Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”), dated April 22, 2005 (the “Effective
Date”), is made between Leslie’s PoolMart, Inc. (the “Company”) and Steven L.
Ortega (“Executive”). The parties agree as set forth below.

 

1. Employment. The Company agrees to employ Executive to render the services
specified herein on the terms and conditions and for the compensation herein
provided, and Executive accepts such employment.

 

2. Term. The term of employment of Executive hereunder will commence on the date
Executive commences work, which will be no later than June 20, 2005, unless by
mutual agreement between the parties (the “Start Date”) and will last for five
years (the “Term of Employment”) and the Term of Employment will automatically
extend for successive one-year periods following the fifth anniversary of the
Start Date, unless:

 

(a) The Company or the Executive delivers written notice to the other party no
later than ninety (90) days prior to the fifth anniversary of this Agreement or
any subsequent anniversary of the Start Date as the case may be, of intent not
to renew; or

 

(b) Executive’s employment is terminated in accordance with Sections 8, 9 or 10.

 

Any extension under this section shall be considered part of the “Term.”

 

3. Position and Duties. During the Term of Employment, Executive will serve as
Executive Vice President and Chief Financial Officer of Company. Promptly after
the Start Date, Company will appoint Executive to fill a vacancy on the Board of
Directors of the Company (the “Board”) and each year thereafter, Company will
nominate and recommend Executive for reelection to the Board at each appropriate
meeting of stockholders. Executive will have responsibilities and authority, and
perform executive duties, appropriate to his position. Excluding periods of
vacation and sick leave, Executive is to devote substantially his full attention
and time to his responsibilities to Company. However, he may serve on boards and
committees of other businesses or industrial groups, attend to personal
investments, and engage in civic and charitable endeavors, provided that such
activities are not competitive with the business of Company and do not unduly
interfere with Executive’s attention to his responsibilities under the
Agreement.

 

If, during the Term, the Company offers, and the Executive accepts, a position
different than that described in Section 3, and such new position represents a
Material Diminution in position or requires Relocation (as those terms are
defined in Section 9(ii)), then the Executive shall have no more than 60 days
after beginning work in such new position to exercise the Good Reason
termination clause under Section 9(b); following which 60-day period, if he has
not then so terminated, Executive shall be deemed to have thereafter waived all
rights to terminate for Good Reason in respect of such Material Diminution or
Relocation.

 

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4. Compensation and Benefits.

 

(a) Base Salary. Executive’s base salary will be no less than $315,000 less
normal withholdings per year, paid in accordance with Company’s standard payroll
practices.

 

(b) One- time Bonus and Relocation Payment. Executive will receive, seven days
after the Start Date, a signing bonus in the amount of $75,000 plus an amount
equal to the Federal, state and local tax he will incur as result of such bonus.
In addition, on the Start Date, Executive will receive a relocation payment in
the amount of $65,000, plus an amount equal to the Federal, state and local
taxes he will incur as a result of such payment.

 

(c) Executive Bonus Plan. Executive will participate in Company’s bonus plan
applicable to its senior executives, with a guaranteed bonus of $100,000 for the
remainder of Company’s 2005 fiscal year. The guaranteed payment of $100,000 will
be paid to Executive no later than November 30, 2005. Commencing the following
fiscal year, Executive’s target bonus will be at least 60% of his base salary in
effect at the end of such fiscal year and the plan shall provide for a minimum
bonus of 50% of target upon achievement of threshold performance. The annual
bonus thereafter will be paid in accordance with Company’s standard bonus
payment practices.

 

(d) Expenses. Executive shall be entitled to receive prompt reimbursement for
all expenses reasonably and necessarily incurred by Executive in performing his
duties hereunder, in accordance with the Company’s then existing practices and
policies for executives and subject to the approval of the Chairman of the Board
or his designee.

 

(e) Cash Allowance. Company will pay Executive an annual cash allowance for
expenses that relate to his employment which might be considered partially or
wholly personal in nature. The allowance will initially be $15,000 (prorated for
2005), increased annually by 5%, plus an amount equal to the Federal, state and
local taxes he will incur as a result of such payment. The Cash Allowance will
be paid to Executive at the same time as it is regularly paid to other
executives entitled to a comparable benefit.

