<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1997
REGISTRATION NO. 333-40245
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SCP POOL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 5091 36-3943363
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
109 NORTHPARK BOULEVARD
COVINGTON, LOUISIANA 70433-5001
TELEPHONE: (504) 892-5521
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
CRAIG K. HUBBARD
109 NORTHPARK BOULEVARD
COVINGTON, LOUISIANA 70433-5001
TELEPHONE: (504) 892-5521
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
STEPHEN L. RITCHIE KIRKLAND & ELLIS JOEL J. HUGHEY ALSTON & BIRD LLP 1201
200 EAST RANDOLPH DRIVE CHICAGO, WEST PEACHTREE STREET ATLANTA, GEORGIA
ILLINOIS 60601 (312) 861-2000 30309 (404) 881-7000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 9, 1997
2,950,000 SHARES
LOGO
LOGO
SCP POOL CORPORATION
COMMON STOCK
-----------
Of the 2,950,000 shares of Common Stock being offered hereby, 1,350,000
shares are being offered by SCP Pool Corporation (the "Company") and 1,600,000
shares are being offered by certain stockholders (the "Selling Stockholders").
See "Principal and Selling Stockholders." The Company will not receive any
proceeds from the sale of shares by the Selling Stockholders.
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "POOL." On November 13, 1997 the last reported sale price of the Common
Stock on that market was $21.25 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE DISCOUNTS AND PROCEEDS TO SELLING
TO PUBLIC COMMISSIONS(1) THE COMPANY(2) STOCKHOLDERS(2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
- ----------------------------------------------------------------------------------------------
Total(3)......................... $ $ $ $
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) See "Underwriting" for a description of the indemnification arrangements
with the Underwriters.
(2) Before deducting expenses of the Offering payable by the Company estimated
to be $450,000.
(3) One of the Selling Stockholders has granted the Underwriters a 30-day
option to purchase up to 442,500 additional shares of Common Stock solely
to cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Selling Stockholders will be $ , $ and $ ,
respectively. See "Underwriting."
-----------
The Common Stock is offered severally by the Underwriters named herein,
subject to prior sale, when, as and if received and accepted by them, and
subject to their right to reject orders in whole or in part, and to certain
other conditions. It is expected that delivery of the certificates representing
the Common Stock will be made on or about , 1997.
MORGAN KEEGAN & COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY
JOHNSON RICE & COMPANY L.L.C.
, 1997.
<PAGE>
[DRAWING OF IN-GROUND SWIMMING POOL WITH NUMBERED CROSS REFERENCES TO
PARTS, EQUIPMENT AND MAINTENANCE PRODUCTS TEXT: "EVERYTHING BUT THE WATER"
THE COMPANY SUPPLIES A FULL ARRAY OF POOL EQUIPMENT IN ADDITION TO POOL
MAINTENANCE PRODUCTS SUCH AS CHEMICALS AND REPLACEMENT PARTS. 1. FILTER,
2. PUMP AND MOTOR, 3. POOL HEATER, 4. CENTRAL STEP HANDRAIL, 5. STEP, 6.
INLET FITTINGS, 7. LINER, 8. AUTOMATIC POOL CLEANER, 9. SAFETY FLOAT LINE,
10. SLIDE, 11. POOL LADDER, 12. DIVING BOARD, 13. UNDERWATER LIGHT, 14.
MAIN DRAIN, 15. LADDER MOUNTS, 16. POOL WATER BRACES, 17. PVC PIPE, 18.
SKIMMER, 19. WALL PANELS, 20. CEMENT DECK BRACES.]
[UNITED STATES MAP SHOWING THE LOCATIONS OF THE COMPANY'S SERVICE CENTERS
TEXT: SCP'S SERVICE CENTER LOCATIONS.
[SQUARE] AS OF THE IPO IN OCTOBER 1995
[CIRCLE] ACQUIRED OR OPENED SINCE OCTOBER 1995
[TRIANGLE] PROPOSED ACQUISITION]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the Consolidated Financial
Statements and the related Notes thereto appearing elsewhere in this
Prospectus. Unless the context otherwise requires, references in this
Prospectus to the "Company" or "SCP Pool" shall mean SCP Pool Corporation and
its predecessor, together with SCP Pool Corporation's direct and indirect
subsidiaries. Unless otherwise indicated, all information contained in this
Prospectus (i) has been adjusted to give effect to the three-for-two stock
split effected in September 1997, and (ii) assumes no exercise of the
Underwriters' over-allotment option.
THE COMPANY
SCP Pool Corporation is the nation's leading independent distributor of
swimming pool supplies and related products. The Company distributes a broad
range of products to three types of customers: (i) swimming pool remodelers and
builders, which refurbish, retrofit and overhaul existing pools and install new
pools; (ii) independent retail stores, which sell swimming pool products to
consumers; and (iii) swimming pool repair and service companies, which perform
periodic maintenance and repair services, primarily for residential and small
commercial swimming pools. The Company distributes more than 34,000 national
brand and private label products to over 20,000 customers. These products
include non-discretionary pool maintenance products, such as chemicals and
replacement parts, packaged pools (kits to build swimming pools which include
walls, liner, bracing and other materials) and pool equipment, such as
cleaners, filters, heaters, pumps and lights.
SCP Pool has managed its growth through a combination of service center
acquisitions, service center additions in new and existing markets, and
continued growth at existing service centers. From January 1, 1990 to September
30, 1997, the Company grew from 8 service centers in 6 states to 74 service
centers in 24 states. Forty-three of the sixty-six service centers added from
January 1, 1990 to September 30, 1997 were through acquisitions, making SCP the
leader in consolidating the pool supply industry. The Company's most
significant acquisition to date occurred in September 1996, when the Company
acquired certain assets (primarily inventory, property and equipment) of The B-
L Network, Inc. ("BLN"), a wholesaler of swimming pool supplies with 39 service
centers in 12 states for an aggregate purchase price of approximately $34.2
million (the "BLN Acquisition"). In November 1997, the Company entered into a
purchase agreement to acquire substantially all of the assets of Bicknell
Huston Distributors, Inc. ("Bicknell"), which distributes swimming pool
supplies and related products through its eleven service centers in six
northeastern states, for a purchase price of approximately $21.0 million (the
"1997 Acquisition"). Following the 1997 Acquisition, which the Company expects
to be completed in late December 1997, the Company will have 85 service centers
in 30 states. There can be no assurances, however, that the 1997 Acquisition
will be completed. Twenty-three of the sixty-six service centers added since
January 1, 1990 were new locations opened by the Company. As a result of
acquisitions and service center openings, the Company has significantly
increased its geographic scope.
SCP Pool estimates that swimming pool supply industry sales in the United
States totalled approximately $2.7 billion in 1996, of which approximately $1.6
billion in sales were made by pool supply distributors, and $1.1 billion in
sales were made by mass merchandisers and large specialty retail chains. The
distribution segment of the industry is fragmented, and is comprised of six
large wholesale swimming pool supply distributors (estimated by management to
be approximately 40% of the market) and a large number of smaller local or
regional companies. These smaller companies generally lack the purchasing
power, management control systems and other resources of large distributors
such as the Company, which has resulted in a trend toward industry
consolidation. The Company believes that this industry consolidation affords it
further opportunities for growth in new and existing markets through
acquisitions of other swimming pool supply distributors.
The Company continues to pursue an aggressive growth strategy. Over the past
seven years, the Company's net sales have grown from $32.1 million in 1990 to
$235.8 million in 1996 and $286.8 million for the nine months ended September
30, 1997. Operating income has increased from $2.1 million in 1990 to $10.5
million
3
<PAGE>
in 1996 and to $18.4 million for the nine months ended September 30, 1997. The
Company expects to continue its growth strategy by making strategic
acquisitions, opening service centers in new locations, and increasing sales at
existing service centers. SCP Pool has completed seven acquisitions since
January 1994 and expects to complete the 1997 Acquisition in late December
1997, although there can be no assurances the 1997 Acquisition will occur at
that time or at all. Management believes that the 1997 Acquisition, if and when
completed, will further establish the Company as the leading national
independent distributor of swimming pool products and supplies, and increase
the geographic scope and diversity of the Company's business. SCP Pool has
complemented these acquisitions with increasing sales at existing service
centers. Comparable service center sales increased 12%, 15%, 16%, 19% and 11%
in 1993, 1994, 1995, 1996 and the nine months ended September 30, 1997,
respectively.
The Company believes that its sales and earnings growth have been and will
continue to be driven by its primary competitive strengths, which include the
following:
. Leading Market Position. The Company believes that its market position as
the nation's leading distributor of swimming pool supplies provides it
with significant name recognition, lower prices due to volume purchasing
discounts, access to distribution rights for name-brand products and
other operating efficiencies. In addition, SCP Pool offers its customers
one of the broadest available selections of products.
. Experienced Management Team. The Company believes that its key personnel,
including service center managers, are among the most experienced in the
swimming pool supply industry. Executive officers and service center
managers have an average of 28 and 16 years of pool industry experience,
respectively. The experience and tenure of SCP Pool's personnel and their
long standing relationships with their customers have been instrumental
to the growth of the Company.
. Experience in Completing and Integrating Acquisitions. SCP Pool has
completed seven acquisitions since 1994, and 43 of the Company's 74
service centers were added pursuant to such acquisitions. Management
believes that the Company's experience in integrating the acquired
businesses provides a competitive advantage in the evaluation and
integration of future acquisitions.
. Entrepreneurial Business Environment. Service center managers are
responsible for day-to-day operations and profitability of their service
center and have sales responsibility within their geographic area. The
Company believes that its entrepreneurial business environment has (i)
contributed to growth in sales and profitability, (ii) enabled the
Company to be highly responsive to customer requirements and preferences,
actions by competitors and changes in local market conditions and (iii)
assisted the Company's efforts to attract and retain qualified employees.
. Advanced Information Systems. The Company has made a significant
investment in its information systems, which it believes are among the
most advanced in the swimming pool distribution industry. The Company
recently upgraded those systems to achieve additional cost reductions,
operating efficiencies, improved inventory management and a higher level
of customer service as well as to provide capacity for future growth.
. Superior Customer Service. The Company attempts to enhance customer
service by providing product marketing support, exclusive territorial
rights, purchase and technical follow-up support and local delivery
service.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.. 1,350,000 shares
Common Stock offered by Selling 1,600,000 shares
Stockholders(1).....................
Total Common Stock offered........... 2,950,000 shares
------
Common Stock to be outstanding after 7,740,060 shares(2)
the Offering........................
Use of Proceeds to the Company....... The net proceeds to the Company of the
Offering will be used to finance the 1997
Acquisition and repay existing
indebtedness.
Nasdaq National Market Symbol........ POOL
</TABLE>
- --------
(1) See "Principal and Selling Stockholders."
(2) Does not include the 248,035 shares issuable upon exercise of outstanding
options issued pursuant to the Company's 1995 Stock Option Plan, the 45,000
shares issuable upon exercise of outstanding options issued pursuant to the
Company's 1996 Non-Employee Director Equity Incentive Plan, the 606,965
additional shares reserved for issuance under such plans or the 98,214
shares issuable upon conversion of the Company's convertible subordinated
promissory notes. See "Management--1995 Stock Option Plan" and "Certain
Relationships and Related Transactions--Stockholder Notes."
The Company's principal executive offices are located at 109 Northpark
Boulevard, Covington, Louisiana 70433-5001 and its telephone number is (504)
892-5521.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THE PREDECESSOR THE COMPANY
---------------- --------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales.............. $54,101 $67,282 $101,977 $161,095 $235,844 $189,356 $286,847
Gross profit........... 13,352 16,421 24,489 37,121 52,030 42,846 63,579
Operating income....... 4,364 5,696 6,678 9,522 10,487 14,762 18,448
Net income(1).......... 1,107 1,579(2) 4,533 7,860 9,262
Net income per
share(1).............. .53 .53 .72 1.24 1.46
PRO FORMA STATEMENT OF
INCOME DATA(3):
Pro forma net income... $ 5,244 $ 11,037
Pro forma net income
per share(4).......... .67 1.41
Fully diluted shares
outstanding........... 7,812 7,825
OPERATING DATA:
Number of service
centers:
Starting sites....... 14 17 18 26 44 44 69
Sites acquired..... 0 0 8 14 39 39 0
Sites opened....... 3 1 3 4 2 0 5
Sites consolidated. 0 0 3 0 16 16 0
Sites closed....... 0 0 0 0 0 0 0
Ending sites......... 17 18 26 44 69 67 74
Comparable service
center sales
increases(5).......... 14% 12% 15% 16% 19% 18% 11%
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
ACTUAL AS ADJUSTED(6)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................... $ 52,203 $ 68,153
Total assets.......................................... 123,663 147,423
Total debt, including current portion................. 50,839 45,236
Stockholders' equity.................................. 46,192 72,995
</TABLE>
- --------
(1) The Predecessor elected to be treated as an S corporation for income tax
purposes, and accordingly did not pay federal and state (except in certain
states) income taxes during such period. The Company is, and has been since
its formation, a C corporation.
(2) The Company recognized an extraordinary loss, net of tax, in 1995 of
$750,000 or $0.25 per share, in connection with the write-off of loan
financing fees and a prepayment premium associated with the application of
the proceeds of the Company's initial public offering to reduce
indebtedness. Income before extraordinary loss and income per share before
extraordinary loss were $2,329,000 and $0.78, respectively.
(3) Gives effect (i) for the year ended December 31, 1996 to the acquisition of
certain assets of BLN, the sale of 1,350,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $21.25 per
share and the application of the estimated net proceeds therefrom, and the
1997 Acquisition as if each had occurred on January 1, 1996 and (ii) for
the nine months ended September 30, 1997 to the sale of 1,350,000 shares of
Common Stock offered by the Company hereby and the application of the
estimated net proceeds therefrom and the 1997 Acquisition as if each had
occurred on January 1, 1997. Such data have been derived from the unaudited
pro forma statements of income included elsewhere in this Prospectus. See
"Unaudited Pro Forma Condensed Financial Data."
(4) Calculated using pro forma net income, adjusted for the assumed reduction
in interest expense, net of tax, related to the Company's Convertible
Subordinated Notes. See Note 5 of Notes to the Company's Consolidated
Financial Statements.
(5) Comparable service center sales have been calculated using sales of service
centers that were open for more than 15 months. Comparable service center
sales for 1994 and 1996, respectively, exclude net sales at the 3 service
centers consolidated following the Aqua Fab Acquisition (as defined below)
in 1994 and the 16 service centers consolidated following the BLN
Acquisition (as defined below) in 1996. The numbers of service centers used
in calculating such figures were 13, 15, 18, 25, 38, 38 and 26, for 1992,
1993, 1994, 1995, 1996 and the nine months ended September 30, 1996 and
1997, respectively.
(6) Adjusted to give effect to the sale of 1,350,000 shares of Common Stock
offered by the Company hereby and the application of the estimated net
proceeds thereof to finance the 1997 Acquisition and reduce indebtedness as
if such application had occurred on September 30, 1997. If the 1997
Acquisition is not consummated: (i) the net proceeds of the Offering will
be used to reduce indebtedness; and (ii) working capital, total assets,
total debt and stockholders' equity, each as of September 30, 1997 and as
adjusted to give effect to the Offering and such use of proceeds as if such
application had occurred on September 30, 1997 would be $53,506, $124,966,
$25,399 and $72,995, respectively. See "Use of Proceeds."
6
<PAGE>
Certain statements in this Prospectus Summary and under the captions "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this Prospectus, such as
statements regarding the Company's strategies, plans, objectives, expectations
and intentions, are forward-looking statements that involve risks and
uncertainties, including but not limited to factors related to (i) the
Company's ability to identify appropriate acquisition candidates, complete
acquisitions on satisfactory terms, or successfully integrate acquired
businesses; (ii) the sensitivity of the swimming pool supply business to cool
or rainy weather; (iii) the intense competition and low barriers to entry in
the swimming pool supply industry; (iv) the Company's ability to obtain
financing on satisfactory terms and the degree to which the Company is
leveraged; (v) the sensitivity of the swimming pool supply business to general
economic conditions; (vi) the Company's ability to remain in compliance with
the numerous environmental, health and safety requirements to which it is
subject; (vii) the risk of fire, safety and casualty losses and related
liabilities claims inherent in the storage and repackaging of chemicals sold by
the Company; and (viii) the other factors discussed in the Company's filings
with the Securities and Exchange Commission. Such factors could affect the
Company's actual results and could cause such results to differ materially from
the Company's expectations described above.
7
<PAGE>
THE ACQUISITIONS
The Company is a successor to a business founded in 1980 by the Company's
current President and Chief Executive Officer, Frank J. St. Romain. The
Company and its wholly owned subsidiary, South Central Pool Supply, Inc. ("SCP
Supply"), were organized by Code, Hennessy & Simmons Limited Partnership
("CHS") and members of the management of the Predecessor for the purpose of
acquiring substantially all of the assets and business of Lake Villa
Corporation (formerly known as South Central Pool Supply, Inc.), a Louisiana
corporation (the "Predecessor"). On December 31, 1993, SCP Supply acquired
substantially all of the assets and business of the Predecessor (the "SCP
Acquisition").
The Company continues to pursue an aggressive growth strategy. Consistent
with this strategy, the Company has completed seven acquisitions since January
1994 (together with the SCP Acquisition, the "Acquisitions"):
. In January 1994, the Company substantially increased its operations by
acquiring certain assets of Aqua Fab Industries, Inc. ("Aqua Fab"),
including eight service centers (three of which the Company subsequently
closed and consolidated into existing service centers) in the midwest and
southeast regions of the United States (the "Aqua Fab Acquisition").
. In February 1995, the Company acquired all of the outstanding capital
stock of Orcal Pool Supplies, Inc. ("Orcal") (the "Orcal Acquisition").
Management believes that the Orcal Acquisition, in which the Company
acquired nine fully operational service centers located throughout
California, was a cost-effective means of entering one of the largest
pool supply markets in the United States.
. In March 1995, the Company acquired certain assets of Aqua Chemical Sales
and Delivery, Inc., primarily inventory and a service center in Illinois.
. In October 1995, the Company acquired certain assets of Crest
Distribution, a division of Aman Enterprises, Inc., primarily inventory
and one service center in each of Oregon and Washington.
. In November 1995, the Company acquired the capital stock of Steven
Portnoff Corporation, which operated a service center in Scottsdale,
Arizona.
. In December 1995, the Company acquired certain assets of Pool Mart of
Nevada, Inc., an affiliate of Steven Portnoff Corporation, primarily
inventory and a service center in Las Vegas, Nevada.
. The Company's most significant acquisition to date occurred in September
1996, when the Company acquired certain assets (primarily inventory,
property and equipment) of BLN, a wholesaler of swimming pool supplies
with 39 service centers in 12 states for an aggregate purchase price of
approximately $34.2 million. The Company subsequently consolidated 16 of
the BLN service centers into existing service centers. At the time of the
BLN Acquisition, BLN was the second largest pool supply distributor in
the United States, according to management estimates. The purchase price
was financed primarily through the issuance of promissory notes payable
to BLN, a portion of which have since been repaid. In connection with the
BLN Acquisition, the Company sold the chemical manufacturing and
repackaging assets of Alliance Packaging, Inc. ("Alliance Packaging"),
one of its subsidiaries, to Bio-Lab, Inc. ("Bio-Lab"), the parent of BLN,
for approximately $5.4 million (the "Alliance Sale"). In addition, the
Company and Bio-Lab entered into two five-year supply agreements pursuant
to which Bio-Lab agreed to supply the Company with certain chemical
products previously supplied to it by Alliance Packaging and with certain
chemical products previously supplied to BLN by Bio-Lab (the "Bio-Lab
Supply Agreements").
8
<PAGE>
THE 1997 ACQUISITION
In November 1997, the Company entered into a purchase agreement to acquire
substantially all of the assets of Bicknell for an aggregate purchase price of
approximately $21.0 million, subject to a purchase price adjustment based on
the working capital of Bicknell at the time of the closing. Bicknell
distributes swimming pool supplies and related products through its eleven
service centers in six northeastern states. In 1996, Bicknell had net sales of
$58.7 million. The Company expects the 1997 Acquisition to be consummated in
late December 1997, but no assurances can be made that the 1997 Acquisition
will occur at that time or at all.
Management believes that the 1997 Acquisition, if and when completed, will
further establish the Company as the leading national independent distributor
of swimming pool products and supplies, and increase the geographic scope and
diversity of the Company's business. If the 1997 Acquisition is completed in
December 1997, the Company will have 85 service centers in 30 states at that
time. As a result of the seasonal nature of the Company's business, the 1997
Acquisition is expected to have a negative effect on operating income in the
first quarter of 1998, and is not expected to benefit the Company's operating
income until at least the second quarter of 1998.
In connection with the 1997 Acquisition, the Company will enter into a
supply agreement with Pacific Industries, Inc. ("Pacific"), the sole
stockholder of Bicknell (the "Supply Agreement"). Under the terms of the
Supply Agreement, Pacific will supply the Company with polymer panels, braces,
steps, liners and other products used in the construction of in-ground pools.
The Supply Agreement will have a term of eight years, subject to renewal
options.
9
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following information
relating to the Company and the Common Stock before making an investment in
the Common Stock offered hereby.
ACQUISITIONS AND INTEGRATION OF ADDITIONAL BUSINESSES
A significant portion of the Company's recent growth has been achieved
through acquisitions of other swimming pool supply distributors, and the
Company's growth strategy includes additional acquisitions. The Company
continuously seeks out appropriate acquisition candidates and is frequently
engaged in discussions regarding potential acquisitions. The Company recently
entered into an agreement to acquire eleven additional service centers in the
northeastern United States for an aggregate consideration of approximately
$21.0 million. There can be no assurance that such acquisition will be
consummated, or that in the future the Company will be able to identify and
acquire appropriate businesses or obtain financing for such acquisitions on
satisfactory terms. Future acquisitions may be financed through the issuance
of Common Stock, which may be dilutive to the Company's stockholders, or
through the incurrence of additional indebtedness. Furthermore, there can be
no assurance that competition for acquisition candidates will not escalate,
thereby increasing the costs of making acquisitions. The process of
integrating acquired businesses into the Company's operations may result in
unforeseen difficulties and may require a disproportionate amount of resources
and management's attention, and there can be no assurance that the Company
will be able to successfully integrate acquired businesses into its
operations. The businesses acquired by the Company typically have lower gross
margins than the Company, which affects the Company's results of operations
for the period in which any such acquisition occurs and subsequent periods
until the acquired business is fully integrated. See "Business--Growth
Strategy" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
SEASONALITY AND WEATHER
The Company's business is highly seasonal. In 1996, approximately 63% of the
Company's net sales were generated in the second and third quarters of the
year, which represent the peak months of swimming pool use, installation,
remodeling and repair, and 134% of the Company's operating income was
generated in such period. Sales are substantially lower during the first and
fourth quarters of the year, when the Company typically incurs net losses. The
principal external factor affecting the Company's business is weather.
Unseasonably late warming trends can decrease the length of the pool season
and unseasonably cool weather or extraordinary rainfall during the peak season
can decrease swimming pool use, installation and maintenance, each of which
adversely affects the Company's sales and operating profit. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Seasonality and Quarterly Fluctuations."
COMPETITION
The Company faces intense competition from many regional and local
distributors, from several companies that distribute swimming pool supplies on
a national basis and, to a lesser extent, from mass market retailers and large
pool supply retailers. The Company believes that there are five swimming pool
supply distributors that compete with the Company on a national or regional
basis: Pool Water Products, Superior Pool Products Co. (a subsidiary of Olin
Corporation), Fort Wayne Pools, Hughes Supply and Benson Pump Co. Barriers to
entry in the swimming pool supply industry are relatively low. Certain of the
Company's competitors have substantially greater capital resources than the
Company.
The Company competes with other distributors for rights to distribute brand-
name products. In the event that a significant supplier of brand-name products
declined to sell or discontinued sales to the Company, the Company's business
could be materially and adversely affected. Some geographic markets serviced
by the Company, particularly California, Texas and Florida, tend to be more
competitive than others. In response to competitive pressures from any of its
current or future competitors, the Company may be required to lower
10
<PAGE>
selling prices to maintain or increase market share, and such measures could
adversely affect the Company's gross margins and operating results. See
"Business--Competition."
DEPENDENCE ON KEY PERSONNEL
The Company's success is largely dependent on the skills, experience and
efforts of its senior management and certain other key personnel. The loss of
services of one or more of the Company's key personnel could have a material
adverse effect upon the Company's business and development. See "Management"
and "Business--Competitive Strengths." The Company does not maintain key man
life insurance.
LEVERAGE
The Company is highly leveraged as a result of the debt incurred to finance
the Acquisitions, and in the event that the Company borrows additional amounts
for future acquisitions, the amount of such leverage will increase. As of
September 30, 1997, the Company's long-term debt was $43.6 million, or 49% of
the Company's total capitalization, and after giving effect to the Offering
and the application of the net proceeds to the Company therefrom to finance
the 1997 Acquisition and reduce indebtedness as if such application has
occurred on September 30, 1997, the Company's long-term debt would have been
$38.0 million, or 34% of the Company's total capitalization.
The degree to which the Company is leveraged could have important
consequences, including the following: (i) the Company's ability to obtain
additional financing for working capital, acquisitions or other purposes in
the future may be limited; (ii) a substantial portion of the Company's cash
flow from operations will be dedicated to the payment of the principal of and
interest on its indebtedness, thereby reducing funds available for operations;
(iii) certain of the Company's borrowings will be at variable rates of
interest, which could cause the Company to be vulnerable to increases in
interest rates; and (iv) the Company may be more vulnerable to economic
downturns and be limited in its ability to withstand competitive pressures.
The Company's ability to make scheduled payments of the principal of or
interest on, or to refinance, its indebtedness will depend on its future
operating performance and cash flow, which are subject to prevailing economic
conditions, prevailing interest rate levels, and financial, competitive,
business and other factors, many of which are beyond its control. There can be
no assurance that the Company will be able to generate sufficient cash flow to
cover required interest and principal payments. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
INDUSTRY AND CYCLICAL FACTORS
Demand for swimming pool products is somewhat dependent upon overall
economic conditions. In economic downturns, new housing construction and
swimming pool construction generally decline. A downturn in the economy in one
or more markets served by the Company could have a material adverse effect on
the Company's results of operations. The financial results of the Company to
date are not necessarily indicative of activities or financial results to be
realized by the Company in the future.
The Company's principal chemical raw materials are granular chlorine
compounds, which are commodity materials. The prices of granular chlorine
compounds are a function of, among other things, manufacturing capacity and
demand. The Company has generally passed through chlorine price increases to
its customers. There can be no assurance that the price of granular chlorine
compounds will not increase in the future or that the Company will be able to
pass on any such increase to its customers. The Company purchases granular
chlorine compounds primarily from two suppliers. The Company believes that
reliable alternate sources of supply are available for all of its raw
materials and finished goods, including chlorine products. There can be no
assurance, however, that the Company will continue to have access to reliable
sources of supply.
11
<PAGE>
ENVIRONMENTAL, HEALTH AND SAFETY REGULATION
The Company's business is subject to regulation under federal, state, and
local environmental and health and safety requirements, including the
Emergency Planning and Community Right-to-Know Act, the Hazardous Materials
Transportation Act and the Occupational Safety and Health Act. Most of these
requirements govern the packaging, labeling, handling, transportation, storage
and sale of pool chemicals by the Company. In addition, the algicides sold by
the Company are regulated as pesticides under the Federal Insecticide,
Fungicide and Rodenticide Act and state pesticide laws, which primarily relate
to labeling and annual registration. There can be no assurance that the
Company will not be determined to be out of compliance with, or liable under,
such requirements. Such an instance of noncompliance or liability could have a
material adverse effect on the Company's operating results. In addition, such
requirements are frequently changing, and, depending upon the nature of any
such change, could require material capital expenditures by the Company in the
future.
The demand for the pool chemicals sold by the Company may also be affected
by changes in consumer attitudes toward pool chemical products for
environmental or safety reasons. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
FIRE, SAFETY AND CASUALTY ISSUES
The Company stores chemicals at its 74 service centers. Certain chemicals
the Company stores are combustible oxidizing compounds and the storage of such
chemicals are strictly regulated by local fire codes. A fire, explosion or
flood affecting one of the Company's facilities could give rise to liability
claims against the Company.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
There will be 7,740,060 shares of Common Stock outstanding upon completion
of the Offering. Of these shares, the 3,337,500 shares sold in the Company's
initial public offering and the 2,950,000 shares offered in the Offering will
be eligible for sale in the public market without restriction upon completion
of the Offering. Therefore, up to 1,452,560 shares of Common Stock may be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act") and, to the extent
they are restricted securities, they may not be sold without registration
under the Securities Act or pursuant to an exemption therefrom. As of the date
hereof, up to 1,452,560 shares of Common Stock may be sold pursuant to Rule
144. The Company and certain of its officers, directors and stockholders have
agreed, in connection with this Offering, not to sell or otherwise dispose of
any shares of Common Stock owned by them in the public market for a period of
90 days after the completion of the Offering without the prior consent of the
Underwriters. Commencing approximately 90 days after the completion of the
Offering, such shares will be eligible for sale in the public market. The
market price of the Company's Common Stock could be adversely affected by the
availability for sale of the restricted securities. See "Description of
Capital Stock" and "Shares Eligible for Future Sale."
In connection with the SCP Acquisition, the Company entered into a
Registration Agreement (the "Registration Agreement") which provides certain
demand and piggy-back registration rights on customary terms and conditions to
certain of the Company's stockholders. Up to approximately 1,200,000 shares of
Common Stock will be covered by such registration rights following the
Offering. Such registration rights are subject to certain notice requirements,
timing restrictions and volume limitations which may be imposed by the
Representatives. See "Shares Eligible for Future Sale--Registration
Agreement."
VOLATILITY OF MARKET PRICE FOR COMMON STOCK
From time to time after the Offering there may be significant volatility in
the market price of the Common Stock. Quarterly operating results of the
Company or of other companies participating in the swimming pool supply
industry, changes in conditions in the economy, the financial markets or the
swimming pool supply industry, natural disasters or other developments
affecting the Company or its competitors could cause the market price of the
Common Stock to fluctuate substantially. See "--Seasonality and Weather" and
"--Industry and Cyclical Factors."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering, after deducting estimated
expenses of $450,000 will be approximately $26.8 million, assuming an offering
price of $21.25 per share. Approximately $21.2 million of the net proceeds to
the Company from the Offering will be used to finance the 1997 Acquisition.
See "The 1997 Acquisition." The remaining $5.6 million will be used to reduce
indebtedness under the Company's senior bank credit facility. If the 1997
Acquisition is not consummated, the entire amount of the net proceeds to the
Company will be used to reduce indebtedness under the Company's senior bank
credit facility and for general corporate purposes.
The Company entered into a Credit Agreement, dated as of December 31, 1993,
as amended from time to time, by and among SCP Supply, The First National Bank
of Chicago, as agent, and various lenders from time to time party thereto (the
"Senior Loan Facility"). Borrowings under the Senior Loan Facility may, at the
Company's option, bear interest at either (i) the agent's corporate base rate
or the federal funds rate plus 0.5%, whichever is higher, plus a margin
ranging from 0.0% to 1.0% or (ii) LIBOR plus a margin ranging from 1.25% to
2.50%, in each case depending on the Company's leverage ratio.
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholders.
DIVIDEND POLICY
The Company currently intends to retain its earnings for use in its business
and therefore does not anticipate paying any cash dividends in the foreseeable
future. The Senior Loan Facility restricts the Company's ability to pay
dividends. Any future determination to pay cash dividends will be made by the
Board of Directors in light of the Company's earnings, financial position,
capital requirements, credit agreements and such other factors as the Board of
Directors deems relevant at such time. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and Note 3 of the Notes to the Company's Consolidated
Financial Statements.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock began trading on the Nasdaq National Market under
the symbol "POOL" in October 1995. The following table sets forth, for the
periods indicated, the range of high and low bid prices for the Common Stock
as reported by the Nasdaq National Market, as adjusted to reflect a three-for-
two stock split in September 1997. These prices do not include retail mark-
ups, markdowns or commissions.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1995
Fourth Quarter......................................... $ 7.500 $ 6.500
1996
First Quarter.......................................... 10.167 6.667
Second Quarter......................................... 13.333 9.333
Third Quarter.......................................... 14.333 11.500
Fourth Quarter......................................... 13.833 12.000
1997
First Quarter.......................................... 16.000 13.172
Second Quarter......................................... 16.672 13.000
Third Quarter.......................................... 17.328 13.672
Fourth Quarter (through November 13, 1997)............. 24.000 16.500
</TABLE>
On November 13, 1997, the last reported sale price for the Common Stock as
reported on the Nasdaq National Market was $21.25 per share. As of November
10, 1997, there were approximately 51 holders of record of Common Stock.
13
<PAGE>
CAPITALIZATION
The following table sets forth the current indebtedness and capitalization
of the Company as of September 30, 1997 and as adjusted to reflect the sale by
the Company of 1,350,000 shares of Common Stock offered hereby at an assumed
public offering price of $21.25 per share and the application of the net
proceeds to the Company therefrom. See "Use of Proceeds." The table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with the Company's Consolidated
Financial Statements and related Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------
AS ADJUSTED
FOR THE
AS ADJUSTED OFFERING
FOR THE AND 1997
ACTUAL OFFERING ACQUISITION
------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt:
Term loan................................. $ 4,500 $ 4,500 $ 4,500
Promissory notes to BLN................... 1,859 1,859 1,859
8% Subordinated Notes..................... 884 884 884
------- ------- --------
Total current portion................... $ 7,243 $ 7,243 $ 7,243
======= ======= ========
Long-term debt:
Revolving loan............................ $25,500 $ -- $ 19,897
Term loan................................. 18,000 18,000 18,000
Promissory notes to BLN................... -- -- --
8% Subordinated Notes..................... -- -- --
Convertible subordinated promissory notes. 96 96 96
------- ------- --------
Total long-term debt, less current
portion................................ 43,596 18,096 37,993
Stockholders' equity:
Preferred stock, $.01 par value.
Authorized 100,000 shares; no shares
issued and outstanding................... -- -- --
Common stock, $0.001 par value. Authorized
10,000,000 shares; 6,390,060 shares
issued and outstanding; 7,740,060 shares
issued and outstanding as adjusted for
the Offering............................. 6 8 8
Additional paid-in capital................ 29,705 56,506 56,506
Retained earnings......................... 16,481 16,481 16,481
------- ------- --------
Total stockholders' equity.............. 46,192 72,995 72,995
------- ------- --------
Total capitalization.................... $89,788 $91,091 $110,988
======= ======= ========
</TABLE>
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data and operating
information of the Company. The selected consolidated statement of earnings
and balance sheet data set forth below as of December 31, 1994, 1995 and 1996
and for the years then ended are derived from the financial statements of the
Company which have been audited by Ernst & Young LLP, independent auditors.
The selected consolidated statement of earnings and balance sheet data as of
December 31, 1992 and 1993 and for the years then ended are derived from the
audited financial statements of the Predecessor. The selected consolidated
financial data as of September 30, 1996 an 1997 and for the nine month periods
then ended are derived from the unaudited financial statements of the Company
for such periods. In the opinion of management, the unaudited financial
statements of the Company reflect all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the financial
condition and results of operations for these periods. Results for interim
periods are not necessarily indicative of results for a full year. The
Company's business is highly seasonal, with sales and net income generally
highest during the second and third quarters. Sales are substantially lower
during the first and fourth quarters, when the Company typically incurs net
losses. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Seasonality and Quarterly Fluctuations." This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and with the
Consolidated Financial Statements of the Company and related Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THE PREDECESSOR THE COMPANY
---------------- --------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales.............. $54,101 $67,282 $101,977 $161,095 $235,844 $189,356 $286,847
Cost of sales.......... 40,749 50,861 77,488 123,974 183,814 146,510 223,268
------- ------- -------- -------- -------- -------- --------
Gross profit......... 13,352 16,421 24,489 37,121 52,030 42,846 63,579
Warehouse expense...... 1,808 2,107 3,610 6,957 9,611 7,114 11,067
Selling and
administrative
expenses.............. 7,180 8,618 13,518 19,907 31,139 20,394 33,416
Goodwill amortization.. -- -- 683 735 793 576 648
------- ------- -------- -------- -------- -------- --------
Operating income..... 4,364 5,696 6,678 9,522 10,487 14,762 18,448
Other income
(expense):
Interest expense..... (206) (100) (4,171) (5,113) (3,176) (2,052) (3,605)
Amortization expense. -- -- (498) (610) (698) (398) (534)
Management fees paid
to majority
stockholder......... -- -- (250) (208) -- -- --
Miscellaneous income. 81 121 118 228 823 577 629
------- ------- -------- -------- -------- -------- --------
(125) 21 (4,801) (5,703) (3,051) (1,873) (3,510)
------- ------- -------- -------- -------- -------- --------
Income before income
taxes and
extraordinary
loss(1)(2).......... 4,239 5,717 1,877 3,819 7,436 12,889 14,938
Provision for income
taxes(1).............. 85 -- 770 1,490 2,903 5,029 5,676
------- ------- -------- -------- -------- -------- --------
Income before
extraordinary
loss(1)............. $ 4,154 $ 5,717 $ 1,107 $ 2,329 $ 4,533 $ 7,860 $ 9,262
======= ======= ======== ======== ======== ======== ========
Net income(1).......... 4,154 5,717 1,107 1,579(2) 4,533 7,860 9,262
Income per share
before extraordinary
loss(1)............... .53 .78 .72 1.24 1.46
Net income per
share(1).............. .53 .53(2) .72 1.24 1.46
PRO FORMA STATEMENT OF
INCOME DATA(3):
Pro forma net income
before extraordinary
loss.................. $ 5,244 $ 11,037
Pro forma net income... 5,244 11,037
Pro forma net income
per share before
extraordinary loss.... .67 1.41
Pro forma net income
per share(4).......... .67 1.41
Fully diluted shares
outstanding........... 7,812 7,825
OPERATING DATA:
Number of service
centers:
Starting sites....... 14 17 18 26 44 44 69
Sites acquired..... 0 0 8 14 39 39 0
Sites opened....... 3 1 3 4 2 0 5
Sites consolidated. 0 0 3 0 16 16 0
Sites closed....... 0 0 0 0 0 0 0
Ending sites......... 17 18 26 44 69 67 74
Comparable service
center sales
increase(5)........... 14% 12% 15% 16% 19% 18% 11%
BALANCE SHEET DATA:
Working capital........ $ 4,729 $ 5,817 $ 8,493 $ 21,187 $ 34,602 $ 24,741 $ 52,203
Total assets........... 9,911 11,306 50,675 75,397 113,245 119,881 123,663
Total debt, including
current portion....... 172 124 38,025 26,476 51,277 58,986 50,839
Stockholders' equity... 5,623 6,767 3,037 32,277 36,810 40,137 46,192
</TABLE>
15
<PAGE>
- --------
(1) The Predecessor elected to be treated as an S corporation for income tax
purposes, and accordingly did not pay federal and state (except in certain
states) income taxes during such period. The Company is, and has been
since its formation, a C corporation.
(2) The Company recognized an extraordinary loss, net of tax, in 1995 of
$750,000 or $0.25 per share, in connection with the write-off of loan
financing fees and a prepayment premium associated with the application of
the proceeds of the Company's initial public offering to reduce
indebtedness.
(3) Gives effect (i) for the year ended December 31, 1996 to the acquisition
of certain assets of BLN, the sale of 1,350,000 shares of Common Stock
offered by the Company hereby at an assumed public offering price of
$21.25 per share and the application of the estimated net proceeds
therefrom, and the 1997 Acquisition as if each had occurred on January 1,
1996 and (ii) for the nine months ended September 30, 1997 to the sale of
1,350,000 shares of net proceeds therefrom and the 1997 Acquisition as if
each had occurred on January 1, 1997. Such data have been derived from the
unaudited pro forma statements of income included elsewhere in this
Prospectus. See "Pro Forma Financial Data."
(4) Calculated using pro forma net income, adjusted for the assumed reduction
in interest expense, net of tax, related to the Company's Convertible
Subordinated Notes. See Note 5 of Notes to the Company's Consolidated
Financial Statements.
(5) Comparable service center sales have been calculated using sales of
service centers that were open for more than fifteen months. Comparable
service center sales for 1994 and 1996, respectively, exclude net sales at
the 3 service centers consolidated following the Aqua Fab Acquisition in
1994 and the 16 service centers consolidated following the BLN Acquisition
in 1996. The numbers of service centers used in calculating such figures
were 13, 15, 18, 25, 38, 38 and 26, for 1992, 1993, 1994, 1995, 1996 and
the nine months ended September 30, 1996 and 1997, respectively.
16
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following sets forth unaudited pro forma condensed consolidated
financial information for the Company. The unaudited pro forma condensed
consolidated statement of income for the year ended December 31, 1996 gives
effect to (i) the acquisition of certain assets of BLN, (ii) the sale of
1,350,000 shares of Common Stock offered by the Company hereby at an assumed
public offering price of $21.25 per share and the application of the estimated
net proceeds therefrom, and (iii) the 1997 Acquisition as if each had occurred
on January 1, 1996. The unaudited pro forma condensed consolidated statement
of income for the nine months ended September 30, 1997 gives effect to (i) the
sale of 1,350,000 shares of Common Stock offered by the Company hereby at an
assumed offering price of $21.25 per share and the application of the
estimated net proceeds therefrom and (ii) the 1997 Acquisition as if each had
occurred on January 1, 1997. The unaudited pro forma condensed consolidated
balance sheet as of September 30, 1997 has been prepared as if the Offering
and the 1997 Acquisition had occurred on September 30, 1997. There can be no
assurances that the 1997 Acquisition will be consummated.
The unaudited consolidated pro forma condensed consolidated financial
information does not purport to present the actual financial position or
results of operations of the Company had the transactions and events assumed
therein in fact occurred on the dates specified, nor are they necessarily
indicative of the results of operations that may be achieved in the future.
The unaudited pro forma condensed consolidated financial information is based
on certain assumptions and adjustments described in the notes thereto and
should be read in conjunction therewith. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and with the
Consolidated Financial Statements and the Notes thereto of the Company
included elsewhere in this Prospectus.
17
<PAGE>
SCP POOL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA AS
PRO FORMA ADJUSTED FOR
AS ADJUSTED ADJUSTMENTS THE OFFERING
HISTORICAL ADJUSTMENTS ADJUSTMENTS FOR THE FOR THE AND THE BLN
------------------ FOR THE BLN FOR OFFERING HISTORICAL 1997 AND 1997
COMPANY BLN ACQUISITION OFFERING AND BLN BICKNELL ACQUISITION ACQUISITIONS
-------- -------- ----------- ----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $235,844 $128,858 $ -- $ -- $364,702 $58,744 $ -- $423,446
Cost of sales........... 183,814 106,500 -- (1) -- 290,314 44,518 -- (7) 334,832
-------- -------- ------- ------ -------- ------- ------- --------
Gross profit........... 52,030 22,358 -- -- 74,388 14,226 -- 88,614
Operating expenses...... 41,543 22,673 77(2) -- 64,293 11,430 131(8) 75,854
-------- -------- ------- ------ -------- ------- ------- --------
Operating income
(loss)................ 10,487 (315) (77) -- 10,095 2,796 (131) 12,760
Other income (expense)
Interest expense....... (3,176) (1,024) (1,433)(3) 2,345(9) (2,264) -- (1,838)(10) (4,102)
1,024(4)
Other income (expense). 125 (466) (65)(5) -- (406) 344 -- (62)
-------- -------- ------- ------ -------- ------- ------- --------
Income (loss) before
income taxes........... 7,436 (1,805) (551) 2,345 7,425 3,140 (1,969) 8,596
Provision (benefit) for
income taxes........... 2,903 (240) (681)(6) 915(6) 2,897 -- 455(6) 3,352
-------- -------- ------- ------ -------- ------- ------- --------
Net income (loss)....... $ 4,533 $ (1,565) $ 130 $1,430 $ 4,528 $ 3,140 $(2,424) $ 5,244
======== ======== ======= ====== ======== ======= ======= ========
Net income per share of
common stock:
Primary................ $ .72 $ .68
Fully diluted.......... $ .70 $ .67
Weighted average shares
outstanding:
Primary................ 6,334 7,684
Fully diluted.......... 6,462 7,812
</TABLE>
See notes to Unaudited Pro Forma Condensed Consolidated Financial Data
18
<PAGE>
SCP POOL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS PRO FORMA AS
ADJUSTMENTS PRO FORMA AS FOR THE ADJUSTED FOR THE
HISTORICAL FOR ADJUSTED FOR HISTORICAL 1997 OFFERING AND THE
COMPANY OFFERING THE OFFERING BICKNELL ACQUISITION 1997 ACQUISITION
---------- ----------- ------------ ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $286,847 $ -- $286,847 $51,197 $ -- $338,044
Cost of sales........... 223,268 -- 223,268 39,778 -- (7) 263,046
-------- ------ -------- ------- ------- --------
Gross profit........... 63,579 -- 63,579 11,419 -- 74,998
Operating expenses...... 45,131 -- 45,131 8,980 98 (8) 54,209
-------- ------ -------- ------- ------- --------
Operating income....... 18,448 -- 18,448 2,439 (98) 20,789
Other income (expense)..
Interest expense....... (3,605) 1,759(9) (1,846) -- (1,379)(10) (3,225)
Other income (expense). 95 95 142 -- 237
-------- ------ -------- ------- ------- --------
Income (loss) before
income taxes........... 14,938 1,759 16,697 2,581 (1,477) 17,801
Provision (benefit) for
income taxes........... 5,676 668(11) 6,344 -- 420 (11) 6,764
-------- ------ -------- ------- ------- --------
Net income (loss)....... $ 9,262 $1,091 $ 10,353 $ 2,581 $(1,897) $ 11,037
======== ====== ======== ======= ======= ========
Net income per share of
common stock:
Primary................ $ 1.46 $ 1.43
Fully diluted.......... $ 1.43 $ 1.41
Weighted average shares
outstanding:
Primary................ 6,358 7,708
Fully diluted.......... 6,475 7,825
</TABLE>
SCP POOL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS PRO FORMA AS
PRO FORMA AS FOR THE ADJUSTED FOR THE
HISTORICAL ADJUSTMENTS ADJUSTED FOR 1997 OFFERING AND THE
COMPANY FOR OFFERING THE OFFERING ACQUISITION 1997 ACQUISITION
---------- ------------ ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
Receivables............. $ 36,889 $ -- $ 36,889 $ 8,197 (13) $ 45,086
Inventory............... 43,079 -- 43,079 10,313 (13) 53,392
Other current assets.... 3,766 1,303 (12) 5,069 (1,303)(13) 3,766
-------- -------- -------- ------- --------
Current assets.......... 83,734 1,303 85,037 17,207 102,244
Property and equipment.. 4,746 -- 4,746 -- 4,746
Goodwill................ 32,844 -- 32,844 5,250 (13) 38,094
Other assets............ 2,339 -- 2,339 -- 2,339
-------- -------- -------- ------- --------
$123,663 $ 1,303 $124,966 $22,457 $147,423
======== ======== ======== ======= ========
Current liabilities..... $ 31,531 $ -- $ 31,531 $ 2,560 (13) $ 34,091
Deferred income taxes... 2,344 -- 2,344 -- 2,344
Long-term debt.......... 43,596 (25,500)(12) 18,096 19,897 (13) 37,993
Stockholders equity..... 46,192 26,803 (12) 72,995 -- 72,995
-------- -------- -------- ------- --------
$123,663 $ 1,303 $124,966 $22,457 $147,423
======== ======== ======== ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Data
19
<PAGE>
SCP POOL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
(1) Does not reflect the anticipated savings in purchasing costs at BLN during
the period presented. Based upon a review of the prices paid by BLN for
its products, the Company expects that because of its size and purchasing
power it will be able to reduce the cost of BLN's supplies and products.
Because most of these purchases are not made pursuant to long-term
contracts, no adjustment has been included in the pro forma statements of
income for the periods presented. There can be no assurance that the
Company will be able to realize such anticipated savings.
(2) Reflects additional amortization of $77,000 related to approximately $4.7
million of goodwill related to the BLN Acquisition, assuming a useful life
of 40 years, offset by the elimination of the amortization of goodwill
related to acquisitions made by BLN.
(3) Reflects additional interest expense resulting from the additional
indebtedness incurred in connection with the BLN Acquisition based on
interest at 6% per annum.
(4) Reflects the elimination of interest expense incurred by BLN on
indebtedness to its Parent, which is not being assumed in the acquisition.
(5) Reflects additional amortization of $65,000 related to approximately $1.1
million of organizational and financing costs related to the BLN
Acquisition, assuming a useful life of five years, offset by the
elimination of amortization recorded by BLN.
(6) Adjusts the provision for income taxes of the pro forma consolidated group
to the Company's historical effective tax rate of 39% during the period
presented.
(7) Does not reflect the anticipated savings in purchasing costs at Bicknell
during the periods presented. Based upon a review of the prices paid by
Bicknell for its products, the Company expects that because of its size
and purchasing power it will be able to reduce the cost of Bicknell's
supplies and products. Because most of these purchases are not made
pursuant to long-term contracts, no adjustment has been included in the
pro forma statements of income for the periods presented. There can be no
assurance that the Company will be able to realize such anticipated
savings.
(8) Reflects additional amortization related to approximately $5.3 million of
goodwill related to the 1997 Acquisition, assuming a useful life of 40
years.
(9) Reflects reduction in interest expense resulting from the application of
the net proceeds of the Offering to reduce indebtedness of the Company.
See "Use of Proceeds."
(10) Reflects the additional interest expense resulting from the additional
indebtedness incurred in connection with the 1997 Acquisition based on
interest at 8.75% per annum.
(11) Adjusts the provision for income taxes of the pro forma consolidated
group to the Company's historical effective tax rate of 38% during the
period presented.
(12) Reflects the issuance of 1,350,000 Shares of Common Stock at an assumed
offering price of $21.25 per share and the application of the net
proceeds of the Offering as discussed in "Use of Proceeds."
(13) Reflects the effects of the allocation of the purchase price of the 1997
Acquisition to the assets acquired and liabilities assumed and the
related funding for the 1997 Acquisition.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations is qualified in its entirety by, and should be read
in conjunction with, the Company's Consolidated Financial Statements and
related Notes thereto included elsewhere in this Prospectus.
GENERAL
SCP Pool was formed in December 1993 to acquire substantially all of the
assets and assume certain liabilities of its Predecessor. From its inception
in 1980 through the end of 1993, the Predecessor steadily increased its sales
by opening new service center locations and by increasing sales to new and
existing customers. Since the Company's acquisition of the Predecessor in
December 1993 (the "SCP Acquisition"), the Company has grown through strategic
acquisitions, by opening new service centers and by increasing sales to new
and existing customers at existing service centers. From January 1, 1990 to
September 30, 1997, the Company expanded from 8 service centers in 6 states to
74 service centers in 24 states, primarily through acquisitions. See "The
Acquisitions."
The Company derives its revenues primarily from the sale of swimming pool
supplies and related products, including chemicals, cleaners, packaged pools
and liners, filters, heaters, pumps, lights, repair parts and other equipment
required to build, maintain, install and overhaul residential and small
commercial swimming pools. The Company sells its products primarily to
swimming pool remodelers and builders, independent swimming pool retailers and
swimming pool repair and service companies. These customers tend to be small,
family owned businesses with relatively limited capital resources. Losses from
customer receivables have historically been less than 0.25%.
The Company's business is highly seasonal. In general, sales and net income
are highest during the second and third quarters, which represent the peak
months of swimming pool use and installation. Sales are substantially lower
during the first and fourth quarters, when the Company may incur net losses.
The swimming pool supply industry is affected by various factors, including
general economic conditions, the level of new housing construction, weather
and consumer attitudes towards pool chemical products for environmental or
safety reasons. Although management believes that the Company's geographic
diversity could mitigate the effect of a regional economic downturn and that
the continuing maintenance and repair needs for existing swimming pools could
mitigate the effect of a general economic downturn, there can be no assurance
that the Company's results of operations and expansion plans would not be
materially adversely affected by any of such downturns.
The principal components of the Company's expenses include the cost of
products purchased from manufacturers and sold during the year, and operating
expenses, which are primarily related to labor, occupancy, commissions and
marketing. Some geographic markets serviced by the Company, particularly
California, Texas and Florida, tend to be more competitive than others. In
response to competitive pressures from any of its current or future
competitors, the Company may be required to lower selling prices in order to
maintain or increase market share, and such measures could adversely affect
the Company's gross margins and operating results.
SCP Pool completed an initial public offering of its common stock in October
1995. The net proceeds of the offering were used primarily to reduce
indebtedness and resulted in an extraordinary charge, net of tax, in the
Company's results of operations in the fourth quarter of 1995 of approximately
$750,000 to account for the write-off of deferred financing costs and the
payment of a prepayment premium associated with extinguishing such
indebtedness. In connection with the initial public offering, the management
agreement between the Company and its principal stockholder was terminated as
of the consummation of the offering and, as a result, no management fees have
been paid with respect thereto after such time.
21
<PAGE>
ACQUISITION ACCOUNTING AND BASIS OF COMPARISONS
Accounting for the Acquisitions has resulted in material differences in the
basis of accounting between the Predecessor and the Company. The Company's
results of operations since December 31, 1993 have been affected by an
increase in interest expense and amortization of goodwill and other intangible
assets. The increase in interest expense is primarily a result of the
additional indebtedness incurred by the Company in connection with the
Acquisitions and the capitalization of certain related financing costs. The
amortization of goodwill and other intangible assets results primarily from
the purchase accounting method used in connection with the Acquisitions and
the associated non-competition agreements.
RESULTS OF OPERATIONS
The following discussions compare the results of operations of the Company
for the nine months ended September 30, 1997 to the results of operations of
the Company for the nine months ended September 30, 1996, the results of
operations of the Company for the years ended December 31, 1994, 1995 and
1996.
The following table shows, for the periods indicated, information derived
from the consolidated statements of operations of the Company, expressed as a
percentage of net sales for the period presented.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER
DECEMBER 31, 30,
------------------- ------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................... 76.0 77.0 77.9 77.4 77.8
----- ----- ----- ----- -----
Gross profit.............................. 24.0 23.0 22.1 22.6 22.2
Warehouse expense........................... 3.5 4.3 4.1 3.7 3.9
Selling and administrative expenses......... 13.3 12.4 13.2 10.8 11.7
Goodwill amortization....................... 0.7 0.4 0.3 0.3 0.2
----- ----- ----- ----- -----
Operating income.......................... 6.5 5.9 4.5 7.8 6.4
Interest expense............................ (4.1) (3.2) (1.3) (1.1) (1.2)
Amortization expense........................ (0.5) (0.4) (0.3) (0.2) (0.2)
Other income (expense)...................... (0.1) -- 0.3 0.3 0.2
----- ----- ----- ----- -----
Income before income taxes and extraordinary
loss....................................... 1.8% 2.3% 3.2% 6.8% 5.2%
===== ===== ===== ===== =====
Number of service centers:
Beginning of period....................... 18 26 44 44 69
Acquisitions.............................. 8 14 39 39 0
Openings.................................. 3 4 2 0 5
Consolidations............................ 3 0 16 16 0
Closures.................................. 0 0 0 0 0
----- ----- ----- ----- -----
Balance at end of period.................. 26 44 69 67 74
===== ===== ===== ===== =====
</TABLE>
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net sales increased by $97.4 million, or 51.5%, to $286.8 million in the
nine months ended September 30, 1997 from $189.4 million in the comparable
1996 period. This increase was primarily due to sales at service centers
acquired from BLN, sales at newly opened service centers and increased sales
at existing service centers. Service centers acquired from BLN in September
1996 contributed $84.1 million to the increase, sales at newly opened service
centers accounted for $10.1 million of the total increase and an increase of
approximately 10.6% in sales at service centers open at least 15 months
contributed $8.6 million to the increase. These increases were partially
offset by the loss of revenue from Alliance Packaging, which was sold in
October 1996.
22
<PAGE>
Gross profit increased by $20.8 million, or 48.4%, to $63.6 million in the
nine months ended September 30, 1997 from $42.8 million in the comparable 1996
period. Gross profit as a percentage of net sales decreased 0.4% to 22.2% in
the 1997 period compared to 22.6% in the 1996 period primarily due to the
increase in the number of service centers in the more competitive markets of
California and Florida. Service centers in California and Florida generated
gross profit margins of 19.3% and 18.3%, respectively, in the nine months
ended September 30, 1997, compared to 18.5% and 17.2% in the nine months ended
September 30, 1996.
Operating expenses increased by $17.0 million, or 60.7%, to $45.1 million in
the nine months ended September 30, 1997 from $28.1 million in the comparable
1996 period. This increase is primarily reflective of salaries, occupancy
expense and other costs associated with new service centers, and, to a lesser
extent, payroll and other operating costs required to support the increased
sales volume at existing service centers. Because of unseasonably cool
temperatures and continuing wet and rainy weather in much of the United
States, primarily during the three-month period ended June 30, 1997, the
increases in revenue over the comparable 1996 period were not proportionate
with these increased costs. Therefore, operating expenses as a percentage of
sales increased to 15.7% in the 1997 period compared to 14.8% in the 1996
period.
Interest and other expenses increased to $3.5 million in the nine months
ended September 30, 1997 from $1.9 million in the comparable 1996 period. The
increase was primarily attributable to the increase in the Company's debt as a
result of the acquisition of BLN in September 1996 and to the financing of
seasonal inventory levels for a larger number of branches than in the
comparable 1996 period.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales increased by $74.7 million, or 46.4%, to $235.8 million in 1996
from $161.1 million in 1995. An increase in sales at service centers opened at
least 15 months of approximately 19.0% accounted for $26.8 million
of the increase. Service centers acquired from BLN accounted for $21.2 million
of the increase, with the remaining increase resulting from sales at service
centers acquired in 1995.
Gross profit increased by $14.9 million, or 40.2%, to $52.0 million in 1996
from $37.1 million in 1995. Gross profit as a percentage of net sales,
however, declined 0.9% to 22.1% in 1996 from 23.0% in 1995. A majority of the
decline in gross profit margin was attributed to lower margins realized at the
service centers in California and Florida due to the more competitive nature
of those markets. The Company significantly expanded its presence in Florida
through the BLN Acquisition. Service centers in California and Florida
generated gross profit margins of 17.2% and 17.6%, respectively, compared to
24.3% for service centers outside these areas. The number of service centers
located in California and Florida increased from 2 on January 1, 1995 to 25 on
December 31, 1996.
Operating expenses increased by $13.9 million, or 50.5%, to $41.5 million in
1996 from $27.6 million in 1995. This increase is reflective of (i) salaries,
occupancy expense and other costs associated with the acquired service
centers, and (ii) payroll and other operating costs required to support the
increased sales volume at existing service centers. Operating expenses as a
percentage of sales increased to 17.6% in 1996 compared to 17.1% in 1995. This
increase was primarily attributable to an increase in bonuses as a percentage
of sales.
Interest and other expenses decreased to $3.1 million in 1996 from $5.7
million in 1995. The decrease was primarily attributable to the reduction in
the Company's debt with the proceeds from the Company's initial public
offering in October 1995, which resulted in a decrease in interest expense in
1996.
The provision for income taxes was $2.9 million in 1996 compared to $1.5
million in 1995. The increase is consistent with the increase in income before
income taxes.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net sales increased by $59.1 million, or 57.9%, to $161.1 million in 1995
from $102.0 million in 1994. An increase in sales at service centers opened at
least 15 months of approximately 15.7% accounted for $14.9 million of the
increase. Service centers acquired in connection with the 1995 acquisitions
accounted for $31.0 million of
23
<PAGE>
the increase in net sales, and an increase in sales at new service centers
accounted for $9.4 million of the total increase.
Gross profit increased by $12.6 million, or 51.4%, to $37.1 million in 1995
from $24.5 million in 1994. Gross profit as a percentage of net sales,
however, declined 1.0% to 23.0% in the 1995 period from 24.0% in the 1994
period. A majority of the decrease in gross profit margin was attributable to
lower margins realized at the service centers acquired in the Orcal
Acquisition, all of which were located in California, which generated gross
profit margins of approximately 19.1% versus 23.8% for all other service
centers. The Orcal Acquisition was completed in February 1995, which made it
difficult for the Company to fully implement its information systems and train
existing employees in time to meet the peak swimming pool supply selling
season. In addition, the Orcal service centers were stocked with inventory
purchased under the prior owner's less attractive purchasing terms. As a
result, the Company was unable to realize its purchasing economies. Increased
competition in certain geographic markets and higher product costs,
particularly for chemicals and packaged pools, also negatively impacted the
gross profit margin during the 1995 period.
Operating expenses increased by $9.8 million, or 55.1%, to $27.6 million in
1995 from $17.8 million in 1994, but declined as a percentage of sales to
17.1% in 1995 from 17.5% in 1994. The dollar increase was primarily
attributable to salaries, higher occupancy expenses in California, commissions
and other costs associated with increased employment at the service centers
acquired in connection with the Orcal Acquisition. The decrease as a
percentage of sales was primarily attributable to the operating leverage
achieved by spreading the Company's fixed expenses over a larger revenue base.
Interest and other expenses increased to $5.7 million in 1995 from $4.8
million in 1994. The increase was primarily attributable to higher interest
rates and to increased interest expense related to the debt incurred in
connection with the various acquisitions.
The provision for income taxes was $1.5 million in 1995 and $770,000 in
1994. The increase is consistent with the increase in income before income
taxes.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company's business is highly seasonal. In general, sales and net income
are highest during the second and third quarters, which represent the peak
months of swimming pool use and installation. Sales are substantially lower
during the first and fourth quarters, when the Company may incur net losses.
The Company experiences a build-up of inventory and accounts payable during
the first and second quarters of the year in anticipation of the peak swimming
pool supply selling season. The Company's peak borrowing occurs during the
second quarter, primarily because dated accounts payable offered by the
Company's suppliers typically are payable in April, May and June, while the
Company's peak accounts receivable collections typically occur in June, July
and August.
The principal external factor affecting the Company's business is weather.
Hot weather can increase purchases of chemicals and supplies and pool
installations. Unseasonably cool weather or extraordinary amounts of rainfall
during the peak sales season can decrease purchases of chemicals and supplies
and pool installations. In addition, unseasonably early or late warming trends
can increase or decrease the length of the pool season and, therefore, the
Company's sales.
To encourage preseason orders, the Company, like many other swimming pool
supply distributors, utilizes preseason sales programs which provide for
extended dating terms and other incentives to its customers. Some of the
Company's suppliers also offer extended dating terms on certain products to
the Company for preseason or early season purchases. In offering extended
dating terms to its customers and accepting extended dating terms from its
suppliers, the Company effectively finances a portion of its receivables with
extended payables.
24
<PAGE>
SCP Pool expects that its quarterly results of operations will fluctuate
depending on the timing and amount of revenue contributed by new service
centers and acquisitions. The Company attempts to open its new service centers
at the end of the fourth quarter or the beginning of the first quarter to take
advantage of preseason sales programs and the peak season.
The following table sets forth certain unaudited quarterly data for 1995,
1996 and the first three quarters of 1997 which, in the opinion of management,
reflect all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of such data. Results of any one
or more quarters are not necessarily indicative of results for an entire
fiscal year or of continuing trends.
<TABLE>
<CAPTION>
THE COMPANY
--------------------------------------------------------------------------------------------------
1995 1996 1997
---------------------------------- ---------------------------------- ------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH 1ST 2ND 3RD
QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR.
------- ------- ------- ------- ------- ------- ------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $25,846 $66,667 $47,229 $21,353 $41,145 $85,867 $62,344 $46,488 $63,565 $124,790 $98,492
Gross profit............ 5,954 14,799 10,399 5,969 9,273 20,042 13,531 9,184 13,960 28,159 21,460
Operating income (loss). 653 7,447 3,236 (1,814) 743 9,843 4,176 (4,275) 104 11,496 6,847
Net sales as a
percentage of annual
net sales.............. 16% 42% 29% 13% 18% 36% 26% 20% N/A N/A N/A
Gross profit as a
percentage of annual
gross profit........... 16% 40% 28% 16% 18% 38% 26% 18% N/A N/A N/A
Operating income as a
percentage of annual
operating income....... 7% 78% 34% (19%) 7% 94% 40% (41%) N/A N/A N/A
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Currently, the Company's primary sources of working capital are cash flow
from operations and borrowings under the Senior Loan Facility. As of September
30, 1997, the Senior Loan Facility consisted of a term loan and a revolving
line of credit. The Company's borrowings under its credit facility, together
with cash flow from operations and seller financing have historically been
sufficient to support the Company's growth and to finance acquisitions.
Considering the Company's borrowing base (i) as of September 30, 1997, and
(ii) after giving effect to the Offering and the 1997 Acquisition as if they
had occurred on September 30, 1997, the Company would have approximately $15.3
million and $26.5 million, respectively, available for borrowing under the
Senior Loan Facility, the only additional credit source currently available to
the Company.
Borrowings under the Senior Loan Facility may, at the Company's option, bear
interest at either (i) the agent's corporate base rate or the federal funds
rate plus 0.5%, whichever is higher, plus a margin ranging from 0.0% to 1.0%,
or (ii) LIBOR plus a margin ranging from 1.25% to 2.50%, in each case
depending on the Company's leverage ratio. Substantially all of the assets of
the Company (other than inventory acquired from BLN, which secures the
Company's obligations to BLN), including the capital stock of SCP Supply,
secure the Company's obligations under the Senior Loan Facility. The Senior
Loan Facility has numerous restrictive covenants which require the Company to
maintain minimum levels of interest coverage and fixed charge coverage and
which also restrict the Company's ability to pay dividends and make capital
expenditures. As of September 30, 1997, the Company was in compliance with all
such covenants and financial ratio requirements. The Senior Loan Facility
expires on September 26, 2002. The Company is in negotiations to amend and
restate the Senior Loan Facility to increase the maximum amount available from
$80.0 million to $85.0 million (or, if the Offering is not consummated, $100.0
million). There can be no assurances that such amendment will be completed.
In connection with the BLN Acquisition, the seller of BLN provided $31.8
million of financing to the Company. This financing, which bears interest at
6%, is due in varying monthly installments through September 1998.
Approximately $30.0 million of this financing was repaid through September 30,
1997, of which $5.4 million was paid from proceeds received in connection with
the Alliance Sale.
25
<PAGE>
During the nine months ended September 30, 1997, the Company borrowed $59.0
million to meet seasonal working capital requirements and made payments of
$45.5 million under its revolving credit facility. In September 1996, the
Company converted approximately $15.6 million due under its revolving credit
facility to the term loan portion of the Senior Loan Facility.
Excluding acquisitions, the Company made capital expenditures of $732,000,
$866,000 and $788,000 in the nine months ended September 30, 1997, and the
years ended December 31, 1995 and 1996, respectively.
The Company believes that its cash flow from operations and the credit
available under its line of credit as proposed to be amended will be
sufficient to finance its operations for at least the next twelve months.
The Company intends to continue to explore acquisition opportunities. To
date, the Company's acquisitions have been financed primarily by borrowings
under the Senior Loan Facility and seller notes. The Company expects to use
the net proceeds to it from the Offering to finance the 1997 Acquisition and
to reduce indebtedness under the Senior Loan Facility or, if the 1997
Acquisition is not completed, to reduce such indebtedness and for general
corporate purposes. To finance future acquisitions, the Company expects to
utilize its ability to borrow additional funds. Depending on market
conditions, the Company may also incur additional indebtedness or issue common
or preferred stock (which may be issued to third parties or to sellers of
acquired businesses). There can be no assurance that additional capital, if
and when required, will be available on terms acceptable to the Company, or at
all.
INFLATION
The Company does not believe that inflation has had a significant impact on
its results of operations for the periods presented.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations and under the captions "Prospectus
Summary," "Risk Factors," "Business" and elsewhere in this Prospectus, such as
statements regarding the Company's strategies, plans, objectives, expectations
and intentions, are forward-looking statements that involve risks and
uncertainties, including but not limited to factors related to (i) the
Company's ability to identify appropriate acquisition candidates, complete
acquisitions on satisfactory terms, or successfully integrate acquired
businesses; (ii) the sensitivity of the swimming pool supply business to cool
or rainy weather; (iii) the intense competition and low barriers to entry in
the swimming pool supply industry; (iv) the Company's ability to obtain
financing on satisfactory terms and the degree to which the Company is
leveraged; (v) the sensitivity of the swimming pool supply business to general
economic conditions; (vi) the Company's ability to remain in compliance with
the numerous environmental, health and safety requirements to which it is
subject; (vii) the risk of fire, safety and casualty losses and related
liabilities claims inherent in the storage and repackaging of chemicals sold
by the Company; and (viii) the other factors discussed in the Company's
filings with the Securities and Exchange Commission. Such factors could affect
the Company's actual results and could cause such results to differ materially
from the Company's expectations described above.
26
<PAGE>
BUSINESS
GENERAL
SCP Pool is the nation's leading independent distributor of swimming pool
supplies and related products. The Company distributes a broad range of
products to three types of customers: (i) swimming pool remodelers and
builders, which refurbish, retrofit and overhaul existing pools and install
new pools; (ii) independent retail stores, which sell swimming pool products
to consumers; and (iii) swimming pool repair and service companies, which
perform periodic maintenance and repair services, primarily for residential
and small commercial swimming pools. The Company distributes more than 34,000
national brand and private label products to over 20,000 customers. These
products include non-discretionary pool maintenance products, such as
chemicals and replacement parts, packaged pools (kits to build swimming pools
which include walls, liner, bracing and other materials) and pool equipment,
such as cleaners, filters, heaters, pumps and lights.
The Company is a successor to a business founded in 1980 by the Company's
current President and Chief Executive Officer, Frank J. St. Romain. The
Company and its wholly owned subsidiary, SCP Supply, were organized by CHS and
members of the management of the Predecessor for the purpose of acquiring
substantially all of the assets and business of the Predecessor. CHS had no
relationship with the Predecessor prior to such acquisition. On December 31,
1993, SCP Supply acquired substantially all of the assets and business of the
Predecessor in the SCP Acquisition.
SCP Pool has managed its growth through a combination of service center
acquisitions, service center additions in new and existing markets, and
continued growth at existing service centers. From January 1, 1990 to
September 30, 1997, the Company grew from 8 service centers in 6 states to 74
service centers in 24 states. Forty-three of the sixty-six service centers
added from January 1, 1990 to September 30, 1997 were added through
acquisitions, making SCP the leader in consolidating the pool supply industry.
The Company's most significant acquisition to date occurred in September 1996,
when the Company acquired certain assets (primarily inventory, property and
equipment) of BLN, a wholesaler of swimming pool supplies with 39 service
centers in 12 states for an aggregate purchase price of approximately $34.2
million. In November 1997, the Company entered into a purchase agreement to
acquire substantially all of the assets of Bicknell, which distributes
swimming pool supplies and related products through its eleven service centers
in six northeastern states, for a purchase price of approximately $21.0
million. Following the 1997 Acquisition, which the Company expects to be
completed in late December 1997, the Company will have 85 service centers in
30 states. There can be no assurances, however, that the 1997 Acquisition will
be completed. Twenty-three of the sixty-six service centers added since
January 1, 1990 were new locations opened by the Company. As a result of
acquisitions and service center openings, the Company has significantly
increased its geographic scope and diversity.
The Company continues to pursue an aggressive growth strategy. Over the past
seven years, the Company's net sales have grown from $32.1 million in 1990 to
$235.8 million in 1996 and $286.8 million for the nine months ended September
30, 1997. Operating income has increased from $2.1 million in 1990 to $10.5
million in 1996 and $18.4 million for the nine months ended September 30,
1997. The Company expects to continue its growth strategy by making strategic
acquisitions, opening service centers in new locations, and increasing sales
at existing service centers. SCP Pool has completed seven acquisitions since
January 1994 and expects to complete the 1997 Acquisition in late December
1997, although there can be no assurances the 1997 Acquisition will occur at
that time or at all. Management believes that the 1997 Acquisition, if and
when completed, will further establish the Company as the leading national
independent distributor of swimming pool products and supplies, and increase
the geographic scope and diversity of the Company's business. SCP Pool has
complemented these acquisitions with increasing sales at existing service
centers. Comparable service center sales increased 12%, 15%, 16%, 19% and 11%
in 1993, 1994, 1995, 1996 and the nine months ended September 30, 1997,
respectively.
INDUSTRY OVERVIEW
The swimming pool supply industry can be divided into four categories by
pool type: residential in-ground swimming pools, above-ground swimming pools,
commercial swimming pools and spas or hot tubs. The
27
<PAGE>
Company's strategy has been to focus on distributing products to the
residential in-ground and above-ground and small commercial pool markets.
Management believes approximately 60% of total pool industry revenues are
based upon numerous ongoing maintenance and repair requirements associated
with pool ownership. The maintenance of proper chemical balance and the
related maintenance and repair of swimming pool equipment, such as pumps,
heaters, filters and cleaners, create a non-discretionary demand for pool
chemicals and other swimming pool supplies and services. The balance of pool
supply industry revenues is derived from sales of the parts and equipment
required for pool remodeling, overhaul and repair and from the sales and
installation of new swimming pools. Although the installation of new pools
and, to a lesser extent, the remodeling and overhaul of existing pools are
affected by general economic conditions, particularly new housing
construction, management believes that most continuing repair requirements are
not as sensitive to these changes in economic conditions.
The pool supply distribution industry is fragmented, with the majority of
sales spread among over 170 companies. The six largest distributors operate on
a national or regional basis, while the remaining distributors tend to be
family owned operations with one to three distribution sites, typically
serving a highly localized customer base with a limited geographic focus.
During the last ten years, the industry has experienced consolidation as
certain larger distributors have acquired smaller local and regional
distributors and have used their superior competitive position to increase
market share. Such consolidation has permitted the larger pool supply
distributors to benefit from various economies of scale resulting from
increased net purchasing power and the elimination of redundant management and
other overhead expenses. Larger distributors also have been able to take
advantage of more sophisticated management techniques and the development of
management information systems specifically designed to enhance customer
service and increase operating efficiency. Management anticipates further
consolidation in the industry as local and regional distributors confront
competitive challenges from larger distributors.
The Company believes that the swimming pool industry as a whole will benefit
from certain forecasted demographic and economic trends, which include the
increasing affluence of the "baby boomer" segment of the population and an
overall increase in spending on home-related products by these consumers.
COMPETITIVE STRENGTHS
SCP Pool believes that the following characteristics enable it to compete
effectively.
Leading Market Position. The Company derives significant benefits from its
position as the nation's leading distributor of swimming pool supplies. The
Company believes that its market position provides it with significant name
recognition, volume purchasing discounts, access to distribution rights for
name-brand products and other operating efficiencies. The Company is an
attractive distribution channel to manufacturers and suppliers because it can
provide them broad product exposure through its 74 geographically dispersed
service centers, making it a logical choice for new product introductions.
Since the Company's initial public offering in October 1995, SCP Pool has
increased the number of products it sells from over 25,000 to over 34,000 and
has increased the number of customers from over 10,000 to over 20,000. The
size and diversity of its customer base reduce the Company's dependence on any
individual customer or geographic market for growth and profitability. In
addition, the Company's geographic diversification mitigates the effects of
regional economic changes and adverse regional weather patterns.
Experienced Senior Management and Service Center Managers. The Company
believes that its key personnel, including its service center managers, are
among the most experienced in the swimming pool supply industry. The Company's
executive officers have an average of 28 years of pool industry experience,
and the Company's service center managers have an average of 16 years of
experience in the pool industry. The Company believes that the expertise of
its senior management has contributed significantly to the Company's
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<PAGE>
growth, both through strategic acquisitions and expansion into new markets. In
addition, the sales and customer service experience of the Company's service
center managers has enabled it to compete successfully in local and regional
markets.
Experience in Completing and Integrating Acquisitions. SCP Pool has
completed seven acquisitions since 1994, and 43 of the Company's 74 service
centers were added pursuant to such acquisitions. Management believes that the
Company's experience in integrating the acquired businesses provides a
competitive advantage in the evaluation and integration of future
acquisitions.
Entrepreneurial Business Environment. Since the Company was founded with a
single service center in 1980, it has maintained an entrepreneurial business
environment, in which each service center has an on-site manager who is
responsible for the day-to-day operations of his service center, including
sales, inventory management, customer service, collections and management of a
staff of 3 to 26 employees. Service center managers also have sales
responsibility within their geographic areas. Service center managers
participate in an incentive program through which they may earn a bonus of up
to 50% to 100% of his base salary, based upon the size, profitability and
return on assets of the service center. As a result, service centers are
operated in an entrepreneurial style yet have access to the Company's volume
purchasing discounts and operating efficiencies and are linked to the
Company's advanced information systems. Management believes that the Company's
entrepreneurial environment contributes to the Company's high levels of
customer service, with service center managers responsible for customer
relationships and branch operations. The Company believes that its
entrepreneurial business environment has (i) contributed to growth in sales
and profitability, (ii) enabled the Company to be highly responsive to
customer requirements and preferences, actions by competitors and changes in
local market conditions and (iii) assisted the Company's efforts to attract
and retain employees.
Advanced Information Systems. The Company has made a significant investment
in its information systems, which it believes are among the most advanced in
the swimming pool supply industry. The Company recently upgraded those systems
to achieve additional cost reductions, operating efficiencies, improved
inventory management and a higher level of customer service and to provide
capacity for future growth. The ordering, shipment, storage and delivery of
the Company's products are managed through a centralized information system
that allows the Company's service centers and corporate headquarters to access
information on a "real time" basis regarding inventory, product availability,
customers, sales, financial reports and other significant operating data and
permit management to monitor closely the sales and profitability of each
service center. Moreover, the Company's information systems ensure consistency
of product, sales and financial information on a timely basis.
Superior Customer Service. The Company believes its high level of customer
service and support differentiates it from its competitors. The Company
provides targeted marketing support to its customers, including supplying
retailers and pool builders with a 728 page pool reference catalog featuring
the products distributed by the Company, which management believes is the most
comprehensive in the industry. In addition, the Company grants exclusive
territorial rights to certain large retailers and pool builders. The Company
encourages its customers to use it as a resource for questions regarding
equipment, replacement parts and supplies. The Company employs two dedicated
product specialists to assist service center managers on technical matters and
to assist in making sales to customers. While a significant portion of its
business is walk-in, the majority of the Company's service centers offer local
delivery. Each of the Company's service centers offers a broad range of
products and can source out-of-stock items from other service centers or
directly from manufacturers. The Company believes that its entrepreneurial
business environment, experienced service center managers and advanced
information systems contribute to its high levels of customer service.
GROWTH STRATEGY
SCP Pool believes that its competitive strengths, coupled with a focus on
the following growth strategies, enhance its ability to expand its sales to
new and existing customers.
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<PAGE>
Identify and Complete Strategic Acquisitions. The Company intends to
continue to make strategic acquisitions to further penetrate existing markets
and to expand into new geographic markets. The Company continuously seeks out
appropriate acquisition candidates and is frequently engaged in discussions
regarding potential acquisitions. The Company completed one acquisition in
1994, five acquisitions in 1995 and one acquisition in 1996. On November 13,
1997, the Company entered into an agreement to purchase substantially all of
the assets of Bicknell. See "The 1997 Acquisition." The Company believes that
numerous other acquisition opportunities exist due to the presence in the
market of small, privately owned, local or regional pool supply distributors.
The Company believes that it can reduce the operating expenses and enhance the
sales and profit margins of acquired businesses by providing such businesses
with access to its information systems, purchasing power and broad product
line. The Company further believes that its entrepreneurial business
environment and advanced information systems will facilitate the successful
integration of acquired operations.
Open Service Centers in New and Existing Locations. The Company intends to
open service centers in locations which are not currently served by, or are
underserved by, the Company. In each of the last five years, the Company has
opened between one and five service centers in new locations. Prior to opening
a new service center, the Company analyzes the size of and existing
competition in the proposed market and recruits an experienced manager with
the necessary entrepreneurial skills and knowledge of the proposed market. The
Company intends to continue to expand in smaller markets, and to fill in
existing markets. Each new service center requires approximately $75,000 of
capital expenditures for leasehold improvements and office and warehouse
equipment and a minimum of $250,000 of inventory. The Company also intends to
open satellite service centers that are smaller than the Company's typical
service center, stock fewer inventory items and have fewer employees and a
lower cost structure, yet have access to the Company's full inventory through
its information systems. The Company continually evaluates new locations and
believes that there will continue to be opportunities to expand by opening new
service centers.
Increase Sales at Existing Service Centers. The Company intends to
capitalize on opportunities to expand sales at its existing service centers.
Comparable service center sales increased 12%, 15%, 16%, 19% and 11% in 1993,
1994, 1995, 1996 and the nine months ended September 30, 1997, respectively.
The Company believes that it can increase its market share by expanding its
private label marketing programs for chemicals and in-ground vinyl pools with
swimming pool remodelers and builders and repair and service companies and by
further developing its joint marketing programs with its customers. The
Company also plans to increase the breadth of its replacement parts product
offering and periodically to add to its outside sales force. The Company
believes that cost pressures will continue to create incentives for its
customers to deal increasingly with fewer distributors that, like the Company,
can provide a broad mix of products at competitive prices.
THE 1997 ACQUISITION
In November 1997, the Company entered into a purchase agreement to purchase
substantially all of the assets of Bicknell for an aggregate purchase price of
$21.0 million, subject to a purchase price adjustment based on the working
capital of Bicknell at the time of the closing. Bicknell distributes swimming
pool supplies and related products through its eleven service centers in six
northeastern states. In 1996, Bicknell had net sales of $58.7 million. The
Company expects the 1997 Acquisition to be consummated in late December 1997,
but no assurances can be made that the 1997 Acquisition will occur at that
time or at all.
Management believes that the 1997 Acquisition, if and when completed, will
further establish the Company as the leading national independent distributor
of swimming pool products and supplies and increase the geographic scope and
diversity of the Company's business. If the 1997 Acquisition is completed in
December 1997, the Company will have 85 service centers in 30 states at that
time.
In connection with the 1997 Acquisition, the Company will enter into a
supply agreement with Pacific, the sole stockholder of Bicknell. Under the
terms of the Supply Agreement, Pacific will supply the Company with polymer
panels, braces, steps, liners and other products used in the construction of
in-ground pools. The Supply Agreement will have a term of eight years, subject
to renewal options.
30
<PAGE>
PRODUCTS
The Company offers a comprehensive selection of more than 34,000 national
brand and private label products to over 20,000 customers. These products
include non-discretionary pool maintenance products, such as chemicals and
replacement parts, packaged pools (kits to build swimming pools which include
walls, liner, bracing, and other materials) and pool equipment, such as
cleaners, filters, heaters, pumps and lights. The Company's service centers
offer a broad range of products, and each service center can access out-of-
stock items from other service centers.
National Brands. The Company supplies a substantial majority of the national
brand products offered by swimming pool equipment manufacturers. Sales of
national brands accounted for a majority of the Company's 1996 net sales.
Management believes that national brands are attractive to many of the
Company's customers who seek consistent product quality throughout their
operations, particularly for heaters, pumps, filters and cleaners. The Company
believes that it has good relationships with all of its major suppliers of
national brands, many of which provide important sales and marketing support
to the Company.
Private Brands. Approximately one-half of the Company's chemical products,
which include chlorine, algicides, water clarifiers and Ph adjusters, are sold
under the Company's private brands. These brands include Regal(R) for small
retail and professional customers, Clear Choice(R) for larger retail customers
and EZ-Clor(R) for pool remodelers and builders, pool service and repair
companies and larger retail customers. Most of these chemical products are
converted from bulk to retail form by Bio-Lab and sold to the Company under
the Bio-Lab Supply Agreements. See "--Purchasing and Suppliers." The Company
sells packaged in-ground vinyl pools (which consist of prefabricated in-ground
pool structures with a vinyl liner) under the Company's Weatherking(R),
Heldor(R), Signature Pools(TM) and Regatta Pools(TM) brands. The Company also
sells a private label line of above-ground pool kits under the name Dream
Line(TM) and pool covers under the Cool Covers(TM) brand name.
MARKETING
The Company's principal marketing activities are conducted by a dedicated
sales force of 58 employees and by its service center managers. The Company's
dedicated sales force has responsibility for developing and maintaining
customer relationships. These salespersons and service center managers make
calls on customers, distribute the Company's product catalog and parts manual
and provide promotional literature in the display areas of the service center.
The Company's commission program is designed to reward account profitability
and promote sales growth. Under the Company's incentive program, salespersons
may earn bonuses of up to 50% of their annual salaries, based on attainment of
certain sales and profitability targets.
CUSTOMERS
The Company sells its products to over 20,000 customers, primarily swimming
pool remodelers and builders, retail swimming pool stores and swimming pool
repair and service companies. No customer accounted for more than 3% of the
Company's sales during 1996. The Company estimates that in 1996, sales to
swimming pool remodelers and builders accounted for approximately 40% of its
sales, while sales to retail pool stores accounted for approximately 30% of
sales, and sales to repair and service companies accounted for the remainder.
Swimming pool remodelers and builders purchase products to refurbish, retrofit
or overhaul existing pools and to build new pools. Customers that operate
retail pool stores tend to have a single outlet and typically purchase a
relatively broad range of products from the Company, including chemicals,
maintenance supplies, repair parts and other related products. Repair and
service companies tend to provide on-site repair and cleaning services for
residential pools. These customers tend to be very small and typically
purchase chemical products, maintenance supplies and repair parts. A
substantial portion of the Company's sales are derived from "walk-in"
business, in which a customer selects the products at the service center and
transports the purchased products from the service center immediately
following the purchase. The Company also offers local delivery service in many
of the markets it serves.
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<PAGE>
The Company encourages its customers to use it as a resource for questions
regarding equipment, replacement parts and supplies. Each of the Company's
service centers typically sponsors local events to help build customer support
and loyalty. The Company also participates in industry trade shows and
conferences, advertises in trade journals and periodically distributes
newsletters and other promotional materials to its customers.
The Company maintains a credit policy for qualified customers. Credit
policies and terms are established at the corporate level, and each service
center manager is responsible for overseeing and collecting from local
accounts. During each of the last three years, the Company's bad debt expense
was less than 0.25% of net sales.
PURCHASING AND SUPPLIERS
The Company believes it has a good relationship with its suppliers and, as a
result, is offered volume discounts, rebates, favorable return policies and
promotional allowances. The Company works closely with many of its suppliers
to develop joint marketing plans. In addition, it is common in the swimming
pool supply industry for manufacturers to offer extended dating terms on their
products to qualifying purchasers, such as the Company. Such terms are
typically available to the Company for pre-season or early season purchases.
Prior to October 31, 1996, a substantial portion of the Company's chemical
products were supplied by its subsidiary, Alliance Packaging. On October 31,
1996, Alliance Packaging sold certain of its assets to Bio-Lab and Bio-Lab and
the Company entered into the Bio-Lab Supply Agreements. Under the Bio-Lab
Supply Agreements, Bio-Lab supplies the Company with certain chemical products
previously supplied to it by Alliance Packaging and with certain chemical
products previously supplied to BLN by Bio-Lab. In addition, in connection
with the 1997 Acquisition, the Company will enter into the Supply Agreement
with Pacific, the sole stockholder of Bicknell. Under the terms of the Supply
Agreement, Pacific will supply the Company with polymer panels, braces, steps,
liners and other products used in the construction of in-ground pools. The
Supply Agreement will have a term of eight years, subject to renewal options.
The principal chemical raw materials used in the products sold by the
Company are granular chlorine compounds, which are commodity materials. The
prices of granular chlorine compounds are a function of, among other things,
manufacturing capacity and demand. Although price increases in granular
chlorine compounds generally result in higher costs of supplies to the
Company, the Company generally has passed through such increased costs to its
customers. There can be no assurance that the price of granular chlorine
compounds will not increase in the future or that the Company will be able to
pass on any such increase to its customers. The Company believes that reliable
alternate sources of supply are available for all of its products, including
chlorine products.
The Company regularly evaluates supplier relationships and considers
alternate sourcing as appropriate to assure competitive costs and quality
standards. One non-affiliated supplier, Pac-Fab, Inc., supplied approximately
11% of the Company's material purchases in 1996. The Company currently has
long-term contracts with two of its largest suppliers including Bio-Lab, but
does not have a contract with Pac-Fab, Inc. The Company believes that it has
good relationships with all of its suppliers.
Decisions relating to pricing, suppliers and product selection are
centralized at the Company's headquarters, with significant input from each of
the Company's service center managers. Decisions relating to purchases and
inventory management are made independently by each of the Company's service
center managers using the data provided by the Company's information systems.
PROPERTIES
As of September 30, 1997, the Company conducted its operations through 74
service centers located in 24 states. Service centers are located near
customer concentrations, typically in industrial, commercial or mixed-use
zones. The Company's executive offices are located in approximately 22,000
square feet of leased space in
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<PAGE>
Covington, Louisiana. If the 1997 Acquisition is completed in December 1997,
the Company will have 85 service centers in 30 states at that time.
