S-4

As filed with the Securities and Exchange Commission on April 22, 2005

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Leslie’s Poolmart, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	5999	95-4620298
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code No.)	(I.R.S. Employer Identification No.)

3925 E. Broadway Road, Suite 100

Phoenix, Arizona 85040

(602) 366-3999

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Lawrence H. Hayward

President and Chief Executive Officer

Leslie’s Poolmart, Inc.

3925 E. Broadway Road, Suite 100

Phoenix, Arizona 85040

(602) 366-3999

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

COPIES TO:

Jennifer Bellah Maguire, Esq.

Gibson, Dunn & Crutcher, LLP

333 South Grand Avenue

Los Angeles, California 90071

(213) 229-7986

Approximate date of commencement of proposed sale to the public:    As soon as practicable after this registration statement becomes effective.

If the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities To Be Registered	Amount To Be Registered	Proposed Maximum Offering Price Per Share(1)	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
7 3/4% Senior Subordinated Notes due 2013	$170,000,000	100%	$170,000,000	$20,009

(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f) promulgated under the Securities Act of 1933, as amended.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

Subject to Completion, Dated April 22, 2005

PROSPECTUS

Offer To Exchange

$170,000,000 Of Our Outstanding 7 ³/4% Senior Notes Due 2013, Series A

For Our New 7 ³/4% Senior Notes Due 2013, Series B

Which Have Been Registered Under the Securities Act

This exchange offer will expire at 5:00 p.m., New York City time,

on                     , 2005, unless extended.

• We are offering to exchange new registered 7 ³/4% Senior Notes due 2013, Series B, or the “exchange notes,” for all of our outstanding unregistered 7 ³/4% Senior Notes due 2013, Series A, or the “original notes,” collectively referred to as the “Notes.”

• We will exchange all original notes that are validly tendered and not withdrawn prior to the expiration of the exchange offer.

• You may withdraw tendered original notes at any time prior to the expiration of the exchange offer.

• The exchange of original notes will not be a taxable exchange for United States federal income tax purposes.

• The terms of the exchange notes to be issued are identical in all material respects to those of the original notes, except that transfer restrictions, registration rights and liquidated damages provisions relating to the original notes and provisions relating to an increase in the interest rate borne by the original notes under circumstances related to the timing of this exchange offer do not apply. See the “Description of Notes” section for more information about the exchange notes to be issued in this exchange offer.

• We will not receive any proceeds from the exchange offer.

• There is no existing market for the exchange notes to be issued and we do not intend to apply for their listing on any securities exchange.

The exchange notes involve substantial risks similar to those associated with the original notes. See the section entitled “ Risk Factors” beginning on page 14 for a discussion of these risks.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Prospectus dated                     , 2005.

Table of Contents

	Page
Summary	1
Risk Factors	14
Use of Proceeds	19
Capitalization	19
The Exchange Offer	20
Selected Historical Consolidated Financial Information	30
Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Business	43
Management	52
Executive Compensation	54
Security Ownership of Principal Stockholders and Management	57
Certain Relationships and Related Transactions	58
Description of Other Indebtedness and Preferred Stock	60
Description of Notes	62
Certain United States Federal Tax Considerations	93
Certain Erisa Considerations	98
Plan of Distribution	100
Legal Matters	101
Independent Registered Public Accounting Firm	101
Where You Can Find More Information	101
Index to Consolidated Financial Statements	F-1

This document is based on information provided by us and other sources we believe are reliable. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We have summarized certain documents and other information in a manner we believe to be accurate, but we refer you to the actual documents for a more complete understanding of what we discuss in this document. In making an investment decision, you must rely on your own examination of our business and the terms of this offering and the exchange notes, including the merits and risks involved. We are not making an offer to sell the exchange notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

This prospectus is part of a registration statement on Form S-4 we filed with the Securities and Exchange Commission. The registration statement that contains this prospectus, including the exhibits to the registration statement, contains additional information about us and the securities offered under this prospectus. That registration statement can be read at the Securities and Exchange Commission, or “SEC,” website or at the SEC offices mentioned under the heading “Where You Can Find More Information.”

No dealer, salesperson or other individual has been authorized to give any information or to make any representations not contained in this prospectus in connection with the exchange offer covered by this prospectus. If given or made such information or representations must not be relied upon as having been authorized by us. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any implications that there has not been any change in the facts set forth in this prospectus or in our affairs since the date hereof.

Each broker-dealer that receives exchange notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of those exchange notes. The letter of

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transmittal accompanying this prospectus states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act of 1933, as amended, sometimes referred to herein as the Securities Act. A participating broker-dealer may use this prospectus in connection with resales of the exchange notes where the corresponding original notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period not to exceed 180 days from the date on which the exchange offer registration statement is declared effective, we will make this prospectus available to any broker-dealer for use in connection with any of those resales. See “The Exchange Offer.”

Neither the U.S. Securities and Exchange Commission, the “SEC,” nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

FORWARD LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this prospectus (as well as information included in oral statements or other written statements made or to be made by us) contains statements that are forward-looking, such as statements relating to plans for future activities. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of us. These risks and uncertainties include, but are not limited to, those relating to

• our capital structure;

• weather conditions;

• domestic economic conditions;

• activities of competitors;

• seasonality; and

• changes in federal or state tax or environmental laws and the administration of such laws.

These and other risks are set forth in more detail under “Risk Factors.” We do not undertake to update any of the forward-looking statements in this prospectus.

INDUSTRY AND MARKET DATA

Some of the industry and market data used throughout this prospectus is based on published independent sources. Other data is based on our good faith estimates, which are derived from our review of internal surveys and independent sources. Although we believe these sources are reliable, we have not independently verified the data and cannot guarantee their accuracy or completeness.

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SUMMARY

The following summary information is qualified in its entirety by the more detailed information contained elsewhere in this prospectus. This summary is not complete and may not contain all of the information that you should consider before investing in the notes. Investors should carefully read this entire prospectus, including the information set forth under “Risk Factors” and in our consolidated financial statements and related notes. Unless the context otherwise requires, all references to “Leslie’s,” the “Company,” “we,” “us” and “our” refer to Leslie’s Poolmart, Inc., our predecessors and our consolidated subsidiaries. References to fiscal years are to our fiscal years, which end on the last Saturday closest to the end of September. For example, references to “fiscal 2004” are to the 53 weeks ending October 2, 2004 and references to “fiscal 2003” are to the 52 weeks ending September 27, 2003. Unless otherwise noted, all quantitative information regarding our business is as of October 2, 2004, except that store count information is as of January 1, 2005. A definition and discussion of Adjusted EBITDA, including a reconciliation to net income, is set forth under “Summary—Summary Consolidated Financial Information.”

Company Overview

We are the leading national specialty retailer of swimming pool supplies and related products. These products primarily consist of regularly purchased, non-discretionary pool maintenance items such as chemicals, equipment, cleaning accessories and parts, which accounted for 82% of our fiscal 2004 sales. Our nondiscretionary products typically have long shelf lives and generally are not prone to either obsolescence or shrinkage. We also sell fun, safety and fitness-oriented recreational items. We currently market our products under the trade name Leslie’s Swimming Pool Supplies through 472 company-owned stores in 36 states, mail order catalogs sent to selected pool owners nationwide and our web store. While our retail stores mainly target residential, “do-it-yourself” pool owners, we also operate a growing commercial service business that serves pool building and remodeling companies as well as other companies that maintain either residential or commercial pools. In fiscal 2004, we generated sales of $356.0 million and Adjusted EBITDA of $45.5 million, representing an increase from fiscal 2003 of 8.8% and 20.3%, respectively. Finally, our comparable store sales increased by 3.3% in fiscal 2004 from fiscal 2003.

We provide our customers a comprehensive selection of high quality products at competitive everyday low prices and superior customer service through knowledgeable and responsive sales personnel who offer a high level of technical assistance. We believe our everyday low prices are generally comparable to or better than those offered by our competitors, including mass merchants and home centers. We believe our product offering, combined with our focus on customer service, are key factors in our long-term success and our leadership position in the industry. In addition to third-party branded products, we carry a broad selection of products under the Leslie’s brand name, which accounted for approximately 37% of our fiscal 2004 sales. We believe that the Leslie’s brand name is one of the most recognized brands in pool supplies and represents an image of quality to consumers.

Our retail stores are located in areas with high concentrations of swimming pools and average approximately 3,900 square feet in size. Our typical store is located either in a strip center or on a freestanding site in an area of heavy retail activity and draws its customers primarily from an approximate three-mile trade area. We maintain a proprietary mailing list of 5.8 million addresses, which we believe includes over 75% of the residential pools in the United States. This highly focused list of target customers is central to our direct mail marketing efforts, which support our retail stores, mail order business and web store.

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Since our formation in 1963, the successful execution of our business strategy has enabled us to generate sales growth in 40 of the past 41 fiscal years despite cyclical turns in the economy and periods of unfavorable weather conditions. We have generated positive comparable store sales growth in nine out of the past ten fiscal years, with comparable store sales growing at an average annual rate of 5.3% during that same ten-year period. Between the beginning of fiscal 2000 and the end of fiscal 2004, we generated a compound annual growth rate, or CAGR, of 4.1% in sales and 24.1% in Adjusted EBITDA, while our Adjusted EBITDA margin grew from 6.3% to 12.8%. Since the end of fiscal 2000, we expanded our store count from 383 to 472.

U.S. Swimming Pool and Spa Supply Industry Overview

We market our products and services in the estimated $4.4 billion U.S. swimming pool and spa supply industry, which can be divided into four major segments: residential in-ground pools, residential above-ground pools, commercial pools and spas or hot tubs. The U.S. swimming pool and spa supply industry has experienced strong and steady unit growth over the last decade. According to market research firm P.K. Data, the installed base of residential in-ground pools, above-ground pools and spas and hot tubs in the United States has grown from just under 9 million in 1993 to over 13 million in 2002, and is projected to grow to over 17 million by 2007. Both historic and new pool unit growth is highly correlated to macroeconomic housing trends, as approximately 60% of all in-ground swimming pools are built as part of new home construction. We believe these historic and increasing levels of pool ownership have continued to create demand for pool maintenance goods and services. In addition, spending in the commercial pool supply market was estimated to be $1.1 billion in 2004, and we expect this market to continue to grow.

U.S. Residential Swimming Pool and Spa Market
(in millions of units)
	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002
In-ground	3.50	3.54	3.59	3.65	3.71	3.77	3.89	4.02	4.15	4.27
Above-ground	2.54	2.60	2.67	2.73	2.81	3.02	3.11	3.19	3.27	3.35
Spas and tubs	2.92	3.13	3.38	3.38	3.70	4.03	4.40	4.79	5.20	5.63
Total	8.96	9.27	9.64	9.76	10.22	10.82	11.40	12.00	12.62	13.25
Growth	3.2%	3.5%	4.0%	1.2%	4.7%	5.9%	5.4%	5.3%	5.2%	5.0%

Source: P.K. Data, Inc., December 2002

Regardless of the type or size of a swimming pool, numerous ongoing maintenance and repairs are associated with pool ownership. In order to keep a pool safe and sanitized, chemical treatment, such as the application of chlorine, is required to maintain proper chemical balance, and chemical treatment requirements are dependent on variables such as pool usage, precipitation and temperature. When the pool is chemically balanced, problems such as algae, mineral and salt saturation, corrosive water, staining, eye irritation and odor are less likely to occur; therefore, a regular testing and maintenance routine results in a stable and more easily maintained pool. Proper swimming pool maintenance also involves the ongoing upkeep and repair of swimming pool equipment, such as pumps, heaters and filters.

Competition within the pool supply industry is highly fragmented and largely populated by local “mom and pop” stores and regional chains. Based on the number of stores, we estimate that the next largest specialty pool supply retailer is less than one-third of our size. Mass merchant and home improvement chains participate in the category on a seasonal basis; however, we believe they do not offer the same level of service and expertise or breadth of product offering provided by us and other specialty stores serving the market.

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Competitive Strengths

We believe that the following competitive strengths will contribute to our continued success in the U.S. swimming pool and spa supply industry:

Extensive National Presence. With 472 company-owned stores in 36 states and a mail order business and web store, we are the leading national specialty retailer of swimming pool supplies and related products. Our national presence provides geographic diversification, which decreases the impact that unfavorable weather in any one region may have on our business. Most of our competition comes from local stores or regional chains, which typically do not manufacture or repackage products. We estimate that we have more stores than the next 15 largest specialty pool supply retailers combined.

Vertically Integrated Operations. We operate two manufacturing and repackaging plants, including one in Ontario, California and one in Hebron, Kentucky. We believe that supplying our stores with chemicals from our own plants provides us with cost savings, as well as greater control over product availability and quality, as compared to non-integrated pool supply retailers. Our vertical integration also offers us greater flexibility of product sourcing and information gathering, which we believe is beneficial when negotiating with third-party repackagers and chemical providers. Unlike most of our competitors, we do not rely upon third-party distribution, but have our own distribution network through four regionally located distribution centers. In 2004, we distributed the majority of our products to our retail stores and to our catalog customers through our leased distribution facilities in Ontario, California; Dallas, Texas; Swedesboro, New Jersey; and Hebron, Kentucky. We believe that these factors help us achieve more efficient inventory management and lower cost of goods. Furthermore, the Leslie’s brand name appears on all products processed at our plants and on the majority of our chemical products, which we believe increases our nationwide brand awareness and customer loyalty.

Broad Product Offerings and Superior Customer Service. We believe the breadth and depth of our product selection, combined with our high level of technical assistance and customer service, are essential to maintaining our leading position in the industry. We sell a broad selection of products under the Leslie’s brand name, as well as third-party branded products. Due to the complicated nature of pool chemistry and pool equipment maintenance, and consistent with our philosophy of being a full service swimming pool supply retailer, we offer a high level of technical assistance to support our customers. We consider the training of store personnel to be an integral part of our service philosophy. As part of our regular customer service program, we offer educational materials in the form of DVDs, videos and pamphlets on pool maintenance, as well as free detailed water testing. We also offer in-store equipment repairs that are generally free of labor charges. We believe that most of our competitors do not offer a comparable level of customer service or selection of swimming pool supplies available at our stores, which we believe increases our customer loyalty.

Significant Scale and Purchasing Power. We believe we are among the largest processors of chlorine products for the swimming pool supply industry as well as one of the largest purchasers of swimming pool supplies for retail sales in the United States. Nearly all raw materials as well as those products that we do not repackage are purchased directly from suppliers. Our scale and leading market position enable us to obtain favorable pricing on our purchases from these suppliers, and we have negotiated favorable long-term contracts for key raw materials, most notably chlorine. Furthermore, our size provides additional important benefits such as increased brand awareness for our products and the enhancement of customer value through broad product offerings and differentiated sales and marketing support. In addition, we expect to realize administrative and marketing cost savings as we continue to expand our store base while maintaining a consistent level of overhead.

Consistent Financial Performance. We have demonstrated consistent financial performance since fiscal 2000. Our sales increased from $303.2 million in fiscal 2000 to $356.0 million in fiscal 2004. During the same period, we grew our Adjusted EBITDA from $19.2 million to $45.5 million, and improved our Adjusted

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EBITDA margin from 6.3% to 12.8%. Our comparable store sales increased at an average annual rate of 2.1% between fiscal 2000 and fiscal 2004. We believe the consistency of our sales growth and profitability during this period is due in large part to the sale of non-discretionary and regularly consumed products, which represented 82% of our sales in fiscal 2004. Pool owners must purchase such products to maintain their pool’s water quality and physical appearance and, in our experience, do so regardless of economic environment or weather conditions.

Strong Free Cash Flow. We believe that our operating model generates significant free cash flow. Our tight inventory controls, combined with our leverage in product sourcing and negotiations with suppliers, enable us to closely monitor and effectively manage our working capital and maintain or increase our margins. Furthermore, as we have grown our business, we have not required significant capital expenditures. For fiscal 2004, our capital expenditures were $10.9 million, which represented 3.1% of our fiscal 2004 sales. Approximately 66% of our fiscal 2004 capital expenditures were related to expanding our store base. Between the end of fiscal 2000 and the end of fiscal 2004, we repaid $31.5 million of debt and increased our cash and cash equivalents by $15.6 million, attesting to our ability to generate significant free cash flow and reduce indebtedness.

Experienced and Committed Management Team. Our senior management team is comprised of five experienced retail industry veterans and since fiscal 2000 has successfully expanded our business, increased our profitability and enhanced our operational excellence. Our senior management team has an average of 26 years of retail industry experience in operations, purchasing, logistics, sales and marketing and information systems, as well as significant experience in managing companies with high levels of indebtedness. Our management team owns approximately 13.5% of our common stock through a reinvestment of existing equity interests.

Business Strategy

Our strategic objective is to increase our sales, profitability and cash flow by building upon our leading position in order to capitalize on the favorable fundamentals of our industry. Key elements of our strategy include the following:

Capitalize on Our Leadership Position in a Highly Fragmented Market. Despite our large size, we believe we accounted for only approximately 12% of the estimated $2.8 billion U.S. residential pool supply market in 2004. We believe that the majority of this market is comprised of independent local operators. Over the last several years, we have accelerated the pace of our store openings and believe we have gained market share through these additional stores. We believe that this market share growth has come primarily at the expense of independent local and regional pool supply retailers. We plan to continue to take advantage of the highly fragmented nature of our market and utilize our strong brand name to enhance our leadership position.

Focus on Operational Efficiencies. Since fiscal 2000, our senior management has been focused on establishing the necessary controls to increase profitability and effectively manage working capital needs throughout the seasonal trends in our business. Between fiscal 2000 and fiscal 2004, our average inventory days outstanding decreased from 124 days to 109 days and our Adjusted EBITDA margins increased from 6.3% to 12.8%. Average inventory days outstanding is calculated by dividing our inventory at the end of the fiscal year by our cost of goods sold during the fiscal year, multiplied by 365. We typically experience substantially lower sales and Adjusted EBITDA in the first half of each fiscal year, primarily due to seasonal weather. However, between fiscal 2000 and 2004, we have consistently reduced our negative Adjusted EBITDA for the first half of each year, and we have achieved 16 consecutive quarters of year-over-year Adjusted EBITDA growth.

Pursue Disciplined Growth Strategy. We believe that our attractive store-level economics are a result of our disciplined growth strategy. We will continue our selective expansion by strategically opening new stores in both new and existing markets. We plan to add 40 to 45 retail stores in fiscal 2005, and we may consider selective

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acquisitions in order to take advantage of the fragmented nature of the swimming pool supply industry. We also expect to increase our geographic diversification as a part of our growth strategy. Furthermore, we believe that the growing commercial pool supply market, which we estimate to be $1.1 billion in 2004, represents a significant opportunity for us. Therefore, we intend to open six commercial service centers in fiscal 2005. In addition, we are expanding our sales of spas and related spa equipment, which we believe also represents a significant growth opportunity.

Continue to Achieve Attractive Store Economics. Our historical results reflect attractive store-level economics. We typically open our new stores in the month of March in order to position them for the ensuing peak season. Based upon our past experience, new stores generally break even in their first year of operation and return their initial investment within three years. In 2004, our mature stores (consisting of 338 stores open for five fiscal years or longer) posted a comparable store sales increase of 3.5%. We emphasize disciplined capital spending and careful site selection in order to maintain our attractive store dynamics. We also focus on operating costs by continuously adjusting our store-level labor to minimize costs while maintaining exceptional customer service. In addition, we typically structure our store lease agreements with five-year terms that include multiple five-year extension options, which provides flexibility in closing stores that do not meet our stringent profitability hurdles.

Continue to Capitalize on and Expand Proprietary Database of Pool Locations. Through ongoing research as well as the conduct of our retail and mail order business, we have developed a proprietary database of 5.8 million addresses. We believe this database includes over 75% of the residential pools in the United States. This list of potential customers is central to our cost-effective, highly targeted direct mail marketing efforts, which support our retail stores, mail order business and web store. When combined with our mail order sales results and computerized mapping, this database also provides us a sophisticated store site selection capability. We believe that the scope and accuracy of our proprietary database is unique in the pool supply industry. We will continue to expand our database to grow our sales through targeted marketing efforts and to determine new store locations.

Company Information

We were incorporated as a Delaware corporation in 1997. Our principal executive offices are located at 3925 E. Broadway Road, Suite 100, Phoenix, Arizona 85040, and our telephone number at that address is (602) 366-3999. Our corporate website address is www.lesliespool.com. Information contained on our website is not part of this prospectus. The “Leslie’s” word mark is registered to us in the United States for various products and services. Other product and company names referred to in this prospectus are trademarks of the respective companies.

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The Transactions

We refer to the following series of related transactions collectively as the Transactions:

• The Recapitalization. LPM Acquisition LLC, a newly-formed entity controlled by GCP California Fund, L.P., or GCP, and affiliates of Leonard Green & Partners, L.P., or LGP, merged with and into Leslie’s on January 25, 2005, with Leslie’s continuing as the surviving entity in the merger. Immediately prior to the consummation of the merger, GCP, one of our directors and one of our executive officers who is also a director contributed a portion of their shares of our common stock with a value of $29.1 million to LPM Acquisition in exchange for common units of LPM Acquisition. In addition, GCP and an additional affiliate of LGP contributed $10.9 million in cash to LPM Acquisition in exchange for common units of LPM Acquisition. As a result of this merger, the common units of LPM Acquisition was converted into our common stock and our common stock is now owned by GCP, additional affiliates of LGP and some of our directors and members of our management. See “Security Ownership of Principal Stockholders and Management.”

In the merger, all of our shares of common and preferred stock outstanding prior to the merger and outstanding options (other than those that have been contributed to LPM Acquisition) were exchanged for cash consideration of $189.5 million. The cash paid for each share of common stock was $15.00, and the cash paid for each share of preferred stock, including redemption premium and accrued interest and dividends, was $1,372.00.

In connection with the merger, GCP and additional affiliates of LGP also acquired shares valued at $40.1 million of a new series of preferred stock from us. One of our directors contributed common stock valued at $0.9 million in exchange for shares of such preferred stock. See “Description of Other Indebtedness and Preferred Stock.”

We refer to the preceding transactions collectively as the Recapitalization.

• The Tender Offer and Consent Solicitation. On December 23, 2004, we commenced a tender offer and solicitation of consents, or the tender offer, to purchase all of the $59.5 million outstanding principal amount of our 10 ³/8% Senior Notes due 2008, and to amend the indenture governing the 10 ³/8% notes to eliminate most of the covenants and certain events of default. On January 11, 2005, we entered into a supplemental indenture with The Bank of New York Trust Company, N.A., as the trustee, supplementing the Indenture dated as of May 21, 2003 as contemplated by the terms of the tender offer. The supplemental indenture eliminated substantially all of the restrictive covenants and certain events of default under the indenture relating to the 10 ³/8% notes. The total consideration for the 10 ³/8% notes which was paid in respect of the 10 ³/8% notes accepted for payment that were validly tendered with consents and not withdrawn on or prior to 5:00 p.m., New York City time on January 7, 2005 was $1,059.30 for each $1,000 principal amount of the 10 ³/8% notes. The 10 ³/8% notes accepted for payment that were validly tendered subsequent to 5:00 p.m., New York City time on January 7, 2005 but on or prior to 5:00 p.m., New York City time, on February 2, 2005, received the tender offer consideration of $1,029.30 for each $1,000 principal amount of the 10 ³/8% notes, which is equal to the total consideration minus the consent payment of $30.00 per $1,000 principal amount of the 10 ³/8% notes. $55.5 million aggregate principal amount of the notes were tendered and accepted in the tender offer.

• The Offering. On January 25, 2005, we issued an aggregate of $170.0 million principal amount of the original notes, which we are offering to exchange in this exchange offer. The net proceeds from the offering of the original notes, together with borrowings under an amended credit facility, proceeds from the issuance of equity securities and cash on hand, were used to complete the Recapitalization, repurchase the outstanding 10 ³/8% notes that were tendered in the tender offer and complete the other Transactions.

• The Amended Credit Facility. On January 25, 2005, we amended our existing credit facility with Wells Fargo Retail Finance, LLC to provide for the extension by the lender of revolving loans and other

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financial accommodations in an aggregate principal amount of $75.0 million. Our obligations under the amended credit facility are secured by a lien on substantially all of our assets. In addition to the $75.0 million commitment, the total commitment was increased by $30.0 million via a temporary over-advance facility through June 30, 2005. At our option, the over-advance facility will again be available in the amount of $20.0 million from September 30, 2005 through March 31, 2006. Finally, at the lender’s discretion, an over-advance facility of $10.0 million may be available to us from September 30, 2006 through March 31, 2007.

The following table illustrates the actual sources and uses of funds relating to the Transactions on January 25, 2005. For additional detail, see “Certain Relationships and Related Transactions—Management Participation in the Recapitalization.”

Sources of Funds			Uses of Funds
(in millions)
Amended credit facility(1)	$	39.7	Payment to existing equityholders(3)	$	219.4
Original notes		168.7	Repurchase of notes in tender offer(4)		58.7
Preferred stock sales(2)		41.0	Fees and expenses		11.3
Common stock sales(2)		40.0
Total sources	$	289.5	Total uses	$	289.5

(1) The amended credit facility consists of a $75.0 million five-year revolving credit facility, with up to an additional $30.0 million available under an over-advance facility. Our prior credit facility consisted of a $75.0 million revolving credit facility that expired January 15, 2008. The effective interest rate on outstanding borrowings under the prior credit facility at October 2, 2004 was 3.3%.

(2) Common stock and preferred stock sold to GCP, additional affiliates of LGP, some of our directors and members of management. Includes $29.9 million of common stock which was contributed to LPM Acquisition.

(3) Payments made to our previous common and preferred stockholders and optionholders pursuant to the Recapitalization. Includes $189.5 million of cash and $29.9 million of new common and preferred stock issued in exchange for existing common stock contributed to LPM Acquisition. Our executive officers received a portion of such cash consideration as a result of their ownership of common stock and options and contributed a portion of their existing common stock to LPM Acquisition.

(4) Does not include $4.0 million aggregate principal amount of 10 ³/8% Senior Notes due 2008 that were not tendered in the tender offer. Includes $3.2 million of tender premiums. The remaining 10 ³/8% notes outstanding are redeemable after July 15, 2005 and have a scheduled maturity date of July 15, 2008. Our executive officers, directors and their affiliates received approximately $2.8 million in the tender offer for the notes they owned.

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The Exchange Offer

The Exchange Offer This is an offer to exchange $1,000 in principal amount of exchange notes for each $1,000 in principal amount of original notes to satisfy our obligations under a registration rights agreement that we entered into with the initial purchasers of the original notes when we sold the original notes in a transaction that was exempt from the registration requirements of the Securities Act. The exchange notes are substantially identical to the original notes, except that:

• the exchange notes will be freely transferable, other than as described in this prospectus;

• the exchange notes will not contain any legend restricting their transfer;

• holders of the exchange notes will not be entitled to the rights of the holders of the original notes under the registration rights agreement; and

• the exchange notes will not contain any provisions regarding the payment of liquidated damages.

We believe that you can transfer the exchange notes without complying with the registration and prospectus delivery provisions of the Securities Act if you:

• acquire the exchange notes in the ordinary course of your business;

• are not and do not intend to become engaged in a distribution of the exchange notes;

• are not an “affiliate” (within the meaning of the Securities Act) of ours;

• are not a broker-dealer that acquired the original notes directly from us; and

• are not a broker-dealer that acquired the original notes as a result of market-making or other trading activities.

If any of these conditions are not satisfied and you transfer any exchange note without delivering a proper prospectus or without qualifying for a registration exemption, you may incur liability under the Securities Act.

Each broker-dealer that receives exchange notes for its own account in exchange for original notes that it acquired as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of those exchange notes. See “Plan of Distribution.”

Minimum Condition The exchange offer is not conditioned on any minimum aggregate principal amount of original notes being tendered for exchange.

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Expiration Date The exchange offer will expire at 5:00 p.m., New York City time, on                     , 2005, unless we extend it.

Exchange Date Original notes will be accepted for exchange at the time when all conditions of the exchange offer are satisfied or waived. The exchange notes will be delivered promptly after we accept the original notes.

Conditions To The Exchange Offer Our obligation to complete the exchange offer is subject to certain conditions. See “The Exchange Offer—Conditions to the Exchange Offer.” We reserve the right to terminate or amend the exchange offer at any time prior to the expiration date upon the occurrence of certain specified events.

Withdrawal Rights You may withdraw the tender of your original notes at any time before the expiration of the exchange offer on the expiration date. Any original notes not accepted for any reason will be returned to you without expense as promptly as practicable after the expiration or termination of the exchange offer.

Procedures For Tendering Original Notes See “The Exchange Offer—How to Tender.”

U.S. Federal Tax Consequences The exchange of the original notes for the exchange notes by U.S. holders should not be a taxable exchange for U.S. federal income tax purposes and U.S. holders should not recognize any taxable gain or loss as a result of such exchange. See “Certain United States Federal Tax Considerations.”

Effect On Holders Of Original Notes If the exchange offer is completed on the terms and within the period contemplated by this prospectus, holders of original notes will have no further registration or other rights under the registration rights agreement except under limited circumstances.

HOLDERS OF ORIGINAL NOTES WHO DO NOT TENDER THEIR ORIGINAL NOTES WILL CONTINUE TO HOLD THOSE ORIGINAL NOTES. ALL UNTENDERED, AND TENDERED BUT UNACCEPTED, ORIGINAL NOTES WILL CONTINUE TO BE SUBJECT TO THE RESTRICTIONS ON TRANSFER PROVIDED FOR IN THE ORIGINAL NOTES AND THE INDENTURE UNDER WHICH THE ORIGINAL NOTES WERE ISSUED.

To the extent that original notes are tendered and accepted in the exchange offer, the trading market, if any, for the original notes could be adversely affected. See “Risk Factors—You may not be able to sell your original notes if you do not exchange them for registered exchange notes in the exchange offer.”

Use Of Proceeds We will not receive any proceeds from the issuance of the exchange notes in the exchange offer.

Exchange Agent The Bank of New York Trust Company, N.A. is serving as the exchange agent in connection with the exchange offer.

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The Exchange Notes

The summary below describes the principal terms of the exchange notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. The terms of the exchange notes to be issued are substantially identical to the terms of the original notes, except that the exchange notes will be registered under the Securities Act and certain transfer restrictions, registration rights and liquidated damages relating to the original notes will not apply to the exchange notes. The exchange notes will evidence the same debt as the original notes and will be entitled to the benefits of the indenture. See “Description of Notes.”

Issuer Leslie’s Poolmart, Inc.

Notes Offered $170,000,000 in aggregate principal amount of 7 ³/4% Senior Notes due 2013, Series B.

Maturity Date February 1, 2013.

Interest Payment Dates The notes will pay interest semi-annually in cash in arrears on February 1 and August 1 of each year, beginning on August 1, 2005.

Ranking The notes will be unsecured senior obligations and will rank equally with current and future unsecured senior indebtedness.

Optional Redemption The notes will be redeemable, in whole or in part, at any time on or after February 1, 2009 at the redemption prices specified under “Description of Notes—Optional Redemption,” plus accrued and unpaid interest. In addition, up to 35% of the aggregate principal amount of the notes may be redeemed on or prior to February 1, 2008 with the net cash proceeds of certain equity offerings at the redemption prices specified under “Description of Notes—Optional Redemption,” plus accrued and unpaid interest.

Change of Control If we undergo a Change of Control, as that term is defined in “Description of Notes—Repurchase at the Option of Holders after a Change of Control,” holders of notes will have the option to require us to repurchase all or part of their notes not previously called for redemption. The repurchase price will be equal to 101% of the principal amount of the notes to be repurchased plus accrued and unpaid interest and additional interest, if any, thereon, to the date of purchase. See “Description of Notes—Repurchase at the Option of Holders after a Change of Control.”

Certain Covenants The indenture under which we will issue the notes restricts our (and/or our subsidiaries’) ability to do the following:

• incur additional indebtedness;

• make certain restricted payments;

• sell certain assets;

• pay dividends or make other payments of our subsidiaries;

• issue preferred stock of our subsidiaries;

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• incur certain liens;

• guarantee certain obligations;

• enter into certain transactions with affiliates; and

• engage in mergers, consolidations and sales of assets. See “Description of Notes—Certain Covenants.”

For a discussion of certain risks that should be considered in connection with an investment in the notes, see “Risk Factors.”

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Summary Consolidated Financial Information

The following table sets forth summarized historical financial and statistical data derived from our audited consolidated financial statements and the related notes thereto as of and for the fiscal years ended September 28, 2002, September 27, 2003 and October 2, 2004 and our unaudited consolidated financial statements for the 13 week periods ending December 27, 2003 and January 1, 2005. The fiscal year ended October 2, 2004 consists of 53 weeks, and the other fiscal years consist of 52 weeks. Our financial statements and the related notes thereto appear elsewhere in this prospectus. The information included in “Other Financial Data,” “Operating Data” and “Pro Forma Data and Credit Statistics” is unaudited. In the opinion of management, the unaudited financial information includes all adjustments, consisting of only normal recurring adjustments considered necessary for a fair presentation of this information. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the entire year. The information set forth below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the complete historical financial statements and related notes thereto contained elsewhere in this prospectus.

	Fiscal Years Ended									13 Weeks Ended
	September 28, 2002 (restated)(1)			September 27, 2003 (restated)(1)			October 2, 2004 (restated)(1)			December 27, 2003 (restated)(1)			January 1, 2005 (restated)(1)
	(dollar amounts in thousands)
Statement of Operations Data:
Sales	$	313,311		$	327,165		$	356,041		$	40,820		$	40,937
Cost of merchandise and services sold		166,340			171,219			183,928			22,390			21,565
Gross profit		146,971			155,946			172,113			18,430			19,372
Selling, general and administrative expenses		125,079			128,290			137,881			27,731			28,798
Unusual expense		1,500			—			—			—			—
Amortization of goodwill		319			—			—			—			—
Operating income (loss)		20,073			27,656			34,232			(9,301	)		(9,426	)
Interest expense, net(2)		10,690			9,566			7,172			1,777			3,649
Write-off of debt issuance costs		—			420			—			—			—
Loss on disposition of fixed assets		1,332			497			440			284			23
Income (loss) before taxes		8,051			17,173			26,620			(11,362	)		(13,098	)
Income tax expense (benefit)		3,358			6,830			10,374			(4,483	)		(4,465	)
Net income (loss)	$	4,693		$	10,343		$	16,246		$	(6,879	)	$	(8,633	)
Other Financial Data:
Cash flows provided by (used in):
Operating activities	$	20,637		$	32,745		$	21,358		$	(21,180	)	$	(17,675	)
Investing activities		(8,452	)		(8,607	)		(10,281	)		(652	)		(1,422	)
Financing activities		(957	)		(32,112	)		(260	)		14,253			2,005
Depreciation and amortization		9,631			10,186			11,281			2,715			2,949
Capital expenditures		8,472			8,616			10,899			665			1,422
Adjusted EBITDA(3)		31,204			37,842			45,513			(6,586	)		(6,477	)
Adjusted EBITDA margin(3,4)		10.0	%		11.6	%		12.8	%		(16.1	)%		(15.8	)%
Rent expense		22,989			24,762			27,283			6,478			7,225
Ratio of earnings to fixed charges(5)		1.2	x		1.6	x		2.2	x		—			—
Operating Data:
Number of stores (at end of period)		410			437			474			437			472
Number of employees (at end of period)		1,691			1,836			1,820			1,494			1,555
Comparable store sales growth(6)		1.9	%		2.3	%		3.3	%		9.3	%		(5.4	)%
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	17,996		$	10,022		$	20,839		$	2,443		$	3,747
Working capital		34,634			15,410			33,354			25,159			30,209
Total assets		143,139			130,220			144,836			129,081			133,707
Total debt(7)		135,517			105,410			105,811			105,510			105,912
Pro Forma Data and Credit Statistics(8):
Interest expense(2,9)							$	14,210					$	4,843
Total debt(7)								195,113						252,749
Total debt to Adjusted EBITDA								4.3	x					—
Adjusted EBITDA to interest expense(2,9)								3.2	x					—

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(1) We have reclassified tenant improvement allowances from a contra asset in property, plant and equipment, net to other long term liabilities in the consolidated balance sheets. The amortization of the tenant improvement allowances has also been reclassified from a reduction of depreciation and amortization expense to a reduction in rent expense. The receipt of tenant improvement allowances has been reclassified in the statement of cash flows by increasing purchase of property, plant and equipment, and increasing cash provided by or decreasing cash used in operating activities. See Note 1 to Consolidated Financial Statements for reconciliation of adjustment.

(2) Interest expense for periods ending on or prior to October 2, 2004 does not include preferred stock dividends and accretion, which were classified as interest expense pursuant to SFAS No. 150 beginning October 3, 2004. Prior to October 3, 2004 preferred stock dividends and accretion were included in stockholders’ equity.

(3) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, loss/(gain) on disposition of fixed assets, write-off of debt issuance costs and unusual and restructuring charges. Adjusted EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles, or “GAAP,” but is used by some investors to determine a company’s ability to service or incur indebtedness. Adjusted EBITDA is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as an indicator of a company’s operating performance or liquidity, and should not be considered in isolation from or as a substitute for net income (loss) or cash flows from operations which are prepared in accordance with GAAP. We have presented Adjusted EBITDA solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. Adjusted EBITDA is not intended to represent and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP. In addition, Adjusted EBITDA may be calculated differently from Consolidated EBITDA as defined in the indenture relating to the notes.

The calculation of Adjusted EBITDA is shown as follows:

	Fiscal Years Ended						13 Weeks Ended
	September 28, 2002 (restated)(1)		September 27, 2003 (restated)(1)		October 2, 2004 (restated)(1)		December 27, 2003 (restated)(1)			January 1, 2005 (restated)(1)
	(dollar amounts in thousands)
Statement of Operations Data:
Net income (loss)	$	4,693	$	10,343	$	16,246	$	(6,879	)	$	(8,633	)
Depreciation and amortization		9,631		10,186		11,281		2,715			2,949
Unusual and restructuring charges		1,500		—		—		—			—
Interest expense, net		10,690		9,566		7,172		1,777			3,649
Write-off of debt issuance costs		—		420		—		—			—
Loss on disposition of fixed assets		1,332		497		440		284			23
Income tax expense		3,358		6,830		10,374		(4,483	)		(4,465	)
Adjusted EBITDA	$	31,204	$	37,842	$	45,513	$	(6,586	)	$	(6,477	)

(4) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of sales.

(5) For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income (loss) before taxes and fixed charges, and fixed charges consist of interest expense, preferred stock dividends, preferred stock accretion (less tax impact), amortization of debt issuance costs and operating lease interest. Our earnings were insufficient to cover fixed charges for the first quarter of fiscal 2004 and the first quarter of fiscal 2005 by $13.1 million and $13.2 million, respectively.

(6) We consider a store to be comparable in the first full month after it has completed 52 weeks of sales. Closed stores become non-comparable during their last partial month of operation. Stores that are relocated are considered comparable stores at the time the relocation is completed. Comparable store sales is not a measure of financial performance under GAAP. Comparable store sales is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies.

(7) Beginning October 3, 2004, we were required to adopt SFAS No. 150 and classify preferred stock, previously included in the mezzanine portion of the balance sheet, as long-term debt. Prior periods have been reclassified for consistency of presentation. As of January 25, 2005, total debt was $9.0 higher than at January 1, 2005 primarily due to the seasonality of our business.

(8) Assumes that the Transactions were consummated on September 28, 2003 for interest expense and October 2, 2004 for long-term debt.

(9) Pro forma interest expense is calculated based on the actual interest rate on the notes and the three-month LIBOR rate as of January 2, 2005, plus the applicable margin on our amended credit facility.

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RISK FACTORS

You should carefully consider the following factors in addition to the other information set forth in this prospectus before you participate in the exchange offer.

Risks Relating to the Exchange Notes and the Exchange Offer.

You may not be able to sell your original notes if you do not exchange them for registered exchange notes in the exchange offer.

If you do not exchange your original notes for exchange notes in the exchange offer, your original notes will continue to be subject to the restrictions on transfer as stated in the legend on the original notes. In general, you may not reoffer, resell or otherwise transfer the original notes in the United States unless they are:

• registered under the Securities Act;

• offered or sold under an exemption from the Securities Act and applicable state securities laws; or

• offered or sold in a transaction not subject to the Securities Act and applicable state securities laws.

Except for limited instances involving the initial purchasers or holders of original notes who are not eligible to participate in the exchange offer or who do not receive freely transferable exchange notes in the exchange offer, we will not be under any obligation to register the original notes under the Securities Act under the registration rights agreement or otherwise. Also, if the exchange offer is completed on the terms and within the time period contemplated by this prospectus, no liquidated damages will be payable on your original notes.

Holders of the original notes who do not tender their original notes will have no further registration rights under the registration rights agreement.

Holders who do not tender their original notes, except for limited instances involving the initial purchasers or holders of original notes who are not eligible to participate in the exchange offer or who do not receive freely transferable exchange notes in the exchange offer, will not have any further registration rights under the registration rights agreement or otherwise and will not have rights to receive liquidated damages.

The market for the original notes may be significantly more limited after the exchange offer and you may not be able to sell your original notes after the exchange offer.

If original notes are tendered and accepted for exchange under the exchange offer, the trading market for the original notes that remain outstanding may be significantly more limited. As a result, the liquidity of the original notes not tendered for exchange could be adversely affected. The extent of the market for the original notes and the availability of price quotations would depend upon a number of factors, including the number of holders of the original notes remaining outstanding and the interest of securities firms in maintaining a market in the original notes. An issue of securities with a similar outstanding market value available for trading, which is called the “float,” may command a lower price than would be comparable to an issue of securities with a greater float. As a result, the market price for the original notes that are not exchanged in the exchange offer may be affected adversely as the original notes exchanged in the exchange offer reduce the float. The reduced float also may make the trading price of the original notes that are not exchanged more volatile.

Your original notes will not be accepted for exchange if you fail to follow the exchange offer procedures and, as a result, your original notes will continue to be subject to existing transfer restrictions and you may not be able to sell your original notes.

We will not accept your original notes for exchange if you do not follow the exchange offer procedures. We will issue exchange notes as part of the exchange offer only after a timely receipt of your original notes, a properly completed and duly executed letter of transmittal and all other required documents. Therefore, if you

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want to tender your original notes, please allow sufficient time to ensure timely delivery. If we do not receive your original notes, letter of transmittal and other required documents by the expiration date of the exchange offer, we will not accept your original notes for exchange. We are under no duty to give notification of defects or irregularities with respect to the tenders of original notes for exchange. If there are defects or irregularities with respect to your tender of original notes, we will not accept your original notes for exchange.

There is no established trading market for the exchange notes, and the offering and sale of the notes is subject to uncertainties regarding the liquidity of the trading market for such securities.

The exchange notes will constitute a new issue of securities with no established trading market, and there can be no assurance as to:

• the liquidity of any such market that may develop;

• the ability of holders of exchange notes to sell their exchange notes; or

• the price at which the holders of exchange notes would be able to sell their exchange notes.

If such a market were to exist, the exchange notes could trade at prices that may be higher or lower than their principal amount or purchase price, depending on many factors, including prevailing interest rates, the market for similar notes and our financial performance. The notes have been designated as eligible for trading in PORTAL. However, we do not intend to list the notes for trading on any national securities exchange or arrange for any quotation system to quote prices for them. We have been advised by the initial purchasers that they presently intend to make a market in the exchange notes. However, they are not obligated to do so, and any market-making activity with respect to the exchange notes may be discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Exchange Act of 1934, as amended.

We are highly leveraged and have substantial debt service obligations that could restrict our ability to grow and operate successfully.

We are highly leveraged and have indebtedness that is substantial in relation to our stockholders’ equity. As of January 1, 2005, on a pro forma basis after giving effect to the Transactions, we would have had an aggregate of $214.5 million of outstanding senior indebtedness for borrowed money (including the notes), $41.0 million (liquidation preference) of outstanding preferred stock and $40.0 million of stockholders’ equity. The degree to which we are leveraged could have important consequences to you, including the following:

• we may be less able to obtain financing for working capital, expansion or general corporate purposes;

• much of our cash flow from operations must go to the payment of interest on the notes and interest and principal on our other indebtedness, reducing funds available for other purposes;

• the agreements governing our long-term indebtedness contain restrictive financial and operating covenants;

• indebtedness under our amended credit facility is at variable rates of interest, which makes us vulnerable to interest rate increases;

• our amended credit facility is secured by substantially all of our assets and will become due before the principal on the notes is due;

• we are more leveraged than some of our competitors, which may be a competitive disadvantage;

• we may have difficulty adjusting rapidly to changing market conditions; and

• our substantial leverage could make us more vulnerable in the event of a downturn in general economic conditions, prolonged unfavorable weather conditions or other adverse events in our business.

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Despite current debt levels, we may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial indebtedness.

We may be able to incur substantial additional indebtedness in the future. The terms of the indenture governing the notes do not fully prohibit us from doing so. Our amended credit facility permits borrowings of up to $105.0 million. If new debt is added to our current level of debt, the related risks that we now face would increase. In addition, we are able to incur obligations that do not constitute indebtedness pursuant to the indenture. This additional debt may be secured, and the notes would rank effectively junior to those obligations and the debt under our amended credit facility to the extent of the value of the collateral securing such obligations.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

On a pro forma basis, after giving effect to the Transactions, interest expense would have been $14.4 million for fiscal 2004. Our ability to make payments on and to refinance our indebtedness, including the notes, will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control.

We cannot assure you that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our amended credit facility to enable us to pay our indebtedness, including the notes, or to fund other liquidity needs. We may need to refinance all or a portion of our indebtedness, including the notes, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including our amended credit facility and the notes, on commercially reasonable terms or at all.

Without such refinancing, we could be forced to sell assets under unfavorable circumstances to make up for any shortfall in our payment obligations. Our amended credit facility and our obligations under the notes limit our ability to sell assets and also restrict the use of proceeds from any such sale. Furthermore, our amended credit facility is secured by substantially all of our assets. Therefore, we may not be able to sell our assets quickly enough or for sufficient amounts to enable us to meet our debt service obligations.

The agreements governing the notes and our amended credit facility impose significant restrictions on our business.

The indenture governing the notes contains, and the agreements governing our amended credit facility contain, a number of covenants imposing significant restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. The restrictions these covenants place on us and our subsidiaries include limitations on our ability and the ability of our subsidiaries to:

• incur indebtedness or issue disqualified stock or preferred stock;

• pay dividends or make other distributions on, redeem or repurchase our capital stock;

• make investments or acquisitions;

• create liens;

• sell assets;

• engage in sale and lease back transactions;

• restrict dividends or other payments to us;

• guarantee indebtedness;

• engage in transactions with affiliates; and

• consolidate, merge or transfer all or substantially all of our assets.

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In addition, our amended credit facility also requires us to meet a number of financial ratio tests and restricts our ability to make capital expenditures or prepay certain other debt. We may not be able to maintain these ratios. These restrictions could limit our ability to plan for or react to market conditions or meet our capital needs. We cannot assure you that we will be granted waivers or amendments to our amended credit facility if for any reason we are unable to meet its requirements, or that we will be able to refinance our debt on terms acceptable to us, or at all.

The breach of any of these covenants or restrictions could result in a default under the indenture governing the notes or our amended credit facility. An event of default under our debt agreements would permit some of our lenders to declare all amounts borrowed from them to be due and payable. If we are unable to repay debt, lenders having secured obligations like the lenders under our amended credit facility could proceed against the collateral securing that debt. If this occurred, there can be no assurance that our assets would be sufficient to repay in full the indebtedness under the amended credit facility and the notes.

We may not be able to meet our obligations in the event of a change in control.

Upon the occurrence of a change of control, we will be required to make an offer to repurchase the notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest. However, our amended credit facility will prohibit the purchase of the notes by us in the event of a change of control, unless and until the indebtedness under our amended credit facility is fully paid. Our failure to purchase the notes would result in a default under the indenture and our amended credit facility. Our inability to pay the indebtedness under our amended credit facility, if accelerated, would also constitute a default under the indenture, which could have adverse consequences to us and to you. In the event of a change of control, we cannot assure you that we would have sufficient assets to satisfy all of our obligations under our amended credit facility and the notes.

The market price for the notes may be volatile.

Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the notes offered hereby. The market for the notes, if any, may be subject to similar disruptions. Any such disruptions may adversely affect the value of the notes.

Risks Relating to Our Business

A small group of stockholders are able to exercise control over our business.

GCP and additional affiliates of LGP, through their ownership or control of over 80% of the outstanding shares of our common stock, have the power to elect a majority of our board of directors. Accordingly, those entities have the power to approve all amendments to our certificate of incorporation and bylaws and to effect fundamental corporate transactions such as mergers, asset sales and public offerings.

Our continued success depends on our successful expansion in new and existing markets.

Our continued growth depends to a significant degree on our ability to open new stores in existing and new markets and to operate these stores on a profitable basis. To a lesser extent, our continued growth depends on increasing comparable store sales. We opened 19 net additional stores in 2002, 27 net additional stores in 2003 and 37 net additional stores in 2004. We cannot assure you that we will be able to open new stores in a timely manner; to hire, train and integrate employees; to continue locating and obtaining favorable store sites; and to adapt our distribution, management information and other operating systems to the extent necessary to grow in a successful and profitable manner. Further, we cannot assure you that our new stores will achieve historical levels of sales or profitability. Since our new stores generally have lower operating margins following their opening than mature stores, the opening of a large number of stores could have an adverse effect on our total operating margins. Additionally, our expansion plans could be adversely affected by a decrease in new home and

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swimming pool construction. We expect that our quarterly results of operations will fluctuate depending on the timing and the amount of revenue contributed by new stores and, to a lesser degree, the timing of costs associated with the opening of new stores.

Our results of operation fluctuate as a result of weather conditions.

Our business exhibits substantial seasonality which we believe is typical of the swimming pool supply industry. In general, sales and earnings are highest during our third and fourth fiscal quarters, which represent the peak months of swimming pool use. Typically, all of our operating income is generated in these two quarters which offsets the operating losses incurred in each of the other two quarters. Our business is significantly affected by weather patterns. For example, unseasonably late warming trends can decrease the length of the pool season, and unseasonably cool weather and/or extraordinary amounts of rainfall in the peak season may decrease swimming pool use, resulting in lower maintenance needs and decreased sales.

We may not be able to successfully compete.

Most of our competition comes from local stores or regional chains which, unlike us, do not repackage products and which generally buy products in smaller quantities. The chain store competitors include a large franchise operator of approximately 140 retail outlets in the Florida market and a limited number of other retail chains of approximately 15 to 30 stores. We compete on selected principal products with large-volume mass merchants and home centers which offer a limited selection of pool supplies as compared to us. There are no proprietary technologies or other significant barriers to prevent other firms from entering the swimming pool supply retail market in the future. Competition could adversely impact our sales and operating margins.

Our business includes the packaging and storage of chemicals and an accident related to those chemicals could subject us to liability and increased costs.

We operate chemical repackaging facilities in Ontario, California and Hebron, Kentucky and store chemicals in our retail stores and in distribution facilities in Ontario, California; Dallas, Texas; Swedesboro, New Jersey; and Hebron, Kentucky. Since some of the chemicals we repackage and store are flammable or combustible compounds, we must comply with various fire and safety ordinances. However, a fire at one of our facilities could give rise to liability claims against us. In addition, if an incident involves the repackaging or a distribution facility, we might be required temporarily to use alternate sources of supply which could increase our cost of sales.

We are dependent on key personnel and the loss of their services could adversely affect us.

We believe that our success is largely dependent upon the abilities and experience of our senior management team. Our senior executives received substantial benefits as a result of the Transactions. The loss of services of one or more of these senior executives could adversely affect our results of operations.

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USE OF PROCEEDS

We will not receive any proceeds from the exchange of the exchange notes for the original notes pursuant to the exchange offer.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of January 1, 2005 on:

• an actual basis; and

• as adjusted to give effect to the Transactions.

You should read this table in conjunction with our financial statements and the related notes to the financial statements included in this prospectus. This should be read in conjunction with “Use of Proceeds,” “Selected Historical Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Other Indebtedness.”

The financial data at January 1, 2005 in the following table are derived from our unaudited financial statements as of and for the three months ended January 1, 2005.

	January 1, 2005
	Actual			As Adjusted
	(in thousands)
Cash and cash equivalents	$	3,747		$	3,747
Long-term debt
Amended credit facility(1)		2,000			41,749
10 3/8% Senior Notes due 2008		59,495			4,000
7 3/4% Senior Notes due 2013(2)		—			168,742
Preferred stock		46,417			41,000
Total long-term debt	$	107,912		$	255,491
Total stockholders’ equity (deficit)		(47,719	)		40,000
Total capitalization	$	61,193		$	295,491

(1) As of January 25, 2005, total debt was $9.0 million higher than at January 1, 2005 primarily due to the seasonality of our business.

(2) Net of original issue discount.

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THE EXCHANGE OFFER

Purpose of the Exchange Offer

On January 25, 2005, we privately placed the original notes in a transaction exempt from registration under the Securities Act. Accordingly, the original notes may not be reoffered, resold or otherwise transferred in the United States unless so registered or unless an exemption from the Securities Act registration requirements is available. Pursuant to the registration rights agreement with the initial purchasers of the original notes, we agreed to:

• prepare and file, within 90 days of the date on which we issued the original notes, an exchange offer registration statement with the SEC with respect to a registered offer to exchange the original notes for exchange notes that are substantially identical in all material respects to the original notes except that they will not contain terms with respect to transfer restrictions or registration rights and will be registered under the Securities Act;

• use our commercially reasonable efforts to cause the exchange offer registration statement to become effective under the Securities Act within 180 days after the date on which we issued the original notes; and

• promptly after the exchange offer registration statement is declared effective, offer the exchange notes in exchange for surrender of the original notes and use our commercially reasonable efforts to consummate the exchange offer within 210 days after the date on which we issued the original notes.

We will be entitled to consummate the exchange offer on the expiration date provided that we have accepted all original notes previously validly tendered in accordance with the terms set forth in this prospectus and the letter of transmittal. In addition, under certain circumstances described below, we may be required to file a shelf registration statement to cover resales of the notes. If we do not comply with certain of our obligations under the registration rights agreement, we must pay liquidated damages to holders of the original notes in addition to the interest that is otherwise due on the notes. The purpose of the exchange offer is to fulfill our obligations with respect to the registration rights agreement. If you are a broker-dealer that receives exchange notes for your own account in exchange for original notes, where you acquired such original notes as a result of market-making activities or other trading activities, you must acknowledge that you will deliver a prospectus in connection with any resale of such exchange notes. See “Plan of Distribution.”

Terms of the Exchange

Upon the terms and subject to the conditions contained in this prospectus and in the letter of transmittal that accompanies this prospectus, with respect to the original notes, we are offering to exchange $1,000 in principal amount of exchange notes for each $1,000 in principal amount of original notes. The terms of the exchange notes are substantially identical to the terms of the original notes for which they may be exchanged in the exchange offer, except that the exchange notes will generally be freely transferable. The exchange notes will evidence the same debt as the original notes and will be entitled to the benefits of the indenture. Any original notes that remain outstanding after the consummation of the exchange offer, together with all exchange notes issued in connection with the exchange offer, will be treated as a single class of securities under the indenture. See “Description of Notes.”

The exchange offer is not conditioned on any minimum aggregate principal amount of original notes being tendered for exchange.

Based on existing interpretations of the Securities Act by the staff of the SEC set forth in several no-action letters to third parties, and subject to the immediately following sentence, we believe that you may offer for resale, resell and otherwise transfer the exchange notes without further compliance with the registration and prospectus delivery provisions of the Securities Act. However, if you are an “affiliate” (within the meaning of the Securities Act) of ours, or you intend to participate in the exchange offer for the purpose of distributing the

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exchange notes, or you are a broker-dealer (within the meaning of the Securities Act) that acquired original notes in a transaction as part of your market-making or other trading activities and who has arranged or has an understanding with any person to participate in the distribution of the exchange notes, you:

• will not be able to rely on the interpretations by the staff of the SEC set forth in the above-mentioned no-action letters;

• will not be able to tender your original notes in the exchange offer; and

• must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of your original notes unless such sale or transfer is made pursuant to an exemption from such requirements.

To participate in the exchange offer you will be required to represent to us at the time of the consummation of the exchange offer, among other things, that (1) you are not an affiliate of ours; (2) you are not engaged in and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution (within the meaning of the Securities Act) of the exchange notes to be issued in the exchange offer; and (3) you are acquiring the exchange notes in the ordinary course of your business. In addition, in connection with any resales of exchange notes, any broker-dealer who acquired exchange notes for its own account as a result of market-making activities or other trading activities must deliver a prospectus meeting the requirements of the Securities Act. The SEC has taken the position that such a broker-dealer may fulfill its prospectus delivery requirements with respect to the exchange notes (other than a resale of an unsold allotment from the initial sale of the original notes) with this prospectus. Under the registration rights agreement, we are required to allow a broker-dealer and other persons with similar prospectus delivery requirements, if any, to use this prospectus in connection with the resale of such exchange notes for a period of time not to exceed 180 days from the date on which the exchange offer registration statement is declared effective. If you are a broker-dealer that receives exchange notes for your own account in exchange for original notes, where you acquired such original notes as a result of market-making activities or other trading activities, you must acknowledge that you will deliver a prospectus in connection with any resale of such exchange notes. See “Plan of Distribution.” You will not be required to pay brokerage commissions or fees or, subject to the instructions in the applicable letter of transmittal, transfer taxes relating to your exchange of original notes for exchange notes in the exchange offer.

Shelf Registration Statement

If any holder of original notes notifies us within 20 business days following the consummation of the exchange offer:

• that such holder is prohibited by law or SEC policy from participating in the exchange offer;

• that such holder may not resell the exchange notes acquired in the exchange offer without delivering a prospectus and the prospectus contained in the registration statement is not appropriate or available for resales by the holder; or

• that such holder is a broker-dealer and holds original notes acquired directly from us or our affiliates,

or if we receive a written request from certain holders specified in the registration rights agreement, we will file, on or prior to 30 days after the earlier of the date we receive proper notice from any such holder or the date we determine that an exchange offer registration cannot be filed, a shelf registration statement, pursuant to Rule 415 of the Securities Act, relating to original or exchange notes. The shelf registration statement may be an amendment to the exchange offer registration statement. We will use our best efforts to cause the shelf registration statement to be declared effective by the SEC as promptly as possible, but not later than 120 days after we become obligated to file the shelf registration statement. We will use our commercially reasonable efforts to keep the shelf registration statement effective, supplemented and amended, as required, for at least two years following the date the shelf registration statement first becomes effective, or a shorter period ending when all the original notes covered by the shelf registration statement have been sold pursuant to the shelf registration statement or are no longer restricted securities (as defined in Rule 144A under the Securities Act).

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You will not be entitled, except if you were an initial purchaser of the original notes, to have your original notes registered under the shelf registration statement, unless you agree in writing to be bound by the applicable provisions of the registration rights agreement. In order to sell your original notes under the shelf registration statement, you generally must be named as a selling security holder in the related prospectus and must deliver a prospectus to purchasers. Consequently, you will be subject to the civil liability provisions under the Securities Act in connection with those sales and indemnification obligations under the registration rights agreements.

Expiration Date; Extensions; Termination; Amendments

The exchange offer expires on the expiration date. The expiration date is 5:00 p.m., New York City time, on                     , 2005, unless we in our sole discretion extend the period during which the exchange offer is open, in which event the expiration date is the latest time and date on which the exchange offer, as so extended by us, expires. We reserve the right to extend the exchange offer at any time and from time to time prior to the expiration date by giving written notice to The Bank of New York Trust Company, N.A., as the exchange agent, and by timely public announcement communicated in accordance with applicable law or regulation. During any extension of the exchange offer, all original notes previously tendered pursuant to the exchange offer and not validly withdrawn will remain subject to the exchange offer. The exchange date will occur promptly after the expiration date. We expressly reserve the right to (i) terminate the exchange offer and not accept for exchange any original notes for any reason, including if any of the events set forth below under “—Conditions to the Exchange Offer” shall have occurred and shall not have been waived by us or (ii) amend the terms of the exchange offer in any manner, whether before or after any tender of the original notes. If any such termination or amendment occurs, we will notify the exchange agent in writing and will either issue a press release or give written notice to the holders of the original notes as promptly as practicable. Unless we terminate the exchange offer prior to 5:00 p.m., New York City time, on the expiration date, we will exchange the exchange notes for the original notes on the exchange date.

If we waive any material condition to the exchange offer, or amend the exchange offer in any other material respect, and if at the time that notice of such waiver or amendment is first published, sent or given to holders of original notes in the manner specified above, the exchange offer is scheduled to expire at any time earlier than the expiration of a period ending on the fifth business day from, and including, the date that such notice is first so published, sent or given, then the exchange offer will be extended until the expiration of such period of five business days. This prospectus and the related letter of transmittal and other relevant materials will be mailed by us to record holders of original notes and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the lists of holders for subsequent transmittal to beneficial owners of original notes.

How To Tender

The tender to us of original notes by you pursuant to one of the procedures set forth below will constitute an agreement between you and us in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal.

General Procedures

A holder of an original note may tender the same by (i) properly completing and signing the letter of transmittal or a facsimile thereof (all references in this prospectus to the letter of transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates representing the original notes being tendered and any required signature guarantees (or a timely confirmation of a book-entry transfer, which we refer to as a Book-Entry Confirmation, pursuant to the procedure described below), to the exchange agent at its address set forth on the back cover of this prospectus on or prior to the expiration date or (ii) complying with the guaranteed delivery procedures described below.

If tendered original notes are registered in the name of the signer of the letter of transmittal and the exchange notes to be issued in exchange therefor are to be issued (and any untendered original notes are to be

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reissued) in the name of the registered holder, the signature of such signer need not be guaranteed. In any other case, the tendered original notes must be endorsed or accompanied by written instruments of transfer in form satisfactory to us and duly executed by the registered holder and the signature on the endorsement or instrument of transfer must be guaranteed by a firm, which we refer to as an Eligible Institution, that is a member of a recognized signature guarantee medallion program, which we refer to as an Eligible Program, within the meaning of Rule 17Ad-15 under the Exchange Act. If the exchange notes and/or original notes not exchanged are to be delivered to an address other than that of the registered holder appearing on the note register for the original notes, the signature on the letter of transmittal must be guaranteed by an Eligible Institution.

Any beneficial owner whose original notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender original notes should contact such holder promptly and instruct such holder to tender original notes on such beneficial owner’s behalf. If such beneficial owner wishes to tender such original notes himself, such beneficial owner must, prior to completing and executing the letter of transmittal and delivering such original notes, either make appropriate arrangements to register ownership of the original notes in such beneficial owner’s name or follow the procedures described in the immediately preceding paragraph. The transfer of record ownership may take considerable time.

Book-Entry Transfer

The exchange agent will make a request to establish an account with respect to the original notes at The Depository Trust Company, which we refer to as the Book-Entry Transfer Facility, for purposes of the exchange offer within two business days after receipt of this prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility’s systems may make book-entry delivery of original notes by causing the Book-Entry Transfer Facility to transfer such original notes into the exchange agent’s account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility’s procedures for transfer. However, although delivery of original notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the letter of transmittal, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the exchange agent at the address specified on the back cover page of this prospectus on or prior to the expiration date or the guaranteed delivery procedures described below must be complied with.

THE METHOD OF DELIVERY OF ORIGINAL NOTES AND ALL OTHER DOCUMENTS IS AT YOUR ELECTION AND RISK. IF SENT BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL, RETURN RECEIPT REQUESTED, OBTAIN PROPER INSURANCE, AND COMPLETE THE MAILING SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.

Unless an exemption applies under the applicable law and regulations concerning “backup withholding” of federal income tax, the exchange agent will be required to withhold, and will withhold, 31% of the gross proceeds otherwise payable to a holder pursuant to the exchange offer if the holder does not provide its taxpayer identification number (social security number or employer identification number) and certify that such number is correct. Each tendering holder should complete and sign the main signature form and the Substitute Form W-9 included as part of the letter of transmittal, so as to provide the information and certification necessary to avoid backup withholding, unless an applicable exemption exists and is proved in a manner satisfactory to us and the exchange agent.

Guaranteed Delivery Procedures

If a holder desires to accept the exchange offer and time will not permit a letter of transmittal or original notes to reach the exchange agent before the expiration date, a tender may be effected if the exchange agent has received at its office listed on the back cover hereof on or prior to the expiration date a letter, telegram or facsimile transmission from an Eligible Institution setting forth the name and address of the tendering holder, the

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names in which the original notes are registered, the principal amount of the original notes and, if possible, the certificate numbers of the original notes to be tendered, and stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission by the Eligible Institution, the original notes, in proper form for transfer, will be delivered by such Eligible Institution together with a properly completed and duly executed letter of transmittal (and any other required documents). Unless original notes being tendered by the above-described method (or a timely Book-Entry Confirmation) are deposited with the exchange agent within the time period set forth above (accompanied or preceded by a properly completed letter of transmittal and any other required documents), we may, at our option, reject the tender. Copies of a Notice of Guaranteed Delivery which may be used by Eligible Institutions for the purposes described in this paragraph are being delivered with this prospectus and the related letter of transmittal.

A tender will be deemed to have been received as of the date when the tendering holder’s properly completed and duly signed letter of transmittal accompanied by the original notes (or a timely Book-Entry Confirmation) is received by the exchange agent. Issuances of exchange notes in exchange for original notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to similar effect (as provided above) by an Eligible Institution will be made only against deposit of the letter of transmittal (and any other required documents) and the tendered original notes (or a timely Book-Entry Confirmation).

All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of original notes will be determined by us and our determination will be final and binding. We reserve the absolute right to reject any or all tenders not in proper form or the acceptances for exchange of which may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any of the conditions of the exchange offer or any defect or irregularities in tenders of any particular holder whether or not similar defects or irregularities are waived in the case of other holders.

None of us, the exchange agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or shall incur any liability for failure to give any such notification. Our interpretation of the terms and conditions of the exchange offer (including the letter of transmittal and the instructions thereto) will be final and binding.

Terms and Conditions of the Letter of Transmittal

The letter of transmittal contains, among other things, the following terms and conditions, which are part of the exchange offer. The party tendering original notes for exchange, to whom we refer as the Transferor, exchanges, assigns and transfers the original notes to us and irrevocably constitutes and appoints the exchange agent as the Transferor’s agent and attorney-in-fact to cause the original notes to be assigned, transferred and exchanged. The Transferor represents and warrants that it has full power and authority to tender, exchange, assign and transfer the original notes and to acquire exchange notes issuable upon the exchange of such tendered original notes, and that, when the same are accepted for exchange, we will acquire good and unencumbered title to the tendered original notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The Transferor also warrants that it will, upon request, execute and deliver any additional documents deemed by us to be necessary or desirable to complete the exchange, assignment and transfer of tendered original notes. The Transferor further agrees that acceptance of any tendered original notes by us and the issuance of exchange notes in exchange therefor shall constitute performance in full by us of our obligations under the registration rights agreement and that we shall have no further obligations or liabilities thereunder (except in certain limited circumstances). All authority conferred by the Transferor will survive the death or incapacity of the Transferor and every obligation of the Transferor shall be binding upon the heirs, legal representatives, successors, assigns, executors and administrators of such Transferor. See “—Terms of the Exchange.”

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Withdrawal Rights

Original notes tendered pursuant to the exchange offer may be withdrawn at any time prior to the expiration date. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the exchange agent at its address set forth on the back cover of this prospectus. Any such notice of withdrawal must specify the person named in the letter of transmittal as having tendered original notes to be withdrawn, the certificate numbers of original notes to be withdrawn, the principal amount of original notes to be withdrawn (which must be an authorized denomination), a statement that such holder is withdrawing his election to have such original notes exchanged, and the name of the registered holder of such original notes, and must be signed by the holder in the same manner as the original signature on the letter of transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to us that the person withdrawing the tender has succeeded to the beneficial ownership of the original notes being withdrawn. The exchange agent will return the properly withdrawn original notes promptly following receipt of notice of withdrawal. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by us, and our determination will be final and binding on all parties.

Acceptance of Original Notes for Exchange; Delivery of Exchange Notes

Upon the terms and subject to the conditions of the exchange offer, the acceptance for exchange of original notes validly tendered and not withdrawn and the issuance of the exchange notes will be made on the exchange date. For the purposes of the exchange offer, we shall be deemed to have accepted for exchange validly tendered original notes when, as and if we have given written notice thereof to the exchange agent.

The exchange agent will act as agent for the tendering holders of original notes for the purposes of receiving exchange notes from us and causing the original notes to be assigned, transferred and exchanged. Upon the terms and subject to the conditions of the exchange offer, delivery of exchange notes to be issued in exchange for accepted original notes will be made by the exchange agent promptly after acceptance of the tendered original notes. Original notes not accepted for exchange by us will be returned without expense to the tendering holders (or in the case of original notes tendered by book-entry transfer into the exchange agent’s account at the Book-Entry Transfer Facility pursuant to the procedures described above, such non-exchanged original notes will be credited to an account maintained with such Book-Entry Transfer Facility) promptly following the expiration date or, if we terminate the exchange offer prior to the expiration date, promptly after the exchange offer is so terminated.

Conditions to the Exchange Offer

Notwithstanding any other provision of the exchange offer, or any extension of the exchange offer, we will not be required to accept for exchange, or to issue exchange notes in exchange for, any outstanding original notes and we may terminate or extend the exchange offer by oral or written notice to the exchange agent and by timely public announcement communicated in accordance with applicable law or regulation, if:

• any federal law, statute, rule, regulation or interpretation of the staff of the SEC has been proposed, adopted or enacted that, in our judgment, might impair our ability to proceed with the exchange offer or otherwise make it inadvisable to proceed with the exchange offer;

• any federal law, statute, rule, regulation or interpretation of the staff of the SEC has been proposed, adopted or enacted that, in our judgment, might result in the holders of the exchange notes having obligations with respect to resales and transfers of exchange notes which are greater than those described in the interpretations of the SEC as described in this prospectus;

• an action or proceeding has been instituted or threatened in any court or by any government or governmental agency, foreign or domestic, that, in our judgment, might impair our ability to proceed with the exchange offer or otherwise make it inadvisable to proceed with the exchange offer;

• there has occurred a material adverse development in any existing action or proceeding that might impair our ability to proceed with the exchange offer or otherwise make it inadvisable to proceed with the exchange offer;

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• any stop order is threatened or in effect with respect to the registration statement of which this prospectus is a part or the qualification of the indenture under the Trust Indenture Act of 1939;

• all governmental approvals that we deem necessary for the consummation of the exchange offer have not been obtained;

• there is a change in the current interpretation by the staff of the SEC which permits holders who have made the required representations to us to resell, offer for resale, or otherwise transfer exchange notes issued in the exchange offer without registration of the exchange notes and delivery of a prospectus; or

• a material adverse change shall have occurred in our business, condition, operations or prospects.

The foregoing conditions are for our sole benefit and may be asserted by us with respect to all or any portion of the exchange offer regardless of the circumstances (including any action or inaction by us) giving rise to such condition or may be waived by us in whole or in part at any time or from time to time in our sole discretion. The failure by us at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, and each right will be deemed an ongoing right which may be asserted at any time or from time to time. In addition, we have reserved the right, notwithstanding the satisfaction of each of the foregoing conditions, to terminate or amend the exchange offer.

Any determination by us concerning the fulfillment or non-fulfillment of any conditions will be final and binding upon all parties.

Exchange Agent

The Bank of New York Trust Company, N.A. has been appointed as the exchange agent for the exchange offer. Letters of transmittal must be addressed to the exchange agent at its address set forth on the back cover page of this prospectus. Delivery to an address other than as set forth herein, or transmissions of instructions via a facsimile or telex number other than the ones set forth herein, will not constitute a valid delivery.

Solicitation of Tenders; Expenses

We have not retained any dealer-manager or similar agent in connection with the exchange offer and will not make any payments to brokers, dealers or others for soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse it for reasonable out-of-pocket expenses in connection therewith. We will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding tenders for their customers.

No dealer, salesperson or other individual has been authorized to give any information or to make any representations not contained in this prospectus in connection with the exchange offer. If given or made, such information or representations must not be relied upon as having been authorized by us. Neither the delivery of this prospectus nor any exchange made hereunder shall, under any circumstances, create any implication that there has been no change in our affairs since the respective dates as of which information is given herein.

The exchange offer is not being made to (nor will tenders be accepted from or on behalf of) holders of original notes in any jurisdiction in which the making of the exchange offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. However, we may, at our discretion, take such action as we may deem necessary to make the exchange offer in any such jurisdiction and extend the exchange offer to holders of original notes in such jurisdiction. In any jurisdiction the securities laws or blue sky laws of which require the exchange offer to be made by a licensed broker or dealer, the exchange offer is being made on behalf of us by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction.

Appraisal Rights

You will not have dissenters’ rights or appraisal rights in connection with the exchange offer.

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Federal Income Tax Consequences

The exchange of original notes for exchange notes by holders should not be a taxable exchange for federal income tax purposes, and holders should not recognize any taxable gain or loss or any interest income as a result of such exchange. See “Certain United States Federal Tax Considerations.”

Other

Participation in the exchange offer is voluntary and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decisions on what action to take.

As a result of the making of, and upon acceptance for exchange of all validly tendered original notes pursuant to the terms of this exchange offer, we will have fulfilled a covenant contained in the terms of the original notes and the registration rights agreement. Holders of the original notes who do not tender their original notes in the exchange offer will continue to hold such original notes and will be entitled to all the rights, and limitations applicable thereto, under the indenture, except for any such rights under the registration rights agreement which by their terms terminate or cease to have further effect as a result of the making of this exchange offer. See “Description of Notes.” All untendered original notes will continue to be subject to the restriction on transfer set forth in the indenture. To the extent that original notes are tendered and accepted in the exchange offer, the trading market, if any, for the original notes could be adversely affected. See “Risk Factors—Your original notes will not be accepted for exchange if you fail to follow the exchange offer procedures and, as a result, your original notes will continue to be subject to existing transfer restrictions and you may not be able to sell your original notes.”

We may in the future seek to acquire untendered original notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plan to acquire any original notes which are not tendered in the exchange offer.

Transfer Taxes

We will pay all transfer taxes, if any, applicable to the exchange of original notes pursuant to the exchange offer. However, the transfer taxes will be payable by the tendering holder if:

• certificates representing exchange notes or original notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the original notes tendered;

• tendered original notes are registered in the name of any person other than the person signing the letter of transmittal; or

• a transfer tax is imposed for any reason other than the exchange of original notes pursuant to the exchange offer.

We will bill the amount of the transfer taxes directly to the tendering holder if satisfactory evidence of payment of the taxes or exemption therefrom is not submitted with the letter of transmittal.

Accounting Treatment

The exchange notes will be recorded at the same carrying value as the original notes. Accordingly, we will not recognize gain or loss upon the exchange for accounting purposes.

Consequences of Failure to Exchange

Holders of original notes who do not exchange their original notes for exchange notes pursuant to the exchange offer will continue to be subject to the restrictions on transfer of the original notes as described in the

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legend on the original notes. Original notes not exchanged pursuant to the exchange offer will continue to remain outstanding in accordance with their terms. In general, the original notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not currently anticipate that we will register the original notes under the Securities Act.

Resale of Exchange Notes

We are making the exchange offer in reliance on the position of the staff of the SEC as set forth in interpretive letters addressed to third parties in other transactions. However, we have not sought our own interpretive letter and we can provide no assurance that the staff would make a similar determination with respect to the exchange offer as it has in such interpretive letters to third parties. Based on these interpretations by the staff, we believe that the exchange notes issued pursuant to the exchange offer in exchange for original notes may be offered for resale, resold and otherwise transferred by a holder, other than any holder who is a broker-dealer or an “affiliate” of ours within the meaning of Rule 405 of the Securities Act, without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that:

• the exchange notes are acquired in the ordinary course of the holder’s business; and

• the holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution of the exchange notes.

However, any holder who is:

• an “affiliate” of ours;

• who has an arrangement or understanding with respect to the distribution of the exchange notes to be acquired pursuant to the exchange offer; or

• any broker-dealer who purchased original notes from us to resell pursuant to Rule 144A or any other available exemption under the Securities Act,

may not rely on the applicable interpretations of the staff and must comply with the registration and prospectus delivery requirements of the Securities Act. A broker-dealer who holds original notes that were acquired for its own account as a result of market-making or other trading activities may be deemed to be an “underwriter” within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of exchange notes. Each such broker-dealer that receives exchange notes for its own account in exchange for original notes, where the broker-dealer acquired the original notes as a result of market-making activities or other trading activities, must acknowledge, as provided in the letter of transmittal, that it will deliver a prospectus in connection with any resale of such exchange notes. For more detailed information, see “Plan of Distribution.”

In addition, to comply with the securities laws of various jurisdictions, if applicable, the exchange notes may not be offered or sold unless they have been registered or qualified for sale in the jurisdiction or an exemption from registration or qualification is available and is complied with. We have agreed, pursuant to the registration rights agreement and subject to specified limitations therein, to register or qualify the exchange notes for offer or sale under the securities or blue sky laws of the jurisdictions as any holder of the exchange notes reasonably requests. The registration or qualification may require the imposition of restrictions or conditions, including suitability requirements for offerees or purchasers, in connection with the offer or sale of any exchange notes.

Additional Interest

If a Registration Default (as defined below) occurs, then we will be required to pay additional interest to each holder of Registrable Notes affected thereby. During the time when a Registration Default has occurred and

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is continuing, we will pay additional interest on the Registrable Notes affected thereby at a rate of 0.25% per annum for the first 90-day period immediately following a Registration Default. The amount of additional interest shall increase by an additional 0.25% per annum for each subsequent 90-day period up to a maximum amount of additional interest of 1.00% per annum, provided that we shall in no event be required to pay such additional interest for more than one Registration Default at any given time; provided, however, that, if one or more Registration Defaults shall occur again, the interest rate shall be increased again pursuant to the foregoing provisions. This additional interest will accrue only for those days that a Registration Default occurs and is continuing. All accrued additional interest will be paid to the holders of the Registrable Notes in the same manner as interest payments on the notes, with payments being made on the interest payment dates for the notes. Following the cure of all Registration Defaults, no more additional interest will accrue unless a subsequent Registration Default occurs. Additional interest will not be payable on any notes other than Registrable Notes.

You will not be entitled to receive any additional interest on any Registrable Notes if you were, at any time while the exchange offer was pending, eligible to exchange, and did not validly tender, Registrable Notes for exchange notes in the exchange offer.

A “Registration Default” will occur if:

• we fail to file any of the registration statements required by the registration rights agreement on or before the date specified for that filing;

• any such registration statement is not declared effective by the SEC on or prior to the date specified for its effectiveness;

• we fail to complete the exchange offer on or prior to the date specified for completion; or

• a registration statement is declared effective but thereafter ceases to be effective or usable in connection with resales of the notes during the periods specified in the registration rights agreement, except during limited periods as a result of the exercise by us of our right to suspend use of the shelf registration statement and the related prospectus as described under “—Shelf Registration” above.

“Registrable Notes” means the original notes until the earliest to occur of (i) the date on which such original note has been exchanged by a person other than a broker-dealer for an exchange note in the exchange offer and is entitled to be resold to the public by such person without complying with the prospectus delivery requirements of the Securities Act, (ii) the date on which such original note has been effectively registered under the Securities Act and disposed of in accordance with the shelf registration statement, or (iii) the date on which such original note is eligible to be distributed to the public pursuant to Rule 144 under the Securities Act or is distributed by a broker-dealer pursuant to the “Plan of Distribution” contemplated by this Registration Statement.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The following table presents our selected historical consolidated financial information for the years ended September 30, 2000, September 29, 2001, September 28, 2002, September 27, 2003 and October 2, 2004 and the thirteen weeks ended December 27, 2003 and January 1, 2005. Our historical financial information for the years ended September 30, 2000, September 29, 2001, September 28, 2002, September 27, 2003 and October 2, 2004 is derived from our audited financial statements. Our historical financial information for the thirteen weeks ended December 27, 2003 and January 1, 2005 is derived from our unaudited financial statements. In the opinion of management, the unaudited financial information includes all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation of this information. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the entire year. The financial information set forth below should be read in conjunction with our historical consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all included elsewhere in this prospectus.

	Fiscal Years Ended											13 Weeks Ended
	September 30, 2000 (restated)(1)			September 29, 2001 (restated)(1)		September 28, 2002 (restated)(1)		September 27, 2003 (restated)(1)		October 2, 2004 (restated)(1)		December 27, 2003 (restated)(1)			January 1, 2005 (restated)(1)
	(dollar amounts in thousands)
Statement of Operations Data:
Sales	$	303,163		$	301,700	$	313,311	$	327,165	$	356,041	$	40,820		$	40,937
Cost of merchandise and services sold		171,968			166,402		166,340		171,219		183,928		22,390			21,565
Gross profit		131,195			135,298		146,971		155,946		172,113		18,430			19,372
Selling, general and administrative expenses		122,501			117,860		125,079		128,290		137,881		27,731			28,798
Stock compensation expense		424			—		—		—		—
Restructuring charge		819			1,466		—		—
Unusual expense		230			—		1,500		—		—		—			—
Amortization of goodwill		742			413		319		—		—		—			—
Operating income (loss)		6,479			15,559		20,073		27,656		34,232		(9,301	)		(9,426	)
Interest expense, net(2)		12,536			12,320		10,690		9,566		7,172		1,777			3,649
Write-off of debt issuance costs		—			—		—		420		—		—			—
Loss on disposition of fixed assets		1,477			919		1,332		497		440		284			23
Income (loss) before taxes		(7,534	)		2,320		8,051		17,173		26,620		(11,362	)		(13,098	)
Income tax expense (benefit)		(2,821	)		1,102		3,358		6,830		10,374		(4,483	)		(4,465	)
Net income (loss)	$	(4,713	)	$	1,218	$	4,693	$	10,343	$	16,246		(6,879	)		(8,633	)

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	Fiscal Years Ended															13 Weeks Ended
	September 30, 2000 (restated)(1)			September 29, 2001 (restated)(1)			September 28, 2002 (restated)(1)			September 27, 2003 (restated)(1)			October 2, 2004 (restated)(1)			December 27, 2003 (restated)(1)			January 1, 2005 (restated)(1)
	(dollar amounts in thousands)
Other Financial Data:
Cash flows provided by (used in):
Operating activities	$	12,295		$	15,511		$	20,637		$	32,745		$	21,358			(21,180	)		(17,675	)
Investing activities		(9,228	)		(7,595	)		(8,452	)		(8,607	)		(10,281	)		(652	)		(1,422	)
Financing activities		(3,432	)		(6,400	)		(957	)		(32,112	)		(260	)		14,253			2,005
Depreciation and amortization		9,093			9,175			9,631			10,186			11,281			2,715			2,949
Capital expenditures		9,701			7,733			8,472			8,616			10,899			665			1,422
Adjusted EBITDA(3)		19,169			26,200			31,204			37,842			45,513			(6,586	)		(6,477	)
Adjusted EBITDA margin(3,4)		6.3	%		8.7	%		10.0	%		11.6	%		12.8	%		(16.1	)%		(15.8	)%
Rent expense		22,260			21,762			22,989			24,762			27,283			6,478			7,225
Ratio of earnings to fixed charges(5)		—			—			1.2	x		1.6	x		2.1	x		—			—
Pro forma ratio of earnings to fixed charges(5,6)		—			—			—			—			1.6	x		—			—
Operating Data:
Number of stores (at end of period)		383			391			410			437			474			437			472
Number of employees (at end of period)		1,838			1,805			1,691			1,836			1,820			1,494			1,555
Comparable store sales growth(7)		3.8	%		(0.8	)%		1.9	%		2.3	%		3.3	%		9.3	%		(5.4	)%
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	5,252		$	6,768		$	17,996		$	10,022		$	20,839		$	2,443			$ 3,747
Working capital		31,257			28,548			34,634			15,410			33,354			25,159			30,209
Total assets		139,297			133,840			143,139			130,220			144,836			129,081			133,707
Total debt(8)		128,514			133,181			135,517			105,410			105,811			105,510			105,912

(1) We have reclassified tenant improvement allowances from a contra asset in property, plant and equipment, net to other long term liabilities in the consolidated balance sheets. The amortization of the tenant improvement allowances has also been reclassified from a reduction of depreciation and amortization expense to a reduction in rent expense. The receipt of tenant improvement allowances has been reclassified in the statement of cash flows by increasing purchase of property, plant and equipment, and increasing cash provided by or decreasing cash used in operating activities. See Note 1 to Consolidated Financial Statements for reconciliation of adjustment.

(2) Interest expense for periods ending on or prior to October 2, 2004 does not include amortization of deferred financing costs or accretion of preferred stock dividends, which was classified as interest expense pursuant to SFAS No. 150 beginning October 3, 2004.

(3) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, loss/(gain) on disposition of fixed assets, write-off of debt issuance costs and unusual and restructuring charges. Adjusted EBITDA is not a measure of financial performance under GAAP, but is used by some investors to determine a company’s ability to service or incur indebtedness. Adjusted EBITDA is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as an indicator of a company’s operating performance or liquidity, and should not be considered in isolation from or as a substitute for net income (loss) or cash flows from operations which are prepared in accordance with GAAP. We have presented Adjusted EBITDA solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. Adjusted EBITDA is not intended to represent and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP. In addition, Adjusted EBITDA may be calculated differently from Consolidated EBITDA as defined in the indenture relating to the notes.

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The calculation of Adjusted EBITDA is shown as follows:

	Fiscal Years Ended											13 Weeks Ended
	September 30, 2000 (restated)(1)			September 29, 2001 (restated)(1)		September 28, 2002 (restated)(1)		September 27, 2003 (restated)(1)		October 2, 2004 (restated)(1)		December 27, 2003 (restated)(1)			January 1, 2005 (restated)(1)
	(in thousands)
Net income (loss)	$	(4,713	)	$	1,218	$	4,693	$	10,343	$	16,246	$	(6,879	)	$	(8,633	)
Depreciation and amortization		9,093			9,175		9,631		10,186		11,281		2,715			2,949
Stock compensation expense		424			—		—		—		—
Unusual and restructuring charges		3,173			1,466		1,500		—		—		—			—
Interest expense, net		12,536			12,320		10,690		9,566		7,172		1,777			3,649
Write-off of debt issuance costs		—			—		—		420		—		—			—
Loss on disposition of fixed assets		1,477			919		1,332		497		440		284			23
Income tax expense/(benefit)		(2,821	)		1,102		3,358		6,830		10,374		(4,483	)		(4,465	)
Adjusted EBITDA	$	19,169		$	26,200	$	31,204	$	37,842	$	45,513	$	(6,586	)	$	(6,477	)

(4) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of sales.

(5) For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income (loss) before taxes and fixed charges, and fixed charges consist of interest expense, preferred stock dividends, preferred stock accretion (less tax impact), amortization of debt issuance costs and operating lease interest. Our earnings were insufficient to cover fixed charges for fiscal 2000, fiscal 2001, the first quarter of fiscal 2004 and the first quarter of fiscal 2005 by $11.7 million, $2.3 million, $13.1 million and $13.2 million, respectively.

(6) Assumes that the transactions were consummated on September 28, 2003. Pro forma interest expense is calculated based on the actual interest rate on the notes and the three-month LIBOR rate as of January 2, 2005, plus the applicable margin on our amended credit facility.

(7) We consider a store to be comparable in the first full month after it has completed 52 weeks of sales. Closed stores become non-comparable during their last partial month of operation. Stores that are relocated are considered comparable stores at the time the relocation is completed. Comparable store sales is not a measure of financial performance under GAAP. Comparable store sales is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies.

(8) Beginning October 3, 2004, we were required to adopt SFAS No. 150 and classify preferred stock, previously included in the mezzanine portion of the balance sheet, as long-term debt. Prior periods have been reclassified for consistency of presentation. As of January 25, 2005, total debt was $9.0 higher than at January 1, 2005 primarily due to the seasonality of our business.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Executive Summary

We are the leading national specialty retailer of swimming pool supplies and related products. We offer a broad range of products that consist of regularly purchased, non-discretionary pool maintenance items such as chemicals, equipment, cleaning accessories and parts, and also include fun, safety and fitness-oriented recreational items. We market our products through 472 company-owned stores in 36 states and through catalogs and other offerings made available to select residential and commercial pool owners nationwide via mail order and internet channels.

We provide our customers with a comprehensive selection of high quality products, competitive everyday low prices and superior customer service through knowledgeable and responsive sales personnel who offer a high level of technical assistance at convenient store locations. The typical Leslie’s store contains approximately 3,900 square feet of space, is located either in a strip center or on a freestanding site in an area of heavy retail activity, and draws its customers primarily from an approximately three-mile trade area. We operate three commercial service centers that average approximately 11,000 square feet of space and are located primarily in industrial real estate space. These centers are designed to cater to our existing non-residential commercial and service customers and provide more customized service than is typically available at the other retail locations. We also maintain a proprietary mailing list of approximately 5.8 million addresses, which we believe includes over 75% of the residential pools in the U.S. This list of customers is central to our direct mail marketing efforts, which support both our retail store and mail order operations.

Results of Operations

The following table sets forth certain statement of income data expressed as a percentage of sales for the periods indicated.

	Fiscal Years Ended						13 Weeks Ended
	October 2, 2004		September 27, 2003		September 28, 2002		January 1, 2005		December 27, 2003
Sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	51.7		52.3		53.1		52.7		54.9
Gross margin	48.3		47.7		46.9		47.3		45.1
Selling, general and administrative expense	38.7		39.2		39.9		70.3		67.9
Unusual expense	—		—		0.5		—		—
Amortization of goodwill	—		—		0.1		—		—
Operating income (loss)	9.6		8.5		6.4		(23.0	)	(22.8	)
Other income, net	2.1		3.2		3.8		9.0		5.0
Income tax expense (benefit)	2.9		2.1		1.1		(10.9	)	(11.0	)
Net income (loss)	4.6	%	3.2	%	1.5	%	(21.1	)%	(16.9	)%

Thirteen weeks ended January 1, 2005 compared to 13 weeks ended December 27, 2003

Net sales for the 13 weeks ended January 1, 2005 were $40.9 million compared to $40.8 million for the 13 weeks ended December 27, 2003. The 0.3% increase was due to the additional store count as compared to the prior year. The modest increase in sales during the quarter was primarily impacted by the change in the comparability of weeks in the quarter as compared to the prior year’s quarter. Fiscal 2004 included a 53^rd week that would have been recorded in the first quarter of fiscal 2005 had the prior year been a 52-week fiscal year. Due to the fact our sales ramp down quickly during the first quarter, had the 53^rd week of 2004 been recorded in the first quarter of 2005, sales would have increased 9.6% during the quarter as compared to the prior year. Retail

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comparable store sales for the 13 weeks ended January 1, 2005 decreased 5.4% as compared to the prior year. Accounting for the shift in sales from the 53^rd week, comparable store sales would have increased 4.0% during the quarter. We consider a store to be comparable in the first full month after it has completed 52 weeks of sales. Closed stores become non-comparable during their last partial month of operation. Stores that are relocated are considered comparable stores at the time the relocation is completed. Comparable store sales is not a measure of financial performance under accounting principles generally accepted in the United States (GAAP). Comparable store sales is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies.

Gross profit for the 13 weeks ended January 1, 2005 was $19.4 million compared to $18.4 million for the 13 weeks ended December 27, 2003. As a percentage of sales, gross profit was 47.3% for the first quarter of fiscal 2005 compared to 45.2% for the first quarter of fiscal 2004. Gross profit improved due to increased sales, reductions in distribution expenses on a dollar and rate basis, and improvements in product acquisition costs.

Operating and administrative expense for the 13 weeks ended January 1, 2005, were $28.8 million compared to $27.7 million for the 13 weeks ended December 27, 2003. Operating and administrative expenses as a percentage of sales were 70.3% for the 13 weeks ended January 1, 2005 compared to 67.9% for the 13 weeks ended December 27, 2003. Operating expenses increased during the quarter primarily due to occupancy and other related costs associated with the additional store count as compared to the prior year.

Operating loss for the 13 weeks ended January 1, 2005 increased by $125,000 from a $9.3 million loss during the 13 weeks ended December 27, 2003 to an operating loss of $9.4 million for the 13 weeks ended January 1, 2005. The operating loss for the 13 weeks ended January 1, 2005 was slightly higher due to the higher costs associated with the increase in store count as compared to the prior year. During the first quarter of fiscal 2005 we operated 472 stores as compared to 437 stores in the first quarter of 2004.

Net interest expense was $3.6 million for the 13 weeks ended January 1, 2005 compared to $1.8 million for the 13 weeks ended December 27, 2003. The increase in interest expense was due primarily to the impact of our adoption of SFAS No. 150 whereby we record the accrued interest and accretion of our preferred stock as interest expense instead of recording this as a reduction of retained earnings. For the 13 week period ended January 1, 2005 this expense was $2.0 million. Our cash interest expense was lower than the prior year due to lower average debt balances during the quarter as compared to the previous year.

Our income tax benefit for the 13 weeks ended January 1, 2005 was $4.5 million, or an effective rate of 34.1% as compared to a $4.5 million benefit, or an effective rate of 39.5% for the 13 weeks ended December 27, 2003. The effective rate is lower in 2005 due to our adoption of SFAS No. 150, whereby preferred stock interest is a permanent difference and receives no income tax benefit.

The Adjusted EBITDA loss for the 13 weeks ended January 1, 2005 was $6.5 million compared to an Adjusted EBITDA loss of $6.6 million, for the 13 weeks ended December 27, 2003.

Fiscal year 2004 compared to fiscal year 2003

For the 53 weeks ended October 2, 2004, sales increased 8.8% to $356.0 million from $327.2 million in the 52 weeks of 2003. The sales increase is attributable to an increase in comparable store sales as well as the addition of 38 new store locations offset by the closing of one store during fiscal 2004.

Comparable store sales increased 3.3% as compared to the prior year. The comparable store sales increase was attributable to increased marketing and merchandising efforts and an increase in customer counts. For definition purposes, a store is considered a comparable store in the first full month after it has completed 52 weeks of sales. Closed stores become non-comparable during their last partial month of operation. Stores that are relocated are considered comparable stores at the time the relocation is completed.

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Gross profit for the fiscal year ended October 2, 2004 improved to $172.1 million or 48.3% of sales, as compared to $155.9 million or 47.7% in 2003. Gross profit represents sales less the cost of services and purchased goods, chemical repackaging costs, and related distribution costs. The gross margin percent increase in 2004 is a result of the lower acquisition costs and improved distribution expenses compared to the prior year.

In 2004, total operating expenses were $137.9 million, versus $128.3 million in 2003, an increase of 7.5%. The increase in operating expenses in 2004 was due primarily to the costs associated with the increase in store count and higher insurance expenses associated with workers compensation and property and casualty coverage. We expect to be impacted by continuing increases in insurance related expenses. However, we do not expect to experience cost increases of greater proportion than the retail industry in general. Expenses as a percent of sales were 38.7% as compared to 39.2% in the prior year.

For the fiscal year ended October 2, 2004, we recognized losses on the disposition of fixed assets totaling approximately $440,000 as compared to $497,000 in the prior year. These losses were primarily associated with our decision to close or relocate stores that were unproductive or not meeting expectations.

Adjusted EBITDA in 2004 increased 20.3% to $45.5 million from $37.8 million in the 52 weeks of 2003. This increase was primarily the result of increased sales, improved gross margins and effective expense controls achieved during the year.

Income from operations for the period increased 23.8% to $34.2 million from $27.7 million in 2003 as a result of the previously noted items.

Interest expense was $7.2 million in 2004, as compared to $9.6 million in 2003. The decrease was primarily the result of reduced average debt balances and the reduction in the related borrowing rates during the year.

We recorded $420,000 of expenses in 2003 for the write-off of debt issuance costs associated with the refinancing of our Senior Notes due 2004 that was completed in May of 2003.

We recorded income tax expenses of $10.4 million in 2004, or an effective tax rate of 39.0%, versus $6.8 million, or an effective tax rate of 39.8% in the prior year. The decrease in effective tax rate is partially related to the benefit we received related to the change in federal tax rate applied to net deferred tax assets.

Fiscal year 2003 compared to fiscal year 2002

For the 52 weeks ended September 27, 2003, sales increased 4.4% to $327.2 million from $313.3 million in the same 52 weeks of 2002. The sales increase is attributable to an increase in comparable store sales as well as the addition of 28 new store locations offset by the closing of one store during the 52 weeks of 2003.

Comparable store sales increased 2.3% as compared to the prior year. The comparable store sales increase was attributable to increased marketing and merchandising efforts and an increase in total customers.

During fiscal 2003, we expanded our business by opening 28 new stores. Additionally, one store was closed and two were relocated in 2003. This resulted in a net increase of 27 stores as of September 27, 2003 as compared to September 27, 2002.

Gross profit for the fiscal year ended September 27, 2003 improved to $155.9 million or 47.7% of sales, as compared to $147.0 million or 46.9% in 2002. Gross profit represents sales less the cost of services and purchased goods, chemical repackaging costs, and related distribution costs. The gross margin percent increase in 2003 is a result of the lower acquisition costs and lower distribution expenses as a percent of sales.

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In 2003, total operating expenses were $128.3 million, versus $126.9 million in 2002, an increase of 1.1%. The increase in operating expenses in 2003 was due primarily to the costs associated with the increase in store count and higher insurance related expenses associated with workers compensation and property and casualty coverage. We expect to be impacted by continuing increases in insurance related expenses. However, we do not expect to experience cost increases of greater proportion than the retail industry in general. Expenses as a percent of sales were 39.2% as compared to 40.5% in the prior year.

On September 29, 2002, we applied the new rules on accounting for goodwill and other intangible assets deemed to have indefinite lives and therefore there was no goodwill amortization expense recorded for the fiscal year ended September 27, 2003 as compared to $319,000 in the same period of 2002.

For the fiscal year ended September 27, 2003, we recognized losses on the disposition of fixed assets totaling approximately $497,000 as compared to $1.3 million in the prior year. These losses were primarily associated with our decision to close or relocate stores that were unproductive or not meeting expectations.

Adjusted EBITDA in 2003 increased 21.3% to $37.8 million from $31.2 million in the same 52 weeks of 2002. This increase was primarily the result of increased sales, improved gross margins and effective expense controls achieved during the year.

Income from operations for the period increased 37.8% to $27.7 million from $20.1 million in 2002 as a result of the previously noted items.

Interest expense was $9.6 million in 2003, as compared to $10.7 million in 2002. The decrease was primarily the result of reduced average debt balances and the reduction in the related borrowing rates during the year.

We recorded no unusual expense in 2003 as compared to a $1.5 million charge in 2002 for expenses associated with defending a purported class action lawsuit that was settled.

We recorded $420,000 of expenses in 2003 for the write-off of debt issuance costs associated with the refinancing of our Senior Notes due 2004 that was completed in May of 2003.

We recorded income tax expenses of $6.8 million in 2003, or an effective tax rate of 39.8% versus $3.4 million, or an effective tax rate of 41.7% in the prior year. The effective tax rate in 2003 was lower due primarily to the fact that the permanent tax differences in 2003 were lower which had the impact of reducing the overall effective tax rate.

Seasonality and Quarterly Fluctuations

Our business exhibits substantial seasonality which we believe is typical of the swimming pool supply industry. In general, sales and net income are highest during our third and fourth fiscal quarters, which represent the peak months of swimming pool use. Sales are substantially lower during our first and second fiscal quarters when we will typically incur net losses. The principal external factor affecting our business is weather. Hot weather and the higher frequency of pool usage in such weather create a greater demand for more pool chemicals and supplies. Unseasonably early or late warming trends can increase or decrease the length of the pool season. In addition, unseasonably cool weather and/or extraordinary amounts of rainfall in the peak season decrease swimming pool use.

We expect our 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. We attempt to open our new stores primarily in the month of March in order to position ourselves for the following peak season.

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Summarized Quarterly Financial Data (Unaudited)

(Dollars In Thousands)

2004	13 weeks Dec. 27 (restated)			13 weeks March 27 (restated)			13 weeks June 26 (restated)			14 weeks Oct. 2 (restated)
Sales	$	40,820		$	38,848		$	151,953		$	124,420
Gross profit		18,430			18,699			75,223			59,761
Operating income/(loss)		(9,301	)		(9,927	)		33,778			19,682
Net income/(loss)		(6,879	)		(6,979	)		19,257			10,847
Adjusted EBITDA(1)		(6,586	)		(7,239	)		36,545			22,793
Comparable store sales growth/(decline)(2)		9.3	%		4.1	%		5.7	%		(1.8	)%
	13 weeks Ended
2003	Dec. 28 (restated)			March 29 (restated)			June 28 (restated)			Sept. 27 (restated)
Sales	$	35,897		$	35,554		$	139,026		$	116,688
Gross profit		15,798			16,310			68,975			54,863
Operating income/(loss)		(10,701	)		(10,908	)		31,545			17,720
Net income/(loss)		(8,128	)		(8,323	)		17,337			9,457
Adjusted EBITDA(1)		(8,276	)		(8,477	)		34,052			20,544
Comparable store sales growth/(decline)(2)		13.7	%		2.5	%		(2.9	)%		5.9	%

(1) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, loss/(gain) on disposition of fixed assets, stock compensation expense, write-off of debt issuance costs and unusual charges. Adjusted EBITDA is not a measure of financial performance under GAAP, but is used by some investors to determine a company’s ability to service or incur indebtedness. Adjusted EBITDA is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as an indicator of a company’s operating performance or liquidity, and should not be considered in isolation from or as a substitute for net income (loss), cash flows from operations or cash flow data all of which are prepared in accordance with GAAP. We have presented Adjusted EBITDA solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. Adjusted EBITDA is not intended to represent and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP.