 

(f) Benefit Plans and Other Fringe Benefits. Executive shall be eligible to
participate in any medical, dental, life insurance, disability, retirement,
profit-sharing, savings, stock option plan or stock-based compensation plan s
made generally available by the Company to executives of the Company presently
or in the future, subject to and on a basis consistent with the terms,
conditions and administration of any such plan. In addition, Executive shall be
entitled to vacation and sick leave benefits in accordance with the policies
applicable to other senior executives of the Company, provided however that
Executive shall be entitled to not less than four (4) weeks paid vacation each
calendar year. Permission to exceed the maximum accrual of vacation hours must
be approved in writing by the Chairman of the Board of the Company.

 

5. Stock Options. On the Start Date, Company shall grant to Executive options to
purchase 700,000 shares of Company’s common stock. At each anniversary of the
Start Date, commencing on the first anniversary, 25% of such options will vest.
The option grant will be evidenced by a stock option agreement to be executed by
Executive and Company.

 

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6. Stock Purchase. On the first anniversary of the Start Date, Company will make
available to Executive for purchase $200,000 worth of shares of the Company’s
common stock at the fair market value applicable on such date.

 

7. Stockholders Agreement. Executive shall enter into a Stockholders Agreement
in respect of the stock options granted pursuant to Section 5 and any shares
purchased pursuant to Section 6 in the same form as previously executed by
Company executives. Such Stockholders Agreement provides for a right of
repurchase and other restrictions in respect of such securities.

 

8. Termination of Employment by Company.

 

(a) Termination For Cause. Executive’s employment may be terminated at any time
by the Board of Directors of the Company for cause. Company will pay to
Executive within 30 days of termination for cause (i) any unpaid base salary
that has been earned at the time of such termination; (ii) a pro-rata portion of
the cash allowance for the year less any amount previously disbursed in that
year, (iii) any reimbursements to which he was entitled; (iv) compensation for
accrued but unused vacation; (v) and any other amounts or benefits due after the
termination of employment under the terms of other agreements, awards, plans’
arrangements, policies or programs.

 

(b) “Cause”. For purposes of this Agreement, “Cause” means:

 

  (i) Executive’s breach of this Agreement or of a material Company policy;

 

  (ii) the engaging by Executive in willful, reckless or grossly negligent
misconduct; or

 

  (iii) Executive’s indictment, charge, conviction or guilty plea (or plea of
nolo contendere) with respect of an offense involving moral turpitude or a
felony.

 

  (iv) Executive failing or refusing to perform any material obligation or to
carry out the reasonable directives of the Executive’s supervisor consistent
with his duties under Section 3, and the Executive fails to cure the same within
a period of 10 days after written notice of such failure is provided to the
Executive by the Company.

 

(c) Termination Without Cause. Executive’s employment may be terminated without
cause at any time by the Board of Directors of the Company without any required
period of notice. However, if Executive’s employment is terminated without
cause, the Company shall pay or provide the following payments and benefits to
executive (subject to applicable withholding):

 

  (i) all amounts and benefits specified in Section 8(a) above;

 

  (ii) 200% of the sum of (A) Executive’s base salary in effect at the time of
the termination, plus (B) his target bonus for the year of termination to be
paid

 

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       in accordance with Company’s normal payroll procedures and as a lump sum
in respect of the amount attributable to the first 12 months after termination
of employment, paid to Executive no later than14 days after the termination
date;

 

  (iii) Company will reimburse Executive for the premium payable by him for
health and medical-care insurance coverage of Executive and his dependents under
COBRA for a period of 18 months after the termination, or as otherwise required
by law; and

 

  (iv) The Executive shall be entitled to independent, offsite, executive career
transition and outplacement services provided by a nationally recognized
outplacement firm, including one-on-one coaching covering reemployment, career
changes, entrepreneurial/consulting ventures, etc., and access to comprehensive
office and administrative services for a period not to exceed six months
following Executive’s termination of employment. Such outplacement services will
be provided by an organization selected mutually by the Executive and the
Company and paid for by the Company.

