10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON‚ D. C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002 OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________.

COMMISSION FILE NO.: 0-26640

SCP POOL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE	36-3943363
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
109 Northpark Boulevard‚
Covington‚ Louisiana	70433-5001
(Address of principal executive offices)	(Zip Code)
985-892-5521
(Registrant’s telephone number‚ including area code)
(former name‚ former address and former fiscal year‚ if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_]

At July 24, 2002, there were 23,694,321 outstanding shares of the Registrant’s common stock, $.001 par value per share.

SCP POOL CORPORATION

Form 10-Q
For the Quarter Ended June 30, 2002

INDEX
		Page
Part I.	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	12
Part II.	Other Information
Item 4.	Submission of Matters to a Vote of Security Holders	14
Item 6.	Exhibits and Reports on Form 8-K	15
Signature Page		16

SCP POOL CORPORATION

Part I. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets
(Dollars, in thousands except share data)	(Unaudited)		(Unaudited)		(Note)
	June 30,		June 30,		December 31,
	2002		2001		2001
Assets
Current assets
Cash and cash equivalents	11,960		2,962		3,524
Receivables, less allowances of $3,325 in 2002,
$3,646 at 6/30/01 and $2,777 at 12/31/01	144,594		134,418		60,231
Product inventories, less reserves of $3,860 in 2002,
$5,984 at 6/30/01 and $3,920 at 12/31/01	168,875		137,766		181,462
Prepaid expenses	4,126		3,420		2,517
Deferred income taxes	2,788		2,884		2,599
Total current assets	332,343		281,450		250,333
Property and equipment, net	16,395		11,922		15,844
Goodwill, net	73,831		77,989		73,582
Intangible assets, net	5,345		4,340		5,840
Other assets, net	997		900		2,991
Total assets	428,911		376,601		348,590
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	120,908		101,913		95,588
Accrued and other current liabilities	37,810		31,776		17,798
Short-term debt and note payable	91		28,750		91
Total current liabilities	158,809		162,439		113,477
Deferred income taxes	5,541		4,458		5,541
Long-term debt, less current portion	97,525		58,026		85,000
Stockholders’ equity
Common stock, $.001 par value; 40,000,000 shares
authorized; 27,052,481, 26,861,159 and 26,966,519
shares issued at 6/30/02, 6/30/01 and 12/31/01,
respectively	27		27		27
Additional paid-in capital	62,960		60,183		61,353
Retained earnings	143,115		103,678		112,611
Treasury stock	(38,016	)	(10,608	)	(27,567	)
Unearned compensation	(742	)	(1,112	)	(909	)
Accumulated other comprehensive loss	(308	)	(490	)	(943	)
Total stockholders’ equity	167,036		151,678		144,572
Total liabilities and stockholders’ equity	428,911		376,601		348,590

Note: The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date.

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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SCP POOL CORPORATION

Consolidated Statements of Income
(Dollars, in thousands except per share data)	Three Months		Six Months
(Unaudited)	Ended		Ended
	June 30,		June 30,
	2002	2001	2002	2001
Net sales	364,088	331,685	535,442	486,892
Cost of sales	267,393	243,827	395,245	360,930
Gross profit	96,695	87,858	140,197	125,962
Selling and administrative expenses	48,320	44,474	87,491	78,830
Goodwill amortization	—	577	—	1,113
Operating income	48,375	42,807	52,706	46,019
Interest expense	1,486	1,413	2,699	2,917
Income before income taxes	46,889	41,394	50,007	43,102
Income taxes	18,287	15,928	19,503	16,594
Net income	28,602	25,466	30,504	26,508
Earnings per share
Basic	1.15	0.99	1.22	1.04
Diluted	1.09	0.95	1.16	0.99
Average shares outstanding
Basic	24,944	25,637	24,975	25,595
Diluted	26,330	26,931	26,234	26,876

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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SCP POOL CORPORATION

Condensed Consolidated Statements of Cash Flows
(Dollars, in thousands)	Six Months Ended
(Unaudited)	June 30,
	2002		2001
Operating activities
Net income	30,504		26,508
Adjustments to reconcile net income to net cash provided by
operating activities	3,636		5,282
Changes in operating assets and liabilities, net of effects
of acquisitions
Receivables	(84,911	)	(69,693	)
Product inventories	12,647		6,234
Accounts payable	25,321		21,914
Other	21,181		11,763
Net cash provided by operating activities	8,378		2,008
Investing activities
Acquisition of businesses, net of cash acquired	(28	)	(25,059	)
Purchase of property and equipment	(2,539	)	(2,020	)
Proceeds from the sale of property and equipment	10		33
Net cash used in investing activities	(2,557	)	(27,046	)
Financing activities
Net proceeds from revolving line of credit	12,525		25,285
Payments on long-term debt	—		(2,500	)
Issuance of common stock	607		1,955
Purchase of treasury stock	(10,450	)	—
Net cash provided by financing activities	2,682		24,740
Effect of exchange rate changes on cash	(67	)	(171	)
Change in cash and cash equivalents	8,436		(469	)
Cash and cash equivalents at beginning of period	3,524		3,431
Cash and cash equivalents at end of period	11,960		2,962

The accompanying Notes are integral part of the Consolidated Financial Statements.

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SCP POOL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

SCP Pool Corporation (the Company, which may be referred to as we, us or our) prepared the consolidated financial statements following accounting principles generally accepted in the United States (GAAP) and the requirements of the Securities and Exchange Commission (SEC). As permitted under those rules, certain footnotes or other financial information normally required by GAAP have been condensed or omitted. The financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. The results for the interim periods are not necessarily indicative of the results to be expected for the full year.

You should also read the financial statements and notes included in the Company’s latest Annual Report on Form 10-K. Except for the adoption of Statement of Financial Accounting Standards (SFAS) 142, Goodwill and Other Intangible Assets and SFAS 144, Accounting for the Impairment of Long-Lived Assets, as discussed in Note 3 below, the accounting policies used in preparing these financial statements are the same as those described in our Annual Report.

Certain prior year amounts have been reclassified to conform to the current year presentation.

2. Earnings Per Share

We calculate basic earnings per share (EPS) by dividing net income by the weighted average number of common shares outstanding. Diluted EPS includes the dilutive effects of stock options and convertible notes.

3. New Accounting Standards

On January 1, 2002, we adopted SFAS 142, Goodwill and Other Intangible Assets. Under these new rules, goodwill is no longer amortized but will be tested for impairment annually or at any other time when impairment indicators exist. Intangible assets with finite lives continue to be amortized over their useful lives. We completed the transitional goodwill impairment test in the first quarter of 2002 and determined that goodwill is not impaired.

The following table presents net income and earnings per share for the three month and six month periods ended June 30, 2002 and June 30, 2001 in a comparative format assuming there was no goodwill amortization in 2001:

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2002	2001		2002	2001
Reported net income	28,602	25,466		30,504	26,508
Add back: goodwill amortization	—	577		—	1,113
Adjust: tax effect	—	(222	)	—	(429	)
Adjusted net income	28,602	25,821		30,504	27,192
Reported basic EPS	1.15	0.99		1.22	1.04
Add back: goodwill amortization	—	0.02		—	0.04
Adjust: tax effect	—	(0.01	)	—	(0.02	)
Adjusted basic EPS	1.15	1.00		1.22	1.06
Reported diluted EPS	1.09	0.95		1.16	0.99
Add back: goodwill amortization	—	0.02		—	0.04
Adjust: tax effect	—	(0.01	)	—	(0.02	)
Adjusted diluted EPS	1.09	0.96		1.16	1.01

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SCP POOL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)(continued)

3. New Accounting Standards (continued)

On January 1, 2002, we adopted SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of and Accounting Principles Board Opinion 30, Reporting on the Results of Operations for a Disposal of a Segment of a Business. The adoption of this Statement did not have a material impact on our financial position or operating results.

4. Comprehensive Income

Comprehensive income for the three months ended June 30, 2002 and June 30, 2001 was $28.8 million and $25.3 million, respectively. Comprehensive income for the six months ended June 30, 2002 and June 30, 2001 was $31.1 million and $26.4 million, respectively.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the year ended December 31, 2001.

Results of Operations

We currently conduct operations through 177 service centers in North America and Europe.

The following table presents information derived from the Consolidated Statements of Income expressed as a percentage of net sales.

(Note)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2002		2001		2002		2001
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	73.4		73.5		73.8		74.1
Gross profit	26.6		26.5		26.2		25.9
Selling and administrative expenses	13.3		13.4		16.3		16.2
Goodwill amortization	—		0.2		—		0.2
Operating income	13.3		12.9		9.8		9.5
Interest expense	0.4		0.4		0.5		0.6
Income before income taxes	12.9		12.5		9.3		8.9

Note: Percentages may not total 100% due to rounding.

We calculate same store growth by excluding the following service centers from the calculation for 15 months:

• New service centers opened within the past 15 months,
• Service centers acquired within the past 15 months and
• Service centers located in the immediate market areas of those mentioned above. Sales often shift from an established location to a newly opened or acquired service center if it is closer in proximity or more convenient for the customer.

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SCP POOL CORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations (continued)

The following discussion of consolidated operating results includes the operating results from service centers acquired in 2001. We accounted for the acquisitions using the purchase method of accounting and the operating results have been included in our consolidated results since the respective acquisition dates.

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Net sales increased $32.4 million, or 10%, to $364.1 million in the three months ended June 30, 2002 from $331.7 million in the comparable 2001 period. A 7% increase in same store sales contributed approximately $18.0 million to the increase, while new locations and service centers acquired in the second half of 2001 accounted for the remaining increase. The increase in same store sales is primarily due to the following:

• a larger installed base of swimming pools resulting in increased sales of non-discretionary products
• the continued execution of our sales, marketing and service programs

Gross profit increased $8.8 million, or 10%, to $96.7 million in the three months ended June 30, 2002 from $87.9 million in the comparable 2001 period. Same store gross profit growth of 8% contributed $5.3 million to the increase while new service centers and stores acquired in the second half of 2001 accounted for the remaining increase. The increase in same store gross profit growth is primarily due to the 7% increase in same store sales.

