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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998
[_] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
for the transition period from to
Commission file number 0-26640
SCP POOL CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 36-3943363
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
109 Northpark Boulevard, Covington, LA 70433-5001
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: 504/892-5521
Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of voting stock and non-voting common equity
held by non-affiliates of the registrant as of March 19, 1999 was approximately
$141,933,675.
As of March 19, 1999 the Registrant had 11,489,031 shares of Common Stock
outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Proxy Statement to be mailed to stockholders
on or about April 12, 1999 for the Annual Meeting to be held on May 12, 1999,
are incorporated by reference in Part III.
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PART I
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Item 1. Business.
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General
SCP Pool Corporation (together with its wholly-owned subsidiaries, the
"Company") distributes swimming pool supplies and related products to swimming
pool remodelers and builders, independent retail stores and swimming pool repair
and service companies. The Company distributes more than 34,000 national brand
and private label products to approximately 26,000 customers. These products
include both non-discretionary pool maintenance products, such as chemicals and
replacement parts, packaged pools (kits to build swimming pools which include
walls, liners, 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
former 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 (as defined below) 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"). 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 a leveraged
buyout.
During 1998, the Company added 11 service centers in the northeastern
United States through an acquisition, one service center in California following
an inventory acquisition, and one service center in the United Kingdom through a
third acquisition. In 1998 the Company also opened five new service centers and
closed two service centers. As of December 31, 1998, the Company operated 89
service centers in 32 states and one service center in the United Kingdom.
During January 1999, the Company added 20 service centers located primarily in
the Midwestern United States through an acquisition (of which 13 are to be
consolidated into existing service centers) and one service center in the United
Kingdom through another acquisition. During the first fiscal quarter of 1999,
the Company also opened four new service centers. The Company currently operates
100 service centers in 34 states and two service centers in the United Kingdom.
The Company's net sales have grown from approximately $32.1 million in 1990
to $457.6 million in 1998. Operating income has increased from $2.1 million in
1990 to $25.4 million in 1998. The Company expects to continue its growth
strategy by opening service centers in new locations, increasing sales at
existing service centers and making strategic acquisitions.
The Acquisitions
In January 1994, the Company substantially increased its operations by
acquiring certain assets of Aqua Fab Industries, Inc., 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.
In February 1995, the Company acquired all of the outstanding capital stock
of Orcal Pool Supplies, Inc., thereby adding nine service centers. 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, primarily inventory and one service center in
each of Oregon and Washington, of Crest Distribution, a division of Aman
Enterprises, Inc. In November 1995, the Company acquired the capital stock of
Steven Portnoff Corporation, which operated a service center in Scottsdale,
Arizona, and in December 1995, the Company acquired certain assets, primarily
inventory and a service center in Las Vegas, Nevada, of Pool Mart of Nevada,
Inc., an affiliate of Steven Portnoff Corporation.
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In September 1996, 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 (the
"BLN Acquisition"), for an aggregate purchase price of approximately $34.5
million. The Company subsequently consolidated 15 of the BLN service centers
into existing service centers. The purchase price for the BLN Acquisition was
financed primarily through the issuance of promissory notes payable to BLN 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"), a subsidiary of SCP Supply, to Bio-Lab, Inc. ("Bio-
Lab"), the parent of BLN and a subsidiary of Great Lakes Chemical Corporation,
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").
In January 1998, the Company acquired certain assets of Bicknell Huston
Distributors, Inc. ("Bicknell"), a wholesaler of swimming pool supplies with 11
service center locations in six northeastern states (the "Bicknell
Acquisition"), for an aggregate purchase price of approximately $21 million,
subject to certain adjustments. The purchase price for the Bicknell Acquisition
was financed through the offering to the public of 2,025,000 shares of the
Company's Common Stock in December 1997 (the "1997 Public Offering"). In
connection with the Bicknell Acquisition, the Company entered into a long-term
supply agreement (the "Pacific Supply Agreement") with Pacific Industries, Inc.,
a subsidiary of Cookson Group plc and the sole stockholder of Bicknell
("Pacific"). Under the terms of the Pacific Supply Agreement, Pacific will
supply the Company with polymer panels, braces, steps, liners and other products
used in the construction of in-ground vinyl pools. The Pacific Supply Agreement
has a term of eight years and is subject to renewal options. Mr. DeMichele, who,
prior to his death in December 1998, was a director of the Company, was also a
director of Pacific and held certain executive positions with affiliates of
Pacific. See "Certain Relationships and Related Transactions."
In February 1998, the Company aquired certain inventory of Valve
Engineering Acquisition Co., a distributor of swimming pool supplies in
Glendale, California.
In August 1998, the Company acquired the capital stock of Nor-Cal Limited,
which distributes swimming pool supplies through its service center in Crawley,
England (the "Nor-Cal Acquisition") and in January 1999, the Company acquired
the capital stock of Pratts Plastics Limited, which distributes swimming pool
supplies through its service center in Essex, England under the trade name "The
Swimming Pool Warehouse."
In January 1999, the Company acquired certain assets of Benson Pump
Company, a wholesaler of swimming pool supplies with 20 service center locations
in 16 states (the "Benson Acquisition"). The Company is in the process of
consolidating 13 of these service center locations into the Company's existing
service center locations. The aggregate purchase price for the Benson
Acquisition was approximately $21 million, subject to certain adjustments.
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 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
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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 five 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. Such consolidation has permitted the larger pool supply
distributors to benefit from various economies of scale. 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 and increased
competition as a result.
Growth Strategy
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, one acquisition in
1996, three acquisitions in 1998 and two acquisitions in January 1999.
The Company intends to open service centers in geographic areas which are
not currently served by, or are underserved by, the Company. The Company has
opened nineteen new service centers during the last five years. 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 intends to capitalize on opportunities to expand sales at its
existing service centers. Comparable service center sales increased 15%, 16%,
19%, 11% and 14% in 1994, 1995, 1996, 1997 and 1998, 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.
Products
The Company offers more than 34,000 national brand and private label
products to approximately 26,000 customers. These products include both non-
discretionary pool maintenance products, such as chemicals and replacement
parts, packaged pools (kits to build swimming pools which include walls, liners,
bracing and other materials), and pool equipment, such as cleaners, filters,
heaters, pumps and lights. 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 net sales in 1998.
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 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.
Approximately one-third 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/, and EZ-Clor/R/, which
are sold to retail and professional customers, pool remodelers and builders, and
pool service and repair companies. Most of these chemical products are converted
from bulk to retail form by Bio-Lab and sold to the Company under the Bio-Lab
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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/, Regatta Pools/TM/ and Prestige/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 84 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 approximately 26,000 customers, primarily
swimming pool remodelers and builders, retail swimming pool stores and swimming
pool repair and service companies. No customer accounted for more than 1% of the
Company's sales during 1998. The Company estimates that in 1998, 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 "delivery" business, in which local deliveries of
products are made directly to customer locations. The Company also offers "walk-
in" service in all of the markets it serves.
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 has a good relationship with its suppliers which generally
offer competitive pricing, rebates, 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 Bicknell Acquisition, the Company entered into the Pacific Supply Agreement
with Pacific, the sole stockholder of Bicknell. Under the terms of the Pacific
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 Pacific Supply Agreement has 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
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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. The Company's largest non-affiliated suppliers are Pac-Fab, Inc. (a
subsidiary of Essex Corporation), Hayward Pool Products, Inc. and Bio-Lab, and
these suppliers provided approximately 15%, 13% and 8%, respectively, of the
Company's material purchases in 1998. In 1998, Pacific supplied approximately 4%
of the Company's purchases, and Pacific is expected to supply a similar
percentage of the Company's purchases in 1999. See "Certain Relationships and
Related Transactions." The Company currently has long-term contracts with Bio-
Lab and Pacific, but does not have contracts with Pac-Fab, Inc. or Hayward Pool
Products, Inc. The Company believes that it has good relationships with all of
its suppliers.
Decisions relating to pricing, suppliers and product selection are
decentralized at the Company's service centers, with significant input from the
Company's headquarters. 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.
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: Hughes Supply, Inc., Pool Water Products, Superior
Pool Products, Inc. (a subsidiary of Arch Chemicals, Inc.), Gorman Company (a
division of Hajoica) and Fort Wayne Pools. Barriers to entry in the swimming
pool supply industry are relatively low.
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, Arizona, Texas and Florida,
tend to be more competitive than others.
Seasonality and Weather
The Company's business is highly seasonal. In 1998, approximately 68% 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 approximately 120% 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 Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality and Quarterly Fluctuations."
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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.
Fire, Safety and Casualty Issues
The Company stores chemicals at each of its 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 could give rise to liability claims against the Company.
Employees
As of March 9, 1999, the Company employed approximately 1,100 persons on a
full-time basis, of whom 270 engaged in management, administration and
accounting, and credit and collections, 84 engaged in outside sales, 176 engaged
in service center management and 570 engaged in warehouse, production and
distribution operations. Of these employees, 82 are employed at the Company's
corporate headquarters in Covington, Louisiana. In January, 1999, 91 of these
employees were added to the Company in connection with the Benson Acquisition.
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.
Item 2. Properties.
As of March, 1999, the Company conducted operations through 102 service
center locations located in 34 states and the United Kingdom. Service centers
are located near customer concentrations, typically in industrial, commercial or
mixed-use zones. The Company's executive offices are located in approximately
26,000 square feet of leased space in Covington, Louisiana.
The Company's service centers range in size from approximately 6,000 square
feet to 51,000 square feet and consist of warehouse, counter, display and office
space. The Company owns the location of a former service center in Phoenix,
Arizona, and the Company has entered a contract to sell such facility. In
February, 1998, the Company sold
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a facility in Fresno, California and leased it back from the purchaser for a
three-year period beginning March 1, 1998. All of the Company's other properties
are leased for terms which expire between 1999 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 Item 13, "Certain
Relationships and Related Transactions" and Note 7 to the Company's Consolidated
Financial Statements.
Item 3. Legal Proceedings.
From time to time, the Company is involved in litigation and proceedings
arising in the ordinary course of its business. There are no pending material
legal proceedings to which the Company is a party or to which the property of
the Company is subject.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
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Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters.
The Common Stock of the Company began trading on the Nasdaq National Market
under the symbol "POOL" in October 1995. At March 19, 1999, there were 54
holders of record of Common Stock.
The following table sets forth, for the period 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 July 1998.
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Fiscal Year High Low
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1997
First Quarter................... $10.667 $ 8.781
Second Quarter.................. 11.115 8.667
Third Quarter................... 11.552 9.115
Fourth Quarter.................. 16.000 11.000
1998
First Quarter................... 15.672 12.250
Second Quarter.................. 16.922 14.672
Third Quarter................... 16.578 12.000
Fourth Quarter.................. 15.875 9.000
</TABLE>
The bid information set forth above reflects inter-dealer prices, without
retail mark-ups, markdowns or commissions and may not necessarily represent
actual transactions.
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 Third Amended and Restated Credit Agreement dated as of
December 31, 1997, by and among SCP Supply, the institutions from time to time
party thereto as lenders, LaSalle National Bank as Agent and Co-Arranger and
Hibernia National Bank as Co-Arranger (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 of the Company ("the Board") in
light of the Company's earnings, financial position, capital requirements,
credit agreements and such other factors as the Board deems relevant at such
time. See Item 7,
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"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.
Item 6. Selected Financial Data.
The following table sets forth selected financial data of the Company and
its Predecessor. This information should be read in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and with the Consolidated Financial Statements of the Company and
the Predecessor and related Notes thereto included herein.
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<CAPTION>
The Company
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Year Ended December 31,
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1998 1997 1996 1995 1994
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(Dollars in thousands, except per share data)
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Statement of Income Data:
Net sales..................................... $457,598 $335,022 $235,844 $161,095 $101,977
Cost of sales................................. 355,059 261,645 183,814 123,974 77,488
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Gross profit........................... 102,539 73,377 52,030 37,121 24,489
Warehouse expense............................. 20,593 14,416 9,611 6,957 3,610
Selling and administrative expenses........... 55,459 42,355 31,139 19,907 13,518
Goodwill amortization......................... 1,102 885 793 735 683
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Operating income....................... 25,385 15,721 10,487 9,522 6,678
Other income (expense):
Interest expense....................... (3,480) (4,482) (3,176) (5,113) (4,171)
Amortization expense................... (848) (708) (698) (610) (498)
Management fees paid to stockholder.... -- -- -- (208) (250)
Miscellaneous income................... 724 852 823 228 118
-------- -------- -------- -------- --------
(3,604) (4,338) (3,051) (5,703) (4,801)
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Income before income taxes and................ 21,781 11,383 7,436 3,819 1,877
extraordinary loss
Provision for income taxes (1)................ 8,043 4,327 2,903 1,490 770
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Income before extraordinary loss (1).......... $ 13,738 $ 7,056 $ 4,533 $ 2,329 $ 1,107
======== ======== ======== ======== ========
Income before extraordinary loss per share of
common stock
Basic (2).................................. 1.18 0.73 0.48 0.52 0.35
Diluted (2)................................ 1.15 0.71 0.46 0.50 0.33
Balance Sheet Data:
Working capital............................... $ 61,672 $ 63,387 $ 34,602 $ 21,187 $ 8,493
Total assets.................................. 163,788 136,452 113,245 75,397 50,675
Total debt, including current portion......... 33,696 39,889 51,277 26,476 38,025
Stockholders' equity.......................... 80,564 66,635 36,810 32,277 3,037
</TABLE>
(1) The Company recognized an extraordinary loss, net of tax, in 1995 of
$750,000, or $0.17 per share on a diluted basis, 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.
(2) Earnings per share information has been restated to reflect the two three-
for-two splits in September, 1997 and July, 1998 and the adoption of FASB
128, Earnings per Share.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company 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 Company has grown through strategic acquisitions, by opening new service
centers and by increasing sales to new and existing customers. From January 1990
to March 1999, the Company expanded primarily through acquisitions from eight
service centers in six states to a total of 102 service centers, 100 of which
operate in 34 states in the United States and two of which operate in the United
Kingdom. 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% of net sales.
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, consumer saving and discretionary spending levels,
the level of new housing construction, weather and consumer attitudes towards
pool 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, Arizona, 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.
9
<PAGE>
Results of Operations
The following table shows, for the periods indicated, information derived
from the consolidated statements of income of the Company expressed as a
percentage of net sales for such year.
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996
------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 77.6 78.1 77.9
------------------------
Gross profit 22.4 21.9 22.1
Warehouse expense 4.5 4.3 4.1
Selling and administrative expenses 12.1 12.6 13.2
Goodwill amortization 0.2 0.3 0.3
------------------------
Operating income 5.6 4.7 4.5
Interest expense (0.8) (1.3) (1.3)
Amortization expense (0.2) (0.3) (0.3)
Other income (expense): 0.2 0.3 0.3
------------------------
Income before income taxes 4.8% 3.4% 3.2%
========================
</TABLE>
The following discussions compare the results of operations for the year
ended December 31, 1998 to the year ended December 31, 1997 and the results of
operations for the year ended December 31, 1997 to the year ended December 31,
1996.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net sales increased by $122.6 million, or 36.6%, to $457.6 million in the
year ended December 31, 1998 from $335.0 million in the comparable 1997 period.
This increase was primarily due to sales at service centers acquired in 1998,
sales at newly opened service centers, and increased sales at existing service
centers. Service centers acquired in 1998 contributed $69.2 million to the
increase, sales at newly opened centers accounted for $9.1 million of the total
increase, and an increase of approximately 13.6% in sales at service centers
open at least 15 months contributed $44.3 million to the increase.
Gross profit increased by $29.1 million, or 39.6%, to $102.5 million in the
year ended December 31, 1998 from $73.4 million in the comparable 1997 period.
Gross profit as a percentage of net sales improved to 22.4% in the 1998 period
from 21.9% in the 1997 period due primarily to higher margins at service centers
acquired in the Bicknell Acquisition and also due to improved margins in
California, Florida and the central United States compared to the same period in
the previous year.
Operating expenses increased by $19.4 million, or 33.6%, to $77.1 million
in the year ended December 31, 1998 from $57.7 million in the comparable 1997
period. This increase is 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. Operating expenses as a percentage of net sales decreased to
16.8% in the 1998 period compared to 17.2% in the 1997 period, primarily as a
result of greater internal operating efficiences.
Interest and other expenses decreased to $3.6 million in the year ended
December 31, 1998 from $4.3 million in the comparable 1997 period. The decrease
was primarily attributable to lower interest expense resulting from lower
average outstanding debt levels between periods and a more favorable interest
rate on the Senior Loan Facility.
10
<PAGE>
The provision for income taxes increased $3.7 million, to $8.0 million for
1998 compared to $4.3 million for 1997 primarily due to the $10.4 million
increase in income before income taxes. The Company's effective tax rate
decreased to 37.0% for 1998 from 38.0% for 1997 to reflect decreases in the
Company's blended state income tax rate.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales increased by $99.2 million, or 42.1%, to $335.0 million in the
year ended December 31, 1997 from $235.8 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 $79.8
million to the increase, sales at newly opened centers accounted for $12.7
million of the total increase and an increase of approximately 11.4% in sales at
service centers open at least 15 months contributed $12.4 million to the
increase. These increases were partially offset by the loss of revenue from the
assets of Alliance Packaging, Inc., which were sold in October 1996.
Gross profit increased by $21.4 million, or 41.2%, to $73.4 million in the
year ended December 31, 1997 from $52.0 million in the comparable 1996 period.
Gross profit as a percentage of net sales remained relatively unchanged at 21.9%
in the 1997 period compared to 22.1% in the 1996 period.
Operating expenses increased by $16.2 million, or 38.8%, to $57.7 million
in the year ended December 31, 1997 from $41.5 million in the comparable 1996
period. This increase is 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. Operating expenses as a percentage of net sales decreased to
17.2% in the 1997 period compared to 17.6% in the 1996 period, primarily as the
result of cost savings efforts instituted by management during 1997.
Interest and other expenses increased to $4.3 million in the year ended
December 31, 1997 from $3.1 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 in the comparable 1996 period.
The provision for income taxes increased $1.4 million, or 49.1%, to $4.3
million for 1997 compared to $2.9 million for 1996. The Company's effective tax
rate decreased to 38.0% for 1997 from 39.0% for 1996 to reflect decreases in the
Company's blended state income tax rate.
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
11
<PAGE>
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.
The Company 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 1998
and 1997 which, in the opinion of management, reflects 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>
1998 1997
----------------------------------------- ---------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- ------- -------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... $73,988 $178,450 $133,883 $71,277 $63,565 $124,790 $98,492 48,175
Gross profit....................... 15,947 41,815 30,051 14,726 13,960 28,159 21,460 9,798
Operating income (loss)............ (1,156) 20,554 10,017 (4,030) 104 11,496 6,847 (2,726)
Net sales as a percentage of
annual net sales.................. 16% 39% 29% 16% 19% 37% 29% 15%
Gross profit as a percentage of
annual gross profit............... 16% 41% 29% 14% 19% 39% 29% 13%
Operating income as a percentage
of annual operating income........ (4%) 81% 39% (16%) 1% 73% 44% (18%)
</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 March 1999,
the Senior Loan Facility consisted of a term loan and a revolving line of credit
with a total borrowing capacity of $86 million, subject to a borrowing base
availability formula. Considering the Company's borrowing base and amounts
outstanding as of March 1, 1999, the Company had approximately $25.1 million
available for borrowing under the Senior Loan Facility, which amount represents
the only additional credit source currently available to the Company. The
Company's borrowings under its credit facility, together with cash flow from
operations and seller financing historically have been sufficient to support the
Company's growth and to finance acquisitions.
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 0.5% or
(ii) LIBOR plus a margin ranging from 0.75% to 2.0%, in each case depending on
the Company's leverage ratio. Substantially all of the assets of the Company,
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 and SCP Supply's abilities to pay dividends and make capital
expenditures.
As of December 31, 1998, the Company was in compliance with all such
covenants and financial ratio requirements. The Senior Loan Facility expires on
December 31, 2002. Between February 24, 1999, and March 19, 1999, the Company
purchased 198,200 shares of its Common Stock pursuant to a share repurchase
program announced in October 1998 (described below). Certain intercompany
dividends paid prior to each of the purchases by the Company
12
<PAGE>
of Common Stock created covenant defaults under the Senior Loan Facility. The
lenders under the Senior Loan Facility have waived such defaults in accordance
with the provisions of the Senior Loan Facility.
In December 1997, the Company completed a public offering of 2,025,000
shares of Common Stock at a public offering price of $12.00 per share, resulting
in net proceeds to the Company of approximately $22.6 million. Approximately $21
million of these proceeds were used to finance the Bicknell Acquisition in
January 1998.
In connection with the BLN Acquisition, the seller of BLN provided $31.8
million of financing to the Company. This financing, which accrued interest at
6%, was paid in full at December 31, 1998.
During the year ended December 31, 1998, the Company borrowed $40.9 million
to meet seasonal working capital requirements and made payments of $40.3 million
under its revolving credit facility. Excluding acquisitions, the Company made
capital expenditures of $1,971,000, $1,105,000 and $788,000 in the years ended
December 31, 1998, 1997 and 1996, respectively.
The Company believes that its cash flow from operations and the credit
available under its line of credit will be sufficient to finance its operations
for at least the next twelve months.
To date, the Company's acquisitions have been financed primarily by
borrowings under the Senior Loan Facility and seller notes. 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).
Share Repurchase Program
In October 1998, the Company announced that it may purchase in the open
market or directly from stockholders up to $10,000,000 of Common Stock of the
Company over a twelve-month period at prices that the Company deems appropriate.
As of March 19, 1999, the Company had purchased a total of 198,200 shares of its
Common Stock at an average price of $13.51 per share.
Year 2000 Issue
The Company utilizes and relies upon computer technology in many facets of
its operations, including its inventory and ordering information systems, the
internal and external reporting of financial and operating information and other
systems and equipment, such as telephones and security systems. The Company is
currently continuing the process it initiated in 1997 of identifying and
remediating computer systems or other equipment which will not be Year 2000
compliant when handling date-related data beyond the twentieth century.
State of Readiness - The Company's core accounting and information systems
are based on consecutively numbered days, and not the "month-date-year" format
which is more vulnerable to Year 2000 problems. The Company's hardware and
software system vendors have assured the Company that its systems are able to
correctly function beyond 1999 when handling date-related data. To verify the
assurances of third-party hardware and software vendors regarding Year 2000
issues, the Company has been testing its hardware and software under a testing
program. A portion of the testing program was conducted during the fourth
quarter of 1998, and as a result of those tests the Company did not identify any
areas of Year 2000 noncompliance. The Company will be working with consultants
during the first quarter of 1999 to develop additional testing procedures, and
the Company will perform such procedures during the first and second quarter of
1999. The Company will work to remediate any Year 2000 noncompliance as such
noncompliance is identified as a result of the testing program. The Company is
near completion of the process of collecting information from each of its
service centers regarding all other devices, such as personal computers,
telephones, security systems, and office and warehouse equipment which may have
"embedded" microprocessors utilizing date information. The assessment, testing
and any necessary remediation of such equipment is expected to be complete by
June 1999. If the assessment, testing and remediation steps described above are
not accomplished in a timely manner, the Year 2000 issue could have a material
impact on the Company's operations.
13
<PAGE>
The Company is communicating with its major suppliers and service providers
and certain large customers regarding their compliance with Year 2000
requirements. The Company has sent out questionnaires to certain suppliers and
service providers to identify potential problems and assess the compliance
efforts undertaken by these parties. The Company has received responses from a
majority of such parties. Since most of the responses indicated that efforts to
comply with Year 2000 requirements are ongoing, further communications with the
Company's major suppliers and service providers will be needed. There can be no
guarantee that the systems of third parties will be made compliant in a timely
manner and would not have an adverse effect on the Company.
Costs to Address the Year 2000 Issue - In 1997, the Company upgraded the
hardware and software of its core accounting and information systems for a total
cost of $1.5 million. The Company believes this cost was, for the most part, not
directly related to Year 2000 issues, but rather, the new systems were needed in
the normal course due to the growth the Company has experienced. The Company
recently incurred costs of $300,000 to upgrade certain data communications
equipment. The Company believes that this data communications upgrade would have
been required in the normal course, but the Company accelerated the timing of
this upgrade in part to improve its Year 2000 readiness. Because it is still in
the assessment phase in some areas, the Company does not yet have an estimate on
its Year 2000 assessment, testing and remediation costs for all systems and
equipment, but based on current information the Company believes that such costs
are not likely to have a material adverse effect on the Company's business,
financial condition or operating results. Management anticipates funding the
costs to address the Year 2000 issue with cash generated from operations and
from borrowing capacity under the Senior Loan Facility.
Risks Presented by the Year 2000 Issue - There may be unanticipated delays
in completing the Company's planned Year 2000 assessment and remediation and, as
the process of inventorying the systems proceeds, the Company may identify
additional systems that present a Year 2000 risk. In addition, if any third
parties who provide goods or services essential to the Company's business
activities fail to appropriately address their Year 2000 issues, such failure
could have a material adverse effect on the Company's business, financial
condition, or operating results. For example, a Year 2000 related disruption on
the part of the financial institutions which process the Company's transactions
could have a material adverse effect on the Company's business, financial
condition or operating results.
Contingency Plans - The Company's Year 2000 initiative includes the
development of contingency plans to address failures of significant portions of
the Company's systems or failures by third parties who provide goods or services
essential to the Company's business to address their Year 2000 issues. The
Company will be working with consultants to develop such plans and expect to
conclude the development of these contingency plans by the end of the second
quarter of 1999.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risks, including interest rate risk and
foreign currency risk. The adverse effects of potential changes in these market
risks are discussed below. The following discussion does not consider the
effects of the reduced level of overall economic activity that could exist
following such changes. Further, in the event of changes of such magnitude,
management would likely take actions to mitigate its exposure to such changes.
The Company has not used derivative instruments to engage in speculative
transactions or hedging activities.
Interest Rate Risk
As a result of the variable interest rates on the Senior Revolving Note and
Senior Term Note under the Senior Loan Facility, the Company's earnings are
exposed to changes in short-term interest rates. If (i) the variable rates on
the Company's Senior Loan Facility were to increase by 1% from the rate at
December 31, 1998; (ii) the Company borrowed the maximum amount available under
its revolving line of credit ($65.0 million) for all of 1999, and (iii) the
Company made all required payments of principal ($5 million) in 1999, solely as
a result of the increase in interest rates, then the Company's interest expense
would increase, resulting in a $296,000 decrease in net income, assuming an
effective tax rate of 37%. The fair value of the Company's Senior Revolving
Note and Senior Term Note is not affected by changes in market interest rates.
14
<PAGE>
Foreign Exchange Risk
The Company has a subsidiary located in the United Kingdom for which the
functional currency is the British Pound. The Company typically does not hedge
its foreign currency exposure. Historically, fluctuations in British Pound/U.S.
dollar exchange rates have not had a material effect on the Company. Future
changes in the exchange rate of the U.S. dollar to the British pound may
positively or negatively impact the Company's revenues, operating expenses and
earnings; however, due to the size of its operations in the United Kingdom, the
Company does not anticipate its exposure to foreign currency rate fluctuations
to be material in 1999.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
With the exception of historical matters, the matters discussed in this
Annual Report on Form 10-K 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; (viii) Year 2000 issues; and (ix)
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.
Item 8. Financial Statements.
- ------- ---------------------
See the attached Consolidated Financial Statements (pages F-1 through
F-22).
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure.
---------------------
None.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
- -------- ---------------------------------------------------
Incorporated by reference to the Company's 1999 Proxy Statement to be
filed with the Commission.
Item 11. Executive Compensation.
- -------- -----------------------
Incorporated by reference to the Company's 1999 Proxy Statement to be
filed with the Commission.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------- ---------------------------------------------------------------
Incorporated by reference to the Company's 1999 Proxy Statement to be
filed with the Commission.
15
<PAGE>
Item 13. Certain Relationships and Related Transactions.
- -------- -----------------------------------------------
Incorporated by reference to the Company's 1999 Proxy Statement to be filed
with the Commission.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- -------- ----------------------------------------------------------------
The following documents are filed as a part of this report:
(a) (1) The Consolidated Financial Statements included in Item 8 hereof
and set forth on pages F-1 through F-22.
(2) Financial Statement Schedules. All schedules are omitted, because
they are not applicable or are not required, or because the
required information is included in the consolidated financial
statements or notes thereto.
(3) The exhibits listed in the Index to the Exhibits.
(b) Reports on Form 8-K.
None.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 25, 1999.
SCP POOL CORPORATION
By: /S/ WILSON B. SEXTON
--------------------------
Wilson B. Sexton, Chairman, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on March 25, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -------
<S> <C>
/S/ WILSON B. SEXTON Chairman, Chief Executive Officer and Director
Wilson B. Sexton
/S/ MANUEL J. PEREZ DE LA MESA President and Chief Operating Officer
Manuel J. Perez de la Mesa
/S/ CRAIG K. HUBBARD Chief Financial Officer, Treasurer and Secretary
Craig K. Hubbard
/S/ ANDREW W. CODE Director
Andrew W. Code
/S/ JAMES J. GAFFNEY Director
James J. Gaffney
/S/ PETER M. GOTSCH Director
Peter M. Gotsch
/S/ FRANK J. ST. ROMAIN Director
Frank J. St. Romain
/S/ ROBERT C. SLEDD Director
Robert C. Sledd
</TABLE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of SCP Pool Corporation
<TABLE>
<S> <C>
Report of Independent Auditors.............................................. F-2
Consolidated Balance Sheets - December 31, 1998 and 1997.................... F-3
Consolidated Statements of Income - Years Ended December 31, 1998, 1997
and 1996................................................................... F-4
Consolidated Statements of Stockholders' Equity - Years Ended December 31,
1998, 1997 and 1996........................................................ F-5
Consolidated Statements of Cash Flows - Years Ended December 31,
1998, 1997 and 1996........................................................ F-6
Notes to Consolidated Financial Statements.................................. F-7
</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, 1998 and 1997, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1998. 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, 1998 and 1997, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
New Orleans, Louisiana
February 19, 1999, except for the
fourth paragraph of Note 3, as to
which the date is March 25, 1999
F-2
<PAGE>
SCP Pool Corporation
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31
1998 1997
---------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,911 $ 22,296
Receivables 34,609 24,775
Inventory 69,377 48,261
Prepaid expenses 1,673 562
Deferred income taxes 1,600 580
---------------------
Total current assets 112,170 96,474
Property and equipment, net 5,435 4,792
Goodwill, net 43,940 32,614
Other assets, net 2,243 2,572
---------------------
Total assets $163,788 $136,452
=====================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 34,589 $ 20,266
Accrued expenses and other current liabilities 10,909 6,078
Current portion of long-term debt 5,000 6,743
---------------------
Total current liabilities 50,498 33,087
Deferred income taxes 4,030 3,584
Long-term debt, less current portion 28,696 33,146
Stockholders' equity:
Preferred stock, $.01 par value; 100,000 shares
authorized; no shares issued and outstanding - -
Common stock, $.001 par value; 20,000,000 shares
authorized; 11,639,434 and 11,610,071 shares
issued and outstanding at December 31, 1998 and 12 12
1997, respectively
Additional paid-in capital 52,516 52,348
Retained earnings 28,013 14,275
Accumulated other comprehensive income 23 -
---------------------
Total stockholders' equity 80,564 66,635
---------------------
Total liabilities and stockholders' equity $163,788 $136,452
=====================
</TABLE>
See accompanying notes.
F-3
<PAGE>
SCP Pool Corporation
Consolidated Statements of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Net sales $457,598 $335,022 $235,844
Cost of sales 355,059 261,645 183,814
-------------------------------------
Gross profit 102,539 73,377 52,030
Warehouse expense 20,593 14,416 9,611
Selling and administrative expenses 55,459 42,355 31,139
Goodwill amortization 1,102 885 793
-------------------------------------
Operating income 25,385 15,721 10,487
Other income (expense):
Interest expense (3,480) (4,482) (3,176)
Amortization expense (848) (708) (698)
Miscellaneous income, net 724 852 823
-------------------------------------
(3,604) (4,338) (3,051)
-------------------------------------
Income before income taxes 21,781 11,383 7,436
Income taxes 8,043 4,327 2,903
-------------------------------------
Net income $ 13,738 $ 7,056 $ 4,533
=====================================
Income per share of common stock:
Basic $ 1.18 $ .73 $ .48
=====================================
Diluted $ 1.15 $ .71 $ .46
=====================================
Weighted average shares outstanding:
Basic 11,626 9,628 9,501
=====================================
Diluted 11,911 9,887 9,765
=====================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
SCP Pool Corporation
Consolidated Statements of Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Stock Paid-In Retained Comprehensive
Shares Amount Capital Earnings Income Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 9,501 $ 9 $29,582 $ 2,686 $ - $32,277
Net income - - - 4,533 - 4,533
-----------------------------------------------------------------------
Balance at December 31, 1996 9,501 9 29,582 7,219 - 36,810
Common stock issued 2,025 3 22,555 - - 22,558
Exercise of stock option 41 - 182 - - 182
Conversion of convertible debt 43 - 29 - - 29
Net income - - - 7,056 - 7,056
-----------------------------------------------------------------------
Balance at December 31, 1997 11,610 12 52,348 14,275 - 66,635
Net income - - - 13,738 - 13,738
Foreign currency translation adjustment,
net of income taxes of $14 - - - - 23 23
-------
Comprehensive income 13,761
-------
Exercise of stock options 29 - 168 - - 168
-----------------------------------------------------------------------
Balance at December 31, 1998 11,639 $12 $52,516 $28,013 $ 23 $80,564
=======================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
SCP Pool Corporation
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 13,738 $ 7,056 $ 4,533
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,285 2,553 2,503
Provision for doubtful accounts receivable, net of write-offs 247 544 388
Provision for inventory obsolescence, net of write-offs 730 447 (86)
Provision for deferred income taxes (574) 1,277 1,029
Loss (gain) on sale of property and equipment 222 (28) 155
Changes in operating assets and liabilities, net of effects of
acquisitions and disposals:
Accounts receivable (1,321) (26) (12,571)
Inventory (8,813) (7,086) 4,877
Prepaid expenses and other assets (1,420) (437) 31
Accounts payable 10,454 5,115 2,638
Accrued expenses and other current liabilities 2,852 (2,143) 4,129
---------------------------------------------
Net cash provided by operating activities 19,400 7,272 7,626
Investing activities
Acquisition of businesses, net of cash acquired (29,676) - (1,664)
Purchase of property and equipment (1,971) (1,105) (788)
Proceeds from sale of property and equipment 864 127 73
---------------------------------------------
Net cash used in investing activities (30,783) (978) (2,379)
Financing activities
Net borrowings (repayments) of revolving loan 550 4,050 (1,000)
Payments on long-term debt (6,743) (15,409) (1,669)
Issuance of common stock 168 22,740 -
---------------------------------------------
Net cash provided by (used in) financing activities (6,025) 11,381 (2,669)
---------------------------------------------
Effect of exchange rate changes on cash 23 - -
Change in cash and cash equivalents (17,385) 17,675 2,578
Cash and cash equivalents at beginning of year 22,296 4,621 2,043
---------------------------------------------
Cash and cash equivalents at end of year $ 4,911 $ 22,296 $ 4,621
=============================================
Supplemental cash flow information
Cash paid (received) during the year for:
Interest $ 3,416 $ 4,424 $ 3,279
=============================================
Income taxes, net of refunds $ 9,505 $ 4,508 $ (561)
=============================================
Supplemental disclosure of noncash investing and financing
activities
Long-term debt issued to acquire businesses $ - $ - $ 31,846
=============================================
Long-term debt reduced through sale of business $ - $ - $ 4,376
=============================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements
December 31, 1998
1. Organization and Summary of Significant Accounting Policies
Description of Business
SCP Pool Corporation and its wholly owned subsidiaries (collectively referred to
as the Company), after giving affect to the January 1999 acquisitions discussed
below, maintain 100 service centers in 34 states and two in the United Kingdom,
from which they sell swimming pool equipment and supplies to pool builders,
retail stores, and service firms.
