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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
-----
Leslie's Poolmart
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(Name of Issuer)
Common Stock, no par value
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(Title of Class of Securities)
527069 10 8
-----------------------------------------
(CUSIP Number)
Jennifer Bellah, Esq.
Gibson, Dunn & Crutcher, LLP
333 South Grand Avenue, Suite 4800
Los Angeles, California 90071
Telephone: 213-229-7000
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
February 26, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
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CUSIP NO. 527069 10 8 SCHEDULE 13D PAGE 2 OF 10 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GREEN EQUITY INVESTORS II, L.P.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
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SOURCE OF FUNDS*
4 OO
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [_]
5
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
DELAWARE
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SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
See Item 5(b)
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
0
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TYPE OF REPORTING PERSON*
14
PN
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*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
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CUSIP NO. 527069 10 8 SCHEDULE 13D PAGE 3 OF 10 PAGES
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ITEM 1(a). NAME OF ISSUER:
Leslie's Poolmart, a California corporation (the "Issuer").
ITEM 1(b). ADDRESS OF ISSUER'S PRINCIPAL EXECUTIVE OFFICES:
20630 Plummer Street, Chatsworth, California 91311.
ITEM 1(c). TITLE OF CLASS OF EQUITY SECURITIES:
Common Stock, no par value (the "Common Stock").
ITEM 2(a)-(c), (f). IDENTITY AND BACKGROUND:
The Reporting Person is Green Equity Investors II, L.P., a Delaware
limited partnership ("GEI II"), an investment partnership having a principal
place of business at 333 South Grand Avenue, Suite 5400, Los Angeles, California
90071.
The general partner of GEI II is Grand Avenue Capital Partners, L.P.,
a Delaware limited partnership ("GACP"). The general partner of GACP is Grand
Avenue Capital Corporation, a Delaware corporation ("GACC"). LGP Management,
Inc., a Delaware corporation ("LGPM") is the general partner of Leonard Green &
Partners, L.P., a Delaware limited partnership ("LGP"), which is an affiliate of
GACP and the management company of GEI II. The principal place of business of
each of GACP, GACC, LGPM and LGP is 333 South Grand Avenue, Suite 5400, Los
Angeles, California 90071.
As a result of their business relationship with GEI II, GACP, GACC,
LGPM and LGP each may be deemed to have indirect beneficial ownership of the
Common Stock with respect to which GEI II may be deemed to have indirect
beneficial ownership by virtue of the HPA Group and GEI II being deemed to
constitute a group; however, each of GACP, GACC, LGPM and LGP disclaim
beneficial ownership of the Common Stock.
Leonard I. Green, Jonathan D. Sokoloff, John G. Danhakl, Gregory J.
Annick and Jennifer Holden Dunbar, each an individual United States citizen
having a principal business address at 333 South Grand Avenue, Suite 5400, Los
Angeles, California 90071, either directly (whether through ownership interest
or position) or through one or more intermediaries, may be deemed to control LGP
and GACP. As stated above, LGP and GACP may be deemed to share voting and
dispositive power with respect to the Common Stock of which GEI II may be deemed
to have indirect beneficial ownership by virtue of the HPA Group and GEI II
being deemed to constitute a group. As such, Messrs. Green, Sokoloff, Danhakl
and Annick and Ms. Holden Dunbar may be deemed to have shared voting and
investment power with respect to the Common Stock. However, such individuals
disclaim beneficial ownership of the Common Stock.
GEI II may be deemed to constitute a "group" within the meaning of
Rule 13d-5 together with Hancock Park Associates II, L.P. ("HPA II"), Liberty
West Partners ("Liberty"), Michael J. Fourticq individually, Brian P. McDermott
individually, Greg Fourticq individually, Richard H. Hillman individually and
Robert D. Olsen individually (collectively the "HPA Group") by virtue of the
matters described in Item 4. Information with respect to the members of the HPA
Group is based on and qualified in its entirety by reference to the Schedule 13D
dated November 11, 1996 filed by the members of the HPA Group (attached hereto
as Exhibit 7(k)) and Amendment No. 1 thereto dated February 26, 1996 (attached
hereto as Exhibit 7(l)).
HPA II is a Delaware limited partnership with its principal office and
place of business at 1925 Century Park East, Suite 810, Los Angeles, California
90067. The principal business of HPA II is investing.
<PAGE>
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CUSIP NO. 527069 10 8 SCHEDULE 13D PAGE 4 OF 10 PAGES
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The General Partners of HPA II are Michael J. Fourticq and Brian P.
McDermott. Mr. Fourticq's principal occupation is acting as a general partner of
HPA II, as chairman of the board of various companies owned or controlled by
various investment partnerships, and as Chairman of the Board of the Issuer. Mr.
McDermott's principal occupation is acting as President and Chief Executive
Officer of the Issuer and as a general partnership of HPA II. Mr. Fourticq's
principal business office is located at 1925 Century Park East, Suite 810, Los
Angeles, California, 90067. Mr. McDermott's principal business office is located
at 20630 Plummer Street, Chatsworth, California, 91311. Both Mr. Fourticq and
Mr. McDermott are United States citizens.
Liberty is a California general partnership with its principal place
of business at 1925 Century Park East, Suite 810, Los Angeles, California,
90067. The principal business of Liberty is investing.
The General Partners of Liberty are Michael J. Fourticq and Greg
Fourticq. Michael J. Fourticq's principal occupation, business address and
citizenship are as discussed above. Greg Fourticq's principal occupation is
acting as President of Cascade Sawing and Drilling. Greg Fourticq's principal
business office is located at P.O. Box 3157, Kent, Washington 98032. Greg
Fourticq is a United States citizen.
Richard H. Hillman's principal occupation is acting as President of
Hillman Capital Partners and as a director of the Issuer. His principal business
address is 2665 Main Street, #260, Santa Monica, California 90405. Richard H.
Hillman is a United States citizen.
Robert D. Olsen's principal occupation is acting as Chief Financial
Officer of the Issuer. His principal business address is 20630 Plummer Street,
Chatsworth, California 91311. Robert D. Olsen is a United States citizen.
ITEM 2(d). CRIMINAL CONVICTIONS IN LAST FIVE YEARS:
Neither GEI II nor any person disclosed in response to Item 2(a) has
been convicted in a criminal proceeding during the last five years.
ITEM 2(e). CERTAIN CIVIL PROCEEDINGS IN LAST FIVE YEARS:
Neither GEI II nor any person disclosed in response to Item 2(a) has
been party to any civil proceeding as a result of which it has been subject to a
judgment, decree, final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws, or finding
any violation in respect of such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION:
The source of funds that will be used in connection with the Merger
Transaction described in Item 4 is expected to be issuance of debt or equity
securities or bank or other commercial borrowings or some combination of
securities issuances and borrowings. As set forth in the Letter dated February
20, 1997 from LGP to the Issuer (attached hereto as Exhibit 7(e)), GEI will
provide not less than $15.3 million nor more than $17 million of equity
financing in connection with the Merger Transaction. Occidental Petroleum
Corporation ("Occidental") has expressed its willingness to provide a portion of
the equity capital to finance the Merger Transaction, as described in the Letter
dated December 27, 1996 from Occidental to Michael J. Fourticq (attached hereto
as Exhibit 7(g)). The Reporting Person understands that Occidental is currently
a holder of $10 million principal amount of the Issuer's 8% Convertible
Subordinated Debentures due 2001 (but redeemable earlier upon the occurrence of
specified change of control events including certain consolidations, mergers and
similar transactions). A subsidiary of Occidental is the Issuer's principal
supplier of chemicals. Dr. Dale R. Laurance, a director of the Issuer, is the
President of Occidental. Additional equity capital would be provided by certain
members of the HPA Group, as described in the Letter dated February 19, 1997
from HPA II to the Issuer (attached hereto as Exhibit 7(f)).
<PAGE>
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CUSIP NO. 527069 10 8 SCHEDULE 13D PAGE 5 OF 10 PAGES
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Additional financing for the Merger Transaction is expected to be
provided by the issuance of debt securities, as described in the Letter dated
February 4, 1997 from BT Securities Corporation to Hancock Park Associates, an
affiliate of HPA II ("HPA") (attached hereto as Exhibit 7(h)) and by a revolving
credit facility of the type described in the Letters dated January 14, 1997 and
February 21, 1997 from Wells Fargo Bank, National Association to the Issuer
(attached hereto as Exhibits 7(i) and 7(j), respectively). No final
determination has been made, or agreement entered into, with respect to the
terms of the financing for the Merger Transaction. In addition, as of the date
of this Schedule 13D, neither the Issuer, any Reporting Person nor any person
disclosed in response to Item 2(a) has received any legally binding commitment
to finance the Merger Transaction.
ITEM 4. PURPOSE OF TRANSACTION:
On February 26, 1997, the Issuer, LPM Holdings, Inc. ("Leslie's
Delaware") and Poolmart USA Inc., a Delaware corporation wholly owned by GEI II
("Poolmart"), entered into an Agreement and Plan of Merger (the "Agreement,"
attached hereto as Exhibit 7(a)) pursuant to which the Issuer agreed to be
acquired in a cash merger at the price of $14.50 per share. Subject to
shareholder approval, the Agreement provides that the Issuer would effect a two-
step merger transaction. In the first step, pursuant to the Agreement and to
the Agreement of Merger dated February 26, 1997 between the Issuer and Leslie's
Delaware (the "Merger Agreement," attached hereto as Exhibit 7(b)) the Issuer
would reincorporate in Delaware by merging with and into Leslie's Delaware, and
each share of the Common Stock (other than shares entitled to exercise
dissenters' rights under California law) would be exchanged for one share of the
common stock of Leslie's Delaware. Immediately thereafter, pursuant to the
Agreement, Leslie's Delaware would effect a merger with Poolmart in which
Leslie's Delaware would be the surviving corporation.
In the merger, a total of 359,505 shares of Leslie's Delaware (the
"Continuing Shares") presently held by certain members of the HPA Group would
remain outstanding, and each of the remaining outstanding shares of Leslie's
Delaware (including a substantial portion of the holdings of the members of the
HPA Group) would be converted into the right to receive $14.50 in cash. In
addition, certain members of the Issuer's management would receive options to
purchase common stock of Leslie's Delaware. The transactions contemplated by
the Agreement and the Merger Agreement are herein collectively referred to as
the "Merger Transaction."
Completion of the Merger Transaction is subject to a number of
conditions, including (i) approval of the Agreement and the Merger Agreement by
the holders of the Common Stock, (ii) obtaining sufficient financing on
satisfactory terms to complete the Merger Transaction, and (iii) compliance with
all applicable regulatory requirements.
It is anticipated that the Common Stock would be delisted from the
NASD National Market System as a result of the Merger Transaction.
The description of the Merger Transaction disclosed in this Item 4 is
qualified in its entirety by reference to the Exhibits attached hereto.
Except as disclosed in this Item 4, no Reporting Person nor any other
person disclosed in response to Item 2(a) has any current plans or proposals
which relate to or would result in any of the events described in clauses (a)
through (j) of the instructions to Item 4 of Schedule 13D.
ITEM 5(a) & (b). AGGREGATE NUMBER AND PERCENTAGE OF CLASS OF COMMON STOCK
BENEFICIALLY OWNED BY THE REPORTING PERSON AND BY PERSONS
COMPRISING GROUP:
All information regarding share ownership of the HPA Group and its
members is based on and qualified by reference to the Schedule 13D dated
November 11, 1996 filed by the members of the HPA
<PAGE>
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CUSIP NO. 527069 10 8 SCHEDULE 13D PAGE 6 OF 10 PAGES
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Group (attached hereto as Exhibit 7(k)) and Amendment No. 1 thereto dated
February 26, 1996 (attached hereto as Exhibit 7(l)).
<TABLE>
<CAPTION>
Number of Shares With
Shared Voting Aggregate
Sole Voting and and Dispositive Number of Shares Percentage of Class
Name Dispositive Power Power Beneficially Owned Beneficially Owned (1)
- ------------------------ ----------------- --------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
GEI II and HPA Group (2) 0 0 1,770,430 25.7%
GEI II (3) 0 0 0 0
HPA Group (4) 0 0 1,770,430 25.7
HPA II (5) 0 0 0 0
Liberty 334,141 0 334,141 5.1
Michael J. Fourticq (6) 507,574 0 507,574 7.7
Brian P. McDermott (7) 367,549 0 367,549 5.5
Greg Fourticq (8) 112,455 0 112,455 1.7
Richard Hillman (9) 324,348 0 324,348 4.9
Robert D. Olsen (10) 124,363 0 124,363 1.9
</TABLE>
(1) The percentages of Common Stock indicated on this table are based on
6,548,411 shares of Common Stock outstanding as of October 17, 1996, as
disclosed in the Issuer's most recent Form 10-Q filed with the Securities
and Exchange Commission, plus, where applicable, shares of Common Stock
subject to options exercisable within 60 days.
(2) Pursuant to Rule 13d-5, the group that may be deemed to be comprised of GEI
II and the HPA Group together are deemed to beneficially own all equity
securities of the Issuer beneficially owned by any member of the deemed
group.
(3) GEI II does not own any shares of Common Stock and is reported herein only
because the HPA Group and GEI II may be deemed to constitute a group
pursuant to Rule 13d-5.
(4) Pursuant to Rule 13d-5, the HPA Group is deemed to beneficially own all
equity securities of the Issuer beneficially owned by any members of the
group. The HPA Group may be deemed to beneficially own 623 shares of
Common Stock held by the spouse of Michael J. Fourticq, but such shares are
excluded from this table and, pursuant to Rule 13d-4, the filing of this
Schedule 13D shall not be construed as an admission that the members of the
HPA Group are the beneficial owners of such shares.
(5) HPA II does not own any shares of Common Stock and is reported herein only
as a member of the HPA Group.
(6) Includes 16,540 shares of Common Stock subject to options exercisable
within 60 days. Also includes 46,192 shares of Common Stock held by HPA, a
partnership of which Mr. Fourticq is the sole general partner. Mr. Fourticq
may also be deemed to beneficially own the 334,141 shares of Common Stock
reported by Liberty by virtue of his being a general partner of Liberty.
<PAGE>
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CUSIP NO. 527069 10 8 SCHEDULE 13D PAGE 7 OF 10 PAGES
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Mr. Fourticq may also be deemed to beneficially own 623 shares of Common
Stock held by Mr. Fourticq's spouse, but such shares are excluded from this
table.
(7) Shares are held through a trust. Includes 190,350 shares of Common Stock
subject to options exercisable within 60 days.
(8) Greg Fourticq does not own any shares of Common Stock outright. Greg
Fourticq's beneficial ownership includes 112,455 shares of Common Stock
held in trusts of which Greg Fourticq is trustee for the benefit of his
nephews and niece. Greg Fourticq may also be deemed to beneficially own the
334,141 shares of Common Stock reported by Liberty by virtue of his being a
general partner of Liberty.
(9) Includes 18,745 shares of Common Stock subject to options exercisable
within 60 days. Also includes 1,323 shares of Common Stock held in a trust
of which Mr. Hillman is trustee for the benefit of his son.
(10) All 124,363 shares of Common Stock are those subject to options exercisable
within 60 days.
ITEM 5(c). TRANSACTIONS IN THE COMMON STOCK WITHIN LAST 60 DAYS:
Neither the Reporting Person nor any other person disclosed in
response to Item 2(a) has effected any transactions in the Common Stock in the
last sixty days.
ITEM 5(d). RIGHTS OF ANY OTHER PERSON:
Not applicable.
ITEM 5(e). DATE ON WHICH REPORTING PERSON CEASED TO BE BENEFICIAL OWNER OF FIVE
PERCENT OF COMMON STOCK:
Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER:
Pursuant to the Letter Agreement dated February 26, 1997 by and among
LGP, Brian P. McDermott and Michael J. Fourticq (attached hereto as Exhibit
7(c)), certain members of the HPA Group have agreed to enter into a Stockholders
Agreement and Subscription Agreement with respect to the Continuing Shares and
other matters. Pursuant to the Letter dated February 26, 1997 from Michael J.
Fourticq and Brian P. McDermott to the Issuer (attached hereto as Exhibit 7(d)),
certain members of the HPA Group have agreed to vote the shares of Common Stock
currently held by them in favor of the Merger Transaction. Other than the
matters disclosed in response to Items 4 and 5 and this Item 6, neither the
Reporting Person nor any other person disclosed in response to Item 2(a) is
party to any contracts, arrangements, understandings or relationships with
respect to any securities of the Issuer, including but not limited to the
transfer or voting of any of the securities, finder's fees, joint ventures, loan
or option agreements, puts or calls, guarantees of profits, division of profits
or loss, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS:
<TABLE>
<C> <S>
Exhibit 7(a) Agreement and Plan of Merger by and among
Leslie's Poolmart, a California corporation, LPM
Holdings, Inc., a Delaware corporation, and
Poolmart USA Inc., a Delaware corporation dated
as of February 26, 1997
</TABLE>
<PAGE>
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CUSIP NO. 527069 10 8 SCHEDULE 13D PAGE 8 OF 10 PAGES
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<TABLE>
<C> <S>
Exhibit 7(b) Agreement of Merger dated February 26, 1997
between LPM Holdings, Inc. and Leslie's Poolmart
Exhibit 7(c) Letter Agreement dated February 26, 1997 by and
among Leonard Green & Partners, L.P., Brian J.
McDermott and Michael J. Fourticq
Exhibit 7(d) Letter dated February 26, 1997 from Michael J.
Fourticq and Brian J. McDermott to Leslie's
Poolmart
Exhibit 7(e) Letter dated February 20, 1997 from Leonard
Green & Partners, L.P. to Leslie's Poolmart
Exhibit 7(f) Letter dated February 19, 1997 from Hancock Park
Associates to Leslie's Poolmart
Exhibit 7(g) Letter dated December 27, 1996 from Occidental
Petroleum Corporation to Michael J. Fourticq
Exhibit 7(h) Letter dated February 4, 1997 from BT Securities
Corporation to Hancock Park Associates
Exhibit 7(i) Letter dated January 14, 1997 from Wells Fargo
Bank, National Association to Leslie's Poolmart
Exhibit 7(j) Letter dated February 21, 1997 from Wells Fargo
Bank, National Association to Leslie's Poolmart
Exhibit 7(k) Schedule 13D dated November 11, 1996 filed by
Hancock Park Associates II, L.P., Liberty West
Partners, Michael J. Fourticq, Brian P.
McDermott, Greg Fourticq, Richard H. Hillman and
Robert D. Olsen
Exhibit 7(l) Amendment No. 1 to Schedule 13D dated February
26, 1997 filed by Hancock Park Associates II,
L.P., Liberty West Partners, Michael J.
Fourticq, Brian P. McDermott, Greg Fourticq,
Richard H. Hillman and Robert D. Olsen
</TABLE>
<PAGE>
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CUSIP NO. 527069 10 8 SCHEDULE 13D PAGE 9 OF 10 PAGES
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
March 10, 1997
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Partners, L.P.,
its General Partner
By: Grand Avenue Capital Corporation,
its General Partner
By: /s/ Gregory J. Annick
________________________________
Name: Gregory J. Annick
Title: Vice President
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 7(a) Agreement and Plan of Merger by and among
Leslie's Poolmart, a California corporation, LPM
Holdings, Inc., a Delaware corporation, and
Poolmart USA Inc., a Delaware corporation dated
as of February 26, 1997
Exhibit 7(b) Agreement of Merger dated February 26, 1997
between LPM Holdings, Inc. and Leslie's Poolmart
Exhibit 7(c) Letter Agreement dated February 26, 1997 by and
among Leonard Green & Partners, L.P., Brian J.
McDermott and Michael J. Fourticq
Exhibit 7(d) Letter dated February 26, 1997 from Michael J.
Fourticq and Brian J. McDermott to Leslie's
Poolmart
Exhibit 7(e) Letter dated February 20, 1997 from Leonard
Green & Partners, L.P. to Leslie's Poolmart
Exhibit 7(f) Letter dated February 19, 1997 from Hancock Park
Associates to Leslie's Poolmart
Exhibit 7(g) Letter dated December 27, 1996 from Occidental
Petroleum Corporation to Michael J. Fourticq
Exhibit 7(h) Letter dated February 4, 1997 from BT Securities
Corporation to Hancock Park Associates
Exhibit 7(i) Letter dated January 14, 1997 from Wells Fargo
Bank, National Association to Leslie's Poolmart
Exhibit 7(j) Letter dated February 21, 1997 from Wells Fargo
Bank, National Association to Leslie's Poolmart
Exhibit 7(k) Schedule 13D dated November 11, 1996 filed by
Hancock Park Associates II, L.P., Liberty West
Partners, Michael J. Fourticq, Brian P.
McDermott, Greg Fourticq, Richard H. Hillman and
Robert D. Olsen
Exhibit 7(l) Amendment No. 1 to Schedule 13D dated February
26, 1997 filed by Hancock Park Associates II,
L.P., Liberty West Partners, Michael J.
Fourticq, Brian P. McDermott, Greg Fourticq,
Richard H. Hillman and Robert D. Olsen
</TABLE>
<PAGE>
EXHIBIT 7(A)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of February 26,
---------
1997 by and among LESLIE'S POOLMART, a California corporation ("Leslie's
--------
California"), LPM HOLDINGS, INC., a Delaware corporation and wholly owned
- ----------
subsidiary of Leslie's California ("Leslie's Delaware"), and POOLMART USA INC.,
-----------------
a Delaware corporation ("Poolmart").
--------
RECITALS
The respective boards of directors of Leslie's California and Leslie's
Delaware deem it advisable for the mutual benefit of Leslie's California and
Leslie's Delaware and their shareholders and stockholder, respectively, that
Leslie's California be merged with and into Leslie's Delaware (the
"Reincorporation Merger") upon the terms and subject to the conditions set forth
- -----------------------
in the Agreement of Merger substantially in the form attached hereto as Exhibit
A (the "Reincorporation Merger Agreement") and in accordance with the General
--------------------------------
Corporation Law of the State of California (the "California Law") and the
--------------
Delaware General Corporation Law (the "Delaware Law"). The board of directors
------------
and sole stockholder of Leslie's Delaware have approved and adopted the
Reincorporation Merger Agreement. The board of directors of Leslie's California
has approved the Reincorporation Merger Agreement and has resolved to recommend
to the shareholders of Leslie's California to vote to approve the principal
terms of the Reincorporation Merger Agreement.
The respective boards of directors of Leslie's Delaware and Poolmart deem
it advisable for the mutual benefit of Leslie's Delaware and Poolmart, and their
stockholder and stockholders, respectively, that Poolmart be merged with and
into Leslie's Delaware (the "Recapitalization Merger") upon the terms and
-----------------------
subject to the conditions set forth herein and in accordance with the Delaware
Law. The board of directors and sole stockholder of Leslie's Delaware have
approved and adopted this Agreement. The board of directors and sole
stockholder of Poolmart have approved and adopted this Agreement. The board of
directors of Leslie's California has approved this Agreement and has resolved to
recommend to the shareholders of Leslie's California to vote to approve the
principal terms of this Agreement in conjunction with their approval of the
principal terms of the Reincorporation Merger Agreement and the Reincorporation
Merger. The Reincorporation Merger and the Recapitalization Merger are
sometimes collectively referred to herein as the "Merger Transaction."
------------------
In consideration of the mutual covenants, agreements, representations and
warranties contained herein, and for the purpose of setting forth certain terms
and conditions of the Recapitalization Merger, and the mode of carrying the same
into effect, Leslie's Delaware, Leslie's California and Poolmart hereby agree as
follows:
ARTICLE 1
MERGER AND ORGANIZATION
The Recapitalization Merger. Poolmart shall be merged with and into
---------------------------
Leslie's Delaware as soon as practicable following the execution of this
Agreement, upon the terms and subject to the conditions hereinafter set forth,
as permitted by and in accordance with the Delaware
1
<PAGE>
Law. Leslie's Delaware and Poolmart are herein sometimes referred to as the
"Constituent Corporations." Leslie's Delaware shall be the surviving corporation
------------------------
following the effectiveness of the Recapitalization Merger (sometimes referred
to herein as the "Surviving Corporation").
---------------------
Section 1.2 Effect of Recapitalization Merger. The parties agree to the
---------------------------------
following provisions with respect to the Recapitalization Merger:
(a) Name of Surviving Corporation. The name of the Surviving
-----------------------------
Corporation shall from and after the Effective Date (as hereinafter
defined) be and continue to be "Leslie's Poolmart, Inc." until changed in
accordance with applicable law.
(b) Certificate of Incorporation. The certificate of incorporation
----------------------------
of Leslie's Delaware as in effect immediately prior to the Effective Date
shall from and after the Effective Date be and continue to be the
certificate of incorporation of the Surviving Corporation until changed or
amended in accordance with the provisions of applicable law.
(c) Bylaws. The bylaws of Leslie's Delaware as in effect immediately
------
prior to the Effective Date shall from and after the Effective Date be and
continue to be the bylaws of the Surviving Corporation until changed or
amended in accordance with the provisions of applicable law.
(d) Corporate Organization. On the Effective Date, the separate
----------------------
corporate existence of Poolmart shall cease, and Leslie's Delaware as the
surviving corporation and successor and shall succeed to Poolmart in the
manner of and as more fully set forth in Section 259 of the Delaware Law.
(e) Directors and Officers. The directors of Leslie's Delaware
----------------------
immediately prior to the Effective Date will be the initial directors of
the Surviving Corporation, and the officers of Leslie's Delaware
immediately prior to the Effective Date will be the initial officers of the
Surviving Corporation, in each case until their successors are elected and
qualified. However, it is expected that immediately after the Effective
Date, all of the directors of the Surviving Corporation other than Michael
J. Fourticq and Brian P. McDermott will resign.
(f) Filing of Certificate of Merger. If this Agreement is not
-------------------------------
terminated pursuant to Article 7 hereof, as soon as practicable after all
conditions to the Recapitalization Merger set forth in Article 6 hereof
shall have been satisfied or waived, Leslie's Delaware and Poolmart shall
cause the Certificate of Merger attached hereto as Exhibit B ("Certificate
-----------
of Merger") to be executed and acknowledged and, as required by the
---------
Delaware Law, filed with the Secretary of State of the State of Delaware as
provided in the Delaware Law. The Recapitalization Merger shall be
consummated and the closing of the transactions contemplated by this
Agreement (the "Closing") shall occur immediately upon the filing of the
-------
Certificate of Merger with the Secretary of State of the State of Delaware
(the date and time of such filing and Closing being referred to herein as
the "Effective Date"). The Recapitalization Merger shall occur immediately
--------------
following the effective time of the Reincorporation Merger. The Closing
shall take place at the offices of Paul, Hastings, Janofsky & Walker, 555
South Flower Street, Los Angeles, California 90071, or at such other place
as the parties may mutually agree.
(g) Further Assurances. If at any time after the Effective Date, the
------------------
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or
2
<PAGE>
assurances or any other acts or things are necessary, desirable or proper
(i) to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in, to or under any of the
rights, properties or assets of the Constituent Corporations acquired or to
be acquired as a result of the Recapitalization Merger, or (ii) otherwise
to carry out the purposes of this Agreement, the Surviving Corporation and
its proper officers and directors or their designees shall be authorized to
execute and deliver, in the name and on behalf of the Constituent
Corporations, all such deeds, bills of sale, assignments and assurances and
do, in the name and on behalf of the Constituent Corporations, all such
other acts and things necessary, desirable or proper to vest, perfect or
confirm its right, title or interest in, to or under any of the rights,
properties or assets of the Constituent Corporations acquired or to be
acquired as a result of the Recapitalization Merger and otherwise to carry
out the purposes of this Agreement.
ARTICLE 2
CONVERSION OF SECURITIES ON THE EFFECTIVE DATE
Conversion of Securities of Leslie's Delaware and Poolmart. At the
----------------------------------------------------------
Effective Date, pursuant to this Agreement and by virtue of the Recapitalization
Merger and without any action on the part of Leslie's Delaware, Poolmart or the
holders of any of the following securities:
(a) Each share of common stock, par value $.001 per share, of
Leslie's Delaware ("Leslie's Common Stock") (shares of Leslie's Common
---------------------
Stock being hereinafter collectively referred to as "Leslie's Shares" and
---------------
individually as a "Leslie's Share") issued and outstanding immediately
--------------
prior to the Effective Date (other than any Leslie's Shares to be cancelled
pursuant to Section 2.1(b) and each Leslie's Share to remain outstanding
pursuant to Section 2.1(c)) shall be cancelled and shall be converted
automatically into the right to receive an amount equal to $14.50 in cash,
without interest (the "Cash Merger Consideration"), payable to the holder
-------------------------
thereof upon surrender of the certificate formerly representing such Other
Common Stock in the manner provided in Section 2.2; the Leslie's Shares
being converted into the right to receive the Cash Merger Consideration are
hereinafter referred to as "Other Common Stock";
------------------
(b) Each Leslie's Share held in the treasury of Leslie's Delaware
and each Leslie's Share owned by Poolmart, if any, immediately prior to the
Effective Date shall be cancelled without any conversion thereof and no
payment or distribution shall be made with respect thereto;
(c) 160,539 Leslie's Shares registered in the name of Michael J.
Fourticq, 166,552 Leslie's Shares registered in the name of Brian P.
McDermott and Manette J. McDermott TR UA dated March 15, 1990 The McDermott
Family Trust, 10,000 Leslie's Shares registered in the name of Greg
Fourticq and 22,414 Leslie's Shares registered in the name of Richard H.
Hillman (such persons are collectively referred to herein as the
"Continuing Stockholders" and such shares are collectively referred to
------------------------
herein as the "Continuing Shares") shall not be converted, exchanged or
-----------------
cancelled as provided above but shall remain outstanding as required by the
letter addressed from Hancock Park Associates II, L.P. ("Hancock") to the
-------
board of directors of Leslie's California dated February 19, 1997
referenced in Section 3.5; and
3
<PAGE>
(d) Each share of Poolmart Common Stock (as hereinafter defined)
that is issued and outstanding immediately prior to the Effective Date
shall be converted into one newly issued, fully paid and nonassessable
share of Leslie's Common Stock (the "Share Exchange Ratio").
--------------------
(e) If between the date of this Agreement and the Effective Date the
number of outstanding shares of Leslie's Common Stock or of the common
stock of Leslie's California (which common stock will automatically be
converted into Leslie's Common Stock upon the effectiveness of the
Reincorporation Merger) ("California Common Stock") shall have been changed
-----------------------
into a different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split-up,
combination, exchange of shares or the like other than pursuant to the
Reincorporation Merger, the amount of the Cash Merger Consideration and the
Share Exchange Ratio shall be correspondingly adjusted.
Section 2.2 Payment of Cash for Other Common Stock.
--------------------------------------
(a) On the Effective Date, the Surviving Corporation shall
irrevocably deposit or cause to be deposited with a bank or trust company to be
designated by the Surviving Corporation which is organized and doing business
under the laws of the United States or any state thereof and has a combined
capital and surplus of at least $100,000,000 (the "Disbursing Agent"), as agent
----------------
for the holders of shares of Other Common Stock, cash in the aggregate amount
required with respect to the conversion of shares of Other Common Stock at the
Effective Date pursuant to Section 2.1(a) hereof. Pending distribution pursuant
to Section 2.2(b) hereof of the cash deposited with the Disbursing Agent, such
cash shall be held in trust for the benefit of the holders of Other Common Stock
and the fund shall not be used for any other purposes, and the Surviving
Corporation may direct the Disbursing Agent to invest such cash, provided that
such investments (i) shall be obligations of or guaranteed by the United States
of America, in commercial paper obligations receiving the highest rating from
either Moody's Investors Services, Inc. or Standard & Poor's Corporation, or in
certificates of deposit, bank repurchase agreements or bankers acceptances of
domestic commercial banks with capital exceeding $250,000,000 (collectively
"Permitted Investments") or in money market funds which are invested solely in
- ----------------------
Permitted Investments and (ii) shall have maturities that will not prevent or
delay payments to be made pursuant to Section 2.2(b) hereof. Each holder of a
certificate or certificates representing shares of Other Common Stock cancelled
and extinguished on the Effective Date pursuant to Section 2.1(a) hereof may
thereafter surrender such certificate or certificates to the Disbursing Agent,
as agent for such holder of shares of Other Common Stock, to effect the exchange
of such certificate or certificates on such holder's behalf for a period ending
one year after the Effective Date.
(b) After surrender to the Disbursing Agent of any certificate which
prior to the Effective Date shall have represented any shares of Other Common
Stock, the Disbursing Agent shall promptly distribute to the person in whose
name such certificate shall have been registered, a check representing the
amount of cash into which such shares of Other Common Stock shall have been
converted at the Effective Date pursuant to Section 2.1(a) hereof. Until so
surrendered and exchanged, each such certificate shall, after the Effective
Date, be deemed to represent only the right to receive such cash, and until such
surrender and exchange, no cash shall be paid to the holder of such outstanding
certificate in respect thereof. The Surviving Corporation shall promptly after
the Effective Date cause to be distributed to such holders appropriate materials
to facilitate such surrender.
4
<PAGE>
(c) If any cash deposited with the Disbursing Agent for purposes of
payment in exchange for shares of Other Common Stock remains unclaimed following
the expiration of one year after the Effective Date, such cash shall be
delivered to the Surviving Corporation by the Disbursing Agent, and thereafter
the Disbursing Agent shall not be liable to any persons claiming any amount of
such cash, and the surrender and exchange shall be effected directly with the
Surviving Corporation (subject to applicable abandoned property, escheat and
similar laws). No interest shall accrue or be payable with respect to any
amounts which any such holder shall be so entitled to receive. The Surviving
Corporation or the Disbursing Agent shall be authorized to pay the cash
attributable to any certificate theretofore issued which has been lost or
destroyed, upon receipt of satisfactory evidence of ownership of the shares of
Other Common Stock represented thereby and of appropriate indemnification.
(d) If payment is to be made to a person other than the person in
whose name a surrendered certificate, which prior to the Effective Date shall
have represented any shares of Other Common Stock, is registered, it shall be a
condition to such payment that the certificate so surrendered shall be endorsed
or shall otherwise be in proper form for transfer, and that the person
requesting such payment shall have paid any transfer and other taxes required by
reason of such payment in a name other than that of the registered holder of the
certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation or the Disbursing Agent that such tax either has been paid
or is not payable .
(e) From and after the Effective Date, the holders of shares of
Other Common Stock outstanding immediately prior to the Effective Date shall
cease to have any rights with respect to such shares of Other Common Stock
except as otherwise provided herein or by law.
(f) After the Effective Date, there shall be no transfers on the
stock transfer books of the Surviving Corporation of any shares of Other Common
Stock which were outstanding immediately prior to the Effective Date. If, after
the Effective Date, certificates for shares of Other Common Stock are presented
to the Surviving Corporation, they shall be cancelled and promptly exchanged for
cash as provided in this Section 2.2.
Section 2.3 Exchange of Stock Certificates. Immediately after the
------------------------------
Effective Date, the Surviving Corporation shall deliver to the record holder of
the certificate which immediately prior to the Effective Date represented all
the outstanding shares of Poolmart Common Stock that were converted into the
right to receive shares of Leslie's Common Stock in accordance with Section
2.1(d), in exchange for such certificate, duly endorsed in blank, a share
certificate, registered in the name of such record holder, representing the
number of shares of Leslie's Common Stock to which such record holder is so
entitled by virtue of Section 2.1(d). Such certificate will bear a legend
restricting the transferability of such shares of Leslie's Common Stock to the
extent contemplated by the Stockholders Agreement referred to in Section 6.3(e),
which restrictions include restrictions designed to assure the Surviving
Corporation that these shares will not be offered or sold in contravention of
any federal or state securities laws.
