER 28, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Transition Period From to .
COMMISSION FILE NUMBER 0 -25068 .
HASKEL INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4107640
---------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 EAST GRAHAM PLACE
BURBANK, CALIFORNIA 91502
(Address of principal executive offices) (Zip Code)
(818) 843 - 4000
----------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, address and former fiscal year, if changed since last report)
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13, or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceeding Five Years
Indicated by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes ___. No ___.
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
AS OF JANUARY 9, 1998 THE REGISTRANT HAD 4,732,630 SHARES OF CLASS A
COMMON STOCK, AND 40,000 SHARES OF CLASS B COMMON STOCK OUTSTANDING.
<PAGE> 2
INDEX
HASKEL INTERNATIONAL, INC.
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - May 31, 1997 and November 28, 1997........ 3
Consolidated statements of operations - Three months ended
November 30, 1996 and November 28, 1997; Six months
ended November 30, 1996 and November 28, 1997 ...................... 5
Consolidated statements of cash flows - Six months ended
November 30, 1996 and November 28, 1997 ............................ 6
Notes to consolidated financial statements - November 28, 1997.......... 7
Item 2. Management's discussion and analysis of financial condition
and results of operations .......................................... 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................. 12
Item 6. Exhibits and Reports on Form 8-K ................................... 14
</TABLE>
2
<PAGE> 3
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MAY 31, NOVEMBER 28,
1997 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,490,000 $ 7,717,000
Accounts receivable, net 11,751,000 11,785,000
Inventories 10,335,000 11,350,000
Prepaid expenses and other current assets 942,000 542,000
Deferred income taxes 1,419,000 1,415,000
----------- -----------
TOTAL CURRENT ASSETS 32,937,000 32,809,000
PROPERTY, PLANT & EQUIPMENT, NET 5,376,000 5,820,000
GOODWILL, NET 698,000 996,000
DEFERRED INCOME TAXES 2,156,000 2,138,000
OTHER ASSETS 65,000 202,000
----------- -----------
TOTAL $41,232,000 $41,965,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
MAY 31, NOVEMBER 28,
1997 1997
----------- -----------
<S> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 978,000 $ 988,000
Accounts payable 4,070,000 4,059,000
Dividends payable 335,000 334,000
Accrued liabilities 3,249,000 2,196,000
Income taxes payable 210,000 659,000
----------- -----------
TOTAL CURRENT LIABILITIES 8,842,000 8,236,000
LONG-TERM DEBT 1,401,000 970,000
OTHER ACCRUED LIABILITIES 2,322,000 2,319,000
COMMITMENTS & CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock: 2,000,000 shares authorized;
none issued and outstanding
Common Stock:
Class A, without par value; 20,000,000 shares
authorized; 4,748,230 and 4,729,630 issued
and outstanding at May 31, 1997 and
November 28, 1997, respectively 13,855,000 13,734,000
Class B, without par value; 40,000 shares
authorized, issued and outstanding at
May 31, 1997 and November 28, 1997 19,000 19,000
Retained Earnings 14,733,000 16,475,000
Cumulative foreign currency translation adjustment 60,000 212,000
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 28,667,000 30,440,000
----------- -----------
TOTAL $41,232,000 $41,965,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 28, NOVEMBER 30, NOVEMBER 28,
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $ 13,010,000 $ 12,332,000 $ 25,225,000 $ 24,850,000
COST OF SALES 7,068,000 6,205,000 13,703,000 12,752,000
------------ ------------ ------------ ------------
GROSS PROFIT 5,942,000 6,127,000 11,522,000 12,098,000
EXPENSES:
Selling 2,134,000 2,184,000 3,939,000 4,136,000
General and administrative 1,190,000 1,728,000 3,086,000 3,664,000
Engineering design, research and development 273,000 349,000 485,000 627,000
------------ ------------ ------------ ------------
Total 3,597,000 4,261,000 7,510,000 8,427,000
------------ ------------ ------------ ------------
OPERATING INCOME 2,345,000 1,866,000 4,012,000 3,671,000
OTHER INCOME 39,000 44,000 98,000 131,000
------------ ------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,384,000 1,910,000 4,110,000 3,802,000
PROVISION FOR INCOME TAXES 863,000 680,000 1,567,000 1,457,000
------------ ------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS 1,521,000 1,230,000 2,543,000 2,345,000
DISCONTINUED OPERATIONS:
Loss from operations, less applicable
income taxes (229,000) (529,000)
Gain/(loss) on disposal of segment (5,406,000) 346,000 (5,406,000) 346,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (4,114,000) $ 1,576,000 $ (3,392,000) $ 2,691,000
============ ============ ============ ============
INCOME (LOSS) PER SHARE:
Continuing operations $ 0.32 $ 0.24 $ 0.53 $ 0.46
Discontinued operations:
Loss from operations ($0.05) ($0.11)
Gain/(loss) on disposal of segment ($1.12) $ 0.07 ($1.12) $ 0.07
------------ ------------ ------------ ------------
Total ($0.85) $ 0.31 ($0.70) $ 0.53
============ ============ ============ ============
DIVIDENDS PER SHARE $ 0.07 $ 0.07 $ 0.14 $ 0.14
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 28,
1996 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by continuing operations $ 1,951,000 $ 1,468,000
Net cash used in discontinued operations (263,000) (348,000)
----------- -----------
Net cash provided by operating activities 1,688,000 1,120,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (990,000) (1,049,000)
Proceeds from sale of property 68,000 29,000
Purchase of subsidiary (net of cash acquired) (791,000) (30,000)
----------- -----------
Net cash used in investing activities (1,713,000) (1,050,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (524,000) (438,000)
Proceeds from issuance of common stock 22,000 130,000
Dividends declared (662,000) (667,000)
----------- -----------
Net cash used in financing activities (1,164,000) (975,000)
----------- -----------
EFFECT OF EXCHANGE RATE ON
CASH AND CASH EQUIVALENTS 171,000 132,000
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,018,000) (773,000)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 8,239,000 8,490,000
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 7,221,000 $ 7,717,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION :
Cash paid for:
Interest -
Continuing operations $ 15,000 $ 76,000
=========== ===========
Discontinued operations $ 93,000 $ 8,000
=========== ===========
Income taxes $ 1,006,000 $ 1,039,000
=========== ===========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES -
In September 1997, the Company sold its electronic products business in
exchange for 35,000 shares of the Company's stock (valued at
$534,000) and a note receivable in the amount of $159,000.
See notes to consolidated financial statements.
6
<PAGE> 7
PART I. FINANCIAL INFORMATION
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (which
comprise only normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the period ended November
28, 1997 are not necessarily indicative of the results that may be expected for
the year ending May 29, 1998. For further information, refer to the consolidated
financial statements and notes thereto for the year ended May 31, 1997.
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
May 31, November 28,
1997 1997
----------- -----------
<S> <C> <C>
Raw Materials $ 3,029,000 $ 3,083,000
Work in Process 1,697,000 1,775,000
Finished Products 5,609,000 6,492,000
----------- -----------
$10,335,000 $11,350,000
=========== ===========
</TABLE>
NOTE C - CHANGE IN ACCOUNTING PERIODS
Effective June 1, 1997, the Company changed its accounting period for financial
statement purposes from a calendar year to a 52/53 week fiscal year. Beginning
with fiscal year 1998, the Company's fiscal year will end on the Friday closest
to May 31. Interim fiscal quarters end on the Friday closest to the calendar end
of August, November and February of each year. This change will not have a
significant impact on the consolidated financial results or financial position
of the Company.
NOTE D - ACQUISITIONS
In November 1997, the Company's foreign subsidiary, Haskel Energy Systems, Ltd.,
acquired all of the outstanding stock of Palpro Limited in exchange for $30,000
plus liabilities. In connection with the acquisition, the Company recorded
goodwill of approximately $280,000, which is being amortized over 15 years.
7
<PAGE> 8
PART I. FINANCIAL INFORMATION
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
NOTE E - EARNINGS PER SHARE
In December 1997, the Company is required to adopt Statement of Financial
Accounting Standards ("SFAS") No. 128, Earnings Per Share. SFAS No. 128 requires
the Company to disclose a basic and diluted earnings per share calculation.
Basic earnings per share (EPS) exclude common stock equivalents, while diluted
EPS calculations generally include the effect of these common stock equivalents.
The Company will adopt the provisions of SFAS No. 128 in the third quarter of
fiscal year 1998. EPS amounts calculated under SFAS No. 128 would be as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 28, November 30, November 28,
1996 1997 1996 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Earnings Per Share:
Continuing Operations:
Basic $ 0.32 $ 0.26 $ 0.54 $ 0.49
Fully Diluted $ 0.32 $ 0.24 $ 0.53 $ 0.46
Discontinued Operations:
Basic $ (1.19) $ 0.07 $ (1.25) $ 0.07
Fully Diluted $ (1.17) $ 0.07 $ (1.23) $ 0.07
Net Income:
Basic $ (0.87) $ 0.33 $ (0.71) $ 0.56
Fully Diluted $ (0.85) $ 0.31 $ (0.70) $ 0.53
</TABLE>
NOTE F - DISCONTINUED OPERATIONS
In fiscal year 1997, the Company decided to sell its electronic products
distribution business. Accordingly, the electronic products business has been
treated as a discontinued segment, and the prior financial results have been
restated to segregate the effect of these operations.
The operating loss from this discontinued segment reflected in the accompanying
consolidated statements of operations for the three and six months ended
November 30, 1996 are net of the related income tax benefit of $46,000 and
$220,000, respectively. Sales from these operations for the three and six months
ended November 30, 1996 were $831,000 and $1,904,000, respectively. The
operating results for the discontinued operations for the three and six months
ended November 28, 1997 approximated amounts estimated and reserved for in the
loss on disposal of the segment recorded in fiscal year 1997.
On September 12, 1997, the Company sold the electronic products business in
exchange for 35,000 shares of the Company's stock (valued at $534,000) and a
note receivable in the amount of $159,000. The Company recognized a gain on the
sale of $346,000.
8
<PAGE> 9
HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Report may contain forward-looking statements that involve risks and
uncertainties. The Company's actual results and timing of certain events could
differ materially from those discussed in any forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, the integration of acquired operations, management of growth and
other factors.
DISCONTINUED OPERATIONS
In fiscal year 1997, the Company decided to sell its electronic products
distribution business. Accordingly, the electronic products business has been
treated as a discontinued segment, and the prior financial results have been
restated to segregate the effect of these operations. The loss from discontinued
operations for the three and six months ended November 30, 1996 was $229,000 and
$529,000, respectively. The loss from discontinued operations for the six months
ended November 30, 1996 includes $240,000 in restructuring costs incurred in the
first quarter of fiscal year 1997. The operating results for the discontinued
operations for the three and six months ended November 28, 1997 were previously
provided for in the Company's reserve for loss on disposal of the segment in
fiscal year 1997. On September 12, 1997, the Company sold the electronic
products business and recognized a gain on the sale of $346,000 which is
reflected in the statement of operations for the three and six months ended
November 28, 1997.
RESULTS OF CONTINUING OPERATIONS
Sales for the second quarter ended November 28, 1997 were $12,332,000, $678,000,
or 5.2%, lower than sales for the same period in the prior year. For the first
six months of fiscal year 1998, sales were $24,850,000, or $375,000 (1.5%) lower
than the same period in fiscal year 1997. Sales for the three and six months
ended November 30, 1996 included approximately $1,200,000 in large system
deliveries to the automotive industry which were not repeated in fiscal year
1998. Additionally, in the beginning of fiscal year 1998 the Company
discontinued distribution of third-party products in the Western United States
resulting in a decrease in sales of approximately $928,000 and $1,378,000 for
the three and six months ended November 28, 1997, respectively, as compared to
the same periods in the prior year. In contrast to these decreases, sales of the
Company's core manufactured products increased $1,450,000 and $2,203,000 for the
three and six months ended November 28, 1997, respectively, as compared to the
same periods in the prior year.