In September 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 $2.7 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. In connection
with this acquisition, the Company recorded goodwill of $4.7 million.
Unaudited pro forma results of operations of the Company for the year ended
December 31, 1996, giving effect to the BLN acquisition as if it had occurred as
of January 1, 1996, are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Net sales $364,702
Gross profit $ 74,388
Operating income $ 10,095
Income before income taxes $ 3,098
Net income $ 3,098
Net income per share:
Basic $ .33
Diluted $ .32
</TABLE>
The unaudited pro forma consolidated results of operations for the year ended
December 31, 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. They do not reflect
the anticipated savings in purchasing costs at BLN during the periods presented,
nor do they reflect cost savings from the closure of certain BLN service
centers.
F-7
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
In January 1998, the Company acquired substantially all of the assets and
assumed certain liabilities of Bicknell Huston Distributors, Inc. ("Bicknell"),
which distributed swimming pool supplies and related products through its eleven
service centers in six northeastern states, for a purchase price of
approximately $22.7 million, which was paid in cash. This acquisition was
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 the acquisition. In connection with this
acquisition, the Company recorded goodwill of $6.1 million.
In August 1998, the Company acquired the capital stock of Nor-Cal Ltd., which
distributes swimming pool supplies and related products through its service
center in Crawley, England, for a purchase price of $8.5 million, which was paid
in cash. This acquisition was 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 the acquisition. The
purchase price was allocated to the net assets and liabilities based on fair
value (assets of $5.1 million and liabilities of $2.9 million). In connection
with this acquisition, the Company recorded goodwill of $6.3 million.
Unaudited pro forma results of operations of the Company for the years ended
December 31, 1998 and 1997, giving effect to the Bicknell and Nor-Cal
acquisitions as if they had occurred as of January 1, 1997, are as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997
---------------------
<S> <C> <C>
Net sales $463,432 $398,171
Gross profit $104,544 $ 88,682
Operating income $ 26,141 $ 20,014
Income before income taxes $ 22,308 $ 12,381
Net income $ 14,070 $ 7,675
Net income per share:
Basic $ 1.21 $ 0.66
Diluted $ 1.18 $ 0.64
</TABLE>
F-8
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
The unaudited pro forma consolidated results of operations for the years ended
December 31, 1998 and 1997 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 acquisitions. They do not
reflect the anticipated savings in purchasing costs at Bicknell and Nor-Cal
during the periods presented.
In January 1999, the Company acquired substantially all of the assets and
assumed certain liabilities of Benson Pump Co., which distributed swimming pool
supplies and related products through its 20 service centers in 16 central and
western states. Also in January 1999, the Company acquired the capital stock of
Pratts Plastics Limited, which distributes swimming pool supplies through its
service center in Essex, England under the trade name "The Swimming Pool
Warehouse." The Benson Pump purchase price was approximately $21.6 million,
which was paid in cash and The Swimming Pool Warehouse purchase price was
$475,000, which was paid in cash. These acquisitions have been accounted for
using the purchase method of accounting.
Principles of Consolidation
The consolidated financial statements include the accounts of SCP Pool
Corporation 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.
F-9
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Financial Instruments
The Company's carrying value of cash, trade receivables, accounts payable, and
accrued liabilities approximates fair value due to the short maturity of those
instruments. The carrying amount of long-term debt approximates fair value
because it bears interest at variable rates.
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
provided. Credit losses have been within management's expectations.
Inventory
Inventory consists primarily of goods purchased for resale and are carried at
the lower of cost, using the average cost method, or market. At December 31,
1998 and 1997, the reserve for inventory obsolescence was approximately
$3,008,000 and $2,161,000, 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 inventory
management 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.
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 $1,335,000, $990,000, and $1,012,000 in 1998, 1997,
and 1996, respectively.
F-10
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Goodwill
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized over 40 years. At December 31, 1998 and 1997,
accumulated amortization was approximately $4,196,000 and $3,096,000,
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. 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.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities." The
SOP is effective beginning on January 1, 1999, and requires that start-up costs
capitalized prior to that date be written-off and any future start-up costs be
expensed as incurred. The unamortized balance of start-up costs of $863,000, net
of $319,000 tax benefit, will be written off as the cumulative effect of an
accounting change as of January 1, 1999.
Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (Statement 130). Statement
130 establishes new rules for the reporting and display of comprehensive income
and its components. Under Statement 130, foreign currency translation
adjustments, which prior to adoption were reported separately in shareholders'
equity, are to be included in other comprehensive income. Since the Company had
no such foreign currency translation
F-11
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
adjustments in years prior to 1998, the adoption of Statement 130 had no affect
on prior year financial statements.
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.
Stock Compensation Arrangements
The Company accounts for its stock compensation arrangements under the
provisions of APB 25, "Accounting for Stock Issued to Employees."
Revenue Recognition
The Company recognizes revenue when products are shipped.
F-12
<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
1998 1997
------------------------
<S> <C> <C>
Receivables:
Trade accounts, less allowance of $2,397
in 1998 and $1,938 in 1997 $28,068 $19,300
Vendor rebates 5,374 4,274
Income tax receivable 446 -
Other 721 1,201
------------------------
$34,609 $24,775
========================
Property and equipment:
Land $ 185 $ 429
Building 432 1,001
Autos and trucks 287 156
Machinery and equipment 2,465 1,485
Furniture and fixtures 4,082 3,434
Leasehold improvements 1,282 508
------------------------
8,733 7,013
Less accumulated depreciation 3,298 2,221
------------------------
$ 5,435 $ 4,792
========================
Other assets:
Loan financing fees $ 2,539 $ 2,453
Noncompete agreement - 500
Organization costs 1,717 1,366
Other 356 282
------------------------
4,612 4,601
Less accumulated amortization 2,369 2,029
------------------------
$ 2,243 $ 2,572
========================
Accrued expenses and other current
liabilities:
Salaries, bonuses, and commissions $ 6,975 $ 2,880
Income taxes payable - 310
Other 3,934 2,888
------------------------
$10,909 $ 6,078
========================
</TABLE>
F-13
<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
1998 1997
------------------------
<S> <C> <C>
Senior Revolving Note, variable rate
(effective interest rate of 7.75% at December
31, 1998), due in 2002 $16,600 $16,050
Senior Term Note, variable rate (effective
interest rate of 5.8% at December 31, 1998),
payable in quarterly installments of variable
amounts through 2002 17,000 21,000
Promissory Notes to BLN, interest rate of 6%,
paid in 1998 - 1,859
8% Subordinated Notes, paid in 1998 - 884
10% Convertible Notes, due in 2002 96 96
------------------------
33,696 39,889
Less current portion 5,000 6,743
------------------------
$28,696 $33,146
========================
</TABLE>
Maturities of long-term debt for the five succeeding years are $5,000,000 in
1999, $5,000,000 in 2000, $5,000,000 in 2001, and $18,696,000 in 2002.
The Company's credit agreement includes, among other things, covenants which
require the Company to maintain minimum levels of interest coverage and fixed
charge coverage and restrict the ability of the Company and its subsidiaries to
pay dividends and make capital expenditures. As of December 31, 1998, the
Company was in compliance with all such covenants and financial ratio
requirements. The Senior Loan Facility expires on December 31, 2002.
Between February 24, 1999 and March 19, 1999, the Company purchased 198,200
shares of its Common Stock pursuant to a share repurchase program announced in
October 1998. Certain intercompany dividends paid prior to each of the purchases
by the Company created a covenant default under the Senior Loan Facility. On
March 25, 1999, the lenders under the Senior Loan Facility waived such defaults.
Substantially all of the assets of the Company are pledged as collateral for the
Senior Revolving Note and the Senior Term Note. Available credit under the
Senior Revolving Note, considering amounts currently outstanding, was
approximately $48.4 million, subject to an accounts receivable and inventory
borrowing base limit. At December 31,
F-14
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
3. Debt (continued)
1998, the unused available credit under the Senior Revolving Note was
approximately $30 million. The Company pays a quarterly commitment fee of .25%
per annum of the unused portion of available credit under the Senior Revolving
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, 1998, the conversion of these notes would result in the
issuance of 147,249 shares of the Company's common stock. Such shares have been
reserved by the Company.
4. Income Taxes
Significant components of the Company's deferred tax liabilities and assets were
as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1998 1997
--------------------
<S> <C> <C>
Deferred tax liabilities:
Goodwill $3,853 $3,544
Trade discounts on purchases 106 157
Prepaid expenses 244 205
Other 919 906
--------------------
Total deferred tax liabilities 5,122 4,812
Deferred tax assets:
Inventory 1,432 764
Allowance for doubtful accounts 1,023 736
Other 237 308
--------------------
Total deferred tax assets 2,692 1,808
--------------------
Net deferred tax liabilities $2,430 $3,004
====================
</TABLE>
F-15
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
Significant components of income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1998 1997 1996
-------------------------------
<S> <C> <C> <C>
Current:
Federal $7,917 $2,644 $1,634
Other, primarily state 700 406 240
-------------------------------
8,617 3,050 1,874
Deferred:
Federal (513) 1,142 898
Other, primarily state (61) 135 131
-------------------------------
(574) 1,277 1,029
-------------------------------
Total $8,043 $4,327 $2,903
===============================
</TABLE>
The reconciliation of income taxes computed at the federal statutory rates to
income taxes was (in thousands):
<TABLE>
<CAPTION>
December 31
1998 1997 1996
------------------------------
<S> <C> <C> <C>
Tax at statutory rates $7,623 $3,884 $2,528
Other, primarily state income taxes 420 443 375
------------------------------
Total $8,043 $4,327 $2,903
==============================
</TABLE>
5. Common Stock and Earnings Per Share
In July 1998, 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
July 24, 1998 to the stockholders of record at the close of business on July 13,
1998. Accordingly, shares, per-share data and related capital amounts for all
periods presented reflect the effects of this split.
In accordance with FAS 128, the Company has presented basic earnings per share,
computed on the basis of the weighted average number of shares outstanding
during the period, and diluted earnings per share, computed on the basis of the
weighted average number of shares and all dilutive potential shares outstanding
during the year. A
F-16
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
5. Common Stock and Earnings Per Share (continued)
reconciliation between basic and diluted weighted average number of shares
outstanding and the related earnings per share calculation is presented below
for each of the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------
<S> <C> <C> <C>
Numerator:
Net income $13,738 $7,056 $4,533
Adjustment for interest expense, net of
tax, on convertible notes 8 8 8
-----------------------------
Numerator for diluted earnings per share $13,746 $7,064 $4,541
=============================
Denominator:
Denominator for basic earnings per
share--weighted-average shares 11,626 9,627 9,501
Effect of dilutive securities:
Stock options 138 93 72
Convertible notes 147 166 192
-----------------------------
Denominator for diluted earnings per share 11,911 9,886 9,765
=============================
Basic earnings per share $ 1.18 $ .73 $ .48
=============================
Diluted earnings per share $ 1.15 $ .71 $ .47
=============================
</TABLE>
F-17
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
6. Commitments and Contingencies
The Company leases facilities for its service centers, corporate office and
vehicles under noncancelable operating leases that expire in various years
through 2007 but which have options to extend for various terms. Rental expense
under such operating leases was approximately $10,563,000 in 1998, $7,747,000 in
1997, and $4,815,000 in 1996. The future minimum lease payments as of December
31, 1998 related to noncancelable operating leases with initial terms of one
year or more are set forth below (in thousands):
<TABLE>
<S> <C>
1999 $ 7,798
2000 6,080
2001 4,218
2002 3,084
2003 2,452
Thereafter 2,145
-------
$25,777
=======
</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 closing of 15 acquired
facilities. During 1997, the Company recorded an additional increase of
approximately $333,000 to goodwill for expected additional lease buyouts and
occupancy costs related to these acquired facilities. As of December 31, 1998,
the Company has closed all of the above-mentioned facilities, having paid
$1,203,000 of such liabilities, and has a remaining accrual of approximately
$330,000 to settle the remaining leases.
In connection with the acquisitions of BLN and Bicknell, the Company entered
into certain vendor supply agreements which require the Company to purchase a
certain percentage of its annual requirements for certain products at prices
defined by the supply agreements. These supply agreements have initial terms
which expire in September 2001 and December 2005, respectively, 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 coverage at
levels generally consistent with industry standards to insure itself against the
normal risks of operations.
F-18
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
7. Employee Benefit Plans
The Company's employees 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 $272,000 and $1,100,000,
respectively, in 1998, $197,000 and $934,000 respectively, in 1997, and $113,000
and $650,000 respectively, in 1996.
8. Stock Option Plans
The 1995 Stock Option Plan authorizes the board of directors 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 900,000. 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 December 31, 2003. In May 1998, the 1995 Stock
Option Plan was suspended. This action had no effect on options granted prior
to the suspension.
In May 1998, the shareholders approved the 1998 Stock Option Plan, which
authorizes the Board of Directors to grant, at its discretion, options to
purchase shares of common stock, stock appreciation rights, restricted stock and
performance awards to employees, agents, consultants or independent contractors
of the Company. The number of shares authorized for issuance under this plan is
limited to an aggregate amount of 1,125,000. 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 or more years after the date of grant and
expire ten years after the date of grant. No options were granted under the 1998
Stock Option Plan during 1998.
The SCP Pool Corporation Non-Employee Directors Equity Incentive Plan permits
the board of directors to grant 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 450,000. The options will
have an exercise 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.
F-19
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
8. Stock Option Plans (continued)
In March 1998, the Company's board of directors adopted the SCP Pool Corporation
Employee Stock Purchase Plan. Under the plan, eligible employees may be granted
rights to purchase up to an aggregate of 900,000 shares of common stock
annually. Rights are exercisable at 85% of the applicable market value provided
that this value is greater than book value per share. If 85% of the applicable
market value is less than book value per share, rights are exercisable at book
value per share. Rights are exercisable at the applicable market value if the
applicable market value is less than book value per share. The applicable market
value, as defined, is the lower of either the beginning of the plan year or the
end of the plan year quoted market price of the Company's stock. Book value per
share is determined as of the most recent audited consolidated balance sheet
date. No shares were issued in 1998 under this plan.
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:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 4.71% 6.2% 6.7%
Expected dividend yield - - -
Expected volatility .29 .38 .32
Weighted average expected life 4.1 years 4.1 years 3.4 years
</TABLE>
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-20
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
8. Stock Option Plans (continued)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options vesting period. As the Company accounts
for stock compensation under APB 25, no compensation cost has been recognized
for its stock options in the financial statements. 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>
1998 1997 1996
-------------------------------
<S> <C> <C> <C>
Pro forma net income $13,193 $6,632 $4,392
Pro forma earnings per share:
Basic $ 1.13 $ .69 $ .46
Diluted $ 1.11 $ .67 $ .45
</TABLE>
A summary of the Company's stock option activity and related information for the
plans described above is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding--Beginning of year 439,542 $ 7.38 253,202 $4.55 70,389 $2.29
Granted 178,500 13.50 226,125 9.25 182,813 5.42
Exercised 26,011 4.68 39,785 2.29 - -
Forfeitures 11,280 9.85 - - - -
-------- -------- --------
Outstanding--End of year 580,751 $ 9.92 439,542 $7.38 253,202 $4.55
======== ======== ========
Exercisable at end of year 352,376 $ 7.38 210,605 $6.18 67,500 $5.00
======== ======== ========
Weighted average fair value of
options granted during the year $ 4.21 $ 3.63 $ 1.61
======== ======== ========
</TABLE>
Exercise prices for options outstanding as of December 31, 1998 ranged from
$2.29 to $13.50, and had a weighted average remaining contractual life of 4.9
years.
F-21
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
9. Quarterly Financial Data (Unaudited)
The following is a tabulation of the Company's unaudited quarterly results of
operations for the years ended December 31, 1998 and 1997 (in thousands, except
per share data):
<TABLE>
<CAPTION>
Quarter Ended
3/98 6/98 9/98 12/98 3/97 6/97 9/97 12/97
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $73,988 $178,450 $133,883 $71,277 $63,565 $124,790 $98,492 $48,175
Gross profit 15,947 41,815 30,051 14,726 13,960 28,159 21,460 9,798
Net income (loss) (1,180) 12,233 5,820 (3,135) (603) 6,394 3,471 (2,206)
Net income (loss)
per share:
Basic $ (.10) $ 1.05 $ .50 $ (.27) $ (.06) $ .67 $ .36 $ (.22)
Diluted (.10) 1.03 .49 (.27) (.06) .65 .35 (.22)
</TABLE>
As a result of differences in the way in-the-money stock options are considered
from quarter-to-quarter under the requirements of FAS 128, diluted EPS for
annual periods may not equal the sum of the individual quarter's diluted EPS
amount.
F-22
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Document Description Number
- ------------------------------------------------------------------------------------------------ ----------
<S> <C> <C> <C>
3.1 Restated Certificate of Incorporation of the Company. (1)
3.2 Restated Bylaws of the Company. (2)
4.1 Form of certificate representing shares of Common Stock of the Company. (2)
4.2 Credit Agreement, dated as of December 31, 1993, by and among South Central Pool (2)
Supply, Inc. (previously known as SCP Acquisition Corp.), The First National Bank of
Chicago, as agent, and various lenders from time to time party thereto.
4.3 Amendment No. 1 to Credit Agreement, dated as of September 1, 1994, by and among (2)
South Central Pool Supply, Inc. ("SCP Supply"), The First National Bank of Chicago,
as agent, and various lenders from time to time party thereto.
4.4 Amendment No. 2 to Credit Agreement, dated as of January 20, 1995, by and among (2)
SCP Supply, The First National Bank of Chicago, as agent, and various lenders from
time to time party thereto.
4.5 Amendment No. 3 to Credit Agreement, dated as of February 28, 1995, by and among (2)
South Central Pool Supply, Inc., The First National Bank of Chicago, as agent, and
various lenders from time to time party thereto.
10.1 Asset Purchase Agreement, dated as of December 31, 1993, by and among the (2)
Company, SCP Acquisition Corp., and South Central Pool Supply, Inc.
10.2 Registration Agreement, dated as of December 31, 1993, by and among the Company, (2)
CHS, various management and outside investors, Berkeley Atlantic Income Limited,
BG Services Limited, and PNC Equity Management Corp.
10.3 Asset Purchase Agreement, dated as of January 4, 1994, by and between Aqua Fab (2)
Industries, Inc. and South Central Pool Supply, Inc.
10.4 Amendment No. 1 to Asset Purchase Agreement, dated as of January 7, 1994, by and (2)
among Aqua Fab Industries, Inc. and South Central Pool Supply Industries, Inc.
10.5 Amendment No. 2 to Asset Purchase Agreement, dated as of January 18, 1994, by and (2)
among Aqua Fab Industries, Inc. and South Central Pool Supply, Inc.
10.6 Amendment No. 3 to Asset Purchase Agreement, dated as of February 17, 1994, by and (2)
among Aqua Fab Industries, Inc. and South Central Pool Supply, Inc.
10.7 Asset Purchase Agreement, dated as of January 20, 1995, by and among Alliance (2)
Packaging, Inc., York Chemical Corporation and Wexco Incorporated.
10.8 Stock Purchase Agreement, dated as of February 15, 1995, by and among the Company, (2)
Orcal Pool Supplies, Inc. and Ronald Hetzner.
10.9 Agreement, dated as of March 31, 1992, by and between Wexco and W.B. Sexton. (2)
10.10 Patent Assignment, dated as of January 20, 1995, between Wexco Incorporated and (2)
Alliance Packaging, Inc.
10.11 Management Agreement, dated as of December 31, 1993, by and between CHS (2)
Management Limited Partnership, an Illinois limited partnership, and SCP Acquisition
Corp.
10.12 Management Agreement, dated as of February 28, 1995, by and between SCP Supply (2)
and Ronald Hetzner.
10.13 SCP Pool Corporation 1995 Stock Option Plan.* (2)
10.14 Form of Individual Stock Option Agreement.* (2)
10.15 Form of Convertible Subordinated Note dated as of December 31, 1993 issued by SCP (2)
Holding Corp.
10.16 Form of Junior Subordinated Note, dated as of December 31, 1993, issued by SCP (2)
Holding Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Document Description Number
- -------- -------------------- ----------
<S><C> <C> <C>
10.17 Form of Executive Securities Agreement, dated as of December 31, 1993, among SCP (2)
Holding Corp., Code Hennessy & Simmons Limited Partnership and certain executives.
10.18 Form of Lease, dated as of February 28, 1995, by and between Ronald Hetzner and (2)
South Central Pool Supply, Inc.
10.19 Lease, dated as of November 8, 1993, by and between Northpark Alliance, LLC and (2)
South Central Pool Supply, Inc.
10.20 Lease, dated as of November 7, 1991, by and between St. Romain Children's Trust and (2)
South Central Pool Supply, Inc.
+10.21 Sales Agreement, dated as of October 1, 1993, between PPG Industries, Inc. and SCP (2)
Supply.
10.22 Asset Purchase Agreement, dated as of September 7, 1995, by and among SCP Supply, (3)
Aman Enterprises, Inc., Stephen Aman and Walter Aman.
10.23 Stock Purchase Agreement, dated as of November 10, 1995, by and among SCP (3)
Supply, Steven Portnoff Corporation and Steven Portnoff
10.24 Asset Purchase Agreement, dated as of December 12, 1995, by and among SCP Supply, (3)
Pool Mart of Nevada, Inc., Robert Portnoff, Sarah Portnoff and Steven Portnoff
10.25 SCP Pool Corporation 1996 Non-Employee Director Equity Incentive Plan* (3)
10.26 Second Amended and Restated Credit Agreement, dated as of September 26, 1996, (4)
among South Central Pool Supply, Inc., the First National Bank of Chicago and the
Institutions party thereto as lenders
10.27 Asset Purchase Agreement, dated as of September 26, 1996, among South Central Pool (4)
Supply, Inc., SCP Pool Corporation, The B-L Network, Inc. and Bio-Lab, Inc.
10.28 Asset Purchase Agreement, dated as of September 26, 1996, among Alliance (4)
Packaging, Inc., SCP Pool Corporation, South Central Pool Supply, Inc. and Bio-Lab,
Inc.
+ 10.29 Supply Agreement, among Bio-Lab, Inc., South Central Pool Supply, Inc., and SCP (4)
Pool Corporation
+ 10.30 Supply Agreement, dated as of September 26, 1996, among Bio-Lab, Inc., South (4)
Central Pool Supply, Inc., and SCP Pool Corporation
++10.31 Asset Purchase Agreement, dated as of November 13, 1997, among SCP Pool (5)
Corporation, South Central Pool Supply, Inc., Bicknell Huston Distributors, Inc.,
Pacific Industries, Inc. and Cookson America, Inc.
10.32 Third Amended and Restated Credit Agreement, dated as of December 31, 1997, by and (6)
among South Central Pool Supply, Inc., the institutions from time to time party thereto
as lenders, LaSalle National Bank, as Agent and Co-Arranger and Hibernia National
Bank as Co-Arranger.
10.33 Amendment, dated December 31, 1997, to the Asset Purchase Agreement, dated as of (6)
November 13, 1997, among SCP Pool Corporation, South Central Pool Supply, Inc.,
Bicknell Huston Distributors, Inc., Pacific Industries, Inc. and Cookson America, Inc.
10.34 SCP Pool Corporation 1998 Stock Option Plan* (1)
10.35 Form of Stock Option Agreement under 1998 Stock Option Plan*
10.36 SCP Pool Corporation Employee Stock Purchase Plan* (1)
10.37 Amendment No. 1 to SCP Pool Corporation Employee Stock Purchase Plan*
10.38 Asset Purchase Agreement, dated as of January 8, 1999, among South Central Pool
Supply, Inc., Benson Pump Co., Benson Pump-Georgia, Inc., and J.K.K.T. Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Document Description Number
- ------ -------------------- ----------
<S> <C> <C>
10.39 Employment Agreement, dated January 25, 1999, among SCP Pool Corporation, South
Central Pool Supply, Inc. and Manuel J. Perez de la Mesa*
21.1 Subsidiaries of the registrant. (6)
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
</TABLE>
____________
+ Confidential Treatment Granted.
++ Confidential Treatment Granted for portions of Exhibit C to this Agreement.
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the respective exhibit to the Company's
Definitive Proxy Statement on Schedule 14A, filed April 8, 1998.
(2) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 33-92738.
(3) Incorporated by reference to the respective exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.
(4) Incorporated by reference to the respective exhibit to the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1996.
(5) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 333-40245.
(6) Incorporated by reference to the respective exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997.
<PAGE>
EXHIBIT 10.35
SCP POOL CORPORATION
109 NORTHPARK BOULEVARD
COVINGTON, LOUISIANA 70433-5001
TELEPHONE: (504) 892-5521
FACSIMILE: (504) 892-1657
[DATE]
[NAME]
South Central Pool Supply, Inc.
109 Northpark Boulevard
Covington, Louisiana 70433-5001
Re: SCP Pool Corporation Grant
of Nonqualified Stock Option
----------------------------
Dear [NAME]:
The Company is pleased to advise you (the "Optionee") that its Board
--------
of Directors has granted to you a stock option (an "Option"), as provided below,
------
under the SCP Pool Corporation 1998 Stock Option Plan (the "Plan"), a copy of
----
which is attached hereto.
1. Definitions. For the purposes of this Agreement, the following
-----------
terms shall have the meanings set forth below:
"Board" means the Board of Directors of the Company.
-----
"Cause" shall mean (i) conviction of a felony or any crime or offense
-----
lesser than a felony involving the property of the Company or a Subsidiary; (ii)
conduct that has caused demonstrable and serious injury to the Company or a
Subsidiary, monetary or otherwise; (iii) willful refusal to perform or
substantial disregard of duties properly assigned, as determined by the Company;
or (iv) breach of duty of loyalty to the Company or a Subsidiary or other act of
fraud or dishonesty with respect to the Company or a Subsidiary. The
determination as to whether the Optionee was terminated for Cause shall be made
by the Board in its sole discretion.
"Change in Control" means the occurrence of one of the following
-----------------
events:
(i) if any "person" or "group" as those terms are used in Sections
13(d) and 14(d) of the Exchange Act, other than an Exempt Person, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; or
<PAGE>
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by the Company's stockholders
was approved by at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation (A) which would result in all or a portion of the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) by which the corporate
existence of the Company is not affected and following which the Company's chief
executive officer and directors retain their positions with the Company (and
constitute at least a majority of the Board); or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets, other than a sale to
an Exempt Person.
"Change in Control Price" means the highest price per share of Common
-----------------------
Stock paid in any transaction reported on the Nasdaq National Market or paid or
offered in any bona fide transaction related to a Change in Control at any time
during the 60-day period immediately preceding the occurrence of the Change in
Control, in each case as determined by the Committee.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
any successor statute.
"Committee" shall mean the Compensation Committee of the Board of
---------
Directors, or such other committee of the Board which may be designated by the
Board to administer the Plan. Any reference herein to the Committee shall be
deemed to refer to the Board in the event that the Board has not delegated the
administration of the Plan to the Committee.
"Common Stock" shall mean the Company's Common Stock, par value $.001
------------
per share, or, in the event that the outstanding Common Stock is hereafter
changed into or exchanged for different stock or securities of the Company, such
other stock or securities.
"Company" shall mean SCP Pool Corporation, a Delaware corporation, and
-------
(except to the extent the context requires otherwise) any subsidiary corporation
of the Company.
"Competition" is deemed to occur if a person whose employment with the
-----------
Company or its Subsidiaries has terminated obtains a position as a full-time or
part-time employee of, as a member of the board of directors of, or as a
consultant or advisor with or to, or acquires an ownership interest in excess of
5% of, a corporation, partnership, firm or other entity that engages in any of
the businesses of the Company or any Subsidiary with which the person was
involved in a management role at any time during his or her last five years of
employment with or other service for the Company or any Subsidiaries.
-2-
<PAGE>
"Disability" shall mean a disability that would entitle Optionee to
----------
payment of disability payments under any Company disability plan or as otherwise
determined by the Committee.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and any successor statute.
"Exempt Person" shall mean any employee benefit plan of the Company or
-------------
a trustee or other administrator or fiduciary holding securities under an
employee benefit plan of the Company.
"Grant Date" shall mean [GRANT DATE].
----------
"Option Shares" shall mean (i) all shares of Common Stock issued or
-------------
issuable upon the exercise of the Option and (ii) all shares of Common Stock
issued with respect to the Common Stock referred to in clause (i) above by way
of stock dividend or stock split or in connection with any conversion, merger,
consolidation or recapitalization or other reorganization affecting the Common
Stock.
"Retirement" means retirement as defined under any Company pension
----------
plan or retirement program or termination of one's employment on retirement with
the approval of the Committee.
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and any successor statute.
"Subsidiary" shall mean South Central Pool Supply, Inc., a Delaware
----------
corporation, and any other corporation of which the Company owns securities
having a majority of the ordinary voting power in electing the board of
directors directly or through one or more Subsidiaries.
2. Option.
------
(a) Terms. Subject to the terms and conditions set forth herein, the
-----
Company hereby grants to the Optionee (or such other persons as permitted by
paragraph 7) an Option to purchase up to [NUMBER OF SHARES] shares of Common
Stock (the "Option Shares") at an option price per share of $[EXERCISE PRICE]
-------------
(the "Exercise Price"), payable upon exercise as set forth in paragraph 2(b)
--------------
below. The Option shall expire at the close of business on April 1, 2008 (the
"Expiration Date"), subject to earlier expiration upon the termination of the
- ----------------
Optionee's employment or the Optionee's death as provided in paragraph 4(b)
below. The Exercise Price and the number and kind of shares of Common Stock or
other property for which the Option may be exercised shall be subject to
adjustment as provided in paragraph 11 hereto. The Option is not intended to be
an "incentive stock option" within the meaning of Section 422 of the Code.
(b) Payment of Option Price. Subject to paragraph 3 below, the
-----------------------
Option may be exercised in whole or in part upon payment of an amount (the
"Option Price") equal to the product of (i) the Exercise Price multiplied by
- -------------
(ii) the number of Option Shares to be acquired. Payment of
-3-
<PAGE>
the Option Price shall be made to the Company in cash or by check by the
Optionee at the time of the delivery of such Option Shares, provided that the
Committee may (but need not) permit payment to be made by (i) delivery to the
Company of outstanding shares of Common Stock held by the Optionee or (ii) any
combination of cash, check, and the Optionee's delivery of outstanding shares of
Common Stock.
3. Exercisability/Vesting.
----------------------
(a) Normal Vesting. The Option granted hereunder may be exercised
--------------
only to the extent it has become vested. The Option shall fully vest and become
exercisable with respect to all of the Option Shares on [VESTING DATE] (the
"Vesting Date"), if and only if the Optionee is, and has been, continuously
- ------------- --------------
employed by the Company from the Grant Date through the applicable Vesting Date.
(b) Change in Control. In the event of a Change in Control, the
-----------------
Option shall be vested and become fully exercisable as to all of the Option
Shares. The Committee may in its sole discretion direct the Company to cash out
the Option on the basis of the Change in Control Price as of the date the Change
of Control occurs or such other date the Committee may determine prior to the
Change in Control.
4. Expiration of Option.
--------------------
(a) Normal Expiration. In no event shall any part of the Option be
-----------------
exercisable after the Expiration Date set forth in paragraph 2(a) above.
(b) Early Expiration Upon Termination of Employment. Except as set
-----------------------------------------------
forth below, any portion of the Option that was not vested and exercisable on
the date the Optionee's employment with the Company terminated (for any reason
whatsoever) shall expire and be forfeited on such date (after giving effect to
the vesting provisions of paragraph 3 above), and any portion of the Option that
was vested and exercisable on the date such employment with the Company
terminated shall expire and be forfeited in accordance the following:
(i) if the Optionee dies or becomes subject to a Disability, the
Option shall be vested and become fully exercisable as to all of the Option
Shares and shall remain exercisable for one year following the date of such
death or Disability, but in no event after the Expiration Date;
(ii) if Optionee ceases to be an officer or employee of, or to
perform other services for, the Company upon the occurrence of his
Retirement, the portion of the Option that was exercisable on the date of
Retirement shall remain exercisable for, and shall otherwise terminate at
the end of, a period of one year after the date of Retirement, but in no
event after the Expiration Date; provided that Optionee does not engage in
Competition during such period unless he receives written consent to do so
from the Board or the Committee;
-4-
<PAGE>
(iii) if the Optionee ceases to be an officer or employee of, or to
perform other services for, the Company or a Subsidiary due to Cause, all
of Optionee's options shall be forfeited immediately upon such cessation,
whether or not then exercisable; and
(iv) if Optionee ceases to be an officer or employee of, or to
otherwise perform services for, the Company or a Subsidiary for any reason
other than death, Disability, Retirement or Cause, the Option shall be
vested and become fully exercisable as to all of the Option Shares and
shall remain exercisable for, and shall otherwise terminate at the end of,
a period of three months after the date of such cessation, but in no event
after the Expiration Date; provided that Optionee does not engage in
Competition during such three-month period unless he receives written
consent to do so from the Board or the Committee.
5. Procedure for Exercise. The Optionee may exercise all or any
----------------------
portion of the Option, to the extent it has vested and is outstanding, at any
time and from time to time prior to the Expiration Date, by delivering written
notice to the Company (to the attention of the Company's Secretary) and the
written acknowledgment that the Optionee has read and has been afforded an
opportunity to ask questions of management of the Company regarding all
financial and other information provided to the Optionee regarding the Company,
together with payment of the Option Price in accordance with the provisions of
paragraph 2(b) above. As a condition to any exercise of the Option, the
Optionee shall permit the Company to deliver to the Optionee all financial and
other information regarding the Company it believes necessary to enable such
Optionee to make an informed investment decision, and the Optionee shall make
all customary investment representations which the Company requires.
6. Securities Laws Restrictions and Other Restrictions on Transfer
---------------------------------------------------------------
of Option Shares. The Optionee represents that upon exercise of the Option, the
- ----------------
Optionee shall be purchasing Option Shares for the Optionee's his or her own
account and not on behalf of others. The Optionee understands and acknowledges
that federal and state securities laws govern and restrict his or her right to
offer, sell or otherwise dispose of any Option Shares unless the offer, sale or
other disposition thereof is registered under the Securities Act and state
securities laws, or in the opinion of the Company's counsel, such offer, sale or
other disposition is exempt from registration or qualification thereunder. The
Optionee agrees that he or she will not offer, sell or otherwise dispose of any
Option Shares in any manner which would: (i) require the Company to file any
registration statement with the Securities and Exchange Commission (or any
similar filing under state law) or to amend or supplement any such filing or
(ii) violate or cause the Company to violate the Securities Act, the rules and
regulations promulgated thereunder or any other state or federal law. The
Optionee further understands that the certificates for any Option Shares
purchased shall bear such legends as the Company deems necessary or desirable in
connection with the Securities Act or other rules, regulations or laws.
7. Transferability of Option. The Option granted hereunder is
-------------------------
personal to the Optionee and may not be transferred by the Optionee other than
by will or the laws of descent and distribution. During the Optionee's
lifetime, only the Optionee (or his or her guardian or legal representative) may
exercise the Option. In the event of the Optionee's death, the Option may be
exercised only (i) by the executor or administrator of the Optionee's estate or
the person or persons to whom his or her rights under the Option shall pass by
will or the laws of descent and distribution and (ii) to the extent that the
Optionee was entitled hereunder at the date of the Optionee's death.
