10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to  

Commission File Number: 0-26640

POOL CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	36-3943363
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
109 Northpark Boulevard, Covington, Louisiana	70433-5001
(Address of principal executive offices)	(Zip Code)

985-892-5521

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.001 per share	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  x    NO  ¨ 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    YES  ¨    NO  x 

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  ¨ 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer ¨
Non-accelerated filer ¨  (Do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  YES  ¨    NOx 

The aggregate market value of voting and non-voting common equity held by non-affiliates of the Registrant based on the closing sales price of the Registrant’s common stock as of June 29, 2007 was $1,860,766,335.

As of February 22, 2008, the Registrant had 47, 722,617 shares of common stock outstanding.

Documents Incorporated by Reference

Portions of the Registrant’s Proxy Statement to be mailed to stockholders on or about March 28, 2008 for the

Annual Meeting to be held on May 6, 2008, are incorporated by reference in Part III of this Form 10-K.

POOL CORPORATION

TABLE OF CONTENTS

		Page
PART I.
Item 1.	Business	1
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	10
Item 2.	Properties	10
Item 3.	Legal Proceedings	12
Item 4.	Submission of Matters to a Vote of Security Holders	12
PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13
Item 6.	Selected Financial Data	15
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 8.	Financial Statements and Supplementary Data	34
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	62
Item 9A.	Controls and Procedures	62
Item 9B.	Other Information	65
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	65
Item 11.	Executive Compensation	65
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65
Item 13.	Certain Relationships and Related Transactions, and Director Independence	65
Item 14.	Principal Accounting Fees and Services	65
PART IV.
Item 15.	Exhibits, Financial Statement Schedules	66
Signatures		67

PART I.

Item 1.  Business

General

Based on industry data, Pool Corporation (the Company, which may be referred to as POOL, we, us or our) is the world’s largest wholesale distributor of swimming pool supplies, equipment and related leisure products. The Company was incorporated in the State of Delaware in 1993 under the name SCP Holding Corporation, and in 1995 changed its name to SCP Pool Corporation. In 2006, the Company changed its name to Pool Corporation. This change acknowledges the Company’s growth from a regional distributor to a multi-national, multi-network distribution company. 

Our industry is highly fragmented, and as such, we add considerable value to the industry by purchasing products from a large number of manufacturers and then distributing the products and offering a range of services to our customer base on conditions that are more favorable than these customers could obtain on their own.

As of December 31, 2007 we operated 281 sales centers in North America and Europe.

Our Industry

We believe that the swimming pool industry is relatively young, with room for continued growth from increased penetration of new pools. Of the approximately 70 million homes in the United States that have the economic capacity and the yard space to have a swimming pool, approximately 12% own a pool. Higher rates of new home construction from 1996 to 2005 have added to the market expansion opportunity for pool ownership, particularly in larger pool markets.

We believe the long-term prospects of our industry are positively impacted by favorable demographic and socioeconomic trends.  This includes the expected continued long-term growth in housing units in warmer markets due to the population migration towards the south and the need to maintain the growing installed base of pools. The industry has also been positively impacted by the trend for increased homeowner spending on outdoor living spaces for relaxation and entertainment. Additionally, consumers frequently bundle the purchase of a pool with other products as part of a complete backyard makeover. New irrigation systems and landscaping are often key components to completing a swimming pool installation or remodel. The irrigation and landscape market has many characteristics in common with the pool industry, and we believe that it benefits from the same favorable demographic and socioeconomic trends and will realize growth rates similar to the pool industry.

The majority of consumer spending in our industry is derived from the non-discretionary maintenance of existing swimming pools, including the repair and replacement of the equipment for those pools. We believe that the recurring nature of the repair and replacement market has helped maintain a relatively consistent rate of industry growth historically, even in periods when unfavorable economic conditions and negative trends in the housing market adversely impact pool construction activities.

New swimming pool construction and irrigation starts comprise the bulk of the remaining consumer spending in our industry.  The demand for new pools is driven by the perceived benefits of pool ownership including relaxation, entertainment, family activity, exercise and convenience. The industry competes for new pool sales against other discretionary consumer purchases such as kitchen and bathroom remodeling, boats, motorcycles, recreational vehicles and vacations.

General economic conditions (as commonly measured by Gross Domestic Product or GDP) and certain trends in the housing market affect our industry, particularly new pool and irrigation system starts.  Positive GDP trends may have a favorable impact on industry starts, while negative trends may be unfavorable for industry starts. We believe there may be some correlation between industry starts and the rate of housing turnover and home appreciation over time, with higher rates of home turnover and appreciation having a positive impact on starts over time.

1

In 2007, the sharp drop in new home construction, home value deflation in many markets, the tightening of credit and negative trends in consumer confidence had a negative impact on the industry and our performance. Since less than 40% of our sales are tied to new pool or irrigation construction and we estimate that only 10% to 20% of new pools are constructed along with new home construction, we do not expect any cyclicality in new housing starts in itself to have a significant long-term impact on our business. Our expectation is that the swimming pool industry will return to an annual growth rate of approximately 2% to 6% when the real estate and credit markets revert to normal.

Our industry is seasonal and weather is one of the principal external factors that affects our business. Peak industry activity occurs during the warmest months of the year, typically April through September.  Unseasonable warming or cooling trends can delay or accelerate the start or end of the pool and landscape season, impacting our maintenance and repair sales. These impacts at the shoulders of the season are generally more pronounced in northern markets.  Weather also impacts our sales of construction and installation products to the extent above average precipitation, late spring thaws in northern markets and other extreme weather conditions delay, interrupt or cancel current or planned construction and installation activities.

The industry is also affected by other factors including, but not limited to, consumer attitudes toward pool and landscape products for environmental or safety reasons.

Business Strategy and Growth

Our mission is to provide exceptional value to our customers and suppliers, in order to provide exceptional return to our shareholders while providing exceptional opportunities to our employees. Our three core strategies are to promote the growth of our industry, to promote the growth of our customers’ businesses and to continuously strive to operate more effectively.

We promote the growth of the industry through various advertising and promotional programs intended to raise consumer awareness of the benefits and affordability of pool ownership, the ease of pool maintenance and the many ways in which a pool and the surrounding spaces may be enjoyed beyond swimming. These programs include media advertising, industry-oriented website development such as www.swimmingpool.com™ and public relations campaigns. We use these programs as tools to educate consumers and lead prospective pool owners to our customers.

We promote the growth of our customers’ businesses through comprehensive support programs that offer promotional tools and marketing support to help generate increased sales for our customers. Our uniquely tailored programs include such features as customer lead generation, personalized websites, brochures, marketing campaigns and business development training. As a customer service, we also provide certain retail store customers assistance with everything from site selection to store layout and design to business management system implementation.

We strive to operate more effectively by continuously focusing on improvements in our operations such as product sourcing, procurement and logistics initiatives, adoption of enhanced business practices and improved working capital management.

In addition to our efforts aimed at industry and customer growth, we have increased our product breadth, as described in the “Customers and Products” section below. We have also expanded our sales center network through acquisitions (which have been an important source of sales growth), new sales center openings and expansions of existing sales centers. Since 2003, we have opened 39 new sales centers (net of sales center closings and consolidations) and successfully completed 11 acquisitions consisting of 64 sales centers (net of sales center closings and consolidations).

Based upon industry data, we believe the industry grew at a 2% to 6% annual rate for the period between 2000 and 2005 but declined in 2006 and 2007.  Historically, our growth has exceeded the industry’s rates and allowed us to increase market share. We expect our sales growth to be higher than the industry average due to increases in market share and expansion of our product offerings.

For additional discussion of our recent acquisitions, see Note 2 and Note 14 of “Notes to Consolidated Financial Statements,” included in Item 8 of this Form 10-K. We intend to pursue additional strategic acquisitions, which will allow us to further penetrate existing markets and expand into new geographic markets and product categories.

2

Customers and Products

We serve roughly 70,000 customers, none of which account for more than 1% of our sales. We primarily serve five types of customers:

·   swimming pool remodelers and builders;

·   retail swimming pool stores;

·   swimming pool repair and service businesses;

·   landscape construction and maintenance contractors; and

·   golf courses.

The majority of these customers are small, family owned businesses with relatively limited capital resources.

We conduct our operations through 281 sales centers in North America and Europe. Our primary markets, which have the highest concentration of swimming pools, are California, Florida, Texas and Arizona, representing approximately 54% of our net sales in 2007. We use a combination of local and international sales and marketing personnel to promote the growth of our business and develop and strengthen our customers’ businesses. Our sales and marketing personnel focus on developing customer programs and promotional activities, creating and enhancing sales management tools and providing product and market expertise. Our local sales personnel work from the sales centers and are charged with understanding and meeting our customers’ specific needs.

We offer our customers more than 100,000 national brand and private label products. We believe that our selection of pool equipment, supplies, chemicals, replacement parts, irrigation and landscape products and complementary products is the most comprehensive in the industry. The products we sell can be categorized as follows:

·   maintenance products such as chemicals, supplies and pool accessories;

·   repair and replacement parts for cleaners, filters, heaters, pumps and lights;

·   packaged pool kits including walls, liners, braces and coping for in-ground and above-ground pools;

·   pool equipment and components for new pool construction and the remodeling of existing pools;

·   irrigation and landscape products, including professional lawn care equipment; and

·   complementary products, including:

­ – ­  building materials used for pool installations and remodeling, such as concrete, plumbing and electrical components and pool surface and decking materials; and

–­   other discretionary recreational and related outdoor lifestyle products that enhance consumers’ use and enjoyment of outdoor living spaces, such as pool toys and games, outdoor furniture and grills.

Maintenance products and repair and replacement parts are non-discretionary in nature, meaning that these items must be purchased by end-users to maintain existing swimming pools and landscaped areas. Over 60% of our gross profits are derived from the sale of products used to maintain and repair these existing features and less than 40% are derived from the construction and installation (equipment, materials, plumbing, electrical, etc.) of new pools and landscaping. We distribute irrigation and landscape products through our Horizon Distributors (Horizon) network, which we acquired through acquisitions in 2005 and 2006.

Our complementary product sales accounted for over 9% of our total net sales in 2007 at comparable margins to our traditional product offerings. While complementary product sales decreased 3% in 2007 due primarily to the downturn in new pool and irrigation construction, complementary product sales have been an important factor in our base business sales growth over the past eight years, having grown from approximately $3.0 million in 1999 to over $180.0 million in 2007.

We have identified other product categories that could become part of our complementary product offerings in the future. We typically introduce two to three categories each year in certain markets. We then evaluate the performance of these test categories and focus on those which we believe exhibit long-term growth potential. In 2008, we intend to continue to expand our complementary products initiative by increasing the number of locations which offer complementary products, increasing the number of complementary products offered at certain locations and continuing a modest broadening of the product offerings on a company-wide basis.

3

Operating Strategy

We operate three distribution networks: the SCP Distributors (SCP) network, the Superior Pool Products (Superior) network and the Horizon network. The SCP network consists of 157 sales centers, including 11 locations in Europe, the Superior network consists of 62 locations and the Horizon network also consists of 62 locations.

We distribute swimming pool supplies, equipment and related leisure products through our SCP and Superior networks, and we distribute irrigation and landscape products through our Horizon network. We adopted the strategy of operating two distinct distribution networks within the swimming pool marketplace primarily for two reasons:

1.   To offer our customers a choice of different distributors, featuring distinctive product selections and service personnel; and

2.   To increase the level of customer service and operational efficiency provided by the sales centers in each network by promoting healthy competition between the two networks.

We evaluate our sales centers based upon their performance relative to predetermined standards that include both financial and operational measures. Our corporate support groups provide our field operations with various services including customer and vendor related programs, information systems support and expert resources to help achieve their goals. We believe our incentive programs and feedback tools, along with the competitive nature of our internal networks, stimulate and enhance employee performance.

Distribution

Our sales centers are located near customer concentrations, typically in industrial, commercial or mixed-use zones. Customers may pick up products at any sales center location, or products may be delivered via our trucks or third party carriers.

Our sales centers maintain well-stocked inventories to meet customers’ immediate needs. We utilize warehouse management technology to optimize receiving, inventory control, picking, packing and shipping functions.

In addition, we operate five centralized shipping locations and four stand-alone construction materials centers that redistribute products we purchase in bulk quantities to our sales centers or directly to customers.

Purchasing and Suppliers

We enjoy good relationships with our suppliers, who generally offer competitive pricing, return policies and promotional allowances. It is customary in our industry for manufacturers to seasonally offer extended payment terms to qualifying purchasers such as POOL. These terms are typically available to us for pre-season or early season purchases.

We initiated a preferred vendor program in 1999 which encourages our buyers to purchase products from a smaller number of vendors. We work closely with these vendors to develop programs and services to better meet the needs of our customers and concentrate our purchasing activities. These practices, together with a more comprehensive service offering, have resulted in improved margins at the sales center level.

We regularly evaluate supplier relationships and consider alternate sourcing to assure competitive cost, service and quality standards. Our largest suppliers include Pentair Corporation, Hayward Pool Products, Inc. and Zodiac Pool Care, Inc., which accounted for approximately 15%, 11% and 9%, respectively, of the cost of products we sold in 2007.

4

Competition

Based on industry knowledge and available data, management believes we are the largest wholesale distributor of swimming pool and related backyard products and the only truly national wholesale distributor focused on the swimming pool industry in the United States. We are also one of the top three distributors of landscape and irrigation products in the United States, and we compete against one national wholesale distributor of these products. We face intense competition from many regional and local distributors in our markets and to a lesser extent, mass-market retailers and large pool supply retailers with their own internal distribution networks.

Some geographic markets we serve, particularly our largest, higher density markets in California, Florida, Texas and Arizona, are more competitive than others. Barriers to entry in our industry are relatively low. We compete with other distributors for rights to distribute brand-name products. If we lose or are unable to obtain these rights, we might be materially and adversely affected. We believe that the size of our operations allows us to compete favorably for such distribution rights.

We believe that the principal competitive factors in swimming pool and landscape supply distribution are:

·     the breadth and availability of products offered;

·     the quality and level of customer service;

·     the breadth and depth of sales and marketing programs;

·     consistency and stability of business relationships with customers; and

·     competitive product pricing.

We believe that we generally compete favorably with respect to each of these factors.

Seasonality and Weather

For a discussion regarding seasonality and weather, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Seasonality and Quarterly Fluctuations,” of this Form 10-K.

Environmental, Health and Safety Regulations

Our business is subject to regulation under local fire codes and international, federal, state and local environmental and health and safety requirements, including regulation by the Environmental Protection Agency, the Department of Transportation, the Occupational Safety and Health Administration, the National Fire Protection Agency and the International Maritime Organization. Most of these requirements govern the packaging, labeling, handling, transportation, storage and sale of chemicals and fertilizers. We store certain types of chemicals and/or fertilizers at each of our sales centers, and the storage of these items is strictly regulated by local fire codes. In addition, we sell algaecides and pest control products that are regulated as pesticides under the Federal Insecticide, Fungicide and Rodenticide Act and various state pesticide laws. These laws are primarily related to labeling, annual registration and licensing.

Employees

We employed approximately 3,500 people at December 31, 2007. Given the seasonal nature of our business, our peak employment period is the summer, when we add approximately 500 more employees to our work force to meet seasonal demand.

Intellectual Property

We maintain both domestic and foreign registered trademarks primarily for our private label products that are important to our current and future business operations. We also own rights to several Internet domain names.

5

Geographic Areas

Net sales by geographic region were as follows for the past three fiscal years (in thousands):

	Year Ended December 31,
		2007		2006		2005
United States	$	1,774,771	$	1,779,085	$	1,442,332
International		153,596		130,677		110,327
	$	1,928,367	$	1,909,762	$	1,552,659

Net property and equipment by geographic region was as follows (in thousands):

	December 31,
		2007		2006		2005
United States	$	30,505	$	29,825	$	22,520
International		3,718		3,808		3,078
	$	34,223	$	33,633	$	25,598

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on our website at www.poolcorp.com as soon as reasonably practical after we electronically file such reports with, or furnish them to, the Securities and Exchange Commission.

Additionally, we have adopted a Code of Business Conduct and Ethics, applicable to all employees, officers and directors, which is available free of charge on our website.

Item 1A.  Risk Factors

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. Our forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of future performance, statements of management’s plans and objectives, future contracts, and forecasts of trends and other matters. Forward-looking statements speak only as of the date of this filing, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as “anticipate”, “estimate”, “expect”, “believe,” “will likely result,” “outlook,” “project” and other words and expressions of similar meaning. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act.

6

Risk Factors

Certain factors that may affect our business and could cause actual results to differ materially from those expressed in any forward-looking statements include the following:

The demand for our swimming pool and related outdoor lifestyle products may be adversely affected by unfavorable economic conditions.

In economic downturns, the demand for swimming pool or leisure related products may decline as discretionary consumer spending, the growth rate of pool eligible households and swimming pool construction decline.  Although maintenance products and repair and replacement equipment that must be purchased by pool owners to maintain existing swimming pools account for more than 60% of our gross profits, the growth of this portion of our business depends on the expansion of the installed pool base and could also be adversely affected by decreases in construction activities similar to the trends in 2007.  In addition, even in generally favorable economic conditions, severe and/or prolonged downturns in the housing market could have a material adverse impact on our financial performance.  Such downturns expose us to certain additional risks, including but not limited to the risk of customer closures or bankruptcies, which could shrink our potential customer base and inhibit our ability to collect on those customers’ receivables.

We are susceptible to adverse weather conditions.

Weather is one of the principal external factors affecting our business. For example, unseasonably late warming trends in the spring or early cooling trends in the fall can shorten the length of the pool season. Also, unseasonably cool weather or extraordinary rainfall during the peak season can decrease swimming pool use, installation and maintenance, as well as landscape installations and maintenance. These weather conditions adversely affect sales of our products. For a discussion regarding seasonality and weather, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Seasonality and Quarterly Fluctuations,” of this Form 10-K.

Our distribution business is highly dependent on our ability to maintain favorable relationships with suppliers.

As a distribution company, maintaining favorable relationships with our suppliers is critical to the success of our business. We believe that we add considerable value to the swimming pool supply chain and landscape supply chain by purchasing products from a large number of manufacturers and distributing the products to a highly fragmented customer base on conditions that are more favorable than these customers could obtain on their own. We believe that we currently enjoy good relationships with our suppliers, who generally offer us competitive pricing, return policies and promotional allowances. However, our inability to maintain favorable relationships with our suppliers could have an adverse effect on our business.

Our largest suppliers are Pentair Corporation, Hayward Pool Products, Inc. and Zodiac Pool Care, Inc., which accounted for approximately 15%, 11% and 9%, respectively, of the costs of products we sold in 2007. A decision by several suppliers, acting in concert, to sell their products directly to retail customers and other end-users of their products, bypassing distribution companies like ours, would have an adverse effect on our business. Additionally, the loss of a single supplier could also adversely affect our business. We dedicate significant resources to promote the benefits and affordability of pool ownership, which we believe greatly benefits our swimming pool customers and suppliers.

We face intense competition both from within our industry and from other leisure product alternatives.

We face competition from both inside and outside of our industry. Within our industry, we compete against various regional and local distributors and, to a lesser extent, mass market retailers and large pool or landscape supply retailers. Outside of our industry, we compete with sellers of other leisure product alternatives, such as boats and motor homes, and with other companies who rely on discretionary homeowner expenditures, such as home remodelers. New competitors may emerge as there are low barriers to entry in our industry. Some geographic markets that we serve, particularly our largest, higher density markets in California, Florida, Texas and Arizona, representing approximately 54% of our net sales in 2007, also tend to be more competitive than others.

More aggressive competition by mass merchants and large pool or landscape supply retailers could adversely affect our sales.

Mass market retailers today carry a limited range of, and devote a limited amount of shelf space to, merchandise and products targeted to our industry. Historically, mass market retailers have generally expanded by adding new stores and product breadth, but their product offering of pool and landscape related products has remained relatively constant.  Should mass market retailers increase their focus on the pool or professional landscape industries, or increase the breadth of their pool and landscape related product offerings, they may become a more significant competitor for direct and end-use customers which could have an adverse impact on our business. We may face additional competitive pressures if large pool or landscape supply retailers look to expand their customer base to compete more directly within the distribution channel.

7

We depend on key personnel.

We consider our employees to be the foundation for our growth and success. As such, our future success depends in large part on our ability to attract, retain and motivate qualified personnel, including our executive officers and key management personnel. If we are unable to attract and retain key personnel, our operating results could be adversely affected.

Specifically, our future success depends to an extent upon the continued service of Manuel Perez de la Mesa, our President and Chief Executive Officer. The loss of Mr. Perez de la Mesa in particular could have a material adverse effect on our business. Mr. Perez de la Mesa is not nearing retirement age, and we have no indication that he intends to retire in the near future. We do not currently maintain key man insurance on Mr. Perez de la Mesa.

Past growth may not be indicative of future growth.

We have experienced substantial sales growth through acquisitions and new sales center openings that have increased our size, scope and geographic distribution. During the past five fiscal years, we have opened 39 new sales centers and have completed 11 acquisitions. These acquisitions have added 64 sales centers, net of sales center closings and consolidations, and a centralized shipping location to our distribution networks. While we contemplate continued growth through acquisitions and internal expansion, no assurance can be made as to our ability to:

·   penetrate new markets;

·   identify appropriate acquisition candidates;

·   complete acquisitions on satisfactory terms and successfully integrate acquired businesses;

·   obtain financing;

·   generate sufficient cash flows to support expansion plans and general operating activities;

·   maintain favorable supplier arrangements and relationships; and

·   identify and divest assets which do not continue to create value consistent with our objectives.

If we do not manage these potential difficulties successfully, our operating results could be adversely affected.

The growth of our business depends on effective marketing programs.

The growth of our business depends on the expansion of the installed pool base. Thus, an important part of our strategy is to promote the growth of the pool industry through our extensive advertising and promotional programs that attempt to raise consumer awareness regarding the benefits and affordability of pool ownership, the ease of pool maintenance and the many ways in which a pool may be enjoyed beyond swimming. These programs include media advertising, website development such as www.swimmingpool.com™ and public relations campaigns. We believe these programs benefit the entire supply chain from our suppliers to our customers.

We also promote the growth of our customers’ businesses through comprehensive support programs that offer promotional tools and marketing support to help generate increased sales for our customers. Our programs include such things as personalized websites, brochures, marketing campaigns and business development training. We also provide certain retail store customers with assistance in site selection, store layout and design and business management system implementation. Our inability to sufficiently develop effective advertising, marketing and promotional programs to succeed in a weakened economic environment and an increasingly competitive marketplace, in which we (and our entire supply chain) also compete with other luxury product alternatives, could have a material adverse effect on our business.

8

Our business is highly seasonal.

In 2007, approximately 65% of our net sales and over 100% of our operating income were generated in the second and third quarters of the year, which represent the peak months of swimming pool use, installation, remodeling and repair. Our sales are substantially lower during the first and fourth quarters of the year, when we may incur net losses.

The nature of our business subjects us to compliance with Environmental, Health, Transportation and Safety Regulations.

We are subject to regulation under federal, state and local environmental, health, transportation and safety requirements, which govern such things as packaging, labeling, handling, transportation, storage and sale of chemicals and fertilizers. For example, we sell algaecides and pest control products that are regulated as pesticides under the Federal Insecticide, Fungicide and Rodenticide Act and various state pesticide laws. These laws are primarily related to labeling, annual registration and licensing.

Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties or the imposition of injunctive relief. Moreover, compliance with such laws and regulations in the future could prove to be costly, and there can be no assurance that we will not incur such costs in material amounts. These laws and regulations have changed substantially and rapidly over the last 20 years and we anticipate that there will be continuing changes. The clear trend in environmental, health, transportation and safety regulation is to place more restrictions and limitations on activities that impact the environment, such as the use and handling of chemical substances. Increasingly, strict restrictions and limitations have resulted in higher operating costs for us and it is possible that the costs of compliance with such laws and regulations will continue to increase. We will attempt to anticipate future regulatory requirements that might be imposed and we will plan accordingly to remain in compliance with changing regulations and to minimize the costs of such compliance.

We store chemicals, fertilizers and other combustible materials that involve fire, safety and casualty risks.

We store chemicals and fertilizers, including certain combustible, oxidizing compounds, at our sales centers. A fire, explosion or flood affecting one of our facilities could give rise to fire, safety and casualty losses and related liability claims. We maintain what we believe is prudent insurance protection. However, we cannot guarantee that our insurance coverage will be adequate to cover future claims that may arise or that we will be able to maintain adequate insurance in the future at rates we consider reasonable. Successful claims for which we are not fully insured may adversely affect our working capital and profitability. In addition, changes in the insurance industry have generally led to higher insurance costs and decreased availability of coverage.

We conduct business internationally, which exposes us to additional risks.

Our international operations expose us to certain additional risks, including:

·   difficulty in staffing international subsidiary operations;

·   different political and regulatory conditions;

·   currency fluctuations;

·   adverse tax consequences; and

·   dependence on other economies.

We source certain products we sell, including our private label products, from Asia and other international sources. There is a greater risk that we may not be able to access products in a timely and efficient manner, and we may also be subject to certain trade restrictions that prevent us from obtaining products. Fluctuations in other factors relating to international trade, such as tariffs, currency exchange rates, transportation costs and inflation are additional risks for our international operations.

9

A terrorist attack or the threat of a terrorist attack could have a material adverse effect on our business.

Discretionary spending on leisure product offerings such as ours is generally adversely affected during times of economic or political uncertainty. The potential for terrorist attacks, the national and international responses to terrorist attacks, and other acts of war or hostility could create these types of uncertainties and negatively impact our business for the short or long-term in ways that cannot presently be predicted.

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

We lease the POOL corporate offices, which consist of approximately 50,000 square feet of office space in Covington, Louisiana, from an entity in which we have a 50% ownership interest. We own three sales centers in Florida and one sales center in Texas. We lease all of our other properties and the majority of our leases have three to seven year terms. As of December 31, 2007, we had seven leases that expire between 2018 and 2027. Most of our leases contain renewal options, some of which involve rent increases. In addition to minimum rental payments, which are set at competitive rates, certain leases require reimbursement for taxes, maintenance and insurance.

Our sales centers range in size from approximately 2,000 square feet to 100,000 square feet and generally consist of warehouse, counter, display and office space. Our centralized shipping locations (CSLs) and construction materials centers range in size from 16,000 square feet to 132,000 square feet.

We believe that our facilities are well maintained, suitable for our business and occupy sufficient space to meet our operating needs. As part of our normal business, we regularly evaluate sales center performance and site suitability and may relocate a sales center or consolidate two locations if a sales center is redundant in a market, under performing or otherwise deemed unsuitable. We do not believe that any single lease is material to our operations.

The table below summarizes the changes in our sales centers during the year ended December 31, 2007:

Network	12/31/06	New Locations	Consolidated & Closed Locations (1)		Acquired Locations	12/31/07
SCP	134	6	(3	)	-	137
SPP	62	1	(1	)	-	62
Horizon	60	4	(2	)	-	62
Total Domestic	256	11	(6	)	-	261
SCP International	18	1	-		1	20
Total	274	12	(6	)	1	281

(1)   Consolidated sales centers are those locations where we expect to transfer the majority of the existing business to our nearby sales center locations. During 2007, we consolidated four sales centers and closed two sales centers.  One of the consolidations was related to Horizon’s CSL, which was previously counted as a separate sales center location since it served walkup customers directly.  In 2007, this customer activity was consolidated with Horizon’s nearby sales center and this location now serves exclusively as a CSL.  In the fourth quarter of 2007, we consolidated three other sales centers and closed two sales centers.

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The table below identifies the number of sales centers in each state or country by distribution network as of December 31, 2007:

Location		SCP	Superior	Horizon	Total
United States
	California	21	18	21	60
	Florida	29	8	-	37
	Texas	14	4	13	31
	Arizona	5	4	10	19
	Georgia	6	2	1	9
	Tennessee	4	3	-	7
	Alabama	4	2	-	6
	Nevada	2	1	3	6
	New York	6	-	-	6
	Washington	1	-	5	6
	Louisiana	5	-	-	5
	New Jersey	3	2	-	5
	Ohio	2	3	-	5
	Colorado	1	1	2	4
	Illinois	3	1	-	4
	Indiana	2	2	-	4
	Missouri	3	1	-	4
	North Carolina	3	1	-	4
	Oregon	-	-	4	4
	Pennsylvania	3	1	-	4
	Michigan	2	1	-	3
	Oklahoma	2	1	-	3
	South Carolina	2	1	-	3
	Virginia	2	1	-	3
	Arkansas	2	-	-	2
	Idaho	-	-	2	2
	Kansas	1	1	-	2
	Massachusetts	2	-	-	2
	Minnesota	1	1	-	2
	Connecticut	1	-	-	1
	Iowa	1	-	-	1
	Kentucky	-	1	-	1
	Maryland	1	-	-	1
	Mississippi	1	-	-	1
	Nebraska	1	-	-	1
	New Mexico	1	-	-	1
	Utah	-	-	1	1
	Wisconsin	-	1	-	1
Total United States		137	62	62	261
International
	Canada	8	-	-	8
	France	5	-	-	5
	Portugal	2	-	-	2
	United Kingdom	2	-	-	2
	Italy	1	-	-	1
	Spain	1	-	-	1
	Mexico	1	-	-	1
Total International		20	-	-	20
Total		157	62	62	281

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Item 3.  Legal Proceedings

From time to time, we are subject to various claims and litigation arising in the ordinary course of business, including product liability, personal injury, commercial, contract and employment matters.  While the outcome of any litigation is inherently unpredictable, we do not believe, based on currently available facts, that the ultimate disposition of any of these matters will have a material adverse impact on our financial condition, results of operations or cash flows. 

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

No matters were submitted to a vote of our stockholders during the quarter ended December 31, 2007.

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PART II.

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the NASDAQ Global Select Market under the symbol “POOL”. On February 22, 2008, there were approximately 14,667 beneficial holders of our common stock. The table below sets forth the high and low sales prices of our common stock as well as dividends declared for each quarter during the last two fiscal years.

						Dividends
			High		Low	Declared
Fiscal 2007
	First Quarter	$	40.73	$	33.77	$	0.105
	Second Quarter		42.62		34.85		0.120
	Third Quarter		39.09		24.08		0.120
	Fourth Quarter		28.24		19.70		0.120
Fiscal 2006
	First Quarter	$	47.67	$	35.42	$	0.090
	Second Quarter		50.20		39.89		0.105
	Third Quarter		46.83		35.35		0.105
	Fourth Quarter		42.75		38.01		0.105

We initiated quarterly dividend payments to our shareholders in the second quarter of 2004, and we have continued payments in each subsequent quarter. Our Board of Directors (our Board) has increased the dividend amount four times including in the fourth quarter of 2004 and annually in the second quarter of 2005, 2006 and 2007. Payment of future dividends will be at the discretion of our Board, after taking into account various factors, including earnings, capital requirements, financial position, contractual restrictions and other relevant business considerations. We plan to continue to pay quarterly dividends, but there can be no assurance that dividends will be declared or paid any time in the future if our Board deems that there is a better use of those funds.

Stock Performance Graph

The information included under the caption “Stock Performance Graph” in this Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 (the 1934 Act) or to the liabilities of Section 18 of the 1934 Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the 1934 Act, except to the extent we specifically incorporate it by reference into such a filing.

The graph below compares the total stockholder return on our common stock for the last five fiscal years with the total return on the NASDAQ US Index and the S&P MidCap 400 Index for the same period, in each case assuming the investment of $100 on December 31, 2002 and the reinvestment of all dividends. We believe the S&P MidCap 400 Index includes companies with capitalization comparable to ours. Additionally, we chose the S&P MidCap 400 Index for comparison, as opposed to an industry index, because we do not believe that we can reasonably identify a peer group or a published industry or line-of-business index that contains companies in a similar line of business.

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	Base	INDEXED RETURNS
	Period	Years Ending
Company / Index	12/31/02	12/31/03	12/31/04	12/31/05	12/31/06	12/31/07
Pool Corporation	100	167.88	247.55	291.54	309.84	159.25
S&P MidCap 400 Index	100	135.62	157.97	177.81	196.16	211.81
NASDAQ US Index	100	150.36	163.00	166.58	183.68	201.91

Purchases of Equity Securities

The table below summarizes the repurchases of our common stock in the fourth quarter of 2007.

Period	Total number of shares purchased(1)	Average price paid per share		Total number of shares purchased as part of publicly announced plan(2)	Maximum approximate dollar value that may yet be purchased under  the plan(3)
October 1-31, 2007	434,752	$	25.07	434,752	$	54,968,410
November 1-30, 2007	-	$	-	-	$	54,968,410
December 1-31, 2007	-	$	-	-	$	54,968,410
Total	434,752	$	25.07	434,752

(1)   These shares may include shares of our common stock surrendered to us by employees in order to satisfy minimum tax withholding obligations in connection with certain exercises of employee stock options and/or the exercise price of such options granted under our share based compensation plans. No shares were surrendered in the fourth quarter.

(2)   In July 2002, our Board authorized $50.0 million for the repurchase of shares of our common stock in the open market. In August 2004, November 2005 and August 2006, our Board increased the authorization for the repurchase of shares of our common stock in the open market to a total of $50.0 million from the amounts remaining at each of those dates. In November 2006 and August 2007, our Board increased the authorization for the repurchase of shares of our common stock in the open market to a total of $100.0 million from the amounts remaining at each of those dates.

(3)   In 2007, we purchased a total of $137.7 million, or 4.1 million shares, at an average price or $33.51 per share.  As of February 22, 2008, $55.0 million of the authorized amount remained available.  

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Item 6.  Selected Financial Data

The table below sets forth selected financial data from the Consolidated Financial Statements. You should read this information in conjunction with the discussions in Item 7 of this Form 10-K and with the Consolidated Financial Statements and accompanying Notes in Item 8 of this Form 10-K.

		Year Ended December 31, (1)
(in thousands, except per share data)		2007			2006			2005(2)			2004(2)			2003(2)
Statement of Income Data
Net sales	$	1,928,367		$	1,909,762		$	1,552,659		$	1,310,853		$	1,155,832
Net income		69,394			95,024			80,455			63,406			48,249
Earnings per share:
Basic	$	1.42		$	1.83		$	1.53		$	1.20		$	0.91
Diluted	$	1.37		$	1.74		$	1.45		$	1.13		$	0.87
Cash dividends declared
per common share	$	0.465		$	0.405		$	0.34		$	0.20		$	—
Balance Sheet Data(3)
Working capital(4)	$	250,849		$	227,631		$	193,525		$	128,189		$	60,030
Total assets		814,854			774,562			740,850			488,075			455,439
Total long-term debt,
including current portion		282,525			191,157			129,100			50,420			42,507
Stockholders' equity(5)		208,791			277,684			281,724			227,544			200,408
Other
Base business sales growth(6)		(1	)%		10	%		14	%		10	%		11	%
Number of sales centers		281			274			246			201			197

____________________

(1) During the years 2003 to 2007, we successfully completed 11 acquisitions consisting of 64 sales centers. For information about our recent acquisitions, see Note 2 of “Notes to Consolidated Financial Statements,” included in Item 8 of this Form 10-K.

(2) As adjusted to reflect the impact of share-based compensation expense related to the adoption of SFAS 123(R), Share-Based Payment, using the modified retrospective transition method.

(3) The 2005 balance sheet data has been adjusted to correct the classification of our deferred tax balances.

(4) The approximate 51% increase in working capital from 2004 to 2005 is due primarily to a greater amount of early buy inventory purchases that we made and received during the fourth quarter of 2005 and the Horizon acquisition. This increase was partially offset by the deferral of our third and fourth quarter 2005 estimated federal income tax payments. For further discussion, see the “LIQUIDITY AND CAPITAL RESOURCES” section included in Item 7 of this Form 10-K.

(5) The beginning stockholders’ equity balance in 2007 reflects a reduction to retained earnings of approximately $0.5 million related to the implementation of FASB Interpretation No.(FIN) 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS 109, Accounting for Income Taxes.

(6) For a discussion regarding our calculation of base business sales growth, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - RESULTS OF OPERATIONS,” of this Form 10-K.

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

2007 FINANCIAL OVERVIEW

Financial Results

Our 2007 financial results were negatively impacted by a difficult combination of external conditions, particularly the depressed housing and real estate markets which intensified throughout 2007. Falling home values across much of the country and tightening credit markets created a significant drop in new construction activities. Unfavorable weather conditions also had an adverse impact during the first half of 2007, both on sales of construction products and on maintenance and repair products.  Extended winter conditions delayed the start of the pool season in the Central and Northeast regions.  Record wet weather in Texas and Oklahoma caused decreases across customer types, greatly hindering construction and installation activities and affecting replacement and repair activities.  Considering the magnitude of these unfavorable external trends, we believe our sales performance compares favorably to 2006 and indicates our success in gaining market share and improving our competitive position.

Base business sales decreased 1% in 2007 as the significant decline in new pool construction permits negatively impacted demand for new pool and irrigation products. This impact was more pronounced in some of our larger markets, most notably in Florida. These sales decreases were partially offset by moderate sales growth for maintenance, repair and replacement products, which comprises the majority of our sales and includes chemicals and parts products. Complementary product sales, which are sold primarily in the new pool construction market, decreased 3% compared to 2006.

For a discussion of our base business calculation, see the RESULTS OF OPERATIONS section below.

Our gross profit as a percentage of net sales (gross margin) decreased 80 basis points to 27.5% in 2007 compared to 2006. This decrease reflects the impact of competitive pricing pressures resulting from the current market environment and unfavorable comparisons to 2006 gross margin.  In 2006, our gross margin improved by 40 basis points over 2005 due to benefits from our supply chain management initiatives including pre-price increase purchases in the fourth quarter of 2005 and the second quarter of 2006.

Selling and administrative expenses (operating expenses) increased 7% compared to 2006. This increase includes the addition of expenses from the Wickham acquisition in August 2006, investments in 29 new sales centers opened since the beginning of 2006, an increase in bad debt expense, higher expenses related to existing sales center expansions and relocations and higher freight costs. These higher expenses were partially offset by lower incentive compensation and the impact of cost control initiatives.

Our operating income decreased 20% to $133.8 million in 2007 while operating income as a percentage of net sales (operating margin) decreased to 6.9% from 8.8% in 2006.  Interest expense increased 46% for 2007 due to higher debt levels for borrowings to fund share repurchases and a higher average effective interest rate compared to the same period in 2006.  Net income decreased 27% to $69.4 million compared to 2006 and included $0.9 million of net equity earnings from our investment in Latham Acquisition Corporation (LAC).

Financial Position and Liquidity

Cash provided by operations increased $2.6 million to $71.6 million in 2007 due primarily to favorable impacts from changes in working capital balances, which offset the decrease in net income.

Coupled with net proceeds from other financing activities of approximately $98.5 million, cash provided by operations helped fund the following in 2007:

·   share repurchases of $139.7 million, including $137.7 million of open market repurchases under our Board authorized repurchase plan;

·   the payment of our quarterly cash dividends to shareholders, which we increased in the second quarter of 2007;

·   capital expenditures of $10.9 million; and

·   financing of over $10.0 million in working capital for our 12 new sales centers opened in 2007.

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Our accounts receivable balance decreased 9% to $141.1 million at December 31, 2007. Days sales outstanding (DSO) increased between periods to 36.3 days at December 31, 2007 compared to 35.0 days at December 31, 2006.  Our allowance for doubtful accounts increased to $9.9 million at December 31, 2007 from $4.9 million at December 31, 2006. This increase reflects slower payments from customers in markets that have been adversely impacted by the decline in new pool and irrigation construction.

Our net inventory balance increased $47.6 million to $379.7 million at December 31, 2007.  The increase reflects inventory for the 12 new sales centers opened in 2007, higher inventory levels attributable to the decline in fourth quarter sales and higher quantities of early buy inventory received in the fourth quarter of 2007 than in the fourth quarter of 2006.  Inventory turns, as calculated on a trailing 12 month basis, slowed to 3.7 times in 2007 from 3.9 times in 2006.

Total debt outstanding increased to $350.9 million at December 31, 2007 compared to $265.4 million at December 31, 2006. This increase is attributable to increased borrowings to fund our 2007 share repurchases and slightly higher working capital levels. We continue to maintain a healthy current ratio of 1.8, which was unchanged from December 31, 2006.

Current Trends

Current economic trends include a slowdown in the domestic housing market, with lower housing turnover, a sharp drop in new home construction, home value deflation in many markets, decreases in short-term interest rates and a tightening of consumer and commercial credit.  Some of the factors that help mitigate the impact of these trends on our business include the following:

·   the majority of our business is driven by the ongoing maintenance and repair of existing pools and landscaped areas, with less than 40% of our sales tied to new pool or irrigation construction;

·   we estimate that only 10% to 20% of new pools are constructed along with new home construction; and

·   we have a low market share with the largest pool builders who we believe are more heavily tied to new home construction.

Despite these mitigating factors, these negative trends had a more pronounced impact during 2007 and have significantly impacted some of our key markets, including Florida, Arizona and parts of California. We believe these trends, along with the impact of unusually wet weather in Texas and Oklahoma and a delay in the start of pool construction in northern markets due to unfavorable weather conditions, resulted in a decrease in new pool construction of approximately 50,000 units, or 25%, in 2007. This followed a decrease of approximately 10,000 units, or 5%, in 2006, representing the first back to back decrease in recent industry history.  A continuation or worsening of these trends may have an even greater impact on new pool construction and consumer spending on outdoor living spaces, which could negatively impact our sales and earnings.

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OUTLOOK

Our objectives in 2008 include:

·   continuing to execute on our business strategies that we believe will provide long-term value to our customers, suppliers and shareholders; and

·   exploiting business improvement opportunities available to us while maintaining tight control over our expenses.

We believe the prolonged downturn in real estate markets and restricted access to credit, coupled with the uncertain general economic environment, will continue to adversely impact new pool and irrigation construction.  Given the challenges in the external environment, we will not provide any earnings per share guidance until we gain more visibility for how our 2008 results are tracking.

We expect to generate sufficient cash flow and have adequate access to capital to both fund our business objectives and provide a direct return to our shareholders in the form of dividend payments.

Our business is subject to significant risks, including weather, competition, general economic conditions and other risks as detailed in Item 1A of this Form 10-K.

CRITICAL ACCOUNTING ESTIMATES

We prepare our Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (GAAP), which requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management identifies critical accounting estimates as:

·   those that require the use of assumptions about matters that are inherently and highly uncertain at the time the estimates are made; and

·   those for which changes in the estimate or assumptions, or the use of different estimates and assumptions, could have a material impact on our consolidated results of operations or financial condition.

Management has discussed the development, selection and disclosure of our critical accounting estimates with the Audit Committee of our Board. We believe the following critical accounting estimates require us to make the most difficult, subjective or complex judgments.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for an estimate of the losses we will incur if our customers do not make required payments. We perform periodic credit evaluations of our customers and typically do not require collateral. Consistent with industry practices, we generally require payment from our customers within 30 days except for sales under early buy programs for which we provide extended payment terms to qualified customers. The extended terms usually require payments in equal installments in April, May and June or May and June, depending on geographical location. Credit losses have generally been within or better than our expectations.

As our business is seasonal, our customers’ businesses are also seasonal. Sales are lowest in the winter months and our past due accounts receivable balance as a percentage of total receivables generally increases during this time. We provide reserves for uncollectible accounts based on the accounts receivable aging ranging from 0.1% for amounts currently due up to 100% for specific accounts more than 60 days past due.

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At the end of each quarter, we perform a reserve analysis of all accounts with past due balances greater than $20,000. Additionally, we perform a separate reserve analysis on the balance of our accounts receivables with emphasis on the remainder of the past due portion of the aging. As we review these past due accounts, we evaluate collectibility based on a combination of factors, including:

·   aging statistics and trends;

·   customer payment history;

·   independent credit reports; and

·   discussions with customers.

During the year, we write off account balances when we have exhausted reasonable collection efforts and determined that the likelihood of collection is remote. Such write-offs are charged against our allowance for doubtful accounts. In the past five years, write-offs have averaged approximately 0.1% of net sales.

If the balance of the accounts receivable reserve increased or decreased by 20% at December 31, 2007, pretax income would change by approximately $1.2 million and earnings per share would change by approximately $0.02 per diluted share based on the number of diluted shares outstanding at December 31, 2007.

Inventory Obsolescence

Product inventories represent the largest asset on our balance sheet. Our goal is to manage our inventory such that we minimize stock-outs to provide the highest level of service to our customers. To do this, we maintain at each sales center an adequate inventory of stock keeping units (SKUs) with the highest sales volume. At the same time, we continuously strive to better manage our slower moving classes of inventory, which are not as critical to our customers and thus, inherently have lower velocity. Sales centers classify products into 13 classes based on sales at that location over the past 12 months. All inventory is included in these classes, except for non-stock special order items and products with less than 12 months of usage. The table below presents a description of these inventory classes:

Class 0	new products with less than 12 months usage
Classes 1-4	highest sales value items, which represent approximately 80% of net sales at the sales center
Classes 5-12	lower sales value items, which we keep in stock to provide a high level of customer service
Class 13	products with no sales for the past 12 months, excluding special order products not yet
	delivered to the customer
Null class	non-stock special order items

There is little risk of obsolescence for products in classes 1-4 because products in these classes generally turn quickly. We establish our reserve for inventory obsolescence based on inventory classes 5-13, which we believe represent some exposure to inventory obsolescence, with particular emphasis on SKUs with the least sales over the previous 12 months. The reserve is intended to reflect the value of inventory that we may not be able to sell at a profit. We provide a reserve of 5% for inventory in classes 5-13 and non-stock inventory as determined at the sales center level. We also provide an additional 5% reserve for excess inventory in classes 5-12 and an additional 45% reserve for excess inventory in class 13. We determine excess inventory, which is defined as the amount of inventory on hand in excess of the previous 12 months usage, on a company-wide basis.

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In evaluating the adequacy of our reserve for inventory obsolescence, we consider a combination of factors including:

·   the level of inventory in relationship to historical sales by product, including inventory usage by class based on product sales at both the sales center and Company levels;

·   changes in customer preferences;

·   seasonal fluctuations in inventory levels;

·   geographical location; and

·   new product offerings.

Our reserve for inventory obsolescence may periodically require adjustment as changes occur in the above-identified factors.

If the balance of our inventory reserve increased or decreased by 20% at December 31, 2007, pretax income would change by approximately $0.7 million and earnings per share would change by approximately $0.01 per diluted share based on the number of diluted shares outstanding at December 31, 2007.

Vendor Incentives

We account for vendor incentives in accordance with the Emerging Issues Task Force Issue 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. Many of our vendor arrangements provide for us to receive incentives of specified amounts of consideration, payable to us when we achieve any of a number of measures. These measures are generally related to the volume level of purchases from our vendors and may include negotiated pricing arrangements. We account for vendor incentives as if they are a reduction of the prices of the vendor’s products and therefore a reduction of inventory until we sell the product, at which time such incentives are recognized as a reduction of cost of sales in our income statement.

Throughout the year, we estimate the amount of the incentive earned based on our estimate of cumulative purchases for the fiscal year relative to the purchase levels that mark our progress toward earning the incentives. We accrue vendor incentives on a monthly basis using these estimates provided that we determine they are probable and reasonably estimable. Our estimates for cumulative purchases and sales of qualifying products are driven by our sales projections, which can be significantly impacted by a number of external factors including weather and changes in economic conditions. Changes in our purchasing mix also impact our incentive estimates, as incentive rates can vary depending on our volume of purchases from specific vendors. We continually revise these estimates throughout the year to reflect actual purchase levels and trends. As a result, our estimated quarterly vendor incentive accruals may include cumulative catch-up adjustments to reflect any changes in our estimates between reporting periods.

If market conditions were to change, vendors may change the terms of some or all of these programs. Although such changes would not affect the amounts we have recorded related to products already purchased, they may lower or raise our gross margins for products purchased and sold in future periods.

Income Taxes

We record deferred tax assets or liabilities based on differences between the financial reporting and tax basis of assets and liabilities using currently enacted rates and laws that will be in effect when we expect the differences to reverse. Due to changing tax laws and state income tax rates, significant judgment is required to estimate the effective tax rate expected to apply to tax differences that are expected to reverse in the future.

As of December 31, 2007, and in accordance with the provisions of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) 109, Accounting for Income Taxes, United States taxes were not provided on undistributed earnings of our foreign subsidiaries, as we have invested or expect to invest the undistributed earnings indefinitely. If in the future these earnings are repatriated to the United States, or if we determine that the earnings will be remitted in the foreseeable future, additional tax provisions may be required.

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We hold, through our wholly owned affiliates, cash balances in the countries in which we operate, including amounts held outside the United States. Most of the amounts held outside the United States could be repatriated to the United States, but, under current law, may be subject to United States federal income taxes, less applicable foreign tax credits. Repatriation of some foreign balances is restricted by local laws including the imposition of withholding taxes in some jurisdictions.

We have operations in 38 states and seven foreign countries. The amount of income taxes we pay is subject to adjustment by the applicable tax authorities. We are subject to regular audits by federal, state and foreign tax authorities. Our estimate for the potential outcome of any uncertain tax issue is highly judgmental. We believe we have adequately provided for any reasonably foreseeable outcome related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved or when statutes of limitation on potential assessments expire. These adjustments may include differences between the estimated deferred tax liability that we have recorded for equity earnings in unconsolidated investments and the actual taxes paid upon the return of undistributed equity earnings through a manner other than a capital transaction. As a result of these uncertainties, our total income tax provision may fluctuate on a quarterly basis.

In June 2006, the FASB issued Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS 109, Accounting for Income Taxes, to create a single model to address accounting for uncertainty in tax positions. We adopted FIN 48 effective January 1, 2007, as required. We recorded the cumulative impact of adopting FIN 48 in retained earnings. We anticipate that the accounting under the provisions of FIN 48 may provide for greater volatility in our effective tax rate as items are derecognized or as we record changes in measurement in interim periods.

Incentive Compensation Accrual

We have an incentive compensation structure designed to attract, motivate and retain employees. Our incentive compensation packages include bonus plans that are specific to each group of eligible participants and their levels and areas of responsibility. The majority of our bonus plans have annual cash payments that are based primarily on objective performance criteria, with a component based on management’s discretion. We calculate bonuses as a percentage of salaries based on the achievement of certain key measurable financial and operational results, including budgeted operating income and diluted earnings per share. We generally make bonus payments at the end of February following the most recent completed fiscal year.

The objectives for our bonus plans are set at the inception of the bonus plan year using both historical information and forecasted results of operations for the current plan year. The Compensation Committee of our Board approves these objectives for certain bonus plans. We record an incentive compensation accrual at the end of each month using management’s estimate of the total overall incentives earned based on the amount of progress achieved towards the stated bonus plan objectives. During the third and fourth quarters and as of our fiscal year end, we adjust our estimated incentive compensation accrual based on our detailed analysis of each bonus plan, the participants’ progress toward achievement of their specific bonus plan objectives and management’s estimates related to the discretionary components of the bonus plans. Due to both the discretionary components of the bonus plans and the timing of the approval and payment of the annual bonuses, our estimated quarterly incentive compensation expense and accrual balances may vary relative to actual annual bonus expense and payouts.

Goodwill

Our largest intangible asset is goodwill. At December 31, 2007, our goodwill balance was $155.2 million, representing 19% of total assets. Goodwill represents the excess of the amount we paid to acquire a company over the estimated fair value of tangible assets and identifiable intangible assets acquired, less liabilities assumed.

We account for goodwill under the provisions of SFAS 142, Goodwill and Other Intangible Assets. Under these rules, we test goodwill for impairment annually or on a more frequent basis if events or changes in circumstances occur that indicate potential impairment. If the estimated fair value of any of our reporting units has fallen below their carrying value, we will compare the estimated fair value of the reporting units’ goodwill to its carrying value. If the carrying value of a reporting units’ goodwill exceeds its estimated fair value, we will recognize the difference as an impairment loss in operating income.

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Our goodwill impairment test requires a comparison of the estimated fair value of each reporting unit to its carrying value, including goodwill. We estimate the fair value of our reporting units based on a discounted cash flow approach, which requires us to make several assumptions about projected future cash flows and appropriate discount rates. If our assumptions or estimates change, we could incur charges in future periods for goodwill impairment.

In October 2007, we completed our annual goodwill impairment test and determined there was no impairment.

Recent Accounting Pronouncements

For information about recent accounting pronouncements, see Note 1 of “Notes to Consolidated Financial Statements,” included in Item 8 of this Form 10-K.

RESULTS OF OPERATIONS

The table below summarizes information derived from our Consolidated Statements of Income expressed as a percentage of net sales for the past three fiscal years:

		Year Ended December 31,
		2007		2006		2005
Net sales		100.0	%	100.0	%	100.0	%
Cost of sales		72.5		71.7		72.1
	Gross profit	27.5		28.3		27.9
Selling and administrative expenses		20.6		19.5		19.1
	Operating income	6.9		8.8		8.7
Interest expense, net		1.1		0.8		0.4
Income before income taxes and equity earnings		5.8		8.0		8.3

Note: Due to rounding, percentages may not add to operating income or income before income taxes and equity earnings.

Our discussion of consolidated operating results includes the operating results from acquisitions in 2007, 2006 and 2005.  We accounted for these acquisitions using the purchase method of accounting and we have included the results of operations in our consolidated results since the respective acquisition dates.

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Fiscal Year 2007 compared to Fiscal Year 2006

The following table breaks out our consolidated results into the base business component and the acquired and new market component (sales centers excluded from base business):

(Unaudited)		Base Business				Acquired & New Market					Total
(In thousands)		Year Ended				Year Ended					Year Ended
		December 31,				December 31,					December 31,
		2007		2006		2007		2006			2007		2006
Net sales	$	1,877,107	$	1,894,169	$	51,260	$	15,593		$	1,928,367	$	1,909,762
Gross profit		516,375		535,510		14,271		4,438			530,646		539,948
Gross margin		27.5	%	28.3	%	27.8	%	28.5	%		27.5	%	28.3	%
Selling and administrative expenses		384,853		369,498		12,019		3,068			396,872		372,566
Expenses as a % of net sales		20.5	%	19.5	%	23.4	%	19.7	%		20.6	%	19.5	%
Operating income		131,522		166,012		2,252		1,370			133,774		167,382
Operating margin		7.0	%	8.8	%	4.4	%	8.8	%		6.9	%	8.8	%

We exclude the following sales centers from our base business results for a period of 15 months:

·   acquired sales centers;

·   sales centers divested or consolidated with acquired sales centers; and

·   sales centers opened in new markets.

Additionally, we generally allocate overhead expenses to acquired and new market sales centers on the basis of their net sales as a percentage of total net sales.

For purposes of comparing operating results for the year ended December 31, 2007 to the year ended December 31, 2006, we have excluded 15 acquired sales centers from base business for the periods identified in the table below and an average of four sales centers opened in new markets, of which two are still excluded from base business as of year end.  Due to the timing of the two sales centers closed during the fourth quarter of 2007, these locations have not been excluded for the purpose of calculating base business for all periods presented. The three sales centers consolidated with existing sales centers during the fourth quarter of 2007 will remain part of the base business since we expect to transfer the majority of the existing business to our nearby locations.

Acquired	Acquisition Date	Sales Centers Acquired	Period Excluded (1)
Wickham Supply, Inc. and Water Zone, LP	August 2006	14	January – October 2007 and  August – October 2006
Tor-Lyn, Limited	February 2007	1	February – December 2007

(1) After 15 months of operations, we include acquired and new market sales centers in the base business calculation including the comparative prior year period.

For information about our recent acquisitions, see Note 2 of “Notes to Consolidated Financial Statements,” included in Item 8 of this Form 10-K.

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Net Sales

	Year Ended December 31,
(in millions)		2007		2006		Change
Net sales	$	1,928.4	$	1,909.8	$	18.6	1	%

The increase in net sales is primarily a result of the Wickham acquisition and sales from new locations that we opened in new markets. Base business sales decreased 1% compared to 2006 as sales declines for products used in new pool and irrigation construction were not fully offset by the solid sales growth for maintenance, repair and replacement products and our international operations.

Demand for pool and irrigation construction products was impacted by the weak housing market, tightening credit markets and unfavorable weather conditions. New pool construction permits declined significantly throughout 2007, especially in our key Florida, Arizona and California markets. Net sales were also adversely impacted by the competitive pricing pressures experienced in the current market environment.

Our sales growth for maintenance, repair and replacement products was primarily due to the following:

·   the continued successful execution of our sales, marketing and service programs, resulting in market share gains;

·   the growing installed base of swimming pools, which resulted in increased sales of non-discretionary products; and

·   price increases, primarily the impact in the first half of 2007 of our mid-year 2006 inflationary increases, which we passed through the supply chain.

Complementary product sales decreased 3% year over year compared to a 26% increase from 2005 to 2006. Our complementary product sales were adversely impacted by the declines in new construction activity, but benefited from our expansion of complementary product offerings and an increase in the number of sales centers that now offer complementary products.

Gross Profit

	Year Ended December 31,
(in millions)		2007			2006			Change
Gross profit	$	530.6		$	539.9		$	(9.3)	(2)	%
Gross margin		27.5	%		28.3	%

Gross margin decreased 80 basis points compared to 2006, including a consistent decline in base business gross margin.

Our 2007 gross margin is comparatively lower primarily due to the following impacts:

·   competitive pricing pressures, which intensified throughout 2007 given the adverse market conditions;

·   early buy inventory purchases and discounts for early payments on those purchases in the fourth quarter of 2005, which benefited our first half 2006 gross margin; and

·   pre-price increase inventory purchases in the second quarter of 2006, which benefited our third quarter 2006 gross margin.

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Operating Expenses

	Year Ended December 31,
(in millions)		2007			2006			Change
Operating expenses	$	396.9		$	372.6		$	24.3	7	%
Operating expenses as a percentage of net sales		20.6	%		19.5	%

Total operating expenses grew 7% and increased 110 basis points as a percentage of net sales compared to 2006, while base business operating expenses were 4% higher and increased 100 basis points as a percentage of net sales. These increases reflect the following:

·   incremental expenses for the 29 new sales centers that we have opened since the beginning of 2006;

·   higher rent expenses related to our expansion or relocation of numerous sales centers;

·   increases in bad debt expense during the last nine months of 2007;

·   higher freight costs; and

·   additional expenses for our investments in other growth initiatives.