Gross profit for the second quarter ended November 28, 1997 increased $185,000
to $6,127,000, or 49.7 % of sales, as compared with gross profit of $5,942,000,
or 45.7% of sales, for the same period in fiscal year 1997. Gross profit for the
first six months of fiscal year 1998 was $12,098,000 (48.7% of sales) as
compared to $11,522,000 (45.7% of sales) for the comparable period in fiscal
year 1997. The gross profit as a percentage of sales for the three and six
months
9
<PAGE> 10
HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
ended November 28, 1997 increased compared to the prior year principally as a
result of the elimination of lower-margin third-party product sales which earned
average gross profit margins of 20-24%. These sales were replaced with sales of
the Company's manufactured products which earn higher gross profits.
Additionally, as the Company increased its production of manufactured products,
the fixed overhead costs were spread over a larger pool of products resulting in
lower overhead costs as a percentage of sales and higher gross margin rates.
General and administrative expenses for the first three and six months of fiscal
year 1997 include reimbursements of $676,000 from the Company's insurance
carriers representing the recovery of legal expenses relating to environmental
matters. Excluding these reimbursements, selling, general and administrative,
and engineering ("operating") expenses were $4,261,000 or 34.6% of sales for the
second quarter of fiscal year 1998 as compared to $4,273,000 or 32.8% of sales
for the comparable period in fiscal year 1997. For the first six months of
fiscal year 1998, these expenses were $8,427,000 or 33.9% of sales as compared
to operating expenses, net of insurance reimbursements, of $8,186,000 or 32.5%
of sales for the prior year. Operating expenses for the first three and six
months of fiscal year 1998 included approximately $262,000 and $540,000,
respectively, attributable to activities of new businesses acquired and started.
Net of these expenses, operating expenses decreased as a result of lower legal
costs being incurred in the current year as compared to the prior year.
Included in income from continuing operations for the three and six months ended
November 30, 1996, was approximately $400,000 (net of taxes) relating to the
insurance reimbursements discussed above. Excluding these reimbursements, income
from continuing operations for the second quarter ended November 28, 1997
increased $109,000 or 9.7% to $1,230,000 (10% of sales) as compared with
$1,121,000 (8.6% of sales) for the comparable prior period. For the six months
ended November 28, 1997, income from continuing operations (excluding the
insurance reimbursements in the prior year) increased $202,000 or 9.4% to
$2,345,000 (9.4% of sales) as compared to $2,143,000 (8.5% of sales) for the
same period in fiscal year 1997. The increased income from continuing operations
is a result of the improvement in gross margins as well as lower operating
expenses.
10
<PAGE> 11
HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND SOURCES OF CAPITAL
For the six months ended November 28, 1997, net cash provided by operating
activities included $1,468,000 from continuing operations as compared to
$1,951,000 for the same period in the prior year. The decrease in cash provided
by operating activities was principally due to the payment of accrued
liabilities in the first quarter of fiscal year 1998. Net cash of $348,000 was
used in discontinued operations in the first six months of fiscal year 1997 as
compared to $263,000 in the prior year.
During the six months ended November 28, 1997, cash used for investing
activities consisted mainly of capital expenditures. During the six months ended
November 30, 1996, cash used in investing activities consisted primarily of
capital expenditures and cash used to purchase a new subsidiary. Cash used in
financing activities for the six months ended November 28, 1997 and November 30,
1996 consisted principally of payments on long-term debt and dividends paid to
shareholders.
To insure the availability of funds to meet its various needs, the Company has a
comprehensive credit facility with its bank. The credit facility includes a
$5,000,000 revolving line of credit; a $4,000,000 acquisition line of credit
available for use in making acquisitions or capital expenditures; and a
$3,000,000 term loan. At November 28, 1997, the Company had no outstanding
balances under the revolving credit or acquisition lines. As of November 28,
1997, the balance of the term debt was $1,565,000, which bears interest at the
LIBOR rate plus 1-3/4% (7.6563% at November 28, 1997.)
As of November 28, 1997, the Company had $7,717,000 in cash and cash
equivalents, and working capital of $24,573,000, with a ratio of current assets
to current liabilities of approximately 4.0 : 1. This compares with cash and
cash equivalents of $8,490,000, and working capital of $24,095,000, with a ratio
of current assets to current liabilities of 3.7 : 1 as of May 31, 1997. The
Company believes it has adequate resources to achieve its operating goals for at
least the next 12 month period.
11
<PAGE> 12
HASKEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On October 17, 1997, the Company held its Annual Meeting of
Shareholders (the "1997 Annual Meeting") for shareholders of record as of
September 12, 1997.
(b) At the 1997 Annual Meeting, holders of the Company's Class A
Common Stock, without par value ("Class A Common Stock"), elected three
Directors and holders of the Company's Class B Common Stock, without par value
("Class B Common Stock"), elected four Directors.
The following individuals were elected by holders of the Company's
Class A Common Stock to serve as Directors of the Company:
R. Malcolm Greaves
Edward Malkowicz
Stanley T. Myers
The following individuals were elected by holders of the Company's
Class B Common Stock to serve as Directors of the Company:
Terrence A. Noonan
John Vinke
H. Carr Wells
W. Bradley Zehner II
(c) Additionally, at the 1997 Annual Meeting, the shareholders
approved the Merger of the Company's 1995 Incentive Stock Option Plan and 1989
Incentive Stock Option Plan and the appointment of Deloitte & Touche, LLP, as
the Company's independent auditors.
12
<PAGE> 13
HASKEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONTINUED)
1. ELECTION OF DIRECTORS:
<TABLE>
<CAPTION>
Number of Number of
Number of Shares Shares
Shares For Against Withheld
---------- ------- --------
<S> <C> <C> <C>
Elected by Class A Stock
R. Malcolm Greaves 4,272,229 - 25
Edward Malkowicz 4,269,057 - 3,197
Stanley T. Myers 4,269,057 - 3,197
Non-Votes
and Abstentions -
</TABLE>
<TABLE>
<CAPTION>
Number of Number of
Number of Shares Shares
Shares For Against Withheld
---------- ------- --------
<S> <C> <C> <C>
Elected by Class B Stock
Terrence A. Noonan 40,000 - -
John Vinke 40,000 - -
H. Carr Wells 40,000 - -
W. Bradley Zehner II 40,000 - -
Non-Votes
and Abstentions -
</TABLE>
13
<PAGE> 14
HASKEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONTINUED)
2. APPROVAL OF MERGER OF THE COMPANY'S 1995 INCENTIVE STOCK OPTION PLAN
AND 1989 INCENTIVE STOCK OPTION PLAN:
<TABLE>
<CAPTION>
Percent of
Shares Shares Voting
------ -------------
<S> <C> <C>
Votes For 3,258,493 75.5
Votes Against 255,230 5.9
Non-Votes and Abstentions 801,131 18.6
</TABLE>
3. APPROVAL OF DELOITTE & TOUCHE, LLP AS THE COMPANY'S INDEPENDENT
AUDITORS:
<TABLE>
<CAPTION>
Percent of
Shares Shares Voting
------ -------------
<S> <C> <C>
Votes For 4,301,493 99.7
Votes Against 4,115 .1
Non-Votes and Abstentions 9,246 .2
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits (numbered in accordance with Item 601 of Regulation S-K):
10.27 Change in Control Agreement dated September 27, 1997 between
R. Malcolm Greaves and the Company.
10.28 Change in Control Agreement dated September 27, 1997 between
Lonnie D. Schnell and the Company.
10.29 Change in Control Agreement dated October 6, 1997 between
Henry Mason and the Company.
11.1 Statement Re: Computation of Earnings Per Share
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the fiscal quarter covered by
this report on Form 10-Q.
14
<PAGE> 15
HASKEL INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HASKEL INTERNATIONAL, INC.
(REGISTRANT)
DATE 1-14-97 /s/ R. MALCOLM GREAVES
----------------------------------------
R. Malcolm Greaves
President & Chief Executive Officer
DATE 1-14-97 /s/ LONNIE D. SCHNELL
----------------------------------------
Lonnie D. Schnell
Chief Financial Officer
15
<PAGE> 1
EXHIBIT 10.27
CHANGE IN CONTROL AGREEMENT
This Change In Control Agreement ("Agreement") is dated as of
September 27, 1997, and is entered into by and between R. MALCOLM
GREAVES, ("Executive") and Haskel International, Inc., a California corporation
("Haskel").
RECITALS
Haskel considers it to be in the best interest of Haskel and its
shareholders that Executive be encouraged to continue his employment with Haskel
and continue to devote full attention to Haskel's business notwithstanding the
possibility, threat or occurrence of an acquisition, merger, or change of
control involving Haskel. Haskel also believes that it is in the best interest
of Haskel and its shareholders to minimize potential conflicts of interest and
to diminish inevitable distractions arising from the possibility of an
acquisition, merger or change of control.
Accordingly, in order to secure these benefits for Haskel, and to
induce Executive to remain in the employ of Haskel,
<PAGE> 2
and for other good and valuable consideration, the Board of Directors of Haskel,
upon the recommendation of its Compensation Committee, has caused Haskel to
enter into this Agreement.
-2-
<PAGE> 3
TERMS AND CONDITIONS
Executive and Haskel hereby agree to the following terms and
conditions:
1. Term of Agreement/Expiration Date. This Agreement shall be
effective as of the date first indicated above and shall remain in effect until
the Expiration Date described below. The "Expiration Date" is the third
anniversary of the date either party gives written notice of the termination of
this Agreement.
2. Event Date. The "Event Date" shall mean the first date during
the term of this Agreement on which an Event (as defined in Section 3) occurs;
[provided, however, that if an Event occurs and if Executive's employment with
Haskel is terminated within the six-month period prior to the date on which the
Event occurs, the "Event Date" shall mean the date immediately prior to the date
of such termination.]
3. Event. "Event" shall mean any of the following:
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(a) The dissolution or liquidation of Haskel following a Change
in Control;
(b) The merger, consolidation, or other reorganization of Haskel
with or into one or more entities which are not "Subsidiaries" (as
defined below), as a result of which 50% or less of the outstanding
voting securities of the surviving or resulting entity are, or are to
be, owned by former shareholders of Haskel;
(c) The sale or transfer of substantially all of Haskel's
business and/or assets to a person or entity which is not a Subsidiary;
or
(d) A Change in Control. A "Change in Control" shall be deemed to
have occurred if:
(i) any "person", alone or together with all "affiliates"
and "associates" of such person is or becomes the "beneficial
owner" of 35% or more of the outstanding Class A Common Shares or
100% of the outstanding Class B Common Shares of Haskel (the
terms
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"person", "affiliates", "associates" and "beneficial owner" are
used as such terms are used in the Securities Exchange Act of
1934 and the General Rules and Regulations thereunder); provided,
however, that a "Change in Control" shall not be deemed to have
occurred if such "person" is (x) any Subsidiary or any employee
benefit plan or employee stock plan of Haskel or of any
Subsidiary, or any trust or other entity organized, established
or holding shares of such voting securities by, for or pursuant
to, the terms of any such plan, or (y) Executive or Executive and
one or more other persons acting as a partnership, limited
partnership, syndicate, or other group for the purpose of
acquiring, holding or disposing of securities of Haskel; or
(ii) individuals who at the beginning of any period of two
consecutive calendar years constitute the Board of Directors
cease for any reason, during such period, to constitute at least
a majority thereof, unless the election, or the nomination for
election by Haskel's shareholders, of each new Board member was
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approved by a vote of at least three-quarters of the Board
members then still in office who were Board members at the
beginning of such period.
"Subsidiary" shall mean any corporation or other entity of which
more than 50% of the outstanding voting stock or voting power is
beneficially owned directly or indirectly by Haskel. If the approval of
the shareholders of Haskel for any of the occurrences set forth in
subsections (a) through (d) is obtained prior to such occurrence, then
such shareholder approval shall constitute the Event.
4. Effective Period. For the purpose of this Agreement, the
"Effective Period" is the period commencing on the Event Date, and ending on the
earlier of the Expiration Date or the third anniversary of the Event Date.
