<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SCP Pool Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
SCP POOL CORPORATION
109 Northpark Boulevard
Covington, Louisiana 70433-5001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
SCP Pool Corporation (the "Company"), which will be held on Wednesday, May 12,
1999, at 9:00 a.m., local time, at the Company's corporate offices located at
109 Northpark Blvd., Covington, Louisiana 70433.
The Notice of Meeting, Proxy Statement, Proxy Form and Annual Report of the
Company are included with this letter. The matters listed in the Notice of
Meeting are more fully described in the Proxy Statement.
It is important that your shares are represented and voted at the Annual
Meeting, regardless of the size of your holdings. Accordingly, please mark,
sign and date the enclosed Proxy and return it promptly in the enclosed
envelope. If you attend the Annual Meeting, you may, of course, withdraw your
proxy should you wish to vote in person.
Sincerely,
/s/ Wilson B. Sexton
Wilson B. Sexton
Chairman and Chief Executive Officer,
Director
<PAGE>
SCP POOL CORPORATION
109 Northpark Boulevard
Covington, Louisiana 70433-5001
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of SCP Pool Corporation (the "Company")
will be held on Wednesday, May 12, 1999, at 9:00 a.m., local time, at the
Company's corporate offices located at 109 Northpark Blvd., Covington,
Louisiana 70433 to consider and take action with respect to the following
matters:
1. The election of six directors to hold office for a term of one year or
until their successors have been elected and qualified;
2. The ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31,
1999; and
3. The transaction of such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
Holders of record of the Company's Common Stock at the close of business on
April 1, 1999 are entitled to receive notice of and to vote on all matters
presented at the Annual Meeting and at any adjournments or postponements
thereof. A list of such stockholders will be available for examination by any
stockholder for any purpose germane to the meeting during normal business
hours at the Company's principal executive offices, 109 Northpark Boulevard,
Covington, Louisiana 70433-5001 for a period of 10 days prior to the meeting.
By Order of the Board of Directors
/s/ Wilson B. Sexton
Wilson B. Sexton
Chairman and Chief Executive
Officer, Director
April 8, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON AND
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED TO ENSURE THAT
YOUR SHARES WILL BE REPRESENTED. YOUR PROXY IS REVOCABLE AT ANY TIME BEFORE IT
IS VOTED OR BY DELIVERY OF A LATER-DATED PROXY. IN ANY EVENT YOU MAY VOTE IN
PERSON IF YOU ATTEND THE ANNUAL MEETING.
<PAGE>
SCP POOL CORPORATION
109 Northpark Boulevard
Covington, Louisiana 70433-5001
----------------
PROXY STATEMENT
----------------
Annual Meeting of Stockholders
to be held on
May 12, 1999 at 9:00 a.m.
----------------
This proxy statement (the "Proxy Statement") is being furnished to the
holders of common stock, par value $0.001 per share (the "Common Stock") of
SCP Pool Corporation (the "Company") in connection with the solicitation of
proxies by and on behalf of the Board of Directors of the Company (the "Board
of Directors" or the "Board") for use at the annual meeting of stockholders to
be held on May 12, 1999 at 9:00 a.m., local time, and at any adjournments or
postponements thereof (the "Annual Meeting"). The enclosed proxy materials are
being mailed in the package with this Proxy Statement on or about April 12,
1999 to holders of record of the Common Stock at the close of business on
April 1, 1999.
If the enclosed Proxy Form is properly signed, dated and returned to the
Company, the individuals identified as proxies thereon will vote the shares
represented by the Proxy Form in accordance with the directions noted thereon.
If no direction is indicated, the proxies will vote FOR the election of the
six nominees named herein as directors and FOR the ratification of the
appointment of Ernst & Young LLP as the Company's independent auditors for the
1999 fiscal year. The Company's management does not know of any matters other
than those discussed in this Proxy Statement that will be presented at the
Annual Meeting. If other matters are presented, all proxies will be voted in
accordance with the recommendations of the Company's management.
Returning your completed Proxy Form will not prevent you from voting in
person at the Annual Meeting if you are present and wish to vote. In addition,
you may revoke your proxy any time before it is voted by written notice to the
Secretary of the Company prior to the Annual Meeting at the Company's
principal executive offices at the address above or by submission of a later-
dated proxy.
Each outstanding share of Common Stock entitles the holder thereof to one
vote on each matter to come before the Annual Meeting. As of March 19, 1999,
there were 11,489,031 shares of Common Stock outstanding. The presence in
person or by proxy of a majority of the shares of Common Stock outstanding
will constitute a quorum for the transaction of business. Under Delaware law,
abstentions are treated as present and entitled to vote, and therefore will be
counted in determining the existence of a quorum and will have the effect of a
vote against any matter requiring the affirmative vote of a majority of the
shares present and entitled to vote at the Annual Meeting. Under Delaware law,
broker "non-votes" are considered present but not entitled to vote, and thus
will be counted in determining the existence of a quorum but will not be
counted in determining whether a matter requiring approval of a majority of
the shares present and entitled to vote has been approved or whether a
plurality of the vote of the shares present and entitled to vote has been
cast.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's by-laws provide that the size of the Board shall be fixed from
time to time by resolution of the Board and that vacancies on the Board may be
filled by the remaining directors. The Board size is currently fixed at six
directors.
<PAGE>
The Board currently consists of Wilson B. Sexton, Frank J. St. Romain,
Andrew W. Code, James J. Gaffney, Peter M. Gotsch and Robert C. Sledd. Each
director elected at an annual meeting of stockholders is elected to serve for
a one-year term or until a successor is duly elected.
Wilson B. Sexton, Frank J. St. Romain, Andrew W. Code, James J. Gaffney,
Peter M. Gotsch and Robert C. Sledd have been nominated for re-election at the
Annual Meeting. The Company has no reason to believe that the nominees named
herein will be unavailable to serve as directors. However, if the nominees for
any reason are unable to serve or for good cause will not serve, the proxy may
be voted for such substitute persons as the nominees appointed in the proxy
may in their discretion determine.
Directors will be elected at the Annual Meeting by a plurality of the votes
cast at the meeting by the holders of shares represented in person or by
proxy. There is no cumulative voting as to any matter, including the election
of directors.
The Board of Directors recommends a vote "FOR" the election of the nominees.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of its Audit Committee, has
selected the accounting firm of Ernst & Young LLP to serve as independent
auditors of the Company with respect to the 1999 fiscal year to audit the
financial statements of the Company for the fiscal year ending December 31,
1999 and to perform other appropriate accounting services.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting to respond to questions and to make a statement if they desire
to do so. If the stockholders do not ratify this appointment by the
affirmative vote of a majority of the shares represented in person or by proxy
at the Annual Meeting, other independent auditors will be considered by the
Board of Directors upon recommendation by the Audit Committee.
