-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ArRXOe6RY6cry1kwSF3sThOeMfQLu77vLMEYSCBYd8ygAkXb25zJOXI91JVibKvo GxfGTe311EHJMSe3KHiElA== 0000898430-01-500596.txt : 20010516 0000898430-01-500596.hdr.sgml : 20010516 ACCESSION NUMBER: 0000898430-01-500596 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LESLIES POOLMART INC CENTRAL INDEX KEY: 0000866048 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 954620298 STATE OF INCORPORATION: DE FISCAL YEAR END: 0927 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18741 FILM NUMBER: 1636508 BUSINESS ADDRESS: STREET 1: 20630 PLUMMER ST CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8189934212 MAIL ADDRESS: STREET 1: 20222 PLUMMER ST CITY: CHATSWORTH STATE: CA ZIP: 91311 10-Q 1 d10q.txt FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ------------------- (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 2001 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 1-18741 LESLIE'S POOLMART, INC. (Exact name of registrant as specified in its charter) Delaware 95-4620298 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3925 E. Broadway Road Phoenix, Arizona 85040 (Address of principal executive offices) Registrant's telephone number, including area code: (602) 366-3999 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to 12(g) of the Act: Common Stock Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] The number of shares of the registrant's Common Stock outstanding at May 8, 2001 was 7,057,105 shares. ================================================================================ LESLIE'S POOLMART, INC. AND SUBSIDIARIES FORM 10-Q For the Quarterly Period Ended March 31, 2001 INDEX
Part I. Financial Information Page Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 2001 (unaudited) and September 30, 2000 1 Consolidated Statements of Operations for the 13 weeks and 26 weeks Ended March 31, 2001 (unaudited) and April 1, 2000 (unaudited) 2 Consolidated Statements of Cash Flows for the 26 weeks ended March 31, 2001 (unaudited) and April 1, 2000 (unaudited) 3 Notes to Consolidated Financial Statements (unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Part II. Other Information 8 Signatures 8
PART I - FINANCIAL INFORMATION Item 1. Financial Statements Leslie's Poolmart, Inc. and Subsidiaries
Consolidated Balance Sheets - -------------------------------------------------------------------------------------------------------------------- Amounts In Thousands, except share amounts March 31, September 30, 2001 2000 - -------------------------------------------------------------------------------------------------------------------- Assets (unaudited) Current assets: Cash and cash equivalents $ 202 $ 199 Accounts receivable, net 4,993 9,143 Inventories 85,368 57,430 Prepaid expenses and other current assets 1,637 1,334 Deferred tax assets 14,797 6,335 - -------------------------------------------------------------------------------------------------------------------- Total current assets 106,997 74,441 Property, plant and equipment, at cost, net of accumulated depreciation 44,916 46,678 Goodwill, net 8,002 8,114 Intangible assets, net of accumulated amortization 2,070 2,583 Other assets 450 496 - -------------------------------------------------------------------------------------------------------------------- $162,435 $132,312 ==================================================================================================================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 44,361 $ 24,141 Accrued expenses 13,725 18,102 Income taxes payable - 4,273 Current maturities of long-term debt 93 108 - -------------------------------------------------------------------------------------------------------------------- Total current liabilities 58,179 46,624 Deferred tax liabilities 3,037 3,036 Line of credit borrowings, net 42,404 1,902 Long-term debt, excluding current maturities 985 988 Senior Notes 90,000 90,000 - -------------------------------------------------------------------------------------------------------------------- Total liabilities 194,605 142,550 Preferred Stock, $0.001 par value; Authorized - 2,000,000 shares; Issued and outstanding - 28,000 Series A at December 30, 2000 And September 30, 2000; liquidation preference $28,000,000 39,856 37,526 Commitments and contingencies - - Shareholder's equity (deficit): Common stock, $0.001 par value, authorized 12,000,000 shares, Issued and outstanding 7,057,105 shares at March 31, 2001 and 7,334 880 at September 30, 2000, respectively 1 1 Loan to officers (450) - Additional paid-in capital (45,294) (44,795) Deficit (26,283) (2,970) - -------------------------------------------------------------------------------------------------------------------- Total shareholders' deficit (72,026) (47,764) - -------------------------------------------------------------------------------------------------------------------- $162,435 $132,312 =====================================================================================================================
See accompanying notes to consolidated financial statements. 1 Leslie's Poolmart, Inc. and Subsidiaries Consolidated Statements of Operations Amounts In Thousands
- --------------------------------------------------------------------------------------------------------------------------- 13 Weeks Ended 26 Weeks Ended ------------------------- ----------------------- March 31, April 1, March 31, April 1, 2001 2000 2001 2000 - --------------------------------------------------------------------------------------------------------------------------- (unaudited) (unaudited) - --------------------------------------------------------------------------------------------------------------------------- Sales $ 32,559 $ 37,683 $ 61,144 $ 68,573 Cost of merchandise sold and services sold, including warehousing and transportation expenses 19,031 24,269 36,613 43,980 - ---------------------------------------------------------------------------------------------------------------------------- Gross profit 13,528 13,414 24,531 24,593 Operating and administrative expense 26,751 29,193 50,828 54,175 Stock compensation expense - 424 - 424 Unusual expense - - 1,466 - - ---------------------------------------------------------------------------------------------------------------------------- Operating loss (13,223) (16,203) (27,763) (30,006) Other expenses/(income): Interest expense, net 3,533 3,410 6,351 6,442 Other expense/(income) (186) 335 15 636 - ---------------------------------------------------------------------------------------------------------------------------- Total other expense (3,347) (3,745) (6,366) (7,078) - ---------------------------------------------------------------------------------------------------------------------------- Net loss before taxes (16,570) (19,948) (34,129) (37,084) Income tax benefit (5,818) (8,996) (13,146) (16,725) - ---------------------------------------------------------------------------------------------------------------------------- Net loss (10,752) (10,952) (20,983) (20,359) Series A Preferred Stock dividends and accretion (1,251) (1,065) (2,330) (2,093) - ---------------------------------------------------------------------------------------------------------------------------- Loss applicable to common shareholders $(12,003) $(12,017) $(23,313) $(22,452) ============================================================================================================================
See accompanying notes to consolidated financial statements. 2 Leslie's Poolmart, Inc. and Subsidiaries Consolidated Statements of Cash Flows
- ------------------------------------------------------------------------------------------------------------------ Amounts in Thousands - ------------------------------------------------------------------------------------------------------------------ 26 Weeks Ended March 31, April 1, 2001 2000 - ------------------------------------------------------------------------------------------------------------------ (unaudited) (unaudited) Operating activities: Net loss $(20,983) $(20,359) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 4,349 4,605 Amortization of loan fees and discounts 350 273 Deferred income taxes (8,461) (12,187) Loss on disposition of assets 15 636 Compensation recognized for stock options - 424 Changes in operating assets and liabilities Accounts and other receivables 4,150 2,284 Inventories (27,938) (24,131) Prepaid expenses and other (303) (368) Other assets 46 21 Accounts payable and accrued liabilities 15,843 36,694 Income taxes (4,273) (4,999) - ------------------------------------------------------------------------------------------------------------------ Net cash used in operating activities (37,205) (17,107) - ------------------------------------------------------------------------------------------------------------------ Investing activities: Additions to property and equipment (2,344) (6,407) Proceeds from sale of property and equipment 17 42 - ------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (2,327) (6,365) - ------------------------------------------------------------------------------------------------------------------ Financing activities: Net short-term borrowings 40,502 23,493 Payments on long-term debt (18) (14) Purchase of common stock (499) - Loan to officers (450) - - ------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 39,535 23,479 - ------------------------------------------------------------------------------------------------------------------ Net increase in cash and cash equivalents 3 7 Cash and cash equivalents and beginning of period 199 193 - ------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of period $ 202 $ 200 ==================================================================================================================
See accompanying notes to consolidated financial statements. 3 Leslie's Poolmart, Inc. and Subsidiaries Notes to Consolidated Financial Statements (unaudited) (1) Presentation and Financial Information The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ended September 29, 2001. The balance sheet at March 31, 2001 has been derived from the unaudited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain reclassifications have been made to the prior year. During prior years, warehousing, transportation and the related occupancy costs were reported as operating and administrative expenses and certain retail occupancy costs were classified as cost of sales. For the current year presentation, these distribution expenses have been reclassified as cost of sales and the retail occupancy costs have been reclassified as operating and administrative expenses. On February 15, 2001, the Board of Directors approved a resolution to amend the Corporation's Certificate of Incorporation (the "Charter Amendment") to effectuate a 5 for 1 stock split whereby each outstanding share of the Corporation's common stock, par value $.001 per share, was converted into five shares of common stock. Following approval by the Corporation's shareholders, the Charter Amendment was filed with the Delaware Secretary of State on February 22, 2001. The consolidated financial statements reflect the split as though it occurred at beginning of the periods presented. During the first quarter 2001, the Company recorded an additional $1.5 million for expenses associated with its Corporate headquarter relocation to Phoenix, Arizona. Termination expenses of $0.7 million were paid to approximately 100 employees that did not relocate to Arizona. It is anticipated that the majority of the relocation costs have been expensed and that there will not be any material changes in future periods. For further information, refer to the consolidated financial statements and footnotes thereto included in Leslie's Poolmart, Inc.'s annual report on Form 10-K for the year ended September 30, 2000. (2) Organization and Operation Leslie's Poolmart, Inc. is a specialty retailer of swimming pool supplies and related products. The Company markets its products under the trade name Leslie's Swimming Pool Supplies through 387 retail stores in 30 states; a nationwide mail order catalog; and an Internet E-commerce capability. The Company also repackages certain bulk chemical products for retail sale. The Company's business is highly seasonal as the majority of its sales and all of its operating profits are generated in the quarters ending June and September. 4 (3) Inventories Inventories consists of the following:
March 31, September 30, Amounts in thousands 2001 2000 - ------------------------------------------------------------------------------------------------- Raw materials and supplies $ 2,746 $ 430 Finished goods 82,622 57,000 - ------------------------------------------------------------------------------------------------- Total Inventories $85,368 $57,430 =================================================================================================