5. Termination of Employment.
(a) General. Executive shall be entitled to the payments and
benefits described in Section 6(a) of this Agreement in the event
Executive's employment is terminated
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(i) by Haskel during the Effective Period for any reason, other than as
a result of Executive's death or for Disability or Cause in accordance
with the terms of this Section 5, or (ii) by Executive for Good Reason
pursuant to a Notice of Termination delivered during the Effective
Period.
(i) Death. Executive's employment shall terminate
automatically upon Executive's death.
(ii) Disability. If the Disability of Executive occurs
during the Effective Period (pursuant to the definition of
Disability set forth below), Haskel may give Executive written
notice in accordance with Section 15 of this Agreement of its
intention to terminate Executive's employment. In such event,
Executive's employment with Haskel shall terminate effective on
the 30th day after receipt of such notice by Executive (the
"Disability Effective Date"), provided that, within the 30 days
after such receipt, Executive shall not have returned to
full-time performance of Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of
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Executive from Executive's duties with Haskel on a full-time
basis for 180 consecutive business days or such shorter period as
a result of incapacity due to mental or physical illness which is
both (i) determined to be total and permanent by a physician
selected by Haskel or its insurers and acceptable to Executive or
Executive's legal representative, and (ii) entitles Executive to
the payment of long-term disability benefits from Haskel's
long-term disability plan commencing immediately upon the
Disability Effective Date.
(iii) Cause. Haskel may terminate Executive's employment
during the Effective Period for Cause. For purposes of this
Agreement, "Cause" shall be limited to:
[a] The conviction of Executive for commission of a
felony, or
[b] The willful engaging by Executive in gross
misconduct which materially and demonstrably
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injures Haskel. For purposes of this paragraph, no act or
failure to act on the part of Executive shall be considered
"willful" unless done, or omitted to be done, by Executive
not in good faith and without reasonable belief that
Executive's action or omission was in the best interest of
Haskel.
[c] The issuance of an order, judgment or decree of
any court of competent jurisdiction permanently enjoining
Executive from violating any provision of the Securities
Act of 1933, the Securities Exchange Act of 1934 and
applicable securities law statute of a state.
[d] A final judgment of a court holding Executive
liable in a civil action based upon conduct showing that
Execution breached a fiduciary duty to Haskel or its
Shareholders.
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(iv) Good Reason. Executive's employment may be terminated
by Executive for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean:
[a] The assignment to Executive of any duties
inconsistent in any material respect with Executive's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as in
effect on the Event Date, or any other action by Haskel
which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken
in bad faith and which is remedied by Haskel promptly
after receipt of notice thereof given by Executive;
[b] Any failure by Haskel to reappoint Executive to
a position held by Executive on the Event Date, except as
a result of the termination of Executive's employment by
Haskel for Cause or Disability, the death of Executive, or
the
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termination of Executive's employment by Executive other
than for Good Reason;
[c] Reduction by Haskel in Executive's base salary
as in effect on the date hereof or as the same may be
increased from time-to-time;
[d] The taking of any action by Haskel (including
the elimination of medical and life insurance plans
without providing substitutes therefore or the reduction
of Executive's benefits thereunder) that would
substantially diminish the aggregate value of Executive's
incentive awards and other fringe benefits including
executive benefits and perquisites from the levels in
effect prior to the Event Date;
[e] Haskel's requiring Executive to be based at any
office or location which increases the distance from
Executive's home to the office or location by more than
35 miles above the number of
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miles Executive drives to the office as of the Event Date;
[f] Any purported termination by Haskel of
Executive's employment otherwise than pursuant to a Notice
of Termination; or
[g] Any failure by Haskel to comply with and
satisfy Section 10(c) of this Agreement.
For purposes of this Section, any good faith determination of "Good
Reason" made by Executive shall be conclusive.
(b) Notice of Termination. Any termination of Executive's
employment by Haskel during the Effective Period for any reason, or by
Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section
15 of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the
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facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall be not
more than thirty days after the giving of such notice). The facts and
circumstances set forth in any Notice of Termination given by Haskel
pursuant to a purported termination of Executive for Cause shall
constitute the exclusive set of facts and circumstances upon which
Haskel may rely to attempt to demonstrate that Cause for such
termination existed. The failure by Executive to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing
of Good Reason shall not waive any right of Executive hereunder or
preclude Executive from asserting such fact or circumstance in enforcing
Executive's rights hereunder.
(c) Date of Termination. "Date of Termination" means (i) if
Executive's employment is terminated by Haskel for Cause, or by
Executive for Good Reason, the date of receipt of the Notice of
Termination or a later date (within the limit set forth in subsection
(b)) specified therein, as the
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case may be, (ii) if Executive's employment is terminated by Haskel
other than for Cause or Disability, the Date of Termination shall be the
date on which Haskel notifies Executive of such termination and (iii) if
Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of Executive or the
Disability Effective Date, as the case may be.
6. Obligations of Haskel upon Termination.
(a) Good Reason, Other Than for Cause, Death or Disability. If
Haskel shall terminate Executive's employment other than for Cause or
Disability during the Effective Period, or Executive shall terminate
employment for Good Reason pursuant to a Notice of Termination delivered
during the Effective Period, Haskel agrees to make the payments and
provide the benefits described below. Haskel shall not be obligated to
make such payments and provide such benefits if the Executive's
employment with Haskel terminates as a result of Executive's death.
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(i) Haskel shall pay to Executive in a lump sum in cash
within 10 days after the Date of Termination an amount equal to
the product of (1) and (2), where (1) is three and (2) is the sum
of (x) Executive's highest rate of annual base salary in effect
at any time in the two years preceding the Date of Termination
and (y) the highest annual amount of incentive compensation
(including both short and long term compensation) paid in respect
of the most recent three fiscal years ending before the Date of
Termination under; provided, however, that if the incentive
compensation otherwise payable under Haskel's Incentive
Compensation Plan in respect of the fiscal year preceding the
fiscal year in which the Date of Termination occurs has not been
paid in full on or before the Date of Termination, "three" in
this clause (y) shall be replaced by "four." (The amount in this
clause (y) is referred to hereinafter as the "Incentive
Compensation Payment.")
(ii) (A) Haskel shall pay Executive his or her full base
salary through the Date of Termination at the rate in effect at
the time the Notice of Termination is
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given [plus a pro-rata share of the Incentive Compensation
Payment.] Such pro-rata share shall equal the fraction of
Haskel's fiscal year which preceded the Date of Termination. (B)
In addition, if the incentive compensation otherwise payable
under Haskel's incentive compensation plan of Haskel in respect
of the fiscal year preceding the fiscal year in which the Date of
Termination occurs has not been paid in full on or before the
Date of Termination, Haskel shall pay Executive an amount equal
to the difference between the Incentive Compensation Payment and
the portion (if any) which was actually paid to the Executive of
such incentive compensation in respect of the fiscal year
preceding the fiscal year in which the Date of Termination
occurs.
(iii) For two years after Executive's Date of Termination,
Haskel shall continue to provide medical and life insurance
benefits and fringe benefits and other perquisites to Executive
and Executive's family at least equal to those which would have
been provided to them if Executive's employment had not been
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terminated in accordance with the most favorable plans,
practices, programs or policies of Haskel and its affiliated
companies applicable generally to other peer executives and their
families immediately preceding the Date of Termination; provided,
however, that if Executive becomes reemployed with another
employer, the medical, life insurance and other benefits
described herein shall cease and terminate thirty (30) days after
the effective date of Executive's reemployment. In connection
with the foregoing, Executive agrees to notify Haskel in writing
of his reemployment within Ten days (10) of such reemployment.
For purposes of determining eligibility (but not the time of
commencement of benefits) of Executive for retiree benefits
pursuant to such plans, practices, programs and policies,
Executive shall be considered to have remained employed until
three years after the Date of Termination and to have retired on
the last day of such period. Following the period of continued
benefits referred to in this subsection, Executive and
Executive's family shall be given the right provided in Section
49808 of the Internal Revenue Code to elect to
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continue benefits in all group medical plans. In the event that
Executive's participation in any of the plans, programs,
practices or policies of Haskel referred to in this subsection is
barred by the terms of such plans, programs, practices or
policies, Haskel shall provide Executive with benefits
substantially similar to those which Executive would be entitled
as a participant in such plans, programs, practices or policies.
At the end of the period of coverage, Executive shall have the
option to have assigned to Executive, at no cost and with no
apportionment of prepaid premiums, any assignable insurance
policy owned by Haskel and relating specifically to Executive.
(iv) Haskel shall enable Executive to purchase the
automobile, if any, that Haskel was providing for Executive at
the time Notice of Termination was given at the wholesale value
of such automobile at such time, as shown in the current addition
of the National Auto Research Publication Blue Book. Any
outstanding relocation loans to Executive from Haskel shall not
be accelerated. The obligations set forth in this
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Section 6(a) (iv) are hereinafter referred to as the "Special
Obligations."
(v) Any compensation previously deferred by the Executive
(together with any accrued earnings or interest thereon) and any
accrued vacation pay, in each case to the extent not theretofore
paid (the amount referred to in this clause (v) and clause (ii)
above being referred to as "Accrued Obligations").
(vi) To the extent not theretofore paid or provided,
Haskel shall timely pay or provide Executive any other amounts or
benefits required to be paid or provided or which Executive is
eligible to receive under any plan, program, policy, practice,
contract or agreement of Haskel and its affiliated companies,
including but not limited to any benefits payable to Executive
under a plan, policy, practice, etc., referred to in Section 7
below, (such other amounts and benefits being hereinafter
referred to as "Other Benefits") in accordance with the terms of
such plan, program, policy, practice, contract or agreement.
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(vii) Upon a Change of Control, any and all options,
warrants and grants to purchase Class A Common Stock of Haskel
shall become immediately vested and exercisable by Executive.
(b) Death. If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for timely performance
of the Special Obligations, payment of Accrued Obligations and payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 10 days of the Date of Termination.
(c) Disability. If the Executives employment is terminated by
reason of the Executive's Disability during the Effective Period,
this Agreement shall terminate without further obligations to the
Executive, other than for timely performance of the Special
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Obligations, payment of Accrued Obligations and payment or
provision of Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
(d) Cause. If Executive's employment shall be terminated for
Cause during the Effective Period, this Agreement shall terminate
without further obligations to Executive (other than the obligation to
pay to Executive his base salary earned through the Date of Termination
and payment or provision of the Other Benefits).
(e) The provisions of this Paragraph 8 supersede and replace any
other agreement between Haskel and Executive relating to the payment of
any benefits as a results of the Termination of Executive by Haskel or
Executive's voluntary termination for any reason.
(f) Other than for Good Reason.
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(i) If Executive shall voluntarily terminate employment,
excluding a termination for Good Reason, within the six month
period following the Event Date, this Agreement shall terminate
without further obligations to Executive, except that Haskel
shall (i) pay to Executive his base salary earned through the
Date of Termination and pay or provide the Other Benefits.
(ii) If Executive shall voluntarily terminate employment,
excluding a termination for Good Reason, within the Effective
Period, but after the six month period following the Event Date,
this Agreement shall terminate without further obligations to
Executive, except that Haskel shall (i) pay to Executive his base
salary earned through the Date of Termination and pay or provide
the Other Benefits, and (ii) timely perform the Special
Obligations.
7. Non-Exclusivity of Rights. Nothing in this Agreement shall
prevent or limit Executive's continuing or future participation in any plan,
program, policy or practice provided by Haskel or any of its affiliated
companies and for which Executive
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may qualify, nor, subject to Section 19, shall anything herein limit or
otherwise affect such rights as Executive may have under any contract or
agreement with Haskel or any of its affiliated companies. Amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of or any contract or agreement with Haskel or
any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.