The Company's service centers range in size from approximately 7,200 square
feet to 40,000 square feet and consist of warehouse, counter, display and
office space. The Company owns service centers in Phoenix, Arizona and Fresno,
California. All of the Company's other properties are leased for terms which
expire between 1997 and 2009, and many of such leases may be extended. In
certain instances, the Company's service centers are leased from the former
owners of businesses acquired by the Company. The Company believes that no
single lease is material to its operations, and that alternate sites are
presently available at market rates. See "Certain Relationships and Related
Transactions" and Note 7 to the Company's Consolidated Financial Statements.
COMPETITION
The Company faces intense competition from many regional and local
distributors in its markets, from several companies that distribute swimming
pool supplies on a national basis and, to a lesser extent, from mass market
retailers and large pool supply retailers. The Company believes that there are
five swimming pool supply distributors which compete with the Company on a
national or regional basis: Pool Water Products, Superior Pool Products, Inc.
(a subsidiary of Olin Corporation), Fort Wayne Pools, Hughes Supply and Benson
Pump Co. Barriers to entry in the swimming pool supply industry are relatively
low. Certain of the Company's competitors have substantially greater capital
resources than the Company.
The Company competes with other distributors for rights to distribute brand-
name products, and the loss of, or inability to obtain such rights could have
a material adverse effect on the Company. Management believes that the
competition for such distribution rights results in a competitive advantage to
larger distributors, such as the Company, and a disadvantage to small
distributors.
The Company believes that the principal competitive factors in pool supply
distribution are the quality and level of customer service, product pricing,
breadth and quality of products offered and consistency and stability of
business relationships with customers. The Company believes it competes
favorably with respect to each of these factors. Some geographic markets
serviced by the Company, particularly California, Texas and Florida, tend to
be more competitive than others. In response to competitive pressures from any
of its current or future competitors, the Company may be required to lower
selling prices in order to maintain or increase market share, and such
measures could adversely affect the Company's gross margins and operating
results.
ENVIRONMENTAL, HEALTH AND SAFETY REGULATION
The Company's business is subject to regulation under federal, state, and
local environmental and health and safety requirements, including the
Emergency Planning and Community Right-to-Know Act, the Hazardous Materials
Transportation Act and the Occupational Safety and Health Act. Most of these
requirements govern the packaging, labeling, handling, transportation, storage
and sale of pool chemicals by the Company. In addition, the algicides sold by
the Company are regulated as pesticides under the Federal Insecticide,
Fungicide and Rodenticide Act and state pesticide laws, which primarily relate
to labeling and annual registration. While the Company expends considerable
resources to operate in substantial compliance with environmental, health and
safety requirements, there can be no assurance that it will not be determined
to be out of compliance with, or liable under, such requirements. Such an
instance of noncompliance or liability could have a material adverse effect on
the Company and its operating results. In addition, such requirements are
frequently changing, and, depending upon the nature of any such changes, could
require material capital expenditures by the Company in the future.
The demand for the pool chemicals sold by the Company may also be affected
by changes in consumer attitudes toward pool chemical products for
environmental or safety reasons. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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<PAGE>
FIRE, SAFETY AND CASUALTY ISSUES
The Company stores chemicals at each of its 74 service centers. Certain
chemicals the Company stores are combustible oxidizing compounds and the
storage of such chemicals is strictly regulated by local fire codes. The
Company maintains strict policies and procedures regarding chemical handling
and fire and safety regulations, and has never incurred any material liability
related to its handling of chemicals. A fire, explosion or flood affecting one
of the Company's facilities, however, could give rise to liability claims
against the Company.
EMPLOYEES
At September 30, 1997, the Company employed 803 persons on a full-time
basis, of whom 164 engaged in management, administration and accounting, and
credit and collections, 58 engaged in outside sales, 73 engaged in service
center management and 508 engaged in warehouse, production and distribution
operations. Of these employees, 76 are employed at the Company's corporate
headquarters in Covington, Louisiana. No employees are covered by collective
bargaining agreements. The Company believes it has good relations with its
employees. In connection with the peak summer selling season, the Company
typically employs additional warehouse, production and distribution personnel
during the months from May through August.
TRADEMARKS
The Company maintains registered trademarks in the United States, primarily
for its private label products, and intends to maintain the trademark
registrations which it deems important to its business operations. See "--
Products--Private Brands."
LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation and proceedings
arising in the ordinary course of its business. Although the outcome of
litigation and claims are uncertain, the Company believes there are no pending
material legal proceedings to which the Company is a party or to which the
property of the Company is subject.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the Company's
executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Wilson B. Sexton........ 60 Chairman and Director
Frank J. St. Romain..... 61 President, Chief Executive Officer and Director
Craig K. Hubbard........ 45 Chief Financial Officer, Treasurer and Secretary
Richard P. Polizzotto... 56 Vice President-Operations
A. David Cook........... 42 Vice President-Sales and Development
John M. Murphy.......... 36 Vice President-Marketing
Andrew W. Code.......... 39 Director
Peter M. Gotsch......... 33 Director
Dominick DeMichele...... 45 Director
Robert C. Sledd......... 44 Director
</TABLE>
Mr. Sexton has served as Chairman and a director of the Company and SCP
Supply since December 1993, and served as a consultant to the Predecessor from
1988 to December 1993. Mr. Sexton held a number of positions at Airwick
Industries, Inc. from 1974 to 1980, including President of the Airwick Pool
Products division and Vice President of Airwick Industries, Inc. From 1958 to
1974, Mr. Sexton was employed by Seablue Corporation, a swimming pool
equipment and supplies manufacturer, where he served as President from 1972 to
1974.
Mr. St. Romain has served as President, Chief Executive Officer and a
director of the Company and SCP Supply since December 1993 and held the same
positions with the Predecessor since its founding in 1980. Prior to 1980, Mr.
St. Romain had 21 years experience in the pool business and had a number of
positions with Seablue Corporation and Airwick Pool Products.
Mr. Hubbard has served as Chief Financial Officer, Treasurer and Secretary
of the Company and SCP Supply since February 1997. From December 1993 until
February 1997, he served as controller of SCP Supply, and held the same
position with the Predecessor since September 1991. From 1985 until 1991, he
served as controller of Alerion Bank.
Mr. Polizzotto has served as Vice President-Operations of the Company since
May 1995, and has served as Vice President of SCP Supply since December 1993.
He served as Vice President of Operations of the Predecessor from June 1992
until December 1993. From 1986 until 1992, he served as Vice President of KSG
Industries, Inc., an auto parts distributor. Prior to 1986, Mr. Polizzotto
held a number of positions with Airwick Industries, Inc. and Airwick Pool
Products, and served as President of Heldor Industries, Inc., a pool supply
distributor.
Mr. Cook has served as Vice President-Sales and Development of the Company
since February 1997. From December 1993 until February 1997, he served as the
Director of National Sales Development of SCP Supply, and held the same
position with the Predecessor since August 1993. He served as a regional
manager of the Predecessor from May 1992 until August 1993. From 1988 until
May 1992, he served as a branch manager of the Predecessor.
Mr. Murphy has served as Vice President-Marketing of the Company since
February 1997. From December 1993 until February 1997, he served as the
Director of Marketing of SCP Supply, and held the same position with the
Predecessor since 1988.
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<PAGE>
Mr. Code has served as a director of the Company since December 1993, and
served as a Vice President of the Company and SCP Supply from December 1993 to
May 1995. Mr. Code has, since August 1988, been a general partner of CHS
Management Limited Partnership ("CHS Management"), the general partner of
Code, Hennessy & Simmons Limited Partnership ("CHS"). Mr. Code was a Vice
President of Citicorp, a commercial bank, from 1986 until August 1988.
Mr. Gotsch has served as a director of the Company since December 1993 and
served as a Vice President of the Company and SCP Supply from December 1993 to
May 1995. Mr. Gotsch has been a Managing Director of Code, Hennessy & Simmons,
Inc., an affiliate of CHS, since January 1996, was a Vice President of CHS
Management from June 1994 to December 1995 and was an Associate of CHS
Management from July 1989 to June 1994. From 1987 to July 1989, he was a
Corporate Banking Officer at The First National Bank of Chicago, N.A., a
commercial bank.
Mr. DeMichele has served as a director of the Company since January 1996.
Mr. DeMichele has served as Chief Executive Officer of Cookson Specialty
Molding Sector (a division of Cookson Group plc.) since February 1994, and
served as President of Loudon Plastics, Inc. ("Loudon") and Pacific
Industries, Inc. ("Pacific") (divisions of Cookson Group plc.) from 1991 to
1995. Mr. DeMichele is a director of Loudon, Pacific, South Pacific Vinyl,
Inc. and Bicknell Huston Distributors, Inc., all of which are divisions of
Cookson Group plc.
Mr. Sledd has served as a director of the Company since March 1996. Mr.
Sledd has served as Chairman of the Board of Directors of Performance Food
Group Company ("PFG"), a food distributor, since February 1995, and has served
as a director and as Chief Executive Officer of PFG since 1987. Mr. Sledd
served as President of PFG from 1987 to February 1995. He served as President
and Chief Executive Officer of Taylor & Sledd Industries, Inc., a predecessor
of PFG from 1984 to 1987.
In connection with the SCP Acquisition, Messrs. Sexton, St. Romain, and
Polizzotto, along with the Predecessor's other shareholders, entered into
noncompetition agreements pursuant to which they agreed not to engage in a
business substantially similar to that of the Company for a period of five
years from the date of the SCP Acquisition.
The Audit Committee of the Board of Directors is composed of three directors
(Messrs. Gotsch, DeMichele and Sledd). The Audit Committee makes
recommendations to the Board of Directors regarding the selection of
independent auditors, reviews the independence of such auditors, approves the
scope of the annual audit activities of the independent auditors, and reviews
such audit results.
The Compensation Committee is composed of three directors (Messrs. Code,
Gotsch and Sledd). The Compensation Committee makes recommendations to the
Board regarding the compensation of officers of the Company, awards under the
Company's compensation and benefit plans and compensation policies and
practices.
The Company does not have a nominating committee.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to the Company's chief
executive officer and three other most highly compensated executive officers
during the year ended December 31, 1996.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ------------
AWARDS
------------
SECURITIES
UNDERLYING
OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (#) COMPENSATION
- --------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Wilson B. Sexton............. 1996 $192,938 $192,938 22,500 $ 12,799(1)
Chairman 1995 183,750 183,750 -- 14,210(2)
1994 175,000 164,500 -- 3,172(3)
Frank J. St. Romain.......... 1996 192,938 192,938 22,500 12,799(4)
President and Chief 1995 183,750 183,750 -- 15,802(5)
Executive Officer 1994 175,000 164,500 -- 16,542(6)
Maurice D. Van Dyke (7)...... 1996 110,250 25,000 -- 11,855(8)
Chief Financial Officer, 1995 105,000 25,000 -- 14,468(9)
Treasurer and Secretary 1994 100,000 25,000 -- 12,377(10)
Richard P. Polizzotto........ 1996 112,000 20,000 4,875 10,582(11)
Vice President 1995 112,000 30,000 6,121 15,041(12)
1994 90,586 30,000 -- 16,498(13)
</TABLE>
- --------
(1) Reflects a $1,335 life insurance premium and $11,464 contributed under the
Company's 401(k) plan.
(2) Reflects a $2,811 life insurance premium and $11,399 contributed under the
Company's 401(k) plan.
(3) Reflects a life insurance premium.
(4) Reflects a $1,335 life insurance premium and $11,464 contributed under the
Company's 401(k) plan.
(5) Reflects a $4,403 life insurance premium and $11,399 contributed under the
Company's 401(k) plan.
(6) Reflects a $3,847 life insurance premium and $12,695 contributed under the
Company's 401(k) plan.
(7) Mr. Van Dyke retired from the Company and SCP Supply in February 1997.
(8) Reflects a $1,335 life insurance premium and $10,520 contributed under the
Company's 401(k) plan.
(9) Reflects a $4,403 life insurance premium and $10,065 contributed under the
Company's 401(k) plan.
(10) Reflects a $4,170 life insurance premium and $8,207 contributed under the
Company's 401(k) plan.
(11) Reflects a $1,335 life insurance policy premium and $9,247 contributed
under the Company's 401(k) plan.
(12) Reflects a $6,084 life insurance premium and $8,957 contributed under the
Company's 401(k) plan.
(13) Includes a $5,755 life insurance premium and $10,743 contributed under
the Company's 401(k) plan.
The following table sets forth, for the executive officers of the Company,
information regarding stock options granted or exercised during, or held at
the end of, 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (1)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ------------ ------------ -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Wilson B. Sexton(2)(3).. 22,500 24% $7.50 12/31/03 $79,772 $190,721
Frank J. St.
Romain(2)(3)........... 22,500 24 7.50 12/31/03 79,772 190,721
Maurice D. Van Dyke(4).. -0- -0- -0- -- -0- -0-
Richard
Polizzotto(3)(5)....... 4,875 5 7.50 12/31/03 17,284 41,323
</TABLE>
- --------
(1) Amounts reflect assumed rates of appreciation from the fair market value
on the date of grant as set forth in the Securities and Exchange
Commission's executive compensation disclosure rules. Actual gains, if
any, on stock option exercises depend on future performance of the Common
Stock and overall stock market conditions. No assurance can be made that
the amounts reflected in these columns will be achieved.
37
<PAGE>
(2) Options were granted and become immediately exercisable on January 24,
1996 pursuant to the SCP Pool Corporation 1995 Stock Option Plan.
(3) In order to prevent dilution or enlargement of rights under the options,
in the event of a reorganization, recapitalization, stock split or
combination or other change in the shares of the Company's Common Stock,
the number and type of shares available upon exercise and the exercise
price will be adjusted accordingly. The Compensation Committee may,
subject to certain restrictions, accelerate or defer the date on which an
option becomes exercisable.
(4) Mr. Van Dyke retired from the Company and SCP Supply in February 1997.
(5) Options become exercisable on January 24, 1998 and were granted on January
24, 1996 pursuant to the SCP Pool Corporation 1995 Stock Option Plan. In
the event of a sale of the capital stock of the Company with the voting
power to elect a majority of the directors or a sale of more than 50% of
the Company's total assets (on a consolidated basis), all options become
fully vested and exercisable.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS
YEAR END (#) AT FISCAL YEAR END
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
- ---- --------------- -------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
Wilson B. Sexton........ -0- -0- 22,500/0(1) $142,500/0(1)
Frank J. St. Romain..... -0- -0- 22,500/0(1) 142,500/0(1)
Maurice D. Van Dyke(2).. -0- -0- 0/0 0/0
Richard Polizzotto...... -0- -0- 0/10,996(3) 0/94,539(3)
</TABLE>
- --------
(1) As of the end of the fiscal year, all of the options held by Mr. Sexton
and Mr. St. Romain were exercisable, and none had been exercised.
(2) Mr. Van Dyke retired from the Company and SCP Supply in February 1997.
(3) As of the end of the fiscal year, none of the options held by Mr.
Polizzotto were exercisable, and none had been exercised.
DIRECTOR COMPENSATION
Non-employee directors of the Company receive (i) an annual retainer of
$6,000, (ii) $1,000 per board meeting attended, (iii) $500 per committee
meeting attended and (iv) $250 per ad-hoc meeting attended. In addition, non-
employee directors of the Company receive a consulting fee of $100 per hour
for tasks performed outside the scope of their service as directors. Directors
who are employees of the Company or its subsidiaries are not entitled to
receive any fees for serving as directors, except that all directors are
reimbursed for out-of-pocket expenses related to their service as directors.
Under the 1996 Non-Employee Director Equity Incentive Plan (the "Directors
Plan"), each non-employee director was granted an option to purchase 3,750
shares of Common Stock upon the establishment of the Directors Plan. In
addition, each non-employee director was granted an option to purchase 3,750
shares of common stock immediately following the May 1996 annual meeting of
the Company's stockholders and will be granted options to purchase an
additional 3,750 shares immediately following each subsequent annual meeting
of the Company's stockholders. Options granted pursuant to the Directors Plan
become exercisable one year after grant, subject to certain exceptions. The
option price per share of Common Stock under the Directors Plan is equal to
100% of the fair market value of the Common Stock at the date of grant. Each
option granted under the Directors Plan is exercisable for ten years after the
date of grant. The maximum number of shares of Common Stock that may be
granted under the Directors Plan is limited to an aggregate of 300,000 (as
adjusted for any change in the Common Stock). Non-employee Directors may elect
to receive shares of Common Stock under the Directors Plan in lieu of the cash
compensation otherwise payable.
38
<PAGE>
EMPLOYMENT AGREEMENTS
In connection with the SCP Acquisition, SCP Supply entered into oral
employment agreements with Wilson B. Sexton and Frank J. St. Romain. The
agreements currently provide, in part, that SCP Supply will pay Messrs. Sexton
and St. Romain an annual base salary of $204,768 and an annual bonus of up to
100% of base salary to be paid in cash and up to 100% of base salary to be
paid in stock. Pursuant to such agreements, Messrs. Sexton and St. Romain are
entitled to be included in SCP Supply's medical program until Medicare
coverage begins (or, if earlier, until terminated for cause or until voluntary
termination of employment prior to 1999), and each will receive an automobile
allowance of $600 per month.
In connection with the acquisition of all of the outstanding stock of Orcal
Pool Supplies, Inc. ("Orcal Acquisition") in March 1995, the Company and SCP
Supply entered into a written Management Agreement with Ronald Hetzner (the
former owner of Orcal), pursuant to which Mr. Hetzner is employed by SCP
Supply as President of Orcal Pool Supplies, a division of SCP Supply. The
Agreement provides that SCP Supply will pay Mr. Hetzner an annual salary of
$100,000. The agreement runs for a period of three years, unless terminated
earlier by the resignation, death, permanent disability or incapacity of Mr.
Hetzner, or by the Company (with or without cause). If terminated without
cause, Mr. Hetzner is entitled to receive his salary until the end of the
three-year employment term. Mr. Hetzner served as a director of the Company
from March 1995 until June 1995.
1995 STOCK OPTION PLAN
In February 1995, the Board of Directors adopted the SCP Pool Corporation
1995 Stock Option Plan and in March 1996, the Board of Directors amended such
plan (as so amended, the "1995 Plan"). The 1995 Plan is administered by the
Compensation Committee of the Board of Directors (or if no such committee
exists, the Board of Directors), which may, at its discretion, grant incentive
stock options and non-qualified stock options to those executive officers or
other key employees of the Company or its subsidiaries selected by the Board
or the Compensation Committee. The maximum aggregate number of shares of
Common Stock with respect to which options may be granted pursuant to the 1995
Plan is 600,000 (as adjusted for any change in the Common Stock). Granted
options have an exercise price of not less than the fair market value of the
stock on the date of grant.
Pursuant to the 1995 Plan, in February 1997 the Company awarded non-
qualified stock options for an aggregate of 99,750 shares of Common Stock to
34 key employees of the Company. Such options expire on December 31, 2003,
become exercisable on the second anniversary of the grant date, and have an
exercise price of approximately $13.17 per share of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONCOMPETITION AGREEMENTS
In connection with the SCP Acquisition, Messrs. Sexton, St. Romain, Van
Dyke, Polizzotto, Cook and Murphy along with the Predecessor's other
shareholders, entered into noncompetition agreements pursuant to which they
agreed not to engage in a business substantially similar to that of the
Company for a period of five years from the date of the SCP Acquisition.
STOCKHOLDER NOTES
Six of the Company's current stockholders (all of whom were stockholders of
the Predecessor) are holders of the Company's Convertible Subordinated
Promissory Notes due December 31, 2002 (the "Convertible Notes") in the
aggregate principal amount of $96,250. They received such notes pursuant to
the liquidation of the Predecessor following the SCP Acquisition. Such notes
were originally issued by the Company to the Predecessor as consideration
pursuant to the SCP Acquisition. In addition, Mr. Hetzner is the holder of the
Company's Junior Subordinated Promissory Notes due April 10, 1998 (the
"Hetzner Notes"), in the original
39
<PAGE>
principal amount of $2,650,000, which he received in connection with the Orcal
Acquisition. As of September 30, 1997, the Company has repaid $1,766,000 of
the principal amount of the Hetzner Notes.
The Convertible Notes bear interest at a rate of 10% per annum and mature on
December 31, 2002. The Convertible Notes are subordinated to the Second
Amended and Restated Credit Agreement, dated as of September 26, 1996, by and
among SCP Supply, The First National Bank of Chicago, as agent, and various
lenders from time to time party thereto (the "Senior Loan Facility") and
certain other indebtedness. The Convertible Notes are convertible into the
number of shares of Common Stock determined by dividing the principal amount
of the note by approximately $0.98, as adjusted for the subdivision or
combination of such shares and for the issuance of any Common Stock (or
securities converted into or exchangeable for shares of Common Stock) at a
price per share less than the conversion price for the Convertible Notes.
The Hetzner Notes bear interest at a rate of 8% per annum and are payable in
three equal annual installments, with the final installment payable on April
10, 1998. The Hetzner Notes are subordinated to the Senior Loan Facility and
certain other indebtedness.
TRANSACTIONS WITH CHS
In connection with the Orcal Acquisition, CHS executed guaranties in favor
of Mr. Hetzner pursuant to which CHS agreed to guarantee payment by the
Company of the Hetzner Notes.
The Company has in the past and may in the future pay to CHS certain
customary investment banking and financial advisory fees for services rendered
by CHS to the Company in connection with acquisitions undertaken by the
Company. In connection with the 1997 Acquisition, the Company expects to pay
$150,000 to an affiliate of CHS for investment banking services.
REGISTRATION AGREEMENT
In connection with the SCP Acquisition in December 1993, the stockholders of
the Company at such time (the "Original Stockholders") entered into a
Registration Agreement with the Company (the "Registration Agreement"). The
Registration Agreement provides for certain demand registration rights to CHS,
certain employees of CHS and its affiliates and an additional investor
(collectively, the "Investor Stockholders"), and to subsequent holders of the
Common Stock acquired by such stockholders in connection with the SCP
Acquisition. The demand registration rights began from and after the effective
date of the first registration statement filed by the Company in connection
with the public offering of its securities. The holders of a majority of the
registrable securities held by the Investor Stockholders (and their permitted
transferees) are entitled to request four long-form registrations in which the
Company pays all registration expenses and an unlimited number of short-form
registrations in which the Company pays all registration expenses. Such
holders are also entitled to request an unlimited number of long-form
registrations in which holders of registrable securities pay their pro rata
share of registration expenses. The Company is entitled to postpone a demand
registration for up to six months under certain circumstances, and is not
required to effect a demand registration within six months of a previous
registration in which holders of registrable securities participated without
reduction of the number of their included shares.
The Registration Agreement also provides that, subject to certain
limitations, the Original Stockholders (and their permitted transferees) may
request inclusion of their shares in a registration of securities by the
Company (other than pursuant to the initial public offering of Common Stock or
a demand registration). Expenses incurred in connection with the exercise of
such piggyback registration rights are borne by the Company.
STOCKHOLDER LEASE AGREEMENTS
In November 1993, the Company entered into a lease agreement (the "Northpark
Lease") with Northpark Alliance, LLC, a limited liability company
("Northpark"), the members of which are Messrs. Van Dyke, Sexton,
40
<PAGE>
and Polizzotto and the St. Romain Children's Trust (a trust established for
the benefit of the children of Mr. St. Romain for which Mr. Van Dyke serves as
Trustee), with respect to a facility at 128 Northpark Boulevard, Covington,
Louisiana. The Company used this facility as its corporate headquarters until
space constraints forced it to relocate to another Covington, Louisiana
facility in October 1996. The Northpark Lease had a term of 15 years,
commencing on June 10, 1994, and monthly rental rates ranging from $6,511 to
$7,698. The Company believes that such lease reflected a fair market rate as
of the date thereof. The Company was obligated to make lease payments under
the Northpark Lease until Northpark sold the facility in October 1997.
In November 1991, the Company entered into a lease agreement (the "Trust
Lease") with the St. Romain Children's Trust with respect to a service center
(the "Trust Facility") in Baton Rouge, Louisiana. The Trust Lease has a term
of nine years and one month, commencing on December 1, 1991, and monthly
rental rates ranging from $5,053 to $5,360. In March 1997, space constraints
forced the Company to relocate its Baton Rouge service center from the Trust
Facility to another Baton Rouge facility which it rents pursuant to a lease
agreement (the "St. Romain Lease") with Kenneth St. Romain, the regional
manager of the Baton Rouge service center and the son of Frank J. St. Romain,
President and Chief Executive Officer of the Company. The St. Romain Lease has
a term of 5 years, commencing on March 1, 1997, and provides for rental
payments of $9,655 per month. The Company is still obligated to make payments
under the Trust Lease, although in November 1997 the St. Romain Children's
Trust subleased the Trust Facility for a term equal to the balance of the
Trust Lease term at a rental which is over 70% of the rate payable under the
Trust Lease. The Company believes that both the Trust Lease and the St. Romain
Lease reflect a fair market rate as of the respective dates thereof.
In connection with the Orcal Acquisition, SCP Supply entered into eight
lease agreements with Mr. Hetzner and his affiliates (the "Hetzner Leases"),
pursuant to which SCP Supply rents service center facilities in California
which are owned by Mr. Hetzner and his affiliates. The Hetzner Leases have
initial terms of five years, commencing on February 28, 1995, and monthly
rental rates ranging from approximately $3,600 to $8,748. The aggregate
monthly rental payment under the Hetzner Leases is approximately $46,260. SCP
Supply has an option to renew each such lease for five years at fair market
rental rate.
DUAL CHEMICAL FEEDER AGREEMENTS
Pursuant to an agreement dated as of March 31, 1992, by and among Mr. Sexton
and Wexco Incorporated, a Pennsylvania corporation ("Wexco"), Mr. Sexton
assigned all of his rights in a patented device for the delivery of multiple
chemicals into a swimming pool (the "Dual Chemical Feeder") to Wexco in return
for a promise to pay certain royalties. In connection with the acquisition by
the subsidiary Alliance Packaging, Inc. of the chemical manufacturing and
repackaging assets of York Chemical Corporation and Wexco (the "York
Acquisition") in January 1995, the Company purchased all of Wexco's rights and
obligations with respect to the Dual Chemical Feeder, including Wexco's
obligation to make royalty payments to Mr. Sexton. The aggregate royalties
paid to Mr. Sexton in 1996 did not exceed $60,000, and the Company does not
expect that the aggregate royalties payable in 1997 will exceed $60,000.
PLEDGE AGREEMENT
In connection with the SCP Acquisition, the Company loaned Mr. Murphy
$125,000 to purchase certain securities (the "Purchased Securities") of the
Company. Mr. Murphy pledged the Purchased Securities to the Company to secure
the repayment of such loan. As of March 1, 1997, Mr. Murphy had repaid such
loan and the Company released the pledge on the Purchased Securities.
TRANSACTIONS WITH THE COOKSON SPECIALTY MOLDING SECTOR
Mr. DeMichele, a director of the Company, is the Chief Executive Officer of
the Molding Sector, a division of Cookson Group plc. Mr. DeMichele is also a
director of Pacific. Pacific is the sole stockholder of Bicknell, the subject
of the 1997 Acquisition. The Company and Pacific will enter into the Supply
Agreement as a part of the 1997 Acquisition. See "The 1997 Acquisition." The
Company believes the 1997 Acquisition and the Supply
41
<PAGE>
Agreement reflect, respectively, the fair market value for the assets of
Bicknell and the products and services to be provided pursuant to the Supply
Agreement.
In connection with the purchase of products or services not related to the
1997 Acquisition, Pacific received approximately $7,880,000 in payments from
the Company in 1996 and expects to receive over $10,000,000 in payments from
the Company in 1997. The Company believes that the payments made to Pacific
reflect the fair market value for the products and services provided.
CERTAIN RELATIONSHIPS
Kenneth St. Romain is a regional manager for the Company in the Baton Rouge
and New Orleans, Louisiana area. In 1996, Mr. St. Romain received
approximately $137,000 in salary and bonus, and the Company expects that his
salary and bonus for 1997 will not exceed the amount paid in 1996. Kenneth St.
Romain is the son of Frank J. St. Romain, President and Chief Executive
Officer of the Company. Alan Henseler is a regional manager for the Company in
the Alabama and northwestern Florida area. In 1996, Mr. Henseler received
approximately $95,000 in salary and bonus, and the Company expects that his
salary and bonus for 1997 will equal or exceed the amount paid in 1996. Mr.
Henseler is the son-in-law of Frank J. St. Romain, President and Chief
Executive Officer of the Company. The compensation formula pursuant to which
Messrs. St. Romain and Henseler are paid is identical to that by which the
Company's other regional managers are paid, and includes a fixed salary and a
bonus based on profitability and return on assets of the service centers for
which such managers are responsible. The actual amount of compensation paid to
each regional manager varies as a result of the application of the bonus
formula as well as such manager's seniority and other objective factors.
42
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of November 14, 1997, and
immediately following the Offering by (i) each person who is known by the
Company to own beneficially more than 5% of the Company's Common Stock, (ii)
each director and named executive officer of the Company, (iii) all directors
and executive officers of the Company as a group and (iv) each Selling
Stockholder. Except as otherwise indicated below, each of the persons named in
the table has sole voting and investment power with respect to the securities
beneficially owned by it or him as set forth opposite its or his name.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR SHARES TO OWNED AFTER
TO OFFERING BE SOLD OFFERING
-------------------- IN --------------------
NAME OF BENEFICIAL OWNER NUMBER(1) PERCENT(2) OFFERING NUMBER(1) PERCENT(2)
------------------------ --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Code, Hennessy & Simmons
Limited Partnership(3).... 2,266,399 35.5% 1,500,379 766,020 9.9%
Andrew W. Code(4)(5)....... 2,289,799 35.8 1,500,379 789,420 10.2
Daniel J. Hennessy(4)(6)... 2,268,349 35.5 1,500,379 767,970 9.9
Brian P. Simmons(4)(7)..... 2,303,899 36.1 1,500,379 803,520 10.4
Wilson B. Sexton(8)........ 229,735 3.6 50,000 179,735 2.3
St. Romain Children's
Trust(9).................. 124,986 2.0 24,434 100,552 1.3
Frank J. St. Romain(10).... 113,749 1.8 17,187 96,562 1.2
Craig K. Hubbard(11)....... 6,151 * -- 6,151 *
Maurice D. Van Dyke(12).... 201,000 3.1 -- 201,000 2.6
Richard P. Polizzotto(13).. 47,333 * 8,000 39,333 *
A. David Cook.............. 3,000 * -- 3,000 *
John M. Murphy(14)......... 34,908 * -- 34,908 *
Peter M. Gotsch(15)........ 10,225 * -- 10,225 *
Dominick DeMichele(16)..... 15,000 * -- 15,000 *
Robert C. Sledd(17)........ 8,250 * -- 8,250 *
All executive officers and
directors
as a group (10 persons)... 2,758,150 42.0 1,600,000 1,182,584 14.9
</TABLE>
- --------
*Less than 1%
(1) Includes shares of Common Stock subject to options which are exercisable
within 60 days of November 14, 1997 and shares of Common Stock issuable
upon conversion of the Company's Convertible Subordinated Promissory Notes
due December 31, 2002 (the "Convertible Notes")
(2) Shares of Common Stock subject to options which are exercisable within 60
days of November 14, 1997 and shares of Common Stock issuable upon
conversion of the Convertible Notes are considered outstanding for the
purpose of determining the percent of the class held by the holder of such
options or notes, but not for the purpose of computing the percentage held
by others.
(3) The business address of CHS is 10 South Wacker Drive, Suite 3175, Chicago,
Illinois 60606.
(4) 2,266,399 of such shares are held of record by CHS. Messrs. Code, Hennessy
and Simmons are general partners of the general partner of CHS and share
investment and voting power with respect to the securities owned by CHS.
Each of Messrs. Code, Hennessy and Simmons disclaims beneficial ownership
of such shares except to the extent of his pecuniary interest therein. The
business address of each such person is c/o CHS, 10 South Wacker Drive,
Suite 3175, Chicago, Illinois 60606.
(5) 15,000 of such shares are held directly by a charitable foundation of
which Mr. Code is a director, president, and the sole member, and as a
result, may be deemed to have voting and dispositive power with respect to
such shares, although neither Mr. Code nor any members of his immediate
family have any pecuniary interest in such shares. 900 of such shares are
held by Mr. Code as custodian for his minor children under the Uniform
Gifts to Minors Act. Also includes options to purchase 7,500 shares issued
to Mr. Code pursuant to the Company's 1996 Non-Employee Director Equity
Incentive Plan (the "Directors Plan").
43
<PAGE>
(6) 1,500 of such shares are held by minor children of Mr. Hennessy, and Mr.
Hennessy disclaims beneficial ownership of such shares. 450 of such shares
are held by Mr. Hennessy and his spouse as joint tenants.
(7) 37,500 of such shares are held by Mr. Simmons and his spouse as joint
tenants.
(8) Includes 31,246 shares issuable upon conversion of the Convertible Note
held of record by Mr. Sexton and options to purchase 45,000 shares issued
to Mr. Sexton pursuant to the Company's 1995 Stock Option Plan (the
"Plan").
(9) Includes 31,246 shares issuable upon conversion of the Convertible Note
held of record by the St. Romain Children's Trust.
(10) Includes options to purchase 45,000 shares issued to Mr. St. Romain
pursuant to the Plan.
(11)Includes options to purchase 5,101 shares issued to Mr. Hubbard pursuant
to the Plan.
(12) Includes 63,261 shares held directly by Mr. Van Dyke, 12,753 shares
issuable upon conversion of the Convertible Note held of record by Mr.
Van Dyke and 124,986 shares (including 31,246 shares issuable upon
conversion of a Convertible Note) held of record by the St. Romain
Children's Trust, of which Mr. Van Dyke is the Trustee. As the Trustee,
Mr. Van Dyke has investment and voting power with respect to the shares
held by the trust. The business address of Mr. Van Dyke is 109 Northpark
Boulevard, Covington, Louisiana 70433. Mr. Van Dyke retired from the
Company and SCP Supply in February 1997.
(13) Includes 8,928 shares issuable upon conversion of the Convertible Note
held of record by Mr. Polizzotto.
(14)Includes 8,928 shares issuable upon conversion of the Convertible Note
held of record by Mr. Murphy.
(15) Includes options to purchase 7,500 shares issued to Mr. Gotsch pursuant
to the Directors Plan. Mr. Gotsch is a Managing Director of an affiliate
of CHS but does not share investment or voting discretion with respect to
the securities held by CHS.
(16) Includes options to purchase 7,500 shares issued to Mr. DeMichele
pursuant to the Directors Plan.
(17)Includes options to purchase 7,500 shares issued to Mr. Sledd pursuant to
the Directors Plan.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock, $0.001
par value (the "Common Stock") and 100,000 shares of Preferred Stock, $.01 par
value (the "Preferred Stock"). Upon completion of the Offering, 7,740,060
shares of Common Stock will be issued and outstanding and no shares of
Preferred Stock will be issued and outstanding. The following summary of
certain provisions of the Company's capital stock describes all material
provisions of, but does not purport to be complete, and is subject to, and
qualified in its entirety by, the Restated Certificate of Incorporation and
the Bylaws of the Company that are included as exhibits to the Registration
Statement of which this Prospectus forms a part and by the provisions of
applicable law.
COMMON STOCK
Subject to the prior rights of the holders of any Preferred Stock, the
holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefor at such time and in such
amounts as the Board of Directors may from time to time determine. See
"Dividend Policy." Following consummation of the Offering, the shares of
Common Stock will not be redeemable, and the holders thereof will have no
preemptive or subscription rights to purchase any securities of the Company.
Upon liquidation, dissolution or winding-up of the Company, the holders of
Common Stock are entitled to receive pro rata the assets of the Company which
are legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding. Each outstanding share of Common Stock is entitled to vote
on all matters submitted to a vote of stockholders.
PREFERRED STOCK
The Company's Board of Directors may, without further action by the
Company's stockholders, from time to time, direct the issuance of up to
100,000 shares of Preferred Stock in series and may, at the time of issuance,
44
<PAGE>
determine the rights, preferences and limitations of each series. Satisfaction
of any dividend preferences of outstanding shares of Preferred Stock would
reduce the amount of funds available for the payment of dividends on shares of
Common Stock. Holders of shares of Preferred Stock may be entitled to receive
a preference payment in the event of any liquidation, dissolution or winding-
up of the Company before any payment is made to the holders of shares of
Common Stock. Under certain circumstances, the issuance of shares of Preferred
Stock may render more difficult or tend to discourage a merger, tender offer
or proxy contest, the assumption of control by a holder of a large block of
the Company's securities or the removal of incumbent management. The Board of
Directors of the Company, without stockholder approval, may issue shares of
Preferred Stock with voting and conversion rights which could adversely affect
the holders of shares of Common Stock.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company has elected not to be governed by the provisions of Section 203
of the Delaware General Corporation Law. In general, the law prohibits a
public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. "Business
combination" includes mergers, asset sales and other transactions resulting in
a financial benefit to the stockholder. An "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three
years, did own) 15% or more of the corporation's voting stock.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Certificate of Incorporation limits the liability of directors to the
fullest extent permitted by the Delaware General Corporation Law. In addition,
the Certificate of Incorporation provides that the Company shall indemnify
directors and officers of the Company to the fullest extent permitted by such
law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is First Chicago Trust
Company of New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company expects to have 7,740,060
shares of Common Stock outstanding (assuming the Underwriters' over-allotment
option is not exercised). Of these shares, the 3,337,500 shares sold in the
Company's initial public offering and the 2,950,000 shares of Common Stock
sold in the Offering will be tradeable without restriction under the
Securities Act, except for any such shares which may be acquired by an
"affiliate" of the Company (an "Affiliate"), as that term is defined in Rule
144 under the Securities Act ("Rule 144"), which shares will be subject to the
resale limitations of Rule 144.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least one year has elapsed
since the later of the date the "restricted securities" (as that phrase is
defined in Rule 144) were acquired from the Company and the date they were
acquired from an Affiliate, then the holder of such restricted securities
(including an Affiliate) is entitled to sell a number of shares within any
three-month period that does not exceed the greater of 1% of the then
outstanding shares of the Common Stock (approximately 77,400 shares
immediately after this Offering) or the average weekly reported volume of
trading of the Common Stock on the Nasdaq National Market during the four
calendar weeks preceding such sale. The holder may only sell such shares
through unsolicited brokers' transactions. Sales under Rule 144 are also
subject to certain requirements pertaining to the manner of such sales,
notices of such sales and the availability of current public information
concerning the Company. Affiliates may sell shares not constituting restricted
shares in accordance with the foregoing volume limitations and other
requirements but without regard to the one-year period. Up to 1,452,560 shares
of Common Stock are eligible for sale in the public market under Rule 144,
45
<PAGE>
subject to the volume limitations and other requirements described above,
without consideration of the contractual restrictions described below.
Under Rule 144(k), if a period of at least two years has elapsed between the
later of the date restricted shares were acquired from the Company and the
date they were acquired from an Affiliate, as applicable, a holder of such
restricted shares who is not an Affiliate at the time of the sale and has not
been an Affiliate for at least three months prior to the sale would be
entitled to sell the shares immediately without regard to the volume
limitations and other conditions described above. Up to 1,142,560 shares of
Common Stock are eligible for sale without restriction under Rule 144(k).
Notwithstanding the foregoing, the Company, and certain of its directors,
executive officers and stockholders have agreed that for a period of 90 days
after the date of the Offering they will not, without the prior written
consent of the Representatives, offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock except pursuant to the
Underwriting Agreement.
The Company can make no predictions as to the effect, if any, that sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of significant amounts of
the Common Stock in the public market, or the perception that such sales may
occur, could adversely affect prevailing market prices. See "Risk Factors--
Shares Eligible for Future Sale; Registration Rights."
REGISTRATION AGREEMENT
In connection with the SCP Acquisition in December 1993, the Company entered
into a Registration Agreement with its stockholders. See "Certain
Relationships and Related Transactions--Registration Agreement."
46
<PAGE>
UNDERWRITING
Morgan Keegan & Company, Inc., The Robinson-Humphrey Company, LLC and
Johnson Rice & Company L.L.C. (the "Underwriters") have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") to purchase from the Company and the Selling
Stockholders the number of shares of Common Stock indicated below opposite
their respective names at the public offering price less the underwriting
discount set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
NAME
OF NUMBER OF
UNDERWRITER SHARES
----------- -----------
<S> <C>
Morgan Keegan & Company, Inc.................................
The Robinson-Humphrey Company, LLC...........................
Johnson Rice & Company L.L.C.................................
-----------
Total....................................................
===========
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any of such shares
are purchased. The Company and the Selling Stockholders have been advised by
the Underwriters that the Underwriters propose to offer the shares of Common
Stock to the public at the public offering price set forth on the cover page
of this Prospectus and to certain dealers at such price less a concession not
in excess of $ per share of Common Stock. The Underwriters may allow, and
such dealers may reallow, a discount not in excess of $ per share to other
dealers. The public offering price and the concessions and discount to dealers
may be changed by the Underwriters after the public offering.
One of the Selling Stockholders has granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
additional 442,500 shares of Common Stock at the public offering price, less
underwriting discounts and commissions, as shown on the cover page of this
Prospectus. The Underwriters may exercise such option solely for the purpose
of covering over-allotments incurred in the sale of the shares of Common Stock
offered hereby.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters or to contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
The Company and certain of its executive officers, directors and
stockholders have agreed, for a period of 90 days from the date of this
Prospectus, not to offer, sell, offer to sell, contract to sell, grant any
option to purchase, or otherwise dispose of, directly or indirectly, any
shares of Common Stock, or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock, in the public market, without the
prior written consent of the Underwriters.
The Underwriters have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, and penalty bids in accordance with
Regulation M under the Exchange Act. Over-allotment involves syndicate sales
in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids for and purchases of Common Stock so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve the purchase of Common Stock in the open market in order
to cover a syndicate short position. Penalty bids permit the Underwriters to
reclaim a selling concession from a syndicate member when the shares of Common
Stock originally sold by such syndicate member are purchased in a stabilizing
transaction or syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions, and
penalty bids may cause the price of the Common Stock to be higher than it
would otherwise be in the absence of such transactions. These transactions may
be effected on the Nasdaq National Market, or otherwise, and, if commenced,
may be discontinued at any time.
47
<PAGE>
In connection with this Offering, the Underwriters and certain selling group
members (if any) or their respective affiliates who are qualified registered
market makers on the Nasdaq National Market may engage in passive market
making transactions in the Common Stock on the Nasdaq National Market in
accordance with Rule 103 of Regulation M under the Exchange Act during the one
business day period before commencement of offers of sales of the Common
Stock. The passive market making transactions must comply with applicable
volume and price limits and be identified as such. In general, a passive
market maker may display its bid at a price not in excess of the highest
independent bid for the security; however, if all independent bids are lowered
below the passive market maker's bid such bid must then be lowered when
certain purchase limits are exceeded.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Kirkland & Ellis, Chicago, Illinois. Kevin R. Evanich,
a partner of Kirkland & Ellis, beneficially owns shares of the Company's
Common Stock. Certain legal matters will be passed upon for the Underwriters
by Alston & Bird LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of SCP Pool Corporation at December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996 appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of The B-L Network, Inc. at December 31, 1995 and
September 25, 1996, and for each of the two years in the period ended December
31, 1995 and for the period ended September 25, 1996, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 pursuant to the Securities
Act with respect to the Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
items of which are omitted as permitted by the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
contract, agreement or other document filed with the Registration Statement as
exhibits are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable
document filed as an exhibit to the Registration Statement. For further
information about the Company and the securities offered hereby, reference is
made to the Registration Statement and to the consolidated financial
statements, schedules and exhibits filed as a part thereof.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy or information statements, and other
information with the Commission. The Registration Statement, the exhibits and
schedules forming a part thereof and the reports, proxy or information
statements, and other information filed by the Company with the Commission in
accordance with the Exchange Act may be inspected without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following regional offices of the
Commission: 7 World Trade Center, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661-2511.
Copies of such materials or any part thereof may also be obtained from the
public reference section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains an Internet web site at http://www.sec.gov containing registration
statements, reports, proxy and information statements and other information
that registrants, such as the Company, file electronically with the
Commission.
48
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF SCP POOL CORPORATION
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets--December 31, 1995 and 1996 and September 30,
1997 (Unaudited)......................................................... F-3
Consolidated Statements of Income--Years Ended December 31, 1994, 1995 and
1996 and Nine Months Ended September 30, 1996 (Unaudited) and 1997
(Unaudited).............................................................. F-4
Consolidated Statements of Stockholders' Equity--Years Ended December 31,
1994, 1995 and 1996 and Nine Months Ended September 30, 1997 (Unaudited). F-5
Consolidated Statements of Cash Flows--Years Ended December 31, 1994, 1995
and 1996 and Nine Months Ended September 30, 1996 (Unaudited) and 1997
(Unaudited).............................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
FINANCIAL STATEMENTS OF THE B-L NETWORK, INC.
Report of Independent Auditors............................................ F-18
Balance Sheets--December 31, 1995 and September 25, 1996.................. F-19
Statements of Operations and Retained Earnings (Deficit)--Years Ended
December 31, 1994 and 1995 and Period Ended September 25, 1996........... F-20
Statements of Cash Flows--Years Ended December 31, 1994 and 1995
and Period Ended September 25, 1996...................................... F-21
Notes to Financial Statements............................................. F-22
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
SCP Pool Corporation
We have audited the consolidated balance sheets of SCP Pool Corporation as
of December 31, 1995 and 1996, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of SCP Pool Corporation at December 31, 1995 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
New Orleans, Louisiana
February 14, 1997, except for Note 11, as
to which the date is September 29, 1997
F-2
<PAGE>
SCP POOL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
---------------- SEPTEMBER 30
1995 1996 1997
------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 2,043 $ 4,621 $ 1,928
Receivables.................................... 12,090 25,293 36,889
Inventory...................................... 25,230 42,112 43,079
Prepaid expenses............................... 363 632 735
Deferred income taxes.......................... 145 392 1,103
------- -------- --------
Total current assets......................... 39,871 73,050 83,734
Property and equipment, net...................... 3,470 4,413 4,746
Goodwill, net.................................... 29,725 33,009 32,844
Other assets, net................................ 2,331 2,773 2,339
------- -------- --------
Total assets................................. $75,397 $113,245 $123,663
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $12,726 $ 15,132 $ 13,359
Accrued and other current liabilities.......... 3,075 7,907 10,929
Current portion of long-term debt.............. 2,883 15,409 7,243
------- -------- --------
Total current liabilities.................... 18,684 38,448 31,531
Deferred income taxes............................ 843 2,119 2,344
Long-term debt, less current portion............. 23,593 35,868 43,596
Stockholder' equity:
Preferred stock, $.01 par value; 100,000 shares
authorized; no shares issued and outstanding.. -- -- --
Common stock, $.001 par value; 10,000,000
shares authorized; 6,334,214 shares issued and
outstanding at December 31, 1995 and 1996 and
6,390,060 shares issued and outstanding at
September 30, 1997............................ 6 6 6
Additional paid-in capital..................... 29,585 29,585 29,705
Retained earnings.............................. 2,686 7,219 16,481
------- -------- --------
Total stockholders' equity................... 32,277 36,810 46,192
------- -------- --------
Total liabilities and stockholders' equity... $75,397 $113,245 $123,663
======= ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
SCP POOL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
---------------------------- ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................... $101,977 $161,095 $235,844 $189,356 $286,847
Cost of sales................ 77,488 123,974 183,814 146,510 223,268
-------- -------- -------- -------- --------
Gross profit................. 24,489 37,121 52,030 42,846 63,579
Warehouse expense............ 3,610 6,957 9,611 7,114 11,067
Selling and administrative
expenses.................... 13,518 19,907 31,139 20,394 33,416
Goodwill amortization........ 683 735 793 576 648
-------- -------- -------- -------- --------
Operating income............. 6,678 9,522 10,487 14,762 18,448
Other income (expense):
Interest expense........... (4,171) (5,113) (3,176) (2,052) (3,605)
Amortization expense....... (498) (610) (698) (398) (534)
Management fees paid to
majority stockholder...... (250) (208) -- --
Miscellaneous income....... 118 228 823 577 629
-------- -------- -------- -------- --------
(4,801) (5,703) (3,051) (1,873) (3,510)
-------- -------- -------- -------- --------
Income before income taxes
and extraordinary loss...... 1,877 3,819 7,436 12,889 14,938
Provision for income taxes... 770 1,490 2,903 5,029 5,676
-------- -------- -------- -------- --------
Income before extraordinary
loss........................ 1,107 2,329 4,533 7,860 9,262
Extraordinary loss, net of
applicable income taxes of
$499........................ -- 750 -- -- --
-------- -------- -------- -------- --------
Net income................... $ 1,107 $ 1,579 $ 4,533 $ 7,860 $ 9,262
======== ======== ======== ======== ========
Income per share of common
stock:
Primary:
Income before
extraordinary loss...... $ .53 $ .78 $ .72 $ 1.24 $ 1.46
Extraordinary loss....... -- .25 -- -- --
-------- -------- -------- -------- --------
Net income............... $ .53 $ .53 $ .72 $ 1.24 $ 1.46
======== ======== ======== ======== ========
Fully diluted:
Income before
extraordinary loss...... $ .50 $ .75 $ .70 $ 1.22 $ 1.43
Extraordinary loss....... -- .24 -- -- --
-------- -------- -------- -------- --------
Net income............... $ .50 $ .51 $ .70 $ 1.22 $ 1.43
======== ======== ======== ======== ========
Weighted average shares
outstanding:
Primary.................... 2,102 2,972 6,334 6,334 6,358
======== ======== ======== ======== ========
Fully diluted.............. 2,229 3,099 6,462 6,462 6,475
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
SCP POOL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL
COMMON STOCK COMMON STOCK COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- ------ ---------- ------ -------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1994................... -- $ -- 1,275,361 $ 1 71,597 $ -- $ 1,929 $ -- $ 1,930
Net income............. -- -- -- -- -- -- -- 1,107 1,107
---------- ----- ---------- ---- -------- ----- ------- ------- -------
Balance at December 31,
1994................... -- -- 1,275,361 1 71,597 -- 1,929 1,107 3,037
Common stock issued.... -- -- 36,730 -- -- -- 300 -- 300
Recapitalization....... 3,104,109 3 (1,312,091) (1) (71,597) -- 7,198 -- 7,200
Initial public
offering.............. 3,080,105 3 -- -- -- -- 19,181 -- 19,184
Exercise of
overallotment option.. 150,000 -- -- -- -- -- 977 -- 977
Net income............. -- -- -- -- -- -- -- 1,579 1,579
---------- ----- ---------- ---- -------- ----- ------- ------- -------
Balance at December 31,
1995................... 6,334,214 6 -- -- -- -- 29,585 2,686 32,277
Net income............. -- -- -- -- -- -- -- 4,533 4,533
---------- ----- ---------- ---- -------- ----- ------- ------- -------
Balance at December 31,
1996................... 6,334,214 6 -- -- -- -- 29,585 7,219 36,810
Common stock issued
(unaudited)........... 55,846 -- -- -- -- -- 120 -- 120
Net income (unaudited). -- -- -- -- -- -- -- 9,262 9,262
---------- ----- ---------- ---- -------- ----- ------- ------- -------
Balance at September 30,
1997 (unaudited)....... 6,390,060 $ 6 -- $ -- -- $ -- $29,705 $16,481 $46,192
========== ===== ========== ==== ======== ===== ======= ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
SCP POOL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
---------------------------- ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................. $ 1,107 $ 1,579 $ 4,533 $ 7,860 $ 9,262
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Write-off of loan
financing fees............ -- 1,249 -- -- --
Depreciation and
amortization.............. 1,566 2,069 2,503 1,801 1,868
Provision for doubtful
accounts receivable, net
of write-offs............. 369 506 388 650 766
Provision for inventory
obsolescence, net of
write-offs................ 482 678 (86) 431 793
Provision for deferred
income taxes.............. 344 935 1,029 31 (486)
Loss (gain) on sale of
property and equipment.... (5) 13 155 (76) (25)
Changes in operating
assets and liabilities,
net of effects of
acquisitions and
disposals:
Accounts receivable...... (2,198) (3,686) (12,571) (6,062) (12,363)
Inventory................ (5,590) (3,667) 4,877 (1,470) (2,250)
Prepaid expenses and
other assets............ (337) (790) 31 (312) (202)
Accounts payable......... 3,048 1,981 2,638 (4,365) (1,792)
Accrued and other current
liabilities............. 1,646 (88) 4,129 6,146 2,713
-------- -------- -------- -------- --------
Net cash provided by
(used in) operating
activities............ 432 779 7,626 4,634 (1,716)
INVESTING ACTIVITIES
Acquisition of businesses... (2,130) (11,108) (1,664) -- --
Purchase of property and
equipment.................. (372) (866) (788) (554) (732)
Proceeds from sale of
property and equipment..... 19 127 73 156 72
-------- -------- -------- -------- --------
Net cash used in investing
activities................. (2,483) (11,847) (2,379) (398) (660)
FINANCING ACTIVITIES
Net borrowings (repayments)
of revolving loan.......... 3,450 6,615 (1,000) (13,000) 13,500
Proceeds from long-term
debt....................... -- 7,200 -- 15,577 --
Payments on long-term debt.. (1,500) (21,799) (1,669) (2,757) (13,909)
Issuance of common stock.... -- 20,461 -- -- 92
Payment of debt prepayment
premium.................... -- (210) -- -- --
-------- -------- -------- -------- --------
Net cash provided by (used
in) financing activities... 1,950 12,267 (2,669) (180) (317)
-------- -------- -------- -------- --------
Change in cash and cash
equivalents................ (101) 1,199 2,578 4,056 (2,693)
Cash and cash equivalents at
beginning of period........ 945 844 2,043 2,043 4,621
-------- -------- -------- -------- --------
Cash and cash equivalents at
end of period.............. $ 844 $ 2,043 $ 4,621 $ 6,099 $ 1,928
======== ======== ======== ======== ========
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid (received) during
the period for:
Interest................... $ 3,285 $ 5,883 $ 3,279 $ 1,139 $ 3,450
======== ======== ======== ======== ========
Income taxes, net of
refunds................... $ 1,121 $ (33) $ (561) $ 10 $ 4,027
======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES
Long-term debt issued to
acquire businesses......... $ -- $ 2,650 $ 31,846 $ 32,691 $ --
======== ======== ======== ======== ========
Long-term debt reduced
through sale of Alliance... $ -- $ -- $ 4,376 $ -- $ --
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements
The consolidated balance sheet as of September 30, 1997 and the related
consolidated statements of income and retained earnings and cash flows for the
nine months ended September 30, 1996 and 1997 and related notes (interim
financial information) have been prepared by SCP Pool Corporation and are
unaudited. In the opinion of management, the interim financial information
includes all adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of the results of the interim periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the interim financial
information. The interim financial information should be read in conjunction
with SCP Pool Corporation's audited consolidated financial statements
appearing herein. The Company's business is highly seasonal. In general, sales
and net income are highest during the second and third quarter, which
represent the peak months of swimming pool use and installation. The results
for the nine months ended September 30, 1997 may not be indicative of
operating results for the year ending December 31, 1997.
Description of Business
SCP Pool Corporation and its wholly owned subsidiaries (collectively
referred to as the Company) maintain 69 service centers in 22 states located
throughout the United States, except in the Northeast, from which they sell
swimming pool equipment and supplies to pool builders, retail stores, and
service firms.
On September 26, 1996, the Company acquired certain assets, primarily
inventory and property and equipment, of The B-L Network, Inc. (BLN), a
wholesaler of swimming pool supplies with 39 service centers in 12 states.
$31.8 million of the aggregate purchase price was financed by BLN, with the
remaining $2.4 million representing liabilities assumed (see Note 6) and other
costs incurred by the Company. This acquisition has been accounted for using
the purchase method of accounting and the results of operations have been
included in the accompanying consolidated financial statements since the date
of acquisition. The cost of the acquisition has been allocated as follows, on
the basis of the fair value of the assets acquired (in thousands):
<TABLE>
<S> <C>
Inventory......................................................... $25,674
Other current assets.............................................. 389
Property and equipment............................................ 2,705
Other assets...................................................... 1,136
Goodwill.......................................................... 4,309
-------
$34,213
=======
</TABLE>
Unaudited pro forma results of operations of the Company for the years ended
December 31, 1995 and 1996, giving effect to the BLN acquisition as if it had
occurred as of January 1, 1995, are as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Net sales.............................................. $301,983 $364,702
Gross profit........................................... $ 64,512 $ 74,388
Operating income....................................... $ 9,619 $ 10,095
Income before extraordinary loss....................... $ 1,198 $ 3,098
Net income............................................. $ 448 $ 3,098
Net income per share:
Primary.............................................. $ .15 $ .49
Fully diluted........................................ $ .15 $ .48
</TABLE>
F-7
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The unaudited pro forma consolidated results of operations for the years
ended December 31, 1995 and 1996 include pro forma adjustments for the
incremental increase or decrease in amortization of goodwill and other
intangible assets, interest expense, and income taxes associated with the
acquisition. It does not reflect the anticipated savings in purchasing costs
at BLN during the periods presented, nor does it reflect cost savings from the
closure of certain BLN service centers.
In October 1996, the Company sold certain assets, including inventory and
fixed assets, of Alliance Packaging, Inc., a wholly owned subsidiary which
operates a manufacturing and repackaging facility in Dallas, Texas, to Bio-
Lab, Inc. (Bio-Lab), the parent company of BLN, for approximately $5.4 million
which approximated the book value of the assets sold.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Seasonality and Weather
The Company's business is highly seasonal. Sales are substantially lower
during the first and fourth quarters of the year, when the Company may incur
net losses. The principal external factor affecting the Company's business is
weather. Unseasonably early or late warming trends can increase or decrease
the length of the pool season and unseasonably cool weather or extraordinary
rainfall during the peak season can decrease swimming pool use, installation
and maintenance, each of which can adversely affect the Company's sales and
operating profit.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Credit Risk
The Company performs periodic credit evaluations of its customers and
generally does not require collateral. Receivables are generally due within 30
days, except for winter sales under early-buy programs for which extended
terms are given. Credit losses have been within management's expectations.
Inventories
Inventories consist primarily of goods purchased for resale and are carried
at the lower of cost, using the average cost method, or market. At December
31, 1995 and 1996, the reserve for inventory obsolescence was approximately
$1,800,000 and $1,714,000, respectively. The reserve for inventory
obsolescence at each service center is based upon a number of factors,
including the experience of the manager at the service center, the previous
operating performance of the service center, geographical location, product
offerings, and other factors. The Company believes that the reserve for
inventory obsolescence may periodically require adjustment as the factors
identified above change.
F-8
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment is stated at cost. The Company provides for
depreciation principally by the straight-line method over estimated useful
lives of three years for autos and trucks, five to ten years for leasehold
improvements, and ten years for furniture and fixtures and machinery and
equipment. Depreciation expense was approximately $385,000, $724,000 and
$1,012,000 in 1994, 1995 and 1996, respectively.
Goodwill
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized over 40 years. At December 31, 1995 and 1996,
accumulated amortization was approximately $1,418,000 and $2,211,000,
respectively. The recoverability of goodwill is assessed periodically and
takes into account whether the goodwill should be completely or partially
written off or the amortization period accelerated. In evaluating the value
and future benefits of goodwill, the recoverability from operating income is
measured. Under this approach, the carrying value of goodwill would be reduced
if it is probable that management's best estimate of future operating income
before goodwill amortization will be less than the carrying amount of goodwill
over the remaining amortization period. In addition, the Company assesses
long-lived assets for impairment under FASB Statement No. 121, Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
(FAS 121). Under those rules, goodwill associated with assets acquired in a
purchase business combination is included in impairment evaluations when
events or circumstances exist that indicate the carrying amounts of those
assets may not be recoverable.
Other Assets
Loan financing fees are being amortized over the term of the related debt.
The noncompete agreement and organization costs are being amortized over five
years.
Income Taxes
Deferred income taxes are determined by the liability method in accordance
with Statement of Financial Accounting Standards (FAS) No. 109, Accounting for
Income Taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
Impairment of Long-Lived Assets
In January 1996, the Company adopted FAS 121 which requires impairment
losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amounts. FAS 121
also addresses the accounting for long-lived assets that are expected to be
disposed of. The adoption had no effect on the Company's financial statements.
Stock Compensation Arrangements
The Company accounts for its stock compensation arrangements under the
provisions of APB 25, Accounting for Stock Issued to Employees.
F-9
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS
Additional information regarding certain balance sheet accounts is presented
below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------- SEPTEMBER 30
1995 1996 1997
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Receivables:
Trade accounts, less allowance of $1,006
in 1995 and $1,394 in 1996............... $ 7,430 $21,578 $32,031
Recoverable income taxes.................. 552 -- --
Vendor rebates............................ 1,387 1,451 3,183
Insurance claims.......................... 1,793 -- --
Other..................................... 928 2,264 1,675
------- ------- -------
$12,090 $25,293 $36,889
======= ======= =======
Property and equipment:
Land...................................... $ -- $ 475 $ 429
Building.................................. -- 622 1,001
Autos and trucks.......................... 490 264 180
Machinery and equipment................... 2,176 1,411 1,504
Furniture and fixtures.................... 1,375 2,648 3,119
Leasehold improvements.................... 463 565 507
------- ------- -------
4,504 5,985 6,740
Less accumulated depreciation............. 1,034 1,572 1,994
------- ------- -------
$ 3,470 $ 4,413 $ 4,746
======= ======= =======
Other assets:
Loan financing fees....................... $ 1,725 $ 2,274 $ 2,365
Noncompete agreement...................... 500 500 500
Organization costs........................ 660 1,168 1,272
Other..................................... 310 347 232
------- ------- -------
3,195 4,289 4,369
Less accumulated amortization............. 864 1,516 2,030
------- ------- -------
$ 2,331 $ 2,773 $ 2,339
======= ======= =======
Accrued and other current liabilities:
Salaries, bonuses, and commissions........ $ 2,099 $ 3,586 $ 3,596
Income taxes payable...................... 116 1,883 4,018
Other..................................... 860 2,438 3,315
------- ------- -------
$ 3,075 $ 7,907 $10,929
======= ======= =======
</TABLE>
F-10
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. DEBT
The components of the Company's debt were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------- SEPTEMBER 30
1995 1996 1997
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Senior Revolving Note, variable rate (effective
interest rate of 9.25% at December 31, 1996),
due in 2002................................... $13,000 $12,000 $25,500
Senior Term Note, variable rate (effective
interest rate of 9.25% at December 31, 1996),
payable in quarterly installments of variable
amounts through 2002.......................... 10,701 24,000 22,500
Promissory Notes to BLN, interest rate of 6%,
payable in monthly installments of variable
amounts through 1998.......................... -- 13,384 1,859
8% Subordinated Notes, payable in annual
installments of $884,000 through 1998......... 2,650 1,768 884
10% Convertible Notes, due in 2002............. 125 125 96
------- ------- -------
26,476 51,277 50,839
Less current portion........................... 2,883 15,409 7,243
------- ------- -------
$23,593 $35,868 $43,596
======= ======= =======
</TABLE>
Maturities of long-term debt for the five succeeding years are $15,409,000
in 1997, $6,743,000 in 1998, $5,000,000 in 1999, $5,000,000 in 2000, and
$5,000,000 in 2001.
The credit agreements include, among other things, covenants which require
the Company to maintain minimum levels of interest coverage and fixed charge
coverage and also restrict the Company's ability to pay dividends and make
capital expenditures. At December 31, 1996, the Company was in compliance with
all such covenants. Substantially all of the assets of the Company (other than
inventory acquired from BLN, which secures the Company's obligations to BLN)
are pledged as collateral for the Senior Revolving Note and the Senior Term
Note. Available credit under the Senior Revolving Note is $43 million, subject
to an accounts receivable and inventory borrowing base limit. At December 31,
1996, the unused available credit under the Senior Revolving Note was
approximately $10 million. The Company pays a quarterly commitment fee of .5%
per annum of the unused portion of available credit under the Senior Revolving
Note. In September 1996, the Company converted approximately $15.6 million due
under its Revolving Note to the Term Note.
The Convertible Notes may be converted at any time through December 31, 2002
into shares of the Company's common stock at a conversion price of $.98 per
share. At December 31, 1996, the conversion of these notes would result in the
issuance of 127,551 shares of the Company's common stock. Such shares have
been reserved by the Company.
The carrying amount of long-term debt approximates fair value. The fair
value of long-term debt was estimated using a discounted cash flow analysis
based on the Company's current incremental borrowing rates for similar types
of borrowing arrangements.
The net proceeds of the Company's initial public offering were used
primarily to reduce indebtedness and resulted in an extraordinary charge, net
of tax in 1995 of approximately $750,000 ($.25 per share) for the write-off of
loan financing fees and a prepayment premium associated with extinguishing
such indebtedness.
F-11
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INCOME TAXES
Significant components of the Company's deferred tax liabilities and assets
were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------
1995 1996
------ ------
<S> <C> <C>
Deferred tax liabilities:
Goodwill................................................. $ 893 $2,094
Trade discounts on purchases............................. 264 45
Prepaid expenses......................................... 119 119
Other.................................................... 187 383
------ ------
Total deferred tax liabilities............................. 1,463 2,641
Deferred tax assets:
Inventory................................................ 322 134
Allowance for doubtful accounts.......................... 392 544
Other.................................................... 51 236
------ ------
Total deferred tax assets.................................. 765 914
------ ------
Net deferred tax liabilities............................... $ 698 $1,727
====== ======
</TABLE>
Significant components of the provision for income taxes, before the income
tax effect of the extraordinary loss, were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1994 1995 1996
---- ------ ------
<S> <C> <C> <C>
Current:
Federal.............................................. $362 $ 484 $1,634
State................................................ 64 70 240
---- ------ ------
426 554 1,874
Deferred:
Federal.............................................. 292 816 898
State................................................ 52 120 131
---- ------ ------
344 936 1,029
---- ------ ------
Total.................................................. $770 $1,490 $2,903
==== ====== ======
</TABLE>
The reconciliation of income tax computed at the federal statutory rates to
income tax expense, before the income tax effect of the extraordinary loss,
was (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1994 1995 1996
---- ------ ------
<S> <C> <C> <C>
Tax at statutory rates................................ $638 $1,298 $2,528
Other, primarily state income taxes................... 132 192 375
---- ------ ------
Total............................................... $770 $1,490 $2,903
==== ====== ======
</TABLE>
5. ISSUANCE OF COMMON STOCK AND EARNINGS PER SHARE
The Company issued 3,080,105 shares of its common stock in an initial public
offering in October 1995. In connection with the public offering, the Company
granted an overallotment option to the underwriters. In November 1995, the
underwriters exercised a portion of this option, and an additional 150,000
shares of the Company's common stock were issued.
F-12
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A recapitalization occurred in connection with the public offering which
included (i) the conversion of all outstanding shares of the Company's Class B
common stock to Class A common stock, (ii) the exchange of $7,200,000 of
Junior Subordinated Notes for Class A common stock, (iii) reclassification of
the Company's Class A common stock to common stock, and (iv) a stock split in
the ratio of approximately 2.04-to-1.
Historical primary earnings per share is calculated by dividing net income
by the weighted average number of common shares outstanding during the year,
adjusted for the stock split. Historical fully diluted earnings per share is
calculated by dividing net income, as adjusted for the assumed reduction in
interest expense, net of tax, related to the Company's convertible notes by
the weighted average number of common shares outstanding during the year,
adjusted for the stock split and the shares contingently issuable upon the
exercise of the convertible notes payable.
The computation of net income, weighted average shares outstanding and
supplementary net income per share assuming the conversion of the Junior
Subordinated Notes at the initial public offering price for the years ended
December 31, 1995 and 1994 are calculated as follows as if the offering had
taken place on January 1, 1994 (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-------------
1994 1995
------ ------
<S> <C> <C>
NET INCOME
Primary:
Historical net income before extraordinary loss............ $1,107 $2,329
Adjustment for interest expense, net of tax in Junior
Subordinated Notes........................................ 420 350
------ ------
Adjusted net income before extraordinary loss.............. 1,527 2,679
Extraordinary loss......................................... -- (750)
------ ------
Adjusted net income........................................ $1,527 $1,929
====== ======
Fully diluted:
Adjusted net income before extraordinary loss.............. $1,527 $2,679
Adjustment for interest expense, net of tax, on Convertible
Notes..................................................... 8 8
------ ------
Adjusted net income before extraordinary loss.............. 1,535 2,687
Extraordinary loss......................................... -- (750)
------ ------
Adjusted net income........................................ $1,535 $1,937
====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary:
Historical weighted average shares of common stock,
adjusted for split........................................ 2,102 2,972
Adjustment for shares added as a result of conversion of
Junior Subordinated Notes................................. 1,029 806
------ ------
3,131 3,778
Fully diluted:
Adjustment for shares related to Convertible Notes......... 128 128
------ ------
3,259 3,906
====== ======
</TABLE>
F-13
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------
1994 1995
------ -----
<S> <C> <C>
SUPPLEMENTARY NET INCOME PER SHARE
Primary:
Before extraordinary loss.................................... $ .49 $ .71
Extraordinary loss........................................... -- (.20)
------ -----
Adjusted net income.......................................... $ .49 $ .51
====== =====
Fully diluted:
Before extraordinary loss.................................... $ .47 $ .69
Extraordinary loss........................................... -- (.19)
------ -----
Adjusted net income.......................................... $ .47 $ .50
====== =====
</TABLE>
The computation of net income, weighted average shares outstanding and
supplementary net income per share for the year ended December 31, 1995,
assuming the Company's public offering and conversion of Junior Subordinated
Notes had taken place on January 1, 1995, are as follows (in thousands, except
per share data):
<TABLE>
<S> <C>
NET INCOME
Primary:
Historical net income before extraordinary loss................ $2,329
Adjustments:
Interest expense from the recapitalization and the
application of net proceeds of the Offering................. 2,149
Management fee to majority stockholder....................... 208
Amortization of financing fees of indebtedness repaid........ 142
Income tax effect............................................ (975)
------
Adjusted net income............................................ 3,853
Fully diluted:
Adjustment for interest expense, net of tax, on Convertible
Notes......................................................... 8
------
Adjusted net income............................................ $3,861
======
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary:
Historical weighted average shares of common stock adjusted for
split......................................................... 2,972
Adjustment for shares added as a result of:
Conversion of Junior Subordinated Notes...................... 806
Initial public offering...................................... 2,410
Exercise of overallotment option............................. 146
------
6,334
Fully diluted:
Adjustment for shares related to Convertible Notes............. 128
------
6,462
======
SUPPLEMENTARY NET INCOME PER SHARE
Primary.......................................................... $ .61
======
Fully diluted.................................................... $ .60
======
</TABLE>
F-14
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
The Company leases facilities for its service centers and corporate office
and vehicles under noncancelable operating leases that expire in various years
through 2009 but which have options to extend for various terms. Rental
expense under such operating leases was approximately $1,641,000 in 1994,
$3,174,000 and in 1995 $4,815,000 in 1996. The future minimum lease payments
as of December 31, 1996 related to noncancelable operating leases with initial
terms of one year or more are set forth below (in thousands):
<TABLE>
<S> <C>
1997.............................................................. $ 5,479
1998.............................................................. 4,231
1999.............................................................. 3,413
2000.............................................................. 2,415
2001.............................................................. 1,371
Thereafter........................................................ 2,705
-------
$19,614
=======
</TABLE>
In connection with the acquisition of BLN, the Company recorded liabilities
at the date of acquisition of approximately $1,200,000 for lease buyouts,
occupancy costs and employee termination costs related to the planned closing
of 16 BLN facilities. As of December 31, 1996, the Company has closed all of
the above-mentioned BLN facilities and has a remaining accrual of
approximately $700,000 to settle the remaining leases and pay any remaining
severance costs. While management believes this amount is adequate to finalize
the closure of these BLN facilities, the actual settlements may result in
additional adjustments to this accrual. Management expects all settlements to
be completed in 1997.
Contemporaneously with the Company's acquisition of BLN and its sale of
Alliance, the Company entered into vendor supply agreements with Bio-Lab.
Under the terms of one of these agreements, the Company is required to
purchase a certain percentage of its annual requirements for the products it
previously purchased through Alliance at prices defined in that supply
agreement. The supply agreements have an initial term which expires September
26, 2001, with an indefinite number of three-year renewal periods until
terminated by either party.
In the normal course of business, the Company becomes involved as a
defendant or plaintiff in various lawsuits. Although a successful claim for
which the Company is not fully insured could have a material effect on the
Company's financial condition, management is of the opinion that it maintains
insurance at levels generally consistent with industry standards to insure
itself against the normal risks of operations.
7. RELATED PARTY TRANSACTIONS
The Company leases an office building from a limited liability company, the
members of which include certain officers and stockholders of the Company and
a trust, the beneficiaries of which are children of an officer and stockholder
of the Company. The lease is a noncancelable operating lease which expires in
2009. Rent expense for this lease was approximately $44,000 in 1994, and
$78,000 in 1995, $83,000 in 1996.
The Company also leases its Baton Rouge service center facility from a
trust, the beneficiaries of which are children of an officer and stockholder
of the Company. This lease is a noncancelable operating lease which expires in
2000. Rent expense for this lease was approximately $61,000 in 1994, $62,000
in 1995 and $63,000 in 1996.
In connection with a 1995 acquisition, the Company entered into eight leases
with the acquired company's previous stockholder for warehouse facilities in
California. The lease agreements have initial terms of five years,
F-15
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
commencing on February 28, 1995, and monthly rental rates ranging from
approximately $4,000 to $9,000. The aggregate monthly rental for all eight
leases is approximately $46,000. At the end of the lease term, the Company has
the option to renew each lease for an additional five years at the then fair
market rental rate. Rental expense under these leases was approximately
$438,000 in 1995 and $775,000 in 1996. In addition, in 1995 the Company paid
$884,000 of the acquired company's past due payables to an affiliate of the
previous stockholder.
8. EMPLOYEE BENEFIT PLANS
The Companys employee's participate in a Company-sponsored savings and
retirement plan which provides for discretionary Company contributions under a
profit-sharing provision. Employees who are eligible to participate in the
savings plan are able to contribute a percentage of their base compensation
not to exceed 10%, subject to a dollar limit. The Company contributes an
amount equal to 25% of employee contributions up to 6% of their base
compensation. Employee contributions are invested in certain equity and fixed
income securities based on employee elections. Matching contributions and
profit-sharing contributions made by the Company were, $53,000 and $275,000 in
1994, $77,000 and $485,000 in 1995 and $113,000 and $650,000 in 1996.
9. STOCK OPTION PLANS
In February 1995, the Company's board of directors adopted the 1995 Stock
Option Plan under which the board of directors is authorized to grant, at its
discretion, to employees, agents, consultants or independent contractors of
the Company, options to purchase shares of common stock. The number of shares
granted under this plan is limited to an aggregate amount of 600,000. Granted
options have an exercise price of not less than the fair market value of the
stock on the date of grant. Options generally are exercisable two years after
the date of grant and expire ten years after the date of grant.
In April 1996, the Company's board of directors adopted the SCP Pool
Corporation Non-Employee Directors Equity Incentive Plan, under which the
Company grants to each non-employee director options to purchase shares of the
Company's common stock. The number of shares granted under this plan is
limited to an aggregate amount of 300,000. The options will have an excerise
price of not less than the fair market value of the stock on the date of
grant, and generally are exercisable one year after the date of grant and
expire ten years after the date of grant.
FASB Statement No. 123, Accounting for Stock-Based Compensation, requires
the Company to disclose pro forma information regarding net income and
earnings per share as if the Company had accounted for its employee stock
options under the fair value method. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions for 1995 and 1996, respectively:
risk-free interest rates of 6.68% and 5.9%; a dividend yield of 0% for both
years; volatility factors of the expected market price of the Company's common
stock of .32 for both years; and a weighted-average expected life of the
option of 2.5 and 3.4 years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
F-16
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. Had the
Company's stock based compensation plan been determined based on the fair
value at the grant dates, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below (in
thousands, except per share data):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Pro forma net income....................................... $1,568 $4,392
Pro forma earnings per share:
Primary.................................................. $ .53 $ .69
Fully diluted............................................ $ .51 $ .68
</TABLE>
A summary of the Company's stock option activity and related information for
the plans described above are as follows:
<TABLE>
<CAPTION>
WEIGHTED
COMMON AVERAGE
STOCK EXERCISE
SHARES PRICE
------- --------
<S> <C> <C>
Outstanding at December 31, 1994......................... -- $ --
Granted................................................ 46,926 3.43
------- -----
Outstanding at December 31, 1995......................... 46,926 3.43
Granted................................................ 121,875 8.13
------- -----
Outstanding at December 31, 1996......................... 168,801 $6.82
======= =====
</TABLE>
In 1995 and 1996, the weighted average fair value of options granted were
$.92 and $2.41, respectively.
In February 1995, the Company granted options for 46,926 shares with an
exercise price of $3.43. At December 31, 1996, none of these options were
exercisable and their remaining contractual life was 8.2 years. In 1996, the
Company granted options for 121,875 shares, with exercise prices ranging from
$7.50 to $11.33, which had a weighted average remaining contractual life of
9.1 years at December 31, 1996. At December 31, 1996, 45,000 of the 1996
granted options were exercisable at an exercise price of $7.50.
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a tabulation of the Company's unaudited quarterly results
of operations for the year ended December 31, 1996 (in thousands, except per
share data):
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------
3/96 6/96 9/96 12/96 3/97 6/97 9/97
------- ------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $41,145 $85,867 $62,344 $46,488 $63,565 $124,970 $98,492
Gross profit............ 9,273 20,042 13,531 9,184 13,960 28,159 21,460
Net income (loss)....... 78 5,615 2,168 (3,328) (603) 6,394 3,471
Net income (loss) per
share:
Primary............... $ .01 $ .89 $ .34 $ (.53) $ (.10) $ 1.01 $ .54
Fully diluted......... .01 .87 .34 (.51) (.09) .99 .53
</TABLE>
11. STOCK SPLIT
On September 4, 1997, the board of directors declared a three-for-two stock
split of the Company's common stock, which was paid in the form of a stock
distribution on September 29, 1997 to the stockholders of record at the close
of business on September 15, 1997. Accordingly, all shares, per-share data and
related capital amounts for all periods presented reflect the effects of this
split.
F-17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
The B-L Network, Inc.
We have audited the accompanying balance sheets of The B-L Network, Inc.
(the "Company") as of December 31, 1995 and September 25, 1996 and the related
statements of income and retained earnings (deficit) and cash flows for each
of the two years in the period ended December 31, 1995 and for the period
ended September 25, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The B-L Network, Inc. at
December 31, 1995 and September 25, 1996, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
1995 and for the period ended September 25, 1996, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Atlanta, Georgia
December 20, 1996, except for
Note 8, as to which the date is October 21, 1997
F-18
<PAGE>
THE B-L NETWORK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 25,
1995 1996
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,454 $ --
Receivables, net.................................. 12,534 17,074
Inventory, net.................................... 26,546 27,267
Prepaid expenses.................................. 495 471
------- -------
Total current assets............................ 41,029 44,812
Property and equipment, net......................... 3,192 2,960
Other assets, net................................... 1,087 1,011
------- -------
Total assets.................................... $45,308 $48,783
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable............................ $ 7,282 $ 4,375
Accrued and other current liabilities............. 1,488 3,019
------- -------
Total current liabilities....................... 8,770 7,394
Due to Parent....................................... 9,418 15,834
Stockholder's equity:
Common stock, $1 par value, 1,000 shares
authorized, issued and outstanding............... 1 1
Additional paid in capital........................ 26,505 26,505
Retained earnings (deficit)....................... 614 (951)
------- -------
Total stockholder's equity...................... 27,120 25,555
------- -------
Total liabilities and stockholder's equity...... $45,308 $48,783
======= =======
</TABLE>
See accompanying notes.
F-19
<PAGE>
THE B-L NETWORK, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED
------------------ SEPTEMBER 25,
1994 1995 1996
-------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................... $134,739 $140,888 $128,858
Cost of sales................................ 109,788 113,497 106,500
-------- -------- --------
Gross profit................................. 24,951 27,391 22,358
Warehouse, selling and administrative
expenses.................................... 24,780 27,195 22,673
-------- -------- --------
Operating income (loss)...................... 171 196 (315)
Other income (expense):
Interest expense........................... (121) (662) (1,024)
Miscellaneous income (expense)............. (88) 46 (466)
-------- -------- --------
(209) (616) (1,490)
-------- -------- --------
Loss before income taxes..................... (38) (420) (1,805)
Provision (benefit) for income taxes......... 82 (45) (240)
-------- -------- --------
Net loss..................................... (120) (375) (1,565)
Retained earnings at beginning of period..... 1,109 989 614
-------- -------- --------
Retained earnings (deficit) at end of period. $ 989 $ 614 $ (951)
======== ======== ========
</TABLE>
See accompanying notes.
F-20
<PAGE>
THE B-L NETWORK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED
---------------- SEPTEMBER 25,
1994 1995 1996
------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss...................................... $ (120) $ (375) $(1,565)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization............... 631 684 627
Provision for doubtful accounts receivable.. 5 211 494
Provision for inventory obsolescence........ 177 2 26
Loss (gain) on sale of property and
equipment.................................. -- 15 (4)
Changes in operating assets and liabilities:
Receivables............................... (3,476) (908) (5,008)
Inventory................................. (3,671) 124 (747)
Prepaid expenses and other assets......... (224) 186 (17)
Accounts payable.......................... 1,571 (870) (2,935)
Accrued and other current liabilities..... 383 (350) 1,531
------- ------- -------
Net cash used in operating activities... (4,724) (1,281) (7,598)
INVESTING ACTIVITIES
Acquisition of businesses..................... (1,286) -- --
Purchase of property and equipment............ (646) (794) (282)
Proceeds from sale of property and equipment.. -- 17 9
------- ------- -------
Net cash used in investing activities......... (1,932) (777) (273)
FINANCING ACTIVITIES
Net borrowings from parent.................... 7,447 1,776 6,417
------- ------- -------
Net cash provided by financing activities..... 7,447 1,776 6,417
------- ------- -------
Net increase (decrease) in cash............... 791 (282) (1,454)
Cash at beginning of period................... 945 1,736 1,454
------- ------- -------
Cash at end of period......................... $ 1,736 $ 1,454 $ --
======= ======= =======
</TABLE>
See accompanying notes.
F-21
<PAGE>
THE B-L NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 25, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The B-L Network, Inc. (the Company), a wholly owned subsidiary of BioLab
Inc. (BioLab or Parent), is a wholesale distributor of swimming pool equipment
and supplies. The Company maintains 39 service centers in 12 states located
throughout the Southeastern, Central and Western United States and sells
primarily to pool builders, retail stores, and pool service companies within
the same geographic regions.
The Company's business is highly seasonal. In general, sales and net income
are substantially higher during the second and third quarters, which represent
the peak months of swimming pool use, installation and maintenance.
Effective September 26, 1996, BioLab sold all of the Company's inventory,
property and equipment and substantially all of the prepaid expenses and other
assets to SCP Pool Corporation (the Purchaser). The Purchaser issued Biolab a
promissory note for the sales price of approximately $32 million.
Net sales and gross profit related to operations of service centers formerly
owned by the Company for the five-day period September 26 through September
30, 1996 were approximately $1,207,000 and $227,000, respectively.
Revenue Recognition
Revenue is recognized at the time of shipment of products or the performance
of services.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and trade accounts
receivable.
Concentrations of credit risk with respect to trade accounts receivable are
generally limited due to the large number of entities comprising the Company's
customer base. The Company performs periodic credit evaluations of its
customers and generally does not require collateral. Receivables are generally
due within 30 days, except for winter sales under early-buy programs for which
extended terms are given.
The large number of financial institutions at which cash balances are
maintained limits the exposure to credit risk.
The carrying amounts reported in the balance sheet for cash, accounts
receivable and accounts payable approximate their fair value.
Inventories
Inventories consist primarily of goods purchased for resale and are carried
at the lower of cost (using the first-in, first-out method) or market, net of
obsolescence reserve. At December 31, 1995 and September 25, 1996, the reserve
for inventory obsolescence was approximately $1,382,000 and $1,408,000,
respectively.
F-22
<PAGE>
THE B-L NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment are stated at cost. The Company provides for
depreciation principally by the straight-line method over estimated useful
lives of 20 years for buildings and 3 to 10 years for furniture and fixtures
and machinery and equipment. Leasehold improvements are depreciated over the
term of the lease. Depreciation expense was approximately $454,000, $555,000,
and $493,000 for the years ended December 31, 1994 and 1995, and for the
period ended September 25, 1996, respectively.
Other Assets
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized over 40 years. The recoverability of goodwill is
assessed annually and takes into account whether the goodwill should be
completely or partially written off or the amortization period accelerated. In
evaluating the value and future benefits of goodwill, the recoverability from
operating income is measured. Under this approach, the carrying value of
goodwill would be reduced if it is probable that management's best estimate of
future operating income before goodwill amortization will be less than the
carrying amount of goodwill over the remaining amortization period.
Other assets also include noncompete agreements being amortized over the
contractual terms of five years.
Income Taxes
The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes and
are measured using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse.
Advertising Costs
Advertising costs are generally charged to expense as the costs are
incurred. Advertising expense was approximately $545,000, $868,000 and
$342,000 for the years ended December 31, 1994 and 1995 and for the period
ended September 25, 1996, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Impact of Recently Issued Accounting Standard
In 1996, the Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." The adoption of the Statement had no impact on the
Company's financial position or results of operations.
F-23
<PAGE>
THE B-L NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS
Additional information regarding certain balance sheet accounts is presented
below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 25,
1995 1996
------------ -------------
<S> <C> <C>
Receivables:
Trade accounts............................... $12,575 $18,366
Other........................................ 757 --
------- -------
13,332 18,366
Less allowance for doubtful accounts......... (798) (1,292)
------- -------
$12,534 $17,074
======= =======
Property and equipment:
Land and buildings........................... $ 1,337 $ 1,337
Machinery and equipment...................... 3,765 3,713
Leasehold improvements....................... 203 203
Construction in progress..................... 312 594
------- -------
5,617 5,847
Less accumulated depreciation................ (2,425) (2,887)
------- -------
$ 3,192 $ 2,960
======= =======
Other assets:
Goodwill..................................... $ 742 $ 742
Non-compete agreements....................... 700 700
Other........................................ 85 126
------- -------
1,527 1,568
Less accumulated amortization................ (440) (557)
------- -------
$ 1,087 $ 1,011
======= =======
Accrued and other current liabilities:
Salaries and bonuses......................... $ 464 $ 624
Accrued rebates.............................. 458 362
Unremitted sales tax......................... 148 220
Deferred revenue............................. 367 488
Freight...................................... 51 323
Accrued litigation........................... -- 598
Other........................................ -- 404
------- -------
$ 1,488 $ 3,019
======= =======
</TABLE>
3. ACQUISITIONS
On August 1, 1994, the Company acquired substantially all of the assets and
assumed certain liabilities of Pioneer Pool Products, Inc., a distributor of
swimming pool equipment and supplies. The purchase price consisted of a cash
payment of approximately $1,165,000, of which $100,000 was allocated to a
covenant not to compete. In connection with this acquisition, the Company
acquired assets with a fair value of approximately $1,580,000 and assumed
liabilities of approximately $805,000. The Company recorded $290,000 of
goodwill from this acquisition.
F-24
<PAGE>
THE B-L NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
On November 4, 1994, the Company acquired substantially all of the assets
and assumed certain liabilities of Aquaquip, Inc., a distributor of swimming
pool equipment and supplies. The purchase price consisted of a cash payment of
approximately $121,000. In connection with this acquisition, the Company
acquired assets with a fair value of approximately $167,000 and assumed
liabilities of approximately $46,000. No goodwill was recorded.
The purchase method of accounting was used to record these acquisitions.
Accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based on estimated fair market values at the purchase
dates. Operations for the acquired companies have been included in the
Company's results of operations from the respective purchase dates.
4. INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 25,
1995 1996
------------ -------------
<S> <C> <C>
Deferred tax assets:
Current:
Inventory capitalization................... $ 194 $ 199
Inventory reserve.......................... 525 535
Allowance for doubtful accounts............ 283 464
Litigation reserve......................... -- 227
Other...................................... 81 --
------ -------
Total current deferred tax assets........ 1,083 1,425
Noncurrent:
Intangible assets.......................... 96 120
------ -------
Total deferred tax assets................ 1,179 1,545
Deferred tax liabilities:
Noncurrent:
Depreciation............................... (148) (117)
Goodwill................................... (117) (113)
------ -------
Total deferred tax liabilities........... (265) (230)
------ -------
Net deferred tax assets........................ 914 1,315
Valuation allowance............................ (914) (1,315)
------ -------
Net deferred tax assets........................ $ -- $ --
====== =======
</TABLE>
The net change in the total valuation allowance for the year ended December
31, 1995 and for the period ended September 25, 1996 was an increase of
approximately $50,000 and $401,000, respectively.