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. General Leslie's Poolmart, Inc. is the leading specialty retailer of swimming pool supplies and related products in the United States. The Company currently markets its products through 387 Company-owned retail stores in 30 states; a nationwide mail order catalog; and an Internet E-commerce capability. Leslie's is vertically integrated, operating a chemical repackaging facility in Ontario, California. It supplies its retail stores from distribution facilities located in Ontario, California; Dallas, Texas; Bridgeport, New Jersey; and Covington, Kentucky. Seasonality and Quarterly Fluctuations The Company's business exhibits substantial seasonality, which the Company believes is typical of the swimming pool supply industry. In general, sales and net income are highest during the fiscal quarters ending in June and September, which represent the peak months of swimming pool use. Sales are substantially lower during the quarters ending December and March when the Company will typically incur operating losses. The Company expects that its quarterly results of operations will fluctuate depending on the timing and amount of revenue contributed by new stores and, to a lesser degree, the timing of costs associated with the opening of new stores. The Company generally attempts to open its new stores in the quarter ending in March in order to position itself for the following peak season. Results of Operations Net Sales. Net sales for the 13 weeks ended March 31, 2001 were $32.6 million compared to $37.7 million for the 13 weeks ended April 1, 2000. The 13.6% decrease due primarily to unseasonably cool weather, the Company's decision to reduce promotional spending as compared to prior years levels and the elimination of low margin business in certain commercial and service markets. Year-to-date sales were $61.1 million as compared to $68.6 million in the prior year. Retail comparable store sales for the 13 weeks and 26 six weeks of fiscal 2001, decreased 13.1% and 11.1%, respectively as compared to the prior year sales. Gross Profit. Gross profit for the 13 weeks ended March 31, 2001 was $13.5 million compared to $13.4 million for the 13 weeks ended April 1, 2000. As a percentage of sales, gross profit was 41.6% for the 13 weeks of fiscal 2001 compared to 35.6% for the 13 weeks of fiscal 2000. Gross profit as a percentage of sales for the 13 weeks 2000 improved partially as a result of the Company's decision to moderate its promotional spending as compared to the prior year, reduced distribution expenses and improved acquisition costs. For the 26 weeks ended March 31, 2001, gross profit was $24.5 million as compared to $24.6 million in the prior year. As a percentage of sales, gross profit was 40.1% as compared to 35.9% in the prior year. 5 Operating and Administrative Expenses. Operating and administrative expenses for the 13 weeks ended March 31, 2001, were $26.8 million compared to $29.6 million for the 13 weeks ended April 1, 2000. Operating and administrative expenses as a percentage of sales were 82.2% for the 13 weeks ended March 31, 2001 compared to 78.6% for the 13 weeks ended April 1, 2000. Operating expenses for the fiscal 2001 quarter decreased as compared to the 2000 quarter primarily due to effective expense controls during the quarter. On a rate basis, expenses increased as a percentage of sales due to the reduction in sales and increases in occupancy costs due to the increased store count. For the 26 weeks ended March 31, 2001, excluding an unusual charge of $1.5 million for expenses associated with the Company's relocation of its Corporate office from Chatsworth, California to Phoenix, Arizona, operating expenses were $50.8 million compared to $54.6 million for the 26 weeks ended April 1, 2000. Operating Loss. Operating loss, for the 13 weeks ended March 31, 2001 was reduced $3.0 million from a $16.2 million loss during the 13 weeks ended April 1, 2000. The improvement in the quarter was due to the improved gross margin rates and effective expense controls. Operating loss for the 26 weeks ended March 31, 2001, excluding the unusual charge in the first quarter, was reduced $3.7 million as compared to a $30.0 million loss in the first half of last year. Other Income and Expense. Net interest expense was $3.5 million for the 13 weeks ended March 31, 2001 compared to $3.4 million for the 13 weeks ended April 1, 2000. The increase in interest expense was due primarily to higher average debt balances in the quarter. For the 26 weeks ended March 31, 2001, net interest expense was $6.4 million as compared to $6.4 million in the prior year. Income Taxes. The Company's income tax benefit for the 13 weeks ended March 31, 2001 was $5.8 million as compared to a $9.0 million benefit for the 13 weeks ended April 1, 2000. For the 26 weeks end March 31, 2001, the income tax benefit was $13.1 million as compared to $16.7 million in the prior year. EBITDA. The EBITDA loss for the 13 weeks ended March 31, 2001 was $11.1 million, versus an EBITDA loss of $13.7 million, for the 13 weeks ended April 1, 2000. For the 26 weeks ended March 31, 2001, the EBITDA loss was reduced by $3.5 million as compared to a loss of $25.4 million in the prior year. EBITDA is determined as follows:
13 Weeks Ended 26 Weeks Ended - --------------------------------------------------------------------------- ---------------------------------------- March 31, April 1, March 31, April 1, Amounts in thousands 2001 2000 2001 2000 - --------------------------------------------------------------------------- ---------------------------------------- Operating loss $(13,223) $(16,203) $(27,763) $(30,006) Depreciation 2,028 1,891 4,074 3,811 Amortization 90 185 275 371 Unusual Charge - - 1,466 - Non-cash compensation - 424 - 424 - --------------------------------------------------------------------------- ---------------------------------------- EBITDA loss $(11,105) $(13,703) $(21,948) $(25,400) ============================================================================ ========================================
Financial Condition, Liquidity and Capital Resources Changes in Financial Condition. Between September 30, 2000 and March 31, 2001, total current assets increased by $32.6 million primarily as the result of increases in inventory partially offset by decreases in accounts receivable which decreased $4.2 million during this period. During the same period, current liabilities increased $11.6 million due primarily to an increase in accounts payable partially offset by a $4.3 million decrease in current income tax liabilities. The change in accounts payable reflects the timing of payments between periods while the reduced income tax liability reflects the accrued tax benefit associated with the quarterly operating loss. 6 Liquidity and Capital Resources. Net cash used by operating activities was $37.2 million for the 26 weeks ended March 31, 2001 compared to net cash used by operating activities of $17.1 million for the same period in the prior year. The change in the 26 weeks 2001 compared to 2000 was due primarily to larger increases in inventory than accounts payable, partially offset by the reduction in accounts receivable. Capital expenditures for the 26 weeks ended March 31, 2001 were $2.3 million. Capital expenditures are expected to range between $6.0 and $9.0 million for fiscal 2001. It is anticipated that the balance of 2001 capital expenditures will be funded out of cash provided by operations and borrowings under the working capital revolver. Net cash provided by financing activities for the 26 weeks ended March 31, 2001 was $39.5 million. Funds borrowed under the revolving credit portion of the Company's credit facility are restricted to working capital and general corporate purposes. The level of borrowings under the Company's revolving debt is dependent primarily upon cash flows from operations, the timing of disbursements, long-term borrowing activity and capital expenditure requirements. On February 15, 2001, the Board of Directors approved a resolution to amend the Corporation's Certificate of Incorporation to effectuate a 5 for 1 stock split whereby each outstanding share of the Corporation's common stock, par value $.001 per share, was converted into five shares of common stock. Following approval by the Corporation's shareholders, the Charter Amendment was filed with the Delaware Secretary of State on February 22, 2001. The consolidated financial statements reflect the split as though it occurred at beginning of the periods presented. On March 23, 2001, the Company individually, and Lawrence Hayward, President and CEO, Donald Anderson, Executive Vice President and CFO, and Green Equity Investors II, L.P., the ("Purchasers") entered into two separate Stock Purchase Agreements, the ("Agreements") with Brian P. McDermott, ("McDermott") the Company's former President and CEO (the "McDermott Transactions"). Pursuant to the Agreements, the Company repurchased 277,775 shares of the Company's voting common stock held by McDermott for an aggregate purchase price of $499,995 and the Purchasers acquired the remaining 554,985 shares of the Company's voting common stock held by McDermott for an aggregate purchase price of $998,973. Also pursuant to the Agreements, (i) McDermott's existing options were cancelled and of no further effect; (ii) McDermott resigned from his position as a director on the Board of Directors of the Company; and (iii) the existing Consulting Agreement, dated as of December 31, 1999, between McDermott and the Company was terminated. As part of the McDermott Transactions, the Company entered into separate loan agreements with each of Mr. Hayward and Mr. Anderson, pursuant to which the Company loaned $225,000 to each of Hayward and Anderson, respectively, thereby providing a portion of the funds required for each of Anderson and Hayward to purchase the shares of the Company's common stock held by McDermott. Each Loan, together with all accrued interest, will be due and payable to the Company in full, on the earlier of: 1) the date which is 7 years from the date hereof; or 2) the termination of Borrower's employment with the Company for any reason, other than a termination by the Company, and is secured by a portion of the shares being purchased by each of Hayward and Anderson, pursuant to Pledge Agreements executed concurrently by each of Hayward and Anderson. Additionally, the Company and Foothill Capital Corporation executed a first amendment to the existing Loan and Security Agreement to effectively permit the Company to make loans to employees in an aggregate amount not to exceed $500,000 at any time, compared to the previous limit of $250,000. The Company believes its internally generated funds, as well as its borrowing capacity, are adequate to meet its working capital needs, maturing obligations and capital expenditure requirements, including those relating to the opening of new stores and the relocation of the corporate office. 7 PART II. OTHER INFORMATION -------------------------- Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K (a) The exhibits set forth in the Exhibit Index on page 9 hereof are filed with this quarterly report on Form 10-Q. (b) There were no reports on Form 8-K filed with this quarterly report on Form 10-Q. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LESLIE'S POOLMART, INC. By: /s/ Lawrence H. Hayward ---------------------------- Lawrence H. Hayward President and Chief Executive Officer Date: May 14, 2001 By: /s/ Donald J. Anderson --------------------------- Donald J. Anderson Executive Vice-President and Chief Financial Officer Date: May 14, 2001 8 Leslie's Poolmart, Inc. Exhibit Index The following exhibits are attached as indicated: Exhibit Number Description of Exhibit - ------- ---------------------- 3.1 Amendment to Certificate of Incorporation, filed with the Delaware Secretary of State on February 22, 2001 10.23 Amendment Number One to Loan and Security Agreement 10.24 Leslie's Poolmart, Inc. Stock Repurchase Agreement 10.25 Stock Purchase Agreement Among Individuals 10.26 Secured, Non-recourse Promissory Note and Pledge Agreement - Lawrence H. Hayward 10.27 Secured, Non-recourse Promissory Note and Pledge Agreement - Donald J. Anderson 9 EX-3.1 2 dex31.txt AMENDMENT TO CERTIFICATE OF INCORPORATION EXHIBIT 3.1 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF LESLIE'S POOLMART, INC. The undersigned, Donald J. Anderson, hereby certifies that: 1. He is the Chief Financial Officer of Leslie's Poolmart, Inc., a Delaware corporation (the "Corporation"). 2. Article Four, Section 1 of the Restated Certificate of Incorporation of the Corporation is amended to read in its entirety as follows: Section 1. Common Stock. The aggregate number of shares of common ------------ stock which the Corporation shall have the authority to issue is Twelve Million (12,000,000) shares of common stock (referred to in this Certificate of Incorporation as "Common Stock") with a par value of $0.001 per share. The Common Stock shall be divided into two classes, as follows: (i) Eleven Million (11,000,000) shares shall be designated as shares of Voting Common Stock, and (ii) One Million (1,000,000) shares shall be designated as shares of nonvoting common stock ("Nonvoting Common Stock"). Except as provided in Section 3 hereof, all shares of Voting Common Stock and Nonvoting Common Stock shall be identical and shall entitle the holders thereof to the same rights, powers and privileges. Upon this Certificate of Amendment becoming effective, each share of Common Stock then outstanding shall be reclassified into five (5) shares of Common Stock. 3. The foregoing Certificate of Amendment has been duly approved by the Board of Directors of the Corporation. 4. The foregoing Certificate of Amendment has been duly approved by the required vote of stockholders of the Corporation in accordance with the applicable provisions of Sections 228 and 242 of the Delaware General Corporation Law. The total number of shares voting in favor of the Certificate of Amendment equaled or exceeded the vote required. The percentage vote required was greater than 50%. The undersigned declares under penalty of perjury under the laws of the State of Delaware that the matters set forth in this Certificate of Amendment are true and correct of his own knowledge. Dated: February 15, 2001 /s/ Donald J. Anderson ------------------------------- Donald J. Anderson Chief Financial Officer EX-10.23 3 dex1023.txt AMENDMENT #1 TO LOAN AND SECURITY AGREEMENT EXHIBIT 10.23 AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT This Amendment Number One to Loan and Security Agreement ("Amendment") is entered into as of February 28, 2001, by and among FOOTHILL CAPITAL CORPORATION, a California corporation, as Agent and Lender ("Foothill"), and LESLIE'S POOLMART, INC., a Delaware corporation and LESLIE'S POOL BRITE, INC., a CALIFORNIA corporation (`Borrowers"), in light of the Following: A. Borrowers and Foothill have previously entered into that certain Loan and Security Agreement, dated as of June 22, 2000 (the "Agreement"). B. Borrowers and Foothill desire to amend the Agreement as provided for and on the conditions herein. NOW, THEREFORE, Borrowers and Foothill hereby amend and Supplement the Agreement as follows: 1. DEFINITIONS. All initially capitalized items used in this ------------ Amendment shall have the meanings given to them in the Agreement unless specifically defined herein. 