8. Full Settlement. Haskel's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which Haskel may have against Executive
or others. In no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to Executive
under any one or more provisions of this Agreement and, except as provided in
Section 6(a) (iii), such amounts shall not be reduced whether or not Executive
obtains other employment. Haskel agrees to pay, to the full extent permitted by
law, all legal fees and expenses which Executive may reasonably incur as a
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result of any contest (regardless of the outcome thereof) by Haskel, Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by Executive about the amount of any payment pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal Rate, provided for in Section 7872(f) (2) (A) of the Internal
Revenue Code of 1986, as amended (the "Code"). Executive shall be entitled to
payment of such legal fees and expenses on a monthly basis during the pendency
of any contest. Accordingly, Haskel shall, on the tenth business day of each
month following the Executive's Date of Termination, pay Executive any legal
fees and expenses incurred by Executive as a result of a contest hereunder for
which the Executive presented invoices to Haskel on or before the last business
day of the preceding month. Notwithstanding the foregoing, Haskel shall be
entitled to reimbursement by the Executive (1) for any legal fees or expenses of
Executive in any contest by Executive about the amount of any payment under this
Agreement if it is determined that Haskel did not breach this Agreement and
Executive's claim was not made in good faith, and (2) to the extent it is
determined
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that the amount of such legal fees and expenses was not reasonable.
9. Certain Additional Payments by Haskel.
(a) In the event that any payment or distribution by Haskel to or
for the benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 9(a)) ("Payments") is determined to be subject to (1) the excise
tax imposed by Section 4999 of the Code or its successor, (2) any
corresponding state excise tax, or (3) any interest or penalties are
incurred by Executive with respect to such state or federal excise tax
(such state or federal excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Haskel shall pay to Executive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of
all taxes (including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any
interest and penalties
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imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a
Gross-Up Payment is required and amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be
made by a certified public accounting firm as may be designated by
Executive and which is reasonably satisfactory to Haskel (the
"Accounting Firm"), which shall provide detailed supporting calculations
both to Haskel and Executive within 15 business days of the receipt of
request from Executive or Haskel. All fees and expenses of the
Accounting Firm shall be borne solely by Haskel. Any Gross-Up Payment,
as determined pursuant to this Section 9(b), shall be paid by Haskel to
Executive within five days of the receipt of the Accounting Firm's
determination. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made
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by Haskel should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that Haskel
exhausts its remedies pursuant to Section 9 (c) and Executive thereafter
is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by Haskel to or for the benefit
of Executive.
(c) Executive shall notify Haskel in writing of any written claim
actually received by Executive from the Internal Revenue Service
requesting the payment by Executive of an Excise Tax in respect of
Payments. Such notification shall be given as soon as practicable (which
shall be deemed to have occurred if it is given within 20 business days)
after Executive actually receives such claim and shall apprise Haskel of
the nature of such claim, and the date on which such claim is requested
to be paid. Executive shall not pay such claim prior to the expiration
of the 30-day period following the date on which it gives such notice to
Haskel (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If
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Haskel notifies Executive in writing prior to the expiration of such
period that it desires to contest such claim, Executive shall:
(i) Give Haskel any information reasonably
requested by Haskel relating to such claim,
(ii) Take such action in connection with contesting such
claim as Haskel shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by Haskel,
(iii) Cooperate with Haskel in good faith in order to
contest such claim effectively, and
(iv) Permit Haskel to participate in any proceedings
relating to such claim;
provided, however, that Haskel shall bear and pay directly all costs and
expenses (including additional interest and
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penalties) incurred in connection with such contest and shall indemnify
and hold Executive harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section
9 (c), Haskel shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as Haskel shall determine; provided, however, that if
Haskel directs Executive to pay such claim and sue for a refund, Haskel
shall advance the amount of such payment to Executive, on an
interest-free basis and shall indemnify and hold Executive harmless, on
an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such
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advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of
Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, Haskel's
control of the contest shall be limited to issues with respect to which
a Gross Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by
Haskel pursuant to Section 9 (c), Executive becomes entitled to receive
any refund with respect to such claim, Executive shall (subject to
Haskel's complying with the requirements of Section 9 (c)) promptly pay
to Haskel the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt
by Executive of an amount advanced by Haskel pursuant to Section 9 (c),
a determination is made that Executive shall not be entitled to any
refund with respect to
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such claim and Haskel does not notify Executive in writing of its intent
to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid.
10. Successors.
(a) This Agreement is personal to Executive and without the prior
written consent of Haskel shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon Haskel and its successors and assigns.
(c) Haskel will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
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to all or substantially all of the business and/or assets of Haskel to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that Haskel would be required to perform it if no
such succession had taken place. As used in this Agreement, "Haskel"
shall mean Haskel as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Arbitration.
(a) Because it is agreed that time will be of the essence in
determining whether any payments are due to Executive under this
Agreement, Executive may, if he desires, submit any claim for payment
under this Agreement or dispute regarding the interpretation of this
Agreement to arbitration. This right to select arbitration shall be
solely that of Executive, and Executive may decide whether or not to
arbitrate in his discretion. The "right to select arbitration" is not
mandatory on Executive, and Executive may choose in lieu thereof to
bring an action in an appropriate civil court. Once an arbitration is
commenced, however, it
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may not be discontinued without the mutual consent of both parties to
the arbitration. During the lifetime of Executive only he can use the
arbitration procedure set forth in this Section.
(b) Any claim for arbitration may be submitted as follows: If
Executive disagrees with Haskel regarding the interpretation of this
Agreement and the claim is finally denied by Haskel in whole or in part,
such claim may be filed in writing with an arbitrator of Executive's
choice who is by the method described in the next three sentences. The
first step of the selection shall consist of Executive's submitting a
list of five potential arbitrators to Haskel. Each of the five
arbitrators must be either (1) a member of the National Academy of
Arbitrators located in the State of California or (2) a retired
California Superior Court or Appellate Court judge. Within two weeks
after receipt of the list, Haskel shall select one of the five
arbitrators as the arbitrator for the dispute in question. If Haskel
fails to select an arbitrator in a timely manner, Executive shall then
designate one of the five arbitrators as the arbitrator for the dispute
in question.
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(c) The arbitration hearing shall be held in the county which
includes the address last given prior to the commencement of arbitration
by the Executive for notices under Section 15; provided that if such is
outside the United States, the arbitration hearing shall be held in
Orange County, California. The arbitration hearing shall be held within
thirty days (or as soon thereafter as possible) after the picking of the
arbitrator. No continuance of said hearing shall be allowed without the
mutual consent of Executive and Haskel. Absence from or nonparticipation
at the hearing by either party shall not prevent the issuance of an
award. Hearing procedures which will expedite the hearing may be ordered
at the arbitrator's discretion, and the arbitrator may close the hearing
in his or her sole discretion when he or she decides he or she has heard
sufficient evidence to satisfy issuance of an award.
(d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than thirty days after the close of the
hearing. In the event the arbitrator finds that Haskel has breached this
Agreement, he
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or she shall order Haskel to immediately take the necessary steps to
remedy the breach. The award of the arbitrator shall be final and
binding upon the parties. The award may be enforced in any appropriate
court as soon as possible after its rendition. If an action is brought
to confirm the award, both Haskel and Executive agree that no appeal
shall be taken by either party from any decision rendered in such
action.
(e) Haskel will be considered the prevailing party in a dispute
if the arbitrator determines (1) that Haskel has not breached this
Agreement and (2) the claim by, Executive was not made in good faith.
Otherwise, Executive will be considered the prevailing party. In the
event that is the prevailing party, the fee of the arbitrator and all
necessary expenses of the hearing (including all attorneys' fees
incurred by Executive in pursuing his claim and, if the Executive's home
on the Date of Termination was more than 70 miles from the location of
the arbitration, his reasonable travel and living expenses during the
arbitration) including the fees of a stenographic reporter if employed,
shall be paid by Haskel.
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12. Governing Law. The laws of California shall govern the
validity and interpretation of this Agreement, with regard to conflicts of laws.
13. Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
14. Amendment. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
15. Notices. All notices and other communications shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receIpt requested, postage prepaid, addressed as
follows:
If to Executive:
-------------------------
-------------------------
-------------------------
If to Haskel:
-------------------------
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-------------------------
-------------------------
-------------------------
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee. Neither the failure of Executive to
give any notice required by this Agreement (including but not limited to the
notice specified in Section 9(c) hereof ), nor defects or errors in any notice
given by Executive, shall relieve Haskel of any corresponding obligation under
this Agreement unless, and only to the extent that, Haskel is actually and
materially prejudiced thereby.
16. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
17. Withholding Taxes. Haskel may withhold from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
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18. No Waiver. Executive's or Haskel's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right Executive or Haskel may have
hereunder, including, without limitation the right of Executive to terminate
employment for Good Reason shall not be deemed to be a waiver of such provision
or right or any other provision or right of this Agreement.
19. At-Will Employment. Executive and Haskel acknowledge that,
except as may otherwise be provided under any other written agreement between
Executive and Haskel, the employment of Executive by Haskel prior to the Event
Date is "at will" and, prior to the Event Date, Executive's employment may be
terminated by either Executive or Haskel at any time, in which case Executive
shall have no further rights under this Agreement. This Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof.
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20. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which shall together constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first written above.
HASKEL INTERNATIONAL, INC.
By: /s/ EDWARD MALKOWICZ
--------------------------------------
EDWARD MALKOWICZ, Chairman
EXECUTIVE
/s/ R. MALCOLM GREAVES
-----------------------------------------
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<PAGE> 1
EXHIBIT 10.28
CHANGE IN CONTROL AGREEMENT
This Change In Control Agreement ("Agreement") is dated as of
September 27, 1997, and is entered into by and between LONNIE D. SCHNELL,
("Executive") and Haskel International, Inc., a California corporation
("Haskel").
RECITALS
Haskel considers it to be in the best interest of Haskel and its
shareholders that Executive be encouraged to continue his employment with Haskel
and continue to devote full attention to Haskel's business notwithstanding the
possibility, threat or occurrence of an acquisition, merger, or change of
control involving Haskel. Haskel also believes that it is in the best interest
of Haskel and its shareholders to minimize potential conflicts of interest and
to diminish inevitable distractions arising from the possibility of an
acquisition, merger or change of control.
Accordingly, in order to secure these benefits for
Haskel, and to induce Executive to remain in the employ of Haskel,
<PAGE> 2
and for other good and valuable consideration, the Board of Directors of Haskel,
upon the recommendation of its Compensation Committee, has caused Haskel to
enter into this Agreement.
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TERMS AND CONDITIONS
Executive and Haskel hereby agree to the following terms and
conditions:
1. Term of Agreement/Expiration Date. This Agreement shall be
effective as of the date first indicated above and shall remain in effect until
the Expiration Date described below. The "Expiration Date" is the third
anniversary of the date either party gives written notice of the termination of
this Agreement.
2. Event Date. The "Event Date" shall mean the first date during
the term of this Agreement on which an Event (as defined in Section 3) occurs;
[provided, however, that if an Event occurs and if Executive's employment with
Haskel is terminated within the six-month period prior to the date on which the
Event occurs, the "Event Date" shall mean the date immediately prior to the date
of such termination.]
3. Event. "Event" shall mean any of the following:
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(a) The dissolution or liquidation of Haskel following
a Change in Control;
(b) The merger, consolidation, or other reorganization of Haskel
with or into one or more entities which are not "Subsidiaries" (as
defined below), as a result of which 50% or less of the outstanding
voting securities of the surviving or resulting entity are, or are to
be, owned by former shareholders of Haskel;
(c) The sale or transfer of substantially all of Haskel's
business and/or assets to a person or entity which is not a Subsidiary;
or
(d) A Change in Control. A "Change in Control" shall be deemed to
have occurred if:
(i) any "person", alone or together with all "affiliates"
and "associates" of such person is or becomes the "beneficial
owner" of 35% or more of the outstanding Class A Common Shares or
100% of the outstanding Class B Common Shares of Haskel (the
terms
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"person", "affiliates", "associates" and "beneficial owner" are
used as such terms are used in the Securities Exchange Act of
1934 and the General Rules and Regulations thereunder); provided,
however, that a "Change in Control" shall not be deemed to have
occurred if such "person" is (x) any Subsidiary or any employee
benefit plan or employee stock plan of Haskel or of any
Subsidiary, or any trust or other entity organized, established
or holding shares of such voting securities by, for or pursuant
to, the terms of any such plan, or (y) Executive or Executive and
one or more other persons acting as a partnership, limited
partnership, syndicate, or other group for the purpose of
acquiring, holding or disposing of securities of Haskel; or
(ii) individuals who at the beginning of any period of two
consecutive calendar years constitute the Board of Directors
cease for any reason, during such period, to constitute at least
a majority thereof, unless the election, or the nomination for
election by Haskel's shareholders, of each new Board member was
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approved by a vote of at least three-quarters of the Board
members then still in office who were Board members at the
beginning of such period.