Significant components of the income tax provision (benefit) are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED
------------- SEPTEMBER 25,
1994 1995 1996
------ ------ -------------
<S> <C> <C> <C>
Current:
Federal...................................... $ 69 $ (38) $(202)
State........................................ 13 (7) (38)
----- ------ -----
Total.................................... $ 82 $(45) $(240)
===== ====== =====
</TABLE>
F-25
<PAGE>
THE B-L NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Reconciliations of the income tax provision (benefit) to the statutory
federal income tax rate are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED
------------- SEPTEMBER 25,
1994 1995 1996
------ ------ -------------
<S> <C> <C> <C>
Tax at statutory rates...................... $ (13) $(143) $(614)
State income taxes, net of federal tax
benefit.................................... (2) (17) (71)
Deferred tax asset valuation................ 43 50 401
Other, net.................................. 54 65 44
----- ------ -----
Total................................... $ 82 $ (45) $(240)
===== ====== =====
</TABLE>
Income taxes are calculated on a separate return basis as if the Company had
not been included in a consolidated income tax return with the Parent. If the
Company had calculated income taxes based on the tax-sharing agreement between
the Company and the Parent, the resulting current and deferred income tax
amounts could be different than the amounts disclosed.
5. COMMITMENTS AND CONTINGENCIES
The Company leases certain service center facilities and vehicles under
noncancelable operating leases that expire in various years through 2002.
Rental expense under operating leases was approximately $2,414,000 and
$2,645,000 for the years ended December 31, 1994 and 1995 and $1,945,000 for
the period ended September 25, 1996, respectively. The future minimum lease
payments as of September 25, 1996 related to noncancelable operating leases
with initial terms of one year or more are set forth below (in thousands).
<TABLE>
<S> <C>
September 26, 1996 to December 31, 1996........................... $ 758
1997.............................................................. 2,178
1998.............................................................. 1,390
1999.............................................................. 1,107
2000.............................................................. 688
2001.............................................................. 494
Thereafter........................................................ 111
------
$6,726
======
</TABLE>
In the normal course of business the Company becomes involved as a defendant
or plaintiff in various lawsuits. Although a successful claim for which the
Company is not fully insured could have a material effect on the Company's
financial condition, management is of the opinion that it maintains insurance
at levels generally consistent with industry standards to insure itself
against the normal risks of operations.
6. RELATED PARTY TRANSACTIONS
The amounts payable to the Parent included in the balance sheets represent
net balances as the result of various transactions between the Company and its
Parent. There are no terms of settlement associated with the account balances.
The balances are primarily the result of the Company's participation in the
Parent's central cash management program, wherein substantially all the
Company's cash receipts are remitted to the Parent and substantially all cash
disbursements are funded by the Parent. On a monthly basis, interest expense
is allocated to the Company by the Parent based on the Company's use of funds
at the Parent's average borrowing rate in
F-26
<PAGE>
THE B-L NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
effect. Interest expense in the statement of operations and retained earnings
(deficit) represents the total of these allocations. Other transactions
include intercompany purchases, the funding of acquisitions, costs directly
attributable to the Company incurred by the Parent, and miscellaneous other
administrative expenses incurred by the Parent on the Company's behalf.
The Company purchased inventory from the Parent of approximately
$14,382,000, $16,868,000 and $15,434,000 for the years ended December 31, 1994
and 1995, and for the period ended September 25, 1996, respectively.
7. BENEFIT PLAN
The Company's employees participate in a Parent-sponsored savings and
retirement plan. Employees who are eligible to participate in the savings plan
are able to contribute a percentage of their base compensation not to exceed
15%, subject to a dollar limit. Employee contributions are invested in equity
and fixed income securities based on employee elections. For the years ended
December 31, 1994 and 1995 and for the period ended September 25, 1996 the
Company made no contributions to the plan.
8. SUBSEQUENT LITIGATION SETTLEMENT
As of October 21, 1997, the Company had settled or was in the process of
settling approximately $598,000 of litigation relating to various events that
had occurred prior to September 25, 1996. These amounts are reflected in the
September 25, 1996 financial statements as miscellaneous income (expense).
F-27
<PAGE>
[PHOTOGRAPHS OF AN ABOVE-GROUND POOL AND TWO IN-GROUND POOLS]
Text: SCP Pool offers its customers a broad selection of products for both
above-ground and in-ground pools. These products include chemicals, packaged
pool kits providing walls, liner and bracing, and other pool equipment such as
cleaners, filters and pumps.
SCP Pool distributes over 34,000 national brand and private label products
to over 20,000 customers. Each of SCP Pool's 74 service centers are computer
linked with advanced information systems to enable its employees to provide
their customers with fast, efficient service.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUB-
SEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGIS-
TERED SECURITIES TO WHICH IT RELATES, OR AN OFFER TO BUY, OR SOLICITATION OF,
ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAW-
FUL.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
The Acquisitions.......................................................... 8
The 1997 Acquisition...................................................... 9
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 13
Dividend Policy........................................................... 13
Price Range of Common Stock............................................... 13
Capitalization............................................................ 14
Selected Consolidated Financial Data...................................... 15
Unaudited Pro Forma Condensed Consolidated Financial Data................. 17
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 27
Management................................................................ 35
Certain Relationships and Related Transactions............................ 39
Principal and Selling Stockholders........................................ 43
Description of Capital Stock.............................................. 44
Shares Eligible for Future Sale........................................... 45
Underwriting.............................................................. 47
Legal Matters............................................................. 48
Experts................................................................... 48
Additional Information.................................................... 48
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,950,000 SHARES
LOGO
LOGO
SCP POOL CORPORATION
COMMON STOCK
---------------
PROSPECTUS
---------------
MORGAN KEEGAN & COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY
JOHNSON RICE & COMPANY L.L.C.
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses of the issuance and
distribution of the securities being registered other than underwriting
compensation:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $ 21,910
NASD Filing Fee................................................. 7,730
Blue Sky Fees and Expenses (including attorneys' fees and
expenses)...................................................... 10,000
Printing and Engraving Expenses................................. 60,000
Transfer Agent's Fees and Expenses.............................. 15,000
Accounting Fees and Expenses.................................... 100,000
Legal Fees and Expenses......................................... 200,000
Miscellaneous Expenses.......................................... 35,360
--------
Total....................................................... $450,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, provided such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director has actually and reasonably incurred.
The Company's Restated Certificate of Incorporation provides for the
indemnification of directors and officers of the Company to the fullest extent
permitted by Section 145.
In that regard, the Restated Certificate of Incorporation provides that the
Company shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, administrative or investigative (other than action
by or in the right of the corporation) by reason of the fact that he is or was
a director or officer of the Company, or is or was serving at the request of
the Company as a director, officer or member of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
II-1
<PAGE>
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of such
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Indemnification in
connection with an action or suit by or in the right of such corporation to
procure a judgment in its favor is limited to payment of expenses (including
attorneys' fees) actually and reasonably incurred in connection with the
defense or settlement of such an action or suit except that no such
indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the indemnifying corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine that, despite
the adjudication of liability but in consideration of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
The Company has in effect insurance policies covering all of the Company's
directors and officers in certain instances where by law they may not be
indemnified by the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the Orcal Acquisition, the Company entered into a
Management Agreement, dated as of March 1, 1995 with Ronald Hetzner, pursuant
to which the Company sold 73,461 shares of Common Stock to Mr. Hetzner for
aggregate consideration of approximately $300,000.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
<C> <S> <C>
1.1 Form of Underwriting Agreement.
3.1(1) Restated Certificate of Incorporation of the Company.
3.2(1) Restated Bylaws of the Company.
4.1(1) Form of certificate representing shares of Common Stock of
the Company.
4.2(1) Credit Agreement, dated as of December 31, 1993, by and
among South Central Pool Supply, Inc. (previously known as
SCP Acquisition Corp.), The First National Bank of Chica-
go, as agent, and various lenders from time to time party
thereto.
4.3(1) Amendment No. 1 to Credit Agreement, dated as of September
1, 1994, by and among South Central Pool Supply, Inc., The
First National Bank of Chicago, as agent, and various
lenders from time to time party thereto.
4.4(1) Amendment No. 2 to Credit Agreement, dated as of January
20, 1995, by and among SCP Supply, The First National Bank
of Chicago, as agent, and various lenders from time to
time party thereto.
4.5(1) Amendment No. 3 to Credit Agreement, dated as of February
28, 1995, by and among SCP Supply, The First National Bank
of Chicago, as agent, and various lenders from time to
time party thereto.
5.1 Opinion of Kirkland & Ellis with respect to legality.
10.1(1) Asset Purchase Agreement, dated as of December 31, 1993,
by and among the Company, SCP Acquisition Corp., and South
Central Pool Supply, Inc.
10.2(1) Registration Agreement, dated as of December 31, 1993, by
and among the Company, CHS, various management and outside
investors, Berkeley Atlantic Income Limited, BG Services
Limited, and PNC Equity Management Corp.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S> <C>
10.3(1) Asset Purchase Agreement, dated as of January 4, 1994, by
and between Aqua Fab Industries, Inc. and South Central
Pool Supply, Inc.
10.4(1) Amendment No. 1 to Asset Purchase Agreement, dated as of
January 7, 1994, by and among Aqua Fab Industries, Inc.
and South Central Pool Supply Industries, Inc.
10.5(1) Amendment No. 2 to Asset Purchase Agreement, dated as of
January 18, 1994, by and among Aqua Fab Industries, Inc.
and South Central Pool Supply, Inc.
10.6(1) Amendment No. 3 to Asset Purchase Agreement, dated as of
February 17, 1994, by and among Aqua Fab Industries, Inc.
and South Central Pool Supply, Inc.
10.7(1) Asset Purchase Agreement, dated as of January 20, 1995, by
and among Alliance Packaging, Inc., York Chemical Corpora-
tion and Wexco Incorporated.
10.8(1) Stock Purchase Agreement, dated as of February 15, 1995,
by and among the Company, Orcal Pool Supplies, Inc. and
Ronald Hetzner.
10.9(1) Agreement, dated as of March 31, 1992, by and between
Wexco and W.B. Sexton.
10.10(1) Patent Assignment, dated as of January 20, 1995, between
Wexco Incorporated and Alliance Packaging, Inc.
10.11(1) Management Agreement, dated as of December 31, 1993, by
and between CHS Management Limited Partnership, an Illi-
nois limited partnership, and SCP Acquisition Corp.
10.12(1) Management Agreement, dated as of February 28, 1995, by
and between SCP Supply and Ronald Hetzner.
10.13(1) SCP Pool Corporation 1995 Stock Option Plan.
10.14(1) Form of Individual Stock Option Agreement.
10.15(1) Form of Convertible Subordinated Note dated as of December
31, 1993 issued by SCP Holding Corp.
10.16(1) Form of Junior Subordinated Note dated as of December 31,
1993 issued by SCP Holding Corp.
10.17(1) Form of Executive Securities Agreement dated as of Decem-
ber 31, 1993 among SCP Holding Corp., Code Hennessy &
Simmons Limited Partnership and certain executives.
10.18(1) Form of Lease, dated as of February 28, 1995, by and be-
tween Ronald Hetzner and South Central Pool Supply, Inc.
10.19(1) Lease, dated as of November 8, 1993, by and between
Northpark Alliance, LLC and South Central Pool Supply,
Inc.
10.20(1) Lease, dated as of November 7, 1991, by and between St.
Romain Children's Trust and South Central Pool Supply,
Inc.
10.21(1)+ Sales Agreement, dated as of October 1, 1993, between PPG
Industries, Inc. and SCP Supply.
10.22(2) Asset Purchase Agreement, dated as of September 7, 1995,
by and among SCP Supply, Aman Enterprises, Inc., Stephen
Aman and Walter Aman.
10.23(2) Stock Purchase Agreement, dated as of November 10, 1995,
by and among SCP Supply, Steven Portnoff Corporation and
Steven Portnoff.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S> <C>
10.24(2) Asset Purchase Agreement, dated as of December 12, 1995,
by and among SCP Supply, Pool Mart of Nevada, Inc., Robert
Portnoff, Sarah Portnoff and Steven Portnoff.
10.25(2) SCP Pool Corporation 1996 Non-Employee Director Equity In-
centive Plan.
10.26(3) Second Amended and Restated Credit Agreement, dated as of
September 26, 1996, among South Central Pool Supply, Inc.,
the First National Bank of Chicago and the Institutions
party thereto as lenders.
10.27(3) Asset Purchase Agreement, dated as of September 26, 1996,
among South Central Pool Supply, Inc., SCP Pool Corpora-
tion, The B-L Network, Inc. and Bio-Lab, Inc.
10.28(3) Asset Purchase Agreement, dated as of September 26, 1996,
among Alliance Packaging, Inc., SCP Pool Corporation,
South Central Pool Supply, Inc. and Bio-Lab, Inc.
10.29(3)+ Supply Agreement, among Bio-Lab, Inc., South Central Pool
Supply, Inc., and SCP Pool Corporation.
10.30(3)+ Supply Agreement, dated as of September 26, 1996, among
Bio-Lab, Inc., South Central Pool Supply, Inc., and SCP
Pool Corporation.
10.31++ Asset Purchase Agreement, dated as of November 13, 1997,
among SCP Pool Corporation, South Central Pool Supply,
Inc., Bicknell Huston Distributors, Inc., Pacific Indus-
tries, Inc. and Cookson America, Inc.
21.1(1) Subsidiaries of the registrant.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Kirkland & Ellis (included in opinion filed as
Exhibit 5.1).
24.1* Power of attorney (included on signature page).
27.1* Financial Data Schedule.
</TABLE>
- --------
* Previously filed
+ Confidential Treatment Granted.
++ Confidential Treatment Requested for portions of Exhibit C to this
Agreement
(1) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 33-92738.
(2) Incorporated by reference to the respective exhibit to the Company's
Annual Report on Form 10-K for the Fiscal Year ended December 31, 1996.
(3) Incorporated by reference to the respective exhibit to the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1996.
(b) FINANCIAL STATEMENT SCHEDULES.
No schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are required under
the related instructions, as they are inapplicable or not material, or the
information called for thereby is otherwise included in the financial
statements and therefore has been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to every purchaser.
II-4
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF COVINGTON, STATE OF LOUISIANA, ON DECEMBER 9, 1997.
SCP POOL CORPORATION
/s/ Wilson B. Sexton
By: _________________________________
Wilson B. Sexton, Chairman
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED ON
DECEMBER 9, 1997, BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
/s/ Wilson B. Sexton Chairman and Director
___________________________________________
Wilson B. Sexton
</TABLE>
<TABLE>
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director
Frank J. St. Romain
/s/ Craig K. Hubbard Secretary, Treasurer and Chief Financial
___________________________________________ Officer
Craig K. Hubbard
* Director
___________________________________________
Andrew W. Code
* Director
___________________________________________
Peter M. Gotsch
* Director
___________________________________________
Dominick DeMichele
/s/ Robert C. Sledd Director
___________________________________________
Robert C. Sledd
</TABLE>
/s/ Craig K. Hubbard
*By: ___________________________
Craig K. Hubbard, attorney in fact
II-6
<PAGE>
EXHIBIT 1.1
A& B Draft Dated 12/8/97
Marked from Draft of 12/3/97
SCP POOL CORPORATION
(a Delaware corporation)
Common Stock
UNDERWRITING AGREEMENT
Dated: November __, 1997
<PAGE>
EXHIBIT 1.1
SCP POOL CORPORATION
UNDERWRITING AGREEMENT
November ___, 1997
MORGAN KEEGAN & COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
JOHNSON RICE & COMPANY L.L.C.
[As Representatives of the Several Underwriters
Named in Schedule A hereto]
c/o Morgan Keegan & Company, Inc.
50 Front Street
Memphis, Tennessee 38103
Dear Sirs:
SCP Pool Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell to the underwriters named in Schedule A (collectively, the
"Underwriters") an aggregate of 1,350,000 shares of Common Stock, $0.001 par
value per share (the "Common Stock"), of the Company (the "Firm Company Shares")
and the selling shareholders of the Company named in Schedule B (the "Selling
Shareholders") propose to sell to the Underwriters an aggregate of 1,600,000
shares of Common Stock (the "Firm Selling Shareholder Shares" and, together with
the Firm Company Shares, the "Firm Shares"). The Firm Shares are to be sold to
each Underwriter, acting severally and not jointly, in such amounts as are set
forth in Schedule A opposite the name of such Underwriter.
The Selling Shareholder listed in Schedule C also grants to the
Underwriters the option described in Section 3 to purchase, on the same terms as
the Firm Shares, up to 442,500 additional shares of Common Stock (the "Option
Shares") solely to cover over-allotments. The Firm Shares, together with all or
any part of the Option Shares, are collectively herein called the "Shares."
Section 1. Representations and Warranties of the Company. The
Company represents and warrants to and agrees with each of the Underwriters
that:
(a) A registration statement on Form S-1 (File No. 333-_______)
with respect to the Shares, including a preliminary form of
prospectus, has been prepared by the Company in conformity with the
requirements of the Securities
<PAGE>
Act of 1933, as amended (the "1933 Act"), and the applicable rules and
regulations (the "1933 Act Regulations") of the Securities and Exchange
Commission (the "Commission"), and has been filed with the Commission; and such
amendments to such registration statement as may have been required prior to the
date hereof have been filed with the Commission, and such amendments have been
similarly prepared. Copies of such registration statement and amendment or
amendments and of each related preliminary prospectus, and the exhibits,
financial statements and schedules, as finally amended and revised, have been
delivered to you. The Company will prepare in the same manner, and proposes so
to file with the Commission, one of the following: (i) prior to effectiveness of
such registration statement, a further amendment thereto, including the form of
final prospectus, (ii) if the Company does not rely on Rule 434 of the 1933 Act,
a final prospectus in accordance with Rules 430A and 424(b) of the 1933 Act
Regulations or (iii) if the Company relies on Rule 434 of the 1933 Act, a term
sheet relating to the Shares that shall identify the preliminary prospectus that
it supplements containing such information as is required or permitted by Rules
434, 430A and 424(b) of the 1933 Act. The Company also may file a related
registration statement with the Commission pursuant to Rule 462(b) of the 1933
Act for the purpose of registering certain additional shares of Common Stock,
which registration statement will be effective upon filing with the Commission.
As filed, such amendment, any registration statement filed pursuant to Rule
462(b) of the 1933 Act and any term sheet and form of final prospectus, or such
final prospectus, shall include all Rule 430A Information (as defined below)
and, except to the extent that you shall agree in a modification, shall be in
all respects in the form furnished to you prior to the date and time that this
Agreement was executed and delivered by the parties hereto, or, to the extent
not completed at such date and time, shall contain only such specific additional
information and other changes (beyond that contained in the latest preliminary
prospectus) as the Company shall have previously advised you in would be
included or made therein.
The term "Registration Statement" as used in this Agreement shall mean such
registration statement at the time such registration statement becomes effective
and, in the event any post-effective amendment thereto becomes effective prior
to the Closing Time (as hereinafter defined), shall also mean such registration
statement as so amended; provided, however, that such term shall also include
all Rule 430A Information contained in any Prospectus and any Term Sheet (as
hereinafter defined) and deemed to be included in such registration statement at
the time such registration statement becomes effective as provided by Rule 430A
of the 1933 Act Regulations. The term "Preliminary Prospectus" shall mean any
preliminary prospectus referred to in the preceding paragraph and any
preliminary prospectus included in the Registration Statement at the time it
becomes effective that omits Rule 430A Information. The term "Prospectus" as
used in this Agreement shall mean (a) if the Company relies on Rule 434 of the
1933 Act, the Term Sheet relating to the Shares that is first filed pursuant to
Rule
-2-
<PAGE>
424(b)(7) of the 1933 Act, together with the Preliminary Prospectus identified
therein that such Term Sheet supplements or (b) if the Company does not rely on
Rule 434 of the 1933 Act, the prospectus relating to the Shares in the form in
which it is first filed with the Commission pursuant to Rule 424(b) of the 1933
Act Regulations or, if no filing pursuant to Rule 424(b) of the 1933 Act
Regulations is required, shall mean the form of final prospectus included in the
Registration Statement at the time such Registration Statement becomes
effective. The term "Rule 430A Information" means information with respect to
the Shares and the offering thereof permitted pursuant to Rule 430A of the 1933
Act Regulations to be omitted from the Registration Statement when it becomes
effective. The term "462(b) Registration Statement" means any registration
statement filed with the Commission pursuant to Rule 462(b) under the 1933 Act
(including the Registration Statement and any Preliminary Prospectus or
Prospectus incorporated therein at the time such registration statement becomes
effective). The term "Term Sheet" means any term sheet that satisfies the
requirements of Rule 434 of the 1933 Act. Any reference to the "date" of a
Prospectus that includes a Term Sheet shall mean the date of such Term Sheet.
(b) No order preventing or suspending the use of any Preliminary Prospectus
has been issued by the Commission, and no proceedings for that purpose have been
instituted or threatened by the Commission or the state securities or blue sky
authority of any jurisdiction. Each Preliminary Prospectus and any amendment or
supplement thereto, at the time of filing thereof, conformed in all material
respects to the requirements of the 1933 Act and the 1933 Act Regulations, and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of an
Underwriter expressly for use in the Registration Statement or any 462(b)
Registration Statement.
(c) When the Registration Statement and any 462(b) Registration Statement
shall become effective, when any Term Sheet that is part of the Prospectus is
filed with the Commission pursuant to Rule 434, when the Prospectus is first
filed pursuant to Rule 424(b) of the 1933 Act Regulations, when any amendment to
the Registration Statement or any 462(b) Registration Statement becomes
effective, and when any supplement to the Prospectus or any Term Sheet is filed
with the Commission and at the Closing Time and Date of Delivery (as hereinafter
defined), (i) the Registration Statement, the 462(b) Registration Statement, the
Prospectus, the Term Sheet and any amendments thereof and supplements thereto
will conform in all material respects with the applicable requirements of the
1933 Act and the 1933 Act Regulations, and (ii) neither the Registration
Statement, the 462(b) Registration Statement, the
-3-
<PAGE>
Prospectus, any Term Sheet nor any amendment or supplement thereto will contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of an Underwriter expressly for use in the Registration Statement or any 462(b)
Registration Statement.
(d) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Delaware with all
requisite corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement and the
Prospectus. The Company is duly qualified to transact business as a foreign
corporation and is in good standing in each of the jurisdictions in which the
ownership or leasing of its properties or the nature or conduct of its business
as described in the Registration Statement and the Prospectus requires such
qualification, except where the failure to do so would not have a material
adverse effect on the financial condition, business or results of operations of
the Company and the Subsidiaries (as hereinafter defined) taken as a whole (such
effect is referred to herein as a Material Adverse Effect).
(e) All of the Company's subsidiaries are named on an exhibit to the
Registration Statement (each a "Subsidiary" and collectively the
"Subsidiaries"). Each of the Subsidiaries has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the state
of its incorporation with all requisite corporate power and authority to own,
lease and operate its properties and conduct its business as described in the
Registration Statement and the Prospectus. Each such entity is duly qualified to
do business and is in good standing as a foreign corporation in each other
jurisdiction in which the ownership or leasing of its properties or the nature
or conduct of its business as described in the Registration Statement and the
Prospectus requires such qualification, except where the failure to do so would
not have a Material Adverse Effect.
(f) The Company has full power and authority (corporate and other) to enter
into this Agreement, to issue, sell and deliver the Firm Company Shares as
provided herein and to consummate the transactions contemplated herein. This
Agreement has been duly authorized, executed and delivered by the Company and
constitutes a valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or other laws of
general applicability relating to or affecting creditors' rights, or by general
principles of equity whether considered at law or at equity and except to the
extent enforcement of the indemnification provisions set forth in Section 8 of
this Agreement may be
-4-
<PAGE>
limited by federal or state securities laws or the public policy underlying such
laws.
(g) Each consent, approval, authorization, order, license, certificate,
permit, registration, designation or filing by or with any governmental agency
or body necessary for the valid authorization, issuance, sale and delivery of
the Shares, the execution, delivery and performance of this Agreement and the
consummation by the Company of the transactions contemplated hereby has been
made or obtained and is in full force and effect, except as may be required to
qualify the Shares for public offering by the Underwriters under applicable
state securities laws.
(h) Neither the issuance, sale and delivery by the Company of the Firm
Company Shares, nor the execution, delivery and performance of this Agreement,
nor the consummation of the transactions contemplated hereby will conflict with
or result in a breach or violation of any of the terms and provisions of, or
(with or without the giving of notice or the passage of time or both) constitute
a default under the charter or bylaws of the Company or the Subsidiaries,
respectively, or under any indenture, mortgage, deed of trust, loan agreement,
note, lease or other agreement or instrument to which the Company or the
Subsidiaries, respectively, is a party or to which the Company or the
Subsidiaries, respectively, any of their respective properties or other assets
is subject; or any applicable statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to any of the
foregoing or any of their respective properties; or result in the creation or
imposition of any lien, charge, claim or encumbrance upon any property or asset
of the Company or the Subsidiaries, respectively.
(i) The Shares to be issued and sold to the Underwriters hereunder have
been validly authorized by the Company. When issued and delivered against
payment therefor as provided in this Agreement, the Shares will be duly and
validly issued, fully paid and nonassessable. No preemptive rights of
shareholders exist with respect to any of the Shares which have not been
satisfied or waived. No person or entity holds a right to require or participate
in the registration under the 1933 Act of the Shares pursuant to the
Registration Statement which has not been satisfied or waived; and, except as
set forth in the Prospectus, no person holds a right to require registration
under the 1933 Act of any shares of Common Stock of the Company at any other
time which has not been satisfied or waived.
(j) The Company's authorized, issued and outstanding capital stock is as
disclosed in the Prospectus. All of the issued shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description of the Company's capital stock
contained in the Prospectus.
-5-
<PAGE>
(k) All of the issued shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and nonassessable
and are owned directly or indirectly through another Subsidiary by the Company
free and clear of all liens, security interests, pledges, charges, encumbrances,
defects, shareholders' agreements, voting trusts, equities or claims of any
nature whatsoever, except for that certain pledge of the capital stock of the
Subsidiaries made by the Company pursuant to its Senior Loan Facility (as
defined in the Prospectus). Other than the Subsidiaries, the Company does not
own, directly or indirectly, any capital stock or other equity securities of any
other corporation or any ownership interest in any partnership, joint venture or
other association.
(1) Except as disclosed in the Prospectus, there are no outstanding (i)
securities or obligations of the Company or any of its Subsidiaries convertible
into or exchangeable for any capital stock of the Company or any such
Subsidiary, (ii) warrants, rights or options to subscribe for or purchase from
the Company or any such Subsidiary any such capital stock or any such
convertible or exchangeable securities or obligations, or (iii) obligations of
the Company or any such Subsidiary to issue any shares of capital stock, any
such convertible or exchangeable securities or obligation, or any such warrants,
rights or options.
(m) The Company and the Subsidiaries have good and marketable title in fee
simple to all real property, if any, and good title to all personal property
owned by them, in each case free and clear of all liens, security interests,
pledges, charges, encumbrances, mortgages and defects, except such as are
disclosed in the Prospectus or such as do not materially and adversely affect
the value of such property and do not interfere with the use made or proposed to
be made of such property by the Company and the Subsidiaries; and any real
property and buildings held under lease by the Company or any Subsidiary are
held under valid, existing and enforceable leases, with such exceptions as are
disclosed in the Prospectus or are not material and do not interfere with the
use made or proposed to be made of such property and buildings by the Company or
such Subsidiary.
(n) The financial statements of the Company and its consolidated
Subsidiaries included in the Registration Statement and Prospectus present
fairly the financial position of the Company and its consolidated Subsidiaries
as of the dates indicated and the results of operations and cash flows for the
Company and its consolidated Subsidiaries for the periods specified, all in
conformity with generally accepted accounting principles applied on a consistent
basis. The financial statement schedules included in the Registration Statement
and the amounts in the Prospectus under the captions "Prospectus Summary --
Summary Consolidated Financial Data," "Selected Consolidated Financial Data,"
"Unaudited Pro Forma Condensed Consolidated Financial Data," "Consolidated
Financial Statements of SCP Pool Corporation," and "Financial Statements of the
B-L Network, Inc." fairly present the information shown therein and have been
compiled on a basis consistent with the financial statements included in the
-6-
<PAGE>
Registration Statement and the Prospectus (other than the pro forma adjustments
specified therein). The unaudited pro forma financial information (including the
related notes) included in the Prospectus or any Preliminary Prospectus complies
as to form in all material respects to the applicable accounting requirements of
the 1933 Act and the 1933 Act Regulations, and management of the Company
believes that the assumptions underlying the pro forma adjustments are
reasonable. Such pro forma adjustments have been properly applied to the
historical amounts in the compilation of the information and such information
fairly presents with respect to the Company and the Subsidiaries, the financial
position, results of operations and other information purported to be shown
therein at the respective dates and for the respective periods specified.
(o) To the knowledge of the Company, Ernst & Young LLP who have examined
and are reporting upon the audited financial statements and schedules included
in the Registration Statement, are, and were during the periods covered by their
reports included in the Registration Statement and the Prospectus, independent
public accountants within the meaning of the 1933 Act and the rules and
regulations of the Commission thereunder.
(p) The Asset Purchase Agreement (the "Asset Purchase Agreement"), dated as
of November 13, 1997 among the Company, South Central Pool Supply, Inc.,
Bicknell Huston Distributors, Inc. (the "Seller"), Pacific Industries, Inc. and
Cookson America, Inc. has been duly authorized, executed and delivered by the
Company and, to the knowledge of the Company, the Seller, and constitutes a
valid and binding agreement of the Company and the Seller, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or other laws of
general applicability relating to or affecting creditors' rights, or by general
principles of equity whether considered at law or at equity and the Company has
no knowledge of any condition to the consummation of the transactions
contemplated therein that is not reasonably likely to be satisfied prior to
January 31, 1998 or that is reasonably likely to materially delay or hinder the
closing as contemplated therein. Neither the Company nor, to the Company's
knowledge, the Seller is in breach of any representation, warranty or covenant
under the terms of the Asset Purchase Agreement.
(q) Except for the Company's Form 8-K/A, Amendment No. 1, which was filed
on November 13, 1997, the Company has timely filed all documents required to be
filed by the Company since the Company's initial public offering in October 1995
pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act").
(r) None of the Company or the Subsidiaries has sustained, since December
31, 1996, any material loss or interference with its business from fire,
explosion, flood, hurricane, accident or other calamity, whether or not covered
by
-7-
<PAGE>
insurance, or from any labor dispute or arbitrators' or court or governmental
action, order or decree; and, since the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except as
otherwise stated in the Registration Statement and Prospectus, there has not
been (i) any material change in the capital stock, long-term debt, obligations
under capital leases or short-term borrowings of the Company, or the
Subsidiaries, or (ii) any Material Adverse Change, or any development which
could reasonably be seen as involving a prospective Material Adverse Change.
(s) Neither the Company nor its Subsidiaries is in violation of its
respective charter, or by-laws, and no default exists, and no event has
occurred, nor state of facts exists, which, with notice or after the lapse of
time to cure or both, would constitute a default in the due performance and
observance of any obligation, agreement, term, covenant, consideration or
condition contained in any indenture, mortgage, deed of trust, loan agreement,
note, lease or other agreement or instrument to which any such entity is a party
or to which any such entity or any of its properties is subject, except as in
the aggregate would not reasonably be expected to have a Material Adverse
Effect. None of the Company or its Subsidiaries is in violation of, or in
default with respect to, any statute, rule, regulation, order, judgment or
decree, except as may be properly described in the Prospectus or such as in the
aggregate do not now have and would not reasonably be expected to have a
Material Adverse Effect.
(t) There is not pending or threatened, any action, suit, proceeding,
inquiry or investigation against the Company, the Subsidiaries or any of their
respective officers and directors or to which the properties, assets or rights
of any such entity are subject, before or brought by any court or governmental
agency or body or board of arbitrators that are required to be described in the
Registration Statement or the Prospectus but are not described as required.
(u) The descriptions in the Registration Statement and the Prospectus of
the contracts, leases and other legal documents therein described present fairly
the information required to be shown, and there are no contracts, leases, or
other documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement which are not described or filed as required.
(v) Except as disclosed to you in a writing as of the date hereof (i) the
Company owns, possesses or has obtained all material permits, licenses,
franchises, certificates, consents, orders, approvals and other authorizations
of governmental or regulatory authorities or other entities as are necessary to
own or lease, as the case may be, and to operate its properties and to carry on
its business as presently conducted, or as contemplated in the Prospectus to be
conducted, and (ii) the Company has not received any notice of proceedings
relating to revocation
-8-
<PAGE>
or modification of any such licenses, permits, franchises, certificates,
consents, orders, approvals or authorizations.
(w) The Company owns or possesses adequate license or other rights to use
all patents, trademarks, service marks, trade names, copyrights, software and
design licenses, trade secrets, manufacturing processes, other intangible
property rights and know-how (collectively, "Intangibles") necessary to entitle
the Company to conduct its business as described in the Prospectus, and the
Company has not received notice of infringement of or conflict with (and knows
of no such infringement of or conflict with) asserted rights of others with
respect to any Intangibles which would reasonably be expected to have a Material
Adverse Effect.
(x) Each of the Company's and the Subsidiaries' respective systems of
internal accounting controls taken as a whole is sufficient to meet the broad
objectives of internal accounting control insofar as those objectives pertain to
the prevention or detection of errors or irregularities in amounts that would be
material in relation to the Company's or the Subsidiaries' financial statements.
(y) Each of the Company and the Subsidiaries has filed on a timely basis
all necessary federal, state, local and foreign income and franchise tax returns
required to be filed through the date hereof and have paid all taxes shown as
due thereon; and no tax deficiency has been asserted against any such entity,
nor does any such entity know of any tax deficiency which is likely to be
asserted against any such entity which if determined adversely to any such
entity, would reasonably be expected to have a Material Adverse Effect. All tax
liabilities are adequately provided for on the respective books of such
entities.
(z) Each of the Company and its Subsidiaries maintain insurance (issued
by insurers of recognized financial responsibility) of the types and in the
amounts generally deemed by the Company to be adequate for their respective
businesses and, consistent with insurance coverage maintained by similar
companies in similar businesses, including, but not limited to, insurance
covering real and personal property owned or leased by the Company and its
Subsidiaries against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect.
(aa) Each of the Company, the Subsidiaries, and their officers, directors
or affiliates has not taken and will not take, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or result in
or constitute the stabilization or manipulation of any security of the Company
or to facilitate the sale or resale of the Shares.
(bb) The Company is not, will not become as a result of the transactions
contemplated hereby, or will not conduct its respective businesses in a manner
in
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which the Company would become, "an investment company," or a company
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
(cc) Neither the Company nor any of the Subsidiaries has at any time
during the last five years (i) made any unlawful contribution to any
candidate for foreign office, or failed to disclose fully any contribution
in violation of law, or (ii) made any payment to a federal or state
governmental officer or official, or other person charge with similar
public or quasi-public duties, other than payments required or permitted by
the laws of the United States or any jurisdiction thereof.
Section 2. Representations and Warranties of the Selling Shareholders.
Each of the Selling Shareholders, severally and not jointly, represents and
warrants to, and agrees with, each of the several Underwriters and the Company
that:
(a) Such Selling Shareholder has full power and authority to enter
into this Agreement, the Power of Attorney and the Custody Agreement (as
hereinafter defined) and to sell, assign, transfer and deliver to the
Underwriters the Shares to be sold by such Selling Shareholder hereunder;
and the execution and delivery of this Agreement, the Power of Attorney and
the Custody Agreement have been duly authorized by all necessary action of
the Selling Shareholder.
(b) Such Selling Shareholder has duly executed and delivered this
Agreement, the Power of Attorney and the Custody Agreement, and each
constitutes the valid and binding agreement of such Selling Shareholder
enforceable against such Selling Shareholder in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws relating to or affecting
the enforcement of creditors' rights generally and to general equitable
principles.
(c) No consent, approval, authorization, order or declaration of or
from, or registration, qualification or filing with, any court or
governmental agency or body is required for the sale of the Shares to be
sold by such Selling Shareholder or the consummation of the transactions
contemplated by this Agreement, the Power of Attorney or the Custody
Agreement, except the registration of such Shares under the 1933 Act
(which, if the Registration Statement is not effective as of the time of
execution hereof, shall be obtained as provided in this Agreement) and such
as may be required under state securities or blue sky laws in connection
with the offer, sale and distribution of such Shares by the Underwriters.
(d) The sale of the Shares to be sold by such Selling Shareholder
and the performance of this Agreement, the Power of Attorney and the
Custody Agreement and the consummation of the transactions herein and
therein
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<PAGE>
contemplated will not conflict with, or (with or without the giving of
notice or the passage of time or both) result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which such Selling Shareholder is a party or to
which any of its properties or assets is subject, nor will such action
conflict with or violate any provision of the charter or bylaws or other
governing instruments of such Selling Shareholder, if any, or any statute,
rule or regulation or any order, judgment or decree of any court or
governmental agency or body having jurisdiction over the Selling
Shareholder or any of such Selling Shareholder's properties or assets.
(e) Such Selling Shareholder has, and immediately prior to the
transfer of the Shares at the Closing Time (as defined in Section 3 hereof)
or at the Date of Delivery, as the case may be, such Selling Shareholder
will have, good and valid title to the Shares to be sold by such Selling
Shareholder hereunder, free and clear of all liens, security interests,
pledges, charges, encumbrances, defects, shareholders' agreements, voting
trusts, equities or claims of any nature whatsoever; and, upon delivery of
such Shares against payment therefor as provided herein, good and valid
title to such Shares, free and clear of all liens, security interests,
pledges, charges, encumbrances, defects, shareholders' agreements, voting
trusts, equities or claims of any nature whatsoever, will pass to the
several Underwriters.
(f) The Selling Shareholder has not (i) taken, directly or
indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares or (ii) since the filing of
the Registration Statement (A) sold, bid for, purchased or paid anyone any
compensation for soliciting purchases of, the Shares or (B) paid or agreed
to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.
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<PAGE>
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Internal Revenue Code of 1986, as amended, with
respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Closing Time (as
hereinafter defined) a properly completed and executed United States Treasury
Department form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
Each of the Selling Shareholders individually represents and warrants that
certificates in negotiable form representing all of the Shares to be sold by
such Selling Shareholder hereunder have been placed in custody under a custody
agreement (the "Custody Agreement"), in the form heretofore furnished to and
approved by you, duly executed and delivered by such Selling Shareholder to
First Chicago Trust Company of New York, as custodian (the "Custodian"), and
that such Selling Shareholder has duly executed and delivered a Power of
Attorney (the "Power of Attorney"), in the form heretofore furnished to and
approved by you, appointing Andrew W. Code, Peter M. Gotsch, Craig K. Hubbard
and Wilson B. Sexton as such Selling Shareholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement on
behalf of such Selling Shareholder, to determine the purchase price to be paid
by the Underwriters to the Selling Shareholders as provided in Section 3 hereof,
to authorize the delivery of the Shares to be sold by such Selling Shareholder
hereunder and otherwise to act
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<PAGE>
on behalf of such Selling Shareholder in connection
with the transactions contemplated by this Agreement and the Custody
Agreement.
Each of the Selling Shareholders specifically agrees that the Shares
represented by the certificates held in custody for such Selling
Shareholder under the Custody Agreement are subject to the interests of the
Underwriters hereunder, and that the arrangements made by such Selling
Shareholder for such custody, and the appointment by such Selling
Shareholder of the Attorneys-in-Fact by the Power of Attorney, are
irrevocable subject to the terms thereof. Each of the Selling Shareholders
specifically agrees that the obligations of the Selling Shareholders
hereunder shall not be terminated by operation of law, whether by the death
or incapacity of any individual Selling Shareholder or, in the case of an
estate or trust, by the death or incapacity of any executor or trustee or
the termination of such estate or trust, or in the case of a partnership or
corporation, by the dissolution of such partnership or corporation, or by
the occurrence of any other event.
Section 3. Sale and Delivery of the Shares to the Underwriters; Closing.
(a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the Underwriters the Firm Company
Shares, and the Selling Shareholders agree, severally and not jointly, to
sell to the Underwriters the Firm Selling Shareholder Shares set forth
opposite the name of such Selling Shareholder on Schedule B, and each
Underwriter agrees, severally and not jointly, to purchase from the Company
and the Selling Shareholders the number of Firm Shares set forth opposite
the name of such Underwriter in Schedule A (the proportion which each
Underwriter's share of the total number of the Firm Shares bears to the
total number of Firm Shares is hereinafter referred to as such
Underwriter's "underwriting obligation proportion"), at a purchase price of
$______ per share.
(b) In addition, on the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth,
the Selling Shareholder set forth in Schedule C hereby grants an option to
the Underwriters, severally and not jointly, to purchase up to an
additional 442,500 Option Shares at the same purchase price as shall be
applicable to the Firm Shares. The option hereby granted will expire if not
exercised within the thirty (30) day period after the date of the
Prospectus by giving written notice to the Company and the Selling
Shareholder set forth in Schedule C. The option granted hereby may be
exercised in whole or in part (but not more than once), only for the purpose
of covering over-allotments that may be made in connection with the offering
and distribution of the Firm Shares. The notice of exercise shall set forth
the number of Option Shares as to which the several Underwriters are
exercising the option, and the time and date of payment and delivery
thereof. Such time and
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<PAGE>
date of delivery (the "Date of Delivery") shall be determined by you but
shall not be later than three full business days after the exercise of such
option, nor in any event prior to the Closing Time. If the option is
exercised as to all or any portion of the Option Shares, the Option Shares
as to which the option is exercised shall be purchased by the Underwriters,
severally and not jointly, in their respective underwriting obligation
proportions.
(c) Payment of the purchase price for and delivery of certificates in
definitive form representing the Firm Shares shall be made at the offices
of Morgan Keegan & Company, Inc., 50 Front Street, Memphis, Tennessee 38103
or at such other place as shall be agreed upon by the Company and you, at
10:00 a.m., either (i) on the third full business day after the execution
of this Agreement, or (ii) at such other time not more than ten full
business days thereafter as you and the Company shall determine (unless, in
either case, postponed pursuant to the term hereof), (such date and time of
payment and delivery being herein called the "Closing Time"). In addition,
in the event that any or all of the Option Shares are purchased by the
Underwriters, payment of the purchase price for and delivery of
certificates in definitive form representing the Option Shares shall be
made at the offices of Morgan Keegan & Company, Inc. in the manner set
forth above, or at such other place as the Company and you shall determine,
on the Date of Delivery as specified in the notice from you to the Company.
Payment for the Firm Shares and the Option Shares shall be made to the
Company and the Selling Shareholders, respectively, by wire transfer in
same-day funds to the accounts designated to the Underwriters in writing by
the Company and the Selling Shareholders, respectively, against delivery to
you for the respective accounts of the Underwriters of the Shares to be
purchased by them.
(d) The certificates representing the Shares to be purchased by the
Underwriters shall be in such denominations and registered in such names as
you may request in writing at least two full business days before the
Closing Time or the Date of Delivery, as the case may be. The certificates
representing the Shares will be made available at the offices of Morgan
Keegan & Company, Inc. or at such other place as Morgan Keegan & Company,
Inc. may designate for examination and packaging not later than 10:00 a.m.
at least one full business day prior to the Closing Time or the Date of
Delivery as the case may be.
(e) After the Registration Statement becomes effective, you intend to
offer the Shares to the public as set forth in the Prospectus, but after
the initial public offering of such Shares, you may in your discretion vary
the public offering price.
Section 4. Certain Covenants of the Company. The Company covenants and
agrees with each Underwriter as follows:
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(a) The Company will use its best efforts to cause the Registration
Statement to become effective (if not yet effective at the date and time
that this Agreement is executed and delivered by the parties hereto). If
the Company elects to rely upon Rule 430A of the 1933 Act Regulations or
the filing of the Prospectus is otherwise required under Rule 424(b) of the
1933 Act Regulations, the Company will comply with the requirements of Rule
430A and will file the Prospectus, properly completed, pursuant to the
applicable provisions of Rule 424(b), or a Term Sheet pursuant to and in
accordance with Rule 434, within the time period prescribed. If the Company
elects to rely upon Rule 462(b), the Company shall file a 462(b)
Registration Statement with the Commission in compliance with Rule 462(b)
by 10:00 p.m., Washington, D.C. time on the date of this Agreement, and the
Company shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee. The Company will notify you
immediately (i) when the Registration Statement, 462(b) Registration
Statement or any post-effective amendment to the Registration Statement,
shall have become effective, or any supplement to the Prospectus or any
amended Prospectus shall have been filed, (ii) of the receipt of any
comments from the Commission with regard to the Registration Statement,
(iii) of any request by the Commission to amend the Registration Statement
or 462(b) Registration Statement or amend or supplement the Prospectus or
for additional information, and (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or any 462(b) Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of
the institution or threatening of any proceeding for any such purposes. The
Company will use every reasonable effort to prevent the issuance of any
such stop order or of any order preventing or suspending such use and, if
any such order is issued, to obtain the withdrawal thereof at the earliest
possible moment.
(b) The Company will not at any time file or make any amendment to the
Registration Statement, or any amendment or supplement (i) to the
Prospectus, if the Company has not elected to rely upon Rule 430A, (ii) if
the Company has elected to rely upon Rule 430A, to either the Prospectus
included in the Registration Statement at the time it becomes effective or
to the Prospectus filed in accordance with Rule 424(b) or any Term Sheet
filed in accordance with Rule 434, or (iii) if the Company has elected to
rely upon Rule 462(b), to any 462(b) Registration Statement in any case if
you shall not have previously been advised and furnished a copy thereof a
reasonable time prior to the proposed filing, or if you or counsel for the
Underwriters shall object to such amendment or supplement.
(c) The Company has furnished or will furnish to you, at its expense,
as soon as available, four (4) copies of the Registration Statement as
originally
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<PAGE>
filed and of all amendments thereto, whether filed before or after the
Registration Statement becomes effective, copies of all exhibits and
documents filed therewith and signed copies of all consents and
certificates of experts, as you may reasonably request, and has furnished
or will furnish to each Underwriter, one conformed copy of the Registration
Statement as originally filed and of each amendment thereto.
(d) The Company will deliver to each Underwriter, at the Company's
expense, from time to time, as many copies of each Preliminary Prospectus
as such Underwriter may reasonably request, and the Company hereby consents
to the use of such copies for purposes permitted by the 1933 Act. The
Company will deliver to each Underwriter, at the Company's expense, as soon
as the Registration Statement shall have become effective and thereafter
from time to time as requested during the period when the Prospectus is
required to be delivered under the 1933 Act, such number of copies of the
Prospectus (as supplemented or amended) as each Underwriter may reasonably
request. The Company will comply to the best of its ability with the 1933
Act and the 1933 Act Regulations so as to permit the completion of the
distribution of the Shares as contemplated in this Agreement and in the
Prospectus. If the delivery of a prospectus is required at any time prior
to the expiration of nine months after the time of issue of the Prospectus
or any Term Sheet in connection with the offering or sale of the Shares and
if at such time any events shall have occurred as a result of which the
Prospectus or any Term Sheet as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made when such Prospectus or any Term
Sheet is delivered not misleading, or, if for any reason it shall be
necessary during such same period to amend or supplement the Prospectus or
any Term Sheet in order to comply with the 1933 Act or the rules and
regulations thereunder, the Company will notify you and upon your request
prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably request
of an amended Prospectus or any Term Sheet or a supplement to the
Prospectus or any Term Sheet or an amendment or supplement to any such
incorporated document which will correct such statement or omission or
effect such compliance, and in case any Underwriter is required to deliver
a prospectus in connection with sales of any of the Shares at any time nine
months or more after the time of issue of the Prospectus or any Term Sheet,
upon your request but at the expense of such Underwriter, the Company will
prepare and deliver to such Underwriter as many copies as you may request
of an amended or supplemented Prospectus or any Term Sheet complying with
Section 10(a)(3) of the 1933 Act.
(e) The Company will take such action as the Underwriters may
reasonably request to qualify the Shares for offering and sale under the
applicable securities laws of such states and other jurisdictions as you
may designate and to
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maintain such qualifications in effect for as long as may be necessary to
complete the distribution of the Shares (not to exceed nine months);
provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to make
any undertakings in respect of doing business in any jurisdiction in which
it is not otherwise so subject. The Company will file such statements and
reports as may be required by the laws of each jurisdiction in which the
Shares have been qualified as above provided.
(f) The Company will make generally available to its security holders
as soon as practicable, but in any event not later than the end of the
fiscal quarter first occurring after the first anniversary of the
"effective date of the Registration Statement" (as defined in Rule 158(c)
of the 1933 Act Regulations), an earnings statement (in reasonable detail
but which need not be audited) complying with the provisions of Section
11(a) of the 1933 Act and Rule 158 thereunder and covering a period of at
least 12 months beginning after the effective date of the Registration
Statement.
(g) The Company will use the net proceeds received by it from the sale
of the Firm Company Shares in the manner specified in the Prospectus under
the caption "Use of Proceeds," it being understood, however, that the
amounts paid for each such specified use may vary based on the actual
amount required to finance the 1997 Acquisition (as defined in the
Prospectus).
(h) During a period of two years after the date hereof, the Company
will furnish to you: (i) copies of all reports (financial or otherwise)
mailed to securityholders; and (ii) as soon as they are available, copies
of all reports and financial statements furnished to or filed with the
Commission, any securities exchange or the National Association of
Securities Dealers, Inc. (the "NASD").
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(i) During the period beginning from the date hereof and continuing to
and including the date 90 days after the date of the Prospectus, the
Company will not, without the prior written consent of Morgan Keegan &
Company, Inc., offer, pledge, issue, sell, contract to sell, grant any
option for the sale of, or otherwise dispose of, or announce any offer,
pledge, sale, grant of any option to purchase or other disposition,
directly or indirectly, any shares of Common Stock or securities
convertible into, exercisable or exchangeable for, shares of Common Stock,
except as provided in Section 3 of this Agreement and except for the
issuance of Common Stock upon the exercise of stock options, warrants or
Convertible Subordinated Promissory Notes due December 31, 2002 outstanding
on the date of this Agreement to the extent that such stock options or
warrants are disclosed in the Prospectus and except for the issuance of
options to purchase shares of Common Stock pursuant to the Company's stock
option plans described under the caption "Management" in the Prospectus.
(j) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be
the same entity as the transfer agent) for its Common Stock.
(k) The Company will use its reasonable best efforts to cause the
Shares to be approved for listing on the Nasdaq Stock Market and to
maintain the listing of the Shares on the Nasdaq Stock Market.
(l) The Company will endeavor in the future to conduct its affairs, in
such a manner so as to ensure that the Company will not be an "investment
company" or an entity "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(m) Prior to termination of the underwriting syndicate contemplated by
this Agreement, the Company will not, and will use its best efforts to
cause its officers, directors and affiliates not to, (i) take, directly or
indirectly any action designed to stabilize or manipulate the price of any
security of the Company, or which may cause or result in, or which might in
the future reasonably be expected to cause or result in, the stabilization
or manipulation of the price of any security of the Company, to facilitate
the sale or resale of any of the Shares, (ii) sell, bid for, purchase or
pay anyone any compensation for soliciting purchases of the Shares or (iii)
pay or agree to pay to any person any compensation for soliciting any order
to purchase any other securities of the Company, except for such fees as
shall be paid to a financial institution relating to the Company's Senior
Loan Facility.
(n) If at any time during the 30-day period after the Registration
Statement becomes effective, any rumor, publication or event relating to or
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affecting the Company shall occur as a result of which in your reasonable
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus) and after
written notice from you advising the Company to the effect set forth above,
the Company agrees to forthwith prepare, consult with you concerning the
substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event.
Section 5. Covenants of the Selling Shareholders. Each of the Selling
Shareholders covenants and agrees with each of the Underwriters that
the Selling Shareholder will not (i) take, directly or indirectly,
prior to the termination of the underwriting syndicate contemplated by this
Agreement, any action designed, or which has constituted, or that might
reasonably be expected to cause or result in, the stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of any of the Shares, (ii) sell, bid for, purchase or pay
anyone any compensation for soliciting purchases of, the Shares or (iii)
pay to or agree to pay any person any compensation for soliciting another
to purchase any other securities of the Company.
Section 6. Payment of Expenses. The Company will pay and bear all costs,
fees and expenses incident to the performance of its obligations under this
Agreement (excluding fees and expenses of counsel for the Underwriters, except
as specifically set forth below), including (a) the preparation, printing and
filing of the Registration Statement (including financial statements and
exhibits), as originally filed and as amended, the Preliminary Prospectuses, the
Prospectus and any Term Sheet and any amendments or supplements thereto, and the
cost of furnishing copies thereof to the Underwriters, (b) the certificates
representing the Shares, the Blue Sky Memoranda and any instruments relating to
any of the foregoing, (c) the issuance and delivery of the Shares to the
Underwriters, including any transfer taxes payable upon the sale of the Shares
to the Underwriters (other than transfer taxes on resales by the Underwriters),
(d) the fees and disbursements of the Company's counsel and accountants, (e) the
qualification of the Shares under the applicable securities laws in accordance
with the terms of this Agreement, including filing fees and fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the Blue Sky Memoranda, (f) all costs, fees and expenses in
connection with the notification to the Nasdaq Stock Market of the proposed
issuance of the Shares, (g) filing fees relating to the review of the offering
by the NASD, (h) the transfer agent's and registrar's fees and all miscellaneous
expenses referred to in Part II of the Registration Statement, (i) costs related
to travel and lodging incurred by the Company and its representatives relating
to meetings with and presentations to prospective purchasers of the Shares
reasonably determined by the Underwriters to be necessary or desirable to effect
the sale of the Shares to the public, and
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(j) all other costs and expenses incident to the performance of the Company's
obligations hereunder (including costs incurred in closing the purchase of the
Option Shares, if any) that are not otherwise specifically provided for in this
section. The Company, upon your request, will provide funds in advance for
filing fees in connection with "blue sky" qualifications.
If the sale of the Shares provided for herein is not consummated because
any condition to the obligations of the Underwriters set forth in Section 7
hereof is not satisfied, because of any termination pursuant to Section 10
(other than Section 10(b)(iii), (v) or (vii)) hereof or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof other than by reason of default by any of
the Underwriters, the Company will reimburse the Underwriters severally on
demand for all reasonable out-of-pocket expenses, including fees and
disbursements of Underwriters' counsel, reasonably incurred by the Underwriters
in reviewing the Registration Statement and the Prospectus, and in investigating
and making preparations for the marketing of the Shares.
Section 7. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase and pay for (i) the Firm Shares that they have
respectively agreed to purchase pursuant to this Agreement (and any Option
Shares as to which the option granted in Section 3 has been exercised and the
Date of Delivery determined by you is the same as the Closing Time) at the
Closing Time and (ii) the Option Shares at the Date of Delivery of the Option
Shares, are subject to the accuracy of the representations and warranties of the
Company and the Selling Shareholders contained herein as of the Closing Time or
the Date of Delivery, as the case may be, and to the accuracy of the
representations and warranties of the Company and the Selling Shareholders
contained in certificates of any officer of the Company and the Selling
Shareholders delivered pursuant to the provisions hereof, to the performance by
the Company and the Selling Shareholders of their obligations hereunder, and to
the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 p.m. (Washington, D.C. time) on the date of this Agreement or,
with your consent, at a later time and date not later, however, than 5:30
p.m. on the first business day following the date hereof, or at such later
time or on such later date as you may agree to in writing; if the Company
has elected to rely upon Rule 462(b), the 462(b) Registration Statement
shall have become effective by 10:00 p.m., Washington, D.C. time, on the
date of this Agreement; and at the Closing Time no stop order suspending
the effectiveness of the Registration Statement or any 462(b) Registration
Statement shall have been issued under the 1933 Act and no proceedings for
that purpose shall have been instituted or shall be pending or, to your
knowledge or the knowledge of the Company, shall be contemplated by the
Commission, and any request on the part of the Commission for additional
information shall have been complied with to the satisfaction of counsel
for the Underwriters. If the Company has elected to rely upon Rule 430A, a
Prospectus or a Term Sheet containing the Rule 430A Information shall have
been filed with
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the Commission in accordance with Rule 424(b) (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A).
(b) At the Closing Time, you shall have received a favorable opinion
of Kirkland & Ellis, counsel for the Company, dated as of the Closing Time,
together with signed or reproduced copies of such opinion for each of the
other Underwriters, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) The Company has been duly organized and is a corporation existing
and in good standing under the General Corporation Law of the
State of Delaware with the corporate power to own and lease its
properties and to conduct its business as described in the
Registration Statement and the Prospectus. The Company is
qualified to transact business as a foreign corporation and is in
good standing in the state of Louisiana
(ii) Each of the Subsidiaries has been duly organized and is a
corporation existing and in good standing under the General
Corporation Law of the State of Delaware. Each such entity has
all requisite corporate power to own and lease its properties and
conduct its business as described in the Registration Statement
and the Prospectus. South Central Pool Supply, Inc. is qualified
to do business and is in good standing in the states listed in
Schedule D. Alliance Packaging, Inc. is qualified to do business
and is in good standing in the State of Texas.
(iii) The Company has the corporate power and authority to enter into
this Agreement, to issue, sell and deliver the Firm Company
Shares as provided herein and to consummate the transactions
contemplated herein. This Agreement has been duly authorized,
executed and delivered by the Company.
(iv) The Company was not required to obtain any consent, approval,
authorization or order of or from any governmental agency or body
for the issuance, sale and delivery of the Firm Company Shares,
the execution, delivery and performance of this Agreement and the
consummation by the Company of the transactions contemplated
hereby, except for the order by the Commission declaring the
Registration Statement effective.
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(v) The issuance, sale and delivery by the Company of the Shares,
the Company's execution, delivery and performance of this
Agreement, and the consummation by the Company of the
transactions contemplated hereby do not conflict with or result
in a breach or violation of any of the terms and provisions of,
or (with or without the giving notice or the passage of time or
both) constitute a default under, (a) the charter or by-laws of
the Company or the Subsidiaries, respectively, ; (b) any existing
obligation of the Company under any of the agreements filed as
exhibits to the Registration Statement (provided, that such
counsel need not express an opinion as to compliance with any
financial test or cross-default provision in any such agreement);
(c) to such counsel's knowledge, any applicable statute,
judgment, decree, order, rule or regulation of any court or
governmental agency or body (except that such counsel need not
express an opinion as to compliance with any disclosure
requirement or any prohibition against fraud or misrepresentation
or as to whether performance of the indemnification or
contribution provisions of this Agreement would be permitted);
or, (d) to such counsel's knowledge, result in the creation or
imposition of any lien, charge, claim or encumbrance upon any
property or asset of the Company or the Subsidiaries,
respectively.
(vi) The Common Stock conforms in all material respects as to legal
matters to the description thereof contained in the Registration
Statement and the Prospectus under the heading "Description of
Capital Stock."
(vii) The Shares to be issued and sold to the Underwriters hereunder
have been validly authorized by the Company. When appropriate
certificates representing those Shares are duly countersigned by
the Company's transfer agent and registrar (or other similar
action is taken by the Company's transfer agent and registrar
with regard to electronic transfer of such Shares) and issued and
delivered against payment therefor as provided in this Agreement,
such shares will be validly issued, fully paid and nonassessable.
To such counsel's knowledge, no preemptive rights of shareholders
exist with respect to any of the Shares which have not been
satisfied or waived. To such counsel's knowledge, no person or
entity holds a right to require or participate in the
registration under the 1933 Act of the Shares pursuant to the
Registration Statement which has not been satisfied or waived.
The form of certificates evidencing the Shares complies with all
applicable requirements of Delaware law.
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(viii) The Company has an authorized capitalization as set forth in
the Prospectus under the caption "Capitalization." All of the
issued shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable.
None of the issued shares of capital stock of the Company has
been issued or is owned or held in violation of any statutory
preemptive rights of shareholders. Such counsel may assume for
purposes of this opinion that in the case of each share issuance
and transfer, the shares were represented by a shares certificate
which complied with all applicable requirements imposed by law,
by the Company's certificate of incorporation and bylaws and by
any applicable resolutions by the Company's board of directors,
that such certificate was properly signed and authenticated and
that payment for such shares was received by the Company.
(ix) All of the issued shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and are owned directly, or
indirectly through another Subsidiary, by the Company and, to the
knowledge of such counsel, are held free and clear of all liens,
security interests, pledges, charges, encumbrances, defects,
shareholders' agreements, voting trusts, equities or claims of
any nature whatsoever except for the pledge of such shares
pursuant to the Company's Senior Loan Facility. Such counsel may
assume for purposes of this opinion that in the case of each
share issuance and transfer, the shares were represented by a
shares certificate which complied with all applicable
requirements imposed by law, by the Company's certificate of
incorporation and bylaws and by any applicable resolutions by the
Company's board of directors, that such certificate was properly
signed and
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authenticated and that payment for such shares was received by
the Company.
(x) Neither the Company nor its Subsidiaries is in violation of their
respective charter or by-laws, and no material default exists,
and to such counsel's knowledge, no event has occurred nor state
of facts exist which, with notice or after the lapse of time to
cure or both, would constitute a material default in the due
performance and observance of any obligation, agreement, term,
covenant, or condition contained in any indenture, mortgage, deed
of trust, loan agreement, note, lease or other agreement or
instrument filed as an exhibit to the Registration Statement.
(xi) Such counsel has no knowledge about any legal or governmental
proceeding that is pending or threatened against the Company that
has caused such counsel to conclude that such proceeding is
required by Item 103 of Regulation S-K to be described in the
Prospectus but that is not so described.
(xii) Such counsel has no knowledge about any contract, lease or
other legal document to which the Company or a Subsidiary is a
party or to which any of their property is subject that has
caused such counsel to conclude that such contract, lease or
other document is required to be described in the Prospectus but
is not so described or is required to be filed as an exhibit to
the Registration Statement but has not been so filed.
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(xiii) Other than financial statements and other financial and
operating data and schedules contained therein, as to which
counsel need express no opinion, the Registration Statement,
any 462(b) Registration Statement, all Preliminary
Prospectuses, the Prospectus and any amendment or supplement
thereto, appear on their face to conform as to form in all
material respects with the requirements of the 1933 Act and the
rules and regulations thereunder.
(xiv) The Company is not, and after giving effect to the offering and
sale of the Shares and the application of the net proceeds to
the Company therefrom as described in the Prospectus, will not
be, an "investment company," or a company "controlled" by an
"investment company," as such terms are defined in of the
Investment Company Act of 1940, as amended.
(xv) The descriptions in the Prospectus of statutes, regulations,
legal or governmental proceedings are accurate and present
fairly a summary of the information required to be shown under
the 1933 Act and the 1933 Act Regulations. The information in
the Prospectus under the caption "Shares Available for Future
Sale" to the extent that it summarizes laws, governmental rules
or regulations or documents, has been reviewed by such counsel,
is correct in all material respects and presents fairly the
information required to be disclosed therein under the 1933 Act
and the 1933 Act Regulations.
A member of the Commission's staff has advised such counsel by
telephone that the Commission's Division of Corporation Finance,
pursuant to authority delegated to it by the Commission, has entered
an order declaring the Registration Statement and any 462(b)
Registration Statement effective under the Securities Act on December
___, 1997 and December ___, 1997, respectively, (the "Effective Date")
and such counsel has no knowledge that any stop order suspending the
effectiveness of such Registration Statements has been issued or that
any proceedings for that
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purpose are pending before, or threatened by, the Commission. Such
counsel also shall state that nothing has come to such counsel's
attention that has caused such counsel to conclude that the
Registration Statement, any 462(b) Registration Statement or any
further amendment thereto made prior to the Closing Time or the Date
of Delivery, as the case may be, on its effective date and as of the
Closing Time or the Date of Delivery, as the case may be, contained or
contains any untrue statement of a material fact or omitted or omits
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, or that the Prospectus,
or any amendment or supplement thereto made prior to the Closing Time
or the Date of Delivery, as the case may be, as of its issue date and
as of the Closing Time or the Date of Delivery, as the case may be,
contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading (provided that such counsel need express no
belief regarding the financial statements and related schedules and
other financial data contained in the Registration Statement, any
462(b) Registration Statement, any amendment thereto, or the
Prospectus, or any amendment or supplement thereto).
(c) You shall have received an opinion, dated such Time of Delivery,
of Kirkland & Ellis, counsel for the Selling Shareholders, in form and substance
satisfactory to you and your counsel, to the effect that:
(i) The Power of Attorney and the Custody Agreement have been duly
executed and delivered by each Selling Shareholder, and each is
enforceable against each Selling Shareholder in accordance with
its terms subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws
relating to or affecting the enforcement of creditors' rights
generally and to general equitable principles.
(ii) This Agreement has been duly executed and delivered by or on
behalf of each Selling Shareholder; the sale of the Shares to be
sold by each Selling Shareholder at such Time of Delivery and the
performance of this Agreement, the Power of Attorney and the
Custody Agreement and the consummation of the transactions herein
and therein contemplated will not,
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violate any provision of the charter or bylaws or other governing
instruments of each Selling Shareholder or any statute, rule or
regulation (except that such counsel need not express an opinion
as to compliance with any disclosure requirement or any
prohibition against fraud or misrepresentation or as to whether
performance of the indemnification or contribution provisions in
the Underwriting Agreement would be permitted).
(iii) The Selling Shareholders were not required to obtain any consent,
approval, authorization or order of or from any governmental
agency or body for the sale of the Shares being sold by such
Selling Shareholder or the consummation of the transactions
contemplated by this Agreement, the Power of Attorney or the
Custody Agreement, except for the order by the Commission
declaring the Registration Statement effective, and except the
registration of such Shares under the Act and such as may be
required under state securities or blue sky laws in connection
with the offer, sale and distribution of such Shares by the
Underwriters.
(iv) Upon your payment to the Selling Shareholders of the purchase
price specified in this Agreement and delivery to you of the
certificate or certificates representing the Selling Shareholder
Shares upon consummation of the sale thereof in accordance with
this Agreement, you will have acquired ownership of the Selling
Shareholder Shares free of any adverse claim. For purposes of
this opinion, such counsel may assume that you will have
purchased the Selling Shareholder Shares in good faith and
without notice of any adverse claim or defect in the validity of
the Selling Shareholder Shares and that you will take possession
at the closing of the certificates representing the Selling
Shareholder Shares and the instrument pursuant to which the
Selling Shareholders have assigned the Selling Shareholder Shares
to you. The term "adverse claim" as used in this opinion has the
meaning given to such term in Article 8 of the Uniform Commercial
Code and does not include (i) any claim which arises through you
or any person claiming through you (such as any security interest
you may have granted in the shares) and (ii) any adverse interest
which would not be extinguished upon the purchase of the Selling
Shareholder Shares by a person who qualifies as a "bona fide
purchaser" or "protected purchaser" under (S) 8-303 of the
Uniform Commercial Code. Such
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counsel will further advise you that it has no actual knowledge
of the existence of any interest of the kind specified in clause
(ii) of the preceding sentence.
(d) In rendering the opinions set forth in Sections 7(b) and (c), such
counsel may assume: each document it has reviewed for purposes of the
letter is accurate and complete, each such document that is an original is
authentic, each such document that is a copy conforms to an authentic
original, and all signatures on each such document are genuine; that this
Agreement and every other agreement it has examined for purposes of the
letter constitutes a valid and binding obligation of each party to that
document and that each such party has satisfied all legal requirements that
are applicable to such party to the extent necessary to entitle such party
to enforce such agreement (except that such counsel will make no such
assumptions with respect to the Company); and that you have acted in good
faith and without notice of any fact which has caused you to reach any
conclusion contrary to any of the advice provided in this letter. Such
counsel may also make other assumptions which it believes to be appropriate
for purposes of the letter.
Such counsel may rely without independent verification upon: (i)
information contained in certificates obtained from governmental
authorities; (ii) factual information represented to be true in this
Agreement and other documents specifically identified at the beginning of
the letter as having been read by such counsel; (iii) factual information
provided to such counsel by the Company or its representatives; and (iv)
factual information obtained by such counsel from such other sources as it
has deemed reasonable. Such counsel may assume that the information upon
which it has relied is accurate and does not omit disclosures necessary to
prevent such information from being misleading. For purposes of the
opinions in subsections (i) and (ii) of Section 7(b), such counsel may, as
to matters of fact, rely exclusively upon certificates issued by
governmental authorities in the relevant jurisdictions.
Such counsel will confirm that it does not have knowledge that
has caused it to conclude that its reliance and assumptions cited in the
two immediately preceding paragraphs are unwarranted. Whenever the letter
provides advice about (or based upon ) knowledge of any particular
information or about any information which has not come to such counsel's
attention such advice is based entirely on the conscious awareness at the
time this letter is delivered on the date it bears by the lawyers with
Kirkland & Ellis at that time who spent substantial time representing the
Company in connection with the offering effected pursuant to the
Prospectus.
Such counsel's advice on every legal issue addressed in the
letter may be based exclusively on the law of the State of Illinois, the
General Corporation Law of the State of Delaware, or the federal law of the
United States, and may
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represent such counsel's opinion as to how that issue would be resolved were it
to be considered by the highest court in the jurisdiction which enacted such
law. None of the opinions or other advice contained in the letter considers or
covers: (i) any state securities (or "blue sky") laws or regulations, (ii) any
financial statements or supporting schedules (or any notes to any such
statements or schedules) or other financial or statistical information set forth
or incorporated by reference in (or omitted from) the Registration Statement or
the Prospectus or (ii) any rules and regulations of the National Association of
Securities Dealers, Inc. relating to the compensation of underwriters. The
letter need not cover any other laws, statutes, governmental rules or
regulations or decisions which in such counsel's experience are not usually
considered for or covered by opinions like those contained in the letter or are
not generally applicable to transactions of the kind covered by this Agreement.
(e) At the Closing Time, you shall have received a favorable opinion from
Alston & Bird LLP, counsel for the Underwriters, dated as of the Closing Time,
with respect to the existence of the Company, the issuance and sale of the
Shares, the Registration Statement, the Prospectus and other related matters as
the Underwriters may reasonably require, and the Company shall have furnished to
such counsel such documents as they may reasonably request for the purpose of
enabling them to pass on such matters. As of the date hereof, you hereby
represent that you know of no reason why such opinions cannot be delivered.
(f) At the Closing Time, (i) the Registration Statement, any 462(b)
Registration Statement, and the Prospectus, as they may then be amended or
supplemented, shall contain all statements that are required to be stated
therein under the 1933 Act and the 1933 Act Regulations and in all material
respects shall conform to the requirements of the 1933 Act and the 1933 Act
Regulations; the Company shall have complied in all material respects with Rule
430A (if it shall have elected to rely thereon) and neither the Registration
Statement, any 462(b) Registration Statement, nor the Prospectus, as they may
then be amended or supplemented, shall contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) there shall not have been,
since the respective dates as of which information is given in the Registration
Statement, any material adverse change in the business, results of operations or
financial condition of the Company, whether or not arising in the ordinary
course of business, (iii) no action, suit or proceeding at law or in equity
shall be pending or, to the best of Company's knowledge, threatened against the
Company that would be required to be set forth in the Prospectus other than as
set forth therein and no proceedings shall be pending or, to the best knowledge
of the Company, threatened against the Company before or by any federal, state
or other commission, board or administrative agency wherein an unfavorable
decision, ruling or finding could materially adversely affect the business,
results of operations or financial
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condition of the Company, other than as set forth in the Prospectus, (iv)
the Company shall have complied with all agreements and satisfied all
conditions on their part to be performed or satisfied at or prior to the
Closing Time, and (v) the representations and warranties of the Company set
forth in Section 1 shall be accurate as though expressly made at and as of
the Closing Time. At the Closing Time, you shall have received a
certificate executed by the President and Chief Financial Officer of the
Company on behalf of the Company dated as of the Closing Time, to such
effect. The representations and warranties of the Selling Shareholders set
forth herein shall be accurate as though expressly made at and as of the
Closing Time. At the Closing Time, you shall have received a certificate
executed on behalf of the Selling Shareholders to such effect.
(g) You shall have received from Ernst & Young LLP letters dated,
respectively, the date hereof (or, if the Registration Statement has been
declared effective prior to the execution and delivery of this Agreement,
dated such effective date and the date of this Agreement) and the Closing
Time and the Date of Delivery, in form and substance satisfactory to you,
to the effect set forth in Annex 1 hereto. In the event that the letters
referred to in this subsection set forth any changes, decreases or
increases in the items specified in paragraph (iv) of Annex 1, it shall be
a further condition to the obligations of the Underwriters that (i) such
letters shall be accompanied by a written explanation by the Company as to
the significance thereof, unless the Underwriters deem such explanation
unnecessary, and (ii) such changes, decreases or increases do not, in your
sole judgment, make it impracticable or inadvisable to proceed with the
purchase, sale and delivery of the Shares as contemplated by the
Registration Statement, as amended as of the date of such letter.
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(h) At the Closing Time, you shall have received from Ernst & Young
LLP a letter, in form and substance satisfactory to you and dated as of the
Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (f) above, except that the
specified date referred to shall be a date not more than five days prior to
the Closing Time.
(i) At the Closing Time, counsel for the Underwriters shall have
been furnished with all such documents, certificates and opinions as they
may reasonably request for the purpose of enabling them to pass upon the
issuance and sale of the Shares as contemplated in this Agreement and the
matters referred to in Section 7(d) and in order to evidence the accuracy
and completeness of any of the representations, warranties or statements of
the Company, the performance of any of the covenants of the Company, or the
fulfillment of any of the conditions herein contained; and all proceedings
taken by the Company at or prior to the Closing Time in connection with the
authorization, issuance and sale of the Shares as contemplated in this
Agreement shall be reasonably satisfactory in form and substance to you and
to counsel for the Underwriters. The Company will furnish you with such
number of conformed copies of such opinions, certificates, letters and
documents as you shall reasonably request.
(j) The NASD, upon review of the terms of the public offering of the
Shares, shall not have objected to such offering, such terms or the
Underwriters' participation in the same.
If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by you on notice to the Company at any time at
or prior to the Closing Time, and such termination shall be without
liability of any party to any other party, except as provided in Section 6.
Notwithstanding any such termination, the provisions of Section 8 shall
remain in effect.
The several obligations of the Underwriters to purchase Option
Shares hereunder are subject to the satisfaction on and as of any Date of
Delivery for Option Shares of the conditions set forth in this Section 7,
except that, if any Date of Delivery for Option Shares is other than the
Closing Time, the certificates, opinions and letters referred to in
paragraphs (b), (c) and (d) shall be revised to reflect the sale of Option
Shares.
Section 8. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject under the 1933 Act, or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) (i) arise
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out of or are based upon any breach of any warranty or covenant of the
Company herein contained, (ii) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in (A)
any Preliminary Prospectus, the Registration Statement, any 462(b)
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or (B) any application or other document, or any amendment or
supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Shares under the securities or blue
sky laws thereof or filed with the Commission or any securities association
or securities exchange (each an "Application"), or (iii) arise out of or
are based upon the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement, any 462(b) Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any Application
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement, any 462(b) Registration Statement
or the Prospectus, or any such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Company by or
on behalf of any Underwriter expressly for use therein and provided,
further, that the indemnity agreement provided in this Section 8(a) with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any losses, claims, damages or
liabilities or actions based upon any untrue statement or alleged untrue
statement of material fact or omission or alleged omission to state therein
a material fact purchased the Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the
time required by the Act and the Rules and Regulations. In addition to its
other obligations under this Section 8(a), the Company agrees that, as an
interim measure during the pendency of any such claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in
this Section 8(a), it will reimburse the Underwriters on a monthly basis
for all reasonable legal and other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. Any such interim reimbursement payments
that are not made to an Underwriter within 30 days of a request for
reimbursement shall bear interest at the prime rate (or reference rate or
other
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commercial lending rate for borrowers of the highest credit standing)
published from time to time by The Wall Street Journal (the "Prime Rate")
from the date of such request. This indemnity agreement shall be in
addition to any liabilities that the Company may otherwise have. The
Company will not, without the prior written consent of each Underwriter,
settle or compromise or consent to the entry of any judgment in any pending
or threatened action or claim or related cause of action or portion of such
cause of action in respect of which indemnification may be sought hereunder
(whether or not such Underwriter is a party to such action or claim),
unless such settlement, compromise or consent includes an unconditional
release of such Underwriter from all liability arising out of such action
or claim (or related cause of action or portion thereof).
The indemnity agreement in this Section 8(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the 1933 Act to the
same extent as such agreement applies to the Underwriters.
(b) Each Selling Shareholder, severally but not jointly, will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject
under the 1933 Act, or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) (i) arise out of or are
based upon any breach of any warranty or covenant of such Selling
Shareholder herein contained, (ii) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained
in (A) any Preliminary Prospectus, the Registration Statement, any 462(b)
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or (B) any Application, or (iii) arise out of or are based upon
the omission or alleged omission to state in any Preliminary Prospectus,
the Registration Statement, any 462(b) Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any Application a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that such Selling Shareholder shall
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement, any 462(b) Registration
Statement, or the Prospectus, or any such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter expressly for use therein and
provided, further, that the indemnity agreement provided in this Section
8(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses,
claims, damages or liabilities or actions based upon any untrue statement
or alleged
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untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased the Shares, if a copy of the Prospectus
in which such untrue statement or alleged untrue statement or omission or
alleged omission was corrected had not been sent or given to such person
within the time required by the Act and the Rules and Regulations. In
addition to their other obligations under this Section 8(b), each Selling
Shareholder agrees that, as an interim measure during the pendency of any
such claim, action, investigation, inquiry or other proceeding arising out
of or based upon any statement or omission, or any alleged statement or
omission, described in this Section 8(b), such Selling Shareholder will
reimburse the Underwriters on a monthly basis for all reasonable legal and
other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety
and enforceability of such Selling Shareholder's obligation to reimburse
the Underwriters for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction. Any such interim reimbursement payments that are not made to
an Underwriter within 30 days of a request for reimbursement shall bear
interest at the prime rate (or reference rate or other commercial lending
rate for borrowers of the highest credit standing) published from time to
time by The Wall Street Journal (the "Prime Rate") from the date of such
request. This indemnity agreement shall be in addition to any liabilities
that such Selling Shareholder may otherwise have. Such Selling Shareholder
will not, without the prior written consent of each Underwriter, settle or
compromise or consent to the entry of any judgment in any pending or
threatened action or claim or related cause of action or portion of such
cause of action in respect of which indemnification may be sought hereunder
(whether or not such Underwriter is a party to such action or claim),
unless such settlement, compromise or consent includes an unconditional
release of such Underwriter from all liability arising out of such action
or claim (or related cause of action or portion thereof).
The indemnity agreement in this Section 8(b) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the 1933 Act to the
same extent as such agreement applies to the Underwriters.
(c) Each Underwriter, severally but not jointly, will indemnify and
hold harmless the Company and each Selling Shareholder against any losses,
claims, damages or liabilities to which the Company and such Selling
Shareholder may become subject, under the 1933 Act, or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any breach of any warranty or
covenant by such Underwriter herein contained or any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement, any 462(b) Registration Statement
or the Prospectus, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state
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therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or
supplement thereto in reliance upon and in conformity with written
information furnished to or on behalf of the Company by such Underwriter
expressly for use therein; and will reimburse the Company and each Selling
Shareholder for any legal or other expenses reasonably incurred by the
Company and such Selling Shareholder in connection with investigating or
defending any such loss, claim, damage, liability or action. In addition to
its other obligations under this Section 8(c), the Underwriters agree that,
as an interim measure during the pendency of any such claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in
this Section 8(c), they will reimburse the Company and each Selling
Shareholder on a monthly basis for all reasonable legal and other expenses
incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability
of their obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. Any such interim reimbursement payments
that are not made to the Company within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement shall be in addition to any liabilities
that the Underwriters may otherwise have. No Underwriter will, without the
prior written consent of the Company, and each Selling Shareholder settle
or compromise or consent to the entry of judgment in any pending or
threatened action or claim or related cause of action or portion of such
cause of action in respect of which indemnification may be sought hereunder
(whether or not the Company is a party to such action or claim), unless
such settlement, compromise or consent includes an unconditional release of
the Company and each Selling Shareholder from all liability arising out of
such action or claim (or related cause of action or portion thereof).
The indemnity agreement in this Section 8(c) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each officer
and director of the Company and each person, if any, who controls the
Company and each Selling Shareholder within the meaning of the 1933 Act to
the same extent as such agreement applies to the Company and the Selling
Shareholder.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof. No
indemnification provided for in
-35-
<PAGE>
subsection (a), (b) or (c) shall be available to any party who shall fail
to give notice as provided in this subsection (d) if the party to whom
notice was not given was unaware of the proceeding to which such notice
would have related and was prejudiced in any material respect by the
failure to give such notice, but the omission so to notify the indemnifying
party will not relieve the indemnifying party or parties from any liability
that it or they may have to any indemnified party otherwise than under this
Section 8. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein
and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party and, after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, except that
if the indemnified party has been advised by counsel in writing that there
are one or more defenses available to the indemnified party which are
different from or additional to those available to the indemnifying party,
then the indemnified party shall have the right to employ separate counsel
and in that event the reasonable fees and expenses of such separate counsel
for the indemnified party shall be paid by the indemnifying party;
provided, however, that if the indemnifying party is the Company, the
Company shall only be obligated to pay the reasonable fees and expenses of
a single law firm (and any reasonably necessary local counsel) employed by
all of the indemnified parties. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent,
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment.
(e) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Section 8(a), (b) and
(c) hereof, including the amounts of any requested reimbursement payments,
the method of determining such amounts and the basis on which such amounts
shall be apportioned among the indemnifying parties, shall be settled by
arbitration conducted pursuant to the Code of Arbitration Procedure of the
National Association of Securities Dealers, Inc. Any such arbitration must
be commenced by service of a written demand for arbitration or a written
notice of intention to arbitrate, therein electing the arbitration
tribunal. In the event the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice, then the
party responding to said demand or notice is authorized to do so. Any such
arbitration will be limited to the operation of the interim reimbursement
provisions contained in Sections 8(a), (b) and (c) hereof
-36-
<PAGE>
and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses that is created by the provisions of
Sections 8(a), (b) and (c).
(f) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 8 is
for any reason judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the right of appeal) to be unenforceable by the
indemnified parties although applicable in accordance with its terms, the
Company and the Selling Shareholders, on the one hand and the Underwriters
on the other shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity incurred
by the Company and the Selling Shareholders, and one or more of the
Underwriters, as incurred, in such proportions that (a) the Underwriters
are responsible pro rata for that portion represented by the percentage
that the underwriting discount appearing on the cover page of the
Prospectus bears to the public offering price (before deducting expenses)
appearing thereon, and (b) the Company and the Selling Shareholders are
responsible for the balance, provided, however, that no person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation; provided, further, that if the
allocation provided above is not permitted by applicable law, the Company
and the Selling Shareholders, on the one hand, and the Underwriters on the
other shall contribute to the aggregate losses in such proportion as is
appropriate to reflect not only the relative benefits referred to above but
also the relative fault of the Company and the Selling Shareholders, on the
one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
Relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Company and the Selling Shareholders, on the one hand or by the
Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Company, the Selling Shareholders, and the Underwriters
agree that it would not be just and equitable if contributions pursuant to
this Section 8(f) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 8(f). The amount paid or
payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending such action or claim. Notwithstanding the
provisions of this Section 8(f), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price
-37-
<PAGE>
at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Underwriters'
obligations in this Section 8(f) to contribute are several in proportion to
their respective underwriting obligations and not joint. For purposes of
this Section 8(f), each person, if any, who controls an Underwriter within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each
officer of the Company who signed the Registration Statement, and each
person, if any, who controls the Company or the Selling Shareholders,
within the meaning of Section 15 of the 1933 Act shall have the same rights
to contribution as the Company or the Selling Shareholders.
(g) Notwithstanding anything to the contrary contained herein, (i) the
Selling Shareholders shall have no liability or obligations under this
Section 8 unless the Company shall have had final, non-appealable judgment
against it with respect to a claim under this Section 8 and such judgment
is not paid or satisfied in full within sixty days, and (ii) the aggregate
liability of the Selling Shareholders under this Section 8 shall not exceed
the net proceeds received by the Selling Shareholders hereunder.
Section 9. Representations, Warranties and Agreements to Survive Delivery.
The representations, warranties, indemnities, agreements and other statements of
the Company and the Selling Shareholders, or their respective officers set forth
in or made pursuant to this Agreement will remain operative and in full force
and effect regardless of any investigation made by or on behalf of the Company,
any Selling Shareholder, or any Underwriter or controlling person, and with
respect to an Underwriter or the Company and the Selling Shareholders, will
survive delivery of and payment for the Shares or termination of this Agreement
and shall continue in full force and effect until the applicable statute of
limitations, except that if a claim for indemnification is made under this
Agreement prior to the expiration of such statute of limitations, the
representations, warranties, indemnities, agreements and other statements set
forth in or made pursuant to this Agreement will remain operative and in full
force and effect until such claim is resolved.
Section 10. Effective Date of Agreement and Termination.
(a) This Agreement shall become effective immediately as to Sections 6
and 8 and, as to all other provisions, (i) if at the time of execution of
this Agreement the Registration Statement has not become effective, at
10:00 a.m., on the first full business day following the effectiveness of
the Registration Statement, or (ii) if at the time of execution of this
Agreement the Registration Statement has been declared effective, at 10:00
a.m. on the first full business day following the date of execution of this
Agreement; but this Agreement shall nevertheless become effective at such
earlier time after the Registration Statement
-38-
<PAGE>
becomes effective as you may determine on and by notice to the Company or
by release of any of the Shares for sale to the public. For the purposes of
this Section 10, the Shares shall be deemed to have been so released upon
the release of publication of any newspaper advertisement relating to the
Shares or upon the release by you of telegrams (i) advising the
Underwriters that the Shares are released for public offering, or (ii)
offering the Shares for sale to securities dealers, whichever may occur
first. By giving notice before the time this Agreement becomes effective,
you, as representative of the several Underwriters, or the Company, may
prevent this Agreement from becoming effective, without liability of any
party to any other party, except that the Company shall remain obligated to
pay costs and expenses to the extent provided in Section 6 hereof.
(b) You may terminate this Agreement, by notice to the Company, at any
time from date hereof until Closing Time (i) in accordance with the last
paragraph of Section 7 of this Agreement, or (ii) if there has been since
the respective dates as of which information is given in the Registration
Statement, any material adverse change, or any development involving a
prospective material adverse change, in or affecting the business, results
of operations or financial condition of the Company, whether or not arising
in the ordinary course of business, or (iii) if there has occurred or
accelerated any outbreak of hostilities or other national or international
calamity or crisis or change in economic or political conditions the effect
of which on the financial markets of the United States is such as to make
it, in your reasonable judgment, impracticable to market the Shares or
enforce contracts for the sale of the Shares, or (iv) if trading in any
securities of the Company has been suspended by the Commission or by the
Nasdaq Stock Market or if trading generally on the New York Stock Exchange
or in the over-the-counter market has been suspended, or limitations on
prices for trading (other than limitations on hours or numbers of days of
trading) have been fixed, or maximum ranges for prices for securities have
been required, by such exchange or the NASD or by order of the Commission
or any other governmental authority, or (v) if a banking moratorium has
been declared by federal or New York or Tennessee authorities, or (vi) any
federal or state statute, regulation, rule or order of any court or other
governmental authority has been enacted, published, decreed or otherwise
promulgated which in your reasonable opinion materially adversely affects
or will materially adversely affect the business or operations of the
Company, or (vii) any action has been taken by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in
your reasonable opinion has a material adverse effect on the securities
markets in the United States.
(c) If this Agreement is terminated pursuant to this Section 10, such
termination shall be without liability of any party to any other party,
except to the extent provided in Section 6. Notwithstanding any such
termination, the provisions of Section 8 shall remain in effect.
-39-
<PAGE>
Section 11. Default by One or More of the Underwriters. If one or more of
the Underwriters shall fail at the Closing Time or the Date of Delivery to
purchase the Shares that it or they are obligated to purchase pursuant to this
Agreement (the "Defaulted Securities"), you shall use your reasonable best
efforts to procure, within 36 hours thereafter, one or more of the non-
defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms set forth in this Agreement; if, however, you have not
completed such arrangements within such 36-hour period, then:
(a) If the aggregate number of Shares which are Defaulted Securities
does not exceed 10% of the aggregate number of Firm Shares or Option
Shares, as the case may be, to be purchased pursuant to this Agreement, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligation
proportions bear to the underwriting obligations of all non-defaulting
Underwriters, and
(b) If the aggregate number of Shares which are Defaulted Securities
exceeds 10% of the aggregate number of Firm Shares or Option Shares as the
case may be to be purchased pursuant to this Agreement, this Agreement
shall terminate without liability on the part of any non-defaulting
Underwriter.