(2) We consider a store to be comparable in the first full month after it has completed 52 weeks of sales. Closed stores become non-comparable during their last partial month of operation. Stores that are relocated are considered comparable stores at the time the relocation is completed. Comparable store sales is not a measure of financial performance under GAAP. Comparable store sales is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies.

Liquidity and Capital Resources

Overview

The following table highlights selected cash flow components and selected balance sheet components for the thirteen weeks ended January 1, 2005 and the thirteen weeks ended December 27, 2003.

	13 Weeks Ended						Dollar Change (restated)			Percent Change (restated)
	January 1, 2005 (restated)			December 27, 2003 (restated)
	(dollar amounts in thousands)
Cash provided by (used in):
Operating activities	$	(17,675	)	$	(21,180	)	$	3,504		16.5	%
Investing activities		(1,422	)		(652	)		(769	)	(117.9	)%
Financing activities		2,005			14,253			(12,248	)	(92.4	)%
Cash and cash equivalents		3,747			2,443			1,304		53.4	%
Working capital		30,209			25,159			5,050		20.1	%
Other long term liabilities		65,122			10,656			54,467		511.2	%
Senior notes, due 2008		59,495			59,495			—		—

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The following table highlights selected cash flow components for fiscal year 2004 and fiscal year 2003, and selected balance sheet components as of October 2, 2004 and September 27, 2003.

	Fiscal Years Ended						Dollar Change (restated)			Percent Change (restated)
	October 2 2004 (restated)			September 27, 2003 (restated)
	(dollar amounts in thousands)
Cash provided by (used in):
Operating activities	$	21,358		$	32,745		$	(11,387	)	(34.8	)%
Investing activities		(10,281	)		(8,607	)		(1,674	)	(19.5	)%
Financing activities		(260	)		(32,112	)		31,852		99.2	%
Cash and cash equivalents		20,839			10,022			10,817		107.9	%
Working capital		33,354			15,410			17,944		116.4	%
Other long term liabilities		16,917			9,198			7,719		83.9	%
Senior notes, due 2008		59,495			59,495			—		—

Working Capital

Working capital as of January 1, 2005 and December 27, 2003 consisted of the following:

	13 Weeks Ended				Dollar Change			Percent Change
	January 1, 2005		December 27, 2003
	(dollar amounts in thousands)
Cash and cash equivalents	$	3,747	$	2,443	$	1,304		53.4	%
Accounts and other receivables		4,190		4,324		(134	)	(3.1	)
Inventories		67,822		64,708		3,114		4.8
Prepaid expenses and other current assets		2,219		1,790		429		24
Deferred tax assets		6,981		6,028		953		15.8
Total current assets		84,959		79,293		5,666		7.1
Accounts payable		27,248		29,375		(2,127	)	(7.2	)
Accrued expenses		25,832		24,264		1,568		6.5
Income taxes payable		1,670		495		1,175		237.4
Total current liabilities		54,750		54,134		616		1.1
Working capital	$	30,209	$	25,159	$	5,050		20.1	%

For the 13 weeks end January 1, 2005, total current assets increased $5.7 million from $79.3 million to $85.0 million as compared to the 13 weeks ended December 27, 2003. The increase in current assets resulted from a stronger cash position and from an increase in inventories due to the increase in store count.

For the 13 weeks ended January 1, 2005, total current liabilities increased by $0.6 million as compared to the 13 weeks ended December 27, 2003. Accounts payable decreased slightly and accrued expenses showed a small increase as compared to the prior year, both due to the timing of disbursements.

For the 13 weeks ended January 1, 2005, net cash used in operating activities was $17.7 million as compared to cash used in operating activities of $21.2 million for the 13 weeks ended December 27, 2004. This improvement was due to a reduction in accounts receivable and increases in accounts payable and accrued expenses due to the timing of disbursements.

For the 13 weeks ended January 1, 2005, cash used in investing activities was $1.4 million as compared with $0.7 million for the 13 weeks ended December 27, 2004. The increase was due to higher capital expenditures in the first quarter as compared to the prior year. We anticipate cash used in investing activities to increase in 2005 primarily from the opening of additional stores.

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For the 13 weeks ended January 1, 2005, cash provided by financing activities was $2.0 million as compared to cash provided by financing activities of $14.3 million for the 13 weeks ended December 27, 2004. The decrease in financing activities was due to a reduced borrowing need as compared to the prior year because we were in a strong cash position at year-end that carried over into the first quarter.

As of January 1, 2005, other long term liabilities increased by $54.4 million as compared to the 13 weeks ended December 27, 2003 due to the reclassification of preferred stock from stockholders’ equity to long-term liabilities. Effective October 3, 2004, we adopted the provisions of SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The effect of SFAS No. 150 was to reclassify the redeemable preferred stock balance from the mezzanine section of the balance sheet to a liability classification on the balance sheet.

Working capital as of October 2, 2004 and September 27, 2003 consisted of the following:

	Fiscal Years Ended				Dollar Change			Percent Change
	October 2, 2004		September 27, 2003
	(dollar amounts in thousands)
Cash and cash equivalents	$	20,839	$	10,022	$	10,817		107.9	%
Accounts and other receivables		10,505		7,801		2,704		34.7
Inventories		54,765		53,030		1,735		3.3
Prepaid expenses and other current assets		1,404		1,301		103		7.9
Deferred tax assets		6,981		6,028		953		15.8
Total current assets		94,494		78,182		16,312		20.9
Accounts payable		22,247		26,217		(3,970	)	(15.1	)
Accrued expenses		30,643		28,739		1,904		6.6
Income taxes payable		8,250		7,816		434		5.6
Total current liabilities		61,140		62,772		(1,632	)	(2.6	)
Working capital	$	33,354	$	15,410	$	17,944		116.4	%

From September 27, 2003 to October 2, 2004, total current assets increased $16.3 million from $78.2 million to $94.5 million. The increase in current assets resulted primarily from the increase in cash and partially to an increase in inventories due to the increase in store count.

Total current liabilities decreased by $1.6 million from October 2, 2004 as compared to September 27, 2003. Accounts payable decreased slightly as compared to the prior year due to the timing of disbursements.

For the fiscal year ended October 2, 2004, net cash provided by operating activities was $21.4 million compared to cash provided by operating activities of $32.7 million in the prior year. The change was due primarily to the increase in profitability, changes in accounts payable and accrued expenses due to the timing of disbursements.

In 2004, cash used in investing activities was $10.3 million as compared with $8.6 million in the prior year. We anticipate cash used in investing activities to increase in 2005 primarily from the opening of additional stores.

Cash used in financing activities was $0.3 million in fiscal 2004 compared with cash used in financing activities of $32.1 million in 2003. The significant decrease in financing activities was due to the early redemption of $30.5 million aggregate principle amount of our senior notes due 2004 completed in fiscal 2003. We had no borrowings at fiscal year-end 2004 or 2003 under our existing credit facility and at October 2, 2004, we had $35.3 million of borrowing capacity. Funds borrowed under this agreement are used primarily to fund working capital and other general corporate purposes.

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Other long term liabilities increased by $7.7 million due to the increase in accrued dividends and interest payable on our Series A Preferred Stock. During fiscal 2003, this annual cumulative dividend converted to an accrued cash dividend and any unpaid dividends began to accrue interest at an annual rate of 15.875%, compounded quarterly. As of October 2, 2004, the cumulative unpaid dividend is $14.7 million as compared to $7.9 million as of September 27, 2003.

We believe our internally generated funds, as well as our borrowing capacity, are adequate to meet our working capital needs, maturing obligations and capital expenditure requirements, including those relating to the opening of new stores.

Contractual Obligations and Commercial Commitments

The following table summarizes our significant contractual obligations as of January 1, 2005, and the effect such obligations are expected to have on our liquidity and cash flows in future periods. This table excludes amounts already recorded on our balance sheet as current liabilities at January 1, 2005 and certain other purchase obligations as discussed below.

	Payments Due By Period
Contractual obligations	Total		Less than 1 Year		1 – 3 years		4 – 5 years		After 5 years
	(in thousands)
Senior notes	$	90,355	$	6,172	$	18,516	$	65,667	$	—
Operating leases		107,413		30,821		46,428		25,213		4,951
Preferred stock		76,214		—		57,765		18,449		—
Total contractual obligations	$	273,982	$	36,993	$	122,709	$	109,329	$	4,951
	Amounts of Commitment Expiration Per Period
Commercial Commitments	Total Amounts Committed		Less than 1 Year		1 – 3 years		4 – 5 years		After 5 years
	(in thousands)
Standby letters of credit	$	3,062	$	3,062	$	—	$	—	$	—
Financial responsibility bonds	$	227	$	106	$	121	$	—	$	—

Purchase orders for raw materials, finished goods and other goods and services are not included in the above table. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements. For the purpose of this table, contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current manufacturing needs and are fulfilled by our vendors with relatively short timetables. We do not have significant agreements for the purchase of raw materials or finished goods specifying minimum quantities or set prices that exceed our short-term expected requirements.

The expected timing of payment of the obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

As part of the Transactions, we incurred new contractual obligations under the indenture governing the notes and a management services agreement with LGP. Following the Transactions, we expect our interest expense to increase as a result of the higher level of indebtedness and our selling, general and administrative expenses to increase as a result of the increased management fees payable to LGP. See “Certain Relationships and Related Transactions—Management Services Agreement.”

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Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with GAAP which requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses. On an ongoing basis, we evaluate our estimates, including those related to inventory reserves, allowance for doubtful accounts, valuation allowance for the net deferred income tax asset, contingencies and litigation liabilities. We base our estimates on historical experience, independent valuations, and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue on retail sales is recognized upon purchase by the customer. Revenue on services is recognized as services are performed and the fee is fixed or determinable and collection is probable. Terms are customarily FOB shipping point or point of sale, net of related discounts. We do not provide an estimated allowance for sales returns as they are deemed to be immaterial.

Inventories are stated at the lower of cost or market. We value inventory using the weighted-average method. Included in cost of sales are the costs of services and purchased goods, chemical repackaging costs and related distribution costs. We recognize consideration received from vendors at the time our obligations to purchase products or perform services have been completed. These items are recorded as a reduction in cost of goods sold in the statement of operations.

Recent Accounting Pronouncements

FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46), was issued in January 2003 and addresses consolidation by business enterprises of variable interest entities. FIN 46 clarifies existing accounting for whether variable interest entities, as defined in FIN 46, should be consolidated in financial statements based upon the investee’s ability to finance activities without additional financial support and whether investors possess characteristics of a controlling financial interest. FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. For variable interest entities created or acquired after January 31, 2003, the provision was to be applied for the first interim or annual period beginning after June 15, 2003. In October 2003, the FASB delayed the effective date of this provision until the first interim or annual period ending after December 15, 2003. We do not have any variable interest entities and therefore this adoption did not have any effect on our results of operations or financial position.

In May 2003, SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, was issued. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective July 1, 2003. At October 2, 2004 we had $46.3 million of mandatorily redeemable preferred stock classified as mezzanine equity on the balance sheet. The effect of SFAS No. 150 will be to reclassify this balance from the mezzanine section of the balance sheet to a liability classification on the balance sheet. In addition, the accretion of the value of the preferred stock will be classified as interest expense instead of reducing retained deficit. In October 2003, the SFAS agreed to defer the effective date of Statement 150 to entities that have issued shares that are mandatorily redeemable on a fixed date at a fixed principal amount to fiscal periods beginning after December 15, 2003. Accordingly, we will adopt this standard beginning October 3, 2004. Had the standard been adopted during fiscal 2004 and 2003, interest expense for the years ended October 2, 2004 and September 27, 2003 would have been increased by $7,160,000 and $6,191,000, respectively, and preferred stock dividends and accretion in the statements of stockholders’ equity would have been reduced by the same amount.

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On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123; (Revised 2004) (Statement 123(R)) “Share-Based Payment”, which revised of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” Statement 123(R) supersedes APB opinion 25, “Accounting for Stock Issued to Employees” and amends FASB Statement No. 95, “Statement of Cash Flows.” Statement 123(R) requires all share-based payments to employees to be recognized in the financial statements based on their fair market values. We will adopt this standard beginning October 2, 2005. As permitted by Statement 123, we currently account for share-based payments to employees using APB Opinion 25’s intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Accordingly, the adoption of Statements 123(R)’s fair value method will have an impact on our results of operations, although it will have no impact on our overall financial position. The impact of adoption of Statement 123(R) cannot be predicted at this time because such impact will depend on levels of share-based payments granted in the future. However, had we adopted Statement 123(R) in prior periods, our net loss would have been increased by $38,000 and $20,000 for the thirteen weeks ended January 1, 2005 and December 27, 2003, respectively. Statement 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature.

Quantitative and Qualitative Disclosures about Market Risk

Our prior credit facility carried, and our amended credit facility carries, interest rate risk. Amounts borrowed under our prior credit facility and our amended credit facility bear interest at either LIBOR plus the applicable LIBOR base rate margin, or at our election, the lender’s reference rate. Based on the LIBOR rate margin at January 1, 2005, the interest rate was 3.19%. $2.0 million was outstanding at January 1, 2005 under our prior credit facility.

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BUSINESS

Company Overview

We are the leading national specialty retailer of swimming pool supplies and related products. These products primarily consist of regularly purchased, non-discretionary pool maintenance items such as chemicals, equipment, cleaning accessories and parts, which accounted for 82% of our fiscal 2004 sales. Our nondiscretionary products typically have long shelf lives and generally are not prone to either obsolescence or shrinkage. We also sell fun, safety and fitness-oriented recreational items. We currently market our products under the trade name Leslie’s Swimming Pool Supplies through 472 company-owned stores in 36 states, mail order catalogs sent to selected pool owners nationwide and our web store. While our retail stores mainly target residential, “do-it-yourself” pool owners, we also operate a growing commercial service business that serves pool building and remodeling companies as well as other companies that maintain either residential or commercial pools. In fiscal 2004, we generated sales of $356.0 million and Adjusted EBITDA of $45.5 million, representing an increase from fiscal 2003 of 8.8% and 20.3%, respectively. Finally, our comparable store sales increased by 3.3% in fiscal 2004 from fiscal 2003.

We provide our customers a comprehensive selection of high quality products at competitive everyday low prices and superior customer service through knowledgeable and responsive sales personnel who offer a high level of technical assistance. We believe our everyday low prices are generally comparable to or better than those offered by our competitors, including mass merchants and home centers. We believe our product offering, combined with our focus on customer service, are key factors in our long-term success and our leadership position in the industry. In addition to third-party branded products, we carry a broad selection of products under the Leslie’s brand name, which accounted for approximately 37% of our fiscal 2004 sales. We believe that the Leslie’s brand name is one of the most recognized brands in pool supplies and represents an image of quality to consumers.

Our retail stores are located in areas with high concentrations of swimming pools and average approximately 3,900 square feet in size. Our typical store is located either in a strip center or on a freestanding site in an area of heavy retail activity and draws its customers primarily from an approximate three-mile trade area. We maintain a proprietary mailing list of 5.8 million addresses, which we believe includes over 75% of the residential pools in the United States. This highly focused list of target customers is central to our direct mail marketing efforts, which support our retail stores, mail order business and web store.

Since our formation in 1963, the successful execution of our business strategy has enabled us to generate sales growth in 40 of the past 41 fiscal years despite cyclical turns in the economy and periods of unfavorable weather conditions. We have generated positive comparable store sales growth in nine out of the past ten fiscal years, with comparable store sales growing at an average annual rate of 5.3% during that same ten-year period. Between the beginning of fiscal 2000 and the end of fiscal 2004, we generated a compound annual growth rate, or CAGR, of 4.1% in sales and 24.1% in Adjusted EBITDA, while our Adjusted EBITDA margin grew from 6.3% to 12.8%. Since the end of fiscal 2000, we expanded our store count from 383 to 472.

U.S. Swimming Pool and Spa Supply Industry Overview

We market our products and services in the estimated $4.4 billion U.S. swimming pool and spa supply industry, which can be divided into four major segments: residential in-ground pools, residential above-ground pools, commercial pools and spas or hot tubs. The U.S. swimming pool and spa supply industry has experienced strong and steady unit growth over the last decade. According to market research firm P.K. Data, the installed base of residential in-ground pools, above-ground pools and spas and hot tubs in the United States has grown from just under 9 million in 1993 to over 13 million in 2002, and is projected to grow to over 17 million by 2007. Both historic and new pool unit growth is highly correlated to macroeconomic housing trends, as approximately 60% of all in-ground swimming pools are built as part of new home construction. We believe these historic and increasing levels of pool ownership have continued to create demand for pool maintenance goods and services. In addition, spending in the commercial pool supply market was estimated to be $1.1 billion in 2004, and we expect this market to continue to grow.

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U.S. Residential Swimming Pool and Spa Market

(in millions of units)
	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002
In-ground	3.50	3.54	3.59	3.65	3.71	3.77	3.89	4.02	4.15	4.27
Above-ground	2.54	2.60	2.67	2.73	2.81	3.02	3.11	3.19	3.27	3.35
Spas and tubs	2.92	3.13	3.38	3.38	3.70	4.03	4.40	4.79	5.20	5.63
Total	8.96	9.27	9.64	9.76	10.22	10.82	11.40	12.00	12.62	13.25
Growth	3.2%	3.5%	4.0%	1.2%	4.7%	5.9%	5.4%	5.3%	5.2%	5.0%

Source: P.K. Data, Inc., December 2002

Regardless of the type or size of a swimming pool, numerous ongoing maintenance and repairs are associated with pool ownership. In order to keep a pool safe and sanitized, chemical treatment, such as the application of chlorine, is required to maintain proper chemical balance, and chemical treatment requirements are dependent on variables such as pool usage, precipitation and temperature. When the pool is chemically balanced, problems such as algae, mineral and salt saturation, corrosive water, staining, eye irritation and odor are less likely to occur; therefore, a regular testing and maintenance routine results in a stable and more easily maintained pool. Proper swimming pool maintenance also involves the ongoing upkeep and repair of swimming pool equipment, such as pumps, heaters and filters.

Competition within the pool supply industry is highly fragmented and largely populated by local “mom and pop” stores and regional chains. Based on the number of stores, we estimate that the next largest specialty pool supply retailer is less than one-third of our size. Mass merchant and home improvement chains participate in the category on a seasonal basis; however, we believe they do not offer the same level of service and expertise or breadth of product offering provided by us and other specialty stores serving the market.

Competitive Strengths

We believe that the following competitive strengths will contribute to our continued success in the U.S. swimming pool and spa supply industry:

Extensive National Presence. With 472 company-owned stores in 36 states and a mail order business and web store, we are the leading national specialty retailer of swimming pool supplies and related products. Our national presence provides geographic diversification, which decreases the impact that unfavorable weather in any one region may have on our business. Most of our competition comes from local stores or regional chains, which typically do not manufacture or repackage products. We estimate that we have more stores than the next 15 largest specialty pool supply retailers combined.

Vertically Integrated Operations. We operate two manufacturing and repackaging plants, including one in Ontario, California and one in Hebron, Kentucky. We believe that supplying our stores with chemicals from our own plants provides us with cost savings, as well as greater control over product availability and quality, as compared to non-integrated pool supply retailers. Our vertical integration also offers us greater flexibility of product sourcing and information gathering, which we believe is beneficial when negotiating with third-party repackagers and chemical providers. Unlike most of our competitors, we do not rely upon third-party distribution, but have our own distribution network through four regionally located distribution centers. In 2004, we distributed the majority of our products to our retail stores and to our catalog customers through our leased distribution facilities in Ontario, California; Dallas, Texas; Swedesboro, New Jersey; and Hebron, Kentucky. We believe that these factors help us achieve more efficient inventory management and lower cost of goods. Furthermore, the Leslie’s brand name appears on all products processed at our plants and on the majority of our chemical products, which we believe increases our nationwide brand awareness and customer loyalty.

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Broad Product Offerings and Superior Customer Service. We believe the breadth and depth of our product selection, combined with our high level of technical assistance and customer service, are essential to maintaining our leading position in the industry. We sell a broad selection of products under the Leslie’s brand name, as well as third-party branded products. Due to the complicated nature of pool chemistry and pool equipment maintenance, and consistent with our philosophy of being a full service swimming pool supply retailer, we offer a high level of technical assistance to support our customers. We consider the training of store personnel to be an integral part of our service philosophy. As part of our regular customer service program, we offer educational materials in the form of DVDs, videos and pamphlets on pool maintenance, as well as free detailed water testing. We also offer in-store equipment repairs that are generally free of labor charges. We believe that most of our competitors do not offer a comparable level of customer service or selection of swimming pool supplies available at our stores, which we believe increases our customer loyalty.

Significant Scale and Purchasing Power. We believe we are among the largest processors of chlorine products for the swimming pool supply industry as well as one of the largest purchasers of swimming pool supplies for retail sales in the United States. Nearly all raw materials as well as those products that we do not repackage are purchased directly from suppliers. Our scale and leading market position enable us to obtain favorable pricing on our purchases from these suppliers, and we have negotiated favorable long-term contracts for key raw materials, most notably chlorine. Furthermore, our size provides additional important benefits such as increased brand awareness for our products and the enhancement of customer value through broad product offerings and differentiated sales and marketing support. In addition, we expect to realize administrative and marketing cost savings as we continue to expand our store base while maintaining a consistent level of overhead.

Consistent Financial Performance. We have demonstrated consistent financial performance since fiscal 2000. Our sales increased from $303.2 million in fiscal 2000 to $356.0 million in fiscal 2004. During the same period, we grew our Adjusted EBITDA from $19.2 million to $45.5 million, and improved our Adjusted EBITDA margin from 6.3% to 12.8%. Our comparable store sales increased at an average annual rate of 2.1% between fiscal 2000 and fiscal 2004. We believe the consistency of our sales growth and profitability during this period is due in large part to the sale of non-discretionary and regularly consumed products, which represented 82% of our sales in fiscal 2004. Pool owners must purchase such products to maintain their pool’s water quality and physical appearance and, in our experience, do so regardless of economic environment or weather conditions.

Strong Free Cash Flow. We believe that our operating model generates significant free cash flow. Our tight inventory controls, combined with our leverage in product sourcing and negotiations with suppliers, enable us to closely monitor and effectively manage our working capital and maintain or increase our margins. Furthermore, as we have grown our business, we have not required significant capital expenditures. For fiscal 2004, our capital expenditures were $10.9 million, which represented 3.1% of our fiscal 2004 sales. Approximately 66% of our fiscal 2004 capital expenditures were related to expanding our store base. Between the end of fiscal 2000 and the end of fiscal 2004, we repaid $31.5 million of debt and increased our cash and cash equivalents by $15.6 million, attesting to our ability to generate significant free cash flow and reduce indebtedness.

Experienced and Committed Management Team. Our senior management team is comprised of five experienced retail industry veterans and since fiscal 2000 has successfully expanded our business, increased our profitability and enhanced our operational excellence. Our senior management team has an average of 26 years of retail industry experience in operations, purchasing, logistics, sales and marketing and information systems, as well as significant experience in managing companies with high levels of indebtedness. Following the Recapitalization, our management team will own approximately 13.5% of our common stock through a reinvestment of existing equity interests.

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Business Strategy

Our strategic objective is to increase our sales, profitability and cash flow by building upon our leading position in order to capitalize on the favorable fundamentals of our industry. Key elements of our strategy include the following:

Capitalize on Our Leadership Position in a Highly Fragmented Market. Despite our large size, we believe we accounted for only approximately 12% of the estimated $2.8 billion U.S. residential pool supply market in 2004. We believe that the majority of this market is comprised of independent local operators. Over the last several years, we have accelerated the pace of our store openings and believe we have gained market share through these additional stores. We believe that this market share growth has come primarily at the expense of independent local and regional pool supply retailers. We plan to continue to take advantage of the highly fragmented nature of our market and utilize our strong brand name to enhance our leadership position.

Focus on Operational Efficiencies. Since fiscal 2000, our senior management has been focused on establishing the necessary controls to increase profitability and effectively manage working capital needs throughout the seasonal trends in our business. Between fiscal 2000 and fiscal 2004, our average inventory days outstanding decreased from 124 days to 109 days and our Adjusted EBITDA margins increased from 6.3% to 12.8%. Average inventory days outstanding is calculated by dividing our inventory at the end of the fiscal year by our cost of goods sold during the fiscal year, multiplied by 365. We typically experience substantially lower sales and Adjusted EBITDA in the first half of each fiscal year, primarily due to seasonal weather. However, between fiscal 2000 and 2004, we have consistently reduced our negative Adjusted EBITDA for the first half of each year, and we have achieved 16 consecutive quarters of year-over-year Adjusted EBITDA growth.

Pursue Disciplined Growth Strategy. We believe that our attractive store-level economics are a result of our disciplined growth strategy. We will continue our selective expansion by strategically opening new stores in both new and existing markets. We plan to add 40 to 45 retail stores in fiscal 2005, and we may consider selective acquisitions in order to take advantage of the fragmented nature of the swimming pool supply industry. We also expect to increase our geographic diversification as a part of our growth strategy. Furthermore, we believe that the growing commercial pool supply market, which we estimate to be $1.1 billion in 2004, represents a significant opportunity for us. Therefore, we intend to open six commercial service centers in fiscal 2005. In addition, we are expanding our sales of spas and related spa equipment, which we believe also represents a significant growth opportunity.

Continue to Achieve Attractive Store Economics. Our historical results reflect attractive store-level economics. We typically open our new stores in the month of March in order to position them for the ensuing peak season. Based upon our past experience, new stores generally break even in their first year of operation and return their initial investment within three years. In 2004, our mature stores (consisting of 338 stores open for five fiscal years or longer) posted a comparable store sales increase of 3.5%. We emphasize disciplined capital spending and careful site selection in order to maintain our attractive store dynamics. We also focus on operating costs by continuously adjusting our store-level labor to minimize costs while maintaining exceptional customer service. In addition, we typically structure our store lease agreements with five-year terms that include multiple five-year extension options, which provides flexibility in closing stores that do not meet our stringent profitability hurdles.

Continue to Capitalize On and Expand Proprietary Database of Pool Locations. Through ongoing research as well as the conduct of our retail and mail order business, we have developed a proprietary database of 5.8 million addresses. We believe this database includes over 75% of the residential pools in the United States. This list of potential customers is central to our cost-effective, highly targeted direct mail marketing efforts, which support our retail stores, mail order business and web store. When combined with our mail order sales results and computerized mapping, this database also provides us a sophisticated store site selection capability. We believe that the scope and accuracy of our proprietary database is unique in the pool supply industry. We will continue to expand our database to grow our sales through targeted marketing efforts and to determine new store locations.

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Seasonality

Our business exhibits substantial seasonality, which we believe is typical of the swimming pool supply industry. In general, sales and net income are highest during our third and fourth fiscal quarters which represent the peak months of swimming pool use. Sales are substantially lower during our first and second fiscal quarters when we typically incur net losses. The principal external factor affecting our business is weather. Hot weather and the higher frequency of pool usage in such weather create a need for more pool chemicals and supplies. Unseasonably early or late warming trends can increase or decrease the length of the pool season. In addition, unseasonably cool weather and/or extraordinary amounts of rainfall in the peak season will tend to decrease swimming pool use. The likelihood that unusual weather patterns will severely impact our results is lessened by the geographical diversification of our store locations. We also expect that our 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. We attempt to open our new stores primarily in the quarter ending March in order to position ourselves for the following peak season.

Products

Leslie’s offers its customers a comprehensive selection of products necessary to satisfy their swimming pool supply needs. During 2004, we stocked approximately 1,700 items in each store, with more than 30,000 additional items available through our other channels of distribution and special order processes. In 2004, approximately 420 items were displayed in our residential mail order catalogs and 900 items were in the commercial catalog, although special order procedures make nearly all Leslie’s products available to mail order customers as well.

Our major product categories are pool chemicals; major equipment; cleaning and testing equipment; pool covers, reels, and liners; above-ground pools in a limited number of stores; and recreational items (which include swimming pool floats, games, lounges, masks, fins, snorkels and other “impulse” items).

Non-discretionary and regularly consumed products such as pool chemicals, major equipment and parts represented approximately 82% of total sales in fiscal 2004. Our non-discretionary products typically have long shelf lives and are generally not prone to either obsolescence or shrinkage.

We believe that product quality and availability are key attributes considered by consumers when shopping for pool supplies and that our ability to provide a high quality, in-stock product offering is fundamental to our concept of value leadership. In addition to third-party brand names, we carry a broad selection of products under the Leslie’s brand name. We believe that the Leslie’s brand name is one of the three most recognized brands in pool supplies and represents an image of quality to consumers. In fiscal 2004, Leslie’s brand name products accounted for approximately 37% of our total sales.

Channels of Distribution

Retail Store Operations. As of January 1, 2005, we marketed our products through 468 retail stores in 36 states under the trade name Leslie’s Swimming Pool Supplies. California represents our single largest concentration of stores with 109, while 82 stores are located in Texas, and 96 stores are in the northeast/mid-Atlantic area. Our retail stores are located in areas with high concentrations of swimming pools and typically are approximately 3,900 square feet in size. In addition to the store manager, the typical Leslie’s store employs one assistant manager, who is generally a full-time employee. Additionally, we make frequent use of part-time and temporary employees to support our full-time employees during peak seasons. During 2004, we had 31 district managers, each of whom was responsible for approximately 14 stores.

Commercial Service Centers. As of January 1, 2005, we operated four commercial service centers that averaged approximately 11,000 square feet of space and were located primarily in industrial real estate space. These centers are designed to cater to our existing non-residential commercial and service customers and provide more customized service than is typically available at the other retail locations.

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Mail Order Catalog. Our mail order catalogs provide an extension of our service philosophies and products to those areas not currently served by a retail store and allow the scope of our business to be truly nationwide.

We believe that our mail order catalogs build awareness of the Leslie’s name, provide us with buying efficiencies and, when coupled with information from our retail stores, are instrumental in determining site selection for new stores.

Internet. We also sell products through our web store, which we recently renovated and expanded in October 2004.

Customer Service

Due to the complicated nature of pool chemistry and equipment maintenance and consistent with our philosophy of being a full service swimming pool supply retailer, we offer a high level of technical assistance to support our customers. We consider our training of store personnel to be an integral part of our service philosophy. Our extensive training program for all full-time and part-time store employees includes courses in water chemistry, water testing, trouble shooting on equipment, equipment sizing and parts replacement.

A significant number of our stores are supported by our Service Department, which offers poolside equipment installation and repair, leak detection and repair, and seasonal opening and closing services. The Service Department coordinates service calls centrally and utilizes both our employees and subcontractors to perform these services.

Marketing

The majority of our marketing is done on a direct mail basis through our proprietary mailing list of approximately 5.8 million addresses at which, primarily, residential pools are located. We have found that our ability to mail directly to this highly focused group is an effective and efficient way to conduct our marketing activities to both retail store and mail order customers. We constantly update our address list through proprietary research techniques and in-store customer sign-ups.

Addresses on our proprietary list that are located within a specified service area of a retail store receive circulars once or twice per month from late March or early April through September or, selectively, through October. As a regular part of our promotional activities, each mailer highlights specific items which are intended to increase store traffic, and reinforces to the customer the advantages of shopping at our stores, which include everyday low pricing, a high level of customer service, and a broad selection of high quality products. Addresses outside our store service areas, and recently active mail order customers within those service areas, receive our mail order catalogs. We utilize local print media when we enter a new market, and do so regularly in connection with our above-ground pool sales markets. New store openings typically involve additional advertising in the first two to three months of operation.

Purchasing

We believe that because we are one of the largest purchasers of swimming pool supplies for retail sales in the United States, we are able to obtain very favorable pricing on our purchases from outside suppliers. Nearly all raw materials and those products not repackaged by us are purchased directly from manufacturers. It is common in the swimming pool supply industry for certain manufacturers to offer extended dating terms on certain products to quantity purchasers such as us. These dating terms are typically available to us for pre-season or early season purchases.

Our principal chemical raw materials and granular chlorine compounds are purchased primarily from three suppliers. At the end of fiscal 1997, we entered into a multi-year product purchase agreement with a major producer of one of the principal chlorine compounds, the chlorinated isocyanurates. This purchase agreement was renewed in 2004. We believe there are several other reliable suppliers of chlorine products in the marketplace today. Although we have one sole source supplier for a nonchlorine shocking compound, we believe

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that termination of supply would not pose any significant problems because substitute chemicals and alternate shocking techniques are available. We believe that reliable alternative sources of supply are available for all of our raw materials and finished products.

Vertical Integration

We operate a plant in the Los Angeles area where we convert dry granular chlorine into tablet form and repackage a variety of bulk chemicals into various sized containers suitable for retail sales. We also formulate a variety of specialty liquids, including water clarifiers, tile cleaners, algaecides and stain preventives. The chemicals we process have a relatively long shelf life. We believe that supplying our stores with chemicals from our own repackaging plant provides us with cost savings, as well as greater control over product availability and quality, as compared to non-integrated pool supply retailers. It also offers us greater flexibility of product sourcing and acquiring vital information when negotiating with third-party repackagers and chemical providers. The Leslie’s brand name appears on all products processed at our repackaging plant, and on the majority of all our chemical products. We believe we are among the largest processors of chlorine products for the swimming pool supply industry.

In connection with the operation of our three distribution centers outside of California, we have expanded our use of third-party chemical repackagers and our purchase of products already in end-use configurations. These products are also generally packaged under the Leslie’s brand name. We continually evaluate the cost effectiveness of third-party sourcing versus internal manufacturing in order to minimize our cost of goods. During 2003, we expanded our packaging operation of specialty items to our Hebron, Kentucky distribution facility. In addition to chemicals, a variety of our other products are packaged under the Leslie’s brand name.

Distribution

In 2004, we distributed all of our products to our retail stores and to our catalog customers through our leased distribution facilities in Ontario, California; Dallas, Texas; Swedesboro, New Jersey; and Hebron, Kentucky.

We purchase the majority of the chemicals to be distributed from the Dallas, Swedesboro and Hebron distribution centers from outside manufacturers rather than obtaining them through our repackaging facility in Southern California. During the height of our seasonal activities, each of our retail stores is generally replenished every five to seven days.

We utilize a variety of leased and owned equipment, supplemented by additional equipment leased during the busy season, to transport our goods to stores.

Competition

Primary elements of competition in the retail swimming pool supply industry are price, technical assistance, customer service, product selection and product availability. Most of our competition comes from local stores or regional chains which do not repackage or manufacture products and which generally buy products in smaller quantities. The chain store competitors include a large franchise operator of approximately 140 retail outlets in the Florida market and a limited number of other retail chains of approximately 15 to 30 stores.

We compete on selected principal products such as chlorine with large volume, mass merchant and home center retailers. While the ability of these merchants to accept low margins on the limited number of items they offer makes them aggressive price competitors of ours, their products are not generally priced significantly below ours and they do not offer the level of customer service or wide selection of swimming pool supplies available at our stores.

Employees

As of January 1, 2005, we employed 1,555 persons. During the height of our seasonal activities in 2004, we employed 2,696 persons, including seasonal and part-time store employees who generally are not employed during the off season. We are not subject to any collective bargaining agreements and believe our relationships with our employees are good.

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Trademarks

In the course of our business, we employ various trademarks, trade names and service marks as well as our logo in packaging and advertising our products. We have registered trademarks and trade names for several of our major products on the Principal Register of the United States Patent and Trademark Office. We distinguish the products produced in our chemical repackaging operation or by third party repackagers at our direction through the use of the Leslie’s brand name and logo and the trademarks and trade names of the individual items, none of which is patented, licensed, or otherwise restricted to or by us. We believe the strength of our trademarks and trade names has been beneficial to our business and intend to continue to protect and promote our trademarks in appropriate circumstances.

Properties

As of January 1, 2005, we operated 472 stores in 36 states. The following table sets forth information concerning our stores:

State	Number of Stores
Alabama	5
Arizona	40
Arkansas	1
California	108
Colorado	1
Connecticut	9
Delaware	2
Florida	33
Georgia	18
Illinois	5
Indiana	6
Iowa	1
Kansas	1
Kentucky	4
Louisiana	6
Maryland	5
Massachusetts	8
Michigan	7
Mississippi	1
Missouri	8
Nebraska	1
Nevada	14
New Hampshire	2
New Jersey	21
New Mexico	2
New York	22
North Carolina	4
Ohio	10
Oklahoma	7
Pennsylvania	18
Rhode Island	1
South Carolina	3
Tennessee	7
Texas	83
Utah	1
Virginia	7
Total Stores	472

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Except for 26 owned stores, we have leases on the remaining retail stores with lease terms expiring between 2005 and 2014. Our typical lease term is five years, and in the majority of instances, we have renewal options at increased rents. Five leases provide for rent contingent on sales exceeding specific amounts. No other leases require payment of percentage rent.

Our corporate office is located in Phoenix, Arizona. The 38,000 square foot office building was leased for five years and had one five-year renewal option. During 2002, we renegotiated our existing lease adding approximately 16,000 square feet of space. The new lease extends the maturity until June 2009, and has one five-year renewal option.

Our southern California distribution center is located in a 183,000 square foot facility Ontario, California. The Ontario facility is leased for 10 years, expiring in 2007 and the lease has two five-year renewal options. Our distribution facility in Dallas, Texas contains 126,000 square feet of space. The lease of this facility expires in 2005. The lease includes an option to renew for an additional five-year period. The 130,540 square foot distribution facility in Bridgeport, New Jersey is leased for a 10-year term, expiring in 2008. The lease includes options to renew for two five-year periods. The 146,000 square foot distribution center in Covington, Kentucky is leased for a 12-year term, expiring in 2010, and provides for three five-year renewal options.

Legal Proceedings

We are routinely involved in legal proceedings related to the ordinary course of our business; however, we are currently not party to any material legal proceedings. We do not believe any current legal proceedings will have a material adverse effect on us.

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MANAGEMENT

Directors and Officers of the Registrant

Our directors and executive officers are as follows:

Name	Age	Positions
Lawrence H. Hayward	50	Chairman of the Board, President and Chief Executive Officer
Donald J. Anderson	44	Executive Vice President, Chief Financial Officer and Director
Michael L. Hatch	51	Senior Vice President, Merchandising and Marketing
Janet I. McDonald	47	Senior Vice President, Chief Information Officer
Marvin D. Schutz	57	Senior Vice President, Store Operations
Edward C. Agnew	65	Director
John M. Baumer	37	Director
John G. Danhakl	48	Director
Michael J. Fourticq	60	Director
Ted C. Nark	46	Director

Lawrence H. Hayward is Chairman of the Board of Directors, President and Chief Executive Officer. He joined us in January 2000 as President and Chief Executive Officer and assumed the additional role of Chairman of the Board in September 2000. Most recently, Mr. Hayward was the President of ABCO Desert Markets located in Phoenix, Arizona. From 1995 until 1999, he served as President and Chief Executive Officer of Carr Gottstein Foods Co., Alaska’s largest food and drug retailer and wholesale provider. From 1990 to 1995, Mr. Hayward held other senior level positions at Buttrey Food and Drug Co. From 1981 until 1990 he served in various corporate positions at American Stores Company headquartered in Salt Lake City, Utah.

Donald J. Anderson is Executive Vice President, Chief Financial Officer and Director. He joined us in May 2000. Mr. Anderson has 28 years of experience in various retail industries. Most recently, Mr. Anderson was Senior Vice President and Chief Financial Officer of the Follett Higher Education Group, located in Oakbrook, Illinois, the nation’s largest operator of University bookstores. From 1995 until 1999, he served as Senior Vice President and Chief Financial Officer of Carr Gottstein Foods Co., Alaska’s largest food and drug retailer and wholesale provider. From 1990 to 1995, Mr. Anderson held various senior level positions at Buttrey Food and Drug Co. From 1977 to 1990, he served in various managerial positions with American Stores Company.

Michael L. Hatch has been Senior Vice President, Merchandising and Marketing since November 2000. Mr. Hatch has more than 29 years of experience in the retail industry. Most recently, Mr. Hatch was the President of ABCO Desert Markets located in Phoenix, Arizona. From 1996 to 1999 he was employed by Smiths Food and Drug where he held various positions including Senior Vice President and Southwest Manager and Vice President of Sales, Merchandising and Marketing. From 1970 to 1996, Mr. Hatch held various senior management positions at Smitty’s Super Value, Inc. located in Phoenix, Arizona, which later merged with Smith’s Food and Drug.

Janet I. McDonald is Senior Vice President, Chief Information Officer. She joined us in August 2000. Ms. McDonald has over 28 years of retail experience. Most recently Ms. McDonald owned and operated her own consulting business where she provided project management, management training, marketing, economic and other business services. From 1990 to 1992 she served as Director of Information Technology for Buttrey Food and Drug Company. From 1981 to 1990 she held progressive levels of management responsibility in corporate technology for American Stores Company.

Marvin D. Schutz has been Senior Vice President, Store Operations since July 1999. From May 1997 through June 1999, he was Vice President of Store Operations. From October 1994 through May 1997, he was Director of Store Operations, Eastern Division. From 1982 through 1993 he held several management positions in specialty retail at Montgomery Ward as National Director of Operations and Training and Silo Inc. as Regional Sales Manager and Director of Operations.

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Edward C. Agnew became a director in December 2002. He is a former retail executive with over 36 years of retail experience. Mr. Agnew held various officer level assignments with Jewel Companies, Inc., Buttrey Food and Drug, Inc., and American Stores/Albertsons, Inc. Mr. Agnew began his career in 1963 with Jewel Food & Drug Stores where he served in various capacities including General Manager of its Midwest Division. In 1987 Mr. Agnew was appointed President and Chief Executive Officer of Buttrey Food and Drug, Inc. In 1990, Mr. Agnew successfully led a leveraged buyout of Buttrey Food and Drug Company and successfully completed an initial public offering of Buttrey in early 1993. In 1994 Mr. Agnew returned to American Stores, Inc., where he served as a Senior Vice President and member of its Executive Committee until his retirement in 1999.

John M. Baumer became a director in November 2001. He has been an executive officer and equity owner of Leonard Green & Partners, L.P. (“LGP”), the firm that manages Green Equity Investors II (“GEI”), since 1999. Mr. Baumer had previously been a Vice President at Donaldson, Lufkin & Jenrette Securities Corporation (“DLJ”), and had been with DLJ since 1995. Prior to joining DLJ, Mr. Baumer was at Fidelity Investments and Arthur Andersen. Mr. Baumer is also a director of FTD, Inc., Intercontinental Art, Inc., Phoenix Scientific, Inc., Rand McNally & Co. and VCA Antech, Inc.

John G. Danhakl became a director in June 1997. He has been an executive officer and an equity owner of LGP, the firm that manages GEI, since 1995. Mr. Danhakl had previously been a Managing Director at DLJ and had been with DLJ since 1990. Prior to joining DLJ, Mr. Danhakl was a Vice President at Drexel Burnham Lambert Incorporated. Mr. Danhakl is also a director of Rite Aid Corporation, Arden Group, Inc., Big 5 Sporting Goods Corp., Liberty Group Operating, Inc., Petco Animal Supplies, Inc., Phoenix Scientific, Inc., MEMC Electronic Materials, Inc., and Diamond Triumph Auto Glass, Inc.

Michael J. Fourticq became a director in May 1988. He also served as Chairman of the Board of Directors from May 1988 until January 2000. Between May 1988 and August 1992, he served as our Chief Executive Officer. From 1995 to 2001, Mr. Fourticq was the Chairman and Chief Executive Officer of Brown Jordan International, a leading manufacturer of outdoor and casual furniture products. Since 1985 he has been the sole general partner of Hancock Park Associates, which is the general partner and affiliate of several investment partnerships. Mr. Fourticq also serves on the boards of Mikol Missile-Air, Brown Jordan International, Gordon Biersch, FHI dba Body Home Fitness, The Right Start, Classic Party Rentals, Stanton International and Saleen, Inc.

Ted C. Nark became a director in November 2004. He has served as the Chief Executive Officer of White Cap Industries, Inc. since April 2002. From 1998 until 2002, Mr. Nark was the Chief Executive Officer and Managing Director of Corporate Express Australia, a publicly traded, business-to-business office products distribution company in Australia. From 1992 until 1998, Mr. Nark worked for Corporate Express, Inc., as Northwest Division President (from 1992 until 1995) and then as Group President (from 1995 until 1998).

All our executive officers are chosen by our Board and serve at the Board’s discretion except as provided in their employment agreements. No family relationships exist between any of our executive officers or directors.

Audit Committee Financial Expert

Our Board does not have a “financial expert” within the meaning of the regulations of the SEC, and is not required to do so. We do not believe that we could recruit a financial expert without unwarranted expense and difficulty.

Code of Ethics

We have adopted a code of ethics and a copy may be obtained on written request to us, attention: Corporate Secretary.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following summary compensation table sets forth for the fiscal years ended October 2, 2004, September 27, 2003, and September 28, 2002, the compensation of our Chief Executive Officer and four most highly compensated executive officers as of October 2, 2004.

		Fiscal Year Compensation		Long-Term Compensation	All Other Compensation
	Year	Salary ($)	Bonus ($)(1)	Stock Options (#)(2)	401(k) ($)(3)	Insurance/ Other ($)(4)
Lawrence H. Hayward	2004	459,327	463,118	60,000	4,000	46,186
Chairman of the Board, President and Chief	2003	425,000	386,750	—	4,000	42,628
Executive Officer	2002	417,308	365,925	30,000	3,400	180
Donald J. Anderson	2004	324,231	233,505	30,000	4,000	28,237
Executive Vice President, Chief Financial	2003	300,000	195,000	—	4,000	24,148
Officer and Director	2002	292,308	183,250	20,000	3,400	120
Michael L. Hatch	2004	201,794	98,741	5,000	4,000	1,517
Senior Vice President, Merchandising and	2003	189,000	85,995	—	3,774	250
Marketing	2002	186,292	81,817	10,000	2,250	180
Janet I. McDonald	2004	166,731	78,854	2,500	3,000	1,417
Senior Vice President, Chief Information	2003	147,473	60,085	—	2,786	180
Officer	2002	—	—	—	—	—
Marvin D. Schutz	2004	190,995	93,385	1,250	4,000	1,766
Senior Vice President, Store Operations	2003	182,000	82,810	—	4,000	516
	2002	179,779	78,792	10,000	3,400	451

(1) Bonuses are attributed to the year in which they were earned, and are paid after the conclusion of the fiscal year. Bonuses were paid on a twelve-month basis for all of the fiscal years presented above.

(2) All options were granted at their fair market value on the date of grant.

(3) Represents our expected matching contributions to individuals’ 401(k) accounts.

(4) Insurance portion represents premiums paid by us for life insurance not generally available to all of our employees.

Option Plans

During 1997, we adopted a non-qualified common stock option plan (the “NQ Option Plan”) and an incentive common stock option plan (the “ISO Option Plan”) and reserved 417,995 shares and 1,369,730 shares, respectively, of our common stock for issuance upon the exercise of options to be granted to our employees thereunder. Options to purchase common stock have been granted at an exercise price of $1.00 per share for options granted under the NQ Option Plan (“NQ Options”) and $2.00 and $5.80 per share in the case of options granted under the ISO Option Plan.

Under the ISO Plan, as amended, ISO Options vest in one-third increments on the first, second and third anniversaries of the original grant date. Options intended to qualify as “incentive stock options” and options not intended to so qualify may be granted under the ISO Option Plan. Pursuant to law, options intended to qualify as “incentive stock options” are subject to limitations on aggregate amounts granted and must be issued to any holder of 10% or more of the issuer’s outstanding common stock at 110% of fair market value. Vested ISO Options may be exercised for 90 days post termination of employment, except in the case of the death of the option holder, in which case the vested portion may be exercised within twelve months from the date of termination. ISO Options have a term of ten years.

In November 1998, our Board adopted the 1998 Incentive Stock Option Plan (the “1998 Plan”), and reserved 300,000 shares of nonvoting common stock for issuance thereunder. In January 2000, our Board

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approved an amendment to the 1998 Plan to increase the number of shares of nonvoting common stock issuable thereunder to 500,000 shares in the aggregate. Options to purchase our nonvoting common stock have been granted at an exercise price of the fair market value at the time of such grant.

On February 15, 2001, our Board approved a resolution to effectuate the “repricing” of options outstanding under our ISO Option Plan and 1998 Plan. Under the program, 198,500 existing options were cancelled and holders thereof were entitled to receive new options on a date which would be at least 6 months and a day from the date of cancellation, at a price equal to the then market value of our stock. The options cancelled had exercise prices that were higher than our Board’s view of the then current market price of our stock and had impaired the ability of such options to fulfill their purpose.

In February 2001, we effected a 5 for 1 stock split whereby each outstanding share of our common stock, par value $.001 per share, was converted into five shares of common stock.

All existing options were accelerated and terminated in connection with the Recapitalization and each optionholder received with respect to each option held an amount equal to the excess of $15.00 over the exercise price of such option.

New Option Plans

We will establish one or more stock option plans for our officers, directors and certain other employees. The stock option plans will be administered by the compensation committee of the board of directors, which will have broad authority in administering and interpreting the stock option plans. Awards will not be restricted to any specified form or structure and may include, without limitation, sales or bonuses of stock, restricted stock, stock options, reload stock options, stock purchase warrants, other rights to acquire stock, securities convertible into or redeemable for stock, stock appreciation rights, phantom stock, dividend equivalents, performance units or performance shares. Options granted to employees under the stock option plans may be options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, or options not intended to so qualify. An award granted under the stock option plans to an employee or independent contractor may include a provision terminating the award upon termination of employment under certain circumstances or accelerating the receipt of benefits upon the occurrence of specified events, including a change of control.

Option Grants in 2004

The following table sets forth the stock options granted to our Chief Executive Officer and other executive officers, during the twelve months ended October 2, 2004, pursuant to our ISO Option Plan, NQ Option Plan, or 1998 Plan.

	Individual Grants
	Options Granted (1)	% of Total Options Granted to Employees in Fiscal Year		Exercise or Base Price		Expiration Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(2)
							0%($)	5%($)	10%($)
Lawrence H. Hayward	60,000	31.6	%	$	5.80	11/21/13	—	219,000	554,400
Donald J. Anderson	30,000	15.8	%	$	5.80	11/21/13	—	109,500	277,200
Michael L. Hatch	5,000	2.6	%	$	5.80	10/1/13	—	18,250	46,200
Janet I. McDonald	2,500	1.3	%	$	5.80	10/1/13	—	9,125	23,100
Marvin D. Schutz	1,250	0.7	%	$	5.80	10/1/13	—	4,563	11,550

(1) Granted pursuant to ISO Option Plan and 1998 Stock Option Plan. All existing options were accelerated and terminated in connection with the Recapitalization and each optionholder received with respect to each option held an amount equal to the excess of $15.00 over the exercise price of such option.

(2) Potential realizable value is based on an assumption that the stock price of the common stock appreciates at the annual rate shown (compounded annually) from the date of grant until the end of the ten-year option term. These numbers are calculated based on requirements promulgated by the SEC and do not reflect our estimate of future stock price growth.

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Aggregated Option Exercises in 2004 and Fiscal Year-End Option Value

The following table sets forth the stock option exercises by the named executive officers during 2004. In addition, the table indicates the total number and value of exercisable and non-exercisable options held by each such officer as of October 2, 2004.

	Shares Acquired on Exercise (#)	Value Realized ($)	Number of Unexercised Options at October 2, 2004		Value of Unexercised In-the-Money Options at October 2, 2004(1) Exercise Realized
			Exercisable	Unexercisable	Exercisable		Unexercisable
Lawrence Hayward	—	—	332,500	70,000	$	1,263,500	$	38,000
Donald J. Anderson	—	—	250,834	36,666		953,169		25,331
Michael L. Hatch	—	—	95,833	6,667		364,165		6,335
Janet I. McDonald	—	—	58,333	6,667		221,665		15,835
Marvin D. Schutz	—	—	124,978	4,167		482,811		12,035

(1) Potential unrealized value is (i) the fair market value at October 2, 2004 ($5.80 per share) less the option exercise price times (ii) the number of shares. The price per share of common stock in the Recapitalization was $15.00.

Directors’ Compensation

Directors do not receive any compensation directly for their service on our Board of Directors, with the exception of Mr. Agnew and Mr. Nark, our unaffiliated directors, each of whom receives $4,000 per each quarterly meeting. We issued 15,000 options to Mr. Agnew and Mr. Nark, respectively. Pursuant to a Management Agreement dated June 11, 1997, which terminated upon closing of the Transactions, during 2004 we paid LGP an annual fee in the amount of $244,800 plus out-of-pocket expenses of approximately $43,670. In connection with the Transactions, we entered into a new Management Services Agreement with LGP dated as of January 25, 2005. See “Certain Relationships and Related Transactions—Management Services Agreement.” John M. Baumer and John G. Danhakl are members of our Board of Directors and are executive officers and equity owners of LGP.

Employment Agreements

Lawrence Hayward and Donald Anderson each entered into employment agreements with us, dated as of November 2003 and amended January 2005. Each of the employment agreements contains non-solicitation and confidentiality covenants and provides that the executive is eligible to participate in our benefit plans consistent with the benefits extended to the most senior of our executives (including vacation, personal and sick leave, disability and medical and life insurance). Each of the employment agreements also provides that the executive will serve at the will of our Board of Directors. Each of the employment agreements expires in November 2008.

Mr. Hayward’s employment agreement provides for a minimum base salary of $425,000 annually, plus a minimum target bonus of no less than $297,500. If we terminate Mr. Hayward’s employment for any reason other than Just Cause (as defined in the Agreement), Mr. Hayward will receive a lump sum payment equal to 200% of the sum of his base salary, bonus and certain costs for health and medical insurance coverage. The benefits are also payable upon a sale of substantially all of the business or assets of Leslie’s or a consolidation, merger or change of control of Leslie’s (a “Change of Control”), if Mr. Hayward chooses to terminate his employment with us as a result of a Change in Control. Mr. Hayward agreed not to invoke this provision in connection with the Recapitalization.

Mr. Anderson’s employment agreement provides for a minimum base salary of $300,000 annually, plus a minimum target bonus of no less than $150,000. If we terminate Mr. Anderson’s employment for any reason other than Just Cause (as defined in the Agreement), Mr. Anderson will receive a lump sum payment equal to 200% of the sum of his base salary, bonus and certain costs for health and medical insurance coverage. The benefits are also payable upon a Change of Control (as defined above) if Mr. Anderson chooses to terminate his employment with us as the result of a Change in Control. We and Mr. Anderson agreed that he may defer invoking this provision in connection with the Recapitalization until September 30, 2005.

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SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

The following table sets forth information as of April 1, 2005 with respect to (i) all persons known by us to be the beneficial owner of more than 5% of our common stock; (ii) all executive officers; (iii) all directors; and (iv) all directors and executive officers as a group.

Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership of Common Stock	Percentage of Shares Outstanding
Leslie’s Coinvestment, LLC(2)	9,152,403	22.9
John M. Baumer(2)(3)	33,867,730	84.7
John G. Danhakl(2)(3)	33,867,730	84.7
GCP California Fund, L.P.(3)	24,715,327	61.8
Michael J. Fourticq	732,270	1.8
Edward C. Agnew	—	—
Ted C. Nark	—	—
Lawrence H. Hayward	3,000,000	7.5
Donald J. Anderson	—	—
Michael L. Hatch	375,000	0.9
Janet I. McDonald	215,000	0.5
Marvin D. Schutz	100,000	0.3
All executive officers and directors as a group (10 persons)	38,290,000	95.7

(1) The address of Messrs. Fourticq, Hayward, Anderson Hatch, McDonald and Schutz is 3925 E. Broadway Road, Suite 100, Phoenix, Arizona 85040. The address of LGP, GCP and Messrs. Baumer and Danhakl is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025.

(2) Leslie’s Coinvestment, LLC is a Delaware limited liability company managed by LGP. Each of Messrs. Jonathan D. Sokoloff, Peter J. Nolan, John D. Danhakl, Jonathan A. Seiffer, John M. Baumer and Timothy J. Flynn, either directly (whether through ownership interest or position) or through one of more intermediaries, may be deemed to control LGP. Accordingly, for certain purposes, Messrs. Sokoloff, Nolan, Danhakl, Seiffer, Baumer and Flynn may be deemed to be beneficial owners of the shares of our common stock held or controlled by LGP. However, such individuals disclaim beneficial ownership of the securities held by LGP, except to the extent of their respective pecuniary interests therein.

(3) GCP is a Delaware limited partnership managed by an affiliate of LGP, which is an affiliate of the general partner of GCP. Each of Messrs. Sokoloff, Nolan, Danhakl, Seiffer, Baumer and Flynn either directly (whether through ownership interest or position) or through one of more intermediaries, may be deemed to control the affiliate of LGP and such general partner. The affiliate of LGP and such general partner may be deemed to control the voting and disposition of the shares of our common stock owned by GCP. Accordingly, for certain purposes, Messrs. Sokoloff, Nolan, Danhakl, Seiffer, Baumer and Flynn may be deemed to be beneficial owners of the shares of our common stock held by GCP. However, such individuals disclaim beneficial ownership of the securities held by GCP, except to the extent of their respective pecuniary interests therein.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Management Participation in the Recapitalization

Our prior common stockholders and optionholders received approximately $124.9 million in cash and our prior preferred stockholder, GEI, received approximately $64.5 million in cash in the Recapitalization. Of these amounts, our five executive officers received approximately $16.3 million, GEI received approximately $160.4 million and Michael Fourticq received approximately $4.4 million in cash. Two of our executive officers, Lawrence Hayward and Donald Anderson, each used a part of their proceeds from the Recapitalization to repay the loans that had previously been extended to them by the Company. These loans, each in the principal amount of $225,000 and bearing a 2.45% interest rate, have been repaid in full.

In the Recapitalization, GCP, an additional affiliate of LGP and some of our directors and management contributed to LPM Acquisition $29.1 million in value of shares of our then existing common stock and $10.9 million of cash, and received an aggregate of $40.0 million of our new common stock. Of these amounts, our executive officers contributed $3.7 million in common stock, GCP contributed $22.9 million in common stock and $1.8 million in cash, additional affiliates of LGP contributed $9.1 million in cash and Michael Fourticq contributed $0.7 million in common stock in exchange for the number of shares set forth opposite their names in the second table under “Security Ownership of Principal Stockholders and Management.”

We also issued $41.0 million of preferred stock in exchange for units issued for $40.1 million in cash contributed to LPM Acquisition by GCP and additional affiliates of LGP and $0.9 million of shares of common stock contributed to LPM Acquisition by Michael Fourticq.

Some of our directors, executive officers and other affiliates own the 10 ³/8% Senior Notes due 2008 that were repurchased in the tender offer. Accordingly, such individuals received cash for any notes they tendered. The following table sets forth such ownership:

Directors and Officers	Principal Amount
John M. Baumer	$	50,000
John G. Danhakl		350,000
Michael J. Fourticq		1,500,000
Lawrence H. Hayward		235,000
Donald J. Anderson		100,000
Other Affiliates
Peter Nolan		350,000
Jonathan Sokoloff		200,000
Jonathan Seiffer		50,000
	$	2,835,000

LGP received closing fees of $5.0 million in the Recapitalization.

Management Services Agreement

We entered into a Management Services Agreement with LGP concurrent with the consummation of the Transactions. The Management Services Agreement provides that we will pay LGP an annual fee of $1.0 million for ongoing management, consulting and financial services. In addition, the Management Services Agreement provides that LGP may provide us with financial advisory or investment banking services in connection with major financial transactions, and LGP will be paid a customary fee for such services. The Management Services Agreement will terminate on the earlier of (a) the tenth anniversary of its execution; provided that the agreement will automatically extend for one year periods thereafter unless either we or LGP gives the other three months prior notice of termination, (b) the consummation of a change of control, including the date that LGP affiliates

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hold 40% or less of our shares and (c) the consummation of a public offering of our common stock in an aggregate offering amount of at least $50 million or as a result of which at least 15% of our shares of common stock is publicly traded. In the event of our bankruptcy, liquidation, insolvency or winding-up, the payment of all accrued and unpaid fees pursuant to the Management Services Agreement is subordinated to the prior payment in full of all amounts due and owing under the indenture governing the notes.

Stockholders Agreement

We entered into a Stockholders Agreement with GCP and each of our other stockholders concurrent with the consummation of the Recapitalization. The Stockholders Agreement generally restricts the transferability of our stock and gives GCP and its affiliates a right of first refusal in the event any other stockholder seeks to transfer any of our stock to a third party. In addition, GCP and its affiliates have certain “drag-along” rights and if GCP and its affiliates desire to sell any of our stock, other stockholders will have certain “tag-along” rights to participate in such sale. We and certain of the non-management stockholders have certain rights to repurchase a portion of the stock held by management upon their ceasing to provide services to us. The Stockholders Agreement also grants demand registration rights to the non-management stockholders and piggyback registration rights for all stockholders. Finally, Mr. Fourticq has certain rights to be elected as a director of Leslie’s.

Indemnification

We have agreed that we will indemnify all of our current and former directors and officers after the consummation of the Recapitalization for all costs and expenses incurred in proceedings arising out of or pertaining to the Recapitalization.

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DESCRIPTION OF OTHER INDEBTEDNESS AND PREFERRED STOCK

Amended Credit Facility

On January 25, 2005, we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with the lenders noted therein and Wells Fargo Retail Finance LLC as agent for the Lenders. The Loan Agreement provides for the extension by the lenders of revolving loans and other financial accommodations to us in an aggregate principal amount of $75.0 million. The amended credit facility was and will be used to refinance the existing credit facility, to provide a portion of the financing required to consummate the Recapitalization, and for general corporate purposes. A portion of the amended credit facility is available for letters of credit. The obligations under the amended credit facility are secured by a lien on substantially all of our assets.

In addition to the $75.0 million commitment, the total commitment has been increased by $30.0 million via a temporary over-advance facility through June 30, 2005. At our option, the over-advance facility will again be available in the amount of $20.0 million from September 30, 2005 through March 31, 2006. During these periods, we will have the ability to draw on the over-advance facility in $2.5 million tranches. Finally, at the lender’s discretion, an over-advance facility of $10.0 million may be available to us from September 30, 2006 through March 31, 2007.

Borrowings under the amended credit facility bear interest at the lender’s reference rate or at LIBOR plus the applicable LIBOR rate margin. The applicable LIBOR rate margin will be adjusted quarterly based on our EBITDA (as defined in the amended credit facility) for the 12 month period ended as of the end of the latest fiscal quarter. The applicable margin for the amended credit facility is initially 0% with respect to base rate loans and 2.00% with respect to eurodollar loans. Borrowings under the over-advance facility will bear interest at LIBOR plus 4.00%.

On the closing of the Transactions, we paid the lender an upfront fee as well as a commitment fee on the $30.0 million over-advance facility. In addition, we are obligated to pay the lender a commitment fee equal to  ¹/4 of 1% per annum of the unused portion of the $75.0 million commitment. If we use the $20.0 million or $10.0 million over-advance facility in the future, we will be required to pay a commitment fee on such facility at such point in time. We are also obligated to pay a commission on all outstanding letters of credit as well as customary administrative, issuance, fronting, amendment, payment and negotiation fees.

The amended credit facility contains customary representations and warranties, covenants and conditions to borrowing. There can be no assurance that the conditions to borrowing under the amended credit facility will be satisfied.

The amended credit facility requires the maintenance of certain quarterly financial and operating ratios and covenants, including minimum calculated EBITDA levels, fixed charge coverage ratio, and senior leverage ratio.

The amended credit facility also contains customary events of default, including default upon the nonpayment of principal, interest, fees or other amounts or the occurrence of a change of control.

Other Outstanding Notes

We currently have outstanding $4.0 million of 10 ³/8% Senior Notes due 2008. The remaining 10 ³/8% senior notes outstanding pay interest semi-annually and mature on July 15, 2008. The remaining 10 ³/8% senior notes outstanding are general unsecured obligations of ours and are subordinated in right of payment to our amended credit facility. The remaining 10 ³/8% senior notes outstanding are redeemable by us beginning July 15, 2005. We have filed copies of the indenture under which the remaining 10 ³/8% senior notes outstanding were issued and the supplemental indenture amending such indenture with the SEC.

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Preferred Stock

On January 25, 2005 we issued $41 million of a new series of 10% senior redeemable exchangeable cumulative preferred stock. A summary of the terms of this new series of preferred stock is presented below:

Ranking. The preferred stock ranks senior as to dividend rights or upon liquidation to all of our common stock and all of our future series of preferred stock which is designated as junior.

Dividends. Dividends accrue quarterly on the preferred stock at a rate per annum equal to ten percent (10%).

Exchange Feature. On any dividend payment date, we may exchange all of the preferred stock for 10% junior subordinated debentures having a maturity date which is the same date as the mandatory redemption date for the preferred stock. The incurrence of the indebtedness represented by the debentures are limited by the covenants in the amended credit facility and the indenture governing the notes. The debentures are subordinated to the debt under the amended credit facility, the Notes and the remaining 10 ³/8% notes outstanding.

Mandatory Redemption. The preferred stock is subject to mandatory redemption 20.5 years after the date of issuance at a redemption price equal to the liquidation preference, together with accrued and unpaid dividends to the date of redemption.

Change of Control Redemption. The preferred stock is subject to mandatory redemption upon the occurrence of a change of control of Leslie’s at a redemption price equal to 101% of the liquidation preference, together with accrued and unpaid dividends to the date of redemption.

Optional Redemption. After the fifth anniversary of the issuance date, the preferred stock will be subject to redemption at any time, in whole or in part, at our option, by payment of the amounts (stated as a percentage of the liquidation preference) set forth below if redeemed during the twelve month period beginning on the anniversary of the issuance date of each of the years indicated, plus accrued and unpaid dividends to the date of redemption:

Year	Redemption Price:
2010	106	%
2011	104	%
2012	102	%
2013 and thereafter	100	%

In addition, prior to the third anniversary of the issuance date, at our option, we may redeem up to 35% of the outstanding shares of preferred stock at a redemption price of 110% of the liquidation preference, together with accrued and unpaid dividends to the date of redemption, with the proceeds from one or more public equity offerings.

Voting. The preferred stock is non-voting except as required by Delaware law, except that holders of a majority of the outstanding shares of preferred stock, voting as a separate class, has the right to approve (a) each issuance by us of any securities that rank senior to or on parity with the preferred stock as to dividends or upon a liquidation, (b) any amendment to our certificate of incorporation that would be adverse to holders of the preferred stock and (c) any amendment of the junior subordinated debentures indenture that would be adverse to holders of the junior subordinated debentures.

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DESCRIPTION OF NOTES

You can find the definitions of certain terms used in this description under the subheading “Certain Definitions.” In this description, the word “Company” refers only to Leslie’s Poolmart, Inc. and not to any of its subsidiaries.

The Company issued the original notes and will issue the exchange notes under an Indenture (the “Indenture”) between itself and The Bank of New York Trust Company, N.A., as trustee (the “Trustee”). The terms of the exchange notes are identical in all material respects to the original notes, except that the exchange notes have been registered under the Securities Act, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the original notes under certain circumstances relating to the Registration Rights Agreement. The following description is a summary of the material provisions of the Indenture and the Registration Rights Agreement. It does not restate these agreements in their entirety. We urge you to read the Indenture and the Registration Rights Agreement because they, and not this description, define your rights as holders of the Notes. Certain defined terms used in this description but not defined below under “Certain Definitions” have the meanings assigned to them in the Indenture.

Brief Description of the Notes

The Notes:

• are senior unsecured obligations of the company;

• are pari passu in right of payment with all other senior unsecured obligations of the Company; and

• rank effectively junior to secured obligations, including obligations under the amended credit facility, to the extent of the value of the collateral securing such obligations.

Principal, Maturity and Interest

The aggregate principal amount of the Notes is $170.0 million. Additional Notes may be issued in one or more series from time to time, subject to the limitations set forth under “—Certain Covenants—Limitation on Incurrence of Additional Indebtedness.” The Notes will mature on February 1, 2013. Interest on the Notes will accrue at the rate of 7 ³/4% per annum and will be payable semi-annually in arrears on each February 1 and August 1 commencing on August 1, 2005, to the persons who are registered holders at the close of business on the January 15 and July 15, respectively, immediately preceding the applicable interest payment date. The Notes and any additional notes subsequently issued under the Indenture would be treated as a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The Company will issue Notes in denominations of $1,000 and integral multiples of $1,000.

Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from and including the date of issuance. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

Paying Agent and Registrar for the Notes

Initially, the Trustee will act as Paying Agent and Registrar for the Notes. The Company may change any Paying Agent and Registrar without prior notice to holders of the Notes, and the Company or any of its Subsidiaries may act as Paying Agent or Registrar.

Methods of Receiving Payments on the Notes

The Company will pay principal (and premium, if any) on the Notes at the Trustee’s corporate office in New York, New York. At the Company’s option, when due, interest may be paid at the Trustee’s corporate trust office

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or by check mailed to the registered addresses of holders. If a Holder has given wire transfer instructions to the Company, the Company will pay all principal, interest and premium and additional interest, if any, on that Holder’s Notes in accordance with those instructions.

Transfer and Exchange

A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed.

The registered Holder of a Note will be treated as the owner of it for all purposes.

Optional Redemption

Redemption after Four Years. On and after February 1, 2009, the Company may, at its option, redeem the Notes, in whole at any time or in part from time to time, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on February 1 of the year set forth below, plus, in each case, accrued and unpaid interest and additional interest, if any, to the date of redemption:

Year	Percentage
2009	103.875	%
2010	101.938	%
2011 and thereafter	100.000	%

Redemption with Proceeds of Public Equity Offerings. On or prior to February 1, 2008, the Company may, at its option, use the net cash proceeds of one or more Public Equity Offerings (as defined below) to redeem up to 35% of the aggregate principal amount of the Notes (including any additional notes) at a redemption price equal to 107.750% of the principal amount thereof, plus accrued and unpaid interest and additional interest, if any, to the date of redemption; provided that after giving effect to any such redemption at least 65% of aggregate principal amount of the Notes and additional notes, if any, remains outstanding. In order to effect the foregoing redemption with the proceeds of any Public Equity Offering, the Company shall make such redemption not more than 60 days after the consummation of any such Public Equity Offering.

“Public Equity Offering” means an underwritten public offering of Qualified Capital Stock of the Company pursuant to a registration statement filed with the Commission in accordance with the Securities Act, or any successor statute.

Redemption with Make-Whole Premium. Prior to February 1, 2009, the Company may, at its option, redeem the Notes, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount thereof plus the Make-Whole Premium, plus accrued and unpaid interest and additional interest, if any, to the date of redemption.

“Make-Whole Premium” means, with respect to any Note on any redemption date, the excess of (a) the present value on such redemption date of (1) the redemption price of the Note on February 1, 2009 plus (2) all scheduled interest payments on the Note through February 1, 2009 (excluding accrued but unpaid interest), computed using a discount rate equal to the Adjusted Treasury Rate plus 50 basis points over (b) the principal amount of the Note.

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Selection and Notice of Redemption

In the event that less than all of the Notes are to be redeemed at any time, selection of such Notes for redemption will be made by the Trustee as follows:

(i) in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed or,

(ii) if such Notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate.

No Notes of a principal amount of $1,000 or less shall be redeemed in part; and if a partial redemption is made with the proceeds of a Public Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures), unless such method is otherwise prohibited. Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable redemption price pursuant to the Indenture.

Mandatory Redemption

Except as provided below under the captions “—Repurchase at the Option of Holders after a Change of Control” and “Certain Covenants—Limitation on Asset Sales,” the Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.

Repurchase at the Option of Holders after a Change of Control

The Indenture provides that upon the occurrence of a Change of Control, each holder will have the right to require that the Company purchase all or a portion (equal to $1,000 or an integral multiple thereof) of such holder’s Notes pursuant to the offer described below (the “Change of Control Offer”), at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest and additional interest, if any, thereon, to the date of purchase. Within 30 days following the date upon which the Change of Control occurred, the Company must send, by first-class mail, a notice to each holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date such notice is mailed, other than as may be required by law (the “Change of Control Payment Date”). Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third business day prior to the Change of Control Payment Date.

If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the Change of Control purchase price for all the Notes that might be delivered by holders seeking to accept the Change of Control Offer. In the event the Company is required to purchase outstanding Notes pursuant to a Change of Control Offer, the Company expects that it would seek third-party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that the Company would be able to obtain such financing. Neither the Board of Directors of the Company nor the Trustee may waive the covenant relating to the Company’s obligation to make a Change of Control Offer. Restrictions in the Indenture described herein on the ability of the Company and its Subsidiaries to incur additional Indebtedness, to grant Liens on its property, to make Restricted Payments and to make Asset Sales may also make more difficult or discourage a takeover of the Company, whether favored or opposed by the

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management of the Company. Consummation of any such transaction in specified circumstances may require redemption or repurchase of the Notes, and there can be no assurance that the Company or the acquiring party will have sufficient financial resources to effect such redemption or repurchase. Such restrictions and the restrictions on transactions with Affiliates may, in some circumstances, make more difficult or discourage any leveraged buyout of the Company or any of its Subsidiaries. While such restrictions cover a wide variety of arrangements which have traditionally been used to effect highly leveraged transactions, the Indenture may not afford the holders of Notes protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction.

On the Change of Control Payment Date, the Company will, to the extent lawful:

(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and

(3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company.

The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof.

The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

The provisions described above that require the Company to make a Change of Control Offer following a Change of Control will be applicable regardless of whether any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.

The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of the Company and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the “Change of Control” provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the “Change of Control” provisions of the Indenture by virtue of such conflict.

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Certain Covenants

The Indenture contains, among others, the following covenants:

Limitation on Incurrence of Additional Indebtedness. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, incur, assume, guarantee, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, “incur”), any Indebtedness (including Acquired Indebtedness but excluding Permitted Indebtedness); provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, the Company may incur Indebtedness (including, without limitation, Acquired Indebtedness) if on the date of the incurrence of such Indebtedness, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0.

Indebtedness of a Person which is secured by a Lien on an asset acquired by the Company or a Subsidiary of the Company (whether or not such Indebtedness is assumed by the acquiring Person) shall be deemed incurred at the time of the Asset Acquisition.

The Company will not incur any Indebtedness which by its terms (or by the terms of any agreement governing such Indebtedness) is subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also by its terms (or by the terms of any agreement governing such Indebtedness) made expressly subordinate in right of payment to the Notes, pursuant to subordination provisions that are substantively identical to the subordination provisions of such Indebtedness (or such agreement) that are most favorable to the holders of any other Indebtedness of the Company.

For purposes of determining compliance with this “Limitation on Incurrence of Additional Indebtedness” covenant, in the event that any proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness or is entitled to be incurred pursuant to the proviso of the first paragraph of this covenant, the Company will be permitted to classify such item of Indebtedness on the date of its incurrence in any manner that complies with this covenant, and later reclassify any such item of Indebtedness from time to time, so long as such item could have been so classified on the date of its incurrence or at any time thereafter in a manner that complies with this covenant.

Limitation on Restricted Payments. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly:

(a) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on or in respect of shares of the Company’s or its Subsidiaries’ Capital Stock (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Subsidiaries) to holders of such Capital Stock in their capacity as such (other than dividends or distributions payable to the Company or a Subsidiary of the Company or, in the case of any Subsidiary, pro rata to all holders of Capital Stock of such Subsidiary),

(b) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock,

(c) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company that is subordinate or junior in right of payment to the Notes, or

(d) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being referred to as a “Restricted Payment”), if at the time of such Restricted Payment or immediately after giving effect thereto:

(i) a Default or an Event of Default shall have occurred and be continuing or would occur as a consequence thereof;

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(ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the covenant described under “—Limitation on Incurrence of Additional Indebtedness”; or

(iii) the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined reasonably and in good faith by the Board of Directors of the Company) shall exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company reported for any period ended subsequent to April 3, 2005 and on or prior to the date the Restricted Payment occurs (the “Reference Date”) (treating such period as a single accounting period); plus (x) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company; plus (y) without duplication of any amounts included in clause (iii)(x) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company’s Capital Stock; plus (z) without duplication, the sum of (1) the aggregate amount returned in cash on or with respect to Investments (other than Permitted Investments) made subsequent to the Issue Date whether through interest payments, principal payments, dividends or other distributions or payments and (2) the Net Cash Proceeds received by the Company or any Subsidiary from the disposition of all or any portion of such Investments (other than to a Subsidiary of the Company).

Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit:

(1) the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted pursuant to the Indenture on the date of declaration;

(2) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any shares of Capital Stock of the Company, either (i) solely in exchange for shares of Qualified Capital Stock of the Company or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company;

(3) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any Indebtedness of the Company that is subordinate or junior in right of payment to the Notes either (i) solely in exchange for shares of Qualified Capital Stock of the Company or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of (a) shares of Qualified Capital Stock of the Company or (b) Refinancing Indebtedness;

(4) so long as no Default or Event of Default shall have occurred and be continuing, repurchases by the Company of Common Stock of the Company or options, warrants or other securities exercisable or convertible into Common Stock of the Company from employees and directors of the Company or any of its Subsidiaries or their authorized representatives upon the death, disability or termination of employment or directorship of such employees or directors, in an aggregate amount not to exceed $1.0 million in any calendar year and $4.0 million in the aggregate (in each case plus the amount of net cash proceeds received by the Company from the sale of Qualified Capital Stock to officers or directors of the Company and its Subsidiaries, provided, that such amounts did not provide the basis for any other Restricted Payment);

(5) so long as no Default or Event of Default shall have occurred and be continuing, the payment of dividends on the shares of Series A Preferred Stock issued on the Issue Date and on any additional shares of such stock issued in lieu of cash dividends thereon with (x) the net proceeds of a sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company or (y) the net cash proceeds of any capital contribution to the Company; and

(6) so long as no Default or Event of Default shall have occurred and be continuing, Restricted Payments not exceeding $7.5 million in the aggregate.

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In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the immediately preceding paragraph, amounts expended pursuant to clauses (2)(ii), 3(ii)(a), (4) and (5) shall be included in such calculation.

Limitation on Asset Sales. The Company will not, and will not permit any of its Subsidiaries to, consummate an Asset Sale unless

(i) the Company or the applicable Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or equity interests sold or otherwise disposed of (as determined in good faith by the Company’s Board of Directors),

(ii) at least 75% of the consideration received for the assets sold by the Company or the Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition; provided, however, that

(a) notes received by the Company as consideration for an Asset Sale that are converted into cash or Cash Equivalents immediately following the consummation of such Asset Sale;

(b) the assumption by the purchaser of assets pursuant to an Asset Sale of liabilities of the Company (other than liabilities that are by their terms subordinate to the Notes); or

(c) shall, in each case of the immediately preceding clauses (a) and (b), be deemed to be cash or Cash Equivalents at the time of such Asset Sale in an amount equal to, in the case of clause (a), the amount of cash or Cash Equivalents realized on such conversion and, in the case of clause (b), the amount of the liabilities so assumed, as reflected on the balance sheet of the Company, and

(iii) following the consummation of an Asset Sale, the Company shall or cause such Subsidiary, within 365 days of receipt thereof, either (a) to apply the Net Cash Proceeds related to such Asset Sale to prepay any Indebtedness that by its terms is not subordinate to the Notes, (b) to make a Permitted Investment or an investment in properties and assets that replace the properties and assets that were the subject of such Asset Sale or in properties and assets that will be used in a Related Business (collectively, “Replacement Assets”) or (c) a combination of prepayment and investment permitted by the foregoing clauses (iii)(a) and (iii)(b).

On the 365th day after an Asset Sale, or such earlier date, if any, as the Board of Directors of the Company or of such Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (iii)(a), (iii)(b) and (iii)(c) of the next preceding sentence (each, a “Net Proceeds Offer Trigger Date”), such aggregate amount of Net Cash Proceeds which have not been applied on or before the applicable Net Proceeds Offer Trigger Date as permitted in clauses (iii)(a), (iii)(b) and (iii)(c) of the next preceding sentence (or, in the case of a Net Proceeds Offer Trigger Date (as defined below) occurring prior to such 365th day, the aggregate amount of Net Cash Proceeds that the Board of Directors has determined not to so apply) (each a “Net Proceeds Offer Amount”) shall be applied by the Company or such Subsidiary to make an offer to purchase (the “Net Proceeds Offer”) on a date (the “Net Proceeds Offer Payment Date”) not less than 30 nor more than 45 days following the applicable Net Proceeds Offer Trigger Date, from all holders on a pro rata basis (and on a pro rata basis with the holders of indebtedness of the Company that is not by its terms subordinate to the Notes), that amount of Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest and additional interest, if any, thereon, to the date of purchase; provided, however, that if at any time any non-cash consideration received by the Company or any Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. The Company may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $5.0 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $5.0 million, shall be applied as required pursuant to this paragraph).

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In the event of the transfer of substantially all (but not all) of the property and assets of the Company and its Subsidiaries as an entirety to a Person in a transaction permitted under “—Merger, Consolidation and Sale of Assets,” the successor corporation shall be deemed to have sold the properties and assets of the Company and its Subsidiaries not so transferred for purposes of this covenant, and shall comply with the provisions of this covenant with respect to such deemed sale as if it were an Asset Sale. In addition, the fair market value of such properties and assets of the Company or its Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this covenant.

Notwithstanding the two immediately preceding paragraphs, the Company and its Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent (i) at least 75% of the consideration for such Asset Sale constitutes Replacement Assets and (ii) such Asset Sale is for fair market value; provided that any consideration not constituting Replacement Assets received by the Company or any of its Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Cash Proceeds subject to the provisions of the two preceding paragraphs.

Each Net Proceeds Offer will be mailed to the record holders as shown on the register of holders within 25 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, holders may elect to tender their Notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent holders properly tender Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering holders will be purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer shall remain open for a period of 20 business days or such longer period as may be required by law.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the “Asset Sale” provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the “Asset Sale” provisions of the Indenture by virtue of such conflict.

Upon completion of a Net Proceeds Offer, the amount of Net Cash Proceeds will be reset at zero. Accordingly, to the extent that the aggregate amount of Notes tendered pursuant to a Net Proceeds Offer is less than the Net Cash Proceeds, the Company may use any remaining Net Cash Proceeds for general corporate purposes.

Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary of the Company to:

(a) pay dividends or make any other distributions on or in respect of its Capital Stock, or with respect to any other interest or participation in, or measured by, its profits;

(b) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Subsidiary of the Company; or

(c) transfer any of its property or assets to the Company or any other Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of:

(1) applicable law;

(2) the Indenture;

(3) any Credit Agreement;

(4) customary non-assignment provisions of any contract or any lease governing a leasehold interest of any Subsidiary of the Company, or any customary restriction on the ability of a Subsidiary of the Company to dividend, distribute or otherwise transfer any asset which secures Purchase Money Indebtedness of such Subsidiary;

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(5) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired;

(6) Permitted Liens securing Indebtedness that limit the right of the debtor to dispose of the assets subject to such Lien; or

(7) an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (2), (3) or (5) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness are no less favorable to the Company in any material respect as determined by the Board of Directors of the Company in their reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (2), (3) or (5).

Limitation on Preferred Stock of Subsidiaries. The Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly Owned Subsidiary of the Company) or permit any Person (other than the Company or a Wholly Owned Subsidiary of the Company) to own any Preferred Stock of any Subsidiary of the Company.

Limitation on Liens. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets of the Company or any of its Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom unless (i) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens and (ii) in all other cases, the Notes are equally and ratably secured, except for (a) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; (b) Liens of the Company or a Wholly Owned Subsidiary of the Company on assets of any Subsidiary of the Company; (c) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien permitted under the Indenture and which has been incurred in accordance with the provisions of the Indenture; provided, however, that such Liens (x) are no less favorable to the holders and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced and (y) do not extend to or cover any property or assets of the Company or any of its Subsidiaries not securing the Indebtedness so Refinanced; and (d) Permitted Liens.

Limitations on Guarantees. The Company will not cause or permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Guarantee of any other Indebtedness of the Company unless (i) in the case of Guarantees of Indebtedness that is expressly subordinate or junior in right of payment of the Notes, the Notes have a Guarantee that is senior to such Guarantee and (ii) in all other cases, the Notes are equally and ratably Guaranteed.

Merger, Consolidation and Sale of Assets. The Company will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company’s assets (determined on a consolidated basis for the Company and the Company’s Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless:

(i) either (1) the Company shall be the surviving or continuing corporation or (2) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Company’s Subsidiaries substantially as an entirety (the “Surviving Entity”) (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and (y) shall expressly assume, by supplemental indenture (in form and substance

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satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Notes and the performance of every covenant of the Notes, the Indenture and the Registration Rights Agreement on the part of the Company to be performed or observed;

(ii) immediately after giving effect to such transaction and the assumption contemplated by clause (i)(2)(y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be, shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the covenant described under “—Limitation on Incurrence of Additional Indebtedness” unless such transaction is solely to form a new holding company for the Company;

(iii) immediately before and immediately after giving effect to such transaction and the assumption contemplated by clause (i)(2)(y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and

(iv) the Company or the Surviving Entity shall have delivered to the Trustee an officers’ certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with the applicable provisions of the Indenture and that all conditions precedent in the Indenture relating to such transaction have been satisfied.

For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Subsidiaries of the Company the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

The Indenture provides that upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, in which the Company is not the continuing corporation, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture and the Notes with the same effect as if such surviving entity had been named as such.

Limitations on Transactions with Affiliates. (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an “Affiliate Transaction”), other than (x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably be expected to have been obtained in a comparable transaction at such time on an arm’s-length basis from a Person that is not an Affiliate of the Company or such Subsidiary, if such a transaction were to be available to the Company or such Subsidiary. All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $1.0 million shall be approved by the Board of Directors of the Company or such Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution stating that such Board of Directors has determined that such transaction complies with the foregoing provisions. If the Company or any Subsidiary of the Company enters into an Affiliate Transaction (or a series of related Affiliate Transactions related to a common plan) that involves an aggregate fair market value of more than $7.5 million, the Company or such Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to the Company or the relevant Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Trustee.

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(b) The restrictions set forth in clause (a) shall not apply to (i) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any Subsidiary of the Company as determined in good faith by the Company’s Board of Directors or senior management; (ii) transactions exclusively between or among the Company and any of its Subsidiaries or exclusively between or among such Subsidiaries; provided such transactions are not otherwise prohibited by the Indenture; (iii) payments of annual fees and reimbursement of reasonable expenses in accordance with the provisions of the Management Services Agreement; (iv) any employment agreement entered into in the ordinary course of business; (v) payments pursuant to customary tax sharing agreements that do not exceed the amount otherwise payable by the Company or such Subsidiary; and (vi) Restricted Payments permitted by the Indenture and Permitted Investments.

Conduct of Business. The Company and its Subsidiaries will not engage in any businesses other than a Related Business.

Reports to Holders. Whether or not required by the Commission, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes, within the time periods specified in the Commission’s rules and regulations:

(1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by the Company’s certified independent accountants; and

(2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports.

In addition, whether or not required by the Commission, the Company will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission’s rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company has agreed that, for so long as any Notes remain outstanding, it will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Payments for Consent. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid and is paid to all holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Events of Default

The following events are defined in the Indenture as “Events of Default”:

(i) the failure to pay interest on, or additional interest with respect to, any Notes when the same becomes due and payable and the default continues for a period of 30 days;

(ii) the failure to pay the principal or premium on any Notes, when such principal or premium, if any, becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a required payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer);

(iii) a default in the observance or performance of any other covenant or agreement contained in the Indenture which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the holders of at

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least 25% of the outstanding principal amount of the Notes (except in the case of a default with respect to the covenants described under “—Repurchase of the Option of Holders”, and “—Merger, Consolidation and Sale of Assets,” which will constitute an Event of Default with such notice requirement but without such passage of time requirement);

(iv) the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Subsidiary of the Company, or the acceleration of the final stated maturity of any such Indebtedness, in any case if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated, aggregates $5.0 million or more at any time;

(v) one or more judgments in an aggregate amount in excess of $5.0 million shall have been rendered against the Company or any of its Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable; or

(vi) events of bankruptcy or insolvency affecting the Company or any of its Significant Subsidiaries.

If an Event of Default (other than an Event of Default specified in clause (vi) above) shall occur and be continuing, the Trustee or the holders of at least 25% in principal amount of outstanding Notes may declare the principal of and accrued and unpaid interest and additional interest, if any, on all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a “notice of acceleration” (the “Acceleration Notice”), and the same shall become immediately due and payable. If an Event of Default specified in clause (vi) above occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest and additional interest, if any, on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder.

The Indenture provides that, at any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences (i) if the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration, (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its reasonable expenses, disbursements and advances and (v) in the event of the cure or waiver of an Event of Default of the type described in clause (vi) of the description above of Events of Default, the Trustee shall have received an officers’ certificate and an opinion of counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto.

The holders of a majority in aggregate principal amount of the Notes may waive any existing Default or Event of Default under the Indenture, and its consequences, except a default in the payment of the principal of or interest or additional interest on any Notes.

Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture and under the TIA. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the holders, unless such holders have offered to the Trustee reasonable indemnity satisfactory to it. Subject to all provisions of the Indenture and applicable law, the holders of a majority in aggregate principal amount of the then outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee.

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The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture. In addition, the Company is required to provide an officers’ certificate to the Trustee promptly upon any such officer obtaining knowledge of any Default or Event of Default (provided that such officers shall provide such certification at least annually whether or not they know of any Default or Event of Default) that has occurred and, if applicable, describe such Default or Event of Default and the status thereof.

No Personal Liability of Directors, Officers, Employees and Stockholders

No director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

Legal Defeasance and Covenant Defeasance

The Company may, at its option and at any time, elect to have its obligations discharged with respect to the outstanding Notes (“Legal Defeasance”). Such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, except for:

(i) the rights of holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest and additional interest on the Notes when such payments are due from the trust referred to below,

(ii) the Company’s obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payments and money for security payments held in trust,

(iii) the rights, powers, trust, duties and immunities of the Trustee and the Company’s obligations in connection therewith, and

(iv) the Legal Defeasance provisions of the Indenture.

In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to some of the covenants that are described in the Indenture (“Covenant Defeasance”) and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, the events (not including non-payment, bankruptcy, receivership, reorganization and insolvency events) described under “—Events of Default” will no longer constitute an Event of Default with respect to the Notes.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the holders cash in U.S. dollars, non-callable U.S. government obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium and Additional Interest, if any, and interest on the Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date;

(ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

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(iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the holders will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit;

(v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(vi) the Company shall have delivered to the Trustee an officers’ certificate stating that the deposit was not made by the Company with the intent of preferring the holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others;

(vii) the Company shall have delivered to the Trustee an officers’ certificate and an opinion of counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with;

(viii) the Company shall have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; and

(ix) other customary conditions precedent are satisfied.

Satisfaction and Discharge

The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when

(i) either

(a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation; or

(b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation;

(ii) the Company has paid all other sums payable under the Indenture by the Company;

(iii) the Company has delivered to the Trustee an officers’ certificate stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with; and

(iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which the Company is bound.

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Modification of the Indenture

From time to time, the Company and the Trustee, without the consent of the holders, may amend the Indenture for specified purposes, including curing ambiguities, defects or inconsistencies, so long as such change does not, in the opinion of the Trustee, adversely affect the rights of any of the holders in any material respect. In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an opinion of counsel. Other modifications and amendments of the Indenture may be made with the consent of the holders of a majority in principal amount of the then outstanding Notes issued under the Indenture, except that, without the consent of each holder affected thereby, no amendment may:

(i) reduce the principal amount of Notes whose holders must consent to an amendment, supplement or waiver;

(ii) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Notes;

(iii) reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor;

(iv) make any Notes payable in money other than that stated in the Notes;

(v) waive a Default or Event of Default in the payment of principal of, or interest or premium, or additional interest, if any, on the Notes (except a rescission of acceleration of the Notes by the holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);

(vi) make any change in provisions of the Indenture protecting the right of each holder to receive payment of principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment, or permitting holders of a majority in principal amount of Notes to waive Defaults or Events of Default;

(vii) amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or modify any of the provisions or definitions with respect thereto;

(viii) modify or change any provision of the Indenture or the related definitions affecting the ranking of the Notes in a manner which adversely affects the holders;

(ix) impair the right to institute suit for the enforcement of any payment on or with respect to the Notes;

(x) except as otherwise permitted under the “—Merger, Consolidation and Sale of Assets” covenant, consent to the assignment or transfer by the Company of any of its rights or obligations under the Indenture; or

(xi) make any change in the preceding amendment and waiver provisions.

Governing Law

The Indenture provides that the Indenture and the Notes will be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby.

The Trustee

The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the

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Trustee will exercise such rights and powers vested in it by the Indenture, and use the same degree of care and skill in its exercise as a prudent man would exercise or use under the circumstances in the conduct of his or her own affairs.

The Indenture and the provisions of the TIA contain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payments of claims in some cases or to realize on property received in respect of any such claim as security or otherwise. Subject to the TIA, the Trustee will be permitted to engage in other transactions; provided that if the Trustee acquires any conflicting interest as described in the TIA, it must eliminate such conflict within 90 days or resign.

Book-Entry, Delivery and Form

Except as set forth below, the new notes will be issued in registered, global form in minimum denominations of $1,000 and integral multiples of $1,000 in excess of $1,000. The exchange notes will be issued at the closing of this exchange offer only upon tender of original notes in accordance with the procedures set forth in this prospectus and the letter of transmittal.

The exchange notes initially will be represented by one or more notes in registered, global form without interest coupons. We will refer to such notes as the global notes. The global notes will be deposited upon issuance with the trustee as custodian for The Depository Trust Company, or DTC, in New York, New York, and registered in the name of DTC or its nominee, in each case, for credit to an account of a direct or indirect participant in DTC as described below.

Except as set forth below, the global notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may not be exchanged for definitive notes in registered certificated form, or the certificate notes, except in the limited circumstances described below. See “ —Exchange of Global Notes for Certificated Notes.” Except in the limited circumstances described below, owners of beneficial interests in the global notes will not be entitled to receive physical delivery of notes in certificated form.

So long as the holder of the global note is the registered owner of the notes, such global note holder will be considered the sole holder under the indenture of any notes evidenced by the global notes. Beneficial owners of notes evidenced by the global notes will not be considered the owners or holders of the notes under the indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the trustee thereunder. Neither we nor the trustee will have any responsibility or liability for any aspect of the records of DTC or for maintaining, supervising or reviewing any records of DTC relating to the notes.

Depository Procedures

The following description of the operations and procedures of DTC, Euroclear and Clearstream are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. The Company takes no responsibility for these operations and procedures and urges investors to contact the system or their participants directly to discuss these matters.

DTC has advised the Company that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the “Participants”) and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC’s system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the “Indirect Participants”). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants.

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DTC has also advised the Company that, pursuant to procedures established by it:

(1) upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Notes; and

(2) ownership of these interests in the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interest in the Global Notes).

Investors in the Rule 144A Global Notes who are Participants in DTC’s system may hold their interests therein directly through DTC. Investors in the Rule 144A Global Notes who are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Clearstream) which are Participants in such system. Investors in the Regulation S Global Notes must initially hold their interests therein through Euroclear or Clearstream, if they are participants in such systems, or indirectly through organizations that are participants in such systems. After the expiration of the Restricted Period (but not earlier), investors may also hold interests in the Regulation S Global Notes through Participants in the DTC system other than Euroclear and Clearstream. Euroclear and Clearstream will hold interests in the Regulation S Global Notes on behalf of their participants through customers’ securities accounts in their respective names on the books of their respective depositories, which are Morgan Guaranty Trust Company of New York, Brussels office, as operator of Euroclear, and Citibank, N.A., as operator of Clearstream. All interests in a Global Note, including those held through Euroclear or Clearstream, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such systems. The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such Persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.

Except as described below, owners of interest in the Global Notes will not have Notes registered in their names, will not receive physical delivery of Notes in certificated form and will not be considered the registered owners or “holders” thereof under the Indenture for any purpose.

Payments in respect of the principal of, and interest and premium and additional interest, if any, on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee will treat the Persons in whose names the Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving payments and for all other purposes. Consequently, neither the Company, the Trustee nor any agent of the Company or the Trustee has or will have any responsibility or liability for:

(1) any aspect of DTC’s records or any Participant’s or Indirect Participant’s records relating to or payments made on account of beneficial ownership interest in the Global Notes or for maintaining, supervising or reviewing any of DTC’s records or any Participant’s or Indirect Participant’s records relating to the beneficial ownership interests in the Global Notes; or

(2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants.

DTC has advised the Company that its current practice, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants

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and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee or the Company. Neither the Company nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the Notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.

Transfers between Participants in DTC will be effected in accordance with DTC’s procedures, and will be settled in same-day funds, and transfers between participants in Euroclear and Clearstream will be effected in accordance with their respective rules and operating procedures.

Subject to compliance with the transfer restrictions applicable to the Notes described herein, cross-market transfers between the Participants in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTC’s rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositories for Euroclear or Clearstream.

DTC has advised the Company that it will take any action permitted to be taken by a holder of Notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the Notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC reserves the right to exchange the Global Notes for legended Notes in certificated form, and to distribute such Notes to its Participants.

Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Rule 144A Global Notes and the Regulation S Global Notes among Participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. Neither the Company nor the Trustee nor any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations.

Exchange of Global Notes for Certificated Notes

A Global Note is exchangeable for definitive Notes in registered certificated form (“Certificated Notes”) if:

(1) DTC (a) notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes and the Company fails to appoint a successor depositary or (b) has ceased to be a clearing agency registered under the Exchange Act;

(2) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Certificated Notes; or

(3) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes.

In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the Trustee by or on behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the

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names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures) and will bear the applicable restrictive legend unless such legend is not required by applicable law.

Exchange of Certificated Notes for Global Notes

Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the transferor first delivers to the Trustee a written certificate (in the form provided in the Indenture) to the effect that such transfer will comply with the appropriate transfer restrictions applicable to such Notes.

Same Day Settlement and Payment

The Company will make payments in respect of the Notes represented by the Global Notes (including principal, premium, if any, interest and additional interest, if any) by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. The Company will make all payments of principal, interest and premium and additional interest, if any, with respect to Certificated Notes by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder’s registered address. The Notes represented by the Global Notes are expected to be eligible to trade in the PORTAL market and to trade in DTC’s Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. The Company expects that secondary trading in any Certificated Notes will also be settled in immediately available funds.

Because of time zone differences, the securities account of a Euroclear or Clearstream Participant purchasing an interest in a Global Note from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream Participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. DTC has advised the Company that cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream Participant to a Participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTC’s settlement date.

Certain Definitions

Set forth below is a summary of some of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms, as well as any other terms used herein for which no definition is provided.

“Acquired Indebtedness” means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Subsidiary of the Company or at the time it merges or consolidates with the Company or any of its Subsidiaries or is assumed in connection with the acquisition of assets from such Person and whether or not such Indebtedness is incurred in connection with, or in anticipation or contemplation of, such acquisition, merger or consolidation.

“Adjusted Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“Affiliate” means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of

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the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative of the foregoing.

“Asset Acquisition” means (a) an Investment by the Company or any Subsidiary of the Company in any other Person pursuant to which such Person shall become a Subsidiary of the Company, or shall be merged with or into the Company or any Subsidiary of the Company, or (b) the acquisition by the Company or any Subsidiary of the Company of the assets of any Person (other than a Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business.

“Asset Sale” means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Subsidiary of the Company (including a Person that is or will become a Subsidiary of the Company immediately after such sale, issuance, conveyance, transfer, lease, assignment or other transfer for value) of (a) any Capital Stock of any Subsidiary of the Company; or (b) any other property or assets of the Company or any Subsidiary of the Company other than in the ordinary course of business.

Notwithstanding the preceding, Asset Sales shall not include

(i) a transaction or series of related transactions for which the Company or its Subsidiaries receive aggregate consideration of less than $1.0 million; and

(ii) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under “—Certain Covenants—Merger, Consolidation and Sale of Assets.”

“Board of Directors” means, as to any Person, the board of directors of such Person or any duly authorized committee thereof.

“Board Resolution” means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Capitalized Lease Obligation” means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.

“Capital Stock” means:

(i) in the case of a corporation, corporate stock;

(ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Cash Equivalents” means:

(i) United States dollars;

(ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition;

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(iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus of not less than $250.0 million and a Thomson Bank Watch Rating of “B” or better;

(iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above;

(v) commercial paper having the highest rating obtainable from Moody’s Investors Service, Inc. or Standard & Poor’s Rating Services and in each case maturing within six months after the date of acquisition; and

(vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i) through (v) of this definition.