The Board of Directors recommends a vote "FOR" ratification of the
appointment of Ernst & Young LLP as the Company's independent auditors for
fiscal year 1999.
2
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following sets forth certain information concerning the Company's
executive officers and directors. Officers of the Company serve at the
discretion of the Board of Directors.
Wilson B. Sexton Age: 62
Mr. Sexton is currently Chairman and Chief Executive Officer of the
Company. Mr. Sexton was appointed Chief Executive Officer in January 1999.
Mr. Sexton has served as Chairman and a director of both the Company and
its wholly owned subsidiary, South Central Pool Supply, Inc. ("SCP
Supply"), since December 1993, and served as a consultant to Lake Villa
Corporation (formerly known as South Central Pool Supply, Inc.), a
Louisiana corporation (the "Predecessor") from 1988 to December 1993. Mr.
Sexton served as a director of and held a number of positions with Airwick
Industries, Inc. from 1974 to 1980, including President of the Airwick Pool
Products division and Vice President of Airwick Industries, Inc. From 1958
to 1974, Mr. Sexton was employed by Seablue Corporation, a swimming pool
equipment and supplies manufacturer, where he served as President from 1972
to 1974.
Frank J. St. Romain Age: 63
Mr. St. Romain has served as a director of the Company and SCP Supply since
December 1993. Mr. St. Romain served as President and Chief Executive
Officer of the Company and SCP Supply between December 1993 and January
1999 and held the same positions with the Predecessor since its founding in
1980. Prior to 1980, Mr. St. Romain had 21 years experience in the pool
business and held a number of positions with Seablue Corporation and
Airwick Pool Products.
Andrew W. Code Age: 40
Mr. Code has served as a director of the Company since December 1993, and
served as a Vice President of the Company and SCP Supply from December 1993
to May 1995. Mr. Code has, since August 1988, been a general partner of CHS
Management Limited Partnership ("CHS Management"), the general partner of
Code, Hennessy & Simmons Limited Partnership ("CHS"). Mr. Code was a Vice
President of Citicorp, a commercial bank, from 1986 until August 1988.
James J. Gaffney Age: 57
Mr. Gaffney was appointed as a director of the Company in December 1998.
Mr. Gaffney is Chairman of Maine Investments Limited, a diversified holding
company involved in mining, retail, manufacturing and distribution
activities. From 1995 to 1997, Mr. Gaffney was the President and Chief
Executive Officer of General Aquatics, Inc. From 1993 to 1995, Mr. Gaffney
was President and Chief Executive Officer of KDI Corporation, and from 1991
to 1992, Mr. Gaffney was President and Chief Executive Officer of
International Tropio-Cal, Inc. Mr. Gaffney is a director of Advantica
Restaurant Group, Inc., C.R. Anthony Company, Insilco Corporation and Koll
Real Estate Group, Inc.
Peter M. Gotsch Age: 35
Mr. Gotsch has served as a director of the Company since December 1993 and
served as a Vice President of the Company and SCP Supply from December 1993
to May 1995. Mr. Gotsch has been a Partner of Code, Hennessy & Simmons,
LLC, an affiliate of CHS, since August 1997, was a Managing Director of
Code, Hennessy & Simmons, Inc., an affiliate of CHS, between January 1996
and August 1997, was a Vice President of CHS Management from June 1994 to
December 1995 and was an Associate of CHS Management from July 1989 to June
1994. From 1987 to July 1989, he was a Corporate Banking Officer at The
First National Bank of Chicago, N.A., a commercial bank.
3
<PAGE>
Robert C. Sledd Age: 46
Mr. Sledd has served as a director of the Company since March 1996. Mr.
Sledd has served as Chairman of the Board of Directors of Performance Food
Group Company ("PFG") since February 1995, and has served as a director and
as Chief Executive Officer of PFG since 1987. Mr. Sledd served as President
of PFG from 1987 to February 1995. He served as President and Chief
Executive Officer of Taylor & Sledd Industries, Inc., a predecessor of PFG,
from 1984 to 1987.
Manuel J. Perez de la Mesa Age: 42
Mr. Perez de la Mesa was appointed President and Chief Operating Officer of
the Company in January 1999. Prior to joining the Company, Mr. Perez de la
Mesa was Vice President, Operations of Watsco, Inc., a NYSE-listed HVAC/R
distribution company. From 1994 to 1996, Mr. Perez de la Mesa was Vice
President, Finance and Operations for Gemaire Distributors, Inc., a wholly-
owned subsidiary of Watsco, Inc. Prior to 1994, Mr. Perez de la Mesa held
various management positions with Fresh Del Monte Produce N.V., RJR Nabisco
and International Business Machines Corporation.
Craig K. Hubbard Age: 47
Mr. Hubbard has served as Chief Financial Officer, Treasurer and Secretary
of the Company and SCP Supply since February 1997. From December 1993 until
February 1997, he served as Controller of SCP Supply, and held the same
position with the Predecessor since September 1991. From 1985 until 1991,
he served as Controller of Alerion Bank.
A. David Cook Age: 43
Mr. Cook has served as Vice President-Sales and Development of the Company
and SCP Supply since February 1997. From December 1993 until February 1997,
he served as the Director of National Sales Development of SCP Supply, and
held the same position with the Predecessor since August 1993. He served as
a regional manager of the Predecessor from May 1992 until August 1993. From
1988 until May 1992, he served as a branch manager of the Predecessor.
John M. Murphy Age: 38
Mr. Murphy has served as Vice President-Marketing of the Company and SCP
Supply since February 1997. From December 1993 until February 1997, he
served as the Director of Marketing of SCP Supply, and held the same
position with the Predecessor since 1988.
Richard P. Polizzotto Age: 57
Mr. Polizzotto has served as Vice President-Operations of the Company since
May 1995, and has served as Vice President of SCP Supply since December
1993. He served as Vice President of Operations of the Predecessor from
June 1992 until December 1993. From 1986 until 1992, he served as Vice
President of KSG Industries, Inc., an auto parts distributor. Prior to
1986, Mr. Polizzotto held a number of positions with Airwick Industries,
Inc. and Airwick Pool Products, and served as President of Heldor
Industries, Inc., a pool supply distributor.
Information About the Board of Directors
The Board of Directors met four times during 1998. The Board of Directors
has standing Audit and Compensation Committees. Each director attended all of
the meetings of the Board of Directors and any committees on which such
director served during 1998.
Audit Committee. Between January 1, 1998 and December 1, 1998, the Audit
Committee of the Board of Directors was composed of three directors (Messrs.
Gotsch, DeMichele and Sledd). Between December 18, 1998 and December 31, 1998,
the Audit Committee of the Board of Directors was composed of three directors
Messrs. Gaffney, Gotsch and Sledd). The Audit Committee met once during 1998.