ARTICLE 3
ADDITIONAL AGREEMENTS IN CONNECTION WITH
THE MERGER TRANSACTION
Section 3.1 Shareholders' Approval. Leslie's California shall take all
----------------------
actions reasonably necessary in accordance with applicable law and its articles
of incorporation and bylaws to convene
5
<PAGE>
a meeting of its shareholders as soon as reasonably practicable for the purpose
of considering and approving the principal terms of the Reincorporation Merger
Agreement, this Agreement and the Merger Transaction (the "Special Meeting"). In
---------------
connection with the Special Meeting, the board of directors of Leslie's
California shall recommend that the shareholders of Leslie's California vote to
approve the principal terms of the Reincorporation Merger Agreement, this
Agreement and the Merger Transaction.
Proxy Materials and Schedule 13E-3.
----------------------------------
(a) In connection with the Special Meeting, Leslie's California
shall prepare and file a preliminary proxy statement relating to the
transactions contemplated by the Reincorporation Merger Agreement, this
Agreement and the Merger Transaction (the "Preliminary Proxy Statement") with
---------------------------
the Securities and Exchange Commission (the "SEC") and shall use its reasonable
---
best efforts to respond to the comments of the SEC and to cause a definitive
proxy statement to be mailed to Leslie's California's shareholders (the
"Definitive Proxy Statement"), all as soon as reasonably practicable; provided,
--------------------------
that prior to the filing of each of the Preliminary Proxy Statement and the
Definitive Proxy Statement, Leslie's California shall consult with Poolmart with
respect to such filings and shall afford Poolmart reasonable opportunity to
comment thereon. Poolmart shall provide Leslie's California with any information
for inclusion in the Preliminary Proxy Statement and the Definitive Proxy
Statement which may be required under applicable law and which is reasonably
requested by Leslie's California. Leslie's California shall promptly notify
Poolmart of the receipt of the comments of the SEC and of any request from the
SEC for amendments or supplements to the Preliminary Proxy Statement or the
Definitive Proxy Statement or for additional information, and will promptly
supply Poolmart with copies of all correspondence between Leslie's California or
its representatives, on the one hand, and the SEC or members of its staff, on
the other hand, with respect to the Preliminary Proxy Statement, the Definitive
Proxy Statement or the Merger Transaction. If at any time prior to the Special
Meeting any event should occur which is required by applicable law to be set
forth in an amendment of, or a supplement to, the Definitive Proxy Statement,
Leslie's California will promptly inform Poolmart. In such case, Leslie's
California, with the cooperation of Poolmart, will, upon learning of such event,
promptly prepare and mail such amendment or supplement; provided, that prior to
such mailing, Leslie's California shall consult with Poolmart with respect to
such amendment or supplement and shall afford Poolmart reasonable opportunity to
comment thereon. Leslie's California will notify Poolmart at least 24 hours
prior to the mailing of the Definitive Proxy Statement, or any amendment or
supplement thereto, to the shareholders of Leslie's California.
(b) Leslie's California shall prepare and file concurrently with the
filing of the Preliminary Proxy Statement, a Statement on Schedule 13E-3
("Schedule 13E-3") with the SEC. If at any time prior to the Special Meeting
- ----------------
any event should occur which is required by applicable law to be set forth in an
amendment of, or supplement to, the Schedule 13E-3, Leslie's California shall
file such amendments or supplements.
Section 3.3 Termination of Leslie's California Stock Option Plans. Leslie's
-----------------------------------------------------
California shall (i) take all steps necessary to cause Leslie's California's
1990 Stock Option Plan and Leslie's California's 1992 Directors' Stock Incentive
Plan (collectively, the "Stock Option Plans") to be terminated on or prior to
------------------
the Effective Date and (ii) if not otherwise terminated by their terms upon the
effectiveness of the Recapitalization Merger, obtain at the earliest practicable
date and prior to the Effective Date the written consent of each holder of an
issued and outstanding stock option issued pursuant to the Stock Option Plans as
well as the written consent of each holder of all other options to purchase
California Common Stock not granted under the Stock Option Plans
6
<PAGE>
(collectively, the "Stock Options") to the cancellation of such holders' Stock
-------------
Options (irrespective of their exercise price and whether or not then currently
exercisable) to take effect on the Effective Date. On the Effective Date, the
Surviving Corporation shall pay each holder of Stock Options, to the extent such
Stock Options have not been previously exercised or cancelled, (x) cash in an
amount equal to the product of (i) the difference between $14.50 and the
exercise price of such Stock Options, multiplied by (ii) the number of shares of
Leslie's Common Stock subject to such Stock Options, less, (y) the amount of all
applicable withholding taxes; provided, that those holders of Stock Options that
have agreed to accept options to purchase common stock of the Surviving
Corporation shall not receive any cash payment with respect to cancelled Stock
Options. From and after the effective time of the Reincorporation Merger, "Stock
Option Plans" and "Stock Options" shall refer to the Stock Option Plans and
Stock Options as the same shall have been assumed by Leslie's Delaware pursuant
to the Reincorporation Merger.
Section 3.4 Reasonable Best Efforts. Upon the terms and subject to the
-----------------------
conditions herein provided, and subject to the fiduciary duties of the board of
directors of Leslie's California, as it, or a special committee thereof that has
been established to, among other things, consider the Reincorporation Merger
Agreement, this Agreement and the Merger Transaction (the "Special Committee"),
-----------------
may be advised in writing by counsel, each party hereto shall use its reasonable
best efforts to take, or cause to be taken, all reasonable action and to do, or
cause to be done and to assist and cooperate with the other parties hereto in
doing, all things necessary, proper or advisable under applicable laws and
regulations and their respective articles or certificates of incorporation and
bylaws to consummate and make effective, as soon as reasonably practicable, the
transactions contemplated by the Reincorporation Merger Agreement or this
Agreement, subject, however, to the requisite vote of shareholders of Leslie's
California. Such actions shall include, without limitation, using its reasonable
best efforts to (a) obtain all consents, amendments to or waivers from other
parties under the terms of all leases and other agreements between Leslie's
California and such parties required as a result of the transactions
contemplated by the Reincorporation Merger Agreement or this Agreement, if any,
(b) obtain all necessary consents, approvals and authorizations as are required
to be obtained under any federal or state law or regulation, (c) defend any
lawsuits or other legal proceedings, whether judicial or administrative and
whether brought derivatively or on behalf of third parties (including
governmental agencies or officials), challenging the Reincorporation Merger
Agreement or this Agreement, or the consummation of the transactions
contemplated thereby or hereby and (d) effect all necessary registrations and
filings, including but not limited to any filings required under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act"), and submissions of
-------
information requested by governmental authorities. Upon the terms and subject
to the conditions hereof, and subject to the fiduciary duties of the board of
directors of Leslie's California, as it, or the Special Committee, may be
advised in writing by counsel, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all reasonable actions
and to do, or cause to be done, all things necessary to satisfy the other
conditions of Closing set forth herein.
Section 3.5 Financing. Poolmart shall use its reasonable best efforts to
---------
obtain the financing on terms and conditions satisfactory to it to (a) effect
the Merger Transaction, (b) refinance outstanding debt of the Surviving
Corporation (c) provide adequate ongoing working capital to the Surviving
Corporation and (d) pay the expenses related to the Merger Transaction and
obtaining the financing and refinancing (the "Financing"). Leslie's California
---------
shall use its reasonable best efforts to cooperate with and assist Poolmart in
obtaining the Financing. The parties acknowledge that the following letters
regarding the Financing have been delivered to the Special Committee: Occidental
Petroleum Corporation, dated December 27, 1996; BT Securities Corporation, dated
February 4, 1997; Hancock Park Associates II, L.P., dated February 19, 1997;
7
<PAGE>
Leonard Green & Partners, L.P., dated February 20, 1997; and BT Commercial
Corporation, dated February 21, 1997 (collectively, the "Financing Letters").
-----------------
Section 3.6 Conduct of Business by Leslie's California Pending the
------------------------------------------------------
Recapitalization Merger. Leslie's California covenants and agrees that, prior to
- -----------------------
the Effective Date, unless Poolmart shall otherwise agree in writing and except
as contemplated by the Reincorporation Merger Agreement or this Agreement:
(a) the business of Leslie's California and its subsidiaries shall
be conducted only in the ordinary and usual course and consistent with past
practice; Leslie's California and its subsidiaries shall not, without the
prior written consent of Poolmart, (i) except in the ordinary course of its
business, enter into any agreement which would be material to the condition
(financial or otherwise), results of operations, properties, assets,
liabilities or business of Leslie's California, (ii) purchase, sell or
encumber (or enter into any agreement to purchase, sell or encumber), or
enter into a merger or consolidation which would affect, any material
properties or assets of Leslie's California, or (iii) except in the
ordinary course of its business, enter into any other agreement or
arrangement involving payments in excess of $100,000 in the aggregate with
respect to the business or operations of Leslie's California;
(b) Leslie's California shall not (i) amend its articles of
incorporation or bylaws or the articles or certificates of incorporation or
bylaws of any of its subsidiaries, (ii) change the number of authorized or
outstanding shares of its capital stock (except for shares of California
Common Stock issued upon the exercise of Stock Options outstanding on the
date hereof), or (iii) declare, set aside or pay any dividend or other
distribution or payment in cash, stock or property in respect of any of its
shares of capital stock;
(c) neither Leslie's California nor any of its subsidiaries shall
(i) issue, grant, sell, pledge or transfer or agree or propose to issue,
grant, sell, pledge or transfer any shares of capital stock, stock options,
warrants, securities or rights of any kind or rights to acquire any such
shares, securities or rights of Leslie's California, any of its
subsidiaries or any successor thereto (except for shares of California
Common Stock issued upon the exercise of Stock Options outstanding on the
date hereof), (ii) incur any indebtedness (other than borrowings under
Leslie's California's existing credit facilities incurred to finance
current operations in the ordinary course of business and short term
indebtedness to trade creditors incurred in the ordinary course of
business), (iii) acquire directly or indirectly by redemption or otherwise
any shares of the capital stock of Leslie's California of any class or any
options, warrants or other rights to purchase any such shares, or (iv)
enter into or modify any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(d) Leslie's California and its subsidiaries shall use their
reasonable best efforts to conduct their relations with employees,
including termination and hiring practices, and their employee benefit
plans only in the ordinary and usual course and consistent with the past
practices and policies of Leslie's California, shall not amend, or enter
into any additional, employment agreements with officers or directors of
Leslie's California, shall make no increases in employee compensation or
benefits (including severance arrangements) except regularly scheduled
periodic increases and customary bonuses for the fiscal year ended December
28, 1996 under Leslie's California's existing bonus plan, and shall not
enter into any employment or termination agreements or other material
arrangements relating to employment benefits;
8
<PAGE>
(e) each of Leslie's California and its subsidiaries shall use its
reasonable best efforts to keep in place its current insurance policies
which are material (either individually or in the aggregate); and
notwithstanding such efforts, if any such policy is cancelled, Leslie's
California shall use its reasonable best efforts to replace such policy or
policies;
(f) neither Leslie's California nor its subsidiaries shall assume,
guarantee, endorse or otherwise become responsible for the obligations of
any other individual, firm or corporation, except in the ordinary and usual
course of its business;
(g) except in the ordinary and usual course of business, neither
Leslie's California nor its subsidiaries shall make any investment of a
capital nature either by purchase of stock or securities, contributions to
capital, property transfers or otherwise, or by the purchase of any
property or assets of any individual, firm or corporation, or otherwise
enter into any material transaction;
(h) neither Leslie's California nor any of its subsidiaries shall
make any material tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(i) neither Leslie's California nor any of its subsidiaries shall
make any change in its accounting principles or methods except insofar as
may be required by a change in generally accepted accounting principles;
and
(j) neither Leslie's California nor any of its subsidiaries shall
enter into an agreement or otherwise agree to do any of the things
described in clauses (a) through (i) or anything which, to Leslie's
California's best knowledge at the time of such action, would make any
representation or warranty of Leslie's California in this Agreement untrue
or incorrect in any material respect as of the date hereof and as of the
Effective Date, as if made on such date, except to the extent such
representations and warranties expressly relate to a specific date (in
which case such representations and warranties shall be true and correct as
of such date).
Section 3.7 Leslie's California's Notification of Certain Matters.
-----------------------------------------------------
Leslie's California shall, promptly upon obtaining knowledge of any of the
following occurring subsequent to the date of this Agreement and prior to the
Effective Date, notify Poolmart of: (a) any material claims, actions,
proceedings, tax audits or investigations commenced or, to its knowledge,
threatened, involving or affecting Leslie's California or any of its
subsidiaries or any of their properties or assets, or, to its knowledge, against
any employee, consultant, director, officer or shareholder of Leslie's
California or any of its subsidiaries, in his, her or its capacity as such, (b)
any notice of, or other communication relating to, a default or event which,
with notice or lapse of time or both, would become a default, received by
Leslie's California or any of its subsidiaries, under any agreement, lease,
indenture or instrument to which Leslie's California or any of its subsidiaries
is a party or is subject where such a default would have a material adverse
effect on Leslie's California and its subsidiaries, taken as a whole, (c) any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by the Reincorporation Merger Agreement or this Agreement, and (d)
any material adverse change in the condition (financial or otherwise), results
of operations, properties, assets, liabilities or business of Leslie's
California and its subsidiaries, taken as a whole, or the occurrence of an event
known to Leslie's California which, so far as reasonably can be foreseen at the
time of its occurrence, could result in any such change.
9
<PAGE>
Section 3.8 Access to Leslie's California's Books and Records. Upon
-------------------------------------------------
reasonable notice, Leslie's California shall afford Poolmart and its
representatives and representatives of all prospective sources of Financing
reasonable access during normal business hours to the properties, books and
records of Leslie's California and its subsidiaries and such additional
information concerning the business and properties of Leslie's California and
its subsidiaries as Poolmart and its representatives may reasonably request,
including the permission of Leslie's California for Poolmart to contact key
suppliers and customers of Leslie's California. Unless and until Leslie's
California otherwise agrees, Poolmart will, and will cause their
representatives, and will obtain appropriate undertakings from the
representatives of all prospective sources of Financing to, hold in confidence
all confidential information and not use any confidential information except in
connection with the transactions contemplated hereby and the Financing, until
such time as (i) such information is otherwise publicly available or (ii) as it
is advised by counsel that any such information or document is required by law
to be disclosed, provided that in such event it shall promptly notify Leslie's
California of such requirement and cooperate in any effort Leslie's California
makes to seek a reasonable protective order to limit the disclosure and use of
such information. In the event of the termination of this Agreement, Poolmart
will, and will cause its representatives and the representatives of all
prospective sources of Financing to, either, at Leslie's California's option,
(a) deliver to Leslie's California all documents, work papers and other
material, and all copies thereof, obtained by it or on its behalf from Leslie's
California as a result of this Agreement or in connection herewith, whether so
obtained before or after the execution hereof, or (b) destroy all such
documents, work papers and other material, and all copies thereof, and deliver
an appropriate certificate of such destruction to Leslie's California; provided,
that in each case Poolmart may retain a single set of copies for file purposes.
Section 3.9 Acquisition Proposals. Leslie's California shall, and shall
---------------------
use its reasonable best efforts to cause each of its officers, directors or
affiliates to, notify Poolmart promptly of any direct or indirect contact by any
corporation, partnership, person or other entity or group concerning any tender
or exchange offer, proposal for a merger or consolidation or other business
combination involving Leslie's California or any of its subsidiaries or
divisions, or any proposal or offer (in each case, whether or not in writing and
whether or not communicated to the shareholders of Leslie's California
generally) to acquire in any manner, directly or indirectly, a substantial
equity interest in, or a substantial portion of the assets of, Leslie's
California or any of its subsidiaries or divisions, other than pursuant to the
transactions contemplated by this Agreement (an "Acquisition Proposal") and
--------------------
shall promptly provide Poolmart with a summary of all material terms and
conditions of such Acquisition Proposal. In addition, Leslie's California shall
give Poolmart not less than three business days' written notice prior to
providing any confidential information to any person (other than Poolmart,
prospective sources of the Financing and their respective representatives)
concerning the business and properties of Leslie's California or affording any
other person access to the properties, books or records of Leslie's California
in connection with any Acquisition Proposal. Leslie's California shall not, nor
shall it permit any of its officers, directors, affiliates, representatives or
agents to, directly or indirectly, (i) take any action to solicit, initiate or,
subject to the rights of Leslie's California to provide confidential information
as provided in the immediately preceding sentence, knowingly encourage any
Acquisition Proposal, or (ii) participate in any negotiations with respect to an
Acquisition Proposal, except that Leslie's California or any such persons may
participate in such negotiations with respect to any unsolicited Acquisition
Proposal from a third party to the extent that the board of directors of
Leslie's California or the Special Committee concludes (A) that such Acquisition
Proposal is superior to the Merger Transaction and (B) based upon the advice of
counsel, that such negotiations are necessary to discharge its fiduciary duty
under applicable law.
10
<PAGE>
Section 3.10 Financial Statements; Communications with Governmental
------------------------------------------------------
Authorities. Leslie's California shall deliver to Poolmart, as soon as
- -----------
practicable (a) Leslie's California's financial statements for the year ended
December 28, 1996 (which statements may be unaudited), and (b) copies of all
filings and submissions by Leslie's California with, and all written and
material oral communications to, and all written and material oral
communications from, the SEC and each other federal, state and local government
agency with respect to the transactions and events contemplated by the
Reincorporation Merger Agreement or this Agreement. Leslie's California shall
deliver to Poolmart, as soon as available but in no event later than March 31,
1997, Leslie's California's audited financial statements for the year ended
December 28, 1996; such audited financial statements (a) shall be in accordance
with the books and records of Leslie's California and its subsidiaries, (b)
shall present fairly the consolidated financial position, results of operations,
changes in shareholders' equity, and cash flow (as applicable) of Leslie's
California and its subsidiaries for the year ended December 28, 1996, and (c)
shall have been prepared in conformity with generally accepted accounting
principles applied in all material respects on a consistent basis through the
year ended December 28, 1996.
ARTICLE 4A
REPRESENTATIONS AND WARRANTIES OF LESLIE'S CALIFORNIA
Except as disclosed in writing to Poolmart by Leslie's California, Leslie's
California represents and warrants to Poolmart as follows:
Section 4A.1 Organization and Good Standing. Each of Leslie's California
------------------------------
and its subsidiaries is a duly organized and validly existing corporation in
good standing under the laws of the state of its incorporation, with all
requisite power and authority (corporate and other) to own, lease and operate
its properties and conduct its business and is duly qualified and in good
standing as a foreign corporation authorized to do business in each of the
jurisdictions in which the character of the properties owned or held under lease
by it or the nature of the business transacted by it makes such qualification
necessary, except where the failure to be so qualified would not have a material
adverse effect on Leslie's California and its subsidiaries, taken as a whole.
Leslie's California has heretofore delivered to Poolmart accurate and complete
copies of its and its subsidiaries' certificates or articles of incorporation
and bylaws, as currently in effect.
Section 4A.2 Authorization; Binding Agreement. Leslie's California has
--------------------------------
all requisite corporate power and authority to execute and deliver the
Reincorporation Merger Agreement and this Agreement and to consummate the
transactions contemplated thereby and hereby. The execution and delivery of the
Reincorporation Merger Agreement and this Agreement and the consummation of the
transactions contemplated thereby and hereby have been duly and validly
authorized by Leslie's California's board of directors and, except for the
approval of the principal terms of the Reincorporation Merger Agreement, this
Agreement and the Merger Transaction by the shareholders of Leslie's California
in accordance with the California Law and the articles of incorporation and
bylaws of Leslie's California, no other corporate proceedings on the part of
Leslie's California are necessary to authorize the Reincorporation Merger
Agreement, this Agreement and the transactions contemplated thereby or hereby.
The Reincorporation Merger Agreement and this Agreement have been duly and
validly executed and delivered by Leslie's California, and subject to the
requisite approval of the shareholders of Leslie's California, constitute legal,
valid and binding agreements of Leslie's California, enforceable against
Leslie's California in accordance with their respective terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other laws, now or hereafter in
11
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effect, relating to or limiting creditors' rights generally, and (b) general
principles of equity (whether considered in an action in equity or at law) which
provide, among other things, that the remedies of specific performance and
injunctive and other forms of equitable relief are subject to equitable defenses
and to the discretion of the court before which any proceedings therefor may be
brought.
Section 4A.3 Capitalization. The authorized capital stock of Leslie's
--------------
California consists of 40,000,000 shares of California Common Stock, and
1,000,000 shares of Preferred Stock ("California Preferred Stock"). As of the
--------------------------
date hereof, 6,550,966 shares of California Common Stock and no shares of
California Preferred Stock were outstanding. As of the date hereof, 988,185
shares of California Common Stock were reserved for issuance upon exercise of
outstanding Stock Options. All of the outstanding shares of capital stock of
Leslie's California and the subsidiaries of Leslie's California have been duly
authorized and validly issued and are fully paid and nonassessable and free of
preemptive rights. All issued and outstanding shares of capital stock of the
subsidiaries of Leslie's California are owned by Leslie's California or a
wholly-owned subsidiary of Leslie's California free and clear of all liens,
charges, encumbrances, claims and options of any nature. Except as contemplated
by the Reincorporation Merger Agreement and this Agreement and except for the
Stock Options, neither Leslie's California nor any subsidiary of Leslie's
California has granted any outstanding option, warrant, subscription or other
right, or entered into any agreement or commitment which either (a) obligates
Leslie's California or any of its subsidiaries to issue, sell or transfer any
shares of the capital stock of Leslie's California or any subsidiary of Leslie's
California or (b) restricts the transfer of, or otherwise encumbers, shares of
California Common Stock.
Section 4A.4 Financial Statements. All consolidated financial statements
--------------------
of Leslie's California and its subsidiaries (including the notes to such
financial statements) included in Leslie's California's Annual Report on Form
10-K for the year ended December 30, 1995 (the "Year End Financial Statements")
-----------------------------
filed pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act"), and the unaudited financial statements of Leslie's California and its
- ---
subsidiaries included in Leslie's California's Quarterly Reports on Form 10-Q
for the quarters ended March 30, June 29, and September 28, 1996 (the "Interim
-------
Financial Statements") filed pursuant to the Exchange Act (a) are in accordance
- --------------------
with the books and records of Leslie's California and its subsidiaries, (b)
present fairly the consolidated financial position, results of operations,
changes in shareholders' equity, and cash flow (as applicable) of Leslie's
California and its subsidiaries as of the respective dates and for the
respective periods indicated, except, in the case of the Interim Financial
Statements, for normal year-end audit adjustments, and (c) except for the
absence of footnotes in the Interim Financial Statements, have been prepared in
conformity with generally accepted accounting principles applied in all material
respects on a consistent basis through all the periods involved. Leslie's
California has no material liabilities that are required by generally accepted
accounting principles to be disclosed on a balance sheet other than (i) those
disclosed in the Year End Financial Statements or the Interim Financial
Statements, and (ii) those arising in the ordinary course of business since
September 28, 1996.
Section 4A.5 Absence of Certain Changes or Events. Since September 28,
------------------------------------
1996, (a) there has not been any change or any development which has had, or, to
Leslie's California's knowledge, would be likely to have, a material adverse
effect on Leslie's California and its subsidiaries, taken as a whole, except for
changes generally affecting the market for securities of publicly traded
companies and changes in general economic conditions, (b) there has not been any
damage, destruction or loss, whether covered by insurance or not, having a
material adverse effect upon Leslie's California and its subsidiaries, taken as
a whole, (c) Leslie's California and its subsidiaries have conducted their
respective businesses only in the ordinary course, (d) Leslie's
12
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California and its subsidiaries have not entered into any material transactions
other than as approved by the board of directors of Leslie's California or as
expressly permitted by this Agreement, (e) Leslie's California has not changed
its accounting principles or methods except insofar as may be required by a
change in generally accepted accounting principles, (f) Leslie's California has
not declared, paid or set aside for payment any dividends, and (g) except for
customary periodic salary increases, automatic annual option grants to directors
of Leslie's California, and other increases expressly approved by the Chief
Executive Officer of Leslie's California, there have not been any changes in
executive compensation levels or in the manner in which other employees of
Leslie's California are compensated or the supplemental benefits provided to
such employees.
Section 4A.6 SEC Reports and Other Documents. Each registration
-------------------------------
statement, proxy statement or report filed with the SEC and not withdrawn by
Leslie's California since January 1, 1994 did not, on the date of effectiveness
in the case of such registration statements, or on the date of filing in the
case of such reports, or on the date of mailing in the case of such proxy
statements, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Since January 1, 1994, Leslie's California has filed all reports
required to be filed by it with the SEC and all such reports complied as to form
in all material respects with the applicable requirements of law. All financial
statements and schedules included in the documents referred to in the preceding
sentence were prepared in accordance with generally accepted accounting
principles (except for the absence of footnotes in the Interim Financial
Statements included in such documents), applied in all material respects on a
consistent basis except as noted therein, and fairly present the information
purported to be shown therein.
Section 4A.7 Governmental and Other Consents and Approvals. Subject to
---------------------------------------------
the approval of the Reincorporation Merger Agreement, this Agreement and the
Merger Transaction by the shareholders of Leslie's California, to Leslie's
California's knowledge, no consent, waiver, approval, license or authorization
of or designation, declaration or filing with any governmental agency or
authority or other public persons or entities in the United States is required
in connection with the execution or delivery by Leslie's California of the
Reincorporation Merger Agreement or this Agreement or the consummation by
Leslie's California of the transactions contemplated thereby or hereby, other
than (a) filings in the States of California and Delaware in accordance with the
California Law and the Delaware Law, respectively, (b) filings required under
the HSR Act, (c) filings required under the Exchange Act and (d) such other
consents, waivers, approvals, licenses or authorizations, the failure of which
to be obtained will not have a material adverse effect on Leslie's California
and its subsidiaries, taken as a whole, or on the ability of Leslie's California
to consummate the transactions contemplated thereby or hereby.
Section 4A.8 No Violation. The execution and delivery of the
------------
Reincorporation Merger Agreement and this Agreement, the filing by Leslie's
California of a certificate of ownership in connection with the Reincorporation
Merger in the States of California and Delaware in accordance with the
California Law and the Delaware Law, respectively, the consummation by Leslie's
California of the transactions contemplated thereby or hereby, or compliance by
Leslie's California with any of the provisions thereof or hereof, will not:
(a) violate any provision of the charter documents of Leslie's
California or any of its subsidiaries;
(b) cause Leslie's California to violate in any material respect (i)
any statute or law or any judgment, decree, order, regulation or rule of
any court or governmental
13
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authority applicable to Leslie's California or any of its subsidiaries or
any of their respective properties or (ii) the award of any arbitrator or
panel of arbitrators;
(c) cause the acceleration of the maturity of any material debt or
obligation of Leslie's California or any of its subsidiaries; or
(d) violate, or be in conflict with, or constitute a material
default under, or permit the termination of, or, except as contemplated by
the Reincorporation Merger Agreement or this Agreement, require the consent
of any person under, or result in the creation of any material lien upon
any property of Leslie's California or any of its subsidiaries under, any
agreement, indenture, lease or instrument to which Leslie's California or
any of its subsidiaries is a party or by which Leslie's California or any
of its subsidiaries (or their respective properties) may be bound, which
individually or in the aggregate would have a material adverse effect on
Leslie's California and its subsidiaries, taken as a whole.
Leslie's California is not in material noncompliance or default (without
giving effect to any grace or cure period or notice requirement) under any
agreement, indenture or instrument creating or evidencing indebtedness for
borrowed money or under any capital lease or under any agreement pursuant to
which any of its securities were sold. Leslie's California has valid leasehold
interests in all material real and personal property held under lease and is not
in default of any of its material obligations under any lease or sublease
establishing such leasehold interests, except in those instances in which such
default, individually or in the aggregate, would not materially and adversely
affect Leslie's California and its subsidiaries taken as a whole.
Section 4A.9 Litigation. There is no legal action, suit, arbitration or
----------
other legal, administrative or other governmental investigation, inquiry or
proceeding (whether federal, state, local or foreign) pending or, to the
knowledge of Leslie's California, threatened against or affecting Leslie's
California or any of its properties, assets, business, franchises or
governmental approvals before any court or governmental department, commission,
board, bureau, agency, instrumentality or arbitrator, which, individually or in
the aggregate, could reasonably be expected (a) to have a material adverse
effect upon Leslie's California and its subsidiaries, taken as a whole, or (b)
to materially and adversely affect the ability of Leslie's California to carry
out, or prevent or make unduly burdensome, the Merger Transaction or the
transactions contemplated by the Reincorporation Merger Agreement or this
Agreement.
Section 4A.10 Governmental Approvals; Compliance with Law. Leslie's
-------------------------------------------
California possesses from the appropriate agency, commission, board or
governmental authority, whether federal, state or local, all licenses, permits,
authorizations, approvals, franchises and rights ("Government Approvals") that
--------------------
are necessary for Leslie's California to engage in the business currently
conducted by it, except in those instances in which failure to possess
Government Approvals, individually or in the aggregate, would not materially and
adversely affect Leslie's California and its subsidiaries, taken as a whole; to
the knowledge of Leslie's California, all Government Approvals possessed by
Leslie's California have been validly issued, are in full force and effect and
Leslie's California has no reason to believe such Government Approvals are
subject to revocation, cancellation, suspension or termination. Leslie's
California is in compliance with all applicable federal, state and local laws,
statutes, ordinances, rules and regulations, except in those instances in which
non-compliance, individually or in the aggregate, would not materially and
adversely affect Leslie's California and its subsidiaries, taken as a whole.
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Section 4A.11 Brokers and Finders. Except for (i) Dillon, Read Co. Inc.
-------------------
("Dillon Read"), which has been engaged, pursuant to an engagement letter dated
-----------
December 17, 1996, a true and complete copy of which has been delivered to
Poolmart, to provide advice to the board of directors of Leslie's California
with respect to whether the consideration to be received by the holders of Other
Common Stock who are not Continuing Stockholders (the "Public Stockholders") is
-------------------
fair to the Public Stockholders from a financial point of view, and (ii)
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") which has been
---
engaged by Leslie's California and the Special Committee to provide financial
advisory services to the Special Committee pursuant to an engagement letter
dated December 17, 1996, a true and complete copy of which has been delivered to
Poolmart, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger Transaction or
in connection with any transaction involving Leslie's California based upon
arrangements made by or on behalf of Leslie's California.
Section 4A.12 Fairness Opinions and Approval by Special Committee. On or
---------------------------------------------------
prior to the date hereof, the Special Committee approved the terms of the
Reincorporation Merger Agreement and this Agreement and received written
opinions from Dillon Read and DLJ as of such date, substantially to the effect
that, from a financial point of view, the consideration to be received by the
Public Stockholders in the Merger Transaction is fair to the Public Stockholders
(which opinions shall be updated on the date the Definitive Proxy Statement is
mailed to Leslie's California's shareholders), a true and complete copy of which
opinions have been or will promptly be delivered to Poolmart.
Section 4A.13 Proxy and Schedule 13E-3 Information. The information
------------------------------------
contained in the Definitive Proxy Statement and the Schedule 13E-3, or any
amendment or supplement thereto, or any other documents filed with the SEC by
Leslie's California in connection with the Merger Transaction, shall, with
respect to the Definitive Proxy Statement at the time the Definitive Proxy
Statement is mailed and at the time of the Special Meeting, and, with respect to
the Schedule 13E-3 and such other documents, at the time of filing with the SEC
and at the time of such Special Meeting, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that Leslie's
California makes no representation or warranty, with respect to any information
contained in the Definitive Proxy Statement, the Schedule 13E-3 or any such
other document, which was furnished to Leslie's California by Poolmart.
Section 4A.14 Taxes. All Returns (as hereinafter defined) required to be
-----
filed by or with respect to Leslie's California and Tax Affiliates (as
hereinafter defined) have been properly and accurately prepared in all material
respects and filed on a timely basis. With respect to taxable periods for which
the statute of limitations on the assessment of Tax (as hereinafter defined)
remains open, the United States federal income tax Returns that have been
examined by the Internal Revenue Service ("IRS"), and any other Returns that
---
currently are the subject of an examination, or with respect to which notice of
a pending or threatened examination has been received, or for which an
examination has been conducted but not finally settled with all Taxes in dispute
paid, have been disclosed in writing to Poolmart. There are no deficiencies for
Taxes that have been proposed, asserted or assessed against Leslie's California
or Tax Affiliates that remain unpaid. No material liability for Taxes has been
incurred by Leslie's California or Tax Affiliates since September 28, 1996 other
than in the ordinary course of their business. No director, officer or employee
of Leslie's California or any of its subsidiaries having responsibility for Tax
matters has reason to believe that any Tax authority has a valid basis to claim
or assess any additional Tax with respect to Leslie's California or any Tax
Affiliate in amounts materially in excess of the amounts shown on the balance
sheet dated September 28, 1996 for the period ending on such date
15
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and amounts incurred in the ordinary course of business since that date. Neither
Leslie's California nor any of its subsidiaries is party to a closing agreement
or similar agreement with any Tax authority or is required to include in income
any material adjustment pursuant to Sections 263A or 481 of the Internal Revenue
Code of 1986, as amended (the "Code"), or comparable state or local tax law. The
----
transactions contemplated by this Agreement will not give rise to an "excess
parachute payment" within the meaning of Section 280G of the Code. As used in
this Section 4A.14, the term "Tax" or "Taxes" means (i) all federal, state,
--- -----
local, foreign and other net income, gross income, gross receipts, franchise,
sales, use, withholding, employment, property or other taxes, fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto, (ii) any liability
for payment of amounts described in clause (i) whether as a result of transferee
liability, of being a member of an affiliated, consolidated, combined or unitary
or other similar group for any period, or otherwise through operation of law and
(iii) any liability for the payment of amounts described in clauses (i) or (ii)
as a result of any tax sharing, tax indemnity or tax allocation agreement or any
other express or implied agreement to indemnify any other person; the term
"Returns" means all returns, declarations, reports, statements and other
-------
documents required to be filed in respect of Taxes; and the term "Tax Affiliate"
-------------
means any subsidiaries of Leslie's California and any individual or entity for
whose Taxes Leslie's California or any of its subsidiaries is or could be held
liable (whether by reason of being a member of an affiliated, consolidated,
combined, unitary, or other similar group for Tax purposes, by reason of being a
successor, by agreement, or otherwise) (but only with respect to the Taxes and
taxable periods(s) or portions thereof with respect to which Leslie's California
or such subsidiaries is or could be held liable for such Taxes).
Section 4A.15 Employee Benefits. A list of all employee benefit plans
-----------------
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), which are maintained or contributed to by
-----
Leslie's California or any of Leslie's California's subsidiaries (the "Company
-------
Benefit Plans") has been disclosed in writing to Poolmart. Leslie's California
- -------------
has provided to Poolmart (i) true and complete copies of all Company Benefit
Plans; (ii) the most recent annual actuarial evaluation, if any, prepared for
each Company Benefit Plan; (iii) the two most recent annual reports (series
5500), if any, required under ERISA with respect to each Company Benefit Plan,
including audited financial statements; (iv) the most recent determination
letter received from the IRS, if any, for each Company Benefit Plan, and (v) the
most recent Summary Plan Description, if any, required under ERISA with respect
to each Company Benefit Plan. Except as disclosed in writing to Poolmart, (i)
with respect to each Company Benefit Plan that is intended to be qualified under
Section 401(a) of the Code and is maintained by Leslie's California or any of
Leslie's California's subsidiaries for any of their employees, (x) Leslie's
California or such subsidiary has obtained a favorable determination letter from
the IRS and nothing has happened since such letter that would adversely affect
the tax qualification of such plan and (y) such plan has been operated in
compliance with ERISA and in accordance with the provisions of, and the rules
and regulations covering, such plan except where the failure to so comply does
not individually or in the aggregate, have a material adverse effect upon
Leslie's California and its subsidiaries, taken as a whole, (ii) with respect to
each Company Benefit Plan, Leslie's California and Leslie's California's
subsidiaries are not, and to Leslie's California's knowledge no other person is,
engaged in a transaction prohibited by Section 4975 of the Code or Section 406
of ERISA which could result in a liability to Leslie's California and Leslie's
California's subsidiaries which would individually or in the aggregate, have a
material adverse effect upon Leslie's California and its subsidiaries, taken as
a whole, (iii) each Company Benefit Plan which is subject to Part III of
Subtitle B of Title I of ERISA or Section 412 of the Code has been maintained in
compliance with the minimum funding standards of ERISA and the Code, and no
reportable event, within the meaning of Section 4043 of ERISA has occurred with
respect to any Company Benefit Plan which is subject to Title IV of ERISA,
other than reportable
16
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events with respect to which notice has been waived by the Pension Benefit
Guaranty Corporation or which would not, individually or in the aggregate, have
a material adverse effect upon Leslie's California and its subsidiaries, taken
as a whole, and (iv) no benefit is provided pursuant to a welfare benefit plan
(as defined in ERISA Section 3(1)) to a former employee of Leslie's California
or any Leslie's California subsidiaries other than for continuation health
coverage benefits provided under Code Section 4980B.