No action taken pursuant to this Section 11 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default that does not result in a termination of
this Agreement, either you or the Company shall have the right to postpone the
Closing Time for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus that
may thereby be made necessary. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 11.
Section 12. Default by the Company. If the Company shall fail at the
Closing Time to sell and deliver the aggregate number of Firm Shares that it is
obligated to sell, then this Agreement shall terminate without any liability on
the part of any non-defaulting party, except to the extent provided in Section 6
and except that the provisions of Section 8 shall remain in effect.
No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect to such default.
Section 13. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered,
-40-
<PAGE>
mailed or transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed c/o Morgan Keegan & Company, Inc., 50 Front
Street, Memphis, Tennessee 38103, Attention: Bill Allen (in each case with a
copy sent in the same manner to Alston & Bird LLP, 1201 West Peachtree Street,
Atlanta, GA 30309 Attention: Joel Hughey and notices to the Company shall be
directed to the Company at 109 Northpark Boulevard, Covington, Louisiana 70433,
Attention: Chairman of the Board, and notices to the Selling Shareholders, shall
be directed to them at the addresses set forth in Schedule B (with a copy sent
in the same manner to Kirkland & Ellis, 200 East Randolph Drive, Chicago,
Illinois 60601 Attention: Stephen L. Ritchie).
Section 14. Parties. This Agreement is made solely for the benefit of and
is binding upon the Underwriters, the Company and the Selling Shareholders, to
the extent provided in Section 8, any person controlling the Company and the
Selling Shareholders, or any of the Underwriters, the officers and directors of
the Company, and their respective executors, administrators, successors and
assigns and subject to the provisions of Section 8, no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several Underwriters of the Shares.
All of the obligations of the Underwriters and the Selling Shareholders
hereunder are several and not joint.
Section 15. Governing Law and Time. This Agreement shall be governed by
the laws of the State of Tennessee. Specified time of the day refers to United
States Eastern Time. Time shall be of the essence of this Agreement.
Section 16. Counterparts. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, and upon the acceptance
hereof by Morgan Keegan & Company, Inc., on behalf of each of the Underwriters,
this instrument will become a binding agreement among the Company, the Selling
Shareholders, and the several Underwriters in accordance with its terms. It is
understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in the Master Agreement
among Underwriters, a copy of which shall be submitted to the Company for
examination, upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
SCP POOL CORPORATION
-41-
<PAGE>
By:
---------------------------------
Name: William B. Sexton
Title: Chairman
Code, Hennessy & Simmons Limited
Partnership
By: CHS Management Limited Partners, its
--------------------------------------
General Partner
---------------
By:
----------------------
Name:
-------------------
Title: General Partner
-42-
<PAGE>
Other Selling Shareholders
Wilson B. Sexton
Frank J. St. Romain
St. Romain Children's Trust
Richard P. Polizzotto
By:
--------------------------------
Name:
---------------------------
Attorney-in-Fact acting on behalf of each of
the Other Selling Shareholders
-43-
<PAGE>
The foregoing Agreement is hereby
confirmed and accepted as of the
date first written above:
MORGAN KEEGAN & COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
JOHNSON RICE & COMPANY L.L.C.
BY: MORGAN KEEGAN & COMPANY, INC.
BY:
-----------------------------
BILL ALLEN
(Authorized Representative)
On Behalf of each of the Underwriters
-44-
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter to be Purchased
- ----------- ---------------
<S> <C>
Morgan Keegan & Company, Inc.
---------------
The Robinson-Humphrey Company, LLC
---------------
Johnson Rice & Company L.L.C.
---------------
TOTAL 2,950,000
=========
</TABLE>
<PAGE>
SCHEDULE B
SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
Number of
Firm Selling
Name Shareholder Shares
- ---- ------------------
<S> <C>
Wilson B. Sexton 50,000
Frank J. St. Romain 17,187
Code, Hennessy & Simmons Limited Partnership 1,500,379
10 South Wacker Drive
Suite 3175
Chicago, Illinois 60606
Maurice D. VanDyke, Trustee under Agreement dated
_____ for the benefit of the St. Romain Children's Trust 24,434
Richard P. Polizzotto 8,000
---------
TOTAL 1,600,000
=========
</TABLE>
<PAGE>
SCHEDULE C
SELLING SHAREHOLDERS
Number of
Name Option Shares
- ---- -------------
Code, Hennessy & Simmons Limited Partnership 442,500
<PAGE>
SECTION D
SOUTH CENTRAL POOL SUPPLY, INC.
FOREIGN QUALIFICATIONS
Alabama
Arizona
Arkansas
California
Florida
Georgia
Illinois
Indiana
Kansas
Louisiana
Mississippi
Missouri
Nevada
New Mexico
North Carolina
Ohio
Oklahoma
Oregon
Tennessee
Texas
Virginia
Washington
<PAGE>
ANNEX 1
Pursuant to Section 7(f) of the Underwriting Agreement, Ernst & Young
LLP shall furnish letters to the Underwriters to the-effect that:
(i) they are independent public accountants with respect to the
Company and its consolidated subsidiaries within the meaning the 1933 Act
and the applicable published rules and regulations thereunder;
(ii) in their opinion, the consolidated financial statements and
schedules audited by them and included in the Prospectus, the Registration
Statement and any 462(b) Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the 1933
Act and the related published rules and regulations thereunder;
(iii) the financial statements of the Company as of and for the
period ended September 30, 1997 were reviewed by them in accordance with
the standards established by the American Institute of Certified Public
Accountants and based upon their review they are not aware of any material
modifications that should be made to such financial statements for them to
be in conformity with generally accepted accounting principles, and such
financial statements comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the applicable rules
and regulations thereunder;
(iv) On the basis of a reading of the latest available interim
unaudited consolidated financial statements of the Company and its
consolidated subsidiaries, and of the unaudited consolidated financial
statements of the Company and its consolidated subsidiaries for the periods
from which such amounts are derived, limited procedures, not constituting
an audit in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries
of officials of the Company and its subsidiaries responsible for financial
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) the unaudited consolidated condensed financial
statements of the Company and its consolidated subsidiaries included
in the Registration Statement and the Prospectus do not comply in form
in all material respects with the applicable accounting requirements
of the 1933 Act and the related published rules and regulations
thereunder or are not in conformity with generally accepted accounting
principles applied on a
<PAGE>
basis substantially consistent with that of the audited consolidated
financial statements included in the Registration Statement and the
Prospectus;
(B) as of a specified date not more than 5 days prior to the
date of such letter, there were any changes in the capital stock
(other than the issuance of capital stock upon exercise of options
which were outstanding on the date of the latest balance sheet
included in the Prospectus) or any increase in inventories or the
long-term debt or short-term debt of the Company and its subsidiaries,
or any decreases in net current assets or net assets or other items
specified by the Underwriters, or any increases in any items specified
by the Underwriters, in each case as compared with amounts shown in
the latest balance sheet included in the Prospectus, except in each
case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in such
letter; and
(C) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (B) there were any decreases in net sales or operating
income or the total or per share amounts of net income or other items
specified by the Underwriters, or any increases in any items specified
by the Underwriters, in each case as compared with the comparable
period of the preceding year and with any other period of
corresponding length specified by the Underwriters, except in each
case for increases or decreases which the Prospectus discloses have
occurred or may occur which are described in such letter; and
(v) In addition to the audit referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraph (iv) above,
they have carried out certain specified procedures, not constituting an
audit in accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial information specified
by the Underwriters which are derived from the general accounting records
of the Company and its subsidiaries, included in the Registration Statement
and the Prospectus, or which appear in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the Underwriters, and
have compared certain of such amounts, percentages and financial
information with the accounting records of the Company and its subsidiaries
and have found them to be in agreement.
(vi) on the basis of a reading of the unaudited pro forma
consolidated condensed financial statements included in the Registration
Statement and the Prospectus, carrying out certain specified procedures
that would not necessarily
-2-
<PAGE>
reveal matters of significance with respect to the comments set forth in
this paragraph (vi), inquiries of certain officials of the Company and its
consolidated subsidiaries and Bicknell Huston who have responsibility for
financial and accounting matters and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical amounts in the
unaudited pro forma consolidated condensed financial statements, nothing
came to their attention that caused them to believe that the unaudited pro
forma consolidated condensed financial statements do not comply as to form
in all material respects with the applicable accounting requirements of
Rule 11-02 of Regulation S-X or that the pro forma adjustments have not
been properly applied to the historical amounts in the compilation of such
statements.
References to the Registration Statement and the Prospectus in
this Annex 1 shall include any amendment or supplement thereto at the date
of such letter.
-3-
<PAGE>
EXHIBIT 5.1
KIRKLAND & ELLIS
PARTNERSHIPS INCLUDING PROFESSIONAL CORPORATIONS
200 East Randolph Drive
Chicago, Illinois 60601
312 861-2000 Facsimile:
312 861-2200
December 9, 1997
SCP Pool Corporation
109 Northpark Boulevard
Covington, Louisiana 70433
Ladies and Gentlemen:
We have acted as special counsel to SCP Pool Corporation, a Delaware
corporation (the "Company"), in connection with the proposed registration by the
Company of up to 3,392,500 shares of the Company's Common Stock, par value
$0.001 per share (the "Shares") pursuant to a Registration Statement on Form S-1
(File No. 333-40245) filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act") (such
Registration Statement, as amended or supplemented and together with any
registration statement referred to in the next sentence, is hereinafter referred
to as the "Registration Statement"). This also relates to any registration
statement in connection with this offering that is to be effective upon filing
pursuant to Rule 462(b) under the Act, and the term "Shares" as used herein
includes any additional shares of the Company's Common Stock registered pursuant
to such subsequently filed registration statement. Of the Shares 1,350,000 are
being registered for sale by the Company (the "Primary Shares") and 2,042,500
are being registered for sale by certain stockholders of the Company (the
"Secondary Shares").
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
letter, including (i) the Amended and Restated Certificate of Incorporation and
By-Laws of the Company, (ii) minutes and records of the corporate proceedings of
the Company with respect to the Shares, (iii) the Registration Statement and
exhibits thereto, (iv) the form of underwriting agreement (the Underwriting
Agreement") to be entered into among the Company and Morgan Keegan & Company,
Inc., The Robinson-Humphrey Company LLC and Johnson Rice & Company L.L.C., as
representatives of the underwriters and (v) such other documents and instruments
as we have deemed necessary for the expression of the opinions contained herein.
For purposes of this letter, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of
the signatures of persons signing all documents in connection with which this
letter is rendered, the authority of such persons signing on behalf of the
parties thereto and the due authorization, execution and delivery of all
documents by the parties thereto other than the Company.
London Los Angeles New York Washington D.C.
<PAGE>
KIRKLAND & ELLIS
SCP Pool Corporation
December 9, 1997
Page 2
In preparing this
letter we have relied without independent verification upon: (i) information
contained in certificates obtained from governmental authorities; (ii) factual
information provided to us by the Company or its representatives; and (iii)
factual information we have obtained from such other sources as we have deemed
reasonable. We have assumed that there has been no relevant change or
development between the dates as of which the information cited in the preceding
sentence was given and the date of this letter and that the information upon
which we have relied is accurate and does not omit disclosures necessary to
prevent such information from being misleading.
Our advice on every legal issue addressed in this letter is based
exclusively on the General Corporation Law of the State of Delaware and the
federal law of the United States, and represents our opinion as to how that
issue would be resolved were it to be considered by the highest court in the
jurisdiction which enacted such law.
Based upon and subject to the foregoing qualifications, assumptions
and limitations and the further limitations set forth below, we are of the
opinion that the issuance of the Primary Shares has been duly authorized and (i)
upon effectiveness under the Act of the Registration Statement, and (ii) when
appropriate certificates representing the Primary Shares are duly countersigned
by the Company's transfer agent/registrar and delivered against payment of the
agreed consideration therefor in accordance with the Underwriting Agreement, the
Shares will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this letter with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
This letter is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. This
letter speaks as of the time of its delivery on the date it bears. We do not
assume any obligation to provide you with any subsequent opinion or advice by
reason of any fact about which we did not have knowledge at that time, by reason
of any change subsequent to that time in any law other governmental requirement
or interpretation thereof covered by any of our opinions or advice, or for any
other reason.
This is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Very truly yours,
KIRKLAND & ELLIS
<PAGE>
Exhibit 10.31
ASSET PURCHASE AGREEMENT
by and among
SCP POOL CORPORATION
SOUTH CENTRAL POOL SUPPLY, INC.,
BICKNELL HUSTON DISTRIBUTORS, INC.,
PACIFIC INDUSTRIES, INC.,
and
COOKSON AMERICA, INC.
November 13, 1997
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TABLE OF CONTENTS
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ARTICLE I
PURCHASE AND SALE OF THE ASSETS........................................ 1
1.1 Asset Purchase............................................... 1
1.2 Purchase Price............................................... 5
1.3 Adjustment to Cash Purchase Price............................ 5
1.4 Closing Transactions......................................... 7
1.5 Consents of Third Parties.................................... 8
ARTICLE II
CONDITIONS TO CLOSING.................................................. 9
2.1 Conditions to Buyer's Obligations............................ 9
2.2 Conditions to Seller's Obligations at the Closing............ 10
ARTICLE III
COVENANTS PRIOR TO CLOSING............................................. 12
3.1 Affirmative Covenants of Seller.............................. 12
3.2 Negative Covenants of Seller................................. 13
3.3 Exclusivity.................................................. 14
3.4 Covenants of SCP and Buyer................................... 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COOKSON ENTITIES................. 14
4.1 Organization and Corporate Power............................. 14
4.2 Authorization of Transactions................................ 15
4.3 Subsidiaries; Investments.................................... 15
4.4 Absence of Conflicts......................................... 15
4.5 Financial Statements......................................... 15
4.6 Absence of Undisclosed Liabilities........................... 16
4.7 Absence of Certain Developments.............................. 16
4.8 Title to Properties.......................................... 18
4.9 Title to Assets.............................................. 18
4.10 Environmental and Safety Matters............................. 19
4.11 Taxes........................................................ 20
4.12 Contracts and Commitments.................................... 21
4.13 Proprietary Rights........................................... 22
4.14 Litigation; Proceedings...................................... 22
4.15 Brokerage.................................................... 23
4.16 Governmental Licenses, Permits and Consents.................. 23
4.17 Employees.................................................... 23
4.18 Employee Benefit Plans....................................... 24
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4.19 Affiliate Transactions....................................... 25
4.20 Compliance with Laws......................................... 26
4.21 Customers and Suppliers...................................... 26
4.22 Officers and Directors....................................... 26
4.23 Product Warranty............................................. 26
4.24 Product Liability............................................ 27
4.25 Powers of Attorney........................................... 27
4.26 Names and Locations.......................................... 27
4.27 Disclosure................................................... 27
4.28 Closing Date................................................. 27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER................................ 27
5.1 Corporate Organization and Power............................. 27
5.2 Authorization................................................ 27
5.3 No Violation................................................. 28
5.4 Subsidiary................................................... 28
5.5 Brokerage.................................................... 28
5.6 Closing Date................................................. 28
ARTICLE VI
TERMINATION............................................................ 28
6.1 Termination.................................................. 28
6.2 Effect of Termination........................................ 29
ARTICLE VII
SURVIVAL; INDEMNIFICATION.............................................. 29
7.1 Survival; Etc................................................ 29
7.2 Indemnification.............................................. 29
7.3 Arbitration Procedure........................................ 34
ARTICLE VIII
ADDITIONAL AGREEMENTS.................................................. 36
8.1 Employees and Employee Benefit Plans......................... 36
8.2 Press Releases and Announcements............................. 36
8.3 Further Agreements and Transfers............................. 37
8.4 Change of Names.............................................. 37
8.5 Tax Matters.................................................. 37
8.6 Transition Assistance........................................ 38
8.7 Books and Records: Personnel................................ 38
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8.8 Mail Received after Closing.................................. 38
8.9 Settlement of Claims......................................... 39
8.10 Noncompete; Nonsolicitation.................................. 39
8.11 Expenses..................................................... 40
8.12 Waiver of Compliance with Bulk Sales Laws.................... 41
8.13 Accounts Receivable.......................................... 41
8.14 Investigation and Confidentiality............................ 41
8.15 Financial Information........................................ 42
8.16 Remedies..................................................... 43
8.17 Personal Property Taxes, Assessments and Charges............. 43
8.18 Guaranty..................................................... 43
8.19 Disclaimer................................................... 43
8.20 Estoppel Letters............................................. 44
ARTICLE IX
MISCELLANEOUS.......................................................... 44
9.1 Amendment and Waiver......................................... 44
9.2 Notices...................................................... 44
9.3 Binding Agreement; Assignment................................ 45
9.4 Severability................................................. 45
9.5 No Strict Construction....................................... 45
9.6 Captions and Headings........................................ 46
9.7 Entire Agreement............................................. 46
9.8 Counterparts................................................. 46
9.9 Governing Law................................................ 46
9.10 Parties in Interest.......................................... 46
ARTICLE X
CERTAIN DEFINITIONS.................................................... 46
10.1 Definitions.................................................. 46
10.2 Other Definitions............................................ 49
</TABLE>
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<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT made as of November 13, 1997 by and among SCP Pool
Corporation, a Delaware corporation ("SCP"), South Central Pool Supply, Inc., a
Delaware corporation ("Buyer"), Bicknell Huston Distributors, Inc., a
Massachusetts corporation ("Seller"), Pacific Industries, Inc., a Delaware
corporation ("Pacific"), and Cookson America, Inc., a Delaware corporation
("Cookson"). Seller, Pacific, and Cookson are herein referred to collectively as
the "Cookson Entities." Certain capitalized terms used herein are defined in
Article X hereof.
Subject to the terms and conditions set forth in this Agreement,
Buyer, a wholly owned subsidiary of SCP, desires to acquire from Seller and
Seller desires to sell to Buyer substantially all of its assets used in or
necessary to its business or operations and certain of Seller's related
liabilities as specifically provided herein, except for certain excluded assets
as specifically provided herein. The business of Seller as presently conducted
is hereinafter referred to as the "Business."
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE ASSETS
--------------------------------
1.1 Asset Purchase.
(a) Purchased Assets. On the terms and subject to the conditions set
forth in this Agreement, at the Closing (as defined in Section 1.4 below), Buyer
shall purchase from Seller, and Seller shall sell, convey, assign, transfer and
deliver to Buyer, free and clear of all Liens, all business, properties, assets,
rights and interests of every kind and nature, whether tangible or intangible,
and wherever located and by whomever possessed, owned by Seller as of the
Closing Date (as defined in Section 1.4 below) (the "Purchased Assets"), but
excluding all Excluded Assets as defined in subsection (b) below, including,
without limitation, the following:
(i) all accounts and notes receivable, other than the intercompany
receivables listed on Schedule 1.1(b)(ii) attached hereto (the "Accounts
Receivable");
(ii) all petty cash and cash-on-hand located at each of Seller's
branch locations;
(iii) all finished goods inventory, other than the inventory described
in Section 1.1(b)(iii) below (the "Inventory");
(iv) all prepayments, accrued vendor rebates, prepaid expenses (other
than prepaid insurance), and other tangible prepaid assets;
(v) all fixed assets, including plant, machinery, equipment, trucks,
tractors, trailers, tools, spare parts, supplies, office furniture,
copiers, fax machines, telephone
<PAGE>
systems, computer monitors, fixtures and leasehold improvements and other
tangible personal property, except as otherwise described in Section
1.1(b)(ix) below;
(vi) all warehouse, cleaning, office and printing supplies, catalogs,
and other related items;
(vii) all Proprietary Rights;
(viii) to the extent transferable, all permits, licenses, franchises,
orders, registrations, certificates, variances, approvals and similar
rights obtained from governments and governmental agencies ("Licenses") and
all data and records pertaining thereto;
(ix) all rights existing under leases, contracts, licenses, supply and
distribution agreements, sales and purchase agreements and orders and other
agreements (the "Contracts"), except contracts or agreements listed on
Schedule 4.12 hereto which are marked as being retained by Seller;
(x) subject to the provisions of Section 8.8 below, all rights to
receive and retain mail and other communications;
(xi) all lists and records pertaining to customers (whether past or
current), suppliers, distributors, personnel and agents and all other
books, ledgers, files, documents, correspondence, drawings and
specifications, computer programs, accounting records and business records
of every kind and nature;
(xii) all creative materials (including, without limitation,
photographs, films, art work, color separations and the like), advertising
and promotional materials and all other printed or written materials;
(xiii) all claims, refunds, deposits, credits, causes of action,
choses in action, rights of recovery and rights of set-off of every kind
and nature, other than those referred to in Section 1.1(b)(viii) below;
(xiv) all rights to real property leased or licensed (the "Leased Real
Property") by Seller and all of Seller's rights to all plants, buildings,
and other improvements located on such owned or leased property, and all of
Seller's right, title and interest in and to all easements, rights of way
and all of Seller's right, title and interest in and to all appurtenances
to the Leased Real Property; and
(xv) all goodwill as a going concern of Seller, all goodwill
associated with the items in (i) through (xiv) above and all other
intangible property of Seller.
(b) Excluded Assets. Notwithstanding the foregoing, the following
assets (the "Excluded Assets") are expressly excluded from the purchase and sale
contemplated hereby and, as such, are not Purchased Assets:
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(i) all cash equivalents and marketable and other investment
securities, other than the petty cash described in Section 1.1(a)(ii);
(ii) the intercompany accounts receivable listed on Schedule
1.1(b)(ii) attached hereto;
(iii) all pool liner inventory which does not meet the minimum
standards established by the National Spa and Pool Institute;
(iv) all monies to be received by Seller from Buyer pursuant to this
Agreement and all other rights of Seller under this Agreement and the
Schedules and Exhibits hereto;
(v) Seller's corporate charter and all qualifications of Seller to
conduct business as a foreign corporation, arrangements with registered
agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books and blank
stock certificates and other documents relating to the organization,
maintenance and existence of Seller as a corporation;
(vi) insurance policies;
(vii) Seller's tax returns and tax refunds;
(viii) all claims, refunds, deposits, credits, causes of action,
choses in action, rights of recovery and rights of set-off of every kind
and nature to the extent arising out of the assets to be retained by Seller
or the Excluded Liabilities (as hereinafter defined);
(ix) any and all interest of Seller in and to the real property
improvements located at 665 Cochituate Road, Framingham, Massachusetts;
(x) all bank accounts of Seller; and
(xi) contracts or agreements listed on Schedule 4.12 hereto which are
marked as being retained by Seller.
(c) Assumed Liabilities. On the terms and subject to the conditions
specified in this Agreement, at the Closing, Buyer will assume and pay, perform
or discharge when due only the following liabilities and obligations of Seller,
subject to Buyer's right to dispute such liabilities and obligations in good
faith with the parties to whom such obligations are owed (collectively, the
"Assumed Liabilities"):
(i) all of Seller's obligations under the agreements, leases,
contracts and commitments listed on Schedule 4.8(a) and Schedule 4.12
hereto and under written or oral agreements, leases, contracts and
commitments entered into in the ordinary course of business which are not
required by the terms of this Agreement to be listed on Schedule 4.8(a) or
Schedule 4.12, but in each case only to the extent that such agreements,
leases,
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<PAGE>
contracts and commitments constitute Purchased Assets and have been validly
assigned to Buyer hereunder or such valid assignment has been waived by
Buyer (but in each case not including any liability or obligation for
breaches thereof arising out of or related to events or occurrences prior
to the Closing and not including any of Seller's employment agreements);
and
(ii) subject to Section 1(d)(ix) below, all of Seller's trade payables
(including intercompany trade payables) and current accrued liabilities, to
the extent that such items are properly recorded in accordance with GAAP as
current liabilities on the Latest Balance Sheet (as defined in Section 4.5
below) or thereafter incurred in the ordinary course of business consistent
with past practices.
(d) Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement or otherwise, Buyer will not assume or in any way be
liable for any of the following liabilities or obligations of Seller (the
"Excluded Liabilities") and none of the following liabilities or obligations
will be Assumed Liabilities for purposes of this Agreement:
(i) any of Seller's liabilities or obligations to Buyer under this
Agreement;
(ii) any of Seller's liabilities or obligations for expenses or fees
incident to or arising out of the negotiation, preparation, approval or
authorization of this Agreement or the consummation (or preparation for the
consummation) of the transactions contemplated hereby (including, without
limitation, all attorneys' and accountants' fees), except that Buyer shall
be responsible for all filing fees for any filing made in connection
herewith under the Hart-Scott-Rodino Act;
(iii) any of Seller's liabilities or obligations in respect of any
amount of Taxes (except to the extent provided in Section 8.5 below), and
specifically (but without limitation) Buyer will not assume or be liable
for any liabilities for Taxes imposed by reason of the sale or conveyance
of the Purchased Assets to Buyer except as otherwise provided in Section
8.5, it being understood and agreed that Buyer shall not be deemed to be
Seller's transferee or successor with respect to any such Taxes;
(iv) any of Seller's liability or obligations (other than liabilities
or obligations described in Section 1.1(c)(i) and (ii) above) arising as a
result of or in connection with the failure of Seller to comply with any
bulk sales or transfer laws;
(v) any of Seller's liabilities or obligations (A) arising by reason
of any violation or alleged violation of any federal, state, local or
foreign law or any requirement of any governmental authority (including
liabilities or obligations arising out of civil litigation brought by any
Person), (B) arising by reason of any breach or alleged breach by Seller of
any agreement, contract, lease, commitment, instrument, judgment, order or
decree (regardless of when any such violation or breach is asserted), or
(C) otherwise arising by reason of any active, pending, threatened or
potential litigation relating to pre-Closing events;
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(vi) any of Seller's liabilities or obligations (other than Seller's
intercompany trade payables and other than obligations under open purchase
orders with Pacific or Technican Pacific Industries, Inc.) owing to any
stockholders of Seller or any of their Affiliates;
(vii) any of Seller's liabilities or obligations related to the
ownership of the Excluded Assets;
(viii) any of Seller's liability or obligations (whether
investigatory, corrective, remedial or otherwise) under Environmental and
Safety Requirements;
(ix) any of Seller's liabilities or obligations relating to customer
rebates (except to the extent accrued on the Closing Statement),
capitalized lease obligations, indebtedness for borrowed money, guarantees,
employment contracts, deferred compensation obligations, related party
obligations (including, without limitation, any intercompany indebtedness
other than intercompany trade payables or rights of setoff between Seller
and its Affiliates) or any interest, penalty, or premium accrued thereon;
and
(x) any other liabilities or obligations of Seller of any nature
whatsoever not expressly assumed by Buyer under subsection (c) above
(including without limitation, any liabilities or obligations arising out
of transactions entered into, at or prior to the Closing, any action or
inaction at or prior to the Closing or any condition existing at or prior
to the Closing, regardless of when asserted), whether accrued, absolute or
contingent, whether known or unknown, whether disclosed or undisclosed,
whether due or to become due and whether related to the Purchased Assets or
otherwise, and regardless of when or by whom incurred, other than the
Assumed Liabilities.
1.2 Purchase Price. The total consideration payable by Buyer to
Seller for the Purchased Assets (the "Purchase Price") shall be:
(i) the assumption by Buyer of the Assumed Liabilities, and
(ii) the payment of $21,000,000, as adjusted in accordance with
Section 1.3 below (the "Cash Purchase Price").
On the Closing Date Buyer shall assume the Assumed Liabilities and
shall pay to Seller the Cash Purchase Price as adjusted pursuant to Section
1.3(b) below by wire transfer of immediately available funds as expressly set
forth in Section 1.4.
1.3 Adjustment to Cash Purchase Price.
(a) The "Net Working Capital" of the Business shall mean, as of any
date of determination, the result of (i) the value of the Accounts Receivables,
plus (ii) the value of the Inventory, plus (iii) the amount of all prepayments
and prepaid expenses constituting Purchased Assets, plus (iv) the value of the
petty cash described in Section 1.1(a)(ii), minus (v) the value of the accounts
payable assumed by Buyer hereunder, minus (vi) the value of all of Seller's
accrued
-5-
<PAGE>
liabilities assumed by Buyer hereunder, in each case as determined in accordance
with GAAP applied in a manner consistent with that used in preparing the Latest
Balance Sheet (as defined in Section 4.5 below).
(b) At least two days prior to the Closing Date, Buyer and Seller
shall attempt in good faith to agree on an estimate of Net Working Capital of
the Business as of the close of business on the Closing Date (the "Estimated
Closing Net Working Capital") based on Seller's books and records and other
information then available. If the parties are unable to agree upon the
Estimated Closing Net Working Capital, such amount shall be determined by Seller
based on Seller's most recently prepared monthly balance sheet. If the Estimated
Closing Net Working Capital is less than $15,950,000 (the "Target"), the Cash
Purchase Price shall be decreased dollar-for-dollar on the Closing Date to
reflect the amount by which the Estimated Closing Net Working Capital is less
than the Target. If the Estimated Closing Net Working Capital is greater than
the Target, the Cash Purchase Price shall be increased dollar-for-dollar on the
Closing Date to reflect the amount by which the Estimated Closing Net Capital is
greater than the Target. The Promissory Note made by Central Pools & Supplies,
Inc. ("CPS") to Bicknell Distributors, Inc. as predecessor to Seller, dated
December 20, 1991, as modified (the "CPS Note"), shall only be reflected in the
Closing Statement if: (i) CPS has consented to the assignment to Buyer of
Seller's interest in each of the CPS Note; the Sales Agreement between CPS and
Bicknell Distributors, Inc. as predecessor to Seller, dated December 20, 1991,
as modified; and the Security Agreement between CPS and Bicknell Distributors,
Inc. as predecessor to Seller, dated December 20, 1991; (ii) both CPS and Sylvia
P. Orfaly have consented to the assignment to Buyer of Seller's interest in the
Stock Pledge Agreement, dated December 20, 1991, between CPS, Bicknell
Distributors, Inc. as predecessor to Seller, and Sylvia P. Orfaly; and (iii)
Sylvia P. Orfaly has consented to the assignment to Buyer of Seller's interest
in the Limited Recourse Guaranty, dated December 20, 1991, made by Sylvia P.
Orfaly to Bicknell Distributors, Inc. as predecessor to Seller, but in each case
only to the extent such consent to assignment is required thereunder. The
Promissory Note made by JJSC, Inc. ("JJSC") to Bicknell Distributors, Inc. as
predecessor to Seller, dated December 21, 1992, as modified (the "JJSC Note"),
shall only be reflected in the Closing Statement if: (i) JJSC has consented to
the assignment to Buyer of Seller's interest in each of the JJSC Note; the Sales
Agreement between JJSC and Bicknell Distributors, Inc. as predecessor to Seller,
dated December 21, 1992, as modified; and the Security Agreement between JJSC
and Bicknell Distributors, Inc. as predecessor to Seller, dated December 21,
1992; and (ii) both JJSC and John J. St. Cyr have consented to the assignment to
Buyer of Seller's interest in the Stock Pledge Agreement, dated December 21,
1992, between JJSC, Bicknell Distributors, Inc. as predecessor to Seller, and
John J. St. Cyr., but in each case only to the extent such consent to assignment
is required thereunder.
(c) Within ninety (90) days after the Closing Date, Seller shall cause
KPMG Peat Marwick (at Seller's expense) to prepare an audited closing statement
of Seller as of the close of business on the Closing Date (the "Closing
Statement"), setting forth the actual Net Working Capital as of such date (the
"Actual Net Working Capital") and the various components thereof. The Closing
Statement shall not contain a reserve for Inventory or Accounts Receivable.
(d) If Buyer disagrees with the computation of the Actual Net Working
Capital, Buyer shall object in writing to Seller within thirty (30) days of
receipt of the Closing Statement.
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Such writing shall be accompanied by a written notice from Buyer's accountants
setting forth the basis for such disagreement. Buyer and Seller thereafter shall
negotiate in good faith to resolve any such disagreements. If Buyer and Seller
are unable to resolve any such disagreements within thirty (30) days after
delivery of Buyer's objection letter, Buyer and Seller shall submit such dispute
to an independent "Big Six" accounting firm mutually agreeable to Buyer and
Seller for resolution. If Buyer and Seller are unable to mutually agree on such
an accounting firm, a "Big Six" accounting firm will be selected by lot after
eliminating one firm designated as objectionable by each of Buyer and Seller
(any accounting firm so selected or agreed upon shall be referred to herein as
the "Independent Auditor"). Buyer and Seller shall use their reasonable best
efforts to cause the Independent Auditor to resolve all disagreements over the
Closing Statement as soon as practicable, but in any event within sixty (60)
days after submission of the disputes to the Independent Arbitrator. The
resolution of such disagreements and the determination of the Actual Net Working
Capital shall be final and binding on Buyer and Seller. The Independent Auditor
shall determine the allocation of the responsibility of Buyer and Seller to pay
its costs and expenses in determining the Closing Statement based upon the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party.
(e) As soon as practicable (but in no event later than five (5)
business days) after the Actual Net Working Capital is finally determined
pursuant to this Section 1.3:
(i) if the Actual Net Working Capital is less than the Estimated
Closing Net Working Capital, Seller shall pay to Buyer an amount equal to
such shortfall; and
(ii) if the Actual Net Working Capital is greater than the Estimated
Closing Net Working Capital, Buyer shall pay to Seller an amount equal to
such excess.
Any amounts payable pursuant to this subsection 1.3(e) shall be an adjustment to
the Cash Purchase Price, shall be paid in immediately available funds, and shall
bear simple interest at a rate of eight percent (8%) per annum measured from the
Closing Date to the date of such payment.
1.4 Closing Transactions.
(a) Closing. Subject to the satisfaction or waiver of the conditions
set forth in Article II, the closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Kirkland & Ellis,
200 East Randolph Drive, Chicago, Illinois 60601, at 9:00 a.m. local time on
December 31, 1997 or, if the conditions to Closing set forth in Article II have
not been satisfied on or prior to such date, promptly following satisfaction of
such conditions, or such other date, time or place as is mutually agreeable to
Buyer and Seller (the "Closing Date"). The effective time of the Closing shall
be the close of business on the Closing Date.
(b) Closing Deliveries. Subject to the conditions set forth in this
Agreement, the parties agree to consummate the following "Closing Transactions"
at the Closing:
(i) Seller will convey to Buyer good and marketable title to all of
the Purchased Assets, free and clear of all Liens, and deliver to Buyer
bills of sale, assignments of leases
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and contracts, documents acceptable for recordation in the United States
Patent and Trademark Office, the United States Copyright Office and any
other similar domestic or foreign office, department or agency and all
other instruments of conveyance, all in the form attached hereto as Exhibit
A (collectively, "Conveyance Documents");
(ii) Buyer will deliver to Seller the Cash Purchase Price by wire
transfer of immediately available funds to an account designated by Seller;
(iii) Buyer will deliver to Seller such instruments of assumption in
order for Buyer to assume the Assumed Liabilities in the form attached
hereto as Exhibit B (the "Assumption Agreement"); and
(iv) there shall be delivered to Buyer and Seller the certificates
and other documents and instruments provided to be delivered under Article
II hereof.
1.5 Consents of Third Parties.
(a) To the extent that the assignment hereunder by Seller to Buyer of
any Contract is not permitted or is not permitted without the consent of any
other party to such Contract, this Agreement shall not be deemed to constitute
an assignment of any such Contract if such consent is not given or if such
assignment otherwise would constitute a breach of, or cause a loss of
contractual benefits under, any such Contract. If any such consent is not
obtained or if such assignment is not permitted irrespective of consent, Seller
shall cooperate with Buyer following the Closing Date in any reasonable
arrangement designed to provide Buyer with the rights and benefits under, but
Buyer shall perform and be fully responsible for the obligations under, any such
Contract, except that with respect to any leases for real property, the costs
and expenses associated with the absence of consent to assign such leases shall
be allocated between Buyer and Seller in accordance with Section 8.20 below.
Seller shall upon the reasonable request of Buyer enforce for the benefit of
Buyer any and all rights of Seller against any other party arising out of any
breach or cancellation of any such Contract by such other party and, if
requested by Buyer, act as an agent on behalf of Buyer or as Buyer shall
otherwise reasonably require.
(b) Buyer hereby expressly waives the obligation of Seller to make any
effort to obtain any consent to assignment under any of the Contracts to be
assigned to Buyer as set forth on Schedule 4.8(a) and Schedule 4.12 hereto,
except for the requirement to obtain the consent to assignment to the real
property leases to the extent provided in Section 2.1(h)(iv) as a condition
precedent to the obligation of Buyer to consummate the transactions contemplated
hereby.
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ARTICLE II
CONDITIONS TO CLOSING
----------------------
2.1 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article IV hereof
and all other representations and warranties of Seller set forth in this
Agreement will be true and correct at and as of the Closing Date as though made
on and as of the Closing Date (without taking into account any disclosures made
by Seller to Buyer pursuant to Section 3.1(k) or Section 4.28 hereof ), except
(i) as otherwise contemplated by Article IV hereof, (ii) to the extent that such
representations and warranties were made as of a specified date, in which case
such representations and warranties shall continue on the Closing Date to be
true as of the specified date, and (iii) to the extent that any failure of such
representations and warranties to be true and correct as aforesaid, individually
or in the aggregate, does not have a Material Adverse Effect;
(b) Seller will have performed and complied in all material respects
with all of the covenants and agreements required to be performed by it under
this Agreement prior to the Closing;
(c) the purchase of the Purchased Assets by Buyer hereunder shall not
be prohibited by any applicable law or governmental regulation and shall not
subject Buyer to any penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation that would be
materially adverse to the business or financial condition of Buyer or the
Business;
(d) no suit, action or other proceeding, or injunction or final
judgment, order or decree relating thereto, will be pending or overtly
threatened before any court or any governmental or regulatory body or authority
(which in Buyer's judgment is not frivolous) in which it is sought to restrain
or prohibit or to obtain material damages or other material relief (including
rescission) in connection with the transactions contemplated hereby, or that is
reasonably likely to have a Material Adverse Effect or materially adversely
affect the right of Buyer to own, operate or control the Purchased Assets or the
Business no investigation that would be reasonably likely to result in any such
suit, action or proceeding shall be pending or overtly threatened and no such
judgment, order or decree shall have been entered and not subsequently dismissed
with prejudice or satisfied;
(e) there shall have been no material adverse change in the assets,
liabilities, condition (financial or otherwise) or operating results of the
Business or the Acquired Assets generally since the date of the Latest Balance
Sheet, except for decreases in sales that are consistent with the past business
experience of Seller due to the seasonal nature of the business;
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(f) Pacific will have entered into a Supply Agreement with Buyer in
the form of Exhibit C attached hereto (the "Pacific Supply Agreement"), and the
Pacific Supply Agreement will be in full force and effect and will not have been
modified or amended as of the Closing;
(g) Seller shall have delivered to Buyer a legal opinion from Adler
Pollock & Sheehan, Incorporated, counsel to Seller, opining as to the matters
set forth on Exhibit D attached hereto, which opinion may be relied upon by
Buyer's financing sources; and
(h) On or prior to the Closing Date, Seller will have delivered to
Buyer all of the following:
(i) a certificate from an officer of Seller in the form set forth in
Exhibit E attached hereto, dated the Closing Date, stating that the
preconditions specified in Sections 2.1(a)-(b), inclusive, have been
satisfied;
(ii) certified copies of the resolutions of the boards of directors of
each of the Cookson Entities and certified copies of the resolutions of the
sole shareholder of Seller approving the transactions contemplated by this
Agreement;
(iii) all Conveyance Documents; and
(iv) with respect to at least 9 of the parcels of Leased Real
Property, excluding the Middlesex, Massachusetts warehouse lease and the
Syracuse lease expiring August 31, 1998, an estoppel letter from the
landlords, substantially in the form of Exhibit F hereto;
(v) with respect to at least 9 of the parcels of Leased Real Property,
excluding the Middlesex, Massachusetts warehouse lease and the Syracuse
lease expiring August 31, 1998, a subordination agreement from the
landlords for each parcel of Leased Real Property substantially in the form
of Exhibit G hereto, consenting to the subordination of any lien granted to
the land with respect to nonpayment of rent or otherwise and such other
terms as set forth in such agreement;
(vi) a certification of Seller pursuant to Treasury Regulation Section
1.1445-2(b)(2) that Seller is not a foreign person; and
(vii) such other documents or instruments as Buyer reasonably requests
to effect the transactions contemplated hereby.
Any condition specified in this Section 2.1 may be waived by Buyer,
provided that no such waiver will be effective unless it is set forth in a
writing executed by Buyer.
2.2 Conditions to Seller's Obligations at the Closing. The
obligation of Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions on or
before the Closing Date:
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(a) the representations and warranties set forth in Article V hereof
and all other representations and warranties of SCP or Buyer set forth in this
Agreement will be true and correct at and as of the Closing Date as though then
made and as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties;
(b) all filings required to be made under the Hart-Scott-Rodino Act
shall have been made, and any applicable waiting period thereunder (and any
extensions thereof) shall have expired;
(c) Buyer will have entered into the Pacific Supply Agreement with
Pacific Industries, Inc. and the Pacific Supply Agreement will be in full force
and effect and will not have been modified or amended as of the Closing;
(d) no suit, action or other proceeding, or injunction or final
judgment, order or decree relating thereto, will be pending or overtly
threatened before any court or any governmental or regulatory body or authority
(which is Seller's judgment is not frivolous) in which it is sought to restrain
or prohibit or to obtain material damages or other material relief (including
rescission) in connection with the transactions contemplated hereby; no
investigation that would be reasonably likely to result in any such suit, action
or proceeding shall be pending or overtly threatened and no such judgment, order
or decree shall have been entered and not subsequently dismissed with prejudice
or satisfied;
(e) Buyer and SCP will have performed and complied in all material
respects with all of the covenants and agreements required to be performed by it
under this Agreement prior to the Closing, except that Buyer in all respects
shall have paid the Cash Purchase Price and entered into the Assumption
Agreement; and
(f) Buyer will have delivered to Seller a legal opinion from Kirkland
& Ellis, counsel to Buyer, opining as to the matters set forth on Exhibit H
attached hereto; and
(g) On or prior to the Closing Date, Buyer will have delivered to
Seller all of the following:
(i) a certificate from Buyer in the form set forth in Exhibit I
attached hereto, dated the Closing Date, stating that the preconditions
specified in Sections 2.2(a) and (e) have been satisfied;
(ii) certified copies of the resolutions of Buyer's and SCP's board of
directors approving the transactions contemplated by this Agreement;
(iii) the Cash Purchase Price; and
(iv) the Assumption Agreement.
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Any condition specified in this Section 2.2 may be waived by Seller,
provided that no such waiver will be effective unless it is set forth in a
writing executed by Seller.
ARTICLE III
COVENANTS PRIOR TO CLOSING
3.1 Affirmative Covenants of Seller. Following the execution of this
Agreement and prior to the Closing, unless Buyer otherwise agrees in writing,
Seller will:
(a) conduct its business (including, without limitation, its cash
management practices, the collection of receivables, payment of payables,
incurrence of capital expenditures and purchase of Inventory) only in the usual
and ordinary course of business in accordance with past custom and practice,
except that it is contemplated by the parties that Seller shall cancel its
current outstanding order for computer hardware;
(b) carry on its business in the same manner as presently conducted
and use its reasonable best efforts to keep its organization and properties
intact, including its present business operations, physical facilities, working
conditions and employees and its present relationships with lessors, licensors,
licensees, suppliers, distributors and customers and others having business
relations with it;
(c) maintain in a manner consistent with its past practice the
machinery and equipment included in the Purchased Assets in satisfactory
condition (reasonable wear and tear excepted) to the extent Seller becomes aware
the same is not in satisfactory operating condition (reasonable wear and tear
excepted), maintain insurance reasonably comparable to that in effect on the
date hereof, maintain Inventory, supplies and spare parts at customary operating
levels consistent with past practices, replace in a manner consistent with past
practice any inoperable, worn out or obsolete machinery and equipment included
in the Purchased Assets with assets of comparable quality and, in the event of a
casualty, loss or damage to any of the Purchased Assets prior to the Closing
Date for which Seller is insured, either repair or replace such Purchased Assets
or, if Buyer agrees, transfer the proceeds of such insurance to Buyer;
(d) maintain its books, accounts (including working capital) and
records in accordance with GAAP;
(e) maintain in full force and effect the existence of all material
Proprietary Rights;
(f) encourage the employees on Exhibit J to accept employment with
Buyer after the Closing;
(g) comply with all legal requirements and contractual obligations
applicable to the Business and the Purchased Assets and pay all applicable
taxes, consistent with past practice;
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(h) cause its current insurance policies not to be canceled or
terminated or any of the coverage thereunder to lapse, unless, simultaneously
with such termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled, terminated or
lapsed policies to the extent practicable for market premiums are in full force
and effect;
(i) cooperate with Buyer and use its reasonable best efforts to make
all registrations, filings and applications, to give all notices and to obtain
all governmental, third party or other consents, transfers, approvals, orders,
qualifications and waivers necessary or desirable for the consummation of the
transactions contemplated hereby and to cause the other conditions to Buyer's
obligation to close specified in Section 2.1 above to be satisfied;
(j) execute and deliver such further instruments of conveyance and
transfer and take such additional action as Buyer may reasonably request to
effect, consummate, confirm or evidence the transactions contemplated by this
Agreement; and
(k) promptly inform Buyer in writing of any variances from the
representations and warranties contained in Article IV or elsewhere in this
Agreement or any breach of any covenants hereunder by any of the Cookson
Entities.
3.2 Negative Covenants of Seller. Following the execution of this
Agreement and prior to the Closing, without Buyer's prior written consent,
Seller will not:
(a) take any action that would require disclosure under Section 4.7
below;
(b) enter into any other transaction with any of its officers,
directors or Affiliates other than transactions in the ordinary course of
business consistent with past practice;
(c) sell, lease, license or otherwise dispose of any interest in any
of the Purchased Assets (other than sales of Inventory in the ordinary course of
business consistent with past custom and practice) or permit, allow or suffer
any of the Purchased Assets to be subjected to any Lien;
(d) terminate or modify any contracts or leases or any government
license, permit or other authorization;
(e) enter into any new, or amend any existing, contracts, leases,
agreements or commitments, other than commitments made in the ordinary course of
business for the purchase of products or supplies or the sale of inventory;
(f) institute any material change in the conduct of its business, or
any change in its method of purchase, sale, lease, management, marketing,
operation or accounting; or
(g) take or omit to take any action which could be reasonably
anticipated to have a material adverse effect upon the business, financial
condition, operating results, employee relations, customer relations, assets or
operations of the Business.
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3.3 Exclusivity. The Cookson Entities will not, directly or
indirectly, through any officer, director, employee, agent or otherwise
(including through any investment banker, attorney or accountant retained by any
of the foregoing), solicit, initiate any discussions or negotiations regarding,
or furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, any proposal or offer from any Person (including any
of such Person's officers, directors, employees, agents or other
representatives) relating to any liquidation (other than as contemplated
hereby), dissolution, recapitalization or refinancing of Seller or any
acquisition of the capital stock or other securities of Seller or any
substantial portion of the assets of Seller or the Business (including any
acquisition structured as a merger, consolidation or share exchange) (an
"Acquisition Proposal"). The Cookson Entities will immediately cease and cause
to be terminated any and all contacts, discussions and negotiations with third
parties regarding any Acquisition Proposal. Each of the Cookson Entities hereby
agrees to notify Buyer immediately upon the receipt of any written proposal,
written offer, written inquiry or written contract with respect to any of the
foregoing and will promptly provide Buyer with copies of and disclose to Buyer
the details concerning any such proposal, inquiry or contract.
3.4 Covenants of SCP and Buyer. Prior to the Closing, SCP and Buyer
will:
(a) cooperate with Seller and use their reasonable best efforts to
make all registrations, filings and applications, to give all notices and to
obtain all governmental, third party or other consents, transfers, approvals,
orders, qualifications and waivers necessary or desirable for the consummation
of the transactions contemplated hereby and to cause the other conditions to
Seller's obligation to close specified in Section 2.2 above to be satisfied,
(b) execute and deliver such further instruments of conveyance and
transfer and take such additional action as Seller may reasonably request to
effect, consummate, confirm or evidence the transactions contemplated by this
Agreement; and
(c) promptly inform Seller in writing of any variances from SCP's and
Buyer's representations and warranties contained in Article V or elsewhere in
this Agreement or any breach of any covenants hereunder by Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COOKSON ENTITIES
As an inducement to enter into this Agreement, each of the Cookson
Entities hereby represents and warrants to Buyer, that:
4.1 Organization and Corporate Power.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the state of Massachusetts. Seller has full
corporate power and other necessary
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power and authority and all licenses, permits and authorizations necessary to
own and operate its properties and business and to conduct its business as
presently conducted.
(b) Seller is qualified to do business in every jurisdiction in which
the nature of its business or its ownership of property requires it to be
qualified where the failure to be so qualified would have a Material Adverse
Effect. All such jurisdictions in which Seller is qualified are set forth on
Schedule 4.1 hereto.
4.2 Authorization of Transactions. Each of the Cookson Entities has
full power and authority to deliver this Agreement and the other agreements
contemplated hereby and to consummate the transactions contemplated hereby and
thereby. The board of directors of each of the Cookson Entities has duly
approved this Agreement and has duly authorized the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby. No
other corporate proceedings on the part of any of the Cookson Entities are
necessary to approve and authorize the execution and delivery of this Agreement.
This Agreement has been duly executed and delivered by each of the Cookson
Entities and constitutes the valid and binding agreement of each of the Cookson
Entities, enforceable against each of the Cookson Entities in accordance with
its terms, subject to the effect of bankruptcy, insolvency, reorganization or
other similar laws and to general principles of equity (whether considered in
proceedings at law or in equity).
4.3 Subsidiaries; Investments. Except as set forth on Schedule 4.3
hereto, Seller does not own or control (directly or indirectly), hold or have
any rights or options to subscribe for, purchase or acquire any shares of stock,
partnership interest, joint venture interest, equity participation or any other
security or interest in any other Person. Seller does not have and has never had
any Subsidiary.
4.4 Absence of Conflicts. Except as set forth in Schedule 4.4 hereto,
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby do not and will not (a) conflict with or
result in any breach of any of the provisions of, (b) constitute a default
under, (c) result in a violation of, (d) give any third party the right to
terminate or to accelerate any obligation under, (e) result in the creation of
any lien, security interest, charge or encumbrance upon the Purchased Assets, or
(f) require any authorization, consent, approval, exemption or other action by
or notice to any court or other governmental body, under the provisions of the
certificate of incorporation or by-laws of any of the Cookson Entities or any
indenture, mortgage, lease, loan agreement or other agreement or instrument to
which any of the Cookson Entities is bound or affected, or to the Knowledge of
Seller, any law, statute, rule or regulation or any judgment, order or decree to
which any of the Cookson Entities is subject.
4.5 Financial Statements. Seller has furnished Buyer with (a) copies
of an unaudited balance sheet as of September 30, 1997, (the "Latest Balance
Sheet") and the related statements of income and cash flow for the 9-month
period then ended and (b) copies of the unaudited balance sheets of Seller as of
December 31, 1994, 1995 and 1996 and the related statements of income and cash
flow for the periods then ended. Each of the foregoing financial statements
(including in all cases the notes thereto, if any) (collectively, the "Financial
Statements") is accurate and complete, is consistent with Seller's books and
records (which, in turn, are accurate
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and complete), presents fairly Seller's financial condition and results of
operations as of the times and for the periods referred to therein, and has been
prepared in accordance with GAAP, consistently applied, subject to normal
year-end adjustments (none of which would be material, individually or in the
aggregate) and the absence of footnote disclosure.
4.6 Absence of Undisclosed Liabilities. To the Knowledge of Seller,
Seller has no obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known, whether due or to become due
and regardless of when or by whom asserted) and there is no basis for any
proceeding, hearing, investigation, charge, complaint or claim with respect to
any obligations or liabilities except (a) obligations under contracts or
commitments described in Schedule 4.12 or Schedule 4.8(a) hereto or under
contracts and commitments entered into in the ordinary course of business which
are not required to be disclosed thereon (but not liabilities for breaches
thereof), (b) liabilities reflected on the liability side of the Latest Balance
Sheet, (c) liabilities which have arisen after the date of the Latest Balance
Sheet in the ordinary course of business or otherwise in accordance with the
terms and conditions of this Agreement (none of which is a liability for breach
of contract, breach of warranty, tort or infringement, or a claim or lawsuit, or
an environmental liability), and (d) liabilities otherwise expressly set forth
in Schedule 4.6 hereto.
4.7 Absence of Certain Developments. Seller has not, except as set
forth in Schedule 4.7 hereto, since September 30, 1997:
(a) suffered a material adverse change or development in the
business, financial condition, operating results, earnings, assets, business
condition or financing arrangements of the Business or the Purchased Assets;
(b) borrowed any amount or issued or exchanged any notes or other
evidences of any indebtedness for borrowed money or incurred or become subject
to or incurred or become subject to any obligations or liabilities (whether
absolute or contingent), except current liabilities incurred in the ordinary
course of business consistent with past practice and liabilities under contracts
entered into in the ordinary course of business consistent with past practices;
(c) discharged or satisfied any Lien or encumbrance or paid any
obligation or liability, other than liabilities paid in the ordinary course of
business, or prepaid any amount of indebtedness for borrowed money;
(d) mortgaged, pledged or subjected to any Lien, charge or any other
encumbrance, any portion of its properties or assets, except Liens for current
taxes and assessments not yet due and payable;
(e) sold, leased, assigned or transferred (including, without
limitation, transfers to any employees or affiliates of Seller) any tangible
assets (other than Inventory in the ordinary course of business consistent with
past practices), Proprietary Rights or other intangible assets, or canceled
without fair consideration any debts or claims owing to or held by it, or
disclosed any
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proprietary confidential information to any Person, other than disclosures of
such information to Affiliates of Seller or Buyer and its Affiliates and
representatives;
(f) suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of business or consistent
with past custom and practice;
(g) suffered any theft, damage, destruction or casualty loss to its
material tangible assets (individually or taken as a whole), whether or not
covered by insurance;
(h) entered into, amended or terminated any lease, contract,
agreement or commitment, or taken any other action or entered into any other
transaction other than in the ordinary course of business and in accordance with
past custom and practice, or entered into any transaction with any Insider (as
defined in Section 4.19 below) other than in the ordinary course of business and
in accordance with past customs and practices, or changed in any material
respect any business practice or manner of dealing with any customer, supplier,
subcontractor, Insider, sales representative, or other person or entity with
whom Seller engages in any business activity;
(i) entered into or modified any employment contract or collective
bargaining agreement, written or oral, or changed the employment terms for any
employee or agent or made or granted any bonus or any wage, salary or
compensation increase to any director, officer, employee or sales
representative, group of employees or consultant or made or granted any increase
in any employee benefit plan or arrangement, or amended or terminated any
existing employee benefit plan or arrangement or adopted any new employee
benefit plan or arrangement, except for normal compensation increases or bonuses
in the ordinary course of business consistent with past practice;
(j) incurred intercompany or conducted its business (including
the collection of receivables, purchase of inventory, payment of payables,
incurrence of capital expenditures, and maintenance and repair of assets) other
than in the usual and ordinary course of business in accordance with past custom
and practice;
(k) made any capital expenditures (or commitments therefor) that
aggregate in excess of $50,000;
(l) made any loans or advances to, or guarantees for the benefit of,
any persons;
(m) entered into any lease of capital equipment or real estate
involving rental in excess of $1,000 per annum;
(n) made any charitable contributions or pledges in excess of $10,000
in the aggregate;
(o) delayed or postponed the payment of any accounts or commissions
payable or any other liabilities or obligations or agreed or negotiated with any
party to extend the payment date of any accounts or commissions payable or
accelerated the collection of any notes, accounts, or commissions receivable
other than in accordance with past customs and practices;
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(p) made any material change in any method of accounting or
accounting practices;
(q) entered into any other material transaction other than in the
ordinary course of business; or
(r) agreed, whether orally or in writing, to do any of the foregoing.
4.8 Title to Properties.
(a) Schedule 4.8(a) attached hereto sets forth a list of all of the
leases and subleases (collectively, the "Leases" and individually, a "Lease")
and each leased and subleased parcel of real property in which Seller has a
leasehold and subleasehold interest. Each of the Leases is in full force and
effect and Seller holds a valid and existing leasehold or subleasehold interest
under each of the Leases. Seller has delivered to Buyer complete and accurate
copies of each of the Leases. With respect to each Lease, except as set forth on
Schedule 4.8(a) hereto: (A) the Lease is legal, valid, binding, enforceable and
in full force and effect against Seller and, to the Knowledge of Seller, the
other party thereto; (B) the Lease will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing; (C) neither Seller nor, to the Knowledge of Seller, any other party to
the Lease is in breach or default, and no event has occurred which, with notice
or lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration under the Lease; (D) neither Seller
nor, to the Knowledge of Seller, any other party to the Lease has repudiated any
provision thereof; (E) there are no disputes, oral agreements, or forbearance
programs in effect as to the Lease; (F) the Lease has not been modified in any
respect, except to the extent that such modifications are disclosed by the
documents delivered to Buyer; and (G) Seller has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Lease.
(b) The real estate demised by the Leased Real Property constitutes
all of the real estate used or owned by Seller in the operation of the Business.
(c) All buildings and all components of all buildings, structures and
other improvements included within the Leased Real Property (the "Improvements")
are adequate to operate such facilities as currently used and, to the Knowledge
of Seller, there are no facts or conditions affecting any of the Improvements
which would, individually or in the aggregate, interfere in any significant
respect with the use, occupancy or operation thereof as currently used, occupied
or operated by Seller. All Improvements have direct vehicular access to a public
street adjoining such Leased Real Property.
(d) Seller owns no real property other than an interest in the
building and other improvements on certain real property located at 665
Cochituate Road, Framingham, Massachusetts.
4.9 Title to Assets.
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(a) Seller owns good and marketable title, free and clear of all
Liens to all of the Purchased Assets, including, without limitation, all
tangible and intangible property other than the Unregistered Marks; and to the
Knowledge of Seller, Seller owns good and marketable title, free and clear of
all Liens, to the Unregistered Marks.
(b) Except for the Excluded Assets, the use of the "Cookson"
trademark or trade name, and the services provided to Seller by its Affiliates
as set forth in Schedule 4.19, the Purchased Assets constitute all of the assets
necessary to allow Buyer to conduct the Business.
4.10 Environmental and Safety Matters.
(a) Except as set forth on Schedule 4.10, to the Knowledge of Seller,
Seller has complied and is in compliance with all Environmental and Safety
Requirements.
(b) Without limiting the generality of the foregoing, to the
Knowledge of Seller, Seller has obtained and complied with, and is in compliance
with, all permits, licenses and other authorizations that may be required
pursuant to Environmental and Safety Requirements for the occupation of its
respective facilities and the operation of its respective business; a list of
all such permits, licenses and other authorizations is set forth on Schedule
4.10 hereto.
(c) Except as set forth on Schedule 4.10, Seller has not received any
written or oral notice, report or other information regarding any actual or
alleged violation of Environmental, Health and Safety Requirements or any
liabilities or potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or corrective
obligations, relating to Seller or Seller's facilities and arising under
Environmental and Safety Requirements.
(d) Except as set forth on Schedule 4.10, to the Knowledge of Seller,
none of the following exists at any property or facility owned or operated by
Seller: 1) underground storage tanks; 2) asbestos-containing material in any
form or condition; 3) materials or equipment containing polychlorinated
biphenyls; or 4) landfills, surface impoundments or disposal areas.
(e) Except as set forth on Schedule 4.10, Seller has not treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled, or released any substance, including without limitation any hazardous
substance, or owned or operated any property or facility (and no such property
or facility is contaminated by Seller with any such substance) in a manner that
has given or would give rise to liabilities, including any liability for
corrective action costs, personal injury, property damage, response costs,
natural resources damages or attorney fees pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA") or any other
Environmental and Safety Requirements.
(f) No Environmental Lien has attached to any property owned, leased,
or operated by Seller.
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(g) Except as set forth on Schedule 4.10, neither this Agreement nor
the consummation of the transactions that are the subject of this Agreement will
result in any obligations for site investigation or cleanup, or notification to
or consent of government agencies or third parties, pursuant to any of the so-
called "transaction-triggered" or "responsible property transfer" Environmental
and Safety Requirements, including, without limitation, the New Jersey
Industrial Site Recovery Act.
(h) Seller has not assumed, undertaken, or otherwise become subject
to any liability, including without limitation any obligation for corrective or
remedial action, of any other Person relating to Environmental and Safety
Requirements.
4.11 Taxes. Except as set forth on Schedule 4.11,
(a) Seller has timely filed or shall timely file all Tax Returns
which are required to be filed on or prior to the Closing, and all such Tax
Returns are or shall be true, complete and accurate in all respects;
(b) all Taxes owed by Seller as of the date hereof, whether or not
shown on a Tax Return, have been paid or shall be paid by Seller or accrued on
the Closing Statement, and no Taxes are delinquent;
(c) no deficiency for any amount of Tax has been asserted or assessed
by a taxing authority against Seller with respect to the operations of Seller
and Seller has no knowledge that any such assessment or asserted Tax liability
shall be made;
(d) Seller has withheld and paid or shall accrue on the Closing
Statement all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party;
(e) Seller has not made an election under Section 341(f) of the Code;
(f) no written claim has ever been received by Seller from an
authority in a jurisdiction where Seller does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction;
(g) Seller has not made and is not obligated to make any payments,
nor is it a party to any agreement that under certain circumstances could
obligate it to make payments, that shall not be deductible under Section 280G of
the Code; and
(h) there are no liens for Taxes (other than for current Taxes not
yet due and payable) upon the Purchased Assets.
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4.12 Contracts and Commitments.
(a) Except as set forth in Schedule 4.12 hereto, Seller is not a
party to or bound by, whether written or oral, any: (i) collective bargaining
agreement or contract with any labor union; (ii) contract for the employment of
any officer, individual employee or other person on a full-time, part-time or
consulting basis or any severance agreements; (iii) agreement or indenture
relating to the borrowing of money or to mortgaging, pledging or otherwise
placing a Lien on any of the Purchased Assets; (iv) license or royalty
agreements; (v) lease or agreement under which Seller is lessee of, or holds or
operates, any personal property owned by any other party; (vi) lease or
agreement under which Seller is lessor of or permits any third party to hold or
operate any property, real or personal, owned or controlled by it; (vii)
contract or group of related contracts with the same party for the purchase or
sale of raw materials, commodities, supplies, products or other personal
property or for the furnishing or receipt of services which either calls for
performance over a period of more than six months or involves a sum in excess of
$25,000 or which may not be terminable with less than six months' notice; (viii)
contract relating to the distribution, marketing or sales of its products or
services (including contracts to provide advertising allowances or promotional
services) involving more than $25,000; (ix) franchise agreements; (x) contracts
with any Insider; (xi) agreements, contracts or understandings pursuant to which
Seller subcontracts work to third parties; (xii) contract or agreement
prohibiting it from freely engaging in any business or competing anywhere in the
world; or (xiii) any other agreement material to Seller whether or not entered
into in the ordinary course of business.
(b) Except as disclosed in Schedule 4.12, (i) all of the contracts,
agreements and instruments set forth of Schedule 4.12 are in full force and
effect, have not been amended or modified as of the Closing, and are valid,
binding and enforceable against Seller and, to the Knowledge of Seller, the
other party thereto in accordance with their respective terms, (ii) no contract
or commitment required to be disclosed on Schedule 4.12 has been, to the
Knowledge of Seller, breached or canceled by the other party since December 31,
1996, (iii) no material customer or supplier has indicated in writing or, to the
Knowledge of Seller, orally that it will stop or decrease the rate of business
done with Seller, (iv) Seller has performed all of the obligations required to
be performed by Seller as of the date hereof in connection with the contracts or
commitments required to be disclosed on Schedule 4.12, and is not in receipt of
any claim of default under any contract or commitment required to be disclosed
on the Schedule 4.12, (v) Seller has no present expectation or intention of not
fully performing any obligation pursuant to any contract set forth on Schedule
4.12 hereto, and (vi) Seller has no knowledge of any breach or anticipated
breach by any other party to any contract set forth on Schedule 4.12.
(c) Seller has provided Buyer with a true and correct copy of all
written contracts which are referred to on Schedule 4.12 and has made available
to Buyer those which are not required to be disclosed on Schedule 4.12, in each
case together with all amendments, waivers or other changes thereto. Schedule
4.12 contains an accurate and complete description of all material terms of all
oral contracts referred to therein.
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4.13 Proprietary Rights.
(a) Schedule 4.13 hereto sets forth a complete and correct list of:
(i) patented or registered Proprietary Rights and pending patent applications or
other applications for registrations of any Proprietary Rights; (ii) all
Trademarks; and (iii) all licenses or similar agreements or arrangements related
to the Proprietary Rights to which Seller is a party, either as licensee or
licensor. Seller has delivered to Buyer complete copies of all items required to
be identified pursuant to this Section 4.13(a).
(b) Except as expressly set forth on Schedule 4.13: (i) Seller owns
and possesses all right, title and interest in and to, or has a valid and
enforceable license to use, the Proprietary Rights used in the operation of the
Business as currently conducted by Seller other than the Unregistered Marks (and
Seller represents that, to the Knowledge of Seller, it owns and possesses all
right, title and interest or has a valid and enforceable license to use the
Unregistered Marks in the operation of the Business as currently conducted by
Seller) free and clear of all Liens; (ii) Seller has a valid and enforceable
right to use in its catalogs, brochures and other sales or advertising materials
all trademarks, service marks, trade names and brand names owned by third
parties and used in such materials; (iii) no claim by any third party contesting
the validity, enforceability, use or ownership of any of the Proprietary Rights
has been made, is currently outstanding or, to the Knowledge of Seller, is
threatened and, to the Knowledge of Seller, there are no grounds for the same;
(iv) Seller has not received any notices of, and Seller has no knowledge of any
facts which indicate a likelihood of, any infringement or misappropriation by,
or conflict with, any third party with respect to the Proprietary Rights; (v) to
the best of Seller's Knowledge, Seller has not infringed, misappropriated or
otherwise conflicted with any intellectual property rights or other rights of
any third parties and, to the Knowledge of Seller, no infringement,
misappropriation or conflict will occur as a result of the continued operation
of the Business as currently conducted by Seller; and (vi) the transactions
contemplated by this Agreement will not conflict with, violate, result in an
alteration of or a loss of rights under, terminate or create a right to
terminate any license or other agreement with any third party relating to the
Proprietary Rights.
(c) Except for the use of the "Cookson" trademark or trade name or
any trademark or trade name including the word "Cookson," the Proprietary Rights
comprise all of the intellectual property necessary for the operation of the
Business as currently conducted by Seller. Except for the use of the "Cookson"
trademark or trade name or any trademark or trade name including the word
"Cookson," all of the Proprietary Rights owned or used by Seller immediately
prior to the Closing will be, to the Knowledge of Seller, owned or available for
use by Buyer immediately after the Closing.
4.14 Litigation; Proceedings. Except as set forth in Schedule 4.14
hereto, there are no actions, suits, proceedings, orders, claims or
investigations pending or, to the Knowledge of Seller, threatened against or
affecting Seller, the Purchased Assets or the Business at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, and
there is no basis to the Knowledge of Seller for any of the foregoing.
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4.15 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement, based on any arrangement or agreement made by or
on behalf of any of the Cookson Entities.
4.16 Governmental Licenses, Permits and Consents.
(a) Schedule 4.16 hereto contains a complete listing and summary
description of all Licenses owned, possessed or used by Seller in the conduct of
the Business and the operation and ownership of the Purchased Assets. Except as
indicated on Schedule 4.16, Seller owns or possesses all right, title and
interest in and to all of the Licenses. Seller is in compliance with the terms
and conditions of such Licenses and has received no notices that it is in
violation of any of the terms and conditions of such Licenses. Seller has taken
all necessary actions to maintain such Licenses. No loss or expiration of any
License is pending or, to the Knowledge of Seller, threatened or reasonably
foreseeable other than expiration in accordance with the terms thereof.
(b) No permit, consent, approval or authorization of, or declaration
to or filing with, any governmental or regulatory authority or any other party
or person is required to be obtained by Seller in connection with such party's
execution, delivery and performance of this Agreement or the consummation of any
other transaction contemplated hereby. Except as set forth on Schedule 4.16, all
of the Licenses shall survive the transfer of the Purchased Assets to Buyer.
4.17 Employees.
(a) Except as expressly set forth in Schedule 4.17 attached hereto,
Seller is not party to or bound by any collective bargaining agreement or
relationship with any labor organization. With respect to the Business, except
as disclosed in Schedule 4.17 attached hereto: (A) to the Knowledge of Seller,
no executive, key employee or group of employees has any plans to terminate
employment; (B) no labor organization or group of employees has filed any
representation petition or made any written or oral demand for recognition; (C)
to the Knowledge of Seller, no union organizing campaigns are underway and no
other question concerning representation exists; (D) no labor strike, work
stoppage or slowdown, or other material labor dispute is underway; and (E) there
is no employment-related charge, complaint, investigation, inquiry or obligation
of any kind, pending or, to the Knowledge of Seller, threatened in any forum,
relating to an alleged violation by Seller of any law, regulation or contract.
(b) Any notice required under any law or collective bargaining
agreement has been given, and all bargaining obligations with any employee
representative have been satisfied, including but not limited to obligations
relating to the effects on bargaining unit employees of the transaction
contemplated by this Agreement. Neither Seller nor the Business have implemented
any plant closing or mass layoff of employees as those terms are defined in the
Worker Adjustment Retraining and Notification ("WARN") Act of 1988, as amended,
or any similar state or local law or regulation, and no layoffs that could
implicate such laws or regulations will be implemented before Closing without
advance notification to Buyer.
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4.18 Employee Benefit Plans.
(a) Except as set forth on Schedule 4.18, with respect to current or
former employees of the Business, Seller does not maintain or contribute to or
have any actual or potential liability with respect to any (a) nonqualified
deferred compensation, bonus, incentive or retirement plans or arrangements, (b)
Employee Pension Benefit Plans, (c) Employee Welfare Benefit Plans, or (d)
material fringe benefit plans or programs (collectively, the "Business Plans").
(b) The Business Plans (other than any such plans that are
Multiemployer Plans) (a) comply in form and in operation in all material
respects with the applicable requirements of law except to the extent such
compliance with form is not required under applicable law as in effect on the
Closing Date; (b) if such Business Plan is intended to be qualified under
Section 401(a) of the Code, such Business Plan has received a favorable
determination letter from the Internal Revenue Service that it is qualified and
no event has occurred and no condition exists which could reasonably be expected
to result in the revocation of any such favorable determination letter; (c) if
such Business Plan is subject to Title IV of ERISA and/or Section 412 of the
Code or Section 302 of ERISA (A) except as disclosed on Schedule 4.18, the
market value of the assets of each such Business Plan equals or exceeds the
present value of benefit liabilities, based on the most recent actuarial
valuation of such plan, and (B) no partial or complete termination has occurred
or is expected to occur, and to the knowledge of Seller no proceedings have been
instituted by the PBGC to terminate or appoint a trustee to administer any such
Business Plan; and (d) all contributions or premium payments which are due on or
before the Closing Date by Seller or any of its Affiliates with respect to each
Business Plan will be timely paid in full and all contributions and premium
payments which are not due for all periods ending on the Closing Date will be
adequately accrued in the financial records of Seller.
(c) To the Knowledge of Seller: (a) no Multiemployer Plan has been
terminated; (b) no proceeding has been initiated to terminate any Multiemployer
Plan; (c) no Multiemployer Plan is in reorganization as described in Section
4241 of ERISA and no Multiemployer Plan is insolvent as described in Section
4245 of ERISA; (d) Seller is not bound by any contract or agreement or has any
obligation or liability described in Section 4204 of ERISA; (e) each
Multiemployer Plan complies in form and has been administered in accordance with
the requirements of ERISA and, where applicable, the Code; and (f) each
Multiemployer Plan is qualified under Section 401(a) of the Code. All
contributions which are due on or before the Closing Date by Seller or any of
its Affiliates with respect to each Multiemployer Plan will be timely paid in
full.
(d) Except as disclosed on Schedule 4.18, with respect to each
Multiemployer Plan, Seller does not have any actual or potential liability for a
"partial withdrawal" or a "complete withdrawal" (within the meaning of Title IV
of ERISA), no such liability has been asserted and there are no events or
circumstances which could reasonably result in any such partial or complete
withdrawal.
(e) Seller does not have any withdrawal liability with respect to any
employee welfare benefit plan that is a Multiemployer Plan.
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(f) All Internal Revenue Service Forms 5500 (annual reports), summary
annual reports, summary plan descriptions and PBGC-1 reports with respect to
each Business Plan (other than any Multiemployer Plan) have been properly and
timely filed with the appropriate government agency or distributed to
participants, as required by ERISA and/or the Code.
(g) Seller has complied in all material respects with the
requirements of Section 4980B of the Code and Sections 601 et seq. of ERISA
("COBRA"). Seller does not have any obligation or liability to provide post-
employment welfare benefits to any current or former employee of the Business
(other than as required by COBRA).
(h) With respect to each Business Plan: (a) neither Seller nor, to
the Knowledge of Seller, any other "disqualified person" (as defined in Section
4975(e)(2) of the Code) or "party in interest" (as defined in Section 3(14) of
ERISA) has engaged in any prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Code) that could reasonably be expected to result
in the imposition of a material penalty pursuant to Section 502(i) of ERISA or a
material tax pursuant to Section 4975(a) of the Code; (ii) nor any of their
officers or employees who would be fiduciaries (as defined in Section 3(21) of
ERISA) with respect to such plan has any liability for breach of fiduciary duty
or any other failure to act or comply with the requirements of part 4 of
subtitle B of Title I of ERISA in connection with the administration of such
Business Plan or the investment of the assets thereunder; and (iii) no actions,
investigation, suits or claims are pending or, to the Knowledge of Seller,
threatened, and Seller has no knowledge of any facts or circumstances which
could give rise to or could reasonably be expected to give rise to any such
actions, suits or claims (other than, for purposes of this clause (h), for
benefits payable in the ordinary course of business).
(i) Except as specifically disclosed above, Seller does not have any
actual liability to the PBGC, the Internal Revenue Service or the Department of
Labor with respect to any Employee Pension Benefit Plan currently or previously
maintained or contributed to by Seller that has not been satisfied in full, and,
to the Knowledge of Seller, no condition exists that presents a risk to Seller
of incurring such a liability.
(j) Seller has delivered or made available to Buyer true and complete
copies of the following documents in connection with each Business Plan that is
not a Multiemployer Plan (where applicable): (a) all plan documents as in effect
on the date hereof, together with all amendments thereto; (b) all current
summary plan descriptions and summaries of material modifications; (c) the most
recent Internal Revenue Service determination letter obtained with respect to
each Business Plan intended to be qualified under Section 401(a) of the Code or
exempt under Section 501(a) of the Code; (d) the most recently prepared
actuarial valuation report for each Business Plan subject to Title IV of ERISA;
and (e) the most recently prepared financial statements.
4.19 Affiliate Transactions. Except as set forth on Schedule 4.19, no
Cookson Entity (other than Seller), no Affiliate of any Cookson Entity and no
officer, director or, to the knowledge of the Cookson Entities, no employee of
any of the Cookson Entities or such Affiliates, or any person related by blood
or marriage to any such Person or any entity in which any such person owns any
beneficial interest (collectively, the "Insiders") is a party to any agreement,
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contract, commitment or transaction with Seller or its Affiliates or which is
pertaining to the Business or has any interest in any property, real or personal
or mixed, tangible or intangible, relating to the Business. Schedule 4.19 hereto
describes all material intercompany services provided to or on behalf of Seller
by its Affiliates and to or on behalf of such Affiliates by Seller.
4.20 Compliance with Laws. Except as set forth on Schedule 4.20
attached hereto, Seller and its officers, directors, agents and employees have
complied and are in compliance with (i) all applicable laws and regulations of
foreign, federal, state and local governments and all agencies thereof which
affect the Business or the Purchased Assets and to which Seller may be subject
other than Environmental and Safety Requirements and (ii) all orders, decrees,
or settlements by or enforceable in any court or other government body which are
in regard to the Business or the Purchased Assets; and no claims have been filed
against Seller alleging a violation of any such laws or regulations. Seller has
not given or agreed to give any money, gift or similar benefit (other than
incidental gifts of articles of nominal value) to any actual or potential
customer, supplier, or governmental employee in a position to assist or hinder
Seller in connection with any actual or proposed transaction concerning the
Business.
4.21 Customers and Suppliers. Schedule 4.21 attached hereto lists (i)
the ten largest customers and the ten largest suppliers of Seller during the 12-
month period ended December 31, 1996 and (ii) the ten largest customers and the
ten largest suppliers for the nine-month period ended September 30, 1997. Except
as expressly set forth on Schedule 4.21, no such customer or supplier has
terminated or materially reduced its business with Seller in the last 12 months.
No material supplier, vendor or service provider of Seller has given Seller
notice in writing or, to the Knowledge of Seller, orally that it shall stop, or
materially decrease the rate of, or materially and adversely change the terms
with respect to supplying materials, products or services to Seller (whether as
a result of the transaction contemplated hereby or otherwise other than as
contemplated by the Pacific Supply Agreement). No material customer of Seller
has given Seller notice that it shall stop, or materially decrease the rate of,
buying services or any materials or products from Seller (whether as a result of
the transaction contemplated hereby or otherwise).
4.22 Officers and Directors. Schedule 4.22 attached hereto lists all
officers and directors of Seller.
4.23 Product Warranty. To the Knowledge of Seller, each product or
service sold, leased, delivered or otherwise provided by Seller has been in
conformity with all applicable contractual commitments and all express and
implied warranties. Liability for replacement, repair or refunds of products or
services sold by Seller in connection with Seller's informal return policy has
not since January 1, 1995 exceeded, in the aggregate, 1% of Seller's annual
sales. Except as set forth on Schedule 4.23 attached hereto, no product or
service sold, leased, delivered or otherwise provided by Seller is subject to
any guaranty, warranty or other indemnity, including without limitation any
guarantee of minimum collections, or provides for any collection fee rebates.
Schedule 4.23 attached hereto includes copies of the standard terms and
conditions for sale or lease for Seller (containing applicable guaranty,
warranty and indemnity provisions).
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4.24 Product Liability. Except as set forth on Schedule 4.24 attached
hereto, to the Knowledge of Seller, Seller has no liabilities that have not been
satisfied (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
Seller and its Affiliates giving rise to any liability) arising out of any
injury to individuals or property as a result of the ownership, possession, or
use of any product manufactured, sold, leased, or delivered by Seller.
4.25 Powers of Attorney. Except as set forth on Schedule 4.25, there
are no outstanding powers of attorney executed on behalf of Seller.
4.26 Names and Locations. Except as set forth on Schedule 4.26
attached hereto, during the five-year period prior to the execution and delivery
of this Agreement, Seller has not used any name or names under which it has
invoiced account debtors, maintained records concerning its assets or otherwise
conducted its business. All of the tangible assets and properties of Seller are
located at the locations set forth on Schedule 4.26.
4.27 Disclosure. To the Knowledge of Seller, neither this Agreement
nor any of the Schedules, attachments or Exhibits hereto, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
4.28 Closing Date. All of the representations and warranties contained
in this Article IV and elsewhere in this Agreement and all information delivered
in any Schedule, attachment or Exhibit hereto or in any writing delivered to
Buyer are true and correct on the date of this Agreement and will be true and
correct on the Closing Date, except to the extent that Seller has advised Buyer
otherwise in writing prior to the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
As an inducement to the Cookson Entities to enter into this Agreement,
SCP and Buyer hereby jointly and severally represent and warrant that:
5.1 Corporate Organization and Power. Each of SCP and Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is qualified to do business in every jurisdiction
in which the nature of its business or its ownership of property requires it to
be qualified, with full corporate power and authority to enter into this
Agreement and the other agreements contemplated hereby and perform its
obligations hereunder and thereunder.
5.2 Authorization. Each of SCP and Buyer has full power and authority
to deliver this Agreement and the other agreements contemplated hereby and to
consummate the
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transactions contemplated hereby and thereby. The board of directors of each of
SCP and Buyer has duly approved this Agreement and has duly authorized the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. No other corporate proceedings on the part of
SCP or Buyer are necessary to approve and authorize the execution and delivery
this Agreement. This Agreement has been duly executed and delivered by SCP and
Buyer and constitutes the valid and binding agreement of SCP and Buyer,
enforceable against SCP and Buyer in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization or other similar laws and to
general principles of equity (whether considered in proceedings at law or in
equity).
5.3 No Violation. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not (a) conflict with or result in any breach of any of the provisions
of, (b) constitute a default under, (c) result in a violation of, or (d) require
any authorization, consent, approval, exemption or other action by or notice to
any court or other governmental body, under the provisions of the certificate of
incorporation or by-laws of SCP or Buyer or any indenture, mortgage, lease, loan
agreement or other agreement or instrument to which SCP or Buyer is bound or
affected, or any law, statute, rule or regulation or any judgment, order or
decree to which SCP or Buyer is subject.
5.4 Subsidiary. Buyer is a wholly owned subsidiary of SCP.
5.5 Brokerage. Other than fees payable to Code, Hennessy & Simmons,
Inc., which shall be the responsibility of Buyer, there are no claims for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Buyer.
5.6 Closing Date. All of the representations and warranties contained
in this Article V and elsewhere in this Agreement and all information delivered
in any Schedule, attachment or Exhibit hereto or in any writing delivered to
Seller are true and correct on the date of this Agreement and will be true and
correct on the Closing Date, except to the extent that Buyer has advised Seller
otherwise in writing prior to the Closing.
ARTICLE VI
TERMINATION
6.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller if there has been a material
misrepresentation in or material breach on the part of the other party of (i)
the representations and warranties set forth in this Agreement or (ii) the
covenants set forth in this Agreement;
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(c) by either Buyer or Seller if the sale contemplated by this
Agreement has not been consummated by January 31, 1998; provided that if Buyer
elects not to consummate this Agreement on December 30, 1997 as a result of a
failure of the condition in Section 2.1(d) to be satisfied, Seller may terminate
this Agreement at any time after December 30, 1997, and if Seller elects not to
consummate this Agreement on December 30, 1997 as a result of a failure of the
condition in Section 2.2(d) to be satisfied, Buyer may terminate this Agreement
at any time after December 30, 1997; and provided, further, that the party
seeking termination pursuant to clause (c) of this Section 6.1 is not in
material breach of any of its representations, warranties or covenants contained
in this Agreement; and provided, further, that neither Buyer nor Seller will be
entitled to terminate this Agreement pursuant to this Section 6.1 if such
party's willful or knowing breach of this Agreement has prevented the
consummation of the transactions contemplated hereby or thereby.
In the event of termination by Seller or Buyer pursuant to this Section 6.1,
written notice thereof (describing in reasonable detail the basis therefor)
shall promptly be delivered to the other party.
6.2 Effect of Termination. In the event of termination of this
Agreement by either Buyer or Seller as provided above, this Agreement will
forthwith become void and there will be no liability on the part of any party
hereto to any other party hereto or its shareholders or directors or officers in
respect thereof, except for the obligations of the parties hereto in Sections
8.2 and 8.11 and except that nothing herein will relieve any party from any
breach of this Agreement prior to such termination.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival; Etc. All representations, warranties, covenants and
agreements set forth in this Agreement or in any writing delivered in connection
with this Agreement will survive the Closing Date and the consummation of the
transactions contemplated hereby and will not be affected by any examination
made for or on behalf of Buyer or Seller, the knowledge of any of their
officers, directors, stockholders, employees or agents, or the acceptance of any
certificate or opinion from Buyer or Seller, their respective officers,
directors, stockholders, employees or agents, and, except in the case of actual
fraud, the representations and warranties set forth in Article IV and Article V
shall terminate, subject to Buyer's or Seller's right (as the case may be) to
seek indemnification after the survival period of such representations or
warranties pursuant to the final paragraphs of Section 7.2(b) and Section
7.2(d), upon the termination of the rights to seek indemnification for breaches
of such representations and warranties pursuant to Section 7.2(b)(i) and Section
7.2(d).
7.2 Indemnification.
(a) Subject to the limitations set forth in this Article VII, each of
the Cookson Entities agrees to jointly and severally indemnify Buyer, its
Affiliates, officers, directors, stockholders, employees, agents,
representatives, successors and permitted assigns (collectively, the "Buyer
Parties") and hold each of them harmless against and pay on behalf of or
reimburse such
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Buyer Parties in respect of any loss, liability, demand, claim, action, cause of
action, cost, damage, deficiency, tax, penalty, fine or expense, whether or not
arising out of third party claims (including, without limitation, interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid in
investigation, defense or settlement of any of the foregoing) (collectively,
"Losses") which any such Buyer Party may suffer, sustain or become subject to,
as a result of, in connection with, relating or incidental to or by virtue of:
(i) the breach of any representation or warranty of any of the Cookson Entities
contained in this Agreement or any Schedule or Exhibit hereto; (ii) the breach
of any covenant or agreement of any of the Cookson Entities contained in this
Agreement; (iii) any claims of any brokers or finders arising from the
consummation of the transactions contemplated hereby claiming by, through or
under any of the Cookson Entities; and (iv) the assertion or recovery against
Buyer of any liability or obligation of Seller not to be assumed or performed by
Buyer hereunder (including, without limitation, the Excluded Liabilities).
(b) The indemnification provided for in Sections 7.2(a) above is
subject to the following limitations:
(i) the Cookson Entities will be liable to Buyer with respect to
claims arising under Section 7.2(a)(iv) above only if Buyer gives Seller
written notice thereof within five years after the Closing Date, and the
Cookson Entities will be liable to Buyer with respect to claims arising
from breaches of (x) the representations and warranties set forth in
Section 4.11 only if Buyer gives to Seller written notice thereof prior to
the 30th day following the expiration of the applicable statute of
limitation with respect thereto, (y) the representations and warranties set
forth in Sections 4.1(a), 4.2, 4.9(a) and 4.15, for which notice may be
given at any time, and (z) all other representations and warranties
contained in this Agreement only if Buyer gives Seller written notice
thereof within one year after the Closing Date;
(ii) The Cookson Entities will not be liable to Buyer for any Loss
arising under subsection (a)(i) above unless the aggregate amount of all
such Losses relating to all such breaches exceeds $225,000 in the aggregate
(the "Buyer's Threshold"), in which case the Cookson Entities shall be
liable for the full amount of such excess, subject to clause (iii) below,
provided, however, that the Buyer's Threshold shall not apply to any
breaches of the representations and warranties set forth in Sections
4.1(a), 4.2, 4.9(a) and 4.15; and
(iii) the aggregate amount of all Losses required to be paid by the
Cookson Entities with respect to claims referred to in subsection (a)(i) or
(a)(iv) above shall not exceed $5,000,000 (the "Buyer's Cap"), provided,
however, that the Buyer's Cap shall not apply to any breaches of the
representations and warranties set forth in Sections 4.1(a), 4.2, 4.9(a)
and 4.15.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as Buyer delivers written notice of a claim to Seller stating facts that
are reasonably specific as to the existence of such claim within the foregoing
respective survival period, the Cookson Entities shall be required to indemnify
Buyer to the extent provided above for all damages with respect to such
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claim that Buyer may suffer though the date of the claim, the end of the
survival period, and beyond to the extent related to the facts stated.
(c) Subject to the limitations set forth in this Article VII, SCP and
Buyer jointly and severally agree to indemnify Seller, its Affiliates, officers,
directors, stockholders, employees, agents, representative, successors and
permitted assigns (collectively, the "Seller Parties") and hold each of them
harmless from and pay on behalf of or reimburse such Seller Parties in respect
of any Losses which any such Seller Party may suffer, sustain or become subject
to, as a result of, in connection with, relating or incidental to or by virtue
of: (i) the breach of any representation or warranty of SCP or Buyer contained
in this Agreement or in any Schedule or Exhibit hereto (ii) the breach of any
covenant or agreement of Buyer contained in this Agreement; (iii) the claims of
any brokers or finders arising from the consummation of the transactions
contemplated hereby claiming by, through or under Buyer or SCP; and (iv) the
assertion or recovery against Seller of any of the Assumed Liabilities, or (v)
except to the extent constituting an Excluded Liability, any liability arising
from the ownership or operation of the Purchased Assets or the Business by Buyer
from and after the Closing.