The Audit Committee makes
4
<PAGE>
recommendations to the Board of Directors regarding the selection of
independent auditors, reviews the independence of such auditors, approves the
scope of the annual audit activities of the independent auditors, and reviews
such audit results.
Compensation Committee. During 1998, the Compensation Committee was composed
of three directors (Messrs. Code, Gotsch and Sledd). The Compensation
Committee met once during 1998. The Compensation Committee makes
recommendations to the Board regarding the compensation of officers of the
Company, awards under the Company's compensation and benefit plans and
compensation policies and practices.
The Company does not have a nominating committee.
Director Compensation
Non-employee directors of the Company receive (i) an annual retainer of
$6,000, (ii) $1,000 per board meeting attended, (iii) $500 per committee
meeting attended and (iv) $250 per ad-hoc meeting attended. In addition, non-
employee directors of the Company receive a consulting fee of $100 per hour
for tasks performed outside the scope of their service as directors. Directors
who are employees of the Company or its subsidiaries are not entitled to
receive any fees for serving as directors, except that all directors are
reimbursed for out-of-pocket expenses related to their service as directors.
Under the SCP Pool Corporation 1996 Non-Employee Director Equity Incentive
Plan (the "Directors Plan"), each non-employee director was granted an option
to purchase 5,625 shares of Common Stock immediately following the May 1998
annual meeting of the Company's stockholders and each non-employee director
will be granted options to purchase an additional 5,625 shares immediately
following each subsequent annual meeting of the Company's stockholders.
Options granted pursuant to the Directors Plan become exercisable one year
after grant, subject to certain exceptions. The option price per share of
Common Stock under the Directors Plan is equal to 100% of the fair market
value of the Common Stock at the date of grant. Each option granted under the
Directors Plan is exercisable for ten years after the date of grant. Non-
employee directors may elect to receive shares of Common Stock under the
Directors Plan in lieu of the cash compensation otherwise payable.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who beneficially own more than
ten percent of a registered class of the Company's equity securities to file
reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission (the "SEC"). Officers, directors and
greater than ten-percent beneficial owners also are required by rules
promulgated by the SEC to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company, or written representations that no Form 5 filings were required, the
Company believes that each of its officers, directors and greater than ten-
percent beneficial owners complied with all Section 16(a) filing requirements
applicable to them during fiscal 1998, except that in April 1999 Wilson B.
Sexton amended a Form 5 originally filed in February 1999 to list certain
gifts which were inadvertently omitted.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 19, 1999 by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each director and named executive officer of the
Company, and (iii) all directors and executive officers of the Company as a
group. Except as otherwise indicated below, to the knowledge of the Company,
each of the persons named in the table has sole voting and investment power
with respect to the securities beneficially owned by it or him as set forth
opposite its or his name. Unless otherwise indicated, the business address of
each person is the Company's corporate address. References to the "1995 Plan"
shall mean the Company's 1995 Stock Option Plan, and references to the "1998
Plan" shall mean the Company's 1998 Stock Option Plan.
<TABLE>
<CAPTION>
Percent
Number of of
Name of Beneficial Owner Shares(1) Class(2)
------------------------ --------- --------
<S> <C> <C>
St. Denis J. Villere & Company (3).......................... 1,535,549 13.4%
Wasatch Advisors, Inc. (4).................................. 734,531 6.4%
Wynnefield Partners Small Cap Value, L.P. (5)............... 461,625 4.0%
Strong Capital Management, Inc. (6)......................... 445,111 3.9%
Wellington Management Company, LLP (7)...................... 436,500 3.8%
Wilson B. Sexton (8)........................................ 332,452 2.9%
Frank J. St. Romain (9)..................................... 182,931 1.6%
Andrew W. Code (10)......................................... 138,824 1.2%
Robert C. Sledd (11)........................................ 93,625 *
Richard P. Polizzotto (12).................................. 69,123 *
John M. Murphy (13)......................................... 57,303 *
A. David Cook (14).......................................... 36,749 *
Peter M. Gotsch (15)........................................ 34,250 *
Craig K. Hubbard (16)....................................... 22,747 *
Manuel J. Perez de la Mesa.................................. 20,000 *
James J. Gaffney............................................ 5,000 *
All executive officers and directors as a group (11
persons)(17)............................................... 990,341 8.3%
</TABLE>
- --------
(1) Includes shares of Common Stock subject to options which are exercisable
within 60 days of March 19, 1999 and shares of Common Stock issuable upon
conversion of the Company's Convertible Subordinated Promissory Notes due
December 31, 2002 (the "Convertible Notes").
(2) Shares of Common Stock subject to options which are exercisable within 60
days of March 19, 1999 and shares of Common Stock issuable upon conversion
of the Convertible Notes are considered outstanding for the purpose of
determining the percent of the class held by the holder of such options or
notes, but not for the purpose of computing the percentage held by others.
Percentages less than one percent are denoted by an asterisk.
(3) Based upon such holder's Schedule 13G/A filed with the Securities and
Exchange Commission on February 10, 1999. St. Denis J. Villere & Company
holds shared power to vote or direct the vote and shared power to dispose
of or direct the disposition of such shares. The business address of such
holder is 210 Baronne Street, Suite 808, New Orleans, LA 70112.
(4) Based upon such holder's Schedule 13G filed with the Securities and
Exchange Commission on February 12, 1999. Wasatch Advisors, Inc. is a
registered investment adviser and holds sole power to vote or direct the
vote and shared power to dispose or to direct the disposition of such
shares. The business address of such holder is 150 Social Hall Avenue,
Salt Lake City, UT 84111.
(5) Based upon such holder's Schedule 13D/A filed with the Securities and
Exchange Commission on October 31, 1997, as adjusted to reflect the
Company's 3-for-2 stock split effected in July 1998. Wynnefield Capital
Management, LLC holds sole power to vote or direct the vote and sole
power to dispose of or direct the
6
<PAGE>
disposition of such shares. The business address of such holder is One Penn
Plaza, Suite 4720, New York, New York 10119.
(6) Based upon such holder's Schedule 13G/A filed with the Securities and
Exchange Commission on February 11, 1999. Strong Capital Management, Inc.
is a registered investment advisor and holds sole power to vote or direct
the vote of 445,111 of such shares, and sole power to dispose or to
direct the disposition of 609,615 shares. 609,615 shares represents 5.3%
of the Company's Common Stock as of March 16, 1999. The business address
of such holder is 100 Heritage Reserve, Menomonee Falls, Wisconsin 53051.
(7) Based upon such holder's Schedule 13G/A filed with the Securities and
Exchange Commission on February 10, 1999. Wellington Management Company,
LLC is a registered investment adviser and holds shared power to vote or
direct the vote of 436,500 of such shares, and shared power to dispose or
to direct the disposition of 886,125 of such shares. 886,125 shares
represents 7.7% of the Company's Common Stock as of March 16, 1999. The
business address of such holder is 75 State Street, Boston,
Massachusetts, 02109.