Section 4A.16 Environmental Matters. Except as disclosed in filings with
---------------------
the SEC under the Exchange Act since January 1, 1994, to the knowledge of
Leslie's California, (i) neither Leslie's California nor any of its subsidiaries
has generated, used, transported, treated, stored, released or disposed of, or
has permitted anyone else to generate, use, transport, treat, store, release or
dispose of any Hazardous Substance (as hereinafter defined), in violation of any
Laws (as hereinafter defined), (ii) there has not been any generation, use,
transportation, treatment, storage, release or disposal of any Hazardous
Substance in connection with the conduct of the business of Leslie's California
or any of its subsidiaries or the use of any property or facility of Leslie's
California or any of its subsidiaries which has created or could reasonably be
expected to create any material liability under any Laws that would require
reporting to or notification of any federal or state governmental agency or
authority, (iii) no asbestos or polychlorinated biphenyl is contained in or
located at any facility of Leslie's California or any of its subsidiaries, and
(iv) any Hazardous Substance handled or dealt with in any way in connection with
the businesses of Leslie's California and its subsidiaries, whether before or
during Leslie's California's ownership, has been and is being handled or dealt
with in all material respects in compliance with applicable Laws; excepting,
however, in each case any acts or omissions referred to in any of the preceding
clauses (i) through (iv) to the extent that such acts or omissions, taken in the
aggregate, would not have a material adverse effect on Leslie's California and
its subsidiaries, taken as a whole. As used in this Section 4A.16, the term
"Hazardous Substance" means substances that are defined or listed in, or
- --------------------
otherwise classified pursuant to, any applicable Laws as "hazardous substances,"
"hazardous materials," "hazardous wastes" or "toxic substances," or any other
formulation intended to define, list or classify substances by reason of
deleterious properties such as ignitibility, corrosivity, reactivity,
carcinogenicity, reproductive toxicity or "EP toxicity," and petroleum and
drilling fluids, produced waters and other wastes associated with the
exploration, development, or production of crude oil, natural gas or geothermal
energy. As used in this Section 4A.16, the term "Laws" means any constitutional
----
provision, statute or other law, rule, regulation, or published interpretation
of any thereof and any decree, injunction, judgment, order, ruling, or writ.
Notwithstanding this Article 4A, neither Leslie's California nor any of its
officers, directors, employees or representatives shall have any liability to
Poolmart, nor shall Poolmart have any claim for damages, whether under this
Agreement or otherwise, as a result of any breach of any of the representations
or warranties contained in this Article 4A. For the avoidance of doubt, the
parties agree that the preceding sentence shall not affect the rights of
Poolmart under Section 6.3(a).
17
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ARTICLE 4B
REPRESENTATIONS AND WARRANTIES OF LESLIE'S DELAWARE
Except as disclosed in writing to Poolmart by Leslie's California, Leslie's
Delaware hereby represents and warrants to Poolmart as follows:
Section 4B.1 Organization and Good Standing. Leslie's Delaware is a duly
------------------------------
organized and validly existing corporation in good standing under the laws of
the state of Delaware. Leslie's Delaware has heretofore delivered to Poolmart
accurate and complete copies of its certificate of incorporation and bylaws as
currently in effect.
Section 4B.2 Authorization; Binding Agreement. Leslie's Delaware has
--------------------------------
all requisite corporate power and authority to execute and deliver the
Reincorporation Merger Agreement and this Agreement and to consummate the
transactions contemplated thereby and hereby. The execution and delivery of the
Reincorporation Merger Agreement and this Agreement and the consummation of the
transactions contemplated thereby and hereby have been duly and validly
authorized by Leslie's Delaware's board of directors, and the Reincorporation
Merger Agreement and this Agreement have been adopted by the sole stockholder of
Leslie's Delaware in accordance with the Delaware Law and its certificate of
incorporation and bylaws. No other corporate proceedings on the part of
Leslie's Delaware are necessary to authorize the Reincorporation Merger
Agreement and this Agreement and the transactions contemplated thereby and
hereby. The Reincorporation Merger Agreement and this Agreement have been duly
and validly executed and delivered by Leslie's Delaware and constitute legal,
valid and binding agreements of Leslie's Delaware, enforceable against Leslie's
Delaware in accordance with their terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other laws,
now or hereafter in effect, relating to or limiting creditors' rights generally,
and (b) general principles of equity (whether considered in an action in equity
or at law) which provide, among other things, that the remedies of specific
performance and injunctive and other forms of equitable relief are subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought.
Section 4B.3 Capitalization. The authorized capital stock of Leslie's
--------------
Delaware consists of 5,000,000 shares of Leslie's Common Stock, and 2,000,000
shares of preferred stock, par value $.001 per share ("Delaware Preferred
------------------
Stock"). As of the date hereof, 10,000 shares of Leslie's Common Stock and no
- -----
shares of Delaware Preferred Stock were outstanding. All of the outstanding
shares of capital stock of Leslie's Delaware are owned by Leslie's California
and have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights. Except as contemplated by the
Reincorporation Merger Agreement and this Agreement, Leslie's Delaware has not
granted any outstanding option, warrant, subscription or other right, or entered
into any agreement or commitment which either (a) obligates Leslie's Delaware to
issue, sell or transfer any shares of the capital stock of Leslie's Delaware or
(b) restricts the transfer of, or otherwise encumbers, shares of Leslie's Common
Stock. Prior to the Effective Date, the certificate of incorporation of
Leslie's Delaware shall be amended to increase the authorized number of shares
of Leslie's Common Stock to the number of shares necessary to carry out the
terms of the Reincorporation Merger Agreement.
Section 4B.4 No Violation. The execution and delivery of the
------------
Reincorporation Merger Agreement and this Agreement, the filing by Leslie's
Delaware of both a certificate of ownership and merger in connection with the
Reincorporation Merger and the Certificate of Merger in
18
<PAGE>
connection with the Recapitalization Merger in the State of Delaware in
accordance with the Delaware Law, the consummation by Leslie's Delaware of the
transactions contemplated thereby or hereby, or compliance by Leslie's Delaware
with any of the provisions thereof or hereof, will not:
(a) violate any provision of the charter documents of Leslie's
Delaware or any of its subsidiaries;
(b) violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority applicable to
Leslie's Delaware or any of its properties;
(c) cause the acceleration of the maturity of any debt or obligation
of Leslie's Delaware; or
(d) violate, or be in conflict with, or constitute a default under, or
permit the termination of, or, except as contemplated by the Reincorporation
Merger Agreement or this Agreement, require the consent of any person under, or
result in the creation of any material lien upon any property of Leslie's
Delaware under, any agreement, indenture, lease or instrument to which Leslie's
Delaware is a party or by which Leslie's Delaware (or its properties) may be
bound, which in the aggregate would have a material adverse effect on Leslie's
Delaware.
Leslie's Delaware is not in material default (without giving effect to any
grace or cure period or notice requirement) under any agreement for borrowed
money or under any agreement pursuant to which any of its securities were sold.
Section 4B.5 Governmental and Other Consents and Approvals. To the
---------------------------------------------
knowledge of Leslie's Delaware, no consent, waiver, approval, license or
authorization of or designation, declaration or filing with any governmental
agency or authority or other public persons or entities in the United States is
required in connection with the execution or delivery by Leslie's Delaware of
the Reincorporation Merger Agreement or this Agreement or the consummation by
Leslie's Delaware of the transactions contemplated thereby or hereby, other than
(a) filings in the States of California and Delaware in accordance with the
California Law and the Delaware Law, respectively, (b) filings required under
the HSR Act, (c) filings required under the Exchange Act, and (d) such other
consents, waivers, approvals, licenses or authorizations, the failure of which
to be obtained will not have a material adverse effect on Leslie's Delaware or
on the ability of Leslie's Delaware to consummate the transactions contemplated
hereby.
Section 4B.6 No Prior Activities. Leslie's Delaware has not incurred, and
-------------------
will not incur, directly or through any subsidiary, any liabilities or
obligations, except those incurred in connection with its organization or with
the negotiation of the Reincorporation Merger Agreement or this Agreement.
Except as contemplated by the Reincorporation Merger Agreement, this Agreement
and the Financing Letters, Leslie's Delaware has not engaged in any business
activities of any type or kind whatsoever, or entered into any agreements or
arrangements with any person or entity, or become subject to or bound by any
obligation or undertaking.
Section 4B.7 Litigation. There is no legal action, suit, arbitration or
----------
other legal, administrative or other governmental investigation, inquiry or
proceeding (whether federal, state, local or foreign) pending or, to the
knowledge of Leslie's Delaware, threatened against or affecting Leslie's
Delaware or any of its properties, assets, business, franchises or governmental
approvals
19
<PAGE>
before any court or governmental department, commission, board, bureau, agency,
instrumentality or arbitrator, which, individually or in the aggregate, could
reasonably be expected (a) to have a material adverse effect upon Leslie's
Delaware or (b) to materially and adversely affect the ability of Leslie's
Delaware to carry out, or prevent or make unduly burdensome, the Merger
Transaction or the transactions contemplated by the Reincorporation Merger
Agreement or this Agreement.
Notwithstanding this Article 4B, neither Leslie's Delaware nor any of its
officers, directors, employees or representatives shall have any liability to
Poolmart, nor shall Poolmart have any claim for damages, whether under this
Agreement or otherwise, as a result of any breach of any of the representations
or warranties contained in this Article 4B. For the avoidance of doubt, the
parties agree that the preceding sentence shall not affect the rights of
Poolmart under Section 6.3(a).
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF POOLMART
Except as disclosed in writing by Poolmart to Leslie's California and
Leslie's Delaware immediately prior to their execution and delivery of this
Agreement, Poolmart hereby represents and warrants to Leslie's California and
Leslie's Delaware as follows:
Section 5.1 Organization and Good Standing. Poolmart is a duly organized
------------------------------
and validly existing corporation in good standing under the laws of the state of
Delaware. Poolmart has heretofore delivered to Leslie's California accurate and
complete copies of its certificate of incorporation and bylaws as currently in
effect. Poolmart does not own or have any subsidiary or own or hold any capital
stock, security or investment in any other person or entity, other than bank
accounts, certificates of deposit, money market or similar short-term
investments.
Section 5.2 Authorization; Binding Agreement. Poolmart has all
--------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the Recapitalization Merger and the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the Recapitalization Merger and the transactions contemplated hereby have been
duly and validly authorized by its board of directors, and this Agreement has
been adopted by the sole stockholder of Poolmart in accordance with Delaware Law
and its certificate of incorporation and bylaws. No other corporate proceedings
on the part of Poolmart are necessary to authorize this Agreement, the
Recapitalization Merger and the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Poolmart and
constitutes a legal, valid and binding agreement of Poolmart, enforceable
against Poolmart in accordance with its terms except as such enforceability may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, relating to or limiting creditors'
rights generally, and (b) general principles of equity (whether considered in an
action in equity or at law) which provide, among other things, that the remedies
of specific performance and injunctive and other forms of equitable relief are
subject to equitable defenses and to the discretion of the court before which
any proceedings therefor may be brought.
Section 5.3 Capitalization. The authorized capital stock of Poolmart
--------------
consists of a single class of 1,000 shares of common stock, par value $.001 per
share, (which class of stock is herein called "Poolmart Common Stock"). Prior
---------------------
to the Effective Date the certificate of incorporation of Poolmart shall be
amended to increase the authorized number of shares of
20
<PAGE>
Poolmart Common Stock to 1,055,172, all of which will be outstanding immediately
prior to the Effective Date. All of the shares of Poolmart Common Stock
outstanding on the Effective Date (i) will have been duly authorized and will
be, validly issued, fully paid and nonassessable and free of preemptive rights,
and (ii) will be beneficially owned, by Green Equity Investors II, L.P. Poolmart
has not granted any outstanding option, warrant, subscription or other right, or
entered into any agreement or commitment which either (a) obligates Poolmart to
issue, sell, repurchase or transfer any shares of the capital stock of Poolmart
or (b) restricts the transfer of, or otherwise encumbers, shares of Poolmart
Common Stock. Poolmart has no treasury stock.
Section 5.4 No Violation. Neither the execution and delivery of this
------------
Agreement, the filing of the Certificate of Merger or the consummation by
Poolmart of the transactions contemplated hereby and thereby, nor compliance by
Poolmart with any of the provisions hereof or thereof, will:
(a) violate any provision of the charter documents of Poolmart;
(b) violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority applicable to
Poolmart or any of its properties;
(c) cause the acceleration of the maturity of any debt or obligation
of Poolmart; or
(d) violate, or be in conflict with, or constitute a default under, or
permit the termination of, or except as contemplated by this Agreement, require
the consent of any person under, or result in the creation of any lien upon any
property of Poolmart under, any agreement, indenture, lease or instrument to
which Poolmart is a party or by which Poolmart (or its properties) may be bound,
which in the aggregate would have a material adverse effect on Poolmart.
Poolmart is not in material default (without giving effect to any grace or
cure period or notice requirement) under any agreement for borrowed money or
under any agreement pursuant to which any of its securities were sold.
Section 5.5 Governmental and Other Consents and Approvals. To the
---------------------------------------------
knowledge of Poolmart, no consent, waiver, approval, license or authorization of
or designation, declaration or filing with any governmental agency or authority
or other public persons or entities in the United States is required in
connection with the execution or delivery by Poolmart of this Agreement or the
consummation by Poolmart of the Recapitalization Merger or the transactions
contemplated hereby, other than (a) filings in the State of Delaware in
accordance with the Delaware Law, (b) filings required under the HSR Act, (c)
filings required under the Exchange Act and (d) such other consents, waivers,
approvals, licenses or authorizations, the failure of which to be obtained will
not have a material adverse effect on Poolmart or on the ability of Poolmart to
consummate the transactions contemplated hereby.
Section 5.6 Proxy and Schedule 13E-3 Information. The information
------------------------------------
furnished to Leslie's California by Poolmart specifically for inclusion in the
Definitive Proxy Statement and the Schedule 13E-3, or any amendment or
supplement thereto, or specifically for inclusion in any other documents filed
with the SEC by Leslie's California in connection with the Merger Transaction,
shall, with respect to the Definitive Proxy Statement at the time the Definitive
Proxy Statement is mailed and at the time of the Special Meeting, and, with
respect to the Schedule 13E-3 and such other documents, at the time of filing
with the SEC and at the time of such Special Meeting, not contain any untrue
statement of a material fact or omit to state a material fact required
21
<PAGE>
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 5.7 Financing Letters. If the funds were provided pursuant to or
-----------------
as described in the Financing Letters, there would be sufficient financing to
satisfy the condition set forth in Section 6.3(c) hereof.
Section 5.8 Brokers and Finders. Except to the extent contemplated by the
-------------------
Financing Letters, Poolmart has not engaged any broker, finder or investment
banker which engagement would require the payment of any brokerage, finder's or
other fees by Leslie's California or Leslie's Delaware in connection with the
transaction contemplated hereby.
Section 5.9 No Prior Activities. Poolmart has not incurred, and will not
-------------------
incur, directly or through any subsidiary, any liabilities or obligations,
except those incurred in connection with its organization or with the
negotiation of this Agreement and the Financing. Except as contemplated by this
Agreement and the Financing Letters, Poolmart has not engaged in any business
activities of any type or kind whatsoever, or entered into any agreements or
arrangements with any person or entity, or become subject to or bound by any
obligation or undertaking.
Section 5.10 Litigation. There is no legal action, suit, arbitration or
----------
other legal, administrative or other governmental investigation, inquiry or
proceeding (whether federal, state, local or foreign) pending or, to the
knowledge of Poolmart, threatened against or affecting Poolmart or any of its
properties, assets, business, franchises or governmental approvals before any
court or governmental department, commission, board, bureau, agency,
instrumentality or arbitrator, which, individually or in the aggregate, could
reasonably be expected (a) to have a material adverse effect upon Poolmart or
(b) to materially and adversely affect the ability of Poolmart to carry out, or
prevent or make unduly burdensome, the Recapitalization Merger or the
transactions contemplated by this Agreement.
ARTICLE 6
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Recapitalization Merger. The respective obligations of each party to effect the
- -----------------------
Recapitalization Merger shall be subject to the satisfaction at or prior to the
Effective Date of the following conditions:
(a) Shareholder Approval. This Agreement, the Reincorporation Merger
--------------------
Agreement and the Merger Transaction shall have been approved at or prior
to the Effective Date by the holders of a majority of (i) the outstanding
shares of California Common Stock entitled to vote thereon and (ii) the
shares of California Common Stock voting thereon and owned by persons other
than persons who, upon consummation of the Recapitalization Merger, will be
the Continuing Stockholders;
(b) Litigation. No action, suit or proceeding shall be pending before
----------
any court or governmental body in which an unfavorable judgment or decree
would prevent or substantially delay the consummation of the
Reincorporation Merger or the Recapitalization Merger, cause either such
transaction to be rescinded or, with respect to any litigation in
connection with the Reincorporation Merger or the Recapitalization Merger,
result in an award of damages that would have a material adverse effect on
the
22
<PAGE>
condition (financial or otherwise), results of operations, properties,
assets, liabilities, business or prospects of Leslie's California and its
subsidiaries, taken as a whole;
(c) Consents. Leslie's California and Poolmart shall have been
--------
furnished with evidence satisfactory to them of the timely consent or
approval of, or notice to, each governmental authority or other person or
entity whose consent or approval, or to whom notice, is required in
connection with the execution or delivery by Leslie's California, Leslie's
Delaware or Poolmart of the Reincorporation Merger Agreement or this
Agreement or consummation of the transactions contemplated thereby or
hereby;
(d) HSR Act. Any applicable waiting period under the HSR Act shall
-------
have expired or early termination shall have been granted;
(e) Fairness Opinions. The fairness opinions delivered by Dillon Read
-----------------
and DLJ pursuant to Section 4A.12 hereof shall not have been withdrawn or
materially and adversely modified; and
(f) Effectiveness of Reincorporation Merger. The Reincorporation
---------------------------------------
Merger shall have become effective in accordance with the California Law
and the Delaware Law.
Section 6.2 Conditions to Obligation of Leslie's California and Leslie's
------------------------------------------------------------
Delaware to Effect the Recapitalization Merger. The obligations of Leslie's
- ----------------------------------------------
California and Leslie's Delaware to effect the Reincorporation Merger and the
obligations of Leslie's Delaware to effect the Recapitalization Merger shall be
subject to the satisfaction at or prior to the Effective Date of the following
additional conditions, unless waived by Leslie's California or, after the
effective time of the Reincorporation Merger, Leslie's Delaware:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Poolmart set forth in Article 5 hereof shall be true and
correct in all material respects as
23
<PAGE>
of the date of this Agreement and as of the Effective Date as though made
on and as of the Effective Date, except as otherwise contemplated by this
Agreement, and Leslie's Delaware shall have received a certificate from
Poolmart signed by its President and a Vice President to that effect; and
(b) Performance of Obligations of Poolmart. Poolmart shall have
--------------------------------------
performed in all material respects all obligations required to be performed
by it under this Agreement prior to the Effective Date, and Leslie's
Delaware shall have received a certificate from Poolmart signed by its
President and a Vice President to that effect.
Section 6.3 Conditions to Obligations of Poolmart to Effect the
---------------------------------------------------
Recapitalization Merger. The obligations of Poolmart to effect the
- -----------------------
Recapitalization Merger shall be subject to the satisfaction at or prior to the
Effective Date of the following additional conditions, unless waived by
Poolmart:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Leslie's California set forth in Article 4A hereof and of
Leslie's Delaware set forth in Article 4B hereof shall be true and correct
in all material respects as of the date of this Agreement and, except as
contemplated by the Reincorporation Merger or as otherwise contemplated by
this Agreement, as of the Effective Date as though all of such
representations were made on and as of the Effective Date by Leslie's
Delaware, and Poolmart shall have received certificates of Leslie's
California and Leslie's Delaware signed by the President and a Vice
President of Leslie's California and Leslie's Delaware, respectively, to
that effect;
(b) Performance of Obligations of Leslie's California and Leslie's
--------------------------------------------------------------
Delaware. Each of Leslie's California and Leslie's Delaware shall have
--------
performed in all material respects all obligations required to be performed
by it under this Agreement prior to the Effective Date, and Poolmart shall
have received certificates of Leslie's California and Leslie's Delaware
signed by the President and a Vice President of Leslie's California and
Leslie's Delaware, respectively, to that effect;
(c) Financing. Poolmart shall have obtained the Financing pursuant to
---------
Section 3.5;
(d) Dissenters' Rights. The aggregate number of shares of California
------------------
Common Stock on the effective time of the Reincorporation Merger, the
holders of which have demanded purchase of their shares from Leslie's
Delaware in accordance with the provisions of Chapter 13 of the California
Law, shall not equal 5% or more of the shares of California Common Stock
outstanding as of the record date for the Special Meeting;
(e) Environmental Due Diligence. Poolmart shall have completed its
---------------------------
environmental due diligence and shall be reasonably satisfied with the
results of such due diligence; provided, however, that this condition shall
be deemed to have been satisfied in full by March 31, 1997 unless prior
thereto Poolmart shall have delivered a written
24
<PAGE>
notice to Leslie's California specifying in reasonable detail the respects
in which it has not been satisfied;
(f) Audited Financial Statements. When Leslie's California's
----------------------------
audited financial statements for the fiscal year ended December 28, 1996
have been prepared, a copy thereof shall have been delivered to Poolmart;
(g) Accounting Treatment. The Definitive Proxy Statement shall
--------------------
contain a statement to the effect that the Recapitalization Merger shall be
treated as a recapitalization for accounting purposes and the Securities
and Exchange Commission shall not have disapproved such statement in the
Definitive Proxy Statement; and
(h) Certification of Non-U.S. Real Property Holding Corporation
-----------------------------------------------------------
Status. Poolmart shall have received from Leslie's California and Leslie's
Delaware a certification described in Treasury Regulation Section 1.1445-
2(c)(3), in form and substance reasonably acceptable to Poolmart, to the
effect that neither Leslie's Delaware nor Leslie's California was a U.S.
real property holding corporation during the period specified in Section
897(c)(1)(ii) of the Code, and shall have been provided evidence reasonably
satisfactory to Poolmart of compliance with the terms of Treasury
Regulation Section 1.897-2(h) with respect to such certificate.
ARTICLE 7
TERMINATION; NON-SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS; WAIVER AND AMENDMENT
Section 7.1 Termination. This Agreement may be terminated, and the
-----------
Recapitalization Merger abandoned, at any time prior to the Effective Date, by:
(a) mutual written consents of the boards of directors of the
Constituent Corporations;
(b) any of the parties, by written notice to the other parties, if the
Recapitalization Merger shall not have been consummated by June 30, 1997;
provided, however, that the right to terminate this Agreement under this
clause (b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Date to occur on or before this date; provided
further, however, that the passage of such period shall be tolled (and the
date for such consummation shall be correspondingly extended) for any part
thereof (but not exceeding 60 days in the aggregate) during which any party
shall be subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Reincorporation
Merger or the Recapitalization Merger or the calling or holding of the
Special Meeting;
(c) Poolmart, by written notice to Leslie's California, if prior to
the Special Meeting the board of directors of Leslie's California or the
Special Committee (i) shall withdraw or modify in any manner adverse to
Poolmart its approval or recommendation of this Agreement, the
Reincorporation Merger Agreement, the Recapitalization Merger or the
Reincorporation Merger, (ii) shall approve or recommend any Acquisition
Proposal
25
<PAGE>
by a party other than Poolmart, or (iii) shall resolve to take any
of the actions specified in clause (i) or (ii);
(d) Poolmart, by written notice to Leslie's California, if after the
date hereof there shall have been a material adverse change in the
condition (financial or otherwise), results of operations, properties,
assets, liabilities or business of Leslie's California and its
subsidiaries, taken as a whole, whether by reason of operations in the
ordinary course of business, changes in general economic conditions, or
otherwise;
(e) Leslie's California, by written notice to Poolmart, if the board
of directors of Leslie's California or the Special Committee, in its good
faith exercise of its business judgment (based on the written advice of
counsel), has determined that the board of directors of Leslie's California
continuing to recommend to the shareholders the approval of this Agreement
or the Reincorporation Merger Agreement would be reasonably likely to be a
breach of the fiduciary duties of the board of directors of Leslie's
California to the shareholders of Leslie's California under California law;
(f) Leslie's California or Poolmart, by written notice to the other,
if upon a vote at the Special Meeting, any approval of the shareholders of
Leslie's California necessary to consummate the Reincorporation Merger or
the Recapitalization Merger and the transactions contemplated thereby or
hereby shall not have been obtained, or by Poolmart if the vote at such
Special Meeting does not satisfy the condition in Section 6.1(a) and such
condition is not waived by Leslie's California;
(g) any of the parties, by written notice, if any court of competent
jurisdiction or other governmental entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Reincorporation Merger or the
Recapitalization Merger and such order, decree, ruling or other action
shall have become final and nonappealable;
(h) Poolmart, in the event that there shall have been a material
breach of Section 3.9.; or
(i) Poolmart, if Leslie's California shall have failed to hold the
Special Meeting by June 16, 1997 and either of the following shall have
occurred prior to such date: (A) any corporation (including Leslie's
California or any of its subsidiaries or affiliates), partnership, person,
other entity or "group" (as referred to in Section 13(d)(3) of the Exchange
Act) other than Poolmart or any of its affiliates (collectively, "Third
-----
Persons") shall have become the beneficial owner (as defined in Rule 13d-3
-------
promulgated under the Exchange Act) of more than 15% of the outstanding
California Common Stock; or (B) any Third Person shall have made, proposed,
communicated or disclosed in a manner which is or becomes known by
stockholders beneficially owning at least 5% of the outstanding California
Common Stock or by any director or officer of Leslie's California an
intention to make a bona fide Acquisition Proposal, unless in the case of
the condition in clause (B) Leslie's California is able to sustain the
burden of showing that the failure to hold the Special Meeting was caused
primarily by factors other than knowledge of such intention to make an
Acquisition Proposal.
26
<PAGE>
Any action to be taken to terminate this Agreement under this Section shall
be taken by, or pursuant to authority granted by, the Boards of Directors of
Leslie's California or Poolmart as applicable. After the effectiveness of the
Reincorporation Merger, all references in this Section 7.1 to "Leslie's
California" shall be deemed to be a reference to Leslie's Delaware.
Section 7.2 Non-Survival of Representations, Warranties and Covenants.
---------------------------------------------------------
The respective representations and warranties of Leslie's California, Leslie's
Delaware and Poolmart contained herein or in any certificate delivered pursuant
hereto shall expire with, and be terminated and extinguished upon, consummation
of the Recapitalization Merger, and thereafter none of Leslie's California,
Leslie's Delaware or Poolmart or any officer, director or principal thereof
shall be under any liability whatsoever with respect to any such representation
or warranty. This Section 7.2 shall have no effect upon any other obligation of
the parties hereto, whether to be performed before or after the consummation of
the Recapitalization Merger.
Section 7.3 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that (i) after approval of this Agreement by the shareholders of
Leslie's California, no amendment may be made which reduces the amount or
changes the form of consideration to be received in the Recapitalization Merger
or otherwise changes or effects any change which would adversely affect either
the shareholders of Leslie's California prior to the effectiveness of the
Reincorporation Merger or the stockholders of Leslie's Delaware immediately
after such effectiveness without the further approval of the shareholders of
Leslie's California, and (ii) after the Effective Date, no amendment may be made
to the indemnification and insurance provisions contained in Section 8.3.
Section 7.4 Waiver. At any time prior to the Effective Date, whether
------
before or after the Special Meeting, any party hereto, by action taken by its
board of directors, may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto or (ii) subject to the
proviso contained in Section 7.3, waive compliance with any of the agreements of
any other party or with any conditions (other than those appearing in Section
6.1(a), (e) or (f)) to its own obligations. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if (i) set
forth in an instrument in writing signed on behalf of such party by a duly
authorized officer, and (ii) if signed by Poolmart.
Section 7.5 Effect of Termination. In the event of the termination of
---------------------
this Agreement under Section 7.1, this Agreement shall thereafter become void
and have no effect and no party hereto shall have any liability to any other
party hereto or its shareholders or directors or officers in respect thereof,
except that the provisions of Section 3.8 (with respect to documents and
confidential information), Section 7.6 (with respect to a break fee under
certain circumstances), Section 8.3 (with respect to indemnification), and
Section 8.12 (with respect to expenses) shall survive any such termination if
such obligations arose at or before the time of such termination.
Section 7.6 Additional Payments in Respect of Certain Terminations. In
------------------------------------------------------
the event that (i) this Agreement is terminated by Leslie's California pursuant
to Section 7.1(e) or (f); or (ii) this Agreement is terminated by Poolmart
pursuant to Section 7.1(c), (f), (h) or (i), then in addition to the expense
reimbursement provided for in Section 8.12, Leslie's California or Leslie's
Delaware (assuming the Reincorporation Merger has occurred) shall promptly (and
in any event within five business days of written notice that such amount is
due) pay to Leonard Green & Partners, L.P., in immediately available funds, the
amount of $1,750,000 as a termination fee. In addition, in the event that
within twelve months of any termination described in the immediately preceding
sentence Leslie's California or Leslie's Delaware, as the case may be,
consummates a transaction
27
<PAGE>
that falls within the definition of an Acquisition Proposal, Leslie's California
or Leslie's Delaware, as the case may be, shall promptly and in no event later
than five business days after the closing of such transaction, pay to Leonard
Green & Partners, L.P., in immediately available funds, an additional $750,000.
ARTICLE 8
GENERAL AGREEMENTS
Section 8.1 Notice. All notices, requests and other communications to any
------
party shall be in writing (including telecopy or similar writing) and shall be
given,
(a) If to Poolmart:
c/o Hancock Park Associates II, L.P.
1925 Century Park East, Suite 810
Los Angeles, California 90067
Attention: Mr. Michael J. Fourticq
Facsimile No.: (310) 201-0403
and
Leonard Green & Partners, L.P.
333 South Grand Avenue
Suite 5400
Los Angeles, California 90071
Attention: Mr. Gregory J. Annick
Facsimile No.: (213) 625-2043
with copies to:
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071-2371
Attention: Alan J. Barton, Esq.
Facsimile No.: (213) 627-0705
and
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Jennifer Bellah, Esq.
Facsimile No.: (213) 229-7520
28
<PAGE>
(b) If to Leslie's California or Leslie's Delaware, to:
Leslie's Poolmart
20630 Plummer Street
Chatsworth, California 91311
Attention: General Counsel
Facsimile No.: (818) 993-1930
with a copy to:
Heller Ehrman White & McAuliffe
601 South Figueroa Street, 40th Floor
Los Angeles, California 90017-5704
Attention: Neal H. Brockmeyer, Esq.
Facsimile No.: (213) 614-1868
or to such other address or telecopier number as such party may hereafter
specify for the purpose of notice to the other parties. Any such notice,
request or other communication shall be deemed to have been given and received
on the day on which it is delivered or telecopied (or, if such day is not a
business day in California or if the notice or other communication is not
telecopied during business hours, at the place of receipt, on the next following
business day); provided that if notice or other communication is given by
telecopy, such notice or communication shall also be given by certified mail or
by overnight courier.
Section 8.2 Entire Agreement. This Agreement (including the documents and
----------------
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
Section 8.3 Indemnification.
---------------
(a) Indemnification by the Surviving Corporation. It is understood and
--------------------------------------------
agreed that Leslie's California may, to the fullest extent permitted under
applicable law, indemnify and hold harmless, and after the effective time of the
Reincorporation Merger, Leslie's Delaware may, and after the Effective Date the
Surviving Corporation shall, indemnify and hold harmless, to the fullest extent
permitted under applicable law (and Leslie's California, Leslie's Delaware and
the Surviving Corporation, as the case may be, will advance expenses to the full
extent so permitted), each present and former director and officer of Leslie's
California or any of its subsidiaries and each director and officer of Leslie's
Delaware upon the effectiveness of the Reincorporation Merger, and their
respective heirs and personal and legal representatives (collectively the
"Indemnified Parties"), against any costs or expenses (including attorneys'
- --------------------
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any pending, threatened or completed claim,
action, suit, proceeding or investigation (whether civil, criminal,
administrative or investigative) arising out of or pertaining to this Agreement
or the Reincorporation Merger Agreement or the approval and consummation of the
transactions contemplated hereby and thereby in his or her capacity as such or
in any other capacity on behalf of a subsidiary, joint venture or any other
entity in which he or she served at the request of Leslie's California or
Leslie's Delaware, and in the event of any such claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Date), (i)
Leslie's California may prior to the effective time of the Reincorporation
Merger and thereafter Leslie's Delaware may prior to the Effective Date, and
after the Effective Date the Surviving Corporation shall, pay the reasonable
fees and expenses of counsel selected by the Indemnified Parties, which counsel
shall be reasonably
29
<PAGE>
satisfactory to Leslie's California, Leslie's Delaware or the Surviving
Corporation, as the case may be, promptly after statements therefor are received
and (ii) Leslie's California, Leslie's Delaware and the Surviving Corporation
will cooperate in the defense of any such matter; provided, however, that none
of Leslie's California, Leslie's Delaware or the Surviving Corporation shall be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld) and provided further that none of Leslie's
California, Leslie's Delaware or the Surviving Corporation shall have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, after exhaustion of all avenues of
appeal, that such Indemnified Party is not entitled to indemnification hereunder
(it being agreed, however, that none of Leslie's California, Leslie's Delaware
or the Surviving Corporation shall challenge a determination by any court which
is favorable to an Indemnified Party).
(b) Notice; Undertaking; Representations. Any Indemnified Party wishing to
------------------------------------
claim indemnification under this Section 8.3 upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the indemnifying party
thereof and shall, if required by applicable law, deliver to the indemnifying
party an undertaking to repay any amounts advanced pursuant hereto when and if a
court of competent jurisdiction shall ultimately determine, after exhaustion of
all avenues of appeal, that such Indemnified Party is not entitled to
indemnification hereunder. The Indemnified Parties shall as a group retain only
one law firm pursuant to this Section 8.3 to represent them with respect to any
such matter unless there is, in the opinion of counsel to the Indemnified
Parties, a conflict on any significant issue between the positions of any two or
more Indemnified Parties, in which case the Indemnified Parties may retain, at
the expense of Leslie's California, Leslie's Delaware or the Surviving
Corporation, as the case may be, but in each such case subject to the terms of
the undertaking referred to in this Section 8.3(b) such number of additional
counsel as are necessary to eliminate all conflicts of the type referred to
above.
(c) Assumption by Successors. In the event Leslie's Delaware or the
------------------------
Surviving Corporation or any of their respective successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) liquidates, dissolves or transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of Leslie's Delaware
or the Surviving Corporation, as the case may be, assume the obligations set
forth in this Section 8.3 to the maximum extent permitted under the laws of such
person's jurisdiction of incorporation, if such person is a corporation, or
under other applicable law.