Gross profit as a percentage of net sales (gross margin) increased slightly to 26.6% in the second quarter of 2002 compared to 26.5% in the second quarter of 2001.

Operating expenses, which consist of selling and administrative expenses, increased $3.2 million, or 7%, to $48.3 million for the three months ended June 30, 2002 compared to $45.1 million in 2001. Operating expenses as a percentage of net sales decreased 30 basis points to 13.3% in 2002 from 13.6% in 2001. Pro forma operating expenses excluding 2001 goodwill amortization increased $3.8 million, or 9%, to $48.3 million for the three months ended June 30, 2002 compared to $44.5 million in 2001. On a pro forma basis, operating expenses as a percentage of net sales decreased 10 basis points to 13.3% for the quarter from 13.4% in the second quarter of 2001.

In the second quarter of 2002, interest expense increased slightly to $1.5 million from $1.4 million in the second quarter of 2001. Although average debt outstanding was higher in the second quarter of 2002, the effective interest rate was approximately 134 basis points lower than last year, which is consistent with the overall decline in interest rates over the past year.

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SCP POOL CORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations (continued)

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Net sales increased $48.5 million, or 10%, to $535.4 million in the six months ended June 30, 2002 from $486.9 million in the comparable 2001 period. A 7% increase in same store sales contributed approximately $27.0 million to the increase, while new service centers and stores acquired in the second half of 2001 accounted for the remaining increase. The increase in same store sales is primarily due to the following:

• a larger installed base of swimming pools resulting in increased sales of non-discretionary products
• the continued execution of our sales, marketing and service programs

Gross profit increased $14.2 million, or 11%, to $140.2 million in the six months ended June 30, 2002 from $126.0 million in the comparable 2001 period. Same store gross profit growth of 8% contributed $7.6 million to the increase, while new service centers and stores acquired in the second half of 2001 accounted for the remaining increase. The increase in same store gross profit growth is primarily due to the 7% increase in same store sales.

Gross margin increased 30 basis points to 26.2% in the first six months of 2002 from 25.9% in the comparable 2001 period, primarily due to continued improvements in pricing accuracy and greater pricing discipline at the point of sale.

Operating expenses, which consist of selling and administrative expenses, increased $7.6 million, or 10%, to $87.5 million in the six months ended June 30, 2002 from $79.9 million in the comparable 2001 period. Operating expenses as a percentage of net sales decreased 10 basis points to 16.3% in the first six months of 2002 from 16.4% in the comparable 2001 period. Pro forma operating expenses excluding 2001 goodwill amortization increased $8.7 million, or 11%, to $87.5 million in the six months ended June 30, 2002 compared to $78.8 million in 2001. On a pro forma basis, operating expenses as a percentage of net sales increased 10 basis points to 16.3% in the first six months of 2002 from 16.2% in the comparable 2001 period.

In the first six months of 2002, interest expense decreased slightly to $2.7 million from $2.9 million in the same period of 2001. Although average debt outstanding was higher in the first six months of 2002, the effective interest rate was approximately 196 basis points lower than last year, which is consistent with the overall decline in interest rates over the past year.

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SCP POOL CORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations (continued)

Seasonality and Quarterly Fluctuations

Our business is highly seasonal, and weather is the principal external factor affecting our business. The following table presents some of the possible effects resulting from various weather conditions.

Weather		Possible Effects
Hot and dry	•	Increase the purchase of chemicals and supplies
		for existing swimming pools
	•	Increased purchases of above ground pools
Unseasonably cool weather or extraordinary	•	Decrease pool installations
amounts of rain	•	Decrease the purchase of chemicals and supplies
	•	Decrease the purchase of impulse items such as above
		ground pools and accessories
Unseasonably early warming trends	•	Increase the length of the pool season, thus
(primarily in the northern region of the US)		increasing our sales
Unseasonably late warming trends	•	Decrease the length of the pool season, thus
(primarily in the northern region of the US)		decreasing our sales

In general, sales and operating income are highest during the second and third quarters, which represent the peak months of swimming pool use and installation. Sales are substantially lower during the first and fourth quarters when we may incur net losses.

We typically experience a build-up of product inventories and accounts payable during the winter months in anticipation of the following peak selling season. Excluding borrowings to finance acquisitions, our peak borrowing usually occurs during the second quarter, primarily because extended payment terms offered by our suppliers typically are payable in April, May and June, while our peak accounts receivable collections typically occur in June, July and August.

We expect that our quarterly operating results will continue to fluctuate depending on the timing and amount of revenue contributed by new service centers and acquisitions. We attempt to open new service centers at the end of the fourth quarter or the first quarter of the subsequent year to take advantage of preseason sales programs and the following peak selling season.

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SCP POOL CORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations (continued)

Seasonality and Quarterly Fluctuations (continued)

The following table presents certain unaudited quarterly data for the first and second quarters of 2002 and the four quarters of 2001. In our opinion, this information reflects all normal and recurring adjustments considered necessary for a fair presentation of this data. The results of any of these quarters are not necessarily a good indication of results for an entire fiscal year or of continuing trends.

(Dollars, in thousands)	QUARTER
(Unaudited)	2002		2001
	First	Second	First		Second		Third		Fourth
Net sales	171,354	364,088	155,207		331,685		235,742		131,600
Gross profit	43,502	96,695	38,104		87,858		61,659		33,254
Operating income (loss)	4,331	48,375	3,202		42,808		21,759		(3,900	)
Net sales as a % of annual
net sales	N/A	N/A	18	%	39	%	28	%	15	%
Gross profit as a % of
annual gross profit	N/A	N/A	17	%	40	%	28	%	15	%
Operating income (loss) as
a % of annual operating
income	N/A	N/A	5	%	67	%	34	%	(6	)%

Financial Condition

Liquidity and Capital Resources

Our primary sources of working capital are cash from operations supplemented by bank borrowings under a credit agreement (the Credit Agreement) with a group of banks. Our primary capital needs are seasonal working capital obligations and other general corporate purposes, including acquisitions. Borrowings, together with cash from operations and seller financing, historically have been sufficient to support our growth and finance acquisitions.

Net cash provided by operating activities was $8.4 million for the six months ended June 30, 2002 compared to $2.0 million in the same period last year. We expect cash flows from operations will continue to increase in the third quarter of 2002 as we collect the seasonal build-up in accounts receivable with reductions in inventory and accounts payable largely offsetting one another.

The Credit Agreement, which matures on November 27, 2004, allows us to borrow up to $110.0 million under a revolving line of credit (the Revolving Credit Facility). The Credit Agreement also has an “accordion” feature that permits us, under certain circumstances, to increase the Revolving Credit Facility to $150.0 million.

During the six months ended June 30, 2002, we received net proceeds of $12.5 million from the Revolving Credit Facility. At June 30, 2002, there was $97.5 million outstanding and $12.5 million available for borrowing under the Revolving Credit Facility.

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SCP POOL CORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Financial Condition (continued)

Liquidity and Capital Resources (continued)

Interest on borrowings under the Revolving Credit Facility may be paid at either of the following rates, in each case depending on our leverage ratio:

1. the agent's corporate base rate or the federal funds rate plus 0.5%, whichever is higher, plus a margin ranging from 0.125% to 0.375%, or
   
   
2. the current Eurodollar Rate plus a margin ranging from 1.125% to 1.750%

Substantially all of our assets, including the capital stock of our wholly-owned subsidiaries, secure our obligations under the Revolving Credit Facility. The Revolving Credit Facility has numerous restrictive covenants, which require that we maintain a minimum net worth and fixed charge coverage and which also restrict our ability to pay dividends. As of June 30, 2002, we were in compliance with all covenants and financial ratio requirements. The effective interest rate of the Revolving Credit Facility was 4.2% at June 30, 2002.

We believe we have adequate availability of capital to fund our current operations and anticipated growth, including expansion in existing and targeted market areas. We continually evaluate potential acquisitions and we have held discussions with a number of acquisition candidates. However, we currently have no binding agreement with respect to any material acquisition candidate. If suitable acquisition opportunities or working capital needs arise that would require additional financing, we believe that our current financial position and earnings history provide a solid basis for obtaining additional financing resources at competitive rates and terms. Additionally, we may issue common or preferred stock in connection with any such acquisition.

Accounts Receivable and the Allowance for Doubtful Accounts

Accounts receivable increased $10.2 million, or 8%, to $144.6 million at June 30, 2002 compared to $134.4 million at June 30, 2001. This increase is commensurate with the increase in sales, and approximately 96% of the accounts receivable balance at June 30, 2002 was included in the “current” or “under 30 days past due” categories of the aging compared to 94% at June 30, 2001. Less than 3% of the accounts receivable balance at June 30, 2002 was included in the “greater than 60 days past due” category of the aging compared to nearly 4% at June 30, 2001.

As we have improved the quality of our accounts receivable aging, the allowance for doubtful accounts decreased to $3.3 million at June 30, 2002 compared to $3.6 million in 2001. In 2002, we reserved approximately 96% of the accounts receivable in the “greater than 60 days” aging category, compared to 81% in 2001.

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SCP POOL CORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Financial Condition (continued)

Product Inventories and the Reserve for Shrink and Obsolescence

Product inventories represent the largest asset on our balance sheet. Our goal is to manage our inventory such that we minimize stock-outs, thus providing the highest level of service to our customers. This requires maintaining at each service center the inventory SKUs with the highest sales volume. Inventory per service center has increased approximately 7% as we improve the availability of our high velocity items such as chemicals, accessories and whole goods such as pumps, filters, heaters and cleaners. At the same time, we are continuously working to better manage our slower moving classes of inventory which are not as important to our customers and thus inherently have lower velocity. We refer to our highest velocity goods as inventory classes 1 – 3. These products represent approximately 80% of our net sales. Inventory classes 4 – 12 consist of lower velocity goods that we stock to maintain a high level of customer service. Class 13 inventory consists of items with no sales at a particular service center for a period of twelve months or longer.

