<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 FEBRUARY 28, 1998
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 (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 APRIL 6, 1998 THE REGISTRANT HAD 4,759,205 SHARES OF
CLASS A COMMON STOCK, AND 40,000 SHARES OF
CLASS B COMMON STOCK OUTSTANDING.
<PAGE> 2
INDEX
HASKEL INTERNATIONAL, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - May 31, 1997 and February 28, 1998.......................... 3
Consolidated statements of operations - Three months ended February 28, 1997 and 1998;
Nine months ended February 28, 1997 and 1998.......................................... 5
Consolidated statements of cash flows - Nine months ended February 28, 1997 and 1998...... 6
Notes to consolidated financial statements - February 28, 1998............................ 7
Item 2. Management's discussion and analysis of financial condition and results of
operations............................................................................ 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................................... 13
</TABLE>
2
<PAGE> 3
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
May 31, February 28,
1997 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,490,000 $ 7,998,000
Accounts receivable, net 11,751,000 11,799,000
Inventories 10,335,000 11,062,000
Prepaid expenses and other current assets 942,000 597,000
Deferred income taxes 1,419,000 1,415,000
----------- -----------
TOTAL CURRENT ASSETS 32,937,000 32,871,000
PROPERTY, PLANT & EQUIPMENT, Net 5,376,000 5,354,000
GOODWILL, Net 698,000 941,000
DEFERRED INCOME TAXES 2,156,000 2,131,000
OTHER ASSETS 65,000 229,000
----------- -----------
TOTAL $41,232,000 $41,526,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
HASKEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
May 31, February 28,
1997 1998
------------ ------------
<S> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 978,000 $ 997,000
Accounts payable 4,070,000 3,476,000
Dividends payable 335,000 334,000
Accrued liabilities 3,249,000 1,909,000
Income taxes payable 210,000 787,000
------------ ------------
TOTAL CURRENT LIABILITIES 8,842,000 7,503,000
LONG-TERM DEBT 1,401,000 666,000
OTHER ACCRUED LIABILITIES 2,322,000 2,308,000
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 4,736,205 issued and outstanding at
May 31, 1997 and February 28, 1998, respectively 13,855,000 13,792,000
Class B, without par value; 40,000 shares
authorized, issued and outstanding at
May 31, 1997 and February 28, 1998 19,000 19,000
Retained Earnings 14,733,000 17,330,000
Cumulative foreign currency translation adjustment 60,000 (92,000)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 28,667,000 31,049,000
------------ ------------
TOTAL $ 41,232,000 $ 41,526,000
============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
February 28, February 28, February 28, February 28,
1997 1998 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $ 12,401,000 $ 14,175,000 $ 37,626,000 $ 39,025,000
COST OF SALES 6,670,000 8,086,000 20,373,000 20,838,000
------------ ------------ ------------ ------------
GROSS PROFIT 5,731,000 6,089,000 17,253,000 18,187,000
EXPENSES:
Selling 1,938,000 1,927,000 5,877,000 6,063,000
General and administrative 1,842,000 1,961,000 4,928,000 5,625,000
Engineering design, research and development 292,000 309,000 777,000 936,000
------------ ------------ ------------ ------------
Total 4,072,000 4,197,000 11,582,000 12,624,000
------------ ------------ ------------ ------------
OPERATING INCOME 1,659,000 1,892,000 5,671,000 5,563,000
OTHER INCOME 104,000 73,000 202,000 204,000
------------ ------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 1,763,000 1,965,000 5,873,000 5,767,000
PROVISION FOR INCOME TAXES 727,000 776,000 2,294,000 2,233,000
------------ ------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS 1,036,000 1,189,000 3,579,000 3,534,000
DISCONTINUED OPERATIONS:
Loss from operations, less applicable
income taxes (529,000)
Gain (loss) on disposal of segment (5,406,000) 346,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 1,036,000 $ 1,189,000 $ (2,356,000) $ 3,880,000
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
5
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HASKEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
February 28, February 28,
1997 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by continuing operations $ 3,220,000 $ 2,479,000
Net cash used in discontinued operations (334,000) (348,000)
----------- -----------
Net cash provided by operating activities 2,886,000 2,131,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,255,000) (1,167,000)
Proceeds from sale of property 71,000 279,000
Purchase of subsidiary (net of cash acquired) (1,172,000) (13,000)
----------- -----------
Net cash used in investing activities (2,356,000) (901,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (767,000) (750,000)
Proceeds from issuance of common stock 22,000 188,000
Dividends declared (994,000) (1,001,000)
----------- -----------
Net cash used in financing activities (1,739,000) (1,563,000)
----------- -----------
EFFECT OF EXCHANGE RATE ON
CASH AND CASH EQUIVALENTS 107,000 (159,000)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,102,000) (492,000)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 8,239,000 8,490,000
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 7,137,000 $ 7,998,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest -
Continuing operations $ 23,000 $ 111,000
=========== ===========
Discontinued operations $ 132,000 $ 8,000
=========== ===========
Income taxes $ 1,720,000 $ 1,750,000
=========== ===========
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.
On June 3, 1996, the Company's foreign subsidiary, Haskel Energy Systems,
Limited ("HESL"), acquired all of the outstanding stock of Hydraulic
Mobile Equipment Limited ("HME") for $851,000 ($814,000 in cash and
$37,000 in acquisition costs) plus liabilities.
