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)
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) |
Registrant's telephone number, including area code: 504/892-5521
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share |
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.
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.
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.
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
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
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
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."
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
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.
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.
Fiscal Year High Low ----------- ------- ------- 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 |
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,
"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.
The Company -------------------------------------------------------------- Year Ended December 31, -------------------------------------------------------------- 1998 1997 1996 1995 1994 -------------------------------------------------------------- (Dollars in thousands, except per share data) 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 -------- -------- -------- -------- -------- 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 -------- -------- -------- -------- -------- 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) -------- -------- -------- -------- -------- 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 -------- -------- -------- -------- -------- 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 |
(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.
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.
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.
Year Ended December 31 1998 1997 1996 ------------------------ 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% ======================== |
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.
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
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.
1998 1997 ----------------------------------------- --------------------------------------- 1st 2nd 3rd 4th 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter -------- -------- -------- -------- ------- -------- ------- ------- (Dollars in thousands) 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%) |
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
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.
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.
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.
See the attached Consolidated Financial Statements (pages F-1 through F-22).
Incorporated by reference to the Company's 1999 Proxy Statement to be filed with the Commission.
Incorporated by reference to the Company's 1999 Proxy Statement to be filed with the Commission.
Incorporated by reference to the Company's 1999 Proxy Statement to be filed with the Commission.
Incorporated by reference to the Company's 1999 Proxy Statement to be filed with the Commission.
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.
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.
Signature Title --------- ------- /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 |
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of SCP Pool Corporation
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 |
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
SCP Pool Corporation
Consolidated Balance Sheets
(In thousands, except share data)
December 31 1998 1997 --------------------- 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 ===================== |
See accompanying notes.
SCP Pool Corporation
Consolidated Statements of Income
(In thousands, except per share data)
Year ended December 31 1998 1997 1996 ------------------------------------- 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 ===================================== |
See accompanying notes.
SCP Pool Corporation
Consolidated Statements of Stockholders' Equity
(In thousands)
Accumulated Additional Other Common Stock Paid-In Retained Comprehensive Shares Amount Capital Earnings Income Total ----------------------------------------------------------------------- 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 ======================================================================= |
See accompanying notes.
SCP Pool Corporation
Consolidated Statements of Cash Flows
(In thousands)
Year ended December 31 1998 1997 1996 --------------------------------------------- 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 ============================================= |
See accompanying notes.
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):
1996 -------- 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 |
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.
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):
1998 1997 --------------------- 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 |
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.
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.
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
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.
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):
December 31 1998 1997 ------------------------ 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 ======================== |
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
3. Debt
The components of the Company's debt were as follows (in thousands):
December 31 1998 1997 ------------------------ 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 ======================== |
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,
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):
December 31 1998 1997 -------------------- 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 ==================== |
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
Significant components of income taxes were as follows (in thousands):
December 31 1998 1997 1996 ------------------------------- 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 =============================== |
The reconciliation of income taxes computed at the federal statutory rates to income taxes was (in thousands):
December 31 1998 1997 1996 ------------------------------ 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 ============================== |
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
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:
1998 1997 1996 ----------------------------- 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 ============================= |
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):
1999 $ 7,798 2000 6,080 2001 4,218 2002 3,084 2003 2,452 Thereafter 2,145 ------- $25,777 ======= |
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.
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.
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:
1998 1997 1996 ------------------------------------- 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 |
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.
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):
1998 1997 1996 ------------------------------- 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 |
A summary of the Company's stock option activity and related information for the plans described above is as follows:
1998 1997 1996 ----------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price ----------------------------------------------------------------- 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 ======== ======== ======== |
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.
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):
Quarter Ended 3/98 6/98 9/98 12/98 3/97 6/97 9/97 12/97 -------------------------------------------------------------------------------------- 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) |
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.
Sequential Exhibit Page Number Document Description Number ------------------------------------------------------------------------------------------------ ---------- 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. |
Sequential Exhibit Page Number Document Description Number -------- -------------------- ---------- 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. |
Sequential Exhibit Page Number Document Description Number ------ -------------------- ---------- 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 |
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
Dear [NAME]:
(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
(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.
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.
(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;
(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.
"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."
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.
* * * * *
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] |
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:
(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.
day immediately preceding such request.