Product inventories increased $31.1 million, or 23%, to $168.9 million at June 30, 2002 from $137.8 million at June 30, 2001. This increase reflects the following:

• Fifteen service centers added to our distribution network in the past twelve months
• A 10% increase in sales in 2002 compared to 2001

At June 30, 2002, the inventory balance was approximately $10.0 million higher than our targeted balance for the end of the second quarter. Strong April sales drove inventory purchases in May and June, when the weather proved to be milder than expected. This additional inventory is primarily comprised of high velocity goods with little or no risk of obsolescence.

As we have improved the quality of our inventory, the inventory reserve has decreased to $3.9 million at June 30, 2002 from $6.0 million at June 30, 2001. The balance of class 13 inventory has decreased from 8.0% of total inventory at the end of the 2001 pool season to 4.2% at June 30, 2002. Our reserve as a percentage of class 13 inventory has remained consistent between periods. At June 30, 2002, approximately 70% of our inventory balance was comprised of high velocity inventory classes 1 – 3.

Share Repurchases

From June 1 through July 24, 2002, we repurchased 1.4 million shares of our common stock at an average price of $26.49 per share.

Since October 1998, we have repurchased a total of 3.4 million shares of our common stock at an average price of $18.94 per share. On July 23, 2002, the Board of Directors authorized an additional $50.0 million for the repurchase of our common stock in the open market.

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SCP POOL CORPORATION

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

There have been no material changes from what we reported in our Form 10-K for the year ended December 31, 2001.

Foreign Exchange Risk

There have been no material changes from what we reported in our Form 10-K for the year ended December 31, 2001.

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SCP POOL CORPORATION

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

Our disclosure and analysis in this report contains forward-looking information that involves risks and uncertainties. From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Forward-looking statements give our current expectations or forecasts of possible future results or events. You can identify these statements by the fact that they do not relate strictly to historic or current facts. We often use words such as “anticipate”, “estimate”, “expect”, “believe” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance.

Among the factors that could cause actual results to differ materially are the following:

• the sensitivity of the industry to weather conditions
• the intense competition and low barriers to entry in the industry
• the sensitivity of the industry to general economic and market conditions
• our ability to:

• penetrate new markets

• identify appropriate acquisition candidates, complete acquisitions on satisfactory terms and successfully integrate acquired businesses

• obtain financing on satisfactory terms

• generate sufficient cash flows to support expansion plans and for general operating activities

• maintain favorable supplier arrangements and relationships

• remain in compliance with the numerous environmental, health and safety requirements to which it is subject

• the effectiveness of our advertising, marketing and promotional programs
• changes in laws and regulations, including changes in accounting standards and taxation requirements (including tax rate changes, new tax laws and revised tax law interpretations)
• the risk of fire, safety and casualty losses and related liability claims inherent in the storage of the chemicals that we sell

We cannot guarantee that any future event or result will be realized, although we believe we have been prudent in our plans and assumptions. Should additional risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from those anticipated. Investors should bear this in mind as they consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of subsequent events, new information or otherwise.

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SCP POOL CORPORATION

Part II. Other Information

Item 4. Submission of Matters to a Vote of Security Holders

At the Annual Meeting of Stockholders held on May 8, 2002, the following proposals were adopted by the margins indicated:

1. To elect a Board of Directors to hold office until the next Annual Meeting of Stockholders and until their successors are elected and qualified.

	Number of Shares
	For	Withheld
Andrew W. Code	20,532,551	332,129
James J. Gaffney	20,500,571	364,109
Manuel J. Perez de la Mesa	20,531,738	332,942
Frank J. St. Romain	20,452,019	412,661
Wilson B. Sexton	20,531,288	333,392
Robert C. Sledd	20,500,296	364,384
John E. Stokely	20,500,296	364,384

2. To adopt the SCP Pool Corporation 2002 Long-Term Incentive Plan

For	20,033,314
Against	802,985
Abstain	28,381

3. To ratify the appointment of Ernst & Young LLP, certified public accountants, as the Company's independent auditors for the fiscal year ending December 31, 2002.

For	20,710,643
Against	134,044
Abstain	19,993

14

SCP POOL CORPORATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits required by Item 601 of Regulation S-K

3.1 Restated Certificate of Incorporation of the Company. ⁽¹⁾

3.2 Restated Bylaws of the Company. ⁽¹⁾

4.1 Form of certificate representing shares of common stock of the Company. ⁽²⁾

10.1 Amendment No. 1 To Amended and Restated SCP Pool Corporation Non-Employee Directors Equity Incentive Plan

10.2 Amended and Restated SCP Pool Corporation Employee Stock Purchase Plan

10.3 SCP Pool Corporation 2002 Long-Term Incentive Plan

(b) Reports on Form 8-K
On April 16, 2002, the Company furnished a Form 8-K, Item 9, Regulation FD Disclosure, announcing the Company's first quarter earnings results.

On May 9, 2002, the Company furnished a Form 8-K, Item 9, Regulation FD Disclosure, announcing the Company's annual meeting voting results.

Items 1, 2, 3 and 5 are not applicable and have been omitted.

_________________

1. Incorporated by reference to the respective exhibit to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2001.
2. Incorporated by reference to the respective exhibit to the Company's Registration Statement No. 33-92738.

15

SCP POOL CORPORATION

Signature Page

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on July 26, 2002.

SCP POOL CORPORATION

By:  /s/ Craig K. Hubbard

Craig K. Hubbard

Chief Financial Officer, Treasurer and Secretary
and duly authorized signatory on behalf of the Registrant

16

EX-10

AMENDMENT NO. 1 TO

AMENDED AND RESTATED

SCP POOL CORPORATION

NON-EMPLOYEE DIRECTORS EQUITY INCENTIVE PLAN

The Board of Directors of SCP Pool Corporation has amended Section 4 of the Amended and Restated SCP Pool Corporation Non-Employee Directors Equity Incentive Plan (“Plan”) pursuant to Section 11 of the Plan. Section 4 of the Plan has been replaced to read as follows:

4. Limitation on Aggregate Shares. The aggregate maximum number of shares of Common Stock that may be granted pursuant to the Plan or issued upon exercise of options granted pursuant to the Plan shall be 600,000; provided, however, that if any options granted under this Plan expire unexercised or unpaid or are cancelled, terminated or forfeited in any manner without the issuance of Common Stock thereunder, the shares with respect to which such options were granted shall be available under this Plan. Such shares of Common Stock may be either authorized and unissued shares, treasury shares or a combination thereof, as the Committee shall determine. Such maximum number of shares is subject to adjustment under the provisions of paragraph 5.

EX-10

AMENDED AND RESTATED

SCP POOL CORPORATION

EMPLOYEE STOCK PURCHASE PLAN

ARTICLE I

GENERAL

1.1 Establishment of Plan. SCP Pool Corporation, a Delaware corporation (the “Company”) with principal offices located in Covington, LA, has adopted the following employee stock purchase plan for its eligible employees, effective on July 1, 1998. This Plan shall be known as the “SCP Pool Corporation Employee Stock Purchase Plan.”

1.2 Purpose. The purpose of this Plan shall be to promote the long-term growth and profitability of the Company and its subsidiaries by: (i) providing an opportunity for eligible employees to become shareholders in the Company with incentives to maximize stockholder value and otherwise contribute to the success of the Company and (ii) enabling the Company to attract, retain and reward the best available employees.

1.3 Qualification. This Plan is intended to be an employee stock purchase plan which qualifies for favorable Federal income tax treatment under Section 423 of the Code, and the provisions of this Plan should be construed so as to extend and limit participation in a manner consistent with the requirements of Section 423 of the Code.

1.4 Rule 16b-3 Compliance. This Plan is intended to comply with Rule 16b-3 under the Securities Exchange Act of 1934, and should be interpreted in accordance therewith.

ARTICLE II

DEFINITIONS

As used herein, the following words and phrases shall have the meanings specified below:

2.1 Board of Directors. The Board of Directors of SCP Pool Corporation.

2.2 Closing Market Price. The last sale price of the stock as reported in the Nasdaq National Market System on the date specified; or if no sales occurred on such day, at the mean between the closing “bid” and “asked” prices on such day; but if there should be any material alteration in the present system of reporting sales prices of such Stock, or if such Stock should no longer be listed on the Nasdaq National Market System, the market value of the Stock as of a particular date shall be determined in such a method as shall be specified by the Plan Administrator.

2.3 Code. The Internal Revenue Code of 1986, as amended from time to time.

2.4 Commencement Date. The first day of each Plan Period (January 1 and July 1). The first Commencement Date shall be July 1, 1998.

2.5 Contribution Account. The account established on behalf of the Participant to which shall be credited the amount of the Participant’s contributions pursuant to Article V.

2.6 Effective Date. July 1, 1998.

2.7 Employee. Each Employee (within the meaning of Code (S)423(b)(1)) of the Employer except: (a) any employee whose customary employment is less than one thousand (1,000) hours per year, or (b) any employee who has been employed by an Employer for less than six (6) consecutive months.

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2.8 Employer. SCP Pool Corporation and any domestic corporation which is a Subsidiary of the Company (except for a Subsidiary which by resolutions of the Board of Directors is expressly not authorized to become a participating Employer). The term “Employer” shall include any domestic corporation into which an Employer may be merged or consolidated or to which all or substantially all of its assets may be transferred, provided such corporation does not affirmatively disavow this Plan. A foreign subsidiary is not authorized to become a participating Employer.

2.9 Five-Percent Shareholder. An Employee who owns five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary thereof. In determining this five percent test, shares of stock which the Employee may purchase under outstanding options, as well as stock attributed to the Employee under Section 424(d) of the Code, shall be treated as stock owned by the Employee in the numerator, but shares of stock which may be issued under options shall not be counted in the total of outstanding shares in the denominator (except for shares attributable to outstanding stock options of the Employee in question, which shall be counted in the denominator).

2.10 Nasdaq. The National Association of Securities Dealers Automated Quotation System.

2.11 Participant. Any Employee of an Employer who has met the conditions for eligibility as provided in Article IV and who has elected to participate in the Plan.