-5-
<PAGE>
8. Conformity with Plan. The Option is intended to conform in all
--------------------
respects with, and is subject to all applicable provisions of, the Plan (which
is incorporated herein by reference). Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Agreement, the Optionee
acknowledges his or her receipt of this Agreement and the Plan and agrees to be
bound by all of the terms of this Agreement and the Plan.
9. Rights of Participants. Nothing in this Agreement shall
----------------------
interfere with or limit in any way the right of the Company to terminate the
Optionee's employment at any time (with or without Cause), nor confer upon the
Optionee any right to continue in the employ of the Company for any period of
time or to continue his or her present (or any other) rate of compensation, and
in the event of termination of employment (including, but not limited to,
termination by the Company without Cause) any portion of the Option that was not
previously vested and exercisable shall expire and be forfeited (other than
termination due to death, Disability or retirement). Nothing in this Agreement
shall confer upon the Optionee any right to be selected again as a Plan
participant, and nothing in the Plan or this Agreement shall provide for any
adjustment to the number of Option Shares subject to the Option upon the
occurrence of subsequent events except as provided in paragraph 11 below.
10. Withholding of Taxes. The Company shall be entitled, if
--------------------
necessary or desirable, to withhold from the Optionee from any amounts due and
payable by the Company to the Optionee (or secure payment from him or her in
lieu of withholding) the amount of any withholding or other tax due from the
Company with respect to any Option Shares issuable under this Agreement, and the
Company may defer such issuance unless indemnified by the Optionee to its
satisfaction.
11. Adjustments. In the event of a reorganization, recapitalization,
-----------
stock dividend or stock split, or combination or other change in the shares of
Common Stock, the Board or the Committee shall, in order to prevent the dilution
or enlargement of rights under the Option, make such adjustments in the number
and type of shares authorized by the Plan, the number and type of shares covered
by the Option and the Exercise Price specified herein as may be determined to be
appropriate and equitable.
12. Additional Restrictions on Transfer.
-----------------------------------
(a) Restrictive Legend. Unless the Option Shares are covered by an
------------------
effective registration statement under the Securities Act, the certificates
representing the Option Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION THEREUNDER."
-6-
<PAGE>
(b) Opinion of Counsel. The Optionee may not sell, transfer or
------------------
dispose of any Option Shares (except pursuant to an effective registration
statement under the Securities Act) without first delivering to the Company an
opinion of counsel reasonably acceptable in form and substance to the Company
that registration under the Securities Act or any applicable state securities
law is not required in connection with such transfer.
13. Remedies. The parties hereto shall be entitled to enforce their
--------
rights under this Agreement specifically, to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto acknowledge and agree that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto may, in its sole discretion, apply to any
court of law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.
14. Amendment. Except as otherwise provided herein, any provision of
---------
this Agreement may be amended or waived only with the prior written consent of
the Optionee and the Company.
15. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and permitted assigns of the parties hereto whether so
expressed or not.
16. Severability. Whenever possible, each provision of this
------------
Agreement shall 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 shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
17. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which shall constitute an original, but all of
which taken together shall constitute one and the same Agreement.
18. Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
19. GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF DELAWARE SHALL
-------------
GOVERN ALL QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
STOCKHOLDERS. ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAW, AND NOT
THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE.
20. Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
or mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications shall
be sent to you and to the Company at the addresses indicated below:
-7-
<PAGE>
(a) If to you:
---------
[NAME]
South Central Pool Supply, Inc.
109 Northpark Boulevard
Covington, Louisiana 70433-5001
(b) If to the Company:
-----------------
SCP Pool Corporation
109 Northpark Boulevard
Covington, Louisiana 70433-5001
Attn: Wilson B. Sexton
with a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Stephen L. Ritchie
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
21. Entire Agreement. This Agreement and the terms of the Plan
----------------
constitute the entire understanding between the Optionee and the Company, and
supersede all other agreements, whether written or oral, with respect to the
acquisition by the Optionee of the Option Shares.
* * * * *
-8-
<PAGE>
Please execute the extra copy of this Agreement in the space below and
return it to the Company's Secretary at its executive offices to confirm your
understanding and acceptance of the agreements contained in this Agreement.
Very truly yours,
SCP POOL CORPORATION
By ________________________________
Name_______________________________
Title______________________________
Enclosures: 1. Extra copy of this Agreement
2. Copy of the Plan
The undersigned hereby acknowledges having read this Agreement and the
Plan and hereby agrees to be bound by all provisions set forth herein and in the
Plan.
Dated as of: OPTIONEE
[DATE]
________________________________
[NAME]
<PAGE>
EXHIBIT 10.37
AMENDMENT NO. 1 TO
SCP POOL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of SCP Pool Corporation has amended Sections
6.3 and 8.1 of the SCP Pool Employee Stock Purchase Plan ("Plan") pursuant to
Section 9.2 of the Plan. Sections 6.3 and 8.1 of the Plan have been replaced to
read as follows:
6.3 Purchase of Stock. On a Purchase Date, the Contribution Account
-----------------
of each Participant shall be used to purchase shares of Stock which shall be
allocated to each Participant's Stock Account. The maximum number of whole
shares of Stock purchased shall be determined by one of the following methods:
(a) by dividing the Purchase Price into the balance of each of the
Participant's Contribution Account and purchasing the nearest whole-share
amount of Stock. Any money remaining in a Participant's Contribution
Account representing a fractional share shall remain in such Participant's
Contribution Account to be used in the next Plan Period along with new
contributions in the next Plan Period; provided, however, that if the
Participant does not enroll for the next Plan Period, the balance remaining
shall be returned to the Participant in cash; or
(b) by dividing the Purchase Price into the balance of all of the
Participants' Contribution Accounts and allocating the purchased shares
among the Participants' Share Accounts according to the amount contributed
(including fractional share amounts, if any).
Shares of Stock allocated to each Participant's Share Account shall remain
uncertificated until such Participant requests the issuance of stock
certificates through the procedure set forth under Section 8.1 hereto.
Fractional share amounts in a Participant's Share Account shall not be
certificated but will remain in a Participant's Stock Account or be exchanged
for cash under the circumstances set forth in Section 8.1 hereto. The Plan
Administrator shall determined in its discretion whether method (a) or (b) above
is applied, and the method chosen shall be applied to all Participants for a
given Purchase Date.
8.1 Issuance of Stock Certificates. Stock certificates for the
------------------------------
number of whole shares of Stock in each Participant's Stock Account may be
issued to Participants only upon the receipt by the Plan Administrator (or its
agent) of a Participant's written request indicating the number of shares of
Stock (to a maximum of the number of whole shares of Stock in the Participant's
Stock Account) for which the Participant wishes to receive certificates. Such
request shall be made on a form at the time prescribed by the Plan Administrator
and filed with the Plan Administrator (or its agent). Share certificates may be
issued, at the request of the Participant, in the name of the Participant,
jointly in the name of the Participant and a member of the Participant's family,
or to the Participant as custodian for the Participant's child under the Gift to
Minors Act. Share certificates shall be issued to the Participant as soon as
practicable after receipt of Participant's request. In addition to any
restrictions on transfer set forth in Section 8.3, no person shall have any
right to sell, assign, mortgage, pledge, hypothecate or otherwise encumber any
uncertificated shares of Stock allocated to a Participant's Stock Account.
Fractional share amounts shall not be certificated and shall remain in a
Participant's Stock Account or, if the Participant is withdrawing from the Plan,
be exchanged for cash upon the request of the Participant (or legal
representative) at a rate determined by the Closing Market Price on the trading
day immediately preceding such request.
<PAGE>
EXHIBIT 10.38
EXECUTION COPY
--------------
ASSET PURCHASE AGREEMENT
by and among
SOUTH CENTRAL POOL SUPPLY, INC.,
BENSON PUMP CO.,
BENSON PUMP-GEORGIA, INC.,
and
J.K.K.T. CORP.
January 8, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I
PURCHASE AND SALE OF THE ASSETS
1.1 Asset Purchase......................................... 1
1.2 Purchase Price......................................... 6
1.3 Base Purchase Price Definition......................... 7
1.4 Base Purchase Price Determination...................... 8
1.5 Accounts Receivable Adjustments........................ 9
1.6 Benson Canada Purchase Option.......................... 10
1.7 Rockford Facility Option............................... 11
1.8 Closing Transactions................................... 11
ARTICLE II
CONDITIONS TO CLOSING
2.1 Conditions to Buyer's Obligations...................... 12
2.2 Conditions to Sellers' Obligations at the Closing...... 15
ARTICLE III
COVENANTS
3.1 Affirmative Covenants of Sellers....................... 16
3.2 Negative Covenants of Seller........................... 17
3.3 Exclusivity............................................ 18
3.4 Covenants of Buyer..................................... 18
3.5 Post-Closing Covenants of Sellers...................... 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
4.1 Organization and Corporate Power....................... 19
4.2 Authorization of Transactions.......................... 19
4.3 Subsidiaries; Investments.............................. 19
4.4 Absence of Conflicts................................... 19
4.5 Financial Statements................................... 20
4.6 Absence of Undisclosed Liabilities..................... 20
4.7 Absence of Certain Developments........................ 20
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
4.8 Title to Properties.................................. 22
4.9 Title to Assets...................................... 22
4.10 Environmental and Safety Matters..................... 23
4.11 Taxes................................................ 24
4.12 Contracts and Commitments............................ 25
4.13 Proprietary Rights................................... 26
4.14 Litigation; Proceedings.............................. 27
4.15 Brokerage............................................ 27
4.16 Governmental Licenses, Permits and Consents.......... 27
4.17 Employees............................................ 28
4.18 Employee Benefit Plans............................... 28
4.19 Affiliate Transactions............................... 29
4.20 Compliance with Laws................................. 29
4.21 Insurance............................................ 29
4.22 Product Warranty..................................... 30
4.23 Product Liability.................................... 30
4.24 Names and Locations.................................. 30
4.25 Disclosure........................................... 30
4.26 Closing Date......................................... 30
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Corporate Organization and Power..................... 31
5.2 Authorization........................................ 31
5.3 No Violation......................................... 31
5.4 Brokerage............................................ 31
5.5 Closing Date......................................... 31
ARTICLE VI
TERMINATION
6.1 Termination.......................................... 31
6.2 Effect of Termination................................ 32
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival; Etc........................................ 32
7.2 Indemnification...................................... 32
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.3 Arbitration Procedure................................. 35
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Press Releases and Announcements..................... 37
8.2 Further Agreements and Transfers..................... 37
8.3 Change of Names...................................... 37
8.4 Tax Matters.......................................... 38
8.5 Transition Assistance................................ 39
8.6 Expenses............................................. 39
8.7 Waiver of Compliance with Bulk Sales Laws............ 39
8.8 Investigation and Confidentiality.................... 39
8.9 Financial Information................................ 40
8.10 Remedies............................................. 41
ARTICLE IX
MISCELLANEOUS
9.1 Amendment and Waiver................................. 42
9.2 Notices.............................................. 42
9.3 Binding Agreement; Assignment........................ 43
9.4 Severability......................................... 43
9.5 No Strict Construction............................... 43
9.6 Captions and Headings................................ 44
9.7 Entire Agreement..................................... 44
9.8 Counterparts......................................... 44
9.9 Governing Law........................................ 44
9.10 Parties in Interest.................................. 44
ARTICLE X
CERTAIN DEFINITIONS
10.1 Definitions.......................................... 44
10.2 Other Definitions.................................... 47
</TABLE>
-iii-
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of January 8, 1999 by and
among South Central Pool Supply, Inc., a Delaware corporation ("Buyer"), Benson
-----
Pump Co., an Illinois corporation ("Benson"), Benson Pump-Georgia, Inc., a
------
Nevada corporation ("BP Georgia") and J.K.K.T. Corp., an Illinois corporation
----------
("JKKT" and together with Benson and BP Georgia, the "Sellers" and individually,
---- -------
a "Seller"). Sellers and JKKT are collectively referred to herein as the
------
"Benson Group", and individually as a member of the Benson Group. Certain
------------
capitalized terms used herein are defined in Article X hereof.
Subject to the terms and conditions set forth in this Agreement, Buyer
desires to acquire from Sellers and Sellers desire to sell to Buyer
substantially all of the assets used in or necessary to their businesses or
operations and certain of Sellers' related liabilities as specifically provided
herein, except for certain excluded assets as specifically provided herein. The
businesses of Sellers as presently conducted are hereinafter collectively
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 1.8 below), Buyer
shall purchase from Sellers, and Sellers 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 Sellers as
of the Closing Date (as defined in Section 1.8 below) (the "Purchased Assets")
----------------
(but excluding all Excluded Assets as defined in clause (b) below) including,
without limitation, the following:
(i) all accounts receivable, other than the intercompany receivables
listed on Schedule 1.1(b)(i) attached hereto (the "Accounts Receivable");
------------------ -------------------
(ii) all whole goods inventory (the "Whole Goods Inventory");
---------------------
(iii) all parts inventory (the "Parts Inventory");
---------------
(iv) all prepayments, accrued vendor rebates to the extent assignable
to Buyer such that Buyer may receive the benefits thereof, prepaid
expenses, deposits and other
<PAGE>
tangible prepaid assets and all interests in insurance policies (including,
without limitation, life insurance policies);
(v) any petty cash at the branch locations of the Business;
(vi) all fixed assets, including machinery, equipment, trucks,
tractors, trailers, tools, spare parts, supplies, pallet racks, office
furniture, copiers, fax machines, telephone systems, computer monitors,
fixtures and leasehold improvements and other tangible personal property,
excluding those assets set forth on Schedule 1.1(b)(v) hereto (the "Fixed
------------------ -----
Assets");
------
(viI) all warehouse, cleaning, office and printing supplies,
catalogs, and other related items;
(viii) all Proprietary Rights;
(ix) 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;
(x) all rights existing under leases, contracts, licenses, supply
and distribution agreements, sales and purchase agreements and orders and
other agreements;
(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 and computer programs;
(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 refunds, deposits, and credits directly relating to
transactions with customers and vendors of the Business;
(xiv) all leased real property leased or licensed (the "Leased Real
-----------
Property") by Sellers which is specifically set forth on Schedule 1.1(a)(xiv)
- -------- --------------------
hereto, and all of Sellers' rights to all plants, buildings, and other
improvements located on such leased property, and all of Sellers' right, title
and interest in and to all easements, rights of way and all of Sellers' right,
title and interest in and to all appurtenances to the Leased Real Property;
-2-
<PAGE>
(xv ) all fixed assets, Whole Goods Inventory and Parts Inventory
relating to the Sellers' retail sales facility located at the Rockford Facility;
and
(xvi) all goodwill as a going concern of Sellers, all goodwill
associated with the items in (i) through (xv) above and all other intangible
property of Sellers.
(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:
(i) the notes receivable and intercompany accounts receivable;
(ii) all cash and cash equivalents and marketable and other
investment securities;
(iii) all monies to be received by Sellers from Buyer pursuant to
this Agreement and all other rights of Sellers under this Agreement and the
Schedules and Exhibits hereto;
(iv) Sellers' accounting records, corporate charters and all
qualifications of Sellers 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 certif icates and other documents relating to the organization,
maintenance and existence of Sellers as a corporation; provided that the Benson
-------- ----
Group shall allow Buyer reasonable access to review accounting and business
records (A) necessary to the transition of the business, (B) for the
determination of the Purchase Price, (C) for background information for Accounts
Receivable and (D) for cost verification of Whole Goods Inventory and Parts
Inventory;
(v) the tangible and intangible personal property and owned real
estate not used in the Business of Sellers and set forth on Schedule 1.1(b)(v)
------------------
hereto;
(vi) all bank accounts of Sellers;
(vii) all causes of action, choses in action, rights of recovery and
rights of set-off of every kind and nature;
(viii) Non-Saleable Inventory, as determined pursuant to Section
1.3(b)(vi) hereof;
(ix) Unassigned Leases, as determined pursuant to Section 2.1(c)
hereof.
(c) Assumed Liabilities. On the terms and subject to the
-------------------
conditions specified in this Agreement, at the Closing, Buyer will assume all of
Sellers' obligations under the agreements, leases, contracts and commitments
listed on Schedule 1.1(c) (but in each case not including liability
---------------
-3-
<PAGE>
or obligation for breaches thereof arising out of or related to events or
occurrences prior to the Closing, and not including any of Sellers' employment
agreements, if any) (the "Assumed Liabilities") and no other liabilities or
-------------------
obligations of the Sellers.
(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 liabilities or obligations of Sellers other than the Assumed
Liabilities. Without limiting the foregoing, none of the following liabilities
or obligations of Sellers (the "Excluded Liabilities") will be Assumed
--------------------
Liabilities for purposes of this Agreement, and Sellers shall pay all Excluded
Liabilities as and when they become due:
(i) any of the liabilities or obligations of the Benson Group to
Buyer under this Agreement;
(ii) any of the liabilities or obligations for expenses or fees of
the Benson Group or Dr. Joon S. Moon 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 transac tions
contemplated hereby (including, without limitation, all attorneys' and
accountants' fees);
(iii) any of either Sellers' liabilities or obligations in respect of
any amount of Taxes, 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, it being understood and agreed
that Buyer shall not be deemed to be either Seller's transferee or successor
with respect to any such Taxes;
(iv) any of Sellers' liabilities or obligations arising as a result
of or in connection with the failure of Sellers to comply with any bulk sales or
transfer laws;
(v) any of Sellers' 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 of Sellers 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;
(vi) any of Sellers' liabilities or obligations owing to any
stockholders of either Seller or any of their Affiliates;
(vii) any of Sellers' liabilities or obligations related to the
ownership of the
-4-
<PAGE>
Excluded Assets;
(viii) any liabilities or obligations (whether investigatory,
corrective, remedial or otherwise) arising under Environmental and Safety
Requirements relating to Sellers, the Business, or the Purchased Assets,
regardless of whether such liability attaches to Sellers or Buyer in the first
instance, except for any such obligations or liabilities, the facts or
circumstances underlying which are caused by operation of the Business after the
Closing Date;
(ix) any liabilities or obligations of any nature relating to the
case Browning-Ferris Industries of Illinois v. Richard Ter Maat, or any other
----------------------------------------------------------
liabilities or obligations of any nature whatsoever relating to the MIG/DeWane
landfill in Boone County, Illinois;
(x) any liabilities or obligations of any nature arising from or
relating to employee benefit "plans" (as such term is defined in Section 4.18
hereof);
(xi) any liabilities or obligations of any nature relating to
entertainment, meetings, gifts, travel or other similar expenses incurred by the
Sellers after the Closing Date with respect to meetings between the Sellers and
their distributors, customers or suppliers;
(xii) any of Sellers' liabilities or obligations relating to customer
rebates, capitalized lease obligations, indebtedness for borrowed money,
guarantees, employment contracts, deferred compensation obligations, related
party obligations (including, without limitation, any intercompany indebtedness
or rights of setoff between either Seller and/or their Affiliates), or any
interest, penalty, or premium accrued thereon;
(xiii) any liabilities relating to the Unassigned Leases (as defined
herein); not including liabilities relating to Unassigned Leases for facilities
which Buyer closes within 60 days of the Closing Date which liabilities shall be
the liabilities of Buyer; and
(xiv) any other liabilities or obligations of Sellers 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 state of fact 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.
-5-
<PAGE>
1.2 PURCHASE PRICE.
--------------
(a) The total purchase price to be paid to Sellers for the Purchased
Assets (the "Purchase Price") will be equal to the Base Purchase Price (as
--------------
defined in Section 1.3 below), plus or minus the amount of any adjustments
determined in accordance with Section 1.4 and 1.5 below.
(b) At the Closing, an amount (the "Closing Payment") equal to the
---------------
Estimated Base Purchase Price (as defined in Section 1.4(a) below) minus (i)
-----
$200,000 (the "Accounts Receivable Holdback") and (ii) $500,000 (together with
----------------------------
earnings thereon, the "Base Purchase Price Escrow Amount") shall be paid by the
---------------------------------
Buyer by wire transfer of immediately available funds to a single account
designated by Sellers. The Base Purchase Price Escrow Amount shall be deposited
in an escrow account (the "Escrow Account") established pursuant to the terms
--------------
and conditions of an escrow agreement (the "Escrow Agreement") in the form
----------------
attached as Exhibit A hereto. The Base Purchase Price Escrow Amount shall be
---------
available to satisfy any amounts owed by Sellers to Buyer as a result of the
determination of the Base Purchase Price pursuant to Section 1.4 below. The
Benson Group agrees not to distribute to their respective shareholders (or
otherwise remove or cause to be removed from the assets of the Sellers), a
portion of the Closing Payment equal to $1.5 million until after the Base
Purchase Price has been determined pursuant to Section 1.4 hereof and any
payments required to be made by Section 1.2(c) hereof have been made. Sellers
agree to furnish to Buyer, promptly upon request by Buyer, information
(including bank account statements) to verify that no such distribution or
removal of funds has been made.
(c) As soon as practicable (but in no event later than five (5)
business days) after the Base Purchase Price is finally determined pursuant to
Section 1.4 below, any payments required to be made by this Section 1.2(c) shall
be made. In the event that the Base Purchase Price is greater than the
Estimated Base Purchase Price, Buyer shall pay to Sellers, by wire transfer of
immediately available funds to an account designated by Sellers, an amount equal
to such excess. In the event that the Base Purchase Price is less than the
Estimated Base Purchase Price, an amount equal to such difference shall be paid
to Buyer in the manner described herein. Amounts owing to Buyer pursuant to this
Section 1.2(c) shall be paid first by delivery of immediately available funds
from the Escrow Account (and Sellers shall cooperate with Buyer in causing such
payment to be made, including executing a letter of direction to the escrow
agent authorizing such payment) and, if the Base Purchase Price Escrow Amount
has been reduced to zero, by delivery of immediately available funds from the
Sellers. The Base Purchase Price Escrow Adjustment, if any, remaining after the
payments set forth in this Section 1.2(c), shall be paid to Sellers in
accordance with the terms of the Escrow Agreement.
(d) As soon as practicable after the Regular Accounts Receivable
Adjustment is determined pursuant to Section 1.5(c) below, any payments required
to be made pursuant to this Section 1.2(d) shall be made. If the Regular
Accounts Receivable Adjustment is required to be paid to Buyer, then (i) if the
amount of the Regular Accounts Receivable Adjustment is less than the
-6-
<PAGE>
Accounts Receivable Holdback, an amount equal to the Regular Accounts Receivable
Adjustment shall be retained by Buyer from the Accounts Receivable Holdback or
(ii) if the amount of the Regular Accounts Receivable Adjustment is greater than
or equal to the Accounts Receivable Holdback, the entire Accounts Receivable
Holdback shall be retained by Buyer, and Sellers shall pay to Buyer, by wire
transfer of immediately available funds, any remaining amounts owed to Buyer. If
the Regular Accounts Receivable Adjustment is required to be paid to Sellers,
then Buyer shall pay to Sellers, by wire transfer of immediately available funds
to an account designated by Sellers, an amount equal to the Regular Accounts
Receivable Amount. The Accounts Receivable Holdback, if any, remaining after the
payments set forth in this Section 1.2(d), shall be used to satisfy any amount
to be paid to Buyer pursuant to Early-Buy Accounts Receivable Adjustment as set
forth in clause (e) below.
(e) As soon as possible after the Early-Buy Accounts Receivable
Adjustment is determined pursuant to Section 1.5(d), any payment required to be
made to Buyer pursuant to this Section 1.2(e) shall be made. If the amount of
the Early-Buy Accounts Receivable Adjustment is less than or equal to the
remaining Accounts Receivable Holdback, an amount equal to the Early-Buy
Accounts Receivable Adjustment shall be retained by Buyer from the Accounts
Receivable Holdback. If the amount of the Early-Buy Accounts Receivable
Adjustment is greater than the remaining Accounts Receivable Holdback, the
entire remaining Accounts Receivable Holdback shall be retained by Buyer, and
Sellers shall pay to Buyer, by wire transfer of immediately available funds, any
remaining amounts owed to Buyer. The Accounts Receivable Holdback, if any,
remaining after the payments set forth in this Section 1.2(e), shall be paid to
Sellers by wire transfer of immediately available funds.
1.3 BASE PURCHASE PRICE DEFINITION.
------------------------------
(a) The Base Purchase Price will be an amount equal to $2.5 million
plus the sum of: (A) the Accounts Receivable Price, (B) the Whole Goods
Inventory Price, (C) the Parts Inventory Price, (D) the Fixed Assets Price and
(E) the Other Assets Price, each as defined in, and determined pursuant to,
clause (b) below.
(b) For the purposes of clause (a) above:
(i) The "Accounts Receivable Price" will be equal to the aggregate
-------------------------
book value of all Accounts Receivable that are 90 days or less past due as
of the Closing Date;
(ii) The "Whole Goods Inventory Price" will be determined based on a
---------------------------
physical audit to be conducted by Buyer and Sellers and their respective
advisors on or before the Closing Date and will be calculated as follows:
(A) the number of substantially similar items in Whole Goods Inventory not
exceeding the number of such items sold by the Business and the Buyer,
combined, during the twelve (12) months ended October 31, 1998 will be
valued
-7-
<PAGE>
at 100% of Sellers' cost for such items; and (B) all Whole Goods Inventory
not included in (A) will be valued at 50% of Sellers' cost for such items.
Notwithstanding anything to the contrary contained herein, Whole Goods
Inventory that is Non-Saleable (as defined in Section 1.3 (b)(vi)) shall be
valued at zero, shall be an Excluded Asset and shall be retained by the
Sellers.
(iii) The "Parts Inventory Price" will be determined based on a
---------------------
physical audit to be conducted by Buyer and Sellers and their respective
advisors on or before the Closing Date and will be calculated as follows:
(A) the number of substantially similar items in Parts Inventory not
exceeding the number of items sold by the Business and the Buyer, combined,
during the twenty-four (24) months ended October 31, 1998 will be valued at
100% of Sellers' cost for such items (before announced price increases for
the 1999 selling season); and (B) all Parts Inventory not included in (A)
will be valued at 50% of Sellers' cost for such items (before announced
price increases for the 1999 selling season). Notwithstanding anything to
the contrary contained herein, Parts Inventory that is Non-Saleable (as
defined in Section 1.3 (b)(vi)) shall be valued at zero, shall be an
Excluded Asset and shall be retained by the Sellers.
(iv) The "Fixed Assets Price" will be equal to the aggregate Book
------------------
Value of those Fixed Assets set forth on Schedule 1.3(b)(iv) (the "Fixed
------------------- -----
Assets Schedule") attached hereto.
---------------
(v) The "Other Assets Price" will be equal to the aggregate Book
------------------
Value of those miscellaneous assets set forth on Schedule 1.3(b)(v) (the
------------------
"Other Assets Schedule") attached hereto.
---------------
(vi) "Non-Saleable Inventory" shall include each item of Sellers'
----------------------
Whole Goods Inventory or Parts Inventory that (A) is damaged, (B) is
missing parts or pieces, (C) is obsolete in the case of pool liners, only,
(D) has been discontinued or has not been sold in each case, for at least
for 5 years, (E) the manufacturer of which has not honored the warranty or
(F) are other items mutually agreed upon by a representative or officer of
Buyer and Sellers.
The Base Purchase Price will be determined in accordance with United States
generally accepted accounting principles ("GAAP"). In computing the Base
----
Purchase Price, (i) all accounting entries shall be taken into account
regardless of their amount, all known errors and omissions shall be corrected,
and (ii) all known proper adjustments shall be made.
1.4 BASE PURCHASE PRICE DETERMINATION.
---------------------------------
(a) On or before the Closing Date, Buyer and Sellers in good faith
shall jointly prepare an estimate of the Base Purchase Price as of the Closing
Date (the "Estimated Base Purchase
-----------------------
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<PAGE>
Price") based on the Company's books and records, the physical audit of Sellers'
- -----
Whole Goods Inventory and Parts Inventory as described in Sections 1.3(b)(ii)
and (iii), the Fixed Asset Schedule, the Other Assets Schedule and other
information then available.
(b) As promptly as practicable, but in no event later than ninety
(90) days after the Closing Date, Buyer shall prepare and deliver to Sellers, at
Buyer's sole expense, a statement of the Base Purchase Price including the
Accounts Receivable Price, the Whole Goods Inventory Price, the Parts Inventory
Price, the Fixed Assets Price and the Other Assets Price.
(c) If the Sellers disagree with Buyer's determination of the Base
Purchase Price, Sellers shall notify Buyer in writing of such disagreement
within twenty (20) days. Such writing shall be accompanied by a written notice
from Sellers' accountants setting forth the basis for such disagreement in
reasonable detail. Buyer and Sellers thereafter will negotiate in good faith to
resolve any such disagreements. If Buyer and Sellers are unable to resolve any
such disagreements within twenty (20) days after the delivery of Seller's
objection letter, Buyer and Sellers will submit such dispute for resolution to
and independent, nationally-recognized accounting firm mutually agreeable to
Buyer and Sellers. If Buyer and Sellers are unable to mutually agree on such
accounting firm, a nationally-recognized firm will be selected by lot after
eliminating one firm designated as objectionable by each of Buyer and Sellers
(any accounting firm so selected or agreed upon will be referred to herein as
the "Independent Auditor").
-------------------
(d) Buyer and Sellers will use their reasonable best efforts to cause
the Independent Auditor to resolve all disagreements over the Base Purchase
Price as soon as practicable, but in any event within sixty (60) days after
submission of the disputes to the Independent Auditor. The resolutions of such
disagreement and the determination of the Base Purchase Price by the Independent
Auditor will be final and binding on Buyer and Sellers.
(e) The Independent Auditor will determine the allocation of its
costs and expenses in determining the Base Purchase Price 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.
1.5 ACCOUNTS RECEIVABLE ADJUSTMENTS.
-------------------------------
(a) Buyer will (i) use reasonable efforts to collect all of the
Accounts Receivable pursuant to the terms of this Section 1.5; (ii) not extend
additional credit to customers who have not paid Accounts Receivable owed by
them as of the time such Accounts Receivable are returned to the Sellers by the
Buyer pursuant to this Section 1.5, unless Buyer determines, in its reasonable
discretion, that (A) the uncollected Accounts Receivable from such customer are
an insignificant portion of the total sales made to such customer or (B) the
customer is a significant customer of Buyer.
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<PAGE>
(b) For the purpose of determining amounts collected with respect to
the Accounts Receivable, (i) if by the amount of a payment, by specification of
an account debtor or otherwise, it is clear that such payment relates to a
specific invoice, the payment will be applied to that invoice and (ii) in the
absence of a bona fide dispute between an account debtor and Buyer regarding
receivables of such account debtor accrued prior to the Closing Date, all other
payments by an account debtor will first be applied to the oldest outstanding
invoice due from that account debtor. Buyer will not be required to retain a
collection agency, bring any suit or take any other action out of the ordinary
course of business to collect any of the Accounts Receivable.
(c) The "Regular Accounts Receivable Adjustment" shall be the result
--------------------------------------
of (i) the aggregate Book Value of Accounts Receivable (excluding Early-Buy
Accounts Receivable) which were 90 days or less past due on the Closing Date but
which were not collected by Buyer within 180 days after the Closing Date; minus
-----
(ii) the actual aggregate amount of all Accounts Receivable which were 91 days
or more past due on the Closing Date but were collected by Buyer within 180 days
of the Closing Date. If such Regular Accounts Receivable Adjustment is greater
than zero, then such amount shall be retained by Buyer from the Accounts
Receivable Holdback pursuant to the terms of Section 1.2(d) hereof and if such
Regular Accounts Receivable Adjustment is less than zero, then such amount shall
be paid to Sellers pursuant to the terms of Section 1.2(d) hereof.
(d) The "Early-Buy Accounts Receivable Adjustment" shall be the
----------------------------------------
amount equal to the Book Value of the Early-Buy Accounts Receivable which
were 90 days or less past due on the Closing Date but which have not been
collected by Buyer on the earlier of (A) 180 days from the date on which such
Early-Buy Accounts Receivable is due for payment or (B) December 31, 1999.
(e) In the event of any dispute with respect to the determination of
the Regular Accounts Receivable Adjustment or the Early-Buy Accounts Receivable
Adjustment, Sellers and Buyer shall follow the dispute resolution procedures set
forth in Section 1.4(c)-(e).
1.6 BENSON CANADA PURCHASE OPTION.
-----------------------------
(a) As of the Closing, Sellers hereby grant to Buyer the exclusive
right (the "Benson Canada Purchase Option") for a period of 90 days after the
-----------------------------
Closing Date to purchase 100% of the capital stock of Adapt Leisure Ltd., a
Canadian corporation ("Benson Canada"), owned by Sellers for $108,147, which is
-------------
Sellers' investment cost for such stock. In the event Buyer exercises the
Benson Canada Purchase Option, Buyer shall assume Sellers' obligations under
certain letters of credit guaranteeing loans on behalf of Adapt Leisure Ltd.
(b) Sellers shall promptly provide to Buyer such financial statements
and other business, financial and legal due diligence information relating to
Benson Canada as Buyer shall
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<PAGE>
reasonably request for the purposes of evaluating Benson Canada and determining
whether to exercise the Benson Canada Purchase Option.
(c) Closing of the purchase ("Benson Canada Stock Purchase") by Buyer
----------------------------
of the stock of Benson Canada shall occur within five business days (or within
such other time period as Buyer and Sellers shall mutually agree) after Buyer
gives timely written notice to Sellers that Buyer wishes to exercise the Benson
Canada Purchase Option. Buyer and Sellers shall together prepare and execute a
stock purchase agreement containing customary representations and warranties
relating to Benson Canada and other provisions reasonably requested by Buyer.
At the closing of the Benson Canada Stock Purchase, Sellers shall deliver the
Benson Canada stock certificates and stock powers and other customary closing
documentation as Buyer shall reasonably request.
1.7 ROCKFORD FACILITY OPTION
------------------------
(a) As of the Closing, Sellers shall grant to Buyer the exclusive
right (the "Rockford Facility Option") for a period of 90 days after the Closing
------------------------
Date to (i) purchase the real property located at 1936 11th Street, Rockford, IL
61104 (the "Rockford Facility") for a price equal to $400,000 and on other terms
-----------------
and conditions reasonably acceptable to the parties and customary for commercial
properties bought and sold in Rockford, Illinois, (ii) lease the Rockford
Facility at fair market value for properties substantially similar to the
Rockford Facility on market and customary terms to be mutually agreed upon by
Sellers and Buyer, or (iii) neither purchase nor lease the Rockford Facility.
(b) During the 90-day period of the Rockford Facility Lease Option
(or until such date as Buyer exercises the Rockford Facility Lease Option, if
after 90 days after the Closing Date) Buyer shall lease the Rockford Facility
for $6,666.67 per month.
1.8 CLOSING TRANSACTIONS.
--------------------
(a) Closing. 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
January __, 1999 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 Sellers (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) Sellers 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 and contracts, documents
acceptable for recordation in the United States Patent and
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<PAGE>
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 form and substance satisfactory to Buyer and its
counsel (collectively, "Conveyance Documents"), which are necessary or
--------------------
desirable to effect the transfer to Buyer of the Purchased Assets;
(ii) Buyer will deliver to Sellers the Estimated Purchase Price
minus (i) the Accounts Receivable Holdback and (ii) the Base Purchase Price
-----
Escrow Amount by wire transfer of immediately available funds;
(iii) Buyer will deliver to Sellers such instruments of
assumption as are required in order for Buyer to assume the Assumed
Liabilities; and
(iv) there shall be delivered to Buyer and Sellers the
certificates and other documents and instruments provided to be delivered
under Article II hereof.