(d) Survival; Third-Party Rights. The terms of this Section 8.3 shall
----------------------------
survive the consummation of the Recapitalization Merger at the Effective Date
and shall continue without time limit. This Section 8.3 is intended to be for
the benefit of, and to grant third-party rights to, the Indemnified Parties
whether or not parties to this Agreement, and each of the Indemnified Parties
shall be entitled to enforce the covenants contained herein.
(e) Adverse Amendments. Subject to applicable law, the certificate of
------------------
incorporation and bylaws of the Surviving Corporation shall not be amended in a
manner which adversely affects the rights of the Indemnified Parties under this
Section 8.3.
(f) Directors' and Officers' Liability Insurance. For a period of eighteen
--------------------------------------------
months after the Effective Date, the Surviving Corporation shall use its
reasonable commercial efforts to maintain in effect the current policies of
directors' and officers' liability insurance maintained
30
<PAGE>
by Leslie's California (provided that the Surviving Corporation may substitute
therefor policies of at least the same amounts and comparable coverage
containing terms and conditions which are comparable thereto; provided further
that such policies may have higher deductibles than the current policy) with
respect to claims arising from fact or events which occurred at or before the
Effective Date; provided, however, that the Surviving Corporation shall not be
obligated to make annual premium payments for such insurance to the extent such
premiums exceed 150% of the premiums paid as of the date of this Agreement by
Leslie's California for such insurance but in such event shall use reasonable
commercial efforts to provide the maximum coverage available at 150% of such
premiums. Notwithstanding anything to the contrary contained elsewhere in this
Agreement, the Surviving Corporation's and Leslie's Delaware's agreement set
forth in Section 8.3(a) shall be limited to cover claims only to the extent that
those claims are not covered, paid and extinguished pursuant to Leslie's
California's directors' and officers' insurance policies (or any substitute
policies permitted by this Section 8.3(f)).
Section 8.4 Parties in Interest. Except as otherwise provided in Section
-------------------
8.3 and, with respect to Hancock, in Section 8.12, and, with respect to Leonard
Green & Partners, L.P., in Section 7.6, this Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 8.5 Material Events. At all times prior to the Effective Date,
---------------
each party shall promptly notify the other party or parties in writing of the
occurrence of any event of which it obtains knowledge which will or may
reasonably be expected to result in a failure to satisfy any of the conditions
specified in Article 6 hereof.
Section 8.6 Publicity. The written release to the public by any party of
---------
any information relating to the Recapitalization Merger shall be approved in
advance by the other parties, which approval shall not be unreasonably withheld
or delayed.
Section 8.7 Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.8 Interpretation. As used herein, "knowledge" of Leslie's
-------------- ---------
California or Leslie's Delaware shall mean actual knowledge of the officers of
Leslie's California or Leslie's Delaware, as the case may be, and "knowledge" of
Poolmart shall mean the actual knowledge of its officers or actual knowledge of
any partner, managing director or employee of Leonard Green & Partners, L.P.
("LGP"). Any agreement or consent given or made by LGP shall be considered to be
---
an agreement or consent, as the case may be, of Poolmart.
Section 8.9 Subsidiaries. When a reference is made in this Agreement to
------------
subsidiaries of Leslie's California, the word "subsidiaries" means any
------------
corporation more than 50% of whose outstanding voting securities are directly or
indirectly owned by Leslie's California.
Section 8.10 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto and, without limitation, shall be binding upon and
inure to the benefit of Leslie's Delaware as the successor to Leslie's
California by reason of the Reincorporation Merger.
Section 8.11 Governing Law. This Agreement shall be governed in all
-------------
respects, including validity, interpretation and effect, by the internal laws of
the State of California, without giving effect to the principles of conflict of
laws thereof, except (i) the laws of the state
31
<PAGE>
of incorporation of a party shall govern its internal corporate affairs, and
(ii) to the extent that the Delaware Law would govern the validity,
interpretation and effect of this Agreement and the legal effect of the
Recapitalization Merger in the absence of this Section 8.11.
Section 8.12 Costs and Expenses.
------------------
(a) Subject to Section 8.12(b) and (c), all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
(b) Leslie's California hereby agrees to pay, or reimburse Hancock for, as
incurred, all Expenses (as hereinafter defined) incurred by or on behalf of
Hancock arising out of, in connection with or related to this Agreement, the
Reincorporation Merger Agreement, the Recapitalization Merger and the
Reincorporation Merger and the transactions contemplated herein and therein;
provided, that Leslie's California shall not be obligated to pay or reimburse
Hancock in excess of $1,000,000 in the aggregate.
(c) If the Recapitalization Merger is not consummated in accordance with
this Agreement, Leslie's California hereby agrees to reimburse Poolmart for all
Expenses incurred by or on behalf of Poolmart arising out of, in connection with
or related to this Agreement, the Reincorporation Agreement, the
Recapitalization Merger and the Reincorporation Merger and the transactions
contemplated herein and therein; provided, that Leslie's California shall not be
obligated to pay or reimburse Poolmart in excess of $750,000 in the aggregate;
and provided further, that Leslie's California shall not be required to pay or
reimburse Poolmart for Expenses if either (x) Poolmart fails in any material
respect to perform any of its material obligations under this Agreement and has
not cured such non-performance within 20 days after Poolmart has received
written notice from Leslie's California specifying the nature of such non-
performance, or (y) Poolmart has materially breached any of the material
representations or warranties made by it in Article 5, such breach occurred with
the knowledge of Poolmart, and such breach is not cured (if the same is
susceptible of being cured) within 20 days after Poolmart has received written
notice from Leslie's California specifying the nature of such breach.
(d) For purposes of Section 8.12(b) and (c), "Expenses" means all
--------
reasonable out-of-pocket expenses actually incurred by or on behalf of Hancock
or Poolmart, as the case may be, supported by invoices, including, without
limitation, fees and expenses of accountants, financial advisors, attorneys,
consultants and appraisers engaged by Poolmart or Hancock, as the case may be,
or any person providing or proposing to provide Financing for the
Recapitalization Merger as well as commitment and other fees, charges and
expenses of any such person; provided, that "Expenses" shall not include
compensation paid or payable to any individual who is an officer or director of
Leslie's California.
Section 8.13 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized officers as of the date first above written.
LPM HOLDINGS, INC.
By:/s/ BRIAN P. MCDERMOTT
----------------------
Brian P. McDermott,
President
LESLIE'S POOLMART
By:/s/ BRIAN P. MCDERMOTT
----------------------
Brian P. McDermott,
President and
Chief Executive Officer
By:/s/ CYNTHIA G. WATTS
--------------------
Cynthia G. Watts,
Vice President, General
Counsel and Secretary
POOLMART USA INC.
By:/s/ JOHN G. DANHAKL
-------------------
Name: John G. Danhakl
-------------------
Title: President
----------
33
<PAGE>
EXHIBIT A
AGREEMENT OF MERGER
AGREEMENT OF MERGER (this "Merger Agreement") made and entered into this
----------------
_____ day of February, 1997 by and between LESLIE'S POOLMART a California
corporation ("Leslie's California"), and LPM HOLDINGS, INC., a Delaware
-------------------
corporation ("Leslie's Delaware");
-----------------
WITNESSETH:
WHEREAS, Leslie's Delaware is a corporation duly organized and existing
under the laws of the State of Delaware;
WHEREAS, Leslie's California is a corporation duly organized and existing
under the laws of the State of California;
WHEREAS, on the date of this Merger Agreement, Leslie's Delaware has
authority to issue 5,000,000 shares of Common Stock, par value $.001 per share
(which class of shares is herein called the "Delaware Common Stock") of which
---------------------
10,000 shares are issued and outstanding and owned by Leslie's California, and
2,000,000 shares of Preferred Stock, par value $.001 per share, of which no
shares are issued and outstanding; and prior to the Effective Date, the
authorized number of shares of Delaware Common Stock will be increased to
12,000,000;
WHEREAS, on the date of this Merger Agreement, Leslie's California has
authority to issue 40,000,000 shares of Common Stock, (the "California Common
-----------------
Stock") of which 6,550,966 shares are issued and outstanding, and 1,000,000
- -----
shares of Preferred Stock, of which no shares are issued and outstanding;
WHEREAS, the respective boards of directors of Leslie's Delaware and
Leslie's California have determined that, for the purpose of effecting the
reincorporation of Leslie's California in the State of Delaware, it is advisable
and to the advantage of said two corporations and their shareholders and sole
stockholder, respectively, that Leslie's California merge with and into Leslie's
Delaware upon the terms and conditions herein provided; and
WHEREAS, the respective boards of directors of Leslie's Delaware and
Leslie's California have approved this Merger Agreement and the board of
directors of Leslie's California and Leslie's Delaware have directed that this
Merger Agreement be submitted to a vote of their shareholders and sole
stockholder, respectively;
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Leslie's California and Leslie's Delaware hereby agree to merge as
follows:
(1) Merger. Leslie's California shall be merged with and into
Leslie's Delaware, and Leslie's Delaware shall survive the merger
("Merger"), effective upon
------
A-1
<PAGE>
the date when this Merger Agreement is made effective in accordance with
applicable law (the "Effective Date").
--------------
(2) Directors and Officers and Governing Documents. The directors
and officers of Leslie's Delaware shall be the same upon the Effective Date
as they are immediately prior thereto. The certificate of incorporation of
Leslie's Delaware, as amended and in effect on the Effective Date, shall
continue to be the certificate of incorporation of Leslie's Delaware as the
surviving corporation without change or amendment until further amended in
accordance with the provisions thereof and applicable laws, except that on
the Effective Date Article I of said certificate of incorporation shall be
amended to read in its entirety as follows: "The name of this Corporation
shall be: Leslie's Poolmart, Inc." The bylaws of Leslie's Delaware, as
amended and in effect on the Effective Date, shall continue to be the
bylaws of Leslie's Delaware as the surviving corporation without change or
amendment until further amended in accordance with the provisions thereof
and applicable laws.
(3) Succession. On the Effective Date, Leslie's Delaware shall
succeed to Leslie's California in the manner of and as more fully set forth
in Section 259 of the General Corporation Law of the State of Delaware and
Section 1107 of the General Corporation Law of the State of California.
(4) Further Assurances. From time to time, as and when required by
Leslie's Delaware or by its successors and assigns, there shall be executed
and delivered on behalf of Leslie's California such deeds and other
instruments, and there shall be taken or caused to be taken by it such
further and other action, as shall be appropriate or necessary in order to
vest, perfect or confirm, of record or otherwise, in Leslie's Delaware the
title to and possession of all the property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of Leslie's
California, and otherwise to carry out the purposes of this Merger
Agreement, and the officers and directors of Leslie's Delaware are fully
authorized in the name and on behalf of Leslie's California or otherwise to
take any and all such action and to execute and deliver any and all such
deeds and other instruments.
(5) Common Stock of Leslie's California. Upon the Effective Date, by
virtue of the Merger and without any action on the part of the holder
thereof, each share of the California Common Stock outstanding immediately
prior thereto shall be changed and converted into one fully paid and
nonassessable share of Delaware Common Stock.
(6) Stock Certificates. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of
California Common Stock shall for all purposes evidence ownership of and
represent the shares of Delaware Common Stock into which the shares of
California Common Stock represented by such certificates have been
converted as herein provided. The registered owner on the books and records
of Leslie's Delaware or its transfer agent of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or otherwise accounted for to Leslie's Delaware or its transfer
agent, have and be entitled to exercise any voting and other rights with
respect to and
A-2
<PAGE>
to receive any dividend and other distributions upon the shares of Delaware
Common Stock evidenced by such outstanding certificate as above provided.
(7) Stock Options. Forthwith upon the Effective Date, each (i)
outstanding option to purchase shares of California Common Stock granted
under the Leslie's California 1990 Stock Option Plan and the Leslie's
California 1992 Directors' Stock Incentive Plan (collectively, the "Plans")
-----
and (ii) outstanding option to purchase California Common Stock not granted
under the Plans, shall be converted into and become an option to purchase
the same number of shares of Delaware Common Stock at the same option price
per share as in effect on the Effective Date and, in the case of options
granted under the Plans (collectively, the "Plan Options"), upon the same
------------
terms and subject to the same conditions as set forth in the Plans, and, in
the case of all options not granted under the Plans (collectively, the
"Non-Plan Options"), upon the same terms and subject to the same conditions
----------------
as set forth in the agreements or instruments that govern the Non-Plan
Options. A number of shares of Delaware Common Stock shall be reserved for
purposes of the Plans equal to the number of shares of California Common
Stock so reserved as of the Effective Date. As of the Effective Date,
Leslie's Delaware hereby assumes all obligations of Leslie's California
under the Plans, the outstanding Plan Options or portions thereof granted
pursuant to the Plans and all Non-Plan Options.
(8) Other Employee Benefit Plans. As of the Effective Date, Leslie's
Delaware hereby assumes all obligations of Leslie's California under any
and all employee benefit plans in effect as of said date or with respect to
which employee rights or accrued benefits are outstanding as of said date.
(9) Common Stock of Leslie's Delaware. Forthwith upon the Effective
Date, the 10,000 shares of Delaware Common Stock presently issued and
outstanding in the name of Leslie's California shall be cancelled and
retired and resume the status of authorized and unissued shares of Delaware
Common Stock, and no shares of Delaware Common Stock or other securities of
Leslie's Delaware shall be issued in respect thereof.
(10) Covenants of Leslie's Delaware. Leslie's Delaware covenants and
agrees that it will, on or before the Effective Date:
(a) Qualify to do business as a foreign corporation in the
State of California, and in connection therewith irrevocably appoint
an agent for service of process as required under the provisions of
Section 2105 of the California Corporations Code.
(b) File any and all documents with the California Franchise
Tax Board necessary to the assumption by Leslie's Delaware of all of
the franchise tax liabilities of Leslie's California.
(11) Book Entries. As of the Effective Date, entries shall be made
upon the books of Leslie's Delaware in accordance with the following:
A-3
<PAGE>
(a) The assets and liabilities of Leslie's California shall be
recorded at the amounts at which they were carried on the books of
Leslie's California immediately prior to the Effective Date, with
appropriate adjustments to reflect the retirement of the 10,000 shares
of Delaware Common Stock presently issued and outstanding.
(b) There shall be credited to the common stock account of
Leslie's Delaware the aggregate amount of the par value of all shares
of Delaware Common Stock resulting from the conversion of the
outstanding California Common Stock pursuant to the Merger.
(c) There shall be credited to the capital surplus account of
Leslie's Delaware the aggregate of the amounts shown in the common
stock and capital surplus accounts of Leslie's California immediately
prior to the Effective Date, less the amount credited to the common
stock account of Leslie's Delaware pursuant to Paragraph (b) above.
(d) There shall be credited to the retained earnings account of
Leslie's Delaware an amount equal to that carried in the retained
earnings account of Leslie's California immediately prior to the
Effective Date.
(12) Amendment. At any time before or after approval and adoption by
the shareholders of Leslie's California, this Merger Agreement may be
amended in any manner (except that Paragraph (5) may not be amended without
the approval of the shareholders of Leslie's California), as may be
determined in the judgment of the respective boards of directors of
Leslie's Delaware and Leslie's California to be necessary, desirable or
expedient in order to clarify the intention of the parties hereto or to
effect or facilitate the purposes and intent of this Merger Agreement.
(13) Abandonment. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned by the board of
directors of either Leslie's California or Leslie's Delaware with the
approval of the board of directors of the other corporation,
notwithstanding approval of this Merger Agreement by the stockholders of
Leslie's Delaware or the shareholders of Leslie's California or both.
(4) Counterparts. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of
counterparts, each of which shall be deemed to be an original.
[SIGNATURE PAGE FOLLOWS]
A-4
<PAGE>
IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by resolution of the boards of directors of Leslie's California and
Leslie's Delaware, is hereby executed on behalf of each said two corporations
by their respective officers thereunto duly authorized.
LPM HOLDINGS, INC.,
a Delaware corporation
By:______________________________
Brian P. McDermott,
President
By: _____________________________
Robert D. Olsen,
Secretary
LESLIE'S POOLMART
a California corporation
By:______________________________
Brian P. McDermott,
President and Chief
Executive Officer
By:______________________________
Cynthia G. Watts,
Secretary
A-5
<PAGE>
CERTIFICATE OF THE SECRETARY OF LPM HOLDINGS, INC.
I, Robert D. Olsen, Secretary of LPM HOLDINGS, INC., a Delaware
corporation, ("Leslie's Delaware"), do hereby certify, as such Secretary, in
accordance with the General Corporation Law of the State of Delaware, that the
Agreement of Merger to which this Certificate is attached, after having been
first duly adopted and executed by Leslie's Delaware and Leslie's Poolmart, a
California corporation, was duly submitted to the sole stockholder of Leslie's
Delaware at a special meeting of stockholders called for the purpose of acting
on said Agreement of Merger, notice of the time, place and purpose of said
meeting having been waived by the sole stockholder of Leslie's Delaware, and
that at said meeting the Agreement of Merger was considered and a vote taken for
its adoption or rejection and that at said meeting all of the outstanding stock
of Leslie's Delaware entitled to vote thereon was voted for the adoption of said
Agreement of Merger and that thereby said Agreement of Merger was at said
meeting duly adopted as the act of the stockholders of Leslie's Delaware and as
the agreement and act of Leslie's Delaware.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
______ day of ___________________, 1997.
________________________________
Robert D. Olsen,
Secretary
A-6
<PAGE>
CERTIFICATE OF THE SECRETARY OF LESLIE'S POOLMART
I, Cynthia G. Watts, Secretary of LESLIE'S POOLMART, a California
corporation ("Leslie's California"), do hereby certify, as such Secretary, in
accordance with the General Corporation Law of the State of Delaware, that the
Agreement of Merger to which this Certificate is attached, after having been
first duly adopted and executed by Leslie's California and LPM Holdings, Inc., a
Delaware corporation, was duly submitted to the shareholders at a meeting of
shareholders called for the purpose of acting on said Agreement of Merger after
due notice of the time, place and purpose of said meeting was mailed to each
holder of Common Stock of Leslie's California at his, her or its address as it
appears on the records of Leslie's California in the manner provided under the
provisions of Section 601 of the California Corporations Code and that at said
meeting the Agreement of Merger was considered and a vote taken for its adoption
or rejection and that at said meeting a majority of the outstanding Common Stock
of Leslie's California entitled to vote thereon was voted for the adoption of
said Agreement of Merger and that thereby said Agreement of Merger was at said
meeting duly adopted as the act of the shareholders of Leslie's California and
as the agreement and act of Leslie's California.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
_____ day of ______________________, 1997.
________________________________
Cynthia G. Watts,
Secretary
A-7
<PAGE>
EXHIBIT B
---------
CERTIFICATE OF MERGER
OF
POOLMART USA INC.
INTO
LESLIE'S POOLMART, INC.
(Pursuant to 8 Del. C. (S) 251)
LESLIE'S POOLMART, INC., a Delaware corporation, hereby certifies
that:
1. The name and state of incorporation of each of the constituent
corporations are:
(a) Poolmart USA Inc., a Delaware corporation; and
(b) Leslie's Poolmart, Inc., a Delaware corporation.
2. An Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with the provisions of Section 251 of the General Corporation Law of
the State of Delaware.
3. The surviving corporation shall be Leslie's Poolmart, Inc.
4. The Certificate of Incorporation of Leslie's Poolmart, Inc., as
in effect on the date on which the merger is effective, shall be the Certificate
of Incorporation of Leslie's Poolmart, Inc. as the surviving corporation without
change or amendment until further amended in accordance with the provisions
thereof and applicable law.
5. The executed Agreement and Plan of Merger is on file at the
principal place of business of Leslie's Poolmart, Inc. located at:
20630 Plummer St.
Chatsworth, California 91311
6. A copy of the Agreement and Plan of Merger will be furnished by
Leslie's Poolmart, Inc., on request and without cost, to any stockholder of any
of the constituent corporations.
B-1
<PAGE>
IN WITNESS WHEREOF, LESLIE'S POOLMART, INC. has caused this
certificate to be executed by a duly authorized officer as of this ___ day of
__________, 1997.
LESLIE'S POOLMART, INC.,
a Delaware corporation
By: _____________________
Brian P. McDermott
President and Chief
Executive Officer
B-2
<PAGE>
EXHIBIT 7(B)
CONFORMED COPY
AGREEMENT OF MERGER
AGREEMENT OF MERGER (this "Merger Agreement") made and entered into this
----------------
26th day of February, 1997 by and between LESLIE'S POOLMART a California
corporation ("Leslie's California"), and LPM HOLDINGS, INC., a Delaware
-------------------
corporation ("Leslie's Delaware");
-----------------
WITNESSETH:
WHEREAS, Leslie's Delaware is a corporation duly organized and existing
under the laws of the State of Delaware;
WHEREAS, Leslie's California is a corporation duly organized and existing
under the laws of the State of California;
WHEREAS, on the date of this Merger Agreement, Leslie's Delaware has
authority to issue 5,000,000 shares of Common Stock, par value $.001 per share
(which class of shares is herein called the "Delaware Common Stock") of which
---------------------
10,000 shares are issued and outstanding and owned by Leslie's California, and
2,000,000 shares of Preferred Stock, par value $.001 per share, of which no
shares are issued and outstanding; and prior to the Effective Date, the
authorized number of shares of Delaware Common Stock will be increased to
12,000,000;
WHEREAS, on the date of this Merger Agreement, Leslie's California has
authority to issue 40,000,000 shares of Common Stock, (the "California Common
-----------------
Stock") of which 6,550,966 shares are issued and outstanding, and 1,000,000
- -----
shares of Preferred Stock, of which no shares are issued and outstanding;
WHEREAS, the respective boards of directors of Leslie's Delaware and
Leslie's California have determined that, for the purpose of effecting the
reincorporation of Leslie's California in the State of Delaware, it is advisable
and to the advantage of said two corporations and their shareholders and sole
stockholder, respectively, that Leslie's California merge with and into Leslie's
Delaware upon the terms and conditions herein provided; and
WHEREAS, the respective boards of directors of Leslie's Delaware and
Leslie's California have approved this Merger Agreement and the board of
directors of Leslie's California and Leslie's Delaware have directed that this
Merger Agreement be submitted to a vote of their shareholders and sole
stockholder, respectively;
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Leslie's California and Leslie's Delaware hereby agree to merge as
follows:
(1) Merger. Leslie's California shall be merged with and into
Leslie's Delaware, and Leslie's Delaware shall survive the merger
("Merger"), effective upon the date when this Merger Agreement is made
------
effective in accordance with applicable law (the "Effective Date").
--------------
<PAGE>
(2) Directors and Officers and Governing Documents. The directors
and officers of Leslie's Delaware shall be the same upon the Effective Date
as they are immediately prior thereto. The certificate of incorporation of
Leslie's Delaware, as amended and in effect on the Effective Date, shall
continue to be the certificate of incorporation of Leslie's Delaware as the
surviving corporation without change or amendment until further amended in
accordance with the provisions thereof and applicable laws, except that on
the Effective Date Article I of said certificate of incorporation shall be
amended to read in its entirety as follows: "The name of this Corporation
shall be: Leslie's Poolmart, Inc." The bylaws of Leslie's Delaware, as
amended and in effect on the Effective Date, shall continue to be the
bylaws of Leslie's Delaware as the surviving corporation without change or
amendment until further amended in accordance with the provisions thereof
and applicable laws.
(3) Succession. On the Effective Date, Leslie's Delaware shall
succeed to Leslie's California in the manner of and as more fully set forth
in Section 259 of the General Corporation Law of the State of Delaware and
Section 1107 of the General Corporation Law of the State of California.
(4) Further Assurances. From time to time, as and when required by
Leslie's Delaware or by its successors and assigns, there shall be executed
and delivered on behalf of Leslie's California such deeds and other
instruments, and there shall be taken or caused to be taken by it such
further and other action, as shall be appropriate or necessary in order to
vest, perfect or confirm, of record or otherwise, in Leslie's Delaware the
title to and possession of all the property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of Leslie's
California, and otherwise to carry out the purposes of this Merger
Agreement, and the officers and directors of Leslie's Delaware are fully
authorized in the name and on behalf of Leslie's California or otherwise to
take any and all such action and to execute and deliver any and all such
deeds and other instruments.
(5) Common Stock of Leslie's California. Upon the Effective Date,
by virtue of the Merger and without any action on the part of the holder
thereof, each share of the California Common Stock outstanding immediately
prior thereto shall be changed and converted into one fully paid and
nonassessable share of Delaware Common Stock.
(6) Stock Certificates. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of
California Common Stock shall for all purposes evidence ownership of and
represent the shares of Delaware Common Stock into which the shares of
California Common Stock represented by such certificates have been
converted as herein provided. The registered owner on the books and records
of Leslie's Delaware or its transfer agent of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or otherwise accounted for to Leslie's Delaware or its transfer
agent, have and be entitled to exercise any voting and other rights with
respect to and to receive any dividend and other distributions upon the
shares of Delaware Common Stock evidenced by such outstanding certificate
as above provided.
(7) Stock Options. Forthwith upon the Effective Date, each (i)
outstanding option to purchase shares of California Common Stock granted
under the Leslie's California 1990 Stock Option Plan and the Leslie's
California 1992 Directors' Stock Incentive Plan (collectively, the "Plans")
-----
and (ii) outstanding option to purchase California Common Stock not granted
under the Plans, shall be converted into and become an option
2
<PAGE>
to purchase the same number of shares of Delaware Common Stock at the same
option price per share as in effect on the Effective Date and, in the case
of options granted under the Plans (collectively, the "Plan Options"), upon
------------
the same terms and subject to the same conditions as set forth in the
Plans, and, in the case of all options not granted under the Plans
(collectively, the "Non-Plan Options"), upon the same terms and subject to
----------------
the same conditions as set forth in the agreements or instruments that
govern the Non-Plan Options. A number of shares of Delaware Common Stock
shall be reserved for purposes of the Plans equal to the number of shares
of California Common Stock so reserved as of the Effective Date. As of the
Effective Date, Leslie's Delaware hereby assumes all obligations of
Leslie's California under the Plans, the outstanding Plan Options or
portions thereof granted pursuant to the Plans and all Non-Plan Options.
(8) Other Employee Benefit Plans. As of the Effective Date, Leslie's
Delaware hereby assumes all obligations of Leslie's California under any
and all employee benefit plans in effect as of said date or with respect to
which employee rights or accrued benefits are outstanding as of said date.
(9) Common Stock of Leslie's Delaware. Forthwith upon the Effective
Date, the 10,000 shares of Delaware Common Stock presently issued and
outstanding in the name of Leslie's California shall be cancelled and
retired and resume the status of authorized and unissued shares of Delaware
Common Stock, and no shares of Delaware Common Stock or other securities of
Leslie's Delaware shall be issued in respect thereof.
(10) Covenants of Leslie's Delaware. Leslie's Delaware covenants and
agrees that it will, on or before the Effective Date:
(a) Qualify to do business as a foreign corporation in the State
of California, and in connection therewith irrevocably appoint an
agent for service of process as required under the provisions of
Section 2105 of the California Corporations Code.
(b) File any and all documents with the California Franchise Tax
Board necessary to the assumption by Leslie's Delaware of all of the
franchise tax liabilities of Leslie's California.
(11) Book Entries. As of the Effective Date, entries shall be made
upon the books of Leslie's Delaware in accordance with the following:
(a) The assets and liabilities of Leslie's California shall be
recorded at the amounts at which they were carried on the books of
Leslie's California immediately prior to the Effective Date, with
appropriate adjustments to reflect the retirement of the 10,000 shares
of Delaware Common Stock presently issued and outstanding.
(b) There shall be credited to the common stock account of
Leslie's Delaware the aggregate amount of the par value of all shares
of Delaware Common Stock resulting from the conversion of the
outstanding California Common Stock pursuant to the Merger.
(c) There shall be credited to the capital surplus account of
Leslie's Delaware the aggregate of the amounts shown in the common
stock and capital
3
<PAGE>
surplus accounts of Leslie's California immediately prior to the
Effective Date, less the amount credited to the common stock account
of Leslie's Delaware pursuant to Paragraph (b) above.
(d) There shall be credited to the retained earnings account of
Leslie's Delaware an amount equal to that carried in the retained
earnings account of Leslie's California immediately prior to the
Effective Date.
(12) Amendment. At any time before or after approval and adoption by
the shareholders of Leslie's California, this Merger Agreement may be
amended in any manner (except that Paragraph (5) may not be amended without
the approval of the shareholders of Leslie's California), as may be
determined in the judgment of the respective boards of directors of
Leslie's Delaware and Leslie's California to be necessary, desirable or
expedient in order to clarify the intention of the parties hereto or to
effect or facilitate the purposes and intent of this Merger Agreement.
(13) Abandonment. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned by the board of
directors of either Leslie's California or Leslie's Delaware with the
approval of the board of directors of the other corporation,
notwithstanding approval of this Merger Agreement by the stockholders of
Leslie's Delaware or the shareholders of Leslie's California or both.
(14) Counterparts. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of
counterparts, each of which shall be deemed to be an original.
[SIGNATURE PAGE FOLLOWS]
4
<PAGE>
IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by resolution of the boards of directors of Leslie's California and
Leslie's Delaware, is hereby executed on behalf of each said two corporations
by their respective officers thereunto duly authorized.
LPM HOLDINGS, INC.,
a Delaware corporation
By:/s/ BRIAN P. MCDERMOTT
---------------------------
Brian P. McDermott,
President
By:/s/ ROBERT D. OLSEN
---------------------------
Robert D. Olsen,
Secretary
LESLIE'S POOLMART
a California corporation
By:/s/ BRIAN P. MCDERMOTT
---------------------------
Brian P. McDermott,
President and Chief
Executive Officer
By:/s/ CYNTHIA G. WATTS
---------------------------
Cynthia G. Watts,
Secretary
5
<PAGE>
CERTIFICATE OF THE SECRETARY OF LPM HOLDINGS, INC.
I, Robert D. Olsen, Secretary of LPM HOLDINGS, INC., a Delaware
corporation, ("Leslie's Delaware"), do hereby certify, as such Secretary, in
accordance with the General Corporation Law of the State of Delaware, that the
Agreement of Merger to which this Certificate is attached, after having been
first duly adopted and executed by Leslie's Delaware and Leslie's Poolmart, a
California corporation, was duly submitted to the sole stockholder of Leslie's
Delaware at a special meeting of stockholders called for the purpose of acting
on said Agreement of Merger, notice of the time, place and purpose of said
meeting having been waived by the sole stockholder of Leslie's Delaware, and
that at said meeting the Agreement of Merger was considered and a vote taken for
its adoption or rejection and that at said meeting all of the outstanding stock
of Leslie's Delaware entitled to vote thereon was voted for the adoption of said
Agreement of Merger and that thereby said Agreement of Merger was at said
meeting duly adopted as the act of the stockholders of Leslie's Delaware and as
the agreement and act of Leslie's Delaware.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
______ day of ___________________, 1997.
________________________________
Robert D. Olsen,
Secretary
6
<PAGE>
CERTIFICATE OF THE SECRETARY OF LESLIE'S POOLMART
I, Cynthia G. Watts, Secretary of LESLIE'S POOLMART, a California
corporation ("Leslie's California"), do hereby certify, as such Secretary, in
accordance with the General Corporation Law of the State of Delaware, that the
Agreement of Merger to which this Certificate is attached, after having been
first duly adopted and executed by Leslie's California and LPM Holdings, Inc., a
Delaware corporation, was duly submitted to the shareholders at a meeting of
shareholders called for the purpose of acting on said Agreement of Merger after
due notice of the time, place and purpose of said meeting was mailed to each
holder of Common Stock of Leslie's California at his, her or its address as it
appears on the records of Leslie's California in the manner provided under the
provisions of Section 601 of the California Corporations Code and that at said
meeting the Agreement of Merger was considered and a vote taken for its adoption
or rejection and that at said meeting a majority of the outstanding Common Stock
of Leslie's California entitled to vote thereon was voted for the adoption of
said Agreement of Merger and that thereby said Agreement of Merger was at said
meeting duly adopted as the act of the shareholders of Leslie's California and
as the agreement and act of Leslie's California.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
_____ day of ______________________, 1997.
________________________________
Cynthia G. Watts,
Secretary
7
<PAGE>
EXHIBIT 7(C)
LEONARD GREEN & PARTNERS, L.P.
------------------------------
February 26, 1997
Mr. Michael J. Fourticq
Mr. Brian P. McDermott
c/o Hancock Park Associates
1925 Century Park East, Suite No. 810
Los Angeles, CA 90067
Re: Stockholders Agreement and Subscription Agreement
Dear Brian and Mike:
The purpose of this letter is to evidence the agreement between us to
the following effect:
1. Each of you agrees, and the undersigned agrees on behalf of GEI (as defined
in the below-defined Agreement) to enter into an agreement in substantially
the form of the attached draft dated February 26, 1997 of a Stockholders
Agreement and Subscription Agreement (the "Agreement") contingent upon the
Closing of the Merger Transaction contemplated by the Agreement and Plan of
Merger by and among Leslie's Poolmart, LPM Holdings, Inc. and Poolmart USA,
Inc. of even date herewith (the "Merger Agreement").
2. Each of you agrees that your obligations in this letter agreement extend to
those shares and shareholders over which you exercise control who are
included in the definition of the HPA Group in the Agreement.
Very truly yours,
LEONARD GREEN & PARTNERS, L.P.
By: LGP Management, Inc. its General Partner
By: /s/ John G. Danhakl ACCEPTED AND AGREED:
-------------------
John G. Danhakl
Vice President /s/ Brian P. McDermott
----------------------
Brian P. McDermott
MICHAEL J. FOURTICQ
By: /s/ Brian P. McDermott
----------------------
Brian P. McDermott
Attorney-in-Fact
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. REPRESENTATIONS AND WARRANTIES................................................ 1
(a) Company Representations................................................... 1
(b) Stockholder Representations and Warranties................................ 2
2. SUBSCRIPTION FOR COMMON STOCK; CALL OPTION.................................... 3
(a) Common Stock Subscription................................................. 3
(b) Call Option............................................................... 3
3. COMPLIANCE WITH SECURITIES LAW................................................ 4
4. TRANSFERS OF SECURITIES....................................................... 4
(a) Prohibition on Transfers.................................................. 4
(b) Transfer Procedure; Right of First Refusal................................ 4
(c) Transfers to Related Transferees.......................................... 5
(d) Legend on Certificates.................................................... 6
(e) Transfers in Violation of this Agreement.................................. 6
5. COMPANY CALL OPTION........................................................... 6
(a) Call Purchase Event and Purchase Price.................................... 6
(b) Exercise of Call Option................................................... 7
6. REGISTRATION RIGHTS........................................................... 8
(a) Demand Registration Rights................................................ 8
(b) Piggyback Registration Rights; Cutbacks................................... 9
(c) Expenses of Registration.................................................. 10
(d) Registration Procedures................................................... 11
(e) Indemnification........................................................... 14
(f) Holdback Amount........................................................... 16
(g) Assignment and Assumption................................................. 16
(h) Stock Option Plans........................................................ 17
7. DRAG-ALONG SALES AND TAG-ALONG SALES.......................................... 17
(a) Drag-Along Sales.......................................................... 17
(b) Optional Participation in Sales of Common Stock (Tag-Along Sales)......... 18
(c) Obligations of Drag-Along Sellers......................................... 19
8. TERMINATION AND LAPSE OF RIGHTS AND RESTRICTIONS; APPLICATIONS TO OTHER
STOCK AND ADJUSTMENTS........................................................ 19
9. ELECTION OF DIRECTORS......................................................... 19
10. CERTAIN ADDITIONAL AGREEMENTS................................................ 20
(a) Right to Participate in Equity Issuances.................................. 20
(b) Right to Participate in Equity Repurchases................................ 20
(c) Affiliate Transactions.................................................... 20
(d) Change of Control Transactions............................................ 21
(e) Information............................................................... 21
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
11. NOTICES...................................................................... 21
12. GENERAL...................................................................... 21
13. ADDITIONAL CLASS II STOCKHOLDERS............................................. 24
14. ARBITRATION.................................................................. 24
(a) General................................................................... 24
(b) Scope..................................................................... 24
(c) Deposition................................................................ 24
(d) JAMS...................................................................... 25
(e) Selection of Arbitrators.................................................. 25
(f) Governing Law............................................................. 25
(g) Procedures................................................................ 26
(h) Award..................................................................... 26
15. DEFINITIONS.................................................................. 26
ANNEX A CAPITAL STRUCTURE........................................................ 1
ANNEX B TERMS OF INCENTIVE STOCK OPTION PLAN..................................... 1
ANNEX C TERMS OF NQ OPTIONS...................................................... 1
</TABLE>
ii
<PAGE>
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "AGREEMENT") is entered into as of
__________, 1997, by and among (i) Leslie's Poolmart, Inc., a Delaware
corporation (the "COMPANY"), (ii) Green Equity Investors II, L.P., a Delaware
limited partnership ("GEI"), (iii) Michael J. Fourticq, Greg Fourticq, Richard
H. Hillman, Brian P. McDermott and Manette J. McDermott, T.R.U.A. DTD 3/15/90
The McDermott Family Trust (collectively referred to as the "HPA GROUP") and
(iv) Occidental Petroleum Corporation, a Delaware corporation ("OCCIDENTAL," and
together with GEI and the HPA Group, the "CLASS I STOCKHOLDERS") and the
individual stockholders named on the signature pages hereto (the "CLASS II
STOCKHOLDERS").