2.12 Plan. SCP Pool Corporation Employee Stock Purchase Plan.

2.13 Plan Administrator. The committee composed of one or more individuals to whom authority is delegated by the Board of Directors to administer the Plan. The initial committee shall be the Compensation Committee of the Board of Directors.

2.14 Plan Period. Successive periods of six (6) months (i) commencing on January 1 and ending on June 30 and (ii) commencing on July 1 and ending on December 31.

2.15 Purchase Date. The last day of each Plan Period of the Plan.

2.16 Purchase Price. The price per share of the Stock to be charged to Participants at the Purchase Date, as determined in Section 6.2.

2.17 Statutory Insider. Any individual subject to Section 16(a) of the Securities Exchange Act of 1934, as amended, and any other person so designated by resolution of the Board of Directors.

2.18 Stock. Those shares of Common Stock of the Company, par value $.001 per share, which are reserved for issuance under the terms of this Plan.

2.19 Stock Account. The account established on behalf of the Participant to which shall be credited the shares of Stock purchased with each Participant’s contributions pursuant to Article VI.

2.20 Subsidiary. Any domestic corporation in an unbroken chain of corporations beginning with the Company each of which (other than the last corporation in the chain) owns stock possessing fifty percent (50%) or more of the combined voting power of all classes of stock in one of the other corporations in such chain.

ARTICLE III

SHAREHOLDER APPROVAL

3.1 Condition Precedent. No purchases under the Plan shall be made without approval of the Plan by the shareholders of the Company. In the event the shareholders of the Company shall not approve the Plan, all rights and obligations hereunder shall be void ab initio.

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3.2 Shareholder Approval Required for Certain Amendments. Without the approval of the shareholders of the Company, no amendment to this Plan shall:

1. increase the number of shares reserved under the Plan, other than as provided in Section 10.3.
   
   
2. materially increase the benefits accruing to the Statutory Insiders under the Plan;
   
   
3. change the method of determining the Purchase Price pursuant to Section 6.2 so that the Purchase Price is reduced for Statutory Insiders, other than as provided in Section 10.3; or
   
   
4. make participation in the Plan available to any person who is not an Employee.

Approval by shareholders must comply with applicable provisions of the corporate charter and bylaws of the Company and with Delaware law prescribing the method and degree of shareholder approval required for reservation and issuance of corporate stock.

ARTICLE IV

ELIGIBILITY AND PARTICIPATION

4.1 Conditions of Eligibility. Each Employee shall become eligible to become a Participant on the Commencement Date for each Plan Period if such Employee (i) has been employed by the Employer for a continuous period of employment of at least six (6) months prior to the Commencement Date, or otherwise meets this requirement as described below, and (ii) regularly works at least 1,000 hours during the calendar year. A continuous period of employment means the absence of any interruption or termination of service as an Employee. A continuous period of employment will be treated as continuing intact while the Employee is on military, sick leave or other bona fide leave of absence as approved by the Employer, provided such leave does not exceed 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or in the case of transfers between locations of the Company or between the Company and any of its Subsidiaries. Where the period of leave exceeds 90 days and where the Employee’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship, for purposes of this plan, will be deemed to have terminated on the 91^st day of such leave. A former employee that is rehired by the Company or a Subsidiary shall be eligible to become a Participant in the Plan on the Commencement Date of the next Plan Period coinciding with or following reemployment, if the employee had satisfied the Plan’s conditions of eligibility, pursuant to Sections 4.1(i) and 4.1(ii), prior to termination of employment, and the Employee is otherwise eligible to participate upon his return to employment. No Employee who is a Five-Percent Shareholder shall be eligible to participate in the Plan. Notwithstanding anything to the contrary contained herein, no individual who is not an Employee shall be able to purchase Stock under the Plan.

4.2 Application for Participation. Each Employee who becomes eligible to participate shall be furnished a summary of the Plan and an enrollment form. If such Employee elects to participate hereunder, he or she shall complete such form and file it with his or her Employer no later than five (5) business days prior to the Commencement Date for the Plan Period for which the Employee is enrolling. The completed enrollment form shall indicate the amount of Employee contribution authorized by the Employee. A participating Employee will be deemed to have authorized the same payroll deduction for each subsequent payroll period provided that he or she is eligible to participate during each subsequent payroll period. A participating Employee may increase or decrease his or her payroll deduction as of the first day of the first full payroll period of any Plan period by filing the required form, in the time and manner prescribed by the Plan Administrator. Except as provided in Section 5.4, if any Employee does not elect to participate for any given Plan Period, such Employee may elect to participate on any future Commencement Date so long as he or she continues to meet the eligibility requirements.

4.3 Date of Participation. All Employees who elect to participate shall be enrolled in the Plan commencing with the first pay date after the Commencement Date following their submission of the enrollment form. Upon becoming a Participant, the Participant shall be bound by the terms of this Plan, including any amendments whenever made.

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4.4 Acquisition or Creation of Subsidiary. If the stock of a corporation is acquired by the Company or another Employer so that the acquired corporation becomes a Subsidiary, or if a Subsidiary is created, the Subsidiary in either case shall automatically become an Employer and its Employees shall become eligible to participate in the Plan on the first Commencement Date after the acquisition or creation of the Subsidiary, as the case may be. In the case of an acquisition, credit shall be given to Employees of the acquired Subsidiary for service with such corporation prior to the acquisition for purposes of satisfying the requirement of Section 4.1 of six (6) months continuous employment. Notwithstanding the foregoing, the Board of Directors may by appropriate resolutions (i) provide that the acquired or newly created Subsidiary shall not be a participating Employer, (ii) specify that the acquired or newly created Subsidiary will become a participating Employer on a date other than the first Commencement Date after the acquisition or creation, or (iii) attach any conditions whatsoever (including denial of credit for prior service) to eligibility of the employees of the acquired or newly created Subsidiary.

ARTICLE V

CONTRIBUTION TO ACCOUNT

5.1 Employee Contributions. The Plan Administrator will cause to be established a Contribution Account and a Stock Account for each Participant under the Plan for bookkeeping purposes. The enrollment form signed by each Participant shall authorize the Employer to deduct from the Participant’s compensation an after-tax amount in an exact number of dollars during each payroll period amounting to not less than twenty-five dollars ($25.00) for each payroll period (the “payroll deduction”). The payroll deduction shall be credited to the Participant’s Contribution Account. Participant contributions will not be permitted to commence at any time during the Plan Period other than on a Commencement Date. No interest will accrue on any contributions or on the balance in a Participant’s Contribution Account.

5.2 Modification of Contribution Rate. No change shall be permitted in a Participant’s amount of withholding except upon a Commencement Date. An enrollment form designating the desired withholding rate must be filed for each Plan Period no later than five (5) business days prior to the Commencement Date for that Plan Period. Notwithstanding the foregoing, a Participant may notify the Employer at any time prior to the Purchase Date that such Participant wishes to discontinue his or her contributions. This notice shall be in writing and on such forms as provided by the Employer and shall become effective as of a date provided on the form not more than thirty (30) days following its receipt by the Employer. The Participant shall become eligible to recommence contributions on the next Commencement Date, subject to a special rule for Statutory Insiders provided in Section 5.4.

5.3 Withdrawal of Contributions. A Participant may elect to withdraw the balance of his or her Contribution Account at any time during the Plan Period prior to the Purchase Date. This election to withdraw must be in writing on such forms as may be provided by the Employer. If contributions are withdrawn in this manner, further contributions during that Plan Period will be discontinued in the manner provided in Section 5.2. and the Participant will not be permitted to make any lump sum contributions pursuant to Section 5.5 for the remainder of that Plan Period. The Participant shall become eligible to recommence contributions on the next Commencement Date, subject to a special rule for Statutory Insiders provided in Section 5.4.

5.4 Suspension for Statutory Insider. If a Statutory Insider discontinues contributions hereunder during a Plan Period, whether or not such Statutory Insider withdraws the balance of his or her Contribution Account, such person shall not become eligible to recommence contributions until the first Commencement Date occurring after the date which is six months subsequent to the later of the date of discontinuance of contributions or (if applicable) the date of withdrawal of the balance in such Statutory Insider’s Contribution Account.

5.5 Lump Sum Contribution. Subject to the limitation described in Section 5.6, a Participant, who has not during a Plan Period discontinued his or her contributions pursuant to Section 5.2 or elected to withdraw his or her contributions pursuant to Section 5.3, may make a lump sum contribution at any time during such Plan Period. The lump sum contribution shall be paid by check by the Participant and shall be credited to the Participant’s Contribution Account.

4

5.6 Limitation on Contributions. A Participant shall be allocated the number of shares of Stock which may be purchased with such Participant’s contributions; provided, that a Participant may purchase no more than 1,000 shares of Stock in any calendar year under this Plan (including both contributions by payroll deduction during the two Plan Periods pursuant to Section 5.1 and lump sum contributions pursuant to Section 5.5). In the case of any partial calendar year in which the Plan is in effect, a Participant shall purchase no more than the number of shares of Stock equal to (i) the number of full or partial Plan Periods in such year in which the Plan is in effect, multiplied by (ii) 500 shares of Stock). If a Participant’s total contributions should exceed this limit, the excess shall be returned to the Participant after the end of the Plan Period, without interest. Notwithstanding the foregoing, no right to purchase shares of Stock under this Plan shall permit a Participant to purchase shares of Stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company at a rate which in aggregate exceeds $25,000 of fair market value of such Stock (determined at the time the right is granted) for each calendar year in which the right is outstanding at any time.

ARTICLE VI

PURCHASE AND ISSUANCE OF STOCK

6.1 Reserved Shares of Stock. The Company shall reserve 425,000 shares of Stock for issuance upon purchase under this Plan.

6.2 Determination of Purchase Price. The Purchase Price for Stock issued under this Plan for any Plan Period shall be the lesser of (a) eighty-five percent (85%) of the Closing Market Price of the Stock on the last trading day of the Plan Period, or (b) eighty-five percent (85%) of the average of the Closing Market Price of the Stock on the Commencement Date and the Closing Market Price of the Stock on the last trading day of the Plan Period.