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 Sellers 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 (without taking into
account any disclosures made by Sellers to Buyer pursuant to Section 4.25
hereof);
(b) Sellers will have performed and complied with all of the
covenants and agreements required to be performed by them under this Agreement
prior to the Closing;
(c) all governmental or third party filings, licenses, consents,
authorizations, waivers and approvals that are required to be made or obtained
for the transfer to Buyer of the Purchased Assets and the operation of the
Business by Buyer following the Closing will have been duly made and obtained
(including the expiration or termination of all applicable waiting periods (and
any extensions thereof) under the Hart-Scott-Rodino Act) without conditions or
requirements that are materially adverse to Buyer or the Business. In the event
that the Sellers fail to obtain the landlord's written consent (the form of such
consent to be approved by the Buyer, and its lender, at their sole and absolute
discretion), together with the associated estoppel letters and
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<PAGE>
subordination agreements, to the assignment to the Buyer of each Leased Real
Property (the "Landlords' Consents") as of the Closing, and notwithstanding such
-------------------
failure, the Buyer closes the transactions contemplated herein, the Sellers
shall have thirty (30) days after the Closing to obtain all of the Landlords'
Consents and the associated estoppel letters and subordination agreements; the
Sellers hereby agree to use their best efforts to obtain such Landlords'
Consents and associated estoppel letters and subordination agreements within
such thirty (30) day period. In the event that any landlord refuses to consent
to assign a lease (an "Unassigned Lease"), Buyer shall have no obligation or
----------------
liability with respect to such Unassigned Lease liability for such Unassigned
Lease shall remain exclusively with Sellers, such Unassigned Lease shall be an
Excluded Asset and liabilities associated with such Unassigned Lease shall be
Excluded Liabilities. Notwithstanding the foregoing, Sellers shall deliver to
the Buyer at the Closing Landlords' Consents, estoppel letters and subordination
agreements, in the form attached as Exhibits hereto with respect to the
facilities for which Dr. Joon S. Moon or his Affiliates or family members are
lessors and as set forth on Schedule 2.1(c) hereto;
---------------
(d) the purchase of the Purchased Assets by Buyer hereunder shall not
be prohibited by any applicable law or governmental regulation, shall not
subject Buyer to any penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation, and shall be
permitted by laws and regulations of the jurisdictions to which Buyer is
subject;
(e) 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
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 on the business, financial condition, operating results, assets,
operations or business prospects of the Business or 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;
(f) there shall have been no material adverse change in the assets,
liabilities, condition (financial or otherwise), operating results, status,
business activities or prospects of the Business or the Purchased Assets
generally since the date of the Latest Balance Sheet;
(g) Dr. Joon S. Moon will have entered into a guarantee agreement
(the "Guarantee and Option Agreement") in the form of Exhibit B attached hereto;
------------------------------ ---------
(h) Kenneth Rogner will have entered into an employment or consulting
arrangement with Buyer satisfactory to Buyer;
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<PAGE>
(i) the individual shareholders of JKKT and BP Georgia will have
entered into a non-compete agreement in the form of Exhibit C attached hereto
---------
(the "Non-Compete Agreement");
---------------------
(j) Buyer will have obtained the consent of its lenders to consummate
the transactions contemplated hereby;
(k) on or prior to the Closing Date, Sellers will have delivered to
Buyer all of the following:
(i) a certificate from officers of Sellers in the form set
forth in Exhibit D attached hereto, dated the Closing Date, stating that
---------
the preconditions specified in Sections 2.1(a)-(f), inclusive, have been
satisfied;
(ii) copies of all lien releases, third party and governmental
consents, approvals, licenses, permits and filings required to be obtained
by Sellers in connection with the consummation of the transactions
contemplated herein;
(iii) certified copies of the resolutions of the boards of
directors of BP Georgia and certified copies of the resolutions of the sole
shareholder of Benson approving the transactions contemplated by this
Agreement;
(iv) all Conveyance Documents which are necessary or desirable
to effect the transfer to Buyer of the Purchased Assets;
(v) with respect to each parcel of Leased Real Property, an
estoppel letter from the landlords in the form attached as Exhibit E hereto
---------
(except as provided in Section 2.1(c) hereof);
(vi) with respect to each parcel of Leased Real Property, a
subordination agreement from the landlords for each parcel of Leased Real
Property substantially in the form of Exhibit F hereto (except as provided
---------
in Section 2.1(c) hereof);
(vii) certifications of Sellers pursuant to Treasury Regulation
Section 1.1445-2(b)(2) that Sellers are not foreign persons; and
(viii) such other documents or instruments as Buyer reasonably
requests to effect the transactions contemplated hereby; and
(l) all proceedings to be taken by Sellers in connection with the
consummation of the Closing Transactions and the other transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to be delivered by Sellers to effect the
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<PAGE>
transactions contemplated hereby requested by Buyer will be satisfactory in form
and substance to Buyer.
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 SELLERS' OBLIGATIONS AT THE CLOSING. The
-------------------------------------------------
obligation of Sellers 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 V hereof
and all other representations and warranties of 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) 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
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 and no such judgment, order or decree shall have been
entered and not subsequently dismissed with prejudice or satisfied;
(d) Buyer will have performed and complied in all material respects
with the covenants and agreements required to be performed by it under this
Agreement prior to the Closing;
(e) on or prior to the Closing Date, Buyer will have delivered to
Sellers all of the following:
(i) a certificate from Buyer in the form set forth in Exhibit E
---------
attached hereto, dated the Closing Date, stating that the preconditions
specified in Section 2.2(a) have been satisfied; and
(ii) certified copies of the resolutions of Buyer's board of
directors approving the transactions contemplated by this Agreement; and
(f) all corporate proceedings to be taken by Buyer in connection
with the consummation of the Closing Transactions and the other transactions
contemplated hereby and all
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<PAGE>
certificates, opinions, instruments and other documents required to be delivered
by Buyer to Sellers to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Sellers.
Any condition specified in this Section 2.2 may be waived by Sellers,
provided that no such waiver will be effective unless it is set forth in a
- -------- ----
writing executed by Sellers.
ARTICLE III
COVENANTS
3.1 AFFIRMATIVE COVENANTS OF SELLERS. Following the execution of this
--------------------------------
Agreement and prior to the Closing, unless Buyer otherwise agrees in writing,
Sellers will:
(a) conduct the Business (including, without limitation, the
collection of receivables, incurrence of capital expenditures and purchase of
Whole Goods Inventory and Parts Inventory) only in the usual and ordinary course
of business in accordance with past custom and practice;
(b) carry on the Business in the same manner as presently conducted
and keep their organization and properties intact, including their 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 the Purchased Assets and the Leased Real Property in
good operating condition (reasonable wear and tear excepted) and repair,
maintain insurance reasonably comparable to that in effect on the date hereof,
maintain Whole Goods Inventory, supplies and spare parts at customary operating
levels consistent with past practices, replace in accordance with past practice
any inoperable, worn out or obsolete 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 their respective 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) 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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<PAGE>
(g) 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;
(h) 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;
(i) 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
(ii) 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 either of the
Sellers.
3.2 NEGATIVE COVENANTS OF SELLER. Following the execution of this
----------------------------
Agreement and prior to the Closing, without Buyer's prior written consent,
Sellers 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 except in the ordinary course of business and consistent
with past practice ;
(c) sell, lease, license or otherwise dispose of any interest in any
of the Purchased Assets (other than sales of Whole Goods 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 for materials made in the
ordinary course of business;
(f) institute any material change in the conduct of the Business, or
any change in its method of purchase, sale, lease, management, marketing,
operation or accounting; or
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<PAGE>
(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,
operations or business prospects of the Business.
3.3 EXCLUSIVITY. The Benson Group 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 Sellers or any acquisition of the capital stock or other
securities of Sellers or any substantial portion of the assets of Sellers or the
Business (including any acquisition structured as a merger, consolidation or
share exchange) (an "Acquisition Proposal"). The Benson Group will immediately
--------------------
cease and cause to be terminated any and all contacts, discussions and
negotiations with third parties regarding any Acquisition Proposal. Each member
of the Benson Group hereby agree to notify Buyer immediately upon the receipt of
any written proposal, written offer, written inquiry or written contract by
either of them 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 BUYER. Prior to the Closing, Buyer will:
------------------
(a) cooperate with Sellers 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
Sellers' 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 Sellers may reasonably request to
effect, consummate, confirm or evidence the transactions contemplated by this
Agreement; and
(c) promptly inform Sellers in writing of any variances from Buyer's
representations and warranties contained in Article V or elsewhere in this
Agreement or any breach of any covenants hereunder by Buyer.
3.5 POST-CLOSING COVENANTS OF SELLERS. After the Closing Date,
---------------------------------
Sellers will use their best efforts to obtain Landlords' Consents, estoppel
letters, subordination agreements and other documentation reasonably requested
by Buyer, with respect to leases for which such documentation was not obtained
prior to the Closing Date.
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<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
As an inducement to enter into this Agreement, the Sellers hereby
represent and warrant to Buyer, that:
4.1 ORGANIZATION AND CORPORATE POWER. Benson and BP Georgia are
--------------------------------
corporations duly organized, validly existing and in good standing under the
laws of the states of Illinois and Nevada, respectively, and are qualified to do
business in every jurisdiction in which the nature of their businesses or their
ownership of property requires them to be qualified. All such jurisdictions in
which Sellers are qualified are set forth on Schedule 4.1 hereto. Sellers have
------------
full corporate power and other necessary 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 and as proposed to
be conducted.
4.2 AUTHORIZATION OF TRANSACTIONS. The Sellers have 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 BP Georgia and the sole shareholder of Benson have duly approved
this Agreement and have 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 either of the Sellers are necessary
to approve and authorize the execution and delivery of this Agreement. This
Agreement has been duly executed and delivered by each member of the Benson
Group and constitutes the valid and binding agreement of the members of the
Benson Group enforceable against the members of the Benson Group 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, Sellers do 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.
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
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<PAGE>
provisions of the certificate of incorporation or by-laws of either of the
Sellers or any indenture, mortgage, lease, loan agreement or other agreement or
instrument to which any member of the Benson Group is bound or affected, or any
law, statute, rule or regulation or any judgment, order or decree to which
either is subject.
4.5 FINANCIAL STATEMENTS. Sellers have furnished Buyer with (a)
--------------------
copies of the unaudited balance sheet which includes the Business as of October
31, 1998 (the "Latest Balance Sheet") and the related statements of income and
--------------------
cash flow for the 12-month period then ended; (b) copies of the audited balance
sheets of Sellers as of October 31, 1995, 1996 and 1997 and the related
statements of income and cash flow for the periods then ended; (c) and the
consolidating statements for the Business which form the basis for the Latest
Balance Sheet and such audited statements. 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 Sellers'
--------------------
books and records (which, in turn, are accurate and complete), presents fairly
Sellers' 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 their knowledge, Sellers
----------------------------------
have no obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, 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. To their knowledge, Sellers
-------------------------------
have not, except as set forth in Schedule 4.7 hereto, since October 31, 1998:
------------
(a) suffered a material adverse change or development in the
business, financial condition, operating results, earnings, assets, customer,
supplier, employee and sales representative relations, business prospects,
business condition or financing arrangements of the Business or the Purchased
Assets;
(b) sold, leased, assigned or transferred (including, without
limitation, transfers
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<PAGE>
to any employees or affiliates of Sellers) any tangible assets (other than Whole
Goods 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
proprietary confidential information to any Person, other than disclosures of
such information to Buyer and its Affiliates and representatives;
(c) 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;
(d) suffered any theft, damage, destruction or casualty loss to its
tangible assets, whether or not covered by insurance;
(e) 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), or changed any business practice or manner of dealing with
- ------------
any customer, supplier, subcontractor, Insider, sales representative, or other
person or entity with whom either Seller engages in any business activity, or
entered into any other material transaction, whether or not in the ordinary
course of business;
(f) 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;
(g) incurred intercompany indebtedness or conducted the 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;
(h) made any capital expenditures (or commitments therefor) that
aggregate in excess of $10,000;
(i) made any loans or advances to, or guarantees for the benefit of,
any persons;
(j) entered into any lease of capital equipment or real estate
involving rental in excess of $10,000 per annum;
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<PAGE>
(k) made any change in any method of accounting or accounting
practices;
(l) entered into any other material transaction other than in the
ordinary course of business; or
(m) 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 Sellers have a
leasehold and subleasehold interest. Each of the Leases is in full force and
effect and Sellers hold a valid and existing leasehold or subleasehold interest
under each of the Leases. Sellers have 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; (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 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) no 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) Sellers have not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Lease.
(b) Except as disclosed on Schedule 4.8(a), there is no real property
---------------
leased or owned by the Sellers used 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 in good condition and repair and adequate to operate such facilities as
currently used, to the best of each Seller's knowledge 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 or intended to be
used, occupied or operated. All Improvements have direct vehicular access to a
public street adjoining such Leased Real Property.
-22-
<PAGE>
4.9 TITLE TO ASSETS.
---------------
(a) Sellers own good and marketable title, free and clear of all
Liens, to all of the
Purchased Assets, including, without limitation, all tangible and intangible
property; and
(b) To the Sellers' knowledge, the facilities, machinery, equipment
and other tangible assets of Sellers which are part of the Purchased Assets are
in good operating condition and repair and are fit for their particular purpose,
and are usable in the ordinary course of business. The Purchased Assets
constitute all of the assets necessary to allow Buyer to conduct the Business.
4.10 ENVIRONMENTAL AND SAFETY MATTERS.
--------------------------------
(a) To the Sellers' knowledge, Sellers have complied and are in
compliance with all Environmental and Safety Requirements.
(b) To the Sellers' knowledge, without limiting the generality of the
foregoing, Sellers have obtained and complied with, and are in compliance with,
all permits, licenses and other authorizations that are required pursuant to
Environmental and Safety Requirements for the occupation of its facilities and
the operation of their businesses; a list of all such permits, licenses and
other authorizations is set forth on Schedule 4.10(b) hereto.
----------------
(c) Sellers have not received any written or oral notice, report or
other information regarding any actual or alleged violation of Environmental 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 any of the
Sellers or Sellers' facilities, properties, operations or the Business and
arising under Environmental and Safety Requirements.
(d) Except as set forth on Schedule 4.10(d), to Sellers' knowledge
----------------
none of the following exists at any property or facility owned or operated by
Sellers or in connection with the Business: (i) underground storage tanks; (ii)
asbestos-containing material in any form or condition; (iii) materials or
equipment containing polychlorinated biphenyls; or (iv) landfills, surface
impoundments or disposal areas.
(e) To Sellers' knowledge, except as set forth on Schedule 4.14,
-------------
Sellers have 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 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,
-23-
<PAGE>
as amended ("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA") or any
------ ----
other Environmental and Safety Requirements.
(f) To Sellers' knowledge, except as set forth on Schedule 4.14, no
------------------------------------
facts, events or conditions relating to the past or present facilities,
properties or operations of Sellers or any predecessor of Sellers or the
Business will prevent, hinder or limit continued compliance with Environmental
and Safety Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental and Safety Requirements, or give rise to
any other liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental and Safety Requirements, including without
limitation any relating to onsite or offsite releases or threatened releases of
hazardous materials, substances or wastes, personal injury, property damage or
natural resources damage.
(g) To the Sellers' knowledge, 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) To Sellers' knowledge, except as set forth on Schedule 4.14
-------------
Sellers have 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) the Sellers have timely filed or shall timely file all Tax
Returns which are required to be filed, and all such Tax Returns are true,
complete and accurate in all respects;
(b) all Taxes owed by the Sellers, whether or not shown on a Tax
return, have been paid or shall be paid by the Sellers and no Taxes are
delinquent;
(c) no deficiency for any amount of Tax has been asserted or assessed
by a taxing authority against the Sellers with respect to the operations of the
Sellers and the Sellers have no knowledge that any such assessment or asserted
Tax liability shall be made;
(d) the Seller's have not consented to extend the time in which any
Tax may be assessed or collected by any Taxing authority;
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<PAGE>
(e) the Seller's have withheld and paid 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;
(f) the Sellers have not made an election under Section 341(f) of the
Code;
(g) the Sellers have no liability for Taxes arising as a result of
being (or ceasing to be) a member of any Affiliated Group as defined in Section
1504 of the Code (or being included (or required to be included) in any Tax
Return related thereto);
(h) no claim has ever been made by an authority in a jurisdiction
where the Sellers do not file Tax Returns that it is or may be subject to
taxation by that jurisdiction;
(i) the Seller have not made and is not obligated to make any
payments, nor are there parties 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
(j) there are no liens for Taxes (other than for current Taxes not
yet due and payable) upon the Purchased Assets.
4.12 CONTRACTS AND COMMITMENTS.
-------------------------
(a) Except as set forth in Schedule 4.12 hereto, neither Seller is a
-------------
party to or bound by, whether written or oral, any: (i) collective bargaining
agreement or contract with any labor union, whether formal or informal; (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 either Seller
is lessee of, or holds or operates, any personal property owned by any other
party; (vi) lease or agreement under which either 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 $10,000 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 $10,000; (ix) franchise
agreements; (x) contracts with any Insider; (xi) agreements, contracts or
understandings pursuant to which either Seller subcontracts work to third
parties; (xii) contract or agreement prohibiting it from freely engaging in any
business or competing anywhere in the world;
-25-
<PAGE>
or (xiii) any other agreement material to Sellers 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 in accordance with their respective terms, (ii) no
contract or commitment required to be disclosed on Schedule 4.12 has been
-------------
breached or canceled by the other party since December 31, 1997, (iii) no
material customer or supplier has indicated that it will stop or decrease the
rate of business done with either Seller, (iv) Sellers have performed all of the
obligations required to be performed by Sellers in connection with the contracts
or commitments required to be disclosed on Schedule 4.12, and are not in default
-------------
under any contract or commitment required to be disclosed on the Schedule 4.12,
-------------
(v) Sellers have no present expectation or intention of not fully performing any
obligation pursuant to any contract set forth on Schedule 4.12 hereto, and (vi)
-------------
Sellers have no knowledge of any breach or anticipated breach by any other party
to any contract set forth on Schedule 4.12.
-------------
(c) Neither Seller is a party to any contract or agreement under
which it is required to purchase or sell goods or services or lease property
above or below (as the case may be) prevailing market prices and rates.
(d) Sellers have 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.
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
material unregistered Trademarks; (iii) all unregistered copyrights and
nonconfidential descriptions of trade secrets and confidential information owned
or used by Sellers and material to the conduct of the Business; and (iv) all
licenses or similar agreements or arrangements related to the Proprietary Rights
to which Sellers are a party, either as licensee or licensor ("Proprietary
-----------
Rights Licenses"). Sellers have delivered to Buyer complete copies of all
- ---------------
Property Rights Licenses.
(b) Except as expressly set forth on Schedule 4.13: (i) Sellers own
-------------
and possess all right, title and interest in and to, free and clear of all Liens
or have valid and enforceable licenses to use, all Proprietary Rights used in
the operation of the Business as currently conducted or as currently proposed to
be conducted; (ii) no claim by any third party contesting the validity,
-26-
<PAGE>
enforceability, use or ownership of any of the Proprietary Rights has been made,
is currently outstanding or, to either Seller's knowledge, is threatened, and,
to each Seller's knowledge, there are no grounds for the same; (iii) neither
Seller has received any notices of, and both Sellers have 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; (iv)
neither Seller has infringed, misappropriated or otherwise conflicted with any
intellectual property rights or other rights of any third parties and, to each
Seller's knowledge, no such infringement, misappropriation or conflict will
occur as a result of the continued operation of the Business as currently
conducted, or as currently proposed to be conducted; (v) 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 Proprietary Rights License; and (vi) neither Seller is in breach
or default under any Proprietary Rights License to which it is a party and, to
each Seller's knowledge, no other party is in breach or default under and
Proprietary Rights License.
(c) The Proprietary Rights comprise all of the intellectual property
necessary for the operation of the Business as currently conducted. All of the
Proprietary Rights owned or used by both Sellers immediately prior to the
Closing will be owned or available for use by Buyer immediately after the
Closing.
4.14 LITIGATION; PROCEEDINGS. Except as set forth in Schedule 4.14
----------------------- -------------
hereto, to Sellers' knowledge there are no actions, suits, proceedings, orders,
claims, complaints, charges or investigations pending or threatened against or
affecting Sellers, the Purchased Assets or the Business at law or in equity, or
pending before any arbitrator 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 known to Sellers for
any of the foregoing.
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 the Benson Group.
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 Sellers in the conduct
of the Business and the operation and ownership of the Purchased Assets. Except
as indicated on Schedule 4.16, Sellers own or possesses all right, title and
-------------
interest in and to all of the Licenses. Sellers are in compliance with the terms
and conditions of such Licenses and have received no notices that either Seller
in violation of any of the terms and conditions of such Licenses. Sellers have
taken all necessary actions to maintain such Licenses.
-27-
<PAGE>
(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 Sellers 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,
-------------
neither Seller is a party to or is 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) no executive, key
-------------
employee or group of employees of either Seller has any intentions of
terminating employment with the Business; (B) no labor organization or group of
employees has filed any representation petition or made any written or oral
demand for recognition; (C) no union organizing or decertification 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
or threatened; and (E) there is no employment-related charge, complaint,
investigation, inquiry or obligation of any kind, pending or threatened in any
forum, relating to an alleged violation by Sellers 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. Neither of the Sellers 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 Act of 1988, as
amended, or any similar state or local law or regulation (collectively, the
"WARN Act"), and no layoffs that could implicate such laws or regulations will
be implemented before Closing without advance notification to Buyer.
4.18 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Schedule 4.18 (the "Employee Benefit Plans Schedule") sets forth
------------- -------------------------------
all bonus, deferred or incentive compensation, profit sharing, retirement,
vacation, sick leave, hospitalization or severance plans, and all "employee
pension benefit plans" (as defined in Section 3(2) of ERISA) or "employee
welfare benefit plans" (as defined in Section 3(1) of ERISA) maintained or
contributed to on behalf of the Business (the "plans"). None of the plans are
-----
subject to Title IV of ERISA nor provide for medical or life insurance benefits
to retired or former employees of Sellers (other than as required under Code
Section 4980B, or similar state law). None of the Sellers are a participating
or contributing employer in any multiemployer benefit plan with respect to
employees of the Business nor has any of the Sellers incurred any withdrawal
liability with respect to any multiemployer plan or any liability in connection
with the termination or reorganization of any multiemployer plan.
-28-
<PAGE>
(b) To Sellers' knowledge, each such plan is in all material respects
in compliance, and has been administered in all material respects in accordance,
with the applicable provisions of ERISA and the Code and all other applicable
laws, rules and regulations, including, but not limited to, medical continuation
under Code Section 4980B. None of the Sellers nor any fiduciary has (i) engaged
in any transaction prohibited by ERISA or the Code; (ii) breached any fiduciary
duty owed by it with respect to the plans described above; or (iii) failed to
file and distribute timely and properly all reports and information required to
be filed or distributed in accordance with ERISA or the Code.
(c) All contributions, premiums or payments which are due on or
before the Closing Date have been paid. Sellers are not aware of any conditions
which exist as of the Closing Date which would be reasonably likely to result in
future health care expenses in excess of $25,000, individually or in the
aggregate.
(d) Each plan which is intended to be qualified under section 401(a)
of the Code is so qualified and has received from the Internal Revenue Service a
favorable determination letter with respect to the plan.
(e) To their knowledge, no Seller has incurred and has no reason to
expect that it will incur, any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code.
4.19 AFFILIATE TRANSACTIONS. Except as set forth on Schedule 4.19, no
---------------------- -------------
member of the Benson Group, no Affiliate of any member of the Benson Group and
no officer, director or, to the knowledge of any member of the Benson Group, no
employee of any member of the Benson Group 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, contract, commitment or transaction with either Seller or their
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 Sellers by their Affiliates and to or on behalf of
such Affiliates by Sellers.
4.20 COMPLIANCE WITH LAWS. To Sellers' knowledge, Sellers and their
--------------------
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 Sellers may be subject 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 Sellers alleging a violation of any such laws or regulations.
Sellers have 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,
-29-
<PAGE>
supplier, governmental employee, Insider or any other person in a position to
assist or hinder Sellers in connection with any actual or proposed transaction
concerning the Business.
4.21 INSURANCE. Schedule 4.21 hereto lists and briefly describes
--------- -------------
each insurance policy maintained by or on behalf of Sellers with respect to
their properties, assets and business (including, without limitation, all
worker's compensation policies maintained by Sellers. All of such insurance
policies are in full force and effect, and Sellers are not in default with
respect to its obligations under any of such insurance policies and has not
received any notification of cancellation of any of such insurance policies.
4.22 Product Warranty. The Sellers provide no warranties with respect
----------------
to products or services sold by Sellers.
4.23 PRODUCT LIABILITY. Except as set forth on Schedule 4.23 attached
----------------- -------------
hereto, the Sellers, to their knowledge, have no liabilities (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Sellers and their
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 Sellers.
4.24 Names and Locations. Except as set forth on Schedule 4.24
------------------- -------------
attached hereto, during the ten-year period prior to the execution and delivery
of this Agreement, Sellers have not used any name or names under which they have
invoiced account debtors, maintained records concerning its assets or otherwise
conducted its business. All of the tangible assets and properties of Sellers
are located at the locations set forth on Schedule 4.24.
-------------
4.25 DISCLOSURE. 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.
There is no fact which has not been disclosed to Buyer of which the Sellers or
any of their officers or directors are aware which affects or could reasonably
be anticipated to have a material adverse effect on the business, financial
condition, operating results, assets, operations or business prospects of the
Business or the Purchased Assets.
4.26 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 Sellers have
advised Buyer otherwise in writing prior to the Closing.
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<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
As an inducement to the Sellers to enter into this Agreement, Buyer
hereby represents and warrants that:
5.1 CORPORATE ORGANIZATION AND POWER. 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. Buyer 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
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 Buyer are necessary to
approve and authorize the execution and delivery of this Agreement. This
Agreement has been duly executed and delivered by Buyer and constitutes the
valid and binding agreement of Buyer, enforceable against 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. Buyer is not subject to or obligated under its
------------
articles of incorporation, its by-laws, any applicable law, or rule or
regulation of any governmental authority, or any agreement or instrument, or any
license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
performance of this Agreement.
5.4 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 Buyer.
5.5 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 Sellers 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 Sellers otherwise in writing prior to the Closing.
-31-
<PAGE>
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 Sellers;
(b) by either Buyer or Sellers 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;
(c) by either (i) Buyer or (ii) Sellers if the sale contemplated by
this Agreement has not been consummated by January 31, 1999; provided 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 Sellers will be
-------- -------
entitled to terminate this Agreement pursuant to this Section 6.1 if such
party's wilful or knowing breach of this Agreement has prevented the
consummation of the transactions contemplated hereby or thereby.
In the event of termination by Sellers 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 Sellers 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
8.1, 8.6 and 8.8 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 Sellers, the knowledge of any of their
officers, directors, stockholders, employees or agents, or the acceptance of any
certificate or opinion from Buyer or Sellers, their respective officers,
directors, stockholders, employees or agents.
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7.2 INDEMNIFICATION.
---------------
(a) Subject to the limitations set forth in (b) below, each member of
the Benson Group agree to jointly and severally indemnify Buyer, its Affiliates,
officers, directors, 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 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 the Sellers contained in this Agreement or any
Schedule or Exhibit hereto, or (ii) the breach of any covenant or agreement of
the Sellers contained in this Agreement; (iii) any claims of any brokers or
finders claiming by, through or under each member of the Benson Group; and (iv)
the assertion or recovery against Buyer of any liability or obligation of
Sellers not to be assumed or performed by Buyer hereunder (including, without
limitation, the Excluded Liabilities). Notwithstanding any provision in this
Article VII to the contrary, the indemnification obligations set forth in this
Article VII shall terminate and have no legal force or effect if Buyer files a
voluntary petition for relief under the United States Bankruptcy Code or an
involuntary case or petition under the United States Bankruptcy Code shall be
commenced against Buyer and such involuntary case or petition shall remain
undismissed or unstayed for a period of 90 days.
(b) The indemnification provided for in Section 7.2(a) above is
subject to the following limitations:
(i) each member of the Benson Group will be liable to Buyer with
respect to claims arising from (x) breaches of the representations and
warranties set forth in Section 4.11 only if Buyer gives to a member of the
Benson Group written notice thereof prior to the 60th day following the
expiration of the applicable statute of limitation with respect thereto,
(y) breaches of the representations and warranties set forth in Sections
4.9(a) and 4.15, for which notice may be given at any time, and (z) any
other provision of this Agreement only if Buyer gives a member of the
Benson Group written notice thereof within three years after the Closing
Date;
(ii) Members of the Benson Group will not be liable to Buyer for
any Loss arising under subsection (a) above unless the aggregate amount of
all such Losses relating
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to all such breaches exceeds $50,000 in the aggregate (the "Buyer's
-------
Threshold"), in which case the members of the Benson Group shall be liable
---------
for the full amount of such excess; and
(iii) the aggregate amount required to be paid by the Benson
Group with respect to claims referred to in subsection (a) above shall not
exceed $2,000,000 (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, 4.2, 4.4, 4.9(a), 4.11 and 4.15.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as Buyer delivers written notice of a claim to a member of the Benson Group
within the foregoing respective survival period, the Benson Group shall be
required to indemnify Buyer for all damages with respect to such matter that
Buyer may suffer though the date of the claim, the end of the survival period,
and beyond.
(c) Buyer agrees to indemnify the Sellers and hold them harmless
against any Loss which it may suffer, sustain or become subject to, as the
result of a breach of any representation, warranty, covenant, or agreement by
Buyer contained in this Agreement.
(d) [INTENTIONALLY OMITTED.]
(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 facts and circumstances giving rise to
------------------
the claim. 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 employment of counsel reasonably satisfactory to
the Indemnified Party and 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 first: (i) enter into an agreement with the Indemnified
Party (in form and substance reasonably satisfactory to the Indemnified Party)
pursuant to which the Indemnifying Party agrees to be fully responsible for all
Losses relating to such claim and unconditionally guarantees the payment and
performance of any liability or obligation which may arise with respect to such
claim or the facts giving rise to such claim for indemnification, and (ii)
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 non-monetary relief; 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
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prudent business judgment, to defend such claim. 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 (i) the employment
thereof has been specifically authorized by the Indemnifying Party in writing,
(ii) the Indemnifying Party and the Indemnified Party reasonably agree that a
reasonable likelihood exists of a conflict of interest between the Indemnifying
Party and the Indemnified Party, (iii) 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, the Indemnifying Party agrees to indemnify and hold harmless the
Indemnified Party from and against any loss or liability by reason of such
judgment. 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 an adverse effect on any
Indemnified Party.
(f) Subject to the terms and conditions set forth in this Section
7.2, in the event of a breach of any representation, warranty, covenant or
agreement contained in this Agreement, Buyer or Sellers, as the case may be,
may, at such party's option, setoff all or any portion of the Losses which such
party suffers, sustains or becomes subject to as a result of such breach against
any amounts due or to become due to members of the Benson Group or Buyer (or
their respective successors and Affiliates), as the case may be, whether
pursuant to this Agreement or otherwise.
(g) The foregoing indemnification provisions are in addition to, and
not in derogation of, any statutory or common law remedy any party may have for
misrepresentation, breach of warranty or breach of covenant.
(h) Any indemnification payments paid under this Section 7.2 will be
considered an adjustment to the Purchase Price.
7.3 Arbitration Procedure.
---------------------
(a) Buyer and the members of the Benson Group 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
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Determination (as defined below). The parties hereby agree and acknowledge that,
except as otherwise provided in this Section 7.3 or in the Commercial
Arbitration Rules of the American Arbitration Association as in effect from time
to time (the "AAA Rules"), the arbitration procedures and any Final
---------
Determination hereunder shall be governed by, and shall be enforced pursuant to
the Uniform Arbitration Act as in effect in the State of Illinois. Buyer and the
Benson Group members 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 Chicago, Illinois 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 ten
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 Sellers shall separately select one non-neutral
arbitrator (i.e. Buyer to select one and Sellers to select one together) expert
in the subject matter of the Dispute (the arbitrators so selected shall be
referred to herein as the "Buyer's Arbitrator" and the "Sellers' 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,
then the matter shall be resolved by the arbitrator selected by the other party.
Sellers' 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 Sellers' Arbitrator and Buyer's Arbitrator and
unable to agree on an third arbitrator within 20 days after their selection,
Sellers' Arbitrator and Buyer's Arbitrator shall each prepare a list of three
independent arbitrators. Sellers' 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 Sellers' 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 Sellers contest only $500 of the amount claimed by Buyer, and if
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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 Sellers 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) 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 rate allowed on state court judgments in the state of
Illinois from the time of the Final Determination until the time the amount is
paid. 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.
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
8.1 PRESS RELEASES AND ANNOUNCEMENTS. Buyer and Sellers shall
--------------------------------
consult with each other prior to issuing any press release or otherwise making
any public statement with respect 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 NASDAQ Stock Market.
8.2 FURTHER AGREEMENTS AND TRANSFERS. Sellers will 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 transfer to Buyer of the
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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. Sellers will execute such documents as may be necessary to assist Buyer
in preserving or perfecting its rights in the Purchased Assets and will also do
such acts as are necessary to perform the representations, warranties and
agreements herein.
8.3 CHANGE OF NAMES. Concurrently with the Closing, Sellers will
---------------
prepare and promptly file the documents necessary to change their corporate
names to names substantially dissimilar to "Benson Pump Co." and "Benson Pump-
Georgia, Inc.," and at all times thereafter, the Sellers shall not use or permit
any Affiliate of either Seller or other business to use the names "Benson Pump
Co." and "Benson Pump-Georgia, Inc." or any names or titles confusingly similar
to such names.
8.4 TAX MATTERS. The following provisions will govern the allocation
-----------
of responsibility as between Buyer and Sellers 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 by Sellers.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, Sellers shall indemnify and hold Buyer harmless for the portion of
each and every liability for any state, county or local real or personal
property tax or other similar ad valorem state, county or local tax on the
Purchased Assets (the "Real and Personal Property Taxes") for any taxable period
--------------------------------
that spans the Closing Date determined by multiplying each such liability by a
ratio, the numerator of which is the total number of days in such taxable period
before and including the Closing Date, and the denominator of which is the total
number of days in such taxable period. Buyer shall indemnify and hold Sellers
harmless for the remainder of such taxes. Sellers shall indemnify and hold
Buyer harmless for the Real and Personal Property Taxes for any taxable period
which ends on or prior to the Closing Date regardless of when such taxes are
assessed or which party bears the legal incidence of taxation. All Real and
Personal Property Taxes which are assessed and owing prior to the Closing Date
shall be paid by Sellers.
(c) Allocation of Purchase Price. The Purchase Price shall be
----------------------------
allocated among the Purchased Assets in accordance with an allocation statement
(the "Allocation Statement"), which shall be prepared by Buyer as soon as
--------------------
reasonably possible after the Closing, and which the parties acknowledge shall
be in accordance with Section 1060 of the Code. Buyer and the Sellers shall
separately 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
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Sellers 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.
(d) Cooperation on Tax Matters. Buyer and Sellers 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 request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Buyer and
Sellers agree (A) to retain all books and records with respect to Tax matters
pertinent to Sellers 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 Sellers, 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 Sellers, as the case may be, shall
allow the other party to take possession of such books and records.
8.5 TRANSITION ASSISTANCE.
---------------------
(a) Sellers 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 Sellers prior to and at the date of this
Agreement.