“Change of Control” means the occurrence of one or more of the following events:

(i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons (other than to a Permitted Holder) for purposes of Section 13(d) of the Exchange Act (a “Group”), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the Indenture);

(ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of the Indenture);

(iii) any Person or Group (other than the Permitted Holders) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company;

(iv) the replacement of a majority of the Board of Directors of the Company over a two-year period from the directors who constituted the Board of Directors of the Company at the beginning of such period, and such replacement shall not have been approved by a vote of at least a majority of the Board of Directors of the Company then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved; or

(v) the Company consolidates with, or merges with or into, another Person, or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the shares representing the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company is converted into or exchanged for cash, securities or other property, other than (a) any such transaction where (1) the shares representing the issued and outstanding ordinary voting Capital Stock of the Company are converted into or exchanged for (i) ordinary voting Capital Stock (other than Disqualified Capital Stock) of the surviving or transferee corporation and/or (ii) cash, securities and other property in an amount which could be paid by the Company as a Restricted Payment under the Indenture and (2) the “beneficial owners” of the shares representing the issued and outstanding ordinary voting Capital Stock of the Company immediately prior to such transaction own, directly or indirectly, shares of Capital Stock representing not less than a majority of voting power of all issued and outstanding shares of Capital Stock of the surviving or transferee corporation immediately after such transaction or (b) any such transaction as a result of which the Permitted Holders own shares of Capital Stock representing more than 50% of the voting power of all issued and outstanding shares of Capital Stock of the surviving or transferee corporation immediately after such transaction.

“Change of Control Offer” has the meaning set forth under “—Change of Control.”

“Change of Control Payment Date” has the meaning set forth under “—Change of Control.”

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“Commission” means the Securities and Exchange Commission, or any successor agency thereto with respect to the regulation or registration of securities.

“Common Stock” of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock.

“Comparable Treasury Issue” means the U.S. Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the Notes being redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity.

“Comparable Treasury Price” means, with respect to any redemption date:

(1) the average of the bid and ask prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities”; or

(2) if such release (or any successor release) is not published or does not contain such prices on such business day, (a) the average of the Reference Treasury Dealer Quotations obtained by the Quotation Agent on the third business day preceding such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (b) if the Quotation Agent obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such quotations.

“Consolidated EBITDA” means, with respect to any Person, for any period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (a) all income taxes of such Person and its Subsidiaries paid or accrued in accordance with GAAP for such period, (b) Consolidated Interest Expense, (c) annual fees up to $1.0 million and other fees and expenses paid pursuant to the Management Services Agreement and (d) Consolidated Non-cash Charges less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP.

“Consolidated Fixed Charge Coverage Ratio” means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the “Four Quarter Period”) ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the “Transaction Date”) to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, “Consolidated EBITDA” and “Consolidated Fixed Charges” shall be calculated after giving effect on a pro forma basis for the period of such calculation to:

(i) the incurrence or repayment of any Indebtedness of such Person or any of its Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period; and

(ii) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Subsidiaries (including any Person who becomes a Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise

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being liable for Acquired Indebtedness and including, without limitation, by giving pro forma effect to any Consolidated EBITDA (provided that such pro forma Consolidated EBITDA shall be calculated in a manner consistent with the exclusions in the definition of “Consolidated Net Income”) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating “Consolidated Fixed Charges” for purposes of determining the denominator (but not the numerator) of this “Consolidated Fixed Charge Coverage Ratio,” (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements.

“Consolidated Fixed Charges” means, with respect to any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense (excluding any amortization or write off of deferred financing costs), plus (ii) the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person paid in cash, Indebtedness or Disqualified Capital Stock during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal.

“Consolidated Interest Expense” means, with respect to any Person for any period, the sum of, without duplication: (i) the aggregate of the interest expense of such Person and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP (excluding any accruals of dividends on Preferred Stock that are not paid in cash in such period, Indebtedness or Disqualified Capital Stock), including, without limitation, (a) any amortization of debt discount, (b) the net costs under Interest Swap Obligations, (c) all capitalized interest and (d) the interest portion of any deferred payment obligation; and (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP.

“Consolidated Net Income” means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom (a) after-tax gains from Asset Sales or abandonments or reserves relating thereto, (b) after-tax items classified as extraordinary or nonrecurring gains or losses, (c) the net income (but not loss) of any Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Subsidiary of that income is restricted by contract, operation of law or otherwise, (d) the net income of any Person, other than a Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Wholly Owned Subsidiary of the referent Person by such Person, (e) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date, (f) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued), (g) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person’s assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets and (h) accruals of dividends on

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Preferred Stock that are not paid in cash in such period, Indebtedness or Disqualified Capital Stock, to the extent that accrued dividends are classified as interest expense in accordance with GAAP.

“Consolidated Net Tangible Assets” means the aggregate amounts of assets of the Company (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (other than obligations under the Indenture or current maturities of long-term Indebtedness), and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the books and records of the Company and the Subsidiaries on a consolidated basis and in accordance with GAAP.

“Consolidated Net Worth” of any Person means the consolidated stockholders’ equity of such Person, determined on a consolidated basis in accordance with GAAP, less (without duplication) amounts attributable to Disqualified Capital Stock of such Person.

“Consolidated Non-cash Charges” means, with respect to any Person, for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Subsidiaries reducing Consolidated Net Income of such Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (including, without limitation, any LIFO adjustments, but excluding any such charge which requires an accrual of or a reserve for cash charges for any future period).

“Covenant Defeasance” has the meaning set forth under “—Legal Defeasance and Covenant Defeasance.”

“Credit Agreement” means credit agreement(s) entered into by the Company and one or more banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing or letters of credit, and all amendments thereto, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring all or any portion of the Indebtedness under such agreement(s) or any successor or replacement agreement(s) and whether by the same or any other agent, lender or group of lenders.

“Default” means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default.

“Disqualified Capital Stock” means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof, in any case, on or prior to the final maturity date of the Notes.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.

“Fair Market Value” means, with respect to any asset or property, the price which could be negotiated in an arm’s-length free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith and shall be evidenced by a Board Resolution of the Board of Directors of the Company delivered to the Trustee.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect as of the Issue Date.

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“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness.

“Indebtedness” means with respect to any Person, without duplication:

(i) all Obligations of such Person for borrowed money;

(ii) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(iii) all Capitalized Lease Obligations of such Person;

(iv) all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 90 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted);

(v) all Obligations for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction;

(vi) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (i) through (v) above and clause (viii) below;

(vii) all Obligations of any other Person of the type referred to in clauses (i) through (vi) which are secured by any lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured;

(viii) all Obligations under currency agreements and interest swap agreements of such Person; and

(ix) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any.

For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock.

“Independent Financial Advisor” means an accounting firm, appraisal firm, investment banking firm or consultant to Persons engaged in a Related Business, in each case, of nationally recognized standing that is, in the judgment of the Company’s Board of Directors, qualified to perform the task for which it has been engaged.

“Interest Swap Obligations” means the obligations of any Person pursuant to any arrangement with any other Person whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements.

“Investment” means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. “Investment” shall exclude extensions of trade credit by the Company or any

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Subsidiary on commercially reasonable terms in accordance with normal trade practices of the Company or such Subsidiary, as the case may be. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, 100% of the outstanding Common Stock of such Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such Subsidiary not sold or disposed of.

“Issue Date” means the date of original issuance of the Notes.

“Legal Defeasance” has the meaning set forth under “—Legal Defeasance and Covenant Defeasance.”

“Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law).

“Management Services Agreement” means that certain Management Services Agreement dated as of the Issue Date by and between Leonard Green & Partners, L.P., on the one hand, and the Company, on the other hand, providing for fees, expenses and reimbursements to be paid to Leonard Green & Partners, L.P., as such Management Services Agreement may be amended from time to time so long as such amendments are in compliance with the provisions of the covenant described under the caption “—Certain Covenants—Limitations on Transactions With Affiliates.” Payments may not be made pursuant to the Management Services Agreement if an Event of Default under the Indenture has occurred and is continuing provided that any fees that have not been paid during the continuation of such an event of default that is subsequently cured may be paid promptly following such cure. In the event of bankruptcy, liquidation, insolvency or winding-up of the Company, the payment of all accrued and unpaid fees pursuant to the Management Services Agreement is subordinated to the prior payment in full of all amounts due and owing under the Indenture governing the Notes.

“Net Cash Proceeds” means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Subsidiaries from such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), (b) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements, (c) repayment of Indebtedness that is required to be repaid in connection with such Asset Sale, (d) appropriate amounts to be provided by the Company or any Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, and (e) that portion of the cash or Cash Equivalents attributable to the Capital Stock of a Subsidiary which is not a Wholly Owned Subsidiary of the Company held, directly or indirectly, by any Person which is not the Company or a Wholly Owned Subsidiary of the Company.

“Net Proceeds Offer” has the meaning set forth under “—Certain Covenants—Limitation on Asset Sales.”

“Net Proceeds Offer Amount” has the meaning set forth under “—Certain Covenants—Limitation on Asset Sales.”

“Net Proceeds Offer Payment Date” has the meaning set forth under “—Certain Covenants—Limitation on Asset Sales.”

“Net Proceeds Offer Trigger Date” has the meaning set forth under “—Certain Covenants—Limitation on Asset Sales.”

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“Obligations” means all obligations for principal, premium, additional interest, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Permitted Holders” means Leonard Green & Partners, L.P., GCP California Fund, L.P. and senior management of the Company as in effect on the Issue Date, including in each case their respective Affiliates.

“Permitted Indebtedness” means, without duplication, each of the following:

(i) Indebtedness represented by the Notes to be issued on the date of the Indenture and the Exchange Notes to be issued pursuant to the Registration Rights Agreement;

(ii) Indebtedness incurred by the Company pursuant to a Credit Agreement(s) in an aggregate principal amount at any time outstanding not to exceed the greater of (a) $105.0 million less the amount of any prepayments made with the proceeds of an Asset Sale or assumed in connection with an Asset Sale and (b) the sum of 85% of the total accounts receivable and 60% of the total inventory of the Company and its Subsidiaries;

(iii) other Indebtedness of the Company and its Subsidiaries outstanding on the Issue Date;

(iv) Interest Swap Obligations of the Company covering Indebtedness of the Company or any of its Subsidiaries and Interest Swap Obligations of any Subsidiary of the Company covering Indebtedness of such Subsidiary; provided, however, that such Interest Swap Obligations are entered into to protect the Company and its Subsidiaries from fluctuations in interest rates on Indebtedness incurred in accordance with the Indenture to the extent the notional principal amount of such Interest Swap Obligation does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligation relates;

(v) Indebtedness of a Subsidiary of the Company to the Company or to a Wholly Owned Subsidiary of the Company for so long as such Indebtedness is held by the Company or a Wholly Owned Subsidiary of the Company, in each case subject to no Lien held by a Person other than the Company or a Wholly Owned Subsidiary of the Company; provided that if as of any date any Person other than the Company or a Wholly Owned Subsidiary of the Company owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the issuer of such Indebtedness;

(vi) Indebtedness of the Company to a Wholly Owned Subsidiary of the Company for so long as such Indebtedness is held by a Wholly Owned Subsidiary of the Company, in each case subject to no Lien held by a Person other than a Wholly Owned Subsidiary of the Company; provided that if as of any date any Person other than a Wholly Owned Subsidiary of the Company owns or holds any such Indebtedness or any Person other than a Wholly Owned Subsidiary of the Company holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the Company;

(vii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within two business days of incurrence;

(viii) Indebtedness of the Company or any of its Subsidiaries represented by letters of credit for the account of the Company or such Subsidiary, as the case may be, in order to provide security for workers’ compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business;

(ix) Refinancing Indebtedness;

(x) Capitalized Lease Obligations and Purchase Money Indebtedness of the Company or any of its Subsidiaries in an aggregate principal amount not to exceed $5.0 million at any one time outstanding; and

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(xi) additional Indebtedness of the Company in an aggregate principal amount not to exceed $10.0 million at any one time outstanding.

“Permitted Investments” means:

(i) Investments by the Company or any Subsidiary of the Company in any Person that is or will become, or Investments by the Company or any Subsidiary of the Company which result in any Person becoming, in any case, immediately after such Investment, a Subsidiary of the Company or that will merge or consolidate into the Company or a Subsidiary of the Company;

(ii) Investments by any Subsidiary of the Company in the Company;

(iii) Investments in cash and Cash Equivalents;

(iv) loans and advances to employees and officers of the Company and its Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $500,000 at any one time outstanding;

(v) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

(vi) Investments made by the Company or its Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with the covenant described under “—Certain Covenants—Limitation on Asset Sales”; and

(vii) other Investments in the aggregate amount outstanding at any one time of up to $10 million.

“Permitted Liens” means the following types of Liens:

(i) Liens securing Indebtedness incurred by the Company pursuant to any Credit Agreement;

(ii) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Subsidiaries shall have set aside on their books such reserves as may be required pursuant to GAAP;

(iii) statutory and contractual Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof;

(iv) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);

(v) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired;

(vi) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries;

(vii) any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation;

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(viii) Liens securing Purchase Money Indebtedness of the Company or any Subsidiary of the Company acquired in the ordinary course of business; provided, however, that (a) the Purchase Money Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Subsidiary of the Company other than the property and assets so acquired and (b) the Lien securing such Indebtedness shall be created within 90 days of such acquisition;

(ix) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(x) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof;

(xi) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or any of its Subsidiaries, including rights of offset and set-off;

(xii) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under the Indenture;

(xiii) Liens securing Acquired Indebtedness incurred in accordance with the covenant described under “—Certain Covenants—Limitation on Incurrence of Additional Indebtedness”; provided that (a) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Subsidiary of the Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Subsidiary of the Company and (b) such Liens do not extend to or cover any property or assets of the Company or of any of its Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Subsidiary of the Company and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Company or a Subsidiary of the Company;

(xiv) Liens created under the Indenture;

(xv) Liens securing Indebtedness incurred pursuant to clause (x) of the definition of Permitted Indebtedness; and

(xvi) Liens incurred with respect to obligations that do not exceed 10% of Consolidated Net Tangible Assets at the time of incurrence thereof.

“Person” means an individual, partnership, corporation, limited liability company, unincorporated organization, association, joint-stock company, trust or joint venture, or a governmental agency or political subdivision thereof.

“Preferred Stock” of any Person means any Capital Stock of such Person that has preferential rights over any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

“Purchase Money Indebtedness” means Indebtedness of the Company and its Subsidiaries incurred in connection with the purchase of businesses (including Capital Stock of businesses primarily engaged in a Related Business), properties or assets for the business of the Company and its Subsidiaries and any Refinancing thereof.

“Qualified Capital Stock” means the Series A Preferred Stock and any other Capital Stock that is not Disqualified Capital Stock.

“Quotation Agent” means the Reference Treasury Dealer appointed by the trustee to act as the Quotation Agent after consultation with the Company.

“Recapitalization” means the merger of LPM Acquisition LLC with and into the Company on the date of the Indenture and related transactions.

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“Reference Date” has the meaning set forth under “—Certain Covenants—Limitation on Restricted Payments.”

“Reference Treasury Dealer” means one of Banc of America Securities LLC, Lehman Brothers Inc. or UBS Securities LLC or their successors; provided that if those firms cease to be primary U.S. Treasury securities dealers in New York City (a “Primary Treasury Dealer”), the Company shall substitute therefor another Primary Treasury Dealer.

“Reference Treasury Dealer Quotations” means, with respect to any redemption date, the average of the bid and ask prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing by any Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption date.

“Refinance” means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. “Refinanced” and “Refinancing” shall have correlative meanings.

“Refinancing Indebtedness” means any Refinancing by the Company or any Subsidiary of the Company of Indebtedness incurred in accordance with the covenant described under “—Certain Covenants—Limitation on Incurrence of Additional Indebtedness” (other than pursuant to clause (ii), (iv), (v), (vi), (vii), (x) or (xi) of the definition of Permitted Indebtedness), to the extent that such Refinancing does not (1) result in an increase in the aggregate principal amount of the Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and plus the amount of reasonable expenses incurred by the Company in connection with such Refinancing) or (2) create Indebtedness with (a) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (b) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (x) if such Indebtedness being Refinanced is Indebtedness solely of the Company, then such Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced is subordinate or junior to the Notes, then such Refinancing Indebtedness shall be subordinate to the Notes at least to the same extent and in the same manner as the Indebtedness being Refinanced.

“Related Business” means a business whose revenues are derived from the general business conducted by the Company on the Issue Date or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto.

“Restricted Payments” has the meaning set forth under “—Certain Covenants—Limitation on Restricted Payments.”

“Sale and Leaseback Transaction” means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Subsidiary of any property, whether owned by the Company or any Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Subsidiary to such Person or to any other Person by whom funds have been or are to be advanced on the security of such Property.

“Series A Preferred Stock” means the Series A Preferred Stock of the Company issued pursuant to the Certificate of Designation, Preferences and Rights of Series A Redeemable Preferred Stock, as in effect on the Issue Date.

“Significant Subsidiary” shall have the meaning set forth in Rule 1.02(w) of Regulation S-X under the Securities Act.

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“Subsidiary,” with respect to any Person, means (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person.

“Surviving Entity” has the meaning set forth under “—Certain Covenants—Merger, Consolidation and Sale of Assets.”

“Wholly Owned Subsidiary” of any Person means any Subsidiary of such Person of which all the outstanding voting securities (other than in the case of a foreign Subsidiary, directors’ qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Subsidiary of such Person.

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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS

The following summary is a description of the material United States federal income tax consequences relating to the exchange offer and the acquisition, ownership and disposition of the notes. The discussion is for general information only and does not consider all aspects of federal income taxation that may be relevant to the purchase, ownership and disposition of notes by a holder in light of such holder’s personal circumstances. In particular, this discussion does not address the federal income tax consequences of the exchange offer and ownership of the notes by investors who do not hold notes as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”), or the federal income tax consequences to holders subject to special treatment under the federal income tax laws, such as:

• dealers in securities or foreign currency;

• tax-exempt investors;

• partnerships or other pass-through entities;

• United States expatriates;

• regulated investment companies, banks, thrifts, insurance companies or other financial institutions;

• persons that hold the notes as a position in a straddle or as part of a synthetic security or hedge, conversion transaction or other integrated investment;

• controlled foreign corporations and foreign personal holding companies;

• corporations that accumulate earnings to avoid U.S. federal income tax;

• U.S. holders that have a functional currency other than the U.S. dollar; or

• except to the extent discussed under “Non-U.S. Holders,” beneficial owners of the notes that are not U.S. holders.

Holders subject to the special circumstances described above may be subject to tax rules that differ significantly from those summarized below. As used in this discussion, you are a “U.S. holder” of a note if you are a beneficial owner of notes that is:

• an individual who is a citizen or resident of the United States;

• a corporation (or other entity treated as a corporation for United States federal income tax purposes) created in the United States or under the laws of the United States or any political subdivision thereof;

• an estate, the income of which is subject to United States federal income tax regardless of its source; or

• a trust (i) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of the trust, or (ii) that has a valid election in place to be treated as a United States person.

The term “non-U.S. holder” means a beneficial owner of notes that is an individual, corporation, estate, or trust and is not a U.S. person.

The U.S. federal income tax treatment of a partner in a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) that holds the notes generally will depend on such partner’s particular circumstances and on the activities of the partnership. Partners in such partnerships should consult their own tax advisors.

This summary is based on the Code, existing and proposed Treasury Regulations promulgated thereunder, administrative pronouncements, and judicial decisions, all as in effect of the date hereof, and all of which are subject to change, possibly on a retroactive basis, and any such change could affect the continuing validity of this discussion. This discussion does not address the effect of any applicable state, local or foreign tax law.

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You should consult your own tax advisor regarding the application of United States federal income tax laws, as well as the laws of any state, local or foreign taxing jurisdiction, to your particular situation.

Federal Income Tax Consequences of the Exchange Offer

The exchange of the original notes for exchange notes pursuant to this exchange offer will not be treated as an “exchange” for United States federal income tax purposes because the exchange notes will not be considered to differ materially in kind or extent from the outstanding notes. As a result, a holder will not be required to recognize any gain or loss as a result of the exchange offer. In addition, each holder will have the same adjusted issued price, adjusted basis, and holding period in the exchange notes as it had in the outstanding notes immediately prior to the exchange.

Federal Income Tax Consequences of the Ownership and Disposition of the Exchange Notes to U.S. Holders

Stated Interest on the Notes. Interest payable on the notes (“stated interest”) generally will be includible in your gross income when accrued or received in accordance with your regular method of accounting for United States federal income tax purposes.

Amortizable Bond Premium. If a U.S. holder purchases a note for an amount in excess of its principal amount, the note will be considered to have “amortizable bond premium” equal in amount to such excess. A U.S. holder may elect to amortize such premium using a constant yield method over the remaining term of the note and may offset interest income otherwise required to be included in respect of the note during the taxable year by the amortized amount of such excess for the taxable year. Any election to amortize bond premium applies to all taxable debt instruments acquired by the U.S. holder on or after the first day of the first taxable year to which such election applies and may be revoked only with the consent of the Internal Revenue Service. Persons considering making this election should consult their own tax advisors.

Sale or Redemption of the Notes. Upon the sale, redemption or retirement of the notes, you will recognize gain or loss equal to the difference between the amount of cash or other property received (other than any amount attributable to accrued but unpaid interest, which will be taxable as such to the extent not already included in income) and your adjusted tax basis in the notes (your adjusted tax basis in your notes generally will be your purchase price for the notes). Any gain or loss you realize upon a sale or disposition of a note generally will be capital gain or loss. This gain or loss will be long-term capital gain or loss if you have held the notes for more than one year prior to such sale or other disposition.

Market Discount. If a U.S. holder purchases a note for an amount that is less than its principal amount by more than a de minimis amount, the excess of the principal amount over the U.S. holder’s purchase price will be treated as “market discount.”

Under the market discount rules, a U.S. holder will be required to treat any gain realized on the sale, exchange, retirement or other taxable disposition of a note as ordinary income to the extent of the lesser of (i) the amount of such realized gain, or (ii) the market discount which has not previously been included in income and is treated as having accrued through the time of such disposition. Market discount will be considered to accrue on a straight-line basis during the period from the date of acquisition to the maturity date of the note unless the U.S. holder elects to accrue market discount on a constant yield basis. A U.S. holder may be required to defer the deduction of all or a portion of the interest paid or accrued on any indebtedness incurred or maintained to purchase or carry a note with market discount until the maturity of the note or certain earlier dispositions.

A U.S. holder may elect to include market discount in income currently as it accrues, in which case the rules described above regarding the treatment as ordinary income of gain upon the disposition of the note and regarding the deferral of interest deductions will not apply. Any election to include market discount in income

94

currently as it accrues applies to all market discount bonds acquired by the U.S. holder on or after the first day of the first taxable year to which such election applies and may be revoked only with the consent of the Internal Revenue Service. Persons considering making this election should consult their tax advisors.

Information Reporting and Backup Withholding. When required, we or our paying agent will report to you and the IRS amounts paid on or with respect to the notes during each calendar year and the amount of tax, if any, withheld from such payments. You may be subject under certain circumstances to backup withholding at a current rate of 28% (subject to change in respect of payments made after December 31, 2010) with respect to payments on your notes. Generally, backup withholding will apply only if:

• you fail to provide your taxpayer identification number (“TIN”) (which, for an individual, is the individual’s social security number) to the withholding agent;

• you provide an incorrect TIN;

• you are notified by the IRS that you have failed to properly report payments of interest and dividends and the IRS has notified us that you are subject to backup withholding; or

• you fail, under certain circumstances, to provide the withholding agent with a certified statement, signed under penalty of perjury, that the TIN you provided is your correct TIN and that you are not subject to backup withholding.

Backup withholding is not an additional tax. Any amount withheld from a payment to you under the backup withholding rules is allowable as a refund or credit against your United States federal income tax liability, provided that the required information timely is furnished to the IRS. You should consult your tax advisor regarding qualifications for exemption from backup withholding and the procedure for obtaining such an exemption.

Federal Income Tax Consequences of the Ownership and Disposition of the Exchange Notes to Non-U.S. Holders

Interest on the Notes. Subject to the discussion below concerning backup withholding, under the “portfolio interest exemption”, the payment by us or our paying agent of interest on a note owned by a non-US. holder will not be subject to United States federal withholding tax, provided that:

• you do not actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock within the meaning of Section 871(h)(3) of the Code and the Treasury Regulations thereunder;

• you are not a controlled foreign corporation that is related to us through stock ownership; and

• you satisfy certain certification requirements (summarized below).

In order to claim exemption from withholding tax on payments of interest on your notes, current Treasury Regulations generally require that:

• you (or your agent) must deliver to the withholding agent an IRS Form W-8BEN (or suitable successor form), signed by you or your agent on your behalf, claiming exemption from withholding;

• if you hold your notes through a securities clearing organization or certain other financial institutions, the organization or institution that holds your notes must provide a signed statement to the withholding agent that is accompanied by an IRS Form W-8BEN (or suitable successor form) provided by you to that same organization or institution.

Special rules may apply to the certifications that must be provided by entities such as partnerships, estates, trusts and intermediaries. You should consult your tax advisor regarding the application of the U.S. withholding tax rules to your particular circumstances.

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If the requirements of the portfolio interest exemption described above are not satisfied, a 30% withholding tax will apply to the gross amount of interest on the notes that is paid to a non-U.S. holder, unless either: (a) an applicable income tax treaty reduces or eliminates such tax, and the non-U.S. holder claims the benefit of that treaty by providing a properly completed and duly executed IRS Form W-8BEN (or suitable successor) establishing qualification for benefits under the treaty, or (b) the interest is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States and the non-U.S. holder provides an appropriate statement to that effect on a properly completed and duly executed IRS Form W-8ECI (or suitable successor form).

If a non-U.S. holder is engaged in a trade or business in the U.S. and interest on a note is effectively connected with the conduct of that trade or business, the non-U.S. holder will be required to pay U.S. federal income tax on that interest on a net income basis (and the 30% withholding tax described above will not apply provided the appropriate statement is provided to us) generally in the same manner as a U.S. person. If a non-U.S. holder is eligible for the benefits of an income tax treaty between the U.S. and its country of residence, any interest income that is effectively connected with a U.S. trade or business will be subject to U.S. federal income tax in the manner specified by the treaty and generally will only be subject to such tax if such income is attributable to a permanent establishment (or a fixed base in the case of an individual) maintained by the non-U.S. holder in the U.S. and the non-U.S. holder claims the benefit of the treaty by properly submitting an IRS Form W-8BEN. In addition, a non-U.S. holder that is treated as a foreign corporation for U.S. federal income tax purposes may be subject to a branch profits tax equal to 30% (or lower applicable treaty rate) of its earnings and profits for the taxable year, subject to adjustments, that are effectively connected with its conduct of a trade or business in the U.S.

Sale of Notes. Subject to the discussion of backup withholding below, if you sell or otherwise dispose of your notes in a transaction that is treated as a sale or exchange for United States federal income tax purposes, you generally will not be subject to United States federal income tax (or any withholding thereof) on any gain you recognize on this transaction, unless:

• the gain is effectively connected with the conduct of your trade or business in the United States (and, in some circumstances, the gain is attributable to a U.S. permanent establishment of the non-U.S. holder or a fixed base in the case of an individual under an applicable income tax treaty); or

• you are an individual who is present in the United States for 183 days or more in the year in which you disposed of your notes and certain other conditions are met.

If the first exception applies, the non-U.S. holder will generally be subject to U.S. federal income tax on the net gain derived from the sale, exchange or other disposition of the notes in the same manner as a U.S. person. If the second exception applies, the non-U.S. holder generally will be subject to U.S. federal income tax at a rate of 30% on the amount by which its U.S.-source capital gains exceed its U.S.-source capital losses. In addition, corporate non-U.S. holders may be subject to a 30% branch profits tax on any such effectively connected gain. If a non-U.S. holder is eligible for the benefits of an income tax treaty between the United States and its country of residence, the U.S. federal income tax treatment of any such gain may be modified in the manner specified by the treaty.

Information Reporting and Backup Withholding. When required, we or our paying agent will report to the IRS and to you the amount of any interest paid on the notes in each calendar year, and the amount of U.S. federal income tax withheld, if any, with respect to these payments.

Non-U.S. holders who have provided certification as to their non-U.S. status or who have otherwise established an exemption will generally not be subject to backup withholding tax if neither we nor our agent have actual knowledge or reason to know that such certification is unreliable or that the conditions of the exemption are in fact not satisfied. Payments of the proceeds from the sale of a note to or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, additional

96

information reporting, but generally not backup withholding, may apply to those payments if the broker is one of the following: (a) a United States person, (b) a controlled foreign corporation for U.S. federal income tax purposes, (c) a foreign person 50 percent or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment was effectively connected with a U.S. trade or business, or (d) a foreign partnership with specified connections to the United States.

Payment of the proceeds from a sale of a note to or through the United States office of a broker will be subject to information reporting and backup withholding unless the non-U.S. holder certifies as to its non-U.S. status or otherwise establishes an exemption from information reporting and backup withholding, provided that neither we nor our agent have actual knowledge or reason to know that such certification is unreliable or that the conditions of the exemption are in fact not satisfied.

Backup withholding is not an additional tax. Any amount withheld from a payment to you under the backup withholding rules is allowable as a refund or credit against your United States federal income tax liability, provided that the required information timely is furnished to the IRS. You should consult your tax advisor regarding qualifications for exemption from backup withholding and the procedure for obtaining such an exemption.

THE PRECEDING DISCUSSION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER AND THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO YOU OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF ANY CHANGES IN U.S. FEDERAL OR OTHER APPLICABLE TAX LAWS.

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CERTAIN ERISA CONSIDERATIONS

The following is a summary of certain considerations associated with the purchase of the notes (and exchange notes) by employee benefit plans that are subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the Code or provisions under any federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, “Similar Laws”), and entities whose underlying assets are considered to include “plan assets” of such plans, accounts and arrangements (each, a “Plan”).

General Fiduciary Matters

ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code (an “ERISA Plan”) and prohibit certain transactions involving the assets of an ERISA Plan and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of such an ERISA Plan or the management or disposition of the assets of such an ERISA Plan, or who renders investment advice for a fee or other compensation to such an ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan.

In considering an investment in the notes (or exchange notes) of a portion of the assets of any Plan, a fiduciary should determine whether the investment is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code or any Similar Law relating to a fiduciary’s duties to the Plan including, without limitation, the prudence, diversification, delegation of control and prohibited transaction provisions of ERISA and the Code.

Prohibited Transaction Issues

Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from engaging in specified transactions involving plan assets with persons or entities who are “parties in interest,” within the meaning of ERISA, or “disqualified persons,” within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or disqualified person who engages in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, a fiduciary of the ERISA Plan that engages in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and/or the Code. The acquisition and/or holding of notes (or exchange notes) by an ERISA Plan with respect to which the issuer, the initial purchasers, or a subsidiary guarantor is considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption. In this regard, the U.S. Department of Labor (the “DOL”) has issued prohibited transaction class exemptions, or “PTCEs,” that may apply to the acquisition and holding of the notes (or exchange notes). These class exemptions include, without limitation, PTCE 84-14 respecting transactions determined by independent qualified professional asset managers, PTCE 90-1 respecting insurance company pooled separate accounts, PTCE 91-38 respecting bank collective investment funds, PTCE 95-60 respecting life insurance company general accounts and PTCE 96-23 respecting transactions determined by in-house asset managers, although there can be no assurance that all of the conditions of any such exemption will be satisfied.

Because of the foregoing, the notes (and exchange notes) should not be purchased or held by any person investing “plan assets” of any Plan, unless such purchase and holding will not constitute a non-exempt prohibited transaction under ERISA and the Code or violation of any applicable Similar Laws.

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Representation

Accordingly, by acceptance of a note (and an exchange note), each purchaser and subsequent transferee of a note (or exchange notes) will be deemed to have represented and warranted that either (i) no portion of the assets used by such purchaser or transferee to acquire and hold the notes (and exchange notes) constitutes assets of any Plan or (ii) the purchase and holding of the notes (and exchange notes) by such purchaser or transferee will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violation under any applicable Similar Law.

The foregoing discussion is general in nature and is not intended to be all-inclusive. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in nonexempt prohibited transactions, it is particularly important that fiduciaries, or other persons considering purchasing the notes on behalf of, or with the assets of, any Plan, consult with their counsel regarding the potential applicability of ERISA, Section 4975 of the Code and any Similar Law to such investment and whether an exemption would be applicable to the purchase and holding of the notes (or registered notes exchanged for the notes pursuant to the exchange offer).

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PLAN OF DISTRIBUTION

Based on interpretations by the SEC set forth in no-action letters issued to third parties, we believe that exchange notes issued pursuant to the exchange offer in exchange for the original notes may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is (i) an “affiliate” of ours within the meaning of Rule 405 under the Securities Act, (ii) a broker-dealer who acquired original notes directly from us or (iii) broker-dealers who acquired original notes as a result of market-making or other trading activities) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such exchange notes are acquired in the ordinary course of such holders’ business, and such holders are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of such exchange notes; provided that broker-dealers, referred to herein as Participating Broker-Dealers, receiving exchange notes in the exchange offer will be subject to a prospectus delivery requirement with respect to resales of such exchange notes. To date, the staff of the SEC has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to transactions involving an exchange of securities such as the exchange pursuant to the exchange offer (other than a resale of an unsold allotment from the sale of the original notes to the initial purchasers) with the prospectus contained in the exchange offer registration statement. Pursuant to the registration rights agreement, we have agreed to permit Participating Broker-Dealers and other persons, if any, subject to similar prospectus delivery requirements to use this prospectus in connection with the resale of such exchange notes. We have agreed that, for a period not to exceed 180 days from the date on which the exchange offer registration statement is declared effective, we will make this prospectus, and any amendment or supplement to this prospectus, available to any broker-dealer that requests such documents in the letter of transmittal.

Each holder of the original notes who wishes to exchange its original notes for exchange notes in the exchange offer will be required to make certain representations to us as set forth in “The Exchange Offer—Terms and Conditions of the Letter of Transmittal.” In addition, each holder who is a broker-dealer and who receives exchange notes for its own account in exchange for original notes that were acquired by it as a result of market-making activities or other trading activities, will be required to acknowledge that it will deliver a prospectus in connection with any resale by it of such exchange notes.

We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

We have agreed to pay all expenses incidental to the exchange offer other than commissions and concessions of any brokers or dealers and will indemnify holders of the original notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act, as set forth in the registration rights agreement.

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LEGAL MATTERS

The validity of the exchange notes will be passed upon for us by Gibson, Dunn & Crutcher LLP, Los Angeles, California.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The consolidated financial statements of Leslie’s Poolmart, Inc. as of October 2, 2004 and September 27, 2003, and for each of the three fiscal years in the period ended October 2, 2004, included in this prospectus have been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report appearing herein.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports and other information with the SEC. Our SEC filings are available to the public over the internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the SEC’s public reference room by calling the SEC at 1-800-SEC-0330. The indenture governing the notes provides that, regardless of whether we are at any time required to file reports with the SEC, we will file with the SEC and furnish to the holders of the notes all such reports and other information as would be required to be filed with the SEC if we were subject to the reporting requirements of the Exchange Act. In addition, we will furnish to the holders of the notes and to prospective investors, upon request, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the notes are not freely transferable under the Securities Act.

You may request a copy of these filings, at no cost, by writing or telephoning us at the following address:

Leslie’s Poolmart, Inc.

3925 E. Broadway Road, Suite 100

Phoenix, AZ 85040

Phone: (602) 366-3999

This prospectus refers to certain important business and financial information about us that is not included in or delivered with this prospectus. This information is available to security holders without charge upon written or oral request to our address or telephone number listed above. To obtain timely delivery, security holders must request the information no later than five business days prior to the expiration date of the exchange offer.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Consolidated Balance Sheets—as of January 1, 2005 (unaudited) and October 2, 2004	F-2
Consolidated Statements of Operations for the Thirteen Weeks Ended January 1, 2005 (unaudited) and December 27, 2003 (unaudited)	F-3
Consolidated Statements of Cash flows for the Thirteen Weeks Ended January 1, 2005 (unaudited) and December 27, 2003 (unaudited)	F-4
Notes to Consolidated Financial Statements (unaudited)	F-5
Report of Independent Registered Public Accounting Firm	F-9
Consolidated Balance Sheets—as of October 2, 2004 and September 27, 2003	F-10
Consolidated Statements of Operations—Years Ended October 2, 2004, September 27, 2003 and September 28, 2002	F-11
Consolidated Statements of Stockholders’ Equity (Deficit)—Years Ended October 2, 2004, September 27, 2003 and September 28, 2002	F-12
Consolidated Statements of Cash Flows—Years Ended October 2, 2004, September 27, 2003 and September 28, 2002	F-13
Notes to Consolidated Financial Statements	F-14

F-1

LESLIE’S POOLMART, INC.

Consolidated Balance Sheets

	January 1, 2005			October 2, 2004
	(unaudited) (restated)			(restated)
	(Dollar amounts in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	3,747		$	20,839
Accounts and other receivables, net		4,190			10,505
Inventories		67,822			54,765
Prepaid expenses and other current assets		2,219			1,404
Deferred tax assets		6,981			6,981
Total current assets		84,959			94,494
Property, plant and equipment, at cost, net of accumulated depreciation		39,053			40,603
Goodwill, net		7,460			7,460
Deferred financing costs, net		1,744			1,811
Other assets		491			468
Total assets	$	133,707		$	144,836
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	27,248		$	22,247
Accrued expenses		25,832			30,643
Income taxes payable		1,670			8,250
Total current liabilities		54,750			61,140
Revolving commitment		2,000			—
Other long term liabilities		18,705			16,917
Redeemable preferred stock, $0.001 par value; authorized—2,000,000 shares; Issued and outstanding—46,417 Series A at January 2, 2005 and 46,316 Series A at October 2, 2004		46,417			46,316
Senior notes		59,495			59,495
Deferred tax liabilities		59			59
Total liabilities		181,426			183,927
Commitments and contingencies		—			—
Stockholder’s equity (deficit):
Common stock, $0.001 par value, authorized 12,000,000 shares, Issued and outstanding 7,371,586 shares at January 1, 2005 and 7,369,502 at October 2, 2004		7			7
Stock subscriptions receivable		(450	)		(450	)
Paid-in capital		(44,709	)		(44,714	)
Retained earnings (deficit)		(2,567	)		6,066
Total stockholders’ deficit		(47,719	)		(39,091	)
Total liabilities and stockholders’ equity (deficit)	$	133,707		$	144,836

See accompanying notes to consolidated financial statements.

F-2

LESLIE’S POOLMART, INC.

Consolidated Statements of Operations (unaudited)

	13 Weeks Ended
	January 1, 2005			December 27, 2003
	(Dollar amounts in thousands)
Sales	$	40,937		$	40,820
Cost of merchandise and services sold, including warehousing and transportation expenses, and related occupancy costs		21,565			22,390
Gross profit		19,372			18,430
Selling, general and administrative expenses		28,798			27,731
Operating loss		(9,426	)		(9,301	)
Other (income) expense:
Interest expense		3,649			1,782
Interest income		—			(5	)
Loss on disposition of fixed assets		23			284
Total other expense		3,672			2,061
Loss before taxes		(13,098	)		(11,362	)
Income tax benefit		(4,465	)		(4,483	)
Net loss		(8,633	)		(6,879	)
Series A Preferred Stock dividends and accretion		—			1,692
Loss applicable to common stockholders	$	(8,633	)	$	(8,571	)

See accompanying notes to consolidated financial statements.

F-3

LESLIE’S POOLMART, INC.

Consolidated Statements of Cash Flows

	13 Weeks Ended
	January 1, 2005			December 27, 2003
	(unaudited) (restated)			(unaudited) (restated)
	(Dollar amounts in thousands)
Operating activities:
Net loss	$	(8,633	)	$	(6,879	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,949			2,715
Preferred stock dividend and accretion		1,962			—
Amortization of loan fees and discounts		67			155
Allowance for doubtful accounts		86			75
Loss on disposition of assets		23			284
Changes in operating assets and liabilities
Accounts and other receivables		6,229			3,402
Inventories		(13,057	)		(11,678	)
Prepaid expenses and other current assets		(815	)		(489	)
Other assets		(23	)		8
Accounts payable and accrued expenses		117			(1,452	)
Income taxes payable		(6,580	)		(7,321	)
Net cash used in operating activities		(17,675	)		(21,180	)
Investing activities:
Purchase of property, plant and equipment		(1,422	)		(665	)
Proceeds from disposition of property, plant and equipment		—			13
Net cash used in investing activities		(1,422	)		(652	)
Financing activities:
Net line of credit borrowings		2,000			14,513
Issuance of common stock		5			—
Payment of deferred financing cost		—			(260	)
Net cash provided by financing activities		2,005			14,253
Net decrease in cash and cash equivalents		(17,092	)		(7,579	)
Cash and cash equivalents at beginning of period		20,839			10,022
Cash and cash equivalents at end of period	$	3,747		$	2,443

See accompanying notes to consolidated financial statements.

F-4

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements (unaudited)

1. Restatement of Previously Issued Financial Statements

Following a review of the Company’s lease accounting, the Company has reclassified tenant improvement allowances from a contra asset in property, plant and equipment, net to accrued expenses in the consolidated balance sheets. The amortization of the tenant improvement allowances has also been reclassified from a reduction of depreciation and amortization expense to a reduction of occupancy expense in the consolidated statements of operations. Finally, the receipt of tenant improvement allowances has been reclassified in the consolidated statement of cash flows by increasing purchase of property, plant and equipment, and decreasing net cash used in operating activities.

The following table reflects the effect of the restatement on the Consolidated Balance Sheet (in thousands):

	As of January 1, 2005				As of October 2, 2004
	As Previously Reported		As Restated		As Previously Reported		As Restated
Selected Balance Sheet Data:
Property, plant and equipment, at cost, net of accumulated depreciation	$	36,882	$	39,053	$	38,359	$	40,603
Total assets		131,536		133,707		142,592		144,836
Other long term liabilities		16,534		18,705		14,673		16,917
Total liabilities		179,255		181,426		181,683		183,927
Total liabilities and stockholder’s equity (deficit)		131,536		133,707		142,592		144,836

The following table reflects the effect of the restatement on the Consolidated statements of Cash Flows (in thousands):

	As of January 1, 2005						As of December 27, 2003
	As Previously Reported			As Restated			As Previously Reported			As Restated
Selected Cash Flow Data:
Depreciation and amortization	$	2,782		$	2,949		$	2,559		$	2,715
Accounts payable, expenses and other liabilities		190			117			(1,317	)		(1,452	)
Net cash provided by operating activities		(17,769	)		(17,675	)		(21,201	)		(21,180	)
Purchase of property, plant and equipment		(1,328	)		(1,422	)		(644	)		(665	)
Net cash used in investing activities		(1,328	)		(1,422	)		(631	)		(652	)

2. Presentation and Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with United States 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 United States 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 13-week period ended January 1, 2005 are not necessarily indicative of the results that may be expected for the year ended October 1, 2005.

The balance sheet at January 1, 2005 has been derived from the unaudited financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.

F-5

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

3. Organization and Operation

Leslie’s Poolmart, Inc. which is sometimes referred to as the “Company” or “Leslie’s” in this report, 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 468 retail stores in 36 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 in June and September.

4. Stock Based Compensation

The Company has adopted the provisions of SFAS No. 148 “Accounting for Stock-Based Compensation—Transition and Disclosure” which amends SFAS No. 123 “Accounting for Stock-Based Compensation”. The Company has adopted the disclosure only provision of SFAS No. 123 and accordingly recognizes no compensation expense for employee stock option grants. Had compensation expense for these plans been determined consistent with SFAS No. 123, the Company’s net loss would have been increased by $38,000 and $20,000 for the 13 weeks ended January 1, 2005 and December 27, 2003, respectively.

5. Inventories

Inventories consists of the following:

	January 1, 2005			October 2, 2004
	Amounts in thousands
Raw materials and supplies	$	1,430		$	355
Finished goods		67,820			55,657
Reserve		(1,428	)		(1,247	)
Total Inventories	$	67,822		$	54,765

6. Redeemable Preferred Stock

Effective October 3, 2004, the Company adopted the provisions of SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The effect of SFAS No. 150 was to reclassify the redeemable preferred stock balance from the mezzanine section of the balance sheet to a liability classification on the balance sheet. In addition, the dividend payable and the accretion of the preferred stock are classified as interest expense instead of charging it against the retained deficit. The amount of interest recorded during the 13-week period ended January 1, 2005 was $1.96 million related to preferred stock accretion.

7. Recent Accounting Pronouncements

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123; (Revised 2004) (Statement 123(R)) “Share-Based Payment”, which revised of FASB Statement No. 123, “Accounting for Stock-Based Compensation”. Statement 123(R) supersedes APB opinion 25, “Accounting for Stock Issued to Employees” and amends FASB Statement No. 95, “Statement of Cash Flows”. Statement 123(R) requires all share-based payments to employees to be recognized in the financial statements based on their fair market values. We will adopt this standard beginning October 2, 2005. As permitted by Statement 123, we

F-6

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

currently account for share-based payments to employees using APB Opinion 25’s intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Accordingly, the adoption of Statements 123(R)’s fair value method will have an impact on our results of operations, although it will have no impact on our overall financial position. The impact of adoption of Statement 123(R) cannot be predicted at this time because such impact will depend on levels of share-based payments granted in the future. However, had we adopted Statement 123(R) in prior periods, our net loss would have been increased by $38,000 and $20,000 for the thirteen weeks ended January 1, 2005 and December 27, 2003, respectively. Statement 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature.

8. Subsequent Events

Recapitalization

On January 25, 2005, Leslie’s completed a recapitalization. The recapitalization was effected through a merger transaction that was financed by a private placement of new notes and borrowings under an amended credit facility.

Pursuant to an Agreement and Plan of Merger between Leslie’s and LPM Acquisition LLC (“LPM”), LPM was merged with and into Leslie’s, with Leslie’s continuing as the surviving entity in the merger (the “Merger”). Immediately prior to the consummation of the merger, GCP California Fund, L.P. (“GCP”) and certain other Leslie’s stockholders contributed all or a portion of their existing Leslie’s common stock to LPM, and GCP and others contributed $51.1 million to LPM, in exchange for common and preferred units of LPM which were subsequently converted into common and preferred stock of Leslie’s in the Merger.

In the merger, each of Leslie’s existing shares of common stock (other than those that were contributed to LPM) were exchanged for $15.00 cash consideration, and each of Leslie’s 46.4 million shares of preferred stock were exchanged for $64.5 million, which was the amount payable under the optional redemption provisions of the preferred stock as if it had been redeemed on the closing date of the merger.

Offering

On January 25, 2005, Leslie’s sold, through a private placement exempt from the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), $170 million in aggregate principal amount of its 7.75% Senior Notes due 2013 (the “Original Notes”), with net proceeds, after fees and discounts, of $164.3 million. The Original Notes were sold in the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons in accordance with Regulation S under the Securities Act. The Original Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Leslie’s used the net proceeds of this offering to finance the Merger and to consummate the tender offer for its 10 ³/8% Senior Notes due 2008.

Amended Credit Facility

On January 25, 2005, Leslie’s and LPM Manufacturing, Inc., a wholly owned subsidiary of Leslie’s, entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with the lenders noted therein and Wells Fargo Retail Finance LLC as agent for the Lenders. The Loan Agreement provides for the extension by the lenders of revolving loans and other financial accommodations to Leslie’s and LPM Manufacturing, Inc. in an aggregate principal amount of $75.0 million. The Company’s obligations under the amended credit facility will be secured by a lien on substantially all of the Company assets. In addition to the

F-7

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

$75.0 million commitment, the total commitment will be increased by $30.0 million via a temporary over-advance facility through June 30, 2005. At the Company’s option, the over-advance facility will again be available in the amount of $20.0 million from September 30, 2005 through March 31, 2006. Finally, at the lender’s discretion, an over-advance facility of $10.0 million may be available to the Company from September 30, 2006 through March 31, 2007.

Tender Offer

As part of the recapitalization, Leslie’s commenced a cash tender offer (the “Tender Offer”) for any and all of its 10 ³/8% Senior Subordinated Notes due 2008 (the “Existing Notes”) and a consent solicitation to amend the related indenture (the “Consent Solicitation” and, together with the Tender Offer, the “Offer”). On January 11, 2005, the Company entered into a supplemental indenture (the “Supplemental Indenture”) with The Bank of New York Trust Company, N.A., as the trustee, supplementing the Indenture dated as of May 21, 2003 (the “Indenture”) as contemplated by the terms of its Offer. The Supplemental Indenture eliminated substantially all of the restrictive covenants and certain events of default under the Indenture relating to the Existing Notes.

The total consideration for the Existing Notes, which was paid in respect of Existing Notes accepted for payment that were validly tendered with consents and not withdrawn on or prior to 5:00 p.m., New York City time, on January 7, 2005, was $1,059.30 for each $1,000 principal amount of Existing Notes, which includes the consent payment of $30.00 per $1,000 principal amount of Existing Notes. Existing Notes accepted for payment that are validly tendered subsequent to 5:00 p.m., New York City time, on January 7, 2005 but on or prior to 5:00 p.m., New York City time, on February 2, 2005, received the tender offer consideration of $1,029.30 for each $1,000 principal amount of Existing Notes, which is equal to the total consideration minus the consent payment of $30.00 per $1,000 principal amount of Existing Notes. $55.5 million aggregate principal amount of the notes have been accepted by the Company in the Offer.

F-8

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board Of Directors And Stockholders Of Leslie’s Poolmart, Inc.:

We have audited the accompanying consolidated balance sheets of Leslie’s Poolmart, Inc. and subsidiaries as of October 2, 2004 and September 27, 2003 and the related consolidated statements of income, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended October 2, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Leslie’s Poolmart, Inc. and subsidiaries at October 2, 2004 and September 27, 2003 and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 2, 2004, in conformity with U.S. generally accepted accounting principles.

As described in Note 1, “Restatement of Previously Issued Financial Statements,” the Company has restated previously issued Financial Statements as of October 2, 2004 and September 27, 2003 and the results of their cash flows for each of the three years in the period ended October 2, 2004.

/s/ ERNST & YOUNG LLP

Phoenix, Arizona

November 19, 2004, except for matters discussed in Note 1

as to which our date is April 15, 2005

F-9

LESLIE’S POOLMART, INC.

Consolidated Balance Sheets

	Fiscal Years Ended
	October 2, 2004			September 27, 2003
	(dollar amounts in thousands)
	(restated)			(restated)
ASSETS
Current Assets:
Cash and cash equivalents	$	20,839		$	10,022
Accounts and other receivables, net		10,505			7,801
Inventories, net		54,765			53,030
Prepaid expenses and other current assets		1,404			1,301
Deferred tax assets		6,981			6,028
Total current assets		94,494			78,182
Property, plant and equipment, at cost, net of accumulated depreciation		40,603			42,043
Goodwill, net		7,460			7,460
Deferred financing costs, net		1,811			2,069
Other assets		468			466
Total assets	$	144,836		$	130,220
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts payable	$	22,247		$	26,217
Accrued expenses		30,643			28,739
Income taxes payable		8,250			7,816
Total current liabilities		61,140			62,772
Other long term liabilities		16,917			9,198
Series A redeemable preferred stock, $0.001 par value; authorized—2,000,000 shares; Issued and outstanding—46,316 shares at October 2, 2004 and 45,915 shares at September 27, 2003		46,316			45,915
Senior notes		59,495			59,495
Deferred tax liabilities		59			1,017
Total liabilities	$	183,927		$	178,397
Commitments and contingencies
Stockholders’ equity (deficit):
Common stock, $0.001 par value, authorized 12,000,000 shares, Issued and outstanding 7,369,502 shares at October 2, 2004 and September 27, 2003, respectively		7			7
Stock subscription receivable		(450	)		(450	)
Paid—in capital		(44,714	)		(44,714	)
Retained earnings (deficit)		6,066			(3,020	)
Total stockholders’ deficit		(39,091	)		(48,177	)
Total liabilities and stockholders’ equity (deficit)	$	144,836		$	130,220

See accompanying notes to consolidated financial statements.

F-10

LESLIE’S POOLMART, INC.

Consolidated Statements of Income

	Fiscal Years Ended
	October 2, 2004			September 27, 2003			September 28, 2002
	(dollar amounts in thousands)
Sales	$	356,041		$	327,165		$	313,311
Cost of merchandise and services sold, including warehousing and transportation expenses, and related occupancy costs		183,928			171,219			166,340
Gross profit		172,113			155,946			146,971
Selling, general and administrative expenses		137,881			128,290			125,079
Unusual expense		—			—			1,500
Amortization of goodwill		—			—			319
Operating income		34,232			27,656			20,073
Other (income) expense:
Interest expense		7,204			9,598			10,708
Write—off of debt issuance costs		—			420			—
Interest income		(32	)		(32	)		(18	)
Loss on disposition of fixed assets		440			497			1,332
Total other expense		7,612			10,483			12,022
Income before taxes		26,620			17,173			8,051
Income tax expense		10,374			6,830			3,358
Net income		16,246			10,343			4,693
Series A preferred stock dividends and accretion		7,160			6,191			5,325
Income (loss) applicable to common shareholders	$	9,086		$	4,152		$	(632	)

See accompanying notes to consolidated financial statements.

F-11

LESLIE’S POOLMART, INC.

Consolidated Statements of Stockholders’ Equity (Deficit)

	Common Stock				Stock Subscription Receivable			Additional Paid In Capital			Retained Earnings/ (Deficit)			Total Stockholders’ Equity/(Deficit)
	Number of Shares		Amount
	(dollar amounts in thousands, except share amounts)
Balance, at September 29, 2001	7,057,105		$	7	$	(450	)	$	(45,301	)	$	(3,020	)	$	(2,284	)
Series A preferred stock dividends and accretion	—			—		—			—			(5,325	)		(5,325	)
Issuance common stock	8,333			—		—			17			—			17
Net income	—			—		—			—			4,693			4,693
Balance, at September 28, 2002	7,065,438			7		(450	)		(45,284	)		(7,172	)		(52,899	)
Series A preferred stock dividends and accretion	—			—		—			—			(6,191	)		(6,191	)
Issuance common stock(1)	390,270			—		—			1,070			—			1,070
Repurchase common stock	(86,206	)		—		—			(500	)		—			(500	)
Net income	—			—		—			—			10,343			10,343
Balance, at September 27, 2003	7,369,502			7		(450	)		(44,714	)		(3,020	)		(48,177	)
Series A preferred stock dividends and accretion	—			—		—			—			(7,160	)		(7,160	)
Net Income	—			—		—			—			16,246			16,246
Balance, at October 2, 2004	7,369,502		$	7	$	(450	)	$	(44,714	)	$	6,066		$	(39,091	)

(1) Inclusive of related income tax benefit of $655,000.

See accompanying notes to consolidated financial statements

F-12

LESLIE’S POOLMART, INC.

Consolidated Statements of Cash Flows

	Fiscal Years Ended
	October 2, 2004			September 27, 2003			September 28, 2002
	(dollar amounts in thousands)
	(restated)			(restated)			(restated)
OPERATING ACTIVITIES:
Net income	$	16,246		$	10,343		$	4,693
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,281			10,186			9,631
Amortization of loan fees and discounts		518			1,174			664
Allowance for doubtful accounts		316			660			437
Deferred income taxes		(1,911	)		855			(2,263	)
Loss on disposition of assets		440			497			1,332
Changes in operating assets and liabilities:
Accounts and other receivables		(3,020	)		(1,063	)		(385	)
Inventories		(1,735	)		2,510			395
Prepaid expenses and other current assets		(103	)		(66	)		(59	)
Other assets		(2	)		92			(74	)
Accounts payable and accrued expenses		(1,106	)		7,966			4,040
Income taxes payable		434			(409	)		2,226
Net cash provided by operating activities		21,358			32,745			20,637
INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(10,899	)		(8,616	)		(8,472	)
Proceeds from disposition of property, plant and equipment		618			9			20
Net cash used in investing activities		(10,281	)		(8,607	)		(8,452	)
FINANCING ACTIVITIES:
Payments of long-term debt		—			(30,519	)		(974	)
Purchase of common stock		—			(500	)		—
Payments of deferred financing cost		(260	)		(2,163	)		—
Proceeds from issuance of common stock, net		—			1,070			17
Net cash used in financing activities		(260	)		(32,112	)		(957	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		10,817			(7,974	)		11,228
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		10,022			17,996			6,768
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	20,839		$	10,022		$	17,996

See accompanying notes to consolidated financial statements.

F-13

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements

1. Restatement of Previously Issued Financial Statements

Restatement and Reclassification

Following a review of the Company’s lease accounting, the Company has reclassified tenant improvement allowances from a contra asset in property, plant and equipment, net to accrued expenses in the consolidated balance sheets. The amortization of the tenant improvement allowances has also been reclassified from a reduction of depreciation and amortization expense to a reduction of occupancy expense in the consolidated statements of income. Finally, the receipt of tenant improvement allowances has been reclassified in the consolidated statement of cash flows by increasing purchase of property, plant and equipment, and increasing cash provided by operating activities.

The following table reflects the effect of the restatement on the Consolidated Balance Sheet (in thousands):

	As of October 2, 2004				As of September 27, 2003
	As Previously Reported		As Restated		As Previously Reported		As Restated
Selected Balance Sheet Data:
Property, plant and equipment, at cost, net of accumulated depreciation	$	38,359	$	40,603	$	40,759	$	42,043
Total assets		142,592		144,836		128,936		130,220
Other long term liabilities		14,673		16,917		7,914		9,198
Total liabilities		181,683		183,927		177,113		178,397
Total liabilities and stockholder’s equity (deficit)		142,592		144,836		128,936		130,220

The following table reflects the effect of the restatement on the Consolidated statements of Cash Flows (in thousands):

	Fiscal Years Ended
	October 2, 2004						September 27, 2003						September 28, 2002
	As Previously Reported			As Restated			As Previously Reported			As Restated			As Previously Reported			As Restated
Selected Cash Flow Data:
Depreciation and amortization	$	10,628		$	11,281		$	9,661		$	10,186		$	9,044		$	9,631
Accounts payable, expenses and other liabilities		(2,066	)		(1,106	)		7,982			7,966			4,195			4,040
Net cash provided by operating activities		19,745			21,358			32,236			32,745			20,205			20,637
Purchase of property, plant and equipment		(9,286	)		(10,899	)		(8,107	)		(8,616	)		(8,040	)		(8,472	)
Net cash used in investing activities		(8,668	)		(10,281	)		(8,098	)		(8,607	)		(8,020	)		(8,452	)

Reclassification

The effect of the adoption of SFAS No. 150 has been reflected in each balance sheet presented as a reclassification of redeemable preferred stock balance from the mezzanine section of the balance sheet to a long term liability classification.

F-14

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

2. Business and Operations

Leslie’s Poolmart, Inc. (the Company) is a specialty retailer of swimming pool supplies and related products. As of October 2, 2004, the Company marketed its products under the trade name Leslie’s Swimming Pool Supplies through 468 stores in 36 states and through mail order catalogs sent to selected swimming pool owners nationwide. 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 in June and September.

On June 11, 1997, Leslie’s Poolmart (a California corporation—“Leslie’s California”) reincorporated in Delaware by merging into a wholly-owned Delaware subsidiary (the “Reincorporation”), changed its name to Leslie’s Poolmart, Inc. and merged Poolmart USA Inc., a newly-formed corporation, with and into the Company (the “Recapitalization”). As a result of the Recapitalization, (i) each outstanding share of common stock of Leslie’s California was converted into $2.90 cash (other than 1,797,525 shares owned primarily by members of management); and (ii) outstanding options covering approximately 4,150,000 shares of common stock, including those not yet vested, were exercised and retired for payment of the difference between the exercise price and $2.90 per share. The total value of the shares and options cashed out approximated $94,300,000, plus $5,229,000 in expenses associated with this transaction. In connection with the Recapitalization, the Company changed the authorized capital of the Company to 12,000,000 shares of common stock with a $0.001 par value and 2,000,000 shares of preferred stock with a $0.001 par value.

In order to finance the merger, the Company issued $90.0 million of its 10.375% Senior Notes due 2003 (“Senior Notes due in 2004”) and sold 5,370,690 shares of its common stock for proceeds of $15.6 million. As indicated above, certain directors and members of management converted some of the Leslie’s California common shares which they owned into shares of the Company’s common stock.

Also in connection with the Recapitalization, the Company issued 28,000 shares of its Series A Preferred Stock of the Company, par value $0.001 per share, at $1,000 per share for a total consideration of $28.0 million, consisting of cash and an exchange of the $10.0 million principal amount of Convertible Subordinated Debentures of Leslie’s California held by a major supplier. In connection with this transaction, the holder of the Series A Preferred Stock received Warrants to purchase up to 15.0% of the shares of the Company’s common stock at a purchase price of $0.01 per share (subject to adjustment) for a period of ten years.

3. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements of the Company include Leslie’s Poolmart, Inc., and its wholly owned subsidiaries, LPM Manufacturing Inc., Sandy’s Pool Supply, Inc. and Blackwood & Simmons, Inc. All significant inter-company transactions and accounts have been eliminated.

Fiscal Periods

The Company’s fiscal year ends on the Saturday closest to September 30. The fiscal year ended on October 2, 2004, included 53 weeks and the fiscal years ended September 27, 2003 and September 28, 2002 included 52 weeks.

Cash and Cash Equivalents

The Company considers all investments with a maturity of three months or less when purchased to be cash equivalents.

F-15

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

Accounts and Other Receivables, Net

Accounts and other receivables include allowances for doubtful accounts of $928,000, $1,125,000 and $717,000 at October 2, 2004, September 27, 2003 and September 28, 2002, respectively.

Allowance for doubtful accounts consists of the following:

	Balance at beginning of period		Additions Charged to costs and expenses		Deductions Write-off of Bad Debts			Balance at end of period
Balance at September 28, 2002	$	422,000	$	437,000	$	(142,000	)	$	717,000
Balance at September 27, 2003		717,000		660,000		(252,000	)		1,125,000
Balance at October 2, 2004		1,125,000		316,000		(513,000	)		928,000

Inventories, Net

Inventories are stated at the lower of cost or market. The Company values inventory using the weighted average method.

Inventory reserves consist of the following:

	Balance at beginning of period		Additions Charged to costs and expenses		Deductions Write-off of Bad Debts			Balance at end of period
Balance at September 28, 2002	$	142,000	$	586,000	$	(234,000	)	$	494,000
Balance at September 27, 2003		494,000		1,130,000		(433,000	)		1,191,000
Balance at October 2, 2004		1,191,000		420,000		(364,000	)		1,247,000

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Costs of normal maintenance and repairs are charged to expense as incurred.

Major replacements or improvements of property, plant and equipment are capitalized. When items are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is included in the statements of income.

Depreciation and amortization are computed using the straight-line method (considering appropriate salvage values) based on the following estimated average useful lives:

Buildings and improvements	5-39 years
Vehicles, machinery and equipment	3-10 years
Office furniture and equipment	3-7 years
Leasehold improvements	5-10 years

Goodwill

The excess of the acquisition price over the fair value of the net assets at the date of acquisition is included in the accompanying consolidated balance sheets as “Goodwill.” In accordance with the provisions of SFAS No. 141 Business Combinations and SFAS No. 142 Goodwill and Other Intangible Assets, the Company applied the

F-16

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

new rules on accounting for goodwill and other intangible assets deemed to have indefinite lives beginning on September 29, 2002. The Company also performed the required impairment tests of goodwill and indefinite lived intangible assets and there was no impairment identified. The Company no longer amortizes its goodwill under SFAS No. 142, but does subject its goodwill to periodic assessments as defined therein. The balance recorded at October 2, 2004 and September 27, 2003 was net of accumulated amortization of $3.1 million. The Company recorded no amortization for the years ended October 2, 2004 and September 27, 2003 and $319,000 for the year ended September 28, 2002.

Deferred Financing Costs

In connection with issuing the Senior Notes due 2004 and entering into a credit agreement in 1997, the Company paid $3.7 million in financing costs that are being deferred and amortized over the lives of the corresponding agreements. During fiscal 2003, the Company recorded $2.2 million in costs associated with the exchange of $59.5 million of Senior Notes due 2004 and concurrently expensed $420,000 of unamortized costs associated with the original 1997 Senior Note issuance. The balance recorded at October 2, 2004 and September 27, 2003 was net of accumulated amortization of $1.3 million and $744,000, respectively.

Income Taxes

The Company provides for deferred income taxes relating to timing differences in the recognition of income and expense items (primarily depreciation and amortization) for financial and tax reporting purposes. Deferred taxes at October 2, 2004 and September 27, 2003 include a provision for the differences between tax and financial asset values except that deferred taxes were not provided with respect to amounts allocated to goodwill.

Sales

Revenue on retail sales is recognized upon purchase by the customer. Revenue on services, is recognized as services are performed and the fee is fixed or determinable and collection is probable. Terms are customarily FOB shipping point or point of sale, net of related discounts. The Company does not provide an estimated allowance for sales returns as they are deemed to be immaterial.

Cost of Sales

Included in cost of sales are the costs of services and purchased goods, chemical repackaging costs and related distribution costs. The Company recognizes consideration received from vendors at the time the obligations to purchase products or perform services have been completed. These items are recorded as a reduction in cost of goods sold in the statement of operations.

Shipping and Handling Costs

The Company records shipping and handling costs paid by customers as revenue. Likewise, the actual costs for shipping and handling are charged to cost of sales.

Advertising

The Company expenses advertising during the period of the event. Advertising expense for the years ended October 2, 2004, September 27, 2003, and September 28, 2002 was approximately $8.3 million, $7.6 million, and $7.4 million, respectively.

F-17

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

Stock Based Compensation

The Company grants stock options for a fixed number of shares to employees and directors with an exercise price equal to the fair market value of the shares at the date of grant. The Company accounts for such stock option grants using the intrinsic-value method of accounting in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and the disclosure requirements of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation and SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure. Under APB 25, the Company generally recognizes no compensation expense with respect to such awards. Also, the Company does not record any compensation expense in connection with our stock Option Plan. If stock options had been accounted for consistent with SFAS No. 123, these amounts would be amortized on a straight-line basis as compensation expense over the average holding period of the options and the Company’s net income would have decreased by $142,000 and $99,000 for the fiscal years ended 2004 and 2003, respectively and the Company’s net loss would have increased by $96,000 in fiscal year ended 2002.

Pro forma results disclosed are based on the provisions of SFAS 123 using the Black-Scholes option valuation model and are not likely to be representative of the effects on pro forma net income for future years. In addition, the Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in our opinion, the estimating models do not necessarily provide a reliable single measure of the fair value of our stock options.

Fair Value of Financial Statements

The fair value of the $59.5 million Senior Notes due 2008 using quoted market prices as of October 2, 2004 is $66.9 million. The carrying amounts of other long-term debt approximate fair value because either the interest rate fluctuates based on market rates or interest rates appear to approximate market rates for similar instruments. The fair value estimates are subjective in nature and involve uncertainties and matters of judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements.

FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46), was issued in January 2003 and addresses consolidation by business enterprises of variable interest entities. FIN 46 clarifies existing accounting for whether variable interest entities, as defined in FIN 46, should be consolidated in financial statements based upon the investee’s ability to finance activities without additional financial support and whether investors possess characteristics of a controlling financial interest. FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. For variable interest entities created or acquired after January 31, 2003, the provision was to be applied for the first interim or annual period beginning after June 15, 2003. In October 2003, the FASB

F-18

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

delayed the effective date of this provision until the first interim or annual period ending after December 15, 2003. The Company does not have any variable interest entities and therefore this adoption will not have any effect on our results of operations or financial position.

In May 2003, SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, was issued. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective July 1, 2003. The Company at September 27, 2003 has $45.9 million of mandatorily redeemable preferred stock classified as mezzanine equity on the balance sheets. The effect of SFAS No. 150 will be to reclassify this balance from the mezzanine section of the balance sheet to a liability classification on the balance sheet. In addition, the accretion of the value of the preferred stock will be classified as interest expense instead of reducing retained deficit. In October 2003, the SFAS agreed to defer the effective date of Statement 150 to entities that have issued shares that are mandatorily redeemable on a fixed date at a fixed principal amount to fiscal periods beginning after December 15, 2003. Accordingly, the Company will adopt this standard beginning October 1, 2004. Had the standard been adopted, interest expense for the fiscal years ended October 2, 2004 and September 27, 2003 would have been increased by $7,160,000 and $6,191,000, respectively and preferred stock dividends and accretion in the statements of stockholders’ equity would have been reduced by the same amount.

4. Inventories

Inventories consist of the following:

	October 2, 2004			September 27, 2003
Raw materials and supplies	$	355,000		$	371,000
Finished goods		55,657,000			53,850,000
Reserve		(1,247,000	)		(1,191,000	))
Total Inventories	$	54,765,000		$	53,030,000

5. Property, Plant and Equipment

Property, plant and equipment consists of the following:

	October 2, 2004		September 27, 2003
	(restated)		(restated)
Land	$	5,865,000	$	6,215,000
Buildings and addresses		8,571,000		8,815,000
Vehicles, machinery and equipment		4,540,000		4,240,000
Leasehold improvements		46,981,000		41,053,000
Office furniture, equipment and other		33,631,000		30,911,000
Construction-in-process		672,000		1,536,000
		100,260,000		92,770,000
Less—accumulated deprecation and amortization		59,657,000		50,727,000
Total Property, Plant and Equipment	$	40,603,000	$	42,043,000

F-19

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

6. Loan and Security Agreement

In June of 2000, the Company entered into a Loan and Security Agreement (the “Agreement”) with Wells Fargo Retail Finance LLC. Under the Agreement, maximum borrowings were $65.0 million with the minimum amount available not to fall below $40.0 million, reduced by outstanding letters of credit, and with a maturity date set at January 31, 2004. Under the Agreement, maximum borrowings are limited as a function of inventory or calculated EBITDA rates as defined in the Agreement.

On October 31, 2003, the Company amended the Agreement (the “Amended Agreement”) with Wells Fargo Retail Finance LLC. The Amended Agreement extends the maturity date to January 15, 2008 and allows the Company to optionally increase its maximum borrowing to $75.0 million. The Amended Agreement contains certain financial covenants that include minimum calculated EBITDA levels, maximum capital expenditure amounts, Fixed Charge Coverage Ratio, and Senior Leverage Ratio. As of October 2, 2004, the Company was in compliance with these covenants. At October 2, 2004 and September 27, 2003, there were no borrowings outstanding under the Agreement. Borrowings under the Agreement accrue interest at the lender’s reference rate or at LIBOR plus the applicable LIBOR rate margin. Based on the LIBOR rate margin at October 2, 2004, the interest rate was 3.3%. The margins are determined by calculated LTM EBITDA rates as defined in the Agreement.

7. Senior Notes

On June 11, 1997, the Company issued $90.0 million aggregate principal amount of its 10.375 percent Senior Notes due July 15, 2004 (the “2004 Notes”). The 2004 Notes were issued under an indenture by and between the Company and U.S. Trust Company of California, N.A., as trustee.

Interest on the 2004 Notes accrued at the rate of 10.375 percent per annum and was payable semi-annually in arrears on each January 15 and July 15 commencing on January 15, 1998. The 2004 Notes were redeemable, in whole or in part, at the option of the Company on or after July 15, 2001, at the specified redemption prices.

On May 16, 2003, the Company entered into exchange agreements with holders of a majority in principal amount of our 2004 Notes pursuant to which the Company exchanged 10.375 percent Senior Notes due 2008, Series A, (the “Series A Notes”) for the 2004 Notes held by them. The exchanges of the 2004 Notes closed on May 21, 2003. In connection with those exchanges, the Company entered into several registration rights agreements which required the exchange of the Series A Notes for registered 10.375 percent Notes due 2008, Series B (the “Series B Notes”). On September 8, 2003, the Company completed its offer to exchange up to $56.5 million aggregate principal amount of Series A Notes for the Series B Notes and a total of $3.0 million of Series A Notes remained outstanding. The remaining $30.5 million of the 2004 Notes were redeemed with cash.

The Series A Notes and the Series B Notes are generally unsecured obligations of the Company and will be subordinated to any secured indebtedness of the Company. In the event of a change of control, the Company will be required to make an offer to purchase all outstanding Notes at a price equal to 101 percent of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.

The Series A Notes and the Series B Notes were issued under an indenture by and between the Company and The Bank of New York Trust Company, N.A., as trustee (the “Indenture”). The Indenture contains certain covenants which include, among other matters, limitations on the incurrence of additional indebtedness and the payment of dividends. As of October 2, 2004, the Company was in compliance with these covenants.

F-20

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

8. Leases

The Company leases certain store, office, distribution and manufacturing facilities under operating leases which expire at various dates through 2013. Lease agreements generally provide for increases related to cost of living indices and require the Company to pay for property taxes, repairs and insurance. Future annual minimum lease payments at October 2, 2004 are as follows:

2005	$	30,821,000
2006		25,521,000
2007		20,907,000
2008		15,294,000
2009		9,919,000
Thereafter		4,951,000
	$	107,413,000

Certain leases are renewable at the option of the Company for periods of one to ten years. Rent expense charged against income totaled $26.5 million, $24.3 million, and $23.8 million in fiscal years 2004, 2003 and 2002 respectively. Five leases provided for rent contingent on sales exceeding specific amounts.

9. Income Taxes

The provision/(benefit) for income taxes is comprised of the following:

	53 Weeks Ended October 2, 2004			52 Weeks Ended September 27, 2003		52 Weeks Ended September 28, 2002
	(dollar amounts in thousands)
Federal:
Current	$	9,722,000		$	4,706,000	$	4,507,000
Deferred		(1,512,000	)		673,000		(1,860,000	)
	$	8,210,000		$	5,379,000	$	2,647,000
State:
Current	$	2,563,000		$	1,269,000	$	1,114,000
Deferred		(399,000	)		182,000		(403,000	)
		2,164,000			1,451,000		711,000
Total	$	10,374,000		$	6,830,000	$	3,358,000

A reconciliation of the provision for income taxes to the amount computed at the federal statutory rate is as follows:

	53 Weeks Ended October 2, 2004			52 Weeks Ended September 27, 2003		52 Weeks Ended September 28, 2002
	(dollar amounts in thousands)
Federal income tax at statutory rate	$	9,317,000		$	5,839,000	$	2,737,000
Permanent differences		36,000			33,000		151,000
State taxes, net of federal benefit		1,407,000			958,000		470,000
Other		(386,000	)		—		—
	$	10,374,000		$	6,830,000	$	3,358,000

F-21

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

The tax effect of temporary differences which give rise to significant portions of the deferred tax asset and liability are summarized below:

	Fiscal 2004						Fiscal 2003
	Deferred Tax Assets			Deferred Tax Liabilities			Deferred Tax Assets			Deferred Tax Liabilities
Depreciation and amortization	$	988,000		$	—		$	687,000		$	—
State income taxes		—			—			—			—
Inventory		—			(59,000	)		—			(317,000	)
Reserves and other accruals		4,095,000			—			3,012,000			—
Deferred rent		597,000			—			629,000			—
Compensation accruals		733,000			—			1,115,000			—
Net operating loss		2,346,000			—			2,308,000			—
Other		490,000			—			481,000			(700,000	)
Valuation allowance		(2,268,000	)		—			(2,204,000	)		—
	$	6,981,000		$	(59,000	)	$	6,028,000		$	(1,017,000	)

The Company has federal net operating losses (NOL) of $6.7 million available to offset future tax liabilities through 2007. The losses are subject to Internal Revenue Code Section 382 which limits the annual utilization of NOL’s after an ownership change. The Company’s annual Section 382 limitation is approximately $83,000. As such, approximately $6.5 million of these NOL’s will expire as worthless. The Company has recorded a valuation allowance amount of $2,268,000 and $2,204,000 as of October 2, 2004 and September 27, 2003, respectively.

10. Contingencies

The Company is a defendant in lawsuits or potential claims encountered in the normal course of business; such matters are being vigorously defended. In the opinion of management, the resolutions of these matters will not have a material effect on the Company’s financial position or results of operations.

On January 31, 2002, a former employee brought a purported class action lawsuit against the Company in California Superior Court for the County of Los Angeles. The complaint alleged failure to pay overtime wages, waiting time penalties and unfair business practices and sought monetary and injunctive relief. A settlement totaling $1.2 million was reached by the parties during a mediation on April 2, 2002. The Court approved the settlement in a final fairness hearing on August 20, 2002. During the second quarter of 2002, the Company reserved a total of $1.5 million for this settlement and its related legal and other expenses, and for which this amount was subsequently paid. As of October 2, 2004 there were no other costs associated with this matter.

The Company’s general liability insurance program and employee group medical plan have self-insurance retention features of $250,000 and $100,000 per incident, respectively.

11. 401(k) Plan

The Company provides for the benefit of its employees a voluntary retirement plan under Section 401(k) of the Internal Revenue Code. During 2002, the plan covered all eligible employees and provided for a matching contribution by the Company of 50% of each participant’s contribution up to 4% of the individual’s compensation as defined. The expenses related to this program were $375,000, $381,000 and $384,000 for fiscal years 2004, 2003 and 2002 respectively.

F-22

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

12. Equity Transactions

Preferred Stock

In connection with the Recapitalization transaction, the Company sold 28,000 shares of Series A Preferred Stock for total consideration of $28.0 million. The holders of the Series A Preferred Stockholder (the “Preferred Stockholder”) is entitled to an annual cumulative dividend (which is payable at the option of the Company either in cash or in additional shares of Preferred Stock for the first five years) and during which time the annual dividend is payable quarterly at the annual rate of 10.875 percent, compounded semi-annually. The Preferred Stockholder is entitled to elect 20 percent of the members of the Board of Directors of the Company. During fiscal 2003 which completed the first five years under the agreement, this annual cumulative dividend converted to an accrued cash dividend and any unpaid dividends accrue interest at an annual rate of 15.875 percent, compounded quarterly. As of October 2, 2004, the cumulative unpaid dividend is $14.7 million.

The Preferred Stock may be redeemed at the option of the Company at any time at 101 percent of the per share price plus accumulated and unpaid dividends. The Company is required to redeem the Preferred Stock in three equal installments terminating on the tenth anniversary of the date of issuance of the Preferred Shares. As such, the Company is accreting the Preferred Stock balance over the ten-year period to adjust the related liability in the amount of $401,000 and $398,000 recorded in 2004 and 2003, respectively.

In connection with the issuance of the Preferred Stock, the original Preferred Stockholder received 1,264,980 warrants to purchase common stock at an exercise price of $0.01 per share expiring in June of 2007. Of the $28.0 million face value of the Preferred Stock, $3.1 million was assigned to the value of these Warrants and reflected as a discount on the Preferred Stock. This discount is being accreted over the life of the Preferred Stock. The terms of the Warrant Agreement provide for a proportionate adjustment of the warrants for stock splits and stock dividends and for additional warrant shares to be issuable in the event any of the 1997 NQ Options (as such term is defined below) or ISO Options or options under the 1998 Plan (as such term is define below) are exercised. Based on the number of options outstanding at October 2, 2004, an additional 287,429 warrants could be granted if the options are exercised.

Common Stock

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 other 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

F-23

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

without Just Cause. The loan agreements are secured by a portion of the shares purchased by each of Hayward and Anderson, pursuant to Pledge Agreements executed concurrently by each of Hayward and Anderson and are recorded as reductions in stockholders equity in the accompanying balance sheets.

On August 29, 2003, the Company, and GCP California Fund L.P., the (“Purchasers”) entered into a Stock Purchase Agreements, (“Agreement”) with Robert D. Olsen, (“Olsen”) the Company’s former Executive Vice President and CFO (the “Olsen Transaction”). Pursuant to the Agreement, the Company repurchased 86,206 shares of the Company’s voting common stock held by Olsen for an aggregate purchase price of $499,995 and the other Purchasers acquired the remaining 429,094 shares of the Company’s voting common stock held by Olsen for an aggregate purchase price of $2,488,745.

13. Related Party Transactions

Leonard Green & Partners (“LGP”), a firm that manages Green Equity Investors II (“GEI”), Hancock Park Associates (“HPA”) and Leslie’s are parties to a Management Agreement dated June 11, 1997. The Management Agreement provides that Leslie’s will pay LGP an annual fee of $244,800 for ongoing management, consulting and financial services. In addition, subject to certain approval requirements, the Management Agreement provides that either LGP or HPA may provide financial advisory or investment banking services for Leslie’s in connection with major financial transactions, and LGP or HPA will be paid a reasonable fee for such services. The Management Agreement terminates on the earlier of the tenth anniversary of its execution or the date that LGP affiliates hold 25% or less of the shares of Leslie’s that they held on the date of the Management Agreement.

During the fiscal years ended October 2, 2004, September 27, 2003, and September 28, 2002, the Company paid management fees to LGP in the amount of $245,000 for each of the three years represented.

14. Stock Based Compensation Plans

During 1997, the Company adopted a non-qualified common stock option plan (the “NQ Option Plan”) and an incentive common stock option plan (the “ISO Option Plan”) and reserved 417,995 shares and 1,369,730 shares, respectively, of Leslie’s common stock for issuance upon the exercise of options to be granted to certain employees of Leslie’s thereunder. Options to purchase Leslie’s common stock have been granted at an exercise price of $1.00 per share for options granted under the NQ Option Plan (“NQ Options”) and $2.00 per share in the case of options granted under the ISO Option Plan.

NQ Options are all vested. NQ Options have a term of ten years and remain exercisable without regard to any termination of employment of the holder.

Under the ISO Plan, as amended, ISO Options vest in one-third increments on the first, second and third anniversaries of the original grant date. Options intended to qualify as “incentive stock options” and options not intended to so qualify may be granted under the ISO Option Plan. Pursuant to law, options intended to qualify as “incentive stock options” are subject to limitations on aggregate amounts granted and must be issued to any holder of 10% or more of the issuer’s outstanding common stock at 110% of fair market value. Vested ISO Options may be exercised for 90 days post termination of employment, except in the case of the death of the option holder, in which case the vested portion may be exercised within twelve months from the date of termination. ISO Options have a term of ten years.

In November 1998, Leslie’s Board adopted its 1998 Incentive Stock Option Plan (the “1998 Plan”), and reserved 300,000 shares of nonvoting common stock for issuance thereunder. In January 2000, the Board approved an amendment to the Plan to increase the number of shares of nonvoting common stock issuable thereunder to 500,000 shares in the aggregate.

F-24

LESLIE’S POOLMART, INC.

Notes to Consolidated Financial Statements—(Continued)

On February 15, 2001, the Board of Directors approved a resolution to effectuate the cancellation and later reissuance of options outstanding under the Company’s ISO Option Plan and the 1998 Plan. Under the program, 198,500 existing options were cancelled and holders thereof were entitled to receive new Options on a date which would be at least 6 months and a day from the date of cancellation, at a price equal to the then market value of the Company’s stock. The options cancelled had exercise prices that were higher than the Board’s view of the then current market price of the Company’s stock and had impaired the ability of such options to fulfill their purpose.

On February 15, 2001, the Board of Directors approved a resolution to amend the Company’s Certificate of Incorporation to effectuate a 5 for 1 stock split whereby each outstanding share of the Company’s common stock, par value $.001 per share, was converted into five shares of common stock. Following approval by the Company’s stockholders, an amendment to the Company’s Articles of Incorporation was filed with the Delaware Secretary of State on February 22, 2001.

We account for stock-based compensation plans under APB Opinion No. 25, under which no compensation expense has been recognized in the accompanying consolidated financial statements for stock-based employee awards with an exercise price equal to or greater than the fair value of the common stock on the date of grant. For purposes of SFAS No. 123, Accounting for Stock-Based Compensation, the fair value of each option granted has been estimated at the date of the grant using the Black-Scholes option pricing model using the following weighted-average assumptions used for grants for each of the fiscal years ended 2004, 2003 and 2002: risk free interest rate 4.0%, expected volatility of 0%; expected lives of 7 years and no expected dividend yield. Based on these assumptions, the weighted average fair value of the options granted is $1.42 in 2004, $0.49 in 2003 and in 2002, respectively.

A summary of option activities for all plans is as follows:

	Fiscal 2004				Fiscal 2003				Fiscal 2002
	Shares		Wt. Avg. Ex Price		Shares		Wt. Avg. Ex Price		Shares		Wt. Avg. Ex Price
Outstanding at beginning of year	1,456,060		$	1.97	1,841,330		$	1.77	1,683,830		$	1.75
Granted	190,200			5.80	15,000			2.00	220,000			2.00
Exercised	—			—	(390,270	)		1.04	(8,333	)		2.00
Cancelled	(17,500	)		2.00	(10,000	)		2.00	(54,167	)		2.00
Outstanding at end of year	1,628,760		$	2.42	1,456,060		$	1.97	1,841,330		$	1.77
Exercisable at end of year	1,385,054		$	1.97	1,226,605		$	1.97	1,278,270		$	1.67

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding	Weighted Avg. Remaining Contractual Life	Weighed Avg Exercise Price		Number Exercisable	Weighted Avg. Exercise Price
$1.00	42,725	2.7	$	1.00	42,725	$	1.00
$2.00	1,395,835	7.0	$	2.00	1,342,329	$	2.00
$5.80	190,200	9.2	$	5.80	—	$	5.80
	1,628,760	7.1	$	2.42	1,385,054	$	1.97

15. Supplemental Cash Flow Disclosures

The Company paid interest charges of $7.0 million, $9.9 million, and $10.1 million in 2004, 2003 and 2002, respectively. The Company paid income taxes of $11.9 million, $5.6 million and $3.4 million in 2004, 2003 and 2002, respectively. The Preferred Stock dividends and the accretion of the Warrants are excluded from the statement of cash flows as non-cash transactions.

F-25

Offer To Exchange

All Our Outstanding 7 ³/4% Senior Notes Due 2013, Series A

For Our New 7 ³/4% Senior Notes Due 2013, Series B

Which Have Been Registered Under the Securities Act

PROSPECTUS

                    , 2005

DEALER PROSPECTUS DELIVERY REQUIREMENTS

Until                     , 2005, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

All tendered original notes, executed letters of transmittal and other related documents should be directed to the exchange agent. Requests for assistance and for additional copies of this prospectus, the letter of transmittal and other related documents should be directed to the exchange agent.

The exchange agent for the exchange offer is

The Bank of New York Trust Company, N.A.

For Information Call:

(213) 630-6493

By Mail:

The Bank of New York Trust Company, N.A.

700 S. Flower Street, Suite 500

Los Angeles, CA 90017

Attention: Melonee Young

By Facsimile:

(213) 630-6298

Attention: Melonee Young

Confirm by Telephone:

(213) 630-6493

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

The Amended and Restated Certificate of Incorporation of the Company eliminates the liability of the Company’s directors for monetary damages arising from a breach of their fiduciary duties to the Company and its stockholders, to the extent permitted by the Delaware General Corporation Law. Such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission.

The Company’s Bylaws provide that the Company shall indemnify its directors and officers to the fullest extent permitted by applicable law. The Company has entered into indemnification agreements with its directors and executive officers containing provisions which are in some respects broader than the specific indemnification provisions contained in the Delaware General Corporation Law. Such agreements require the Company, among other things, (i) to indemnify its officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers provided such persons acted in good faith and in a manner reasonably believed to be in the best interests of the Company and, with respect to any criminal action, had no cause to believe their conduct was unlawful; (ii) to advance the expenses actually and reasonably incurred by its officers and directors as a result of any proceeding against them as to which they could be indemnified; and (iii) to obtain directors’ and officers’ insurance if available on reasonable terms. There is no action or proceeding pending or, to the knowledge of the Company, threatened which may result in a claim for indemnification by any director, officer, employee or agent of the Company.

Item 21. Exhibits and Financial Statement Schedules

(a) Exhibits

Exhibit Number	Description
2.1	Agreement and Plan of Merger dated as of January 7, 2005 between the Company and LPM Acquisition LLC (previously filed as Exhibit 2.1 to the Current Report on Form 8-K filed on January 11, 2005)
3.1*	Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on January 25, 2005
3.2	Bylaws of the Company (previously filed as Exhibit 3.5 to Registration Statement on Form S-1 filed on June 27, 1997)
4.1	Indenture dated as of May 21, 2003 between the Company and The Bank of New York Trust Company, N.A. (previously filed as Exhibit 4.1 to the Registration Statement on Form S-4 filed on July 18, 2003)
4.2	Supplemental Indenture dated as of January 11, 2005 between the Company and The Bank of New York Trust Company, N.A. (previously filed as Exhibit 10.01 to the Current Report on Form 8-K filed on January 25, 2005)
4.3	Indenture dated as of January 25, 2005 between the Company and The Bank of New York Trust Company, N.A. (previously filed as Exhibit 10.2 to the Current Report on Form 8-K filed on January 28, 2005)
5.1*	Opinion of Gibson, Dunn & Crutcher LLP
10.1*	Stockholders Agreement dated as of January 25, 2005 among the Company, GCP California Fund, L.P., Leslie’s Coinvestment, LLC and the stockholders identified on the signature pages thereto
10.2*	Management Services Agreement dated as of January 25, 2005 between the Company and Leonard Green & Partners, L.P.

II-1

Exhibit Number	Description
10.3	Lease Agreement dated as of August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.7 to Registration Statement on Form S-1/A filed on July 21, 1997)
10.4*	First Amendment dated as of June 21, 1996 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company
10.5*	Second Amendment dated as of September 30, 1999 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company
10.6*	Third Amendment dated as of April 14, 2000 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company
10.7	Lease dated as of November 26, 1996 by and between Bedford Property Investors, Inc. and the Company (previously filed as Exhibit 10.8 to Registration Statement on Form S-1/A filed on July 21, 1997)
10.8*	Addendum dated as of November 1996 to the Lease dated November 26, 1996 by and between Bedford Property Investors, Inc. and the Company
10.9	Lease Agreement dated as of December 30, 1997 by and between Liberty Property Limited Partnership and the Company (previously filed as Exhibit 10.8 to Registration Statement on Form S-1/A filed on July 21, 1997)
10.10*	First Amendment dated as of June 3, 1999 to the Lease Agreement dated December 30, 1997 by and between Liberty Property Limited Partnership and the Company
10.11*	Lease dated as of April 30, 1998 by and between Paul Hemmer Development Co., III and the Company
10.12*	First Addendum dated as of July 21, 1999 to the Lease dated April 30, 1998 by and between Paul Hemmer Development Co., III and the Company
10.13*	Lease Agreement dated as of March 30, 2004 between ProLogis and the Company
10.14*	Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company
10.15*	First Amendment dated as of November 30, 2000 to the Lease dated October 31, 2000 between Broadway Business Center LLC and the Company
10.16*	Second Amendment dated as of June 26, 2001 to the Lease dated October 31, 2000 between Broadway Business Center LLC and the Company
10.17*	Third Amendment dated as of May 31, 2002 to the Lease dated October 31, 2000 between Broadway Business Center LLC and the Company
10.18*	Fourth Amendment dated as of April 9, 2004 to the Lease dated October 31, 2000 between Broadway Business Center LLC and the Company
10.19*	Form of Director’s and Officer’s Indemnification Agreement dated as of January 1, 2000 between the Company and certain members of management
10.20	Amended and Restated Employment Agreement dated November 21, 2003 between the Company and Lawrence H. Hayward (filed as Exhibit 10.13 to the Annual Report on Form 10-K filed on December 12, 2003)
10.21	Amended and Restated Employment Agreement dated November 21, 2003 between the Company and Donald J. Anderson (filed as Exhibit 10.14 to the Annual Report on Form 10-K filed on December 12, 2003)
10.22	Amendment No. 1 dated as of January 24, 2005 to the Amended and Restated Employment Agreement dated November 21, 2003 between the Company and Lawrence H. Hayward (previously filed as Exhibit 10.3 to the Current Report on Form 8-K filed on January 25, 2005)

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Exhibit Number	Description
10.23	Amendment No. 1 dated as of January 19, 2005 to the Amended and Restated Employment Agreement dated November 21, 2003 between the Company and Donald J. Anderson (previously filed as Exhibit 10.2 to the Current Report on Form 8-K filed on January 25, 2005)
10.24	Amended and Restated Loan and Security Agreement dated as of January 25, 2005 among the Company, LPM Manufacturing, Inc., Wells Fargo Retail Finance LLC and the other lenders parties thereto (previously filed as Exhibit 10.3 to the Current Report on Form 8-K filed on January 28, 2005)
10.25	Registration Rights Agreement, dated January 25, 2005, between the Company and certain holders of the Company’s 7.75% Senior Notes due 2013 (filed as Exhibit 10.01 to the Current Report on Form 8-K filed on January 28, 2005)
12.1*	Statement of Computation of Ratio of Earnings to Fixed Charges
21.1	Subsidiaries (previously filed as Exhibit 21.1 to Annual Report on Form 10-K405 filed on December 22, 1999)
23.1*	Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
23.2*	Consent of Ernst & Young LLP
24.1*	Power of Attorney (included on signature page)
25.1*	Statement of Eligibility of The Bank of New York Trust Company, N.A. under the Trust Indenture Act of 1939, as trustee
99.1*	Form of Letter of Transmittal
99.2*	Form of Notice of Guaranteed Delivery
99.3*	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
99.4*	Form of Letter to Clients

* Filed herewith.

Item 22. Undertakings

The undersigned Registrant hereby undertakes that, insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Securities Act”) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the DGCL, the Certificate of Incorporation and By-laws, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

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SIGNATURES AND POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, hereunto authorized, in the city of Phoenix, state of Arizona, on April 22, 2005.

LESLIE’S POOLMART, INC.
By:	/s/    DONALD J. ANDERSON
	Donald J. Anderson Executive Vice President, Chief Financial Officer and Secretary

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Lawrence H. Hayward and Donald J. Anderson, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or his substitute or their substitutes, may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE DATES INDICATED.

NAME	TITLE	DATE
/s/    LAWRENCE H. HAYWARD         Lawrence H. Hayward	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officers)	April 22, 2005
/s/    DONALD J. ANDERSON         Donald J. Anderson	Director, Executive Vice President, Chief Financial Officer and Secretary (Principal Financial Officer and Principal Accounting Officer)	April 22, 2005
/s/    EDWARD C. AGNEW         Edward C. Agnew	Director	April 22, 2005
/s/    JOHN M. BAUMER         John M. Baumer	Director	April 22, 2005
/s/    JOHN G. DANHAKL         John G. Danhakl	Director	April 22, 2005
/s/    MICHAEL J. FOURTICQ         Michael J. Fourticq	Director	April 22, 2005
/s/    TED C. NARK         Ted C. Nark	Director	April 22, 2005

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EX-3.1

Exhibit 3.1

CERTIFICATE OF MERGER

OF

LPM ACQUISITION LLC

INTO

LESLIE’S POOLMART, INC.

(Pursuant to 8 Del. C. (§) 264)

LESLIE’S POOLMART, INC., a Delaware corporation, hereby certifies that:

1. The name and state of incorporation of each of the constituent entities are:

(a) LPM Acquisition LLC, a Delaware limited liability company; and

(b) Leslie’s Poolmart, Inc., a Delaware corporation.

2. An Agreement and Plan of Merger has been approved, adopted, certified, executed and acknowledged by each of the constituent entities in accordance with the provisions of Section 264 of the General Corporation Law of the State of Delaware.

3. The surviving corporation shall be Leslie’s Poolmart, Inc.

4. The Certificate of Incorporation attached hereto as Exhibit A shall be the Certificate of Incorporation of Leslie’s Poolmart, Inc. as the surviving corporation until amended in accordance with the provisions thereof and applicable law.

5. The executed Agreement and Plan of Merger is on file at the principal place of business of Leslie’s Poolmart, Inc. located at:

3925 East Broadway Road, Suite 100

Phoenix, Arizona 85040

6. A copy of the Agreement and Plan of Merger will be furnished by Leslie’s Poolmart, Inc. at no charge upon request to any stockholder of Leslie’s Poolmart, Inc. or any member of LPM Acquisition LLC.

IN WITNESS WHEREOF, LESLIE’S POOLMART, INC. has caused this certificate to be executed by a duly authorized officer as of this 25 day of January, 2005.

LESLIE’S POOLMART, INC. a Delaware corporation
By:	/s/ Donald J. Anderson
Name:	Donald J. Anderson
Title:	Chief Financial Officer

Exhibit A

RESTATED CERTIFICATE OF INCORPORATION

OF

LESLIE’S POOLMART, INC.

(A DELAWARE CORPORATION)

ARTICLE I

NAME

The name of the corporation is Leslie’s Poolmart, Inc. (the “Corporation”).

ARTICLE II

AGENT

The address of the corporation’s registered office in the State of Delaware is c/o The Corporation Trust Company, The Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801 and the name of its registered agent at that address is The Corporation Trust Company.

ARTICLE III

PURPOSE

The purposes for which the Corporation is formed are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

ARTICLE IV

STOCK

Section 4.1 Authorized Stock. The aggregate number of shares which the Corporation shall have authority to issue is 51,000,000, of which 50,000,000 shall be designated as Common Stock, par value $0.001 per share (the “Common Stock”), and 1,000,000 shall be designated as Preferred Stock, par value $0.001 per share (the “Preferred Stock”).

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Section 4.2 Common Stock.

(a) Voting. Each holder of Common Stock shall be entitled to one (1) vote for each share of Common Stock held of record by such holder on all matters submitted to a vote of stockholders of the Corporation.

(b) Dividends. Subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive dividends out of any funds of the Corporation legally available therefor when and as declared by the Board of Directors.

(c) Liquidation. Upon the dissolution, liquidation or winding up of the Corporation, subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive the assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them.

Section 4.3 Preferred Stock. Subject to limitations prescribed by law and the provisions of this Article IV, the Board of Directors is hereby authorized to provide by resolution for the issuance of the shares of Preferred Stock in one or more series, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or restrictions thereof.

The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:

(i) the number of shares constituting such series, including any increase or decrease in the number of shares of any such series (but not below the number of shares in any such series then outstanding), and the distinctive designation of such series;

(ii) the dividend rate on the shares of such series, if any, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of such series;

(iii) whether the shares of such series shall have voting rights (including multiple or fractional votes per share) in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

(iv) whether the shares of such series shall have conversion privileges, and, if so, the terms and conditions of such privileges, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;

(v) whether or not the shares of such series shall be redeemable, and if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption rates;

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(vi) whether a sinking fund shall be provided for the redemption or purchase of shares of such series, and, if so, the terms and the amount of such sinking fund;

(vii) the rights of the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of such series; and

(viii) any other relative rights, preferences and limitations of such series.

4.3.A. Designation of 10% Series A Redeemable Exchangeable Cumulative Preferred Stock.

The series of Preferred Stock designated and known as “10% Series A Redeemable Exchangeable Cumulative Preferred Stock” shall consist of 41,000 shares.

1. Definitions and Interpretation.

(a) Definitions. As used in this Section 4.3.A, the following terms shall have the following meanings, unless the context otherwise requires:

“10% Preferred Stock” means the Corporation’s 10% Redeemable Exchangeable Cumulative Preferred Stock.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract, or otherwise; provided, that, with respect to the Corporation and its Subsidiaries, a Beneficial Owner of 10% or more of the total voting power normally entitled to vote in the election of directors of the Corporation shall for such purposes be deemed to constitute control.

“Asset Sale” means, in one or a series of related transactions, the conveyance, sale, transfer, assignment or other disposal by the Corporation or any of its Subsidiaries of, directly or indirectly, any of their property, business or assets, including by merger or consolidation (in the case of one of the Corporation’s Subsidiaries), and including any sale or other transfer or issuance of any Capital Stock, or warrants, options or other rights to acquire such Capital Stock, of any of the Corporation’s Subsidiaries, whether by the Corporation or one of the Corporation’s Subsidiaries or through the issuance, sale or transfer of Capital Stock, or warrants, options or other rights to acquire such Capital Stock, by one of the Corporation’s Subsidiaries and including any sale and leaseback transaction, other than in any such case to the Corporation or another Subsidiary.

“Bank Facility” shall mean that certain Amended and Restated Loan and Security Agreement, dated as of the Closing Date (as amended, modified and supplemented from time to time), by and among the Corporation, LPM Manufacturing, Inc., the financial institutions named therein and Wells Fargo Retail Finance LLC.

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“Beneficial Owner” or “beneficial owner” for purposes of the definition of Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Preferred Stock Issue Date), whether or not applicable.

“Business Day” means any day other than a Legal Holiday.

“Capital Contribution” means any contribution to the equity of the Corporation subsequent to the Preferred Stock Issuance Date for which no consideration (other than the issuance of Qualified Capital Stock) is given.

“Capital Stock” means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity or ownership interests of such Person.

“Cash Equivalents” shall have the meaning ascribed to such term in the Series A Junior Subordinated Debentures.

“Certificate of Designations” shall mean this Section 4.3.A.

“Change of Control” means: (1) prior to consummation of the first Public Offering after the Preferred Stock Issue Date, the Permitted Holders shall cease to beneficially own, in the aggregate, a majority of the voting power of the Voting Equity Interests of the Corporation, or (2) following the consummation of the first Public Offering after the Preferred Stock Issue Date, (A) any merger or consolidation of the Corporation with or into any Person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the Corporation’s assets, on a consolidated basis, in one transaction or a series of related transactions, if, immediately after giving effect to such transaction(s), any “person” (including any group that is deemed to be a “person”) (other than the Permitted Holders) is or becomes the beneficial owner of more than 40% of the aggregate voting power of the Voting Equity Interests of the transferee(s) or surviving entity or entities and the Permitted Holders, in the aggregate, beneficially own, directly or indirectly, less voting power than such person, (B) any “person” (including any group that is deemed to be a “person”) (other than the Permitted Holders) is or becomes the beneficial owner of more than 40% of the aggregate voting power of the Voting Equity Interests of the Corporation and the Permitted Holders, in the aggregate, beneficially own, directly or indirectly, less voting power than such person, (C) the Continuing Directors cease for any reason to constitute a majority of the Corporation’s Board of Directors then in office, or (D) the Corporation adopts a plan of liquidation. As used in this definition, “person” (including any group that is deemed to be a “person”) has the meaning given by Section 13(d) of the Exchange Act, whether or not applicable.