6.3 Purchase of Stock. On a Purchase Date, the Contribution Account of each Participant shall be used to purchase shares of Stock which shall be allocated to each Participant’s Stock Account. The maximum number of whole shares of Stock purchased shall be determined by one of the following methods:

(a) by dividing the Purchase Price into the balance of each of the Participant’s Contribution Account and purchasing the nearest whole-share amount of Stock. Any money remaining in a Participant’s Contribution Account representing a fractional share shall remain in such Participant’s Contribution Account to be used in the next Plan Period along with new contributions in the next Plan Period; provided, however, that if the Participant does not enroll for the next Plan Period, the balance remaining shall be returned to the Participant in cash; or

(b) by dividing the Purchase Price into the balance of all of the Participants’ Contribution Accounts and allocating the purchased shares among the Participants’ Share Accounts according to the amount contributed (including fractional share amounts, if any).

Shares of Stock allocated to each Participant’s Share Account shall remain uncertificated until such Participant requests the issuance of stock certificates through the procedure set forth under Section 8.1 hereto. Fractional share amounts in a Participant’s Share Account shall not be certificated but will remain in a Participant’s Stock Account or be exchanged for cash under the circumstances set forth in Section 8.1 hereto. The Plan Administrator shall determine in its discretion whether method (a) or (b) above is applied, and the method chosen shall be applied to all Participants for a given Purchase Date.

6.4 Pro-Rata Reduction of Stock. If the total number of shares of Stock to be purchased by all Participants on a Purchase Date exceeds the number of shares of Stock remaining authorized for issuance under Section 6.1 (subject to adjustment upon the occurrence of an event described in Section 10.3), a pro-rata allocation of the shares of Stock available for issuance will be made among Participants in proportion to their respective Contribution Account balances on the Purchase Date, and any money remaining in the Contribution Accounts shall be returned to the Participants.

5

6.5 State Securities Laws. Notwithstanding anything to the contrary contained herein, the Company shall not be obligated to issue shares of Stock to any Participant if to do so would violate any state securities law applicable to the sale of Stock to any Participant. In the event that the Company refrains from issuing shares of Stock to any Participant in reliance on this Section, the Company shall return to such Participant the amount in such Participant’s Contribution Account that would otherwise have been applied to the purchase of Stock.

ARTICLE VII

TERMINATION OF PARTICIPATION

7.1 Termination of Employment. Any Employee whose employment with the Employer is terminated for any reason except death, disability or retirement at or after age 65 shall cease being a Participant immediately. The balance of that Participant’s Contribution Account shall be paid to such Participant as soon as practical after such Participant’s termination.

7.2 Death. If a Participant should die while employed by the Employer, no further contributions on behalf of the deceased Participant shall be made. The legal representative of the deceased Participant may elect to withdraw the balance in said Participant’s Contribution Account by notifying the Employer in writing prior to the Purchase Date next occurring after the death of the Participant. In the event no election to withdraw is made on or before the Purchase Date, the balance accumulated in the deceased Participant’s Contribution Account shall be used to purchase shares of Stock in accordance with Section 6.3. Any money remaining which is insufficient to purchase a whole share shall be paid to the legal representative. Shares purchased pursuant to this Section 7.2 may not qualify for favorable tax treatment under Code (S)423.

7.3 Retirement. If a Participant should retire from the employment of Employer at or after attaining age 65, no further contributions on behalf of the retired Participant shall be made. The Participant may elect to withdraw the balance in such Participant’s Contribution Account by notifying the Employer in writing prior to the Purchase Date next occurring after the date such Participant retired. In the event no election to withdraw is made on or before the Purchase Date, the balance accumulated in the retired Participant’s Contribution Account shall be used to purchase shares of Stock in accordance with Section 6.3 and any money remaining which is insufficient to purchase a whole share shall be paid to the retired Participant. Shares purchased pursuant to this Section 7.3 may not qualify for favorable tax treatment under Code (S)423.

7.4 Disability. If a Participant should terminate employment with the Employer on account of disability, as determined by reference to the definition of “disability” in the SCP Pool Corporation Savings and Retirement Fund policy, no further contributions on behalf of the disabled Participant shall be made. The Participant may elect to withdraw the balance in such Participant’s Contribution Account by notifying the Employer in writing prior to the Purchase Date next occurring after the Participant became disabled. In the event no election to withdraw is made on or before the Purchase Date, the balance accumulated in the disabled Participant’s Contribution Account shall be used to purchase shares of Stock in accordance with Section 6.3, and any money remaining which is insufficient to purchase a whole share shall be paid to the disabled Participant.

6

ARTICLE VIII

OWNERSHIP OF STOCK

8.1 Issuance of Stock Certificates. Stock certificates for the number of whole shares of Stock in each Participant’s Stock Account may be issued to Participants only upon the receipt by the Plan Administrator (or its agent) of a Participant’s written request indicating the number of shares of Stock (to a maximum of the number of whole shares of Stock in the Participant’s Stock Account) for which the Participant wishes to receive certificates. Such request shall be made on a form at the time prescribed by the Plan Administrator and filed with the Plan Administrator (or its agent). Share certificates may be issued, at the request of the Participant, in the name of the Participant, jointly in the name of the Participant and a member of the Participant’s family, or to the Participant as custodian for the Participant’s child under the Gift to Minors Act. Share certificates shall be issued to the Participant as soon as practicable after receipt of Participant’s request. In addition to any restrictions on transfer set forth in Section 8.3, no person shall have any right to sell, assign, mortgage, pledge, hypothecate or otherwise encumber any uncertificated shares of Stock allocated to a Participant’s Stock Account. Fractional share amounts shall not be certificated and shall remain in a Participant’s Stock Account or, if the Participant is withdrawing from the Plan, be exchanged for cash upon the request of the Participant (or legal representative) at a rate determined by the Closing Market Price on the trading day immediately preceding such request.

8.2 Notice to Company Upon Sales of Stock Within Two Years of Purchase. If a Participant (or former Participant) sells or otherwise disposes of any shares of Stock obtained under this Plan prior to two (2) years after the Purchase Date, such Participant must notify the Employer immediately in writing concerning such disposition.

8.3 Transfer Restrictions. No Participant shall sell, assign or otherwise transfer any shares of Stock acquired on any Purchase Date for a period of six months following such Purchase Date without the consent of the Plan Administrator. The Plan Administrator may, in its sole discretion, discontinue any Participant’s participation in the Plan for any period of time upon the occurrence of any such sale or transfer.

8.4 Cash Dividends, Stock Splits and Distributions.

1. Cash Dividends. Cash dividends attributable to shares of Stock allocated to Participants’ Stock Accounts as of the record date for which such cash dividends are declared will be credited to Participants’ Contribution Accounts as of the dividend payment date and applied to Stock purchases and allocations on the next Purchase Date in accordance with the methods set forth in Articles V and VI hereof.
   
   
2. Stock Distributions and Stock Splits. Stock distributions and Stock splits attributable to Stock allocated to Participants’ Stock Accounts as of the Purchase Date or the Stock split effective date will be credited directly to Participants’ Stock Accounts as of the record date and the effective date, respectively, of such Stock distributions and such Stock splits. Any cash payments by the Company made with respect to fractional shares of Stock created by Stock splits shall be credited to Participants’Contribution Accounts as of the effective date of any such stock split.
   
   
3. Company shall issue, and the Plan Administrator shall allocate, such Stock rights and/or warrants directly to the appropriate Participants as though the shares of Stock allocated to the account of each such Participant were held of record by such Participant. Certificates representing such Stock rights or warrants, if any such certificates have been authorized by the Board of Directors of the Company, may be issued to Participants pursuant to the procedures set forth in Section 8.1 of this Plan.

8.5 Voting Rights. Holders of Stock have the right to vote on matters affecting the Company. If one of these matters is submitted to the shareholders for a vote, then following the record date for any shareholder meeting at which such vote is to occur, the Plan Administrator shall advise the Company of the number of Participants for whom Stock is held in Stock Accounts on such record date, and the Company shall furnish the Plan Administrator (or its agent) with sufficient sets of its proxy soliciting materials to deliver one set to each such Participant. The Plan Administrator shall thereupon forward one set to each Participant for whom allocated Stock is being held and request voting instructions. Upon receipt of voting instructions, the Plan Administrator shall vote the Stock as instructed. The Plan Administrator shall not vote any Stock allocated to a Participant’s Stock Account unless voting instructions have been received from the Participant.

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8.6 Records and Reports to Participants. The Plan Administrator shall cause to be maintained true and accurate books of account, and a record of all transactions under the Plan, and such accounts, books and records relating thereto shall be open to inspection and audit by such person or persons designated by the Company. At least annually, but in all cases on or before March 31 of each year, the Plan Administrator shall file with the Chief Financial Officer of the Company a written report setting forth all receipts and disbursements and other transactions effected on behalf of the Plan during the last preceding Plan year, including a description of all Stock purchased together with the cost of all such Stock. Such report shall also disclose any liabilities of the Plan and shall show, as of the close of the Plan year, the value of each active Contribution Account and Stock Account of each Participant together with the record of Stock certificates delivered to each of the Participants during such Plan year. The Plan Administrator shall have the right to maintain one or more bank accounts for funds contributed to the Plan, and to make deposits in and withdrawals therefrom in connection with its administration of the Plan.

An annual report shall be rendered to each Participant in the Plan annually within 90 days after the close of the Plan year, showing for the Plan year just ended: (i) the amounts of Employee payroll deductions made for each Participant; (ii) the amounts of cash dividends credited to such Participant’s Contribution Account; (iii) the number of shares of Stock acquired for such Participant’s Stock Account (including the amounts of Stock distributions or Stock splits so allocated or credited); (iv) the cost to the Participant per share of Stock purchased for such Participant; (v) the number of shares, if any, for which certificates were delivered to such Participant; and (vi) the beginning and ending balances in the Participant’s Stock Account and Contribution Account.