(8) Includes 46,869 shares issuable upon conversion of the Convertible Note
held of record by Mr. Sexton, options to purchase 90,000 shares issued to
Mr. Sexton pursuant to the 1995 Plan and options to purchase 30,000
shares issued to Mr. Sexton pursuant to the 1998 Plan.
(9) Includes options to purchase 90,000 shares issued to Mr. St. Romain
pursuant to the 1995 Plan and options to purchase 15,000 shares issued to
Mr. St. Romain pursuant to the 1998 Plan. Includes 588 shares purchased
on behalf of Mr. St. Romain pursuant to the Company's Employee Stock
Purchase Plan.
(10) Includes options to purchase 22,500 shares issued to Mr. Code pursuant to
the Directors Plan. 56,000 of such shares are held directly by a
charitable foundation of which Mr. Code is a director, president, and the
sole member, and as a result, Mr. Code may be deemed to have voting and
dispositive power with respect to such shares, although neither Mr. Code
nor any members of his immediate family have any pecuniary interest in
such shares. 1,350 of such shares are held by Mr. Code as custodian for
his minor children under the Uniform Gifts to Minors Act. 2,663 of such
shares are held by a partnership of which Mr. Code is a general partner
and as a result, Mr. Code may be deemed to have voting and dispositive
power with respect to such shares.
(11) Includes options to purchase 22,500 shares issued to Mr. Sledd pursuant
to the Directors Plan. 45,000 of such shares are held in three trusts for
the benefit of the minor children of Mr. Sledd; Mr. Sledd is the trustee
of such trusts, and as a result, he may be deemed to have voting and
dispositive power with respect to such shares.
(12) Includes 13,392 shares issuable upon conversion of the Convertible Note
held of record by Mr. Polizzotto and options to purchase 14,807 shares
issued to Mr. Polizzotto pursuant to the 1995 Plan.
(13) Includes 13,392 shares issuable upon conversion of the Convertible Note
held of record by Mr. Murphy and options to purchase 7,875 shares issued
to Mr. Murphy pursuant to the 1995 Plan.
(14) Includes options to purchase 14,062 shares issued to Mr. Cook pursuant to
the 1995 Plan.
(15) Includes options to purchase 22,500 shares issued to Mr. Gotsch pursuant
to the Directors Plan. 2,663 of such shares are held by a partnership of
which Mr. Gotsch is a general partner and as a result, Mr. Gotsch may be
deemed to have voting and dispositive power with respect to such shares.
(16) Includes options to purchase 21,151 shares issued to Mr. Hubbard pursuant
to the 1995 Plan. Includes 21 shares purchased on behalf of Mr. Hubbard
pursuant to the Company's Employee Stock Purchase Plan.
(17) The 2,663 shares held by a general partnership which may be attributable
to both Messrs. Code and Gotsch are counted once.
7
<PAGE>
EXECUTIVE COMPENSATION
The following tables summarizes the compensation paid to the Company's chief
executive officer and four other most highly compensated executive officers
(collectively, the "Named Executive Officers") during the year ended December
31, 1998. All figures relating to shares of Common Stock of the Company are
adjusted to give effect to the three-for-two stock split effected in July
1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long term compensation
---------------------------- -------------------------------
Awards Payouts
----------------------- -------
All
Other Restricted Securities Other
Annual Stock Underlying LTIP Compen-
Name and Principal Fiscal Salary Bonus Compensation Awards Options/SARs Payouts sation
Position Year ($) ($) ($)(1) ($) (#) ($) ($)
------------------ ------ ------- ------- ------------ ---------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank J. St. Romain
(2)................... 1998 214,000 214,000 -- -- 22,500 -- 10,181
President and Chief 1997 204,768 205,000 -- -- 33,750 -- 12,554
Executive Officer 1996 192,938 192,938 -- -- 33,750 -- 11,589
Wilson B. Sexton (3)... 1998 214,000 214,000 -- -- 22,500 -- 10,113
Chairman 1997 204,768 205,000 -- -- 33,750 -- 12,554
1996 192,938 192,938 -- -- 33,750 -- 11,589
Arthur David Cook (4).. 1998 110,000 110,000 -- -- 5,250 -- 10,181
Vice President-Sales
and 1997 104,712 64,100 -- -- 6,750 -- 9,844
Development 1996 90,000 60,000 -- -- 7,312 -- 7,362
John M. Murphy (5)..... 1998 110,000 110,000 -- -- 7,500 -- 10,181
Vice President-
Marketing 1997 104,712 75,000 -- -- 7,875 -- 10,329
1996 90,000 60,000 -- -- 7,875 -- 7,485
Richard P. Polizzotto
(6)................... 1998 120,000 50,000 -- -- 5,250 -- 10,071
Vice President-
Operations 1997 114,942 40,000 -- -- 5,625 -- 11,526
1996 112,000 20,000 -- -- 7,312 -- 9,373
</TABLE>
- --------
(1) Other annual compensation amounts were not reportable in 1998, 1997 and
1996.
(2) Mr. St. Romain resigned as President and Chief Executive Officer on
January 4, 1999. For 1998, All Other Compensation reflects a $194 life
insurance premium, $7,487 paid under the Company's profit-sharing program
and $2,500 contributed under the Company's 401(k) plan. For 1997, All
Other Compensation reflects a $126 life insurance premium, $10,053 paid
under the Company's profit-sharing program and $2,375 contributed under
the Company's 401(k) plan. For 1996, All Other Compensation reflects a
$126 life insurance premium, $9,088 paid under the Company's profit-
sharing program and $2,375 contributed under the Company's 401(k) plan.
(3) Mr. Sexton was appointed Chief Executive Officer effective January 4,
1999. For 1998, All Other Compensation reflects a $126 life insurance
premium, $7,487 paid under the Company's profit-sharing program and $2,500
contributed under the Company's 401(k) plan. For 1997, All Other
Compensation reflects a $126 life insurance premium, $10,053 paid under
the Company's profit-sharing program and $2,375 contributed under the
Company's 401(k) plan. For 1996, All Other Compensation reflects a $126
life insurance premium, $9,088 paid under the Company's profit-sharing
program and $2,375 contributed under the Company's 401(k) plan.
(4) For 1998, Mr. Cook's All Other Compensation reflects a $194 life insurance
premium, $7,487 paid under the Company's profit-sharing program and $2,500
contributed under the Company's 401(k) plan. For 1997, All Other
Compensation reflects a $5,810 life insurance premium $126 paid under the
Company's profit-sharing program and $1,570 contributed under the
Company's 401(k) plan. For 1996, All Other Compensation reflects a $52
life insurance premium, $5,998 paid under the Company's profit-sharing
program and $1,312 contributed under the Company's 401(k) plan.