(d) The indemnification provided for in Sections 7.2(c) above is subject
to the following limitation: SCP and Buyer will be liable to Seller with respect
to claims arising from breaches its representations and warranties contained in
this Agreement only if Seller gives Buyer written notice thereof within one year
after the Closing Date, except for the representations and warranties set forth
in Sections 5.1, 5.2 and 5.5, for which notice may be given at any time.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as Seller delivers written notice of a claim to Buyer stating facts that
are reasonably specific as to the existence of such claim within the foregoing
respective survival period, SCP and Buyer shall be required to indemnify Seller
for all damages with respect to such claim that Seller may suffer though the
date of the claim, the end of the survival period, and beyond to the extent
related to the facts stated.
(e) If a party hereto seeks indemnification under this Section 7.2, such
party (the "Indemnified Party") shall give written notice to the other party
(the "Indemnifying Party") of the specific facts and circumstances giving rise
to the claim, provided that the failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of its obligations hereunder except to
the extent that (and only to the extent that) such failure shall have caused the
damages for which the Indemnifying Party is obligated to be greater than such
damages would have been had the Indemnified Party given the Indemnifying Party
prompt notice hereunder or the Indemnifying Party is otherwise prejudiced by
such failure. If such indemnification claim is based upon or related to any
suit, action, claim, liability or obligation brought or asserted by any third
party, the Indemnified Party shall promptly notify the Indemnifying Party of the
same in writing, specifying in detail the basis of such claim and the facts
pertaining thereto and the Indemnifying Party, if it so elects, shall assume and
control the defense thereof (and shall consult with the Indemnified Party with
respect thereto), including the payment of all necessary expenses, provided,
that, as a condition precedent to the Indemnifying Party's right to assume
control of such defense, it must furnish the Indemnified Party with reasonable
evidence that the Indemnifying Party is and will be able to satisfy any such
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liability; and provided, further, that the Indemnifying Party shall not have the
right to assume control of such defense if the claim which the Indemnifying
Party seeks to assume control (i) seeks primarily non-monetary relief against
the Indemnified Party; or (ii) involves criminal or quasi- criminal allegations.
In the event that the Indemnified Party has the right to retain exclusive
control of the defense of such claim due to a failure of the Indemnifying Party
to satisfy any of the requirements set forth above, the Indemnified Party shall
use good faith efforts, consistent with prudent business judgment, to defend
such claim and, if not unduly burdensome on the Indemnified Party, mitigate all
Losses, provided that the failure to mitigate all Losses shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent that (and
only to the extent that) such failure shall have caused the damages for which
the Indemnifying Party is obligated to be greater than such damages would have
been had the Indemnified Party mitigated all Losses. If the Indemnifying Party
is permitted to assume and control the defense and elects to do so, the
Indemnifying Party shall have the right to employ counsel separate from counsel
employed by the Indemnifying Party in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel employed by the
Indemnified Party shall be at the expense of the Indemnified Party unless the
employment thereof has been specifically authorized by the Indemnifying Party in
writing or the Indemnifying Party has failed to assume the defense and employ
counsel, in which case the fees and expenses of the Indemnified Party's counsel
shall be paid by the Indemnifying Party. The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected without the
written consent of the Indemnifying Party, however, if there shall be a final
judgment for the plaintiff in any such action for which indemnification is to be
provided under Section 7.2, the Indemnifying Party agrees to indemnify and hold
harmless the Indemnified Party from and against any loss or liability by reason
of such judgment to the extent indemnification is to be provided under this
Section 7.2. In addition, the Indemnifying Party shall obtain the prior written
consent of the Indemnified Party (which shall not be unreasonably withheld)
before entering into any settlement of a claim or ceasing to defend such claim
if, pursuant to or as a result of such settlement or cessation, injunctive or
other equitable relief shall be imposed against the Indemnified Party or if such
settlement does not expressly and unconditionally release the Indemnified Party
from all liabilities and obligations with respect to such claim, without
prejudice or if such settlement otherwise has a material adverse effect on any
Indemnified Party. Regardless of which party shall assume the defense of the
claim the parties agree to cooperate fully with one another in connection
therewith and to keep each other reasonably informed of the status of the claim
and any related proceeding and shall take no action or make any admissions or
statements not required by applicable law which would adversely effect the
defense of any such claim.
(f) The Indemnified Party shall provide to the Indemnifying Party on
request all information and documentation reasonably necessary to support and
verify any Losses which the Indemnified Party believes give rise to a claim for
indemnification hereunder and shall give the Indemnified Party reasonable access
to all premises (including the Leased Real Property), books, records and
personnel in the possession or under the control of the Indemnified Party which
could reasonably be expected to have bearing on such claim.
(g) Neither Buyer nor Seller, as the case may be, may setoff all or
any portion of the Losses which such party suffers, sustains or becomes subject
to as a result of any breach of any representation, warranty, covenant or
agreement contained in this Agreement against any amounts
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due or to become due to Seller or Buyer (or their respective successors or
Affiliates), as the case may be, whether pursuant to this Agreement or
otherwise, including without limitation amounts owed to Pacific under the
Pacific Supply Agreement.
(h) Notwithstanding anything herein to the contrary, the Indemnified
Parties shall have no right to any indemnification under this Article VII for
any matter to the extent that the Actual Net Working Capital was reduced for
such matter and either Buyer did not dispute the amount of the reduction in the
Closing Statement or the dispute as to the amount of the reduction was resolved
pursuant to Section 1.3.
(i) The amount which the Indemnifying Party is required to pay
to, for, or on behalf of the Indemnified Party pursuant to this Article VII
shall be reduced by the amount of any foreign, federal, state or local tax
benefit actually received by the Indemnified Party as a result of the
indemnifiable Loss.
(j) The sole resource and exclusive remedy of Buyer and SCP and the
Cookson Entities against each other arising out of this Agreement or otherwise
arising out of Buyer's acquisition of the Purchased Assets and the Business,
whether based on tort, contract, or otherwise, including but not limited to, any
misrepresentation, breach of warranty or breach of covenant, shall be to assert
a claim for indemnification under the indemnification provision of this Article
VII, except in the case of fraud, and except that Buyer and Seller shall retain
all equitable rights and remedies existing in their favor for specific
performance and/or injunctive or other equitable relief.
(k) Any indemnification payments paid under this Section 7.2 will be
considered an adjustment to the Cash Purchase Price.
(l) The Indemnifying Party shall make any indemnification payments
determined to be payable to the Indemnified Party hereunder without regard to
any expectation that the Indemnified Party will recover insurance proceeds as a
result of the matter giving rise to the claim for which indemnification payments
are to be made. The Indemnified Party shall not have an obligation to seek to
recover or make a claim for insurance proceeds as a result of any matter giving
rise to an indemnification claim of the Indemnified Party against the
Indemnifying Party, provided that if the Indemnified Party receives any
insurance proceeds as a result of the matter giving rise to any indemnification
claim of the Indemnified Party prior to the date upon which the Indemnifying
Party is given notice of the claim, the Indemnifying Party's indemnification
obligation with respect to such claim shall be reduced by the amount of any such
insurance proceeds actually received by the Indemnified Party. If the
Indemnified Party receives any insurance proceeds as a result of the matter
giving rise to any indemnification claim of the Indemnified Party against the
Indemnifying Party after the Indemnifying Party has paid such indemnification
claim to the Indemnified Party, then the Indemnified Party shall promptly turn
over any such insurance proceeds received to the Indemnifying Party to the
extent of the payments made by the Indemnifying Party to the Indemnified Party
on the claim.
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(m) Notwithstanding anything herein to the contrary, the
parties shall have no right to any loss of profits or any consequential,
indirect, special or punitive damages under this Section 7.2.
7.3 Arbitration Procedure.
(a) Buyer and each of the Cookson Entities agree that the arbitration
procedure set forth below shall be the sole and exclusive method for resolving
and remedying claims for money damages arising out of the provisions of Section
7.2 (the "Disputes"). Nothing in this Section 7.3 shall prohibit a party hereto
from instituting litigation to enforce any Final Determination (as defined
below). The parties hereby agree and acknowledge that, except as otherwise
provided in this Section 7.3, the arbitration procedures and any Final
Determination hereunder shall be governed by, and shall be enforced pursuant to
the Commercial Arbitration Rules of the American Arbitration Association as in
effect from time to time (the "AAA Rules"). Buyer and each of the Cookson
Entities agree that, with regard to any dispute or controversy that is to be
arbitrated, discovery in the nature of that allowed by the Federal Rules of
Civil Procedure (Rules 26-37) will be afforded each party and any dispute with
respect to such discovery shall also be settled by the arbitrator. Arbitration
proceedings shall take place in the city of New York, New York or such other
place as the parties may agree.
(b) In the event that any party asserts that there exists a Dispute,
such party shall deliver a written notice to each other party involved therein
specifying the nature of the asserted Dispute and requesting a meeting to
attempt to resolve the same. If no such resolution is reached within twenty
business days after such delivery of such notice, the party delivering such
notice of Dispute (the "Disputing Person") may, within 45 business days after
delivery of such notice, commence arbitration hereunder by delivering to each
other party involved therein a notice of arbitration (a "Notice of
Arbitration"). Such Notice of Arbitration shall specify the matters as to which
arbitration is sought, the nature of any Dispute, the claims of each party to
the arbitration and shall specify the amount and nature of any damages, if any,
sought to be recovered as a result of any alleged claim, and any other matters
required by the AAA Rules to be included therein, if any.
(c) Buyer and Seller shall separately select one non-neutral
arbitrator expert in the subject matter of the Dispute (the arbitrators so
selected shall be referred to herein as the "Buyer's Arbitrator" and the
"Seller's Arbitrator," respectively). In the event that either party fails to
select an arbitrator as set forth herein within 20 days from the delivery of a
Notice of Arbitration, the party which has selected an arbitrator shall deliver
a second notice of arbitration (the "Second Notice") to the party which has not
selected an arbitrator. The Second Notice shall specify the information to be
included in the Notice of Arbitration as set forth in this Section 7.3. In the
event that the party which has not selected an arbitrator fails to select an
arbitrator as set forth herein within 5 days from the delivery of the Second
Notice, then the matter shall be resolved by the arbitrator selected by the
other party. Seller's Arbitrator and Buyer's Arbitrator shall select a third
independent, neutral arbitrator expert in the subject matter of the dispute, and
the three arbitrators so selected shall resolve the matter according to the
procedures set forth in this Section 7.3. If Seller's Arbitrator and Buyer's
Arbitrator are unable to agree on an third arbitrator within 20 days after their
selection, Seller's Arbitrator and Buyer's Arbitrator shall each prepare a list
of three
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independent arbitrators. Seller's Arbitrator and Buyer's Arbitrator shall each
have the opportunity to designate as objectionable and eliminate one arbitrator
from the other arbitrator's list within 7 days after submission thereof, and the
third arbitrator shall then be selected by lot from the arbitrators remaining on
the lists submitted by Seller's Arbitrator and Buyer's Arbitrator.
(d) The arbitrator(s) selected pursuant to paragraph (c) will
determine the allocation of the costs and expenses of arbitration based upon the
ratio of the portion of the contested amount not awarded to each party to the
amount contested by such party. For example, if Buyer submits a claim for $1,000
and if Seller contests only $500 of the amount claimed by Buyer, and if the
arbitrator(s) ultimately resolves the dispute by awarding Buyer $300 of the $500
contested, then the costs and expenses of arbitration will be allocated 60%
(i.e., 300/500) to Seller and 40% (i.e., 200/500) to Buyer.
(e) The arbitration shall be conducted under the AAA Rules, except as
modified by the agreement of all of the parties to this Agreement. The
arbitrator(s) shall so conduct the arbitration that a final result,
determination, finding, judgment and/or award (the "Final Determination") is
made or rendered as soon as practicable, but in no event later than 90 business
days after the delivery of the Notice of Arbitration nor later than 10 days
following completion of the arbitration. The Final Determination must be agreed
upon and signed by the sole arbitrator or by at least two of the three
arbitrators (as the case may be). The Final Determination shall be final and
binding on all parties and there shall be no appeal from or reexamination of the
Final Determination, except for fraud, perjury, evident partiality or misconduct
by an arbitrator prejudicing the rights of any party and to correct manifest
clerical errors.
(f) Buyer and Seller may enforce any Final Determination in any state
or federal court having jurisdiction over the dispute. For the purpose of any
action or proceeding instituted with respect to any Final Determination, each
party hereto hereby irrevocably submits to the jurisdiction of such courts,
irrevocably consents to the service of process by registered mail or personal
service and hereby irrevocably waives, to the fullest extent permitted by law,
any objection which it may have or hereafter have to personal jurisdiction, the
laying of the venue of any such action or proceeding brought in any such court
and any claim that any such action or proceeding bought in any court has been
brought in an inconvenient form.
(g) Any party required to make a payment pursuant to this Section 7.3
shall pay the party entitled to receive such payment within three days of the
delivery of the Final Determination to such responsible party. If any party
shall fail to pay the amount of any damages, if any, assessed against it within
such three day period, the unpaid amount shall bear interest from the date of
such delivery at the lesser of (i) the prime rate of interest announced by The
First National Bank of Chicago in effect from time to time (which rate shall be
adjusted on the effective date of each change in such prime rate) plus 5% and
(ii) the maximum rate permitted by applicable usury laws. Interest on any such
unpaid amount shall be compounded semi-annually, computed on the basis a 360-day
year consisting of twelve 30-day months and shall be payable on demand. In
addition, such party shall promptly reimburse the other party for any and all
costs and expenses of any nature or kind whatsoever (including but not limited
to all reasonable attorneys' fees) incurred in seeking to collect such damages
or to enforce any Final Determination.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
---------------------
8.1 Employees and Employee Benefit Plans.
(a) Employees. As of the Closing Date, Buyer shall offer employment
to all of the employees of Seller assigned to the Business as of the Closing
Date other than those persons listed on Schedule 8.1 hereto and any person on
long term disability as of such date. Such offers of employment shall be for
compensation which is substantially comparable to that provided by Seller
immediately prior to the Closing Date. Those employees who accept such offers of
employment effective as of the Closing Date shall be referred to herein as
"Transferred Employees."
(b) Benefit Liabilities. Unless otherwise specifically set forth
herein to the contrary, Seller shall retain and be fully responsible for (i) all
liabilities, obligations and commitments relating to all wages, salaries,
bonuses and other forms of compensation and related expenses incurred or accrued
on or before the Closing Date and (ii) all employee benefits incurred or accrued
under any and all plans, programs or arrangements maintained or contributed to
by Seller or any affiliate on or before the Closing Date, except to the extent
accrued on the Closing Statement. Buyer shall be fully responsible for all such
liabilities, obligations and commitments and employee benefits with respect to
the Transferred Employees under Buyer's plans, programs and arrangements for the
period after the Closing Date.
(c) Benefit Plans. Effective as of the Closing Date, the Transferred
Employees shall cease to be covered under the employee benefit plans of Seller,
and shall participate under the employee benefit plans maintained or established
by Buyer on terms generally no less favorable in the aggregate than those
offered to other employees of Buyer. Buyer shall not be liable for any acts of
Seller or its employees or agents with respect to any employee benefit plan
maintained by Seller.
(d) 401(k) Plan. With respect to the Loudon Plastics, Inc. 401(k)
Profit Sharing Plan (the "Savings Plan"), Seller agrees that it shall fully vest
all Transferred Employees, and shall be solely responsible to the Transferred
Employees with respect to benefits accrued thereunder, as of the Closing Date.
To the extent required under the Savings Plan, Seller shall contribute to the
Savings Plan, in accordance with the terms of said plan, all amounts
attributable to the Transferred Employees which are owed to or under the Savings
Plan as of the Closing Date. Seller shall permit the Transferred Employees to
elect a distribution of their account balance from the Savings Plan in
accordance with the requirements of Section 401(k)(10) of the Code and the terms
of such plan, and shall permit the Transferred Employees to rollover any loan
balance outstanding as of the Closing Date under the Savings Plan to the savings
plan maintained by Buyer. Buyer shall credit each Transferred Employee with the
service recognized by Seller under the Savings Plan for the purpose of
determining such Transferred Employee's eligibility to participate and vest
under Buyer's employee pension plans (including any savings plan maintained by
Buyer).
8.2 Press Releases and Announcements. Buyer and Seller shall consult
with each other prior to issuing any press release or otherwise making any
public statement with respect
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to the contents of this Agreement in principle or the transactions contemplated
hereby, and none of the parties hereto shall issue any such press release or
make any such public statement prior to such consultation except as may be
required by law or applicable regulations or requirements of the New York Stock
Exchange or the NASDAQ Stock Market or the London Stock Exchange.
8.3 Further Agreements and Transfers. Seller and Buyer will execute
and deliver such further instruments of conveyance and transfer and take such
additional action as the other party may reasonably request to effect,
consummate, confirm or evidence the transfer to Buyer of the Purchased Assets
and any other transactions contemplated hereby including, without limitation,
any agreements consistent with the terms hereof necessary to effect the transfer
of any of the Purchased Assets located outside the United States. Seller will
execute such documents as may be necessary to assist Buyer in preserving or
perfecting its rights in the Purchased Assets and Seller and Buyer will also do
such acts as are necessary to perform the representations, warranties and
agreements herein.
8.4 Change of Names. Concurrently with the Closing, Seller will
prepare and promptly file thereafter the documents necessary to change its
corporate name to a name substantially dissimilar to "Bicknell Huston
Distributors," and at all times thereafter, none of the Cookson Entities shall
use, or permit any of their Affiliates to use, the name "Bicknell Huston
Distributors" or any name including the words "Bicknell Huston Distributors" or
any names or titles confusingly similar to such names.
8.5 Tax Matters. The following provisions will govern the allocation
of responsibility as between Buyer and Seller for certain Tax matters following
the Closing Date:
(a) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be borne equally by
Buyer and Seller.
(b) Allocation of Purchase Price. The Purchase Price shall be
allocated for tax purposes among the Purchased Assets in accordance with an
allocation statement (the "Allocation Statement"), which shall be agreed to by
the Buyer and Seller as soon as reasonably possible after the Closing, and which
the parties acknowledge will be in accordance with Section 1060 of the Code.
Each of Buyer and Seller shall prepare and file on a timely basis Internal
Revenue Service Form 8594, setting forth an allocation of such Purchaser Price
among the Purchased Assets in accordance with the Allocation Statement. Not less
than ten (10) days prior to the filing of their respective Forms 8594 relating
to this transaction, each party shall deliver to the other party a copy of its
Form 8594. Buyer and Seller further agree to report this transaction for federal
income Tax purposes in accordance with the Allocation Statement and each party
agrees to act in accordance with such Allocation Statement in the course of any
Tax audit, Tax review or Tax litigation.
(c) Cooperation on Tax Matters. Buyer and Seller shall, and shall
cause their respective Affiliates to, cooperate fully, as and to the extent
reasonably requested by the other party, in connection with any audit,
litigation, preparation and filing of Tax Returns or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's
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request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
at the expense of the requesting party on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. Buyer
and Seller agree (A) to retain all books and records with respect to Tax matters
pertinent to Seller relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the extent
notified by Buyer or Seller, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if the other party so requests, Buyer or Seller, as the case may be, shall allow
the other party to take possession of such books and records.
8.6 Transition Assistance. Seller will not in any manner take any
action which is designed, intended, or might be reasonably anticipated to have
the effect of discouraging customers, suppliers, lessors, licensors and other
business associates from maintaining the same business relationships with Buyer
after the date of this Agreement as were maintained with Seller prior to and at
the date of this Agreement.
8.7 Books and Records: Personnel.
In addition to the obligations under Section 8.5(c), for a period of
seven years from the Closing Date (or such longer period as may be required of
Buyer by any governmental agency or requested by Seller in connection with
disputes or litigation):
(a) Buyer shall not dispose of or destroy any of the books, records,
files and data of the Business relating to periods prior to the Closing ("Books
and Records") without first offering to turn over possession thereof to Seller
by written notice to Seller at least thirty (30) days prior to the proposed date
of such disposition or destruction.
(b) Buyer shall allow Seller and their respective agents access to
all Books and Records during normal working hours at Buyer's principal place of
business or at any location where any Books and Records are stored, and Seller
shall have the right, at their own expense, to make copies of any Books and
Records; provided, however, that any such access or copying shall be
accomplished in such a manner so as not to interfere with the normal conduct of
Buyer's business.
(c) Buyer shall make available to Seller upon written request (i)
copies of any Books and Records, (ii) Buyer's personnel to assist Seller in
locating and obtaining any Books and Records and (iii) any of Buyer's personnel
whose assistance or participation is reasonably required by Seller or any of its
Affiliates in anticipation of, or preparation for, existing or future
litigation, tax returns or other matters in which Seller or any of its
affiliates are involved. Seller shall reimburse Buyer for its costs and expenses
incurred by Buyer in performing the covenants contained in this Section 8.7.
8.8 Mail Received after Closing.
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(a) In the event that Buyer receives after the Closing any mail or
other communications addressed to Seller, Buyer may open such mail or other
communications and deal with the contents thereof in its discretion to the
extent that Buyer reasonably believes such mail or other communications and the
contents thereof relate to any of the Purchased Assets or to any of the Assumed
Liabilities, including the right to endorse without recourse the name of Seller
on any check received by Buyer with respect to the Purchased Assets, and to deal
with the proceeds in accordance with the terms of this Agreement. Buyer agrees
to deliver or cause to be delivered to Seller all other mail and the contents
thereof which does not relate to the Purchased Assets or the Assumed
Liabilities, including any amounts received by Buyer on or after the Closing
Date not in respect of Purchased Assets or Assumed Liabilities. If any check or
other evidence of indebtedness received by Buyer represents a payment not on
account of the Purchased Assets or an Assumed Liability, Buyer shall promptly
remit such payment to Seller.
(b) In the event that Seller receives after the Closing Date any mail
or other communications addressed to Seller which relates to any of the
Purchased Assets or the Assumed Liabilities, Seller shall promptly deliver or
cause to be delivered all such mail or other written communication and the
contents thereof to Buyer. Seller agrees to cooperate with Buyer and to make
arrangements (including "lock box" and other banking arrangements) reasonably
necessary in order to properly deal with checks addressed to Seller but which
belong to Buyer and to properly direct the proceeds thereof to Buyer.
8.9 Settlement of Claims. In order to facilitate settlement of any
warranty claims by customers on warranties provided by Seller (as opposed to the
manufacturer), if any, arising out of products sold or services rendered, Buyer,
upon providing written notice to Seller at least fifteen (15) days prior to
taking such action and if Seller does not object for valid reasons within ten
(10) days, may repay, rework, replace or grant credit in respect of finished
goods sold prior to the Closing Date insofar as the same shall relate to
defective products or claims under product warranties provided by Seller (as
opposed to the manufacturer), if any, and Seller will reimburse Buyer for its
costs of reworking or replacing the same, and any reasonable out-of-pocket
expenses incurred in making any such repairs or providing such replacement or in
granting any such credit.
8.10 Noncompete; Nonsolicitation.
(a) In consideration of the acquisition of the Purchased Assets and
the consideration to be provided to Seller hereunder, each of the Cookson
Entities agrees on behalf of itself and each of its Affiliates (collectively,
the "Noncompete Parties") that during the period beginning on the Closing Date
and ending on the earlier of the termination of the Pacific Supply Agreement or
the seventh anniversary of the Closing Date (the "Noncompete Period"), each of
the Noncompete Parties shall not, directly or indirectly, either for itself or
for any other Person, permit its name to be used by or Participate in any
business or enterprise (including, without limitation, Seller) that engages in
the wholesale distribution of swimming pool supplies anywhere in the United
States (the "Competitive Activities"); provided, however, (i) Pacific
Industries, Inc. and Technican Pacific Industries, Inc. may continue to conduct
their business in the Competitive Activities in the United States to the extent
they are currently conducting the same, and (ii) in the event that any of the
Cookson Entities or any of their Affiliates acquires a business during the Non-
Compete Period
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of which a Competitive Activity constitutes less than twenty (20%) percent of
the revenues of the acquired business and divests itself of the Competitive
Business within two (2) years of acquisition, such action shall not constitute a
breach of this covenant not to compete. For purposes of this Agreement, the term
"Participate" means any direct or indirect interest in any enterprise, whether
as an officer, director, employee, partner, sole proprietor, agent,
representative, consultant, franchisor, franchisee, creditor, owner or other
similar capacity.
(b) During the Noncompete Period, each of the Noncompete Parties
shall not, directly or indirectly (A) induce or attempt to induce any employee
of Buyer to leave their employ or in any way interfere with the relationship
between Buyer and any of their employees; (B) employ or contract for services
with any employee of Buyer; or (C) induce or attempt to induce any customer,
supplier, licensee, licensor, franchisee, or other business relation of Buyer to
cease doing business with Buyer or in any way interfere with the relationship
between Buyer and any customer or business relation.
(c) The Parties hereto acknowledge and agree that Buyer will suffer
irreparable harm from a breach by any of the Noncompete Parties of any of the
covenants or agreements contained in this Section 8.10. In the event of an
alleged or threatened breach by any of the Noncompete Parties of any of the
provisions of this Section 8.10, Buyer or its successors or assigns may, in
addition to all other rights and remedies existing in its or their favor, apply
to any court of competent jurisdiction for specific performance and/or
injunctive or other equitable relief in order to enforce or prevent any
violations of the provisions hereof (including, without limitation, the
extension of the Noncompete Period by a period equal to the duration of the
violation of this Section 8.10). In the event of an alleged breach or violation
by any of the Noncompete Parties of any of the provisions of this Section 8.10,
the Noncompete Period shall be tolled until such alleged breach or violation is
resolved. Each of the Noncompete Parties acknowledges and agrees that these
restrictions are reasonable, and acknowledges and affirms that Seller conducts
the Business throughout the United States.
(d) If, at the time enforcement is sought of any of the provisions of
this Section 8.10, a court holds that the restrictions stated herein are
unreasonable under the circumstances then existing, the Parties hereto agree
that the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
(e) Each of the Noncompete Parties agrees that the covenants made in
Section 8.10(a) and (b) shall be construed as an agreement independent of any
other provision of this Agreement and shall survive any order of a court of
competent jurisdiction terminating any other provision of this Agreement.
8.11 Expenses. Except as otherwise provided herein, Buyer and Seller
will each pay all of their own expenses (including fees and expenses of legal
counsel, investment bankers, brokers or other representatives and consultants
and appraisal fees and expenses) incurred in connection with the negotiation of
this Agreement and the other agreements contemplated hereby and the performance
of its or their obligations hereunder and thereunder, and the consummation of
the transactions contemplated hereby and thereby (whether consummated or not).
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8.12 Waiver of Compliance with Bulk Sales Laws. Buyer hereby waives
compliance by Seller with the requirements of any bulk sales or transfers laws
of any jurisdiction in connection with the sale of the Purchased Assets to Buyer
(if and to the extent such laws are applicable to such sale); provided that such
waiver shall not affect the obligation of Seller under Section 7.2 to indemnify
Buyer and hold Buyer harmless from and against any Losses which Buyer may
suffer, sustain or become subject to as a result of the assertion or recovery
against Buyer of the Excluded Liabilities set forth in Section 1.1(d) hereof.
8.13 Accounts Receivable.
(a) After the Closing Date, Buyer shall use commercially reasonable
efforts in accordance with Seller's past practices to collect the accounts
receivable which are on the Closing Statement (the "Closing Accounts
Receivable"). For the purpose of determining amounts collected by Buyer with
respect to the Closing Accounts Receivable of the Business, all payments by an
account debtor shall first be applied to the oldest outstanding invoice due from
that account debtor. Buyer shall not be required to bring any suit or take any
other action to collect any of the Closing Accounts Receivable that is not
consistent with the past practices of Seller.
(b) If, on the two hundred fortieth (240th) day following the Closing
Date any of the Closing Accounts Receivable remain uncollected, Buyer shall
assign promptly thereafter all of the uncollected Closing Accounts Receivable to
Seller and Seller shall promptly deliver to Buyer an amount equal to the amount
used in preparing the Closing Statement for such uncollected Closing Accounts
Receivable plus interest accruing thereon at the rate of eight percent (8%) per
annum from the Closing Date to the date such payment is made. Any payment from
Seller to Buyer under the foregoing sentence of this subsection (b) shall be an
adjustment to the Cash Purchase Price, except for the interest portion thereof.
(c) In the event that prior to any assignment to Seller of any
Closing Accounts Receivable, Seller shall receive any remittance from or on
behalf of any account debtor with respect to such Closing Accounts Receivable,
Seller shall endorse without recourse such remittance to the order of Buyer and
forward such remittance to Buyer promptly upon receipt thereof.
(d) In the event that after any assignment to Seller of any Closing
Accounts Receivable, Buyer shall receive any remittance from or on behalf of any
account debtor with respect to such Closing Accounts Receivable, Buyer shall
endorse without recourse such remittance to the order of Seller and forward such
remittance to Seller promptly upon receipt thereof.
8.14 Investigation and Confidentiality.
(a) Prior to the Closing Date, Buyer may make or cause to be made
such investigation of the business and properties of Seller as it deems
necessary or advisable to familiarize itself therewith. Seller agrees to permit
Buyer, its employees, agents, accounting and legal representatives and lenders
(and such lenders' audit staff) and their representatives to (i) have full and
complete access to the premises, books, records, invoices, contracts, leases,
personnel, facilities, equipment and other things reasonably related to the
Business and the Purchased Assets,
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wherever located, of Seller upon reasonable prior notice and during normal
business hours, (ii) visit and inspect any of the properties of Seller upon
reasonable prior notice and during normal business hours, and (iii) discuss upon
reasonable prior notice the affairs, finances and accounts of Seller with the
directors, officers, key employees, key customers, key sales representatives,
key suppliers and independent accountants of Seller.
(b) If the transactions contemplated by this Agreement are not
consummated, Buyer will maintain the confidentiality of all information and
materials reasonably designated by Seller as confidential, and Buyer and its
representatives will return to Seller originals of and destroy copies of all
materials obtained from Seller in connection with the transactions contemplated
by this Agreement. Whether or not the transactions contemplated hereby are
consummated, each of the Cookson Entities will maintain the confidentiality of
all information and materials regarding Buyer and its Affiliates reasonably
designated by Buyer as confidential. If the transactions contemplated by this
Agreement are consummated, each of the Cookson Entities agrees to maintain the
confidentiality of all proprietary and other non-public information regarding
Seller, except as necessary to file tax returns and other reports to
governmental agencies, and to turn over to Buyer at the Closing copies of all
such materials it has in its possession. In the event of the breach of any of
the provisions of this Section 8.11, the non-breaching party, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief (without the posting of bond or other
security) in order to enforce or prevent any violations of the provisions
hereof.
(c) In the event that any party reasonably believes after
consultation with counsel that it is required by law to disclose any
confidential information described in this Section 8.11, the disclosing party
will use its reasonable efforts to (i) provide the other party with prompt
notice before such disclosure in order that such other party may attempt to
obtain a protective order or other assurance that confidential treatment will be
accorded such confidential information and (ii) cooperate with the other party
in attempting to obtain such order or assurance. The provisions of this Section
8.11 shall not apply to any information, documents or materials which are, as
shown by appropriate written evidence, in the public domain or, as shown by
appropriate written evidence, shall come into the public domain, other than by
reason of default by the applicable party bound hereunder or its Affiliates. Any
party may disclose any such information in connection with litigation or
arbitration among the parties hereto.
8.15 Financial Information. Seller understands that as a reporting
company under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), Buyer will be required to file a Current Report on Form 8-K (the "8-K")
with the Securities and Exchange Commission ("SEC") following the Closing in
connection with consummation of the transactions contemplated hereunder, which
8-K will be required to include financial statements of Seller prepared in
accordance with Regulation S-X of the Exchange Act ("Regulation S-X"), for the
periods required by Regulation S-X (the "S-X Financial Statements"). Seller also
understands that Buyer may prepare and file with the SEC a Registration
Statement on Form S-1 or other form (each, a "Registration Statement") for the
registration of securities under the Securities Act of 1933, as amended (the
"Securities Act"). Accordingly, Seller shall, at Buyer's expense, make available
to Buyer and Buyer's auditors the books and records of Seller and shall cause
Seller's auditors to make available
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to Buyer all of such auditor's records and work papers relating to Seller to
assist Buyer in preparation of the S-X Financial Statements or one or more
Registration Statements. In addition, if requested by Buyer, Seller will use its
reasonable efforts to cause its accountants to provide, at Buyer's expense,
opinions which meet the applicable requirements of the Securities Act and the
Exchange Act, and consents to the inclusion of such opinions in any Registration
Statements and to the references to such firm in the prospectus contained in
such Registration Statements. Such consents and opinions may be included in S-X
Financial Statements or Registration Statements.
8.16 Remedies. Each of the Cookson Entities acknowledge that the
Business and the Purchased Assets are unique and recognize that in the event of
a breach of this Agreement by any of the Cookson Entities, money damages may be
inadequate and Buyer may have no adequate remedy at law. Accordingly, each of
the Cookson Entities agree that Buyer shall have the right, in addition to any
other rights and remedies existing in its favor, to enforce its rights and the
obligations of the Cookson Entities hereunder (including, without limitation,
those obligations set forth in Section 8.10 and Section 8.14 of this Agreement)
not only by an action or actions for damages but also by an action or actions
for specific performance, injunctive and/or other equitable relief.
8.17 Personal Property Taxes, Assessments and Charges. Seller shall be
liable for all personal property and other ad valorem taxes, and other
assessments with respect to the Purchased Assets accruing prior to the Closing
Date, provided that any such taxes which relate to a tax period beginning prior
to the Closing Date and ending after such date (a "Closing Period Tax") shall be
prorated as of the Closing Date. If any Closing Period Tax has not been paid on
or prior to the Closing Date, the portion of such tax attributable to the period
ending on the Closing Date shall be accrued and included on the Closing
Statement. If any Closing Period Tax has been paid on or prior to the Closing
Date, the portion of such tax attributable to the period after the Closing Date
shall be treated as a prepaid item and included on the Closing Statement.
8.18 Guaranty. For value received, and in order to induce Seller to
enter into the Agreement, SCP, for itself and its successors and assigns, hereby
guarantees prompt payment and performance to Seller of all of the obligations of
Buyer under the Agreement (the "Obligations") as and when the same are due and
payable or to be performed. SCP agrees to the provisions of the Agreement;
waives demand, presentment, protest, notice of any kind and all suretyship
defenses generally; agrees that (1) any renewal, extension or postponement of
the time of payment or performance or any other indulgence, (2) any
modification, supplement or alteration of any of the Obligations, and (3) any
addition or release of any person or entity primarily or secondarily liable, may
be effected without notice to and without releasing SCP. SCP agrees that the
liability of SCP hereunder is primary, direct and unconditional and may be
enforced without requiring Seller first to resort to any other person
(including, without limitation, Buyer), right, remedy or collateral.
8.19 Disclaimer. Buyer acknowledges that the Cookson Entities are
specifically disclaiming any representation or warranty, express or implied, as
to the Purchased Assets, the Business or the Assumed Liabilities, except for,
and to the extent of, the representations and warranties specifically set forth
herein. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE COOKSON
ENTITIES HEREBY DISCLAIM ANY
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REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE DESIGN, CONSTRUCTION
OR CONDITION OF, OR THE QUALITY OF OR THE MATERIAL OR WORKMANSHIP IN THE
PURCHASED ASSETS AND MAKE NO WARRANTY OF MERCHANTABILITY OR FITNESS OF THE
PURCHASED ASSETS FOR ANY PARTICULAR PURPOSE.
8.20 Estoppel Letters. In the event the Closing occurs but not all of
the landlords of the Leased Real Property have entered into an estoppel letter
in the form of Exhibit H hereto, Buyer and Seller shall share equally all costs
and expenses incurred in obtaining such estoppel letters from such landlords and
all liabilities associated with not having obtained such estoppel letters from
such landlords.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Amendment and Waiver. This Agreement may be amended and any
provision of this Agreement may be waived, provided that any such amendment or
waiver will be binding upon a party only if such amendment or waiver is set
forth in a writing executed by Buyer and Seller. No course of dealing between or
among any persons having any interest in this Agreement will be deemed effective
to modify, amend or discharge any part of this Agreement or any rights or
obligations of any party under or by reason of this Agreement.
9.2 Notices. All notices, demands and other communications given or
delivered under this Agreement will be in writing and will be deemed to have
been given when personally delivered, mailed by first class mail, return receipt
requested, delivered by express courier service or telecopied. Notices, demands
and communications to Seller and Buyer will, unless another address is specified
in writing, be sent to the address indicated below:
Notices to Seller:
-----------------
Cookson America, Inc.
One Cookson Place
Providence, RI 02903
Attention: Stuart L. Daniels
with a copy to:
--------------
Adler Pollock & Sheehan, Incorporated
2300 Hospital Trust Tower
Providence, RI 02903
Attention: Paul Campellone
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Notices to SCP or Buyer:
South Central Pool Supply, Inc.
109 Northpark Boulevard
Covington, LA 70433-5001
Attention: W.B. Sexton
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Stephen L. Ritchie
9.3 Binding Agreement; Assignment.
(a) This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns (including all successors and assigns in the
event of a liquidation or dissolution of Seller), except that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned or delegated by Seller without the prior written consent of Buyer.
(b) Buyer may, at its sole discretion, assign, in whole or in
part, its rights and obligations pursuant to this Agreement to one or more of
its Affiliates; provided that Buyer shall not be released from any of its
obligations hereunder by reason of such assignment.
(c) Buyer may assign its rights under this Agreement (including its
right to indemnification) for collateral security purposes to any of its lenders
providing financing for the transactions contemplated hereby and all extensions,
renewals, replacements, refinancings and refundings thereof in whole or in part;
provided that Buyer shall not be released from any of its obligations hereunder
by reason of such assignment.
9.4 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.
9.5 No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
collective mutual intent, and no rule of strict construction shall be applied
against any person. The term "including" as used herein shall be by way of
example and shall not be deemed to constitute a limitation of any term or
provision contained herein.
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9.6 Captions and Headings. The captions and headings used in this
Agreement are for convenience of reference only and do not constitute a part of
this Agreement and will not be deemed to limit, characterize or in any way
affect any provision of this Agreement, and all provisions of this Agreement
will be enforced and construed as if no caption had been used in this Agreement.
9.7 Entire Agreement. This Agreement and the documents referred to
herein and therein contain the entire agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way, including, without limitation, the letter agreement dated
September 3, 1997, between Code, Hennessy & Simmons, Inc. and Cookson
Investments, Inc.
9.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which taken
together will constitute one and the same instrument.
9.9 Governing Law. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO, AND THE
PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT, WITHOUT GIVING EFFECT
TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE
STATE OF ILLINOIS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
9.10 Parties in Interest. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
ARTICLE X
CERTAIN DEFINITIONS
10.1 Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
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"Employee Pension Benefit Plan" shall have the meaning set forth in
Section 3(2) of ERISA.
"Employee Welfare Benefit Plan" shall have the meaning set forth in
Section 3(1) of ERISA.
"Environmental Lien" means a lien, either recorded or unrecorded, in
favor of any governmental entity, relating to any liability arising under
Environmental and Safety Requirements.
"Environmental and Safety Requirements" means all federal, state,
local and foreign statutes, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, each as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted accounting principles.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
"Knowledge of Seller" means the actual knowledge of Stuart L. Daniels,
Jay Forte, Jonathan F. Hulme, and Bruce Quay.
"Liens" means any mortgage, pledge, security interest, encumbrance,
easement, lease, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against Seller, any Subsidiary
or any Affiliate of Seller, any filing or agreement to file a financing
statement as debtor under the Uniform Commercial Code or any similar statute
other than to reflect ownership by a third party of property leased to Seller or
Subsidiaries of Seller under a lease which is not in the nature of a conditional
sale or title retention agreement, or any subordination arrangement in favor of
another Person (other than any subordination arising in the ordinary course of
business), except any lien for taxes not yet due and payable or liens arising by
operation of law.
"Material Adverse Effect" means having a material adverse
effect on the business or financial condition of the Business taken as a whole.
"Multiemployer Plan" shall have the meaning set forth in Section 3(37)
of ERISA.
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"PBGC" means Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Proprietary Rights" means all of the following owned by, used by,
issued to or licensed to Seller, along with all income, royalties, damages and
payments due or payable at the Closing or thereunder (including, without
limitation, damages and payments for past or future infringements or
misappropriations thereof), the right to sue and recover for past infringements
or misappropriations thereof and any and all corresponding rights that, now or
hereafter, may be secured throughout the world: (i) all inventions, all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuance, continuations, continuations-in-part,
divisions, extensions, and reexaminations thereof, (ii) all Trademarks, (iii)
all copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (iv) all trade secrets and confidential
business information, (v) all computer software and related documentation, (vi)
all other proprietary rights, and (vii) all copies and tangible embodiments of
any of the foregoing; in each case including, without limitation, the items set
forth on Schedule 4.13.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unem ployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not, and including any obligation to indemnify or otherwise assume
or succeed to the Tax liability of any other Person.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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"Trademarks" means all registered and unregistered trademarks, service
marks, trade dress, logos, trade names, Internet domain names and corporate
names (including the name Bicknell Huston Distributors and all other trade names
listed on Schedule 4.13), including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, but excluding
the "Cookson" trademark or tradename used alone or with any other wording.
"Unregistered Marks" means the unregistered trademarks, service marks,
trade names and brand names included in the Trademarks and identified on
Schedule 4.13.
10.2 Other Definitions. Each of the following defined terms has the
meaning given such term in the Section set forth opposite such defined term:
Defined Term Section
"8-K" 8.15
"AAA Rules" 7.3(a)
"Accounts Receivable" 1.1(a)(i)
"Acquisition Proposal" 3.3
"Actual Net Working Capital" 1.3(c)
"Allocation Statement" 8.5(b)
"Assumed Liabilities" 1.1(c)
"Assumption Agreement" 1.4(b)(iii)
"Books and Records" 8.7(a)
"Business Plans" 4.18(a)
"Business." Preamble
"Buyer" Preamble
"Buyer Parties" 7.2(a)
"Buyer's Arbitrator" 7.3(c)
"Buyer's Cap" 7.2(b)(ii)
"Buyer's Threshold" 7.2(b)(i)
"Cash Purchase Price" 1.2(ii)
"CERCLA" 4.10(e)
"Closing" 1.4(a)
"Closing Accounts Receivable" 8.13(a)
"Closing Date" 1.4(a)
"Closing Period Tax" 8.17
"Closing Statement" 1.3(c)
"Closing Transactions" 1.4(b)
"COBRA" 4.18(g)
"Competitive Activities" 8.10(a)
"Contracts" 1.1(a)(ix)
"Conveyance Documents" 1.4(b)(i)
"Cookson Entities." Preamble
"Cookson" Preamble
"CPS" 1.3(b)
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"CPS Note" 1.3(b)
"Disputes" 7.3(a)
"Disputing Person" 7.3(b)
"Estimated Closing Net Working Capital" 1.3(b)
"Exchange Act" 8.15
"Excluded Assets" 1.1(b)
"Excluded Liabilities" 1.1(d)
"Final Determination" 7.3(e)
"Financial Statements" 4.5
"Improvements" 4.8(c)
"Indemnified Party" 7.2(d)
"Indemnifying Party" 7.2(d)
"Independent Auditor" 1.3(d)
"Insiders" 4.19
"Inventory" 1.1(a)(iii)
"JJSC" 1.3(b)
"JJSC Note" 1.3(b)
"Latest Balance Sheet" 4.5
"Lease" 4.8(b)
"Leased Real Property" 1.1(a)(xiv)
"Leases" 4.8(b)
"Licenses" 1.1(a)(viii)
"Losses" 7.2(a)
"Net Working Capital" 1.3(a)
"Noncompete Parties" 8.10(a)
"Noncompete Period" 8.10(a)
"Notice of Arbitration" 7.3(b)
"Obligations" 8.18
"Pacific" Preamble
"Pacific Supply Agreement" 2.1(f)
"Participate" 8.10(a)
"Purchase Price" 1.2
"Purchased Assets" 1.1(a)
"Registration Statement" 8.15
"Regulation S-X" 8.15
"Savings Plan" 8.1(d)
"SCP" Preamble
"SEC" 8.15
"Securities Act" 8.15
"Seller" Preamble
"Seller Controlled Group" 4.18(d)
"Seller Parties" 7.2(c)
"Seller's Arbitrator" 7.3(c)
"SWDA" 4.10(e)
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"S-X Financial Statements" 8.15
"Target" 1.3(b)
"Transferred Employees" 8.1(a)
"WARN" 4.17(b)
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SCP POOL CORPORATION
/s/ W. B. Sexton
-------------------------
By: W. B. Sexton
Its: Chairman
SOUTH CENTRAL POOL SUPPLY, INC.
/s/ W. B. Sexton
-------------------------
By: W. B. Sexton
Its: Chairman
BICKNELL HUSTON DISTRIBUTORS, INC.
/s/ Stuart L. Daniels
-------------------------
By: Stuart L. Daniels
Its: Chairman
PACIFIC INDUSTRIES, INC.
/s/ Bruce Quay
-------------------------
By: Bruce Quay
Its: President
COOKSON AMERICA, INC.
/s/ Stuart L. Daniels
-------------------------
By: Stuart L. Daniels
Its: President
<PAGE>
List of Exhibits
----------------
Exhibit A - Conveyance Documents
Exhibit B - Assumption Agreement
Exhibit C - Pacific Supply Agreement
Exhibit D - Opinion of Seller's Counsel
Exhibit E - Seller's Certificate
Exhibit F - Form of Estoppel Letter
Exhibit G - Landlord Subordination Agreement
Exhibit H - Opinion of Buyer's Counsel
Exhibit I - Buyer's Certificate
Exhibit J - Key Employees
<PAGE>
List of Schedules
-----------------
Schedule 1.1(b)(ii) - Intercompany Accounts Receivable
Schedule 4.1(b) - Qualification of Seller
Schedule 4.3 - Investments
Schedule 4.4 - Conflicts
Schedule 4.6 - Liabilities
Schedule 4.7 - Developments
Schedule 4.8(a) - Leases and Subleases
Schedule 4.10 - Environmental Matters
Schedule 4.11 - Taxes
Schedule 4.12 - Contracts
Schedule 4.13 - Proprietary Rights
Schedule 4.14 - Litigation
Schedule 4.16 - Governmental Licenses, Permits and Consents
Schedule 4.17 - Employee Matters
Schedule 4.18 - Employee Benefit Plans
Schedule 4.19 - Affiliate Transactions
Schedule 4.20 - Compliance with Laws
Schedule 4.21 - Customers and Suppliers
Schedule 4.22 - Officers and Directors
Schedule 4.23 - Product Warranty
Schedule 4.24 - Product Liability
Schedule 4.25 - Powers of Attorney
Schedule 4.26 - Names and Locations
Schedule 8.1 - Employees and Employee Benefit Plans
<PAGE>
DISCLOSURE SCHEDULE
-------------------
Disclosure Schedule to Asset Purchase Agreement
------------------------------------------------
("Purchase Agreement") dated November 13, 1997
-----------------------------------------------
by and among SCP Pool Corporation ("SCP"), South Central Pool
--------------------------------------------------------------
Supply, Inc. ("Buyer") and Bicknell Huston Distributors, Inc. ("Seller"),
--------------------------------------------------------------------------
Pacific Industries, Inc. ("Pacific") and Cookson Investments, Inc. ("Cookson")
------------------------------------------------------------------------------
providing for the purchase of all of the assets of the pool supply business of
------------------------------------------------------------------------------
the Seller
----------
This Disclosure Schedule is divided into sections which are numbered to
correspond to the sections of the Purchase Agreement. Notwithstanding anything
to the contrary contained in the Purchase Agreement, any matter which is
disclosed in a schedule which has been cross-referenced in another schedule
herein shall be deemed to be disclosed in or attached as a copy to such schedule
of the Disclosure Schedule and to qualify all of the representations and
warranties of the Seller, Pacific and Cookson contained in such schedule in
which it has been cross-referenced. Any capitalized terms not defined in the
Disclosure Schedule shall have the meanings assigned to them in the Purchase
Agreement.
<PAGE>
SCHEDULE 1.1(b)(i)
------------------
INTERCOMPANY ACCOUNTS RECEIVABLE
All intercompany receivables with Pacific Industries, Inc. and Technican
Pacific Industries, Inc.
2
<PAGE>
BHD
Intercompany accounts
October 1997
Trade Administrative
Due to Pacific 152,670 11,980,672
Due to Technican 0 0
Due from Pacific 0 0
Due from Technican 16,101 0
<PAGE>
SCHEDULE 4.1
------------
INCORPORATION AND QUALIFICATION
The Seller is incorporated in Massachusetts.
The Seller is qualified to do business in the following jurisdictions:
Connecticut
Maine
New York
Pennsylvania
New Jersey
3
<PAGE>
SCHEDULE 4.3
------------
SUBSIDIARIES; INVESTMENTS
None
4
<PAGE>
SCHEDULE 4.4
------------
ABSENCE OF CONFLICTS
1. The consent of the other contractual party will be required for the
assignment of the leases as set forth on Schedule 4.8(a) and the
contracts to be assigned as set forth on Schedule 4.12.
2. A filing is required to be made under the Hart-Scott-Rodino Act for
this transaction and the waiting period in connection with such filing
must expire.
3. Seller may have to notify the Connecticut Department of Environmental
Protection of the transfer of the Connecticut branch of the Seller
within ten (10) days after the transfer in accordance with the
Connecticut Property Transfer Act.
4. The Massachusetts Tax Commission is to be notified and all tax returns
filed in accordance with Section 51 of Chapter 62C of Massachusetts
Taxation Statutes regarding the sale of the assets of Seller located
in Massachusetts at least five (5) days prior to the sale of the
assets. If the requirements are not satisfied, a lien will attach to
the assets for any unpaid taxes owed to the Commonwealth of
Massachusetts as of the Closing Date.
5. The Pennsylvania Department of Unemployment Compensation is to be
notified and all contribution reports filed in accordance with Section
788.3 of Chapter 14 of Pennsylvania Labor Statutes regarding the sale
of the assets of Seller located in Pennsylvania at least ten (10) days
prior to the sale. If the requirements are not satisfied, the Buyer
shall also be liable to the Pennsylvania Department of Unemployment
Compensation for withholding taxes owed.
6. The Pennsylvania Department of Administration/Taxation is to be
notified and all tax returns filed in accordance with Section 1403 of
Chapter 1and Section 7240 and 7321.1 of Chapter 5 of Pennsylvania
Taxation and Fiscal Affairs Statutes regarding the sale of the assets
of Seller located in Pennsylvania at least ten (10) days prior to the
sale. If the requirements are not satisfied, the Buyer shall also be
liable to the Pennsylvania Department of Administration/Taxation for
corporate, educational and withholding taxes owed.
7. The New York Department of Taxation and Finance is to be notified by
Buyer in accordance with Section 1141(c) of Article 28 of the New York
State Sales and Use Tax Law of the sale of the assets located in New
York at least ten (10) days prior to the sale of the assets. If the
requirements are not satisfied, a lien will attach to the
consideration being paid by Buyer in an amount equal to the sales and
use taxes owed.
5
<PAGE>
8. The New Jersey Department of Taxation is to be notified by Buyer in
accordance with Section 54:32B-22 of New Jersey Sales and Use Tax
Statutes of the sale of assets located in New Jersey at least ten (10)
days prior to the sale of the assets. If the requirements are not
satisfied, a lien will attach to the consideration being paid by Buyer
in an amount equal to the sales and use taxes owed.
9. The Seller and Buyer are subject to the bulk transfer law requirements
in the State of New York where assets of Seller are located.
10. The issuance of new certificates of occupancy or certain notifications
may be required in certain jurisdictions in which the branches of
Seller are located as a result of the change in possession of such
leased premises.
11. The issuance of new licenses and permits to Buyer with respect to the
licenses and permits on Schedule 4.16 will be necessary.
6
<PAGE>
SCHEDULE 4.6
------------
ABSENCE OF UNDISCLOSED LIABILITIES
(1) Any liabilities relating to the litigation or claims referenced in
Schedule 4.14.
(2) Any liabilities relating to the matters set forth on Schedule 4.7.
7
<PAGE>
SCHEDULE 4.7
------------
ABSENCE OF CERTAIN DEVELOPMENTS
(1) A major customer of Seller (Clear Blue) currently has certain tax problems
that is likely to result in it filing for bankruptcy and terminating its
operations and any further purchases of product.
(2) It is anticipated that the note receivable of Central Pools & Supplies,
Inc. referenced on Schedule 4.12 will be discharged prior to the Closing
Date upon receipt of final payment.
(3) The Seller is in the process of moving its current Syracuse branch to 900
E. Hiawatha Boulevard, Syracuse, New York on or about December 1, 1997. The
Seller has entered into a real estate lease with respect to the new
location as set forth on Schedule 4.8(a). Seller will be completing
leasehold improvements in the amount of approximately $156,000. The current
Syracuse lease will expire on August 31, 1998.
(4) Seller has terminated its software contract with its software supplier due
to its acquisition of the software.
(5) The Massachusetts Attorney General's Office has completed an audit of
Seller in 1997 which will require Seller to reclassify approximately 27
employees from exempt to non-exempt status as of January 1, 1998, which
reclassification will cost the Seller approximately $7,000 in back wages -
See Schedule 4.17.
(6) Seller anticipates subleasing the Framingham storage facility, which is not
currently being used by Seller.
(7) The Business of Seller may be affected by adverse changes in its operations
and operating results due to the seasonal nature of the Business.
8
<PAGE>
SCHEDULE 4.8(a)
---------------
LEASES AND SUBLEASES
(1) NORTH ANDOVER, MASSACHUSETTS. Lease Agreement dated September 30, 1996
between Nomed Realty Trust and Bicknell Huston Distributors, Inc.; written
consent of landlord required to assign.
(2) SYRACUSE, NEW YORK (New). Lease Agreement dated July 2, 1997 between Dale
Weaver and Bicknell Huston Distributors, Inc.; written consent of landlord
required to assign.
(3) SYRACUSE, NEW YORK (Existing/Old). Lease Agreement date March 21, 1988
between Dubnoff-Koldin Realty and Bicknell, Incorporated. Lease expires
August 31, 1998; written consent of the landlord required to assign.
(4) ALBANY, NEW YORK. Lease Agreement dated January 11, 1995 between The Marvel
Company and Bicknell Distributors, Inc.; written consent of landlord
required to assign (notice by certified mail); Landlord has 30 days to
approve or can terminate lease.
(5) ZELIENOPLE, PENNSYLVANIA. Lease Agreement dated October 4, 1996 between
Schreiber Industrial Park North Company and Bicknell Huston Distributors,
Inc.; written consent of landlord required to assign.
(6) BOUND BROOK, NEW JERSEY. Lease Agreement and Addendum to Lease dated
January 9, 1995 between Edmar Corporation and Huston Distributors, Inc.;
written consent of landlord required to assign.
(7) DELANCO, NEW JERSEY. Lease Agreement dated May 1, 1996 between Andrew E.
Colson, Jr. and Bicknell Huston Distributors, Inc.; written consent of
landlord required to assign; must deliver to Landlord full assignment
agreement and banking information of assignee/sublessee adequate to
demonstrate financial responsibility.
(8) WINDSOR, CONNECTICUT. Lease Agreement dated January 1, 1994 between The
Teacher's Retirement System of the State of Illinois and Bicknell
Distributors, Inc.; written consent of landlord required to assign;
landlord has right of first refusal to take the remainder of the lease.
(9) PORTLAND, MAINE. Lease Agreement dated May 30, 1991 between 500 Riverside
Associates and Pacific Industries, Inc. and Assignment and Assumption and
Amendment of Lease dated October 1, 1995 between 500 Riverside Associates,
Pacific Industries, Inc. and Bicknell Distributors, Inc.; written consent
of landlord required to assign.
9
<PAGE>
(10) HOPKINTON, MASSACHUSETTS. First Amendment to Lease Agreement dated January
1, 1991 between Elmwood Realty Associates and Bicknell Distributors, Inc.
and Lease Agreement dated January 1, 1991.; written consent of landlord
required to assign.
(11) BATAVIA, NEW YORK. Lease Agreement dated January 25, 1995 between Mega
Properties Corp. and Bicknell Distributors, Inc.; written consent of
landlord required to assign.
(12) RONKONKOMA, NEW YORK. Lease Agreement dated March 22, 1995 between Lakeland
Five Associates and Huston Distributors, Inc.; written consent of landlord
required to assign.
(13) FRAMINGHAM, MASSACHUSETTS. Indenture of Lease dated January 30, 1974
between Frank W. Generazio, Jr. and John C. Acton and Bicknell, Inc.;
written consent of landlord required to assign.
10
<PAGE>
SCHEDULE 4.10
-------------
ENVIRONMENTAL AND SAFETY MATTERS
BOUND BROOK, NEW JERSEY
Two test wells exist on this site which are monitored due to a spill from a
prior tenant.
DELANCO, NEW JERSEY
There were two inactive underground storage tanks for unleaded gasoline and
diesel fuel (UST Nos. 0065667 and 0065649) located within the premises
leased by Seller at Coopertown Road, Delanco, New Jersey, at the time
Seller entered into the lease. It was the obligation of the owner of the
Delanco premises to remove the tanks.
ENVIRONMENTAL PERMITS, LICENSES AND AUTHORIZATIONS
1. United States Department of Transportation Hazardous Materials Certificate
of Registration.
2. State of New Jersey Hazardous Material Storage Certificate of Registration.
3. State of New York Certificate of Pesticide Registration.
4. State of Virginia Certificate of Pesticide Registration.
5. State of Maine Certificate of Pesticide Registration
6. State of New Hampshire Registration of Economic Poisons.
7. State of Connecticut Registration of Pesticides.
8. Private Label Registration done by Aqua Clear Industries.
9. State of Vermont Certificate of Registration of Pesticides.
10. State of Massachusetts Pesticides Registration.
11. State of New Jersey Pesticide Product Registration.
11
<PAGE>
NOTIFICATIONS
See Item No. 3 on Schedule 4.4
COMPLIANCE AND NOTICE OF VIOLATION ISSUES
(1) On June 6, 1995 a truck of Seller was involved in a hazardous material
spill while transporting U.S. Department of Transportation regulated
materials through the Worcester, Massachusetts area. See Annex 4.10-C
attached hereto for more information regarding the spill.
(2) The Seller was audited by the U.S. Department of Transportation ("DOT")
regarding motor vehicle safety matters. Attached as Annex 4.10-D is the
report received by Seller regarding that audit and the fact that Seller was
not in compliance in certain respects with certain DOT regulations,
including certain regulations relating to the transportation of certain
hazardous materials. The DOT fined Seller $12,500.00 in connection with
such non-compliance matters.
(3) From time to time Seller's trucks, while transporting products, have been
stopped by various local authorities performing spot checks and have been
issued citations and minor fines relating to defects in shipping
documentation.
12
<PAGE>
Annex 4.10-C
A Massachusetts based Cookson company dealing with hazardous materials
experienced a hazmat spill while transporting DOT regulated materials on I-190
through Worcester, MA. The driver of the vehicle was pulled over by a local
police officer when he noticed a dripping of liquid from the rear of the truck.
The truck was placarded for Corrosives and Oxidizers and the driver was
carrying all of the proper paperwork and documentation. When the back of the
truck was opened it was noted that two 5 gallon containers of liquid sodium
hypochlorite (PGIII Corrosive) had ruptured and was all over the floor of the
truck. Because the officer was concerned that the corrosive liquid might mix
with the dry oxidizers (PGII), he called in the Fire Department and Hazmat
reponse team to deal with the problem. When the fire dept. arrived along with
many more police, it was decided that the highway (I-190) be closed in both
directions and that access to the highway be denied until the situation was
remedied. The company's response (Zecco) was dispatched to the scene. The
company's compliance expert was also dispatched to the scene. A nearby shopping
mall within 1/2 mile of scene was informed of the situation and voluntarily
closed. EPA officials at the scene concluded that there was no release to the
environment. After Zecco removed the hazardous materials from the truck, the
driver was allowed to drive the truck away.
The spill turned out to be relatively minor.
The costs incurred were as follows:
Worcester Fire Dept. $8,957.75
3 command vehicles, 5.5 hrs at $110.00/hr
3 engine company vehicles, 5.5 hrs at $150.00/hr
1 rescue company vehicle, 5.5 hrs at $200.00/hr
1 hazmat vehicle, 5.5 hrs at $200.00/hr
District chief, 5.5 hrs at $25.03/hr
Captain, 5,5 hrs at $22.99/hr
6 Lieutenants, 5.5 hrs at $19.79/hr
16 Firefighters, 5.5 hrs at $17.62/hr
District 6 Haz Mat Team $ 9,968.00
4 level "A" suit $450.00 ea.
6 level "B" suits $55.00 ea.
10 PVC boots $24.50 ea.
12 pr. SOLVEX gloves $7.50 ea.
14 pr. Silver shield $2.50 ea.
1 latex gloves $2.50 ea.
1 Decron solution $25.00
1 poly 4 m.m. sheet $35.00
2 hazmat trash bags $2.00 ea.
3 Decron pools $10.50 ea.
4 Drager tubes $10.50 ea.
1 poly over pack $195.00
<PAGE>
District 6 Haz Mat Team (cont.)
1 trash barrel $15.00
3 drain covers $300.00 ea.
4 rolls duct tape $4.50 ea.
8 Combination cartridge $10.00 ea.
136 Man Hours at $45.00/hr
Zecco Haz Mat Response $3,386.83
Emergency response van, 4 hrs at $35.00/hr
Box Drum Truck, 4 hrs at $35.00/hr
2 Self contained breathing apparatus, $75.00 ea.
2 55 gallon steel drum, $35.00 ea.
2 Tyvek coverall, $16.00 ea.
2 PVC gloves. $9.25 ea.
Absorbent bags $81.50
Kurz Environmental $1800.00
Site visit during spill, MA-DEP form completion and LSP certification for
site closure
Attorney Fees $1500.00
Company's response person $160.00
Eight Hours at $20.00/hr
Citations $1500.00 (Reduced to $250.00)
<PAGE>
Annex 4. 10-D
UNITED STATES DEPARTMENT OF TRANSPORTATION FEDERAL HIGHWAY ADMINISTRATION
- --------------------------------------------------------------------------------
US DOT # 0333376 LEGAL: BICKNELL DISTRIBUTORS, INC.
- ------------------ OPERATING:
REVIEW TYPE: OR PHYSICAL ADDRESS: 12 PARKWOOD DRIVE
STATUS: Update (County Code: 017) HOPKINTON, MA 01748
PLACE: MAILING ADDRESS: P.O. BOX 9102
Principal office (County Code: 017) HOPKINTON, MA 01748
CENSUS TYPE ------------------------------------------------------------
Carrier/Shipper ICC #: N/A PHONE #:
BUSINESS: --------------------------------- VOICE (508) 435-2321
Corporation FEDERAL TAX ID #: 043109159 (EIN) FAX (508) 435-6651
================================================================================
CARRIER OPERATION: Interstate - HM Intrastate - HM REGION OIC TERRITORY
SHIPPER OPERATION: Interstate Intrastate - HM 01 25 K
- --------------------------------------------------------------------------------
CLASS: (C) Private (Property)
================================================================================
CARGO CLASSIFICATION: (G. U. Z) Building Materials; Chemicals;
POOL MATERIALS
- --------------------------------------------------------------------------------
HAZARDOUS MATERIALS (C=CARRIED S=SHIPPED T=TANKS P=PACKAGES)
J. Class 3 0 8 P/U. Class 8 O S P
N. Division 5.1 0 8 P/AA. ORM-D O 8 P
================================================================================
EQUIPMENT: TRUCK HM TANK HM TANK MOTOR SCHOOL PASS.
TRUCKS TRACTORS TRAILERS TRAILERS TRUCKS COACH BUS LIMO VAN
- --------------------------------------------------------------------------------
OWNED 1 0 0 0 0 0 0 0 0
- --------------------------------------------------------------------------------
TERM LS 22 1 1 0 0 0 0 0 0
- --------------------------------------------------------------------------------
TRIP LS 0 0 0 0 0 0 0 0 0
================================================================================
DRIVERS: Inter Intra TOTAL Drivers: 20
Less than 100 miles 0 0 CDL Drivers: 20
Greater than 100 miles 20 0 Trip Lease/Mo: 0
================================================================================
THIS REPORT WILL RESULT IN A NEW SAFETY RATING. PLEASE REVIEW IT CAREFULLY.
- --------------------------------------------------------------------------------
QUESTIONS regarding this report or the Federal Motor Carrier Safety or
Hazardous Materials rules may be addressed to the Office of Motor Carriers at:
Transportation Systems Center, 55 Broadway, Rm 1-35
Cambridge, MA 02142 (617) 494-2770
================================================================================
PERSON(S) INTERVIEWED: MARK S. FEELEY JOHN HULME
TITLE: BRANCH MANAGER PRESIDENT
- --------------------------------------------------------------------------------
RECEIVED BY: TITLE:
- --------------------------------------------------------------------------------
REPORTED BY: TITLE: CODE: US0613 DATE: 01/30/95
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COMPLIANCE BICKNELL DISTRIBUTORS, INC. DATE: 01/30/95
REVIEW USDOT:0333376 PAGE 1 OF 6
- --------------------------------------------------------------------------------
SEQ 1 NUMBER NUMBER DRVRS/VHCLS
FEDERAL PRIMARY: 107.608(b) FOUND CHECKED IN VIOL CHKD
VIOL. SECONDARY: 171.2(b) 32 32 4 OF 4
- --------------------------------------------------------------------------------
Transporting a hazardous material without having registered with the
Department, under Subpart G of Part 107.
Date: 07/1194, Shipping Document Number: B1512
Hazardous Material: Calcium Hypochlorite, Dry 5.1, UN 1748. PG II.
Driver:
- --------------------------------------------------------------------------------
SEQ 2 NUMBER NUMBER DRVRS/VHCLS
FEDERAL PRIMARY: 107.608(b) FOUND CHECKED IN VIOL CHKD
VIOL. SECONDARY: 171.2(a) 13 13 2 OF 2
- --------------------------------------------------------------------------------
Offering a hazardous material for transportation without having registered with
the Department of Transportation, under Subpart G of Part 107.
Date: 07/06/94, Order No. 0294058
Customer Name:
- --------------------------------------------------------------------------------
SEQ 3 NUMBER NUMBER DRVRS/VHCLS
FEDERAL PRIMARY: 107.620(b) FOUND CHECKED IN VIOL CHKD
VIOL. 32 32 4 OF 4
- --------------------------------------------------------------------------------
Failing to carry a copy of the Certificate of Registration or document
containing "USDOT Hazmat Reg No._" on board a truck or truck tractor used to
transport a haz. mat. subject to the requirements of Subpart G of Part 107.
Date: 06/13/94, Invoice Number: 0309826
Hazardous Material: Trichloroisocyanuric Acid, Dry, 5.1, UN 2468, PG II
Total Weight: 2,580 lbs. (640 x 4lbs)
- --------------------------------------------------------------------------------
SEQ 4 NUMBER NUMBER DRVRS/VHCLS
FEDERAL PRIMARY: 107.202(a) FOUND CHECKED IN VIOL CHKD
VIOL. SECONDARY: 172.200 23 113 3 OF 8
- --------------------------------------------------------------------------------
Failing to enter on a shipping paper the proper description, hazard class or
identification number.
Date of Violation: 05/24/94 Shipper's Number: 144014
Carrier did not enter proper shipping name (Calcium Hypochlorite, hydrated)
hazard class (5.1), identification number (UN 2880), packaging group (PB II)
- --------------------------------------------------------------------------------
RECEIVED BY: TITLE:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COMPLIANCE BICKNELL DISTRIBUTORS, INC. DATE: 01/30/95
REVIEW USDOT:0333376 PAGE 2 OF 6
- --------------------------------------------------------------------------------
SEQ 5 NUMBER NUMBER DRVRS/VHCLS
FEDERAL PRIMARY: 172.704(a)(2) FOUND CHECKED IN VIOL CHKD
VIOL. 20 28 20 OF 28
- --------------------------------------------------------------------------------
Failing to train hazardous material employee in function specific training.
Employee's Name:
Date of Employment: 05/18/24
Employee's HM function: Driver, Date worked in function: 08/26/94
- --------------------------------------------------------------------------------
SEQ 6 NUMBER NUMBER DRVRS/VHCLS
FEDERAL PRIMARY: 172.704(a)(3) FOUND CHECKED IN VIOL CHKD
VIOL. 20 28 20 OF 28
- --------------------------------------------------------------------------------
Failing to train hazardous material employee in safety training.
Employee's Name:
Date of Employment: 04/30/94
Employee's HM function: Driver, Date worked in function: 08/10/94
- --------------------------------------------------------------------------------
SEQ 7 NUMBER NUMBER DRVRS/VHCLS
FEDERAL PRIMARY: 177.804 FOUND CHECKED IN VIOL CHKD
VIOL. 34 88 10 OF 19
- --------------------------------------------------------------------------------
Failing to comply with the Federal Motor Carrier Safety Regulations, 49 OFR
Parts 390 through 397 when transporting hazardous materials.
Date: 07/11/94, Driver:
Shipping Document Number: B 1512
Must conduct pre-employment drug test prior to operating a CMV. 391.103(a)
- --------------------------------------------------------------------------------
SEQ 8 NUMBER NUMBER DRVRS/VHCLS
FEDERAL (C) PRIMARY: 177.817(a) FOUND CHECKED IN VIOL CHKD
VIOL. 28 118 3 OF 8
- --------------------------------------------------------------------------------
Transporting a shipment of hazardous materials not accompanied by a properly
prepared shipping paper.
Date of Violation: 06/17/94 Shipping Document Number: B 2871
Carrier did not have a shipping paper when transporting the following H/M:
Trichloroisocyanuric Acid, Dry, 5.1 UN 2468. PG II
- --------------------------------------------------------------------------------
RECEIVED BY: TITLE:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COMPLIANCE BICKNELL DISTRIBUTORS, INC. DATE: 01/30/95
REVIEW USDOT:0333376 PAGE 3 OF 6
- --------------------------------------------------------------------------------
SEQ 9 NUMBER NUMBER DRVRS/VHCLS
FEDERAL (A) PRIMARY: 391.11(b)(6) FOUND CHECKED IN VIOL CHKD
VIOL. SECONDARY: 391.11(a) 1 7 1 OF 7
- --------------------------------------------------------------------------------
Using a physically unqualifed driver.
Driver: Interstate trip date: 01/18/94 (Syracuse, NY to
Albany, NY and RETURN, interstate freight)
Driver does not meet vision requirement, as left eye vision is 20/200.
- --------------------------------------------------------------------------------
SEQ 10 NUMBER NUMBER DRVRS/VHCLS
FEDERAL (A) PRIMARY: 391.11(a) FOUND CHECKED IN VIOL CHKD
VIOL. SECONDARY: 391.95 1 28 1 OF 18
- --------------------------------------------------------------------------------
Using an unqualifed driver, a driver who has tested positive for controlled
substances, or refused to be tested as required.
Driver: Interstate trip date: 05/26/94 (MA to CT) Tested
Positive for Marijuana. Truck Number: 2001, Carrier failed to have driver
receive negative test and medically recertified prior to operating a CMV.
- --------------------------------------------------------------------------------
SEQ 11 NUMBER NUMBER DRVRS/VHCLS
FEDERAL (B) PRIMARY: 391.45(b) FOUND CHECKED IN VIOL CHKD
VIOL. SECONDARY: 391.11(a) 2 7 2 OF 7
- --------------------------------------------------------------------------------
Using a driver not medically examined and certified each 24 months.
Driver:
Interstate trip date: 01/18/95
Last Examination date: 10/22/91
- --------------------------------------------------------------------------------
SEQ 12 NUMBER NUMBER DRVRS/VHCLS
FEDERAL (C) PRIMARY: 391.51(c)(i) FOUND CHECKED IN VIOL CHKD
VIOL. 2 7 2 OF 7
- --------------------------------------------------------------------------------
Failing to maintain medical examiner's certificate in driver's qualifiction
file.
Driver:
Interstate trip date: 05/25/94
Must maintain copy of every driver's medical certificate in DQ file.
- --------------------------------------------------------------------------------
RECEIVED BY: TITLE:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COMPLIANCE BICKNELL DISTRIBUTORS, INC. DATE: 01/30/95
REVIEW USDOT:0333376 PAGE 4 OF 6
- --------------------------------------------------------------------------------
SEQ 13 NUMBER NUMBER DRVRS/VHCLS
FEDERAL (C) PRIMARY: 391.103(a) FOUND CHECKED IN VIOL CHKD
VIOL. 10 17 10 OF 17
- --------------------------------------------------------------------------------
Failing to require a driver-applicant whom the motor carrier intends to hire or
use to be tested for the use of controlled substances as a pre-qualified
condition.
Driver: Date of Hire: 04/18/94
Interstate trip date: 04/20/94 (MA to OT)
Driver was tested on 04/30/94 an was confirmed positive on 05/08/94.
- --------------------------------------------------------------------------------
SEQ 14 NUMBER NUMBER DRVRS/VHCLS
FEDERAL PRIMARY: 391.121(a) FOUND CHECKED IN VIOL CHKD
VIOL. 19 19 10 OF 10
- --------------------------------------------------------------------------------
Failing to have an effective Employee Assistance Program (EAP).
Driver: Driver
Interstate trip date: 05/18/94 (CT to MA)
Carrier stated that training was provided, but neglected to document.
- --------------------------------------------------------------------------------
SEQ 15 NUMBER NUMBER DRVRS/VHCLS
FEDERAL (C) PRIMARY: 392.2 FOUND CHECKED IN VIOL CHKD
VIOL. 8 8 2 OF 9
- --------------------------------------------------------------------------------
Operating a motor vehicle not in accordance with the laws, ordinances,
and regulations of the jurisdiction in which it is being operated.
Driver: Interstate trip date: 01/18/95. Driver operated in violation of
New York State Law NY14R, which states a driver which does not meet NY medical
vision requirement can not transport H/M intrastate.
- --------------------------------------------------------------------------------
CONTINUED ON NEXT PAGE
- --------------------------------------------------------------------------------
RECEIVED BY: TITLE:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COMPLIANCE BICKNELL DISTRIBUTORS, INC. DATE: 01/30/95
REVIEW USDOT: 0333376 PAGE 5 OF 6
================================================================================
<TABLE>
<CAPTION>
SAFETY FITNESS RATING INFORMATION:
<S> <C> <C> <C>
Total Miles Operated: 347,577 RATING POINTS
Preventable-Recordable Accidents: 0 FACTORS # OF # OF
Total Recordable Accidents: 0 ACUTE CRITICAL
Prev-Rcrdbl Acc. / Million Miles: 0.000 Factor 1: 8 0 0
Factor 2: 0 2 3
008 Vehicles (CR): 8 Factor 3: 0 0 1
# of Vehicles Inspected (CR): 8 Factor 4: 8 0 0
008 Vehicles (MCMIS): 1 Factor 5: 8 0 1
# of Vehicles Inspected (MCMIS): 5 Factor 6: 6 - -
</TABLE>
An unsatisfactory or conditional safety rating will become effective thirty days
from the date of this compliance review (CR). It is anticipated the official
safety rating from Washington, DC, will be:
**** CONDITIONAL ****
================================================================================
RECOMMENDATIONS:
1. Establish a system to ensure each shipment of hazardous materials is
accompanied by a properly prepared shipping paper, including quantity,
proper DOT shipping name, hazard class, and identification number.
2. ON 01/01/96 A NEW CONTROLLED SUBSTANCES AND ALCOHOL TESTING LAW BECOMES
EFFECTIVE FOR MOTOR CARRIERS WHO HAD 50 OR MORE DRIVERS ON 03/17/94. IT IS
EFFECTIVE ON 01/01/95 FOR MOTOR CARRIERS WHO HAD FEWER THAN 50 DRIVERS ON
03/17/94. THIS NEW RULE IS APPLICABLE TO BOTH MOTOR CARRIERS AND DRIVERS.
SEE LATEST EDITION OF THE FEDERAL MOTOR CARRIER SAFETY REGULATIONS.
3. Obtain and become familiar with the Federal Motor Carrier Safety
Regulations and the Hazardous Materials Regulations.
4. Ensure all drivers are fully and properly qualified before operating in
interstate commerce. Maintain a complete file for each driver documenting
the qualification process.
5. Do not allow drivers to drive interstate unless they have been physically
re-examined each 24 months.
6. Ensure all drivers subject to pre-employment are tested if the carrier does
not comply with all five requirements of the exeception to pre-employment
drug testing listed under 40 CFR Part 391.103(d), Subpart H of the Federal
Motor Carrier Safety Regulations.
7. Ensure all drivers subject to pre-employment, random, reasonable cause
and/or post accident controlled substance testing are tested as required
by Part 391, Subpart H of the FMCSR.
- --------------------------------------------------------------------------------
RECEIVED BY: TITLE:
- --------------------------------------------------------------------------------
MCS-151/CR Software Version 3.01 PART B Printed 01/30/95 13:13
<PAGE>
- --------------------------------------------------------------------------------
COMPLIANCE BICKNELL DISTRIBUTORS, INC. DATE: 01/30/95
REVIEW USDOT:0333376 PAGE 6 OF 6
- --------------------------------------------------------------------------------
RECOMMENDATIONS:
8. Maintain all required controlled substance testing records including yearly
summaries, monthly summaries, test information, test results, records of
training and any other record required by Part 391, Subpart H of the FMCSR.
9. Do not allow drivers who have tested positive for use of a controlled
substance to drive.
10. In order to qualify for the 100 air-mile radius the company must keep true
and accurate time records on each driver that shows the time he starts work,
finishes work and the total number of hours worked each day and must be
retained for a period of six months.
11. Require all drivers to prepare complete, accurate records of duty status for
each day, and to submit them within 13 days. Maintain all duty status
records on file, with all supporting documents, for at least 6 months.
12. Establish a system to control drivers' hours of service. Do not dispatch
drivers who don't have adequate hours available to complete assigned trips
legally. Do not allow drivers to exceed the 10, 15 and 60/70 hour limits.
13. Ensure all documents supporting records of duty status (such as toll, fuel,
repair and other on-the-road expense receipts, as well as invoices, bills of
lading, dispatch records, etc.) are kept on file for at least 6 months.
14. IN ORDER TO QUALIFY FOR THE 100 AIR-MILE RADIUS EXEMPTION THE DRIVER MUST
MEET ALL REQUIREMENTS UNDER 395.1(E), WHICH INCLUDES OPERATING WITHIN 100
AIR-MILES OF REPORTING LOCATION, RELEASED FROM WORK WITHIN 12 HOURS, 8
CONSECUTIVE HOURS OFF DUTY, DOES/NOT DRIVE MORE THAN 10 HOURS, AND MUST
MAINTAIN TRUE AND ACCURATE TIME RECORDS FOR A PERIOD OF SIX MONTHS.
15. Ensure all employees involved in handling hazardous materials shipments are
properly trained and familiar with the regulations applicable to their jobs
in the hazardous materials transportation system.
16. Within 15 days, send a letter to our office describing what actions you have
taken in response to this review to ensure you are complying with the
Federal Motor Carrier Safety and Hazardous Materials Regulations.
17. Conduct periodic internal reviews of your maintenance, hazardous materials
handling, driver qualification, hours of service control, accident
reporting, training and other safety systems to ensure compliance.
- --------------------------------------------------------------------------------
RECEIVED BY : TITLE :
- --------------------------------------------------------------------------------
PART B
<PAGE>
- --------------------------------------------------------------------------------
Worksheet BICKNELL DISTRIBUTORS, INC. DATE: 01/30/95
Report USDOT:0333376 PAGE 1
- --------------------------------------------------------------------------------
Verification of Driver Qualification File Status
- --------------------------------------------------------------------------------
An examination of your company's driver qualification files has revealed the
following documents to be missing. Please indicate the status of each document
listed below by noting beside it whether it was prepared but not maintained in
the listed driver's qualification file, or was never prepared. Attach copies of
any listed documents which you are able to locate. Please sign the form,
including your title and the date on which you verified the information.
Hired: 08/06/94 Medical: 04/02/94 Trip: / / REGULAR
Failing to drug test driver - pre-employment
Failing to document drug training for driver
Hired: 04/17/92 Medical: 10/22/91 Trip: 01/18/95 REGULAR
Medical certificate expired Syracuse, NY to Albany, NY & return
Failing to document drug training for driver (Interstate Freight)
Using a physically unqualified driver, right eye 20/200
Hired: 05/09/94 Medical: 05/09/94 Trip: / / REGULAR
Failing to document drug training for driver
Hired: 04/27/94 Medical: / / Trip: 05/25/94 REGULAR
No medical certificate
Failing to drug test driver - pre-employment
Failing to document drug training for driver
Hired: 04/18/94 Medical: Trip: 05/26/94 REGULAR
No medical certificate Windsor, CT to Sutton, MA
Medical certificate expired
Unqualified driver - VERIFIED positive CST
Failing to drug test driver - pre-employment
Verified by Title Date
--------------------------- ------------------ ----------
<PAGE>
SCHEDULE 4.11
-------------
TAXES
See Schedule 4.4 for notifications required to be given to tax authorities
in certain jurisdictions, which may make certain taxes immediately due and
payable as of the Closing Date that would not otherwise be immediately due
and payable in the ordinary course of business.
13
<PAGE>
SCHEDULE 4.12
-------------
CONTRACTS
- ---------
1. Asset Purchase Agreement dated December 21, 1992, between Bicknell
Distributors, Inc., JJSC, Inc. and John J. St. Cyr. - Written consent to
assignment required from JJSC, Inc. and John J. St. Cyr.
2. Sales Agreement dated December 21, 1992, between JJSC and Bicknell
Distributors, Inc., as amended by the Modification Agreement dated May 30,
1996, among Bicknell Distributors, Inc., JJSC, Inc. and John J. St. Cyr. -
Written consent to assignment required from JJSC, Inc. and John J. St. Cyr.
3. License Agreement dated December 21, 1992, between JJSC, Inc. and Bicknell
Distributors, Inc. - Obligations of Seller under agreement expire on
December 21, 1997.
4. Promissory Note dated December 21, 1992 in the original amount of
$346,358.13 issued by JJSC, Inc. and made payable to Bicknell Distributors,
Inc., as secured by: (i) Security Agreement dated December 21, 1992,
between JJSC, Inc. and Bicknell Distributors, Inc., and (ii) Stock Pledge
Agreement dated December 21, 1992, among JJSC, Inc., John J. St. Cyr,
Bicknell Distributors, Inc. and Ardiff & Morse, P.C.
5. Asset Purchase Agreement dated December 20, 1991, by and between Bicknell
Distributros, Inc. and Central Pools & Supplies, Inc. - Written Consent to
assignment required from Central Pools & Supplies, Inc.
6. Sales Agreement dated December 20, 1991, by and between Bicknell
Distributors, Inc. and Central Pools Supplies, Inc., as amended by the
Modification Agreement dated May 29, 1996, by and among Bicknell Huston
Distributors, Inc., Central Pools & Supplies, Inc. and Sylvia P. Orfaly -
Written Consent of Central Pools & Supplies, Inc. and Sylvia Orfaley are
required to assign but this agreement should be completed and expire on
December 15, 1997.
7. Promissory Note dated December 20, 1991 in the original amount of $250,174
issued by Central Pools & Supplies, Inc. ("CPS") and made payable to
Bicknell Distributors, Inc. as secured by: (i) Security Agreement dated
December 20, 1991, between CPS and Bicknell Distributors, Inc., (ii)
Assignment of Lease dated December 20, 1991, between CPS and Bicknell
Distributors, Inc., (iii) Limited Recourse Guaranty dated December 20,
1991, between Sylvia Orfaly and Bicknell Distributors, Inc., and (iv) Stock
Pledge Agreement dated December 20, 1991, among CPS, Sylvia Orfaly,
Bicknell Distributors, Inc. and Ardiff & Morse, P.C. - Obligations should
be completed on December 15, 1997 under these documents.
14
<PAGE>
8. Sales Agreement dated October 1, 1993, by and between PPG Industries, Inc.
and Huston Distributors, Inc. - Written consent to assignment required from
PPG Industries, Inc.
9. Lease Agreement dated April 5, 1995 between TriCon and Bicknell
Distributors, Incorporated (copier). No mention of assignment in this
lease.
10. Lease Agreement between Pitney Bowes and Bicknell Distributors,
Incorporated (postage meter). No lease on hand, only an invoice.
11. Lease Agreement dated July 25, 1996 between Xerox Corporation and Bicknell-
Huston Distributors, Incorporated (copier). Written consent from Xerox is
required to assign this lease.
12. Lease Agreement between Neopost Leasing and Bicknell Huston Distributors,
Incorporated (postage meter). Written consent from Neopost Leasing is
required to assign this lease. This lease was not signed.
13. Lease Agreement between Ikon Capital and Bicknell Huston Distributors,
Incorporated (copier). No lease on hand, only an invoice.
14. Lease Agreement dated March 15, 1996 between Minolta Leasing Services and
Bicknell Huston Distributors, Incorporated (mail machine). Written consent
from Minolta is required to assign this lease.
15. Lease Agreement dated April 8, 1996 between Neopost and Bicknell Pools,
Incorporated (postage meter). No mention of assignment in this lease.
16. Lease Agreement dated April 24, 1995 between Lewis Boyle, Incorporated and
Bicknell Distributors, Incorporated (lift truck). No mention of assignment
in this lease.
17. Lease Agreement between Pitney Bowes and Bicknell Distributors,
Incorporated (mail machine and postage meter). No lease on hand, only an
invoice.
18. Lease Agreement between Pitney Bowes and Bicknell Distributors,
Incorporated (postage meter). No lease on hand, only an invoice.
19. Lease Agreement between Hyster Credit Company and Bicknell-Huston
Distributors, Incorporated (forklift). No lease on hand, only an invoice.
20. Lease Agreement between Hyster Credit Company and Bicknell-Huston
Distributors (forklift). No lease on hand, only an invoice.
21. Lease Agreement between Pitney Bowes and Bicknell Distributors,
Incorporated (postage meter). No lease on hand, only an invoice.
15
<PAGE>
22. Lease Agreement dated May 15, 1997 between Hyster New England, Incorporated
and Bicknell-Huston Distributors, Incorporated (lift truck). Written
consent from Hyster New England, Incorporated is required to assign this
lease.
23. Lease Agreement dated November 21, 1995 between Ful Incorporated/Mellon
First United and Huston Distributors, Incorporated (sweeper). Written
consent from Mellon/Ful Incorporated is required to assign this lease.
24. Lease Agreement dated June 10, 1996 between Modern Handling Equipment of
New Jersey, Incorporated and Bicknell-Huston Distributors, Incorporated
(lift truck). No mention of assignment in this lease.
25. Lease Agreement dated February 19, 1997 between Modern Handling Equipment
of New Jersey, Incorporated and Bicknell-Huston Distributors, Incorporated
(forklift). No mention of assignment in this lease.
26. Lease Agreement dated March 13, 1997 between Modern Handling Equipment of
New Jersey, Incorporated and Bicknell-Huston Distributors, Incorporated
(forklift). No mention of assignment in this lease.
27. Lease Agreement between Pitney Bowed and Bicknell-Huston Distributors,
Incorporated (mailing machine). No lease on hand, only an invoice.
28. Lease Agreement dated March 17, 1995 between General Electric Capital and
Pacific Industries (phone system). This Agreement may not be sold,
transferred or assigned.
29. Lease Agreement dated 1/31/97 between Pitney Bowes, Incorporated and
Bicknell-Huston Distributors, Incorporated (postage meter). No mention of
assignment in this lease.
30. Lease Agreement dated March 10, 1997 between American Office Equipment,
Incorporated/Tokai Financial Services and Bicknell-Huston Distributors,
Incorporated (Ricoh copier). Written consent from Tokai Financial Services,
Incorporated is required to assign this lease.
31. Lease Agreement between Swana Business Credit Corporation and Huston
Distributors, Incorporated (forklift). No lease on hand, only an invoice.
32. Lease Agreement dated July 13, 1994 between Pitney Bowes Credit Corporation
and Huston Distributors, Incorporated (postage scale). Written consent from
Pitney Bowes is required to assign this lease.
16
<PAGE>
33. Lease Agreement dated February 24, 1997 between Canon Financial Services
and Bicknell-Huston Distributors, Incorporated (copier/cabinet). Written
consent from Canon Financial Services is required to assign this lease.
34. Lease Agreement dated July 16. 1996 between Pitney Bowes Credit Corporation
and Bicknell-Huston Distributors, Incorporated (postage meter). Written
consent from Pitney Bowes Credit Corporation is required to assign this
lease.
35. Lease Agreement between Xerox Corporation and Bicknell-Huston Distributors,
Incorporated (copier). No lease on hand, only an invoice.
36. Lease Agreement dated October 23, 1991 between Lewis Boyle, Incorporated
and Bicknell Distributors, Incorporated (lift truck). No mention of
assignment in this lease.
37. Lease Agreement between Neopost Leasing and Bicknell-Huston Distributors,
Incorporated (mail machine). No lease on hand, only an invoice.
38. Lease Agreement dated April 24, 1995 between Lewis Boyle, Incorporated and
Bicknell Distributors, Incorporated (lift truck). No mention of assignment
in this lease.