WHEREAS, on the date hereof the Company has consummated a merger (the
"MERGER") with Poolmart USA Inc., a Delaware corporation ("POOLMART"), pursuant
to which certain of the outstanding shares of common stock of the Company, $.001
par value per share (which authorized class of stock is hereinafter called
"COMMON STOCK"), remained outstanding and the shares of capital stock of
Poolmart were converted into capital stock of the Company; and
WHEREAS, concurrently with the Merger, GEI acquired ______ shares of Common
Stock, the HPA Group collectively retained _________ shares of Common Stock,
Occidental acquired ______ shares of preferred stock of the Company (the
"PREFERRED STOCK") and warrants (the "WARRANTS") to purchase ________ shares of
Common Stock, subject to adjustment (the "WARRANT SHARES") certain of the Class
II Stockholders are subscribing for Common Stock and certain of the Class II
Stockholders will acquire certain nonqualified options and incentive stock
options, as described on Annex B and Annex C, respectively (collectively, the
"OPTIONS" and the Common Stock issuable upon exercise thereof, the "OPTION
SHARES"); and
WHEREAS, the Company and the Class I and Class II Stockholders
(collectively, the "STOCKHOLDERS") desire to enter into certain agreements
concerning their holdings of Common Stock, Warrants, Warrant Shares, Options
and Option Shares (collectively, the "SECURITIES");
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Representations and Warranties.
------------------------------
(a) Company Representations. The Company hereby represents and
-----------------------
warrants to the Class I and Class II Stockholders as follows:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has
full corporate power and authority to carry on its business as and where it
is now being conducted. The Company has full corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by
<PAGE>
all necessary corporate action on the part of the Company. This Agreement
has been duly executed and delivered by the Company. This Agreement
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in
equity).
(ii) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will violate or
conflict with (A) any provision of the Certificate of Incorporation or
Bylaws of the Company, or (B) any agreement, indenture, undertaking,
permit, license or other instrument to which the Company is a party or by
which it or any of its properties may be bound or affected, other than such
violations and conflicts which are not reasonably likely to (1) prevent or
materially delay consummation of the transactions contemplated by this
Agreement or (2) prevent the Company from performing its obligations under
this Agreement.
(iii) The Company has no outstanding capital stock or securities
convertible into or exchangeable or exercisable for any shares of its
capital stock, nor any outstanding rights to subscribe for or to purchase,
or any options for the purchase of, or any agreement providing for the
issuance (contingent or otherwise) of any shares of its capital stock or
any securities convertible into or exchangeable or exercisable for any
shares of its capital stock, other than the Preferred Stock and the
Securities.
(b) Stockholder Representations and Warranties. Each Stockholder
------------------------------------------
hereby severally represents and warrants as follows:
(i) If it is an entity, it is a corporation, limited
partnership, trust or other entity duly organized and validly existing
under the laws of its state of organization.
(ii) It has full power and authority and, in the case of an
individual, legal and fiduciary capacity to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby. This
Agreement constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its
terms, except as the enforceability hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity
(regardless of whether enforceability is considered in a proceeding at law
or in equity).
(iii) Each of the Class II Stockholders (A) as a result of his
relationship with the Company and experience in financial matters, is able
to evaluate the acquisition of Common Stock and Options, the business and
proposed capital structure of the Company and the risks inherent therein;
(B) has been given the opportunity to obtain any additional information or
documents, and to ask questions and receive answers, from the officers and
representatives of the Company to the extent necessary to evaluate the
risks and merits of an investment in the Company; (C) has determined that
the acquisition of Common Stock
2
<PAGE>
and Options is consistent both in nature and amount, with his overall
investment program and financial condition, and that his financial
condition is such that he can afford to bear the economic risk of holding
unregistered Securities for which there is no market and acknowledges that
he may suffer a complete loss of such investment.
(iv) (A) the Securities acquired by him are being acquired for
his own account for investment, without any present intention of selling or
further distributing the same, (B) acknowledges that no liquid trading
market currently exists or is expected to exist in the foreseeable future
and as a result, such Stockholder may be unable to sell any of the
Securities for an indefinite period of time and (C) acknowledges that the
Company has no obligation, except as set forth in Section 6 hereof, to
register any of the Securities.
(v) Each member of the HPA Group represents and warrants that
he or it is an accredited investor within the meaning of Regulation D under
the Act.
Each Stockholder acknowledges that the Company is relying upon the truth and
accuracy of the above representations to a material degree in effectuating the
transactions contemplated hereby.
2. Subscription for Common Stock; Call Option.
------------------------------------------
(a) Common Stock Subscription. Each Class II Stockholder reflected
-------------------------
as a purchaser of Common Stock on Annex A hereto (a "PURCHASER") severally
agrees to purchase, and the Company agrees to sell to such Purchaser, the number
of shares of Common Stock set forth opposite his name on Annex A hereto, at the
purchase price shown thereon. Each Purchaser severally agrees to make payment
for the Subscription Shares by delivery to the Company of a certified check or
wire transfer in the amount of the purchase price therefore.
(b) Call Option. Each Class II Stockholder agrees that the Company
-----------
and certain other Stockholders shall have a call ("Call Option") in respect of
certain shares of Common Stock acquired pursuant to Section 2(a) above
("SUBSCRIPTION STOCK"), as well as in respect of the Non-Qualified Options
described on Annex B hereto (the "NQ OPTIONS") and shares issued upon the
exercise thereof. As to each holder of Subscription Stock, of an NQ Option or of
shares issued upon the exercise thereof, the Call Option shall apply only to (i)
two-thirds of all of such holder's shares of Subscription Stock, NQ Options and
shares issued upon exercise of such NQ Options (collectively, "Callable
Securities") if the Call Option is exercised on or before the first anniversary
of the date hereof, and (ii) one-third of the holder's Callable Securities of
each category if the Call Option is exercised on or after the first anniversary
of the date hereof but before the second anniversary of the date hereof. Except
as expressly provided in this Section 2(b), the Call Option shall not otherwise
apply to Subscription Stock, NQ Options or shares issued upon the exercise
thereof. Subscription Stock NQ Options and shares issuable upon the exercise
thereof that are Callable Securities are respectively hereinafter referred to as
"Call Option Stock," "Call NQ Options" and "Call Option Shares."
3
<PAGE>
3. Notice of Transfer; Compliance with Securities Law. In addition to the
--------------------------------------------------
other applicable restrictions provided in this Agreement, each Stockholder
agrees that prior to effecting any Transfer of any Securities (other than a
Transfer to the Company) such Stockholder will give not less than 15 days'
advance written notice to the Company describing the manner of such proposed
Transfer. Each Stockholder further agrees that he or it will not effect such
proposed Transfer until either (A) such Stockholder has provided to the Company,
if so requested by the Company, an opinion of counsel reasonably satisfactory in
form and substance to the Company that such proposed Transfer is exempt from
registration under the Act and any applicable state securities laws, or (B) a
registration statement under the Act covering such proposed Transfer has been
filed by the Company and become effective under the Act and compliance with
applicable state securities laws has been effected and in each case, the
Company's independent public accountants have advised the Company that it is not
reasonably likely that such Transfer will necessitate a new basis for accounting
for the Company. Each Stockholder also agrees that he or it will not Transfer
any Securities except in compliance with the registration requirements of the
Act, the rules and regulations of the SEC thereunder, the relevant state
securities laws applicable to the Stockholder's actions, and the applicable
terms of this Agreement. The restrictions in this Section 3 shall remain in
effect until, the opinion of counsel for the Company, Securities held by the
Stockholder are no longer subject to restrictions pursuant to the Act or
applicable state securities law.
4. Transfers of Securities.
-----------------------
(a) Prohibition on Transfers. Each of the members of the HPA Group,
------------------------
Occidental and each of the Class II Stockholders hereby agrees that such
Stockholder will not Transfer any Securities (or any interest therein) now or
hereafter at any time owned by such Stockholder, except for Transfers permitted
pursuant to this Section 4, Section 5 or Section 7 of this Agreement (each such
Transfer being a "PERMITTED TRANSFER").
(b) Transfer Procedure; Right of First Refusal. If any member of the
------------------------------------------
HPA Group, Occidental or any of the Class II Stockholders hereby shall have
received a bona fide arm's-length written offer (a "BONA FIDE OFFER") which such
Stockholder desires to accept from an independent party unrelated to such
Stockholder (the "OUTSIDE PARTY") for the purchase of Securities for
consideration consisting entirely of cash (it being understood that no sale for
any other consideration would be a Permitted Transfer), then such Stockholder
shall give a notice in writing (the "OPTION NOTICE") to each Class I Stockholder
and the Company setting forth such desire, which notice shall set forth at least
the name and address of the Outside Party and the price and terms of the Bona
Fide Offer and be accompanied by a copy of the Bona Fide Offer. Upon the giving
of such Option Notice, the Company, and to the extent the Company elects not to
do so, the respective Stockholders set forth in the following sentence (each an
"ELECTING STOCKHOLDER") shall have an option to purchase all, but no less than
all, of the Securities specified in the Option Notice, such option to be
exercised within 30 days after the giving of such Option Notice by giving a
counter-notice (the "ELECTION NOTICE") to the Stockholder. If the Stockholder
sending an Option Notice is (i) Occidental or a Class II Stockholder, then GEI
and the HPA Group shall be entitled to be Electing Stockholders; or (ii) a
member of the HPA Group, then GEI and the other members of the HPA Group shall
be entitled to be Electing Stockholders. Where more than one Electing
Stockholder desires to participate in a purchase pursuant to an
4
<PAGE>
Option Notice, such Stockholders shall participate, pro rata based upon their
--- ----
respective Equity Ownership in the Company, with the portion attributable to
Stockholders declining to be Electing Stockholders being redistributed to the
remaining Stockholders pro rata based upon their respective Equity Ownership in
--- ----
the Company, it being understood that the Company may elect to purchase up to
all of the Securities and any remainder shall be prorated as aforesaid. The
Company and, if applicable, the Electing Stockholders shall be severally
obligated to purchase, and the Stockholder shall be obligated to sell, the
Securities covered by such Election Notice at the cash price and terms indicated
in the Bona Fide Offer, provided that the closing of the purchase by the
Electing Stockholder shall be held on a business day within 30 days after the
giving of the Election Notice at 10:30 a.m., California time, at the principal
executive office of the Company, or at such other time and place as may be
mutually agreed to by the Stockholder, the Company and, if applicable, the
Electing Stockholders. If an Election Notice is not timely given by the Company
and/or one or more Electing Stockholders within the period specified above after
an Option Notice has been given, the Stockholder thereafter, at any time within
a period of four months from the giving of such Option Notice, may Transfer all
(but not less than all) of the Securities covered by such Option Notice to the
Outside Party at the cash price and terms contained in the Bona Fide Offer;
provided, however, that such Outside Party and such Securities shall thereafter
- --------- --------
be subject to and bound by all of the provisions of this Agreement as if such
party were a Class II Stockholder except as otherwise provided in Section 6(g)
and, as a condition precedent to the completion of such Transfer of Securities
to such Outside Party, shall execute and deliver to the Company a written
consent to such effect in form and substance satisfactory to the Company; and
provided, further, however, that to the extent that the Stockholder has not so
Transferred such Securities to the Outside Party within such four-month period,
then such Securities thereafter shall continue to be subject to all of the
restrictions contained in this Agreement. Any election in any instance by the
Company or any Stockholder entitled to be Electing Stockholders not to exercise
its rights under this clause (b) shall not constitute a waiver of such rights
with respect to any other actual or proposed Transfer of Securities.
(c) Transfers to Related Transferees. Notwithstanding anything to
-------------------------------
the contrary contained in clauses (a) and (b) of this Section 4, any Stockholder
may Transfer Securities to a Related Transferee provided that such Related
--------
Transferee shall first (i) execute a written consent in form and substance
satisfactory to the Company to be bound by all of the provisions of this
Agreement and (ii) give a duplicate original of such consent to the Company. In
the event of any Transfer by a Stockholder to a Related Transferee of all or any
part of his or its Securities (or in the event of any subsequent Transfer by any
such Related Transferee to another Related Transferee of the Stockholder), such
Related Transferee shall receive and hold such Securities subject to the terms
of this Agreement and the rights and obligations hereunder of a Stockholder as
though such Securities were still owned by the Stockholder, and such Related
Transferee shall be deemed the Stockholder for the purposes of this Agreement.
If the Related Transferee acquired Securities from a Stockholder, such Related
Transferee shall be entitled to participate, collectively with the Stockholders
of the same group, in the registration rights provided for in Section 6 hereof.
There shall be no further Transfer of such Securities by a Related Transferee
except between and among such Related Transferee, the original Stockholder and
other Related Transferees, or except as otherwise permitted by this Agreement.
5
<PAGE>
(d) Legend on Certificates. Each certificate of the Company issued to
----------------------
represent any of the Securities shall bear the following (or substantially
equivalent) legends on the face or reverse side thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (I) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER
SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY
EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE
SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES,
INCLUDING RULE 144, PROVIDED AN OPINION OF COUNSEL IS FURNISHED
TO THE COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
THE COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE
SECURITIES LAW IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF
THE STOCKHOLDERS AGREEMENT DATED AS OF _____________, 1997, A
COPY OF WHICH IS ON FILE AT THE OFFICES OF THE COMPANY.
Any stock certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon the
completion of a public offering) shall also bear such (or substantially
equivalent) legends, unless the Security represented by such certificate is no
longer subject to the provisions of this Agreement and, in the opinion of
counsel for the Company, the Security represented thereby need no longer be
subject to restrictions pursuant to the Act or applicable state securities law.
(e) Transfers in Violation of this Agreement. The Company shall not
----------------------------------------
be required to record on its books and records, or otherwise to recognize or
facilitate, any Transfer of Securities in violation of this Agreement, nor shall
the Company be required to issue any certificate for Securities Transferred in
violation of this Agreement.
5. Company "Call" Option.
---------------------
(a) Call Purchase Event and Purchase Price. Upon the termination of a
--------------------------------------
Class II Stockholder's employment with the Company or its subsidiaries for any
reason (including, without limitation, the voluntary termination, dismissal,
involuntary termination, Retirement, death or Permanent Disability of the
Stockholder) (a "CALL PURCHASE EVENT"), the Company, and
6
<PAGE>
to the extent the Company elects not to do so and, in the case of the NQ
Options, such purchase may otherwise be made pursuant to the NQ Option Plan,
GEI, Michael J. Fourticq and Brian P. McDermott (or any Related Transferee of
the latter) (collectively the "PURCHASING GROUP") may, collectively and pro
---
rata based upon their respective Equity Ownership in the Company, exercise the
- ----
Call Option by written notice (a "PURCHASE NOTICE") delivered to the Class II
Stockholder within 90 days after such Call Purchase Event, elect to purchase,
and, upon the giving of such notice, the Company, and if applicable, the
Purchasing Group shall be severally obligated to purchase and the Class II
Stockholder (and the Related Transferees, if any, of the Class II Stockholder)
(in each case, the "SELLER") shall be obligated to sell all, or any lesser
portion indicated in the Purchase Notice, of the Callable Securities owned at
the time of the Call Purchase Event by the Seller; for consideration calculated
as to each share of Call Option Stock and each Call Option Share or Call NQ
Option, as the case may be, as follows:
(i) in the case of voluntary termination by a Class II
Stockholder holding Call NQ Options, an amount equal to the difference
between the cash consideration per share paid in the Merger and the
exercise price of the Call NQ Option; or
(ii) in the case of any other termination (including without
limitation dismissal, involuntary termination, death, Retirement or
Permanent Disability of a Class II Stockholder holding Option Shares)
("OTHER TERMINATION"), of a Class II Stockholder holding Call NQ Options,
the difference between the higher of (A) the cash consideration per share
paid in the Merger and (B) the Fair Market Value of the underlying shares
on the date of the Call Purchase Event, and the exercise price of the Call
NQ Option; or
(iii) in the case of voluntary termination by a Class II
Stockholder holding Call Option Stock, the purchase price therefor; or
(iv) in the case of Other Termination of a Class II Stockholder
holding Call Option Stock, the higher of the Fair Market Value thereof on
the date of the Call Purchase Event and the purchase price paid by the
holder therefor; or
(v) in the case of voluntary termination by a Class II
Stockholder holding Call Option Shares, an amount equal to the cash
consideration per share paid in the Merger; or
(vi) in the case of Other Termination of a Class II Stockholder
holding Call Option shares, the higher of the Fair Market Value of such
shares on the date of the Call Purchase Event and the amount payable
pursuant to clause (v) above.
(b) Exercise of Call Option. In the event the Company and/or any
-----------------------
Class I Stockholder elects not to participate in the purchase of Callable
Securities pursuant to the Call Option, all remaining Purchasing Group
Stockholders desiring so to participate may do so, pro rata amongst such
--- ----
remaining Purchasing Group Stockholders based upon their respective Equity
Ownership in the Company, or in any other proportion as they may agree. The
closing for all purchases and sales of Callable Securities pursuant to this
Section 5 shall be at the principal executive offices of the Company at 10:30
a.m., California time, on the 60th day after the giving
7
<PAGE>
of the applicable Purchase Notice. The purchase price for the purchase and sale
of Callable Securities shall be paid in cash, by certified or official bank
check. The Seller(s) of Callable Securities sold pursuant to this Section 5
shall cause such Securities to be delivered to the Purchasing Group or the
Company at the relevant closing free and clear of all liens, charges or
encumbrances of any kind. Such Seller(s) shall take all actions as the
Purchasing Group or the Company shall request as necessary to vest in the
members of the Purchasing Group and/or the Company at such closing such Callable
Securities, free and clear of all liens, charges and encumbrances incurred,
voluntarily or involuntarily, by or through Seller(s).
6. Registration Rights.
-------------------
(a) Demand Registration Rights. At any time on or after January 31,
--------------------------
1998, each of (i) GEI, (ii) the HPA Group collectively, and (iii) Occidental
shall be entitled, respectively, to request a registration (a "DEMAND
REGISTRATION") of no less than 50% of its Registrable Securities held by such
Class I Stockholder, and at such time as the Company qualifies for registration
of securities on Form S-3 or any successor short-form, one additional
registration for a period not to exceed 180 days on such form. In such event,
the Company shall:
(i) as soon as reasonably practicable, and at its expense as
set forth in Section 6 hereof, effect such registration and all such
qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of the Class
I Stockholder's Registrable Securities as are specified in such request on
the form specified in such request covering the Registrable Securities;
(ii) use its best efforts to cause such registration to become
and remain effective, as soon as practicable after receipt of the request
of the Class I Stockholder, for the period necessary to effectuate the
distribution contemplated by the Class I Stockholder; and
(iii) at the request of the Class I Stockholder or the Manager,
enter into and perform its obligations under an underwriting or purchase
agreement (the "UNDERWRITING AGREEMENT") in customary form for secondary
offerings of common stock, and otherwise reasonably acceptable to the
parties, with the Manager (acting for itself and/or a group of syndicate of
underwriters) and the Class I Stockholder.
Notwithstanding the foregoing, the Company shall be entitled to delay any such
Demand Registration if (i) the Company has determined in good faith that in view
of pending negotiations or other material developments regarding the Company not
otherwise required to be made public, disclosure of such information is not in
the best interest of the Company (in which case the delay in filing a Demand
Registration may not exceed 90 days); (ii) the Company has initiated discussions
with an underwriter regarding the sale of securities of the same class or
convertible into the same class as the Registrable Securities in a registered
primary public offering, in which case the Demand Registration may be delayed
for up to 180 days from the effectiveness of such primary public offering,
provided that the Company may not invoke the provision of clause (i) for more
than an aggregate of 120 days in any twelve-month period, and may not invoke the
delay in clause (ii) more than once in any such period. In addition, to the
extent a Demand Registration is
8
<PAGE>
a "shelf" registration, the Company may interrupt such registration for the
reasons set forth above, provided that sales under such shelf registration shall
in all events be permitted for an aggregate of 180 days if requested.
(b) Piggyback Registration Rights; Cutbacks. Each time the Company
---------------------------------------
proposes to register under the Act (other than registration (A) on Forms S-4 or
S-8 or any successor forms thereto, or (E) filed in connection with an exchange
offer) securities of the same class as any of the Registrable Securities, the
Company shall give written notice of such proposed registration (a "REGISTRATION
NOTICE") to each Class I Stockholder and Class II Stockholder at least 20 days
prior to the filing thereof. Each Registration Notice shall indicate that the
recipient has the right (subject to the provisions of this Section 6) to propose
that its Registrable Securities be included in such registration. Each Class I
Stockholder and Class II Stockholder shall have the right to propose that a
number of its Registrable Securities be included in such registration by written
notice given to the Company within fifteen (15) days after the giving of such
Registration Notice. Subject to the provisions of this Section 6, the Company
shall include all such Registrable Securities in such registration provided,
--------
however, that:
- -------
(i) if the registration is in whole or part an underwritten
primary registration on behalf of the Company (whether or not it is also in
part a Demand Registration or other secondary registration on behalf of any
Company securityholders) and the managing underwriters of such offering
determine that the aggregate amount of securities of the Company which all
Stockholders and all other Company securityholders pursuant to future
contractual rights to participate in such registration (such other Company
securityholders, "FUTURE PARTICIPANTS") propose to include in such
registration exceeds the maximum amount of securities that should be
included therein, the Company will include in such registration, first,
-----
the shares which the Company proposes to sell and second, securities to be
------
sold for the account of any Class I Stockholder pro rata among the Class I
--- ----
Stockholders, and third, securities to be sold for the account of the Class
-----
II Stockholders, pro rata among the Class II Stockholders and fourth, the
--- ---- ------
other securities to be sold for the account of Future Participants, pro
---
rata among such Future Participants, in each case on the basis of the
----
relative Equity Ownership of the parties who have requested that securities
owned by them be so included (it being agreed and understood, however, that
such underwriters shall have the right to eliminate entirely the
participation in such registration of all Stockholders and Future
Participants);
(ii) if the registration is pursuant to an underwritten Demand
Registration and the managing underwriters determine that the aggregate
amount of securities which all Stockholders and all Future Participants
propose to include in such registration exceeds the maximum amount of
securities that should be included therein, the Company will include in
such registration, first, the securities to be sold for the account of the
-----
Class I Stockholders, pro rata among the Class I Stockholders, second,
--- ---- ------
securities to be sold for the account of the Company, if any, third,
-----
securities to be sold for the account of the Class II Stockholders, pro
---
rata among the Class II Stockholders and fourth, securities to be sold for
---- ------
the account of the Future Participants electing to include securities in
such registration, pro rata among such Future Participants, in each case,
--- ----
on the basis of their relative Equity Ownership (it being agreed and
understood, however, that such
9
<PAGE>
underwriters shall have the right to eliminate entirely the participation
therein of the Company and all such Future Participants not entitled to
demand inclusion of securities in such registration);
(iii) if the registration is pursuant to an underwritten
secondary registration other than as described in clause (ii) above on
behalf of Future Participants and the managing underwriters determine that
the aggregate amount of securities which all Future Participants and
Stockholders propose to include in such registration exceeds the maximum
number of securities that should be included therein, the Company will
include in such registration first, the securities to be sold for the
-----
account of the Future Participants, pro rata among the Future Participants,
--- ----
second, securities to be sold for the account of the Company, if any,
------
third, securities to be sold for the account of the Class I Stockholders,
-----
pro rata among such Stockholders and fourth, securities to be sold for the
--- ---- ------
account of the Class II Stockholders, in each case, on the basis of their
relative Equity Ownership (it being agreed and understood, however, that
such underwriters shall have the right to eliminate the participation
therein of the Company and the Stockholders entirely unless, on the date of
such secondary registration, any Class I Stockholder electing to
participate in such registration shall not theretofore have completed one
Demand Registration in which all of the Registrable Securities it sought to
include were sold, in which case any such Class I Stockholder may convert
such registration into one governed by clause (ii) above);
(iv) in the event that, as a result of the provisions of
Section 6(b)(i) or (ii), a group of Stockholders which has exercised its
rights to request a Demand Registration is unable to register all of the
Registrable Securities as to which the request was made, such Stockholder
shall not be considered to have utilized a Demand Registration under
Section 6(a); and
(v) in exercising the rights of Stockholders in respect of
Registrable Securities in this Section 6, Stockholders comprising the
holders of the Demand Registrations enumerated in clauses (i) through (iii)
of Section 6(a) shall, if more than one Stockholder has or succeeds to such
rights, exercise such rights and make all determinations hereunder acting
by majority-in-interests based upon their respective ownership of
Registrable Securities.
(c) Expenses of Registration. Whether or not any registration
------------------------
statement prepared and filed pursuant to Section 6(a) or (b) hereof is declared
effective by the SEC (except where a Demand Registration is terminated,
withdrawn or abandoned at the written request of a Class I Stockholder solely
due to market conditions), the Company shall pay all expenses incident to
Company's performance of or compliance with the registration requirements of
this Agreement, including, without limitation, the following: (A) all SEC
registration and filing fees and expenses; (B) the filing fees incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of Registrable Securities; (C) any and all
expenses incident to its performance of, or compliance with, this Agreement,
including, without limitation, any allocation of salaries and expenses of
Company personnel or other general overhead expenses of Company, or other
expenses for the preparation of historical and pro forma financial
10
<PAGE>
statements; (D) fees and expenses incurred in connection with the listing of
Registrable Securities on each securities exchange or the NASDAQ Stock Market,
as applicable, on which securities of the same class are then listed; (E) all
transfer and/or exchange agent and registrar fees; (F) fees and expenses in
connection with the qualification of the Registrable Securities under securities
or "blue sky" laws including reasonable fees and disbursements of counsel for
the underwriters in connection therewith; (G) mailing and printing expenses
relating to the registration and distribution of Registrable Securities; (H)
messenger and delivery expenses relating to the registration and distribution of
Registrable Securities; (I) fees and out-of-pocket expenses of a single counsel
for the selling Stockholders and (J) fees and out-of-pocket expenses of counsel
for Company and its independent certified public accountants (including the
expenses of any audit, review and/or "cold comfort" letters) and other persons,
including special experts, retained by Company (collectively, clauses (A)
through (J), "REGISTRATION EXPENSES"); provided, however, that Company shall not
-------- -------
be required to pay, and the Stockholder shall pay, any discounts, commissions or
fees of underwriters, selling brokers and dealers relating to the distribution
of the Registrable Securities.
(d) Registration Procedures. In the case of each registration
-----------------------
effected by Company pursuant to this Agreement, Company shall keep the
participating Stockholders advised in writing as to the initiation of each
registration and as to the completion thereof. The Company shall (i) permit the
Stockholder, the Manager, if any, and their respective counsel to make such
investigation of Company as they may reasonably request, (ii) furnish to the
participating Stockholders, the Manager and their respective counsel drafts of
the registration statement and all amendments thereto, all prospectuses and
supplements thereof prior to filing with the SEC and consider their comments and
suggestions with respect to such documents, and (iii) not file any such
registration statement, amendment, prospectus or supplement to which the
participating Stockholders or the Manager shall reasonably object. At its
expenses, Company shall:
(i) keep such registration effective and current as required
by law for such period necessary to permit the Stockholder to complete the
distribution described in the registration statement relating thereto, or
for such period as may be agreed to in the Underwriting Agreement;
(ii) prepare and file with the SEC such amendments, post-
effective amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to comply with
the provisions of the Securities Act and the Underwriting Agreement and to
keep such registration statement effective and current as required by law
for that period of time specified above, in each case exclusive of any
period during which the prospectus used in connection with such
registration shall not comply with the requirements of Section 10 of the
Securities Act, and respond as promptly as practicable to any comments
received from the SEC with respect to such registration statement or any
amendment thereto;
(iii) furnish such number of copies of the registration
statement, each amendment thereto, each preliminary prospectus,
prospectuses, supplements and incorporated documents and other documents
incident thereto as the Stockholder or the Manager from time to time may
reasonably request;
11
<PAGE>
(iv) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Stockholder and the
Manager shall reasonably request, and do any and all other acts and things which
may be necessary or desirable to enable the Stockholder and the Manager to
consummate the offering and disposition of Registrable Securities in such
jurisdictions; provided, however, that the Company shall not, by virtue of this
-------- -------
Agreement, be required to qualify generally to do business as a foreign
corporation, subject itself to taxation, or consent to general service of
process, in any jurisdiction wherein it would not, but for the requirements of
this clause (iv), be obligated to be qualified;
(v) notify the Stockholder and the Manager promptly and, if
requested by any such person, confirm such notification in writing, (A) when a
prospectus or any prospectus supplement has been filed with the SEC, and, with
respect to a registration statement or any post-effective amendment thereto,
when the same has been declared effective by the SEC, (B) of any request by the
SEC for amendments or supplements to a registration statement or related
prospectus, or for additional information, (C) of the issuance by the SEC of any
stop order or the initiation of any proceedings for such or a similar purpose
(and the Company shall make every reasonable effort to obtain the withdrawal of
any such order at the earliest practicable time), (D) of the receipt by Company
of any notification with respect to the suspension of the qualification of any
of the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose (and the Company shall make every
reasonable effort to obtain the withdrawal of any such suspension at the
earliest practicable time), (E) of the occurrence of any event with requires the
making of any changes to a registration statement or related prospectus so that
such documents shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading (and the Company shall promptly prepare and furnish to the
Stockholder and the Manager a reasonable number of copies of a supplemented or
amended prospectus such that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not statements therein, in light of the circumstances under
which they are made, not misleading), and (F) of the Company's determination
that the filing of a post-effective amendment to the Registration Statement
shall be necessary or appropriate. Each Stockholder agrees that it shall, as
expeditiously as possible, notify the Company at any time when a prospectus
relating to a registration statement covering such Stockhloder's Registrable
Securities is required to be delivered under the Securities Act, of the
happening of any event of the kind described in this clause (v) as a result of
any information provided by such Stockholder in writing expressly for inclusion
in such prospectus included in such registration statement and at the request of
the Company, promptly prepare and furnish to it such information as may be
necessary so that, after incorporation into a supplement or amendment of such
prospectus as thereafter delivered to the purchasers of such securities, the
information so provided by the Stockholder shall
12
<PAGE>
not include an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading. Each Stockholder shall be deemed to have
agreed by acquisition of such Registrable Securities that upon the receipt
of any notice from the Company of the occurrence of any event of the kind
described in clause (E) of this clause (v), such Stockholder shall
forthwith discontinue its offer and disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such Stockholder shall have received copies of a supplemented or
amended prospectus which is no longer defective as contemplated by clause
(E) of this clause (v) and, if so directed by the Company, shall deliver to
the Company, at the Company's expense, all copies (other than permanent
file copies) of the defective prospectus covering such Registrable
Securities which are then in such Stockholder's possession;
(vi) use its best efforts to cause all such Registrable
Securities covered by such registration statement to be listed on each
securities exchange or the Nasdaq Stock Market, as applicable, on which
similar securities issued by the Company are then listed, if the listing of
such Registrable Securities is then permitted under the rules and
regulations of such exchange or the Nasdaq Stock Market, as applicable;
(vii) engage and provide a transfer agent for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(viii) whether or not the Underwriting Agreement is entered into
and whether or not any portion of the offering contemplated by such
registration statement is an underwritten offering or is made through a
placement or sales agent or any other entity, (A) make such representations
and warranties to the underwriters, if any, in form, substance and scope as
are customarily made in connection with an offering of common stock or
other equity securities pursuant to any appropriate agreement and/or to a
registration statement filed on the form applicable to such registration;
(B) obtain an opinion of counsel to the Company in customary form and
covering such matters, of the type customarily covered by such opinions, as
the Manager, if any, and as the Stockholder may reasonable request; (C)
obtain a "cold comfort" letter or letters from the independent certified
public accountants of Company addressed to the underwriters, if any,
thereof, dated (i) the effective date of such registration statement and
(ii) the date of the closing under the underwriting agreement relating
thereto, such letter or letters to be in customary form and covering such
matters of the type customarily covered, from time to time, by letters of
such type and such other financial matters as the Manager, if any, may
reasonably request; (D) deliver such documents and certificates, including
officers' certificates, as may be reasonably requested by the underwriters,
if any, therefor and the Manager, if any, thereof to evidence the accuracy
of the representations and warranties made pursuant to clause (A) above and
the compliance with or satisfaction of any agreements or conditions
contained in the underwriting agreement or other agreement entered into by
Company, and (E) undertake such obligations relating to expense
reimbursement, indemnification and contribution as are provided in this
Agreement;
13
<PAGE>
(ix) permit the Stockholder to participate in the preparation
of such registration statement and include therein material acceptable to
the Company and its counsel, furnished to Company in writing which in the
reasonable judgement of the Stockholder and its counsel is required to be
included therein:
(x) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement by the SEC or
any state securities authority as promptly as possible; and
(xi) cooperate with the Stockholder to facilitate the timely
preparation and delivery certificate representing Registrable Securities to
be sold and enable certificates for such Registrable Securities to be
issued for such number of shares of Company Common Stock and registered in
such names as Stockholder may reasonably request.
(e) Indemnification
---------------
(i) The Company shall indemnify and hold harmless each
Stockholder, each of its directors, officers and agents, each underwriter
(as defined in the Securities Act) of such Registrable Securities, if any,
and each person who controls (within the meaning of Section 15 of the
Securities Act) such Stockholder or any underwriter of the Registrable
Securities held by or issuable to such Stockholder, against all claims,
losses, expenses, damages and liabilities, joint or several, including any
of the foregoing incurred in settlement of any proceeding, commenced or
threatened, (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to any
such registration or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of
any rule or regulation promulgated under the Act of any state securities
law applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, and shall
reimburse each Stockholder each of its directors, officers and agents, each
such underwriter and each person who controls such Stockholder or any such
underwriter for any reasonable legal and any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, provided, however, that the Company shall not
-------- -------
be liable in any such case to the extent that any such claim, loss, damage
or liability arises out of or is based on any untrue statement or omission
based upon written information furnished to the Company by such Stockholder
or such underwriter specifically for use therein. The indemnity provided by
this Section (6)(e) shall be in addition to any liability which Company may
otherwise have.
(ii) Each Stockholder shall indemnity and hold harmless
Company, each of its directors and officers, each underwriter, if any, and
each person who controls Company or any of the underwriters within the
meaning of the Act, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereof) arising out of or
14
<PAGE>
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse the Company or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information pertaining to such Stockholder, which
is furnished in writing to Company by such Stockholder specifically for use
therein.