Fair value of assets acquired $ 1,067,000
Cash paid (851,000)
-----------
Liabilities assumed $ 216,000
===========
</TABLE>
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 February
28, 1998 are not necessarily indicative of the results that may be expected for
the year ending May 30, 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, February 28,
1997 1998
----------- -----------
<S> <C> <C>
Raw Materials $ 3,029,000 $ 3,203,000
Work in Process 1,697,000 2,398,000
Finished Products 5,609,000 5,461,000
----------- -----------
$10,335,000 $11,062,000
=========== ===========
</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 Saturday
closest to May 31. Interim fiscal quarters end on the Saturday 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
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
128, Earnings Per Share, which replaces the presentation of "primary" earnings
per share with "basic" earnings per share and the presentation of "fully
diluted" earnings per share with "diluted" earnings per share. All previously
reported earnings per share amounts have been restated based on the provisions
of the new standard. Basic earnings per share are based upon the weighted
average number of common shares outstanding. Diluted earnings per share amounts
are based upon the weighted average number of common and common equivalent
shares for each period presented. Common equivalent shares include stock options
assuming conversion under the treasury stock method.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- -------------------------------
February 28, February 28, February 28, February 28,
1997 1998 1997 1998
------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
BASIC AND DILUTED EARNINGS
Income from continuing operations $ 1,036,000 $ 1,189,000 $ 3,579,000 $ 3,534,000
Loss from discontinued operations (529,000)
Income (loss) from disposal of segment (5,406,000) 346,000
------------- ------------ ------------- -----------
Net income (loss) $ 1,036,000 $ 1,189,000 $ (2,356,000) $ 3,880,000
============= ============ ============= ===========
COMPUTATION OF BASIC AND DILUTED SHARES
Basic EPS
Common Shareholders 4,732,230 4,734,277 4,732,003 4,737,817
Effect of Dilutive Securities
Dilutive options 113,276 245,781 88,282 298,577
------------- ------------ ------------- -----------
Diluted EPS
Common shareholders plus assumed conversion
of dilutive securities 4,845,506 4,980,058 4,820,285 5,036,394
============= ============ ============= ===========
EARNINGS PER SHARE
Basic EPS
Income from continuing operations $ 0.22 $ 0.25 $ 0.76 $ 0.74
Loss from discontinued operations (0.11)
Income (loss) from disposal of segment (1.14) 0.07
------------- ------------ ------------- -----------
Net income (loss) $ 0.22 $ 0.25 $ (0.49) $ 0.81
============= ============ ============= ===========
Diluted EPS
Income from continuing operations $ 0.21 $ 0.24 $ 0.74 $ 0.70
Loss from discontinued operations (0.11)
Income (loss) from disposal of segment (1.12) 0.07
------------- ------------ ------------- -----------
Net income (loss) $ 0.21 $ 0.24 $ (0.49) $ 0.77
============= ============ ============= ===========
</TABLE>
8
<PAGE> 9
PART I. FINANCIAL INFORMATION
HASKEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
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 financial results segregate the
effect of these operations.
The operating loss from this discontinued segment reflected in the accompanying
consolidated statements of operations for the nine months ended February 28,
1997, are net of the related income tax benefit of $220,000. The operating
results for the discontinued operations for the three and nine months ended
February 28, 1998 approximated amounts estimated and reserved for in the loss on
disposal of the segment recorded in fiscal year 1997.
In September 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.
NOTE G - SUBSEQUENT EVENT
Effective March 1, 1998, the Company acquired all of the operating assets of
M.D.C. Australasia Pty. Ltd. and Hydraulics & Air Engineering, Pty. Ltd. for
approximately $632,000 in cash plus liabilities. The businesses are located in
Brisbane, Australia.
9
<PAGE> 10
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.
RESULTS OF CONTINUING OPERATIONS
Sales for the third quarter ended February 28, 1998 increased $1,774,000, or
14.3%, to $14,175,000, as compared with sales of $12,401,000 for the same period
in the prior year. For the first nine months of fiscal year 1998, sales were
$39,025,000, or $1,399,000 (3.7%) higher than the same period in fiscal year
1997. Sales for the nine months ended February 28, 1997 included approximately
$1,200,000 in large system deliveries to the automotive industry which were not
repeated in fiscal year 1998. Sales for the three and nine months ended February
28, 1998 included approximately $2,200,000 in sales from a long-term system
contract acquired with the Palpro business in November 1997. Accounting
principles appropriate to accounting for long-term contracts, including the
recognition of revenue under the percentage of completion method, have been
adopted in connection with long-term contracts acquired or purchased.
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 $1,000,000 and $2,400,000 for the three and
nine months ended February 28, 1998, 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 approximately 5.5% and 8.2% for
the three and nine months ended February 28, 1998, respectively, as compared to
the same periods in the prior year.
Gross profit for the third quarter ended February 28, 1998 increased $358,000 to
$6,089,000, or 43.0 % of sales, as compared with gross profit of $5,731,000, or
46.2% of sales, for the same period in fiscal year 1997. Gross profit for the
first nine months of fiscal year 1998 was $18,187,000 (46.6% of sales) as
compared to $17,253,000 (45.9% of sales) for the comparable period in fiscal
year 1997. The gross profit as a percentage of sales for the three months ended
February 28, 1998 decreased compared to the prior year principally as a result
of a lower-margin associated with the long-term system sales recognized during
the quarter. This long-term contract, which is expected to be substantially
complete by fiscal year end 1998, was acquired in November 1997 with the
acquisition of the Palpro business, and is not expected to be representative of
the on-going systems and product margins from this acquisition beyond the
current contract. The gross profit as a percentage of sales for the nine months
ended February 28, 1998 increased compared to the prior year principally as a
result of the elimination of lower-margin third-party product sales, through
increased production of its manufactured products, lowering its overhead costs
as a percentage of sales, resulting in higher gross margin rates.