 

9. Executive Termination.

 

(a) Voluntary Termination. During the Term, the Executive may terminate his
employment for any reason upon not less than 30 days prior written notice to the
Company; provided, that the Company may accelerate the Executive’s employment
termination date to the date on which the Executive gives the Company notice of
termination or on any date between such dates. If the Company accelerates the
Executive’s termination date, the Executive shall be paid the amounts and
benefits specified in Section 8(a) above as if he had worked the entirety of the
actual notice period, but not in excess of 30 days.

 

(b) Good Reason Termination. Notwithstanding paragraph 9(a), the Executive may
terminate his employment for “Good Reason” in accordance with and during the
period specified in Section 3 above upon 15 day’s prior notice to the Company.
For this purpose, “Good Reason” shall be deemed to exist if (i) there is a
material diminution in title and/or duties, responsibilities or authority of the
Executive (“Material Diminution”); (ii) the Company requires the Executive to
move to another location of the Company or any affiliate and the distance
between the new job site is at least 50 miles away from Metropolitan Phoenix,
Arizona (“Relocation”); (iii) there is a willful failure or refusal by the
Company to perform any material obligation under this Agreement or (iv) there is
a reduction in the Executive’s Base Salary or annual bonus target amount. In
each such case, the Executive shall provide the Company with written notice of
the grounds for a Good Reason termination, and the Company shall have a period
of 10 days to cure after receipt of the written notice. Resignation by the
Executive following Company’s cure or before the expiration of the 10-day cure
period shall constitute a voluntary resignation and not a termination for Good
Reason. If, during the Term, the Executive terminates his employment for Good
Reason, the Executive will be entitled to the amounts and benefits provided in
Sections 8 (c) (i) through (iv).

 

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10. Mitigation. Executive agrees that upon any termination pursuant to Section
8(c) hereof, Executive shall have a duty to mitigate his damages to the extent
required hereunder. Executive will not be obligated to actively seek employment
or to accept employment unsatisfactory to Executive. Moreover as to the first
twelve months of salary payments, and the pro rata portion corresponding to such
twelve months in respect of the bonus payments provided for above, the deduction
provided in the next sentence will not apply. Thereafter, and with prospective
effect Executive agrees that if he obtains other employment before the payments
set forth in Section 8(c) (ii) have been fully paid, any further payments under
Section 8(c)(ii) will be reduced by the amounts payable to Executive from such
new employment. Executive further agrees that if in the event Executive obtains
other employment before the expiration of the eighteen-month period noted in
Section 8(c)(iii), under which Executive and his dependents would be provided
health and medical-care insurance coverage under such employer’s benefit plans
or policies, then the Company’s obligation to continue health and medical-care
insurance coverage under Section 8(c)(iii) shall immediately cease and
terminate.

 

11. Death and Disability.

 

(a) Disability. If Executive should become disabled from performing his duties
hereunder for a period exceeding the maximum leave allowed under the Family and
Medical Leave Act (“FMLA”) and any analogous state law, the Company may
terminate Executive’s employment upon thirty (30) days’ written notice. It is
agreed that given the nature of Executive’s position it would not be reasonable
for the Company to provide for a leave for a longer period of time. In the event
of such termination, the Company shall pay to Executive the amounts described in
Section 8(a) above. Executive’s rights under any benefit plan as described in
Section 4(f) will be those rights accorded to any terminated employee under the
plan provisions and applicable law.

 

(b) Death. If Executive should die during the employment term, his estate will
receive the payments described in Section 8(a) above, and in addition,
Executive’s target bonus for the fiscal year.

 

12. Confidentiality and Trade Secrets. Executive recognizes that he will have
access to trade secrets and proprietary information of Company and any Company
Affiliate (the “Company Information”), and he recognizes that should such
information be revealed to a competitor, Company would be materially damaged in
an amount difficult to calculate. Except in the performance of his duties to the
Company Executive shall not, during the Term of Employment and at all times
thereafter, directly or indirectly for any reason whatsoever, disclose or use
any such Company Information. All records, files, drawings, documents, equipment
and other tangible items, wherever located, relating in any way to or containing
Company Information, which Executive has prepared, used or encountered or shall
in the future prepare, use or encounter, shall be and remain Company’s sole and
exclusive property and shall constitute Company Information. Upon the expiration
of the Term of Employment or earlier termination of this Agreement, or whenever
requested by the Company, Executive shall promptly deliver to Company any and
all of Company Information and copies thereof, not previously delivered to
Company, that may be in the possession or under the control of Executive. The
foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Company Information to the extent, but only to the extent,
(i) expressly permitted or required pursuant to