"Subsidiary" shall mean any corporation or other entity of which
more than 50% of the outstanding voting stock or voting power is
beneficially owned directly or indirectly by Haskel. If the approval of
the shareholders of Haskel for any of the occurrences set forth in
subsections (a) through (d) is obtained prior to such occurrence, then
such shareholder approval shall constitute the Event.
4. Effective Period. For the purpose of this Agreement, the
"Effective Period" is the period commencing on the Event Date, and ending on the
earlier of the Expiration Date or the third anniversary of the Event Date.
5. Termination of Employment.
(a) General. Executive shall be entitled to the payments and
benefits described in Section 6(a) of this Agreement in the event
Executive's employment is terminated
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(i) by Haskel during the Effective Period for any reason, other than as
a result of Executive's death or for Disability or Cause in accordance
with the terms of this Section 5, or (ii) by Executive for Good Reason
pursuant to a Notice of Termination delivered during the Effective
Period.
(i) Death. Executive's employment shall terminate
automatically upon Executive's death.
(ii) Disability. If the Disability of Executive occurs
during the Effective Period (pursuant to the definition of
Disability set forth below), Haskel may give Executive written
notice in accordance with Section 15 of this Agreement of its
intention to terminate Executive's employment. In such event,
Executive's employment with Haskel shall terminate effective on
the 30th day after receipt of such notice by Executive (the
"Disability Effective Date"), provided that, within the 30 days
after such receipt, Executive shall not have returned to
full-time performance of Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of
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Executive from Executive's duties with Haskel on a full-time
basis for 180 consecutive business days or such shorter period as
a result of incapacity due to mental or physical illness which is
both (i) determined to be total and permanent by a physician
selected by Haskel or its insurers and acceptable to Executive or
Executive's legal representative, and (ii) entitles Executive to
the payment of long-term disability benefits from Haskel's
long-term disability plan commencing immediately upon the
Disability Effective Date.
(iii) Cause. Haskel may terminate Executive's employment
during the Effective Period for Cause. For purposes of this
Agreement, "Cause" shall be limited to:
[a] The conviction of Executive for
commission of a felony, or
[b] The willful engaging by Executive in gross
misconduct which materially and demonstrably
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injures Haskel. For purposes of this paragraph, no act or
failure to act on the part of Executive shall be
considered "willful" unless done, or omitted to be done,
by Executive not in good faith and without reasonable
belief that Executive's action or omission was in the best
interest of Haskel.
[c] The issuance of an order, judgment or decree of
any court of competent jurisdiction permanently enjoining
Executive from violating any provision of the Securities
Act of 1933, the Securities Exchange Act of 1934 and
applicable securities law statute of a state.
[d] A final judgment of a court holding Executive
liable in a civil action based upon conduct showing that
Execution breached a fiduciary duty to Haskel or its
Shareholders.
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(iv) Good Reason. Executive's employment may be
terminated by Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
[a] The assignment to Executive of any duties
inconsistent in any material respect with Executive's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as in
effect on the Event Date, or any other action by Haskel
which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken
in bad faith and which is remedied by Haskel promptly
after receipt of notice thereof given by Executive;
[b] Any failure by Haskel to reappoint Executive to
a position held by Executive on the Event Date, except as
a result of the termination of Executive's employment by
Haskel for Cause or Disability, the death of Executive, or
the
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termination of Executive's employment by Executive
other than for Good Reason;
[c] Reduction by Haskel in Executive's base salary
as in effect on the date hereof or as the same may be
increased from time-to-time;
[d] The taking of any action by Haskel (including
the elimination of medical and life insurance plans
without providing substitutes therefore or the reduction
of Executive's benefits thereunder) that would
substantially diminish the aggregate value of Executive's
incentive awards and other fringe benefits including
executive benefits and perquisites from the levels in
effect prior to the Event Date;
[e] Haskel's requiring Executive to be based at any
office or location which increases the distance from
Executive's home to the office or location by more than 35
miles above the number of
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<PAGE> 12
miles Executive drives to the office as of the
Event Date;
[f] Any purported termination by Haskel of
Executive's employment otherwise than pursuant to a Notice
of Termination; or
[g] Any failure by Haskel to comply with and
satisfy Section 10(c) of this Agreement.
For purposes of this Section, any good faith determination of "Good
Reason" made by Executive shall be conclusive.
(b) Notice of Termination. Any termination of Executive's
employment by Haskel during the Effective Period for any reason, or by
Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section
15 of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the
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facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall be not
more than thirty days after the giving of such notice). The facts and
circumstances set forth in any Notice of Termination given by Haskel
pursuant to a purported termination of Executive for Cause shall
constitute the exclusive set of facts and circumstances upon which
Haskel may rely to attempt to demonstrate that Cause for such
termination existed. The failure by Executive to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing
of Good Reason shall not waive any right of Executive hereunder or
preclude Executive from asserting such fact or circumstance in enforcing
Executive's rights hereunder.
(c) Date of Termination. "Date of Termination" means (i) if
Executive's employment is terminated by Haskel for Cause, or by
Executive for Good Reason, the date of receipt of the Notice of
Termination or a later date (within the limit set forth in subsection
(b)) specified therein, as the
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case may be, (ii) if Executive's employment is terminated by Haskel
other than for Cause or Disability, the Date of Termination shall be the
date on which Haskel notifies Executive of such termination and (iii) if
Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of Executive or the
Disability Effective Date, as the case may be.
6. Obligations of Haskel upon Termination.
(a) Good Reason, Other Than for Cause, Death or Disability. If
Haskel shall terminate Executive's employment other than for Cause or
Disability during the Effective Period, or Executive shall terminate
employment for Good Reason pursuant to a Notice of Termination delivered
during the Effective Period, Haskel agrees to make the payments and
provide the benefits described below. Haskel shall not be obligated to
make such payments and provide such benefits if the Executive's
employment with Haskel terminates as a result of Executive's death.
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(i) Haskel shall pay to Executive in a lump sum in cash
within 10 days after the Date of Termination an amount equal to
the product of (1) and (2), where (1) is two and (2) is the sum
of (x) Executive's highest rate of annual base salary in effect
at any time in the two years preceding the Date of Termination
and (y) the highest annual amount of incentive compensation
(including both short and long term compensation) paid in respect
of the most recent three fiscal years ending before the Date of
Termination under; provided, however, that if the incentive
compensation otherwise payable under Haskel's Incentive
Compensation Plan in respect of the fiscal year preceding the
fiscal year in which the Date of Termination occurs has not been
paid in full on or before the Date of Termination, "two" in this
clause (y) shall be replaced by "three." (The amount in this
clause (y) is referred to hereinafter as the "Incentive
Compensation Payment.")
(ii) (A) Haskel shall pay Executive his or her full base
salary through the Date of Termination at the rate in effect at
the time the Notice of Termination is
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given [plus a pro-rata share of the Incentive Compensation
Payment.] Such pro-rata share shall equal the fraction of
Haskel's fiscal year which preceded the Date of Termination. (B)
In addition, if the incentive compensation otherwise payable
under Haskel's incentive compensation plan of Haskel in respect
of the fiscal year preceding the fiscal year in which the Date of
Termination occurs has not been paid in full on or before the
Date of Termination, Haskel shall pay Executive an amount equal
to the difference between the Incentive Compensation Payment and
the portion (if any) which was actually paid to the Executive of
such incentive compensation in respect of the fiscal year
preceding the fiscal year in which the Date of Termination
occurs.
(iii) For two years after Executive's Date of Termination,
Haskel shall continue to provide medical and life insurance
benefits and fringe benefits and other perquisites to Executive
and Executive's family at least equal to those which would have
been provided to them if Executive's employment had not been
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terminated in accordance with the most favorable plans,
practices, programs or policies of Haskel and its affiliated
companies applicable generally to other peer executives and their
families immediately preceding the Date of Termination; provided,
however, that if Executive becomes reemployed with another
employer, the medical, life insurance and other benefits
described herein shall cease and terminate thirty (30) days after
the effective date of Executive's reemployment. In connection
with the foregoing, Executive agrees to notify Haskel in writing
of his reemployment within Ten days (10) of such reemployment.
For purposes of determining eligibility (but not the time of
commencement of benefits) of Executive for retiree benefits
pursuant to such plans, practices, programs and policies,
Executive shall be considered to have remained employed until
three years after the Date of Termination and to have retired on
the last day of such period. Following the period of continued
benefits referred to in this subsection, Executive and
Executive's family shall be given the right provided in Section
49808 of the Internal Revenue Code to elect to
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continue benefits in all group medical plans. In the event that
Executive's participation in any of the plans, programs,
practices or policies of Haskel referred to in this subsection is
barred by the terms of such plans, programs, practices or
policies, Haskel shall provide Executive with benefits
substantially similar to those which Executive would be entitled
as a participant in such plans, programs, practices or policies.
At the end of the period of coverage, Executive shall have the
option to have assigned to Executive, at no cost and with no
apportionment of prepaid premiums, any assignable insurance
policy owned by Haskel and relating specifically to Executive.
(iv) Haskel shall enable Executive to purchase the
automobile, if any, that Haskel was providing for Executive at
the time Notice of Termination was given at the wholesale value
of such automobile at such time, as shown in the current addition
of the National Auto Research Publication Blue Book. Any
outstanding relocation loans to Executive from Haskel shall not
be accelerated. The obligations set forth in this
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Section 6(a) (iv) are hereinafter referred to as the
"Special Obligations."
(v) Any compensation previously deferred by the Executive
(together with any accrued earnings or interest thereon) and any
accrued vacation pay, in each case to the extent not theretofore
paid (the amount referred to in this clause (v) and clause (ii)
above being referred to as "Accrued Obligations").
(vi) To the extent not theretofore paid or provided,
Haskel shall timely pay or provide Executive any other amounts or
benefits required to be paid or provided or which Executive is
eligible to receive under any plan, program, policy, practice,
contract or agreement of Haskel and its affiliated companies,
including but not limited to any benefits payable to Executive
under a plan, policy, practice, etc., referred to in Section 7
below, (such other amounts and benefits being hereinafter
referred to as "Other Benefits") in accordance with the terms of
such plan, program, policy, practice, contract or agreement.
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(vii) Upon a Change of Control, any and all options,
warrants and grants to purchase Class A Common Stock of Haskel
shall become immediately vested and exercisable by Executive.
(b) Death. If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for timely performance
of the Special Obligations, payment of Accrued Obligations and payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 10 days of the Date of Termination.
(c) Disability. If the Executives employment is terminated by
reason of the Executive's Disability during the Effective Period,
this Agreement shall terminate without further obligations to the
Executive, other than for timely performance of the Special
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Obligations, payment of Accrued Obligations and payment or
provision of Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
(d) Cause. If Executive's employment shall be terminated for
Cause during the Effective Period, this Agreement shall terminate
without further obligations to Executive (other than the obligation to
pay to Executive his base salary earned through the Date of Termination
and payment or provision of the Other Benefits).
(e) The provisions of this Paragraph 8 supersede and replace any
other agreement between Haskel and Executive relating to the payment of
any benefits as a results of the Termination of Executive by Haskel or
Executive's voluntary termination for any reason.
(f) Other than for Good Reason.
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(i) If Executive shall voluntarily terminate employment,
excluding a termination for Good Reason, within the six month
period following the Event Date, this Agreement shall terminate
without further obligations to Executive, except that Haskel
shall (i) pay to Executive his base salary earned through the
Date of Termination and pay or provide the Other Benefits.
(ii) If Executive shall voluntarily terminate employment,
excluding a termination for Good Reason, within the Effective
Period, but after the six month period following the Event Date,
this Agreement shall terminate without further obligations to
Executive, except that Haskel shall (i) pay to Executive his base
salary earned through the Date of Termination and pay or provide
the Other Benefits, and (ii) timely perform the Special
Obligations.