(iii) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an Indemnified Party (as
defined below) in respect of any losses, claims, damages or liabilities (or
action in respect thereof) referred to therein, then Company and the
Stockholder shall contribute to the amount paid or payable as a result of
such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of
Company on the one hand and the Stockholder on the other in connection with
the statements or omission which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one
hand or the Stockholder on the other and such persons's relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company agrees that it would not be just and
equitable if contribution pursuant to this Section 6(e) were determined pro
---
rata allocation or by any other method of allocation which does not take
----
account of the equitable considerations referred to above in this Section
6(e). The amount paid or payable by a party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this Section 6(e) shall include any legal or other expenses
reasonably incurred by such party in connection with investigating or
defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. No person shall be required to
contribute to any settlement effected without its consent, which consent
shall not be unreasonably withheld. If, however, indemnification is
available under this Section 6, the indemnifying parties shall indemnify
each indemnified party to the fullest extent provided here without regard
to the relative fault of such indemnifying party or indemnified party or
any other equitable considerations.
(iv) Each party entitled to indemnification under this Section
6(e) (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided
that
15
<PAGE>
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld, and the Indemnified Party may
participate in such defense at such party's expense, unless the Indemnified
Party in its reasonable judgment determines that joint representation by
counsel for the Indemnifying Party would be inappropriate due to actual or
potential differing interests between the Indemnifying Party and the
Indemnified Party in the conduct of the defense of such action, in which
case the Indemnified Party shall be entitled to be represented by separate
counsel selected by it, the reasonable fees and expenses of which shall be
borne by the Indemnifying Party, and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations hereunder, unless such failure
resulted in actual detriment to the Indemnifying Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with
the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation.
(v) Notwithstanding the foregoing, to the extent that the
provisions on indemnification of the underwriters and their controlling
persons contained in the Underwriting Agreement in connection with an
underwritten public offering are in conflict with the foregoing provisions,
the provisions in the Underwriting Agreement shall control as to
indemnification of the underwriters and their controlling persons in the
public offering.
(vi) Notwithstanding the foregoing, in no event shall any
Stockholder be liable under this Section 6(e) for an amount exceeding the
net proceeds received by Stockholder from the sale of its Registrable
Securities pursuant to the registration rights granted to Stockholder
hereunder.
(f) Holdback Amount. Each Stockholder agrees that in the event of an
---------------
underwritten public offering of Registrable Securities for the account of any
Stockholder, such Stockholder and any Related Transferee thereof will not,
without the written consent of the underwriters, offer for public sale (other
than as part of such underwritten public offering) any Securities during the ten
(10) days prior to and such number of days (not to exceed 180 days in the case
of an initial public offering and 90 days in all other cases) after the
effective date of the registration statement in connection with such public
offering as the underwriters may reasonably request in writing.
(g) Assignment and Assumption. For avoidance of doubt, the parties
-------------------------
acknowledge that each Stockholder may assign its rights under this Section 6 as
an incident to any permitted Transfer of Securities held by it to the Transferee
of such Securities, and if the Stockholder retains any Securities, the rights
under this Section 6 shall remain applicable to the retained Securities. If
Securities are acquired from a Class I Stockholder, such Securities shall be
entitled to participate in any Demand Registration as a member of the group
enumerated in clauses (i) through (iii) of Section 6(a), without thereby
increasing the aggregate number of Demand Registrations the Company may be
required to effect. Each Stockholder shall promptly
16
<PAGE>
notify the Company in writing of each such assignment of rights, and the
assignee shall execute such documentation as the Company may reasonably request
to evidence its agreement to be bound by this Section 6. Registration rights
shall not be assignable to any purchaser of Securities sold under Rule 144 or in
any public securities sale. If the Company effects a business combination in
which Stockholders receive securities of another issuer and such securities
cannot be resold by the Stockholders without registration under the Securities
Act, as a condition to the consummation of such business combination, the
Company shall cause such issuer to assume the Company's obligations under this
Section 6.
(h) Stock Option Plans. After the IPO, the Company shall use its
------------------
reasonable efforts to register, on Form S-3 or any similar or successor form,
the ISOs and NQ Options so as to permit the non-Affiliate Stockholders to
dispose of Common Stock issuable upon the exercise thereof pursuant to Rule 144.
7. Drag-Along Sales and Tag-Along Sales.
------------------------------------
(a) Drag-Along Sales.
----------------
(i) Notwithstanding any other provision hereof, if GEI agrees to
sell Securities held by it pursuant to a transaction in which more than 75% of
the then-outstanding Common Stock of the Company will be sold to or acquired by
a Third Party (either of such sales, a "DRAG-ALONG SALE"), then upon the demand
of GEI, (i) in the case of Occidental and the Class II Stockholders, made at any
time after the Closing Date and (ii) in the case of the HPA Group, made at any
time after the fourth anniversary of the Closing Date (the HPA Group and the
Class II Stockholders being collectively referred to for this purpose as
"DRAG-ALONG SELLERS"), each Drag-Along Seller hereby agrees to sell to such
Third Party the same percentage of the total number of Securities held by such
Drag-Along Seller on the date of the Drag-Along Notice, as the number of
Securities GEI is selling in the Drag-Along Sale bears to the total number of
shares held by GEI as of the date of the Drag-Along Notice (the "SALE
PERCENTAGE"), at the same price and form of consideration and on the same terms
and conditions as GEI has agreed to with such Third Party. If the Drag-Along
Sale is in the form of a merger transaction, the Drag-Along Seller agrees to
vote his or her Securities in favor of such merger and not to exercise any
rights of appraisal or dissent afforded under applicable law. The provisions of
this Section 7 shall apply regardless of the form of consideration received in
the Drag-Along Sale. For purposes of Drag-Along Sales, the number of shares
owned by each Drag-Along Seller shall include all shares underlying NQ Options,
which NQ Options will be exercised by the Drag-Along Sellers immediately prior
to and contingent upon consummation of the Drag-Along Sale.
(ii) Prior to making any Drag-Along Sale, if GEI elects to
exercise the option described in this Section 7, GEI shall provide the
Drag-Along Seller to whom this Section 7 then applies with written notice (the
"DRAG-ALONG NOTICE") not more than 60 nor less than 15 days prior to the
proposed date of the Drag-Along Sale (the "DRAG-ALONG SALE DATE"). The
Drag-Along Notice shall set forth: (i) a general description of the transaction
and the proposed amount and form of consideration to be
17
<PAGE>
paid per share offered by the Third Party; (ii) the aggregate number of
Securities held by GEI as of the date that the Drag-Along Notice is first
given to a Drag-Along Seller; (iii) the Sale Percentage; and (iv) the Drag-
Along Sale Date.
(iii) On the Drag-Along Sale Date, each Drag-Along Seller shall
deliver a certificate or certificates for the Sale Percentage of its
Securities, duly endorsed for transfer with signatures guaranteed, to such
Third Party in the manner and at the address indicated in the Drag-Along
Notice against delivery of the purchase price therefor, provided, however,
-------- -------
that in the eventthe Company has possession of any such certificates
pursuant to this Agreement, upon the written request of the Drag-Along
Seller at least five (5) business days in advance of-the Drag-Along Sale
Date, the Company shall deliver such certificates to the purchaser at the
time and in the manner described above.
(b) Optional Participation in Sales of Common Stock (Tag-Along
----------------------------------------------------------
Sales).
------
(i) If GEI shall at any time desire to Transfer shares of
Common Stock to a third party, other than ratably to its partners, then
each of the HPA Group and the Class II Stockholders and their Related
Transferees (collectively, a "TAG-ALONG SELLER") shall be entitled, to
participate pro rata in such Transfer at the same price and on the same
--- ----
terms and conditions applicable to GEI, based upon their respective Fully
Diluted Ownership in the Company.
(ii) Each Tag-Along Seller shall have the right to Transfer up
to a percentage of the number of shares specified in the Transfer Notice
delivered pursuant to the following sentence by the aggregate number of
shares of Common Stock then owned by GEI. GEI shall deliver or cause to be
delivered to each Tag-Along Seller a written notice (a "TRANSFER NOTICE")
of a proposed tag-along sale no later than 30 days prior to the proposed
closing thereof. Such notice shall make reference to the Tag-Along Sellers'
rights under this Section 7(b) and shall describe in reasonable detail (A)
the aggregate number of shares of Common Stock to be Transferred by GEI if
none of the HPA Group or Class II Stockholders participates, (B) the
aggregate number of shares of Common Stock then owned by GEI, (C) the
person or entity to whom or which such shares of Common Stock are proposed
to be Transferred, (D) the terms and conditions of the Transfer, including
the consideration to be paid therefor, (E) the maximum percentage of its
shares such Tag-Along Seller is entitled to include in the Transfer and (F)
the proposed date, time and location of the closing of the Transfer. Each
Stockholder receiving a Transfer Notice shall exercise its right to
participate in a Transfer of Common Stock pursuant to this Section 7 by
delivering to GEI a written notice (a "TAG-ALONG NOTICE") stating its
election to do so and specifying the number of shares (which shall not
exceed the number of shares determined for such Tag-Along Seller in the
Transfer Notice) of Common Stock held by it to be Transferred no later than
fifteen days after receipt of the Transfer Notice. Failure to provide a
Tag-Along Notice within such fifteen-day period shall be deemed to
constitute an election by such Stockholder not to exercise its rights
pursuant to this Section 7, and GEI shall have 90 days following the
expiration of such fifteen-day period in which to Transfer the number of
shares equal to the difference between the number set forth in the Transfer
Notice and the aggregate number of shares
18
<PAGE>
as to which GEI has received a Tag-Along Notice, on terms not more
favourable to GEI than those set forth in the Transfer Notice.
(iii) Each Tag-Along Seller shall be required to deliver at such
closing the certificate or certificates representing the shares to be
Transferred, duly endorsed for transfer, and shall be entitled to receive
the net proceeds allocable to the Transfer thereof, after deduction of such
Tag-Along Seller's proportionate share of the expenses of Transfer, which
share shall not exceed an amount proportionate to the amount of such
expenses allocated to GEI. If, at the end of the 90-day period following
the expiration of such fifteen-day period, GEI has not completed the
Transfer of shares of Common Stock, GEI may not sell the shares of Common
Stock without again fully providing a Transfer Notice.
(c) Obligations of Drag-Along Sellers. In connection with any
---------------------------------
Drag-Along Sale, Drag-Along Sellers shall not be required to make any
representation or warranty to the purchaser other than to the effect that they
hold title to the Securities they are selling in the Drag-Along Sale, free and
clear of liens and the like, and as to their right, power and authority to sell
such Securities. Except as to such representations, Drag-Along Sellers shall not
be liable beyond the net proceeds of the Drag-Along Sale for any other breach of
representations or warranties. In addition, unless expressly agreed to by a
Drag-Along Seller, no Drag-Along Seller shall be required to enter into any
covenant not to compete or similar agreement restricting their business
activities.
8. Termination and Lapse of Rights and Restrictions; Applications of
-----------------------------------------------------------------
Other Stock and Adjustments. The provisions of Sections 4, 5, 7, 9, and 10
- ---------------------------
shall lapse and be of no further effect immediately following the earlier to
occur of a Change in Control or an IPO. In the event any capital stock of the
Company or any other corporation shall be distributed on, with respect to, or in
exchange for Securities as a stock dividend, stock split, reverse stock split,
reclassification or recapitalization, or in connection with any merger or
reorganization, the restrictions, rights and options and prices set forth herein
shall apply with respect to such other capital stock to the same extent as they
are, or would have been applicable, to the Securities on or with respect to
which such other capital stock was distributed and shall continue to apply to
the Securities or such other securities outstanding thereafter, in each case
with such adjustments as are necessary or appropriate.
9. Election of Directors. So long as such individuals respectively own
----------------------
the requisite amount of Common Stock set forth herein, each of the other
Stockholders agrees to vote his or its Common Stock, and cause his Related
Transferees to vote their Common Stock, in favor of Michael J. Fourticq and
Brian P. McDermott ("FOURTICQ" and MCDERMOTT") in all elections of the directors
of the Company whether by meeting or action in writing. Such agreement to vote
shall be effective as to each such individual so long as such individual
continues to own (directly or, in the case of Mr. McDermott, through a family
trust and in either case, through Related Transferees after the date hereof) at
least two-thirds (2/3) of the Common Stock owned by him on the date hereof. Such
agreement to vote shall cease to be effective upon the first to occur of: (i)
such individual ceasing to own (directly or indirectly, as aforesaid) in excess
of one-third (1/3) of the Common Stock owned by him on the date hereof and (ii)
a Disproportionate Sale after
19
<PAGE>
which such individual and his Related Transferees own less than two-thirds (2/3)
of the Common Stock owned by him and such Related Transferees on the date
hereof. A "DISPROPORTIONATE SALE" as to either individual occurs on the date of
a Transfer of Common Stock as a result of which the Common Stock owned by such
individual and Related Transferees has decreased by a percentage that is
greater, by at least five percent (5%), than the corresponding decrease in
ownership of Common Stock of GEI to date. Each of the Stockholders further
agrees the he or it shall vote its Common Stock and cause its Related
Transferees to vote their Common Stock, in all elections of directors of the
Company, whether by meeting or action in writing, in favour of all nominees for
the board of directors proposed by GEI. For purposes of this Section 9 and the
effectiveness of the voting agreements herein, ownership of Common Stock shall
be calculated based upon the Fully Diluted Ownership of the individual and his
Related Transferees, in the aggregate.
10. Certain Additional Agreements.
-----------------------------
(a) Right to Participate in Equity Issuances. If the Company shall
----------------------------------------
issue, sell or distribute to GEI or any of its Affiliates any equity or debt
securities of the Company, or any option warrant, or right to acquire, or any
security convertible into or exchangeable for, any of the foregoing (other than
pursuant to an underwritten public offering, a stock dividend, stock split or
other pro rata distribution of securities to stockholders of the Company
--- ----
generally in which the HPA Group participates on an equal basis, including any
Related Transferees), the HPA Group shall be entitled, provided that they
collectively maintain two-thirds (2/3) of the Fully Diluted Ownership held by
them on the date hereof, to participate in such issuance, sale or distribution,
at the same price and on the same terms and conditions applicable to GEI, pro
---
rata, based upon their respective Fully Diluted Ownership in the Company.
- ----
(b) Right to Participate in Equity Repurchases. GEI agrees that the
------------------------------------------
Company will not purchase any Securities from GEI or any of its Affiliates
unless the Company offers to simultaneously purchase a proportionately equal
number of Securities of the same class from each member of the HPA Group at the
same price and on the same terms and conditions applicable to GEI and its
Affiliates, based upon their respective Fully Diluted Ownership.
(c) Affiliate Transactions. No material transaction or series or
----------------------
related transactions (including any issuance of securities, profits interests,
stock appreciation rights, or similar rights or interests of the Company)
between the Company and GEI or any of its Affiliates involving value in excess
of $1,000,000 may be consummated unless approved (i) if one of Fourticq or
McDermott then holds at least one-third of his Fully Diluted Ownership as of the
date hereof, by such individual, and otherwise by a majority of the
disinterested directors of the Company, or (ii) by the board of directors of the
Company after it is presented with a fairness opinion of a nationally recognized
investment bank to the effect that the transaction is fair to the Company and
its stockholders. Notwithstanding the foregoing, other than the Management
Agreement of even date herewith between the Company and Leonard Green &
Partners, L.P. (the "Management Agreement"), GEI and its Affiliates will not
enter into any consulting management or similar agreement or arrangement with
the Company or increase the fees provided for in the Management Agreement as of
the date hereof, except that such fees may be proportionately increase provided
such increase is calculated on the same basis (1.6% of invested capital) as the
20
<PAGE>
fee currently provided for therein and such increase reflects further investment
by GEI consistent with the terms of this Section 10.
(d) Change of Control Transactions. Each of GEI, Fourticq and
------------------------------
McDermott agrees that no such Stockholder shall, without the prior consent of
the other two Stockholders, pursue, advocate or enter into an agreement in
respect of any recapitalization, reclassification, share exchange,
reorganization, merger, consolidation or similar transaction involving the
Company unless all holders of Common Stock of the Company will be treated
identically in such transaction, but ratably in proportion to their respective
Equity Ownership.
(e) Information. The Company shall provide each Class I Stockholder
-----------
with the following information, all of which each Class I Stockholder agrees to
hold in confidence:
(i) For each fiscal quarter of the Company, as and when
submitted to Green, unaudited consolidated financial statements of the
Company (consisting of balance sheet and statements of operations,
stockholders' equity and cash flows for such fiscal quarter, in the form
submitted to GEI;
(ii) For each fiscal year of the Company, as and when submitted
to Green audited financial statements of the Company for such fiscal year,
certified by the Company's independent certified public accounting firm, in
the form submitted to GEI;
(iii) Such additional information about the Company as such
Class I Stockholder may reasonably request from time to time.
11. Notices. All notices or other communications under this Agreement
-------
shall be given in writing and shall be deemed duly given and received on the
third full business day following the day of the mailing thereof by registered
or certified mail or the next Business Day if sent by overnight courier or when
delivered personally or sent by facsimile transmission as follows:
(a) if to the Company, at its principal executive offices at the time
of the giving of such notice, or at such other place as the Company shall have
designated by notice as herein provided to the Purchaser;
(b) if to a Class I Stockholder, at its principal executive offices
at the time of the giving of such notice, or at such other place as such
Stockholder shall have designated by notice as herein provided to the Company.
(c) if to any Class II Stockholder, at his address as it appears on
Annex A or at such other place as he shall have designated by notice as herein
provided to the Company.
12. General.
-------
(a) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except by a written agreement signed by each of the Company and the Class I
Stockholders and, to the extent their interests are affected, by the Class II
Stockholders, provided, however, that Class II Stockholders having a
-------- -------
21
<PAGE>
majority of Equity Ownership as amongst such Stockholders may bind all of such
Stockholders as to any matter adversely affecting them if such adverse effect is
equal, on a proportionate basis, as to all such Stockholders and the consent of
each adversely affected Class II Stockholders shall otherwise be required.
(b) No waiver of any breach or default hereunder shall be considered
valid unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
(c) Except as otherwise expressly provided herein, this Agreement
shall be binding upon and inure to the benefit of each of the Company, the
Stockholders and their respective heirs, personal representatives, successors
and assigns; provided, however, that nothing contained herein shall be construed
-------- -------
as granting any Stockholder the right to Transfer any of the Securities except
in accordance with this Agreement and any Transferee shall hold such Securities
having only those rights and being subject to the restrictions provided for in
this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
(e) Each Class II Stockholder agrees that nothing herein shall be
deemed to create any implication concerning the adequacy of his services to the
Company, or shall be construed as an agreement by the Company, express or
implied, to employ him or contract for his services, to restrict the right of
the Company to discharge him or cease contracting for his services or to modify,
extend or otherwise affect in any manner whatsoever, the terms of any employment
agreement or contract for services which may exist between him and the Company
or its subsidiaries. Each Class II Stockholder represents that he has been
advised, to the extent he deemed necessary, by legal counsel and tax advisors
of his choice in connection with this Agreement. Each Class II Stockholder
further represents that, if he is married, his spouse has executed and delivered
to the Company the Acknowledgment and Agreement of Spouse set forth at the end
of this Agreement.
(f) In the event any day upon which a sale, notice or other matter is
required to occur hereunder is not a Business Day, such matter shall be deferred
until the next Business Day.
(g) The section headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents of such
sections. The masculine pronoun shall be deemed to include and incorporate the
feminine pronoun.
(h) Each party hereto shall cooperate and shall take such further
action and shall execute and deliver such further documents as may be reasonably
requested by any other party in order to carry out the provisions and purposes
of this Agreement.
22
<PAGE>
(i) Words in the singular shall be read and construed as though in
the plural and words in the plural shall be read and construed as though in the
singular in all cases where they would so apply.
(j) This Agreement may be executed in one or more counterparts, all
of which taken together shall be deemed one original.
(k) Due to the fact the securities of the Company cannot be readily
purchased or sold in the open market, and for other reasons, the parties will be
irreparably damaged in the event that this Agreement is not specifically
enforced. In the event of a breach or threatened breach of the terms, covenants
and/or conditions of this Agreement by any of the parties hereto, the other
parties shall, subject to Section 13, in addition to all other remedies, be
entitled to a temporary and/or permanent injunction, without showing any actual
damage or that monetary damages would not provide an adequate remedy, and/or a
decree for specific performance, in accordance with the provisions hereof. Each
Stockholder hereby irrevocably and unconditionally consents to the jurisdiction
of any California State court or federal court of the United States sitting in
the State of California in any action or proceeding relating to this Agreement
and consents to service of process in connection therewith by the delivery of
notice to such Stockholder's address set forth in the Agreement.
(l) This Agreement shall be deemed to be a contract under the laws of
the State of Delaware and for all purposes shall be construed and enforced in
accordance with the internal laws of such state without regard to the principles
of conflicts of law.
13. Additional Class II Stockholders. Prior to issuing any Options, Common
--------------------------------
Stock or other right exercisable for or convertible into Common Stock, and as a
condition to the receipt thereof, the Company shall require the recipient to
execute and deliver a duplicate counterpart of this Agreement, and such
recipient shall become a Class II Stockholder for all purposes hereof.
14. Arbitration.
-----------
(a) General. Except as provided in this Section 14, the Federal
-------
Arbitration Act shall govern the interpretation, enforcement and all proceedings
pursuant to this Section 14. To the extent that the Federal Arbitration Act is
inapplicable, Delaware law pertaining to agreements to arbitrate shall apply.
(b) Scope.
-----
(i) The parties mutually consent to the resolution by
arbitration of all claims or controversies ("CLAIMS"), past, present, or
future, whether or not arising out of matters related to this Agreement or
that any party may have against another party or against its partners,
officers, directors, employees, agents or trustees in their capacity as
such or otherwise. The only claims that are arbitrable are those that, in
the absence of this Section 14, would have been justifiable under
applicable state or federal law. Except as otherwise provided in this
Section 14, no party shall initiate or prosecute any lawsuit or
23
<PAGE>
administrative action (other than an administrative charge of
discrimination) in any way related to any claim covered by this Section 14.
(ii) Claims for workers' compensation or unemployment
compensation benefits are not covered by this Section 14. Also not covered
are claims by any of the parties for injunctive and/or other equitable
relief including but not limited to claims for specific performance.
(c) Deposition. Each party to a dispute shall have the right to take
----------
the deposition of up to [two] individuals and any expert witness designated by
each other party. Each party also shall have the right to make requests for
production of documents to any party. The subpoena right specified below shall
be applicable to discovery pursuant to this paragraph. Additional discovery may
be had only where the arbitrator selected pursuant to this Section 14 so orders,
upon a showing of reasonable and substantial need. At least 30 days before the
arbitration, the parties must exchange lists of witnesses, including any expert,
and copies of all exhibits intended to be used at the arbitration. Each party
shall have the right to subpoena witnesses and documents for the arbitration.
(d) JAMS. The Arbitration will be held under the auspices of either
----
the American Arbitration Association ("AAA") or Judicial Arbitration & Mediation
Services, Inc. ("J.A.M.S"), with the designation of the sponsoring organization
to be made by the party who did not initiate the claim. The parties agree that,
except as provided in this Agreement, the arbitration shall be in accordance
with the AAA's then-current arbitration procedures (if AAA is designated) or the
then-current J.A.M.S arbitration rules (if J.A.M.S is designated). The
arbitration shall be conducted by a panel of three arbitrators each of whom
shall be either a retired judge, or an attorney licensed to practice law in the
state in which the arbitration is convened (the "ARBITRATORS"). The arbitration
shall take place in Los Angeles, California.
(e) Selection of Arbitrators. The Arbitrators shall be selected as
------------------------
follows:
(i) If the dispute to be resolved is between the Company and
another party, shall each select an arbitrator from a list of arbitrators
provided by the sponsoring organization and meeting the criteria set forth
above. If the dispute is between two Stockholders, each shall select an
arbitrator from such list. If the dispute involves more than two parties
and if the parties to the dispute agree to being separated into two groups,
each group may select one arbitrator from such list. If the parties to a
dispute cannot agree on a third arbitrator, the arbitrators so selected
shall select a third arbitrator who also meets the above criteria. If the
two named arbitrators are unable to agree upon the third arbitrator, or
fail to designate such arbitrator within 30 days from the day the matter is
submitted to arbitration, then, on application of any party, the third
arbitrator shall be designated by the sponsoring organization.
(ii) If two arbitrators cannot be selected by the process
described in subparagraph (i) within 30 days from the day the matter is
submitted to arbitration, then, on application of any party, the three
arbitrators shall be designated by the sponsoring organization.
24
<PAGE>
(iii) The decision of any two (2) Arbitrators shall constitute a
final decision and award hereunder.
(f) Governing Law. The Arbitrators shall apply the substantive law
-------------
(and the law of remedies, if applicable) of the state of Delaware or federal
law, or both, as applicable to the claim(s) asserted. The Arbitrators are
without jurisdiction to apply any different substantive law, or law of remedies.
The Federal Rules of Evidence shall apply. The Arbitrators, and not any federal,
state, or local court or agency, shall have exclusive authority to resolve any
dispute relating to the interpretation, applicability, enforceability or
formation of this Agreement, including but not limited to any claim that all or
any part of this Agreement is void or voidable. The arbitration shall be final
and binding upon the parties, except as provided in this Agreement.
(g) Procedures. The Arbitrators shall have jurisdiction to hear and
----------
rule on pre-hearing disputes and are authorized to hold pre-hearing conferences
by telephone or in person, as the Arbitrators deem necessary. The Arbitrators
shall have the authority to entertain a motion to dismiss and/or a motion for
summary judgment by any party and shall apply the standards governing such
motions under the Federal Rules of Civil Procedure. Any party to a dispute, at
its expense, may arrange for and pay the cost of a court reporter to provide a
stenographic record of proceedings. Any party to a dispute, upon request at the
close of hearing, shall be given leave to file a post-hearing brief. The time
for filing such a brief shall be set by the Arbitrators.
(h) Award. The Arbitrators shall render an award and opinion
-----
outlining in reasonable detail the findings of fact and conclusions of law upon
which the award is based. The award of the Arbitrators shall be final, binding
and conclusive on the parties. If the Company is a party to the dispute, the
Company shall bear the fees and costs of the Arbitrators. If Company is not a
party to the dispute, the parties to the dispute shall equally share the fees
and costs of the Arbitrators. Each party shall pay for its own costs and
attorneys' fees.
15. Definitions. As used in this Agreement, unless the context requires
-----------
otherwise, the capitalized terms described in this Section 15 shall have the
meanings indicated herein.
(a) Each of the following capitalized terms shall have the meaning
ascribed to such term in the section of this Agreement indicated:
<TABLE>
<CAPTION>
Term Section
---------------------------------------------- ----------------
<S> <C>
Act.......................................... 15(b)
Affiliate.................................... 15(b)
Agreement.................................... Introduction
Bona Fide Offer.............................. 4(b)
Business Day................................. 15(b)
Callable Securities.......................... 2(b)
Call Purchase Event.......................... 5(a)
Call Option.................................. 2(b)
Change in Control............................ 15(b)
Class I Stockholder.......................... Introduction
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Term Section
---------------------------------------------- ----------------
<S> <C>
Class II Stockholder......................... Introduction
Common Stock................................. Recitals
Company...................................... Introduction
Control...................................... 13(b)
Demand Registration.......................... 6(a)
Demand Seller................................ 6(b)
Disproportionate Disposition................. 9
Drag-Along Notice............................ 7(b)
Drag-Along Sale.............................. 7(a)
Drag-Along Sale Date......................... 7(b)
Drag-Along Seller............................ 15(b)
Electing Stockholder......................... 4(b)
Equity Ownership............................. 15(b)
Fair Market Value............................ 15(b)
Fully Diluted Ownership...................... 15(b)
Future Stockholder........................... 6(b)
Future Participants.......................... 6(a)
GEI.......................................... Introduction
GEI Distribution............................. 12
Stockholder.................................. 6(a)
IPO.......................................... 15(b)
Living Trust................................. 15(b)
Manager...................................... 15(b)
NQ Option.................................... 2(b)
Option Notice................................ 4(b)
Other Termination............................ 5(a)
Outside Party................................ 4(b)
Permanent Disability......................... 15(b)
Permitted Transfer........................... 4(a)
Purchase Notice.............................. 5(a)
Purchaser.................................... 2(b)
Purchasing Group............................. 5(a)
Registrable Securities....................... 15(b)
Registration Notice.......................... 6(a)
Related Transferee........................... 15(b)
Retirement................................... 15(b)
Rule 144..................................... 15(b)
Sale Percentage.............................. 7(a)
SEC.......................................... 15(b)
Securities................................... Introduction
Seller....................................... 5(a)
Subscription Stock........................... 2(b)
Tag-Along Notice............................. 7(e)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Term Section
---------------------------------------------- ----------------
<S> <C>
Tag-Along Seller............................. 7(d)
Third Party.................................. 7(a)
Transfer..................................... 15(b)
Transfer Notice.............................. 7(e)
</TABLE>
(b) Each of the following capitalized terms shall have the meanings
indicated in this clause (b):
"ACT" means the Securities Act of 1933, as amended from time to time.
"AFFILIATE" has the meaning set forth in Rule 405 under the Act.
"BUSINESS DAY" means a day on which banks are open for business in the
State of California.
"CHANGE IN CONTROL" means any of (i) a sale or other disposition by the
Company of all or substantially all of the assets of the Company and its
subsidiaries, taken as a whole, or (ii) a merger or consolidation of the Company
if, immediately following such merger or consolidation, there is not Control of
the surviving entity of such merger or consolidation, or (iii) a sale of capital
stock of the Company (by any holder thereof or by the Company) if, immediately
following such sale, there is not Control of the Company.
"CONTROL" means that the holders of the capital stock of the Company
immediately following the Merger (including the Class I Stockholders) hold, in
the aggregate, directly and indirectly, the power to elect a majority of the
directors of the Company that are not elected pursuant to the provisions of the
Preferred Stock (or, as the case may be, the surviving entity of a merger or
consolidation of the Company).
"EQUITY OWNERSHIP" means the relative interests of the holders of the
Company's outstanding Common Stock as of the date of determination.
"FAIR MARKET VALUE" of Securities means the fair market value of Securities
as determined as of the time of the Call Purchase Event by the Company's Board
of Directors in the exercise of its reasonable discretion; provided, however,
-------- -------
that in the event that the Common Stock is traded publicly on any national
securities exchanges) (including without limitation NASDAQ National Market
System or the NASDAQ "Small-Cap" Issues System), such fair market value shall be
based upon the closing price for such Common Stock on such Exchange(s) on the
date preceding the Call Purchase Event.
"FULLY DILUTED OWNERSHIP" means, as to any Stockholder, his or its
aggregate ownership of all equity interests in the Company, including all
Options and all other securities exercisable convertible or exchangeable for
Common Stock.
27
<PAGE>
"IPO" means the completion of the first underwritten public offering of the
Company's shares of Common Stock registered under the Act.
"LIVING TRUST" means a revocable living trust established by the Purchaser
for estate planning purposes and pursuant to which no one other than the
Purchaser and/or the Purchaser's spouse is the beneficiary during the
Purchaser's lifetime.
"MANAGER" means the investment banking firm or firms designated by the
Stockholder as the managing underwriter(s) of an offering registered pursuant to
this Agreement, which firm or firms shall be the existing investment bankers for
or other nationally recognized investment bankers reasonably acceptable to the
Company.
"PERMANENT DISABILITY" of a Class II Stockholder means that (i) the Class
II Stockholder becomes physically or mentally incapacitated or disabled so that
he is unable to perform for the Company substantially the same services as he
performed prior to incurring such incapacity or disability, and (ii) such
incapacity or disability continues for a period of 120 days, whether or not
consecutive, over a period of six consecutive months; provided, however, that
-------- -------
(x) the Company, at its option and expense, shall be entitled to retain a
physician to confirm the existence of such incapacity or disability, and the
determination of such physician shall be binding upon the Company and the Class
II Stockholder.
"REGISTRABLE SECURITIES" means the Common Stock and the Warrant Shares,
subject to adjustment pursuant to Section 8 hereof.
"RELATED TRANSFEREE" means (i) in the case of any individual, any of the
Stockholder's spouse, adult lineal descendants, adult spouses of such lineal
descendants, a Living Trust, trusts solely for the benefit of the Stockholder's
spouse or the Stockholder's minor or adult lineal descendants, and (in the event
of the Stockholder's death) the Stockholder's personal representatives (in their
capacities as such), estate or named beneficiaries and (ii) in the case of a
business organization, any individual or other business organization controlled
by or under common control with such business organization, as such terms but
defined within the meaning of Rule 405 under the Act.
"RETIREMENT" means retirement pursuant to the Company's standard retirement
policy in effect from time to time but in no event prior to the age of 65,
unless pursuant to a specific determination by the Board of Directors of the
Company.
"RULE 144" means Rule 144 under the Act, as amended from time to time, or
any successor or similar rule.
"SEC" means the Securities Exchange Commission.
"TRANSFER," used as a noun, means any sale, pledge, gift, bequest,
transfer, assignment or any other encumbrance or disposition, whether direct or
indirect, conditional or unconditional. "TRANSFER," used as a verb means to make
a Transfer.
28
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date written above.
LESLIE'S POOLMART, INC.
By___________________________________
Its__________________________________
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners,
L.P., its sole general partner
By: Grand Avenue Capital
Corporation, its sole
general partner
By:__________________________________
Name_________________________________
Title________________________________
_____________________________________
Richard H. Hillman
_____________________________________
Michael J. Fourticq
_____________________________________
Greg Fourticq
_____________________________________
Brian P. McDermott
_____________________________________
Brian P. McDermott and Manette J. McDermott,
T.R.U.A. DTD 3/15/90 The McDermott Family
Trust
OCCIDENTAL PETROLEUM CORPORATION
By___________________________________
Name_________________________________
Title________________________________
29
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT OF SPOUSE
--------------------------------------
The undersigned, being the spouse of a Purchaser listed on Annex A hereto,
hereby agrees to be bound by the provision of this Agreement and consents to the
Purchaser's subscription for the Common Stock pursuant hereto.
_____________________________________
Name_________________________________
30
<PAGE>
ANNEX A
CAPITAL STRUCTURE
-----------------
<TABLE>
<CAPTION>
Fully
Diluted
Shares
-------------
<S> <C>
Michael J. Fouricq 160,539
Brian McDermott 166,552
Richard H. Hillman 22,414
Greg Fourticq 10,000
-------------
Total Stock Remaining Outstanding 359,505
Michael J. Fourticq 4,976
Robert Olsen 52,761
Other Management 25,862
-------------
Total Options 83,599
Robert Olsen-Cash 14,768
Other Management Cash 4,198
Green Equity Investors II, L.P. 1,055,172
Occidental Warrants 316,092
Management Incentive Stock Options 273,946
Total 2,107,280
=============
</TABLE>
A-1
<PAGE>
ANNEX B.
TERMS OF INCENTIVE STOCK OPTION PLAN
------------------------------------
Number of Shares............ 83,599 total. The number of shares covered by each
individual grant will be the quotient of (i) the
product of (x) the number of shares subject to the
corresponding cancelled option multiplied by (y)
the difference between $14.50 and such cancelled
option's exercise price, divided by (ii) $9.50. In
the case of Messrs. Fourtiqc and Olson, the
foregoing formula results in the issuance of
options for a maximum of 4,976 and 52,761 shares,
respectively, with the balance to be allocated to
management as heretofore agreed.
Exercise Price.............. $5.00
Type of Options............. Non-Qualified, ten year options
Termination of
Employment.................. A portion of options and shares are subject to
repurchase upon termination of employment prior to
the second anniversary of the Closing Date as set
forth in the Agreement, all other options remain
exercisable notwithstanding employment status of
optionee
Adjustment.................. The number of shares subject to Options, and the
exercise price, will be proportionately adjusted
for each subdivision and combination of Company
common stock.