These increased costs were partially offset by lower incentive expenses and the impact from cost control initiatives.

We opened 12 new sales centers in 2007 compared to 17 new sales centers in 2006.

Interest Expense

Interest expense increased $7.0 million between periods as average debt outstanding was 41% higher in 2007 compared to 2006. The higher debt levels in 2007 reflect increased borrowings to fund share repurchases. The weighted average effective interest rate also increased to 6.0% in 2007 from 5.8% in 2006.

Income Taxes

Income taxes decreased to $43.2 million in 2007 from $58.8 million in 2006 due to the $40.6 million decrease in income before income taxes and equity earnings. Our effective income tax rate was 38.66% at December 31, 2007 and 38.61% at December 31, 2006.

Net Income and Earnings Per Share

Net income decreased to $69.4 million in 2007 from $95.0 million in 2006.  Our equity interest in LAC produced $0.9 million of net earnings in 2007 compared to $1.6 million in 2006.  Earnings per share for 2007 decreased to $1.37 per diluted share compared to $1.74 in 2006. The decrease includes the impact of approximately $0.16 per diluted share related to the incremental operating expenses for new sales centers opened since January 2006.  By comparison, the impact of incremental operating expenses for new sales centers opened in 2006 was approximately $0.06 per diluted share last year. In both 2007 and 2006, earnings per share benefited from the reduction of our weighted average shares outstanding due to the impact of our share repurchase activities.

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Fiscal Year 2006 compared to Fiscal Year 2005

The following table breaks out our consolidated results into the base business component and the acquired and new market component (sales centers excluded from base business):

(Unaudited)		Base Business				Acquired & New Market					Total
(In thousands)		Year Ended				Year Ended					Year Ended
		December 31,				December 31,					December 31,
		2006		2005		2006		2005			2006		2005
Net sales	$	1,653,475	$	1,501,096	$	256,287	$	51,563		$	1,909,762	$	1,552,659
Gross profit		465,942		417,195		74,006		15,253			539,948		432,448
Gross margin		28.2	%	27.8	%	28.9	%	29.6	%		28.3	%	27.9	%
Selling and administrative expenses		316,617		284,443		55,949		12,642			372,566		297,085
Expenses as a % of net sales		19.1	%	18.9	%	21.8	%	24.5	%		19.5	%	19.1	%
Operating income		149,325		132,752		18,057		2,611			167,382		135,363
Operating margin		9.0	%	8.8	%	7.0	%	5.1	%		8.8	%	8.7	%

Please refer to the discussion of base business exclusions under the heading “Fiscal Year 2007 compared to Fiscal Year 2006” above.

For purposes of comparing operating results for the year ended December 31, 2006 to the year ended December 31, 2005, we have excluded 58 acquired sales centers from base business for the periods identified in the table below and an average of three sales centers opened in new markets, all which remain excluded as of December 31, 2006.

Acquired	Acquisition Date	Sales Centers Acquired	Period Excluded(1)
Wickham Supply, Inc. and Water Zone, LP	August 2006	14	August - December 2006
Horizon Distributors, Inc.	October 2005	40	October - December 2005 and
			January - December 2006
B&B s.r.l. (Busatta)	October 2005	1	November - December 2005 and
			January - December 2006
Direct Replacements, Inc.	October 2005	1	November - December 2005 and
			January - December 2006
Pool Tech Distributors, Inc.	December 2004	2	January - February 2006 and 2005

(1) After 15 months of operations, we include acquired and new market sales centers in the base business calculation including the comparative prior year period.

For information about our recent acquisitions, see Note 2 of “Notes to Consolidated Financial Statements,” included in Item 8 of this Form 10-K.

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Net Sales

	Year Ended December 31,
(in millions)		2006		2005		Change
Net sales	$	1,909.8	$	1,552.7	$	357.1	23	%

The increase in net sales is primarily a result of the Horizon acquisitions and the growth in our base business.

Base business sales growth was 10% in 2006 due primarily to the following:

·   a larger installed base of swimming pools resulting in increased sales of non-discretionary products;

·   estimated price increases of 3% to 4% that we passed through the supply chain;

·   the continued successful execution of our sales, marketing and service programs;

·   26% growth in complementary product sales; and

·   the opening of nine new base business sales center locations.

New product initiatives continue to be focused on our complementary products category, for which sales have grown from $3.0 million in 1999 to $180.1 million in 2006. These products, which our customers historically purchased from other suppliers, carry gross margins comparable to our traditional product categories. We no longer include Horizon’s sales in our complementary product calculations.

Gross Profit

	Year Ended December 31,
(in millions)		2006			2005			Change
Gross profit	$	539.9		$	432.4		$	107.5	25	%
Gross margin		28.3	%		27.9	%

Base business gross profit growth of 12% contributed $48.7 million to the increase in 2006, while acquired sales centers accounted for most of the remaining increase.

Gross margin increased 40 basis points in 2006 due primarily to the benefits achieved through our supply chain management initiatives, including our pre-price increase inventory purchases in the fourth quarter of 2005 and second quarter of 2006. We made aggressive early buy purchases during the fourth quarter of 2005 to take advantage of price discounts and to mitigate the impact of expected 2006 price increases, and we made additional pre-price increase purchases during the second quarter of 2006 that benefited our third quarter gross margins.

Our gross margin improvement also includes slightly higher margin contribution from acquired businesses and a small favorable product mix shift in 2006 to higher margin products, which is attributable to our successful sales initiatives including our expansion of parts and complementary product offerings. The overall increase in gross margin was partially offset by lower earned vendor incentives as a percentage of total net sales in 2006. This decrease reflects a lower aggregate vendor incentive rate compared to 2005 and a slight decrease between years in our annual purchase volumes as a percentage of total net sales. The decrease in rate is due to lower incentives as a percentage of total net sales for our acquired businesses and a shift in purchasing mix to products with lower incentives, primarily complementary products.

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Operating Expenses

	Year Ended December 31,
(in millions)		2006			2005			Change
Operating expenses	$	372.6		$	297.1		$	75.5	25	%
Operating expenses as a percentage of net sales		19.5	%		19.1	%

Operating expenses grew 25% and as a percentage of net sales increased 40 basis points in 2006 due primarily to higher expense ratios for our recently acquired businesses and start-up costs and higher expense ratios for new sales centers opened in 2006. We opened 17 sales centers in 2006 compared to only three sales centers in 2005. The 17 new locations include 11 new pool sales centers and six new Horizon sales centers. Expenses related to other investments in our business also contributed to the increase in operating expenses. We moved 24 existing sales centers to bigger locations, expanded another 16 existing sales center locations, opened two new construction material distribution centers and also launched two new value-added customer programs, among other new company initiatives in 2006. These increases in operating expenses were partially offset by lower employee bonuses in 2006 of approximately $4.0 million.

Interest Expense

Interest expense increased $8.8 million between periods as average debt outstanding was 79% higher in 2006 compared to 2005. The higher debt levels in 2006 reflect increased borrowings to fund share repurchases, acquisitions and higher working capital levels. The weighted average effective interest rate also increased to 5.8% in 2006 from 4.3% in 2005.

Income Taxes

Income taxes increased to $58.8 million in 2006 from $49.9 million in 2005 due to the $23.3 million increase in income before income taxes and equity earnings. Our effective income tax rate was 38.61% at December 31, 2006 and 38.74% at December 31, 2005 as adjusted for the impact of share-based compensation expense.

Net Income and Earnings Per Share

Net income increased 18% to $95.0 million in 2006 from $80.5 million in 2005. Net income in 2006 included $1.6 million of net equity earnings from our investment in LAC. Diluted earnings per share increased 20% to $1.74 per share in 2006 from $1.45 per share in 2005.

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Seasonality and Quarterly Fluctuations

Our business is highly seasonal. In general, sales and operating income are highest during the second and third quarters, which represent the peak months of both swimming pool use and installation and landscape installations and maintenance. Sales are substantially lower during the first and fourth quarters, when we may incur net losses. In 2007, approximately 65% of our net sales and over 100% of our operating income were generated in the second and third quarters of the year.

We typically experience a build-up of product inventories and accounts payable during the winter months in anticipation of the peak selling season.  Excluding borrowings to finance acquisitions and share repurchases, 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.

The following table presents certain unaudited quarterly data for 2007 and 2006. We have included income statement and balance sheet data for the most recent eight quarters to allow for a meaningful comparison of the seasonal fluctuations in these amounts. In our opinion, this information reflects all normal and recurring adjustments considered necessary for a fair presentation of this data. Due to the seasonal nature of the swimming pool industry, the results of any one or more quarters are not necessarily a good indication of results for an entire fiscal year or of continuing trends.

(Unaudited)		QUARTER
(in thousands)		2007								2006
		First		Second		Third		Fourth		First		Second		Third		Fourth
Statement of Income Data
Net sales	$	373,706	$	726,472	$	527,434	$	300,755	$	348,556	$	705,703	$	537,017	$	318,486
Gross profit		103,485		207,922		139,803		79,436		98,048		209,000		149,995		82,905
Operating income (loss)		8,632		98,433		39,505		(12,796	)	15,022		103,338		53,092		(4,070	)
Net income (loss)		1,354		57,794		21,835		(11,589	)	6,422		62,110		31,493		(5,001	)
Net sales as a % of annual net sales		19	%	38	%	27	%	16	%	18	%	37	%	28	%	17	%
Gross profit as a % of annual
gross profit		20	%	39	%	26	%	15	%	18	%	39	%	28	%	15	%
Operating income (loss) as a
% of annual operating income		6	%	74	%	30	%	(10	)%	9	%	62	%	32	%	(3	)%
Balance Sheet Data
Total receivables, net	$	231,034	$	301,265	$	200,534	$	141,117	$	211,578	$	295,722	$	211,589	$	154,937
Product inventories, net		413,161		388,364		317,110		379,663		406,310		367,096		283,930		332,069
Accounts payable		325,448		229,691		127,889		194,178		267,296		207,727		111,349		177,544
Total debt		358,522		425,599		406,465		350,852		236,188		303,000		257,974		265,443

In the third and fourth quarters of 2006 and full year 2007, our results of operations include the 14 Wickham sales centers that we acquired in August 2006. We expect that our quarterly results of operations will continue to fluctuate depending on the timing and amount of revenue contributed by new and acquired sales centers. We attempt to open new sales 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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Weather is one of the principal external factors affecting our business. The table below presents some of the possible effects resulting from various weather conditions.

Weather		Possible Effects
Hot and dry	•	Increased purchases of chemicals and supplies
		for existing swimming pools
	•	Increased purchases of above-ground pools and
		irrigation products
Unseasonably cool weather or extraordinary amounts of rain	•	Fewer pool and landscape installations
	•	Decreased purchases of chemicals and supplies
	•	Decreased purchases of impulse items such as
		above-ground pools and accessories
Unseasonably early warming trends in spring/late cooling trends in fall	•	A longer pool and landscape season, thus positively impacting our sales
(primarily in the northern half of the US)
Unseasonably late warming trends in spring/early cooling trends in fall	•	A shorter pool and landscape season, thus negatively impacting our sales
(primarily in the northern half of the US)

In 2007, our sales were negatively impacted by extended winter conditions that delayed the start of the pool season in the Northeast compared to 2006, much cooler and unusually wet weather conditions in Texas and Oklahoma during the first seven months of 2007 (which had a significant impact on sales related to pool and landscape construction) and less than ideal conditions in the third quarter, which compared unfavorably to the same period in 2006.

In 2006, our sales benefited from near record high temperatures across much of North America. This favorable impact was more pronounced in the first quarter of 2006, especially in our northern markets which experienced an earlier start to the pool season compared to 2005. While maintenance and impulse sales benefited from the near record high temperatures, sales tied to pool construction and pool usage were hindered by above average precipitation in the northeast and northwest. Despite 2006 being the hottest year on record nationally, sales were negatively impacted by much colder than average August and September temperatures which shortened the pool season in certain markets.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is defined as the ability to generate adequate amounts of cash to meet short-term and long-term cash needs. We assess our liquidity in terms of our ability to generate cash to fund our operating activities, taking into consideration the seasonal nature of our business. Significant factors which could affect our liquidity include the following:

·   cash flows generated from operating activities;

·   the adequacy of available bank lines of credit;

·   acquisitions;

·   the timing and extent of share repurchases;

·   capital expenditures;

·   dividend payments; and

·   the ability to attract long-term capital with satisfactory terms.

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Our primary capital needs are seasonal working capital obligations and other general corporate purposes, including acquisitions, share repurchases and dividend payments. Our primary sources of working capital are cash from operations supplemented by bank borrowings, which combined with seller financing have historically been sufficient to support our growth and finance acquisitions. The same principle applies to funds used for share repurchases and capital expenditures. We prioritize our use of cash based on investing in our business, returning money to our shareholders and maintaining a prudent debt structure. Our specific priorities for the use of cash are as follows:

·   maintenance and new sales center capital expenditures estimated at 0.5% to 0.75% of net sales;

·   strategic acquisitions executed opportunistically;

·   payment of cash dividends as and when declared by the Board;

·   repurchase of common stock within Board defined parameters; and

·   repayment of debt.

Sources and Uses of Cash

The following table summarizes our cash flows (in thousands):

	Year Ended December 31,
		2007			2006
Operating activities	$	71,644		$	69,010
Investing activities		(12,638	)		(41,439	)
Financing activities		(63,957	)		(41,586	)

Our 2007 cash provided by operations increased $2.6 million compared to 2006 due primarily to favorable impacts from changes in working capital balances, which offset the decrease in net income.  The working capital impact is reflected in the net change in our receivable and accounts payable balances between periods, but this benefit to our 2007 cash provided by operations was largely offset by the increase in inventory.  The change from a use of cash in 2006 to a source of cash in 2007 from other accrued liabilities is due to the payment in 2006 of $27.0 million in estimated federal tax payments that we deferred from 2005 as allowed by the IRS.

Cash used in investing activities decreased due to the reduced level of acquisition activity in 2007.  Our financing activities for the year included $98.5 million of net proceeds from debt and cash related to our stock plans, offset by $139.7 million of total share repurchases and $22.7 million for the payment of our quarterly cash dividends to shareholders, which we increased in the second quarter of 2007.

Our 2006 cash provided by operations increased $29.6 million compared to 2005 due primarily to the increase in net income and the impact related to our fourth quarter 2005 early buy purchases. In 2005, our cash provided by operations was negatively impacted by early buy inventory purchases that we received and paid for in the fourth quarter of 2005. This impact is reflected in the net change in our inventory and accounts payable balances between periods, but the benefit to our 2006 cash provided by operations was largely offset by the decrease in accrued expenses which included a $27.0 million payment for estimated federal tax payments that were deferred from the second half of 2005 as allowed by the Katrina Emergency Tax Relief Act of 2005. The remaining increase in cash provided by operations is attributable to the change in our accounts receivable balance between periods.

Future Sources and Uses of Cash

As amended on December 20, 2007, our unsecured syndicated senior credit facility (the Credit Facility) now provides for $300.0 million in borrowing capacity including a $240.0 million five-year revolving credit facility (the Revolver) and a $60.0 million term loan (the Term Loan). The Term Loan matures on December 20, 2010 and the Revolver matures on December 20, 2012.  The Credit Facility includes sublimits for the issuance of swingline loans and standby letters of credit.  Pursuant to an accordion feature, the aggregate maximum principal amount of the commitments under the Revolver may be increased from time to time, by up to $75.0 million, to a total of $315 million.

At December 31, 2007, there was $125.5 million outstanding and $114.0 million available for borrowing under the Revolver. The weighted average effective interest rate on the Revolver was approximately 6.4% for the year ended December 31, 2007.

At December 31, 2007, there was $57.0 million outstanding under the Term Loan of which $3.0 million is classified as current. In December 2005, we entered into an interest rate swap agreement to reduce our exposure to fluctuations in interest rates. The swap agreement converts our variable rate Term Loan to a fixed-rate basis until its termination on December 31, 2008. We have designated this swap as a cash flow hedge. During the year ended December 31, 2007, no gains or losses were recognized on this swap. The weighted average effective interest rate of the Term Loan was approximately 5.7% for the year ended December 31, 2007.

31

In March 2007, we renewed our accounts receivable securitization facility (the Receivables Facility), which provides a seasonal borrowing capacity of up to $150.0 million, through March 2008. The Receivables Facility provides for the true sale of certain of our receivables as they are created to a wholly owned, bankruptcy-remote subsidiary. This subsidiary grants an undivided security interest in the receivables to an unrelated commercial paper conduit. Because of the structure of the bankruptcy-remote subsidiary and our ability to control its activities, we include the transferred receivables and related debt in our Consolidated Balance Sheets. We continue to employ this arrangement because it provides us with a lower cost form of financing. At December 31, 2007, there was $68.3 million outstanding under the Receivables Facility at a weighted average effective interest rate of 6.0%. We intend to renew the Receivables Facility in March 2008 with comparable or similar terms, and we do not have any reason to believe that we will not be able to do so.

On February 12, 2007, we issued and sold $100.0 million aggregate principal amount of Floating Rate Senior Notes (the Notes) in a private placement offering pursuant to a Note Purchase Agreement. The Notes are due February 12, 2012 and accrue interest on the unpaid principal balance at a floating rate equal to a spread of 0.600% over the three-month LIBOR, as adjusted from time to time. We used the net proceeds from the placement to pay down borrowings under the Credit Facility. In February 2007, we also entered into an interest rate swap agreement to reduce our exposure to fluctuations in interest rates on the Notes. The swap agreement converts the Notes’ variable interest rate to a fixed rate of 5.088% on the initial notional amount of $100.0 million, which will decrease to a notional amount of $50.0 million in 2010.

As of December 31, 2007, we were in compliance with all covenants and financial ratio requirements related to our Credit Facility, our Notes and our Receivables Facility. For additional information regarding our debt arrangements, see Note 5 of “Notes to Consolidated Financial Statements,” included in Item 8 of this Form 10-K.

Our Board increased the authorization for the repurchase of shares of our common stock in the open market during 2007, including an increase to $100.0 million in August 2007.  As of February 22, 2008, $55.0 million of the authorized amount remained available. We intend to continue to repurchase shares on the open market from time to time, depending on market conditions. We may use cash flows from operations to fund these purchases, or we may incur additional debt.

We believe we have adequate availability of capital to fund present operations and anticipated growth, including expansion in existing and targeted market areas. We continually evaluate potential acquisitions and hold discussions with acquisition candidates. If suitable acquisition opportunities or working capital needs arise that would require additional financing, we believe that our financial position and earnings history provide a solid base for obtaining additional financing resources at competitive rates and terms. Additionally, we may issue common or preferred stock to raise funds.

Contractual Obligations

At December 31, 2007, our contractual obligations for long-term debt, short-term financing and operating leases were as follows (in thousands):

				Payments due by period
				Less than						5 years and
		Total		1 year		1-2 years		3-4 years		thereafter
Long-term debt	$	282,525	$	3,000	$	6,000	$	48,000	$	225,525
Short-term financing		68,327		68,327		—		—		—
Operating leases		201,844		46,754		75,130		45,102		34,858
	$	552,696	$	118,081	$	81,130	$	93,102	$	260,383

This table does not include estimated future interest expense related to long-term debt and short-term financing. For additional discussion related to our debt, see Note 5 of “Notes to Consolidated Financial Statements,” included in Item 8 of this Form 10-K.

We have minimum purchase requirements under a limited number of vendor agreements, primarily those related to the purchase of chemicals.  Since these requirements are either based on a percentage of our total purchases for a product category or a minimum number of pounds of chemicals at prevailing market prices, the amounts of these contractual obligations are not reasonably estimatable as of December 31, 2007 and therefore are not included in the table above.

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Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks, including interest rate risk and foreign currency risk. The adverse effects of potential changes in these market risks are discussed below. The following discussion does not consider the effects of the reduced level of overall economic activity that could exist following such changes. Further, in the event of changes of such magnitude, we would likely take actions to mitigate our exposure to such changes.

Interest Rate Risk

Our earnings are exposed to changes in short-term interest rates because of the variable interest rates on our debt. However, we have entered into interest rate swap agreements to reduce our exposure to fluctuations in interest rates on our Term Loan and our Notes.

If (i) the variable rates on our Revolver and our Receivables Facility increased or decreased 1.0% from the rate at December 31, 2007; and (ii) we borrowed the maximum amount available as of December 31, 2007 under the Revolver ($315.0 million assuming that we exercised the $75.0 million accordion feature) and the Receivables Facility ($150.0 million) for all of 2007, then our pretax income would change by approximately $4.7 million and earnings per share would change by $0.06 per diluted share based on the number of weighed average diluted shares outstanding at December 31, 2007.

Currency Risk

We have wholly owned subsidiaries in Canada, Mexico, the United Kingdom, France, Portugal, Spain and Italy. In the past, we have not hedged our currency exposure, and fluctuations in exchange rates have not materially affected our operating results. Future changes in exchange rates may positively or negatively impact our revenues, operating expenses and earnings. Due to the size of our international operations, however, we do not anticipate that exposure to currency rate fluctuations will be material in 2008.

Functional Currencies
Canada	Canadian Dollar
United Kingdom	British Pound
France	Euro
Italy	Euro
Portugal	Euro
Spain	Euro
Mexico	Peso

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Item 8.  Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	35
Consolidated Statements of Income	36
Consolidated Balance Sheets	37
Consolidated Statements of Cash Flows	38
Consolidated Statements of Changes in Stockholders’ Equity	40
Notes to Consolidated Financial Statements	41

34

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Pool Corporation

We have audited the accompanying consolidated balance sheets of Pool Corporation as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2007.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred  to above present fairly, in all material respects, the consolidated financial position of Pool Corporation at December 31, 2007 and 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 8 to the financial statements, in 2007 the Company changed its method of accounting for income taxes.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Pool Corporation's internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2008 expressed an unqualified opinion thereon.

               /s/ Ernst & Young LLP

New Orleans, Louisiana

February 29, 2008

35

POOL CORPORATION

Consolidated Statements of Income

(In thousands, except per share data)

	Year Ended December 31,
		2007		2006		2005
						(As Adjusted -  See Note 7)
Net sales	$	1,928,367	$	1,909,762	$	1,552,659
Cost of sales		1,397,721		1,369,814		1,120,211
Gross profit		530,646		539,948		432,448
Selling and administrative expenses		396,872		372,566		297,085
Operating income		133,774		167,382		135,363
Interest expense, net		22,148		15,196		6,434
Income before income taxes and equity earnings		111,626		152,186		128,929
Provision for income taxes		43,154		58,759		49,941
Equity earnings in unconsolidated investments, net		922		1,597		1,467
Net income	$	69,394	$	95,024	$	80,455
Earnings per share:
Basic	$	1.42	$	1.83	$	1.53
Diluted	$	1.37	$	1.74	$	1.45
Weighted average shares outstanding:
Basic		48,887		51,866		52,445
Diluted		50,802		54,662		55,665
Cash dividends declared per common share	$	0.465	$	0.405	$	0.34

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

36

POOL CORPORATION

Consolidated Balance Sheets

(In thousands, except share data)

			December 31,
				2007		2006
Assets
Current assets:
	Cash and cash equivalents		$	15,825	$	16,734
	Receivables, net			45,257		51,116
	Receivables pledged under receivables facility			95,860		103,821
	Product inventories, net			379,663		332,069
	Prepaid expenses and other current assets			8,265		8,005
	Deferred income taxes			9,139		7,676
Total current assets				554,009		519,421
Property and equipment, net				34,223		33,633
Goodwill				155,247		154,244
Other intangible assets, net				14,504		18,726
Equity interest investments				33,997		32,509
Other assets, net				22,874		16,029
Total assets			$	814,854	$	774,562
Liabilities and stockholders' equity
Current liabilities:
	Accounts payable		$	194,178	$	177,544
	Accrued expenses and other current liabilities			37,216		35,610
	Short-term financing			68,327		74,286
	Current portion of long-term debt and other long-term liabilities			3,439		4,350
Total current liabilities				303,160		291,790
Deferred income taxes				17,714		15,023
Long-term debt				279,525		188,157
Other long-term liabilities				5,664		1,908
Total liabilities				606,063		496,878
Stockholders' equity:
	Common stock, $.001 par value; 100,000,000 shares authorized; 47,516,989 and 50,929,665 shares
		issued and outstanding at December 31, 2007 and 2006, respectively		47		50
	Additional paid-in capital			171,996		148,821
	Retained earnings			29,044		129,932
	Treasury stock			—		(7,334	)
	Accumulated other comprehensive income			7,704		6,215
Total stockholders' equity				208,791		277,684
Total liabilities and stockholders' equity			$	814,854	$	774,562

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

37

POOL CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

				Year Ended December 31,
					2007			2006			2005
											(As Adjusted - See Note 7)
Operating activities
Net income				$	69,394		$	95,024		$	80,455
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation				9,289			8,162			5,410
	Amortization				4,694			4,742			3,998
	Share-based compensation				7,398			7,204			5,966
	Excess tax benefits from share-based compensation				(8,482	)		(14,627	)		(13,473	)
	Provision for doubtful accounts receivable, net of write-offs				5,047			1,217			(332	)
	Provision for inventory obsolescence, net				610			902			115
	Change in deferred income taxes				(3,747	)		(4,521	)		(7,292	)
	Loss on sale of property and equipment				56			73			133
	Equity earnings in unconsolidated investments				(1,523	)		(2,602	)		(2,386	)
	Other				(40	)		—			—
	Changes in operating assets and liabilities,
		net of effects of acquisitions and divestitures:
			Receivables		8,822			(5,301	)		(13,394	)
			Product inventories		(48,001	)		5,882			(103,579	)
			Prepaid expenses and other assets		(870	)		(1,054	)		(934	)
			Accounts payable		16,505			(5,269	)		41,932
			Accrued expenses and other current liabilities		12,492			(20,822	)		42,834
Net cash provided by operating activities					71,644			69,010			39,453
Investing activities
Acquisition of businesses, net of cash acquired					(2,087	)		(26,662	)		(89,963	)
Equity interest investments					—			—			(3,539	)
Proceeds from sale of investment					75			—			—
Purchase of property and equipment, net of sale proceeds					(10,626	)		(14,777	)		(8,361	)
Net cash used in investing activities					(12,638	)		(41,439	)		(101,863	)
Financing activities
Proceeds from revolving line of credit					477,246			442,495			364,383
Payments on revolving line of credit					(482,878	)		(380,438	)		(345,703	)
Proceeds from asset-backed financing					87,479			93,347			67,133
Payments on asset-backed financing					(93,438	)		(84,718	)		(44,071	)
Proceeds from long-term debt					100,000			—			60,000
Payments on long-term debt and other long-term liabilities					(4,321	)		(1,514	)		(1,350	)
Payments of capital lease obligations					(257	)		(257	)		—
Payment of deferred financing costs					(1,152	)		(156	)		(243	)
Excess tax benefits from share-based compensation					8,482			14,627			13,473
Issuance of common stock under stock plans					7,292			7,220			4,481
Payments of cash dividends					(22,734	)		(21,080	)		(17,862	)
Purchases of treasury stock					(139,676	)		(111,112	)		(32,091	)
Net cash provided by (used in) financing activities					(63,957	)		(41,586	)		68,150
Effect of exchange rate changes on cash					4,042			3,883			(636	)
Change in cash and cash equivalents					(909	)		(10,132	)		5,104
Cash and cash equivalents at beginning of year					16,734			26,866			21,762
Cash and cash equivalents at end of year				$	15,825		$	16,734		$	26,866

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

38

POOL CORPORATION

Consolidated Statements of Cash Flows (continued)

(In thousands)

Supplemental cash flow information			Year Ended December 31,
			2007		2006		2005
Cash paid during the year for:
	Interest	$	21,321	$	14,823	$	5,660
	Income taxes, net of refunds		30,509		74,822		14,313

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

39

POOL CORPORATION

Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, amounts in Dollars except share data)

(2004 and 2005 as adjusted - see Note 7)
										Accumulated
								Additional		Other
		Common Stock				Treasury		Paid-In	Retained	Comprehensive
		Shares		Amount		Stock		Capital	Earnings	Income (Loss)		Total
Balance at December 31, 2004		52,186		52		—		95,358	129,260	2,874		227,544
	Net income	—		—		—		—	80,455			80,455
	Foreign currency translation	—		—		—		—	—	(634	)	(634	)
	Interest rate swap, net of tax of $63	—		—		—		—	—	(101	)	(101	)
	Comprehensive income, net of tax											79,720
	Treasury stock, 964 shares of common stock	—		—		(32,091	)	—	—	—		(32,091	)
	Retirement of treasury shares	(939	)	(1	)	31,170		—	(31,169)	—		—
	Share-based compensation	—		—		—		6,458	—	—		6,458
	Exercises of stock options including tax benefit of $13,473	1,124		1		—		16,757	—	—		16,758
	Declaration of cash dividends	—		—		—		—	(17,862)	—		(17,862	)
	Employee stock purchase plan	44		—		—		1,197	—	—		1,197
Balance at December 31, 2005		52,415		52		(921	)	119,770	160,684	2,139		281,724
	Net income	—		—		—		—	95,024			95,024
	Foreign currency translation	—		—		—		—	—	3,854		3,854
	Interest rate swap, net of tax of $139	—		—		—		—	—	222		222
	Comprehensive income, net of tax											99,100
	Treasury stock, 2,778 shares of common stock	—		—		(111,112	)	—	—	—		(111,112	)
	Retirement of treasury shares	(2,616	)	(3	)	104,699		—	(104,696)	—		—
	Share-based compensation	—		—		—		7,204	—	—		7,204
	Exercise of stock optionsincluding tax benefit of $14,627	1,072		1		—		19,948	—	—		19,949
	Declaration of cash dividends	—		—		—		—	(21,080)	—		(21,080	)
	Employee stock purchase plan	58		—		—		1,899	—	—		1,899
Balance at December 31, 2006		50,929		50		(7,334	)	148,821	129,932	6,215		277,684
	Net income	—		—		—		—	69,394			69,394
	Foreign currency translation	—		—		—		—	—	4,042		4,042
	Interest rate swap, net of tax of  $1,606	—		—		—		—	—	(2,553	)	(2,553	)
	Comprehensive income, net of tax											70,883
	Treasury stock, 4,165 shares of common stock	—		—		(139,676	)	—	—	—		(139,676	)
	Retirement of treasury shares	(4,351	)	(4	)	147,010		—	(147,006)	—		—
	FIN 48 cumulative adjustment	—		—		—		—	(542)	—		(542	)
	Share-based compensation	—		—		—		7,398	—	—		7,398
	Exercise of stock optionsincluding tax benefit of $8,482	839		1		—		14,544	—	—		14,545
	Declaration of cash dividends	—		—		—		—	(22,734)	—		(22,734	)
	Issuance of restricted stock	62		—		—		—	—	—		—
	Employee stock purchase plan	37		—		—		1,233	—	—		1,233
Balance at December 31, 2007		47,516		47		—		171,996	29,044	7,704		208,791

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

40

POOL CORPORATION

Notes to Consolidated Financial Statements

Note 1 - Organization and Summary of Significant Accounting Policies

Description of Business

As of December 31, 2007, Pool Corporation and its wholly owned subsidiaries (the Company, which may be referred to as POOL, we, us or our), maintained 281 sales centers in North America and Europe from which we sell swimming pool equipment, parts and supplies and irrigation and landscape products to pool builders, retail stores, service companies, landscape contractors and golf courses. We distribute products through three networks: The SCP Distributors (SCP) network, the Superior Pool Products (Superior) network and the Horizon Distributors (Horizon) network.

Basis of Presentation and Principles of Consolidation

We prepared the Consolidated Financial Statements following U.S. generally accepted accounting principles (GAAP) and the requirements of the Securities and Exchange Commission (SEC). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of our financial position and operating results.

The Consolidated Financial Statements include the accounts of Pool Corporation and our wholly owned subsidiaries. We eliminated all significant intercompany accounts and transactions among our wholly owned subsidiaries. We account for our 38% investment in Latham Acquisition Corporation (LAC), which was a 42% interest when acquired in December 2004, and our 50% investment in Northpark Corporate Center, LLC (NCC) using the equity method of accounting. Accordingly, we report our share of income or loss based on our ownership interests in these investments.

Use of Estimates

In order to prepare financial statements that conform to GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Our most significant estimates are those relating to the allowance for doubtful accounts, the inventory reserve, vendor incentives, income taxes and incentive compensation accruals. We continually review our estimates and make adjustments as necessary, but actual results could be significantly different from what we expected when we made these estimates.

Segment Reporting

Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for the way that public companies report information about operating segments in annual financial statements and for related disclosures about products and services, geographic areas and major customers. POOL’s management evaluates our sales centers based upon their individual performance relative to predetermined standards that include both financial and operational measures. Additionally, POOL’s management makes decisions about how to allocate resources primarily on a sales center-by-sales center basis. Since all of our sales centers have similar operations and share similar economic characteristics, we aggregate our sales centers into a single reportable segment.

41

Seasonality and Weather

Our business is highly seasonal and weather is one of the principal external factors affecting our business.  In general, sales and net income are highest during the second and third quarters, which represent the peak months of both swimming pool use and installation and landscape installations and maintenance.  Sales are substantially lower during the first and fourth quarters when we may incur net losses.

Earnings Per Share

In accordance with SFAS 128, Earnings per Share, we calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share includes the dilutive effects of stock awards. For additional discussion of earnings per share, see Note 9.

Financial Instruments

The carrying values of cash, receivables, accounts payable and accrued liabilities approximate fair value due to the short maturity of those instruments. The carrying amount of long-term debt approximates fair value as it bears interest at variable rates. The carrying value of interest rate swap agreements is based on quoted market rates at each balance sheet date.

Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Credit Risk and Allowance for Doubtful Accounts

We record trade receivables at the invoiced amount less an allowance for doubtful accounts for estimated losses due to customer non-payment. We perform periodic credit evaluations of our customers and we typically do not require collateral. Consistent with industry practices, we require payment from our customers within 30 days except for sales under early buy programs for which we provide extended payment terms to qualified customers. The following table summarizes the changes in our allowance for doubtful accounts for the past three years (in thousands):

		2007			2006			2005
Balance at beginning of year	$	4,892		$	4,211		$	3,138
Acquisition of businesses, net		—			(536	)		1,160
Bad debt expense		7,634			3,420			1,850
Write-offs, net of recoveries		(2,587	)		(2,203	)		(1,937	)
Balance at end of year	$	9,939		$	4,892		$	4,211

42

Product Inventories and Reserve for Inventory Obsolescence

Product inventories consist primarily of goods purchased from manufacturers for resale to our customers. We record inventory at the lower of cost, using the average cost method, or market. We establish our reserve for inventory obsolescence based on inventory turns by category with particular emphasis on stock keeping units with the weakest sales over the previous 12 months. The reserve is intended to reflect the net realizable value of inventory that we may not be able to sell at a profit.

In evaluating the adequacy of our reserve for inventory obsolescence at the sales center level, we consider a combination of factors including:

·   the level of inventory in relationship to historical sales by product, including inventory usage by class based on product sales at both the sales center and Company levels;

·   changes in customer preferences;

·   seasonal fluctuations in inventory levels;

·   geographical location; and

·   new product offerings.

Our reserve for inventory obsolescence may periodically require adjustment as changes occur in the above-identified factors.

The following table summarizes the changes in our allowance for inventory obsolescence for the past three years (in thousands):

		2007			2006			2005
Balance at beginning of year	$	4,777		$	3,875		$	3,085
Acquisition of businesses, net		—			350			685
Provision for inventory write-downs		1,788			1,196			808
Deduction for inventory write-offs		(1,162	)		(644	)		(703	)
Balance at end of year	$	5,403		$	4,777		$	3,875

Vendor Incentives

We account for vendor incentives in accordance with the Emerging Issues Task Force Issue 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. Many of our arrangements with our vendors provide for us to receive incentives of specified amounts of consideration, payable to us when we achieve any of a number of measures. These measures are generally related to the volume level of purchases from our vendors and may include negotiated pricing arrangements. We account for such incentives as if they are a reduction of the prices of the vendor’s products and therefore as a reduction of inventory until we sell the product, at which time such incentives are recognized as a reduction of cost of sales in our income statement.

Throughout the year, we estimate the amount of the incentive earned based on our estimate of cumulative purchases for the fiscal year relative to the purchase levels that mark our progress toward earning the incentives. We accrue vendor incentives on a monthly basis using these estimates provided that we determine they are probable and reasonably estimable. We continually revise these estimates to reflect actual incentives earned based on actual purchase levels and trends. When we make adjustments to our estimates, we determine whether any portion of the adjustment impacts the amount of vendor incentives that are deferred in inventory. In accordance with EITF 02-16, we recognize changes in our estimates for vendor incentives as a cumulative catch-up adjustment to the amounts recognized to date in our financial statements.

43

Property and Equipment

Property and equipment are stated at cost. We depreciate property and equipment on a straight-line basis over the following estimated useful lives:

Buildings	40 years
Leasehold improvements	1 - 10 years (1)
Autos and trucks	3 years
Machinery and equipment	10 years
Computer equipment	3 - 5 years
Furniture and fixtures	10 years

 (1) For substantial improvements made near the end of a lease term where we are reasonably certain the lease will be renewed, we amortize the leasehold improvement over the remaining life of the lease including the expected renewal period.

The table below presents depreciation expense for the past three years (in thousands):

	2007		2006		2005
$	9,289	$	8,162	$	5,410

Acquisitions

In accordance SFAS 141, Business Combinations, we account for acquisitions using the purchase method of accounting and allocate the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values. We revise these estimates as necessary if any additional information becomes available during a one year allocation period from the date of acquisition. These revisions may include working capital adjustments based on new or additional facts about the business, final estimates of acquired assets and assumed liabilities and changes in the purchase price due to updated estimates or the resolution of items related to contingent consideration. We include the results of operations of acquisitions in our Consolidated Financial Statements as of the acquisition date.  For additional discussion of acquisitions, see Note 2.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the amount we paid to acquire a company over the estimated fair value of tangible assets and identifiable intangible assets acquired, less liabilities assumed. We account for goodwill under the provisions of SFAS 142, Goodwill and Other Intangible Assets. In accordance with these rules, we test goodwill and other indefinite lived intangible assets for impairment annually or at any other time when impairment indicators exist. For our annual goodwill impairment test, we compare our estimated fair value of each reporting unit to its carrying value, including goodwill. For additional discussion of goodwill and other intangible assets, see Note 3.

Self Insurance

We are self-insured for employee health benefits, workers’ compensation coverage, automobile and property and casualty insurance. We have limited our exposure by maintaining excess and aggregate liability coverage for each of these items. We establish self-insurance reserves based on information that we obtain from third-party service providers regarding known claims and estimates of claims incurred but not reported. Our management reviews these reserves based on consideration of various factors, including but not limited to the age of existing claims, estimated settlement amounts and other historical claims data.

44

Advertising Costs

We expense advertising costs when incurred. The table below presents advertising expense for the past three years (in thousands):

	2007		2006		2005
$	7,646	$	9,463	$	7,763

Income Taxes

In June 2006, the FASB issued Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS 109, Accounting for Income Taxes, to create a single model to address accounting for uncertainty in tax positions. We adopted FIN 48 effective January 1, 2007, as required. We recorded the cumulative impact of adopting FIN 48 in retained earnings. We anticipate that the accounting under the provisions of FIN 48 may provide for greater volatility in our effective tax rate as items are derecognized or as we record changes in measurement in interim periods.

We record deferred tax assets or liabilities based on differences between financial reporting and tax basis of assets and liabilities using currently enacted rates and laws that will be in effect when we expect the differences to reverse. Due to changing tax laws and state income tax rates, significant judgment is required to estimate the effective tax rate expected to apply to tax differences that are expected to reverse in the future.

We record a valuation allowance to reduce the carrying amounts of net deferred tax assets if there is uncertainty regarding their realization. We consider many factors when assessing the likelihood of future realization including our recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, the carryforward periods available to us for tax reporting purposes and other relevant factors.For additional discussion of income taxes, see Note 8.

Share-Based Compensation

We account for our employee stock options under SFAS 123(R), Share-Based Payment, which requires companies to recognize compensation cost for stock options and other stock-based awards based on their estimated fair value as measured on the grant date. We have selected a Black-Scholes model for estimating the grant date fair value of share-based payments under SFAS 123(R).  For additional discussion of share-based compensation, see Note 7.

Revenue Recognition

We recognize revenue in accordance with SEC Staff Accounting Bulletin 104 (SAB 104), Revenue Recognition in Financial Statements, and the appropriate amendments. SAB 104 requires that four basic criteria must be met before we can recognize revenue:

1.      persuasive evidence of an arrangement exists;

2.      delivery has occurred or services have been rendered;

3.      the seller’s price to the buyer is fixed or determinable; and

4.      collectibility is reasonably assured.

We record revenue when customers take delivery of products. Customers may pick up products at any sales center location, or products may be delivered via our trucks or third party carriers. Products shipped via third party carriers are considered delivered based on the shipping terms, which are generally FOB shipping point.

We may offer volume incentives, which we accrue monthly as an adjustment to net sales. We record customer returns, including those associated with early buy programs, as an adjustment to net sales. In the past, customer returns have not been material.

We report revenue net of tax amounts that we collect from our customers and remit to governmental authorities. These tax amounts may include, but are not limited to, sales, use, value added and some excise taxes.

45

Derivatives and Hedging Activities

We recognize all derivatives at fair value on the balance sheet. The effective portion of changes in the fair value of derivatives qualifying as cash flow hedges are recognized in other comprehensive income until the hedged item is recognized in earnings, or until it becomes unlikely that the hedged transaction will occur. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings.

We currently have two interest rate swaps in place to reduce our exposure to fluctuations in interest rates. We designated these swaps as cash flow hedges. We recognize any differences paid or received on the interest rate swaps as an adjustment to interest expense over the life of the swaps. For additional discussion of our interest rate swaps, see Note 5.

Shipping and Handling Costs

We include shipping and handling fees billed to customers in net sales and we record shipping and handling costs associated with inbound freight as cost of sales. The table below presents shipping and handling costs associated with outbound freight, which we include in selling and administrative expenses (in thousands):

	2007		2006		2005
$	36,054	$	32,682	$	27,332

Reclassifications

For comparative purposes, certain amounts in the 2006 and 2005 financial statements have been reclassified to conform to the 2007 presentation.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS 157, Fair Value Measurements (SFAS  157). SFAS 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition and disclosure purposes under generally accepted accounting principles. SFAS 157 will require the fair value of an asset or liability to be based on market-based measures that reflect our credit risk. SFAS 157 will also expand disclosure requirements to include the methods and assumptions used to measure fair value and the effect of fair value measures on earnings. We will adopt SFAS 157 on January 1, 2008 and this pronouncement is not expected to have a material impact on our Consolidated Financial Statements.

In December 2007, the FASB issued SFAS 141 (Revised), Business Combinations (SFAS 141(R)), which replaced SFAS 141, Business Combinations (SFAS 141), and SFAS 160, Noncontrolling Interests in Consolidated Financial Statements — an Amendment of ARB 51 (SFAS 160). SFAS 141(R) retains the fundamental requirements of SFAS 141, but broadens its scope by applying the acquisition method to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS 141(R) also requires that consideration exchanged be measured at fair value as of the acquisition date, that liabilities related to contingent consideration be recognized at the acquisition date and remeasured at fair value in each subsequent reporting period, that acquisition-related costs be expensed as incurred and that income be recognized if the fair value of the net assets acquired exceeds the fair value of the consideration transferred. SFAS 160 establishes accounting and reporting standards for noncontrolling interests (i.e., minority interests) in a subsidiary, including changes in a parent’s ownership interest in a subsidiary, and requires that noncontrolling interests in subsidiaries be classified as a separate component of equity.

SFAS 141(R) and SFAS 160 are effective for fiscal years beginning after December 15, 2008. These pronouncements are required to be applied prospectively, except for the presentation and disclosure requirements of SFAS 160, which are required to be applied retrospectively for all periods presented. We are currently assessing the impact SFAS 141(R) and SFAS 160 will have on our Consolidated Financial Statements.

46

Note 2 - Acquisitions and Divestitures

2007 Acquisitions

In February 2007, we acquired Tor-Lyn Limited, a swimming pool supply distributor with one sales center location in Ontario, Canada.  We have included the results of operations for Tor-Lyn Limited in our Consolidated Financial Statements since the acquisition date.  This acquisition did not have a material impact on our financial position or results of operations.

2006 Acquisitions

In August 2006, we acquired all of the outstanding stock of Wickham Supply, Inc. and Water Zone, LP (collectively Wickham), a leading regional irrigation products distributor. Wickham operates 14 distribution sales centers with 13 locations throughout Texas and one location in Georgia. We have included the results of operations for Wickham in our Consolidated Financial Statements since the acquisition date. We finalized the purchase price allocations for our acquisition of Wickham during the third quarter of 2007.

2005 Acquisitions

In October 2005, we acquired all of the outstanding stock of Automatic Rain Company through our newly formed and wholly owned subsidiary Horizon Distributors, Inc. (Horizon). Horizon is a leading regional wholesale distributor of irrigation and landscape products serving professional contractors in the landscape construction and maintenance markets. This transaction brought added depth and diversity to our operations through an extension of our non-core swimming pool product offerings and furthered our objective of being the resource for pool and landscaping contractors. Horizon was a natural addition to our business, as irrigation and landscaping are often key components to completing a swimming pool installation or remodel.

The purchase price for the issued and outstanding stock of Automatic Rain Company was approximately $87.1 million in cash, which included approximately $1.4 million in working capital adjustments that were recorded as of December 31, 2005 and paid in 2006. The purchase price was determined based on our negotiations with the former shareholders of Automatic Rain Company and our valuation considerations, which included historical and prospective earnings, net asset value and other valuation considerations consistent with our historical valuation of acquisitions.

We finalized the purchase price allocations for our acquisition of Automatic Rain Company during the third quarter of 2006. In connection with the acquisition, we recorded other intangible assets totaling $11.8 million for the estimated fair value of a tradename, a non-compete agreement and certain employment contracts. We also recorded $35.0 million of goodwill in connection with the acquisition. Horizon's results of operations are included in the Consolidated Statements of Income since the acquisition date.

In October 2005, we also acquired B&B s.r.l. (Busatta), a swimming pool supply distributor based in the northwestern Italian city of San Bernardo d'Ivrea, near Turin, as well as the assets of Direct Replacements, Inc., a Marietta, Georgia packaged pool distributor. Busatta is our first location in Italy and allows us to further our presence in the European market. We have included the results of operations for Busatta and Direct Replacements, Inc. in our Consolidated Financial Statements since the respective acquisition dates. We have finalized the purchase price allocations for these acquisitions.

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Note 3 - Goodwill and Other Intangible Assets

In October 2007, we performed our annual goodwill impairment test.  As a result of this test, we believe the goodwill on our balance sheet is not impaired.

The changes in the carrying amount of goodwill are as follows (in thousands):

Balance at December 31, 2005	$	139,546
Acquired goodwill		14,613
Purchase price adjustments, net		85
Balance at December 31, 2006		154,244
Acquired goodwill		585
Purchase price adjustments, net		418
Balance at December 31, 2007	$	155,247

Purchase price adjustments in 2007 represent final adjustments for the Wickham acquisition. Purchase price adjustments in 2006 represent final adjustments for the Horizon acquisition, the write-off of a $2.1 million deferred tax liability related to a previous acquisition and final adjustments related to our other 2005 acquisitions.

Other intangible assets consist of the following (in thousands):

	December 31,
	2007			2006
Tradename (indefinite life)	$	8,400		$	8,400
Non-compete agreements (5.0 year weighted average useful life)		18,761			18,561
Employment contracts (2.9 year weighted average useful life)		1,000			1,000
Distribution agreement (5.0 year useful life)		6,115			6,115
		34,276			34,076
Less accumulated amortization		(19,772	)		(15,350	)
	$	14,504		$	18,726

The tradename has an indefinite useful life, and therefore is not subject to amortization, but is subject to periodic impairment testing under SFAS 142. The non-compete agreements, employment contracts and distribution agreements have finite useful lives and we amortize these agreements using the straight-line method over their respective contractual terms. Other intangible amortization expense was $4.5 million in 2007 and $4.6 million in 2006.

The table below presents estimated amortization expense for other intangible assets for the next five years (in thousands):

2008	$	3,186
2009		1,485
2010		1,053
2011		380
2012		—

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Note 4 - Details of Certain Balance Sheet Accounts

The table below presents additional information regarding certain balance sheet accounts (in thousands):

		December 31,
			2007			2006
Receivables:
	Trade accounts	$	21,281		$	18,952
	Trade accounts, pledged		95,860			103,821
	Vendor incentives		32,118			34,085
	Other		1,796			2,971
			151,055			159,829
	Less allowance for doubtful accounts		(9,938	)		(4,892	)
		$	141,117		$	154,937
Property and equipment:
	Land	$	1,185		$	1,621
	Building		1,716			1,342
	Leasehold improvements		17,459			14,360
	Autos and trucks		1,405			1,388
	Machinery and equipment		20,065			17,439
	Computer equipment		16,316			18,737
	Furniture and fixtures		9,161			8,109
	Fixed assets in progress		2,143			3,733
			69,450			66,729
	Less accumulated depreciation		(35,227	)		(33,096	)
		$	34,223		$	33,633
Other assets, net:
	Non-current deferred income taxes	$	17,275		$	12,742
	Other		5,599			3,287
		$	22,874		$	16,029
Accrued expenses and other current liabilities:
	Salaries and bonuses	$	13,867		$	19,006
	Current deferred tax liability		2,144			4,039
	Other		21,205			12,565
		$	37,216		$	35,610

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Note 5 - Debt

The components of our debt for the past two years were as follows (in thousands):

			December 31,
			2007		2006
Current portion:
	Accounts Receivable Securitization Facility (described below)	$	68,327	$	74,286
	Current portion of Term Loan		3,000		3,000
			71,327		77,286
Long-term portion:
	Revolving Line of Credit, variable rate (described below)		125,525		131,157
	Term Loan, variable rate (described below)		54,000		57,000
	Floating Rate Senior Notes (described below)		100,000		—
			279,525		188,157
Total debt		$	350,852	$	265,443

Unsecured Syndicated Senior Credit Facility

As amended on December 20, 2007, our unsecured syndicated senior credit facility (the Credit Facility) now provides for $300.0 million in borrowing capacity including a $240.0 million five-year revolving credit facility (the Revolver) and a $60.0 million term loan (the Term Loan). The Term Loan matures on December 20, 2010 and the Revolver matures on December 20, 2012. The Credit Facility includes sublimits for the issuance of swingline loans and standby or trade letters of credit.   Pursuant to an accordion feature, the aggregate maximum principal amount of the commitments under the Revolver may be increased from time to time, by up to $75.0 million, to a total of $315 million.

At December 31, 2007, there was $125.5 million outstanding and $114.0 million available for borrowing under the Revolver. The weighted average effective interest rate of the Revolver was approximately 6.4% for the year ended December 31, 2007.

Borrowings under the Revolver bear interest, at our option, at either of the following:

a.   a base rate, which is the greater of (i) the prime rate or (ii) the overnight Federal Funds Rate plus 0.500%; plus a spread ranging from 0% to 0.250% depending on our leverage ratio; or

b.   the London Interbank Offered Rate (LIBOR) plus a spread ranging from 0.500% to 1.250%, with such spread in each case depending on our leverage ratio.

Borrowings under the Term Loan bear interest, at our option, at either of the following:

a.   a base rate, which is the greater of (i) the Wachovia Bank, National Association prime rate or (ii) the overnight Federal Funds Rate plus 0.500%; or

b.   LIBOR plus a spread ranging from 0.625% to 0.750%, with such spread in each case depending on our leverage ratio.

We are also required to pay the following amounts under the Credit Facility:

a.   an annual facility fee of 0.125% to 0.300%, with such spread in each case depending on our leverage ratio;

b.   an annual letter of credit issuance fee of 0.125% multiplied by the face amount of each letter of credit; and

c.   a letter of credit commission of 0.500% to 1.250% multiplied by face amount of each letter of credit, with such spread in each case depending on our leverage ratio.

At December 31, 2007, there was $57.0 million outstanding on the Term Loan. Our scheduled quarterly principal installments on the Term Loan began on March 31, 2007. Future payments on the Term Loan will be $3.0 million in 2008, $6.0 million in 2009 and $48.0 million in 2010. The weighted average effective interest rate of the Term Loan was approximately 5.7% for the year ended December 31, 2007.

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Our obligations under the Credit Facility are guaranteed by all of our existing and future direct and indirect domestic subsidiaries. The Credit Facility contains terms and provisions (including representations, covenants and conditions) and events of default customary for transactions of this type. If an event of default occurs and is continuing under the Credit Facility, the lenders may terminate their obligations under the Credit Facility and may require us to repay all amounts.

Floating Rate Senior Notes

On February 12, 2007, we issued and sold $100.0 million aggregate principal amount of Floating Rate Senior Notes (the Notes) in a private placement offering pursuant to a Note Purchase Agreement.  The Notes are due February 12, 2012 and accrue interest on the unpaid principal balance at a floating rate equal to a spread of 0.600% over the three-month LIBOR, as adjusted from time to time.  The Notes have scheduled quarterly interest payments that are due on February 12, May 12, August 12 and November 12 of each year.  The Notes are unsecured and are guaranteed by each domestic subsidiary that is or becomes a borrower or guarantor under our Credit Facility.  We used the net proceeds from the placement to pay down borrowings under our revolving credit facility.

The Notes are subject to redemption at our option, in whole or in part, at 103% of the principal amount on or prior to February 12, 2008 and at 100% of the principal amount thereafter, plus accrued interest to the date of redemption and any LIBOR breakage amount as defined by the Note Purchase Agreement.  In the event we have a change of control, the holders of the Notes will have the right to put the Notes back to us at par.

Accounts Receivable Securitization Facility

In March 2007, we renewed our accounts receivable securitization facility (the Receivables Facility), which provides a seasonal borrowing capacity of up to $150.0 million, through March 2008. The Receivables Facility provides for the true sale of certain of our receivables as they are created to a wholly owned, bankruptcy-remote subsidiary. This subsidiary grants an undivided security interest in the receivables to an unrelated commercial paper conduit. Because of the structure of the bankruptcy-remote subsidiary and our ability to control its activities, we include the transferred receivables and related debt in our Consolidated Balance Sheets. We employed this arrangement because it provides us with a lower cost form of financing. At December 31, 2007 there was $68.3 million outstanding under the Receivables Facility at a weighted average effective interest rate of 6.0%.

Interest Rate Swaps

In December 2005, we entered into an interest rate swap agreement to reduce our exposure to fluctuations in interest rates. Effective on June 30, 2006, the swap agreement converts our variable rate Term Loan to a fixed-rate basis until its termination on December 31, 2008. In February 2007, we also entered into an interest rate swap agreement to reduce our exposure to fluctuations in interest rates on the Notes.  The swap agreement converts the variable interest rate to a fixed rate of 5.088% on the initial notional amount of $100.0 million, which will decrease to a notional amount of $50.0 million in 2010.  This swap agreement will terminate on February 12, 2012.  Including the 0.600% spread, we expect to pay an effective interest rate on the Notes of approximately 5.688%.

We record any differences paid or received on our interest rate swaps as adjustments to interest expense over the life of the swaps. We have designated these swaps as a cash flow hedges and we record the changes in the fair value of the swaps to accumulated other comprehensive income.  During the year ended December 31, 2007, no gains or losses were recognized on these swaps and there was no effect on income from hedge ineffectiveness. The net difference between interest paid and interest received related to the swap agreements resulted in a $0.5 million reduction of interest expense. At December 31, 2007, the combined fair value of the swap agreements was a $4.0 million unrealized loss in the Consolidated Balance Sheet.

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Financial and Other Covenants

Financial covenants on our amended Credit Facility include maintenance of a maximum average total leverage ratio and a minimum fixed charge coverage ratio. Other covenants include restrictions on our ability to, among other things, pay dividends or make other capital distributions (other than in accordance with our current dividend policy). The Credit Facility limits the declaration and payment of dividends on our common stock to no more than 50% of the preceding year’s net income, provided that we are not in default or no event of default has occurred and the dividends are declared and paid in a manner consistent with our past practice.

Financial covenants on the Notes and on the Receivables Facility are similar to those on the Credit Facility. In December 2007, we amended the covenants on the Receivables Facility to align them more closely with those under the amended Credit Facility and the Notes.

As of December 31, 2007, we were in compliance with all covenants and financial ratio requirements related to our Credit Facility, our Notes and our Receivables Facility.

Deferred Financing Costs

We capitalize financing costs we incur related to implementing and amending our debt. We record these costs as other assets on our Consolidated Balance Sheets and amortize them over the contractual life of the related debt. The changes in deferred financing costs are as follows (in thousands):

	2007			2006
Balance at beginning of year	$	856		$	726
Financing costs deferred		1,152			155
Write-off fully amortized financing costs		—			(25	)
Balance at end of year		2,008			856
Less accumulated amortization		(469	)		(242	)
	$	1,539		$	614

Note 6 - Comprehensive Income

Comprehensive income includes net income, foreign currency translation adjustments and the unrealized gain or loss on interest rate swaps. Total comprehensive income for the past three years (in thousands) was:

	2007		2006		2005
$	70,883	$	99,100	$	79,720

Accumulated other comprehensive income as presented on the Consolidated Balance Sheets consists of the following components (in thousands):

	Foreign Currency Translation		Unrealized Gain (Loss) on Interest Rate Swaps			Total
Balance at December 31, 2005	$	2,240	$	(101	)	$	2,139
Net change		3,854		222			4,076
Balance at December 31, 2006		6,094		121			6,215
Net change		4,042		(2,553	)		1,489
Balance at December 31, 2007	$	10,136	$	(2,432	)	$	7,704

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Note 7 - Share-Based Compensation

We adopted SFAS 123(R) on January 1, 2006 using a Black-Scholes-Merton option valuation model and the modified retrospective transition method. Prior to January 1, 2006, we accounted for stock option awards under the intrinsic value method prescribed by APB 25, as permitted by SFAS 123, Accounting for Stock-Based Compensation. Accordingly, we did not record compensation expense for options issued with an exercise price equal to the stock’s market price on the grant date. As of January 1, 2006, we have adjusted all prior period financial statements and the related footnote disclosures to reflect compensation cost for the amounts previously reported in our pro-forma footnote disclosures required by SFAS 123, as corrected for immaterial amounts of compensation cost associated with our employee stock purchase plan.