7. Non-Exclusivity of Rights. Nothing in this Agreement shall
prevent or limit Executive's continuing or future participation in any plan,
program, policy or practice provided by Haskel or any of its affiliated
companies and for which Executive
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may qualify, nor, subject to Section 19, shall anything herein limit or
otherwise affect such rights as Executive may have under any contract or
agreement with Haskel or any of its affiliated companies. Amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of or any contract or agreement with Haskel or
any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.
8. Full Settlement. Haskel's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which Haskel may have against Executive
or others. In no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to Executive
under any one or more provisions of this Agreement and, except as provided in
Section 6(a) (iii), such amounts shall not be reduced whether or not Executive
obtains other employment. Haskel agrees to pay, to the full extent permitted by
law, all legal fees and expenses which Executive may reasonably incur as a
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result of any contest (regardless of the outcome thereof) by Haskel, Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by Executive about the amount of any payment pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal Rate, provided for in Section 7872(f) (2) (A) of the Internal
Revenue Code of 1986, as amended (the "Code"). Executive shall be entitled to
payment of such legal fees and expenses on a monthly basis during the pendency
of any contest. Accordingly, Haskel shall, on the tenth business day of each
month following the Executive's Date of Termination, pay Executive any legal
fees and expenses incurred by Executive as a result of a contest hereunder for
which the Executive presented invoices to Haskel on or before the last business
day of the preceding month. Notwithstanding the foregoing, Haskel shall be
entitled to reimbursement by the Executive (1) for any legal fees or expenses of
Executive in any contest by Executive about the amount of any payment under this
Agreement if it is determined that Haskel did not breach this Agreement and
Executive's claim was not made in good faith, and (2) to the extent it is
determined
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that the amount of such legal fees and expenses was not reasonable.
9. Certain Additional Payments by Haskel.
(a) In the event that any payment or distribution by Haskel to or
for the benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 9(a)) ("Payments") is determined to be subject to (1) the excise
tax imposed by Section 4999 of the Code or its successor, (2) any
corresponding state excise tax, or (3) any interest or penalties are
incurred by Executive with respect to such state or federal excise tax
(such state or federal excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Haskel shall pay to Executive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of
all taxes (including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any
interest and penalties
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imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a
Gross-Up Payment is required and amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be
made by a certified public accounting firm as may be designated by
Executive and which is reasonably satisfactory to Haskel (the
"Accounting Firm"), which shall provide detailed supporting calculations
both to Haskel and Executive within 15 business days of the receipt of
request from Executive or Haskel. All fees and expenses of the
Accounting Firm shall be borne solely by Haskel. Any Gross-Up Payment,
as determined pursuant to this Section 9(b), shall be paid by Haskel to
Executive within five days of the receipt of the Accounting Firm's
determination. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made
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by Haskel should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that Haskel
exhausts its remedies pursuant to Section 9 (c) and Executive thereafter
is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by Haskel to or for the benefit
of Executive.
(c) Executive shall notify Haskel in writing of any written claim
actually received by Executive from the Internal Revenue Service
requesting the payment by Executive of an Excise Tax in respect of
Payments. Such notification shall be given as soon as practicable (which
shall be deemed to have occurred if it is given within 20 business days)
after Executive actually receives such claim and shall apprise Haskel of
the nature of such claim, and the date on which such claim is requested
to be paid. Executive shall not pay such claim prior to the expiration
of the 30-day period following the date on which it gives such notice to
Haskel (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If
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Haskel notifies Executive in writing prior to the expiration of such
period that it desires to contest such claim, Executive shall:
(i) Give Haskel any information reasonably
requested by Haskel relating to such claim,
(ii) Take such action in connection with contesting such
claim as Haskel shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by Haskel,
(iii) Cooperate with Haskel in good faith in order to
contest such claim effectively, and
(iv) Permit Haskel to participate in any
proceedings relating to such claim;
provided, however, that Haskel shall bear and pay directly
all costs and expenses (including additional interest and
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penalties) incurred in connection with such contest and shall indemnify
and hold Executive harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section
9 (c), Haskel shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as Haskel shall determine; provided, however, that if
Haskel directs Executive to pay such claim and sue for a refund, Haskel
shall advance the amount of such payment to Executive, on an
interest-free basis and shall indemnify and hold Executive harmless, on
an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such
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<PAGE> 30
advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of
Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, Haskel's
control of the contest shall be limited to issues with respect to which
a Gross Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by
Haskel pursuant to Section 9 (c), Executive becomes entitled to receive
any refund with respect to such claim, Executive shall (subject to
Haskel's complying with the requirements of Section 9 (c)) promptly pay
to Haskel the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt
by Executive of an amount advanced by Haskel pursuant to Section 9 (c),
a determination is made that Executive shall not be entitled to any
refund with respect to
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<PAGE> 31
such claim and Haskel does not notify Executive in writing of its intent
to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid.
10. Successors.
(a) This Agreement is personal to Executive and without the prior
written consent of Haskel shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon Haskel and its successors and assigns.
(c) Haskel will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
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<PAGE> 32
to all or substantially all of the business and/or assets of Haskel to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that Haskel would be required to perform it if no
such succession had taken place. As used in this Agreement, "Haskel"
shall mean Haskel as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Arbitration.
(a) Because it is agreed that time will be of the essence in
determining whether any payments are due to Executive under this
Agreement, Executive may, if he desires, submit any claim for payment
under this Agreement or dispute regarding the interpretation of this
Agreement to arbitration. This right to select arbitration shall be
solely that of Executive, and Executive may decide whether or not to
arbitrate in his discretion. The "right to select arbitration" is not
mandatory on Executive, and Executive may choose in lieu thereof to
bring an action in an appropriate civil court. Once an arbitration is
commenced, however, it
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<PAGE> 33
may not be discontinued without the mutual consent of both parties to
the arbitration. During the lifetime of Executive only he can use the
arbitration procedure set forth in this Section.
(b) Any claim for arbitration may be submitted as follows: If
Executive disagrees with Haskel regarding the interpretation of this
Agreement and the claim is finally denied by Haskel in whole or in part,
such claim may be filed in writing with an arbitrator of Executive's
choice who is by the method described in the next three sentences. The
first step of the selection shall consist of Executive's submitting a
list of five potential arbitrators to Haskel. Each of the five
arbitrators must be either (1) a member of the National Academy of
Arbitrators located in the State of California or (2) a retired
California Superior Court or Appellate Court judge. Within two weeks
after receipt of the list, Haskel shall select one of the five
arbitrators as the arbitrator for the dispute in question. If Haskel
fails to select an arbitrator in a timely manner, Executive shall then
designate one of the five arbitrators as the arbitrator for the dispute
in question.
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<PAGE> 34
(c) The arbitration hearing shall be held in the county which
includes the address last given prior to the commencement of arbitration
by the Executive for notices under Section 15; provided that if such is
outside the United States, the arbitration hearing shall be held in
Orange County, California. The arbitration hearing shall be held within
thirty days (or as soon thereafter as possible) after the picking of the
arbitrator. No continuance of said hearing shall be allowed without the
mutual consent of Executive and Haskel. Absence from or nonparticipation
at the hearing by either party shall not prevent the issuance of an
award. Hearing procedures which will expedite the hearing may be ordered
at the arbitrator's discretion, and the arbitrator may close the hearing
in his or her sole discretion when he or she decides he or she has heard
sufficient evidence to satisfy issuance of an award.
(d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than thirty days after the close of the
hearing. In the event the arbitrator finds that Haskel has breached this
Agreement, he
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<PAGE> 35
or she shall order Haskel to immediately take the necessary steps to
remedy the breach. The award of the arbitrator shall be final and
binding upon the parties. The award may be enforced in any appropriate
court as soon as possible after its rendition. If an action is brought
to confirm the award, both Haskel and Executive agree that no appeal
shall be taken by either party from any decision rendered in such
action.
(e) Haskel will be considered the prevailing party in a dispute
if the arbitrator determines (1) that Haskel has not breached this
Agreement and (2) the claim by, Executive was not made in good faith.
Otherwise, Executive will be considered the prevailing party. In the
event that is the prevailing party, the fee of the arbitrator and all
necessary expenses of the hearing (including all attorneys' fees
incurred by Executive in pursuing his claim and, if the Executive's home
on the Date of Termination was more than 70 miles from the location of
the arbitration, his reasonable travel and living expenses during the
arbitration) including the fees of a stenographic reporter if employed,
shall be paid by Haskel.
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<PAGE> 36
12. Governing Law. The laws of California shall govern the
validity and interpretation of this Agreement, with regard to conflicts of laws.
13. Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
14. Amendment. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
15. Notices. All notices and other communications shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receIpt requested, postage prepaid, addressed as
follows:
If to Executive:
-------------------------
-------------------------
-------------------------
If to Haskel:
-------------------------
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<PAGE> 37
-------------------------
-------------------------
-------------------------
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee. Neither the failure of Executive to
give any notice required by this Agreement (including but not limited to the
notice specified in Section 9(c) hereof ), nor defects or errors in any notice
given by Executive, shall relieve Haskel of any corresponding obligation under
this Agreement unless, and only to the extent that, Haskel is actually and
materially prejudiced thereby.
16. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
17. Withholding Taxes. Haskel may withhold from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
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<PAGE> 38
18. No Waiver. Executive's or Haskel's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right Executive or Haskel may have
hereunder, including, without limitation the right of Executive to terminate
employment for Good Reason shall not be deemed to be a waiver of such provision
or right or any other provision or right of this Agreement.
19. At-Will Employment. Executive and Haskel acknowledge that,
except as may otherwise be provided under any other written agreement between
Executive and Haskel, the employment of Executive by Haskel prior to the Event
Date is "at will" and, prior to the Event Date, Executive's employment may be
terminated by either Executive or Haskel at any time, in which case Executive
shall have no further rights under this Agreement. This Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof.
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<PAGE> 39
20. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which shall together constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first written above.
HASKEL INTERNATIONAL, INC.
By: /s/ EDWARD MALKOWICZ
-------------------------------------
EDWARD MALKOWICZ, Chairman
EXECUTIVE
/s/ LONNIE D. SCHNELL
-----------------------------------------
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<PAGE> 1
EXHIBIT 10.29
CHANGE IN CONTROL AGREEMENT
---------------------------
This Change In Control Agreement ("Agreement") is dated as of October 6th 1997,
and is entered into by and between HENRY MASON ("Executive") and Haskel Energy
Systems Limited (CRN 1278832 whose registered office is at North Hylton Road,
Sunderland, SR5 3JD, England.
RECITALS
- --------
Haskel considers it to be in the best interest of Haskel, Haskel International
Inc. ("HII") and HII's shareholders that the Executive be encouraged to continue
his employment with Haskel and continue to devote full attention to Haskel's
business notwithstanding the possibility, threat or occurrence of an
acquisition, merger, or change of control involving HII. Haskel also believes
that it is in the best interest of Haskel, HII and its shareholders to minimise
potential conflicts of interest and to diminish inevitable distractions arising
from the possibility of an acquisition, merger or change of control.
Accordingly, in order to secure these benefits for Haskel, and to induce the
Executive to remain in the employ of Haskel, and for other good and valuable
consideration, the Board of Directors of Haskel has caused Haskel to enter into
this Agreement.
TERMS AND CONDITIONS
- --------------------
The Executive and Haskel hereby agree to the following terms and conditions:
1. TERMS OF AGREEMENT/EXPIRATION DATE
----------------------------------
This Agreement shall be effective as of the date first indicated above and
shall remain in effect until the Expiration Date described below. The
"Expiration Date" is the third anniversary of the date either party gives
written notice of the termination of this Agreement.
2. EVENT DATE
----------
The "Event Date" shall mean the first date during the term of this Agreement on
which an Event (as defined in Clause 3) occurs; provided, however, that if an
Event occurs and if the Executive's employment with Haskel is terminated within
the six-month period prior to the date on which the Event occurs, the "Event
Date" shall mean the date immediately prior to the date of such termination.