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)
Selling, general and administrative, and engineering ("operating") expenses were
$4,197,000 or 29.6% of sales for the third quarter of fiscal year 1998 as
compared to $4,072,000 or 32.8% of sales for the comparable period in fiscal
year 1997. For the first nine months of fiscal year 1998, operating expenses
were $12,624,000 or 32.3% of sales as compared to $12,258,000 or 32.6% of sales
for the prior year, before legal reimbursements. General and administrative
expenses for the first nine 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. Operating expenses for the
three and nine months ended February 28, 1998 included approximately $372,000
and $911,000, respectively, attributable to activities of new businesses
acquired and started.
Income from continuing operations for the third quarter ended February 28, 1998
increased $153,000 or 14.8% to $1,189,000 (8.4% of sales) as compared with
$1,036,000 (8.4% of sales) for the comparable prior period. For the nine months
ended February 28, 1998, income from continuing operations increased $355,000 or
11.2% to $3,534,000 (9.1% of sales) as compared to $3,179,000 (8.4% of sales)
for the same period in fiscal year 1997 before the reimbursements of legal
costs. Included in income from continuing operations for the nine months ended
February 28, 1997, was approximately $400,000 (net of taxes) relating to the
insurance reimbursements discussed above. The increased income from continuing
operations is a result of the improvement in gross margins as well as lower
operating expenses.
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 financial results segregate the
effect of these operations. The loss from discontinued operations for the nine
months ended February 28, 1997 was $529,000, which 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 nine months
ended February 28, 1998 were previously provided for in the Company's reserve
for loss on disposal of the segment in fiscal year 1997. In September 1997, the
Company sold the electronic products business and recognized a gain on the sale
of $346,000.
11
<PAGE> 12
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 nine months ended February 28, 1998, net cash provided by operating
activities included $2,479,000 from continuing operations as compared to
$3,220,000 for the same period in the prior year. The decrease in cash provided
by operating activities was principally due to the reduction of accrued
liabilities in the first quarter of fiscal year 1998. Net cash of $348,000 was
used in discontinued operations in the first nine months of fiscal year 1998 as
compared to $334,000 in the prior year.
During the nine months ended February 28, 1998, cash used for investing
activities consisted mainly of capital expenditures. During the nine months
ended February 28, 1997, 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 nine months ended February 28, 1998 and 1997
consists 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 $10,000,000 acquisition line of credit
available for use in making acquisitions or capital expenditures; and a
$1,370,000 term loan. At February 28, 1998, the Company had no outstanding
balances under the revolving credit or acquisition lines. As of February 28,
1998, the balance of the term debt was $1,370,000, which bears interest at the
LIBOR rate plus 1-1/2 % (7.4063% at February 28, 1998.)
As of February 28, 1998, the Company had $7,998,000 in cash and cash
equivalents, and working capital of $25,368,000, with a ratio of current assets
to current liabilities of approximately 4.4 : 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.
12
<PAGE> 13
HASKEL INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
10.30 Amended and Restated Loan Agreement dated February 13, 1998
between the Company and Union Bank of California, N.A.
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.
13
<PAGE> 14
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 4-13-98 /S/ R. MALCOLM GREAVES
---------------------- ----------------------------------------
R. Malcolm Greaves
President & Chief Executive Officer
DATE 4-13-98 /S/ LONNIE D. SCHNELL
---------------------- ----------------------------------------
Lonnie D. Schnell
Chief Financial Officer
14
<PAGE> 1
[UNION
BANK OF
CALIFORNIA LOGO]
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made and
entered into as of February 13, 1998 by and between HASKEL INTERNATIONAL, INC.,
a California corporation ("Borrower") and UNION BANK OF CALIFORNIA, N.A.
("Bank"). This Agreement amends and restates in its entirety that certain loan
agreement dated February 21, 1995 between Bank and Borrower, as amended.
SECTION 1. THE LOAN
1.1.1 THE REVOLVING LOAN. Bank will loan to Borrower an
amount not to exceed Five Million Dollars ($5,000,000) outstanding in the
aggregate at any one time (the "Revolving Loan"). Borrower may borrow, repay
and reborrow all or part of the Revolving Loan in accordance with the terms of
the Revolving Note; provided, however, that for at least thirty (30)
consecutive days during each twelve (12)-month period, the principal amount
outstanding under the Revolving Loan must be zero (0). All borrowings of the
Revolving Loan must be made before December 15, 2000 at which time all unpaid
principal and interest of the Revolving Loan shall be due and payable. The
Revolving Loan shall be evidenced by a promissory note (the "Revolving Note")
on the standard form used by Bank for commercial loans. Bank shall enter each
amount borrowed and repaid in Bank's records and such entries shall be deemed
to be the amount of the Revolving Loan outstanding. Omission of Bank to make
any such entries shall not discharge Borrower of its obligation to repay in
full with interest all amounts borrowed.