(5) For 1998, Mr. Murphy's All Other Compensation reflects a $194 life
insurance premium, $7,487 paid under the Company's profit-sharing program
and $2,500 contributed under the Company's 401(k) plan. For 1997, All
Other Compensation reflects a $5,966 life insurance premium, $126 paid
under the Company's profit-sharing plan and $1,570 contributed under the
Company's 401(k) plan. For 1996, All Other Compensation reflects a $45
life insurance premium, $5,800 paid under the Company's profit-sharing
program and $1,640 contributed under the Company's 401(k) plan.
(6) For 1998, Mr. Polizzotto's All Other Compensation reflects a $194 life
insurance premium, $7,487 paid under the Company's profit-sharing program
and $2,390 contributed under the Company's 401(k) plan. For 1997, All
Other Compensation reflects a $126 life insurance premium, $9,376 paid
under the Company's profit-sharing program and $2,024 contributed under
the Company's 401(k) plan. For 1996, All Other Compensation reflects a
$126 life insurance premium, $7,505 paid under the Company's profit-
sharing program and $1,742 contributed under the Company's 401(k) plan.
8
<PAGE>
The following table sets forth, for the executive officers of the Company,
information regarding stock options granted or exercised during, or held at
the end of, 1998.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants (1)
-------------------------------------------
Potential
Realizable
Value at
Assumed Annual
Number of Rates of Stock
Securities Price
Underlying % of Total Appreciation
Options/ Options/SARs Exercise for Option Term
SARs Granted to or Base (2)
Granted Employees in Price Expiration ---------------
Name (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ---------- ------------ -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Frank J. St. Romain (3). 22,500 18% $13.50 12/31/03 101,180 229,000
Wilson B. Sexton (3).... 22,500 15% $13.50 12/31/03 101,180 229,000
Arthur David Cook (4)... 5,250 3% $13.50 12/31/03 23,609 53,433
John M. Murphy (4)...... 7,500 5% $13.50 12/31/03 33,727 76,333
Richard P. Polizzotto
(4).................... 5,250 3% $13.50 12/31/03 23,609 53,433
</TABLE>
- --------
(1) In order to prevent dilution or enlargement of rights under the options,
in the event of a reorganization, recapitalization, stock split or
combination or other change in the shares of the Company's Common Stock,
the number and type of shares available upon exercise and the exercise
price will be adjusted accordingly. The Compensation Committee may,
subject to certain restrictions, accelerate or defer the date on which an
option becomes exercisable. The above figures reflect the adjustments made
to give effect to the three-for-two stock split effected with respect to
the Company's Common Stock in July 1998.
(2) Amounts reflect assumed rates of appreciation from the fair market value
on the date of grant as set forth in the Securities and Exchange
Commission's executive compensation disclosure rules. Actual gains, if
any, on stock option exercises depend on future performance of the Common
Stock and overall stock market conditions. No assurance can be made that
the amounts reflected in these columns will be achieved.
(3) Options were granted and became exercisable on February 9, 1998 pursuant
to the SCP Pool Corporation 1995 Stock Option Plan.
(4) Options were granted on February 9, 1998 and become exercisable on
February 9, 2000 pursuant to the SCP Pool Corporation 1995 Stock Option
Plan. In the event of a sale of the capital stock of the Company with the
voting power to elect a majority of the directors or a sale of more than
50% of the Company's total assets (on a consolidated basis), all options
become fully vested and exercisable.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal Year
Shares Year End (#) End ($)
Acquired Value ------------- --------------
on Realized Exercisable/ Exercisable/
Name Exercise ($) Unexercisable Unexercisable1
---- -------- -------- ------------- --------------
<S> <C> <C> <C> <C>
Frank J. St. Romain............. -0- -0- 90,000/0 592,500/0
Wilson B. Sexton................ -0- -0- 90,000/0 592,500/0
Arthur David Cook............... -0- -0- 7,312/12,000 74,034/51,375
John M. Murphy.................. 7,875 73,336 0/15,375 0/62,172
Richard P. Polizzotto........... 7,312 84,703 9,182/10,875 117,879/44,234
</TABLE>
Employment Agreements
SCP Supply is a party to oral employment agreement with Wilson B. Sexton.
The agreement currently provides, in part, that SCP Supply will pay Mr. Sexton
an annual base salary of $214,000 and an annual bonus of up to 100% of base
salary to be paid in cash and an amount of stock options determined by the
Compensation Committee based on achievement of goals and objectives. Prior to
his resignation on January 4, 1999, Frank St. Romain was a party to an oral
agreement on the same terms as Mr. Sexton. In February 1998, Messrs. Sexton
and St. Romain were each granted options to purchase 22,500 shares of Common
Stock at an exercise price of $13.50. Pursuant to such agreements, each of
Messrs. Sexton and St. Romain are entitled to be included in SCP
9
<PAGE>
Supply's medical program until Medicare coverage begins (or, if earlier, until
terminated for cause) and Mr. Sexton will receive an automobile allowance of
$700 per month.
In January 1999, SCP Supply entered an employment agreement with Manuel
Perez de la Mesa. Pursuant to this employment agreement, SCP Supply will pay
Mr. Perez de la Mesa an annual base salary of $200,000 and an annual bonus to
be paid in cash as determined by the Compensation Committee based on
achievement of goals and objectives. The employment agreement with Mr. Perez
de la Mesa provides for annual stock option grants of 50,000 shares with fair
market value exercise prices during each of 1999, 2000 and 2001. In addition,
the employment agreement with Mr. de la Mesa provides for the following three
stock option grants: (i) a 1999 grant of options to purchase 20,000 shares of
Common Stock at $15.0625 per share; (ii) a 1999 grant of options to purchase
30,000 shares of Common Stock at $0.01 per share, the exercise of which is
conditioned on exercise of and payment for the option described in clause (i);
and (iii) a 2000 grant of options to purchase 30,000 shares of Common Stock at
$0.01 per share, the exercise of which is conditioned on exercise of and
payment for the option described in clause (i). The options listed in clauses
(ii) and (iii) shall vest over the first five years of Mr. Perez de la Mesa's
employment with the Company. Pursuant to this agreement, Mr. Perez de la Mesa
will receive an automobile allowance of $700 per month, or such other amount
as determined by the Compensation Committee.
In March 1999, the Compensation Committee of the Board of Directors, as
administrator of the Company's 1995 Stock Option Plan and the Company's 1998
Stock Option Plan, approved amendments to the outstanding option agreements
with Frank St. Romain regarding the event which triggers early expiration of
the options. The option agreements initially provided for early expiration of
the options following termination of Mr. St. Romain's services as an employee;
the amended agreements provide for early expiration of the options following
termination of Mr. St. Romain's services as a director.