3. EVENT
-----
"Event" shall mean any of the following:
(a) The dissolution or liquidation of HII following a Change in Control;
<PAGE> 2
(b) The merger, consolidation, or other reorganisation of HII with or into
one or more entities which are not "Subsidiaries" (as defined below), as
a result of which 50% or less of the outstanding voting securities of
the surviving or resulting entity are, or are to be, owned by former
shareholders of HII;
(c) The sale or transfer of substantially all of HII's business and/or
assets to a person or entity which is not a Subsidiary; or
(d) A Change in Control. A "Change in Control" shall be deemed to have
occurred if:
(i) any "person", alone or together with all "affiliates" and
"associates" of such person is or becomes the "beneficial owner"
of 35% or more of the outstanding Class A Common Shares or 100%
of the outstanding Class B Common Shares of HII (the terms
"person", "affiliates", "associates" and "beneficial owner" are
used as such terms are used in the U.S. legislation known as the
Securities Exchange Act of 1934 and the General Rules and
Regulations thereunder); provided, however, that a "Change in
Control" shall not be deemed to have occurred if such "person"
is (x) any Subsidiary or any employee stock plan of HII or of
any Subsidiary, or any trust or other entity organised,
established or holding shares of such voting securities by, for
or pursuant to, the terms of any such plan, or (y) the Executive
or the Executive and one or more other persons acting as a
partnership, limited partnership, syndicate, or other group for
the purpose of acquiring, holding or disposing of securities of
HII; or
(ii) individuals who at the beginning of any period of two
consecutive calendar years constitute the Board of Directors
cease for any reason, during such period, to constitute at least
a majority thereof, unless the election, or the nomination for
election by HII's shareholders, of each new Board member was
approved by a vote of at least three quarters of the Board
members then still in office who were Board members at the
beginning of such period.
"Subsidiary" shall mean any corporation or other entity of which
more than 50% of the outstanding voting stock or voting power is
beneficially owned directly or indirectly by HII. If the
approval of the shareholders of HII for any of the occurrences
set forth in sub Clauses (a) to (d) above is obtained prior to
such occurrence, then such shareholder approval shall constitute
the Event.
4. EFFECTIVE PERIOD
----------------
For the purpose of this Agreement, the "Effective Date" is the period commencing
on the Event Date and ending on the earlier of the Expiration Date or the third
anniversary of the Event Date.
5. TERMINATION OF EMPLOYMENT
-------------------------
(a) General. The Executive shall be entitled to the payments and
benefits described in Clause 6 (a) of this Agreement in the
event the Executive's employment is terminated (i) by Haskel
during the Effective Period for any reason, other than as a
result of Executive's death or for Disability or Cause in
accordance with the terms of this Clause 5, or (ii) by the
Executive for Good Reason pursuant to a Notice of Termination
delivered during the Effective Period.
(i) Death. The Executive's employment shall terminate
automatically upon his death.
<PAGE> 3
(ii) Disability. If the Disability of the Executive occurs
during the Effective Period (pursuant to the definition
of Disability set forth below), Haskel may give
Executive written notice in accordance with Clause 15 of
this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's
employment with Haskel shall terminate effective on the
30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the
Executive's duties. For the purposes of this Agreement,
"Disability" shall mean the absence of the Executive
from his duties with Haskel on a full-time basis for 180
consecutive business days or such shorter period as a
result of incapacity due to mental or physical illness
which is both (i) determined to be total and permanent
by a physician selected by Haskel or its insurers and
acceptable to the Executive or his legal representative,
and (ii) entitles the Executive to the payment of
long-term disability benefits from Haskel's long-term
disability plan commencing immediately upon the
Disability Effective Date.
(iii) Cause. Haskel may terminate the Executive's employment
during the Effective Period for Cause. For the purposes
of this Agreement, "Cause" shall be limited to:
(a) The conviction of the Executive for commission
of an indictable offence, or
(b) The wilful engaging by Executive in gross
misconduct which materially and demonstrably
injures Haskel. For the purposes of this sub
Clause, no act or failure to act on the part of
the Executive shall be considered "wilful"
unless done, or omitted to be done, by the
Executive not in good faith and without
reasonable belief that his action or omission
was in the best interest of Haskel.
(c) The issuance of an order, judgment or decree of
any court of competent jurisdiction permanently
enjoining the Executive from violating any
provision of the U.S. legislation known as the
Securities Act 1933, the Securities Exchange Act
1934 and applicable securities law of a state.
(d) A final judgment of a court holding Executive
liable in a civil action based upon conduct
showing that Execution breached a fiduciary duty
to Haskel.
(iv) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:
(a) The assignment to the Executive of any duties
inconsistent in any material respect with his
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as in effect on the Event Date,
or any other action by Haskel which results in a
diminution in such position, authority, duties
or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent
action not taken in bad faith and
<PAGE> 4
which is remedied by Haskel promptly after
receipt of notice thereof given by the
Executive;
(b) Any failure by Haskel to reappoint the Executive
to a position held by him on the Event date,
except as result of the termination of
Executive's employment by Haskel for Cause or
Disability, the death of the Executive, or the
termination of the Executive's employment by the
Executive other than for Good Reason;
(c) Reduction by Haskel in the Executive's basic
salary as in effect on the date hereof or as the
same may be increased from time-to-time;
(d) The taking of any action by Haskel (including
the elimination of medical and life insurance
plans without providing substitutes therefore or
the reduction of the Executive's benefits
thereunder) that would substantially diminish
the aggregate value of the Executive's bonus
awards and other fringe benefits including
executive benefits and perquisites from the
levels in effect prior to the Event Date;
(e) Haskel requiring the Executive to be based at
any office or location which increases the
distance from his home to the office or location
by more than 35 miles above the number of miles
the Executive drives to the office as of the
Event Date;
(f) Any purported termination by Haskel of the
Executive's employment otherwise than pursuant
to a Notice of Termination; or
(g) Any failure by Haskel to comply with and satisfy
Clause 10 (c) of this Agreement.
For purposes of this Clause, any good faith determination of
"Good Reason" made by Executive shall be conclusive.
(b) Notice of Termination. Any termination of the
Executive's employment by Haskel during the Effective
Period for any reason, or by the Executive for Good
Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with
Clause 15 of this Agreement. For the purposes of this
Agreement, a "Notice of Termination" means a written
notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the
provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of
receipt of such notice, specifies the terminate date
(which date shall not be more than thirty days after the
giving of such notice). The facts and circumstances set
forth in any Notice of Termination given by Haskel
pursuant to a purported termination of the Executive for
Cause shall constitute the exclusive set of facts and
circumstances upon which Haskel may rely to attempt to
demonstrate that Cause for such termination existed. The
failure by the
<PAGE> 5
Executive to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Executive
hereunder or preclude him from asserting such fact or
circumstance in enforcing his rights hereunder.
(c) Date of Termination. "Date of termination" means (i) if
the Executive's employment is terminated by Haskel for
Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or a later date
(within the limit set forth in subsection (b)) specified
therein, as the case may be, (ii) if the Executive's
employment is terminated by Haskel other than for Cause
or Disability, the Date of Termination shall be the date
on which Haskel notifies Executive of such termination
and (iii) if the Executive's employment is terminated by
reason of death or Disability, the Date of Termination
shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
6. OBLIGATIONS OF HASKEL UPON TERMINATION
--------------------------------------
(a) Good Reason, Other Than for Cause, Death or Disability.
-------------------------------------------------------
If Haskel shall terminate the Executive's employment other than for
Cause or Disability during the Effective Period, or the Executive shall
terminate employment for Good Reason pursuant to a Notice of Termination
delivered during the Effective Period, Haskel agrees to make the
payments and provide the benefits described below. Haskel shall not be
obligated to make such payments and provide such benefits if the
Executive's employment with Haskel terminates as a result of his death.
(i) Haskel shall pay to the Executive in a lump sum in cash within
10 days after the Date of Termination an amount equal to the
product of (1) and (2), where (1) is "2" and (2) is the sum of
(x) the Executive's highest rate of annual basic salary in
effect at any time in the two years preceding the Date of
Termination and (y) the highest annual amount of any bonus paid
in respect of the most recent three fiscal years ending before
the Date of termination; provided, however, that if any bonus
otherwise payable under Haskel's bonus scheme in respect of the
fiscal year preceding the fiscal year in which the Date of
termination occurs has not been paid in full on or before the
Date of Termination, in this clause (y) shall be replaced by "[
]". (The amount in this Clause (y) is referred to hereinafter as
the "Incentive Compensation Payment.")
(ii) (A) Haskel shall pay Executive his or full basic salary through
the Date of Termination at the rate in effect at the time the
Notice of Termination is given plus a pro-rata share of the
Incentive Compensation Payment. Such pro-rata share shall equal
the fraction of Haskel's fiscal year which preceded the Date of
Termination. (B) In addition, if the bonus otherwise payable
under Haskel's bonus scheme in respect of the fiscal year,
preceding the fiscal year in which the Date of Termination
occurs has not been paid in full on or before the Date of
Termination, Haskel shall pay the Executive an amount equal to
the difference between the Incentive Compensation Payment and
the portion (if any) which was actually paid to the Executive of
such bonus in respect of the fiscal year preceding the fiscal
year in which the Date of Termination occurs.
(iii) For two years after the Executive's Date of Termination, Haskel
shall continue to provide medical and life insurance benefits
and fringe benefits and other
<PAGE> 6
perquisites to the Executive and his family at least equal to
those which would have been provided to them if the Executive's
employment had not been terminated in accordance with the most
favourable plans, practices, programs or policies of Haskel and
its affiliated companies applicable generally to other peer
executives and their families immediately preceding the Date of
Termination; provided, however, that if the Executive becomes
re-employed with another employer, the medical, life insurance
and other benefits described herein shall cease and terminate
thirty (30) days after the effective date of the Executive's
reemployment. In connection with the foregoing, the Executive
agrees to notify Haskel in writing of his employment within Ten
days (10) of such reemployment. For purposes of determining
eligibility (but not the time of commencement of benefits) of
the Executive for retirement benefits pursuant to such plans,
practices, programs and policies, Executive shall be considered
to have remained employed until three years after the Date of
Termination and to have retired on the last day of such period.
In the event that the Executive's participation in any of the
plans, programs, practices or policies of Haskel referred to in
this subsection is barred by the terms of such plans, programs,
practices or policies, Haskel shall provide the Executive with
benefits substantially similar to those which the Executive
would be entitled as a participant in such plans, programs,
practices or policies. At the end of the period of coverage, the
Executive shall have the option to have assigned to him, at no
cost and with no apportionment of prepaid premiums, any
assignable insurance policy owned by Haskel and relating
specifically to the Executive.
(iv) Haskel shall enable the Executive to purchaser the car, if any,
that Haskel was providing for him at the time notice of
Termination was given at the market value of such car at such
time, as shown in the current addition of Glass Guide. The
obligations set forth in this Section 6(a) (iv) are hereinafter
referred to as the "Special Conditions".
(v) Any bonus previously deferred by the Executive (together with
any accrued earnings or interest thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the amount referred to in this clause (v) and clause (ii) above
being referred to as "Accrued Obligations").
(vi) To the extent not theretofore paid or provided, Haskel shall
promptly pay or provide the Executive any other amounts or
benefits required to be paid or provided or which the Executive
is eligible to receive under any plan, program, policy,
practice, contract or agreement of Haskel and its affiliated
companies, including but not limited to any benefits payable to
the Executive under a plan, policy, practice, etc., referred to
in Section 7 below, (such other amounts and benefits being
hereinafter referred to as "Other Benefits") in accordance with
the terms of such plan, program, policy, practice, contract or
agreement.
(vii) Upon a Change of Control, any and all options, warrants and
grants to purchase Class A Common Stock of HII shall become
immediately vested and exercisable by Executive.
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for timely performance
of the Special Obligations, payment of Accrued Obligations and payment
or provision of the Other Benefits. Accrued Obligations shall be paid to
the Executive's
<PAGE> 7
estate or beneficiary, as applicable, in a lump sum in cash within 10
days of the Date of Termination.
(c) Disability. If the Executive's employment is terminated by reason of the
Executive's Disability during the Effective Period, this Agreement shall
terminate without further obligations to the Executive, other than for
timely performance of the Special Obligations, payment of Accrued
Obligations and payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination.