“Continuing Director” means during any period of 12 consecutive months after the Preferred Stock Issue Date, individuals who at the beginning of any such 12-month period constituted the Board of Directors (together with any new directors whose election by such

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Board of Directors or whose nomination for election by the shareholders of the Corporation was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, including new directors designated in or provided for in an agreement regarding the merger, consolidation or sale, transfer or other conveyance, of all or substantially all of the assets of the Corporation or any Parent Entity, if such agreement was approved by a vote of such majority of directors).

“Common Stock” means, of any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or nonvoting) of such Person’s common stock, and includes, without limitation, all series and classes of such common stock.

“Consolidated Net Income” means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries (before preferred stock dividends and otherwise determined on a consolidated basis in accordance with GAAP) for such period; provided, that there shall be excluded therefrom (only to the extent included in computing such net income (or loss) and without duplication): (a) any net after-tax gain, loss, charge or expense which is either extraordinary (as determined in accordance with GAAP) or is either unusual or nonrecurring (including any restructuring charges and any gain, loss, charge or expense from the sale or other disposition of assets outside the ordinary course of business or from the issuance or sale of any securities) as determined in good faith by the Corporation, it being understood and agreed that Item 10(e) of Regulation S-K under the Securities Act shall not constitute a limitation on any such determination, (b) the net income, if positive, of any Person, other than a Subsidiary, in which such Person or any of its Subsidiaries has an interest, except to the extent of the amount of any dividends or distributions actually paid in cash to such Person or a Subsidiary of such Person during such period, but in any case not in excess of such Person’s pro rata share of such Person’s net income for such period, (c) the net income, if positive, of any of such Person’s Subsidiaries to the extent that the declaration or payment of dividends or similar distributions is not at the time permitted by operation of the terms of its charter or bylaws or any other agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary, (d) the cumulative effect of a change in accounting principles, (e) any non-cash compensation expense realized from grants of stock appreciation or similar rights, stock options or other rights to officers, directors and employees of the Corporation, and (f) any goodwill impairment charges pursuant to Financial Accounting Standards Board Statement No. 142.

“Contribution Agreement” means the Contribution and Subscription Agreement dated as of January 24, 2005, by and between LPM Acquisition LLC and the stockholders named on the signature pages thereto, as the same may be amended from time to time.

“Default Event” means any of the following events: (i) any time when the Corporation fails to make a mandatory redemption of the 10% Preferred Stock when required (whether or not any contractual or other restrictions apply to such redemption, including restrictions imposed by the Bank Facility) pursuant to Section 4.3.A.6(a) hereof; or (ii) any time when the Corporation fails to make an offer to repurchase all of the outstanding shares of 10% Preferred Stock (or fails to consummate any such offer to repurchase) following a Change of Control, if such offer to

5

repurchase is required to be made pursuant to Section 4.3.A.8(a) hereof (whether or not any contractual or other restrictions apply to such repurchase, including restrictions imposed by the Bank Facility).

“Disqualified Capital Stock” means (i) that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof, in any case, on or prior to July 25, 2025, (ii) any preferred stock of the Corporation that is issued for cash and is so designated as Disqualified Capital Stock, pursuant to an officer’s certificate on the issuance date thereof, and (iii) any Capital Stock, or warrants, options or rights to acquire shares of Capital Stock, of any Subsidiary of such Person other than common equity with no preferences, privileges, and no redemption or repayment provisions. Notwithstanding the foregoing, any Capital Stock that would constitute Disqualified Capital Stock solely because the holders of the Capital Stock have the right to require the Corporation to repurchase such Capital Stock upon the occurrence of a change of control shall not constitute Disqualified Capital Stock if the terms of such Capital Stock provide that the Corporation may not repurchase or redeem any such Capital Stock pursuant to such provisions prior to the Corporation’s purchase of the 10% Preferred Stock pursuant to Section 4.3.A.8 hereof.

“Dividend Payment Date” means January 1, April 1, July 1, and October 1 of each year following the Preferred Stock Issue Date.

“Dividend Period” means the Initial Dividend Period and, thereafter, each Quarterly Dividend Period.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

“Exchange Date” has the meaning set forth in Section 4.3.A.9(a)(i) hereof.

“Exchange Notice” has the meaning set forth in Section 4.3.A.9(a)(i) hereof.

“fair market value” means, with respect to any asset or property, the price which could be negotiated in an arm’s-length free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors acting reasonably and in good faith.

“GAAP” means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other statements by such other entity as approved by a significant segment of the accounting profession in the United States.

“Holder” means a Person in whose name a share of 10% Preferred Stock is registered.

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“Indebtedness” of any Person means, without duplication, (a) all liabilities and obligations, contingent or otherwise, of such any Person, to the extent such liabilities and obligations would appear as a liability upon the consolidated balance sheet of such Person in accordance with GAAP, (i) in respect of the principal amount of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures or similar instruments, (iii) representing the balance deferred and unpaid of the purchase price of any property or services, except those incurred in the ordinary course of its business that would constitute ordinarily a trade payable to trade creditors; (b) all liabilities and obligations, contingent or otherwise, of such Person (i) evidenced by bankers’ acceptances or similar instruments issued or accepted by banks, (ii) relating to any capitalized lease obligation, or (iii) evidenced by a letter of credit or a reimbursement obligation of such Person with respect to any letter of credit; (c) all net obligations of such Person under Interest Swap and Hedging Obligations; (d) all liabilities and obligations of others of the kind described in the preceding clauses (a), (b) or (c) that such Person has guaranteed or that is otherwise its legal liability or which are secured by one or more liens on any assets or property of such Person; (e) any and all deferrals, renewals, extensions, refinancing and refundings (whether direct or indirect) of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a), (b), (c) or (d), or this clause (e), whether or not between or among the same parties; and (f) all Disqualified Capital Stock of such Person (measured at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends). For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value to be determined in good faith by the board of directors of the issuer (or managing general partner of the issuer) of such Disqualified Capital Stock. The amount of any Indebtedness outstanding as of any date shall be (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount and (2) the principal amount thereof in the case of any other Indebtedness.

“Indenture” means that certain Indenture dated as of January 25, 2005 (as modified and supplemented from time to time) by and between the Corporation and the Bank of New York, as Trustee, in connection with the issuance of the 7¾% Senior Notes due 2013.

“Initial Dividend Period” means the dividend period commencing on the Preferred Stock Issue Date and ending on the day before the first Dividend Payment Date to occur thereafter.

“Interest Swap and Hedging Obligation” shall have the meaning ascribed to such term in the Series A Junior Subordinated Debentures.

“Junior Securities” has the meaning set forth in Section 4.3.A.3 hereof.

“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the City of New York are authorized by law, regulation or executive order to remain closed.

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“LGP” means Leonard Green & Partners, L.P.

“liquidation preference” has the meaning set forth in Section 4.3.A.5(a) hereof.

“Net Cash Proceeds” means the aggregate amount of cash or Cash Equivalents received by the Corporation in the case of a sale of Qualified Capital Stock or a Capital Contribution and by the Corporation and its Subsidiaries in respect of an Asset Sale plus, in the case of an issuance of Qualified Capital Stock upon any exercise, exchange or conversion of securities (including options, warrants, rights and convertible or exchangeable debt) of the Corporation that were issued for cash on or after the Preferred Stock Issue Date, the amount of cash originally received by the Corporation upon the issuance of such securities (including options, warrants, rights and convertible or exchangeable debt) less, in each case, the direct costs relating to such Asset Sale or issuance of Qualified Capital Stock, including, without limitation, legal, accounting, investment banking and other professional fees, and brokerage and sales commissions and any relocation expenses incurred as a result thereof incurred in connection with such Asset Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only less (1) the amount (estimated reasonably and in good faith by the Corporation) of income, franchise, sales and other applicable taxes required to be paid by the Corporation or any of its respective Subsidiaries in connection with such Asset Sale in the taxable year that such sale is consummated or in the immediately succeeding taxable year, the computation of which shall take into account the reduction in tax liability resulting from any available operating losses and net operating loss carryovers, tax credits and tax credit carry-forwards, and similar tax attributes, (2) cash payments attributable to Persons owning an interest (other than a lien) in the assets subject to the Asset Sale, (3) any deduction of appropriate amounts to be provided by the Corporation as a reserve in accordance with GAAP against any liability associated with the asset disposed of in such transaction and retained by the Corporation after such sale or other disposition thereof, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction and (4) any holdbacks with respect to indemnification obligations or purchase price adjustments pending receipt thereof.

“Parent Entity” means a Person that holds, directly or indirectly, Voting Equity Interests of the Corporation with voting power, in the aggregate, at least equal to the voting power of the Voting Equity Interests of the Corporation held by the Permitted Holders on the Preferred Stock Issue Date.

“Parity Securities” has the meaning set forth in Section 4.3.A.3 hereof.

“Permitted Holders” means each of GCP California Fund, L.P., a Delaware limited partnership, LGP and any of their respective Affiliates.

“Person” means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof or other entity.

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“Preferred Stock” of any Person means any Capital Stock of such Person that has preferential rights over any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

“Preferred Stock Issue Date” means the first date on which shares of 10% Preferred Stock are originally issued by the Corporation.

“Public Offering” has the meaning set forth in Section 4.3.A.6(b)(ii) hereof.

“Qualified Capital Stock” means the 10% Preferred Stock and any other Capital Stock that is not Disqualified Capital Stock.

“Quarterly Dividend Period” means the quarterly period commencing on each January 1, April 1, July 1 and October I and ending on the day before the following Dividend Payment Date.

“Redemption Date” with respect to any shares of 10% Preferred Stock, means the date on which such shares of 10% Preferred Stock are redeemed by the Corporation.

“Redemption Notice” has the meaning set forth in Section 4.3.A.6(c)(i) hereof.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

“Senior Securities” has the meaning set forth in Section 4.3.A.3 hereof.

“Series A Junior Subordinated Debentures” means the Corporation’s 10% Series A Junior Subordinated Debentures due 2025 substantially in the form attached to the Certificate of Incorporation as Annex I.

“Stockholders Agreement” means the Stockholders Agreement, dated as of the Preferred Stock Issue Date, among the Corporation, GCP California Fund, L.P and the other stockholders named therein, as the same may be amended from time to time.

“Subsidiary” with respect to any Person, means (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person.

“Voting Equity Interests” means Capital Stock, or warrants, options or other rights to acquire such Capital Stock, which at the time are entitled to vote in the election of, as applicable, directors, members or partners generally.

(b) Interpretation. For the purposes of this Certificate of Designations: (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be

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held to include the other gender as the context requires, (ii) the word “including” and words of similar import shall mean “including, without limitation;” unless the context otherwise requires or unless otherwise specified, and (iii) the word “hereof” and words of similar import shall mean this Certificate of Designations.

2. Authorized Shares. The number of authorized shares constituting such series shall be 41,000 shares of 10% Preferred Stock. The liquidation preference of the 10% Preferred Stock shall be $1,000.00 per share as of the Preferred Stock Issue Date.

3. Rank. The 10% Preferred Stock shall, with respect to dividend distributions and distributions upon the liquidation, winding up or dissolution of the Corporation, rank senior to all classes of Common Stock of the Corporation and to each other class of Capital Stock or series of Preferred Stock now or hereafter created by the Board of Directors, the terms of which do not expressly provide that it ranks senior to or on a parity with the 10% Preferred Stock as to dividend distributions and distributions upon the liquidation, winding up or dissolution of the Corporation (collectively referred to with the Common Stock of the Corporation as “Junior Securities”). The 10% Preferred Stock shall, with respect to dividend distributions and distributions upon the liquidation, winding up or dissolution of the Corporation, rank on a parity with any class of Capital Stock or series of Preferred Stock hereafter created which expressly provides that it ranks on a parity with the 10% Preferred Stock as to dividend distributions and distributions upon the liquidation, winding up or dissolution of the Corporation (“Parity Securities”); provided, that any such Parity Securities that were not (but were required to be) approved by the Holders of shares of 10% Preferred Stock in accordance with Section 4.3.A.7(b)(i) hereof shall be deemed to be Junior Securities and not Parity Securities. The 10% Preferred Stock shall, with respect to dividend distributions and distributions upon the liquidation, winding up or dissolution of the Corporation, rank junior to each class of Capital Stock or series of Preferred Stock now or hereafter created which has been approved by the Holders of shares of 10% Preferred Stock in accordance with Section 4.3.A.7(b)(ii) hereof and which expressly provides that it ranks senior to the 10% Preferred Stock as to dividend distributions and distributions upon the liquidation, winding up or dissolution of the Corporation (collectively referred to as “Senior Securities”).

4. Dividends.

(a) Beginning on the Preferred Stock Issue Date, the Holders of the outstanding shares of 10% Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, distributions in the form of cash dividends on each share of 10% Preferred Stock, at a rate per annum equal to 10% of the liquidation preference as of the first day of the applicable Dividend Period (as such liquidation preference may be adjusted from time to time as hereinafter provided) per share of the 10% Preferred Stock, payable quarterly. Dividends on the 10% Preferred Stock shall be cumulative on a daily basis from the Preferred Stock Issue Date, whether or not the Corporation has earnings or profits, there are funds legally available for the payment of such dividends, the Corporation has sufficient cash, or dividends are declared. Dividends shall be payable when, as and if declared by the Board of Directors, quarterly in arrears on each Dividend Payment Date, commencing on April 1, 2005, provided that if any dividend payable on any Dividend Payable Date is not declared and paid in full in cash on such Dividend Payment Date, the amount payable as dividends on such

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Dividend Payment Date that is not paid in cash on such Dividend Payment Date shall be added to the Liquidation Preference on the relevant Dividend Payment Date and may no longer be declared or paid as dividends in cash. Each distribution shall be payable to the Holders of shares of 10% Preferred Stock of record as they appear on the stock books of the Corporation on such record dates, not less than 10 nor more than 45 days preceding the related Dividend Payment Date, as shall be fixed by the Board of Directors from time to time. Dividends shall cease to accumulate in respect of shares of the 10% Preferred Stock on the date of their redemption unless the Corporation shall have failed to pay the relevant redemption price on the date fixed for redemption. Not more than 30 days after a Dividend Payment Date, written notice of the amount of the dividend per share paid or accumulated shall be given by first-class mail, postage prepaid, to each Holder of shares of 10% Preferred Stock of record, on the record date fixed by the Board of Directors for payment of such dividend or, if no record date was fixed, the Dividend Payment Date, at such Holder’s address as the same appears on the stock books of the Corporation.

(b) All dividends paid with respect to shares of the 10% Preferred Stock pursuant to Section 4.3.A.4(a) hereof shall be paid pro rata to the Holders thereof entitled thereto.

(c) Dividends in connection with any mandatory redemption pursuant to Section 4.3.A.6(a) hereof or any optional redemption pursuant to Section 4.3.A.6(b) hereof may be declared and paid at any time, without reference to any regular Dividend Payment Date, to Holders of shares of 10% Preferred Stock of record on such date not more than 45 days prior to the payment thereof as may be fixed by the Board of Directors.

(d) No full dividends shall be declared by the Board of Directors or paid or funds set apart for payment of dividends by the Corporation on any Parity Securities for any period unless full cumulative dividends shall have been or contemporaneously are declared and paid in full, or declared and (in the case of dividends payable in cash) a sum in cash is set apart sufficient for such payment, on the 10% Preferred Stock for all Dividend Periods terminating on or prior to the date of payment of such full dividends on such Parity Securities. If any dividends are not paid in full, as aforesaid, upon the shares of the 10% Preferred Stock and any other Parity Securities, all dividends declared upon shares of the 10% Preferred Stock and any other Parity Securities shall be declared pro rata based on the then relative liquidation preference of the 10% Preferred Stock and such Parity Securities. So long as any shares of the 10% Preferred Stock are outstanding, the Corporation shall not make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any Parity Securities or any warrants, rights, calls or options exercisable for or convertible into any Parity Securities, and shall not permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any Parity Securities or any such warrants, rights, calls or options unless full dividends determined in accordance herewith on the 10% Preferred Stock shall have been paid or contemporaneously are declared and paid in full.

(e) The Holders of shares of the 10% Preferred Stock shall be entitled to receive the dividends provided for in Section 4.3.A.4(a) hereof in preference to and in priority over any dividends upon any Junior Securities.

(f) So long as any shares of 10% Preferred Stock are outstanding, except pursuant to the Stockholders Agreement or pursuant to the Contribution Agreement, the Corporation shall

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not (1) declare, pay or set apart for payment any dividend on any Junior Securities or make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any Junior Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities (other than the repurchase, redemption or other acquisition or retirement for value of Junior Securities solely in exchange for Junior Securities and other than the repurchase, redemption or other acquisition or retirement for value of Junior Securities (and any warrants, rights, calls or options exercisable for or convertible into such Junior Securities) held by employees of or consultants or advisors to the Corporation or any of its Subsidiaries, which repurchase, redemption or other acquisition or retirement shall have been approved by the Board of Directors), or (2) make any distribution in respect of any Junior Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities, either directly or indirectly, and whether in cash, obligations or shares of the Corporation or other property (other than distributions or dividends in Junior Securities to the holders of Junior Securities), or (3) permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any Junior Securities or any such warrants, rights, calls or options, unless, in any such case, full cumulative dividends determined in accordance herewith have been paid in full in cash on the 10% Preferred Stock (such payment to be deemed to have been made in cash for purposes of this provision even if dividends had theretofore been paid by increasing the then liquidation preference of the 10% Preferred Stock if (x) there are no arrears in the payment of dividends on the 10% Preferred Stock for any past Dividend Period and (y) the aggregate liquidation preference then in effect of all outstanding shares of 10% Preferred Stock does not exceed the initial aggregate liquidation preference for such shares) and all other redemption or repayment obligations in respect of the 10% Preferred Stock have been paid in full in cash.

(g) Dividends payable on shares of the 10% Preferred Stock for any year shall be computed on the basis of a 360-day year of twelve 30-day months, and dividends payable on shares of the 10% Preferred Stock for any period less than a year shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period for which payable. If any Dividend Payment Date occurs on a day that is not a Business Day, any accrued dividends otherwise payable on such Dividend Payment Date shall be paid on the next succeeding Business Day.

5. Liquidation Preference.

(a) Subject to the priority of any Senior Securities, upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the Holders of shares of 10% Preferred Stock then outstanding shall be entitled to be paid, out of the assets of the Corporation available for distribution to its stockholders, $1,000.00 per share of 10% Preferred Stock plus (i) all accumulated and unpaid dividends and (ii) any accrued dividends for the current Dividend Period (including an amount equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the date fixed for liquidation, dissolution or winding up to the date fixed for liquidation, dissolution or winding up) that have been added to the liquidation preference pursuant to Section 4.3.A.4(a) (collectively, the “liquidation preference”), before any payment shall be made or any assets distributed to the holders of any Junior Securities, including Common Stock of the Corporation. In connection with any redemption of 10% Preferred Stock or any Change of Control Offer under Sections 4.3.A.6 or

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4.3.A.8, respectively, clause (ii) of the term “liquidation preference” as used in such sections shall instead mean and include any accrued dividends for the current Dividend Period (including an amount equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Redemption Date or the Change of Control Payment Date, as applicable, to the Redemption Date or the Change of Control Payment Date, as applicable). Except as provided in the first sentence of this Section 4.3.A.5(a), the Holders of shares of 10% Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Corporation. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the Holders of outstanding shares of the 10% Preferred Stock and the holders of all outstanding Parity Securities, then the holders of all such shares shall share equally and ratably in such distribution of assets of the Corporation in accordance with the amounts which would be payable on such distribution if the amount to which the Holders of outstanding shares of 10% Preferred Stock and the holders of outstanding shares of all Parity Securities are entitled were paid in full.

(b) For the purposes of this Section 4.3.A.5, neither the consolidation nor merger of the Corporation with or into one or more corporations or other entities shall be deemed to be a liquidation, dissolution or winding up of the affairs of the Corporation.

6. Redemption.

(a) Mandatory Redemption. On July 25, 2025, the Corporation shall (subject to contractual and other restrictions with respect thereto, including restrictions imposed by the Bank Facility, and the legal availability of funds therefor), in the manner provided in Section 4.3.A.6(c) hereof, redeem all but not less than all of the shares of the 10% Preferred Stock then outstanding, at a redemption price equal to 100% of the aggregate liquidation preference (as then in effect) per share.

(b) Optional Redemption.

(i) The Corporation may (subject to contractual and other restrictions with respect thereto, including restrictions imposed by the Bank Facility, and the legal availability of funds therefor), at the option of the Corporation, redeem at any time or from time to time on or after January 25, 2010, from any source of funds legally available therefor, in whole or in part, in the manner provided in Section 4.3.A.6(c) hereof, any or all of the shares of the 10% Preferred Stock then outstanding, at a redemption price equal to the following percentages of the aggregate liquidation preference (as then in effect) per share, in each case beginning on January 25 of the year indicated:

Year	Redemption Price
2010	106%
2011	104%
2012	102%
2013 and thereafter	100%

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provided, however, that no optional redemption pursuant to this Section 4.3.A.6(b)(i) shall be authorized or made at any time when the Corporation is making or required to make within the next 30 days, or purchasing shares of 10% Preferred Stock under, a Change of Control offer in accordance with the provisions of Section 4.3.A.8 hereof.

(ii) In the event of one or more public offerings of Common Stock of the Corporation in an aggregate offering amount of at least twenty-five million dollars ($25,000,000) or as a result of which at least fifteen percent (15%) of the Common Stock of the Corporation (after giving effect to such offerings) is publicly traded (the “Public Offering”), the Corporation may (subject to contractual and other restrictions with respect thereto, including restrictions imposed by the Bank Facility, and the legal availability of funds therefor), at the option of the Corporation, redeem at any time or from time to time prior to January 25, 2008, from the net cash proceeds of the Public Offering, in the manner provided in Section 4.3.A.6(c) hereof, shares of the 10% Preferred Stock equal to up to 35% of such shares then outstanding, at a redemption price equal to 110% of the aggregate liquidation preference (as then in effect) per share.

(iii) in the event of a redemption pursuant to Section 4.3.A.6(b)(i) or (ii) hereof of only a portion of the then outstanding shares of the 10% Preferred Stock, the Corporation shall effect such redemption, pro rata according to the number of shares held by each Holder of shares of 10% Preferred Stock.

(c) Procedures for Redemption.

(i) At least 30 days and not more than 60 days prior to the date fixed for any redemption of the 10% Preferred Stock, written notice (the “Redemption Notice”) shall be given by first-class mail, postage prepaid, to each Holder of shares of 10% Preferred Stock to be redeemed, at such Holder’s address as the same appears on the stock register of the Corporation; provided, that no failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of 10% Preferred Stock to be redeemed except as to the Holder or Holders to whom the Corporation has failed to give said notice or except as to the Holder or Holders whose notice was defective. The Redemption Notice shall state: (1) the redemption price; (2) whether all or less than all of the outstanding shares of the 10% Preferred Stock are to be redeemed and the total number of shares of the 10% Preferred Stock being redeemed; (3) the number of shares of 10% Preferred Stock held by the Holder that the Corporation intends to redeem; (4) the date fixed for redemption; (5) that the Holder is to surrender to the Corporation, at the place or places where certificates for shares of 10% Preferred Stock are to be surrendered for redemption, in the manner and at the place designated, such Holder’s certificate or certificates representing the shares of 10% Preferred Stock to be redeemed; (6) the Section of this Certificate of Designations pursuant to which the shares of 10% Preferred Stock called for redemption are being redeemed; and (7) that dividends on the shares of the 10% Preferred Stock to be redeemed shall cease to accrue on and after such Redemption Date unless the Corporation defaults in the payment in full of the redemption price. A Redemption Notice may not be conditional.

(ii) Each Holder of shares of 10% Preferred Stock shall surrender to the Corporation the certificate or certificates representing its shares of 10% Preferred Stock to be redeemed, duly endorsed, in the manner and at the place designated in the Redemption Notice, and on the

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Redemption Date the full redemption price for such shares shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled and retired. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.

(iii) Unless the Corporation defaults in the payment in full of the redemption price, dividends on the shares of 10% Preferred Stock called for redemption shall cease to accumulate on the Redemption Date, and the Holders of such shares shall cease to have any further rights with respect thereto on the Redemption Date, other than the right to receive the redemption price, without interest.

7. Voting Rights.

(a) The Holders of shares of the 10% Preferred Stock, except as otherwise required under Delaware law, other applicable law or as set forth in Section 4.3.A.7(b) below, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation.

(b) (i) So long as any shares of the 10% Preferred Stock are outstanding, the Corporation shall not authorize or issue any class or series of Parity Securities without the affirmative vote or consent of the Holders of at least a majority of the outstanding shares of 10% Preferred Stock, voting or consenting, as the case may be, separately as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting, except that without the approval of Holders of shares of 10% Preferred Stock the Corporation may authorize and issue shares of Parity Securities the proceeds of which are used to redeem or repurchase all shares of 10% Preferred Stock then outstanding.

(ii) So long as any shares of the 10% Preferred Stock are outstanding, the Corporation shall not authorize or issue any class or series of Senior Securities without the affirmative vote or consent of the Holders of at least a majority of the outstanding shares of 10% Preferred Stock, voting or consenting, as the case may be, separately as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting.

(iii) So long as any shares of the 10% Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote or consent of the Holders of at least a majority of the outstanding shares of 10% Preferred Stock, voting or consenting, as the case may be, separately as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting, amend, alter or repeal (whether by merger, consolidation or otherwise) any of the provisions of the Certificate of Incorporation of the Corporation or of any certificate amendatory thereof or supplemental thereto so as to (1) affect adversely any of the preferences, rights, powers or privileges of the 10% Preferred Stock or of the holders thereof as such or (2) authorize the issuance after the Preferred Stock Issue Date of any additional shares of 10% Preferred Stock.

(iv) So long as any shares of the 10% Preferred Stock are outstanding, prior to the issuance of any Series A Junior Subordinated Debentures, the Corporation shall not, without the

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affirmative vote or consent of the Holders of at least a majority of the outstanding shares of 10% Preferred Stock, voting or consenting, as the case may be, as a single class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting, amend or modify (whether by merger, consolidation or otherwise) any of the provisions of the Series A Junior Subordinated Debenture or of any amendment or supplement thereto so as to affect adversely any of the preferences, rights, powers or privileges of the Series A Junior Subordinated Debentures or of the holders thereof as such.

(v) The affirmative vote or consent of the Holders of at least a majority of the outstanding shares of 10% Preferred Stock, voting or consenting, as the case may be, separately as one class, whether voting in person or by proxy, either in writing or by resolution adopted at an annual or special meeting, may waive compliance with any provision of this Certificate of Designations.

(vi) Except as set forth in Sections 4.3.A.7(b)(i) and 4.3.A.7(b)(ii) above or in clause (2) of Section 4.3.A.7(b)(iii) above, (1) the creation, authorization or issuance of any shares of any Junior Securities, Parity Securities or Senior Securities, or (2) the increase or decrease in the amount of authorized capital stock of any class or series, including 10% Preferred Stock or any other series of Preferred Stock, shall not require the consent of the Holders of 10% Preferred Stock and shall not, unless not complying with Sections 4.3.A.7(b)(i) or 4.3.A.7(b)(ii) hereof or clause (2) of Section 4.3.A.7(b)(iii) above, be deemed to affect adversely the rights, preferences, privileges or voting rights of the Holders of shares of 10% Preferred Stock.

(vii) The Corporation shall not amend or modify any of the provisions of the Certificate of Incorporation of the Corporation or of any certificate amendatory thereof or supplemental thereto so as to affect adversely any of the preferences, rights, powers or privileges of the 10% Preferred Stock, or waive compliance with any provision of this Certificate of Designations, unless such amendment, modification or waiver applies identically to all shares of 10% Preferred Stock.

(c) In any case in which the Holders of shares of the 10% Preferred Stock shall be entitled to vote pursuant to this Section 4.3.A.7 or pursuant to Delaware law or other applicable law, each Holder of shares of the 10% Preferred Stock shall be entitled to one vote for each share of 10% Preferred Stock held.

8. Change of Control Offer.

(a) Subject to contractual and other restrictions with respect thereto, including restrictions imposed by the Bank Facility, and the legal availability of funds therefor, upon the occurrence of a Change of Control, the Corporation shall make an offer (a “Change of Control Offer”) to each Holder of shares of 10% Preferred Stock to repurchase, at the Holder’s option, any or all of such Holder’s shares of 10% Preferred Stock at a purchase price in cash equal to 101% of the aggregate liquidation preference (as then in effect) per share (the “Change of Control Payment”).

(b) Within 30 days following any Change of Control, the Corporation shall mail a notice to each Holder of shares of 10% Preferred Stock stating: (1) that the Change of Control

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Offer is being made pursuant to this Section 4.3.A.8 and that all shares of 10% Preferred Stock duly tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no sooner than 20 Business Days nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”); (3) that any shares not tendered will continue to accumulate dividends; (4) that, unless the Corporation defaults in the payment of the Change of Control Payment, all shares of 10% Preferred Stock accepted for payment pursuant to the Change of Control Offer shall cease to accumulate dividends on the Change of Control Payment Date; (5) that Holders electing to have any shares of 10% Preferred Stock repurchased pursuant to a Change of Control Offer will be required to surrender such shares, with the form entitled “Option of Holder to Elect Purchase” on the reverse side of the certificate representing the shares of 10% Preferred Stock completed, or transfer such shares by book-entry transfer, to the Corporation or its transfer agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Corporation or the transfer agent, as the case may be, receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the number of shares of 10% Preferred Stock delivered for repurchase, and a statement that such Holder is withdrawing its election to have such shares repurchased; and (7) that Holders whose shares of 10% Preferred Stock are being repurchased only in part will be issued a new certificate representing a number of shares of 10% Preferred Stock equal to the number of shares of 10% Preferred Stock that were not surrendered (or transferred by book-entry transfer) by the Holder for repurchase by the Corporation.

(c) On the Change of Control Payment Date, the Corporation shall, to the extent lawful, (1) accept for payment all shares of 10% Preferred Stock or portions thereof properly tendered pursuant to the Change of Control Offer and (2) deposit with the Corporation or its transfer agent, as the case may be, an amount equal to the Change of Control Payment in respect of all shares of 10% Preferred Stock or portions thereof so tendered. The Corporation or its transfer agent, as the case may be, shall promptly mail to each Holder of shares of 10% Preferred Stock so tendered the Change of Control Payment for such shares or portions thereof. The Corporation shall promptly issue a new certificate representing shares of 10% Preferred Stock and mail (or cause to he transferred by book entry) to each Holder that did not sell all of its 10% Preferred Stock in the Change of Control Offer a new certificate representing the remaining number of shares of 10% Preferred Stock held by such Holder that were not purchased in the Change of Control Offer. The Corporation shall announce to its stockholders the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(d) The Corporation shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of shares of 10% Preferred Stock in connection with a Change of Control.

(e) Notwithstanding the foregoing, the Corporation shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.3.A.8 applicable to a Change of Control Offer made by the Corporation, and purchases all shares of 10% Preferred Stock validly tendered and not withdrawn under such Change of Control Offer.

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9. Exchange.

(a) Conditions.

(i) Subject to contractual and other restrictions with respect thereto, including restrictions imposed by the Bank Facility, the Corporation may, at its option on any Dividend Payment Date (herein the “Exchange Date”), exchange all, but not less than all, of the then outstanding shares of 10% Preferred Stock into the Series A Junior Subordinated Debentures. To exchange 10% Preferred Stock into Series A Junior Subordinated Debentures, the Corporation shall send a written notice (the “Exchange Notice”) of exchange by first-class mail to each Holder of shares of 10% Preferred Stock, which notice shall state: (v) that the Corporation has elected to exchange the 10% Preferred Stock into Series A Junior Subordinated Debentures pursuant to this Section 4.3.A.9; (w) the Exchange Date, which shall be the next succeeding Dividend Payment Date and shall not be less than 20 days following the date on which the Exchange Notice is mailed; (x) that the Holder is to surrender to the Corporation, at the place or places where certificates for shares of 10% Preferred Stock are to be surrendered for exchange, in the manner designated in the Exchange Notice, such Holder’s certificate or certificates representing the shares of 10% Preferred Stock to be exchanged (properly endorsed or assigned for transfer); (y) that dividends on the shares of 10% Preferred Stock to be exchanged shall cease to accrue, and the Holders of such shares shall cease to have any further rights with respect to such shares (other than the right to receive Series A Junior Subordinated Debentures), on the Exchange Date whether or not certificates for shares of 10% Preferred Stock are surrendered for exchange on the Exchange Date unless the Corporation shall default in the delivery of Series A Junior Subordinated Debentures; and (z) that interest on the Series A Junior Subordinated Debentures shall accrue from and after the Exchange Date whether or not certificates for shares of 10% Preferred Stock are surrendered for exchange on the Exchange Date. On the Exchange Date, if the conditions set forth in clauses (1) through (3) below are satisfied, the Corporation shall issue Series A Junior Subordinated Debentures in exchange for the 10% Preferred Stock as provided in the next paragraph; provided, that on the Exchange Date: (1) there shall be legally available funds sufficient therefor (including legally available funds sufficient therefor under Sections 160 and 170 (or any successor provisions) of the DGCL); (2) either (a) a registration statement relating to the Series A Junior Subordinated Debentures shall have been declared effective under the Securities Act prior to such exchange and shall continue to be in effect on the Exchange Date or (b)(i) the Corporation shall have obtained a written opinion of counsel that an exemption from the registration requirements of the Securities Act is available for such exchange and that upon receipt of such Series A Junior Subordinated Debentures pursuant to such exchange made in accordance with such exemption, the holders (assuming such holder is not an Affiliate of the Corporation) thereof will not be subject to any restrictions imposed by the Securities Act upon the resale thereof and (ii) such exemption is relied upon by the Corporation for such exchange; and (3) immediately after giving effect to such exchange, no Default or Event of Default (each as defined in the Series A Junior Subordinated Debentures) would exist under the Series A Junior Subordinated Debentures.

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In the event that the issuance of the Series A Junior Subordinated Debentures is not permitted on the Exchange Date set forth in the Exchange Notice, or any of the conditions set forth in clauses (1) through (3) of the preceding sentence are not satisfied on the Exchange Date set forth in the Exchange Notice, the Exchange Date shall be deemed to be the first Business Day thereafter, if any, upon which all of such conditions are satisfied.

(ii) Upon any exchange pursuant to Section 4.3.A.9(a)(i) hereof, each Holder of outstanding shares of 10% Preferred Stock shall be entitled to receive Series A Junior Subordinated Debentures in a principal amount equal to the sum of the aggregate liquidation preference (then in effect) of such Holder’s shares of 10% Preferred Stock; provided, that the Corporation may pay cash in lieu of issuing a Series A Junior Subordinated Debenture in a principal amount of less than $1,000.00.

(b) Procedure for Exchange.

(i) On or before the Exchange Date, each Holder of shares of 10% Preferred Stock shall surrender the certificate or certificates representing such shares of 10% Preferred Stock, in the manner and at the place designated in the Exchange Notice. The Corporation shall cause the Series A Junior Subordinated Debentures to be executed on the Exchange Date and, upon surrender in accordance with the Exchange Notice of the certificates for any shares of 10% Preferred Stock so exchanged (properly endorsed or assigned for transfer), such shares shall be exchanged by the Corporation into Series A Junior Subordinated Debentures. The Corporation shall pay interest on the Series A Junior Subordinated Debentures at the rate and on the dates specified therein from and after the Exchange Date.

(ii) Subject to the conditions set forth in Section 4.3.A.9(a) hereof, as of the Exchange Date the rights of the Holders of shares of the 10% Preferred Stock as stockholders of the Corporation shall cease (except the right to receive Series A Junior Subordinated Debentures), and the Person or Persons entitled to receive the Series A Junior Subordinated Debentures issuable upon exchange shall be treated for all purposes as the registered Holder or Holders of such Series A Junior Subordinated Debentures as of the date of exchange without any further action of the Holders of shares of 10% Preferred Stock.

10. Reports. So long as any shares of 10% Preferred Stock are outstanding, the Corporation shall furnish to each Holder of shares of 10% Preferred Stock (at such Holder’s address as the same appears on the stock register of the Corporation): (a) as soon as available, but in any event within 105 days after the end of each fiscal year of the Corporation, a copy of the audited consolidated balance sheet of the Corporation and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, reported on without any qualification arising out of the scope of the audit, by the Corporation’s independent certified public accountants; and (b) as soon as available, but in any event not later than 60 days after the end of each of the first three quarterly periods of each fiscal year of the Corporation, the unaudited consolidated balance sheet of the Corporation and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, certified by the Chief Executive Officer, the President, or the Chief Financial Officer of the Corporation as being fairly stated in all material respects (subject to

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normal year-end audit adjustments). All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods.

11. Preemptive Rights. No shares of 10% Preferred Stock shall have any rights of preemption whatsoever hereunder as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities or such warrants, rights or options may be designated, issued or granted.

12. Conversion. No shares of 10% Preferred Stock shall be convertible into Common Stock of the Corporation or any other securities convertible or exchangeable into Common Stock of the Corporation.

13. Reissuance of 10% Preferred Stock. Shares of 10% Preferred Stock that have been issued and reacquired by the Corporation in any manner, including shares purchased, redeemed or exchanged, shall (upon compliance with any applicable provisions of the laws of Delaware) have the status of authorized but unissued shares of Preferred Stock of the Corporation undesignated as to series and, subject to the provisions of Sections 4.3.A.7(b)(i) and 4.3.A.7(b)(ii) hereof and clause (2) of Section 4.3.A.7(b)(iii) hereof, may be designated or redesignated and issued or reissued, as the case may be, as part of any series of Preferred Stock of the Corporation; provided, that such shares may not in any event be reissued as 10% Preferred Stock.

14. Business Day. If any payment, redemption or exchange shall be required by the terms hereof to be made on a day that is not a Business Day, such payment, redemption or exchange shall be made on the immediately succeeding Business Day.

ARTICLE V

BOARD OF DIRECTORS

Section 5.1 Number. Except as otherwise fixed by or pursuant to the provisions of Article IV of this Certificate of Incorporation relating to the rights of the holders of any series of Preferred Stock to elect additional directors in certain circumstances, the Board of Directors shall consist of such number of directors as fixed from time to time pursuant to the Bylaws of the Corporation.

Section 5.2 Powers. Except as otherwise expressly provided by the DGCL or this Certificate of Incorporation, the management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors.

Section 5.3 Election.

(a) Ballot Not Required. The directors of the Corporation need not be elected by written ballot unless the Bylaws of the Corporation so provide.

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(b) Notice. Advance notice of stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation.

ARTICLE VI

EXISTENCE

The Corporation shall have perpetual existence.

ARTICLE VII

AMENDMENT

Section 7.1 Amendment of Certificate of Incorporation. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights conferred herein are granted subject to this reservation.

Section 7.2 Amendment of Bylaws. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation.

ARTICLE VIII

LIABILITY AND INDEMNIFICATION OF DIRECTORS

Section 8.1 No Personal Liability. To the fullest extent permitted by the DGCL as the same exists or as may hereafter be amended, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.

Section 8.2 Indemnification. Each director who was or is made a party or is threatened to be made a party to or is involved in any claim, action, suit or proceeding, whether civil, criminal, administrative, investigative or other (a “proceeding”), by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director, or is or was serving in the course of employment, or at the request of the Corporation, as a director of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action or inaction in an official capacity as a director, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL as the same exists or as may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than the DGCL permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise taxes pursuant to the Employee Retirement Income Security Act of 1974, as amended, or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such director in connection therewith. The right to indemnification conferred by this Section 8.2 shall continue as to a person who has

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ceased to be a director and shall inure to the benefit of such person’s heirs, executors, administrators and other legal representatives; provided, however, that, except as provided in Section 8.3, the Corporation shall indemnify any such person seeking indemnification in connection with such a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof), or the initiation thereof, was authorized or approved by the Corporation. The right to indemnification conferred by this Section 8.2 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition in accordance with and to the fullest extent permitted by the DGCL, as the same exists or as may hereafter be amended; provided, however, that, if the DGCL requires the payment of such expenses incurred by a director in his or her capacity as a director (and not in any other capacity in which service was or is rendered by such person while a director, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, payment shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director to repay all amounts so advanced if it shall ultimately be determined that such director is not entitled to be indemnified under this Section or otherwise.

Section 8.3 Defenses To Indemnification Claim. If a claim under Section 8.2 is not paid in full by the Corporation within thirty (30) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the requirements of the DGCL have been complied with by the claimant) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 8.4 Amendment or Repeal. Any amendment, alteration or repeal of this Article VIII that adversely affects any right of an indemnitee or its successors shall be prospective only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.

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ANNEX I

FORM OF SERIES A JUNIOR SUBORDINATED DEBENTURE

[FORM OF SERIES A JUNIOR SUBORDINATED DEBENTURE]

THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND IT MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.

LESLIE’S POOLMART, INC.

10% JUNIOR SUBORDINATED DEBENTURE DUE 2025

$             [DATE]

Leslie’s Poolmart, Inc., a corporation duly organized and existing under the laws of Delaware (herein called the “Company”), for value received, hereby promises to pay to                     , or registered assigns (the “Holder”), the principal sum of              dollars, together with any accrued and unpaid interest, on July 25, 2025 (the “Maturity Date”), and to pay interest, calculated and payable as set forth below.

ARTICLE I.

PAYMENT OF PRINCIPAL AND INTEREST

Section 1.1 Payment of Principal and Interest. Interest on the principal balance of this Debenture outstanding from time to time until paid in full shall accrue at the rate of 10% per annum, computed on the basis of a 360-day year, commencing on the Exchange Date, payable semi-annually on each Interest Payment Date and (to the extent that the payment of such interest shall be legally enforceable) at the rate of 16% per annum on any overdue principal and on any overdue installment of interest, until paid as specified herein. Payment of the principal of and interest on this Debenture will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts and at such place in the United States as the Company may from time to time designate in writing to the Holders.

Section 1.2 Payment Only on Business Days. Any payment hereunder which, but for this Section 1.2, would be payable on a day which is not a Business Day, shall instead be due and payable on the Business Day next following such date for payment.

ARTICLE II.

REMEDIES

Section 2.1 Events of Default.

(a) Each of the following is an “Event of Default”:

(i) the Company defaults for 30 days in the payment when due of interest on this Debenture whether or not prohibited by the subordination provisions herein;

(ii) the failure by the Company to pay all or any part of the principal or premium on this Debenture when and as the same becomes due and payable at maturity, redemption, by acceleration or otherwise, including payment of the Change of Control Purchase Price, or otherwise;

(iii) the failure by the Company to observe or perform any other covenant or agreement contained in this Debenture and the continuance of such failure for a period of 30 days after written notice is given to the Company by the Holder, specifying such Default;

(iv) the entry by a court of competent jurisdiction of (A) a decree or order for relief in respect of the Company or any Subsidiary of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company or any such Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any such Subsidiary under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any such Subsidiary or of any substantial part of the property of the Company or any such Subsidiary, or ordering the winding up or liquidation of the affairs of the Company or any such Subsidiary, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days;

(v) (A) the commencement by the Company or any Subsidiary of the Company of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by the Company or any such Subsidiary to the entry of a decree or order for relief in respect of the Company or any Subsidiary of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law, (B) the consent by the Company or any Subsidiary of the Company to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or any Subsidiary of the Company or for all or substantially all of the property and assets of the Company or any Subsidiary of the Company, or (C) the making by the Company or any Subsidiary of the Company of any general assignment for the benefit of creditors;

(vi) a default in any Indebtedness of the Company or its Subsidiaries, with an aggregate principal amount in excess of $15,000,000 (a) resulting from the failure to pay principal at maturity or interest or (b) as a result of which the maturity of such Indebtedness has been accelerated prior to its stated maturity; or

(vii) a final unsatisfied judgment or final unsatisfied judgments for the payment of money not covered by insurance in an aggregate amount in excess of $15,000,000, at any one time rendered against the Company or any Subsidiary of the Company by a court or courts of competent jurisdiction, which judgments remain unstayed, undischarged or unbonded for a period (during which execution shall not be effectively stayed) of 60 days.

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(b) In the case of (l) an Event of Default specified in clause (i) or (ii) of Section 2.1(a) hereof, the Holder hereof may, at its option, by notice in writing to the Company, declare this Debenture to be, and this Debenture shall thereupon be and become, due and payable immediately without further action or notice, or (2) an Event of Default specified in clause (iv) or (v) of Section 2.1(a) hereof, with respect to the Company or any of its Subsidiaries, this Debenture will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Holders of at least 50% in principal amount of the then Outstanding Debentures may declare all the Debentures to be due and payable immediately. Upon any such declaration, the Debentures shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (iv) or (v) of Section 2.1 hereof occurs with respect to the Company or any of its Subsidiaries, all Outstanding Debentures shall be due and payable immediately without further action or notice.

(c) If payment of this Debenture is accelerated because of an Event of Default, the Company shall promptly notify the holders of Senior Debt of the acceleration.

(d) If any Event of Default shall have occurred and be continuing, subject to the provisions of Article 2 and Article 5 hereof, the Holder may proceed to protect and enforce its rights either by suit in equity or by action at law, or both, whether for specific performance of any provision of this Debenture or in aid of the exercise of any power granted to the Holder under this Debenture.

Section 2.2 Unconditional Right of Holders to Receive Principal and Interest. Notwithstanding any other provision in this Debenture, the Holder shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on this Debenture on the Maturity Date (or, in the case of redemption, on the Redemption Date, or in the case of a Change of Control Offer made by the Company, on the Change of Control Purchase Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

Section 2.3 Restoration of Rights and Remedies. If the Holder has instituted any proceeding to enforce any right or remedy under this Debenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Holder, then and in every such case, subject to any determination in such proceeding, the Company and the Holder shall be restored severally and respectively to their former positions under this Debenture and thereafter all rights and remedies of the Holder shall continue as though no such proceeding had been instituted.

Section 2.4 Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of a mutilated, destroyed, lost or stolen Debenture in Section 7.7, no right or remedy herein conferred upon or reserved to the Holder is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder or otherwise shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

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Section 2.5 Delay or Omission Not Waiver. No delay or omission of the Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Holder may be exercised from time to time, and as often as may be deemed expedient by the Holder.

ARTICLE III.

COVENANTS

Section 3.1 Limitation on Merger, Sale or Consolidation. The Company shall not, directly or indirectly, consolidate with or merge with or into another Person or sell, assign, convey or transfer all or substantially all of its assets (computed on a consolidated basis), whether in a single transaction or a series of related transactions, to another Person or group of affiliated Persons or adopt a plan of liquidation, unless:

(a) either (i) the Company is the continuing entity or (ii) the resulting, surviving or transferee entity or, in the case of a plan of liquidation, the entity which receives the greatest value from such plan of liquidation is a corporation organized under the laws of the United States, any state thereof or the District of Columbia and expressly assumes in writing all of the obligations of the Company in connection with this Debenture; and

(b) no Default or Event of Default shall exist or shall occur immediately after such transaction(s).

In addition, the Company will not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person.

Section 3.2 Successor Substituted. Upon any consolidation or merger or any transfer of all or substantially all of the assets of the Company or consummation of a plan of liquidation in accordance with the foregoing, the successor corporation formed by such consolidation or into which the Company is merged or to which such transfer is made or, in the case of a plan of liquidation, the entity which receives the greatest value from such plan of liquidation shall succeed to and be substituted for (so that from and after the date of such consolidation, merger, transfer or consummation of a plan of liquidation, the provisions of this Debenture referring to the “Company” shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of, the Company under this Debenture with the same effect as if such successor corporation had been named therein as the Company; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on this Debenture except in the case of a sale of all of the Company’s assets in a transaction that is subject to, and that complies with the provisions of, Section 3.1 hereof.

Section 3.3 Change of Control Offer.

(a) Subject to contractual and other restrictions with respect thereto, including restrictions imposed by the Bank Facility, upon the occurrence of a Change of Control, the Company shall make an offer (a “Change of Control Offer”) to repurchase, at the Holder’s option, this Debenture or any portion hereof at a cash price equal to 101% of the aggregate

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principal amount of this Debenture then outstanding that is accepted for repurchase by the Holder hereof, plus, without duplication, all unpaid interest on the Debenture (including an amount equal to the prorated interest from the Interest Payment Date immediately prior to the repurchase to the date of repurchase), if any, to the date of repurchase (the “Change of Control Payment”).

(b) Within 30 days following any Change of Control, the Company shall mail a notice to the Holder stating: (1) that the Change of Control Offer is being made pursuant to this Section 3 and that this Debenture, upon being duly tendered, will be accepted for payment; (2) the purchase price and the purchase date, which shall be no sooner than 20 Business Days nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”); (3) that if less than the full principal amount of this Debenture is tendered, the amount not so tendered will continue to accrue interest in accordance with Section 1.1; (4) that, unless the Company defaults in the payment of the Change of Control Payment, the portion of this Debenture accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest on the Change of Control Payment Date; (5) that the Holder electing to have this Debenture or any portion hereof repurchased pursuant to a Change of Control Offer will be required to surrender this Debenture to the Company at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that the Holder will be entitled to withdraw its election if the Company receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount tendered for repurchase, and a statement that the Holder is withdrawing its election to have the Debenture or such portion, repurchased; and (7) that the Holder, if the Debenture is being repurchased only in part, will be issued a new debenture with the same terms and conditions as this Debenture in a principal amount equal in amount to the unpurchased principal amount of the Debenture.

(c) On the Change of Control Payment Date, the Company shall accept for payment this Debenture or any portion hereof properly tendered pursuant to the Change of Control Offer. The Company shall promptly mail to the Holder the Change of Control Payment for this Debenture or any portion hereof. The Company shall promptly issue a new debenture for any unpurchased portion of this Debenture surrendered by the Holder, if any. The Company shall announce to all holders of Company debentures the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(d) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of this Debenture in connection with a Change of Control.

(e) The Company’s obligations with respect to a Change of Control Offer shall be satisfied to the extent actually performed by a third party in the manner, at the times and otherwise in compliance with the terms of this Section 3. Any portion of this Debenture purchased by such third party as contemplated by the preceding sentence shall, notwithstanding the foregoing provisions of this Section 3, remain outstanding and continue to accrue interest on and after the Change of Control Payment Date.

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(f) Notwithstanding the foregoing, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Debenture applicable to a Change of Control Offer made by the Company, and purchases all Debentures validly tendered and not withdrawn under such Change of Control Offer.

Section 3.4 Restricted Payments.

(a) The Company shall not, directly or indirectly, (i) declare or pay any dividend or make any other distribution in respect of shares of the Company’s Capital Stock, or any warrants, options or other rights to acquire shares of such Capital Stock, and (ii) make any payment (except to the extent made with Qualified Capital Stock) on account of the purchase, redemption or other acquisition or retirement for value of any of the Company’s Capital Stock, or any warrants, options or other rights to acquire shares of such Capital Stock (each of the foregoing actions set forth in clauses (i) and (ii) being referred to as a “Restricted Payment”), if at the time of such Restricted Payment or immediately after giving effect thereto, (1) a Default Event shall have occurred and be continuing or (2) the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made subsequent to the Preferred Stock Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property) shall exceed the sum of (without duplication): (x) 50% of the cumulative Consolidated Net Income (taken as one accounting period) of the Company accrued during the period commencing on the first day of the first full fiscal quarter in which the Preferred Stock Issue Date occurs to and including the last day of the most recent fiscal period for which internal financial statements are available (or if cumulative Consolidated Net Income shall be a deficit, minus 100% of such deficit); plus (y) 100% of the aggregate Net Cash Proceeds received by the Company from any Person (other than a Subsidiary of the Company) from a Capital Contribution or from the sale subsequent to the Preferred Stock Issue Date of Qualified Capital Stock of the Company. For purposes of this Section 3.4, the term “Restricted Payment” does not include (A) any dividend, distribution or other payment on or with respect to any Capital Stock of the Company, or any warrants, options or rights to acquire shares of such Capital Stock, to the extent payable solely in shares of Qualified Capital Stock, (B) any dividend, distribution or other payment to the Company, or to any Subsidiary of the Company, by the Company or any of its Subsidiaries; or (C) the payment of the Merger Consideration (as defined in the Merger Agreement).

(b) Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date of declaration; (2) if no Default Event shall have occurred and be continuing, Restricted Payments which do not exceed $15,000,000 in the aggregate from and after the Preferred Stock Issue Date; (3) for the avoidance of doubt, payments pursuant to the Management Agreement; (4) if no Default Event shall have occurred and be continuing, the declaration and payment of dividends to holders of any class or series of Disqualified Capital Stock issued after the Preferred Stock Issue Date; (5) any dividend, distribution or other payments by any of the Company’s Subsidiaries on its Capital Stock, or warrants, options or other rights to acquire such Capital Stock, that is paid pro rata to all holders of such Capital Stock, warrants, options or rights, as applicable; (6) (i) any legal defeasance, redemption, retirement, repurchase or other acquisition

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of Capital Stock of the Company with the Net Cash Proceeds received by the Company made within 60 days of the sale of its Qualified Capital Stock (other than to a Subsidiary), or (ii) any issuance of Qualified Capital Stock of the Company in exchange for, or the proceeds of which are used to purchase, any Capital Stock of the Company; (7) the repurchase of Capital Stock, or warrants, options or other rights to acquire such Capital Stock, deemed to occur upon the exercise of stock options, warrants or other convertible securities to the extent such Capital Stock, warrants, options or other rights represent a portion of the exercise price thereof; and (8) payments to a Parent Entity (or a subsidiary of a Parent Entity), (i) to enable the Parent Entity to pay federal, state or local tax liabilities (any such payments to a Parent Entity, a “Tax Payment”), not to exceed the amount of any tax liabilities that would be otherwise payable by the Company and its United States subsidiaries to the appropriate taxing authorities to the extent that the Parent Entity has an obligation to pay such tax liabilities relating to the operations, assets, or capital of the Company or its United States subsidiaries; provided, that (x) notwithstanding the foregoing, in the case of determining the amount of a Tax Payment that is permitted to be paid by the Company and any of its United States subsidiaries in respect of their consolidated Federal income tax liability, or consolidated, combined, unitary or group, state or local income tax liability, such payment shall be determined assuming that the Company is the parent company of an affiliated group (the “Company Affiliated Group”) filing a consolidated federal income tax return or consolidated, combined, unitary, or group, state or local income tax return, and that the Parent Entity and each such United States subsidiary is a member of the Company Affiliated Group and (y) any Tax Payments shall either be used by the Parent Entity to pay such tax liabilities within 90 days of the Parent Entity’s (or a subsidiary of a Parent Entity) receipt of such payment or refunded to the payee, and (ii) in an aggregate amount not to exceed (A) prior to an initial public offering by any Parent Entity, $500,000 per year and (B) after an initial public offering by any Parent Entity, $2,000,000 per year, in each case in order to pay legal and accounting expenses, payroll and other compensation expenses in the ordinary course of business, filing and listing fees and other corporate overhead expenses in the ordinary course of business (for purposes of this clause (8), “tax liabilities” shall include any penalties and interest related to a tax liability).

In determining the aggregate amount of Restricted Payments made subsequent to the Preferred Stock Issue Date in accordance with clause (2) of Section 3.4(a) hereof, amounts distributed pursuant to clauses (1) and (4) of this Section 3.4(b) hereof shall be included in such calculation, and amounts distributed pursuant to clauses (2), (3), (5), (6), (7), and (8) shall not be included in such calculation. For purposes of this Section 3.4, the amount of any Restricted Payment made or returned, if other than in cash, shall be the fair market value thereof, as determined in the good faith reasonable judgment of the Board of Directors, unless stated otherwise, at the time made or returned, as applicable.

Section 3.5 Reports. The Company shall furnish to the Holder (at such Holder’s address as set forth below): (a) as soon as available, but in any event within 105 days after the end of each fiscal year of the Company, a copy of the audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, reported on without any qualification arising out of the scope of the audit, by the Company’s independent certified public accountants; and (b) as soon as available, but in any event not later than 60 days after the end of each of the first three quarterly periods of each fiscal year of the Company, the unaudited

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consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, certified by the Chief Executive Officer, the President, or the Chief Financial Officer of the Company as being fairly stated in all material respects (subject to normal year-end audit adjustments). All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods.

Section 3.6 Investment Company. The Company will not, and will not permit any of its Subsidiaries to, be required to register as an “investment company” (as that term is defined in the Investment Company Act of 1940, as amended), or otherwise become subject to registration under the Investment Company Act.

Section 3.7 No Senior Subordinated Debt. The Company will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to this Debenture.

Section 3.8 Waiver of Usury, Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Debenture, and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 3.9 Taxes. The Company will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holder.

Section 3.10 Corporate Existence. Subject to Section 3.1 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect:

(a) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary; and

(b) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holder.

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ARTICLE IV.

REDEMPTION OF DEBENTURES

Section 4.1 Optional Redemption.

(a) (i) The Company may (subject to contractual and other restrictions with respect thereto, including restrictions imposed by the Bank Facility), at the option of the Company, redeem at any time or from time to time on or after January 25, 2010, from any source of funds legally available therefor, in whole or in part, in the manner provided in Section 4.2 hereof, this Debenture or any portion hereof, at a redemption price equal to the following percentages of the aggregate principal amount proposed to be redeemed by the Company plus, without duplication, all accrued and unpaid interest on the Debenture, if any, to the Redemption Date, in each case beginning on January 25 of the year indicated:

Year	Redemption Price
2010	106	%
2011	104	%
2012	102	%
2013 and thereafter	100	%

provided, however, that no optional redemption pursuant to this Section 4.1(a)(i) shall be authorized or made at any time when the Company is making or required to make within the next 30 days, or purchasing this Debenture or any portion hereof, under, a Change of Control offer in accordance with the provisions of Section 3.3 hereof.

(ii) In the event of one or more public offerings of Common Stock of the Company in an aggregate offering amount of at least twenty-five million dollars ($25,000,000) or as a result of which at least fifteen percent (15%) of the Common Stock of the Company (after giving effect to such offerings) is publicly traded (the “Public Offering”), the Company may (subject to contractual and other restrictions with respect thereto, including restrictions imposed by the Bank Facility), at the option of the Company, redeem at any time or from time to time prior to January 25, 2008, from the net cash proceeds of the Public Offering, in the manner provided in Section 4.2 hereof, this Debenture, at a redemption price equal to 107.75% of the aggregate principal amount proposed to be redeemed by the Company plus, without duplication, all accrued and unpaid interest on the Debenture, if any, to the Redemption Date; provided, that, the Company shall redeem only up to 35% in principal amount of the then Outstanding Debentures.

(b) In the event of a redemption pursuant to Section 4.1(a)(i) or (ii) hereof of only a portion of the total aggregate principal amount outstanding of the Outstanding Debentures, the Company shall effect such redemption as it determines pro rata according to the principal amount outstanding of debentures held by each Holder of Outstanding Debentures.

Section 4.2 Procedures for Redemption.

(a) At least 30 days and not more than 60 days prior to the date fixed for any redemption of this Debenture, written notice (the “Redemption Notice”) shall be given by first-class

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mail, postage prepaid, to the Holder at such Holder’s address as set forth below. The Redemption Notice shall state: (1) the redemption price; (2) whether all or less than all the outstanding principal amount of this Debenture is to be redeemed and the amount being redeemed; (3) the date fixed for redemption; (4) that the Holder is to surrender the Debenture to the Company, at the place or places where the Debenture is to be surrendered for redemption, in the manner and at the place designated; (5) the Section of this Debenture pursuant to which the Debenture called for redemption is being redeemed; and (6) that interest on the portion of the Debenture to be redeemed shall cease to accrue on such Redemption Date unless the Company defaults in the payment in full of the redemption price. A Redemption Notice may not be conditional.

(b) The Holder shall surrender to the Company this Debenture to be redeemed, duly endorsed, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full redemption price for this Debenture shall be payable in cash to the Person whose name appears on this Debenture as the holder thereof, and this Debenture shall be canceled and retired. In the event that less than all of the principal amount outstanding represented by this Debenture is redeemed, a new debenture, with the same terms and conditions as this Debenture, shall be issued representing the unredeemed portion.

(c) Unless the Company defaults in the payment in full of the redemption price, interest on the portion of this Debenture called for redemption shall cease to accrue on the Redemption Date, and the Holder shall cease to have any further rights with respect thereto on the Redemption Date, other than the right to receive the redemption price, without interest.

ARTICLE V.

SUBORDINATION

Section 5.1 Agreement to Subordinate. The Company agrees, and the Holder by accepting this Debenture agrees, that the Indebtedness evidenced by this Debenture and all Obligations in respect of this Debenture are subordinated in right of payment, to the extent and in the manner provided in this Article 5, to the prior payment in full in cash or Cash Equivalents of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt.

Section 5.2 Liquidation; Dissolution; Bankruptcy. Upon any distribution of assets of the Company upon any dissolution, winding up, total or partial liquidation or reorganization of the Company, whether voluntary or involuntary, in bankruptcy, insolvency, receivership or similar proceeding or upon assignment for the benefit of creditors or any marshaling of the Company’s assets and liabilities (1) the holders of all Senior Debt of the Company shall first be entitled to receive payment in full in cash or Cash Equivalents of all Senior Debt (including Post-Commencement Interest and Expense Claims) before the Holder is entitled to receive any payment on account of the principal of and interest on this Debenture or any Obligation in respect to this Debenture (other than Junior Securities); and (2) any payment or distribution of assets of the Company of any kind or character from any source, whether in cash, property or securities (other than Junior Securities), to which the Holder would be entitled (by set-off or otherwise), except for this Article 5, shall be paid by the liquidating trustee or agent or other

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Person making such a payment or distribution directly to the holders of such Senior Debt or their representatives to the extent necessary to make payment in full of all such Senior Debt (including Post-Commencement Interest and Expense Claims) remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of Senior Debt.

Section 5.3 Default on Senior Debt.

(a) The Company may not make any payment or distribution to the Holder in respect of Obligations with respect to this Debenture and may not acquire from the Holder this Debenture for cash or property (other than Junior Securities) until all principal and other Obligations with respect to the Senior Debt have been paid in full if:

(i) a payment default on Senior Debt occurs and is continuing beyond any applicable grace period in the agreement, indenture or other document governing such Senior Debt; or

(ii) any other default occurs and is continuing on any series of Senior Debt that permits holders of that series of Senior Debt to accelerate its maturity and the Company receives a notice of such default (a “Payment Blockage Notice”) from the holders of any Senior Debt. If the Company receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice will be effective for purposes of this Section unless and until (A) at least 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (B) all scheduled payments of principal and interest on this Debenture that have come due have been paid in full in cash.

No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Company may be, or may be made, the basis for a subsequent Payment Blockage Notice unless such default has been waived for a period of not less than 90 days.

(b) The Company may and will resume payments on and distributions in respect of this Debenture and may acquire this Debenture upon the earlier of:

(i) in the case of a payment default, upon the date upon which such default is cured or waived, or

(ii) in the case of a nonpayment default, upon the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Senior Debt has been accelerated, if this Article 5 otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition.

Section 5.4 Acceleration. If payment of this Debenture is accelerated because of an Event of Default, the Company will promptly notify the holders of Senior Debt of the acceleration.

Section 5.5 Subrogation. After all Senior Debt is paid in full in cash or Cash Equivalents and until this Debenture is paid in full, the Holder shall be subrogated (equally and ratably with all other Indebtedness pari passu with this Debenture) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions

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otherwise payable to the Holder has been applied to the payment of Senior Debt. A distribution made under this Article 5 to holders of Senior Debt that otherwise would have been made to the Holder is not, as between the Company and the Holder, a payment by the Company on this Debenture. No holder of Senior Debt shall be obligated to create, warrant, preserve or protect any such subrogation right or shall suffer any loss or diminution of its rights hereunder if for any reason (including the lack of enforceability or disallowance of any Post-Commencement Interest and Expense Claim) such right of subrogation is not available to any Holder.

Section 5.6 Relative Rights. This Article 5 defines the relative rights of the Holder and holders of Senior Debt. Nothing in this Debenture shall:

(a) impair, as between the Company and the Holder, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on this Debenture in accordance with its terns;

(b) affect the relative rights of the Holder and creditors of the Company other than their rights in relation to the holders of Senior Debt; or

(c) prevent the Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of the holders of Senior Debt to receive distributions and payments otherwise payable to the Holder.

If the Company fails because of this Article 5 to pay principal of or interest on a Debenture on the due date, the failure is still a Default or Event of Default.

Section 5.7 Subordination May Not Be Impaired by Company.

(a) No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by this Debenture shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any holder of Senior Debt to comply with this Debenture.

(b) Without in any way limiting the generality of the foregoing paragraph, the holders of the Senior Debt may, at any time and from time to time, without the consent of or notice to the Holder, without incurring responsibility to the Holder and without impairing or releasing the subordination provided in this Article 5 or the Obligations hereunder of the Holder to the holders of Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time or payment of, or renew or alter, Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person in any manner for the collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company or any other Person; provided, however, that in no event shall any such actions limit the right of the Holder to take any action to accelerate the maturity of the Debentures in accordance with the provisions set forth in Section 5.2 or to pursue any rights or remedies against the Company under this Debenture or under applicable laws if the taking of such action does not otherwise violate the terms of this Article 5.

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ARTICLE VI.

DEFINITIONS

“10% Preferred Stock” means the Company’s 10% Redeemable Exchangeable Cumulative Preferred Stock.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract, or otherwise.

“Asset Sale” means, in one or a series of related transactions, the conveyance, sale, transfer, assignment or other disposal by the Company or any of its Subsidiaries of, directly or indirectly, any of their property, business or assets, including by merger or consolidation (in the case of one of the Company’s Subsidiaries), and including any sale or other transfer or issuance of any Capital Stock, or warrants, options or other rights to acquire such Capital Stock, of any of the Company’s Subsidiaries, whether by the Company or one of the Company’s Subsidiaries or through the issuance, sale or transfer of Capital Stock, or warrants, options or other rights to acquire such Capital Stock, by one of the Company’s Subsidiaries and including any sale and leaseback transaction, other than in any such case to the Company or another Subsidiary.

“Bank Facility” shall mean that certain Amended and Restated Loan and Security Agreement, dated as of the Closing Date (as amended, modified and supplemented from time to time), by and among the Company, LPM Manufacturing, Inc., the financial institutions named therein and Wells Fargo Retail Finance LLC.

“Beneficial Owner” or “beneficial owner” for purposes of the definition of Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Exchange Date), whether or not applicable.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in the City of New York are authorized by law, regulation or executive order to remain closed.

“Capital Contribution” means any contribution to the equity of the Company subsequent to the Preferred Stock Issuance Date from a direct or indirect parent of the Company for which no consideration (other than the issuance of Qualified Capital Stock) is given.

“Capital Stock” means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity or ownership interests of such Person.

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“Cash Equivalents” means:

(a) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided, that the full faith and credit of the United States of America is pledged in support thereof), maturing within one year after the date of acquisition;

(b) demand deposits, time deposits and certificates of deposit and commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000, maturing within one year after the date of acquisition;

(c) commercial paper issued by others rated at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody’s, maturing within one year after the date of acquisition;

(d) repurchase obligations having terms not more than seven days, with institutions meeting the criteria set forth in clause (b) above, for direct obligations issued by or fully guaranteed by the United States of America (provided, that the full faith and credit of the United States of America is pledged in support thereof), having, on the date of purchase thereof, a fair market value of at least 100% of the amount of repurchase obligations;

(e) interests in money market or mutual funds all of whose assets are invested in assets or securities of the type described in clauses (a) through (d) above;

(f) direct investments in tax exempt obligations of any state of the United States of America, or any municipality of any such state, in each case rated “AA” or better by S&P, “Aa2” or better by Moody’s or an equivalent rating by any other credit rating agency of recognized national standing; provided, that such obligations mature within six months from the date of acquisition thereof; or

(g) investments in mutual funds, 95% of more of the assets of which are invested in obligations of the types described in clauses (a) - (f) above.

“Change of Control” means (1) prior to consummation of the first Public Offering after the Preferred Stock Issue Date, the Permitted Holders shall cease to beneficially own, in the aggregate, a majority of the voting power of the Voting Equity Interests of the Company, or (2) following the consummation of the first Public Offering after the Preferred Stock Issue Date, (A) any merger or consolidation of the Company with or into any Person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the Company’s assets, on a consolidated basis, in one transaction or a series of related transactions, if, immediately after giving effect to such transaction(s), any “person” (including any group that is deemed to be a “person”) (other than the Permitted Holders) is or becomes the beneficial owner of more than 40% of the aggregate voting power of the Voting Equity Interests of the transferee(s) or surviving entity or entities and the Permitted Holders, in the aggregate, beneficially own, directly

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or indirectly, less voting power than such person, (B) any “person” (including any group that is deemed to be a “person”) (other than the Permitted Holders) is or becomes the beneficial owner of more than 40% of the aggregate voting power of the Voting Equity Interests of the Company and the Permitted Holders, in the aggregate, beneficially own, directly or indirectly, less voting power than such person, (C) the Continuing Directors cease for any reason to constitute a majority of the Company’s Board of Directors then in office, or (D) the Company adopts a plan of liquidation. As used in this definition, “person” (including any group that is deemed to be a “person”) has the meaning given by Section 13(d) of the Exchange Act, whether or not applicable.

“Continuing Director” means during any period of 12 consecutive months after the Preferred Stock Issue Date, individuals who at the beginning of any such 12-month period constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, including new directors designated in or provided for in an agreement regarding the merger, consolidation or sale, transfer or other conveyance, of all or substantially all of the assets of the Company or any Parent Entity, if such agreement was approved by a vote of such majority of directors).

“Change of Control Offer” has the meaning set forth in Section 3.3(a).

“Change of Control Payment” has the meaning set forth in Section 3.3(a).

“Change of Control Payment Date” has the meaning set forth in Section 3.3(b).

“Common Stock” means, of any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock, and includes, without limitation, all series and classes of such common stock.

“Company” has the meaning set forth in the Preamble.

“Consolidated Net Income” means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries (before preferred stock dividends and otherwise determined on a consolidated basis in accordance with GAAP) for such period; provided, that there shall be excluded therefrom (only to the extent included in computing such net income (or loss) and without duplication): (a) any not after-tax gain, loss, charge or expense which is either extraordinary (as determined in accordance with GAAP) or is either unusual or nonrecurring (including any restructuring charges and any gain, loss, charge or expense from the sale or other disposition of assets outside the ordinary course of business or from the issuance or sale of any securities) as determined in good faith by the Company, it being understood and agreed that Item 10(c) of Regulation S-K under the Securities Act shall not constitute a limitation on any such determination, (b) the net income, if positive, of any Person, other than a Subsidiary, in which such Person or any of its Subsidiaries has an interest, except to the extent of the amount of any dividends or distributions actually paid in cash to such Person or

15

a Subsidiary of such Person during such period, but in any case not in excess of such Person’s pro rata share of such Person’s net income for such period, (c) the net income, if positive, of any of such Person’s Subsidiaries to the extent that the declaration or payment of dividends or similar distributions is not at the time permitted by operation of the terms of its charter or bylaws or any other agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary, (d) the cumulative effect of a change in accounting principles, (e) any non-cash compensation expense realized from grants of stock appreciation or similar rights, stock options or other rights to officers, directors and employees of the Company, and (f) any goodwill impairment charges pursuant to Financial Accounting Standards Board Statement No. 142.

“Debenture” means this 10% Series A Junior Subordinated Debenture due 2025.

“Default” means any event which is, or after notice or lapse of time or both would become, an Event of Default.

“Disqualified Capital Stock” means (i) that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof, in any case, on or prior to July 25, 2025, (ii) any preferred stock of the Company that is issued for cash and is so designated as Disqualified Capital Stock, pursuant to an officer’s certificate on the issuance date thereof, and (iii) any Capital Stock, or warrants, options or rights to acquire shares of Capital Stock, of any Subsidiary of such Person other than common equity with no preferences, privileges, and no redemption or repayment provisions. Notwithstanding the foregoing, any Capital Stock that would constitute Disqualified Capital Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control shall not constitute Disqualified Capital Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions prior to the Company’s purchase of the Debentures pursuant to Section 3.3.

“Event of Default” has the meaning set forth in Section 2.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

“Exchange Date” means the date fixed by the Company at its option upon which the Company’s 10% Preferred Stock was exchanged for an aggregate principal amount of Debentures equal to the liquidation value of the 10% Preferred Stock so exchanged.

“fair market value” means, with respect to any asset or property, the price which could be negotiated in an arm’s-length free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith.

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“GAAP” means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other statements by such other entity as approved by a significant segment of the accounting profession in the United States.

“Holder” has the meaning set forth in the Preamble.

“Indebtedness” of any Person means, without duplication, (a) all liabilities and obligations, contingent or otherwise, of such any Person, to the extent such liabilities and obligations would appear as a liability upon the consolidated balance sheet of such Person in accordance with GAAP, (i) in respect of the principal amount of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures or similar instruments, (iii) representing the balance deferred and unpaid of the purchase price of any property or services, except those incurred in the ordinary course of its business that would constitute ordinarily a trade payable to trade creditors; (b) all liabilities and obligations, contingent or otherwise, of such Person (i) evidenced by bankers’ acceptances or similar instruments issued or accepted by banks, (ii) relating to any capitalized lease obligation, or (iii) evidenced by a letter of credit or a reimbursement obligation of such Person with respect to any letter of credit; (c) all net obligations of such Person under Interest Swap and Hedging Obligations; (d) all liabilities and obligations of others of the kind described in the preceding clauses (a), (b) or (c) that such Person has guaranteed or that is otherwise its legal liability or which are secured by one or more liens on any assets or property of such Person; (e) any and all deferrals, renewals, extensions, refinancing and refundings (whether direct or indirect) of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a), (b), (c) or (d), or this clause (e), whether or not between or among the same parties; and (f) all Disqualified Capital Stock of such Person (measured at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends). For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value to be determined in good faith by the board of directors of the issuer (or managing general partner of the issuer) of such Disqualified Capital Stock. The amount of any Indebtedness outstanding as of any date shall be (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount and (2) the principal amount thereof in the case of any other Indebtedness.

“Indenture” means that certain Indenture dated as of January 25, 2005 (as modified and supplemented from time to time) by and between the Company and the Bank of New York, as Trustee, in connection with the issuance of the 7¾% Senior Notes due 2013.

“Interest Payment Date” means each January 1 and July 1 commencing the earlier of the first January 1 or July 1 immediately following the Exchange Date.

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“Interest Swap and Hedging Obligation” means any obligation of any Person pursuant to any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate exchange agreement, currency exchange agreement, commodity hedging agreement or any other agreement or arrangement designed to protect against fluctuations in interest rates, currency values or commodity prices and not for speculative purposes, including, without limitation, any arrangement whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a fixed or floating rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or floating rate of interest on the same notional amount.

“Junior Securities” means (1) the Company’s Capital Stock and all warrants, options or other rights to acquire the Company’s Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, the Company’s Capital Stock) or (2) debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, this Debenture is subordinated to Senior Debt hereunder.

“LGP” means Leonard Green & Partners, L.P.

“Management Agreement” means that certain management agreement among the Company and LGP, as such agreement may be amended from time to time.

“Maturity Date” has the meaning set forth in Section 1.2.

“Merger Agreement” means the Agreement and Plan of Merger, dated as of January 7, 2005, by and between the Company and LPM Acquisition LLC.

“Net Cash Proceeds” means the aggregate amount of cash or Cash Equivalents received by the Company in the case of a sale of Qualified Capital Stock or a Capital Contribution and by the Company and its Subsidiaries in respect of an Asset Sale plus, in the case of an issuance of Qualified Capital Stock upon any exercise, exchange or conversion of securities (including options, warrants, rights and convertible or exchangeable debt) of the Company that were issued for cash on or after the Preferred Stock Issue Date, the amount of cash originally received by the Company upon the issuance of such securities (including options, warrants, rights and convertible or exchangeable debt) less, in each case, the direct costs relating to such Asset Sale or issuance of Qualified Capital Stock, including, without limitation, legal, accounting, investment banking and other professional fees, and brokerage and sales commissions and any relocation expenses incurred as a result thereof incurred in connection with such Asset Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only less (1) the amount (estimated reasonably and in good faith by the Company) of income, franchise, sales and other applicable taxes required to be paid by the Company or any of its respective Subsidiaries in connection with such Asset Sale in the taxable year that such sale is consummated or in the immediately succeeding taxable year, the computation of which shall take into account the reduction in tax liability resulting from any available operating losses and net operating loss carryovers, tax credits and tax credit carry-forwards, and similar tax attributes, (2) cash payments attributable to Persons owning an interest (other than a lien) in the assets subject to the Asset Sale, (3) any deduction of appropriate amounts to be provided by the Company as a reserve in

18

accordance with GAAP against any liability associated with the asset disposed of in such transaction and retained by the Company after such sale or other disposition thereof, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction and (4) any holdbacks with respect to indemnification obligations or purchase price adjustments pending receipt thereof.

“Obligation” means any principal, premium or interest payment, or monetary penalty, or damages, or purchase price due by the Company or any Subsidiary under the terms of this Debenture.

“Outstanding Debentures” means, as of the date of determination, all Series A Junior Subordinated Debentures except Series A Junior Subordinated Debentures theretofore canceled by the Company or delivered to the Company for cancellation.

“Parent Entity” means a Person that holds, directly or indirectly, Voting Equity Interests of the Company with voting power, in the aggregate, at least equal to the voting power of the Voting Equity Interests of the Company held by the Permitted Holders on the Preferred Stock Issue Date.

“pari passu”, when used with respect to the ranking of any Indebtedness of any Person in relation to other Indebtedness of such Person, means that each such Indebtedness (a) either (i) is not subordinated in right of payment to any other Indebtedness of such Person or (ii) is subordinate in right of payment to the same Indebtedness of such Person as is the other and is so subordinate to the same extent and (b) is not subordinate in right of payment to the other or to any Indebtedness of such Person as to which the other is not so subordinate.

“Payment Blockage Notice” has the meaning set forth in Section 5.3.

“Permitted Holders” means each of GCP California Fund, L.P., a Delaware limited partnership, LGP and any of their Affiliates.

“Person” means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof or other entity.

“Preferred Stock Issue Date” means the first date on which shares of 10% Preferred Stock were originally issued by the Company.

“Post-Commencement Interest and Expense Claims” means any and all claims arising after the commencement of any bankruptcy, insolvency, receivership or similar proceeding for interest on Senior Debt at the rate (including any applicable post-default rate) set forth in the instrument evidencing or agreement governing such Senior Debt or for expense reimbursement or indemnification on the terms set forth in such instrument or agreement, whether or not such claims are enforceable, allowable or allowed in such bankruptcy, insolvency, receivership or similar proceeding and even if such claims are not enforceable or allowed therein.

“Public Offering” has the meaning set forth in Section 5(b)(ii) hereof.

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“Qualified Capital Stock” means any Capital Stock that is not Disqualified Capital Stock.

“Redemption Date” with respect to this Debenture, means the date on which this Debenture is redeemed by the Company.

“Redemption Notice” has the meaning set forth in Section 4.2(a).

“Restricted Payment” has the meaning set forth in Section 3.4.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

“Senior Debt” of the Company means Indebtedness (including Post-Commencement Interest and Expense Claims) of the Company under the Bank Facility or that, by the terms of the instrument creating or evidencing such Indebtedness, is expressly designated Senior Debt and made senior in right of payment to the Debenture; provided, that in no event shall Senior Debt include (a) Indebtedness to any Subsidiary of the Company or any officer, director or employee of the Company or any Subsidiary of the Company, (b) Indebtedness incurred in violation of the terms of this Debenture, and (c) Disqualified Capital Stock.

“Series A Junior Subordinated Debentures” means all 10% Junior Subordinated Debentures of the Company issued on the Exchange Date in exchange for 10% Preferred Stock.

“Subsidiary” with respect to any Person, means (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person.

“Transfer” has the meaning set forth in Section 7.4.

“Transferee” has the meaning set forth in Section 7.4.

“Voting Equity Interests” means Capital Stock, or warrants, options or other rights to acquire such Capital Stock, which at the time are entitled to vote in the election of, as applicable, directors, members or partners generally.

ARTICLE VII.

MISCELLANEOUS

Section 7.1 Section Headings. The section headings contained in this Debenture are for reference purposes only and shall not affect the meaning or interpretation of this Debenture.

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Section 7.2 Amendments. Except as otherwise provided herein, no provision of this Debenture may be amended, modified or waived unless the Company shall have obtained the written agreement of the Holders of at least 50% in principal amount of the then Outstanding Debentures. Notwithstanding the previous sentence, the Company may amend or modify this Debenture, at any time, to cure any ambiguity, defect or inconsistency. Any amendment, modification or waiver made to this Debenture or any other Debenture shall be made to all Outstanding Debentures and shall be deemed to have been made on all Outstanding Debentures immediately upon such amendment, modification or waiver to this Debenture.

Section 7.3 No Personal Liability. A director, officer, employee, incorporator or stockholder, of the Company, as such, will not have any liability for any obligations of the Company under the Debenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Debenture waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Debentures.

Section 7.4 Assignment. The Holder may sell, assign or otherwise transfer (collectively, a “Transfer”) any or all right, title or interest in or to this Debenture to any Person (a “Transferee”); provided, however, that if the Transferee is not a Person described in Section i(A), Section iv or Section vi of the definition of Qualified Institutional Buyer in Rule 144A promulgated under the Securities Act, then such Transfer to such Person shall be subject to the consent of the Company, such consent not to be unreasonably withheld or delayed (it being understood that, prior to the Company making any determination to grant or withhold such consent, a proposed Transferee shall be required to represent and warrant to the Company as to whether or not it engages, or directly or indirectly owns an equity interest in any Person that engages, in any line of business conducted by the Company or its Subsidiaries or any reasonably related line of business). Any attempt to Transfer any or all right, title or interest in or to this Debenture in violation of this Section 7.4 shall be null and void.

Section 7.5 Governing Law. This Debenture shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to any conflicts of laws principles thereof that would otherwise require the application of the law of any other jurisdiction. All actions and proceedings arising out of or relating to this Debenture shall be heard and determined in a New York State or Federal court sitting in the City of New York, and the parties hereto hereby irrevocably submit to the exclusive jurisdiction of such courts in any such action or proceeding and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding.

Section 7.6 Waiver of Jury Trial. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY AND THAT ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS NOTE OR ANY OF THE

21

TRANSACTIONS CONTEMPLATED HEREIN SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

Section 7.7 Lost, Stolen, Destroyed or Mutilated Debenture. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture and of indemnity arrangements reasonably satisfactory to the Company from or on behalf of the Holder, and upon surrender or cancellation of this Debenture if mutilated, the Company shall make and deliver a new debenture of like tenor in lieu of such lost, stolen, destroyed or mutilated Debenture, at the Holder’s expense.

Section 7.8 Waiver of Presentment, Etc. Except as otherwise provided herein, presentment, demand, protest, notice of dishonor and all other notices are hereby expressly waived by the Company.

Section 7.9 Usury. Nothing contained in this Debenture shall be deemed to establish or require the payment of a rate of interest in excess of the maximum rate legally enforceable. If the rate of interest called for under this Debenture at any time exceeds the maximum rate legally enforceable, the rate of interest required to be paid hereunder shall be automatically reduced to the maximum rate legally enforceable. If such interest rate is so reduced and thereafter the maximum rate legally enforceable is increased, the rate of interest required to be paid hereunder shall be automatically increased to the lesser of the maximum rate legally enforceable and the rate otherwise provided for in this Debenture.

Section 7.10 Interpretation. For the purposes of this Debenture: (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires and (ii) the word “including” and words of similar import shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified.

Section 7.11 Notices. Any notice, request, instruction or other document to be given hereunder by either party to the other shall be in writing and shall be deemed given when received and shall be (i) delivered personally or (ii) mailed by certified mail, postage prepaid, return receipt requested or (iii) delivered by Federal Express or a similar overnight courier or (iv) sent via facsimile transmission to the fax number given below, as follows:

If to the Company, addressed to:
	Leslie’s Poolmart, Inc.
	3925 East Broadway Road, Suite 100
	Phoenix, Arizona 85040
	Attention: General Counsel
	Facsimile No.: (602) 366-3934
	with a copy to:
	Gibson, Dunn & Crutcher LLP
	333 South Grand Avenue
	Los Angeles, California 90071-3197

22

	Attention: Jennifer Bellah Maguire
	Facsimile No.: (213) 229-6986
	or at such other place as the Company shall have designated by notice as herein provided to the Holder.
If to the Holder, addressed to:
	Facsimile No.:

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on the date first written above.

LESLIE’S POOLMART, INC.
By:
Name:	Donald J. Anderson
Title:	Chief Financial Officer

23

EX-5.1

Exhibit 5.1

On letterhead of Gibson, Dunn & Crutcher LLP

April 22, 2005

(213) 229-7000 C 56314-00008

(213) 229-7520

Leslie’s Poolmart, Inc.

3925 E. Broadway Road

Phoenix, Arizona 85040

Re:     Exchange of 7 ³/4% Senior Notes due 2013 – Registration Statement on Form S-4

Ladies and Gentlemen:

We have acted as special counsel to Leslie’s Poolmart, Inc., a Delaware corporation (the “Issuer”), in connection with the preparation of a Registration Statement on Form S-4 (the “Registration Statement”), to be filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, for the proposed offer to exchange (the “Exchange Offer”) up to $170,000,000 aggregate principal amount of 7 ³/4% Senior Notes due 2013 of the Issuer (the “Exchange Notes”), registered under the Securities Act of 1933, as amended, for a like aggregate principal amount of 7 ³/4% Senior Notes due 2013 issued on January 25, 2005 (the “Outstanding Notes”). The Exchange Notes will be issued pursuant to the terms of the Indenture, dated as of January 25, 2005 (the “Indenture”), between the Issuer and The Bank of New York Trust Company, N.A., as trustee (the “Trustee”). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Indenture.

As such counsel, we have examined, among other things, (i) the Registration Statement on Form S-4 to be filed by the Issuer with the Securities and Exchange Commission (“Commission”) to register the issuance of the Exchange Notes under the Securities Act of 1933, as amended; (ii) the Indenture; and (iii) the form of the Exchange Notes to be issued in the Exchange Offer. The Exchange Notes and the Indenture are sometimes referred to herein collectively as the “Documents.” We have also made such other inquiries and examined, among other things, originals or copies, certified or otherwise identified to our satisfaction, of such records, agreements, certificates, instruments and other documents as we have considered necessary or appropriate for the purposes of this opinion.

In rendering this opinion, we have assumed:

Leslie’s Poolmart, Inc.

April 22, 2005

Page 2

(a) Each party to the Documents (i) is a validly existing corporation in good standing under the laws of its state of incorporation, (ii) has all requisite power and authority to execute, deliver and perform its obligations under the Documents, (iii) has duly authorized, by all necessary action on such party’s part, the execution and delivery of each such Document and the performance of such obligations and (iv) has duly executed and delivered each such Document;

(b) Each of the Documents is the legal, valid and binding obligation of, and is enforceable against, each party thereto (other than the Issuer, as to which the assumptions in this clause (b) do not apply) in accordance with its terms;

(c) The signatures on all documents examined by us are genuine, all individuals executing such documents had all requisite legal capacity and competency and were duly authorized to execute and deliver such documents, the documents submitted to us as originals are authentic, and the documents submitted to us as certified or reproduction copies conform to the originals;

(d) There are no agreements or understandings between or among the Issuer and other parties to the Documents, or third parties, that would expand, modify or otherwise affect the terms of the Documents or the respective rights or obligations of the parties thereunder; and

(e) The issuance and delivery of the Exchange Notes will not, at any time, violate any applicable law or result in a violation of any provision of any instrument or agreement then binding on the Issuer or any restriction imposed by any court or governmental body having jurisdiction over the Issuer.

Based upon the foregoing and in reliance thereon, and subject to the assumptions, exceptions, qualifications and limitations contained herein, we are of the opinion that:

(1) when executed and authenticated in accordance with the provisions of the Indenture and delivered in exchange for the Original Notes pursuant to the exchange offer described in the Registration Statement, the Exchange Notes will be legal, valid and binding obligations of the Issuer.

The foregoing opinions are subject to the following exceptions, qualifications and limitations:

A. Our opinions are subject to (i) the effect of any bankruptcy, insolvency, reorganization, moratorium, arrangement or similar laws affecting the rights and remedies of creditors’ generally (including, without limitation, the effect of statutory or other laws regarding fraudulent transfers or preferential transfers) and (ii) general principles of equity, including without limitation concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance, injunctive relief or other equitable remedies regardless of whether enforceability is considered in a proceeding in equity or at law.

Leslie’s Poolmart, Inc.

April 22, 2005

Page 3

B. We express no opinion regarding the effectiveness (i) of any waiver (whether or not stated as such) under the Documents, or any consent thereunder relating to, any unknown future rights or the rights of any party thereto existing, or duties owing to it, as a matter of law; (ii) of any waiver (whether or not stated as such) contained in the Documents of rights of any party, or duties owing to it, that is broadly or vaguely stated or does not describe the right or duty purportedly waived with reasonable specificity; (iii) of provisions relating to indemnification, exculpation or contribution, (iv) of any provisions of the Documents that may be construed as penalties or forfeitures; or (v) of any covenants (other than covenants relating to the payment of principal, interest, premium, indemnities and expenses) in the Indenture to the extent they are construed to be independent requirements as distinguished from conditions to the declaration or occurrence of a default or any event of default.

C. We render no opinion herein as to matters involving the laws of any jurisdiction other than the State of New York and the United States of America, and this opinion is limited to the effect of the present state of the laws of the State of New York and the United States of America. We assume no obligation to revise or supplement this opinion in the event of changes in such laws or the interpretations thereof or in the event of changes in such facts.

D. We express no opinion as to the applicability to, or the effect of noncompliance by, the holders of the Exchange Notes or the Trustee with any state or federal laws applicable to the transactions contemplated by the Documents because of the nature of the business of such party.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the heading “Legal Matters” contained in the prospectus that forms a part of the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder.

Very truly yours,

/s/ GIBSON, DUNN & CRUTCHER LLP

GIBSON, DUNN & CRUTCHER LLP

EX-10.1

Exhibit 10.1

STOCKHOLDERS AGREEMENT

by and among

LESLIE’S POOLMART, INC,

GCP CALIFORNIA FUND, L.P.

and

CERTAIN STOCKHOLDERS

JANUARY 25, 2005

TABLE OF CONTENTS

			Page
ARTICLE 1. Definitions			2
1.1.	Certain Definitions		2
1.2.	Index of Certain Definitions		4
ARTICLE 2. Restrictions on Transfer			5
2.1.	General Restrictions on Transfer		5
2.2.	Compliance with Securities Laws		5
2.3.	Agreement to be Bound		6
2.4.	Tag-Along Rights		6
	2.4.1.	Right to Participate in Sale	6
	2.4.2.	Sale Notice	7
	2.4.3.	Tag-Along Notice	7
	2.4.4.	Delivery of Certificates	8
	2.4.5.	Exempt Transfers	8
2.5.	Improper Transfer		8
2.6.	Involuntary Transfer		9
2.7.	First Option and Call Rights		9
	2.7.1.	First Option	9
	2.7.2.	No Waiver	10
	2.7.3.	Exempt Transfers	10
2.8.	Call Option		10
2.9.	Put Option		13
2.10.	Nomination Rights		13
2.11.	Election of Nominee		13
ARTICLE 3. Drag-Along Sales			14
3.1.	Right of the Green Parties to Require Sale		14
3.2.	Drag-Along Notice		14
3.3.	Delivery of Certificates		14
3.4.	Consideration		14
3.5.	Cooperation		14
ARTICLE 4. Registration Rights			15
4.1.	Demand Registrations		15
	4.1.1.	Number of Registrations	15
	4.1.2.	Registration	15
	4.1.3.	Priority on Demand Registrations	17
	4.1.4.	Compliance	17
4.2.	Piggyback Registration		18
	4.2.1.	Right to Include Registrable Shares	18
	4.2.2.	Priority on Piggyback Registrations	18

i

			Page
4.3.	Registration Statement		19
4.4.	Registration Procedures		20
4.5.	Holdback Agreements; Restrictions on Public Sale by Holders of Registrable Shares		25
4.6.	Registration Expenses		25
4.7.	Conditions to Holder’s Rights		27
	4.7.1.	Cooperation	27
	4.7.2.	Undertakings	27
	4.7.3.	Indemnification	27
4.8.	Indemnification		27
	4.8.1.	Indemnification by the Company	27
	4.8.2.	Indemnification by Holders of Registrable Shares	28
	4.8.3.	Conduct of Indemnification Proceedings	29
	4.8.4.	Contribution	30
	4.8.5.	Underwriting Agreement to Govern	30
4.9.	Rule 144		31
4.10.	Limitation on Subsequent Registration Rights		31
ARTICLE 5. Representations and Warranties			31
5.1.	Representations and Warranties of the Company		31
	5.1.1. Organization		31
	5.1.2. Authority		31
	5.1.3. Binding Obligation		31
	5.1.4. No Conflict		31
5.2.	Representations and Warranties of the Securityholders		32
	5.2.1.	Organization	32
	5.2.2.	Authority	32
	5.2.3.	Binding Obligation	32
	5.2.4.	No Conflict	32
	5.2.5	No Intent to Transfer	32
ARTICLE 6. Termination of Agreement			32
ARTICLE 7. General			32
7.1.	Recapitalization, Exchanges, Etc., Affecting the Shares		32
7.2.	Injunctive Relief		33
7.3.	Notices		33
7.4.	Legend		33
7.5.	Transferees Bound		34
7.6.	Amendment; Waiver		34
7.7.	Additional Documents		35
7.8.	No Third-Party Benefits		35
7.9.	Successors and Assigns		35
7.10.	Severability		35
7.11.	Integration		35

ii

		Page
7.12.	Governing Law	35
7.13.	Attorneys’ Fees	35
7.14.	Headings	36
7.15.	Information for Notices	36
7.16.	Counterparts	36
7.17.	Consent to Jurisdiction	36
7.18.	No Inconsistent Agreements	36
7.19.	Certain Distributions Exempt	36
7.20.	Certain Limitations	36
7.21.	Additional Securityholders	37
7.22.	Approval of Management Services Agreement by Stockholders	37

iii

STOCKHOLDERS AGREEMENT

THIS STOCKHOLDERS AGREEMENT (the “Agreement”) is entered into as of January 25, 2005, by and among Leslie’s Poolmart, Inc., a Delaware corporation (the “Company”), GCP California Fund, L.P., a Delaware limited partnership (“GCP”), Leslie’s Coinvestment LLC, a Delaware limited liability company together with GCP, the “Green Parties” and individually, each, a “Green Party”), the stockholders of the Company (as hereinafter defined) set forth on Schedule 1 attached hereto (collectively, the “Management Parties” and individually, each, a “Management Party”) and the other stockholders of the Company listed on the signatures pages hereto (the “Investor Holders” and, together with the Management Parties, the “Individual Stockholders”). Each of the parties to this Agreement (other than the Company) and any other Person (as defined in Section 4.1) who shall become or be deemed to be a party to or agree to be bound by the terms of this Agreement after the date hereof is sometimes hereinafter referred to as a “Stockholder.”

RECITALS

WHEREAS, pursuant to a Contribution and Subscription agreement dated January 25, 2005 (the “Contribution Agreement”), the Stockholders purchased from LPM Acquisition LLC, a Delaware limited liability company (“Acquisition Sub”), shares of common units of Acquisition Sub (the “Common Units”) and shares of preferred units of Acquisition Sub (the “Preferred Units” and, together with the Common Units, the “Units”), in the amounts as set forth in the Contribution Agreement;

WHEREAS, the Company and Acquisition Sub have entered into an Agreement and Plan of Merger, dated as of January 7, 2005 (the “Merger Agreement”), pursuant to which Acquisition Sub will merge with and into the Company (the “Merger”);

WHEREAS, upon consummation of the Merger, each Common Unit that is issued and outstanding immediately prior to the Merger will be converted into one (1) newly issued, fully paid and nonassessable share of the Company’s common stock, par value $.001 per share (the “Common Shares”) and each Preferred Unit that is issued and outstanding immediately prior to the Merger will be converted into one (1) newly issued, fully paid and nonassessable share of Company’s 10% senior redeemable exchangeable cumulative preferred stock, par value $.001 per share (the “Preferred Shares” and together with the Common Shares, the “Shares”);

WHEREAS, following the consummation of the Contribution Agreement and the Merger (collectively, the “Transactions”), (a) the Green Parties, the Management Parties and the Investor Holders will collectively own 100% of the outstanding shares of Common Shares and (b) the Green Parties and the Investor Holders will own 100% of the outstanding shares of Preferred Shares; and

WHEREAS, the Company and each Stockholder desire, for their mutual benefit and protection, to enter into this Agreement to set forth their respective rights and obligations with respect to the Shares (whether issued or acquired hereafter, including all shares of Common Shares, Preferred Shares, or other equity interests of the Company issuable upon the exercise, conversion or exchange of warrants, options or other securities or rights to acquire shares of Common Shares, Preferred Shares, or other equity interests of the Company, or upon the conversion or exchange of any security).

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1. Definitions

1.1 Certain Definitions. The following terms have the respective meanings when used in this Agreement:

“affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person.

“Board” means the board of directors of the Company.

“Commission” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act and the Exchange Act.

“control” (including, with correlative meanings, the terms “controlling,” “controlled by,” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities or by contract or otherwise.

“Cost” means the cash consideration paid by a Management Party per Common Unit pursuant to the Contribution Agreement.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder.

“Holder” means a holder of Registrable Shares. A Person is deemed to be a holder of Registrable Shares whenever such Person beneficially owns Registrable Shares; provided, however, that unless the Company is otherwise notified by the Holder of Registrable Shares, the holder of Registrable Shares shall be deemed to be that Person set forth on the books and records of the Company or the registrar for such Registrable Shares.

“Individual Related Holder” means a Holder of Registrable Individual Shares, including a Transferee of Registrable Individual Shares if (i) the Transfer to such Transferee is not prohibited by this Agreement, and (ii) the Shares Transferred to such Transferee continue to be Registrable Shares.

“Individual Related Parties” means the Individual Stockholders together with their respective spouses, direct lineal descendants or ancestors or any trust solely for the benefit of any or all of the foregoing are sometimes referred to in this Agreement, and each of the foregoing is an “Individual Related Party.”

2

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or entity or government or other agency or political subdivision thereof.

“Public Offering Date” means the first date after which at least twenty percent (20%) of the Company’s outstanding shares of Common Shares is publicly held and such Common Shares is listed or admitted to trading on a national securities exchange or quoted on the National Association of Securities Dealers, Inc.’s National Market System or Small Capitalization System.

“Public Offering Event” means a firm commitment underwritten public offering of shares of Common Shares of the Company, whether on a primary or secondary basis, pursuant to a registration statement filed under the Securities Act, with a net aggregate offering price in excess of $25,000,000, and in connection with such offering such Common Shares is listed or admitted to trading on a national securities exchange or on the Nasdaq Stock Market or quoted on the National Association of Securities Dealers, Inc.’s National Market System.

“Registrable Individual Shares” means the shares of Common Shares owned by the Individual Related Parties on the date hereof immediately after giving effect to the Transactions, or subsequently acquired by any Individual Related Party (and any securities issued or issuable with respect to such Common Shares by way of stock dividends or stock splits or in connection with a combination of shares, recapitalization, merger, consolidation, or other reorganization or otherwise); provided, however, that any such shares will cease to be Registrable Individual Shares when (i) a registration statement covering such Registrable Individual Shares has been declared effective and such Registrable Individual Shares have been disposed of pursuant to such effective registration statement, or (ii) such Registrable Individual Shares are distributed to the public pursuant to Rule 144.

“Registrable Green Shares” means the shares of Common Shares owned by the Green Parties on the date hereof immediately after giving effect to the Transactions or subsequently acquired by any Green Party (and any securities issued or issuable with respect to such Common Shares by way of stock dividends or stock splits or in connection with a combination of shares, recapitalization, merger, consolidation, or other reorganization or otherwise); provided, however, that any such shares will cease to be Registrable Green Shares when (i) a registration statement covering such Registrable Green Shares has been declared effective and such Registrable Green Shares have been disposed of pursuant to such effective registration statement, or (ii) such Registrable Green Shares are distributed to the public pursuant to Rule 144.

“Registrable Shares” means the Registrable Green Shares and Registrable Individual Shares, collectively.

“Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

3

“Selling Holder” means, with respect to any registration statement, any Holder whose Registrable Shares are included therein.