(b) The parties to this Agreement will use their reasonable best
efforts to assist each other with all post-Closing logistical matters with
respect to transactions contemplated by this Agreement.
8.6 EXPENSES. Except as otherwise provided herein, Buyer and Sellers
--------
will 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).
8.7 WAIVER OF COMPLIANCE WITH BULK SALES LAWS. Buyer hereby waives
-----------------------------------------
compliance by Sellers 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
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applicable to such sale); provided that such waiver shall not affect the
-------- ----
obligation of Sellers 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 .
8.8 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 Sellers as it deems
necessary or advisable to familiarize itself therewith. Sellers agree 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,
facilities, equipment and other things reasonably related to the Business and
the Purchased Assets, wherever located, of Sellers upon reasonable prior notice
during normal business hours, (ii) visit and inspect any of the properties of
Sellers, and (iii) discuss the affairs, finances and accounts of Sellers with
Ken Rogner and/or Keith Kopf only.
(b) If the transactions contemplated by this Agreement are not
consummated, Buyer will maintain the confidentiality of all information and
materials reasonably designated by Sellers as confidential, and Buyer and its
representatives will return to Sellers originals of and destroy copies of all
materials obtained from Sellers in connection with the transactions contemplated
by this Agreement. Whether or not the transactions contemplated hereby are
consummated, the Sellers 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, the Sellers agree to maintain the confidentiality of all
proprietary and other non-public information regarding Sellers, 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
8.8, 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 8.8, the disclosing party
will (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 8.8 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,
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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.
8.9 FINANCIAL INFORMATION. Sellers understand that as a reporting
---------------------
company under the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act"), Buyer may 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 Sellers 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"). Sellers
------------------------
also understands that Buyer may prepare and file with the SEC a Registration
Statement on Form S-1, S-3 or other form (each, a "Registration Statement") for
----------------------
the registration of securities under the Securities Act of 1933, as amended (the
"Securities Act"). Accordingly, Sellers shall make available to Buyer and
--------------
Buyer's auditors the books and records of Sellers and shall cause Sellers'
auditors to make available to Buyer all of such auditor's records and work
papers relating to Sellers to assist Buyer in preparation of the S-X Financial
Statements or one or more Registration Statements. In addition, if requested by
Buyer, Sellers will 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.
8.10 REMEDIES; DISPUTE RESOLUTION.
----------------------------
(a) Each of the Sellers acknowledge that the Business and the
Purchased Assets are unique and recognize that in the event of a breach of this
Agreement by the Sellers money damages may be inadequate and Buyer may have no
adequate remedy at law. Accordingly, the Sellers 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 Sellers hereunder 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.
(b) Buyer and Sellers may enforce (i) any decision of an Independent
Arbitrator with respect to the determination of the Final Purchase Price or the
Accounts Receivable Adjustment pursuant to Section 1.4 and Section 1.5,
respectively, hereof, or (ii) any Final Determination in any state or federal
court having jurisdiction over such dispute (each of (i) and (ii), a "Dispute").
-------
For the purpose of any action or proceeding instituted with respect to any
Dispute, 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
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laying of venue of any such action or proceeding brought in any such court and
any claim that any such action or proceeding brought in any court has been
brought in an inconvenient forum.
8.11 PRORATION OF RENT. Buyer and Sellers hereby agree that in the
-----------------
event Sellers shall have paid rent in advance for the month during which the
Closing Date occurs under any of the Leases, then all such advance rent shall be
multiplied by a fraction, the numerator of which shall be the number of calendar
days in the applicable month prior to the Closing Date and the denominator of
which shall be thirty-one (31), and the product of such calculation shall be
added to the Purchase Price.
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 Sellers. 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 Sellers and Buyer will, unless another address is
specified in writing, be sent to the address indicated below:
Notices to Sellers:
------------------
Mt. Rose Capital
11000 Mt. Rose Hwy.
Reno, Nevada 89511
Facsimile: (702) 849-1332
Attention: Dr. Joon S. Moon
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with a copy to:
--------------
The Kizer Law Firm, P.C.
2829 W. Grand River
Howell, Michigan 48843
Facsimile: (517) 548-1483
Attention: Thomas Kizer, Jr.
Notices to JKKT:
----------------
JKKT Corp.
11000 Mt. Rose Hwy.
Reno, Nevada 89511
Facsimile: (702) 849-1332
Attention: Dr. Joon S. Moon
Notices to Buyer:
-----------------
South Central Pool Supply, Inc.
109 Northpark Boulevard
Covington, Louisiana 70433-5001
Facsimile: (504) 892-1657
Attention: W.B. Sexton
with a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile: (312) 861-2200
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 either Seller), except that neither
this Agreement nor any of the rights, interests or obligations hereunder may be
assigned or delegated by Sellers without the prior written consent of Buyer.
-43-
<PAGE>
(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
with which it has financing arrangements and all extensions, renewals,
replacements, refinancings and refundings of such financings in whole or in
part.
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.
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
November 30, 1998, by and among Buyer, Sellers, JKKT and Dr. Joon S. Moon.
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 ILLINOIS 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
-44-
<PAGE>
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 ILLINOIS.
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.
"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 and Safety Requirements" means as now or hereinafter in
-------------------------------------
effect 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.
-45-
<PAGE>
"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.
"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).
"Multiemployer Plan" shall have the meaning set forth in Section 3(37)
------------------
of ERISA.
"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 Sellers, along with all income, royalties, damages and
payments due or payable at the Closing or thereafter (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
-46-
<PAGE>
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, unemployment, 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.
"Trademarks" means all registered and unregistered trademarks, service
----------
marks, trade dress, logos, trade names, Internet domain names and corporate
names (including the names Benson Pump Co. and Benson Pump-Georgia, Inc., and
all other trade names listed on Schedule 4.13), including all goodwill
-------------
associated therewith, and all applications, registrations, and renewals in
connection therewith.
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" 8.9
---
"AAA Rules" 7.3(a)
---------
"Accounts Receivable" 1.1(a)(i)
-------------------
"Accounts Receivable Price" 1.3(b)(i)
-------------------------
"Accounts Receivable Holdback" 1.2(b)
----------------------------
"Acquisition Proposal" 3.3
--------------------
"Allocation Statement" 8.4(c)
--------------------
"Assumed Liabilities" 1.1(c)
-------------------
"Base Purchase Price Escrow Amount" 1.2(b)
---------------------------------
"Benson" Preamble
------
"Benson Canada Purchase Option" 1.6
-----------------------------
-47-
<PAGE>
"Benson Canada Stock Purchase" 1.6(c)
----------------------------
"Benson Group" Preamble
------------
"BP Georgia" Preamble
----------
"Business" Preamble
--------
"Buyer" Preamble
-----
"Buyer Parties" 7.2(a)
-------------
"Buyer's Arbitrator" 7.3(c)
------------------
"Buyer's Cap" 7.2(b)(iii)
-----------
"Buyer's Threshold" 7.2(b)(ii)
-----------------
"CERCLA" 4.10(e)
------
"Closing" 1.8(a)
-------
"Closing Date" 1.8(a)
------------
"Closing Payment" 1.2(b)
---------------
"Closing Transactions" 1.8(b)
--------------------
"Conveyance Documents" 1.8(b)(i)
--------------------
"Disputes" 7.3(a)
--------
"Disputing Person" 7.3(b)
----------------
"Early-Buy Accounts Receivable Adjustment" 1.5(d)
----------------------------------------
"Employee Benefit Plans Schedule" 4.18
-------------------------------
"Estimated Base Purchase Price" 1.4(a)
-----------------------------
"Exchange Act" 8.9
------------
"Excluded Assets" 1.1(b)
---------------
"Excluded Liabilities" 1.1(d)
--------------------
"Final Determination" 7.3(e)
-------------------
"Financial Statements" 4.5
--------------------
"Fixed Assets" 1.1(a)(vi)
------------
"Fixed Assets Price" 1.3(b)(iv)
------------------
"Fixed Assets Schedule" 1.3(b)(iii)
---------------------
"GAAP" 1.3(b)
----
"Improvements" 4.8(c)
------------
"Indemnified Party" 7.2(d)
-----------------
"Indemnifying Party" 7.2(d)
-----------------
"Independent Auditor" 1.4(c)
-------------------
"Insiders" 4.19
---------
"JKKT" Preamble
-----
"Landlord's Consent" 2.1(c)
------------------
"Latest Balance Sheet" 4.5
--------------------
"Lease" 4.8(a)
-----
"Leased Real Property" 1.1(a)(xiv)
--------------------
"Leases" 4.8(b)
------
"Licenses" 1.1(a)(ix)
--------
-48-
<PAGE>
"Losses" 7.2(a)
------
"Notice of Arbitration" 7.3(b)
---------------------
"Other Assets Price" 1.3(b)(v)
------------------
"Parts Inventory" 1.1(a)(ii)
---------------
"Parts Inventory Price" 1.3(b)(iii)
---------------------
"Proprietary Rights Licenses" 4.13(a)
---------------------------
"Purchase Price" 1.2(a)
--------------
"Purchased Assets" 1.1(a)
----------------
"Real and Personal Property Taxes" 8.4(b)
--------------------------------
"Registration Statement" 8.9
----------------------
"Regular Accounts Receivable Adjustment" 1.5(c)
--------------------------------------
"Regulation S-X" 8.9
--------------
"Rockford Facility" 1.7
-----------------
"SEC" 8.9
---
"Securities Act" 8.9
--------------
"Seller" Preamble
------
"Seller's Arbitrator" 7.3(c)
-------------------
"SWDA" 4.10(e)
----
"S-X Financial Statements" 8.9
------------------------
"Unassigned Lease" 2.1(c)
----------------
"WARN Act" 4.17(b)
--------
"Whole Goods Inventory" 1.1(a)(ii)
---------------------
"Whole Goods Inventory Price" 1.3(b)(ii)
---------------------------
* * * *
-49-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase
Agreement as of the date first written above.
SOUTH CENTRAL POOL SUPPLY, INC.
/s/ A. DAVID COOK
-----------------
By: A. David Cook
Its: Vice President
BENSON PUMP CO.
/s/ DR. JOON S. MOON
--------------------
By: Dr. Joon S. Moon
Its: Chairman
BENSON PUMP-GEORGIA, INC.
/s/ DR. JOON S. MOON
--------------------
By: Dr. Joon S. Moon
Its: Chairman
J.K.K.T. CORPORATION
/s/ DR. JOON S. MOON
--------------------
By: Dr. Joon S. Moon
Its: Chairman
-50-
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A - Escrow Agreement
Exhibit B - Moon's Guarantee and Option Agreement
Exhibit C - Non-Compete Agreements
Exhibit D - Sellers' Certificate
Exhibit E - Form of Estoppel Letter
Exhibit F - Form of Landlord Subordination Agreement
Exhibit G - Buyer's Certificate
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 1.1(a)(xiv) - Leased Real Property
Schedule 1.1(b)(i) - Intercompany Accounts Receivable
Schedule 1.1(b)(v) - Excluded Assets
Schedule 1.1(c) - Assumed Liabilities
Schedule 1.3(b)(iv) - Fixed Assets
Schedule 1.3(b)(v) - Other Assets
Schedule 2.1(c) - Affiliate Leases
Schedule 4.1 - Incorporation and Qualification
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(b) - Environmental Permits
Schedule 4.10(d) - 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 4.21 - Insurance
<PAGE>
Schedule 4.23 - Product Liability
Schedule 4.24 - Names and Locations
<PAGE>
Schedule 1.1(a)(xiv)
Branch Locations Landlord
- ---------------- --------
Atlanta: Security Capital Industrial Trust
- -------
4030 Pleasantdale Rd. #E
Doraville, Georgia 30340
Chicago: Joon S. Moon
- -------
800 Central Ave.
University Park, Illinois 60466
Columbus: James D. Crawford, Trustee
- --------
1303 Alum Creek Dr.
Columbus, Ohio 43209
Dallas: Joon S. Moon
- ------
4505 McEwen
Farmers Branch, Texas 75244
Denver: TKJP Denver Investments
- ------
5390 E 39th Ave.
Denver, Colorado 80207
Greensboro: Howard H. Kaiser and wife
- ----------
7015 Cessna Drive Alice K. Kaiser
Greensboro, North Carolina 27409
Houston: JMB/HYPERION Corporation
- -------
8758 Clay Rd. #410
Houston, Texas 77041
Howell: Joon S. Moon
- ------
3511 W Grand River Ave
Howell, Michigan 48843
Indianapolis: Zaiga K. Moon
- ------------
6885 E 34th St.
Indianapolis, Indiana 46226
Kansas City: Anbren IV
- -----------
15301 W. 110th St.
Lenexa, Kansas 66219
<PAGE>
Schedule 1.1(a)(xiv) page 2
Knoxville: John R. Fiser
- ---------
122 Sherlake Rd.
Knoxville, Tennessee 37922
Las Vegas: Lawrence Warehouse Company, Inc
- ---------
4705 S. Valley View Blvd.
Las Vegas, Nevada 89103
Memphis: Bermar Assoc.
- -------
4920 Pleasant Hill #105
Memphis, Tennessee 38118
Minneapolis: George Holm Properties
- -----------
2468 Louisiana Ave. N.
Minneapolis, Minnesota 55427
Nashville: Metropolitan Life Insurance
- ---------
1827 Air Lane Dr. Company
Nashville, Tennessee 37210
New Orleans: Plant Mechanical Services
- -----------
921 Distributors Row
Harahan, Louisiana 70123
Oklahoma City: State of California Public
- -------------
257 N. Harvard Employees Retirement System
Oklahoma City, Oklahoma 73127
Omaha: MRK Investments
- -----
14535 Grover St.
Omaha, Nebraska 68144
Rockford: JKKT Corp
- --------
1936 11th St.
Rockford, Illinois 61104
St. Louis: John W. Moon
- ---------
150 Milwell Drive
Maryland Heights, Mo 63043
<PAGE>
Schedule 1.1(b)(v)
- ------------------
All property at the Reno, NV location is excluded.
The real estate at Rockford, IL is also excluded, but subject to options
elsewhere in this agreement.
. Mail Order Management System leased from AT&T Capital Leasing
Equipment/Lease # 00664997 (See attached)
. P-55-200 Enterprise Pentium PC's (total of 5 PC's) leased from AT&T Capital
L-Leasing # 00665737 (See attached)
<PAGE>
Schedule 1.1(b)(v)
<TABLE>
<S> <C>
THIS STATEMENT is presented to a filing officer for filing pursuant to the For Filing officer
Uniform Commercial Code. (Date, Time, Number and Filing Office)
- ------------------------------------------------------------------------------
Lessee(s) (Last Name First) and address(es) Lessor(ies) and address(es)
- ------------------------------------------------------------------------------
BENSON PUMP CO AT&T Capital Leasing
Services, Inc
DBA ANCHOR SUPPLY 550 Cochituate Rd.
2232 CORNELL AVE,
MONTGOMERY, IL 60538
Farmingham, MA 01701
- ------------------------------------------------------------------------------
1. This financing statement covers the following types (or items) of property:
MAIL ORDER MANAGEMENT SYSTEM........... This transaction is a true
lease and is not intended by the parties as a secured transaction. Filing is
only intended to make the true lease a matter of public record. The lessor is
the owner of such property included all accessories, attachments, additions and
any substitutions of similar equipment types, and the lessee has no rights,
express or implied to sell, exchange, encumber or otherwise dispose of such
property. Equipment/Lease No: 00664997
92320 AT&T Capit
1357829-41-1
Equipment/Lease No: 00664997
Filed With: Illinois
2. [_] Products of Collateral are also covered.
- ------------------------------------------------------------------------------------------------------------------------------
BENSON PUMP CO
By: Attorney-in-fact
-------------------------
Signature of (Lessee)
</TABLE>
<PAGE>
Schedule 1.1(b)(v)(con't.)
<TABLE>
<S> <C>
This STATEMENT is presented to a filing officer for filing pursuant to the For Filing Officer
Uniform Commercial Code. (Date, Time, Number and Filing Office)
- ------------------------------------------------------------------------------
Lessee(s) (Last Name First) and address(es) Lessor(ies) and address(es)
- ------------------------------------------------------------------------------
BENSON PUMP CO AT&T Capital Leasing
Services, Inc.
DBA ANCHOR SUPPLY 550 Cochituate Rd PO Box 9104
2232 CORNELL AVE,
MONTGOMERY, IL 60538
Framingham, MA 01701
- ------------------------------------------------------------------------------
1. This financing statement covers the following types (or items) of property:
P55-200 ENTERPRISE PENTIUM PC 009210898, P55-200 ENTERPRISE
PENTIUM PC 009210899, P55-200 ENTERPRISE PENTIUM PC
009210900, P55-200 ENTERPRISE PENTIUM PC 009210901, P55-200
ENTERPRISE PENTIUM PC 009210902........This transaction is a true
lease and is not intended by the parties as a secured transaction.
Filing is only intended to make the true lease a matter of public
record. The lessor is the owner of such property including all
accessories, attachments, additions and any substitutions of
similar equipment types, and the lessee has no rights, express or implied to 90101 AT&T CAPIT
sell, exchange, encumber or otherwise dispose of such property. Equipment/Lease 1362188-41-1
No: 00665737
Equipment/Lease No: 00665737
Filed With: Illinois
</TABLE>
2. [_] Products of Collateral are also covered.
- --------------------------------------------------------------------------------
BENSON PUMP CO
By: /s/ Attorney-in-fact
-------------------------
Signature of (Lessee)
<PAGE>
Schedule 1.1(c)
Branch Location. Landlord
- ---------------- --------
Atlanta: Security Capital Industrial Trust
- --------
4030 Pleasantdale Rd. #E
Doraville, Georgia 30340
Chicago: Joon S. Moon
- --------
800 Central Ave.
University Park, Illinois 60466
Columbus: James D. Crawford, Trustee
- ---------
1303 Alum Creek Dr.
Columbus, Ohio 43209
Dallas:
- ------- Joon S. Moon
4505 McEwen
Farmers Branch, Texas 75244
Denver: TKJP Denver Investments
- -------
5390 E 39th Ave.
Denver, Colorado 80207
Greensboro: Howard H. Kaiser and wife
- -----------
7015 Cessna Drive Alice K. Kaiser
Greensboro, North Carolina 27409
Houston: JMB/HYPERION Corporation
- --------
8758 Clay Rd. #410
Houston, Texas 77041
Howell: Joon S. Moon
- -------
3511 W Grand River Ave
Howell, Michigan 48843
Indianapolis: Zaiga K. Moon
- -------------
6885 E 34th St.
Indianapolis, Indiana 46226
Kansas City: Anbren IV
- ------------
15301 W. 110th St.
Lenexa, Kansas 66219
<PAGE>
Schedule 1.1(c) page 2
Knoxville: John R. Fiser
- ----------
122 Sherlake Rd.
Knoxville, Tennessee 37922
Las Vegas: Lawrence Warehouse Company, Inc
- ----------
4705 S. Valley View Blvd.
Las Vegas, Nevada 89103
Memphis: Bermar Assoc.
- --------
4920 Pleasant Hill #105
Memphis, Tennessee 38118
Minneapolis: George Holm Properties
- ------------
2468 Louisiana Ave. N.
Minneapolis, Minnesota 55427
Nashville: Metropolitan Life Insurance Company
- ----------
1827 Air Lane Dr.
Nashville, Tennessee 37210
New Orleans: Plant Mechanical Services
- ------------
921 Distributors Row
Harahan, Louisiana 70123
Oklahoma City: State of California Public
- --------------
257 N. Harvard Employees Retirement System
Oklahoma City, Oklahoma 73127
Omaha: MRK Investments
- ------
14535 Grover St.
Omaha, Nebraska 68144
Rockford: JKKT Corp
- ---------
1936 11th St.
Rockford, Illinois 61104
St. Louis: John W. Moon
- ----------
150 Milwell Drive
Maryland Heights, Mo 63043
<PAGE>
Schedule 1.3(b)(iv)
- -------------------
Fixed assets as per following 22 pages which total $683,712.83.
<PAGE>
Schedule 1.3(b)(iv)
------------------
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET Rockford Warehouse Page 1
===================================================================================================================
Asset No Desc1 Desc2 Location Net Book
===================================================================================================================
<S> <C> <C> <C> <C>
00001 Jacuzzi Lighted Sign 01 50.00
00002 Lighted Sign Base 01 125.00
00003 Remodeling Second Floor Offices 01 7,162.00
00004 2nd Floor Electrical, Heating, Plumbing, etc. 01 3,284.00
00005 Remodeling First Floor 01 1,368.00
00006 New Warehouse Dock 01 2,804.00
00007 Warehouse Remodeling 01 3,870.00
00008 Overhead Door in Chlorine Room 01 291.00
00010 2nd & 3rd Floor Window Panels 01 549.82
00011 Fence Around Dock Area 01 298.76
00012 Warehouse Overhead Door 01 185.06
00013 Air Conditioner Unit, Furnace & Ducts in Office 01 625.68
00014 Installed A/C Condenser & Water Cooler 01 153.80
00015 Concrete Pad in Dock Area For Trucks 01 176.00
00016 New Warehouse Roof 01 992.79
00017 New Warehouse Roof 01 3,171.37
00018 Concrete Truck Pad 01 170.03
00019 New Dock Bay 01 412.63
00020 Air Conditioning Condenser 01 171.51
00021 14 Freuhauf Trailers For Storage 01 2,500.00
00023 2 Max One Ton Lift Gates 01 0.00
00025 Box From 1979 LN 7000 01 0.00
00026 3 40ft Semi Trailers 01 450.00
00037 Two Tool Boxes 01 39.00
00038 Staple Guns 01 34.00
00041 Racks and Parts for Storage Bins 01 200.00
00042 Storage Racks 01 145.00
00044 12,000 Gallon Clorine Tank 01 1,800.00
00047 Yale Electric Fork Lift Truck 01 0.00
00049 Sweeper 01 78.75
00050 Snow Thrower 01 187.00
00052 Clark Forklift Model C500Y55 01 0.00
00053 Yale Forklift 4,000 lb Capacity 01 1,486.00
00054 Yale Forklift Battery 01 191.25
00055 Counter Machine 01 40.00
00057 Catalog Holder 01 23.00
00063 NCR Cash Register 01 277.00
00067 Canon CP 1214D Calculator 01 4.65
00068 IBM Model D Typewriter 01 7.41
00069 Telephone System for Office 01 3,054.00
00071 IBM Typewriter Model D 01 50.00
00072 Pitney Bowes Mailing Machine Model # 5600 01 695.00
00073 Cash Register # 1 01 466.00
00081 Fax Machine Capicon 205 01 211.00
00084 Sharp Copier SF-8500 01 519.00
00086 Qantel Computer System Less Disk Drive see Asset #93 01 5,143.00
00087 BCS Co. Software 01 0.00
00088 Calculator Software Package 01 0.00
00089 CRT Video Terminal 01 157.50
00090 Printronix Printer & Pedestal 01 1,981.00
00091 Six Ampex Terminals and Seven Line Drivers 01 0.00
00092 Software 01 0.00
00093 Q30 Processor, 384K memory 150Mbyte Disk Drive 01 8,734.00
00095 Ampex Terminal 01 0.00
00096 128K Memory Module 01 0.00
00097 Modems for Lenexa & Minneapolis - 1 each 01 0.00
00098 Compac Personal Computer 01 0.00
00099 Modem for St. Louis 01 0.00
00100 Qantel 230 Terminal AQP #8055 01 0.00
00102 MACOLA 4.0 Software Package 01 250.00
00107 Qantel Terminal and Printer for Parts Counter 01 53.85
00108 Restore Original Cost of Digital PC From TW to BPC 01 0.00
00111 NEC3142/MMP-80386SX 16Mhz Computer 01 75.00
00112 480 7U Controller 01 133.50
00115 Storage Racks & Shelving 01 1,208.00
00116 Storage Shelves From Noonan Abrasives 01 140.00
00117 Bulk Storage Racks 35 Add on Units 01 781.00
===================================================================================================================
</TABLE>
<PAGE>
1.3 (b)(iv)
<TABLE>
<CAPTION>
Tuesday, December 29,1998 FXASSET Page 2
=====================================================================================================
AssetNo Desc1 Desc2 Location Net Book
=====================================================================================================
<S> <C> <C> <C> <C>
00118 Storage Racks & Shelving From Weeco Ltd 01 412.00
00119 Storage Racks & Shelving From Weeco Ltd 01 150.00
00120 Storage Racks & Shelving From Industrial 01 150.00
00121 Storage Racks & Shelving Part of Howell Shipment 01 67.00
00144 Desk & Office Furniture For Bill Benson's Office 01 395.00
00145 Furniture for Bill Benson's Office 01 0.00
00146 Cabinet for Computer Room 01 120.00
00147 Cabinet for Computer Room 01 118.00
00148 Low Console With Adjustable Shelves 01 0.00
00149 Desk, Chair & Credenza 01 0.00
00150 Fireproof Four Drawer File Cabinet 01 0.00
00151 Furniture For Waiting Room 01 0.00
00152 File Cabinet 01 9.50
00153 Catalog Holder 01 21.43
00154 Two Used File Cabinets 01 10.00
00155 Fireproof File Cabinet 01 14.40
00156 Three Used Brown File Cabinets 01 15.00
00157 Desk & Chair For Bill Benson's Office 01 26.78
00158 Blinds For Bill Benson's Office 01 250.00
00160 Conference Table & Eight Chairs 01 121.00
00161 Ten File Cabinets For Acct Payable Department 01 150.00
00229 NCR Cash Register 01 171.00
00243 Pallet Racking 01 300.00
00288 Two each Ampex Terminals and One Printer 01 200.00
00299 230-AQP Terminal & Printer 01 67.50
00506 Spa Trailer 01 272.05
00557 Copier 01 141.65
00597 Trailer - S&W Metropolitan 01 447.30
00598 Computer Q-Card 01 29.94
00615 General leasehold improvements 01 27,120.47
00631 New phone system-deposit 01 446.24
00648 Panasonic KX-1616 Telephone sys, balance Laying Comm 01 509.16
00657 Installation of new phone sys. see assets #631 & 848 01 223.11
00660 1994 Dodge Dakota p/u vin #1B7GL26X3RW125137 01 2,400.00
00661 1994 Dodge Dakota p/u vin #1B7GL26X3RS628934 01 2,400.00
00670 Remodeling work 01 1,752.21
00676 Parking lot restone, regrade 01 2,562.27
00677 8' Aluminum trailer 01 47.87
00678 Bed topper for #661-Dodge p/u 01 30.60
00707 Garage door construction 01 1,596.19
00710 Shelving materials 01 1,176.26
00712 1995 Dodge Dakota p/u vin #1B7FL26G5SW907554 01 2,400.00
00723 Roofing & construction work Illinois Construction 01 13,764.50
00724 Heater Kobels, Inc. 01 2,518.19
00725 Re-route gas pipe for roofing Nelson Carison Contractors 01 1,551.24
00731 Garage door openers Raynor Garage Doors 01 279.57
00739 Counter construction Michael Heng 01 555.20
00790 Roof on elevator room 01 6,005.22
00808 Replaced windows 01 4,079.91
00845 Elevator overhaul 01 19,866.93
00856 Sharp SF2027 Copier 01 1,951.53
00906 ENGINE REBUILD FORKLIFT 01 1,183.17
00924 PALLET TRUCK 01 354.80
00931 NEW DOCK 01 5,917.70
00940 SALES/DELIVERY VAN DAN YOUNG AUTO 01 8,561.27
00970 PALLET TRUCK 01 431.39
00972 PALLET TRUCK 01 431.39
=====================================================================================================
170,726.30
</TABLE>
<PAGE>
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Richford Showroom Page 3
================================================================================
Asset No Desc 1 Desc 2 Location Net Book
================================================================================
00163 Conrete Work 03 1,280.00
00164 Heating & Air Conditioning Equipment 03 1,428.00
00165 Electrical Work 03 3,869.00
00166 Carpentry & Renovation 03 8,218.00
00167 Paving Parking Lot 03 800.00
00168 Showroom Track Lighting 03 0.00
00169 Carpeting for 2nd Floor Display Room 03 0.00
00170 Stairway to 2nd Floor Showroom 03 0.00
00171 Sign on the South Side of the Building 03 0.00
00172 Lighting for 1st & 2nd Floor Showrooms 03 0.00
00173 Spa Display Area For Showroom 03 0.00
00174 Sign on a Post Outside of Showroom 03 365.00
00175 Carpeting Retail Floor 03 0.00
00176 Chimney for Wood Stove 03 0.00
00177 Patio & Fireplace Installation 03 2,115.00
00178 Install Doors to Patio 03 542.00
00179 Two Dome Awnings 03 339.00
00180 Fence Around Patio 03 669.00
00181 Vinyl Tile Floor 03 83.52
00182 Carpet 03 573.88
00183 Cash Register #2 03 0.00
00184 Telephone 03 0.00
00185 Computer Desk and Printer Stand 03 69.00
00186 Shelving From LP Retail Store 03 0.00
00188 Nine 10ft Used Shelving Units 03 234.00
00715 Lozier showcases (2) 03 313.19
00959 NEW FURNACES & AIR CONDI 03 6,314.65
================================================================================
27,213.24
<PAGE>
1.5 (b)(iv)
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET Ormalia Page 4
================================================================================================
AssetNo Desc1 Desc2 Location Ne: Book
================================================================================================
<S> <C> <C> <C> <C>
00189 Air Conditioner and Duct Work 04 357.50
00191 Clark Forklift Model C500-55 04 600.00
00192 Asuzi 616 Telephone System (Vicom) 04 192.00
00193 Sharp Fax machine FO-300 04 138.00
00194 Epson Printer Modell FX286E 04 23.50
00195 Northgate PM386, 16MHZ, Computer with Hard Drive 04 130.00
00196 Printer Model MH-4015 04 37.50
00197 Uninteruptable Power Source Model 450AT 04 18.50
00198 Storage Racks & Shelving 04 279.00
00199 Storage Racks & Shelving 04 113.00
00200 Storage Racks & Shelving 04 137.00
00608 Micro Express Computer 04 83.96
00658 1994 Dodge Dakota p/u Vin #1B7GL26X1RS628933 04 753.15
00730 Remodel cust svc/showroom Gil Stanley Construction 04 733.12
00740 Carpet & installation Jack Andersen 04 382.76
00770 Omaha computer & cable 04 695.01
00810 Forklift overhaul 04 1,682.28
=================================================================================================
6,356.28
</TABLE>
<PAGE>
1.3(b)(iv)
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET St.Louis Page 5
=========================================================================================================
AssetNo Desc1 Desc2 Location Net Book
=========================================================================================================
<S> <C> <C> <C> <C>
00201 Storage Racks & Shelving 05 122.00
00202 Storage Racks & Shelving 05 267.19
00203 Ladder, Uprights & Crossbars 05 108.47
00204 Storage Racks & Shelving 05 460.26
00210 Yale 3,000lb Forklift 05 0.00
00211 Toyota Forklift - Orange 05 236.25
00212 TIE Telephone System Model 16 05 0.00
00215 Two Ampex 230 Terminals and Line Drivers 05 0.00
00216 Okidata 192 Printer 05 0.00
00217 Printer Model 920 SPC 05 0.00
00318 1989 Dodge Sprit (M.Ford) ID # 1AB3BA46K1KF537581 05 1,653.84
00550 Shelves, Racking 05 81.52
00552 Major body work-M.Ford Shadow 05 218.48
00580 05 331.51
00599 Panasonic KX-P2624 Printer 05 18.98
00638 Minolta FAX 3000 fax machine 05 134.66
00639 Minolta EP4230 copier 05 404.06
00640 Flourescent lighting-whse 05 122.66
00688 5 computers 05 325.59
00720 Renovate warehouse doors Martin Co., Inc. 05 831.10
00742 Printer Office Max 05 73.07
00761 Carpeting 05 2,616.84
00771 Printer 05 51.83
00781 Warehouse racking 05 730.11
00785 Remodeling 05 2,837.02
00824 Water pipes replacement 05 3,566.37
00825 Roof repair 05 2,436.19
00826 Forklift - St Louis 05 1,525.96
00941 VEHICLE REBUILD 05 372.99
=========================================================================================================
19,426.75
</TABLE>
<PAGE>
1.3(b)(??)