Share-Based Plans

We award stock options and restricted stock to our employees and non-employee directors under our stock option plans.

Under the 1995 Stock Option Plan (the 1995 Plan) our Board of Directors (the Board) was authorized to grant stock options to employees, agents, consultants or independent contractors. These options generally were exercisable two years after the grant date, and they expire ten years from the grant date. In May 1998, the Board suspended the 1995 Plan. Options granted prior to the suspension were not affected by this action.

In May 1998, our stockholders approved the 1998 Stock Option Plan (the 1998 Plan), which authorized the Board to grant stock options, stock appreciation rights, restricted stock and performance awards to employees, agents, consultants or independent contractors. These options generally were exercisable three or more years after the grant date, and they expire ten years after the grant date. In May 2002, the Board suspended the 1998 Plan. Options granted prior to the suspension were not affected by this action.

In May 2002, our stockholders approved the 2002 Long-Term Incentive Plan (the 2002 Plan), which authorized the Board to grant stock options and restricted stock awards to employees, agents, consultants or independent contractors. In May 2004, our stockholders approved an amendment to increase the number of shares authorized for issuance under the 2002 Plan from 1,575,000 to 2,700,000 shares. Granted options have an exercise price equal to our stock’s market price on the grant date. These options generally vest either five years from the grant date or on a three/five year split vest schedule, where half of the options vest three years from the grant date and the remainder vest five years from the grant date. These options expire ten years from the grant date. In May 2007, the Board suspended the 2002 Plan. Options granted prior to the suspension were not affected by this action.

The SCP Pool Corporation Non-Employee Directors Equity Incentive Plan (the Director Plan) permitted the Board to grant stock options to each non-employee director. No more than 1,350,000 shares were authorized to be issued under this plan. Granted options have an exercise price equal to our stock’s market price on the grant date. The options generally may be exercised one year after the grant date, and they expire ten years after the grant date. The Director Plan expired during 2006.

In May 2007, our stockholders approved the 2007 Long-Term Incentive Plan (the 2007 LTIP), which authorizes the Compensation Committee of our Board to grant non-qualified stock options and restricted stock to employees, directors, consultants or advisors.  The 2007 LTIP has replaced the 2002 Plan and the Director Plan. No more than 1,515,000 shares may be issued under this plan.  Granted stock options have an exercise price equal to our stock’s closing market price on the date of grant. These options generally vest either five years from the grant date or on a three/five year split vest schedule, where half of the options vest three years from the grant date and the remainder vest five years from the grant date. These options expire ten years from the grant date. Restricted stock awarded under the 2007 LTIP is issued at no cost to the grantee and is subject to vesting restrictions. The restricted stock awards generally vest either one year from the grant date for awards to directors or five years from the grant date for all other awards.

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Stock Option Awards

The following is a summary of the stock option activity under our stock option plans for the year ended December 31, 2007:

	Shares			Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Balance at December 31, 2006	6,271,959		$	14.26
Granted	551,875			37.08
Exercised	(838,746	)		7.23
Forfeited	(107,723	)		33.75
Balance at December 31, 2007	5,877,365		$	17.05	4.78	$	42,715,526
Exercisable at December 31, 2007	3,572,108		$	9.65	3.21	$	38,732,856

The table below summarizes information about stock options outstanding and exercisable at December 31, 2007:

	Outstanding Stock Options				Exercisable Stock Options
		Weighted Average	Weighted			Weighted
		Remaining	Average			Average
Range of exercise prices	Shares	Contractual Life (years)	Exercise Price		Shares	Exercise Price
$ 0.00 to $ 5.99	1,453,377	1.67	$	3.64	1,453,377	$	3.64
$ 6.00 to $ 11.99	1,670,086	4.05		10.79	1,164,956		10.27
$ 12.00 to $ 17.99	606,428	4.18		13.08	603,503		13.08
$ 18.00 to $ 23.99	557,732	6.11		21.67	214,355		21.67
$ 24.00 to $ 29.99	36,500	6.52		26.74	12,750		26.91
$ 30.00 to $ 47.30	1,553,242	8.18		36.00	123,167		35.23
	5,877,365	4.78	$	17.05	3,572,108	$	9.65

The following table summarizes the cash proceeds and tax benefits realized from the exercise of stock options:

		Year Ended December 31,
(In thousands, except share data)		2007		2006		2005
Options exercised		838,746		1,072,286		1,124,241
Cash proceeds	$	6,061	$	5,287	$	3,311
Intrinsic value of options exercised	$	24,457	$	39,921	$	35,788
Tax benefits realized	$	9,443	$	15,414	$	14,133

We estimated the fair value of employee stock option awards at the grant date based on the assumptions summarized in the following table:

		Year Ended December 31,
(Weighted average)		2007			2006			2005
Expected volatility		29.6	%		30.8	%		30.3	%
Expected term		6.5	years		6.0	years		7.0	years
Risk-free interest rate		4.49	%		4.33	%		4.22	%
Expected dividend yield		1.0	%		1.0	%		1.0	%
Grant date fair value	$	12.99		$	13.27		$	11.34

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We calculated expected volatility over the expected term of the awards based on our historical volatility. In 2006, we began using weekly price observations for our historical volatility calculation because we believe that they provide a more appropriate measurement of volatility given the trading patterns of our common stock. Prior to 2006, we used monthly price observations for our historical volatility calculation. We estimated the expected term based on the vesting period of the awards and our historical exercise activity for awards with similar characteristics. The risk-free interest rate is based on the U.S. Treasury zero-coupon issues with a remaining term approximating the expected term of the option. We determined the expected dividend yield based on the anticipated dividends over the expected term.

For purposes of recognizing share-based compensation expense, we ratably expense the estimated fair value of employee stock options over the options’ requisite service period. Generally, the requisite service period for our share-based awards is the vesting period. We recognize compensation cost for awards with graded vesting using the graded vesting recognition method.

The table below presents the total share-based compensation expense for stock option awards and the related recognized tax benefits for the past three years (in thousands):

		2007		2006		2005
Share-based compensation expense	$	5,875	$	6,554	$	5,344
Recognized tax benefits		2,268		2,525		2,078

In 2006, we modified certain stock option agreements to reflect the proper grant dates and exercise prices. There was no material impact related to the modification of these stock option agreements. As such, we did not recognize any additional share-based compensation expense.

Restricted Stock Awards 

The following is a summary of the restricted stock awards activity under our stock option plans for the year ended December 31, 2007:

	Shares		Weighted Average Grant Date Fair Value
Balance unvested at December 31, 2006	49,900		$	21.03
Granted (at market price)	66,151			37.85
Vested	(2,500	)		21.67
Forfeited	(3,750	)		37.85
Balance unvested at December 31, 2007	109,801		$	30.58

The restricted stock awards generally vest one year from the grant date for awards to directors and five years from the grant date for other awards. At December 31, 2007, the unamortized compensation expense related to the restricted stock awards totaled $1.5 million, which will be recognized over a weighted average period of 2.04 years. The total fair value of restricted stock awards vested during the years ended December 31, 2007, 2006 and 2005 was $0.1 million for each year. Total share-based compensation expense recognized related to these restricted stock awards was $1.3 million, $0.2 million and $0.3 million for the years ended December 31, 2007, 2006 and 2005, respectively.

Employee Stock Purchase Plan

In March 1998, the Board adopted the SCP Pool Corporation Employee Stock Purchase Plan (the ESPP). Under our ESPP, employees who meet minimum age and length of service requirements may purchase stock at 85% of the lower of:

a.	the closing price of our common stock at the end of a six month plan period ending either June 30 or December 31; or
b.	the average of the beginning and ending closing prices of our common stock for such six month period.

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No more than 956,250 shares of our common stock may be issued under our ESPP. For the two plan periods in each year presented below, we awarded the following aggregate share amounts:

2007	2006	2005
50,482	49,666	49,795

Share-based compensation expense related to our ESPP was $0.2 million in 2007, $0.4 million in 2006 and $0.3 million in 2005. The grant date fair value for the most recent purchase period ended December 31, 2007 was $2.97 per share.

Note 8 - Income Taxes

Income from continuing operations before the provision for income taxes is attributable to the following jurisdictions (in thousands):

		Year Ended December 31,
	2007		2006		2005
United States	$	107,853	$	147,345	$	124,679
Foreign		3,773		4,841		4,250
Total	$	111,626	$	152,186	$	128,929

The provision for income taxes consisted of the following (in thousands):

		Year Ended December 31,
		2007			2006			2005
Current:
	Federal	$	41,040		$	49,603		$	44,864
	State and other		6,471			8,812			8,381
			47,511			58,415			53,245
Deferred:
	Federal		(4,005	)		362			(2,844	)
	State and other		(352	)		(18	)		(460	)
			(4,357	)		344			(3,304	)
Total		$	43,154		$	58,759		$	49,941

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We made payments related to income taxes totaling $31.0 million in 2007 and $74.8 million in 2006. We deferred our third and fourth quarter 2005 estimated federal tax payments as allowed by the Katrina Emergency Tax Relief Act of 2005 (the Act). These payments of approximately $27.0 million were paid in October 2006.

A reconciliation of the U.S. federal statutory tax rate to our effective tax rate on income before income taxes and equity earnings is as follows:

	Year Ended December 31,
	2007		2006		2005
Federal statutory rate	35.00	%	35.00	%	35.00	%
Other, primarily state income tax rate	3.66		3.61		3.74
Total effective tax rate	38.66	%	38.61	%	38.74	%

We recorded equity earnings in LAC net of a deferred tax liability of $0.9 million in 2007 and $1.0 million in 2006. These amounts are not reflected in the tables above.

The components of the deferred tax assets and liabilities are as follows (in thousands):

			December 31,
			2007			2006
Deferred tax assets:
	Product inventories	$	6,417		$	5,380
	Accrued expenses		1,418			1,482
	Allowance for doubtful accounts		1,304			814
Total current			9,139			7,676
	Leases		1,206			1,073
	Share-based compensation		12,155			10,483
	Depreciation		135			331
	Uncertain tax positions		1,062			—
	Net operating losses		1,082			304
	Interest rate swaps		1,529			—
	Other		1,188			855
			18,357			13,046
Less: Valuation allowance			(1,082	)		(304)
Total non-current			17,275			12,742
Total deferred tax assets			26,414			20,418
Deferred tax liabilities:
	Trade discounts on purchases		716			2,726
	Prepaid expenses		1,428			1,313
Total current			2,144			4,039
	Intangible assets, primarily goodwill		15,188			13,099
	Equity earnings in unconsolidated interests		2,526			1,924
Total non-current			17,714			15,023
Total deferred tax liabilities			19,858			19,062
Net deferred tax asset		$	6,556		$	1,356

At December 31, 2007, certain international subsidiaries had tax loss carryforwards of approximately $3.2 million, which expire in various years after 2008.  Deferred tax assets related to the tax loss carryforwards of these international subsidiaries were $1.1 million as of December 31, 2007 and $0.3 million as of December 31, 2006.  We have recorded a corresponding valuation allowance of $1.1 million and $0.3 million in the respective years.

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As presented in the Consolidated Statements of Cash Flows, the change in deferred income taxes includes, among other items, the change in deferred income taxes related to the deferred income tax provision, the change in deferred income taxes related to the increase in equity earnings in unconsolidated investments and the change in deferred income taxes related to the estimated tax impact of accumulated other comprehensive income. 

We reduce federal and state income taxes payable by the tax benefits associated with the exercise of nonqualified stock options. We receive an income tax benefit based on the difference between the option exercise price and the fair market value of the stock at the time the option is exercised. To the extent realized tax deductions for option exercises exceed the amount of previously recognized deferred tax benefits related to share-based compensation for these option awards, we record an excess tax benefit in stockholders' equity.  We recorded excess tax benefits of $8.5 million in 2007 and $14.6 million in 2006.

As of December 31, 2007, United States income taxes were not provided on earnings of our foreign subsidiaries, as we have invested or expect to invest the undistributed earnings indefinitely. If in the future these earnings are repatriated to the United States, or if we determine that the earnings will be remitted in the foreseeable future, additional income tax provisions may be required.

We hold, through our affiliates, cash balances in the countries in which we operate, including significant amounts held outside the United States. Most of the amounts held outside the United States could be repatriated to the United States, but, under current law, may be subject to United States federal income taxes, less applicable foreign tax credits. Repatriation of some foreign balances is restricted by local laws including the imposition of withholding taxes in some jurisdictions. We have not provided for the United States federal tax liability on these amounts and for financial statement purposes, these foreign cash balances are considered indefinitely reinvested outside the United States.

The following is a summary of the activity related to uncertain tax positions for the year ended December 31, 2007 (in thousands):

Balance at January 1, 2007	$	3,345
Decreases for tax positions taken during a prior period		(126	)
Increases for tax positions taken during the current period		1,009
Decreases resulting from the expiration of the statute of limitations		(588	)
Decreases relating to settlements		(102	)
Balance at December 31, 2007	$	3,538

As discussed in Note 1, we adopted FIN 48 on January 1, 2007.  As a result of the implementation of FIN 48, we recognized a reduction of approximately $0.5 million to the January 1, 2007 retained earnings balance.  At January 1, 2007 the total amount of unrecognized tax benefits was approximately $3.3 million.

The total amount of unrecognized tax benefits that, if recognized, would decrease the effective tax rate was $2.2 million at January 1, 2007 and $2.3 million December 31, 2007.

Effective January 1, 2007, in connection with the adoption of FIN 48, we changed our accounting policy and now recognize accrued interest related to unrecognized tax benefits in interest expense and recognize penalties in selling and administrative expenses.  These amounts were previously classified as a component of income tax expense.  We had approximately $0.4 million in accrued interest at both January 1, 2007 and December 31, 2007.

We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004.  We anticipate that the accounting under the provisions of FIN 48 may provide for greater volatility in our effective tax rate as items are derecognized or as we record changes in measurement in interim periods.

58

Note 9 - Earnings Per Share

The table below presents the reconciliation of basic and diluted weighted average number of shares outstanding (in thousands):

			Year Ended December 31,
				2007		2006		2005
Net income			$	69,394	$	95,024	$	80,455
Weighted average common shares outstanding:
	Basic			48,887		51,866		52,445
	Effect of dilutive securities:
		Stock options		1,848		2,758		3,185
		Restricted stock awards		62		30		24
		Employee stock purchase plan		5		8		11
	Diluted			50,802		54,662		55,665

The weighted average diluted shares outstanding for the year ended December 31, 2007 exclude stock options to purchase 1,077,375 shares.  Since these options have exercise prices that are higher than the average market price of our common stock, including them in the calculation would have an anti-dilutive effect on earnings per share for the respective periods.  There were no anti-dilutive stock options excluded from the earnings per share calculation for the years ended December 31, 2006 and December 31, 2005.

Note 10 - Commitments and Contingencies

We lease facilities for our corporate office, sales centers, vehicles and equipment under operating leases that expire in various years through 2027. Most of our leases contain renewal options, some of which involve rate increases. For leases with step rent provisions whereby the rental payments increase incrementally over the life of the lease, we recognize the total minimum lease payments on a straight-line basis over the minimum lease term. The table below presents rent expense associated with operating leases for the past three years (in thousands):

	2007		2006		2005
$	66,015	$	58,398	$	43,513

The table below sets forth the approximate future minimum lease payments as of December 31, 2007 related to non-cancelable operating leases and the non-cancelable portion of certain vehicle operating leases with initial terms of one year or more (in thousands):

2008	$	46,754
2009		40,977
2010		34,153
2011		26,086
2012		19,016
Thereafter		34,858

From time to time, we are subject to various claims and litigation arising in the ordinary course of business, including product liability, personal injury, commercial, contract and employment matters. While the outcome of any litigation is inherently unpredictable, we do not believe, based on currently available facts, that the ultimate disposition of any of these matters will have a material adverse impact on our financial condition, results of operations or cash flows. 

Note 11 - Related Party Transactions

In May 2005, we acquired a 50% membership interest in NCC through a $1.1 million cash contribution. NCC owns and operates an office building in Covington, Louisiana. We lease corporate and administrative offices from NCC, occupying approximately 50,000 square feet of office space. We amended the lease agreement in May 2005. The amended agreement has a 10 year term and, as of December 31, 2007, we pay rent of $67,258 per month.

59

In October 1999, we entered into a lease agreement with S&C Development, LLC for a sales center facility in Mandeville, Louisiana. The sole member of S&C Development, LLC is A. David Cook, a POOL executive officer. The original seven year lease term commenced on January 1, 2000 and was set to expire on December 31, 2006. We renewed this lease for an additional seven year term.  In November, 2007, S&C Development, LLC sold this facility to an unrelated third party and we executed a lease with the new landlord.

In January 2002, we entered into a lease agreement with S&C Development, LLC for additional warehouse space adjacent to our Mandeville sales center. The original five year lease term commenced on February 4, 2002, and was set to expire on December 31, 2006. We renewed this lease for an additional seven year term.  We pay rent of $4,985 per month for the 8,600 square foot space.  The lease will expire on December 31, 2013.

In January 2001, we entered into a lease agreement with S&C Development, LLC for a sales center facility in Oklahoma City, Oklahoma. The ten year lease term commenced on November 10, 2001 and will expire on November 30, 2011.  As of December 31, 2007, we pay rent of $12,995 per month for the 25,000 square foot facility.

In March 1997, we entered into a lease agreement with Kenneth St. Romain for a sales center facility in Baton Rouge, Louisiana. Kenneth St. Romain is a POOL Group Vice President.  We extended this lease for a third term of five years, which commenced on March 1, 2007 and will expire on February 28, 2012.  As of December 31, 2007, we pay rent of $10,723 per month for the 23,500 square foot facility.

In May 2001, we entered into a lease agreement with Kenneth St. Romain for a sales center facility in Jackson, Mississippi. The seven year lease term commenced on November 16, 2001 and will expire on November 30, 2008.  As of December 31, 2007, we pay rent of $8,580 per month for the 20,000 square foot facility.

The table below presents rent expense associated with these leases for the past three years (in thousands):

	2007		2006		2005
$	1,317	$	952	$	946

Note 12 - Employee Benefit Plans

We offer a 401(k) savings and retirement plan, which provides benefits for substantially all employees who meet minimum age and length of service requirements. Eligible employees are able to contribute up to 75% of their compensation, subject to the federal dollar limit.  For plan participants, we provide a matching contribution. As of January 1, 2007, we contribute a total match on employee contributions of up to 4% of their compensation, with a 100% match on the first 3% of compensation deferred and a 50% match on deferrals between 3% and 5% of compensation.

Effective March 1, 2005, we adopted the Pool Corp Deferred Compensation Plan, a nonqualified deferred compensation plan. The plan allows certain employees who occupy key management positions to defer salary and bonus amounts, and provides a matching contribution similar to that provided under our 401(k) plan to the extent that a participant’s contributions to the 401(k) plan are limited by IRS non-discrimination limitations. The total Company matching contribution provided to a participant under the 401(k) plan and the Pool Corp Deferred Compensation Plan combined for any one year may not exceed 4% of a participant’s salary and bonus.

The employee and Company sponsored contributions are invested in certain equity and fixed income securities based on individual employee elections.

60

The table below sets forth our matching contributions for the past three years (in thousands):

		2007		2006		2005
Matching contributions 401(k)	$	3,497	$	3,043	$	2,244
Matching contributions deferred compensation plan		32		125		77

Note 13 - Quarterly Financial Data (Unaudited)

The table below summarizes the unaudited quarterly operating results of operations for the past two years (in thousands, except per share data):

		Quarter
		2007									2006
			First		Second		Third		Fourth			First		Second		Third		Fourth
Net sales		$	373,706	$	726,472	$	527,434	$	300,755		$	348,556	$	705,703	$	537,017	$	318,486
Gross profit			103,485		207,922		139,803		79,436			98,048		209,000		149,995		82,905
Net income (loss)			1,354		57,794		21,835		(11,589	)		6,422		62,110		31,493		(5,001	)
Earnings (loss) per share:
	Basic	$	0.03	$	1.17	$	0.45	$	(0.24	)	$	0.12	$	1.18	$	0.61	$	(0.10	)
	Diluted	$	0.03	$	1.12	$	0.43	$	(0.24	)	$	0.12	$	1.12	$	0.58	$	(0.10	)

The sum of basic and diluted earnings per share for each of the quarters does not equal the total basic and diluted earnings per share for the annual periods because of rounding differences and a difference in the way that in-the-money stock options are considered from quarter to quarter under the requirements of SFAS 128, Earnings per Share. 

Note 14 - Subsequent Event

On February 16, 2008, we signed a definitive purchase agreement to acquire National Pool Tile Group, Inc. (National Pool Tile), the leading wholesale distributor of pool tile and composite pool finishes. National Pool Tile serves professional contractors in the swimming pool refurbish and construction markets through 15 distribution sales centers. We expect the transaction to close in March 2008 and we intend to fund this transaction through utilization of our existing bank facilities.

61

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.  Controls and Procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Act). The rules refer to the controls and other procedures designed to ensure that information required to be disclosed in reports that we file or submit under the Act is recorded, processed, summarized and reported within the time periods specified. As of December 31, 2007, management, including the CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures. Based on that evaluation, management, including the CEO and CFO, concluded that as of December 31, 2007, our disclosure controls and procedures were effective.

We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Based on the most recent evaluation, we have concluded that no change in our internal control over financial reporting occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

62

Management’s Report on Internal Control Over Financial Reporting

POOL’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  Our internal control system was designed to provide reasonable assurance to POOL’s management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements.  All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Any evaluation or projection of effectiveness to future periods is also subject to risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

POOL’s management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, management has concluded that, as of December 31, 2007, POOL’s internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

The independent registered public accounting firm that audited the consolidated financial statements included in Item 8 of this Form 10-K has issued a report on POOL’s internal controls over financial reporting. This report appears below.

63

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Pool Corporation

We have audited Pool Corporation’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Pool Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Pool Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Pool Corporation as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007 of Pool Corporation and our report dated February 29, 2008 expressed an unqualified opinion thereon.

               /s/ Ernst & Young LLP

New Orleans, Louisiana

February 29, 2008

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Item 9B.  Other Information

Not applicable.

PART III.

Item 10.  Directors, Executive Officers and Corporate Governance

Incorporated by reference to POOL’s 2008 Proxy Statement to be filed with the SEC.

Item 11.  Executive Compensation

Incorporated by reference to POOL’s 2008 Proxy Statement to be filed with the SEC.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated by reference to POOL’s 2008 Proxy Statement to be filed with the SEC.

Item 13.  Certain Relationships and Related Transactions, and Director Independence

Incorporated by reference to POOL’s 2008 Proxy Statement to be filed with the SEC.

Item 14.  Principal Accounting Fees and Services

Incorporated by reference to POOL’s 2008 Proxy Statement to be filed with the SEC.

65

PART IV.

Item 15.  Exhibits, Financial Statement Schedules

(a)   The following documents are filed as part of this report:

(1)	Consolidated Financial Statements:
		Page
	Report of Independent Registered Public Accounting Firm	35
	Consolidated Statements of Income	36
	Consolidated Balance Sheets	37
	Consolidated Statements of Cash Flows	38
	Consolidated Statements of Changes in Stockholders’ Equity	40
	Notes to Consolidated Financial Statements	41
(2)	Financial Statement Schedules.
	All schedules are omitted because they are not applicable or are not required
	or because the required information is provided in our Consolidated Financial
	Statements or accompanying Notes included in Item 8 of this Form 10-K.
(3)	The exhibits listed in the Index to the Exhibits.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 29, 2008.

	POOL CORPORATION
By:	/s/ WILSON B. SEXTON
	Wilson B. Sexton, Chairman of the Board and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated on February 29, 2008.

Signature:	Title:
/s/ WILSON B. SEXTON
Wilson B. Sexton	Chairman of the Board and Director
/s/ MANUEL J. PEREZ DE LA MESA
Manuel J. Perez de la Mesa	President, Chief Executive Officer and Director
/s/ MARK W. JOSLIN
Mark W. Joslin	Vice President and Chief Financial Officer (Principal Accounting Officer)
/s/ ANDREW W. CODE
Andrew W. Code	Director
/s/ JAMES J. GAFFNEY
James J. Gaffney	Director
/s/ GEORGE T. HAYMAKER
George T. Haymaker	Director
/s/ HARLAN F. SEYMOUR
Harlan F. Seymour	Director
/s/ ROBERT C. SLEDD
Robert C. Sledd	Director
/s/ JOHN E. STOKELY
John E. Stokely	Director

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INDEX TO EXHIBITS

				Incorporated by Reference
No.		Description	Filed with this Form 10-K	Form	File No.	Date Filed
3.1		Restated Certificate of Incorporation of the Company.		10-Q	000-26640	08/09/2006
3.2		Restated Composite Bylaws of the Company.		10-Q	000-26640	08/09/2006
4.1		Form of certificate representing shares of common stock of the Company.		8-K	000-26640	05/19/2006
10.1	*	SCP Pool Corporation 1995 Stock Option Plan.		S-1	33-92738	08/18/1995
10.2	*	Form of Individual Stock Option Agreement under 1995 Stock Option Plan.		S-1	33-92738	08/18/1995
10.3	*	Amended and Restated Non-Employee Directors Equity Incentive Plan,		10-Q	000-26640	08/13/2001
10.4		as amended by Amendment No. 1.		10-Q	000-26640	07/25/2002
10.5	*	SCP Pool Corporation 1998 Stock Option Plan.		DEF 14A	000-26640	04/08/1998
10.6	*	Form of Stock Option Agreement under 1998 Stock Option Plan.		10-K	000-26640	03/31/1999
10.7	*	Amended and Restated SCP Pool Corporation Employee Stock Purchase Plan.		10-Q	000-26640	07/25/2002
10.8	*	Amended and Restated SCP Pool Corporation 2002 Long-Term Incentive Plan.		10-K	000-26640	03/01/2005
10.9	*	Form of Stock Option Agreement under 2002 Long-Term Incentive Plan.		10-K	000-26640	03/01/2005
10.10	*	Pool Corporation 2007 Long-Term Incentive Plan		8-K	000-26640	05/11/2007
10.11	*	Form of Stock Option Agreement for Employees under the 2007 Long-Term Incentive Plan		8-K	000-26640	05/11/2007
10.12	*	Form of Restricted Stock Agreement for Employees under the 2007 Long-Term Incentive Plan		8-K	000-26640	05/11/2007
10.13	*	Form of Stock Option Agreement for Directors under the 2007 Long-Term Incentive Plan		8-K	000-26640	05/11/2007
10.14	*	Form of Restricted Stock Agreement for Directors under the 2007 Long-Term Incentive Plan		8-K	000-26640	05/11/2007
10.15	*	Employment Agreement, dated January 25, 1999, among SCP Pool Corporation, South Central Pool Supply, Inc. and Manuel J. Perez de la Mesa.		10-K	000-26640	03/31/1999
10.16	*	Employment Agreement, dated January 17, 2003, between SCP Distributors, LLC and A. David Cook.		10-K	000-26640	03/01/2005
10.17	*	Employment Agreement, dated January 17, 2003, between SCP Distributors, LLC and Christopher W. Wilson.		10-K	000-26640	03/01/2005

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				Incorporated by Reference
No.		Description	Filed with this Form 10-K	Form	File No.	Date Filed
10.18	*	Employment Agreement, dated January 17, 2003, between SCP Distributors, LLC and Stephen C. Nelson.		10-K	000-26640	03/01/2005
10.19	*	Compensation of Non-Employee Directors.		10-K	000-26640	03/07/2006
10.20	*	Form of Indemnity Agreement for Directors and Officers.		10-Q	000-26640	10/29/2004
10.21		Louisiana Tax Equalization Agreement.		10-Q	000-26640	10/29/2004
10.22	*	Tax Reimbursement Arrangement		10-Q	000-26640	07/30/2004
10.23		Receivables Sale Agreement dated as of March 27, 2003, among SCP Distributors LLC, SCP Services LP and Superior Pool Products LLC, as Originators, and Superior Commerce LLC, as Buyer.		10-Q	000-26640	04/30/2003
10.24		Receivables Purchase Agreement dated as of March 27, 2003, among Superior Commerce, LLC, as Seller, SCP Distributors LLC, as Servicer, Jupiter Securitization Corporation and Bank One, NA (Main Office Chicago) as Agent		10-Q	000-26640	04/30/2003
10.25		as amended by amendment dated as of March 25, 2004		10-Q	000-26640	04/30/2004
10.26		Omnibus Amendment for Amendment No. 7 to Receivables Purchase Agreement and Amendment No. 2 to Receivables Sales Agreement, dated as of March 22, 2007, among SCP Distributors, LLC, Superior Pool Products, LLC, Horizon Distributors, Inc., Superior Commerce LLC, JPMorgan Chase Bank, N.A. f/k/a Bank One, NA (Main Office Chicago) and Jupiter Securitization Corporation		8-K	000-26640	3/26/2007
10.27		Amendment No. 8 to the Receivables Purchase Agreement, dated as of March 29, 2007.		10-Q	000-26640	5/02/2007
10.28		Amendment No. 9 to the Receivables Purchase Agreement, dated as of August 10, 2007.	X
10.29		Amendment No. 10 to the Receivables Purchase Agreement, dated as of December 20, 2007.	X
10.30		Intercreditor Agreement dated as of March 27, 2003, by and between Bank One, NA, as agent under the Credit Agreement, and Bank One, NA (Main Office Chicago), as agent under the Receivables Purchase Agreement.		10-Q	000-26640	04/30/2003
10.31		Performance Undertaking dated as of March 27, 2003, by and between SCP Pool Corporation and Superior Commerce LLC.		10-Q	000-26640	04/30/2003

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			Incorporated by Reference
No.	Description	Filed with this Form 10-K	Form	File No.	Date Filed
10.32	Asset Exchange Agreement, dated as of November 12, 2004 by and among SCP Pool Corporation, Les Industries R.P. Inc. and Latham Acquisition Corp.		10-K	000-26640	03/01/2005
10.33	Asset Contribution Agreement, dated as of November 12, 2004 by and among SCP Pool Corporation, Fort Wayne Pools, Inc and Latham Acquisition Corp.		10-K	000-26640	03/01/2005
10.34	Subscription and Stockholders’ Agreement, dated as of November 12, 2004, by and among Latham Acquisition Corp., Fort Wayne Pools, Inc., Brockway Moran & Partners Fund II, L.P. and Brockway Moran & Partners II. Co-Invest Fund, L.P		10-K	000-26640	03/01/2005
10.35	Lease (Mandeville Service Center) entered into as of October 19, 1999, by and between S&C Development Company, LLC and South Central Pool Supply, Inc, as amended by Lease Agreement Amendment No. One, entered into as of May 26, 2000, by and between S&C Development Company, LLC and South Central Pool Supply, Inc		10-Q	000-26640	07/30/2004
10.36	as amended by the Second Amendment entered into as of January 16, 2007 by and between S&C Development Company, LLC and SCP Distributors, LLC		10-K	000-26640	03/01/2007
10.37	as amended by Lease Agreement (Warehouse) entered into as of January 16, 2002, by and between S&C Development Company, LLC and SCP Distributors, LLC, as amended by First Amendment entered into as of February 11, 2002 by and between S&C Development Company, LLC and SCP Distributors, LLC		10-Q	000-26640	07/30/2004
10.38	as amended by Second Amendment entered into as of January 16, 2007 by and between S&C Development Company, LLC and SCP Distributors, LLC.		10-K	000-26640	03/01/2007
10.39	Lease (Oklahoma Service Center) entered into as of January 15, 2001, by and between Dave Cook, individually and SCP Pool Corporation, as amended by First Amendment, entered into as of October 24, 2001 by and between S&C Development, LLC and SCP Pool Corporation, as amended by First Amendment, entered into, as of December 5, 2001 by and between S&C Development, LLC and SCP Pool Corporation.		10-Q	000-26640	07/30/2004

70

				Incorporated by Reference
No.		Description	Filed with this Form 10-K	Form	File No.	Date Filed
10.40	*	Form of Stock Option Agreement under the Non-employee Directors Equity Incentive Plan.		10-K	000-26640	03/01/2005
10.41		Nonqualified Deferred Compensation Plan Basic Plan Document, dated March 1, 2005.		10-Q	000-26640	04/29/2005
10.42		Nonqualified Deferred Compensation Plan Adoption Agreement by an among SCP Distributors, L.L.C., Superior Pool Products, L.L.C. and Cypress, Inc., dated March 1, 2005		10-Q	000-26640	04/29/2005
10.43		Trust Agreement by and among SCP Distributors, L.L.C., Superior Pool Products, L.L.C. and Cypress, Inc. and T. Rowe Price Trust Company, dated March 1, 2005.		10-Q	000-26640	04/29/2005
10.44		Agreement and Plan of Merger by and among Automatic Rain Company, Horizon Distributors, Inc. and the Shareholder Parties, dated August 26, 2005.		8-K	000-26640	10/04/2005
10.45		Note Purchase Agreement by and among Pool Corporation and the Purchasers party thereto.		8-K	000-26640	02/15/2007
10.46		Subsidiary Guaranty by Pool Corporation in favor of the holders from time to time of the Notes.		8-K	000-26640	02/15/2007
10.47	*	Pool Corporation Executive Bonus Plan		10-K	000-26640	03/01/2007
10.48		Amended and Restated Credit Agreement dated as of December 20, 2007, among Pool Corporation, as US Borrower, SCP Distributors Inc., as Canadian Borrower, the Lenders, Wachovia Bank, National Association, as Administrative Agent, Swingline Lender and Issuing Lender, Wachovia Capital Finance Corporation (Canada) as Canadian Dollar Lender, JPMorgan Chase Bank, a syndication Agent, Wells Fargo Bank National Association, Regions Bank and Capital One, National Association, as Documentation Agents.	X
10.49		Amended and Restated Subsidiary Guaranty Agreement dated as of December 20, 2007.	X
14		Code of Business Conduct and Ethics for Directors, Officers and Employees.		10-K	000-26640	03/01/2004
21.1		Subsidiaries of the registrant.	X
23.1		Consent of Ernst & Young LLP.	X
31.1		Certification by Mark W. Joslin pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
31.2		Certification by Manuel J. Perez de la Mesa pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
32.1		Certification by Manuel J. Perez de la Mesa and Mark W. Joslin pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X

* Indicates a management contract or compensatory plan or arrangement

71

EX-10.28

EXHIBIT 10.28

AMENDMENT NO. 9 TO RECEIVABLES PURCHASE AGREEMENT

THIS AMENDMENT (this “Amendment”), dated as of August 10, 2007, is entered into by and among is entered into by and among SCP Distributors LLC (“Distributors”), Superior Commerce LLC (“SPE”), JPMorgan Chase Bank, N.A. f/k/a Bank One, NA (Main Office Chicago), individually (“JPMorgan Chase”), Jupiter Securitization Company LLC f/k/a Jupiter Securitization Corporation (“Conduit”), JS Siloed Trust (the “Trust”), and JPMorgan Chase Bank, N.A. f/k/a Bank One, NA (Main Office Chicago), as agent for the Purchasers (the “Agent”), and pertains to that certain RECEIVABLES PURCHASE AGREEMENT dated as of March 27, 2003 by and among the parties hereto other than the Trust (as has been amended prior to the date hereof, the “RPA”).  Unless defined elsewhere herein, capitalized terms used in this Amendment shall have the meanings assigned to such terms in the RPA.

PRELIMINARY STATEMENTS

Jupiter wishes to assign all of its right, title and interest in, to and under the Agreement to the Trust, and the Trust wishes to accept such assignment; and

In connection with the foregoing assignment, certain technical amendments to the Agreement are required.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.                      Amendments.

(a)           For value received, Jupiter hereby assigns all of its right, title and interest in, to and under the Agreement and other Transaction Documents to the Trust, and the Trust hereby accepts such assignment.  From and after the date hereof, all references in the Transaction Documents to “Jupiter Securitization Company LLC,” “Jupiter” or “Conduit,” whether alone or as part of another defined term, are hereby replaced with references to “JS Siloed Trust,” “JSST” or “Trust,” respectively.  The address for notices to JS Siloed Trust shall be as set forth below its signature hereto.

(b)           Section 7.1(a) is hereby amended to re-number existing clause (viii) thereof as clause (ix) and to insert the following new clause (viii) in its appropriate numerical order:

(viii)  Change in Accounting Treatment.  Promptly, upon any determination by Distributors and its consolidated Subsidiaries to account for the transactions contemplated by the Transaction Documents, as off-balance sheet sales for financial accounting purposes, written notice of such proposed change in financial accounting treatment.

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(c)           Section 10.1 is hereby amended to delete “the Agent and each Purchaser” where it appears in the third line thereof and to replace it with “the Agent, Jupiter and each Purchaser”.

(d)           Section 14.5(b)(iii) is hereby amended and restated in its entirety to read as follows:

(iii) by the Agent to any rating agency, Commercial Paper dealer, Funding Source or any other entity organized for the purpose of purchasing, or making loans secured by, financial assets for which JPMorgan Chase acts as the administrative agent or trusteeand to any officers, directors, employees, outside accountants and attorneys of any of the foregoing, provided each such Person referred to in clause (iii) is informed of the confidential nature of such information.

(e)           Section 14.6 is hereby amended and restated in its entirety to read as follows:

Section 14.6.  Bankruptcy Petition.  Each of Seller, the Servicer, the Agent and each Financial Institution hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of JSST or Jupiter, it will not institute against, or join any other Person in instituting against, JSST or Jupiter any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.

(f)           Section 14.13 is hereby amended and restated in its entirety to read as follows:

Section 14.13.  JPMorgan Chase Roles

.  Each of the Financial Institutions acknowledges that JPMorgan Chase acts, or may in the future act, (i) as administrative trustee for the Trust, (ii) as administrative agent for Jupiter and the Financial Institutions, (iii) as issuing and paying agent for the Commercial Paper, (iv) to provide credit or liquidity enhancement for the timely payment for the Commercial Paper and (v) to provide other services from time to time for the Trust, Jupiter or any Financial Institution (collectively, the “JPMorgan Chase Roles”).  Without limiting the generality of this Section 14.13, each Financial Institution hereby acknowledges and consents to any and all JPMorgan Chase Roles and agrees that in connection with any JPMorgan Chase Role, JPMorgan Chase may take, or refrain from taking, any action that it, in its discretion, deems appropriate, including, without limitation, in its role as administrative trustee for the Trust, and the giving of notice to the Agent of a mandatory purchase pursuant to a Funding Agreement.

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(g)           The following definitions are hereby amended and restated in their entirety as set forth below:

“Commercial Paper” means promissory notes of Jupiter Securitization Company LLC (together with its successors, “Jupiter”) issued in the commercial paper market.

“Funding Agreement” means this Agreement, any agreement executed by the Trust and Jupiter under which Jupiter agrees to provide funds to the Trust, and any agreement or instrument executed by any Funding Source with or for the benefit of Jupiter or the Trust.

“Funding Source” means (i) any Financial Institution, (ii) Jupiter, or (iii) any insurance company, bank or other funding entity providing liquidity, credit enhancement or back-up purchase support or facilities to Jupiter or the Trust.

“Pooled Commercial Paper” means Commercial Paper notes of Jupiter subject to any particular pooling arrangement by Jupiter, but excluding Commercial Paper issued by Jupiter for a tenor and in an amount specifically requested by any Person in connection with any agreement effected by Jupiter or the Trust.

                Section 2.                      Representations and Warranties.  In order to induce the Agent and the Purchasers to enter into this Amendment, each of the Originators and the SPE hereby represents and warrants to the Agent and the Purchasers that (a) after giving affect to this Amendment each of such Person’s representations and warranties contained in Article II of the RSA or Article V of the RPA, as applicable, is true and correct as of the date hereof, (b) the execution and delivery by such Person of this Amendment, and the performance of its obligations hereunder, are within its corporate or limited partnership, as applicable, powers and authority and have been duly authorized by all necessary corporate or limited partnership, as applicable, action on its part, and (c) this Amendment has been duly executed and delivered by such Person and constitutes the legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

Section 3.                      Condition Precedent. This Amendment shall become effective as of the date first above written upon receipt by the Agent of this Amendment duly executed by each of the parties hereto.

Section 4.                      Miscellaneous.

(a)           Except as expressly modified hereby, the RPA remains unaltered and in full force and effect.  This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy).

(b)

This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

<signature pages follow>

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers as of the date hereof.

SUPERIOR COMMERCE LLC

By:       /s/ Shaleen Lee

Name:  Shaleen Lee

Title:    President

SCP DISTRIBUTORS LLC

By:       /s/ Craig K. Hubbard

Name:  Craig Hubbard

Title:    Treasurer

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JUPITER SECURITIZATION COMPANY LLC

By:  JPMorgan Chase Bank, N.A., its attorney-in-fact

        /s/ Authorized Signatory

By:  Authorized Signatory

Its:   Vice President

JS SILOED TRUST

By:  JPMorgan Chase Bank, N.A., as Administrative Trustee

        /s/ Authorized Signatory

By:  Authorized Signatory

Its:   Vice President

Address for Notices:

JS Siloed Trust

c/o JPMorgan Chase Bank, N.A., as Administrative Trustee

Chase Tower, 10 S. Dearborn

Chicago, Illinois 60670

Attn:    Asset Backed Securities Conduit Group

Fax:     (312) 732-3600

JPMORGAN CHASE BANK, N.A.,

    as a Financial Institution and as Agent

        /s/ Authorized Signatory

By:  Authorized Signatory

Its:   Vice President

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EX-10.29

EXHIBIT 10.29

AMENDMENT NO. 10 TO RECEIVABLES PURCHASE AGREEMENT

THIS AMENDMENT (this “Amendment”), dated as of December 20, 2007, is entered into by and among is entered into by and among Superior Commerce LLC, a Delaware limited liability company (“SPE”), SCP Distributors LLC, a Delaware limited liability company, as initial Servicer (together with SPE, the “Seller Parties” and each, a “Seller Party”), JS Siloed Trust (the “Trust”), and JPMorgan Chase Bank, N.A. f/k/a Bank One, NA (Main Office Chicago), individually (together with the Trust, the “Purchasers”) and as agent for the Purchasers (in such capacity, the “Agent”), and pertains to that certain RECEIVABLES PURCHASE AGREEMENT dated as of March 27, 2003 by and among the parties hereto other than the Trust (as has been amended prior to the date hereof, the “RPA”).  Unless defined elsewhere herein, capitalized terms used in this Amendment shall have the meanings assigned to such terms in the RPA.

PRELIMINARY STATEMENTS

SPE has requested that the Agent and the Purchasers amend certain provisions of the RPA; and

The Agent and the Purchasers are willing to amend the requested provisions on the terms hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

                Section 1.                      Amendments.

(a)The definitions of the following terms set forth in Exhibit I to the RPA are hereby deleted in their entirety:

“Consolidated EBITDA”

“Consolidated EBITR”

“Consolidated Indebtedness”

“Consolidated Interest Expense”

“Consolidated Net Income”

“Consolidated Net Worth”

“Consolidated Rentals”

“EBITR”

(b)The following new definitions are hereby inserted into Exhibit I to the RPA in their appropriate alphabetical order:

“Accounts Securitization” means, with respect to POOLCORP and its Subsidiaries (other than Seller), any pledge, sale, transfer, contribution, conveyance or other disposition of (a) “accounts”, “chattel paper”, “instruments” or “general intangibles” (each as defined in the UCC) arising in connection with the sale of goods or the rendering of services by such Person, including, without limitation, the related rights to any finance, interest, late payment or similar charges (such items, the “Securitized Receivables”), (b) such Person’s interest in the inventory or goods the sale of which by such Person gave rise to such Securitized Receivable (but only to the extent such inventory or goods consists of returned or repossessed inventory or goods, if any), (c) all other guaranties, letters of credit, insurance and security interests or liens purporting to secure or support payment of such Securitized Receivable, (d) all insurance contracts, service contracts, books and records associated with such Securitized Receivable, (e) any lockbox, post office box or similar deposit account related solely to the accounts being transferred, (f) cash collections and cash proceeds of such Securitized Receivable and (g) any proceeds of the foregoing (all such items referenced in clauses (a) through (g), the “Transferred Assets”) which such sale, transfer, contribution, conveyance or other disposition is funded by the recipient of such Transferred Assets in whole or in part by borrowings or the issuance of instruments or securities that are paid principally from the cash derived from such Transferred Assets; provided that the aggregate amount of gross proceeds available to POOLCORP or any Subsidiary in connection with all such transactions shall not at any time exceed $175,000,000; and provided further that such sale, transfer, contribution, conveyance or other disposition and any Indebtedness arising from such sale, transfer, contribution, conveyance or other disposition shall be without recourse to POOLCORP or any of its Subsidiaries (other than Seller) except with respect to (i) reductions in the balance of such Securitized Receivable as a result of any defective or rejected goods or set off by the obligor of such Securitized Receivable transferred by such Person, (ii) breaches of representations or warranties by such Person in the Receivables Sale Agreement or any other receivables sale agreements which contain representations and warranties which are no broader in scope and obligation than the representations and warranties contained in the Receivables Sale Agreement and (iii) indemnification of Seller, to the extent provided in the Receivables Sale Agreement or any other receivables sale agreements which contain indemnification terms and provisions which are no broader in scope and obligation than the terms and provisions contained in the Receivables Sale Agreement.

“Attributable Indebtedness” means, on any date, (a) in respect of any Capitalized Lease of any Person, the associated Capitalized Lease Obligations as of such date, and (b) in respect of any Synthetic Lease, the capitalized amount or principal amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capitalized Lease.

“Average Accounts Securitization Proceeds” means, for any period, as determined on a Consolidated basis, without duplication, for POOLCORP and its Subsidiaries, the average for such period of the total amount of borrowings or issuances of instruments or securities in connection with any Accounts Securitization as of each calendar month end during such period.

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“Average Total Funded Indebtedness” means, for any period, as determined on a Consolidated basis, without duplication, for POOLCORP and its Subsidiaries in accordance with GAAP, the average for such period of the Total Funded Indebtedness as of each calendar month end during such period.

“Average Total Leverage Ratio” means, for any date, the ratio of (a) the sum of (i) the Average Total Funded Indebtedness for the period of twelve (12) consecutive months ending on or immediately prior to such date plus (ii) the Average Accounts Securitization Proceeds for the period of twelve (12) consecutive months ending on or immediately prior to such date to (b) EBITDAfor the period of twelve (12) consecutive months ending on or immediately prior to such date.

“Consolidated” means, when used with reference to financial statements or financial statement items of POOLCORP and its Subsidiaries, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP.

“EBITDAR” means, for any period, the sum of the following determined on a Consolidated basis, without duplication, for POOLCORP and its Subsidiaries in accordance with GAAP:  (a) Net Income for such period plus (b) the sum of the following to the extent deducted in determining Net Income for such period: (i) income and franchise taxes, (ii) Interest Expense, (iii) amortization, (iv) depreciation, (v) Rental Expense, (vi) non-cash stock option expense and (vii) extraordinary losses incurred other than in the ordinary course of business less (c) any extraordinary gains realized during such period other than in the ordinary course of business.

“Hedging Agreement” means any agreement with respect to any Interest Rate Contract, forward rate agreement, commodity swap, forward foreign exchange agreement, currency swap agreement, cross-currency rate swap agreement, currency option agreement or other agreement or arrangement designed to alter the risks of any Person arising from fluctuations in interest rates, currency values or commodity prices, all as amended, restated, supplemented or otherwise modified from time to time.

“Interest Expense” means, with respect to POOLCORP and its Subsidiaries for any period, the gross interest expense (including, without limitation, interest expense attributable to Capitalized Leases and all net payment obligations pursuant to Hedging Agreements) of POOLCORP and its Subsidiaries, all determined for such period on a Consolidated basis, without duplication, in accordance with GAAP.

“Interest Rate Contract” means any interest rate swap agreement, interest rate cap agreement, interest rate floor agreement, interest rate collar agreement, interest rate option or any other agreement regarding the hedging of interest rate risk exposure executed in connection with hedging the interest rate exposure of any Person and any confirming letter executed pursuant to such agreement, all as amended, restated, supplemented or otherwise modified from time to time.

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“Net Income” means, with respect to POOLCORP and its Subsidiaries, for any period of determination, the net income (or loss) of POOLCORP and its Subsidiaries for such period, determined on a Consolidated basis in accordance with GAAP; provided that there shall be excluded from Net Income (a) the net income (or loss) of any Person (other than a Subsidiary which shall be subject to clause (c) below), in which POOLCORP or any of its Subsidiaries has a joint interest with a third party, except to the extent such net income is actually paid to POOLCORP or any of its Subsidiaries by dividend or other distribution during such period, (b) the net income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of such Person or is merged into or consolidated with such Person or any of its Subsidiaries or that Person’s assets are acquired by such Person or any of its Subsidiaries except to the extent included pursuant to the foregoing clause (a), (c) the net income (if positive) of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary to POOLCORP or any of its Subsidiaries of such net income (i) is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary or (ii) would be subject to any taxes payable on such dividends or distributions.

“Operating Lease” means, as to any Person as determined in accordance with GAAP, any lease of property (whether real, personal or mixed) by such Person as lessee which is not a Capitalized Lease.

“POOLCORP” means Pool Corporation, a Delaware corporation formerly known as SCP Pool Corporation.

“Rental Expense” means, with respect to POOLCORP and its Subsidiaries for any period, the aggregate fixed amounts payable with respect to Operating Leases of POOLCORP and its Subsidiaries for such period, determined on a Consolidated basis in accordance with GAAP.

“Total Funded Indebtedness” means, with respect to POOLCORP and its Subsidiaries at any date and without duplication, the sum of the following:

(i)           all liabilities, obligations and indebtedness for borrowed money including, but not limited to, obligations evidenced by bonds, debentures, notes or other similar instruments of any such Person;

(ii)           all obligations to pay the deferred purchase price of property or services of any such Person (including, without limitation, all obligations under non-competition, earn-out or similar agreements), except trade payables arising in the ordinary course of business not more than ninety (90) days past due;

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(iii)           the Attributable Indebtedness of such Person with respect to such Person’s obligations in respect of Capitalized Leases and Synthetic Leases (regardless of whether accounted for as indebtedness under GAAP);

(iv)           all indebtedness of any other Person secured by a Lien on any asset owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(v)           all obligations, contingent or otherwise, of any such Person relative to the face amount of letters of credit, whether or not drawn, including, without limitation, any Reimbursement Obligation, and banker’s acceptances issued for the account of any such Person; and

(vi)           all Contingent Obligations of any such Person with respect to outstanding Indebtedness of the types specified in clauses (a) through (e) above.

For all purposes hereof, the Total Funded Indebtedness of any Person shall include the indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.

(c)The definitions of the terms below set forth in Exhibit I to the RPA are hereby amended and restated in their entirety to read, respectively, as follows:

“Contingent Obligation” means, with respect to POOLCORP and its Subsidiaries, without duplication, any obligation, contingent or otherwise, of any such Person pursuant to which such Person has directly or indirectly guaranteed any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business.

“GAAP” means generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained on a consistent basis for POOLCORP and its Subsidiaries throughout the period indicated and (subject to the next sentence) consistent with the prior financial practice of the US Borrower and its Subsidiaries.  If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Transaction Document, and either the Seller Parties or the Required Financial Institutions shall so request, the Agent, the Purchasers and the Seller Parties shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided that, until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) the Seller Parties shall provide to the Agent and the Purchasers financial statements and other documents required under the Transaction Documents or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

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“Synthetic Lease” means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an Operating Lease in accordance with GAAP.

(d)Sections 9.1(h), (i) and (j) of the RPA are hereby amended and restated in their entirety to read as follows:

(h)           As of any fiscal quarter end of POOLCORP, the Average Total Leverage Ratio shall be greater than or equal to 3.25 to 1.00.

(i)           [intentionally deleted].

(j)           As of any fiscal quarter end of POOLCORP, the ratio of (i) EBITDAR for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date to (ii) the sum of (A) Interest Expense paid or payable in cash for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date plus (B) Rental Expense for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date shall be less than 2.25 to 1.00.

    Section 2.                      Representations and Warranties.  In order to induce the Agent and the Purchasers to enter into this Amendment, each of the Seller Parties hereby represents and warrants to the Agent and the Purchasers that (a) after giving affect to this Amendment each of such Person’s representations and warranties contained in Article II of the RSA or Article V of the RPA, as applicable, is true and correct as of the date hereof, (b) the execution and delivery by such Person of this Amendment, and the performance of its obligations hereunder, are within its corporate or limited partnership, as applicable, powers and authority and have been duly authorized by all necessary corporate or limited partnership, as applicable, action on its part, and (c) this Amendment has been duly executed and delivered by such Person and constitutes the legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

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Section 3.                      Condition Precedent. This Amendment shall become effective as of the date first above written upon receipt by the Agent of this Amendment duly executed by each of the parties hereto.

Section 4.                      Miscellaneous.

(a)           Except as expressly modified hereby, the RPA remains unaltered and in full force and effect.  This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy).

(b)

This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

<signature pages follow>

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers as of the date hereof.