1.2	Index of Certain Definitions.
	Acceptance Notice	Section 2.7.1
	Merger	Recitals
	Acquisition Sub	Recitals
	Agreement	Preamble
	Bona Fide Offer	Section 2.7.1
	Call Event	Section 2.8
	Call Option	Section 2.8
	Callable Securities	Section 2.8
	Chosen Buyer(s)	Section 2.7.1
	Common Share Purchaser Fraction	Section 2.4.1
	Common Shares	Recitals
	Company	Preamble
	Demand	Section 4.1.1
	Demand Period	Section 4.1.2
	Demand Registration	Section 4.1.1
	Demand Suspension Period	Section 4.1.2
	Drag-Along Notice	Section 3.2
	Drag-Along Notice Date	Section 3.2
	Drag-Along Sale	Section 3.1
	Drag-Along Sale Date	Section 3.2
	Indemnified Party	Section 4.8.3
	Indemnifying Party	Section 4.8.3
	Individual Stockholders	Preamble
	Investor Holders	Preamble
	Involuntary Transfer	Section 2.6
	Losses	Section 4.8.1
	Management Related Person	Section 2.7.3
	Management Party(s)	Preamble
	New Securities	Section 2.10.1
	Option Notice	Section 2.8
	Other Holders	Section 4.2.2
	Outside Party	Section 2.7.1
	Permitted Investor Transferee	Section 2.3
	Potential Buyer	Section 2.7.1
	Preferred Share Purchaser Fraction	Section 2.4.1
	Preferred Shares	Recitals
	Proposed Issuance	Section 2.9
	Proposed Issuance Record Date	Section 2.9
	Contribution Agreement	Recitals
	Purchase Option	Section 2.7.1
	Green Parties	Recitals
	Green Party	Recitals

4

Registration Expenses	Section 4.6
Required Sellers	Section 3.1
Rights	Recitals
Rule 144	Section 2.3
Sale Notice	Section 2.7.1
Shares	Recitals
Stockholder	Preamble
Stockholders Agreement	Section 7.4
Seller	Section 2.8
Seller Indemnified Persons	Section 4.8.1
Shares	Recitals
Contribution Agreement	Recitals
Tag-Along Allotment	Section 2.4.1
Tag-Along Notice	Section 2.4.3
Tag-Along Notice Date	Section 2.4.2
Tag-Along Sale	Section 2.4.1
Tag-Along Sale Date	Section 2.4.2
Tag-Along Sale Notice	Section 2.4.2
Tag-Along Stockholder	Section 2.4.1
Tag-Along Stockholders	Section 2.4.1
Termination Date	Section 6
Third Party	Section 3.1
Transaction	Recitals
Transfer	Section 2.1
Transferee	Section 2.1

ARTICLE 2. Restrictions on Transfer

2.1 General Restrictions on Transfer. Each Stockholder agrees that such Stockholder will not, directly or indirectly, sell, hypothecate, give, bequeath, transfer, assign, pledge or in any other way whatsoever encumber or dispose of any Shares (or any interest therein) (any such event, a “Transfer”) now or hereafter at any time owned of record or beneficially by such Stockholder to another Person (“Transferee”), other than in accordance with the applicable provisions of this Agreement. The Company shall not transfer upon its books any Shares to any Person to the extent prohibited by this Agreement and any purported transfer in violation hereof shall be null and void ab initio and of no effect.

2.2 Compliance with Securities Laws. Each Stockholder agrees with the Company that such Stockholder will not Transfer any Shares, and the Company shall not be obligated to transfer on its books any Shares, unless (a) (i) the Transfer is pursuant to an effective registration statement under the Securities Act or (ii) no registration of such Shares under the Securities Act is required because of the availability of an exemption from registration under the Securities Act and, if requested by the Company such Stockholder shall have furnished the Company with an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to the Company, to the effect that no such registration is required because of the availability of an exemption from registration under the Securities Act and (b) such Transfer is in compliance with any applicable state securities or blue sky laws and, if requested by the Company such Stockholder shall have

5

furnished the Company with an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to the Company, to the effect that such Transfer is in compliance with any applicable state securities or blue sky laws.

2.3 Agreement to be Bound. No Transfer of the Shares by a Stockholder shall be effective (and the Company shall not transfer on its books any Shares) unless (i) the certificates representing such Shares issued to the Transferee shall bear the legend provided in Section 7.4, if required by such Section 7.4, and (ii) the Transferee shall have executed and delivered to the Company, as a condition precedent to such Transfer, an instrument or instruments in form and substance satisfactory to the Company confirming that the Transferee agrees to be bound by the terms of this Agreement and accepts the rights and obligations set forth hereunder to the same extent as the transferor, provided, however, that the conditions set forth in this Section 2.3 shall not apply to any sale of the Shares pursuant to an effective registration statement under the Securities Act. Notwithstanding anything to the contrary contained herein, the Investor Holders shall be entitled to Transfer their Shares to any Person (each, a “Permitted Investor Transferee”), subject only to compliance with the requirements of Section 2.2 and 2.3.

2.4 Tag-Along Rights.

2.4.1 Right to Participate in Sale. If at any time any Green Party proposes to enter into an agreement (or substantially contemporaneous agreements, not with the same or affiliated parties) to sell or otherwise dispose of for value any Common Shares in one or more related transactions which will result in the transfer of at least ten percent (10%) of the outstanding Common Shares (such sale or other disposition for value being referred to as a “Tag-Along Sale”), then such Green Parties shall afford each of the Individual Related Parties who hold Common Shares (each individually a “Tag-Along Stockholder” and, collectively, the “Tag-Along Stockholders”) the opportunity to participate proportionately in such Tag-Along Sale in accordance with this Section 2.4. The number of Common Shares that each Tag-Along Stockholder will be entitled to include in such Tag-Along Sale (such Tag-Along Stockholder’s “Tag-Along Allotment”) shall be determined by multiplying (i) the number of Common Shares owned by such Tag-Along Stockholder on a fully-diluted basis as of the close of business on the day immediately prior to the Tag-Along Notice Date (as defined in Section 2.4.2) times (ii) a fraction, the numerator of which is the number of Common Shares proposed by the Green Parties to be sold or otherwise disposed of pursuant to the Tag-Along Sale and the denominator of which is the total number of Common Shares beneficially owned by the Green Parties and the Individual Related Parties collectively on a fully diluted basis as of the close of business on the day immediately prior to the Tag-Along Notice Date (the fraction referred to in this clause (ii) being the “Common Share Purchaser Fraction”); provided, however, that if any Tag-Along Stockholder fails to timely elect to participate in a Tag-Along Sale, the Green Parties shall give prompt notice of such failure to the other Tag-Along Stockholders who timely elect to participate in such Tag-Along Sale. Such other Tag-Along Stockholders shall have three (3) business days from the date such written notice was given to elect to sell their pro rata share of any unsold portion of the Tag-Along Allotments of the non-participating Tag-Along Stockholders. For purposes of this Section 2.4.1, a Tag-Along Stockholder’s pro rata share of any such unsold portion shall be equal to the number of shares obtained by multiplying (i) a fraction, the numerator of which is such Tag-Along Stockholder’s Tag-Along Allotment of Common Shares and the denominator of which is the aggregate Tag-Along Allotment of

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Common Shares of all Tag-Along Stockholders fully participating in such sale of Common Shares, times (ii) the total number of Common Shares constituting the unsold portions of the Tag-Along Allotments of Common Shares of all Tag-Along Stockholders that are not fully participating in such Tag-Along Sale.

2.4.2 Sale Notice. The Green Parties shall provide each Tag-Along Stockholder and the Company written notice (the “Tag-Along Sale Notice”) not more than sixty (60) days nor less than thirty (30) days prior to the proposed date of the Tag-Along Sale (the “Tag-Along Sale Date”). Each Tag-Along Sale Notice shall be accompanied by a copy of any written agreement relating to the Tag-Along Sale and shall set forth: (i) the name and address of each proposed Transferee of Shares in the Tag-Along Sale; (ii) the number of Common Shares proposed to be Transferred by such Green Parties; (iii) the proposed amount and form of consideration to be paid for such Common Shares and the terms and conditions of payment offered by each proposed Transferee; (iv) the aggregate number of Common Shares held of record by the Green Parties as of the close of business on the day immediately prior to the date of the Tag-Along Sale Notice (the “Tag-Along Notice Date”); (v) the Tag-Along Stockholder’s Tag-Along Allotment of Common Shares, assuming the Tag-Along Stockholder elected to sell the maximum number of Common Shares permissible; (vi) confirmation that the proposed Transferee has been informed of the “Tag-Along Rights” provided for herein and has agreed to purchase Common Shares from any Tag-Along Stockholder in accordance with the terms hereof; and (vii) the Tag-Along Sale Date.

2.4.3 Tag-Along Notice.

(a) Any Tag-Along Stockholder wishing to participate in the Tag-Along Sale shall provide written notice (the “Tag-Along Notice”) to the Green Parties no less than fifteen (15) days prior to the Tag-Along Sale Date. The Tag-Along Notice shall set forth the number of Common Shares that such Tag-Along Stockholder elects to include in the Tag-Along Sale, which shall not exceed such Tag-Along Stockholder’s respective Tag-Along Allotments of Common Shares. The Tag-Along Notice given by any Tag-Along Stockholder shall constitute such Tag-Along Stockholder’s binding agreement to sell the Common Shares specified in the Tag-Along Notice on the terms and conditions applicable to the Tag-Along Sale; provided, however, that in the event that there is any material change in the terms and conditions of such Tag-Along Sale applicable to the Tag-Along Stockholder (including, but not limited to, any decrease in the purchase price that occurs other than pursuant to an adjustment mechanism set forth in the agreement relating to the Tag-Along Sale) after such Tag-Along Stockholder gives its Tag-Along Notice, then, notwithstanding anything herein to the contrary, the Tag-Along Stockholder shall have the right to withdraw from participation in the Tag-Along Sale with respect to all of its Common Shares affected thereby. If the proposed Transferee does not consummate the purchase of all of the Common Shares requested to be included in the Tag-Along Sale by any Tag-Along Stockholder on the same terms and conditions applicable to the Green Parties, then such Green Parties shall not consummate the Tag-Along Sale of any of its Common Shares to such Transferee, unless the Common Shares of such Green Parties and the Tag-Along Stockholders to be sold are reduced or limited pro rata in proportion to the respective number of Common Shares actually sold in any such Tag-Along Sale and all other terms and conditions of the Tag-Along Sale are the same for the Green Parties and the Tag-Along Stockholders.

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(b) If a Tag-Along Notice from any Tag-Along Stockholder is not received by the Green Parties prior to the lapse of the fifteen (15) day period specified above, the Green Parties shall have the right to consummate the Tag-Along Sale without the participation of such Tag-Along Stockholder, but only on terms and conditions which are no more favorable in any material respect to the Green Parties (and, in any event, at no greater a purchase price, except as the purchase price may be adjusted pursuant to any agreement relating to the relevant Tag-Along Sale) than as stated in the Tag-Along Sale Notice and only if such Tag-Along Sale occurs on a date within sixty (60) days after the Tag-Along Sale Date. If such Tag-Along Sale does not occur within such sixty (60) day period, the Common Shares that were to be subject to such Tag-Along Sale thereafter shall continue to be subject to all of the restrictions contained in this Section 2.4.

2.4.4 Delivery of Certificates. On the Tag-Along Sale Date, each Tag-Along Stockholder shall deliver a certificate or certificates for the Common Shares to be sold by such Tag-Along Stockholder in connection with the Tag-Along Sale, duly endorsed for transfer with signatures guaranteed, to the Transferee in the manner and at the address indicated in the Tag-Along Notice against delivery of the purchase price for such Common Shares.

2.4.5 Exempt Transfers. The provisions of this Section 2.4 shall not apply:

(i) to any sale, transfer or other disposition of Shares by one or more Green Parties to one or more other Green Parties or to any of the general or limited partners of any Green Party that is a general or limited partnership or to the members of any Green Party that is a limited liability company;

(ii) to any sale of Shares to the public pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any other similar regulation hereafter adopted by the Commission (“Rule 144”);

(iii) from and after a Public Offering Date;

(iv) to any bona fide pledge of Shares to a commercial bank, savings and loan institution or any other similar lending institution as security for any indebtedness to such lender, provided, however, that, prior to any such pledge, the Company is informed in writing of such pledge and the pledgee shall deliver to the Company its written agreement, in form and substance satisfactory to the Company, that upon any foreclosure such pledgee shall comply with the terms of Sections 2.3 through 2.6 of this Agreement; or

(v) to any distribution of Shares made in accordance with Section 7.19.

2.5 Improper Transfer. Any attempt to Transfer or otherwise encumber any Shares in violation of this Agreement shall be null and void ab initio and neither the Company nor any transfer agent of such Shares shall give any effect to such attempted Transfer or encumbrance in its stock records.

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2.6 Involuntary Transfer. In the case of any Transfer of title or beneficial ownership of Shares upon default, foreclosure, forfeit, court order, or otherwise than by a voluntary decision on the part of a Stockholder (an “Involuntary Transfer”), such Stockholder (or his legal representatives) shall promptly (but in no event later than two (2) business days after such Involuntary Transfer) furnish written notice to the Company indicating that the Involuntary Transfer has occurred, specifying the name of the Person to whom such Shares have been transferred, giving a detailed description of the circumstances giving rise to, and stating the legal basis for, the Involuntary Transfer.

2.7 First Option and Call Rights.

2.7.1 First Option.

(a) Except for Transfers of Shares through the exercise of rights as a Tag-Along Shareholder with respect to any Tag-Along Sale made in accordance with Section 2.4 or Transfer of Shares pursuant to any Drag-Along Sale made in accordance with Article 3, no Management Party or Investor Holder shall Transfer any Shares, except as specifically permitted by this Section 2.7. If at any time any Management Party or Investor Holder (a “Selling Person”) desires to sell or otherwise dispose of for cash all or any part of the Shares held by such Selling Person, and such Selling Person shall have received a bona fide arm’s-length written offer (the “Bona Fide Offer”) for the purchase of such Shares for cash from any third party unaffiliated with such Selling Person (an “Outside Party”), the Selling Person shall provide written notice (the “Sale Notice”) to each of (i) the Green Parties and (ii) the Company (each Green Party and the Company a “Potential Buyer”) setting forth such desire to sell or otherwise dispose of for value such Shares, which Sale Notice shall be accompanied by a copy of the original Bona Fide Offer and shall set forth at least the name and address of the Outside Party and the price and terms of such Bona Fide Offer. Upon the giving of such Sale Notice, each Potential Buyer shall, subject to the priorities set forth below, have the option (the “Purchase Option”) to purchase some or all of the Shares specified in the Sale Notice, on the same terms and conditions as the Bona Fide Offer, including but not limited to the offer price for the Shares. The Purchase Option, in the case of a Green Party, shall be assignable at such Green Party’s sole discretion. Each Potential Buyer shall have thirty (30) days from receipt of the Sale Notice to provide written notice (the “Acceptance Notice”) to such Selling Person of its desire to exercise such Purchase Option. If more than one Potential Buyer shall deliver an Acceptance Notice within such thirty (30) day period, the priority as among such Potential Buyers shall be first, the Company, and second, the other Green Parties who delivered an Acceptance Notice pro rata based on the relative percentages of the then outstanding Common Shares then beneficially owned by such Green Parties), unless such Green Parties have mutually agreed to a different allocation.

(b) If a Potential Buyer or Potential Buyers, as applicable, elects to purchase Shares covered by the Bona Fide Offer on the terms and conditions set forth in the Sale Notice, the Potential Buyer(s) entitled to purchase such Shares (the “Chosen Buyer(s)”) shall be determined in accordance with the priorities set forth above and such Chosen Buyer(s) shall be obligated to purchase, and such Selling Person shall be obligated to sell, such Shares at the price and terms specified in the Sale Notice. The closing of the purchase by the Chosen Buyer(s) shall be held at the principal offices of the Chosen Buyer(s) on a business day within ninety days (90) days after the giving of the relevant Acceptance Notices, or at such other place and time as may be mutually agreed to by the Chosen Buyer(s) and the Selling Person.

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(c) If Acceptance Notices are not delivered within the periods specified above with respect to all of the Shares included in the Sale Notice, the Selling Person shall, upon compliance with the provisions of Section 2.3 and 2.4 (to the extent applicable), have the right to sell to the Outside Party for cash all (but not less than all) of the Shares covered by the Sale Notice not taken up by one or more Potential Buyers, but only at the price and upon terms and conditions no less favorable to the Selling Person than those contained in the Sale Notice, and only if such sale occurs on a date within ninety (90) days of the date after the Sale Notice; provided, however, that in the event the Selling Person has not so transferred all of such remaining Shares to the Outside Party within such ninety-day period, then such Shares thereafter shall continue to be subject to all of the restrictions contained in this Agreement.

2.7.2 No Waiver. Any election in any instance by any Potential Buyer not to exercise its option rights under this Section 2.7 shall not constitute a waiver of such rights with respect to any other proposed Transfer of Shares.

2.7.3 Exempt Transfers. The provisions of this Section 2.7 shall not apply to any Transfer of Shares by any Management Party who is a natural person to his or her spouse, any direct lineal descendant or ancestor of such Management Party or his or her spouse or any trust solely for the benefit of any or all of the foregoing (each such Person, together with such Management Party, is referred to herein as a “Management Related Person”); provided, however, that in each such case each of the following conditions shall be satisfied:

(i) after giving effect to such Transfer, sole voting power with respect to such Transferred Shares shall be held by the Management Party making the Transfer during his lifetime or, after the death of such Management Party, by one or more Management Related Persons; and

(ii) the Transferee of such Transferred Shares shall have executed and delivered to the Company, as a condition precedent to such Transfer, an instrument or instruments in form and substance satisfactory to the Company confirming that the Transferee agrees to be bound by the terms of this Agreement and accepts the rights and obligations set forth in this Agreement, and designating an address for notices to such Transferee required or permitted hereunder.

2.8 Call Option.

(a) Each Management Party agrees for himself or herself and all other Management Related Persons who acquire Common Shares from such Management Party that the Company and the Green Parties will have a call right (the “Call Option”) on his or her Common Shares (the “Callable Shares”) which call right will, as to each Management Party and his or her related Management Related Persons (i) expire upon the first anniversary of the date hereof as to 20% of the Common Shares owned by such Management Party on the date hereof, (ii) expire as to an additional 20% of such shares on the second anniversary of the date hereof, and (iii) thereafter expire ratably at the end of every month through the fifth anniversary of the

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date hereof. Upon the termination of a Management Party’s employment with the Company for any reason including, without limitation, the voluntary termination or resignation, dismissal, involuntary termination, death, retirement or permanent disability of such Management Party (each, a “Call Event”), the Company may exercise the Call Option by written notice (a “Company Option Notice”) delivered to the Management Party and any applicable Management Related Parties (with a copy to the Green Parties) within ninety (90) days after the receipt by the Chosen Buyer (defined for this purpose the same as in Section 2.7.1(b)) of notice of such Call Event. Upon the giving of such notice the Company will be obligated to purchase and the Management Party will be obligated to sell all or any lesser portion indicated in the Company Option Notice of the Callable Shares owned at the time of the Call Event by the Seller for consideration calculated as set forth below:

(i) in the case of voluntary termination of employment of such Management Party other than for Good Reason or in the case of termination of employment of such Management Party for Cause, the consideration will be the lesser of the Cost of such Shares to such Management Party and Fair Market Value on the date of the Call Event; and

(ii) in the case of any other termination of such Management Party (including dismissal, death, Retirement or Permanent Disability) or in the case of voluntary termination of employment of such Management Party for Good Reason, the consideration will be Fair Market Value of the relevant Shares on the date of the call Event.

(b) To the extent the Company does not elect to purchase all Callable Shares pursuant to the Company Option Notice, the Green Parties shall be entitled to elect to purchase any or all Callable Shares not subject to the Company Option Notice, exercisable by delivery of a written notice (the “Second Call Notices”) to the Management Party (who shall provide a copy to each Management Related Party then holding Callable Shares) within thirty (30) days after delivery of the Company Option Notice. The Green Parties shall be entitled to elect to purchase up to all of the remaining Callable Shares; provided, however, that in the event of over-subscription, the Callable Shares shall be allocated among the parties delivering Second Call Notices pro rata based on the relative percentages of the Common Shares owned by such Green Parties. Delivery of the Company Option Notice or a Second Call Notice, as the case may be, constitutes an irrevocable election to purchase and, upon giving such notice the Chosen Buyers will be obligated to purchase and the Management Party and such Management Related Parties (each, a “Seller”) will be obligated to sell all or any lesser portion of the Callable Shares indicated in the Company Option Notice or the Second Call Notices, as applicable. The cash consideration to be paid for the Callable Shares purchased in connection with any Call Event shall be the same as set forth in Section 2.8(a) above.

(c) The closing for all purchases and sales of Callable Shares pursuant to this Section 2.8 will be at the principal executive offices of the Company on the 60th day after the giving of the Option Notice. The purchase price for the Callable Shares will be paid in cash, by cashier’s check or by wire fund. The Seller will cause the Callable Shares to be delivered to the Chosen Buyer at the closing free and clear of all liens, claims, charges or encumbrances of any kind, other than those which continue to apply pursuant to the terms of this Agreement. Such

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Seller will take all such actions as the Chosen Buyer reasonably requests to vest in the Chosen Buyer title to the Callable Shares free of any lien, claim, charge, restriction or encumbrance incurred by or through the Seller.

(d) For purposes of this Section 2.8 and Section 2.9, the following terms have the following meanings:

“Cause” means, as to a Management Party, (i) if such Person is a party to an employment agreement with the Company, a material violation of any provision thereof which constitutes “cause” thereunder, or any other conduct as listed in (ii)–(v) of this definition; (ii) such Person engaging in conduct which is fraudulent or illegal with respect to the Company or any of its subsidiaries; (iii) such Person’s gross negligence in the performance or non-performance of his or her duties, (iv) such Person’s engagement in conduct that is materially injurious or materially damaging to the Company or any of its subsidiaries or the reputation of the Company or any of its subsidiaries or (v) such Person’s conviction of, or plea of nolo contendere to, a felony; provided, however, that in respect of clauses (i) and (iii) the Company has given at least thirty (30) days’ prior written notice to such Person describing the alleged breach or gross negligence and such Person has failed to cure the breach or deficiency within such thirty (30) day period.

“Fair Market Value” means the product of 6.5 and the Consolidated EBITDA (as such term is defined in the Indenture dated as of January     , 2005 by and between the Company as the issuer and The Bank of New York as the trustee) of the Company for the 12 month period ending at the time of the Call Event.

“Good Reason” means (i) assignment to a Management Party of duties and responsibilities that are substantially inconsistent with the scope of their duties and responsibilities theretofore or (ii) relocation of the Company’s corporate offices outside of a 25-mile radius of Phoenix, Arizona without his or her consent.

“Permanent Disability” of a Management Party means permanent disability or incapacity as determined in accordance with the Company’s disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by the Board in its good faith judgment based upon inability to perform the essential functions of his or her position, with reasonable accommodation by the Company, for a period in excess of 180 days during any period of 365 calendar days; and

“Retirement” means retirement of such Management Party pursuant to the Company’s standard retirement policy in effect from time to time but in no event prior to the age of 65, unless pursuant to a specific determination by the Board.

(d) Notwithstanding anything to the contrary contained herein, following the occurrence of a Public Offering Date, the number of Callable Shares of each Management Party subject to the Call Option at the time of such Public Offering Event shall be reduced by fifty percent (50%).

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2.9 Put Option.

(a) At any time after the second anniversary of this agreement but prior to a Public Offering Event, Mr. Lawrence Hayward (“Mr. Hayward”) may elect to require the Company to purchase, for Fair Market Value, up to $1,500,000 in aggregate total value of the Shares owned by Mr. Hayward. This election may be exercised by providing a 60 days advance written notice (the “Put Notice”) to the Company and such election shall be irrevocable, except with respect to purchases of such Shares by the Company pursuant to the last sentence of this Section 2.9(a). Upon receipt of such notice, the Company shall be required to purchase such Shares for Fair Market Value within 60 days of such notice; provided, however, that in the event (i) the Company is prohibited from acquiring any such Shares under the terms of any agreement or indenture governing indebtedness of the Company or any of its subsidiaries or (ii) such purchase would directly or indirectly result in a breach of any such agreement or indenture or would otherwise violate applicable law, then the Company shall have no obligation to purchase the shares unless and until such purchase will no longer be subject to the prohibitions or result in the breach or violation as noted above; provided, further, if the Company may acquire such Shares without violation of any such agreements or indentures and in accordance with applicable law, then the Company shall provide a 60 days advance written notice to Mr. Hayward indicating that the Company, to the extent then permissible, will purchase such Shares owned by Mr. Hayward unless Mr. Hayward revokes and withdraws his election upon receipt of such notice from the Company.

(b) The closing for all purchases and sales of such Shares pursuant to this Section 2.9 will be at the principal executive offices of the Company on the 60th day after the giving of the written notice. The applicable purchase price for such Shares will be paid in cash or by cashier’s check. Mr. Hayward (or his spouse or heirs, as the case may be) will cause such Shares to be delivered to the Company at the closing free and clear of all liens, charges or encumbrances of any kind. Mr. Hayward will take all such actions as the Company reasonably requests to vest in the Company title to such Shares free of any lien, charge or encumbrance incurred by or through Mr. Hayward.

2.10 Nomination Rights. So long as (i) Mr. Michael J. Fourticq (“Mr. Fourticq”) continues to own no less than 66.66% of the number of Common Shares he owns as of the date hereof, less the number of any Common Shares Mr. Fourticq has sold pursuant to the Tag Along Rights set forth in Section 2.4 hereof, and (ii) a Public Offering Event has not occurred, the Company will nominate Mr. Fourticq to serve as a director of the Company and as a director of the Company.

2.11 Election of Nominee. Each party hereto will use its respective best efforts to cause Mr. Fourticq to be elected in any and all elections of directors of the Company, if he is so nominated by the Company. Without limiting the generality of the foregoing, each Shareholder will vote, consent or cause to be voted for the election of Mr. Fourticq, in all elections of directors of the Company in which he is so nominated by the Company or written consents in lieu thereof held during the term of this Agreement, all securities entitled to vote or consent in such election that such Person has the power to vote or consent (or in respect of which such Person has the power to direct the vote or consent).

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ARTICLE 3. Drag-Along Sales

3.1 Right of the Green Parties to Require Sale. Notwithstanding any other provision of this Agreement, if some or all Green Parties agree to sell or otherwise dispose of (or cause to be sold or otherwise disposed of) for value either (x) 51% or more of the Common Shares then owned by the Green Parties or (y) 50% or more in the aggregate of the then outstanding Common Shares in one or more related transactions (a “Drag-Along Sale”) to a third Person or third Persons who are not affiliates of any of the Green Parties (a “Third Party”), then, upon the demand of a Green Party, the other Stockholders (the “Required Sellers”) shall be required to sell to such Third Party in the event of a Drag-Along Sale under this Section 3.1, all, but not less than all, of the Shares beneficially owned by such Required Seller upon substantially the same terms as the Green Parties, it being acknowledged that Management Stockholders may receive different treatment as a result of their status as such in such a transaction.

3.2 Drag-Along Notice. Prior to making any Drag-Along Sale, the relevant Green Parties shall promptly provide each Required Seller with written notice (the “Drag-Along Notice”) not more than thirty (30) or less than fifteen (15) days prior to the proposed date of the Drag-Along Sale (the “Drag-Along Sale Date”). The Drag-Along Notice shall set forth: (i) the name and address of the Third Party; (ii) the proposed amount and form of consideration to be paid per Share and the terms and conditions of payment offered by the Third Party; (iii) the number of Shares held of record as of the close of business on the date of the Drag-Along Sale Notice (the “Drag-Along Notice Date”) by the Required Seller to whom the notice is sent and the number of Shares required to be sold in the Drag-Along Sale; (iv) the proposed Drag-Along Sale Date; and (v) confirmation that the proposed Third Party has agreed to purchase the Required Sellers’ Shares in accordance with the terms thereof.

3.3 Delivery of Certificates. On the Drag-Along Sale Date, each Required Seller shall deliver a certificate or certificates for the Shares required to be sold by it in the Drag-Along Sale, duly endorsed for transfer or assignment with signatures guaranteed, to such Third Party in the manner and at the address indicated in the Drag-Along Notice against delivery of the purchase price for such Required Seller’s Shares being transferred.

3.4 Consideration. The provisions of this Section 3 shall apply regardless of the form of consideration received in the Drag-Along Sale.

3.5 Cooperation. The Required Sellers shall cooperate in good faith with the relevant Green Parties in connection with the consummation of the Drag-Along Sale. Without in any way limiting the foregoing, in the event that the Green Parties receive a bona fide offer from a Third Party to (a) effect a business combination of the Company or with such Third Party (or an affiliate thereof) or (b) purchase all or substantially all of the assets of the Company (and/or its Subsidiaries), then, upon the demand of the Green Parties, the Required Sellers shall be required to vote all Shares in favor of (and not otherwise dissent to or oppose) the business combination or sale of all or substantially all of the assets of the Company (and/or its Subsidiaries) as described in such offer, and otherwise to take all actions reasonably necessary or appropriate to cause the Company to consummate the proposed transaction.

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ARTICLE 4. Registration Rights

4.1 Demand Registrations.

4.1.1 Number of Registrations.

(a) Demand Rights. Green Parties and Investor Holders holding an aggregate number of Registrable Shares at least equal to twenty percent (20%) of the number of Registrable Shares on the date hereof shall be entitled to make written request (a “Demand”) of the Company to register all or part of their Registrable Shares under the Securities Act (including, but not limited to, a shelf registration under Rule 415 promulgated under the Securities Act) (a “Demand Registration”); provided, however, that not more than an aggregate of three (3) Demand Registrations with respect to the Registrable Shares may be made pursuant to the rights granted by this Section 4.1.1(a).

(b) Selection of Underwriter. Any Demand Registration hereunder shall be on any appropriate form under the Securities Act permitting registration of such Registrable Shares for resale by the Green Parties in the manner or manners designated by them (including, without limitation, pursuant to one or more underwritten offerings). The determination of whether the offering will involve an underwritten offering, and the selection of investment bankers and managers, if any, and counsel, shall be made by the Green Parties; provided, however, that the selection of investment bankers and managers, if any, and counsel so selected shall be reasonably satisfactory to the Company. If requested, the Company shall enter into an underwriting or purchase agreement with an investment banking firm in connection with a Demand Registration, containing representations, warranties, indemnities and agreements then customarily included in underwriting or purchase agreements by such underwriter with respect to secondary distributions of securities.

4.1.2 Registration.

(a) The Company shall file a registration statement with respect to each Demand Registration and use its best efforts to cause the same to be declared effective as promptly as practicable following such Demand, but not later than one hundred twenty (120) days thereafter. Unless all of the Registrable Shares covered by the registration statement have earlier been sold or withdrawn from sale, the Company shall keep any such Registration Statement effective for a period of at least one hundred eighty (180) days after such registration statement is first declared effective plus a period equal to (x) any period during which the Selling Holders are prohibited from making sales because of any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court plus (y) any Demand Suspension Period (as defined below) plus (z) any holdback period pursuant to Section 4.5 that occurs while the registration statement is effective (the “Demand Period”), and a registration will not count as a Demand Registration unless it is declared effective by the Commission and remains effective until the earlier of such time as all of the Registrable Shares included in such registration have been sold or disposed of or withdrawn from sale by the Selling Holders or the expiration of the Demand Period or, if the registration remains effective for a shorter period, the Selling Holders have sold at least ninety percent (90%) of their Registrable Shares included in such Demand Registration.

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(b) In addition, a request for registration shall not be deemed to constitute a Demand Registration if:

(i) the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such Demand Registration are not satisfied other than by reason of some act or omission by the applicable Green Parties;

(ii) the Company voluntarily takes any action that would result in the Selling Holders not being able to sell such Registrable Shares covered thereby during the Demand Period;

(iii) after it has become effective, such Demand Registration becomes subject to any stop order, injunction or other order or requirement of the Commission or other governmental agency or court and such order, injunction or requirement is not promptly withdrawn or lifted, and such Demand Registration has not otherwise remained effective for the Demand Period (including effective periods both before and after the order, injunction or requirement is made or imposed); or

(iv) such Demand Registration does not involve an underwritten offering and the Green Parties determine not to proceed following any delay imposed hereunder by the Company; provided, however, that prior to such a delay under this clause (iv), the Green Parties that are Selling Holders have not sold more than eighty percent (80%) of the Registrable Shares included in such Demand Registration.

(c) Notwithstanding the foregoing, the Company may, at any time, delay the filing or delay or suspend the effectiveness of the Demand Registration or, without suspending such effectiveness, instruct the Selling Holders not to sell any securities included in the Demand Registration, if the Company shall have determined in good faith (as evidenced by a resolution of the Board delivered to the Selling Holders) that proceeding with the Demand Registration at such time may have a material adverse effect on the Company or the Company shall have determined upon the advice of counsel that it would be required to disclose any actions taken by the Company in good faith and for valid business reasons, including without limitation, the acquisition or divestiture of assets, which disclosure may have a material adverse effect on the Company or on such actions (a “Demand Suspension Period”), by providing the Selling Holders with written notice of such Demand Suspension Period and the reasons therefor. The Company shall use its best efforts to provide such notice at least ten (10) days prior to the commencement of such a Demand Suspension Period; provided, however, that in any event the Company shall provide such notice no later than the commencement of such Demand Suspension Period; and provided, further, that in no event shall the Demand Suspension Periods exceed ninety (90) days in any 12 month period.

(d) The Company further agrees to supplement or amend the registration statement with respect to such Demand Registration, as required by the registration form utilized by the Company or by the Securities Act or as reasonably requested (which request shall result in the filing of a supplement or amendment subject to approval thereof by the Company, which approval shall not be unreasonably withheld) by any Selling Holder or any managing underwriter

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of Registrable Shares to which such Demand Registration relates, and the Company agrees to furnish to the Selling Holders (and any managing underwriter) copies, in substantially the form proposed to be used and/or filed, of any such supplement or amendment prior to its being used and/or filed with the Commission. The Company shall amend or supplement the registration statement with respect to such Demand Registration no less frequently than every forty five (45) days to update the list of Selling Holders pursuant to written requests by such Selling Holders.

4.1.3 Priority on Demand Registrations. If a Demand Registration is an underwritten registration and the managing underwriters of such offering determine that the aggregate number of (i) Registrable Shares of the Selling Holders exercising their rights to participate in the Demand Registration on a demand basis, pursuant to this Section 4.1; (ii) securities of the Company; and (iii) securities of any other Persons entitled to participate in such Demand Registration, in each case proposed to be included in such registration statement, exceeds the maximum number of securities that can reasonably be expected to be sold within a price range acceptable to the Company and the Green Parties, then the number of securities to be offered for the account of the Company and for the account of all such other Persons participating in such registration (other than Green Parties and Investor Holders participating pursuant to a Demand), shall be reduced or limited pro rata (and to zero, if necessary) in proportion to the respective number of securities requested to be registered, to the extent necessary to reduce the total number of securities to the maximum number that can reasonably be expected to be included therein and still satisfy such price requirement. If the foregoing market “cutback” does not reduce the aggregate number of securities proposed to be included in the registration statement to the maximum number that can reasonably be expected to be sold within the price range acceptable to the Company and the Green Parties, the Company shall include in such registration securities of such Green Parties pro rata on the basis of the number of securities of the Company requested to be included by all such Selling Holders. Any request for registration with respect to which such a market “cutback” with respect to such Selling Holders occurs shall be deemed to constitute a Demand Registration for all purposes of this Article 4; provided, however, that if any such market “cutback” occurs with respect to a Demand Registration and such Selling Holders are not able to sell at least eighty percent (80%) of the securities such Selling Holders proposed to sell pursuant to such Demand Registration, then such request for registration will not count against the number of Demands to which the Green Parties and Investor Holders are entitled pursuant to Section 4.1.1 hereof.

4.1.4 Compliance. Notwithstanding any other provisions hereof, the Company shall use its best efforts to ensure that (i) any registration statement filed in connection with a Demand Registration or a Piggyback Registration pursuant to Section 4.2 below, and any amendment thereto, and any prospectus forming a part thereof, and any supplement thereto, complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any registration statement filed in connection with a Demand Registration or a Piggyback Registration pursuant to Section 4.2 below, and any amendment thereto, does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any registration statement filed in connection with a Demand Registration or a Piggyback Registration pursuant to Section 4.2 below, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they are made, not misleading.

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4.2 Piggyback Registration.

4.2.1 Right to Include Registrable Shares. If the Company at any time proposes or is obligated to register any of its equity securities under the Securities Act, whether or not for sale for its own account, on a form and in a manner which would permit registration of Registrable Shares for a public offering under the Act (other than on a registration statement (i) on Form S-4 or Form S-8 or any successor form thereto or (ii) filed in connection with an exchange offer), the Company shall give written notice of the proposed registration to each Holder at least fifteen (15) days prior to the filing thereof, and each Holder shall have the right to request that all or any part of its Registrable Shares be included in such registration by giving written notice to the Company within fifteen (15) days after the giving of such notice by the Company. If the registration statement is to cover an underwritten offering, such Registrable Shares shall be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. Notwithstanding the foregoing, an Individual Related Holder may not request the registration of its Registrable Individual Shares if such Registrable Individual Shares may, at the time (or within thirty days thereafter), be distributed to the public pursuant to paragraph (k), as such paragraph may be amended from time to time, or any other similar provision hereafter adopted by the Commission, of Rule 144.

4.2.2 Priority on Piggyback Registrations.

(a) Company Registrations. If the registration is an underwritten primary registration on behalf of the Company and not as the result of a Demand Registration pursuant to Section 4.1.1, and the managing underwriter(s) of such offering determine in their good faith judgment that the aggregate number of securities, including Registrable Shares, of the Company which all Selling Holders and all other security holders of the Company, pursuant to contractual rights to participate in such registration (the “Other Holders”), propose to include in such registration statement exceeds the maximum number of securities, including Registrable Shares, that can reasonably be expected to be sold in such offering without materially and adversely affecting the marketability of the offering or the selling price obtained, the Company will include in such registration, first, the shares of Common Shares or other securities which the Company proposes to sell, and second, the Registrable Shares of such Selling Holders and other securities to be sold for the account of the Selling Holders and Other Holders, pro rata among all such Selling Holders and Other Holders, taken together, on the basis of the number of Registrable Shares or other securities of the Company requested to be included in such registration by all Selling Holders and Other Holders (it being agreed and understood, however, that as a result of such cutbacks, such managing underwriter(s) shall have the right to eliminate entirely the participation in such registration of all Selling Holders and all Other Holders).

(b) Selling Holders’ Registration. If the registration is an underwritten secondary registration on behalf of Selling Holders that are Green Parties pursuant to Section 4.1.1 hereof, and the managing underwriters determine that the aggregate number of securities which all Selling Holders, the Company and all Other Holders propose to include in such registration exceeds the maximum number of securities that can reasonably be expected to

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be sold within the price range acceptable to the Company and the Green Parties, the Company will include the securities proposed to be included in such registration in the same priority as is specified in Section 4.1.3 above.

(c) Other Holders’ Registration. If the registration is an underwritten secondary registration on behalf of any of Other Holders pursuant to demand registration rights arising from a document other than this Agreement and the managing underwriters determine in good faith that the aggregate number of securities which all Selling Holders, the Company and all Other Holders propose to include in such registration exceeds the maximum number of securities that can reasonably be expected to be sold within the price range acceptable to the Other Holders, the Company will include in such registration, first, the securities to be sold for the account of the Other Holders demanding registration (but only to the extent such Other Holders are entitled to demand inclusion thereof pursuant to demand registration rights), second, any securities to be sold for the account of the Company, and third, the Registrable Shares of such Selling Holders and other securities to be sold for the account of the Selling Holders and Other Holders entitled and electing to include such securities in such registration, pro rata among all such Selling Holders and Other Holders, taken together, on the basis of the number of Registrable Shares or other securities of the Company requested to be included by all Selling Holders and Other Holders (it being agreed and understood, however, that such managing underwriter(s) shall have the right, as a result of such cutbacks, to eliminate entirely the participation therein of all such Selling Holders and all Other Holders with respect to any securities they are not entitled to demand be included pursuant to demand registration rights.

(d) Underwriters. Except in the case of a Demand Registration, the securities proposed to be registered and sold for the account of any Selling Holder pursuant to a piggyback registration shall be sold to prospective underwriters selected or approved by the Company, and on the terms and subject to the conditions of one or more underwriting agreements negotiated between the Company, the Green Parties, if any, and/or Other Holders demanding registration and such prospective underwriters. The Selling Holders shall be permitted to withdraw all or a part of the securities held by such Selling Holders which were to be included in such piggyback registration at any time prior to the effective date of such registration. The Company may withdraw any registration statement for such registration at any time before it becomes effective, or postpone the offering of securities, without obligation or liability to any Selling Holder participating on a piggyback basis.

4.3. Registration Statement.

(a) In connection with any registration of securities under the Securities Act pursuant to this Agreement, the Company will furnish each Selling Holder and each underwriter, if any, with a copy of the registration statement and all amendments thereto and will supply each such Selling Holder with copies of any prospectus included therein (including a preliminary prospectus and all amendments and supplements thereto), in each case including all exhibits, and such other documents as may be reasonably requested, in such quantities as may be reasonably necessary for the purposes of the proposed sale or distribution covered by such registration. The Company hereby consents to the use in accordance with all applicable law of each such registration statement (or amendment or post-effective amendment thereto) and each such prospectus (or preliminary prospectus or supplement thereto) by each such Selling Holder and

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the underwriters, if any, in connection with the offering and sale of the securities covered by such registration statement or prospectus. The Company shall not, however, be required to maintain the registration statement relating to a Demand Registration and to supply copies of a prospectus for a period beyond the Demand Period, and, at the end of such period, the Company may deregister any securities covered by such registration statement and not then sold or distributed. In connection with any such registration, the Company will, at the request of the managing underwriter with respect thereto (or at the request of the Green Parties, if not an underwritten offering) use its reasonable best efforts to register or qualify such securities for sale under the securities laws of such states as is reasonably requested to permit the distribution of such securities and to use its reasonable efforts to keep each such registration or qualification effective during the period such registration statement is required to be kept effective and to do such other acts or things reasonably necessary to enable the disposition in such jurisdictions of the securities covered by the applicable registration statement in accordance with applicable “blue sky” securities laws of such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereof to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or become subject to taxation in any jurisdiction.

(b) In connection with any offering of securities registered pursuant to this Agreement, the Company shall (i) furnish each Selling Holder, at the Company’s expense at least three (3) business days prior to the sale of any securities to the underwriters, unlegended certificates in a form eligible for deposit with The Depository Trust Company representing ownership of the securities sold pursuant to the registration statement, in such denominations and registered in such names as any managing underwriter or such Selling Holder shall reasonably request, and (ii) instruct the transfer agent and registrar of the Company’s securities to release any stop transfer orders with respect to the securities so sold.

4.4. Registration Procedures. In connection with the Company’s obligations to effect a registration pursuant to Sections 4.1 and 4.2 (but subject to the last sentence of Section 4.2.2(d) and provided that any time periods set forth in this Section 4.4 regarding effective periods and the like shall apply only in the event of a Demand Registration), the Company will as expeditiously as is reasonably practicable:

(i) in the case of a Demand Registration, prepare and file with the Commission a registration statement on a form available for the sale of the securities by the Holders thereof in accordance with the intended method or methods of distribution thereof and use its commercially reasonable efforts to cause each such registration statement to become and remain effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto (including documents that would be incorporated or deemed to be incorporated therein by reference) and, whether or not filed pursuant to Section 4.1 or 4.2, the Company will furnish to the Holders of the securities covered by such registration statement and the underwriters, if any, and any attorney, accountant or other agent retained by the Holders of securities covered by such registration statement, copies of all such documents proposed to be filed, which documents will be subject to the review and comment of such Holders, such counsel and underwriters, if any. The Company will not file any registration statement or any amendment thereto or any prospectus or any supplement

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thereto in connection with a Demand Registration pursuant to Section 4.1.1 (including such documents incorporated by reference and proposed to be filed after the initial filing of the registration statement) to which the Holders of a majority of the securities covered by such registration statement or the underwriters, if any, shall reasonably and timely object;

(ii) prepare and file with the Commission such amendments and post-effective amendments to such registration statement and such supplements to the prospectus used in connection therewith as may be necessary to keep such registration statement effective (to the extent otherwise required by this Agreement) and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until the earlier of (A) such time as all such securities have been disposed of by seller or sellers thereof set forth in such registration statement in accordance with the intended methods of disposition and (B) the expiration of the Demand Period (in the case of a Demand Registration); provided, however, that the only remedy for any failure to keep the registration statement so effective shall be as set forth in Section 4.1.2; provided, further that the Company will have no obligation to a Selling Holder participating on a “piggyback” basis in a registration statement to keep such registration statement effective for a period for more than one hundred and twenty (120) days from the effective date of such registration statement;

(iii) cooperate and assist in any filings required to be made with the National Association of Securities Dealers, Inc. (the “NASD”);

(iv) notify each Selling Holder and any managing underwriter promptly (and in any event within three (3) business days):

(A) when the prospectus or any prospectus supplement or post-effective amendment has been filed, and with respect to the registration statement or any post-effective amendment, when the same has become effective;

(B) of any request by the Commission or any other federal or state governmental authority for any amendments or supplements to the registration statement or the prospectus or for additional information;

(C) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose;

(D) if, at any time prior to the closing contemplated by an underwriting agreement or other such agreement entered into in connection with such registration statement, the representations and warranties of the Company contained in such agreement cease to be true and correct;

(E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;

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(F) of the happening of any event which makes any statement made in the registration statement, the prospectus or any document incorporated or deemed to be incorporated therein by reference untrue or which requires changes in the registration statement, the prospectus, or any document incorporated therein by reference in order to make the statements therein not misleading; and

(G) of the Company’s reasonable determination that a post-effective amendment to a registration statement would be required;

(v) make commercially reasonable efforts to prevent the issuance of any order suspending the effectiveness of the registration statement or any order preventing or suspending the use of a prospectus or suspending the qualification of any of the Registrable Shares included therein for sale in any jurisdiction (subject to the proviso at the end of the penultimate paragraph of Section 4.3(a)), and, in the event of the issuance of any stop order suspending the effectiveness of the registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Registrable Shares included in such registration statement for sale in any jurisdiction (subject to the proviso at the end of the penultimate paragraph of Section 4.3(a)), the Company will use its best efforts to promptly obtain the withdrawal of any such order;

(vi) furnish each Selling Holder and any managing underwriter without any additional charge, one signed copy of the registration statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference);

(vii) as promptly as reasonably practicable, if required, based on the advice of the Company’s counsel, or upon the occurrence of any event contemplated by Section 4.4(iv)(F), prepare and file a supplement or post-effective amendment to the registration statement, the related prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading;

(viii) cause all securities covered by the registration statement to be listed on each securities exchange on which identical securities issued by the Company are then listed if requested by the Green Parties;

(ix) provide and cause to be maintained a transfer agent and registrar for all securities covered by such registration statement by the effective date of such registration statement;

(x) use its best efforts to provide a CUSIP number for the securities by the effective date of the registration statement;

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(xi) use its best efforts to (a) obtain opinions of counsel to the Company (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to any managing underwriter, and not reasonably objected to by the Green Parties), and updates thereof addressed to the Selling Holders, covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the underwriters, if any; and (b) obtain “cold comfort” letters and updates thereof from the Company’s independent certified public accountants addressed to such Selling Holders (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the registration statement). Such “cold comfort” letters shall be in customary form and cover matters customarily covered in “cold comfort” letters from accountants in connection with underwritten offerings and such other matters as the underwriters, if any, or the Green Parties, may reasonably request. The above shall be done at each closing under such underwriting or similar agreement or as and to the extent required thereunder or, if not an underwritten offering, as otherwise reasonably requested by the Green Parties;

(xii) make available for inspection by a representative of the Selling Holders and any attorneys or accountants retained by such Holders (and, to the extent reasonably requested, furnish copies), in connection with the preparation of a registration statement pursuant to this Agreement, all financial and other records and pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representatives, attorneys or accountants in connection with such registration; provided, however, that any records, information or documents that are designated as confidential by the Company in writing shall be kept confidential by such persons unless disclosure of such records, information or documents is required by court or administrative order or under applicable law; provided, further, that, without limiting the foregoing, no such confidential information shall be used by any such Person in connection with any market transactions in securities of the Company or its subsidiaries in violation of law;

(xiii) enter into such agreements reasonably requested (including, as applicable, an underwriting agreement in form, scope and substance as is customary in underwritten secondary offerings and is reasonably satisfactory to the Company) and take all such other customary and reasonable actions in connection therewith (including those requested by the managing underwriters) in order to expedite or facilitate the disposition of the securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration:

(a) make such representations and warranties to the Holders of securities included in the registration statement and the underwriters, if any, with respect to the business of the Company and the registration statement, prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters and stockholders in underwritten offerings and confirm the same, if and when reasonably requested; and

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(b) deliver such documents and certificates as may be reasonably requested by the Green Parties to evidence compliance with clause (a) above and with any provisions contained in the underwriting agreement or other similar agreement entered into by the Company;

The above shall be done at each closing under such underwriting or similar agreement or as and, if not an underwritten offering, to the extent otherwise reasonably requested by the Holders of a majority of the securities being sold pursuant to the registration statement;

(xiv) (a) if so required by the managing underwriter in an underwritten offering of securities covered by a registration statement filed pursuant to Section 4.1 or 4.2 hereof, not publicly or privately sell, make any short sale of, loan, grant any option, effect any public sale or distribution of or otherwise dispose of its equity securities or securities convertible into or exchangeable or exercisable for any of such securities during the ten (10) days prior to and the one hundred eighty days (180) days after any underwritten registration pursuant hereto has become effective, except as part of such underwritten registration and except pursuant to any exchange offer or registrations on Form S-4 or S-8 or any successor or similar forms thereto, except that the Company may make grants of options under its stock option plans and may issue securities issuable upon the exercise or conversion of outstanding convertible securities, stock options and other options, warrants and rights of the Company and (b) if requested, use reasonable efforts to cause each director, officer and holder of ten percent (10%) or more of the securities of the same class as the securities included in any underwritten registration pursuant to Section 4.1 hereof, or any securities convertible into or exchangeable or exercisable for such securities, in each case purchased from the Company at any time after the date of this Agreement (other than in a registered public offering) to agree not to effect any public or private sale or distribution or otherwise dispose of any such securities (including sales pursuant to Rule 144 promulgated under the Act) during the ten (10) days prior to and the one hundred eight days (180) days after any underwritten registration pursuant hereto has become effective (except as part of such underwritten registration, if otherwise permitted), unless the underwriters managing the registered public offering otherwise agree;

(xv) if requested, furnish each Selling Holder with a copy of the registration statement (together with the Exhibits thereto) and each amendment thereto prior to the filing thereof with the Commission;

(xvi) if requested by any managing underwriter or a Holder of securities being sold, (A) promptly incorporate in a prospectus, supplement or post-effective amendment such information as any such managing underwriter and the Holders of the securities being sold reasonably request to be included therein relating to the sale of the securities, including, without limitation, information with respect to the number of securities being sold to underwriters, the purchase price being paid therefor by such underwriters and with respect to any other terms of the underwritten offering of the securities to be sold in such offering, and (B) make all required filings of such prospectus, supplement or post-effective amendment promptly following notification of the matters to be incorporated in such supplement or post-effective amendment;

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(xvii) upon the occurrence of any event that would cause a shelf registration statement (A) to contain a material misstatement or omission or (B) to be not effective and usable for resale of securities during the Demand Period, the Company shall promptly file an amendment to such shelf registration statement, in the case of clause (A), correcting any such misstatement or omission and, in the case of either clause (A) or (B), use its commercially reasonable efforts to cause such amendment to be declared effective and such shelf registration statement to become usable as soon as reasonably practicable thereafter;

(xviii) otherwise use its best efforts to (A) comply with all applicable rules and regulations of the Commission and to take all other steps reasonably necessary to effect the registration of the securities covered by the registration statement contemplated hereby, and (B) make available to its Stockholders an earnings statement which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Act) no later than forty-five (45) days after the end of any twelve-month (12) period (or ninety (90) days after the end of any twelve-month (12) period if such period is a fiscal year) (or in each case within such extended period of time as is permitted by the Commission for filing the applicable report with the Commission) (x) commencing at the end of any fiscal quarter in which securities are sold to underwriters in a firm commitment or best efforts underwritten offering and (y) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said twelve-month periods; and

(xix) in connection with any underwritten offering, cooperate with all marketing efforts reasonably requested by the managing underwriter or managing underwriters in connection with the sale of the securities, including, without limitation, participating in a reasonable number of road-show presentations and other marketing activity by Individual Stockholders and other employees of the Company requested by such underwriter or underwriters; provided, however, that the scheduling of the road-show presentations shall be set in consultation with the Company and will not require the Company’s involvement at any time or place to which the Company has a reasonable objection.

4.5 Holdback Agreements; Restrictions on Public Sale by Holders of Registrable Shares. Each Holder of Registrable Shares (whether or not such Registrable Shares are covered by a Registration Statement filed pursuant to Section 4.1 or 4.2 hereof) and the Company (only in the event of a Demand Registration in accordance with Section 4.1) agrees, if timely requested in writing by the managing underwriter or underwriters in an underwritten offering, not to effect any public sale or distribution of any of the Company’s securities, including a sale pursuant to Rule 144 (except as part of such underwritten offering), during the period beginning ten (10) days prior to, and ending one hundred eighty (180) days after, the closing date of the underwritten offering made pursuant to such Registration Statement.

4.6 Registration Expenses. Except as otherwise required by state securities laws or the rules and regulations promulgated thereunder, all expenses, disbursements and fees incurred by the Company in connection with carrying out its obligations under this Article 4 will be borne

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by the Company regardless of whether a registration statement becomes effective, including but not limited to:

(a) the reasonable and documented fees and expenses of one counsel for the Selling Holders (which counsel shall be selected by the Green Parties if they are Selling Holders and if not, by holders of a majority of the Registrable Securities included in the registration);

(b) all registration, filing fees and expenses (including fees with respect to filings made with the NASD, including, if applicable, the fees and expenses of any “qualified independent underwriter” and its counsel, as may be required by the rules and regulations of the NASD;

(c) fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of counsel for the underwriters or Selling Holders in connection with blue sky qualifications of the Registrable Shares and determinations of their eligibility for investment under the laws of such jurisdiction as the managing underwriters or the Green Parties may designate, subject to the proviso to the last sentence of the penultimate paragraph of Section 4.3);

(d) printing expenses (including printing certificates for the Registrable Shares to be sold and the registration statements and prospectuses), messenger and delivery expenses, duplication, word processing, and telephone expenses;

(e) fees and disbursements of counsel for the Company; and

(f) fees and disbursements of all independent certified public accountants of the Company incurred in connection with such registration (including the expenses of any special audit and “cold comfort” letters incident to such registration) and fees and disbursements of underwriters (excluding discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the distribution of the Registrable Shares) and other Persons retained by the Company (all such expenses being herein called “Registration Expenses”).

The Company will, in any event, pay its internal expenses (including, without limitation), all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit or quarterly review, the fees and expenses of any Person, including special experts, retained by the Company, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed or on the NASD automated quotation system. Notwithstanding the foregoing provisions of this Section 4.6, each Selling Holder shall pay (i) all costs and expenses of counsel (other than the counsel costs referred to in clause (a) above), accounting or financing professionals retained by such Selling Holder, (ii) all underwriting discounts, commissions, fees and expenses and all transfer taxes with respect to the Shares sold by such Selling Holder, and (iii) all other expenses incurred by such Selling Holder and incidental to the sale and delivery of the Shares to be sold by such Holder.

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4.7 Conditions to Holder’s Rights. It shall be a condition of each Selling Holder’s rights hereunder that:

4.7.1 Cooperation. Such Selling Holder shall cooperate with the Company by supplying information and executing documents relating to such Selling Holder or the securities of the Company owned by such Selling Holder in connection with such registration that are customary for offerings of this type (including agreeing to sell such Selling Holder’s Registrable Shares on the basis provided in any underwriting arrangements containing customary terms reasonably satisfactory to such Selling Holder)

4.7.2 Undertakings. Such Selling Holder shall enter into any undertakings and take such other action relating to the conduct of the proposed offering that the Company or the underwriters may reasonably request as being necessary to insure compliance with federal and state securities laws and the rules or other requirements of the NASD or which the Company or the underwriters may reasonably request to otherwise effectuate the offering; and

4.7.3 Indemnification. Such Selling Holder shall execute and deliver an agreement to indemnify and hold harmless to the fullest extent permitted by law the Company, each of its directors, each of its officers who has signed the registration statement, any underwriter (as defined in the Securities Act), and each person, if any, who controls the Company or such underwriter within the meaning of the Securities Act, against such losses, claims, damages or liabilities (including reimbursement for legal and other expenses) to which the Company or any such director, officer, underwriter or controlling person may become subject under the Securities Act or otherwise, in such manner as is customary for registrations of the type then proposed (and in scope and substance substantially equivalent to the indemnification obligations described in Section 4.8.2 below), but only with respect to written information about or pertaining to such Selling Holder furnished by such Selling Holder for inclusion in the Registration Statement.

4.8 Indemnification.

4.8.1 Indemnification by the Company. In the case of any offering registered pursuant to this Agreement, the Company agrees to indemnify to the fullest extent permitted by law and hold harmless each Selling Holder, each affiliate of such Selling Holder and each director, officer, agent, representative, principal, partner, member and employee of such Selling Holder and its affiliates, each Person who controls each Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the directors, officers, agents or employees of each such controlling person (each or all of the foregoing, as the context requires, the “Seller Indemnified Persons”) against any and all losses, claims, damages, liabilities, actions (including reasonable and documented costs (including, without limitation, costs of preparation and reasonable attorneys’ fees and disbursements) and expenses, including reasonable expenses of investigation) (collectively “Losses”) to which any such Seller Indemnified Persons may become subject under the Securities Act or any other statute or common law or otherwise, insofar as any such Losses shall arise out of, be caused by or shall be based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement relating to the sale of the Registrable Shares covered thereby, or the omission or alleged omission to state therein a material fact required to be stated therein or

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necessary to make the statements therein not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus (as amended or supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereof), if used prior to the effective date of such registration statement, or contained in the prospectus (as amended or supplemented if the Company shall have filed with the Commission any amendment, thereof or supplement thereof, including the information deemed part of such registration statement pursuant to Rule 430A promulgated under the Securities Act), if used within the period during which the Company shall be required to keep the registration statement to which such prospectus relates current pursuant to the terms of this Agreement, or the omission or alleged omission to state therein (if so used) a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the indemnification agreement contained in this Section 4.8.1 shall not apply to such Losses which shall arise from the sale of Registrable Shares to any Person if such Losses shall arise out of, shall be caused by or shall be based upon any such untrue statement or alleged untrue statement, or any such omission or alleged omission, (i) if such statement or omission shall have been made in reliance upon and in conformity with information furnished in writing to the Company by a Selling Holder who is a Seller Indemnified Person specifically for use in connection with the preparation of the registration statement or any preliminary prospectus or prospectus contained in the registration statement or any such amendment thereof or supplement thereto; (ii) if such untrue statement or omission was made in any preliminary prospectus to the extent that (a) the prospectus corrected such untrue statement or such omission and (b) the Selling Holder who is a Seller Indemnified Person was legally required to and failed to send or deliver a copy of the prospectus with or prior to the delivery of written confirmation of the sale by such Selling Holder to the Person asserting the claim from which such Losses arise; or (iii) if any such Losses arise out of, are caused by or are based upon an untrue statement or omission in the prospectus, to the extent that (a) such untrue statement or omission is corrected in an amendment or supplement to the prospectus and (b) having previously been furnished by or on behalf of the Company with copies of the prospectus as so amended or supplemented, such Selling Holder who is a Seller Indemnified Person was legally required to and thereafter fails to deliver such prospectus as so amended or supplemented, prior to or concurrently with the sale of Registrable Shares to the Person asserting the claim from which such Losses arise and the Company timely made the prospectus available to such Selling Stockholder in accordance with this Agreement. This indemnity shall be in addition to any other indemnification arrangements to which the Company may otherwise be a party.

4.8.2 Indemnification by Holders of Registrable Shares. Each Selling Holder agrees to indemnify to the fullest extent permitted by law and hold the Company, its directors, officers, agents, representatives and employees, each Person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the directors, officers, agents, representatives or employees of such controlling persons harmless against any and all Losses arising out of, caused by or based upon any untrue statement of a material fact contained in any registration statement, prospectus or form of prospectus, or arising out of, caused by or based upon any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of the preliminary prospectus and the prospectus, in each case, including amendments or supplements, in light of the circumstances in which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information furnished in writing by such Selling

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Holder to the Company expressly for use in such registration statement or prospectus; provided, however, that the obligation to indemnify will be several and not joint and in no event shall the liability of any Selling Holder hereunder be greater in amount than the dollar amount of the proceeds (net of the payment of underwriting discounts and commissions payable by such Selling Holder) received by any such Selling Holder upon the sale of the Registrable Shares giving rise to such indemnification obligation. The Company and the Selling Holders shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution to the same extent as provided above with respect to information so furnished in writing by such Persons expressly for use in any prospectus or registration statement.

4.8.3 Conduct of Indemnification Proceedings. Any Person entitled to indemnity under this Agreement (an “Indemnified Party”) shall give prompt written notice to the party from which such indemnity is sought (the “Indemnifying Party”) of any claim or of the commencement of any proceeding with respect to which such Indemnified Party seeks indemnification or contribution pursuant hereto; provided, however, that the failure so to notify the Indemnifying Party shall not relieve the indemnifying party from any obligation or liability, except to the extent that the Indemnifying Party has been prejudiced materially by such failure. The Indemnifying Party shall have the right to assume the defense of any such claim or proceeding at the Indemnifying Party’s expense, with counsel reasonably satisfactory to such Indemnified Party, exercisable by giving written notice to an Indemnified Party promptly after the receipt of written notice from such Indemnified Party of such claim or proceeding; provided, however, that under such circumstances an Indemnified Party shall have the right to employ separate counsel in any such claim or proceeding and to participate in the defense thereof, at the expense of such Indemnified Party, unless: (a) the Indemnifying Party agrees to pay such fees and expenses; or (b) the Indemnifying Party fails promptly to assume the defense of such claim or proceeding or fails to employ counsel reasonably satisfactory to such Indemnified Party; or (c) the Indemnified Party shall have been advised by counsel that (i) there may be one or more material defenses available to such Indemnified Party that are different from or additional to those available to the Indemnifying Party or its affiliates, or (ii) a conflict of interest likely exists if such counsel represents such Indemnified Party and such Indemnifying Party or its affiliate. If such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party as specified above, the Indemnifying Party shall not have the right to assume the defense thereof, it being understood, however, that the Indemnifying Party shall not, in connection with any one such claim or proceeding, or separate but substantially similar or related claims or proceedings arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel which such counsel shall be designated by the Indemnified Party and be reasonably acceptable to the Indemnifying Party) at any time for such Indemnified Party, or for fees and expenses that are not reasonable. Whether or not such defense is assumed by the Indemnifying Party, no Indemnifying Party will be subject to any liability for any settlement made without its consent (which consent shall not be unreasonably withheld). The Indemnifying Party shall not consent to entry of any judgment or settle or compromise any pending or threatened claim, action or proceeding, unless it contains as an unconditional term thereof the giving by the claimant or plaintiff to the Indemnified Party of a release, in form and substance satisfactory to the Indemnified Party, from all liability in respect of such claim or litigation for which such Indemnified Party would be entitled to indemnification hereunder.

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The Indemnifying Party’s liability to any Indemnified Party hereunder shall not be extinguished solely because any other Indemnified Party is not entitled to indemnity hereunder.

4.8.4 Contribution.

(a) If the indemnification provided for in this Section 4.8 is unavailable to an Indemnified Party in respect of any Losses or is insufficient to hold such Indemnified Party harmless, then, except to the extent that contribution is not permitted under Section 11(f) of the Securities Act, each applicable Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations appropriate under the circumstances. The relative fault of such Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue statement of a material fact or omission to state a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information concerning the matter with respect to which the claim was asserted and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding.

(b) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.8.4 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 4.8.4, no Indemnifying Party that is a Selling Holder shall be required to contribute any amount in excess of the amount by which the net proceeds received by such Selling Holder from the sale of Registrable Shares exceeds the amount of any damages that such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(c) The indemnity and contribution agreements contained in this Section 4.8 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

4.8.5 Underwriting Agreement to Govern. At such time as an underwriting agreement with respect to a particular underwriting is entered into, the terms of any such underwriting agreement shall govern with respect to the matters set forth therein to the extent inconsistent with this Section 4.8; provided, however, that the indemnification provisions of such underwriting agreement as they relate to Selling Holders are customary for registrations of the type then proposed and provide for indemnification by such Selling Holders only with respect to written information furnished by such Selling Holders for inclusion in the registration statement for such offering.

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4.9 Rule 144. Following a Public Offering Date, the Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder and will take such further action as any Holder of Registrable Shares may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144. Upon the request of any Holder of Registrable Shares, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

4.10 Limitation on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company which would provide such holder or prospective holder registration rights preferential or superior to those accorded the Green Parties hereunder; provided, however, the execution or agreement to be bound by this Agreement by any permitted Transferee of Shares owned by the Green Parties hereunder shall not be deemed to violate this Agreement.

ARTICLE 5. Representations and Warranties

5.1 Representations and Warranties of the Company. The Company represents and warrants to the Stockholders as follows:

5.1.1 Organization. It is a corporation duly organized and validly existing under the laws of the State of Delaware;

5.1.2 Authority. It has full corporate power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby;

5.1.3 Binding Obligation. The execution, delivery and performance of this Agreement by it and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on its part, and this Agreement constitutes its binding obligation, enforceable against it in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other laws which may affect creditors rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law); and

5.1.4 No Conflict. The execution, delivery and performance of this Agreement by it and the consummation by it of the transactions contemplated hereby will not, with or without the giving of notice or the lapse of time, or both, (a) violate any provision of law, statute, rule or regulation to which it is subject, (b) violate any order, judgment or decree applicable to it, or (c) conflict with, or result in a breach or default under, any term or condition of its certificate or articles of incorporation or its by-laws or any material agreement or other material instrument to which it is a party or by which it or its property is bound.

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5.2 Representations and Warranties of the Stockholders. Each of the Stockholders represents and warrants to each other and to the Company as follows:

5.2.1 Organization. If it is an entity, it is a corporation, limited partnership, limited liability company or other entity duly organized and validly existing under the laws of its respective state of organization;

5.2.2 Authority. It has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby;

5.2.3 Binding Obligation. The execution, delivery and performance of this Agreement by it and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary action on its part, and this Agreement constitutes its binding obligation, enforceable against it in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other laws which may affect creditors’ rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law); and

5.2.4 No Conflict. The execution, delivery and performance of this Agreement by it and the consummation by it of the transactions contemplated hereby will not, with or without the giving of notice or the lapse of time, or both, (i) violate any provision of law, statute, rule or regulation to which it is subject, (ii) violate any order, judgment or decree applicable to it, or (iii) conflict with, or result in a breach or default under, any term or condition of its certificate of incorporation, bylaws, trust, partnership agreement, operating agreement or equivalent governing document or any material agreement or other material instrument to which it is a party or by which it or its property is bound.

5.2.5 No Intent to Transfer. Except as permitted by Section 2.4 and Article 3, there is not any present plan or intention on the part of such Stockholder to sell, exchange or otherwise dispose of the Shares owned or held by such Stockholder after the Acquisition.

ARTICLE 6. Termination of Agreement

Subject to the next succeeding sentence, this Agreement shall terminate ten (10) years from the date of this Agreement (the “Termination Date”). The provisions of Article 3 of this Agreement and the provisions of Sections 2.3 through 2.10 (other than Section 2.8) of this Agreement shall terminate immediately prior to any Public Offering Date which occurs prior to the Termination Date. In addition, (i) the provisions of Article 3 shall terminate on the date the Green Parties cease to collectively own at least 50% of the Common Shares owned by the Green Parties on the date hereof and (ii) the provisions of Section 2.8 shall terminate on the date that any person or group (within the meaning of Rule 13d-5 of the Exchange Act) owns a percentage of the Common Shares greater than the percentage of Common Shares owned by the Green Parties on such date.

ARTICLE 7. General

7.1 Recapitalization, Exchanges, Etc., Affecting the Shares. The provisions of this Agreement shall apply to the full extent set forth herein with respect to (a) the Shares and any

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option, right or warrant to acquire Shares, and (b) any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution for any Shares, by combination, recapitalization, reclassification, merger, consolidation or otherwise. To the extent a provision of this Agreement addresses solely Common Stock, Shares shall only mean securities into which such Common Stock is converted. In the event of any change in the capitalization of the Company, as a result of any stock split, stock dividend or stock combination, the provisions of this Agreement shall be deemed appropriately adjusted.

7.2 Injunctive Relief. It is hereby agreed and acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that, in the event of any such failure, an aggrieved person will be irreparably damaged and will not have an adequate remedy of law. Any such person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, without the posting of any bond and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.

7.3 Notices. All notices, requests, demands or other communications required or permitted hereunder shall be in writing and shall be made by hand delivery (deemed given upon receipt), or by certified mail return receipt requested (deemed given upon execution of such return receipt), addressed to a Stockholder and the Company at the address set forth below such person’s or entity’s signature. Any party may change its address for notice by notice to each Stockholder and the Company in accordance with the foregoing. No objection may be made to the method of delivery of any notice actually and timely received.

7.4 Legend. In addition to any other legend which may be required by applicable law, each share certificate representing Shares which are subject to this Agreement shall have endorsed, to the extent appropriate, upon its face the following words:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SHARES THAT IS EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION OF SHARES, INCLUDING RULE 144, PROVIDED AN OPINION OF COUNSEL IS FURNISHED TO THE COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE SECURITIES LAW IS AVAILABLE.

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IN ADDITION, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF             , 2005 (AS THE SAME MAY BE AMENDED FROM TIME TO TIME, THE “STOCKHOLDERS AGREEMENT”), A COPY OF WHICH IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY. NO TRANSFER OF THE SHARES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH STOCKHOLDERS AGREEMENT. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO OTHER RIGHTS AND OBLIGATIONS, INCLUDING VOTING AGREEMENTS, AS SET FORTH IN THE STOCKHOLDERS AGREEMENT.

7.5 Transferees Bound. All Shares owned by a Transferee shall, subject to the terms of Section 2.3 of this Agreement, for all purposes be subject to the terms of this Agreement, whether or not such Transferee has executed a consent to be bound by this Agreement. The foregoing shall not apply in the case of any Shares acquired by a Transferee pursuant to a sale of Shares pursuant to an effective registration statement under the Securities Act or, except for sales to an affiliate of the Company or sales made prior to a Public Offering Date, pursuant to Rule 144.

7.6 Amendment; Waiver.

(a) This Agreement may be amended, modified, supplemented or terminated only by a written instrument signed by each of (i) the Company, (ii) GCP and (iii) Stockholders holding a majority of the Registrable Individual Shares, on a fully-diluted basis. Notwithstanding the foregoing, no provision of this Agreement may be waived, amended, supplemented, discharged or terminated in a manner materially adverse to a Stockholder without the consent of the party against whom enforcement of any such amendment, waiver, discharge or termination is sought if any such action affects such Stockholder disproportionately from all other similarly situated Stockholders. No provision of this Agreement may be waived orally, but only by a written instrument signed by the party against whom enforcement of such waiver is sought. Stockholders shall be bound from and after the date of the receipt of a written notice from the Company setting forth such amendment or waiver by any consent authorized by this Section, whether or not the Shares shall have been marked to indicate such consent; no alteration, modification or impairment shall be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.

(b) Notwithstanding the foregoing, if the registration requirements under the Securities Act are amended or eliminated to accommodate a “company registration” or similar approach, this Agreement shall be deemed amended to the extent necessary to reflect such changes and the intent of the parties hereto with respect to the benefits and obligations of the parties, and in such connection, the Company shall use reasonable efforts to provide Holders of Registrable Shares equivalent benefits to those provided under this Agreement.

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7.7 Additional Documents. Each party hereto agrees to execute any and all further documents and writings within its powers and to perform such other actions which may be or become necessary or expedient to effectuate and carry out this Agreement.

7.8 No Third-Party Benefits. Except as provided in Sections 4.8.3 and 4.9, none of the provisions of this Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.

7.9 Successors and Assigns. Subject to the terms hereof, this Agreement shall be binding upon and shall inure to the benefit of the Stockholders, and their respective successors and permitted assigns; provided, however, (i) neither this Agreement nor any rights or obligations hereunder may be transferred by the Company and (ii) no rights or obligations of any Stockholder under this Agreement may be assigned except that any Stockholder may transfer its rights and obligations hereunder, in whole or in part, in connection with a Transfer of Shares made in compliance with all of the provisions of this Agreement.

7.10 Severability. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein; provided, however, that the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such invalid, illegal or unenforceable term, provision, covenant or restriction.

7.11 Integration. This Agreement, together with the Contribution Agreement, contains the entire understanding of the parties hereto and thereto, as applicable, with respect to the collective subject matter of such agreements. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof and thereof other than those expressly set forth or referred to herein and thereof. This Agreement and such other agreements supersede all prior agreements and understandings between the parties with respect to such subject matter.

7.12 Governing Law. THE RIGHTS AND LIABILITIES OF THE PARTIES SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE CHOICE OF LAWS PROVISIONS OF SUCH STATE OR ANY OTHER JURISDICTION.

7.13 Attorneys’ Fees. Should any litigation or arbitration be commenced (including any proceedings in a bankruptcy court) between or among the parties hereto or their representatives concerning any provision of this Agreement or the rights and duties of any person or entity hereunder, the party or parties prevailing in such proceeding shall be entitled, in addition to such other relief as may be granted, to the reasonable attorneys’ fees and court costs incurred by reason of such litigation or arbitration.

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7.14 Headings. The headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit, or extend or interpret the scope of this Agreement or of any particular Section.

7.15 Information for Notices. No Stockholder (other than a Stockholder as of the date of this Agreement with respect to the Shares held as of such date) shall hold any of its Shares in nominee name unless it otherwise provides the Company with its name and address and other information reasonably requested by the Company in order to establish such Stockholder’s particular status under this Agreement (e.g., Green Party, Individual Related Party, etc.).

7.16 Counterparts. This Agreement may be executed by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

7.17 Consent to Jurisdiction. Each Stockholder agrees that any proceeding arising out of or relating to this Agreement or the breach or threatened breach of this Agreement may be commenced and prosecuted in a court in the State of Delaware. Each Stockholder hereby irrevocably and unconditionally consents and submits to the non-exclusive personal jurisdiction of any court in the State of Delaware in respect of any such proceeding. Each Stockholder consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable laws and rules. Each Stockholder waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in any court in the State of Delaware and any claim that it may now or hereafter have that any such proceeding in any court in the State of Delaware has been brought in an inconvenient forum.

7.18 No Inconsistent Agreements. The Company will not hereafter enter into any agreements with respect to its securities which are inconsistent with or violate in any material respects the provisions in this Agreement.

7.19 Certain Distributions Exempt. Notwithstanding anything to the contrary contained in this Agreement, any distribution of Shares by the Green Parties or any other Green Party to its equity participants in accordance with the terms of its limited partnership agreement, operating agreement or other governing agreement or instrument (other than a Transfer for separate consideration) shall be exempt from the terms and conditions of this Agreement, except that the Persons receiving the Shares in connection with any such distribution shall be bound on a going-forward basis by the terms and conditions of this Agreement. For example, and not by way of limitation, any such distribution shall not trigger any of the “tag-along” rights set forth in Section 2.4.

7.20 Certain Limitations. Notwithstanding anything to the contrary contained in this Agreement, prior to the issuance or sale of any shares of the Company’s capital stock pursuant to an effective registration statement under the Securities Act, the Company shall not be required to register any transfer of Shares on the Company’s books if in the reasonable, good faith judgment of the Company, registering such transfer would cause the Company to become subject to registration pursuant to the Exchange Act.

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7.21 Additional Stockholders. Prior to issuing any options or shares of Common Shares or Preferred Shares or other right exercisable for or convertible into Common Shares or Preferred Shares, and as a condition to the receipt thereof, the Company shall require the recipient to execute and deliver a duplicate counterpart of this Agreement or an instrument of joinder hereto and such recipient shall become a Stockholder for all purposes hereof.

7.22 Approval of Management Services Agreement by Stockholders. Each of the Stockholders (solely in its capacity as a Stockholder), by such Stockholder’s execution of this Agreement, hereby approves and acknowledges the Management Services Agreement to be entered into between the Company and Leonard Green & Partners L.P., dated as of the date hereof, the description of which is attached hereto as Exhibit A.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first set forth above.

LESLIE’S POOLMART, INC.
By:	/s/ Donald J. Anderson
Name:	Donald J. Anderson
Title:	EVP & CFO
GCP CALIFORNIA FUND, L.P.
By:	GCP California Capital, LLC
	Its General Partner
	By:	/s/ John Baumer
	Name:
	Title:	Manager
LESLIE’S COINVESTMENT LLC
By:	LEONARD GREEN & PARTNERS, L.P.
	Its Manager
	By:	LGP Management, Inc.
		Its General Partner
		By:	/s/ John Baumer
		Name:
		Title:	Vice President
INVESTOR HOLDERS:
/s/ Michael Fourticq
Michael Fourticq

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MANAGEMENT PARTIES:

/s/ Lawrence Hayward

Lawrence Hayward

/s/ Marv Schutz

Marv Schutz

/s/ Mike Hatch

Mike Hatch

/s/ Rick Carlson

Rick Carlson

/s/ Janet McDonald

Janet McDonald

/s/ Larry Peck

Larry Peck

/s/ John Kelly

John Kelly

/s/ Bill Hicks

Bill Hicks

/s/ Bill Rutherford

Bill Rutherford

/s/ Mark Lum

Mark Lum

/s/ Dwight Groth

Dwight Groth

/s/ Joanne Franey

Joanne Franey

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/s/ Mark Marcano

Mark Marcano

/s/ Marie Sousa

Marie Sousa

/s/ Rob Peterson

Rob Peterson

/s/ Jim Iacobazzi

Jim Iacobazzi

/s/ Len Tamboer

Len Tamboer

/s/ Mark McQuivey

Mark McQuivey

/s/ Eric Chin

Eric Chin

/s/ Kristi White

Kristi White

/s/ Kean Corrigan

Kean Corrigan

/s/ David Small

David Small

/s/ Stephanie Sassenberg

Stephanie Sassenberg

/s/ Tabatha Gordon

Tabatha Gordon

/s/ Adam Kaminitz

Adam Kaminitz

/s/ Brook Hicks

Brook Hicks

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/s/ Tim Kelly

Tim Kelly

/s/ Brian Agnew

Brian Agnew

/s/ Mark Sweeney

Mark Sweeney

/s/ Brad Smith

Brad Smith

/s/ Mike Burns

Mike Burns

/s/ Rick Sawin

Rick Sawin

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SCHEDULE 1

Management Parties

Lawrence Hayward

Donald Anderson

Marv Schutz

Mike Hatch

Rick Carlson

Janet McDonald

Larry Peck

John Kelly

Bill Hicks

Bill Rutherford

Mark Lum

Dwight Groth

Joanne Franey

Mark Marcano

Marie Sousa

Rob Peterson

Jim Iacobazzi

Len Tamboer

Mark McQuivey

Eric Chin

Kristi White

Kean Corrigan

David Small

Stephanie Sassenberg

Tabatha Gordon

Adam Kaminitz

Brook Hicks

Tim Kelly

Brian Agnew

Mark Sweeney

Brad Smith

Mike Burns

Rick Sawin

Schedule 1

EXHIBIT A

The Management Services Agreement will provide that the Company will pay Leonard Green & Partners, L.P. (“LGP”) an annual fee of $1.0 million for ongoing management, consulting and financial services. In addition, the Management Services Agreement will provide that LGP may provide Leslie’s with financial advisory or investment banking services in connection with major financial transactions, and LGP will be paid a customary fee for such services. The Management Services Agreement will terminate on the earlier of (a) the tenth anniversary of its execution; provided that the agreement will automatically extend for one year periods thereafter unless either Leslie’s or LGP gives the other three months prior notice of termination, (b) the consummation of a change of control, including the date that LGP affiliates hold 40% or less of Leslie’s shares and (c) the consummation of a public offering of Leslie’s common stock in an aggregate offering amount of at least $50 million or as a result of which at least 15% of Leslie’s shares of common stock is publicly traded. In the event of bankruptcy, liquidation, insolvency or winding-up of Leslie’s, the payment of all accrued and unpaid fees pursuant to the Management Services Agreement is subordinated to the prior payment in full of all amounts due and owing under the Indenture dated as of January 24, 2005 by and between Leslie’s as the issuer and The Bank of New York as the trustee.

A-1

EX-10.2

Exhibit 10.2

Management Services Agreement

This Management Services Agreement, dated as of January 25, 2005 (this “Agreement”), is made by and among Leslie’s Poolmart, Inc., a Delaware corporation (the “Company”) and Leonard Green & Partners, L.P., a Delaware limited partnership (the “Advisor”).

WHEREAS, as of the date of this Agreement, pursuant to a Merger Agreement, dated as of January 7, 2005 (the “Merger Agreement”), by and among the Company and LPM Acquisition LLC, a Delaware limited liability company, the Company will become a portfolio company of GCP California Fund, L.P., an affiliate of the Advisor;

WHEREAS, in connection with the Merger, the Company is amending its Credit Agreement (as such agreement may be further amended from time to time, the “Credit Agreement”) with Wells Fargo Retail Finance, LLC;

WHEREAS, in connection with the Merger, the Company will be party to an Indenture, dated as of January 25, 2005 (as such agreement may be amended from time to time, the “Indenture”), with The Bank of New York, as trustee, pursuant to which the Company will issue $170,000,000 aggregate principal amount of its 7.75% Senior Notes due 2013 (the “Notes”); and

WHEREAS, the Company desires to obtain from the Advisor, and the Advisor desires to provide, certain services on an ongoing basis as provided herein.

NOW, THEREFORE, in consideration of the mutual promises made herein, and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged by each party, the parties, intending to be legally bound, hereby agree as follows:

1. Retention of Services

1.1 Investment Banking Services. Subject to the terms and conditions of this Agreement, the Company hereby retains the Advisor, and the Advisor hereby agrees to be retained by the Company, to provide investment banking services to the Company (the “Investment Banking Services”).

1.2 General Services. Subject to the terms and conditions of this Agreement, the Company hereby retains the Advisor, and the Advisor hereby agrees to be retained by the Company, to provide management, consulting and financial planning services to the Company on an ongoing basis in connection with the operation and growth of the Company in the ordinary course of their businesses during the term of this Agreement (the “General Services”).

1.3 Major Transaction Services. Subject to the terms and conditions of this Agreement, the Company hereby retains the Advisor, and the Advisor hereby agrees to be retained by the Company, to provide financial advisory and investment banking services to the Company in connection with major financial transactions that may be undertaken from time to time in the future (“Major Transaction Services” and, together with the Investment Banking Services and General Services, the “Services”).

2. Compensation

2.1 General Services Fee. In consideration of the General Services, the Company shall pay the Advisor (or its designee or designees) an annual fee (the “Annual Fee”) payable in cash equal to one million dollars ($1,000,000); provided, however, that no such payments will be made at any time that an event of default under the Indenture has occurred and is continuing; provided, further that any portion of the Annual Fee that has not been paid during the continuation of such an event of default that is subsequently cured shall be promptly paid to the Advisor following such cure. In the event of a bankruptcy, liquidation or winding-up of the Company, the payment of all accrued and unpaid fees and other obligations under this Agreement shall be subordinated to the prior payment in full of all amounts due and owing under the Indenture and the Credit Agreement. Subject to the foregoing provisions of this Section 2.1, the Annual Fee shall be payable by the Company in equal monthly installments in advance, on the first business day of each month commencing on the first such day following the date of this Agreement, without regard to the amount of services actually performed by the Advisor.

2.2 Major Transaction Services Fee. In consideration of any Major Transaction Services provided by the Advisor from time to time, the Company shall pay the Advisor normal and customary fees for services of like kind as agreed by the Advisor and the Company, taking into consideration all relevant factors, including, but not limited to, the size and complexity of the subject transaction, the time devoted to providing such services and the value of the Advisor’s investment banking expertise and relationships within the business and financial community.

2.3 Structuring Fee. In connection with the services provided for the Company in connection with the transactions and contemplated by the Merger Agreement, the Company shall pay to the Advisor in cash concurrently with the execution and delivery of this Agreement a structuring fee of five million dollars ($5,000,000).

2.4 Expenses. In addition to the fees to be paid to the Advisor pursuant to this Agreement, the Company shall pay to, or on behalf of, the Advisor, promptly when billed, all reasonable out-of-pocket expenses incurred by the Advisor (or submitted by the Advisor on behalf of other persons that incurred such expenses) in connection with the Services rendered pursuant to this Agreement. Such expenses shall include, among other things, fees and disbursements of counsel, travel expenses (including all airplane travel expenses), word processing charges, messenger and duplicating services, telephone and facsimile expenses and other customary expenditures.

3. Term

3.1 Termination; Acceleration of Amounts Due Upon Change of Control. This Agreement shall terminate on the tenth anniversary of the date of this Agreement; provided, however, that on each anniversary of the date of this Agreement, the term of this Agreement shall be extended automatically for one additional year, unless at least three months prior to such anniversary the Advisor or the Company have delivered to the other party written notice of its

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desire not to extend the term of this Agreement. Notwithstanding the foregoing, in the event of a Change of Control (as defined below) or Public Offering Event (as defined below), this Agreement shall terminate and all amounts payable under this Agreement during the term of this Agreement, as extended from time to time pursuant to this Section 3.1, discounted to present value at the date of such acceleration, shall become immediately due and payable.

As used in this Agreement, (a) “Change of Control” means (i) any transaction shall occur, including an equity sale, merger or consolidation of the Company with or into any entity or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the Company’s assets, on a consolidated basis, whether in one transaction or a series of related transactions, if, immediately after giving effect to such transaction(s), the Advisor and its affiliates, in the aggregate, cease to own at least 40% of the aggregate equity interests of the Company or (ii) a Change of Control (as defined in the Credit Agreement) or a Change of Control (as defined in the Indenture) shall occur; and (b) “Public Offering Event” means the first date after which the Company or any other entity holding, directly or indirectly, all of the equity interests in the Company has completed one or more public offerings of its common stock in an aggregate offering amount of at least $50.0 million or as a result of which at least fifteen percent (15%) of the common stock of such entity (after giving effect to such offerings) is publicly traded.

3.2 Survival of Certain Obligations. Notwithstanding any other provision of this Agreement, the obligations of the Company to pay amounts due pursuant to Section 2 of this Agreement with respect to periods prior to the termination of this Agreement, the subordination provisions of Section 2.1 of this Agreement and the provisions of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement.

4. Decisions/Authority of the Advisor.

4.1 Limitation on the Advisor’s Liability. The Company reserves the right to make all decisions with regard to any matter upon which the Advisor has rendered its advice and consultation, and there shall be no liability to the Advisor for any such advice accepted by the Company.

4.2 Independent Contractor. The Advisor shall act solely as an independent contractor and shall have complete charge of its respective personnel engaged in the performance of the Services. As an independent contractor, the Advisor shall have authority only to act as an advisor to the Company and shall have no authority to enter into any agreement or to make any representation, commitment or warranty binding upon the Company or to obtain or incur any right, obligation or liability on behalf of the Company. Nothing contained in this Agreement shall cause the Advisor or any of its partners or members or any of their affiliates, investment managers, investment advisors or partners to be deemed a partner of or joint venturer with the Company.

5. Indemnification.

5.1 Indemnification/Reimbursement of Expenses. The Company shall (i) indemnify the Advisor and its partners and members any of their affiliates, and the partners, directors, officers,

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employees, agents and controlling persons of the Advisor and its partners and members and any of their respective affiliates (collectively, the “Indemnified Parties”), to the fullest extent permitted by law, from and against any and all losses, claims, damages and liabilities, joint or several, to which any Indemnified Party may become subject, caused by, related to or arising out of the Services or any other advice or services contemplated by this Agreement or the engagement of the Advisor pursuant to, and the performance by the Advisor of the Services contemplated by, this Agreement, and (ii) promptly reimburse each Indemnified Party for all costs and expenses (including reasonable and documented attorneys’ fees and expenses), as incurred, in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party and whether or not such claim, action or proceeding is initiated or brought by or on behalf of the Company and whether or not resulting in any liability.

5.2 Limited Liability. The Company shall not be liable under the indemnification contained in Section 5.1 of this Agreement to the extent that such loss, claim, damage, liability, cost or expense is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the Advisor’s bad faith or gross negligence. The Company further agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Company, holders of its securities or its creditors related to or arising out of the engagement of the Advisor pursuant to, or the performance by the Advisor of the Services contemplated by, this Agreement, except to the extent that any loss, claims, damage, liability, cost or expense is found in a non-appealable judgment by a court of competent jurisdiction to have resulted from the Advisor’s bad faith or gross negligence.

6. Miscellaneous.

6.1 Assignment. None of the parties hereto shall assign this Agreement or the rights and obligations hereunder, in whole or in part, without the prior written consent of the other parties; provided, however, that, without obtaining such consent, the Advisor may assign this Agreement or its rights and obligations hereunder to (i) any affiliate of the Advisor; (ii) any investment manager, investment advisor or partner of the Advisor or any principal or beneficial owner of any of the foregoing; or (iii) any investment fund, investment account or investment entity whose investment manager, investment advisor or partner, or any principal or beneficial owner of any of the foregoing, is the Advisor or any person identified in clauses (i) or (ii) above. Subject to the foregoing, this Agreement will be binding upon and inure solely to the benefit of the parties hereto and their respective successors and assigns, and no other person shall acquire or have any right hereunder or by virtue of this Agreement.

6.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware as applied to contracts made and performed within the State of Delaware without regard to principles of conflict of laws.

6.3 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the

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same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any such which may be hereafter declared invalid, illegal, void or unenforceable.

6.4 Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all written or verbal representations, warranties, commitments and other understandings with respect to the subject matter of this Agreement prior to the date of this Agreement.

6.5 Further Assurances. Each party hereto agrees to use all reasonable efforts to obtain all consents and approvals and to do all other things necessary to consummate the transactions contemplated by this Agreement. The parties agree to take such further action and to deliver or cause to be delivered any additional agreements or instruments as any of them may reasonably request for the purpose of carrying out this Agreement and the agreements and transactions contemplated hereby.

6.6 Attorneys’ Fees. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision of this Agreement is validly asserted as a defense, the prevailing party, as determined by a court of competent jurisdiction, shall be entitled to recover reasonable and documented attorneys’ fees in addition to any other available remedy.

6.7 Headings. The headings in this Agreement are for convenience and reference only and shall not limit or otherwise affect the meaning of this Agreement.

6.8 Amendment and Waiver. This Agreement may be amended, modified or supplemented, and waivers or consents to departures from the provisions of this Agreement may be given, provided that the same are in writing and signed by each of the parties hereto.

6.9 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Management Services Agreement as of the date first appearing above.

LESLIE’S POOLMART, INC.
By:	/s/ Donald J. Anderson
Name:	Donald J. Anderson
Title:	Chief Financial Officer
LEONARD GREEN & PARTNERS, L.P.
By:	LGP Management, Inc.
Its:	General Partner
By:	/s/ John Baumer
Name:
Title:

EX-10.4

Exhibit 10.4

FIRST AMENDMENT TO LEASE AGREEMENT

BY AND BETWEEN

SECURITY CAPITAL INDUSTRIAL TRUST,

a Maryland real estate investment trust,

and

LESLIE’S POOL MART,

a California corporation

This First Amendment To Lease Agreement (this “First Amendment”) is made and entered into effective as of                     , 1996, by and between SECURITY CAPITAL INDUSTRIAL TRUST (hereinafter “Landlord”), and LESLIE’S POOL MART (hereinafter “Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord (or its predecessor in title) and Tenant have previously made and entered into that certain Lease Agreement dated August 30, 1990 (the “Lease”), pursuant to which Landlord currently leases to Tenant approximately 100,800 square feet of office/warehouse space (the “Existing Leased Premises” or the “Existing Premises”) situated in Suite 100 of the Project known as the 4202 Dan Morton Project, situated at 4202 Dan Morton, Dallas, Texas 75236; and

WHEREAS, Landlord and Tenant desire to provide for the expansion of the Existing Premises, and to modify certain terms and provisions of the Lease, all as herein more particularly set forth;

NOW, THEREFORE, pursuant to the foregoing, and in consideration of the mutual covenants and agreements contained in the Lease and in this First Amendment, the Lease is hereby modified and amended as set out below:

1. Section 1 of the Lease, captioned “Premises and Term,” is hereby amended to reflect the following:

(a) Effective as of July 1, 1996 (the “Expansion Commencement Date”), the Existing Premises shall be expanded to include the approximately 25,200 square feet of space (the “Expansion Premises”) situated in Suite 103 of the 4202 Dan Morton Project, said Expansion Space being depicted on Exhibit A attached to this First Amendment and made a part hereof for all purposes. From and after the Expansion Commencement Date, all references in the Lease to the “Premises” or the “Leased Premises” shall mean and refer to the Existing Premises and the Expansion Premises, together, unless otherwise expressly provided in this First Amendment. Without limiting the generality of the foregoing, Tenant shall obtain an amended certificate of insurance, as provided for in Paragraph 9B of the

Lease, evidencing extension of the coverages therein required to the Expansion Premises, and naming Landlord and SCI Client Services Incorporated as additional insureds with respect to Tenant’s operations and activities in and about the Expansion Premises.

(b) With respect to the Expansion Space, the Term of the Lease shall run from the Expansion Commencement Date through September 30, 1997. Additionally, Tenant shall have the right and option to further renew the Lease Term for the Expansion Space for one (1) additional year, on and subject to the terms and provisions of Exhibit B attached to this First Amendment and made a part hereof for all purposes.

(c) Expiration of the Lease Term with respect to the Expansion Premises as provided in (b) above shall not alter or affect the continuing effectiveness of the Lease with respect to the Existing Premises, on and subject to the remaining terms and provisions of the Lease.

2.    (a) Tenant may, at its sole cost and expense, and within 30 days after the Expansion Space Commencement Date described in Paragraph 1 above, construct one (1) opening, not to exceed a 10’ x 10’ opening, in the common demising wall between the Existing Premises and the Expansion Premises. Tenant accepts the Expansion Premises in their present, “as is” condition.

(b) Upon expiration or termination of the Lease Term for the Expansion Premises for any reason, Tenant, at its sole cost and expense, shall restore the opening constructed by Tenant in the demising wall between the Existing Premises and the Expansion Premises to its original condition and to Landlord’s reasonable satisfaction.

3. Section 2A of the Lease, captioned “Base Rent, Security Deposit and Escrow Payments,” is hereby amended to reflect the following:

(a) Commencing July 1, 1996, the Base Rental payable by Tenant to Landlord for the Expansion Premises shall be $4,725.00 per month ($2.25 per square foot per year, triple net).

(b) Beginning July 1, 1996 and continuing during the Lease Term for the Expansion Premises, Tenant’s obligation to pay to Landlord, as additional rental, Tenant’s pro rata share of all Operating Expenses of the project allocable to the Expansion Premises. Tenant’s estimated pro rata share of Operating Expenses allocable to the Expansion Premises shall be payable monthly in advance, commencing July 1, 1996 (with an annual reconciliation of estimated and actual Operating Expenses as provided for in Paragraph 2C of the Lease), in the following amounts:

Taxes	$0.46 per square foot per year ($966.00 per month)
Insurance	$0.05 per square foot per year ($105.00 per month)
Common Area Maintenance	$0.13 per square foot per year ($273.00 per month)
Management Fee	$0.0476 per square foot per year ($100.00 per month)
Total	$0.74 per square foot per year ($1,444.00 per month)

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(c) The Base Rental and Operating Expense obligations of Tenant with respect to the Expansion Premises, as hereinabove set forth, are in addition to Tenant’s Base Rental and Operating Expense obligations for the Existing Premises as set forth in the Lease.

4.    (a) Notwithstanding anything to the contrary set forth in Paragraph 12 of the Lease, captioned “USE,” or in Paragraphs 2 or 6 of Exhibit B to the Lease, with respect to Hazardous Substances the Expansion Premises shall be used only as a staging area for Tenant’s sales and distribution operations on and from the Premises, and shall not be used for the processing, mixing, blending, packaging, or re-packaging of any Hazardous Substances. All Permitted Materials that are at any time in the Expansion Premises shall be and remain in sealed, unopened containers.

(b) So long as Tenant complies with the use restrictions set forth in subparagraph 4(a) above, the indemnification by Tenant of Landlord set forth in the first full paragraph on page two of Exhibit B to the Lease shall not apply to the Expansion Premises, and in lieu of such indemnity Tenant covenants and agrees that in the event of contamination of the Expansion Premises as a result of the presence or release of Hazardous Substances in, on or under the Expansion Premises caused by Tenant, its employees, agents, contractors, assignees or subtenants, Tenant, at its sole cost and expense, shall promptly institute and diligently prosecute to completion proper and thorough remediation procedures in accordance with applicable Environmental Laws, so that upon completion of such remediation the Expansion Premises may be used for customary office/warehouse purposes without any use restrictions thereon that did not apply prior to such contamination.

5. The environmental representations, warranties, covenants, agreements and indemnity of Landlord as set forth in the last three grammatical paragraphs of Exhibit B to the Lease shall not apply to the Expansion Premises or any portion thereof, or the presence or release of any Hazardous Substances therein, thereon or thereunder. However, and in lieu of such indemnity, Landlord covenants and agrees that in the event it is determined the Expansion Premises are contaminated by Hazardous Substances, and such contamination was not caused by Tenant, its employees, agents, contractors, assignees or subtenants, Landlord, at its sole cost and expense, shall promptly institute and diligently prosecute to completion proper and thorough remediation procedures in accordance with applicable Environmental Laws, so that upon completion of such remediation the Expansion Premises may be used for customary office/warehouse purposes without any use restrictions thereon that did not apply prior to such contamination.

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6. ANY OBLIGATION OR LIABILITY WHATSOEVER OF SECURITY CAPITAL INDUSTRIAL TRUST, A MARYLAND REAL ESTATE INVESTMENT TRUST, WHICH MAY ARISE AT ANY TIME UNDER THIS LEASE OR ANY OBLIGATION OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER INSTRUMENT, TRANSACTION, OR UNDERTAKING CONTEMPLATED HEREBY SHALL NOT BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OF ANY OF ITS TRUSTEES, DIRECTORS, SHAREHOLDERS, OFFICERS, OR EMPLOYEES, REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT, OR OTHERWISE.

7. With the exception of those terms and conditions specifically modified and amended herein, the herein referenced Lease shall remain in full force and effect in accordance with all its terms and conditions. In the event of any conflict between the terms and provisions of this First Amendment and the terms and provisions of the Lease, the terms and provisions of this First Amendment shall supersede and control.

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment To Lease Agreement to be effective as of the day and year as first above written.

LANDLORD:		TENANT:
SECURITY CAPITAL INDUSTRIAL TRUST		LESLIE’S POOL MART
By:	/s/ Steven K. Meyer	By:	/s/ Richard Grice
Name:	Steven K. Meyer	Name:	Richard Grice
Title:	Senior Vice President	Title:	Vice President
Date:	, 1996	Date:	6/21, 1996

Landlord’s Address for Notices:

5420 LBJ Freeway, Suite 375

Dallas, Texas 75240

Phone: (214) 770-2292

Fax: (214) 770-2290

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EX-10.5

Exhibit 10.5

SECOND AMENDMENT OF LEASE

This SECOND AMENDMENT OF LEASE (“Amendment”) made and entered into this 30 day of September, 1999, by and between PAMI SP-1 INDUSTRIAL LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter referred to as “Landlord”) and LESLIE’S POOLMART, INC. a California corporation, (hereinafter referred to as “Tenant”);

W I T N E S S E T H:

WHEREAS, Landlord and Tenant entered into that certain “Lease” dated August 30, 1990 for a “Premises” located at 4202 Dan Morton Drive, Dallas, Texas “Building” as more particularly described in said Lease and that certain “First Amendment to Lease Agreement” dated June 21, 1996; and

WHEREAS, Landlord is the successor in interest to SECURITY CAPITAL INDUSTRIAL TRUST by property purchase and has succeeded to all rights, obligations, title, and interest therein; and

WHEREAS, Landlord and Tenant now desire to further amend said Lease as hereinafter set forth;

NOW, THEREFORE, for good, lawful and valuable consideration, including the undertakings of the parties hereto, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto by the Lease.

2. The “Effective Date” of this Amendment shall be the date hereof.

3. The term of this Amendment shall commence Oct. 1, 1999 and shall expire September 30, 2000. Tenant shall vacate the “Expansion Area”, as herein defined, as well as the Premises, as defined in the Lease and as required in Tenant’s Lease.

4. The square footage of the Premises as defined in Tenant’s Lease (“Existing Area”) shall be increased by Twenty Five Thousand Two Hundred (25,200) square feet, (“Expansion Area”), such square footage to be contiguous to Tenant’s Master Lease Plan. Tenant accepts the Expansion Area in its “As-Is” condition with no work of any type being performed by Landlord. Landlord has made no representations to tenant as to the suitability of the Premises for a particular use.