Tuesday, December 29, 1998 FXASSET University Park Page 6
<TABLE>
<CAPTION>
================================================================================================
Asset No Desc 1 Desc 2 Location Net Book
================================================================================================
<S> <C> <C> <C> <C>
00224 Printer 07 59.45
00244 Concrete Work on Dock 07 ?,232.91
00245 Trim Work For Offices 07 715.01
00246 Additional Cost for University Park Building 07 5,700.90
00252 Kalmar Lift Truck Model CP 50 07 819.18
00253 Allis Chalmers Forklift 07 350.00
00254 Siemens Telephone System 07 560.52
00256 Storage Racks & Shelving 07 900.00
00257 Storage Racks & Shelving 07 842.30
00258 Storage Racks & Shelving 07 267.34
00544 Warehouse Furn & Fixt 07 614.16
00545 Warehouse Furn & Fixt 07 155.43
00562 WAREHOUE FIXTURES 07 1,495.69
00566 SECURITY SYSTEM 07 747.09
00567 FENCING 07 844.17
00592 Re-pave stone area 07 3,651.56
00644 Engineering Services-site imp J.A. Schudt V92281 07 1,448.16
00692 Various fixed assets acquired from Aquafab; detail not pro 07 2,231.21
00743 Cust. Svc. counter Hulsey Custom Remodeling 07 452.45
00791 Fence 07 438.43
00863 Insight/Macola computer system 07 4,675.51
00925 ADDITIONAL FLORESCENT LIG 07 739.50
00933 LEASEHOLD IMPROVEMENT 07 845.75
00960 CONCRETE RAMP & STORAGE 07 2,945.00
00967 98 DODGE CARAVAN 07 14,534.80
00973 COPIER 07 652.03
================================================================================================
47,918.55
</TABLE>
<PAGE>
1.3(b)(iv)
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET Minneapolis Page 7
==================================================================================================================
AssetNo Desc1 Desc2 Location Net Book
==================================================================================================================
<S> <C> <C> <C> <C>
00260 Construction of Wall, Rock & Spa Skirting in Showroom 08 600.00
00254 1986 Ford F-700 Truck 1FDNF70H4GVA41629,LIC#YU5 08 1,275.75
00266 Ladder on Wheels 08 60.00
00267 8 Foot Wooden Step Ladder 08 0.00
00268 Fairbanks Morse 1000# Scale 08 350.00
00269 Clark Forklift Truck Model TW25 08 750.00
00270 Oasis Water Cooler 08 0.00
00272 Pitney-Bowes Scale 08 0.00
00275 Olympia Electric Typewriter 08 0.00
00277 TeLephone System Extrom II 616 08 568.00
00279 Four each 4-Drawer Steelmaster File Cabinets 08 160.00
00280 Three Drawer File Cabinet 08 30.00
00281 Remington Rand Two-Drawer Safe File Cabinet 08 40.00
00282 Invincible Two Shelf Cabinet 08 20.00
00283 Typewriter Stand 08 10.00
00284 2ft X 5ft Steel Table 08 30.00
00285 Invincible Desk 3ft X 6ft 08 60.00
00286 Three each 2.5ft X 5ft Invincible Desks 08 150.00
00287 Two each 2.5ft X 5ft Tables With Folding Legs 08 30.00
00288 Four each Desk Chairs With Wheels 08 80.00
00289 Five each Chairs 08 75.00
00290 Coat Rack 08 0.00
00291 Various Furniture & Fixtures From Aermotor 08 1,000.00
00292 Eight Racks-UP-R 32-144 12ft X 32in 08 120.00
00293 Nineteen Racks-UP-R 24-144 12ft X 34in 08 295.00
00294 Seventy Pair Shelves 8ft X 42in 08 650.00
00295 15 Racks-Uprights 8ft X 38in 08 180.00
00296 43 Shelves 8ft X 39in 08 396.00
00297 50 Racks and Shelves 08 318.00
00635 Used pallet racking Minn disb ck #4396 08 342.65
00652 Computer K.Rogner V91646 08 95.96
00668 Micro Express computer Magtron 486SX-25MHZ 08 63.38
00693 Pallet jack 08 99.80
00836 Sharp SF2014 copier 08 693.05
00853 Brothers Fax Machine ML2500 08 404.26
00895 CHEVY CAVALIER 08 4,867.75
00966 98 DODGE CARAVAN 08 14,534.80
==================================================================================================================
28,349.40
</TABLE>
<PAGE>
1.3(b)(iv)
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET Howell Page 6
==================================================================================================
Asset No Desc1 Desc2 Location Net Book
==================================================================================================
<S> <C> <C> <C> <C>
00300 WP-6012 COPIER 09 718.51
00303 Forklift CY500Y4S 09 468.00
00304 Telephone System 09 237.55
00305 Sharp Copier Model SF7350 09 184.60
00306 Northgate 386 PC w/68mb Hard Drive 09 139.95
00307 Uninteruptable Power Supply 09 18.50
00308 Storage Racks & Shelves 09 65.81
00309 Storage Racks & Uprights 09 562.57
00310 Uprights, Crossbars and Support Bars for Storage Racks 09 501.45
00311 Freight Related to Storage Racks - Asset #s 308 309 310 09 56.70
00312 Storage Racks & Shelving 09 130.20
00313 Construction Materials For New Showroom 09 105.45
00314 Carpeting for Office Area 09 383.62
00564 COMPUTER 09 67.46
00573 Gravel improvement 09 345.20
00585 Forklift 09 400.00
00600 Micro Express Computer 09 88.72
00623 Forklift overhaul 09 207.92
00662 Computer monitor 09 17.90
00676 Parking lot re-gravel 09 1,134.84
00685 sales tax for asset #681, 1994 Dodge Dakota p/u 09 46.14
00741 Fax machine PPF900 Best Buy, Inc. 09 155.24
00762 Gravel & limestone 09 474.52
00767 1995 Dodge Dakota p/u Vin # 187FL26G7SW934769 09 1,963.30
00772 Computer & cable 09 261.05
00806 Electrical work Landry Electric 09 3,108.87
00814 Warehouse racking 09 2,163.71
00819 Clark II forklift 09 3,476.67
00820 Phone System 09 437.31
00832 3 Whirlpool A/C units 09 733.99
00838 2 Garage doors replaced 09 3,492.49
00965 98 CHEV S-10 1GCCS1440W81 09 10,187.30
==================================================================================================
32,337.54
</TABLE>
<PAGE>
1.3(b)(iv)
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET Lenexa Page 9
=================================================================================================================
Asset No Desc1 Desc2 Location Net Book
=================================================================================================================
<S> <C> <C> <C>
00315 Sign 3ft x 18ft 10 60,000
00323 Telephone System Model T-616 10 473,000
00325 Storage Racks & Shelves 10 1,535,00
00326 Storage Racks & Shelves 10 51.77
00327 Storage Racks & Shelving 10 288.00
00328 Storage Racks & Shelving 10 82.00
00609 Micro Express Computer 10 83.96
00645 Warehouse door Miller Contract ck #4261 10 597.94
00649 Ricoh Copier Modem Business Sys ck#4263 10 366.15
00690 1992 Dodge Caravan van vin# 2B4GH45R3NR736835 10 777.60
00698 Epson LQ-1070+ printer 10 95.75
00773 Computer & cable 10 261.05
00861 Caterpillar Forklift T50D 10 5,051.02
==================================================================================================================
9,725.24
</TABLE>
<PAGE>
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Indianapolis Page ?C
<TABLE>
<CAPTION>
===================================================================================================================================
AssetNo Desc1 Desc2 Location Net Book
===================================================================================================================================
<S> <C> <C> <C> <C>
00345 1990 Dodge Shadow 11 1,381.87
00346 1990 Dodge Spirit (K.Mitten) 11 1,523.82
00348 Fence, Storage Area 11 195.55
00350 6" of Stone, storage area 11 175.00
00351 Paving of parking lot 11 ?,249.40
00352 Paving of driveway 11 165.00
00353 Fence installation & permit 11 523.47
00356 Small Tools 11 595.00
00357 Forklift 11 ?,200.00
00358 Pallet Truck 11 36.96
00359 Forklift 11 ?,580.00
00360 Warehouse Equipment 11 61.00
00361 Warehouse Equipment 11 105.00
00363 Scale 11 20.00
00366 Rack 11 360.00
00367 Rack 11 500.00
00368 Bins 11 90.00
00369 Racks 11 300.00
00370 Racks 11 1,000.00
00371 Racks 11 200.00
00372 Racking 11 600.00
00373 Racking & Shelves 11 21.08
00376 Uninterupted Power Source 11 18.50
00377 Computer Equipment 11 58.75
00378 Office Equipment 11 295.00
00380 Files 11 180.00
00381 Office Equipment 11 0.00
00385 Office Equipment 11 7.50
00387 Answer Machine 11 13.12
00388 Equipment 11 0.00
00389 Telephone System 11 892.00
00390 Repicon 205 fax machine 11 210.00
00558 Computer Equipment 11 79.58
00601 Micro Express Computer 11 88.72
00746 Computer monitor & printer Elec-Tek & MW Peripherals 11 95.44
00774 Computer & cable 11 702.79
00837 Furnace/A/C unit for office A/R cr issued in exchange 11 3,474.00
00839 Dock repair 11 488.12
00848 1997 Chev S-10 P/U BLACK 1GCCS1445VK146366 11 6,241.24
00896 CHEVY S-10 PICKUP 11 4,697.23
00935 GRADE WORK/INSTALL SUMP 11 3,619.00
00936 NEW AIR CONDITIONING 11 5,695.00
00947 SHARP COPIER 11 1,440.00
00948 KONICA 1015 COPIER 11 1,020.00
00964 1998 FLEETSIDE PICKUP HD 3/ 1GCGC24RWE175434 11 15,932.58
00968 2 TRAILERS 11 6,630.00
===================================================================================================================================
63,661.72
</TABLE>
<PAGE>
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Nashville Page 11
<TABLE>
<CAPTION>
===================================================================================================================================
AssetNo Desc1 Desc2 Location Net Book
====================================================================================================================================
<S> <C> <C> <C> <C>
00392 Building Offices 12 382.00
00396 Clark Forklift model C50040 12 291.00
00397 Yale Forklift Truck 12 400.00
00398 12' Ladder 12 0.00
00400 Telephone System 12 385.00
00401 Equipment 12 0.00
00407 Racks 12 2,600.00
00408 File Cabinets 12 146.00
00409 Racks 12 57.00
00410 Desk & Chairs 12 74.00
00591 Forklift Rebuild/repairs 12 232.84
00603 Magtron PC (Micro Xpress) 12 90.04
00775 Computer & cable 12 261.92
00798 Warehouse shelving 12 595.48
00889 XEROX XC104 COPIER 12 642.86
00903 FORKLIFT OVERHAUL 12 2,383.23
00971 PALLET TRUCK 12 396.04
====================================================================================================================================
8,939.41
</TABLE>
<PAGE>
1.3(b)(iv)
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET Oklahoma City Page 12
======================================================================================================
Asset No Desc1 Desc2 Location Net Book
======================================================================================================
<S> <C> <C> <C> <C>
00411 Security System 13 95.50
00414 White Brand Forklift 13 400.25
00415 Semi Trailer for storage 13 120.00
00416 2 Calculators 13 7.77
00417 Labeling machine 13 121.00
00418 IBM Electric Typewriter 13 62.13
00419 IBM Elec Typewriter w/mem 13 72.50
00420 Gestler 2002R Copy System 13 114.14
00421 Cash Register 13 36.14
00422 Microwave 13 9.79
00423 Misc Office Equipment 13 15.34
00424 Polariod Camera 13 13.12
00425 Telephone System 13 157.50
00426 Paper Shredder 13 13.64
00428 Computer 13 542.45
00430 Racking 13 60.60
00431 Racking & Shelving 13 283.85
00432 Shelving Units 13 118.77
00433 Office Furniture 13 28.50
00434 Desk & Chairs 13 6.52
00435 Executive Desk & Chair 13 26.25
00436 Sec Desk & Chair 13 17.55
00437 Office Furniture 13 20.00
00438 Water Cooler 13 12.87
00439 Office Furniture 13 8.26
00440 Fireproof Safe 13 33.56
00441 Window Blinds 13 18.74
00442 Office Furniture 13 79.01
00546 Warehouse Furn & Fixt 13 515.97
00610 Micro Express Computer 13 83.96
00650 Major copier overhaul OK Copier Service ck#3596 13 152.67
00680 1994 Dodge Dakota vin # 1B7GL26X9RW127801 13 663.07
00701 Major rebuild-forklift 13 729.74
00821 Phone system 13 587.31
00823 Copier 13 615.65
00828 Fax machine 250 Xerox 13 260.66
======================================================================================================
6,104.78
</TABLE>
<PAGE>
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Columbus Page 13
================================================================================
Asset No Desc 1 Desc 2 Location Net Book
================================================================================
00443 386SX Computer 14 67.50
00605 Micro Express Computer 14 90.04
00682 Brother 620 fax machine 14 82.34
00699 Telephone system 14 469.07
00706 Epson printer 14 97.56
00776 Computer & cable 14 265.37
================================================================================
1,071.88
<PAGE>
1.3 (b) (iv)
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET Memphis Page 14
================================================================================
AssetNo Desc1 Desc2 Location Net Book
================================================================================
<S> <C> <C> <C> <C>
00444 Copier 15 175.20
00445 Telephone System 15 180.00
00446 386 SX Computer 15 67.50
00570 MISC COMPUTER EQUIP 15 22.08
00588 2 Office Chairs 15 94.47
00604 Micro Express Computer 15 90.04
00616 General Leasehold Improvements 15 1,866.75
00636 Platform trucks & posts 15 206.84
00641 Warehouse shelving 15 123.66
00673 Warehouse shelving 15 123.66
00726 1995 Dodge Dakota p/u 1B7FL26GOSW920518 15 6,684.45
00777 Computer & cable 15 478.03
00858 Komatsu Forklift C50 15 4,865.56
00864 Compaq/Insight new computer 15 956.25
================================================================================
</TABLE>
15,936.49
<PAGE>
1.3(b)(iv)
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET Denver Page 15
=================================================================================================
Asset No Desc1 Desc2 Location Net Book
=================================================================================================
<S> <C> <C> <C> <C>
00447 Roof 16 26,911.38
00448 Forklift & Racking 16 140.00
00541 Used Shelving 16 839.44
00543 Building Materials-Lsehd Imp 16 203.04
00547 Warehouse Furn & Fixt 16 1,025.33
00555 2 Siemens Phones, horns, amp 16 102.60
00563 ADT SECURITY SYSTEM 16 53.00
00602 Micro Express Computer 16 88.72
00617 General Leasehold Improvements 16 17,364.95
00669 1994 Dodge Dakota p/u vin#1B7GL26X6RW124712 16 731.18
00778 Computer & cable 16 261.05
00782 Chain link fence & gate 16 2,014.94
00792 Roofing 16 ?,845.98
00805 Printer-Lewan & Associates 16 744,69
00811 Forklift 16 437.31
00865 Compaq/insight new computer 16 958.25
00904 NEW ROOF SECTION 16 3,049.80
00907 FORKLIFT 16 2,950.75
00923 DODGE DAKOTA REBUILT 16 2,280.05
00955 CONSTRUCTION OF OFFICE 16 783.75
00982 PARKING LOT PAVING 16 3,695.07
00983 NEW ROOF SECTION 16 4,638.75
00985 NEW WINDOWS 16 5,942.38
=================================================================================================
77,063.41
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tuesday December 29, 1998 FXASSET Page 16
==============================================================================================================
Asset No Desc1 Desc2 Location Net Book
==============================================================================================================
<S> <C> <C> <C> <C>
00207 1990 Dodge Shadow ID # 1B3XP48D1LN227408 21 1,448.44
00542 Santana-various assets 21 2,048.21
00565 3 CHAIRS 21 48.73
00568 VARIOUS LEASEHOLD IMP 21 776.74
00571 SHELVING 21 20.93
00572 Leasehold Imp-Griffin Mech 21 1,492.16
00578 Forklift 21 389.70
00583 Warehouse Furn & Fixt Storage Equipment V61091 21 1,779.03
00594 Canon PC6-RE Copier & Cartridge 21 90.10
00611 Micro Express Computer 21 83.96
00620 General Leasehold Improvements 21 942.63
00628 Telephone system expansion 21 128.29
00633 1993 Isuzu truck w/liftgate JALB4B1A2P7009279 21 1,411.53
00642 Rolling ladder, shelving, dollys platform and piano trucks 21 583.73
00667 Telephone system AT&T Spirit 21 289.84
00671 Chain link fence-Jacuzzi spas 21 308.51
00713 1995 Dodge Dakota p/u vin#1B7FL26G4SW906332 21 710.77
00737 Warehouse racking 21 538.86
00744 Warehouse shelving Home Depot 21 200.04
00748 Warehouse racking Home Depot 21 175.85
00751 Warehouse shelving Shannon Corp. 21 3,257.95
00752 Misc. whse trucks, dollys Shannon Corp. 21 825.96
00754 1995 Dodge Dakota p/u 1B7FL26G3SW934770 21 1,966.64
00755 Telephone system Telecom Brokers 21 143.54
00756 Computer & network cards K. Kopf 21 905.86
00759 FW Comp K. kopf 21 436.94
00768 Sales tax on '95 Dodge Dakota 21 131.07
00769 Clark 5000# Model GCS25MB 21 2,860.91
00784 1995 Isuzu truck vin #4KLB4B1AXSJ000553 21 4,317.14
00786 21 219.40
00793 Copier 21 295.86
00797 Warehouse shelving 21 738.82
00804 96 Dodge truck 21 5,351.81
00822 Phone system 21 673.47
00831 Isuzu '95 truck engine rebuild 21 1,209.14
00833 Burglar alarm system 21 1,184.58
00841 Warehouse shelving 21 384.93
00963 NEW ROOF 21 24,225.00
00969 WAREHOUSE SHELVING 21 3,710.50
00979 FILES 21 371.43
==============================================================================================================
66,679.00
</TABLE>
<PAGE>
1.3(b)(iv)
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET Atlanta Page 17
=====================================================================================================
AssetNo Desc1 Desc2 Location Net Book
=====================================================================================================
<S> <C> <C> <C> <C>
00646 Clark 500# forklift w/side shifter Tower Sales V22294 22 780.92
00647 Clark 5500# forklift Tower Sales V22294 22 669.36
00651 Telephone System American Telcom V92619 22 96.39
00653 Computer 22 95.96
00654 Whse Equip-ladder, jack, vac, stacker Tower Sales V91650 22 178.49
00655 Orange & Blue pallet racking Tower Sales V91650 22 379.31
00656 Parts racking Tower Sales V91650 22 223.11
00683 Warehouse racking 22 353.76
00684 1994 Dodge Dakota p/u vin# 1B7FL26X2RW131183 22 683.39
00700 Epson LQ 1070 + printer 22 91.36
00779 Computer & cable 22 210.93
00783 1995 Isuzu truck VIN #4KLB4B1A2SJ000272 22 4,091.73
00807 SF-7200 Copier 22 277.69
00812 Forklift 22 4,045.19
00902 SHELVING 22 1,508.92
00939 REBUILD DELIVERY TRUCK 22 1,268.66
00980 FILES/DESK 22 464.29
00981 WAREHOUSE SHELVING 22 787.43
=====================================================================================================
16,206.89
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET
Page 18
=======================================================================================================================
AssetNo Desc 1 Desc2 Location Net Book
=======================================================================================================================
<S> <C> <C> <C> <C>
00728 Pallet jack W. Carolina Forklift, Inc. 23 140.72
00729 Telephone system Tri-Com Communications, Inc 23 669.21
00732 Sharp FO-245 Fax machine 23 139.39
00733 Sharp SF-7100 Copier 23 180.39
00734 Office Furniture MacThrift Clearance Ctr 23 550.97
00736 Forklift W. Carolina Forklift, Inc. 23 2,152.22
00738 Warehouse shelving W. Carolina Forklift, Inc. 23 1,296.11
00745 Ladder, hand trucks 23 295.03
00747 Shelving & dockboard 23 1,039.94
00749 Office Furniture 23 147.01
00750 Warehouse racking W. Carolina Forklift, Inc. 23 4,318.02
00757 Computer & network cards 23 884.26
00758 Epson FX870 Printers (3) CLG, Inc. 23 160.36
00763 Fence 23 1,451.96
00764 Ramp installation 23 1,545.61
00765 Grading & stone installation 23 1,091.02
00766 Install door 23 3,182.16
00787 CANON PC-6RE COPIER 23 278.74
00855 Concrete-fenced area at rear Mid Atlantic Paving 23 4,751.12
00922 ADDITIONAL LIGHTING WAREH 23 462.08
00934 LEASEHOLD IMPROVEMENTS 23 340.00
=======================================================================================================================
25,076.32
</TABLE>
<PAGE>
1.3(b)(iv)
<TABLE>
<CAPTION>
Tuesday, December 29, 1998 FXASSET Knoxville Page ??
===================================================================================================
Asset No Desc 1 Desc 2 Location Net Book
===================================================================================================
<S> <C> <C> <C> <C>
00714 1995 Dodge Dakota p/u vin#1B7FL26GXSW910790 26 755.95
00794 Stell Crete office fum 26 2,186.59
00894 WIRE SHELVING/DECKING 26 812.05
00909 SHELVING 26 3,899.01
00910 WAREHOUSE LADDERS 26 554.64
===================================================================================================
9,208.24
</TABLE>
<PAGE>
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET New Orleans Page 20
================================================================================
Asset No Desc 1 Desc 2 Location Net Book
================================================================================
00847 No office remodel 27 1,458.20
00849 No warehouse racking 27 3,195.91
00850 No Komatsu Forklift ARK Equipment 27 4,622.45
00857 Misc new furniture & fixtures 27 1,051.16
00866 Compaq/Insight computer 27 724.49
00868 Canon Copier/BRT fax machine 27 948.12
00890 LOADING EQUIPMENT 27 1,554.27
00891 SHELVING 27 935.63
00892 SHELVING 27 3,062.40
00893 WAREHOUSE LADDERS 27 777.47
00901 SHELVING 27 888.64
00928 MINI-DOCK 27 764.75
00943 FORKLIFT DAILY EQUIPMENT 27 4,785.00
00961 NEW AIR HANDLER 27 1,213.15
================================================================================
25,981.64
<PAGE>
1.3 (b)(iv)
Tuesday, December 29, 1998 FXASSET Houston Page 21
<TABLE>
<CAPTION>
======================================================================
Asset No Desc1 Desc2 Location Net Book
======================================================================
<S> <C> <C> <C> <C>
00867 Compaq/Insight computer 28 663.67
00899 SHELVING 28 768.05
00900 SHELVING 28 625.27
00921 SHELVING 28 7,714.36
00927 WAREHOUSE LADDERS 28 970.04
00944 FORKLIFT WAGNER EQUIPME 28 5,323.21
00950 FAX MACHINE 28 228.86
00951 COPY MACHINE 28 507.22
00954 OFFICE DESKS AND FILES 28 1,267.30
======================================================================
18,067.98
</TABLE>
<PAGE>
1.3 (b)(iv)
Tuesday, December 29, 1998 FXASSET Las Vegas Page 22
<TABLE>
<CAPTION>
======================================================================
Asset No Desc1 Desc2 Location Net Book
======================================================================
<S> <C> <C> <C> <C>
00956 TELEPHONE INSTALLATION 29 478.32
00958 COUNTER CONSTRUCTION, E 29 2,510.26
00962 CHLORINE ROOM DESIGN & P 29 1,140.00
00977 WAREHOUSE SHELVING 29 2,993.10
00978 COPIER 29 540.09
======================================================================
7,661.77
</TABLE>
<PAGE>
Schedule 1.3(b)(v)
- ------------------
<TABLE>
<S> <C>
Miscellaneous other assets:
Building Rent for January (attached) $ 74,903.50
Deposits (attached) $ 78,571.30
Petty Cash (attached) $ 7,820.00
Total $161,294.80
</TABLE>
<PAGE>
Prepaid January 1998 Rent 1.3(b)(v)
Branch Amount
22 AT Atlanta 5,084.71
14 CO Columbus 4,674.86
21 DA Dallas 5,215.15
16 DE Denver 4,166.67
23 GR Greensboro 3,735.00
28 HU Houston 5,169.00
9 HO Howell 4,291.67
11 IN Indianapolis 4,807.01
26 KN Knoxville 2,131.16
29 LA Las Vegas 7,500.00
10 LE Lenexa 3,881.25
15 ME Memphis 5,500.00
8 MI Minneapolis 6,065.77
12 NA Nashville 5,524.00
27 NE New Orleans 4,958.00
13 OK Oklahoma City 4,189.85
4 OM Omaha 2,760.40
1 RO Rockford
3 RR Rockford retail
5 ST St. Louis 8,727.11
7 UN University Park 8,368.75
99 COR Corporate
Total 96,750.36
Prepaid Amount (31-7)/31 74,903.50
<PAGE>
Deposits 1.3(b)(v)
Branch Lease Utilities
22 AT Atlanta 4,467.23 3,430.00
14 CO Columbus 3,690.00
21 DA Dallas 0.00 845.00
16 DE Denver 3,200.00
23 GR Greensboro 3,313.37 150.00
28 HU Houston 5,514.00
9 HO Howell 4,375.00
11 IN Indianapolis 4,000.00 224.00
26 KN Knoxville 0.00
29 LA Las Vegas 7,500.00
10 LE Lenexa 5,000.00
15 ME Memphis 0.00
8 MI Minneapolis 0.00
12 NA Nashville 0.00 870.95
27 NE New Orleans 4,958.00
13 OK Oklahoma City 3,000.00
4 OM Omaha 2,065.00 800.00
1 RO Rockford
3 RR Rockford retail
5 ST St. Louis 7,656.25
7 UN University Park 12,187.50 1,325.00
99 COR Corporate
Total 70,926,35 7,644.95
<PAGE>
Petty Cash 1.3(b)(v)
Branch Amount
22 AT Atlanta 300.00
14 CO Columbus 250.00
21 DA Dallas 1,000.00
16 DE Denver 270.00
23 GR Greensboro 200.00
28 HU Houston 500.00
9 HO Howell 300.00
11 IN Indianapolis 500.00
26 KN Knoxville 300.00
29 LA Las Vegas 375.00
10 LE Lenexa 300.00
15 ME Memphis 300.00
8 MI Minneapolis 300.00
12 NA Nashville 200.00
27 NE New Orleans 500.00
13 OK Oklahoma City 300.00
4 OM Omaha 200.00
1 RO Rockford 700.00
3 RR Rockford retail 325.00
5 ST St. Louis 400.00
7 UN University Part 300.00
99 COR Corporate
Total 7,820.00
<PAGE>
Schedule 2.1(c)
Affiliated Leases
Branch Locations Landlord
- ---------------- --------
Chicago: John S. Moon
- --------
800 Central Ave.
University Park, Illinois 60466
Dallas: John S. Moon
- -------
4505 McEwen
Farmers Branch, Texas 75244
Denver: TKJP Denver Investments
- -------
5390 E 39th Ave.
Denver, Colorado 80207
Howell: John S. Moon
- -------
3511 W Grand River Ave
Howell, Michigan 48843
Indianapolis: Zaiga K. Moon
- -------------
6885 E 34th St.
Indianapolis, Indiana 46226
Omaha: MRK Investments
- ------
14535 Grover St.
Omaha, Nebraska 68144
Rockford: JKKT Corp
- ---------
1936 11th St.
Rockford, Illinois 61104
St. Louis: John Moon
- ----------
150 Milwell Drive
Maryland Heights, MO 63043
<PAGE>
Schedule 4.1
Seller does business in:
Georgia
Ohio
Texas
Colorado
North Carolina
Michigan
Indiana
Tennessee
Nevada
Kansas
Minnesota
Louisiana
Oklahoma
Nebraska
Illinois
Missouri
<PAGE>
SCHEDULE 4.3
------------
NONE.
<PAGE>
Schedule 4.4
All leases as follows
Agreements with Michigan National Bank
<PAGE>
Schedule 4.4
------------
Branch Locations Landlord
- ---------------- --------
Atlanta: Security Capital Industrial Trust
- --------
4030 Pleasantdale Rd. #E
Doraville, Georgia 30340
Chicago: Joon S. Moon
- --------
800 Central Ave.
University Park, Illinois 60466
Columbus: James D. Crawford, Trustee
- ---------
1303 Alum Creek Dr.
Columbus, Ohio 43209
Dallas: Joon S. Moon
- -------
4505 McEwen
Farmers Branch, Texas 75244
Denver: TKJP Denver Investments
- -------
5390 E. 39th Ave.
Denver, Colorado 80207
Greensboro: Howard H. Kaiser and wife
- ----------- Alice K. Kaiser
7015 Cessna Drive
Greensboro, North Carolina 27409
Houston: JMB/HYPERION Corporation
- --------
8758 Clay Rd. #410
Houston, Texas 77041
Howell: Joon S. Moon
- -------
3511 W. Grand River Ave
Howell, Michigan 48843
Indianapolis: Zaiga K. Moon
- -------------
6885 E. 34th St.
Indianapolis, Indiana 46226
Kansas City: Anbren IV
- ------------
15301 W. 110th St.
Lenexa, Kansas 66219
<PAGE>
Schedule 4.4
Knoxville: John R. Fiser
- ----------
122 Sherlake Rd.
Knoxville, Tennessee 37922
Las Vegas: Lawrence Warehouse Company, Inc
- ----------
4705 S. Valley View Blvd.
Las Vegas, Nevada 89103
Memphis: Bermar Assoc.
- --------
4920 Pleasant Hill #105
Memphis, Tennessee 38118
Minneapolis: George Holm Properties
- ------------
2468 Louisiana Ave. N.
Minneapolis, Minnesota 55427
Nashville: Metropolitan Life Insurance Company
- ----------
1827 Air Lane Dr.
Nashville, Tennessee 37210
New Orleans: Plant Mechanical Services
- ------------
921 Distributors Row
Harahan, Louisiana 70123
Oklahoma City: State of California Public
- --------------
257 N. Harvard Employees Retirement System
Oklahoma City, Oklahoma 73127
Omaha: MRK Investments
- ------
14535 Grover St.
Omaha, Nebraska 68144
Rockford: JKKT Corp
- ---------
1936 11th St.
Rockford, Illinois 61104
St. Louis: John W. Moon
- ----------
150 Milwell Drive
Maryland Heights, Mo 63043
<PAGE>
Schedule 4.6
Not applicable
<PAGE>
SCHEDULE 4.7
------------
NONE.
<PAGE>
Schedule 4.8(a)
Leases as per attached schedule.
<PAGE>
Schedule 4.8(a)
<TABLE>
<CAPTION>
Branch Location Landlord
- --------------- --------
<S> <C>
Atlanta: Security Capital Industrial Trust
- --------
4030 Pleasantdale Rd, #E
Doraville, Georgia 30340
Chicago: Joon S. Moon
- ---------
800 Central Ave.
University Park, Illinois 60466
Columbus: James D. Crawford, Trustee
- ---------
1303 Alum Creek Dr.
Columbus, Ohio 43209
Dallas: Joon S. Moon
- -------
4505 McEwen
Farmers Branch, Texas 75244
Denver: TKJP Denver Investments
- -------
5390 E 39th Ave.
Denver, Colorado 80207
Greensboro: Howard H. Kaiser and wife
- -----------
7015 Cessna Drive Alice K. Kaiser
Greensboro, North Carolina 27409
Houston: JMB/HYPERION Corporation
- --------
8758 Clay Rd, #410
Houston, Texas 77041
Howell: Joon S. Moon
- -------
3511 W Grand River Ave
Howell, Michigan 48843
Indianapolis: Zaiga K. Moon
- -------------
6885 E 34th St.
Indianapolis, Indiana 46226
Kansas City: Anbren IV
- ------------
15301 W. 110th St.
Lenexa, Kansas 66219
</TABLE>
<PAGE>
Schedule 4.10(b)
Re: A list of permits, licenses and other authorization required persuant to
Environmental and Safety requirements for occupation of facilities and operation
of business.
To the best of our knowledge we are in compliance with all requirements for
above. We have previously submitted a list of occupancy permits for branches
that are in locations that require them and have included that list again here.
State of Nevada Registration #157874427
Village of University Park, IL License No. 5014
City of Maryland Heights, MO License No. 00325
City of Greensboro, NC License No. 08987
City of Lenexa, KS License No. 10016850
City of Farmers Branch, TX Certificate of Occupancy
City of Harahan, LA Certificate of Occupancy #307226
<PAGE>
Schedule 4.10(d)
None.
<PAGE>
Schedule 4.11
None
<PAGE>
Schedule 4.12
Purchase orders placed in the normal course of business for normal merchandise,
but for which the merchandise has not yet been received.
<PAGE>
Schedule 4.13
Trademarks as follows:
PRO PURE #1971102
TIDEWATER #1951111
SUNSCAPE #1948912
PROPURE #1525193
<PAGE>
SCHEDULE 4.14
-------------
Benson Pump was named as a defendant in the federal case of Browning-Ferris
---------------
Industries of Illinois v. Richard Ter Maat et al, Case No. 91 C 8353 (N.D. III).
- ------------------------------------------------
This case relates to the MIG/DeWane Landfill Site in Boone County, Illinois.
Plaintiffs allege that Benson Pump and other parties disposed of materials at
the Landfill Site, and Plaintiffs are seeking contribution for the clean-up of
the Site.
<PAGE>
Schedule 4.16
State of Nevada Registration #157874427
Village of University Park, IL License No. 5014
City of Maryland Heights, MO license No. 00325
City of Greensboro, North Carolina license No. 08987
City of Lenexa, KS license No. 10016850
City of Farmers Branch, TX certificate of occupancy
<PAGE>
SCHEDULE 4.17
-------------
NONE.
<PAGE>
Schedule 4.18
Eight paid holidays per year.
Two or three weeks vacation
Group health insurance. A major medical type plan. Employee pays half.
Involuntary long term illness benefit
Discretionary profit sharing plan. No contributions in last 2 years.
401(k) Plan. Employer match only up to 25% of employees contribution up to 6% of
employee pay.
Branch managers have an annual program where they can earn up to 25% of base by
exceeding profit and inventory goals.
A few salesmen have a sliding commission scale on sales with the maximum being
2% of sales. Most salesmen have a quarterly incentive up to $2,000 for making
or exceeding sales goals.
Employee handbook is attached.
<PAGE>
BENSON PUMP CO.
EMPLOYEE HANDBOOK
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
INTRODUCTION............................................................. 1
EMPLOYMENT AT WILL....................................................... 1
EQUAL OPPORTUNITY EMPLOYER............................................... 2
IMMIGRATION LAW COMPLIANCE............................................... 2
NON-DISCLOSURE OF CONFIDENTIAL, PROPRIETARY, AND TRADE
SECRET INFORMATION................................................. 2
CONFLICTS OF INTEREST.................................................... 3
OUTSIDE EMPLOYMENT....................................................... 4
EMPLOYMENT CATEGORIES.................................................... 5
REFERENCE CHECKS OF EMPLOYEES............................................ 6
MEDICAL EXAMINATIONS..................................................... 6
EMPLOYMENT APPLICATIONS.................................................. 7
PERSONNEL DATA CHANGES................................................... 7
PROBATIONARY PERIOD...................................................... 7
PERFORMANCE EVALUATIONS.................................................. 8
TIMEKEEPING.............................................................. 8
ADMINISTRATIVE PAY CORRECTIONS........................................... 9
PAY DEDUCTIONS AND OFFSETS............................................... 9
PAYDAYS.................................................................. 9
OVERTIME................................................................. 10
ATTENDANCE AND PUNCTUALITY............................................... 10
PERSONAL APPEARANCE...................................................... 10
VISITORS IN THE WORKPLACE................................................ 11
EMPLOYEE BENEFITS OUTLINE................................................ 11
MAJOR MEDICAL INSURANCE............................................ 12
LONG TERM INVOLUNTARY ILLNESS BENEFIT.............................. 12
LIFE INSURANCE PLAN................................................ 14
BENEFITS CONTINUATION (COBRA)...................................... 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
WORKERS' COMPENSATION INSURANCE........................... 15
SAVINGS AND RETIREMENT FUND............................... 15
HOLIDAYS.................................................. 15
VACATION BENEFITS......................................... 16
PERSONAL LEAVE............................................ 17
MEDICAL LEAVE............................................. 18
MATERNITY-RELATED ABSENCES................................ 19
FAMILY LEAVE.............................................. 20
BEREAVEMENT LEAVE......................................... 21
EDUCATIONAL LEAVE......................................... 22
MILITARY LEAVE............................................ 22
JURY DUTY................................................. 23
WITNESS DUTY.............................................. 24
TIME OFF TO VOTE.......................................... 24
BUSINESS TRAVEL EXPENSES.................................. 24
EDUCATIONAL ASSISTANCE.................................... 26
EMERGENCY CLOSING OF OPERATIONS................................ 27
EMPLOYMENT TERMINATION......................................... 27
UNUSED VACATION IN THE EVENT OF TERMINATION.................... 27
SAFETY......................................................... 28
DRUG AND ALCOHOL USE........................................... 28
DRUG TESTING................................................... 28
SMOKING........................................................ 29
WORK SCHEDULES................................................. 29
USE OF TELEPHONES AND MAIL SYSTEM.............................. 29
MEAL TIME PERIODS.............................................. 29
USE OF BENSON PUMP EQUIPMENT AND VEHICLES...................... 30
RETURN OF BENSON PUMP PROPERTY................................. 30
EMPLOYEE CONDUCT AND WORK RULES................................ 30
SEXUAL AND OTHER FORMS OF ILLEGAL HARASSMENT................... 32
RESIGNATION.................................................... 32
SOLICITATION................................................... 32
</TABLE>
ii
<PAGE>
INTRODUCTION
Welcome to Benson Pump Co. We are pleased to have the opportunity to work with
you and are looking forward to it being an enjoyable and rewarding relationship
for all of us.
Benson Pump is one of the oldest, largest and most successful distributors in
the swimming pool industry. We are the major distributor force in the Central
United States and have an excellent reputation for high levels of service and
quality with our dealers.
It is our intent that you become a long term employee in this company and to
that end, we have created this manual to show some of the benefits of employment
with this company as well as some of our expectations.
The purpose of this handbook is to provide our employees with some general
information about your employment with Benson Pump. All employees are encouraged
to read this handbook and familiarize themselves with its contents since it
describes many of the responsibilities to Benson Pump, as well as some of the
benefits which our company offers. In addition, this handbook may answer many of
the initial questions which employees often have concerning their employment
with Benson Pump.
Because this handbook cannot anticipate every situation or answer every question
about your employment with Benson Pump, we encourage each employee to raise any
additional questions or concerns which he or she may have about their employment
with our Company.
As Benson Pump continues to grow, changes and revisions in our policies and
procedures may become necessary. In order to retain the flexibility in the
administration of our policies and procedures, Benson Pump reserves the sole and
absolute right to modify, revise, change, supplement, or rescind any of the
policies, procedures or benefits outlined in this handbook from time to time as
the Company deems necessary and appropriate.