2. AMENDMENTS. ---------- (a) Section 7.13(c)(y) of the Agreement is amended to read as Follows: "(y) loans by a Borrower to employees which do not exceed $500,000 in the aggregate at any time, and" 3. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby affirms ------------------------------ to Foothill that all of such Borrower's representations and warranties set forth in the Agreement are true, complete and accurate in all respects as of the date hereof. 4. NO DEFAULTS. Borrowers hereby affirm to Foothill that no ----------- Event of Default has occurred and is continuing as of the date hereof. 5. CONDITION PRECEDENT. The effectiveness of this Amendment is expressly ------------------- conditioned upon receipt by Foothill of an executed copy of this Amendment. 6. COSTS AND EXPENSES. Borrower shall pay to Foothill all of ------------------ Foothill's out-of-pocket costs and expenses (including, without limitation, the fees and expenses of its counsel, which counsel may include any local counsel deemed necessary, search fees, filing and recording fees, documentation fees, appraisal fees, travel expenses, 1 and other fees) arising in connection with the preparation, execution, and delivery of this Amendment and all related documents. 7. LIMITED EFFECT. In the event of a conflict between the terms and -------------- provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as amended and supplemented hereby, shall remain in full force and effect. 8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any --------------------------- number of counterparts and by different parties on separate counterparts, each of which when so executed and delivered shall be deemed to be an original. All such counterparts, taken together, shall constitute but one and the same Amendment. This Amendment shall become effective upon the execution of a Counterpart of this Amendment by each of the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above. FOOTHILL CAPITAL CORPORATION, A California corporation By: /s/ Robert Castine --------------------------- Robert Castine Vice President PNC BANK, N.A., a national banking association By: /s/ Pete Martinez --------------------------- Pete Martinez Vice President LESLIE'S POOLMART, INC., a Delaware corporation By: /s/ Donald J. Anderson ---------------------------- Donald J. Anderson Executive Vice-President and Chief Financial Officer 2 EX-10.24 4 dex1024.txt LESLIE'S POOLMART INC. STOCK PURCHASE AGREEMENT EXHIBIT 10.24 LESLIE'S POOLMART, INC. STOCK REPURCHASE AGREEMENT This LESLIE'S POOLMART, INC. STOCK REPURCHASE AGREEMENT (this "Agreement") is entered into as of March 23, 2001, by and between Leslie's - ---------- Poolmart, Inc., a Delaware corporation (the "Company"), The McDermott Family ------- Trust UA March 15, 1990 (the "Seller") and Brian P. McDermott, as an individual ------ ("McDermott"). --------- RECITALS WHEREAS, the Seller owns 166,552 shares (the "Shares") of the Common ------ Stock of the Company in the aggregate; WHEREAS, McDermott desires to cause Seller to sell to the Company, and the Company desires to repurchase from the Seller, 55,555 of such shares (the "Purchased Shares") on the terms and conditions set forth below. - ----------------- AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and the covenants, representations and warranties set forth below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Transactions. ------------ (a) Sale and Purchase of the Purchased Shares. The Seller hereby ----------------------------------------- sells to the Company, and the Company hereby purchases from the Seller, the Purchased Shares, for an aggregate purchase price of $499,995.00 (the "Purchase -------- Price"). Concurrently with the execution and delivery of this Agreement, the - ----- Seller hereby delivers to the Company, and the Company hereby accepts from the Seller, the certificate(s) evidencing the Purchased Shares held by the Seller duly endorsed for transfer pursuant to the Assignment Separate From Stock Certificate attached hereto as Exhibit A, and the Company hereby delivers to the --------- Seller by wire transfer in immediately available funds, and the Seller hereby acknowledges receipt from the Company of, the Purchase Price delivered by the Company. Seller and McDermott acknowledge and agree that such amount represents payment in full of the Purchase Price. (b) Cancellation of Outstanding Options. Concurrently with the ----------------------------------- execution and delivery of this Agreement, all outstanding options (whether or not presently exercisable and regardless of the specific option plan of the Company such options were issued under) to purchase the Company's Common Stock issued to McDermott (the "Options") shall be cancelled and of no further effect. ------- (c) Board Resignation. Concurrently with the execution and delivery ----------------- of this Agreement, McDermott hereby resigns from his position as a director on the Board of Directors of the Company and McDermott shall not thereafter have any entitlement to be a director, officer or other agent of the Company. Stock Purchase Agreement 2. Waiver of Shareholders Agreement. For the purposes of the -------------------------------- transactions contemplated by this Agreement, the parties hereby waive any and all restrictions on transfer, rights of first refusal and any other rights or obligations pursuant to that certain Shareholders Agreement among the Company, the Seller, McDermott and the other parties thereto dated as of June 11, 1997. Such waiver shall be effective only as to this Agreement and the transactions contemplated herein and shall have no effect on the rights of the Company except as to this Agreement and the transactions contemplated herein. 3. Representations and Warranties of Seller and McDermott. The ------------------------------------------------------ Seller and McDermott hereby jointly and severally represent, warrant, covenant and agree that: (i) each of Seller and McDermott has full legal capacity, power and authority to enter into this Agreement and carry out the terms and provisions hereof; (ii) this Agreement has been duly executed and delivered by each of the Seller and McDermott and is the valid and binding agreement of each of the Seller and McDermott enforceable against each of the Seller and McDermott in accordance with its terms; (iii) Seller is legal, record and beneficial holder of the Shares free and clear of all liens, claims, encumbrances or adverse interests of any kind; and (iv) following payment of the Purchase Price, Seller will have delivered legal, record and beneficial title to the Purchased Shares to the Company free and clear of any and all liens, claims, encumbrances or adverse interests of any kind. Seller and McDermott are familiar with the business and financial condition of the Company and are satisfied by reason of their own knowledge and investigation, and not in reliance on any express or implied representation of the Company or any of its directors, officers, agents or affiliates, as to the sale of the Purchased Shares at the Purchase Price specified herein. Seller and McDermott have had access to documents pertaining to valuation of the Purchased Shares, or have requested and received such documents. 4. Representations and Warranties of Company. The Company ----------------------------------------- represents, warrants, covenants and agrees that: (i) it has full power and authority to enter into this Agreement and carry out the terms and provisions hereof; (ii) this Agreement has been duly executed and delivered by the Company and is the valid and binding agreement of the Company enforceable against the Company in accordance with its terms; and (iii) the Company has full legal right, power and authority to purchase the Purchased Shares in the manner provided in this Agreement. The Company further represents that it has performed its due diligence review for examination and inspection of all matters pertaining to its acquisition of the Purchased Shares, including, without limitation the non-statutory stock option agreement, the Company's 1997 Incentive Stock Option Plan, minutes of the meeting of the Board of Directors, vesting agreements, all financial and corporate matters and conditions with respect to the Purchased Shares. By execution of this Agreement, the Company has concluded its due diligence with respect to questions concerning said shares or deemed such questions inconsequential; provided, that the Company's -------- representations regarding diligence contained herein shall not in any way limit the accuracy of McDermott's and Seller's representations and warranties contained in Section 3 hereto. 5. No Representation as to Condition of Company. Neither of the -------------------------------------------- Seller, McDermott or the Company is making any representation or warranty as to the condition (financial or otherwise) or results of operations, prospects or any other aspect of the Company's operations. Stock Purchase Agreement 2 6. Mutual Release. Except for their respective obligations, -------------- representations, warranties and covenants arising under this Agreement, each of the Seller and McDermott, on the one hand, and the Company, on the other hand (for himself or itself, his or its agents, heirs, successors, assigns, executors and/or administrators) does hereby and forever mutually release and discharge the other, and the other's past and present parent, subsidiary, sister and affiliated corporations, divisions or other related entities, including, without limitation, in the case of the Company, Green Equity Investors II, L.P., Leonard Green & Partners, L.P., and the respective partners, employees, agents and affiliates thereof, employee benefit plans and fiduciaries of the foregoing, as well as the successors, shareholders, partners, officers, directors, heirs, predecessors, assigns, agents, employees, attorneys and representatives of each of them, past or present, from any and all causes of actions, actions, judgments, liens, debts, contracts, indebtedness, damages, losses, claims, liabilities, rights, interests and demands of whatsoever kind or character, known or unknown, suspected to exist or not suspected to exist, anticipated or not anticipated, whether or not heretofore brought before any state or federal court or before any state or federal agency or other governmental entity, which any such party has or may have against any released person or entity by reason of any and all acts, omissions, events or facts occurring or existing prior to the date hereof, including, without limitation, all claims attributable to the ownership of the Shares and the Options or the sale or conveyance of the Purchased Shares under this Agreement (except for the parties' respective obligations, representations, warranties and covenants arising under this Agreement), all claims attributable to the employment of McDermott, all claims attributable to the termination of that employment and all claims arising under any federal, state or other governmental statute, regulation or ordinance or common law, such as, for example and without limitation, Title VII of the Civil Rights Act of 1964 which prohibits discrimination and harassment on the basis of sex, race, color, national origin and religion, the Civil Rights Act of 1866, the Age Discrimination in Employment Act which prohibits discrimination on the basis of age over 40, the California Fair Employment Act which prohibits discrimination on the basis of race, religion, creed, color, national origin, ancestry, disability, medical condition, age over 40 and sex, the California Labor Code, and wrongful termination claims. Section 1542 Waiver. It is further understood and agreed by Seller, -------------------- McDermott and the Company that, except for their respective obligations, representations, warranties and covenants arising under this Agreement, the foregoing releases extend to all claims, of every nature and kind whatsoever, known, suspected, or unsuspected, past, present or future, and all rights under Section 1542 of the California Civil Code, in so far as applicable to this Agreement, are hereby expressly waived by the Seller, McDermott, the Company and their respective affiliates. Said section reads as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Each of the Seller, McDermott and the Company hereby acknowledge that he or it may hereafter discover facts different from, or in addition to, those which he or it now believes to be true with respect to the released claims, and agrees that this Agreement and the releases Stock Purchase Agreement 3 contained herein shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery thereof. 7. Miscellaneous. -------------- 7.1 Further Assurances. Each party hereto shall execute and deliver such ------------------ further instruments and take such further actions as the other party hereto may reasonably request in order to carry out the intent of this Agreement. 7.2 Successors and Assigns. This Agreement shall not be assignable by any ---------------------- of the parties hereto. This Agreement shall inure to the benefit of and be binding upon, the successors, assigns, heirs, executors and legal representatives of the parties hereto. 7.3 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the internal laws of the State of California without regard to conflict of laws. The venue of any action instituted under this Agreement shall be proper in Los Angeles County, California, and each party hereby waives any objection to venue. 7.4 Entire Agreement. This Agreement constitutes the entire agreement ---------------- between the parties hereto with regard to the subject matter hereof and shall supersede all previous or contemporaneous oral or written negotiations, commitments or understandings with regard to the subject matter hereof. 7.5 Modification. The provisions of this Agreement may be modified, ------------ amended or waived only by a writing executed by both parties hereto. 7.6 Headings. Captions of the Sections of this Agreement are for -------- convenience only and shall not be considered or referred to in resolving questions of interpretation or construction of this Agreement. 