5. For the period beginning Oct. 1, 1999 and continuing through September 30, 2000 the Rent for the Expansion Area as herein defined shall be Five Thousand Seven Hundred Seventy-five Dollars ($5,775.00) per month for the Expansion Area, which shall be in addition to Tenant’s Rent for the Existing Area.

6. The Use of the Expansion Area shall remain the same as the Use allowed under the Lease.

7. Beginning Oct. 1, 1999 and continuing through September 30, 2000, for the Expansion Area, Tenant shall pay to Landlord, as additional rental, Tenant’s pro rata share of all Operating Expenses of the Building allocable to the Expansion Area. Tenant’s estimated pro rata share of Operating Expenses for the Expansion Area shall be payable as defined in Section 2(C) of the Lease. The initial amounts shall be as follows:

Common Area Maintenance	$0.04 per square foot	$84.00/month
Taxes	$0.62 per square foot	$1,302.00/month
Insurance	$0.04 per square foot	$84.00/month
Management Fee	$0.14 per square foot	$294.00/month

The above amounts shall be in addition to Tenant’s Rent and Operating Expense obligations on the Existing Area.

8. Tenant shall provide to Landlord proof of insurance for the Expansion Area as required in sections 12 and 13 of the Lease.

9. Tenant acknowledges and affirms Landlord’s continuing right, upon Tenant’s Default, as defined in the Lease, throughout the term of this Second Amendment, to enforce Landlord’s rights and remedies afforded in the Lease upon the Expansion Area, or upon the Premises being defined in Section 1 of the Lease or upon the aggregate of both spaces, such determination to be made in Landlord’s sole and absolute discretion.

EXCEPT as specifically provided to the contrary herein, all of the rest and remaining terms and conditions of the Lease shall remain in full force and effect.

EXECUTED in multiple counterparts, each of which shall have the force and effect of an original, on the day and year first written above.

PAMI SP-1 INDUSTRIAL LIMITED PARTNERSHIP
a Delaware corporation
By:	Clarion Partners, LLC
	as agent
	By:	/s/ Ada M. Healey
	Name:	Ada M. Healey
	Title:	Director
		“LANDLORD”

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LESLIE’S POOLMART, INC.
By:	/s/ Richard Grice
Name:	Richard Grice
Title:	VP Logistics
	“TENANT”

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EX-10.6

Exhibit 10.6

THIRD AMENDMENT TO LEASE

THIS AMENDMENT OF LEASE (“Amendment”) made and entered into as of this 14th day of April 2000, by and between PAMI SP-1 INDUSTRIAL LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter referred to as “Landlord”); and LESLIE’S POOLMART, INC., a Delaware corporation (hereinafter referred to as “Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord’s predecessor-in-interest and Tenant entered into that certain Lease dated August 30, 1990, as amended by First Amendment to Lease Agreement dated June 21, 1996, and Second Amendment of Lease dated September 30, 1999 (hereinafter, collectively, “Lease”) whereby Tenant is presently in possession of premises containing approximately 126,000 square feet of space, comprised of approximately 100,800 square feet known as Suite 100 (the “Original Premises”) and an additional approximate 25,200 square feet known as Suite 103 (the “Expansion Premises”) (the original Premises and the Expansion Premises being hereinafter sometimes, collectively, referred to as the “Premises”) in the building located at 4202 Dan Morton, Dallas, Texas 75236 (hereinafter referred to as the “Building”) as more particularly described in said Lease; and

WHEREAS, Landlord and Tenant now desire to further amend said Lease as hereinafter set forth;

NOW, THEREFORE, for good, lawful and valuable consideration, including the undertakings of the parties hereto, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto by the Lease.

2. The “Effective Date” of this Amendment shall be the date hereof.

3. Landlord and Tenant hereby confirm that the expiration date of the Lease term with respect to the Original Premises and the Expansion Premises is currently September 30, 2000.

4. The term of the Lease with respect to the original Premises and the Expansion Premises is hereby extended an additional five (5) years so that the Lease shall now terminate at 11:59 p.m. on September 30, 2005. The period from October 1, 2000 through September 30, 2005 is hereinafter referred to as the “Extended Term,” and Paragraph 1 of the Lease shall be deemed modified accordingly.

5. During the Extended Term, Tenant shall pay to Landlord, rent at a rate of Two and 50/100 ($2.50) Dollars per square foot per annum, which shall accrue at an annual rate of Three Hundred Fifteen Thousand and 00/100 ($315,000.00) Dollars, payable in advance on the

first day of each calendar month in installments of Twenty-six Thousand Two Hundred Fifty and 00/100 ($26,250.00) Dollars each, and Paragraph 2 of the Lease shall be deemed modified accordingly. Notwithstanding the foregoing, during the last two (2) years of the Extended Term (i.e. October 1, 2003 through September 30, 2005), the aforesaid rent shall be subject to being increased to Two and 60/100 ($2.60) Dollars per square foot per annum if Tenant exercises its option to draw down on all or any part of the Construction Allowance (as hereinafter defined). In the event Tenant does not exercise its option to draw down on all or any part of the Construction Allowance, Tenant’s rent shall remain at the rate of Two and 50/100 ($2.50) Dollars per square foot per annum.

6. During the Extended Term, in addition to the rent due and payable in accordance with Paragraph 5 hereof, Tenant shall continue to pay to Landlord, Tenant’s pro rata share of all Operating Expenses for the Premises, including without limitation, common Area Maintenance, Taxes, Insurance, and Management Fees.

7. Landlord shall furnish Tenant with a construction allowance in a sum up to Three Hundred Fifty Thousand and 00/100 ($350,000.00) Dollars (the “Construction Allowance”) to be applied by Tenant towards the construction of a pool supply containment room (“Tenant’s Work”). Tenant may elect to draw from the Construction Allowance at any time prior to March 31, 2002, limited however to not more than two (2) separate occasions, upon presentation of (i) paid bills in an amount equal to at least the amount of the Construction Allowance requested, (ii) lien waivers for all Tenant’s Work performed in the Premises, and (iii) architect’s or general contractor’s certification that the Tenant’s Work has been completed. In the event Tenant draws on this Construction Allowance, Tenant shall reimburse Landlord, on a monthly basis commencing with the first day of the month immediately following the month in which the draw has occurred, an amount equal to the amortized portion of the amount so drawn, together with interest thereon at the rate of ten (10%) percent per annum, amortized over the then remaining Extended Term. Landlord shall have all the remedies for the collection of this amount as it does for the collection of rent. Tenant shall, prior to the expiration of the Extended Term, at Landlord’s option and upon written notice from Landlord, restore the pool supply containment room to the condition existing as of the date hereof, reasonable wear and tear and damage by casualty or the elements excepted.

8. Subject to applicable law and prior to the commencement of the Extended Term, Landlord shall construct a completely fenced parking area for Tenant as set forth on Exhibit A (“Landlord’s Work”). The cost of Landlord’s Work shall be amortized over a period of twenty (20) years and Tenant shall reimburse Landlord, on a monthly basis commencing on October 1, 2000 and ending on the expiration of the Extended Term, an amount equal to the amortized portion thereof, together with interest thereon at the rate of ten (10%) percent per annum. Landlord shall have all the remedies for the collection of this amount as it does for the collection of rent. Landlord and Tenant agree that the cost of Landlord’s Work shall not exceed the sum of Fifty Thousand and 00/100 ($50,000.00) Dollars. In addition, prior to the commencement of the Extended Term, Landlord shall, at its sole cost and expense, perform the following demolition work (the “Demolition Work”) to the Premises: (i) completely demolish and remove the office and bathrooms (consisting of an area approximately 56’x 42’ in dimension); (ii) remove and cap all of the heating, ventilating and air-conditioning equipment and ducts and the plumbing located in the office and bathrooms; (iii) remove and relocate the electrical service from the office and

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bathrooms to a location mutually agreeable to Landlord and Tenant; and (iv) repair any slab damage caused by the Demolition Work. Upon the completion of the Demolition Work, and continuing thereafter upon each annual anniversary of the commencement date of the Extended Term, and expiring September 30, 2005, Tenant shall pay to Landlord the sum of Three Hundred Twenty Five and 00/100 ($325.00) Dollars to partially offset Landlord’s cost of the Demolition Work, and Landlord shall have all the remedies for the collection of this amount as it does for the collection of rent.

9. In the event Landlord is unable to substantially complete Landlord’s Work on or before October 1, 2000, Tenant shall have the right, upon written notice to Landlord, which notice must be given, if at all, on or before October 15, 2000, to terminate this Amendment and render same null and void for all purposes ab initio. In the event Tenant exercises its option to terminate this Amendment, the term of the Lease shall automatically be extended to March 31, 2001 upon the terms and conditions contained therein. In the event Tenant elects not to exercise its option to terminate this Amendment as set forth herein, the terms and conditions of this Amendment shall be binding upon the parties hereto, except Landlord shall not be obligated to complete Landlord’s Work.

10. Subject to applicable law, during the Extended Term, Tenant shall be permitted, at no additional cost, to use a portion of the parking field measuring approximately 60 feet by 100 feet (but in no event shall such area extend more than 60 feet out from the Building), as generally depicted on Exhibit A (the “Storage Area”), for outdoor storage. Tenant agrees to keep and maintain the Storage Area in a clean, safe, sightly and orderly manner. The Storage Area may be used for storage purposes only, and may not be used to store garbage or refuse of any manner. In the event that the applicable governmental authorities shall require screening of the Storage Area, Tenant shall, at its sole cost and expense, install such screening and otherwise comply with all applicable governmental ordinances and regulations and obtain all necessary governmental approvals regarding the Storage Area.

11. Tenant represents that, except for CB Richard Ellis, no other broker was involved in consummating this Amendment and that Tenant had no conversations or prior negotiations with any other broker concerning this Amendment. Tenant agrees to indemnify Landlord against and hold Landlord safe and harmless from any and all claims for brokerage commissions arising out of any breach of the above representations of Tenant.

12. Paragraph 24 of the Lease (“Notices”) is hereby amended to reflect that all notices, rent and other payments required to be made by Tenant to Landlord shall be addressed to PAMI SP-1 INDUSTRIAL LIMITED PARTNERSHIP, c/o Clarion Partners, 335 Madison Avenue, New York, New York 10017, with a copy to DOLLINGER & DOLLINGER, P.A., Mack-Cali Centre II, One Mack Centre Drive, Paramus, New Jersey 07652-3906, Attn: Martin E. Dollinger, Esq.; and all notices required to be given by Landlord to Tenant shall be addressed to Tenant, at 20630 Plummer Street, Chatfworth, California 91311.

13. Tenant represents, warrants and covenants that as of the date hereof: (i) Landlord is not in default under any of its obligations under the Lease; (ii) Tenant is not in default of any of its obligations under the Lease; and (iii) no event has occurred which, with the passage of time or the giving of notice, or both, would constitute a default by either Landlord or Tenant thereunder.

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14. Except as modified by this Amendment, the Lease for the Premises, and all the covenants, agreements, terms, provisions and conditions thereof shall remain in full force and effect and unchanged, and are hereby ratified and affirmed. The covenants, agreements, terms, provisions and conditions contained in this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. In the event of any conflict between the terms contained in this Amendment and the Lease, the terms herein contained shall supersede and control the obligations and liabilities of the parties.

15. The submission of this Amendment for examination does not constitute a reservation of, or option for, the Premises, and this Amendment becomes effective only upon execution and delivery thereof by Landlord and Tenant.

16. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, Landlord and Tenant have hereunto set their hands and seals as of the date and year first above written, and acknowledge the one to the other that they possess the requisite authority to enter into this transaction and to sign this Amendment.

PAMI SP-1 INDUSTRIAL LIMITED PARTNERSHIP, a Delaware corporation, Landlord
By:	Clarion Partners, LLC, as agent
	By:	/s/ Ada M. Healey
		ADA M. HEALEY, Director
LESLIE’S POOLMART, INC., Tenant
By:	/s/ Patrick Murphy
	PATRICK MURPHY,
	Vice President-Real Estate & Construction

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EX-10.8

Exhibit 10.8

ADDENDUM TO LEASE

DATED NOVEMBER             ,1996

BETWEEN BEDFORD PROPERTY INVESTORS, INC.,

a Maryland corporation (“LESSOR”) AND

LESLIE’S POOLMART (INC), a California corporation (“LESSEE”)

FOR PREMISES GENERALLY LOCATED AT

1595 DUPONT AVENUE, ONTARIO, CALIFORNIA

This Addendum is intended to supplement, but not supersede (unless specifically so stated), the provisions of the Lease described above (the “Lease”), and the provisions hereof are hereby incorporated into the Lease. Any capitalized term is hereby given the same meaning as set forth in the Lease. In the event of any conflict between any provision of this Addendum and any provision of the Lease, the provision of this Addendum shall control.

1. The following is hereby added to Section 1.3, Term:

Term. The “Original Term” shall commence on the earlier to occur of (i) the date that Lessee substantially completes the Improvements (as defined in Exhibit C hereto) such that Lessee can utilize the Premises for Lessee’s intended use, notwithstanding minor incomplete or defective items that do not materially prevent Lessee from utilizing the Premises, or (ii) subject to “Force Majeure” (as defined below), eight (8) weeks following the Early Possession Date (the “Commencement Date”), and shall continue for One Hundred Twenty (120) months, plus any partial month at the beginning of the term if the Commencement Date is other than the first day of a calendar month (the “Expiration Date”). Notwithstanding the foregoing, Lessor and Lessee acknowledge and agree that both Lessor and Lessee shall have a right to terminate this Lease pursuant to and in accordance with the terms and conditions set forth in Section 5 of Exhibit C hereto. Within thirty (30) days following the Commencement Date, Lessee shall execute and deliver to Lessor a written acknowledgment of the Commencement Date in the form attached hereto as Exhibit “B” and incorporated herein by this reference. In the event that the Commencement Date is delayed because (i) Lessor has agreed to perform the Compliance Obligations (as defined in Section 5.B. of Exhibit C), or (ii) of Force Majeure, the Commencement Date shall be delayed one day for each day that Lessor’s performance of the Compliance Obligations within the Premises, or Force Majeure, delays the Commencement Date. Lessee shall notify Lessor in writing in the event that a Force Majeure occurrence arises that will likely delay the Commencement Date beyond eight (8) weeks following the Early Possession Date. In the event that Force Majeure delays the Commencement Date beyond eight (8) weeks following the Early Possession Date, but Lessee is utilizing all or a portion of the Premises for its business operations from and after eight (8) weeks following the Early Possession Date, Lessee shall pay to Lessor a proportionate share of the Base Rent and Additional Rent payable by Lessee hereunder, based upon the portion of the Premises being utilized by Lessee. As used herein, the term “Forces Majeure” shall mean any delay resulting from or caused by an Act of God, fire, earthquake, flood, explosion, action of the elements, war, invasion,

insurrection, riot, mob violence, sabotage, malicious mischief, inability to procure or general shortage of labor, equipment, facilities, materials, or supplies in the open market, failure of transportation, strike, lockout, action of labor unions, litigation not within the reasonable control of Lessee, condemnation, requisition, law, order or regulation of government or civil, military or naval authority, or any other cause (excluding financial inability) whether similar or dissimilar to the foregoing not within the reasonable control of Lessee.

2. The following is hereby added to Section 1.4, Early Possession:

Early Possession. Lessor shall deliver possession of the Premises to Lessee on or before three (3) business days following the full execution of this Lease (the “Early Possession Date.”)

3. The following is hereby added to Section 1.5, Base Rent:

Months 1 through 2:	$-0-
Months 3 through 60:	$43,978.00
Months 61 through 90:	$47,643.00
Month 91:	$-0-
Months 92 through 120:	$51,308.00

Notwithstanding the foregoing, Lessor and Lessee agree that, in the event that Lessee completes the contemplated Management Buyout (as defined in Paragraph 3 on Page 6A of the Lease), Base Rent in the amount of $43,978.00 per month shall be payable during months 1 and 2 of the term hereof, and no Base Rent shall be due from Lessee to Lessor for months 36 and 48 of the Lease term. In the event that the Management Buyout has not occurred prior to the Commencement Date, and thereafter the Management Buyout occurs, Lessee shall (i) provide written notice to Lessor that the Management Buyout has occurred within five (5) business days following the completion thereof, and (ii) pay to Lessor, with the next installment of Base Rent becoming due under the Lease, all Base Rent for months 1 and/or 2 of the term hereof not previously paid to Lessor by Lessee.

4. The following is hereby added to Section 1.6(b), Lessee’s Share of Common Area Operating Expenses:

A. Notwithstanding anything to the contrary contained herein, “Lessee’s Share” of (i) Common Area Operating Expenses and (ii) expenses reimbursable to Lessor by Lessee pursuant to Section 7.2 of the Lease (collectively, the “Reimbursable Costs”) shall be (a) Forty and 6/10 Percent (40.6%), based upon the square footage of the Premises (not including the square footage of the Truck Parking Area) as compared to the square footage of the Industrial Center available for lease, with respect to those Reimbursable Costs identified below as applicable to the Industrial Center, and (b) one hundred percent (100%) with respect to those Reimbursable Costs identified below as applicable to the Building.

B. Those categories of Reimbursable Costs applicable to the Industrial Center include Real Property Taxes, insurance premiums payable by Lessor, property

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association dues and fees payable by Lessor in connection with the recorded covenants, conditions and restrictions for California Commerce Center, miscellaneous cleaning of Common Area facilities, including without limitation, windows, walls, sidewalks, landscaping and parking lots that are part of Common Areas, miscellaneous repair and maintenance of electrical facilities and service serving the Common Areas, including without limitation, replacement of exterior lights, miscellaneous repair and maintenance of plumbing facilities and service serving the Common Areas, miscellaneous repair and maintenance of doors (excluding roll-up doors), painting of the Industrial Center, the cost of providing water, gas, and electricity for Common Area facilities, the cost of maintaining, repairing and replacing landscaping in the Industrial Center, the cost of maintaining, repairing and replacing the parking lots, paved or concreted areas and walkways within the Industrial Center, the cost of any capital improvements or replacements made to the Common Areas, and any other costs or expenses incurred by Lessor in the operation and maintenance of the Common Areas which are not part of the Reimbursable Costs applicable to the Building.

C. Those categories of Reimbursable Costs applicable to the Building include sprinkler monitoring costs for the Building, including without limitation, all testing costs, inspection costs, telephone and monitoring charges and repair or replacement costs, the cost of repairing or replacing the roof on the Building, the cost of repairing or replacing the heating, ventilating and air conditioning system serving the Building, the cost of repairing or replacing the electrical service and meters serving the Building, the cost of repairing or replacing the water and sewer service and meters to the Building, the cost of maintaining, repairing and replacing the Truck Parking Area, the cost of any capital improvements or replacements made to the Building and Truck Parking Area, and any other costs or expenses incurred by Lessor in the operation and maintenance of the Building or Truck Parking Area which are not part of the Reimbursable Costs applicable to the Common Areas.

D. Notwithstanding anything to the contrary set forth above, with respect to Reimbursable Costs that constitute replacements of equipment and improvements which Lessor is required to perform pursuant to the terms of this Lease, and any other replacements or improvements which Lessor determines to be reasonably necessary to the operation of the Industrial Center, or which are mandated or required by applicable law, ordinance or code, shall hereinafter be known as “Capital Costs.” Certain Capital Costs shall be reimbursed by Lessee to Lessor hereunder as part of Reimbursable Costs each year, only to the extent of that fraction allocable to the year in question. Lessee shall reimburse Lessor each year for that portion of the Capital Cost determined by taking (i) the total Capital Cost amount incurred by Lessor, with interest on such Capital Cost amount at a rate equal to ten percent (10%) per annum over the commercially reasonable useful life of the improvement for which such Capital Cost was incurred, and (ii) multiplying such amount by a fraction, the numerator of which is the then remaining term of this Lease (or if Lessee elects to extend the term hereof, by such extended term or the remainder thereof), and the denominator of which is the commercially reasonable useful life of the improvement for which such Capital Cost was incurred. The Capital Costs subject to such amortization procedure are restricted to the following two categories: (a) those costs for capital improvements to the Industrial Center or the

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Building of a type which do not normally recur more frequently than every five (5) years in the normal course of operation and maintenance of facilities such as the Industrial Center or the Building (specifically excluding painting of all or a portion of the Industrial Center or Building); and (b) costs incurred for the purpose of reducing other operating expenses or utility costs, from which Lessee can expect a reasonable benefit, or that are required by governmental law, ordinance, regulation or mandate, not applicable to the Industrial Center or Building at the time of the original construction.

E. With respect to Capital Costs incurred solely for the purpose of reducing other operating expenses or utility costs, from which Lessee can expect a reasonable benefit, Lessor shall obtain Lessee’s prior written consent to the incurring of such Capital Costs by Lessor, which consent shall not be unreasonably withheld or delayed. Lessee shall approve or disapprove Lessor’s request to incur such Capital Costs within five (5) business days of Lessee’s receipt of written notice from Lessor that it desires to incur such Capital Costs, which notice from Lessor shall describe with reasonable specificity the nature and extent of the Capital Costs proposed to be incurred. In the event that Lessee shall disapprove of Lessor’s incurring of such Capital Costs, Lessee’s written disapproval shall include the specific reasons for Lessee’s disapproval.

F. With respect to Capital Costs incurred for the purpose of seismically upgrading or retro-fitting the Building and which is required by governmental mandate or ordinance, Lessor and Lessee agree that the commercially reasonable useful life of such improvements shall be a period of thirty (30) years. With respect to Capital Costs incurred for the purpose of re-roofing the Building, Lessor and Lessee agree that the commercially reasonable useful life of such roof shall be a period of (i) ten (10) years, if Lessor determines to put a three-ply roof on the Building, or (ii) twenty (20) years, if Lessor determines to put a four-ply roof on the Building.

G. Lessor and Lessee acknowledge that the water pressure currently provided by the local water utility company is sufficient for Lessee’s use and for the fire protection system serving the Premises. In the event that, in the future, the water pressure provided by the local water utility company reasonably becomes insufficient for Lessee’s use and the fire protection system serving the Premises, Lessor agrees, as Reimbursable Cost applicable to the Building, to install an ancillary water pump to provide water pressure reasonably sufficient for Lessee’s use and for the fire protection system serving the Premises. The cost of such pump shall be deemed to be a Capital Cost, amortized in accordance with the provisions set forth above in subsection D.

5. The following is hereby added to Section 1.8, Permitted Use:

Use. The Premises shall be used solely for general warehouse use and distribution, storage, packaging, service and repair of products, for the forming of granular chlorine into tablets, the packaging of chlorine into Department of Transportation (“DOT”) approved consumer sized containers, the repackaging of granular chemicals (including chlorine compounds) into DOT approved consumer sized containers, the mixing, dilution and packaging of liquid pool products and for any other uses which are incidental or reasonably related thereto, and for no other purpose.

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6. The following is hereby added as new Section 4.2 (e):

Also included within the definition of Common Area Operating Expenses shall be a yearly management fee paid to Lessor for the operation and management of the Industrial Center, which in no event shall exceed ten percent (10%) of the sum of (i) Common Area Operating Expenses of the Building and/or the Industrial Center, as applicable (not including Real Property Taxes), which are payable by Lessee hereunder, plus (ii) those costs incurred by Lessor pursuant to Section 7.2 of the Lease which are applicable to the Building and/or the Industrial Center and which are payable by Lessee hereunder. The aforementioned management fee is the only management or administrative fee charged to Lessee by Lessor in connection with its management and operation of the Premises and the Industrial Center.

7. The following is hereby added to Section 8.2(a) where indicated:

“ONE MILLION DOLLARS ($1,000,000.00) per occurrence with a ONE MILLION DOLLAR ($1,000,000.00) annual aggregate and an umbrella policy of FIVE MILLION DOLLARS ($5,000,000.00) any occurrence,”

8. The following is hereby added as new Section 9 where indicated:

A. Rights of Termination. In the event the Premises suffers (a) an “uninsured property loss” (as hereinafter defined) or (b) a property loss which cannot be repaired within two hundred seventy (270) days from the date of destruction under the laws and regulations of state, federal, county or municipal authorities, or other authorities with jurisdiction, lessor may terminate this Lease as at the date of the damage upon written notice to Lessee following the casualty. In the event of a property loss to the Premises which cannot be repaired within two hundred seventy (270) days of the occurrence thereof, Lessee shall have the right to terminate the Lease by written notice to Lessor within thirty (30) days following notice from Lessor that the time for restoration shall exceed two hundred seventy (270) days. Lessor shall deliver such notice to Lessee within forty-five (45) days following the date of such damage or destruction. For purposes of this Lease, the term “uninsured property loss” shall mean any loss arising from a peril not covered by the standard form of “All Risk” property insurance policy, or not covered by Lessor’s policy of earthquake insurance, including any deductible related thereto (subject to the provisions of Subsection B, below.)

B. Earthquake Damage. Subject to Subparagraph A, above, in the event of any earthquake damage to the Premises (not including Lessee’s Special Improvements or Lessee-Owned Alterations or Utility Installations, for which Lessee shall be solely responsible) which is not covered by Lessor’s policy of earthquake insurance, including any deductible related thereto, and which costs less than Fifty Thousand Dollars (50,000.00) to repair. Lessor shall be obligated to make such repairs at its sole cost and expense. Subject to Subparagraph A, above, in the event of any earthquake damage to the Premises which is not covered by Lessor’s policy of earthquake insurance, including any deductible related thereto, and which costs in excess of Fifty Thousand Dollars (50,000.00) to repair, Lessor shall have no obligation to make any such repairs, and may

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elect to terminate this Lease pursuant to Subsection A, above, unless Lessee agrees in writing, within thirty (30) days following receipt of notice from Lessor that the cost to repair is reasonably estimated by Lessor to exceed the sum of Fifty Thousand Dollars (50,000.00), to the “Capitalization Procedure” (as described below.) In the event that Lessee timely and property notifies Lessor that it agrees to the Capitalization Procedure, Lessor shall have no right to terminate this Lease as a result of such earthquake damage, and shall commence to repair all such damage as soon as reasonably possible and thereafter to diligently prosecute such repairs to completion. In the event that Lessee timely and properly notifies Lessor that it agrees to the Capitalization Procedure, all costs of repairing such earthquake damage in excess of Fifty Thousand Dollars (50,000.00) shall be treated as a Capital Cost, as specified in Paragraph 4 of this Addendum, recoverable from Lessee in accordance therewith, with the reasonable useful life of such repairs being agreed between Lessor and Lessee to be thirty (30) years (the “Capitalization Procedure.”)

C. Repairs. In the event of a property loss which may be repaired within two hundred seventy (270) days from the date of the damage, or, in the alternative, in the event the parties do not elect to terminate this Lease under the terms set forth above, then this Lease shall continue in full force and effect and Lessor shall forthwith undertake to make such repairs to reconstitute the Premises to as near the condition as existed prior to the property loss as practicable. Such partial destruction shall in no way annul or void this Lease except that Lessee shall be entitled to a proportionate reduction of Base Rent and Additional Rent following the property loss and until the time the Premises are restored. Such reduction shall be an amount which reflects the degree of interference with Lessee’s business. So long as Lessee conducts its business in the Premises, there shall be no abatement until the parties agree on the amount thereof. If the parties cannot agree within forty-five (45) days of the property loss, the matter shall be submitted to arbitration under the commercial arbitration rules of the American Arbitration Association. Upon the resolution of the dispute, the settlement shall be retroactive and Lessor shall within ten (10) days thereafter refund to Lessee any sums due in respect of the reduced rental from the date of the property lose. If such dispute is arbitrated, the losing party in such dispute shall pay all the fees and cost of the American Arbitration Association in such arbitration, including without limitation the fee for the arbitrator. Lessor’s obligations to restore shall in no way include any construction originally performed by Lessee or subsequently undertaken by Lessee, including without limitation Lessee’s Special Improvements (as defined in Exhibit C hereto) and any Lessee-Owned Alterations and/or Utility Installations, but shall include solely that property constructed by Lessor prior to commencement of the Term hereof.

D. Repair Costs. The cost of any repairs to be made by Lessor, pursuant to this Section 9 of this Lease (specifically excluding Subparagraph B, above), shall be paid by Lessor utilizing available insurance proceeds. In no event shall Lessor be required to expend in restoration of the Premises more than it receives from Lessor’s property insurance policies.

E. Total Destruction. Total destruction of the Premises shall terminate this Lease.

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F. Waiver. Lessee hereby waives all statutory or common law rights of termination in respect to any partial destruction or property loss which Lessor is obligated to repair or may elect to repair under the terms of this Article. Further, in event of a property loss to the Premises which costs in excess of Two Hundred Thousand Dollars ($200,000.00) to repair and occurring during the last two (2) years of the original term hereof or of any extension, Lessor need not undertake any repairs and may cancel this Lease unless Lessee has the right under the terms of this Lease to extend the term for an additional period of at least five (5) years and does so within thirty (30) days following the date of the property loss. In event of a property loss to the Premises during the last twelve (12) months of the original term hereof or of any extension thereof, which will take in excess of one hundred eighty (180) days to repair or restore, either Lessor or Lessee may elect to terminate this Lease upon written notice to the other.

9. The following is hereby added as new Section 12.4:

A. “In addition to any other conditions to Lessor’s consent to a proposed assignment or sublet of all or a portion of the Premises contained herein, Lessor and Lessee agree that should Lessor withhold its consent for any of the following reasons, which list is not exclusive, such withholding shall be deemed to be reasonable:

(1) The tangible net worth of the proposed assignee or sublessee of all of the Premises is not at least equal to Thirty Million Dollars (provided, however, that the foregoing requirement shall not apply to a sublease of less than all of the Premises);

(2) A proposed transferee whose occupation of the Premises would cause a diminution in the reputation of the Industrial Center or the other businesses located therein;

(3) A proposed transferee whose impact on the Premises, the common facilities or the other occupants of the Industrial Center would be in excess of the impact caused by Lessee; or

(4) A proposed transferee whose occupancy will require a variation in the terms of the Lease.

B. Procedure for Obtaining Consent. Lessor need not commence its review of any proposed assignment or sublet, or respond to any request by Lessee with respect to such, unless and until it has received from Lessee reasonably adequate descriptive information concerning the business to be conducted by the proposed transferee, the transferee’s financial capacity, and such other information as may reasonably be required in order to form a prudent judgment as to the acceptability of the proposed assignment or sublet, including, without limitation, the following:

(1) The past two years’ Federal Income Tax returns of the proposed transferee (or in the alternative the past two years’ audited annual Balance Sheets and Profit and Loss statements, certified correct by a Certified Public Accountant);

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(2) Banking references of the proposed transferee; and

(3) A resume of the business background and experience of the proposed transferee.

Lessee shall reimburse Lessor as additional rent for Lessor’s reasonable costs and attorneys’ fees incurred in conjunction with the processing and documentation of any proposed Transfer of the Premises, whether or not consent is granted, provided that the same shall not exceed Fifteen Hundred Dollars ($1500.00) per transaction. Lessor shall approve or disapprove of Lessee’s request for consent to a Transfer within five (5) business days of Lessor’s receipt of all of the above referenced information from Lessee.

C. Recapture. By written notice to Lessee (the “Termination Notice”) within five (5) business days following submission to Lessor by Lessee of the information specified above, Lessor may terminate this Lease in the event of a proposed assignment of this Lease or sublet of the entire Premises.

D. Effect of Transfer. If Lessor consents to a proposed assignment or sublet, the following conditions shall apply:

(1) Each and every covenant, condition or obligation imposed upon Lessee by this Lease and each and every right, remedy or benefit afforded Lessor by this Lease shall not be impaired or diminished as a result of such assignment or sublet.

(2) On a monthly basis, any sums of money, or other economic consideration received by Lessee from the transferee in such month (whether or not for a period longer than one month), including higher rent, bonuses, key money, or the like which exceed, in the aggregate, the total sums which Lessee pays Lessor under this Lease in such month, or the prorated portion thereof if the premises transferred is less than the entire Premises, shall be payable fifty percent (50%) to Lessor and fifty percent (50%) to Lessee, and Lessor’s share shall be paid with Lessee’s payment of Base Rent after deduction of the reasonable out-of-pocket costs incurred by Lessee for (i) any space planning, architectural or design fees or expenses incurred in connection with such assignment or sublease, (ii) any improvement allowance or other monetary consideration provided to the transferee by Lessee, (iii) reasonable legal fees incurred in connection with such assignment or sublease, (iv) costs of advertising the Premises or portion thereof which is the subject of the assignment or sublease (hereinafter, the “Transfer Costs”), pursuant to the following procedure: the Transfer Costs shall be amortized on a monthly straight line basis over the term of the assignment or sublease, and only that amortized portion of the Transfer Costs applicable to each month of the term of the assignment or sublease shall be deducted from the payment hereinabove specified to be made by Lessee to Lessor.

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(3) Subject to the provisions of Paragraph F, below, no Transfer, whether or not consent of Lessor is required hereunder, shall relieve Lessee of its primary obligation to pay the rent and to perform all other obligations to be performed by Lessee hereunder. The acceptance of rent by Lessor from any person shall not be deemed to be a waiver by Lessor of any provision of this Lease or to be a consent to any assignment or sublet of the Premises.

(4) If Lessor consents to a sublease, such sublease shall not extend beyond the expiration of the term of this Lease.

(5) No proposed assignment or sublet shall be valid and no transferee shall take possession of the Premises or any part thereof unless, within ten (10) days after the execution of the documentary evidence thereof, Lessee shall deliver to Lessor a duly executed duplicate original of the instrument by which the proposed assignment or sublet is to be documented, in form reasonably satisfactory to Lessor which provides that (i) any assignee (but not necessarily any subtenant) assumes Lessee’s obligations for the payment of rent and for the full and faithful observance and performance of the covenants, terms and conditions contained herein, (ii) such transferee will, at Lessor’s election, attorn directly to Lessor in the event Lessee’s Lease is terminated for any reason on the terms set forth in the instrument of transfer and (iii) such instrument of transfer contains such other assurances as Lessor reasonably deems necessary.

E. Excluded Transfers. Notwithstanding any provision of this Lease to the contrary, Lessor’s consent shall not be required for, Lessor’s recapture right specified in subparagraph C, above, shall not apply to, and Lessor shall not share in any profits of the type described in subparagraph D.2, above, with respect to, any (i) sublease of all or a portion of the Premises to Leslie’s Pool Brite, a California corporation, (ii) sublease to a company that provides to Lessee (and possibly third parties) pool equipment or other parts incidental to Lessee’s business operations within the Premises, (iii) lease of storage space within the Premises where the party leasing such space does not enter into possession of the Premises or any portion thereof but merely consigns items for storage to Lessee (provided that such items consigned for storage do not include any Hazardous Substances), or (iv) any assignment of this lease or sublease of any portion of the Premises to any entity or person which controls, is controlled by, or under common control with, Lessee. Lessee shall notify Lessor in writing of any assignment of this Lease or any sublease of all or a portion of the Premises (except for leases of storage space as contemplated by subsection (ii), above, which shall require no notice to Lessor) within ten (10) days following such assignment or sublease. Included in such notice shall be an executed copy of the document by which such assignment or sublease has been effectuated. As used above, “control” means ownership and the right to vote stock possessing at least fifty percent (50%) of the total combined voting power of all classes of Lessee’s capital stock issued, outstanding and entitled to vote for election of directors.

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F. Release of Lessee. In the event that Lessee proposes an assignment of this Lease to an assignee that Lessor agrees meets the requirements set forth in subparagraph A, above, upon receiving Lessor’s written consent to such assignment Lessee shall be released from all of its obligations thereafter accruing under this Lease.

10. The following is hereby added as new Section 36(c):

“Notwithstanding anything to the contrary contained in this Lease, if any provision of this Lease expressly or impliedly obligates Lessor not to unreasonably withhold its consent or approval, an action for declaratory judgment or specific performance will be Lessee’s sole right and remedy in any dispute as to whether Lessor has breached such obligation.”

11. The following is hereby added as new Section 49:

“Limited Liability. In the event of default, breach, or violation by Lessor (which term includes Lessor’s, partners, co-venturers, co-tenants, officers, directors, employees, agents or representatives) of any Lessor’s obligations under this Lease, Lessor’s liability to Lessee shall be limited to its ownership interest in the Industrial Center or the proceeds of a public sale of such interest pursuant to foreclosure of a judgment against Lessor. Lessor (as defined above) shall not be personally liable for any deficiency beyond its interest in the industrial Center.”

12. [NOT IN HARD COPY]

13. The following is hereby added as new Section 50:

“Interruptions. It is understood that Lessor does not warrant that any of the services or utilities in this Lease will be free from interruption. Lessee acknowledges that any one or more such services or utilities maybe suspended or reduced by reason of repairs, alterations or improvements necessary to be made, by strikes or accidents, by action of the local utility supplier, by orders or regulations of any federal, state, county or municipal authority, and other cause beyond the reasonable control of Lessor. Any such interruption or suspension of services or utilities shall not be deemed an eviction or disturbance of Lessee’s use and possession of the Premises or any part hereof, not render Lessor liable to Lessee for damages by abatement of Rent or otherwise, nor relieve Lessee of performance of Lessee’s obligations under this Lease.”

14. The following is hereby added as new Section 51.

“Condition of Premises. Except as to the specific warranties of Lessor contained herein, and the construction obligations of Lessor, if any, stated in Exhibit “C” to this Lease, Lessee shall accept the Premises in “as is” condition as of the date of execution of this Lease by Lessee, and Lessee acknowledges that the Premises in such condition are in good and sanitary order, condition and repair.”

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15. The following is hereby added as new Section 52:

“Waiver of Claims. Provided that Lessee elects to self insure for damage to its personal property, trade fixtures, Lessee’s Special Improvements, Lessee-Owned Alterations or Utility Installations, and for business interruption/loss of income due to damage or destruction to the Premises, interruptions with necessary utility services, or other events which cause Lessee economic loss because it is unable to utilize the Premises to any extent, Lessee, as a material part of the consideration to be rendered to Lessor, hereby waives all claims against Lessor for damages to goods, wares, merchandise and loss of business (including loss of income in other retail outlets of Lessee as a result of its inability to utilize the Premises to any extent) in, upon or about the Premises and injury to Lessee, its agents, employees, invitees or third persons, in, upon or about the Premises, from any cause arising at any time, including the negligence of the parties hereto.”

16. The following is hereby added as new Section 53:

“Notice and Right to Cure Default. Lessee agrees to give any mortgagee(s) and/or trust deed holders, by registered mail, a copy of any notice of default served upon Lessor, provided that prior to such notice Lessee has been notified, in writing (by way of Notice of Assignment of Rents and Leases, or otherwise), of the address of such mortgagees and/or trust deed holders. Lessee further agrees that if Lessor shall have failed to cure such default within the time provided for in this Lease, then the mortgagees and/or trust deed holders shall have an additional thirty (30) days within which to cure such default or, if such default cannot be cured within that time, then such additional time as may be necessary if within such thirty (30) days, any mortgagee and/or trust deed holder has commenced and is diligently pursuing the remedies necessary to cure such default (including but not limited to commencement of foreclosure proceedings, if necessary to effect such cure), in which event this Lease shall not be terminated while such remedies are being so diligently pursued.”

17. The following is hereby added as new Section 54:

“Waiver of California Code Sections. In this Lease, numerous provisions have been negotiated by the parties, some of which provisions are covered by statute. Whenever a provision of this base and a provision of any statute or other law cover the same matter, the provisions of this Lease shall control. Therefore, Lessee waives (for itself and all persons claiming under Lessee) the provisions of Civil Code Sections 1932(2) and 1933(4) with respect to the destruction of the Premises; Civil Code Sections 1941 and 1942 with respect to Lessor’s repair duties and Lessee’s right to repair, Code of Civil Procedure Section 1265.130, allowing either party to petition the Superior Court to terminate this Lease in the event of a partial taking of the Premises by condemnation as herein defined; and any right of redemption or reinstatement of Lessee under any present or future case law or statutory provision (including Code of Civil Procedure Section 1179) in the event Lessee is dispossessed from the Premises for any reason. This waiver applies to future statutes enacted in addition to or in substitution for the statutes specified herein.”

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18. The following is hereby added as new Section 55:

“OPTION TO EXTEND THE TERM.

1. Notice to Exercise. Lessee shall have the right to extend the initial term hereof for two (2) additional and consecutive periods of five (5) years each upon the same terms and conditions as stated herein, except for the Base Rent, which shall be determined for the first Extended Term in accordance with paragraph 3, below, and which shall be determined for the second Extended Term in accordance with paragraphs 4 through 9, below; and further, except that the number of additional periods shall be reduced by one for each extension option that is exercised. Each such extension is herein referred to as an “Extended Term”. Failure to timely exercise any extension option hereunder shall cause all subsequent options to immediately become null and void. Lessee must exercise its right, if at all, by written notification (the “Notice to Exercise”) to Lessor not less than One Hundred Eighty (180) nor more than Two Hundred Seventy (270) days prior to the expiration of the initial term hereof, or the then current Extended Term, if any, provided that Lessee is not in Breach of this Lease as of the date (i) that Lessee exercises its right to extend the term hereof, or (ii) of the commencement of the applicable Extended Term.

2. Options are Personal. The options to extend granted herein are personal to the original Lessee executing this lease, and notwithstanding anything to the contrary contained in the Lease, the rights contained in this Addendum are not assignable or transferable by such original Lessee. Lessor grants the rights contained herein to Lessee in consideration of Lessee’s strict compliance with the provisions hereof, including without limitation, the manner of exercise of this option.

3. CPI Adjustment. The Base Rent provided herein shall be subject to increase at the commencement of the first Extended term hereof, and upon the expiration of the thirtieth (30th) month of the first Extended Term (hereinafter, the “adjustment dates”), as follows:

The basis for computing the increase in Base Rent is the Consumer Price Index, All Urban Consumers, All Items, Los Angeles-San Diego-Riverside Area, published by the United States Department of Labor, Bureau of Labor Statistics (1984=100) (the “Index”). The Index which is published nearest to the commencement of the ninety-second (92nd) full calendar month of the initial term of this Lease (for the rental adjustment as of the commencement of the first Extended Term), or the immediately prior adjustment date (for the rental adjustment as of the end of the thirtieth (30th) month of the first Extended Term) shall be deemed to be the “Beginning Index”. The Index published nearest to the applicable adjustment date shall be deemed to be the “Extension Index”. If the Extension Index has increased over the applicable Beginning Index, the Base Rent until the next rent adjustment date, if any, shall be established by multiplying the Base Rent in effect immediately prior to the applicable adjustment date by a fraction, the numerator of which is the Extension Index and the denominator is the

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Beginning Index. In no event, however, shall the Base Rent as established at the (i) first adjustment date be less than seven percent (7%) more than, or more than fourteen percent (14%) more than, the Base Rent due immediately prior to the first adjustment date, and (ii) second adjustment date be less than seven and one-half percent (7.5%) more than, or more than fifteen percent (15%) more than, the Base Rent due immediately prior to the second adjustment date. Lessor shall notify Lessee of the amount of such adjustment, and Lessee shall acknowledge such adjustment within five (5) days of such notice from Lessor. Following adjustment of the Base Rent as specified herein, the parties shall immediately execute an amendment to the Lease on request of either party stating the new Base Rent. In the event the Extension Index has not been published as of the applicable adjustment date, the previous Base Rent shall remain in effect until publication thereof. On the first calendar month following publication of the Extension Index (the “Retroactive Date”), Lessee shall pay to Lessor (i) the Base Rent for the current month as increased as provided herein, and (ii) the monthly increase in the Base Rent resulting from the calculation upon publication of the Extension Index multiplied by the number of months that have elapsed between the last adjustment date and the Retroactive Date, such that the newly revised Base Rent shall have been paid in full commencing with the immediately preceding adjustment date.

If the Index is changed so that the Beginning Index differs from that used for the Extension Index, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or revised during the term of the Lease, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would have been obtained if the Index had not been discontinued or revised.

4. Fair Market Rental. If Lessee exercises the right to extend the term of the Lease for the second Extended Term contemplated hereby, then the Base Rent shall be adjusted to equal the Fair Market Rental for the Premises as of the date of the commencement of the second Extended Term, pursuant to the procedures hereinafter set forth. The term “Fair Market Rental” means the Base Rent chargeable for the Premises based upon the following factors applicable to the Premises or any comparable premises:

(a) Rental rates being charged for comparable premises in the same geographical location;

(b) The relative locations of the comparable premises;

(c) Improvements, or allowances provided for improvements, or to be provided;

(d) Rental adjustments, if any, or rental concessions;

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(e) Services and utilities provided or to be provided;

(f) Use limitations or restrictions;

(g) Any other relevant Lease terms or conditions.

In no event, however, shall the Fair Market Rental be less than the Base Rent in effect immediately prior to the commencement date of the second Extended Term. The Fair Market Rental may include provision for further Base Rent adjustments during the Extended Term if such adjustments are commonly required in the market place for similar types of leases.

5. Determination of Fair Market Rental. Upon exercise of the right to extend for the second Extended Term, and included within the Notice of Exercise, Lessee shall notify Lessor of its opinion of Fair Market Rental as above defined for the second Extended Term. If the parties are unable to agree upon a Base Rent for the second Extended Term within thirty (30) days following Lessor’s receipt of the Notice to Exercise, within ten (10) days thereafter, either party at its own cost and expense and by giving notice to the other party in writing, may appoint a real estate appraiser who is a member of the Appraisal Institute, or the Society of Real Estate Appraisers, or an equivalent professional organization, with at least five (5) years’ experience appraising properties devoted to the same general type of use (e.g. office, industrial) as the Premises in the county in which the Premises are located (“Qualified Appraiser”), to set the Fair Market Rental for the second Extended Term. The terms “Base Rent” and “Fair Market Rental” as used in this article shall be interchangeable. If a party does not appoint a Qualified Appraiser within ten (10) days after the first party has given notice of the name of its Qualified Appraiser, the single Qualified Appraiser appointed shall be the sole appraiser and shall set the Fair Market Rental for the second Extended Term. If two Qualified Appraisers are appointed by the parties, they shall meet promptly, on five (5) days’ notice to the parties, to take such evidence and other information as the parties may deem reasonable to submit to the Qualified Appraiser. Within thirty (30) days after the selection of the last of the two Qualified Appraisers to be appointed by the parties, the Qualified Appraisers shall render their opinions of the Fair Market Rental of the Premises as above qualified. If the two valuations are within ten percent (10%) of each other, they shall be averaged and the average of the two shall be the Base Rent for the second Extended Term. If only one appraisal is timely submitted, that opinion shall constitute the Base Rent for the second Extended Term. If the two valuations are separated by more than ten percent (10%), then the two Qualified Appraisers shall, within ten (10) days following the last date for submission of the two appraisals of Fair Market Rental, appoint a third Qualified Appraiser. If they are unable to agree upon a third Qualified Appraiser within such ten (10) day period, either of the parties to this Lease, by giving five (5) days’ notice to the other party, may demand Arbitration as specified in Section 7 of this Addendum. If neither party applies for Arbitration within the ten (10) day period herein specified, the two appraisals of Fair Market Rental shall be averaged as stated above, and such average shall be the Base Rent for the second Extended Term.

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6. Arbitration. In the event the parties are unable to mutually agree upon a Base Rent for the second Extended Term, and in such event proceed to the Appraisal or Arbitration procedure herein specified, both parties shall be bound to submit the matter for such determination. The procedure specified in this article for appointment of Qualified Appraisals, delivery of appraisals, appointment of an Arbitrator, and determination of Fair Market Base Rental Value thereby, is herein collectively referred to as “Arbitration.” The Arbitration shall be conducted and determined in the County where the Premises are situated. If the Arbitration is not concluded before the commencement of the second Extended Term, Lessee shall pay Base Rent to Lessor in an amount equal to the Fair Market Rental set forth in the appraisal by Lessor’s Qualified Appraiser until the Fair Market Rental is determined in accordance with the arbitration provisions hereof. If the Fair Market Rental as determined by Arbitration differs from that stated by Lessor’s Qualified Appraiser, then any adjustment required to correct the amount previously paid by Lessee shall be made by payment by the appropriate party within thirty (30) days after the determination of Fair Market Rental by Arbitration has been concluded, as provided herein. Lessee shall be obligated to make payment during the entire second Extended Term of the Base Rent determined in accordance with the Arbitration procedures hereunder.

7. Demand for Arbitration. A party demanding Arbitration hereunder shall make its demand in writing (“Demand Notice”) within ten (10) days after receipt of notice from the Qualified Appraisers that they have failed to appoint a third Qualified Appraiser as specified in Section 5 above. A copy of the Demand Notice shall be sent to the President of the Real Estate Board for the County in which the Premises are located. If there is no Real Estate Board, or Board President, in said County then a copy of the Demand Notice shall be sent to the Presiding Judge of the highest trial court in such County for the State in which the Premises are located. The Board President or Presiding Judge, whichever is applicable, is hereinafter referred to as the “Appointer”. The Appointer, acting in his personal, private capacity, shall appoint within ten (10) days thereafter a Qualified Appraiser. The Arbitrator shall be qualified to serve as an expert witness, over objection, to give opinion testimony addressed to the issue in a court of competent jurisdiction.

8. Decision of the Arbitrator. As used herein, the term Arbitrator refers to a third Qualified Appraiser, selected by any of the methods heretofore set forth. The Arbitrator shall, within sixty (60) days after his appointment, state in writing his determination as to whether the Fair Market Rental stated by Lessor’s Qualified Appraiser or the Fair Market Rental stated by Lessee’s Qualified Appraiser, most closely approximates his own. The Arbitrator shall have the right to consult experts and competent authorities with factual information or evidence pertaining to a determination of Fair Market Rental, but any such consultation shall be made in the presence of both parties with full right to cross examine. The Arbitrator

15

may not state his own opinion of Fair Market Rental, but is strictly limited to the selection of one of the two appraisals submitted by the other two Qualified Appraisers. The Arbitrator shall have no right to propose a middle ground or any modification of either of the proposed valuation, and shall have no power to modify this Lease. The valuation so chosen as most closely approximating that of the Arbitrator shall constitute his decision, shall be deemed the Base Rent for the second Extended Term and shall be final and binding upon the parties absent fraud or gross error. The Arbitrator shall render a decision and ward in writing, with counterpart copies to each party. Judgment may be entered thereon in any court of competent jurisdiction.

9. Successor Arbitrator; Fees and Expenses. In the event of failure, refusal, or inability of the Arbitrator to act in a timely manner, a successor shall be appointed in the same manner as such Arbitrator was first chosen hereunder. The fees and expenses of the Arbitrator and for the administrative hearing fee, if any, shall be divided equally between the parties. Each party shall bear its own attorneys’ fees and other expenses including fees of witnesses in presenting evidence, and the fees and cost of its own Qualified Appraiser.”

IN WITNESS WHEREOF, the parties have initialed this Addendum to Lease on the date set forth above.

LESSOR:	/s/
LESSEE:	/s/

16

EX-10.10

Exhibit 10.10

FIRST AMENDMENT TO LEASE AGREEMENT

THIS FIRST AMENDMENT is made this 3 day of June, 1999, by and between LIBERTY PROPERTY LIMITED PARTNERSHIP, a Pennsylvania limited partnership (“Landlord”), and LESLIE’S POOLMART, INC., a Delaware corporation (“Tenant”).

BACKGROUND:

A. Landlord and Tenant entered into a Lease Agreement dated December 30, 1997 (the “Lease”), covering premises at 300 Commodore Drive, Swedesboro, New Jersey, as more fully described in the Lease (the “Original Premises”).

B. Tenant desires to increase the amount of space leased and Landlord has agreed to such increase subject to the provisions of this First Amendment. Accordingly, Landlord and Tenant desire to amend the Lease.

NOW, THEREFORE, the parties hereto, in consideration of the mutual promises and covenants contained herein and in the Lease, and intending to be legally bound hereby, agree that, effective June 1, 1999 (the “Effective Date”), the Lease is amended as follows:

1. All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Lease.

2. Section 1(a) defining “PREMISES” is amended by deleting the reference to “119,148” approximate rentable square feet and inserting “130,540” in its place. The Original Premises and the 11,392 additional square feet (the “Additional Space”) being leased pursuant to this First Amendment (collectively, the “Premises”), is shown on attached Exhibit “A-1”.

3. Section 1(b) defining “BUILDING” is amended by deleting the reference to “166,333” approximate rentable square feet and inserting “166,400” in its place.

4. Section 1(d)(i) defining “MINIMUM ANNUAL RENT” is deleted in its entirety and the following is substituted therefor:

“Period	Annual		Monthly
6/1/99-2/29/00	$	366,380.10	$	40,708.90
3/1/00-2/28/01	$	514,138.80	$	42,844.90
3/1/01-2/28/02	$	526,053.60	$	43,837.80
3/1/02-2/28/03	$	548,268.00	$	45,689.00
3/1/03-2/29/04	$	548,268.00	$	45,689.00
3/1/04-2/28/05	$	548,268.00	$	45,689.00
3/1/05-2/28/06	$	580,903.00	$	48,408.58
3/1/06-2/28/07	$	580,903.00	$	48,408.58
3/1/07-2/29/08	$	580,903.00	$	48,408.58	”

5. Section 1(d)(ii) defining “ANNUAL OPERATING EXPENSES” is deleted in its entirety and the following is substituted therefor:

“(ii) Estimated “ANNUAL OPERATING EXPENSES”: $135,761.60 (One Hundred Thirty-Five Thousand Seven Hundred Sixty-One and 60/100 Dollars), payable in monthly installments of $11,313.47 (Eleven Thousand Three Hundred Thirteen and 47/100 Dollars), subject to adjustment (§7(a)).”

6. Section 1(e) defining “PROPORTIONATE SHARE” is amended by deleting the reference to “71%” and inserting “76.45%” in its place.

7. Section 7(a) entitled “PAYMENT OF OPERATING EXPENSES” is amended by deleting the third sentence in its entirety and substituting the following: “The amount of the Annual Operating Expenses set forth in Section 1(d) represents Tenant’s Proportionate Share of the estimated operating expenses during the calendar year of the Term in which the rentable square feet of the Premises was increased to include the Additional Space on an annualized basis; from time to time Landlord may adjust such estimated amount if the estimated operating expenses increase.”

8. Tenant agrees to occupy the Additional Space in its present “as is” condition and acknowledges that Landlord has made no representation with respect thereto. It is understood and agreed that Landlord is under no duty to make repairs, alterations, or decorations to the Additional Space, except that within 60 days after the Commencement Date, Landlord shall, at its sole cost and expense:

a. install dock levelers, with a 20” double lift lip, and seals on the two existing loading docks appurtenant to the Additional Space;

b. supply lighting and heating to the Additional Space comparable to the lighting and heating in the Original Premises;

c. cut two openings in the existing demising wall between the Original Premises and the Additional Space; and

d. relocate the battery changing station.

9. The parties agree that they have dealt with no brokers in connection with this First Amendment. Each party agrees to indemnify and hold the other harmless from any and all claims for commissions or fees in connection with the Additional Space and this First Amendment from any real estate brokers or agents with whom they may have dealt.

10. Tenant acknowledges and agrees that the Lease is in full force and effect and Tenant has no claims or offsets against rent due or to become due hereunder.

11. Except as expressly modified herein, the terms and conditions of the Lease shall remain uncharged and in full force and effect.

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12. This First Amendment shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.

IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment as of the day and year first above written.

LANDLORD:
LIBERTY PROPERTY LIMITED PARTNERSHIP
By:	Liberty Property Trust,
	Sole General Partner
	By:	/s/ James J. Mazzarelli, Jr.
	Name:	James J. Mazzarelli, Jr.
	Title:	Senior Vice President
TENANT:
LESLIE’S POOLMART, INC.
By:	/s/ Richard L. Grice
Name:	Richard L. Grice
Title:	VP Logistics

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EX-10.11

Exhibit 10.11

LEASE AGREEMENT

BETWEEN

PAUL HEMMER DEVELOPMENT CO., III

A KENTUCKY CORPORATION

(LESSOR)

AND

LESLIE’S POOLMART, INC.

A DELAWARE CORPORATION

(LESSEE)

(EXECUTION COPY)

TABLE OF CONTENTS

		Page
1.	Premises	1
2.	Term	1
3.	Conditions of Improvements to Leased Premises	2
4.	Changes During Construction	3
5.	Security Deposit	4
6.	Base Rent	4
7.	Additional Rent Adjustment and Expense Stop	5
8.	Park Requirements	5
9.	Tenant Finish Allowance	6
10.	Real Estate Taxes	6
11.	Other Taxes	7
12.	Utilities	8
13.	Repairs	8
14.	Use	8
15.	Assignment	9
16.	Casualty Loss	9
17.	Nonliability	10
18.	Alterations	10
19.	Abandonment	10
20.	Reentry	11
21.	Insurance: Indemnification	11
22.	Condemnation	12
23.	Default	12
24.	Notice	15
25.	(Deleted)	15
26.	Binding Effect	15
27.	Short Form	16
28.	Quiet Enjoyment	16
29.	Estoppel Certificate	16
30.	Subordination	16
31.	Authority	17
32.	Holding Over	17
33.	Broker’s Commission	17
34.	Lessor’s Liability	17
35.	Entire Agreement	18
36.	Captions for Convenience	18
37.	Governing Law	18
38.	Nonwaiver	18
39.	Severability	18
40.	Duplicate Counterparts	18
41.	Indemnification Agreement	18
42.	Asbestos and Environmental Hazards	19
43.	Miscellaneous	19
44.	Tri-County Economic development	20
45.	Americans With Disabilities Act	20

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EXHIBITS

Exhibit A	Site Plan
Exhibit B	Plat
Exhibit C	Common Areas
Exhibit D	Shared Access & Maintenance Agreement
Exhibit E	Base Rent
Exhibit F	Plans and Specifications
Exhibit G	Protective Covenants
Exhibit H	Signage

ii

LEASE AGREEMENT

This lease (the “Lease”) made this 30 day of April, 1998, by and between Paul Hemmer Development Co., III, a Kentucky Corporation, hereinafter referred to as “Lessor”, and Leslie’s Poolmart, Inc., a Delaware Corporation, hereinafter referred to as “Lessee”.

WITNESSETH:

1. Premises. Lessor does hereby let to Lessee and, Lessee does hereby agree to lease from Lessor, approximately nine and one-half (9.5) acres of real property (the “Real Estate”) on Aviation Boulevard together with a building located thereon which is estimated to have approximately 146,000 square feet including approximately 3,000 square feet of office space in connection therewith (the “Building”), together with 49 parking spaces for full-size American automobiles and access roadway to publicly dedicated highways to be constructed by Lessor and to be used as a warehouse/distribution facility (such Real Estate and Building hereinafter sometimes referred to as “Leased Premises”) in Airpark International, Boone County, Kentucky (the “Park”) which Real Estate and footprint of Building are more particularly described in red on the plat attached hereto as Exhibit “A” and legally described on Exhibit “B” both incorporated by reference herein. In addition to the Leased Premises, Lessee, its employees, agents, licensees, customers, invitees, successors and assigns (the “Lessee’s Agents”) shall have, to the extent of Lessor’s right and title thereto, all rights appurtenant thereto and Lessor, to the extent of Lessor’s right and title thereto, hereby grants and conveys to Lessee, for itself, and for the benefit of Lessee’s Agents for the Term of this Lease a non-exclusive, irrevocable easement and right, in common with the other occupants of the Park and with the public for the purpose of access over and across as well as the use of all common areas in or about the Park, including, without limitation, the driveways, parking areas and roadways connecting the Real Estate to Aviation Boulevard all as depicted on Exhibit “C” attached hereto and made a part hereof (the “Common Areas”). The aforementioned easement(s) shall be appurtenant to the Leased Premises, and shall run with the land. Lessee shall also enjoy and be responsible for the benefits and burdens of a Shared Access and Maintenance Agreement in the form attached hereto as Exhibit “D” providing for the shared use and maintenance of certain common dock areas with the owner of the adjoining property.

2. Term.

(a) The Term of this Lease shall be for twelve (12) years beginning December 1, 1998, and ending on November 30, 2010 (the “Initial Term”), subject however to the terms of paragraph 3 and further subject to any of the conditions and/or covenants of this Lease or pursuant to law, judicial interpretation, ordinance or administrative or zoning regulation (the “Laws”).

(b) So long as no Event of Default is continuing with respect to any material term or condition of this Lease upon exercise of such Option, Lessor grants to Lessee three (3) options (each one being an “Option”) to extend the Term of this Lease for three (3) successive periods of five (5) years each (each one being an “Option Term”), commencing on the expiration of then existing Lease Term, under and subject to all the other conditions and terms of this Lease.

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During each such five (5) year extension Option Term, Lessee shall pay to Lessor, as annual base rent, in advance and in monthly installments without deduction or setoff except as expressly set forth herein, the amounts set forth on Exhibit “E”. Notice of the exercise of such Option shall be given by the Lessee to the Lessor at least nine (9) months before the expiration of the then existing Lease Term and if Lessee does not provide such notice, the Option(s) are voided and, Lessee waives its right to any such Option to extend the Lease Term. This Option may be exercised only in the event that all Rents are then fully paid, and all terms and conditions of this Lease are then fully complied with as of the date of exercise of such Option.

3. Conditions of Improvements to Leased Premises. Immediately upon execution of this Lease, Lessor shall commence any alterations or improvements to the Leased Premises indicated on the Plans and Specifications approved by the parties and attached hereto as Exhibit ”F”. Lessor covenants that the Plans and Specifications have been approved in writing by the Developer pursuant to the Declaration (declared in Exhibit “G”) and at the time of substantial completion will comply in all respects with the Declaration. Lessor shall proceed diligently with said work and use all reasonable efforts to complete same by November 30, 1998, which date is contingent upon Lessee’s approval in writing of Final Plans and Specifications complying with Exhibit “F” within ten (10) days after receipt from Lessor. So long as the Leased Premises are available for occupancy by December 31, 1998, Lessee shall have no claim against Lessor due to such alleged delay. If the Leased Premises are not available and in compliance with Exhibit “F” by December 31, 1998 through no fault of Lessee, and such delay was not caused by Lessee, then Lessor agrees to credit Lessee $500.00 per day for each day (not caused by Lessee) beyond December 31, 1998 that the Leased Premises are not available. If the Leased Premises are not available by March 31, 1999 through no fault of Lessee, and such delay was not caused by Lessee, then Lessee shall have the right to cancel this Lease in its entirety, by giving Lessor written notice of its intent to cancel this Lease at any time thereafter but before the Leased Premises are delivered. Such notice shall be effective at least thirty (30) days after receipt unless the Leased Premises completed in accordance with this Lease are delivered prior to such effective date. This Lease shall automatically terminate if the Lease Premises, delivered in accordance with this Lease, are not delivered by January 1, 2000. (Note: All such dates are also contingent upon (i) Lessee indemnifying Lessor for reasonable costs to be incurred or committed for this project pursuant to “Letters of Authorization” to be promptly signed and submitted to Lessor from Lessee and (ii) this Lease being fully executed by no later than April 30, 1998). All such dates shall be extended by a corresponding amount of time for delays caused by Lessee. If not otherwise canceled, the Term of this Lease shall not commence until the Leased Premises are deemed to be available to Lessee, and the Term shall expire twelve (12) years after the first day of the first month following such date. Until such time as the Leased Premises are available to Lessee, as hereinafter defined, Lessor shall provide to Lessee meaningful and timely reports relating to the progress of the alterations and improvements. The Leased Premises shall be deemed to be available (the “Deemed Available Date”) to Lessee at the earlier of the time when:

(a) the alterations or improvements to be made by Lessor are substantially completed (notwithstanding the necessity of punch list items or minor repairs and adjustments still to be made by the Lessor which do not impair Lessee’s ability to operate in the Leased Premises and^- notwithstanding the Lessee has not completed installation and/or connection of its fixtures and/or equipment) and Lessor has obtained the approvals required by any laws, ordinances [illegible]; or

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(b) The Lessee actually occupies [illegible].

As used herein, Commencement Date shall mean the first day of the first full month following the date the Leased Premises are deemed to be available pursuant to the preceding paragraph.

Lessor warrants to Lessee that the Leased Premises will be constructed in a good and workmanlike manner using new building materials (and free of hazardous materials not used in compliance with Laws and free of asbestos and PCBs of all sorts) in accordance with the Plans and Specifications free of all liens and/or encumbrances that affect Lessee’s use and enjoyment of the Leased Premises. Lessee, at its sole cost, may hire an independent consultant to periodically inspect the construction to be done by Lessor, during the construction period, who shall comply with all project safety rules. Consultant shall indemnify and hold Lessor and Lessor’s agents harmless from any and all claims for bodily injury and damages caused by consultant.

Immediately after the Commencement Date, Lessor and Lessee shall execute a written instrument fixing the Commencement Date and Termination Date of this Lease and summarizing any Change Orders pursuant to paragraph 4 which effect the Rent.

Lessee’s taking possession shall be conclusive evidence that the Leased Premises were then in good order and satisfactory condition, except for the completion of written punch list items and minor repairs or adjustments, if any and provided that Lessee shall not be deemed to waive any latent defects. Lessee shall have assigned to it any and all warranties from the General Contractor, all Subcontractors, materialmen and suppliers responsible for the work in connection with the alterations and improvements to the Leased Premises.

Within thirty (30) days following the date the Leased Premises are deemed to be available pursuant to this paragraph 3, Lessee shall provide Lessor with a list of incomplete or defective work (the “Punchlist”) which Lessor shall immediately attempt to cure and remedy. If within one hundred twenty (120) days thereafter, Lessor has not cured such work (other than landscaping, grading, blacktopping or other work which cannot be completed due to the weather conditions and does not interfere with Lessee’s use of or access to the Leased Premises), Lessee may upon seven (7) days written notice to Lessor, cure such incomplete or defective work specified in such notice and deduct the reasonable cost thereof from the next Monthly Base Rent payment(s) due.

Lessor agrees to furnish all of the labor, supervision, administration and materials, together with all transportation, supplies, fuel, tools, equipment and incidentals, all of which is necessary or appropriate to complete the work in accordance with the Plans and Specifications at no cost to Lessee.

4. Changes During Construction. No changes from the Plans or Specifications shall be made unless both parties agree thereto in a written change order (the “Change Order”) specifying such changes and the amount and terms of reimbursement to Lessor from Lessee, or

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increase or decrease to the rental payments, and the impact to the anticipated Commencement Date, if any. Both parties shall be reasonable in their review of any Change Order requested by the other. Upon reaching an understanding, the parties shall prepare and execute an Addendum to this Lease which shall incorporate all such Change Orders. Lessee’s authorized representative for approving Change Orders shall be Mr. Richard L. Grice and Lessor’s authorized representative shall be Mr. Jon J. Hemmer. Such representatives may be changed by providing written notice to the other party.

5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the sum of two (2) estimated months’ rent ($61,600.00) as security for Lessee’s faithful performance of Lessee’s obligations hereunder. Said Security Deposit shall not earn interest thereon for the benefit of Lessee. No trust relationship is created herein between Lessor and Lessee with respect to said Security Deposit. The Security Deposit shall be applied towards the first two month’s rent on the Commencement Date. If for any reason, except default by Lessee, the Commencement Date does not occur, the Security Deposit shall be paid to Lessee upon request therefore.

6. Base Rent.

(a) As annual base rent for the use and occupancy of the Leased Premises during the Initial Term, and, if exercised, as annual base rent during the Option Term(s), Lessee shall pay to Lessor base rent pursuant to the schedule attached as Exhibit “E”.

The annual base rent is due and payable in equal monthly installments, (the “Monthly Base Rent”) in advance on the first day of each and every month during the Initial Term or Option Term(s) of the Lease, without deduction or setoff, except as provided in the next to last subparagraph in paragraph 3 or elsewhere in this Lease.

(b) Lessee agrees to pay as supplemental base rent for the use of said Leased Premises an amount equal to four percent (4%) of any Monthly Base Rent payment which is not received by Lessor within ten (10) days after such Monthly Base Rent is due, and an additional one and one-half percent (1.50%) per month of any Monthly Base Rent which such Monthly Base Rent remains outstanding. Such supplemental base rent shall be paid to help offset Lessor’s additional financial and administrative expenses thereby incurred. Provided, however, so long as Lessee is not otherwise in default of this Lease, and only with respect to the first two (2) times in any calendar year that such failure occurs, Lessor shall provide Lessee written notice on or after five (5) days after such Monthly Base Rent is due,     t such Monthly Base Rent is due, and Lessee shall have five (5) days from the date of such notice to pay such Monthly Base Rent to Lessor before the above supplemental base rent shall apply. Notwithstanding anything to the contrary, Lessee shall not be entitled to the five (5) day notice herein provided if Lessee is then in default or if Lessee then owes any rent, base, supplemental, additional or otherwise, in addition to the Monthly Base Rent then due and owing.

(c) If this Lease commences or rent otherwise becomes due on a day other than the first day of the month, the first monthly installments of rent provided for in paragraph (6)(a) shall be adjusted and prorated (based on the number of days in such month) so that Lessee shall only pay rent for the actual number of days in the first month of said term; but for all other months, Lessee shall pay the full monthly installment on the first day of each and every month.

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(d) Rent shall be mailed by Lessee to Lessor at Lessor’s principal place of business or at such other place in the U.S. as Lessor may designate in writing. Rent shall be payable promptly without deduction or setoff or prior demand thereof by Lessor except as provided in the next to last subparagraph in paragraph 3 or elsewhere in this Lease (with respect to setoff) and paragraph 6(b) (with respect to notice). All payments shall be in U.S. dollars, in cash or by check, all checks subject to collection. If the Lease permits Lessor to bill Lessee for additional rent, such amounts shall be paid by Lessee to Lessor within thirty (30) days, unless otherwise noted.

(e) Expect as outlined in Paragraph 13, this is an absolute net lease. Expect as outlined in Paragraph 13, it is the intent of the parties hereto that the base rent payable under this Lease shall be an absolute net return to the Lessor and that the Lessee shall pay all costs and expenses relating to or associated with the Leased Premises and the business carried on therein, unless otherwise expressly provided in this Lease to the contrary. Any amount or obligation herein relating to the Leased Premises which is not expressly declared to be that of the Lessor shall be deemed to be an obligation of the Lessee to be performed by the Lessee at the Lessee’s expense. Except as expressly provided herein, base rent, additional or supplemental rent and all other sums payable hereunder by Lessee, shall be timely paid to Lessor without setoff, counterclaim, abatement, suspension, deduction or defense, the failure of which to timely pay shall constitute an Event of Default.

(f) As used herein, the term “Rent” shall include base rent, supplemental rent, additional rent as well as any other amounts paid or payable to or for Lessor pursuant to this Lease.

7. Additional Rent Adjustment and Expense Stop. (Deleted).

8. Park Requirements. It is expressly understood by the Lessee that the Leased Premises form a part of a development known as Airpark International (the “Park”) and are subject and subordinate to, Protective Covenants, attached hereto as Exhibit “G”, and Bylaws, Rules and Regulations of the Park. Lessee covenants and that it will at all times comply with all the requirements, covenants and restrictions contained in said documents and Lessee shall promptly execute any document acknowledging such fact. As additional rent, Lessee agrees to pay, immediately upon notice, any and all charges or assessments levied or assessed against the Real Estate, Building or Leased Premises relating to or as the result of or arising out of the Park and applicable to the Term of this Lease. Lessee shall also pay any and all charges or assessments levied or assessed against the Real Estate, Building or Leased Premises relating to or as the result of the Shared Access and Maintenance Agreement. In the event that such charge or assessment as outlined in this paragraph, is for a specific improvement that Lessee’s cost would have been more than $5,000.00 and that has an expected life of ten (10) years or more, the charge or assessment may, at Lessee’s option, be amortized by Lessor for Lessee over a ten (10) year period using an annual interest rate of ten percent (10%). Lessee shall pay such amount monthly on the first day of each month without deduction or setoff as Additional Rent, to Lessor, in addition to and along with the Monthly Base Rent. Lessee shall only be responsible for such

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Additional Rent for the time remaining in the Lease Term. In such event, and provided that the Lease Term is later extended, then Lessee shall be responsible for such Additional Rent during the Extended Lease Term until fully amortized.

9. Tenant Finish Allowance. A reimbursable tenant finish allowance of $325,000 (the “Allowance”) is established in this Lease, to cover Lessor’s cost to design and construct (the “Costs”) the Containment Room in the Leased Premises (the “Containment Room”). Prior to commencement of the construction of the Containment Room, Lessor shall estimate and submit the Costs of the Containment Room for Lessee’s approval which shall not be unreasonably withheld or delayed. In order to reimburse Lessor for all of Lessor’s Costs, Lessee shall pay to Lessor, in addition to and along with the Monthly Base Rent, the amount of $3,698.60 per month on the first day of each month without deduction or setoff as Additional Rent for each month during the Initial Term of this Lease. In the event that the Costs are different than the Allowance set forth herein, this monthly Additional Rent shall be recalculated based on the Costs being fully amortized over the Initial Term of this Lease using a nine percent (9%) annual interest rate. If there is an Event of Default of this Lease, as defined herein, in addition to other remedies allowed Lessor pursuant to this Lease or by law, Lessor shall recover a money judgment against Lessee in the full amount of the unamortized balance of the Costs owed to Lessor.

10. Real Estate Taxes. Lessee shall pay to Lessor in monthly installments (the “Tax Payments”) as reasonably established from time to time by Lessor, all Taxes upon the Leased Premises and the Real Estate, which are assessed or accrue during the Lease Term.

The term “Taxes” shall mean the ad valorem real estate taxes and Special Assessments (as defined herein below) levied or assessed upon the Leased Premises. “Taxes” shall not include any income, profit, business or gross receipts tax, inheritance, estate, succession, transfer, gift, franchise or corporation tax levied or imposed upon Lessor, nor any real estate transfer tax, documentary stamp tax, transfer gains tax, recording fees or the like. Subject to the limitations below, “Taxes” shall include assessments (“Special Assessments”) included in Lessor’s real estate tax bill which are imposed by a governmental authority against the Leased Premises, provided Taxes shall not include Special Assessments payable for infrastructure or other development expenses related to the Building.

If any Taxes may, at the option of the taxpayer, be paid in installments over a period longer than one (1) year, then the same shall be deemed paid in installments over the maximum period permitted by the taxing authority, not to exceed ten (10) years, and Lessee’s obligation to make its Tax Payment for any one (1) tax fiscal year shall only apply to those installments which become actually due and payable (i.e., failing which payment the same would become delinquent), together with the interest charged thereon by the governmental authority, during that same tax fiscal year. Lessee shall not be obligated to pay any portion of Taxes or installments thereof which actually accrue during any period prior to or subsequent to the Term of this Lease unless such Taxes were incurred at the request of Lessee. Taxes for any fraction of a Tax Year at the commencement or expiration of the Lease Term shall be apportioned pro rata between the parties based on the number of days in such Tax Year during the Lease Term.

Lessor shall render to Lessee, promptly after the receipt of the tax bill applicable to the Leased Premises for a given Tax Year, a statement showing the amount of Taxes and indicating

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in reasonable detail the items included in Taxes and the computation of the Tax Payment with a copy of the tax bill. Lessee agrees to make its Tax Payment in equal monthly installments it being understood however that Lessee’s obligation for the payment of any Taxes during each Lease Year shall apply only to Taxes which are allocable to the tax year then in progress (plus any previously accrued Taxes which Lessee has not yet paid) and Lessee shall not be obligated to make any prepayment of taxes for tax years not yet in progress unless the taxing authority has billed Lessor for the same. If the actual Taxes for the current tax year are not yet known, Lessor may estimate such Taxes based on reasonably anticipated increases provided however that in no event may such estimate exceed one hundred ten percent (110%) of the prior year’s actual Taxes; when the actual Taxes become known, Lessee’s estimated payments shall be readjusted as the case may require. Overpayments by Lessee of Taxes shall be promptly refunded or credited to succeeding monthly payments.

Lessee shall have the right to contest the amount or validity of any Taxes or to seek a reduction in the valuation of the Leased Premises and to have Lessor prosecute any proceedings to that end, but only as provided herein below.

In the event Lessee desires to contest the amount or validity of any Taxes or to seek a reduction in the valuation of the Leased Premises, Lessee shall provide Lessor at least sixty (60) days advance written notice instructing Lessor to undertake upon Lessee’s behalf the desired action and/or appeal and agreeing to reimburse Lessor for any and all reasonable costs and expenses incurred, including reasonable attorney’s fees. Lessee and Lessor shall jointly choose counsel to represent them, at Lessee’s cost, and such counsel shall prosecute such case pursuant to their reasonable directions. Counsel shall keep Lessee and Lessor informed of any and all such action on a meaningful and timely basis and shall confer with Lessee on all matters of material significance. With the prior written consent of Lessor, which consent shall not be unreasonably withheld, Lessee may postpone or defer payment of such Taxes pending the outcome of such proceedings if neither the Real Estate nor Leased Premises would be in danger of being forfeited and such action would not constitute a default pursuant to Lessor’s financing on the Leased Premises. Lessor shall not be required to join in any proceedings unless the provisions of any Laws require such proceedings to be brought by or in the name of Lessor in which event Lessor shall join in such proceedings or permit the same to be brought in its name. Lessee will indemnify and save harmless Lessor from any costs and expenses in connection with such proceedings. Lessee shall be entitled to a refund of any Taxes (and penalties or interest thereon) received by Lessor (net of any and all expenses incurred by Lessor) which have been paid by Lessee.

11. Other Taxes. Lessee shall pay before delinquency any and all other taxes and assessments assessed against Lessee’s operations or property at the Leased Premises and incurred or accruing during the Term of this Lease, including licenses, sales, business, occupation or other taxes or fees or charges levied or imposed upon its business operations in or upon the Leased Premises, including but not limited to, taxes or assessments imposed upon trade fixtures, leasehold improvements, merchandise and other personalty in or upon the Leased Premises. In the event any such taxes, fees or charges referred to hereinabove to be paid by Lessee are assessments levied or imposed upon or with the property of Lessor, such assessment, fees or charges shall be paid by Lessee to Lessor promptly upon Lessor’s request for payments. Provided, however, that such taxes and assessments do not include federal, state and local income taxes, estate, franchise or similar taxes imposed upon Lessor.

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12. Utilities. Lessee shall pay all utility charges incurred for utilities consumed at the Leased Premises during the Term of this Lease, including all charges for gas, electricity, water, sanitation, light, heat, power and telephone or other communication service used, rendered or supplied upon or in connection with the Leased Premises, and shall indemnify and hold the Lessor harmless against any liability or damages on such account.

13. Repairs. Lessor shall maintain and repair at its sole cost and expense the roof and structural portions of the Building (excluding floor slabs and exterior pavement) unless damaged by act of Lessee or its agents, employees or licensees and shall perform all repairs necessitated by the act or omission of Lessor or its employees, contractors or agents, including the repair of latent defects of the Leased Premises discovered within one (1) year from the Commencement Date. Lessee shall promptly and properly keep and repair and maintain at its expense all other portions of the Leased Premises (including the roof and structural portions of the Building if occasioned by any intentional or negligent act of Lessee, its agents, employees or licensees in which event such damage shall be promptly repaired by Lessee at Lessee’s sole cost and expense). Lessee shall, at its own expense, keep the Leased Premises clean and free of all dirt and refuse; keep all waste and drain pipes open within the Leased Premises; make all necessary repairs to plumbing and all other utility lines in, upon, over, about and within the Leased Premises and continuously keep and maintain, every part and portion of the Leased Premises, including mechanical, HVAC, electrical and related systems, and equipment, in good repair and fully operational, normal wear and tear excepted. Lessor shall assign to Lessee and Lessee may enforce directly any warranties and guarantees of the Contractors, Subcontractors and Materialmen responsible for the Lessor’s initial work at the Leased Premises which is Lessee’s obligation to maintain. Lessor shall cooperate with Lessee and assist Lessee in enforcing any such warranties and guarantees. In the event that through no fault of Lessee a major component or piece of equipment costing more than $5,000.00 needs to be replaced, that has an expected life of ten (10) years or more, such costs may, at Lessee’s option, be amortized by Lessor for Lessee over a ten (10) year period using an annual interest rate of ten percent (10%). Lessee shall pay such amount monthly on the first day of each month without deduction or setoff as Additional Rent, to Lessor, in addition to and along with the Monthly Base Rent. Lessee shall only be responsible for such Additional Rent for the time remaining in the Lease Term. In such event, and provided that the Lease Term is later extended, then Lessee shall be responsible for such Additional Rent during the Extended Lease Term until fully amortized.

14. Use. Lessee covenants and agrees to use the Leased Premises solely for the purpose of a warehouse/distribution and mail-order fulfillment facility and all uses incidental thereto which are allowed by applicable zoning and the Protective Covenants. Lessee shall not use or permit upon the Leased Premises anything that would invalidate any policy of insurance now or hereafter carried on the Leased Premises or that will increase the rate of said insurance (unless Lessee agrees to pay the amount of such increase). The Lessee shall comply with all Laws, Protective Covenants and other requirements of all governmental agencies having jurisdiction over the Leased Premises; the Lessee shall not in any manner deface or injure the Leased Premises or any part thereof, or overload the floor of the Leased Premises; the Lessee shall not keep gasoline, other inflammable material, any explosives or other hazardous or toxic

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material or waste within, upon or around the Leased Premises except in commercially reasonable quantities for use (as determined for Lessee’s use) at the Leased Premises and in compliance with Environmental Laws (as defined in paragraph 41). Lessee shall not permit any objectionable noise or odors to escape or be emitted from the Leased Premises or do anything or permit anything to be done in any way tending to unreasonably disturb the occupants of the neighboring buildings. Lessee shall not commit waste upon the Leased Premises nor shall Lessee cause or permit any mechanic’s lien to be placed against the Leased Premises. In the event a mechanic’s lien is placed of record against the Leased Premises as a direct or indirect result of Lessee’s activity and such lien is not removed or bonded off by Lessee within thirty (30) days of notice thereof, Lessor may, at its option, take whatever steps it deems reasonable to litigate, remove or bond off the mechanic’s lien and, in which case, Lessor shall recover from Lessee as additional rent any and all costs, expenses and damages thereby incurred, including reasonable attorney fees and court costs.

15. Assignment. The Lessee (as well as any Sub-Lessee or assignee) shall not assign this Lease or any interest hereunder, and shall not permit any assignment by law, nor sublet any Leased Premises or any part thereof, and shall not permit the use of said Leased Premises by any party other than the Lessee, its agents, clients, employees, invitees and servants without first obtaining the prior written consent of the Lessor, which consent shall not be unreasonably withheld, delayed or conditioned and shall be deemed granted if Lessor withholds consent without cause for thirty (30) days after request therefore. Lessee shall remain liable for the payment of all rent and the performance of all covenants of this Lease in the event of an assignment or sublease. Any such assignment or sublease shall not affect, modify, amend, diminish or decrease the liability or obligations of any guarantor hereon. Lessor may assign its rights and duties hereunder, upon reasonable notice to Lessee, to any party purchasing the fee title to the Leased Premises provided such party shall recognize this Lease and not disturb Lessee hereunder.

Notwithstanding the foregoing, Lessee upon thirty (30) days prior written notice to Lessor, may assign this Lease or any interest therein or sublet the Leased Premises or any portion thereof to a Related Party (as defined below), without Lessor’s consent (herein called “Permitted Transactions”). “Related Party” shall mean the following persons or entities: (a) an “Affiliate” of Lessee, which term is defined as a subsidiary, parent or subsidiary of a parent of Lessee; (b) a successor to Lessee by one of the following means: (1) merger or consolidation; (2) acquisition of substantially all of the assets or stock of Lessee; (c) an Affiliate of any of the entities described in subparagraph (b) above. For purposes of this definition a “subsidiary” is a corporation fifty percent (50%) of whose voting stock is owned by another corporation, which latter corporation is referred to as a “parent.”

In the event of an assignment of this Lease, Lessee shall remain liable for the performance by the assignee-in-possession of Lessee’s obligations hereunder.

16. Casualty Loss. In the event of partial destruction of the Leased Premises by reason of fire, windstorm or other casualty, Lessor, upon settlement and receipt of insurance proceeds, shall forthwith repair the same but such partial destruction shall not annul or void this Lease, except as hereinafter set forth. Lessee shall be entitled to partial reduction of rent from the date of casualty until repairs are completed, such proportionate reduction to be based upon

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the extent to which the damage and the making of required repairs shall actually interfere with Lessee’s use of the Leased Premises as set forth herein. In the event the Leased Premises have been partially or totally destroyed so that it cannot be made fit for occupancy and use by the Lessee for the full conduct of Lessee’s business within two hundred and ten (210) days from the date of casualty, then Lessee shall have the option to terminate this Lease on written notice within thirty (30) days of such event of destruction or casualty. Provided further, that in the event of the substantial destruction of the Leased Premises during the last two (2) years of the Lease Term, then either party may cancel the Lease upon written notice within thirty (30) days of such event of destruction or casualty.

17. Nonliability. Lessor shall not be liable for care or safety of merchandise or other property of Lessee kept upon the Leased Premises by Lessee, and shall not be liable for damage thereto, or by water leaking, bursting or escaping from sprinkler equipment, water pipes, washstands, tanks, water closets, or sewers upon the Leased Premises, or by water, snow or ice being upon or coming through the roof, skylights, windows or otherwise, except as caused by the negligent acts or omissions of Lessor, its agents or employees. Lessor shall not be liable for failure to furnish water, electric, light, heat or any other utility caused by riot, strike, accident or any cause over which Lessor has little or no control.

18. Alterations. Lessee shall not make any alterations or improvements in or to the Leased Premises having a value in excess of $10,000 (including, without limitation, any alteration or improvement effecting the Building systems or the structure of the Building) without the prior written consent of Lessor and upon such terms as Lessor reasonably determines. Lessor’s consent will not be unreasonably withheld, delayed or conditioned and shall be deemed granted if Lessor withholds consent without cause for thirty (30) days after request therefor. Prior to commencement of any and all alterations or improvements by Lessee, Lessee and/or its  contractor(s) shall provide Lessor proof of adequate insurance, copies of plans and specifications detailing such alteration or improvement, copy of building permits, if applicable, qualifications and references of its contractor and other reasonable items that Lessor may request. Any additions to or alterations of the Leased Premises except movable furniture and trade fixtures, shall at once be deemed to have become a part of the Real Estate and belong to Lessor and Lessee shall leave such alteration at the Leased Premises at the expiration or earlier termination of this Lease. Lessor may require Lessee to repair all damages caused by the removal of its fixtures or alterations. Upon termination of the Lease, Lessee may or upon demand by Lessor, Lessee shall, remove all trade fixtures and/or other personalty of Lessee and Lessee shall at Lessee’s cost, repair all damages caused by such removal. Lessee at its cost shall be permitted to maintain an appropriate sign in conformity with the Protective Covenants and Laws. Lessor warrants to Lessee that the signage depicted on Exhibit “H” attached hereto and made a part hereof is in conformity with the Protective Covenants and has been approved by the Developer thereunder and Lessor hereby consents to the installation of the same.

19. Abandonment. Subject to the remainder of this paragraph 19, Lessee shall not vacate or abandon the Leased Premises at any time during the Lease Term. If Lessee shall abandon, vacate or surrender said Leased Premises or be dispossessed by process of law, or otherwise, any personal property belonging to Lessee and left on the Leased Premises shall be deemed to be abandoned, at the option of Lessor. Lessor, in any and all events, shall not be liable for the storage or disposal of any such property. Lessee shall quit and surrender the

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Leased Premises at the expiration or earlier termination of the Lease Term in as good condition as reasonable use and ordinary wear and tear will permit, damage by acts of God and the elements excepted, together with all installations, alterations, additions and improvements. Notwithstanding anything contained herein to the contrary, there shall be no abandonment or vacation implied merely because of Lessee’s non-occupancy so long as Lessee remains current in its rent and other obligations contained herein.

20. Reentry. Lessee shall permit Lessor and its agents to enter the Leased Premises at all reasonable times upon reasonable advance notice (except in the case of an emergency where advance notice is hereby waived) for the purpose of inspecting the same or upon the default of Lessee of its obligations herein, for the purpose of operating, maintaining and/or repairing the Leased Premises, without any rebate of rent to Lessee provided Lessor does not unreasonably interfere with Lessee’s use. All repairs or other work done by Lessor shall be performed in a reasonable manner so as to cause the least possible interference with Lessee’s operation. Lessor shall have the right to show the Leased Premises to prospective tenants at reasonable times during the last nine (9) months of the Term, and to maintain “for rent” or “for sale” signs upon the Leased Premises during the same period, which signs shall not be removed or obscured by Lessee.

21. Insurance; Indemnification.

(a) Lessee agrees to obtain and keep in full force during the Term of this Lease, at Lessee’s sole expense, commercial general liability insurance to protect against liability to the public incident to the use of or resulting from any accident occurring on the Leased Premises, the liability under such insurance to be not less than $2,000,000.00 for bodily or personal injury to any one person; or $1,000,000.00 for property damage; or a single limit of $5,000,000.00 for bodily and personal injury and property damage combined (two or more persons as a result of one accident). Such insurance may be obtained as part of a “blanket or umbrella” policy covering other premises of Lessee. Lessor and Lessor’s lender shall be named as additional insureds on such policies of insurance. Lessee shall deliver to Lessor certificates thereof, and such policy shall contain a clause that the insurer will give Lessor and Lessor’s lender thirty (30) days’ prior written notice of any cancellation thereof (ten (10) days in the event of nonpayment of premium). If Lessee fails to obtain and maintain insurance as above-described herein, Lessor may, at Lessor’s option, obtain such insurance and treat the cost therefor as additional rent which shall immediately become due and payable.

(b) Lessee shall, at its sole expense, at all times during the Term of this Lease, keep all buildings, improvements and other structures on said Real Estate, as well as any and all additions thereto, insured for their full replacement value against loss or destruction by fire and the perils commonly covered under the standard extended coverage endorsement to fire insurance policies in the county where said Leased Premises are located. Any loss payable under such insurance shall be payable to Lessee (or Lessor or Lessor’s lender or mortgagee as their interests may appear as additional insureds). Lessor shall notify Lessee promptly upon the Commencement Date (and annually thereafter) of the Building replacement value.

(c) Lessor and Lessee each hereby releases the other, and their respective agents and employees, to the extent of their respective insurance coverages, from any claims for damage or

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destruction to the Leased Premises, the contents therein belonging to either, and to any other losses which they may suffer which are caused by fire or any other peril not excluded in the insurance policy, whether or not such loss was due to the negligence of either of them or otherwise; and it is further agreed that this agreement or consent thereto shall be effective upon their respective insurance companies. Lessor’s agreement to release Lessee from such claims is contingent upon Lessee maintaining for Lessor’s benefit the insurance described herein.

22. Condemnation. If the whole or a substantial part of the Leased Premises shall be taken under the power of eminent domain, or shall be conveyed to a governmental agency to avoid such taking, and such taking shall cause the remaining Leased Premises to be unsuitable and inadequate for use by Lessee for the purposes for which the Leased Premises were leased, Lessee shall have the option to terminate this Lease on the date Lessee is required to yield possession. If a part of the Leased Premises shall be taken but the remaining portion of the Leased Premises is in Lessee’s reasonable opinion adequate for Lessee’s use, then this Lease shall terminate as to the part taken or conveyed on the date Lessee shall yield possession, and Lessor shall make such repairs and alterations as may be necessary to make the part not taken usable, and the rental payable hereunder shall be reduced in proportion to the part of the Leased Premises taken. All compensation awarded for such taking of the fee and leasehold shall belong to and be the property of Lessor without any deduction therefrom for any present or future estate of Lessee and Lessee hereby assigns to Lessor all its right, title and interest to any such award. Notwithstanding the foregoing, Lessee shall have the right to recover from the condemning authority, but not from Lessor, such compensation as may be specifically awarded to Lessee on account of interruption of Lessee’s business, for moving and relocation expenses, and for depreciation to and removal of Lessee’s goods and trade fixtures.

23. Default.

(a) In the event of the failure of the Lessee to pay Rent (base, supplemental, additional or otherwise) when due, which failure shall remain uncured for five (5) days after written notice of such deficiency or delinquency, or in the event of the failure of Lessee to comply with any of the other terms, covenants or conditions of this Lease, the Shared Access and Maintenance Agreement or the Protective Covenants for a period of thirty (30) days after written notice from Lessor except in the case that compliance cannot be completed within thirty (30) in which case Lessee shall have a reasonable period to comply provided Lessee commences to cure within such thirty (30) day period and diligently and continuously prosecutes the work through completion, or if Lessee shall abandon (as such term is defined hereinabove) the Leased Premises before the end of said Lease Term, or should any proceeding in bankruptcy under any State or Federal law relating to the relief of debtors be filed by or against Lessee, or should a receiver be appointed of any of Lessee’s property so as to affect the fulfillment of Lessee’s obligations hereunder, or if Lessee shall be adjudicated a bankrupt or insolvent according to law, or if a creditor shall obtain an assignment of or attachment of or levy on Lessee’s interest herein, which proceeding, receiver, assignment, attachment, or levy shall not have been relieved or removed within one hundred twenty (120) days (all the foregoing are hereinafter referred to as an “Event of Default”), then and in any of said cases Lessor may terminate this Lease in accordance with paragraph 23(b) hereof and/or lawfully enter into the Leased Premises and repossess the same as of the former estate of Lessor, expel Lessee and those claiming under and through Lessee, remove Lessee’s effects, without being guilty in any manner or in trespass and without

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prejudice to any remedies which might otherwise be used for arrears of rent or breach of covenants and Lessee covenants that in case of such termination, Lessee shall pay to Lessor the amount provided in paragraph 23(b). Lessor shall make a commercially reasonable effort to lease the Leased Premises or portion thereof, in any such case of an Event of Default.

(b) If an Event of Default shall have happened and be continuing at the time of the delivery of the Termination Notice as defined below, Lessor shall have the right at its election to give Lessee written notice (the “Termination Notice”) of Lessor’s intention to terminate the Term of this Lease on the date specified in the Termination Notice. Thereupon, the Term of this Lease and the estate hereby granted shall terminate on such date as completely and with the same effect as if such date were the date fixed herein for the expiration of the Lease Term, and all rights of Lessee hereunder shall terminate, but Lessee shall remain liable as provided herein. In the event of any such default by Lessee, then in addition to any other remedies available to Lessor at law or in equity, Lessor shall have the immediate option to terminate this Lease and all rights of Lessee hereunder by giving written notice of such intention, to terminate. In the event that Lessor shall elect so to terminate this Lease, then Lessor may recover from Lessee:

(i) The worth at the time of judgment (“Judgment”) of any unpaid Rent which had accrued at the time of such termination; plus

(ii) The worth at the time of Judgment of the amount by which the unpaid Rent which would have accrued after termination until the time of Judgment exceeds the amount of rent received by Lessor; plus

(iii) The worth at the time of Judgment of the amount by which the unpaid Rent for the balance of the Lease Term after the time of Judgment exceeds the amount of such rental loss that Lessee proves could be reasonably avoided; plus

(iv) Any other amount necessary to compensate Lessor for all the detriment proximately caused by Lessee’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom including attorney fees; and

(v) At Lessor’s election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law.

(c) If an Event of Default shall have happened and be continuing at the time of the delivery of the Possession Notice as defined below, Lessor shall have the immediate right, whether or not the Term of this Lease shall have been terminated pursuant to paragraph 23(b) at its election to give Lessee written notice (the “Possession Notice”) of Lessor’s intent to (i) reenter and repossess the Leased Premises or any part thereof by force, summary proceedings, ejections or otherwise and/or (ii) remove all persons and property therefrom, Lessee hereby expressly waiving any and all notices, other than the Possession Notice, to quit, cure or vacate provided by current or any future law. Lessor shall be under no liability by reason of any such reentry, repossession or removal. No such reentry or taking of possession of the Leased Premises by Lessor shall be construed as an election on Lessor’s part to terminate the Term of this Lease unless the Termination Notice of such intention be given to Lessee pursuant to paragraph 23(b).

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(d) At any time or from time to time after the repossession of the Leased Premises or any part thereof pursuant to paragraph 23(c), whether or not the Term of this Lease shall have been terminated pursuant to paragraph 23(b), Lessor shall use good faith efforts to (but shall be under no obligation to) relet the Leased Premises or any part thereof for the account of Lessee, except as required herein, in the name of Lessee or Lessor or otherwise, without notice to Lessee, for such Term or Terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term of this Lease) and on such conditions (which may include concessions or free rent) and for such uses Lessor, in its absolute discretion, may determine, and Lessor may collect and receive any rents payable by reason of such reletting. Lessor shall not be responsible or liable for any failure to relet the Leased Premises or any part thereof or for any failure to collect any rent due upon any such reletting.

(e) No termination of the Term of this Lease pursuant to paragraph 23(b), by operation of law or otherwise, and no repossession of the Leased Premises or any part thereof pursuant to paragraph 23(c) or otherwise, and no reletting of the Leased Premises or any part thereof pursuant to paragraph 23(d), shall relieve Lessee of its liabilities and obligations hereunder, all of which shall survive such termination, repossession or reletting.

(f) In the event of any such repossession, Lessee will pay to Lessor the rent, additional and supplemental rent and other sums required to be paid by Lessee to and including the date of such termination or repossession; and, thereafter, Lessee shall, until the end of what would have been the Term of this Lease in the absence of such termination or repossession, and whether or not the Leased Premises or any part thereof shall have been relet, be liable to Lessor for, and shall pay to Lessor, as liquidated and agreed current damages: (i) the rent and other sums which would be payable under this Lease by Lessee (including Taxes, Insurance, Park fees and expenses and costs to repair and maintain the Leased Premises) in the absence of such termination or repossession, less (ii) the net proceeds, if any, of any reletting effected for the account of Lessee pursuant to paragraph 23(d), after deducting from such proceeds all Lessor’s expenses incurred in connection with such reletting (including, without limitation, all repossession costs, commissions, legal expenses, attorneys’ fees, employees’ expenses, alteration costs and expense of preparation for such reletting). Lessee will pay such current damages on the days on which the rent would have been payable under this Lease in the absence of such termination or repossession, and Lessor shall be entitled to recover the same from Lessee on each such day.

(g) Notwithstanding anything to the contrary stated herein, if an Event of Default shall have happened and be continuing, whether or not Lessee shall have abandoned the Leased Premises, Lessor may elect to continue this Lease in effect for so long as Lessor does not terminate this Lease pursuant to paragraph 23(b) and Lessor may enforce all of its rights and remedies hereunder including without limitation the right to recover all rent and other sums payable hereunder as the same become due.

(h) If Lessor should be in default in the performance of any of its obligations under this Lease, which default continues for a period of more than thirty (30) days after receipt of written notice from Lessee specifying such default, or if such default is of a nature to require more than thirty (30) days for remedy and continues beyond the time reasonably necessary to cure (provided Lessor has undertaken procedures to cure the default within such thirty (30) day

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period and diligently pursued such efforts to cure to completion and provided that in the event of emergency such notice and cure period shall be shortened to three (3) business days), Lessee may, in addition to availing itself of any other remedies available at law or in equity, incur any expense reasonably necessary to perform the obligation of Lessor specified in such notice and deduct such expense from the Rents or other charges next becoming due. In such case Lessee shall be diligent so as not to void any existing warranty that may apply.

24. Notice. Any and all notices to be given either Lessor or Lessee shall be given by certified mail, nationally recognized over night carrier or hand delivered and sent and faxed to the addresses set forth below;

Lessor:	Paul Hemmer Development Co., III
	250 Grandview Drive, Suite 400
	P.O. Box 17310
	Fort Mitchell, KY 41017-7310
	Attn: Jon J. Hemmer
	Phone #: (606) 341-8300
	Fax #: (606) 341-6817
with a copy to:	Donald M. Hemmer, Esquire
	Taft, Stettinius & Hollister LLP
	2670 Chancellor Drive, Suite 400
	Crestview Hills, KY 41017-3491
	Phone #: (513) 357-9655
	Fax #: (513) 381-6613
Lessee:	Leslie’s Poolmart, Inc.
	20630 Plummer Street
	Chatsworth, CA 91311
	Attn: Richard L. Grice
	Phone #: (818) 993-4212
	Fax #: (818) 717-0649
with a copy to:	Leslie’s Poolmart, Inc.
	20630 Plummer Street
	Chatsworth, CA 91311
	Attn: Accounting
	Phone #: (818) 993-4212
	Fax #: (818) 717-0649

or to such other place as may be designated in writing by Lessor or by Lessee.

25. (Deleted).

26. Binding Effect. This Lease shall be binding upon and inure to the benefit of Lessor, Lessee and their respective assigns and successors.

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27. Short Form. Should either Lessor or Lessee desire to record this Lease, it is agreed they shall execute and deliver a Memorandum of Lease for the purpose of recording and all parties agree only such Memorandum of Lease shall be recorded.

28. Quiet Enjoyment. Upon payment by the Lessee of the rents herein provided and upon the observance and performance of all the covenants, terms and conditions of this Lease on Lessee’s part to be observed and performed, Lessee shall peaceably and quietly hold and enjoy the Leased Premises for the term hereby devised, without hindrance or interruption by Lessor or any other person or persons, either lawfully or equitably claiming by, through or under the Lessor and Lessor shall defend Lessee’s rights to such use and occupancy.