B-1
<PAGE>
ANNEX C
TERMS OF ISO OPTIONS
--------------------
Number of Shares......... 13% of the Company's fully-diluted Common
Stock on the Closing Date
Exercise Price........... Fair Market Value (opening equity price)
Type of Options.......... Incentive, ten-year options
Vesting.................. One-third (1/3) on the first, second and third
anniversaries of the Closing Date, except in respect
of performance portion
Performance Portion ..... Options equivalent to 3% of the fully-diluted Common
Stock outstanding on the Closing Date vest upon
achievement (assuming continued employment) of
performance targets as follows:
EBITDA for Year Ended: Number of Stores Opened by:
--------------------- --------------------------
$18M............. 1997 30...........March 31, 1998
$22M............. 1998 30...........March 31, 1999
$26M............. 1999 30...........March 31, 2000
Note: Vesting also occurs if the store opening
----
target is met in each prior year and the Company
achieves 95% of a year's EBITDA target and the sum
of that year and the following year's EBITDA equals
100% of the combined targets
Termination of
Employment .............. Vested options may be exercised for 90 days post-
termination; unvested options are forfeited and
become eligible for future grant at Fair Market
Value
Adjustment............... The number of shares subject to Options, and the
exercise price, will be proportionately adjusted for
each subdivision and combination of Company common
stock.
C-1
<PAGE>
EXHIBIT 7(D)
MICHAEL J. FOURTICQ
BRIAN P. MCDERMOTT
February 26, 1997
Board of Directors of
Leslie's Poolmart
20630 Plummer Street
Chatsworth, California 91311
Attention: Special Committee
Re: Proposed Reincorporation and Recapitalization Merger Involving
Leslie's Poolmart
Gentlemen:
Reference is made to the Agreement of Merger entered into as of
February 26, 1997 between Leslie's Poolmart, a California corporation ("Leslie's
--------
California") and LPM Holdings, Inc., a Delaware corporation ("Leslie's
- ---------- --------
Delaware") (the "Reincorporation Merger Agreement") and the Agreement and Plan
- -------- --------------------------------
of Merger entered into as of February 26, 1997 among Leslie's California,
Leslie's Delaware and Poolmart USA, Inc., a Delaware corporation ("Poolmart")
--------
(the "Recapitalization Merger Agreement").
---------------------------------
Each of the undersigned agrees to vote all shares of Leslie's
California common stock ("California Shares") held by the undersigned, as well
-----------------
as all California Shares over which either of the undersigned has voting power,
in favor of (i) the Reincorporation Merger Agreement and the Recapitalization
Merger Agreement, and (ii) the respective merger transactions contemplated by
the Reincorporation Merger Agreement and the Recapitalization Merger Agreement;
provided, that the undersigned shall not be obligated by this letter to vote
California Shares in its capacity as a named proxy in any proxy solicited by the
board of directors of Leslie's California from its shareholders generally in
connection with seeking approval of the matters referred to in the preceding
clauses (i) and (ii).
<PAGE>
Board of Directors of Leslie's Poolmart
February 26, 1997
Page 2
This agreement shall (i) not require the undersigned to vote
California Shares if either the Reincorporation Merger Agreement or the
Recapitalization Merger Agreement is amended without the written approval of the
undersigned, and (ii) terminate automatically upon any termination of either the
Reincorporation Merger Agreement or the Recapitalization Merger Agreement.
This agreement is not intended to be for the benefit of any entity or
person other than Leslie's California.
Very truly yours,
/s/ BRIAN P. MCDERMOTT
-----------------------------
Brian P. McDermott
MICHAEL J. FOURTICQ
By:/s/ BRIAN P. MCDERMOTT
--------------------------
Brian P. McDermott
Attorney-in-Fact
<PAGE>
EXHIBIT 7(E)
[LETTERHEAD OF LEONARD GREEN & PARTNERS, L.P.]
February 20, 1997
Board of Directors of Leslie's Poolmart
LESLIE'S SWIMMING POOL SUPPLIES
20222 Plummer Street
Chatsworth, CA 91311
Gentlemen:
This letter will confirm that Leonard Green & Partners, L.P. ("LGP") on
behalf of Green Equity Investors II, L.P. ("GEI II"), will commit to provide up
to $17 million but not less than $15.3 million out of total of up to $22 million
in value, of common stock equity financing for the previously announced
transaction by Hancock Park Associates II, L.P. and its affiliates and
associates to acquire Leslie's Poolmart. LGP is satisfied with the terms of the
$28 million of preferred stock financing to be provided by Occidental Petroleum
Corporation, as they have been modified, and the general terms of the $85
million of senior note financing described in BT Securities Corporation's highly
confident letter dated February 4, 1997 and the revolving line of credit
facilities proposed by Wells Fargo Bank and Bankers Trust Company. Morever, I
advise you that LGP has substantially completed its due diligence for this
transaction.
LGP's investment will be provided immediately prior to the closing of the
sale of the preferred stock, senior note financing and revolving line of credit.
It is subject to fully diluted ownership by GEI II greater than 50%, no material
adverse change in the condition or prospects for Leslie's, sufficient and
satisfactory financing to complete the transaction and satisfactory
documentation among all parties.
LGP is delighted to be part of a transaction that will bring substantial
value to the public shareholders of Leslie's.
Very truly yours,
LEONARD GREEN & PARTNERS, L.P.
By: LGP Management, Inc.
By: /s/ Gregory J. Annick
------------------------------
Gregory J. Annick
<PAGE>
EXHIBIT 7(F)
HANCOCK PARK ASSOCIATES
1925 Century Park East, Suite No. 810, Los Angeles, CA 90067
(310) 553-5550 Fax (310) 201-0403
February 19, 1997
Board of Directors of
Leslie's Poolmart
20222 Plummer Street
Chatsworth, California 91311
Attention: Special Committee
Gentlemen:
Reference is made to the Agreement and Plan of Merger among Leslie's
Poolmart, LPM Holdings, Inc. and Green LPM Investors dated as of February __,
1997, in the draft form dated February 17, 1997 that has been distributed to you
("Agreement"). Unless the context otherwise requires, capitalized terms herein
will have the same meaning as in the Agreement.
We are prepared to proceed with the Merger Transaction and acknowledge the
participation in the Merger Transaction by Green Equity Partners II, L.P.
("GEI"). Enclosed is a schedule of equity participation in the Merger
Transaction by Leslie's California's management. We personally undertake to
continue our ownership in the Surviving Corporation to the extent shown on this
Schedule. The possibility exists that holders of Leslie's California stock
options will cancel all or a portion of their existing options and will receive
new options of the Surviving Corporation.
This letter will also confirm our discussions with Occidental Petroleum
Corporation in which Occidental confirmed its agreement to provide up to $30
million of preferred stock financing for the Merger Transaction on terms that
are mutually acceptable to Occidental, GEI and Hancock Park Associates II, L.P.
We also understand that you have received or shortly will receive a letter
from GEI confirming its equity participation in the Merger Transaction.
We have previously delivered to you (or counsel for the Special Committee) a
highly confident letter from BT Securities Corporation with respect to $85
million of high-rate Senior Note financing for the Merger Transaction and a
letter from BT Commercial Corporation for a Senior Revolving Credit Financing
Facility for Leslie's Delaware.
In light of the information provided as described in the immediately
preceding four paragraphs, we believe that the Special Committee and the Board
of Directors has been provided with adequate assurances as to our ability to
finance the Merger Transaction.
<PAGE>
Board of Directors of
Leslie's Poolmart
2
We wish to have the Special Committee's counsel meet with our counsel to
finalize the Agreement and to have the Agreement submitted to the Special
Committee and the Board of Directors at a meeting to be held on February 21.
Please contact either of us if you have any questions about the matters
described or referred to in this letter. We are anxious to proceed with the
Merger Transaction and look forward to positive action by the Special Committee
and the Board of Directors this coming Friday.
Very truly yours,
HANCOCK PARK ASSOCIATES II, L.P.
/s/ MICHAEL J. FOURTICQ
- -----------------------
Michael J. Fourticq
/s/ BRIAN P. MCDERMOTT
- -----------------------
Brian P. McDermott
<PAGE>
EQUITY PARTICIPANTS
Michael J. Fourticq $2,700,000*
Brian P. McDermott 2,500,000
Richard H. Hillman 300,000
Robert D. Olsen 825,000
Other Management 375,000
----------
$6,700,000
Leonard Green 15,300,000
----------
Total Common $22,000,000
Occidental Preferred 28,000,000
----------
Total Equity $50,000,000
===========
*Michael J. Fourticq may allocate a portion of his investment to his brother,
Gregory Fourticq, who is a current shareholder through their partnership,
Liberty West Partners.
<PAGE>
EXHIBIT 7(G)
[LETTERHEAD OF OCCIDENTAL PETROLEUM CORPORATION]
STEPHEN I. CHAZEN
EXECUTIVE VICE PRESIDENT
CORPORATE DEVELOPMENT
Direct Telephone (310) 443-6311
Direct Fax (310) 443-6812
December 27, 1996
Mr. Michael J. Fourticq
Hancock Park Associates
1925 Century Park East, Suite 810
Los Angeles, California 90067
Dear Michael:
This letter is intended to clarify the terms and conditions under which
we would participate in the buyout of Leslie's.
Occidental is prepared to invest up to $30 million in the proposed deal,
as I understand it to be, under the conditions detailed in this letter.
As you know, we have not performed any due diligence on the company. We
will focus our efforts on assuring that the 1996 numbers are as stated,
and that the 1997 forecast would at least be achieved under reasonably
adverse conditions. We will also want to better understand your model.
We, of course, have no idea what the terms of senior financing will be,
and so we will reserve any commitments until that becomes clearer.
An outline of the preferred stock term sheet is attached. We reserve
the right to alter this term sheet and tighten the restrictions listed.
Occidental would receive 15% of the fully diluted equity in Leslie's in
the form of warrants convertible over a 10 year period at a strike price
of $.01 per share. By fully diluted, I mean to include any other
warrants or employee options issued as a result of this transaction. If
we are required to invest less than $25 million, we will reduce the 15%
in proportion to that reduction using $25 million as a base. (i.e. $20
million investment is 20/25 of 15% or 12% - fully diluted).
The attached term sheet gives the company the option to pay dividends to
us in cash, new preferred stock or to allow the dividends to accrue on
the existing preferred, for a period of 5 years. For the next two years
cash payments of dividends are required. In years 8, 9 and 10 the
preferred will be retired.
<PAGE>
Mr. Michael Fourticq
Hancock Park Associates
December 27, 1996
Page 2
I believe that this proposal represents very cost effective financing compared
with any third party sources. If you have any questions, please call me.
Very truly yours,
/s/ STEPHEN I. CHAZEN
SIC:jk
Attachment
cc: Marty Murrer
Donaldson, Lufkin, Jenrette
<PAGE>
EXHIBIT 7(H)
BT SECURITIES CORPORATION
ONE BANKERS TRUST PLAZA
NEW YORK, NEW YORK, 10006
February 4, 1997
Hancock Park Associates
1925 Century Park East
Suite 810
Los Angeles, CA 90067
Attention: Michael Fourticq
Brian McDermott
Gentlemen:
You have advised BT Securities Corporation ("BTSC") of your intention to
enter into a transaction (the "Transaction") in which a company ("Newco") formed
by you and other third party investors would acquire all of the outstanding
capital stock of Leslie's Poolmart (the "Acquired Business"). You have asked us
to assist you in raising a portion of the funds required to consummate the
Transaction through the sale or placement of $85 million aggregate principal
amount of senior debt securities (the "Securities") to be issued by the Acquired
Business.
We understand that the cash proceeds to be paid to the shareholders of
the Acquired Business in connection with the Transaction will be approximately
$101.5 million and the total amount of funds necessary to effect the
Transaction, to refinance existing debt of the Acquired Business, to pay all
fees and expenses incurred in connection therewith and to provide for ongoing
working capital of the Acquired Business will be provided through (i) a
revolving credit facility pursuant to which the Acquired Business may borrow
amounts based a borrowing base of receivables and inventory (the "Revolving
Credit Facility"), of which $18 million will be drawn upon closing of the
Transaction (assuming the Transaction closes in March 1997), (ii) at least $28
million from the issuance of pay-in-kind preferred stock of Newco (the "PIK
Preferred Financing"), (iii) at least $13 million from the issuance of common
stock of Newco (the "Common Stock Financing"); provided that the aggregate of
proceeds raised by Newco from the PIK Preferred Financing and the Common Stock
Financing shall not be
<PAGE>
-2-
less than $50 million, and (iv) the Securities. It is our understanding that
other than indebtedness under the Revolving Credit Facility and the Securities,
neither Newco nor the Acquired Business will have other indebtedness for money
borrowed after giving affect to the consummation of the Transaction.
We are pleased to inform you that, based upon our understanding of the
Transaction as summarized above and current market conditions and subject to the
conditions set forth below, we are highly confident of our ability to sell or
place the Securities in connection with the Transaction. The structure,
covenants and terms of the Securities thereof will be as determined by BTSC in
consultation with you, on terms mutually acceptable to both parties based on
market conditions at the time of the sale or placement and on the structure and
documentation of the Transaction. Our confidence in our ability to consummate
the sale or placement of the Securities is subject to (i) there not having
occurred any material adverse change in the financial condition, results of
operations, business or prospects of the Acquired Business since December 31,
1995, (ii) there not existing any pending or threatened claim, suit or
proceeding by any governmental or regulatory authority which BTSC shall
reasonably determine could have a materially adverse effect on the business,
property, assets, liabilities, condition (financial or otherwise) or prospects
of Newco or the Acquired Business, (iii) the receipt of all necessary
governmental, regulatory or third party approvals or consents in connection with
the Transaction, (iv) the execution and delivery of documentation for the
Transaction and related transactions in form and substance reasonably
satisfactory to BTSC and such documentation being in full force and effect, (v)
agreement on the terms of the Securities consistent with the term sheet attached
hereto and negotiation and execution of satisfactory documentation with respect
to the Securities and the offering and sale thereof, (vi) the terms and
structure of the Revolving Credit Facility being reasonably acceptable to BTSC
and the execution of documentation relating thereto reasonably satisfactory in
form and substance to BTSC, (vii) the terms and provisions of the PIK Preferred
Financing and the Common Stock Financing being reasonably acceptable to BTSC and
the entities that own the securities comprising the PIK Preferred Financing and
the Common Stock Financing, and the level of ownership, shall be reasonably
acceptable to BTSC, (viii) BTSC and its representatives shall have completed and
be satisfied with the results of its continuing financial, business,
environmental and legal due diligence, (ix) the receipt and review (to our
<PAGE>
-3-
reasonable satisfaction) of independent third party reports as to certain
matters customarily so reported upon in transactions of this type, including,
without limitation, solvency, (x) the availability of audited and unaudited
historical financial statements of Newco and the Acquired Business and pro forma
financial statements of Newco and the Acquired Business after giving effect to
the Transaction, in each case reasonably acceptable to BTSC and in form and
presentation as required by the Securities Act of 1933, as amended, and the
rules and regulations thereunder applicable to registration statements filed
thereunder, (xi) there not having been any disruption or material adverse change
in the market for new issues of high yield securities or the financial or
capital markets in general, in the judgment of BTSC and (xii) BTSC having a
reasonable time to market the Securities based on BTSC's experience in
comparable transactions.
This letter is not intended to be and should not be construed as a
commitment with respect to the underwriting, sale or placement of the
Securities.
<PAGE>
-4-
Except as otherwise required by law or unless BTSC has otherwise
consented in writing, you are not authorized to show or circulate this letter to
any other person or entity (other than your legal or financial advisors in
connection with your evaluation hereof and Leslie's Poolmart, its' Board of
Directors and its legal and financial advisors); provided that BTSC agrees that
this letter may be referred to in Leslie's Poolmart's proxy statement relating
to the Transaction in such a manner as Leslie's Poolmart and BTSC shall agree in
their reasonable discretion. If this letter is not accepted by you by 3:00 p.m.
on February 28, 1997, you are to immediately return this letter (and any copies
hereof) to the undersigned.
Very truly yours,
BT SECURITIES CORPORATION
By: /s/ Kate W. Cook
---------------------------
Name: Kate W. Cook
Title: Managing Director
AGREED TO AND ACCEPTED as of
the date first written above:
HANCOCK PARK ASSOCIATES
By:
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT 7(I)
[LETTERHEAD OF WELLS FARGO BANK]
January 14, 1997
Mr. Robert Olsen
Chief Financial Officer
Leslie's Poolmart
20222 Plummer Street
Chatsworth, CA 91311
Dear Bob:
This letter is to confirm that Wells Fargo Bank, National Association ("Bank"),
subject to all terms and conditions contained herein, has agreed to make
available to Leslie's Poolmart, a California Corporation ("Borrower") a
revolving line of credit under which Bank will make advances to Borrower from
time to time up to and including March 31, 2000 not to exceed at any time the
maximum principal of $30,000,000 during 1997, $32,000,000 during 1998 and
$35,000,000 thereafter ("Line of Credit"), the proceeds of which shall be used
for working capital.
Letter of Credit Subfeature. As a subfeature under the Line of Credit, Bank
- ---------------------------
agrees from time to time during the term thereof to issue sight commercial or
standby letters of credit for the account of Borrower (each, a "Letter of
Credit" and collectively, "Letters of Credit"); provided however, that the form
and substance of each Letter of Credit shall be subject to approval by Bank, in
its sole discretion; and provided further, that the aggregate undrawn amount of
all outstanding Letters of Credit shall not at any time exceed Three Million
Dollars ($3,000,000.00). Each Letter of Credit shall be issued for a term not to
exceed 365 days, as designated by Borrower; provided however, that no Letter of
Credit shall have an expiration date subsequent to the maturity date of the Line
of Credit. The undrawn amount of all Letters of Credit shall be reserved under
the Line of Credit and shall not be available for borrowings thereunder.
Borrowing and Repayment. Borrower may from time to time during the term of the
- -----------------------
Line of Credit borrow, partially or wholly repay its outstanding borrowings, and
reborrow; provided however, that the total outstanding borrowings under the Line
of Credit shall
1
<PAGE>
not at any time exceed the maximum principal amount available thereunder, as set
forth above.
COLLATERAL:
As security for all indebtedness of Borrower to Bank, Borrower shall grant to
Bank security interests of first priority in all Borrower's accounts, accounts
receivable, equipment, general intangibles, deposit accounts, chattel paper,
documents, instruments, rights to payment and inventory.
Borrower shall reimburse Bank immediately upon demand for all costs and expenses
incurred by Bank in connection with any of the foregoing security, including
without limitation, filing and recording fees and costs of appraisals, audits
and title insurance.
INTEREST/FEES:
Interest. The outstanding principal balance of the Line of Credit shall bear
- --------
interest in accordance with the following interest rate options, as designated
by Borrower:
(a) at a fluctuating rate per annum equal to the Prime Rate in effect from
time to time plus the Applicable Prime Rate Margin*, or
----
(b) at a fixed rate per annum equal to the Base LIBOR Rate plus the
----
Applicable LIBOR Rate Margin*; provided, however, that each LIBOR interest
-------- -------
selection must be for a minimum amount of FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($500,000).
* The EBITDA Covorage Ratio tests below, used to determine the applicable
margins are based upon a March 31, 1997 transaction closing date. Any material
change in transaction closing date may require a change in the Coverage Ratio
tests.
Applicable LIBOR and Prime Rate Margins:
- ---------------------------------------
At Closing Date LIBOR plus 1.75% or Prime plus .25%
thereafter:
EBITDA Coverage Ratio Applicable LIBOR and Prime Rate Margins
- --------------------- ---------------------------------------
Upon Bank's receipt of the
designated financial statement
of Borrower, if Borrower's
EBITDA Coverage Ratio, as
2
<PAGE>
described below, is:
<TABLE>
<S> <C>
(based upon Borrower's September 30,
1997 financial statement) (a) greater than
or equal to 6.10:1.00 LIBOR plus 1.50% or Prime plus 0%
or (b) less than 6.10:1.00 LIBOR plus 1.75% or Prime plus .25%
(based upon Borrower's December 31,
1997 financial statement) (a) greater than
or equal to 3.50:1.00 LIBOR plus 1.50% or Prime plus 0%
or (b) less than 3.50:1.00 LIBOR plus 1.75% or Prime plus .25%
(based upon Borrower's March 31, 1998
financial statement) (a) greater than or
equal to 1.70:1.00 LIBOR plus 1.50% or Prime plus 0%
or (b) less than 1.70:1.00 LIBOR plus 1.75% or Prime plus .25%
(based upon Borrower's June 30, 1998
financial statement and each quarterly
statement thereafter) (a) greater than or
equal to 2.25:1.00, as of the end of any
fiscal quarter of any fiscal year LIBOR plus 1.25% or Prime plus 0%
or (b) greater than or equal to 1.90:1.00, as
of the end of any fiscal quarter of any fiscal
year LIBOR plus 1.50% or Prime plus 0%
or (c) less than 1.90:1.00, as of the end of
any fiscal quarter of any fiscal year LIBOR plus 1.75% or Prime plus .25%
</TABLE>
The Applicable LIBOR and Prime Rate Margins shall be based upon the Borrower's
EBITDA Coverage Ratio, as calculated quarterly as at the end of each fiscal
quarter of Borrower based upon the two (2) and three (3) immediately preceding
fiscal quarters, including the quarter then ended, for the quarters ending
September 30, 1997 and December 31, 1997, respectively. Beginning with the
Bank's receipt of the Borrower's March 31, 1998 financial statement, the
Applicable LIBOR and Prime Rate Margins shall be based upon the Borrower's
EBITDA Coverage Ratio, as calculated quarterly as at the end of each fiscal
quarter of Borrower based upon the four (4) immediately preceding fiscal
quarters, including the quarter then ended. The applicable margins shall be
redetermined quarterly on the date Bank receives quarterly financial
3
<PAGE>
statements.
Base LIBOR Rate "The Base LIBOR Rate" means the average of the rate per annum at
- ---------------
which U.S. dollar deposits are offered to Bank in the London interbank
eurocurrency market on the second LIBOR Business Day prior to the commencement
of a LIBOR interest period at or about 11:00 a.m. (London time), for delivery on
the first day of such interest period, for a term comparable to the number of
days in such interest period and in an amount approximately equal to the
principle amount to which such interest period shall apply.
Prime Rate. The "Prime Rate" is a base rate that Bank from time to time
- ----------
establishes and which serves as the basis upon which effective rates of interest
are calculated for those loans making reference thereto. Each change in the
rate of interest shall become effective on the date each Prime Rate change is
announced within Bank.
Computation and Payment. Interest shall be computed on the basis of a 360-day
- -----------------------
year, actual days elapsed, and shall be payable at the times and place set forth
in any promissory note of other document executed by Borrower to evidence any
extension of credit by Bank.
Unused Commitment Fee. Borrower shall pay to bank a fee equal to one quarter
- ---------------------
percent (1/4%) per annum (computed on the basis of a 360-day year, actual days
elapsed) on the average daily unused amount of the Line of Credit, which fee
shall be calculated on a quarterly basis by Bank.
Letter of Credit Fees. Borrower shall pay to Bank fees upon the issuance of each
- ---------------------
Letter of Credit, upon the payment of negotiation by Bank of each draft under
any Letter of Credit and upon the occurrence of any other activity with respect
to any Letter of Credit (including without limitation, the transfer, amendment
or cancellation of any Letter of Credit) determined in accordance with Bank's
standard fees and charges then in effect for such activity.
CONDITIONS PRECEDENT:
Prior to Bank's extension to Borrower of any credit contemplated by this letter,
all of the following shall have occurred:
Loan Documents. Borrower shall have executed, or caused to be executed by any
- --------------
guarantor or other party required hereby, and delivered to Bank, any and all
promissory notes, contracts, instruments and other documents, including without
limitation a comprehensive loan agreement, required by Bank to evidence Bank's
extension of credit pursuant to the terms and conditions of this letter, all of
which shall be in form and substance satisfactory to Bank and shall include, in
addition to the terms and
4
<PAGE>
conditions of this letter, such representations, warranties, conditions,
covenants, events of default and other provisions as Bank deems appropriate.
Financial Condition. There shall have been no material adverse change, as
- -------------------
determined by Bank, in the financial condition or business of Borrower, nor any
material
decline, as determined by Bank, in the market value of any collateral required
hereunder or a substantial or material portion of the assets of Borrower.
Credit Checks. Bank shall have conducted and shall be satisfied with the results
- -------------
of credit checks on Borrower and all other persons and entities which directly
or indirectly own or control Borrower.
Insurance. Borrower shall have delivered to Bank evidence of insurance coverage
- ---------
on all Borrower's property, in form, substance, amounts, covering risks and
issued by companies satisfactory to Bank, and where required by Bank, with loss
payable endorsements in favor of Bank.
Senior Unsecured Debt Securities. Borrower shall have delivered to Bank the
- --------------------------------
proposed Bond Indenture Agreement and all related documents to be entered into
by Borrower in connection with BT Securities Corporation's proposed $85 Million
Senior Unsecured Debt Securities underwriting for Borrower. All of said
documents shall be in form and substance satisfactory to Bank, including all
proposed covenants included in said documents.
Preferred and Common Stock Issuance. Borrower shall have a minimum of $50
- -----------------------------------
Million, in aggregate, in common and payment-in-kind preferred stock on its
opening balance sheet, as of the transaction closing date.
COVENANTS:
The loan agreement required by Bank shall include such covenants as Bank may
require, which may include, without limitation, (a) covenants obligating
Borrower, and any guarantor or other party as required by Bank, to: provide
financial statements; preserve and maintain its facilities; maintain insurance;
pay taxes and other indebtedness when due; notify Bank of litigation; and
maintain Borrower's financial condition at all levels and in accordance with
standards acceptable to Bank; and (b) covenants restricting the ability of
Borrower, or any such guarantor or other party, to: invest in fixed assets;
incur lease obligations; borrow from others; create or permit liens on assets;
merge; change the nature of Borrower's business; sell a substantial part of
Borrower's assets; make loans or investments; pay dividends or redeem stock; or
guaranty debts of others.
5
<PAGE>
Without limiting the covenants which Bank may require in the loan agreement
with Borrower, Bank has determined that such document will include Borrower's
agreement:
Financial Statements. To provide to Bank all of the following, in form and
- --------------------
detail satisfactory to Bank:
(a) not later than 90 days after and as of the end of each fiscal year, an
audited financial statement of Borrower, prepared by a Certified Public Account
acceptable to Bank to include a Balance Sheet, Income Statement and Statement
of Cash Flow.
(b) not later than 45 days after and as of the end of each quarter, a financial
statement of Borrower, prepared by Borrower, to include a Balance Sheet, Income
Statement and Statement of Cash Flow.
(c) from time to time such other information as Bank shall reasonably request.
Litigation. To promptly give notice in writing to Bank of any litigation
- ----------
pending or threatened against Borrower with a claim in excess of $1,000,000.
Financial Condition. To maintain Borrower's financial condition as follows using
- -------------------
generally accepted accounting principles consistently applied and used
consistently with prior practices (except to the extent modified by the
definitions herein), with compliance determined commencing with Borrower's
financial statements for the period ending June 30, 1997.
(a) Net Worth not less than the following amounts shown below, determined as of
the end of each corresponding fiscal quarter (based upon a transaction closing
date of March 31, 1997):
<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
- -------------------- ------
<S> <C>
June 30, 1997 $49,000,000
September 30, 1997 $56,000,000
December 31, 1997 $46,000,000
March 31, 1998 $32,000,000
June 30, 1998 $50,500,000
September 30, 1998 $59,500,000
December 31, 1998 $49,000,000
March 31, 1999 $33,500,000
June 30, 1999 $55,000,000
September 30, 1999 $66,500,000
December 31, 1999 $55,000,000
</TABLE>
(b) Net Income (net loss) after taxes not less than (not greater than) the
amount set
6
<PAGE>
forth below, determined as of the corresponding fiscal quarter for the then
current fiscal year-end based upon the four (4) immediate preceding fiscal
quarters, including the fiscal quarter then ended:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
- -------------------- ------
<S> <C>
March 31, 1998 ($5,000,000)
June 30, 1998 ($2,500,000)
September 30, 1998 ($500,000)
December 31, 1998 ($1,000,000)
March 31, 1999 ($2,500,000)
June 30, 1999 $0
September 30, 1999 $2,500,000
December 31, 1999 $1,500,000
</TABLE>
(c) EBITDA Coverage Ratio not less than the ratio set forth below, determined as
of the end of the corresponding fiscal quarter for the then current fiscal year
end based upon the four (4) immediate preceding fiscal quarters, including the
fiscal quarter then ended, with "EBITDA" defined as net profit before tax plus
interest expense (net of capitalized interest expense), depreciation expense and
amortization expense, and with "EBITDA Coverage Ratio" defined as EBITDA divided
by the aggregate of total interest expense plus the prior period current
maturity of long-term debt and the prior period current maturity of subordinated
debt:
<TABLE>
<CAPTION>
Quarter Ended Minimum EBITDA Coverage Ratio
- ------------- -----------------------------
<S> <C>
September 30, 1997 5.75:1.00*
December 31, 1997 3.20:1.00*
March 31, 1998 1.50:1.00
Each fiscal quarter thereafter 1.75:1.00
</TABLE>
* The EBITDA Coverage Ratios calculated for the quarters ending September 30,
1997 and December 31, 1997 are based upon the two (2) and three (3) immediate
preceding fiscal quarters, including the fiscal quarter then ended,
respectively.
(d) The sum of the aggregate amount of all outstanding borrowings under the Line
of Credit (including advances and Letters of Credit) shall not, as of the end of
any quarter, exceed a borrowing base ("Borrowing Base") which is: (i) eighty
percent (80%) of Borrower's outstanding accounts receivable, plus (ii) (A) for
each quarter ending March 31, sixty percent (60%) of the value of Borrower's
inventory, or (B) for each remaining quarter end, fifty percent (50%) of the
value of Borrow's inventory, with "value" defined as the lower of cost or market
value; provided however, that in the event such borrowings exceed the Borrowing
-------- -------
Base at the end of any quarter, an Event
7
<PAGE>
of Default shall not exist unless Borrower fails to cure such default within
twenty (20) days after Borrower receives written notice from Bank that
borrowings exceeded the Borrowing Base. Bank shall have no obligation to make
new advances under the Line of Credit or issue new Letters of Credit during such
cure period.
(e) Funded Debt Ratio not greater than the ratio set forth below, determined as
of the end of the corresponding fiscal quarter for the then current fiscal year
end based upon the four (4) immediate preceding fiscal quarters, including the
fiscal quarter then ended, with "Funded Debt" defined as all indebtedness or
obligations of Borrower for borrowed money, all obligations evidenced by notes,
bonds, debentures or similar instruments, all obligations under capital leases,
and all reimbursement or other obligations of Borrower under or in respect of
letters of credit, and "Funded Debt Ratio" defined as Funded Debt divided by
EBITDA:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Maximum Funded Debt Ratio
- -------------------- -------------------------
<S> <C>
September 30, 1997 3.00:1.00*
December 31, 1997 4.15:1.00*
March 31, 1998 7.25:1.00
Each fiscal quarter thereafter 5.00:1.00**
</TABLE>
* The Funded Debt Ratios calculated for the quarters ending September 30, 1997
and December 31, 1997 are based upon the two (2) and three (3) immediate
preceding fiscal quarters, including the fiscal quarter then ended,
respectively.
** Except for the quarter ending March 31, 1999, at which time the Maximum
Funded Debt Ratio shall be 5.75:1.00.
Capital Expeditures. Not to mako any additional investment in fixed assets in
- -------------------
excess of an aggregate of $4,000,000 for the nine months ended December 31,
1997, $9,000,000 for 1998 and $10,500,000 for 1999.
Other Indebtedness. Not to create, incur, assume or permit to exist any
- ------------------
indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, and (b) any
other existing liabilities disclosed by Borrower to, and deemed acceptable by,
Bank prior to Bank's extension of any credit to borrower, including but not
limited to an $85,000,000 Senior Unsecured bond issuance to be underwritten by
BT Securities Corporation.
Merger Consolidation Transfer of Assets. Not to merge into or consolidate with
- ---------------------------------------
any other entity; nor to make any substantial change in the nature of Borrower's
business as presently conducted; nor to acquire all or substantially all of the
assets or any other
8
<PAGE>
entity; nor to sell, lease, transfer or otherwise dispose of all or a
substantial or material portion of Borrower's assets except in the ordinary
course of its business.
Guaranties. Not to guarantee or become liable in any way as surety, endorser
- ----------
(other than as endorser of negotiable instruments for deposit or collection in
the ordinary course of business), accommodation endorser or otherwise for, nor
to pledge or hypothecate any assets of Borrower as security for, any liabilities
or obligations of any other person or entity, except any of the foregoing in
favor of Bank.
Loans, Advances, Investments. Not to make any loans or advances to or
- ----------------------------
investments in any person or entity, except any of the foregoing disclosed by
Borrower to, and deemed acceptable by, Bank prior to Bank's extension of any
credit to Borrower and additional loans or advances to employees in amounts not
to exceed an aggregate of $250,000 outstanding at any one time.
Dividends, Distributions. Not to declare or pay any dividend or distribution
- ------------------------
either in cash, stock or any other property on Borrower's stock now or hereafter
outstanding; nor to redeem, retire, repurchase or otherwise acquire any shares
of any class of Borrower's stock now or hereafter outstanding.
Pledge of Assets. Not to mortgage, pledge, grant or permit to exist a security
- ----------------
interest in, or lien upon, all or any portion of Borrower's assets now owned or
hereafter acquired, except any of the foregoing in favor of Bank or which is
disclosed by Borrower to, and deemed acceptable by, Bank prior to Bank's
extension of any credit to Borrower.
ADDITIONAL TERMS AND PROVISIONS:
Whether or not any credit is extended to Borrower or a loan agreement or any
other documents are agreed to and executed, Borrower shall be liable for and
shall pay to Bank, immediately upon demand, the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys' fees (to
include outside counsel fees and all allocated costs of Bank's in-house
counsel), expended or incurred by Bank in connection with the negotiation and/or
preparation of this letter, any such loan agreement, and any other contracts,
instruments and documents required hereunder or thereunder, whether incurred at
the trial or appellate level, in an arbitration proceeding or otherwise, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested
matter or motion brought by Bank or any other person) relating to any Borrower
or any other person or entity.
This letter shall be governed by and construed in accordance with the laws of
the State
9
<PAGE>
of California. Upon demand of any party, any action, dispute, claim or
controversy of any kind, whether in contract or tort, statutory or common law,
legal or equitable, arising under or in any way pertaining to this letter or any
extensions of credit or other activities, transactions or obligations of any
kind related hereto, shall be resolved by binding arbitration administered by
the American Arbitration Association ("AAA") in accordance with the AAA
Commercial Arbitration Rules and the Federal Arbitration Act (Title 9 of the
United States Code), notwithstanding any conflicting choice of law provision
herein. Bank's current standard provision governing arbitration of disputes is
deemed incorporated herein as though set forth in full and shall be included in
full in the loan agreement and/or other contracts, instruments and documents
required hereby. Any party who fails or refuses to submit to arbitration
following a lawful demand by any other party shall bear all costs and expenses
incurred by such other party in compelling arbitration.
The commitment set forth herein is personal to Borrower and may not be
transferred or assigned without the prior written consent of Bank. Neither this
letter, nor any portions hereof, may be disclosed or exhibited to any person or
entity without the prior written consent of the Bank.
Bank reserves the right to terminate this commitment at any time prior to
receipt by Bank of a copy of this letter executed below by Borrower.
Your acknowledgment of this letter shall constitute acceptance of the foregoing
terms and conditions. Unless accepted or terminated, this commitment shall
expire on February 15, 1997. If the loan documentation required by Bank
hereunder is not completed and the credit contemplated hereby has not been
extended by Bank to Borrower for any reason by April 30, 1997, then this
commitment shall expire on said date.