ARTICLE IX

ADMINISTRATION AND AMENDMENT

9.1 Administration. The Plan Administrator shall (i) administer the Plan and keep records of the Stock Account and Contribution Account balances of each Participant, (ii) interpret the Plan, and (iii) determine all questions arising as to eligibility to participate, amount of contributions permitted, determination of the Purchase Price, and all other matters of administration. The Plan Administrator shall have such duties, powers and discretionary authority as may be necessary to discharge the foregoing duties, and may delegate any or all of the foregoing duties to any individual or individuals (including officers or other Employees who are Participants.) The Board of Directors shall have the right at any time and without notice to remove or replace any individual or committee of individuals serving as Plan Administrator. All determinations by the Plan Administrator shall be conclusive and binding on all persons. Any rules, regulations, or procedure that may be necessary for the proper administration or functioning of this Plan that are not covered in this Plan document shall be promulgated and adopted by the Plan Administrator.

9.2 Amendment. The Board of Directors of the Company may at any time amend the Plan in any respect, including termination of the Plan, without notice to Participants. If the Plan is terminated, the balance in each Participant’s Contribution Account shall be paid to that Participant. Notwithstanding the foregoing, no amendment of the Plan as described in Section 3.2 shall become effective until and unless such amendment is approved by the shareholders of the Company.

ARTICLE X

MISCELLANEOUS

10.1 Expenses. The Employer will pay all expenses of administering the Plan that may arise in connection with the Plan. No expenses attributable to a Participant’s sale of Stock, however, will be borne by the Employer.

10.2 No Contract of Employment. Nothing in this Plan shall be construed to constitute a contract of employment between an Employer and any Employee or to be an inducement for the employment of any Employee. Nothing contained in this Plan shall be deemed to give any Employee the right to be retained in the service of an Employer or to interfere with the right of an Employer to discharge any Employee at any time, with or without cause, regardless of the effect which such discharge may have upon him as a Participant of the Plan.

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10.3 Adjustment Upon Changes in Stock. The aggregate number of shares of Stock reserved for purchase under the Plan as provided in Section 6.1, and the calculation of the Purchase Price as provided in Section 6.2, shall be adjusted by the Plan Administrator (subject to direction by the Board of Directors) in an equitable manner to reflect changes in the capitalization of the Company, including, but not limited to, such changes as result from merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, combination of shares, exchange of shares and change in corporate structure. If any adjustment under this Section 10.3 would create a fractional share of Stock or a right to acquire a fractional share of Stock, such fractional share shall disregarded and the number of shares available under the Plan shall be the next lower number of shares, rounding all fractions downward.

10.4 Employer’s Rights. The rights and powers of any Employer shall not be affected in any way by its participation in this Plan, including but not limited to the right or power of any Employer to make adjustments. reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell or transfer all or any part of its business or assets.

10.5 Limit on Liability. No liability whatever shall attach to or be incurred by any past, present or future shareholders, officers or directors, as such, of the Company or any Employer, under or by reason of any of the terms, conditions or agreements contained in this Plan or implied therefrom, and any and all liabilities of any and all rights and claims against the Company, an Employer, or any shareholder, officer or director as such, whether arising at common law or in equity or created by statute or constitution or other wise, pertaining to this Plan, are hereby expressly waived and released by every Participant as a part of the consideration for any benefits under this Plan; provided, however, no waiver shall occur, solely by reason of this Section 10.5, of any right which is not susceptible to advance waiver under applicable law.

10.6 Gender and Number. For the purposes of the Plan, unless the contrary is clearly indicated. the use of the masculine gender shall include the feminine, and the singular number shall include the plural and vice versa.

10.7 Governing Law. The validity, construction, interpretation, administration and effect of this Plan, and any rules or regulations promulgated hereunder, including all rights or privileges of any Participants hereunder, shall be governed exclusively by and in accordance with the laws of the State of Delaware, except that the Plan shall be construed to the maximum extent possible to comply with Section 423 of the Code and the Treasury regulations promulgated thereunder.

10.8 Headings. Any headings or subheadings in this Plan are inserted for convenience of reference only and are to be ignored in the construction of any provisions hereof.

10.9 Severability. If any provision of this Plan is held by a court to be unenforceable or is deemed invalid for any reason, then such provision shall be deemed inapplicable and omitted, but all other provisions of this Plan shall be deemed valid and enforceable to the full extent possible under applicable law.

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EX-10

SCP POOL CORPORATION
2002 LONG-TERM INCENTIVE PLAN

1. Purpose. The purpose of the 2002 Long-Term Incentive Plan (the “Plan”) of SCP Pool Corporation (“SCP”) is to increase shareholder value and to advance the interests of SCP and its subsidiaries (collectively, the “Company”) by furnishing stock-based economic incentives (the “Incentives”) designed to attract, retain, reward and motivate key employees, officers and consultants and advisors to the Company and to strengthen the mutuality of interests between such persons and SCP’s shareholders. Incentives consist of opportunities to purchase or receive shares of common stock, $.001 par value per share, of SCP (the “Common Stock”), on terms determined under the Plan. As used in the Plan, the term “subsidiary”means any corporation, limited liability company or other entity, of which SCP owns (directly or indirectly) within the meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended (the “Code”), 50% or more of the total combined voting power of all classes of stock, membership interests or other equity interests issued thereby.

2. Administration.

2.1 Composition. The Plan shall be administered by the Compensation Committee of the Board of Directors of SCP or by a subcommittee thereof (the “Committee”). The Committee shall consist of not fewer than two members of the Board of Directors, each of whom shall (a) qualify as a “non-employee director”under Rule 16b-3 under the Securities Exchange Act of 1934 (the “1934 Act”) or any successor rule, and (b) qualify as an “outside director”under Section 162(m) of the Code (“Section 162(m)”).

2.2 Authority. The Committee shall have plenary authority to award Incentives under the Plan, to interpret the Plan, to establish any rules or regulations relating to the Plan that it determines to be appropriate, to enter into agreements with or provide notices to participants as to the terms of the Incentives (the “Incentive Agreements”) and to make any other determination that it believes necessary or advisable for the proper administration of the Plan. Its decisions in matters relating to the Plan shall be final and conclusive on the Company and participants. The Committee may delegate its authority hereunder to the extent provided in Section 3 hereof.

3. Eligible Participants. Key employees, officers (including officers who are also directors) and persons providing services as consultants or advisors to the Company shall become eligible to receive Incentives under the Plan when designated by the Committee. Employees may be designated individually or by groups or categories, as the Committee deems appropriate. With respect to participants not subject to Section 16 of the 1934 Act or Section 162(m) of the Code, the Committee may delegate to appropriate officers of the Company its authority to designate participants, to determine the size and type of Incentives to be received by those participants and to set and modify the terms of the Incentives; provided, however, that the per share exercise price of any options granted by an officer, rather than by the Committee, shall be equal to the Fair Market Value (as defined in Section 9.11) of a share of Common Stock. Directors who are not also employees of the Company are not eligible to receive awards under the Plan.

4. Types of Incentives. Incentives may be granted under the Plan to eligible participants in the forms of (a) incentive stock options; (b) non-qualified stock options; and (c) restricted stock.

5. Shares Subject to the Plan.

5.1 Number of Shares. Subject to adjustment as provided in Section 9.5, the maximum number of shares of Common Stock that may be delivered to participants and their permitted transferees under the Plan shall be 700,000. No additional awards will be made under the Company’s predecessor stock option plans (The SCP Pool Corporation 1995 Stock Option Plan and The SCP Pool Corporation 1998 Stock Option Plan).

5.2 Share Counting. To the extent any shares of Common Stock covered by a stock option are not delivered to a participant or permitted transferee because the Option is forfeited or canceled or because of a Net Share Exercise, as defined in Section 6.5 hereof, or shares of Common Stock are not delivered because an Incentive is paid or settled in cash or used to satisfy the applicable tax withholding obligation, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under this Plan. In the event that shares of Common Stock are issued as an Incentive and thereafter are forfeited or reacquired by the Company pursuant to rights reserved upon issuance thereof, such forfeited and reacquired Shares may again be issued under the Plan. If the exercise price of any stock option granted under the Plan or the applicable withholding tax obligation is satisfied by tendering shares of Common Stock to the Company (by either actual delivery or by attestation), only the number of shares of Common Stock issued net of the shares of Common Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan.

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5.3 Limitations on Awards. Subject to Section 9.5, the following additional limitations are imposed under the Plan:

A. The maximum number of shares of Common Stock that may be issued upon exercise of stock options intended to qualify as incentive stock options under Section 422 of the Code shall be 700,000 shares. Notwithstanding any other provision herein to the contrary, (i) all shares issuable under incentive stock options shall be counted against this limit and (ii) shares that are issued and are later forfeited, cancelled or reacquired by the Company, shares withheld to satisfy withholding tax obligations and shares delivered in payment of the option exercise price or withholding taxes shall have no effect on this limitation.

B. The maximum number of shares of Common Stock that may be covered by Incentives granted under the Plan to any one individual during any one calendar-year period shall be 200,000.

C. The maximum number of shares of Common Stock that may be issued as restricted stock shall be 50,000 shares.

5.4 Type of Common Stock. Common Stock issued under the Plan may be authorized and unissued shares or issued shares held as treasury shares.

6. Stock Options. A stock option is a right to purchase shares of Common Stock from SCP. Stock options granted under the Plan may be incentive stock options (as such term is defined in Section 422 of the Code) or non-qualified stock options. Any option that is designated as a non-qualified stock option shall not be treated as an incentive stock option. Each stock option granted by the Committee under this Plan shall be subject to the following terms and conditions:

6.1 Price. The exercise price per share shall be determined by the Committee, subject to adjustment under Section 9.5; provided that in no event shall the exercise price be less than the Fair Market Value of a share of Common Stock on the date of grant, except in case of a stock option granted in assumption or substitution for an outstanding award of a company acquired by the Company or with which the Company combines.

6.2 Number. The number of shares of Common Stock subject to the option shall be determined by the Committee, subject to Section 5 and subject to adjustment as provided in Section 9.5.