1.1.1.1 THE COMMERCIAL L/C SUBLIMIT. As a sublimit to the
Revolving Loan, Bank shall issue, for the account of Borrower, one or more
irrevocable commercial letters of credit (individually, a "Commercial L/C" and
collectively, the "Commercial L/Cs") and calling for drafts at sight or usance
up to 90 days covering the importation or purchase of inventory used in the
normal course of business. The aggregate amount available to be drawn under all
outstanding Commercial L/Cs and the aggregate amount of unpaid reimbursement
obligations under drawn Commercial L/Cs shall not exceed One Million Two
Hundred Fifty Thousand Dollars ($1,250,000) and shall reduce, dollar for
dollar, the maximum amount available under the Revolving Loan. All such
Commercial L/Cs shall be drawn on such terms and conditions as are acceptable
to Bank and shall be governed by the terms of (and Borrower agrees to execute)
Bank's standard form for commercial L/C applications and reimbursement
agreement and shall not have an expiration date more than 90 days from its date
of issuance. No Commercial L/C shall expire more than 90 days after the
maturity date of the Revolving Loan.
1.1.1.2 THE STANDBY L/C SUBLIMIT. As a sublimit to the
Revolving Loan, Bank shall issue, for the account of Borrower, one or more
irrevocable, standby letters of credit (individually, a "Standby L/C" and
collectively, the "Standby L/Cs"). All such Standby L/Cs shall be drawn on such
terms and conditions as are acceptable to Bank. The aggregate amount available
to be drawn under all outstanding Standby L/Cs and the aggregate amount of
unpaid reimbursement obligations under drawn Standby L/Cs shall not exceed One
- 1 -
<PAGE> 2
Million Two Hundred Fifty Thousand Dollars ($1,250,000) and shall reduce,
dollar for dollar, the maximum amount available under the Revolving Loan. No
Standby L/C shall have an expiry date more than 12 months from its date of
issuance unless approved by Bank and each Standby L/C shall be governed by the
terms of (and Borrower agrees to execute) Bank's standard form for standby L/C
applications and reimbursement agreements. No L/C shall expire more than 90
days after the maturity date of the Revolving Loan.
1.1.2 THE MULTIPLE DISBURSEMENT LOAN; TERM OUT LOANS. Bank
will loan to Borrower an amount not to exceed Ten Million Dollars ($10,000,000)
outstanding in the aggregate at any one time (the "Multiple Disbursement
Loan"). Borrower may borrow all or part of the Multiple Disbursement Loan in
amounts of not less than Two Hundred Fifty Thousand Dollars ($250,000) in
accordance with the terms of a promissory note evidencing such Multiple
Disbursement Loan (the "Multiple Disbursement Note"). The amount available to
be borrowed under the Multiple Disbursement Note shall automatically and
without notice to Borrower be reduced by the amount of any disbursement of the
Multiple Disbursement Loan evidenced thereby. On each of December 15, 1998 and
December 15, 1999, the entire amount of principal and accrued interest then
outstanding under the Multiple Disbursement Note shall be converted into a
single term out loan as described below (each, a "Term Out Loan"). On December
15, 2000, all remaining principal and accrued interest then remaining
outstanding under the Multiple Disbursement Loan shall be converted into an
additional Term Out Loan. Each Term Out Loan shall bear interest at the rates
set forth in, and be payable in accordance with the terms of, a promissory note
evidencing such Term Out Loan (each, a "Term Out Note"). Each Term Out Note
shall provide for payments of interest only for the first twelve (12) months,
and the principal amount thereof shall thereafter amortize in equal consecutive
principal installments over an additional period of forty-eight (48) months. In
the event of a prepayment of principal and payment of any resulting fees, any
prepaid amounts shall be applied to the scheduled principal payments in the
reverse order of their maturity. Bank shall enter the balances of the Multiple
Disbursement Loan and Term Out Loan from time to time outstanding in Bank's
records, and such entries shall be deemed to be the amount of such Loan from
time to time outstanding. Omission of Bank to make any such entries shall not
discharge Borrower of its obligation to repay in full with interest all amounts
borrowed pursuant to such Loan.
1.1.3 TERM LOAN. Bank previously made a certain term loan
("Term Loan") to Borrower, which matures on November 15, 1999. The current
outstanding principal amount of the Term Loan is One Million Three Hundred
Sixty-Nine Thousand Five Hundred Sixty-Five and 25/100 Dollars ($1,369,565.25).
The Term Loan shall be evidenced by a promissory note ("Term Note") on the
standard form used by Bank for commercial loans. In the event of a prepayment
of principal and any resulting fees, any prepaid amounts shall be applied to
the scheduled principal payments in the reverse order of their maturity.
1.2 TERMINOLOGY.
As used herein, the word "Loan" shall mean, collectively, all
the credit facilities described above.
As used herein, the word "Note" shall mean, collectively, all
the promissory notes described above.
- 2 -
<PAGE> 3
As used herein, the words "Loan Documents" shall mean all
documents executed in collection with this Agreement.
1.3 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall be
used for general working capital purposes and the proceeds of the Multiple
Disbursement Loan shall be used to finance capital expenditures and
acquisitions.
1.4 INTEREST. The unpaid principal balance of the Loan shall bear
interest at the rate or rates provided in the Note and selected by Borrower.
The Loan may be prepaid in full or in part only in accordance with the terms of
the Note and any such prepayment shall be subject to the prepayment fee
provided for therein.