Sincerely,
WELLS FARGO BANK
NATIONAL ASSOCIATION
By: /s/ Brian Carrico
-----------------------
Title: Vice President
--------------------
10
<PAGE>
Acknowledged and accepted as of _________________.
- -----------------------------
By:
--------------------------
Title:
-----------------------
By:
--------------------------
Title:
-----------------------
11
<PAGE>
EXHIBIT 7(J)
[LETTERHEAD OF WELLS FARGO BANK]
February 21, 1997
Robert Olsen
Chief Financial Officer
Leslie's Poolmart
20222 Plummer Street
Chatsworth, CA 91311
Dear Bob:
This letter is to confirm that Wells Fargo Bank, National Association ("Bank"),
subject to all terms and conditions contained herein, has agreed to extend from
February 15, 1997 until March 15, 1997 the date on which Bank's commitment
letter from Bank to Leslie's Poolmart, a California Corporation ("Borrower")
date January 14, 1997 will expire. As an additional condition precedent to the
credit accommodation described therein, not less than 95% of Borrower's common
equity ownership, at closing, shall be held by the following parties: Leonard
Green Partners, Existing Management and Directors; and Occidental Petroleum
Corporation.
Except as expressly provided herein, all terms and conditions of said
commitment letter shall continue in full force and effect without waiver or
modification. Without limiting the forgoing, Bank reserves the right to
terminate its commitment at any time prior to receipt by Bank of a copy of the
commitment letter executed by Borrower.
<PAGE>
Your acknowledgment of this letter shall constitute acceptance of the foregoing
terms and conditions.
Sincerely,
WELLS FARGO BANK, N.A.
/s/ Brian Carrico
Brian Carrico
Vice President
Accepted and Agreed to:
LESLIE'S POOLMART
By:
--------------------
Title:
-----------------
Date: , 1997
------------------
<PAGE>
EXHIBIT 7(K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ________)*
LESLIE'S POOLMART
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, no par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
527069 10 8
------------
(CUSIP Number)
Alan J. Barton, Esq., Paul, Hastings, Janofsky & Walker,
555 S. Flower Street, 23rd Floor,
Los Angeles, CA 90071-2371, (213) 683-6140
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
November 11, 1996
-----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 527069 10 8 PAGE 2 OF 24 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
HANCOCK PARK ASSOCIATES II, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF -0-
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
-0-
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
-0-
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
0%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 527069 10 8 PAGE 3 OF 24 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
LIBERTY WEST PARTNERS
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
WC, OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
California
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 334,141
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
-0-
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 334,141
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
334,141
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
5.1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 527069 10 8 PAGE 4 OF 24 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
MICHAEL J. FOURTICQ
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
PF, 00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 507,574
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
-0-
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 507,574
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
507,574
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
7.7%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 527069 10 8 PAGE 5 OF 24 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
BRIAN P. MCDERMOTT
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
PF,00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 367,549
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
-0-
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 367,549
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
367,549
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
5.5%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 527069 10 8 PAGE 6 OF 24 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
GREG FOURTICQ
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 112,455
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
-0-
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 112,455
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
112,455
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
1.7%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 527069 10 8 PAGE 7 OF 24 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
RICHARD H. HILLMAN
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
PF, 00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 324,348
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
-0-
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 324,348
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
324,348
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
4.9%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 527069 10 8 PAGE 8 OF 24 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
ROBERT D. OLSEN
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 124,363
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
-0-
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 124,363
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
124,363
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
1.9%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to shares of the common
stock, no par value (the "Issuer Common Stock"), of Leslie's Poolmart, a
California corporation (the "Issuer"). The address of the principal
executive offices of the Issuer is 20222 Plummer Street, Chatsworth,
California 91311.
The Information set forth in the Exhibits attached hereto is
expressly incorporated herein by reference and the response to each item of
this statement is qualified in its entirety by the provisions of such
Exhibits.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is being filed jointly on behalf of Hancock Park
Associates II, L.P. ("HPA II"), Liberty West Partners ("Liberty"), Michael
J. Fourticq individually, Brian P. McDermott individually, Greg Fourticq
individually, Richard H. Hillman individually and Robert D. Olsen
individually (collectively, the "Reporting Persons" or the "HPA Group") on
the basis that the Reporting Persons may be deemed to constitute a "group"
within the meaning of Rule 13d-5 promulgated under the Securities Exchange
Act of 1934, as amended, due to the desire of the Reporting Persons to
effect a business combination transaction whereby the Reporting Persons
would form a corporation controlled by the Reporting Persons that would
acquire the outstanding Issuer Common Stock in a cash merger (described in
Item 4 as the "merger"). Information in this statement is also being
disclosed by Michael J. Fourticq and Brian P. McDermott in their capacity
as the general partners of HPA II and is being disclosed by Michael J.
Fourticq and Greg Fourticq in their capacity as the general partners of
Liberty.
HPA II
------
HPA II is a Delaware limited partnership with its principal office
and place of business at 1925 Century Park East, Suite 810, Los Angeles,
California, 90067. The principal business of HPA II is investing.
The General Partners of HPA II are Michael J. Fourticq and Brian P.
McDermott. Mr. Fourticq's principal occupation is acting as a general
partner of HPA II, as chairman of the board of various companies owned or
controlled by various investment partnerships, and as Chairman of the Board
of the Issuer. Mr. McDermott's principal occupation is acting as President
and Chief Executive Officer of the Issuer and as a general partner of HPA
II. Mr. Fourticq's principal business office is located at 1925 Century
Park East, Suite 810, Los Angeles, California, 90067. Mr. McDermott's
principal business office is located at 20222 Plummer Street, Chatsworth,
California, 91311. Both Mr. Fourticq and Mr. McDermott are United States
citizens.
Liberty
-------
Liberty is a California general partnership with its principal place
of business at 1925 Century Park East, Suite 810, Los Angeles, California,
90067. The principal business of Liberty is investing.
The General Partners of Liberty are Michael J. Fourticq and Greg
Fourticq. Michael J. Fourticq's principal occupation, business address and
citizenship are as discussed above. Greg Fourticq's principal occupation
is acting as President of Cascade Sawing and Drilling. Greg Fourticq's
principal business office is located at P.O. Box 3157, Kent, Washington
98032. Greg Fourticq is a United States citizen.
Michael J. Fourticq
-------------------
Michael J. Fourticq's principal occupation, business address and
citizenship are as discussed above.
Page 9 of 24
<PAGE>
Brian P. McDermott
------------------
Brian P. McDermott's principal occupation, business address and
citizenship are as discussed above.
Greg Fourticq
-------------
Greg Fourticq's principal occupation, business address and
citizenship are as discussed above.
Richard H. Hillman
------------------
Richard H. Hillman's principal occupation is acting as President of
Hillman Capital Partners and as a director of the Issuer. His principal
business address is 2665 Main Street, #260, Santa Monica, California 90405.
Richard H. Hillman is a United States citizen.
Robert D. Olsen
---------------
Robert D. Olsen's principal occupation is acting as Chief Financial
Officer of the Issuer. His principal business address is 20222 Plummer
Street, Chatsworth, California 91311. Robert D. Olsen is a United States
citizen.
None of the Reporting Persons nor any other person disclosed in
response to this Item 2 has during the last five years, been (a) convicted
in a criminal proceeding, or (b) a party to any civil proceeding as a
result of which it has been subject to a judgment, decree, final order
enjoining further violations of, or prohibiting or mandating activities
subject to, federal or state securities laws, or finding any violation in
respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Liberty, Michael J. Fourticq, Brian P. McDermott and Greg Fourticq
initially acquired the shares of Issuer Common Stock held by such persons
when the Issuer was purchased in a highly leveraged transaction on
September 1, 1988 by an investment group led by Hancock Park Associates, an
affiliate of HPA II.
Liberty used working capital to acquire its initial Issuer Common
Stock. Shares of Issuer Common Stock have subsequently been acquired as
stock dividends made by the Issuer.
Michael J. Fourticq used personal funds to acquire his initial
Issuer Common Stock. Shares of Issuer Common Stock have subsequently been
acquired as stock dividends made by the Issuer and from distribution by
various partnerships owning shares of the Issuer. Mr. Fourticq also holds
options to purchase Issuer Common Stock granted in connection with his
position with the Issuer.
Brian P. McDermott used personal funds to acquire his initial Issuer
Common Stock. Mr. McDermott also holds options to purchase Issuer Common
Stock granted in connection with his position with the Issuer.
Greg Fourticq is the trustee of three trusts for the benefit of
Michael J. Fourticq's children, which trusts contain shares of Issuer
Common Stock as part of their corpus. Shares of Issuer Common Stock have
subsequently been acquired as stock dividends made by the Issuer.
Richard H. Hillman used personal funds to acquire his Issuer Common
Stock. Mr. Hillman also holds options to purchase Issuer Common Stock
granted in connection with his position with the Issuer.
Robert D. Olsen holds options to purchase Issuer Common Stock
granted in connection with his position with the Issuer.
Page 10 of 24
<PAGE>
Financing for the merger described in Item 4 may be supplied by
issuance of debt or equity securities or bank or other commercial
borrowings or some combination of securities issuances and borrowings.
There have been preliminary discussions between certain of the Reporting
Persons and Occidental Petroleum Corporation ("Occidental") about
Occidental providing a portion of the financing for the merger as a
purchaser of equity securities. Occidental is currently a holder of $10
million principal amount of the Issuer's 8% Convertible Subordinated
Debenture due 2001 (but redeemable earlier upon the occurrence of specified
change of control events including certain consolidations, mergers and
similar transactions). A subsidiary of Occidental is the Issuer's principal
supplier of chemicals. Dr. Dale R. Laurance, a director of the Issuer, is
the President of Occidental. No definitive determination has been made, or
agreement entered into, with respect to financing for the merger.
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Persons and any other person disclosed in response to
Item 2 acquired the shares beneficially owned by each of them, pursuant to
the transactions described in Item 3, for investment. However, as
described in the Letter, dated November 11, 1996 from HPA II to the Issuer
(the "Offer Letter") (attached hereto as Exhibit 1) and in the press
release issued by the Issuer on November 12, 1996 (attached hereto as
Exhibit 2), the HPA Group has offered to, and is taking steps to, acquire
the outstanding Issuer Common Stock in a transaction in which a corporation
to be formed by the HPA Group ("Newco") would, either directly or through a
wholly-owned subsidiary, effect a cash merger with the Issuer (the
"merger"). It is expected that members of the HPA Group will become
holders of equity securities of Newco and that certain officers of the
Issuer will be invited to participate as holders of equity securities of
Newco.
Completion of the merger would be subject to a number of conditions
including (i) execution of a definitive merger agreement by Newco and the
Issuer, (ii) approval of the merger and the definitive merger agreement by
the board of directors of the Issuer and the special committee of the board
of directors that has been established to consider the merger and certain
other indications of interest to acquire the Issuer received by the Issuer,
(iii) receipt by the board of directors of a opinion of an independent
investment banker as to the fairness of the merger from a financial point
of view to the holders of the Issuer Common Stock, (iv) approval of the
merger by the holders of the Issuer Common Stock, (v) Newco obtaining
sufficient financing on satisfactory terms to complete the merger, and (vi)
compliance with all applicable regulatory requirements.
It is also anticipated that the Issuer Common Stock would be
delisted from the NASD National Market System.
Except as disclosed in this Item 4, each Reporting Person and any
other person disclosed in response to Item 2 has no current plans or
proposals which relate to or would result in any of the events described in
clauses (a) through (j) of the instructions to Item 4 of Schedule 13D.
Page 11 of 24
<PAGE>
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) and (b) Set forth in the table below are the number and percentage of
shares of Issuer Common Stock beneficially owned, as well as
the nature of ownership, for each Reporting Person and any
other person disclosed in response to Item 2 as of the date
hereof.
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Beneficially Beneficially
Owned Owned Aggregate
With Sole With Shared Number of Percentage
Voting and Voting and Shares of Shares
Dispositive Dispositive Beneficially Beneficially
Name Power Power Owned Owned(2)
- ---- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
HPA Group(1) -0- -0- 1,770,430 25.7%
HPA II (3) -0- -0- -0- 0%
Liberty 334,141 -0- 334,141 5.1%
Michael J. Fourticq(4) 507,574 -0- 507,574 7.7%
Brian P. McDermott(5) 367,549 -0- 367,549 5.5%
Greg Fourticq(6) 112,455 -0- 112,455 1.7%
Richard Hillman(7) 324,348 -0- 324,348 4.9%
Robert D. Olsen(8) 124,363 -0- 124,363 1.9%
</TABLE>
(1) Pursuant to Rule 13d-5, the HPA Group is deemed to beneficially own
all equity securities of the Issuer beneficially owned by any
members of the group. The HPA Group may be deemed to beneficially
own 623 shares of Issuer Common Stock held by Michael J. Fourticq's
spouse, but such shares are excluded from this table and, pursuant
to Rule 13d-4, the filing of this statement shall not be construed
as an admission that the members of the HPA Group are the beneficial
owners of such shares.
(2) The percentages of Issuer Common Stock indicated in this table are
based on 6,548,411 shares of Issuer Common Stock outstanding as of
October 17, 1996, as disclosed in the Issuer's most recent Form 10-Q
filed with the Securities and Exchange Commission, plus, where
applicable, shares of Issuer Common Stock subject to options
exercisable within 60 days.
(3) HPA II does not own any shares of Issuer Common Stock and is
reported herein only as a member of the HPA Group.
(4) Includes 16,540 shares of Issuer Common Stock subject to options
exercisable within 60 days. Also includes 46,192 shares of Issuer
Common Stock held by Hancock Park Associates, a partnership of which
Mr. Fourticq is the sole general partner. Mr. Fourticq may also be
deemed to beneficially own the 334,141 shares of Issuer Common Stock
reported by Liberty by virtue of his being a general partner of
Liberty. Mr. Fourticq may also be deemed to beneficially own 623
shares of Issuer Common Stock held by Mr. Fourticq's spouse, but
such shares are excluded from this table and, pursuant to Rule 13d-
4, the filing of this statement shall not be construed as an
admission that Mr. Fourticq is the beneficial owner of such shares.
(5) Shares are held through a trust. Includes 190,350 shares of Issuer
Common Stock subject to options exercisable within 60 days.
(6) Greg Fourticq does not own any shares of Issuer Common Stock
outright. Greg Fourticq's beneficial ownership includes 112,455
shares of Issuer Common Stock held in trusts of which Greg Fourticq
is trustee for the benefit of his nephews and his niece. Greg
Fourticq may also be deemed to beneficially own the 334,141 shares
of Issuer Common Stock reported by Liberty by virtue of his being a
general partner of Liberty.
Page 12 of 24
<PAGE>
(7) Includes 18,745 shares of Issuer Common Stock subject to options
exercisable within 60 days. Also includes 1,323 shares of Issuer
Common Stock held in a trust of which Mr. Hillman is trustee for the
benefit of his son.
(8) All 124,363 shares of Issuer Common Stock are those subject to
options exercisable within 60 days.
(c) None of the Reporting Persons nor any other person disclosed in
response to Item 2 has effected any transactions in the Common Stock
in the past sixty days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Except as disclosed in Items 4 and 5 and the Joint Filing Agreement,
dated November 20, 1996, by and among HPA II, Liberty, Michael J. Fourticq,
Brian P. McDermott, Greg Fourticq, Richard H. Hillman and Robert D. Olsen,
none of the Reporting Persons and any other person disclosed in response to
Item 2 is a party to any contracts, arrangements, understandings or
relationships with respect to any securities of the Issuer, including but
not limited to the transfer or voting of any of the securities, finder's
fees, joint ventures, loan or option agreements, puts or calls, guarantees
of profits, division of profits or loss, or the giving or withholding of
proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The information set forth in the Exhibit Index is incorporated
herein by reference.
Page 13 of 24
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of the undersigned's
knowledge and belief, the undersigned certifies that the information set
forth in this statement is true, complete and correct.
Dated: November 21, 1996
HANCOCK PARK ASSOCIATES II, L.P.
By: /s/ BRIAN P. MCDERMOTT
-----------------------------------------
Name: Brian P. McDermott
Title: General Partner
/s/ BRIAN P. MCDERMOTT
-----------------------------------------
Brian P. McDermott
LIBERTY WEST PARTNERS*
Michael J. Fourticq*
Greg Fourticq*
Richard H. Hillman*
Robert D. Olsen*
/s/ BRIAN P. MCDERMOTT
------------------------------------------
* By Brian P. McDermott, Attorney-in-fact
Page 14 of 24
<PAGE>
Exhibit Index
1. Letter, dated November 11, 1996 from HPA II to Issuer.
2. Press release issued by the Issuer, dated November 12, 1996.
3. Joint Filing Agreement, dated November 20, 1996, by and among HPA II,
Liberty, Michael J. Fourticq, Brian P. McDermott, Greg Fourticq, Richard
H. Hillman, Robert D. Olsen and Murray H. Dashe.
4. Power of Attorney of Michael J. Fourticq, dated November 20, 1996,
naming Brian P. McDermott and Robert D. Olsen as attorney-in-fact.
5. Power of Attorney of Greg Fourticq, dated November 20, 1996, naming
Michael J. Fourticq, Brian P. McDermott and Robert D. Olsen as attorney-
in-fact.
6. Power of Attorney of Liberty, dated November 20, 1996, naming Brian P.
McDermott and Robert D. Olsen as attorney-in-fact.
7. Power of Attorney of Richard H. Hillman, dated November 20, 1996, naming
Michael J. Fourticq, Brian P. McDermott and Robert D. Olsen as attorney-
in-fact.
8. Power of Attorney of Robert D. Olsen, dated November 18, 1996, naming
Michael J. Fourticq and Brian P. McDermott as attorney-in-fact.
Page 15 of 24
<PAGE>
EXHIBIT 7(L)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
LESLIE'S POOLMART
-----------------
(Name of Issuer)
Common Stock, no par value
------------------------------
(Title of Class of Securities)
527069 10 8
-----------------------------
(CUSIP Number)
Alan J. Barton, Esq., Paul, Hastings, Janofsky & Walker,
555 S. Flower Street, 23rd Floor,
Los Angeles, CA 90071-2371, (213) 683-6140
------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
February 26, 1997
-----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box .
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
<TABLE>
<CAPTION>
CUSIP No. 527069 10 8
- --------------------------------------------------------------------------------------------------------------------
Page 2 of 14 Pages
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
HANCOCK PARK ASSOCIATES II, L.P.
- --------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [X]
(b) [ ]
--------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS *
OO
- --------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
- --------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY ---------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH -0-
---------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
---------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
-0-
- --------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * [X]
- --------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
- --------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
PN
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
<TABLE>
<CAPTION>
CUSIP No. 527069 10 8
- --------------------------------------------------------------------------------------------------------------------
Page 3 of 14 Pages
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
LIBERTY WEST PARTNERS
- --------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [X]
(b)
- --------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS *
WC, OO
- --------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 334,141
OWNED BY ---------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH -0-
---------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
334,141
---------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
334,141
- --------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * [X]
- --------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1%
- --------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
PN
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
<TABLE>
<CAPTION>
CUSIP No. 527069 10 8
- -------------------------------------------------------------------------------------------------------------------
Page 4 of 14 Pages
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
MICHAEL J. FOURTICQ
- -------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [X]
(b)
- -------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS *
PF, OO
- -------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- -------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 507,574
OWNED BY ---------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH -0-
---------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
507,574
---------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
507,574
- -------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * [X]
- -------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.7%
- --------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
<TABLE>
<CAPTION>
CUSIP No. 527069 10 8
- --------------------------------------------------------------------------------------------------------------------
Page 5 of 14 Pages
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
BRIAN P. MCDERMOTT
- -------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [X]
(b) [ ]
------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS *
PF, OO
------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 367,549
OWNED BY --------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH -0-
--------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
367,549
--------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
367,549
------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * [X]
------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.5%
- -------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
<TABLE>
<CAPTION>
CUSIP No. 527069 10 8
- --------------------------------------------------------------------------------------------------------------------
Page 6 of 14 Pages
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
GREG FOURTICQ
- --------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [X]
(b)
- --------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS *
OO
--------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
--------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 112,455
OWNED BY --------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH -0-
--------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
112,455
--------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
112,455
- -------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * [X]
- -------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.7%
- -------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
<TABLE>
<CAPTION>
CUSIP No. 527069 10 8
- --------------------------------------------------------------------------------------------------------------------
Page 7 of 14 Pages
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
RICHARD H. HILLMAN
--------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [X]
(b) [ ]
- --------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS *
PF, OO
--------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
--------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 324,348
OWNED BY --------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH -0-
--------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
324,348
---------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
324,348
------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * [X]
------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
4.9%
- -------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
<TABLE>
<CAPTION>
CUSIP No. 527069 10 8
- --------------------------------------------------------------------------------------------------------------------
Page 8 of 14 Pages
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
ROBERT D. OLSEN
- --------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [X]
(b) [ ]
--------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS *
OO
--------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
--------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 124,363
OWNED BY ---------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH -0-
---------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
124,363
---------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
124,363
- --------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * [X]
- --------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.9%
- --------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
Items 1, 2, 3, and 4 of the Schedule 13D of the HPA Group filed with the
Commission on November 21, 1996 are hereby amended as follows:
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to shares of the common
stock, no par value (the "Issuer Common Stock"), of Leslie's Poolmart, a
California corporation (the "Issuer"). The address of the principal
executive offices of the Issuer is 20630 Plummer Street, Chatsworth,
California 91311.
The Information set forth in the Exhibits attached hereto is
expressly incorporated herein by reference and the response to each item of
this statement is qualified in its entirety by the provisions of such
Exhibits.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is being filed jointly on behalf of Hancock Park
Associates II, L.P. ("HPA II"), Liberty West Partners ("Liberty"), Michael
J. Fourticq individually, Brian P. McDermott individually, Greg Fourticq
individually, Richard H. Hillman individually and Robert D. Olsen
individually (collectively, the "Reporting Persons" or the "HPA Group") on
the basis that the Reporting Persons may be deemed to constitute a "group"
within the meaning of Rule 13d-5 promulgated under the Securities Exchange
Act of 1934, as amended, due to the desire of the Reporting Persons to
effect a business combination transaction whereby the Reporting Persons
would acquire the outstanding Issuer Common Stock in a cash merger
(described in Item 4 as the "Merger Transaction"). Information in this
statement is also being disclosed by Michael J. Fourticq and Brian P.
McDermott in their capacity as the general partners of HPA II and is being
disclosed by Michael J. Fourticq and Greg Fourticq in their capacity as the
general partners of Liberty.
The HPA Group and Green Equity Investors II, L.P. ("Green"), which
is an affiliate of Leonard Green & Partners, L.P. ("LGP"), a merchant
banking firm, may be deemed to constitute a "group" within the meaning of
Rule 13d-5 by virtue of the matters described in Items 3 and 4. The
Reporting Persons have been informed by Green and LGP that information with
respect to such entities will be provided by them in a separate filing and
no information regarding such persons is included either expressly or by
incorporation, in this Filing.
HPA II
------
HPA II is a Delaware limited partnership with its principal office
and place of business at 1925 Century Park East, Suite 810, Los Angeles,
California, 90067. The principal business of HPA II is investing.
The General Partners of HPA II are Michael J. Fourticq and Brian P.
McDermott. Mr. Fourticq's principal occupation is acting as a general
partner of HPA II, as chairman of the board of various companies owned or
controlled by various investment partnerships, and as Chairman of the Board
of the Issuer. Mr. McDermott's principal occupation is acting as President
and Chief Executive Officer of the Issuer and as a general partner of HPA
II. Mr. Fourticq's principal business office is located at 1925 Century
Park East, Suite 810, Los Angeles, California, 90067. Mr. McDermott's
principal business office is located at 20630 Plummer Street, Chatsworth,
California, 91311. Both Mr. Fourticq and Mr. McDermott are United States
citizens.
Liberty
-------
Liberty is a California general partnership with its principal place
of business at 1925 Century Park East, Suite 810, Los Angeles, California,
90067. The principal business of Liberty is investing.
The General Partners of Liberty are Michael J. Fourticq and Greg
Fourticq. Michael J. Fourticq's principal occupation, business address and
citizenship are as discussed above. Greg Fourticq's principal occupation
is acting as President of Cascade Sawing and Drilling. Greg Fourticq's
principal business office is located at P.O. Box 3157, Kent, Washington
98032. Greg Fourticq is a United States citizen.
Page 9 of 14
<PAGE>
Michael J. Fourticq
-------------------
Michael J. Fourticq's principal occupation, business address and
citizenship are as discussed above.
Brian P. McDermott
------------------
Brian P. McDermott's principal occupation, business address and
citizenship are as discussed above.
Greg Fourticq
-------------
Greg Fourticq's principal occupation, business address and
citizenship are as discussed above.
Richard H. Hillman
------------------
Richard H. Hillman's principal occupation is acting as President of
Hillman Capital Partners and as a director of the Issuer. His principal
business address is 2665 Main Street, #260, Santa Monica, California 90405.
Richard H. Hillman is a United States citizen.
Robert D. Olsen
---------------
Robert D. Olsen's principal occupation is acting as Chief Financial
Officer of the Issuer. His principal business address is 20630 Plummer
Street, Chatsworth, California 91311. Robert D. Olsen is a United States
citizen.
None of the Reporting Persons nor any other person disclosed in
response to this Item 2 has during the last five years, been (a) convicted
in a criminal proceeding, or (b) a party to any civil proceeding as a
result of which it has been subject to a judgment, decree, final order
enjoining further violations of, or prohibiting or mandating activities
subject to, federal or state securities laws, or finding any violation in
respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Liberty, Michael J. Fourticq, Brian P. McDermott and Greg Fourticq
initially acquired the shares of Issuer Common Stock held by such persons
when the Issuer was purchased in a highly leveraged transaction on
September 1, 1988 by an investment group led by Hancock Park Associates, an
affiliate of HPA II.
Liberty used working capital to acquire its initial Issuer Common
Stock. Shares of Issuer Common Stock have subsequently been acquired as
stock dividends made by the Issuer.
Michael J. Fourticq used personal funds to acquire his initial
Issuer Common Stock. Shares of Issuer Common Stock have subsequently been
acquired as stock dividends made by the Issuer and from distribution by
various partnerships owning shares of the Issuer. Mr. Fourticq also holds
options to purchase Issuer Common Stock granted in connection with his
position with the Issuer.
Brian P. McDermott used personal funds to acquire his initial Issuer
Common Stock. Mr. McDermott also holds options to purchase Issuer Common
Stock granted in connection with his position with the Issuer.
Greg Fourticq is the trustee of three trusts for the benefit of
Michael J. Fourticq's children, which trusts contain shares of Issuer
Common Stock as part of their corpus. Shares of Issuer Common Stock have
subsequently been acquired as stock dividends made by the Issuer.
Page 10 of 14
<PAGE>
Richard H. Hillman used personal funds to acquire his Issuer Common
Stock. Mr. Hillman also holds options to purchase Issuer Common Stock
granted in connection with his position with the Issuer.
Robert D. Olsen holds options to purchase Issuer Common Stock
granted in connection with his position with the Issuer.
Financing for the Merger Transaction described in Item 4 is
expected to be supplied by issuance of debt or equity securities or bank or
other commercial borrowings or some combination of securities issuances and
borrowings. Occidental Petroleum Corporation ("Occidental") has expressed
its willingness to provide a portion of the equity capital to finance the
Merger Transaction, as described in the Letter dated December 27, 1996 from
Occidental to Michael J. Fourticq (attached hereto as Exhibit 9).
Occidental is currently a holder of $10 million principal amount of the
Issuer's 8% Convertible Subordinated Debenture due 2001 (but redeemable
earlier upon the occurrence of specified change of control events including
certain consolidations, mergers and similar transactions). A subsidiary of
Occidental is the Issuer's principal supplier of chemicals. Dr. Dale R.
Laurance, a director of the Issuer, is the President of Occidental.
Additional equity capital would be provided (i) by certain members of the
HPA Group, as described in the Letter dated February 19, 1997 from Hancock
Park Associates to the Issuer (attached hereto as Exhibit 10) and (ii) by
Green, as described in the Letter dated February 20, 1997 from LGP to the
Issuer (attached hereto as Exhibit 11). Additional financing for the
Merger Transaction is expected to be provided by the issuance of debt
securities, as described in the Letters dated February 4, 1997 from BT
Securities Corporation to Hancock Park Associates (attached hereto as
Exhibits 12 and 13) and by a revolving credit facility of the type
described in Letters to the Issuer from Wells Fargo Bank, National
Association, ("Wells Fargo") dated January 14, 1997 and February 21, 1997
(attached hereto as Exhibits 19A and 19B). No final definitive
determination has been made, or agreement entered into, with respect to the
terms of the financing for the Merger Transaction. In addition, as of the
date of this Amendment No. 1 to Schedule 13D, neither the Issuer nor any
Reporting Person has received any legally binding commitment to finance the
Merger Transaction.
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Persons and any other person disclosed in response to
Item 2 acquired the shares beneficially owned by each of them, pursuant to
the transactions described in Item 3, for investment. However, as
described in the Letter, dated November 11, 1996 from HPA II to the Issuer
(the "Offer Letter") (attached hereto as Exhibit 1), in the press release
issued by the Issuer on November 12, 1996 (attached hereto as Exhibit 2)
and in the press release issued by the Issuer on February 27, 1997
(attached hereto as Exhibit 14), on February 26, 1997, the Issuer entered
into an Agreement and Plan of Merger dated February 26, 1997 ("Agreement")
(attached hereto as Exhibit 16) under which the Issuer agreed to be
acquired in a cash merger at the previously announced offer price of $14.50
per share. The Agreement was approved by the board of directors of the
Issuer after receiving a recommendation from the special committee (the
"Special Committee") of two directors of the Issuer who were elected to the
board of directors in November, 1996 after the Issuer received the Offer
Letter. The Special Committee was established to consider the proposed
transaction and any and all other indications of interest or proposals to
acquire the Issuer. The board of directors of the Issuer and the Special
Committee received fairness opinions from Donaldson, Lufkin & Jenrette
Securities Corporation and Dillon, Read & Co. The parties to the Agreement
are the Issuer, LPM Holdings, Inc., a wholly owned Delaware subsidiary of
the Issuer ("Leslie's Delaware") and Poolmart USA Inc. ("Poolmart"), a
Delaware corporation that is wholly-owned by Green. The board of directors
of the Issuer also approved, pursuant to the Agreement, an Agreement of
Merger dated February 26, 1997 with Leslie's Delaware ("Merger Agreement")
(attached hereto as Exhibit 15).
Under the Agreement, subject to appropriate shareholder approval,
the Issuer would effect a two-step merger transaction. In the first step,
pursuant to the Agreement and the Merger Agreement, the Issuer would
reincorporate in Delaware by merging with and into Leslie's Delaware, and
each share of the Issuer (other than shares entitled to exercise
dissenters' rights under California law) would be exchanged for one share
of Leslie's Delaware. Immediately thereafter, pursuant to the Agreement,
Leslie's Delaware would effect a merger ("Merger") with Poolmart in which
Leslie's Delaware would be the surviving corporation.
Page 11 of 14
<PAGE>
In the Merger, a total of 359,505 shares of Leslie's Delaware ("Continuing
Shares") presently held by certain members of the HPA Group would remain
outstanding, and each of the remaining outstanding shares of Leslie's
Delaware (including a substantial portion of the holdings of the HPA Group)
would be converted into the right to receive $14.50 in cash. In addition,
certain members of the Issuer's management would receive new options to
purchase common stock of Leslie's Delaware. The transactions contemplated
by the Agreement and the Merger Agreement, including the Merger, are herein
referred to as the "Merger Transaction".
Certain members of the HPA Group have agreed to vote their shares of
Issuer Common Stock in favor of the Merger Transaction, as described in the
Letter dated February 26, 1997 from Michael J. Fourticq and Brian P.
McDermott to the Issuer (attached hereto as Exhibit 17) and have agreed to
enter into a Stockholders Agreement and Subscription Agreement with respect
to Continuing Shares and other matters, as described in the Letter dated
February 26, 1997 from LGP to Michael J. Fourticq and Brian P. McDermott
(attached hereto as Exhibit 18).
Completion of the Merger Transaction is subject to a number of
conditions including (i) approval of the Merger Transaction by the holders
of the Issuer Common Stock, (ii) obtaining sufficient financing on
satisfactory terms to complete the Merger Transaction, and (iii) compliance
with all applicable regulatory requirements.
It is also anticipated that the Issuer Common Stock would be
delisted from the NASD National Market System.
The description of the Merger Transaction disclosed in this Item 4
is qualified in its entirety by reference to the filed exhibits.
Except as disclosed in this Item 4, no Reporting Person nor any
other person disclosed in response to Item 2 has any current plans or
proposals which relate to or would result in any of the events described in
clauses (a) through (j) of the instructions to Item 4 of Schedule 13D.
Page 12 of 14
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of the undersigned's
knowledge and belief, the undersigned certifies that the information set
forth in this statement is true, complete and correct.
Dated: March 3, 1997
HANCOCK PARK ASSOCIATES II, L.P.
By: /s/ BRIAN P. MCDERMOTT
-----------------------------------------
Name: Brian P. McDermott
Title: General Partner
/s/ BRIAN P. MCDERMOTT
----------------------------------------------
Brian P. McDermott
LIBERTY WEST PARTNERS*
----------------------
Michael J. Fourticq*
Greg Fourticq*
Richard H. Hillman*
Robert D. Olsen*
/s/ BRIAN P. MCDERMOTT
---------------------------------------------
* By Brian P. McDermott, Attorney-in-fact
Page 13 of 14
<PAGE>
Exhibit Index
* 1. Letter, dated November 11, 1996 from HPA II to Issuer.
* 2. Press release issued by the Issuer, dated November 12, 1996.
* 3. Joint Filing Agreement, dated November 20, 1996, by and among HPA II,
Liberty, Michael J. Fourticq, Brian P. McDermott, Greg Fourticq,
Richard H. Hillman, Robert D. Olsen and Murray H. Dashe.
* 4. Power of Attorney of Michael J. Fourticq, dated November 20, 1996,
naming Brian P. McDermott and Robert D. Olsen as attorney-in-fact.
* 5. Power of Attorney of Greg Fourticq, dated November 20, 1996, naming
Michael J. Fourticq, Brian P. McDermott and Robert D. Olsen as
attorney-in-fact.
* 6. Power of Attorney of Liberty, dated November 20, 1996, naming Brian P.
McDermott and Robert D. Olsen as attorney-in-fact.
* 7. Power of Attorney of Richard H. Hillman, dated November 20, 1996,
naming Michael J. Fourticq, Brian P. McDermott and Robert D. Olsen as
attorney-in-fact.
* 8. Power of Attorney of Robert D. Olsen, dated November 18, 1996, naming
Michael J. Fourticq and Brian P. McDermott as attorney-in-fact.
9. Letter dated December 27, 1996 from Occidental to Michael J. Fourticq.
10. Letter dated February 19, 1997 from Hancock Park Associates to the
Issuer.
11. Letter dated February 20, 1997 from LGP to the Issuer.
12. Letter dated February 4, 1997 from BT Securities Corporation to
Hancock Park Associates.
13. Letter dated February 4, 1997 from BT Securities Corporation to
Hancock Park Associates.
14. Press release issued by the Issuer on February 27, 1997.
15. Agreement of Merger dated February 26, 1997 between Leslie's Delaware
and the Issuer.
16. Agreement and Plan of Merger dated February 26, 1997 among the Issuer,
Leslie's Delaware and Poolmart.
17. Letter dated February 26, 1997 from Michael J. Fourticq and Brian P.
McDermott to the Issuer.
18. Letter dated February 26, 1997 from LGP to Michael J. Fourticq and
Brian P. McDermott.
19A Letter dated January 14, 1997 from Wells Fargo to the Issuer.
19B Letter dated February 21, 1997 from Wells Fargo to the Issuer.
__________
* Exhibits to the Schedule 13D of the HPA Group filed with the Commission
on November 21, 1996 are incorporated herein by reference.
Page 14 of 14