29. Estoppel Certificate.

(a) Lessee and Lessor shall at any time upon not less than ten (10) days’ prior written notice from Lessor or Lessee, respectively, execute, acknowledge and deliver to Lessor or Lessee, respectively, a statement in writing: (i) certifying that the Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified, is in full force and effect) and the date to which rent and other charges are paid in advance, if any; (ii) acknowledging that there are not, to the signatory’s knowledge, any uncured defaults on the part of Lessor or Lessee hereunder, or specifying such defaults, if any, are claimed; and (iii) such other items as Lessor or Lessee may reasonably request. Such statement shall run in favor of and be in a form as Lessor, purchaser or encumbrancer or Lessee or its purchaser shall require subject to any reasonable objection made by Lessee or Lessor.

(b) (deleted)

30. Subordination.

(a) Subject to the remainder of this paragraph 30, this Lease, at Lessor’s option, shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the Leased Premises and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Lessee’s right to quiet possession of the Leased Premises shall not be disturbed if Lessee is not in default and so long as Lessee shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee shall elect to have this Lease prior to the lien of its mortgage, and shall give written notice thereof to Lessee, this Lease shall be deemed prior to such mortgage, whether this Lease is dated prior or subsequent to the date of said mortgage, or the date of recording thereof. Lessor covenants to obtain from each lender, the security for whose loan encumbers the Leased Premises, an executed nondisturbance agreement, assuring Lessee that notwithstanding any foreclosure or deed in lieu thereof, Lessee’s rights under this Lease shall continue in full force and effect and its possession of the Leased Premises shall remain undisturbed, except in accordance with the provisions of this Lease, so long as Lessee is not in default hereunder.

Notwithstanding anything in this Lease to the contrary, subordination of this Lease to the lien of any future interest (whether denominated mortgage, deed of trust, security interest,

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ground lease, overlease, or otherwise) shall not be automatic, but rather subordination is conditioned upon the prospective lien holder or lessor executing and delivering to Lessee a nondisturbance agreement in recordable form providing that if Lessee is not in default under this Lease, this Lease shall not terminate as a result of the foreclosure of such lien or conveyance in lieu thereof, or Lease termination proceedings or the like, and Lessee’s rights under this Lease shall continue in full force and effect, and their possession undisturbed except in accordance with the provisions of this Lease.

(b) Lessee agrees to execute any documents reasonably required to effectuate any attornment, a subordination or to make this Lease prior to the lien of any mortgage provided however, that such other document shall be strictly limited to such matters and shall contain no other matters whatsoever which materially increase any of Lessee’s obligations or materially decrease any of Lessee’s rights under this Lease. Lessee’s failure to execute such documents within thirty (30) days after written demand shall constitute a material default by Lessee hereunder.

31. Authority. If either Lessee is a corporation, trust, general or limited partnership, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said entity and shall, upon the execution of this Lease, deliver to Lessor evidence of such authority reasonably satisfactory to Lessor.

32. Holding Over. Lessee shall pay Lessor for each day Lessee retains possession of the Leased Premises or any part thereof after termination or expiration of the Term an amount equal to 125% of all amounts, including rent then required by the terms hereof and also pay all damages sustained by Lessor by reason of such retention, including direct, indirect and consequential damages.

33. Broker’s Commission. Lessor and Lessee represent that neither has dealt with any broker in connection with this Lease other than Grubb & Ellis Company and West Shell Commercial and that no other broker negotiated or participated in the negotiations of this Lease or submitted or showed the Leased Premises to either or is entitled to any commission in connection therewith. Lessor shall pay West Shell Commercial any such commission due as a result of this Lease, which such commission shall be shared with Grubb & Ellis Company, pursuant to a separate agreement.

34. Lessor’s Liability.

(a) The term “Lessor” as used herein shall mean only the owner or owners at the time in question of the fee title. In the event of any transfer of such title, Lessor herein named (and in case of any subsequent transfers, then the grantor) shall be relieved from and after the date of such transfer of all liability as respects Lessor’s obligations thereafter to be performed, provided that any funds in the hands of Lessor or the then grantor at the time of such transfer, in which Lessee has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Lessor shall, subject as aforesaid, be binding on Lessor’s successors and assigns, only during their respective periods of ownership. However, nothing in this provision shall relieve Lessor or any successor Lessor for liability or responsibility for breach of that Lessor’s obligation under this Lease during its respective period of ownership.

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(b) Anything contained in this Lease to the contrary notwithstanding, Lessee agrees that Lessee shall look solely to Lessor’s interest in the Leased Premises and Building for the collection of any judgment (or other judicial process) requiring the payment of money by Lessor in the event of any default or breach by Lessor with respect to any of the terms and provisions of this Lease to be kept, observed, and performed by Lessor, subject, however, to the prior rights of any mortgagee of all or any part of the property; no other assets of Lessor shall be subject to levy, execution or other judicial process for the satisfaction of Lessee’s claim. Nothing in this Lease shall be construed in any event whatsoever to impose any personal liability upon the trustees, officers or the shareholders of Lessor, or of the general or limited partners comprising Lessor, as Lessor herein or otherwise.

35. Entire Agreement. This instrument contains the entire and only agreement between the parties with respect to the Leased Premises and the subject matter hereof and no oral statements or any prior written matter not contained in this instrument shall have any force or effect. This Lease shall not be modified in any way except by writing subscribed to by both parties.

36. Captions for Convenience. The captions of the paragraphs throughout this Lease are for convenience only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of the terms and conditions of this Lease.

37. Governing Law. This Lease shall be governed by, construed and enforced in accordance with the laws of the Commonwealth of Kentucky.

38. Nonwaiver. The failure of Lessor or Lessee to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease, or of any rule or regulation, shall not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by Lessor of rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach except as to the rent received and accepted. No provision of this Lease shall be deemed to have been waived by Lessor or Lessee, unless such waiver be in writing signed by the party against whom enforcement is sought.

39. Severability. If any term or provision of this Lease or the application thereof to any person or circumstance shall to any extent, be invalid or unenforceable, the remainder of this Lease or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.

40. Duplicate Counterparts. This Lease may be executed in one or more counterparts, each of which shall be an original, and all of which shall constitute one and the same instrument.

41. Indemnification Agreement. Lessee hereby agrees to indemnify, reimburse, defend and hold harmless Lessor, its successors and assigns, for, from and against all demands,

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claims, actions or causes of action, assessments, losses, damages, liabilities, costs, expenses, fees and disbursements, asserted against, imposed on or incurred by Lessor, directly or indirectly, pursuant to or in connection with the application of any Environmental Law (as defined herein) to the acts or omissions occurring at any time after the Commencement Date or date of occupancy, whichever occurs sooner, of Lessee and/or its officers, directors, guests, agents, licensees and/or employees, specifically including acts or omissions with respect to the on-site and/or off-site disposal of wastes and waste waters, or threatened damage to the environment (including without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) at any on-site or off-site location, occurring at any time, and alleged to have been caused, in whole or in part, by the transportation, treatment, storage, or disposal or any pollutant, contaminant, chemical, or industrial, toxic, hazardous substance or waste generated or produced in connection with the business of Lessee and/or by its officers, directors, guests, agents, licensees and/or their employees, irrespective of whether Lessee knew of the acts or omissions allegedly causing the damage to the environment. At Lessor’s option, the occurrence of any such event giving rise to the application of this Paragraph may also be deemed an Event of Default pursuant to Paragraph 23 of this Lease.

Lessor hereby agrees to indemnify, reimburse, defend and hold harmless Lessee for, from and against all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs, expenses, fees and disbursements, asserted against, imposed on, or incurred by Lessee, directly or indirectly, pursuant to or in connection with the application of any Environmental Law due to and caused by the acts or omissions of Lessor or based on a violation by Lessor of Environmental Law due to acts prior to the Commencement Date, specifically including claims relating to acts or omissions with respect to the on-site and/or off-site disposal of wastes and waste waters, or threatened damage to the environment (including without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) at any on-site or off-site location, occurring at any time, and alleged to have been caused, in whole or in part, by the transportation, treatment, storage or disposal of any pollutant, contaminant, chemical, or industrial, toxic, or hazardous substance or waste by Lessor.

For the purpose of this indemnification, “Environmental Law” shall mean any federal, state or local statutory or common laws relating to pollution or protection of the environment, including without limitation, any common law of nuisance or trespass, and any law or regulation relating to emissions, discharges, releases or threatened release of pollutants, contaminants or chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants or chemicals, or industrial, toxic or hazardous substances or wastes.

42. Asbestos and Environmental Hazards. (Deleted)

43. Miscellaneous. Any and all obligations, duties and liabilities imposed on Lessee by the terms and conditions of this Lease, including but not limited to the obligation to pay rent, shall be joint and several.

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44. Tri-County Economic Development Corporation. Lessee, with assistance from the Tri-County Economic Development Corporation, has submitted a Kentucky Jobs Development Act (“KJDA”) application to the Kentucky Economic Development Finance Authority (“KEDFA”). This application is for inducements available to Lessee under the KJDA incentive program (KRS 154.01-010 and KRS 154.24-010 thru KRS 154.24-150). Subject to the terms set forth below in this Paragraph 44, this Lease is hereby conditioned upon Lessee receiving a timely KEDFA resolution to “preliminarily designate Lessee as an approved company” and to “preliminarily authorize the undertaking of the economic development project” (KRS 154.24-100) by Lessee. Without receiving such preliminary designation by KEDFA, the execution of this Lease would preclude Lessee from obtaining the inducements available under the KJDA program (KRS 154.24-090(4)). Lessee may cancel this Lease if, prior to the close of business on April 28, 1998, Lessee has not received such preliminary designation and authorization from KEDFA, as set forth above. Provided, however, in order for Lessee to cancel this Lease pursuant to this Paragraph 44, Lessee shall notify Lessor in writing no later than 5:00 p.m. local time on May 15, 1998. In the event Lessee cancels this Lease as provided herein, Lessee shall pay to Lessor any and all of Lessor’s documented costs, fees, charges and expenses incurred or accrued in connection with the negotiation, acquisition, development and improvement of the Lease and/or Leased Premises prior to receipt of Lessee’s notice of cancellation, up to the amounts contained in and subject to letters of authorization between Lessee and Lessor (or its contractor). Provided further, in the event Lessor does not receive Lessee’s notice of cancellation by 5:00 p.m. local time on May 15, 1998, then this contingency shall be deemed fully satisfied and waived by Lessee.

45. Americans With Disabilities Act. It shall be the responsibility of the Lessor in its capacity as lessor, to comply initially, at its expense, with the obligations imposed by the Americans With Disabilities Act of 1990 (“ADA”) with respect to the Leased Premises; provided, however, that such obligation shall be limited to compliance with ADA as such relates to: (i) the terms of the ADA as such exist and are interpreted on the Deemed Available Date; and (ii) the physical condition of the Leased Premises on the Deemed Available Date as constructed pursuant to the terms of this Lease. If compliance with ADA causes Lessor to incur costs which would have been incurred by Lessor had the changes been made when the improvements were constructed, then there shall be an equitable sharing of the costs between Lessor and Lessee. Thereafter, it shall be the responsibility of the Lessee to comply, at its expense, with the obligations imposed by ADA with respect to the Leased Premises and Lessee’s employees and operation. These obligations include, but are not limited to, responsibilities under Title I and III of the ADA and the regulations thereunder, for making readily achievable changes to remove architectural barriers in the Leased Premises, for providing required auxiliary aids and services, for making reasonable modifications to Lessee’s policies, practices and procedures, and for insuring that, to the maximum extent feasible, all alterations to the Leased Premises are readily accessible to individuals with disabilities and are in compliance with the ADA accessibility guidelines. Lessee shall defend and indemnify Lessor against all claims, losses, expenses and liabilities arising from any alleged discrimination on the basis of disability and the full and equal enjoyment of the goods, services, facilities, privileges, advantages or accommodations of the Leased Premises.

( - Remainder of page left intentionally blank - )

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IN WITNESS WHEREOF, the parties hereto have executed this Lease in duplicate originals the day and year first above written.

WITNESS:	LESSOR: Paul Hemmer Development Co., III
/s/	By:	/s/ Paul W. Hemmer, Jr.
/s/	Title:	President
WITNESS:	LESSEE: Leslie’s Poolmart, Inc.
/s/	By:	/s/ Dick Grice
/s/	Title:	VP Logistics

STATE OF KENTUCKY	)
	) SS.
COUNTY OF KENTON	)

The foregoing instrument was acknowledged before me this 4 day of May, 1998, by Paul W. Hemmer, Jr., its President on behalf of Paul Hemmer Development Co., III, a Kentucky Corporation, on behalf of said LESSOR.

[Seal]	/s/ Karen Moffitt
	Notary Public

STATE OF California	)
	) SS.
COUNTY OF Los Angeles	)

The foregoing instrument was acknowledged before me this 30th day of April, 1998, by Dick Grice, V.P. Logistics on behalf of Leslie’s Poolmart, Inc., a Delaware Corporation, on behalf of said LESSEE.

/s/ T J Gillian

Notary Public

[Seal]

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EX-10.12

Exhibit 10.12

FIRST ADDENDUM TO LEASE AGREEMENT

BETWEEN

AIRPARK BUSINESS CENTER II, LLC.

AND

LESLIE’S POOLMART, INC.

Airpark Business Center II, LLC, a Kentucky Limited Liability Company, as successor landlord, hereinafter referred to as LESSOR, and Leslie’s Poolmart, Inc., a Delaware Corporation, as tenant, hereinafter referred to as LESSEE, do hereby add the following provisions to the Lease Agreement dated April 30, 1998, hereinafter referred to as LEASE, between the parties pertaining to the leasing approximately 146,000 square feet of space in LESSOR’s building located at 1231 Aviation Boulevard, Hebron, Kentucky. The terms of this ADDENDUM are as follows:

A. The tenant finish allowance for the design and construction of the Containment Room as outlined in Section 9 of the LEASE shall be decreased by $49,908.00 from $325,000.00 to $275,092.00. The Additional Rent payable from LESSEE to LESSOR to reimburse LESSOR for providing this allowance shall be decreased by $567.97 per month from $3,698.60 to $3,130.63 per month for each month of the Initial Term of the LEASE.

B. The purpose of this ADDENDUM is to allow for the modification as set forth herein above and to affect the relationship of the parties thereto in no other way.

C. The parties acknowledge that the LEASE hereinbefore executed remains in full force and effect and neither party is in default thereunder.

In witness whereof, the parties have executed this ADDENDUM in duplicate originals as of the 21st day of July, 1999.

WITNESSES:	LANDLORD: Airpark Business Center II, LLC.
/s/	By:	/s/
/s/ Kim Miller	Title:	Authorized Agent
	TENANT: Leslie’s Poolmart, Inc.
/s/ Michelle Wisk	By:	/s/ Richard Grice
/s/ Kathy L. Hall	Title:	Richard Grice VP of Logistics

EX-10.13

Exhibit 10.13

[Florida Net Lease]

LEASE AGREEMENT

THIS LEASE AGREEMENT is made this 30th day of March, 2004, between ProLogis (“Landlord”), and the Tenant named below.

Tenant:	Leslie’s Poolmart, Inc.
Tenant’s Representative, Address, and Telephone:	Mr. Jim Iacabozzi 3925 E. Broadway Road Suite 100 Phoenix, AZ 85040 (602) 366-3999 x4248
Premises:	That portion of the Building, containing approximately 20,509 rentable square feet, as determined by Landlord, as shown on Exhibit A.
Project:	Consulate Distribution Center
Building:	Consulate Distribution Center #100 2100 Consulate Drive Suite 104 Orlando, FL 32837
Tenant’s Proportionate Share of Project:	3.590%
Tenant’s Proportionate Share of Building:	27.350%
Lease Term:	Beginning on the Commencement Date and ending on December 31, 2009.
Commencement Date:	Upon the earlier of: (i) ninety (90) days following full execution of this Lease, or (ii) upon Substantial Completion of the Initial Improvements as set forth in Addendum 2.
Initial Monthly Base Rent:				$	8,306.15
Initial Estimated Monthly Operating Expense Payments: (estimates only and subject to adjustment to actual costs and expenses according to the provisions of this Lease)	1. Utilities 2. Common Area Charges: 3. Taxes: 4. Insurance: 5. Others:         Mgmt. Fee	$ $ $ $ $	0.00 837.45 1,025.45 119.64 256.36

1

Initial Estimated Monthly Operating Expense Payments:	$2,238.90
Initial Monthly Sales Tax:	$685.43
Initial Monthly Base Rent, Operating Expense and Sales Tax Payments:	$11,230.48
Security Deposit:	$5,000,00
Broker:	Cushman & Wakefield of Florida (Susan Ruby)
Addenda:	1. Miscellaneous Provisions 2. Construction (Allowance) 3. HVAC Maintenance Contract 4. Sign Specifications 5. Move Out Conditions 6. Renewal Option (Baseball Arbitration) 7. Cap On Controllable Operating Expenses 8. Vacation of Premises 9. Storage & Use of Hazardous Materials
Exhibits:	A. Site Plan B. Premises C. Tenant’s Plans D. Hazardous Materials Inventory Statement

1. Granting Clause. In consideration of the obligation of Tenant to pay rent as herein provided and in consideration of the other terms, covenants, and conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord, the Premises, to have and to hold for the Lease Term, subject to the terms, covenants and conditions of this Lease.

2. Acceptance of Premises. Landlord shall deliver the Premises within ten (10) days of Lease Execution. Tenant shall accept the Premises in its condition as of that date, subject to all applicable laws, ordinances, regulations, covenants and restrictions. Landlord has made no representation or warranty as to the suitability of the Premises for the conduct of Tenant’s business, and Tenant waives any implied warranty that the Premises are suitable for Tenant’s intended purposes. Except as provided in Paragraph 10, in no event shall Landlord have any obligation for any defects (except for Latent Defects) in the Premises or any limitation on its use. The taking of possession of the Premises shall be conclusive evidence that Tenant accepts the Premises and that the Premises were in good condition at the time possession was taken except for items that are Landlord’s responsibility under Paragraph 10, Latent Defects, and any punchlist items agreed to in writing by Landlord and Tenant.

3. Use. The Premises shall be used only for the purpose of receiving, storing, shipping and selling (but limited to wholesale sales) products, materials and merchandise made and/or distributed by Tenant and for such other lawful purposes as may be incidental thereto; provided, however, with Landlord’s prior written consent, Tenant may also use the Premises for light manufacturing. Tenant shall not conduct or give notice of any auction, liquidation, or going out of business sale on the Premises. Tenant will use the Premises in a careful, safe and proper manner and will not commit waste, overload the floor or structure of the Premises or subject the Premises to use that would damage the Premises. Tenant shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise, or vibrations to emanate from the Premises, or take

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any other action that would constitute a nuisance or would disturb, unreasonably interfere with, or endanger Landlord or any tenants of the Project. Outside storage, including without limitation, storage of trucks and other vehicles, is prohibited without Landlord’s prior written consent. Tenant, at its sole expense, shall use and occupy the Premises in compliance with all laws, including, without limitation, the Americans With Disabilities Act, orders, judgments, ordinances, regulations, codes, directives, permits, licenses, covenants and restrictions now or hereafter applicable to the Premises (collectively, “Legal Requirements”). The Premises shall not be used as a place of public accommodation under the Americans With Disabilities Act or similar state statutes or local ordinances or any regulations promulgated thereunder, all as may be amended from time to time. Tenant shall, at its expense, make any alterations or modifications, within or without the Premises, that are required by Legal Requirements related to Tenant’s use or occupation of the Premises. Tenant will not use or permit the Premises to be used for any purpose or in any manner that would void Tenant’s or Landlord’s insurance, increase the insurance risk, or cause the disallowance of any sprinkler credits. If any increase in the cost of any insurance on the Premises or the Project is caused by Tenant’s use or occupation of the Premises, or because Tenant vacates the Premises, then Tenant shall pay the amount of such increase to Landlord. Any occupation of the Premises by Tenant prior to the Commencement Date shall be subject to all obligations of Tenant under this Lease. Notwithstanding the foregoing, Tenant shall be permitted to store and park trucks and commercial vehicles in the fenced or block wall enclosure in the rear of the Premises, as depicted in the site plan attached hereto as Exhibit B.

4. Base Rent. Tenant shall, beginning on the 91^st day of the Lease Term, pay Base Rent in the amount set forth above. The first month’s Base Rent, the Security Deposit, and the first monthly installment of estimated Operating Expenses (as hereafter defined) shall be due and payable on the date hereof, and Tenant promises to pay to Landlord in advance, without demand, deduction or set-off, monthly installments of Base Rent on or before the first day of each calendar month succeeding the Commencement Date. Payments of Base Rent for any fractional calendar month shall be prorated. All payments required to be made by Tenant to Landlord hereunder (or to such other party as Landlord may from time to time specify in writing) shall be made by check or Electronic Fund Transfer (“EFT”) of immediately available federal funds before 11:00 a.m., Eastern Time, at such place, within the continental United States, as Landlord may from time to time designate to Tenant in writing. The obligation of Tenant to pay Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are independent obligations. Tenant shall have no right at any time to abate, reduce, or set-off any rent due hereunder except as may be expressly provided in this Lease. If Tenant is delinquent in any monthly installment of Base Rent or of estimated Operating Expenses for more than 5 days, Tenant shall pay to Landlord on demand a late charge equal to 8 percent of such delinquent sum. The provision for such late charge shall be in addition to all of Landlord’s other rights and remedies hereunder or at law and shall not be construed as a penalty.

5. Security Deposit. The Security Deposit shall be held by Landlord as security for the performance of Tenant’s obligations under this Lease. The Security Deposit is not an advance rental deposit or a measure of Landlord’s damages in case of Tenant’s default. Upon each occurrence of an Event of Default (hereinafter defined), Landlord may use all or part of the Security Deposit to pay delinquent payments due under this Lease, and the cost of any damage, injury, expense or liability caused by such Event of Default, without prejudice to any other remedy provided herein or provided by law. Tenant shall pay Landlord on demand the amount

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that will restore the Security Deposit to its original amount. Landlord’s obligation respecting the Security Deposit is that of a debtor, not a trustee; no interest shall accrue thereon. The Security Deposit shall be the property of Landlord, but shall be paid to Tenant when Tenant’s obligations under this Lease have been completely fulfilled. Landlord shall be released from any obligation with respect to the Security Deposit upon transfer of this Lease and the Premises to a person or entity assuming Landlord’s obligations under this Paragraph 5.

6. Operating Expense Payments. During each month of the Lease Term, on the same date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12 of the annual cost, as estimated by Landlord from time to time, of Tenant’s Proportionate Share (hereinafter defined) of Operating Expenses for the Project. Payments thereof for any fractional calendar month shall be prorated. The term “Operating Expenses” means all costs and expenses incurred by Landlord with respect to the ownership, maintenance, and operation of the Project including, but not limited to costs of Taxes (hereinafter defined) and fees payable to tax consultants and attorneys for consultation and contesting taxes; insurance; utilities; maintenance, repair and replacement of all portions of the Project, including without limitation, paving and parking areas, roads, roofs (including the roof membrane), alleys, and driveways, mowing, landscaping, exterior painting, utility lines, heating, ventilation and air conditioning systems, lighting, electrical systems and other mechanical and building systems; amounts paid to contractors and subcontractors for work or services performed in connection with any of the foregoing; charges or assessments of any association to which the Project is subject; property management fees payable to a property manager, including any affiliate of Landlord, security services, if any; trash collection, sweeping and removal; and additions or alterations made by Landlord to the Project or the Building in order to comply with Legal Requirements (other than those expressly required herein to be made by Tenant) or that are appropriate to the continued operation of the Project or the Building as a bulk warehouse facility in the market area, provided that the cost of additions or alterations that are required to be capitalized for federal income tax purposes shall be amortized on a straight line basis over a period equal to the lesser of the useful life thereof for federal income tax purposes or 10 years. Operating Expenses do not include costs, expenses, depreciation or amortization for capital repairs and capital replacements required to be made by Landlord under Paragraph 10 of this Lease, debt service under mortgages or ground rent under ground leases, costs of restoration to the extent of net insurance proceeds received by Landlord with respect thereto, leasing commissions, or the costs of renovating space for tenants.

If Tenant’s total payments of Operating Expenses for any year are less than Tenant’s Proportionate Share of actual Operating Expenses for such year, then Tenant shall pay the difference to Landlord within 30 days after demand, and if more, then Landlord shall retain such excess and credit it against Tenant’s next payments. For purposes of calculating Tenant’s Proportionate Share of Operating Expenses, a year shall mean a calendar year except the first year, which shall begin on the Commencement Date, and the last year, which shall end on the expiration of this Lease. With respect to Operating Expenses which Landlord allocates to the entire Project, Tenant’s “Proportionate Share” shall be the percentage set forth on the first page of this Lease as Tenant’s Proportionate Share of the Project as reasonably adjusted by Landlord in the future for changes in the physical size of the Premises or the Project; and, with respect to Operating Expenses which Landlord allocates only to the Building, Tenant’s “Proportionate Share” shall be the percentage set forth on the first page of this Lease as Tenant’s Proportionate Share of the Building as reasonably adjusted by Landlord in the future for changes in the

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physical size of the Premises or the Building. Landlord may equitably increase Tenant’s Proportionate Share for any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a portion of the Project or Building that includes the Premises or that varies with occupancy or use. The estimated Operating Expenses for the Premises set forth on the first page of this Lease are only estimates, and Landlord makes no guaranty or warranty that such estimates will be accurate.

7. Utilities. Tenant shall pay for all water, gas, electricity, heat, light, power, telephone, sewer, sprinkler services, refuse and trash collection, and other utilities and services used on the Premises, all maintenance charges for utilities, and any storm sewer charges or other similar charges for utilities imposed by any governmental entity or utility provider, together with any taxes, penalties, surcharges or the like pertaining to Tenant’s use of the Premises. Landlord may cause at Tenant’s expense any utilities to be separately metered or charged directly to Tenant by the provider. Tenant shall pay its share of all charges for jointly metered utilities based upon consumption, as reasonably determined by Landlord. No interruption or failure of utilities shall result in the termination of this Lease or the abatement of rent. Tenant agrees to limit use of water and sewer for normal restroom use.

8. Taxes. Landlord shall pay all taxes, assessments and governmental charges (collectively referred to as “Taxes”) that accrue against the Project during the Lease Term, which shall be included as part of the Operating Expenses charged to Tenant. Landlord may contest by appropriate legal proceedings the amount, validity, or application of any Taxes or liens thereof. All capital levies or other taxes assessed or imposed on Landlord upon the rents payable to Landlord under this Lease and any franchise tax, any excise, transaction, sales or privilege tax, assessment, levy or charge measured by or based, in whole or in part, upon such rents from the Premises and/or the Project or any portion thereof shall be paid by Tenant to Landlord monthly in estimated installments or upon demand, at the option of Landlord, as additional rent; provided, however, in no event shall Tenant be liable for any net income taxes imposed on Landlord unless such net income taxes are in substitution for any Taxes payable hereunder. If any such tax or excise is levied or assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at such times and in such manner as the taxing authority shall require. Tenant shall be liable for all taxes levied or assessed against any personal property or fixtures placed in the Premises, whether levied or assessed against Landlord or Tenant.

9. Insurance. Landlord shall maintain all risk property insurance covering the full replacement cost of the Building. Landlord may, but is not obligated to, maintain such other insurance and additional coverages as it may deem necessary, including, but not limited to, commercial liability insurance and rent loss insurance. All such insurance shall be included as part of the Operating Expenses charged to Tenant. The Project or Building may be included in a blanket policy (in which case the cost of such insurance allocable to the Project or Building will be determined by Landlord based upon the insurer’s cost calculations). Tenant shall also reimburse Landlord for any increased premiums or additional insurance which Landlord reasonably deems necessary as a result of Tenant’s use of the Premises.

Tenant, at its expense, shall maintain during the Lease Term: all risk property insurance covering the full replacement cost of all property and improvements installed or placed in the Premises by Tenant at Tenant’s expense; worker’s compensation insurance with no less than the minimum limits required by law; employer’s liability insurance with such limits as required by law; and commercial liability insurance, with a minimum limit of $1,000,000 per

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occurrence and a minimum umbrella limit of $1,000,000, for a total minimum combined general liability and umbrella limit of $2,000,000 (together with such additional umbrella coverage as Landlord may reasonably require) for property damage, personal injuries, or deaths of persons occurring in or about the Premises. Landlord may from time to time require reasonable increases in any such limits. The commercial liability policies shall name Landlord as an additional insured, insure on an occurrence and not a claims-made basis, be issued by insurance companies which are reasonably acceptable to Landlord, not be cancelable unless 30 days’ prior written notice shall have been given to Landlord, contain a hostile fire endorsement and a contractual liability endorsement and provide primary coverage to Landlord (any policy issued to Landlord providing duplicate or similar coverage shall be deemed excess over Tenant’s policies). Such policies or certificates thereof shall be delivered to Landlord by Tenant upon commencement of the Lease Term and upon each renewal of said insurance.

The all risk property insurance obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord or Tenant, their officers, directors, employees, managers, agents, invitees and contractors, in connection with any loss or damage thereby insured against. Neither party nor its officers, directors, employees, managers, agents, invitees or contractors shall be liable to the other for loss or damage caused by any risk coverable by all risk property insurance, and each party waives any claims against the other party, and its officers, directors, employees, managers, agents, invitees and contractors for such loss or damage. The failure of a party to insure its property shall not void this waiver. Landlord and its agents, employees and contractors shall not be liable for, and Tenant hereby waives all claims against such parties for, business interruption and losses occasioned thereby sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises or the Project from any cause whatsoever, including without limitation, damage caused in whole or in part, directly or indirectly, by the negligence of Landlord or its agents, employees or contractors.

10. Landlord’s Repairs. Landlord shall maintain, at its expense, Latent Defects and the structural soundness of the roof, foundation, and exterior walls of the Building in good repair, reasonable wear and tear and uninsured losses and damages caused by Tenant, its agents and contractors excluded. The term “walls” as used in this Paragraph 10 shall not include windows, glass or plate glass, doors or overhead doors, special store fronts, dock bumpers, dock plates or levelers, or office entries. Tenant shall promptly give Landlord written notice of any repair required by Landlord pursuant to this Paragraph 10, after which Landlord shall have a reasonable opportunity to repair.

11. Tenant’s Repairs. Landlord, at Tenant’s expense as provided in Paragraph 6, shall maintain in good repair and condition the parking areas and other common areas of the Building, including, but not limited to driveways, alleys, landscape and grounds surrounding the Premises. Subject to Landlord’s obligation in Paragraph 10 and subject to Paragraphs 9 and 15, Tenant, at its expense, shall repair, replace and maintain in good condition all portions of the Premises and all areas, improvements and systems exclusively serving the Premises including, without limitation, dock and loading areas, truck doors, plumbing, water and sewer lines up to points of common connection, fire sprinklers and fire protection systems, entries, doors, ceilings, windows, interior walls, and the interior side of demising walls, and heating, ventilation and air conditioning systems. Such repair and replacements include capital expenditures and repairs whose benefit may extend beyond the Term. Heating, ventilation and air conditioning systems and other mechanical and building systems serving the Premises shall be maintained at Tenant’s

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expense pursuant to maintenance service contracts entered into by Tenant or, at Landlord’s election, by Landlord. The scope of services and contractors under such maintenance contracts shall be reasonably approved by Landlord. If Tenant fails to perform any repair or replacement for which it is responsible, Landlord may perform such work and be reimbursed by Tenant within 10 days after demand therefor. Subject to Paragraphs 9 and 15, Tenant shall bear the full cost of any repair or replacement to any part of the Building or Project that results from damage caused by Tenant, its agents, contractors, or invitees and any repair that benefits only the Premises.

12. Tenant-Made Alterations and Trade Fixtures. Any alterations, additions, or improvements made by or on behalf of Tenant to the Premises (“Tenant-Made Alterations”) having a value in excess of $25,000 shall be subject to Landlord’s prior written consent, which shall not be unreasonably withheld. Tenant shall cause, at its expense, all Tenant-Made Alterations to comply with insurance requirements and with Legal Requirements and shall construct at its expense any alteration or modification required by Legal Requirements as a result of any Tenant-Made Alterations. All Tenant-Made Alterations shall be constructed in a good and workmanlike manner by contractors reasonably acceptable to Landlord and only good grades of materials shall be used. All plans and specifications for any Tenant-Made Alterations shall be submitted to Landlord for its approval. Landlord may monitor construction of the Tenant-Made Alterations. Tenant shall reimburse Landlord for its costs in reviewing plans and specifications and in monitoring construction. Landlord’s right to review plans and specifications and to monitor construction shall be solely for its own benefit, and Landlord shall have no duty to see that such plans and specifications or construction comply with applicable laws, codes, rules and regulations. Tenant shall provide Landlord with the identities and mailing addresses of all persons performing work or supplying materials, prior to beginning such construction, and Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable law. Tenant shall furnish security or make other arrangements satisfactory to Landlord to assure payment for the completion of all work free and clear of liens and shall provide certificates of insurance for worker’s compensation and other coverage in amounts and from an insurance company satisfactory to Landlord protecting Landlord against liability for personal injury or property damage during construction. Upon completion of any Tenant-Made Alterations, Tenant shall deliver to Landlord sworn statements setting forth the names of all contractors and subcontractors who did work on the Tenant-Made Alterations and final lien waivers from all such contractors and subcontractors. Upon surrender of the Premises, all Tenant-Made Alterations and any leasehold improvements constructed by Landlord or Tenant shall remain on the Premises as Landlord’s property, except to the extent Landlord requires removal at Tenant’s expense of any such items or Landlord and Tenant have otherwise agreed in writing in connection with Landlord’s consent to any Tenant-Made Alterations. Tenant shall repair any damage caused by such removal.

Tenant, at its own cost and expense and without Landlord’s prior approval, may erect such shelves, bins, machinery and trade fixtures (collectively “Trade Fixtures”) in the ordinary course of its business provided that such items do not alter the basic character of the Premises, do not overload or damage the Premises, and may be removed without injury to the Premises, and the construction, erection, and installation thereof complies with all Legal Requirements and with Landlord’s requirements set forth above. Tenant shall remove its Trade Fixtures and shall repair any damage caused by such removal.

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13. Signs. Tenant shall not make any changes to the exterior of the Premises, install any exterior lights, decorations, balloons, flags, pennants, banners, or painting, or erect or install any signs, windows or door lettering, placards, decorations, or advertising media^-of any type which can be viewed from the exterior of the Premises, without Landlord’s prior written consent. Upon surrender or vacation of the Premises, Tenant shall have removed all signs and repair, paint, and/or replace the building facia surface to which its signs are attached. Tenant shall obtain all applicable governmental permits and approvals for sign and exterior treatments. All signs, decorations, advertising media, blinds, draperies and other window treatment or bars or other security installations visible from outside the Premises shall be subject to Landlord’s approval and conform in all respects to Landlord’s requirements.

14. Parking. Tenant shall be entitled to park in common with other tenants of the Project in those areas designated for nonreserved parking. Landlord may allocate parking spaces among Tenant and other tenants in the Project if Landlord determines that such parking facilities are becoming crowded. Landlord shall not be responsible for enforcing Tenant’s parking rights against any third parties.

15. Restoration. If at any time during the Lease Term the Premises are damaged by a fire or other casualty, Landlord shall notify Tenant within 60 days after such damage as to the amount of time Landlord reasonably estimates it will take to restore the Premises. If the restoration time is estimated to exceed 4 months, either Landlord or Tenant may elect to terminate this Lease upon notice to the other party given no later than 30 days after Landlord’s notice. If neither party elects to terminate this Lease or if Landlord estimates that restoration will take 4 months or less, then, subject to receipt of sufficient insurance proceeds, Landlord shall promptly restore the Premises excluding the improvements installed by Tenant or by Landlord and paid by Tenant, subject to delays arising from the collection of insurance proceeds or from Force Majeure events. Tenant at Tenant’s expense shall promptly perform, subject to delays arising from the collection of insurance proceeds, or from Force Majeure events, all repairs or restoration not required to be done by Landlord and shall promptly re-enter the Premises and commence doing business in accordance with this Lease. Notwithstanding the foregoing, either party may terminate this Lease if the Premises are damaged during the last year of the Lease Term and Landlord reasonably estimates that it will take more than one month to repair such damage. Base Rent and Operating Expenses shall be abated for the period of repair and restoration in the proportion which the area of the Premises, if any, which is not usable by Tenant bears to the total area of the Premises. Such abatement shall be the sole remedy of Tenant, and except as provided herein, Tenant waives any right to terminate the Lease by reason of damage or casualty loss.

16. Condemnation. If any part of the Premises or the Project should be taken for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a “Taking” or “Taken”), and the Taking would prevent or materially interfere with Tenant’s use of the Premises or in Landlord’s judgment would materially interfere with or impair its ownership or operation of the Project, then upon sixty (60) days written notice by Landlord this Lease shall terminate and Base Rent shall be apportioned as of said date. If part of the Premises shall be Taken, and this Lease is not terminated as provided above, the Base Rent payable hereunder during the unexpired Lease Term shall be reduced to such extent as may be fair and reasonable under the circumstances. In the event of any such Taking, Landlord shall be entitled to receive the entire price or award from any such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant’s

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interest, if any, in such award. Tenant shall have the right, to the extent that same shall not diminish Landlord’s award, to make a separate claim against the condemning authority (but not Landlord) for such compensation as may be separately awarded or recoverable by Tenant for moving expenses and damage to Tenant’s Trade Fixtures, if a separate award for such items is made to Tenant.

17. Assignment and Subletting. Without Landlord’s prior written consent, which shall not be unreasonably withheld, Tenant shall not assign this Lease or sublease the Premises or any part thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within the Premises and any attempt to do any of the foregoing shall be void and of no effect. For purposes of this paragraph, a transfer of the ownership interests controlling Tenant shall be deemed an assignment of this Lease unless such ownership interests are publicly traded. Notwithstanding the above, Tenant may assign or sublet the Premises, or any part thereof, to any entity controlling Tenant, controlled by Tenant or under common control with Tenant (a “Tenant Affiliate”), without the prior written consent of Landlord. Tenant shall reimburse Landlord for all of Landlord’s reasonable out-of-pocket expenses in connection with any assignment or sublease. Upon Landlord’s receipt of Tenant’s written notice of a desire to assign or sublet the Premises, or any part thereof (other than to a Tenant Affiliate), Landlord may, by giving written notice to Tenant within 30 days after receipt of Tenant’s notice, terminate this Lease with respect to the space described in Tenant’s notice, as of the date specified in Tenant’s notice for the commencement of the proposed assignment or sublease.

Notwithstanding any assignment or subletting, Tenant and any guarantor or surety of Tenant’s obligations under this Lease shall at all times remain fully responsible and liable for the payment of the rent and for compliance with all of Tenant’s other obligations under this Lease (regardless of whether Landlord’s approval has been obtained for any such assignments or sublettings). In the event that the rent due and payable by a sublessee or assignee (or a combination of the rental payable under such sublease or assignment plus any bonus or other consideration therefor or incident thereto) exceeds the rental payable under this Lease, then Tenant shall be bound and obligated to pay Landlord as additional rent hereunder all such excess rental and other excess consideration within 10 days following receipt thereof by Tenant.

If this Lease be assigned or if the Premises be subleased (whether in whole or in part) or in the event of the mortgage, pledge, or hypothecation of Tenant’s leasehold interest or grant of any concession or license within the Premises or if the Premises be occupied in whole or in part by anyone other than Tenant, then upon a default by Tenant hereunder Landlord may collect rent from the assignee, sublessee, mortgagee, pledgee, party to whom the leasehold interest was hypothecated, concessionee or licensee or other occupant and, except to the extent set forth in the preceding paragraph, apply the amount collected to the next rent payable hereunder; and all such rentals collected by Tenant shall be held in trust for Landlord and immediately forwarded to Landlord. No such transaction or collection of rent or application thereof by Landlord, however, shall be deemed a waiver of these provisions or a release of Tenant from the further performance by Tenant of its covenants, duties, or obligations hereunder.

18. Indemnification. Except for the negligence of Landlord, its agents, employees or contractors, and to the extent permitted by law, Tenant agrees to indemnify, defend and hold harmless Landlord, and Landlord’s agents, employees and contractors, from and against any and all losses, liabilities, damages, costs and expenses (including attorneys’ fees) resulting from claims by third parties for injuries to any person and damage to or theft or misappropriation or

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loss of property occurring in or about the Project and arising from the use and occupancy of the Premises or from any activity, work, or thing done, permitted or suffered by Tenant in or about the Premises or due to any other act or omission of Tenant, its subtenants, assignees, invitees, employees, contractors and agents. The furnishing of insurance required hereunder shall not be deemed to limit Tenant’s obligations under this Paragraph 18.

19. Inspection and Access. Landlord and its agents, representatives, and contractors may enter the Premises at any reasonable time to inspect the Premises and to make such repairs as may be required or permitted pursuant to this Lease and for any other business purpose. Landlord and Landlord’s representatives may enter the Premises during business hours for the purpose of showing the Premises to prospective purchasers and, during the last year of the Lease Term, to prospective tenants. Landlord may erect a suitable sign on the Premises stating the Premises are available to let or that the Project is available for sale. Landlord may grant easements, make public dedications, designate common areas and create restrictions on or about the Premises, provided that no such easement, dedication, designation or restriction materially interferes with Tenant’s use or occupancy of the Premises. At Landlord’s request, Tenant shall execute such instruments as may be necessary for such easements, dedications or restrictions.

20. Quiet Enjoyment. If Tenant shall perform all of the covenants and agreements herein required to be performed by Tenant, Tenant shall, subject to the terms of this Lease, at all times during the Lease Term, have peaceful and quiet enjoyment of the Premises against any person claiming by, through or under Landlord.

21. Surrender. Upon termination of the Lease Term or earlier termination of Tenant’s right of possession, Tenant shall surrender the Premises to Landlord in the same condition as received, broom clean, ordinary wear and tear and casualty loss and condemnation covered by Paragraphs 15 and 16 excepted. Any Trade Fixtures, Tenant-Made Alterations and property not so removed by Tenant as permitted or required herein including the fenced or block wall enclosure in the rear of the Premises as depicted in the site plan attached hereto as Exhibit B, shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord’s retention and disposition of such property. All obligations of Tenant hereunder not fully performed as of the termination of the Lease Term shall survive the termination of the Lease Term, including without limitation, indemnity obligations, payment obligations with respect to Operating Expenses and obligations concerning the condition and repair of the Premises. Landlord and Tenant acknowledge that the Security Deposit being given by Tenant to Landlord is to be applied first against the cost of removing the fenced or block wall enclosure in the rear of the Premises, in the event that Tenant does not remove that enclosure itself at Tenant’s own cost, prior to or upon surrender of the Premises.

22. Holding Over. If Tenant retains possession of the Premises after the termination of the Lease Term, unless otherwise agreed in writing, such possession shall be subject to immediate termination by Landlord at any time, and all of the other terms and provisions of this Lease (excluding any expansion or renewal option or other similar right or option) shall be applicable during such holdover period, except that Tenant shall pay Landlord from time to time, upon demand, as Base Rent for the holdover period, an amount equal to 150% of the Base Rent in effect on the termination date, computed on a monthly basis for each month or part thereof during such holding over. All other payments shall continue under the terms of this Lease. In addition, Tenant shall be liable for all damages incurred by Landlord as a result of such holding

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over. No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided, and this Paragraph 22 shall not be construed as consent for Tenant to retain possession of the Premises.

23. Events of Default. Each of the following events shall be an event of default (“Event of Default”) by Tenant under this Lease:

(i) Tenant shall fail to pay any installment of Base Rent or any other payment required herein when due, and such failure shall continue for a period of 5 days from the date such payment was due and written notice received.

(ii) Tenant or any guarantor or surety of Tenant’s obligations hereunder shall (A) make a general assignment for the benefit of creditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a “proceeding for relief”); (C) become the subject of any proceeding for relief which is not dismissed within 60 days of its filing or entry; or (D) die or suffer a legal disability (if Tenant, guarantor, or, surety is an individual) or be dissolved or otherwise fail to maintain its legal existence (if Tenant, guarantor or surety is a corporation, partnership or other entity).

(iii) Any insurance required to be maintained by Tenant pursuant to this Lease shall be cancelled or terminated or shall expire or shall be reduced or materially changed, except, in each case, as permitted in this Lease.

(iv) Tenant shall not occupy or shall vacate the Premises or shall fail to continuously operate its business at the Premises for the permitted use set forth herein, whether or not Tenant is in monetary or other default under this Lease. See Addendum 8 (Vacation of Premises).

(v) Tenant shall attempt or there shall occur any assignment, subleasing or other transfer of Tenant’s interest in or with respect to this Lease except as otherwise permitted in this Lease.

(vi) Tenant shall fail to discharge any lien placed upon the Premises in violation of this Lease within 30 days after any such lien or encumbrance is filed against the Premises.

(vii) Tenant shall fail to comply with any provision of this Lease other than those specifically referred to in this Paragraph 23, and except as otherwise expressly provided herein, such default shall continue for more than 30 days after Landlord shall have given Tenant written notice of such default.

24. Landlord’s Remedies. Upon each occurrence of an Event of Default and so long as such Event of Default shall be continuing, Landlord may at any time thereafter at its election: terminate this Lease or Tenant’s right of possession, (but Tenant shall remain liable as hereinafter provided) and/or pursue any other remedies at law or in equity. Upon the termination of this

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Lease or termination of Tenant’s right of possession, it shall be lawful for Landlord, with formal demand or notice of any kind, to re-enter the Premises by summary dispossession proceedings or any other action or proceeding authorized by law and to remove Tenant and all persons and property therefrom. If Landlord re-enters the Premises, Landlord shall have the right to keep in place and use, or remove and store, all of the furniture, fixtures and equipment at the Premises.

If Landlord terminates this Lease, Landlord may recover from Tenant the sum of: all Base Rent and all other amounts accrued hereunder to the date of such termination; the cost of reletting the whole or any part of the Premises, including without limitation brokerage fees and/or leasing commissions incurred by Landlord, and costs of removing and storing Tenant’s or any other occupant’s property, repairing, altering, remodeling, or otherwise putting the Premises into condition acceptable to a new tenant or tenants, and all reasonable expenses incurred by Landlord in pursuing its remedies, including reasonable attorneys’ fees and court costs; and the excess of the then present value of the Base Rent and other amounts payable by Tenant under this Lease as would otherwise have been required to be paid by Tenant to Landlord during the period following the termination of this Lease measured from the date of such termination to the expiration date stated in this Lease, over the present value of any net amounts which Tenant establishes Landlord can reasonably expect to recover by reletting the Premises for such period, taking into consideration the availability of acceptable tenants and other market conditions affecting leasing. Such present values shall be calculated at a discount rate equal to the 90-day U.S. Treasury bill rate at the date of such termination.

If Landlord terminates Tenant’s right of possession (but not this Lease), Landlord may, but shall be under no obligation to, relet the Premises for the account of Tenant for such rent and upon such terms as shall be satisfactory to Landlord without thereby releasing Tenant from any liability hereunder and without demand or notice of any kind to Tenant. For the purpose of such reletting Landlord is authorized to make any repairs, changes, alterations, or additions in or to the Premises as Landlord deems reasonably necessary or desirable. If the Premises are not relet, then Tenant shall pay to Landlord as damages a sum equal to the amount of the rental reserved in this Lease for such period or periods, plus the cost of recovering possession of the Premises (including attorneys’ fees and costs of suit), the unpaid Base Rent and other amounts accrued hereunder at the time of repossession, and the costs incurred in any attempt by Landlord to relet the Premises. If the Premises are relet and a sufficient sum shall not be realized from such reletting [after first deducting therefrom, for retention by Landlord, the unpaid Base Rent and other amounts accrued hereunder at the time of reletting, the cost of recovering possession (including attorneys’ fees and costs of suit), all of the costs and expense of repairs, changes, alterations, and additions, the expense of such reletting (including without limitation brokerage fees and leasing commissions) and the cost of collection of the rent accruing therefrom] to satisfy the rent provided for in this Lease to be paid, then Tenant shall immediately satisfy and pay any such deficiency. Any such payments due Landlord shall be made upon demand therefor from time to time and Tenant agrees that Landlord may file suit to recover any sums falling due from time to time. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect in writing to terminate this Lease for such previous breach.

Exercise by Landlord of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this Lease by Landlord, whether by agreement or by operation of law, it being understood that such surrender and/or termination can be effected only by the written agreement

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of Landlord and Tenant. Any law, usage, or custom to the contrary notwithstanding, Landlord shall have the right at all times to enforce the provisions of this Lease in strict accordance with the terms hereof; and the failure of Landlord at any time to enforce its rights under this Lease strictly in accordance with same shall not be construed as having created a custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease or as having modified the same. Tenant and Landlord further agree that forbearance or waiver by Landlord to enforce its rights pursuant to this Lease or at law or in equity, shall not be a waiver of Landlord’s right to enforce one or more of its rights in connection with any subsequent default. A receipt by Landlord of rent or other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. To the greatest extent permitted by law, Tenant waives the service of notice of Landlord’s intention to re-enter as provided for in any statute, or to institute legal proceedings to that end, and also waives all right of redemption in case Tenant shall be dispossessed by a judgment or by warrant of any court or judge. The terms “enter,” “re-enter,” “entry” or “re-entry,” as used in this Lease, are not restricted to their technical legal meanings. Any reletting of the Premises shall be on such terms and conditions as Landlord in its sole discretion may determine (including without limitation a term different than the remaining Lease Term, rental concessions, alterations and repair of the Premises, lease of less than the entire Premises to any tenant and leasing any or all other portions of the Project before reletting the Premises). Landlord shall not be liable, nor shall Tenant’s obligations hereunder be diminished because of, Landlord’s failure to relet the Premises or collect rent due in respect of such reletting.

25. Tenant’s Remedies/Limitation of Liability. Landlord shall not be in default hereunder unless Landlord fails to perform any of its obligations hereunder within 30 days after written notice from Tenant specifying such failure (unless such performance will, due to the nature of the obligation, require a period of time in excess of 30 days, then after such period of time as is reasonably necessary). All obligations of Landlord hereunder shall be construed as covenants, not conditions; and, except as may be otherwise expressly provided in this Lease, Tenant may not terminate this Lease for breach of Landlord’s obligations hereunder. All obligations of Landlord under this Lease will be binding upon Landlord only during the period of its ownership of the Premises and not thereafter. The term “Landlord” in this Lease shall mean only the owner, for the time being of the Premises, and in the event of the transfer by such owner of its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing, but such obligations shall be binding during the Lease Term upon each new owner for the duration of such owner’s ownership. Any liability of Landlord under this Lease shall be limited solely to its interest in the Project, and in no event shall any personal liability be asserted against Landlord in connection with this Lease nor shall any recourse be had to any other property or assets of Landlord.

26. Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

27. Subordination. This Lease and Tenant’s interest and rights hereunder are and shall be subject and subordinate at all times to the lien of any first mortgage, now existing or

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hereafter created on or against the Project or the Premises, and all amendments, restatements, renewals, modifications, consolidations, refinancing, assignments and extensions thereof, without the necessity of any further instrument or act on the part of Tenant. Tenant agrees, at the election of the holder of any such mortgage, to attorn to any such holder. Tenant agrees upon demand to execute, acknowledge and deliver such instruments, confirming such subordination and such instruments of attornment as shall be requested by any such holder. Notwithstanding the foregoing, any such holder may at any time subordinate its mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to such mortgage without regard to their respective dates of execution, delivery or recording and in that event such holder shall have the same rights with respect to this Lease as though this Lease had been executed prior to the execution, delivery and recording of such mortgage and had been assigned to such holder. The term “mortgage” whenever used in this Lease shall be deemed to include deeds of trust, security assignments and any other encumbrances, and any reference to the “holder” of a mortgage shall be deemed to include the beneficiary under a deed of trust.

28. Mechanic’s Liens. Tenant has no express or implied authority to create or place any lien or encumbrance of any kind upon, or in any manner to bind the interest of Landlord or Tenant in, the Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Premises and that it will save and hold Landlord harmless from all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the interest of Landlord in the Premises or under this Lease. Tenant shall give Landlord immediate written notice of the placing of any lien or encumbrance against the Premises and cause such lien or encumbrance to be discharged within 30 days of the filing or recording thereof; provided, however, Tenant may contest such liens or encumbrances as long as such contest prevents foreclosure of the lien or encumbrance and Tenant causes such lien or encumbrance to be bonded or insured over in a manner satisfactory to Landlord within such 30 day period.

29. Estoppel Certificates. Tenant agrees, from time to time, within 10 days after request of Landlord, to execute and deliver to Landlord, or Landlord’s designee, any estoppel certificate requested by Landlord, stating that this Lease is in full force and effect, the date to which rent has been paid, that Landlord is not in default hereunder (or specifying in detail the nature of Landlord’s default), the termination date of this Lease and such other matters pertaining to this Lease as may be requested by Landlord. Tenant’s obligation to furnish each estoppel certificate in a timely fashion is a material inducement for Landlord’s execution of this Lease. No cure or grace period provided in this Lease shall apply to Tenant’s obligations to timely deliver an estoppel certificate. Tenant hereby irrevocably appoints Landlord as its attorney in fact to execute on its behalf and in its name any such estoppel certificate if Tenant fails to execute and deliver the estoppel certificate within 10 days after Landlord’s written request thereof.

30. Environmental Requirements. Except for Hazardous Material contained in products used by Tenant in de minimis quantities for ordinary cleaning and office purposes and Hazardous Material used, sold or stored by Tenant in the ordinary course of its business, as described in Addendum 9, Tenant shall not permit or cause any party to bring any Hazardous Material upon the Premises or transport, store, use, generate, manufacture or release any

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Hazardous Material in or about the Premises without Landlord’s prior written consent. Tenant, at its sole cost and expense, shall operate its business in the Premises in strict compliance with all Environmental Requirements and shall remediate in a manner satisfactory to Landlord any Hazardous Materials released on or from the Project by Tenant, its agents, employees, contractors, subtenants or invitees. Tenant shall complete and certify to disclosure statements as requested by Landlord from time to time relating to Tenant’s transportation, storage, use, generation, manufacture or release of Hazardous Materials on the Premises. The term “Environmental Requirements” means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, orders or other similar enactments of any governmental authority or agency regulating or relating to health, safety, or environmental conditions on, under, or about the Premises or the environment, including without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; and all state and local counterparts thereto, and any regulations or policies promulgated or issued thereunder. The term “Hazardous Materials” means and includes any substance, material, waste, pollutant, or contaminant listed or defined as hazardous or toxic, under any Environmental Requirements, asbestos and petroleum, including crude oil or any fraction thereof, natural gas liquids, liquified natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas). As defined in Environmental Requirements, Tenant is and shall be deemed to be the “operator” of Tenant’s “facility” and the “owner” of all Hazardous Materials brought on the Premises by Tenant, its agents, employees, contractors or invitees, and the wastes, by-products, or residues generated, resulting, or produced therefrom.

Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all losses (including, without limitation, diminution in value of the Premises or the Project and loss of rental income from the Project), claims, demands, actions, suits, damages (including, without limitation, punitive damages), expenses (including, without limitation, remediation, removal, repair, corrective action, or cleanup expenses), and costs (including, without limitation, actual attorneys’ fees, consultant fees or expert fees and including, without limitation, removal or management of any asbestos brought into the property or disturbed in breach of the requirements of this Paragraph 30, regardless of whether such removal or management is required by law) which are brought or recoverable against, or suffered or incurred by Landlord as a result of any release of Hazardous Materials for which Tenant is obligated to remediate as provided above or any other breach of the requirements under this Paragraph 30 by Tenant, its agents, employees, contractors, subtenants, assignees or invitees, regardless of whether Tenant had knowledge of such noncompliance. The obligations of Tenant under this Paragraph 30 shall survive any termination of this Lease.

Landlord shall have access to, and a right to perform inspections and tests of, the Premises to determine Tenant’s compliance with Environmental Requirements, its obligations under this Paragraph 30, or the environmental condition of the Premises. Access shall be granted to Landlord upon Landlord’s prior notice to Tenant and at such times so as to minimize, so far as may be reasonable under the circumstances, any disturbance to Tenant’s operations. Such inspections and tests shall be conducted at Landlord’s expense, unless such inspections or tests reveal that Tenant has not complied with any Environmental Requirement, in which case Tenant shall reimburse Landlord for the reasonable cost of such inspection and tests. Landlord’s receipt of or satisfaction with any environmental assessment in no way waives any rights that Landlord holds against Tenant. Notwithstanding anything to the contrary in this Paragraph 30, Tenant shall have no liability of any kind to Landlord as to Hazardous Materials existing on the

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Premises prior to Tenant’s occupancy of the Premises or as to Hazardous Materials caused or permitted by (i) Landlord, its agents, employees, contractors or invitees; or (ii) any other tenants in the Project or their agents, employees, contractors, subtenants, assignees, or invitees; or (iii) any other person or entity located outside of the Premises or the Project (including, without limitation, migration of Hazardous Materials caused by any person or entity, other than Tenant, its agents, employees, contractors, assignees, subtenants or invitees).

31. Rules and Regulations. Tenant shall, at all times during the Lease Term and any extension thereof comply with all reasonable rules and regulations at any time or from time to time established by Landlord covering use of the Premises and the Project. The current rules and regulations are attached hereto. In the event of any conflict between said rules and regulations and other provisions of this Lease, the other terms and provisions of this Lease shall control. Landlord shall not have any liability or obligation for the breach of any rules or regulations by other tenants in the Project.

32. Security Service. Tenant acknowledges and agrees that, while Landlord may patrol the Project, Landlord is not providing any security services with respect to the Premises and that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises.

33. Force Majeure. Landlord shall not be held responsible for delays in the performance of its obligations hereunder when caused by strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes therefor, governmental restrictions, governmental regulations, governmental controls, delay in issuance of permits, enemy or hostile governmental action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of landlord (“Force Majeure”).

34. Entire Agreement. This Lease constitutes the complete agreement of Landlord and Tenant with respect to the subject matter hereof. No representations, inducements, promises or agreements, oral or written, have been made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not contained herein, and any prior agreements, promises, negotiations, or representations are superseded by this Lease. This Lease may not be amended except by an instrument in writing signed by both parties hereto.

35. Severability. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby. It is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there be added, as apart of this Lease, a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.

36. Brokers. Tenant represents and warrants that it has dealt with no broker, agent or other person in connection with this transaction and that no broker, agent or other person brought about this transaction, other than the broker, if any, set forth on the first page of this Lease, and Tenant agrees to indemnify and hold Landlord harmless from and against any claims by any other broker, agent or other person claiming a commission or other form of compensation by virtue of having dealt with Tenant with regard to this leasing transaction.

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37. Miscellaneous. (a) Any payments or charges due from Tenant to Landlord hereunder shall be considered rent for all purposes of this Lease.

(b) If and when included within the term “Tenant,” as used in this instrument, there is more than one person, firm or corporation, each shall be jointly and severally liable for the obligations of Tenant.

(c) All notices required or permitted to be given under this Lease shall be in writing and shall be sent by registered or certified mail, return receipt requested, or by a reputable national overnight courier service, postage prepaid, or by hand delivery addressed to the parties at their addresses below, and with a copy sent to Landlord at 14100 East 35th Place, Aurora, Colorado 80011. Either party may by notice given aforesaid change its address for all subsequent notices. Except where otherwise expressly provided to the contrary, notice shall be deemed given upon delivery.

(d) Except as otherwise expressly provided in this Lease or as otherwise required by law, Landlord retains the absolute right to withhold any consent or approval.

(e) At Landlord’s request from time to time Tenant shall furnish Landlord with true and complete copies of its most recent annual and quarterly financial statements prepared by Tenant or Tenant’s accountants and any other financial information or summaries that Tenant typically provides to its lenders or shareholders. Tenant may satisfy this requirement by providing Landlord with most recent copy of 10K or 10Q.

(f) Neither this Lease nor a memorandum of lease shall be filed by or on behalf of Tenant in any public record. Landlord may prepare and file, and upon request by Landlord Tenant will execute, a memorandum of lease.

(g) The normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or any exhibits or amendments hereto.

(h) The submission by Landlord to Tenant of this Lease shall have no binding force or effect, shall not constitute an option for the leasing of the Premises, nor confer any right or impose any obligations upon either party until execution of this Lease by both parties.

(i) Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any way affect the interpretation of this Lease.

(j) Any amount not paid by Tenant within 5 days after its due date in accordance with the terms of this Lease shall bear interest from such due date until paid in full at the lesser of the highest rate permitted by applicable law or 8 percent per year. It is expressly the intent of Landlord and Tenant at all times to comply with applicable law governing the maximum rate or

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amount of any interest payable on or in connection with this Lease. If applicable law is ever judicially interpreted so as to render usurious any interest called for under this Lease, or contracted for, charged, taken, reserved, or received with respect to this Lease, then it is Landlord’s and Tenant’s express intent that all excess amounts theretofore collected by Landlord be credited on the applicable obligation (or, if the obligation has been or would thereby be paid in full, refunded to Tenant), and the provisions of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder.

(k) Construction and interpretation of this Lease shall be governed by the laws of the state in which the Project is located, excluding any principles of conflicts of laws.

(l) Time is of the essence as to the performance of Tenant’s obligations under this Lease.

(m) All exhibits and addenda attached hereto are hereby incorporated into this Lease and made a part hereof. In the event of any conflict between such exhibits or addenda and the terms of this Lease, such exhibits or addenda shall control.

(n) In the event Landlord initiates litigation to enforce the terms and provisions of this Lease, the Tenant in such action shall reimburse Landlord for any and all costs incurred by Landlord in prosecuting such action, including (without limitation) attorney’s fees, filing fees, and court costs.

38. (deleted)

39. Radon Gas. Radon is a naturally occurring radioactive gas, that when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit.

40. Limitation of Liability of Trustee, Shareholders, and Officers of ProLogis. Any obligation or liability whatsoever of ProLogis, a Maryland real estate investment trust, which may arise at any time under this Lease or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction, or undertaking contemplated hereby shall not be personally binding upon, nor shall resort for the enforcement thereof be had to the property of its trustees, directors, shareholders, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort, or otherwise.

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written.

TENANT:		LANDLORD:
Leslie’s Poolmart, Inc.		PROLOGIS, a Maryland real estate investment trust
By:	/s/ Donald J. Anderson	By:	/s/ Charles E. Sullivan
Name:	Donald J. Anderson	Name:	Charles E. Sullivan
Title:	Executive Vice President & CFO	Title:	Senior Vice President
Address:		Address:
3925 E. Broadway Road Suite 100 Phoenix, AZ 85040		4105-A 34th Street Orlando, FL 32811
WITNESSES AS TO TENANT:		WITNESSES AS TO LANDLORD:
/s/		/s/
/s/		/s/

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EX-10.14

Exhibit 10.14

LEASE

BY AND BETWEEN

BROADWAY BUSINESS CENTER LLC

AND

LESLIE’S POOLMART, INC.

October 31, 2000

ARTICLE I REFERENCE DATA		1
1.1	BASIC LEASE TERMS.	1
1.2	EXHIBITS.	3
ARTICLE II PREMISES AND TERM		3
2.1	PREMISES.	3
2.2	APPURTENANT RIGHTS AND RESERVATIONS.	4
2.3	TERM.	4
ARTICLE III DELIVERY OF PREMISES; CONSTRUCTION		4
3.1	INITIAL CONSTRUCTION.	4
3.2	DELIVERY OF POSSESSION AND COMMENCEMENT DATE.	4
3.3	CONCLUSIVENESS OF LANDLORD’S PERFORMANCE.	5
3.4	GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.	5
ARTICLE IV RENT		6
4.1	BASE RENT.	6
4.2	ADDITIONAL RENT.	7
4.3	REAL PROPERTY TAXES.	7
4.4	CAM EXPENSES.	8
4.5	PAYMENTS.	9
ARTICLE V LANDLORD’S COVENANTS		10
5.1	LANDLORD’S COVENANTS DURING THE TERM	10
5.2	INTERRUPTIONS.	11
ARTICLE VI TENANT’S COVENANTS		12
6.1	TENANT’S COVENANTS DURING THE TERM.	12
ARTICLE VII CASUALTY AND TAKING		17
7.1	CASUALTY AND TAKING.	17

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7.2	RESERVATION OF AWARD.	17
ARTICLE VIII RIGHTS OF MORTGAGEE		18
8.1	SUBORDINATION.	18
8.2	SUCCESSOR LANDLORD.	18
ARTICLE IX DEFAULT		19
9.1	EVENTS OF DEFAULT.	19
9.2	TENANT’S OBLIGATIONS AFTER TERMINATION.	20
9.3	LANDLORD DEFAULT.	20
ARTICLE X MISCELLANEOUS		21
10.1	NOTICES FROM ONE PARTY TO THE OTHER.	21
10.2	BIND AND INURE.	21
10.3	NO SURRENDER.	21
10.4	NO WAIVER, ETC.	21
10.5	NO ACCORD AND SATISFACTION.	22
10.6	CUMULATIVE REMEDIES.	22
10.7	LANDLORD’S RIGHT TO CURE.	22
10.8	ESTOPPEL CERTIFICATE.	22
10.9	WAIVER OF JURY TRIAL.	23
10.10	ACTS OF GOD.	23
10.11	BROKERAGE.	23
10.12	SUBMISSION NOT AN OFFER.	23
10.13	APPLICABLE LAW AND CONSTRUCTION.	23
10.14	EXTENSION OPTION.	24
10.15	SIGNS.	25
10.17	ACKNOWLEDGMENT OF LENDER’S LIEN.	25

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EXHIBITS

EXHIBIT A	PLAN OF PREMISES	A-1
EXHIBIT A-1	LEGAL DESCRIPTION AND PLAN OF PROPERTY	A-1-1
EXHIBIT B	WORK LETTER	B-1

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ARTICLE I

REFERENCE DATA

1.1 BASIC LEASE TERMS.

Each reference in this Lease to any of the following subjects shall be construed to incorporate the data stated for that subject in this Section 1.1:

LANDLORD:	Broadway Business Center LLC, a Massachusetts limited liability company
LANDLORD’S NOTICE ADDRESS:	c/o Great Point Investors LLC 265 Franklin Street, 18th Floor Boston, MA 02110 Attn: John H. Baxter with a copy to: Bancroft Capital Advisors, Inc. 1112 Ocean Drive, Suite 300 Manhattan Beach, CA Attn: Douglas J. McDonald Rent payments to: c/o Trammell Crow Company P.O. Box 52673 Phoenix. AZ 85072-2673
TENANT:	Leslie’s Poolmart, Inc., a Delaware corporation
TENANT’S NOTICE ADDRESS:	Prior to the Commencement Date: CONFIDENTIAL 20630 Plummer Street Chatsworth, CA 91311 Attn: Legal And a copy to: Foothill Capital Corp. 2450 Colorado Avenue Suite 3000 West Santa Monica, CA 90404 After the Commencement Date: At the Premises And a copy to: Foothill Capital Corp. 2450 Colorado Avenue Suite 3000 West Santa Monica, CA 90404

PREMISES:	Approximately 37,579 rentable square feet on the first floor of the building commonly known as 4620 40th Street, Phoenix, Arizona (the “Building”), which Premises are shown on the plan attached to this Lease as Exhibit A, together with the right, in common with others, to use all easements, rights and privileges appurtenant to the Premises and the property known as 4620 40th Street and 4500 S. 40th Street, Phoenix, Arizona, which is more fully described in Exhibit A-1 (the “Property”), which Property is known as Broadway Business Center
RENTABLE FLOOR AREA OF PREMISES:	Approximately 37,579 rentable square feet
COMMENCEMENT DATE:	Substantial completion of Landlord’s Work (as provided for in Section 3.1)
SCHEDULED COMMENCEMENT DATE:	December 14, 2000 with respect to that portion of the space shown on Exhibit A as the “Second Generation Space” and January 3, 2000 with respect to that portion of the space shown on Exhibit A as the “Shell Space”
BUILDING RENTABLE AREA:	75,140 rentable square feet
TENANT’S PRO RATA SHARE:	50% with respect to items relating solely to the Building and 27% with respect to all other items
EXPIRATION DATE:	The last day of the 75th full calendar month after the Commencement Date
TERM:	Approximately six years and three months commencing on the Commencement Date and expiring on the Expiration Date

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OPTION:	One five year extension option
LEASE YEAR:	The period of twelve full calendar months beginning with the first full calendar month of the Term, and each subsequent period of twelve full calendar months during the Term
BASE RENT:	Months 1-3	$0.00
	Months 4-27	$27,056.88/month
	Months 28-39	$27,868.59/month
	Months 40-51	$28,706.60/month
	Months 52-63	$29,567.16/month
	Months 64-75	$30,454.02/month
OPTION BASE RENT:	For each Lease Year: 103% of the Base Rent for the previous Lease Year
SECURITY DEPOSIT:	None
PERMITTED USES:	General office purposes
TENANT IMPROVEMENT ALLOWANCE:	$697,416.00
PARKING SPACES:	225 unreserved spaces; 10 covered reserved spaces
BROKERS:	Trammell Crow Company and Grubb & Ellis

1.2 EXHIBITS.

The exhibits listed below in this section are incorporated in this Lease by reference and are to be construed as part of this Lease:

EXHIBIT A	Plan of Premises
EXHIBIT A-1	Plan of Property and Legal Description of Property
EXHIBIT B	Work Letter

ARTICLE II

PREMISES AND TERM

2.1 PREMISES.

Landlord hereby leases to Tenant, and Tenant leases from Landlord the Premises for the rents hereinafter reserved, and upon and subject to the terms and conditions of this Lease.

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2.2 APPURTENANT RIGHTS AND RESERVATIONS.

Tenant shall have, as appurtenant to the Premises, the nonexclusive right to use and to permit its invitees to use in common with others the Common Areas (as defined in Section 4.4) of the Building and the Property. Such rights shall always be subject to reasonable, nondiscriminatory, uniformly applied rules and regulations from time to time established by Landlord by written notice to Tenant in advance (which rules and regulations do not require structural changes or otherwise unreasonably and adversely affect Tenant’s business) and to the right of Landlord to reasonably designate and change from time to time any Common Areas provided Tenant is given written notice before any such change and such change does not unreasonably and adversely affect Tenant’s business.

2.3 TERM.

The Premises are leased for the Term unless the Term shall sooner terminate pursuant to any of the terms of this Lease or pursuant to Law.

ARTICLE III

DELIVERY OF PREMISES; CONSTRUCTION

3.1 INITIAL CONSTRUCTION.

As indicated in the Work Letter Agreement attached hereto as Exhibit B (the “Work Letter”), Landlord shall complete the Landlord’s Work (as defined in the Work Letter) on the terms, conditions and provisions set forth in the Work Letter. Except for Landlord’s Work, Landlord is leasing the Premises to Tenant “as is,” excluding any latent defects, without any representations or warranties of any kind (including, without limitation, any express or implied warranties of merchantability, fitness or habitability), subject to all recorded matters, laws, ordinances, codes and governmental regulations and orders.

3.2 DELIVERY OF POSSESSION AND COMMENCEMENT DATE.

For purposes of determining the Commencement Date only, the Premises shall be considered as delivered upon the first to occur of:

(a) the date on which (i) Landlord or Landlord’s architect gives notice of Substantial Completion (as hereinafter defined) of Landlord’s Work (provided that Substantial Completion has occurred on said date), and (ii) Landlord has delivered actual possession of the Premises to Tenant free of all tenants and occupants; or

(b) if the date of Substantial Completion of Landlord’s Work is delayed by reason of Tenant Delays (as defined in the Work Letter), the date on which, in Landlord’s architect’s reasonable judgment, provided timely notice of such Tenant Delay was provided to Tenant, Landlord’s Work would have been Substantially Completed but for such Tenant Delays.

“Substantial Completion” of Landlord’s Work shall mean (i) completion of Landlord’s Work except for items which can be completed after Tenant’s occupancy without undue interference with Tenant’s use of the Premises (“Punchlist Items”) and (ii) the issuance of a

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certificate of occupancy for the Premises with respect to Landlord’s Work, if such a certificate is issued by the City of Phoenix for such work. Landlord shall promptly commence and use commercially reasonable efforts to complete or correct all Punchlist Items within thirty days or, if such completion is not feasible for any reason, as soon as conditions permit, and Tenant shall afford Landlord access to the Premises for such purpose pursuant to the terms of this Lease, provided that Landlord does not unreasonably interfere with Tenant’s use or occupancy of the Premises. Tenant’s acceptance of the Premises shall not diminish or otherwise affect Landlord’s maintenance or other obligations provided for in this Lease.

Tenant shall be permitted access to the Premises up to thirty (30) days in advance of the estimated date of Substantial Completion for the purposes of installing telephone and computer wiring, modular cubicles and furniture in the Premises. Such access shall be conditioned upon (a) delivery to Landlord of a certificate of insurance as required by Section 6.1.9 and (b) Tenant’s activities in the Premises during, such early access period not unreasonably interfering with or delaying Landlord’s completion of Landlord’s Work. Tenant may use such utilities as are available during the course of pre-possession entry at no cost.

Landlord shall use diligent efforts to deliver the various portions of the Premises to Tenant on or before the Scheduled Commencement Dates. If delivery of all or a portion of the Premises is delayed as a result of a Landlord Delay (as defined in the Work Letter), Tenant shall receive an abatement of one day of Base Rent for that portion of the Premises not delivered for each day of delay so caused. Nothing contained in this lease shall cause the Commencement Date to occur until both the “Second Generation Space” and the “Shell Space” are substantially complete.

3.3 CONCLUSIVENESS OF LANDLORD’S PERFORMANCE.

Except for latent defects, and except to the extent Tenant shall have given Landlord notice not later than 90 days after the Commencement Date of defects in Landlord’s Work, Tenant shall have no claim that Landlord has failed to perform any of Landlord’s Work.

3.4 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.

Tenant shall not make any installations, alterations, additions, or improvements in or to the Premises, including, without limitation, any apertures in the walls, partitions, ceilings or floors, without on each occasion obtaining the prior written consent of Landlord, which shall not be unreasonably withheld. Notwithstanding the foregoing, Tenant may make non-structural, interior alterations to the Premises up to $25,000.00 without first obtaining the prior written consent of Landlord. Tenant shall reimburse Landlord for all reasonable and actual costs incurred by Landlord or any Superior Mortgagee (as defined below) in reviewing Tenant’s proposed installation, alterations, additions or improvements, and provided further that, in order to protect the functional integrity of the Premises (and if required by Landlord), all such installations, alterations, additions or improvements shall be performed by contractors selected from a list of approved contractors prepared by Landlord from time to time. Any such work so approved by Landlord shall be performed only in accordance with plans and specifications therefore approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant shall procure at Tenant’s sole expense all necessary permits and licenses

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before undertaking any such work on the Premises and shall perform all such work in a good and workmanlike manner employing materials of good quality and so as to conform with all applicable insurance requirements, laws, ordinances, regulations and orders of governmental authorities. Tenant shall employ for such work only contractors approved by Landlord and shall require all contractors employed by Tenant to carry worker’s compensation insurance in accordance with statutory requirements and commercial general liability insurance covering such contractors on or about the Premises with a combined single limit not less than $3,000,000 and shall submit certificates evidencing such coverage to Landlord prior to the commencement of such work. Tenant shall indemnify and hold harmless Landlord from all injury, loss, claims or damage to any person or property occasioned by or growing out of such work. Landlord may inspect the work of Tenant upon reasonable notice at reasonable times. Upon completion of any such work, Tenant shall provide Landlord with “as built” plans and lien waivers, as applicable, for all labor and materials.

Tenant covenants and agrees that with respect to the carpentry work on any and all alterations, improvements and/or additions that are made to the Premises, Tenant’s construction managers, general contractors and subcontractors shall be signatory to and in good standing under the Carpenters Union collective bargaining agreement covering the geographical area where the work is performed, and with respect to non-carpentry work, wherever possible, such work shall be performed by contractors signatory to and in good standing under the collective bargaining agreement of the local building trades union affiliated with the AFL-CIO which covers that work. If the construction manager, general contractor and/or subcontractor with responsibility for the carpentry work is not signatory to and in good standing under the Carpenters Union’s collective bargaining agreement, then the Landlord shall have the right, upon 24 hours’ written notice to Tenant, to order Tenant to cease all work on the Premises, in which event all work then in progress shall be halted and shall not be recommenced until and unless Tenant’s construction manager, general contractor and/or subcontractor becomes subject to or covered by and in good standing under the Carpenters Union’s collective bargaining agreement. The requirements of this paragraph shall cease to apply if the Premises is sold to an entity which does not require same.

ARTICLE IV

RENT

4.1 BASE RENT.

Beginning on the Commencement Date, Tenant agrees to pay rent to Landlord without notice or demand and without any offset or reduction whatever (except as made in accordance with the express provisions of this Lease), equal to the Base Rent in equal installments in advance on the first day of each calendar month included in the Term. If the Commencement Date occurs on a day other than the first day of a calendar month, Tenant shall pay to Landlord, on the Commencement Date, Base Rent for the partial month after the Commencement Date at the proportionate rate payable for such portion.

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4.2 ADDITIONAL RENT.

All sums payable by Tenant under this Lease other than Base Rent shall be deemed “Additional Rent;” the term “Rent” shall mean Base Rent and Additional Rent. Landlord shall reasonably estimate in advance by written notice to Tenant at least thirty days in advance and beginning on the Commencement Date Tenant shall pay the following costs (the “Total Operating Costs”), to be paid with the Base Rent throughout the Term in equal monthly installments based on Landlord’s most recent reasonable estimate: (i) all Real Property Taxes for which Tenant is liable under Section 4.3 of the Lease, (ii) all utility costs (if not separately metered) for which Tenant is liable under Section 6.1.1 of the Lease, and (iii) all CAM Expenses for which Tenant is liable under Section 4.4 of the Lease. Landlord may adjust its estimates of Total Operating Costs at any time based upon Landlord’s experience and reasonable anticipation of costs, upon at least ten business days prior written notice specifying the reasons for any adjustments. Such adjustments shall be effective as of the next Rent payment date after notice to Tenant. Within 90 days after the end of each fiscal year (which shall be January 1 through December 31 for this Lease) during the Term, Landlord shall deliver to Tenant a statement (the “Statement”) prepared in accordance with generally accepted accounting principles setting forth, in reasonable detail, the Total Operating Costs paid and incurred by Landlord during the preceding fiscal year in accordance with this Lease. Within thirty days after Tenant’s receipt of such Statement, there shall be an adjustment made in good faith between Landlord and Tenant, with payment to or credit given by Landlord (as the case may be) in order that Landlord shall have received the actual amount of Total Operating Costs for such period. If a credit is due in the final year of any Term for which any option is not, or has not been, exercised, Landlord shall reimburse Tenant by check. Tenant (and its accountants and representatives) shall have the right, within thirty days of receipt of the Statement, to notify Landlord that it would like to audit Landlord’s books and records with respect to the Total Operating Costs. Such audit is to be performed by a qualified certified public accountant at Tenant’s sole cost and expense (except as provided in the following sentence) and is to be performed and completed within two months of the receipt of the Statement by Tenant. If such audit reveals that the Total Operating Costs billed to Tenant exceed the actual Total Operating Costs to have been paid by Tenant by more than ten percent, Landlord shall pay the reasonable costs of such audit and shall reimburse or credit Tenant for any overcharged amount.

In addition to its obligation to pay Base Rent and Total Operating Expenses, Tenant is required hereunder to pay directly to suppliers, vendors, carriers, contractors, etc. certain insurance premiums, utility costs, personal property taxes, cleaning and other expenses (collectively “Additional Expenses”). If Landlord pays for any Additional Expenses in accordance with the terms of this Lease, Tenant’s obligation to reimburse such costs shall be an Additional Rent obligation. Unless this Lease provides otherwise, Tenant shall pay all Additional Rent then due with the next monthly installment of Base Rent due after Tenant received written notice of the amount of such Additional Rent.

4.3 REAL PROPERTY TAXES.

Tenant shall pay its Pro Rata Share of all Real Property Taxes on the Property attributable to any period included in the Term; provided, however, if the Term includes only a portion of a fiscal tax period, the Real Property Taxes for such period shall be prorated according

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to the fraction of the total days in such period falling within the Term, and Tenant shall be responsible for paying only such prorated amount. The term “Real Property Taxes” shall mean taxes, assessments (special, betterment, or otherwise), levies, fees, rent taxes, impositions, excises, charges, water and sewer rents and charges, and all other government levies and charges, general and special, ordinary and extraordinary, foreseen and unforeseen, which are imposed or levied upon or assessed against the Premises. If at any time during the term the present system of ad valorem taxation of real property shall be changed so that in lieu of the whole or any part of the ad valorem tax on real property, or in lieu of increases therein, there shall be assessed on Landlord a capital levy or other tax on the gross rents received with respect to the Property or a federal, state, county, municipal, or other local income, franchise, excise or similar tax, assessment, levy, or charge (distinct from any now in effect) measured by or based, in whole or in part, upon gross rents, then all of such taxes, assessments, levies, or charges, to the extent so measured or based, shall be deemed to be a Real Property Tax. Notwithstanding any other provision of this Lease, Real Property Taxes shall not include, and Tenant shall have no obligation to pay, any taxes on Landlord’s income, rent (except in the case above), profits, business or estate, or any personal property, franchise, gross receipts, inheritance or estate taxes, Landlord’s failure to timely pay taxes (unless caused by Tenant’s non-payment), nor any administrative fee. Landlord shall use commercially reasonable efforts in determining whether to dispute any Real Property Taxes attributable to any fiscal tax period included wholly or partially within the Term. The cost of such review and/or contest shall be included in the calculation of Total Operating Costs.

4.4 CAM EXPENSES.

“CAM Expenses” are all out-of-pocket costs and expenses paid or incurred by Landlord in connection with the operation and maintenance of the Common Areas (as defined below), the Property and the repair, maintenance and/or, replacement of the heating, ventilation, air conditioning, plumbing, electrical, utility, and safety systems, including, but not limited to, the following: gardening and landscaping; snow removal; utility, water and sewage services for the Common Areas or provided to all tenants of the Property; maintenance of signs; worker’s compensation insurance; personal property taxes; rental or lease payments for rented or leased personal property used in the operation or maintenance of the Common Areas; fees for required licenses and permits; routine maintenance, repair and replacement of roof membrane, flashings, gutters, downspouts, roof drains, skylights and waterproofing; repair, maintenance and replacement of paving (including sweeping, striping, repairing, resurfacing and repaving); general maintenance; painting; lighting; cleaning; refuse removal; payroll of maintenance personnel and management personnel not above the level of property manager; security guards; a property management fee (not to exceed market rates); and premiums for the insurance carried by Landlord pursuant to Section 5.1.4 of this Lease. Notwithstanding any other provision of this Lease, CAM Expenses shall not, however, include the following: rent and other concessions, refurbishment and improvement expenses incurred in connection with other tenant’s spaces, leasing commissions, advertising and promotional expenses, legal fees and other costs in leasing and procuring new tenants for the Property; expenditures for capital improvements except (i) capital expenditures which Landlord reasonably anticipates will have the effect of reducing current and/or future CAM Expenses and (ii) capital expenditures required by laws enacted or regulations promulgated after the date of this Lease (provided, however, only an amortized portion of any capital expenditures permitted to be included in CAM Expenses shall be included

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in CAM Expenses for the year in which the expenditures are incurred and subsequent years, on a straight line basis, over the useful life of the item, with an interest factor reasonably determined by Landlord in good faith at the time of Landlord’s having incurred said expenditure); cost of repairs or replacements incurred by reason of fire or other casualty or by the exercise of the right of eminent domain to the extent to which Landlord is compensated therefor through proceeds of insurance or a condemnation award; accounting and legal fees and other expenses incurred in disputes with tenants; costs incurred in performing work or furnishing services exclusively to or for the benefit of individual tenants or prospective tenants and which are separately billed to such tenants, including, but not limited to painting, redecorating and after hours HVAC; payments of principal, interest and other charges under any Superior Mortgage or rent and other charges payable under any Superior Lease; salaries, wages, benefits and other expenses of administrative employees and other employees involved in the operation or management of the Property above the level of property manager; compensation paid to employees or other persons in connection with commercial concessions operated by Landlord; Landlord’s general overhead and general administrative expenses; costs due to Landlord’s violation of any agreement or law; acquisition costs or any depreciation of land and buildings at the Property; costs due to defective construction of the Property; costs, fees and compensation paid by or to Landlord to any party affiliated with Landlord to the extent that such costs, fees or compensation exceed those charged by unaffiliated third parties on a competitive basis; costs incurred as a result of the Property violating any valid applicable building code, regulation, or law in effect prior to the Commencement Date; reserves; and costs arising from the presence of any hazardous materials at the Property (provided such condition is not Tenant’s responsibility under the terms of this Lease). Notwithstanding the foregoing, when determining CAM Expenses for which Tenant is charged its Pro Rata Share, all controllable CAM Expenses shall not be increased cumulatively by more than 4% each Lease Year.

As used in this Lease, “Common Areas” shall mean all areas within the Property which are not part of the rentable areas of the Property including, but not limited to, lobbies, loading docks, cafeterias, parking areas, driveways, sidewalks, access roads, landscaping, and planted areas. Landlord, from time to time, may change the size, location, nature, and use of any of the Common Areas, convert Common Areas into leasable areas, construct additional parking facilities (including parking structures), and increase or decrease Common Area land or facilities provided that such change shall not materially interfere with Tenant’s use of the Premises and Common Areas.

4.5 PAYMENTS.

All payments of Rent shall be made to Landlord at Landlord’s Notice Address, or to such other person as Landlord may from time to time designate by written notice to Tenant. If any installment of Rent is paid more than 5 days after written notice from Landlord of such late payment, at Landlord’s election, it shall bear interest from such due date at a rate equal to the average prime commercial rate from time to time established by FleetBoston plus 4% per annum, which interest shall be immediately due and payable as further Additional Rent.

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ARTICLE V

LANDLORD’S COVENANTS

5.1 LANDLORD’S COVENANTS DURING THE TERM

Landlord covenants during the Term:

5.1.1 Repairs and Maintenance. Except as provided in Article VII, Landlord shall perform all maintenance, repairs, improvements and replacements necessary to keep in good condition and working order, and in compliance with all applicable laws, the foundation, floor slab, columns, exterior walls, floors, roof, roof drainage system and other structural elements of the Building (collectively, “Structural Components”), and the outdoor lighting, sprinkler system, Building electrical system, Building pipes and plumbing system, all Common Areas, the HVAC system and all other mechanical systems and equipment of the Building not exclusively serving the Premises. Within a reasonable time after receiving actual knowledge thereof, Tenant shall notify Landlord of any maintenance within the Premises that Landlord is obligated to perform pursuant to this Section 5.1.1 and Landlord shall complete same with reasonable diligence. Landlord shall repair any and all damage or defects caused by the negligence or intentional act of Landlord, its employees, agents or contractors.

5.1.2 Quiet Enjoyment. That Landlord has the right to make this Lease and that Tenant on paying the Rent and performing its obligations hereunder shall peacefully and quietly have, hold and enjoy the Premises throughout the Term without any manner of hindrance, interference or molestation from Landlord or anyone claiming under Landlord, subject however to all the terms and provisions hereof.

5.1.3 Insurance. During the Term, Landlord shall maintain in effect all risk insurance covering loss of or damage to the Building and all leasehold and other improvements at the Property in the amount of its replacement value with such endorsements and deductibles as Landlord shall reasonably determine prudent from time to time. Landlord shall have the right to obtain flood, earthquake, and such other insurance as Landlord shall reasonably determine prudent from time to time or shall be reasonably required by any lender holding a security interest in the Premises. Landlord shall not obtain insurance for Tenant’s trade fixtures, equipment or leasehold improvements. During the Term, Landlord shall also maintain a rental income insurance policy, with loss payable to Landlord, in an amount equal to one year’s Base Rent, plus estimated Real Property Taxes, Operating Costs, and insurance premiums. Tenant shall not do or permit anything to be done which shall invalidate any such insurance. Any policy obtained by Landlord shall not be contributory, shall not provide primary insurance, and shall be excess over any insurance maintained by Tenant. Landlord shall also maintain during the Term a policy of general liability insurance in an amount not less than $3,000,000 combined single limit in any one accident with respect to the Premises naming Tenant as an additional insured, with a cross-liability endorsement.

5.1.4 Tenant’s Access. Tenant shall have uninterrupted access to the Premises at all times (24 hours each day and seven days each week).

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5.1.5 Indemnity. To indemnify and hold harmless Tenant from any liabilities, losses, damages, costs, expenses (including reasonable attorneys’ fees and expenses), causes of action, suits, claims, demands or judgments arising from any breach by Landlord of its obligations under this Lease or any act of negligence of Landlord or any Indemnified Parties (as defined in Section 6.1.8), except to the extent arising out of the negligence or willful misconduct of Tenant or its agents, employees, contractors or invitees.

5.1.6 Environmental Indemnity. To indemnify and hold harmless Tenant from any liabilities, losses, damages, costs, expenses (including reasonable attorneys’ fees and expenses), causes of action, suits, claims, demands or judgments arising from (a) injury to or death of any person, or damage to or loss of property or (b) any third-party action or any governmental inquiry or action, resulting from the presence of any hazardous substance (as defined in Section 6.1.4) at the Property (i) as of the date of this Lease or (ii) resulting from the negligence or willful misconduct of Landlord; except to the extent that any circumstance described above is arising from the negligence or willful misconduct of Tenant, its invitees, agents or contractors.

5.1.7 ADA. Landlord shall be responsible for ensuring that as of the Commencement Date the Common Areas being used by Tenant comply with the Americans With Disabilities Act.

5.2 INTERRUPTIONS.

Landlord shall not be liable to Tenant for any compensation or reduction of Rent by reason of necessary inconvenience or annoyance or for loss of business arising from power losses or shortages or from the necessity of Landlord’s entering the Premises for any of the purposes in this Lease authorized, or for repairing the Premises or any portion thereof in accordance with this Lease. In case Landlord is prevented or delayed from making any repairs, alterations or improvements, or furnishing any service or performing any other covenant or duty to be performed on Landlord’s part, by reason of any cause beyond Landlord’s reasonable control, Landlord shall not be liable to Tenant therefor, nor, except as expressly otherwise provided in Article VII, shall Tenant be entitled to any abatement or reduction of rent by reason thereof, nor shall the same give rise to a claim in Tenant’s favor that such failure constitutes actual or constructive, total or partial, eviction from the Premises.

Landlord reserves the right to stop any service or utility system when necessary by reason of accident or emergency acting in good faith, until necessary repairs have been completed. Except in case of emergency repairs, Landlord will give Tenant reasonable advance written notice of any contemplated stoppage and will use reasonable efforts to avoid unnecessary inconvenience to Tenant by reason thereof.

Landlord also reserves the right, by written notice to Tenant at least 10 days in advance, to institute such policies, programs and measures as may be required to comply with applicable municipal/governmental codes, rules, regulations or standards.

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ARTICLE VI

TENANT’S COVENANTS

6.1 TENANT’S COVENANTS DURING THE TERM.

Tenant covenants during the Term and such further time as Tenant occupies any part of the Premises:

6.1.1 Tenant’s Payments. To pay when due (a) all Base Rent and Additional Rent, (b) all taxes which may be imposed on Tenant’s personal property in the Premises (including, without limitation, Tenant’s fixtures and equipment) regardless to whomever assessed, (c) all charges by public utilities for telephone, electricity and other utility services (including service inspections therefor) rendered to the Premises, and (d) as Additional Rent, all other charges payable to Landlord pursuant to this Lease.

6.1.2 Repairs and Yielding Up. Except as otherwise provided in this Lease, at Tenant’s sole expense to keep the Premises in as good order, repair and condition as exists on the Commencement Date or in such improved condition as it may be put during the Lease Term, normal wear and damage by fire, casualty and eminent domain excepted, and to make all necessary and customary repairs thereto in order to do so; and at the expiration or termination of this Lease peaceably to yield up the Premises and all changes and additions therein in good order, repair and condition, first removing all goods and effects of Tenant and any Tenant alterations required to be removed by Landlord, and repairing all damage caused by such removal and restoring the Premises and leaving the Premises clean and neat. At the time that Tenant requests Landlord’s consent to any alterations, Tenant may request that in connection with the granting of such consent, Landlord state whether such alterations or improvements will need to be removed by Tenant at the end of the Lease Term. Alterations for which Landlord’s consent is not required are not required to be removed.

6.1.3 Cleaning. At its sole cost and expense enter into a service contract to provide for the cleaning of the Premises. Such cleaning contracts and the vendors thereunder shall be subject to Landlord’s reasonable approval.

6.1.4 Occupancy and Use. To use and occupy the Premises only for the Permitted Uses; not to injure or deface the Premises; not to permit in the Premises any use thereof which is contrary to law or ordinances, or creates a nuisance or to render necessary any alteration or addition to the Building; not to dump, flush, or in any way introduce any hazardous substances or any other toxic substances into the septic, sewage or other waste disposal system serving the Premises; and not to generate, store or dispose of hazardous substances in or on the Premises or dispose of hazardous substances from the Premises to any other location without the prior written consent of Landlord, which shall not be unreasonably withheld, delayed or conditioned, and then only in compliance with all applicable laws, ordinances and regulations; to notify Landlord of any incident which would require the filing of a notice under applicable federal, state, or local law; not to store or dispose of hazardous substances on the Premises without first submitting to Landlord a list of all such hazardous substances and confirming in writing to Landlord that Tenant has obtained all permits required therefor and thereafter providing to Landlord on an annual basis Tenant’s certification that all such permits have been renewed with copies of such

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renewed permits; and to comply with the orders and regulations of all governmental authorities with respect to zoning, building, fire, health and other codes, regulations, ordinances or laws, to the extent applicable to Tenant’s particular use of the Premises, including without limitation, the Americans with Disabilities Act. Tenant shall not be so required if such is required of the Property in general. “Hazardous substances” as used in this paragraph shall mean “hazardous substances” as defined in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 and regulations adopted pursuant to said Act, provided, however, “hazardous substances” shall not include customary quantities of ordinary office and cleaning products, fuel for any generators on the Premises.

6.1.5 Rules and Regulations/Security. To comply with any reasonable, nondiscriminatory, uniformly applied rules and regulations hereafter made by Landlord, which do not materially interfere with Tenant’s use of the Premises, of which Tenant has been given notice, for the care and use of the Premises and the Property. To provide, at its sole cost and expense, any security system serving the Premises. Tenant acknowledges that Landlord is not providing any security system or security guards at the Property.

6.1.6 Safety Appliances. To keep the Premises equipped with all safety appliances required by law or ordinance or any other regulation of any public authority because of any particular use made by Tenant and to procure all licenses and permits so required because of such use and, if required by law, to do any work so required because of such use, it being understood that the foregoing provisions shall not be construed to broaden in any way Tenant’s Permitted Uses.

6.1.7 Assignment and Subletting. Not without the prior written consent of Landlord to assign this Lease, to make any sublease, or to permit occupancy of the Premises or any part thereof by anyone other than Tenant, voluntarily or by operation of law; as Additional Rent, to reimburse Landlord promptly for reasonable and customary legal and other expenses (not to exceed $1,000.00) incurred by Landlord or any Superior Mortgagee in connection with any request by Tenant for consent to assignment or subletting; no assignment or subletting shall affect the continuing primary liability of Tenant (which, following assignment, shall be joint and several with the assignee); no consent to any of the foregoing in a specific instance shall operate as a waiver in any subsequent instance. Notwithstanding the foregoing, Landlord’s consent will not be unreasonably withheld and any disapproval shall include a specific reason for same. Landlord’s consent to any proposed assignment or subletting is required both as to the terms and conditions thereof, and as to the creditworthiness of the proposed assignee or subtenant and the consistency of the proposed assignee’s or subtenant’s business with the Permitted Uses of the Premises. In the event that any assignee or subtenant pays to Tenant any consideration attributable to the interest in this Lease or the Premises so assigned or subleased in excess of the Rent then payable hereunder, or pro rata portion thereof on a square footage basis for any portion of the Premises, after deducting Tenant’s reasonable attorneys’ fees, brokerage commissions and other costs, fees and expenses relating to such assignment or sublease. Tenant shall promptly pay 50% of said net excess to Landlord as and when received by Tenant. If Tenant requests Landlord’s consent to assign this Lease or sublet more than 1/3 of the Premises, or the assignment or sublease term will begin three or fewer months before the end of the Lease Term, Landlord shall have the option, exercisable by written notice to Tenant given within 10 days after receipt of such request, to terminate this Lease as of a date specified in such notice which shall

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be not less than 30 days after the date of such notice. Notwithstanding anything to the contrary contained herein. Tenant shall have the right, without Landlord’s consent, to assign this Lease or sublet the Premises to a corporation or other entity with which it may merge or consolidate, or in connection with a sale of all or substantially all of its assets or to any parent or subsidiary of Tenant; provided that after such assignment or sublet the assignee or sublessee shall have a creditworthiness at least equal to that of Tenant as of the Commencement Date of this Lease.

6.1.8 Indemnity. To defend, with counsel approved by Landlord, all actions against Landlord, its officers, directors, members, employees, agents, advisors and contractors and all others who could be liable for the obligations of any of them, and any holders of mortgages secured by the Property (“Indemnified Parties”) with respect to, and to indemnify and save harmless, to the extent permitted by law, all Indemnified Parties from and against, any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys’ fees and expenses), causes of action, suits, claims, demands or judgments of any nature arising from (i) injury to or death of any person, or damage to or loss of property, in the Premises, or connected with the use, condition or occupancy of any thereof, (ii) a breach of Tenant’s obligations under this Lease, or (iii) any act, negligence or willful misconduct of Tenant or its employees, agents, contractors, licensees, sub lessees or invitees; except to the extent arising from the gross negligence or willful misconduct of Landlord or any Indemnified Party.

6.1.9 Tenant’s Liability Insurance.

a. Liability Insurance. To maintain in effect commercial general liability insurance insuring Tenant against liability for bodily injury, property damage and personal injury at the Premises, which may be through an endorsement on a blanket liability policy. Such insurance shall name Landlord, its property manager, any mortgagee of which Tenant has received written notice, and Great Point Investors LLC, as additional insureds. The initial amount of such insurance shall be One Million Dollars ($1,000,000) combined single limit per occurrence, Two Million Dollars ($2,000,000) in the aggregate, with an umbrellas policy of at least Ten Million Dollars ($10,000,000), and shall be subject to reasonable periodic increases specified by Landlord based upon inflation, increased liability awards, recommendation of Landlord’s professional insurance advisers, and other relevant factors. The liability insurance obtained by Tenant under this Section 6.1.9 shall (i) be primary and (ii) insure Tenant’s obligation to Landlord under Section 6.1.8 under a standard contractual liability endorsement. The amount and coverage of such insurance shall not limit Tenant’s liability nor relieve Tenant of any other obligation under this Lease.

b. Worker’s Compensation Insurance. To maintain in effect Worker’s Compensation Insurance (including Employees’ Liability Insurance) in the statutory amount covering all employees of Tenant employed or performing services at the Premises, in order to provide the statutory benefits required by the laws of the state in which the Premises are located.

c. Automobile Liability Insurance. To maintain in effect Automobile Liability Insurance, including but not limited to, passenger liability, on all owned and hired vehicles at the Premises, with a combined single limit per occurrence of not less than One Million Dollars ($1,000,000) per vehicle for injuries or death of one or more persons or loss or damage to property.

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d. Personal Property Insurance. To maintain in effect Personal Property Insurance covering Tenant’s personal property and trade fixtures from time to time in, on, or at the Premises, in an amount not less than 100% of the full replacement cost, without deduction for depreciation, providing protection against events protected under “All Risk Coverage,” as well as against sprinkler damage, vandalism, and malicious mischief. Any proceeds from the Personal Property Insurance shall be used for the repair or replacement of the property damaged or destroyed, unless this Lease is terminated under an applicable provision herein including, but not limited to, a casualty.

e. Business Interruption Insurance. To maintain in effect Business Interruption Insurance, providing in the event of damage or destruction of the Premises an amount sufficient to sustain Tenant for a period of not less than one year for: (i) the net profit that would have been realized had Tenant’s business continued; and (ii) such fixed charges and expenses as must necessarily continue during a total or partial suspension of business to the extent to which they would have been incurred had no business interruption occurred, including, but not limited to, interest on indebtedness of Tenant, salaries of executives, foremen, and other employees under contract, charges under noncancelable contracts, charges for advertising, legal or other professional services, taxes and rents that may still continue, trade association dues, insurance premiums, and depreciation.

f. General Insurance Provisions.

(i) Any insurance which Tenant shall be required to maintain under this Lease shall include a provision which requires the insurance carrier to give Landlord not less than 30 days’ written notice prior to any cancellation or modification of such coverage.

(ii) Prior to the earlier of Tenant’s entry into the Premises or the Commencement Date, Tenant shall deliver to Landlord an insurance company certificate that Tenant maintains the insurance required by Sections 6.1.9(a)-(e) and not less than 30 days prior to the expiration or termination of any such insurance. Tenant shall deliver to Landlord renewal certificates therefore. Tenant shall provide Landlord with copies of the policies promptly upon written request from time to time. If Tenant shall fail to deliver any certificate or renewal certificate to Landlord required under this Lease within the prescribed time period or if any such policy shall be canceled or modified in contradiction to the terms of this Lease during the Lease Term without Landlord’s consent, Landlord may, after notice and the expiration of the applicable grace period, obtain such insurance, in which case Tenant shall reimburse Landlord, as Additional Rent, for the actual cost of such insurance within 10 days after receipt of a statement of the cost of such insurance. Each time, if any, Tenant exercises a renewal right pursuant to Article 10 of this Lease. Landlord shall have the right to reasonably adjust the terms of Tenant’s insurance requirements hereunder.