EXHIBIT 10.38
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
TABLE OF CONTENTS
Page ---- 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 OF CONTENTS
Page ---- 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 OF CONTENTS
Page ---- 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 |
ASSET PURCHASE AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
(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
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;
(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;
(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.
(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;
(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.
(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
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;
(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.
(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
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.
(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:
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.
Value of those Fixed Assets set forth on Schedule 1.3(b)(iv) (the "Fixed ------------------- ----- Assets Schedule") attached hereto. --------------- |
(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.
(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.
(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.
(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.
(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).
(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
reasonably request for the purposes of evaluating Benson Canada and determining whether to exercise the Benson Canada Purchase Option.
(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.
(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
(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
(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
(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;
(h) Kenneth Rogner will have entered into an employment or consulting arrangement with Buyer satisfactory to Buyer;
(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:
(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;
(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
transactions contemplated hereby requested by Buyer will be satisfactory in form and substance to Buyer.
(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:
(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
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.
ARTICLE III
COVENANTS
(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;
(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.
(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
(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.
(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.
ARTICLE IV
As an inducement to enter into this Agreement, the Sellers hereby represent and warrant to Buyer, that:
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.
(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
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;
(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;
(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.
(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.
(a) To the Sellers' knowledge, Sellers have complied and are in compliance with all Environmental and Safety Requirements.
(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.
(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.
(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;
(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.
or (xiii) any other agreement material to Sellers whether or not entered into in the ordinary course of business.
(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.
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.
(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.
(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.
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.
ARTICLE V
As an inducement to the Sellers to enter into this Agreement, Buyer hereby represents and warrants that:
ARTICLE VI
(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;
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.
ARTICLE VII
(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
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.]
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.
(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
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.
(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
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.
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.
(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.
(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,
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.
(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.
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.
ARTICLE IX
Mt. Rose Capital
11000 Mt. Rose Hwy.
Reno, Nevada 89511
Facsimile: (702) 849-1332 Attention: Dr. Joon S. Moon |
The Kizer Law Firm, P.C.
2829 W. Grand River
Howell, Michigan 48843
Facsimile: (517) 548-1483
Attention: Thomas Kizer, Jr.
JKKT Corp.
11000 Mt. Rose Hwy.
Reno, Nevada 89511
Facsimile: (702) 849-1332
Attention: Dr. Joon S. Moon
South Central Pool Supply, Inc.
109 Northpark Boulevard
Covington, Louisiana 70433-5001
Facsimile: (504) 892-1657 Attention: W.B. Sexton |
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile: (312) 861-2200
Attention: Stephen L. Ritchie
(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.
(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.
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.
ARTICLE X
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.
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- |
"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- |
"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) --------------------------- |
* * * *
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 |
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 |
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 |
Schedule 4.23 - Product Liability Schedule 4.24 - Names and Locations |
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 |
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 |
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)
Schedule 1.1(b)(v)
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) |
Schedule 1.1(b)(v)(con't.)
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 |
BENSON PUMP CO
By: /s/ Attorney-in-fact ------------------------- Signature of (Lessee) |
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 |
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 |
Fixed assets as per following 22 pages which total $683,712.83.
Tuesday, December 29, 1998 FXASSET Rockford Warehouse Page 1 =================================================================================================================== Asset No Desc1 Desc2 Location Net Book =================================================================================================================== 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 =================================================================================================================== |
1.3 (b)(iv)
Tuesday, December 29,1998 FXASSET Page 2 ===================================================================================================== AssetNo Desc1 Desc2 Location Net Book ===================================================================================================== 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 |
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 |
1.5 (b)(iv)
Tuesday, December 29, 1998 FXASSET Ormalia Page 4 ================================================================================================ AssetNo Desc1 Desc2 Location Ne: Book ================================================================================================ 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 |
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET St.Louis Page 5 ========================================================================================================= AssetNo Desc1 Desc2 Location Net Book ========================================================================================================= 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 |
1.3(b)(??)