39. Lease Agreement between Leas-Co Leasing, Inc. and Bicknell-Huston
Distributors, Incorporated (copier). No lease on hand, only an invoice.
40. Lease Agreement dated March 27, 1995 between Yale Financial Services,
Incorporated and Huston Distributors, Incorporated (forklift). No mention
of assignment in this lease.
41. Lease Agreement dated March 10, 1995 between Hilo Maintenance Systems,
Incorporated and Huston Distributors, Incorporated (forklift). Written
consent from Hilo Maintenance Systems, Incorporated is required to assign
this lease.
42. Lease Agreement dated March 20, 1995 between Republic Leasing Company,
Incorporated and Huston Distributors, Incorporated (upright frames) No
mention of assignment in this lease.
43. Lease Agreement dated March 28, 1995 between Hilo Maintenance Systems,
Incorporated and Huston Distributors, Incorporated (forklift). Written
consent from Hilo Maintenance Systems, Incorporated is required to assign
this lease.
44. Lease Agreement dated March 22, 1995 between AT&T Credit Corporation and
Huston Distributors (phone system). This agreement may not be assigned,
sold or transferred.
17
<PAGE>
45. Lease Agreement dated January 29, 1996 between Ascom Hasler Mailing
Systems, Incorporated and Bicknell-Huston Distributors, Incorporated
(postage meter). No mention of assignment in this lease.
46. Consulting Agreement dated August 26, 1997 between Mega Logistics Division
and Bicknell-Huston Distributors, Incorporated (freight
management/consulting agreement). No mention of assignment in this
agreement.
47. Consulting Agreement dated June 6, 1994 between International Lease
Consultants, Incorporated and Huston Distributors, Incorporated (motor
vehicle lease consultants). No mention of assignment in this agreement.
48. Confidentiality Agreement dated January 6, 1993, between Loudon Plastics,
Inc., an affiliate of Seller, and Jon Hulme.
49. Real estate leases set forth on Schedule 4.8(a).
50. Open purchase orders of Seller for the purchase or sale of product entered
into in the ordinary course of business.
51. Oral contract with Bicknell Tidewater pursuant to which Bicknell Tidewater
(for a service charge of $500 per month) can purchase product from Seller
at several percentage points above cost.
Note: The following agreements are agreements to which Seller is bound but which
shall be retained by Seller:
(i) Twenty-one vehicles leased through U.S. Fleet Leasing under
Cookson America Master Auto Lease Agreement - Lease to be
retained by Seller - Buyer will need to enter into new lease for
the vehicles directly with U.S. Fleet Leasing.
(ii) Asset Purchase Agreement dated April 19, 1993, by and among
Huston Distributors, Inc. (now known as Bicknell Huston
Distributors, Inc.), Huston Supply Company, Inc., Douglas F.
Colson and Steven A. Colson, and all of the collateral documents
executed in connection therewith - To be retained by Seller.
(ii) Asset Purchase Agreement dated October 1, 1993, by and among
Bicknell Distributors, Inc. (now known as Bicknell Huston
Distributors, Inc.), Aqua World Pool Products, Inc., John
Stiglmeier, Jr. and Leonard Rosenberg, and all of the collateral
documents executed in connection therewith - To be retained by
Seller.
18
<PAGE>
(iii) Asset Purchase Agreement dated January 4, 1994, by and among
Bicknell Distributors, Inc. (now known as Bicknell Huston
Distributors, Inc.), Aqua Fab Industries, Inc., Weatherking
Products, Inc., Armory Distributors, Inc. and Heldor
Corporation, and all of the collateral documents executed in
connection therewith - To be retained by Seller.
(iv) Insurance policies - To be retained by Seller.
(v) Employee Benefit Plans - See Schedule 4.18.
Note: It is likely that Clear Blue will decrease or suspend purchase of products
from Seller due to its financial problems - See Schedule 4.7
19
<PAGE>
SCHEDULE 4.13
-------------
PROPRIETARY RIGHTS
- ------------------
(1) The Seller has used the following common law trade names:
Bicknell
Huston
(2) The Seller has used the following common law servicemark:
BHD with logo
(3) The Seller has used the following brand names:
Heritage
Whale Brand
See License Agreement referenced as Item No. 3 on Schedule 4.12 for restriction
on use of "Bicknell".
Note: Seller has not registered the tradenames, servicemarks or brand names
referenced above.
20
<PAGE>
SCHEDULE 4.14
-------------
LITIGATION
- ----------
1. Daniel J. Matthews and Sandra Matthews v. Ken Adams, Jr. and Sally Adams
and Anderson Aquatic Group, Inc. and Anderson Aquatic Group, Inc. v. Huston
Supply and Bicknell/Huston Distributors, individually and successor in
interest to Huston Supply and Fort Wayne Pools - (Superior Court of New
Jersey, Atlantic County) (1996) - Lawsuit relates to an action for
contribution by Anderson Aquatic Group, Inc. for liabilities arising in
connection with a lawsuit brought against Anderson Aquatic Group, Inc. by
Daniel J. Matthews and Sandra Matthews for injuries incurred in connection
with a swimming pool accident. Anderson Aquatic Group, Inc. alleges that
Huston Supply, Inc. designed and drew specifications for and sold the pool
and diving board to which the accident relates. Anderson Aquatic Group,
Inc. also alleges that Bicknell Huston Distributors, Inc. is the successor-
in-interest to Huston Supply, Inc. It is unclear as to the amount of
damages for which contribution is requested by Anderson Aquatic Group, Inc.
from Bicknell Huston Distributors, Inc. This claim relates to activities of
Huston Supply, Inc. which occurred prior to the acquisition of the pool
supply distributor business of Huston Supply, Inc. by Bicknell Huston
Distributors, Inc. Pursuant to the Asset Purchase Agreement with Huston
Supply, Inc., Bicknell Huston Distributors, Inc. never assumed any
liabilities for such pre-closing activities of Huston Supply, Inc. and the
matter has been forwarded to Huston Supply, Inc. and its insurer for
defense and indemnification.
2. William C. Nicholson v. Pocono Pool Products North, Inc., Aqua World Pool
Products, Inc., SR Smith, Inc., Cypress Pools, Ltd., Bicknell/Huston
Distributors, Inc. and Loudon Plastics, Inc. (Supreme Court of New York,
County of Albany) (1996) -The lawsuit relates to claims for injuries
incurred in connection with a swimming pool accident which occurred on or
prior to October 1, 1993, and relate to a pool with a liner purchased from
Aqua World Pool Products, Inc. Mr. Nicholson sets forth four causes of
action for which he is to demanding judgment in the amount of $1,000,000
for each cause of action. The liner in question was allegedly acquired from
Aqua World Pool Products, Inc. prior to the acquisition of the assets of
Aqua World Pool Products, Inc. by Bicknell Huston Distributors, Inc.
Pursuant to the Asset Purchase Agreement with Aqua World Pool Products,
Inc., Bicknell Huston Distributors, Inc. did not assume any responsibility
for these pre-closing acts. As a result, the matter has been forwarded to
Aqua World Pool Products, Inc. and its insurer for defense and
indemnification.
3. Workers' compensation claims occurring in the ordinary course of business,
including those claims referenced on the Loss Detail Report - Workers'
Compensation for the period 8/26/97 to 9/24/97 attached hereto as Annex
4.14-A.
4. Claims by customers for the replacement, repair, or refund of products
occurring in the ordinary course of business and which are consistent with
the 1% of Seller's annual sales experience since January 1, 1995 for
replacement, repair or refunds of products.
21
<PAGE>
ANNEX 4.14-A
PACIFIC INDUSTRIES
Policy Number: DWP 80741176
Policy Period: 04-01-97 to 04-01-98
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0007
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report Level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MC CONNELL, MA 09-03-97 FOREIGN BODY WHILE PULLING A BOX, SHELF DUST ENTERED EYES.
09-05-97 FOREIGN BODY SYRACUSE, NY
OPEN -- LABORER NEW YORK
160-117988 2 DAYS 4475 N/N
22 / M
MEDICAL 0 0 0 0 0 N/A N/A
----- ----- ----- ----- ----- ----- -----
0 0 0 0 0 N/A N/A
----- ----- ----- ----- ----- ----- -----
0007 TOTALS 0 0 0 0 0 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 0% 1 TO 3 DAYS = 100% 4 TO 7 DAYS = 0% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 014 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DWP 80741176
Policy Period: 04-01-97 to 04-01-98
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0009
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report Level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ERVIN, FRANCIS 05-15-97 SLIPPED NO FALL EE DESCENDED FROM THE TRUCK & SLIPPED ON A BOARD TURNING HIS ANKLE.
05-16-97 SPRAIN DELANCO, NJ
OPEN -- SHIPPING MGR NEW JERSEY
160-113568 1 DAYS 8018 N/N
00 / M
INDEMNITY 1,134 1,518 0 0 2,652 N/A N/A
MEDICAL 1,761 4,202 895 0 6,858 N/A N/A
----- ----- ----- ----- ----- ----- -----
2,895 5,720 895 0 9,510 N/A N/A*
----- ----- ----- ----- ----- ----- -----
0009 TOTALS 2,895 5,720 895 0 9,510 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 0% 1 TO 3 DAYS = 100% 4 TO 7 DAYS = 0% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 015 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DWP 80741176
Policy Period: 04-01-97 to 04-01-98
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0010
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report Level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JHONSON, WILLY 08-04-97 LIFTING EMPLOYEE WAS LIFTING LINERS AND SUFFERED INJURY TO LOWER BACK
08-12-97 STRAIN BOUND BROOK, NJ
CLOSED 08-25-97 PACKER NEW JERSEY
160-117041 8 DAYS 8018 N/N
29 / M
MEDICAL 59 0 0 0 59 N/A N/A
----- ----- ----- ----- ----- ----- -----
59 0 0 0 59 N/A N/A
PASTER, JOHN 04-23-97 HOLD/CARRYING WHILE PULLING MERCHANDISE OFF RACK & CARRYING A LINER THE EMPLOYEE INJURED NECK
04-24-97 STRAIN BOUND BROOK, NJ
CLOSED 06-24-97 TRAFFIC MANAGER NEW JERSEY
160-544938 1 DAYS 8018 N/N
34 / M
INDEMNITY 375 0 0 0 375 N/A N/A
MEDICAL 228 0 895 0 1,123 N/A N/A
----- ----- ----- ----- ----- ----- -----
603 0 895 0 1,498 N/A N/A*
----- ----- ----- ----- ----- ----- -----
0010 TOTALS 662 0 895 0 1,557 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 0% 1 TO 3 DAYS = 50% 4 TO 7 DAYS = 0% 8 TO 13 DAYS = 50% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 016 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DWP 80741176
Policy Period: 04-01-97 to 04-01-98
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0011
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report Level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DOIRON, DENIS 08-26-97 LIFTING EMPLOYEE WAS LIFTING A COVER WHEN HIS MID BACK BEGAN TO HURT.
08-27-97 STRAIN HOPKINGTON, MA
OPEN -- SUPERVISOR MASSACHUSETTS
160-117688 1 DAYS 8018 N/N
44 / M
INDEMNITY 450 600 0 0 1,050 N/A N/A
MEDICAL 31 2,869 0 0 2,900 N/A N/A
----- ----- ----- ----- ----- ----- -----
481 3,469 0 0 3,950 N/A N/A*
PICARD, KAREN 08-20-97 CUMULATIVE INJ EMPLOYEE INJURED NECK DUE TO SPENDING TIME ON THE PHONE, MAKING COLLECTION CALLS
08-25-97 STRAIN HOPKINGTON, MA
OPEN -- COLLECTNS SPEC MASSACHUSETTS
160-117550 5 DAYS 8810 N/N
42 / F
MEDICAL 0 0 0 0 0 N/A N/A
----- ----- ----- ----- ----- ----- -----
0 0 0 0 0 N/A N/A
DELNEGRO, PHIL 07-08-97 ANIMAL/INSERT THE EMPLOYEE WAS BITTEN BY A SPIDER ON HIS RIGHT CALF WHILE SLEEPING IN A HOTEL.
07-15-97 INFECTION HOPKINGTON, MA
OPEN -- MANAGER MASSACHUSETTS
160-115767 7 DAYS 8018 N/N
29 / M
MEDICAL 0 0 0 0 0 N/A N/A
----- ----- ----- ----- ----- ----- -----
0 0 0 0 0 N/A N/A
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 017 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES Policy Number: DWP 80741176
Policy Period: 04-01-97 to 04-01-98
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
Loss Detail Report - Workers' Compensation
Reporting Level: 0011
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report Level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WYNNE, ANNE 06-09-97 SLIPPED NO FALL EE DESCENDED A FLIGHT OF STAIRS CARRYING REPORTS, HER LT KNEE BUCKLED CAUSING IN
06-11-97 STRAIN HOPKINTON, MA
CLOSED 07-16-97 ACCOUNTANT MASSACHUSETTS
160-114497 2 DAYS 8810 N/N
48/F
MEDICAL 151 0 0 0 151 N/A N/A
----- ----- ----- ----- ----- ----- -----
151 0 0 0 151 N/A N/A*
----- ----- ----- ----- ----- ----- -----
0011 TOTALS 632 3,469 0 0 4,101 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 0% 1 TO 3 DAYS = 50% 4 TO 7 DAYS = 50% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 018 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DWP 80741176
Policy Period: 04-01-97 to 04-01-98
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0012
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report Level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CURRY, RON 06-06-97 LIFTING WHILE EE WAS UNLOADING A TRUCK, HE HIT HIS HEAD ON SOME PVC, CAUSING A HEADACHE.
06-07-97 CONCUSSION NESCONSET, NY
CLOSED 09-04-97 WAREHSEMAN NEW YORK
160-114351 1 DAY 4475 N/N
23 / M
MEDICAL 122 0 55 0 177 N/A N/A
----- ----- ----- ----- ----- ----- -----
122 0 55 0 177 N/A N/A
JONES, THOMAS 05-17-97 DIFFERENT LEVEL EMPLOYEE TRIPPED AND FELL ON CURB BRUISING RIGHT SHIN BONE.
05-19-97 CONTUSION RONKONKOMA, NY
CLOSED 06-20-97 SALESMAN NEW YORK
160-113590 2 DAYS 8742 N/N
00 / M
MEDICAL 49 0 0 0 49 N/A N/A
----- ----- ----- ----- ----- ----- -----
49 0 0 0 49 N/A N/A
----- ----- ----- ----- ----- ----- -----
0012 TOTALS 171 0 55 0 226 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 0% 1 TO 3 DAYS = 100% 4 TO 7 DAYS = 0% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 019 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DZP 80704656
Policy Period: 04-01-96 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0013
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report Level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IVALVE, SIMON 04-02-96 LADDER/SCAFFOLD EMPLOYEE WAS WALKING DOWN ROLLING LADDER AND MISSED STEP FALLING FRACTURING RIGHT
04-03-96 FRACTURE WINDSOR, CT
OPEN -- WAREHOUSEMAN CONNECTICUT
160-526381 1 DAY 8018 N/N
48 / M
INDEMNITY 170 6,000 0 0 6,170 N/A N/A
MEDICAL 2,610 0 152 0 2,762 N/A N/A
----- ----- ----- ----- ----- ----- -----
2,780 6,000 152 0 8,932 N/A N/A
----- ----- ----- ----- ----- ----- -----
0013 TOTALS 2,780 6,000 152 0 8,932 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 0% 1 TO 3 DAYS = 100% 4 TO 7 DAYS = 0% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 022 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DZP 80704660
Policy Period: 04-01-96 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0000
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SMITH, RANDALL 08-02-96 MISC CUT/SCRAPE LACERATION TO THE LEFT THUMB FROM A SHARP EDGE . . . .
08-06-96 LACERATION CRANBERRY TOWNSHIP,
CLOSED 08-29-96 DRV./WAREHOUSE PENNSYLVANIA
610-752071 4 DAYS 0924 N/N
41 / M
MEDICAL 246 0 50 0 296 N/A N/A
----- ----- ----- ----- ----- ----- -----
246 0 50 0 296 N/A N/A
----- ----- ----- ----- ----- ----- -----
0000 TOTALS 246 0 50 0 296 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 0% 1 TO 3 DAYS = 0% 4 TO 7 DAYS = 100% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 025 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DZP 80704660
Policy Period: 04-01-96 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0004
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HALL, KEVIN 08-05-96 LIFTING EMPLOYEE WAS LIFTING PACKAGES AND FELT PAIN IN GROIN AREA.
###-##-#### 09-09-96 STRAIN ALBANY, NY
CLOSED 09-20-96 LABORER NEW YORK
160-534664 35 DAYS 8018 N/N
24 / M
MEDICAL 178 0 0 0 186 N/A N/A
----- ----- ----- ----- ----- ----- -----
178 0 0 0 186 N/A N/A
WINNIE, ROBERT 07-10-96 LIFTING EMPLOYEE FELT PAIN IN HIS GROIN AREA AFTER LIFTING SOME BOXES (EPIDIDYMITIS)
07-11-96 INFECTION ALBANY, NY
CLOSED 09-17-96 WAREHOUSE EE NEW YORK
160-531624 1 DAYS 4475 N/N
23 / M
INDEMNITY 0 0 77 0 77 N/A N/A
MEDICAL 0 0 13 0 13 N/A N/A
----- ----- ----- ----- ----- ----- -----
0 0 90 0 90 N/A N/A
ELLIS, RONALD 06-11-96 MOTOR VEHICLE EMPLOYEE'S CAR WAS REAR ENDED BY ANOTHER CAR WHEN EMPLOYEE STOPPED HIS CAR.
06-18-96 OTHER CUMULATV NEW HARTFORD, NY
CLOSED 07-18-96 SALESMAN NEW YORK
160-530425 7 DAYS 8742 N/N
49 / M
MEDICAL 711 0 26 0 737 N/A N/A
----- ----- ----- ----- ----- ----- -----
711 0 26 0 737 N/A N/A
----- ----- ----- ----- ----- ----- -----
0004 TOTALS 889 0 124 0 1,013 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 0% 1 TO 3 DAYS = 33% 4 TO 7 DAYS = 33% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 33%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 039 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DZP 80704660
Policy Period: 04-01-96 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0006
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAGNEY, JAMES 12-16-96 FALLING OBJECT A WOODEN RACK FELL ON THE EMPLOYEES RIGHT FOOT CAUSING A FRACTURE TO HIS BIG TOE
12-16-96 FRACTURE MIDDLETON, MA
OPEN -- SHIPPER MASSACHUSETTS
160-530482 SAME DAY 8018 N/N
48 / M
INDEMNITY 0 1,500 0 0 1,500 N/A N/A
MEDICAL 886 0 960 0 1,846 N/A N/A
----- ----- ----- ----- ----- ----- -----
886 1,500 960 0 3,346 N/A N/A
----- ----- ----- ----- ----- ----- -----
0006 TOTALS 886 1,500 960 0 3,346 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 100% 1 TO 3 DAYS = 0% 4 TO 7 DAYS = 0% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 040 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DZP 80704660
Policy Period: 04-01-96 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0008
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VESCOVI, KIP 06-06-96 MISC ALL OTHER EMPLOYEE STATED THAT HE FELT LIGHTHEADED AND THEN PASSED OUT AND HIT HIS HEAD ON
06-06-96 UNDEFINED BATAVIA, NY
CLOSED 04-04-97 FINANCE LEIASO NEW YORK
160-529810 SAME DAY 8810
25 / M
MEDICAL 0 0 17 0 17 N/A N/A
----- ----- ----- ----- ----- ----- -----
0 0 17 0 17 N/A N/A
----- ----- ----- ----- ----- ----- -----
0000 TOTALS 0 0 17 0 17 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 100% 1 TO 3 DAYS = 0% 4 TO 7 DAYS = 0% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 041 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DZP 80704660
Policy Period: 04-01-96 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0009
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JOHNSON, STEVE 08-06-96 MISC STRUCK EMPLOYEE'S CHEST WAS BRUISED WHEN HIS BODY WAS THROWN AGAINST STEERING COLUMN OF)
08-08-96 CONTUSION DELANCO, NJ
CLOSED 12-17-96 SHIPPING NEW JERSEY
160-533140 2 DAYS 8018 N/N
37 / M
INDEMNITY 429 0 0 0 429 N/A N/A
MEDICAL 236 0 25 0 261 N/A N/A
----- ----- ----- ----- ----- ----- -----
665 0 25 0 690 N/A N/A
JOHNSON, STEVE 07-17-96 FALLING OBJECT EMPLOYEE WAS LOADING A TRUCK WHEN A PALLET FELL ONTO HIS RIGHT FOOT.
07-18-96 CONTUSION DELANCO, NJ
CLOSED 10-17-96 WAREHOUSEMAN NEW JERSEY
160-531957 1 DAYS 8018 N/N
37 / M
MEDICAL 150 0 19 0 169 N/A N/A
----- ----- ----- ----- ----- ----- -----
150 0 19 0 169 N/A N/A
----- ----- ----- ----- ----- ----- -----
0009 TOTALS 815 0 44 0 859 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 0% 1 TO 3 DAYS = 100% 4 TO 7 DAYS = 0% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 042 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DZP 80704660
Policy Period: 04-01-96 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0010
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HUERTA, WILLIA 08-16-96 DUST/FUMES/GAS WHILE SCRUBBING FLOORS WITH CHEMICALS, THE EMPLOYEE WAS EXPOSED TO TOXIC FUMES.
10-29-97 HERNIATED DISK DUND BROOK, NJ
CLOSED 11-25-96 WAREHOUSEMAN NEW JERSEY
160-537253 74 DAYS 8018 N/N
34 / M
MEDICAL 400 0 20 0 420 N/A N/A
----- ----- ----- ----- ----- ----- -----
400 0 20 0 420 N/A N/A
O'BRIEN, SEAN 08-16-96 DUST/FUMES/GAS WHILE SCRUBBING FLOORS WITH CHEMICALS, THE EMPLOYEE WAS EXPOSED TO TOXIC FUMES.
10-29-97 HERNIATED DISK DUND BROOK, NJ
CLOSED 11-26-96 WAREHOUSEMAN NEW JERSEY
160-537256 74 DAYS 8018 N/N
24 / M
MEDICAL 291 0 19 0 310 N/A N/A
----- ----- ----- ----- ----- ----- -----
291 0 19 0 310 N/A N/A
HUERTA, WILLIA 07-26-96 FOREIGN BODY EMPLOYEE REPORTED IRRITATION IN ONE OF HIS EYES.
07-26-96 FOREIGN BODY BOUND BROOK, NJ
CLOSED PENDING ORDER PICKER NEW JERSEY
160-532489 SAME DAY 8018 N/N
00 / M
MEDICAL 367 0 17 0 384 N/A N/A
----- ----- ----- ----- ----- ----- -----
367 0 17 0 384 N/A N/A
O'BRIEN, SEAN 06-12-96 FOREIGN BODY FOREIGN BODY IN EYE
06-17-96 FOREIGN BODY BOUND BROOK, NJ
CLOSED 08-27-97 WAREHOUSE NEW JERSEY
160-530329 5 DAYS 8018 N/N
24 / M
MEDICAL 455 0 22 0 477 N/A N/A
----- ----- ----- ----- ----- ----- -----
455 0 22 0 477 N/A N/A
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 043 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DZP 80704660
Policy Period: 04-01-96 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0010
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MITCHELL, JERO 05-28-96 CUMULATIVE INJ CONSTANT REPETITIVE LIFTING AND BENDING.
08-12-96 OTHER CUMULATV BOUND BROOK, NJ
CLOSED 12-17-96 SHIP/WHSEMAN NEW JERSEY
160-533426 76 DAYS 8018 N/N
38 / M
INDEMNITY 4,500 0 1,353 0 5,853 N/A N/A
MEDICAL 65 0 295 0 360 N/A N/A
----- ----- ----- ----- ----- ----- -----
4,565 0 1,648 0 6,213 N/A N/A
----- ----- ----- ----- ----- ----- -----
0010 TOTALS 6,078 0 1,726 0 7,804 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 20% 1 TO 3 DAYS = 0% 4 TO 7 DAYS = 20% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 60%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 044 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES
Policy Number: DZP 80704660
Policy Period: 04-01-97 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
Producer: MARSHALL & STERLING
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0011
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MC DERMOTT, DAN 09-16-96 COLL W/VEHICLE WHILE STOPPED FOR ANOTHER VEHICLE EMPLOYEE'S TRUCK WAS REARENDED BY A STATE TROO)
09-17-96 STRAIN HOPKINTON, MA
CLOSED 10-10-96 DRIVER MASSACHUSETTS
160-535096 1 DAY 7380 N/N
23 / M
MEDICAL 558 0 0 0 576 N/A N/A
----- ----- ----- ----- ----- ----- -----
558 0 0 0 576 N/A N/A
HYLAND, MICHAE 07-17-96 MISC IN/BETWEEN EMPLOYEE CAUGHT HIS LEFT FOOT UNDER A PALLET CAUSING BRUISING.
07-18-96 CONTUSION HOPKINTON, MA
CLOSED 08-16-96 PICK UP COUNTE MASSACHUSETTS
160-531954 1 DAY 8018 N/N
35 / M
MEDICAL 129 0 5 0 134 N/A N/A
----- ----- ----- ----- ----- ----- -----
129 0 5 0 134 N/A N/A
DOIRON, STEVEN 07-15-96 FALLING OBJECT A BOX SLID OFF THE TRUCK AND STRUCK THE EMPLOYEE IN HIS LEFT FOOT CAUSING A CONT)
07-16-96 CONTUSION HOPKINTON, MA
CLOSED 08-22-96 SHIPPER RECEIV MASSACHUSETTS
160-531769 1 DAY 8018 N/N
20 / M
MEDICAL 157 0 6 0 163 N/A N/A
----- ----- ----- ----- ----- ----- -----
157 0 6 0 1163 N/A N/A
KANZ, WALTER 07-11-96 PUSHING/PULLING PALLET JACK STARTED TO GO OVER AND EMPLOYEE STARTED TO PULL IT BACK INJURING LEF)
07-11-96 STRAIN MARSHFIELD, MA
CLOSED 07-25-96 DRIVER MASSACHUSETTS
160-531684 1 DAY 7380 N/N
46 / M
MEDICAL 416 0 13 0 429 N/A N/A
----- ----- ----- ----- ----- ----- -----
416 0 13 0 429 N/A N/A
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 045 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES Policy Number: DZP 80704660
Policy Period: 04-01-96 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
FIREMAN'S FUND Producer: MARSHALL & STERLING
Loss Detail Report - Workers' Compensation
Reporting Level: 0011
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PARKER, ERIC 05-01-96 MISC CUT/SCRAPE EMPLOYEE EMPTYING TRASH INTO DUMPSTER, NAIL IN TRASH CUT HIS RIGHT HAND MIDDLE F
05-01-96 LACERATION HOPKINTON, MA
CLOSED 05-22-96 RECEIVER MASSACHUSETTS
160-527815 SAME DAY 8018 N/N
23/M
MEDICAL 120 0 5 0 125 N/A N/A
----- ----- ----- ----- ----- ----- -----
120 0 5 0 125 N/A N/A
----- ----- ----- ----- ----- ----- -----
0011 TOTALS 1,380 0 47 0 1,427 N/A N/A
TIMELINESS PERCENTAGE:
SAME DAY = 20% 1 TO 3 DAYS = 80% 4 TO 7 DAYS = 0% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 0%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 046 of 047
</TABLE>
<PAGE>
PACIFIC INDUSTRIES Policy Number: DZP 80704660
Policy Period: 04-01-96 to 04-01-97
Account Number: 96115712918
Report Period: 8-26-97 to 9-24-97
FIREMAN'S FUND Producer: MARSHALL & STERLING
<TABLE>
<CAPTION>
[FIREMAN'S FUND LOGO]
Loss Detail Report - Workers' Compensation
Reporting Level: 0012
- -----------------------------------------------------------------------------------------------------------------------------------
Employee Loss Date Injury Source Description
SSN Report Date Nature Loss Location
Status Closed Date Occupation Jurisdiction Estimated Incurred
Claim Number Timeliness Class Code Atty/Suit Paid Additional Expense Recovery Total Deductible Net
Report level Age/Sex Coverage To Date Payments To Date To Date Incurred To Date Deductible
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULRY, TIMOTHY 09-18-96 LIFTING EMPLOYEE FELT PAIN IN HIS BACK THE DAY AFTER HE HAD MOVED VINYL LINERS AT WORK.
02-19-97 STRAIN RONKONKOMA, NY
CLOSED 07-22-97 BRANCH MANAGER NEW YORK
160-542192 154 DAYS 8018 N/N
40/M
MEDICAL 6,255 0 250 0 6,505 N/A N/A
----- ----- ----- ----- ----- ----- -----
6,255 0 250 0 6,505 N/A N/A
KAPLAN, JOSHUA 06-06-96 LIQUID SPILLS UNLOADING A TRUCK, SLIPPED ON POOL BASE AND WATER HIT LEFT KNEE CAP ON METAL PLA
06-07-96 STRAIN RONKONKOMA, NY
CLOSED 09-05-96 WHSE WKR NEW YORK
160-529867 1 DAYS 4475 N/N
21/M
MEDICAL 141 0 0 0 141 N/A N/A
TIMELINESS PERCENTAGE: ----- ----- ----- ----- ----- ----- -----
141 0 0 0 141 N/A N/A
----- ----- ----- ----- ----- ----- -----
0012 TOTALS 6,396 0 250 0 6,646 N/A N/A
SAME DAY = 0% 1 TO 3 DAYS = 50% 4 TO 7 DAYS = 0% 8 TO 13 DAYS = 0% 14 TO 21 DAYS = 0% OVER 21 DAYS = 50%
* = Financial Activity # = Claim Has Not Cleared Accounting Process
Valuation Date: 09-24-97 Customer Copy WC 047 of 047
</TABLE>
<PAGE>
SCHEDULE 4.16
-------------
GOVERNMENTAL LICENSES, PERMITS AND CONSENTS
- -------------------------------------------
1. Maryland Sales and Use Tax License;
2. New York State Department of Taxation- Sales Tax;
3. New Jersey Sales and Use Tax Certificate;
4. Vermont Sales and Use Tax Permit;
5. Rhode Island Permit to Make Sales at Retail;
6. Connecticut sales and Use Tax Permit;
7. Ohio Use Tax Certificate;
8. Pennsylvania sales Tax Registration Certificate;
9. Maine Sales and Use Tax Form;
10. Certificates of Occupancy for the various branch locations;
11. Registration of motor vehicles owned by Seller.
12. See the environmental licenses and permits referenced on Schedule 4.10
Note: To the Knowledge of Seller, none of the licenses or permits may be
transferred.
22
<PAGE>
SCHEDULE 4.17
-------------
EMPLOYEE MATTERS
- ----------------
The Seller has been required by the Massachusetts Attorney General's Office
to change approximately 27 employees classified as exempt to non-exempt for
January 1, 1998 to comply with a wage audit performed by the Massachusetts
Attorney General's office in 1997.
23
<PAGE>
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS
- ----------------------
A. Retirement Plan:
Loudon Plastics, Inc. 401(k) Profit Sharing Plan
B. Employee Stock Purchase Plan:
Cookson Group U.S. Employee Stock Purchase Plan
C. Welfare Benefits:
1. Cookson America, Inc. Point-of-Service Medical Plan:
(a) Tufts -- Hopkinton, MA
(b) HealthAmerica/Coordinated Care -- Zelienople, PA
(c) Metra Health -- Windsor, CT
(d) Independent Health -- Albany, NY
(e) PruCare -- Boundbrook, NJ
2. Prudential Comprehensive 100 Medical Plan (out-of-area employees)
3. Cookson America, Inc. Pre-Tax Premium Plan
4. Cookson America, Inc. Long-Term Disability Plan
5. Cookson America, Inc. Business Travel Accident Plan
6. CIGNA Dental 25; CIGNA Dental 25 PPO Program (Windsor, CT and
Boundbrook, NJ only)
7. Life Insurance (One Times Pay)
8. Caremark Prescription Drug Plan
9. Cookson America, Inc. Group Universal Life Insurance
10. Cookson America, Inc. Vision 20/20 Plan
24
<PAGE>
D. Bonuses
Seller pays bonuses to the following bonus plans after year-end performance
has been finalized with the bonus amounts being accrued at year end:
Executive
Management
Branch Managers
Mid-Management
Salesmen
Total Company
25
<PAGE>
SCHEDULE 4.19
-------------
AFFILIATE TRANSACTIONS
(1) Cookson America, Inc. and/or Pacific Industries, Inc. and other affiliates
provide the following services for Seller:
(i) Treasury Management
(ii) Insurance Coverage
(iii) Welfare Benefits
(iv) Retirement/401(k)
(v) Profit Sharing Plan
(vi) Employee Stock Purchase Plan
(vii) Annual Audit
(viii) Supply of Products
(2) The Delanco, New Jersey, branch of Seller is leased from the father of
Douglas Colson an employee of Seller to be retained.
(3) Seller purchases product from International Swimming Pools, Inc., which is
an entity in which Douglas Colson, an employee of Seller to be retained,
has an ownership interest.
26
<PAGE>
SCHEDULE 4.20
-------------
COMPLIANCE WITH LAWS
See Schedule 4.10.
27
<PAGE>
SCHEDULE 4.21
-------------
CUSTOMERS AND SUPPLIERS
See Annex 4.21-A attached hereto.
28
<PAGE>
ANNEX 4.21
At September 1997
Top 10 Customers Top 10 Suppliers
# Name Amt. # Name Amt
6984488 Modern Comfort 923,371 7700 Hayward 10,299,490
41103 Concord Pools 607,380 30000 Pacific 6,580,259
5050404 Nicholas Pools 590,350 8507 Interpool 1,663,720
8459000 Budd's Pool Svc 524,415 13100 PPG 1,241,888
7478483 Pool World 518,541 4043 Cormier 751,103
38275 Central Pools 491,954 14300 SR Smith 951,748
2442190 BG Pools 430,027 15720 Technican 937,423
8457454 Olympic Pools 416,632 13694 Raypack 904,953
106005 McCarthy Pools 413,876 2850 Cantar 628,923
80460 JJSC 411,957 2442 Biolab 746,309
At December 1996
Top 10 Customers Top 10 Suppliers
# Name Amt # Name Amt
6984488 Modern Comfort 1,109,490 7700 Hayward 10,589,198
41103 Concord Pools 782,535 30000 Pacific 7,176,525
38275 Central Pools 731,862 8507 Interpool 2,816,290
39456 Clear Blue* 578,950 405 Alliance 1,818,580
2442198 BG Pools (construction) 561,865 13100 PPG 1,291,035
35365 Canon Recreation 546,330 2850 Cantar 1,238,174
3583333 Piper Pools 538,134 14300 SR Smith 1,137,927
2442190 BG Pools (retail) 518,168 1000 Polaris 1,078,016
80460 JJSC 507,893 9400 Teledyne 1,037,985
157597 Teddy Bear 475,799 7880 Home and Roam 842,144
* Tax difficulties in 1997 - expect company to shut down
<PAGE>
SCHEDULE 4.22
-------------
OFFICER AND DIRECTORS
Directors of Seller:
Stuart L. Daniels
Mark J. Pechak
Jonathan F. Hulme
Dominick DeMichele
Thomas G. Gibbs
Officers of Seller:
Chairman - Stuart L. Daniels
President - Jonathan F. Hulme
Treasurer - Thomas G. Gibbs
Assistant Treasurer - Stuart L. Daniels
Assistant Treasurer - John H. Doherty
Secretary - Frank T. Caprio
Assistant Secretary - Providencia Ortiz
29
<PAGE>
SCHEDULE 4.23
-------------
PRODUCT WARRANTY
See order form terms and conditions attached hereto as Annex 4.23-A.
30
<PAGE>
ANNEX 4.23-A
BHD INC. CONDITIONS OF SALE
- --------------------------------------------------------------------------------
TERMS: Net cash 30 days to established and approved accounts. Others, check with
order or C.O.D. Accounts unpaid after 30 days will be considered delinquent and
will be subject to a 1 1/2% per month (18% per annum) service charge and put on
a C.O.D. basis until all delinquent balances are paid. Any account that runs 60
days or over will AUTOMATICALLY be placed on C.O.D.
Any account exceeding their established credit limit will be notified and
requested to send a check to bring the balance to within credit limit. If you do
not know what your credit limit is, please ask. If you feel it is not adequate
for your needs, we will try to raise it based upon your dollar volume and
payment history with us. Returned checks due to insufficient funds will result
in a $25.00 service charge to the issuer. Any collection costs for delinquent
accounts incurred by the seller, including legal fees, will be paid by the
customer.
MINIMUM BILLING: Due to the cost of processing charge invoices, a minimum
billing of $25.00 is required. A $5.00 service charge will be applied to all
invoices that fall under the minimum.
PRICES: Subject to change without notice. All accounts will be automatically
charged applicable sales and/or use taxes unless BHD has on file up to date tax
exempt certificate with a valid resale permit number. The seller reserves the
right to invoice at prices in effect at the time of shipment and to correct
typographical errors.
RETURN OF GOODS: Application for Return of Goods must be made within 30 days of
purchase. New equipment of current design in saleable condition will be
considered for return and is subject to a restocking charge of 15%. Written
authorization from BHD, Inc. must be obtained before returning any merchandise.
Date of original purchase and invoice number must be included in request.
Returned material must be sent prepaid and accompanied by a BHD, Inc. return
authorization. Any product returned without return authorization will be
refused and returned to the sender.
STATEMENTS AND INVOICES: The company shall inform BHD Inc. in writing, of any
dispute concerning any statements and or invoices mailed to it, within 15 days
of the statement or invoice, and agrees to waive any defense concerning the
quality or quantity of the goods and services and the authority of the
individual ordering or accepting delivery of the goods provided unless the
company so informs BHD Inc. in writing, within 15 days of date of delivery.
Note: Possession of the wholesale confidential catalog does not authorize
purchase at wholesale prices. To qualify at these prices a dealer date sheet
must be submitted and approved by BHD, Inc.
MANUFACTURERS WARRANTY: All products sold by BHD, Inc. shall be covered solely
and exclusively by the manufacturer's warranties. BHD, Inc. serves only as a
distributor and BHD, Inc. makes no express warranties or implied warranties of
merchantability or fitness for a particular purpose. All damages shall be
recoverable solely against the manufacturer. BHD, Inc. shall not be liable for
consequential damages or any other losses. The customer will be responsible for
transportation, labor costs and any other incidental expenses in connection with
warranty repair or replacement.
FREIGHT: Except for pool packages and items marked "F.O.B.", we will pay freight
on orders over $1500.00 net when shipped to one destination in Continental
U.S.A. Any "special instruction charges" and "phone before delivery charges"
will be charged to buyer.
TRANSPORTATION CLAIMS: Every reasonable precaution is exercised in packing, but
BHD, Inc. is not responsible for goods damaged or lost in transit. Claims to
recover such loss or damage must be filed with the common carrier by the
purchaser, within the time allowed by such carrier.
SPECIAL ORDERS: On all special orders (merchandise not shown in our catalogue)
we require a 50% deposit when the order is placed. Also, special orders are non
cancellable and non returnable. All special orders will be F.O.B. factory.
METHOD OF SHIPPING: Normally UPS under "70 lbs. and under max. size of 130"
(length & girth). Common carrier over "70 lbs. or if the product exceeds maximum
size requirements. Certain hazardous materials are restricted by new UPS
regulations and must be shipped via common carrier. UPS orders subject to
handling charge. Hazardous materials accepted by UPS for shipment are subject
to an additional charge, currently $10.00/pkg. (ground) or $14.00/pkg. (air) UPS
charge. These rates are published by UPS and are subject to change without
notice.
*150 lbs. interstate as well as MA, ME & NJ intrastate shipments.
- -------------------------------------------------------------------------------
FREIGHT EXCEPTIONS
------------------
We do not pay freight on the following items in the wholesale catalog.
Calcium Hypochlorite
D.E. (Diatomaceous Earth)
Pool Base
Poly & PVC Pipe
Saunas
Solar Blankets
Solar Reels
Special order items
Steps
Commercial Equipment
Coping Deck forms
Linens
Sand
Pools:I/G & A/G
Slides
Spas/Whirlpools
Spa Covers
Spa Packs
Wall Foam
Whirlpool Baths
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 4.24
-------------
PRODUCT LIABILITY
See Schedule 4.14
31
<PAGE>
SCHEDULE 4.25
-------------
POWERS OF ATTORNEY
None
32
<PAGE>
SCHEDULE 4.26
-------------
NAMES AND LOCATIONS
(i) Prior use of names: Bicknell Huston Distributors, Inc. has used
as prior names:
(a) Bicknell Distributors, Inc.
(b) Huston Distributors, Inc.
(ii) Location of tangible assets: The tangible assets of Bicknell
Huston Distributors, Inc. are located at the following locations:
Corporate Office:
12 Parkwood Drive
Hopkinton, Massachusetts 01748
Branch Locations:
45 Industrial Park Road
Albany, New york 12206
2 Treadway Avenue
Batavia, New York 14020
6E Easy Street
Bound Brook, New Jersey 08805
416 Grandview Blvd.
Zelienople, Pennsylvania 16063
PO Box 5037 Coopertown Road
Delanco, New Jersey 08075
2350 Turnpike Street, Building C
North Andover, Massachusetts 01845
520 Riverside Industrial Parkway
Portland, Maine 04103
*1901 LeMyne Avenue, PO Box 38
Syracuse, New York 13211
33
<PAGE>
2133 Ocean Avenue
Ronkonkoma, New York 11779
436 Hayden Station Road
Windsor, Connecticut 06095
*Note: On or about December 1, 1997, the location of the Syracuse branch shall
be 900 E. Hiawatha Boulevard, Syracuse, New York 13208.
34
<PAGE>
SCHEDULE 8.1
------------
EXCLUDED EMPLOYEES
- ------------------
Douglas Colson
35
<PAGE>
EXHIBIT A-1
BILL OF SALE AND ASSIGNMENT
THIS BILL OF SALE AND ASSIGNMENT (this "Instrument"), dated as of December
__, 1997, is made and delivered pursuant to, and subject to the terms of, the
Asset Purchase Agreement, dated as of November __, 1997 (the "Purchase
Agreement"), by and among SCP Pool Corporation, a Delaware corporation; South
Central Pool Supply, Inc., a Delaware corporation ("Buyer"); Bicknell Huston
Distributors, Inc., a Massachusetts corporation ("Seller"); Pacific Industries,
Inc., a Delaware corporation ("Pacific"); and Cookson America, Inc., a Delaware
corporation (together with Seller and Pacific, the "Cookson Entities").
NOW THEREFORE, subject to the terms and conditions of the Purchase
Agreement and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Buyer and Seller hereby each agree as follows:
1. On the terms and subject to the conditions contained in the Purchase
Agreement, Buyer hereby purchases from Seller, and Seller hereby sells, conveys,
assigns, transfers and delivers to Buyer, free and clear of all Liens ( as
defined in the Purchase Agreement) other than Assumed Liabilities, all of the
Purchased Assets.
2. Seller hereby covenants that it will, from time to time after delivery
of this Instrument and without further consideration, at Buyer's request and in
accordance with Section 8.3 of the Purchase Agreement, do, execute, acknowledge
and deliver, or cause to be done, executed, acknowledged and delivered, all
further acts, conveyances, transfers, assignments and assurances as reasonably
may be required to convey more effectively or transfer to Buyer the Purchased
Assets.
3. The obligations, agreements, representations, and warranties of the
Cookson Entities under the Purchase Agreement shall survive the execution and
delivery of this Instrument to the extent set forth in the Purchase Agreement.
The representations and warranties made by the Cookson Entities in Article IV of
the Purchase Agreement are specifically incorporated herein by reference to the
extent they pertain to the Purchased Assets described in paragraph 1 above.
To the extent any terms and provisions of this Instrument are in any way
inconsistent with or in conflict with any term, condition or provision of the
Purchase Agreement, the Purchase Agreement shall govern and control.
* * * *
<PAGE>
IN WITNESS WHEREOF, this Instrument is duly executed and delivered as of
the date first above written.
BICKNELL HUSTON DISTRIBUTORS, INC.
By:
------------------------------
Its:
------------------------------
State of Illinois )
)
County of Cook )
SUBSCRIBED AND SWORN TO before me this __st day of December, 1997.
---------------------------------
Notary Public
My commission expires:
---------------------------------
<PAGE>
EXHIBIT A-2
[Intellectual Property Conveyance]
[To Come]
<PAGE>
EXHIBIT A-3
ASSIGNMENT OF LEASE
-------------------
This Assignment of Lease ("Assignment") is made this ____ day of
_________________, 19__, between ____________________________________________
("Assignor") and_____________________________________________________________
("Assignee") with reference to the following:
RECITALS:
--------
A. The ____________________________________________________ ("Landlord"),
as landlord, and Assignor, as tenant, executed a Lease covering certain premises
commonly known as __________________ (the "Premises") dated _____________,19 __
as amended by _________________________________________________________________
(collectively, "Lease"), a copy of which is attached hereto as Exhibit A,
pursuant to which Landlord leased to Assignor and Assignor leased from Landlord
that certain property, and improvements which are described in the Lease and
commonly known as
______________________________________________________________________ (the
"Premises").
B. Assignee is acquiring certain assets from Assignor pursuant to that
certain Asset Purchase Agreement dated ______________________, 19___, by and
between ______________________________________________________________________
___________________.
C. In connection with such asset acquisition, Assignor desires to assign
the Lease to Assignee, and Assignee desires to accept the assignment of the
Lease from Assignor.
For good and valuable consideration, the receipt and adequacy of which are
acknowledged, Assignor and Assignee agree as follows:
1. Assignment. Assignor grants, assigns and transfers to Assignee, its
successors and assigns, all right, title and interest in, to and under the Lease
and Assignee accepts from Assignor all right, title, and interest in the Lease,
subject to the terms and conditions set forth in this Assignment.
2. Assumption of Lease Obligation. Assignee assumes and agrees to perform
and fulfill all the terms, covenants, conditions, and obligations required to be
performed and fulfilled by Assignor as tenant under the Lease first arising or
occurring on or after the date hereof.
3. Assignor's Covenants. Assignor covenants that the copy of the Lease
attached as Exhibit A is a true, correct and complete copy of the Lease as
currently in effect and that there exists no other agreement affecting the
Assignor's tenancy under the Lease.
<PAGE>
4. Successors and Assigns. This Assignment shall be binding on and inure
to the benefit of the parties hereto, their successors and assigns. This
Assignment and the rights and obligations herein may not be transferred or
assigned by one party without the other party's written consent.
5. Counterparts. This Assignment may be signed in counterparts and, as so
executed, shall constitute a binding agreement.
6. Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the State of in which the Premises is located.
The parties have executed this Assignment as of the date first above
written.
ASSIGNOR: ASSIGNEE:
- ------------------------------ --------------------------------
By: By:
--------------------------- -----------------------------
Name: Name:
------------------------- ---------------------------
Title: Title:
------------------------ --------------------------
-2-
<PAGE>
EXHIBIT B
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated December __, 1997 between South Central Pool
Supply, Inc., a Delaware corporation ("Buyer") and Bicknell Huston Distributors,
Inc., a Massachusetts corporation ("Seller").
WHEREAS, pursuant to the Asset Purchase Agreement, dated as of November __,
1997 (the "Purchase Agreement"), by and among Buyer, Seller, SCP Pool
Corporation, a Delaware corporation, Pacific Industries, Inc., a Delaware
corporation ("Pacific"), and Cookson America, Inc., a Delaware corporation,
Seller has agreed to sell to Buyer, and Buyer has agreed to purchase from
Seller, the Purchased Assets (as defined in the Purchase Agreement); and
WHEREAS, in connection with the purchase of the Purchased Assets, pursuant
to Section 1.1(c) of the Purchase Agreement, Buyer has agreed to assume certain
liabilities and obligations of Seller as set forth in the Purchase Agreement.
NOW THEREFORE, the parties hereto agree as follows:
1. Buyer hereby undertakes on the terms and subject to the conditions set
forth in the Purchase Agreement to assume and pay, perform or discharge when due
the Assumed Liabilities (as defined in the Purchase Agreement);
2. Other than specifically stated above, Buyer assumes no liability or
obligation of Seller by this Agreement.
* * * *
IN WITNESS WHEREOF, the parties hereto have caused this Assumption
Agreement to be duly executed as of the date first above written.
BICKNELL HUSTON DISTRIBUTORS, INC.
By:
-------------------------------
Its:
------------------------------
SOUTH CENTRAL POOL SUPPLY, INC.
By:
-------------------------------
Its:
------------------------------
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Exhibit C
SUPPLY AGREEMENT
----------------
This Supply Agreement (this "Agreement") is made and entered into as of
December 31, 1997, by and among Pacific Industries, Inc., a Delaware corporation
("Supplier") and South Central Pool Supply, Inc., a Delaware corporation (the
"Buyer").
WHEREAS, the Buyer has, contemporaneously with the execution of this
Agreement, purchased substantially all of the assets of Bicknell Huston
Distributors, Inc., a Delaware corporation and an Affiliate of Supplier
("Seller"), pursuant to an Asset Purchase Agreement dated November 13, 1997 (the
"Purchase Agreement"), by and among Seller, Supplier, Cookson America, Inc.,
Buyer and SCP Pool Corporation; and
WHEREAS, as a condition to the sale of Seller's assets to Buyer, Buyer and
Supplier have agreed to enter into this Agreement;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein and to comply with the conditions of closing set
forth above and other good and valuable consideration, the receipt, adequacy and
sufficiency of which is hereby acknowledged, the parties hereto covenant and
agree as follows:
ARTICLE I.
----------
Definitions
-----------
1.1 "Affiliate" means, in the case of Buyer, an entity controlled by
either SCP Pool Corporation, a Delaware corporation and ultimate parent of
Buyer, or Buyer and, in the case of Supplier, an entity controlled by either
Cookson Group Plc, a United Kingdom corporation and ultimate parent of Supplier,
or Supplier. "Control" means the possession, directly or indirectly, of the
power to direct the management and policies of an entity whether through the
ownership of voting securities, contract or otherwise.
1.2 "Available Territory" means the State of California.
1.3 "BHD Territories" means the states of Maine, Vermont, New Hampshire,
New York, Connecticut, Massachusetts, New Jersey, Pennsylvania and Rhode Island.
1.4 "Buyer Group" means, at any time, Buyer and each of Buyer's Affiliates
and Subsidiaries.
1.5 "Calendar Quarter" means each consecutive period of three months
beginning on January 1, April 1, July 1 and October 1 during a Calendar Year.
1.6 "Calendar Year" means, in the case of the first year of this
Agreement, that period from the Closing Date through December 31, 1998.
Commencing January 1, 1999, the term "Calendar Year" shall mean each successive
12 month period commencing on January 1 and ending on the next succeeding
December 31, except that in the event this Agreement terminates or expires
* * * = Redacted pursuant to Confidential Treatment Order
1
<PAGE>
on any day other than December 31, then the last "Calendar Year" shall mean that
period from the end of the preceding Calendar Year to such date of termination
or expiration.
1.7 "Closing Date" has the meaning given to such term in the Purchase
Agreement.
1.8 "Current Products" means (i) polymer panels, braces, steps, in ground
liners manufactured or sold by any member of the Supplier Group and (ii) any
products manufactured by any member of the Supplier Group that are substantially
similar in form and function to the items listed in clause (i); provided that
"Current Products" shall not include any products that Buyer is currently
contractually obligated to purchase from Bio-Lab, Inc. or PPG Industries.
1.9 "Existing Customers" means Supplier's customers existing as of
September 3, 1997 and who are listed on Exhibit 1.9 attached hereto.
1.10 "Force Majeure" means and includes any circumstance to the extent
beyond the reasonable control of the party so affected, including without
limitation, the following: any act of nature or public enemies, explosion, fire,
storm, earthquake, flood, drought, perils of the sea, casualty, breakdown of
plant, strikes, lock-outs, labor troubles or shortages, lack of transportation,
riots, shortage of product or raw materials, sabotage, embargo, war, changes in
governmental laws or regulations, or seizure; in each case for reasons other
than the adverse financial condition of the party so affected.
1.11 * * * means, with respect to any particular Calendar Year in which
the Minimum Volume Requirement has been satisfied by Buyer in such Calendar
Year, an amount equal to the product of: (i) the result of (a) the * * *
Supplier as a result of the sale of * * * in such Calendar Year less all * * *
Supplier Group in the * * * of such * * * in such Calendar Year (consisting of
all * * * (using the prime rate from time to time in effect at Fleet national
Bank), and * * * ) as reflected in the books and records of the Supplier Group
in accordance with generally accepted accounting principles consistently
applied, divided by (b) the * * * Supplier as a result of the sale of * * * in
such Calendar Year multiplied by (ii) the amount by which the * * * Supplier as
a result of the sale of * * * in such Calendar Year * * * for such Calendar
Year. For purposes of clarification only, attached hereto as Exhibit 1.11 is an
example of the calculation of * * *.
1.12 "Liners-To-Go" means Supplier's in stock one pattern liner program
consisting of standard stocked sizes which are outlined and defined in the
Pacific Handbook pricing pages and also on a one page promotional reference
guide. (Sizes and patterns subject to change on an annual basis).
1.13 "Minimum Volume Requirement" means the amount set forth on Exhibit
1.13 attached hereto, as adjusted from time to time in accordance with the terms
of this Agreement.
1.14 "Net Margins" with respect to any polymer pool kits means the result
of one minus the result of (i) the Net Purchase Price paid by Buyer for such
polymer pool kits divided by (ii) the net invoice price received by Buyer from
the sale of such polymer pool kits (after deduction of any
2
<PAGE>
prompt payment discounts), in each case determined in accordance with generally
accepted accounting principles.
1.15 "Net Purchase Price" with respect to any Product means the invoice
price for the Product less any SPP freight paid by Supplier, discounts, rebates,
credits, returns or allowances with respect thereto.
1.16 "New Customer" means any of Supplier's customers or proposed
customers not listed on Exhibit 1.8 attached hereto.
1.17 "New Products" means any swimming pool supplies or related products
manufactured or sold by any member of the Supplier Group that are not
substantially similar in form and function to Current Products; provided that
"New Products" shall not include (a) any steel pool products or (b) any products
that Buyer is currently contractually obligated to purchase from Bio-Lab, Inc.
or PPG Industries.
.
1.18 "Non-Exclusive Products" means any above ground liners, above ground
ladders, safety covers, steel pool products, PVC cements or coping.
1.19 "Products" means, collectively, the Current Products, Non-Exclusive
Products and the New Products.
1.20 "SPP" means Supplier's seasonal purchase plan offered to Buyer for
all Buyer's purchases of Products (other than special order liners) that are
ordered by Buyer on or after November 1 of any Calendar Year and shipped by
Pacific on or prior to December 20 of such Calendar Year on terms and conditions
more fully described in Section 7.6 hereof.
1.21 "Subsidiary" mean, with respect to either Buyer or Seller, any
corporation, partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such party or one or more of the other Subsidiaries
of such party or a combination thereof, or (ii) if a partnership, limited
liability company, association or other business entity, a majority of the
partnership, limited liability company or other similar ownership interests
thereof is at the time owned or controlled, directly or indirectly, by such
party or one or more Subsidiaries of such party or a combination thereof. For
purposes hereof, a party or parties shall be deemed to have a majority ownership
interest in a partnership, limited liability company, association or other
business entity if such a party or parties shall be allocated a majority of
partnership, limited liability company, association or other business entity
gains or losses or shall be or control the managing director, general partner or
manager of such partnership, limited liability company, association or other
business entity.
1.22 "Supplier Group" means, at any time, Supplier and each of Supplier's
Affiliates and Subsidiaries.
3
<PAGE>
ARTICLE II.
-----------
Sale of Products
----------------
2.1 Sale of Products. During the Term of this Agreement, and on the terms
and subject to the conditions of this Agreement, Supplier shall sell to Buyer
Group all Products requested to be purchased by Buyer Group and Buyer Group
shall purchase from Supplier (i) 100% of Buyer Group's requirements for Current
Products and above ground liners and coping in the BHD Territories, (ii) 100%
of Buyer Group's requirements for polymer panels and polymer braces in the
United States, (iii) * * * of Buyer Group's requirements for in-ground steps
in the United States, (iv) * * * (or, in the case of Calendar Year 1998,* * *)
of Buyer Group's requirements for in-ground liners in the United States and
(v) * * * of Buyer Group's requirements for coping in the BHD Territories.
2.2 Current Products.
(a) Subject to Buyer satisfying the purchase requirements under
Section 2.1 and subject to the provisions of this Section 2.2, no member of the
Supplier Group shall sell any Current Products anywhere in the United States
(other than the Available Territories) to any party other than Buyer; provided,
however, (i) such restriction shall not apply to any of the Non-Exclusive
Products; (ii) such restriction shall not apply to sales of Current Products
where the net invoice price for the transaction does not exceed $5,000 and the
total amount of such transactions in any Calendar Year do not exceed $50,000 in
the aggregate; and (iii) such restriction shall not apply to sales of Current
Products to satisfy any product warranty claim.
(b) Notwithstanding anything in subsection (a) above to the contrary,
Supplier may sell all Current Products to Existing Customers and, upon the
mutual agreement of Buyer and Supplier, any New Customers; provided, however,
Buyer shall receive from Supplier an amount within 30 days after each Calendar
Quarter equal to * * * of the Net Purchase Price on all sales of Current Product
during such Calendar Quarter to (i) any Existing Customer at a location other
than the location listed opposite such Existing Customer's name on Exhibit 1.8
attached hereto or, if any such Existing Customer relocated from an existing
location specified on Exhibit 1.8 attached hereto to a new location no more than
40 miles from such existing location, at such new location, (ii) New Customers,
and (iii) with respect to polymer panels and braces only, Existing Customers
listed on Exhibit 1.9 attached hereto and not marked with and asterisk (*). In
addition to the payment provided in the immediately preceding sentence, the
Minimum Volume Requirement for the Calendar Year in which such Calendar Quarter
is included shall be reduced dollar for dollar by the Net Purchase Price paid
for the Products described in clauses (i) and (ii) above.
(c) No member of the Supplier Group may sell Current Products to any
New Customer in the Available Territory unless Supplier complies with the
provisions of this subsection (c). In the event that Supplier desires to sell
any Current Product to any New Customer in the Available Territory, Supplier
shall provide a written notice (a "Supplier's Notice") to Buyer, which notice
shall specify the Current Product proposed to be sold and the territory in which
the Current Product is proposed to be sold. Supplier shall provide Buyer after
delivery of the Supplier's Notice with any other information reasonably
requested by Buyer. Buyer shall have 30 days after receipt of the Supplier's
Notice to provide a written notice (a "Buyer's Notice") to Supplier of Buyer's
4
<PAGE>
reasonable intention to service the local dealer base in the specified territory
with the specified Current Product within 60 days after receipt of Supplier's
Notice. If Buyer delivers a Buyer's Notice to Supplier, and Buyer has
demonstrated to the satisfaction of Supplier that Buyer is capable of servicing
the local dealer base in the specified territory, Supplier shall use
commercially reasonable efforts to assist Buyer in establishing a mechanism to
adequately service the local dealer base in the specified territory with the
specified Current Product within 60 days after Buyer's receipt of Supplier's
Notice. If within 60 days after receipt of Supplier's Notice Buyer has
demonstrated to the satisfaction of Supplier its ability to adequately service
the local dealer base in the specified territory with the specified Current
Product, Supplier shall sell such Current Product exclusively to Buyer in the
specified territory. In the event that Buyer (i) has not delivered a Buyer's
Notice to Supplier within such 30 day period or (ii) Buyer has been unwilling or
unable to demonstrate to the satisfaction of Supplier its ability to adequately
service the local dealer base in the specified territory with the specified
Current Product, Supplier may sell such Current Product in the specified
territory to any New Customer.
(d) The Minimum Volume Requirement shall be reduced for each Calendar
Year by any purchases of Current Products by New Customers pursuant to
subsection (c) above during such Calendar Year. In addition, in the event Buyer
begins selling Current Products in the Available Territory, Supplier shall
provide Buyer with a * * * of Current Products to such New Customer in the
Available Territory. Notwithstanding anything herein to the contrary, the
Supplier Group may sell without restriction any Current Products in the
Available Territory to any New Customer pursuant to a product warranty claim and
any such sales shall not reduce the Minimum Volume Requirement or require the
* * * as a result of each sale.
2.3 New Products.
(a) No member of the Supplier Group shall sell any New Products to any
customer anywhere in the United States during the term of this Agreement except
in accordance with the provisions of this Section 2.3.
(b) If any member of the Supplier Group desires to sell any New
Products anywhere in the United States, Supplier shall provide Buyer with a
written notice (a "First Refusal Notice") specifying the details of such
proposed sale, including the proposed New Product, the proposed price, the
proposed product warranty, and the proposed reasonable minimum volume of
purchases of the New Product to be required to be purchased on an annual basis.
After receipt of the First Refusal Notice by Buyer, Supplier will provide Buyer
any other information reasonably requested by Buyer. Buyer shall have 30 days
from the date of receipt of a First Refusal Notice to notify Supplier that it
desires to purchase the specified New Products on the terms specified in the
First Refusal Notice. If Buyer delivers to Supplier a written notice within such
30 day period of Buyer's intent to purchase the New Product on the terms
specified in the First Refusal Notice, Supplier shall sell such New Products
exclusively to Buyer in the United States as long as the requirements for the
minimum volume of purchases to be made annually is satisfied by Buyer. If Buyer
does not deliver a notice to Supplier of Buyer's intention to purchase the
specified New Product within 30 days after Buyer's receipt of a First Refusal
Notice, Supplier may commence selling the New Product anywhere in the United
States, provided, however, no other party is given any exclusive rights to the
New Product in the United States at a price and on terms, including minimum
volume requirements, more favorable than those specified in the First Refusal
Notice. In
5
<PAGE>
the event Supplier intends to grant to a third party exclusive rights in the
United States to the New Product on terms more favorable, including lower price
and lower minimum volume requirement, than offered to Buyer, then Supplier must
deliver a new First Refusal Notice to Buyer in accordance with the terms of this
subsection (b) prior to selling the specified New Products. If Buyer fails to
satisfy the minimum volume requirements for a New Product in any Calendar Year
(other than as a result of Supplier's failure to supply such New Products or an
event of Force Majeure) after exercising its rights under the First Refusal
Notice, then Supplier shall notify Buyer in writing thereof and shall have 60
days to cure the same by purchasing quantities of such New Product to satisfy
the volume requirement for the prior year. If Buyer fails to cure such failure
or satisfy the minimum volume requirement with such 60 day period, then Supplier
may commence selling the New Product anywhere in the United States.
2.4 Forecasts. On or before November 15 of each Calendar Year, Buyer shall
submit to Supplier a forecast of the Buyer's estimated purchases of Products
from Supplier by Product for the following Calendar Year (the "Annual
Forecast"); provided that Buyer may submit to Supplier the Annual Forecast for
Calendar Year 1998 at any time on or prior to February 15, 1998. Buyer shall
update the Annual Forecast from time to time as necessary to reflect anticipated
changes in the Buyer's requirements, and at minimum, shall update the Annual
Forecast each Calendar Quarter, except in the case of special order liners,
which shall be updated on a monthly basis. Buyer shall have no obligation to
purchase the forecast quantity of Products.
2.5 Force Majeure.
(a) Supplier shall not be liable for its failure to produce,
transport or deliver any of the Products, or to otherwise perform its
obligations hereunder, if such failure is due to an event of Force Majeure.
Similarly, Buyer shall not be liable for its failure to take delivery of any of
the Products or to otherwise perform its obligations hereunder if such failure
is due to an event of Force Majeure. Any party suffering an event of Force
Majeure shall use all commercially reasonable efforts to remove such cause or
causes as promptly as practicable and shall promptly notify the other party of
the existence of the event of Force Majeure, and the expected delays and the
estimated effect upon performance to result therefrom in terms of the Products
and geographic region involved (which notices shall be updated monthly during
the event of the Force Majeure).
(b) Should an event of Force Majeure require Supplier to allocate
Product, Supplier shall do so on a basis so that Buyer receives its pro rata
share based upon the percentage of the then current Annual Forecast for Product
bears to Supplier's estimates of its total requirements for Product to all of
its customers (including Buyer) during such period. The Minimum Volume
Requirement for the applicable Calendar Year shall be reduced by any Product
deliveries omitted hereunder as a result of either party's failure to perform
its obligations hereunder due to an event of Force Majeure.
(c) If, due to an event of Force Majeure, Supplier cannot deliver any
of the Products to Buyer, Buyer may, notwithstanding anything in Section 2.1
hereof to the contrary, during the period such event of Force Majeure exists
and, if such event of Force Majeure exists for less than 90 days, for a period
of 60 days after the event of Force Majeure expires or, if such event of Force
Majeure exists for 90 or more days, for a period of 90 days after the event of
Force Majeure expires, purchase such Products, to the extent Supplier cannot
deliver the same, from a third party,
6
<PAGE>
which right shall be the sole recourse and remedy of Buyer against Supplier as a
result thereof; provided that during the 60 or 90 day period following the
expiration of the event of Force Majeure (as the case may be), Buyer may
purchase the applicable Product from a supplier other than Supplier to the
extent the event of Force Majeure caused Buyer to purchase such Product from
such other supplier during such event of Force Majeure. If, due to an event of
Force Majeure, Buyer cannot purchase or accept delivery of any of the Products
from Supplier, during the period such event of Force Majeure exists and, if such
event of Force Majeure exists for less than 90 days, for a period of 60 days
after the event of Force Majeure expires or, if such event of Force Majeure
exists for 90 or more days, for a period of 90 days after the event of Force
Majeure expires, then the restrictions and limitations on the ability of
Supplier to sell Products under Section 2.2 or Section 2.3, as the case may be,
with respect to such Product or Products shall not apply to the extent Buyer
cannot purchase or accept delivery of such Product, which right shall be the
sole recourse and exclusive remedy of Supplier against Buyer as a result
thereof; provided that during the 60 or 90 day period following the expiration
of the event of Force Majeure (as the case may be), Supplier may sell the
applicable Product to a customer other than Buyer to the extent the event of
Force Majeure caused Supplier to sell such Product to such other customer during
such event of Force Majeure.
2.6 Purchase Orders.
(a) All sales and purchases under this Agreement shall be made upon
written or electronic purchase orders sent by Buyer to Supplier. All purchase
orders shall specify the type and quantity of Products to be delivered and
Buyer's preferred date and location of delivery. In case of a conflict between
any of the terms contained in a written or electronic purchase order and any of
the terms of this Agreement, the terms of this Agreement shall control. No
additional terms or conditions of sale other than those contained in this
Agreement shall be effective unless approved in writing by an authorized officer
of Buyer and Supplier.
(b) Buyer and Supplier shall use their reasonable efforts to mutually
develop and implement an electronic data interchange system for processing
Buyer's orders with Supplier that meets industry standards prior to the second
anniversary of the Closing Date. Buyer and Supplier shall each pay their own
costs and expenses of developing and implementing such system.
ARTICLE III.
------------
Price and Payment
-----------------
3.1 Price.
(a) The initial price for the Current Products shall be as set forth
in Exhibit 3.1(a) attached hereto. The initial price for New Products shall be
set by Supplier based on its market place requirements. Prices of Products shall
be adjusted as provided in subsections (b), (c) and (d) below.
(b) The prices of any Products shall be increased or decreased
dollar-for-dollar to reflect increases or decreases, respectively, in Supplier's
direct raw material costs and direct
7
<PAGE>
production costs (including, without limitation, labor and variable overhead
costs) for such Products. In the event of any price adjustments, Supplier shall
deliver to Buyer a written notice detailing the components thereof. Price
adjustments due to changes in raw material costs shall occur at the end of the
Calendar Quarter and shall take effect at the beginning of the immediately
following Calendar Quarter, and price adjustments due to changes in direct
production costs shall occur at the end of the Calendar Year (based upon actual
changes through November 1 of such Calendar Year and good faith estimates for
the remainder of such Calendar Year) and shall take effect at the beginning of
the immediately following Calendar Year; provided that price increases shall
only take effect at the end of the Calendar Quarter or Calendar Year, as the
case may be, occurring at least 30 days after the Supplier has delivered to
Buyer written notice thereof. Price adjustments shall only apply to Product
orders received by Supplier after such price adjustments take effect.
(c) Supplier recognizes that Buyer may deem it necessary or advisable
to price its polymer pool kits to certain customers * * * . In such event, and
provided that Buyer purchases from Supplier * * * of the polymer panels, in
ground steps and in ground liners used in such polymer pool kits, Supplier shall
* * * polymer panels, in ground steps and in ground liners used in such polymer
pool kits * * * described in this Section 3.1(c) shall be * * * will be made as
promptly as practicable, but in no event later than the end of the first
Calendar Quarter of the immediately following Calendar Year.
(d) Prior to offering any customer a * * * described in (c) above,
Buyer's branch location shall inform Buyer's regional manager of such sale, and
Buyer shall use good faith efforts to provide written notice thereof to the Vice
President of Sales of Supplier within 15 days after such sale, which notice
shall detail the * * * and the components thereof and Buyer shall provide
Supplier with any other information reasonably requested by Supplier thereafter.
3.2 Payment. Prior to the second anniversary of the Closing Date, payment
terms for the Products shall be * * * from the date of Supplier's invoice.
Beginning on the second anniversary of the Closing Date, payment terms for the
Products shall be * * * from the date of Supplier's invoice. Notwithstanding the
foregoing, payment terms for all Products purchased during any Calendar Year in
the SPP shall be as follows: * * * of the invoice amount shall be due on April 1
of the immediately following Calendar Year,* * * of the invoice amount shall be
due on May 1 of the immediately following Calendar Year, and * * * of the
invoice amount shall be due on June 1 of the immediately following Calendar
Year. Unless otherwise directed by Buyer, payments received from Buyer for
purchases hereunder shall be applied by Supplier to Buyer's oldest then existing
monetary obligations to Supplier for purchases made hereunder. If any payment
due is more than ten (10) days overdue based upon the payment terms applicable
as provided above, then Buyer shall also pay to Supplier an amount equal to one
and one-half (1.5%) percent of the overdue amount for each month or portion
thereof such amount is overdue, except to the extent such payment is overdue
because of an error in shipping or billing.
3.3 Volume Rebates.
(a) In addition to all * * * pursuant to this Agreement, (i) Supplier
shall * * * of all of Buyer's purchases of Products and (ii) with respect to
each Calendar Year, Supplier shall * * * of all of Buyer's purchases of Products
* * * of the Minimum Volume Requirement for such Calendar Year.
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<PAGE>
(b) All * * * shall be * * * Supplier within 30 days after the end of
each Calendar Quarter based on Buyer's purchases of Products during such
Calendar Quarter. All * * * with respect to the first Calendar Year during which
the amount of Products purchased by Buyer * * * shall be * * * Supplier no later
than the end of the first Calendar Quarter of the immediately following Calendar
Year. All * * * with respect to each Calendar Year thereafter shall be * * *
Supplier within 30 days after the end of the month in which the amount of
Products purchased by Buyer * * * and within 30 days after the end of each month
thereafter during such Calendar Year in an amount equal to Supplier's good faith
estimate of * * * of the * * * that has accrued during each such month. The
remaining * * * of the * * * with respect to each such Calendar Year and any
adjustments to the * * * for such Calendar Year shall be * * * Supplier as soon
as practicable after such Calendar Year, but in no event later than the end of
the first Calendar Quarter of the immediately following Calendar Year.
(c) In the event Supplier is required to * * * pursuant to
subsections (a)(ii) above, Supplier shall deliver a written notice thereof to
Buyer detailing the * * * and the components thereof.
3.4 Penalty Payments.
(a) If with respect to any Calendar Year the total Net Purchase Price
of Products purchased by Buyer Group for such Calendar Year are less than the
Minimum Volume Requirement for such Calendar Year (the amount of such deficiency
being a "Shortfall"), Buyer shall pay to Supplier a penalty payment (the
"Penalty Payment") equal to the product of (i) the amount of the Shortfall
multiplied by (ii)* * * multiplied by (iii)* * *
(b) Notwithstanding anything in subsection (a) above to the contrary,
so long as Buyer Group has achieved the Minimum Percentage Requirements for the
applicable Calendar Year in each of the categories of Products set forth in
subsection (c) below, the amount of the Penalty Payment for such Calendar Year
shall in no event * * * .
(c) Notwithstanding anything in subsection (a) above to the contrary,
if the aggregate Net Purchase Price on all Products purchased by the Buyer Group
during the Calendar Year 1997 SPP * * * , then, for purposes of computing the
Penalty Payment pursuant to this Section 3.4 only, the Minimum Volume
Requirement shall be reduced for the 1998 Calendar Year dollar-for-dollar by the
amount of such excess.
(d) The "Minimum Percentage Requirements" for any Calendar Year shall
be achieved if, with respect to each of the Products listed below, the result of
(i) the total Net Purchase Price on such Products purchased by Buyer Group from
the Supplier during such Calendar Year divided by (ii) the aggregate amount of
the net purchases by Buyer Group of such Product and products substantially
similar to such Product from all suppliers (including Supplier) during such
Calendar Year is equal to or greater than the percentages listed below:
<TABLE>
<CAPTION>
Product Minimum Percentage Requirement
------- -------------------------------
<S> <C>
Polymer Panels and Braces * * *%
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Ground Steps * * *%
In Ground Liners * * * %;
</TABLE>
provided that the "Minimum Percentage Requirement" for in ground liners for
Calendar Year 1998 shall be * * * %.
(e) Penalty Payments with respect to any Calendar Year shall be paid
by Buyer to Supplier no later than the end of the first Calendar Quarter of the
immediately following Calendar Year.
3.5 Most Favored Pricing. Notwithstanding anything in this Agreement to
the contrary, Buyer's purchase price for any particular Product shall * * * for
such Product during the Calendar Quarter in which Supplier receives Buyer's
purchase order for such Product; provided that, with respect to any customer,
the aggregate * * * for any Products purchased by such customer during any
Calendar Year may * * * the aggregate purchase price paid by Buyer during such
Calendar Year for the same quantity of such Products. The * * * of a particular
Product shall be * * * of Supplier for such Product at any time during the same
Calendar Quarter; provided that, with respect to New Products only, the * * *
shall not apply to purchases of New Products by Buyer as compared to the * * *
to any other customer during a Calendar Quarter where the quantity of New
Product purchased by such other customer in such Calendar Quarter exceeds the
quantity purchased by Buyer. Notwithstanding anything therein to the contrary,
any pricing provided to an Existing Customer under any pre-existing settlement
agreement, and any amendment thereto, between Supplier and an Existing Customer
* * *, which survive no longer than two years after the date of this Agreement,
shall be an exception to the provision of this Section 3.5.
ARTICLE IV.
-----------
Title and Risk of Loss; Acceptance and Return of Products
---------------------------------------------------------
4.1 Title, Shipment and Risk of Loss.
(a) Subject to the provisions of this Section 4.1, all Products shall
be shipped to the destination specified by Buyer F.O.B. Supplier's plant. Title
and risk of loss to all Products purchased by Buyer shall pass to Buyer upon
delivery of the Products to the common carrier for shipment to or for Buyer.
(b) In the case of all Products other than liners, Supplier shall
prepay freight charges if the Product is not shipped within five business days
after Supplier's receipt of Buyer's purchase order; provided that if within 2
business days after Supplier's receipt of Buyer's purchase order Supplier
notifies Buyer that an ordered Product is on backorder, Supplier shall only be
required to pay freight charges if the ordered Products are not shipped within
10 business days after Supplier's receipt of Buyer's purchase order, provided
such purchase order requires immediate shipment. Notwithstanding the foregoing,
Buyer may require Supplier to ship the ordered Products (other than the
backordered Product) immediately, in which case Buyer shall pay freight charges
for
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<PAGE>
such Products (including the backordered Product); provided that Supplier shall
pay freight charges for the backordered Product if such Product is not shipped
within 10 business days after Supplier's receipt of Buyer's purchase order. If
any Products (other than liners) are not shipped within 10 business days after
receipt of Buyer's purchase order, Buyer shall have the right, at its option, to
purchase such Products to the extent ordered and not shipped from a third party,
and the Minimum Volume Requirement for the applicable Calendar Year shall be
reduced by the amount of such purchases, which shall be the sole recourse and
exclusive remedy available to Buyer against Supplier as a result thereof.
(c) In the case of liners, Supplier shall prepay freight charges if
the liners are not shipped within, in the case of Liners-To-Go, five business
days after Supplier's receipt of Buyer's purchase order, in the case of
manufactured-to-order liners, seven business days after Supplier's receipt of
Buyer's purchase order and, in the case of hand-layout liners, fifteen business
days after Supplier's receipt of Buyer's purchase order; provided that if the
amount of liners ordered in any month exceeds the amount of liners specified in
the Annual Forecast for that month (as updated from time to time), Supplier
shall only be required to prepay freight charges for the excess amount of liners
if they are not shipped within, in the case of Liners-To-Go, five business days
after Supplier's receipt of Buyer's purchase order, in the case of manufactured-
to-order liners, 14 business days after Supplier's receipt of Buyer's purchase
order and, in the case of hand-layout liners, 22 business days after Supplier's
receipt of Buyer's purchase order. In the event that Supplier is unable or
reasonably anticipates that it will be unable to ship the excess amount of
liners within 5, 14 or 22 business days (as the case may be) after Supplier's
receipt of Buyer's purchase order, Supplier shall promptly notify Buyer thereof.
Upon receipt of such notice, and in any event upon the failure of Supplier to
deliver the excess amount within 5, 14 or 22 business days (as the case may be)
after Supplier's receipt of Buyer's purchase order, Buyer shall have the right,
at its option, to purchase such excess amount of lines from a third party, and
the Minimum Volume Requirement for the applicable Calendar Year shall be reduced
by the amount of such purchases, which shall be the sole recourse and exclusive
remedy available to Buyer against Supplier as a result thereof. In the case of
manufactured-to-order liners, for purposes of this paragraph (c) Buyer's
purchase order shall only be deemed received by Supplier if Buyer's purchase
order is accurate and correct.
(d) Notwithstanding anything in subsections (b) or (c) to the
contrary, five business days shall be added to each time period specified in
subsections (b) and (c) above for all purchase orders received by Supplier
during the period of each Calendar Year beginning five business days immediately
prior to Memorial Day and ending on the fifth business day after Memorial Day.
(e) 50% of freight charges on all Products purchased by Buyer in the
SPP will be paid by Supplier by credit to final payment, provided all payments
due for Products purchased under the SPP are made when due.
4.2 Acceptance of Products; Return of Products. In the event of any
Deficiency (as hereinafter or defined), Buyer shall notify Supplier of such
Deficiency within 15 days after Buyer becomes aware of such Deficiency. Buyer
shall (at Supplier's cost) return such Products to a location specified by
Supplier and Supplier shall (at Supplier's option) either replace such Product
or provide buyer with a credit or refund for the purchase price of such Product
(including freight charges). For purposes of this Section 4.2, the term
"Deficiency" shall mean either (i) any shortages
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<PAGE>
in a shipment of Product, (ii) any shipment of incorrect Products or (iii) as
determined by Supplier, any Products which were in a damaged or defective
condition prior to shipment by Supplier. In the event of any Deficiency relating
to at least $100,000 of Products, if Supplier does not provide Buyer with
replacement Products within 15 days after receipt of Buyer's notice, Buyer shall
be entitled to purchase up to the amount such Products from a third party, and
the Minimum Volume Requirements shall be reduced by the amount of Products
actually purchased from a third party.
ARTICLE V.
----------
Term
----
5.1 Term. Unless terminated sooner as expressly permitted by Section 5.2
hereof, this Agreement shall be in full force and effect for an initial term of
eight (8) years beginning on the date hereof and will continue thereafter for
successive renewal periods of three (3) years each unless and until terminated
by either party at the end of the eight (8) year initial term or at the end of
any three (3) year renewal period upon at least two (2) years prior written
notice.
5.2 Early Terminations. This Agreement may be terminated prior to the
expiration of the initial term or any renewal period as follows:
(a) If an event of Force Majeure prevents a party from substantially
performing its obligations hereunder, the other party may immediately terminate
this Agreement if (i) the notice delivered by the nonperforming party pursuant
to Section 2.5(a) hereof (including any monthly updates) states that the event
of Force Majeure is anticipated to continue to prevent such party from
substantially performing its obligations hereunder for at least twelve months
or, in the case of a Force Majeure event affecting Supplier, is anticipated to
affect more than one of Buyer's selling seasons (a selling season being from
April 1st through June 30th of each Calendar Year) or (ii) the event of Force
Majeure actually prevents such party from substantially performing its
obligations hereunder for at least twelve months or, in the case of a Force
Majeure event affecting Supplier, actually affects more than one of Buyer's
selling seasons (a selling season being from April 1st through June 30th of each
Calendar Year). In the event of a termination pursuant to this subsection (a),
there will be no liability on the part of any party to any other party hereto,
except that nothing herein will relieve any party from any breach of this
Agreement prior to such termination.
(b) If an event of Force Majeure prevents a party from substantially
performing its obligations hereunder with respect to a particular Product, the
other party may immediately partially terminate this Agreement with respect to
such Product (and only with respect to such Product) if (i) the notice delivered
by the nonperforming party pursuant to Section 2.5(a) hereof (including any
monthly updates) states that the event of Force Majeure is anticipated to
continue to prevent such party from substantially performing its obligations
hereunder with respect to such Product for at least twelve months or, in the
case of a Force Majeure event affecting Supplier, is anticipated to affect more
than one of Buyer's selling seasons (a selling season being from April 1st
through June 30th of each Calendar Year) or (ii) the event of Force Majeure
actually prevents such party from substantially performing its obligations
hereunder with respect to such Product for at least twelve months or, in the
case of a Force Majeure event affecting Supplier, actually affects more than one
of Buyer's selling seasons (a selling season being from April 1st through June
30th of each Calendar Year). In the event of a partial termination pursuant to
this subsection (b), there will be
12
<PAGE>
no liability on the part of any party to any other party hereto, except that
nothing herein will relieve any party from any breach of this Agreement prior to
such termination.
(c) In addition to all other rights of Buyer to terminate this
Agreement hereunder, Buyer may terminate this Agreement at any time in its sole
discretion upon 90 days prior written notice delivered to Supplier. In
connection with a termination of this Agreement pursuant to this subsection (b),
Buyer (i) authorizes Supplier to immediately ship all Product under open
purchase orders, (ii) shall pay all outstanding invoices within 30 days of the
date of receipt of the invoice, and (iii) shall pay to Supplier, in addition to
the amounts under subclause (ii) above, the amount of $12,000,000, which shall
be paid to Supplier in three annual installments of $4,000,000 beginning on the
date of termination. In connection with a termination of this Agreement pursuant
to this subsection (c), Supplier shall settle with and credit to the account of
Buyer no later than the termination date all outstanding payments payable to
Buyer hereunder. In the event of a termination pursuant to this subsection (b),
there will be no liability on the part of any party to any other party hereto
(other than the payments and other obligations described in this subsection
(b)), except that nothing herein will relieve any party from any breach of this
Agreement prior to such termination.
(d) Upon the occurrence of any event of default (as described in
Sections 5.3 and 5.4 hereof), and during the continuance thereof the non-
defaulting party, at its option, and without prejudice to other lawful remedies
which may be available, may elect to terminate this Agreement upon 30 days'
prior written notice.
5.3 Events of Default by Buyer. Buyer shall be in default if any one or
more of the following events shall happen:
(i) Buyer shall fail to perform or comply with any of the
material terms or conditions of this Agreement for reasons other than an
event of Force Majeure if such failure results in a Material Breach (as
defined in Section 5.7 hereof) and such failure shall continue without cure
for a period of 90 days after written notice thereof from Supplier to
Buyer;
(ii) Filing by Buyer of a voluntary petition of bankruptcy or a
voluntary petition or answer seeking reorganization, rearrangement or
readjustment of its debts, or any relief under any bankruptcy or insolvency
act or law, now or hereafter existing, or any agreement by Buyer indicating
consent to, approval of, or acquiescence in, any such petition or
proceeding;
(iii) The application by Buyer or the consent or acquiescence of
Buyer in the appointment of a receiver or trustee for all or a substantial
part of any of its properties or assets;
(iv) The making by Buyer of a general assignment for the benefit
of creditors;
(v) The admission of Buyer in writing of its inability generally
to pay its debts as they mature; or
13
<PAGE>
(vi) The filing of an involuntary petition against Buyer seeking
reorganization, rearrangement, or readjustment of its debts or for any
other relief under any bankruptcy or insolvency act or law, now or
hereafter existing, or the involuntary appointment of a receiver or trustee
for Buyer for all or a substantial part of its property or assets, or the
issuance of a warrant of attachment, or execution of similar process
against a substantial part of the property of Buyer and the continuance of
such for 90 days undismissed or undischarged.
5.4 Events of Default by Supplier. Supplier shall be in default if any one
or more of the following events happen:
(i) Supplier shall fail to perform or comply with any of the
material terms or conditions of this Agreement, for reasons other than an
event of Force Majeure if such failure results in a Material Breach, and
such failure shall continue without cure for a period of 90 days after
receipt of written notice thereof from Buyer to Supplier;
(ii) The filing by Supplier of a voluntary petition of bankruptcy
or a voluntary petition or answer seeking reorganization, rearrangement, or
readjustment of its debts, or any relief under any bankruptcy or insolvency
act or law, now or hereafter existing, or any Agreement by Supplier
indicating consent to, approval of, or acquiescence in, any such petition
or proceeding;
(iii) The application by Supplier or the consent or acquiescence
of Supplier in the appointment of a receiver or trustee for all or a
substantial part of any of its properties or assets;
(iv) The making by Supplier of a general assignment for the
benefit of creditors;
(v) The admission of Supplier in writing of its inability
generally to pay its debts as they mature; or
(vi) The filing of an involuntary petition against Supplier
seeking reorganization, rearrangement or readjustment of its debts or for
any other relief under any bankruptcy or insolvency act or law, now or
hereafter existing, or the involuntary appointment of a receiver or trustee
for Supplier for all or a substantial part of its property or assets, or
the issuance of a warrant of attachment, or execution of similar process
against a substantial part of the property of Supplier and the continuance
of such for 90 days undismissed or undischarged.
5.5 Right to Damages. Notwithstanding anything herein to the contrary,
neither Buyer nor Supplier shall have the right to terminate this Agreement as a
result of any breach or default by the other party of any of the terms of this
Agreement, except in accordance with and to the extent expressly provided for in
Section 5.3(i) and Section 5.4(i). In the event any breach or default of this
Agreement does not satisfy the requirements of Section 5.3(i) or Section 5.4(i),
then the sole and exclusive remedy shall be the recovery of damages, injunctive
relief or specific performance, if appropriate, but not the termination of this
Agreement.
14
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5.6 Open Orders. Upon the termination of this Agreement, Buyer shall
continue to be obligated to make any payments outstanding hereunder and to pay
for Products shipped under open orders.
5.7 Definition of Material Breach. For purposes of this Agreement, a
"Material Breach" shall means any breach or breaches by the breaching party
under this Agreement of its obligations hereunder that results in or will result
in the other party incurring damages, liabilities, losses, costs or expenses in
an aggregate amount of Two Million ($2,000,000) Dollars or more.
ARTICLE VI.
-----------
Product Warranties; Indemnification
-----------------------------------
6.1 Product Warranties. (a) Notwithstanding anything herein to the contrary
(but subject to the terms of Section 6.2 below), the warranties provided by
Supplier on any of the Products shall be limited to the terms and conditions of
the Standard Product Warranty attached hereto as Exhibit 6.1 for each of the
Current Products and the product warranty provided in connection with the Right
of First Refusal Notice for any New Product (collectively, the "Standard Product
Warranty").
(b) EXCEPT AS PROVIDED IN THE STANDARD PRODUCT WARRANTY SET FORTH
ABOVE FOR EACH OF THE PRODUCTS, SUPPLIER DOES NOT MAKE AND SHALL NOT BE DEEMED
TO HAVE MADE, AND SUPPLIER HEREBY DISCLAIMS, ANY REPRESENTATION OR WARRANTY,
EXPRESSED OR IMPLIED, AS TO THE CONDITION OR THE QUALITY OF ANY MATERIAL OR
WORKMANSHIP IN THE PRODUCTS, AND SUPPLIER MAKES NO WARRANTY OF MERCHANTABILITY
OR FITNESS OF THE PRODUCTS FOR ANY PARTICULAR PURPOSE.
6.2 Indemnification.
(a) Notwithstanding anything to the contrary in the Standard Product
Warranty, Supplier shall indemnify, defend and hold Buyer, its officers,
directors, and employees and agents (the "Buyer Indemnified Parties") harmless
from and against any and all claims, losses, damages, judgments, costs, awards,
expenses (including reasonable attorneys' fees) and liabilities of every kind
(collectively, "Losses") suffered or incurred by any of the Buyer Indemnified
Parties as a result of any breach by Supplier of its warranties, guarantees,
representations, obligations, agreements or covenants contained herein.