SUPERIOR COMMERCE LLC

By:       /s/ Steven Cassanova

Name:  Steven Cassanova

Title:    Treasurer

SCP DISTRIBUTORS LLC

By:       /s/ Mark W. Joslin

Name:  Mark W. Joslin

Title:    Vice President and CFO

JS SILOED TRUST

By:  JPMorgan Chase Bank, N.A., as Administrative Trustee

        /s/ Maureen E. Marcon

By:  Maureen E. Marcon

Its:   Vice President

JPMORGAN CHASE BANK, N.A.,

    as a Financial Institution and as Agent

        /s/ Maureen E. Marcon

By:  Maureen E. Marcon

Its:   Vice President

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EX-10.48

EXHIBIT 10.48

Published CUSIP Number:  78403GAA

Revolving Credit CUSIP Number:  78403GAB9

Term Loan CUSIP Number:  78403GAC7

$300,000,000

AMENDED AND RESTATED CREDIT AGREEMENT

dated as of December 20, 2007,

by and among

POOL CORPORATION,

as US Borrower,

SCP DISTRIBUTORS INC.,

as Canadian Borrower,

the Lenders referred to herein,

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Administrative Agent,

Swingline Lender and Issuing Lender,

WACHOVIA CAPITAL FINANCE CORPORATION (CANADA),

as Canadian Dollar Lender,

JPMORGAN CHASE BANK, N.A.,

as Syndication Agent,

WELLS FARGO BANK, N.A.,

as Documentation Agent

REGIONS BANK,

as Documentation Agent

and

CAPITAL ONE, N.A.,

as Documentation Agent

WACHOVIA CAPITAL MARKETS, LLC,

as Sole Lead Arranger and Sole Book Manager

TABLE OF CONTENTS
		Page
ARTICLE I DEFINITIONS		2
SECTION 1.1	Definitions	2
SECTION 1.2	Other Definitions and Provisions	26
SECTION 1.3	Accounting Terms	26
SECTION 1.4	UCC Terms	26
SECTION 1.5	Rounding	26
SECTION 1.6	References to Agreement and Laws	26
SECTION 1.7	Times of Day	27
SECTION 1.8	Letter of Credit Amounts	27
ARTICLE II REVOLVING CREDIT FACILITY		27
SECTION 2.1	Revolving Credit Loans	27
SECTION 2.2	Canadian Dollar Loans	27
SECTION 2.3	Swingline Loans	29
SECTION 2.4	Procedure for Advances of Revolving Credit Loans, Canadian Dollar Loans and Swingline Loans	31
SECTION 2.5	Repayment of Loans	32
SECTION 2.6	Permanent Reduction of the Revolving Credit Commitment	35
SECTION 2.7	Termination of Revolving Credit Facility	36
SECTION 2.8	Nature of Obligations	36
SECTION 2.9	Optional Increase of Revolving Credit Commitment	36
ARTICLE III LETTER OF CREDIT FACILITY		38
SECTION 3.1	L/C Commitment	38
SECTION 3.2	Procedure for Issuance of Letters of Credit	39
SECTION 3.3	Commissions and Other Charges	39
SECTION 3.4	L/C Participations	39
SECTION 3.5	Reimbursement Obligation of the US Borrower	40
SECTION 3.6	Obligations Absolute	41
SECTION 3.7	Effect of Letter of Credit Application	42
ARTICLE IV TERM LOAN FACILITY		42
SECTION 4.1	Term Loan	42
SECTION 4.2	Repayment of Term Loan	42
SECTION 4.3	Prepayments of Term Loan	42
ARTICLE V GENERAL LOAN PROVISIONS		45
SECTION 5.1	Interest	45
SECTION 5.2	Notice and Manner of Conversion or Continuation of Loans	48
SECTION 5.3	Fees	48
SECTION 5.4	Manner of Payment	48
SECTION 5.5	Evidence of Indebtedness	49

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SECTION 5.6	Adjustments	50
SECTION 5.7	Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the Administrative Agent	51
SECTION 5.8	Changed Circumstances	51
SECTION 5.9	Indemnity	53
SECTION 5.10	Increased Costs	53
SECTION 5.11	Taxes	55
SECTION 5.12	Mitigation Obligations; Replacement of Lenders	57
SECTION 5.13	Redenomination of Canadian Dollar Loans	58
SECTION 5.14	US Borrower as Agent for the Canadian Borrower	58
ARTICLE VI CLOSING; CONDITIONS OF CLOSING AND BORROWING		59
SECTION 6.1	Closing	59
SECTION 6.2	Conditions to Closing and Initial Extensions of Credit	59
SECTION 6.3	Conditions to All Extensions of Credit	62
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE BORROWERS		63
SECTION 7.1	Representations and Warranties	63
SECTION 7.2	Survival of Representations and Warranties, Etc.	70
ARTICLE VIII FINANCIAL INFORMATION AND NOTICES		71
SECTION 8.1	Financial Statements and Projections	71
SECTION 8.2	Officer’s Compliance Certificate	72
SECTION 8.3	Accountants’ Certificate	72
SECTION 8.4	Other Reports	72
SECTION 8.5	Notice of Litigation and Other Matters	73
SECTION 8.6	Accuracy of Information	74
ARTICLE IX AFFIRMATIVE COVENANTS		74
SECTION 9.1	Preservation of Corporate Existence and Related Matters	75
SECTION 9.2	Maintenance of Property	75
SECTION 9.3	Insurance	75
SECTION 9.4	Accounting Methods and Financial Records	75
SECTION 9.5	Payment and Performance of Obligations	75
SECTION 9.6	Compliance With Laws and Approvals	75
SECTION 9.7	Environmental Laws	75
SECTION 9.8	Compliance with ERISA	76
SECTION 9.9	Compliance With Agreements	76
SECTION 9.10	Visits and Inspections	76
SECTION 9.11	Additional Subsidiaries	77
SECTION 9.12	Use of Proceeds	77
SECTION 9.13	Further Assurances	77
ARTICLE X FINANCIAL COVENANTS		77
SECTION 10.1	Average Total Leverage Ratio	77

ii

SECTION 10.2	Fixed Charge Coverage Ratio	78
ARTICLE XI NEGATIVE COVENANTS		78
SECTION 11.1	Limitations on Indebtedness	78
SECTION 11.2	Limitations on Liens	80
SECTION 11.3	Limitations on Loans, Advances, Investments and Acquisitions	81
SECTION 11.4	Limitations on Mergers and Liquidation	84
SECTION 11.5	Limitations on Sale of Assets	85
SECTION 11.6	Limitations on Dividends and Distributions	85
SECTION 11.7	Limitations on Exchange and Issuance of Capital Stock	86
SECTION 11.8	Transactions with Affiliates	86
SECTION 11.9	Certain Accounting Changes; Organizational Documents	86
SECTION 11.10	Amendments; Payments and Prepayments of Certain Indebtedness	86
SECTION 11.11	Restrictive Agreements	87
SECTION 11.12	Nature of Business	88
ARTICLE XII UNCONDITIONAL US BORROWER GUARANTY		88
SECTION 12.1	Guaranty of Obligations	88
SECTION 12.2	Nature of Guaranty	88
SECTION 12.3	Demand by the Administrative Agent	89
SECTION 12.4	Waivers	89
SECTION 12.5	Modification of Loan Documents etc.	90
SECTION 12.6	Reinstatement	90
SECTION 12.7	No Subrogation	90
ARTICLE XIII DEFAULT AND REMEDIES		91
SECTION 13.1	Events of Default	91
SECTION 13.2	Remedies	94
SECTION 13.3	Rights and Remedies Cumulative; Non-Waiver; etc.	94
SECTION 13.4	Crediting of Payments and Proceeds	95
SECTION 13.5	Administrative Agent May File Proofs of Claim	95
SECTION 13.6	Judgment Currency	96
ARTICLE XIV THE ADMINISTRATIVE AGENT		97
SECTION 14.1	Appointment and Authority	97
SECTION 14.2	Delegation of Duties	97
SECTION 14.3	Exculpatory Provisions	97
SECTION 14.4	Reliance by the Administrative Agent	98
SECTION 14.5	Notice of Default	98
SECTION 14.6	Non-Reliance on the Administrative Agent and Other Lenders	98
SECTION 14.7	Indemnification	99
SECTION 14.8	The Administrative Agent in Its Individual Capacity	99

iii

SECTION 14.9	Resignation of the Administrative Agent; Swingline Lender, Issuing Lender and Canadian Dollar Lender; Successor Administrative Agent, Swingline Lender, Issuing Lender and Canadian Dollar Lender	100
SECTION 14.10	Guaranty Matters	101
SECTION 14.11	Other Agents, Arrangers and Managers	101
ARTICLE XV MISCELLANEOUS		102
SECTION 15.1	Notices	102
SECTION 15.2	Amendments, Waivers and Consents	103
SECTION 15.3	Expenses; Indemnity	104
SECTION 15.4	Set-off	105
SECTION 15.5	Governing Law	106
SECTION 15.6	Jurisdiction and Venue	106
SECTION 15.7	Binding Arbitration; Waiver of Jury Trial	106
SECTION 15.8	Reversal of Payments	108
SECTION 15.9	Injunctive Relief; Punitive Damages	108
SECTION 15.10	Accounting Matters	108
SECTION 15.11	Successors and Assigns; Participations	108
SECTION 15.12	Confidentiality	111
SECTION 15.13	Performance of Duties	112
SECTION 15.14	All Powers Coupled with Interest	112
SECTION 15.15	Survival of Indemnities	112
SECTION 15.16	Titles and Captions	112
SECTION 15.17	Severability of Provisions	112
SECTION 15.18	Counterparts	112
SECTION 15.19	Integration	112
SECTION 15.20	Term of Agreement	113
SECTION 15.21	Advice of Counsel, No Strict Construction	113
SECTION 15.22	Inconsistencies with Other Documents; Independent Effect of Covenants	113
SECTION 15.23	USA Patriot Act	113
SECTION 15.24	Amendment and Restatement; No Novation	113

iv

		EXHIBITS
Exhibit A-1	-	Form of Revolving Credit Note
Exhibit A-2	-	Form of Swingline Note
Exhibit A-3	-	Form of Canadian Note
Exhibit A-4	-	Form of Term Note
Exhibit B	-	Form of Notice of Borrowing
Exhibit C	-	Form of Notice of Account Designation
Exhibit D	-	Form of Notice of Repayment
Exhibit E	-	Form of Notice of Conversion/Continuation
Exhibit F	-	Form of Officer’s Compliance Certificate
Exhibit G	-	Form of Assignment and Assumption
Exhibit H	-	Form of Amended and Restated Subsidiary Guaranty Agreement
SCHEDULES
Schedule 1.1	-	Existing Letters of Credit
Schedule 7.1(a)	-	Jurisdictions of Organization and Qualification
Schedule 7.1(b)	-	Subsidiaries and Capitalization
Schedule 7.1(i)	-	ERISA Plans
Schedule 7.1(l)	-	Material Contracts
Schedule 7.1(m)	-	Labor and Collective Bargaining Agreements
Schedule 7.1(t)	-	Indebtedness
Schedule 7.1(u)	-	Litigation
Schedule 11.2	-	Existing Liens
Schedule 11.3	-	Existing Loans, Advances and Investments

v

AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 20, 2007, by and among POOL CORPORATION (formerly known as SCP Pool Corporation), a Delaware corporation (the “US Borrower”), SCP DISTRIBUTORS INC., a company organized under the laws of Ontario (the “Canadian Borrower” and, together with the US Borrower, the “Borrowers”), the lenders who are or may become a party to this Agreement (collectively, the “Lenders”), WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as Administrative Agent for the Lenders, WACHOVIA CAPITAL FINANCE CORPORATION (CANADA), as Canadian Dollar Lender, JPMORGAN CHASE BANK, N.A., as Syndication Agent, WELLS FARGO BANK, N.A., as Documentation Agent, REGIONS BANK, as Documentation Agent and CAPITAL ONE, N.A., as Documentation Agent.

STATEMENT OF PURPOSE

Pursuant to that certain Credit Agreement dated as of November 2, 2004 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”) by and among the US Borrower, the Canadian Borrower, the lenders from time to time party thereto (the “Existing Lenders”) and Wachovia Bank, National Association, as Administrative Agent, the Existing Lenders extended certain credit facilities to the Borrowers pursuant to the terms thereof.

The Borrowers have requested that the Lenders agree to amend and restate the Existing Credit Agreement to (a) provide a revolving credit loan facility in the amount of $240,000,000 and make certain related amendments necessary for such purpose and (b) make certain other amendments.

It is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities of the parties with respect to the Existing Credit Agreement or be deemed to be evidence of or constitute repayment of all or any portion of such obligations and liabilities, but that this Agreement amend and restate in its entirety the Existing Credit Agreement and re-evidence the obligations and liabilities of the Borrowers and the other credit parties with respect thereto.

It is also the intent of the Borrowers and Subsidiary Guarantors (as defined below) to confirm that all obligations under the loan documents referred to in the Existing Credit Agreement shall continue in full force and effect as modified by the Loan Documents referred to herein and that, from and after the Closing Date, all references to the “Credit Agreement” contained in any such existing loan documents shall be deemed to refer to this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereby agree that the Existing Credit Agreement is hereby amended and restated as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1Definitions

The following terms when used in this Agreement shall have the meanings assigned to them below:

“Accounts Securitization” means, with respect to the US Borrower and its Subsidiaries (other than Superior Commerce), any pledge, sale, transfer, contribution, conveyance or other disposition of (a) “accounts”, “chattel paper”, “instruments” or “general intangibles” (each as defined in the UCC) arising in connection with the sale of goods or the rendering of services by such Person, including, without limitation, the related rights to any finance, interest, late payment or similar charges (such items, the “Receivables”), (b) such Person’s interest in the inventory or goods the sale of which by such Person gave rise to such Receivable (but only to the extent such inventory or goods consists of returned or repossessed inventory or goods, if any), (c) all other guaranties, letters of credit, insurance and security interests or liens purporting to secure or support payment of such Receivable, (d) all insurance contracts, service contracts, books and records associated with such Receivable, (e) any lockbox, post office box or similar deposit account related solely to the accounts being transferred, (f) cash collections and cash proceeds of such Receivable and (g) any proceeds of the foregoing (all such items referenced in clauses (a) through (g), the “Transferred Assets”) which such sale, transfer, contribution, conveyance or other disposition is funded by the recipient of such Transferred Assets in whole or in part by borrowings or the issuance of instruments or securities that are paid principally from the cash derived from such Transferred Assets; provided that the aggregate amount of gross proceeds available to the US Borrower or any Subsidiary in connection with all such transactions shall not at any time exceed $175,000,000; and provided further that such sale, transfer, contribution, conveyance or other disposition and any Indebtedness arising from such sale, transfer, contribution, conveyance or other disposition shall be without recourse to the US Borrower or any of its Subsidiaries (other than Superior Commerce) except with respect to (i) reductions in the balance of such Receivable as a result of any defective or rejected goods or set off by the obligor of such Receivable transferred by such Person, (ii) breaches of representations or warranties by such Person in the Receivables Sale Agreement or any other receivables sale agreements which contain representations and warranties which are no broader in scope and obligation than the representations and warranties contained in the Receivables Sale Agreement and (iii) indemnification of Superior Commerce to the extent provided in the Receivables Sale Agreement or any other receivables sale agreements which contain indemnification terms and provisions which are no broader in scope and obligation than the terms and provisions contained in the Receivables Sale Agreement.

“Administrative Agent” means Wachovia, in its capacity as Administrative Agent hereunder, and any successor thereto appointed pursuant to Section 14.9.

“Administrative Agent’s Office” means the office of the Administrative Agent specified in or determined in accordance with the provisions of Section 15.1(c).

“Administrative Questionnaire” means an administrative questionnaire in a form supplied by the Administrative Agent.

2

“Affiliate” means, with respect to any Person, any other Person (other than any Subsidiary of a Borrower) which, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person or any Subsidiary thereof.  The term “control” means (a) the power to vote ten percent (10%) or more of the securities or other equity interests of a Person having ordinary voting power, or (b) the possession, directly or indirectly, of any other power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“Agreement” means this Amended and Restated Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time.

“Applicable Law” means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators.

“Applicable Margin” means

(a)with respect to the Revolving Credit Facility, the corresponding percentages per annum as set forth below:

			Revolving Credit Facility
Pricing Level	Average Total Leverage Ratio	Revolving Credit Facility Fee	LIBOR + and LIBOR Market Index Rate +	Base Rate + and Canadian Base Rate+
I	Greater than or equal to 3.00 to 1.00	0.300%	1.250%	0.250%
II	Greater than or equal to 2.50 to 1.00 but less than 3.00 to 1.00	0.250%	1.000%	0.000%
III	Greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00	0.200%	0.800%	0.000%
IV	Greater than or equal to 1.50 to 1.00 but less than 2.00 to 1.00	0.175%	0.700%	0.000%
V	Greater than or equal to 1.00 to 1.00 but less than 1.50 to 1.00	0.150%	0.600%	0.000%
VI	Less than 1.00 to 1.00	0.125%	0.500%	0.000%

(b)with respect to the Term Loan Facility, (i) at any time for which the Average Total Leverage Ratio is greater than or equal to 1.25 to 1.00 as of the most recently ended fiscal quarter for which an Officer’s Compliance Certificate has been received by the Administrative Agent, 0.750% for LIBOR Rate Loans and 0.000% for Base Rate Loans or (ii) at any time for which the Average Total Leverage Ratio is less than 1.25 to 1.00 as of the most recently ended fiscal quarter for which an Officer’s Compliance Certificate has been received by the Administrative Agent, 0.625% for LIBOR Rate Loans and 0.000% for Base Rate Loans.

3

The Applicable Margin shall be determined and adjusted quarterly on the date (each a “Calculation Date”) ten (10) Business Days after receipt by the Administrative Agent of the Officer’s Compliance Certificate pursuant to Section 8.2 for the most recently ended fiscal quarter of the US Borrower; provided, however, that:

(i)           the Applicable Margin with respect to the Revolving Credit Facility shall be based on Pricing Level III until the first Calculation Date occurring after the first full fiscal quarter ending after the Closing Date and thereafter the Applicable Margin shall be determined by reference to the Average Total Leverage Ratio as of the last day of the most recently ended fiscal quarter of the US Borrower preceding the applicable Calculation Date; and

(ii)           if the Borrowers fail to provide the Officer’s Compliance Certificate as required by Section 8.2 for the most recently ended fiscal quarter of the US Borrower preceding the applicable Calculation Date, the Applicable Margin from such Calculation Date shall be (A) based on Pricing Level I with respect to Revolving Credit Loans, (B) 0.750% for Term Loans that are LIBOR Rate Loans and (C) 0.000% for Term Loans that are Base Rate Loans, in each case until such time as an appropriate Officer’s Compliance Certificate is provided, at which time the Pricing Level shall be determined by reference to the Average Total Leverage Ratio as of the last day of the most recently ended fiscal quarter of the US Borrower preceding such Calculation Date.  The Applicable Margin shall be effective from one Calculation Date until the next Calculation Date.  Any adjustment in the Applicable Margin shall be applicable to all Extensions of Credit then existing or subsequently made or issued.

Notwithstanding the foregoing, in the event that any financial statement or Officer’s Compliance Certificate delivered pursuant to Section 8.1 or 8.2 is shown to be inaccurate (regardless of whether (i) this Agreement is in effect, or (ii) the Revolving Credit Commitments are in effect, or (iii) any Extension of Credit is outstanding when such inaccuracy is discovered or such financial statement or Officer’s Compliance Certificate was delivered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period (an “Applicable Period”) than the Applicable Margin applied for such Applicable Period, then (x) the US Borrower shall immediately deliver to the Administrative Agent a correct Officer’s Compliance Certificate for such Applicable Period, (y) the Applicable Margin for such Applicable Period shall be determined as if the Average Total Leverage Ratio in the corrected Officer’s Compliance Certificate were applicable for such Applicable Period, and (z) the US Borrower shall immediately pay to the Administrative Agent the accrued additional interest owing as a result of such increased Applicable Margin for such Applicable Period, which payment shall be promptly applied by the Administrative Agent in accordance with Section 5.4.  Nothing in this paragraph shall limit the rights of the Administrative Agent and the Lenders with respect to Sections 5.1(c) and Article XIII.

4

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Arbitration Rules” has the meaning assigned thereto in Section 15.7(a).

“Asset Disposition” means the disposition of any or all of the assets of any Credit Party or Subsidiary thereof (including, without limitation, the Capital Stock of a Subsidiary or any ownership interest in a joint venture) whether by sale, lease, transfer or otherwise.  The term “Asset Disposition” shall not include any Equity Issuance or Debt Issuance.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 15.11), and accepted by the Administrative Agent, in substantially the form of Exhibit G or any other form approved by the Administrative Agent.

“Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease, the capitalized amount or principal amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capital Lease.

“Average Accounts Securitization Proceeds” means, for any period, as determined on a Consolidated basis, without duplication, for the US Borrower and its Subsidiaries, the average for such period of the total amount of borrowings or issuances of instruments or securities in connection with any Accounts Securitization as of each calendar month end during such period.

“Average Total Funded Indebtedness” means, for any period, as determined on a Consolidated basis, without duplication, for the US Borrower and its Subsidiaries in accordance with GAAP, the average for such period of the Total Funded Indebtedness as of each calendar month end during such period.

“Average Total Leverage Ratio” means, for any date, the ratio of (a) the sum of (i) the Average Total Funded Indebtedness for the period of twelve (12) consecutive months ending on or immediately prior to such date plus (ii) the Average Accounts Securitization Proceeds for the period of twelve (12) consecutive months ending on or immediately prior to such date to (b) EBITDAfor the period of twelve (12) consecutive months ending on or immediately prior to such date.

“Bankruptcy Event of Default” means any Event of Default pursuant to Sections 13.1(j) or (k).

“Base Rate” means, at any time, the higher of (a) the Prime Rate and (b) the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate or the Federal Funds Rate.

5

“Base Rate Loan” means any Loan bearing interest at a rate based upon the Base Rate as provided in Section 5.1(a).

“Borrowers” has the meaning assigned thereto in the introductory paragraph hereto.

“Business Day” means:

(a)for all purposes other than as set forth in clauses (b) or (c) below, any day other than a Saturday, Sunday or legal holiday on which banks in Charlotte, North Carolina and New York, New York, are open for the conduct of their commercial banking business;

(b)with respect to all notices and determinations in connection with, and payments of principal and interest on, any LIBOR Rate Loan, any day that is a Business Day described in clause (a) and that is also a day for trading by and between banks in Dollar deposits in the London interbank market; and

(c)with respect to all notices and determinations in connection with, and payments of principal and interest on, any Canadian Dollar Loan, any day that is a Business Day described in clause (a) and on which banks are open for business in Toronto, Ontario.

“Calculation Date” has the meaning assigned thereto in the definition of Applicable Margin.

“Canadian Base Rate” means at any time, the greater of (a) the rate of interest publicly announced from time to time by the Canadian Reference Bank as its prime rate in effect for determining interest rates on Canadian Dollar denominated commercial loans in Canada (which such rate is not necessarily the most favored rate of the Canadian Reference Bank and the Canadian Reference Bank may lend to its customers at rates that are at, above or below such rate) or, if the Canadian Reference Bank ceases to announce a rate so designated, any similar successor rate designated by the Canadian Reference Bank and (b) the annual rate of interest equal to the sum of (i) the CDOR Rate at such time plus (ii) one percent (1%) per annum.

“Canadian Base Rate Loan” means any Canadian Dollar Loan which bears interest at a rate determined by reference to the Canadian Base Rate.

“Canadian Borrower” has the meaning assigned thereto in the introductory paragraph hereto.

“Canadian Dollar” or “C$” means, at any time of determination, the then official currency of Canada.

“Canadian Dollar Commitment” means the lesser of (a) Twenty Million Dollars ($20,000,000) and (b) the Revolving Credit Commitment.

“Canadian Dollar Lender” means Wachovia Canada, in its capacity as Canadian Dollar Lender hereunder, and any successor thereto appointed pursuant to Section 14.9.

6

“Canadian Dollar Loan” means any revolving credit loan made by the Canadian Dollar Lender pursuant to Section 2.2.

“Canadian Note” means the promissory note made by the Canadian Borrower payable to the order of the Canadian Dollar Lender, substantially in the form of Exhibit A-3 hereto, evidencing the Canadian Dollar Loans, and any amendments, supplements and modifications thereto, any substitutes therefor and any replacements, restatements, renewals or extensions thereof, in whole or in part.

“Canadian Reference Bank” means Bank of Montreal, or its successor and assigns, or such other bank as the Canadian Dollar Lender may from time to time designate.

“Capital Lease” means any lease of any property by the US Borrower or any of its Subsidiaries, as lessee, that should, in accordance with GAAP, be classified and accounted for as a capital lease on a Consolidated balance sheet of the US Borrower and its Subsidiaries.

“Capital Stock” means (a) in the case of a corporation, capital stock, (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (c) in the case of a partnership, partnership interests (whether general or limited), (d) in the case of a limited liability company, membership interests and (e) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Cash Equivalents” means any investments permitted pursuant to Section 11.3(b).

“CDOR Rate” means the rate of interest per annum determined on the basis of an average thirty (30) day rate applicable to Canadian Dollar bankers’ acceptances appearing on the “Reuters Screen CDOR Page” (as defined in the International Swap Dealer Association, Inc.’s definitions, as amended, restated, supplemented or otherwise modified from time to time) as of 10:00 a.m. one (1) Canadian Business Day prior to the first day of the applicable Interest Period (rounded upward, if necessary, to the nearest 1/100th of 1%).  If, for any reason, such rate does not appear on the Reuters Screen CDOR Page, then the “CDOR Rate” shall be determined by the Canadian Dollar Lender to be the arithmetic average of the rate per annum at which deposits in Canadian Dollars would be offered by first class banks in Canada to the Canadian Dollar Lender.  Each calculation by the Canadian Dollar Lender of the CDOR Rate shall be conclusive and binding for all purposes, absent manifest error.

“Change in Control” means (a) any event or series of events in which any person or group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended) acting in concert obtain beneficial ownership or control in one or more series of transactions of more than thirty percent (30%) of the Capital Stock or thirty percent (30%) of the voting power of the US Borrower entitled to vote in the election of members of the board of directors of the US Borrower, (b) during any period of twelve (12) consecutive months, a majority of the members of the board of directors of the US Borrower cease to be composed of individuals (i) who were members of the board of directors on the first day of such period, (ii) whose election or nomination to the board of directors was approved by individuals who comprised a majority of the board of directors on the first day of such period or (iii) whose election or nomination to the board of directors was approved by (A) individuals who were members of the board of directors on the first day of such period or (B) individuals whose election or nomination to the board of directors was approved by a majority of the board of directors on the first day of such period; provided that in each case such individuals constituted a majority of the board of directors at the time of such election or nomination, or (c) there shall have occurred under any indenture or other evidence of Indebtedness in excess of $5,000,000 any “change in control” (as defined in such indenture or other evidence of Indebtedness) obligating the US Borrower to repurchase, redeem or repay all or any part of the Indebtedness or Capital Stock provided for therein.

7

“Change in Law” means the occurrence, after the Closing Date, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

“Closing Date” means December 20, 2007.

“Code” means the Internal Revenue Code of 1986, and the rules and regulations thereunder, each as amended or modified from time to time.

“Commitment” means, as to any Lender, on a collective basis, such Lender’s Canadian Dollar Commitment, if any, Swingline Commitment, if any, Revolving Credit Commitment and Term Loan Commitment, in each case as set forth in the Register, as the same may be reduced or modified at any time or from time to time pursuant to the terms hereof.

“Commitment Percentage” means, as to any Lender at any time, such Lender’s Revolving Credit Commitment Percentage or Term Loan Commitment Percentage, as applicable.

“Consolidated” means, when used with reference to financial statements or financial statement items of the US Borrower and its Subsidiaries, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP.

“Credit Facility” means, collectively, the Revolving Credit Facility, the Term Loan Facility, the Swingline Facility and the L/C Facility.

“Credit Parties” means, collectively, the US Borrower, the Canadian Borrower and the Subsidiary Guarantors.

“Debt Issuance” shall mean the issuance of any Indebtedness for borrowed money by any Borrower or any of its Subsidiaries, excluding any Equity Issuance or any Indebtedness of the Borrowers and their Subsidiaries permitted to be incurred pursuant to Section 11.1 (other than Section 11.1(j)).

“Default” means any of the events specified in Section 13.1 which with the passage of time, the giving of notice or any other condition, would constitute an Event of Default.

8

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Revolving Credit Loans, the Term Loan, participations in Canadian Dollar Loans, participations in Swingline Loans or participations in L/C Obligations required to be funded by it hereunder within one (1) Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one (1) Business Day of the date when due, unless such amount is the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

“Disputes” has the meaning set forth in Section 15.7.

“Dollar Amount” means, (a) with respect to each Extension of Credit made or continued (or to be made or continued) in Dollars, the principal amount thereof and (b) with respect to each Loan made or continued (or to be made or continued) in Canadian Dollars, the amount of Dollars which is equivalent to the principal amount of such Loan at the most favorable spot exchange rate determined by the Administrative Agent at approximately 11:00 a.m. two (2) Business Days before such Loan is made or continued (or to be made or continued).  When used with respect to any other sum expressed in Canadian Dollars, “Dollar Amount” shall mean the amount of Dollars which is equivalent to the amount so expressed in Canadian Dollars at the most favorable spot exchange rate determined by the Administrative Agent to be available to it at the relevant time.

“Dollars” or “$” means, unless otherwise qualified, dollars in lawful currency of the United States.

“Domestic Subsidiary” means any Subsidiary organized under the laws of any political subdivision of the United States.

“EBITDA” means, for any period, the sum of the following determined on a Consolidated basis, without duplication, for the US Borrower and its Subsidiaries in accordance with GAAP: (a) Net Income for such period plus (b) the sum of the following to the extent deducted in determining Net Income for such period: (i) income and franchise taxes, (ii) Interest Expense, (iii) amortization, (iv) depreciation, (v) non-cash stock option expense and (vi) extraordinary losses incurred other than in the ordinary course of business less (c) any extraordinary gains realized during such period other than in the ordinary course of business.

“EBITDAR” means, for any period, the sum of the following determined on a Consolidated basis, without duplication, for the US Borrower and its Subsidiaries in accordance with GAAP:  (a) Net Income for such period plus (b) the sum of the following to the extent deducted in determining Net Income for such period: (i) income and franchise taxes, (ii) Interest Expense, (iii) amortization, (iv) depreciation, (v) Rental Expense, (vi) non-cash stock option expense and (vii) extraordinary losses incurred other than in the ordinary course of business less (c) any extraordinary gains realized during such period other than in the ordinary course of business.

“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent, (ii) in the case of any assignment of a Revolving Credit Commitment, the Canadian Dollar Lender, the Swingline Lender and the Issuing Lender, and, (iii) unless a Default or Event of Default has occurred and is continuing, the US Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the US Borrower, the Canadian Borrower or any of their Affiliates or Subsidiaries.

9

“Employee Benefit Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of the US Borrower or any ERISA Affiliate or (b) has at any time within the preceding six (6) years been maintained for the employees of the US Borrower or any current or former ERISA Affiliate.

“Environmental Claims” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, accusations, allegations, notices of noncompliance or violation, investigations (other than internal reports prepared by any Person in the ordinary course of business and not in response to any third party action or request of any kind) or proceedings relating in any way to any actual or alleged violation of or liability under any Environmental Law or relating to any permit issued, or any approval given, under any such Environmental Law, including, without limitation, any and all claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to human health or the environment.

“Environmental Laws” means any and all federal, foreign, state, provincial and local laws, statutes, ordinances, codes, rules, standards and regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities, relating to the protection of human health or the environment, including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials.

“Equity Issuance” means any issuance by either Borrower or any Subsidiary to any Person which is not a Credit Party of (a) shares of its Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of options or warrants or (c) any shares of its Capital Stock pursuant to the conversion of any debt securities to equity.  The term “Equity Issuance” shall not include (i) any Asset Disposition or (ii) any Debt Issuance.

“ERISA” means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended or modified from time to time.

“ERISA Affiliate” means any Person who together with any Credit Party is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.

“Eurodollar Reserve Percentage” means, for any day, the percentage (expressed as a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect for such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any basic, supplemental or emergency reserves) in respect of eurocurrency liabilities or any similar category of liabilities for a member bank of the Federal Reserve System in New York City.

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“Event of Default” means any of the events specified in Section 13.1; provided that any requirement for passage of time, giving of notice, or any other condition, has been satisfied.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the Canadian Dollar Lender, the Issuing Lender or any other recipient of any payment to be made by or on account of any obligation of any Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which such Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrowers under Section 5.12(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 5.11(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the applicable Borrower with respect to such withholding tax pursuant to Section 5.11(a).  Notwithstanding anything to the contrary contained in this definition, “Excluded Taxes” shall not include any withholding tax imposed at any time on payments made by or on behalf of the Canadian Borrower (including, without limitation, any payment made to any Lender under Section 2.2(b)(iii)) or any other Foreign Subsidiary to any Lender hereunder or under any other Loan Document, provided that such Lender shall have complied with the last paragraph of Section 5.11(e).

“Existing Facility” means that certain credit facility established pursuant to the Existing Credit Agreement.

“Existing Credit Agreement” has the meaning set forth in the Statement of Purpose.

“Existing Letters of Credit” means all letters of credit described on Schedule 1.1.

“Extensions of Credit” means, as to any Lender at any time, (a) an amount equal to the sum of (i) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding, (ii) such Lender’s Revolving Credit Commitment Percentage of the L/C Obligations then outstanding, (iii) such Lender’s Revolving Credit Commitment Percentage of the Swingline Loans then outstanding, (iv) such Lender’s Revolving Credit Commitment Percentage of the Canadian Dollar Loans then outstanding and (v) the aggregate principal amount of the Term Loan made by such Lender then outstanding or (b) the making of any Loan or participation in any Letter of Credit by such Lender, as the context requires.

“FDIC” means the Federal Deposit Insurance Corporation, or any successor thereto.

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“February 2007 Note Purchase Agreement” means that certain Note Purchase Agreement dated as of February 1, 2007, as such agreement may be amended, restated, supplemented or otherwise modified, in each case in accordance with Section 11.10 of this Agreement.

“February 2007 Notes” means the senior unsecured floating rate notes issued by the US Borrower pursuant to the February 2007 Note Purchase Agreement in an initial aggregate principal amount of $100,000,000.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day (or, if such day is not a Business Day, for the immediately preceding Business Day), as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that if such rate is not so published for any day which is a Business Day, the average of the quotation for such day on such transactions received by the Administrative Agent from three (3) Federal funds brokers of recognized standing selected by the Administrative Agent.

“Fee Letter” means the separate letter agreement executed by the US Borrower and the Administrative Agent and/or certain of its affiliates dated November 20, 2007, as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof.

“Fiscal Year” means the fiscal year of the US Borrower and its Subsidiaries ending on December 31.

“Foreign Lender” means, with respect to any Borrower, any Lender that is organized under the laws of a jurisdiction other than that in which such Borrower is resident for tax purposes.  For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“GAAP” means generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained on a consistent basis for the US Borrower and its Subsidiaries throughout the period indicated and (subject to Section 15.10) consistent with the prior financial practice of the US Borrower and its Subsidiaries.

“Governmental Approvals” means all authorizations, consents, approvals, permits, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities.

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state, provincial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

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“Guaranty Obligation” means, with respect to the US Borrower and its Subsidiaries, without duplication, any obligation, contingent or otherwise, of any such Person pursuant to which such Person has directly or indirectly guaranteed any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, that the term Guaranty Obligation shall not include endorsements for collection or deposit in the ordinary course of business.

“Hazardous Materials” means any substances or materials (a) which are or become defined as hazardous wastes, hazardous substances, pollutants, contaminants, chemical substances or mixtures or toxic substances under any Environmental Law, (b) which are toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human health or the environment and are or become regulated by any Governmental Authority, (c) the presence of which require investigation or remediation under any Environmental Law or common law, (d) the discharge or emission or release of which requires a permit or license under any Environmental Law or other Governmental Approval, (e) which are deemed to constitute a nuisance or a trespass which pose a health or safety hazard to Persons or neighboring properties, (f) which consist of underground or aboveground storage tanks, whether empty, filled or partially filled with any substance, or (g) which contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.

“Hedging Agreement” means any agreement with respect to any Interest Rate Contract, forward rate agreement, commodity swap, forward foreign exchange agreement, currency swap agreement, cross-currency rate swap agreement, currency option agreement or other agreement or arrangement designed to alter the risks of any Person arising from fluctuations in interest rates, currency values or commodity prices, all as amended, restated, supplemented or otherwise modified from time to time.

“Hedging Obligations” means all existing or future payment and other obligations owing by any Credit Party under any Hedging Agreement (which such Hedging Agreement is permitted hereunder) with any Person that is a Lender or an Affiliate of a Lender at the time such Hedging Agreement is executed.

“Increase Effective Date” means the date, which shall be a Business Day, on or before the Revolving Credit Maturity Date, but no earlier than fifteen (15) days after any Increase Notification Date, on which each of the Increasing Revolving Credit Lenders increase (or, in the case of New Revolving Credit Lenders, provide) their respective Revolving Credit Commitments to the US Borrower pursuant to Section 2.9.

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“Increase Notification” means the written notice by the US Borrower of its desire to increase the Revolving Credit Commitment pursuant to Section 2.9.

“Increase Notification Date” means the date on which the Increase Notification is received by the Administrative Agent.

“Increasing Revolving Credit Lenders” has the meaning assigned thereto in Section 2.9(b).

“Indebtedness” means, with respect to the US Borrower and its Subsidiaries at any date and without duplication, the sum of the following:

(a)all liabilities, obligations and indebtedness for borrowed money including, but not limited to, obligations evidenced by bonds, debentures, notes or other similar instruments of any such Person;

(b)all obligations to pay the deferred purchase price of property or services of any such Person (including, without limitation, all obligations under non-competition, earn-out or similar agreements), except trade payables arising in the ordinary course of business not more than ninety (90) days past due;

(c)the Attributable Indebtedness of such Person with respect to such Person’s obligations in respect of Capital Leases and Synthetic Leases (regardless of whether accounted for as indebtedness under GAAP);

(d)all indebtedness of any other Person secured by a Lien on any asset owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(e)all Guaranty Obligations of any such Person;

(f)all obligations, contingent or otherwise, of any such Person relative to the face amount of letters of credit, whether or not drawn, including, without limitation, any Reimbursement Obligation, and banker’s acceptances issued for the account of any such Person;

(g)all obligations of any such Person to redeem, repurchase, exchange, defease or otherwise make payments in respect of Capital Stock of such Person;

(h)all net obligations incurred by any such Person pursuant to Hedging Agreements;

(i)the outstanding attributed principal amount under any asset securitization program; and

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(j)all outstanding payment obligations with respect to Synthetic Leases.

For all purposes hereof, the indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such indebtedness is expressly made non-recourse to such Person.  The amount of any net obligation under any Hedging Agreement on any date shall be deemed to be the Termination Value thereof as of such date.

“Indemnified Taxes” means Taxes and Other Taxes other than Excluded Taxes.

“Insurance and Condemnation Event” means the receipt by either Borrower or any Subsidiary of any cash insurance proceeds or condemnation award payable by reason of theft, loss, physical destruction or damage, taking or similar event with respect to any of their respective property or assets.

“Interest Expense” means, with respect to the US Borrower and its Subsidiaries for any period, the gross interest expense (including, without limitation, interest expense attributable to Capital Leases and all net payment obligations pursuant to Hedging Agreements) of the US Borrower and its Subsidiaries, all determined for such period on a Consolidated basis, without duplication, in accordance with GAAP.

“Interest Period” has the meaning assigned thereto in Section 5.1(b).

“Interest Rate Contract” means any interest rate swap agreement, interest rate cap agreement, interest rate floor agreement, interest rate collar agreement, interest rate option or any other agreement regarding the hedging of interest rate risk exposure executed in connection with hedging the interest rate exposure of any Person and any confirming letter executed pursuant to such agreement, all as amended, restated, supplemented or otherwise modified from time to time.

“ISP98” means the International Standby Practices (1998 Revision, effective January 1, 1999), International Chamber of Commerce Publication No. 590.

“Issuing Lender” means Wachovia (or any successor thereto), in its capacity as issuer of any Letter of Credit (including each Existing Letter of Credit) under this Agreement.

“L/C Commitment” means the lesser of (a) Twenty Million Dollars ($20,000,000) and (b) the Revolving Credit Commitment.

“L/C Facility” means the letter of credit facility established pursuant to Article III.

“L/C Obligations” means at any time, an amount equal to the sum of (a) the aggregate undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 3.5.

“L/C Participants” means the collective reference to all the Revolving Credit Lenders other than the Issuing Lender and the Canadian Dollar Lender.

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“Lender” means each Person executing this Agreement as a Lender (including, without limitation, the Canadian Dollar Lender, the Issuing Lender and the Swingline Lender unless the context otherwise requires) set forth on the signature pages hereto and each Person that hereafter becomes a party to this Agreement as a Lender pursuant to Section 15.11.

“Lender Addition and Acknowledgement Agreement” shall have the meaning assigned thereto in Section 2.9.

“Lending Office” means, with respect to any Lender, the office of such Lender maintaining such Lender’s Extensions of Credit.

“Letter of Credit Application” means an application, in the form specified by the Issuing Lender from time to time, requesting the Issuing Lender to issue a Letter of Credit.

“Letters of Credit” means the collective reference to the letters of credit issued pursuant to Section 3.1 and the Existing Letters of Credit.

“LIBOR” means the rate of interest per annum determined on the basis of the rate for deposits in Dollars in minimum amounts of at least $5,000,000 for a period equal to the applicable Interest Period which appears on the Reuters Page LIBOR01 (or any successor page) at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period (rounded upward, if necessary, to the nearest 1/100th of 1%).  If, for any reason, such rate does not appear on Reuters Page LIBOR01 (or any successor page), then “LIBOR” shall be determined by the Administrative Agent to be the arithmetic average of the rate per annum at which deposits in Dollars in minimum amounts of at least $5,000,000 would be offered by first class banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period.  Each calculation by the Administrative Agent of LIBOR shall be conclusive and binding for all purposes, absent manifest error.

“LIBOR Market Index Rate” means, for any day, the rate of interest per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) determined on the basis of the rate for deposits in Dollars in minimum amounts of at least $5,000,000 for a period equal to one (1) month which appears on the Reuters Page LIBOR01 (or any successor page) at approximately 11:00 a.m. (London time) on such date (or if such day is not a Business Day, the immediately preceding Business Day).  If, for any reason, such rate does not appear on Reuters Page LIBOR01 (or any successor page), then the “LIBOR Market Index Rate” shall be determined by the Administrative Agent to be the arithmetic average of the rate per annum at which deposits in Dollars in minimum amounts of at least $5,000,000 would be offered by first class banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) on such date for a period equal to one (1) month.  Each calculation by the Administrative Agent of the LIBOR Market Index Rate shall be conclusive and binding for all purposes, absent manifest error.  Each change in the LIBOR Market Index Rate shall be effective as of the opening of business on the day such change occurs.

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“LIBOR Rate” means a rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) determined by the Administrative Agent pursuant to the following formula:

LIBOR Rate =                                              LIBOR                

1.00-Eurodollar Reserve Percentage

“LIBOR Rate Loan” means any Loan bearing interest at a rate based upon the LIBOR Rate as provided in Section 5.1(a).

“Lien” means, with respect to any asset, any mortgage, leasehold mortgage, lien, pledge, charge, security interest, hypothecation or encumbrance of any kind in respect of such asset.  For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset.

“Loan Documents” means, collectively, this Agreement, each Note, the Letter of Credit Applications, the Subsidiary Guaranty Agreement, the Fee Letter and each other document, instrument, certificate and agreement executed and delivered by each Borrower or any Subsidiary thereof in connection with this Agreement or otherwise referred to herein or contemplated hereby (excluding any Hedging Agreement), all as may be amended, restated, supplemented or otherwise modified from time to time.

“Loans” means the collective reference to the Revolving Credit Loans, the Term Loan, the Canadian Dollar Loans and the Swingline Loans and “Loan” means any of such Loans.

“Material Adverse Effect” means, with respect to the US Borrower or any of its Subsidiaries, a material adverse effect on (a) the properties, business, operations or condition (financial or otherwise) of the US Borrower and its Subsidiaries, taken as a whole, (b) the ability of the US Borrower or any Subsidiary to perform its obligations under the Loan Documents to which it is a party or (c) the legality, validity, binding effect or enforceability against the US Borrower or any Subsidiary thereof of any Loan Document to which it is a party.

“Material Contract” means (a) any contract or other agreement, written or oral, of the US Borrower or any of its Subsidiaries involving monetary liability of or to any such Person in an amount in excess of $5,000,000 per annum, or (b) any other contract or agreement, written or oral, of the US Borrower or any of its Subsidiaries the failure to comply with which could reasonably be expected to have a Material Adverse Effect.

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which the US Borrower or any ERISA Affiliate is making, or is accruing an obligation to make, or has accrued an obligation to make contributions within the preceding six (6) years.

“Net Cash Proceeds” means, as applicable, (a) with respect to any Asset Disposition by any Credit Party or any of its Subsidiaries, the gross cash proceeds received by such Credit Party or any of its Subsidiaries from such sale less the sum of (i) all Taxes assessed as a result of such sale and any other fees and expenses incurred in connection therewith and (ii) the principal amount of, premium, if any, and interest on any Indebtedness secured by a Lien on the asset (or a portion thereof) sold, which Indebtedness is required to be repaid in connection with such sale, (b) with respect to any Equity Issuance or Debt Issuance, the gross cash proceeds received by either Borrower or any of its Subsidiaries from such Equity Issuance or Debt Issuance less all legal, underwriting and other fees and expenses incurred in connection therewith and (c) with respect to any Insurance and Condemnation Event, the gross cash proceeds received by either Borrower or any of its Subsidiaries from an insurance company or Governmental Authority, as applicable, less the sum of (i) all fees and expenses in connection therewith and (ii) the principal amount of, premium, if any, and interest on any Indebtedness secured by a Lien on the asset (or a portion thereof) subject to such loss or condemnation proceeding, which Indebtedness is required to be repaid in connection with such loss or condemnation proceeding.

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“Net Income” means, with respect to the US Borrower and its Subsidiaries, for any period of determination, the net income (or loss) of the US Borrower and its Subsidiaries for such period, determined on a Consolidated basis in accordance with GAAP; provided that there shall be excluded from Net Income (a) the net income (or loss) of any Person (other than a Subsidiary which shall be subject to clause (c) below), in which the US Borrower or any of its Subsidiaries has a joint interest with a third party, except to the extent such net income is actually paid to the US Borrower or any of its Subsidiaries by dividend or other distribution during such period, (b) the net income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of such Person or is merged into or consolidated with such Person or any of its Subsidiaries or that Person’s assets are acquired by such Person or any of its Subsidiaries except to the extent included pursuant to the foregoing clause (a), (c) the net income (if positive) of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary to the US Borrower or any of its Subsidiaries of such net income (i) is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary or (ii) would be subject to any taxes payable on such dividends or distributions.

“New Revolving Credit Lender” has the meaning assigned thereto in Section 2.9(b).

“Note” means a Revolving Credit Note, a Term Note, a Canadian Note or a Swingline Note.

“Notice of Account Designation” has the meaning assigned thereto in Section 2.4(b).

“Notice of Borrowing” has the meaning assigned thereto in Section 2.4(a).

“Notice of Conversion/Continuation” has the meaning assigned thereto in Section 5.2.

“Notice of Repayment” has the meaning assigned thereto in Section 2.5(c).

“Obligations” means, in each case, whether now in existence or hereafter arising: (a) the principal of and interest on (including interest accruing after the filing of any bankruptcy or similar petition) the Loans, (b) the L/C Obligations, (c) all Hedging Obligations and (d) all other fees and commissions (including attorneys’ fees), charges, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the US Borrower or any of its Subsidiaries to the Lenders or the Administrative Agent, in each case under any Loan Document or otherwise, with respect to any Loan or Letter of Credit of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note.

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“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

“Officer’s Compliance Certificate” means a certificate of the chief financial officer or the treasurer of the US Borrower substantially in the form of Exhibit F.

“Operating Lease” means, as to any Person as determined in accordance with GAAP, any lease of property (whether real, personal or mixed) by such Person as lessee which is not a Capital Lease.

“Original Closing Date” means November 2, 2004.

“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Participant” has the meaning assigned thereto in Section 15.11(d).

“Payment Event of Default” means any Event of Default pursuant to Sections 13.1(a) or (b).

“PBGC” means the Pension Benefit Guaranty Corporation or any successor agency.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (a) is maintained for the employees of the US Borrower or any ERISA Affiliates or (b) has at any time within the preceding six (6) years been maintained for the employees of the US Borrower or any of its current or former ERISA Affiliates.

“Permitted Acquisition” means any Permitted Domestic Acquisition or any Permitted Foreign Acquisition.

“Permitted Acquisition Consideration” means the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Capital Stock of the US Borrower, net of the applicable acquired company’s cash (including Cash Equivalents) balance as shown on its most recent financial statements delivered in connection with the applicable Permitted Acquisition) to be paid on a singular basis in connection with any applicable Permitted Acquisition as set forth in the applicable acquisition documents executed by the US Borrower or any of its Subsidiaries in order to consummate the applicable Permitted Acquisition.

“Permitted Domestic Acquisition” means any acquisition permitted pursuant to Section 11.3(c).

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“Permitted Foreign Acquisition” means any acquisition permitted pursuant to Section 11.3(d).

“Permitted Liens” means the Liens permitted pursuant to Section 11.2.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, governmental authority or other entity.

“Prime Rate” means, at any time, the rate of interest per annum publicly announced from time to time by Wachovia as its prime rate.  Each change in the Prime Rate shall be effective as of the opening of business on the day such change in such prime rate occurs.  The parties hereto acknowledge that the rate announced publicly by Wachovia as its prime rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks.

“Receivables Sale Agreement” means that certain Receivables Sale Agreement dated as of March 27, 2003 by and among SCP Distributors LLC, SCP Services LP and Superior Pool Products LLC, as originators, and Superior Commerce, as buyer (as amended, restated, supplemented or otherwise modified).

“Register” has the meaning assigned thereto in Section 15.11(c).

“Reimbursement Obligation” means the obligation of the US Borrower to reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit.

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

“Rental Expense” means, with respect to the US Borrower and its Subsidiaries for any period, the aggregate fixed amounts payable with respect to Operating Leases of the US Borrower and its Subsidiaries for such period, determined on a Consolidated basis in accordance with GAAP.

“Required Lenders” means, at any date, any combination of Lenders having more than fifty percent (50%) of the sum of (a) the aggregate amount of the Revolving Credit Commitment plus (b) the aggregate outstanding principal amount of the Term Loan or, if the Revolving Credit Commitment has been terminated, any combination of Lenders holding more than fifty percent (50%) of the aggregate Extensions of Credit (with the aggregate amount of each Lender’s risk participation and funded participation in Canadian Dollar Loans, Swingline Loans and L/C Obligations being deemed “held” by such Lender for purposes of this definition); provided that the Revolving Credit Commitment of, and the portion of the Extensions of Credit, as applicable, held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer or assistant treasurer of a Credit Party or any other officer of a Credit Party reasonably acceptable to the Administrative Agent.  Any document delivered hereunder that is signed by a Responsible Officer of a Credit Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Credit Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Credit Party.

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“Revolving Credit Commitment” means (a) as to any Revolving Credit Lender, the obligation of such Lender to make Revolving Credit Loans (including, without limitation, to participate in Canadian Dollar Loans and Swingline Loans) and to issue or participate in Letters of Credit issued for the account of any Borrower hereunder, in an aggregate principal or face amount at any time outstanding not to exceed the amount set forth opposite such Revolving Credit Lender’s name on the Register, as the same may be increased, reduced or modified at any time or from time to time pursuant to the terms hereof and (b) as to all Revolving Credit Lenders, the aggregate commitment of all Revolving Credit Lenders to make Revolving Credit Loans, as such amount may be increased, reduced or modified at any time or from time to time pursuant to the terms hereof.  The Revolving Credit Commitment of all Revolving Credit Lenders on the Closing Date shall be Two-Hundred and Forty Million Dollars ($240,000,000).

“Revolving Credit Commitment Percentage” means, as to any Revolving Credit Lender at any time, the ratio of (a) the amount of the Revolving Credit Commitment of such Revolving Credit Lender to (b) the Revolving Credit Commitment of all Revolving Credit Lenders.

“Revolving Credit Facility” means the revolving credit facility established pursuant to Article II.

“Revolving Credit Lender” means any Lender with a Revolving Credit Commitment.

“Revolving Credit Loans” means any revolving credit loan denominated in Dollars made to the US Borrower pursuant to Section 2.1, and all such revolving credit loans collectively as the context requires.

“Revolving Credit Maturity Date” means the earliest to occur of (a) December 20, 2012, (b) the date of termination by the Borrowers pursuant to Section 2.6, or (c) the date of termination by the Administrative Agent, on behalf of the Lenders, pursuant to Section 13.2(a).

“Revolving Credit Note” means a promissory note made by the US Borrower in favor of a Revolving Credit Lender evidencing the Revolving Credit Loans made by such Revolving Credit Lender, substantially in the form of Exhibit A-1 hereto, and any amendments, supplements and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part.

“Sanctioned Entity” shall mean (a) an agency of the government of, (b) an organization directly or indirectly controlled by, or (c) a person resident in, a country that is subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise published from time to time as such program may be applicable to such agency, organization or person.

“Sanctioned Person” shall mean a person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise published from time to time.

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“Second Amendment Effective Date” means December 20, 2005.

“Solvent” means, as to the US Borrower and its Subsidiaries on a particular date, that any such Person (a) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage and is able to pay its debts as they mature, (b) has assets having a value, both at fair valuation and at present fair saleable value, greater than the amount required to pay its probable liabilities (including contingencies), and (c) does not believe that it will incur debts or liabilities beyond its ability to pay such debts or liabilities as they mature.

“Subordinated Indebtedness” means the collective reference to any Indebtedness of the US Borrower or any Subsidiary subordinated in right and time of payment to the Obligations and containing such other terms and conditions, in each case as are satisfactory to the Required Lenders.

“Subsidiary” means as to any Person, any corporation, partnership, limited liability company or other entity of which more than fifty percent (50%) of the outstanding Capital Stock having ordinary voting power to elect a majority of the board of directors or other managers of such corporation, partnership, limited liability company or other entity is at the time owned by or the management is otherwise controlled, directly or indirectly, by such Person (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation, partnership, limited liability company or other entity shall have or might have voting power by reason of the happening of any contingency).  Unless otherwise qualified references to “Subsidiary” or “Subsidiaries” herein shall refer to those of the US Borrower.

“Subsidiary Guarantors” means each Domestic Subsidiary of the US Borrower in existence on the Closing Date (other than the Superior Commerce) or which becomes a party to the Subsidiary Guaranty Agreement pursuant to Section 9.11.

“Subsidiary Guaranty Agreement” means the amended and restated unconditional guaranty agreement of even date executed by the Subsidiary Guarantors in favor of the Administrative Agent for the ratable benefit of itself and the Lenders, substantially in the form of Exhibit H, as amended, restated, supplemented or otherwise modified from time to time.

“Superior Commerce” means Superior Commerce LLC, a Delaware limited liability company, and its successors and assigns.

“Swingline Commitment” means the lesser of (a) Fifteen Million Dollars ($15,000,000)and (b) the Revolving Credit Commitment.

“Swingline Facility” means the swingline facility established pursuant to Section 2.3.

“Swingline Lender” means Wachovia in its capacity as swingline lender hereunder.

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“Swingline Loan” means any swingline loan made by the Swingline Lender to the US Borrower pursuant to Section 2.3, and all such swingline loans collectively as the context requires.

“Swingline Note” means a promissory note made by the US Borrower in favor of the Swingline Lender evidencing the Swingline Loans made by the Swingline Lender, substantially in the form of Exhibit A-2 hereto, and any amendments, supplements and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part.

“Swingline Termination Date” means the first to occur of (a) the resignation of Wachovia as Administrative Agent in accordance with Section 14.9 and (b) the Revolving Credit Maturity Date.

“Synthetic Lease” means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an Operating Lease in accordance with GAAP.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term Loan Commitment” means (a) as to any Term Loan Lender, the obligation of such Term Loan Lender to make a portion of the Term Loans to the US Borrower hereunder in an aggregate principal amount not to exceed the amount set forth opposite such Term Loan Lender’s name on the Register, as such amount may be increased, reduced or otherwise modified at any time or from time to time pursuant to the terms hereof  and (b) as to all Term Loan Lenders, the aggregate commitments of all Term Loan Lenders to make the Term Loans hereunder as such amount may be increased, reduced or otherwise modified at any time or from time to time pursuant to the terms hereof.

“Term Loan Commitment Percentage” means, as to any Term Loan Lender, the ratio of (a) the outstanding principal balance of the Term Loan held by such Term Loan Lender to (b) the aggregate outstanding principal balance of the Term Loan held by all Term Loan Lenders.

“Term Loan Facility” means the term loan facility established pursuant to Article IV.

“Term Loan Lender” means any Lender holding a portion of the Term Loans.

“Term Loan Maturity Date” means the first to occur of (a) December 20, 2010, or (b) the date the Term Loan is declared due and payable by the Administrative Agent, on behalf of the Lenders, pursuant to Section 13.2(a).

“Term Loans” means the term loans made to the US Borrower as referred to in Section 4.1.

“Term Note” means a promissory note made by the US Borrower in favor of a Term Loan Lender evidencing the portion of the Term Loans of such Term Loan Lender, substantially in the form of Exhibit A-4 hereto, and any amendments, supplements and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part.

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“Termination Event” means except for any such event or condition that could not reasonably be expected to have a Material Adverse Effect: (a) a “Reportable Event” described in Section 4043 of ERISA for which the notice requirement has not been waived by the PBGC, or (b) the withdrawal of the US Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination, under Section 4041 of ERISA, if the plan assets are not sufficient to pay all plan liabilities, or (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC, or (e) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan, or (f) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA, or (g) the partial or complete withdrawal of the US Borrower of any ERISA Affiliate from a Multiemployer Plan if withdrawal liability is asserted by such plan, or (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA, or (i) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.

“Termination Value” means, in respect of any one or more Hedging Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Agreements, (a) for any date on or after the date such Hedging Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedging Agreements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Agreements (which may include a Lender or any Affiliate of a Lender).

“Total Funded Indebtedness” means, with respect to the US Borrower and its Subsidiaries at any date and without duplication, the sum of the following:

(a)all liabilities, obligations and indebtedness for borrowed money including, but not limited to, obligations evidenced by bonds, debentures, notes or other similar instruments of any such Person;

(b)all obligations to pay the deferred purchase price of property or services of any such Person (including, without limitation, all obligations under non-competition, earn-out or similar agreements), except trade payables arising in the ordinary course of business not more than ninety (90) days past due;

(c)the Attributable Indebtedness of such Person with respect to such Person’s obligations in respect of Capital Leases and Synthetic Leases (regardless of whether accounted for as indebtedness under GAAP);

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(d)all indebtedness of any other Person secured by a Lien on any asset owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(e)all obligations, contingent or otherwise, of any such Person relative to the face amount of letters of credit, whether or not drawn, including, without limitation, any Reimbursement Obligation, and banker’s acceptances issued for the account of any such Person; and

(f)all Guaranty Obligations of any such Person with respect to outstanding Indebtedness of the types specified in clauses (a) through (e) above.

For all purposes hereof, the Total Funded Indebtedness of any Person shall include the indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.

“Transferred Assets” has the meaning assigned thereto in the definition of “Accounts Securitization”.

“UCC” means the Uniform Commercial Code as in effect in the State of North Carolina, as amended or modified from time to time.

“Uniform Customs” means the Uniform Customs and Practice for Documentary Credits (1993 Revision), effective January, 1994 International Chamber of Commerce Publication No. 500.

“United States” means the United States of America.

“US Borrower” has the meaning assigned thereto in the introductory paragraph hereto.

“US Borrower Guaranteed Obligations” shall have the meaning set forth in Section 12.1.

“US Borrower Guaranty” means the unconditional guaranty of the payment of the Obligations of the Canadian Borrower by the US Borrower under Article XII hereof.

“Wachovia” means Wachovia Bank, National Association, a national banking association, and its successors.

“Wachovia Canada” means Wachovia Capital Finance Corporation (Canada) and its successors.

“Wholly-Owned” means, with respect to a Subsidiary, that all of the shares of Capital Stock of such Subsidiary are, directly or indirectly, owned or controlled by the US Borrower and/or one or more of its Wholly-Owned Subsidiaries (except for directors’ qualifying shares or other shares required by Applicable Law to be owned by a Person other than the US Borrower).

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SECTION 1.2Other Definitions and Provisions

With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:  (a) the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined, (b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms, (c) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (d) the word “will” shall be construed to have the same meaning and effect as the word “shall”, (e) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (f) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (g) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (h) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (i) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, (j) the term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form, (k) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including”, and (l) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

SECTION 1.3Accounting Terms

All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the audited financial statements required by Section 8.1(b), except as otherwise specifically prescribed herein.

SECTION 1.4UCC Terms

Terms defined in the UCC in effect on the Closing Date and not otherwise defined herein shall, unless the context otherwise indicates, have the meanings provided by those definitions.  Subject to the foregoing, the term “UCC” refers, as of any date of determination, to the UCC then in effect.

SECTION 1.5Rounding

.  Any financial ratios required to be maintained by the Borrowers pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

SECTION 1.6References to Agreement and Laws

Unless otherwise expressly provided herein, (a) references to formation documents, governing documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Applicable Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Applicable Law.

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SECTION 1.7Times of Day

Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

SECTION 1.8Letter of Credit Amounts

Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit or the Letter of Credit Application therefor, whether or not such maximum face amount is in effect at such time.

ARTICLE II                                

REVOLVING CREDIT FACILITY

SECTION 2.1Revolving Credit Loans

Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties set forth herein, each Revolving Credit Lender severally agrees to make Revolving Credit Loans to the US Borrower in Dollars from time to time from the Closing Date through, but not including, the Revolving Credit Maturity Date as requested by the US Borrower in accordance with the terms of Section 2.4; provided that, based upon the Dollar Amount of all outstanding Loans and L/C Obligations, (a) the aggregate principal amount of all outstanding Revolving Credit Loans (after giving effect to any amount requested) shall not exceed the Revolving Credit Commitment less the sum of all outstanding Canadian Dollar Loans, Swingline Loans and L/C Obligations and (b) the aggregate principal amount of all outstanding Revolving Credit Loans from any Revolving Credit Lender to the US Borrower shall not at any time exceed such Revolving Credit Lender’s Revolving Credit Commitment less such Revolving Credit Lender’s Revolving Credit Commitment Percentage of all outstanding Canadian Dollar Loans, Swingline Loans and L/C Obligations.  Each Revolving Credit Loan by a Revolving Credit Lender shall be in a principal amount equal to such Revolving Credit Lender’s Revolving Credit Commitment Percentage of the aggregate principal amount of Revolving Credit Loans requested on such occasion.  Subject to the terms and conditions hereof, the US Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder until the Revolving Credit Maturity Date.

