-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UJDhqPTk87x2+yZFlOSK8YJc87zh0GtU7kHdnfR2Cns7ud4PZPkIxxaD++2ZbLON sDMcTz9MCyDR63PjA9hzKg== 0000950150-98-000057.txt : 19980115 0000950150-98-000057.hdr.sgml : 19980115 ACCESSION NUMBER: 0000950150-98-000057 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19971128 FILED AS OF DATE: 19980114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HASKEL INTERNATIONAL INC CENTRAL INDEX KEY: 0000918022 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 954107640 STATE OF INCORPORATION: CA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25068 FILM NUMBER: 98506417 BUSINESS ADDRESS: STREET 1: 100 EAST GRAHAM PL CITY: BURBANK STATE: CA ZIP: 91502 BUSINESS PHONE: 8188434000 MAIL ADDRESS: STREET 1: 100 EAST GRAHAM PLACE CITY: BURBANK STATE: CA ZIP: 91502 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED 11/28/97 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. 2 INDEX HASKEL INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION PAGE 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
2 3 HASKEL INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MAY 31, NOVEMBER 28, 1997 1997 ----------- ----------- 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 =========== ===========
See notes to consolidated financial statements. 3 4 HASKEL INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) (UNAUDITED)
MAY 31, NOVEMBER 28, 1997 1997 ----------- ----------- 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 =========== ===========
See notes to consolidated financial statements. 4 5 HASKEL INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED NOVEMBER 30, NOVEMBER 28, NOVEMBER 30, NOVEMBER 28, 1996 1997 1996 1997 ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============
See notes to consolidated financial statements. 5 6 HASKEL INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED NOVEMBER 30, NOVEMBER 28, 1996 1997 ----------- ----------- 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 =========== ===========
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 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:
May 31, November 28, 1997 1997 ----------- ----------- 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 =========== ===========
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 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:
Three Months Ended Six Months Ended November 30, November 28, November 30, November 28, 1996 1997 1996 1997 --------- -------- -------- -------- 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
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 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 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 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 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 13 HASKEL INTERNATIONAL, INC. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONTINUED) 1. ELECTION OF DIRECTORS:
Number of Number of Number of Shares Shares Shares For Against Withheld ---------- ------- -------- 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 -
Number of Number of Number of Shares Shares Shares For Against Withheld ---------- ------- -------- 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 -
13 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:
Percent of Shares Shares Voting ------ ------------- Votes For 3,258,493 75.5 Votes Against 255,230 5.9 Non-Votes and Abstentions 801,131 18.6
3. APPROVAL OF DELOITTE & TOUCHE, LLP AS THE COMPANY'S INDEPENDENT AUDITORS:
Percent of Shares Shares Voting ------ ------------- Votes For 4,301,493 99.7 Votes Against 4,115 .1 Non-Votes and Abstentions 9,246 .2
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 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 EX-10.27 2 CHANGE IN CONTROL AGREEMENT DATED 09/27/97 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, 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- 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: -3- 4 (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 -4- 5 "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 -5- 6 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 -6- 7 (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 -7- 8 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 -8- 9 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. -9- 10 (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 -10- 11 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 -11- 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 -12- 13 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 -13- 14 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. -14- 15 (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 -15- 16 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 -16- 17 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 -17- 18 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 -18- 19 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. -19- 20 (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 -20- 21 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. -21- 22 (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 -22- 23 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 -23- 24 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 -24- 25 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 -25- 26 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 -26- 27 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 -27- 28 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 -28- 29 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 -29- 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 -30- 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) -31- 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 -32- 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. -33- 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 -34- 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. -35- 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: ------------------------- -36- 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. -37- 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. -38- 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/ R. MALCOLM GREAVES ----------------------------------------- -39- EX-10.28 3 CHANGE OF CONTROL AGREEMENT DATED 09/27/97 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, 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- 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: -3- 4 (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 -4- 5 "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 -5- 6 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 -6- 7 (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 -7- 8 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 -8- 9 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. -9- 10 (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 -10- 11 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 -11- 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 -12- 13 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 -13- 14 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. -14- 15 (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 -15- 16 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 -16- 17 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 -17- 18 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 -18- 19 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. -19- 20 (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 -20- 21 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. -21- 22 (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 -22- 23 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 -23- 24 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 -24- 25 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 -25- 26 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 -26- 27 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 -27- 28 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 -28- 29 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 -29- 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 -30- 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) -31- 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 -32- 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. -33- 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 -34- 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. -35- 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: ------------------------- -36- 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. -37- 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. -38- 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 ----------------------------------------- -39- EX-10.29 4 CHANGE OF CONTROL AGREEMENT DATED 10/06/97 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; 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. 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 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 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 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 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. 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 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 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. 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 ----------------- 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 EX-11.1 5 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11.1 HASKEL INTERNATIONAL, INC. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
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 -------------- ------------- ------------ ------------- 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 =========== =========== =========== ===========
16 EX-27 6 FINANCIAL DATA SCHEDULE
5 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. 6-MOS MAY-29-1998 NOV-28-1997 7,717 0 12,303 518 11,350 32,809 11,896 6,076 41,965 8,236 0 0 0 13,753 212 41,965 24,850 24,850 12,752 12,752 8,427 45 77 3,802 1,457 2,345 346 0 0 2,691 .53 .53 Other expenses are comprised of selling, general and administrative, engineering design, research and development. Fully diluted earnings per share is not disclosed in the Company's consolidated financial statements since the maximum dilutive effect is not material.
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