Compensation Committee Interlocks and Insider Participation
During 1998, Messrs. Code, Gotsch and Sledd served as members of the
Company's Compensation Committee. Mr. Code is a general partner of CHS
Management. Mr. Gotsch has been a Partner of Code, Hennessy & Simmons, LLC, an
affiliate of CHS, since August 1997, was a Managing Director of Code, Hennessy
& Simmons, Inc., an affiliate of CHS, between January 1996 and August 1997,
was a Vice President of CHS Management from June 1994 to December 1995 and was
an associate of CHS Management from July 1989 to June 1994. Mr. Code and Mr.
Gotsch each served as Vice President of the Company from December 1993 until
May 1995. See "Certain Relationships and Related Transactions--Transactions
with CHS."
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "committee")
reviews and makes recommendations to the Board regarding salaries,
compensation and benefits of executive officers and key employees of the
Company and develops and administers programs providing stock-based
incentives. After consideration of the committee's recommendations, the entire
Board reviews and approves the salaries and bonuses and the stock and benefit
programs for the Company's executive officers. This committee report documents
the components of the Company's executive officer compensation programs and
describes the bases upon which compensation will be determined by the
committee with respect to the executive officers of the Company.
This committee report shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
10
<PAGE>
Compensation Philosophy. The compensation philosophy of the Company is to
link executive and employee compensation to continuous improvements in
corporate performance and increases in stockholder value. The goals of the
Company's executive and employee compensation programs are as follows:
. To establish pay levels that are necessary to retain and attract highly
qualified executives in light of the overall competitiveness of the
market for high quality executive talent.
. To recognize superior individual performance, new responsibilities and
new positions within the Company.
. To balance short-term and long-term compensation to complement the
Company's annual and long-term business objectives and strategy and
encourage executive performance in furtherance of the fulfillment of
those objectives.
. To provide variable compensation opportunities based on the Company's
performance.
. To encourage stock ownership by executives and other employees.
. To align executive and employee remuneration with the interests of
stockholders.
Compensation Program Components. The committee regularly reviews the
Company's compensation program to ensure that pay levels and incentive
opportunities are competitive with the market and reflect the performance of
the Company. The particular elements of the compensation program for executive
officers are further explained below. In the case of Mr. St. Romain, the
following explanation applies to his employment prior to his retirement in
January 1999. In the case of Mr. Perez de la Mesa, the following explanation
applies to his employment with the Company and SCP Supply which commenced
February 1, 1999.
Base Salary. Base pay levels for Messrs. Perez de la Mesa, Sexton and St.
Romain are determined pursuant to their employment agreements. See
"Executive Compensation--Employment Agreements." The base pay levels for
Messrs. Hubbard, Cook, Murphy and Polizzotto are determined by the
committee in its discretion based on achievement of goals and objectives
determined by it.
Annual Incentives. Annual bonus formulae for Messrs. Perez de la Mesa,
Sexton and St. Romain have been negotiated and agreed upon. The bonus
formulae include bonuses payable in immediately exerciseable options to
purchase Common Stock under the Company's 1998 Stock Option Plan. See
"Executive Compensation--Employment Agreements." The annual bonuses for
Messrs. Hubbard, Cook, Murphy and Polizzotto are determined by the
committee in its discretion based on achievement of goals and objectives
determined by it. The Company uses annual bonuses to enhance management's
contribution to stockholder returns by offering competitive levels of
compensation for the attainment of the Company's financial objectives. In
particular, the Company utilizes annual bonuses to focus corporate behavior
on the achievement of goals for growth, financial performance and other
items.
Stock Ownership. The committee believes that it can align the interests of
stockholders, executives and other employees of the Company by providing
those persons who have substantial responsibility over the management
and/or growth of the Company with an opportunity to establish a meaningful
ownership position in the Company. Under the Company's 1995 Stock Option
Plan, the Company granted stock options to Messrs. Sexton, St. Romain,
Hubbard, Cook, Murphy and Polizzotto in January of 1996, January of 1997
and February of 1998. Under the Company's 1998 Stock Option Plan, the
Company granted stock options to Messrs. Sexton, St. Romain, Perez de la
Mesa, Hubbard, Cook, Murphy and Polizzotto in February of 1999.
Senior Executive Officer Compensation. The base pay level and annual
incentive bonus compensation for Mr. Sexton, the Company's Chairman and Chief
Executive Officer, Mr. St. Romain, the Company's former President and Chief
Executive Officer, and Mr. Perez de la Mesa, the Company's President and Chief
Operating Officer, are determined in accordance with their employment
agreements.
Messrs. Sexton and St. Romain. In addition to base salary, Messrs. Sexton
and St. Romain are eligible for annual bonuses consisting of up to 100% of
base salary to be paid in cash and an amount of stock options
11
<PAGE>
determined by the committee based on achievement of goals and objectives
set by the committee. Pursuant to their employment agreements, the base
salaries of Messrs. Sexton and St. Romain for 1998 were set at $214,000. In
addition, in 1998 Messrs. Sexton and St. Romain each received a bonus of
100% of base salary and 22,500 options immediately exercisable for Common
Stock at an exercise price of $13.50 per share. In February 1999, Mr.
Sexton was granted options to purchase 30,000 shares of Common Stock at an
exercise price of approximately $13.38 per share. In February 1999, Mr. St.
Romain was granted options to purchase 15,000 shares of Common Stock at an
exercise price of approximately $13.38 per share. In March 1999, the
committee approved amendments to Mr. St. Romain's outstanding option
agreements which alter a trigger for early expiration of the options from
the termination of services as an employee to termination of services as a
director.
Mr. Perez de la Mesa. Mr. Perez de la Mesa was appointed President and
Chief Operating Officer in January 1999. In addition to base salary, Mr.
Perez de la Mesa is eligible for an annual bonus to be paid in cash as
determined by the Compensation Committee based on achievement of goals and
objectives. The base salary of Mr. Perez de la Mesa is set at $200,000. In
addition, Mr. Perez de la Mesa received the following stock option grants
in connection with the commencement of his employment: (i) a grant of
options to purchase 20,000 shares of Common Stock at $15.0625 per share and
(ii) a grant of options to purchase 30,000 shares of Common Stock at $0.01
per share, the exercise of which is conditioned on exercise of and payment
for the option described in clause (i). The options listed in clause (ii)
of the preceding sentence shall vest over the first five years of Mr. Perez
de la Mesa's employment with the Company.
Certain Tax Considerations. Section 162(m) of the Internal Revenue Code of
1986, as amended, limits the deductibility on the Company's tax return of
compensation over $1 million to any of the Named Executive Officers, unless,
in general, the compensation is paid pursuant to a plan which is performance-
based, non-discretionary and has been approved by the Company's stockholders.
The Company's policy with respect to Section 162(m) is to make reasonable
efforts to ensure that compensation is deductible without limiting the
Company's ability to attract and retain qualified executives.