SECTION 2.2Canadian Dollar Loans

(a)Availability.  Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties set forth herein, the Canadian Dollar Lender agrees to make Canadian Dollar Loans to the Canadian Borrower in Canadian Dollars from time to time from the Closing Date through, but not including, the Revolving Credit Maturity Date as requested by the US Borrower, on behalf of the Canadian Borrower, in accordance with the terms of Section 2.4; provided that, based upon the Dollar Amount of all outstanding Loans and L/C Obligations, the aggregate principal amount of all outstanding Canadian Dollar Loans (after giving effect to any amount requested) shall not exceed the lesser of (i) the Revolving Credit Commitment less the sum of all outstanding Revolving Credit Loans, Swingline Loans and L/C Obligations and (ii) the Canadian Dollar Commitment.  Subject to the terms and conditions hereof, the Canadian Borrower may borrow, repay and reborrow Canadian Dollar Loans hereunder until the Revolving Credit Maturity Date.

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(b)Refunding of Canadian Dollar Loans.

(i)Upon the occurrence and during the continuance of an Event of Default, each Canadian Dollar Loan may, at the discretion of the Canadian Dollar Lender, be converted immediately to a Base Rate Loan funded in Dollars by the Revolving Credit Lenders in an amount equal to the Dollar Amount of such Canadian Dollar Loan; provided that the Borrowers shall pay to the Canadian Dollar Lender any and all costs, fees and other expenses incurred by the Canadian Dollar Lender in effecting such conversion.  Such Base Rate Loan shall thereafter be reflected as a Revolving Credit Loan of the Revolving Credit Lenders to the US Borrower on the books and records of the Administrative Agent and the US Borrower shall lend the proceeds of such Base Rate Loan to the Canadian Borrower to repay the applicable Canadian Dollar Loans.  Each Revolving Credit Lender shall fund its respective Revolving Credit Commitment Percentage of such Revolving Credit Loan as required to repay Canadian Dollar Loans outstanding to the Canadian Dollar Lender upon such demand by the Canadian Dollar Lender in no event later than 1:00 p.m. on the next succeeding Business Day after such demand is made.  No Revolving Credit Lender’s obligation to fund its respective Revolving Credit Commitment Percentage of any Revolving Credit Loan required to repay such Canadian Dollar Loan shall be affected by any other Revolving Credit Lender’s failure to fund its Revolving Credit Commitment Percentage of such Revolving Credit Loan, nor shall any Revolving Credit Lender’s Revolving Credit Commitment Percentage be increased as a result of any such failure of any other Revolving Credit Lender to fund its Revolving Credit Commitment Percentage of such Revolving Credit Loan.

(ii)The Canadian Borrower shall pay to the Canadian Dollar Lender on demand the amount of such Canadian Dollar Loans to the extent that the Revolving Credit Lenders fail to refund in full the outstanding Canadian Dollar Loans requested or required to be refunded.  In addition, the Canadian Borrower hereby authorizes the Administrative Agent to charge any account maintained by the Canadian Borrower with the Canadian Dollar Lender or any Affiliate thereof(up to the amount available therein) in order to immediately pay the Canadian Dollar Lender the amount of such Canadian Dollar Loans to the extent amounts received from the Revolving Credit Lenders are not sufficient to repay in full the outstanding Canadian Dollar Loans requested or required to be refunded.  If any portion of any such amount paid to the Canadian Dollar Lender shall be recovered by or on behalf of the Canadian Borrower or US Borrower from the Canadian Dollar Lender in bankruptcy or otherwise, the loss of the amount so recovered shall be ratably shared among all the Revolving Credit Lenders in accordance with their respective Revolving Credit Commitment Percentages.

(iii)Each Revolving Credit Lender acknowledges and agrees that its obligation to refund Canadian Dollar Loans in accordance with the terms of this Section is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, non-satisfaction of the conditions set forth in Article VI.  Further, each Revolving Credit Lender acknowledges and agrees that if prior to the refunding of any outstanding Canadian Dollar Loans pursuant to this Section, a Bankruptcy Event of Default shall have occurred, each Revolving Credit Lender will, on the date the applicable Revolving Credit Loan would have been made to refund such Canadian Dollar Loans, purchase an undivided participating interest in such Canadian Dollar Loans in an amount equal to its Revolving Credit Commitment Percentage of the aggregate amount of such Canadian Dollar Loans.  Each Revolving Credit Lender will immediately transfer to the Administrative Agent, for the account of the Canadian Dollar Lender, in immediately available funds in Canadian Dollars, the amount of its participation.  Whenever, at any time after the Canadian Dollar Lender has received from any Revolving Credit Lender such Revolving Credit Lender’s participating interest in the refunded Canadian Dollar Loans, the Canadian Dollar Lender receives any payment on account thereof, the Canadian Dollar Lender will distribute to such Revolving Credit Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s participating interest was outstanding and funded).

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(iv)In the event that any Revolving Credit Lender fails to make payment to the Canadian Dollar Lender of any amount due under this Section, the Administrative Agent, on behalf of the Canadian Dollar Lender, shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Revolving Credit Lender hereunder until the Canadian Dollar Lender receives such payment from such Lender or such obligation is otherwise fully satisfied.  In addition to the foregoing, if for any reason any Revolving Credit Lender fails to make payment to the Canadian Dollar Lender of any amount due under this Section, such Revolving Credit Lender shall be deemed, at the option of the Administrative Agent, to have unconditionally and irrevocably purchased from the Canadian Dollar Lender, without recourse or warranty, an undivided interest and participation in the applicable Canadian Dollar Loan, and such interest and participation may be recovered from such Revolving Credit Lender together with interest thereon at the Federal Funds Rate for each day during the period commencing on the date of demand and ending on the date such amount is received.

SECTION 2.3Swingline Loans

(a)Availability.  Subject to the terms and conditions of this Agreement, the Swingline Lender agrees to make Swingline Loans to the US Borrower from time to time from the Closing Date through, but not including, the Swingline Termination Date; provided, that (i) all Swingline Loans shall be denominated in Dollars and (ii) based upon the Dollar Amount of all outstanding Loans and L/C Obligations, the aggregate principal amount of all outstanding Swingline Loans (after giving effect to any amount requested), shall not exceed the lesser of (A) the Revolving Credit Commitment less the sum of all outstanding Revolving Credit Loans, Canadian Dollar Loans and L/C Obligations and (B) the Swingline Commitment.  Subject to the terms and conditions hereof, the US Borrower may borrow, repay and reborrow Swingline Loans hereunder until the Swingline Termination Date.

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(b)Refunding.

(i)Swingline Loans shall be refunded by the Revolving Credit Lenders on demand by the Swingline Lender.  Such refundings shall be made by the Revolving Credit Lenders in accordance with their respective Revolving Credit Commitment Percentages and shall thereafter be reflected as Revolving Credit Loans of the Revolving Credit Lenders on the books and records of the Administrative Agent.  Each Revolving Credit Lender shall fund its respective Revolving Credit Commitment Percentage of Revolving Credit Loans as required to repay Swingline Loans outstanding to the Swingline Lender upon demand by the Swingline Lender but in no event later than 1:00 p.m. on the next succeeding Business Day after such demand is made.  No Revolving Credit Lender’s obligation to fund its respective Revolving Credit Commitment Percentage of a Swingline Loan shall be affected by any other Revolving Credit Lender’s failure to fund its Revolving Credit Commitment Percentage of a Swingline Loan, nor shall any Revolving Credit Lender’s Revolving Credit Commitment Percentage be increased as a result of any such failure of any other Revolving Credit Lender to fund its Revolving Credit Commitment Percentage of a Swingline Loan.

(ii)The US Borrower shall pay to the Swingline Lender on demand the amount of such Swingline Loans to the extent amounts received from the Revolving Credit Lenders are not sufficient to repay in full the outstanding Swingline Loans requested or required to be refunded.  In addition, the US Borrower hereby authorizes the Administrative Agent to charge any account maintained by the US Borrower with the Swingline Lender or any Affiliate thereof (up to the amount available therein) in order to immediately pay the Swingline Lender the amount of such Swingline Loans to the extent amounts received from the Revolving Credit Lenders are not sufficient to repay in full the outstanding Swingline Loans requested or required to be refunded.  If any portion of any such amount paid to the Swingline Lender shall be recovered by or on behalf of the US Borrower from the Swingline Lender in bankruptcy or otherwise, the loss of the amount so recovered shall be ratably shared among all the Revolving Credit Lenders in accordance with their respective Revolving Credit Commitment Percentages.

(iii)Each Revolving Credit Lender acknowledges and agrees that its obligation to refund Swingline Loans in accordance with the terms of this Section is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, non-satisfaction of the conditions set forth in Article VI.  Further, each Revolving Credit Lender acknowledges and agrees that if prior to the refunding of any outstanding Swingline Loans pursuant to this Section, a Bankruptcy Event of Default shall have occurred, each Revolving Credit Lender will, on the date the applicable Revolving Credit Loan would have been made, purchase an undivided participating interest in the Swingline Loan to be refunded in an amount equal to its Revolving Credit Commitment Percentage of the aggregate amount of such Swingline Loan.  Each Revolving Credit Lender will immediately transfer to the Swingline Lender, in immediately available funds, the amount of its participation and upon receipt thereof the Swingline Lender will deliver to such Revolving Credit Lender a certificate evidencing such participation dated the date of receipt of such funds and for such amount.  Whenever, at any time after the Swingline Lender has received from any Revolving Credit Lender such Revolving Credit Lender’s participating interest in a Swingline Loan, the Swingline Lender receives any payment on account thereof, the Swingline Lender will distribute to such Revolving Credit Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Revolving Credit Lender’s participating interest was outstanding and funded).

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(iv)In the event that any Revolving Credit Lender fails to make payment to the Swingline Lender of any amount due under this Section, the Administrative Agent, on behalf of the Swingline Lender, shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Revolving Credit Lender hereunder until the Swingline Lender receives such payment from such Revolving Credit Lender or such obligation is otherwise fully satisfied.  In addition to the foregoing, if for any reason any Revolving Credit Lender fails to make payment to the Swingline Lender of any amount due under this Section, such Revolving Credit Lender shall be deemed, at the option of the Administrative Agent, to have unconditionally and irrevocably purchased from the Swingline Lender, without recourse or warranty, an undivided interest and participation in the applicable Swingline Loan, and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Rate for each day during the period commencing on the date of demand and ending on the date such amount is received.

SECTION 2.4Procedure for Advances of Revolving Credit Loans, Canadian Dollar Loans and Swingline Loans

(a)Requests for Borrowing.  The US Borrower, on behalf of itself and the Canadian Borrower, shall give the Administrative Agent irrevocable prior written notice substantially in the form attached hereto as Exhibit B (a “Notice of Borrowing”) not later than (i) 12:00 noon on the same Business Day as each Base Rate Loan and each Swingline Loan, (ii) 12:00 noon at least three (3) Business Days before each LIBOR Rate Loan, and (iii) 12:00 noon at least one (1) Business Day before each Canadian Base Rate Loan, of its intention to borrow, specifying:

(A)if the applicable Borrower is the US Borrower or the Canadian Borrower;

(B)the date of such borrowing, which shall be a Business Day;

(C)whether such Loan is to be a Revolving Credit Loan, Swingline Loan or Canadian Dollar Loan;

(D)if such Loan is a Revolving Credit Loan, whether such Revolving Credit Loan shall be a LIBOR Rate Loan or a Base Rate Loan;

(E)if such Loan is a LIBOR Rate Loan, the duration of the Interest Period applicable thereto;

(F)the amount of such borrowing, which shall be, (1) with respect to Base Rate Loans (other than Swingline Loans) in an aggregate principal amount of $500,000 or a whole multiple of $100,000 in excess thereof, (2) with respect to LIBOR Rate Loans in an aggregate principal amount of $1,000,000 or a whole multiple of $1,000,000 in excess thereof, (3) with respect to Swingline Loans in an aggregate principal amount of $100,000 or a whole multiple of $100,000 in excess thereof and (4) with respect to Canadian Base Rate Loans in an aggregate principal amount of C$500,000 or a whole multiple of C$100,000 in excess thereof.

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A Notice of Borrowing received after the times set forth above shall be deemed received on the next Business Day.  The Administrative Agent shall promptly notify the Revolving Credit Lenders of each Notice of Borrowing.

(b)Disbursement of Revolving Credit Loans, Canadian Dollar Loans and Swingline Loans.

(i)Not later than 1:00 p.m. on the proposed borrowing date for any Revolving Credit Loan, each Revolving Credit Lender will make available to the Administrative Agent, for the account of the US Borrower, at the office of the Administrative Agent in Dollars in funds immediately available to the Administrative Agent, such Lender’s Revolving Credit Commitment Percentage of the Revolving Credit Loans to be made on such borrowing date.

(ii)Not later than 12:00 noon on the proposed borrowing date for any Canadian Base Rate Loan, the Canadian Dollar Lender will make available to the Administrative Agent, for the account of the Canadian Borrower, at the office of the Canadian Dollar Lender in Canadian Dollars in funds immediately available to the Administrative Agent, the Canadian Base Rate Loan to be made on such borrowing date.

(iii)Not later than 1:00 p.m. on the proposed borrowing date for any Swingline Loan, as applicable, the Swingline Lender will make available to the Administrative Agent, for the account of the US Borrower, at the office of the Administrative Agent in Dollars in funds immediately available to the Administrative Agent, the Swingline Loans to be made on such borrowing date.

(iv)The Borrowers hereby irrevocably authorize the Administrative Agent to disburse the proceeds of each borrowing requested pursuant to this Section in immediately available funds by crediting or wiring such proceeds to the deposit account of the applicable Borrower identified in the most recent notice substantially in the form of Exhibit C hereto (a “Notice of Account Designation”) delivered by the US Borrower, on behalf of itself and the Canadian Borrower, to the Administrative Agent or as may be otherwise agreed upon by the US Borrower, on behalf of itself and the Canadian Borrower, and the Administrative Agent from time to time.  Subject to Section 5.7 hereof, the Administrative Agent shall not be obligated to disburse any amount with respect to any Revolving Credit Loan, Canadian Dollar Loan or Swingline Loan requested pursuant to this Section to the extent that such amount has not been made available by the applicable Lenders to the Administrative Agent.

(v)Revolving Credit Loans to be made for the purpose of (A) refunding Swingline Loans shall be made by the Revolving Credit Lenders as provided in Section 2.3(b) and (B) refunding Canadian Dollar Loans shall be made by the Revolving Credit Lenders as provided in Section 2.2(b).

SECTION 2.5Repayment of Loans

(a)Repayment on Revolving Credit Maturity Date or Swingline Termination Date.  The Borrowers agree to repay the outstanding principal amount of (i) all Revolving Credit Loans in full in Dollars on the Revolving Credit Maturity Date, (ii) all Canadian Dollar Loans in full in Canadian Dollars on the Revolving Credit Maturity Date, and (iii) all Swingline Loans in accordance with Section 2.3(b) or, if earlier, on the Swingline Termination Date, together, in each case, with all accrued but unpaid interest thereon.

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(b)Mandatory Repayment of Revolving Credit Loans.

(i)Aggregate Commitment.  If at any time (as determined by the Administrative Agent under Section 2.5(b)(v)), based upon the Dollar Amount of all outstanding Revolving Credit Loans, Canadian Dollar Loans, Swingline Loans and L/C Obligations, (A) solely because of currency fluctuation, the outstanding principal amount of all Revolving Credit Loans plus the sum of all outstanding Canadian Dollar Loans, Swingline Loans and L/C Obligations exceeds one hundred and five percent (105%) of the Revolving Credit Commitment or (B) for any other reason, the outstanding principal amount of all Revolving Credit Loans plus the sum of all outstanding Canadian Dollar Loans, Swingline Loans and L/C Obligations exceeds the Revolving Credit Commitment, then, in each such case, the Borrowers shall (1) first, if (and to the extent) necessary to eliminate such excess, immediately repay outstanding Swingline Loans (and/or reduce any pending request for a borrowing of such Loans submitted in respect of such Loans on such day) by the Dollar Amount of such excess, (2) second, if (and to the extent) necessary to eliminate such excess, immediately repay outstanding Revolving Credit Loans which are Base Rate Loans (and/or reduce any pending requests for a borrowing or continuation or conversion of such Loans submitted in respect of such Loans on such day) by the Dollar Amount of such excess, (3) third, if (and to the extent) necessary to eliminate such excess, immediately repay outstanding Revolving Credit Loans which are LIBOR Rate Loans (and/or reduce any pending requests for a borrowing or continuation or conversion of such Loans submitted in respect of such Loans on such day) by the Dollar Amount of such excess, (4) fourth, if (and to the extent) necessary to eliminate such excess, immediately repay outstanding Canadian Dollar Loans (and/or reduce any pending requests for a borrowing or continuation or conversion of such Loans submitted in respect of such Loans on such day) by the Dollar Amount of such excess, and (4) fifth, with respect to any Letters of Credit then outstanding, make a payment of cash collateral into a cash collateral account opened by the Administrative Agent for the benefit of the Revolving Credit Lenders in an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit (such cash collateral to be applied in accordance with Section 13.2(b)).

(ii)Canadian Dollar Commitment.  If at any time (as determined by the Administrative Agent under Section 2.5(b)(v)), based upon the Dollar Amount of all outstanding Revolving Credit Loans, Canadian Dollar Loans, Swingline Loans and L/C Obligations, (A) solely because of currency fluctuation, the outstanding principal amount of all Canadian Dollar Loans exceeds one hundred five percent (105%) of the Canadian Dollar Commitment or (B) for any other reason, the outstanding principal amount of all Canadian Dollar Loans exceeds the Canadian Dollar Commitment, then, in each such case, such excess shall be immediately repaid, in Canadian Dollars, by the Canadian Borrower to the Administrative Agent for the account of the Canadian Dollar Lender.

(iii)Swingline Commitment.  If at any time (as determined by the Administrative Agent under Section 2.5(b)(v)), based upon the Dollar Amount of all outstanding Revolving Credit Loans, Canadian Dollar Loans, Swingline Loans and L/C Obligations, and for any reason, the outstanding principal amount of all Swingline Loans exceeds the Swingline Commitment, then, in each such case, such excess shall be immediately repaid, in Dollars, by the US Borrower to the Administrative Agent for the account of the Swingline Lender.

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(iv)Excess L/C Obligations.  If at any time (as determined by the Administrative Agent under Section 2.5(b)(v)), based upon the Dollar Amount of all outstanding Revolving Credit Loans, Canadian Dollar Loans, Swingline Loans and L/C Obligations, and for any reason, the outstanding amount of all L/C Obligations exceeds the L/C Commitment, then, in each such case, the US Borrower shall make a payment of cash collateral into a cash collateral account opened by the Administrative Agent, for the benefit of itself and the Revolving Credit Lenders, in an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit (such cash collateral to be applied in accordance with Section 13.2(b)).

(v)Compliance and Payments.  The Borrowers’ compliance with this Section 2.5(b) shall be tested from time to time by the Administrative Agent at its sole discretion, but in any event shall be tested on the date on which (A) the US Borrower requests that the applicable Revolving Credit Lenders make a Revolving Credit Loan, (B) the US Borrower, on behalf of the Canadian Borrower, requests that the Canadian Dollar Lender make a Canadian Dollar Loan, (C) the US Borrower requests that the Swingline Lender make a Swingline Loan or (D) the US Borrower requests that the Issuing Lender issue a Letter of Credit.  Each such repayment pursuant to this Section 2.5(b) shall be accompanied by any amount required to be paid pursuant to Section 5.9.

(c)Optional Repayments.  The Borrowers may at any time and from time to time repay the Revolving Credit Loans, Canadian Dollar Loans or Swingline Loans, in whole or in part, (i) upon at least three (3) Business Days’ irrevocable notice to the Administrative Agent with respect to LIBOR Rate Loans and (ii) upon irrevocable notice to the Administrative Agent before 12:00 noon on the same Business Day with respect to Base Rate Loans, Swingline Loans and Canadian Dollar Loans, substantially in the form attached hereto as Exhibit D (a “Notice of Repayment”), specifying (A) the date of repayment, (B) the amount of repayment, (C) whether the repayment is of Revolving Credit Loans, Canadian Dollar Loans, Swingline Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each and (D) with respect to Revolving Credit Loans, whether the repayment is of LIBOR Rate Loans, Base Rate Loans, or a combination thereof, and, if of a combination thereof, the amount allocable to each.  Upon receipt of such notice, the Administrative Agent shall promptly notify each Revolving Credit Lender.  If any such notice is given, the amount specified in such notice shall be due and payable on the date set forth in such notice.  Partial repayments shall be in an aggregate amount of (i) $500,000 or a whole multiple of $100,000 in excess thereof with respect to Base Rate Loans (other than Swingline Loans), (ii) $1,000,000 or a whole multiple of $1,000,000 in excess thereof with respect to LIBOR Rate Loans, (iii)  C$500,000 or a whole multiple of C$100,000 in excess thereof with respect to Canadian Dollar Loans and (iv) $100,000 or a whole multiple of $100,000 in excess thereof with respect to Swingline Loans.  A Notice of Repayment received after applicable time set forth above shall be deemed received on the next Business Day.  Each such repayment shall be accompanied by any amount required to be paid pursuant to Section 5.9.

(d)Excess Proceeds.  In the event proceeds remain after the prepayments of the Term Loan Facility pursuant to Section 4.3, the amount of such excess proceeds shall, at the option of the US Borrower, either (i) be retained by the US Borrower or its Subsidiaries or (ii) be used on the date of the required prepayment under Section 4.3 to prepay the outstanding principal amount of the Revolving Credit Loans, without a corresponding reduction of the Revolving Credit Commitment.

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(e)Limitation on Repayment of LIBOR Rate Loans.  The Borrowers may not repay any LIBOR Rate Loan on any day other than on the last day of the Interest Period applicable thereto unless such repayment is accompanied by any amount required to be paid pursuant to Section 5.9 hereof.

(f)Payment of Interest.  Each repayment pursuant to this Section shall be accompanied by accrued interest on the amount repaid.

(g)Hedging Agreements.  No repayment pursuant to this Section shall affect any Borrower’s obligations under any Hedging Agreement.

SECTION 2.6Permanent Reduction of the Revolving Credit Commitment

(a)Voluntary Reduction.  The Borrowers shall have the right at any time and from time to time, upon at least five (5) Business Days prior written notice to the Administrative Agent, to permanently reduce, without premium or penalty, (i) the entire Revolving Credit Commitment at any time or (ii) portions of the Revolving Credit Commitment, from time to time, in an aggregate principal amount not less than $5,000,000 or any whole multiple of $1,000,000 in excess thereof.  Any reduction of the Revolving Credit Commitment shall be applied to the Revolving Credit Commitment of each Revolving Credit Lender according to its Revolving Credit Commitment Percentage.  All fees accrued until the effective date of any termination of the Revolving Credit Commitment shall be paid on the effective date of such termination.

(b)Corresponding Payment.  Each permanent reduction permitted pursuant to this Section shall be accompanied by a payment of principal sufficient to reduce (i) the aggregate Dollar Amount of all outstanding Revolving Credit Loans, Canadian Dollar Loans, Swingline Loans and L/C Obligations, as applicable, after such reduction to the Revolving Credit Commitment as so reduced and (ii) to the extent that the Canadian Dollar Commitment is reduced, the aggregate Dollar Amount of all outstanding Canadian Dollar Loans to the Canadian Dollar Commitment as so reduced.  If the Revolving Credit Commitment as so reduced is less than the aggregate amount of all outstanding Letters of Credit, the Borrowers shall be required to deposit cash collateral in a cash collateral account opened by the Administrative Agent in an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit.  Such cash collateral shall be applied in accordance with Section 13.2(b).  Any reduction of the Revolving Credit Commitment to zero shall be accompanied by payment of all outstanding Revolving Credit Loans, Swingline Loans and Canadian Dollar Loans (and furnishing of cash collateral satisfactory to the Administrative Agent for all L/C Obligations) and shall result in the termination of the Revolving Credit Commitment, the Swingline Commitment, the Canadian Dollar Commitment and the Revolving Credit Facility.  Such cash collateral shall be applied in accordance with Section 13.2(b).  If the reduction of the Revolving Credit Commitment requires the repayment of any LIBOR Rate Loan, such repayment shall be accompanied by any amount required to be paid pursuant to Section 5.9 hereof.

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SECTION 2.7Termination of Revolving Credit Facility

The Revolving Credit Facility shall terminate on the Revolving Credit Maturity Date.

SECTION 2.8Nature of Obligations

The obligations of the US Borrower hereunder and under the other Loan Documents shall be joint and several with the Obligations of the Canadian Borrower.  The obligations of the Canadian Borrower hereunder and under the other Loan Documents shall not be joint and several.

SECTION 2.9Optional Increase of Revolving Credit Commitment

(a)Subject to the conditions set forth below, at any time prior to the Revolving Credit Maturity Date, the US Borrower shall have the right from time to time to increase the Revolving Credit Commitment in an additional aggregate principal amount of up to $75,000,000 less the aggregate principal amount of all prior increases to the Revolving Credit Commitment made pursuant to this Section.  Pursuant to an Increase Notification, the US Borrower may request that additional Revolving Credit Loans be made on the Increase Effective Date.

(b)Increases in the Revolving Credit Commitment shall be obtained from existing Revolving Credit Lenders or from other banks, financial institutions or investment funds that qualify as Eligible Assignees, in each case in accordance with this Section 2.9.  Participation in any increase in the Revolving Credit Commitment shall be offered first to each of the existing Revolving Credit Lenders (who shall promptly, but in no event later than ten (10) days after such offer, make a determination as to whether to participate in such increase); provided that no such Revolving Credit Lender shall have any obligation to provide any portion of such increase.  If the amount of the increase requested by the US Borrower shall exceed the commitments which the existing Revolving Credit Lenders are willing to provide with respect to such increase, then the US Borrower may invite other banks, financial institutions and investment funds which meet the requirements of an Eligible Assignee to join this Agreement as Revolving Credit Lenders for the portion of such increase not committed to by existing Revolving Credit Lenders (each such other bank, financial institution or investment fund, a “New Revolving Credit Lender” and, collectively with the existing Revolving Credit Lenders providing increased Revolving Credit Commitments, the “Increasing Revolving Credit Lenders”). The Administrative Agent is authorized to enter into, on behalf of the Lenders, any amendment to this Agreement or any other Loan Document as may be necessary to incorporate the terms of any increase in the Revolving Credit Commitment herein or therein; provided that such amendment shall not modify this Agreement or any other Loan Document in any manner materially adverse to any Lender and shall otherwise be in accordance with Section 15.2 hereof.

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(c)The following terms and conditions shall apply to each increase in the Revolving Credit Commitment: (i) such increase in the Revolving Credit Commitment pursuant to this Section 2.9 (and any Extensions of Credit made thereunder) shall constitute Obligations of the US Borrower and shall be guaranteed with the other Extensions of Credit on a pari passu basis; (ii) any New Revolving Credit Lender providing such increase shall be entitled to the same voting rights as the existing Revolving Credit Lenders under the Revolving Credit Facility and any Extensions of Credit made in connection with such increase shall receive proceeds of prepayments on the same basis as the other Revolving Credit Loans made hereunder; (iii) the US Borrower shall, upon the request of any Increasing Revolving Credit Lender, execute such Revolving Credit Notes as are necessary to reflect such Increasing Revolving Credit Lender’s Revolving Credit Commitment (as increased); (iv) the Administrative Agent and the Revolving Credit Lenders shall have received from the US Borrower updated financial projections and an Officer’s Compliance Certificate, in each case in form and substance reasonably satisfactory to the Administrative Agent, demonstrating that, based on information contained in the most recent quarterly or annual financial statements provided to the Administrative Agent and the Lenders pursuant to Section 8.1(a) or (b) as adjusted to give effect to any such increase in the Revolving Credit Commitment and any Extensions of Credit made or to be made in connection therewith, the US Borrower and its Subsidiaries will be in pro forma compliance with the financial covenants set forth in Article X; (v) no Default or Event of Default shall have occurred and be continuing as of the applicable Increase Effective Date or after giving effect to such increase in the Revolving Credit Commitment pursuant to this Section 2.9 or any Extensions of Credit made in connection therewith; (vi) the representations and warranties made by the Borrowers and contained in Article VII shall be true and correct on and as of the Increase Effective Date with the same effect as if made on and as of such date (other than those representations and warranties that by their terms speak as of a particular date, which representations and warranties shall be true and correct as of such particular date); (vii) the amount of such increase in the Revolving Credit Commitment shall not be less than a minimum principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof, or if less, the maximum amount permitted pursuant to clause (a) above; (viii) the Administrative Agent shall have received a resolution duly adopted by the board of directors (or equivalent governing body) of each Credit Party authorizing such increase in the Revolving Credit Commitments; (ix) the US Borrower and each Increasing Revolving Credit Lender shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, a written agreement acknowledged by the Administrative Agent and each Subsidiary Guarantor, in form and substance satisfactory to the Administrative Agent (a “Lender Addition and Acknowledgement Agreement”); (x) the Administrative Agent shall have received any documents or information, including any joinder agreements, in connection with such increase in the Revolving Credit Commitment as it may request in its reasonable discretion; and (xi) the outstanding Revolving Credit Loans and Revolving Credit Commitment Percentages of L/C Obligations and Swingline Loans will be reallocated by the Administrative Agent on the applicable Increase Effective Date among the Revolving Credit Lenders in accordance with their revised Revolving Credit Commitment Percentages (and the Revolving Credit Lenders agree to make all payments and adjustments necessary to effect such reallocation and the US Borrower shall pay any and all costs required pursuant to Section 5.9 in connection with such reallocation as if such reallocation were a repayment).

(d)Upon the execution, delivery, acceptance and recording of the applicable Lender Addition and Acknowledgment Agreement, from and after the applicable Increase Effective Date, each Increasing Revolving Credit Lender shall have a Revolving Credit Commitment as set forth in the Register and all the rights and obligations of a Lender with a Revolving Credit Commitment hereunder.

(e)The Administrative Agent shall maintain a copy of each Lender Addition and Acknowledgment Agreement delivered to it in accordance with Section 15.11(c).

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(f)Within five (5) Business Days after receipt of notice, the US Borrower shall execute and deliver to the Administrative Agent, in exchange for any surrendered Revolving Credit Note or Revolving Credit Notes of any existing Revolving Credit Lender or with respect to any New Revolving Credit Lender, a new Revolving Credit Note or Revolving Credit Notes to the order of the applicable Revolving Credit Lenders in amounts equal to the Revolving Credit Commitment of such Revolving Credit Lenders as set forth in the Register.  Such new Revolving Credit Note or Revolving Credit Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such Revolving Credit Commitments, shall be dated as of the Increase Effective Date and shall otherwise be in substantially the form of the existing Revolving Credit Notes.  Each surrendered Revolving Credit Note and/or Revolving Credit Notes shall be canceled and returned to the US Borrower.

(g)All Revolving Credit Loans made on account of any increase in the Revolving Credit Commitment pursuant to this Section 2.9 shall bear interest at the rate applicable to the Revolving Credit Loans immediately prior to giving effect to such increase in the Revolving Credit Commitment pursuant to this Section 2.9.

ARTICLE III                                

LETTER OF CREDIT FACILITY

SECTION 3.1L/C Commitment

Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue Letters of Credit for the account of the US Borrower on any Business Day from the Closing Date to but not including the fifth (5th) Business Day prior to the Revolving Credit Maturity Date in such form as may be approved from time to time by the Issuing Lender; provided, that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, based upon the Dollar Amount of all outstanding Loans and L/C Obligations, the aggregate amount of all outstanding L/C Obligations would exceed the lesser of (a) the L/C Commitment or (b) the Revolving Credit Commitment less the aggregate principal amount of all outstanding Loans.  Each Letter of Credit (other than the Existing Letters of Credit) shall (i) be denominated in Dollars in a minimum amount of $30,000 or a lesser amount acceptable to the Issuing Lender, (ii) be a standby letter of credit or a trade letter of credit issued to support obligations of the US Borrower or any of its Subsidiaries, contingent or otherwise, incurred in the ordinary course of business, (iii) expire on a date no later than the earlier of (A) five (5) Business Days prior to the Revolving Credit Maturity Date and (B) one year after its date of issuance, and (iv) be subject to the Uniform Customs and/or ISP98, as set forth in the Letter of Credit Application or as determined by the Issuing Lender and, to the extent not inconsistent therewith, the laws of the State of North Carolina.  As of the Closing Date, each of the Existing Letters of Credit shall constitute, for all purposes of this Agreement and the other Loan Documents, a Letter of Credit issued and outstanding hereunder.  The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any Applicable Law.  References herein to “issue” and derivations thereof with respect to Letters of Credit shall also include extensions or modifications of any existing Letters of Credit, unless the context otherwise requires.

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SECTION 3.2Procedure for Issuance of Letters of Credit

The US Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender at the Administrative Agent’s Office a Letter of Credit Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request.  Upon receipt of any Letter of Credit Application, the Issuing Lender shall process such Letter of Credit Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall, subject to Section 3.1 and Article VI, promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three (3) Business Days after its receipt of the Letter of Credit Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the US Borrower.  The Issuing Lender shall promptly furnish to the US Borrower a copy of such Letter of Credit and promptly notify each Revolving Credit Lender of the issuance and upon request by any Revolving Credit Lender, furnish to such Revolving Credit Lender a copy of such Letter of Credit and the amount of such Revolving Credit Lender’s participation therein.

SECTION 3.3Commissions and Other Charges

(a)Letter of Credit Commissions.  The US Borrower shall pay to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit commission with respect to each Letter of Credit in an amount equal to the face amount of such Letter of Credit multiplied by the Applicable Margin with respect to Revolving Credit Loans that are LIBOR Rate Loans (determined on a per annum basis).  Such commission shall be payable quarterly in arrears on the last Business Day of each calendar quarter, on the Revolving Credit Maturity Date and thereafter on demand of the Administrative Agent.  The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the L/C Participants all commissions received pursuant to this Section in accordance with their respective Revolving Credit Commitment Percentages.

(b)Issuance Fee.  In addition to the foregoing commission, the US Borrower shall pay to the Administrative Agent, for the account of the Issuing Lender, an issuance fee with respect to each Letter of Credit in an amount equal to the face amount of such Letter of Credit multiplied by one eighth of one percent (0.125%) per annum.  Such issuance fee shall be payable quarterly in arrears on the last Business Day of each calendar quarter commencing with the first such date to occur after the issuance of such Letter of Credit, on the Revolving Credit Maturity Date and thereafter on demand of the Issuing Lender (through the Administrative Agent).

(c)Other Costs.  In addition to the foregoing fees and commissions, the US Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit.

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SECTION 3.4L/C Participations

(a)The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant’s own account and risk an undivided interest equal to such L/C Participant’s Revolving Credit Commitment Percentage in the Issuing Lender’s obligations and rights under and in respect of each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder.  Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the US Borrower through a Revolving Credit Loan or otherwise in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender’s address for notices specified herein an amount equal to such L/C Participant’s Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed.

(b)Upon becoming aware of any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit, the Issuing Lender shall notify each L/C Participant of the amount and due date of such required payment and such L/C Participant shall pay to the Issuing Lender the amount specified on the applicable due date.  If any such amount is paid to the Issuing Lender after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand, in addition to such amount, the product of (i) such amount, times (ii) the daily average Federal Funds Rate as determined by the Administrative Agent during the period from and including the date such payment is due to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360.  A certificate of the Issuing Lender with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error.  With respect to payment to the Issuing Lender of the unreimbursed amounts described in this Section, if the L/C Participants receive notice that any such payment is due (A) prior to 1:00 p.m. on any Business Day, such payment shall be due that Business Day, and (B) after 1:00 p.m. on any Business Day, such payment shall be due on the following Business Day.

(c)Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its Revolving Credit Commitment Percentage of such payment in accordance with this Section, the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the US Borrower or otherwise), or any payment of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it.

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SECTION 3.5Reimbursement Obligation of the US Borrower

In the event of any drawing under any Letter of Credit, the US Borrower agrees to reimburse (either with the proceeds of a Revolving Credit Loan as provided for in this Section or with funds from other sources), in same day funds, the Issuing Lender on each date on which the Issuing Lender notifies the US Borrower of the date and amount of a draft paid under any Letter of Credit for the amount of (a) such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by the Issuing Lender in connection with such payment.  Unless the US Borrower shall immediately notify the Issuing Lender that the US Borrower intends to reimburse the Issuing Lender for such drawing from other sources or funds, the US Borrower shall be deemed to have timely given a Notice of Borrowing to the Administrative Agent requesting that the Revolving Credit Lenders make a Revolving Credit Loan bearing interest at the Base Rate on such date in the amount of (i) such draft so paid and (ii) any amounts referred to in Section 3.3(c) incurred by the Issuing Lender in connection with such payment, and the Revolving Credit Lenders shall make a Revolving Credit Loan bearing interest at the Base Rate in such amount, the proceeds of which shall be applied to reimburse the Issuing Lender for the amount of the related drawing and costs and expenses. Each Revolving Credit Lender acknowledges and agrees that its obligation to fund a Revolving Credit Loan in accordance with this Section to reimburse the Issuing Lender for any draft paid under a Letter of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, non-satisfaction of the conditions set forth in Section 2.4(a) or Article VI.  If the US Borrower has elected to pay the amount of such drawing with funds from other sources and shall fail to reimburse the Issuing Lender as provided above, the unreimbursed amount of such drawing shall bear interest at the rate which would be payable on any outstanding Base Rate Loans which were then overdue from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full.

SECTION 3.6Obligations Absolute

The US Borrower’s obligations under this Article III (including, without limitation, the Reimbursement Obligation) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the US Borrower may have or have had against the Issuing Lender or any beneficiary of a Letter of Credit or any other Person.  The US Borrower also agrees that the Issuing Lender and the L/C Participants shall not be responsible for, and the US Borrower’s Reimbursement Obligation under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the US Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the US Borrower against any beneficiary of such Letter of Credit or any such transferee.  The Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender’s gross negligence or willful misconduct, as determined by a court of competent jurisdiction by final nonappealable judgment.  The US Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct, shall be binding on the US Borrower and shall not result in any liability of the Issuing Lender or any L/C Participant to the US Borrower.  The responsibility of the Issuing Lender to the US Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit.

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SECTION 3.7Effect of Letter of Credit Application

To the extent that any provision of any Letter of Credit Application related to any Letter of Credit is inconsistent with the provisions of this Article III, the provisions of this Article III shall apply.

ARTICLE IV                                

TERM LOAN FACILITY

           SECTION 4.1                                Term Loan

On the Second Amendment Effective Date, the Term Loan was made to the US Borrower in an aggregate principal amount equal to $60,000,000. After giving effect to all prior repayments of the Term Loan prior to the Closing Date, the aggregate amount of the Term Loan on the Closing Date is $57,750,000.

           SECTION 4.2                                Repayment of Term Loan

The US Borrower shall repay the aggregate outstanding principal amount of the Term Loan, in consecutive quarterly installments on the last Business Day of each of March, June, September and December commencing on December 31, 2007 as set forth below, except as the amounts of individual installments may be adjusted pursuant to Section 4.3:

YEAR	PAYMENT DATE	PRINCIPAL INSTALLMENT	REMAINING PRINCIPAL AMOUNT OF TERM LOAN
2007	12/31/2007	$750,000	$57,000,000
2008	3/31/2008	$750,000	$56,250,000
	6/30/2008	$750,000	$55,500,000
	9/30/2008	$750,000	$54,750,000
	12/31/2008	$750,000	$54,000,000
2009	3/31/2009	$1,500,000	$52,500,000
	6/30/2009	$1,500,000	$51,000,000
	9/30/2009	$1,500,000	$49,500,000
	12/31/2009	$1,500,000	$48,000,000
2010	3/31/2010	$12,000,000	$36,000,000
	6/30/2010	$12,000,000	$24,000,000
	9/30/2010	$12,000,000	$12,000,000
	Term Loan Maturity Date	$12,000,000	$0

If not sooner paid, the Term Loan shall be paid in full, together with accrued interest thereon, on the Term Loan Maturity Date.  Amounts repaid pursuant to this Section 4.2 may not be reborrowed.

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           SECTION 4.3                                Prepayments of Term Loan

(a)Optional Prepayments of Term Loans.  The US Borrower shall have the right at any time and from time to time, without premium or penalty, to prepay the Term Loans in whole or in part, upon delivery to the Administrative Agent of a Notice of Repayment not later than 12:00 noon (i) on the same Business Day as such prepayment with respect to Base Rate Loans and (ii) at least three (3) Business Days prior to such prepayment with respect to LIBOR Rate Loans, specifying the date and amount of repayment, whether the repayment is of LIBOR Rate Loans or Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each.  Each optional prepayment pursuant to this Section 4.3 shall be in an aggregate principal amount of at least $5,000,000 or any whole multiple of $1,000,000 in excess thereof and shall be applied to reduce, on a pro rata basis, the outstanding scheduled principal installments of the Term Loans with respect to any such outstanding Term Loans, pro rata on the basis of the original aggregate funded amount thereof, among the Term Loans.  Each repayment shall be accompanied by any amount required to be paid pursuant to Section 5.9.  The Administrative Agent shall promptly notify the Term Loan Lenders of each such Notice of Repayment.

(b)Mandatory Prepayments.

(i)Debt Issuances.  The US Borrower shall make mandatory principal prepayments of the Loans, in the manner set forth in clause (v) below, in an amount equal to 100% of the aggregate Net Cash Proceeds from any Debt Issuance by the US Borrower or any of its Subsidiaries.  Such prepayments shall be made within three (3) Business Days after receipt of such Net Cash Proceeds.

(ii)Equity Issuances.  The US Borrower shall make mandatory principal prepayments of the Loans, in the manner set forth in clause (v) below, in an amount equal to one hundred percent (100%) of the aggregate Net Cash Proceeds from any Equity Issuance by the US Borrower or any of its Subsidiaries (other than the exercise price on stock options issued as part of employee compensation); provided, that so long as no Event of Default has occurred and is continuing, no prepayments shall be required from the Net Cash Proceeds from Equity Issuances the proceeds of which are used to finance a Permitted Acquisition.  Such prepayment shall be made within three (3) Business Days after the date of receipt of such Net Cash Proceeds.

(iii)Asset Dispositions.  The US Borrower shall make mandatory principal prepayments of Loans, in the manner set forth in clause (v) below, in an amount equal to one hundred percent (100%) of the aggregate Net Cash Proceeds from any Asset Disposition by the US Borrower or any of its Subsidiaries.  Such prepayments shall be made within three (3) Business Days after receipt of such Net Cash Proceeds; provided that, so long as no Default or Event of Default has occurred and is continuing, no prepayments shall be required hereunder:

(A)to the extent that the Net Cash Proceeds from Asset Dispositions by the US Borrower or any of its Subsidiaries have been committed to be reinvested in similar replacement assets within one hundred eighty (180) days after receipt thereof and are thereafter actually reinvested in similar replacement assets within two hundred seventy (270) days after receipt of such Net Cash Proceeds; provided further that any portion of such Net Cash Proceeds not reinvested within such two hundred seventy (270) day period shall be prepaid in accordance with this Section; or

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(B)in connection with Asset Dispositions permitted pursuant to Section 11.5.

(iv)Insurance and Condemnation Events. The US Borrower shall make mandatory principal prepayment of the Loans, in the manner set forth in clause (v) below, in an amount equal to one hundred percent (100%) of the aggregate Net Cash Proceeds from any Insurance and Condemnation Event by the US Borrower or any of its Subsidiaries.  Such prepayments shall be made within three (3) Business Days after receipt of such Net Cash Proceeds; provided that, so long as no Default or Event of Default has occurred and is continuing, no prepayments shall be required hereunder:

(A)to the extent that the Net Cash Proceeds from Insurance and Condemnation Events by the US Borrower or any of its Subsidiaries have been committed to be reinvested in similar replacement assets within one hundred eighty (180) days after receipt thereof (it being understood that the amount of any expenditures committed to be reinvested in similar replacement assets during the period commencing on the date of the circumstance giving rise to the applicable Insurance and Condemnation Event and ending on the date of receipt of the Net Cash Proceeds from such Insurance and Condemnation Event, but in anticipation of such receipt, shall be deemed to have been committed for reinvestment within such 180 day period) and are thereafter actually reinvested in similar replacement assets within two hundred seventy (270) days after receipt of such Net Cash Proceeds (it being understood that the amount of any expenditures made to reinvest in similar replacement assets during the period commencing on the date of the circumstance giving rise to the applicable Insurance and Condemnation Event and ending on the date of receipt of the Net Cash Proceeds from such Insurance and Condemnation Event, but in anticipation of such receipt, shall be deemed to have been reinvested within such 270 day period); provided further that any portion of such Net Cash Proceeds not reinvested within such two hundred seventy (270) day period shall be prepaid in accordance with this Section; or

(B)in connection with any Insurance or Condemnation Event to the extent that:

(1)           the Net Cash Proceeds from such individual Insurance and Condemnation Event together with all related Insurance and Condemnation Events (if any) is equal to or less than $10,000,000; and

(2)           the Net Cash Proceeds of any Insurance and Condemnation Event together with all related Insurance and Condemnation Events (if any) when aggregated with all other Insurance and Condemnation Events for which a prepayment was not required pursuant to this clause (B) of this Section 4.3(b)(iv) is equal to or less than $25,000,000 in the aggregate during the period from the Original Closing Date through and including the later to occur of the Revolving Credit Maturity Date or the Term Loan Maturity Date.

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For the purposes of this Section 4.3(b)(iv), any Net Cash Proceeds reinvested pursuant to and in accordance with clause (A) shall be excluded for purposes of determining the amounts of Net Cash Proceeds under clause (B).

(v)Notice; Manner of Payment.  Upon the occurrence of any event requiring a prepayment under clauses (i) through (iv) above, the US Borrower shall promptly deliver a Notice of Repayment to the Administrative Agent and, upon receipt of such notice, the Administrative Agent shall promptly so notify the Lenders.  Each prepayment of the Loans under this Section shall be applied as follows:  first, to prepay, on a pro rata basis, the outstanding scheduled principal installments of the Term Loans with respect to such outstanding Term Loans and second, to the extent of any excess, to prepay the outstanding principal of the Revolving Credit Loans pursuant to Section 2.5(d).

Amounts prepaid under the Term Loan pursuant to this Section may not be reborrowed.  Each prepayment shall be accompanied by any amount required to be paid pursuant to Section 5.9.

ARTICLE V                                

GENERAL LOAN PROVISIONS

SECTION 5.1Interest

(a)Interest Rate Options.  Subject to the provisions of this Section, at the election of the US Borrower, on behalf of itself and the Canadian Borrower:

(i)Revolving Credit Loans and the Term Loan shall bear interest at (A) the Base Rate plus the Applicable Margin or (B) the LIBOR Rate plus the Applicable Margin (provided that the LIBOR Rate shall not be available with respect to Revolving Credit Loans until three (3) Business Days after the Closing Date unless the US Borrower has delivered to the Administrative Agent a letter in form and substance satisfactory to the Administrative Agent indemnifying the Revolving Credit Lenders in the manner set forth in Section 5.9 of this Agreement);

(ii)Canadian Dollar Loans shall bear interest at the Canadian Base Rate plus the Applicable Margin; and

(iii)Swingline Loans shall bear interest at the LIBOR Market Index Rate plus the Applicable Margin.

The US Borrower, on behalf of itself and the Canadian Borrower, shall select the rate of interest and Interest Period, if any, applicable to any Loan at the time a Notice of Borrowing is given pursuant to Section 2.4 or at the time a Notice of Conversion/Continuation is given pursuant to Section 5.2.  Any Revolving Credit Loan or Term Loan or any portion thereof as to which the US Borrower has not duly specified an interest rate as provided herein shall be deemed a Base Rate Loan.  Any LIBOR Rate Loan or any portion thereof as to which the US Borrower has not duly specified an Interest Period as provided herein shall be deemed a LIBOR Rate Loan with an Interest Period of one (1) month.

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(b)Interest Periods.  In connection with each LIBOR Rate Loan, the US Borrower, on behalf of itself and the Canadian Borrower, by giving notice at the times described in Section 2.4 or 5.2, as applicable, shall elect an interest period (each, an “Interest Period”) to be applicable to such LIBOR Rate Loan, which Interest Period shall be a period of one (1), two (2), three (3), or six (6) months; provided that:

(i)the Interest Period shall commence on the date of advance of or conversion to any LIBOR Rate Loan and, in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the date on which the immediately preceding Interest Period expires;

(ii)if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, that if any Interest Period with respect to a LIBOR Rate Loan would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day;

(iii)any Interest Period with respect to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month at the end of such Interest Period;

(iv)no Interest Period shall extend beyond the Revolving Credit Maturity Date or the Term Loan Maturity Date, as applicable, and the quarterly principal installment payments pursuant to Section 4.2 without payment of any amounts pursuant to Section 5.9; and

(v)there shall be no more than eight (8) Interest Periods in effect at any time.

(c)Default Rate.  Subject to Section 13.3, upon the occurrence and during the continuance of a Payment Event of Default or a Bankruptcy Event of Default or, at the discretion of the Administrative Agent or as directed by the Required Lenders, upon the occurrence and during the continuance of an Event of Default other than a Payment Event of Default or Bankruptcy Event of Default, (i) the Borrowers shall no longer have the option to request LIBOR Rate Loans, Swingline Loans or Letters of Credit, (ii) all outstanding LIBOR Rate Loans shall bear interest at a rate per annum of two percent (2%) in excess of the rate then applicable to LIBOR Rate Loans until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans, (iii) all outstanding Canadian Base Rate Loans shall bear interest at a rate per annum equal to two percent (2%) in excess of the rate then applicable to Canadian Base Rate Loans and (iv) all outstanding Base Rate Loans, Swingline Loans and other Obligations arising hereunder or under any other Loan Document shall bear interest at a rate per annum equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans.  Interest shall continue to accrue on the Obligations after the filing by or against any Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state, federal or foreign.  The interest accrued pursuant to this Section 5.1(c) shall be payable by the applicable Borrower on demand of the Administrative Agent.

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(d)Interest Payment and Computation.

(i)Interest on each Base Rate Loan, each Canadian Base Rate Loan and each Swingline Loan shall be due and payable in arrears on the last Business Day of each calendar quarter commencing March 31, 2008; and interest on each LIBOR Rate Loan shall be due and payable on the last day of each Interest Period applicable thereto, and if such Interest Period extends over three (3) months, at the end of each three (3) month interval during such Interest Period.  All computations of interest for Base Rate Loans when the Base Rate is determined by the Prime Rate and Canadian Base Rate Loans shall be made on the basis of a year of 365 or 366 days, as the case may be, and assessed for the actual days elapsed.  All other computations of fees and interest provided hereunder shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year).

(ii)For greater certainty, whenever any amount is payable under this Agreement or any other Loan Document by the Canadian Borrower as interest or as a fee which requires the calculation of an amount using a percentage per annum, each party to this Agreement acknowledges and agrees that such amount shall be calculated as of the date payment is due without application of the “deemed reinvestment principle” or the “effective yield method” (e.g., when interest is calculated and payable monthly, the rate of interest payable per month is 1/12 of the stated rate of interest per annum).

(e)Maximum Rate.

(i)In no contingency or event whatsoever shall the aggregate of all amounts deemed interest under this Agreement charged or collected pursuant to the terms of this Agreement exceed the highest rate permissible under any Applicable Law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event that such a court determines that the Lenders have charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by Applicable Law and the Lenders shall at the Administrative Agent’s option (A) promptly refund to the Borrowers any interest received by the Lenders in excess of the maximum lawful rate or (B) apply such excess to the principal balance of the Obligations on a pro rata basis.  It is the intent hereof that the Borrowers not pay or contract to pay, and that neither the Administrative Agent nor any Lender receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrowers under Applicable Law.

(ii)Notwithstanding the provisions of this Section 5.1 or any other provision of this Agreement, in no event shall the aggregate “interest” (as such term is defined in Section 347 of the Criminal Code (Canada)) exceed the effective annual rate of interest on the “credit advanced” (as such term is defined in Section 347 of the Criminal Code (Canada)) lawfully permitted under Section 347 of the Criminal Code (Canada).  The effective annual rate of interest shall be determined in accordance with generally accepted actuarial practices and principles over the term of the applicable Loan, and in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries qualified for a period of ten (10) years and appointed by the Canadian Dollar Lender will be conclusive for the purposes of such determination.  A certificate of an authorized signing officer of the Canadian Dollar Lender as to each amount and/or each rate of interest payable hereunder from time to time shall be conclusive evidence of such amount and of such rate, absent manifest error.

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SECTION 5.2Notice and Manner of Conversion or Continuation of Loans

Provided that no Default or Event of Default has occurred and is then continuing, the US Borrower, on behalf of itself and the Canadian Borrower, shall have the option to (a) convert all or any portion of any outstanding Base Rate Loans in a principal amount equal to $1,000,000 or any whole multiple of $1,000,000 in excess thereof into one or more LIBOR Rate Loans (provided however that no Revolving Credit Loan may be so converted until the third (3rd) Business Day after the Closing Date unless the US Borrower has delivered to the Administrative Agent a letter in form and substance satisfactory to the Administrative Agent indemnifying the Revolving Credit Lenders in the manner set forth in Section 5.9 of this Agreement) and (b) upon the expiration of any Interest Period, (i) convert all or any part of its outstanding LIBOR Rate Loans in a principal amount equal to $500,000 or a whole multiple of $100,000 in excess thereof into Base Rate Loans or (ii) continue such LIBOR Rate Loans as LIBOR Rate Loans.  Whenever the US Borrower desires to convert or continue Revolving Credit Loans or Term Loans, as applicable, as provided above, the US Borrower shall give the Administrative Agent irrevocable prior written notice in the form attached as Exhibit E (a “Notice of Conversion/Continuation”) not later than 12:00 noon three (3) Business Days before the day on which a proposed conversion or continuation of such Revolving Credit Loan or such Term Loan, as applicable, is to be effective specifying (A) the Revolving Credit Loans or Term Loans, as applicable, to be converted or continued, and, in the case of any LIBOR Rate Loan to be converted or continued, the last day of the Interest Period therefor, (B) the effective date of such conversion or continuation (which shall be a Business Day), (C) the principal amount of such Revolving Credit Loans or Term Loans, as applicable, to be converted or continued, and (D) the Interest Period to be applicable to such converted or continued LIBOR Rate Loan.  The Administrative Agent shall promptly notify the applicable Lenders of such Notice of Conversion/Continuation.

SECTION 5.3Fees

(a)Facility Fee.  Commencing on the Closing Date, the Borrowers shall pay to the Administrative Agent, for the account of the Revolving Credit Lenders, a non-refundable facility fee at a rate per annum equal to the Applicable Margin on the Revolving Credit Commitment (regardless of usage).  The facility fee shall be payable in arrears on the last Business Day of each calendar quarter during the term of this Agreement commencing March 31, 2008, and on the Revolving Credit Maturity Date.  Such facility fee shall be distributed by the Administrative Agent to the Revolving Credit Lenders pro rata in accordance with such Lenders’ respective Revolving Credit Commitment Percentages.

(b)Administrative Agent’s and Other Fees.  In order to compensate the Administrative Agent for structuring and syndicating the Loans and for its obligations hereunder, the Borrowers agree to pay to the Administrative Agent and its affiliates, for their own account, the fees set forth in the Fee Letter.

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SECTION 5.4Manner of Payment

(a)Loans Denominated in Dollars.  Each payment by the US Borrower on account of the principal of or interest on any Loan or Letter of Credit denominated in Dollars or of any fee, commission or other amounts (including the Reimbursement Obligation) payable to the Lenders under this Agreement or any Note (except as set forth in Section 5.4(b)) shall be made in Dollars not later than 2:00 p.m. on the date specified for payment under this Agreement to the Administrative Agent at the Administrative Agent’s Office for the account of the Lenders (other than as set forth below) pro rata in accordance with their respective Commitment Percentages (except as specified below) in immediately available funds and shall be made without any set-off, counterclaim or deduction whatsoever.  Any payment received after such time but before 3:00 p.m. on such day shall be deemed a payment on such date for the purposes of Section 13.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day.  Any payment received after 3:00 p.m. shall be deemed to have been made on the next succeeding Business Day for all purposes.

(b)Canadian Dollar Loans.  Each payment by the Borrowers on account of the principal of or interest on the Canadian Dollar Loans shall be made in Canadian Dollars not later than 2:00 p.m. on the date specified for payment under this Agreement to the Administrative Agent’s account with the Canadian Dollar Lender for the account of the Canadian Dollar Lender (other than as set forth below) in immediately available funds, and shall be made without any set-off, counterclaim or deduction whatsoever.  Any payment received after such time but before 3:00 p.m. on such day shall be deemed a payment on such date for the purposes of Section 13.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day.  Any payment received after 3:00 p.m. shall be deemed to have been made on the next succeeding Business Day for all purposes.

(c)General Payment Provisions.  Upon receipt by the Administrative Agent of each such payment, the Administrative Agent shall distribute to each Lender at its address for notices set forth herein its pro rata share of such payment in accordance with such Lender’s Commitment Percentage (except as specified below) and shall wire advice of the amount of such credit to each Lender.  Each payment to the Administrative Agent of the Issuing Lender’s fees or L/C Participants’ commissions shall be made in like manner, but for the account of the Issuing Lender or the L/C Participants, as the case may be.  Each payment to the Administrative Agent of Administrative Agent’s fees or expenses shall be made for the account of the Administrative Agent and any amount payable to any Lender under Sections 5.9, 5.10, 5.11 or 15.2 shall be paid to the Administrative Agent for the account of the applicable Lender.  Each payment to the Administrative Agent with respect to Swingline Loans (including, without limitation, the Swingline Lender’s fees or expenses) shall be made for the account of the Swingline Lender.  Each payment to the Administrative Agent with respect to the Canadian Dollar Loans (including, without limitation, the Canadian Dollar Lender’s fees or expenses) shall be made for the account of the Canadian Dollar Lender.  Subject to Section 5.1(b)(ii) if any payment under this Agreement shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day and such extension of time shall in such case be included in computing any interest if payable along with such payment.