6.3 Duration and Time for Exercise. The term of each stock option shall be determined by the Committee but shall not exceed 10 years from date of grant. Each stock option shall become exercisable at such time or times during its term as shall be determined by the Committee. Notwithstanding the foregoing, the Committee may accelerate the exercisability of any stock option at any time, in addition to the automatic acceleration of stock options under Section 9.10.

6.4 Repurchase. Upon approval of the Committee, the Company may repurchase a previously granted stock option from a participant by mutual agreement before such option has been exercised by payment to the participant of the amount per share by which: (i) the Fair Market Value (as defined in Section 9.11) of the Common Stock subject to the option on the business day immediately preceding the date of purchase exceeds (ii) the exercise price.

6.5 Manner of Exercise. A stock option may be exercised, in whole or in part, by giving written notice to the Company, specifying the number of shares of Common Stock to be purchased. The exercise notice shall be accompanied by the full purchase price for such shares. The option price shall be payable in United States dollars and may be paid (a) in cash; (b) by check; (c) by delivery of shares of Common Stock which, unless otherwise determined by the Committee, shall have been held by the optionee for at least six months, and which shares shall be valued for this purpose at the Fair Market Value on the business day immediately preceding the date such option is exercised; (d) by delivery of irrevocable written instructions to a broker approved by the Company (with a copy to the Company) to immediately sell a portion of the shares issuable under the option and to deliver promptly to the Company the amount of sale proceeds (or loan proceeds if the broker lends funds to the participant for delivery to the Company) to pay the exercise price; (e) if permitted by the Committee, by authorizing the Company to withhold from the exercise that number of shares of Common Stock which, when multiplied by the Fair Market Value of a share of Common Stock on the date of exercise, is equal to the aggregate exercise price payable with respect to the options being exercised (a “Net Share Exercise”) or (f) in such other manner as may be authorized from time to time by the Committee.

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6.6 Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant of stock options that are intended to qualify as incentive stock options (as such term is defined in Section 422 of the Code):

A. Any incentive stock option agreement authorized under the Plan shall contain such other provisions as the Committee shall deem advisable, but shall in all events be consistent with and contain or be deemed to contain all provisions required in order to qualify the options as incentive stock options.

B. All incentive stock options must be granted within ten years from the date on which this Plan is adopted by the Board of Directors.

C. No incentive stock options shall be granted to any participant who, at the time such option is granted, would own (within the meaning of Section 422 of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the employer corporation or of its parent or subsidiary corporation.

D. The aggregate Fair Market Value (determined with respect to each incentive stock option as of the time such incentive stock option is granted) of the Common Stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year (under the Plan or any other plan of SCP or any of its subsidiaries) shall not exceed $100,000. To the extent that such limitation is exceeded, such options shall not be treated, for federal income tax purposes, as incentive stock options.

6.7 Repricing. Except for adjustments pursuant to Section 9.5 or actions permitted to be taken by the Committee under Section 9.10C. in the event of a Change of Control, unless approved by the stockholders of the Company, (a) the exercise price for any outstanding option granted under this Plan may not be decreased after the date of grant; and (b) an outstanding option that has been granted under this Plan may not, as of any date that such option has a per share exercise price that is less than the then current Fair Market Value of a share of Common Stock, be surrendered to the Company as consideration for the grant of a new option with a lower exercise price, shares of Common Stock or a cash payment.

7. Restricted Stock.

7.1 Grant of Restricted Stock. The Committee may award shares of restricted stock to such eligible participants as the Committee determines pursuant to the terms of Section 3. An award of restricted stock shall be subject to such restrictions on transfer and forfeitability provisions and such other terms and conditions, including the attainment of specified performance goals, as the Committee may determine, subject to the provisions of the Plan. To the extent restricted stock is intended to qualify as “performance-based compensation”under Section 162(m), it must be granted subject to the attainment of performance goals as described in Section 8 below and meet the additional requirements imposed by Section 162(m).

7.2 The Restricted Period.At the time an award of restricted stock is made, the Committee shall establish a period of time during which the transfer of the shares of restricted stock shall be restricted and after which the shares of restricted stock shall be vested (the “Restricted Period”). Except for shares of restricted stock that vest based on the attainment of performance goals, the Restricted Period shall be a minimum of three years, with incremental vesting of portions of the award over the three-year period permitted. If the vesting of the shares of restricted stock is based upon the attainment of performance goals, a minimum Restricted Period of one year is allowed, with incremental vesting of portions of the award over the one-year period permitted. Each award of restricted stock may have a different Restricted Period. The expiration of the Restricted Period shall also occur as provided under Section 9.3 and under the conditions described in Section 9.10 hereof.

7.3 Escrow.The participant receiving restricted stock shall enter into an Incentive Agreement with the Company setting forth the conditions of the grant. Certificates representing shares of restricted stock shall be registered in the name of the participant and deposited with the Company, together with a stock power endorsed in blank by the participant. Each such certificate shall bear a legend in substantially the following form:

The transferability of this certificate and the shares of Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the SCP Pool Corporation 2002 Long-Term Incentive Plan (the “Plan”), and an agreement entered into between the registered owner and SCP Pool Corporation thereunder. Copies of the Plan and the agreement are on file at the principal office of the Company.

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7.4 Dividends on Restricted Stock.Any and all cash and stock dividends paid with respect to the shares of restricted stock shall be subject to any restrictions on transfer, forfeitability provisions or reinvestment requirements as the Committee may, in its discretion, prescribe in the Incentive Agreement.

7.5 Forfeiture.In the event of the forfeiture of any shares of restricted stock under the terms provided in the Incentive Agreement (including any additional shares of restricted stock that may result from the reinvestment of cash and stock dividends, if so provided in the Incentive Agreement), such forfeited shares shall be surrendered and the certificates cancelled. The participants shall have the same rights and privileges, and be subject to the same forfeiture provisions, with respect to any additional shares received pursuant to Section 9.5 due to a recapitalization, merger or other change in capitalization.

7.6 Expiration of Restricted Period.Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee, the restrictions applicable to the restricted stock shall lapse and a stock certificate for the number of shares of restricted stock with respect to which the restrictions have lapsed shall be delivered, free of all such restrictions and legends, except any that may be imposed by law, to the participant or the participant’s estate, as the case may be.

7.7 Rights as a Shareholder.Subject to the terms and conditions of the Plan and subject to any restrictions on the receipt of dividends that may be imposed in the Incentive Agreement, each participant receiving restricted stock shall have all the rights of a shareholder with respect to shares of stock during the Restricted Period, including without limitation, the right to vote any shares of Common Stock.

8. Performance Goals for Section 162(m) Awards.

     To the extent that shares of restricted stock granted under the Plan are intended to qualify as “performance-based compensation” under Section 162(m), the vesting or grant of such awards shall be conditioned on the achievement of one or more performance goals and must satisfy the other requirements of Section 162(m). The performance goals pursuant to which such shares of restricted stock shall vest or be granted shall be any or a combination of the following performance measures applied to the Company, SCP, a division or a subsidiary: earnings per share, return on assets, an economic value added measure, shareholder return, earnings, stock price, return on equity, return on total capital, reduction of expenses, increase in cash flow, increase in revenues or customer growth. The performance goals may be subject to such adjustments as are specified in advance by the Committee. For any performance period, such performance objectives may be measured on an absolute basis or relative to a group of peer companies selected by the Committee, relative to internal goals or relative to levels attained in prior years. For grants intended to qualify as performance-based compensation under Section 162(m), the Committee may not waive any of the pre-established performance goal objectives, except for an automatic waiver under Section 9.10 hereof, or as may be provided by the Committee in the event of death or disability.

9. General.

9.1 Duration.Subject to Section 9.9, the Plan shall remain in effect until all Incentives granted under the Plan have either been satisfied by the issuance of shares of Common Stock or otherwise been terminated under the terms of the Plan and all restrictions imposed on shares of Common Stock in connection with their issuance under the Plan have lapsed.

9.2 Transferability.No Incentives granted hereunder may be transferred, pledged, assigned or otherwise encumbered by a participant except: (a) by will; (b) by the laws of descent and distribution; (c) pursuant to a domestic relations order, as defined in the Code; or (d) as to options only, if permitted by the Committee and so provided in the Incentive Agreement or an amendment thereto, (i) to Immediate Family Members, (ii) to a partnership in which the participant and/or Immediate Family Members, or entities in which the participant and/or Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the sole partners, (iii) to a limited liability company in which the participant and/or Immediate Family Members, or entities in which the participant and/or Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the sole members, (iv) to a trust for the sole benefit of the participant and/or Immediate Family Members or (v) to a charitable organization. “Immediate Family Members”shall be defined as the spouse and natural or adopted children or grandchildren of the participant and their spouses. To the extent that an incentive stock option is permitted to be transferred during the lifetime of the participant, it shall be treated thereafter as a nonqualified stock option. Any attempted assignment, transfer, pledge, hypothecation or other disposition of Incentives, or levy of attachment or similar process upon Incentives not specifically permitted herein, shall be null and void and without effect.

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9.3 Effect of Termination of Employment or Death. In the event that a participant ceases to be an employee of the Company or to provide services to the Company for any reason, including death, disability, early retirement or normal retirement, any Incentives may be exercised, shall vest or shall expire at such times as may be determined by the Committee and provided in the Incentive Agreement.

9.4 Additional Conditions.Anything in this Plan to the contrary notwithstanding: (a) the Company may, if it shall determine it necessary or desirable for any reason, at the time of award of any Incentive or the issuance of any shares of Common Stock pursuant to any Incentive, require the recipient of the Incentive, as a condition to the receipt thereof or to the receipt of shares of Common Stock issued pursuant thereto, to deliver to the Company a written representation of present intention to acquire the Incentive or the shares of Common Stock issued pursuant thereto for his own account for investment and not for distribution; and (b) if at any time the Company further determines, in its sole discretion, that the listing, registration or qualification (or any updating of any such document) of any Incentive or the shares of Common Stock issuable pursuant thereto is necessary on any securities exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with the award of any Incentive, the issuance of shares of Common Stock pursuant thereto, or the removal of any restrictions imposed on such shares, such Incentive shall not be awarded or such shares of Common Stock shall not be issued or such restrictions shall not be removed, as the case may be, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company.