Tuesday, December 29, 1998 FXASSET University Park Page 6
================================================================================================ Asset No Desc 1 Desc 2 Location Net Book ================================================================================================ 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 |
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Minneapolis Page 7 ================================================================================================================== AssetNo Desc1 Desc2 Location Net Book ================================================================================================================== 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 |
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Howell Page 6 ================================================================================================== Asset No Desc1 Desc2 Location Net Book ================================================================================================== 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 |
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Lenexa Page 9 ================================================================================================================= Asset No Desc1 Desc2 Location Net Book ================================================================================================================= 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 |
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Indianapolis Page ?C
=================================================================================================================================== AssetNo Desc1 Desc2 Location Net Book =================================================================================================================================== 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 |
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Nashville Page 11
=================================================================================================================================== AssetNo Desc1 Desc2 Location Net Book ==================================================================================================================================== 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 |
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Oklahoma City Page 12 ====================================================================================================== Asset No Desc1 Desc2 Location Net Book ====================================================================================================== 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 |
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
1.3 (b) (iv)
Tuesday, December 29, 1998 FXASSET Memphis Page 14 ================================================================================ AssetNo Desc1 Desc2 Location Net Book ================================================================================ 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 ================================================================================ |
15,936.49
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Denver Page 15 ================================================================================================= Asset No Desc1 Desc2 Location Net Book ================================================================================================= 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 |
Tuesday December 29, 1998 FXASSET Page 16 ============================================================================================================== Asset No Desc1 Desc2 Location Net Book ============================================================================================================== 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 |
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Atlanta Page 17 ===================================================================================================== AssetNo Desc1 Desc2 Location Net Book ===================================================================================================== 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 |
Tuesday, December 29, 1998 FXASSET Page 18 ======================================================================================================================= AssetNo Desc 1 Desc2 Location Net Book ======================================================================================================================= 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 |
1.3(b)(iv)
Tuesday, December 29, 1998 FXASSET Knoxville Page ?? =================================================================================================== Asset No Desc 1 Desc 2 Location Net Book =================================================================================================== 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 |
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 |
1.3 (b)(iv)
Tuesday, December 29, 1998 FXASSET Houston Page 21
====================================================================== Asset No Desc1 Desc2 Location Net Book ====================================================================== 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 |
1.3 (b)(iv)
Tuesday, December 29, 1998 FXASSET Las Vegas Page 22
====================================================================== Asset No Desc1 Desc2 Location Net Book ====================================================================== 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 |
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 |
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 |
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 |
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
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 |
Schedule 4.1 Seller does business in: Georgia Ohio Texas Colorado North Carolina Michigan Indiana Tennessee Nevada Kansas Minnesota Louisiana Oklahoma Nebraska Illinois Missouri |
NONE.
Schedule 4.4
All leases as follows
Agreements with Michigan National Bank
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 |
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 |
Schedule 4.6 Not applicable |
NONE.
Schedule 4.8(a)
Leases as per attached schedule.
Schedule 4.8(a)
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 |
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
Schedule 4.10(d)
None.
Schedule 4.11
None
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.
Schedule 4.13
Trademarks as follows:
PRO PURE #1971102 TIDEWATER #1951111 SUNSCAPE #1948912 PROPURE #1525193 |
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
NONE.
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.
BENSON PUMP CO.
EMPLOYEE HANDBOOK
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 |
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 |
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
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
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.
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.
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:
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
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
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.
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.
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
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
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.
NON-EXEMPT EMPLOYEES
Years of Service
Week of 0-2 2-5 5-10 10-15 15+ Illness 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% |
EXEMPT EMPLOYEES
Years of Service
Week of 0-2 2-5 5-10 10-15 15+ Illness 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% |
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.
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
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)
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.
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.
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,
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
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,
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.
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.
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.
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
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.
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.
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.
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.
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.
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
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
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.
None.
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 |
NONE.
BENSON POOL SYSTEMS
TIDEWATER
EXHIBIT 10.39
SOUTH CENTRAL POOL SUPPLY, INC.
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:
(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.
(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
$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.
(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:
(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.
Employment Period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).
(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
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.
(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.
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.
assigns, except that Executive may not assign his rights or delegate his obligations hereunder without the prior written consent of the Company.
* * * * *
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 |
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 |
ARTICLE 5 |
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
MULTIPLIER: 1,000 |
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 |
PREFERRED MANDATORY | 0 |
PREFERRED | 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 |
CHANGES | 0 |
NET INCOME | 13,738 |
EPS PRIMARY | 1.18 |
EPS DILUTED | 1.15 |