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SECTION 5.5Evidence of Indebtedness

(a)Extensions of Credit.  The Extensions of Credit made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business.  The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Extensions of Credit made by the Lenders to the Borrowers and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.  Upon the request of any Lender made through the Administrative Agent, the Borrowers shall execute and deliver to such Lender (through the Administrative Agent) a Revolving Credit Note, a Term Loan Note, a Canadian Note and/or a Swingline Note, as applicable, which shall evidence such Lender’s Revolving Credit Loans, Term Loans, Canadian Dollar Loans and/or Swingline Loans, as applicable, in addition to such accounts or records.  Each Lender may attach schedules to its Notes and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.

(b)Participations.  In addition to the accounts and records referred to in subsection (a), each Revolving Credit Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Canadian Dollar Loans, Swingline Loans and Letters of Credit.  In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Revolving Credit Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

SECTION 5.6Adjustments

If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or other obligations hereunder resulting in such Lender’s receiving payment of a proportion of the aggregate amount of its Loans and accrued interest thereon or other such obligations (other than pursuant to Sections 5.9, 5.10, 5.11 or 15.3 hereof) greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them; provided that

(i)if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and

(ii)the provisions of this Section shall not be construed to apply to (x) any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in Canadian Dollar Loans, Swingline Loans and Letters of Credit to any assignee or participant, other than to a Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply).

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Each Credit Party consents to the foregoing and agrees, to the extent it may effectively do so under Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Credit Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of each Credit Party in the amount of such participation.

SECTION 5.7Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the Administrative Agent

The obligations of the Lenders under this Agreement to make, to issue or to participate in Loans and Letters of Credit, as applicable, are several and are not joint or joint and several.  Unless the Administrative Agent shall have received notice from a Lender prior to a proposed borrowing date that such Lender will not make available to the Administrative Agent such Lender’s ratable portion of the amount to be borrowed on such date (which notice shall not release such Lender of its obligations hereunder), the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the proposed borrowing date in accordance with Section 2.4(b), and the Administrative Agent may, in reliance upon such assumption, make available to the Borrowers on such date a corresponding amount.  If such amount is made available to the Administrative Agent on a date after such borrowing date, such Lender shall pay to the Administrative Agent on demand an amount, until paid, equal to the product of (a) the amount not made available by such Lender in accordance with the terms hereof, times (b) the daily average Federal Funds Rate during such period as determined by the Administrative Agent, times (c) a fraction the numerator of which is the number of days that elapse from and including such borrowing date to the date on which such amount not made available by such Lender in accordance with the terms hereof shall have become immediately available to the Administrative Agent and the denominator of which is 360.  A certificate of the Administrative Agent with respect to any amounts owing under this Section shall be conclusive, absent manifest error.  If such Lender’s Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three (3) Business Days after such borrowing date, the Administrative Agent shall be entitled to recover such amount made available by the Administrative Agent with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrowers.  The failure of any Lender to make available its Commitment Percentage of any Loan requested by the Borrowers shall not relieve it or any other Lender of its obligation, if any, hereunder to make its Commitment Percentage of such Loan available on the borrowing date, but no Lender shall be responsible for the failure of any other Lender to make its Commitment Percentage of such Loan available on the borrowing date.  Notwithstanding anything set forth herein to the contrary, any Lender that fails to make available its Commitment Percentage of any Loan shall not (a) have any voting or consent rights under or with respect to any Loan Document (except that the Commitment of such Lender may not be increased or extended without the consent of such Lender) or (b) constitute a “Lender” (or be included in the calculation of Required Lenders hereunder) for any voting or consent rights under or with respect to any Loan Document.

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SECTION 5.8Changed Circumstances

(a)Circumstances Affecting LIBOR Rate and Canadian Dollar Availability.  If (i) with respect to any Interest Period for any LIBOR Rate Loan the Administrative Agent or any Lender (after consultation with the Administrative Agent) shall determine that, by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in eurodollars, in the applicable amounts are not being quoted via the Reuters Page LIBOR01 (or any successor page) or offered to the Administrative Agent or such Lender for such Interest Period, (ii) a fundamental change has occurred in the foreign exchange or interbank markets with respect to Canadian Dollars (including, without limitation, changes in national or international financial, political or economic conditions or currency exchange rates or exchange controls) or (iii) it has become otherwise materially impractical for the Canadian Dollar Lender to make any Canadian Dollar Loans, then the Administrative Agent shall forthwith give notice thereof to the Borrowers.  Thereafter, until the Administrative Agent notifies the Borrowers that such circumstances no longer exist, the obligation of the Lenders or the Canadian Dollar Lender, as applicable, to make LIBOR Rate Loans or Canadian Dollar Loans, as applicable, and the right of the US Borrower to convert any Revolving Credit Loan or Term Loan to or continue any Revolving Credit Loan or Term Loan as a LIBOR Rate Loan shall be suspended, and (i) the US Borrower or the Canadian Borrower, as applicable, shall repay in full (or cause to be repaid in full) the then outstanding principal amount of each such LIBOR Rate Loan or Canadian Dollar Loan, as applicable, together with accrued interest thereon, (A) with respect to any LIBOR Rate Loan, on the last day of the then current Interest Period applicable to such LIBOR Rate Loan or (B) with respect to any Canadian Dollar Loan, immediately upon the request of the Administrative Agent or (ii) with respect to any LIBOR Rate Loan, convert the then outstanding principal amount of such LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period.

(b)Laws Affecting LIBOR Rate and Canadian Dollar Availability.  If, after the date hereof, the introduction of, or any change in, any Applicable Law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Lenders (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, shall make it unlawful or impossible for any of the Lenders (or any of their respective Lending Offices) to honor its obligations hereunder to make or maintain any LIBOR Rate Loan or Canadian Dollar Loan, such Lender shall promptly give notice thereof to the Administrative Agent and the Administrative Agent shall promptly give notice to the Borrowers and the other Lenders.  Thereafter, until the Administrative Agent notifies the Borrowers that such circumstances no longer exist, (i) the obligations of the Lenders or the Canadian Dollar Lender, as applicable, to make LIBOR Rate Loans or Canadian Dollar Loans, as applicable, and the right of the US Borrower to convert any Revolving Credit Loan or Term Loan or continue any Revolving Credit Loan or Term Loan as a LIBOR Rate Loan shall be suspended and thereafter the US Borrower may select only Base Rate Loans hereunder, (ii) if any of the Lenders may not lawfully continue to maintain a LIBOR Rate Loan to the end of the then current Interest Period applicable thereto as a LIBOR Rate Loan, the applicable LIBOR Rate Loan shall immediately be converted to a Base Rate Loan for the remainder of such Interest Period and (iii) if the Canadian Dollar Lender may not lawfully continue to maintain a Canadian Dollar Loan, the applicable Canadian Dollar Loan shall immediately be repaid in full (together with accrued interest thereon).

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SECTION 5.9Indemnity

The US Borrower hereby indemnifies each of the Lenders against any loss or expense which may arise or be attributable to each Lender’s obtaining, liquidating or employing deposits or other funds acquired to effect, fund or maintain any Revolving Credit Loan or Term Loan (a) as a consequence of any failure by the US Borrower to make any payment when due of any amount due hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the US Borrower to borrow, continue or convert on a date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation or (c) due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date other than the last day of the Interest Period therefor.  The amount of such loss or expense shall be determined, in the applicable Lender’s sole discretion, based upon the assumption that such Lender funded its Commitment Percentage of the LIBOR Rate Loans in the London interbank market and using any reasonable attribution or averaging methods which such Lender deems appropriate and practical.  A certificate of such Lender setting forth the basis for determining such amount or amounts necessary to compensate such Lender shall be forwarded to the US Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for manifest error.

SECTION 5.10Increased Costs

(a)Increased Costs Generally.  If any Change in Law shall:

(i)impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or advances, loans or other credit extended or participated in by, any Lender (except any reserve requirement reflected in the LIBOR Rate), the Canadian Dollar Lender or the Issuing Lender (or any of their respective Lending Offices);

(ii)subject any Lender, the Canadian Dollar Lender or the Issuing Lender to any tax of any kind whatsoever with respect to this Agreement, any Canadian Dollar Loan, any Letter of Credit, any participation in a Canadian Dollar Loan or a Letter of Credit or any LIBOR Rate Loan made by it, or change the basis of taxation of payments to such Lender, the Canadian Dollar Lender or the Issuing Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 5.11 and the imposition of, or any change in the rate of any Excluded Tax payable by such Lender, the Canadian Dollar Lender or the Issuing Lender); or

(iii)impose on any Lender, the Canadian Dollar Lender or the Issuing Lender (or any of their respective Lending Offices) or the London interbank market any other condition, cost or expense affecting this Agreement, any Canadian Dollar Loan, any Letter of Credit, any participation in a Canadian Dollar Loan or a Letter of Credit or any LIBOR Rate Loan made by it;

and the result of any of the foregoing shall be to increase the cost to such Lender, the Canadian Dollar Lender or the Issuing Lender of making, converting into or maintaining any LIBOR Rate Loan or Canadian Dollar Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender, the Canadian Dollar Lender or the Issuing Lender of participating in, issuing or maintaining any Canadian Dollar Loan or Letter of Credit (or of maintaining its obligation to participate in or to issue any Canadian Dollar Loan or Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender, the Canadian Dollar Lender or the Issuing Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, the Canadian Dollar Lender or the Issuing Lender, the Borrowers shall promptly pay to any such Lender, the Canadian Dollar Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender, the Canadian Dollar Lender or the Issuing Lender, as the case may be, for such additional costs incurred or reduction suffered.

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(b)Capital Requirements.  If any Lender, the Canadian Dollar Lender or the Issuing Lender determines that any Change in Law affecting such Lender, the Canadian Dollar Lender or the Issuing Lender or any Lending Office of such Lender, the Canadian Dollar Lender or such Lender’s, the Canadian Dollar Lender’s or the Issuing Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s, the Canadian Dollar Lender’s or the Issuing Lender’s capital or on the capital of such Lender’s, the Canadian Dollar Lender’s or the Issuing Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender, the Canadian Lender or the Issuing Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, the Canadian Dollar Lender or the Issuing Lender or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender, the Canadian Dollar or the Issuing Lender or such Lender’s, the Canadian Dollar Lender’s or the Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s, the Canadian Dollar Lender’s or the Issuing Lender’s policies and the policies of such Lender’s, the Canadian Dollar Lender’s or the Issuing Lender’s holding company with respect to capital adequacy), then from time to time the Borrowers shall promptly pay to such Lender, the Canadian Dollar Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender, the Canadian Dollar Lender or the Issuing Lender or such Lender’s, the Canadian Dollar Lender’s or the Issuing Lender’s holding company for any such reduction suffered.

(c)Certificates for Reimbursement.  A certificate of a Lender, the Canadian Dollar Lender or the Issuing Lender setting forth the amount or amounts necessary to compensate such Lender, the Canadian Dollar Lender or the Issuing Lender or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrowers shall be conclusive absent manifest error.  The Borrowers shall pay such Lender, the Canadian Dollar Lender or the Issuing Lender, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

(d)Delay in Requests.  Failure or delay on the part of any Lender, the Canadian Dollar Lender or the Issuing Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s, the Canadian Dollar Lender’s or the Issuing Lender’s right to demand such compensation; provided that the Borrowers shall not be required to compensate a Lender, the Canadian Dollar Lender or the Issuing Lender pursuant to this Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date that such Lender, the Canadian Dollar Lender or the Issuing Lender, as the case may be, notifies the Borrowers of the Change in Law giving rise to such increased costs or reductions and of such Lender’s, the Canadian Dollar Lender’s or the Issuing Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

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SECTION 5.11Taxes

(a)Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrowers hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes; provided that if any Borrower shall be required by Applicable Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, the Lenders or the Issuing Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with Applicable Law.

(b)Payment of Other Taxes by the Borrowers. Without limiting the provisions of subsection (a) above, the Borrowers shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law.

(c)Indemnification by the Borrowers.  The Borrowers shall indemnify the Administrative Agent, each Lender and the Issuing Lender, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the Issuing Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the US Borrower by a Lender or the Issuing Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Lender, shall be conclusive absent manifest error.

(d)Evidence of Payments.  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by any Borrower to a Governmental Authority, such Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e)Status of Lenders.  Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the applicable Borrower (with a copy to the Administrative Agent), at the time or times prescribed by Applicable Law or reasonably requested by the applicable Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by Applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if requested by the applicable Borrower or the Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the applicable Borrower or the Administrative Agent as will enable the applicable Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.  Without limiting the generality of the foregoing, in the event that the applicable Borrower is a resident for tax purposes in the United States, any Foreign Lender shall deliver to the applicable Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the applicable Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

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(i)duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,

(ii)duly completed copies of Internal Revenue Service Form W-8ECI,

(iii)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the applicable Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or

(iv)any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by Applicable Law to permit applicable Borrower to determine the withholding or deduction required to be made.

Without limiting the obligations of the Lenders set forth above regarding delivery of certain forms and documents to establish each Lender’s status for U.S. withholding tax purposes, each Lender agrees promptly to deliver to the Administrative Agent or the US Borrower, on behalf of itself and the Canadian Borrower, as the Administrative Agent or the US Borrower, on behalf of itself and the Canadian Borrower, shall reasonably request, on or prior to the Closing Date, and in a timely fashion thereafter, such other documents and forms required by any relevant taxing authorities under Applicable Law of any other jurisdiction, duly executed and completed by such Lender, as are required under such Applicable Law to confirm such Lender’s entitlement to any available exemption from, or reduction of, applicable withholding taxes in respect of all payments to be made to such Lender outside of the United States by the Borrowers pursuant to this Agreement or otherwise to establish such Lender’s status for withholding tax purposes in such other jurisdiction.  Each Lender shall promptly (i) notify the Administrative Agent of any change in circumstances which would modify or render invalid any such claimed exemption or reduction, and (ii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of Applicable Law of any such jurisdiction that any Borrower make any deduction or withholding for taxes from amounts payable to such Lender.  Additionally, each Borrower shall promptly deliver to the Administrative Agent or any Lender, as the Administrative Agent or such Lender shall reasonably request, on or prior to the Closing Date, and in a timely fashion thereafter, such documents and forms required by any relevant taxing authorities under the Applicable Law of any jurisdiction, duly executed and completed by such Borrower, as are required to be furnished by such Lender or the Administrative Agent under such Applicable Law in connection with any payment by the Administrative Agent or any Lender of Taxes or Other Taxes, or otherwise in connection with the Loan Documents, with respect to such jurisdiction

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(f)Treatment of Certain Refunds.  If the Administrative Agent, a Lender or the Issuing Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to this Section, it shall pay to the Borrowers an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the Issuing Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that the Borrowers, upon the request of the Administrative Agent, such Lender or the Issuing Lender, agree to repay the amount paid over to the Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the Issuing Lender in the event the Administrative Agent, such Lender or the Issuing Lender is required to repay such refund to such Governmental Authority.  This subsection shall not be construed to require the Administrative Agent, any Lender or the Issuing Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrowers or any other Person.

(g)Survival.  Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section shall survive the payment in full of the Obligations and the termination of the Commitments.

SECTION 5.12Mitigation Obligations; Replacement of Lenders

(a)Designation of a Different Lending Office.  If any Lender requests compensation under Section 5.10, or requires the Borrowers to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.11, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 5.10 or Section 5.11, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b)Replacement of Lenders.  If any Lender requests compensation under Section 5.10, or if the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.11, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 15.11), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:

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(i)the Borrowers shall have paid to the Administrative Agent the assignment fee specified in Section 15.11;

(ii)such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in Letters of Credit, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 5.9) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts);

(iii)in the case of any such assignment resulting from a claim for compensation under Section 5.10 or payments required to be made pursuant to Section 5.11, such assignment will result in a reduction in such compensation or payments thereafter; and

(iv)such assignment does not conflict with Applicable Law.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.

SECTION 5.13Redenomination of Canadian Dollar Loans

.  If any Canadian Dollar Loan is required to bear interest based at the Base Rate rather than the Canadian Base Rate pursuant to any applicable provision hereof, such Loan shall be funded in Dollars in an amount equal to the Dollar Amount of such Canadian Dollar Loan, all subject to the provisions of Section 2.4(b).  The Borrowers shall reimburse the Lenders upon any such conversion for any amounts required to be paid under Section 5.9.

SECTION 5.14US Borrower as Agent for the Canadian Borrower

The Canadian Borrower hereby irrevocably appoints and authorizes the US Borrower (a) to provide the Administrative Agent with all notices with respect to Extensions of Credit obtained for the benefit of either Borrower and all other notices and instructions under this Agreement, (b) to take such action on behalf of the Borrowers as the US Borrower deems appropriate on its behalf to obtain Extensions of Credit and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement and (c) to act as its agent for service of process and notices required to be delivered under this Agreement or the other Loan Documents, it being understood and agreed that receipt by the US Borrower of any summons, notice or other similar item shall be deemed effective receipt by the Borrowers and their Subsidiaries.

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ARTICLE VI                                

CLOSING; CONDITIONS OF CLOSING AND BORROWING

SECTION 6.1Closing

The closing shall take place at the offices of Kennedy Covington Lobdell & Hickman, L.L.P. at 10:00 a.m. on December 20, 2007, or on such other place, date and time as the parties hereto shall mutually agree.

SECTION 6.2Conditions to Closing and Initial Extensions of Credit

The obligation of the Lenders to close this Agreement and to make the initial Loan or issue or participate in the initial Letter of Credit, if any, is subject to the satisfaction of each of the following conditions:

(a)Executed Loan Documents.  This Agreement, a Revolving Credit Note in favor of each Lender requesting a Revolving Credit Note, a Canadian Note in favor of the Canadian Dollar Lender (if requested thereby), a Swingline Note in favor of the Swingline Lender (if requested thereby), the Subsidiary Guaranty Agreement, together with any other applicable Loan Documents, shall have been duly authorized, executed and delivered to the Administrative Agent by the parties thereto, shall be in full force and effect and no Default or Event of Default shall exist hereunder or thereunder.

(b)Closing Certificates; Etc.  The Administrative Agent shall have received each of the following in form and substance reasonably satisfactory to the Administrative Agent:

(i)Officer’s Certificate of the US Borrower.  A certificate from a Responsible Officer of the US Borrower to the effect that all representations and warranties of the Credit Parties contained in this Agreement and the other Loan Documents are true, correct and complete in all material respects as of the Closing Date, except for any representation and warranty made as of an earlier date, which representation and warranty shall remain true and correct as of such earlier date; provided that any representation and warranty that is qualified by materiality or by reference to Material Adverse Effect shall be true, correct and complete in all respects as of the Closing Date; that none of the Credit Parties are in violation of any of the covenants contained in this Agreement and the other Loan Documents; that, after giving effect to the transactions contemplated by this Agreement, no Default or Event of Default has occurred and is continuing; and that each of the Credit Parties, as applicable, has satisfied each of the conditions set forth in Section 6.2 and Section 6.3.

(ii)Certificate of Responsible Officer of each Credit Party.  A certificate of a Responsible Officer of each Credit Party certifying as to the incumbency and genuineness of the signature of each officer of such Credit Party executing Loan Documents to which it is a party and certifying that attached thereto is a true, correct and complete copy of (A) the articles of incorporation (or equivalent documentation) of such Credit Party and all amendments thereto, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation or formation, (B) the bylaws (or equivalent documentation) of such Credit Party as in effect on the Closing Date, (C) resolutions duly adopted by the board of directors (or equivalent governing body) of such Credit Party authorizing the transactions contemplated hereunder and the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, and (D) each certificate required to be delivered pursuant to Section 6.2(b)(iii).

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(iii)Certificates of Good Standing.  Certificates as of a recent date of the good standing or status of each Credit Party under the laws of its jurisdiction of organization and, to the extent requested by the Administrative Agent, each other jurisdiction where such Credit Party is qualified to do business and, to the extent available, a certificate of the relevant taxing authorities of such jurisdictions certifying that such Credit Party has filed required tax returns and owes no delinquent taxes.

(iv)Opinions of Counsel.  Favorable opinions of counsel to the Credit Parties addressed to the Administrative Agent and the Lenders with respect to the Credit Parties, the Loan Documents and such other matters as the Lenders shall request, each in form and substance satisfactory to the Administrative Agent (including, without limitation, favorable opinions of foreign counsel to the Credit Parties), which such opinions shall expressly permit reliance by successors and assigns of the Administrative Agent and the Lenders.

(v)Tax Forms.  Copies of the United States Internal Revenue Service forms required by Section 5.11(e).

(vi)Liability Insurance.  The Administrative Agent shall have received certificates evidencing the insurance required to be maintained pursuant to Section 9.3, evidence of payment of all insurance premiums for the current policy year of each insurance policy and, if requested by the Administrative Agent, copies (certified by a Responsible Officer) of each insurance policy in form and substance reasonably satisfactory to the Administrative Agent.

(c)Consents; Defaults.

(i)Governmental and Third Party Approvals.  The Credit Parties shall have received all material governmental, shareholder and third party consents and approvals necessary (or any other material consents as determined in the reasonable discretion of the Administrative Agent) in connection with the transactions contemplated by this Agreement and the other Loan Documents and the other transactions contemplated hereby and all applicable waiting periods shall have expired without any action being taken by any Person that could reasonably be expected to restrain, prevent or impose any material adverse conditions on any of the Credit Parties or such other transactions or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable which in the reasonable judgment of the Administrative Agent could reasonably be expected to have such effect.

(ii)No Injunction, Etc.  No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of this Agreement or the other Loan Documents or the consummation of the transactions contemplated hereby or thereby, or which, in the Administrative Agent’s sole discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement or the other Loan Documents or the consummation of the transactions contemplated hereby or thereby.

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(d)Financial Matters.

(i)Financial Statements.  The Administrative Agent and the Lenders shall have received the following financial statements of the US Borrower and its Subsidiaries, all in form and substance reasonably satisfactory to the Administrative Agent and the Lenders and prepared in accordance with GAAP (and, with respect to all audited financial statements, to be audited by an independent certified public accounting firm reasonably satisfactory to the Administrative Agent):

(A)           the audited consolidated financial statements of the US Borrower and its Subsidiaries for the Fiscal Years ended December 31, 2004, December 31, 2005 and December 31, 2006; and

(B)           the unaudited consolidated financial statements of the US Borrower and its Subsidiaries for each interim quarterly period ended after the date of the last audited financial statements for which financial statements are available.

(ii)Financial Projections.  The Administrative Agent shall have received financial projections with respect to the US Borrower and its Subsidiaries prepared by a Responsible Officer of the US Borrower, in form reasonably satisfactory to the Administrative Agent, of balance sheets, income statements and cash flow statements on a quarterly basis for the first year following the Closing Date and an annual basis for the next five (5) years thereafter.

(iii)Financial Condition Certificate.  The US Borrower shall have delivered to the Administrative Agent a certificate, in form and substance satisfactory to the Administrative Agent, and certified as accurate by a Responsible Officer of the US Borrower, that (A) the US Borrower and each of its Subsidiaries are each Solvent, (B) the payables of each Borrower and each of its Subsidiaries are current and not past due (except to the extent consistent with the past practice of the Borrowers and their respective Subsidiaries), (C) attached thereto are calculations evidencing compliance on a pro forma basis with the covenants contained in Article X hereof, (D) the financial projections previously delivered to the Administrative Agent represent the good faith estimates (utilizing reasonable assumptions) of the financial condition and operations of the Borrowers and their respective Subsidiaries; and (E) attached thereto is a calculation of the Applicable Margin.

(iv)Payment at Closing; Fee Letters. The Borrowers shall have paid to the Administrative Agent and the Lenders the fees set forth or referenced in Section 5.3 and any other accrued and unpaid fees or commissions due hereunder (including, without limitation, legal fees and expenses) and to any other Person such amount as may be due thereto in connection with the transactions contemplated hereby, including all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of any of the Loan Documents.

(e)Miscellaneous.

(i)Notice of Borrowing.  The Administrative Agent shall have received a Notice of Borrowing from the applicable Borrower in accordance with Section 2.4(a) and a Notice of Account Designation from the US Borrower specifying the account or accounts to which the proceeds of any Loans made after the Closing Date are to be disbursed.

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(ii)Due Diligence.  The Administrative Agent shall have completed, to its satisfaction, all legal and other due diligence with respect to the business, assets, liabilities, operations and condition (financial or otherwise) of the US Borrower and its Subsidiaries in scope and determination satisfactory to the Administrative Agent in its sole discretion.  In connection therewith, the Administrative Agent may request the results of a Lien search (including a search as to judgments, pending litigation and tax matters), in form and substance reasonably satisfactory thereto, made against the Credit Parties under the Uniform Commercial Code (or applicable judicial docket) as in effect in any state or comparable legislation in other jurisdictions in which any of the assets of such Credit Party are located, indicating among other things that its assets are free and clear of any Lien except for Permitted Liens.

(iii)Existing Facility.  All indebtedness (including, without limitation, all accrued interest and fees) under the Existing Credit Agreement (other than indebtedness with respect to the Term Loans under the Existing Credit Agreement and Existing Letters of Credit) shall be refinanced and replaced by the Revolving Credit Facility and the Administrative Agent shall make such transfers of funds as are necessary in order that the outstanding balance of such Loans, together with any Loans funded on the Closing Date, reflect the respective Revolving Credit Commitment of the Lenders hereunder.

(iv)Other Documents.  All opinions, certificates and other instruments and all proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Administrative Agent.  The Administrative Agent shall have received copies of all other documents, certificates and instruments reasonably requested thereby, with respect to the transactions contemplated by this Agreement.

SECTION 6.3Conditions to All Extensions of Credit

The obligations of the Lenders to make any Extensions of Credit (including the initial Extension of Credit), convert or continue any Loan and/or the Issuing Lender to issue or extend any Letter of Credit are subject to the satisfaction of the following conditions precedent on the relevant borrowing, continuation, conversion, issuance or extension date:

(a)Continuation of Representations and Warranties.  The representations and warranties contained in Article VII shall be true and correct on and as of such borrowing, continuation, conversion, issuance or extension date with the same effect as if made on and as of such date, except for any representation and warranty made as of an earlier date, which representation and warranty shall remain true and correct as of such earlier date.

(b)No Existing Default.  No Default or Event of Default shall have occurred and be continuing (i) on the borrowing, continuation or conversion date with respect to such Loan or after giving effect to the Loans to be made, continued or converted on such date or (ii) on the issuance or extension date with respect to such Letter of Credit or after giving effect to the issuance or extension of such Letter of Credit on such date.

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(c)Notices.  The Administrative Agent shall have received a Notice of Borrowing or Notice of Conversion/Continuation, as applicable, from the US Borrower in accordance with Section 2.4(a) and Section 5.2.

(d)Additional Documents.  The Administrative Agent shall have received each additional document, instrument, legal opinion or other item reasonably requested by it.

ARTICLE VII                                           

REPRESENTATIONS AND WARRANTIES OF THE BORROWERS

SECTION 7.1Representations and Warranties

To induce the Administrative Agent and Lenders to enter into this Agreement and to induce the Lenders to make Extensions of Credit, each Borrower hereby represents and warrants to the Administrative Agent and Lenders both before and after giving effect to the transactions contemplated hereunder that:

(a)Organization; Power; Qualification.  Each of the US Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification and authorization, except where the failure to be qualified or authorized, individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect.  The jurisdictions in which the US Borrower and its Subsidiaries are organized and qualified to do business as of the Closing Date are described on Schedule 7.1(a).

(b)Ownership.  Each Subsidiary of the US Borrower as of the Closing Date is listed on Schedule 7.1(b).  As of the Closing Date, the capitalization of the US Borrower and its Subsidiaries consists of the number of shares, authorized, issued and outstanding, of such classes and series, with or without par value, described on Schedule 7.1(b).  All outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and not subject to any preemptive or similar rights.  The shareholders of the Subsidiaries of the US Borrower and the number of shares owned by each as of the Closing Date are described on Schedule 7.1(b).  As of the Closing Date, there are no outstanding stock purchase warrants, subscriptions, options, securities, instruments or other rights of any type or nature whatsoever, which are convertible into, exchangeable for or otherwise provide for or permit the issuance of Capital Stock of the US Borrower or its Subsidiaries, except as described on Schedule 7.1(b).

(c)Authorization of Agreement, Loan Documents and Borrowing. Each of the US Borrower and its Subsidiaries has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Agreement and each of the other Loan Documents to which it is a party in accordance with their respective terms.  This Agreement and each of the other Loan Documents has been duly executed and delivered by the duly authorized officers of the US Borrower and each of its Subsidiaries party thereto, and each such document constitutes the legal, valid and binding obligation of the US Borrower or its Subsidiary party thereto, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of creditors’ rights in general and the availability of equitable remedies.

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(d)Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.  The execution, delivery and performance by the US Borrower and its Subsidiaries of the Loan Documents to which each such Person is a party, in accordance with their respective terms, the Extensions of Credit hereunder and the transactions contemplated hereby do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any Governmental Approval or violate any Applicable Law relating to the US Borrower or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of the US Borrower or any of its Subsidiaries or any indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person, (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by such Person other than Liens arising under the Loan Documents or (iv) require any consent or authorization of, filing with, or other act in respect of, an arbitrator or Governmental Authority and no consent of any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement.

(e)Compliance with Law; Governmental Approvals.  Each of the US Borrower and its Subsidiaries (i) has all Governmental Approvals required by any Applicable Law for it to conduct its business, each of which is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending or, to the best of its knowledge, threatened attack by direct or collateral proceeding, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect (ii) is in compliance with each Governmental Approval applicable to it and in compliance with all other Applicable Law relating to it or any of its respective properties, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect and (iii) has timely filed all material reports, documents and other materials required to be filed by it under all Applicable Law with any Governmental Authority and has retained all material records and documents required to be retained by it under Applicable Law, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

(f)Tax Returns and Payments.  Each of the US Borrower and its Subsidiaries has duly filed or caused to be filed all federal, state, provincial, local and other material tax returns required by Applicable Law to be filed, and has paid, or made adequate provision for the payment of, all federal, state, provincial, local and other material taxes, assessments and governmental charges or levies upon it and its property, income, profits and assets which are due and payable (other than any amount the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which adequate reserves in conformity with GAAP have been provided for on the books of the US Borrower and its Subsidiaries and no Lien exists).  Such returns accurately reflect in all material respects all liability for taxes of the US Borrower and its Subsidiaries for the periods covered thereby.  There is no ongoing audit or examination or other investigation by any Governmental Authority of the tax liability of the US Borrower and its Subsidiaries in each case, except as could not reasonably be expected to have a liability in excess of $5,000,000. No Governmental Authority has asserted any Lien or other claim against the US Borrower or any Subsidiary thereof with respect to unpaid taxes which has not been discharged, resolved or adequately reserved for on the books of the US Borrower and its Subsidiaries.  The charges, accruals and reserves on the books of the US Borrower and any of its Subsidiaries in respect of federal, state, provincial, local and other taxes for all Fiscal Years and portions thereof since the organization of the US Borrower and any of its Subsidiaries are in the judgment of the Borrowers adequate, and the Borrowers do not anticipate any additional taxes or assessments for any of such years beyond those for which such reserves have been made.

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(g)Intellectual Property Matters.  Each of the US Borrower and its Subsidiaries owns or possesses rights to use all franchises, licenses, copyrights, copyright applications, patents, patent rights or licenses, patent applications, trademarks, trademark rights, service mark, service mark rights, trade names, trade name rights, copyrights and other rights with respect to the foregoing which are required to conduct its business, except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.  No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights, and neither the US Borrower nor any Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to any such rights as a result of its business operations, except any such revocation, termination or liability as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

(h)Environmental Matters.

(i)The properties owned, leased or operated by the US Borrower and its Subsidiaries now or in the past do not contain, and to their knowledge have not previously contained, any Hazardous Materials in amounts or concentrations which (A) constitute or constituted a violation of applicable Environmental Laws or (B) could give rise to liability under applicable Environmental Laws, except where such violation or liability could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect;

(ii)The US Borrower, each Subsidiary and such properties and all operations conducted in connection therewith are in compliance, and have been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about such properties or such operations which could interfere with the continued operation of such properties or impair the fair saleable value thereof, except for any such noncompliance or contamination, that could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect;

(iii)Neither the US Borrower nor any Subsidiary thereof has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters, Hazardous Materials, or compliance with Environmental Laws, nor does the US Borrower or any Subsidiary thereof have knowledge or reason to believe that any such notice will be received or is being threatened, except where such violation, alleged violation, noncompliance, liability or potential liability which is the subject of such notice could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect;

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(iv)Hazardous Materials have not been transported or disposed of to or from the properties owned, leased or operated by the US Borrower and its Subsidiaries in violation of, or in a manner or to a location which could give rise to liability under, Environmental Laws, nor have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of such properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Laws, except where such violation or liability could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect;

(v)No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of the Borrowers, threatened, under any Environmental Law to which the US Borrower or any Subsidiary thereof is or will be named as a potentially responsible party with respect to such properties or operations conducted in connection therewith, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to US Borrower, any Subsidiary or such properties or such operations; except where such proceeding, action, degree, order or other requirement could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and

(vi)There has been no release, or to the best of the Borrowers’ knowledge, threat of release, of Hazardous Materials at or from properties owned, leased or operated by the US Borrower or any Subsidiary, now or in the past, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws, except where such violation or liability could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

(i)ERISA.

(i)As of the Closing Date, neither the US Borrower nor any ERISA Affiliate maintains or contributes to, or has any obligation under, any Employee Benefit Plans other than those identified on Schedule 7.1(i);

(ii)The US Borrower and each ERISA Affiliate is in material compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired and except where a failure to so comply could not reasonably be expected to have a Material Adverse Effect.  Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code except for such plans that have not yet received determination letters but for which the remedial amendment period for submitting a determination letter has not yet expired.  No liability has been incurred by the US Borrower or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan except for a liability that could not reasonably be expected to have a Material Adverse Effect;

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(iii)As of the Closing Date, no Pension Plan has been terminated, nor has any accumulated funding deficiency (as defined in Section 412 of the Code) been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue Service been received or requested with respect to any Pension Plan, nor has the US Borrower or any ERISA Affiliate failed to make any contributions or to pay any amounts due and owing as required by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension Plan prior to the due dates of such contributions under Section 412 of the Code or Section 302 of ERISA, nor has there been any event requiring any disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan;

(iv)Except where the failure of any of the following representations to be correct in all material respects could not reasonably be expected to have a Material Adverse Effect, neither the US Borrower nor any ERISA Affiliate has: (A) engaged in a nonexempt prohibited transaction described in Section 406 of the ERISA or Section 4975 of the Code, (B) incurred any liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid, (C) failed to make a required contribution or payment to a Multiemployer Plan, or (D) failed to make a required installment or other required payment under Section 412 of the Code;

(v)No Termination Event has occurred or is reasonably expected to occur; and

(vi)Except where the failure of any of the following representations to be correct in all material respects could not reasonably be expected to have a Material Adverse Effect, no proceeding, claim (other than a benefits claim in the ordinary course of business), lawsuit and/or investigation is existing or, to the best knowledge of the Borrowers after due inquiry, threatened concerning or involving any (A) employee welfare benefit plan (as defined in Section 3(1) of ERISA) currently maintained or contributed to by the US Borrower or any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.

(j)Margin Stock.  Neither the US Borrower nor any Subsidiary thereof is engaged principally or as one of its activities in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” (as each such term is defined or used, directly or indirectly, in Regulation U of the Board of Governors of the Federal Reserve System).  No part of the proceeds of any of the Loans or Letters of Credit will be used for purchasing or carrying margin stock or for any purpose which violates, or which would be inconsistent with, the provisions of Regulation T, U or X of such Board of Governors.

(k)Government Regulation.  Neither the US Borrower nor any Subsidiary thereof is an “investment company” or a company “controlled” by an “investment company” (as each such term is defined or used in the Investment Company Act of 1940, as amended) and neither the US Borrower nor any Subsidiary thereof is, or after giving effect to any Extension of Credit will be, subject to regulation under the Interstate Commerce Act, as amended, or any other Applicable Law which limits its ability to incur or consummate the transactions contemplated hereby.

(l)Material Contracts.  Schedule 7.1(l) sets forth a complete and accurate list of all Material Contracts of the US Borrower and its Subsidiaries in effect as of the Closing Date not listed on any other Schedule hereto; other than as set forth in Schedule 7.1(l), each such Material Contract is, and after giving effect to the consummation of the transactions contemplated by the Loan Documents will be, in full force and effect in accordance with the terms thereof.  To the extent requested by the Administrative Agent, the US Borrower and its Subsidiaries have delivered to the Administrative Agent a true and complete copy of each Material Contract required to be listed on Schedule 7.1(l) or any other Schedule hereto.  Neither the US Borrower nor any Subsidiary (nor, to the knowledge of the Borrowers, any other party thereto) is in breach of or in default under any Material Contract in any material respect.

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(m)Employee Relations. Each of the US Borrower and its Subsidiaries has a stable work force in place and is not, as of the Closing Date, party to any collective bargaining agreement nor has any labor union been recognized as the representative of its employees except as set forth on Schedule 7.1(m).  The Borrowers know of no pending, threatened or contemplated strikes, work stoppage or other collective labor disputes involving its employees or those of its Subsidiaries.

(n)Burdensome Provisions.  Neither the US Borrower nor any Subsidiary thereof is a party to any indenture, agreement, lease or other instrument, or subject to any corporate or partnership restriction, Governmental Approval or Applicable Law which is so unusual or burdensome as in the foreseeable future could be reasonably expected to have a Material Adverse Effect.  The US Borrower and its Subsidiaries do not presently anticipate that future expenditures needed to meet the provisions of any statutes, orders, rules or regulations of a Governmental Authority will be so burdensome as to have a Material Adverse Effect.  No Subsidiary is party to any agreement or instrument or otherwise subject to any restriction or encumbrance that restricts or limits its ability to make dividend payments or other distributions in respect of its Capital Stock to the US Borrower or any Subsidiary or to transfer any of its assets or properties to the US Borrower or any other Subsidiary in each case other than existing under or by reason of the Loan Documents or Applicable Law.

(o)Financial Statements.  The (i) audited Consolidated balance sheet of the US Borrower and its Subsidiaries as of December 31, 2006 and the related audited statements of income and retained earnings and cash flows for the Fiscal Year then ended and (ii) unaudited Consolidated balance sheet of the US Borrower and its Subsidiaries as of September 30, 2007 and related unaudited interim statements of income and retained earnings, copies of which have been furnished to the Administrative Agent and each Lender, are complete and correct and fairly present on a Consolidated basis the assets, liabilities and financial position of the US Borrower and its Subsidiaries as at such dates, and the results of the operations and changes of financial position for the periods then ended (other than customary year-end adjustments and the absence of footnotes for unaudited financial statements).  All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP.  The US Borrower and its Subsidiaries have no Indebtedness, obligation or other unusual forward or long-term commitment which is not fairly reflected in the foregoing financial statements or in the notes thereto.

(p)No Material Adverse Change.  Since December 31, 2006, there has been no material adverse change in the properties, business, operations, or condition (financial or otherwise) of the US Borrower and its Subsidiaries, taken as a whole, and no event has occurred or condition arisen that could reasonably be expected to have a Material Adverse Effect.

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(q)Solvency.  As of the Closing Date and after giving effect to each Extension of Credit made hereunder, the US Borrower and each of its Subsidiaries will be Solvent.

(r)Titles to Properties.  Each of the US Borrower and its Subsidiaries has such title to the real property owned or leased by it as is necessary or desirable to the conduct of its business and valid and legal title to all of its personal property and assets, including, but not limited to, those reflected on the balance sheets of the US Borrower and its Subsidiaries delivered pursuant to Section 7.1(o), except those which have been disposed of by the US Borrower or its Subsidiaries subsequent to the date of such balance sheets pursuant to dispositions in the ordinary course of business or as otherwise expressly permitted hereunder.

(s)Liens.  None of the properties and assets of the US Borrower or any Subsidiary thereof is subject to any Lien, except Permitted Liens.  No financing statement under the Uniform Commercial Code of any state or comparable legislation in other jurisdictions which names the US Borrower or any Subsidiary thereof or any of their respective trade names or divisions as debtor and which has not been terminated, has been filed in any state or other jurisdiction and neither the US Borrower nor any Subsidiary thereof has signed any such financing statement or any security agreement authorizing any secured party thereunder to file any such financing statement, except to perfect those Permitted Liens.

(t)Indebtedness and Guaranty Obligations.  Schedule 7.1(t) is a complete and correct listing of all Indebtedness and Guaranty Obligations of the US Borrower and its Subsidiaries as of the Closing Date in excess of $5,000,000.  The US Borrower and its Subsidiaries have performed and are in compliance with all of the terms of such Indebtedness and Guaranty Obligations and all instruments and agreements relating thereto, and no default or event of default, or event or condition which with notice or lapse of time or both would constitute such a default or event of default on the part of the US Borrower or any of its Subsidiaries exists with respect to any such Indebtedness or Guaranty Obligation.

(u)Litigation. Except for matters existing on the Closing Date and set forth on Schedule 7.1(u), there are no actions, suits or proceedings pending nor, to the knowledge of the Borrowers, threatened against or in any other way relating adversely to or affecting the US Borrower or any Subsidiary thereof or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Authority that (i) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions provided for herein or therein, or (ii) either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect.

(v)Absence of Defaults.  No event has occurred or is continuing which constitutes a Default or an Event of Default, or which constitutes, or which with the passage of time or giving of notice or both would constitute, a default or event of default by the US Borrower or any Subsidiary thereof under any Material Contract or judgment, decree or order to which the US Borrower or its Subsidiaries is a party or by which the US Borrower or its Subsidiaries or any of their respective properties may be bound or which would require the US Borrower or its Subsidiaries to make any payment thereunder prior to the scheduled maturity date therefor.

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(w)Senior Indebtedness Status.  The Obligations of the US Borrower and each of its Subsidiaries under this Agreement and each of the other Loan Documents ranks and shall continue to rank at least senior in priority of payment to all Subordinated Indebtedness and at least equal to all senior unsecured Indebtedness of each such Person and is designated as “Senior Indebtedness” (or the equivalent term) under all instruments and documents, now or in the future, relating to all Subordinated Indebtedness and all senior unsecured Indebtedness of such Person.

(x)Accuracy and Completeness of Information.  All written information, reports and other papers and data produced by or on behalf of the US Borrower or any Subsidiary thereof (other than financial projections, which shall be subject to the standard set forth in Section 8.1(c)) and furnished to the Lenders were, at the time the same were so furnished, complete and correct in all respects to the extent necessary to give the recipient a true and accurate knowledge of the subject matter.

(y)OFAC.  None of the Borrowers, any Subsidiary of the Borrowers or any Affiliate of the Borrowers: (i) is a Sanctioned Person, (ii) has more than ten percent (10%) of its assets in Sanctioned Entities, or (iii) derives more than ten percent (10%) of its operating income from investments in, or transactions with Sanctioned Persons or Sanctioned Entities.  None of the proceeds of any Loan will be used, nor have they been used, to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

(z)Disclosure.  The Borrowers have disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which any of the Credit Parties are subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.  No financial statement, material report, material certificate or other material information furnished (whether in writing or orally) by or on behalf of any of the Credit Parties to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, pro forma financial information, estimated financial information and other projected or estimated information, the Borrowers represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

SECTION 7.2Survival of Representations and Warranties, Etc.

All representations and warranties set forth in this Article VII and all representations and warranties contained in any certificate, or any of the Loan Documents (including, but not limited to, any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement.  All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date (except those that are expressly made as of a specific date), shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Lenders or any borrowing hereunder.

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ARTICLE VIII                                           

FINANCIAL INFORMATION AND NOTICES

Until all the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 15.2, the Borrowers will furnish or cause to be furnished to the Administrative Agent at the Administrative Agent’s Office at the address set forth in Section 15.1 and to the Lenders at their respective addresses as set forth on the Register, or such other office as may be designated by the Administrative Agent and Lenders from time to time:

SECTION 8.1Financial Statements and Projections

(a)Quarterly Financial Statements.  As soon as practicable and in any event within forty-five (45) days (or, if earlier, on the date of any required public filing thereof) after the end of each fiscal quarter of each Fiscal Year, an unaudited Consolidated balance sheet of the US Borrower and its Subsidiaries as of the close of such fiscal quarter and unaudited Consolidated statements of income, retained earnings and cash flows for the fiscal quarter then ended and that portion of the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures as of the end of and for the corresponding period in the preceding Fiscal Year and prepared by the US Borrower in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the period, and certified by the chief financial officer of the US Borrower to present fairly in all material respects the financial condition of the US Borrower and its Subsidiaries on a Consolidated basis as of their respective dates and the results of operations of the US Borrower and its Subsidiaries for the respective periods then ended, subject to normal year end adjustments and the absence of footnotes.  Delivery by the Borrowers to the Administrative Agent and the Lenders of the US Borrower’s quarterly report to the SEC on Form 10-Q with respect to any fiscal quarter, or the availability of such report on EDGAR Online, within the period specified above shall be deemed to be compliance by the Borrowers with this Section 8.1(a).

(b)Annual Financial Statements.  As soon as practicable and in any event within ninety (90) days (or, if earlier, on the date of any required public filing thereof) after the end of each Fiscal Year, an audited Consolidated balance sheet of the US Borrower and its Subsidiaries as of the close of such Fiscal Year and audited Consolidated statements of income, retained earnings and cash flows for the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures as of the end of and for the preceding Fiscal Year and prepared in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the year.  Such annual financial statements shall be audited by Ernst & Young LLP or such other independent certified public accounting firm acceptable to the Administrative Agent, and accompanied by a report thereon by such certified public accountants that is not qualified with respect to scope limitations imposed by the US Borrower or any of its Subsidiaries or with respect to accounting principles followed by the US Borrower or any of its Subsidiaries not in accordance with GAAP.  Delivery by the US Borrower to the Administrative Agent and the Lenders of the US Borrower’s annual report to the SEC on Form 10-K with respect to any fiscal year, or the availability of such report on EDGAR Online, within the period specified above shall be deemed to be compliance by the US Borrower with this Section 8.1(b).

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(c)Annual Business Plan and Financial Projections.  As soon as practicable and in any event within forty-five (45) days prior to the beginning of each Fiscal Year, a business plan of the US Borrower and its Subsidiaries for the ensuing four (4) fiscal quarters, such plan to be prepared in accordance with GAAP and to include, on a quarterly basis, the following:  a quarterly operating and capital budget, a projected income statement, statement of cash flows and balance sheet and a report containing management’s discussion and analysis of such projections, accompanied by a certificate from the chief financial officer of the US Borrower to the effect that, to the best of such officer’s knowledge, such projections are good faith estimates (utilizing reasonable assumptions) of the financial condition and operations of the US Borrower and its Subsidiaries for such four (4) quarter period.

SECTION 8.2Officer’s Compliance Certificate

At each time financial statements are delivered pursuant to Sections 8.1(a) or (b) and at such other times as the Administrative Agent shall reasonably request, an Officer’s Compliance Certificate.

SECTION 8.3Accountants’ Certificate

At each time financial statements are delivered pursuant to Section 8.1(b), a certificate of the independent public accountants certifying such financial statements that in connection with their audit, nothing came to their attention that caused them to believe that the Borrowers failed to comply with the terms, covenants, provisions or conditions of Articles X and XI, insofar as they relate to financial and accounting matters or, if such is not the case, specifying such non-compliance and its nature and period of existence.

SECTION 8.4Other Reports

(a)Promptly after becoming available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the US Borrower generally, and copies of all annual, regular, periodic and special reports and registration statements which the US Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto; provided that, delivery of the foregoing shall be deemed to have been made if made available on EDGAR Online or the website of the US Borrower and the US Borrower shall have given notice thereof to Administrative Agent;

(b)Promptly upon receipt thereof, copies of all reports, if any, submitted to the US Borrower or its board of directors by its independent public accountants in connection with their auditing function, including, without limitation, any management report and any management responses thereto; and

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(c)Such other information regarding the operations, business affairs and financial condition of the US Borrower or any of its Subsidiaries as the Administrative Agent or any Lender may reasonably request.

The Borrowers hereby acknowledge that (a) the Administrative Agent will make available to the Lenders and the Issuing Lender materials and/or information provided by or on behalf of the Borrowers hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on SyndTrak Online or another similar electronic system (the “Platform”) and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrowers or their securities) (each, a “Public Lender”).  The Borrowers hereby agree that they will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (i) all such Borrower Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (ii) by marking Borrower Materials “PUBLIC,” the Borrowers shall be deemed to have authorized the Administrative Agent, the Issuing Lender and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Borrowers or their securities for purposes of United States federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 15.12); (iii) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and (iv) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.”

SECTION 8.5Notice of Litigation and Other Matters

Prompt telephonic and written notice of:

(a)the commencement of all proceedings and investigations by or before any Governmental Authority and all actions and proceedings in any court or before any arbitrator against or involving the US Borrower or any Subsidiary thereof or any of their respective properties, assets or businesses which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect;

(b)any notice of any violation received by the US Borrower or any Subsidiary thereof from any Governmental Authority including, without limitation, any notice of violation of Environmental Laws which in any such case could reasonably be expected to have a Material Adverse Effect;

(c)any labor controversy that (i) has resulted in a strike or other work stoppage or slow down against the US Borrower or any Subsidiary thereof, or (ii) threatens to result in, a strike or other work stoppage or slow down against the US Borrower or any Subsidiary thereof which could reasonably be expected to, individually or in the aggregate with any other labor controversy, work stoppage or slow down, have a Material Adverse Effect;

(d)any attachment, judgment, lien, levy or order exceeding $1,000,000 (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) that may be assessed against or threatened against the US Borrower or any Subsidiary thereof;

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(e)(i) any Default or Event of Default or (ii) any event which constitutes or which with the passage of time or giving of notice or both would constitute a default or event of default under any Material Contract to which the US Borrower or any of its Subsidiaries is a party or by which the US Borrower or any Subsidiary thereof or any of their respective properties may be bound;

(f)(i) any unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code (along with a copy thereof), (ii) all notices received by the US Borrower or any ERISA Affiliate of the PBGC’s intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (iii) all notices received by the US Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA and (iv) the Borrowers obtaining knowledge or reason to know that the US Borrower or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA; and

(g)any event which makes any of the representations set forth in Section 7.1 inaccurate in any respect.

Each notice pursuant to this Section 8.5 shall be accompanied by a statement of a Responsible Officer of the US Borrower setting forth details of the occurrence referred to therein and stating what action the US Borrower or any Subsidiary thereof, as applicable, has taken and proposes to take with respect thereto.  Each notice pursuant to Section 8.5(e)(i) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached; provided that, delivery of the foregoing notices shall be deemed to have been made if made available on EDGAR Online or the website of the US Borrower and the US Borrower shall have given notice thereof to Administrative Agent.

SECTION 8.6Accuracy of Information

All written information, reports, statements and other papers and data furnished by or on behalf of the Borrowers to the Administrative Agent or any Lender whether pursuant to this Article VIII or any other provision of this Agreement, shall, at the time the same is so furnished, comply with the representations and warranties set forth in Section 7.1(x).

ARTICLE IX                                

AFFIRMATIVE COVENANTS

Until all of the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner provided for in Section 15.2, the Borrowers will, and will cause each of their Subsidiaries to:

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SECTION 9.1Preservation of Corporate Existence and Related Matters

Except as permitted by Section 11.4, preserve and maintain its separate corporate existence and all rights, franchises, licenses and privileges necessary to the conduct of its business, and qualify and remain qualified as a foreign corporation and authorized to do business in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Effect.

SECTION 9.2Maintenance of Property

Protect and preserve all properties useful in and material to its business, including copyrights, patents, trade names, service marks and trademarks; maintain in good working order and condition, ordinary wear and tear excepted, all buildings, equipment and other tangible real and personal property; and from time to time make or cause to be made all repairs, renewals and replacements thereof and additions to such property necessary for the conduct of its business, so that the business carried on in connection therewith may be conducted in a commercially reasonable manner.

SECTION 9.3Insurance

Maintain insurance with financially sound and reputable insurance companies against such risks and in such amounts as are customarily maintained by similar businesses and as may be required by Applicable Law (including, without limitation, hazard and business interruption insurance), and on the Closing Date and from time to time thereafter deliver to the Administrative Agent upon its request a detailed list of the insurance then in effect, stating the names of the insurance companies, the amounts and rates of the insurance, the dates of the expiration thereof and the properties and risks covered thereby.

SECTION 9.4Accounting Methods and Financial Records

Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete in all material respects) as may be required or as may be necessary to permit the preparation of financial statements in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction over it or any of its properties.

SECTION 9.5Payment and Performance of Obligations

Pay and perform all Obligations under this Agreement and the other Loan Documents, and pay or perform (a) all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its property, and (b) all other indebtedness, obligations and liabilities in accordance with customary trade practices; provided, that the US Borrower or such Subsidiary may contest any item described in clauses (a) or (b) of this Section in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP.

SECTION 9.6Compliance With Laws and Approvals

Observe and remain in compliance in all material respects with all Applicable Law and maintain in full force and effect all Governmental Approvals, in each case applicable to the conduct of its business, except where the failure to so comply or maintain such Governmental Approval could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

SECTION 9.7Environmental Laws

In addition to and without limiting the generality of Section 9.6, (a) comply with, and ensure such compliance by all tenants and subtenants with all applicable Environmental Laws and obtain and comply with and maintain, and ensure that all tenants and subtenants, if any, obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except where the failure to do so could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, (b) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, and promptly comply with all lawful orders and directives of any Governmental Authority regarding Environmental Laws, except where the failure to conduct or complete such actions, or comply with such orders or directions, could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, and (c) defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates, employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the presence of Hazardous Materials, or the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of the US Borrower or any such Subsidiary, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney’s and consultant’s fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing directly result from the gross negligence or willful misconduct of the party seeking indemnification therefor, as determined by a court of competent jurisdiction by final nonappealable judgment.

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SECTION 9.8Compliance with ERISA

In addition to and without limiting the generality of Section 9.6, (a) except where the failure to so comply could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) comply with all material applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans, (ii) not take any action or fail to take action the result of which could be a liability to the PBGC or to a Multiemployer Plan, (iii) not participate in any prohibited transaction that could result in any civil penalty under ERISA or tax under the Code and (iv) operate each Employee Benefit Plan in such a manner that will not incur any tax liability under Section 4980B of the Code or any liability to any qualified beneficiary as defined in Section 4980B of the Code and (b) furnish to the Administrative Agent upon the Administrative Agent’s request such additional information about any Employee Benefit Plan as may be reasonably requested by the Administrative Agent.

SECTION 9.9Compliance With Agreements

Comply in all respects with each term, condition and provision of all leases, agreements and other instruments entered into in the conduct of its business including, without limitation, any Material Contract; provided, that the Borrowers or any Subsidiary thereof may contest any such lease, agreement or other instrument in good faith through applicable proceedings so long as adequate reserves are maintained in accordance with GAAP.

SECTION 9.10Visits and Inspections

Permit representatives of the Administrative Agent or any Lender, from time to time, to visit and inspect its properties; inspect, audit and make extracts from its books, records and files, including, but not limited to, management letters prepared by independent accountants; and discuss with its principal officers, and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects; provided that so long as no Default or Event of Default has occurred and is continuing, the Administrative Agent or applicable Lender shall give reasonable prior to notice to the US Borrower of its intention to visit and inspect the properties and records pursuant to this Section.

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SECTION 9.11Additional Subsidiaries

Notify the Administrative Agent of the creation or acquisition of any Domestic Subsidiary and promptly thereafter (and in any event within thirty (30) days), cause such Person to (a) become a Subsidiary Guarantor by delivering to the Administrative Agent a duly executed supplement to the Subsidiary Guaranty Agreement or such other document as the Administrative Agent shall deem appropriate for such purpose, (b) deliver to the Administrative Agent such documents and certificates referred to in Section 6.2 as may be reasonably requested by the Administrative Agent, (c) deliver to the Administrative Agent such updated Schedules to the Loan Documents as requested by the Administrative Agent with respect to such Person, and (d) deliver to the Administrative Agent such other documents as may be reasonably requested by the Administrative Agent, all in form, content and scope reasonably satisfactory to the Administrative Agent.

SECTION 9.12Use of Proceeds

(a)The Borrowers shall use the proceeds of the Extensions of Credit under the Revolving Credit Facility (i) to refinance the existing indebtedness of the Borrowers under the Existing Credit Agreement (other than the Existing Letters of Credit and the Term Loans), and (ii) for general corporate purposes of the Borrowers and their Subsidiaries (including, without limitation, working capital, capital expenditures in the ordinary course of business, Permitted Acquisitions, dividends and stock repurchases) and (iii) to pay fees and expenses related to the Credit Facility.

(b)The US Borrower shall use the proceeds of the Term Loans for working capital and general corporate requirements of the US Borrower and its Subsidiaries, including, but not limited to, Permitted Acquisitions, dividends, stock repurchases and the payment of certain fees and expenses incurred in connection with the Term Loan Facility.

SECTION 9.13Further Assurances

Make, execute and deliver all such additional and further acts, things, deeds and instruments as the Administrative Agent or the Required Lenders (through the Administrative Agent) may reasonably require to document and consummate the transactions contemplated hereby and to vest completely in and insure the Administrative Agent and the Lenders their respective rights under this Agreement, the Letters of Credit and the other Loan Documents.

ARTICLE X                                

FINANCIAL COVENANTS

Until all of the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 15.2, the US Borrower and its Subsidiaries on a Consolidated basis will not:

SECTION 10.1Average Total Leverage Ratio

As of any fiscal quarter end, permit the Average Total Leverage Ratio to be greater than or equal to 3.25 to 1.00.