7.7 Severability. Any provision of this Agreement that is deemed invalid, ------------ illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this paragraph be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable. 7.8 Third Party Beneficiaries. Except for rights given to releasees ------------------------- specified in Section 6 hereof, no person shall be deemed a third party beneficiary of this Agreement. 7.9 Consulting Agreement. The parties hereto agree that on the date -------------------- hereof, that certain Consulting Agreement, dated as of December 31, 1999, by and between McDermott and the Company (the "Consulting Agreement"), is terminated and of no further effect. Stock Purchase Agreement 4 7.10 Transfer Costs. The Company shall incur all reasonable transfer -------------- costs, if any, associated with the repurchase and cancellation of the Purchased Shares and the Options hereunder, together with any reasonable transfer costs associated with cancelling and reissuing the purchased shares pursuant to that certain Stock Purchase Agreement Among Individuals, by and among Seller, McDermott, Green Equity Investors II, L.P., Lawrence H. Hayward and Donald J. Anderson, dated of even date herewith (the "Stock Purchase Agreement Among Individuals"); provided, that nothing herein shall obligate the Company to pay -------- for any party's legal fees (other than the Company's legal fees) in connection with this Agreement or in connection with the Stock Purchase Agreement Among Individuals. 7.11 Counterparts. This Agreement may be executed in counterparts, each ------------ of which shall be deemed an original and all of which shall be deemed to constitute one and the same instrument. 7.12 Authority. Each of the signatories hereto warrants and represents --------- that he or she is competent and authorized to enter in to this Agreement on behalf of the party for whom he or she purports to sign. 7.13 Non-Disparagement. Seller and McDermott, on the one hand, and the ----------------- Company, on the other hand, covenant and agree that each will not disparage the other with respect to the subject of this Agreement and the terms therein, including but not limited to, disparaging the Company or its services, executives, agents, or business reputation, nor disparaging McDermott concerning his termination by Company, his services with the Company and matters relating to his employment. Stock Purchase Agreement 5 In witness whereof, the undersigned have executed this Agreement effective as of March 23, 2001. ----------------------------------- Brian P. McDermott, individually The McDermott Family Trust UA March 15, 1990 By: -------------------------------- Brian P. McDermott, Trustee By: ------------------------------- Manette J. McDermott, Trustee LESLIE'S POOLMART, INC., a Delaware corporation By: ------------------------------- Donald J. Anderson Executive Vice President, Chief Financial Officer and Secretary Signature Page to Stock Purchase Agreement EXHIBIT A --------- ASSIGNMENT SEPARATE FROM STOCK CERTIFICATE STATE OF ARIZONA ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF MARICOPA ) For value received, The McDermott Family Trust UA March 15, 1990, does hereby sell, assign and transfer unto Leslie's Poolmart, Inc., a Delaware corporation (the "Corporation"), 55,555 shares of the Common Stock, par value $0.001 per share, of the Corporation, standing in its name on the books of the Corporation represented by Certificate No. __ herewith, and does hereby irrevocably constitute and appoint the Secretary of the Corporation as its attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises. Dated: March 23, 2001 The McDermott Family Trust UA March 15, 1990 By: ------------------------------- Brian P. McDermott, Trustee By: ------------------------------- Manette J. McDermott, Trustee In Presence of: ---------------------------- EX-10.25 5 dex1025.txt STOCK PURCHASE AGREEMENT AMONG INDIVIDUALS EXHIBIT 10.25 STOCK PURCHASE AGREEMENT AMONG INDIVIDUALS THIS STOCK PURCHASE AGREEMENT AMONG INDIVIDUALS (this "Agreement"), dated as of March 23, 2001, is made by and among Brian P. McDermott, as an individual ("McDermott"), The McDermott Family Trust UA March 15, 1990 ("Seller"), Lawrence H. Hayward ("Hayward"), Donald J. Anderson ("Anderson") and Green Equity Investors II, L.P. ("Green"). (Green, Hayward and Anderson shall sometimes collectively be referred to herein as the "Purchasers".) RECITALS A. Seller holds 166,552 shares of the Common Stock (the "Shares"), of Leslie's Poolmart, Inc., a Delaware corporation (the "Company") and McDermott wishes to cause Seller to sell a portion of such shares to each of the Purchasers, and each of the Purchasers wishes to purchase a portion of such shares (hereinafter, the "Purchased Shares") on the terms and conditions set ---------------- forth herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Agreement to Purchase and Sell. Contemporaneously with the execution ------------------------------ of this Agreement, Seller shall sell, transfer, convey, assign and deliver to each of the Purchasers, and each of the Purchasers shall purchase, acquire and accept from Seller, the number of shares set forth after each Purchaser's respective signature hereto for the purchase price set forth underneath such signature. 2. Purchase Price. Upon delivery of the documents referenced in Section 3 -------------- below, each Purchaser shall pay the amount set forth underneath his/its respective signature hereto by wire transfer in immediately available funds, representing payment in full for the Purchased Shares (at an aggregate purchase price of $998,973.00). 3. Delivery of Certificate and Assignments. Concurrently with the --------------------------------------- execution of this Agreement, Seller shall deliver the share certificate representing the Purchased Shares, properly endorsed and together with the Assignments Separate from Certificate in the forms attached hereto as Exhibits A-C, to the Company with instructions to transfer the Purchased Shares to the Purchasers in the amounts set forth on the signature page hereto on the books of the Company and the Company shall issue new stock certificates as appropriate. 4. Representations and Warranties. ------------------------------ (a) Seller and McDermott hereby jointly and severally represent and warrant to Purchasers as follows, which representations and warranties shall survive the consummation of the transactions contemplated by this Agreement: (i) (A) each of Seller and McDermott has full legal capacity, power and authority to enter into this Agreement and carry out the terms and provisions hereof; (B) this Agreement has been duly executed and delivered by each of the Seller and McDermott and is the valid and binding agreement of each of the Seller and McDermott enforceable against the Seller and McDermott in accordance with its terms; (C) Seller is legal, record and beneficial holder of the Shares free and clear of all liens, claims, encumbrances or adverse interests of any kind; and (D) following payment of the purchase price specified on the signature page hereto, Seller will have delivered legal, record and beneficial title to the Purchased Shares to the Purchasers free and clear of any and all liens, claims, encumbrances or adverse interests of any kind. (ii) Seller and McDermott are familiar with the business and financial condition of the Company and are satisfied by reason of their own knowledge and investigation, and not in reliance on any express or implied representation of the Company or any of its directors, officers, agents or affiliates, as to the sale of the Purchased Shares at the purchase price specified in Section 2 hereof. Seller and McDermott have had access to documents pertaining to valuation of the Purchased Shares, or have requested and received such documents. (b) Purchasers hereby represent and warrant to Seller and McDermott as follows, which representations and warranties shall survive the consummation of the transactions contemplated by this Agreement: (i) Purchasers have performed their due diligence review, examination and inspection of all matters pertaining to their acquisition of the Purchased Shares, including, without limitation, the non-statutory stock option agreement, the Company's 1997 incentive stock option plan ("the Plan") minutes of the meetings of the Board of Directors of the Company, vesting agreements, all financial, and corporate matters and conditions respecting the Purchased Shares. By execution of this Agreement, Purchasers have concluded all of their due diligence with respect to questions concerning said Purchased Shares, or deemed such questions inconsequential; provided, that Purchasers' representation to the foregoing shall not in any way limit the accuracy of Seller's representations and warranties contained in Section 4(a)(i) hereto. 5. (a) Mutual Release. Except for their respective obligations, -------------- representations, warranties and covenants arising under this Agreement, each of the Purchasers, one the one hand, and the Seller and McDermott, on the other hand (for himself or itself, his or its agents, heirs, successors, assigns, executors and/or administrators) does hereby and forever mutually release and discharge the other, and the other's past and present parent, subsidiary, sister and affiliated corporations, divisions or other related entities, including, without limitation, in the case of Green, Leonard Green & Partners, L.P., and the respective partners, employees, agents and affiliates thereof, employee benefit plans and fiduciaries of the foregoing, as well as the successors, shareholders, partners, officers, directors, heirs, predecessors, assigns, agents, employees, attorneys and representatives of each of them, past or present, from any and all causes of actions, actions, judgments, liens, debts, contracts, indebtedness, damages, losses, claims, liabilities, rights, interests and demands of whatsoever kind or character, known or unknown, suspected to exist or not suspected to exist, anticipated or not anticipated, whether or Stock Purchase Agreement 2 not heretofore brought before any state or federal court or before any state or federal agency or other governmental entity, which any such party has or may have against any released person or entity by reason of any and all acts, omissions, events or facts occurring or existing prior to the date hereof, including, without limitation, all claims attributable to the ownership of the Shares and the Options or the sale or conveyance of the Purchased Shares under this Agreement (except for the parties' respective obligations, representations, warranties and covenants arising under this Agreement), all claims attributable to the employment of McDermott, all claims attributable to the termination of that employment and all claims arising under any federal, state or other governmental statute, regulation or ordinance or common law, such as, for example and without limitation, Title VII of the Civil Rights Act of 1964 which prohibits discrimination and harassment on the basis of sex, race, color, national origin and religion, the Civil Rights Act of 1866, the Age Discrimination in Employment Act which prohibits discrimination on the basis of age over 40, the California Fair Employment Act which prohibits discrimination on the basis of race, religion, creed, color, national origin, ancestry, disability, medical condition, age over 40 and sex, the California Labor Code, and wrongful termination claims. Section 1542 Waiver. It is further understood and agreed by the Seller, -------------------- McDermott and the Purchasers that, except for their respective obligations, representations, warranties and covenants arising under this Agreement, the foregoing releases extend to all claims, of every nature and kind whatsoever, known, suspected, or unsuspected, past, present or future, and all rights under Section 1542 of the California Civil Code, in so far as applicable to this Agreement, are hereby expressly waived by the Seller, McDermott, the Purchasers and their respective affiliates. Said section reads as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Each of the Seller, McDermott and the Purchasers hereby acknowledge that he or it may hereafter discover facts different from, or in addition to, those which he or it now believes to be true with respect to the released claims, and agrees that this Agreement and the releases contained herein shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery thereof. (b) Waiver and Amendment of Shareholders Agreement. For the purposes of ---------------------------------------------- the transactions contemplated by this Agreement, the parties hereby waive any and all restrictions on transfer, rights of first refusal and any other rights or obligations pursuant to that certain Shareholders Agreement among the Company, the Seller, McDermott and the other parties thereto dated as of June 11, 1997 (the "Shareholders Agreement"). Such waiver shall be effective only as to this Agreement and the transactions contemplated herein and shall have no effect on the rights of the Company except as to this Agreement and the transactions contemplated herein. Also concurrently with the execution and delivery of this Agreement, the Shareholders Agreement shall be deemed amended to reflect (i) the withdrawal of Seller and McDermott as parties thereto; (ii) with respect to Hayward and Anderson, to record the number of shares of Common Stock acquired hereunder by each; and (iii) with respect to Green, to Stock Purchase Agreement 3 record the additional number of shares of Common Stock acquired by Green hereunder. Each of Hayward and Anderson hereby agree to continue to be bound by all of the terms and conditions of the Shareholders Agreement as a Class II Stockholder for the term thereof. 6. Miscellaneous. ------------- (a) This Agreement shall not be assignable by either of the parties hereto. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and heirs. (b) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS, AND NOT THE LAWS PERTAINING TO CHOICE OR CONFLICTS OF LAWS, OF THE STATE OF CALIFORNIA. The venue of any action instituted under this Agreement shall be proper in Los Angeles County, California, and each party hereby waives any objection to venue. (c) This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute but one and the same instrument. (d) This Agreement and the exhibits attached hereto contain the entire agreement among the parties hereto with respect to the transactions contemplated herein and supersede all previous oral and written and all contemporaneous oral negotiations, commitments, writings and understandings. (e) This Agreement shall not be amended other than by written agreement executed by each of the parties hereto. (f) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Each of the signatories hereto warrants and represents that he or she is competent and authorized to enter in to this Agreement on behalf of the party for whom he or she purports to sign. (h) Seller and McDermott, on the one hand, and Purchasers, on the other hand, covenant and agree that each will not disparage the other with respect to the subject of this Agreement and the terms therein, including but not limited to, disparaging the Company or its services, executives, agents, or business reputation, nor disparaging McDermott concerning his termination by Company, his services with the Company and matters relating to his employment. (i) Except for rights given to releasees specified in Section 5(a) hereof, no person shall be deemed a third party beneficiary of this Agreement. Stock Purchase Agreement 4 (j) Each party represents that in executing this Agreement he or it has relied on legal advice from the attorney of his or its choice and that execution of this Agreement is free and voluntary. Stock Purchase Agreement 5 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of March 23, 2001. ---------------------------------- Brian P. McDermott, individually The McDermott Family Trust UA March 15, 1990 By: ----------------------------- Brian P. McDermott, Trustee By: ----------------------------- Manette J. McDermott, Trustee PURCHASERS: HAYWARD: By: ----------------------------- Lawrence H. Hayward Number of Shares: 50,000 Purchase Price: $450,000 ANDERSON: By: ----------------------------- Donald J. Anderson Number of Shares: 50,000 Purchase Price: $450,000 GREEN EQUITY INVESTORS II, L.P.: By: Grand Avenue Capital Partners, L.P., its sole general partner By: Grand Avenue Capital Corporation, its sole general partner By: ----------------------------- Name: Title: Number of Shares: 10,997 Purchase Price: $98,973 Signature Page to Stock Purchase Agreement EXHIBIT A --------- ASSIGNMENT SEPARATE FROM STOCK CERTIFICATE STATE OF ARIZONA ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF MARICOPA ) For value received, The McDermott Family Trust UA March 15, 1990, does hereby sell, assign and transfer unto Lawrence H. Hayward, an individual, 50,000 shares of the Common Stock, par value $0.001 per share, of Leslie's Poolmart, Inc., a Delaware corporation (the "Corporation"), standing in its name on the books of the Corporation represented by Certificate No. __ herewith, and does hereby irrevocably constitute and appoint the Secretary of the Corporation as its attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises. Dated: March 23, 2001 The McDermott Family Trust UA March 15, 1990 By: ---------------------------- Brian P. McDermott, Trustee By: ---------------------------- Manette J. McDermott, Trustee In Presence of: ------------------- EXHIBIT B --------- ASSIGNMENT SEPARATE FROM STOCK CERTIFICATE STATE OF ARIZONA ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF MARICOPA ) For value received, Brian P. McDermott does hereby sell, assign and transfer unto Donald J. Anderson, an individual, 50,000 shares of the Common Stock, par value $0.001 per share, of Leslie's Poolmart, Inc., a Delaware corporation (the "Corporation"), standing in its name on the books of the Corporation represented by Certificate No. __ herewith, and does hereby irrevocably constitute and appoint the Secretary of the Corporation as its attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises. Dated: March 23, 2001 The McDermott Family Trust UA March 15, 1990 By: ---------------------------- Brian P. McDermott, Trustee By: ---------------------------- Manette J. McDermott, Trustee In Presence of: ----------------------- EXHIBIT C --------- ASSIGNMENT SEPARATE FROM STOCK CERTIFICATE STATE OF ARIZONA ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF MARICOPA ) For value received, Brian P. McDermott does hereby sell, assign and transfer unto Green Equity Investors II, L.P., a Delaware limited partnership, 10,997 shares of the Common Stock, par value $0.001 per share, of Leslie's Poolmart, Inc., a Delaware corporation (the "Corporation"), standing in its name on the books of the Corporation represented by Certificate No. __ herewith, and does hereby irrevocably constitute and appoint the Secretary of the Corporation as its attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises. Dated: March 23, 2001 The McDermott Family Trust UA March 15, 1990 By: ----------------------------- Brian P. McDermott, Trustee By: ----------------------------- Manette J. McDermott, Trustee In Presence of: -------------------------- EX-10.26 6 dex1026.txt SECURED, NON-RECOURSE PROMISSORY NOTE/HAYWARD EXHIBIT 10.26 SECURED, NON-RECOURSE PROMISSORY NOTE ------------------------------------- Phoenix, Arizona Dated as of March 23, 2001 FOR VALUE RECEIVED, the undersigned, Lawrence H. Hayward, an individual, (the "Borrower"), hereby promises to pay to the order of LESLIE'S POOLMART, INC. (the "Lender"), the principal sum of $225,000.00, (the "Loan") when fully due ------ and payable as specified below, with interest compounded annually at the applicable Federal Rate (as defined below). The Loan (together with all accrued interest at the Federal Rate) will be due and payable to Lender in full, on the earlier of: 1) date which is 7 years from the date hereof; or 2) the termination of Borrower's employment with Lender for any reason, other than a termination by the Company. Additionally, at any time that dividends or other cash distributions are made with respect to the Pledged Shares (as defined in and pursuant to that certain Pledge Agreement between Lender and Borrower, dated as of the date hereof, hereinafter, the "Pledge Agreement"), such amounts (less an amount sufficient to pay applicable taxes on the dividend or distribution) shall be due and payable hereunder, and applied directly against the amounts owed under the Loan. The Loan may be prepaid at any time without premium or penalty. For purposes of this Agreement, the term "applicable Federal Rate" will be the rate, determined by the Borrower prior to the first anniversary of this Note, that is at least equal to the minimum applicable federal rate applicable to the term of the Loan on the date so selected. All payments due hereunder shall be made to the Lender when fully due and payable at the principal place of business of the Lender, without any deduction whatsoever, including, without limitation, any deduction for any set-off, recoupment, counterclaim or taxes. The Borrower hereby waives diligence, presentment, demand, protest, notice of dishonor and all other demands and notices in connection with the execution, delivery, performance or enforcement of this Note. The Loan shall be secured only by Borrower's Pledged Shares. Except for Lender's remedies and rights set forth in the Pledge Agreement, neither Borrower nor its affiliates or representatives shall have any personal liability for the payment of any sum of money which is or may be payable under this Note. The Lender is authorized (but not obligated) to endorse on the Schedule hereto, or on a continuation thereof, each payment or prepayment with respect to the Loan. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE. THE BORROWER AND, BY ACCEPTANCE HEREOF, THE LENDER WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS NOTE OR ANY ACTION ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS. - -------------------------- Borrower PLEDGE AGREEMENT ---------------- PLEDGE AGREEMENT (the "Pledge Agreement") dated as of March 23, 2001 between Lawrence H. Hayward, an individual ("Pledgor"), and LESLIE'S POOLMART, ------- INC. ("Pledgee"). W I T N E S S E T H: A. Pledgee and Pledgor have entered into that certain Note (the "Note") dated as of the date hereof, pursuant to which Pledgee has agreed, upon the terms and subject to the conditions thereof, to make a Loan in the principal amount of $225,000.00 (the "Loan") available to Pledgor. ---- B. Concurrently with the execution and delivery of this Pledge Agreement, Pledgor has agreed to use the proceeds of the Loan to purchase 25,000 shares of common stock of Leslie's Poolmart, Inc. (together with another 10,000 shares being purchased by Pledgor with his own funds, the "Pledged Shares") from Brian P. McDermott, and Mr. McDermott has agreed to sell the Pledged Shares to Pledgor. C. Pledgor intends by the execution and delivery of this Pledge Agreement to secure to Pledgee the performance of the terms, covenants and agreements hereof and of the Note and each other document executed by Pledgor evidencing, securing, guaranteeing or otherwise relating to the Loan (the Note and such other documents, as each of the foregoing may from time to time be amended, consolidated, renewed or replaced, being collectively referred to herein as the "Note"). ---- D. It is a condition to the making of the Loan that Pledgor shall have executed and delivered to Pledgee this Pledge Agreement. A G R E E M E N T: NOW, THEREFORE, in consideration of the foregoing, and in order to induce Pledgee to make the Loan, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Defined Terms. The following terms shall have the following meanings ------------- (such meanings being equally applicable to both the singular and plural forms of the terms defined): "Default" means the occurrence of any event which, but for the giving of ------- notice or passage of time, or both, would be an Event of Default. "Event of Default" has the meaning provided in Section 8. ---------------- --------- "Issuer" means Leslie's Poolmart, Inc., as the issuer of the Pledged ------ Shares. 2 "Lien" means any lien, charge or other encumbrance, whether arising by ---- contract or by operation of law, or otherwise. "Proceeds" means all "proceeds," as such term is defined in the UCC and, to -------- the extent not included in such definition, all proceeds whether cash or noncash, movable or immovable, tangible or intangible, from the Pledged Collateral, including, without limitation, those from the sale, exchange, transfer, collection, loss, damage, disposition, substitution or replacement of any of the Pledged Collateral and all income, gain, credit, distributions and similar items from or with respect to the Pledged Collateral. "Secured Obligations" means the obligations of Pledgor under the Note, ------------------- including, without limitation, the obligations of Pledgor to repay principal of, and other amounts under or with respect to, the Loan. "Transfer" means any conveyance, transfer (including, without limitation, -------- any transfer of any direct or indirect legal or beneficial interest (including, without limitation, any profits interest in the Issuer)), sale, Lien, assignment, pledge, grant of a security interest or hypothecation, whether by law or otherwise, of, on or affecting the Pledged Collateral. "UCC" means the Uniform Commercial Code, as in effect from time to time in --- any applicable jurisdiction. 2. Grant of Security Interest. As security for the full and punctual -------------------------- payment and performance of the Secured Obligations when due and payable (whether upon stated maturity, by acceleration or otherwise), Pledgor hereby grants, pledges, hypothecates, transfers and assigns to Pledgee a first and continuing lien on and first priority security interest (the "Security Interest") in all ----------------- right, title, claim and interest of Pledgor in and to the following, whether now owned or hereafter acquired, now existing or hereafter arising and wherever located (the "Pledged Collateral"): (a) all rights, privileges, authority and ------------------ power arising from the Pledged Shares, (b) all rights, powers and remedies of Pledgor with respect to the Pledged Shares as a common stockholder of Issuer, including without limitation, Pledgor's rights to receive dividends or other cash or property distributions made with respect to the Pledged Shares and (c) all other payments, if any, due or to become due to Pledgor in respect of the Pledged Shares, whether as contractual obligations, damages, insurance proceeds, condemnation awards or otherwise and (e) all of Pledgor's claims, rights, powers, privileges, authority, options, security interests, Liens and remedies, if any, under or arising out of the ownership of the Pledged Shares. The Pledged Shares shall be evidenced by certificates in definitive form duly endorsed for transfer to, or accompanied by a separate irrevocable assignment duly executed in favor of Pledgee and delivered to Pledgee to hold for the term of this Agreement upon the date of execution hereof. 3. Representations and Warranties of Pledgor. Pledgor hereby makes the ----------------------------------------- following representations and warranties: (A) Validity of Pledge Agreement. This Pledge Agreement constitutes a ---------------------------- legal, valid and binding obligation of Pledgor, enforceable in accordance with its terms. 3 (B) No Conflict. Neither the execution or delivery of this Pledge ----------- Agreement nor the consummation of the transactions contemplated hereby constitute a violation of, conflict with, or constitute a default under, any contract, commitment, agreement, understanding, arrangement or other restriction of any kind to which Pledgor is a party or by which Pledgor is bound. (C) No Financing Statements. There are no financing statements under ----------------------- the UCC covering any or all of the Pledged Collateral, other than financing statements filed pursuant to this Pledge Agreement evidencing the Security Interest. 