1.5 UNUSED COMMITMENT FEE. On the last calendar day of the third
month following the execution of this Agreement and on the last calendar day
of each three-month period thereafter until the maturity date of the Multiple
Disbursement Loan or the earlier termination of the Multiple Disbursement Loan,
Borrower shall pay to Bank a fee of one-eighth percent (1/8%) per year on the
average unused portion of the Multiple Disbursement Loan for the preceding
quarter computed on the basis of actual days elapsed of a year of 360 days.
1.6 BALANCES. Borrower shall maintain its major domestic
depository accounts with Bank until the Note and all sums payable pursuant to
this Agreement have been paid in full.
1.7 DISBURSEMENT. Upon execution hereof, Bank shall disburse
the proceeds of the Loan as provided in Bank's standard form Authorizations
executed by Borrower.
1.8 SECURITY. Prior to any disbursement of the Loan, Borrower shall
pledge and grant to Bank a first priority perfected security interest in 50,000
shares of deferred ordinary stock of Borrower's subsidiary, Haskel Energy
Systems, Ltd.
1.9 CONTROLLING DOCUMENT. In the event of any inconsistency
between the terms of this Agreement and the Note or any of the other Loan
Documents, the terms of the Note or other Loan Documents will prevail over the
terms of this Agreement, except as provided in Section 6.3 of this Agreement.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the proceeds
of the Loan unless at or prior to the time for the making of such disbursement,
the following conditions have been fulfilled to Bank's satisfaction:
2.1 COMPLIANCE. Borrower shall have performed and complied with
all terms and conditions required by this Agreement to be performed or complied
with by it prior to or at the date of the making of such disbursement and shall
have executed and delivered to Bank the Note and other documents deemed
necessary by Bank.
2.2 BORROWING RESOLUTION. Borrower shall have provided Bank with
certified copies of resolutions duly adopted by the Board of Directors of
Borrower, authorizing this Agreement and the Loan Documents. Such resolutions
shall also designate the persons who
- 3 -
<PAGE> 4
are authorized to act on Borrower's behalf in connection with this Agreement
and to do the things required of Borrower pursuant to this Agreement.
2.3 CONTINUING COMPLIANCE. At the time any disbursement is to be
made, there shall not exist any event, condition or act which constitutes an
event of default under Section 6 hereof or any event, condition or act which
with notice, lapse of time or both would constitute such event of default; nor
shall there be any such event, condition, or act immediately after the
disbursement were it to be made.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 BUSINESS ACTIVITY. The principal business of Borrower is the
manufacture and distribution of pneumatically-driven, high-pressure liquid
pumps, gas boosters, and related products.
3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling
interest or at least a 25% ownership interest) are Haskel Energy Systems, Ltd.,
Haskel-Hogan Systems and Service, and Haskel Asia Pte.
3.3 AUTHORITY TO BORROW. The execution, delivery and performance
of this Agreement, the Note and all other agreements and instruments required
by Bank in connection with the Loan are not in contravention of any of the terms
of any indenture, agreement or undertaking to which Borrower is a party or by
which it or any of its property is bound or affected.
3.4 FINANCIAL STATEMENTS. The audited consolidated financial
statements of Borrower, including both a balance sheet at May 31, 1997,
together with supporting schedules, and an income statement for the twelve (12)
months ended May 31, 1997, have heretofore been furnished to Bank, and are true
and complete and fairly represent the financial condition of Borrower during
the period covered thereby. Since May 31, 1997, there has been no material
adverse change in the financial condition or operations of Borrower.
3.5 TITLE. Except for assets which may have been disposed of in
the ordinary course of business, Borrower has good and marketable title to all
of the property reflected in its financial statements delivered to Bank and to
all property acquired by Borrower since the date of said financial statements,
free and clear of all liens, encumbrances, security interests and adverse
claims except those specifically referred to in said financial statements.
3.6 LITIGATION. Except as described in the audited consolidated
financial statement of Borrower for the fiscal year ended May 31, 1997, there
is no litigation or proceeding pending or threatened against Borrower or any of
its property which is reasonably likely to affect the financial condition,
property or business of Borrower in a materially adverse manner or result in
liability in excess of Borrower's insurance coverage.
3.7 DEFAULT. Borrower is not now in default in the payment of any
of its material obligations, and there exists no event, condition or act which
constitutes an Event of
- 4 -
<PAGE> 5
Default under Section 6 hereof and no condition, event or act which with notice
or lapse of time, or both, would constitute an Event of Default.
3.8 ORGANIZATION. Borrower is duly organized and existing under
the laws of the state of its organization, and has the power and authority to
carry on the business in which it is engaged and/or proposes to engage.
3.9 POWER. Borrower has the power and authority to enter into this
Agreement and to execute and deliver the Note and all of the other Loan
Documents.
3.10 AUTHORIZATION. This Agreement and all things required by this
Agreement have been duly authorized by all requisite action of Borrower.
3.11 QUALIFICATION. Borrower is duly qualified and in good standing
in any jurisdiction where such qualification is required.
3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with
respect to any applicable laws, rules, ordinances or regulations which
materially affect the operations or financial condition of Borrower.
3.13 ERISA. Any defined benefit pension plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.
3.14 REGULATION U. No action has been taken or is currently planned
by Borrower, or any agent acting on its behalf, which would cause this
Agreement or the Note to violate Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Securities
and Exchange Act of 1934, in each case as in effect now or as the same may
hereafter be in effect. Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock as one of its
important activities and none of the proceeds of the Loan will be used directly
or indirectly for such purpose.