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SECTION 10.2Fixed Charge Coverage Ratio

As of any fiscal quarter end, permit the ratio of (a) EBITDAR for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date to (b) the sum of (i) Interest Expense paid or payable in cash for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date plus (ii) Rental Expense for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date to be less than 2.25 to 1.00.

ARTICLE XI                                

NEGATIVE COVENANTS

Until all of the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 15.2, the Borrowers have not and will not and will not permit any of their Subsidiaries to:

SECTION 11.1Limitations on Indebtedness

Create, incur, assume or suffer to exist any Indebtedness except:

(a)the Obligations (excluding Hedging Obligations permitted pursuant to Section 11.1(b));

(b)Indebtedness incurred in connection with a Hedging Agreement, in each case, incurred in the ordinary course of business and not for speculative purposes;

(c)Indebtedness existing on the Closing Date and not otherwise permitted under this Section, as set forth on Schedule 7.1(t), and the renewal, refinancing, extension and replacement (but not the increase in the aggregate principal amount) thereof;

(d)Indebtedness of the US Borrower and its Subsidiaries incurred in connection with Capital Leases in an aggregate amount not to exceed $10,000,000 on any date of determination;

(e)purchase money Indebtedness of the US Borrower and its Subsidiaries in an aggregate amount not to exceed $10,000,000 on any date of determination;

(f)Guaranty Obligations in favor of the Administrative Agent for the benefit of the Administrative Agent and the Lenders;

(g)Guaranty Obligations with respect to Indebtedness permitted pursuant to subsections (a) through (e) or subsection (p) of this Section;

(h)Indebtedness owed (i) by the US Borrower to any Subsidiary Guarantor, (ii) by any Subsidiary Guarantor to the US Borrower, (iii) by any Subsidiary Guarantor to any other Subsidiary Guarantor, or (iv) by any Subsidiary that is not a Subsidiary Guarantor to any other Subsidiary that is not a Subsidiary Guarantor;

(i)so long as no Default or Event of Default has occurred and is continuing or would result therefrom, Indebtedness owed by the US Borrower and any Subsidiary Guarantor to any Foreign Subsidiary or Indebtedness owed by any Foreign Subsidiary to the US Borrower and any Subsidiary Guarantor which, together with the Permitted Acquisition Consideration payable in connection with all Permitted Foreign Acquisitions and the total amount of any transactions permitted under Sections 11.3(i) and 11.5(f), does not exceed $60,000,000 in the aggregate during the period from the Closing Date through and including the later to occur of the Revolving Credit Maturity Date or the Term Loan Maturity Date;

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(j)Subordinated Indebtedness; provided that in the case of each issuance of Subordinated Indebtedness, (i) no Default or Event of Default shall have occurred and be continuing or would be caused by the issuance of such Subordinated Indebtedness and (ii) the Administrative Agent shall have received satisfactory written evidence that the US Borrower and its Subsidiaries would be in compliance with all covenants contained in this Agreement on a pro forma basis after giving effect to the issuance of any such Subordinated Indebtedness;

(k)additional Indebtedness of the US Borrower and the Subsidiary Guarantors not otherwise permitted pursuant to this Section in an aggregate amount outstanding not to exceed $5,000,000;

(l)so long as no Default or Event of Default has occurred and is continuing or would occur as a result therefrom, Indebtedness arising in connection with an Accounts Securitization;

(m)endorsements of negotiable instruments for deposit or collection in the ordinary course of business;

(n)unsecured Indebtedness in respect of performance bonds, worker’s compensation claims, surety or appeal bonds and payment obligations in connection with self insurance or similar obligations, in each case to the extent incurred in the ordinary course of business;

(o)Guaranty Obligations consisting of an unsecured limited guaranty of certain of the obligations of Northpark Corporate Center, L.L.C. pursuant to that certain $9,400,000 loan agreement by and between Northpark Corporate Center, L.L.C. and Wells Fargo Bank, National Association; provided that such Guaranty Obligations shall be (i) in an aggregate principal amount not to exceed $9,400,000 and (ii) evidenced by a guaranty agreement in form and substance satisfactory to the Administrative Agent; and

(p)(i) Indebtedness in connection with the February 2007 Notes and (ii) any refinance of the February 2007 Notes or any additional unsecured Indebtedness issued under, or by a supplement to, the February 2007 Note Purchase Agreement or any similar note purchase agreement or other debt instrument; provided that such refinancing or additional unsecured Indebtedness shall be on terms and conditions that are, taken as a whole, (A) consistent with the then-current market terms and conditions of such type of unsecured debt (as reasonably determined in good faith by the board of directors of the US Borrower) and (B) no less favorable to the Lenders than the terms of the February 2007 Notes (as reasonably determined by the Administrative Agent); provided further that with respect to any Indebtedness incurred pursuant to clause (ii), (1) no Default or Event of Default shall have occurred and be continuing or would be caused by the issuance thereof, (2) the Administrative Agent shall have received satisfactory written evidence that the US Borrower and its Subsidiaries would be in compliance with all covenants in this Agreement on a pro forma basis after giving effect to the issuance thereof, and (3) the maturity date of such senior Indebtedness shall be no earlier than the Indebtedness (if any) being refinanced and in any event shall be at least six (6) months after each of the Revolving Credit Maturity Date and the Term Loan Maturity Date;

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provided, that no agreement or instrument with respect to Indebtedness permitted to be incurred by this Section shall restrict, limit or otherwise encumber (by covenant or otherwise) the ability of any Subsidiary of any Borrower to make any payment to such Borrower or any of its Subsidiaries (in the form of dividends, intercompany advances or otherwise) for the purpose of enabling such Borrower to pay the Obligations.

SECTION 11.2Limitations on Liens

Create, incur, assume or suffer to exist, any Lien on or with respect to any of its assets or properties (including, without limitation, shares of Capital Stock), real or personal, whether now owned or hereafter acquired, except:

(a)Liens for taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or Environmental Laws) not yet due or as to which the period of grace (not to exceed thirty (30) days), if any, related thereto has not expired or which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP;

(b)the claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business, (i) which are not overdue for a period of more than thirty (30) days or (ii) which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP;

(c)Liens consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers’ compensation, unemployment insurance or similar legislation;

(d)Liens constituting encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property as are of a nature generally existing with respect to properties of a similar character, which in the aggregate are not substantial in amount and which do not, in any case, materially detract from the value of such property or materially impair the use thereof in the ordinary conduct of business;

(e)Liens securing the Obligations;

(f)Liens not otherwise permitted hereunder securing obligations not at any time exceeding in the aggregate $5,000,000;

(g)(i) Liens not otherwise permitted by this Section and in existence on the Closing Date and described on Schedule 11.2 and (ii) Liens incurred in connection with any refinancing, refunding, renewal or extension of Indebtedness pursuant to Section 11.1(c); provided that such Liens (A) were not created in contemplation of such refinancing, refunding, renewal or extension and (B) do not extend to cover any other property or assets of the Borrowers and their Subsidiaries;

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(h)Liens securing Indebtedness permitted under Sections 11.1(d) and (e); provided that (i) such Liens shall be created substantially simultaneously with the acquisition or lease of the related asset, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed one hundred percent (100%) of the original purchase price or lease payment amount of such property at the time it was acquired;

(i)Liens incurred in connection with any Accounts Securitization (which Liens shall attach solely to the Transferred Assets sold or transferred in connection with such Accounts Securitization); and

(j)Liens securing Indebtedness permitted under Section 11.1(k).

SECTION 11.3Limitations on Loans, Advances, Investments and Acquisitions

Purchase, own, invest in or otherwise acquire, directly or indirectly, any Capital Stock, interests in any partnership or joint venture (including, without limitation, the creation or capitalization of any Subsidiary), evidence of Indebtedness or other obligation or security, substantially all or a portion of the business or assets of any other Person or any other investment or interest whatsoever in any other Person, or make or permit to exist, directly or indirectly, any loans, advances or extensions of credit to, or any investment in cash or by delivery of property in, any Person except:

(a)(i) investments existing on the Closing Date in Subsidiaries, and (ii) the other loans, advances and investments existing on the Closing Date which are described on Schedule 11.3;

(b)investments in (i) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency thereof maturing within one hundred twenty (120) days from the date of acquisition thereof, (ii) commercial paper maturing no more than one hundred twenty (120) days from the date of creation thereof and currently having the highest rating obtainable from either Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or Moody’s Investors Service, Inc., (iii) certificates of deposit maturing no more than one hundred twenty (120) days from the date of creation thereof issued by commercial banks incorporated under the laws of the United States, each having combined capital, surplus and undivided profits of not less than $500,000,000 and having a rating of “A” or better by a nationally recognized rating agency; provided, that the aggregate amount invested in such certificates of deposit shall not at any time exceed $5,000,000 for any one such certificate of deposit and $10,000,000 for any one such bank, (iv) time deposits maturing no more than thirty (30) days from the date of creation thereof with commercial banks or savings banks or savings and loan associations each having membership either in the FDIC or the deposits of which are insured by the FDIC and in amounts not exceeding the maximum amounts of insurance thereunder, (v) demand deposit accounts maintained in the ordinary course of business or (vi) any Eurodollar deposits maturing no more than seven (7) days from the date of creation thereof issued by a Lender, an Affiliate of a Lender orcommercial banks, each having combined capital, surplus and undivided profits of not less than $500,000,000 in an aggregate amount invested at any one time not to exceed $10,000,000;

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(c)investments by the US Borrower or any Subsidiary thereof in the form of acquisitions of all or substantially all of the business or a line of business (whether by the acquisition of Capital Stock, assets or any combination thereof) of any other Person if each such acquisition meets all of the following requirements (such acquisition being referred to herein as a “Permitted Domestic Acquisition”):

(i)the Person to be acquired shall be organized under the laws of the United States of America, or the assets to be acquired shall be located in the continental United States of America, and such Person shall be engaged in a business, or such assets shall be used in a business, permitted pursuant to Section 11.12;

(ii)the US Borrower or any Subsidiary (including any entity being acquired that becomes a Subsidiary) shall be the surviving Person and no Change of Control shall have been effected thereby;

(iii)the Person to be acquired shall not be subject to any material pending litigation which could reasonably be expected to have a Material Adverse Effect;

(iv)prior to the closing of such acquisition, the acquisition is approved by the board of directors (or a majority of the holders of the Capital Stock of such Person) of the Person whose assets or Capital Stock are being acquired pursuant to such acquisition;

(v)no Default or Event of Default shall have occurred and be continuing both before and after giving effect to such proposed acquisition;

(vi)if the aggregate amount of Permitted Acquisition Consideration payable in cash with respect to such proposed acquisition or series of related acquisitions exceeds $50,000,000, the US Borrower shall have (A) demonstrated to the Administrative Agent pro forma compliance (as of the date of the proposed acquisition and after giving effect thereto and any Extensions of Credit made or to be made in connection therewith) with each covenant contained in, and in the manner set forth in, Article X, (B) delivered to the Administrative Agent evidence of the approval referred to in clause (iv) above, and (C) delivered written notice of such proposed acquisition to the Administrative Agent and the Lenders, which notice shall include the proposed closing date of such proposed acquisition and a description of the acquisition in the form customarily prepared by the US Borrower, not less than five (5) Business Days prior to such proposed closing date;  and

(vii)the US Borrower shall have delivered to the Administrative Agent such documents reasonably requested by the Administrative Agent or the Required Lenders (through the Administrative Agent) pursuant to Section 9.11 to be delivered at the time required pursuant to Section 9.11.

(d)investments by the US Borrower or any Subsidiary thereof in the form of acquisitions of all or substantially all of the business or a line of business (whether by the acquisition of Capital Stock, assets or any combination thereof) of any other Person if each such acquisition meets all of the following requirements (such acquisition being referred to herein as a “Permitted Foreign Acquisition”):

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(i)the Person to be acquired shall be organized under the laws of a jurisdiction other than the United States of America, or the assets to be acquired shall be located outside of the continental United States of America, and such Person shall be engaged in a business, or such assets shall be used in a business, permitted pursuant to Section 11.12;

(ii)the US Borrower or any Subsidiary (including any entity being acquired that becomes a Subsidiary) shall be the surviving Person and no Change of Control shall have been effected thereby;

(iii)the Person to be acquired shall not be subject to any material pending litigation which could reasonably be expected to have a Material Adverse Effect;

(iv)prior to the closing of such acquisition, the acquisition is approved by the board of directors (or a majority of the holders of the Capital Stock of such Person) of the Person whose assets or Capital Stock are being acquired pursuant to such acquisition;

(v)no Default or Event of Default shall have occurred and be continuing both before and after giving effect to such proposed acquisition;

(vi)the aggregate amount of Permitted Acquisition Consideration payable (A) with respect to any Permitted Foreign Acquisition or series of related Permitted Foreign Acquisitions does not exceed $35,000,000 in cash and (B) with respect to all Permitted Foreign Acquisitions and the total amount of any transactions permitted under Sections 11.1(i), 11.3(i) and 11.5(f) does not exceed $60,000,000 in the aggregate during the period from the Closing Date through and including the later to occur of the Revolving Credit Maturity Date or the Term Loan Maturity Date; and

(vii)if the aggregate amount of Permitted Acquisition Consideration payable in cash with respect to such proposed acquisition or series of related acquisitions exceeds $20,000,000, the US Borrower shall have (A) demonstrated to the Administrative Agent pro forma compliance (as of the date of the proposed acquisition and after giving effect thereto and any Extensions of Credit made or to be made in connection therewith) with each covenant contained in, and in the manner set forth in, Article X, (B) delivered to the Administrative Agent evidence of the approval referred to in clause (iv) above, and (C) delivered written notice of such proposed acquisition to the Administrative Agent and the Lenders, which notice shall include the proposed closing date of such proposed acquisition and a description of the acquisition in the form customarily prepared by the US Borrower, not less than five (5) Business Days prior to such proposed closing date.

(e)Hedging Agreements permitted pursuant to Section 11.1;

(f)purchases of assets in the ordinary course of business;

(g)investments in the form of loans and advances to employees in the ordinary course of business, which, in the aggregate, do not exceed at any time $500,000;

(h)intercompany Indebtedness permitted pursuant to Section 11.1(h);

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(i)the creation of new Foreign Subsidiaries or additional investments in existing Foreign Subsidiaries, the investment in which, together with the Permitted Acquisition Consideration payable in connection with all Permitted Foreign Acquisitions and the total amount of any transactions permitted under Sections 11.1(i) and 11.5(f), does not exceed $60,000,000 in the aggregate during the period from the Closing Date through and including the later to occur of the Revolving Credit Maturity Date or the Term Loan Maturity Date;

(j)the creation of Domestic Subsidiaries after the Closing Date so long as (i) each such Domestic Subsidiary shall comply with Section 9.11 and (ii) the creation of such Domestic Subsidiary is otherwise made in accordance with the terms and conditions of this Agreement (including, without limitation, this Section 11.3);

(k)equity investments (i) by the US Borrower in any Subsidiary Guarantor, (ii) by any Subsidiary in the US Borrower, (iii) by any Subsidiary in any Subsidiary Guarantor or (iv) by any Subsidiary that is not a Subsidiary Guarantor in any other Subsidiary that is not a Subsidiary Guarantor;

(i)so long as no Default or Event of Default has occurred or would result therefrom, the additional investment by the US Borrower and its Subsidiaries in Latham International, Inc. in an aggregate amount not to exceed $20,000,000 during the period from the Closing Date through and including the later to occur of the Revolving Credit Maturity Date or the Term Loan Maturity Date, provided that the US Borrower’s and its Subsidiaries’ interest in Latham International, Inc. shall not at any time exceed forty percent (40%) of the Capital Stock of Latham International, Inc.; and

(l)other additional domestic investments not otherwise permitted pursuant to this Section not exceeding $7,500,000in the aggregate in any Fiscal Year.

SECTION 11.4Limitations on Mergers and Liquidation

Merge, consolidate, amalgamate or enter into any similar combination with any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) except:

(a)any Wholly-Owned Subsidiary of the US Borrower may be merged or consolidated with or into the US Borrower (provided that the US Borrower shall be the continuing or surviving Person) or with or into any Subsidiary Guarantor (provided that the Subsidiary Guarantor shall be the continuing or surviving Person);

(b)any Wholly Owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the US Borrower or any other Wholly-Owned Subsidiary; provided that if the transferor in such a transaction is a Subsidiary Guarantor, then the transferee must either be the US Borrower or a Subsidiary Guarantor;

(c)any Wholly-Owned Subsidiary of the US Borrower may merge into the Person such Wholly-Owned Subsidiary was formed to acquire in connection with a Permitted Acquisition; and

(d)any Subsidiary of the US Borrower may wind-up or dissolve into the US Borrower or any Wholly-Owned Subsidiary of the US Borrower (provided that if the Subsidiary subject to such winding up or dissolution is a Subsidiary Guarantor, such Subsidiary shall wind-up or dissolve into the US Borrower or another Subsidiary Guarantor).

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SECTION 11.5Limitations on Sale of Assets

Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, the sale of any receivables and leasehold interests and any sale-leaseback or similar transaction), whether now owned or hereafter acquired except:

(a)the sale of inventory in the ordinary course of business;

(b)the sale of obsolete assets no longer used or usable in the business of the  US Borrower or any of its Subsidiaries;

(c)the transfer of assets pursuant to Section 11.4;

(d)the Borrowers or any of their Subsidiaries may write-off, discount, sell or otherwise dispose of defaulted or past due receivables and similar obligations in the ordinary course of business and not as part of an accounts receivable financing transaction;

(e)the disposition of any Hedging Agreement;

(f)sales of assets to Foreign Subsidiaries the fair market value with respect to which, together with the Permitted Acquisition Consideration payable in connection with all Permitted Foreign Acquisitions and the total amount of any transactions permitted under Sections 11.1(i) and 11.3(i), does not exceed $60,000,000 in the aggregate during the period from the Closing Date through and including the later to occur of the Revolving Credit Maturity Date or the Term Loan Maturity Date;

(g)so long as no Default or Event of Default has occurred and is continuing or would occur as a result therefrom, transfers of an interest in the Transferred Assets in connection with an Account Securitization; and

(h)additional dispositions of assets not otherwise permitted pursuant to this Section the fair market value with respect to which does not exceed $7,500,000in the aggregate in any Fiscal Year.

SECTION 11.6Limitations on Dividends and Distributions

Declare or pay any dividends upon any of its Capital Stock; purchase, redeem, retire or otherwise acquire, directly or indirectly, any shares of its Capital Stock, or make any distribution of cash, property or assets among the holders of shares of its Capital Stock, or make any change in its capital structure which such change in its capital structure could reasonably be expected to have a Material Adverse Effect; provided that:

(a)the US Borrower or any Subsidiary may pay dividends in shares of its own Capital Stock;

(b)so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the US Borrower may declare and pay dividends in a manner consistent with the past practice of the US Borrower in an amount reasonably determined by the board of directors of the US Borrower; provided that such amount shall not exceed fifty percent (50%) of Net Income for the preceding Fiscal Year;

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(c)any Subsidiary may declare and pay dividends of any type (cash or non-cash) to the US Borrower or any other Wholly-Owned Subsidiary, provided that if the Subsidiary paying the dividend is a Subsidiary Guarantor then the recipient of the dividend must be either the US Borrower or another Subsidiary Guarantor; and

(d)the US Borrower may repurchase shares of its Capital Stock, so long as:

(i)no Default or Event of Default has occurred and is continuing at the time of such repurchase or would result therefrom; and

(ii)the US Borrower and its Subsidiaries shall have demonstrated to the Administrative Agent that the Average Total Leverage Ratio (as of the date of the proposed share repurchase, based on the most recent financial statements delivered to the Administrative Agent pursuant to Section 8.1, and, on a pro forma basis, after giving effect to such share repurchase and any Indebtedness incurred in connection therewith) is less than 3.00 to 1.00.

SECTION 11.7Limitations on Exchange and Issuance of Capital Stock

Issue, sell or otherwise dispose of any class or series of Capital Stock that, by its terms or by the terms of any security into which it is convertible or exchangeable, is, or upon the happening of an event or passage of time would be, (a) convertible or exchangeable into Indebtedness or (b) required to be redeemed or repurchased, including at the option of the holder, in whole or in part, or has, or upon the happening of an event or passage of time would have, a redemption or similar payment due.

SECTION 11.8Transactions with Affiliates

Except for transactions permitted by Sections 11.3, 11.6 and 11.7, directly or indirectly (a) make any loan or advance to, or purchase or assume any note or other obligation to or from, any of its officers, directors, shareholders or other Affiliates, or to or from any member of the immediate family of any of its officers, directors, shareholders or other Affiliates, or subcontract any operations to any of its Affiliates or (b) enter into, or be a party to, any other transaction not described in clause (a) above with any of its Affiliates, except pursuant to the reasonable requirements of its business and upon fair and reasonable terms that are no less favorable to it than it would obtain in a comparable arm’s length transaction with a Person not its Affiliate.

SECTION 11.9Certain Accounting Changes; Organizational Documents

(a) Change its Fiscal Year end, or make any change in its accounting treatment and reporting practices except as required by GAAP or (b) amend, modify or change its articles of incorporation (or corporate charter or other similar organizational documents) or amend, modify or change its bylaws (or other similar documents) in any manner adverse in any respect to the rights or interests of the Lenders.

SECTION 11.10Amendments; Payments and Prepayments of Certain Indebtedness.

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(a)Amend or modify (or permit the modification or amendment of) any of the terms or provisions of any Subordinated Indebtedness.

(b)Amend or modify (or permit the modification or amendment of) any of the terms or provisions of any Indebtedness permitted pursuant to Section 11.1(p) of this Agreement in any respect which would materially adversely affect the rights or interests of the Administrative Agent or any Lender hereunder.

(c)Cancel, forgive, make any payment or prepayment on, or redeem or acquire for value (including, without limitation, (i) by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due and (ii) subject to clause (C) below, at the maturity thereof) any Subordinated Indebtedness or any Indebtedness permitted pursuant to Section 11.1(p) of this Agreement, except:

(A)           refinancings, refundings, renewals, extensions or exchange of any such Indebtedness to the extent permitted by Section 11.1(j) (in the case of Subordinated Indebtedness) or Section 11.1(p) (in the case of Indebtedness permitted by Section 11.1(p));

(B)           so long as no Default or Event of Default has occurred or would result therefrom regularly scheduled payments of interest on Indebtedness issued pursuant to Section 11.1(p); or

(C)           repayments of Indebtedness issued pursuant to Section 11.1(p) at the stated maturity thereof, so long as:

(1)           no Default or Event of Default shall have occurred and be continuing at the time of such repayment or would result therefrom;

(2)           the US Borrower and its Subsidiaries shall have demonstrated to the Administrative Agent that the Average Total Leverage Ratio (as of the date of such repayment, based on the most recent financial statements delivered to the Administrative Agent pursuant to Section 8.1), and, on a pro forma basis, after giving effect to such repayment and any Indebtedness incurred in connection therewith) is less than 3.00 to 1.00.

SECTION 11.11Restrictive Agreements

(a)Enter into any Indebtedness which contains any negative pledge on assets or any covenants more restrictive than the provisions of Articles IX, X and XI hereof, or which restricts, limits or otherwise encumbers its ability to incur Liens on or with respect to any of its assets or properties other than the assets or properties securing such Indebtedness (other than (i) Indebtedness permitted pursuant to Section 11.1(p) of this Agreement (provided that any such negative pledge, restriction, limitation or encumbrance is no more restrictive than the February 2007 Notes) and (ii) Superior Commerce solely in connection with an Accounts Securitization).

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(b)Enter into or permit to exist any agreement which impairs or limits the ability of any Subsidiary of a Borrower (other than Superior Commerce solely in connection with an Accounts Securitization) to pay dividends to such Borrower.

SECTION 11.12Nature of Business

Substantively alter in any material respect the character or conduct of the business conducted by the US Borrower and its Subsidiaries as of the Closing Date.

ARTICLE XII                                           

UNCONDITIONAL US BORROWER GUARANTY

SECTION 12.1Guaranty of Obligations

The US Borrower hereby unconditionally guarantees to the Administrative Agent for the ratable benefit of the Administrative Agent and the Lenders, and their respective successors, endorsees, transferees and assigns, the prompt payment of all Obligations of the Canadian Borrower, whether primary or secondary (whether by way of endorsement or otherwise), whether now existing or hereafter arising, whether or not from time to time reduced or extinguished (except by payment thereof) or hereafter increased or incurred, whether or not recovery may be or hereafter become barred by the statute of limitations, whether enforceable or unenforceable as against the Canadian Borrower, whether or not discharged, stayed or otherwise affected by any bankruptcy, insolvency or other similar law or proceeding, whether created directly with the Administrative Agent or any Lender or acquired by the Administrative Agent or any Lender through assignment, endorsement or otherwise, whether matured or unmatured, whether joint or several, as and when the same become due and payable (whether at maturity or earlier, by reason of acceleration, mandatory repayment or otherwise), in accordance with the terms of any such instruments evidencing any such obligations, including all renewals, extensions or modifications thereof (all Obligations of the Canadian Borrower to the Administrative Agent and the Lenders, including all of the foregoing, being hereinafter collectively referred to as the “US Borrower Guaranteed Obligations”).

SECTION 12.2Nature of Guaranty

The US Borrower agrees that this US Borrower Guaranty is a continuing, unconditional guaranty of payment and not of collection, and that its obligations under this US Borrower Guaranty shall be primary, absolute and unconditional, irrespective of, and unaffected by (a) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement or any other Loan Document or any other agreement, document or instrument to which the Canadian Borrower is or may become a party, (b) the absence of any action to enforce this US Borrower Guaranty, this Agreement or any other Loan Document or the waiver or consent by the Administrative Agent or any Lender with respect to any of the provisions of this US Borrower Guaranty, this Agreement or any other Loan Document, (c) the existence, value or condition of, or failure to perfect aLien, if any, against, any security for or other guaranty of the US Borrower Guaranteed Obligations or any action, or the absence of any action, by the Administrative Agent or any Lender in respect of such security or guaranty (including, without limitation, the release of any such security or guaranty), (d) any structural change in, restructuring of or other similar change of the Canadian Borrower or any of its Subsidiaries or (e) any other action or circumstances which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor; it being agreed by the US Borrower that its obligations under this US Borrower Guaranty shall not be discharged until the final and indefeasible payment, in full, of the US Borrower Guaranteed Obligations and the termination of the Commitments.  To the extent permitted by law, the US Borrower expressly waives all rights it may now or in the future have under any statute (including, without limitation, North Carolina General Statutes Section 26-7, et seq. or similar law), or at law or in equity, or otherwise, to compel the Administrative Agent or any Lender to proceed in respect of the US Borrower Guaranteed Obligations against the Canadian Borrower, any other guarantor or any other party or against any security for or other guaranty of the payment of the US Borrower Guaranteed Obligations before proceeding against, or as a condition to proceeding against, the US Borrower.  To the extent permitted by law, the US Borrower further expressly waives and agrees not to assert or take advantage of any defense based upon the failure of the Administrative Agent or any Lender to commence an action in respect of the US Borrower Guaranteed Obligations against the Canadian Borrower, the US Borrower, any other guarantor or any other party or any security for the payment of the US Borrower Guaranteed Obligations.  The US Borrower agrees that any notice or directive given at any time to the Administrative Agent or any Lender which is inconsistent with the waivers in the preceding two sentences shall be null and void and may be ignored by the Administrative Agent or such Lender, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this US Borrower Guaranty for the reason that such pleading or introduction would be at variance with the written terms of this US Borrower Guaranty, unless the Administrative Agent and the Required Lenders have specifically agreed otherwise in writing.  The foregoing waivers are of the essence of the transaction contemplated by the Loan Documents and, but for this US Borrower Guaranty and such waivers, the Administrative Agent and the Lenders would decline to enter into this Agreement.

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SECTION 12.3Demand by the Administrative Agent

In addition to the terms set forth in Section 12.2, and in no manner imposing any limitation on such terms, if all or any portion of the then outstanding US Borrower Guaranteed Obligations under this Agreement are declared to be immediately due and payable in accordance with the terms of this Agreement, then the US Borrower shall, upon demand in writing therefor by the Administrative Agent to the US Borrower, pay all or such portion of the outstanding US Borrower Guaranteed Obligations then declared due and payable.  Payment by the US Borrower shall be made to the Administrative Agent, to be credited and applied upon the US Borrower Guaranteed Obligations, in immediately available funds to an account designated by the Administrative Agent or at the Administrative Agent’s Office or at any other address that may be specified in writing from time to time by the Administrative Agent.

SECTION 12.4Waivers

In addition to the waivers contained in Section 12.2, the US Borrower waives, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshalling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by the US Borrower of its obligations under, or the enforcement by the Administrative Agent or the Lenders of, this US Borrower Guaranty.  The US Borrower further hereby waives diligence, presentment, demand, protest and notice of whatever kind or nature with respect to any of the US Borrower Guaranteed Obligations and waives the benefit of all provisions of law which are or might be in conflict with the terms of this US Borrower Guaranty.  The US Borrower represents, warrants and agrees that its obligations under this US Borrower Guaranty are not and shall not be subject to any counterclaims, offsets or defenses of any kind against the Administrative Agent, the Lenders or the Canadian Borrower whether now existing or which may arise in the future.

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SECTION 12.5Modification of Loan Documents etc.

If the Administrative Agent or the Lenders shall at any time or from time to time, with or without the consent of, or notice to, the US Borrower (a) change or extend the manner, place or terms of payment of, or renew or alter all or any portion of, the US Borrower Guaranteed Obligations, (b) take any action under or in respect of the Loan Documents in the exercise of any remedy, power or privilege contained therein or available to it at law, in equity or otherwise, or waive or refrain from exercising any such remedies, powers or privileges, (c) amend or modify, in any manner whatsoever, the Loan Documents, (d) extend or waive the time for performance by the US Borrower, any other guarantor, the Canadian Borrower or any other Person of, or compliance with, any term, covenant or agreement on its part to be performed or observed under a Loan Document (other than this US Borrower Guaranty), or waive such performance or compliance or consent to a failure of, or departure from, such performance or compliance, (e) take and hold security or collateral for the payment of the US Borrower Guaranteed Obligations or sell, exchange, release, dispose of, or otherwise deal with, any property pledged, mortgaged or conveyed, or in which the Administrative Agent or any Lender has been granted a Lien, to secure any Indebtedness of the US Borrower, any other guarantor or the Canadian Borrower to the Administrative Agent or any Lender, (f) release anyone who may be liable in any manner for the payment of any amounts owed by the US Borrower, any other guarantor or the Canadian Borrower to the Administrative Agent or any Lender, (g) modify or terminate the terms of any intercreditor or subordination agreement pursuant to which claims of other creditors of the US Borrower, any other guarantor or the Canadian Borrower are subordinated to the claims of the Administrative Agent or any Lender or (h) apply any sums by whomever paid or however realized to any US Borrower Guaranteed Obligations owing by the US Borrower, any other guarantor or the Canadian Borrower to the Administrative Agent or any Lender in such manner as the Administrative Agent or any Lender shall determine in its reasonable discretion; then neither the Administrative Agent nor any Lender shall incur any liability to the US Borrower as a result thereof, and no such action shall impair or release the obligations of the US Borrower under this US Borrower Guaranty.

SECTION 12.6Reinstatement

The US Borrower agrees that, if any payment made by the Canadian Borrower or any other Person applied to the Obligations is at any time annulled, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of any collateral are required to be returned by the Administrative Agent or any Lender to the Canadian Borrower, its estate, trustee, receiver, liquidator, administrator or any other party, including, without limitation, the US Borrower, under any Applicable Law or equitable cause, then, to the extent of such payment or repayment, the US Borrower’s liability hereunder shall be and remain in full force and effect, as fully as if such payment had never been made, and, if prior thereto, this US Borrower Guaranty shall have been canceled or surrendered, this US Borrower Guaranty shall be reinstated in full force and effect, and such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of the US Borrower in respect of the amount of such payment.

SECTION 12.7No Subrogation

Notwithstanding any payment or payments by the US Borrower hereunder, or any set-off or application of funds of the US Borrower by the Administrative Agent or any Lender, or the receipt of any amounts by the Administrative Agent or any Lender with respect to any of the US Borrower Guaranteed Obligations, the US Borrower shall not be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Canadian Borrower or any other guarantor or against any collateral security held by the Administrative Agent or any Lender for the payment of the US Borrower Guaranteed Obligations nor shall the US Borrower seek any reimbursement from the Canadian Borrower or any of the other guarantors in respect of payments made by the US Borrower in connection with the US Borrower Guaranteed Obligations, until all amounts owing to the Administrative Agent and the Lenders on account of the US Borrower Guaranteed Obligations are paid in full and the Commitments are terminated.  If any amount shall be paid to the US Borrower on account of such subrogation rights at any time when all of the US Borrower Guaranteed Obligations shall not have been paid in full, such amount shall be held by the US Borrower in trust for the Administrative Agent, segregated from other funds of the US Borrower, and shall, forthwith upon receipt by the US Borrower, be turned over to the Administrative Agent in the exact form received by the US Borrower (duly endorsed by the US Borrower to the Administrative Agent, if required) to be applied against the US Borrower Guaranteed Obligations, whether matured or unmatured, in such order as set forth herein.

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ARTICLE XIII                                

DEFAULT AND REMEDIES

SECTION 13.1Events of Default

Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or otherwise:

(a)Default in Payment of Principal of Loans and Reimbursement Obligations.  The Borrowers shall default in any payment of principal of any Loan when due or in any payment of a Reimbursement Obligation (whether at maturity, by reason of acceleration or otherwise).

(b)Other Payment Default.  The Borrowers or any other Credit Party shall default in the payment when and as due (whether at maturity, by reason of acceleration or otherwise) of interest on any Loan or Reimbursement Obligation or the payment of any other Obligation, and such default shall continue for a period of five (5) days.

(c)Misrepresentation.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Borrower or any other Credit Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith that is subject to materiality or Material Adverse Effect qualifications, shall be incorrect or misleading in any respect when made or deemed made or any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Borrower or any other Credit Party herein, any other Loan Document, or in any document delivered in connection herewith or therewith that is not subject to materiality or Material Adverse Effect qualifications, shall be incorrect or misleading in any material respect when made or deemed made.

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(d)Default in Performance of Certain Covenants.  The US Borrower or any other Credit Party shall:

(i) default in the performance or observance of any covenant or agreement contained in Sections 8.1(a), 8.1(b), or 8.5(e)(i) or Articles X or XI of this Agreement; or

(ii) default in the performance or observance of any covenant or agreement contained in Section 8.2 and such default shall continue for a period of five (5) days.

(e)Default in Performance of Other Covenants and Conditions.  The US Borrower or any other Credit Party shall default in the performance or observance of any term, covenant, condition or agreement contained in this Agreement (other than as specifically provided for otherwise in this Section) or any other Loan Document and such default shall continue for a period of thirty (30) days after written notice thereof has been given to the US Borrower by the Administrative Agent.

(f)Hedging Agreement.  The US Borrower or any other Credit Party shall default in the performance or observance of any terms, covenant, condition or agreement (after giving effect to any applicable grace or cure period) under any Hedging Agreement and such default causes the termination of such Hedging Agreement and the Termination Value owned by such Credit Party as a result thereof exceeds $5,000,000.

(g)Indebtedness Cross-Default.  The US Borrower or any other Credit Party shall (i) default in the payment of any Indebtedness (other than the Loans or any Reimbursement Obligation) the aggregate outstanding amount of which Indebtedness is in excess of $7,500,000 beyond the period of grace if any, provided in the instrument or agreement under which such Indebtedness was created, or (ii) default in the observance or performance of any other agreement or condition relating to any Indebtedness (other than the Loans or any Reimbursement Obligation) the aggregate outstanding amount of which Indebtedness is in excess of $7,500,000 or contained in any instrument or agreement evidencing, securing or relating thereto or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, any such Indebtedness to become due prior to its stated maturity (any applicable grace period having expired).

(h)Other Cross-Defaults.  The US Borrower or any other Credit Party shall default in the payment when due, or in the performance or observance, of any obligation or condition of any Material Contract unless, but only as long as, the existence of any such default is being contested by the US Borrower or any such Subsidiary in good faith by appropriate proceedings and adequate reserves in respect thereof have been established on the books of the US Borrower or such Credit Party to the extent required by GAAP.

(i)Change in Control.  A Change in Control shall occur.

(j)Voluntary Bankruptcy Proceeding.  The US Borrower or any Subsidiary thereof shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay its debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii) take any corporate action for the purpose of authorizing any of the foregoing.

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(k)Involuntary Bankruptcy Proceeding.  A case or other proceeding shall be commenced against the US Borrower or any Subsidiary thereof in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for the US Borrower or any Subsidiary thereof or for all or any substantial part of their respective assets, domestic or foreign, and such case or proceeding shall continue without dismissal or stay for a period of sixty (60) consecutive days, or an order granting the relief requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered.

(l)Failure of Agreements.  Any provision of this Agreement or any provision of any other Loan Document shall for any reason cease to be valid and binding on the US Borrower or any Subsidiary thereof party thereto or any such Person shall so state in writing.

(m)Termination Event.  The occurrence of any of the following events:  (i) the US Borrower or any ERISA Affiliate fails to make full payment when due of all amounts which, under the provisions of any Pension Plan or Section 412 of the Code, the US Borrower or any ERISA Affiliate is required to pay as contributions thereto, (ii) an accumulated funding deficiency in excess of $5,000,000 occurs or exists, whether or not waived, with respect to any Pension Plan, (iii) a Termination Event or (iv) the US Borrower or any ERISA Affiliate as employers under one or more Multiemployer Plans makes a complete or partial withdrawal from any such Multiemployer Plan and the plan sponsor of such Multiemployer Plans notifies such withdrawing employer that such employer has incurred a withdrawal liability requiring payments in an amount exceeding $5,000,000 in the aggregate or $2,000,000 per annum.

(n)Judgment.  A judgment or order for the payment of money which causes the aggregate amount of all such judgments to exceed $7,500,000 in any Fiscal Year (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), shall be entered against the US Borrower or any Subsidiary thereof by any court and such judgment or order shall continue without having been discharged, vacated or stayed for a period of thirty (30) days after the entry thereof.

(o)Environmental.  Any one or more Environmental Claims shall have been asserted against the US Borrower or any Subsidiary thereof; the US Borrower and any Subsidiary thereof would be reasonable likely to incur liability as a result thereof; and such liability would be reasonably likely, individually or in the aggregate, to have a Material Adverse Effect.

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SECTION 13.2Remedies

Upon the occurrence and during the continuance of an Event of Default, with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the US Borrower:

(a)Acceleration; Termination of Facilities.  Terminate the Commitments and declare the principal of and interest on the Loans and the Reimbursement Obligations at the time outstanding, and all other amounts owed to the Lenders and to the Administrative Agent under this Agreement or any of the other Loan Documents (including, without limitation, all L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented or shall be entitled to present the documents required thereunder) and all other Obligations (other than Hedging Obligations), to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived by each Credit Party, anything in this Agreement or the other Loan Documents to the contrary notwithstanding, and terminate the Credit Facility and any right of the Borrowers to request borrowings or Letters of Credit thereunder; provided, that upon the occurrence of an Event of Default specified in Section 13.1(j) or (k), the Credit Facility shall be automatically terminated and all Obligations (other than Hedging Obligations) shall automatically become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived by each Credit Party, anything in this Agreement or in any other Loan Document to the contrary notwithstanding.

(b)Letters of Credit.  With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding subsection, the Borrowers shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit.  Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay the other Obligations on a pro rata basis.  After all such Letters of Credit shall have expired or been fully drawn upon, the Reimbursement Obligation shall have been satisfied and all other Obligations shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrowers.

(c)Rights of Collection.  Exercise on behalf of the Lenders all of its other rights and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy all of the Borrowers’ Obligations.

SECTION 13.3Rights and Remedies Cumulative; Non-Waiver; etc.

Neither the Administrative Agent nor any Lender shall by any act (except by a written instrument pursuant to Section 15.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default.  No delay or failure to take action on the part of the Administrative Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default.  No course of dealing between the  Borrowers, the Administrative Agent and the Lenders or their respective agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default.  The enumeration of the rights and remedies of the Administrative Agent and the Lenders set forth in this Agreement is not intended to be exhaustive and the exercise by the Administrative Agent and the Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under the other Loan Documents or that may now or hereafter exist at law or in equity or by suit or otherwise.

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SECTION 13.4Crediting of Payments and Proceeds

In the event that the Borrowers shall fail to pay any of the Obligations when due and the Obligations have been accelerated pursuant to Section 13.2, all payments received by the Lenders upon the Obligations and all net proceeds from the enforcement of the Obligations shall be applied:

First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts, including attorney fees, payable to the Administrative Agent in its capacity as such and the Issuing Lender in its capacity as such (ratably among the Administrative Agent and the Issuing Lender in proportion to the respective amounts described in this clause First payable to them);

Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders, including attorney fees (ratably among the Lenders in proportion to the respective amounts described in this clause Second payable to them);

Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and Reimbursement Obligations and any Hedging Obligations (including any termination payments and any accrued and unpaid interest thereon) (ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them);

Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans and Reimbursement Obligations (ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them);

Fifth, to the Administrative Agent for the account of the Issuing Lender, to cash collateralize any L/C Obligations then outstanding; and

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrowers or as otherwise required by Applicable Law.

SECTION 13.5Administrative Agent May File Proofs of Claim

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Credit Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrowers) shall be entitled and empowered, by intervention in such proceeding or otherwise:

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(a)to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 3.3, 5.3 and 15.3) allowed in such judicial proceeding; and

(b)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 5.3 and 15.3.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

SECTION 13.6Judgment Currency

(a)The obligation of the Borrowers to make payments of the principal of and interest on the Notes and the obligation of any such Person to make payments of any other amounts payable hereunder or pursuant to any other Loan Document in the currency specified for such payment shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment, which is expressed in or converted into any other currency, except to the extent that such tender or recovery shall result in the actual receipt by each of the Administrative Agent and Lenders of the full amount of the particular currency expressed to be payable pursuant to the applicable Loan Document.  The Administrative Agent shall, using all amounts obtained or received from the Borrowers pursuant to any such tender or recovery in payment of principal of and interest on the Obligations, promptly purchase the applicable currency at the most favorable spot exchange rate determined by the Administrative Agent to be available to it.  The obligation of the Borrowers to make payments in the applicable currency shall be enforceable as an alternative or additional cause of action solely for the purpose of recovering in the applicable currency the amount, if any, by which such actual receipt shall fall short of the full amount of the currency expressed to be payable pursuant to the applicable Loan Document.

(b)Without limiting Section 13.6(a), the Borrowers shall indemnify and hold harmless the Administrative Agent, the Lenders and the Issuing Lender, as applicable, against any loss incurred by the Administrative Agent, any Lender or the Issuing Lender as a result of any payment or recovery described in Section 13.6(a) and as a result of any variation having occurred in rates of exchange between the date of any such amount becoming due under this Agreement or any other Loan Document and the date of actual payment thereof.  The foregoing indemnity shall constitute a separate and independent obligation of the Borrowers and shall continue in full force and effect notwithstanding any such payment or recovery.

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ARTICLE XIV                                           

THE ADMINISTRATIVE AGENT

SECTION 14.1Appointment and Authority

Each of the Lenders hereby irrevocably designates and appoints Wachovia to act on its behalf as the Administrative Agent of such Lender under this Agreement and the other Loan Documents for the term hereof and each such Lender irrevocably authorizes Wachovia, as Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary elsewhere in this Agreement or such other Loan Documents, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Loan Documents or otherwise exist against the Administrative Agent.  Any reference to the Administrative Agent in this Article XIV shall be deemed to refer to the Administrative Agent solely in its capacity as Administrative Agent and not in its capacity as a Lender.

SECTION 14.2Delegation of Duties

The Administrative Agent may execute any of its respective duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by the Administrative Agent with reasonable care.

SECTION 14.3Exculpatory Provisions

Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Loan Documents (except for actions occasioned solely by its or such Person’s own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrowers or any of the Credit Parties or any officer thereof contained in this Agreement or the other Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or the other Loan Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan Documents or for any failure of the Borrowers or any of the Credit Parties to perform their respective obligations hereunder or thereunder.  The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Borrowers or any of the Credit Parties.

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SECTION 14.4Reliance by the Administrative Agent

(a)The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrowers), independent accountants and other experts selected by the Administrative Agent.  The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement and the other Loan Documents unless it shall first receive such advice or concurrence of the Required Lenders (or, when expressly required hereby or by the relevant other Loan Documents, all the Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action except for its own gross negligence or willful misconduct.  The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Lenders (or, when expressly required hereby, all the Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.

(b)For purposes of determining compliance with the conditions specified in Section 6.2, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

SECTION 14.5Notice of Default

The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless it has received notice from a Lender or the Borrowers referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”.  In the event that the Administrative Agent receives such a notice, it shall promptly give notice thereof to the Lenders.  The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, when expressly required hereby, all the Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders, except to the extent that other provisions of this Agreement expressly require that any such action be taken or not be taken only with the consent and authorization or the request of the Lenders or Required Lenders, as applicable.

SECTION 14.6Non-Reliance on the Administrative Agent and Other Lenders

Each Lender expressly acknowledges that neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of the  Borrowers or any Credit Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender.  Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrowers and its Subsidiaries and made its own decision to make its Loans and issue or participate in Letters of Credit hereunder and enter into this Agreement.  Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrowers or any Credit Party.  Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder or by the other Loan Documents, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrowers or any of the Credit Parties which may come into the possession of the Administrative Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates.

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SECTION 14.7Indemnification

The Lenders agree to indemnify the Administrative Agent in its capacity as such and (to the extent not reimbursed by the Borrowers and without limiting the obligation of the Borrowers to do so), ratably according to the respective amounts of their Commitment Percentages from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans or any Reimbursement Obligation) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or the other Loan Documents, or any documents, reports or other information provided to the Administrative Agent or any Lender or contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent’s bad faith, gross negligence or willful misconduct.  The agreements in this Section shall survive the payment of the Obligations and the termination of this Agreement.

SECTION 14.8The Administrative Agent in Its Individual Capacity

The Administrative Agent and its respective Subsidiaries and Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrowers as though the Administrative Agent were not the Administrative Agent hereunder.  With respect to any Loans made or renewed by it and with respect to any Letter of Credit issued by it or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” shall include the Administrative Agent in its individual capacity.

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SECTION 14.9Resignation of the Administrative Agent; Swingline Lender, Issuing Lender and Canadian Dollar Lender; Successor Administrative Agent, Swingline Lender, Issuing Lender and Canadian Dollar Lender

(a)Subject to the appointment and acceptance of a successor as provided below, Wachovia may resign as the Administrative Agent at any time by giving notice thereof to the Lenders and the US Borrower.  Upon any such resignation, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders, which successor administrative agent shall be consented to by the Borrowers at all times other than during the existence of an Event of Default (which consent of the Borrowers shall not be unreasonably withheld or delayed).  If no successor administrative agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the Administrative Agent’s giving of notice of resignation, then the Administrative Agent may, on behalf of the Lenders, appoint a successor administrative agent.  Upon the acceptance of any appointment as Administrative Agent hereunder by a successor administrative agent, such successor administrative agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder without any other or further act or deed on the part of such retiring Administrative Agent or any other Lender.  After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article XIV and Section 15.3 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.  If no successor administrative agent has accepted appointment as Administrative Agent by the date which is thirty (30) days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

(b)Notwithstanding anything to the contrary contained herein, Wachovia may, (i) upon thirty (30) days’ notice to the US Borrower and the Revolving Credit Lenders, resign as Issuing Lender and/or (ii) upon thirty (30) days’ notice to the US Borrower, resign as Swingline Lender.  In the event of any such resignation as Issuing Lender or Swingline Lender, the US Borrower shall be entitled to appoint from among the Revolving Credit Lenders a successor Issuing Lender or Swingline Lender hereunder; provided that no failure by the US Borrower to appoint any such successor shall affect the resignation of Wachovia as Issuing Lender or Swingline Lender, as the case may be.  If Wachovia resigns as Issuing Lender, it shall retain all the rights and obligations of the Issuing Lender hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as Issuing Lender and all L/C Obligations with respect thereto, including the right to require the Lenders to make Revolving Credit Loans or fund risk participations for unreimbursed amounts of Letters of Credit pursuant to Section 3.4.  If Wachovia resigns as Swingline Lender, it shall retain all the rights of the Swingline Lender provided for hereunder with respect to Swingline Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Revolving Credit Lenders to make Revolving Credit Loans or fund risk participations in outstanding Swingline Loans pursuant to Section 2.3(b).

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(c)Notwithstanding anything to the contrary contained herein, Wachovia Canada may, upon thirty (30) days’ notice to the US Borrower and the Revolving Credit Lenders, resign as Canadian Dollar Lender.  In the event of any such resignation as Canadian Dollar Lender, the US Borrower shall be entitled to appoint from among the Revolving Credit Lenders or an Eligible Assignee, a successor Canadian Dollar Lender hereunder; provided that (i) no Revolving Credit Lender shall be required to accept such appointment as successor Canadian Dollar Lender; (ii) any successor Canadian Dollar Lender shall be approved by the Administrative Agent (such approval not to be unreasonably withheld or delayed); and (iii) until a Revolving Credit Lender or an Eligible Assignee shall have notified the Administrative Agent and the current Canadian Dollar Lender in writing that it has agreed to act as a successor Canadian Dollar Lender, the current Canadian Dollar Lender shall continue as Canadian Dollar Lender hereunder.  If no successor Canadian Dollar Lender shall have been so appointed and accepted such appointment within thirty (30) days after the Canadian Dollar Lender’s giving of notice of resignation, then the Canadian Dollar Lender, with the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), may, on behalf of the Lenders, appoint an Eligible Assignee as a successor Canadian Dollar Lender. Upon the acceptance of any appointment as Canadian Dollar Lender hereunder by a successor, such successor Canadian Dollar Lender shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the replaced Canadian Dollar Lender, and the replaced Canadian Dollar Lender shall be discharged from its duties and obligations in its capacity as Canadian Dollar Lender without any other or further act or deed on the part of such replaced Canadian Dollar Lender, the Administrative Agent  or any other Lender.  If Wachovia Canada resigns as Canadian Dollar Lender, it shall retain all the rights of the Canadian Dollar Lender provided for hereunder with respect to Canadian Dollar Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Revolving Credit Lenders to make Revolving Credit Loans or fund risk participations in outstanding Canadian Dollar Loans pursuant to Section 2.2(b).

SECTION 14.10Guaranty Matters

The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion, to release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty Agreement if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty Agreement pursuant to this Section.

SECTION 14.11Other Agents, Arrangers and Managers

None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” “documentation agent,” “co-agent,” “book manager,” “lead manager,” “arranger,” “lead arranger” or “co-arranger” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than, in the case of such Lenders, those applicable to all Lenders as such.  Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender.  Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

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ARTICLE XV                                

MISCELLANEOUS

SECTION 15.1Notices

(a)Method of Communication.  Except as otherwise provided in this Agreement, all notices and communications hereunder shall be in writing (for purposes hereof, the term “writing” shall include information in electronic format such as electronic mail and internet web pages), or by telephone subsequently confirmed in writing.  Any notice shall be effective if delivered by hand delivery or sent via electronic mail, posting on an internet web page, telecopy, recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by electronic mail, posting on an internet web page, telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the third (3rd) Business Day following the date sent by certified mail, return receipt requested.  A telephonic notice to the Administrative Agent as understood by the Administrative Agent will be deemed to be the controlling and proper notice in the event of a discrepancy with or failure to receive a confirming written notice.

(b)Addresses for Notices.  Notices to any party shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing.

If to the Borrowers:                              Pool Corporation

109 Northpark Boulevard

Covington, Louisiana 70433

Attention: Mark Joslin, Chief Financial Officer

Telephone No.: (985) 801-5702

Telecopy No.: (985) 801-8302

With copies to:                                     Pool Corporation

109 Northpark Blvd

Covington, Louisiana 70433

Attention:  Jennifer Neil, General Counsel

Telephone No.:  (985) 801-5269

Telecopy No.:  (985) 801-8269

If to Wachovia as

 Administrative Agent:                       Wachovia Bank, National Association

NC0680

1525 West W.T. Harris Blvd.

Charlotte, North Carolina 28262

Attention of: Syndication Agency Services

Telephone No.:  (704) 590-2703

Telecopy No.: (704) 590-3481

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With copies to:                                    Wachovia Bank, National Association

1 South Broad Street

PA4843

Philadelphia, PA 19107

Attention: Mark Supple

Telephone No.: (267) 321-6634

Telecopy No.: (267) 321-6700

If to any Lender:                   To the address set forth on the Register

(c)Administrative Agent’s Office.  The Administrative Agent hereby designates its office located at the address set forth above, or any subsequent office which shall have been specified for such purpose by written notice to the Borrowers and Lenders, as the Administrative Agent’s Office referred to herein, to which payments due are to be made and at which Loans will be disbursed and Letters of Credit requested.

(d)Change of Address, Etc.  Any party hereto may change its address or telecopier number for notices and other communications hereunder by notice to the other parties hereto.

SECTION 15.2Amendments, Waivers and Consents

Except as set forth below or as specifically provided in any Loan Document, any term, covenant, agreement or condition of this Agreement or any of the other Loan Documents may be amended or waived by the Lenders, and any consent given by the Lenders, if, but only if, such amendment, waiver or consent is in writing signed by the Required Lenders (or by the Administrative Agent with the consent of the Required Lenders) and delivered to the Administrative Agent and, in the case of an amendment, signed by the Borrowers; provided, that no amendment, waiver or consent shall:

(a)waive any condition set forth in Section 6.2 without the written consent of each Revolving Credit Lender;

(b)amend, modify or waive Section 6.3 or any other provision of this Agreement if the effect of such amendment, modification or waiver is to require the Revolving Credit Lenders to make Revolving Credit Loans when such Revolving Credit Lenders would not otherwise be required to do so without the prior written consent of any combination of Revolving Credit Lenders whose Revolving Credit Commitments aggregate more than fifty percent (50%) of the Revolving Credit Commitment;

(c)extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 13.2) or the amount of Loans of any Lender without the written consent of each Lender directly affected thereby;

(d)postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory repayment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

(e)reduce the principal of, or the rate of interest specified herein on, any Loan or Reimbursement Obligation, or (subject to clause (v) of the second proviso to this Section) any fees or other amounts payable hereunder or under any other Loan Documentwithout the written consent of each Lender directly affected thereby; provided that only the consent of the Required Lenders shall be necessary (i) to waive any obligation of the Borrowers to pay interest at the rate set forth in Section 5.1(c) during the continuance of an Event of Default, or (ii) to amend any financial covenant hereunder (or any defined term used therein) even if the effect of such amendment would be to reduce the rate of interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder;

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(f)change Section 5.4 or Section 13.4 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender directly affected thereby;

(g)change any provision of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; or

(h)release all of the Subsidiary Guarantors or release Subsidiary Guarantors comprising substantially all of the credit support for the Obligations, in either case, from the Subsidiary Guaranty Agreement (other than as authorized in Section 14.10), without the written consent of each Lender;

provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Issuing Lender in addition to the Lenders required above, affect the rights or duties of the Issuing Lender under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swingline Lender in addition to the Lenders required above, affect the rights or duties of the Swingline Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Canadian Dollar Lender in addition to the Lenders required above, affect the rights or duties of the Canadian Dollar Lender under this Agreement; (iv) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (v) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.  Notwithstanding anything to the contrary herein, (x) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender and (y) each Lender hereby irrevocably authorizes the Administrative Agent, on its behalf, and without further consent to enter into amendments or modifications to this Agreement or any other Loan Document as the Administrative Agent reasonably deems appropriate in order to effectuate the terms of Section 2.9; provided that such amendment or modification shall not modify this Agreement or any other Loan Document in a manner materially adverse to any Lender.

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SECTION 15.3Expenses; Indemnity

The Borrowers will (a) pay all out-of-pocket expenses (including, without limitation, all costs of electronic or internet distribution of any information hereunder) of the Administrative Agent in connection with (i) the preparation, execution and delivery of this Agreement and each other Loan Document, whenever the same shall be executed and delivered, including, without limitation, all out-of-pocket syndication and due diligence expenses and reasonable fees, disbursements and other charges of counsel for the Administrative Agent and (ii) the preparation, execution and delivery of any waiver, amendment or consent by the Administrative Agent or the Lenders relating to this Agreement or any other Loan Document, including, without limitation, reasonable fees and disbursements of counsel for the Administrative Agent, (b) pay all reasonable out-of-pocket expenses of the Administrative Agent and each Lender actually incurred in connection with the administration and enforcement of any rights and remedies of the Administrative Agent and Lenders under the Credit Facility, including, without limitation, in connection with any workout, restructuring, bankruptcy or other similar proceeding, creating and perfecting Liens in favor of  the Administrative Agent on behalf of Lenders, enforcing any Obligations of, or collecting any payments due from, the Borrowers or any Subsidiary Guarantor by reason of an Event of Default (including in connection with the sale of, collection from, or other realization upon any collateral or the enforcement of the Subsidiary Guaranty Agreement); consulting with appraisers, accountants, engineers, attorneys and other Persons concerning the nature, scope or value of any right or remedy of the Administrative Agent or any Lender hereunder or under any other Loan Document or any factual matters in connection therewith, which expenses shall include without limitation the reasonable fees and disbursements of such Persons, and (c) defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates, partners, employees, agents, officers, advisors and directors, from and against any losses, penalties, fines, liabilities, settlements, damages, costs and expenses, suffered by any such Person in connection with any claim (including, without limitation, any Environmental Claims), investigation, litigation or other proceeding (whether or not the Administrative Agent or any Lender is a party thereto) and the prosecution and defense thereof, arising out of or in any way connected with the Loans, this Agreement, any other Loan Document, or any documents, reports or other information provided to the Administrative Agent or any Lender or contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby, including, without limitation, reasonable attorney’s and consultant’s fees, except to the extent that any of the foregoing (i) are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted directly from the gross negligence or willful misconduct of the party seeking indemnification therefor or (ii) result from a claim brought by any Credit Party against an indemnitee for breach in bad faith of the  obligations under this Agreement or the other Loan Documents of the party seeking indemnification if such Credit Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

SECTION 15.4Set-off

If an Event of Default shall have occurred and be continuing, each Lender, the Issuing Lender, the Canadian Dollar Lender, the Swingline Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the Issuing Lender, the Canadian Dollar Lender, the Swingline Lender or any such Affiliate to or for the credit or the account of the Borrowers or any other Credit Party against any and all of the obligations of the Borrowers or such Credit Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, the Issuing Lender, the Canadian Dollar Lender or the Swingline Lender, irrespective of whether or not such Lender, the Issuing Lender, the Canadian Dollar Lender or the Swingline Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrowers or such Credit Party may be contingent or unmatured or are owed to a branch or office of such Lender, the Issuing Lender, the Canadian Dollar Lender or the Swingline Lender different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of each Lender, the Issuing Lender, the Canadian Dollar Lender, the Swingline Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the Issuing Lender, the Canadian Dollar Lender, the Swingline Lender or their respective Affiliates may have.  Each Lender, the Issuing Lender, the Canadian Dollar Lender and the Swingline Lender agrees to notify the Borrowers and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

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SECTION 15.5Governing Law

This Agreement and the other Loan Documents, unless otherwise expressly set forth therein, shall be governed by, construed and enforced in  accordance with the laws of the State of North Carolina, without reference to the conflicts or choice of law principles thereof.