 

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any other written agreement between or among Executive and Company (and/or
Company Affiliates), (ii) such Company Information which has become publicly
known and made generally available through no wrongful act of Executive or of
others who were under confidentiality obligations as to the item or items
involved, or (iii) Executive is required to disclose Company Information by or
to any court of competent jurisdiction or any governmental or quasi-governmental
agency, authority or instrumentality of competent jurisdiction; provided, that
Executive shall, prior to any such disclosure, immediately notify the Company of
such requirement; provided, further, that Company shall have the right, at its
expense, to object to such disclosures and to seek confidential treatment of any
Company Information to be so disclosed on such terms as it shall determine.

 

13. Return of All the Company’s Property and Documents. Upon the termination of
his employment, Executive immediately will return to the Company all property of
the Company, including, without limitation, all documents and information,
however maintained (including computer files, tapes and recordings), concerning
the Company or acquired by Executive in the course and scope of his employment
(excluding only those documents relating to Executive’s own salary and
benefits), any laptop computer, Company-owned automobile(s), keys, access cards
or credit cards.

 

14. Noninterference.

 

(a) The Executive agrees that during the Term of Employment and for two (2) year
subsequent to termination of Executive’s employment with the Company for any
reason (the “Non-Compete Term”) the Executive shall not:

 

  (i) Either directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, firm, partnership,
corporation, business, group or other entity (each, a “Person”), engage in any
Competing Business, whether as an employee, consultant, partner, principal,
agent, representative, stockholder or other individual, corporate, or
representative capacity, or render any services or provide any advice or
substantial assistance to any such Person that engages in a Competing Business.
“Competing Businesses” shall include any business which derives material revenue
from the sale of swimming pool products or the service of swimming pools.

 

  (ii) Either directly or indirectly, for himself or on behalf of or in
conjunction with any other Person, solicit, hire or divert any Person who is, or
who is, at the time of termination of the Executive’s employment, or has been
within six (6) months prior to the time of termination of Executive’s
employment, an employee of the Company or any of its subsidiaries for the
purpose or with the intent of enticing such employee away from the employ of the
Company or any of its subsidiaries.

 

  (iii) Either directly or indirectly, for himself or on behalf of or in
conjunction with any other Person, solicit, hire or divert any Person who is, or
who is, at the time of termination of the Executive’s employment, or has been

 

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       within six (6) months prior to the time of termination of Executive’s
employment, a customer or supplier of the Company or any of its subsidiaries for
the purpose or with the intent of (A) inducing or attempting to induce such
Person to cease doing business with the Company or (B) in any way interfering
with the relationship between such Person and the Company.

 

(b) The covenants in this Section 14 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth herein are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent that such court deems reasonable, and the
Agreement shall thereby be reformed to reflect the same.

 

(c) All of the covenants in this Section 14 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of the Executive against the Company whether predicated
on this Agreement or otherwise shall not constitute a defense to the enforcement
by the Company of such covenants. It is specifically agreed that the period
following the termination of the Executive’s employment with the Company during
which the agreements and covenants of the Executive made in this Section 12
shall be effective, shall be computed by excluding from such computation any
time during which the Executive is in violation of any provision of this Section
14.

 

(d) Notwithstanding any of the foregoing, if any applicable law, judicial ruling
or order shall reduce the time period during which the Executive shall be
prohibited from engaging in any competitive activity described in Section 14
hereof, the period of time for which the Executive shall be prohibited pursuant
to Section 14 hereof shall be the maximum time permitted by law.