3.15 CONTINUING REPRESENTATIONS. These representations shall be
considered to have been made again at and as of the date of each disbursement
of the Loan and shall be true and correct as of such date or dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and all sums payable pursuant to this Agreement or any other
of the Loan Documents have been paid in full, unless Bank waives compliance in
writing, Borrower agrees that:
4.1 USE OF PROCEEDS. Borrower will use the proceeds of the Loan
only as provided in subsection 1.3 above.
4.2 PAYMENT OF OBLIGATIONS. Borrower will pay and discharge
promptly all taxes, assessments and other governmental charges and claims
levied or imposed upon it or its
- 5 -
<PAGE> 6
property, or any part thereof, provided, however, that Borrower shall have the
right in good faith to contest any such taxes, assessments, charges or claims
and, pending the outcome of such contest, to delay or refuse payment thereof
provided that adequately funded reserves are established by it to pay and
discharge any such taxes, assessments, charges and claims.
4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and preserve
its existence and assets and all rights, franchises, licenses and other
authority necessary for the conduct of its business and will maintain and
preserve its property, equipment and facilities in good order, condition and
repair. Bank may, at reasonable times, visit and inspect any of the properties
of Borrower.
4.4 RECORDS. Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during regular business
hours. Costs for such audits shall be paid by Borrower.
4.5 INFORMATION FURNISHED. Borrower will furnish to Bank:
(a) Within sixty (60) days after the close of each fiscal
quarter, except for the final quarter of each fiscal year, its Form 10Q, its
unaudited consolidated and consolidating balance sheet as of the close of such
fiscal quarter, its unaudited consolidated and consolidating income and expense
statement with supportive schedules and statement of retained earnings for that
fiscal quarter, prepared in accordance with generally accepted accounting
principles;
(b) Within one hundred twenty (120) days after the close of
each fiscal year, its Form 10K, a copy of its consolidated and consolidating
statement of financial condition including at least its balance sheet as of the
close of such fiscal year, its consolidated and consolidating income and
expense statement and retained earnings statement for such fiscal year,
examined and prepared on an audited basis by independent certified public
accountants selected by Borrower and reasonably satisfactory to Bank, in
accordance with generally accepted accounting principles applied on a basis
consistent with that of the previous year;
(c) Such other financial statements and information as Bank
may reasonably request from time to time;
(d) In connection with each financial statement provided
hereunder, a statement executed by chief financial officer of Borrower in form
acceptable to Bank, certifying that no Event of Default has occurred and no
event exists which with notice or the lapse of time, or both, would result in
an Event of Default hereunder and certifying compliance with all covenants
under this Agreement;
(e) In connection with each fiscal year-end statement required
hereunder, any management letter of Borrower's certified public accountants;
(f) Prompt written notice to Bank of all events of default
under any of the terms or provisions of this Agreement or of any other
agreement, contract, document or instrument entered, or to be entered into with
Bank; and of any litigation which, if decided
- 6 -
<PAGE> 7
adversely to Borrower, would have a material adverse effect on Borrower's
financial condition; and of any other matter which has resulted in, or is
likely to result in, a material adverse change in its financial condition or
operations;
(g) Prior written notice to Bank of any changes in
Borrower's officers and other senior management; Borrower's name; and location
of Borrower's assets, principal place of business or chief executive office.
4.6 WORKING CAPITAL. Borrower will at all times maintain a working
capital equal to at least Fifteen Million Dollars ($15,000,000). "Working
Capital" for the purpose of this subsection shall mean the excess of current
assets over current liabilities of Borrower, as such terms are defined by
generally accepted accounting principles.
4.7 TANGIBLE NET WORTH. Until May 31, 1998, Borrower will at all
times maintain Tangible Net Worth of not less than Twenty Five Million Dollars
($25,000,000). Thereafter, Borrower will at all times maintain a minimum
Tangible Net Worth that increases from said amount as of the end of Borrower's
fiscal year by one hundred percent (100%) of Borrower's net profit after taxes.
"Tangible Net Worth" shall mean net worth increased by indebtedness of Borrower
subordinated to Bank and decreased by patents, licenses, trademarks, trade
names, goodwill and other similar intangible assets, organizational expenses,
and monies due from affiliates (including officers, shareholders and directors).
4.8 DEBT TO TANGIBLE NET WORTH. Borrower will at all times
maintain a ratio of total liabilities to Tangible Net Worth of not greater than
1.25:1.0.
4.9 EBITDA TO DEBT SERVICE RATIO. Borrower will maintain a ratio of
EBITDA to Debt Service of not less than 1.25:1.0. "EBITDA" shall mean earnings
before interest, taxes, depreciation, amortization, other non-cash charges, plus
cash in excess of Two Million Dollars ($2,000,000). "Debt Service" shall mean
the sum of (i) that principal portion of term obligations including capitalized
lease obligations coming due during twelve (12) months after the date of
calculation; and (ii) for the twelve months preceding calculation, (a) interest
expense, (b) taxes, (c) non-financed capital expenditures, (d) dividends, and
(e) the aggregate amount, expressed in dollars, of all purchases, redemptions,
retirements and other acquisitions of shares of the capital stock of Borrower.
Compliance with this subsection shall be measured as of the end of each fiscal
quarter on a rolling four-quarter basis.
4.10. INSURANCE. Borrower will keep all of its insurable property,
real, personal or mixed, insured by good and responsible companies against fire
and such other risks as are customarily insured against by companies conducting
similar business with respect to like properties. Borrower will maintain
adequate worker's compensation insurance and adequate insurance against
liability for damages to persons and property.