SECTION 15.6Jurisdiction and Venue

(a)Jurisdiction.  The Borrowers hereby irrevocably consent to the personal jurisdiction of the state and federal courts located in Mecklenburg County, North Carolina (and any courts from which an appeal from any of such courts must or may be taken), in any action, claim or other proceeding arising out of any dispute in connection with this Agreement and the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations.  The Borrowers hereby irrevocably consent to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Administrative Agent or any Lender in connection with this Agreement or the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 15.1.  Nothing in this Section shall affect the right of the Administrative Agent or any Lender to serve legal process in any other manner permitted by Applicable Law or affect the right of the Administrative Agent or any Lender to bring any action or proceeding against the Borrowers or their respective properties in the courts of any other jurisdictions.

(b)Venue

.  The Borrowers hereby irrevocably waive any objection they may have now or in the future to the laying of venue in the aforesaid jurisdiction in any action, claim or other proceeding arising out of or in connection with this Agreement, any other Loan Document or the rights and obligations of the parties hereunder or thereunder.  The Borrowers irrevocably waive, in connection with such action, claim or proceeding, any plea or claim that the action, claim or proceeding has been brought in an inconvenient forum.

SECTION 15.7Binding Arbitration; Waiver of Jury Trial

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(a)Binding Arbitration.  Upon demand of any party, whether made before or after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Agreement or any other Loan Document (“Disputes”), between or among parties hereto and to the other Loan Documents shall be resolved by binding arbitration as provided herein.  Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder.  Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from Loan Documents executed in the future, disputes as to whether a matter is subject to arbitration, or claims concerning any aspect of the past, present or future relationships arising out of or connected with the Loan Documents.  Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the “Arbitration Rules”) of the American Arbitration Association (the “AAA”) and the Federal Arbitration Act.  All arbitration hearings shall be conducted in Charlotte, North Carolina.  The expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000.  All applicable statutes of limitations shall apply to any Dispute.  A judgment upon the award may be entered in any court having jurisdiction.  Notwithstanding anything foregoing to the contrary, any arbitration proceeding demanded hereunder shall begin within ninety (90) days after such demand thereof and shall be concluded within one hundred twenty (120) days after such demand.  These time limitations may not be extended unless a party hereto shows cause for extension and then such extension shall not exceed a total of sixty (60) days.  The panel from which all arbitrators are selected shall be comprised of licensed attorneys selected from the Commercial Financial Dispute Arbitration Panel of the AAA.  The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted.  The parties hereto do not waive any applicable Federal or state substantive law except as provided herein.  Notwithstanding the foregoing, this subsection shall not apply to any Hedging Agreement.

(b)Jury Trial.  THE ADMINISTRATIVE AGENT, EACH LENDER AND THE BORROWERS HEREBY ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

(c)Preservation of Certain Remedies.  Notwithstanding the preceding binding arbitration provisions, the parties hereto and the other Loan Documents preserve, without diminution, certain remedies that such Persons may employ or exercise freely, either alone, in conjunction with or during a Dispute.  Each such Person shall have and hereby reserves the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following remedies, as applicable:  (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted in the Loan Documents or under Applicable Law or by judicial foreclosure and sale, including a proceeding to confirm the sale, (ii) all rights of self help including peaceful occupation of property and collection of rents, set off, and peaceful possession of property, (iii) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, appointment of receiver and in filing an involuntary bankruptcy proceeding, and (iv) when applicable, a judgment by confession of judgment.  Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute.

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SECTION 15.8Reversal of Payments

To the extent a Borrower makes a payment or payments to the Administrative Agent for the ratable benefit of the Lenders or the Administrative Agent receives any payment or proceeds of the collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state, provincial or federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid, the Obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Administrative Agent.

SECTION 15.9Injunctive Relief; Punitive Damages

(a)The Borrowers recognize that, in the event the Borrowers fail to perform, observe or discharge any of their obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Administrative and the Lenders. Therefore, the Borrowers agree that the Administrative Agent and the Lenders, at the Administrative Agent’s or the Required Lenders’ option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

(b)The Administrative Agent, the Lenders and the US Borrower (on behalf of itself and the Credit Parties) hereby agree that no such Person shall have a remedy of punitive, exemplary or consequential damages against any other party to a Loan Document and each such Person hereby waives any right or claim to punitive or exemplary damages that they may now have or may arise in the future in connection with any Dispute, whether such Dispute is resolved through arbitration or judicially.

SECTION 15.10Accounting Matters

If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrowers or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) the Borrowers shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

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SECTION 15.11Successors and Assigns; Participations

(a)Successors and Assigns Generally.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Borrower nor any other Credit Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)Assignments by Lenders.  Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that

(i)except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000, in the case of any assignment, unless such assignment is made to an existing Lender, to an Affiliate thereof, or to an Approved Fund, in which case no minimum amount shall apply, unless each of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the US Borrower otherwise consent (each such consent not to be unreasonably withheld or delayed); provided that the US Borrower shall be deemed to have given its consent ten (10) Business Days after the date written notice thereof has been delivered by the assigning Lender (through the Administrative Agent) unless such consent is expressly refused by the US Borrower prior to such tenth (10th) Business Day;

(ii)each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned;

(iii)any assignment of a Revolving Credit Commitment must be approved by the Administrative Agent, the Canadian Dollar Lender, the Swingline Lender and the Issuing Lender unless the Person that is the proposed assignee is itself a Lender with a Revolving Credit Commitment (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and

(iv)the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

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Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 5.8, 5.9, 5.10, 5.11 and 15.3 with respect to facts and circumstances occurring prior to the effective date of such assignment.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.

(c)Register.  The Administrative Agent, acting solely for this purpose as an agent of the US Borrower, shall maintain at one of its offices in Charlotte, North Carolina, a copy of each Assignment and Assumption and each Lender Addition and Acknowledgement Agreement delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, and the US Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the US Borrower and any Lender, solely to the extent of any entries applicable to such Lender, at any reasonable time and from time to time upon reasonable prior notice.

(d)Participations.  Any Lender may at any time, without the consent of, or notice to, the Borrowers or the Administrative Agent, sell participations to any Person (other than a natural person or a Borrower or any of the Borrowers’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the Section 15.2 that directly affects such Participant and could not be effected by a vote of the Required Lenders.  Subject to subsection (e) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 5.8, 5.9, 5.10 and 5.11 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 15.4 as though it were a Lender, provided such Participant agrees to be subject to Section 5.6 as though it were a Lender.

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(e)Limitations upon Participant Rights.  A Participant shall not be entitled to receive any greater payment under Sections 5.10 and 5.11than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the US Borrower’s prior written consent.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 5.11 unless the US Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the US Borrower, to comply with Section 5.11(e) as though it were a Lender.

(f)Certain Pledges.  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

SECTION 15.12Confidentiality

Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Affiliates’ respective partners, directors, officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by Applicable Law or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies under this Agreement or under any other Loan Document (or any Hedging Agreement with a Lender or the Administrative Agent) or any action or proceeding relating to this Agreement or any other Loan Document (or any Hedging Agreement with a Lender or the Administrative Agent) or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, Participant or proposed Participant or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to any Borrower and its obligations, (g) with the consent of the US Borrower, (h) to Gold Sheets and other similar bank trade publications, such information to consist of deal terms and other information customarily found in such publications, or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent or any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrowers.  For purposes of this Section, “Information” means all information received from any Credit Party relating to any Credit Party or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by any Credit Party; provided that, in the case of information received from a Credit Party after the Closing Date, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

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SECTION 15.13Performance of Duties

Each of the Credit Party’s obligations under this Agreement and each of the other Loan Documents shall be performed by such Credit Party at its sole cost and expense.

SECTION 15.14All Powers Coupled with Interest

All powers of attorney and other authorizations granted to the Lenders, the Administrative Agent and any Persons designated by the Administrative Agent or any Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied, any of the Commitments remain in effect or the Credit Facility has not been terminated.

SECTION 15.15Survival of Indemnities

Notwithstanding any termination of this Agreement, the indemnities to which the Administrative Agent and the Lenders are entitled under the provisions of this Article XV and any other provision of this Agreement and the other Loan Documents shall continue in full force and effect and shall protect the Administrative Agent and the Lenders against events arising after such termination as well as before.

SECTION 15.16Titles and Captions

Titles and captions of Articles, Sections and subsections in, and the table of contents of, this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement.

SECTION 15.17Severability of Provisions

Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

SECTION 15.18Counterparts

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement.

SECTION 15.19Integration

This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter.  In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement.  Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

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SECTION 15.20Term of Agreement

This Agreement shall remain in effect from the Closing Date through and including the date upon which all Obligations arising hereunder or under any other Loan Document shall have been indefeasibly and irrevocably paid and satisfied in full and all Commitments have been terminated.  No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination or in respect of any provision of this Agreement which survives such termination.

SECTION 15.21Advice of Counsel, No Strict Construction

Each of the parties represents to each other party hereto that it has discussed this Agreement with its counsel.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

SECTION 15.22Inconsistencies with Other Documents; Independent Effect of Covenants

(a)In the event there is a conflict or inconsistency between this Agreement and any other Loan Document, the terms of this Agreement shall control; provided that any provision of the Security Documents which imposes additional burdens on any Borrower or its Subsidiaries or further restricts the rights of any Borrower or its Subsidiaries or gives the Administrative Agent or Lenders additional rights shall not be deemed to be in conflict or inconsistent with this Agreement and shall be given full force and effect.

(b)The Borrowers expressly acknowledge and agree that each covenant contained in Articles IX, X or XI hereof shall be given independent effect.  Accordingly, the Borrowers shall not engage in any transaction or other act otherwise permitted under any covenant contained in Articles IX, X or XI if, before or after giving effect to such transaction or act, the Borrowers shall or would be in breach of any other covenant contained in Articles IX, X or XI.

SECTION 15.23USA Patriot Act

The Administrative Agent and each Lender hereby notifies the Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrowers and Subsidiary Guarantors, which information includes the name and address of each Borrower and Subsidiary Guarantor and other information that will allow such Lender to identify such Borrower or Subsidiary Guarantor in accordance with the Act.

SECTION 15.24Amendment and Restatement; No Novation

This Agreement constitutes an amendment and restatement of the Existing Credit Agreement, as amended, effective from and after the Closing Date.  The execution and delivery of this Agreement shall not constitute a novation of any indebtedness or other obligations owing to the Lenders or the Administrative Agent under the Existing Credit Agreement based on facts or events occurring or existing prior to the execution and delivery of this Agreement.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers, all as of the day and year first written above.

       POOL CORPORATION, as US Borrower

       By:             /s/ Mark W. Joslin                                                                           

       Name: Mark W. Joslin                                                                    

       Title:   Vice President and CFO                                                                    

       SCP DISTRIBUTORS INC., as Canadian Borrower

       By:             /s/ Mark W. Joslin                                                                           

       Name: Mark W. Joslin                                                                    

       Title:   Secretary/Treasurer                 & #160;                                                  

   AGENTS AND LENDERS:

           &# 160;      WACHOVIA BANK, NATIONAL ASSOCIATION,

               as Administrative Agent, Swingline Lender, Issuing Lender and Lender

       By:             /s/ Mark S. Supple                                                                           

       Name: Mark S. Supple                                                                    

       Title:   Vice President                                                                    

       WACHOVIA CAPITAL FINANCE CORPORATION (CANADA),

       as Canadian Dollar Lender

       By:             /s/ Raymond Eghobamien

       Name: Raymond Eghobamien                                                                    

       Title:   Vice President                                                                    

                  JPMORGAN CHASE BANK, N.A., as Lender

       By:             /s/ John A. Horst                                                                           

       Name: John A. Horst                                                                    

       Title:   Vice President                                                                    

       WELLS FARGO BANK, N.A., as Lender

       By:             /s/ Warren R. Ross                                                                           

       Name: Warren R. Ross                                                                    

       Title:   Vice President                                                                    

       REGIONS BANK, as Lender

       By:             /s/ Jorge E. Goris                                                                           

       Name: Jorge E. Goris                                                                    

       Title:   Senior Vice President                                                                    

       CAPITAL ONE, N.A., as Lender

       By:             /s/ Katharine G. Kay                                                                           

       Name: Katharine G. Kay                                                                    

       Title:   Senior Vice President                                                                    

       BANK OF AMERICA, N.A., as Lender

       By:             /s/ Gary L. Mingle                                                                           

       Name: Gary L. Mingle                                                                    

       Title:   Senior Vice President                                                                    

       COMERICA BANK, as Lender

       By:             /s/ De Von Lang                                                                           

       Name: De Von Lang                                                                    

       Title:   Corporate Banking Officer                                                                    

EX-10.49

EXHIBIT 10.49

AMENDED AND RESTATED SUBSIDIARY GUARANTY AGREEMENT

dated as of December 20, 2007

by and among

certain Subsidiaries of POOL CORPORATION,

as Subsidiary Guarantors,

in favor of

WACHOVIA BANK, NATIONAL ASSOCIATION

as Administrative Agent

TABLE OF CONTENTS
ARTICLE I  DEFINED TERMS		1
SECTION 1.1	Definitions	1
SECTION 1.2	Other Definitional Provisions	2
ARTICLE II   GUARANTY		2
SECTION 2.1	Guaranty	2
SECTION 2.2	Bankruptcy Limitations on each Subsidiary Guarantor	3
SECTION 2.3	Agreements for Contribution	3
SECTION 2.4	Nature of Guaranty	4
SECTION 2.5	Waivers	5
SECTION 2.6	Modification of Loan Documents, etc	6
SECTION 2.7	Demand by the Administrative Agent	7
SECTION 2.8	Remedies	8
SECTION 2.9	Benefits of Guaranty	8
SECTION 2.10	Termination; Reinstatement	8
SECTION 2.11	Payments	9
ARTICLE III  REPRESENTATIONS AND WARRANTIES		9
SECTION 3.1	Existence	9
SECTION 3.2	Authorization of Agreement; Enforceability	9
SECTION 3.3	No Conflict; Consents	10
SECTION 3.4	Litigation	10
SECTION 3.5	Title to Properties; Liens	10
SECTION 3.6	Solvency	10
SECTION 3.7	Compliance with the Credit Agreement	11
ARTICLE IV  MISCELLANEOUS		11
SECTION 4.1	Amendments, Waivers and Consents	11
SECTION 4.2	Notices	11
SECTION 4.3	Enforcement Expenses, Indemnification	11
SECTION 4.4	Governing Law	12
SECTION 4.5	Jurisdiction and Venue	12
SECTION 4.6	Binding Arbitration; Waiver of Jury Trial	13
SECTION 4.7	Injunctive Relief; Punitive Damages	14
SECTION 4.8	No Waiver by Course of Conduct, Cumulative Remedies	14
SECTION 4.9	Successors and Assigns	15
SECTION 4.10	Severability	15
SECTION 4.11	Titles and Captions	15
SECTION 4.12	Counterparts	15
SECTION 4.13	Set-Off	15
SECTION 4.14	Integration	16
SECTION 4.15	Acknowledgements	16
SECTION 4.16	Releases	16
SECTION 4.17	Additional Subsidiary Guarantors	16
SECTION 4.18	No Strict Construction	16
SECTION 4.19	Powers Coupled with an Interest	17
SECTION 4.20	Secured Parties	17

AMENDED AND RESTATED SUBSIDIARY GUARANTY AGREEMENT, dated as of December 20, 2007 (as amended, restated, supplemented or otherwise modified from time to time, this “Guaranty”), made by certain Domestic Subsidiaries (such Subsidiaries, collectively, the “Subsidiary Guarantors”, each, a “Subsidiary Guarantor”) of POOL CORPORATION (formerly known as SCP Pool Corporation), a Delaware corporation (the “US Borrower”), in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent (in such capacity, the “Administrative Agent”) for the ratable benefit of the Secured Parties (as defined below).

STATEMENT OF PURPOSE

Pursuant to the terms of the Amended and Restated Credit Agreement, dated of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among the US Borrower, SCP Distributors, Inc., a company organized under the laws of Ontario (the “Canadian Borrower” and together with the US Borrower, the “Borrowers”), the financial institutions from time to time parties thereto (the “Lenders”) and the Administrative Agent, the Lenders have agreed to make Extensions of Credit to the Borrowers upon the terms and subject to the conditions set forth therein.

The Borrowers and the Subsidiary Guarantors, though separate legal entities, comprise one integrated financial enterprise, and all Extensions of Credit to the Borrowers will inure, directly or indirectly, to the benefit of each of the Subsidiary Guarantors.

It is a condition precedent to the obligation of the Lenders to make their respective Extensions of Credit to the Borrowers under the Credit Agreement that the Subsidiary Guarantors shall have executed and delivered this Guaranty to the Administrative Agent, for the ratable benefit of (a) the Administrative Agent and the Lenders and (b) any party to a Hedging Agreement that was (i) a Lender or (ii) an Affiliate of a Lender, in each case, at the time such Hedging Agreement was executed (collectively, the “Secured Parties”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective Extensions of Credit to the Borrowers thereunder, each Subsidiary Guarantor hereby agrees with the Administrative Agent, for the ratable benefit of the Secured Parties, as follows:

ARTICLE I

DEFINED TERMS

SECTION 1.1    Definitions.  The following terms when used in this Guaranty shall have the meanings assigned to them below:

“Applicable Insolvency Laws” means all Applicable Laws governing bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent transfers or conveyances or other similar laws (including, without limitation, 11 U.S.C. Sections 544, 547, 548 and 550 and other “avoidance” provisions of Title 11 of the United States Code, as amended or supplemented).

“Guaranteed Obligations” has the meaning set forth in Section 2.1.

“Guaranty” has the meaning set forth in the Preamble.

SECTION 1.2    Other Definitional Provisions.  Capitalized terms used and not otherwise defined in this Guaranty, including the preambles and recitals hereof, shall have the meanings ascribed to them in the Credit Agreement.  In the event of a conflict between capitalized terms defined herein and in the Credit Agreement, the Credit Agreement shall control.  The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Guaranty shall refer to this Guaranty as a whole and not to any particular provision of this Guaranty, and Section references are to this Guaranty unless otherwise specified.  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

ARTICLE II

GUARANTY

SECTION 2.1    Guaranty.  Each Subsidiary Guarantor hereby, jointly and severally with the other Subsidiary Guarantors, unconditionally guarantees to the Administrative Agent, for the ratable benefit of the Secured Parties, and their respective permitted successors, endorsees, transferees and assigns, the prompt payment and performance of all Obligations, in each case, whether primary or secondary (whether by way of endorsement or otherwise), whether now existing or hereafter arising, whether or not from time to time reduced or extinguished (except by payment thereof) or hereafter increased or incurred, whether or not recovery may be or hereafter becomes barred by the statute of limitations, whether enforceable or unenforceable as against such Borrower, whether or not discharged, stayed or otherwise affected by any Applicable Insolvency Law or proceeding thereunder, whether created directly with the Administrative Agent or any other Secured Party or acquired by the Administrative Agent or any other Secured Party through assignment or endorsement or otherwise, whether matured or unmatured, whether joint or several, as and when the same become due and payable (whether at maturity or earlier, by reason of acceleration, mandatory repayment or otherwise), in accordance with the terms of any such instruments evidencing any such obligations, including all renewals, extensions or modifications thereof (all of the foregoing being hereafter collectively referred to as the “Guaranteed Obligations”).

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SECTION 2.2    Bankruptcy Limitations on each Subsidiary Guarantor.  Notwithstanding anything to the contrary contained in Section 2.1, it is the intention of each Subsidiary Guarantor, the Administrative Agent and the other Secured Parties that, in any proceeding involving the bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors, dissolution or insolvency or any similar proceeding with respect to any Subsidiary Guarantor or its assets, the amount of such Subsidiary Guarantor’s obligations with respect to the Guaranteed Obligations shall be equal to, but not in excess of, the maximum amount thereof not subject to avoidance or recovery by operation of Applicable Insolvency Laws after giving effect to Section 2.3.  To that end, but only in the event and to the extent that after giving effect to Section 2.3 such Subsidiary Guarantor’s obligations with respect to the Guaranteed Obligations or any payment made pursuant to such Guaranteed Obligations would, but for the operation of the first sentence of this Section 2.2, be subject to avoidance or recovery in any such proceeding under Applicable Insolvency Laws after giving effect to Section 2.3, the amount of such Subsidiary Guarantor’s obligations with respect to the Guaranteed Obligations shall be limited to the largest amount which, after giving effect thereto, would not, under Applicable Insolvency Laws, render such Subsidiary Guarantor’s obligations with respect to the Guaranteed Obligations unenforceable or avoidable or otherwise subject to recovery under Applicable Insolvency Laws.  To the extent any payment actually made pursuant to the Guaranteed Obligations exceeds the limitation of the first sentence of this Section 2.2 and is otherwise subject to avoidance and recovery in any such proceeding under Applicable Insolvency Laws, the amount subject to avoidance shall in all events be limited to the amount by which such actual payment exceeds such limitation and the Guaranteed Obligations, as limited by the first sentence of this Section 2.2, shall in all events remain in full force and effect and be fully enforceable against such Subsidiary Guarantor.  The first sentence of this Section 2.2 is intended solely to preserve the rights of the Administrative Agent and the other Secured Parties hereunder against such Subsidiary Guarantor in such proceeding to the maximum extent permitted by Applicable Insolvency Laws and neither such Subsidiary Guarantor, any Borrower, any other Subsidiary Guarantor nor any other Person shall have any right or claim under such sentence that would not otherwise be available under Applicable Insolvency Laws in such proceeding.

SECTION 2.3    Agreements for Contribution.

(a)           To the extent any Subsidiary Guarantor is required, by reason of its obligations hereunder, to pay to the Administrative Agent or any other Secured Party an amount greater than the amount of value (as determined in accordance with Applicable Insolvency Laws) actually made available to or for the benefit of such Subsidiary Guarantor on account of the Credit Agreement, this Guaranty or any other Loan Document, such Subsidiary Guarantor shall have an enforceable right of contribution against the Borrowers and the remaining Subsidiary Guarantors, and the Borrowers and the remaining Subsidiary Guarantors shall be jointly and severally liable for repayment of the full amount of such excess payment.  Subject only to the subordination provided in Section 2.3(d), such Subsidiary Guarantor further shall be subrogated to any and all rights of the Secured Parties against the Borrowers and the remaining Subsidiary Guarantors to the extent of such excess payment.

(b)           To the extent that any Subsidiary Guarantor would, but for the operation of this Section 2.3 and by reason of its obligations hereunder or its obligations to other Subsidiary Guarantors under this Section 2.3, be rendered insolvent for any purpose under Applicable Insolvency Laws, each of the Subsidiary Guarantors hereby agrees to indemnify such Subsidiary Guarantor and commits to make a contribution to such Subsidiary Guarantor’s capital in an amount at least equal to the amount necessary to prevent such Subsidiary Guarantor from having been rendered insolvent by reason of the incurrence of any such obligations.

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(c)           To the extent that any Subsidiary Guarantor would, but for the operation of this Section 2.3, be rendered insolvent under any Applicable Insolvency Law by reason of its incurring of obligations to any other Subsidiary Guarantor under the foregoing Sections 2.3(a) and (b), such Subsidiary Guarantor shall, in turn, have rights of contribution and indemnity, to the full extent provided in the foregoing Sections 2.3(a) and (b), against the Borrowers and the remaining Subsidiary Guarantors, such that all obligations of all of the Subsidiary Guarantors hereunder and under this Section 2.3 shall be allocated in a manner such that no Subsidiary Guarantor shall be rendered insolvent for any purpose under Applicable Insolvency Law by reason of its incurrence of such obligations.

(d)           Notwithstanding any payment or payments by any of the Subsidiary Guarantors hereunder, or any set-off or application of funds of any of the Subsidiary Guarantors by the Administrative Agent or any other Secured Party, or the receipt of any amounts by the Administrative Agent or any other Secured Party with respect to any of the Guaranteed Obligations, none of the Subsidiary Guarantors shall be entitled to be subrogated to any of the rights of the Administrative Agent or any other Secured Party against the Borrowers or the other Subsidiary Guarantors or against any collateral security held by the Administrative Agent or any other Secured Party for the payment of the Guaranteed Obligations nor shall any of the Subsidiary Guarantors seek any reimbursement from the Borrowers or any of the other Subsidiary Guarantors in respect of payments made by such Subsidiary Guarantor in connection with the Guaranteed Obligations, until all amounts owing to the Administrative Agent and the other Secured Parties on account of the Guaranteed Obligations are indefeasibly paid in full in cash and the Commitments are terminated.  If any amount shall be paid to any Subsidiary Guarantor on account of such subrogation rights at any time when all of the Guaranteed Obligations shall not have been indefeasibly paid in full in cash and the Commitments shall not have been terminated, such amount shall be held by such Subsidiary Guarantor in trust for the Administrative Agent, segregated from other funds of such Subsidiary Guarantor, and shall, forthwith upon receipt by such Subsidiary Guarantor, be turned over to the Administrative Agent in the exact form received by such Subsidiary Guarantor (duly endorsed by such Subsidiary Guarantor to the Administrative Agent, if required) to be applied against the Guaranteed Obligations, whether matured or unmatured, in such order as set forth in the Credit Agreement.

SECTION 2.4    Nature of Guaranty.

(a)           Each Subsidiary Guarantor agrees that this Guaranty is a continuing, unconditional guaranty of payment and performance and not of collection, and that its obligations under this Guaranty shall be primary, absolute and unconditional, irrespective of, and unaffected by:

(i) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, the Credit Agreement, any other Loan Document, any Hedging Agreement or any other agreement, document or instrument to which any Borrower, any Subsidiary Guarantor or any of their respective Subsidiaries or Affiliates is or may become a party;

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(ii) the absence of any action to enforce this Guaranty, the Credit Agreement, any other Loan Document or any Hedging Agreement or the waiver or consent by the Administrative Agent or any other Secured Party with respect to any of the provisions of this Guaranty, the Credit Agreement, any other Loan Document or any Hedging Agreement;

(iii) the existence, value or condition of, or failure to perfect its Lien against, any security for or other guaranty of the Guaranteed Obligations or any action, or the absence of any action, by the Administrative Agent or any other Secured Party in respect of such security or guaranty (including, without limitation, the release of any such security or guaranty);

(iv) any structural change in, restructuring of or other similar organizational change of any Borrower, any Subsidiary Guarantor, any other guarantors or any of their respective Subsidiaries or Affiliates; or

(v) any other action or circumstances which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor;

it being agreed by each Subsidiary Guarantor that, subject to the first sentence of Section 2.2, its obligations under this Guaranty shall not be discharged until the final indefeasible payment in cash and performance, in full, of the Guaranteed Obligations and the termination of the Commitments, provided that a Subsidiary Guarantor may be released from the Guaranteed Obligations pursuant to Section 4.16 of this Guaranty.

(b)           Each Subsidiary Guarantor represents, warrants and agrees that the Guaranteed Obligations and its obligations under this Guaranty are not and shall not be subject to any counterclaims, offsets or defenses of any kind against the Administrative Agent, the other Secured Parties or the Borrowers whether now existing or which may arise in the future.

(c)           Each Subsidiary Guarantor hereby agrees and acknowledges that the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guaranty, and all dealings between any Borrower and any Subsidiary Guarantor, on the one hand, and the Administrative Agent and the other Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Guaranty.

SECTION 2.5    Waivers.  To the extent permitted by Applicable Law, each Subsidiary Guarantor expressly waives all of the following rights and defenses (and agrees not to take advantage of or assert any such right or defense):

(a)           any rights it may now or in the future have under any statute (including, without limitation, North Carolina General Statutes Section 26-7, et seq. or similar law), or at law or in equity, or otherwise, to compel the Administrative Agent or any other Secured Party to proceed in respect of the Guaranteed Obligations against any Borrower, any Subsidiary Guarantor or any other Person or against any security for or other guaranty of the payment and performance of the Guaranteed Obligations before proceeding against, or as a condition to proceeding against, such Subsidiary Guarantor;

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(b)           any defense based upon the failure of the Administrative Agent or any other Secured Party to commence an action in respect of the Guaranteed Obligations against any Borrower, any Subsidiary Guarantor or any other Person or any security for the payment and performance of the Guaranteed Obligations;

(c)           any right to insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshalling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by such Subsidiary Guarantor of its obligations under, or the enforcement by the Administrative Agent or the other Secured Parties of this Guaranty;

(d)           any right of diligence, presentment, demand, protest and notice (except as specifically required herein) of whatever kind or nature with respect to any of the Guaranteed Obligations and waives, to the fullest extent permitted by Applicable Law, the benefit of all provisions of Applicable Law which are or might be in conflict with the terms of this Guaranty; and

(e)           any and all right to notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by the Administrative Agent or any other Secured Party upon, or acceptance of, this Guaranty.

Each Subsidiary Guarantor agrees that any notice or directive given at any time to the Administrative Agent or any other Secured Party which is inconsistent with any of the foregoing waivers shall be null and void and may be ignored by the Administrative Agent or such other Secured Party, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guaranty for the reason that such pleading or introduction would be at variance with the written terms of this Guaranty, unless the Administrative Agent and the Required Lenders have specifically agreed otherwise in writing.  The foregoing waivers are of the essence of the transaction contemplated by the Credit Agreement, the other Loan Documents and the Hedging Agreements and, but for this Guaranty and such waivers, the Administrative Agent and the other Secured Parties would decline to enter into the Credit Agreement, the other Loan Documents and the Hedging Agreements.

SECTION 2.6    Modification of Loan Documents, etc.  Neither the Administrative Agent nor any other Secured Party shall incur any liability to any Subsidiary Guarantor as a result of any of the following, and none of the following shall impair or release this Guaranty or any of the obligations of any Subsidiary Guarantor under this Guaranty:

(a)           any change or extension of the manner, place or terms of payment of, or renewal or alteration of all or any portion of, the Guaranteed Obligations;

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(b)           any action under or in respect of the Credit Agreement, any other Loan Document or any Hedging Agreement in the exercise of any remedy, power or privilege contained therein or available to any of them at law, in equity or otherwise, or waiver or refraining from exercising any such remedies, powers or privileges;

(c)           any amendment to, or modification of, in any manner whatsoever, the Credit Agreement, any other Loan Document or any Hedging Agreement;

(d)           any extension or waiver of the time for performance by any Borrower, any Subsidiary Guarantor or any other Person of, or compliance with, any term, covenant or agreement on its part to be performed or observed under the Credit Agreement, any other Loan Document or any Hedging Agreement, or waiver of such performance or compliance or consent to a failure of, or departure from, such performance or compliance;

(e)           the taking and holding of security or collateral for the payment of the Guaranteed Obligations or the sale, exchange, release, disposal of, or other dealing with, any property pledged, mortgaged or conveyed, or in which the Administrative Agent or the other Secured Parties have been granted a Lien, to secure any Indebtedness of any Borrower, any Subsidiary Guarantor or any other Person to the Administrative Agent or the other Secured Parties;

(f)           the release of anyone who may be liable in any manner for the payment of any amounts owed by any Borrower, any Subsidiary Guarantor or any other Person to the Administrative Agent or any other Secured Party;

(g)           any modification or termination of the terms of any intercreditor or subordination agreement pursuant to which claims of other creditors of any Borrower, any Subsidiary Guarantor or any other Person are subordinated to the claims of the Administrative Agent or any other Secured Party; or

(h)           any application of any sums by whomever paid or however realized to any Guaranteed Obligations owing by any Borrower, any Subsidiary Guarantor or any other Person to the Administrative Agent or any other Secured Party in such manner as the Administrative Agent or any other Secured Party shall determine in its reasonable discretion.

SECTION 2.7    Demand by the Administrative Agent.  In addition to the terms set forth in this Article II and in no manner imposing any limitation on such terms, if all or any portion of the then outstanding Guaranteed Obligations  are declared to be immediately due and payable, then the Subsidiary Guarantors shall, upon demand in writing therefor by the Administrative Agent to the Subsidiary Guarantors, pay all or such portion of the outstanding Guaranteed Obligations due hereunder then declared due and payable.  Notwithstanding the foregoing, each Subsidiary Guarantor agrees that, in the event of the dissolution or insolvency of any Borrower or any Subsidiary Guarantor, or the inability or failure of any Borrower or any Subsidiary Guarantor to pay debts as they become due, or an assignment by any Borrower or any Subsidiary Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of any Borrower or any Subsidiary Guarantor under bankruptcy, insolvency or similar laws, and if such event shall occur at a time when any of the Guaranteed Obligations may not then be due and payable, each Subsidiary Guarantor will pay to the Administrative Agent, for the ratable benefit of the Secured Parties and their respective successors, indorsees, transferees and assigns, forthwith the full amount which would be payable hereunder by each Subsidiary Guarantor if all such Guaranteed Obligations were then due and payable.

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SECTION 2.8    Remedies.  Upon the occurrence and during the continuance of any Event of Default, with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, enforce against the Subsidiary Guarantors their respective obligations and liabilities hereunder and exercise such other rights and remedies as may be available to the Administrative Agent hereunder, under the Credit Agreement, the other Loan Documents, the Hedging Agreements or otherwise.

SECTION 2.9    Benefits of Guaranty.  The provisions of this Guaranty are for the benefit of the Administrative Agent and the other Secured Parties and their respective permitted successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any Borrower, the Administrative Agent and the other Secured Parties, the obligations of any Borrower under the Credit Agreement, the other Loan Documents or the Hedging Agreements .  In the event all or any part of the Guaranteed Obligations are transferred, endorsed or assigned by the Administrative Agent or any other Secured Party to any Person or Persons as permitted under the Credit Agreement, any reference to an “Administrative Agent” or “Secured Party” herein shall be deemed to refer equally to such Person or Persons.

SECTION 2.10  Termination; Reinstatement.

(a)           Subject to clause (c) below, this Guaranty shall remain in full force and effect until all the Guaranteed Obligations and all the obligations of the Subsidiary Guarantors shall have been indefeasibly paid in full in cash and the Commitments terminated.

(b)           No payment made by any Borrower, any Subsidiary Guarantor or any other Person received or collected by the Administrative Agent or any other Secured Party from any Borrower, any Subsidiary Guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Guaranteed Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Subsidiary Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Subsidiary Guarantor in respect of the obligations of the Subsidiary Guarantors or any payment received or collected from such Subsidiary Guarantor in respect of the obligations of the Subsidiary Guarantors), remain liable for the obligations of the Subsidiary Guarantorsup to the maximum liability of such Subsidiary Guarantor hereunder until the Guaranteed Obligations and all the obligations of the Subsidiary Guarantorsshall have been indefeasibly paid in full in cash and the Commitments terminated.

(c)           Each Subsidiary Guarantor agrees that, if any payment made by any Borrower or any other Person applied to the Guaranteed Obligations is at any time avoided, annulled, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid or is repaid in whole or in part pursuant to a good faith settlement of a pending or threatened avoidance claim, or the proceeds of any collateral are required to be refunded by the Administrative Agent or any other Secured Party to any Borrower, its estate, trustee, receiver or any other Person, including, without limitation, anySubsidiary Guarantor, under any Applicable Law or equitable cause, then, to the extent of such payment or repayment, each Subsidiary Guarantor’s liability hereunder (and any Lien or collateral securing such liability) shall be and remain in full force and effect, as fully as if such payment had never been made, and, if prior thereto, this Guaranty shall have been canceled or surrendered (and if any Lien or collateral securing such Subsidiary Guarantor’s liability hereunder shall have been released or terminated by virtue of such cancellation or surrender), this Guaranty (and such Lien or collateral) shall be reinstated in full force and effect, and such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of such Subsidiary Guarantor in respect of the amount of such payment (or any Lien or collateral securing such obligation).

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               SECTION 2.11       Payments.  Payments by the Subsidiary Guarantors shall be made to the Administrative Agent to be credited and applied to the Guaranteed Obligations in accordance with Sections 5.4 and 13.4 of the Credit Agreement, in immediately available Dollars or Canadian Dollars, as the case may be, to an account designated by the Administrative Agent or at the Administrative Agent’s Office or at any other address that may be specified in writing from time to time by the Administrative Agent.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

To induce the Administrative Agent and the other Secured Parties to enter into the Loan Documents and Hedging Agreements and to make any Extensions of Credit, each Subsidiary Guarantor hereby represents and warrants that:

SECTION 3.1    Existence.  Such Subsidiary Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification and authorization, except where the failure to be qualified or authorized, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  The jurisdictions in which such Subsidiary Guarantor is organized and qualified to do business as of the Closing Date are described on Schedule 7.1(a) to the Credit Agreement.

SECTION 3.2    Authorization of Agreement; Enforceability. Such Subsidiary Guarantor has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Guaranty in accordance with its terms.  This Guaranty has been duly executed and delivered by the duly authorized officers of such Subsidiary Guarantor and this Guaranty constitutes the legal, valid and binding obligation of such Subsidiary Guarantor, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of creditors’ rights in general and the availability of equitable remedies.

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SECTION 3.3    No Conflict; Consents.  The execution, delivery and performance by such Subsidiary Guarantor of this Guaranty, in accordance with its terms, and the transactions contemplated hereby do not and will not, by the passage of time, the giving of notice or otherwise, (a) require any Governmental Approval or violate any Applicable Law relating to such Subsidiary Guarantor; (b) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of such Subsidiary Guarantor or any indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person, (c) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by such Subsidiary Guarantor other than Liens arising under the Loan Documents or (d) require any consent or authorization of, filing with, or other act in respect of, an arbitrator or Governmental Authority and no consent of any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Guaranty.

SECTION 3.4    Litigation.  Except for matters existing on the Closing Date and set forth on Schedule 7.1(u) to the Credit Agreement, there are no actions, suits or proceedings pending nor, to the knowledge of such Subsidiary Guarantor, threatened against or in any way relating adversely to or affecting such Subsidiary Guarantor or any of its properties in any court or before any arbitrator of any kind or before or by any Governmental Authority that (a) purport to affect or pertain to this Guaranty or any of the transactions contemplated hereby, or (b) either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect.

SECTION 3.5    Title to Properties; Liens.  Such Subsidiary Guarantor has such title to the real property owned or leased by it as is necessary or desirable to the conduct of its business and valid and legal title to all of its personal property and assets, including, but not limited to, those reflected on the balance sheets of the US Borrower and its Subsidiaries delivered pursuant to the Credit Agreement, except those which have been disposed of by such Subsidiary Guarantor subsequent to the date of such balance sheets pursuant to dispositions in the ordinary course of business or as otherwise expressly permitted under the Credit Agreement.  None of the properties and assets of such Subsidiary Guarantor is subject to any Lien, except Permitted Liens.  No financing statement under the Uniform Commercial Code of any state or comparable legislation in other jurisdictions which names such Subsidiary Guarantor or any of its trade names or divisions as debtor and which has not been terminated, has been filed in any state or other jurisdiction nor has such Subsidiary Guarantor signed any such financing statement or any security agreement authorizing any secured party thereunder to file any such financing statement, except to perfect Permitted Liens.

SECTION 3.6    Solvency. Subject in each case to the first sentence of Section 2.2, as of the Closing Date (or such later date upon which such Subsidiary Guarantor became a party hereto), and after giving effect to the transactions contemplated hereby, such Subsidiary Guarantor will be Solvent.

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SECTION 3.7    Compliance with the Credit Agreement.  Until the Guaranteed Obligations shall have been paid in full and the Commitments terminated, such Subsidiary Guarantor shall comply with the provisions of  Articles IX , X and XI of the Credit Agreement as if a party thereto.

ARTICLE IV

MISCELLANEOUS

SECTION 4.1    Amendments, Waivers and Consents.  None of the terms, covenants, agreements or conditions of this Guaranty may be amended, supplemented or otherwise modified, nor may they be waived, nor may any consent be given, except in accordance with Section 15.2 of the Credit Agreement.

SECTION 4.2    Notices.  All notices and communications hereunder shall be given to the addresses and otherwise made in accordance with Section 15.1 of the Credit Agreement; provided that notices and communications to the Subsidiary Guarantors shall be directed to the Subsidiary Guarantors at the address of the US Borrower set forth in Section 15.1(b)of the Credit Agreement.

SECTION 4.3    Enforcement Expenses, Indemnification.

(a)           The Subsidiary Guarantors shall, jointly and severally, pay all out-of-pocket expenses (including, without limitation, reasonable attorney’s fees and expenses) incurred by the Administrative Agent and each other Secured Party to the extent the Borrower would be required to do so pursuant to Section 15.3 of the Credit Agreement.

(b)           The Subsidiary Guarantors shall, jointly and severally, pay and indemnify each Indemnitee against , and save each Indemnitee harmless from, Indemnified Taxes and Other Taxes to the extent the Borrowers would be required to do so pursuant to Section 5.11 of the Credit Agreement.

(c)           The Subsidiary Guarantors shall, jointly and severally, indemnify each Indemnitee ,and save each Indemnitee harmless from, to the extent the Borrowers would be required to do so pursuant to Section 15.3 of the Credit Agreement.

(d)           No Indemnitee referred to in this Section 4.3 shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Guaranty, any other Loan Document, any Hedging Agreement or the transactions contemplated hereby or thereby.

(f)           The agreements in this Section 4.3 shall survive termination of the Commitments and repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.

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(g)           All amounts due under this Section 4.3 shall be payable promptly after demand therefor.

SECTION 4.4    Governing Law.  This Guaranty, unless otherwise expressly set forth herein, shall be governed by, construed and enforced in accordance with the laws of the State of North Carolina, without reference to the conflicts or choice of law principles thereof.

SECTION 4.5    Jurisdiction and Venue.

(a)           Jurisdiction.  Each Subsidiary Guarantor hereby irrevocably consents to the personal jurisdiction of the state and federal courts located in Mecklenburg County, North Carolina (and any courts from which an appeal from any of such courts must or may be taken), in any action, claim or other proceeding arising out of any dispute in connection with this Guaranty, any rights or obligations hereunder, or the performance of such rights and obligations.  Each Subsidiary Guarantor hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Administrative Agent or any Secured Party in connection with this Guaranty, any rights or obligations hereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 4.1.  Nothing in this Section 4.5 shall affect the right of the Administrative Agent or any other Secured Party to serve legal process in any other manner permitted by Applicable Law or affect the right of the Administrative Agent or any Secured Party to bring any action or proceeding against any Subsidiary Guarantor or its properties in the courts of any other jurisdictions.

(b)           Venue.  Each Subsidiary Guarantor hereby irrevocably waives any objection it may have now or in the future to the laying of venue in the aforesaid jurisdiction in any action, claim or other proceeding arising out of or in connection with this Guaranty or the rights and obligations of the parties hereunder.  Each Subsidiary Guarantor irrevocably waives, in connection with such action, claim or proceeding, any plea or claim that the action, claim or proceeding has been brought in an inconvenient forum.

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SECTION 4.6    Binding Arbitration; Waiver of Jury Trial.

(a)           Binding Arbitration.  Upon demand of any party, whether made before or after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Guaranty or any other Loan Document (each a “Dispute”) between or among parties hereto and to the other Loan Documents shall be resolved by binding arbitration as provided herein.  Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder.  A Dispute may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from Loan Documents executed in the future, disputes as to whether a matter is subject to arbitration, or claims concerning any aspect of the past, present or future relationships arising out of or connected with the Loan Documents.  Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the “Arbitration Rules”) of the American Arbitration Association (the “AAA”) and the Federal Arbitration Act.  All arbitration hearings shall be conducted in Charlotte, North Carolina.  The expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000.  All applicable statutes of limitations shall apply to any Dispute.  A judgment upon the award may be entered in any court having jurisdiction.  Notwithstanding anything foregoing to the contrary, any arbitration proceeding demanded hereunder shall begin within ninety (90) days after such demand thereof and shall be concluded within one hundred twenty (120) days after such demand.  These time limitations may not be extended unless a party hereto shows cause for extension and then such extension shall not exceed a total of sixty (60) days.  The panel from which all arbitrators are selected shall be comprised of licensed attorneys selected from the Commercial Financial Dispute Arbitration Panel of the AAA.  The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted.  The parties hereto do not waive any applicable Federal or state substantive law except as provided herein.  Notwithstanding the foregoing, this subsection shall not apply to any Hedging Agreement.

(b)           Jury Trial.  EACH PARTY HERETO HEREBY ACKNOWLEDGES THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

(c)           Preservation of Certain Remedies.  Notwithstanding the preceding binding arbitration provisions, the parties hereto and the other Loan Documents preserve, without diminution, certain remedies that such Persons may employ or exercise freely, either alone, in conjunction with or during a Dispute.  Each such Person shall have and hereby reserves the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following remedies, as applicable:  (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted in the Loan Documents or under Applicable Law or by judicial foreclosure and sale, including a proceeding to confirm the sale, (ii) all rights of self help including peaceful occupation of property and collection of rents, set off, and peaceful possession of property, (iii) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, appointment of receiver and in filing an involuntary bankruptcy proceeding, and (iv) when applicable, a judgment by confession of judgment.  Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute.

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SECTION 4.7    Injunctive Relief; Punitive Damages.

(a)           Each Subsidiary Guarantor recognizes that, in the event such Subsidiary Guarantor fails to perform, observe or discharge any of its obligations or liabilities under this Guaranty, any remedy of law may prove to be inadequate relief to the Administrative Agent and the other Secured Parties. Therefore, each Subsidiary Guarantor agrees that the Administrative Agent and the other Secured Parties, at the Administrative Agent’s or the Required Lenders’ option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

(b)           The Administrative Agent, the other Secured Parties and each Subsidiary Guarantor hereby agree that no such Person shall have a remedy of punitive, exemplary or consequential damages against any other party to a Loan Document or a Hedging Agreement and each such Person hereby waives any right or claim to punitive or exemplary damages that such Person may now have or may arise in the future in connection with any Dispute, whether such Dispute is resolved through arbitration or judicially.

                SECTION 4.8         No Waiver by Course of Conduct, Cumulative Remedies.  Neither the Administrative Agent nor any other Secured Party shall by any act (except by a written instrument pursuant to Section 4.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No delay or failure to take action on the part of the Administrative Agent or any other Secured Party in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default..  No course of dealing between any Subsidiary Guarantor, the Administrative Agent and the other Secured Parties or their respective agents or employees shall be effective to change, modify or discharge any provision of this Guaranty or to constitute a waiver of any Event of Default.  The enumeration of the rights and remedies of the Administrative Agent and the other Secured Parties set forth in this Guaranty is not intended to be exhaustive and the exercise by the Administrative Agent and the other Secured Parties of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under the other Loan Documents or that may now or hereafter exist at law or in equity or by suit or otherwise.

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SECTION 4.9    Successors and Assigns.  This Guaranty shall be binding upon and inure to the benefit of each of the parties hereto and its permitted successors and assigns (and shall bind all Persons who become bound as a Subsidiary Guarantor under this Guaranty), except that no Subsidiary Guarantor may assign or otherwise transfer any of its rights or obligations under this Guaranty without the prior written consent of the Administrative Agent and the other Secured Parties (given in accordance with the Credit Agreement).

               SECTION 4.10   Severability. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

                SECTION 4.11   Titles and Captions.  Titles and captions of Articles, Sections and subsections in, and the table of contents of, this Guaranty are for convenience only, and neither limit nor amplify the provisions of this Guaranty.

SECTION 4.12  Counterparts.  This Guaranty may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Guaranty or any document or instrument delivered in connection herewith by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Guaranty or such other document or instrument, as applicable.

SECTION 4.13  Set-Off.  If an Event of Default shall have occurred and be continuing, each  Secured Party and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Secured Party or any such Affiliate to or for the credit or the account of the applicable Subsidiary Guarantor against any and all of the obligations of the such Subsidiary Guarantor now or hereafter existing under this Guaranty or any other Loan Document to such Secured Party, irrespective of whether or not such Secured Party shall have made any demand under this Guaranty or any other Loan Document and although such obligations of such Subsidiary Guarantor may be contingent or unmatured or are owed to a branch or office of such Secured Party different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of each Secured Party and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Secured Party or its Affiliates may have.  Each Secured Party agrees to notify the applicable Subsidiary Guarantor and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

15

SECTION 4.14  Integration.  This Guaranty, together with the other Loan Documents comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter.  In the event of any conflict between the provisions of this Guaranty and the Credit Agreement, the provisions of the Credit Agreement shall control and in the event of any conflict between the provisions of this Guaranty and those of any other document (other than the Credit Agreement), the provisions of this Guaranty shall control; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the other Secured Parties in any other document shall not be deemed a conflict with this Guaranty.

SECTION 4.15  Acknowledgements  Each Subsidiary Guarantor hereby acknowledges that:

(a)           it has been advised by counsel in the negotiation, execution and delivery of this Guaranty and the other Loan Documents to which it is a party;

(b)           it has received a copy of the Credit Agreement and has reviewed and understands the same;

(c)           neither the Administrative Agent nor any other Secured Party has any fiduciary relationship with or duty to any Subsidiary Guarantor arising out of or in connection with this Guaranty or any of the other Loan Documents, and the relationship between the Subsidiary Guarantors, on the one hand, and the Administrative Agent and the other Secured Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(d)           no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby or thereby among the Secured Parties or among the Subsidiary Guarantors and the Secured Parties.

SECTION 4.16  Releases.  At such time as (a) the Guaranteed Obligations shall have been indeafeasibly paid in full in cash and the Commitments have been terminated, this Guaranty and all obligations (other than those expressly stated to survive such termination or as may be reinstated after such termination) of the Administrative Agent and each Subsidiary Guarantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party or (b) a Subsidiary Guarantor ceases to be a Subsidiary of a Borrower in connection with a transaction expressly permitted under the terms and conditions of the Credit Agreement, such Subsidiary Guarantor shall be released from the Guaranteed Obligations.

SECTION 4.17  Additional Subsidiary Guarantors.  Each Domestic Subsidiary of a Borrower that is required to become a party to this Guaranty pursuant to Section 9.11 of the Credit Agreement shall become a Subsidiary Guarantor for all purposes of this Guaranty upon execution and delivery by such Subsidiary of a supplement in form and substance satisfactory to the Administrative Agent.

                SECTION 4.18       No Strict Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Guaranty.  In the event an ambiguity or question of intent or interpretation arises, this Guaranty shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Guaranty.

16

SECTION 4.19  Powers Coupled with an Interest. All powers of attorney and other authorizations granted to the Secured Parties, the Administrative Agent and any Persons designated by the Administrative Agent or any other Secured Party pursuant to any provisions of this Guaranty or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Guaranteed Obligations remain unpaid or unsatisfied, any of the Commitments remain in effect or the Credit Facility has not been terminated.

SECTION 4.20  Secured Parties.  Each Secured Party not a party to the Credit Agreement who obtains the benefit of this Guaranty shall be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of the Credit Agreement, and agrees that with respect to the actions and omissions of the Administrative Agent hereunder or otherwise relating hereto that do or may affect such Secured Party, the Administrative Agent and each of its Affiliates shall be entitled to all the rights, benefits and immunities conferred under Article XIII of the Credit Agreement.

[Signature Pages to Follow]

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IN WITNESS WHEREOF, each of the Subsidiary Guarantors has executed and delivered this Guaranty under seal by their duly authorized officers, all as of the day and year first above written.

SCP DISTRIBUTORS LLC, as Subsidiary Guarantor

        By:             /s/ Mark W. Joslin                                                                           

       Name: Mark W. Joslin                                                                    

       Title:   Vice President and CFO                                                                    

ALLIANCE TRADING, INC., as Subsidiary Guarantor

        By:             /s/ Melanie Housey                                                                           

       Name: Melanie Housey                                                                    

       Title:   President                                                                     

CYPRESS, INC., as Subsidiary Guarantor

        By:             /s/ Melanie Housey                                                                           

       Name: Melanie Housey                                                                    

       Title:   President                                                                     

SUPERIOR POOL PRODUCTS LLC, as Subsidiary Guarantor

        By:             /s/ Mark W. Joslin                                                                           

       Name: Mark W. Joslin                                                                    

       Title:   Vice President                                                                    

[Signature Pages Continue]

SCP ACQUISITION CO. LLC, as Subsidiary Guarantor

        By:             /s/ Mark W. Joslin

       Name: Mark W. Joslin

       Title:   Vice President

SCP INTERNATIONAL, INC., as Subsidiary Guarantor

        By:             /s/ Mark W. Joslin

       Name: Mark W. Joslin

       Title:   Vice President

POOL DEVELOPMENT LLC, as Subsidiary Guarantor

        By:             /s/ Mark W. Joslin

       Name: Mark W. Joslin

       Title:   Vice President and CFO

SPLASH HOLDINGS, INC. (formerly known

as FORT WAYNE POOLS, INC.),

as Subsidiary Guarantor

        By:             /s/ Mark W. Joslin

       Name: Mark W. Joslin

       Title:   Vice President

HORIZON DISTRIBUTORS, INC., as Subsidiary Guarantor

        By:             /s/ Mark W. Joslin

       Name: Mark W. Joslin

       Title:   Vice President

[Signature Pages Continue]

POOLCORP FINANCIAL MORTGAGE, LLC as Subsidiary Guarantor

        By:             /s/ Mark W. Joslin

       Name: Mark W. Joslin

       Title:   President and Treasurer

POOLCORP FINANCIAL INC., as Subsidiary Guarantor

        By:             /s/ Mark W. Joslin

       Name: Mark W. Joslin

       Title:   President and Treasurer

WACHOVIA BANK, NATIONAL ASSOCIATION,

 as Administrative Agent

        By:             /s/ Authorized Signatory

       Name: Authorized Signatory

       Title:

EX-21.1

            &# 160;            EXHIBIT 21.1

List of Subsidiaries

Subsidiary	State or Jurisdiction  of Incorporation or Organization
SCP Distributors LLC	Delaware
Superior Commerce LLC	Delaware
SCP Northpark LLC	Delaware
SCP Services LP	Delaware
Alliance Trading, Inc.	Delaware
SCP Acquisition Co. LLC	Delaware
Superior Pool Products LLC	Delaware
SCP International, Inc.	Delaware
Pool Development LLC	Delaware
Horizon Distributors, Inc.	Delaware
POOLCORP Financial, Inc.	Delaware
POOLCORP Financial Mortgage, LLC	Louisiana
SCP Pool Holdings, BV	Netherlands
SCP Pool, BV	Netherlands
SCP (UK) Holdings Limited	United Kingdom
SCP (UK) Limited	United Kingdom
Garden Leisure Products, Ltd	United Kingdom
Swimming Pool Warehouse Ltd	United Kingdom
Cascade Swimming	United Kingdom
Norcal Pool Supplies Ltd	United Kingdom
Bonin Consultores E Servicos, LDA	Portugal
SCP Pool Portugal LDA	Portugal
B&B s.r.l.	Italy
SCP Europe, SAS	France
SCP France SAS	France
SCP Distributors Inc.	Ontario
Superior Pool Products, Inc.	Ontario
TorLyn Limited	Ontario
Splash Holdings, Inc.	Indiana
Windsor International, Ltd	Cayman Islands
SCP Pool Distributors Spain, S.L.	Spain
SCP Mexico S.A. de C.V	Mexico
Les Industries R.P. Inc.	Quebec
Sud Ouest Filtration SAS	France
Cypress, Inc.	Nevada
Cypress Hong Kong Limited	Hong Kong

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-115356, No. 333-16641, No. 333-16639, No. 333-58805, No. 333-75617, No. 333-97905 and 333-142706) pertaining to the SCP Pool Corporation Non-Employee Directors Equity Incentive Plan, the SCP Pool Corporation 1995 Stock Option Plan, the SCP Pool Corporation Employee Stock Purchase Plan, the SCP Pool Corporation 1998 Stock Option Plan, the SCP Pool Corporation 2002 Long-Term Incentive Plan and the Pool Corporation 2007 Long-Term Incentive Plan of our reports dated February 29, 2008, with respect to the consolidated financial statements of Pool Corporation and the effectiveness of internal control over financial reporting of Pool Corporation included in this Annual Report (Form 10-K) of Pool Corporation for the year ended December 31, 2007.

     /s/ Ernst & Young LLP

New Orleans, Louisiana

February 29, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Mark W. Joslin, certify that:

1. I have reviewed this annual report on Form 10-K of Pool Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 29, 2008	/s/ Mark W. Joslin
	Vice President and Chief Financial Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Manuel J. Perez de la Mesa, certify that:

1. I have reviewed this annual report on Form 10-K of Pool Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 29, 2008	/s/ Manuel J. Perez de la Mesa
	President and Chief Executive Officer

EX-32.1

EXHIBIT 32.1

Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350

(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

        In connection with the Annual Report on Form 10-K of Pool Corporation (the “Company”) for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Manuel J. Perez de la Mesa, as Chief Executive Officer of the Company, and Mark W. Joslin, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 29, 2008

/s/ Manuel J. Perez de la Mesa

        Manuel J. Perez de la Mesa

        President and Chief Executive Officer

/s/ Mark W. Joslin

        Mark W. Joslin

        Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.