(iii) Landlord and Tenant shall maintain all insurance required under this Lease with companies having a “General Policy Rating” of A-X or better, as set forth in the most current issue of the Best Key Rating Guide. Landlord and Tenant, on behalf of themselves and their insurers, each hereby waive any and all rights of recovery against the other, or against the officers, partners, members, employees, agents, or representatives of the other, for loss of or damage to its property or the property of others under its control, if such loss or damage shall be

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covered by any insurance policy in force (whether or not described in this Lease) at the time of such loss or damage. All property insurance carried by either party shall contain a waiver of subrogation against the other party to the extent such right shall have been waived by the insured party prior to the occurrence of loss of injury.

6.1.10 Landlord’s Right of Entry. To permit Landlord and Landlord’s agents entry upon reasonable advance notice and without material interference with Tenant’s use of the Premises: to examine the Premises at reasonable times upon reasonable notice and, if Landlord shall so elect, to make repairs or replacements as required or permitted by this Lease; to remove, at Tenant’s expense, any changes, additions, signs, curtains, blinds, shades, awnings, aerials, flagpoles, or the like not consented to in writing (to the extent required under this Lease); and to show the Premises to prospective tenants during the 9 months preceding expiration of the Term provided that Tenant has not exercised its extension option, and to prospective purchasers and mortgagees at all reasonable times upon reasonable notice.

6.1.11 Loading. Not to place Tenant’s property (as described in Section 6.1.12), upon the Premises so as to exceed the floor load capacities; Tenant’s business machines and mechanical equipment which cause vibration or noise that may be transmitted to the Building structure shall be placed and maintained by Tenant in settings of cork, rubber, spring, or other types of vibration eliminators sufficient to eliminate such vibration or noise.

6.1.12 Tenant’s Property. All the furnishings, fixtures, equipment, effects and property of every kind, nature and description of Tenant and of all persons claiming by, through or under Tenant which, during the continuance of this Lease or any occupancy of the Premises by Tenant or anyone claiming under Tenant, may be on the Premises, shall be at the sole risk and hazard of Tenant, and if the whole or any part thereof shall be destroyed or damaged by fire, water or otherwise, or by the leakage or bursting of water pipes, steam pipes, or other pipes, by theft, or from any other cause, no part of said loss or damage is to be charged to or to be borne by Landlord, unless due to the gross negligence of Landlord.

6.1.13 Labor or Materialmen’s Liens. To pay promptly when due the entire cost of any work done on the Premises by Tenant, its agents, employees, or independent contractors; not to cause or permit any liens for labor or materials performed or furnished in connection therewith to attach to the Premises; and to discharge any such liens which may so attach within five business days after receiving notice of such liens.

6.1.14 Holdover. (A) For each month or portion thereof that Tenant shall retain possession of the Premises, to pay Landlord 200% of the total of the Base Rent and Additional Rent then applicable for each month or portion thereof; and (B) also to pay all damages sustained by Landlord on account thereof. The provisions of this Subsection 6.1.14 shall not operate as a waiver by Landlord of the right of re-entry provided in this Lease.

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ARTICLE VII

CASUALTY AND TAKING

7.1 CASUALTY AND TAKING.

In case during the Term all or any substantial part of the Premises, are damaged materially by fire or any other cause, or by action of public or other authority in consequence thereof, or are taken by eminent domain, and the condition of the Premises cannot be restored within 6 months of such event, Landlord shall have the right to terminate this Lease, by notice to Tenant within 30 days after the occurrence of the event giving rise to the election to terminate, which notice shall specify the effective date of termination which shall be not less than 30 nor more than 60 days after the date of notice of such termination. If Landlord does not terminate this Lease as provided above, Landlord shall use due diligence to restore the Premises, or, in case of a taking, what may remain thereof (excluding any items installed or paid for by Tenant which Tenant may be required or permitted to remove) into proper condition for use and occupation to the extent permitted by the net award of insurance or damages available to Landlord, and a just proportion of the Base Rent according to the nature and extent of the injury shall be abated until the Premises or such remainder shall have been restored by Landlord to such condition; and in case of a taking which permanently reduces the area of the Premises, a just proportion of the Base Rent and shall be abated for the remainder of the Term. In case during the Term (i) all or any substantial part of the Premises are damaged materially by fire or any other cause, or by action of public or other authority in consequence thereof, or are taken by eminent domain, (ii) Landlord does not elect to terminate this Lease as provided for in this Section 7.1 and (iii) either (a) such damage or taking occurs during the last year of the Lease Term or (b) Landlord does not restore the Premises within 180 days of such event, Tenant shall have the right to terminate this Lease, by notice to Landlord within 30 days after the occurrence of the event giving rise to the election to terminate.

7.2 RESERVATION OF AWARD.

Landlord reserves to itself any and all rights to receive awards made for damages to the Premises and the leasehold hereby created, accruing by reason of exercise of eminent domain. Tenant hereby releases and assigns to Landlord all Tenant’s rights to such awards, and covenants to deliver such further assignments and assurances thereof as Landlord may from time to time request. It is agreed and understood, however, that Landlord does not reserve to itself, and Tenant may make claim for and does not assign to Landlord, any damages payable for (i) trade fixtures installed by Tenant or anybody claiming under Tenant, at its own expense, (ii) relocation expenses recoverable by Tenant from such authority in a separate action and (iii) any other of Tenant’s claims to the extent such do not diminish Landlord’s award.

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ARTICLE VIII

RIGHTS OF MORTGAGEE

8.1 SUBORDINATION.

This Lease and all rights of Tenant hereunder, except as expressly provided herein, shall be subject and subordinate in all respects to (a) all present and future ground leases (collectively, including the applicable items set forth in Subdivision (d) of this Section 8.1, the “Superior Lease”) whether or not the Superior Lease shall also cover other lands or buildings, (b) all mortgages and building loan agreements, including leasehold mortgages, which may now or hereafter affect the Premises or the Superior Lease (collectively, including the applicable items set forth in Subdivisions (c) and (d) of this Section 8.1, the “Superior Mortgage”), whether or not any Superior Mortgage shall also cover other lands or buildings or leases, (c) each advance made or to be made under any Superior Mortgage, and (d) all renewals, modifications, replacements, substitutions and extensions of the Superior Lease and any Superior Mortgage. Any holder of a Superior Mortgagee (a “Superior Mortgagee”) may elect that this Lease shall have priority over such Superior Mortgage and, upon notification thereof by such Superior Mortgagee to Tenant, this Lease shall be deemed to have priority over such Superior Mortgage, whether this Lease is dated prior to or subsequent to the date of such Superior Mortgage. Tenant agrees that it will take no steps to terminate this Lease or abate Rent payable hereunder without giving each lessor under a Superior Lease (a “Superior Lessor”), and any Superior Mortgagee requesting same, written notice of any default by Landlord and the opportunity to cure such default (without any obligation on the part of any such person to cure such default) within 45 days thereafter or, if such Superior Lessor or Superior Mortgagee commences such cure within 30 business days and diligently pursues such cure, such longer period as may be reasonably necessary to effect such cure provided Tenant has received notice of the existence of such Superior Lessor or Superior Mortgagee. Landlord shall use reasonable efforts to obtain a subordination and non-disturbance agreement, in recordable form, for each present and future Superior Mortgagee or Superior Lessor.

8.2 SUCCESSOR LANDLORD.

For purposes of this Section 8.2, the term “Successor Landlord” shall mean and include (i) any person, including but not limited to any Superior Lessor or Superior Mortgagee, who, prior to the termination of this Lease, acquires or succeeds to the interest of Landlord under this Lease through summary proceedings, foreclosure action, assignment, deed in lieu of foreclosure or otherwise, and (ii) the successors and assigns of any person referred to in clause (i) of this sentence. Upon any Successor Landlord’s so acquiring, or so succeeding to, the interest of Landlord under this Lease, Tenant shall, at the election and upon the request of the Successor Landlord, fully attorn to and recognize such Successor Landlord as Tenant’s landlord under this Lease upon the then executors terms of this Lease, and, provided that this Lease has not been terminated, such Successor Landlord shall recognize Tenant as the tenant under this Lease and perform all of Landlord’s obligations under the Lease. No Successor Landlord shall be bound by any prepayment of rent or additional rent for more than one month in advance. Upon demand of any such Successor Landlord, Tenant agrees to execute reasonable and customary instruments to evidence and confirm the foregoing provisions of this Section reasonably satisfactory to any such Successor Landlord.

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ARTICLE IX

DEFAULT

9.1 EVENTS OF DEFAULT.

There shall be an “Event of Default” hereunder if:

(i) any default by Tenant continues after notice (describing such default in reasonable detail), (a) in case of the payment of Rent or any other monetary obligation to Landlord for more than 5 days, (b) in case of the delivery of any document to Landlord for more than 10 days or (c) in any other case for more than 30 days and such additional time, if any, as is reasonably necessary to cure the default if the default is of such a nature that it cannot reasonably be cured in 30 days and Tenant diligently commences and continues to cure such default and completes such cure within 90 days; or

(ii) if Tenant becomes a “debtor” as defined in the U.S. Bankruptcy Code, 11 U.S.C, 101 et seq., as it may be amended (or any similar petition under any insolvency law of any jurisdiction), or if such petition is filed against Tenant and not dismissed within 60 days; or

(iii) if Tenant makes an assignment or trust mortgage for benefit of creditors, or if a receiver, trustee, custodian or similar agent is appointed or takes possession with respect to any property of Tenant and such appointment or taking is not dismissed within 60 days; or if the leasehold hereby created is taken on execution or other process of law in any action against Tenant.

If there shall be an Event of Default hereunder, Landlord and the agents and servants of Landlord may, in addition to and not in derogation of any remedies for any preceding breach of covenant, immediately or at any time thereafter while such Event of Default continues and without further notice, at Landlord’s election, do any one or more of the following:

(a) give Tenant written notice stating that the Lease is terminated, effective upon the giving of such notice or upon a date stated in such notice, as Landlord may elect, in which event the Lease shall be irrevocably extinguished and terminated as stated in such notice without any further action; or

(b) with process of law, in a lawful manner enter and repossess the Premises and expel Tenant and those claiming through or under Tenant, and remove its and their effects, without being guilty of trespass, in which event the Lease shall be irrevocably extinguished and terminated at the time of such entry; or

(c) pursue any other rights or remedies permitted by law.

Landlord shall use reasonable efforts to mitigate its damages in the case of an Event of Default.

Any such termination of the Lease shall be without prejudice to any remedies which might otherwise be used for arrears of Rent or prior breach of covenant, and in the event of such termination Tenant shall remain liable under this Lease as hereinafter provided. Tenant hereby waives all statutory rights (including, without limitation, rights of redemption, if any) to the

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extent such rights may be lawfully waived, and Landlord, without notice to Tenant, may store Tenant’s effects and those of any person claiming through or under Tenant at the reasonable expense and risk of Tenant and, if Landlord so elects, may sell such effects at public auction or private sale and apply the net proceeds to the payment of all sums due to Landlord from Tenant, if any, and pay over the balance, if any, to Tenant.

9.2 TENANT’S OBLIGATIONS AFTER TERMINATION.

In the event that this Lease is terminated in accordance with its terms as a result of Tenant’s default, Tenant covenants to pay forthwith to Landlord, as compensation, the excess of the total rent reserved for the residue of the Term over the rental value of the Premises for said residue of the Term. In calculating the rent reserved and the rental value, there shall be included, in addition to the Base Rent and all Additional Rent, the value of all other consideration agreed to be paid or performed by Tenant for said residue. Tenant further covenants as an additional and cumulative obligation after any such termination to pay punctually to Landlord all the sums and perform all the obligations which Tenant covenants in this Lease to pay and to perform in the same manner and to the same extent and at the same time as if this Lease had not been terminated. In calculating the amounts to be paid by Tenant under the next foregoing covenant, Tenant shall be credited with any amount paid to Landlord as compensation as provided in the first sentence of this Section 9.2 and also with the net proceeds of any rents obtained by Landlord by reletting the Premises, after deducting all Landlord’s reasonable and actually incurred expenses in connection with such reletting, including, without implied limitation, all repossession costs, brokerage commissions, fees for legal services and expenses of preparing the Premises for such reletting, it being agreed by Tenant that Landlord may (i) relet the Premises or any part or parts thereof for a term or terms which may at Landlord’s option be equal to or less than or exceed the period which would otherwise have constituted the balance of the Term and may grant such concessions and free rent as Landlord in its reasonable judgment considers advisable or necessary to relet the same and (ii) make such alterations, repairs and decorations in the Premises as Landlord in its sole judgment considers advisable or necessary to relet the same, and no action of Landlord in accordance with the foregoing or failure to relet or to collect rent under reletting shall operate or be construed to release or reduce Tenant’s liability as aforesaid.

Nothing contained in this Lease shall, however, limit or prejudice the right of Landlord to prove and obtain in proceedings for bankruptcy or insolvency by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above.

9.3 LANDLORD DEFAULT.

If Landlord defaults in the performance of any of its obligations under this Lease and such default continues for a period of more than 30 days after receipt of written notice from Tenant specifying such default, except if such default requires more than 30 days to cure and Landlord has commenced and is diligently prosecuting such cure, Tenant may avail itself of any remedies available to it at law or in equity.

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ARTICLE X

MISCELLANEOUS

10.1 NOTICES FROM ONE PARTY TO THE OTHER.

All notices, requests and other communications required or permitted under this Lease shall be in writing and shall be personally delivered or sent by certified mail, return receipt requested, postage prepaid or by a national overnight delivery service which maintains delivery records. Notices to Tenant and Landlord shall be delivered to the address specified in Article I above. All notices shall be effective upon delivery (or refusal to accept delivery). Either party may change its notice address upon notice to the other party.

10.2 BIND AND INURE.

The obligations of this Lease shall run with the land, and this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Landlord named herein and each successive owner of the Property shall be liable only for the obligations accruing during the period of its ownership. The obligations of Landlord shall be binding upon the assets of Landlord which comprise the Property and the proceeds of any insurance or action in the nature of eminent domain relating to the Property, but not upon other assets of Landlord. No individual partner, trustee, stockholder, officer, director, employee, member, beneficiary, agent or advisor of Landlord or Tenant shall be personally liable under this Lease. Tenant shall look solely to Landlord’s interest in the Property, and the proceeds of any insurance or action in the nature of eminent domain relating to the Property remedies upon an event of default hereunder, and the general assets of the individual partners, trustees, stockholders, officers, employees, members or beneficiaries of Landlord shall not be subject to levy, execution or other enforcement procedure for the satisfaction of the remedies of Tenant.

10.3 NO SURRENDER.

The delivery of keys to any employee of Landlord or to Landlord’s agent or any employee thereof shall not operate as a termination of this Lease or a surrender of the Premises.

10.4 NO WAIVER, ETC.

The failure of Landlord or of Tenant to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this Lease shall not be deemed a waiver of such violation nor prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by Landlord of Base Rent or Additional Rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach by Landlord, unless such waiver is in writing and signed by Landlord. No consent or waiver, express or implied, by Landlord or Tenant to or of any breach of any agreement or duty shall be construed as a waiver or consent to or of any other breach of the same or any other agreement or duty.

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10.5 NO ACCORD AND SATISFACTION.

No acceptance by Landlord of a lesser sum than the Rent then due shall be deemed to be other than on account of the earliest installment of such Rent due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent be deemed as accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such installment or pursue any other remedy in this Lease provided.

10.6 CUMULATIVE REMEDIES.

The specific remedies to which Landlord or Tenant may resort under the terms of this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which it may be lawfully entitled in case of any breach or threatened breach by Tenant or Landlord of any provisions of this Lease. In addition to the other remedies provided in this Lease, Landlord or Tenant shall be entitled to the restraint by injunction of the violation or attempted or threatened violation of any of the covenants, conditions or provisions of this Lease or to a decree compelling specific performance of any such covenants, conditions or provisions.

10.7 LANDLORD’S RIGHT TO CURE.

If Tenant shall at any time default in the performance of any obligation under this Lease, Landlord shall have the right, but shall not be obligated, to enter upon the Premises and to perform such obligation, notwithstanding the fact that no specific provision for such substituted performance by Landlord is made in this Lease with respect to such default. In performing such obligation, Landlord may make any reasonable and necessary payment of money or perform any reasonable and necessary other act. All sums so paid by Landlord (together with interest at the rate of 4% per annum in excess of the then average prime commercial rate of interest being charged by FleetBoston) and all necessary incidental costs and expenses in connection with the performance of any such act by Landlord, shall be deemed to be Additional Rent under this Lease and shall be payable to Landlord immediately on demand. Landlord may exercise the foregoing rights without waiving any other of its rights or releasing Tenant from any of its obligations under this Lease.

10.8 ESTOPPEL CERTIFICATE.

Tenant and Landlord agree, from time to time, upon not less than 10 days’ prior written request by the other, to execute, acknowledge and deliver to the requesting party a statement in writing certifying that this Lease is unmodified and in full force and effect; that, to such party’s knowledge, it has no defenses, offsets or counterclaims against its obligations to pay the Rent and/or to perform its other covenants under this Lease; that to the extent true, there is no default or Event of Default then existing and it has not received a notice of any alleged default by the requesting party under the Lease; that the Lease has not been modified or amended (or, if there have been modifications, that this Lease is in full force and effect as modified and stating the modifications, and, if there are any defenses, offsets, counterclaims, or defaults, setting them forth in reasonable detail); the dates to which the Base Rent, Additional Rent and other charges have been paid; and such other factual matters as the requesting party may reasonably request.

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Any such statement delivered pursuant to this Section 11.8 shall be in a form reasonably acceptable to and may be relied upon by any prospective purchaser or mortgagee of premises which include the Premises or any prospective assignee of any such mortgagee.

10.9 WAIVER OF JURY TRIAL.

THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY(IES) AGAINST ANY OTHER PARTY(IES) ON ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIP OF THE PARTIES CREATED HEREUNDER.

10.10 ACTS OF GOD.

In any case where either party hereto is required to do any act, delays caused by or resulting from Acts of God, war, civil commotion, fire, flood or other casualty, labor difficulties not limited to the Premises or Tenant’s or Landlord’s business operations, shortages of labor, materials or equipment, government regulations, unusually severe weather, or other causes beyond such party’s reasonable control shall not be counted in determining the time during which work shall be completed, whether such time be designated by a fixed date, a fixed time or a “reasonable time”, and such time shall be deemed to be extended by the period of such delay.

10.11 BROKERAGE.

Tenant represents and warrants that it has dealt with no broker in connection with this transaction other than the Brokers and agrees to defend, with counsel reasonably approved by Landlord, indemnify and save Landlord harmless from and against any and all cost, expense or liability for any compensation, commissions or charges claimed by a broker or agent, other than the Brokers, with respect to Tenant’s dealings in connection with this Lease. Landlord represents and warrants to Tenant that it has dealt with no broker in connection with this transaction other than the Brokers and agrees to defend, with counsel reasonably approved by Tenant, indemnify and save Tenant harmless from and against any and all cost, expense or liability for any compensation, commissions or charges claimed by a broker or agent with respect to Landlord’s dealings in connection with this Lease.

10.12 SUBMISSION NOT AN OFFER.

The submission of a draft of this Lease or a summary of some or all of its provisions does not constitute an offer to lease or demise the Premises, it being understood and agreed that neither Landlord nor Tenant shall be legally bound with respect to the leasing of the Premises unless and until this Lease has been executed by both Landlord and Tenant and a fully executed copy has been delivered to each of them.

10.13 APPLICABLE LAW AND CONSTRUCTION.

This Lease shall be governed by and construed in accordance with the laws of the state in which the Premises are located. If any term, covenant, condition or provision of this Lease or the application thereof to any person or circumstances shall be declared invalid or unenforceable by

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the final ruling of a court of competent jurisdiction having final review, the remaining terms, covenants, conditions and provisions of this Lease and their application to persons or circumstances shall not be affected thereby unless the purpose of this Lease is materially and adversely affected and shall continue to be enforced and recognized as valid agreements of the parties, and in the place of such invalid or unenforceable provision, there shall be substituted a like, but valid and enforceable provision which comports to the findings of the aforesaid court and most nearly accomplishes the original intention of the parties.

There are no oral or written agreements between Landlord and Tenant affecting this Lease, except as specified in this Lease. This Lease may be amended, and the provisions hereof may be waived or modified, only by instruments in writing executed by Landlord and Tenant.

The titles of the several Articles and Sections contained herein are for convenience only and shall not be considered in construing this Lease.

Unless repugnant to the context, the words “Landlord” and “Tenant” appearing in this Lease shall be construed to mean those named above and their respective heirs, executors, administrators, successors and assigns, and those claiming through or under them respectively. If Tenant is comprised of more than one person or entity, the obligations imposed by this Lease upon Tenant shall be joint and several.

10.14 EXTENSION OPTION.

10.14.1 Provided that there is not an outstanding Event of Default under this Lease and that no event or condition exists with respect to which Landlord has given Tenant written notice and after the expiration of any grace period would constitute an Event of Default under this Lease at the time the option may be exercised and at the time the Extension Period commences, Landlord grants Tenant one option (the “Extension Option”) to extend this Lease with respect to all of the Premises for one additional period of five years (the “Extension Period”). The Extension Option shall be exercised by Tenant delivering written notice to Landlord at least 9 months and not more than 12 months prior to the Expiration Date of the initial Term. Time is of the essence as to the giving of such notice.

10.14.2 The rate of annual Base Rent (the “Extension Rental Rate”) for each year of the Extension Period will be 103% of the annual Base Rent for the previous Lease Year.

10.14.3 Landlord and Tenant shall execute an amendment to this Lease within 30 days after Landlord’s receipt of the Extension Notice, which amendment shall set forth the extended Term and the Extension Rental Rate. Except for the change in the rate of Base Rent, the Extension Period shall be subject to all of the terms and conditions of this Lease.

10.14.4 Neither any option granted to Tenant in this Lease to renew or extend the Term, nor the exercise of any such option by Tenant, shall prevent Landlord from exercising any option or right granted or reserved to Landlord in this Lease or that Landlord may otherwise have, to terminate this Lease or any renewal or extension of the Term either during the original Term or during the renewed or extended term. Any renewal or extension right granted to Tenant shall be personal to Tenant and may not be exercised by any assignee, subtenant or legal representative of Tenant. Any termination of this Lease shall serve to terminate any such

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renewal or extension of the Term, whether or not Tenant shall have exercised any option to renew or extend the Term. No option granted to Tenant to renew or extend the Term shall be deemed to give Tenant any further option to renew or extend.

10.15 SIGNS.

Tenant, at Tenant’s expense, will be allowed exterior Building signage using its national logo and colors in accordance with the Property’s signage program. All signage must comply with all applicable laws, codes and regulations, including, without limitation, zoning and building codes. Tenant shall be responsible for obtaining all necessary permits and approvals. The location, materials, design and method of installation of all signage shall be subject to Landlord’s prior written approval, which will not be unreasonably withheld. Landlord will provide Tenant with the Property’s signage program as soon as it is available. Landlord, at Landlord’s expense, shall provide Tenant with suite identity and directory signage in accordance with the Property’s signage program. Monument signage may be available to Tenant at Tenant’s expense. In all events, Tenant shall have no less signage than the other tenants, if any, in the building. Time is of the essence.

10.16 PARKING.

During the initial Lease Term, Tenant shall have the right to occupy the Parking Spaces (as defined in Section 1.1) at no extra charge. Subject to availability, additional covered reserved parking spaces will be available to Tenant at Landlord’s then applicable monthly rates, which initially shall be $30.00 per stall.

10.17 ACKNOWLEDGMENT OF LENDER’S LIEN.

Landlord acknowledges that Tenant has previously granted its lending institution, Foothill Capital Corp and its successors and assigns (“Foothill”), a lien on, and security interest in, all of Tenant’s inventory, furniture and equipment (the “Collateral”). Notwithstanding anything to the contrary in this Lease, Landlord agrees that Foothill’s lien is, and shall be, during the existence of this Lease, and without requirement of any other written documentation, first and superior to any lien or claim Landlord may have with respect to the Collateral.

SIGNATURES FOLLOW ON NEXT PAGE

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EXECUTED as a sealed instrument in two or more counterparts on the day and year first above written.

LANDLORD:

BROADWAY BUSINESS CENTER LLC
By:	MSC Broadway LLC, Primary Member
	By:	/s/ John H. Baxter
	Name:	John H. Baxter
	Title:	Vice President

TENANT:

LESLIE’S POOLMART, INC.
By:	/s/ Lawrence H. Hayward
Name:	Lawrence H. Hayward
Title:	President & CEO

EX-10.15

Exhibit 10.15

FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT made as of the              day of November, 2000, by and between BROADWAY BUSINESS CENTER LLC, a Massachusetts limited liability company (“Landlord”) and LESLIE’S POOLMART, INC., a Delaware corporation (“Tenant”).

WITNESSETH:

WHEREAS, Landlord and Tenant entered into a certain Lease (the “Lease”), dated as of October 31, 2000, whereby Tenant agreed to lease certain premises consisting of approximately 37,579 rentable square feet in the building located at 4620 40th Street, Phoenix, Arizona, which building is located within the property known as Broadway Business Center;

WHEREAS, pursuant to a side letter, dated as of October 31, 2000, Landlord and Tenant agreed that at such time as the actual date for the commencement of construction of Landlord’s Work is established, Section 1.1 of the Lease and Schedule 1 to Exhibit B of the Lease would be revised based on the issuance of a new Work Schedule; and

WHEREAS, Landlord and Tenant desire to memorialize their understanding and modify the Lease consistent therewith,

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

1. Amendment to Section 1.1. The definition of “Schedule Commencement Date” shall be deleted in its entirety and replaced with the following:

SCHEDULED COMMENCEMENT DATE: December 22, 2000 with respect to that portion of the space shown on Exhibit A as the “Second Generation Space” and January 11, 2001 with respect to that portion of the space shown on Exhibit A as the “Shell Space”

2. Amendment to Exhibit B. Schedule 1 to Exhibit B of the Lease is hereby deleted in its entirety and. replaced with Schedule l (Revised), which is attached to this Amendment.

3. No Other Amendments. In all other respects, the terms and provisions of the Lease are ratified and reaffirmed hereby, are incorporated herein by this reference and shall be binding upon the parties to this First Amendment.

4. Definitions. All capitalized terms used and not otherwise defined herein, shall have the meanings ascribed to them in the Lease.

IN WITNESS WHEREOF, Landlord and Tenant have caused this First Amendment to be duly executed, under seal, by persons hereunto duly authorized, in multiple copies, each to be considered an original hereof, as of the day and year first above written.

BROADWAY BUSINESS CENTER LLC
	By:	MSC Broadway LLC, Primary Member
		By:
		Name:
		Title:
LESLIE’S POOLMART, INC.
By:	/s/ Donald J. Anderson
Name:	Donald J. Anderson
Title:	Vice President and CFO

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EX-10.16

Exhibit 10.16

SECOND AMENDMENT TO LEASE

THIS SECOND AMENDMENT made as of the 26th day of June, 2001, by and between BROADWAY BUSINESS CENTER LLC, a Massachusetts limited liability company (“Landlord”) and LESLIE’S POOLMART, INC., a Delaware corporation (“Tenant”).

WITNESSETH:

WHEREAS, Landlord and Tenant entered into a certain Lease (the “Lease”), dated as of October 31, 2000, whereby Tenant agreed to Lease dated as of November     , 2000 (as amended, the “Lease”) whereby Tenant agreed to lease certain premises consisting of approximately 37,579 rentable square feet in the building located at 40th Street and Broadway Road, Phoenix, Arizona (the “Building”), which building is located within the property known as Broadway Business Center;

WHEREAS, the address of the Building specified in the Lease has been changed and the parties desire to clarify this change in the Lease;

WHEREAS, Tenant has requested that Landlord reserve additional parking spaces for Tenant’s exclusive use; and

WHEREAS, Landlord and Tenant desire to memorialize their understanding and modify the Lease consistent therewith.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

1. Amendment to Section 1.1. The definition of “Premises” shall be deleted in its entirety and replaced with the following:

PREMISES: Approximately 37,579 rentable square feet on the first floor of the building commonly known as 3925 E. Broadway Road, Phoenix, Arizona (the “Building”), which Premises are shown on the plan attached to this Lease as Exhibit A, together with the right, in common with others, to use all easements, rights and privileges appurtenant to the Premises and the property known as 3945 E. Broadway Road and 3925 E. Broadway Road, Phoenix, Arizona, which is more fully described in Exhibit A-1 (the “Property”), which Property is known as Broadway Business Center

2. Parking. The definition of “Parking Spaces” set forth in Section 1.1 of the Lease shall be deleted in its entirety and replaced with the following:

PARKING SPACES: 147 unreserved spaces in the area shown on Exhibit C as “Unreserved Parking for Building B” and 88 covered reserved spaces as shown in Exhibit C as “LP Reserved Spaces”

The following shall be added at the end of Section 10.16 of the Lease: “Tenant acknowledges that Landlord is reserving those areas shown on Exhibit C as “Future Tenant Reserved Parking” for the exclusive use of other tenants of the Property and that Tenant may not park in such areas.”

3. No Other Amendments. In all other respects, the terms and provisions of the Lease are ratified and reaffirmed hereby, are incorporated herein by this reference and shall be binding upon the parties to this Second Amendment.

4. Definitions. All capitalized terms used and not otherwise defined herein, shall have the meanings ascribed to them in the Lease.

IN WITNESS WHEREOF, Landlord and Tenant have caused this Second Amendment to be duly executed, under seal, by persons hereunto duly authorized, in multiple copies, each to be considered an original hereof, as of the day and year first above written.

BROADWAY BUSINESS CENTER LLC
By:	MSC/Bancroft Portfolio LLC, Manager
	By:	MSC Boulder LLC, Primary Member
		By:	/s/ John H. Baxter
		Name:	John H. Baxter
		Title:	Vice President
LESLIE’S POOLMART, INC.
By:	/s/ Lawrence H. Hayward
Name:	Lawrence H. Hayward
Title:	President and Chief Executive Officer

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EX-10.17

Exhibit 10.17

THIRD AMENDMENT TO LEASE

This THIRD AMENDMENT TO LEASE (“Third Amendment”) is made and entered into as of the 31^st day of May, 2002, by and between BROADWAY BUSINESS CENTER LLC, a Delaware limited liability company (formerly a Massachusetts limited liability company) (“Landlord”), and LESLIE’S POOLMART, INC., a Delaware corporation (“Tenant”).

R E C I T A L S:

A. Landlord and Tenant entered into that certain Lease dated as of October 31, 2000 (the “Original Lease”), as amended by that certain First Amendment to Lease dated as of November 30, 2000 (the “First Amendment”), and as further amended by that certain Second Amendment to Lease dated as of June 26, 2001 (the “Second Amendment”) (the Original Lease, First Amendment and Second Amendment, collectively, the “Lease”) whereby Landlord leased to Tenant and Tenant leased from Landlord those certain premises consisting of approximately 37,579 rentable square feet (the “Existing Premises”) commonly known as Suite 100 and located on the first (1^st) floor of that building located at 3925 East Broadway, Phoenix, Arizona (the “Building”) which Building is located within the property known as the Broadway Business Center (the “Property”).

B. Tenant desires to expand the Existing Premises to include that certain space consisting of approximately 16,126 rentable square feet of space commonly known as Suite 202 and located on the second (2^nd) floor of the Building (the “Expansion Premises”), as delineated on Exhibit A attached hereto and made a part hereof, and to make other modifications to the Lease, and in connection therewith, Landlord and Tenant desire to amend the Lease as hereinafter provided.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Capitalized Terms. All capitalized terms when used herein shall have the same meaning as is given such terms in the Lease unless expressly superseded by the terms of this Third Amendment.

2. Modification of Premises. Effective as of July 1, 2002 (the “Expansion Commencement Date”), Tenant shall lease from Landlord and Landlord shall lease to Tenant the Expansion Premises. Consequently, effective upon the Expansion Commencement Date, the Existing Premises shall be increased to include the Expansion Premises. Landlord and Tenant hereby acknowledge that, subject to any verification/re-measurement of the Expansion Premises pursuant to the terms and conditions of Section 11 of this Third Amendment, such addition of the Expansion Premises to the Existing Premises shall, effective as of the Expansion Commencement Date, increase the size of the Premises to approximately 53,705 rentable square feet. The Existing Premises and the Expansion Premises may hereinafter collectively be referred to as the “Premises.”

3. Extension of Lease Term. Notwithstanding anything to the contrary in the Lease, the term of Tenant’s lease of the Existing Premises shall expire coterminously with the term of Tenant’s lease of the Expansion Premises on June 30, 2009 (the “Lease Expiration Date”), unless sooner terminated as provided in the Lease, as hereby amended. The period of time commencing on the Expansion Commencement Date and terminating on the Lease Expiration Date shall be referred to herein as the “Expansion Term.”

4. Base Rent.

4.1. Existing Premises. Notwithstanding anything to the contrary in the Lease as hereby amended, prior to May 1, 2007, Tenant shall continue to pay Base Rent for the Existing Premises in accordance with the terms of Article IV of the Original Lease. Commencing on May 1, 2007, and continuing throughout the remainder of the Expansion Term, Tenant shall pay to Landlord monthly installments of Base Rent for the Existing Premises as follows:

Period During Expansion Term	Monthly Installment of Base Rent		Approximate Monthly Rental Rate per Rentable Square Foot
May 1, 2007 through April 30, 2008	$	31,367.64	$	0.84
May 1, 2008 through April 30, 2009	$	32,308.67	$	0.86
May 1, 2009 through June 30, 2009	$	33,277.93	$	0.89

4.2. Expansion Premises. Commencing on the Expansion Commencement Date and continuing throughout the Expansion Term, Tenant shall pay to Landlord monthly installments of Base Rent for the Expansion Premises as follows:

Period During Expansion Term	Monthly Installment of Base Rent		Approximate Monthly Rental Rate per Rentable Square Foot
July 1, 2002 through November 30, 2002	$	0.00	$	0.00
December 1, 2002 through June 30, 2003	$	10,481.90	$	0.65
July 1, 2003 through June 30, 2004	$	10,796.36	$	0.67
July 1, 2004 through June 30, 2005	$	11,120.25	$	0.69
July 1, 2005 through June 30, 2006	$	11,453.86	$	0.71
July 1, 2006 through June 30, 2007	$	11,797.47	$	0.73
July 1, 2007 through June 30, 2008	$	12,151.39	$	0.75
July 1, 2008 through June 30, 2009	$	12,515.94	$	0.78

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5. Tenant’s Pro Rata Share of Total Operating Costs.

5.1. Existing Premises. Notwithstanding anything in the Lease, as hereby amended, to the contrary, throughout the remaining Term of the Lease (specifically including the Expansion Term), Tenant shall continue to pay Tenant’s Pro Rata Share of Total Operating Costs and any Additional Expenses in connection with the Existing Premises in accordance with the terms of the Lease.

5.2. Expansion Premises. Except as specifically set forth in this Section 5.2, commencing on the Expansion Commencement Date, Tenant shall pay Tenant’s Pro Rata Share of Total Operating Costs in connection with the Expansion Premises in accordance with the terms of Article IV of the Original Lease; provided, however, that with respect to the calculation of Tenant’s Pro Rata Share of Total Operating Costs in connection with the Expansion Premises, and subject to any verification/re-measurement of the Expansion Premises pursuant to the terms and conditions of Section 11 of this Third Amendment, Tenant’s Pro Rata Share shall equal 21.46% with respect to items relating solely to the Building and 11.82% with respect to all other items; provided further, however, that with regard to the period commencing on the Expansion Commencement Date and continuing through November 30, 2002, in no event shall Tenant’s Pro Rata Share of Total Operating Costs in connection with the Expansion Premises exceed, cumulatively, the sum of Fifteen Thousand and No/100 Dollars ($15,000.00).

5.3. Entire Premises. Notwithstanding anything to the contrary in Sections 5.1 or 5.2, above, Landlord and Tenant hereby agree that, effective as of the Expansion Commencement Date, and subject to any verification/re-measurement of the Expansion Premises pursuant to the terms and conditions of Section 11 of this Third Amendment, Tenant’s aggregate Pro Rata Share of Total Operating Costs and any Additional Expenses in connection with the entire Premises (including both the Existing Premises and the Expansion Premises) shall equal 71.46% with respect to items relating solely to the Building and 39.36% with respect to all other items.

6. Improvements.

6.1. Generally. Except as specifically set forth to the contrary in this Section 6, below, Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Expansion Premises, and Tenant shall accept the Expansion Premises in its presently existing, “as is” condition.

6.2. Landlord Work. Notwithstanding the foregoing, Landlord hereby agrees to (i) ensure that all plumbing, lighting and electrical systems in the Expansion Premises are in

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good working order as of the Expansion Commencement Date, (ii) provide electrical wiring to separately metered subpanel facilities for the Expansion Premises for Tenant’s connection with a minimum capacity of no less than 500 Amps at 120/277 Volts, (iii) construct and install a “shared-use corridor,” including all reasonably necessary doors, hardware and equipment to provide for shared accessibility to the restroom(s), and (iv) cause the base building portion of the Expansion Premises to comply with applicable building codes and other governmental laws, ordinances and regulations which were enacted prior to the Expansion Commencement Date and applicable to new construction for unoccupied space to the extent required to obtain a certificate of occupancy (“Code”) (collectively, “Landlord’s Work”). Landlord’s Work shall be completed to building standards materially consistent with (in terms of quality of the improvements, fixtures and finishes) the level of the existing improvements on the first level of the Building (the “Building Standards”). Landlord shall use commercially reasonable efforts to cause the Landlord’s Work to be substantially complete (to the extent necessary for Tenant to commence construction of any improvements in the Expansion Premises and occupy and conduct its operations without material interference) on or before July 1, 2002; provided, however, such Landlord Work shall not be deemed substantially complete until Landlord causes the access to the Expansion Premises and the shared common area facilities on the second (2^nd) floor of the Building to be secure and provide Tenant with reasonable levels of access control. The Expansion Commencement Date shall occur on July 1, 2002, regardless of the date upon which the Landlord’s Work is completed. Notwithstanding Landlord’s obligation to cause the Landlord Work to be performed, Tenant’s right to quite enjoyment and twenty-four (24) hour access to the Existing Premises pursuant to Sections 5.1.2 and 5.1.4 of the Lease, respectively, shall continue unabated.

6.3. Tenant Improvement Allowance. Notwithstanding anything to the contrary in this Third Amendment, Tenant shall be entitled to a one-time tenant improvement allowance (the “Tenant Improvement Allowance”) equal to One Hundred Twenty Thousand Six Hundred Eighty-One and No/100 Dollars ($120,681.00). Landlord shall disburse the entire Tenant Improvement Allowance to Tenant on or before December 1, 2002. Tenant’s construction of any improvements in the Expansion Premises shall be constructed in accordance with the terms and conditions of Section 3.4 of the Original Lease and consistent with the Building Standards.

7. Brokers. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Third Amendment and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Third Amendment. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorneys’ fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of the indemnifying party’s dealings with any real estate broker or agent. The terms of this Section 7 shall survive the expiration or earlier termination of this Third Amendment.

8. Parking. Tenant hereby acknowledges that pursuant to the terms of the Lease, Tenant has the right to approximately 6.0 Parking Spaces per 1000 rentable square feet of space in the entire Premises (the Existing Premises and the Expansion Premises). As a result thereof,

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effective as of the Expansion Commencement Date and continuing throughout the Expansion Term, Tenant shall be entitled to a total of ninety-seven (97) additional reserved and unreserved Parking Spaces in connection with Tenant’s lease of the Expansion Space (the “Expansion Parking Spaces”). The number and location of the additional reserved parking spaces shall be mutually and reasonably agreed upon between Landlord and Tenant. Except as set forth in this Section 8, Tenant’s use of the Expansion Parking Spaces shall be in accordance with the provisions of Section 10.16 of the Original Lease.

9. Security Deposit. Landlord and Tenant hereby acknowledge and agree that (i) Tenant has no obligation pursuant to the Lease to post any security deposit with regard to the Existing Premises, and (ii) Tenant shall have no obligation pursuant to the Lease to post any security deposit with regard to the Expansion Premises.

10. Signs. Tenant shall be entitled, at its sole cost and expense, to install identification signage in the common lobbies of the Building (e.g., the first (1^st) and second (2^nd) floors). The location, quality, design, style, lighting and size of such signage shall be consistent with the Property’s signage program and shall be subject to Landlord’s prior written approval, in its reasonable discretion. Upon the expiration or earlier termination of the Lease, as hereby amended, Tenant shall be responsible, at its sole cost and expense, for the removal of such signage and the repair of all damage to the Building caused by such removal.

11. Verification of Rentable Square Feet of Expansion Premises. For purposes of this Third Amendment, the “rentable square feet” of the Expansion Premises was calculated by Landlord’s architect, Knoell & Quidort, pursuant to the Standard Method for Measuring Floor Area in Office Buildings, ANSI Z65.1 – 1996 (“BOMA”), which calculation shall be certified to Tenant by such architect on or before July 1, 2002. Notwithstanding the foregoing, for the initial thirty (30) days following Landlord’s delivery to Tenant of the Expansion Premises, Tenant shall have the right, but not the obligation, at Tenant’s sole cost and expense (except as otherwise set forth below), to verify the rentable square feet of the Expansion Premises. If Tenant, at its option, re-measures the Expansion Premises pursuant to the terms and conditions of this Section 11, and such re-measurement results in rentable square feet of other than 16,126 square feet, then Tenant shall provide Landlord written notice of such result (“Tenant’s Re-measurement Notice”) within ten (10) days of such re-measurement. Within thirty (30) days of Landlord’s receipt of Tenant’s Re-measurement Notice, Landlord shall either (i) accept Tenant’s determination of rentable square feet, or (ii) reject Tenant’s determination of rentable square feet. In the event Landlord rejects Tenant’s determination of rentable square feet, Landlord and Tenant shall, within thirty (30) days, mutually and reasonably agree upon a third-party architect/space planner to measure the rentable square feet of the Expansion Premise pursuant to BOMA and the terms and conditions of this Section 11. The cost of such third-party architect/space planner shall be split evenly (50/50) between Landlord and Tenant and the determination of such third-party architect/space planner shall be binding upon both Landlord and Tenant. If the rentable square feet of the Expansion Premises is determined, pursuant to this Section 11, to be other than 16,126 square feet, then the rentable square feet of the Expansion Premises shall be appropriately adjusted as of the date of such re-measurement and all amounts, percentages and figures appearing or referred to in the Lease or this Third Amendment based upon such rentable square feet (including, without limitation, the amount of the Base Rent and Tenant’s Pro Rata Share as it relates to the Expansion Premises) shall be modified in accordance with such

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determination; provided, however, that to the extent the rentable square feet of the Expansion Premises is determined, pursuant to this Section 11 to be less than 16,000 square feet, then Landlord shall (i) reimburse Tenant for the reasonable, third-party costs incurred by Tenant with regard to Tenant’s initial re-measurement of the Expansion Premises, and (ii) be responsible for one hundred percent (100%) of the cost of the third-party architect/space planner identified in the preceding sentence.

12. Labor Harmony. The second paragraph of Section 3.4 of the Original Lease beginning with the word “Tenant covenants and agrees that with respect to the carpentry work on any and all alterations....” is hereby deleted in its entirety.

13. Liability.

13.1. Landlord Exculpation. Landlord’s partners, subpartners and their respective officers, agents, servants, employees, and independent contractors (collectively, “Landlord Parties”), shall not have any personal liability for any default by Landlord under this Lease, as amended hereby, or arising in connection herewith or with Landlord’s operation, management, leasing, repair, renovation, alteration or any other matter relating to the Property or the Premises, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. The limitations of liability contained in this Section 13 shall inure to the benefit of Landlord’s and the Landlord Parties’ present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have any liability for the performance of Landlord’s obligations under this Lease.

13.2. Tenant Exculpation. Tenant’s partners, subpartners and their respective officers, agents, servants, employees, and independent contractors (collectively, “Tenant Parties”), shall not have any personal liability for any default by Tenant under this Lease, as amended hereby, or arising in connection herewith or any matter relating to the Property or the Premises, and Landlord hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Landlord. The limitations of liability contained in this Section 13 shall inure to the benefit of Tenant’s and the Tenant Parties’ present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future partner of Tenant (if Tenant is a partnership), or trustee or beneficiary (if Tenant or any partner of Tenant is a trust), have any liability for the performance of Tenant’s obligations under this Lease.

13.3. Consequential Damages. Notwithstanding anything to the contrary contained in the Lease or this Third Amendment, nothing in the Lease, as amended hereby, shall impose any obligations on Tenant or Landlord to be responsible or liable for, and each hereby releases the other from all liability for, consequential damages other than those consequential damages incurred by Landlord in connection with a holdover of the Premises by Tenant after the expiration or earlier termination of this Lease, provided Landlord notifies Tenant in writing at least sixty (60) days prior to the expiration or earlier termination of the Lease that Landlord has signed a letter or intent or a lease with a new tenant for the Premises, or portion thereof.

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14. Notices. Notwithstanding any contrary provision of the Lease, as hereby amended, as of the date of this Third Amendment, any notices to Landlord must be sent, transmitted or delivered, as the case may be, to the following addresses:

Broadway Business Center LLC

c/o Bancroft Capital Advisors, Inc.

1112 Ocean Drive, Suite 300

Manhattan Beach, California 90266

Attention: Joseph W. Lamkin

and

Allen Matkins Leck Gamble & Mallory

1901 Avenue of the Stars

Suite 1800

Los Angeles, California 90067

Attention: Peter J. Roth, Esq.

with Rent payments to

Broadway Business Center

P.O. Box 60000

Lockbox #74236

San Francisco, CA 94160

15. Financial Statements. To the extent Landlord executes a mutually agreeable confidentiality agreement, Tenant hereby agrees to provide to Landlord, within ninety (90) days following the end of each calendar quarter, a copy of Tenant’s reasonably detailed financial statements.

16. No Further Modification. Except as set forth in this Third Amendment, all of the terms and provisions of the Lease shall apply with respect to the Existing Premises and Expansion Premises and shall remain unmodified and in full force and effect, specifically including, but not limited to, Landlord repair and maintenance obligations with regard to the Structural Components of the Building and the Building systems and equipment pursuant to the terms and conditions of Section 5.1.1 of the Lease.

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IN WITNESS WHEREOF, this Third Amendment has been executed as of the day and year first above written.

“LANDLORD”
BROADWAY BUSINESS CENTER LLC
a Delaware limited liability company
By:	THREE BEARS, LLC
		a Delaware limited liability company,
		Its Managing member
		By:	/s/ Joseph W. Lamkin
			Joseph W. Lamkin
			Its Member
“TENANT”
LESLIE’S POOLMART, INC.
a Delaware corporation
		By:	/s/ Donald J. Anderson
			Donald J. Anderson
			Its Executive Vice President/Chief Financial Officer

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EX-10.18

Exhibit 10.18

FOURTH AMENDMENT TO LEASE

This Fourth Amendment to Office Lease is entered into as of the 9th day of April, 2004, by and between ColRich Broadway, L.P., an Arizona Limited Partnership (“Landlord”), and Leslie’s Poolmart, Inc., A Delaware Corporation (“Tenant”).

WHEREAS, Lessor and Lessee are now parties to a certain Lease Agreement dated October 31, 2000 (“Original Lease”), as amended by that certain First Amendment to Lease dated as of November 30, 2000 (the “First Amendment”), as further amended by that certain Second Amendment to Lease dated as of June 26, 2001 (the “Second Amendment”), and as further amended by that certain Third Amendment to Lease dated, May 31, 2002 (the “Third Amendment”) (the Original Lease, First Amendment, Second Amendment and Third Amendment are hereinafter collectively referred to as the “Lease”) whereby Tenant leased those certain premises consisting of approximately 35,579 rentable square feet commonly known as Suite 100 and those certain premises consisting of approximately 16,126 rentable square feet commonly known as Suite 202 (collectively, “the Existing Premises”), both of which are located at 3925 East Broadway, Phoenix, Arizona (the “Building”) which Building is located within the property known as the Broadway Business Center (the “Property”).

WHEREAS, Landlord and Tenant desire to modify certain provisions of the Lease and to provide for the terms and conditions for such modifications as hereinafter set forth;

NOW, THEREFORE, Landlord and Tenant agree as follows:

1. Provided Tenant is not in default under the Lease at the time of its receipt of Landlord’s Notice (as defined below), and upon or in advance of the availability of all or any portion of the remaining 21,435 rentable square feet (the “Additional Premises”) at the Building, Tenant will have (subject to the, pre-existing rights of other tenants at the Project) the right of first refusal to lease the Additional Premises in accordance with the following:

(A) Landlord will provide Tenant written notice (“Landlord’s Notice”) of the availability of the Additional Premises no earlier than ninety (90) days prior to the availability of the Additional Premises.

(B) Tenant will have fifteen (15) days from its receipt of Landlord’s Notice to respond in writing to Landlord that Tenant wishes to exercise Tenant’s right of first refusal to lease the Additional Premises (“Tenant’s Notice”).

(C) Upon Landlord’s receipt of Tenant’s Notice, Landlord and Tenant shall have thirty (30) to negotiate mutually acceptable 1 terms and conditions under which Tenant will lease the Additional Premises.

(D) Should Tenant and Landlord not agree to such alternative terms within the thirty (30) day period referenced in paragraph C above, then Tenant

will be deemed to lease the Additional Premises on the following terms: 1] The commencement date shall be the earlier of the date Tenant takes occupancy of the Additional Premises or thirty (30) days after the Additional Premises becomes available; 2] The expiration date shall be coterminous with the expiration date applicable to the Existing Premises, which Lease Expiration Date is currently June 30, 2009; 3] The Base Rent for the Additional Premises shall be calculated at the same rental rate per rentable square foot that Tenant is paying for Suite 202 of the Existing Premises (which rental rate per rentable square foot is more specifically set forth in Paragraph 4.2 of the Third Amendment); and 4] Landlord’s tenant improvement obligations will be limited to the repainting and re-carpeting of the Additional Premises such that the condition and quality of the Additional Premises will be comparable to the existing quality and condition of Suite 202 at the time of Tenant’s Notice; and 5] all other terms, charges and conditions of the Lease will be in effect.

(E) Time is of the essence in regard to Tenant’s obligations under this Fourth Amendment.

Unless otherwise defined in this Fourth Amendment, all capitalized terms used herein shall have the same meaning as ascribed to such term in the Lease. The Lease remains in full force and effect as to its stated terms, except as modified herein.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Fourth Amendment as of the date and year written above.

LANDLORD ColRich Broadway Investors, L.P.	TENANT Leslie’s Poolmart, Inc.
By	By
Executed at	Executed at
Address	Address

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[Trammell Crow Company letterhead]

January 3, 2002

Leslie’s Poolmart, Inc.

3925 E. Broadway Road

Phoenix, Arizona 85040

Re: Lease Agreement dated October 31, 2000 between Broadway Business Center LLC, as Landlord and Leslie’s Poolmart, Inc.

Dear Gentlemen:

We are pleased to have you as a new tenant at Broadway Business Center. It is our objective to provide the very best in services to your company.

This letter will serve to document certain terms of the lease for 3925 E. Broadway Road, Phoenix, Arizona 85040.

The lease commencement date is January 11, 2001. Rent commencement date is February 13, 2001. The primary lease term as set forth in the lease shall be 75 months; the lease expiration is April 30, 2007.

The approximate area in the premises is 37,579 rentable square feet. The actual rentable area in the project is 136,450 rentable square feet. Tenant’s proportionate share, with respect to the common area, therefore, shall be 27.00%. Tenant’s proportionate share with respect to the building shall be 50.01%.

Please execute below and return to my attention at Trammell Crow Company acknowledging the above referenced lease information. Again, we welcome you to Broadway Business Center and look forward to a long and mutually beneficial relationship.

Sincerely,

TRAMWELL CROW COMPANY	Agreed and Accepted this Third day of January, 2002
/s/ Olympia Bella	TENANT NAME
Olympia Bella Assistant Property Manager	By:	/s/ Donald J. Anderson
	Print Name:	Donald J. Anderson
	ITS:	CFO, EVP

EX-10.19

Exhibit 10.19

INDEMNIFICATION AGREEMENT

This Indemnification Agreement, dated as of January 1, 2000, is made by and between Leslie’s Poolmart, Inc., a Delaware corporation (the “Corporation”), and             , whose name, address and position(s) at the Corporation and/or any of the direct or indirect subsidiaries of the Corporation appear on the signature page hereto (“Indemnitee”).

RECITALS

A. Indemnitee is currently serving as, or is assuming the position of, a director and/or officer of the Corporation and/or, at the Corporation’s request, a director, officer, employee and/or agent of another corporation, partnership, joint venture, trust or other enterprise, and the Corporation wishes Indemnitee to continue in such capacity(ies);

B. The Corporation and Indemnitee recognize that the present state of the law is too uncertain to provide the Corporation’s directors and officers with adequate and reliable advance knowledge or guidance with respect to the legal risks and potential liabilities to which they may become personally exposed as a result of performing their duties for the Corporation;

C. The Certificate of Incorporation (the “Certificate”) and the Bylaws (the “Bylaws”) of the Corporation each provide that the Corporation may indemnify, to the fullest extent permitted by law, certain persons, including directors, officers, employees or agents of the Corporation, against specified expenses and losses arising out of certain threatened, pending or completed actions, suits or proceedings;

D. Section 145(f) of the Delaware General Corporation Law (the “DGCL”) expressly recognizes that the indemnification provided by the other subsections of Section 145 of the DGCL shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office;

E. Indemnitee has indicated that s/he may not be willing to serve, or continue to serve, as a director and/or officer of the Corporation and/or, at the Corporation’s request, as a director, officer, employee and/or agent of another corporation, partnership, joint venture, trust or other enterprise in the absence of an indemnification agreement of the Corporation; and

F. The Board of Directors of the Corporation has concluded that, to retain and attract talented and experienced individuals to serve as directors and officers of the Corporation and to encourage such individuals to take the business risks necessary for the success of the Corporation, it is necessary for the Corporation to contractually indemnify them, and to assume for itself liability for expenses and damages in connection with claims against them in connection with their service to the Corporation, and has further concluded that the failure to provide such contractual indemnification could result in great harm to the Corporation and its stockholders.

AGREEMENT

NOW, THEREFORE, the Corporation and Indemnitee agree as follows:

1. Definitions.

a) “Expenses” means, for the purposes of this Agreement, all direct and indirect costs of any type or nature whatsoever (including, without limitation, any fees and disbursements of Indemnitee’s counsel, accountants and other experts and other out-of-pocket costs) actually and reasonably incurred by Indemnitee in connection with the investigation, preparation, defense or appeal of a Proceeding; provided, however, that Expenses shall not include judgments, fines, penalties or amounts paid in settlement of a Proceeding unless such matters may be indemnified under applicable provisions of the DGCL. Expenses shall include any federal, state, local and foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of payments under this Agreement.

(b) “Proceeding” means, for the purposes of this Agreement, any threatened, pending or completed action, suit, arbitration or proceeding whether civil, criminal, administrative or investigative (including actions, suits or proceedings brought by or in the right of the Corporation) in which Indemnitee may be or may have been involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director or officer of the Corporation, by reason of any action taken by him or of any inaction on his part while acting as such director or officer or by reason of the fact that s/he is or was serving at the request of the Corporation as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, was a fiduciary of any trust or employee benefit plan or was a director and/or officer of the foreign or domestic corporation which was a predecessor corporation to the Corporation or of another enterprise at the request of such predecessor corporation, whether or not s/he is serving in such capacity at the time any liability or expense is incurred for which indemnification or reimbursement can be provided under this Agreement.

2. Indemnification.

(a) Third Party Proceedings. To the fullest extent permitted by law, the Corporation shall indemnify and hold harmless Indemnitee against Expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, penalties, and amounts paid in settlement (if the settlement is approved in advance by the Corporation, which approval shall not be unreasonably withheld)) actually and reasonably incurred by Indemnitee in connection with a Proceeding (other than a Proceeding by or in the right of the Corporation) if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner that Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, or, with respect to any criminal Proceeding, had reasonable cause to believe that Indemnitee’s conduct was unlawful. Notwithstanding the foregoing, no indemnification shall be made in any criminal proceeding where Indemnitee has been adjudged guilty unless a

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disinterested majority of the directors determines that Indemnitee did not receive, participate in or share in any pecuniary benefit to the detriment of the Corporation and, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for Expenses or liabilities.

(b) Proceedings by or in the Right of the Corporation. To the fullest extent permitted by law, the Corporation shall indemnify and hold harmless Indemnitee against Expenses actually and reasonably incurred by Indemnitee in connection with the defense or settlement of a Proceeding by or in the right of the Corporation to procure a judgment in its favor if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation. Notwithstanding the foregoing, no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation in the performance of Indemnitee’s duty to the Corporation unless and only to the extent that the court in which such Proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for Expenses and then only to the extent that the court shall determine.

(c) Scope. Notwithstanding any other provision of this Agreement other than Sections 3 and 13, the Corporation shall indemnify Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by other provisions of this Agreement, the Certificate, the Bylaws or statute.

3. Limitations on Indemnification. Any other provision herein to the contrary notwithstanding, the Corporation shall not be obligated pursuant to the terms of this Agreement:

(a) Excluded Acts. To indemnify Indemnitee for any acts or omissions or transactions from which a director may not be relieved of liability under Section 102(b)(7) of the DGCL; or

(b) Claims Initiated by Indemnitee. To indemnify or advance Expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145 of the DGCL, but such indemnification or advancement of Expenses may be provided by the Corporation in specific cases if a majority of the disinterested directors has approved the initiation or bringing of such suit; or

(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous; or

(d) Insured Claims. To indemnify Indemnitee for Expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines or penalties, and amounts paid in settlement) which have been paid directly to or on behalf of Indemnitee by an insurance carrier under a policy of directors’ and officers’ liability insurance maintained by the Corporation or any other policy of insurance maintained by the Corporation or Indemnitee; or

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(e) Claims Under Section 16(b). To indemnify Indemnitee for Expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

4. Determination of Right to Indemnification. Upon receipt of a written claim addressed to the Board of Directors for indemnification pursuant to Section 2 of this Agreement, the Corporation shall determine by any of the methods set forth in Section 145(d) of the DGCL whether Indemnitee has met the applicable standards of conduct that make it permissible under applicable law to indemnify Indemnitee. If a claim under Section 2 of this Agreement is not paid in full by the Corporation within thirty days after such written claim has been received by the Corporation, Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, unless such action is dismissed by the court as frivolous or brought in bad faith, Indemnitee shall be entitled to be paid also the expense of prosecuting such claim. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to make a determination prior to the commencement of such action that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct under applicable law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that Indemnitee has not met the applicable standard of conduct, shall create a presumption that Indemnitee has not met the applicable standard of conduct. The court in which such action is brought shall determine whether Indemnitee or the Corporation shall have the burden of proof concerning whether Indemnitee has or has not met the applicable standard of conduct.

5. Advancement and Repayment of Expenses. The Expenses incurred by Indemnitee in defending and investigating any Proceeding shall be paid by the Corporation prior to the final disposition of such Proceeding within thirty days after receiving from Indemnitee copies of invoices presented to Indemnitee for such Expenses and an undertaking by or on behalf of Indemnitee to the Corporation to repay such amount to the extent it is ultimately determined that Indemnitee is not entitled to indemnification. In determining whether or not to make an advance hereunder, the ability of Indemnitee to repay shall not be a factor. Notwithstanding the foregoing, in a proceeding brought by the Corporation directly, in its own right (as distinguished from an action brought derivatively or by any receiver or trustee), the Corporation shall not be required to make the advances called for hereby if a majority of the disinterested directors determine that it does not appear that Indemnitee has met the standards of conduct that made it permissible under applicable law to indemnify Indemnitee and that the advancement of Expenses would not be in the best interests of the Corporation and its stockholders.

6. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification or advancement by the Corporation of some or a portion of any Expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, penalties, and amounts paid in settlement) incurred by him in the investigation, defense, settlement or appeal of a Proceeding, but is not entitled to indemnification or advancement of the total amount thereof, the Corporation shall nevertheless indemnify or pay advancements to Indemnitee for the portion of such Expenses or liabilities to which Indemnitee is entitled.

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7. Notice to Corporation by Indemnitee. Indemnitee shall notify the Corporation in writing of any matter with respect to which Indemnitee intends to seek indemnification hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof; provided that any delay in so notifying the Corporation shall not constitute a waiver by Indemnitee of his rights hereunder. The written notification to the Corporation shall be addressed to the Board of Directors and shall include a description of the nature of the Proceeding and the facts underlying the Proceeding and be accompanied by copies of any documents filed with the court, if any, in which the Proceeding is pending. In addition, Indemnitee shall give the Corporation such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

8. Defense of Claim. In the event that the Corporation shall be obligated under Section 5 hereof to pay the Expenses of any Proceeding against Indemnitee, the Corporation, if appropriate, shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Corporation, the Corporation will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding; provided that (i) Indemnitee shall have the right to employ his own counsel in any such Proceeding at Indemnitee’s expense, and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Corporation, or (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Corporation and Indemnitee in the conduct of such defense or (C) the Corporation shall not, in fact, have employed counsel to assume the defense of such Proceeding, then the fees and expenses of Indemnitee’s counsel shall be paid by the Corporation.

9. Attorneys’ Fees. If any legal action is necessary to enforce the terms of this Agreement, the prevailing party shall be entitled to recover, in addition to other amounts to which the prevailing party may be entitled, actual attorneys’ fees and court costs as may be awarded by the court.

10. Continuation of Obligations. All agreements and obligations of the Corporation contained herein shall continue during the period Indemnitee is a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, fiduciary, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding by reason of the fact that Indemnitee served in any capacity referred to herein.

11. Assumption of Prior Agreement; Successors and Assigns.

(a) The Corporation hereby expressly assumes the obligations of Leslie’s California, a California corporation (the “Predecessor”), under the Predecessor’s bylaws, articles and indemnification agreements as to all acts or omissions occurring prior to the effective time (the “Effective Time”) of the merger of the Predecessor with and into the Corporation.

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(b) This Agreement establishes contract rights that shall be binding upon, and shall inure to the benefit of, the successors, assigns, heirs and legal representatives of the parties hereto.

12. Non-exclusivity.

(a) The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed to be exclusive of any other rights that Indemnitee may have under any provision of law, the Certificate or Bylaws, the vote of the Corporation’s stockholders or disinterested directors, other agreements or otherwise, both as to action in his official capacity and action in another capacity while occupying his position as a director or officer of the Corporation; provided, however, that as to all acts or omissions occurring after the Effective Time, this Agreement supersedes in its entirety any and all prior agreements with respect to the subject matter hereof between Indemnitee and the Predecessor.

(b) In the event of any changes, after the date of this Agreement, in any applicable law, statute, or rule that expand the tight of a Delaware corporation to indemnify its directors and officers, Indemnitee’s rights and the Corporation’s obligations under this Agreement shall be expanded to the fullest extent permitted by such changes. In the event of any changes in any applicable law, statute or rule, that narrow the right of a Delaware corporation to indemnify a director and officer, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder,

13. Effectiveness of Agreement. This Agreement shall be effective as of the date set forth on the first page and may apply to acts or omissions of Indemnitee that occurred prior to such date if Indemnitee was a director or officer of the Corporation or its predecessor, or was serving at the request of the Corporation or its predecessor as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, at the time such act or omission occurred.

14. Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Corporation to do or fail to do any act in violation of applicable law. The Corporation’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 14. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify Indemnitee to the fullest extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

15. Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Delaware without regard to its rules pertaining to conflicts of laws. To the extent permitted by applicable law, the parties hereby waive any provisions of law that render any provision of this Agreement unenforceable in any respect.

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16. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressed, on the date of such receipt, or (ii) if delivered by facsimile transmission to the recipient followed by a copy sent by mail on the same date as the facsimile transmission, on the date of receipt of such facsimile transmission, or (iii) if mailed by certified or registered mail with postage prepaid, on the third business day after the mailing date. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice.

17. Mutual Acknowledgment. Both the Corporation and Indemnitee acknowledge that in certain instances, federal law or applicable public policy may prohibit the Corporation from indemnifying its directors and officers under this Agreement or otherwise. Indemnitee understands and acknowledges that the Corporation has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Corporation’s right under public policy to indemnify Indemnitee.

18. Counterparts. This Agreement may be executed in several counterparts, each of which shall constitute an original.

19. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year set forth above.

LESLIE’S POOLMART, INC.

a Delaware corporation

By:

Donald J. Anderson, Executive Vice President and CFO

Notices should be addressed to:

Chief Financial Officer

Leslie’s Poolmart, Inc.

3925 E. Broadway Road, Suite 100

Phoenix, Arizona 85040

INDEMNITEE:

Street Address

City, State and Zip Code

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EX-12.1

Exhibit 12.1

Leslie’s Poolmart, Inc.
Computation of Ratio of Earnings to Fixed Charges
	Fiscal Years Ended											Thirteen Weeks Ended
	September 30, 2000			September 29, 2001		September 28, 2002		September 27, 2003		October 2, 2004		January 1, 2005			December 27, 2003
	(dollars in thousands)
Earnings:
Income before income taxes	$	(7,534	)	$	2,320	$	8,051	$	17,173	$	26,620	$	(13,097	)	$	(11,362	)
Fixed charges:
Interest expense		13,165			12,994		11,353		10,741		7,690		3,770			1,937
Operating leases interest expense		2,108			2,061		2,177		2,345		2,584		684			613
Total earnings	$	7,739		$	17,375	$	21,581	$	30,259	$	36,894	$	(8,643	)	$	(8,812	)
Fixed Charges:
Interest expense	$	13,165		$	12,994	$	11,353	$	10,741	$	7,690	$	3,770		$	1,937
Preferred stock dividends		3,995			4,443		4,939		5,793		6,759		—			1,692
Preferred stock accretion (less tax impact)		184			207		232		239		241		61			60
Operating leases interest expense		2,108			2,061		2,177		2,345		2,584		684			613
Total fixed charges	$	19,452		$	19,705	$	18,701	$	19,118	$	17,274	$	4,515		$	4,302
Ratio of earnings to fixed charges		0.40			0.88		1.15		1.58		2.14		(1.91	)		(2.05	)
Deficiency of earnings to cover fixed charges	$	11,713		$	2,330		—		—		—	$	13,158		$	13,114

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Independent Registered Public Accounting Firm” in the Registration Statement on Form S-4 and related Prospectus of Leslie’s Poolmart, Inc. for the registration of $170,000,000 of 7¾% Senior Notes and to the inclusion therein of our report dated November 19, 2004, except for matters disclosed in Note 1 as to which our date is April 15, 2005, with respect to the consolidated financial statements of Leslie’s Poolmart, Inc. included in its Annual Report (Form 10-K) for the year ended October 2, 2004, filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Phoenix, Arizona

April 22, 2005

EX-25.1

Exhibit 25.1

FORM T-1

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

STATEMENT OF ELIGIBILITY

UNDER THE TRUST INDENTURE ACT OF 1939 OF A

CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE

ELIGIBILITY OF A TRUSTEE PURSUANT TO

SECTION 305(b)(2) ¨

THE BANK OF NEW YORK

(Exact name of trustee as specified in its charter)

New York	13-5160382
(State of incorporation if not a U.S. national bank)	(I.R.S. employer identification no.)
One Wall Street, New York, N.Y.	10286
(Address of principal executive offices)	(Zip code)

Leslie’s Poolmart, Inc.

(Exact name of obligor as specified in its charter)

Delaware	95-4620298
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)
3925 E. Broadway Road, Suite 100 Phoenix, Arizona	85040
(Address of principal executive offices)	(Zip code)

7¾% Senior Subordinated Notes due 2013

(Title of the indenture securities)

1. General information. Furnish the following information as to the Trustee:

(a) Name and address of each examining or supervising authority to which it is subject.

Name	Address
Superintendent of Banks of the State of New York	2 Rector Street, New York, N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York	33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation	Washington, D.C. 20429
New York Clearing House Association	New York, New York 10005

(b) Whether it is authorized to exercise corporate trust powers.

Yes.

2. Affiliations with Obligor.

If the obligor is an affiliate of the trustee, describe each such affiliation.

None.

16. List of Exhibits.

Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the “Act”) and 17 C.F.R. 229.10(d).

1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672, Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-121195.)

4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-121195.)

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6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 333-106702.)

7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.

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SIGNATURE

Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 12th day of April, 2005.

THE BANK OF NEW YORK
By:	/s/ ROBERT A. MASSIMILLO
Name:	ROBERT A. MASSIMILLO
Title:	VICE PRESIDENT

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Exhibit 7

Consolidated Report of Condition of

THE BANK OF NEW YORK

of One Wall Street, New York, N.Y. 10286

And Foreign and Domestic Subsidiaries,

a member of the Federal Reserve System, at the close of business December 31, 2004, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.

	Dollar Amounts In Thousands
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin	$	3,866,500
Interest-bearing balances		8,455,170
Securities:
Held-to-maturity securities		1,885,665
Available-for-sale securities		20,781,508
Federal funds sold and securities purchased under agreements to resell
Federal funds sold in domestic offices		3,730,007
Securities purchased under agreements to resell		847,805
Loans and lease financing receivables:
Loans and leases held for sale		0
Loans and leases, net of unearned income		36,195,743
LESS: Allowance for loan and lease losses		587,611
Loans and leases, net of unearned income and allowance		35,608,132
Trading Assets		4,174,521
Premises and fixed assets (including capitalized leases)		949,424
Other real estate owned		754
Investments in unconsolidated subsidiaries and associated companies		268,366
Customers’ liability to this bank on acceptances outstanding		52,800
Intangible assets
Goodwill		2,746,404

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Other intangible assets		758,137
Other assets		8,013,234
Total assets	$	92,138,427
LIABILITIES
Deposits:
In domestic offices	$	41,480,131
Noninterest-bearing		16,898,525
Interest-bearing		24,581,606
In foreign offices, Edge and Agreement subsidiaries, and IBFs		24,028,722
Noninterest-bearing		576,431
Interest-bearing		23,452,291
Federal funds purchased and securities sold under agreements to repurchase
Federal funds purchased in domestic offices		1,040,432
Securities sold under agreements to repurchase		491,007
Trading liabilities		2,724,930
Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases)		4,780,573
Not applicable
Bank’s liability on acceptances executed and outstanding		54,517
Subordinated notes and debentures		2,390,000
Other liabilities		6,901,014
Total liabilities	$	83,891,326
Minority interest in consolidated subsidiaries		140,499
EQUITY CAPITAL
Perpetual preferred stock and related surplus		0
Common stock		1,135,284
Surplus (exclude all surplus related to preferred stock)		2,087,221
Retained earnings		4,892,420
Accumulated other comprehensive income		-8,323
Other equity capital components		0
Total equity capital		8,106,602
Total liabilities, minority interest, and equity capital	$	92,138,427

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I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.

Thomas J. Mastro,

Senior Vice President and Comptroller

We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.

Thomas A. Renyi
Gerald L. Hassell	Directors
Alan R. Griffith

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EX-99.1

Exhibit 99.1

LETTER OF TRANSMITTAL

LESLIE’S POOLMART, INC.

Exchange Offer for $170,000,000 Outstanding

7 ³/4% Senior Notes due 2013, Series A

in Exchange for New

7 ³/4% Senior Notes due 2013, Series B

Pursuant to the Prospectus, dated                     , 2005

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [                    ], 2005, UNLESS EXTENDED (THE “EXPIRATION DATE”). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

The Exchange Agent for the Exchange Offer is:

The Bank of New York Trust Company, N.A.

By Mail: The Bank of New York Trust Company, N.A. 700 S. Flower Street, Suite 500 Los Angeles, CA 90017 Attention: Melonee Young By Facsimile: (for eligible institutions only) (213) 630-6298 Attention: Melonee Young Confirm by Telephone: (213) 630-6493

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY OF THIS LETTER OF TRANSMITTAL.

The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated                     , 2005 (the “Prospectus”), of Leslie’s Poolmart, Inc., a Delaware corporation (the “Issuer”) and this Letter of Transmittal (the “Letter of Transmittal”), which together constitute the Issuer’s offer (the “Exchange Offer”) to exchange an aggregate principal amount of up to $170,000,000 of the Issuer’s 7 ³/4% Senior Notes due 2013, Series B, which have been registered under the Securities Act of 1933, as amended (the “New Notes”), for a like principal amount, in the aggregate, of the Issuer’s issued and outstanding 7 ³/4% Senior Notes due 2013, Series A (the “Original Notes”) from the registered holders thereof who are not “affiliates” of the Issuer, as such term is defined in Rule 405 promulgated under the Securities Act of 1933, as amended.

For each Original Note accepted for exchange, the holder of such Original Note will receive a New Note having a principal amount equal to that of the surrendered Original Note. Interest accrues on the New Notes at the rate of 7 ³/4% per annum and is payable in cash semiannually in arrears on each February 1 and August 1, starting August 1, 2005. No interest is payable on the Original Notes on the date of the exchange for the New Notes and therefore no interest will be paid thereon to the holders at such time. Original Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer.

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This Letter of Transmittal is to be completed by a holder of Original Notes either if certificates for such Original Notes are to be forwarded herewith or if a tender is to be made by book-entry transfer to the account maintained by The Bank of New York, as Exchange Agent for the Exchange Offer (the “Exchange Agent”), at The Depository Trust Company (the “Book-Entry Transfer Facility”) pursuant to the procedures set forth in the Prospectus under “The Exchange Offer—Acceptance of Original Notes for Exchange; Delivery of Exchange Notes” and an Agent’s Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent’s Message in lieu of this Letter of Transmittal. The term “Agent’s Message” means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation (as defined below), which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by this Letter of Transmittal and that the Issuer may enforce this Letter of Transmittal against such participant. Holders of Original Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Original Notes into the Exchange Agent’s account at the Book-Entry Transfer Facility (a “Book-Entry Confirmation” and all other documents required by this Letter of Transmittal to the Exchange Agent on or prior to the Expiration Date, must tender their Original Notes according to the guaranteed delivery procedures set forth in the Prospectus under “The Exchange Offer—Guaranteed Delivery Procedures.” See Instruction 1.

Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.

The undersigned has completed the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer.

List below the Original Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and principal amount of Original Notes should be listed on a separate signed schedule affixed hereto.

DESCRIPTION OF ORIGINAL NOTES	1	2	3
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank)	Certificate Number(s)*	Aggregate Principal Amount of Original Note(s)	Principal Amount Tendered**
	Total
*     Need not be completed if Original Notes are being tendered by book-entry transfer. **     Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Original Notes represented by the Original Notes indicated in column 2. See Instruction 2. Original Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1.

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¨ CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:

Name of Tendering Institution

Account Number

Transaction Code Number

By crediting the Original Notes to the Exchange Agent’s account at the Book-Entry Transfer Facility’s Automated Tender Offer Program (“ATOP”) and by complying with applicable ATOP procedures with respect to the Exchange Offer, including transmitting to the Exchange Agent a computer-generated Agent’s Message in which the holder of the Original Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, the Letter of Transmittal, the participant in the Book-Entry Transfer Facility confirms on behalf of itself and the beneficial owners of such Original Notes all provisions of this Letter of Transmittal (including all representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent.

¨ CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:

Name(s) of Registered Holder(s)

Window Ticket Number (if any)

Date of Execution of Notice of Guaranteed Delivery

Name of Institution Which Guaranteed Delivery

If Delivered by Book-Entry Transfer, Complete the Following:

Account Number

Transaction Code Number

Name of Tendering Institution

¨ CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.

¨ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

Name                                                                                                                                                                                                                  

Address                                                                                                                                                                                                              

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PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuer the aggregate principal amount of Original Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Original Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Original Notes as are being tendered hereby.

The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the undersigned’s true and lawful agent and attorney-in-fact with respect to such tendered Original Notes, with full power of substitution, among other things, to cause the Original Notes to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Original Notes, and to acquire New Notes issuable upon the exchange of such tendered Original Notes, and that, when the same are accepted for exchange, the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Issuer.

If the undersigned is not a broker-dealer, the undersigned hereby represents (i) that any New Notes acquired in exchange for Original Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, (ii) that neither the holder of such Original Notes nor such other person is engaged in, or intends to engage in, a distribution of such New Notes or has any arrangement or understanding with any person to participate in the distribution of such New Notes and (iii) that neither the holder of such Original Notes nor any such other person is an “affiliate,” as defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”), of the Issuer.

If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Original Notes tendered hereby, the undersigned hereby acknowledges (i) that such Original Notes were acquired by such broker-dealer as a result of market-making or other trading activities and (ii) that it must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of New Notes; however, by so acknowledging and by delivering a prospectus meeting the requirements of the Securities Act, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuer to be necessary or desirable to complete the sale, assignment and transfer of the Original Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in the Prospectus under “The Exchange Offer—Withdrawal Rights.”

Unless otherwise indicated herein in the box entitled “Special Issuance Instructions” below, please deliver the New Notes (and, if applicable, substitute certificates representing Original Notes for any Original Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Original Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled “Special Delivery Instructions” below, please send the New Notes (and, if applicable, substitute certificates representing Original Notes for any Original Notes not exchanged) to the undersigned at the address shown above in the box entitled “Description of Original Notes.”

THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED “DESCRIPTION OF ORIGINAL NOTES” ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED THE ORIGINAL NOTES AS SET FORTH IN SUCH BOX ABOVE.

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SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if certificates for Original Notes not exchanged and/or New Notes are to be issued in the name of someone other than the person or persons whose signature(s) appear(s) on this Letter of Transmittal above, or if Original Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue New Notes and/or Original Notes to: Name(s)                                                                                     (Please Type or Print) (Please Type or Print) Address                                                                                      (Zip Code) (Complete Substitute Form W-9) Credit unexchanged Original Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. (Book-Entry Transfer Facility Account Number, if applicable) SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if certificates for Original Notes not exchanged and/or New Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter of Transmittal above or to such person or persons at an address other than shown in the box entitled “Description of Original Notes” on this Letter of Transmittal above. Mail New Notes and/or Original Notes to: Name(s)                                                                                     (Please Type or Print) (Please Type or Print) Address                                                                                      (Zip Code)

IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF OR AN AGENT’S MESSAGE IN LIEU THEREOF (TOGETHER WITH THE CERTIFICATES FOR ORIGINAL NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.

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(TO BE COMPLETED BY ALL TENDERING HOLDERS)

(Complete Accompanying Substitute Form W-9)

Dated                                                  , 2005

X                                                                                                                                                                                                        , 2005

X                                                                                                                                                                                                        , 2005

Signature(s) of Owner                                                                                  Date

Area Code and Telephone Number                                                                                                                                                    

This Letter of Transmittal must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Original Notes hereby tendered or on a security position listing or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3.

Name(s)                                                                                                                                                                                                        

(Please Type or Print)

Capacity                                                                                                                                                                                                       

Address                                                                                                                                                                                                          

(Including Zip Code)

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SIGNATURE GUARANTEE

(If required by Instruction 3)

Signature(s) Guaranteed by an Eligible Institution                                                                                                                       

(Authorized Signature)

(Title)

(Name and Firm)

Dated                                     , 2005

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INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF

EXCHANGE OFFER FOR $170,000,000 OUTSTANDING

7 ³/4% SENIOR NOTES DUE 2013, SERIES A

IN EXCHANGE FOR NEW

7 ³/4% SENIOR NOTES DUE 2013, SERIES B

1. Delivery of This Letter of Transmittal and Original Notes; Guaranteed Delivery Procedures.

This Letter of Transmittal is to be completed by holders of Original Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in the Prospectus under “The Exchange Offer—Acceptance of Original Notes for Exchange; Delivery of Exchange Notes” and an Agent’s Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent’s Message in lieu of this Letter of Transmittal. The term “Agent’s Message” means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal and that the Issuer may enforce the Letter of Transmittal against such participant. Certificates for all physically tendered Original Notes, or a Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile hereof or Agent’s Message in lieu thereof) and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Original Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof.

Holders whose certificates for Original Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedures for book-entry transfer on a timely basis, may tender their Original Notes pursuant to the guaranteed delivery procedures set forth in the Prospectus under “The Exchange Offer—Guaranteed Delivery Procedures.” Pursuant to such procedures, (i) such tender must be made through an Eligible Institution, (ii) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Issuer (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Original Notes and the amount of Original Notes tendered, stating that the tender is being made thereby and guaranteeing that within five (5) New York Stock Exchange (“NYSE”) trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Original Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent’s Message in lieu thereof) with any required signature guarantees and any other documents required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent and (iii) the certificates for all physically tendered Original Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent’s Message in lieu thereof) with any required signature guarantees and all other documents required by this Letter of Transmittal, are received by the Exchange Agent within five (5) NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. An “eligible institution” is a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States or otherwise an “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended.

The method of delivery of this Letter of Transmittal, the Original Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only

8

when actually received or confirmed by the Exchange Agent. If Original Notes are sent by mail, it is suggested that the mailing be registered mail, properly insured, with return receipt requested, made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. No Letters of Transmittal or Original Notes should be sent directly to the Issuer.

See “The Exchange Offer” in the Prospectus.

2. Partial Tenders (Not Applicable to Holders Who Tender by Book-Entry Transfer).

If less than all of the Original Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Original Notes to be tendered in the box above entitled “Description of Original Notes — Principal Amount Tendered.” A reissued certificate representing the balance of nontendered Original Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, promptly after the Expiration Date. All of the Original Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated.

3. Signatures on This Letter of Transmittal; Note Powers and Endorsements; Guarantee of Signatures.

If this Letter of Transmittal is signed by the holder of the Original Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates or on the Book-Entry Transfer Facility’s security position listing as the holder of such Original Notes without any change whatsoever.

If any tendered Original Notes are owned of record by two or more joint owners, all of such owners must sign this Letter of Transmittal.

If any tendered Original Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of certificates.

When this Letter of Transmittal is signed by the registered holder or holders of the Original Notes specified herein and tendered hereby, no endorsements of certificates or written instrument or instruments of transfer or exchange are required. If, however, the Original Notes are registered in the name of a person other than a signer of the Letter of Transmittal, the Original Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Issuer in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution.

If this Letter of Transmittal is signed by a person or persons other than the registered holder or holders of Original Notes, such Original Notes must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name or names of the registered holder or holders that appear on the Original Notes.

If this Letter of Transmittal or any Original Notes or powers of attorneys are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuer, proper evidence satisfactory to the Issuer of their authority to so act must be submitted with the Letter of Transmittal.

Endorsements on certificates for Original Notes or signatures on powers of attorneys required by this Instruction 3 must be guaranteed by an Eligible Institution.

Signatures on this Letter of Transmittal need not be guaranteed by an Eligible Institution, provided the Original Notes are tendered: (i) by a registered holder of Original Notes (which term, for purposes of the

9

Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Original Notes) who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on this Letter of Transmittal or (ii) for the account of an Eligible Institution.

4. Special Issuance and Delivery Instructions.

Tendering holders of Original Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and or substitute certificates evidencing Original Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Holders tendering Original Notes by book-entry transfer may request that Original Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such holder may designate hereon. If no such instructions are given, such Original Notes not exchanged will be returned to the name and address of the person signing this Letter of Transmittal.

5. Taxpayer Identification Number.

Federal income tax law generally requires that a tendering holder who is a U.S. person and whose Original Notes are accepted for exchange must provide the Issuer (as payor) with such holder’s correct Taxpayer Identification Number (“TIN”) on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Issuer is not provided with the current TIN or an adequate basis for an exemption, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, the tendering holder may be subject to backup withholding at a rate of 28% on all reportable payments made after the exchange. If withholding results in an overpayment of taxes, a refund may be obtained.

To prevent backup withholding, each tendering holder of Original Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) after being so notified, the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding.

If the Original Notes are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines for instructions on applying for a TIN and check the “applied for” box in Part 2 of the Substitute Form W-9. Note: Checking the “applied for” box and writing “applied for” on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. Checking this box also requires that the holder complete the Certificate of Awaiting Taxpayer Identification Number form attached to the Substitute Form W-9. If such holder does not provide its TIN to the Exchange Agent within 60 days, backup withholding will begin and continue until such holder furnishes its TIN to the Exchange Agent.

Exempt holders of Original Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the “W-9 Guidelines”) for additional instructions. If the tendering holder of Original Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Exchange Agent a completed Form W-8BEN (or Forms W-8ECI or W-8IMY, if applicable). Such forms can be provided by the Exchange Agent upon request.

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The information requested above should be directed to the Exchange Agent at the following address:

The Exchange Agent for the Exchange Offer is:

The Bank of New York Trust Company, N.A.

By Mail:

The Bank of New York Trust Company, N.A.

700 S. Flower Street, Suite 500

Los Angeles, CA 90017

Attention: Melonee Young

By Facsimile:

(for eligible institutions only)

(213) 630-6298

Attention: Melonee Young

Confirm by Telephone:

(213) 630-6493

6. Transfer Taxes.

Holders who tender their Original Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Original Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Original Notes in connection with the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder.

Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Original Notes specified in this Letter of Transmittal.

7. Waiver of Conditions.

The Issuer reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Original Note either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Original Notes in the Exchange Offer) except that the Issuer will not waive the requirement that the holder seeking to tender Original Notes in the Exchange Offer be a non-”affiliate” of the issuer as such term is defined in Rule 405 promulgated under the Securities Act of 1933, as amended.

8. No Conditional Tenders.

No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Original Notes, by execution of this Letter of Transmittal or an Agent’s Message in lieu thereof, shall waive any right to receive notice of the acceptance of their Original Notes for exchange.

Neither the Issuer, the Exchange Agent nor any other person shall be obligated to give notice of any defect or irregularity with respect to any tender of Original Notes.

9. Mutilated, Lost, Stolen or Destroyed Original Notes.

Any holder whose Original Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions.

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10. Withdrawal Rights.

Tenders of Original Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date.

For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth above prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must: (i) specify the name of the person having tendered the Original Notes to be withdrawn (the “Depositor”), (ii) identify the Original Notes to be withdrawn (including the principal amount of such Original Notes) and (iii) where certificates for Original Notes have been transmitted, specify the name in which such Original Notes are registered, if different from that of the Depositor. If certificates for Original Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the release of such certificates the Depositor must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such Depositor is an Eligible Institution. If Original Notes have been tendered pursuant to the procedure for book-entry transfer set forth in the Prospectus under “The Exchange Offer—Acceptance of Original Notes for Exchange; Delivery of Exchange Notes,” any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Original Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Issuer, whose determination shall be final and binding on all parties. Any Original Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Original Notes so withdrawn are validly retendered. Any Original Notes that have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Original Notes tendered by book-entry transfer into the Exchange Agent’s account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures set forth in the Prospectus under “The Exchange Offer—Acceptance of Original Notes for Exchange; Delivery of Exchange Notes,” such Original Notes will be credited to an account maintained with the Book-Entry Transfer Facility for the Original Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Original Notes may be retendered by following the procedures described above at any time on or prior to 5:00 p.m., New York City time, on the Expiration Date.

11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.

Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, and requests for Notices of Guaranteed Delivery and other related documents may be directed to the Exchange Agent at the address and telephone number set forth above.

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TO BE COMPLETED BY ALL TENDERING HOLDERS

(See Instruction 5)

PAYOR’S NAME:    THE BANK OF NEW YORK
SUBSTITUTE Form W-9 Department of the Treasury Internal Revenue Service Payor’s Request For Taxpayer Identification Number (“TIN”) and Certification	Part 1—PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW.	TIN                                                    Social Security Number or Employer Identification Number
	Part 2—TIN Applied For ¨
	Payor’s Request For Taxpayer Identification Number (“TIN”) and Certification
	CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
	(1)    the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me). (2)    I am not subject to backup withholding either because: (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service (the “IRS”) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3)    any other information provided on this form is true and correct.
	Signature	Date                                    , 2005
	You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED

THE BOX IN PART 2 OF SUBSTITUTE FORM W-9

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within 60 days, 28% of all reportable payments made to me will be withheld.

Signature

Date

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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper Identification Number to Give the Payer—Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.

For this type of account	Give the SOCIAL SECURITY number of:	For this type of account	Give the EMPLOYER IDENTIFICATION number of:
1.     An individual’s account	The individual	6.     Sole proprietorship or single-owner LLC account	The owner(3)
2.     Two or more individuals (joint account)	The actual owner of the account or, if combined funds, the first individual on the account(1)	7.     A valid trust, estate, or pension trust	Legal entity(4)
3.     Custodian account of a minor (Uniform Gift to Minors Act)	The minor(2)	8.     Corporate account or LLC electing corporate status on Form 8832	The corporation
4.     a. The usual revocable savings trust account (grantor is also trustee)	The grantor-trustee(1)	9.     Association, club, religious, charitable, educational or other tax-exempt organization account	The organization
b. So-called trust account that is not a legal or valid trust under State law	The actual owner(1)	10.  Partnership or multi-member LLC account	The partnership
5.     Sole proprietorship or single-owner LLC account	The owner(3)	11.  A broker or registered nominee	The broker or nominee
		12.  Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district or prison) that receives agricultural program payments	The public entity

(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person’s number must be furnished.

(2) Circle the minor’s name and furnish the minor’s social security number.

(3) You must show your individual name, but you may also enter your business or “doing business as” name. You may use either your social security number or employer identification number.

(4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title).

Note: If no name is circled when there is more than one name listed, the number will be considered to be that of the first name listed.

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How to Obtain a TIN

If you don’t have a taxpayer identification number or you don’t know your number, obtain Form SS-5, Application for a Social Security Card for individuals, or Form SS-4, Application for Employer Identification Number (for business and other entities), or Form W-7, Application for IRS Individual Taxpayer Identification Number (for certain resident aliens), at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number.

If you return the Substitute Form W-9 with the “Applied for” box checked in Part 2, you must provide the payer with a Certificate of Awaiting Taxpayer Identification Number and, within 60 days, a TIN. If you do not provide the TIN by the date of payment, 28% of all reportable payments will be withheld.

As soon as you receive your TIN, complete another Substitute Form W-9, include your TIN, sign and date the form, and give it to the payer.

For interest, dividends and broker transactions, you must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to a payer, you must cross out item 2 in the certification before signing the form.

Payees Exempt from Backup Withholding

Payees specifically exempted from backup withholding on ALL payments by the Payer include the following:

• A corporation.

• A financial institution.

• An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under section 403(b)(7) if the account satisfies the requirements of Section 401(f)(2).

• The United States or any agency or instrumentality thereof.

• A state, the District of Columbia, a possession of the United States or any political subdivision or instrumentality thereof.

• A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof.

• An international organization or any agency or instrumentality thereof.

• A registered dealer in securities or commodities registered in the U.S., the District of Columbia or a possession of the U.S.

• A real estate investment trust.

• A common trust fund operated by a bank under section 584(a).

• An entity registered at all times during the tax year under the Investment Company Act of 1940.

• A foreign central bank of issue.

• A futures commission merchant registered with the Commodity Futures Trading Commission.

• A middleman known in the investment community as a nominee or custodian.

• A trust exempt from tax under section 664 or described in section 4947.

Payments of dividends and patronage dividends not generally subject to backup withholding include the following:

• Payments to nonresident aliens subject to withholding under section 1441.

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• Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident alien partner.

• Payments of patronage dividends not paid in money.

• Payments made by certain foreign organizations.

• Section 404(K) payments made by an ESOP.

Payments of interest not generally subject to backup withholding include the following:

• Payments of interest on obligations issued by individuals. Note: You are subject to information reporting if this interest is $600 or more and is paid in the course of the payer’s trade or business and backup withholding if you have not provided your correct TIN to the payer.

• Payments of tax-exempt interest (including exempt interest dividends under section 852).

• Payments described in section 6049(b)(5) to nonresident aliens.

• Payments on tax-free covenant bonds under section 1451.

• Payments made by certain foreign organizations.

• Mortgage or student loan interest paid to you.

Exempt payees described above should file Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TIN, WRITE “EXEMPT” ON THE FACE OF THE FORM, SIGN AND DATE THE FORM, AND RETURN IT TO THE PAYER.

Certain payments, other than interest, dividends and patronage dividends that are not subject to information reporting also are not subject to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N and the regulations thereunder.

Privacy Act Notice.—Section 6109 requires most recipients of dividend, interest or other payments to give their correct TIN to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of tax returns. The IRS also may provide this information to the Department of Justice for civil and criminal litigation and to cities, states and the District of Columbia to carry out their tax laws. The IRS also may disclose this information to other countries under a tax treaty, or to federal and state agencies to enforce federal nontax criminal laws and to combat terrorism. Payers must be given the TIN whether or not recipients are required to file tax returns. Payers generally must withhold 31% of taxable interest, dividend and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply.

Penalties

(1) Penalty for Failure to Furnish TIN.—If you fail to furnish your correct TIN to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

(2) Civil Penalty for False Information With Respect to Withholding.—If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500.

(3) Criminal Penalty for Falsifying Information.—Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

(4) Misuse of TINS.—If the payer discloses or uses TINs in violation of federal law, the payer may be subject to civil and criminal penalties.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE.

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EX-99.2

Exhibit 99.2

NOTICE OF GUARANTEED DELIVERY FOR

7 ³/4% SENIOR NOTES DUE 2013, SERIES A

LESLIE’S POOLMART, INC.

This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Leslie’s Poolmart, Inc. (the “Issuer”) made pursuant to the Prospectus, dated                     , 2005 (the “Prospectus”), if certificates for the Issuer’s outstanding 7 3/4% Senior Notes due 2013, Series A (the “Original Notes”) are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach The Bank of New York, as exchange agent (the “Exchange Agent”), prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to the Exchange Agent as set forth below. Capitalized terms not defined herein are defined in the Prospectus.

Main Delivery To:

The Bank of New York Trust Company, N.A.

By Mail:

The Bank of New York Trust Company, N.A.

700 S. Flower Street, Suite 500

Los Angeles, CA 90017

Attention: Melonee Young

By Facsimile:

(213) 630-6298

Attention: Melonee Young

Confirm by Telephone:

(213) 630-6493

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.

Ladies and Gentlemen:

Upon the terms and conditions set forth in the Prospectus, the undersigned hereby tenders to the Issuer the principal amount of Original Notes set forth below pursuant to the guaranteed delivery procedure described in the Prospectus under “The Exchange Offer—Guaranteed Delivery Procedures.”

Principal Amount of Original Notes Tendered (must be in denominations of principal amount of $1,000 or any integral multiple thereof):
$
Certificate Nos. (if available)
Total Principal Amount Represented by Original Notes Certificate(s):	If Original Notes will be delivered by book-entry transfer to The Depository Trust Company, provide account number.
$	Account Number

All authority herein conferred or agreed to be conferred shall survive the death of incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.

PLEASE SIGN HERE
X	X
X	X
Signature(s) of Owner(s) or Authorized Signatory	Date
Area Code and Telephone Number
Must be signed by the holder(s) of Original Notes as their names(s) appear(s) on certificates for Original Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below.
Please print name(s) and address(es)
Name(s)
Capacity
Address(es)

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GUARANTEE (Not to be used for signature guarantee) The undersigned, an Eligible Institution that is a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States or otherwise an “eligible guarantor institution” within the meaning of Rule 17Ad- 15 under the Exchange Act of 1934, as amended, hereby guarantees that the certificates for all physically tendered Original Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent’s Message in lieu thereof) with any required signature guarantees and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, within five (5) New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery. The undersigned acknowledges that it must deliver the Letter of Transmittal and the Original Notes tendered hereby to the Exchange Agent within the time period set for the above and that failure to do so could result in a financial loss to the undersigned.
Name of Firm	Authorized Signature
Address	Title
Zip Code	(Please Type or Print)

NOTE: DO NOT SEND CERTIFICATES FOR ORIGINAL NOTES WITH THE FORM. CERTIFICATES FOR ORIGINAL NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.

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EX-99.3

Exhibit 99.3

LESLIE’S POOLMART, INC.

Exchange Offer for $170,000,000 Outstanding

7 ³/4% Senior Notes due 2013, Series A

in Exchange for New

7 ³/4% Senior Notes due 2013, Series B

To Brokers, Dealers, Commercial Banks,

Trust Companies and Other Nominees:

Leslie’s Poolmart, Inc. (the “Issuer”) is offering, upon and subject to the terms and conditions set forth in the prospectus dated [                    ], 2005 (the “Prospectus”), and the enclosed letter of transmittal (the “Letter of Transmittal”), to exchange (the “Exchange Offer”) up to $170,000,000 aggregate principal amount of its 7 3/4% Senior Notes due 2013, Series B, which have been registered under the Securities Act of 1933, as amended (the “New Notes”), for a like principal amount, in the aggregate, of the Issuer’s issued and outstanding 7 3/4% Senior Notes due 2013, Series A (the “Original Notes”), upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Issuer contained in the registration rights agreement in respect of the Original Notes, dated January 25, 2005, by and among the Issuer and the purchasers referred to therein.

We are requesting that you contact your clients for whom you hold Original Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Original Notes registered in your name or in the name of your nominee, or who hold Original Notes registered in their own names, we are enclosing the following documents:

1. Prospectus dated [                    ], 2005;

2. A Letter of Transmittal relating to the Original Notes for your use and for the information of your clients;

3. A Notice of Guaranteed Delivery relating to the Original Notes which is to be used to accept the Exchange Offer if certificates for Original Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis; and

4. A form of letter which may be sent to your clients for whose account you hold Original Notes registered in your name or the name of your nominee, with space provided for obtaining such clients’ instructions with regard to the Exchange Offer.

Your prompt action is requested. The Exchange Offer will expire at 5:00 p.m., New York City time, on [                    ], 2005, unless extended by the Issuer (the “Expiration Date”). Original Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date.

To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal relating to the Original Notes (or facsimile thereof or Agent’s Message in lieu thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Original Notes, or a timely confirmation of a book-entry transfer of such Original Notes, should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus.

If a registered holder of Original Notes desires to tender, but such Original Notes are not immediately available, or time will not permit such holder’s Original Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under “The Exchange Offer—Guaranteed Delivery Procedures.”

The Issuer will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Original Notes held by them as nominee or in a fiduciary capacity. The Issuer will not make any payments to brokers, dealers, or others soliciting acceptances of the Exchange Offer. Holders of Original Notes will not be obligated to pay or cause to be paid all stock transfer taxes applicable to the exchange of Original Notes pursuant to the Exchange Offer.

Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to The Bank of New York, the Exchange Agent for the Exchange Offer, at its address and telephone number set forth on the front of the Letter of Transmittal.

Very truly yours,

LESLIE’S POOLMART, INC.

NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OR THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.

Enclosures

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EX-99.4

Exhibit 99.4

LESLIE’S POOLMART, INC.

Exchange Offer for $170,000,000 Outstanding

7 ³/4% Senior Notes due 2013, Series A

in Exchange for New

7 ³/4% Senior Notes due 2013, Series B

To Our Clients:

Enclosed for your consideration is a prospectus dated [                    ], 2005 ( the “Prospectus”), and the related letter of transmittal (the “Letter of Transmittal”), relating to the offer (the “Exchange Offer”) of Leslie’s Poolmart, Inc. (the “Issuer”) to exchange up to $170,000,000 aggregate principal amount of its 7 3/4% Senior Notes due 2013, Series B, which have been registered under the Securities Act of 1933, as amended (the “New Notes”), for a like principal amount, in the aggregate, of the Issuer’s issued and outstanding 7 3/4% Senior Notes due 2013, Series A (the “Original Notes”), upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Issuer contained in the registration rights agreement in respect of the Original Notes, dated January 25, 2005, by and among the Issuer and the purchasers referred to therein.

This material is being forwarded to you as the beneficial owner of the Original Notes held by us for your account but not registered in your name. A tender of such Original Notes may only be made by us as the holder of record and pursuant to your instructions.

Accordingly, we request instructions as to whether you wish us to tender on your behalf the Original Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal.

Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Original Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on [                    ], 2005 (the “Expiration Date”), unless extended by the Issuer. Any Original Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date.

Your attention is directed to the following:

1. The Exchange Offer is for any and all Original Notes held by record holders who are not “affiliates” of the Issuer, as such term is defined in Rule 405 promulgated under the Securities Act of 1933, as amended.

2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned “The Exchange Offer—Conditions to the Exchange Offer.”

3. Subject to the terms and conditions in the Prospectus and the Letter of Transmittal, any transfer taxes incident to the transfer of Original Notes from the holder of Original Notes to the Issuer will be paid by the Issuer.

4. The Exchange Offer expires at 5:00 p.m., New York City time, on [                    ], 2005, unless extended by the Issuer.

If you wish to have us tender your Original Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. The Letter of Transmittal is furnished to you for information only and may not be used directly by you to tender Original Notes.

INSTRUCTIONS WITH RESPECT TO

THE EXCHANGE OFFER

The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Leslie’s Poolmart, Inc. with respect to their Original Notes.

This will instruct you to tender the Original Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal.

The undersigned expressly agrees to be bound by the enclosed Letter of Transmittal and that such Letter of Transmittal may be enforced against the undersigned.

Please tender the Original Notes held by you for my account as indicated below:

7 3/4% Senior Notes due 2013	Aggregate Principal Amount of Original Notes
	$
¨        Please do not tender any Original Notes held by you for my account.
Dated:                             , 2005
	Signature(s)
	Please print name(s) here
	Address(es)
	Area Code and Telephone Number
	Tax Identification or Social Security No(s).

None of the Original Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Original Notes held by us for your account.

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