EMPLOYMENT AT WILL
This handbook, and the policies and procedures contained in the handbook, are
not an employment contract, nor are they intended to create contractual
obligations of any kind. All employees of Benson Pump are considered employees
at will, and neither the employee nor Benson Pump is bound to continue the
employment relationship. As such, all employment is voluntarily entered into and
all employees are free to leave Benson Pump at any time; and likewise, Benson
Pump may terminate an employee, at its will, at any time and for any reason, or
no reason at all, and with or without cause.
Under no circumstances shall any policy, procedure, or other matter stated
within this handbook, or later adopted by Benson Pump, be in any manner
construed or intended to alter
Page 1
<PAGE>
an employee's status as an employee at will. The policies and procedures
contained in this handbook shall supersede and replace all prior and existing
policies and procedures.
EQUAL OPPORTUNITY EMPLOYER
Benson Pump is an equal opportunity employer. In order to provide equal
employment and advancement opportunities to all individuals, it is the policy of
Benson Pump that all employment decisions will be based on qualifications,
merit, and competence. Except as otherwise required or permitted by law, the
employment practices of Benson Pump shall not be influenced or affected by
virtue of an applicant's or employee's race, color, age, gender, religion,
national origin, or any other characteristic protected by law. In addition, it
is Benson Pump's policy to provide a work environment free from unlawful
harassment of any kind, including any harassment related to sex, age, or ethnic
origin. This policy governs all aspects of employment with Benson Pump,
including but not limited to promotions, assignments, discharges, disciplinary
measures, and any other terms and conditions of employment.
Employees are strongly encouraged to raise with their immediate supervisor or
the executive office any questions or concerns which they may have about any
type of discrimination in the work place. Employees should know that they may
raise such concerns and report such incidents without fear of reprisal. Any
employee who is determined to be engaging in any unlawful discrimination will be
subject to disciplinary measures, up to and including termination of employment.
IMMIGRATION LAW COMPLIANCE
Benson Pump is committed to employing only United States citizens or aliens who
are authorized to work in the United States and to comply with the Immigration
Reform and Control Act of 1986.
As a condition of employment, therefore, each new employee must properly and
accurately complete, sign, and date the first section of the Employee
Eligibility verification Form I-9. Before commencing work, former employees who
are re-hired must also complete the form under the following circumstances: (1)
if they have not previously filed an I-9 with this organization, (2) if their
previous I-9 is more than three years old, or (3) if their previous I-9 is no
longer valid.
NON-DISCLOSURE OF CONFIDENTIAL, PROPRIETARY, AND TRADE SECRET INFORMATION
Page 2
<PAGE>
Protection of confidential business and proprietary information and trade
secrets is vital to the interests and the success of Benson Pump. Such
confidential information includes, but is not limited to, the following
examples:
Customer lists
Financial information
Compensation information
Management strategies
Promotional strategies
Marketing strategies
New product research and development
Pending projects
Purchasing and procurement information and strategies
Employees who are exposed to confidential information of any nature may be
required to sign a non-disclosure agreement as a condition of employment. Any
employee who discloses confidential or proprietary information, trade secrets or
other confidential business information will be subject to disciplinary action,
up to and including discharge, as well as legal action, even if the employee
does not actually benefit from the disclosed information.
CONFLICTS OF INTEREST
Employees have an obligation to conduct business within guidelines that prevent
actual or potential conflicts of interest. This policy only establishes the
framework within which Benson Pump wishes its business to operate. The purpose
of these guidelines is to provide general direction so that employees can seek
further clarification on issues related to the subject of acceptable standards
of operation.
Transactions with outside entities shall be conducted within the framework
established and controlled by the executive level of Benson Pump. Business
dealings with outside firms or entities shall not result in unusual gain for
those firms or entities. Unusual gain refers to, but is not limited to, bribes,
product bonuses, special fringe benefits, unusual price breaks, business
opportunities which Benson Pump may or could obtain benefit from, and other
windfalls designed to ultimately benefit either the employer, the employee, or
both. Promotional plans that could be interpreted to involve unusual gain
require specific executive-level approval.
An actual or potential conflict of interest occurs when an employee is in a
position to influence a decision that may result in a personal gain for that
employee or for a relative as a result of this organization's business dealings.
For the purposes of this policy, a relative in any person who is related by
blood or marriage, or whose relationship with the employee is similar to that of
persons who are related by blood or marriage.
Page 3
<PAGE>
No "presumption of guilt" is created by the mere existence of a relationship
with outside firms or entities. However, if an employee has any influence on
transactions involving purchases, contracts, or leases, it is imperative that he
or she disclose to an officer of the organization as soon as possible the
existence of any actual or potential conflict to interest so that necessary
safeguards can be established to protect all parties.
Personal gain may result not only in cases where an employee or relative has a
significant ownership in a firm or entity with which this organization does
business but also when an employee or relative receives any kickback, bribe,
substantial gift, or special consideration as a result or any transaction or
business dealings involving the organization.
The sales and management materials, products, designs, plans, ideas, and data of
Benson Pump are the property of the employer and should never be given to an
outside firm, entity or individual except through normal channels and with
appropriate authorization. Any improper transfer of material or disclosure of
information, even though it is not apparent that an employee has personally
gained by such action, constitutes unacceptable conduct. Any employee who
participates in such a practice will be subject to disciplinary action, up to
and including discharge.
No employee shall accept gifts of more than nominal value from any individual or
business who does business, or seeks to do business, with Benson Pump or the
customer to which the employee is assigned. In addition, no employee shall
accept any travel, living or entertainment expenses from such persons or
business organizations, either in kind or as an expense allowance. Nominal gifts
are those whose value is so small that they are unlikely to influence a business
decision.
Moreover, no employee will do anything in the conduct of business which would
violate any local, state or federal law.
OUTSIDE EMPLOYMENT
Benson Pump prefers that each employee not seek or undertake additional part-
time employment. Employees, however, may hold outside jobs as long as he or she
satisfactorily meets the performance standards of their job with Benson Pump,
and does not create a potential or actual conflict of interest as previously
discussed. All employees will be judged by the same performance standards and
will be subject to Benson Pump's scheduling demands, regardless of any existing
outside work requirements.
If Benson Pump determines that an employee's outside work interferes with
performance or the ability to meet the requirements of Benson Pump as they are
modified from time to time, the employee may be asked to terminate the outside
employment if he or she wishes to remain with Benson Pump.
Page 4
<PAGE>
Outside employment that constitutes a potential or actual conflict of interest
is prohibited. Employees may not receive any income or material gain from
individuals outside Benson Pump for materials produced or services rendered
while performing their jobs.
The following supplemental employment will not be permitted:
1) Extra or outside work for any customer of Benson Pump;
2) Extra or outside work for any competitor of Benson Pump;
3) Extra or outside work for any supplier or vendor to Benson Pump;
4) Engaging in self-employment, working for any firm, entity, or otherwise
within the swimming pool or spa trade at any level including building repair,
service or retail sales; and
5) Any extra employment that requires an employee to overwork himself to the
extent his job efficiency at Benson Pump is affected.
Each employee undertaking outside extra work or employment is responsible to
notify his immediate supervisor in writing. If an employee changes outside
employment, an additional report must be filed with the employee's immediate
supervisor in writing. Failure to comply with the required written statement may
be grounds for dismissal of the employee.
EMPLOYMENT CATEGORIES
It is the intent of Benson Pump to clarify the definitions of employment
classifications so that employees understand their employment status and benefit
eligibility. These classifications do not guarantee employment for any
specified period of time. Accordingly, the right to terminate the employment
relationship at will at any time is retained by both the employee and Benson
Pump.
Each employee is designated as either NON-EXEMPT or EXEMPT from federal and
state wage and hour laws. NON-EXEMPT employees are entitled to overtime pay
under the specific provisions of federal and state laws. EXEMPT employees are
excluded from specific provisions of federal and state wage and hour laws. An
employee's status as an EXEMPT or NON-EXEMPT employee may only be changed upon
written approval by the management of Benson Pump.
In addition to the above categories, each employee will belong to one other
employment category:
Page 5
<PAGE>
REGULAR FULL-TIME employees are those who are not in temporary or
probationary status and who are regularly scheduled to work Benson Pump's
full-time schedule. Generally, these employees are eligible for Benson Pump's
benefit package, subject to the terms, conditions, and limitations of each
benefit program.
REGULAR PART-TIME employees are those who are not in temporary or
probationary status and who are regularly scheduled to work Benson Pump's
part-time schedule. Generally they are eligible for Benson Pump's benefit
package, subject to the term, conditions, and limitations of each benefit
program.
PROBATIONARY employees are those whose performance is being evaluated to
determine whether further employment in a specific position or with Benson Pump
is appropriate. Employees who satisfactorily complete the probationary period
will be notified of their new employment classification.
TEMPORARY employees are those who are hired as interim replacements, to
temporarily supplement Benson Pump's work force or to assist in the completion
of a specific project. Employment assignments in this category are of a limited
duration. Employment beyond any initially stated period does not in any way
imply a change in employment status. Temporary employees retain that status
unless and until notified of a change. While temporary employees receive all
legally mandated benefits - such as workers' compensation insurance and Social
Security - they are ineligible for all of Benson Pump's other benefit programs.
CASUAL employees are those who have established an employment relationship
with Benson Pump but who are assigned to work on an intermittent and/or
unpredictable basis. While they receive all legally mandated benefits - such as
workers' compensation insurance and Social Security - they are ineligible for
all of Benson Pump's other benefit programs.
REFERENCE CHECKS OF EMPLOYEES
In an effort to ensure that persons who are employed by Benson Pump are properly
qualified and have a strong potential to be productive and successful, it is the
policy of Benson Pump to check the employment references of all applicants.
Benson Pump will also respond to all reference check inquiries from other
employers should any employee at some point in time, make applications for
employment elsewhere. Responses to such inquiries will confirm only dates of
employment, wage rates, and position(s) held.
MEDICAL EXAMINATIONS
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In order to ensure that employees are able to perform the duties for which they
were hired in a manner that is safe to themselves as well as their fellow
employees, medical examinations may be required at the sole discretion of Benson
Pump.
After an offer has been made to an applicant entering a designated job category,
a medical examination may be performed at Benson Pump's expense by a health care
professional of Benson Pump's choice. The offer and assignment of duties is
contingent upon the completion of the examination, if requested, to the
satisfaction of Benson Pump.
Information concerning an employee's medical condition or history will be kept
separate from the employee's other personal information and maintained
confidentially. Access will be limited to those individuals within Benson Pump
who have a legitimate need to know. No medical information will be turned over
to any third-party outside of Benson Pump without the employee's signed written
release and authorization, unless otherwise required by law.
EMPLOYMENT APPLICATIONS
Benson Pump feels that all information contained in employment applications is
material to its review of each application and relies upon the accuracy of
information contained in every employment application, as well as the accuracy
of other data presented throughout the hiring process and employment. Any
misrepresentations, falsifications, or material omissions of any nature with
respect to this information or data will result in Benson Pump's exclusion of
the individual from further consideration for employment or, if the person has
been hired, probable termination of his or her employment with Benson Pump.
PERSONNEL DATA CHANGES
It is the responsibility of each employee to promptly notify Benson Pump of any
changes in personal data. Changes in mailing addresses, telephone numbers,
numbers and names of dependents and individuals to be contacted in the event of
an emergency, educational accomplishments, and other similar status changes that
could affect the employee's best interests should be accurately and immediately
reported to the employee's immediate supervisor and to the personnel department
at Benson Pump's corporate office.
PROBATIONARY PERIOD
The probationary period is intended to provide an employee with an opportunity,
during the initial period after being hired or rehired, to determine whether the
new position meets his or her expectations, and to demonstrate to Benson Pump
his or her ability to achieve a satisfactory level of performance. In addition,
Benson Pump uses this period to evaluate each employee's
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capabilities, compatibilty, attitude, work habits, and overall performance
associated with his or her position. Either the employer or Benson Pump may end
the employment relationship at will at any time during or after the probationary
period, with or without cause or advance notice.
All new and rehired employees work on a probationary basis for the first ninety
(90) calendar days after their date of hire. Any significant absence will
automatically extend the probationary period by the length of the absence. If
Benson Pump determines that the designated probationary period does not allow
sufficient time to thoroughly evaluate the employee. Benson Pump, in its sole
discretion, may extend the probationary period for specified period. Upon the
satisfactory completion of the probationary period, employees will assume
"regular" status.
During the probationary period, new employees are only eligible for those
benefits which are required by law, such as workers' compensation insurance and
Social Security. Upon satisfactory completion of the probationary period,
however, employees become eligible for all other benefits provided by Benson
Pump, subject to the terms and conditions of each benefit program. Employees are
encouraged to seek clarification of these benefits provisions.
PERFORMANCE EVALUATIONS
Supervisors and employees are strongly encouraged to discuss job performance and
goals on an informal, day-to-day basis. Additional formal performance reviews
will be conducted on at least an annual basis to provide both supervisors and
employees the opportunity to discuss job tasks, identify and correct weakness,
encourage and recognize strengths, and discuss positive, purposeful approaches
for meeting goals.
TIMEKEEPING
Ensuring that each employee's time worked is accurately recorded is the
responsibility of every non-exempt employee. Federal and state laws require
Benson Pump to keep an accurate record of time worked in order to calculate
employee pay and benefits. Time worked is all the time actually spent on the job
performing assigned duties.
Non-exempt employees should accurately record the time they begin and end their
work, as well as the beginning and ending time of each meal period. Each
employee should also record the beginning and ending time of any split shift or
departure from work for personal reasons. Overtime work must always be approved
before it is performed.
Falsifying, altering, or otherwise tampering with time records, or recording
time on another employee's time record will result in disciplinary action, up to
and including discharge.
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Non-exempt employees should report to work no more than five minutes prior to
their scheduled starting time nor stay more than five minutes after their
scheduled stop time without expressed, prior authorization from their
supervisor.
The supervisor will review and initial the time record before submitting it for
payroll processing. if corrections or modifications are made to the time record,
the supervisor must verify the accuracy of the changes by initialing the time
record.
ADMINISTRATIVE PAY CORRECTIONS
Benson Pump takes all reasonable steps to assure that employees receive the
correct amount of pay in each paycheck and that employees are paid promptly on
the scheduled payday
In the likely event that there is an error in the amount of pay, the employee
should immediately bring the discrepancy to the attention of his or her
supervisor so that corrections can be made as soon as possible.
PAY DEDUCTIONS AND OFFSETS
The law requires that Benson Pump make certain deductions from every employee's
compensation. Among these are applicable federal, state, and local income
taxes. Benson Pump must also deduct Social Security taxes on each employee's
earnings up to a specified limit that is called the Social Security "wage base".
Benson Pump matches the amount of Social Security taxes paid by each employee.
Benson Pump may from time to time offer programs and benefits beyond those
required by law. Eligible employees may voluntarily authorize deductions from
their paychecks to cover the cost of participation in these programs. Employees
who choose to voluntarily participate in such programs must provide advance
written authorization to Benson Pump indicating their agreement that deductions
from their paychecks may be made by the Company.
Pay offsets may be necessary or required by law in the event of mandated pay
garnishments. If you have questions concerning why deductions were made from
your paycheck or how they were calculated, please feel free to discuss the
matter with your supervisor.
PAYDAYS
The Benson Pump work week and payroll period begins on Monday and ends on
Sunday. All employees are paid bi-weekly on every other Friday. Each paycheck
will include earnings for all work performed through the end of the previous
payroll period.
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If a regularly scheduled payday falls on a day off, a weekend or holiday,
employees will receive pay on the last day of work before the regularly
scheduled payday.
OVERTIME
When operating requirements or other needs of Benson Pump cannot be met during
regular working hours, employees may be scheduled to work overtime hours. When
possible, advance notification of these mandatory assignments will be provided.
All overtime work must be authorized and approved in advance by the employee's
supervisor. Overtime assignments will be distributed as equitably as practical
to all employees qualified to perform the required work.
Overtime compensation is paid to all non-exempt employees in accordance with
federal and state laws. In accordance with the law, overtime pay is based on
actual hours worked in excess of 40 hours per week. Time off on vacation leave,
or any leave of absence will not be considered hours worked for purposes of
performing overtime calculations.
Failure to work scheduled overtime or overtime worked without prior
authorization from the employee's supervisor may result in disciplinary action,
up to and including possible discharge.
ATTENDANCE AND PUNCTUALITY
In order to maintain a safe and productive work environment, Benson Pump expects
all employees to be reliable and punctual in reporting for scheduled work.
Absenteeism and tardiness place a burden on other employees, as well as Benson
Pump. In the rare instance when an employee cannot avoid being late to work or
is unable to work as scheduled, he or she should notify the supervisor as soon
as possible in advance of the anticipated tardiness or absence.
Poor attendance and excessive tardiness are disruptive and may lead to
disciplinary action, up to and including termination of employment.
PERSONAL APPEARANCE
Benson Pump wishes to maintain a professional appearance at all times. Dress,
grooming, and personal cleanliness standards contribute to this goal, as well as
to the morale of all employees and will affect the business image we present to
the community.
During business hours, employees are expected to present a clean and neat
appearance and to dress according to the requirements of their positions.
Employees who appear for work
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inappropriately dressed will be sent home and directed to return to work in
proper attire. Under these circumstances, employees will not be compensated for
the time away from work.
Consult your supervisor or department head if you have questions as to what
constitutes appropriate attire.
VISITORS IN THE WORKPLACE
To provide for the safety and security of employees and the facilities at Benson
Pump, only authorized visitors are allowed in the workplace. Restricting
unauthorized visitors helps maintain safety standards, protects against theft,
ensures security of equipment, protects confidential information, safeguards
employee welfare, and avoids potential distractions and disturbances.
All visitors should enter Benson Pump at the main entrance. Authorized visitors
will receive directions or be escorted to their destination. Employees are
responsible for the conduct and safety of their visitors.
If an unauthorized individual is observed on Benson Pump's premises, employees
should immediately notify their supervisor or, if necessary, direct the
individual to the main entrance.
EMPLOYEE BENEFITS OUTLINE
Eligible employees of Benson Pump are provided with a wide range of benefits. A
number of the programs - such as Social Security, workers' compensation, state
disability, and unemployment insurance - cover all employees in the manner
prescribed by law.
Benefit eligibility is dependent upon numerous factors, including, but not
limited to, employee classification and status. Your immediate supervisor can
assist you to identify the programs for which you are eligible. Details of many
of these programs will be found in this section of the employee handbook.
The following benefit programs are available to eligible employees:
Major Medical Insurance
Long Term Involuntary Illness Benefit
Life Insurance Plan
Benefits Continuation (COBRA)
Workers' Compensation Insurance
Savings and Retirement Fund
Holidays
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Vacation Benefits
Personal Leave
Medical Leave
Maternity-Related Absences
Family Leave
Bereavement Leave
Educational Leave
Military Leave
Jury Duty
Witness Duty
Time off to vote
Business Travel Expenses
Educational Assistance
Some of the above benefit programs may require some contribution from the
employee, but most are fully paid by Benson Pump. Following is a more detailed
explanation of each employee benefit outlined.
MAJOR MEDICAL INSURANCE
Benson Pump's Major Medical Insurance Plan is available to all regular full-time
employees on the first of the month following ninety (90) calendar days of
employment.
For complete details of the plan, please refer to "Your Certificate Booklet" as
published by our insurance plan administrator.
For such eligible employees who elect to take the major medical insurance
coverage, Benson Pump and the employee share in the monthly cost. The
employee's share is deducted from your payroll twice per month. A current list
of rates is available from the payroll department.
LONG TERM INVOLUNTARY ILLNESS BENEFIT
Benson Pump provides wage continuation benefits to all eligible employees for
temporary periods of absence due to the employee's involuntary illnesses or
injuries. Eligible employee classification(s):
Regular full-time employees
Eligible employees will receive a percentage of their base pay depending on
their status, length of service and length of illness as shown in the tables
below.
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NON-EXEMPT EMPLOYEES
Years of Service
<TABLE>
<CAPTION>
Week of 0-2 2-5 5-10 10-15 15+
Illness
<S> <C> <C> <C> <C> <C>
1-4 0% 50% 75% 100% 100%
5-8 0% 0% 50% 75% 100%
9-12 0% 0% 25% 25% 75%
13-16 0% 0% 0% 0% 50%
over 16 0% 0% 0% 0% 0%
</TABLE>
EXEMPT EMPLOYEES
Years of Service
<TABLE>
<CAPTION>
Week of 0-2 2-5 5-10 10-15 15+
Illness
<S> <C> <C> <C> <C> <C>
1-2 0% 100% 100% 100% 100%
3-4 0% 50% 75% 75% 100%
5-8 0% 0% 50% 50% 100%
9-12 0% 0% 25% 25% 75%
13-16 0% 0% 0% 0% 50%
Over 16 0% 0% 0% 0% 0%
</TABLE>
These benefits are intended solely to provide income protection in the event of
long term involuntary illness or injury to eligible employees, and may not be
used for any other absence. For purposes of these benefits, involuntary illness
does not include disabilities related to pregnancy, childbirth, elective
procedures and related medical conditions.
These benefits do not apply until the illness has caused the employee to be
absent for five or more consecutive days. A physician's statement must be
provided verifying the disability and its beginning and expected ending dates.
Benefits will then be applied retroactively to the beginning date of the
disability.
Benefits will be calculated based on the eligible employee's base pay rate at
the time of absence and will not include any special forms of compensation, such
as incentives, commissions, bonuses, or shift differentials.
Payments under the benefit will be reduced by the amount of wage continuation
benefits received by the employee from any source that the company pays for,
including insurance plans, cooperatives, government sponsored programs and
worker's compensation plans.
Long term involuntary illness benefits are limited to sixteen weeks within any
three year period for eligible employees.
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Subject to the terms, conditions and limitations of the applicable plans the
employee may elect to continue participation in the Major Medical Insurance
plan, however, the employee will be responsible for the full amount of premiums
and expenses for the full period of absence.
Accruals for benefit calculations, such as vacation, or holiday benefits will be
suspended during the absence and will resume upon the employee's return to
active employment.
Prior to returning, the employee must provide a satisfactory statement from a
medically licensed physician or health care provider that verifies the
employee's fitness to return to work. To the extent possible, employees will be
returned to their former position or will be offered the first available
comparable position for which they are qualified.
LIFE INSURANCE PLAN
Life insurance is available to all regular full-time employees on the first of
the month following ninety (90) days of employment.
The fixed amount of life insurance is provided in conjunction with the Major
Medical Insurance plan, however, eligible employees may elect to participate in
the life insurance only, and not elect participation under the other coverage's.
For complete details, please refer to "Your Certificate Booklet" as published by
our insurance plan administrator.
For such eligible employees who elect to take life insurance coverage. Benson
Pump and the employee share in the monthly cost. The employee's share is
deducted from your payroll twice per month. A current list of rates is available
from the payroll department.
BENEFITS CONTINUATION (COBRA)
The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) gives
employees and their qualified beneficiaries the opportunity to continue health
insurance coverage under Benson Pump's health plan when a "qualifying event"
would normally result in the loss of eligibility. Some common qualifying events
are resignation, termination of employment, or death of an employee; a reduction
in employee's hours or a leave of absence: an employee's divorce or legal
separation; and a dependent child no longer meeting eligibility requirements.
Under COBRA, the employee or beneficiary pays the full cost of coverage at
Benson Pump's group rates plus an administration fee.
Benson Pump provides each eligible employee with a written notice describing
rights granted under COBRA when the employee becomes eligible for coverage under
Benson Pump's health
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insurance plan. The notice contains important information about the employee's
rights and obligations.
WORKERS' COMPENSATION INSURANCE
Benson Pump provides a comprehensive workers' compensation insurance program at
no cost to employees. This program covers most injuries or illnesses, subject to
any limitations or exclusions set forth by law or in the program policy through
which Benson Pump obtains such insurance, sustained in the course of employment
that requires medical, surgical, or hospital treatment. Subject to applicable
legal requirements, workers' compensation insurance provides benefits after a
short waiting period or, if the employee is hospitalized, immediately.
Any employee who sustains a work-related injury or illness should inform his or
her supervisor immediately. Regardless of how minor an on-the-job injury may
appear, it is important that it be reported immediately. This will enable an
eligible employee to qualify for coverage as quickly as possible.
Neither Benson Pump nor the insurance carrier will be liable for the payment of
workers' compensation benefits for injuries that occur during an employee's
voluntary participation in any off-duty recreational, social, or athletic
activity sponsored be Benson Pump.
SAVINGS AND RETIREMENT FUND
For more information on the savings and retirement programs available through
Benson Pump, please refer to the applicable booklet(s).
HOLIDAYS
Benson Pump will grant holiday time off to all employees on the holidays listed
below.
New Year's Day (January 1)
Memorial Day (last Monday in May)
Independence Day (July 4)
Labor Day (first Monday in September)
Thanksgiving (fourth Thursday in November)
The Day after Thanksgiving
Christmas Eve (December 24)
Christmas (December 25)
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Benson Pump will grant paid holiday time off to all eligible non-exempt
employees after thirty (30) calendar days of employment and upon the employee's
assignment to an eligible employment classification. Holiday pay will be
calculated based on the employee's straight-time pay rate (as of the date of the
holiday) times the number of hours the employee would otherwise have worked on
that day. Eligible employee classification(s):
Regular full-time employees
Regular part-time employees
Probationary employees
To be eligible for holiday pay, non-exempt employees must work the last
scheduled day immediately preceding the holiday and first scheduled day
immediately following it.
In the event a recognized holiday falls on a Saturday, that holiday will be
observed on the preceding Friday. A recognized holiday that falls on a Sunday
will be observed on the following Monday.
If a recognized holiday falls during an eligible employee's paid absence, such
as vacation or sick leave, an extra day may be added to the vacation at a later
date.
If an eligible non-exempt employee works at the request of Benson Pump on a
recognized holiday, he or she will receive holiday pay plus wages at his or her
straight-time rate for the hours worked on the holiday.
Paid time off for holidays will not be counted as hours worked for the purposes
of determining overtime.
VACATION BENEFITS
Benson Pump grants two (2) weeks paid vacation to regular full-time and regular
part-time employees after one year's uninterrupted service and three (3) weeks
paid vacation to regular full-time and regular part-time employees after five
(5) years uninterrupted service. Temporary and casual employees are not entitled
to any vacation allowance. Vacations are non-cumulative and pay in lieu of a
vacation in not permitted.
Vacation eligibility shall continue without interruption when an employee is
transferred from one Department or Branch to another.
If a company designated holiday occurs during an employee's vacation period, an
extra day may be added to the vacation or scheduled at a later date, with the
mutual agreement of the employee and his/her supervisor.
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Department and Branch Managers are responsible for scheduling employee's
vacations in a manner that protects the Department's or Division's work
objectives and Benson Pump's best interest. It is the responsibility of the
Manager to maintain an adequately staffed Department or Branch at all times. The
employee's preference as to vacation date should be considered on the basis of
seniority and best supervisory practices.
Vacation time is computed from the employee's beginning payroll date and
vacations may not be taken before the anniversary date in any year. The employee
has until his or her next anniversary date to take the vacation.
Due to the nature of our business, the spring and early summer months account
for nearly one-half of our sales volume. For this reason, we find it necessary
to close vacation scheduling during the periods of April 15th through July 15th
(however, due to certain mitigating circumstances, vacations during this period
may be granted if in the best interest of the company. The request must be
submitted in writing explaining the circumstances and be approved by a Corporate
Officer). The following periods are open for vacations: January 1st through
April 15th and July 15th through December 31st.
This vacation schedule will be observed each year as long as the employee works
for Benson Pump.
There must be at least two (2) months between annual vacations and all vacations
must be taken by the close of the applicable period.
Vacation must be taken in full week increments unless prior written approval
is obtained from employee's immediate supervisor. For vacation request during
the period of July 15th and August 15th, definite preference will be given first
to those employees with school-age children.
Vacation hours will not be counted as hours worked for the purpose of
determining overtime.
PERSONAL LEAVE
Benson Pump provides leaves of absence without pay to eligible employees who
wish to take time off from work duties to fulfill personal obligations.
Employees in the following employment classification(s) are eligible to request
personal leave as described in this policy:
Regular full-time employees
Eligible employees may request personal leave only after having completed 365
calendar days of service. As soon as eligible employees become aware of the need
for a personal leave of absence, they should request a leave from their
supervisor.
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Personal leave may be granted for a period of up to 30 calendar days every two
years. If this initial period of absence proves insufficient, consideration will
be given to a written request for a single extension of no more than ten
calendar days. With the supervisor's approval an employee may take any
available vacation leave as part of the approved period of leave.
Requests for personal leave will be evaluated based on a number of factors,
including anticipated work load requirements and staffing considerations during
the proposed period of absence.
Subject to the terms, conditions, and limitations of the applicable plans, the
employee may elect to continue participation in the Major Medical insurance
plan, however, the employee will be responsible for the full amount of premiums
and expenses for the full period of approved personal leave.
Benefit accruals, such as vacation, sick leave, or holiday benefits, will be
suspended during the leave and will resume upon return to active employment.
When a personal leave ends, every reasonable effort will be made to return the
employee to the same position, if it is available, or to a similar available
position for which the employee is qualified. However, Benson Pump cannot
guarantee reinstatement in all cases.
If an employee fails to report to work promptly at the expiration of the
approved leave period, Benson Pump will assume the employee has resigned.
MEDICAL LEAVE
Benson Pump will provide unpaid medical leave to eligible employees who are
temporarily unable to work due to a medical disability or a serious health
condition, which include temporary disabilities associated with pregnancy,
childbirth, and related medical conditions. Employee classification(s) eligible
for medical leave are as follows:
Regular full-time employees
As soon as an eligible employee becomes aware of a need for a medical leave of
absence, he or she must provide a satisfactory statement from a medically
licensed physician or health care provider that verifies the existence and
nature of the medical disability. The statement must contain the approximate
date the leave is expected to begin, its anticipated duration, and the date the
employee can be expected to return to work. Any changes in this information
should be immediately reported to Benson Pump. Any employee returning from a
medical leave of absence must provide a satisfactory statement form a medically
licensed physician or health care provider that verifies the employee's fitness
to return to work. To the extent possible,
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employees will be returned to their former position or will be offered the first
available comparable position for which they are qualified.
In order to properly schedule an employee's return to work following a medical
leave of absence, the employee must provided Benson Pump with at least one (1)
week advance notice of the date on which they employee intends to return to
work.
Eligible employees will be granted leave for the period of the disability, up to
a maximum of 30 days every two years. Pending supervisor approval, an employee
may take any available vacation leave prior to the effective date of the medical
leave of absence. If this initial period of absence proves insufficient,
consideration will be given to a written request for a single extension of no
more than 30 days.
Subject to the terms, conditions, and limitations of the applicable plans, the
employee may elect to continue participation in the Major Medical insurance
plans, however, the employee will be responsible for the full amount of premiums
and expenses for the full period of approved medical leave.
Accruals for benefit calculations, such as vacation, or holiday benefit, will be
suspended during the leave and will resume upon the employee's return to active
employment.
Employees who sustain a work-related injury will be eligible for a medical leave
of absence for the period of disability in accordance with all applicable laws
covering occupational disability.
Benson Pump, when applicable, will comply with the Family and Medical Leave Act
of 1993 (FMLA). FMLA requires covered employers to provide up to 12 weeks of
unpaid, job-protected leave to "eligible" employees for certain family and
medical reasons. Employees are eligible if they have worked for a covered
employer for at least one year, and for 1250 hours over the previous 12 months,
and if there are at least 50 employees within 75 miles. Additional information
on employee entitlements and obligations for FMLA leave are available through
your payroll administrator.
When calculating the maximum number of weeks any eligible employee is able to
request for medical and/or family leave at any given time, the number of weeks
already taken, if any, within the 12 months prior to the day the requested leave
is to begin shall be considered and applied towards such calculation.
MATERNITY-RELATED ABSENCES
Benson Pump will not discriminate against any employee who requests an excused
absence for medical disabilities associated with a pregnancy. Such leave
requests will be made and
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evaluated in accordance with the medical leave policy provisions outlined in
this handbook and in accordance with all applicable federal and state laws.
Requests for time off associated with pregnancy and/or childbirth (apart from
medical disabilities associated with these conditions) will be considered in the
same manner as any other request for an unpaid personal leave.
FAMILY LEAVE
Benson Pump provides family leaves of absence without pay to eligible employees
who wish to take time off from work duties to fulfill family obligations
relating directly to childbirth, adoption, or placement of a foster child; or to
care for a child, spouse, or parent with a serious health condition. A serious
health condition means an illness, injury, impairment, or physical or mental
condition that involves inpatient care in a hospital, hospice, or residential
medical care facility; or continuing treatment by a health care provider.
Employees in the following employment classifications are eligible to request
family leave as described in this policy:
Regular full-time employees
Eligible employees may request family leave only after having completed 365
calendar days of service. Eligible employees should make requests for family
leave to their supervisors at least 30 days in advance of foreseeable events and
as soon as possible for unforeseeable events.
Employees requesting family leave related to the serious health condition of a
child, spouse, or parent may be required to submit a health care provider's
statement verifying the need for a family leave to provide care, its beginning
and expected ending dates, and the estimated time required.
Eligible employees may request up to a maximum of 12 weeks of family leave
within any 24 month period. Any combination of family leave and medical leave
may not exceed this maximum limit. If this initial period of absence proves
insufficient, consideration will be given to a written request for a single
extension of no more than 30 calendar days. Employees will be required to first
use any accrued paid leave time before taking unpaid family leave. Married
employee couples may be restricted to a combined total of 12 weeks leave within
any 24 month period for childbirth, adoption, or placement of a foster child; or
to care for a parent with a serious health condition.
When calculating the maximum number of weeks any eligible employee is able to
request for medical and/or family leave at any given time, the number of weeks
already taken, if any,
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within the 12 months prior to the day the requested leave is to begin shall be
considered and applied toward such calculation.
Subject to the terms, conditions, and limitations of the applicable plans, the
employee may elect to continue participation in the Major Medical insurance
plan; however, the employee will be responsible for the full amount of premiums
and expenses for the full period of approved family leave.
Benefit accruals, such as vacation, sick leave, or holiday benefits, will be
suspended during the leave and will resume upon return of active employment.
So that an employee's return to work can be properly scheduled, an employee on
family leave is requested to provide Benson Pump with at least two weeks
advance notice of the date the employee intends to return to work. When a family
leave ends, the employee will be reinstated to the same position, if it is
available, or to an equivalent position for which the employee is qualified. If
an employee's work in a singular position was filled during the absence and
there are no available openings for the same position. Benson Pump will do its
best to find a similar position. However, Benson Pump cannot guarantee
reinstatement in all cases.
If an employee fails to report to work promptly at the end of the approved leave
period, Benson Pump will assume that the employee has resigned.
BEREAVEMENT LEAVE
If an employee wishes to take time off due to the death of an immediate family
member, the employee should notify his or her supervisor immediately. Approval
of bereavement leave will occur in the absence of unusual operating
requirements. Any employee may, with the supervisor's approval, use any
available paid leave for additional time off as necessary.
Paid bereavement leave will be provided to regular full-time employees for death
of an immediate family member. "Immediate family" and bereavement leave
allowance is as follows:
Spouse, child, or parent - 5 days.
Parent-in-law, sister, brother, grandparent or other relative living in
employee's home - 2 days
Paid bereavement leave of one day may be provided to regular full-time employees
for the death of an aunt, uncle or cousin or any other blood-related relative
not specifically mentioned.
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Bereavement pay is calculated based on the employee's base pay rate at the
time of absence and will not include any special forms of compensation, such as
incentives, commissions, and bonuses.