4.11 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon demand by
Bank, take such further action and execute all such additional documents and
instruments in connection with this Agreement as Bank in its reasonable
discretion deems necessary, and promptly supply Bank with such other
information concerning its affairs as Bank may request from time to time.
- 7 -
<PAGE> 8
4.12 LITIGATION AND ATTORNEYS' FEES. Borrower will pay promptly to
Bank upon demand, reasonable attorneys' fees (including but not limited to the
reasonable estimate of the allocated costs and expenses of in-house legal
counsel and legal staff) and all costs and other expenses paid or incurred by
Bank in collecting, modifying or compromising the Loan or in enforcing its
rights or remedies created by, connected with or provided for in this Agreement
or any of the Loan Documents whether or not an arbitration, judicial action or
other proceeding is commenced. If such proceeding is commenced, only the
prevailing party shall be entitled to attorneys' fees and court costs.
4.13 BANK EXPENSES. Borrower will pay or reimburse Bank for all
costs, expenses and fees incurred by Bank in preparing and documenting this
Agreement and the Loan, and all amendments and modifications thereof, including
but not limited to all filing and recording fees, and costs of appraisals.
4.14 REPORTS UNDER PENSION PLANS. Borrower will furnish to Bank, as
soon as possible and in any event within 15 days after Borrower knows or has
reason to know that any event or condition with respect to any defined benefit
pension plans of Borrower described in Section 3 above has occurred, a
statement of an authorized officer of Borrower describing such event or
condition and the action, if any, which Borrower proposes to take with respect
thereto.
SECTION 5. NEGATIVE COVENANTS
Until the Note and all other sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
5.1 ENCUMBRANCES AND LIENS. Borrower will not create, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance, or lien
other than for taxes not delinquent and for taxes and other items being
contested in good faith) on property of any kind, whether real, personal or
mixed, now owned or hereafter acquired, or upon the income or profits thereof,
except to Bank and except for minor encumbrances and easements on real property
which do not affect its market value, and except for existing liens on
Borrower's personal property and future purchase money security interests
encumbering only the personal property purchased.
5.2 BORROWINGS. Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face value
for deposit or collection purposes only and without any fee other than fees
normally charged by the financial institution for deposit or collection
services. Borrower will not borrow any money, become contingently liable to
borrow money, nor enter any agreement to directly or indirectly obtain borrowed
money, except pursuant to agreements made with Bank.
5.3 SALES OF ASSETS, LIQUIDATION OR MERGER. Borrower will neither
liquidate nor dissolve nor enter into any consolidation, merger, partnership or
other combination, nor convey, nor sell, nor lease all or the greater part of
its assets or business, nor purchase or lease all or the greater part of the
assets or business of another; provided, however, so long as no Event of
Default then exists or would then exist after giving effect thereto, Borrower
may acquire, merge or consolidate with another corporation if (a) Borrower is
the surviving corporation, (b) Borrower's assets will not be subject to any
lien or encumbrance following the effective date
- 8 -
<PAGE> 9
of such combination, and (c) consideration paid by Borrower in connection with
such combination (whether paid in cash, by the incurrence of indebtedness or
otherwise) does not exceed Ten Million Dollars ($10,000,000) in any fiscal
year.
5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not, except in
the ordinary course of business as currently conducted, make any loans or
advances, become a guarantor or surety, pledge its credit or properties in any
manner or extend credit except that Borrower may guarantee the unsecured
indebtedness of Haskel Energy Systems Ltd.; provided however that the amount of
such guaranty shall not exceed Two Million Dollars ($2,000,000).
5.5 INVESTMENTS. Borrower will not purchase the debt or equity of
another person or entity except for investment grade instruments maturing
within one year of purchase.
5.6 PAYMENTS OF DIVIDENDS. Borrower will not declare or pay any
dividends, other than a dividend payable in its own common stock, or authorize
or make any other distribution with respect to any of its stock now or
hereafter outstanding except from subsidiaries to Borrower, if an Event of
Default has occurred and is then continuing.
5.7 RETIREMENT OF STOCK. Borrower will not acquire or retire any
share of its capital stock for value in excess of 50,000 shares per fiscal year
without prior Bank approval.
5.8 PARENT AND SUBSIDIARY PROPERTY. Borrower will not transfer any
property to its parent or any affiliate of its parent, except for value
received in the normal course of business as business would be conducted with
an unrelated or unaffiliated entity. In no event shall management fees or fees
for services be paid by Borrower to any such direct or indirect affiliate
without Bank's prior written approval.