(b) Notwithstanding anything to the contrary in the Standard Product
Warranty, Buyer shall indemnify, defend and hold Supplier, its officers,
directors, and employees and agents (the "Supplier Indemnified Parties")
harmless from and against any and all Losses suffered or incurred by any of the
Supplier Indemnified Parties as a result of any breach by Buyer of its
warranties, guarantees, representations, obligations, agreements or covenants
contained herein.
(c) Notwithstanding Section 6.2(a) and 6.2(b) hereof, the parties
shall have no right to any lost profits or punitive damages.
15
<PAGE>
(d) If a party hereto seeks indemnification under this Section 6.2,
such party (the "Indemnified Party") shall give written notice to the other
party (the "Indemnifying Party") of the specific facts and circumstances giving
rise to the claim promptly after such fact or circumstance first comes to the
attention of the Indemnified Party, provided that the failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
hereunder except to the extent that (and only to the extent that) such failure
shall have caused the damages for which the Indemnifying Party is obligated to
be greater than such damages would have been had the Indemnified Party given the
Indemnifying Party prompt notice hereunder or the Indemnifying Party is
otherwise prejudiced by such failure. If such indemnification claim is based
upon or related to any suit, action, claim, liability or obligation brought or
asserted by any third party, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in detail the basis of
such claim and the facts pertaining thereto and the Indemnifying Party, if it so
elects, shall assume and control the defense thereof (and shall consult with the
Indemnified Party with respect thereto), including the payment of all necessary
expenses, provided, that, as a condition precedent to the Indemnifying Party's
right to assume control of such defense, it must furnish the Indemnified Party
with reasonable evidence that the Indemnifying Party is and will be able to
satisfy any such liability; and provided, further, that the Indemnifying Party
shall not have the right to assume control of such defense if the claim which
the Indemnifying Party seeks to assume control (i) seeks primarily non-monetary
relief against the Indemnified Party; or (ii) involves criminal or quasi-
criminal allegations. In the event that the Indemnified Party has the right to
retain exclusive control of the defense of such claim due to a failure of the
Indemnifying Party to satisfy any of the requirements set forth above, the
Indemnified Party shall use good faith efforts, consistent with prudent business
judgment, to defend such claim and, if not unduly burdensome on the Indemnified
Party, mitigate all Losses, provided that the failure to mitigate all Losses
shall not relieve the Indemnifying Party of its obligations hereunder except to
the extent that (and only to the extent that) such failure shall have caused the
damages for which the Indemnifying Party is obligated to be greater than such
damages would have been had the Indemnified Party mitigated all Losses. If the
Indemnifying Party is permitted to assume and control the defense and elects to
do so, the Indemnified Party shall have the right to employ counsel separate
from counsel employed by the Indemnifying Party in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Party shall be at the expense of the Indemnified
Party unless the employment thereof has been specifically authorized by the
Indemnifying Party in writing or the Indemnifying Party has failed to assume the
defense and employ counsel, in which case the fees and expenses of the
Indemnified Party's counsel shall be paid by the Indemnifying Party. The
Indemnifying Party shall not be liable for any settlement of any such action or
proceeding effected without the written consent of the Indemnifying Party,
however, if there shall be a final judgment for the plaintiff in any such action
for which indemnification is to be provided under Section 6.2, the Indemnifying
Party agrees to indemnify and hold harmless the Indemnified Party from and
against any loss or liability by reason of such judgment to the extent
indemnification is to be provided under this Section 6.2. In addition, the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim if, pursuant to or as a
result of such settlement or cessation, injunctive or other equitable relief
shall be imposed against the Indemnified Party or if such settlement does not
expressly and unconditionally release the Indemnified Party from all liabilities
and obligations with respect to such claim, without prejudice or if such
settlement otherwise has a material adverse effect on any Indemnified Party.
Regardless of which party shall assume the defense of the claim the parties
agree to cooperate fully with one
16
<PAGE>
another in connection therewith and to keep each other reasonably informed of
the status of the claim and any related proceeding and shall take no action or
make any admissions or statements not required by applicable law which would
adversely effect the defense of any such claim.
(e) The obligations under this Section 6.2 shall survive until three
years after the expiration or termination of this Agreement, except with respect
to any claims for indemnification made prior thereto. Following the end of such
three year period, Buyer's rights to seek recovery against Supplier (except with
respect to any claims for indemnification made prior thereto) shall be limited
to the terms of the Standard Product Warranty.
(f) The sole recourse and exclusive remedy of Supplier and Buyer
against each other for money damages arising out of this Agreement, whether
based on tort, contract or otherwise, shall be to assert a claim for
indemnification under the indemnification provisions of this Section 6.2, except
in the case of fraud.
ARTICLE VII.
------------
Additional Agreements
---------------------
7.1 Confidentiality
(a) Supplier shall treat as confidential and prevent unauthorized
duplication or disclosure of any confidential information concerning the
business, affairs or the goods of Buyer which Supplier may acquire during the
course of its activities under this Agreement and shall not use any of such
confidential information for any purpose other than in furtherance of Supplier's
obligations under this Agreement. In addition, Supplier shall use commercially
reasonable efforts to prevent any such disclosure by any and all of its
employees or representatives outside the scope of employment of such employees'
and representatives' employment or engagement with Supplier. Supplier agrees
that except for such disclosure as is required by law, the terms of this
Agreement shall be deemed confidential information for purposes of this Section
7.1(a)
(b) Buyer shall treat as confidential and prevent unauthorized
duplication or disclosure of any confidential information concerning the
business, affairs or the goods of Supplier which Buyer may acquire during the
course of its activities under this Agreement and shall not use any of such
confidential information for any purpose other than in furtherance of Buyer's
obligations under this Agreement. In addition, Buyer shall use commercially
reasonable efforts to prevent any such disclosure by any and all of its
employees or representatives outside the scope of employment of such employees'
and representatives' employment or engagement with Buyer. Buyer agrees that
except for such disclosure as required by law, the terms of this Agreement shall
be deemed confidential information for purposes of this Section 7.1(b).
(c) The obligations of confidentiality provided in this Agreement
shall survive for a period of five years after the expiration or termination of
this Agreement for any reason; provided, however, that with respect to any item
of confidential information which is a trade secret under applicable law, the
obligations of confidentiality hereunder shall survive the expiration of such
five year period and remain in full force and effect for so long as the
applicable confidential information remains a trade secret under applicable law.
The provisions of this Section 7.1 shall not
17
<PAGE>
apply to any information, documents or materials which are, as shown by
appropriate written evidence, in the public domain or, as shown by appropriate
written evidence, shall come into the public domain, other than by reason of
default by the applicable party bound hereunder or its Affiliates. Any party may
disclose any such information in connection with litigation or arbitration among
the parties hereto.
7.2 Meetings.
(a) At least once each Calendar Quarter representatives of Buyer and
Supplier shall meet to discuss issues relating to this Agreement, including
without limitation, forecasting accuracy, new product development, industry
strategy and costing and rebate management.
(b) Supplier shall be entitled to participate in all of Buyer's
annual sales meetings that involve vendor participation.
7.3 Insurance. Supplier shall maintain in full force and effect during
the term of this Agreement product liability insurance policies in connection
with its activities as contemplated hereby, which insurance polices shall
provide for coverage in an amount at least equal to $5,000,000 and shall name
Buyer as an additional insured; provided, however, if such insurance is not
occurrence based at the time of termination of this Agreement, then Supplier
shall maintain such insurance for a period of three years after the termination
of this Agreement. In the event that Supplier at any time shall fail to maintain
such insurance or to pay any premium relating thereto during the term of this
Agreement, Buyer may obtain and maintain such of insurance and pay the premiums,
and Supplier shall promptly reimburse Buyer for all costs thereof.
7.4 Unmarketability or Unsuitability of Products. It the event that any
of the Products becomes obsolete or outdated primarily as a result of (i)
changes in laws which prohibit the use of such Product or (ii) technological
advances in a directly competing product that has captured at least 10% of the
United States market for the applicable Product and all other products
substantially similar to such Product, and Supplier fails to develop and produce
a substitute for such Product within 120 days after its receipt of written
notice from Buyer thereof, then (i) the Minimum Volume Requirement shall be
decreased dollar-for-dollar by the total of the Net Purchase Price of Product
that has become obsolete or outdated that was purchased by Buyer in the
immediately preceding Calendar Year to the extent Buyer does not purchase such
Product thereafter and (ii) Buyer shall no longer be required to purchase such
Product from Supplier pursuant to Section 2.1 hereof and Supplier shall no
longer be subject to the restrictions of Section 2.2 or 2.3, as the case may be,
with respect to such Product.
7.5 Incentive Plan. Supplier and Buyer shall collectively develop
independent incentive plans to reward sales personnel for promoting and selling
the Products.
7.6 Seasonal Purchase Plan. The SPP for any Calendar Year shall be
available for all Products (other than special order liners) purchased by Buyer
in an amount up to * * * of the amount of all Products purchased by Buyer from
Supplier prior to November 1 of such Calendar Year (including the amount of
Products purchased by Buyer during the previous Calendar Year in the SPP and as
increased to give effect to new service centers opened by Buyer in such Calendar
Year as to be mutually agreed upon by Supplier and Buyer at such time); provided
that Supplier may
18
<PAGE>
agree to increase the amount of Products Buyer may purchase in the SPP for any
Calendar Year. On or prior to November 1 of each Calendar Year, Buyer and
Supplier shall mutually agree on the amount of Products to be purchased in the
SPP for such Calendar Year; provided that Buyer may in all events purchase in
the SPP for such Calendar Year at least the amount specified in the preceding
sentence; and provided further that Supplier may in any event require Buyer to
purchase at least * * * in the SPP for such Calendar Year. All amount purchased
by Buyer in the SPP at Supplier's request (but not including any such amounts
requested by Buyer as provided above) shall be applied to the Minimum Volume
Requirements for the immediately following Calendar Year as opposed to Calendar
Year in which such order is submitted.
7.7 Access to Books and Records.
(a) During the term of this Agreement, Buyer shall make or cause to
be made such investigation of the books and records of Supplier which are
reasonably necessary to verify Supplier's compliance with the terms of this
Agreement. For purposes of the foregoing, Supplier Group agrees to permit Buyer
and its accountants and other representatives to (i) have full and complete
access to Supplier's books and records upon reasonable prior notice during
normal business hours and (ii) discuss the calculations of such items with
Seller and its relevant employees and accountants. Buyer may not make any such
investigation more than twice per Calendar Year and no such investigation may
relate to more than the two (2) most recent prior Calendar Years.
(b) During the term of this Agreement, Supplier shall make or cause
to be made such investigation of the books and records of Buyer Group which are
reasonably necessary to verify Buyer's compliance with the terms of this
Agreement. For purposes of the foregoing, Buyer agrees to permit Supplier and
its accountants and other representatives to (i) have full and complete access
to Buyer's books and records upon reasonable prior notice during normal business
hours and (ii) discuss the calculations of such items with Buyer and its
relevant employees and accountants. Supplier may not make any such investigation
more than twice per Calendar Year and no such investigation may relate to more
than the two (2) most recent prior Calendar Years.
7.8 Designated Representatives. Each of the parties shall designate an
individual who shall be acceptable to the other party ("Designated
Representative") who shall be authorized to deal with matters arising under this
Agreement. Neither party shall unreasonably withhold approval of the individual
designated by the other party to serve as the Designated Representative. A
Designated Representative shall continue as the Designated Representative of the
appointing party until written notice of the intention to appoint a successor is
given by the appointing party until written notice of the intention to appoint a
successor is given by the appointing party to the other party at least 10
business days prior to the effective date of the new designation. The initial
Designated Representative of each party is set forth on Exhibit 7.8.
ARTICLE VIII.
-------------
Miscellaneous
-------------
8.1 Waivers and Consents. All waivers and consents given hereunder shall
be in writing. No waiver by any party hereto of any breach or anticipated breach
of any provision hereof by any
19
<PAGE>
other party shall be deemed a waiver of any other contemporaneous, preceding or
succeeding breach or anticipated breach, whether or not similar, on the part of
the same or any other party. Except as otherwise provided herein, time is of the
essence in this Agreement.
8.2 Notices.
(a) All notices and other communications hereunder shall be in
writing, and shall be deemed to have been given only if and when (i) if
personally delivered, at the time of delivery, (ii) if sent by first class
certified or registered air mail, postage prepaid, three business days after
mailing, (iii) if sent through a reputable overnight courier service, one
business day after deposit with such service or (iv) if sent by telecopy, upon
confirmation of receipt, addressed in each case as follows:
(b) If to Buyer to:
SCP Pool Corporation
109 Northpark Boulevard
Covington, Louisiana 70433
Attention: W.B. Sexton and John Murphy
Telecopier: 504-892-1657
with a copy, except for purchase or sales orders and billing
matters, in like manner to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
Telecopier: 312-861-2200
(c) If to Supplier to:
Pacific Industries, Inc.
787 Watervliet-Shaker Road
Latham, NY 12110
Attention: Bruce Quay, President
and
Thomas Gibbs
with a copy, except for purchase or sales orders and billing
matters, in like manner to:
20
<PAGE>
Adler Pollock & Sheehan Incorporated
2300 Hospital Trust Tower
Providence, RI 02903
Attention: Paul A. Campellone, Esq.
Both Supplier and Buyer may change the addresses for the giving of notices and
communications and/or copies thereof, by written notice to the other party in
conformity with the foregoing.
8.3 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.4 Governing Law. The interpretation and construction of this Agreement,
and all matters relating hereto, shall be governed by the internal laws of the
State of New York.
8.5 Parties in Interest. This Agreement shall not be assigned by either
party without the prior written consent of the other party, such consent not to
be unreasonably withheld; provided that Buyer may assign this Agreement to its
lending sources for collateral assignment and either Buyer or Supplier may
assign this Agreement to one of their Affiliates or a person or entity which
acquires substantively all of its assets if such assignee assumes and such
assignor shall remain bound by all the terms of this Agreement, except that
following any such acquisition this Agreement shall only relate to the specific
business and assets being acquired from the assignor and shall not relate to any
other business of the acquirer. Subject to the foregoing restriction, this
Agreement shall inure to the benefit of, and be binding upon, the parties hereto
and their respective successors and assigns.
8.6 Dispute Resolution Procedure. In the event of any dispute arising
between the parties out of this Agreement, representatives of each party shall
meet as promptly as practicable (but in any event within twenty (20) business
days of one party's request to the other for such a meeting) to discuss in good
faith a resolution ti the disagreement. If the representatives of the parties
are not able to resolve the dispute, the Chief Executive of the Cookson
Specialty Molding Sector (or its successor business unit) or his designee and
the Chief Executive Officer of Buyer (or its successor business unit) shall meet
as promptly as practicable (but in any event within twenty (20) business days of
one party's request to the other for such an additional meeting) to resolve the
dispute. If the dispute still cannot be resolved, either party may seek a
resolution of such dispute in accordance with the provisions if Section 8.7
hereof.
8.7 Arbitration. Without limiting either party's right to seek injunctive
or other equitable relief in any court of competent jurisdiction, any dispute
between the parties arising under or in connection with this Agreement shall be
settled by binding arbitration in accordance with the commercial rules then in
force of the American Arbitration Association ("AAA"), except that a written
opinion of the arbitrator or arbitrators must be delivered to the parties,
notwithstanding any rules to the contrary. The location of any arbitration
hereunder shall be in New York, New York, and the arbitration proceedings and
the substantive law of this Agreement will be governed by the laws of the State
of New York, without reference to conflict of laws principles. The arbitrators
shall be individuals generally skilled in the legal and business aspects of the
subject matter at issue. A
21
<PAGE>
single arbitrator is to be selected jointly by the parties to settle the
dispute. If the parties cannot agree on the selection of an arbitrator within
fifteen (15) days after notice by one party that it desires to refer a matter to
arbitration hereunder, each party shall then select one arbitrator giving notice
of its nominee to the other party; and the two arbitrators so selected shall
select a third arbitrator within fifteen (15) days after their selection. If a
party fails to select an arbitrator within fifteen (15) days after the other
party's notice of selection of its nominee, the other party may apply to AAA for
selection of a second arbitrator, and the AAA shall do so within fifteen (15)
days of such application. If the two (2) arbitrators selected as aforesaid
cannot agree upon the selection of the third arbitrator within fifteen (15) days
after selection of the second arbitrator, the third arbitrator shall be
appointed by the AAA within fifteen (15) days after application by either party.
The decision of the arbitrator or any two of the three arbitrators, as the case
may be, shall be final, binding and conclusive upon the parties. The prevailing
party in any arbitration proceeding hereunder may be awarded, and shall be
entitled to recover, all or such portion of its costs and reasonable attorney
fees incurred in connection with such proceeding as may be assessed in the
discretion of the arbitrators. Judgment upon the award rendered may be entered
in any court having jurisdiction or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as the case may
be.
8.8 No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their
collective mutual intent, and no rule of strict construction shall be applied
against any person.
8.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.
8.10 Entire Agreement. This Agreement, including all schedules and
exhibits annexed hereto, contains the entire understanding of the parties hereto
with respect to the subject matter contained herein or therein.
8.11 Amendments. This Agreement may not be changed orally, nor shall any
modification of this Agreement be affected by the use of purchase orders,
acknowledgments, acceptances or other forms at variance with or in addition to
the terms and conditions herein. This Agreement may be changed only by a written
agreement signed by Buyer and Supplier.
8.12 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
* * * *
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their corporate names to
be hereunto subscribed, under seal by their respective duly authorized officers,
all as of the day and year first above written.
SOUTH CENTRAL POOL SUPPLY, INC.
By:
-----------------------------------
Title:
--------------------------------
PACIFIC INDUSTRIES, INC.
By:
-----------------------------------
Title:
--------------------------------
23
<PAGE>
Exhibit 1.9
-----------
Existing Customers
------------------
<TABLE>
<CAPTION>
Existing Customer Location
----------------- --------
<S> <C>
</TABLE>
24
<PAGE>
PACIFIC CUSTOMERS
- -----------------
<TABLE>
<CAPTION>
Company Name Address City State Zip
- ------------ ------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
A & M Distributors 1105 Mackey Avenue Chattanooga TN 37421
Aloha Pools 1932 Highway 45 Bypass Jackson TN 38305 *
Alpine Pools 4880 Route 8 Allison Park PA 15101 *
American Pool & Spa 280 Crestwood Road Mountain Top PA 18707 *
Aquarius Pools Const 2395 Whittlesey Road Columbus GA 31909 *
Artesian Pools, LLC 1105 Mackey Avenue Chattanooga TN 37421
B & R Distributing 278 Possum Park Mall Kirkwood Hwy Newark DE 19711
Beck Enterprises 517 West 10th Street P.O. Box 1894 Marion IN 46953
Benson Pump Company 11000 Mount Rose Highway Reno NV 89511 *
Benson Pump Company 10730 East Bethany Dr #304 Aurora CO 80014 *
Benson Pump Company 150 Millwell Drive Maryland Heights MO 63043 *
Benson Pump Company 2468 Louisianna Avenue North Minneapolis MN 55427 *
Benson Pump Company 15301 West 110th Street Suite 2 Lenexa KS 66219 *
Benson Pump Company 800 Central Avenue University Park IL 60668 *
Benson Pump Company 14535 Grover Street Omaha NE 86317 *
Benson Pump Company 3511 Grand River Avenue Howell MI 48843 *
Benson Pump Company 8385 East 34th Street Indianapolis IN 46226 *
Benson Pump Company 1827 Air Lane Drive Nashville TN 37210 *
Benson Pump Company 257 North Harvard Oklahoma City OK 73127 *
Benson Pump Company 1303 Alum Creek Drive Columbus OH 43209 *
Benson Pump Company 1936 11th Street Rockford IL 61108 *
Benson Pump Company 5390 East 39th Avenue Denver CO 80207 *
Benson Pump Company 4920 Pleasant Hill Rd #105 Memphis TN 38118 *
Benson Pump Company 4505 McEwen Farmers Branch TX 75244 *
Benson Pump Company 4030 Pleasantdale Road Doraville GA 30340 *
Benson Pump Company 7015 Cessna Drive Greensboro NC 27409 *
Benson Pump Company 7341A Dogwood Park Fort Worth TX 76118 *
Benson Pump Company 122-B Shorlake Drive Knoxville TN 37922 *
Benson Pump Company 921 Distributors Row Harahan LA 70123 *
Benson Pump Company 8758 Clay Road #410 Houston TX 77080 *
Bicknell Huston 12 Parkwood Drive Hopkinton MA 01748 *
11/10/1997 A=Alpha, G=Graphex, P=Polymer, S=Steps, L=Liners, E=Everything Page 1
</TABLE>
<PAGE>
PACIFIC CUSTOMERS
<TABLE>
<CAPTION>
Company Name Address City State Zip
<S> <C> <C> <C> <C> <C> <C>
Bicknell Huston 2350 Turnpike Street Bldg C North Andover MA 01845 *
Bicknell Huston 45 Industrial Park Road Albany NY 12206 *
Bicknell Huston 1901 LeMoyne Avenue P.O. Box 38 Syracuse NY 13211 *
Bicknell Huston 520 Riverside Industrial Pkwy Portland ME 04103 *
Bicknell Huston 416 Grandview Blvd Zellenople PA 18063 *
Bicknell Huston 436 Hayden Station Road Windsor CT 08095 *
Bicknell Huston 2 Treadeasy Avenue Batavia NY 14020 *
Bicknell Huston Central Jersey Industrial Pk 3 Easy Street Bldg 6E Bound Brook NJ 08805 *
Bicknell Huston Coopertown Road P.O. Box 5037 Delanco NJ 08075 *
Bicknell Huston 2133 Ocean Avenue Ronkonkoma NY 11779 *
Bicknell Tidewater Hampton Industrial Park 707 Industry Drive Hampton VA 23662 *
Bicknell Tidewater 1244 Executive Blvd Suite 115 Chesapeake VA 23320 *
Budd's Pools 950 Cooper Street Box 5570 Deptford NJ 06096
Centrex Intl 109-14 Ascan Avenue Forest Hills NY 11375
Concord Pools 158 Sparrowbush Road Latham NY 12110 *
Direct Replacements, Inc. 840 Pickens Industrial Drive Marietta GA 30062
Dover Pool & Patio 4000 DuPont Highway Dover DE 19901 *
Eastgate Pools 685 Old State Route 74 Cincinnati OH 45245
Ellison Enterprises 100 Main Street P.O. Box 66 Sanborn ND 58480
English Pools 631 NE Bypass P.O. Box 210688 Montgomery AL 36121
Gorman Company 1845 S Orange Blossom Trail Apopka FL 32703 *
Gorman Company 440 Third Street Holy Hill FL 32117 *
Gorman Company 915 Apollo Boulevard Melbourne FL 32901 *
Gorman Company 125 NE 16th Street P.O. Box 2076 Ocala FL 34478 *
Gorman Company 2937 NE 19th Drive Gainesville FL 32609 *
Gorman Company 4910 Adamo Drive Tampa FL 33601 *
Gorman Company 5757 McIntosh Road Sarasota FL 34233 *
Gorman Company 109 Century Park Drive Tallahassee FL 32302 *
Gorman Company 4191 SE Commence Avenue P.O. Box 2830 Stuart FL 34997 *
Gorman Company 1930 West Beaver Street Jacksonville FL 32209 *
Gorman Company 2606 Airport Road Panama City FL 32405 *
</TABLE>
11/16/1997 Page 2
<PAGE>
PACIFIC CUSTOMERS
- -----------------
<TABLE>
<CAPTION>
Company Names Address City State Zip
- ------------- ------- ---- ----- ---
<S> <C> <C> <C> <C> <C>
Gorman Company 3439 Reynolds Road Lakeland FL 33603 *
Gorman Company 3220 Hanson Street Fort Myers FL 33916 *
Gorman Company 3969 Prospect Avenue Naples FL 33942 *
Gorman Company 4149 Warehouse Lane Pensacola FL 32505 *
Gorman Company 35 Jet Drive Fort Walton Beach FL 32548 *
Gorman Company 1925 SE Biltmore Street Port St. Lucie FL 34952 *
Gorman Company 511 North Canal Street Leesburg FL 34748 *
Gorman Company 8130 Leo Kidd Avenue Port Richey FL 34666 *
Gorman Company 111 West Vermont Avenue Deland FL 32720 *
Gorman Company 51 West Glades Road Boca Raton FL 33432 *
Gorman Company 235 State Road 207 Bldg 4 St. Augustine FL 32095 *
Gorman Company 9121 Eden Avenue Hudson FL 34667 *
Gorman Company 1212 Market Circle Port Charlotte FL 33953 *
Gorman Company 1135 18th Place Vero Beach FL 32960 *
Gorman Company 144 North Florida Avenue Inverness FL 34453 *
Horner Discus 5755 Powerline Road Fort Lauderdale FL 33309 *
Island Pools 1865 Grand Island Blvd Grand Island NY 14072
Islander Pools 1967 Central Avenue Albany NY 12205
Knickerbocker Pools 2000 US North 68 Xenia OH 44095
LeisureSource 1601 Wicomica Street Baltimore MD 21230
Leasuretime 33205 Curtis Blvd Eastlake OH 44095
Litehouse Products 11052 Pearl Road Strongsville OH 44136 *
Majestic Pools 4370 Walden Avenue Lancaster NY 14086
Marion Pools 414 East Court Street P.O. Box 1244 Marion NC 28752
Mid State Pools Highway 80 Industrial Blvd Dublin GA 31021
Mushkin Leisure Products 401 East Thomas Street Wilkes-Barre PA 18705
New Kayak Pool Corp, The 2700 Transit Road West Seneca NY 14224
Niagara Pools 318 South Black Horse Pike Blackwood NJ 08012
Olympic Pools (OH) 26812 Eckel Road Perrysburg OH 43551
Optimus, Inc. 2762 Getwell Road Memphis TN 38118
Pensacola Pools 8514 Pensacola Blvd Pensacola FL 32534 *
</TABLE>
Page 3
<PAGE>
PACIFIC CUSTOMERS
- -----------------
<TABLE>
<CAPTION>
Company Name Address City State Zip
- ------------ ------- ---- ----- ---
<S> <C> <C> <C> <C> <C>
Piscines Trevi 510 Boulevard Labelle Fabreville, Quebec H7P2P4 *
Polynesian Pools 2980 Virginia Beach Blvd Virginia Beach VA 23452 *
Pool City Inc 64 Old Clarion Road Pittsburgh PA 15236
Pool Equipment Supply 893 Plantation Way Montgomery AL 38117
Pool Mart 8410 Transit Road Depew NY 14043
Pool Water Products 21540 Strathorn Street Canoga Park CA 91314 *
Pool Water Products 11572 Salines Drive Garden Grove CA 92643 *
Pool Water Products 1343 Dodson Way Riverside CA 92507 *
Pool Water Products 7777 Ostrow Street San Diego CA 92111 *
Pool Water Products 1443 South Lyon Street Santa Ana CA 92705 *
Pool Water Products 2334 Havenhurst Dallas TX 75234
Pool Water Products 12849 Windfern Houston TX 77064
Pool Water Products 3340 East McDowell Road Phoenix AZ 85006
Pool Water Products 1940 Arnold Industrial Place Concord CA 94520 *
Pool Water Products P.O. Box 17358 Irvine CA 92713 *
Pool Water Products 2801 Land Avenue Sacramento CA 95815 *
Pool Water Products 2170 Del Franco Street San Jose CA 95131 *
Pool Water Products 8151 Onion Avenue Vay Nuys CA 95131 *
Pool Water Products 524 Commerce Way Longwood FL 32750
Pool Water Products 6500 Sawyer Loop Road Sarasota FL 34238
Pool Water Products 5901 Powerline Road Fort Lauderdale FL 33309
Red Sea Trading 6333 South Peoria Suite 101 Tulsa OK 74138 *
Rogers of Indiana 6364 Westfield Blvd Indianapolis IN 46220
South Central Pool Supply 2106 North Forbs Blvd Suite 104 Tuscon AZ 85705 *
South Central Pool Supply 2916 East McDowell Road Phoenix AZ 85008 *
South Central Pool Supply 4801 Grissom Street Bakersfield CA 93313 *
South Central Pool Supply 8977 West Goshen Avenue Visalia CA 93291 *
South Central Pool Supply 5640 Jason Lee Place Sarasota FL 34233 *
South Central Pool Supply 2078 Andrea Lane SE Unit 1 Fort Myers FL 33912 *
South Central Pool Supply 121-B Kelsey Lane Tampa FL 33619 *
South Central Pool Supply 860 North Dorothy Suite 606 Richardson TX 75081 *
Page 4
</TABLE>
<PAGE>
PACIFIC CUSTOMERS
- -----------------
<TABLE>
<CAPTION>
Company Names Address City State Zip
- ------------- ------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
South Central Pool Supply 2107 Hutton Drive Carrolton TX 75008 *
South Central Pool Supply 109 Northpark Blvd 4th Floor Covington LA 70433 *
South Central Pool Supply 4310 Hessner Avenue Metairie LA 70002 *
South Central Pool Supply 2409 Bransford Avenue Nashville TN 37204 *
South Central Pool Supply 13703 Gamma Road Dallas TX 75244 *
South Central Pool Supply 1565 Townhurst Houston TX 77043 *
South Central Pool Supply 320 Quaphah Avenue Oklahoma City OK 73107 *
South Central Pool Supply 1305 N Hills Blvd N Little Rock AR 72114 *
South Central Pool Supply 7115 Exchequer Drive Baton Rouge LA 70809 *
South Central Pool Supply 2235-39 Highway 80 West Jackson MS 39204 *
South Central Pool Supply 6400 Midway Road Forth Worth TX 76117 *
South Central Pool Supply 4460 South Boulevard Charlotte NC 28209 *
South Central Pool Supply 5815 Brook Hollow Parkway Suite A Norcross GA 30071 *
South Central Pool Supply 4800 South Ridge Boulevard Memphis TN 38141 *
South Central Pool Supply 3900 Middlebrook Pike Knoxville TN 37921 *
South Central Pool Supply 149 Distribution Drive Birmingham AL 35226 *
South Central Pool Supply 10801 Millington Court Cincinnati OH 45242 *
South Central Pool Supply 9230 Neils Thompson Drive Suite 108 Austin TX 78758 *
South Central Pool Supply 5821 "A" Midway Park NE Albuquerque NM 87109 *
South Central Pool Supply 9310 Meadow Vista Blvd Houston TX 77064 *
South Central Pool Supply 11140 Leadbetter Road Ashland VA 23005 *
South Central Pool Supply 1305 Transport Drive Raleigh NC 27603 *
South Central Pool Supply 6737 East 30th Indianapolis IN 46219 *
South Central Pool Supply 11540 Ade Road Maryland Heights MO 63043 *
South Central Pool Supply 9802 Widmer Lenexa KS 66215 *
South Central Pool Supply 8504-A Tyco Road Vienna VA 22180 *
South Central Pool Supply 3691 S 73rd East Avenue Tulsa OK 74145 *
South Central Pool Supply 1158 Arion Parkway San Antonio TX 78218 *
South Central Pool Supply 8808 Grow Drive Pensacola FL 32514 *
South Central Pool Supply 2900 Dawn Road Jacksonville FL 32207 *
South Central Pool Supply 1412 Joliet Road Romeoville IL 60446 *
Page 5
</TABLE>
<PAGE>
PACIFIC CUSTOMERS
- -----------------
<TABLE>
<CAPTION>
Company Name Address City State Zip
- ------------ ------- ---- ----- ---
<S> <C> <C> <C> <C> <C>
South Central Pool Supply 586 North Tulip Escondido CA 92025 *
South Central Pool Supply 2160 Hardy Parkway Grove City OH 43123 *
South Central Pool Supply 12670 SW Hall Blvd Tigard OR 97223 *
South Central Pool Supply 12344 75th Street North Largo FL 33773 *
South Central Pool Supply 302 Western Street NW Auburn WA 96002 *
South Central Pool Supply 701 North Hariton Avenue Orange CA 92667 *
South Central Pool Supply 2325 Paragon Drive San Jose CA 95131 *
South Central Pool Supply 11365 Sunrise Gold Circle Rancho Cordova CA 95742 *
South Central Pool Supply 2123 East LaCadena Drive Riverside CA 92507 *
South Central Pool Supply 1619-A Capital Circle NE Tallahassee FL 32306 *
South Central Pool Supply 107 Jetplex Circle Madison AL 35758 *
South Central Pool Supply 8261 Business Park Drive Port St. Lucie FL 34952 *
South Central Pool Supply 806 Oliver Court Montgomery AL 36117 *
South Central Pool Supply 751 Lakeside Drive Mobile AL 36693 *
South Central Pool Supply 1992 Rockefeller Drive #100 Ceres CA 95307 *
South Central Pool Supply 6101 Courtesy Lane Shreveport LA 71108 *
South Central Pool Supply 3135 South Scenic Avenue Springfield MO 65807 *
South Central Pool Supply 1420 Armour Street East Ridge TN 37412 *
South Central Pool Supply 4951 Sheraton Drive Macon GA 31210 *
South Central Pool Supply 3209 Meade Avenue Las Vegas NV 89102 *
South Central Pool Supply 16221 Flight Path Drive Brooksville FL 34609 *
South Central Pool Supply 1045 Sullivan Road Suite A Atlanta GA 30349 *
South Central Pool Supply 14306 C Circle Omaha NE 68144 *
South Central Pool Supply 265 West Marvin Avenue Longwood FL 32750 *
South Central Pool Supply 1909 Southgreat Southwest Grand Prairie TX 75051 *
South Central Pool Supply 140 South Pecos Denver CO 80223 *
South Central Pool Supply 3938 Dunvale Houston TX 77063 *
South Central Pool Supply 7301 Ellis Road Melbourne FL 32904 *
South Central Pool Supply 401 West Bedford Fresno CA 93711 *
South Central Pool Supply 2020 Elsa Street Naples FL 33942 *
Splash Pools & Spas 737 South Professional Drive Shreveport LA 71105 *
</TABLE>
Page 9
<PAGE>
<TABLE>
PACIFIC CUSTOMERS
- -----------------
Company Name Address City State Zip
- ------------ ------- ---- ----- ---
<S> <C> <C> <C> <C> <C>
Syracuse Pool Center 6176 South Bay Road Cicero NY 13039
Technican Pool Products 383 Elgin Street P.O. Box 1870 Brantford, Orlando N3TSW4*
Thouin Enterprises, Inc. 3933 Memorial Blvd Kingsport TN 37664
Universal Pool Company 2 West 166th Street South Holland IL 69473
W. W. Adcock 4425 Chambers Hill Road Harrisburg PA 17111*
W. W. Adcock (MD) 305 Najoles Road Millersville MO 21108*
W. W. Adcock (PA) 2811 Phillmont Avenue Huntington Valley PA 19006*
W. W. Adcock (VA) 5596 Raby Road Norfolk VA 23502*
Walter Chemical 1718 Eoff Street Wheeling WV 28003
Water Hole, The 12101 East 40 Highway Independence MO 64055*
Watson's of Cincinnati 2721 East Sharen Road Cincinnati OH 45241
Watson's of Dayton 4399 State Route 725 Bellbrook OH 45305
Watson's of Indianapolis 6283 Oaklantion Road Indianapolis IN 45236
Watson's of Kansas City 5101 Bristol Kansas City MO 54129
Watson's of Louisville 3401 Ruckriegel Louisville KY 40299
Watson's of Memphis 2120 Whitten Road Memphis TN 38134
Watson's of Nashville 12966 Old Hickory Blvd Nashville TN 37013
</TABLE>
Page 7
<PAGE>
Exhibit 1.11
Example of * * *
----------
* * * * * *
* * * * * *
* * * * * *
* * * * * * * * *
* * * * * *
* * * * * *
* * * * * *
* * * * * *
* * * * * * * * * * * *
* * * * * * * * *
* * * * * *
* * * * * *
* * * * * * * * * * * *
* * *
25
<PAGE>
Exhibit 1.12
Minimum Volume Requirement
--------------------------
1. The Minimum Volume Requirement for Calendar Year 1998 shall be * * * .
2. The Minimum Volume Requirement for Calendar Year 1999 shall be * * *
3. The Minimum Volume Requirement for Calendar Year 2000 and each Calendar
Year thereafter shall be * * * , as adjusted based on actual price increases or
decreases of any Products during the immediately preceding Calendar Year and the
amount of such Product purchased in such immediately preceding Calendar Year.
4. For purposes of determining whether the Minimum Volume Requirements have
been achieved, (i) if Buyer notifies Supplier within 30 days after the date
hereof that Buyer desires to purchase above ground liners from Supplier at the
prices specified on Exhibit 3.1(a) hereto, then * * * of the amount of above
ground liners purchased by Buyer shall be included in Net Purchase Price, and
(ii) if Buyer does not notify Supplier within 30 days after the date hereof that
Buyer desires to purchase above ground liners from Supplier at the prices
specified on Exhibit 3.1(a) attached hereto, then none of the above ground
liners purchased by Buyer shall be included in Net Purchase Price.
26
<PAGE>
Exhibit 3.1(a)
Price
-----
27
<PAGE>
Section IV 11/10/97
Page 1
PRICE EFFECTIVE JUNE 12, 1995
<TABLE>
<CAPTION>
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
- -------------------------------------------------------------------------------------------
GRAPHEX COMPONENTS UNIT SCP
CATALOG # QTY PRICE NET
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MH101 1" NUT & BOLT (STAKES) 35/PKG 1 6.44 ***
MH103 2" NUT & BOLT (STEPS) 15/PKG 1 8.76 ***
MH105 2 1/2" NUT & BOLT PKG (STEP/OVAL) 1 10.30 ***
PH120 NYLON WALL FASTENERS 25/PKG 1 7.21 ***
PH125 NYLON WALL FASTENERS 3" (OVAL HDW) 25/PKG 1 29.61 ***
PN1001 6" GRAPHEX PANEL 1 43.00 ***
PN1002 1' GRAPHEX PANEL 44 50.00 ***
PN1004 2' GRAPHEX PANEL 22 59.50 ***
PN1005 3' GRAPHEX PANEL 11 70.00 ***
PN1007 4' GRAPHEX PANEL 11 72.25 ***
PN1008 4' GRAPHEX PANEL SKIMMER PANEL (SP1065) 11 76.50 ***
PN1014 4' GRAPHEX LIGHT PANEL 11 79.50 ***
PN1016 4' GRAPHEX EXERCISE PANEL (BADU JET-DUAL STR *NP 122.50 ***
PN1019 5' GRAPHEX PANEL 11 102.00 ***
PN1020 6' GRAPHEX PANEL 11 106.00 ***
PN1021 6' GRAPHEX SKIMMER PANEL (SP1085) 11 110.25 ***
PN1027 6' GRAPHEX LIGHT PANEL 11 102.50 ***
PN1032 17 7/8" RAD GRAPHEX SPACER PANEL 24 55.75 ***
PN1036 RADIUS GRAPHEX PANEL 11 76.25 ***
PN1045 RADIUS GRAPHEX SKIMMER PANEL (SP 1097/1096) 11 116.25 ***
PN1047 REVERSE RADIUS GRAPHEX PANEL 10 94.75 ***
PN1054 135 DEGREE RIGHT GRAPHEX PANEL *NP 86.75 ***
PN1055 135 DEGREE LEFT GRAPHEX PANEL *NP 86.75 ***
PN1057 2' RAD GRAPHEX PANEL 8 71.50 ***
PN10571 HALF OF 2' RADIUS GRAPHEX PANEL *NP 81.50 ***
PN1065 1' X 1' DOUBLE 225 DEGREE GRAPHEX PANEL *NP 95.75 ***
PN1066 121 DEGREE GRAPHEX PANEL *NP 109.25 ***
PN1072 6" X 6" 152 DEGREE GRAPHEX CORNER PANEL *NP 109.25 ***
PN1075 4 1/16" X 4 1/16" 229 DEGREE GRAPHEX PANEL *NP 109.25 ***
PN1078 239 DEGREE GRAPHEX PANEL *NP 109.25 ***
PN1079 1' X 1' 270 DEG GRAPHEX PANEL *NP 109.25 ***
PN1080 6" X 6" 208 DEGREE GRAPHEX PANEL *NP 109.25 ***
PN1083 9" X 9" 270 DEGREE GRAPHEX PANEL *NP 109.25 ***
PN1086 1' X 2' 90 DEGREE RIGHT GRAPHEX PANEL *NP 146.50 ***
PN1087 2' X 1' 90 DEGREE LEFT GRAPHEX PANEL *NP 146.50 ***
PN1089 21' X 21' DOUBLE 225 DEGREE GRAPHEX PANEL *NP 150.00 ***
PN7093 K-BRACE 46 21.25 ***
PN751 5-DEGREE WEDGE 1 2.83 ***
PN752 9-DEGREE WEDGE 1 3.09 ***
PN754 15 DEGREE WEDGE 1 3.35 ***
PN756 45 DEGREE WEDGE 1 9.79 ***
PH140 MALE MATE-LOCK ADAPTER (2 PER 45 DEG WEDGE) *NP 0.40 ***
AH100 WELD-ON #16 (ORDER IN 5 OZ INCREMENTS) *NP 1.09 ***
SP0045 GRAPHEX PANEL SAMPLE (1' X 1') 1 11.00 ***
- --------------------------------------------------------------------------------------------
</TABLE>
* NP = NOT PALLETIZED
THESE PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE MERCHANDISE WILL BE INVOICED
AT THE PRICE IN EFFECT AT THE TIME OF SHIPMENT. ALL ITEMS F.O.B. LATHAM, NY. WE
RESERVE THE RIGHT TO MAKE IMPROVEMENTS AND CHANGES IN DESIGN AT ANY TIME
INTEREST WILL BE CHARGED ON ALL PAST DUE BALANCES AT THE RATE OF 1 1/2% PER
MONTH (18% PER ANNUM).
<PAGE>
Section IV 11/10/97
Page 3
PRICE EFFECTIVE JANUARY 1, 1997
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
POLYMER COMPONENTS UNIT SCP
CATALOG # QTY PRICE NET*
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MH101 1" NUT & BOLT (STAKES) (35/PKG) 1 6.44 ***
MH103 2" NUT & BOLT (STEPS) (15/PKG) 1 8.76 ***
PH120 NYLON WALL FASTENERS (25/PKG) 1 7.21 ***
PN1534 22 7/8" RADIUS POLYMER SPACER PANEL 20 55.62 ***
PN1535 26 1/4" RADIUS POLYMER SPACER PANEL *NP 80.86 ***
PN1536 RADIUS POLYMER PANEL 11 75.96 ***
PN15361 RADIUS SKIMMER PANEL (SP1097/1096) 11 103.75 ***
PN1547 REVERSE RADIUS POLYMER PANEL 10 99.14 ***
PN1554 135 DEGREE RIGHT POLYMER PANEL *NP 46.35 ***
PN1555 135 DEGREE LEFT POLYMER PANEL *NP 46.35 ***
PN1556 1' X 1' POLYMER PANEL (6" RAD) 16 38.37 ***
PN1558 4" RADIUS POLYMER PANEL (2 REQUIRED - 90 DEGR) 8 84.20 ***
PN1601 6" POLYMER PANEL *NP 46.35 ***
PN1602 1' POLYMER PANEL 44 53.56 ***
PN1603 1' 3" POLYMER PANEL *NP 51.50 ***
PN1604 2' POLYMER PANEL 22 63.35 ***
PN1605 3' POLYMER PANEL *11 79.83 ***
PN1606 3' 6" POLYMER PANEL 11 89.61 ***
PN1607 4' POLYMER PANEL 11 81.63 ***
PN1610 4' POLYMER SKIMMER PANEL (SP1064) 11 83.95 ***
PN1614 4' POLYMER LIGHT PANEL 11 83.17 ***
PN1616 4' POLYMER EXERCISE PANEL (BADU JET-DUAL STR) *NP 127.46 ***
PN1619 5' POLYMER PANEL 11 106.09 ***
PN1620 6' POLYMER PANEL 11 112.53 ***
PN1623 6' POLYMER SKIMMER PANEL (SP1084) 11 116.91 ***
PN1657 2' RADIUS POLYMER PANEL 8 86.52 ***
PN16571 HALF OF 2' RADIUS POLYMER PANEL *NP 90.25 ***
PN1665 1' X 1' DOUBLE 225 DEGREE POLYMER PANEL *NP 118.97 ***
PN1667 135 DEGREE POLYMER PANEL *NP 110.98 ***
PN1672 152 DEGREE POLYMER PANEL *NP 117.94 ***
PN1673 12" X 7 1/4" 219 DEGREE LEFT POLYMER PANEL *NP 118.97 ***
PN1674 7 1/4" X 12" 219 DEGREE RIGHT POLYMER PANEL *NP 118.97 ***
PN1677 225 DEGREE POLYMER PANEL *NP 118.97 ***
PN1679 1' X 1' 270 DEGREE POLYMER PANEL *NP 118.97 ***
PN1680 208 DEGREE POLYMER PANEL *NP 117.94 ***
PN1688 9" SPACER POLYMER PANEL *NP 83.69 ***
PN1689 21" X 21" DOUBLE 225 POLYMER PANEL *NP 166.86 ***
PN7090 A-BRACE 46 17.25 ***
PN7094 Y-BRACE 46 21.63 ***
PN7095 Z-BRACE 23 28.84 ***
PN751 5 DEGREE WEDGE 1 2.83 ***
PN752 9 DEGREE WEDGE 1 3.09 ***
PN754 15 DEGREE WEDGE 1 3.35 ***
PN756 45 DEGREE WEDGE 1 9.79 ***
PH140 MALE MATE-LOCK ADAPTER (2 PER 45 DEG WEDGE) 1 0.40 ***
AH100 WELD-ON ADHESIVE (ORDER IN 5 OZ INCREMENTS) 1 0Z 1.09 ***
SP0048 POLYMER PANEL SAMPLE (1' X 1') 1 10.30 ***
- --------------------------------------------------------------------------------
</TABLE>
THESE PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE. MERCHANDISE WILL BE INVOICED
AT THE PRICE IN EFFECT AT THE TIME OF SHIPMENT. ALL ITEMS F.O.B. LATHAM, NY. WE
RESERVE THE RIGHT TO MAKE IMPROVEMENTS AND CHANGES IN DESGN AT ANY TIME.
INTEREST WILL BE CHARGED ON ALL PAST DUE BALANCES AT THE RATE OF 1 1/2% PER
MONTH (18% PER ANNUM).
<PAGE>
Section IV 11/10/97
Page 6
PRICE EFFECTIVE JANUARY 1, 1997
<TABLE>
<CAPTION>
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING
- ------------------------------------------------------------------------------------------------------------------------------------
NEW PERFORMANCE STEP COMPONENTS BRACES UNIT SCP
CATALOG # REQUIRED QTY PRICE NET
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ST0018 INSIDE CORNER STEP *1+"2 7 594.05 ***
ST0019 INSIDE CORNER STEP CANTILEVER *1+"2 7 594.05 ***
ST2001 2' POOL WALL LADDER 10 175.87 ***
ST4018 4' 3 TRD STEP *2 8 444.45 ***
ST4019 4' 3 TRD STEP CANTILEVER *2 8 444.45 ***
ST6007 6' SWIM N LOUNGE 1 8 506.25 ***
ST6008 6' SWIM N LOUNGE CANTILEVER 1 8 506.25 ***
ST6018 6' 4 TRD STRAIGHT STEP 2 8 489.51 ***
ST6019 6' 4 TRD STRAIGHT STEP CANTILEVER 2 8 489.51 ***
ST6043 6' 4 TRD RADIUS STEP 2 8 534.31 ***
ST6044 6' 4 TRD RADIUS STEP CANTILEVER 2 8 534.31 ***
ST6118 6' 4 TRD FRENCH CURVE STEP 2 8 570.00 ***
ST6119 6' 4 TRD FRENCH CURVE STEP CANTILEVER 2 8 570.00 ***
ST8018 8' 4 TRD STRAIGHT STEP 3 8 544.36 ***
ST8019 8' 4 TRD STRAIGHT STEP CANTILEVER 3 8 544.36 ***
ST8024 8' 4 TRD STRAIGHT SIT N STEP 4 8 594.05 ***
ST8025 8' 4 TRD STRAIGHT SIT N STEP CANTILEVER 4 8 594.05 ***
ST8043 8' 4 TRD RADIUS STEP 3 8 632.16 ***
ST8044 8' 4 TRD RADIUS STEP CANTILEVER 3 8 632.16 ***
ST8049 8' 4 TRD RADIUS SIT N STEP 4 8 637.06 ***
ST8050 8' 4 TRD RADIUS SIT N STEP CANT 4 8 637.06 ***
ST1024 10' ROMAN SIT N STEP *3+*2 6 927.00 ***
ST1025 10' ROMAN SIT N STEP CANTILEVER *3+*2 6 927.00 ***
ST8900 8' STRAIGHT STEP N SPA - TECHNICIAN 1 1910.00 ***
ST8910 8' RADIUS STEP N SPA - TECHNICIAN 1 1955.00 ***
PS10 POOLSIDE SPA - STRAIGHT - TECHNICIAN 1 1910.00 ***
PS20 POOLSIDE SPA - RADIUS - TECHNICIAN 1 1910.00 ***
PH325 *10' ROMAN STEP BRACE - 3 REQUIRED PER STEP TBD 19.57 ***
PH326 *10' ROMAN SEAT BRACE - 2 REQUIRED PER STEP TBD 12.36 ***
PH338 *LOUNGE BRACE (1 REQUIRED PER LOUNGE) 32 15.97 ***
PH339 STEP BRACE (SEE BRACES REQUIRED COLUMN) 32 18.80 ***
PH3391 *4' STEP BRACE - 2 REQUIRED PER STEP 17.00 ***
PH3392 *INSIDE CORNER STEP CENTER BRACE - 1 REQUIRED PER STEP 17.77 ***
PH3393 *INSIDE CORNER STEP DIAGONAL BRACE - 2 REQUIRED PER STEP 17.00 ***
SP0064 HALF STEP - DISPLAY (CALL FOR AVAILABILITY) 150.00 NET ***
PH390 PERFORMANCE STEP CANTILEVER DECK FORMS - STRAIGHT** NP 47.00 ***
PH39+ PERFORMANCE STEP CANTILEVER DECK FORMS - RADIUS** NP 47.00 ***
** SEE COPING PRICE LISTS FOR CANTILEVER STEP COPING KITS
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. PERFORMANCE STEPS ARE PRICED WITHOUT STEP BRACES.
2. DECK SUPPORTS ARE OPTIONAL.
3. STEP BRACES WILL BE SHIPPED (IN PALLET QUANTITIES) AND PACKAGED SEPARATELY
FROM THE STEP.
4. ADD $20.00 PER STEP FOR ORDERS IN LESS THAN PALLET QUANTITIES EXCEPT FOR THE
2' POOL WALL LADDER AND 4' STRAIGHT STEP.
PERFORMANCE STEPS CARRY A 25 YEAR WRITTEN NON-PRORATED WARRANTY WHEN USED WITH
THE PERFORMANCE STEP BRACES.
THESE PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE. MERCHANDISE WILL BE INVOICED
AT THE PRICE IN EFFECT AT THE TIME OF SHIPMENT ALL ITEMS F.O.B. LATHAM, NY. WE
RESERVE THE RIGHT TO MAKE IMPROVEMENTS AND CHANGES IN DESIGN AT ANY TIME.
INTEREST WILL BE CHARGED ON ALL PAST DUE BALANCES AT THE RATE OF 1 1/2% PER
MONTH (18% PER ANNUM).
<PAGE>
Section IV 11/10/97
Page 7
PRICE EFFECTIVE JANUARY 1, 1997
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
STEP ACCESSORIES UNIT SCP
CATALOG # PRICE NET
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MH300 INDIVIDUAL STEP SCREWS 0.10 ***
ORDER QTY NEEDED (SEE CHART BELOW)
MH330 STEP HARDWARE PACKAGE (CONTAINS: 55 SCREWS, 2 VINYL CAP 1.25 ***
(. . . 2 ALCOHOL TOWELS, 2 FOAM BLOCKS, STEP WARRANTY)
PH314 GASKET MATERIAL WITH HOLES PER FOOT 1.29 ***
FOR SINGLE GASKET STYLE (SEE CHART BELOW)
PH315 GASKET MATERIAL WITHOUT HOLES PER FOOT 1.29 ***
FOR SINGLE GASKET STYLE (SEE CHART BELOW)
PH348 VINYL CAP -- WHITE 0.44 ***
PH336 SUPPORT PAD FOR SIT N STEP (2 REQUIRED PER STEP) 4.38 ***
REPLACEMENT FACEPLATE, COVERSTRIP, SCREWS AND GASKET
SEE NEXT PAGE
LR303006 6' STEP TENT -- BLUE 43.26 ***
LR303008 8' STEP TENT -- BLUE 57.68 ***
LR3030010 10' STEP TENT -- BLUE 65.50 ***
SP0064 HALF STEP -- DISPLAY (CALL FOR AVAILABLITY) 150.00 NET ***
SP0063 STEP TREAD HAND SAMPLE 2.06 ***
- -------------------------------------------------------------------------------------------
</TABLE>
THESE PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE. MERCHANDISE WILL BE INVOICED
AT THE PRICE IN EFFECT AT THE TIME OF SHIPMENT. ALL ITEMS F.O.B. LATHAM, NY. WE
RESERVE THE RIGHT TO MAKE IMPROVEMENTS AND CHANGES IN DESIGN AT ANY TIME.
INTEREST WILL BE CHARGED ON ALL PAST DUE BALANCES AT THE RATE OF 1 1/2% PER
MONTH (18% ANNUM).
<PAGE>
Section IV 11/10/97
Page 8
PRICE EFFECTIVE JANUARY 1, 1997
<TABLE>
<CAPTION>
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
- --------------------------------------------------------------------------------
NEW MISCELLANEOUS ITEMS UNIT SCP
CATALOG# PRICE NET*
- --------------------------------------------------------------------------------
<S> <C> <C>
PH110 WHITE LINER SPLINE (PER FOOT) $0.20 ***
PH111 BLUE LINER SPLINE (PER FOOT) 0.20 ***
PH102 LINER LOCK - RIGID PVC WHT (48") 1.29 ***
PH150 HOOK & LOOP - FITS UP TO AN 8' STEP* $56.00 ***
*ORDER FROM SCOTIA OR ATLANTA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PH100 CR LINER STRIPS GRAY (6') 7.99 ***
MH125 8A X 1" PHILLIPS OVAL SCREW 0.05 ***
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PH130 8' STR COVER CAP (5/PKG)* 57.94 ***
PH131 55" RAD COVER CAP (12/PKG)* 86.78 ***
PH132 COVER CAP CORNER (4/PKG)* 23.18 ***
PH133 REV RAD COVER CAP COR (3/PKG)* 12.62 ***
PH134 COVER CAP CLIPS* 1.29 ***
*SEE NEXT PAGE FOR LIST OF COMPONENTS IN EACH KIT.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PH115 GARDEN PANEL CLIP 1.25 ***
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PH101 24' RND LINER STRIP WHT (37.5") 1.80 ***
PH116 24' RND 6" SEAT PANEL CLIP 1.80 ***
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PH140 MALE MATE-LOCK ADAPTER 0.40 ***
AH100 WELD-ON #16 ADHESIVE (ORDER IN 5 OZ INCRE 1.09 ***
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AH302 WELD-ON #10 REPAIR KIT 4 OZ - STEP REPAIR 11.85 ***
AH301 HANDIFOAM 2 PT MODEL II - STEP REPAIR 123.60 ***
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CO201 LINER BOX - SMALL TOP 3.86 ***
CO202 LINER BOX - SMALL BOTTOM 3.61 ***
CO206 LINER BOX - LARGE TOP 4.89 ***
CO207 LINER BOX - LARGE BOTTOM 4.38 ***
CO242 ABG LINER BOX - SMALL TOP 3.35 ***
CO243 ABG LINER BOX - SMALL BOTTOM 3.35 ***
CO244 ABG LINER BOX - LARGE TOP 4.64 ***
CO245 ABG LINER BOX - LARGE BOTTOM 4.64 ***
- --------------------------------------------------------------------------------
</TABLE>
THESE PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE. MERCHANDISE WILL BE INVOICED
AT THE PRICE IN EFFECT AT THE TIME OF SHIPMENT. ALL ITEMS F.O.B., LATHAM, NY.
WE RESERVE THE RIGHT TO MAKE IMPROVEMENTS AND CHANGES IN DESIGN AT ANY TIME.
INTEREST WILL BE CHARGED ON ALL PAST DUE BALANCES AT THE RATE OF 1 1/2% PER
MONTH (18% PER ANNUM).
<PAGE>
11/10/97
SPECIAL LINER PRICING
EFFECTIVE JANUARY 1, 1997
I. FORMULA
MAXIMUM LENGTH X MAXIMUM WIDTH X PRICE/SQUARE FOOT + ADD ONS X DISCOUNT
II. SQUARE FOOT PRICING (20MIL)--TILE/PRINT
<TABLE>
<CAPTION>
SQ. FT SCP NET
------ -------
<S> <C>
LESS THAN 100 SQ FT ***
100-499 SQ FT ***
500-640 ***
641-799 ***
800-1249 ***
1250+ ***
</TABLE>
III. ADD ONS TO FORMULA:
<TABLE>
<CAPTION>
net
---
<C> <S> <C> <C>
A. FREE FORM/IRREGULAR SHAPE (KIDNEY) ***
B. STEEL STEPS OR SWIM OUTS (WITH ROD POCKETS) *** PER STEP
C. VINYL STEPS OR SWIM OUTS (WITH VELCRO) *** PER STEP
D. OVERLAP ***
E. OVER 9' DEEP ***
F. ANY LINER LESS THAN 100 SQ FT ***
G. UPCHARGE FOR NON-STANDARD MATERIAL MATCH ***
H. UPCHARGE FOR OVER 42" FINISHED GRADE ***
I. UPCHARGE FOR ALL PRINT LINER ***
(NOTE: ALL SPARKLE BLUE AND ALL SPARKLE WHITE
LINERS ARE AVAILABLE WITHOUT AN UPCHARGE)
LIST Net
------ ---
J. SPECIAL FEATURES CALL FOR QUOTE
***PH150--HOOK & LOOP--FITS UP TO AN 8' STEP $58.00 ***
</TABLE>
IV. TYE DYE LINERS ADD 20% TO 20 MIL PRICES
V. 27 MIL LINERS ADD 30% TO 20 MIL PRICE
27/20 MIL LINERS ADD 15% TO 20 MIL PRICE
VI. LAZY L- CALCULATE AS THREE RECTANGLES (SEE NEXT PAGE)
ROUNDS- FIGURE AS TRUE SQ FT (PI) 3.14 X RAD X RAD
OCTAGON- FIGURE LIKE ROUND, DIAGONAL POINT TO POINT DIVIDE BY 2 = RADIUS
FREEFORM- ANYTHING WITH A REVERSE RADIUS
TRUE L- FIGURE AS TWO RECTANGLES
ALL DIMENSIONS SHOULD BE BASED ON NEAREST INCH WHEN FIGURING SQUARE
FOOTAGE
<TABLE>
<CAPTION>
INCHES DECIMAL INCHES INCHES DECIMAL INCHES INCHES DECIMAL INCHES
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
1 0.08 5 0.42 9 0.75
2 0.17 6 0.5 10 0.83
2 0.25 7 0.58 11 0.92
4 0.33 8 0.67 12 1
</TABLE>
PLEASE USE CATALOGUE NUMBERS WHEN ORDERING. These prices are subject to change
without notice. Merchandise will be invoiced at price in effect at the time of
shipment. All items F.O.B., Latham/Scotia, NY or Atlanta, GA. We reserve the
right to make improvements and changes in design at any time. Interest will be
charged on all past due balances at the rate of 1 1/2% per month (18% per annum)
<PAGE>
Section IV 11/10/97
Page 10
PRICE EFFECTIVE JANUARY 1, 1997
<TABLE>
<CAPTION>
REPLACEMENT LINERS
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
- --------------------------------------------------------------------------------------------------------------
Pacific Liners - Flat
13th Edition (1996 & Prior) 40" Finish Only 3TH EDITIO
Florentine/Sparkle DRAWING UNIT SCP
CATALOG # DESCRIPTION NUMBER PRICE NET*
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LR 47321321 9'8 X 13'8 FLAT GRECIAN EXERCISE W/GUIDE GX-162 $150.40 ***
LR 47321331 12 X 16 FLAT RCT 2' RAD COR EXERCISE W/GUIDE GX-163 $227.68 ***
LR 47320031 17" ROUND FLAT GX-101 $273.12 ***
LR 47320331 13 X 25 OVAL FLAT GX-158 $403.68 ***
LR 47320341 13 X 24 OVAL FLAT W/8' RAD STEP GX-158-8'SC $385.38 ***
LR 47320351 14'3 X 22'10 OVAL FLAT GX-102 $400.30 ***
LR 47320371 14'3 X 28'10 OVAL FLAT GX-103 $509.95 ***
LR 47320421 17 X 27 OVAL FLAT GX-104 $572.11 ***
LR 47320481 17 X 35 OVAL FLAT GX-105 $717.80 ***
LR 4732073106 10 X 40 FLAT 2' RAD COR GX-109 $496.00 ***
LR 4732075106 12 X 24 FLAT RCT 2' RAD COR GX-111 $351.52 ***
LR 4732079106 14 X 26 FLAT RCT 2' RAD COR GX-112 $449.56 ***
LR 4732081106 16 X 32 FLAT RCT 2' RAD COR GX-113 $614.88 ***
LR 4732088106 18 X 36 FLAT RCT 2' RAD COR GX-114 $712.24 ***
LR 4732093106 20 X 40 FLAT RCT 2' RAD COR GX-115 $868.00 ***
LR 47321511 14 X 25 KIDNEY FLAT RT GX-156 $434.08 ***
LR 47321521 14 X 25 KIDNEY FLAT LT GX-157 $434.06 ***
LR 47321461 15 X 30 KIDNEY FLAT RT GX-142 $561.79 ***
LR 47321471 15 X 30 KIDNEY FLAT LT GX-143 $561.79 ***
LR 47321531 13 X 26 GRECIAN FLAT GX-159 $419.14 ***
LR 47320181 16' OCTAGON FLAT GX-119 $228.65 ***
LR 47320221 21' OCTAGON FLAT GX-120 $423.17 ***
LR 47320281 26' OCTAGON FLAT GX-121 $644.11 ***
LR 47320311 31' OCTAGON FLAT GX-122 $851.25 ***
- --------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are subject to change
without notice. Merchandise will be invoiced at the price in effect at the time
of shipment. All items F.O.B. Latham/Scotia, NY. We reserve the right to make
improvements and changes in design at any time. Interest will be charged on all
past due balances at the rate of 1 1/2% per month (18% per annum).
<PAGE>
Section IV 11/10/97
Page 11
PRICE EFFECTIVE JANUARY 1, 1997
<TABLE>
<CAPTION>
REPLACEMENT LINERS
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
- --------------------------------------------------------------------------------------------------------------
Pacific Liners - Hopper
13th Edition (1996 & Prior) 40" Finish Only 3TH EDITIO
Florentine/Sparkle with stripe DRAWING UNIT SCP
CATALOG # DESCRIPTION NUMBER PRICE NET*
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LR47320482 17 X 35 OVAL HOP GX-106 $737.80 ***
LR47320642 19 X 37 OVAL HOP GX-107 $790.50 ***
LR47320682 21 X 41 OVAL HOP GX-108 $951.51 ***
LR4732061206 16 X 32 RCT HOP 2' RAD COR GX-116 $634.88 ***
LR4732088206 18 X 36 RCT HOP 2' RAD COR GX-117 $732.24 ***
LR4732093206 20 X 40 RCT HOP 2' RAD COR GX-118 $888.00 ***
LR473210806 16 X 24 X 41 TRUE L RT HOP 2' COR - DOUBLE 45 DEG. GX-128 $885.92 ***
LR473210906 16 X 24 X 41 TRUE L LT HOP 2' COR - DOUBLE 45 DEG. GX-129 $885.92 ***
LR4732119206 16 X 41 LAZY L RT 2' COR GX-130 $741.28 ***
LR4732120206 16 X 41 LAZY L LT 2' COR GX-131 $741.28 ***
LR4732123206 18 X 44 LAZY L RT 2' COR GX-132 $874.62 ***
LR4732124206 18 X 44 LAZY L LT 2' COR GX-133 $874.62 ***
LR4732125206 20 X 46 LAZY L RT 2' COR GX-134 $1,021.20 ***
LR4732126206 20 X 46 LAZY L LT 2' COR GX-135 $1,021.20 ***
LR4732141206 18 X 34'6" RMN HOP 2' RAD GX-136 $770.04 ***
LR4732142206 18 X 33'7" RMN HOP 2' RAD W/8' RAD STEP GX-136-8'SC $749.57 ***
LR47321512 17 X 33 KID RT HOP GX-145 $693.16 ***
LR47321522 17 X 33 KID LT HOP X-144 $693.16 ***
LR47321622 18 X 36 KID RT HOP GX-147 $758.23 ***
LR47321632 18 X 36 KID LT HOP GX-146 $758.23 ***
LR47321782 17 X 33 OBL RT HOP GX-139 $689.44 ***
LR47321792 17 X 33 OBL LT HOP GX-138 $689.44 ***
LR47321802 17 X 37 SUPER 8 HOP GX-141 $779.96 ***
LR47321982 17 X 30 FIGURE 8 GX-140 $636.12 ***
LR47321822 21 X 33 ELLIPSE HOP GX-137 $757.10 ***
LR47321861 18 X 36 MTN LK RT HOP GX-149 $856.54 ***
LR47321871 18 X 36 MTN LK LT HOP GX-153 $856.54 ***
LR47321881 21 X 40 MTN LK RT HOP GX-151 $1,025.64 ***
LR47321891 21 X 40 MTN LK LT HOP GX-152 $1,025.64 ***
LR47321332 16'6" X 32'6" GREC HOP GX-123 $664.95 ***
LR47321352 16'6" X 36'6" GREC HOP GX-124 $746.79 ***
LR47321362 17'11 X 37'11 GREC HOP GX-125 $767.61 ***
LR47321382 19'4 X 39'4 GREC HOP GX-126 $859.09 ***
LR47321402 24'2 X 44'2 GREC HOP GX-127 $1,184.71 ***
LR47322002 17 X 27 X 34 LAGOON RT HOP GX-148 $793.26 ***
LR47322012 17 X 27 X 34 LAGOON LT HOP GX-154 $793.26 ***
- -------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are subject to change
without notice. Merchandise will be invoiced at the price in effect at the time
of shipment. All items F.O.B. Latham/Scoita, NY. We reserve the right to make
improvements and changes in design at any time. Interest will be charged on all
past due balances at the rate of 1 1/2% per month (18% per annum).
<PAGE>
Section IV 11/10/97
PRICE EFFECTIVE: JANUARY 1, 1997
REPLACEMENT LINERS
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
South Central Pool Supply
Private Label Liners
Gulfstar/Sparkle Blue -------------------------
1996 & Prior (40" Finish only) DRAWING UNIT SCP
CATALOG # DESCRIPTION NUMBER PRICE NET*
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LR11326041 31' OCT FLT PP-136 $851.25 ***
LR11326071 15'2" X 29'10" OVAL FLT PP-102 $563.65 ***
LR11326091 18 X 36 OVAL FLT PP-104 $712.24 ***
LR11326092 18 X 36 OVAL HOP PP-105 $732.24 ***
LR11326101 18 X 42 OVAL FLT PP-106 $834.28 ***
LR11326102 18 X 42 OVAL HOP PP-107 $854.28 ***
LR1132613104 12 X 24 RECT FLT 6" COR PP-111 $351.52 ***
LR1132613106 12 X 24 RECT FLT 2' COR PP-111A $351.52 ***
LR1132613107 12 X 24 RECT FLT 4' COR PP-112 $351.52 ***
LR1132614104 14 X 26 RECT FLT 6" COR PP-113 $449.56 ***
LR1132614106 14 X 26 RECT FLT 2' COR PP-113A $449.56 ***
LR1132614107 14 X 26 RECT FLT 4' COR PP-114 $449.56 ***
LR1132615104 16 X 32 RECT FLT 6" COR PP-115 $614.88 ***
LR1132615107 16 X 32 RECT FLT 4' COR PP-119 $614.88 ***
LR1132615204 16 X 32 RECT HOP 6" COR PP-116 $634.88 ***
LR1132615206 16 X 32 RECT HOP 2' COR PP-118 $634.88 ***
LR1132615207 16 X 32 RECT HOP 4' COR PP-120 $634.88 ***
LR1132616104 18 X 36 RECT FLT 6" COR PP-121 $712.24 ***
LR1132616107 18 X 36 RECT FLT 4' COR PP-125 $712.24 ***
LR1132616204 18 X 36 RECT HOP 6" COR PP-122 $732.24 ***
LR1132616206 18 X 36 RECT HOP 2' COR PP-124 $732.24 ***
LR1132616207 18 X 36 RECT HOP 4' COR PP-126 $732.24 ***
LR1132617104 20 X 40 RECT FLT 6" COR PP-127 $868.00 ***
LR1132617107 20 X 40 RECT FLT 4' COR PP-131 $868.00 ***
LR1132618204 20 X 40 RECT HOP 6" COR 8-6 DP PP-128 $888.00 ***
LR1132618206 20 X 40 RECT HOP 2' COR 8-6 DP PP-130 $888.00 ***
LR1132618207 20 X 40 RECT HOP 4' COR 8-6 DP PP-132 $888.00 ***
LR1132625204 16 X 42 X 24 TRUE L RT HOP 6" COR R6TLR16 $888.00 ***
LR1132625206 16 X 42 X 24 TRUE L RT HOP 2' COR R2TLR16 $888.00 ***
LR1132625207 16 X 42 X 24 TRUE L RT HOP 4' COR R4TLR16 $888.00 ***
LR1132626204 16 X 42 X 24 TRUE L LT HOP 6" COR R6TLL16 $888.00 ***
LR1132626206 16 X 42 X 24 TRUE L LT HOP 2' COR R2TLL16 $888.00 ***
LR1132626207 16 X 42 X 24 TRUE L LT HOP 4' COR R4TLL16 $888.00 ***
- ---------------------------------------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are subject to change
without notice. Merchandise will be invoiced at the price in effect at the
time of shipment. All items F.O.B. Latham/Scoita, NY. We reserve the right to
make improvements and changes in design at any time. Interest will be charged
on all past due balances at the rate of 1 1/2% per month (18% per annum).
<PAGE>
Section IV 11/10/97
PRICE EFFECTIVE: JANUARY 1, 1997
REPLACEMENT LINERS
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
South Central Pool Supply
Private Label Liners
Gulfstar/Sparkle Blue ----------------
1996 & Prior (40" Finish only) DRAWING UNIT SCP
CATALOG # DESCRIPTION NUMBER PRICE NET
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LR1132629204 16 X 37 X 45 LAZY L RT HOP 6" COR R6LLR16 $741.28 ***
LR1132629206 16 X 37 X 45 LAZY L RT HOP 2' COR R2LLR16 $741.28 ***
LR1132629207 16 X 37 X 45 LAZY L RT HOP 4' COR R4LLR16 $741.28 ***
LR1132630204 16 X 37 X 45 LAZY L LT HOP 6" COR R6LLL16 $741.28 ***
LR1132630206 16 X 37 X 45 LAZY L LT HOP 2' COR R2LLL16 $741.28 ***
LR1132630207 16 X 37 X 45 LAZY L LT HOP 4' COR R4LLL16 $741.28 ***
LR1132627204 20 X 46'2 LAZY L RT HOP 6" COR R6LLR20 $954.60 ***
LR1132627206 20 X 46'2 LAZY L RT HOP 2' COR R2LLR20 $954.60 ***
LR1132627207 20 X 46'2 LAZY L RT HOP 4' COR R4LLR20 $954.60 ***
LR1132628204 20 X 46'2 LAZY L LT HOP 6" COR R6LLL20 $954.60 ***
LR1132628206 20 X 46'2 LAZY L LT HOP 2' COR R2LLL20 $954.60 ***
LR1132628207 20 X 46'2 LAZY L LT HOP 4' COR R4LLL20 $954.60 ***
LR11326442 16'6 X 32'6 GREC HOP PP-138 $664.95 ***
LR11326452 16'6 X 36'6 GREC HOP PP-139 $746.79 ***
LR11326462 18'6 X 36'6 GREC HOP SC-66 $763.03 ***
LR11326472 17'11 X 37'11 GREC HOP PP-140 $767.87 ***
LR11326492 19'4 X 39'4 GREC HOP (New Type III) RG1939 $859.09 ***
LR11326522 24'2 X 44' 1-1/2" GREC HOP (New Type III) RG2444 $1,183.68 ***
LR1132657204 16'6 X 36 RMN HOP 6" COR PP-151 $736.56 ***
LR11326662 18 X 34'5 KID RT HOP PP-156 $768.80 ***
LR11326672 18 X 34'5 KID LT HOP PP-155 $768.80 ***
LR11326702 18 X 37'6 MTN LAKE RT HOP PP-158 $880.98 ***
LR11326712 18 X 37'6 MTN LAKE LT HOP PP-157 $880.98 ***
LR1132672204 18 X 32'11 KEYHOLE HOP 6" COR PP-152 $731.60 ***
LR1132672207 18 X 32"11 KEYHOLE HOP 4' COR PP-153 $731.60 ***
- ---------------------------------------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are subject to change
without notice. Merchandise will be invoiced at the price in effect at the
time of shipment. All items F.O.B. Latham/Scoita, NY. We reserve the right to
make improvements and changes in design at any time. Interest will be charged
on all past due balances at the rate of 1 1/2% per month (18% per annum).
<PAGE>
Section IV 11/10/97
Page 12
PRICE EFFECTIVE: JANUARY 1, 1997
*If Aspen/Sparkle Blue fill in 2532 (####)
If Aspen/Sparkle White fill in 5048 (####)
REPLACEMENT LINERS
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Private Label Liners
Aspen/Sparkle Blue or White*
1996 & Prior (40" Finish only) Drawing UNIT SCP
CATALOG # DESCRIPTION Number PRICE NET
- ------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LR####6431 9'8 X 13'8 GREC FLAT SWIMFIT W/GUIDE PP-137 $150.40 ***
LR####420107 12 X 16 RCT FLAT 4' COR SWIMFIT W/GUIDE PP-110 $227.68 ***
LR####6011 16' OCT FLT PP-133 $228.65 ***
LR####6021 21' OCT FLT PP-134 $423.17 ***
LR####6031 26' OCT FLT PP-135 $644.11 ***
LR####6041 31' OCT FLT PP-136 $851.25 ***
LR####6071 15'2" X 29'10" OVAL FLT PP-102 $563.65 ***
LR####6091 18 X 36 OVAL FLT PP-104 $712.24 ***
LR####6092 18 X 36 OVAL HOP PP-105 $732.24 ***
LR####6101 18 X 42 OVAL FLT PP-106 $834.28 ***
LR####6102 18 X 42 OVAL HOP PP-107 $854.28 ***
LR####613104 12 X 24 RCT FLT 6" COR PP-111 $351.52 ***
LR####613106 12 X 24 RCT FLT 2' COR PP-111A $351.52 ***
LR####613107 12 X 24 RCT FLT 4' COR PP-112 $351.52 ***
LR####614104 14 X 26 RCT FLT 6" COR PP-113 $449.56 ***
LR####614106 14 X 26 RCT FLT 2' COR PP-113A $449.56 ***
LR####614107 14 X 26 RCT FLT 4' COR PP-114 $449.56 ***
LR####615104 16 X 32 RCT FLT 6" COR PP-115 $614.88 ***
LR####615106 16 X 32 RCT FLT 2' COR PP-117 $614.88 ***
LR####615107 16 X 32 RCT FLT 4' COR PP-119 $614.88 ***
LR####615204 16 X 32 RCT HOP 6" COR PP-116 $634.88 ***
LR####615206 16 X 32 RCT HOP 2' COR PP-118 $634.88 ***
LR####615207 16 X 32 RCT HOP 4' COR PP-120 $634.88 ***
LR####616104 18 X 36 RCT FLT 6" COR PP-121 $712.24 ***
LR####616106 18 X 36 RCT FLT 2' COR PP-123 $712.24 ***
LR####616107 18 X 36 RCT FLT 4' COR PP-125 $712.24 ***
LR####616204 18 X 36 RCT HOP 6" COR PP-122 $732.24 ***
LR####616206 18 X 36 RCT HOP 2' COR PP-124 $732.24 ***
LR####616207 18 X 36 RCT HOP 4' COR PP-126 $732.24 ***
LR####617104 20 X 40 RCT FLT 6" COR PP-127 $868.00 ***
LR####617106 20 X 40 RCT FLT 2' COR PP-129 $868.00 ***
LR####617107 20 X 40 RCT FLT 4' COR PP-131 $868.00 ***
LR####618204 20 X 40 RCT HOP 6" COR 8'6" DP PP-128 $888.00 ***
LR####618206 20 X 40 RCT HOP 2' COR 8'6" DP PP-130 $888.00 ***
LR####618207 20 X 40 RCT HOP 4' COR 8'6" DP PP-132 $888.00 ***
- ------------------------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are subject to change
without notice. Merchandise will be invoiced at the price in effect at the time
of shipment. All items F.O.B. Latham/Scoita, NY. We reserve the right to make
improvements and changes in design at any time. Interest will be charged on all
past due balances at the rate of 1 1/2% per month (18% per annum).
<PAGE>
Section IV 11/10/97
Page 13
PRICE EFFECTIVE: JANUARY 1, 1997
* If Aspen/Sparkle Blue fill in with 2532(####)
If Aspen/Sparkle White fill in with 5048(####)
REPLACEMENT LINERS
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Private Label Liners
Aspen/Sparkle Blue or White*
1996 & Prior(40" Finish) DRAWING UNIT SCP
CATALOG # DESCRIPTION NUMBER PRICE NET
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LR####621204 16 X 24 X 40 TRUE L RT HOP 6" COR 90 DEG. PM-59R $867.84 ***
LR####621207 16 X 24 X 40 TRUE L RT HOP 4' COR 90 DEG. PM-59R $867.84 ***
LR####622204 16 X 24 X 40 TRUE L LT HOP 6" COR 90 DEG. PM-59L $867.84 ***
LR####622207 16 X 24 X 40 TRUE L LT HOP 4' COR 90 DEG. PM-59L $867.84 ***
LR####631204 16 X 24 X 41 TRUE L RT HOP 6" COR DOUBLE 45 PP-144 $885.92 ***
LR####631206 16 X 24 X 41 TRUE L RT HOP 2' COR DOUBLE 45 PP-144A $885.92 ***
LR####631207 16 X 24 X 41 TRUE L RT HOP 4' COR DOUBLE 45 PP-146 $885.92 ***
LR####632204 16 X 24 X 41 TRUE L LT HOP 6" COR DOUBLE 45 PP-143 $885.92 ***
LR####632206 16 X 24 X 41 TRUE L LT HOP 2' COR DOUBLE 45 D PP-143A $885.92 ***
LR####632207 16 X 24 X 41 TRUE L LT HOP 4' COR DOUBLE 45 D PP-145 $885.92 ***
LR####623204 16 X 20 X 41 LAZY L LT HOP 6" COR PP-147 $737.08 ***
LR####623206 16 X 20 X 41 LAZY L LT HOP 2' COR PP-147A $737.08 ***
LR####623207 16 X 20 X 41 LAZY L LT HOP 4' COR PP-149 $737.08 ***
LR####624204 16 X 20 X 41 LAZY L RT HOP 6" COR PP-148 $737.08 ***
LR####624206 16 X 20 X 41 LAZY L RT HOP 2' COR PP-148A $737.08 ***
LR####624207 16 X 20 X 41 LAZY L RT HOP 4' COR PP-150 $737.08 ***
LR####6442 16'6" X 32'6" GREC HOP PP-138 $664.95 ***
LR####6452 17'6" x 36'6" GREC HOP PP-139 $746.79 ***
LR####6472 17'11 X 37'11 GREC HOP PP-140 $767.61 ***
LR####6482 19'4 X 39'4 GREC HOP PP-141 $859.09 ***
LR####6512 24'2 X 44'2 GREC HOP PP-142 $1,184.71 ***
LR####657204 16'6" X 36 RMN HOP 6" COR PP-151 $736.56 ***
LR####6631 15'2 X 31'4 KID FLT PP-154 $594.04 ***
LR####6662 18 X 34'5 KID RT HOP PP-156 $768.80 ***
LR####6672 18 X 34'5 KID LT HOP PP-155 $768.80 ***
LR####6702 18 X 37'6" MTN LAKE RT HOP PP-158 $880.98 ***
LR####6802 18 X 37'6" MTN LAKE LT HOP PP-157 $880.98 ***
LR####672204 18 X 33 KEYHOLE HOP 6" COR PP-152 $731.60 ***
LR####672207 18 X 33 KEYHOLE HOP 4' COR PP-153 $731.60 ***
- -----------------------------------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are subject to change
without notice. Merchandise will be invoiced at the price in effect at the time
of shipment. All items F.O.B. Latham/Scoita, NY. We reserve the right to make
improvements and changes in design at any time. Interest will be charged on all
past due balances at the rate of 1 1/2% per month (18% per annum).
<PAGE>
Section IV 11/10/97
PRICE EFFECTIVE JANUARY 1, 1997
*If Prestige/Stoneleigh 27/20 use 2188(####)
REPLACEMENT LINERS If Baroque II/Crystal II 27/20 use 5377(####)
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Weatherking Liners
Prestige/Stoneleigh 27/20* or
Baroque II/Crystal II 27/20* DRAWING UNIT SCP
CATALOG # DESCRIPTION NUMBER PRICE NET
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LR####401104 14 X 28 RECT FLT 6" RAD W6R1428 $561.53 ***
LR####402204 16 X 32 RECT HOP 6" RAD W6R1632 $730.11 ***
LR####403204 18 X 36 RECT HOP 6" RAD W6R1836 $842.08 ***
LR####404204 20 X 40 RECT HOP 6" RAD W6R2040 $1,021.20 ***
LR####405204 25 X 50 RECT HOP 6" RAD W6R2550 $1,538.13 ***
LR####406106 14 X 28 RECT FLT 2' RAD W2R1428 $561.53 ***
LR####407206 16 X 32 RECT HOP 2' RAD W2R1632 $730.11 ***
LR####408206 18 X 36 RECT HOP 2' RAD W2R1836 $842.08 ***
LR####409206 20 X 40 RECT HOP 2' RAD W2R2040 $1,021.20 ***
LR####4102 16'6" X 32'6" GREC HOP WG1632 $764.69 ***
LR####4112 16'6" X 35'6" GREC HOP WG1635 $835.28 ***
LR####4122 17'11" X 36'11" GREC HOP WG1837 $859.76 ***
LR####4132 20'9" 39'9" GREC HOP WG2040 $1,051.33 ***
LR####4142 16 X 32 OVAL HOP WO1632 $730.11 ***
LR####4152 18 X 36 OVAL HOP WO1836 $842.08 ***
LR####4162 22 X 40 OVAL HOP WO2240 $1,123.32 ***
LR####417206 16 X 42 X 24 TRUE L LT HOP 2' RAD W2TLL16 $1,021.20 ***
LR####418206 16 X 42 X 24 TRUE L RT HOP 2' RAD W2TKR16 $1,021.20 ***
LR####419206 20 X 46 X 28 TRUE L LT HOP 2' RAD W2TLL20 $1,358.20 ***
LR####420206 20 X 46 X 28 TRUE L RT HOP 2' RAD W2TLR20 $1,358.20 ***
LR####421206 18 X 40'8" LAZY L LT HOP 2' RAD W2LLL18 $900.55 ***
LR####422206 18 X 40'8" LAZY L RT HOP 2' RAD W2LLR18 $900.55 ***
LR####423206 20 X 44'9" LAZY L LT HOP 2' RAD W2LLL20 $1,072.26 ***
LR####424206 20 X 44'9" LAZY L RT HOP 2' RAD W2LLR20 $1,072.26 ***
LR####425204 16 X 36'7" ROMAN END HOP 6" RAD W6RE16 $834.61 ***
LR####426204 18 X 39'7" ROMAN END HOP 6" RAD W6RE18 $925.82 ***
LR####427204 20 X 42'7" ROMAN END HOP 6" RAD W6RE20 $1,087.07 ***
LR####4282 18 X 34 KIDNEY LT HOP WK18L $872.71 ***
LR####4292 18 X 34 KIDNEY RT HOP WK18R $872.71 ***
LR####4302 22 X 41 KIDNEY LT HOP WK22L $1,151.40 ***
LR####4312 22 X 41 KIDNEY RT HOP WK22R $1,151.40 ***
- ------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are subject to change
without notice. Merchandise will be invoiced at the price in effect at the time
of shipment. All items F.O.B. Latham/Scoita, NY. We reserve the right to make
improvements and changes in design at any time. Interest will be charged on all
past due balances at the rate of 1 1/2% per month (18% per annum).
<PAGE>
Section IV 11/10/97
PRICE EFFECTIVE JANUARY 1, 1997
[B<TABLE>
<CAPTION>
*If Tahoe/Stoneleigh use 8788(####)
If Presidential/Sparkle Blue use 2332(####)
REPLACEMENT LINERS
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
- ----------------------------------------------------------------------------------------------------------
Heidor Liners
Tahoe/Stoneleigh or Presidential/Sparkle Blue
Oct '94 thru Dec '96 DRAWING UNIT SCP
CATALOG # Description NUMBER PRICE NET
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LR####401104 14 X 28 RECT FLAT 6" RAD H6R1428 $505.68 ***
LR####401133 14 X 28 RECT FLAT 6" RAD SSC H6R1428-8'SSC $665.68 ***
LR####402204 16 X 32 RECT HOP 6" RAD G6R1632 $634.88 ***
LR####402233 16 X 32 RECT HOP 6" RAD SSC H6R1632-8'SSC $794.88 ***
LR####402234 16 X 32 RECT HOP 6" RAD 6' SSL H6R1632-6'SSL $794.88 ***
LR####402235 16 X 32 RECT HOP 6" RAD 6' SSR H6R1632-6'SSR $794.88 ***
LR####403204 18 X 36 RECT HOP 6" RAD H6R1836 $732.24 ***
LR####403233 18 X 36 RECT HOP 6" RAD SSC H6R1836-8'SSC $892.24 ***
LR####403234 18 X 36 RECT HOP 6" RAD SSL H6R1836-8'SSL $892.24 ***
LR####403235 18 X 36 RECT HOP 6" RAD SSR H6R1836-8'SSR $892.24 ***
LR####404204 20 X 40 RECT HOP 6" RAD H6R2040 $888.00 ***
LR####404233 20 X 40 RECT HOP 6" RAD SSC H6R2040-8'SSC $1,048.00 ***
LR####404234 20 X 40 RECT HOP 6" RAD SSL H6R2040-8'SSL $1,048.00 ***
LR####404235 20 X 40 RECT HOP 6" RAD SSR H6R1836-8'SSR $1,048.00 ***
LR####405204 25 X 50 RECT HOP 6" RAD H6R2550 $1,337.50 ***
LR####405233 25 X 50 RECT HOP 6" RAD SSC H6R2550-8'SSC $1,497.50 ***
LR####406106 14 X 28 RECT FLAT 2' RAD H2R1428 $505.68 ***
LR####406130 14 X 28 RECT FLAT 2' RAD SSC H2R1428-8'SSC $665.68 ***
LR####407206 16 X 32 RECT HOP 2' RAD H2R1632 $634.88 ***
LR####407230 16 X 32 RECT HOP 2' RAD SSC H2R1632-8'SSC $794.88 ***
LR####408206 18 X 36 RECT HOP 2' RAD H2R1836 $732.24 ***
LR####408230 18 X 36 RECT HOP 2' RAD SSC H2R1836-8'SSC $892.24 ***
LR####409206 20 X 40 RECT HOP 2' RAD H2R2040 $888.00 ***
LR####409230 20 X 40 RECT HOP 2' RAD SSC H2R2040-8'SSC $1,048.00 ***
LR####4102 16'6" X 32'6" GREC HOP HG1632 $664.95 ***
LR####410230 16'6" X 32'6" GREC HOP SSC HG1632-8'SSC $824.95 ***
LR####4112 16'6" X 35'6" GREC HOP HG1635 $726.33 ***
LR####411230 16'6" X 35'6" GREC HOP SSC HG1635-8'SSC $886.33 ***
LR####4122 17'11" X 36'11" GREC HOP HG1837 $747.62 ***
LR####412230 17'11" X 36'11" GREC HOP SSC HG1837-8'SSC $907.62 ***
- ----------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are subject to change
without notice. Merchandise will be invoiced at the price in effect at the time
of shipment. All items F.O.B. Latham/Scoita, NY. We reserve the right to make
improvements and changes in design at any time. Interest will be charged on all
past due balances at the rate of 1 1/2% per month (18% per annum).