EDUCATIONAL LEAVE
Benson Pump provides educational leaves of absence without pay to eligible
employees who wish to take time off from work duties to pursue course work that
is applicable to their job duties with Benson Pump. Employees in the following
employment classification(s) are eligible to request educational leave as
described in this policy:
Regular fill-time employees
Eligible employees may request educational leave for a period of up to one month
every two years. Requests will be evaluated based on a number of factors,
including anticipated work load requirements and staffing considerations during
the proposed period of absence. Due to the seasonal cycle of our business,
requests for educational assistance should not be made for the period of April
15 through July 15.
Subject to the terms, conditions, and limitations of the applicable plans, the
employee may elect to continue participation in the Major Medical insurance plan
however the employee will be responsible for the full amount of premiums and
expenses for the full period of approved educational leave.
Benefit accruals, such as vacation, sick leave, or holiday benefits, will be
suspended during the leave and will resume upon return to active employment.
When an educational leave ends, every reasonable effort will be made to return
the employee to the same position, if it is available, or to a similar available
position for which the employee is qualified. However, Benson Pump cannot
guarantee reinstatement in all cases.
If an employee fails to report to work at the end of the approved leave period.
Benson Pump will assume that the employee has resigned.
MILITARY LEAVE
A leave of absence without pay will be granted to any employee who enters any
branch of the United States armed services. Benefit accruals for any employee
serving on active duty longer than 30 consecutive days will be calculated in
accordance with applicable federal laws.
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<PAGE>
Employees will be reinstated with full seniority to his or her former position
or to a comparable position if application for re-employment is made within 90
calendar days of the date of an honorable discharge or the date of release from
hospitalization following discharge.
Any employee who is a member of a reserve component of the armed forces will be
placed on unpaid leave for his or her annual two-week training duty. Benefit
programs will be unaffected by the leave, and the employee may elect to use any
vacation entitlements for the absence. Training leaves will not normally exceed
two weeks per year, plus reasonable travel time.
JURY DUTY
Benson Pump encourages employees to fulfill their civic responsibilities by
serving jury duty when required. Employees in an eligible classification may
request up to one week of paid jury duty leave over any one year period. Jury
duty pay will be calculated on the employee's base pay rate times the number of
hours the employee would otherwise have worked on the day of absence less any
compensation received from the court for jury duty. Employee classifications
that qualify for paid jury duty leave:
Regular Full-Time Employees
Regular Part-Time Employees
If an employee is required to serve jury duty beyond the period of paid jury
duty leave, he or she may use any available paid time off (for example, vacation
benefits) or may request an unpaid jury duty leave of absence.
Employees must show the jury duty summons to their supervisor as soon as
possible so that the supervisor may make arrangements to accommodate the
employee's absence. In addition, employees are expected to report for work
whenever the court schedule permits.
Either Benson Pump or the employee may request an excuse from or delay in jury
duty if, in Benson Pump's judgment, the employee's absence would create serious
operational difficulties.
Insurance benefits will remain in effect and unchanged for the full term of the
jury duty absence.
Accrual for benefits calculations, such as vacation, or holiday benefits, will
not be affected during unpaid jury duty leave.
Probationary, Temporary and Casual Employees are not eligible for any jury duty
pay.
Page 23
<PAGE>
Regular Part-Time Employees receive jury duty pay in accordance with the
description above with the exception that any pay is based on a ratio of number
of hours normally worked per weeks as compared to full-time 40 hours.
WITNESS DUTY
Benson Pump encourages employees to appear in court as witnesses when subpoenaed
to do so. If an employee has received a subpoena to appear as a witness by
Benson Pump, they will receive paid time off for the entire period of witness
duty.
An employee will be granted a maximum of two (2) days in any given year of paid
time off to appear in court as a witness at the request of a party other than
Benson Pump. Employees will be paid at their base rate of pay times the number
of hours the employee would have otherwise worked on the day of the absence less
any compensation received for witness duty. Employees are free to use any
remaining paid leave benefits (such as vacation time) to receive compensation
for any period of witness duty absence that would otherwise be unpaid.
A subpoena to appear in court is required and must be shown to the employee's
immediate supervisor as soon as it is received in order to allow operating
requirements to be properly adjusted in the employee's absence. All employees
are expected to report to work whenever the court schedule permits.
TIME OFF TO VOTE
Benson Pump encourages employes to fulfill their civic responsibilities by
participating in elections. Generally, employees are able to find time to vote
either before or after their regular work schedule. If employees are unable to
vote in an election during their non-working hours. Benson Pump will grant up to
two hours of unpaid time off to vote.
Employees should request time off to vote from their supervisor at least two
working days prior to the election day. Advance notice is required so that the
necessary time off can be scheduled at the beginning or end of the work shift,
whichever provides the least disruption to the normal work schedule.
Employees must submit a voter's receipt on the first working day following the
election to qualify for time off.
BUSINESS TRAVEL EXPENSES
Page 24
<PAGE>
Benson Pump will reimburse employees for reasonable and actual business travel
expenses incurred while on assignments away from the normal work location. All
business travel must be approved in advance by the employee's supervisor.
Employees whose travel plans have been approved should make all travel
arrangements through Benson Pump's designated travel agency.
When approved, the actual costs of travel, meals, lodging, and other expenses
directly related to accomplishing business travel objectives will be reimbursed
by Benson Pump. Employees are expected to limit expenses to reasonable amounts.
Expenses that generally will be reimbursed include, but are not limited to the
following:
Car rental fees, only for compact cars.
Fares for shuttle or airport bus service, where available; costs of
public transportation for other ground travel.
Taxi fares, only when there is no less expensive alternative.
Cost of standard accommodations in low to mid-priced hotels, motels,
or similar lodgings.
Cost of meals, no more lavish than would be eaten at the employee's
own expense.
Tips not exceeding 15% of the total cost of a meal or 10% of a taxi
fare.
Charges for telephone calls, fax, and similar services required for
business purposes.
Personal entertainment, alcoholic beverages, and personal care items are not
reimbursed.
Employees who are involved in an accident while traveling on business must
promptly report the incident to their immediate supervisor. Vehicles owned,
leased, or rented by Benson Pump may not be used for personal use without prior
approval.
When travel is completed, employees should submit completed travel expense
reports within 14 days on company approved forms. Reports should be accompanied
by receipts for all individual expenses. Sales persons are required to submit a
sales call report with their expense report. Expenses submitted after three
months will not be paid.
Page 25
<PAGE>
Employees should contact their supervisor for guidance and assistance on
procedures related to travel arrangements, expense reports, reimbursement for
specific expenses, or any other business travel issues.
Abuse of this business travel expenses policy, including falsifying expense
reports to reflect costs not incurred by the employee, will be grounds for
disciplinary action, up to and including termination of employment.
EDUCATIONAL ASSISTANCE
Benson Pump recognizes that the skills and knowledge of its employees are
critical to the success of the organization. The educational assistance program
encourages personal development through formal education so that employees can
maintain and improve job-related skills or enhance their ability to compete for
reasonably attainable jobs within Benson Pump.
Benson Pump will provide educational assistance to all eligible employees
immediately upon assignment to an eligible employment classification. To
maintain eligibility, employees must remain on the active payroll and be
performing their job satisfactorily through completion of each course. Employees
in the following employee classification(s) are eligible for educational
assistance:
Regular full-time employees
Individual courses or courses that are part of a degree, licensing, or
certification program must be related to the employee's current job duties or a
foreseeable-future position in the organization in order to be eligible for
educational assistance. Benson Pump has the sole discretion to determine whether
a course relates to an employee's current job duties or a foreseeable-future
position. Employees should contact the Executive Officer for more information or
questions about educational assistance.
While educational assistance is expected to enhance employees performance and
professional abilities, Benson Pump cannot guarantee that participation in
formal education will entitle the employee to automatic advancement, a different
job assignment, or pay increases.
Benson Pump invests in educational assistance to employees with the expectation
that the investment be returned through enhanced job performance. However, if an
employee voluntarily separates from Benson Pump's employment within two years of
the last educational assistance payment, the amount of the payment will be
considered only a loan. Accordingly, the employee will be required to repay up
to fifty percent of the original educational assistance payment Benson Pump
provided.
Page 26
<PAGE>
EMERGENCY CLOSING OF OPERATIONS
Emergency conditions, such as severe weather, fire, flood, or earthquake, may
disrupt the operations of Benson Pump and interfere with work schedules, as well
as endanger employees' well-being. These extreme circumstances may require the
closing of the work facility.
When the daily operations of Benson Pump are required to close in any location
the time off from scheduled work will be unpaid for all non-exempt employees.
Such employees who work on a day when operations are officially closed will
receive regular pay.
EMPLOYMENT TERMINATION
Termination's are an inevitable part of every personnel activity within any
organization, and many of the reasons for termination are routine. Below are
examples of some, but not all, of the most common circumstances under which
employment is terminated:
RESIGNATION - employment termination initiated by an employee who chooses to
leave the organization voluntarily. Employee should give two (2) weeks notice.
DISCHARGE - employment termination initiated by Benson Pump, with or without
cause, at any time.
LAYOFF - involuntary employment termination initiated by Benson Pump for
non-disciplinary reasons. Benson Pump will give regular full-time employees two
(2) weeks notice.
MEDICAL TERMINATION - employment termination initiated by the employee or by
Benson Pump when an employee is unable, for health reasons, to continue to
perform the duties for which he or she was hired. Reasonable notice under these
circumstances should be given.
RETIREMENT - voluntary retirement from active employment status initiated by the
employee meeting any age, length of service, or any other criteria for
retirement of Benson Pump.
UNUSED VACATION IN THE EVENT OF TERMINATION
If an employee is discharged by the company for serious cause including but not
limited to: insubordination, theft of Benson Pump property, damaging Benson Pump
property due to gross negligence or careless or drunkenness, etc., Benson Pump
will refuse to pay any unused vacation.
Employees laid-off because of reduction of work force, resign with adequate
notice or retire will receive pay equal to all unused and authorized vacation
allowance.
Page 27
<PAGE>
SAFETY
Establishment and maintenance of safe a work environment is the shared
responsibility of Benson Pump and all employees. Benson Pump will make an effort
to do everything within its control to assure a safe environment and compliance
with federal, state, and local safety regulations. Likewise, all employees are
expected and must obey all safety rules and regulations, and exercise caution in
all of their work activities. Each employee is asked to immediately report any
unsafe condition as quickly as possible.
All accidents that result in injury must be reported to the appropriate
supervisor, regardless of how insignificant the injury may be in order to allow
Benson Pump to comply with laws and initiate insurance and workers' compensation
procedures.
DRUG AND ALCOHOL USE
Drug and alcohol use is highly detrimental to the safety and productivity of
employees in the work place. No employee may be under the influence of any
illicit drug or alcohol while in the work place, while on duty, or while
operating a vehicle or equipment owned or leased by the employer. Employees may
use physician-prescribed medications, provided that the use of such drugs does
not adversely affect job performance or the safety of the employee or other
individuals in the work place. In the event any employee is taking prescription
medication that may affect the employee's ability to perform the duties of his
or her job, it is the responsibility of the employee to bring this fact to the
attention of his or her supervisor so that appropriate measures can be taken to
ensure the safety of all employees.
The unlawful manufacture, possession, distribution, transfer, purchase, sale,
use or being under the influence of alcoholic beverages or illegal drugs while
on the employer's property, while attending business-related activities, while
on duty, or while operating a vehicle or machine leased or owned by the employer
is strictly prohibited and may lead to disciplinary action, including suspension
without pay or discharge. When appropriate, Benson Pump may refer the employee
to approved counselling or rehabilitation programs.
DRUG TESTING
Benson Pump is committed to providing a safe and productive work environment. In
order to ensure this type of environment, job applicants and employees may be
asked to submit to drug testing to determine the use of illicit or illegal drugs
and alcohol. Refusal to submit to drug testing may result in disciplinary
action, up to and including termination.
Page 28
<PAGE>
SMOKING
Consistent with Benson Pump's intent to provide a safe and healthful work
environment, smoking in the work place is strictly prohibited except in those
locations that have been specifically designated as smoking areas. This policy
applies equally to all employees, customers, and visitors.
WORK SCHEDULES
Work schedules for employees vary throughout our organization. Supervisors will
advise employees of their individual work schedules. Staffing needs and
operational demands may necessitate variations in starting and ending times, as
well as variation in the total hours that may be scheduled each day and week.
USE OF TELEPHONES AND MAIL SYSTEM
Company telephone lines are designed to adequately service the customers of
Benson Pump, inter-company needs, suppliers and other business purposes. Use of
company phone lines for personal use should be kept to a minimum and only for
emergencies, special needs or other mitigating circumstances. Long distance
calls or any other type of toll calls are not permitted for personal use. Any
employee found abusing Benson Pump's telephone lines in any manner will be
subject to repayment of any charges and to disciplinary action, up to and
including discharge.
We realize everyone needs to use the phone from time to time, and only ask that
each employee respect Benson Pump's priorities.
Benson Pump's mail system is strictly for Benson Pump business only. No personal
use is allowed. Any abuse of this policy will subject the offender to repayment
and disciplinary action, up to and including discharge.
MEAL TIME PERIODS
All full-time employees are provided with one meal period each work day.
Supervisors will schedule meal periods to accommodate operating requirements.
Employees will be relieved of all active responsibilities and restrictions
(other than those restrictions which all employees are expected to observe while
on the premises of Benson Pump) during meal time periods and will not be
compensated for that time.
Page 29
<PAGE>
USE OF BENSON PUMP EQUIPMENT AND VEHICLES
Equipment and vehicles essential to an employee's job duties are expensive and
difficult to replace. When using Benson Pump property, employees are expected to
exercise care, use the equipment and property only in the manner for which it
was intended, perform required maintenance, and follow all operating
instructions, safety standards, and guidelines. Employees that are assigned a
company vehicle are responsible for keeping the vehicle in a clean and
professional appearing condition.
Please notify your supervisor if any equipment, machines, tools, or vehicles
appear to be damaged, defective, or in need of repair. Prompt reporting of
damages, defects, and the need for repairs may prevent deterioration of
equipment and possible injury to employees or others. Your supervisor can answer
any question about an employee's responsibility for maintenance and care of
equipment or vehicles used on the job.
Any improper, careless, negligent, destructive, or unsafe use or operation of
equipment or vehicles, as well as excessive or avoidable traffic and parking
violations, or loss of driving privileges may result in disciplinary action, up
to and including discharge.
Should the company's insurance carrier refuse to insure an employee or require
an extra premium to insure an employee's due to employee's driving or accident
record, the employee will immediately cease operation of any company vehicle.
The employee will have a reasonable opportunity to pay any extra premium or
provide other insurance acceptable to the company. Should an employee be unable
to preform his regular duties due to the lack of insurance, the employee will be
subject to discharge.
RETURN OF BENSON PUMP PROPERTY
Employees are responsible for all Benson Pump property, materials or written
information issued to them or in their possession or control. Employees must
return all property of Benson Pump that is in their possession or control in the
event of termination of employment, resignation, layoff, or immediately upon
request. Where permitted by applicable laws, Benson Pump may withhold from the
employee's check of final paycheck the cost of any items that are not returned
when required. Benson Pump may also take all action deemed appropriate to
recover or protect its property.
EMPLOYEE CONDUCT AND WORK RULES
In order to assure orderly operations and provide the best possible work
environment, Benson Pump expects employees to follow all rules of conduct that
will protect the interests and
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<PAGE>
safety of all employees and the employer. Although it is not possible to list
all forms of behavior that are considered unacceptable in the work place, the
following are examples of infractions of rules of conduct that may result in
disciplinary action, up to and including suspension or termination of
employment:
Working under the influence of alcohol or illegal drugs
Possession, distribution, sale, transfer, or use of alcoholic or illegal
drugs in the work place, while on duty, or while operating employer-owned
vehicles or equipment
Possession of dangerous or unauthorized materials, such as explosives or
firearms, in the work place
Unauthorized disclosure of business "secrets" or confidential information
Excessive absenteeism or any absence without notice
Unauthorized absence from work station during the work day
Theft or inappropriate removal or possession of property
Falsification of timekeeping records
Negligence or improper conduct leading to damage of employer-owned or
customer-owned property
Insubordination or other disrespectful conduct
Fighting or threatening violence in the work place
Smoking in prohibited areas
Boisterous or disruptive activity in the work place
Violation of safety or health rules
Sexual or other unlawful harassment
Unauthorized use of telephones, mail system, or other employer-owned
equipment
Again, while this is not an inclusive list, employment with Benson Pump is based
on the mutual consent of Benson Pump and each employee, and either party may
terminate the employment
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<PAGE>
relationship at any time, with or without cause. Nothing stated herein shall be
intended or construed to alter or otherwise change this relationship.
SEXUAL AND OTHER FORMS OR ILLEGAL HARASSMENT
Benson Pump is committed to providing a work environment that is free of
discriminatory actions, words, jokes, or comments based on an individual's sex,
race, ethnicity, age, religion, or any other legally-protected characteristic.
Such discrimination will not be tolerated.
Anyone engaging in any improper harassment will be subject to disciplinary
action, up to and including possible discharge.
RESIGNATION
Resignation is a voluntary act initiated by the employee to terminate
employment with Benson Pump. Although advance notice is not required, the
employer requests at least two weeks' written resignation notice from all
employees.
Prior to any resignation, an exit interview may be scheduled for purposes of
discussing the reasons for the resignation. Any employee who resigns
voluntarily, forfeits any rights to state or local unemployment compensation
benefits.
SOLICITATION
In an effort to assure a productive and harmonious work environment, persons not
employed by this organization may not solicit or distribute literature in the
work place at any time for any purpose.
Benson Pump recognizes that employees may have interests in events and
organizations outside the work place. However, employees may not solicit or
distribute literature concerning these activities during working time and in
work areas. Working time does not include lunch periods, work breaks, or any
other periods in which employees are not on duty.
In addition, the posting of written solicitations on company bulletin boards is
prohibited. Bulletin boards are reserved for official Benson Pump
communications.
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<PAGE>
Schedule 4.19
-------------
None.
<PAGE>
Schedule 4.21
Zurich Insurance Company Binder 01/01/99-01/01/00
Workers Compensation
Same carrier as prior policy WC84D8976-01 expired 01/01/99. New policy on the
way.
Hartford Insurance Co. 35MSPCR2881 08/01/98-08/01/99
Property coverage for all buildings where required, and contents, accounts
receivable and equipment floater.
Hartford Insurance Co. 35UENM53501 08/01/98-08/01/99
General liability. Occurrence basis.
Hartford Insurance Co. 35UENM53500 08/01/98-08/01/99
Business auto owned and hired
Hartford Insurance Co. 35 HUSL5660 08/01/98-08/01/99
Umbrella liability
<PAGE>
SCHEDULE 4.23
-------------
NONE.
<PAGE>
SCHEDULE 4.24
-------------
BENSON POOL SYSTEMS
TIDEWATER
<PAGE>
EXHIBIT 10.39
SOUTH CENTRAL POOL SUPPLY, INC.
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of January 25, 1999, between South Central
Pool Supply, Inc., a Delaware corporation (the "Company"), SCP Pool Corporation
-------
("Parent") and Manuel J. Perez de la Mesa ("Executive"). Capitalized terms used
------ ---------
herein and not otherwise defined have the definitions set forth in paragraph 9.
WHEREAS, the Company is the nation's leading independent distributor
of swimming pool equipment, maintenance supplies, building materials, chemicals,
accessory items and related leisure products;
WHEREAS, the Company engages in marketing and promoting such products
to both retailers and end-users as of the date hereof in Alabama, Arizona,
Arkansas, California, Colorado, Connecticut, Florida, Georgia, Illinois,
Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico,
New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island,
Tennessee, Texas, Virginia, Washington and the United Kingdom; and
WHEREAS, the Company opens or acquires new locations from time to time
and may expand its marketing and sales of such products into states and other
areas in which the Company does not currently operate;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
----------
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on February 1, 1999 (the
"Commencement Date") and ending as provided in paragraph 4 hereof (the
-----------------
"Employment Period").
-----------------
2. Position and Duties.
-------------------
(a) During the Employment Period, Executive shall render such
administrative, sales, marketing and other executive and managerial services to
the Company and its Subsidiaries as the Company's board of directors (the
"Board") may from time to time direct.
-----
(b) Executive shall report to the Company's Chairman, and Executive
shall devote his best efforts and his full business time and attention (except
for permitted vacation periods and reasonable periods of illness or other
incapacity) to the business and affairs of the Company and its Subsidiaries.
Executive shall perform his duties and responsibilities to the best of his
abilities in a diligent, trustworthy, businesslike and efficient manner.
<PAGE>
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
------------
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one of more Subsidiaries.
3. Base Salary and Benefits.
------------------------
(a) During the Employment Period, Executive's base salary shall be
$200,000, or such greater rate as the Compensation Committee of the Parent's
Board of Directors (the "Compensation Committee") may designate from time to
----------------------
time (the "Base Salary"), which salary shall be payable in regular bi-weekly
-----------
installments in accordance with the Company's general payroll practices and
shall be subject to customary withholding.
(b) During the Employment Period, Executive shall be entitled to
participate in all of the Company's employee benefit programs for which senior
executive employees of the Company and its Subsidiaries are generally eligible,
including without limitation the SCP Pool Corporation Employee Stock Purchase
Plan. Executive shall receive a car allowance of $700 per month or such other
amount as determined from time to time under the Company's automobile allowance
policy.
(c) The Compensation Committee shall grant to Executive under the
Parent's 1998 Stock Option Plan non-qualified options to purchase 50,000 shares
of Common Stock of the Parent during the first fiscal quarter of each of 1999,
2000 and 2001. The exercise price of such options shall be the fair market value
as determined by the Compensation Committee on the date of each respective
grant. Each grant of options shall vest 5 years from the date of grant, except
in the case of a Change of Control of the Parent or termination of Executive for
reasons other than Cause, in which cases any granted options shall vest
immediately.
(d) The Executive shall be fully eligible for bonuses as awarded by
the Compensation Committee in its discretion following the end of each fiscal
year during the Employment Period based upon Executive's performance and the
Company's operating results during such year. During the first year of
employment, Executive shall be eligible for a bonus of 50% of Base Salary upon
the Compensation Committee's determination that specified performance goals have
been met (or such greater amount as the Compensation Committee determines in its
discretion if such goals are exceeded).
(e) Upon the execution of this Agreement, the Compensation Committee
shall grant to Executive under the Parent's 1998 Stock Option Plan non-qualified
options to purchase 20,000 shares of Common Stock of the Parent. Such options
shall vest immediately, shall have an exercise price equal to the fair market
value of the Common Stock as determined by the Compensation Committee, and shall
be exerciseable for a period of 30 days after the date of grant.
(f) Upon the execution of this Agreement, the Compensation Committee
shall grant to Executive under the Parent's 1998 Stock Option Plan non-qualified
options to purchase 30,000 shares of Common Stock of the Parent. Such options
shall have an exercise price equal to
2
<PAGE>
$0.01 per share. As more fully described in the stock option agreement
accompanying such grant, twenty percent (20%) of such options shall vest over
each of the five anniversaries following the date of grant, except in the case
of a Change of Control of the Parent or termination of the Executive for reasons
other than Cause, in which case the granted options shall vest immediately. In
addition, such options shall have as a condition to exercise a requirement that
Executive shall have exercised the option set forth in paragraph 3(e) above for
20,000 shares of Common Stock.
(g) During January 2000, the Compensation Committee shall grant to
Executive under the Parent's 1998 Stock Option Plan non-qualified options to
purchase 30,000 shares of Common Stock of the Parent. Such options shall have an
exercise price equal to $0.01 per share. As more fully described in the stock
option agreement accompanying such grant, twenty percent (20%) of such options
shall vest over each of the five anniversaries following the date hereof, except
in the case of a Change of Control of the Parent or termination of the Executive
for reasons other than Cause, in which case the granted options shall vest
immediately. In addition, such options shall have as a condition to exercise a
requirement that Executive shall have exercised the option set forth in
paragraph 3(e) above for 20,000 shares of Common Stock.
(h) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(i) The Company shall reimburse Executive for reasonable expenses
incurred in traveling to Louisiana to locate permanent housing and moving
expenses. The Company shall reimburse Executive for reasonable temporary housing
and commuting expenses incurred between the Commencement Date and June 30, 1999.
4. Termination.
-----------
(a) The Employment Period shall continue until Executive's
resignation, death or disability or other incapacity (as determined by the
Board) or until the Board determines to terminate Executive's employment with
the Company.
(b) In the event of Executive's resignation or termination for Cause
(as defined below), Executive shall not be entitled to receive his Base Salary
(or any fringe benefits or bonuses) for periods after the termination of the
Employment Period.
(c) Upon any termination other than Executive's resignation or
termination for Cause (including termination in connection with a Change of
Control of the Parent) on or before the second anniversary of the Commencement
Date, Executive shall be entitled to receive his Base Salary (but not any fringe
benefits or bonuses) for a period of 1 year thereafter, subject to the following
limitations:
3
<PAGE>
(i) Executive shall be entitled to receive the Base Salary
during such period if and only if Executive has executed and delivered
to the Company a release of employment-related claims against the
Company in a form acceptable to the Company.
(ii) Executive shall be entitled to receive the Base Salary
during such period if and only if Executive has not breached the
provisions of paragraphs 5, 6 and 7 hereof.
(d) Upon any termination other than Executive's resignation or
termination for Cause (including termination in connection with a Change of
Control of the Parent) after the second anniversary of the Commencement Date,
Executive shall be entitled to receive his Base Salary (but not any fringe
benefits or bonuses) for a period of six months year thereafter, subject to the
limitations set forth in subparagraphs 4(c)(i) and (ii) above.
(e) All of Executive's rights to fringe benefits and bonuses
hereunder (if any) which accrue after the termination of the Employment Period
shall cease upon such termination. The Company may offset any amounts Executive
owes to the Company, the Parent or their Subsidiaries against any amounts it
owes Executive hereunder.
5. Confidential Information. Executive acknowledges that the
------------------------
information, observations and data obtained by him while employed by the
Company, its Parent and their Subsidiaries concerning the business or affairs of
the Company, the Parent or any of their Subsidiaries ("Confidential
------------
Information") are the property of the Company, its Parent or such Subsidiary.
- -----------
Executive acknowledges that the Company has a protectable interest in the
Confidential Information. Therefore, Executive agrees that he shall not
disclose to any unauthorized person or use for his own purposes any Confidential
Information without the prior written consent of the Board, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Executive's acts or omissions.
Executive shall deliver to the Company at the termination of the Employment
Period, or at any other time the Company may request, all memoranda, notes,
plans, records, reports, computer tapes, printouts and software and other
documents and data (and copies thereof) relating to the Confidential
Information, Work Product (as defined below) or the business of the Company, the
Parent or any Subsidiary which he may then possess or have under his control.
6. Inventions and Patents. Executive acknowledges that all
----------------------
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company's, the Parent's or any of their
Subsidiaries' actual or anticipated business, research and development or
existing or future products or services and which are conceived, developed or
made by Executive while employed by the Company, the Parent or their
Subsidiaries ("Work Product") belong to the Company, the Parent or such
------------
Subsidiary. Executive acknowledges that the Company has a protectable interest
in the Work Product. Executive shall promptly disclose such Work Product to the
Board and perform all actions reasonably requested by the Board (whether during
or after the
4
<PAGE>
Employment Period) to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other instruments).
7. Non-Compete, Non-Solicitation. In further consideration of the
-----------------------------
compensation to be paid to Executive hereunder, Executive acknowledges that in
the course of his employment with the Company he shall become familiar with the
Company's, the Parent's and their Subsidiaries' trade secrets and with other
Confidential Information concerning the Company, the Parent and their
Subsidiaries and that his services have been and shall be of special, unique and
extraordinary value to the Company, the Parent and their Subsidiaries.
Therefore, Executive agrees that:
(a) During the Employment Period and for two years thereafter (the
"Noncompete Period"), Executive shall not, within a 100-mile radius of any
-----------------
location where the Company or any of its Subsidiaries has an office or facility,
directly or indirectly own any interest in, manage, control, participate in,
consult with, render services for, or in any manner engage in any business
competing with the businesses of the Company, the Parent or their Subsidiaries,
as such businesses exist or are in process on the date of the termination of
Executive's employment. Nothing herein shall prohibit Executive from being a
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company, its Parent or any Subsidiary to leave the employ of the Company,
its Parent or such Subsidiary, or in any way interfere with the relationship
between the Company, its Parent or any Subsidiary and any employee thereof, (ii)
hire any person who was an employee of the Company, its Parent or any Subsidiary
within 180 days prior to the time such employee was hired by Executive, (iii)
induce or attempt to induce any customer, supplier, licensee, licensor,
franchisee or other business relation of the Company, its Parent or any
Subsidiary to cease doing business with the Company, its Parent or such
Subsidiary, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company, its Parent or
any Subsidiary (including, without limitation, making any negative statements or
communications about the Company, its Parent or any Subsidiary), (iv) directly
or indirectly acquire or attempt to acquire an interest in any business relating
to the business of the Company, the Parent or any Subsidiary and with which the
Company, the Parent or any Subsidiary has entertained discussions or has
requested and received information relating to the acquisition of such business
by the Company, the Parent or any Subsidiary in the two-year period immediately
preceding the termination of Executive's employment with the Company.
(c) If, at the time of enforcement of this paragraph 7, a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law. Executive acknowledges that he has carefully
read this Agreement and has given careful consideration to the restraints
imposed upon the Executive by this Agreement, and is in full accord
5
<PAGE>
as to their necessity for the reasonable and proper protection of the Company.
The Executive expressly acknowledges and agrees that each and every restriction
imposed by this Agreement is reasonable with respect to subject matter, time
period and geographical area.
(d) In the event of the breach or a threatened breach by Executive of
any of the provisions of this paragraph 7, the Company, 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 in order to enforce or prevent any violations
of the provisions hereof (without posting a bond or other security). In
addition, in the event of an alleged breach or violation by Executive of this
paragraph 7, the Noncompete Period shall be tolled until such breach or
violation has been duly cured.
(e) Executive acknowledges that the provisions of this paragraph 7
are in consideration of: (i) employment with the Company and (ii) additional
good and valuable consideration as set forth in this Agreement. Executive
expressly agrees and acknowledges that the restrictions contained in this
paragraph 7 do not preclude Executive from earning a livelihood, nor does it
unreasonably impose limitations on Executive's ability to earn a living. In
addition, the Executive agrees and acknowledges that the potential harm to the
Company of its non-enforcement outweighs any harm to Executive of its
enforcement by injunction or otherwise.
8. Executive's Representations. Executive hereby represents and
---------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and shall not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.
9. Certain Definitions.
-------------------
(a) For purposes of this Agreement, "Cause" shall mean (i) the
-----
commission of a felony or a crime involving moral turpitude or the commission of
any other act or omission involving dishonesty, disloyalty or fraud with respect
to the Company, the Parent or any of their Subsidiaries or any of their
customers or suppliers, (ii) conduct tending to bring the Company, the Parent or
any of their Subsidiaries into substantial public disgrace or disrepute, (iii)
substantial and repeated failure to perform duties as reasonably directed by the
Board, (iv) gross negligence or willful misconduct with respect to the Company,
the Parent or any of their Subsidiaries or (v) any other material breach of this
Agreement which is not cured within 15 days after written notice thereof to
Executive.
6
<PAGE>
(b) For purposes of this Agreement, a "Change of Control" shall mean
-----------------
the occurrence of any of the following:
(i) When any "person" as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and as
------------
used in Sections 13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) of the Exchange Act but excluding the Parent, the Company and
any Subsidiary, any existing stockholders of the Parent on the effective
date of the Plan and any employee benefit plan sponsored or maintained by
the Parent or any of its Subsidiaries (including any trustee of such plan
acting as trustee), directly or indirectly, becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), after the effective date
of the Plan, of securities of the Parent representing 20 percent or more of
the combined voting power of the Parent's then outstanding securities;
(ii) When, during any period of 24 consecutive months during the
existence of the Parent's 1998 Stock Option Plan, the individuals who, at
the beginning of such period, constitute the Parent's Board of Directors
(the "Incumbent Directors") cease for any reason other than death to
-------------------
constitute at least a majority thereof, provided, however, that a director
who was not a director at the beginning of such 24-month period shall be
deemed to have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of or
with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually (because they were
directors at the beginning of such 24 month period) or by prior operation
of this provision;
(iii) the stockholders of the Parent approve a merger or
consolidation of the Parent with any other corporation, other than a merger
or consolidation (A) which would result in all or a portion of the voting
securities of the Parent outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Parent or such surviving
entity outstanding immediately after such merger or consolidation or (B) by
which the corporate existence of the Parent is not affected and following
which the Parent's chief executive officer and directors retain their
positions with the Parent (and constitute at least a majority of the
Parent's Board of Directors); or
(iv) the stockholders of the Parent approve a plan of complete
liquidation of the Parent or an agreement for the sale or disposition by
the Parent of all or substantially all the Parent's assets.
10. Survival. Paragraphs 5, 6 and 7 and paragraphs 10 through 17
--------
shall survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period.
7
<PAGE>
11. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
Notices to Executive:
--------------------
Manuel J. Perez de la Mesa
15885 West Prestwick Place
Miami Lakes, FL 33104
Notices to the Company:
----------------------
South Central Pool Supply, Inc.
109 Northpark Boulevard
Covington, LA 70433
Attn.: Wilson B. Sexton
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
12. Severability. Whenever possible, each provision of this
------------
Agreement shall 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 invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
13. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
14. No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
16. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and
8
<PAGE>
assigns, except that Executive may not assign his rights or delegate his
obligations hereunder without the prior written consent of the Company.
17. CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
-------------
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE.
18. Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
* * * * *
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SOUTH CENTRAL POOL SUPPLY, INC.
By /s/ WILSON B. SEXTON
--------------------
Its:Chairman and Chief Executive Officer
/s/ MANUEL PEREZ DE LA MESA
---------------------------
MANUEL PEREZ DE LA MESA
AGREED AND ACCEPTED:
SCP POOL CORPORATION
By /s/ WILSON B. SEXTON
--------------------
Its: Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 333-16641, No. 333-16639 and No. 333-58805) pertaining to the SCP
Pool Corporation Non-Employee Directors Equity Incentive Plan, the SCP Pool
Corporation 1995 Stock Option Plan, and the SCP Pool Corporation Employee Stock
Purchase Plan of our report dated February 19, 1999 (except for the fourth
paragraph of Note 3, as to which the date is March 25, 1999), with respect to
the consolidated financial statements of SCP Pool Corporation included in the
Annual Report (Form 10-K) for the year ended December 31, 1998.
/S/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
New Orleans, Louisiana
March 30, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,911
<SECURITIES> 0
<RECEIVABLES> 37,006
<ALLOWANCES> (2,397)
<INVENTORY> 69,377
<CURRENT-ASSETS> 112,170
<PP&E> 8,733
<DEPRECIATION> (3,298)
<TOTAL-ASSETS> 163,788
<CURRENT-LIABILITIES> 50,498
<BONDS> 33,696
0
0
<COMMON> 12
<OTHER-SE> 80,552
<TOTAL-LIABILITY-AND-EQUITY> 163,788
<SALES> 457,598
<TOTAL-REVENUES> 457,598
<CGS> 355,059
<TOTAL-COSTS> 432,213
<OTHER-EXPENSES> 848
<LOSS-PROVISION> 1,392
<INTEREST-EXPENSE> 3,480
<INCOME-PRETAX> 21,781
<INCOME-TAX> 8,043
<INCOME-CONTINUING> 13,738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 13,738
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.15
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