4. Covenants of Pledgor. Pledgor hereby covenants to Pledgee: -------------------- (A) No Transfer. Except for the Transfer effected by this Pledge ----------- Agreement and subsequent transfers to a Related Transferee (as defined in and permitted by the Issuer's Shareholders Agreement, dated as of June 11, 1997), Pledgor will not Transfer any of the Pledged Collateral or any interest therein, or suffer or permit any of the foregoing to occur; provided, that any Related Transferee shall agree to be bound by the terms -------- and provisions of this Pledge Agreement as if such Transferee were a Pledgor hereunder. Any Transfer made in violation of the foregoing provisions shall be void and of no force and effect. (B) Payment of Charges and Claims. Pledgor agrees to pay prior to ----------------------------- delinquency all taxes, charges, liens and assessments against the Pledged Collateral, and upon the failure of Pledgor to do so, Pledgee at its option may pay any of them and shall be the sole judge of the legality or validity thereof and the amount necessary to discharge the same. (D) Other Financing Statements. Pledgor will not, without the prior -------------------------- written consent of Pledgee, execute and there will not be on file in any public office, any enforceable financing statement or statements covering any or all of the Pledged Collateral, except financing statements filed or to be filed in favor of Pledgee as secured party while any Secured Obligations remain outstanding. 5. Distributions. ------------- Pledgee shall be entitled to receive directly, and to apply in accordance with the provisions of the Note, any dividends or other cash distributions in respect of the Pledged Shares or any proceeds thereof given during the term of this Pledge Agreement, in such order and against such of the Secured Obligations (as defined below) as Pledgee may, in its sole and absolute discretion, determine; provided, that Pledgor shall be entitled to retain from any such -------- dividend or cash distribution an amount sufficient to pay applicable taxes on such dividend or distribution. 4 6. Rights, Powers and Remedies. --------------------------- (A) No Default or Event of Default. So long as no Default or Event of ------------------------------ Default shall exist, Pledgor shall be entitled to exercise any and all administrative and other consensual rights, powers and remedies pertaining to any Pledged Collateral for any purpose not inconsistent with the terms of this Pledge Agreement and the Note. (B) Upon Occurrence of Default or Event of Default. So long as a ---------------------------------------------- Default or an Event of Default shall exist, any and all rights of Pledgor to exercise any and all voting, administrative and other consensual rights, powers and remedies pertaining to any Pledged Collateral shall cease without notice by or any other action of Pledgee, and Pledgee shall have the sole right and power to exercise any and all voting, administrative and other consensual rights, powers and remedies pertaining to any Pledged Collateral. 7. Irrevocable Proxy/Voting Rights. Pledgor hereby irrevocably appoints ------------------------------- Pledgee as Pledgor's proxy holder with respect to the Pledged Shares with full power and authority to vote the Pledged Shares and otherwise act with respect to such Pledged Shares on behalf of Pledgor, provided that this proxy shall only be operative upon the occurrence of an Event of Default and/or so long as such Event of Default continues. This proxy shall be irrevocable for so long as any of the Secured Obligations remains in existence. 8. Events of Default. The occurrence of the following event shall ----------------- constitute an "Event of Default" under this Pledge Agreement: (a) The failure of Pledgor to pay on the Loan when due and payable pursuant to the Note, if such failure has not been cured within 15 business days of written notice thereof given to Pledgor by Pledgee. 9. Remedies. If an Event of Default shall exist: -------- (A) Remedies with Respect to Pledged Collateral. Pledgee, without ------------------------------------------- obligation to resort to any other security, right or remedy granted under any other agreement or instrument, shall have the right to, in addition to all rights, powers and remedies of a secured party pursuant to the UCC and, in addition to any and all rights which Pledgee may have at law or in equity as to the Pledged Collateral, at any time and from time to time, (i) if applicable, cause any or all of the Pledged Shares to be registered in or transferred into the name of Pledgee or into the name of a nominee or nominees, or designee or designees, of Pledgee, and/or (ii) pursuant to Section 10, sell, resell, assign and deliver, in its sole discretion, any ---------- or all of the Pledged Collateral or any other security for the Secured Obligations (whether in whole or in part and at the same or different times) and all right, title and interest, claim and demand therein and right of redemption thereof, at public or private sale, for cash, upon credit (by Pledgee only), and in connection therewith Pledgee may grant options and may impose reasonable conditions such as requiring any purchaser to represent that any "securities" constituting any part of the Pledged Collateral are being purchased for investment only, Pledgor hereby waiving and releasing any and all rights of redemption. If all or any portion of the Pledged 5 Collateral is sold by Pledgee upon credit (by Pledgee only), Pledgee shall not be liable for the failure of the purchaser to purchase or pay for the same and, in the event of any such failure, Pledgee may resell such Pledged Collateral. It is expressly agreed that Pledgee may exercise its rights with respect to less than all of the Pledged Collateral, leaving unexercised its rights with respect to the remainder of the Pledged Collateral; provided, however, that such partial exercise shall in no way restrict or jeopardize Pledgee's right to exercise its rights with respect to all or any other portion of the remainder of the Pledged Collateral at a later time or times. Pledgee may exercise all of the rights and remedies of a secured party under the UCC as to the Pledged Collateral. The rights, powers and remedies of Pledgee under this Pledge Agreement shall be cumulative and not exclusive of any other right, power or remedy which Pledgee may have against Pledgor or existing at law or in equity or otherwise. (B) Cure. Without limiting any other provision of this Pledge ---- Agreement, and without waiving or releasing Pledgor from any obligation or default hereunder, Pledgee shall have the right, but not the obligation, to perform any act or take any appropriate action, as it, in its reasonable judgment, may deem necessary to cure such Default or Event of Default or cause any term, covenant, condition or obligation required under this Pledge Agreement to be performed or observed by Pledgor to be promptly performed or observed on behalf of Pledgor or to protect the security of this Pledge Agreement. All reasonable amounts advanced by, or on behalf of, Pledgee in exercising its rights under this Section 9(B) (including, ------------ but not limited to, reasonable legal expenses and disbursements incurred in connection therewith) shall be payable by such Pledgor to Pledgee upon demand therefor and shall become Secured Obligations hereunder. 10. Sales of the Pledged Collateral. No demand, advertisement or notice, ------------------------------- all of which are hereby expressly waived by Pledgor, shall be required in connection with any sale or other disposition of all or any part of the Pledged Collateral, except that Pledgee shall give Pledgor at least ten (10) days' prior written notice of the time and place of any public sale or of the time and the place at which any private sale or other disposition is to be made, which notice Pledgor hereby agrees is reasonable, all other demands, advertisements and notices being hereby waived. To the extent permitted by law, Pledgee shall not be obligated to make any sale of the Pledged Collateral if it shall determine not to do so, regardless of the fact that notice of sale may have been given, and Pledgee may without notice or publication adjourn any public or private sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Upon each public or private sale of any portion of or all of the Pledged Collateral, unless prohibited by any applicable statute which cannot be waived, Pledgee (or its nominee or designee) may purchase any or all of the Pledged Collateral being sold, free and clear of and discharged from any trusts, claims, equity or right of redemption of Pledgor, all of which are hereby waived and released to the extent permitted by applicable law, and may make payment therefor by credit against any of the Secured Obligations in lieu of cash or any other obligations. In the case of any sale, public or private, of any portion of or all of the Pledged Collateral, Pledgor shall be responsible for the payment of all reasonable costs and expenses of every kind for the sale and delivery, including, without limitation, brokers' and reasonable attorneys' fees and disbursements and any tax imposed thereon. The proceeds of the sale of the Pledged 6 Collateral shall be available to cover such costs and expenses and, after deducting such costs and expenses from the proceeds of the sale, Pledgee shall first apply any residue to the payment of costs and expenses comprising Secured Obligations and shall apply any further residue to the payment of any outstanding principal amount with respect to the Secured Obligations until fully paid. 11. Receipt of Sale Proceeds. Upon any sale of the Pledged Collateral, or ------------------------ any portion thereof, by Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Pledged Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 12. Modification, Waiver in Writing. No modification, amendment, ------------------------------- extension, discharge, termination or waiver of any provision of this Pledge Agreement or any other Loan Document, or consent to any departure by Pledgor therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on Pledgor shall entitle Pledgor to any other or future notice or demand in the same, similar or other circumstances. 13. Notices. All notices and other communications given hereunder shall ------- be given in writing and shall be delivered via confirmed fascimile, overnight courier, by hand delivery or by certified mail, return receipt requested, to the appropriate party at the address set forth on the signature page of this Agreement (subject to change from time to time by written notice to all other parties to this Agreement). All communications shall be deemed served upon delivery of, or if mailed, upon the first to occur of receipt or the expiration of 3 business days after the deposit in the United States Postal Service mail, or, if transmitted via facsimile, upon electronic confirmation of receipt. 14. Pledgee Not Bound. Pledgee shall not be obligated to perform or ----------------- discharge any obligation of Pledgor as a result of the collateral assignment hereby effected. The acceptance by Pledgee of this Pledge Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate Pledgee to appear in or defend any action or proceeding relating to the Pledged Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Pledged Collateral. 15. No Release, Etc. The obligations of Pledgor under this Pledge --------------- Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstances or occurrence whatsoever, including, without limitation: (a) any renewal, extension, amendment or modification of, or addition or supplement to or deletion from, the Note or any other instrument or agreement referred to therein, or any assignment or transfer 7 thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such instrument or agreement or this Pledge Agreement or any exercise or non-exercise of any right, remedy, power or privilege under or in respect of this Pledge Agreement or any other Loan Document; (c) any furnishing of any additional security to Pledgee or any acceptance thereof or any sale, exchange, release, surrender or realization of or upon any security by Pledgee; or (d) any invalidity, irregularity or unenforceability of all or part of the Secured Obligations or of any security therefor. 16. Severability. Wherever possible, each provision of this Pledge ------------ Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Pledge Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Pledge Agreement. 17. Further Assurances. Pledgor agrees to do such further acts and things ------------------ and to execute and deliver to Pledgee such additional conveyances, assignments, agreements and instruments as Pledgee from time to time may reasonably require or deem reasonably advisable to carry into effect this Pledge Agreement or to further assure and confirm unto Pledgee the rights, powers and remedies intended to be granted hereunder or under any other Loan Document. Pledgor hereby agrees to sign and deliver to Pledgee financing statements, continuation statements and other documents, in form acceptable to Pledgee, as Pledgee may from time to time reasonably request or as are reasonably necessary in the opinion of Pledgee to establish and maintain a valid and perfected Security Interest in the Pledged Collateral and to pay any filing fees and taxes related thereto. Pledgor also authorizes Pledgee, to the extent permitted by applicable law, to file such financing statements and amendments thereto relating to all or any part of the Pledged Collateral without the signature of Pledgor and further authorizes Pledgee, to the extent permitted by applicable law, to file a photographic or other reproduction of this Pledge Agreement or of a financing statement in lieu of a financing statement. 18. Headings. The Article and Section headings in this Pledge Agreement -------- are included herein for convenience of reference only and shall not constitute a part of this Pledge Agreement for any other purpose. 