<PAGE>
Section IV 11/10/97
PRICE EFFECTIVE JANUARY 1, 1997
*If Tahoe/Stoneleigh use 8788(####)
If Presidential/Sparkle Blue use 2332(####)
REPLACEMENT LINERS
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Heldor Liners
Tahoe/Stoneleigh or President/Sparkle Blue
Oct '94 thru Dec '96 DRAWING UNIT SCP
CATALOG # DESCRIPTION NUMBER PRICE NET*
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LR####4132 20'9" X 36'9" GREC HOP HG2040 $914.20 ***
LR####413230 20'9" X 39'9" GREC HOP SSC HG2040-8'SSC $1,074.20 ***
LR####4142 16 X 32 OVAL HOP HO1632 $634.88 ***
LR####14230 16 X 32 OVAL HOP SSC HO-8'SSC $794.88 ***
LR####4152 18 X 36 OVAL HOP HO1836 $732.24 ***
LR####415230 18 X 36 OVAL HOP SSC HO1836-8'SSC $892.24 ***
LR####4162 22 X 40 OVAL HOP HO2240 $976.80 ***
LR####416230 22 X 40 OVAL HOP SCC HO2240-8'SCC $1,136.80 ***
LR####417206 16 X 42 X 24 TRUE L LT HOP 2' RAD H2TTL16 $888.00 ***
LR####417230 16 X 42 X 24 TRUE L LT HOP 2' RAD SSCOL H2TLL16-8'SSC $1,048.00 ***
LR####418206 16 X 42 X 24 TRUE L RT HOP 2' RAD H2TLR16 $888.00 ***
LR####418230 16 X 42 X 24 TRUE L RT HOP 2' RAD SSCOL H2TLR16-8'SSC $1,048.00 ***
LR####419206 20 X 46 X 28 TRUE L LT HOP 2' RAD H2TLL20 $1,181.04 ***
LR####419230 20 X 46 X 28 TRUE L LT HOP 2' RAD SSCOL H2TLL20-8'SSC $1,341.04 ***
LR####420206 20 X 46 X 28 TRUE L RT HOP 2' RAD H2TLR20 $1,181.04 ***
LR####420230 20 X 46 X 28 TRUE L RT HOP 2' RAD SSCOL H2TLR20-8'SSC $1,341.04 ***
LR####421206 18 X 40'8" LAZY L LT HOP 2' RAD H2LLL18 $783.09 ***
LR####421230 18 X 40'8" LAZY L LT HOP 2' RAD SSC H2LLL18-8'SSC $943.09 ***
LR####422206 18 X 40'8" LAZY L RT HOP 2' RAD H2LLR18 $783.09 ***
LR####422230 18 X 40'8" LAZY L RT HOP 2' RAD SSC H2LLR18-8'SSC $943.09 ***
LR####423206 20 X 44'9" LAZY L LT HOP 2' RAD H2LLL20 $932.40 ***
LR####423230 20 X 44'9" LAZY L LT HOP 2' RAD SSC H2LLL20-8'SSC $1,092.40 ***
LR####424206 20 X 44'9" LAZY L RT HOP 2' RAD H2LLR20 $932.40 ***
LR####424230 20 X 44'9" LAZY L RT HOP 2' RAD SSC H2LLR20-8'SSC $1,092.40 ***
LR####425204 16 X 36'7" ROMAN END HOP 6" RAD H6RE16 $725.75 ***
LR####425233 16 X 36'7" ROMAN END HOP 6" RAD SSC H6RE16-8'SSC $885.75 ***
LR####426204 18 X 39'7" ROMAN END HOP 6" RAD H6RE18 $805.06 ***
LR####426233 18 X 39'7" ROMAN END HOP 6" RAD SSC H6RE18-8'SSC $965.06 ***
LR####427204 20 X 42'7" ROMAN END HOP 6" RAD H6RE20 $945.28 ***
LR####427233 20 X 42'7" ROMAN END HOP 6" RAD SSC H6RE20-8'SSC $1,105.28 ***
LR####4282 18 X 34 KIDNEY LT HOP HK18LD $758.88 ***
LR####428236 18 X 34 KIDNEY LT HOP SSC HK18LD-8'SSC $918.88 ***
LR####4292 18 X 34 KIDNEY RT HOP HK18RD $758.88 ***
LR####429236 18 X 34 KIDNEY RT HOP SSC HK18RD-8'SSC $918.88 ***
LR####4302 22 X 41 KIDNEY LT HOP HK22LD $1,001.22 ***
LR####430236 22 X 41 KIDNEY LT HOP SSC HK22LD-8'SSC $1,161.22 ***
LR####4312 22 X 41 KIDNEY RT HOP HK22RD $1,001.22 ***
LR####431236 22 X 41 KIDNEY RT HOP SSC HK22RD-8'SSC $1,161.22 ***
- ----------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are subject to change
without notice. Merchandise will be invoiced at the price in effect at the time
of shipment. All items F.O.B. Latham/Scoita, NY. We reserve the right to make
improvements and changes in design at any time. Interest will be charged on all
past due balances at the rate of 1 1/2% per month (18% per annum).
<PAGE>
<TABLE>
<CAPTION>
Section IV 11/10/97
PRICE EFFECTIVE JANUARY 1, 1997
LINERS TO GO
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING.
------------------------------------------------------------
<S> <C> <C> <C> <C>
Liners to Go
Cheyenne/Crystal II UNIT SCP
CATALOG # DESCRIPTION PRICE NET
------------------------------------------------------------
LR5577615204 16 X 32 RECT HOP 6" COR $634.88 ***
LR5577616204 18 X 36 RECT HOP 6" COR $732.24 ***
LR5577618204 20 X 40 RECT HOP 6" COR $888.00 ***
1996 LR5577615206 16 X 32 RECT HOP 2' COR $634.88 ***
AND EARLIER LR5577616206 18 X 36 RECT HOP 2' COR $732.24 ***
STANDARD LR5577618206 20 X 40 RECT HOP 2' COR $888.00 ***
CONFIGURATIONS LR5577615207 16 X 32 RECT HOP 4' COR $634.88 ***
LR5577616207 18 X 36 RECT HOP 4' COR $732.24 ***
LR5577618207 20 X 40 RECT HOP 4' COR $888.00 ***
LR55775252 17 X 35 OVAL HOP $737.80 ***
LR55776092 18 X 36 OVAL HOP $732.24 ***
LR55775302 19'2 X 36'7 OVAL HOP $790.50 ***
LR55775332 21'2 X 40'7 OVAL HOP $951.51 ***
LR55776442 16'6 X 32'6 GREC HOP $664.95 ***
LR55776452 16'6 X 36'6 GREC HOP $746.79 ***
LR55776472 17'11 X 37'11 GREC HOP $767.61 ***
1997 LR5577402204 16 X 32 RECT HOP 6" COR $634.88 ***
STANDARD LR5577403204 18 X 36 RECT HOP 6" COR $732.24 ***
CONFIGURATION LR5577432204 20 X 40 RECT HOP 6" COR $888.00 ***
LR5577402206 16 X 32 RECT HOP 2' COR $634.88 ***
LR5577403206 18 X 36 RECT HOP 2' COR $732.24 ***
LR5577432206 20 X 40 RECT HOP 2' COR $888.00 ***
LR5577402207 16 X 32 RECT HOP 4' COR $634.88 ***
LR5577403207 18 X 36 RECT HOP 4' COR $732.24 ***
LR5577432207 20 X 40 RECT HOP 4' COR $888.00 ***
LR55774332 17 X 35 OVAL HOP $737.80 ***
LR55774152 18 X 36 OVAL HOP $732.24 ***
LR55774342 19'2 X 36'7 OVAL HOP $790.50 ***
LR55774352 21'2 X 40'7 OVAL HOP $951.51 ***
LR55774102 16'6 X 32'6 GREC HOP $664.95 ***
LR55774112 16'6 X 35'6 GREC HOP $726.33 ***
LR55774122 17'11 X 36'11 GREC HOP $747.62 ***
------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are
subject to change without notice. Merchandise will be
invoiced at the price in effect at the time of shipment. All
items F.O.B. Latham/Scotia, NY. We reserve the right to make
improvements and changes in design at any time. Interest
will be charged on all past due balances at the rate of
1 1/2% per month (18% per annum).
<PAGE>
<TABLE>
<CAPTION>
PLEASE USE OUR CATALOG NUMBERS WHEN ORDERING
-------------------------------------
PACIFIC ABOVE GROUND STOCK LINERS
OVERLAP PLAIN/PLAIN
UP TO 52" DEPTH
----------------------------------------------------------------
<S> <C> <C> <C>
SCP
NET NET
CATALOG # DESCRIPTION PRICE COST
----------------------------------------------------------------
LR00050021 8 - 52" ROUND $36.98 ***
LR00050000 10 - 52" ROUND $40.89 ***
PAF-75-100 LR00050011 12 - 52" ROUND $45.24 ***
PAF-75-101 LR00050001 15 - 52" ROUND $53.64 ***
LR00050041 16 - 52" ROUND $56.80 ***
PAF-75-102 LR00050031 18 - 52" ROUND $63.75 ***
LR00050051 20 - 52" ROUND $72.05 ***
PAF-75-103 LR00050061 21 - 52" ROUND $75.22 ***
PAF-75-104 LR00050081 23'9 - 52" ROUND $84.00 ***
PAF-75-105 LR00050091 24 - 52" ROUND $84.00 ***
PAF-75-106 LR00050121 26-9 - 52" ROUND $103.54 ***
PAF-75-107 LR00050101 27 - 52" ROUND $103.54 ***
PAF-75-108 LR00058301 28 - 52" ROUND $108.26 ***
LR00050201 30 - 52" ROUND $119.14 ***
LR00050301 33 - 52" ROUND $133.15 ***
11 x 18.5 - 52" OVAL $58.97 ***
11 x 25 - 52" OVAL $68.14 ***
PAF-75-109 LR00058341 12 x 18 - 52" OVAL $59.52 ***
PAF-75-110 LR00050341 12 x 24 - 52" OVAL $88.14 ***
PAF-75-111 LR00050331 12-3 x 23-7 - 52" OVAL $68.14 ***
PAF-75-112 LR00050381 15 x 24 - 52" OVAL $79.89 ***
PAF-75-113 LR00058381 15 x 25 - 52" OVAL $81.71 ***
PAF-75-114 LR00050411 15 x 27 - 52" OVAL $86.31 ***
PAF-75-115 LR00050391 15 x 30 - 52" OVAL $92.88 ***
PAF-75-116 LR00050421 16 x 24 - 52" OVAL $84.70 ***
PAF-75-117 LR00050441 15-8 x 26-7 - 52" OVAL $95.95 ***
PAF-75-118 LR00050401 16 x 32 - 52" OVAL $102.61 ***
PAF-75-119 LR00050451 15-8 x 32 - 52" OVAL $102.61 ***
16 x 34 - 52" OVAL $106.24 ***
PAF-75-120 LR00050491 18 x 33 - 52" OVAL $110.36 ***
18 x 38 - 52" OVAL $124.24 ***
21 x 41 - 52" OVAL $141.95 ***
----------------------------------------------------------------
</TABLE>
PLEASE USE CATALOG NUMBERS WHEN ORDERING. These prices are
subject to change without notice. Merchandise will be invoiced at
the price in effect at the time of shipment. All terms F.O.B.
Latham/Scotia, NY. We reserve the right to make improvements and
changes in design at any time. Interest will be changed on all
past due balances at the rate of 1 1/2 per month (18% per annum)
1. All liners are "as is" and are not available in other sizes,
patterns, or changes.
2. All questions regarding exact dimensions should be directed to
Gary O'Brien at the Scotia, NY plant (800-582-0024) or to Al
Niessink at the Atlanta, GA Plant (770-338-0443).
<PAGE>
PACIFIC ABOVE GROUND STOCK LINERS
OVERLAP PLAIN/ICE
UP TO 52" DEPTH
<TABLE>
<CAPTION>
SCP
NET
COST
<S> <C> <C> <C> <C>
LR00060021 8 - 52" ROUND $38.65 ***
LR00060000 10 - 52" ROUND $43.59 ***
PAF-75-121 LR00060011 12 - 52" ROUND $49.12 ***
PAF-75-122 LR00060001 15 - 52" ROUND $59.71 ***
LR00060041 16 - 52" ROUND $63.71 ***
PAF-75-123 LR00060031 18 - 52" ROUND $72.52 ***
LR00060051 20 - 52" ROUND $82.85 ***
PAF-75-124 LR00060061 21 - 52" ROUND $87.15 ***
PAF-75-125 LR00060081 23'9" - 52" ROUND $98.61 ***
PAF-75-126 LR00060091 24 - 52" ROUND $98.61 ***
PAF-75-127 LR00060121 26-9 - 52" ROUND $123.22 ***
PAF-75-128 LR00060101 27 - 52" ROUND $123.22 ***
PAF-75-129 LR00068301 28 - 52" ROUND $129.41 ***
LR00060201 30 - 52" ROUND $143.44 ***
LR00060301 33 - 52" ROUND $162.54 ***
11 x 18.5 - 52" OVAL $66.32 ***
11 x 25 - 52" OVAL $77.64 ***
PAF-75-130 LR00068341 12 x 18 - 52" OVAL $66.66 ***
PAF-75-131 LR00060341 12 x 24 - 52" OVAL $77.64 ***
PAF-75-132 LR00060331 12-3 x 23-7 - 52" OVAL $77.64 ***
PAF-75-133 LR00060381 15 x 24 - 52" OVAL $91.76 ***
PAF-75-134 LR00068381 15 x 25 - 52" OVAL $94.09 ***
PAF-75-135 LR00060411 15 x 27 - 52" OVAL $99.64 ***
PAF-75-136 LR00060391 15 x 30 - 52" OVAL $107.73 ***
PAF-75-137 LR00060421 16 x 24 - 52" OVAL $97.36 ***
PAF-75-138 LR00060441 15-8 x 26-7 - 52" OVAL $110.95 ***
16 x 28 - 52" OVAL $113.19 ***
PAF-75-139 LR00060401 16 x 32 - 52" OVAL $119.49 ***
PAF-75-140 LR00060451 15-8 x 32 - 52" OVAL $119.49 ***
16 x 34 - 52" OVAL $123.25 ***
PAF-75-141 LR00060491 18 x 33 - 52" OVAL $129.94 ***
18 x 38 - 52" OVAL $146.69 ***
21 x 41 - 52" OVAL $170.21 ***
</TABLE>
<PAGE>
PACIFIC ABOVE GROUND STOCK LINERS
STANDARD BEAD 48" POOL
BLUE STONE/SAPPHIRE
<TABLE>
<CAPTION>
SCP
NET
COST
<C> <S> <C> <C>
LR07120021 8' ROUND FLAT $56.62 * * *
LR07120000 10' ROUND FLAT $66.07 * * *
LR07120011 12' ROUND FLAT $76.47 * * *
LR07120001 15' ROUND FLAT $95.23 * * *
LR07120041 16' ROUND FLAT $102.18 * * *
LR07120031 18' ROUND FLAT $117.20 * * *
LR/2071240051 20' ROUND FLAT $134.22 * * *
LR07120061 21' ROUND FLAT $141.78 * * *
LR07120081 23'9" ROUND FLAT $170.39 * * *
LR07120091 24' ROUND FLAT $170.39 * * *
LR07120121 26'9" ROUND FLAT $200.66 * * *
LR07120101 27' ROUND FLAT $200.66 * * *
LR07128301 28' ROUND FLAT $210.93 * * *
LR07120201 30' ROUND FLAT $233.54 * * *
LR07120301 33' ROUND FLAT $265.75 * * *
LR07128311 10 x 15 OVAL FLAT 11 x 18-6/2 $89.93 * * *
LR07128331 11'6" x 18'6" OVAL FLAT $107.74 * * *
11' x 25' OVAL FLAT $128.15 * * *
LR07128341 12 x 18 OVAL FLAT $108.24 * * *
LR07128351 12'6" x 18'6" OVAL FLAT $112.08 * * *
LR07120341 12 x 24 OVAL FLAT $128.15 * * *
LR07128371 12'6" x 24'6" OVAL FLAT $134.92 * * *
LR07120381 15 x 24 OVAL FLAT $149.29 * * *
LR07128381 15 x 25 OVAL FLAT $153.24 * * *
LR07120391 15 x 30 OVAL FLAT $175.49 * * *
LR07120421 16 x 24 OVAL FLAT $157.33 * * *
LR07120401 16 x 32 OVAL FLAT $193.43 * * *
LR07120491 18 x 33 OVAL FLAT $210.74 * * *
LR07128391 18 x 38 OVAL FLAT $236.88 * * *
21 x 41 OVAL FLAT $275.18 * * *
11 x 18-6 * * *
</TABLE>
<PAGE>
PACIFIC ABOVE GROUND STOCK LINERS
STANDARD BEAD 52" POOL
BLUE STONE/SAPPHIRE
<TABLE>
<CAPTION>
10/5 SCP
NET
COST
<C> <S> <C> <C>
LR43120021 8' ROUND FLAT $57.49 ***
LR43120000 10' ROUND FLAT $67.16 ***
LR43120011 12' ROUND FLAT $77.78 ***
LR43120001 15' ROUND FLAT $96.86 ***
LR43120041 16' ROUND FLAT $103.93 ***
LR43120031 18' ROUND FLAT $119.16 ***
LR43120051 20' ROUND FLAT $136.40 ***
LR43120061 21' ROUND FLAT $144.07 ***
LR43120081 23'9" ROUND FLAT $173.00 ***
LR43120091 24' ROUND FLAT $173.00 ***
LR43120121 26'9" ROUND FLAT $203.60 ***
LR43120101 27' ROUND FLAT $203.60 ***
LR43128301 28' ROUND FLAT $213.98 ***
LR43120201 30' ROUND FLAT $236.80 ***
LR43120301 33' ROUND FLAT $269.34 ***
LR43128311 10 X 15 OVAL FLAT $91.63 ***
LR43128331 11'6 x 18'6 OVAL FLAT $109.78 ***
11' X 25' OVAL FLAT $130.06 ***
LR43128341 12 x 18 OVAL FLAT $110.28 ***
LR43128351 12'6" x 18'6" OVAL FLAT $114.19 ***
LR43120341 12 x 24 OVAL FLAT $130.06 ***
LR43128371 12'6" x 24'6" OVAL FLAT $137.44 ***
LR43120381 15 x 24 OVAL FLAT $151.94 ***
LR43128381 15 x 25 OVAL FLAT $155.96 ***
LR43120391 15 x 30 OVAL FLAT $178.55 ***
LR43120421 16 x 24 OVAL FLAT $160.05 ***
LR43120401 16 x 32 OVAL FLAT $196.69 ***
LR43120491 18 x 33 OVAL FLAT $214.21 ***
LR43128391 18 x 38 OVAL FLAT $240.69 ***
21 x 41 OVAL FLAT $279.40 ***
11 x 18-6 ***
</TABLE>
<PAGE>
PACIFIC ABOVE GROUND STOCK LINERS
J-BEAD 48" POOL
BLUE STONE/SAPPHIRE
<TABLE>
<CAPTION>
SCP
NET
10/5 COST
<S> <C> <C> <C>
LR07120021W 8' ROUND FLAT $ 56.62 ***
LR07120000W 10' ROUND FLAT $ 66.07 ***
LR07120011W 12' ROUND FLAT $ 76.47 ***
LR07120001W 15' ROUND FLAT $ 95.23 ***
LR07120041W 16' ROUND FLAT $102.18 ***
LR07120031W 18' ROUND FLAT $117.20 ***
L071240051W 20' ROUND FLAT $134.22 ***
LR07120061W 21' ROUND FLAT $141.78 ***
LR07120081W 23'9" ROUND FLAT $170.39 ***
LR07120091W 24' ROUND FLAT $170.39 ***
LR07120121W 26'9" ROUND FLAT $200.66 ***
LR07120101W 27' ROUND FLAT $200.66 ***
LR07128301W 28' ROUND FLAT $210.93 ***
LR07120201W 30' ROUND FLAT $233.54 ***
LR07120301W 33' ROUND FLAT $265.75 ***
LR07128311W 10 x 15 OVAL FLAT $ 89.93 ***
LR07128331W 11'6" X 18'6" OVAL FLAT $107.74 ***
11' X 25' OVAL FLAT $128.15 ***
LR07128341W 12 x 18 OVAL FLAT $108.24 ***
LR07128351W 12'6" x 18'6" OVAL FLAT $112.08 ***
LR07120341W 12 x 24 OVAL FLAT $128.15 ***
LR07128371W 12'6" X 24'6" OVAL FLAT $134.92 ***
LR07120381W 15 x 24 OVAL FLAT $149.29 ***
LR07128381W 15 x 25 OVAL FLAT $153.24 ***
LR07120391W 15 x 30 OVAL FLAT $175.49 ***
LR07120421W 16 x 24 OVAL FLAT $157.33 ***
LR07120401W 16 x 32 OVAL FLAT $193.43 ***
LR07120491W 18 x 33 OVAL FLAT $210.74 ***
LR07128391W 18 x 38 OVAL FLAT $236.88 ***
21 x 41 OVAL FLAT $275.18 ***
11 x 18-6 ***
</TABLE>
<PAGE>
PACIFIC ABOVE GROUND STOCK LINERS
J-BEAD 52" POOL
BLUE STONE/SAPPHIRE
<TABLE>
<CAPTION>
SCP
NET
10/5 COST
<S> <C> <C> <C>
LR43120021W 8' ROUND FLAT $ 57.49 ***
LR43120000W 10' ROUND FLAT $ 67.16 ***
LR43120011W 12' ROUND FLAT $ 77.78 ***
LR43120001W 15' ROUND FLAT $ 96.86 ***
LR43120041W 16' ROUND FLAT $103.93 ***
LR43120031W 18' ROUND FLAT $119.16 ***
LR43120051W 20' ROUND FLAT $136.40 ***
LR43120061W 21' ROUND FLAT $144.07 ***
LR43120081W 23'9" ROUND FLAT $173.00 ***
LR43120091W 24' ROUND FLAT $173.00 ***
LR43120121W 26'9" ROUND FLAT $203.60 ***
LR43120101W 27' ROUND FLAT $203.60 ***
LR43128301W 28' ROUND FLAT $213.98 ***
LR43120201W 30' ROUND FLAT $236.80 ***
LR43120301W 33' ROUND FLAT $269.34 ***
LR43128311W 10 x 15 OVAL FLAT $ 91.63 ***
11' x 18'6" OVAL FLAT $109.78 ***
LR43128331W 11'6" X 18'6" OVAL FLAT $109.78 ***
11 x 25 OVAL FLAT $130.06 ***
LR43128341W 12 x 18 OVAL FLAT $110.28 ***
LR43128351W 12'6" x 18'6" OVAL FLAT $114.19 ***
LR43120341W 12 x 24 OVAL FLAT $130.06 ***
LR43128371W 12'6" X 24'6" OVAL FLAT $137.44 ***
LR43120381W 15 x 24 OVAL FLAT $151.94 ***
LR43128381W 15 x 25 OVAL FLAT $155.96 ***
LR43120391W 15 x 30 OVAL FLAT $178.55 ***
LR43120421W 16 x 24 OVAL FLAT $160.05 ***
LR43120401W 16 x 32 OVAL FLAT $196.69 ***
LR43120491W 18 x 33 OVAL FLAT $214.21 ***
LR43128391W 18 x 38 OVAL FLAT $240.69 ***
21 x 41 OVAL FLAT $279.40 ***
</TABLE>
<PAGE>
PACIFIC ABOVE GROUND STOCK LINERS
J-BEAD 48" POOL
LR8574 CHYENNE/CRYSTAL
<TABLE>
<CAPTION>
SCP
NET
COST
<S> <C> <C> <C>
LR85740021W 8' ROUND FLAT $56.62 ***
LR85740000W 10' ROUND FLAT $66.07 ***
LR85740011W 12' ROUND FLAT $76.47 ***
LR85740001W 15' ROUND FLAT $95.23 ***
LR85740041W 16' ROUND FLAT $102.18 ***
LR85740031W 18' ROUND FLAT $117.20 ***
LR85740051W 20' ROUND FLAT $134.22 ***
LR85740061W 21' ROUND FLAT $141.78 ***
LR85740081W 23'9" ROUND FLAT $170.39 ***
LR85740091W 24' ROUND FLAT $170.39 ***
LR85740121W 26'9" ROUND FLAT $200.66 ***
LR85740101W 27' ROUND FLAT $200.66 ***
LR85748301W 28' ROUND FLAT $210.93 ***
LR85740201W 30' ROUND FLAT $233.54 ***
LR85740301W 33' ROUND FLAT $265.75 ***
LR85748311W 10 x 15 OVAL FLAT $89.93 ***
LR85748331W 11'6" x 18'6" OVAL FLAT $107.74 ***
11' x 25' OVAL FLAT $128.15 ***
LR85748341W 12 x 18 OVAL FLAT $108.24 ***
LR85748351W 12'6" x 18'6" OVAL FLAT $112.08 ***
LR85740341W 12 x 24 OVAL FLAT $128.15 ***
LR85748371W 12'6" x 24'6" OVAL FLAT $134.92 ***
LR85740381W 15 X 24 OVAL FLAT $149.29 ***
LR85748381W 15 x 25 OVAL FLAT $153.24 ***
LR85740391W 15 x 30 OVAL FLAT $175.49 ***
LR85740421W 16 x 24 OVAL FLAT $157.33 ***
LR85740401W 16 x 32 OVAL FLAT $193.43 ***
LR85740491W 18 x 33 OVAL FLAT $210.74 ***
LR85748391W 18 x 38 OVAL FLAT $236.88 ***
21 x 41 OVAL FLAT $275.18 ***
11 x 18-6 ***
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PACIFIC ABOVE GROUND STOCK LINERS SCP
J-BEAD 52" POOL NET
LR5874 CHEYENNE/CRYSTAL COST
<C> <S> <C> <C>
LR0021W 8' ROUND FLAT $57.49 * * *
LR0000W 10' ROUND FLAT $67.16 * * *
LR0011W 12' ROUND FLAT $77.78 * * *
LR0001W 15' ROUND FLAT $96.86 * * *
LR0041W 16' ROUND FLAT $103.93 * * *
LR0031W 18' ROUND FLAT $119.16 * * *
LR0051W 20' ROUND FLAT $136.40 * * *
LR0061W 21' ROUND FLAT $144.07 * * *
LR0081W 23'9" ROUND FLAT $173.00 * * *
LR0091W 24' ROUND FLAT $173.00 * * *
LR0121W 26'9" ROUND FLAT $203.60 * * *
LR0101W 27' ROUND FLAT $203.60 * * *
LR8301W 28' ROUND FLAT $213.98 * * *
LR0201W 30' ROUND FLAT $236.80 * * *
LR0301W 33' ROUND FLAT $269.34 * * *
LR8311W 10 x 15 OVAL FLAT $91.63 * * *
11' x 18'6 OVAL FLAT $109.78 * * *
LR8331W 11'6 x 18'6 OVAL FLAT $109.78 * * *
11 x 25 OVAL FLAT $130.06 * * *
LR8341W 12 x 18 OVAL FLAT $110.28 * * *
LR8351W 12'6" x 18'6" OVAL FLAT $114.19 * * *
LR0341W 12 x 24 OVAL FLAT $130.06 * * *
LR8371W 12'6" x 24'6' OVAL FLAT $137.44 * * *
LR0381W 15 x 24 OVAL FLAT $151.94 * * *
LR8381W 15 x 25 OVAL FLAT $155.96 * * *
LR0391W 15 x 30 OVAL FLAT $178.55 * * *
LR0421W 16 x 24 OVAL FLAT $160.05 * * *
LR0401W 16 x 32 OVAL FLAT $196.69 * * *
LR0491W 18 x 33 OVAL FLAT $214.21 * * *
LR58748391W 18 x 38 OVAL FLAT $240.69 * * *
21 x 41 OVAL FLAT $279.40 * * *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PACIFIC ABOVE GROUND STOCK LINERS
J-BEAD 48" POOL
LR8474 CANYON/CRYSTAL
<C> <S> <C> <C>
LR0021W 8' ROUND FLAT $56.62 ***
LR0000W 10' ROUND FLAT $66.07 ***
LR0011W 12' ROUND FLAT $76.47 ***
LR0001W 15' ROUND FLAT $95.23 ***
LR0041W 16' ROUND FLAT $102.18 ***
LR0031W 18' ROUND FLAT $117.20 ***
LR0051W 20' ROUND FLAT $134.22 ***
LR0061W 21' ROUND FLAT $141.78 ***
LR0081W 23'9" ROUND FLAT $170.39 ***
LR0091W 24' ROUND FLAT $170.39 ***
LR0121W 26'9" ROUND FLAT $200.66 ***
LR0101W 27' ROUND FLAT $200.66 ***
LR8301W 28' ROUND FLAT $210.93 ***
LR0201W 30' ROUND FLAT $233.54 ***
LR0301W 33' ROUND FLAT $265.75 ***
LR8311W 10 x 15 OVAL FLAT $89.93 ***
LR8331W 11'6 x 18'6 OVAL FLAT $107.74 ***
11' x 25' OVAL FLAT $128.15 ***
LR8341W 12 x 18 OVAL FLAT $108.24 ***
LR8351W 12'5" x 18'6" OVAL FLAT $112.08 ***
LR0341W 12 x 24 OVAL FLAT $128.15 ***
LR8371W 12'6" x 24'6" OVAL FLAT $134.92 ***
LR0381W 15 x 24 OVAL FLAT $149.29 ***
LR8381W 15 x 25 OVAL FLAT $153.24 ***
LR0391W 15 x 30 OVAL FLAT $175.49 ***
LR0421W 16 x 24 OVAL FLAT $157.33 ***
LR0401W 16 x 32 OVAL FLAT $193.43 ***
LR0491W 18 x 33 OVAL FLAT $210.74 ***
LR84748391W 18 x 38 OVAL FLAT $236.88 ***
21 x 41 OVAL FLAT $275.18 ***
11 x 18 -6 ***
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LR5474 PACIFIC ABOVE GROUND STOCK LINERS
J-BEAD 52" POOL
LR#### CANYON/CRYSTAL
<C> <S> <C> <C>
LR43120021W 8' ROUND FLAT $57.49 * * *
LR43120000W 10' ROUND FLAT $67.16 * * *
LR43120011W 12' ROUND FLAT $77.78 * * *
LR43120001W 15' ROUND FLAT $96.86 * * *
LR43120041W 16' ROUND FLAT $103.93 * * *
LR43120031W 18' ROUND FLAT $119.16 * * *
LR43120051W 20' ROUND FLAT $136.40 * * *
LR43120061W 21' ROUND FLAT $144.07 * * *
LR43120081W 23'9" ROUND FLAT $173.00 * * *
LR43120091W 24' ROUND FLAT $173.00 * * *
LR43120121W 26'9" ROUND FLAT $203.60 * * *
LR43120101W 27' ROUND FLAT $203.60 * * *
LR43128301W 28' ROUND FLAT $213.98 * * *
LR43120201W 30' ROUND FLAT $236.80 * * *
LR43120301W 33' ROUND FLAT $269.34 * * *
LR43128311W 10 x 15 OVAL FLAT $91.63 * * *
11' x 18'6 OVAL FLAT $109.78 * * *
LR43128331W 11'6 x 18'6 OVAL FLAT $109.78 * * *
11 x 25 OVAL FLAT $130.06 * * *
LR43128341W 12 x 18 OVAL FLAT $110.28 * * *
LR43128351W 12'6" x 18'6" OVAL FLAT $114.19 * * *
LR43120341W 12 x 24 OVAL FLAT $130.06 * * *
LR43128371W 12'6" x 24'6" OVAL FLAT $137.44 * * *
LR43120381W 15 x 24 OVAL FLAT $151.94 * * *
LR43128381W 15 x 25 OVAL FLAT $155.96 * * *
LR43120391W 15 x 30 OVAL FLAT $178.55 * * *
LR43120421W 16 x 24 OVAL FLAT $160.05 * * *
LR43120401W 16 x 32 OVAL FLAT $196.69 * * *
LR43120491W 18 x 33 OVAL FLAT $214.21 * * *
LR54748391W 18 x 38 OVAL FLAT $240.69 * * *
21 x 41 OVAL FLAT $279.40 * * *
</TABLE>
<PAGE>
Exhibit 6.1
Standard Product Warranty
-------------------------
29
<PAGE>
20 YEAR LIMITED PRO RATED WARRANTY
ABOVE-GROUND VINYL LINER
Pacific Industries warrants to the original retail consumer purchaser that
if a Pacific Above Ground Vinyl Liner should fail due to defective workmanship
in welding seams and edges within twenty (20) years from date of original
purchase, and the attached warranty card has been completed, signed, and
returned to Pacific Industries within ten (10) days of purchase, Pacific
Industries will, at its option, repair any such defect or in the alternative
supply a new liner, F.O.B. Scotia, New York, on the following basis:
If the original liner is repaired or a new liner supplied, the charge to
the original consumer purchaser shall be, first year, no charge. After the first
year, the same will be repaired or supplied, at the Company's option, upon
payment of a charge in accordance with the then retail selling price. The
following schedule sets forth the percentage of the retail price in effect at
the same time of replacement which the original retail consumer purchaser will
be charged for repair or replacement. The percentages are based on the length
of time you have owned the liner from the date of purchase.
Up to 1 year N/C 9 to 10 yrs. 65% 17 to 18 yrs. 85%
1 to 4 yrs. 45% 11 to 12 yrs. 70% 19 to 20 yrs. 95%
5 to 6 yrs. 55% 13 to 14 yrs. 75% After 20 yrs. 100%
7 to 8 yrs. 60% 15 to 16 yrs. 80%
This warranty is subject to the following terms and conditions:
This warranty relates only to manufacturing defects and does not include
damage or failure from other causes, including but not limited to, acts of God,
misuse or abuse, accident, negligence, fire, improper installation or ice
damage.
Pacific Industries will not be responsible for labor charges, cost of
replacement water or replacement chemicals, or any other related damage that may
occur.
Warranty is void if the liner is exposed to excessive heat or cold,
chemical abuse, or lack of proper chemical maintenance. Chemicals should not be
allowed to settle dissolved or undissolved onto the liner as chemicals can
bleach the color or pattern print. The pH of the pool water must be properly
maintained and balanced.
Manufacturer further warrants that the liner will fit into the finished
pool excavation exactly the same as the specifications given in order to produce
the liner.
Irregularities in printing, fading or tile alignment are specifically
excluded from this warranty. Materials used in the fabrication of the liner are
not produced by Pacific Industries; therefore any failure due to material
defects have to be referred to the manufacturer of the raw materials.
This warranty is enforceable only by the original retail consumer purchaser
and applies only to liners purchased for private residential use.
This warranty shall be void unless the attached warranty registration card
is completed, signed, and returned to Pacific Industries, at the address below
within ten (10) days of purchase.
PACIFIC INDUSTRIES SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES, INCLUDING BUT NOT LIMITED TO ANY DAMAGES FOR LOSS OF USE OF POOL OR
INJURY TO PERSON OR PROPERTY, AND ANY CLAIMS THEREFORE ARE HEREBY SPECIFICALLY
DISCLAIMED AND EXCLUDED. SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR EXCLUSION MAY
NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS AND YOU MAY ALSO
HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
If the Pacific liner should fail during the warranty period as a result of
a problem covered by this warranty, the consumer should send a letter to Pacific
Industries factory identifying the liner, setting forth the date of purchase and
specifying the serial number, and describing the nature of the defect.
Upon either (1) receipt of the liner at our factory for factory
confirmation of the claimed defect or (2) receipt of a cut-out of the defective
area and a cut-out of the serial number at our factory for confirmation of the
claimed defect, we will inform the consumer owner as to the disposition of
inspection and warranty claim.
Consumer purchaser is required to remove liner, or cut-out area as
indicated above, clean and return it to Pacific Industries, at its offices, at
Corporations Park, Bldg #705 West, Scotia, NY 12302, freight prepaid.
Any liner repaired or new liner shipped to consumer purchaser shall be
shipped on a freight collect basis and any installation costs of the liner shall
also be borne by the consumer purchaser.
Pacific Industries makes no other warranty, express or implied, and any
statutory warranties, including implied warranties of MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, are hereby specifically disclaimed and excluded.
No representative of Pacific Industries, nor any of its agents,
distributors, or dealers has any authority to alter in any manner the terms of
this warranty and Pacific Industries is not responsible for any undertaking,
representation or warranty made by any other person beyond those expressly set
forth in this warranty certificate.
PACIFIC INDUSTRIES, INC. Stock No. _________________________
Customer Relations Department
787 Watervliet-Shaker Road Liner serial no. __________________
Latham, NY 12110
518-783-7776 AD 275 FC 1/96 10M
<PAGE>
5 YEAR FULL
20 YEAR LIMITED PRO RATED WARRANTY
PACIFIC GRAPHEX FLORENTINE/SPARKLE LINER
Pacific Industries warrants to the original retail consumer purchaser that
if a Pacific Vinyl Liner should fail due to defective workmanship in welding
seams and edges within twenty (20) years from date of original purchase, and the
attached warranty card has been completed, signed, and returned to Pacific
Industries within ten (10) days of purchase. Pacific Industries will, at its
option, repair any such defect or in the alternative supply a new liner, F.O.B.
Scotia, New York, on the following basis:
If the original liner is repaired or a new liner supplied, the charge to
the original consumer purchaser shall be, first five years, no charge. After the
fifth year, the same will be repaired or supplied, at the Company's option, upon
payment of a charge in accordance with the then retail selling price. The
following schedule sets forth the percentage of the retail price in effect at
the same time of replacement which the original retail consumer purchaser will
be charged for repair or replacement. The percentages are based on the length of
time you have owned the liner from the date of purchase.
WITHIN FIVE (5) YEARS NO CHARGE
0 to 5 yrs. N/C After 8 yrs. 60% After 14 yrs. 80%
After 5 yrs. 45% After 9 yrs. 65% After 16 yrs. 85%
After 6 yrs. 50% After 10 yrs. 70% After 18 yrs. 95%
After 7 yrs. 55% After 12 yrs. 75% After 20 yrs. 100%
This warranty is subject to the following terms and conditions:
This warranty relates only to manufacturing defects and does not include
damage or failure from other causes, including but not limited to, acts of God,
misuse or abuse, accident, negligence, fire, improper installation or ice
damage.
Pacific Industries will not be responsible for labor charges, cost of
replacement water or replacement chemicals, or any other related damage that may
occur.
Warranty is void if the liner is exposed to excessive heat or cold,
chemical abuse, or lack of proper chemical maintenance. Chemicals should not be
allowed to settle dissolved or undissolved onto the liner as chemicals can
bleach the color or pattern print. The pH of the pool water must be properly
maintained and balanced.
Manufacturer further warrants that the liner will fit into the finished
pool excavation exactly the same as the specifications given in order to produce
the liner.
Irregularities in printing, fading or tile alignment are specifically
excluded from this warranty. Materials used in the fabrication of the liner are
not produced by Pacific Industries; therefore any failure due to material
defects have to be referred to the manufacturer of the raw materials.
This warranty is enforceable only by the original retail consumer purchaser
and applies only to liners purchased for private residential use.
This warranty shall be void unless the attached warranty registration card
is completed, signed, and returned to Pacific Industries, at the address below
within ten (10) days of purchase.
PACIFIC INDUSTRIES SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES, INCLUDING BUT NOT LIMITED TO ANY DAMAGES FOR LOSS OF USE OF POOL OR
INJURY TO PERSON OR PROPERTY, AND ANY CLAIMS THEREFORE ARE HEREBY SPECIFICALLY
DISCLAIMED AND EXCLUDED. SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR EXCLUSION MAY
NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS AND YOU MAY ALSO
HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
If the Pacific liner should fail during the warranty period as a result of
a problem covered by this warranty, the consumer should send a letter to Pacific
Industries factory identifying the liner, setting forth the date of purchase and
specifying the serial number, and describing the nature of the defect.
Upon either (1) receipt of the liner at our factory for factory
confirmation of the claimed defect or (2) receipt of a cut-out of the defective
area and a cut-out of the serial number at our factory for confirmation of the
claimed defect, we will inform the consumer owner as to the disposition of
inspection and warranty claim.
Consumer purchaser is required to remove liner, or cut-out area as
indicated above, clean and return it to Pacific Industries, at its offices, at
Corporations Park, Bldg #705 West, Scotia, NY 12302, freight prepaid.
Any liner repaired or new liner shipped to consumer purchaser shall be
shipped on a freight collect basis and any installation costs of the liner shall
also be borne by the consumer purchaser.
Pacific Industries makes no other warranty, express or implied, and any
statutory warranties, including implied warranties of MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, are hereby specifically disclaimed and excluded.
No representative of Pacific Industries, nor any of its agents,
distributors, or dealers has any authority to alter in any manner the terms of
this warranty and Pacific Industries is not responsible for any undertaking,
representation or warranty made by any other person beyond those expressly set
forth in this warranty certificate.
PACIFIC INDUSTRIES, INC. Stock No. _________________________
Customer Relations Department
787 Watervliet-Shaker Road Liner serial no. __________________
Latham, NY 12110
518-783-7776 AD 133 FC 1/96 5M
<PAGE>
Performance(TM) Step
Warranty
Loudon Plastics Inc., warrants to the original retail consumer purchaser
that if a Performance(TM) Step utilizing the complete TES System with the
required number of step braces should fail structurally due to a manufacturing
defect within twenty-five (25) years from the date of original purchase, and the
attached warranty card has been completed, signed, and returned to Loudon
Plastics within ten (10) days of purchase, Loudon Plastics will, at its option,
repair any such defect or in the alternative supply a new step, F.O.B., Latham,
New York, on a no-charge basis.
Loudon Plastics Inc., warrants to the original retail consumer purchaser
that if a Performance(TM) Step not utilizing the complete TES System or the
required number of step braces should fail structurally due to a manufacturing
defect within Five (5) years, Loudon Plastics will, at its option, repair any
such defect or in the alternative supply a new step, F.O.B., Latham, New York,
on a no-charge basis.
This warranty is subject to the following terms and conditions:
Loudon shall not be responsible for the cost of removal or replacement of
any defective step, nor for any other expenses or damages which might be
incurred in such removal and replacement.
This warranty relates only to manufacturing defects which result in
structural failure and does not include damage or failure resulting from other
causes, including but not limited to acts of God, misuse or abuse, accident,
negligence, fire, discoloration or failure due to improper installation.
This warranty is enforceable only by the original retail consumer
purchaser and applies only to walk-in steps purchased for private residential
use.
This warranty shall be void unless the attached warranty registration card
is completed, signed and returned to Loudon Plastics at the address below within
ten (10) days of purchase.
LOUDON PLASTICS SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES, INCLUDING, BUT NOT LIMITED TO ANY DAMAGES FOR LOSS OF USE OF POOL OR
INJURY TO PERSON OR PROPERTY, AND ANY CLAIMS THEREFORE ARE HEREBY SPECIFICALLY
DISCLAIMED AND EXCLUDED. SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR EXCLUSION MAY
NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS AND YOU MAY ALSO
HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
Loudon Plastics makes no other warranty, express or implied, and any
statutory warranties, including implied warranties of MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, are hereby specifically disclaimed and
excluded.
No representative of Loudon Plastics nor any of its agents, distributors or
dealers has any authority to alter in any manner the terms of this warranty and
Loudon Plastics is not responsible for any undertaking, representation or
warranty made by any other person beyond those expressly set forth in this
warranty certificate.
LOUDON PLASTICS
Consumer Relations Department
787 Watervliet-Shaker Road
Latham, NY 12110
<PAGE>
STRUCTURAL POLYMER WALL PANELS
Limited Lifetime Warranty
-------------------------
Pacific Industries, Inc. warrants to the original consumer purchaser, and
to any subsequent purchaser to whom this warranty is transferred, for so long as
he shall own the same, that if a Graphex structural wall panel should fail
beyond use due to manufacturing or material defect, and the attached warranty
card has been completed, signed, and returned to Pacific within ten (10) days of
purchase, Pacific will, at its option, repair any such defect or in the
alternative supply a new panel, F.O.B., Latham, NY, on the following basis:
If a new panel is supplied or the old panel repaired, the charge to the
original consumer purchaser shall be, first year, no charge. After the first
year the charge will be at a price equal to 1/10 of the retail price in effect
at the time of replacement or repair for each year of use up to five (5). The
charge of 5/10 (50%) will remain in effect past the sixth year of use of the
pool.
The warranty is subject to the following terms and conditions:
Pacific shall not be responsible for the cost of removal or replacement of
any defective panel, nor for any other expenses or damages which might be
incurred in such removal and replacement.
This warranty relates only to manufacturing or material defects and does
not cover damage or failure resulting from other causes, including but not
limited to acts of God, misuse or abuse, improper maintenance, accident,
negligence, fire, ice, or improper installation.
This warranty applies only to polymer walls panels purchased for private
residential use.
This warranty shall be void unless the attached warranty registration card
is completed, signed and returned to Pacific at the address below within ten
(10) days of purchase.
In the event of transfer of this warranty to any subsequent purchaser, the
subsequent consumer purchaser must notify Pacific within 10 days of such
transfer for this warranty to be valid.
PACIFIC INDUSTRIES, INC. SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL OR
INCIDENTAL DAMAGES, INCLUDING, BUT NOT LIMITED TO ANY DAMAGES FOR LOSS OF USE OF
POOL OR INJURY TO PERSON OR PROPERTY, AND ANY CLAIMS THEREFORE ARE HEREBY
SPECIFICALLY DISCLAIMED AND EXCLUDED. SOME STATES DO NOT ALLOW THE EXCLUSION OR
LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR
EXCLUSION MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS
AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
Pacific makes no other warranty, express or implied, and any statutory
warranties, including implied warranties of MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, are hereby specifically disclaimed and excluded.
No representative of Pacific nor any of its agents, distributors, or
dealers has any authority to alter in any manner the terms of this warranty and
Pacific is not responsible for any undertaking, representation or warranty made
by any other person beyond those expressly set forth in this warranty
certificate.
PACIFIC INDUSTRIES, INC
Consumer Relations Department
787 Watervliet-Shaker Road
Latham, NY 12110
<PAGE>
WARRANTY
STRUCTURAL POLYMER WALL PANELS
Loudon Plastics warrants to the original retail consumer purchaser that if
a Loudon structural polymer wall panel should fail due to manufacturing or
material defect within fifty (50) years from date of original purchase, and the
attached warranty card has been completed, signed, and returned to Loudon
Plastics within ten (10) days of purchase, Loudon Plastics will, at its option,
repair any such defect or in the alternative supply a new panel, F.O.B., Latham,
New York, on the following basis:
If the original is repaired, or a new panel is supplied, the charge to the
original consumer purchaser shall be, first year, no charge. After the first
year, the same will be repaired or supplied, at the Company's option, upon
payment of a charge in accordance with the then retail selling price. The
following schedule sets forth the percentage of the retail price in effect at
the time of the claim which the original retail consumer purchaser will be
charged for repair or replacement. The percentages are based on the length of
time you have owned the polymer wall panels.
<TABLE>
<S> <C> <C> <C>
Year 1 - year 5 30% Year 31 - year 35 75%
Year 6 - year 10 50% Year 36 - year 40 80%
Year 11 - year 15 55% Year 41 - year 45 85%
Year 16 - year 20 60% Year 46 - year 50 90%
Year 21 - year 25 65% After year 50 100%
Year 26 - year 30 70%
</TABLE>
This warranty is subject to the following terms and conditions:
Loudon shall not be responsible for the cost of removal or replacement of
any defective panel, nor for any other expenses or damages which might be
incurred in such removal and replacement.
This warranty relates only to manufacturing defects and does not include
damage or failure resulting from other causes, including but not limited to acts
of God, misuse or abuse, accident, negligence, fire or improper installation.
This warranty is enforceable only by the original retail consumer purchaser
and applies only to polymer wall panels purchased for private residential use.
This warranty shall be void unless the attached warranty registration card
is completed, signed, and returned to Loudon Plastics at the address below
within ten (10) days of purchase.
LOUDON PLASTICS SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES, INCLUDING, BUT NOT LIMITED TO ANY DAMAGES FOR LOSS OF USE OF POOL OR
INJURY TO PERSON OR PROPERTY, AND ANY CLAIMS THEREFORE ARE HEREBY SPECIFICALLY
DISCLAIMED AND EXCLUDED. SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR EXCLUSION MAY
NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS AND YOU MAY ALSO
HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
Loudon Plastics makes no other warranty, express or implied, and any
statutory warranties, including implied warranties of MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, are hereby specifically disclaimed and excluded.
No representative of Loudon Plastics, nor any of its agents, distributors,
or dealers has any authority to alter in any manner the terms of this warranty
and Loudon Plastics is not responsible for any undertaking, representation or
warranty made by any other person beyond those expressly set forth in this
warranty certificate.
LOUDON PLASTICS, INC.
Customer Services Department
787 Watervliet-Shaker Road
Latham, NY 12110 518-783-7776
AD 146 NA 3/96 1M
Polymer
<PAGE>
ALPHA POOL
POLYCARBONATE POOL PANEL
LIFETIME WARRANTY/GUARANTEE
* * * * *
Pacific Industries, Inc. warrants to the original consumer purchaser, and to any
subsequent purchaser to whom this warranty is transferred, so long as he shall
own the same, the Alpha Pool Polycarbonate wall panel from any structural
failure due to manufacturing defects, or it will be repaired or replaced, at the
discretion of Pacific, at no charge to the consumer.
Pacific Industries, Inc. guarantees to the consumer purchaser that the Alpha
Pool Polycarbonate wall panel will not rust, rot, corrode, crack or decay for as
long as he/she shall own the same, or it will be repaired or replaced, at the
discretion of Pacific, at no charge to the original consumer.
This lifetime warranty/guarantee is subject to the following conditions:
[_] That the Polycarbonate Alpha Pool contract has been fully executed
by the owner and that all warranty/guarantee information has been
filed with Pacific Industries, Inc. within thirty (30) days of
completion of the pool.
[_] That a Certified Alpha Pool Dealer is the sole supply and
servicing agent for the pool and all related chemicals and
equipment for the pool.
[_] This warranty/guarantee relates only to manufacturing or material
defects and does not cover damage or failure resulting from other
causes, including but not limited to acts of God, misuse or abuse,
improper installation or maintenance, accident, negligence, fire
or ice.
[_] The Alpha Pool has been constructed using Polycarbonate panels and
I-braces, manufactured by Pacific Industries, Inc.
PACIFIC INDUSTRIES, INC. SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES, INCLUDING, BUT NOT LIMITED TO ANY DAMAGES FOR LOSS OF USE OF THE POOL
OR INJURY TO PERSON OR PROPERTY, AND ANY CLAIMS THEREFORE ARE HEREBY
SPECIFICALLY DISCLAIMED AND EXCLUDED. SOME STATES DO NOT ALLOW THE EXCLUSION OR
LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR
EXCLUSION MAY NOT APPLY TO YOU. THIS WARRANTY/GUARANTEE GIVES YOU SPECIFIC LEGAL
RIGHTS AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
NO REPRESENTATIVE OF PACIFIC INDUSTRIES, INC. NOR ANY OF ITS AGENTS,
DISTRIBUTORS OR DEALERS HAS ANY AUTHORITY TO ALTER IN ANY MANNER THE TERMS OF
THIS WARRANTY/GUARANTEE AND PACIFIC INDUSTRIES, INC. IS NOT RESPONSIBLE FOR ANY
UNDERTAKING, REPRESENTATION OR WARRANTY MADE BY ANY OTHER PERSON BEYOND THOSE
EXPRESSLY SET FORTH IN THIS WARRANTY/GUARANTEE CERTIFICATE.
* * * * *
PACIFIC INDUSTRIES, INC.
Consumer Relations Department
787 Watervliet-Shaker Road . Latham, NY 12110
1-800-833-3800
<PAGE>
20 YEAR LIMITED PRO RATED
LINER WARRANTY
Pacific Industries warrants to the original retail consumer purchaser that
if a Pacific Vinyl Liner should fail due to defective workmanship in welding
seams and edges within twenty (20) years from date of original purchase, and the
attached warranty card has been completed, signed, and returned to Pacific
Industries within ten (10) days of purchase. Pacific Industries will, at its
option, repair any such defect or in the alternative supply a new liner, F.O.B.
Scotia, New York, on the following basis:
If the original liner is repaired or a new liner supplied, the charge to
the original consumer purchaser shall be, first year, no charge. After the first
year, the same will be repaired or supplied, at the Company's option, upon
payment of a charge in accordance with the then retail selling price. The
following schedule sets forth the percentage of the retail price in effect at
the same time of replacement which the original retail consumer purchaser will
be charged for repair or replacement. The percentages are based on the length
of time you have owned the liner from the date of purchase.
WITHIN ONE (1) YEAR NO CHARGE
After 1 yr. 25% After 6 yrs. 50% After 12 yrs. 75%
After 2 yrs. 30% After 7 yrs. 55% After 14 yrs. 80%
After 3 yrs. 35% After 8 yrs. 60% After 16 yrs. 85%
After 4 yrs. 40% After 9 yrs. 65% After 18 yrs. 95%
After 5 yrs. 45% After 10 yrs. 70% After 20 yrs. 100%
This warranty is subject to the following terms and conditions:
This warranty relates only to manufacturing defects and does not include
damage or failure from other causes, including but not limited to, acts of God,
misuse or abuse, accident, negligence, fire, improper installation or ice
damage.
Pacific Industries will not be responsible for labor charges, cost of
replacement water or replacement chemicals, or any other related damage that may
occur.
Warranty is void if the liner is exposed to excessive heat or cold,
chemical abuse, or lack of proper chemical maintenance. Chemicals should not be
allowed to settle dissolved or undissolved onto the liner as chemicals can
bleach the color or pattern print. The pH of the pool water must be properly
maintained and balanced.
Manufacturer further warrants that the liner will fit into the finished
pool excavation exactly the same as the specifications given in order to produce
the liner.
Irregularities in printing, fading or tile alignment are specifically
excluded from this warranty. Materials used in the fabrication of the liner are
not produced by Pacific Industries; therefore any failure due to material
defects have to be referred to the manufacturer of the raw materials.
This warranty is enforceable only by the original retail consumer purchaser
and applies only to liners purchased for private residential use.
This warranty shall be void unless the attached warranty registration card
is completed, signed, and returned to Pacific Industries, at the address below
within ten (10) days of purchase.
PACIFIC INDUSTRIES SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES, INCLUDING BUT NOT LIMITED TO ANY DAMAGES FOR LOSS OF USE OF POOL OR
INJURY TO PERSON OR PROPERTY, AND ANY CLAIMS THEREFORE ARE HEREBY SPECIFICALLY
DISCLAIMED AND EXCLUDED. SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR EXCLUSION MAY
NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS AND YOU MAY ALSO
HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
If the Pacific liner should fail during the warranty period as a result of
a problem covered by this warranty, the consumer should send a letter to Pacific
Industries factory identifying the liner, setting forth the date of purchase and
specifying the serial number, and describing the nature of the defect.
Upon either (1) receipt of the liner at our factory for factory
confirmation of the claimed defect or (2) receipt of a cut-out of the defective
area and a cut-out of the serial number at our factory for confirmation of the
claimed defect, we will inform the consumer owner as to the disposition of
inspection and warranty claim.
Consumer purchaser is required to remove liner, or cut-out area as
indicated above, clean and return it to Pacific Industries, at its offices, at
Corporations Park, Bldg #705 West, Scotia, NY 12302, freight prepaid.
Any liner repaired or new liner shipped to consumer purchaser shall be
shipped on a freight collect basis and any installation costs of the liner shall
also be borne by the consumer purchaser.
Pacific Industries makes no other warranty, express or implied, and any
statutory warranties, including implied warranties of MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, are hereby specifically disclaimed and excluded.
No representative of Pacific Industries, nor any of its agents,
distributors, or dealers has any authority to alter in any manner the terms of
this warranty and Pacific Industries is not responsible for any undertaking,
representation or warranty made by any other person beyond those expressly set
forth in this warranty certificate.
PACIFIC INDUSTRIES, INC. Stock No. _________________________
Customer Services Department
787 Watervliet-Shaker Road Liner serial no. __________________
Latham, NY 12110
518-783-7776 AD 272 FC 1/96 15M
<PAGE>
EXHIBIT D
LEGAL OPINION OF
ADLER POLLOCK & SHEEHAN INCORPORATED
December ___, 1997
South Central Pool Suply, Inc.
109 Northpark Boulevard
Covington, Louisiana 70433
Ladies and Gentlemen:
We have acted as counsel to Bicknell Huston Distributors, Inc., a
Massachusetts corporation (the "Seller"), Pacific Industries, Inc., a Delaware
corporation ("Pacific"), and Cookson America, Inc., a Delaware corporation
("Cookson"), in connection with the transactions contemplated by an Asset
Purchase Agreement dated as of November ___, 1997 (the "Purchase Agreement") by
and among the Seller, Pacific, Cookson, SCP Pool Corporation, a Delaware
corporation, and South Central Pool Supply, Inc., a Delaware corporation
("Buyer"), pursuant to which Buyer shall acquire substantially all of the assets
used in connection with the swimming pool supply distribution business of the
Seller. Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Purchase Agreement.
In connection with the foregoing, we have examined the following documents
(collectively, the "Agreements"):
1. Purchase Agreement; and
2. Supply Agreement dated the date hereof, by and between Pacific
and Buyer.
<PAGE>
South Central Pool Supply, Inc.
December ___, 1997
Page 2
In addition, we have examined the original or photostatic or certified
copies of all such corporate records and of such agreements, communications and
other instruments, certificates of public officials and corporate officers and
such other documents as we have deemed relevant and necessary as a basis for the
opinions hereinafter set forth (except to the extent we have specifically set
forth below limitations of such examination). In such examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as original, photostatic or certified copies and the current
accuracy and completeness of all statements of fact as set forth in such
documents.
We call your attention to the fact that we are members of the Bar of the
State of Rhode Island and are not admitted to practice in and do not purport to
be experts in the laws of any other jurisdiction. Accordingly, except for the
opinions regarding Massachusetts and Delaware corporate law set forth in
paragraphs 1, 2 and 4 hereof, we express no opinion other than with respect to
the federal laws of the United States of America and the laws of the State of
Rhode Island.
In connection with the opinions set forth in paragraph 1 below with respect
to Seller, we have relied solely upon:
1. Certified copies dated December ___, 1997, of the Articles of
Organization, as amended, of the Seller issued by the Office of
the Secretary of State of the Commonwealth of Massachusetts; and
<PAGE>
South Central Pool Supply, Inc.
December ___, 1997
Page 3
2. A Certificate dated December ___, 1997, of the Secretary of State
of the Commonwealth of Massachusetts as to the legal existence
and corporate good standing of the Seller.
Such opinions are expressed as of the date of such certificates and cover only
the matters set forth therein. We express no opinion herein as to the tax good
standing of the Seller.
For purposes of the opinions set forth in paragraph 3 below, we have
assumed that the substantive laws of the State of Rhode Island (other than its
conflict of laws principles) govern the Agreements, notwithstanding that the
Agreements provide that they shall be governed by the laws of the State of New
York. Furthermore, we express no opinion as to any covenant not to compete
provision (including Section 8.10 of the Purchase Agreement) or to the
enforceability of the Agreements under any antitrust or restraint of trade laws.
In connection with the opinion set forth in paragraph 5 below, we have
undertaken to determine from lawyers currently in this firm whether they have
performed or are performing services which involve attention in the form of
legal consultation concerning overtly threatened or pending actions, suits or
proceedings against the Seller. Beyond that, no review or inquiry has been made
of any other matters for the purpose of identifying such overtly threatened or
pending actions, suits or proceedings and no information with respect to such
matters, if any, is set forth herein. The information set forth herein is as of
December ___, 1997, and
<PAGE>
South Central Pool Supply, Inc.
December ___, 1997
Page 4
we disclaim any undertaking to advise you of any changes or additional
information which thereafter may be brought to our attention.
Based upon and subject to the foregoing and further subject to the matters
hereinafter set forth, we are of the opinion that:
1. The Seller has been duly incorporated and is existing and in good
standing under the laws of the Commonwealth of Massachusetts. Each of
Pacific and Cookson has been duly incorporated and is existing and in good
standing under the laws of the State of Delaware.
2. Each of the Cookson Entities has the corporate power and authority
to enter into and perform the Agreements to the extent they are a party
thereto. The execution, delivery and performance of the Agreements have
been duly authorized by all requisite corporate action of each of the
Cookson Entities, and the Agreements have been duly executed and delivered
by each of the Cookson Entities where appropriate.
3. The Agreements are valid, binding and enforceable obligations of
each of the Cookson Entities which is a party thereto, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights and to the application of
equitable principles.
<PAGE>
South Central Pool Supply, Inc.
December ___, 1997
Page 5
4. The execution and delivery of the Agreements, the consummation of
the transactions therein contemplated and the performance by each of the
Cookson Entities of its respective obligations thereunder (i) will not
violate any provision of the Articles of Organization or Bylaws of the
Seller or the Certificate of Incorporation or Bylaws of Pacific or Cookson
or (ii) require any material governmental consent or approval under federal
law, except as set forth on Schedule 4.4 of the Purchase Agreement.
5. Except as set forth on Exhibit A attached hereto, we know of no
actions, suits or proceedings pending or overtly threatened against the
Seller.
The opinions expressed herein are for the sole benefit of, and may only be
relied upon by, the Buyer and ____________________, its financial lender for the
transactions contemplated by the Purchase Agreement, and may not be relied upon
by any other person.
Very truly yours,
ADLER POLLOCK & SHEEHAN
INCORPORATED
<PAGE>
EXHIBIT E
BICKNELL HUSTON DISTRIBUTORS, INC.
OFFICER'S CERTIFICATE
The undersigned, Stuart L. Daniels, Chairman of Bicknell Huston
Distributors, Inc., a Massachusetts corporation (the "Company"), in connection
with that certain Asset Purchase Agreement, dated as of November __, 1997, by
and among the Company; SCP Pool Corporation, a Delaware corporation; South
Central Pool Supply, Inc., a Delaware corporation; Pacific Industries, Inc., a
Delaware corporation; and Cookson America, Inc., a Delaware corporation, does
hereby certify that the conditions specified in Sections 2.1(a) and (b) of the
Purchase Agreement have been satisfied.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the
__ day of December, 1997.
BICKNELL HUSTON DISTRIBUTORS, INC.
By
-------------------------------
Stuart L. Daniels
Its: Chairman
<PAGE>
EXHIBIT F
ESTOPPEL CERTIFICATE
--------------------
_______________________________
_______________________________
_______________________________
Attention: ___________________
Re: ______________________
______________________ (the "Property")
Gentlemen:
The undersigned ("Landlord") is the owner of the Property which is subject
to a certain lease (which lease and all amendments and other agreements referred
to in Paragraph 1 below collectively are referred to herein as the "Lease")
dated _________________, 19__, made to ______________________________________,
as tenant (hereinafter referred to as "Tenant"). The undersigned, as landlord
under the Lease, understands that Purchaser and Tenant have entered into a
certain Asset Purchase Agreement (the "Asset Purchase Agreement") to purchase
certain of Tenant's assets, including Tenant's right, title and interest under
the Lease. Landlord understands that, as a condition to entering into the Asset
Purchase Agreement, Purchaser has required this agreement and certification by
the undersigned.
The undersigned, as landlord under the Lease, hereby represents, warrants
and certifies to Purchaser that the following statements are true, correct and
complete as of the date hereof:
1. Landlord is the landlord under the Lease which demises the Property to
Tenant. A true, correct and complete copy of the Lease is attached hereto as
Exhibit A. There have been no other amendments, modifications or revisions to
the Lease, and there are no other agreements of any kind between Landlord and
Tenant regarding the Property.
2. The term of the Lease commenced on _____________, 19__, and will
expire on _____________, ____, exclusive of unexercised renewal options and
extension options contained in the Lease.
3. The Lease has been duly authorized and executed by Landlord and is in
full force and effect.
4. Tenant is obligated to pay fixed or base rent under the Lease in the
annual amount of _______________________________________ Dollars ($________),
payable in monthly installments of
________________________________________________ Dollars ($__________). No rent
under the Lease has been paid more than one month in advance.
<PAGE>
5. Annual rental and all other sums due the undersigned pursuant to the
Lease have been paid in full through the date hereof.
6. Landlord has received no notice from any governmental authority
respecting a condemnation or threatened condemnation of all or a portion of the
Property.
7. Neither Landlord nor, to the best of Landlord's knowledge, Tenant is
in default under the Lease, and no event has occurred which, with the giving of
notice or passage of time, or both, could result in such a default.
8. Landlord has no notice of any assignment, hypothecation or pledge of
Tenant's interest under the Lease.
9. The current address of the undersigned is as set forth in the Lease.
10. Landlord hereby consents to the assignment by Tenant to Purchaser of
the Lease and all of Tenant's right, title and interest in and under the Lease.
11. All conditions and obligations under the Lease to be performed by the
Tenant thereunder have been satisfied as of the date hereof and all required
payments by Tenant to Landlord under the Lease have been received as of the date
hereof.
The undersigned further understands and acknowledges that Purchaser
anticipates acquiring certain assets of Tenant and assuming the Lease in
reliance upon the representations contained in this certificate and agrees that
Purchaser and its successors and assigns may rely upon said representations for
that purpose. For purposes of this certificate, terms initially capitalized
herein and not defined herein shall have the meanings ascribed to such terms in
the Lease.
This Estoppel Certificate is executed as of the ____ day of __________,
19______.
LANDLORD:
________________________________
By:
Name:
Title:
<PAGE>
EXHIBIT G
LESSOR'S SUBORDINATION AGREEMENT
WHEREAS, ________________________________ (hereinafter referred to as the
"Lessor") is the owner and/or Lessor of the following premises (hereinafter
referred to as the "Premises") which are leased to the following Lessee
(hereinafter referred to as the "Lessee"):
Premises:
Address:
Lessee:
AND WHEREAS, there has been or will be stored or installed in, attached to or
affixed to the Premises certain property (hereinafter referred to as the
"Property") more specifically described in Addendum A hereto; and
WHEREAS, to secure Lessee's obligation to pay certain indebtedness owed to
_________________ (hereinafter referred to as the "Secured Party"), a security
title to and/or a security interest in such Property has been or will be
retained by or as has been or will be transferred, conveyed or assigned to the
Secured Party under a security agreement, conditional sales contract, lease
agreement, chattel mortgage, bill of sale to secure debt or similar agreement;
NOW, THEREFORE, for and in consideration of the premises and the Secured Party's
reliance upon the aforedescribed security interest, it is hereby agreed as
follows:
1. Except as otherwise provided herein, the Lessor subordinates any and
all liens, claims or rights the Lessor may have to the Property by virtue of its
lease with Lessee, operation of law or otherwise, to the security title and/or
security interest of the Secured Party in the Property.
2. The Secured Party is expressly authorized to enter upon Premises at
any time and remove the Property therefrom; provided, however, that nothing
herein contained shall release the Secured Party from, and the Secured Party
shall be responsible for, costs of repairs and any and all damage resulting to
the Premises as a result of such entry and such removal.
3. Without in any manner entitling the Secured Party to occupy the
Premises during such time as the Lessee is not so entitled under the Lessee's
lease with the Lessor, this Lessor's Subordination Agreement is conditioned upon
Secured Party's, in case of default by the Lessee under the Lessee's lease with
Lessor and upon receipt of notice from the Lessor of such default, removal of
the Property from the Premises within thirty (30) days after receipt of such
notice, or this Lessor's Subordination Agreement shall be null and void. Also,
the Secured Party herein agrees to pay Lessor rental for the time period
commencing from the date of such notice from
<PAGE>
Lessor of Lessee's default and ending on the date the Secured Party completes
the removal of the property from the Premises. The rent for this time period
would be at the same rate the Lessee was paying up until the time of Lessee's
default.
4. This Agreement shall be binding upon and inure to the benefit of the
heirs, representatives, successors and assigns of Lessor and Secured Party.
5. This Agreement shall be binding when Lessor receives executed copy
signed by all parties.
WITNESS the hand and seal of Lessor this ____ day of __________________, 19__.
LESSOR:
By: ________________________
Name: _____________________
Title: ____________________
SECURED PARTY: _________________________________________
By:_____________________________
Authorized Officer
LESSEE:
By:_____________________________
<PAGE>
Exhibit H
---------
December 31, 1997
Bicknell Huston Distributors, Inc.
12 Parkwood Drive
Hopkinton, MA 01748
We are issuing this opinion letter in our capacity as special legal counsel
to South Central Pool Supply, Inc., a Delaware corporation (the "Company"), and
SCP Pool Corporation, a Delaware corporation ("SCP") in response to the
requirement in Section 2.2(f) of the Asset Purchase Agreement, dated as of
November __, 1997, among SCP Pool Corporation, South Central Pool Supply, Inc.,
Bicknell Houston Distributors, Inc. ("you") and Pacific Industries, Inc. (the
"Main Agreement"). The term "Transaction Agreements" whenever it is used in this
letter means the Main Agreement and the Pacific Supply Agreement, dated as of
December __, 1997, between the Company and you.
Subject to the assumptions, qualifications, exclusions and other
limitations which are identified in this letter and in the schedules attached to
this letter, we advise you that:
1. Each of the Company and SCP is a corporation existing and in good standing
under the General Corporation Law of the State of Delaware.
2. Each of the Company and SCP has the corporate power to enter into and
perform its obligations under the Transaction Agreements to which it is a
party.
3. The Company's execution, delivery and performance of the Transaction
Agreements has been duly authorized by all necessary corporate action on
the part of the Company. SCP's execution, delivery and performance of the
Main Agreement has been duly authorized by all necessary corporate action
on the part of SCP.
4. Each of the Company and SCP has duly executed and delivered the Transaction
Agreements to which it is a party.
5. Each of the Transaction Agreements is a valid and binding obligation of the
Company and is enforceable against the Company in accordance with its
terms. The Main Agreement is a valid and binding obligation of SCP and is
enforceable against SCP in accordance with its terms.
In preparing this letter, we have relied without any independent
verification upon the assumptions recited in Schedule B to this letter and upon:
(i) information contained in certificates obtained from governmental
authorities; (ii) factual information represented to be true in the Main
Agreement and the other Transaction Agreements; (iii) factual information
provided to us in the
<PAGE>
Support Certificate signed by the Company and attached hereto; and (iv) factual
information we have obtained from such other sources as we have deemed
reasonable. We have assumed without investigation that there has been no
relevant change or development between the dates as of which the information
cited in the preceding sentence was given and the date of this letter and that
the information upon which we have relied is accurate and does not omit
disclosures necessary to prevent such information from being misleading. For
purposes of each opinion in paragraph 1, we have relied exclusively upon a
certificate issued by a governmental authority in each relevant jurisdiction,
and such opinion is not intended to provide any conclusion or assurance beyond
that conveyed by that certificate.
While we have not conducted any independent investigation to determine
facts upon which our opinions are based or to obtain information about which
this letter advises you, we confirm that we do not have any actual knowledge
which has caused us to conclude that our reliance and assumptions cited in the
preceding paragraph are unwarranted or that any information supplied in this
letter is wrong. The term "actual knowledge" whenever it is used in this letter
with respect to our firm means conscious awareness at the time this letter is
delivered on the date it bears by the following Kirkland & Ellis lawyers who
have had significant involvement with negotiation or preparation of the Main
Agreement (herein called "our Designated Transaction Lawyers"): Stephen L.
Ritchie, David M. Schlossberg and Nicholas DiCrescenzo.
Our advice on every legal issue addressed in this letter is based
exclusively on the internal law of New York or the federal law of the United
States except that the opinions in paragraphs 1 through 4 are based on the
Delaware General Corporation Law. Issues addressed by this letter may be
governed in whole or in part by other laws, but we express no opinion as to
whether any relevant difference exists between the laws upon which our opinions
are based and any other laws which may actually govern. Our opinions are subject
to all qualifications in Schedule A and do not cover or otherwise address any
law or legal issue which is identified in the attached Schedule C or any
provision in the Main Agreement or any of the other Transaction Agreements of
any type identified in Schedule D. Provisions in the Transaction Agreements
which are not excluded by Schedule D or any other part of this letter or its
attachments are called the "Relevant Agreement Terms."
Our advice on each legal issue addressed in this letter represents our
opinion as to how that issue would be resolved were it to be considered by the
highest court of the jurisdiction upon whose law our opinion on that issue is
based. The manner in which any particular issue would be treated in any actual
court case would depend in part on facts and circumstances particular to the
case, and this letter is not intended to guarantee the outcome of any legal
dispute which may arise in the future. It is possible that some Relevant
Agreement Terms may not prove enforceable for reasons other than those cited in
this letter should an actual enforcement action be brought, but (subject to all
the exceptions, qualifications, exclusions and other limitations contained in
this letter) such unenforceability would not in our opinion prevent you from
realizing the principal benefits purported to be provided by the Relevant
Agreement Terms.
This letter speaks as of the time of its delivery on the date it bears. We
do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact about which our Designated Transaction Lawyers did
not have actual knowledge at that time, by reason of any change subsequent to
that time in any law covered by any of our opinions, or for any other reason.
<PAGE>
The attached schedules are an integral part of this letter, and any term defined
in this letter or any schedule has that defined meaning wherever it is used in
this letter or in any schedule to this letter.
You may rely upon this letter only for the purpose served by the provision
in the Main Agreement cited in the initial paragraph of this letter in response
to which it has been delivered. Without our written consent: (i) no person other
than you may rely on this letter for any purpose; (ii) this letter may not be
cited or quoted in any financial statement, prospectus, private placement
memorandum or other similar document; (iii) this letter may not be cited or
quoted in any other document or communication which might encourage reliance
upon this letter by any person or for any purpose excluded by the restrictions
in this paragraph; and (iv) copies of this letter may not be furnished to anyone
for purposes of encouraging such reliance.
Sincerely,
Kirkland & Ellis
<PAGE>
Schedule A
General Qualifications
All of our opinions ("our opinions") in the letter to which this Schedule
is attached ("our letter") are subject to each of the qualifications set forth
in this Schedule.
1. Bankruptcy and Insolvency Exception. Each of our opinions is subject to
the effect of bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws. This exception includes:
a. the Federal Bankruptcy Code and thus comprehends, among others,
matters of turn-over, automatic stay, avoiding powers, fraudulent
transfer, preference, discharge, conversion of a non-recourse
obligation into a recourse claim, limitations on ipso facto and anti-
assignment clauses and the coverage of pre-petition security
agreements applicable to property acquired after a petition is filed;
b. all other Federal and state bankruptcy, insolvency, reorganization,
receivership, moratorium, arrangement and assignment for the benefit
of creditors laws that affect the rights of creditors generally or
that have reference to or affect only creditors of specific types of
debtors;
c. state fraudulent transfer and conveyance laws; and
d. judicially developed doctrines in this area, such as substantive
consolidation of entities and equitable subordination.
2. Equitable Principles Limitation. Each of our opinions is subject to the
effect of general principles of equity, whether applied by a court of law
or equity. This limitation includes principles:
a. governing the availability of specific performance, injunctive relief
or other equitable remedies, which generally place the award of such
remedies, subject to certain guidelines, in the discretion of the
court to which application for such relief is made;
b. affording equitable defenses (e.g., waiver, laches and estoppel)
against a party seeking enforcement;
c. requiring good faith and fair dealing in the performance and
enforcement of a contract by the party seeking its enforcement;
d. requiring reasonableness in the performance and enforcement of an
agreement by the party seeking enforcement of the contract;
e. requiring consideration of the materiality of (i) a breach and (ii)
the consequences of the breach to the party seeking enforcement;
A-1
<PAGE>
f. requiring consideration of the impracticability or impossibility of
performance at the time of attempted enforcement; and
g. affording defenses based upon the unconscionability of the enforcing
party's conduct after the parties have entered into the contract.
3. Other Common Qualifications. Each of our opinions is subject to the effect
of rules of law that:
a. limit or affect the enforcement of provisions of a contract that
purport to waive, or to require waiver of, the obligations of good
faith, fair dealing, diligence and reasonableness;
b. provide that forum selection clauses in contracts are not necessarily
binding on the court(s) in the forum selected;
c. limit the availability of a remedy under certain circumstances where
another remedy has been elected;
d. provide a time limitation after which a remedy may not be enforced;
e. limit the right of a creditor to use force or cause a breach of the
peace in enforcing rights;
f. relate to the sale or disposition of collateral or the requirements of
a commercially reasonable sale;
g. limit the enforceability of provisions releasing, exculpating or
exempting a party from, or requiring indemnification of a party for,
liability for its own action or inaction, to the extent the action or
inaction involves negligence, recklessness, willful misconduct,
unlawful conduct, violation of public policy or litigation against
another party determined adversely to such party;
h. may, where less than all of a contract may be unenforceable, limit the
enforceability of the balance of the contract to circumstances in
which the unenforceable portion is not an essential part of the agreed
exchange;
i. govern and afford judicial discretion regarding the determination of
damages and entitlement to attorneys' fees and other costs;
j. may permit a party that has materially failed to render or offer
performance required by the contract to cure that failure unless (i)
permitting a cure would unreasonably hinder the aggrieved party from
making substitute arrangements for performance, or (ii) it was
important in the circumstances to the aggrieved party that performance
occur by the date stated in the contract.
A-2
<PAGE>
k. may render guarantees unenforceable under circumstances where your
actions, failures to act or waivers, amendments or replacement of the
Transaction Agreements so radically change the essential nature of the
terms and conditions of the guaranteed obligations and the related
transactions that, in effect, a new relationship has arisen between
you and Company or Guarantors which is substantially and materially
different from that presently contemplated by the Transaction
Agreements.
4. Referenced Provision Qualification. In addition, our opinions, insofar as
they relate to the validity, binding effect or enforceability of a
provision in any of the Transaction Agreements requiring the Company to
perform its obligations under, or to cause any other person to perform its
obligations under, any provision (a "Referenced Provision") of such
Transaction Agreement or of any of the other Transaction Agreements or
stating that any action will be taken as provided in or in accordance with
any provision (also a "Referenced Provision") of any other Transaction
Agreement, are subject to the same qualifications as the corresponding
opinion in this letter relating to the validity, binding effect and
enforceability of such Referenced Provision. Requirements in the
Transaction Agreements that provisions therein may only be waived or
amended in writing may not be enforceable to the extent that an oral
agreement or an implied agreement by trade practice or course of conduct
has been created modifying any such provision.
A-3
<PAGE>
Schedule B
Assumptions
For purposes of our letter, we have relied, without investigation, upon
each of the following assumptions:
1. The Company has the requisite title and rights to any property involved in
the transactions effected under the Transaction Agreements (herein called
the "Transactions").
2. You are existing and in good standing in your jurisdiction of organization.
3. The Transaction Agreements constitute valid and binding obligations of
yours and are enforceable against you in accordance with their terms
(subject to qualifications, exclusions and other limitations similar to
those applicable to our letter).
4. You have satisfied those legal requirements that are applicable to you to
the extent necessary to entitle you to enforce the Transaction Agreements
against the Company.
5. Each document submitted to us for review is accurate and complete, each
such document that is an original is authentic, each such document that is
a copy conforms to an authentic original, and all signatures (other than
those of or on behalf of the Company) on each such document are genuine.
6. There has not been any mutual mistake of fact or misunderstanding, fraud,
duress or undue influence.
7. The conduct of the parties to the Transaction Agreements has complied with
any requirement of good faith, fair dealing and conscionability.
8. You have acted in good faith and without notice of any defense against the
enforcement of any rights created by, or adverse claim to any property or
security interest transferred or created as part of, the Transactions.
9. There are no agreements or understandings among the parties, written or
oral, and there is no usage of trade or course or prior dealing among the
parties that would, in either case, define, supplement or qualify the terms
of the Main Agreement or any of the other Transaction Agreements.
10. The constitutionality or validity of a relevant statute, rule, regulation
or agency action is not in issue.
11. All parties to the Transactions will act in accordance with, and will
refrain from taking any action that is forbidden by, the terms and
conditions of the Transaction Agreements.
B-1
<PAGE>
12. All agreements other than the Transaction Agreements (if any) with respect
to which we have provided advice in our letter or reviewed in connection
with our letter would be enforced as written.
13. The Company will not in the future take any discretionary action (including
a decision not to act) permitted under the Transaction Agreements that
would result in a violation of law or constitute a breach or default under
any other agreements or court orders to which the Company may be subject.
14. The Company has obtained (and will in the future obtain) all permits and
governmental approvals required, and has taken (and will in the future
take) all actions required, relevant to the consummation of the
Transactions or performance of the Transaction Agreements.
15. All information required to be disclosed in connection with any consent or
approval by the Company's Board of Directors or stockholders (or equivalent
governing group) and all other information required to be disclosed in
connection with any issue relevant to our opinions has in fact been fully
and fairly disclosed to all persons to whom it is required to be disclosed.
16. The Company's certificate of incorporation (or equivalent governing
instrument), all amendments to that certificate, all resolutions adopted
establishing classes or series of stock under that certificate, the
Company's bylaws and all amendments to its bylaws have been adopted in
accordance with all applicable legal requirements.
17. Each person who has taken any action relevant to any of our opinions in the
capacity of director or officer was duly elected to that director or
officer position and held that position when such action was taken.
B-2
<PAGE>
Schedule C
Excluded Law and Legal Issues
None of the opinions or advice contained in our letter covers or otherwise
addresses any of the following laws, regulations or other governmental
requirements or legal issues:
1. Federal securities laws and regulations (including the Investment Company
Act of 1940 and all other laws and regulations administered by the United
States Securities and Exchange Commission), state "Blue Sky" laws and
regulations, and laws and regulations relating to commodity (and other)
futures and indices and other similar instruments;
2. Federal Reserve Board margin regulations;
3. pension and employee benefit laws and regulations (e.g., ERISA);
4. Federal and state antitrust and unfair competition laws and regulations;
5. Federal and state laws and regulations concerning filing and notice
requirements other than requirements applicable to charter-related
documents such as a certificate of merger;
6. compliance with fiduciary duty requirements;
7. the statues and ordinances, the administrative decisions and the rules and
regulations of counties, towns, municipalities and special political
subdivisions (whether created or enabled through legislative action at the
Federal, state or regional level -- e.g., water agencies, joint power
districts, turnpike and tollroad authorities, rapid transit districts or
authorities, and port authorities) and judicial decisions to the extent
that they deal with any of the foregoing;
8. the characterization of a transaction as one involving the creation of a
lien on real property or a security interest in personal property, the
characterization of a contract as one in a form sufficient to create a lien
or a security interest, the creation, attachment, perfection, priority or
enforcement of a lien on real property or a security interest in personal
property or matters involving ownership or title to any real or personal
property;
9. fraudulent transfer and fraudulent conveyance laws;
10. Federal and state environmental laws and regulations;
11. Federal and state land use and subdivision laws and regulations;
12. Federal and state tax laws and regulations;
C-1
<PAGE>
13. Federal patent, trademark and copyright, state trademark, and other Federal
and state intellectual property laws and regulations;
14. Federal and state racketeering laws and regulations (e.g., RICO);
15. Federal and state health and safety laws and regulations (e.g., OSHA);
16. Federal and state labor laws and regulations;
17. Federal and state laws, regulations and policies concerning (i) national
and local emergency, (ii) possible judicial deference to acts of sovereign
states, and (iii) criminal and civil forfeiture laws;
18. other Federal and state statutes of general application to the extent they
provide for criminal prosecution (e.g., mail fraud and wire fraud
statutes);
19. any laws, regulations, directives and executive orders that prohibit or
limit the enforceability of obligations based on attributes of the party
seeking enforcement (e.g., the Trading with the Enemy Act and the
International Emergency Economic Powers Act); and
20. the effect of any law, regulation or order which hereafter becomes
effective.
We have not undertaken any research for purposes of determining whether
the Company or any of the Transactions which may occur in connection with the
Main Agreement or any of the other Transaction Agreements is subject to any law
or other governmental requirement other than to those laws and requirements
which in our experience would generally be recognized as applicable in the
absence of research by lawyers in New York, and none of our opinions covers any
such law or other requirement unless (i) one of our Designated Transaction
Lawyers had actual knowledge of its applicability at the time our letter was
delivered on the date it bears and (ii) it is not excluded from coverage by
other provisions in our letter or in any Schedule to our letter.
C-2
<PAGE>
Schedule D
Excluded Provisions
None of the opinions in the letter to which this Schedule is attached
covers or otherwise addresses any of the following types of provisions which may
be contained in the Transaction Agreements:
1. Choice-of-law provisions.
2. Covenants not to compete, including without limitation covenants not to
interfere with business or employee relations, covenants not to solicit
customers, and covenants not to solicit or hire employees.
3. Indemnification for negligence, willful misconduct or other wrongdoing or
strict product liability or any indemnification for liabilities arising
under securities laws.
4. Provisions mandating contribution towards judgments or settlements among
various parties.
5. Waivers of (i) legal or equitable defenses, (ii) rights to damages, (iii)
rights to counter claim or set off, (iv) statutes of limitations, (v)
rights to notice, (vi) the benefits of statutory, regulatory, or
constitutional rights, unless and to the extent the statute, regulation, or
constitution explicitly allows waiver, (vii) broadly or vaguely stated
rights, and (viii) other benefits to the extent they cannot be waived under
applicable law.
6. Provisions providing for forfeitures or the recovery of amounts deemed to
constitute penalties, or for liquidated damages, acceleration of future
amounts due (other than principal) without appropriate discount to present
value, late charges, prepayment charges, interest upon interest, and
increased interest rates upon default.
7. Time-is-of-the-essence clauses.
8. Provisions which provide a time limitation after which a remedy may not be
enforced.
9. Confession of judgment clauses.
10. Agreements to submit to the jurisdiction of any particular court or other
governmental authority (either as to personal jurisdiction and subject
matter jurisdiction); provisions restricting access to courts; waiver of
the right to jury trial; waiver of service of process requirements which
would otherwise be applicable; and provisions otherwise purporting to
affect the jurisdiction and venue of courts.
11. Provisions that attempt to change or waive rules of evidence or fix the
method or quantum of proof to be applied in litigation or similar
proceedings.
D-1
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12. Provisions appointing one party as an attorney-in-fact for an adverse party
or providing that the decision of any particular person will be conclusive
or binding on others.
13. Provisions purporting to limit rights of third parties who have not
consented thereto or purporting to grant rights to third parties.
14. Provisions which purport to award attorneys' fees solely to one party.
15. Arbitration agreements.
16. Provisions purporting to create a trust or constructive trust without
compliance with applicable trust law.
17. Provisions relating to (i) insurance coverage requirements and (ii) the
application of insurance proceeds and condemnation awards.
18. Provisions that provide for the appointment of a receiver.
19. Provisions or agreements regarding proxies, shareholders agreements,
shareholder voting rights, voting trusts, and the like.
20. Confidentiality agreements.
21. Provisions in any of the Transaction Agreements requiring the Company to
perform its obligations under, or to cause any other person to perform its
obligations under, or stating that any action will be taken as provided in
or in accordance with, any agreement or other document that is not a
Transaction Agreement.
22. Provisions, if any, which are contrary to the public policy of any
jurisdiction.
D-2
<PAGE>
EXHIBIT I
SOUTH CENTRAL POOL SUPPLY, INC.
OFFICER'S CERTIFICATE
The undersigned, Wilson B. Sexton, Chairman of South Central Pool Supply,
Inc., a Delaware corporation (the "Company"), in connection with that certain
Asset Purchase Agreement, dated as of November __, 1997, by and among the
Company; SCP Pool Corporation, a Delaware corporation; Bicknell Huston
Distributors, Inc., a Massachusetts corporation; Pacific Industries, Inc., a
Delaware corporation; and Cookson America, Inc., a Delaware corporation, does
hereby certify that the conditions specified in Sections 2.2(a) and (e) of the
Purchase Agreement have been satisfied.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the
__ day of December, 1997.
SOUTH CENTRAL POOL SUPPLY, INC.
By:
---------------------------
Wilson B. Sexton
Its: Chairman
<PAGE>
EXHIBIT J
KEY EMPLOYEES
The following individuals are the key employees referred to in Section 3.1(f):
Terry Allen
Rick Bowley
Al Callahan
Tom Elsner
Jay Forte
Jon Hulme
Bob Keimer
Rodger Lamy
Tod Rice
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
February 14, 1997 (except Note 11, as to which the date is September 29,
1997), in the Registration Statement (Form S-1) and related Prospectus of SCP
Pool Corporation for the registration of 2,950,000 shares of its common stock.
ERNST & YOUNG LLP
New Orleans, Louisiana
December 9, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 20, 1996 (except Note 8, as to which the
date is October 21, 1997), with respect to the financial statements of The B-L
Network, Inc. included in the Registration Statement (Form S-1) and related
Prospectus of SCP Pool Corporation for the registration of 2,950,000 shares of
its common stock.
ERNST & YOUNG LLP
Atlanta, Georgia
December 9, 1997