9.5 Adjustment.In the event of any recapitalization, stock dividend, stock split, combination of shares or other similar change in the Common Stock, the number of shares of Common Stock then subject to the Plan, including shares subject to outstanding Incentives, and all limitations on the number of shares that may be issued hereunder shall be adjusted in proportion to the change in outstanding shares of Common Stock. In the event of any such adjustments, the purchase price of any option and the performance objectives of any Incentive, shall also be adjusted as and to the extent appropriate, in the reasonable discretion of the Committee, to provide participants with the same relative rights before and after such adjustment. No substitution or adjustment shall require the Company to issue a fractional share under the Plan and the substitution or adjustment shall be limited by deleting any fractional share.

9.6 Withholding.

A. The Company shall have the right to withhold from any stock issued under the Plan or to collect as a condition of issuance or vesting, any taxes required by law to be withheld. At any time that a participant is required to pay to the Company an amount required to be withheld under applicable income tax laws in connection with the lapse of restrictions on Common Stock or the exercise of an option, the participant may, subject to disapproval by the Committee, satisfy this obligation in whole or in part by electing (the “Election”) to deliver currently owned shares of Common Stock or to have the Company withhold shares of Common Stock, in each case having a value equal to the minimum statutory amount required to be withheld under federal, state and local law. The value of the shares to be delivered or withheld shall be based on the Fair Market Value of the Common Stock on the date that the amount of tax to be withheld shall be determined (“Tax Date”).

B. Each Election must be made prior to the Tax Date. The Committee may disapprove of any Election, may suspend or terminate the right to make Elections, or may provide with respect to any Incentive that the right to make Elections shall not apply to such Incentive. If a participant makes an election under Section 83(b) of the Code with respect to shares of restricted stock, an Election to have shares withheld to satisfy withholding taxes is not permitted to be made.

9.7 No Continued Employment. No participant under the Plan shall have any right, because of his or her participation, to continue in the employ of the Company for any period of time or to any right to continue his or her present or any other rate of compensation.

9.8 Deferral Permitted. Payment of an Incentive may be deferred at the option of the participant if permitted in the Incentive Agreement.

9.9 Amendments to or Termination of the Plan. The Board may amend or discontinue this Plan at any time; provided, however, that no such amendment may:

A. without the approval of the shareholders, (i) except for adjustments permitted herein, increase the maximum number of shares of Common Stock that may be issued through the Plan, (ii) materially increase the benefits accruing to participants under the Plan, (iii) materially expand the classes of persons eligible to participate in the Plan, or (iv) amend Section 6.7 to permit repricing of options; or

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B. materially impair, without the consent of the recipient, an Incentive previously granted.

9.10 Change of Control.

A. A Change of Control shall mean:

(i) the acquisition by any person of beneficial ownership of 50% or more of the outstanding shares of the Common Stock or 50% or more of the combined voting power of SCP’s then outstanding securities entitled to vote generally in the election of directors; provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control:

(a) any acquisition (other than a Business Combination (as defined below) which constitutes a Change of Control under Section 9.10(A)(iii) hereof) of Common Stock directly from the Company,

(b) any acquisition of Common Stock by the Company,

(c) any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or

(d) any acquisition of Common Stock by any corporation pursuant to a Business Combination that does not constitute a Change of Control under Section 9.10(A)(iii) hereof.

(ii) individuals who, as of January 1, 2002, constituted the Board of Directors of SCP (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to such date whose election, or nomination for election by SCP’s shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered a member of the Incumbent Board, unless such individual’s initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board; or

(iii) consummation of a reorganization, share exchange, merger or consolidation (including any such transaction involving any direct or indirect subsidiary of SCP) or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”); provided, however, that in no such case shall any such transaction constitute a Change of Control if immediately following such Business Combination:

(a) the individuals and entities who were the beneficial owners of SCP’s outstanding Common Stock and SCP’s voting securities entitled to vote generally in the election of directors immediately prior to such Business Combination have direct or indirect beneficial ownership, respectively, of more than 50% of the then outstanding shares of common stock, and more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the surviving or successor corporation, or, if applicable, the ultimate parent company thereof (the “Post-Transaction Corporation”), and

(b) except to the extent that such ownership existed prior to the Business Combination, no person (excluding the Post-Transaction Corporation and any employee benefit plan or related trust of either SCP, the Post-Transaction Corporation or any subsidiary of either corporation) beneficially owns, directly or indirectly, 50% or more of the then outstanding shares of common stock of the corporation resulting from such Business Combination or 50% or more of the combined voting power of the then outstanding voting securities of such corporation, and

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(c) at least a majority of the members of the board of directors of the Post-Transaction Corporation were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination; or

(iv) approval by the shareholders of SCP of a complete liquidation or dissolution of SCP.

     For purposes of this Section 9.10, the term “person” shall mean a natural person or entity, and shall also mean the group or syndicate created when two or more persons act as a syndicate or other group (including, without limitation, a partnership or limited partnership) for the purpose of acquiring, holding, or disposing of a security, except that “person” shall not include an underwriter temporarily holding a security pursuant to an offering of the security.

B. Upon a Change of Control of the type described in clause (A)(i) or (A)(ii) of this Section 9.10 or immediately prior to any Change of Control of the type described in clause (A)(iii) or (A)(iv) of this Section 9.10, all outstanding Incentives granted pursuant to this Plan shall automatically become fully vested and exercisable, all restrictions or limitations on any Incentives shall automatically lapse and, unless otherwise provided in the applicable Incentive Agreement, all performance criteria and other conditions relating to the payment of Incentives shall be deemed to be achieved or waived by SCP without the necessity of action by any person. As used in the immediately preceding sentence, ‘immediately prior’to the Change of Control shall mean sufficiently in advance of the Change of Control to permit the grantee to take all steps reasonably necessary (i) if an optionee, to exercise any such option fully and (ii) to deal with the shares purchased or acquired under any such option and any formerly restricted shares on which restrictions have lapsed so that all types of shares may be treated in the same manner in connection with the Change of Control as the shares of Common Stock of other shareholders.

C. No later than 30 days after a Change of Control of the type described in subsections (A)(i) or (A)(ii) of this Section 9.10 and no later than 30 days after the approval by the Board of a Change of Control of the type described in subsections (A)(iii) or (A)(iv) of this Section 9.10, the Committee, acting in its sole discretion without the consent or approval of any participant (and notwithstanding any removal or attempted removal of some or all of the members thereof as directors or Committee members), may act to effect one or more of the alternatives listed below, which may vary among individual participants and which may vary among Incentives held by any individual participant:

(i) require that all outstanding options be exercised on or before a specified date (before or after such Change of Control) fixed by the Committee, after which specified date all unexercised options and all rights of participants thereunder shall terminate,

(ii) make such equitable adjustments to Incentives then outstanding as the Committee deems appropriate to reflect such Change of Control (provided, however, that the Committee may determine in its sole discretion that no adjustment is necessary),

(iii) provide for mandatory conversion of some or all of the outstanding options held by some or all participants as of a date, before or after such Change of Control, specified by the Committee, in which event such options shall be deemed automatically cancelled and the Company shall pay, or cause to be paid, to each such participant an amount of cash per share equal to the excess, if any, of the Change of Control Value of the shares subject to such option, as defined and calculated below, over the exercise price of such options or, in lieu of such cash payment, the issuance of Common Stock or securities of an acquiring entity having a Fair Market Value equal to such excess, or

(iv) provide that thereafter, upon any exercise of an option, the holder shall be entitled to purchase or receive under such option, in lieu of the number of shares of Common Stock then covered by such option, the number and class of shares of stock or other securities or property (including, without limitation, cash) to which the holder would have been entitled pursuant to the terms of the agreement providing for the reorganization, share exchange, merger, consolidation or asset sale, if, immediately prior to such Change of Control, the holder had been the record owner of the number of shares of Common Stock then covered by such option.

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D. For the purposes of paragraph (iii) of Section 9.10(C), the "Change of Control Value" shall equal the amount determined by whichever of the following items is applicable:

(i) the per share price to be paid to holders of Common Stock in any such merger, consolidation or other reorganization,

(ii) the price per share offered to holders of Common Stock in any tender offer or exchange offer whereby a Change of Control takes place,

(iii) in all other events, the fair market value per share of Common Stock into which such options being converted are exercisable, as determined by the Committee as of the date determined by the Committee to be the date of conversion of such options, or

(iv) in the event that the consideration offered to holders of Common Stock in any transaction described in this Section 9.10 consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered that is other than cash.

9.11 Definition of Fair Market Value. Whenever “Fair Market Value”of Common Stock shall be determined for purposes of this Plan, it shall be determined as follows: (i) if the Common Stock is listed on an established stock exchange or any automated quotation system that provides sale quotations, the closing sale price for a share of the Common Stock on such exchange or quotation system on the applicable date, or if no sale of the Common Stock shall have been made on that day, on the next preceding day on which there was a sale of the Common Stock; (ii) if the Common Stock is not listed on any exchange or quotation system, but bid and asked prices are quoted and published, the mean between the quoted bid and asked prices on the applicable date, and if bid and asked prices are not available on such day, on the next preceding day on which such prices were available; and (iii) if the Common Stock is not regularly quoted, the fair market value of a share of Common Stock on the applicable date as established by the Committee in good faith.

9.12 Incentive Agreements. Each award of an Incentive hereunder shall be evidenced by an agreement or notice delivered to the participant, by paper copy or electronic copy, that shall specify the terms and conditions thereof and any rules applicable thereto, including but not limited to the effect on such Incentive of the participant’s ceasing to be employed by or to provide services to the Company. The Incentive Agreement may also provide for the forfeiture of an Incentive in the event that the participant competes with the Company or engages in other activities that are harmful to or against the interests of the Company.

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