(d) Cause. If the Executive's employment shall be terminated for Cause
during the Effective Period, this Agreement shall terminate without
further obligations to the Executive (other than the obligation to pay
to the Executive his basic salary earned through the Date of Termination
and payment or provision of other Benefits).
(e) The provisions of this Paragraph 6 supersede and replace any other
agreement between Haskel and the Executive relating to the payment of
any benefits as a result of the Termination of his employment by Haskel
or the Executive's voluntary termination for any reason.
(f) Other than for Good Reason
(i) If the Executive shall voluntarily terminate his employment,
excluding a termination for Good Reason, within the six month
period following the Event Date, this Agreement shall terminate
without further obligations to Executive, except that Haskel
shall pay to the Executive his basic salary earned through the
Date of Termination and pay or provide the Other Benefits.
(ii) If the Executive shall voluntarily terminate his employment,
excluding a termination for Good Reason, within the Effective
Period, but after the six month period following the Event Date,
this Agreement shall terminate without further obligations to
Executive, except that Haskel shall (i) pay to the Executive his
basic salary earned through the Date of Termination and pay or
provide the Other Benefits, and (ii) timely perform the Special
Obligations.
7. Non-Exclusivity of Rights.
--------------------------
Nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice provided by Haskel
or any of its affiliated companies and for which the Executive may qualify, nor,
subject to Clause 19, shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with Haskel or
any of its affiliated companies. Amounts which are vested benefits or which
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with Haskel or any of its affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement
except as explicitly modified by this Agreement.
8. Full Settlement
---------------
Haskel's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defence to other claims, right or action
which Haskel may have against the Executive or others.
<PAGE> 8
In no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to him under any
one or more provisions of this Agreement and, except as provided in Clause
6(a)(iii), such amounts shall not be reduced whether or not Executive obtains
other employment. Haskel agrees to pay, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by Haskel, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Judgment Rate, the Executive shall be entitled to payment of such legal fees and
expenses on a monthly basis during the pendency of any contest. Accordingly,
Haskel shall, on the tenth business day of each month following the Executive's
Date of Termination, pay the Executive any legal fees and expenses incurred by
him as a result of a dispute hereunder for which the Executive presented
invoices to Haskel on or before the last business day of the preceding month.
Notwithstanding the foregoing, Haskel shall be entitled to reimbursement by the
Executive (1) for any legal fees or expenses of Executive in any contest by
Executive about the amount of any payment under this Agreement if it is
determined that Haskel did not breach this Agreement and Executive's claim was
not made in good faith, and (2) to the extent it is determined that the amount
of such legal fees and expenses was not reasonable.
9. Certain Additional Payments by Haskel
-------------------------------------
(a) In the event that any payment or distribution by Haskel to or for the
benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Clause 9 (a)) ("Payments") is determined to be subject to (1) the tax
imposed by or any taxation authority (2) any interest or penalties are
incurred by the Executive with respect to such tax, then Haskel shall
pay to Executive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Tax
imposed upon the Payments.
(b) Subject to the provisions of Clause 9 (c), all determinations required
to be made under this Clause 9, including whether and when a Gross-Up
Payment is required and amount of such Gross-Up Payment and the
assumptions to be utilised in arriving at such determination, shall be
made by such firm of chartered accountants as may be designated by the
Executive and which is reasonably satisfactory to Haskel (the
"Accounting Firm"), which shall provide detailed supporting calculations
both to Haskel and Executive within 15 business days of the receipt of
request from Executive to Haskel. All fees and expenses of the
Accounting Firm shall be borne solely by Haskel. Any Gross-Up Payment,
as determined pursuant to this Clause 9 (b), shall be paid by Haskel to
Executive within five days of the receipt of the Accounting Firm's
determination.
(c) The Executive shall notify Haskel in writing of any written claim
actually received by the Executive from the relevant taxation authority
requesting the payment by the Executive of any tax in respect of
Payments. Such notification shall be given as soon as practicable (which
shall be deemed to have occurred if it is given within 20 business days)
after the Executive actually receives such claim and shall apprise
Haskel of the nature of such claim, and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to
the expiration of the 30 day period following the date on which it
<PAGE> 9
gives such notice to Haskel (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If Haskel
notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) Give Haskel any information reasonably requested by Haskel
relating to such claim;
(ii) Take such action in connection with contesting such claim as
Haskel shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by a legal adviser reasonably
selected by Haskel;
(iii) Co-operate with Haskel in good faith in order to context such
claim effectively, and
(iv) Permit Haskel to participate in any proceedings relating to such
claim;
provided, however that Haskel shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after tax basis, for any tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Clause 9 (c), Haskel shall control all
proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate courts, as
Haskel shall determine; provided, however, that if Haskel directs the
Executive to pay such claim and sue for a refund, Haskel shall advance
the amount of such payment to the Executive on an interest free basis
and shall indemnify and hold the Executive harmless, on an after tax
basis, from any tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that
any extension of the statute of limitations relating to payment of taxes
for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, Haskel's control of the contest shall be limited to issues
with respect to which Gross Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Inland Revenue or any other taxing
authority.
(d) If, after the receipt of the Executive of an amount advanced by Haskel
pursuant to Clause 9 (c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to
Haskel's complying with the requirements of Clause 9 (c)) promptly pay
to Haskel the amount of such refund (together with any interest paid or
credited therein after taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by Haskel pursuant to Clause 9
(c) determination is made that the Executive shall not be entitled to
any refund with respect to such claim and Haskel does not notify the
Executive in writing or its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such
advance shall be forgiven
<PAGE> 10
and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross Up Payment
required to be paid.
10. Successors
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of Haskel shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon Haskel
and its successors and assigns.
(c) Haskel will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of Haskel to assume expressly and
agree to perform this Agreement in the same manner and to the same
extent that Haskel would be required to perform it if no such succession
had taken place. As used in this Agreement, "Haskel" shall mean Haskel
as hereinbefore defined and any successor it its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
11. Arbitration
-----------
(a) Because it is agreed that time will be of the essence in determining
whether any payments are due to the Executive under this Agreement, he
may, if he desires, submit any claim for payment under this Agreement or
dispute regarding the interpretation of this Agreement to arbitration in
accordance with the Arbitration Acts. This right to select arbitration
shall be solely that of the Executive, and he may decide whether or not
to arbitrate in his discretion. The "right to select arbitration" is not
mandatory on the Executive, and he may choose in lieu thereof to bring
an action in an appropriate civil court. Once an arbitration is
commenced, however, it may not be discontinued without the mutual
consent of both parties to the arbitration. During the lifetime of the
Executive only he can use the arbitration procedure set forth in this
Clause.
(b) In the event the arbitrator finds that Haskel has breached this
Agreement, Haskel shall immediately take the necessary steps to remedy
the breach. The award of the arbitrator shall be final and binding upon
the parties. The award may be enforced in any appropriate court as soon
as possible after its rendition. If an action is brought to confirm the
award, both Haskel and Executive agree that no appeal shall be taken by
either party from any decision rendered in such action.
12. Governing Law
-------------
The laws of England shall govern the validity and interpretation of this
Agreement, with regard to conflicts of laws.
13. Headings
--------
The headings of this Agreement are not part of the provisions hereof and shall
have no force or effect.
<PAGE> 11
14. Amendment
---------
This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
15. Notices
-------
All notices and other communications shall be in writing and shall be given by
hand delivery to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:-
If to the Executive:-
....................................................
....................................................
....................................................
....................................................
If to Haskel:-
North Hylton Road
.....................................................
Sunderland
.....................................................
SR5 3JD
.....................................................
.....................................................
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee. Neither the failure of the Executive to
give any notice required by this Agreement (including but not limited to the
notice specified in Clause 9 (c) hereof), nor defects or errors in any notice
given by the Executive, shall relieve Haskel of any corresponding obligation
under this Agreement unless, and only to the extent that, Haskel is actually and
materially prejudiced thereby.
16. Severability
------------
The invalidity or unenforceability of any provision of this Agreement shall not
effect the validity or enforceability of any other provision of this Agreement.
17. Withholding Taxes
-----------------
<PAGE> 12
Haskel may withhold from any amounts payable under this Agreement such taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
18. No Waiver
---------
The Executive's or Haskel's failure to insist upon strict compliance with any
provision hereof or any other provision of this Agreement or the failure to
assert any right the Executive or Haskel may have hereunder, including, without
limitation, the right of Executive to terminate employment for Good Reason shall
not be deemed to be a waiver of such provision or right or any other provision
or right of this Agreement.
19. Counterparts
------------
This Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original, but all of which shall together constitute
one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
THE COMMON SEAL OF HASKEL )
ENERGY SYSTEMS LIMITED was ) R. MALCOLM GREAVES
hereunto affixed in the )
presence of:
/s/ LONNIE D. SCHNELL
Director /s/ R. MALCOLM GREAVES
---------------------------
Director/Secretary
SIGNED AS A DEED by HENRY /s/ HENRY MASON
MASON in the presence of:
/s/ LONNIE D. SCHNELL
<PAGE> 1
EXHIBIT 11.1
HASKEL INTERNATIONAL, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------------- -------------------------------
NOVEMBER 30, NOVEMBER 28, NOVEMBER 30, NOVEMBER 28,
1996 1997 1996 1997
-------------- ------------- ------------ -------------
PRIMARY & PRIMARY & PRIMARY & PRIMARY &
FULLY DILUTED FULLY DILUTED FULLY DILUTED FULLY DILUTED
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Primary and Fully Diluted Earnings
Income from continuing operations $ 1,521,000 $ 1,230,000 $ 2,543,000 $ 2,345,000
Loss from discontinued operations (229,000) -- (529,000) --
Income (loss) from disposal of segment (5,406,000) 346,000 (5,406,000) 346,000
----------- ----------- ----------- -----------
Net income $(4,114,000) $ 1,576,000 $(3,392,000) $ 2,691,000
=========== =========== =========== ===========
Weighted average number of
shares outstanding 4,732,230 4,769,048 4,731,890 4,780,035
Dilutive effect of stock options
and warrants 83,908 329,610 75,786 324,684
----------- ----------- ----------- -----------
Number of shares used to
compute primary and fully
diluted earnings per share 4,816,138 5,098,658 4,807,676 5,104,719
=========== =========== =========== ===========
Primary and Fully Diluted Earnings per Share
Income from continuing operations $ 0.32 $ 0.24 $ 0.53 $ 0.46
Loss from discontinued operations (0.05) -- (0.11) --
Income (loss) from disposal of segment (1.12) 0.07 (1.12) 0.07
----------- ----------- ----------- -----------
Net income $ (0.85) $ 0.31 $ (0.70) $ 0.53
=========== =========== =========== ===========
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HASKEL
INTERNATIONAL INC'S CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF
INCOME AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-29-1998
<PERIOD-END> NOV-28-1997
<CASH> 7,717
<SECURITIES> 0
<RECEIVABLES> 12,303
<ALLOWANCES> 518
<INVENTORY> 11,350
<CURRENT-ASSETS> 32,809
<PP&E> 11,896
<DEPRECIATION> 6,076
<TOTAL-ASSETS> 41,965
<CURRENT-LIABILITIES> 8,236
<BONDS> 0
0
0
<COMMON> 13,753
<OTHER-SE> 212
<TOTAL-LIABILITY-AND-EQUITY> 41,965
<SALES> 24,850
<TOTAL-REVENUES> 24,850
<CGS> 12,752
<TOTAL-COSTS> 12,752
<OTHER-EXPENSES> 8,427<F1>
<LOSS-PROVISION> 45
<INTEREST-EXPENSE> 77
<INCOME-PRETAX> 3,802
<INCOME-TAX> 1,457
<INCOME-CONTINUING> 2,345
<DISCONTINUED> 346
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,691
<EPS-PRIMARY> .53<F2>
<EPS-DILUTED> .53<F2>
<FN>
<F1>Other expenses are comprised of selling, general and administrative,
engineering design, research and development.
<F2>Fully diluted earnings per share is not disclosed in the Company's consolidated
financial statements since the maximum dilutive effect is not material.
</FN>
</TABLE>