19. Waiver of Defenses. To the fullest extent permitted by applicable ------------------ law, Pledgor waives any defense arising by reason of any disability or other defense of Pledgor by reason of the cessation from any cause whatsoever of the liability of Pledgor or the Issuer. To the fullest extent permitted by applicable law, Pledgor waives any set-off, defense or counterclaim which Pledgor may have or claim to have against Pledgee. 20. Waiver of Marshaling of Assets Defense. To the fullest extent that -------------------------------------- Pledgor may legally do so, Pledgor waives all rights to a marshaling of the assets of Pledgor as to the Pledged Collateral, or to a sale in inverse order of alienation in the event of foreclosure of the interests hereby created, and agrees not to assert any right under any laws pertaining to the marshaling of assets, the sale in inverse order of alienation, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Pledgee under the Note to a sale of the Pledged Collateral for the collection of the Secured Obligations without any prior or 8 different resort for collection, or the right of Pledgee to the payment of such obligations and liabilities in preference to every other claimant whatsoever. 21. Counterparts. This Pledge Agreement may be executed in any number of ------------ counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 22. Governing Law. ------------- (A) THIS PLEDGE AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, PLEDGOR HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS PLEDGE AGREEMENT AND THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. (B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN DELAWARE AND PLEDGOR WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. 23. TRIAL BY JURY. PLEDGOR AND PLEDGEE, TO THE FULLEST EXTENT THAT THEY ------------- MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS PLEDGE AGREEMENT OR THE NOTE. 24. Non-Recourse Obligation. Notwithstanding anything to the contrary ----------------------- contained herein, Pledgee shall look solely to the Pledged Collateral for satisfaction of Pledgor's obligations under the Note and any other sums due hereunder, and neither Pledgor nor his affiliates or representatives shall have any personal liability hereunder. Pledgor hereby acknowledges that he has had the opportunity to consult with counsel before executing this Pledge Agreement. 9 IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to be executed and delivered on the date first set forth above. PLEDGOR: ------------------------------------------- Lawrence H. Hayward Address: PLEDGEE: LESLIE'S POOLMART, INC. By: ------------------------------------------- Donald J. Anderson, Executive Vice President and Chief Financial Officer EX-10.27 7 dex1027.txt SECURED, NON-RECOURSE PROMISSORY NOTE/ANDERSON EXHIBIT 10.27 SECURED, NON-RECOURSE PROMISSORY NOTE ------------------------------------- Phoenix, Arizona Dated as of March 23, 2001 FOR VALUE RECEIVED, the undersigned, Donald J. Anderson, an individual, (the "Borrower"), hereby promises to pay to the order of LESLIE'S POOLMART, INC. (the "Lender"), the principal sum of $225,000.00, (the "Loan") when fully due ------ and payable as specified below, with interest compounded annually at the applicable Federal Rate (as defined below). The Loan (together with all accrued interest at the Federal Rate) will be due and payable to Lender in full, on the earlier of: 1) date which is 7 years from the date hereof; or 2) the termination of Borrower's employment with Lender for any reason, other than a termination by the Company. Additionally, at any time that dividends or other cash distributions are made with respect to the Pledged Shares (as defined in and pursuant to that certain Pledge Agreement between Lender and Borrower, dated as of the date hereof, hereinafter, the "Pledge Agreement"), such amounts (less an amount sufficient to pay applicable taxes on the dividend or distribution) shall be due and payable hereunder, and applied directly against the amounts owed under the Loan. The Loan may be prepaid at any time without premium or penalty. For purposes of this Agreement, the term "applicable Federal Rate" will be the rate, determined by the Borrower prior to the first anniversary of this Note, that is at least equal to the minimum applicable federal rate applicable to the term of the Loan on the date so selected. All payments due hereunder shall be made to the Lender when fully due and payable at the principal place of business of the Lender, without any deduction whatsoever, including, without limitation, any deduction for any set-off, recoupment, counterclaim or taxes. The Borrower hereby waives diligence, presentment, demand, protest, notice of dishonor and all other demands and notices in connection with the execution, delivery, performance or enforcement of this Note. The Loan shall be secured only by Borrower's Pledged Shares. Except for Lender's remedies and rights set forth in the Pledge Agreement, neither Borrower nor its affiliates or representatives shall have any personal liability for the payment of any sum of money which is or may be payable under this Note. The Lender is authorized (but not obligated) to endorse on the Schedule hereto, or on a continuation thereof, each payment or prepayment with respect to the Loan. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE. THE BORROWER AND, BY ACCEPTANCE HEREOF, THE LENDER WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS NOTE OR ANY ACTION ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS. - --------------------------- Borrower PLEDGE AGREEMENT ---------------- PLEDGE AGREEMENT (the "Pledge Agreement") dated as of March 23, 2001 between Donald J. Anderson, an individual ("Pledgor"), and LESLIE'S POOLMART, ------- INC. ("Pledgee"). W I T N E S S E T H: A. Pledgee and Pledgor have entered into that certain Note (the "Note") dated as of the date hereof, pursuant to which Pledgee has agreed, upon the terms and subject to the conditions thereof, to make a Loan in the principal amount of $225,000.00 (the "Loan") available to Pledgor. ---- B. Concurrently with the execution and delivery of this Pledge Agreement, Pledgor has agreed to use the proceeds of the Loan to purchase 25,000 shares of common stock of Leslie's Poolmart, Inc. (together with another 10,000 shares being purchased by Pledgor with his own funds, the "Pledged Shares") from Brian P. McDermott, and Mr. McDermott has agreed to sell the Pledged Shares to Pledgor. C. Pledgor intends by the execution and delivery of this Pledge Agreement to secure to Pledgee the performance of the terms, covenants and agreements hereof and of the Note and each other document executed by Pledgor evidencing, securing, guaranteeing or otherwise relating to the Loan (the Note and such other documents, as each of the foregoing may from time to time be amended, consolidated, renewed or replaced, being collectively referred to herein as the "Note"). ---- D. It is a condition to the making of the Loan that Pledgor shall have executed and delivered to Pledgee this Pledge Agreement. A G R E E M E N T: NOW, THEREFORE, in consideration of the foregoing, and in order to induce Pledgee to make the Loan, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Defined Terms. The following terms shall have the following meanings ------------- (such meanings being equally applicable to both the singular and plural forms of the terms defined): "Default" means the occurrence of any event which, but for the giving of ------- notice or passage of time, or both, would be an Event of Default. "Event of Default" has the meaning provided in Section 8. ---------------- --------- "Issuer" means Leslie's Poolmart, Inc., as the issuer of the Pledged ------ Shares. "Lien" means any lien, charge or other encumbrance, whether arising by ---- contract or by operation of law, or otherwise. "Proceeds" means all "proceeds," as such term is defined in the UCC and, to -------- the extent not included in such definition, all proceeds whether cash or noncash, movable or immovable, tangible or intangible, from the Pledged Collateral, including, without limitation, those from the sale, exchange, transfer, collection, loss, damage, disposition, substitution or replacement of any of the Pledged Collateral and all income, gain, credit, distributions and similar items from or with respect to the Pledged Collateral. "Secured Obligations" means the obligations of Pledgor under the Note, ------------------- including, without limitation, the obligations of Pledgor to repay principal of, and other amounts under or with respect to, the Loan. "Transfer" means any conveyance, transfer (including, without limitation, -------- any transfer of any direct or indirect legal or beneficial interest (including, without limitation, any profits interest in the Issuer)), sale, Lien, assignment, pledge, grant of a security interest or hypothecation, whether by law or otherwise, of, on or affecting the Pledged Collateral. "UCC" means the Uniform Commercial Code, as in effect from time to time in --- any applicable jurisdiction. 2. Grant of Security Interest. As security for the full and punctual -------------------------- payment and performance of the Secured Obligations when due and payable (whether upon stated maturity, by acceleration or otherwise), Pledgor hereby grants, pledges, hypothecates, transfers and assigns to Pledgee a first and continuing lien on and first priority security interest (the "Security Interest") in all ----------------- right, title, claim and interest of Pledgor in and to the following, whether now owned or hereafter acquired, now existing or hereafter arising and wherever located (the "Pledged Collateral"): (a) all rights, privileges, authority and ------------------ power arising from the Pledged Shares, (b) all rights, powers and remedies of Pledgor with respect to the Pledged Shares as a common stockholder of Issuer, including without limitation, Pledgor's rights to receive dividends or other cash or property distributions made with respect to the Pledged Shares and (c) all other payments, if any, due or to become due to Pledgor in respect of the Pledged Shares, whether as contractual obligations, damages, insurance proceeds, condemnation awards or otherwise and (e) all of Pledgor's claims, rights, powers, privileges, authority, options, security interests, Liens and remedies, if any, under or arising out of the ownership of the Pledged Shares. The Pledged Shares shall be evidenced by certificates in definitive form duly endorsed for transfer to, or accompanied by a separate irrevocable assignment duly executed in favor of Pledgee and delivered to Pledgee to hold for the term of this Agreement upon the date of execution hereof. 3. Representations and Warranties of Pledgor. Pledgor hereby makes the ----------------------------------------- following representations and warranties: (A) Validity of Pledge Agreement. This Pledge Agreement constitutes a ---------------------------- legal, valid and binding obligation of Pledgor, enforceable in accordance with its terms. 2 (B) No Conflict. Neither the execution or delivery of this Pledge ----------- Agreement nor the consummation of the transactions contemplated hereby constitute a violation of, conflict with, or constitute a default under, any contract, commitment, agreement, understanding, arrangement or other restriction of any kind to which Pledgor is a party or by which Pledgor is bound. (C) No Financing Statements. There are no financing statements under ----------------------- the UCC covering any or all of the Pledged Collateral, other than financing statements filed pursuant to this Pledge Agreement evidencing the Security Interest. 4. Covenants of Pledgor. Pledgor hereby covenants to Pledgee: -------------------- (A) No Transfer. Except for the Transfer effected by this Pledge ----------- Agreement and subsequent transfers to a Related Transferee (as defined in and permitted by the Issuer's Shareholders Agreement, dated as of June 11, 1997), Pledgor will not Transfer any of the Pledged Collateral or any interest therein, or suffer or permit any of the foregoing to occur; provided, that any Related Transferee shall agree to be bound by the terms -------- and provisions of this Pledge Agreement as if such Transferee were a Pledgor hereunder. Any Transfer made in violation of the foregoing provisions shall be void and of no force and effect. (B) Payment of Charges and Claims. Pledgor agrees to pay prior to ----------------------------- delinquency all taxes, charges, liens and assessments against the Pledged Collateral, and upon the failure of Pledgor to do so, Pledgee at its option may pay any of them and shall be the sole judge of the legality or validity thereof and the amount necessary to discharge the same. (D) Other Financing Statements. Pledgor will not, without the prior -------------------------- written consent of Pledgee, execute and there will not be on file in any public office, any enforceable financing statement or statements covering any or all of the Pledged Collateral, except financing statements filed or to be filed in favor of Pledgee as secured party while any Secured Obligations remain outstanding. 5. Distributions. ------------- Pledgee shall be entitled to receive directly, and to apply in accordance with the provisions of the Note, any dividends or other cash distributions in respect of the Pledged Shares or any proceeds thereof given during the term of this Pledge Agreement, in such order and against such of the Secured Obligations (as defined below) as Pledgee may, in its sole and absolute discretion, determine; provided, that Pledgor shall be entitled to retain from any such -------- dividend or cash distribution an amount sufficient to pay applicable taxes on such dividend or distribution. 3 6. Rights, Powers and Remedies. --------------------------- (A) No Default or Event of Default. So long as no Default or Event of ------------------------------ Default shall exist, Pledgor shall be entitled to exercise any and all administrative and other consensual rights, powers and remedies pertaining to any Pledged Collateral for any purpose not inconsistent with the terms of this Pledge Agreement and the Note. (B) Upon Occurrence of Default or Event of Default. So long as a ---------------------------------------------- Default or an Event of Default shall exist, any and all rights of Pledgor to exercise any and all voting, administrative and other consensual rights, powers and remedies pertaining to any Pledged Collateral shall cease without notice by or any other action of Pledgee, and Pledgee shall have the sole right and power to exercise any and all voting, administrative and other consensual rights, powers and remedies pertaining to any Pledged Collateral. 