5.9 CAPITAL EXPENDITURES. Borrower will not make capital
expenditures in excess of Five Million Dollars ($5,000,000) in any fiscal year;
and shall only make such expenditures as are necessary for Borrower in the
conduct of its ordinary course of business. Each said expenditure shall be
needed by Borrower in the ordinary course of its business. Expenditures as used
in this subsection shall include the current expense portion of all leases
whether or not capitalized and shall also include the current portion of any
debt used to finance capital expenditures.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default") shall
terminate any obligation on the part of Bank to make or continue the Loan and
automatically, unless otherwise provided under the Note, shall make all sums of
interest and principal and any other amounts owing under the Loan immediately
due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:
6.1 Borrower shall default in the due and punctual payment of the
principal of or the interest on the Note or any of the other Loan Documents; or
6.2 Except as provided in Section 6.3 below, any default shall
occur under the Note; or
- 9 -
<PAGE> 10
6.3 Borrower shall default in the due performance or observance of
any covenant or condition of the Loan Documents; provided, however, that
Borrower shall be given a 30-day grace period to cure a violation of (i) any of
the financial covenants set forth in Section 4 hereof, and (ii) Subsections
5(j), 5(k), 5(l), and 5(m) of the Note; further provided, however (with respect
to each of the foregoing Subsections of the Note), that Borrower shall have set
aside adequate reserves as required by GAAP; that any such Events of Default
described in such aforementioned Subsections shall not (a) concern a sum of
money in excess of $250,000, (b) upset the priority of Bank's own security
interest in the Borrower's assets, nor (c) be a cause of or contribute to a
default by Borrower under one or more terms of this Agreement; and (solely with
respect to Subsection 5(l) of the Note), that the grace period afforded to
Obligor shall be co-extensive with the grace period, if any, so afforded
pursuant to the instrument or document evidencing such Obligor's obligation
concerning the borrowing of money. The grace periods, extended to Borrower
pursuant to this Section 6.3 shall commence upon the earlier to occur of (i)
the date Borrower first becomes aware (or, with the exercise of reasonable
care, should have become aware) of such Event of Default and (ii) the date on
which Bank first notifies Borrower of such Event of Default.
6.4 Any guaranty or subordination agreement required hereunder is
breached or becomes ineffective, or any Guarantor or subordinating creditor
dies, disavows or attempts to revoke or terminate such guaranty or
subordination agreement; or
6.5 There is a change in ownership or control of ten percent (10%)
or more of the issued and outstanding stock of Borrower or any Guarantor, or
(if Borrower is a partnership) there is a change in ownership or control of any
general partner's interest.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 ADDITIONAL REMEDIES. The rights, powers and remedies given to
Bank hereunder shall be cumulative and not alternative and shall be in addition
to all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.2 NONWAIVER. Any forbearance or failure or delay by Bank in
exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof. No waiver shall be effective unless
it is in writing and signed by an officer of Bank.
7.3 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assignees of
Borrower, and any assignment by Borrower without Bank's consent shall be null
and void.
7.4 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California.
7.5 SEVERABILITY. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective. In the event of any conflict between the
provisions of this Agreement and the provisions of any note or reimbursement
agreement evidencing any indebtedness hereunder, the provisions of such note or
reimbursement agreement shall prevail.
- 10 -
<PAGE> 11
7.6 INTEGRATION CLAUSE. Except for documents and instruments
specifically referenced herein, this Agreement constitutes the entire agreement
between Bank and Borrower regarding the Loan and all prior communications
verbal or written between Borrower and Bank shall be of no further effect or
evidentiary value.
7.7 CONSTRUCTION. The section and subsection headings herein are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.8 AMENDMENTS. This Agreement may be amended only in writing
signed by all parties hereto.
7.9 COUNTERPARTS. Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original, but
when together shall be one and the same instrument.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following methods
and addressed to the respective party at its address given with the signatures
at the end of this Agreement and shall be considered to have been validly
given: (a) upon delivery, if delivered personally; (b) upon receipt, if mailed,
first class postage prepaid, with the United States Postal Service; (c) on the
next business day, if sent by overnight courier service of recognized standing;
and (d) upon telephoned confirmation of receipt, if telecopied.
8.2 The addresses to which notices or demands are to be given may
be changed from time to time by notice delivered as provided above.
THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
UNION BANK OF CALIFORNIA, N.A. HASKEL INTERNATIONAL, INC.
By: /s/ CATHERINE ABE By: /s/ R. MALCOLM GREAVES
---------------------------- ------------------------------
Catherine Abe R. Malcolm Greaves
Title: Vice President Title: President/CEO
Address:
445 S. Figueroa St. By: /s/ LONNIE D. SCHNELL
Los Angeles, CA 90071 ------------------------------
Attn: Catherine Abe, VP Lonnie D. Schnell
Commercial Portfolio Title: Chief Financial Officer
Administration, 10th Fl.
Address:
100 E. Graham Place
Burbank, CA 91502
Attn: Lonnie D. Schnell, CFO
- 11 -
<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> 9-MOS
<FISCAL-YEAR-END> MAY-30-1998
<PERIOD-END> FEB-28-1998
<CASH> 7,998
<SECURITIES> 0
<RECEIVABLES> 12,275
<ALLOWANCES> 476
<INVENTORY> 11,062
<CURRENT-ASSETS> 32,871
<PP&E> 11,647
<DEPRECIATION> 6,293
<TOTAL-ASSETS> 41,526
<CURRENT-LIABILITIES> 7,503
<BONDS> 0
0
0
<COMMON> 13,811
<OTHER-SE> (92)
<TOTAL-LIABILITY-AND-EQUITY> 41,526
<SALES> 39,025
<TOTAL-REVENUES> 39,025
<CGS> 20,838
<TOTAL-COSTS> 20,838
<OTHER-EXPENSES> 12,624<F1>
<LOSS-PROVISION> 38
<INTEREST-EXPENSE> 112
<INCOME-PRETAX> 5,767
<INCOME-TAX> 2,233
<INCOME-CONTINUING> 3,534
<DISCONTINUED> 346
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,880
<EPS-PRIMARY> .81<F2>
<EPS-DILUTED> .77
<FN>
<F1>Other expenses are comprised of selling, general administrative,
engineering design, research and development.
<F2>For the purposes of this Exhibit, Primary means Basic.
</FN>
</TABLE>