Summary. After its review of all existing programs, the committee believes
that the total compensation program for executives of the Company is focused
on increasing values for stockholders and enhancing corporate performance. The
committee currently believes that the compensation of executive officers and
other employees is properly tied to stock appreciation through stock options
or stock ownership. The committee believes that executive and employee
compensation levels at the Company are competitive with the compensation
programs provided by other corporations with which the Company competes. The
foregoing report has been approved by all members of the committee.
COMPENSATION COMMITTEE
Andrew W. Code
Peter M. Gotsch
Robert C. Sledd
12
<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of the Company's Common Stock
with the Nasdaq National Market Composite Index and with the S&P SmallCap 600
Index. The Company has chosen the S&P SmallCap 600 Index for comparison
because the Company does not believe that it can reasonably identify a peer
group or a published industry or line-of-business index that contains
companies in a similar line of business and because the S&P SmallCap 600 Index
includes companies of similar capitalization to the Company.
[SCP POOL PERFORMANCE CHART]
<TABLE>
<CAPTION>
10/12/95 12/29/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SCP Pool Corporation............... $100 $ 99 $198 $275 $324
S&P SmallCap 600................... $100 $104 $127 $159 $157
The Nasdaq Stock Market............ $100 $102 $125 $154 $216
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Noncompetition Agreements
In connection with the acquisition in 1993 of the Predecessor by CHS (the
"SCP Acquisition"), Messrs. Sexton, St. Romain, Polizzotto, Cook and Murphy
along with the Predecessor's other shareholders, entered into noncompetition
agreements pursuant to which they agreed not to engage in a business
substantially similar to that of the Company for a period of five years from
the date of the SCP Acquisition.
Stockholder Notes
Six of the Company's current stockholders (all of whom were stockholders of
the Predecessor) are holders of the Company's Convertible Subordinated
Promissory Notes due December 31, 2002 (the "Convertible Notes") in the
aggregate principal amount of $96,250. They received such notes pursuant to
the liquidation of the Predecessor following the SCP Acquisition. Such notes
were originally issued by the Company to the
13
<PAGE>
Predecessor as consideration pursuant to the SCP Acquisition. In addition,
Ronald Hetzner, the formal owner of Orcal Pool Supplies, Inc., is the holder
of the Company's Junior Subordinated Promissory Notes due April 10, 1998 (the
"Hetzner Notes"), in the original principal amount of $2,650,000, which he
received in connection with the Orcal Acquisition. During 1998 the Company
paid all remaining amounts due on the Hetzner Notes.
The Convertible Notes bear interest at a rate of 10% per annum and mature on
December 31, 2002. The Convertible Notes are subordinated to all amounts
outstanding under the Third Amended and Restated Credit Agreement, dated as of
December 31, 1997, by and among SCP Supply, LaSalle National Bank, as agent,
and various lenders from time to time party thereto (the "Senior Loan
Facility") and certain other indebtedness. The Convertible Notes are
convertible into the number of shares of Common Stock determined by dividing
the principal amount of the note by approximately $0.98, as adjusted for the
subdivision or combination of such shares and for the issuance of any Common
Stock (or securities converted into or exchangeable for shares of Common
Stock) at a price per share less than the conversion price for the Convertible
Notes.
Transactions with CHS
In connection with the Orcal Acquisition, CHS executed guaranties in favor
of Mr. Hetzner pursuant to which CHS agreed to guarantee payment by the
Company of the Hetzner Notes. During 1998 the Company paid all remaining
amounts due on the Hetzner Notes.
The Company has in the past and may in the future pay to CHS certain
customary investment banking and financial advisory fees for services rendered
by CHS to the Company in connection with acquisitions undertaken by the
Company. In connection with the acquisition by SCP Supply of the assets of
Bicknell Huston Distributors, Inc. (the "Bicknell Acquisition") on January 1,
1998, SCP Supply paid to CHS a fee of $150,000.
Registration Agreement
In connection with the SCP Acquisition in December 1993, the stockholders of
the Company at such time (the "Original Stockholders") entered into a
Registration Agreement with the Company (the "Registration Agreement"). The
Registration Agreement provides for certain demand registration rights to CHS,
certain employees of CHS and its affiliates and an additional investor
(collectively, the "Investor Stockholders"), and to subsequent holders of the
Common Stock acquired by such stockholders in connection with the SCP
Acquisition. The demand registration rights began from and after the effective
date of the first registration statement filed by the Company in connection
with the public offering of its securities. The holders of a majority of the
registrable securities held by the Investor Stockholders (and their permitted
transferees) are entitled to request four long-form registrations in which the
Company pays all registration expenses and an unlimited number of short-form
registrations in which the Company pays all registration expenses. Such
holders are also entitled to request an unlimited number of long-form
registrations in which holders of registrable securities pay their pro rata
share of registration expenses. The Company is entitled to postpone a demand
registration for up to six months under certain circumstances, and is not
required to effect a demand registration within six months of a previous
registration in which holders of registrable securities participated without
reduction of the number of their included shares.
The Registration Agreement also provides that, subject to certain
limitations, the Original Stockholders (and their permitted transferees) may
request inclusion of their shares in a registration of securities by the
Company (other than pursuant to the initial public offering of Common Stock or
a demand registration). Expenses incurred in connection with the exercise of
such piggyback registration rights are borne by the Company.
Stockholder Lease Agreements
In November 1991, the Company entered into a lease agreement (the "Trust
Lease") with the St. Romain Children's Trust with respect to a service center
(the "Trust Facility") in Baton Rouge, Louisiana. The Trust Lease has a term
of nine years and one month, commencing on December 1, 1991, and monthly
rental rates
14
<PAGE>
ranging from $5,053 to $5,360. In March 1997, space constraints forced the
Company to relocate its Baton Rouge service center from the Trust Facility to
another Baton Rouge facility which it rents pursuant to a lease agreement (the
"St. Romain Lease") with Kenneth St. Romain, the regional manager of the Baton
Rouge service center and the son of Frank J. St. Romain (who until January
1999 was President and Chief Executive Officer of the Company). The St. Romain
Lease has a term of 5 years, commencing on March 1, 1997, and provides for
rental payments of $9,655 per month. The Company is still obligated to make
payments under the Trust Lease, although in November 1997 the St. Romain's
Children's Trust subleased the Trust Facility for a term equal to the balance
of the Trust Lease term at a rental which is over 70% of the rate payable
under the Trust Lease. The Company believes that both the Trust Lease and the
St. Romain Lease reflect a fair market rate as of the respective dates
thereof.
In connection with the Orcal Acquisition, SCP Supply entered into eight
lease agreements with Mr. Hetzner and his affiliates (the "Hetzner Leases"),
pursuant to which SCP Supply rents service center facilities in California
which are owned by Mr. Hetzner and his affiliates. The Hetzner Leases have
initial terms of five years, commencing on February 28, 1995, and monthly
rental rates ranging from approximately $3,600 to $8,748. The aggregate
monthly rental payment under the Hetzner Leases is approximately $45,860. SCP
Supply has an option to renew each such lease for five years at fair market
rental rate.