7. Irrevocable Proxy/Voting Rights. Pledgor hereby irrevocably appoints ------------------------------- Pledgee as Pledgor's proxy holder with respect to the Pledged Shares with full power and authority to vote the Pledged Shares and otherwise act with respect to such Pledged Shares on behalf of Pledgor, provided that this proxy shall only be operative upon the occurrence of an Event of Default and/or so long as such Event of Default continues. This proxy shall be irrevocable for so long as any of the Secured Obligations remains in existence. 8. Events of Default. The occurrence of the following event shall ----------------- constitute an "Event of Default" under this Pledge Agreement: (a) The failure of Pledgor to pay on the Loan when due and payable pursuant to the Note, if such failure has not been cured within 15 business days of written notice thereof given to Pledgor by Pledgee. 9. Remedies. If an Event of Default shall exist: -------- (A) Remedies with Respect to Pledged Collateral. Pledgee, without ------------------------------------------- obligation to resort to any other security, right or remedy granted under any other agreement or instrument, shall have the right to, in addition to all rights, powers and remedies of a secured party pursuant to the UCC and, in addition to any and all rights which Pledgee may have at law or in equity as to the Pledged Collateral, at any time and from time to time, (i) if applicable, cause any or all of the Pledged Shares to be registered in or transferred into the name of Pledgee or into the name of a nominee or nominees, or designee or designees, of Pledgee, and/or (ii) pursuant to Section 10, sell, resell, assign and deliver, in its sole discretion, any ---------- or all of the Pledged Collateral or any other security for the Secured Obligations (whether in whole or in part and at the same or different times) and all right, title and interest, claim and demand therein and right of redemption thereof, at public or private sale, for cash, upon credit (by Pledgee only), and in connection therewith Pledgee may grant options and may impose reasonable conditions such as requiring any purchaser to represent that any "securities" constituting any part of the Pledged Collateral are being purchased for investment only, Pledgor hereby waiving and releasing any and all rights of redemption. If all or any portion of the Pledged 4 Collateral is sold by Pledgee upon credit (by Pledgee only), Pledgee shall not be liable for the failure of the purchaser to purchase or pay for the same and, in the event of any such failure, Pledgee may resell such Pledged Collateral. It is expressly agreed that Pledgee may exercise its rights with respect to less than all of the Pledged Collateral, leaving unexercised its rights with respect to the remainder of the Pledged Collateral; provided, however, that such partial exercise shall in no way restrict or jeopardize Pledgee's right to exercise its rights with respect to all or any other portion of the remainder of the Pledged Collateral at a later time or times. Pledgee may exercise all of the rights and remedies of a secured party under the UCC as to the Pledged Collateral. The rights, powers and remedies of Pledgee under this Pledge Agreement shall be cumulative and not exclusive of any other right, power or remedy which Pledgee may have against Pledgor or existing at law or in equity or otherwise (B) Cure. Without limiting any other provision of this Pledge ---- Agreement, and without waiving or releasing Pledgor from any obligation or default hereunder, Pledgee shall have the right, but not the obligation, to perform any act or take any appropriate action, as it, in its reasonable judgment, may deem necessary to cure such Default or Event of Default or cause any term, covenant, condition or obligation required under this Pledge Agreement to be performed or observed by Pledgor to be promptly performed or observed on behalf of Pledgor or to protect the security of this Pledge Agreement. All reasonable amounts advanced by, or on behalf of, Pledgee in exercising its rights under this Section 9(B) (including, ------------ but not limited to, reasonable legal expenses and disbursements incurred in connection therewith) shall be payable by such Pledgor to Pledgee upon demand therefor and shall become Secured Obligations hereunder. 10. Sales of the Pledged Collateral. No demand, advertisement or notice, ------------------------------- all of which are hereby expressly waived by Pledgor, shall be required in connection with any sale or other disposition of all or any part of the Pledged Collateral, except that Pledgee shall give Pledgor at least ten (10) days' prior written notice of the time and place of any public sale or of the time and the place at which any private sale or other disposition is to be made, which notice Pledgor hereby agrees is reasonable, all other demands, advertisements and notices being hereby waived. To the extent permitted by law, Pledgee shall not be obligated to make any sale of the Pledged Collateral if it shall determine not to do so, regardless of the fact that notice of sale may have been given, and Pledgee may without notice or publication adjourn any public or private sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Upon each public or private sale of any portion of or all of the Pledged Collateral, unless prohibited by any applicable statute which cannot be waived, Pledgee (or its nominee or designee) may purchase any or all of the Pledged Collateral being sold, free and clear of and discharged from any trusts, claims, equity or right of redemption of Pledgor, all of which are hereby waived and released to the extent permitted by applicable law, and may make payment therefor by credit against any of the Secured Obligations in lieu of cash or any other obligations. In the case of any sale, public or private, of any portion of or all of the Pledged Collateral, Pledgor shall be responsible for the payment of all reasonable costs and expenses of every kind for the sale and delivery, including, without limitation, brokers' and reasonable attorneys' fees and disbursements and any tax imposed thereon. The proceeds of the sale of the Pledged 5 Collateral shall be available to cover such costs and expenses and, after deducting such costs and expenses from the proceeds of the sale, Pledgee shall first apply any residue to the payment of costs and expenses comprising Secured Obligations and shall apply any further residue to the payment of any outstanding principal amount with respect to the Secured Obligations until fully paid. 11. Receipt of Sale Proceeds. Upon any sale of the Pledged Collateral, or ------------------------ any portion thereof, by Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Pledged Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 12. Modification, Waiver in Writing. No modification, amendment, ------------------------------- extension, discharge, termination or waiver of any provision of this Pledge Agreement or any other Loan Document, or consent to any departure by Pledgor therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on Pledgor shall entitle Pledgor to any other or future notice or demand in the same, similar or other circumstances. 13. Notices. All notices and other communications given hereunder shall ------- be given in writing and shall be delivered via confirmed facsimile, overnight courier, by hand delivery or by certified mail, return receipt requested, to the appropriate party at the address set forth on the signature page of this Agreement (subject to change from time to time by written notice to all other parties to this Agreement). All communications shall be deemed served upon delivery of, or if mailed, upon the first to occur of receipt or the expiration of 3 business days after the deposit in the United States Postal Service mail, or, if transmitted via facsimile, upon electronic confirmation of receipt. 14. Pledgee Not Bound. Pledgee shall not be obligated to perform or ----------------- discharge any obligation of Pledgor as a result of the collateral assignment hereby effected. The acceptance by Pledgee of this Pledge Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate Pledgee to appear in or defend any action or proceeding relating to the Pledged Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Pledged Collateral. 15. No Release, Etc. The obligations of Pledgor under this Pledge --------------- Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstances or occurrence whatsoever, including, without limitation: (a) any renewal, extension, amendment or modification of, or addition or supplement to or deletion from, the Note or any other instrument or agreement referred to therein, or any assignment or transfer 6 thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such instrument or agreement or this Pledge Agreement or any exercise or non-exercise of any right, remedy, power or privilege under or in respect of this Pledge Agreement or any other Loan Document; (c) any furnishing of any additional security to Pledgee or any acceptance thereof or any sale, exchange, release, surrender or realization of or upon any security by Pledgee; or (d) any invalidity, irregularity or unenforceability of all or part of the Secured Obligations or of any security therefor. 16. Severability. Wherever possible, each provision of this Pledge ------------ Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Pledge Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Pledge Agreement. 17. Further Assurances. Pledgor agrees to do such further acts and things ------------------ and to execute and deliver to Pledgee such additional conveyances, assignments, agreements and instruments as Pledgee from time to time may reasonably require or deem reasonably advisable to carry into effect this Pledge Agreement or to further assure and confirm unto Pledgee the rights, powers and remedies intended to be granted hereunder or under any other Loan Document. Pledgor hereby agrees to sign and deliver to Pledgee financing statements, continuation statements and other documents, in form acceptable to Pledgee, as Pledgee may from time to time reasonably request or as are reasonably necessary in the opinion of Pledgee to establish and maintain a valid and perfected Security Interest in the Pledged Collateral and to pay any filing fees and taxes related thereto. Pledgor also authorizes Pledgee, to the extent permitted by applicable law, to file such financing statements and amendments thereto relating to all or any part of the Pledged Collateral without the signature of Pledgor and further authorizes Pledgee, to the extent permitted by applicable law, to file a photographic or other reproduction of this Pledge Agreement or of a financing statement in lieu of a financing statement. 18. Headings. The Article and Section headings in this Pledge Agreement -------- are included herein for convenience of reference only and shall not constitute a part of this Pledge Agreement for any other purpose. 19. Waiver of Defenses. To the fullest extent permitted by applicable ------------------ law, Pledgor waives any defense arising by reason of any disability or other defense of Pledgor by reason of the cessation from any cause whatsoever of the liability of Pledgor or the Issuer. To the fullest extent permitted by applicable law, Pledgor waives any set-off, defense or counterclaim which Pledgor may have or claim to have against Pledgee. 20. Waiver of Marshaling of Assets Defense. To the fullest extent that -------------------------------------- Pledgor may legally do so, Pledgor waives all rights to a marshaling of the assets of Pledgor as to the Pledged Collateral, or to a sale in inverse order of alienation in the event of foreclosure of the interests hereby created, and agrees not to assert any right under any laws pertaining to the marshaling of assets, the sale in inverse order of alienation, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Pledgee under the Note to a sale of the Pledged Collateral for the collection of the Secured Obligations without any prior or 7 different resort for collection, or the right of Pledgee to the payment of such obligations and liabilities in preference to every other claimant whatsoever. 21. Counterparts. This Pledge Agreement may be executed in any number of ------------ counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 22. Governing Law. ------------- (A) THIS PLEDGE AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, PLEDGOR HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS PLEDGE AGREEMENT AND THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. (B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN DELAWARE AND PLEDGOR WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. 23. TRIAL BY JURY. PLEDGOR AND PLEDGEE, TO THE FULLEST EXTENT THAT THEY ------------- MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS PLEDGE AGREEMENT OR THE NOTE. 24. Non-Recourse Obligation. Notwithstanding anything to the contrary ----------------------- contained herein, Pledgee shall look solely to the Pledged Collateral for satisfaction of Pledgor's obligations under the Note and any other sums due hereunder, and neither Pledgor nor his affiliates or representatives shall have any personal liability hereunder. Pledgor hereby acknowledges that he has had the opportunity to consult with counsel before executing this Pledge Agreement. 8 IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to be executed and delivered on the date first set forth above. PLEDGOR: _____________________________________ Donald J. Anderson Address: PLEDGEE: LESLIE'S POOLMART, INC. By: ------------------------------------ Lawrence H. Hayward, President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----