 

15. Arbitration. Employee and Executive agree that any and all disputes,
controversies, or claims arising out of or related to this Agreement or its
breach, including without limitation, disputes, claims, or controversies
concerning the validity of this Agreement, in whole or in part, shall be
determined exclusively by final and binding arbitration before a single
arbitrator in Phoenix Arizona administered by JAMS pursuant to its Employment
Arbitration Rules & Procedures and subject to JAMS Policy on Employment
Arbitration Minimum Standards of Procedural Fairness, and that judgment upon the
award of the arbitrator may be rendered in any court of competent jurisdiction.
The arbitrator shall be selected from a list of arbitrators provided by JAMS
with substantial professional experience in employment matters. Company will pay
all administration fees associated with the arbitration and the cost of
arbitrator, it being the parties’ intention that Employee not bear any costs
that he would not be required to bear in a court proceeding.

 

The arbitrator’s authority and jurisdiction shall be limited to determining the
dispute in arbitration in conformity with law, to the same extent as if such
dispute were to be determined as to liability and remedy by a court without a
jury. The arbitrator shall render an award that shall include a written
statement of opinion setting forth the arbitrator’s findings of fact and
conclusions of law. Employee and Executive expressly waive all rights to a jury
trial in court on all statutory or other claims.

 

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16. Indemnification. Executive shall be provided with an indemnification
agreement on the same terms as the Company’s other senior executives and shall
be covered as an officer and director under any directors’ and officers’
liability insurance policy maintained by the Company or by any affiliate of the
Company for the benefit of the officers of the Company.

 

17. Governing Law. This Agreement was negotiated, executed and delivered within
the State of Arizona, and the rights and obligations of the parties shall be
construed, enforced and governed by the laws of the State of Arizona.

 

18. Notice. Any written notice or other document required or permitted to be
given under this Agreement, including payments, shall be personally delivered or
mailed, by certified mail or by first class U.S. mail, as follows:

 

If to Executive:

 

Mr. Steven L. Ortega

6 Medallion Court

Greer, SC 29650

 

If to the Company:

 

3925 East Broadway Road, Suite 100

Phoenix, Arizona 85040

Attn.: Chairman of the Board

 

Notice shall be deemed to have been given immediately upon personal delivery or
on the third business day following placement in the U.S. mail in the
continental United States (or on the fifth business day if placed in the U.S.
mail elsewhere in the United States) as specified above.

 

19. Successors and Assigns. Any payments and benefits due to Executive under the
Agreement that have not been made to Executive at the time of Executive’s death
will be made to his surviving spouse or, if none, to his estate. The Agreement
will inure to the benefit of, and be enforceable by, Company and its successors
and Executive and his beneficiaries, administrators and executors. However, the
Agreement may not be assigned by either party without written consent of the
other.

 

20. Survival of Obligations. Provisions of this Agreement imposing obligations
that, by character, design or otherwise, must be or can be discharged following
termination of employment will remain in effect after the end of the Term of
Employment until all such obligations are discharged.

 

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21. Counterparts. This Agreement may be executed in counterparts. When each
party has signed and delivered at least one such counterpart, each counterpart
shall be deemed an original, and, when taken together with other signed
counterparts, shall constitute one Agreement which shall be binding upon and
effective as to all parties. No counterpart shall be effective until all parties
hereto have executed and exchanged an executed counterpart hereof.

 

22. No Waiver. No party’s failure to enforce any provision or provisions of this
Agreement will be provisions, or prevent that party thereafter from enforcing
each and every other provision of this Agreement.

 

23. Partial Invalidity. The invalidity or unenforceability of any provision or
portion of this Agreement will not affect the validity or enforceability of the
other provisions or portions of this Agreement.

 

24. Entire Agreement. This Agreement constitutes a single integrated contract
expressing the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous oral and/or written
agreements. There are no other agreements, written or oral, expressed or
implied, between the parties hereto concerning the subject matter hereof. This
Agreement may be modified or amended only by an Agreement in writing signed by
the parties.

 

25. Representations and Warranties. Company represents and warrants to Executive
that this Agreement has been approved by the Board of Directors of the Company.
Executive represents and warrants to Company that the execution and performance
of this Agreement do not and will not conflict with, violate or give rise to any
liability on the part of Executive or Company under any agreement or policy to
which Executive is subject or bound.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.

 

LESLIE’S POOLMART, INC.   STEVEN L. ORTEGA    

/s/ Lawrence H. Hayward

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/s/ Steven L. Ortega

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Name:   Lawrence H. Hayward     Title:   Chief Executive Officer         and
President    

 

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