Dual Chemical Feeder Agreements
The Company pays Mr. Sexton certain royalties in connection with a patented
device for the delivery of multiple chemicals into a swimming pool. The
aggregate royalties paid to Mr. Sexton in 1998 did not exceed $60,000, and the
Company does not expect that the aggregate royalties payable in 1999 will
exceed $60,000.
Transactions with the Cookson Speciality Molding Sector
Mr. DeMichele was a director of the Company from January 1996 until his
death in December 1998. At the time of his death, Mr. DeMichele was the Chief
Executive Officer of Cookson Specialty Molding Sector (the "Molding Sector"),
a division of Cookson Group plc. Mr. DeMichele was also a director of Pacific
Industries, Inc. ("Pacific"), a member of the Molding Sector and the sole
stockholder of Bicknell Huston Distributors, Inc ("Bicknell"). On January 1,
1998, SCP Supply paid a purchase price of approximately $21,450,000 to Pacific
in connection with the Bicknell Acquisition. The purchase price was subject to
certain adjustments based on a net working capital formula under the terms of
the Bicknell Acquisition. In connection with the Bicknell Acquisition, SCP
Supply and Pacific entered into a supply agreement (the "Supply Agreement")
under the terns of which Pacific shall supply SCP Supply with various pool
components and related products. The Supply Agreement has a term of eight
years, subject to renewal options. The Company believes the Bicknell
Acquisition and the Supply Agreement reflect, respectively, the fair market
value for the assets of Bicknell and the products and services to be provided
pursuant to the Supply Agreement.
In connection with the purchase of products or services not related to the
Bicknell Acquisition, Pacific received approximately $12 million in payments
from the Company in 1998. Purchases during 1999 from Pacific will be made
pursuant to the terms of the Supply Agreement, and the Company expects such
purchases to be significantly in excess of $60,000. The Company believes that
the payments made to Pacific reflect the fair market value for the products
and services provided.
Certain Relationships
Kenneth St. Romain is a regional manager for the Company in the Baton Rouge
and New Orleans, Louisiana area. In 1998, Mr. St. Romain received
approximately $88,900 in salary and bonus, and the Company expects that his
salary and bonus for 1999 will equal or exceed the amount paid in 1998.
Kenneth St. Romain is the son of Frank J. St. Romain, who until January 1999
was President and Chief Executive Officer of the Company. Alan Henseler is a
regional manager for the Company in the Alabama and northwestern Florida area.
In 1998, Mr. Henseler received approximately $93,400 in salary and bonus, and
the Company expects that his
15
<PAGE>
salary and bonus for 1999 will equal or exceed the amount paid in 1998. Mr.
Henseler is the son-in-law of Frank J. St. Romain, who until January 1999 was
President and Chief Executive Officer of the Company. The compensation formula
pursuant to which Kenneth St. Romain and Alan Henseler are paid is identical
to that by which the Company's other regional managers are paid, and includes
a fixed salary and a bonus based on profitability and return on assets of the
service centers for which such managers are responsible. The actual amount of
compensation paid to each regional manager varies as a result of the
application of the bonus formula as well as such manager's seniority and other
objective factors.
SOLICITATION AND EXPENSES OF SOLICITATION
The solicitation of proxies will be made initially by mail. The Company's
directors, officers and employees may also solicit proxies in person or by
telephone without additional compensation. The Company does not currently
anticipate a need for additional solicitation by third parties on its behalf.
If the Company believes it to be necessary, the Company may retain an outside
firm to assist in proxy solicitation by telephone or mail, and the Company
expects that in such case it would retain Corporate Communications, Inc.,
which currently provides investor relations services to the Company. Brokers,
dealers, banks, nominees, fiduciaries and other custodians will be requested
to forward solicitation materials to the beneficial owners of the Common Stock
held of record by such persons and will be reimbursed for reasonable out-of-
pocket expenses incurred by them in doing so. All expenses of solicitation of
proxies will be paid by the Company.
ANNUAL REPORT AND FORM 10-K
Copies of the Company's Annual Report to Stockholders, which includes the
Company's Annual Report on Form 10-K for the Fiscal Year ended December 31,
1998, are being mailed with this Proxy Statement to each stockholder entitled
to vote at the Annual Meeting. Stockholders not receiving a copy of the Annual
Report may obtain one by writing or calling Craig K. Hubbard, SCP Pool
Corporation, 109 Northpark Boulevard, Covington, Louisiana 70433-5001,
telephone (504) 892-5521.
SUBMISSION OF STOCKHOLDER PROPOSALS
FOR THE 2000 ANNUAL MEETING
Stockholder proposals for inclusion in the Proxy Statement to be issued in
connection with the 2000 Annual Meeting of Stockholders must be mailed to
Craig K. Hubbard, SCP Pool Corporation, 109 Northpark Boulevard, Covington,
Louisiana 70433-5001, and must have been received by Craig K. Hubbard, on or
before December 8, 1999. The Company will consider only proposals meeting the
requirements of applicable SEC rules.
The Board of Directors
April 8, 1999
16
<PAGE>
SCP POOL CORPORATION
109 Northpark Boulevard
Covington, Louisiana 70433-5001
PROXY
Solicited by the Board of Directors
The undersigned hereby appoints Wilson B. Sexton and Craig K. Hubbard, and
each of them, proxies, with power of substitution and revocation, acting
together or, if only one is present and voting, then that one, to vote the stock
of SCP Pool Corporation which the undersigned is entitled to vote at the Annual
Meeting of Stockholders to be held on May 12, 1999 and at any adjournments or
postponements thereof, with all the powers the undersigned would possess if
personally present, as designated herein and authorizes the proxies to vote in
accordance with the recommendations of the Company's management upon such other
business as may properly come before the Annual Meeting of Stockholders.
1. ELECTION OF DIRECTORS:
Nominees: Wilson B. Sexton, Frank J. St. Romain,
Andrew W. Code, Peter M. Gotsch,
James J. Gaffney and Robert C. Sledd
(Continued and to be signed and dated on the reverse side.)
<PAGE>
________________________________________________________________________________
[Box] Please mark your
votes as in this
example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
FOR WITHHELD
1. Election of [Box] [Box]
Directors
(See Reverse)
For, except vote withheld from the following nominee(s):
_______________________________________________
FOR AGAINST ABSTAIN
2. PROPOSAL TO RATIFY [Box] [Box] [Box]
APPOINTMENT OF ERNST &
YOUNG LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as names appear on this Proxy. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
______________________________________________________
______________________________________________________
SIGNATURE(S) DATE
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
